White elephant ‘will be a black elephant spewing manganese’
Kalagadi Manganese, the R9bn manganese mine the industry thought would never happen is starting to ramp up production.
The mining company, chaired by Daphne Mashile-Nkosi, is targeting October 2019 for steady-state production of 2.4-million tonnes a year of sintered manganese, a form of manganese no other company in SA produces except South32, which uses it in its own alloy smelters.
"This white elephant which is so famous in the Northern Cape will be a black elephant spewing manganese," Mashile-Nkosi said, referring to the black colour of raw manganese.
The 350m-deep mine has started blasting ore, with a steep ramp-up to 67,269 tonnes of manganese ore in December as the company embarks on bord-and-pillar development on the thick deposit, taking delivery of machinery each month to reach the target. The mine will generate 3-million tonnes of ore a year to convert into 2.4-million tonnes of sinter, which is in demand in Chinese steel mills because of its reduced levels of pollutant gases and higher manganese content.
Our focus now is to get this mine and sinter plant into steady-state production and repay our debtDaphne Mashile-Nkosi,
It has been a long and difficult decade-long project that came perilously close to financial distress a number of times, with Mashile-Nkosi telling stories of begging the Industrial Development Corporation (IDC) — the 20% partner in the mine — for money to pay salaries, borrowing money from friends and sleepless nights fretting about empty bank accounts at the end of the month.
"It’s been a humbling process," she said, but holds up the IDC support and that of the African Development Bank as creating a model that could be used for other start-up projects and fostering true black empowerment rather than a system of buying stakes in existing companies.
Part of that self-awareness is slowing the plans to build a smelter for nearly R4bn to produce high carbon ferromanganese, which is a premium product to sell into the steel market and is fetching $1,300 a tonne.
"We don’t have the capacity right now to raise that kind of capital. When we spoke of doing a three-in-one project with the mine, sinter plant and smelter we did not realise how difficult it would be to raise capital," Mashile-Nkosi said.
"Our focus now is to get this mine and sinter plant into steady-state production and repay our debt.
"The IDC has given us eight years. We think at these prices we can repay it sooner than that. Then we’ll look at our smelter. We have all the design and engineering work ready to go."
Kalagadi processed and sold 500,000 tonnes of manganese from on-reef development and purchases from third parties. It loaded the ore on open wagons and into containers to rail to Port Elizabeth as well as trucking it to the coast.
Third-party purchases had dried up as the mine started to ramp up, said Mashile-Nkosi.
Kalagadi was keen to do business with its neighbour, South32, which had millions of tonnes of ultra-fine manganese stocked at its Blackrock mine and which would be a good feedstock for the sinter plant, she said. Talks had, however, proved fruitless.