Abiel Mngomezulu, deputy director-general: mineral policy and promotion, DME
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SA govt says Pt producers to benefit
David McKay
Posted: Wed, 20 Jun 2007

[miningmx.com] -- PLATINUM producers have a greater chance of winning beneficiation offsets from the South African government than their gold industry counterparts owing to the wide industrial usage of platinum group metals.

Commenting on government deliberations on beneficiation, Abiel Mngomezulu, deputy director-general of mineral policy and promotion at the minerals and energy department, said fuel cell production would garner more points than producing gold bars.

Mngomezulu’s comments come as the South African government is edging closer to fixing definitions on metals beneficiation, a development that could enable mining companies to pay less annual royalties or transfer less shares in empowerment deals.

The key decision was to discover where mining ended and beneficiation began. In layman’s terms, beneficiation is value added to a raw resource, but according to Mngomezulu, miners have different interpretations of this.

In South Africa’s chrome industry, the last point of mining is production of ferrochrome. This means production of chrome alloys, the next step in the process, represents beneficiation. On this front, Mngomezulu said South Africa’s ferrochrome producers said they had already completed their empowerment transactions, and therefore elected not to benefit from less royalties, as being finalised in the Finance Department’s Royalty Bill.

In the precious metals industry, production of 99.99% gold and platinum bars is considered end of mining. But importantly, not all precious metal beneficiation has the same value. The cost of producing fuel cells would be greater and would therefore require a greater level of compensation.

“We’re still waiting to discover how we’ll calculate those points above the base; in other words, how many ‘offsets’ do you receive for producing fuel cells relative to platinum or gold chains,” said Mngomezulu.

An intriguing question is how the iron ore industry will fare in the beneficiation stakes? Companies such as Kumba Iron Ore, in which Anglo American has a 64% stake, and African Rainbow Minerals’ (ARM’s) Assmang, feel heavily penalised by the Royalty Bill which decided in a redraft of the proposed legislation not to change the 4% annual levy on their revenues.

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These companies may find themselves assessed on similar terms to the ferrochrome industry which would mean the production of iron ore would not be considered sufficiently beneficiated. Does this mean iron ore producers have to move into the production of steel which represents the next logical step in the iron ore chain?

Mngomezulu said of the potential debate at hand: “We’re still working on that one. But all base levels will be gazetted by the minister.”

Said Andre Wilkens, CEO of ARM: “The opportunities for beneficiation in iron ore are really limited. To create your own projects is very difficult.” ARM produces about 5.53 million tonnes of iron ore a year from its Beeshoek mine and has plans to produce more from its two Khumani projects.