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Energy for Xstrata's R4,9bn Lion ferrochrome add-on, plus new R700m mine
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20th October 2010
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JOHANNESBURG ( – The London-listed global ferrochrome leader Xstrata is pressing ahead with its long-delayed second-phase expansion of the Lion plant in South Africa, following an energy nod from Eskom augmented by the company's own self-generation plans.

Going ahead concurrently will also be the development of a new chrome mine.

Xstrata, led by South African CEO Mick Davis, says that the expansion will involve the construction of a 360 000 t/y capacity smelter that will increase the Xstrata-Merafe chrome venture's total ferrochrome capacity to more than 2,3-million tons a year.

The JSE-listed Merafe, in which South Africa's 300 000-member Bafokeng community has the influential shareholding, is Xstrata's South African black economic-empowerment (BEE) and pooling and sharing partner,  which owns 20,5% of the Xstrata Merafe venture, and wants more. Merafe is certain to participate in the extension.

Although Lion's expansion has met value and risk hurdles for some time, it has been marking time until a firm Eskom power allocation was forthcoming.

Xstrata has won a nod from Eskom by relentlessly cutting its historical electricity consumption through the implementation of its energy-slashing proprietary Premus technology and a series of other initiatives.

Also, the company's energy confidence has been further boosted by the own generation plans of its Xstrata Alloys subsidiary, that are expected to begin unfolding, probably incrementally, by the time Lion Two is ready for commissioning.

Xstrata Alloys is completing a feasibility study for the first phase of a 600 MW thermal power generation plant that will supplement future electricity supply. This plant, which may be built in four modules of 150 MW each, is expected to make use of the company's own discard coal resource, probably close to its Tweefontein colliery.

The total capital investment of R4,9-billion (US$710-million) embraces a R700-million component for the concurrent development of the new Magareng mine that will provide 1,2 million run-of-mine tons of chrome a year.

Magareng will be located within Xstrata's well-established Thorncliffe mine complex in Mpumalanga province.

Construction of the smelter is due to begin in the first quarter of 2011, with commissioning planned for the first half of 2013.

The expansion will create more than 1 000 permanent jobs and a further 1 800 jobs will be generated during the construction phase.

Eighty per cent of the total project expenditure on goods and services will be sourced from South Africa.

The expansion will again make use of Premus technology, which consumes a third less electricity than other available smelting technologies, at an industry leading average of between 2,2 MW/t to 2,4 MW/t.

Premus will expand Xstrata's low-cost leadership in an environment of escalating energy costs, says Xstrata Alloys CEO Peet Nienaber, who adds that the project is aligned with South African's draft Integrated Resource Plan 2010 through its energy efficiency and the use of electricity to create sustainable jobs.

Xstrata's beneficiation activities, in upscaling raw chromite ore to higher-value ferrochrome, dovetails with the Department of Trade and Industry's Industrial Policy Action Plan, as well as the Revised Mining Charter, which allows for 11% of the BEE equity requirement of 26% to be offset by beneficiation.

The Xstrata-Merafe venture earlier this year announced that it had decided to invest R917-million in Project Tswelopele, a chrome pelletising plant in Rustenburg that makes use of waste material.

The project is the first major investment in South Africa since the announcement of the Revised Mining Charter, which strives to extract maximum benefit for the country through fixed investment, sustainable job creation, beneficiation, enhancement of South Africa's export earnings and contribution to the national fiscus.

The expansion will allow Xstrata to increase procurement from BEE enterprises, support the growth of new local enterprises and develop technical skills, which are among the Mining Charter's pillars.

The expansion also allows Xstrata to benefit from anticipated growth in global demand for stainless steel, which uses ferrochrome as its main ingredient.



Edited by: Creamer Media Reporter


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Xstrata CEO Mick Davis
Picture by: Bloomberg
Xstrata CEO Mick Davis