Pig iron project could boost company profile

25th July 2014 By: Mia Breytenbach - Creamer Media Deputy Editor: Features

Pig iron project could boost company profile

ON TRACK Ironveld expects to start production at its pig iron project in 2015

Once pig iron developer Ironveld’s Limpopo-based pig iron project starts production, which is expected in the second half of 2015, the company is likely to become South Africa’s first producer of high-purity iron (HPI), says Ironveld CEO Peter Cox.

“Currently, no company is producing HPI and, as South Africa imports all the HPI powder it uses, we hope to capture the South African market in due course,” Cox tells Mining Weekly.

Creamer Media’s Research Channel Africa reported in April that the pig iron project remains within budget and on schedule. It will comprise a $60-million smelter as a precursor to a larger $938-million pig iron plant; both will be fed with magnetite from the Ironveld project.

The smelter will require 15 MW of capacity, for which power is immediately available from an electrical substation 12 km away. “Ironveld hopes to start construction of the smelter plant in October,” notes Cox.

Ironveld expects to produce about 42 000 t of HPI, in addition to titanium and vanadium slag products, at the smelter, in 2015. “Depending on market needs, Ironveld can produce the HPI in several different specifications, from high- quality pig iron to powder HPI,” Cox explains.

However, production of the different iron products will depend on requirements from the offtake agreements that the company is negotiating with industry stakeholders.

HPI is produced in various forms, from cast products to metal powder, with applications in the steel and stainless steel industries, where it helps to control the iron content or iron units in stainless steel production. HPI can also be used in the manufacture of tools for the medical and agriculture sectors.

Project Insight
Ironveld’s pig iron project, located in the northern limb of the Bushveld Complex, about 60 km north-west of Polokwane, comprises seven adjacent farms with rights covering 165 km2. The project’s combined mineral resource is estimated at 32-million tonnes of iron (Fe).

The smelter will initially produce pig iron and then also ferrovanadium. It will also function as an ore preparation plant, where the ore will be ground to –1 mm. “The ore will then be preheated and smelted and will include another processing step – the details of which we cannot disclose – to produce the HPI,” Cox explains.

A definitive feasibility study of the project confirmed its ability to deliver an “exceptionally” high-grade 99.5% HPI, which commands a premium to the price of conventional pig iron.

The study also confirmed “a highly scalable project, with a life-of-mine (LoM) in excess of 100 years and the ability to deliver a yearly turnover of $51.6-million (or about R568-million), and earnings of $24.1-million (or about R265-million) a year, before interest, tax, depreciation and amortisation from 2016 onwards”.

Ironveld predicts that the pig iron project will produce about 42 000 t/y of iron products in 2016, including HPI and high-quality pig iron, with production continuing at that rate until the large smelters come into production in 2020, Cox points out.

The full-scale plant will require the construction of four 75 MW direct current smelters. The 300 MW for the plant will be provided by State-owned power utility Eskom’s Medupi power station from late 2018.

“We expect construction to start in late 2017, with staged commissioning of the smelters in 2018 and 2019. The first full year of production is scheduled for 2020, with production from the large smelters estimated at one-million tonnes of pig iron a year,” Cox says.

Ironveld expects to mine 2.4-million tonnes a year of magnetite as feedstock for its eventual one-million-tonne-a-year pig iron plant, which will also produce vanadium and titanium by-products.

Cox estimates that the project has an LoM in excess of 25 years, which is contributing to a positive outlook for the project.

He emphasises: “Ironveld’s goal would be to ensure that our products are sold in South Africa to reduce the use of scrap metal and the import of speciality iron products, so that when companies eventually buy an iron or steel product, it will truly be made in South Africa.”

Project Progress
Ironveld expects the mining licence for the first group of rights, which were applied for in May last year, to be awarded in the third quarter of this year. Cox says the company is finalising the mining licence application for the second group of rights, which will be submitted next month.

He also hopes that the project will be fully funded by the fourth quarter of this year. Ironveld is currently in advanced discussions with financial institutions, industry stakeholders and banks for debt fundraising and marketing to procure a 60:40 debt:equity ratio, with the debt provided locally.

While Ironveld is currently involved in the finalisation of the water-use licence for the smelter, Cox highlights the need to upgrade the infrastructure, which includes the construction of a power line from the substation to the smelter and the upgrade of a gravel road to allow for easy access to the project.

Social Responsibility Projects
Ironveld is working with the various local communities, which comprise seven villages and local tribal authorities, in its mining rights area to potentially issue project/mine shares.

As part of its social labour programme, the company is also investigating projects, such as specialised agricultural projects, that will benefit the local communities and reduce their dependence on the mine, Cox concludes.