Every Friday morning, SAfm’s AMLive’s radio anchor Gillian De Gouveia speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday’s At the Coalface transcript:
De Gouveia: I see this past week you had quite an interesting trip to Kalahari with Saki Macozoma. Tell us a bit about that.
Creamer: The one time Robben Island prisoner Saki Macozoma is at the forefront of South Africa’s newest mine in an impoverished part of South Africa’s Northern Cape Province and I was down there with him. He is being joined by a great mining luminary Brian Gilbertson. Of course, Gilbertson saw the future.
He was the man who turned our Gencor mine into Billiton and then BHP Billiton and it became the biggest mining company in the world and the most profitable miner in the world. He is seeing the future again and he is seeing it together with Saki Macozoma and together they see a good demand coming for the quality of manganese that we produce down in the Kalahari.
The proximity of this manganese to the surface is shallow, so it can be mined quite cheaply. The funding of this operation is very good and also the broad based black economic empowerment. So it is all equity funding, there is no debt, they are unencumbered.
There they are going and starting to turn the sods and get this new mine, which is the Tshipi mine. The big issue will come with logistics. This is where the State needs to come in. We might have the best manganese in the world and a lot of the commentators there where just saying that this is like a dream world. People with manganese interests elsewhere saying the quality of the ore is just superb.
It is large, thick and shallow, homogenous and continuous. It is like a dream the one fellow said and another said that the seams are so thick it is like standing under a 16 storey building glancing up and saying that is solid manganese. You just don’t get that in world, but it will stand or fall by our logistics.
De Gouveia: In terms of the world-wide demand for manganese, what is that look like at the moment?
Creamer: If you are going to have steel, you need manganese. Any development in the world needs steel and you can’t make steel without manganese. The quality of the manganese in China is diminishing quite substantially and we see that this has got a 37% manganese content at the Tshipi mine. Nearby you get 44% manganese, whereas in China they are looking at below 20% at the moment, which means you need more energy, which then ads to a whole lot of dynamics which could create quite a strong demand for us.
De Gouveia: You were speaking about manganese and the logistics that go with it. Now apparently increasing the capacity of South Africa’s manganese rail line to Coega is being seen as a matter of national urgency.
Creamer: I’m so pleased about that, because also down in the Kalahari with us, in the sands of the Kalahari, was the newly reinstated Transnet Freight Rail Chief Executive Siyabonga Gama.
It was fantastic to see the urgency and spirit in him. He was saying it is now a national issue, it is one of national urgency to get the logistics right for these new manganese miners in the Kalahari. Of course, these are all new black controlled, beyond 50% is in the hands of blacks, so these are all new mines coming through.
Tshipi is one of them and there are another two nearby in the Kalagadi and also you have got the UMK. So, there is going to be need for rail. Trucking is just out of the questions and we’ve seen even young kids being killed recently with trucks down there. It is important that you get onto rail and he sees it as national urgency. He wants to go the route of the Eastern Cape.
They were thinking of taking manganese down the Sishen-Saldanha line and making that a duel-commodity line and there was some preference for that. He is starting to turn eyes towards Eastern Cape and say that they have a general freight line there, we need to turn this into a heavy haul line. We have an underutilised port at Coega, we need to utilise that fully. Where else is there a deep water port without a heavy haul line, lets get that heavy haul line in.
He is talking a year to eighteen months when they start moving on this, because the window of opportunity opens for this manganese at a time when we need to have the logistics ready. We say Brian Gilbertson speaking there and saying that he has been other momentous occasions.
He was the CEO of BHP Billiton and cut the ribbon at one of the important iron-ore projects in Australia. He said because of the investment in the mine, rail and the port, that particular country has seen 10% a year compound growth in iron-ore sales. He is saying look, can’t we repeat this in South Africa?
During the same period we were ill-equipped to see the oncoming Chinese boom and we only grew our iron-ore at about 2%. Here is an opportunity, go for it, see it as national urgency and get that manganese out. There is a demand for it at the moment and it is good that people at high levels at Transnet are acknowledging this.
De Gouveia: Now, at the risk of sounding cynical, there are with positives sometimes also negatives. We look at international investors at this point that are fighting shy of South African risk and actually awarding companies that reduce their exposure to South Africa, that doesn’t sound very good.
Creamer: They give a pat on the back to South African companies that reduce their South African exposure and we see a lot of chief executives coming under pressure now and saying you are too South African. They might be a South African born and bred company, died in the wool, but you will have analysts and investors saying reduce your South African exposure.
Now at a time when we have actually got to grow, because we have got more then 51% of our young people between the ages of 18 and 25 unemployed and untrained, we have got this huge problem, its not the time of disinvestment. We saw Rio Tinto wanting to withdraw from Palabora, we see the CEO of Anglo American, which was formed here in 1917, being told by the Bank of America Merril Lynch’s Jason Fairclough to reduce their South African exposure.
De Gouveia: Before we wrap it up, why Martin?
Creamer: We are shooting ourselves in the foot in South Africa. We have these on going wage demands which result in above inflation increases with no matching productivity. This is not just a one year thing, it goes on and on. We saw what happened in Greece when they did that. The whole country can fall apart. You can’t have above inflation wage increases on an ongoing basis without matching productivity.
Your electricity mine cost inflation lifts through and we have this way above inflation electricity increase with more on the way then you add to that the nationalisation word and they run away. That is a very bad signal that is coming through to South Africa at the moment.
De Gouveia: Unfortunately, we have to leave it there. Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly, he’ll be back with us at the same time next week.