Mining Indaba ’16: Afarak fine-tunes strategy with speciality chromite offering

By IM Staff
Published: Wednesday, 24 February 2016

Finnish producer increases exposure to non-met; seeks to expand away from ferro-alloys.

By Bianca Markram

News11 

Going non-ferro: Afarak is looking to expand its offering of speciality chromite products in the wake of softer pricing and demand for ferroalloys (source: Afarak).

Finland-based Afarak Group Plc., which produces chromite and ferrochrome in South Africa, is looking to navigate a tricky ferro-alloys market by producing more specialised products for the foundry and refractories sectors.

The company first embarked on the strategy eight years ago, when it began producing 400-500 tpm foundry sand, chemical and refractory-grade chromite, depending on availability, for sale on a spot basis, according to Michael Ilja, executive director at Afarak.

"We have the niche grades in the ground," he told IM at the Mining Indaba Conference in Cape Town, South Africa.

Ilja noted that Afarak has a significant, although not large, share of the foundry-grade chromite market, including at least 90% of the Finnish market and sizable supply deals in Russia, Ukraine, India and Korea.

Afarak expects market fundamentals for foundry and refractory chromite to strengthen this year, with some chromite producers shrinking operations or winding up.

"We think the market will become tighter," Ilja said.

Afarak owns three mines in South Africa in the country’s Bushveld comlex, which has 70% of the world’s chrome resources. 

The company does not currently mine all of the niche grade chromite that it sells, according to Danko Koncar, business development director. 

"We sell more [refractory, foundry and chemical-grade chromite] than we produce, simply because
we are positioning ourselves to service our clients’ needs," he explained. "We have the possibility to ramp up production [of these products] in our mines if the need arises, but we would rather utilise the material that is available, than create more supply and downward price pressure. Instead, we’re trying to be responsible about how we conduct ourselves in this niche market," he told IM.

Kenmare expects greater stability in 2016

Improvements to the power network in northern parts of Mozambique, as well as additional megawatts (MW) added to the grid, will enable mineral sands miner Kenmare Resources Plc to stabilise its production at its Moma mine this quarter, according to managing director, Michael Carvill.

The Ireland-based company suffered production outages in 2015 as output from the Mozambican power grid was constrained. As a result of these outages, Kenmare’s ilmenite production dropped by 11% last year to 763,000 tonnes from 854,600 tonnes in 2014. Heavy mineral output fell to 1.1m tonnes, compared to 1.28m tonnes 2014.

"We suffered badly from poor electricity supply in the northern network last year, but the silver lining for this year is that a lot of that was put to bed in December," Carvill told IM on the sidelines of Mining Indaba.

Mozambique’s state utility provider, Electricidade de Moçambique (EDM), added 45 MW to its existing 118 MW on the grid in December and another 15 MW is set to come online this year.

Kenmare has made certain onsite adjustments to cope better with any future outages, including the installation of a motor that fills in power during spikes and dips in grid supply. It has also installed a 10 MW diesel generator to keep production consistent at the plant, even if mining is affected.

Despite its power issues, Kenmare managed to recover more zircon last year, at 51,800 tonnes – all of which it sold – compared with 50,800 tonnes in 2014. [Greater recovery rates in zircon] is our good news story of 2015, Carvill said, adding that zircon prices remained flat.

The company is in the process of optimising output of all its minerals at Moma, where it produces ilmenite, rutile and zircon, Carvill said, but declined to confirm a figure for the cost of this programme.

Higher slag demand

The company has witnessed an uptick in demand for ilmenite chloride as feedstock material to other producers looking to supplement their own ore production. It sees further upside in this segment of the market in China because of a sharp decrease in slag production there.

"The sulphate ilmenite market was pushed into oversupply when the price of iron ore increased, since China produces ilmenite as a by-product of iron ore," Carvill explained. Since the price of iron ore has fallen in line with declining Chinese consumption of the mineral, ilmenite output has also slipped.

Although China has stockpiles of ilmenite, Carvill believes these inventories have dropped sharply in the last year and said he expects some 500,000-750,000 tonnes to drop out of the market in the near future.

No merger plans

At the end of last year, Australian-based titanium dioxide (TiO2) producer, Iluka Resources Ltd, withdrew an offer for Kenmare after it appeared that one of Kenmare’s major shareholders would not support the deal.

Carvill said Kenmare has no plans to pursue a new tie-up any time soon. "We found it attractive at the time to pursue, but in the end we have our shareholders to consider," he said.