2.5
|
Iron Ore
Exxaro’s iron ore interests comprise its 20% stake in Sishen Iron Ore.
2.5.1 |
Sishen Mine
Sishen Mine is located in the Magisterial District of Postmasburg in the Northern Cape Province of South Africa, some 280km northwest of Kimberley. Located at latitude 27°47’S and longitude 23°00’E, the site is accessed via a tarred road, the R27, between Vryburg and Upington.
Exploration, development and production history dates from the early 19th Century, however large scale exploration only commenced in the 1940s. Following a diamond-drilling programme in 1947, mining operations at Sishen Mine commenced in 1953, primarily providing ore for consumption at domestic steel mills. A further exploration programme during the 1960s led to a significant increase in the resource base, and coupled with the completion of the Sishen to Saldanha railway line, in 1976, enabled increased production through export of iron ore. Total mine production since 1953 is estimated at 812Mt yielding some 665Mt of saleable product (refer to Table 2.3). Sishen Iron Ore has a 100% equity stake in Sishen Mine, but a 78.6% undivided share in the Sishen Mine minerals rights. The remaining mineral rights are held by Mittal Steel, which is entitled to 6.25Mtpa of final ore products over the life of the mine.
| Table 2.3 Sishen Mine: Historical Production |
| |
Tonnes |
Lump |
DR |
DRS |
Fine |
CS |
Total |
| Year(1) |
Treated (Mt) |
(Mt) |
(Mt) |
(Mt) |
(Mt) |
(Mt) |
Products (Mt) |
| 1953 – 1970 |
31.5 |
25.5 |
|
|
|
|
25.5 |
| 1971 – 1980 |
127.4 |
68.0 |
|
|
35.4 |
|
103.4 |
| 1981 – 1990 |
209.5 |
100.0 |
|
6.6 |
62.7 |
0.8 |
170.1 |
| 1991 – 2000 |
268.5 |
134.7 |
1.3 |
3.9 |
72.6 |
6.6 |
219.1 |
| 2001(F) |
31.3 |
14.3 |
0.8 |
0.2 |
6.9 |
1.7 |
23.9 |
| 2002(F) |
30.9 |
15.1 |
0.2 |
0.6 |
8.7 |
1.7 |
26.3 |
| 2003(F) |
32.0 |
15.0 |
0.7 |
0.6 |
8.7 |
1.8 |
26.8 |
| 2003(H2) |
16.1 |
7.6 |
0.5 |
0.3 |
4.5 |
0.7 |
13.6 |
| 2004(C) |
32.8 |
14.7 |
1.3 |
0.7 |
8.3 |
2.5 |
27.5 |
| 2005(C) |
31.8 |
15.2 |
1.3 |
1.2 |
8.8 |
2.4 |
28.8 |
| Total |
811.8 |
410.1 |
6.1 |
14.1 |
216.6 |
18.2 |
665.0 |
| (1) |
Tonnes treated between 1953 and 1997 estimated from average yields from 1998 to 30 June 2001. |
| (F) |
Financial Year ended 30 June. |
| (H2) |
Six months ended 31 December due to the change of Financial Year. |
| (C) |
Calendar Year ended 31 December. |
Sishen Mine currently comprises conventional open-pit operation, processing through a single processing facility with an operating capacity of 32.5Mtpa of RoM. The Main Plant production at Sishen Mine is focused on the beneficiation of high-grade iron ore (beneficiated Fe=60%) to produce a product of 66%Fe. Saleable products comprise some 28.5Mtpa and include Lump, Direct Reduction (“DR”), Direct Reduction Shaft Furnace (“DRS”), Fines and Coarse Sinter (“CS”). These products are supplied in varying amounts to domestic steel mills with the majority, 22Mtpa, exported via the port facilities at Saldanha. In addition to the exports and sales on commercial terms Kumba has an agreement with Mittal Steel to supply Mittal Steel domestically with 6.25Mtpa of saleable product on a cost plus 3% management fee basis of which a maximum of 1.8Mtpa is to be delivered to Saldanha Steel.
The Sishen Expansion Project (“SEP”) is based on the introduction of new jigging process technology that is planned to upgrade traditionally lower grade iron ore (Fe >50%) to export quality at some 64%Fe. The project is planned to be undertaken in two phases for which a Feasibility Study for Phase I, some 13Mtpa of product, was completed in January 2005. Phase II is planned to increase SEP production by a further 10 – 20Mtpa of product but is dependent on a higher rail capacity than included in the current Transnet contract agreement. SRK has consequently reviewed and included the TEPs associated with the SEP Phase I project. SRK understands that Kumba is currently undertaking investigations to increase the SEP capacity and, subsequent to review, these projections may be included in the current valuation exercise either through a DCF analysis or attributing value to the Mineral Resource.
| Table 2.4 Sishen Mine: Current Infrastructure |
| Type |
Infrastructure |
Detail |
| Mine Access |
North Pit, South Pit |
Long life asset with waste mining capacity of 4,100ktpm and ore mining capacity of
2,800ktpm in current mine configurations. |
| Process Facilities |
Main Plant |
Long life asset with operating capacity of 2,900ktpm comprising conventional
heavy media circuits to produce various iron ore products. |
| |
SEP Plant |
Long life asset with operating capacity of 1,400ktpm comprising jig circuits. |
| Tailings Facilities |
No. 1 Plant |
Long life asset. |
Table 2.4 provides summary details of the infrastructure currently servicing Sishen Mine, type of operation and projected life. Table 2.5 provides a summary of the principal operating statistics for the years ending
30 June 2002 to 31 December 2006 inclusive. The increase in capital expenditure in 2006 is principally associated with the construction of the SEP process plant which forms the principal project capital for Sishen. The SEP Phase I project is being constructed over some three years from 2006 at a total capital cost of ZAR4.0 billion. In addition to the SEP capital for 2006, sustaining capital is required in terms of the main plant and replacement mining equipment. The increase in cash production costs between 2003 and 2006 is largely as a result of an increase in on-mine costs, notably diesel.
|
Table 2.5 Sishen Mine: Historical Operating Statistics
|
| Statistics |
Units |
2002(F) |
2003(F) |
2003(H2) |
2004(C) |
2005(C) |
2006(C) |
| Production Statistics |
|
|
|
|
|
|
|
| Tonnes Treated |
(Mt) |
30.9 |
32.0 |
16.3 |
32.8 |
31.8 |
33.5 |
| Waste Mined |
(Mt) |
57.2 |
65.4 |
30.8 |
54.7 |
58.6 |
78.9 |
| Stripping Ratio |
(tw : to) |
1.8 |
2.0 |
1.9 |
1.7 |
1.8 |
2.4 |
| Overall Yield |
(%) |
84 |
82 |
83 |
85 |
89 |
86% |
| Sales |
|
|
|
|
|
|
|
| Lump |
(Mt) |
15.1 |
15.0 |
7.7 |
14.7 |
15.2 |
14.7 |
| DR Ore |
(Mt) |
0.2 |
0.7 |
0.6 |
1.3 |
1.3 |
1.7 |
| DRS Ore |
(Mt) |
0.6 |
0.6 |
0.4 |
0.7 |
1.2 |
1.2 |
| Coarse Sinter |
(Mt) |
1.7 |
1.8 |
0.7 |
2.5 |
2.4 |
3.0 |
| Fine |
(Mt) |
8.7 |
8.7 |
4.1 |
8.3 |
8.8 |
8.4 |
| Total |
(Mt) |
26.3 |
26.8 |
13.5 |
27.5 |
28.8 |
29.0 |
| Expenditure Statistics |
|
|
|
|
|
|
|
| Total Cash Production Costs |
(ZARm) |
1,156 |
1,239 |
619 |
1,353 |
1,540 |
1,803 |
| Total Capital Expenditure |
(ZARm) |
251 |
197 |
96 |
170 |
243 |
1,718 |
| Expenditure Efficiencies |
|
|
|
|
|
|
|
| Total Cash Production Costs |
(ZAR/t treated) |
37.4 |
38.8 |
38.0 |
41.3 |
48.4 |
53.8 |
| |
(ZAR/t sales) |
44.0 |
46.3 |
46.0 |
49.2 |
53.5 |
62.2 |
| (F) |
Financial Year ended 30 June. |
| (H2) |
Six months ended 31 December due to the change of Financial Year. |
| (C) |
Calendar Year ended 31 December. |
|
2.5.2 |
Sishen South Project
The Sishen South Project is located 12km southwest of Postmasburg in the Northern Cape and 85km south of Sishen Mine. The Sishen South Project consists of two phases. The LoM and associated FM and NPV presented in this CPR represents Sishen South Project Phase I, while Sishen South Project Phase II is valued as an exploration project.
The project site is accessed via a gravel road, the R383, to Postmasburg. A rail network exists between Beeshoek and Sishen Mine and a link will be constructed to a siding at the Beeshoek Mine from the Sishen South Project which is 14km to the south. Power is available via Postmasburg or the Beeshoek Mine and the Sishen South Project plans to utilise power from Postmasburg, which will be sourced via a new Eskom Holdings Limited (“Eskom”) line to be constructed between Postmasburg and the Sishen South Project.
A new sub-station will be installed at site and the existing sub-station at Postmasburg upgraded. In terms of water supply 35m3/hr is required at site principally as potable water and at the plant this will be obtained from the de-watering programme that is to be established. De-watering will commence at some 100m3/hr and build-up to a maximum of 350m3/hr for Phase I. Excess water is planned to be delivered to the Vaal-Gamagara pipe line.
The region is semi-arid with annual rainfall between 300mm and 500mm, and current land use is limited to sheep and goat farming and minor irrigation agriculture. The surface topography is medium to flat and the site is some 1,300m above sea level. Exploration has been undertaken by Kumba since 1953 and a number of option and feasibility type studies had been completed.
The increase in planned rail capacity to 35Mtpa has enabled Kumba to proceed with a combination of Phase I of the Sishen South Project and to introduce SEP. The high grade iron ore available at the Sishen South Project is considered comparable to that of the Sishen Expansion Project – 64%Fe Lump ore and 63.5%Fe Fine ore. A feasibility study was completed by Kumba in June 2005. SRK’s review of Sishen South is based upon the designs and projections contained in this CPR.
|
2.5.3 |
Thabazimbi Mine
Thabazimbi Mine is situated in the Magisterial District of Thabazimbi, Limpopo Province, South Africa, some 200km north of Johannesburg. Located at latitude 24°36’S and longitude 27°23’E, the site is accessed via a tarred road, the R511, between Brits and Lephalale. Exploration, development and production history dates from 1919, however large-scale exploration only commenced in the 1930s when Iscor acquired the mineral rights.
Substantive mining operations at Thabazimbi Mine commenced in 1932, primarily providing ore for consumption at domestic steel mills. Total mine production since 1932 is some 154Mt yielding some 118Mt of saleable products (refer to Table 2.6). Thabazimbi Mine is effectively a Mittal captive operation, which operates on a cost plus 3% management fee basis.
|
Table 2.6 Thabazimbi Mine: Historical Production
|
| Year |
Tonnes Treated (Mt) |
Lump (Mt) |
Fine (Mt) |
Total Products (Mt) |
| 1932 – 1970 |
49.8 |
19.9 |
17.2 |
37.1 |
| 1971 – 1980 |
28.2 |
11.2 |
9.7 |
20.9 |
| 1981 – 1990 |
29.3 |
11.7 |
10.1 |
21.8 |
| 1991 – 2000 |
31.1 |
13.5 |
11.1 |
24.6 |
| 2001(F) |
2.6 |
1.0 |
1.1 |
2.1 |
| 2002(F) |
2.7 |
1.3 |
1.1 |
2.4 |
| 2003(F) |
2.8 |
1.3 |
1.1 |
2.4 |
| 2003(H2) |
1.5 |
0.7 |
0.6 |
1.3 |
| 2004(C) |
3.1 |
1.3 |
1.2 |
2.6 |
| 2005(C) |
3.1 |
1.3 |
1.2 |
2.5 |
| Total |
154.2 |
63.2 |
54.4 |
117.7 |
| (F) |
Year ended 30 June. |
| (H2) |
Six months ended 31 December due to the change of Financial Year. |
| (C) |
Calendar Year ended 31 December. |
| Table 2.7 Thabazimbi Mine: Current Infrastructure |
| Type |
Infrastructure |
Detail |
| Mine Access |
Donkerpoort Nek/East Pit |
Short life asset |
| |
Buffelshoek West Pit |
Short life asset |
| |
Donkerpoort West Pit |
Short life asset |
| |
Kwaggashoek East Pit |
Short life asset |
| Process Facilities |
No.1 Plant |
Short life asset with operating capacity of 270ktpm comprising conventional dense medium separation circuits |
| Tailings Facilities |
No. 1 Plant |
Short life asset |
Thabazimbi Mine comprises an established conventional open-pit operation, processing through a single processing facility with an operating capacity of some 3Mtpa of RoM. The operation is considered to be a short-life operation although investigations into the Phoenix Project, a significant LoM extension project, are well-advanced.
Table 2.7 provides summary details of the infrastructure currently servicing Thabazimbi Mine, type of operation and projected life. Table 2.8 indicates a summary of the principal operating statistics for the years ending 30 June 2002 through to 31 December 2006 inclusive. Actual production for the financial year ending 31 December 2005 is some 2.5Mt of saleable products.
The declining stripping ratio is a result of the relatively short LoM as well as the topography particular to Thabazimbi. A number of the pits started with very high stripping ratios due to the mountainous terrain where, in places, the side or top of the mountain initially needed to be removed to create a stable slope or to access the ore. The stripping ratio, as the elevation drops, therefore declines.
|
Table 2.8 Thabazimbi Mine: Historical Operating Statistics
|
| Statistics |
Units |
2002(F) |
2003(F) |
2003(H2) |
2004(C) |
2005(C) |
2006(C) |
| Production Statistics |
|
|
|
|
|
|
|
| Tonnes Treated |
(Mt) |
2.7 |
2.8 |
1.5 |
3.1 |
3.1 |
3.0 |
| Waste Mined |
(Mt) |
34.9 |
33.2 |
19.8 |
34.5 |
25.0 |
15.4 |
| Stripping Ratio |
(tw : to) |
12.8 |
12.0 |
12.9 |
11.2 |
7.5 |
5.1 |
| Overall Yield |
(%) |
89 |
87 |
85 |
81 |
83 |
85 |
| Sales |
|
|
|
|
|
|
|
| Lump |
(Mt) |
1.3 |
1.3 |
0.7 |
1.3 |
1.2 |
1.1 |
| Fine |
(Mt) |
1.1 |
1.1 |
0.6 |
1.2 |
1.3 |
1.4 |
| Total |
(Mt) |
2.4 |
2.4 |
1.3 |
2.6 |
2.5 |
2.5 |
| Expenditure Statistics |
|
|
|
|
|
|
|
| Total Cash Production Costs |
(ZARm) |
395 |
341 |
160 |
370 |
388 |
358 |
| Total Capital Expenditure |
(ZARm) |
69 |
106 |
80 |
104 |
40 |
66 |
| Expenditure Efficiencies |
|
|
|
|
|
|
|
| Total Cash Cost of Sales |
(ZAR/t treated) |
145.2 |
123.6 |
104.1 |
120.0 |
127.0 |
119.3 |
| |
(ZAR/t sales) |
164.8 |
140.3 |
125.4 |
145.4 |
153.0 |
143.2 |
| (F) |
Financial Year ended 30 June. |
| (H2) |
Six months ended 31 December due to the change of Financial Year. |
| (C) |
Calendar Year ended 31 December. |
|
2.5.4 | Exploration Potential
Sishen Iron Ore has seven iron ore exploration projects in various development stages as indicated in Table 2.9 below.
| Table 2.9 Iron Ore Exploration Properties: Development Stages |
| Exploration Project |
Development Stage |
|
| Assen |
The Assen Project has small classified mineral resources and is deemed an
Advanced Exploration Area. |
|
| Kromdraai |
The Kromdraai Project has no classified mineral resources and is deemed an
Exploration Area. |
|
| Sishen South Phase II
Project |
The Sishen South Project has significant Measured Resources and has
been the subject of high level technofinancial investigations but a final decision to proceed with construction has not been made. It is deemed a
Pre-Development Project.
|
|
|
Zandrivierspoort |
This Project has significant Indicated Resources, but no feasibility type work has been done. It is deemed a
Pre-Development Project.
|
|
|
Falémé |
The Falémé Project has significant Indicated Resources and has been the subject of some feasibility work, but a final decision to proceed with construction has not been made. The mineral titles for the Falémé Project are currently under dispute. It is deemed a
Pre-Development Project.
|
|
|
Phoenix |
The Phoenix Project has significant unclassified mineralisation and is currently the subject of a technical feasibility study and a final decision to proceed with construction has not been made. It is deemed to be a
Pre-Development Project.
|
|
| Boven Zeekoebaart |
This Project has some Inferred Resources and is deemed an Exploration
Area |
|
Table 2.10 to Table 2.16 provide summary details of the iron ore exploration projects.
| Table 2.10 Exploration, Iron Ore: Assen Project |
| Location |
25°10’S, 27°35’E. North West Province, South Africa, ~55km north-northwest
of Brits. |
| Ownership |
100% Sishen Iron Ore. Pending new order prospecting right application. |
| Total Area |
5,831.36Ha |
| Exploration Completed(1) |
ZAR1.74m |
| Planned Exploration |
ZAR0.84 |
Years 1 and 2 |
|
Potential
|
The Assen project’s potential is limited to the mineralisation intersected to date (small high grade hematite deposit). The planned exploration aims to bring this mineralisation into a classified Mineral Resource category. |
(1)
|
Historical costs have been adjusted to present day terms by either adjusting for inflation or by using present day costs for a specific activity. The latter method was used preferentially.
|
| Table 2.11 Exploration, Iron Ore: Kromdraai Project |
| Location |
25°14’S, 28°44’E. Gauteng Province, South Africa,
~70km northeast of Pretoria. |
| Ownership |
100% Sishen Iron Ore. Prospecting rights. |
| Total Area |
7,650.646Ha |
| Exploration Completed(1) |
ZAR0.80m |
Based on estimate by Kumba |
| Planned Exploration |
ZAR0.21m |
Years 1 and 2 |
|
| |
Measured |
Indicated |
Inferred |
| |
0.56Mt at 60% Fe |
|
|
| Potential
|
The Kromdraai project’s potential is limited to the mineralisation identified to date. The planned exploration aims to bring this mineralisation into a classified Mineral Resource category. |
(1)
|
Historical costs have been adjusted to present day terms by either adjusting for inflation or by using present day costs for a specific activity. The latter method was used preferentially. |
| Table 2.12 Exploration, Iron Ore: Sishen South Phase II Project |
| Location |
28°21’S, 22°58’E. |
Northern Cape Province, South Africa, ~70km south of Sishen and immediately west of
the Beeshoek project of Assmang. |
| Ownership |
100% Sishen Iron Ore. |
Pending mining right application. |
| Total Area |
10,731.29Ha |
|
| Exploration Completed(1) |
ZAR40m |
Based on estimate by Kumba |
| Planned Exploration |
ZAR6.8m |
Years 1 and 2 |
| Mineralisation |
see Mineral Resources |
Medium (50% – 60% Fe) to high grade (>60% Fe) |
| |
|
hematite mineralisation |
| Mineral Resources(2), (3) |
Measured |
Indicated |
Inferred |
| |
51Mt at 64.6% Fe |
93Mt at 63.9% Fe |
42Mt at 62% Fe |
| Potential
|
The Sishen South Phase II project is at the pre-development stage and the potential is well-explored. The planned expenditure is mainly feasibility level work. |
| (1) |
Historical costs have been adjusted to present day terms by adjusting for inflation. Historical costs from 1980s discounted by 50% and from 1960s by 75%. Historical costs could not be split between Sishen South Project Phase I and Phase II and therefore SRK applied a 50 : 50 allocation. |
| (2) |
Compiled and signed by Louis Jacobs and Pieter Mienie, both registered Pr.Sci.Nat. with SACNASP. |
| (3) |
Refer to Table 4.2. |
|
Table 2.13 Exploration, Iron Ore: Zandrivierpoort Project
|
| Location
|
23°41’S, 29°35’E. Limpopo Province, South Africa, ~25km north-northeast of Polokwane. |
| Ownership
|
Some titles held 100% by Pietersburg Iron Ore Company, in which Sishen Iron Ore Company holds a 50% interest. Pending prospecting permit application. |
| Total Area |
347.91Ha |
Sisen Iron Ore |
|
| |
2,393.74Ha |
Pietersburg Iron Ore |
|
| Exploration Completed(1) |
ZAR10m |
Based on estimate by Kumba |
| Planned Exploration |
ZAR4.7m |
Years 1 and 2 |
|
| Mineralisation |
see Mineral Resources |
Low grade (~35% Fe) magnetite mineralisation |
| Mineral Resources and Reserves(2) |
Measured |
Indicated |
Inferred |
| |
34.93% Fe |
– |
447Mt |
| Potential |
The Zandrivierspoort project’s potential is limited to the mineralisation identified
to date. Planned work is aimed at upgrading the resource and technical information. |
| (1) |
Historical costs have been adjusted to present day terms by either adjusting for inflation or by using present day costs for a specific activity. The latter method was used preferentially. |
| (2) |
Compiled and signed by Louis Jacobs and Pieter Mienie, both registered Pr.Sci.Nat. with SACNASP. |
| Table 2.14 Exploration, Iron Ore: Falémé Project |
| Location |
12°45’N, 11°31’W. Extreme southeast corner of
Senegal. Local infrastructure is very poor to non-existent. |
| Ownership |
Mineral title held 100% by Miferso(1).
Kumba holds an option to acquire 80% interest financing all exploration and
development costs. Miferso to supply infrastructure. The mineral title is currently under dispute. |
| Total Area |
|
|
| Exploration Completed(2) |
ZAR43.9m |
Based on estimate by Kumba |
| Planned Exploration |
ZAR8.5m |
Years 1 and 2 |
| Potential |
The Falémé project’s potential is high,
with exploration expenditure reflecting this. |
| (1) |
Senegalese Government development company. |
| (2) |
Historical costs came to USD7m. Converted by ZAR6.313 = USD1. |
| Table 2.15 Exploration, Iron Ore: Phoenix Project |
| Location |
Limpopo Province, South Africa, ~15km south of Thabazimbi. |
| Ownership |
Sishen Iron Ore holds 100% interest. Pending mining licence conversion
application. |
| Total Area |
2,010.577Ha |
| Exploration Completed |
ZAR34.7m |
Based on estimate by Kumba |
|
Planned Exploration |
Not finalised |
|
| Potential(1)
|
The Phoenix project is at the pre-development stage, and the potential is well explored. The project is currently subject to a pre-feasibility study. |
| (1) Compiled and signed by D Rossouw, J H Feldtmann and R Kruger, all of Kumba. |
| Table 2.16 Exploration, Iron Ore: Boven Zeekoebaart Project1
|
| Location |
29°06’S, 22°15’E.
Approximately 35km
north-northeast of
Marydale, the
deposit borders the Gariep River in the Northern Cape Province, South Africa. |
| Ownership |
50% owned by Sishen Iron Ore. Valid Prospecting Right. |
| Total Area |
384.82Ha |
Mineral Title |
| Potential |
The average grade of the ore is reported to be 64% Fe. |
| (1) From Venmyn valuation report, 2004. |
|
|
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