No electricity – no smelter

Mineral beneficiation not possible if Nampower cannot guarantee power supply

The proposed export levy on unprocessed minerals is under attack again, this time from Shaw River, an Australian manganese-focused mineral exploration company that holds a 75% stake in the Otjozondu Manganese project. Shaw River’s country manager, Ashley Jones told the Economist this week that it will be rather  unfortunate if government were to proceed to gazette “across the board” the controversial export levies because they would make an additional barrier for new mines to start up.
Jones said it will be uneconomic and impossible for his company, which is targeting production of 500,000 tonnes of manganese per annum (tpa), to add value to the manganese. He said that to add value to the lumpy concentrate that Otjozondu intends to produce, a smelter is needed which requires a significant injection of capital and a major dedicated and guaranteed power supply.
“A smelter to treat 500,000 tpa of lumpy concentrate would cost approximately US$500 million, but more importantly, would require a dedicated power supply of 130MW. This represents about 20 to 25% of Namibia’s current power consumption.
“The smelting process also requires the importation of metallurgical coal (approximately 250,000 tpa) which is not available locally in Namibia. Studies have shown that under current conditions, a smelting operation is not viable primarily because of the increasingly high unit cost of power, let alone the availability of a suitable power supply,” Jones said.
Namibian manganese ore is mainly used in the production of silico-manganese alloy which is  increasingly being used as a key steel-making additive in China, India and Europe.
Otjozond intends to produce the lumpy concentrate which involves a gravity separation plant after crushing and screening to produce 500,000 tpa of product containing 36 to 40% manganese.  The capital required for such an operation is about US$60 million and the installed power is about 2000kW. Jones said such a power supply is within the capability of Nampower or alternatively it is also viable to install diesel-fired generators on site for such a power demand.
Jones added that the delay by the Ministry of Finance to pronounce itself on the matter of export levies was causing uncertainties in the industry. He said it was important to have a key set of criteria (on the export levies) so that miners have certainty and can plan their financing models and see if the economics are justifiable. “It potentially is 0% – 2%, if it is 2%, we need to know the criteria and how it is justified,” he said.
Soon after presenting her budget speech in Parliament in February, Finance Minister Saara-Kuugongelwa Amadhila said her ministry was trying to determine what the rate of the levy will be on the resources affected. She was confident that the new levies would be passed by parliament before the end of March.
“It’s a very involved process and it is ongoing but we are confident that by the end of the first quarter of 2012 we will approach Parliament with proposals,” the Minister said at the time.