Tshipi sold over 1.5 million tonnes of manganese ore in its financial year up to 29th February 2016.
Despite the very difficult price environment, rigorous cost management has helped Tshipi to achieve positive cash flows in every quarter.
In 2007, Pallinghurst identified the raw materials needed for steelmaking as having attractive investment fundamentals. Steel is an important driver of the global economy and has shown consistent growth through a number of economic cycles, in particular when developing economies expand rapidly.
Manganese is a key component in steelmaking, removing impurities and increasing the strength and impact resistance of steel. Global manganese resources are concentrated within South Africa, with approximately 80% of the world’s known economically mineable manganese deposits located in the Kalahari Manganese Field (“KMF”) in the Northern Cape Province.
* The balance of 50.1% of Tshipi’s shares is held by Ntsimbintle Mining (Pty) Limited (“Ntsimbintle”), a broad-based BEE consortium (consisting of Safika Resources, Nkojane Economic Prospecting and a number of national and local economic development and community organisations and social trusts), and OM Holdings Limited (“OMH”), an Australian Securities Exchange (“ASX”) listed integrated manganese mining and trading house. The Pallinghurst Co-Investors provided exploration funding, proving a 189 million tonne manganese deposit at an estimated average grade of 37%.
The year has been difficult for manganese producers, with significant price declines as a result of slowing demand from China. Despite the very difficult price environment, rigorous cost management has helped Tshipi to achieve positive cash flows in every quarter.
In response to the low manganese prices, several producers have either temporarily shut operations or have announced significant cutbacks in production. In December 2015, Tshipi announced that it would cut exports by 35% in the first quarter of 2016. Tshipi’s manganese stockpiles will be utilised for export whilst mining operations will take place only on already exposed ore. This action will involve significant job losses but should enable Tshipi to withstand the prevailing market conditions even if low prices remain for a sustained period. In the year to 29 February 2016, Tshipi Borwa sold over 1.5 million tonnes of manganese ore.
In manganese, Tshipi has been built from a greenfields site into one of the world’s largest and lowest cost manganese producers. The Pallinghurst/Ntsimbintle partnership has stood its test of time, with each partner bringing unique skills to the operation and its own financial backing.
The rigorous cost management has helped position Tshipi Borwa in the lowest cost quartile and the mine remains able to rapidly increase its capacity to over three million tonnes per annum. Tshipi is well-positioned to generate superior returns for all stake- holders once the market recovers.
Tshipi is committed to contributing to the development of the community in which it operates. In conjunction with the Joe Morolong Municipality, Tshipi provided a local waste management company with vehicles, office space, mentorship and training, and committed to a one year contract for waste removal at the mine. Tshipi supports education in the local community by awarding internships and bursaries to local students.
Tshipi has provided funding for a water infrastructure project which provides the local Maphiniki Community with a sustainable water supply, the construction of a health care clinic and the improvement of local services within the Joe Morolong Municipality. Tshipi also continues to provide free health screening and medical surveillance to employees, and actively promotes sustainable mining by replanting trees, creating an onsite nursery and the establishment of a wildlife conservation area.
Tshipi Borwa is a surface, open-cut mine, which typically is the safest mining operation. Tshipi adds to this structural advantage with its strong emphasis on worker safety programmes and procedures. No fatalities have ever occurred at Tshipi Borwa and this strong safety record continued with only two reportable lost time injuries during 2015, an impressive achievement over a twelve month period.
Jupiter holds two iron ore exploration assets in the Central Yilgarn region of Western Australia, the Mount Mason Direct Shipping Ore (“DSO”) hematite project and the Mount Ida magnetite project. Mount Mason has a measured/indicated DSO resource of 5.9 million tonnes at a grade of 60.1% Fe (iron) and has the potential to produce two million tonnes per annum. Mount Ida has a JORC- compliant inferred resource of 1.85 billion tonnes at 29.48% Fe and has the ability to produce ten million tonnes per annum of high grade magnetite concentrate.
As a result of the current low iron ore price, Jupiter has placed its Mount Ida magnetite and Mount Mason hematite projects on care and maintenance. Jupiter continues to monitor the iron ore market and is ready to restart work on these projects once market conditions are favourable.
Despite the current low manganese prices, the medium to long- term supply/demand fundamentals remain favourable. Tshipi has established itself as a significant, low-cost player in the South African manganese ore industry and is well placed to benefit when the market recovers.