Charlotte Mathews
5 November 2008
Johannesburg — PALABORA Mining (Palamin) plans to raise exports of magnetite, a type of iron ore, to 4-million tons a year within the next three years from about 1,7m tons at present, MD Matthew Gili said yesterday.
He said Palamin would present a proposal to its board next week on a proposed black empowerment transaction including 26% equity ownership.
He did not give further details but admitted Palamin was behind other companies in concluding a black empowerment equity deal.
Under the Mining Charter, mining companies must have 26% black ownership by 2014. Compliance is needed to convert old order mining licences to new order licences.
Palamin, which is 58% owned by Rio Tinto and 17% by Anglo American, with the remainder of the shares traded on the JSE, has been operating a copper mine at Phalaborwa since 1966.
It also produces vermiculite, which is used as a heat retardant, and magnetite. A stockpile of about 240-million tons of magnetite has been built up over the years but as the steel industry has burgeoned in the past few years, demand for magnetite has grown.
Palamin has appointed Min-metals, a Japanese company, as its exclusive distributor until Sep-tember next year. Minmetals sells the magnetite, which is transported by rail to Maputo and Richards Bay, to China and the Middle East.
Palamin sold 793101 tons of magnetite in the six months to June compared with 585851 tons last year. About 350000 tons a year were sold to domestic coal producers, who use it for washing coal to be supplied to Eskom. The remainder is exported.
Gili said magnetite could potentially contribute about a quarter of Palamin's revenue. It was looking at three options to increase magnetite sales.
The preferred option was to increase rail shipments to Richards Bay and Maputo. Pala-min was discussing expanded rail capacity with Transnet and an investment with CFM, the Mozambiqan port authority, to expand the port of Maputo.
The second option, which would be expensive, would be to pump the magnetite in the form of a slurry through a pipeline to Maputo. This was done success-fully in Brazil, Gili said.
The third option would be to sell magnetite to a company that would beneficiate it into pig iron. Building its own iron smelters to make pig iron was not part of Rio Tinto's strategy, but it was keen to stimulate secondary industry near Phalaborwa.
Gili said demand for magnetite was down, in line with the slower global steel industry, but as Palamin was producing magnetite as a by-product, it could stockpile the metal until conditions improved.
Gili said Palamin was continuing to ramp up copper production. In 2004, when Palamin moved from open pit to underground mining, it hoisted 18 000 tons of ore a day, compared with 35 000 tons hosted in the latest quarter. It was targeting 33 000 tons a day next year.
Palamin was considering two options to extend the life of the current mine, Gili said.
The first is advanced exploration work under way on a potential resource to the west of the current workings, which could be accessed at low capital cost.
The second would be to build another underground mine, 300 meters below the current one, with a decline shaft between the two areas. Palamin must make a decision next year because it would take five years before the second, deeper mine could come into production.
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