Manganese prices remained resilient in the first quarter of 2020, even as Chinese imports fell by 18%, with in-country logistics impacted on by the country’s Covid-19 lockdown, says natural resources developer South32 CEO Graham Kerr.
He was speaking to delegates of the BofA Securities 2020 Global Metals, Mining and Steel conference last month, and noted that prices had increased sharply in April, as disruptions to supply from South Africa, Brazil and other markets affected more than 40% of global supply.
South32 operates two manganese mines – the Mamatwan opencast mine and the Wessels underground mine – in the Kalahari basin, in the Northern Cape, as well as an alloy smelter in Gauteng, collectively known as South Africa Manganese. The basin is said to host 80% of the world’s manganese orebody.
Mines in South Africa were shut down from March 27, when the 21-day national lockdown started, and permitted to operate at 50% capacity when the Level 5 lockdown was extended by two weeks on April 9, 2020.
“Our manganese ore and alloy operations were placed on temporary care and maintenance at the start of the lockdown,” says South32’s March 2020 quarterly report, published on April 20.
Subsequently, South32 requested and received government approval in early April to undertake limited activity during the lockdown period and partially remobilised its manganese ore operations to resume production activities at a reduced rate in the June 2020 quarter.
Meanwhile, as of May 1, opencast mines were permitted to operate at 100% capacity, while underground mines were limited to 50% capacity. As of June 1, underground mines were permitted to operate at 100% capacity.
Kerr said while manganese prices were expected to normalise once production resumed, South32 would monitor the potential for persistent challenges related to the ramp-up of logistics in South Africa that might impact on seaborne supply.
Owing to the pandemic, the production guidance for the 2020 financial year for South Africa Manganese, where production has resumed, has been lowered to between 1.7-million and 1.85-million tonnes. The delivery of this guidance is subject to the pace of ramp-up and inland logistics performance, stated Kerr.
This was on the back of South Africa Manganese’s saleable ore production decreasing by 7% to about 1.5-million tonnes in the nine months ended March 2020 as South32 reduced its use of higher cost trucking and undertook an extended maintenance shutdown at its Wessels mine in the December quarter, in response to market conditions.
During the period, manganese alloy saleable production increased by 2% to 48 000 t; however, the Metalloys smelter remains on temporary care and maintenance.
South32 explains that production stopped at Metalloys at the start of the national lockdown. Samancor Manganese has since taken an in-principle decision to place Metalloys under care and maintenance following an extensive review of the business over the last 12 months.
“Following a review of activity in response to market conditions and an update to our assumptions for foreign exchange rates over the remainder of 2020 financial year, South Africa Manganese’s guidance for sustaining capital expenditure has been reduced by $5-million, or 19%, to $21-million.”
Measures implemented by South32 to protect employees at its South Africa Manganese ore operations include screening for Covid-19 using a questionnaire and thermometer reading before permitting workers to board transport to site and/or when they arrive at the gates by any other means.
Transport adheres to government guidelines, with hand sanitising at entry, physical distancing and the wearing of masks enforced, in addition to the sanitising of buses between transport.
Further, South32 has aligned its testing with the National Institute for Communicable Diseases guidelines, with hand sanitisers available at numerous points across the sites where physical-distancing measures and the wearing of masks have been implemented.
All employees also receive Covid-19 training and there are regular reminders of necessary hygiene measures and physical-distancing requirements.
“At our South Africa Manganese ore operations, we have participated in the Northern Cape Shared Value Initiative . . . with other local mining operations. Together, the group has produced Covid-19 information that has been shared in the communities and worked closely with the John Taolo Gaetsewe (JTG) district municipality and local municipalities to refine their Covid-19 response strategy,” says a South32 spokesperson.
South32 has also delivered medical equipment to the district municipality’s department of health, for three local hospitals designated as treatment centres. Equipment includes beds, surgical masks, gloves, temperature scanners, monitors and sanitisers, with two ventilators currently on order.
In addition, food parcels have been donated to the JTG district’s department of social development for local community members, with donations ongoing.
“We are also repairing water tanks and have replaced pressure pumps at ten local clinics. We have delivered 50 tanks, each with a capacity of 10 000 ℓ, and 600 water roller drums, as well as water, to communities in the Joe Morolong, Gamagara and Ga-Segonyana municipalities,” states the South32 spokesperson.
South32 has donated more than R40-million to support initiatives in the communities around its operations. This is in addition to projects that were already under way as part of its Social and Labour Plan, its strategic community investments and a R10-million donation to the South African Solidarity Fund.
In March, Kerr said South32 was well positioned to successfully navigate this period of uncertainty resulting from the Covid-19 pandemic, and highlighted that initiatives were in place to deliver about $160-million in lower expenditure over the next 15 months to protect the company’s financial position.
“Our balance sheet remains strong, with reported net cash of $277-million at December 31, 2019, including cash and cash equivalents of $1.4-billion, no term debt and an undrawn $1.5-billion revolving credit facility.”