Perth-based South32 said Wednesday the South African mines operated by its 60%-owned Samancor Manganese joint venture would remain closed, possibly until January 2016, pending the results of an ongoing strategic review of its interest in the JV.
The company's South African manganese operations are located in Hotazel, Northern Cape province. Ore at Hotazel is accessed from the Wessels underground mine and the Mamatwan opencast mine. The mines are integrated with the Metalloys smelter which processes manganese ore for exports.
Production was suspended at the Mamatwan mine on November 2 following a fatal accident.
"The planned reconfiguration of the Samancor manganese mines in the Kalahari Basin is required to secure their longer term viability in an increasingly competitive market. The current stakeholder consultation process is continuing and mining activity is likely to recommence in January 2016," South32 said in a statement filed to the Australian Securities Exchange.
While production will be significantly impacted in the fiscal year ending June 30, 2016, rail and customer commitments will be met by drawing on inventory during this period, South32 noted.
It stopped short of giving an estimate of the amount of manganese ore production that would be affected by the extension of the Hotazel mines closure, and the impact of its production guidance on South African manganese operations for the current fiscal year. Operation of the Metalloys smelter at Hotazel has already declined substantially since the June quarter of this year, as the fatality led to the initial suspension of operations before a decision was taken in June by the JV to restart only one of the four furnaces in challenging market conditions. High chrome ferromanganese alloy prices have fallen about 20% since the beginning of the year, according to South32. The company also said in June it was reviewing the fair value of its interest in the Samancor JV.
South32's partner in the Samancor JV is Anglo American.
In the fiscal year ended June 30, 2015, the Hotazel operations produced 1.68 million mt of manganese ore. Announcing its results last August, South32 estimated annual manganese ore production from the Hotazel operations to drop marginally to 1.65 million mt in fiscal 2015/16 taking into consideration market demand, the continuing review of its manganese assets, and decreased operating capacity at the Metalloys smelter.
Samancor Manganese is the world's largest producer of manganese with operations in South Africa and Australia. Its Australian operations include GEMCO, an open-cut manganese mine in the Northern Territory, ranked as the largest and one of the world's lowest cost manganese ore producers, and TEMCO, a manganese alloy plant in Tasmania.
Consolidated production of the Australian operations was 2.94 million mt of manganese ore in fiscal 2014/15. Output is expected to rise to 3.05 million mt in the current fiscal year and to 3.25 million mt in fiscal 2016/17.
