Better, bigger manganese transport corridor needed – BHP Billiton

A better, bigger manganese transport corridor is needed so that South Africa can benefit optimally from its rich source of manganese in the Kalahari. That is the message South African-born BHP Billiton CEO Marius Kloppers and BHP Billiton manganese president Peter Beaven left with journalists in a media conference. Beaven tells Mining Weekly that the company has been through a “very flat spot” in manganese demand in recent months. BHP Billiton’s manganese business at one stage went for six months without sales. The flatness of the market, Beaven says, is the result of a market destocking cycle, which is similar in its causes to the London Metal Exchange (LME) destocking cycle, but it is “more violent”. “We are back into selling some product now. “The Chinese are reaching the end of their restocking phase and the markets in Europe and the US are starting to come back to life again,” he says. “If you look at spot prices, which are published, you will see that ore prices have started to tick back up again, as have alloy prices. “Beyond that, we will wait and see. Real fundamental demand is still difficult to see,” says Beaven. In developing BHP Billiton’s case for a better, bigger manganese transport corridor, Kloppers says that it is useful to reflect on BHP Billiton’s view on social development. “Our view has always been that new investment drives new opportunities,” he says. New opportunities are created, for instance, for black economic empowerment, because new partners are needed, and new opportunities are created to hire people and provide jobs, all driven by new investment. “We emphasise that and we talk about that a lot. One of the things the manganese business has been working on is that, if we want to grow structurally our manganese business, off a very, very good resource base – not only our resource base, but also South Africa’s resource base – it is important that, in due course, we find another export route, with more capacity. “We look forward to working with all the people, other producers, service providers and so on, towards making that a reality,” says Kloppers. Adds Beaven: “There is more demand than capacity at this point in time. In addition to that, we have to find another cost option. “Those are the discussions we are having, in a very cooperative fashion, and we are really very pleased with that and with the attitude of Transnet.” Kloppers adds: “What we do know is that there are very significant manganese resources in the Kalahari and we basically have a logistical constraint, which prevents South Africa from taking market share from other producers. “In addition, the current export route is logistically fairly expensive and also from a cost com-petition point of view, it’s sometimes, particularly in depressed scenarios, difficult for the South African producers to compete. “I think that the solution that we need to see, and I really don’t want to say exactly how it will work out, has got to be something that is both lower cost and higher capacity, and may entail significant capital investments in order to get there.” Kloppers places manganese with laggards nickel and aluminium as commodities unlikely to contribute a large portion to BHP Billiton this year. “But the portfolio is diversified. When one commodity does well, perhaps another commodity does less well. “I don’t think there are many that would have predicted a couple of years ago how well the manganese business did in the last couple of years. “Similarly, three years ago, the market couldn’t get enough nickel, yet last year nickel wasn’t exactly the star performer in BHP Billiton’s portfolio. “For us, an individual year is an individual year from an individual product, but the most salient feature of the BHP Billiton port-folio is the fact that it is diversified by product, operating geography and by the markets that it serves,” Kloppers says. Petroleum, iron-ore, base metals and the company’s two coal businesses are expected to contribute a substantial part of the overall profits of BHP Billiton. The first shipment of coal has been made from BHP Billiton’s Klipspruit energy-coal project, in Mpumalanga, representing the culmination of a project that began as a mini project and then attracted billions of rands in investment. BHP Billiton scaled back its lower-return coal businesses, shedding Zululand Anthracite collieries and Rietspruit because they failed to fit the portfolio of long-life low-cost assets. But that was done to reconfigure the coal business to one of high margin and, thus, sustainable throughout the downturn. Kloppers points out that BHP Billiton has invested R15-billion in both the Klipspruit project and the Douglas Middelburg Optimisation coal in the last few years. “We feel comfortable that we have got a very solid base in which we have invested a substantial amount of money to go forward,” he says. On aluminium, the company lost 10% of its power capacity and has had to make adjust-ments. With demand coming back over the next 12 months, operations should begin functioning at better capacity than in the past year.