BHP to say good­bye to smelters

CityPress - - Business - DE­WALD VAN RENS­BURG de­wald.vrens­burg@city­

Min­ing gi­ant BHP Bil­li­ton is set to di­vest it­self of its con­tro­ver­sial alu­minium smelters in Richards Bay and Mozam­bique, as well as other South African as­sets, as part of a port­fo­lio “sim­pli­fi­ca­tion”.

The fi­nal de­tails will most likely be an­nounced next week af­ter a board meet­ing, the group said in a state­ment on Fri­day.

It has been widely spec­u­lated that the world’s largest min­ing com­pany wanted to pull out of South Africa en­tirely, but this is the first ex­plicit con­fir­ma­tion that many of its lo­cal as­sets will go.

Bil­li­ton says it would pre­fer a “de­merger” – which would in­volve sep­a­rat­ing the un­wanted as­sets into a sep­a­rate com­pany that could be listed it­self. Apart from the Hill­side, Bayside and Mozal alu­minium smelters, Bil­li­ton will most likely get rid of its 60% stake in Sa­man­cor Hold­ings, which in turn owns Ho­tazel man­ganese mines and Me­tal­loys.

Ac­cord­ing to Fri­day’s an­nounce­ment, Bil­li­ton will re­tain its “ma­jor” coal as­sets, which may or may not in­clude its three huge lo­cal coal mines. These mines con­trib­ute about 13% to South Africa’s to­tal an­nual coal pro­duc­tion of 260 mil­lion tons.

The group’s coal op­er­a­tions are in essence split be­tween a me­tal­lur­gi­cal coal op­er­a­tion in Aus­tralia and a lower-value ther­mal op­er­a­tion in South Africa.

Sa­man­cor, of which An­glo Amer­i­can owns the other 40%, pro­duces more than a third of South Africa’s man­ganese ore, about 3.5 mil­lion tons a year. Its Me­tal­loys sub­sidiary pro­duces 377 000 tons of man­ganese al­loys.

The alu­minium smelters have been a bit­ter bone of con­tention ever since the elec­tric­ity cri­sis in 2008.

They use up to 7% of Eskom’s gen­er­at­ing ca­pac­ity but pay half the cost of gen­er­at­ing that elec­tric­ity be­cause of a se­cre­tive con­tract signed when South Africa en­joyed an over­abun­dance of power.

When­ever there is a short­age of power that could lead to load shed­ding, Eskom has the abil­ity to cut off the smelters’ power sup­ply with­out no­tice for short pe­ri­ods.

The con­tract ties the smelters’ elec­tric­ity tar­iff to the alu­minium price and has caused Eskom mas­sive losses due to low alu­minium prices that have pre­vailed since the eco­nomic cri­sis of 2009.

But Bil­li­ton has also suf­fered mas­sive losses and in June this year closed the Bayside smelter.

The pos­si­bly im­mi­nent di­vest­ment from the smelters com­pli­cates an al­ready wind­ing saga.

In March this year, the Na­tional En­ergy Reg­u­la­tor of SA was about to start a longde­layed in­ves­ti­ga­tion into the con­tracts, fol­low­ing a 2012 ap­pli­ca­tion by Eskom to re­view them be­cause they are un­fair to other power users.

At the last minute, Bil­li­ton stopped the in­ves­ti­ga­tion by re­open­ing di­rect talks with Eskom, as re­ported by City Press’ sis­ter pub­li­ca­tion Rap­port.

Ac­cord­ing to Eskom spokesper­son An­drew Etzinger, the con­tracts are at­tached to the smelters and would go to who­ever ends up own­ing them.

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