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» Big Samancor manganese alloy cut
» Merafe tumbles on more ferrochrome cuts
» Xstrata slashes ferrochrome output

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ARM cuts chrome, manganese sales fall
Allan Seccombe
Posted: Mon, 08 Dec 2008

[miningmx.com] -- BARELY a month after shutting down two charge-chrome furnaces, African Rainbow Minerals (ARM) has shut another at its Assmang joint venture, reducing output to a third of capacity or 66,000 tonnes because of weak stainless steel markets.

Chrome is a key ingredient in the production of stainless steel and prices have been hit hard by a startling downturn in the global economy. Nobody can say with any certainty when the demand for resources will return.

ARM will review the markets and its assets in January after the year-end holidays to decide on production levels next year, said spokesperson Monique Swartz.
We are no longer doing the spot sales
Assmang is jointly owned by ARM and Assore. ARM’s share price was up 3.3% at R86.78 in line with the resources index, which was nine percent higher on the day.

In recent weeks, Xstrata and Merafe Resources, its partner in the South African ferrochrome business, have cut ferrochrome by half or 906,000t because of the state of the markets.

ARM is down to one furnace at its Machadodorp works to meet contracted deliveries. It will trim back production at its Dwarsrivier mine to match the decreased furnace output.

“If the furnaces are out for only a few months then we probably don’t need to look at retrenchments, but if it’s an extended period of time then we will. We’ll only be in a position at the end of January to make that call,” Swartz told Miningmx.

The closures announced today and on October 24 cut ARM’s power demand by 81 megawatts at Machadodorp.

Machadodorp generated a 653% increase in operating profit at R949m in financial 2008. The Dwarsrivier mine narrowed its loss to R3m from R12m before.

ARM’s Nkomati nickel operation, which has chrome as a byproduct, expects to sell 50% or 500,000t less of the metal in the form of ore and concentrate because of the weakening demand for chrome.

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Nkomati sold 1.1 million tonnes of chrome ore in its 2008 financial year. The concentrator has been in operation for just two months.

“We’ve cut back significantly on the chrome ore sales, but the chrome concentrate, we are still selling most of it although we are seeing bit of a slowdown,” she said.

Meanwhile, ARM expects to sell less manganese, which is also used to make steel. The manganese division sells 3.7 million tonnes a year, with 800,000t of that going onto the spot market.

“We are no longer doing the spot sales and we don’t think we will for the rest of the financial year (to June 2009) either,” Swartz said. “The contractual sales, at this stage, are largely unaffected - we’ve seen some deferments of sales, but very small volumes.

“We are comfortable we’ll have lower volumes year-on-year, but not far off the normalised contractual sales we have from that business.”

Manganese made up half of ARM’s earnings in financial 2008 and chrome 13%. The manganese mines posted a 948% increase in operating profit in the year at R4.7bn and the manganese alloy business a 217% improvement at R1.4bn.

Mining will continue at full production to restock depleted stockpiles after an exceptional year in financial 2008. That will continue until January, but again, ARM will decide then if the state of the market will show longer-term weakness and see about production cuts.

BHP Billiton’s 60% owned Samancor is cutting 170,000t or 23% of manganese alloy out of its 2009 production plans because of weak demand.

Samancor, which is 40% owned by Anglo American, will cut manganese ore production from its Hotazel and GEMCO operations in South Africa and Australia respectively by 1.5 million tonnes in 2009 to 5.5 million tonnes.

The plan is to take advantage of market conditions to replenish ore stockpiles, which have been run down, and rebuild furnaces in both countries, BHP Billiton said in a statement.

ARM is not planning any cutbacks at its 5,500 tonne/year Nkomati nickel project.