'Iron lady' of mining takes on SOEs

The executive chairwoman of Kalagadi Manganese, Daphne Mashile-Nkosi, South Africa's "iron lady" of mining, says electricity costs are threatening the industry and her own dreams.

Eskom needs to be fundamentally restructured so that it supports rather than retards economic growth, she says.

Eighteen years of hard work and a never-say-die attitude in the face of huge industry scepticism are about to pay off for Nkosi, whose company has announced that its R9-billion mine in the Kalahari will ramp up to three million tons of manganese ore a year from October 2019. This will be processed into 2.4million tons of a high-grade agglomeration known as sinter, and exported to steel mills in China and India.

Kalagadi Manganese has the world's largest sinter plant, employing 800 people, but running it is exorbitantly expensive. Electricity costs will make her less competitive and endanger jobs, she says. "You have to keep shutting the sinter down. And when you shut it down, you have to lay off people."

She says production costs will become prohibitively high unless Eskom is radically transformed. "It is time that government looks at a different structure for Eskom. You can no longer continue to have an Eskom that operates the way they are operating. Their operating model has to change to meet the requirements of the mining industry."

She says the government demands beneficiation but ignores the costs.

"If you want companies to beneficiate, you need to understand what it involves. People must look at the costs of producing sinter versus the costs of selling ore as it is."

3 million

Production, in tons, of ore expected at Kalagadi Manganese from October next year

Instead of incentivising the industry to beneficiate, the government is negatively incentivising it to export the raw product.

"And then you're exporting jobs. And we're trying to retain and create jobs. If you want people to beneficiate, what are the incentives so you meet them halfway so they are able to compete fairly in the market?

"You have a government that wants beneficiation, but you have state-owned enterprises that have no appreciation of the beneficiation project. A lot of companies will not beneficiate at these prices. They will opt to export raw minerals rather than process them because that is too expensive.

"You depend on other people to give you money so you can produce, but if your product is overpriced because of your electricity costs, how do you do it?"

A further level of beneficiation is from sinter into high-carbon ferromanganese, which is in demand in Chinese and Indian steel markets at an enticing $1300 (about R15233) a ton. For this, Kalagadi Manganese needs a smelter costing R4-billion, which funders the Industrial Development Corporation and African Development Bank are not ready to lend it.

When she started Kalagadi in 2001, Mashile-Nkosi's wish list was a mine, an ore preparation plant, sinter plant and smelter.

The IDC and AfDB funded the 350m-deep mine and the two plants, but balked at the smelter. So that's on hold for now.

"We want a smelter in Coega. That would be in line with what government wants to see us do in terms of beneficiation."

But even if she gets funding, electricity costs could thwart her. "A lot of companies take ore from South Africa and put it in a smelter in Malaysia, and create jobs in Malaysia because ... it's cheaper to put your ore through a smelter in Malaysia."

She'll go this route herself if the situation doesn't change, she says. "Keeping a smelter open is so expensive it is unaffordable. I'm hoping that through constructive engagement with Eskom and government about pricing, things might change."

Another major challenge is Transnet. Kalagadi Manganese relies on Transnet to get sinter to Port Elizabeth for export, and to the hoped-for smelter in Coega.

It's making her very nervous.

A lot of companies take ore fro SA and put it in a smelter in Malaysia, and create jobs in Malaysia

—  Daphne Mashile-Nkosi

"Transnet were supposed to improve the capacity of their line for our manganese exports, but they could not spend the money on that because of their capital-raising difficulties and internal problems."

As she ramps up production, allocation will become even more of a challenge.

"People in the industry are worried that now that Kalagadi is coming on stream, they might not get the allocations they were getting last year. So you're actually making companies compete with each other for allocations. It's very difficult."

Last year the company had to "road-haul" product to Durban because there wasn't enough rail capacity. And that was only for 500000 tons.

"As a new entrant we're experiencing all sorts of logistical problems." She's reluctant to sign long-term take-or-pay agreements with Transnet because she can't trust it. "If they don't turn up, who takes the responsibility if I'm sitting with a vessel in Port Elizabeth and I can't put product in that vessel?

"Transnet are unreliable. It's a huge challenge for people like us who don't have deep pockets."

Mashile-Nkosi, 60, started Kalahari Resources with her husband, Stanley Nkosi, in 2001. When they got a licence to mine in 2005 they formed Kalagadi Manganese in a joint venture with ArcelorMittal and the IDC.

When her husband died in 2008 she carried on alone. Being a black woman in charge of a start-up mining operation was not for the faint-hearted, but this former member of the ANC underground was never that - as ArcelorMittal discovered when she took it to court for not fulfilling its funding obligations. The global steel giant was ordered to pay R285-million within five days.

She is encouraged that new Mineral Resources Minister Gwede Mantashe is "at least beginning to engage" over the disputed Mining Charter. She has firm views on the once empowered always empowered debate. "I don't agree with people who want to get into a mining company's shares and then sell them the next day. Mining is long-term. If you think mining's a short-term project then don't come into mining because mining is not for you."