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Ferrochrome project kicks off

Johannesburg - International Ferro Metals (IFM) will commence construction of its R1.4bn ferrochrome mine and plant at the Buffelsfontein ferrochrome smelting and mining operation near Mooinooi in the North West province, the company announced on Friday.

The Buffelfontein operation will be the first chrome operation in South Africa which has a processing plant adjacent to the mine, and it will be one of the lowest cost producers of ferrochrome in the world, IFM South Africa chief executive officer Ronnie Barnard said.

The Buffelsfontein mine has a life of 19 years, but the company was conducting a feasibility to double the mine's current projected production of 267,400 tons per annum, he added.

IFM listed on London's Alternative Investment Market (AIM) on September 30 and raised £80m. It has raised debt through various financial institutions and Saab, which provided R150m in junior debt.

IFM has appointed Pyromet Technologies to construct its smelter, which consists of two 66 million volt-amperes (MVA) furnaces, as well as its beneficiation plant.

Bateman Africa will construct a 400,000-ton per annum pelletising and sintering plant and SDM Mining contractors will construct and operate the company's mining operations.

The total value of the four contracts is in the region of R1.1bn.

Funding has been raised through a combination of equity through various UK based financial institutions via the AIM market and debt through various institutions and Saab.

The construction of the entire operation will take around 18 months. It is envisaged that the project will be at its full production of 267,400 tons of ferrochrome per annum by the end of 2007.

IFM has entered into an agreement with Global Eagle Strategic Empowerment Alliance Systems, which is chaired by Seth Phalatse, a former BMW South Africa marketing director.

Global Eagle will be IFM's black economic empowerment partner and it has thus far taken a 1.3% stake in IFM South Africa.

At the beginning of 2005, ferrochrome was trading at 77 US cents per pound and was currently trading at 65 US cents per pound; in the first quarter of 2006 the price of ferrochrome was expected to pick up, Barnard said.

IFM expected that the price of ferrochrome would climb to between 70 US cents per pound and 72 US cents per pound.

The venture is the latest National Industrial Participation offset project to be announced and arises from South Africa's procurement of Hawk and Gripen aircraft from Saab-BAE Systems.

One of IFM's major shareholders is its Chinese partner, Jiuquan Iron and Steel group (JISCO).

JISCO has entered into an off-take agreement to buy ferrochrome from IFM at market related prices and will market ferrochrome in China, Taiwan, Japan and South Korea.

IFM has entered into a marketing agreement with New York-listed Commercial Metals Company, which will act as an agent outside Asia.

About 64% of IFM South Africa's projected off take of ferrochrome has already been sold forward, Barnard said.

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