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Mining & Metals
The Northern Cape’s biggest mining companies are ramping up production despite a global recession.
Mining is the biggest contributor to gross regional domestic product (GRDP) at 30%. Diamonds, iron ore and copper are the most important minerals. The South African mining sector as a whole declined in terms of output by 7% in 2008 and by 7.6% in the first half of 2009. Despite this gloomy scenario, a number of expansion projects are under way in the Northern Cape mining sector.
Iron ore is mainly found at Sishen/Kathu, copper is mined at Okiep, Springbok and Aggeneys, while diamonds are found in several areas. Historically, Kimberley was the centre point of the diamond industry and it still has active mines but diamonds are also found in the Richtersveld, Namaqualand, along the Orange River and at sea.
A 2.1% decline in the sector’s size to the end of 2007 had a negative effect on many Northern Cape families. Whereas 4.85% of the province’s workforce was employed in the mining sector in 2001 (16 545 people), this figure had dropped to 2.69% (or 14 500 people) in 2008. Lower commodity prices (the price of iron ore fell by 40% in 2009) and a reduced global demand for diamonds were the chief reasons for the downturn.
Diamonds
In the context of the economic downturn, the implementation of the Northern Cape Diamond Strategy takes on increased importance. This scheme aims to diversify and transform the provincial economy by carrying out seven projects with a focus on mineral beneficiation. In 2008, the Kimberley Diamond and Jewellery Centre was launched and 30 people are currently employed there. Since then, provincial government has focused on achieving these goals:
• Launch of the Kimberley International Diamond and Jewellery Academy and Incubation Centre
• Creation of a business plan for the Kimberley Diamond and Jewellery Hub
• Relocation of the State Diamond Trader to Kimberley
• Increase of diamond polishing and cutting capacity
• Implementation of monitoring and evaluation strategies
• Registration of brands to do with Kimberley’s diamond and jewellery industry
De Beers is the world’s foremost producer of uncut diamonds; its mines produce 95% of South Africa’s total output. Of this, the company’s Northern Cape mines account for 38% of total De Beers production. In 2008, De Beers Consolidated Mines’ South African operations recovered almost 12 million carats.
Modern mining practices have revitalised the mining industry in the Northern Cape. The Dutoitspan Mine, in Kimberley, has had its estimated lifespan extended by six years due to new extraction and treatment processes. A new, ‘gentle’ recovery process was also recently installed at De Beers’ large Finsch plant. In 2008, Finsch produced 2.317 million carats.
Other major companies active in the province are Trans Hex (which owns Baken in the Lower Orange region and three mines in the Richtersveld) and Alexkor, a joint venture between the national government (51%) and the community of the Richtersveld, which is very active in looking for diamonds off-shore. Petra Diamonds (Sedibeng mine), Dwyka Diamonds, Rockwell Diamonds, Pikwane Diamonds, Diamond Core Resources and Tawana Resources are among the smaller companies to have entered the market, in some cases having bought mines from De Beers or Trans Hex.
Away from the underground kimberlite pipes and fissures, river and coastal deposits are also present in the Northern Cape. Diamonds have been recovered along the Orange, Buffels, Spoeg, Horees, Groen, Doom and Swart rivers in the province, while coastal deposits have been found from the mouth of the Orange River to Lamberts Bay.
Copper
The Northern Cape is responsible for around 18% of South Africa’s total copper production, with the two most prominent mines located in Nababeep and Aggeneys. The Carolusberg Mining Complex has copper reserves of 37.5 million tons, while the Nigramoep deposit has 15 million tons.
Lead and zinc
Aggeneys, in the Namaqualand district of the Northern Province, is responsible for approximately 93% of South Africa’s lead production, and 12% of all world lead exports. Zinc is less abundant, but the province is still responsible for about 43% of South Africa’s overall zinc production. Anglo American is investing R4-billion in the Gamsberg zinc deposit near Aggeneys, which is reported to hold about 93 million tons of zinc, and could produce as much as 300 000 tons annually.
Iron ore
The Northern Cape produces more than 84% of South Africa’s iron ore. Chinese demand for iron ore is a major factor in sustaining production volumes.
The province has two major iron belts, from Postmasburg to Hotazel, and running through Sishen and Kathu. Sishen is the most important iron-ore mine in South Africa, where operations include extraction and four beneficiation plants. The availability of natural resources, labour and infrastructure (including the Sishen-Saldanha railway line), make Sishen the ideal location.
At the time of writing, an extraordinary tussle was under way for the prospecting rights to the Sishen Mine. When ArcelorMittal (Mittal) failed to convert its 21.4% mining right in the Sishen Mine (the rest of which is owned by Kumba), Kumba cancelled its preferential contract to supply Mittal with iron ore. Mittal argued that the contract remained binding and that they were entitled to keep receiving iron ore at the agreed price from Kumba. There was much surprise in March 2010 when a new and unknown company, Imperial Crown Trading, was awarded the prospecting rights to Sishen. All of this is under review by the Department of Mineral Resources.
Sishen
This Kumba Iron Ore facility at Kathu increased production by 16% in 2009, to 39.4 million tons, mostly as a result of improved efficiencies. The jig plant increased production by 121% and the aim is to have it producing 13 million tons by 2010. Employing more than 9 000 people and with an open pit extending more than 12km, everything about Sishen mine is huge. Kumba intends applying new technologies to material that previously was dumped as waste, with the goal of extracting up to 13 million tons of usable ore. A mine operation has been launched south of Sishen at Kolomela and is reviewed in a separate article.
Khumani iron-ore project
Assmang is set to spend R5.5-billion on ramping up production of iron ore at Khumani from the 10 million tons per annum initially planned for the site to 16 million tons. The first phase of this greenfields project was completed in 2009 at a cost of R4.5-billion. Assmang is a joint venture comprising African Rainbow Minerals and Assore. The extra six million tons will be assigned as follows: export (four) and domestic use (two).
Manganese
The overwhelming majority of the world’s manganese comes from the Postmasburg and Kalahari regions of the Northern Cape. The province is responsible for 25% of the world’s exports of the mineral.
Assmang has two manganese mines in the province: Nchwaning and Gloria. S a m a n c o r ( a j o i n t v e n - ture between BHP Billiton and Anglo-American) runs the Hotazel Manganese Mines comprising Wessels, Mamatwan and a sinter plant.
Hotazel is the site of a new manganese mine, Tshipie Ntle Manganese Mining (Tshipi), which is a joint venture between Pallinghurst Co-Investors (led by Brian Gilbertson) and a black empowerment company
representing several groups called Ntsimbintle Mining. Singapore-based OM Holdings acquired a 26% interest in Ntsimbintle in March 2010 for R430-million and will draw on their experience in marketing the manganese produced by Tshipi to China. Indications are that Tshipi can produce about 2.2 million tons of ore per year, for about 60 years.
The Kalagadi manganese project involves the construction of a manganese mine and sinter plant near Hotazel in the Northern Cape, and was initiated by Kalagadi Manganese Ltd, a new company comprising mainly black business leaders, with women in many leadership positions. The Industrial Development Corporation is a 10% shareholder in this project by virtue of its investment of about R60-million in start-up costs. ArcelorMittal became a 50% shareholder in the project when it paid about R3.4-billion.
The production capacity at the mine will have to be three million tons a year to produce the projected 2.4 million tons of sinter at the plant. The associated plan to build a ferromanganese smelter complex at the Coega Industrial Development Zone (IDZ) in the Eastern Cape has been put on hold until economic conditions improve.
Rail expansion
Supporting these increases in mineral extraction is a complementary upgrading and expansion of the capacity of the railway lines to the coast to cope with these extra volumes. All told, the iron-ore channel is being extended from 38 million tons per year to 58 million tons per year. The final capacity target is intended to be reached by the year 2012 with an interim target of 47 million due to be reached in 2010.
The line will be upgraded, new rolling stock added and a new loop added to service the new mines mentioned above. There is a possibility that some form of private-public partnership might be entered into to expand the line.
Other minerals
Other important minerals mined in the Northern Cape include limestone, gypsum, granite, verdite, mica, rose quartz and various semiprecious stones. PPC Lime has two large plants in the north-eastern corner of the province.
Transformation initiatives
The Mineral and Petroleum Resource Development Act (2002) requires all mining companies to have a comprehensive social and labour development plan. Part of this plan involves gearing procurement towards historically disadvantaged people and their companies. This is known as the Preferential Mining Procurement Initiative (PMPI): all of the big mining houses operational in the Northern Cape have committed to support this initiative and a suppliers database and a website for mining companies to advertise their needs has been created.
As an example of this principle at work, BEE company Setjhaba was awarded a R400-million contract by De Beers to load and haul material from Kimberley Mines.
A specially focused funding vehicle has been established. The Northern Cape Growth Fund will assist companies in the mining supply sector and also focus on companies intent on setting up companies to beneficiate the raw materials produced by the mining sector.
