ArcelorMittal sees strategic value in mothballed Thabazimbi mine

Steelmaker mulls reopening operations after taking full control of the asset

15 October 2018 - 05:04 Allan Seccombe

Thabazimbi was a source of about 2-million tons of ore a year that was supplied solely to ArcelorMittal for at least five years before it was decided to close it.  The mine employed 1,150 people at the time. Picture: REUTERS/DAVID GRAY

Having secured full ownership of the asset for a paltry sum, ArcelorMittal SA will decide in a few years whether it can restart operations at the Thabazimbi mine Kumba Iron Ore stopped two years ago.

The Thabazimbi mine in Limpopo was jointly owned by the companies and was a source of iron ore for ArcelorMittal, which blended it with ore from Kumba’s flagship Sishen mine in the Northern Cape.
After a failure of the pit wall in 2015, Kumba, an Anglo American subsidiary and Africa’s largest iron ore miner, decided to shut the marginal operation, triggering talks with SA’s leading steelmaker to buy the mine. Iron ore is a major ingredient of the steel-making process.
“What we would like to achieve is to prolong the life of the mine. The town of Thabazimbi is dependent on that, but there has to be commercial [value] for ourselves,” ArcelorMittal SA CEO Kobus Verster said on Friday. “It’s very early days.”
In February 2017, the parties said ArcelorMittal, which was responsible for 96% of the cost of rehabilitating Thabazimbi, would buy the mine’s assets and liabilities for R1 and that the steelmaker would assume responsibility for the 63 people working on rehabilitation at the site.

Concurrently with the rehabilitation work, which was funded by money in secure trust, ArcelorMittal would extract 1.3-million tons of iron ore from stockpiled material through a small, relatively cheap modular plant rather than restarting the large idled processing plant, he said.
While those two work streams were under way, ArcelorMittal was assessing what opportunities existed to restart mining, using part of the existing pit and moving into fresh sources of ore, he said.
Verster said having full ownership of Thabazimbi would make the rehabilitation work easier.
“That material on the surface is not our main objective. Our focus is on the rehabilitation,” he said.
“We will start doing sampling and see what opportunities there are in the longer term to restart the mine. We have to consider what new technologies we could use, what the life of the mine would be, and how the ore could best be utilised,” he said.
Thabazimbi was a source of about 2-million tons of ore a year that was supplied solely to ArcelorMittal for at least five years before it was decided to close it. The mine employed 1,150 people at the time.
There was strategic rationale for ArcelorMittal having its own iron ore mine, Verster said, adding to the risk mitigation of sourcing iron ore from third parties. ArcelorMittal buys ore from Kumba’s Sishen under a favourable pricing agreement, as well as from a number of junior miners in the Northern Cape.
“Where we can expand on that diversification it would be beneficial from a pricing perspective and give us more flexibility on the mix of material we use,” he said. The Thabazimbi ore was historically blended with that from Sishen to dilute the impurities in the Northern Cape ore.
As Thabazimbi aged it became progressively more expensive to operate and was regularly unprofitable on an annual basis by the time the decision was made in July 2015 to close it, with Kumba saying it was a “high-cost mine with difficult mining” that had “reached the end of its economic life”.
Kumba had investigated an extension to Thabazimbi, a project it dubbed Project Phoenix that was estimated in 2006 to cost $290m. It would deliver up to 3.4-million tons a year and add 20 years’ life beyond the 2016 closure the company had envisioned. However, it opted not to invest in the project, which sparked a legal row with ArcelorMittal.
seccombea@bdfm.co.za