COMPANY PROFILE
2014
Palabora
Mining Company
A shining beacon in Africa’s copper industry
company profile
A shining beacon in Africa’s copper industry Editorial: Roland Douglas Production: Ajuanne Payne Despite challenges in South Africa’s copper industry, the country’s leading copper producing organisation, Palabora Mining Company, is sitting in a strong position. With changes in organisational structure providing a fresh approach to business and on-going operational excellence, this is one company that is a genuine industry leader.
Copper is one of the most important chemical elements found on this planet. Apart from being essential to all living organisms, the mineral has hundreds of important uses and has been used by people for thousands of years. But do we often forget about the importance of copper? After all, it isn’t as glamorous as gold or platinum and isn’t as abundant as aluminium or iron so where does copper sit on the list of important minerals being mined? Well, in southern Africa, copper is right up there, mixing it at the top of the list with the shiny names. Copper, especially in Zambia, South Africa, DRC and Botswana, is hugely important. It provides jobs, creates wealth and contributes to export values and economic development. This is why there are some big names involved in copper mining and why these big names continue to pour there resources into producing more and more of this valuable mineral. The flagship names in copper mining in Zambia include Equinox Minerals, African Eagle Resources, Luanshya Copper Mine Company and Zambia Consolidated Copper Mines to name but a few and the country ranks as the eighth largest producer of copper in the world (2013) but the industry has been fraught with problems. The distribution of wealth and
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the management of the industry have all been criticised in the past but since privatisation, copper prices (along with the prices of other minerals) have risen dramatically and subsequently the country has seen foreign investments estimated at around US$4 billion. But in South Africa, the industry is different, the country is ranked 21st on the list of the world’s top copper producers and there is one name that dominates the industry. That name is Palabora Mining Company (PMC) and since its establishment in 1956, the business has been the country’s only producer of refined copper, with an output of approximately 60,000-80,000 tonnes per year.
SHINING HISTORY Palabora Mining Company has, for many years, drawn on the skills and expertise of its local community; the small mining town of Phalaborwa is situated in the Letaba District of the Limpopo Province. The reason for the company’s, and the community’s establishment in the region, was the discovery of a unique rock formation; the Palabora Igneous Complex. This ‘complex’ contains a vast mixed bag of metals and minerals and it is thought that the area was once home to a large volcano (2000 million years ago) which
Palabora Mining Company
erupted on numerous occasions helping to create the mineral rich zone that is mined today. Nowhere else is copper known to occur in carbonitites as is the case here, and a host of other minerals such as phosphates, vermiculite, phlogopite, magnetite, nickel, gold, silver, platinum and palladium also occur. Although PMC controls the region today, it is reported that throughout history there have been different groups of metal workers that have dominated the region including the Makušane-Malatji, MasêkêMalatji, the Shai (in the Mašišimale Hills) and the Majaji-Malatji. Today, PMC’s operations are state-of-the-art and the envy of many international peers. The company operates a large block cave copper mine and smelter complex with a staff of 2200. The refinery produces continuous cast rod for the domestic market and cathodes for export. Useful by-product metals and minerals include zirconium chemicals, magnetite and nickel sulphate as well as small quantities of gold, silver and platinum. The company has developed a US$410 million underground mine with a production capacity of 30,000 tonnes of ore per day. Palabora also owns a nearby vermiculite deposit, a versatile industrial mineral with hundreds of uses,
which is mined and processed for sale worldwide. The company supplies most of South Africa’s copper needs and exports the balance. Palabora’s block-cave mine is a benchmark for integrated design. No other block-cave mine has been put into as competent an ore-body. The block height of the cave reaches a record 450 meters in the centre, increasing up to 700 meters on the periphery, rendering it a world-class mine. The company is understandably proud of its operations and describes them as best-in-class: “Our fleet of Load-Haul-Dump (LHDs) vehicles tip 3000 buckets of ore per day into four jaw crushers on the northern side of the footprint. Ore is reduced to less than 220mm and fed onto a high-capacity conveyor system up to the shaft complex from where it is hoisted to the surface. “A mature and highly skilled underground workforce - using best-in-class technologies and equipment - delivers safe and cost-efficient tonnages to the concentrator. “Palabora uses current leading practices in production, scheduling, reconciliation, rehabilitation and maintenance of the block-cave mine. This includes leading practices in roadway construction, oversize and hang-up treatment
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company profile and the maintenance of loader efficiencies and dust suppression systems,” the company says.
GROWTH Growth has been a key topic for the management at PMC and on-going discussions about the strategy will continue following the recent changes in the company’s ownership structure. Former Managing Director, Anthony Lennox told Limpopo Business magazine last year that the company had put in place a strategic plan to drive business growth through until 2030. He said: “We have a great asset, committed people, supportive host communities and above all, a solid business case and strategy.” However, the growth strategy is currently being reviewed following the recent announcement of changes at the top. PMC announced on April 3rd that Smart Union Resources South Africa, formerly Rio Tinto South Africa, had invoked provisions of Section 124(1)(a) of the Companies Act to compulsorily acquire all the remaining ordinary shares in the company. Late last year, a consortium led by Smart Union Resources, including South African and Chinese entities - the Industrial Development Corporation, Hebei Iron and Steel, Tewoo, General Nice and the China-Africa Development Fund - acquired 96.9% of PMC shares.
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At that stage, PMC shareholders who did not accept the consortium’s offer were advised that if they did not want Smart Union to compulsorily acquire their remaining offer shares, they were entitled to make an application to the High Court of South Africa seeking an order to prevent this. The last day for the remaining shareholders to make an application to court was April 1st, 2014. It had been confirmed that, as of April 3rd, no applications had been made to the court and, accordingly, Smart Union was entitled and bound to acquire the remaining offer shares under the same terms and conditions as those of the original offer.
COPPER INDUSTRY In April, Copper Development Association Africa (CDAA) centre director Evert Swanepoel said that South Africa will need assistance from other African copper mines – particularly those in the Copperbelt region – for additional supply as the country’s stock gradually depletes. “Currently, South Africa’s primary reserves are decreasing because the local primary copper mines are nearing their end-of-life,” he told Engineering News. Of course this is cause for concern for PMC who could potentially lose out financially if a deal is struck with Copperbelt producers. Then there is the proposed
Palabora Mining Company
“Mining insurance is a speciality field and mining insurance portfolios should be placed with specialist mining insurance underwriters...” The GIB group was founded in 1982 and has grown to be one of South Africa’s leading composite insurance broking houses. In 1990, GIB formed a specialist Construction & Engineering Insurance Division. The division was successful in acquiring Major Construction and Engineering Clients and structuring their Risk Management and Insurance Portfolios. In 1993 this Specialist Division was expanded to include Mining Insurance and to provide a full prospectus of tailored Risk Solutions for the Mining Industry.
Risk Solutions as follows: • Mining Insurance
• Liability
• Building Project Insurance
• Directors & Officers Liability
• Civil engineering Insurance
• Prospectus Indemnity
• Guarantees
• Professional Indemnity
• Mining Rehabilitation Guarantees • Defective Workmanship and Products Liability • Machinery Breakdown • Advance Loss of Profit
• HIV Insurance
• Project Delivery
• High Quality Service Delivery
The Mining, Engineering and Construction Division is now established as a specialist in the Mining Industry and continues to provide specialist services on major construction projects. As industry experts we provide tailored risk solutions. ANTHONY CALMEYER Managing Director - Mining, Construction & Engineering Division Landline: +27 11 483 1212 Mobile: +27 83 255 3371 Email: anthony@gib.co.za
BARRY GOEBEL Associate Account Executive - Mining, Construction & Engineering Division Landline: +27 11 483 1212 Mobile: +27 82 081 0210 Email: barry@gib.co.za GIB Insurance Brokers (Pty) Ltd is a authorised financial services provider. FSP Number:10406
duty on copper exports which could turn international customers away from South Africa, but Swanepoel is confident that these actions would only benefit the country’s industry. “The common consensus is that China will remain the key driver for the commodity until 2020, sustaining copper demand until then. “I believe that African mines and South Africa’s copper industry can both benefit from a partnership.” Speaking about exports, Swanepoel said: “Legal and illegal copper scrap dealers are exporting copper at rates that vary from about R70,000 per tonne to R80,000 per tonne, which is creating greater demand for copper scrap in the local industry. “It is important to retain copper and copper scrap locally, as it can be re-melted and used again in the industry. “By offering the local copper industry the chance to buy the copper first, employment can be maintained, foundry processes can continue and the local industry will grow.” Whatever the outcome of discussions on exports, PMC will remain in a strong position thanks to its significant customer base in its local market place. And whatever happens with partnerships with other
PARTNER
African countries, PMC will be confident as it is still the country’s only producer of refined copper and, as such, remains an industry leader, one in which other companies aspire to imitate.
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“Palabora uses current leading practices in production, scheduling, reconciliation, rehabilitation and maintenance of the block-cave mine” MAY 14 PAGE 5
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www.palabora.com T: +27 (0)15 780 2911
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