Review of Operations - Ferrous Metals

Jan started his career with the Anglovaal Group in 1973. Trained as a mining engineer, he has worked and managed Group mining operations within the gold, copper, manganese and iron ore sectors.

Assmang Limited’s headline earnings rose by 82 per cent to R231 million (R127 million). A stringent cost control programme, better efficiencies at all operations, and a favourable United States dollar/South African rand exchange rate, all contributed to these good results. Revenue rose to R1,9 billion (R1,6 billion) and cost of sales were well contained at R1,4 billion(R1,3 billion). Assmang’s profit before tax was significantly higher at R350 million (R216 million).


Divisionalisation
Over the years Assmang’s product range has developed in three distinct areas: manganese, iron ore and chrome. To reflect this, it was decided to form three distinct operating divisions along these commodity lines. In terms of the changing environment in which Assmang operates, these divisions will focus on achieving higher efficiencies through integration.The manganese division consists of the Nchwaning and Gloria mines and the works at Cato Ridge. The chrome division comprises the Dwarsrivier mine and the Machadodorp works. The iron ore division is made up of the Beeshoek mine and the iron ore resources around Postmasburg as well as on various properties adjacent to the Sishen mine. To facilitate this divisionalisation, Feralloys Limited, the structure that previously ‘housed’ the alloy operations, will be absorbed into Assmang.

Sales volumes maintained
Manganese sales, excluding deliveries to the manganese alloys plant, were higher at 979 000 tons (926 000 tons) and iron ore sales were 145 000 tons higher at 4,3 million tons. Themanganese alloy operations sold 193 000 tons (206 000  tons), inclusive of refined ferro-manganese, and despite weak market conditions chrome alloy sales were slightly higher at 125 000 tons (114 000 tons). The new Dwarsrivier opencast chrome mine and beneficiation plant were commissioned ahead of schedule and under budget and the supply of ore to the chrome alloys division has commenced. Chrome ore production totalled 254 000 tons, which was delivered to Assmang’s chrome alloy operation.  

Capital expenditure
Capital expenditure on Assmang’s major projects, which include the iron ore jig plant at the Beeshoek mine, the chrome smelter expansion and pelletising plant at Assmang’s chrome alloys facility and the new shaft complex at the Nchwaning manganese mine, rose to R626 million (R405 million). Cold commissioning is currently underway at the R375 million expansion of the chrome alloy plant. This comprises a 54 MVA furnace and a 350 000 tons a year pelletising plant that will improve furnace productivity. The chrome alloy capacity is on track to double by the middle of the current financial year to 300 000 tons a year.  The R97 million jig plant at Beeshoek was commissioned within schedule towards the end of the 2001 financial year. This significantly improves product qualities resulting in a more saleable product, while enabling the build-up to over five million tons a year of iron ore from this mine in the current financial year. This is expected to increase to nearly six million tons by 2003. The new R517 million shaft complex at the Nchwaning manganese mine is proceeding according to schedule for commissioning in late 2003. Significant progress was made during the year and the sinking of the decline shaft is progressing satisfactorily to intersect the orebody. The shaft system will increase the operational life by over 20 years and the mechanised nature of the mining will result in a lower operating cost.

Assmang’s headline earnings rose by 82 per cent to R231 million from the previous year’s R127 million

PGM assets sold
Two Rivers Platinum (Proprietary) Limited, a company jointly owned by Avmin and Impala Platinum Holdings Limited, has acquired the rights to the platinum group metals (PGMs) on the farm Dwars Rivier in the Mpumalanga Province. Assmang mines chrome ore on the property and agreed to dispose of the underlying PGM assets, as these are not its core business. The transaction was concluded recently for a sale consideration of R551 million, which should be paid to Assmang in the first six months of the current financial year. Competition Commission and shareholder approvals to conclude this transactionare currently being obtained.