South Africa has put global equity markets on notice that it is open to new investment to help the mineral rich country achieve a transition from an exporter of raw minerals to a value-add minerals processor and exporter. Addressing the opening day today of the three-day Paydirt 2010 Africa Downunder Conference, in Perth, South Africa’s Minister of Mineral Resources, the Hon. Susan Shabangu, said if South Africa was to succeed in extracting its mining endowment, it must conduct its mining industry differently.
“We could continue to mine and export our raw mineral commodities but we have recognised the need to move from a resource-based economy to a secondary development economy by increasing the value of our minerals via beneficiation, before they are exported,” Ms Shabangu said. “This transition provides significant new investment opportunities both for domestic African investors and international resources and value-add mining and energy investors. This will also help unlock renewed interest in South Africa’s minerals wealth.
“However, we recognise we need to enlist particularly, the backing of strategic international partners experienced in beneficiation development and operation. Australia and other like-minded resources countries are obvious sources for this new investment opportunity.”
She said her Government well recognised the need to revitalise the country’s resourcres sector and to rebuild its global competiveness. “As a result, we have undetaken to review the mining commitments originally outlined in our 2004 mining charter and the outcome of that review is due this month.”
The Minister added that South Africa also planned to streamline its mineral processes to achieve greater transparency, including halving from 12 months to six the approvals for mining licences, and from six months to three for prospecting licences.
She also signalled to equity markets that South Africa had identified a number of constraints to overcome to develop a more sustainable long-term mining plan, and infrastructure gains were paramount in that objective. “For the mining industry to prosper, we need to achieve new paradigms in the way we conduct mining, including introducing new technology within the emerging green economy paradigm.”
Australia’s Secretary of the Department of Foreign Affairs and Trade, Dennis Richardson, said the growth of Australia’s investment in Africa had been impressive – led by its exploration and mining companies. He encouraged Australia’s mining fraternity to be the catalyst for boosting the country’s current levels of A$20 billion investment in Africa’s economy, particularly Africa’s mineral opportunities.”This growth has been in absolute terms and geographic terms,” Richardson said.
“Over 170 Australian companies are now involved in mining projects in nearly 40 African countries – with this footprint covering involvement in nearly 500 mines and exploration projects. In addition, Australian companies are active in delivering mining services, engineering, consulting and mining analyses, bringing world-class technology and expertise to African resources’ operations. This has reinforced Australia’s well deserved global reputation for mining integrity, safety, and with good mining practices and high environmental standards.
“Significantly, the potential for Australia to lift its mining investment in Africa comes at a time when Africa itself is on the move. Despite many challenges and some exceptions, Africa today is more politically stable and prosperous than at any time in its past.”
Richardson said Africa had in recent years, seen an end to many of its civil wars, and governance had moved in the right direction. “Africa does have its challenges, being home to 33 of 49 of the world’s least developed countries,” he said. “Economic growth has slowed during the Global Financial Crisis and will remain uneven and vulnerable to shocks in the global economy. The countries which have achieved the strongest growth are those that have undertaken significant reforms. The result of these reforms has been strong growth in inward investment – from $9 billion in 2002 to $62 billion in 2008.
“Predictions are that Africa’s consumer spending will reach $1.4 trillion dollars by 2020 with 128 million households having discretionary spending. Africa therefore is on new growth trajectory and we believe Australia is in a unique position to help build Africa’s mineral resources sector and harness its economic potential. Australia is proud to be part of that story, and to be playing a part in Africa’s future.”
Ravaged by a slump in diamond production, Botswana says its willingness to go into debt and to introduce new legislative measures sufficient to revive its recovering resources sector, will start delivering substantial and full anticipated gains by next year. Botswana’s Permanent Secretary, Ministry of Minerals, Energy and Water Resources, Gabaake Gabaake, said the country was now well positioned to “take off” once Botswana had shaken off the last of its recessionary impacts. “All of our proposed changes will be effected by the end of 2011 and while a minerals downturn in 2009 presented without doubt the biggest challenge for our mining industry, recovery is now well underway,” Gabaake said.
“The new minerals policy objectives will ensure economic benefits for Botswana are maximised from the resources recovery while enabling private investors to earn competitive returns. We take seriously the return to investors from projects and we have ensured such investors can repatriate profits so that a competitive environment to stimulate mineral exploration and exploitation ensues. Our target also is to issue prospecting licences within 60 days of application, mining licences within 30 days and two days only for diamond export permits.”
The strategy includes a switch to minerals beneficiation and downstream activities to be undertaken in Botswana if feasible and to encourage diversification, and to have all sales of diamonds produced in Botswana, sold in Botswana. Suppliers are also being encouraged to manufacture mining consumable such as reagents and equipment spares, at a local level.
“The turnaround strategy is working, with the latest Fraser Institute report ranking Botswana as the highest ranking African country for attractiveness of mining policy,” Gabaake said. “Such surveys have highlighted the access to road, power and skilled labour pools as areas of major concern needing addressing, and as a result, we are now running a budget deficit to bring on stream such major projects as the Morupule colliery expansion and the 600 MW Morupule B power station to boost electricity supplies.
“The deficit also allows for the construction of three dams (Dikgathong, Lotsane and Thuie) to meet water demand and feasibility studies are underway on improving our rail networks, particularly as used for minerals projects.”
Botswana saw its 2009 diamond production collapse to 17.7 Mct from 32.6 Mct in 2008. “A significant improvement in diamond production is expected by the end of 2010 as markets are now recovering,” Gabaake said. Botswana’s 2009 diamond output accounted for 14% of world diamond output, commanding 17% of the total world diamond production value of $8,636 million.
Gabaaka said the impact of the downturn was felt at employment levels, with average job levels in Botswana’s mining sector falling to 15,359 last year – 18% lower than the sector’s 18,820 jobs capacity in 2008.
Other speakers today included the CEO, Peter Sullivan, of Perth-based and African-focused gold miner, Resolute Mining. He anticipates significant cash generation over the next four years as its flagship Syama gold mine in Mali accesses its main ore zone in the open pit in 12 months time. He explained that the enhanced Syama production (current production is sourced only from processing of ore from the open pit cutback) would favourably change the cash costs of the company, substantially lift cash flows and be matched by major liability reductions by December next year.
“These liability reductions include a closing out by September 2011 our remaining $80 million gold hedge book, debt payments of $30 million, a potential convertible note conversion of $75 million in December next year and a potential options exercise around that same time worth around $60 million. From that point of view, Resolute will achieve a substantial transition to a much stronger cash backed, higher production operation with balance sheet strength and Syama being a key driver for shareholder returns.”
Located in southern Mali, Resolute’s 80% owned Syama mine has resources of more than 6 Moz, and reserves of 1.6 Moz, and has Sullivan says, potential for a 10 plus year operation. “The current cutback will take another 12 months with anticipated average grade of 2.5 g/t Au but once we access the main open pit orebody, we expect average produced grades to comfortably exceed 3 g/t Au,” he said. “The program to expedite completion of the ramp-up to a throughput target of 2.4 Mt/y is showing good progress.”
The underground resource at Syama is estimated at higher than 3 Moz with further infill drilling planned to boost underground reserves ahead of plans for mining of that resource.
A scoping study is expected to be completed by the end of the month on plans by Australia’s Minemakers to develop a marine phosphate mining operation offshore from Namibia. Addressing the opening day, Minemakers’ General Manager, Marine and African Projects, Mike Woodborne, presenting on behalf of the Namibian Marine Phosphate Joint Venture, said completion of the key study came at a time of strong global phosphate demand.
“The scoping study will set the terms of reference to complete a definitive feasibility study over 2011 to dredge the phosphate and transport it to shore – probably via a floating pipeline – from our 7,000 km2 Sandpiper/Meob project and then produce a simple beneficiated product on a land base at Walvis Bay,” Woodborne said. “The floating pipeline is our preferred option at the moment.”
Initial studies have pointed to a cost of $26/t to dredge and deliver phosphate to shore and from depths of between 180-300 m. Sandpiper/Meob has a resource of 1,581 Mt of P2O5 with sediment up to 6 m thick. Deeper testing is now underway to increase the project’s resource base.
Woodbourne said global phosphate demand was strong, with China’s production of phosphate rock booming 18% per annum over the past four years and tipped to more than double to above 350 Mt by 2020.
“Sandpiper/Meob is well placed to service expanding global markets with easy routes to South and North America, Europe and Asia/China. Once we have completed the resource update, we plan to submit a mining licence application and conduct a feasibility study over 2010-2011,” he said. “Our aim is to fast-track this project into mining production.”
Brisbane-based Discovery Metals expects construction to commence in the December quarter on its flagship Boseto copper project in northern Botswana to deliver maiden copper production from early in 2012. Discovery’s Managing Director, Brad Sampson, told the conference the bankable feasibility study (BFS) and Boseto development plan (BDP) undertaken on Boseto favoured its rapid development as an initial open pit mining operation with throughput of 3 Mt/y of copper and silver ore over five years for the BFS and continuing for at least 15 years in the DBP.
“On that basis, we anticipate commencing mine construction from fourth quarter this year with commissioning expected in the first half of 2012,” Sampson said. “The power source for the initial open-pit mining operations will be diesel generated but be replaced by coal fired power from mid 2013. In mid 2014, the BDP plans to take Boseto into an underground copper operation delivering at 1.5 Mt/y for a further 11 years whilst the open pit is wound back to 1.5 Mt/y.”
The Boseto mine, once commissioned, will be the first Botswana mine in the Kalahari Copper Belt with Discovery Metals already embarking on additional exploration to locate similar sized Botswana deposits to Boseto. The deposit has current ore reserves of 24.1Mt grading 1.3% Cu and 16.7% Ag. Discovery has secured with Transamine, offtake agreements for the mine’s maiden five year copper output and expects this month to lodge its formal mining licence application for the mine. First concentrate production is scheduled for the first half of 2012.
On likely forward copper prices, Sampson said nearly 3.5 Mt of copper capacity was lost due to the 2008 global financial crisis and a recent Standard Chartered Bank article stated the copper price could spike to $12,000/t if start-up issues were compounded by production slippages.
More details of Australian projects in Africa will be published in the next issue of International Mining Project News, to be emailed to subscribers on September 10. For details of subscriptions to this fortnightly source of project data and key contacts, email [email protected]
