ARM, Assore to build smelter in Malaysia

[miningmx.com] – AFRICAN Rainbow Minerals (ARM) and Assore are to build a R3bn ($312m) manganese alloy smelting facility in Malaysia in joint venture with Sumitomo Corporation and China Steel Corporation.

ARM and Assore said their boards have approved the construction of a 169,000 tonne/year smelter that would firstly service existing Asian clients as well as benefit from “reasonably priced hydro power” where price escalation was low.

Manganese ore for the project would be provided from the partner’s South African mines through the jointly controlled Assmang.

China Steel Corporation would take about a one fifth stake in the project for $62.46m providing it offtake of between 30,000 to 32,000 tonnes/year of manganese alloy, used in the fabrication of steel products.

ARM, Assore and Sumitomo Corporation would control the balance of the shares in the project although the respective shares held by the companies has not yet been disclosed to the market.

The project is an interesting development because it flies in the face of South Africa’s beneficiation strategy which has yet to claim a major new smelting investment in the steel-feed business.

There are a number of manganese mines under development in the country but none yet have installed smelting facilities, a level of investment that adds value to the ore and creates jobs – high on the government’s mining policy radar.

In October last year Tshipi e Ntle Manganese said it had mined its first manganese at the new Borwa mine in the Northern Cape while Kalahari Manganese is embroiled in a dispute with ArcelorMittal, the steelmaker, which is divesting from a joint venture that aimed to add a smelter to the existing manganese mine and sintering facilities.

ARM and Assore have ferromanganese smelting facilities in South Africa, and recently converted ferrochrome facilities to ferromanganese. While these may have been expanded, it seems power costs and availability played an important role in the investment decision, said Michael Kavanagh, an analyst for Noah Capital.

“The numbers have to add up [before investment can take place in South Africa],” Kavanagh said. “If South Africa wants to beneficiate minerals there has to be the groundwork first which includes cheap power,” he added.

“We don’t have cheap labour anymore, we don’t have cheap power while our location to certain markets is not a competitive advantage either. We have to be able to create competitive advantage,” he said.

Construction of the project was expected to begin in the first quarter of 2014 while furnace commissioning would take place in 2016, ARM and Assore said in a joint announcement.