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Xstrata unveils R4.9bn expansion plan

21 October 2010

Global mining giant Xstrata is to spend US$710-million (about R4.9-billion) the second phase of its Lion ferrochrome complex near Steelpoort in Mpumalanga, and is conducting studies on generating its own electricity to ensure security of supply.

Xstrata's pooling and sharing venture partner, JSE-listed Merafe Resources, holds a 20.5% interest in the venture and has an option to participate in the expansion.

The expansion will involve the construction and commissioning of a 360 000 tonne per annum capacity smelter, and will increase the Xstrata-Merafe chrome venture's total ferrochrome capacity to over 2.3-million tonnes per annum.

The amount also includes spending R700-million on the concurrent development of the 1.2-million ton per annum Magareng mine situated within the Throncliffe mine complex.

"This expansion further enhances Xstrata's leading position in the ferrochrome market and will allow the group to benefit from anticipated growth in global demand for stainless steel," Xstrata plc CEO Mick Davies said in a statement this week.

"The venture's management team has already, through the first phase of this expansion, demonstrated its ability to deliver projects on time and on budget. I am confident that the team is equally committed to the expansion's second phase."

Energy supply security

The expansion had been on the cards for some three years, but the absence of security of supply of electricity led to the project's approval being held back until a firm allocation of capacity was received from Eskom.

In addition, Xstrata is advancing its own power generation plans, and is currently completing a feasibility study for the first phase of a 600MW thermal power generation plant.

Construction is scheduled to begin in the first quarter of 2011, with commissioning planned for the first half of 2013. The expansion will create over 1 000 permanent jobs, with a further 1 800 jobs expected to be generated during construction.

Around 80% of the total expenditure on project goods and services will be sourced locally.

Integrated Resource Plan, Mining Charter

According to Xstrata, the project is further aligned with some of the key principles contained in the government's recently publicised draft Integrated Resource Plan, including world leading energy-efficiency, and using electricity to create sustainable jobs.

"This investment is aligned with the South Africa's Industrial Policy Action Plan and demonstrates Xstrata's continued commitment to beneficiation following the R917-million investment by the venture in Project Tswelopele, a chrome pelletising plant in Rustenburg," said Xstrata Alloys CEO Peet Nienaber.

The Lion smelter development is also the first major investment of its kind for South Africa since the government announced the amended Mining Charter, which strives to extract maximum benefit for the country through fixed investment, new and sustainable job creation, beneficiation, enhancement of South Africa's export earnings, and contribution to state revenue.

"The expansion will also allow us to significantly increase procurement from BEE enterprises, support the growth of new local enterprises and develop technical skills. These are some of the key pillars of the amended Mining Charter," said Nienaber.

"We also look forward to Merafe's participation in the expansion, and understand that they have their own processes to follow prior to making a commitment."

SAinfo reporter