Assmang Limited: Adding new chapters to a long history

South Africa’s mining sector continues to go through bittersweet times with labour disputes, the weak rand and fluctuating commodity prices all having a huge influence on bottom line figures. For JSE-listed mining holding company Assore, the 6 months to December 31st represented a fantastic time, with a big helping hand from its subsidiary Assmang.

image1During that period Assore saw its headline earnings increase by 119.4 per cent to R 2.4 billion. Assmang had a 104.4 per cent earnings jump for the corresponding timeframe and posted headline earnings of R 4.3 billion.

The weaker rand:dollar exchange rate undoubtedly was a big factor in Assmang’s turnover, which enjoyed increased sales volumes for its iron-ore business thanks to increased sales in the local market from Assmang’s Beeshoek mine, in the Northern Cape, on the back of increased local demand.

“However, export sales volumes from Assmang’s Khumani iron-ore mine, in the Northern Cape, are being restricted, owing to a lack of plant availability and unreliable water supply by the regional water board – issues that are being addressed,” the company noted.

It was reported that group’s manganese and chrome divisions enjoyed steady growth which enabled it to record budgeted export sales volumes for the period; however, local sales volumes of manganese ore) were lower.

Assmang Limited is a South African company which aims to supply raw material to the world’s steel mills and alloy plants. The business is jointly controlled by Assore Limited and African Rainbow Minerals Limited (ARM) through a longstanding arrangement between the two major shareholders.

ARM carries out the day-to-day management of the operations while two Assore subsidiary companies, Ore & Metal Company Limited and African Mining and Trust Company, are the marketing, sales & shipping agents and the technical advisors respectively.

Today the company operates 3 divisions:

Assmang’s Manganese Ores & Alloys division runs manganese mines in the Northern Cape Province of South Africa, namely N’Chwaning and Gloria mine, in addition to the ferromanganese works at Cato Ridge in the KwaZulu-Natal province. The Chrome Ores & Alloys consists of the Dwarsrivier chrome mine and the Machadodorp ferrochrome works both in the Mpumalanga Province, while the Iron Ore is made up of the high grade Khumani Mine and the Beeshoek Mine both situated in the Northern Cape Province, around the towns of Kathu and Postmasburg.

Iron ore operations are hugely dependent on Transnet, which provides the Iron Ore Line (the only service of its kind in Southern Africa), which runs from the Northern Cape down to the Saldanha Bay Iron Ore terminal.

The company has a long history, having started out in the Northern Cape’s manganese fields in 1935. Just a year later the company had listed on the Johannesburg Stock Exchange. The area first came to prominence in 1867, when geological exploration began and surveys took place on farms that Assmang would eventually mine – Beeshoek, Doornfontein, Drieheokspan and Paling.

The company attained ISO 9002 accreditation back in 1994 and in so-doing, was the first mining company in the Southern hemisphere to be audited and accredited for all surface and underground operations.

By the end of the 20th Century, the company had made further acquisitions, including the chrome resource at Dwarsrivier, in Mpumalanga Province. With the Beeshoek mine reaching the end of its productive life, Assmang started planning to build a new mine on Bruce, King and Mokaning (BKM) farms. A feasibility study was commissioned in 1999 for a 10 million ton per year mine.

In 2001 the company underwent a restructuring process and reformed under three divisions: Manganese (N’Chwaning, Gloria and Cato Ridge Works); Chrome (Dwarsrivier and Machadodorp); and Iron Ore (BKM project (Khumani) and Beeshoek).

image2With transformation becoming a reality in South Africa, 2004 saw the restructuring of Anglovaal mining, to create African Rainbow Minerals (ARM), which became the first Black Economic Empowerment (BEE) mining giant in South Africa, with Assore and ARM each taking a 50 per cent holding.

During 2005, a number of Assmang’s main markets struggled but the company pressed on with its ambitions for the BKM project. As a consequence, in 2006 the company delisted from the Johannesburg Stock Exchange, with the proceeds from the sale earmarked for investment into new projects.

The company has continued to invest in capital equipment and last year spent approximately R 131 million at its Khumani operation on the completion of a wet high-intensity magnetic separation plant.

Additionally it was reported that a further R 297 million was spent in Assmang’s manganese division on infrastructure and feasibility studies for the expansion of the Northern Cape-based Black Rock mine’s capacity to at least four-million tons a year.

Tenova Mining and Minerals announced in May that its Group company Tenova Pyromet, had successfully completed the replacement of Assmang Chrome Machadodorp Works Furnace No 2’s electrode pressure rings, 4 weeks ahead of schedule.

Awarded as a turnkey contract in April 2012, the project involved the verification and adjustment of designs, supply and installation of lower electrode equipment, including pressure rings and heat shields, manufactured from stainless steel, as opposed to the mild steel of the original equipment. The conversion to stainless steel was necessary to enable the equipment to withstand the higher temperatures required for smelting manganese.

Earlier in 2013, Weba Chute Systems installed more than 300 transfer points at various sections of Assmang’s Iron Ore Mine.

image8Whilst the company’s focus has been on South Africa, Assmang also has wider ambitions and last June it was reported that the business had completed a definitive feasibility study to establish the financial viability of a manganese alloy smelting facility in Malaysia.

Assmang, in collaboration with the China Steel Corporation and Sumitomo Corporation, was pursuing the project to maintain its existing alloy customers and to access growing Asian markets, by leveraging the long-term availability of reasonably priced hydropower with guaranteed low escalation rates in the region.

China Steel had approved an investment of $62.46 million to acquire a 19 per cent interest in Assmang, which would afford it the right to purchase between 30 000 t/y and 32 000 t/y of alloys from the project. However, approval of the investment was subject to approval by the Taiwanese government.

Assmang is a forward-thinking company, despite its long history. With investment and growth driving the business forwards in the 21st Century, the business looks set to add many more chapters in the future.