2.   THE MINING ASSETS

2.8.1  

Rosh Pinah

Rosh Pinah is situated in the Karas region of southwest Namibia, Southern Africa, some 800km south of the capital city of Windhoek. Located at latitude 27°56’S and longitude 17°03’E, the site is accessed via a gravel road from the regional town of Keetmanshoop. Exploration, development and production history in the area dates from 1915 leading to discovery of the sulphide deposits in 1964 and construction of Rosh Pinah in 1967.

Production commenced in 1969 and continued until 1993 when Imcor Zinc (Proprietary) Limited was placed in liquidation. Following a period negotiation with the Namibian Government Rosh Pinah ceded the mining rights associated with the mine to PE Minerals, and Iscor sold a 5% interest in Rosh Pinah to three Namibian empowerment groups. This has since diluted to 4.4%. A further 6.1% interest was obtained by PE Minerals for vesting certain exploration properties into Rosh Pinah.

Kumba has also stated its intention to dispose of a further 39.5% to similar empowerment groups in due course. Mining recommenced, and total mine production since 1967 is estimated at some 21Mt grading 8% zinc and 2.4% lead. Rosh Pinah comprises a mechanised underground operation processing through a conventional crushing-milling-flotation circuit with an operating capacity of 65ktpm.

Rosh Pinah has a five-year LoM. Regional exploration has been carried out and no significant new orebodies have been identified. Recently, the regional exploration program was stopped, and three alternative plans have been considered. These are:

• Manage to closure (five-year LoM);
• Sustain operation with annual exploration drilling to extend life of existing orebodies (estimated life is five-year LoM plus eight additional years); and
• Modified focus plan – a plan to increase development and drilling of existing orebodies to achieve a 10-year LoM in three years and thereafter to maintain this on an annual basis.

This report is based on the manage-to-closure (five-year LoM) option. This option is not necessarily the way forward. This report is done on the manage-to-closure option due to the reliance on known reserves and resources only.

Table 2.59 indicates summary details of the infrastructure currently servicing Rosh Pinah, type of operation and projected life. Zinc concentrate is sold directly for consumption at Zincor Refinery and Lead concentrate is exported via port facilities at Walvisbay.

Table 2.60 provides a summary of the principal operating statistics at Rosh Pinah.

2.8.2  

Zincor

Located 50km east of Johannesburg in Springs, Zincor is an electrolytic zinc plant with the capacity to produce 110ktpa of zinc metal and 170ktpa of sulphuric acid. The plant employs some 569 permanent people and 186 contractors and processes some 230ktpa of zinc concentrate, sourced predominantly from Rosh Pinah and Black Mountain. Zincor is currently the only zinc refinery in South Africa.

The majority of sales are made to customers in the galvanising, zinc chemical and zinc alloy industries. The plant’s pricing structures are linked to the London Metals Exchange. The plant is on the site of an old Gold Fields of South Africa Limited gold plant (Vogels), and some of the old plant buildings and equipment (tanks, thickeners, etc.) are still in use. The zinc plant was commissioned in 1968 with two concentrate roasters. Subsequently two larger roasters were also installed, the first in 1975, the second in 1980.

2.8.3  

Chifeng Phase

The Chifeng smelter is located in Chifeng City, which is the second largest city of Inner Mongolia Autonomous Region and about 500km north east of Beijing. The distance from the center of the city to the smelter is about 5.5km.

Chifeng is a joint venture, established by Kumba Base Metals China Limited (Hong Kong), Chifeng Hongye Zinc-smelting Company Limited and Chifeng Baiyinnuoer Lead and Zinc Mine in July 2003 with total assets of RMB785m. The annual production capacity of the smelter is 50ktpa of electrolytic zinc, and 90ktpa of sulphuric acid. The bulk of the main product, zinc ingot, and by-product, sulphuric acid, are sold in the Northeast and the North of China. Some of the production is exported to Korea and Japan. To fully utilise the resource advantages in Chifeng region and to transfer resources into economic growth an expansion strategy is followed. The Phase III project, currently under construction, is focused on increasing the production to 110ktpa of zinc products, and 180ktpa of sulphuric acid. The current ownership structure is: Hongye 100% of Phase I (23,75ktpa zinc) and 26% of Phase II (25ktpa zinc). Baiyinuoer Mines 14% of Phase II (25ktpa zinc) and Kumba 60% of Phase II (25ktpa zinc). Phase II pays a rental lease (fixed on a quarterly basis and variable on an annual basis) for the equipment in Phase I. Exxaro will have a 25% interest in Chifeng Phase III Project, which is expected to commence production in 2007, processing some 110ktpa of zinc concentrate to produce some 52ktpa of zinc metal and alloy. This will give Exxaro an effective 22% interest in Chifeng.

The decision to build a smelter in Chifeng City was made by the Chifeng municipal government to exploit the rich lead-zinc deposits in the region. The smelter was built on the outskirts of Chifeng near the Yingjin River in the early 1990s, and was progressively commissioned between August 1994 and September 1995. In 1999 the smelter was transformed from a State-owned enterprise to a limited liability company. In 2001 discussions with Kumba resulted in a decision to cooperate in a joint venture. Kumba’s 60% share in the JV was secured by an injection of USD18m in order to fund the expansion work at the Chifeng site, namely the provision of a new calcine handling facility, expansion and development of leaching and purification and their conversion from batch processing to continuous, the addition of a second tankhouse, induction furnace and casting line and the provision of an additional steam boiler. The expansion, providing a design capacity of 50ktpa slab zinc, was commissioned at the end of 2003.

2.8.4  

Black Mountain Mine and Gamsberg Project

The Black Mountain base metal mine exploits lead, zinc, copper and silver from the mining of ore by underground methods from various deposits. The mine produces three concentrates with the zinc concentrate delivered to Zincor. Lead and copper concentrates are exported to various smelters worldwide via Saldanha, from which silver is also extracted. The mine was originally destined to be closed in 2002 but the discovery and development of the Deeps project has resulted in an extension of mining to at least 2014.

The Black Mountain mine is located adjacent to the town of Aggeneys in the Northern Cape Province, South Africa some 110km east of the regional centre of Springbok.

Further details on the Black Mountain Mine and Gamsberg Project will be filed in a Circular to Shareholders later this year should Exxaro decide to exercise the option to acquire the Black Mountain Mine and Gamsberg Project.

2.8.5  

Exploration Potential

Exxaro has three base metal exploration projects in various development stages as indicated in Table 2.63.

 Table 2.64 to Table 2.66 provide summary details of the base metals exploration projects.