Assmang Proprietary Ltd: Over 80 years of assured delivery

The global nature of mining continues to impact on South African operations. Assmang Proprietary Limited, a company incorporated in the Republic of South Africa and its joint venture and subsidiary companies, has dealt with the effects of globalisation for decades, and continues to excel.

The company mines manganese ore at the Black Rock Mining Complex and iron ore at Khumani and Beeshoek Mines in the Northern Cape Province.

In addition, Assmang produces manganese alloys at its works at Cato Ridge in the Kwazulu-Natal province and at Machadodorp in the Mpumalanga province.

Meanwhile, in mid-March of this year, Assmang’s Sakura ferroalloys smelter, in Sarawak, Malaysia, was officially opened.

Sakura is a low-cost ferromanganese producer and has successfully commissioned two 81 MVA furnaces, within an approved budget of $328 million.

Both furnaces, currently producing high-carbon ferromanganese, are flexible as they are designed to produce either high-carbon ferromanganese or silicomanganese.

Furnace 1 was successfully commissioned in April 2016, followed by Furnace 2 in September, with the first shipment of high-carbon ferromanganese having been exported in June 2016.

Sakura (was built) in Malaysia largely owing to the availability of hydroelectric power. Many environmental considerations have been incorporated into this greenfield project’s production process to reduce its impact on the surrounding areas,” Assmang commented.

Assmang’s ownership very much illustrates the role of partnership that embodies much of the mining fraternity.

The company’s Cato Ridge Alloys Proprietary Limited, is a joint venture between the company and Japanese businesses Mizushima Ferroalloys Company Limited (40 per cent) and Sumitomo Corporation (10 per cent). It produces refined manganese alloys at Cato Ridge Works.

Assmang was incorporated in 1935 and according to the official website, the Group today employs 6,567 permanent employees and operates as three divisions, namely iron ore, manganese and chrome. Assmang is controlled jointly by Assore Limited and African Rainbow Minerals (ARM) which each holds 50 per cent of the issued share capital and voting rights of the Company. Both shareholders are listed on the JSE Limited.

Assmang in turn 100 per cent owns three entities: Assmang Manganese, Assmang Chrome and Assmang Iron Ore.

The effects of globalisation remain as pertinent to Assmang today, as they ever did, with the bulk of the Group’s production exported to the Far East, Europe, India and the United States of America.

Transportation is of course another important consideration for a company shipping its production around the world.

According to the official website; “Product, from the different Assmang operations, is transported to the various ports for export, either via rail transport on a national rail network operated by Transnet Freight Rail (TFR), the largest division of the government owned Transnet Limited, or via road transport, by privately owned road freight companies.

“Iron Ore is railed approximately 861 kilometres from Khumani Mine to the Saldanha Bay Iron Ore Terminal via the, so called, Orex Line.  The Orex line is a core heavy haul business line that runs from the Northern Cape along the West Coast of South Africa. The service operates with unique rolling stock designed specifically to meet customer’s needs. TFR currently transports a total of 60 million tons of iron ore per annum for the export market; including Assmang’s 14 million ton of iron ore.  Assmang’s Khumani Mine is supplied with trains consisting of 342 wagons.  Each wagon is capable of carrying approximately 100 tons of iron ore; therefore 1 train is able to move a total of 34,200 tons.

“Beeshoek Mine’s iron Ore is supplied mainly into the domestic market. Customers arrange their own transport, either via rail, with services also being provided by TFR, or by means of road hauling. Some iron ore is transported by road to Khumani Mine to be exported via the Orex Line through Saldanha Bay Iron Ore Bulk Terminal.

“The majority of the direct bulk export manganese ore produced at the mines is transported by private rail to Hotazel where the rail trucks are transferred to the Hotazel-Port Elizabeth railway line. Each train transports about 6500mt of ore and takes approximately 30 hours for the 1,100 kilometre distance from the mines to Port Elizabeth port for direct bulk export.

“Other direct bulk export ore is railed via the general freight rail line to Durban port where it is offloaded at the privately operated Bulk Connections terminal. On this route each train transports about 3900mt of ore and takes approximately 36 hours for the over 1000 kilometre distance from the mines to Durban port.

“Assmang’s ferromanganese produced at their Cato Ridge Works and Machadodrop plants is both railed and road hauled from the plants to Richards Bay for bulk exports and road hauled to Durban for container exports.”

In August 2016 it was confirmed that Assore and African Rainbow Minerals Limited (“ARM”) had concluded definitive agreements for Assore’s acquisition of ARM’s 50 per cent indirect interest in the Dwarsrivier Chrome Mine (“Dwarsrivier”), held through Assmang Proprietary Limited (“Assmang”), for an amount of ZAR450 million (the “Purchase Consideration”) (the “Transaction”).

In accordance with the terms of the Transaction, Assore, in addition to paying the Purchase Consideration, refunded Assmang an amount of approximately ZAR55 million for additional funding advanced to Dwarsrivier’s operations by Assmang between 1 July 2014, being the effective date of the transaction, and 30 June 2016.

“The acquisition of Dwarsrivier represents a major step forward for the Assore group, in balancing our product risk more equitably.

“Additionally, the group has embarked on cost saving programmes to improve and maintain the competitiveness of its operations in light of increased operating costs in South Africa,” Assore chairman Des Sacco subsequently said.

In March of this year ARM announced a huge leap in headline earnings for the six months ending December, underpinned by strong cash flows.

Headline earnings increased by 234 per cent to R1.69 billion, mainly due to strong earnings from iron ore, manganese, and Two Rivers Platinum Mine. Headline earnings per share increased by 283 per cent to R8.93 per share.

The bulk of the group’s profits, and the majority of the increase came from ARM Ferrous, and specifically the iron ore division, where ARM’s 50 per cent interest in Khumani and Beeshoek contributed headline earnings of just over R1 billion.

The manganese division contributed a further R378 million to the bottom line. ARM Ferrous as a whole, increased headline earnings by 197 per cent to R1.8 billion.

The group’s results were also characterised by significant cash flow generation. ARM generated more than R1 billion from operating activities during the period, aided by cash dividends received from the Assmang joint venture, which increased to R988 million from R500 million. Post year end ARM received a dividend of R1.5 billion from Assmang.

After more than 80 years, Assmang continues to deliver and as long as global demand continues for its minerals, the long-term future looks assured.