Waiting for an adventure

For a startling example of how opaque, and even unfriendly, mining regulations have hampered economic development in South Africa, look no further than the case of Aquila Steel’s Avontuur manganese prospect.

You have to go back about six years to a prospecting dispute involving Aquila and the department of mineral resources (DMR) regarding Gravenhage – a valuable manganese prospect situated at the top portion of Avontuur in the Northern Cape.

The dispute was a complex one that eventually wound up in the Constitutional Court, pitching the rival claims of Aquila against Pan African Mining Development Corporation (PAMDC), a shadily-composed multi-government agency that alleged it had acquired the prospecting right over Gravenhage first.

As it turned out, the Constitutional Court found in favour of Aquila, in which Chinese firm Baosteel has an 85% controlling stake. 

The legal battle was a torturous process of twists, turns and delay.

A few reputations also got toasted in the process, not least of which was former minister of mineral resources, Ngoako Ramatlhodi. He was found to have incompetently overseen the dispute process, according to a High Court ruling. But that’s another story.

Now, however, the mining right over Gravenhage has been finally awarded to Aquila, which is looking around for an adviser that can help it assess potential partners to assist it develop a mine on Gravenhage.

To put this into perspective, this is new investment worth $200m, based on Aquila’s 2012 feasibility study. Given that President Cyril Ramaphosa has just concluded his second investment conference, which is helping to raise funds as part of his $100bn, ten-year investment target, a new mining project in a relatively undeveloped province couldn’t come at a more apposite time.

Market sources now suggest it’s full-steam ahead on Gravenhage.

The plan is to reboot the feasibility study on which Aquila Steel had spent a tidy R160m. The study scoped for a 1.5m tonnes a year manganese ore mine, operating for about 15 years with the opportunity for life extension.

Some 320 jobs would be created during construction of the project and a further 700 in the permanent operational phase.

“Gravenhage is near Transnet rail facilities and existing mines, so the infrastructure is good,” a market source told finweek. He added that Aquila was happy to part with control of the project on the basis that it doesn’t have much of a presence in SA anymore, and is not a project developer in any case. It’s more an investor.

However, there are some considerations. The project’s social and labour plans have to be implemented in short course by Aquila, which also doesn’t yet have a water use licence for the project which it needs to process. Incoming partners may also find that Aquila’s shareholder, Baosteel, will seek an offtake agreement for the manganese – a mineral used in steelmaking.

SA has an estimated 80% of the world’s manganese reserves but only controls 33% of total manganese production, so it’s a mineral that strategically ought to see more development in SA. The current market players consist of Anglo American, which is in a joint venture with South32, and Saki Macozoma’s Ntsimbintle Mining, a company that almost listed this year and is known to be seeking opportunities for consolidation in the manganese sector.

This is an edited version of an article that originally appeared in the 21 November edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.

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