South32, the world’s largest manganese producer, has called for further consolidation of the segment in SA and an improvement in Transnet’s rail performance to increase the country’s output of the metal.
Speaking at a mining conference hosted by Bank of America this week, South32 outgoing CEO Graham Kerr was upbeat about coal miner Exxaro’s R12bn acquisition of manganese assets in the Northern Cape, announced on Tuesday.
“Consolidation by Exxaro is a good thing for the industry. Without getting too far into it, I think there’s an opportunity to look for economies of scale and see what can be done to improve the rail network,” said Kerr.
The deal will give Exxaro controlling stakes in several major manganese mines in the Northern Cape, a region which is home to about 80% of the world’s manganese reserves.
SA’s abundant reserves of the metal make it well positioned to capitalise on its importance in the shift towards renewable energy, given its use in emerging battery technologies.
The most recent data from the Minerals Council SA shows the country’s manganese output soared in the first two months of this year, increasing by almost a quarter year on year.
Along with coal, manganese was the largest contributor to SA’s mining production figures last year, with output up 8.7% year on year in December.
Still, SA’s manganese sector continues to be constrained by high freight costs and inefficient logistics.
“There’s no shortage of resource [in SA],” said Kerr, but “the challenge lies between the mine and the port, between the port and the customer. SA can certainly turn out material pretty quickly, but it’s very sensitive to pricing”.
He said mining costs in SA are not that different from the group’s Australian manganese operation, Groote Eylandt Mining Company (Gemco), though logistics inefficiencies meant operating costs were about double that of Gemco.
“That makes SA a difficult place to make a decent margin through the cycle,” Kerr said.
He reiterated the group’s commitment to holding on to its long-life SA manganese assets, but added that South32 would not get involved in consolidating the sector.
“That’s not a role for us — our growth strategy is focused more on base metals, particularly copper and zinc. We’ll watch with interest what happens in that space, but it’s probably not for us to be the consolidator,” he said.
South32’s SA manganese operations reported an 18% decline in sales for the quarter to end-March, primarily the result of port congestion which affected the timing of shipments.
Last year, the group announced it would invest $15m on an expansion programme for its Wessels manganese mine in an effort to increase its exposure to commodities which are critical to the energy transition.
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