JOHANNESBURG (miningweekly.com) – Diversified miner African Rainbow Minerals (Arm) aims to be producing at least 100 000 t/y of copper in five years, CEO André Wilkens tells Mining Weekly Online.
Wilkens says that the company is already in a sweet spot with the commodities it has, which include coal, manganese, iron-ore, platinum, nickel and chrome, and now copper is poised to provide a tailwind.
Copper production is expected to begin in years two and three in the next three years, but will still have to grow significantly.
"We certainly want to get to at least 100 000 t of copper a year over the next five years," Wilkens confides.
The company has a joint venture with South American major Vale and intends focusing initially on the assets that were in Arm's former Teal exploration company, and then look for other opportunities to work together.
Vale/Arm's primary projects are in Zambia at the Konkola North copper project and in copper/cobalt in the Kalumines prospect in the Democratic Republic of Congo.
"Copper is a very good commodity to be in and we are going to keep out eyes open and try to expand in copper as soon as possible," Wilkens tells Mining Weekly Online.
In its overall spread of its commodities, Arm will be investing R8-billion in the next three years, and its partners another R8-billion, as Arm owns 50% stakes in a series of partnerships with several blue-chip companies.
The capital investment creates a further expansion to its iron-ore mine by another six-million tons plus arrival at the commissioning point later this year for the low-cost new local coal mine, Goedgevonden.
The capital investment also embraces the company's large-scale new Nkomati nickel mine, where commissioning has begun.
"We believe that those projects are well timed in terms of the market conditions we are seeing.
"All our operations are below the 50% percentile on the cost curve, which is going to give us very good margins going forward. We have also got volume growth and cost reductions in all commodities," Wilkens says.
The company is bullish on its new coal dragline operation at Goedgevonden, which is destined to be one of the lower cost operations.
Half of Goedgevonen's coal will be exported and the other half will be sold locally.
"The prices we are going to get for our coal are very good because we actually deliver a washed and sized coal product, the type of product that Eskom needs," he adds
Together with its partner Xstrata Coal, Arm is considering other new coal-mining projects, on which feasibility is still to be finalised.
One reason why the iron-ore has done well - building up from a six-million-ton operation to a ten-million-ton-operation, and now going to 16-million tons a year - is because of the high quality of the material, a large percentage of which is lumpy ore.
"We've also got long-term relationships, some more than 50-years old, and they have stuck to the agreements and we've delivered very well in the last year," Wilkens says.
Of Arm's platinum operations, Two Rivers and Modikwa, the company has been able to reduce costs significantly at Modikwa, where a 30% saving has been achieved in the last five months, and there is potential to achieve better recoveries at Two Rivers.
"We have an agreement with Impala to add one of the adjacent orebodies into Two Rivers. We think platinum is a very good metal to have long term," Wilkens says.
With nickel, Arm is going to be set fairly low on the cost curve with the R3,3-billion Nkomati expansion project.
With Arm's nickel cost base at $3,50/lb and the current nickel price north of $8/lb, Arm expects to have good margins.
"We think the timing of Nkomati will fall into line with the nickel market," says Wilkens.
On the company's good cash position, Wilkens commented: "In October, we sat down with our teams and said no business is going to burn cash and we've achieved the objective for the year.
"There is market-to-market accounting that puts platinum into the negative, while they are really cash positive, and that has helped us with our cash management, helped us to reduce our loans. We are sitting at a 1% debt-to-equity ratio and we have no immediate requirements to raise any further funding, we've got everything that we need.
"We had to reorganise to avoid cash burn, but with the growth projects, we actually create many more jobs. In the last two years and over the next three years, we will have created two jobs every day of the year, and we were able to move some of our people around in the group, which means a lot less reduction in labour," Wilkens says.
The company has restructured its R967-million corporate loan, which was due for refinancing, because it needs more money to finance the Nkomati project and, together with Norilsk Nickel, Arm decided to fund the project completely.
"The rand is very strong and there are factors that indicate that, over the next two years, it will actually weaken, but we have a robust plan, even in a strong rand environment," Wilkens adds.