Potash exploration rights are selling like hot cakes in Saskatchewan, with several sites in the Regina area and nearby Belle Plaine being eyed as possible sites for new, billion dollar mines.
George Patterson, the executive director of exploration and geological services for Saskatchewan Energy and Resources said exploration permits on about 5.5 million hectares of land have been taken out provincewide by exploration companies in recent months.
That’s way up from the situation as recently as eight months ago when there were the total amount of permits that had been taken out for potash exploration only amounted to about 200,000 hectares, Patterson said.
“There certainly are a lot of permits,” Patterson commented, in a telephone interview Friday.
A combination of factors, including a tight world supply for potash and higher prices for that fertilizer product, have clearly played a role in sparking increased interest in potash exploration, Patterson said.
Among the company’s known to be interested in exploration and possible mine development, specifically in the Regina area, is Rio Tinto, the Anglo-Australian mining giant, which has acquired exploration rights to a number of blocks of property, including property east of the existing potash mine, owned by Mosaic, near Belle Plaine.
Preston Chiaro, the chief executive of energy and mineral with Rio Pinto, was quoted in a recent article in the National Post as saying the company is interested in developing projects in Argentina and Canada that would give the company 10 per cent of the world’s potash market by 2012.
Another business — the Vancouver based Potash One company — has obtained extensive exploration rights on several sections of property near Belle Plaine.
In a news release issued July 24, Potash One announced it had obtained full ownership of Potash Permit KP289 (also known as the legacy project) north of Belle Plaine.
That acquisition in conjunction with other acquisitions means the company has potash mineral rights for over 300,000 acres of property (in the general vicinity of Belle Plaine) the news release said.
In a telephone interview Friday Farhad Abasov, the senior vice-president of Potash One, said seismic and other testing of the legacy project site should occur this year.
Abasov said he is optimistic that the mine will be built, possibly within four to five years.
Total investment would be in excess of $1 billion, he said, adding that the mine would employ about 300 people.
A solution mining process would be used which would involve injecting water into the ground which would bring dissolved potash to the surface without the need for underground mining, Abasov said.
In addition to Potash One and Rio Tinto, several other players are involved in potash exploration in the province, Patterson said.
But it can be anywhere from seven to 10 years from the time initial exploration begins until a new potash mine goes into full production, Patterson said.
“These guys (buying exploration rights) are all in the preliminary exploration stage,” Patterson said.
But that exploration activity still has the potential to lead to major investment and employment in the potash industry, he said.
The new exploration activity is on top of already announced plans, valued at $7 billion to $8 billion, to expand existing potash mines in the province, Patterson said.
Showing posts with label exploration. Show all posts
Showing posts with label exploration. Show all posts
Friday, August 8, 2008
Thursday, August 7, 2008
Northern Offshore, Ltd to Acquire Two North Sea Semisubmersible Drilling Rigs
Northern Offshore, Ltd told the press that the company has entered into agreements with affiliates of Transocean, Inc. (NYSE: RIG ) to acquire the semisubmersible drilling rigs GSF Arctic II and GSF Arctic IV currently operating in the U.K. North Sea (collectively the “Rigs”). The total acquisition price for the two rigs is approximately US$750 million. The purchase of the GSF Arctic IV is expected to close in the third quarter of 2008 and the purchase of the GSF Arctic II is expected to close in the fourth quarter of 2008, following completion of existing contract commitments.
CEO Marion M. Woolie said: “We are very pleased to announce the planned acquisition of these strategic assets. This transaction will greatly improve the Company’s earnings visibility and will be accretive to shareholders. The acquisition is an important next step in the Company’s growth strategy and builds on the North Sea jackup acquisitions in 2007. The Rigs are well-maintained, high quality assets that will complement our existing fleet. They provide significant additional scale to our North Sea operations and facilitate a more cost efficient organization. The senior management of Northern Offshore, having been formerly employed by GlobalSantaFe, is well acquainted with the Rigs and their crews, which should ensure a safe and smooth integration process”.
Under the purchase and sale agreements, the Rigs will be owned by subsidiaries of Northern Offshore. Transocean will provide $745 million in seller financing through December 31, 2010 at an interest rate of 10% per annum. The financing will be secured by the Rigs, but non-recourse to Northern Offshore and its other affiliates. Closing is subject to customary consent of the Company’s lenders.
Northern Offshore, Ltd. is a Bermuda holding company which operates offshore oil and gas production and drilling vessels deployed around the world. The Company’s current fleet consists of one floating production facility, and five drilling units (a drillship, a semisubmersible and three jackup drilling rigs). The vessels operate in various markets including the North Sea, the Indian Ocean, offshore Russia and Southeast Asia
CEO Marion M. Woolie said: “We are very pleased to announce the planned acquisition of these strategic assets. This transaction will greatly improve the Company’s earnings visibility and will be accretive to shareholders. The acquisition is an important next step in the Company’s growth strategy and builds on the North Sea jackup acquisitions in 2007. The Rigs are well-maintained, high quality assets that will complement our existing fleet. They provide significant additional scale to our North Sea operations and facilitate a more cost efficient organization. The senior management of Northern Offshore, having been formerly employed by GlobalSantaFe, is well acquainted with the Rigs and their crews, which should ensure a safe and smooth integration process”.
Under the purchase and sale agreements, the Rigs will be owned by subsidiaries of Northern Offshore. Transocean will provide $745 million in seller financing through December 31, 2010 at an interest rate of 10% per annum. The financing will be secured by the Rigs, but non-recourse to Northern Offshore and its other affiliates. Closing is subject to customary consent of the Company’s lenders.
Northern Offshore, Ltd. is a Bermuda holding company which operates offshore oil and gas production and drilling vessels deployed around the world. The Company’s current fleet consists of one floating production facility, and five drilling units (a drillship, a semisubmersible and three jackup drilling rigs). The vessels operate in various markets including the North Sea, the Indian Ocean, offshore Russia and Southeast Asia
Mining News-TEAL finalizes funding of additional US$35 million
TEAL Exploration & Mining Incorporated (TSX-“TL”) (JSE-“TEL”) (“TEAL” or the “Group”) has announced that a consortium of two lenders, Standard Chartered Bank and Standard Finance (Isle of Man) Limited, part of the Standard Bank Group, has made available a loan facility to the Group that totals US$85 million.
This unsecured US$85 million facility replaces the previous US$50 million loan. The facility is available from July 18, 2008 to August 31, 2009. The loan is guaranteed by African Rainbow Minerals Limited, TEAL’s major shareholder.
The facility will be used to settle the existing US$50 million loan, and to continue funding exploration work, general corporate expenditure and working capital requirements, inter alia:
TEAL’s Lupoto Copper Project in the Democratic Republic of Congo (“DRC”), where small scale mining is underway;
Continuing exploration drilling to expand the current resource base at the Lupoto Copper Project, which will ultimately be used in the feasibility study aimed at assessing a mining operation capable of producing around 40,000 tonnes a year of copper;
Finalizing the feasibility study on the Konkola North Copper Project in Zambia, where TEAL intends using an existing shaft and other infrastructure to produce 25,000 tonnes a year of copper;
Continuing the large exploration drilling campaign that is underway within Area “A” on the Konkola North property; and
Progressing various other exploration and evaluation projects on TEAL’s properties in the DRC, Namibia, Zambia and Mozambique.
This unsecured US$85 million facility replaces the previous US$50 million loan. The facility is available from July 18, 2008 to August 31, 2009. The loan is guaranteed by African Rainbow Minerals Limited, TEAL’s major shareholder.
The facility will be used to settle the existing US$50 million loan, and to continue funding exploration work, general corporate expenditure and working capital requirements, inter alia:
TEAL’s Lupoto Copper Project in the Democratic Republic of Congo (“DRC”), where small scale mining is underway;
Continuing exploration drilling to expand the current resource base at the Lupoto Copper Project, which will ultimately be used in the feasibility study aimed at assessing a mining operation capable of producing around 40,000 tonnes a year of copper;
Finalizing the feasibility study on the Konkola North Copper Project in Zambia, where TEAL intends using an existing shaft and other infrastructure to produce 25,000 tonnes a year of copper;
Continuing the large exploration drilling campaign that is underway within Area “A” on the Konkola North property; and
Progressing various other exploration and evaluation projects on TEAL’s properties in the DRC, Namibia, Zambia and Mozambique.
Mining News-Australian Natural Gas Exploration Find off Australia’s Northwest
The Briseis-1 exploration well found gas over a depth of 151 feet (46 meters), in line with estimates before the well was drilled, New York-based Hess said today in a statement distributed on Business Wire. Two more wells will be drilled this year, it said.
Hess last year beat 10 rivals for the permit on the North West Shelf, with a commitment to drill 16 wells within the first three years at a cost of A$501 million ($469 million), making it the most-expensive license to be awarded in Australia. Last month, the company announced a gas discovery at the Glencoe-1 well, the first to be drilled in the permit.
“While we are still in the early stages of our exploration program in Australia, the results of these first two wells reinforce our view of the high impact potential of the WA- 390-P permit,” John O’Connor, president of exploration and production at Hess, said in the statement.
The license area, wholly owned by the U.S. company, lies to the southwest of the 40 trillion cubic feet Gorgon and Jansz gas fields, which Chevron Corp. is seeking to develop for liquefied natural gas exports. Hess has estimated the potential gas resource in the WA-390-P permit at between 2 trillion cubic feet and 15 trillion cubic feet.
The Jack Bates drill-rig will now be moved 25 kilometers to the southwest to drill the Nimblefoot prospect, Hess said.
source : bloomberg.com
Hess last year beat 10 rivals for the permit on the North West Shelf, with a commitment to drill 16 wells within the first three years at a cost of A$501 million ($469 million), making it the most-expensive license to be awarded in Australia. Last month, the company announced a gas discovery at the Glencoe-1 well, the first to be drilled in the permit.
“While we are still in the early stages of our exploration program in Australia, the results of these first two wells reinforce our view of the high impact potential of the WA- 390-P permit,” John O’Connor, president of exploration and production at Hess, said in the statement.
The license area, wholly owned by the U.S. company, lies to the southwest of the 40 trillion cubic feet Gorgon and Jansz gas fields, which Chevron Corp. is seeking to develop for liquefied natural gas exports. Hess has estimated the potential gas resource in the WA-390-P permit at between 2 trillion cubic feet and 15 trillion cubic feet.
The Jack Bates drill-rig will now be moved 25 kilometers to the southwest to drill the Nimblefoot prospect, Hess said.
source : bloomberg.com
Wednesday, August 6, 2008
Mining News-Australian Natural Gas Exploration Find off Australia’s Northwest
The Briseis-1 exploration well found gas over a depth of 151 feet (46 meters), in line with estimates before the well was drilled, New York-based Hess said today in a statement distributed on Business Wire. Two more wells will be drilled this year, it said.
Hess last year beat 10 rivals for the permit on the North West Shelf, with a commitment to drill 16 wells within the first three years at a cost of A$501 million ($469 million), making it the most-expensive license to be awarded in Australia. Last month, the company announced a gas discovery at the Glencoe-1 well, the first to be drilled in the permit.
“While we are still in the early stages of our exploration program in Australia, the results of these first two wells reinforce our view of the high impact potential of the WA- 390-P permit,” John O’Connor, president of exploration and production at Hess, said in the statement.
The license area, wholly owned by the U.S. company, lies to the southwest of the 40 trillion cubic feet Gorgon and Jansz gas fields, which Chevron Corp. is seeking to develop for liquefied natural gas exports. Hess has estimated the potential gas resource in the WA-390-P permit at between 2 trillion cubic feet and 15 trillion cubic feet.
The Jack Bates drill-rig will now be moved 25 kilometers to the southwest to drill the Nimblefoot prospect, Hess said.
source : bloomberg.com
Hess last year beat 10 rivals for the permit on the North West Shelf, with a commitment to drill 16 wells within the first three years at a cost of A$501 million ($469 million), making it the most-expensive license to be awarded in Australia. Last month, the company announced a gas discovery at the Glencoe-1 well, the first to be drilled in the permit.
“While we are still in the early stages of our exploration program in Australia, the results of these first two wells reinforce our view of the high impact potential of the WA- 390-P permit,” John O’Connor, president of exploration and production at Hess, said in the statement.
The license area, wholly owned by the U.S. company, lies to the southwest of the 40 trillion cubic feet Gorgon and Jansz gas fields, which Chevron Corp. is seeking to develop for liquefied natural gas exports. Hess has estimated the potential gas resource in the WA-390-P permit at between 2 trillion cubic feet and 15 trillion cubic feet.
The Jack Bates drill-rig will now be moved 25 kilometers to the southwest to drill the Nimblefoot prospect, Hess said.
source : bloomberg.com
Mining Invesment News-Global demand for iron-ore is real, strong, and still rising.
China continues to invest, especially domestically,” highlights new Kumba Iron Ore CEO Chris Griffith.
“They are taking more than 50% of seaborne iron-ore. Even if there is a global downturn, we see that Chinese demand for steel, and, therefore, for iron-ore, will continue and increase. There have been slight increases in China’s own production of iron-ore, but their grades are decreasing and so, on a rich-ore basis, their production is actually decreasing.”
Nor is Griffith alone in his confidence. Only last week, Roberto Castello Branco, investor relations director for Companhia Vale do Rio Doce, the world’s number one iron-ore- miner (and number three mining group, in terms of market capitalisation), speaking at the Euronext stock exchange, in Paris, said, “When you go to places like China, the Middle East, India and Vietnam, you perceive that we don’t have a bubble; the demand is real,” adding that “it is not a cyclical process, it is a structural change” in the commodities markets.
The global demand for iron-ore, and the concommitant desire to secure access to orebodies, is illustrated by the current competition to buy Nacional Minérios SA (Namisa), one of two iron-ore mining subsidiaries of Brazilian steelmaker Companhia Siderúrgica Nacional (CSN). Namisa expects to produce 7,5-million tons of iron-ore this year, and CSN is seeking to sell part or all of it in order to be able to reduce its debt burden. The steelmaker has brought in US investment bank Goldman Sachs to assist with the sale.
Press reports in Brazil state that Goldman Sachs valued Namisa at $10-billion, higher than estimates by various analysts, which ranged between $7-billion and $8-billion. Even so, international interest was immediate and strong.
Companies reportedly bidding include world number one steelmaker ArcelorMittal, Russia’s Severstal, an unidentified Japanese consortium, three Indian steelmakers – Essar Steel, JSW, and Tata Steel – and two Chinese consortiums, one of which includes both Baosteel and Shougang Group, with the other centred on private-sector steelmaker Shagang Group, despite the fact that it is still not clear how much of Namisa CSN will sell, or even if any sale will take place at all. Clearly, iron-ore is not only a hot commodity, but everyone involved sees it staying that way, and for some time. “We believe, as Kumba, that this is a really tight market,” affirms Griffith. “Demand for iron-ore exceeds supply. We’re certainly feeling bullish about the long-term future of iron-ore. For the next three to five years, supply is not going to be able to keep up with demand.”
Kumba, which is about two-thirds-owned by world number five (by market capitalisation) mining group Anglo American, and was listed on the JSE, in 2006, is currently the world’s fourth-biggest player in the seaborne iron-ore market. “We’re a significant player,” says Kumba GM: commercial Timo Smit. “But the top three are much bigger than us.” (Kumba is not Anglo American’s only iron-ore subsidiary; the London-listed group also owns 63% of recently established Brazilian iron-ore group IronX.)
The South African company is determined to grow with the rising demand for its product.
"Clearly, everyone in the market is looking to expand as much as they can. And so are we. We’re not focused on being number four or number five – that doesn’t drive us,” explains Griffith. “What drives us is to expand our production.” Currently, Kumba’s forecast annual production is 37-million tons a year to 38-million tons a year, of which nine-million tons a year are for the domestic market and 29-million tons a year are for export.
Of these exports, 37% go to China, another 37% to Europe, and 26% to the rest of Asia. “We have plans to increase our export capacity to 44- million tons a year in 2013, which would take our total production to 53-million tons a year. We have the potential to increase this to 70-million tons a year by 2015. Our project pipeline has the capacity to do this. The capability of doing it will be influenced by issues of infrastructure – power, water, and transport – and the situation of the market.” (Unlike rivals in Australia and Brazil, Kumba does not have its own railways and ports.
This expansion will be entirely organic. “We are not seeking acquisitions,” states Griffith. “Our board wants us to focus on the projects we are already working on. We have a wonderful project pipeline and our strategy is to focus on our pipeline.”
An important competitive advantage for Kumba is its ability to supply niche products.
These niche products are a coarse sinter product, from 5 mm to 8 mm in size, a direct reduction iron-ore product (which acts as an alternative, or supplement, to iron-ore pellets) with a size between 8 mm and 20 mm, and a direct reduction shaft product, ranging between 13 mm and 27 mm. “About 25% of our products are niche products,” reports Smit. “We get a premium on these products and we’re trying to increase the proportion of these niche products in our output. We have a niche market strategy,” confirms Griffith.
Currently, the company operates two mines, both in South Africa – Sishen, in the Northern Cape province, and Thabazimbi, in Limpopo province. In the six months ending June 30, 2008, Sishen produced 15,8-million tons, and Thabazimbi 1,3- million tons, of iron-ore products.
It is clearly part of our expansion strategy to focus first on the Northern Cape,” avers Griffith. “The Northern Cape is where we do most of our mining, and where we have the best ability to deliver on projects. However, we do have other projects in South Africa, at Thabazimbi, and at Zandrivierspoort, also in Limpopo. Outside South Africa, we have a project in Guinea, in West Africa."
The most advanced of these projects is the Sishen Expansion Project (SEP), with the first phase, designated SEP1, in production ramp-up. SEP uses jigging technology, rather than dense-media separation (DMS), to process the iron-ore, because jigging can handle lower grades of ore than DMS. Although delayed by the late commissioning of the crushing and sample plants, SEP1 achieved production of 1,3-million tons in the first six months of this year and, with the commissioning of the seventh and eighth jig modules scheduled during this quarter, the company expects that SEP1 will have a total production of five-million tons for this year.
At full production, SEP1 will add 13-million tons a year to Kumba’s output. The next phase, SEP1B, is currently under feasibility study and will add a further 0,4-million tons a year in 2009, while, beyond this, SEP2 is now in prefeasibility and will contribute 10-million tons a year by 2012.
“We have already secured expansion of the logistics line for SEP,” assures Griffith. “We’ll imminently announce the successful end of negotiations to expand the Sishen–Saldanha railway line.” Sishen’s products are railed to the Port of Saldanha, in the Western Cape province, for export. The Sishen–Saldanha railway is operated by Transnet Freight Rail, while Saldanha harbour, including the iron-ore export terminal, is operated by Transnet Port Terminals.
Next in line is the slightly misleadingly named Sishen South Project – Sishen South will be a completely new mine, and will be located 80 km south of the existing Sishen mine.
This R5,9-billion (in real 2008 terms) project is now in the final stages of its approval process, and, when in full production, will add another nine-million tons a year to Kumba’s output. Production at Sishen South is expected to start in 2012, with full production in 2013. Transnet will have to construct a 36-km branch line to link Sishen South to the main Sishen–Saldanha line, and they have committed to doing so. Despite its distance from Sishen, Sishen South will be able to share services with the older mine.
Apart from SEP2, there are two projects under prefeasibility study – Zandrivierspoort, and Project Phoenix. Zandrivierspoort is a quite substantial, but low-grade, magnetitie resource. The project is a 50:50 joint venture with ArcelorMittal South Africa. If it gets the go-ahead, Zandrivierspoort will enter production in 2013, and reach one-million tons a year. Project Phoenix is located at Thabazimbi and could, if realised, contribute 3,4-million tons a year to Kumba’s production. “The market is the key to unlocking Phoenix,” explains Smit. “We are doing studies on it. It will not be a decision we make in the short term. We have six years to decide. This gives us the time to do thorough studies.”
We are also looking at lower-grade deposits in the Northern Cape,” adds Griffith. For example, the Sishen C-grade project could add 10-million tons a year in production capacity. Further out, the Sishen South MGO could provide an extra 3-million tons a year.
Kumba also has projects under study to diversify its products. “We are investigating fines projects – value-adding pellets projects,” cites Griffith. “Pellets would be for both the export and domestic markets. And we are considering further value addition, beyond pelletisation.” The initial concept is for a pelletisation plant at Sishen with a production capacity of 1,5-million tons a year.
Abroad, there is the project in Guinea. “This is an early-stage greenfield exploration project,” elucidates Griffith. “It is too early to release any details.”
Abroad, Kumba is in dispute with ArcelorMittal over an iron-ore deposit in Senegal. This dispute is now in arbitration. “This arbitration process is confidential and it is not speedy – but I cannot say that you can write off Senegal as far as Kumba is concerned,” he comments. “In Guinea, we have 51% ownership of the company which has the exploration title. We are in a strong position. We have learnt lessons in Senegal.”
Meanwhile, back in South Africa, the power restrictions imposed by State-owned electricity utility Eskom have had an impact on Kumba. Although only 24 000 t of iron-ore production was lost in the first six months of this year owing to the power situation, Sishen mine has had to cease using electrical power (delivered by means of pantographs) for its giant ore-carrying trucks – now they run mainly on diesel. The result is that Sishen’s diesel consumption has increased 10% year-on-year. “Diesel fuel is more expensive than electricity, but it is cheaper than losing production,” he comments.
The company has committed itself to reducing electricity consumption at its DMS plants to 90% of the 2007 level, and has deferred waste prestripping at the Thabazimbi mine. Kumba is optimistic that it can meet its electricity saving targets without losing any more production. On the bright side, neither SEP nor Sishen South will be subject to any power restrictions during their ramp-up phases.
“They are taking more than 50% of seaborne iron-ore. Even if there is a global downturn, we see that Chinese demand for steel, and, therefore, for iron-ore, will continue and increase. There have been slight increases in China’s own production of iron-ore, but their grades are decreasing and so, on a rich-ore basis, their production is actually decreasing.”
Nor is Griffith alone in his confidence. Only last week, Roberto Castello Branco, investor relations director for Companhia Vale do Rio Doce, the world’s number one iron-ore- miner (and number three mining group, in terms of market capitalisation), speaking at the Euronext stock exchange, in Paris, said, “When you go to places like China, the Middle East, India and Vietnam, you perceive that we don’t have a bubble; the demand is real,” adding that “it is not a cyclical process, it is a structural change” in the commodities markets.
The global demand for iron-ore, and the concommitant desire to secure access to orebodies, is illustrated by the current competition to buy Nacional Minérios SA (Namisa), one of two iron-ore mining subsidiaries of Brazilian steelmaker Companhia Siderúrgica Nacional (CSN). Namisa expects to produce 7,5-million tons of iron-ore this year, and CSN is seeking to sell part or all of it in order to be able to reduce its debt burden. The steelmaker has brought in US investment bank Goldman Sachs to assist with the sale.
Press reports in Brazil state that Goldman Sachs valued Namisa at $10-billion, higher than estimates by various analysts, which ranged between $7-billion and $8-billion. Even so, international interest was immediate and strong.
Companies reportedly bidding include world number one steelmaker ArcelorMittal, Russia’s Severstal, an unidentified Japanese consortium, three Indian steelmakers – Essar Steel, JSW, and Tata Steel – and two Chinese consortiums, one of which includes both Baosteel and Shougang Group, with the other centred on private-sector steelmaker Shagang Group, despite the fact that it is still not clear how much of Namisa CSN will sell, or even if any sale will take place at all. Clearly, iron-ore is not only a hot commodity, but everyone involved sees it staying that way, and for some time. “We believe, as Kumba, that this is a really tight market,” affirms Griffith. “Demand for iron-ore exceeds supply. We’re certainly feeling bullish about the long-term future of iron-ore. For the next three to five years, supply is not going to be able to keep up with demand.”
Kumba, which is about two-thirds-owned by world number five (by market capitalisation) mining group Anglo American, and was listed on the JSE, in 2006, is currently the world’s fourth-biggest player in the seaborne iron-ore market. “We’re a significant player,” says Kumba GM: commercial Timo Smit. “But the top three are much bigger than us.” (Kumba is not Anglo American’s only iron-ore subsidiary; the London-listed group also owns 63% of recently established Brazilian iron-ore group IronX.)
The South African company is determined to grow with the rising demand for its product.
"Clearly, everyone in the market is looking to expand as much as they can. And so are we. We’re not focused on being number four or number five – that doesn’t drive us,” explains Griffith. “What drives us is to expand our production.” Currently, Kumba’s forecast annual production is 37-million tons a year to 38-million tons a year, of which nine-million tons a year are for the domestic market and 29-million tons a year are for export.
Of these exports, 37% go to China, another 37% to Europe, and 26% to the rest of Asia. “We have plans to increase our export capacity to 44- million tons a year in 2013, which would take our total production to 53-million tons a year. We have the potential to increase this to 70-million tons a year by 2015. Our project pipeline has the capacity to do this. The capability of doing it will be influenced by issues of infrastructure – power, water, and transport – and the situation of the market.” (Unlike rivals in Australia and Brazil, Kumba does not have its own railways and ports.
This expansion will be entirely organic. “We are not seeking acquisitions,” states Griffith. “Our board wants us to focus on the projects we are already working on. We have a wonderful project pipeline and our strategy is to focus on our pipeline.”
An important competitive advantage for Kumba is its ability to supply niche products.
These niche products are a coarse sinter product, from 5 mm to 8 mm in size, a direct reduction iron-ore product (which acts as an alternative, or supplement, to iron-ore pellets) with a size between 8 mm and 20 mm, and a direct reduction shaft product, ranging between 13 mm and 27 mm. “About 25% of our products are niche products,” reports Smit. “We get a premium on these products and we’re trying to increase the proportion of these niche products in our output. We have a niche market strategy,” confirms Griffith.
Currently, the company operates two mines, both in South Africa – Sishen, in the Northern Cape province, and Thabazimbi, in Limpopo province. In the six months ending June 30, 2008, Sishen produced 15,8-million tons, and Thabazimbi 1,3- million tons, of iron-ore products.
It is clearly part of our expansion strategy to focus first on the Northern Cape,” avers Griffith. “The Northern Cape is where we do most of our mining, and where we have the best ability to deliver on projects. However, we do have other projects in South Africa, at Thabazimbi, and at Zandrivierspoort, also in Limpopo. Outside South Africa, we have a project in Guinea, in West Africa."
The most advanced of these projects is the Sishen Expansion Project (SEP), with the first phase, designated SEP1, in production ramp-up. SEP uses jigging technology, rather than dense-media separation (DMS), to process the iron-ore, because jigging can handle lower grades of ore than DMS. Although delayed by the late commissioning of the crushing and sample plants, SEP1 achieved production of 1,3-million tons in the first six months of this year and, with the commissioning of the seventh and eighth jig modules scheduled during this quarter, the company expects that SEP1 will have a total production of five-million tons for this year.
At full production, SEP1 will add 13-million tons a year to Kumba’s output. The next phase, SEP1B, is currently under feasibility study and will add a further 0,4-million tons a year in 2009, while, beyond this, SEP2 is now in prefeasibility and will contribute 10-million tons a year by 2012.
“We have already secured expansion of the logistics line for SEP,” assures Griffith. “We’ll imminently announce the successful end of negotiations to expand the Sishen–Saldanha railway line.” Sishen’s products are railed to the Port of Saldanha, in the Western Cape province, for export. The Sishen–Saldanha railway is operated by Transnet Freight Rail, while Saldanha harbour, including the iron-ore export terminal, is operated by Transnet Port Terminals.
Next in line is the slightly misleadingly named Sishen South Project – Sishen South will be a completely new mine, and will be located 80 km south of the existing Sishen mine.
This R5,9-billion (in real 2008 terms) project is now in the final stages of its approval process, and, when in full production, will add another nine-million tons a year to Kumba’s output. Production at Sishen South is expected to start in 2012, with full production in 2013. Transnet will have to construct a 36-km branch line to link Sishen South to the main Sishen–Saldanha line, and they have committed to doing so. Despite its distance from Sishen, Sishen South will be able to share services with the older mine.
Apart from SEP2, there are two projects under prefeasibility study – Zandrivierspoort, and Project Phoenix. Zandrivierspoort is a quite substantial, but low-grade, magnetitie resource. The project is a 50:50 joint venture with ArcelorMittal South Africa. If it gets the go-ahead, Zandrivierspoort will enter production in 2013, and reach one-million tons a year. Project Phoenix is located at Thabazimbi and could, if realised, contribute 3,4-million tons a year to Kumba’s production. “The market is the key to unlocking Phoenix,” explains Smit. “We are doing studies on it. It will not be a decision we make in the short term. We have six years to decide. This gives us the time to do thorough studies.”
We are also looking at lower-grade deposits in the Northern Cape,” adds Griffith. For example, the Sishen C-grade project could add 10-million tons a year in production capacity. Further out, the Sishen South MGO could provide an extra 3-million tons a year.
Kumba also has projects under study to diversify its products. “We are investigating fines projects – value-adding pellets projects,” cites Griffith. “Pellets would be for both the export and domestic markets. And we are considering further value addition, beyond pelletisation.” The initial concept is for a pelletisation plant at Sishen with a production capacity of 1,5-million tons a year.
Abroad, there is the project in Guinea. “This is an early-stage greenfield exploration project,” elucidates Griffith. “It is too early to release any details.”
Abroad, Kumba is in dispute with ArcelorMittal over an iron-ore deposit in Senegal. This dispute is now in arbitration. “This arbitration process is confidential and it is not speedy – but I cannot say that you can write off Senegal as far as Kumba is concerned,” he comments. “In Guinea, we have 51% ownership of the company which has the exploration title. We are in a strong position. We have learnt lessons in Senegal.”
Meanwhile, back in South Africa, the power restrictions imposed by State-owned electricity utility Eskom have had an impact on Kumba. Although only 24 000 t of iron-ore production was lost in the first six months of this year owing to the power situation, Sishen mine has had to cease using electrical power (delivered by means of pantographs) for its giant ore-carrying trucks – now they run mainly on diesel. The result is that Sishen’s diesel consumption has increased 10% year-on-year. “Diesel fuel is more expensive than electricity, but it is cheaper than losing production,” he comments.
The company has committed itself to reducing electricity consumption at its DMS plants to 90% of the 2007 level, and has deferred waste prestripping at the Thabazimbi mine. Kumba is optimistic that it can meet its electricity saving targets without losing any more production. On the bright side, neither SEP nor Sishen South will be subject to any power restrictions during their ramp-up phases.
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