By Martin Creamer of Mining Weekly, 20 Nov 2007 Empowered South African development company Kalagadi Manganese had selected ArcelorMittal as its strategic equity partner in a R4,2-billion deal that would fund South Africa’s first major greenfield manganese project in 30 years, Kalagadi Manganese chairperson Daphne Mashile-Nkosi told Mining Weekly Online on Tuesday.

Mashile-Nkosi said that Kalagadi had chosen the world’s largest steel company as its partner from a total of 19 bidders that included the short-listed Minmetals of China and Eramet Comilog, one of the world’s largest manganese companies.

She said that ArcelorMittal had arrived at a project value of $630-million for the building of a manganese mine and sinter plant in the Northern Cape and a ferromanganese smelter at Coega in the Eastern Cape.

Kalagadi Manganese and ArcelorMittal had formed a 50:50 joint venture and ArcelorMittal had signed an agreement to buy 50% of the ferromanganese produced at market-related prices, and also signed a special business-assistance agreement that would facilitate the growth of the predominantly women-owned Kalagadi Manganese.

Mashile-Nkosi said the R728-billion-market-capitalisation Luxembourg-listed ArcelorMittal, which owned 52% of steelmaker ArcelorMittal South Africa, had been selected for fully meeting Kalagadi’s financial, project-suitability and business-compatibility criteria. In addition to funding their half of the project, ArcelorMittal would pay $222,5-million to existing Kalagadi Manganese shareholders for the contribution of their mining right to the project.

"We required a very good price because we are a new entrant and we are delighted to have succeeded in raising the required funding for this project," Mashile-Nkosi said. "Two years ago nobody wanted to fund us and I can recollect when we actually struggled to raise R5-million from the banks for a company that is now valued at R4,2-billion," she said.

ArcelorMittal would make a cash contribution of $312-million and would pay the $222,5-million to Kalagadi so that the empowered South African company could contribute to the project and also have working capital. Mashile-Nkosi pointed out that the transaction had been consummated at a time of the ferromanganese price rising to a high of $1 625/t.

Kalagadi Manganese technical director David Wellbeloved said the transaction spearheaded the growing trend of global steel producers to backwardly integrate into manganese and other raw materials required for steelmaking. Wellbeloved estimated that South Africa's last similar greenfield manganese project was in the late Seventies.

South Africa's Shaft Sinkers had been contracted to begin sinking the shaft on March 1, 2008, and the first manganese in the Hotazel formation was scheduled to be traversed by June. The project would produce 2,4-million tons a year of sintered product and 320 000 tons a year of high-carbon ferromanganese.

Eskom had undertaken to supply 25 MW of electricity to the mine and sinter plant and 65 MW would be required from the Nelson Mandela Municipality to power the ferromanganese smelter.

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