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World’s biggest steel producer accelerates trend of backward integration into mining
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30th November 2007
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Luxembourg, November 19 – ArcelorMittal, the world’s largest steel company, signs a joint venture manganese partnership with South Africa’s Kalagadi Manganese.

Luxembourg, November 21 – ArcelorMittal, the world’s largest steel company, signs a joint venture coking-coal partnership with Mozambique’s Black Gold Mining.

In between, the Brussels-based International Iron and Steel Institute screams blue murder over BHP Billiton attempting to create what it condemns as a seaborne iron-ore monopoly in aspiring to transact with Rio Tinto.

No doubt about it, backward integration into mining is hotting up, motivated by rising raw material prices.

Says Kalagadi Manganese technical director David Wellbeloved: “Our deal spearheads the backward-integration trend.”

He estimates that the Kalagadi initiative is the first integrated manganese project since the late 1970s.

Kalagadi chairperson Daphne Mashile-Nkosi is smiling from ear to ear.

“Two years ago nobody wanted to fund us. I recollect struggling to raise R5-million for a company that is now valued at R4,2-billion,” she tells Mining Weekly.
The 50:50 Kalagadi-Arcerlor-Mittal joint venture will see the development of a manganese mine, a beneficiation plant and a sinter complex in the Northern Cape province and a smelter in the Eastern Cape.

The steel giant says that Kalagadi will be a competitive source of manganese for its plants.

The mine and sinter plant will produce 2,4-million tons of sinter a year at Hotazel and the smelter 320 000 t/y of ferromanganese alloy at the Coega industrial develop-ment zone.

Drilling to date has confirmed the presence of a high-grade manganese ore resource sufficient to support a 20-year life-of-mine.

Mashile-Nkosi reiterates that manganese scavenges impurities such as oxygen and sulphur in the steelmaking process and adds toughness, hardness and abrasion resistance to steel in the form of an alloying component.

Ninety per cent of manganese is consumed in manganese ferroalloys as well as manganese metal in the production of iron and steel.

Manganese metal is also used to produce aluminium alloys.

Nonmetallurgical applications include the use of manganese chemicals in fertilisers, bricks, paint and water purification. Some of the main minerals containing manganese are pyrolusite, psilomelane and rhodochrosite.

The project overlies a manganese basin that is endowed with 80% of the world’s known high-grade manganese, estimated at 12-billion tons.
Kalahari Resources, a majority black women-controlled company, owns 80% of Kalagadi Manganese and South Africa’s State-owned Industrial Development Corpora-tion (IDC) 20%.

ArcelorMittal paid $312-million for 50% of the asset, while IDC paid R60-million for 20% of the equity.

Macquarie First South Corporate Finance and Edward Nathan Sonnenbergs advised Kalagadi Manganese.

ArcelorMittal beat off 18 rival bidders, including the shortlisted Minmetals, of China, and Eramet Comilog, one of the world’s largest manganese companies, after arriving at a project value of $630-million and meeting Kalagadi’s financial, project-suitability and business-compatibility criteria.

It also agreed to buy 50% of the ferromanganese produced at market price, and signed a special business-assistance agreement that will facilitate the growth of Kalagadi Manganese.

Luxembourg-listed Arcelor- Mittal has a market capitalisation of R728-billion and owns 52% of steelmaker ArcelorMittal South Africa, the former State-owned Iscor.

ArcelorMittal will, in addition to funding half of the project, pay Kalagadi shareholders $222,5-million for their mining right, by means of a cash contribution of $312-million so that the empowered South African company can contribute to the project and also have working capital.

The transaction takes place at a time of ferromanganese prices hitting their high points beyond the $1 600/t level

South Africa’s Shaft Sinkers has been contracted to begin sinking the shaft on March 1, 2008, and the first manganese in the Hotazel formation is expected to be traversed by mid-2008.

Eskom has undertaken to supply 25 MW of electricity to the mine and sinter plant and 65 MW will be required from the Nelson Mandela Municipality to power the ferromanganese smelter.

MOZAMBIQUE
In an entirely separate transaction, but displaying the same backward-integration trend, Black Gold Mining will transfer its coal licences, covering 49 360 ha of the Moatize-Minjova subbasin in the Tete province, to Rio Minjova Mining & Exploration Company, in which ArcelorMittal has bought a 35% shareholding for $2,5-million.

ArcelorMittal has an earn-in option to become the majority shareholder for an additional $2,5-million on the confirmation of coking-coal reserves.

Edited by: Martin Zhuwakinyu

 

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DAPHNE MASHILE-NKOSI
Two years ago nobody wanted to fund us. I recollect struggling to raise R5-million
 
Picture by: Duane Daws
DAPHNE MASHILE-NKOSI Two years ago nobody wanted to fund us. I recollect struggling to raise R5-million
 

DAVID WELLBELOVED
Believes Kalagadi to be South Africa’s first new manganese project since late 1970s
 
Picture by: Duane Daws
DAVID WELLBELOVED Believes Kalagadi to be South Africa’s first new manganese project since late 1970s
 
 
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