Assmang Limited: Evolution in the natural resource market

The past decade has put a premium on the need for steel. Whilst the concept of globalisation has intensified over the same period, for mining companies like Assmang Limited, the world steel market has long been a primary focus.

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.

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.

By 1907 South Africa was beginning to understand the scope of manganese deposits in the area and by the 1920s, large scale mining had already begun. In 1934, a new organisation called Anglo Transvaal Consolidated Investment Company Limited (Anglovaal) was established and when the existing Gloucester Manganese company owner proposed the restructure of the industry and mine on both Manganese Corporation and Gloucester Manganese properties, Anglovaal and its partner enterprise, African Mining and Trust registered a new company on 2 November 1935 to mine the Gloucester Manganese and Manganese Corporation deposits: the Associated Manganese Mines of South Africa Limited, AMMOSAL, which later became Assmang Limited.

A series of acquisitions over the ensuing decades strengthened the company’s hand and negotiations with Anglovaal, and African Mining and Trust resulted in the acquisition in 1956 of the entire share capital of Gloucester Manganese, which became Assmang’s first ever wholly owned subsidiary.

At that time, one of the biggest operational challenges that Assmang faced was continuing rail capacity shortages, which led to the decision to diversify into mineral beneficiation.

A new company called Feralloys Limited was formed, which was a venture between Anglovaal, Associated Ore and Metal Corporation, Assmang and African Mining and Trust and was set-up to produce ferro-manganese and pig iron.

Agreements in the 1970s with US Steel ensured that production was already supplying the global market and overtime, globalisation began to impact on mining processes. 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).

With 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.

In December 2005, the board approved the first phase of the BKM project, to establish an 8.4 million ton per annum export mine. The plans came after Transnet had committed to expanding Sishen Orex export rail line. The BKM project entered a second development phase in parallel with the commissioning of the first phase in December 2007, to increase the export tonnage from 8.4 million tons to 10 million tons per annum, as of March 2009.

Today the company operates three 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. It was estimated that during 2012, Transnet Freight Rail would transport a total of 60 million tons.

Assmang is supplied with trains on a daily basis, consisting of 342 wagons, each wagon capable of loading approximately 100 tons of iron ore. Each fully loaded train is capable of hauling approximately 34,200 tons of iron ore along the 861 km railway line to the port of Saldanha Bay, situated on the West coast of South Africa and the last stop before it heads to the export markets.

The Saldanha Bay Iron Ore Terminal is run and managed by the Transnet Port Terminals. Saldanha is the largest deep-water port in South Africa with a draft restriction at high tide of 21,5m and can accommodate Panamax and Cape size vessels with deadweight of approximately 300,000 tons.

The manganese ore, which is produced at Nchwaning and Gloria mines, travels for approximately 30 hours by rail to Port Elizabeth, from where it is split into various grades and eventually either stored in bins or moved onto ships. Part of the manganese ore is also shipped out of Durban, from where it is managed by Bulk Connections (Pty) Ltd.

Chrome ores and alloys similarly are reliant on rail services – this time the ferrochrome is dispatched from the Machadodorp works to Richards Bay using the General Freight system.

Assmang Limited has come a long way from the business that formed in 1935. Almost 80 years on, preparations for the next phase are already well underway with the expansion of the Khumani iron ore mine.

The mine produces approximately 10 million tons a year but in 2010 the company approved R5.5 billion of investment for the completion of the Khumani Expansion Project, which is set to increase the mine’s output to 16 million tons per annum.