Metorex (Pty) Ltd
Johannesburg-based mining company Metorex has launched a multi-million dollar investment programme with an ambitious goal of reaching a target of producing 250,000 tonnes of copper a year in 10 years’ time.
Following its takeover by Chinese mining company Jinchuan in 2012, this established mid-tier mining group, which is a US$400 plus million revenue business with assets in both Zambia and the Democratic Republic of Congo (DRC), is very much on the expansion path.
The company has immediate projects in hand which are set to take the current annual copper production rate of 55,000 tonnes a year to 80,000 tonnes in the next 18 months and then exceed 100 000 tonnes within five years.
These projects are coupled with a strategic plan aimed at creating greater efficiencies within the company’s supply chain which is centred at its South African headquarters.
Mike Benfield, Chief Financial Officer, said: “Our target is that in 10 years’ time we will be producing 250,000 tonnes of copper a year.
“That is a lofty target that we have set ourselves but we believe we will achieve this through a combination of developing the projects and deposits that we have in our current portfolio and by acquisition with the backing of our Chinese parent company, Jinchuan Group International Resources, which is listed on the Hong Kong Stock Exchange.”
Metorex owns two operating mines; Chibuluma in Zambia, which began production in 1955 and currently produces around 18,000 tonnes of copper in concentrate a year, and Ruashi, a copper and cobalt mine in Katanga province in the DRC.
Chibuluma was acquired by Metorex in 1997 through a Government privatisation programme and is often referred to as Zambia’s model mine.
The copper concentrate from the mine is sold to Chambishi Copper Smelter in Zambia where it is converted into copper blister and moved into the market.
Benfield said: “It is a mature mine nearing the end of its life and as a consequence is one of very few mines in Zambia which is tax paying.
“We have discovered a smaller satellite deposit about a kilometre and a half away from Chibuluma and we are about to open that up so we can effectively extend the life of Chibuluma for another six or seven years.”
Some 400 people are employed at Chibuluma and Metorex is keen to hang onto its operations in Zambia, consequently the company will invest some $24 million on the decline development required to access the recently-discovered ore body.
“Extending our operation in Chibuluma will give us more time to continue our exploration efforts in the area. We have an experienced staff compliment, who are performing well and we very much want to keep them within the Group and maintain our operational presence in Zambia.”
Copper and Cobalt
The Ruashi mine employs 2,500 people and currently produces 38,000 tonnes of copper cathode and 4,400 tonnes of cobalt a year.
“There are plans to take the copper production up to between 45,000 and 50,000 tonnes a year as we de-bottle neck the process plant,” explained Benfield.
Over and above the two existing operating mines, Metorex has three major projects in the pipeline including its new Kinsenda mine where it has embarked on an investment of $322 million to develop the mine and build a process plant to bring into operation in late 2015
The Kinsenda Project currently ranks as one of the world’s highest grade copper deposits with declared mineral resources of 20.7 million tonnes at a grade of 5.6 percent copper.
Kinsenda is situated within the DRC near the border town of Kasumbalesa and was purchased by Metorex in the mid-2000s.
At the time it was taken over, it was a flooded mine, previously run by a Japanese Mining consortium and then by the Congolese government, and Metorex ultimately gained controlled with the intention of opening and mining it.
With the purchase came 400 employees and the challenge of dewatering the mine before any new development could take place.
“We have dewatered the mine to 300 metres below surface and are now in the process of developing a further decline into the western ore body, which is our current focus, but over time we will move into the eastern ore body, the previous operators having mined the central areas” said Benfield.
Construction work on the project began in April 2013 and it is anticipated copper production will begin in late 2015, with expected production levels in the order of 25,000-26,000 tonnes of copper concentrate a year.
Kinsenda will create further employment for the nearby settlements of Meleke, Twibombele and Kisenda.
The projects’ environmental impact assessment and associated management plans were submitted to DRC authorities in 2011 and all approvals required by the DRC Mining Law have been obtained.
Metorex is also planning another $400 million investment in its Musonoi project, which lies a little further northwest near the mining town of Kolwezi.
The project area contains at least two known mineralised zones, one of which known as Dilala East was discovered as a blind, high grade copper and cobalt deposit in 2007.
Following the initial discovery of the high grade mineralised zone, the property has been
extensively drilled and has declared a mineral resource at 31.7 million tonnes at a grade of 2.8 percent copper and 0.9 percent cobalt.
Benfield said: “It is a very high grade copper cobalt deposit. In December last year we completed the bankable feasibility study and we are going through some further optimisation studies on the back of that.
“This will be an underground mine, but the challenge for us will be accessing the ore body, which currently is estimated to take about four and a half years to get to.
“We are trying to work out a way of getting to it faster so that it will improve the returns and valuation of the mine, ultimately we should be in production in about five years’ time.”
Finally, Metorex’s Lubembe project, which is located near to the Kinsenda mine, is a much larger deposit, but of lower grade ore.
A scoping study completed in early 2012 confirmed the potential to mine and process mixed sulphide and oxide ores. The mineral resource of 93 million tonnes at a grade of 1.9 percent copper will eventually be mined by open pit methods.
“We anticipate this project will cost somewhere between $500 million and $600 million and think that we may start it within the next five years,” said Benfield.
The Chinese factor
While the history of Metorex’s two operating mines extends back over many decades, the company itself was founded in 1975 by a consortium including Simon Malone which acquired Rand London Mines and subsequently became known as Metorex.
The financial crisis impacted the business requiring it to divest of all of its South African assets leaving it focused as a base metal miner in Africa.
Its fortunes have turned around somewhat dramatically following its acquisition by the China state owned entity, Jinchuan Group, which is providing the capital and support for its varied investment projects.
Metorex officially ceased trading on the Johannesburg Stock Exchange in January 2012 and in November 2013, Jinchuan successfully incorporated Metorex into Jinchuan Group International Resources Company Ltd, a Jinchuan subsidiary listed on the Hong Kong Stock Exchange.
“From that point onwards Metorex became Jinchuan’s African platform to develop further assets and acquire assets through the Metorex brand that are primarily focused on base metals,” said Benfield.
“Jinchuan Group International has now become our new parent company with a 75 percent holding from the Jinchuan Group and 25 percent held by minorities. So now it has become the spring board to raise the capital and create the platform for Metorex to grow in Africa.”
In China, Jinchuan owns and operates a massive nickel deposit, which has still got a mining life of 50 years’ plus around which a whole integrated city has established itself.
Jinchuan also holds a 51 percent stake in a South African platinum mine in the north west province and a few other assets outside of Africa.
Since the acquisition, apart from financing of projects, Jinchuan has extended its technical support and advice to Metorex.
“I think by and large Jinchuan has left Metorex to manage the African environment, and although we have a few Jinchuan secondees here that are helping to build a bridge between the two companies and cultures we are operating fairly autonomously.” said Benfield.
In order to maximise efficiency and productivity, Metorex is tackling two major hurdles that come with operating in central Africa, a skills shortage and long, logistical supply chain.
“The skills shortage in Africa is immense with miners in Africa, depending on the scale of their operation, employing people with the skills from many other countries,” said Benfield.
“For example we have a small contingent South Africans, Australians and British citizens working at our mines, although it does vary from mine to mine, but the majority of the work force are local employees.”
Benfield explained that part of Metorex’s strategy was to ensure continuity by with its ex-pats, so as not to lose their expertise, through helping them develop their careers at the company’s various locations.
In a bid to counteract skills and supply chain issues, the company has established a central services operation called Metorex Commercial Services (MCS) at its headquarters in Johannesburg.
MCS has begun by bolstering technical skills at an administrative level including its accounts payable function which is controlled and supported from the head office.
It has also sought to centralise its procurement activities leveraging more scale by being the procurement service provider for all of its operations, thus aiming to secure better price points from suppliers and ultimately getting costs per unit down.
“Commodity price is not in our control, however we can control two things, the cost at which we produce a copper unit at and how many units we produce. So at a cost level we have got to get our supply chain right,” explained Benfield.
“We have a well thought-out supply chain management strategy which we are aiming to
develop, managed from Johannesburg and then integrated into our various operations.”
Supplies are predominately sourced in South Africa but chemical reagents to extract ore through the copper process come from other parts of the world.
The challenge of connectivity is one that the company is also endeavouring to constantly improve in order to allow good communication across its operations.
“In Africa there are issues with internet and telecommunication connectivity which can be a challenge for us,” said Benfield. “We are looking at standardising our communications from our headquarters in Johannesburg through to our sites in Central Africa.
“We are also looking at Chinese procurement. The Chinese have an amazing track record for doing things quicker for less and we believe that their quality is constantly improving ensuring that supplies are fit for purpose, reliable and cost effective.”
However, Metorex has high standards for its suppliers and only seeks to enter partnerships with those companies that are reliable and provide reliable components and services.
With regard to the construction works being carried out at the Kinsenda project, Metorex has partnered with South African based project management and engineering group, DRA, a diversified construction and infrastructure company Group Five, civil contracting firm Safricas, which is based in DRC, the MCK mining company based in the Katanga Province and component supplier, Outotec.
Looking after its employees and the communities in which it operates are always regarded highly by the company which has developed a strong set of values it adheres to.
“We have an acronym – PALETZ which is our mantra,” said Benfield. “P is for people focus, A is for accountability, L is for the long term perspective, E is for excellence in everything we do, T is for teamwork and Z is for zero harm.
“We have a vision and that is to grow a sustainable African-focused base metal mining company that offers opportunity for the development of our employees and communities, delivering to shareholders’ expectations and contributing to the development of our world,” concluded Benfield, quoting from the Metorex mission statement