Ferrochrome News: IFM Sees Q4 Contract Price At Current Level
South African ferrochrome producer IFM says it does not see ferrochrome contract prices falling below current levels for the fourth quarter. Earlier this month contract prices for the third quarter were set at USD1.30 a pound, a fall of 4 per cent on the second quarter price but a smaller fall than had been expected. Spot market prices are around USD1.18 a pound, down from a level of around USD2.50 a pound in April 2009.
IFM sells much of its output through contracts and into the spot market in Europe and the USA.
Mr David Kovarsky CEO of IFM said that "We are happy with the price. At the moment we're going through a de stocking cycle but it doesn't reflect end consumption. By the end of this quarter we'll start seeing a revival in demand as stainless steel production starts increasing. I wouldn't expect it Q4 price to be lower than USD 1.30."
Mr Kovarsky said that "We are seeing a contraction in global steel production globally, particularly in China and Europe. The immediate challenge is volume in this quarter but I think they will pick up in the next quarter."
He added that IFM’s output for 2010 will be lower than its capacity of 265,000 tonnes due to the global economic downturn.
Vedanta Resources has bought Anglo American's zinc assets for $1.34 billion in a deal that will see it become the world's largest zinc producer.
After the deal has gone through, Vedanta will have 11 percent of the global zinc market, including the Skorpion mine in Namibia, Lisheen in Ireland and Black Mountain in South Africa.
"These high quality assets complement Vedanta's existing portfolio, creating the largest zinc and lead producer in the world," Chairman Anil Agarwal said.
The sale for Anglo is one step on a divestment programme that seeks trim its portfolio and focus on key commodities, such as copper, iron ore and platinum.
South Africa Could Become Centre for Mining Finance
Xstrata Chief Executive Mick Davis has called on the Johannesburg Stock Exchange to relax its entry requirements to new companies if South Africa is to become a centre of mining finance for Africa.
Speaking to an audience at the Wits Business School in Johannesburg, Mr Davis recalled that when a small South African company called Gencor listed as Billiton on the London Stock Exchange, it was at a time when the international mining sector on the LSE was quite small with only Rio Tinto as a major player. However, with the advent of Billiton, Anglo American and as other companies from around the world listed on the exchange, the LSE became a major generator of mining finance, both in the equity and debt markets.
"That happened because there was little regulation that we had to fulfill as Gencor to list on the LSE. There were very few barriers to entry. Essentially, they created an environment where any credible company with an appropriate track record could actually list, and they have continued to maintain that situation," Mr Davis said.
South Africa could become a centre of African mining finance as the continent becomes the world's next major copper-and-cobalt producer, however restrictions prevented foreign companies from enjoying a full listing on the Johannesburg Stock Exchange and this, coupled with South Africa’s exchange controls, made a vision of South Africa as an international finance centre impossible to achieve.
"Amendments to these regulations could open up the JSE to the world's major mining companies and aspirant regional players, attracting additional investment flows and encouraging the re-establishment of a centre of mining finance excellence," Mr Davis said.
He suggested that the JSE create a separate indexation for foreign companies that want a separate listing in South Africa as without indexation shares had no liquidity and could not be traded. Without liquidity, South Africa cannot be a finance centre and would not be in a position to generate capital. He added that companies only listed on stock exchanges to access the public finance market.
"If the stock exchange cannot deliver capital to you, it's a waste of time and money to list on it. It's a simple issue that the JSE will have to attend to.
"But the other restriction is exchange control. You have to allow the free flow of funds, both in and out of this country. This country has matured over many years, but no government has had the courage to remove exchange control and ultimately that step has to be taken before South Africa can become a normalised environment.
"If that does happen, I am convinced that, with developments in Africa, you will see the JSE generate significant finance for resource companies," Mr Davis said.
South Africa’s Merafe Resources has announced that its benchmark ferrochrome price for European customers has been settled at $1.36 a pound for the April to June quarter.
The price is a 35% increase over the first quarter.
China and South Africa have signed a series of deals worth $US300 million to the African nation. The deals were signed on Wednesday during a visit by Jia Qinglin, chairman of the National Committee of the Chinese People's Political Consultative Conference (CPPCC), during his goodwill visit to South Africa. Mr Jia was in Pretoria to attend the China-South Africa Economic and Trade Forum.
The deals, involving almost 30 companies from the two countries, include the purchase of South African chrome ore, a vital raw material in the manufacture of steel.
South Africa wants iron ore to trade on a futures exchange to create a more transparent benchmark for pricing deals, one of the country's top mining officials said on Monday.
"The most important thing for me is the creation of a transparent instrument for price determination," said Sandile Nogxina, South Africa's Director General of the Ministry of Mineral Resources told Reuters on the sidelines of the UN commodity conference in Geneva.
"It is up for the various players to take this forward. What I'm proposing is similar to aluminium on the London Metals Exchange (LME). Let iron ore also be traded so it is more open."
Coal exports from Richards Bay fell from 5.2 million tonnes in February last year to 4.94 million tonnes this year.
Stockpiles rose to 2.98 million tons at the end of February from 2.71 million in January. The terminal received 5.19 million tons in February when 714 trains offloaded coal.
Richards Bay is Africa’s largest coal terminal. By the end of this month export capacity is expected to hit 91 million tons a year.
Statistics SA announced on Thursday that the country’s production of platinum group metals increased by 3.3 per cent in January,
The agency said the sector made the most significant contribution to the country's overall mining production with a rise of 7.7 per cent over the course of the month. It was the first improvement since July 2008.
PGM mineral sales were 11.2 per cent lower in 2009 than in the previous year. The fall for the whole of the mining sector was 22.7 per cent.
Steve Phiri is to step down as CEO of Merafe Resources, the black-owned ferrochrome company, with effect from end March 2010.
Mr Phiri will continue as a non-executive director of the company.
Stuart Elliot, Merafe Resources' current chief financial officer (CFO) will replace Mr Phiri as CEO with effect from April 2010.
Merafe said that Mr Phiri was poised to become the first CEO of the Royal Bafokeng controlled platinum company, which has as its main assets the currently operating Bafokeng Rasimone Platinum Mine and the adjacent Styldrift project.
Mr Elliot has been with Merafe for over nine years and involved in all aspects of the business.
Merafe said discussions were at an advanced stage on the appointment of a new CFO and it is anticipated that the appointment of the new CFO will be announced prior to end March 2010.
Finland’s Outotec has agreed to design and deliver a new manganese plant for South Africa’s Kalagadi Manganese Pty Ltd. The plant will be built in Hotazel in South Africa’s Northern Cape Province in a contract worth EUR 119 million. The plant will be commissioned by March 2012.
Outotec is responsible for the delivery of the sinter plant on a turnkey basis including engineering, project management, supply of all equipment and structural steel, construction, commissioning as well as advisory services for civil works. The new plant will ultimately produce 2.4 million tonnes of sinter annually.
Kalagadi Manganese is 50-percent owned by ArcelorMittal, 40 per cent by Kalagadi Resources owns 40 percent with IDC owning the remaining 10 percent.
"Kalagadi's new plant will be one of the world's largest manganese sinter plants. This significant order once again demonstrates our ability to deliver total process solutions to customers - from the test work with raw materials to defining the optimal process and technology, plant engineering, as well as equipment supplies and services, not to mention taking full responsibility of the project and performance guarantees," said Outotec's President and CEO, Pertti Korhonen.
Earlier this month Outotec signed a EUR 116 million deal with Chile’s Codelco for the design and delivery of a copper concentrate roasting plant, gas cleaning system and sulfuric acid plant for its new Mina Ministro Hales mine near Calama, Northern Chile.
AIM-listed, Cromex Mining turned in a profit of £195,000 for the year ended 30 September 2009, compared with a £1.4m loss in 2008.
The company has two key mining assets on the Bushveld Complex in South Africa, which between them have total resources of approximately 41 million tonnes of chromite.
Chromex successfully commissioned its processing facility at the Stellite open cast chrome mine in South Africa during the course of the year, thus enabling it to take advantage as the chrome market began to recover towards the end of 2009. The commissioning of the first phase was completed in August 2009 and used stockpiles mined in the early part of the financial year. This allowed mining operations at Stellite to be suspended during a period of adverse market conditions. Full mining restarted in January 2010.
Stellite will initially produce approximately 20,000 run of mine (ROM) tonnes per month, increasing to 40,000 ROM tonnes per month once a dense media separation circuit (DMS) is installed at the plant. This is expected to be completed during Q3 of 2010.
Both Stellite, and the Mecklenburg mine on the east limb of the Bushveld, are owned and operated by South African registered Chromex Mining Co, which is 74% owned by Chromex and 26% owned by their Black Economic Empowerment partner Umnotho WeSizwe.
Development at Mecklenburg project has been deferred pending the conclusion of a court case with Samancor Chrome Limited who applied to the South African High Court in 2008, to set aside the decision to award Chromex the Mining Rights.
The company said that it continues to consolidate its position as a long term chrome producer in southern Africa. Chromex has agreed to acquire 49% of Falvect Mining Ltd, a Zimbabwe-based company with chrome assets.
South African fluorspar miner Sallies incurred a loss of R8.9 million from mining activities in the six months to December 2009. This compares to a profit of R42 million for the same period last year.
Turnover decreased from R149.6 million to R44.6 million for the six months to December 2009.
The company said that demand for acid grade fluorspar collapsed in the early part of last year and despite concerted efforts by management and its marketing agent, future orders have not been secured.
"Consequently, as announced in June 2009, the company decided to mothball its Witkop Fluorspar Mine ("Witkop'). Both of the company's mines are now on care and maintenance, Buffalo Fluorspar Mine ("Buffalo") having been mothballed in October 2008," Sallies said.
Enough fluorspar had been produced at Witkop to honour export sale contracts for the six months ended 31 December 2009 and the final export sale contract was fulfilled last month.
Key staff have been retained at Witkop and the production facilities are being maintained in anticipation of recommissioning, the company added.
South Africa's state-owned mining firm African Exploration, Mining and Financing Corp. (AEMFC) has said that it has dropped the Bosa Energy coal exploration project in Botswana because it was no longer viable, its CEO said.
"(African Exploration) has opted to move out of the project after assessing the... market for the product," chief executive Sizwe Madondo told Reuters on Wednesday. He cited a number of factors for AEMFC's withdrawal, including South African power utility Eskom "not committing to a power station in the area, logistics to other potential markets and funding requirements".
JSE-listed ferrochrome producer Merafe, suffered a R152-million loss in the year to December as it recovered from the global financial crisis.
The company operates a joint-venture with Xstrata and its share of saleable ferrochrome for 2009 rose to 281,000 tonnes against 223,000 tonnes the previous year, while revenue fell to 1.8 billion rand ($234.4 million) against 2.8 billion the previous year.
CEO Steve Phiri said on Tuesday that ferrochrome stock levels were at historic lows but that they were the equivalent to only ten-weeks of consumption, compared with 24 weeks in 2008. Prices were now at USc103 a pound with the company’s marketing team currently in Asia working on Q2 contracts. Mr Phiri expected these prices to be announced at the end of March.
However, he warned that supply would be tight until 2013, given the absence of electricity availability, coupled to limited access to finance for large capital projects. South African electricity producer, Eskom, is building two coal-fired power stations that are expected to come on stream in three years’ time.
China’s demand for steel is leading to huge demand for ferrochrome from that country. Mr Phiri said that China alone was able to consume all the company's production and that if demand from the rest of the world increased there would be serious supply shortages, something the company is already seeing evidence of.
During the last year Merafe halved its ferrochrome inventory in the period, reduced its net financing costs by 81% and has R463-million cash on hand.
South African ferrochrome producer International Ferro has reported increased losses as a combination of lower ferrochrome prices and a stronger Rand outweighed higher volumes.
Losses for the six months to December 2009 were R145m, up from R27m in the December 2008 half-year. In the previous six months losses were R429m.
Revenues fell 14% to R452m for the six months to December 2009, though this was up 77% on the previous six months.
There was a loss before tax of R145m in the December 2009 half, compared to a R27m loss in the December 2008 half. Losses in the previous six months were R429m. There is no interim dividend.
Sales volumes increased to 71,000 tonnes, up 35% on the June 2009 half, while production volumes increased by 4% to 95,000 tonnes as furnaces operated at full capacity for the half-year.
Meanwhile CEO David Kovarsky has suggested that Ferrochrome contract prices may rise as much as 29 percent in the second quarter as demand improves citing a tightness of supply. Mr Kovarsky said he expecs the European benchmark contract prices may rise to between $1.20 and $1.30 a pound from $1.01 a pound this quarter.
South African miner Kumba Iron Ore reported an increase in full-year earnings of 10 per cent to R23.4 billion, as export sales jumped 37% to 34.2 million tonnes. However, headline earnings per share fell to 21.82 rand ($2.86) from 23.02 rand in 2008, hit by a stronger rand against the U.S. dollar. Kumba said its operating profit remained highly sensitive to the rand/dollar exchange rate. The rand has risen by 20 percent since the start of 2009. Headline earnings are the main measure of profit in South Africa and strip out one-off, financial and non-trading items.
Kumba, Africa’s largest iron ore producer, saw an increase in exports to China of 130%. China now accounts for 75% of total exports. The company said it produced 41.9 million tonnes of iron ore last year, up from 36.7 million tonnes in 2008.
"Kumba is committed to a further increase in production volumes during 2010, with the continued ramp up of the Jig plant," the company said. "Although global steel demand is expected to return to growth in 2010, this is likely to be moderate and the sustainability of increase in demand outside of China remains uncertain," it added. Analysts expect exports to China to grow by 5% this year.
CEO Chris Griffith said " We expect demand for iron ore to rise further during 2010 as Chinese domestic iron ore production falls and a further recovery in steel markets outside of China, in our traditional markets, starts to take hold.”
Kumba is paying a final cash dividend of R7.40 per share, bringing the total cash dividend for 2009 to R14.60 per share. The company’s majority shareholder, Anglo American, reported that its 64% investment would generate underlying earnings of $490 million for the year ended 31 December 2009.
Optimum Coal, South Africa's sixth-largest thermal coal miner and its fourth largest coal exporter, is looking to to raise $300-$500 million via an initial public offering on the Johannesburg Stock Exchange in March according to sources in South Africa.
About 30 per cent of the company’s enlarged share capital will be offered valuing the firm at about $1 billion to $1.5 billion. The company announced on 1 February that it would float on the Johannesburg main board during the first half of this year. Proceeds from the IPO would repay debt and fund acquisitions.
Exports accounts for 45 per cent of Optimum’s sales mostly to Europe under a supply deal with BHP Billiton.
In the year to June 2009, the company generated earnings before interest, tax, depreciation and amortization of 1.4 billion rand ($181.8 million) on revenues of 4 billion rand ($519.5 million).
South African ferrochrome producer Assmang has announced to shareholders that it plans to convert one of the furnaces at its Machadodorp Works to produce high-carbon ferromanganese, rather than ferrochrome. The converted furnace is expected to produce 4000 tonnes per month of HCFeMn and production will commence by the middle of this year.
In its statement Assmang said that it needs to meet higher than expected demand for high-carbon ferromanganese but that it does not have excess capacity at its Cato Ridge Works to expand production.
The company said that it still expects to meet its contractual obligations for ferrochrome and that it is committed to continuing ferrochrome production. Its ferrochrome furnaces were idle for much of 2009.
Figures released by the South African government show that mining production declined by 6.7% year-on-year in 2009. A rise in iron ore production of 13.1% was offset by a fall of 6.7% in diamonds. Gold production also fell.
The figures, prepared by Stats SA, added that the seasonally adjusted value of mineral sales at current prices for the three months ended November 2009 increased by 847.3 million rand - or 1.5% - compared with the previous three months. This was mainly due to increases in the sales value of Platinum Group Metals (PGMs) contributing 4.4 percentage points or 2.494 billion rand, gold (contributing 1.6 percentage points or 923.1 million rand) and manganese ore (contributing 1.3 percentage points or 730.2 million rand.
South African steel producer ArcelorMittal South Africa has stepped up its efforts to secure control of raw material resources in Southern Africa, and is ready to partner with black economic empowerment (BEE) companies that have secured exploration rights for those categories of resources.
Speaking on Wednesday, CEO Nonkululeko Nyembezi-Heita said that the group was intensifying its efforts to secure control of additional iron ore and coal resources although she said that the group was following a strategy of lowering costs rather than any concerns over security of supply.
"We are not concerned about accessing iron ore, we are concerned about having control over than iron-ore," she explained, adding that the same was true for coal, which underpinned its decision to invest in Coal of Africa. ArcelorMittal lost out in a long-running dispute with Kumba Iron Ore over its right to participate in the R8.5-million Sishen South project, in the Northern Cape. The imminent closure of the Thabazimbi mine, in Limpopo province, also meant that an alternative supply source was needed to close a capacity shortfall.
The company reported a loss of R440-million for the year ended December 31, 2009 against a record profit of R9,5-billion in 2008 but still had more than R4-billion of cash on hand, which it could use for investments and acquisitions, including into mining assets or companies.
