Sepfluor seeks to assure banks that new project is safe

Privately owned Sepfluor, an aspiring fluorspar producer, has reduced risk at its R1.7bn mining and concentrating project, which is due to come into production in 2018, assuring three bankers of the viability of the latest addition to the global fluorspar market in an uncertain regulatory environment in SA.

One of the key risks to the project is regulatory uncertainty. The Department of Mineral Resources provoked litigation from the Chamber of Mines by imposing a contentious third iteration of the Mining Charter on the industry in June.

Nedbank as well as Dutch and German development banks were the project’s key lenders and needed much reassurance that the investment in a new mining project in SA was safe, said CEO Rob Wagner.

They wanted assurances that Sepfluor had contracts in place, Wagner said.

The banks had stipulated in their agreements they could change those agreements or withdraw without penalties if there were “substantive legislative change which has a material change on the financing agreement”, said Wagner. Sepfluor was 34% black owned.

“Their view … is similar to the industry’s view that the [third mining] charter is unlikely to be implemented in its current form and they are more than happy to sit where they are at the moment,” said Wagner.

The first draw-down on bank debt was scheduled in the final quarter of 2017, he said. The R1.7bn Nokeng project south of Bela-Bela, Limpopo will supply 180,000 tonnes a year of acidgrade fluorspar to the global acidspar market, which uses it to make plastics, paints and refrigerant gases.

The project will produce 30,000 tonnes of metspar annually, which is used as a flux in steel smelters.

THE BANKS HAD STIPULATED THEY COULD CHANGE THOSE AGREEMENTS OR WITHDRAW WITHOUT PENALTIES

The mine is entwined in Spain’s Grupo Minersa’s Vergenoeg mine, the leading source of fluorspar from SA to a delicately balanced market that can only absorb a new fluorspar mine with annual capacity of about 200,000 tonnes every three to four years. Sepfluor has sold forward 40% of three years’ production at prevailing spot prices to provide comfort to its bankers and has entered a seven-year marketing and logistics deal with commodity trader Traxis for the balance.

China had embarked on a domestic beneficiation programme that would take much fluorspar off the market from 2021, making China a net importer, a positive development for prices, said Wagner.

“We have achieved off-take contracts before being a producer that Vergenoeg has been unable to get in the past 10 years,” he said.