South African Firm Working with ArcelorMittal on Manganese Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Kalagadi Manganese (South Africa), 80% owned by Kalahari Resources, a company majority-controlled and owned by black women, has announced a strategic equity partnership with ArcelorMittal (AM), one of the world's largest steel companies. The 50-50 joint venture will develop a manganese mine, beneficiation plant and sinter complex in South Africa's Northern Cape Province and a smelter complex at Coega, the new industrial zone and port on the country's coast just north of the city of Port Elizabeth. The state's Industrial Development Corporation will hold the 20% balance in the project.

The project partners in the $600 million development will build a mine and sinter plant at Hotazel that will produce 2.4 million tons per annum (TPA) of sinter product. The ferro-manganese alloy production plant will have an initial production capacity of 320,000 (TPA), which could be doubled in the long-term.

Kalagadi Manganese struck a favorable deal with AM. The latter will provide $220 million of the project financing and will provide business and technical assistance and has agreed to up to half of the sinter plant's output at market-related prices. An agreement has been signed between Kalagadi and the state power utility Eskom, which, under developmental electricity-pricing programs, will secure power supply at a favorable price. Shaft sinking and mine construction is scheduled to start in March 2008, and the $300 million smelter construction will start at the end of 2008 with an 18-month schedule to completion.

The project's location overlies the Kalagadi Managanese Basin, a resource containing about 80% of the world's known manganese reserves. Drilling has confirmed the presence of high-grade manganese ore sufficient to support an operating mine life in excess of 20 years. The ferro-manganese output at Coega will provide at least 50% of AM's requirements. The mining and smelter operations will employ 800 people during construction and 1,300 when operational.

Kalagadi Chairwoman Daphne Mashile-Nkosi said: "We are delighted to have attracted a strategic equity partner of the caliber of ArcelorMittal, the biggest player in the global steel industry. The deal is particularly important as it comes at a time when we are spearheading the trend towards backward integration into raw materials. AM's operating track record in South Africa is a significant advantage to the implementation and operation of the project."

The deal is well-timed, as manganese is expected to see healthy price increases in the coming years. Global steel production takes 90% of current consumption, and the metal is increasingly being used to replace nickel in stainless and special alloy steels. It gives toughness to steel products, such as rails, and is used as an agent in many metals processes. It is used to strengthen auto body metals and is a component of the next generation of fuel-cell batteries.

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