[miningmx.com] -- IF SOUTH Africa's mining industry needs a good news story during one of its most uncertain periods, it will probably be the soft-spoken Daphne Mashile-Nkosi, chairperson of Kalahari Minerals.

Her strategy to mine manganese and have it processed locally is so uncomplicated, yet brilliantly considered, and in tune with every transformation imperative South Africa needs, that one inadvertently wonders why others so often feel the need to create a fuss. Mashile-Nkosi’s Kalagadi Resources is in the process of establishing a manganese mine, coupled with a sinter plant, near Hotazel in the Northern Cape. The project includes Kalagadi constructing a high-carbon ferromanganese smelter in Coega’s industrial development zone near Port Elizabeth, which will create the steel-making ingredient ready for consignment to foreign and local factories.

In reference to the remark about transformation imperatives, consider this: Kalagadi’s major shareholder, Kalahari Minerals (40%, and the initiators of the project, also led by Mashile-Nkosi), is 100% black-owned of which women make up 60%. The smelter alone will pump an estimated R2.7bn a year into the Eastern Cape’s economy, crystalising what government has in mind with its beneficiation drive, while the ferromanganese product will be an exponentially higher earner of foreign currency than what would’ve been the case for untreated ore.

One may argue that the R11bn project is still in its commissioning phase, which at some stage will hit the almost obligatory speed bumps for projects of this size. But Mashile-Nkosi is able to show an impressive list of backers who trust Kalagadi will eventually achieve what it set out to do. "I come from a development background; for me the issue was that although I eat well, I must also sleep well."

“(In 2005) we applied for a prospecting right in a province that was poor,” says Mashile-Nkosi. “I come from a development background; for me the issue was that although I eat well I must also sleep well.” The issue of social responsibility comes up often, too often to be a conscious attempt at being politically correct, with convincing arguments as to how it drove many strategic decisions. “You have a poor province in the Northern Cape and a poor province in the Eastern Cape, so for us the issue was how to create jobs where you mine and where you export, so how do you beneficiate other than creating jobs to mine the ore and shipping it out of the country?” she reckons. “South Africa has to utilise its mineral resources for local economic development. You have to find a way to do it, because if you don’t the country will still be facing the same problems five or ten years down the line.

It will throw challenges at you, it won’t be easy, but nobody said it was going to be easy.” Add to this the economics, it became clear to Kalahari/Kalagadi what it had to do: 37% manganese is currently fetching around $4/t, a 48% sinter product goes for around $5.50/t, while the 78% ferromanganese will sell for up to $1,300/t. “We looked at the price of raw ore, and we looked at the price of a product that has been beneficiated. If we only had the revenue streams for ore, it would not have supported what we wanted to achieve. So six years after being granted the prospecting right; the mine and sinter plant are about to be commissioned, with the smelter to be completed by 2013.

This is how it will work: The mine will supply 3mt of ore a year to be converted into 2.4mt of sinter product. This will be railed via Transnet’s manganese line to Port Elizabeth. The smelter will convert 700,000t of sinter product into high carbon ferromanganese, with the balance to be exported in sinter format. ArcelorMittal (the international group, not the South African subsidiary) has a 50% offtake agreement for both products.

The project’s price tag is R11.2bn; R7bn for the mine and sinter plant and R4.2bn for the smelter. Shareholders have forked out R4.2bn of the funds needed; with development institutions and commercial banks providing loans to make up the balance.

“The case for beneficiation here… was straight forward. If we were selling ore next year, we wouldn’t have been where we are today because the banks wouldn’t have lent us money. Just for selling sinter (for six months of the financial year) we’ll be looking at a turnover of R7bn, followed next year by between R12bn and R13bn.

"I could’ve screamed and shouted at board meetings, but it wouldn’t have helped me." “If we didn’t beneficiate, we wouldn’t have been at that turnover figure so soon.” So, the question remains why nobody else has caught on to the idea? It may have to do with the fact that the manganese sector has for a long time been dominated by two players – BHP Billiton and Associated Manganese – which had a very set model for their operations. “For me as a South African, I was looking at the fact that 80% of the world’s resources sit here, but beneficiation is happening in Australia,” says Mashile-Nkosi. “It worried me a lot because there was this leakage in term of tax money and spending inside the country.

“We need to lead the market and keep it alive; we control 80% of reserves.” WHY START KALAHARI? Launched at the height of the financial crisis in 2009, the project has come a long way, says Mashile-Nkosi. “Every challenge can be turned into an opportunity.

That’s what I’ve done with Kalahari. What people don’t know about me is that before Kalahari I was involved in coal with Eyesizwe. “The challenges I saw there was why I started Kalahari. For instance, when I asked why there weren’t more women, people asked me where we would get them from. This is why I started Kalahari, because I’ve been fighting a losing battle.

I could’ve screamed and shouted at board meetings, but it wouldn’t have helped me.” How do you put up a mine of the scale of this project when you have no track record or history? How do you make sure people take you seriously? “You do things,” she says. “Challenges in the mining sector can be turned to opportunity. If you go to Eskom and say, ‘I generate my own 9MW can you give me another three?’ it becomes easier to negotiate than when you have nothing. “The same with rail, people will get more committed if you say, ‘I’m spending R7bn in the Northern Cape, can you give me an allocation?’” She says the nationalisation debate does not bother her. “There are fundamental issues you have to discuss before you start taking over mines,” she says. “What is the strategy, what is the quantum, who’s going to put the funding together, who’s going to run it, what exactly are we talking about when we say nationalisation? “Before you can run, you must crawl, before you crawl you must sit. First know what the assets are and what you want to do before you talk about nationalisation.”

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