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22/06/2012 (On-The-Air)
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22nd June 2012
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Every Friday morning, SAfm’s AMLive’s radio anchor Xolani Gwala speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday’s At the Coalface transcript:

Gwala: Foreign explorers have discovered a nickel deposit in Limpopo province worth more than a billion dollars.

Creamer: Foreigners come in and our Minister for Mineral Resources Susan Shabangu has been urging South Africans to explore. She says we don’t do enough exploration here. In comes London AIM-listed URU Metals, does some drilling in Limpopo and hits a jackpot with a very interesting nickel discovery in the Northern Bushveld.

It was sitting there quite obvious for South Africans, because its pretty close, south of Polokwane, near Makopane, but the big thing is that it is in a good address. It is close to Mogalakwena, which is a very rich platinum mine belonging to Anglo Platinum. If you study the secret to that mine you will find it is the nickel that sometimes pays all costs.

Just in the sale of the nickel as a by-product they cover all their costs. These particular foreign explorers took note of that address, drilled down and they’ve hit the potential for the extraction of 56-million pounds of nickel a year for the next 25 years. So they are rushing off to Toronto and they are going to list on the Toronto Venture Exchange, raise some more capital, do more drilling. They think there is a lot more to be found there and possibly build the mine themselves.

These start-ups are nimble small, they get risk investment capital, which we don’t seem able to raise here on our local exchanges. We are risk averse and we don’t have that same retail backing, because we haven’t got that flow-through scheme that incentivises all the ordinary people to invest. So these guys can come through and turn something to account which we should be turning into account as South Africans.

Give them their due, they’ve done it and they are prepared to take the risk. They say they haven’t even put into the equation the iron, the magnetite that they’ve also discovered there. So they can possibly build a mine that will cost about R6-billion, but they have got to go through all their studies first.

Gwala: A strong call is being made for the creation of a platinum exchange to stabilise platinum mining.

Creamer: The Minister of Minerals Resources Susan Shabangu has asked the government, labour and business to put their heads together and she has given them short timelines to come forward with proposals to make sure we get over this crisis in platinum. They will be doing that but while everybody is thinking about it, on the sidelines, people also coming up with suggestions.

At the Mining for Change Seminar in Johannesburg this week, Dr Iraj Abedian came up with the idea of where we are dominant in metals and minerals, let’s create our own exchanges, our own commodity exchanges.

That means a single-channel marketing system instead of all the individual mines selling their product individually, come through a single channel. It is interesting because the chrome mining industry, they had just recommended this three months ago, they said why don’t we have a chrome exchange where we go through a single channel.

So this idea of where South Africa is very dominant in its metals and minerals and actually is duty bound to the world to make sure that there is an even supply of these products going in. They are saying that we should think of some different mechanism. We won’t be reinventing the wheel because if you look at potash in Canada, they have been doing this for 40 years.

They went through a crisis in 1972, where their potash price was very depressed and tumbled, they set-up Canpotex which is exactly what is being advocated here, a single channel marketing system where you try and synchronise supply with demand so that you are not just a price-taker but you are also something of a price-maker. This is what is being proposed at the moment and we see even India have gone in with this exchange idea for its raw chrome ore.

It was giving all its raw-chrome to China, China was then employing three times more people, because they beneficiate it up into ferrochrome, earning six-times more in the sale. India said let’s create this exchange, let’s do some of the ferrochrome production by ourselves.

We know South Africa was the big producers of ferrochrome here, but it has been hard hit. Ironically by the platinum industry, because the platinum miners are now mining chrome, because they mine a new reef called upper-group two (UG2). They need the cash, so they are selling the raw chrome ore directly to China. We are then losing market share to China on the ferrochrome side.

So the ferrochrome industry is saying let’s look after ourselves here, the government policy is beneficiation, we beneficiate, we employ three times more people through this beneficiation and we earn six-times more in revenue, let’s think of another way of doing things.

It seems like the Treasury might be coming through with this idea, because we’ve got government policy on beneficiation and maybe they can structure it to make sure we market our dominant metals through a single channel. We used to do it with gold for many years, the Reserve Bank used to sell all our gold. That single channel idea then went out in 1996. Now people during this critical period are calling for it again for platinum and chrome.

Gwala: A Southern African master plan just completed requires a massive potential expenditure of $500-billion.

Creamer: This is a very interesting master plan for Southern Africa.

We know that master plans can gather dust and they need a champion. We seem to have a champion here in the SADC secretariat João Caholo is pushing this very hard. It is against the background of a report by Standard Bank recently saying that there is not enough trade being done between Southern Africans.

There is no intra-regional trade, a very small percentage of our trade, because there is no infrastructure. The SADC are coming in with this master plan, saying let’s get our roads infrastructure right, let’s get our power stations, telecoms, water infrastructure and integrate this into a master plan.

We then present it, which they are going to do next week in Luanda, to all the regional infrastructure Ministers and then in July, they will present it to all the infrastructure finance ministers. In August they will have a summit in Mozambique where they will arrive at giving this a stamp of approval. At that stage they want to move into feasibility studies.

They already are using the South African Development Bank premises to start feasibility studies. So you get a feasibility study going and then you turn that into a bankable feasibility study. Very good word bankable, because it means that the banks are prepared to invest.

Now we hear from the World Bank saying if this infrastructure  increases intra-regional activity, particularly trade, we will prioritise this. So hopefully this time round we don't have a master plan that simply gathers dust and that it is given momentum. A lot of money, R4-trillion we are talking about over 15-years. Big opportunities.

So once they’ve got those bankable feasibility studies they realise there needs to be a foreign investment element and they are planning to take it on roadshows to Brazil, China, India, Japan, UK, US and Europe to get people behind it. There is a lot of construction companies that can really do well out of this. We hope that the new $500-billion infrastructure plan coming out of the SADC will gather momentum.

Gwala: 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.

Edited by: Creamer Media Reporter

 

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