Kalagadi on course for 2012 start

[miningmx.com] — KALAGADI Manganese says it has reached significant milestones in the construction of its R7bn mine and sinter plant development close to Hotazel in the Northern Cape, remaining on track to start production in June 2012.

With all development so far financed with shareholders’ cash, executive chairwoman Daphne Mashile-Nkosi said the group has sunk both the ventilation and main shafts of the mine down to the production level of around 280m. The group envisages annual production of 3 million tonnes per year.

“What you see here has been funded from our own bank account,’ she told journalists during a site visit on Tuesday. “There’s already value on the ground.’

Around 52% of the sinter plant, which will process all of the mine’s ore to a 48% manganese sinter product, has been completed, according project manager George Maluleke. The plant is due for cold-commissioning in March, with a nameplate capacity of 2.4 million tonnes output per year.

Mashile-Nkosi said the group has a signed agreement with Transnet Freight Rail (TFR) to transport its total sinter output to Coega in the Eastern Cape, already valid from January next year. This would tie in with the stated intentions of TFR CEO Siyabonga Gama to have all the Northern Cape’s manganese production railed to the Ngqura port at Coega, as opposed to Saldanha in the Western Cape.

The development of the third component of the Kalagadi Manganese project, a 700,000 tonnes per year ferro-manganese smelter at Coega, would start as soon as Kalagadi’s financing deals have been finalised, Mashile-Nkosi said.

The smelter, to be built at a cost of R4.2, would give the total project a price tag of R11.2bn, of which 40% has been funded by shareholders’ contributions. The remaining 60% are funded by development financing institutions and commercial banks. Mashile-Nkosi said the company has already agreed to a common term sheet with all the lenders, and expects the loans to be finalised by end-October.

That would signal not only the go-ahead for the construction of the smelter, but also a 23km railway line connecting the sinter plant site with the Hotazel-to-Port Elizabeth manganese line.

While Kalagadi has already secured a 50% offtake agreement for both the ferromanganese and remaining sinter product with ArcelorMittal (the international group; not the South Africa subsidiary), Mashile Nkosi said it would pursue other offtake opportunities to minimise the group’s exposure to the spot market.

Asked whether the significant amount of new manganese supply from South Africa might cause an overhang in the world market, Mashile-Nkosi said Kalagadi had an edge given that it would sell beneficiated products, and not unprocessed ore.

“There wouldn’t have been a business if we didn’t beneficiate,’ she said. “Just for selling sinter (in 2012) we’ll be looking at a turnover of R7bn, followed the next year by between R12bn and R13bn.’