London-listed South African ferrochrome 
 junior International Ferro Metals
 (IFM) is all set to cogenerate its own electricity at a fraction of the proposed new Eskom tariffs.

IFM CEO David Kovarsky says that the company may be able to do so for as little as 10% of Eskom’s steep new power price proposal.

The feasibility study cost of self-generation was 50% of Eskom’s previous tariff, but, since then, Eskom has not only pushed charges up by 30%, but also proposed that its tariff be 
increased by 45% a year for the next three years.

Kovarsky estimates that, if the latest tariff eventuates, IFM’s self-generation might amount to as little 10% of the Eskom charge.

“If we do see the kind of increase that has been proposed, we’ll be at 10% to 15% of the Eskom price,” Kovarsky tells Mining Weekly.

IFM is also now rebuilding its inventory to more normal levels in order to mitigate against the expected increase in electricity prices in 2010 and to take advantage of any ferrochrome price increases.

The construction of IFM’s cogeneration electricity plant is well under way and will be commissioned in the second half of 2010.

Once in operation, it will provide 10% of IFM’s power needs and qualify the ferrochrome producer for carbon credits.

IFM would like to accelerate its cogeneration project, but has been unable to speed up the procurement of specialised equipment, despite the economic downturn.

IFM achieved Eskom-constrained capacity at the end of October and both of its furnaces are running smoothly.

Should it ever build a third furnace, Kovar-sky is sure that his board would be supportive of additional cogeneration capacity, “because it makes a helluva lot of sense”.

Of the total R350-million capital expenditure budgeted for the remainder of the financial year, R190-million is for the cogeneration plant and R80-million for the development of the company’s mine near Rustenburg.

The R80-million on mining is being spent on sinking a second decline and upgrading an existing one.

A mining contractor is to be appointed towards the end of January, and mining operations are expected to resume four weeks thereafter.

IFM produces ferrochrome from Bushveld chromite, its orebody at Buffelsfontein consisting of multiple seams.

The company’s balance sheet remains strong with net cash of R433-million, compared with R340-million in the June quarter.

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