[miningmx.com] – THE economics of up to $480m worth of potential mining investment in the Northern and Limpopo provinces may be negatively affected if discretion was handed to the mines minister in respect of pricing for certain exports, said Aquila Resources.
Aquila Resources is an Australian-listed mining company which is developing two projects in South Africa: the Thabazimbi iron ore and Avontuur manganese project in the Limpopo and Northern provinces respectively.
Speaking at a presentation to media, Michael Halliday, who heads Aquila’s South African projects, said amendments to the Minerals and Petroleum Resources Development Act (MPRDA), currently under discussion in parliament, was a concern to the company.
“It’s obviously a concern,” said Halliday. “The freedom given to minister is a concern. Local beneficiation is something we are in favour of, but setting of prices could affect the economics of the projects,” he said.
In terms of one amendment to the MPRDA, the mines minister will have the discretion to declare certain minerals ‘strategic’ which could materialise as ‘developmental pricing’, capping the value of exports or placing a quota on export volumes.
It’s thought the amendment is being specially formulated to cater for Eskom’s future coal procurement. The power utility has claimed that its primary energy costs are far outstripping its ability to increase revenue for electricity supply.
Supply of iron ore, however, is also not without its controversy especially as Kumba Iron Ore and ArcelorMittal South Africa (AMSA) are soon to enter arbitration over the cost of iron ore supplies to the steelmaker traditionally supplied on a cost plus basis.
“Hopefully common sense will prevail,” said Halliday. “We have seen a similar process in Australia and now things have changed with a change of government,” he said.
The Mineral Resource Rent Tax (MRRT), an unpopular piece of legislation during the tenure of Australia’s Labour government, is due to be ditched by newly elected prime minister, Tony Abbott, who leads a coalition government.
Aquila has so far spent R450m exploring South Africa’s manganese and iron ore fields since 2006 and has former mineral resources department director, Nchakha Moloi’s Rakana Consolidated Mines as an empowerment partner.
“We are open for business looking for opportunities,” said Tony Poli, executive chairperson of Aquila Resources and its founder with some 30% of the company capitalised on the Australian Stock Exchange at about A$500m.
Poli, on a visit to South Africa in order to meet with executives from other mining companies, said the company was looking to invest up to $480m in the country of which $180m would be on the proposed 1.5 million tonne/year (mtpa) Avontuur manganese mine, and between $215m and $300m on Thabazimbi, an iron ore prospect containing an estimated 37.1mt in measured resources.
A key element in proceeding with the investments was securing rail offtake agreements with Transnet. Martin Stulpner, senior commercial manager for Aquila in South Africa, said the project’s needed “cheap means of transport”, but that he was confident of Transnet’s cooperation following discussions.
One potential headwind, however, is a troublesome “confusion” regarding claims over part of the mineral rights to Avontuur, its most advanced project.
“There is a company claiming right on the area on Avontuur; there is an overlap,” said Poi in response to questions on the matter.
“The best way to attack the issue is to have the matter discussed face-to-face. We don’t want to go into details on the matter,” said Poli who declined to say whether the other party claiming ownership rights had applied first for the prospect.
