GEMCO

The world’s largest and low­est-cost man­ganese ore pro­ducer, South32, is set to pro­duce even more, as it launches a three-year drilling pro­gram at GEMCO.

The Australian Mining Review - - CONTENTS - AMY BLOM

SOUTH32 has con­tin­ued to surge on the back of its Groote Ey­landt Min­ing Com­pany op­er­a­tion (GEMCO), with ex­plo­ration plans un­der­way de­signed to lever­age even more value from the man­ganese mine.

GEMCO is an open-cut min­ing op­er­a­tion in the Gulf of Car­pen­taria, 50km from the North­ern Ter­ri­tory main­land, pro­duc­ing high-grade man­ganese ore that is then shipped to South32’s Tas­ma­nian man­ganese al­loy plant ( TEMCO) and around the world.

Ac­cord­ing to South32, GEMCO is one of the largest and low­est-cost man­ganese ore pro­duc­ers in the world.

To­gether, GEMCO and TEMCO form South32’s Aus­tralian man­ganese op­er­a­tions.

South32 holds a 60 per cent share in the op­er­a­tion, with An­glo Amer­i­can hold­ing the re­main­ing 40 per cent.

At its an­nual gen­eral meet­ing on 25 Oc­to­ber, South32 chief ex­ec­u­tive Gra­ham Kerr said the min­ing gi­ant had de­liv­ered record pro­duc­tion at its Aus­tralia man­ganese op­er­a­tions for FY18 and a 10 per cent in­crease in to­tal man­ganese ore pro­duc­tion, as the com­pany re­sponded to favourable mar­ket con­di­tions.

South32 fol­lowed it up in Q1 FY19 with yet an­other quar­terly record at GEMCO, pro­duc­ing 932,000 wet met­ric tonnes (wmt) of man­ganese ore – a 15 per cent in­crease year-on-year.

“An­nual pro­duc­tion guid­ance is main­tained for all of our op­er­a­tions with Aus­tralia man­ganese achiev­ing an­other quar­terly record and to­tal man­ganese ore pro­duc­tion in­creas­ing by 8 per cent,” Mr Kerr said.

“We fin­ished the pe­riod with a net cash bal­ance of $US679 mil­lion and ad­di­tional funds in our man­ganese joint ven­ture as our key com­mod­ity mar­kets ben­e­fit­ted from ro­bust de­mand and pric­ing.”

Dur­ing Q1 FY19, South32 re­ported it re­ceived net dis­tri­bu­tions of $US24 mil­lion from its man­ganese eq­uity ac­counted in­vest­ments.

The com­bi­na­tion of strong op­er­at­ing per­for­mance and pric­ing saw ad­di­tional cash build in its man­ganese joint ven­ture, de­spite Aus­tralian man­ganese pay­ing $US13 mil­lion in roy­al­ties in re­spect of the prior six month pe­riod.

Ac­cord­ing to South32, the pri­mary cir­cuit con­tin­ued to achieve high util­i­sa­tion rates while the Pre­mium Con­cen­trate Ore (PCO2) cir­cuit op­er­ated at about 120 per cent of its de­sign ca­pac­ity, con­tribut­ing 9 per cent of to­tal pro­duc­tion for the quar­ter.

The $US139 mil­lion PCO2 was com­pleted at the end of FY16 and ramp up to full pro­duc­tion of 0.5 mil­lion tonnes per an­num (mtpa) was achieved in FY17, thereby in­creas­ing GEMCO’s ca­pac­ity from 4.8mtpa to 5.3mtpa.

Man­ganese al­loy saleable pro­duc­tion de­creased by 2 per cent or 1000 tonnes, to 42,000 tonnes in the Septem­ber quar­ter.

FY19 pro­duc­tion guid­ance re­mained un­changed at 3.35 mil­lion wet met­ric tonnes.

Ex­plo­ration

De­spite record pro­duc­tion al­ready be­ing achieved, South32 had even higher hopes for GEMCO, with aims to con­tinue de­vel­op­ing the mine fur­ther.

The miner has plans to drill 4800 holes over about 115,200 me­tres over the next three years, tar­get­ing an in­crease in re­serves, as well as look­ing to re­duce costs through im­prove­ments to the mine sup­ply chain.

South32 awarded the three-year drilling con­tract to Utah-based com­pany in Oc­to­ber, which would pro­vide 16 em­ploy­ees, in­clud­ing fit­ters and full-time drilling su­per­vi­sors to op­er­ate two re­verse cir­cu­la­tion rigs.

Fur­ther min­ing was planned to be­gin within the eastern leases of GEMCO in about 2022 to 2023.

The lease ar­eas are 2km east of the ex­ist­ing mine at their clos­est point.

“An­nual pro­duc­tion guid­ance is main­tained for all of our op­er­a­tions with Aus­tralia man­ganese achiev­ing an­other quar­terly record and to­tal man­ganese ore pro­duc­tion in­creas­ing by 8 per cent.”

Although drilling has pre­vi­ously been con­ducted at the eastern leases, ac­cord­ing to South32, ad­di­tional drilling was re­quired be­fore min­ing be­gan to im­prove GEMCO’s un­der­stand­ing of the min­er­al­i­sa­tion on the leases, in­clud­ing ore qual­ity and ge­o­log­i­cal con­di­tions.

The drilling would also sup­port the fur­ther def­i­ni­tion of the ge­o­log­i­cal block model and the devel­op­ment of the mine plan.

The Big­ger Pic­ture

Plans to de­velop the mine came amid in­creased mar­ket volatil­ity, how­ever Mr Kerr re­mained con­fi­dent that South32’s op­er­a­tions, in­clud­ing GEMCO, would con­tinue pro­duc­ing strong re­sults.

“Look­ing ahead, we are well-po­si­tioned for the fu­ture,” Mr Kerr said.

“We an­tic­i­pate some price volatil­ity in global com­mod­ity mar­kets, driven by ris­ing trade ten­sions and a strength­en­ing US dol­lar.

“How­ever, strong de­mand for higher qual­ity raw ma­te­ri­als is ex­pected to con­tinue as China im­ple­ments pol­icy ini­tia­tives to meet en­vi­ron­men­tal re­forms.

“Im­proved pro­duc­tion from many of our op­er­a­tions, along with our con­tin­ued fo­cus on pro­duc­tiv­ity gains and pro­cure­ment sav­ings, will al­low us to fur­ther mit­i­gate in­dus­try-wide in­fla­tion­ary pres­sure.”

Mr Kerr’s out­look was sup­ported by the most re­cent Re­sources and En­ergy Quar­terly Re­port, re­leased by the Depart­ment of In­dus­try, In­no­va­tion and Sci­ence.

Ac­cord­ing to the re­port, world steel con­sump­tion was forecast to rise to 1.8 bil­lion tonnes in 2020, led by growth in emerg­ing mar­kets, while China – the world’s largest steel con­sumer – was forecast to re­duce con­sump­tion by 0.5 per cent an­nu­ally, driven by an ex­pected slow-down in in­fra­struc­ture projects and con­struc­tion.

About 90 per cent of man­ganese goes into steel- mak­ing as it im­proves the strength of the build­ing ma­te­rial.

Man­ganese can be added to alu­minium for the same rea­son, how­ever it was in­creas­ingly be­ing used in next- gen­er­a­tion bat­tery and power stor­age ap­pli­ca­tions.

The in­creas­ing de­mand for these tech­nolo­gies would also likely serve as an im­por­tant driver in the de­mand for man­ganese.

“Im­proved pro­duc­tion from many of our op­er­a­tions, along with our con­tin­ued fo­cus on pro­duc­tiv­ity gains and pro­cure­ment sav­ings, will al­low us to fur­ther mit­i­gate in­dus­try-wide in­fla­tion­ary pres­sure.”

Al­li­mages:South32.

GEMCO has con­tin­ued to in­crease pro­duc­tion, and has fur­ther ex­pan­sion plans.

Man­ganese is shipped from GEMCO to be smelted at TEMCO, form­ing South32’s Aus­tralian man­ganese op­er­a­tions.

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