DEPARTMENT: MINERALS AND ENERGYREPUBLIC OF SOUTH AFRICA

Directorate: Mineral Economics

SOUTH AFRICA’S MINERAL INDUSTRY2004/2005

Cover picture:Underground mining at Kimberley ceased this year,

after more than 100 years of mining operations.Recovery of diamonds from waste dumps continues.

The cover pictures commemorates the end of a mining era, but not the end of diamond production from Kimberley.

Issued free by and obtainable from theDirector: Mineral Economics, Mineralia Centre,

234 Visagie Street, Pretoria 0001, Private Bag X59, Pretoria 0001Telephone (012) 317-8538, Telefax (012) 320-4327

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Editing:(External)I Robinson (Internal)

N Van Averbeke, A J Harding, J A G Duval, P Mwape, J W Perold

Statistics: M Köhler

Co-ordinator: J A G Duval

First Published August 1984

This, the 22nd revised edition, published December 2005

Whereas the greatest care has been taken in the compilation of the contents of this publication, the Mineral Economics Directorate

does not hold itself responsible for any errors or omissions

Copyright Reserved

ISBN 1 – 919927 - 07 - 7

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FOREWORD

The year 2004 will be remembered as the year South Africa finally reached a major milestone inthe development of its new mineral legislation. On the 1st of May 2004, the Minerals Act, 1991was repealed and replaced by the Mineral and Petroleum Resources Development Act of 2002.The Act enshrines a process of minerals and mining policy re-formulation that took some 10years to complete and involved extensive consultation with a broad spectrum of role players inSouth Africa’s mineral industry.

This publication for 2004/2005 is the 22nd edition that sees a return to its traditional format fromthe revised edition that carried advertising space and so characterized the 2003/2004publication.

Sustained high demand from Asia in particular, with few exceptions, encouraged increasedproduction of mineral commodities in South Africa during 2004. In general there were alsonotable rises in domestic output. Although mining’s contribution to gross value added in theSouth African economy decreased from 7,4 percent in 2003 to 7,1 percent in 2004, the actualcontribution in 2004 was 3,5 percent higher in 2004. Compared with 2003, total primary mineralsales increased by 6,0 percent while despite the strong rand total mineral export sales increasedby 3,2 percent in 2004. In dollar terms, however, the increase in export sales was far moreimpressive, rising by a hefty 21 percent year-on-year. The contribution of export sales to totalprimary mineral sales decreased from 74 percent in 2003 to 72 percent in 2004.

Output from gold mining continued to decline, falling another 7,6 percent to 347 tons in 2004.Theaverage gold price received for South African gold production declined from R88 092 per kg in2003 to R84 785 per kg in 2004 as a result of a slightly stronger average rand/dollar exchangerate in 2004.

Another milepost could have been reached during 2004 with the fall of gold from the number oneposition as South Africa’s main mineral income generator. Processed minerals generated thehighest income by commodity group accounting for 22 percent of total mineral processed plusprimary mineral sales in 2004, followed by platinum-group metals (21,0 percent) and then gold(18,4 percent). I would like to take this opportunity to thank the staff of the Mineral EconomicsDirectorate for their major contribution to the compilation of this publication as well as the manySouth African mining companies for their co-operation and support in submitting the statisticsSpecial appreciation is given to Mr Ian Robinson for undertaking the onerous task of externaleditor for this publication.

N. VAN AVERBEKEDIRECTOR: Mineral Economics

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CONTENTS

PageForeword iiiAbbreviations and symbols viExplanatory notes vii

PART ONE: GENERAL REVIEW (P Mwape, M Roberts, E Mokwena, T Tjatjie)

Introduction 1Structure of the industry 1South Africa’s mineral industry strengths 4Mineral exploration 6Communications, infrastructure and labour 8Role in the national economy 12Mineral production and sales 15Mineral benefication 17South Africa’s imports of mineral products 18Forecast of mineral exports for products 2003 to 2009 20Mineral related investment in South Africa 21Regional cooperation (SADC)

PART TWO: REVIEW OF SELECTED COMMODITIES

PRECIOUS METALS AND MINERALS Diamonds A K Damarupurshad 24Gold A S Conradie 30Platinum-group Metals A S Conradie 34Silver A K Damarupurshad 38

ENERGY MINERALS Coal X M Prevost 43Hydrocarbon Fuels L Musi 51Uranium A K Damarupurshad 54

NONFERROUS METALS AND MINERALS Overview J W Perold 59 Aluminium L A Themba 64Antimony L Maphango 69Cobalt A J Harding 72 Copper J W Perold 77 Lead L Maphango 80Nickel A J Harding 83 Titanium J W Perold 87Zinc L A Themba 89 Zirconium L A Themba 93

FERROUS MINERALS Overview A J Harding 97Chromium N Kweyama 101Iron Ore M Bonga 106Manganese M Bonga 110Silicon M Bonga 115Vanadium N Kweyama 118

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INDUSTRIAL MINERALS Overview J A G Duval 121Aggregate & sand V N Agnello 126Alumino-silicates N Tshabalala 130Dimension Stone D Naidoo 133Fluorspar D Naidoo 136Limestone and Dolomite V N Agnello 139Phosphate Rock D Naidoo 144Special Clays V N Agnello 148Sulphur D Naidoo 155Vermiculite V N Agnello 159Statistics for other Industrial Minerals V N Agnello, D Naidoo, N Tshabalala 163

PART THREE: GENERAL INFORMATION

RECENT DIRECTORATE: MINERAL ECONOMICS PUBLICATIONS

USEFUL ADDRESSES:Department of Minerals and Energy 174Department of Trade and Industry 176Parastatal Organisations 176Other Mineral-related Organisations 177Selected South African Mining Companies 179Tertiary Institutions 182

ORGANOGRAMSOrganisational Structure of Mineral Policy and Promotion Branch 183Directorate: Mineral Economics 184

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ABBREVIATIONS AND SYMBOLS

A$ Australian dollar LME London Metal Exchangebbl barrel m metrebbl/d barrels per day M millionBGS British Geological Survey m3 cubic metrebillion thousand million mic metal-in-concentratect carat Ma million yearsconc concentrate Mct million caratsCIF cost, insurance, freight Mozt million ounces troyCIS Commonwealth of Independent States. Mozt/a million ounces troy per annum

Part of the former Union of Soviet Mt megaton (million tons)Socialist Republics (USSR) Mt/a million tons per annum

CPI Consumer price index MVA megavolt ampereChina People’s Republic of China MWh megawatt hourDM Deutsche Mark na not availableDME Department of Minerals and Energy nar not as receivedDRC Democratic Republic of Congo ns not specifiedDRI Direct reduced iron NW North West Europee estimate ozt troy ounceEAF Electric-arc furnace pa per annumEU European Economic Union PGMs platinum-group metalsFOB free on board ppm parts per millionFOR free on rail R rand (South African currency)FSU Former Union of Soviet Socialist SA South Africa

Republics (USSR) S.ton Short tong gram t metric tonGa giga year t/a tons per annumg/t gram per ton UAE United Arab EmiratesGAR gross as received USA United States of AmericaGWe net gigawatts electric USBM United States Bureau of MinesILZSG International Lead & Zinc Study Group USGS United States Geological SurveyINSG International Nickel Study Group TCF trillion cubic feetk thousand w withheldkcal kilocalorie WBMS World Bureau of Metal Statisticskg kilogram y yearkg/t kilogram per metric ton y-o-y year-on-yearkm kilometre $ US dollar, unless stated otherwisekt kiloton C$ Canadian dollarkt/a kiloton per annum £ British pound sterlinglb pound avoirdupois % percent

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EXPLANATORY NOTES

Reference Due to space limitations the sources of statistical information only aregiven. The absence of a source reference to statistical data indicates thatsuch data was sourced from the Directorate: Mineral Economics databaseof mineral production, sales and labour in South Africa. A bibliography ispresented in Part Three.

Identified Resource Resources of which location, grade and quality are known, or estimatedfrom specific geological evidence, and include economic, marginallyeconomic and sub-economic components, also demonstrated andinferred subdivisions.

Reserve Base In this publication RESERVE BASE is defined as that of an identifiedresource that meets specified minimum physical and chemical criteriarelated to current mining and production practices, including those forgrade, quality, thickness, and depth. The RESERVE BASE is the in situdemonstrated resource from which reserves are estimated. It mayencompass those parts of the resource that have a reasonable potentialfor becoming economically viable within planning horizons beyond thosethat assure proven technology and current economics. The RESERVEBASE includes those resources that are currently economic(DEMONSTRATED RESERVES) and marginally economic(DEMONSTRATED MARGINAL RESERVES).

Reserves That part of the RESERVE BASE, which could be economically extractedat the time of determination.

In many cases the number of mines reported by the statistical division differs from those reportedin commodity chapters by mineral economists. There are technical reasons for these differences– mainly, that a single mining unit, as interpreted by a mineral economist, may for legal reasons,reflect as more than one production entity in the statistical returns.

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PART ONE: SOUTH AFRICA’S MINERAL INDUSTRYGENERAL REVIEW

P Mwape, MJ Roberts, E Mokwena, T Tjatjie, M Phale

INTRODUCTION

For more than a century, South Africa’s mineral industry, largely supported by gold, diamond,coal and platinum production, has made an important contribution to the national economy. Ithas provided the impetus for the development of an extensive and efficient physical infrastructureand has contributed greatly to the establishment of the country’s secondary industries.

The mineral industry is a well-established and resourceful sector of the economy, has a highdegree of technical expertise and the ability to mobilize capital for new development. Mining isSouth Africa’s largest industry sector, followed by manufacturing. Other sectors, which contributesignificantly to the country’s economy, are oil and gas, chemicals, agriculture and tourism. Theclothing and textiles, financial services and banking sectors have also had significant growth inrecent years.

South Africa is a leading world supplier of a range of minerals and mineral products ofconsistently high quality. In 2004, some 59 different minerals were produced from 993 mines andquarries, of which 49 produced gold, 28 produced platinum-group minerals, 64 produced coaland 145 produced diamonds. The increase in the number of operating mines and quarriesrecorded by the Department of Minerals and Energy (DME) can be attributed to the improvementin the quality and quantity of data from the mining industry, improved data collection methodologyand new entrants especially in the Platinum Group Metals (PGM) sector. Mineral commoditieswere exported to 82 countries.

STRUCTURE OF THE INDUSTRY

Democratic change in South Africa during the 1990s resulted in the endorsement of theprinciples of private enterprise within a free-market system, offering equal opportunities for allthe people. The State’s influence within the mineral industry is confined to orderly regulation andthe promotion of equal opportunity for all citizens.

Discriminatory policies excluded a large sector of the population from full participation in theSouth African minerals industry during the pre-1994 period, before democracy was realized. Thenew Minerals and Petroleum Resources Development Act, which came into effect on 1st May2004, legislates the official policy concerning the exploitation of the country’s minerals. Therestructuring of the South African economy and changing local and international circumstanceswere taken into consideration by the Department of Minerals and Energy, which drafted the newAct. The Act addresses many issues, including the following:

• Transformation of the minerals and mining industry;• Promotion of equitable access to South Africa’s mineral resources;• Promotion of investment in exploration, mining and mineral beneficiation;• Socio-economic development of South Africa; and • Environmental sustainability of the mining industry.

Previously in South Africa, mineral rights were owned either by the State or the private sector.This dual ownership system represented an entry barrier to potential new investors.Government’s objective is for all mineral rights to be vested in the State within the next five years,with due regard to constitutional ownership rights and security of tenure.

Private SectorCorporate restructuring of the South African mining industry, which has been in progress for overa decade, continued throughout 2004. Mining houses were transformed into focused miningcompanies by shedding their non-core industrial holdings. The transformation included theconsolidation of ownership through minority buy-outs, the transfer of primary listings (andcorporate head offices) offshore, as well as the purchase of South African mining assets byforeign companies.

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As the South African mining industry is still controlled predominantly by white males, emphasisis being placed on stimulating black and women economic empowerment in the industry. Severalblack-owned firms are now beginning to play an important role in the mining industry. The nextfew years will probably see the emergence of several empowerment companies of substantialsize in South Africa’s mining and resources sector. Mining has thus become a focus of theReconstruction and Development Programme in terms of entrepreneurial development, blackeconomic empowerment and stimulating employment and growth.

The broad-based socio-economic Empowerment Charter for the South African mining industrywas promulgated in May 2004. Following careful negotiation, the Charter calls for HistoricallyDisadvantaged South Africans (HDSA’s) to control 15 percent of mines within five years, risingto 26 percent within 10 years. The Mining Empowerment Charter stresses commitment to pursuea shared vision of a globally competitive mining industry that draws on the human and financialresources of all South Africa’s people, and offers real benefits to all South Africans. The goal ofthe Charter is to create an industry that will proudly reflect the non-racial South Africa.

In order to give effect to the provisions contained in the broad-based socio-economicEmpowerment Charter for the mining and minerals industry, a scorecard was drawn up. Thescorecard is designed to facilitate the application of the Charter in terms of the Minerals andPetroleum Resources Development Act requirements for the conversion of all the “old orderrights” into new rights within a five-year conversion window period, but recognizing the full 10-year period.

During 2004, the DME drafted proposals for a Precious Metals and Diamond GeneralAmendment Bill with the intention to improve access to rough diamonds and precious metals, forthe purposeof local mineral beneficiation or value addition. During 2003, the South Africangovernment had drafted proposals for a royalty on mining revenues, known as the Minerals andPetroleum Royalty Bill.

Black Economic Empowerment (BEE) mining deals worth about R6,5 billion were concluded in2004, and new giants such as African Rainbow Minerals and Mvelaphanda Resources areshaping the new South African mining landscape. Most of the BEE deals are taking a form ofmergers and acquisition. Prominent deals in 2004 include the purchase of 18 percent of Lonplatsby Incwala Resources amounting to R3,187 billion, the JCI unbundling totalling R1,840 billionand the R1,276 billion merger of Pelawan Investments and Anooraq Resources Corporation.

The Chamber of Mines of South Africa is a voluntary, private sector employer’s organisationfounded in 1889 – three years after gold was discovered on the Witwatersrand. The Chamber isan association of mining companies and mines operating in the gold, coal, diamond, platinum,lead, iron ore, manganese, antimony, zinc and copper mining sectors. In recent years, theChamber’s role and functions have undergone substantial change in response to developmentsin the external environment. Today, the organisation acts as the principal advocate of the majorpolicy positions endorsed by mining employers. The Chamber represents the formalised viewsof its membership to various organs of South Africa’s national and provincial governments, andto other relevant policy-making and opinion-forming entities, both in and outside of the country.The South African Mining Development Association (SAMDA) is a new organization establishedwith a vision to be the vehicle for the development of a vibrant and sustainable junior miningsector.

Numerous smaller groups and companies also carry out mining and beneficiation activities. Notonly do they contribute towards the creation of employment opportunities, but they also exploitthe relatively smaller mineral deposits which may not be considered economically attractive tothe larger groups. The National Small-scale Mining Development Framework, established in1999, is contributing to the development of the junior mining sector. The unique mechanism ofthe Framework was designed to assist first-time entrepreneurs in overcoming the manyobstacles faced by small-scale miners.

Many co-operative organisations protect and serve the interests of the smaller groups andindependent operators, or specific sectors of the industry. These include the AluminiumFederation of South Africa, the South African Copper Development Association, the Ferro-Alloy

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Producers Association, the Engineering Industries Federation of South Africa, the SouthernAfrica Stainless Steel Development Association and the Aggregate and Sand ProducersAssociation of South Africa.

GovernmentThe State’s involvement in the mineral industry is of a complementary and supportive nature, andseeks to provide and maintain:• A legal and fiscal environment which will allow unimpeded exploration for, as well as mining,

beneficiation and marketing of the country’s minerals, and• An efficient physical infrastructure including road, rail, air and harbour facilities,

communications and health services, and the supply of electricity and water.

The Department of Minerals and Energy (DME) is responsible for the administration of theMinerals and Petroleum Resources Development Act, 28 of 2002, which came into effect on 1stMay 2004. This Act replaces the Minerals Act, 50 of 1991 and regulates the prospecting for, andoptimal exploitation, processing and utilisation of minerals, provides for safety and health in themining industry, and controls the rehabilitation of land disturbed by exploration and mining.Various specialised divisions of the DME and associated institutions are responsible for theadministration of the mining laws (Table 1) and for promoting the development of the industry.

The office of the Director-General, the permanent head of the Department of Minerals andEnergy, is located in Pretoria. The Mine Health and Safety Inspectorate of the Departmentensures the safe mining of minerals under healthy working conditions and is represented in thevarious provinces by Principal Inspectors. The Energy branch promotes the optimum andsustainable utilisation of energy resources. The Minerals Development Branch (MDB) promotesthe orderly and optimal mining and utilisation of mineral resources and is represented in theprovinces by Regional Directors. The MDB consists of a Mineral Resource Management ChiefDirectorate to control mineral resource management, a Mineral Development and AdministrationChief Directorate to direct and administer regional offices and a Mineral Policy and InvestmentChief Directorate to promote minerals development and advise on trends in the mining industry(see Annexure A, page vi, for related directorates). The Directorate Mineral Economics promotesmineral exploitation and beneficiation in South Africa: it collects, classifies and analyses mineraldata in order to advise both Government and the private sector on local and internationaldevelopments in the mineral industry. The Directorate also disseminates mineral-relatedinformation through publications and by participating in local and international conferences.

The Council for Geoscience undertakes geological mapping and carries out studies relevant tothe identification, nature, extent and genesis of ore deposits and also maintains nationaldatabases of the country’s geoscientific data and information.

Mintek’s aim is to enable the minerals industry to operate more effectively by developing andmaking available the most appropriate and cost-effective technology. It is engaged in the fullspectrum of minerals research, from the mineralogical examination of ores to the developmentof extraction and refining technologies, the manufacturing of end products, and feasibility andeconomic studies. Much of this work is carried out in close liaison with the minerals andmetallurgical industries, both locally and internationally.

The South African Nuclear Energy Corporation (NECSA) undertakes and promotes researchand development in the field of nuclear energy and radiation sciences and technology in orderto process source material, special nuclear material and restricted material; and to co-operatewith persons in these fields.

The Council for Scientific and Industrial Research (CSIR) conducts, inter alia, research relatedto specific minerals, brownfields mineral exploration, air quality, water pollution and purification,and mining and mineral processing. The CSIR’s Division of Mining Technology serves, primarily,the local gold and coal-mining industries, but increasingly also other mining sectors andinternational markets. Major research activity focuses on the most crucial problems threateningthe health and safety of the underground workforce and overcoming a variety of technologicalproblems that impact on profitability in the mining industry. Services range from fundamentalresearch, technology development and general advice and assistance, and cover the areas of

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improving the underground environment, strata control, reducing the hazardous conditionsassociated with rock pressure in mining operations and developing new or improved miningsystems and equipment.

Most of South Africa’s institutions of higher education (universities and technikons) undertakemineral and/or mining research and are responsible for the training of professional and technicalpersonnel required by the mineral industry.

TABLE 1: SUMMARY OF SOUTH AFRICA’S ADMINISTRATION OF MINERAL AND MININGLAWS

SOUTH AFRICA’S MINERAL INDUSTRY STRENGTHS

South Africa’s mineral wealth is found in diverse geological formations, some of which are uniqueand extensive by world standards:

• The best-known geological formation is the unique and extensive Witwatersrand Basin,hosting a considerable portion of the world’s gold reserves, as well as uranium, silver, pyrite,and osmiridium and yields some 98 percent of South Africa’s gold output;

• The Transvaal Supergroup contains enormous resources of manganese and iron ore;• The Bushveld Complex, contains more than half of the world’s reserves of chrome ore and

platinum-group metals. Additionally, the Complex hosts ores of vanadium, iron, titanium,copper, nickel and fluorspar;

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Electricity Act, 1987(Act No. 41 of 1987)

Mineral Technology Act, 1989(Act No. 30 of 1989)

Geoscience Act, 1993(Act No. 100 of 1993)

Mine Health and Safety Act, 1996(Act No. 29 of 1996)

Nuclear Energy Act, 1999(Act No. 47 of 1999)

Section 9

National Nuclear Regulator Act, 1999(Act No. 47 of 1999)

Abolition of the Lebowa Minerals Trust Act, 2000

(Act No. 67 of 2000)

Minerals and Petroleum Resources Development Act

(Act No. 28 of 2002)

ADMINISTRATION OF LAWS

Mines and Works Act, 1956(Act No. 27 of 1956)

Section 9

Mining Rights Act, 1956(Act No. 20 of 1967)

(Chapter XVI)

Mining Titles Registration Act, 1967(Act No. 16 of 1967)

(Latest amendments in Act 24 of 2003)

Central Energy Fund Act, 1977(Act No. 58 of 1977)

Petroleum Products Act, 1977(Act No. 120 of 1977)

Diamonds Act, 1986(Act No. 56 of 1986)

• The coal and anthracite beds of the Karoo basins in Mpumalanga, KwaZulu-Natal andLimpopo;

• The Phalaborwa Igneous Complex, which hosts extensive deposits of copper, phosphate,titanium, iron, vermiculite and zirconium ores;

• Diamond (kimberlitic, alluvial and marine) deposits • Heavy mineral sand occurrences containing titanium minerals, iron and zircon;• Large deposits of lead/zinc ores with associated copper and silver in the Northern Cape.

South Africa holds the world’s largest reserves of ores of platinum-group metals (PGMs, 87,7percent), manganese (some 80 percent of the total world reserves), chromium (72,4 percent),gold (40,1 percent), and alumino-silicates (37,4 percent) (Table 2 and Figure 1). It is alsoprominent in terms of reserves of: titanium, vanadium, zirconium, vermiculite, and fluorspar.

TABLE 2: SOUTH AFRICA’S ROLE IN WORLD MINERAL RESERVES, PRODUCTION ANDEXPORTS, 2004

COMMODITY RESERVE BASE PRODUCTION EXPORTSUnit Mass % Rank Unit Mass % Rank Unit Mass % Rank

Aluminium+ * * * kt 866 2,9 8 kt 611 3,0 8 Alumino-silicates Mt 51 37,4 1 kt 235 38,0 2 kt 168 44,0 1 Antimony kt 250 6,4 4 t 4 967 3,2 3 t 4 762 * * Chrome Mt 5 500 72,4 1 kt 7 645 44,5 1 kt 513 11,4 4 Coal Mt 28 559 6,0 6 Mt 243 5,2 5 Mt 68 8,9 4 Copper Mt 13 1,4 14 kt 103 0,8 15 kt 29 0,5 18 Ferrochromium * * * kt 2 965 46,0 1 kt 2 618 54,0 1 Ferro-alloys of manganese * * * kt 985 7,2 3 kt 754 15,9 3 Ferrosilicon * * * kt 141 4,4 5 kt 58 5,9 4 Fluorspar Mt 80 16,7 2 Kt 365 5,0 3 kt 211 9,6 3 Gold t 36 000 40,1 1 t 341 13,8 1 t 343 * * Iron Ore Mt 1 500 0,9 9 Mt 39,3 3,3 7 Mt 25 3,9 5 Lead kt 3 000 2,0 7 kt 38 1,3 12 kt 32 1,6 12 Manganese Mt 4 000 80,0 1 kt 4 282 14,8 1 kt 2 403 20,2 2 Nickel Mt 12 8,4 5 kt 40 3,1 8 kt 18 * * PGMs t 70 000 87,7 1 kg 286 157 57,8 1 kg 259 716 * * Phosphate Rock Mt 2 500 5,0 4 Kt 2 735 1,9 9 kt 268 0,8 9 Silicon Metal * * * kt 51 4,9 7 kt 46 7,6 5 Silver kt 10 * * t 72 0,4 20 t 72 * * Titanium Minerals Mt 244 29,8 2 * * * * * * Uranium kt 298 9,6 4 t 887 2,1 10 * * * Vanadium kt 12 000 27,0 2 kt 23 48,0 1 kt 11 * * Vermiculite Mt 80 40,0 2 kt 197 41,0 1 kt 178 95,0 1 Zinc Mt 15 3,3 8 kt 32 0,4 22 kt 16 0,2 24 Zirconium Mt 14 19,4 2 * * * * * *

Notes: Full details given in respective commodity chapters+ Figure under Reserve Base refers to metal production capacity* Confidential or information not available

As a result of its large reserve base, South Africa is the leading producer and produces over 40percent of world production of the following mineral commodities: chrome ore, ferrochromium,platinum-group metals, vanadium and vermiculite (Table 2 and Figure 2). South Africa is also theleading world producer of manganese and gold and is one of the top three producers of alumino-silicates, antimony, manganese, ferro-alloys and fluorspar.

The domestic market for most of the mineral commodities produced is relatively small. Hence,South Africa’s mineral industry is export-orientated (Table 2 and Figure 3); it contributes 95,0percent of world vermiculite exports, 54,0 percent of ferrochromium and 44,0 percent of alumino-silicates. It is also probably the world’s largest exporter of PGM’s, gold and vanadium, but theunavailability of export data from other producing countries makes it impossible to confirm thisrating. Other important export commodities include manganese ore, ferro-alloys and fluorspar.

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MINERAL EXPLORATION

Although the existence of large reserves of a variety of minerals has been proven in South Africa,the country cannot be considered over-explored. Experts generally agree that there remainsconsiderable potential for the discovery of other world-class deposits in areas that have not yetbeen exhaustively explored. There is, therefore, still ample potential for exploration programmesin certain areas.

Expenditure on exploration is subject to many decision variables tied to ongoing results andbusiness, economic and political factors and, therefore, may vary considerably from the projectedinvestment. Exploration success in South Africa has made substantial investments in explorationfor gold, platinum, diamonds, heavy minerals and base metals. Several major South Africanmining companies have also adopted aggressive exploration strategies beyond the borders ofthe country, which has resulted in the internationalisation of these companies.

Although exploration expenditure has been increasing since 2002, South Africa is losing out inthe race for international exploration dollars. By contrast Australia and Canada continue to attractnew investments in exploration. A total amount of R5,412 million was spent on exploration inSouth Africa between 1998 and 2003. Of this amount, R768,9 million was laid out in 2001,R669,7 million in 2002 and R1,201 million in 2003. The preliminary figure for 2004, indicates thatR1,052 million was spent on exploration in South Africa.

The Limpopo, Northern Cape, Gauteng, Northwest and Mpumalanga provinces figuredprominently in terms of exploration. Most of the exploration activities took place in the BushveldComplex. The northern limb of the Complex has become the focus of recent exploration activitiesby both junior and senior mining companies, domestic and international.

Exploration for diamonds in South Africa continues to draw worldwide attention. South Africa’smajor diamond companies spend substantial amounts on exploration. Six kimberlites, whichaccount for over 80 percent of De Beers’ and Debswana’s diamond production (equivalent to 30percent of world output by value) were discovered in the past by De Beers’ in-house explorationteams in South Africa and Botswana.

COMMUNICATION, INFRASTRUCTURE AND LABOUR

The South African communication system is well developed with 5,1 million installed telephonesand 4,3 million installed exchange lines. The network is almost entirely digitised with digitalmicrowave and fibre optics serving as the main transmission media.

The country’s transport infrastructure is highly developed with extensive road and rail networks.For many years this efficient transport infrastructure has been utilised by other countries insouthern Africa, to as far north as the Democratic Republic of Congo. The Department ofTransport is responsible for the maintenance of roads comprising approximately 63 027 km ofpaved and 471 104 km of unpaved roads. The rail nexus that links major centres and isextensively used by heavy industry for freight transport extends over more than 30 000 km. Thisincludes dedicated railway lines; one of them for iron ore from Sishen, in the Northern Cape toSaldanha Bay on the west coast, and another for transporting coal from the coal fields ofMpumalanga to the port of Richards Bay on the east coast. Of the five major ports through whichmost of South Africa’s minerals are shipped, the largest are Richards Bay (capacity 81,0 Mt,mainly for coal and other minerals), Saldanha Bay (30,9 Mt, chiefly for iron ore) and Durban (29,7Mt, mainly for liquids, containers and break bulk cargoes).

Electric power is largely generated by the country’s giant electricity utility, Eskom, and is amongthe cheapest electricity available anywhere in the world. This low electricity cost has contributedto the establishment of sizeable ferro-alloys, stainless steel and aluminium beneficiationindustries, and also to the exploitation of the country’s deep gold reserves.

Most importantly, the country enjoys political stability and has a fundamentally sound economy.Its banking and finance infrastructure is excellent and is on par with those in most developedcountries, which assists global trade through a network of international links.

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South Africa has a sizable labour pool, although to a large extent, unskilled. The Government is,therefore, actively pursuing a higher level of education, training and productivity in the nation.The labour force, whilst unionised, welcomes the inflow of foreign investment.

It is envisaged that implementation of the new minerals policy will lead to increased investmentin South Africa’s mineral industry by ensuring a competitive business environment and thelowering of barriers to entry. This, and the creation of a national mineral promotion system (“one-stop shop”), furthermore, will stimulate small-scale mining and job creation. Other measures willbe proposed to intensify mineral beneficiation. The whole of the subcontinent will also benefitfrom anticipated improved regional co-operation.

FIGURE 1: SOUTH AFRICA’S ROLE IN WORLD MINERAL RESERVES, 2004

Note: Full details given in respective commodity chapters

FIGURE 2: SOUTH AFRICA’S ROLE IN WORLD MINERAL PRODUCTION, 2004

Note: Full details given in respective commodity chapters

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FIGURE 3: SOUTH AFRICA’S ROLE IN WORLD MINERAL EXPORTS, 2004

Notes: Gold and PGM’s omitted as there is no comparative data Full details given in respective commodity chapters

ROLE IN THE NATIONAL ECONOMY

In 2004, mining contributed R87,1 billion (US$13,5 billion) or 7,1 percent to gross value added(Figure 4 and Table 3); this contribution increased by R2,93 billion from that of the previous year.The contribution as a percentage of the total has ranged between 6,5 in 1997 and 8,7 in 2002over the last decade, largely due to the growth experienced in the secondary and tertiary sectorsof the economy and the contraction in the gold-mining industry. However, if the gross value-added contribution of processed minerals (presently included in the manufacturing sector’sfigures) were added to that of mining and quarrying, the impact on the national accounts wouldbe significantly higher. During 2004, mining and quarrying contributed 9,9 percent to Total FixedCapital Formation (Figure 4 and Table 3). This sum of R22,3 billion is equal to 25,6 percent ofthe sector’s gross value-added contribution.

FIGURE 4: CONTRIBUTION OF MINING AND QUARRYING TO GROSS VALUE ADDEDAND TOTAL FIXED CAPITAL FORMATION OF SOUTH AFRICA, 1995 – 2004(Current Rand Prices)

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TABLE 3: CONTRIBUTIONS OF MINING AND QUARRYING TO VALUE ADDED, FIXEDCAPITAL FORMATION (at current prices) AND TOTAL NATIONAL EXPORTS OFGOODS, 1995–2004

CONTRIBUTION TO CONTRIBUTION TO CONTRIBUTION TO NATIONAL VALUE ADDED FIXED CAPITAL FORMATION TOTAL EXPORT OF GOODS

YEAR GROSS FROM TOTAL FROM TOTAL FROMVALUE MINING FIXED MINING EXPORT MINING ADDED CAPITAL OF GOODS

FORMATION R’million R’million % R’million R’million % R’million R’million %

1995 500 354 34 830 7,0 87 042 7 397 8,5 109 118 44 145 40,5 1996 565 470 38 768 6,9 100 632 8 003 8,0 130 206 50 691 38,9 1997 627 167 40 524 6,5 113 221 9 638 8,5 143 830 51 708 36,0 1998 674 874 45 879 6,8 126 913 11 317 8,9 160 763 55 295 34,4 1999 738 873 52 173 7,1 126 754 11 635 9,2 174 319 58 303 33,4 2000 838 218 63 391 7,6 139 647 13 847 9,9 222 061 76 304 34,4 2001 928 215 77 214 8,3 153 525 15 871 10,3 265 832 89 943 33,8 2002 1 059 789 92 113 8,7 175 592 19 802 11,3 333 251 109 357 32,8 2003 1 134 585 84 128 7,4 200 290 20 816 10,4 290 544 86 747 29,9 2004 1 230 409 87 058 7,1 226 118 22 303 9,9 311 762 89 546 28,7

Sources: Department of Minerals and Energy: Mineral EconomicsSouth African Reserve Bank, 2005, pS113

TABLE 4: CONTRIBUTIONS OF MINING AND QUARRYING TO STATE REVENUE,1995–2004

CONTRIBUTIONS TO STATE REVENUE YEAR MINING State Share of Profits* Total Revenue As Percentage STATE AID#

Ended TAXATION and Diamond Exports Duties of Total 31 Mar State Revenue

R’ 000 R’000 R’000 % R’000 1995 1 509 901 259 521 1 769 422 1,6 22 726 1996 1 608 455 217 078 1 825 553 1,4 43 239 1997 1 849 253 146 427 1 995 680 1,4 36 404 1998 1 681 851 157 620 1 839 470 1,1 29 999 1999 2 134 737 57 715 2 190 452 1,2 29 499 2000 1 072 047 120 083 1 192 130 0,6 27 990 2001 4 499 248 452 903 4 952 151 2,3 34 939 2002¢ 8 885 713 169 313 9 055 026 3,5 28 914 2003 6 773 780 1 041 860 7 815 640 2,6 20 349 2004 2 941 091 466 338 3 407 429 1,0 32 530

Sources: RSA, Department of Finance, South African Revenue ServiceDepartment of Minerals and Energy: Financial Planning and Management Accounting

Notes: * In respect of leased mines# Aid to marginal mines¢ In 2002, R28 914 000 from State Aid budget was directed to Council for Geoscience for technical investigation on the mines that required State

Aid.

Sales of primary mineral products accounted for 28,7 percent of South Africa’s total exportrevenue during 2004, while gold’s contribution decreased to 9,3 percent from 11,2 percent in2003 (Figure 5 and Table 3). The declining trend over the last two decades in both theseindicators has been the result of the contraction in the gold-mining industry, increased localbeneficiation and relatively lower commodity rand prices across the board. However, theinclusion of various processed mineral products, such as ferro-alloys, aluminium and carbon andstainless steel, would raise the contribution of the minerals sector to above 35 percent.

9

FIGURE 5: CONTRIBUTION OF PRIMARY MINERALS TO SOUTH AFRICA’S EXPORTS#,1995–2004

Sources: Mineral Economics

Notes: + Includes gold# Total exports of goods only, including gold

During 2004, the mining industry employed 2,9 percent of South Africa’s economically activepopulation (Table 5), or some 5,3 percent of all workers in the non-agricultural formal sectors ofthe economy. The average number of workers employed in the mining industry increased by 16139, or 3,7 percent, from 434 859 in 2003. This increase can be attributed to the improvementsin the quality and quantity of data from the mining industry, the DME’s data collectionmethodology and new entrants and expansions especially in the PGM sector. A total of 147 125mineworkers lost their jobs over the ten-year period from 1995 to 2004 as a result of, inter alia,the shrinking gold sector and improvements in productivity in the domestic minerals industry.Nevertheless, taking into account the multiplying effect with regard to the supply and consumingindustries, as well as the related dependants, many millions of people still rely on the miningindustry for their livelihood. Wage income amounted to R33,81 billion in 2004, or 27,0 percentof total mining revenue, an increase in nominal terms of 9,8 percent when compared with that of2003. The average annual income per worker was R74 958 in 2004, registering an increase inreal rand terms in excess of 4,4 percent year-on-year

TABLE 5: EMPLOYMENT AND WAGES IN SOUTH AFRICA’S MINING INDUSTRY,1995–2004

EMPLOYMENT WAGES YEAR Average As % of total Total Per worker As % of

number economically per annum total mining employed active population revenue#

Nominal Real+ Nominal Real+

R million R R 1995 598 123 4,3 15 485 26 477 25 889 44 266 28,1 1996 569 069 4,1 16 885 26 886 29 672 47 245 26,8 1997 553 116 3,8 18 644 27 343 33 708 49 435 27,9 1998 466 663 3,4 19 240 26 398 41 228 59 567 27,0 1999 437 028 3,0 20 138 26 271 46 079 60 113 26,3 2000 418 294 2,6 22 127 27 407 52 898 65 522 22,5 2001 407 154 2,7 24 409 28 595 59 979 70 265 21,2 2002 416 925 2,6 26 406 28 339 63 335 67 972 19,3 2003 434 859 2,7 30 801 33 056 70 830 71 815 26,0 2004 450 998 2,9 33 806 33 806 74 958 74 958 27,0

Sources: Labour Force Survey (Stats SA), 2004

Notes: # Export plus local commodity sales+ Deflated by means of the CPI with 2004 as base year

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TABLE 6: SOUTH AFRICA’S MINING INDUSTRY: EMPLOYMENT AND REMUNERATIONBY PROVINCE, 2004

PROVINCE EMPLOYEES TOTAL REMUNERATION Number % R million %

North West 148 260 32,9 9 077 26,9 Gauteng 92 951 20,6 6 563 19,4 Mpumalanga 57 236 12,7 6 194 18,3 Free State 53 013 11,8 4 105 12,1 Limpopo 61 014 13,5 4 299 12,7 Northern Cape 26 434 5,9 2 476 7,3 KwaZulu-Natal 7 692 1,7 730 2,2 Western Cape 3 164 0,7 286 0,8 Eastern Cape 1 234 0,3 76 0,2 TOTAL 450 998 100,0 33 806 100,0

Sources: Directorate Mineral Economics

Provincial employment distribution was distinctly lopsided with five provinces (North West,Gauteng, Mpumalanga, Free State and the Limpopo) employing 91,5 percent of the miningworkforce, which, in turn, earned 89,4 percent of the total remuneration (Table 6 and Figure 6).

FIGURE 6: SOUTH AFRICA’S MINING INDUSTRY: EMPLOYMENT BY PROVINCE, 2004

Despite its declining economic contribution, the gold-mining sector was the largest employer withsome 40 percent of the total mining industry’s labour force (Figure 7). The PGM industryemployed 33 percent, with the coal industry in third place with 11 percent. The employment crisiscaused by the low gold price resulted in the inception of the Gold Crisis Committee (GCC) during1998. Through a concerted effort, job losses by gold mines were kept down to below 8 000 in2004. The Mining Summit, an initiative born out of the GCC and hosted by the Department ofMinerals and Energy in early 2000, had as its main objective to addressed key issues critical tothe survival of the industry, amongst them being labour concerns.

11

FIGURE 7: SOUTH AFRICA’S MINING INDUSTRY: EMPLOYMENT BY SECTOR, 2004

The gold industry was responsible for some 37 percent of the total remuneration and the PGMsindustry for 27 percent (Figure 8). The higher degree of mechanisation in the coal sector isreflected by its contribution of 11 percent in terms of the labour force, but 18 percent in terms ofremuneration.

FIGURE 8: SOUTH AFRICA’S MINING INDUSTRY: REMUNERATION BY SECTOR, 2004

MINERAL PRODUCTION AND SALES IN 2004

Most of the world’s economies entered a period of subdued growth in 2001 and 2002; howeversome economies, most notably that of China, continued to grow strongly and increased theirdemand for commodities. As the United States and, to a lesser extent, the rest of the worldentered a period of stronger economic growth in 2003 and 2004, the demand for commoditiesoutstripped supply and as a result commodity prices began to increase sharply. It seems unlikelythat world commodity prices will be sustained at these levels indefinitely because the presenthigh prices substantially exceed the cost of production.

Both demand for minerals and prices showed positive movement from the low levels experiencedduring 2003. Despite the large increase in gold and platinum prices and moderate increases inthose of most other mineral commodities, the strong rand/dollar exchange rate, resulted in onlya moderate increase in South African sales revenue in rand terms during the year.

South Africa’s total primary mineral sales revenue increased by 6,5 percent, from R117,6 billionin 2003 to R125,2 billion in 2004 (Tables 7 and 8). When the total sales and total export sales

12

are expressed in US dollars, the annual changes reflect increases of 26,0 percent (fromUS$15,4 billion to US$ 19,4 billion), and 20,9 percent (from US$11,5 billion to US$ 13,9 billion)respectively. The modest increase in revenues in rand terms was due to the strengthening valueof the rand, which achieved an average of R6,4499 in 2004, compared with R7,5647 in 2003.The major foreign revenue earners in 2004 were platinum-group metals (33,0 percent), followedby gold (32,4 percent) and coal (16,1 percent).

Domestic mineral sales proceeds increased in rand terms by 15,1 percent, and 32,7 percent indollar terms. Improvements in local sales income were recorded for all the minerals that make ameaningful contribution to the total. Coal remained the major local income earner, accounting for38,2 percent of total domestic mineral sales, followed by metallic commodities with 31,2 percentand miscellaneous mineral commodities with 16,5 percent. Industrial commodities accounted for14,1 percent.

Of South Africa’s nine provinces, North West, Gauteng, Mpumalanga, Limpopo, and NorthernCape they contributed the bulk of the totalmineral revenue, together generating 87,1 percent ofthe total primary mineral sales income (Table 9). The same five provinces accounted for 89,6percent of export sales revenue, while Mpumalanga, North West and Limpopo accounted for67,2 percent of local sales earnings in 2004. North West is mainly dependent on PGMs as themajor contributor towards minerals revenue, Gauteng on gold, Mpumalanga on coal and theLimpopo on diamonds, copper and coal. The economies of North-West, Limpopo, the NorthernCape and Mpumalanga are particularly dependent on the contributions from their respectivemining industries.

TABLE 7: SOUTH AFRICA’S MINERAL PRODUCTION AND SALES, 2003

COMMODITY PRODUCTION LOCAL SALES (FOR) EXPORT SALES (FOB) TOTAL SALES Quantity Quantity Value (R) Quantity Value (R) Quantity Value (R)

1. Precious Diamonds ct 12 666 536 ** ** ** ** ** **

Gold kg 372 766 3 117 276 457 930 372 478 32 776 441 477 375 595 33 052 899 407

Platinum-group metals kg 266 150 ** 3 270 364 832 241 262 25 553 564 539 ** 28 823 929 371Silver kg 79 817 3 583 4 656 419 97 536 106 556 129 101 119 111 212 548

2. Semi-precious stones kg * * * * * *

3. Ferrous@ 48 991 884 * 2 648 865 610 26 534 800 4 161 298 955 * 6 810 164 565 4. Non-ferrous+@ 248 504 159 833 2 853 373 808 352 623 1 857 264 968 512 456 4 710 638 776 5. Energy

Coal 239 300 510 168 028 212 13 212 837 453 71 556 461 13 490 623 059 239 584 673 26 703 460 512 Uranium oxidekg 893 896 ** ** ** ** ** **

6. Industrial@ 4 305 812 084 1 378 800 279 5 684 612 363 7. Miscellaneous 4 368 103 550 7 484 886 968 11 852 990 518 TOTAL# 30 940 471 686 86 809 436 374 117 749 908 060

Notes: All quantities are in metric tons, unless otherwise specified** Classified: where applicable, earnings are included under ‘Miscellaneous’@ Full details given in respective overview chapters+ Excludes titanium and zirconium minerals which are included under ‘Miscellaneous’* Nil# Hydrocarbons were produced and sold at a value of R767 million locally

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TABLE 8: SOUTH AFRICA’S MINERAL PRODUCTION AND SALES, 2004

COMMODITY PRODUCTION LOCAL SALES (FOR) EXPORT SALES (FOB) TOTAL SALES Quantity Quantity Value (R) Quantity Value (R) Quantity Value (R)

1. Precious Diamonds ct 14 450 173 ** ** ** ** ** **Gold kg 340 506 3857 347 093 241 343 118 28 982 777 601 346 976 29 329 870 842Platinum-group metals kg 286 157 ** 3 786 133 314 259 716 29 526 670 482 ** 33 312 803 796Silver kg 71 643 4 810 7 483 062 71 784 93 995 154 76 594 101 478 216

2. Semi-precious stones kg * * * * * *

3. Ferrous@ 51 249 115 * 3 168 710 136 27 661 307 4 841 063 224 * 8 009 773 3604. Non-ferrous+@ 525 807 159 172 3 799 534 205 392 619 2 266 653 568 551 791 6 066 187 773 5. Energy

Coal 242 821 694 178 372 267 13 606 151 275 67 946 518 14 472 904 537 246 318 785 28 079 055 812 Uranium oxide kg 887 249 ** ** ** ** ** **

6. Industrial@ 5 033 229 192 1 052 163 016 6 085 392 208 7. Miscellaneous 5 862 879 562 8 334 522 588 14 197 402 150TOTAL# 35 611 213 987 89 570 750 170 125 181 964 157

Notes: All quantities are in metric tons, unless otherwise specified** Classified: where applicable, earnings are included under ‘Miscellaneous’@ Full details given in respective overview chapters+ Excludes titanium and zirconium minerals which are included under ‘Miscellaneous’* Nil# Hydrocarbons were produced and sold at a value of R1 612,4 million locally

Exports of primary and processed minerals were made to 82 countries during 2004. The mostimportant export destination for South Africa’s primary minerals remained Europe, with 89,8percent, while Pacific Rim countries accounted for 36,9 percent of the selected processedminerals, exceeding all other destinations (Table10). When precious metals and minerals areexcluded from primary mineral exports, Europe accounted for 63,0 percent and the Pacific Rimcountries for 23,8 percent of the total value in 2004.

TABLE 9: SOUTH AFRICA’S PRIMARY MINERAL SALES BY PROVINCE, 2004

PROVINCE LOCAL SALES (FOR) EXPORT SALES (FOB) TOTAL SALESR’000 % R’000 % R’000 %

North West 6 941 646 19,5 27 950 167 31,2 34 891 813 27,9Mpumalanga 11 523 434 32,4 12 662 349 14,1 24 185 783 19,3Limpopo 5 432 366 15,3 7 540 277 8,4 12 972 643 10,4Gauteng 1 523 034 4,3 25 051 393 28,0 26 583 427 21,2Northern Cape 3 373 844 9,5 7 067 437 7,9 10 441 281 8,3Free State 1 270 596 3,6 5 475 141 6,1 6 746 737 5,4Western Cape# 3 951 531 11,1 959 913 1,1 4 911 444 3,9KwaZulu-Natal 1 115 875 3,1 2 863 073 3,2 3 978 948 3,2Eastern Cape 469 888 1,3 0 0,0 469 888 0,4TOTAL# 35 611 214 100,0 89 570 750 100,0 125 181 964 100,0

Note: # Hydrocarbons were produced and sold at a value of R1 612,4 million locally

TABLE 10: SOUTH AFRICA’S EXPORT VALUE OF PRIMARY AND SELECTEDPROCESSED MINERAL PRODUCTS ACCORDING TO DESTINATION, 2004

REGION PRIMARY PROCESSED Including precious Excluding precious metals/minerals metals/minerals

% % % 2003 2004 2003 2004 2003 2004

Europe 89,7 89,8 61,2 63,0 37,7 36,4Pacific Rim countries 6,7 6,5 25,3 23,8 44,1 36,9Middle and Near East 1,9 2,1 7,0 7,5 1,2 3,3 North and Central America 0.9 0,7 3,4 2,6 12,6 16,1South America 0,3 0,5 1,0 1,6 0,4 0,6Africa 0,6 0,4 2,1 1,5 4,0 6,7TOTAL 100,0 100,0 100,0 100,0 100,0 100,0

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MINERAL BENEFICIATION

Beneficiation or value-added processing involves the transformation of primary material(produced by mining and extraction process), to a more finished product, which has a higherexport sales value. Beneficiation involves a range of different activities including large-scale,capital-intensive activities, such as smelting, and sophisticated refining plants as well as labour-intensive processes, such as craft jewellery and metal fabrication. Each successive level ofprocessing permits the product to be sold at a higher price than the previous intermediateproduct or original raw material and adds value at each stage.

The concept of beneficiation is not new in South Africa, but it took major steps forward during the1990s. The key has been to establish South Africa as a base for adding value to raw materialinputs from anywhere in the world, not only domestic resources. During this period, the SouthAfrican mining sector has undergone a major transformation away from gold into higher value-added mineral processing and manufacturing, becoming a world exporter of processed mineralsas opposed to its previous role as a predomonantly primary commodity exporter. This transitionhas resulted from the construction of a number of large-scale, resource-based investmentprojects (such as Columbus Stainless, Hillside Aluminium, Namakwa Sands and SaldanhaSteel) in addition to the continuing expansion of ferro-alloy production.

Despite these developments, South Africa still has the potential to further raise the level ofbeneficiated mineral output. Table 11 shows South Africa’s first stage of beneficiation, which ischaracterised by capital-intensive plants with low employment levels engaged in the productionof mass intermediate products. This first stage of beneficiation accounts for nearly 90 percent ofthe total minerals revenue with the other 10 percent coming from entirely beneficiated minerals,including partial commodities.

Government is committed to the promotion of beneficiation and the Mineral and PetroleumResources Development Act of 2002 includes provisions that will ensure that the Ministerpromotes the establishment of secondary and tertiary mineral-based industries, aimed at addingmaximum value to mineral raw materials, where economically justifiable. The South AfricanMining Charter of 2004 specifically stipulates that mining companies will be able to offset thevalue of the level of beneficiation achieved by the company against its HDSA ownershipcommitments.

Production and sales figures for a selected group of processed mineral products for 2003 and2004 are shown in Tables 12 and 13, respectively. Export revenue comprised 74,8 percent oftotal sales of these processed minerals in 2004. Total sales revenue increased by 27,0 percentcompared to 2003, from R27,8 billion to R35,3 billion. When expressed in dollar terms, anincrease of 48,6 percent was recorded from $3,7 billion in 2003 to $5,5 billion in 2004. Thebiggest contributors to export sales were chromium alloys (37,5 percent), aluminium (24,1percent) and manganese alloys (16,4 percent).

The value of local sales of processed mineral products increased by 29,0 percent, from R6,9billion in 2003 to R8,9 billion in 2004. Aluminium, with a 41,5 percent contribution, was the majorrevenue earner in 2004, with chrome alloys, manganese alloys, zinc metal and phosphoric acidalso contributing substantially. Vanadium total sales increased by 75,0 percent from R1,2 billionin 2003 to R2,1 billion in 2004.

Two provinces, KwaZulu-Natal and Mpumalanga contributed more than 67,0 percent of the totalprocessed minerals sales revenue in 2004 (Table 14). Aluminium and titanium slag dominate theKwaZulu-Natal contribution, whilst more than two-thirds of Mpumalanga’s total sales werederived from chromium alloys. These two provinces dominated both the export and local salesrevenues, with respective combined contributions of 70,4 and 66,3 percent. No beneficiation ofthe selected minerals occurred in the Eastern Cape, the Northern Cape and the Free State.

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TABLE 11: FIRST STAGE OF BENEFICIATION WITHIN SOUTH AFRICA’S MINERALSECTOR, 2004 (Before manufacturing by alloying, working etc)

COMMODITY BENEFICIATION COMMENT MINERALS MINERALS RATIO BY REVENUE REVENUE

VALUE(%) (R’Million) SHARE (%)

GOLD 100 All is refined 29 330 20,3COAL 100 Can be used for power generation and

fuel manufacturing 28 071 19,4 PGM’s 100 All is refined 33 313 23,1ALUMINIUM 100 Imported raw materials to metal/alloys 10 105 7,0CHROME 100 Ferro-alloys 11 753 8,1COPPER 100 As refined metal 2 026 1,4NICKEL 100 Nickel concentrate imports exceed exports.

Beneficiation actually >100 3 653 2.5LIMESTONE 100 For local consumption 1 240 0,9AGGREGATE/SAND 100 For local consumption 1 901 1,3SILICON 100 As metal, ferro-alloy and DMS product 1 160 0,8ZINC 100 As refined metal. Concentrate also imported

from Namibia. Beneficiation > 100% 782 0,5IRON 100 As high grade pig iron co-product of

titanium slag 945 0,7MANGANESE 100 As metal and dioxide 1 739 1,2Manganese Alloys 100 Alloys 4 699 3,3PHOSPHATE 82 Concentrate applied locally 881 0,6Phosphoric acid 100 Value of fully beneficiated acid 1 581 1,1OTHER 100 Beneficiated to a degree immediately

required by the export market 11 250 7,8TOTAL 144 438 100,0

TABLE 12: SOUTH AFRICA’S PRODUCTION, LOCAL AND EXPORT SALES OF SELECTEDPROCESSED MINERAL PRODUCTS, 2003

COMMODITY PRODUCTION LOCAL SALES EXPORT SALESMass Value (FOR) Mass Value (FOB)

t t R’000 t R’000Chromium alloys 2 812 595 300 954 886 219 2 640 137 7 658 552Manganese alloys 920 514 192 704 633 653 707 407 2 534 220Other: Classifiedx 184 206 84 659 414 429 106 449 672 867Subtotal: Ferroalloys 1 934 301 10 865 639Aluminium 734 787 299 303 3 320 629 497 892 4 981 081 Vanadium+ 27 172 1 119 108 667 18 816 1 072 477 Other: Classifiedx 2 422 360 497 297 1 536 944 1 850 935 3 971 391 TOTAL 6 900 542 20 890 588

Notes: + Contained vanadiumx Comprises of titanium slag, zinc metal, low-manganese pig iron, silicon alloys and metal, phosphoric acid and antimony trioxide

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TABLE 13: SOUTH AFRICA’S PRODUCTION, LOCAL AND EXPORT SALES OF SELECTEDPROCESSED MINERAL PRODUCTS, 2004

COMMODITY PRODUCTION LOCAL SALES EXPORT SALESMass Value (FOR) Mass Value (FOB)

t t R’000 t R’000 Chromium alloys 2 965 296 486 306 1 849 169 2 617 505 9 903 486 Manganese alloys 985 842 191 885 932 019 753 504 4 329 260 Other:Classifiedx 191 097 93 134 501 509 103 790 658 216 Subtotal:Ferroalloys 3 282 697 14 890 963 Aluminium 866 074 341 747 3 724 359 610 702 6 380 404 Vanadium+ 23 303 2 637 415 916 16 276 1 674 788 Other: Classifiedx 2 668 633 574 221 2 119 661 1 750 629 3 471 928 TOTAL 8 887 407 26 418 080

Notes: + Contained vanadium.x Comprises of titanium slag, zinc metal, low-manganese pig iron, silicon alloys and metal, phosphoric acid, and antimony trioxide

TABLE 14: SOUTH AFRICA’S LOCAL AND EXPORT SALES OF SELECTED PROCESSED MINERAL PRODUCTS BY PROVINCE, 2004

PROVINCE LOCAL SALES (FOR) EXPORT SALES (FOB) TOTAL SALES R’000 % R’000 % R’000 %

KwaZulu-Natal 4 040 565 45,5 10 032 861 38,0 14 073 426 39,9 Mpumalanga 2 210 980 24,9 7 471 784 28,3 9 682 764 27,4 North West and Western Cape@ 613 893 6,9 5 485 792 20,8 6 099 685 17,3 Gauteng 1 504 404 16,9 2 482 765 9,4 3 987 169 11,3 Limpopo Province 517 566 5,8 944 878 3,6 1 462 444 4,1 TOTAL 8 887 407 100,0 26 418 080 100,0 35 305 487 100,0

Note: @ Values combined due to the confidentiality of the Western Cape figures

SOUTH AFRICA’S IMPORTS OF MINERAL PRODUCTS

As a result of its vast mineral resource base, South Africa is self-sufficient with respect to thesupply of many minerals. However, some minerals and mineral products need to be importeddue to the absence of economically viable mineral deposits; another factor is that certainspecialised grades and products are not produced in South Africa. The value of the moresignificant imports during 2004 decreased by 9,3 percent from R17,2 billion to R15,6 billion(Table 15). Expressed in current dollars, the value of imports increased by 6,5 percent.

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TABLE 15: SOUTH AFRICA’S IMPORTS OF SELECTED PRIMARY AND PROCESSEDMINERAL PRODUCTS, 2004

PRODUCT VALUE (FOB) 2003** 2004 Year on yearR’000 R’000 % change

PreciousDiamonds 4 670 569 4 319 651 -7,5 Other precious and semi-precious stones * 485 876 411 131 -15,4 Precious metals + 611 190 661 806 8,3

Ferrous@

Primary 190 700 159 628 -16,3 Processed 379 136 780 073 105,8

Nonferrous@ 30 144 76 158 152,6 Coking Coal 1 281 125 1 540 532 20,2

Industrial@

Primary 631 816 577 175 -8,6 Processed 3 948 696 4 702 584 19,1 Manufactured 4 949 279 2 378 707 -51,9 TOTAL# 17 178 531 15 607 445 -9,1

Source: South African Revenue Service, 2004

Notes: * Includes natural and synthetic precious or semi-precious stones and dust and powders of these stones+ Includes alloys containing base metals@ Full details given in respective overview chapters# In addition, crude oil to the value of R38,0 billion was imported during 2004 (R34,3 billion in 2003)** Revised figures

FORECAST OF MINERAL EXPORTS FOR 2004 TO 2009

South Africa’s mineral industry is primarily export driven, with 71,6 and 74,8 percent of primaryand processed mineral sales during 2004 respectively, destined for world markets, respectively.Therefore, it is pertinent to estimate future earnings from mineral exports. Since gold, coal, theplatinum-group metals and diamonds together contribute almost 90 percent to total primarymineral export revenue, forecasts in respect of these commodities are the most critical.

For the purpose of forecasting South Africa’s mineral export revenue from 2005 to 2009, it wasassumed that the major economies of the world would enjoy sustainable expansion over themedium term, providing a stable base for the smaller economies to achieve relatively highgrowth. This should filter through to mineral commodity markets, with volumes increasingmoderately and significant price increase from 2004 to 2005. In 2006 and 2007 prices may againcome under pressure as production of minerals is likely to start outpacing consumption.

Based on these broad assumptions, as well as a detailed analysis of the supply and demand foreach of the significant individual commodities, Table 16 presents the forecasts made in June2005. Values are given in US dollars and kept constant at the average 2004 exchange rate ofR6,4499 to the US dollar.

The value of South Africa’s exports of primary minerals is forecast to increase by 6,8 percent perannum, which compounded from $13 607 million in 2004 will reach $19 965 million in 2009. Thesectors with the highest expected growth rates are coal (11,4 percent), gold (8,8 percent) andferrous (7,4 percent).

Export earnings from gold are expected to decrease from $4 494 million in 2004 to $4 250million in 2006 as a result of a continued drop in output, despite higher US dollar prices. A risein US dollar prices should see the export revenue grow to $7 455 million by 2009, despite apossible decline in gold production. The export revenue from gold is forecast to increase by 8,8percent per annum.

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South Africa’s export earnings of platinum group metals (PGMs) are expected to increase from$4 578 million in 2004 to $5 429 million in 2005, as a result of a continued rise in output as wellas higher US dollar prices of the constituent metals. Export revenue is forecast to decrease to$4 622 in 2007 mainly due to a lower platinum price, despite higher production, before climbingto $5 735 in 2009 on the back of a rising platinum price. The weighted average price for thebasket of PGMs is expected to average $644/ozt in 2005.

The export value of coal is expected to increase by 41,3 percent, to $3 169 million in 2005 fromthe $2 243 million recorded in 2004. Export revenue for coal is likely to show an increase of 11,4percent per annum rising from $2 243 million in 2004 to $4 280 million in 2009. Europe andMiddle East are still South Africa’s major customers and coal demand is rising in those regions.Furthermore, this increase in forecast export volumes is influenced mainly by the increasingnumber of exporting mines created as a result of the implementation of the Mineral andPetroleum Resources Development Act (MPRDA) and the willingness of the big coal companiesto allow economic empowerment companies to mine coal blocks wits in their mining concessionareas.

Export earnings from ferrous minerals ($751 million in 2004) are foreseen to rise by 3,8 percentannually. By 2009 the value is expected to be almost $939 million. The sector’s share of totalprimary mineral export earnings is expected to almost remain constant from 5,5 percent in 2004to 4,7 percent in 2009.

Primary nonferrous mineral export revenues are expected to increase from $355 million in2004 to $373 million in 2005. Export income is also anticipated to increase to $386 million in2009, reflecting a compound growth rate of 1,4 percent per annum.

The forecast for primary industrial minerals export earnings indicates a possible increase of 1,8percent from $163 million in 2004 to $166 million in 2005. The export revenue of these mineralsis anticipated to increase by 3,1 percent per annum, to $196 million over the five-year period to2009.

The contribution of processed mineral products to foreign exchange earnings is expected togrow at a rate of 4,8 percent rate per annum, from $4 349 million in 2004 to $5 748 million in2009, compared with a 6,8 percent per annum increase for primary minerals. The ratio ofprimary to processed minerals is foreseen to increase from 3,1 to 3,5 over the forecast period.

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TABLE 16: FORECAST OF SOUTH AFRICA’S MINERAL EXPORT REVENUE, 2004–2009

COMMODITY VALUE GROWTH*GROUP $ million (FOB)

2004+ 2005 2006 2007 2008 2009 % paGold 4 494 4 197 4 250 4 682 6 767 7 455 8,8

(33,4) (27,7) (28,1) (30,1) (36,7) (25,1) PGMs 4 578 5 429 5 072 4 622 5 324 5 735 3,8

(34,0) (35,8) (33,5) (29,7) (28,8) (28,7) Coal 2 243 3 169 3 497 3 842 4 056 4 280 11,4

(16,7) (20,9) (23,1) (24,7) (22,0) (21,4) Ferrous 751 786 814 857 784 939 3,8

(5,5) (5,2) (5,4) (5,5) (7,2) (4,7) Nonferrous@ 355 373 362 411 404 386 1,4

(2,6) (2,5) (2,4) (2,6) (2,2) (1,9) Industrial 163 166 173 180 188 196 3,1

(1,2) (1,1) (1,1) (1,2) (1,0) (1,0) Otherx 1 023 1 057 980 959 934 974 -0,8

(7,6) (7,0) (6,5) (6,2) (5,1) (4,9) Total primary (P1) 13 607 15 177 15 148 15 553 18 457 19 965 6,8

(100) (100) (100) (100) (100) (100) Processed (P2) 4 349 5 629 5 697 5 765 5 825 5 748 4,8 Total P1 and P2 17 956 21 806 20 845 21 318 24 282 25 713 6,3 P1: P2 3,1 2,7 2,7 2,7 3,2 3,5

Notes: Figures in parentheses represent percentages of total primary minerals* Compounded annual growth rate from 2004 to 2009+ Actual, converted from rand to dollars at the average exchange rate for 2004 of R6,4499/$@ Consists of nonferrous minerals and metals, as well as titanium slag, zinc metal and antimony trioxidex Consists of minor contributors not included above, as well as export values for diamonds, uranium and silver

MINERAL-RELATED INVESTMENT IN SOUTH AFRICA

Investments of R64,93 billion have already been committed to mineral-related projects in SouthAfrica in 2004 and 2005 (until August), of which some 93 percent is for primary minerals andabout 7 percent for processed mineral products (Table 17). Gold and platinum projects make up26 percent and 61 percent, respectively, of the total for primary minerals.

In addition, investments of R54,44 billion in other mining and mineral-related projects are beingconsidered (Table 18). Of the primary mineral projects being contemplated, valued at R53,86billion, gold accounts for 55 percent, PGMs 37 percent and other minerals for 8 percent.

TABLE 17: NEWLY COMMITTED MINERAL-RELATED PROJECTS IN SOUTH AFRICA,2004*

SECTOR COST COST+ AS A PERCENTAGE OF AS A PERCENTAGE OFR million $ million PRIMARY MINERALS TOTAL MINERAL PRODUCTS

Primary 60 595 9 372,8 100 93Gold 15 478 2 394,2 26 24Platinum 37 092 5 737,4 61 57Other 8 025 1 241,3 13 12

Processed minerals 4 333 670,2 7

TOTAL 64 928 100

Note: * To August 2005+ At a Rand/dollar exchange rate of R6,4650

A number of projects are expected to be completed in 2005 in South Africa. Notable among theseprojects are:

• Placer Dome / Western Areas JV Twin Shafts in the Gauteng Province, for R4 billion.• Avgold’s project at Target Mine in the Free State, estimated at R2,1 billion.• Anglo Platinum’s ACP plant phase A. The project is estimated at R1,8 billion.• Anglo Platinum in Potgietersrust Platinum valued at R1,3 billion.

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TABLE 18: POTENTIAL MINERAL-RELATED PROJECTS IN SOUTH AFRICA, 2004*

SECTOR COST COST+ AS A PERCENTAGE OF AS A PERCENTAGE OFR million $ million PRIMARY MINERALS TOTAL MINERAL PRODUCTS

Primary 53 864 8 331,6 100 99Gold 29 740 4 600,2 55 55Platinum 19 815 3 065,0 36Other 4 309 666,5 37 8

Processed minerals 575 89,0 8 1 TOTAL 54 439 100

Note: * August 2005+ At a Rand/dollar exchange rate of R6,4650

REGIONAL COOPERATION (SADC)

South African Development Community (SADC)On 17 August 1992, the Declaration and Treaty establishing the Southern African DevelopmentCommunity (SADC) was signed at the Summit of Head of States or Governments, in Windhoek,Namibia. This Declaration and Treaty replaced those regarding the South African DevelopmentCoordination Conference established on 1 April 1980, following the Lusaka Declaration. Today,the SADC comprises of the following 14 member states:

• Angola• Botswana• D.R. Congo• Lesotho• Malawi• Mauritius• Mozambique• Namibia• South Africa• Swaziland• Seychelles• Tanzania• Zambia• Zimbabwe

The Treaty establishing the SADC was designed to lead to higher levels of co-operation andintegration in the region. Member States pledged commitment to pursue common approachesand policies and also effective participation by the people of the region and their institutions inthe formulation and execution of policies, strategies and programmes. The SADC vision formining is hence in harmony with the overall objectives of the Community, which include ‘toachieve development and economic growth, alleviate poverty, enhance the standard and qualityof life of the peoples of Southern Africa and support the socially disadvantaged through regionalintegration’. Another objective of the SADC is support for small-scale mining which has beenrecognised by nearly all the countries in the region as a means of alleviating poverty andempowering local communities. A number of support programmes have been established invarious Member States, ranging from provision of loans and grants, to equipment and plant hireschemes and making policy provisions that will enhance and support small-scale activities.

The SADC Mining Sector Programme of Action, which was subdivided into six sub-sectors,namely Information, Geology, Mining and Marketing, Mineral Processing, Environment andHuman Resources Development, has been restructured to be in line with the Regional IndicativeStrategic Development Plan (RISDP). The Mining Sector Programme of Action now comprisesonly three sub-sectors namely, the Mining Advisory Committee, Geology and EnvironmentTechnical Committees and Mining, and the Value Addition Technical Committee.

During the last decade, a number of countries within the SADC region have made efforts toreform their mineral policies and regulatory environments, aimed at encouraging private sectorparticipation, attracting new capital investments, technology and skills, and stimulatingexploration.

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Mining continues to be the major foreign exchange earner in most of the larger economies of theSADC region. The mining sector in the region contributes approximately 10 percent of the GrossDomestic Product and 5 percent to employment, while accounting for 60 percent of foreignexchange earnings.

TABLE 19: SADC MINE PRODUCTION OF SELECTED MAJOR MINERALS

MINERAL PRODUCTION 1998 1999 2000 2001 2002 2003 2004

Asbestos t 178 740 156 514 183 426 132 054 ** ** ** Coal t 230 601 454 229 904 202 230 438 448 229 189 557 228 400 000 244 543 000 242 543 000 Cobalt t 7 995 5 014 4 335 5 155 11 966 22 271 20 309 Copper t 471 092 466 541 420 521 492 673 525 700 518 300 602 900 Chromite t 7 085 405 7 470 479 7 289 043 6 224 635 7 106 750 7 803 023 7 730 844 Diamonds cts 46 913 807 48 596 177 54 345 051 44 271 933 62 281 889 7 5 538 418 80 910 427 Gold kg 492 588 485 197 510 311 455 976 461 100 442 166 422 200 PGMs kg 204 917 217 167 207 704 238 798 243 831 274 300 294 897 Nickel t 69 686 68 692 66 797 66 906 89 900 79 600 74 200 Lead t 84 275 99 191 95 965 63 598 50 000 57 000 53 000 Zinc t 148 147 140 735 140 735 98 843 101 000 148 000 230 000

Source: DME, Directorate Mineral Economics** Figures not available

During 2001, the total labour force in the SADC mining industry stood at 1 535 642, comparedwith the 2000 figure of 1 978 845. The decrease in employment was largely due to rationalisationof the workforce after privatisation of previously state-owned mining companies, particularly inZambia, and declining world demand for and production of minerals, notably asbestos. Theintroduction of new technologies in the industry has also contributed to the decline inemployment levels.

The SADC region is a major producer of several important minerals and metals including gold,PGMs, diamonds, manganese, chromium, nickel, copper and cobalt (see Table 19). Althoughonly South Africa’s production was recorded, the region still experienced an increase in diamondproduction during 2003 and 2004. Output amounted to 75 538 418 carats in 2003 compared with80 910 427 carats in 2004. Cobalt production decreased slightly from 22 271 t in 2003 to 20 309t in 2004 after a dramatic increase from 11 966 t in 2002.

The SADC region is the world’s largest producer of gem quality diamonds, producing around 50percent of the world’s production. The region’s gold production increased slightly from 442 166kg in 2003 to 442 200 kg in 2003.

During 2002, several mining companies in Tanzania, Botswana, Namibia, Zambia andMozambique continued to implement investment programmes. Mine development in the regionhas focused primarily on gold, diamonds, platinum and base metals. However, there is still greatscope for more investments in the mining industry in the region.

During 2001, the total expenditure on exploration programmes in the SADC region wasestimated at approximately $100 million. Private companies continued to carry out explorationprogrammes in almost all member states.

African Mining Partnership (AMP)

African Mining Ministers from Algeria, Angola, Benin, Burkina Faso, Burundi, Cameroon,Republic of Congo, Democratic Republic of Congo, Egypt, Ghana, Lesotho, Malawi, Mali,Morocco, Mozambique, Namibia, Niger, Senegal, Sierra Leone, South Africa, Sudan, Swaziland,United Republic of Tanzania, Uganda, Zambia and Zimbabwe attended the second AfricanMining Partnership (AMP) meeting in Cape Town on 7 February 2005. Representatives fromCanada, Sweden and from the mining industry also attended. During the meeting, it wasreiterated that member states should continue to show commitment in to facilitate theimplementation of adopted projects. The countries represented also reiterated their commitmentto policies will enable the mining and minerals industry to contribute significantly to povertyreduction.

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The Ministers reviewed the progress made on identified projects. They also invited other projectleaders to bring the level of their projects up to the level of those that were endorsed. TheMinisters further recommended that the Executive Committee meet during the year to reviewprogress on the projects.

Following the Cape Town recommendation, the Executive Committee viz. Ghana (Chair) Mali(Vice Chair), South Africa (Secretariat), Egypt (North Africa), Nigeria (West Africa), Namibia(SADC) and Ethiopia (East Africa) held its second meeting in Addis Ababa, Ethiopia on the 12August 2005. The meeting was also attended by representatives from the following institutionsfrom South Africa, Mintek, Council for Geoscience, Council for Scientific and Industrial Research(CSIR); and Natural Resources Canada, Department of Earth Sciences, Addis Ababa University,Ethiopian Geoscience and Mineral Engineering Association, private and government miningcompanies/consultants, Geological Survey of Ethiopia, Southern and Eastern African MineralsCentre (SEAMIC), Chamber of Commerce (Ethiopia), United Nations Economic Commission forAfrica (UNECA) and Communities and Small Scale Mining (CASM)- Global and Communitiesand Small Scale Mining (CASM) -Africa.

The meeting noted with satisfaction the impressive progress made in implementing most of theprojects. Furthermore, it recommended that coordination in the implementation of projects onArtisanal Small Scale Mining (ASM) should be improved and the concept of centres ofexcellence be broadened to incorporate already existing institutions. The Ministers noted withconcern that some of the member states were not responding to requests to send information,which results in delays in the implementation of projects.

The meeting also noted the inaugural meeting of the CASM Africa initiative that took place on 10August 2005 in Addis Ababa, Ethiopia preceding the AMP meeting. The Ministers wereconcerned that mining was absent on the New Partnership for Africa’s Development (NEPAD)submission on centres of excellence and emphasised the need to have it included on theagenda.

The Secretariat informed the meeting that the application for accreditation by the African Union(AU) was submitted, but the AU is currently restructuring and when this exercise is complete, theapplication will then be considered. An update on Registration, Evaluation and Authorization ofChemicals (REACH) was also presented by the Secretariat. The Ministers noted the positionpaper made by the African Caribbean Pacific group (ACP) ministers to the EU commission andfurther urged AMP member states to continue lobbying within their governments and with othermining countries.

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DIAMONDSAshok Damarupurshad

WORLD DIAMOND PRODUCTION, 2004

World mine production of rough diamonds in 2004 (Table 1) has been estimated at 150 millioncarats (Mct), a modest increase of 3 percent compared with the revised total for 2003 (146 Mct).It is estimated that the value of mine production increased by 14 percent to $10,35 billion in 2004,from $9,1 billion the year before.

The volume increase is attributed to significant increases in production in Canada, Russia, SouthAfrica, Botswana and Namibia, and was achieved despite the approximately ten-million caratdrop in production at the Argyle Mine in Australia. Some producers, such as De Beers in SouthAfrica and Botswana, increased output because of a strong rough diamond market, increasedcompetition amongst producers for market share, and also to offset the effects of stronger localcurrencies against a weaker dollar (the currency in which diamonds are priced). The increase inthe value of production was attributed to the continued weakening of the dollar and theconsequent 14 percent (overall) upward adjustment in rough diamond prices, stronger demand,and the modest increase in world output.

The De Beers Group, with mines in South Africa, Botswana, Namibia and Tanzania, contributed47,01 Mct carats, or 31,3 percent, to world production by mass and an estimated $4,2 billion (41percent) by value. In addition, De Beers bought rough diamonds to the value of $700-800 millionfrom Russia’s Alrosa, and probably also drew on stocks.

Russia is currently the largest producer by volume (mass in carats) and the second-rankedproducer in terms of value of production (Table 1). The country’s 2004 production is estimated tohave increased to 32 million carats valued at an estimated $1,9 billion. Almazy Rossii Sakha(ALROSA) produces about 98 percent of the country’s production.

Botswana retained its rank as the top producer by value in 2004. Debswana produced 31 124649 carats in 2004 (valued at an estimated $2,57 billion), up marginally compared with 2003 (30412 155 carats). The Damtshaa Mine produced 338 909 carats in 2004, a modest increaserelative to its first full year of production (2003). Most of Botswana’s output was made up by thecombined production of the three larger kimberlite mines, viz. Orapa (16 070 076 carats),Jwaneng (13 682 502 carats) and Letlhakane (1 033 162 carats).

Production in the Democratic Republic of Congo (DRC) is estimated to have increased to 27 Mct (valued at over $650 million) in 2004. Societe Miniere de Bakwanga (MIBA), the DRC’s80 percent state-owned diamond company, produced 7,5 Mct of mostly industrial and near-gemquality diamonds at Mbuyi-Maji. Small operators and artisanal miners may have produced asmuch as 19,5 million carats (value at over $500 million) in 2004.

Australia lost its number-one ranking in terms of output by volume in 2004 (21,1 million carats).The 10-million-carat drop in production at Rio Tinto’s Argyle Mine, resulted in the country’sranking, in terms of quantity of output, dropping to fourth. The Argyle Mine produced 20,62 Mct– down 10,29 Mct (or about 33 percent) relative to the previous year’s output, mainly due todifficult mining conditions, which led to the processing of lower grade ore. The balance of thecountry’s production came from Kimberley Diamond Company’s Ellendale project.

According to Natural Resources Canada, Canadian mine production increased to about 12,8million carats valued at $1,670 billion in 2004, from 11,2 million carats valued at $1,3 billion in2003. BHP Billiton’s (80%-owned) Ekati produced 5,2 Mct in 2004, a decrease of 25 percentascribed to the processing of lower grade ore during the period, but the value of productionincreased by 12,5 percent on account of better-quality stones. Rio Tinto’s (60%-owned) DiavikDiamond Mine, Canada’s second diamond mine, produced 7,6 million carats, an increase of 98percent.

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TABLE 1: ESTIMATED WORLD ROUGH DIAMOND PRODUCTION+, 2004

COUNTRY/S PRODUCTION MASS VALUE

CARATS % RANK $ MILLION % RANK Russiae 32 000 000 21,3 1 1 900 18,4 2 Botswana 31 124 649 20,7 2 2 570 25,0 1 DR of Congoe 27 000 000 18,0 3 650 5,8 7 Australiae 21 100 000 14,1 4 280 2,7 8 South Africae 14 400 000 9,6 5 1 200 11,7 4 CanadaM 12 800 000 8,5 6 1 670 16,2 3 Angolae 6 200 000 4,1 7 900 8,7 5 Namibia 1 900 000 1,3 8 650 6,3 6 South American countriese 750 000 0,5 9 150 1,5 9 Sierra Leonee 650 000 0,4 13 130 1,3 10 Ghanae 600 000 0,4 10 30 0,3 13 Guineae 400 000 0,3 11 75 0,7 11 Central African Republice 350 000 0,2 12 55 0,5 12 Tanzania 285 778 0,2 14 20 0,2 13 SUBTOTAL 149 560 427 99,7 10 280 99,3 Other countries* 439 573 0,3 70 0,7 TOTAL: 150 000 000 100 10 350 100

Sources: e Estimates by the author, De Beers Group annual review, IDEX, 2005, Rapaport News and Natural Resources Canada for Canadian production

Notes: All production values, including that for South Africa are estimates+ Gem and industrial diamonds* Includes China, Lesotho, India, Ivory Coast, Togo, Zimbabwe and other artisanal production from AfricaM March 2004 to February 2005 (i.e., not calendar year)

Angolan production in 2004 is estimated to have increased to 6,2 million carats. The CatocaKimberlite Mine produces about 3 Mct (worth an estimated $200 million) with the balance comingfrom alluvial sources, including the Luzamba project, and small-scale and artisanal miners.Alluvial production is difficult to estimate both in terms of volume and value. Angola’s totalproduction has thus been conservatively estimated at $900 million.

Namibian production from onshore and beach plus marine sources increased significantly to 1,9Mct, compared with the 1,46 Mct produced in 2003. Of this, marine production totalled a record865 000 carats. In 2004, Namdeb produced 992 872 carats from its Diamond Area No.1. Theincrease in production was attributed mainly to the deployment of two new mining vessels, viz.,Ya Toivo and !Gariep. Contractors recovered 865 511 carats, compared with 658 062 carats in2003.

At the Williamson Diamond Mine in Tanzania, 285 778 carats were produced from the Mwaduikimberlite pipe during 2004, compared with 166 263 carats in 2003.

SOUTH AFRICAN PRODUCTION AND DEVELOPMENTS, 2004

Preliminary statistics indicate that South Africa’s diamond production in 2004 achieved a newrecord level of 14,3 million carats, representing an increase of 11,7 percent compared with the12,8 million carats produced in 2003. The increase was attributable mainly to higher productionat De Beers’ Kimberley and Venetia mines.

The increase in production, the continued weakening of the US dollar relative to the rand and theincrease in rough prices by an average of 14 percent in 2004 resulted in an increase in the valueof production to an estimated $1,2 billion last year.

A total of 86 mining and prospecting licensees produced diamonds in 2004, of which, 18 minedkimberlites, 47 exploited alluvial deposits and 21 recovered diamonds from a marineenvironment.

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Production from kimberlite contributed about 13 million carats (or 90,1 percent) to totalproduction, significantly up on the output of 11,4 million carats in 2003 as a result of theaforementioned higher production at De Beers’ Kimberley and Venetia mines. Kimberley minesproduced a record two million carats (Table 2), due chiefly to the new Combined Treatment Plant,a production level last achieved 90 years ago (in 1914).The alluvial diamond sector’s contributionto total output, at 1,2 million carats (9,2 percent) was modestly up compared with 2003. Marinediamond production declined marginally to about 105 000 carats (0,7 percent) from 116 000carats in 2003. In South Africa, the Trans Hex Group and Alexkor dominate this sector.

De Beers Consolidated Mines accounted for about 13,7 million carats (or about 95 percent) ofSouth Africa’s preliminary recorded production in volume terms (Table 2), compared with 11,9million carats in 2003. By value De Beers accounted for an estimated 90 percent of South Africa’sproduction in 2004.

Trans Hex, South Africa’s second biggest producer, reported that diamond production for thefinancial year ending March 2005 totalled 207 000 carats, moderately higher than the 178 200carats produced in FY2004, due to higher marine diamond production. Alluvial diamondproduction totalled 137 100 carats in FY2005, marginally lower than the 140 300 carats producedduring FY2004, due mainly to lower production at its Saxendrift and Reuning mines. Totalproduction from marine operations was 69 900 carats in FY2005, compared with 37 900 caratsin FY2004. Trans Hex also has interests in the Luarica and Fucauma mines in Angola. Thecompany reported that total diamond sales were $162,2 million in FY2005, 13 percent higherthan in FY2004.

The balance of South Africa’s production (between 3 to 4 percent by volume) came from state-owned Alexkor and the smaller juristic and natural alluvial diamond producers.

South Africa’s exports of rough diamonds tend to exceed domestic production, due to inventorysales (marginal in 2004) and also to the fact that significant amounts of imported diamonds(supplied by the Diamond Trading Company to sightholders and imported by dealers and cuttersin general) are re-exported by these dealers and cutters in the rough form. The total gross rough-diamond export value for 2004 has been tentatively estimated at $1,4 billion.

According to the South African Diamond Board, polished diamonds exports in 2004 totalledabout 271 000 carats valued at some $552 million, compared with about 353 000 carats worthsome $550 million in 2003.

DevelopmentsIn mid-April 2004, the Department of Minerals and Energy released draft amendments todiamond and precious metals legislation for comment, in the form of the Precious Metals andDiamonds General Amendment Bill. This Bill sought to amend the Diamonds Act, 1986 and theMining Rights Act, 1967 (the un-repealed chapter 16 of which controls the possession, tradingand fabrication of precious metals). In 2005, a decision was taken to separate amendments tothe Mining Rights Act, 1967 from this Bill. Subsequently, in June 2005, two Bills, viz., theDiamonds Amendment Bill, 2005, which amends the principal Diamonds Act, 1986 and the new,standalone Precious Metals Bill, 2005 were being finalised.

Other important developments during 2004 are given below in chronological order:

• A R3-million Jewellery and Craft Exhibition Centre (emporium) was opened at theJohannesburg International Airport precinct in April.

• In May 2004, the Mineral and Petroleum Resources Development Act, 2002, which controlsthe prospecting for, and mining of, minerals, came into effect.

• At the end of October, De Beers sold Dancarl, a small kimberlite fissure mine, to a BEEcompany in the Northern Cape.

• De Beers reported that five of its seven mines in South Africa were unprofitable in 2004 dueto the strengthening of the Rand against the dollar.

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TABLE 2: DE BEERS CONSOLIDATED MINES’ ROUGH DIAMOND PRODUCTION, 2004

MINE SOURCE ORE TREATED CARATS CARATS/(thousand RECOVERED 100 tonnes) TONNES

Finsch kimberlite 5 773 2 108 481 36,5 Kimberley+ kimberlite 9 070 2 050 907 22,6 Koffiefontein kimberlite 1 966 113 481 5,8 Namaqualand alluvial 6 385 909 706 14,2 Cullinan kimberlite 4 458 1 304 416 29,3 Venetia kimberlite 5 871 7 187 300 122,4 The Oaks kimberlite 290 68 943 23,8 TOTAL/Average 33 813 13 743 234 40,6

Notes: + Includes contractors

Source: De Beers group annual review 2004

DIAMOND TRADING COMPANY (DTC) SALES

Rough diamond sales by De Beers’ marketing arm, the DTC, increased by 3 percent to $5 695million compared with $5 518 million in 2003. De Beers reported that there was strong demandfor rough diamonds from the cutting centres throughout the year. However, cognisance must alsobe taken of the fact that the DTC raised prices on three occasions, resulting in an averageincrease of 14 percent for the year.

ROUGH DIAMOND SUPPLY

Stronger demand for rough diamonds usually induces inventory sales by the larger miningcompanies including De Beers, ALROSA and Rio Tinto. Moreover, there will be significant tradingin the secondary market. Consequently, total rough diamond supply tends to exceed mineproduction significantly. Total rough diamond supply to the next component of the diamondpipeline (diamond cutters) is therefore estimated to be in excess of $11 billion. Althoughencouraging, this figure must be seen against the backdrop of high level of debt in the cuttingcentres.

WORLD DEMAND IN 2004

Major trading centres: Belgium, Israel and India The strengthening of consumer (retail) markets causes a “ripple effect” back up the diamondpipeline, which is evidenced by a rise in off-take of polished diamonds (brillion). This isrepresented statistically as an increase in net exports of polished diamonds from the countriesthat accommodate major diamond trading centres, viz., Belgium, Israel and India.

According to the HRD (Belgium’s Diamond High Council) polished diamond exports fromAntwerp, the world’s largest diamond trading centre, were $8,12 billion, an increase of about 13percent in value terms relative to 2003. In terms of volume, exports increased marginally to 9,73Mct. Polished diamond imports into Belgium in 2004 totalled 10,0 Mct valued at $7,58 billion, anincrease of 4,7 percent by volume and 18,3 percent in dollar terms. Therefore, net exports(exports minus imports) of polished diamonds dropped by 31 percent to $541 million. Thisreduction may be indicative of the growing importance of other trading centres such as Dubaiand China.

In Israel, polished diamond exports reached 4,64 Mct, worth $6,33 billion, which was a decreaseof 1,6 percent in carats, but an increase of 14,4 percent in value terms relative to 2003. Polisheddiamond imports were some 4,06 Mct, worth about $3,56 billion, a rise of 4,6 percent in dollarterms compared with the year before. Net polished exports were therefore around $2,77 billionin 2004, compared with $2,13 billion the year before.

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India’s gross polished exports for the financial year ending March 2005 grew by 23,6 percent to$11,18 billion in 2004. Polished diamond imports increased to $2,84 billion from $1,19 billion in2003. Net polished exports thus increased 12 percent to $8,34 billion. The country produces over52 percent of the world output of polished diamonds by value (estimated at about $16 billion),about 80 percent in carat terms and about 90 percent in terms of number of polished diamonds.

World diamond jewellery retail sales The Diamond Trading Company (DTC) reported that global retail sales value of diamondjewellery in 2004 had increased by 8,7 percent in dollar terms, underpinned largely by growth inIndia and the Gulf region. Also encouraging was modest growth in Japan for the secondconsecutive year. Thus, world jewellery retail sales in 2004 is estimated at about $64 billion. TheDTC attributed this increase to higher economic growth in the major consuming countries and tothe continued weakening of the dollar.

Retail sales in the United States, which account for half of global diamond jewellery sales, wereup by 8 percent to $31,5 billion. Other major consuming markets, including Europe (up 14%)Japan (up 8%), and Asia (up 15%) also saw growth in 2004.

PRODUCTION AND MARKET OUTLOOK

World diamond mine production is forecast to increase in 2005 to about 160 million carats valuedat some $11 billion, on the back of production increases in Australia, Angola, DemocraticRepublic of Congo, Canada, Botswana, South Africa and Namibia.

In July 2005, De Beers reported that group production during the first half (H1) of 2005 hadincreased to 23,72 million carats from 19,34 million carats in H1 2004. Production at Debswanain Botswana increased to 15,28 million carats in H1-2005, from 12,05 million carats in H1-2004,while production at De Beers Consolidated Mines in South Africa increased to 7,39 million caratsfrom 6,21 million carats in H1-2004.

Australia’s production showed signs of rebounding in the first half of 2005, following difficultmining conditions in 2004. Rio Tinto also reported that production at the Murowa mine, nearZvishavane in southern Zimbabwe, totalled about 180 000 carats in the period between the startof mining in the third quarter of 2004 and the end of June 2005.

Angola’s production is expected to increase to over 8 million carats in 2005, due mainly to thedoubling of capacity at the Catoca diamond mine, via the commencement of a new diamondtreatment centre. Societe Miniere de Bakwanga (MIBA), the DRC’s 80 percent state-owneddiamond company, expects 2005 production to rise to 8,5 million carats from 7,5 million caratsin 2004. In Namibia, production is forecast to pass the 2 million carat mark, through highermarine diamond production.

Canada’s Ekati mine reported that production at its Panda underground project has commenced,and full production is expected early in 2006. The project is expected to deliver 4,7 million caratsover a period of six years.

Looking further ahead, Canada’s third diamond mine, Jericho, which began construction earlierthis year is expected to start commercial production in 2006 in the open pit, at a rate of 350 000carats/year. De Beers first diamond mine outside Africa, Snap Lake in Canada, is scheduled forconstruction in 2006, and is expected to begin production in 2007, with a full output of 1,5 millioncarats/year anticipated from 2008.

DIAMOND MARKET

De Beers reported that rough diamond sales by the DTC for the first half of 2005 totalled $3,2billion, 8 percent higher that the corresponding period in 2004. De Beers has raised the price ofdiamonds by an average 6 percent thus far in 2005. Demand for rough diamonds from the cuttingcentres remained strong during the period. De Beers anticipate that sales in the second half ofthe year will at least match those of the first half, and that stocks will reduce.

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Increases in polished exports (by value) from Israel (up 9 percent) and Belgium (up 12 percent)in the first 5 months of 2005, and strong US retail sales for the half of the year are indicative ofcontinuing robust demand conditions.Consumer demand remains high, but there are downside risks in the short term. These include:shrinking diamond-manufacturing profit margins, high diamond industry banking indebtedness,and rising interest rates.

For the medium term, the supply/demand fundamentals look much better. In fact, De Beersforecast that consumption of diamond jewellery would increase to $80 billion over the comingdecade. This growth in consumption would outstrip growth in supply over this period.

REFERENCES & BIBLIOGRAPHY

De Beers, 2005De Beers Group Annual Review, 2004Diamond Board of South Africa, 2004/5HRD, 2005IDEX, 2005Rapaport News, 2004/5Tacy Consultants, 2004-5

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GOLDA S Conradie

GLOBAL DEVELOPMENTS DURING 2004/2005

The average dollar gold price for 2004, at $409,33/ozt, was 12,6 percent higher than in 2003.This was caused by sustained investment demand, record levels of producer de-hedging, a risein fabrication demand and lower supply from official sector sales, scrap and mine production.

Total world gold supply decreased by 7,2 percent to 3 849t during 2004, caused by losses in allcomponents except implied net disinvestment. Mine production dropped by 4,9 percent, to 2462t, (Table 1), the lowest level since 1996, while net official sector sales fell by 22,5 percent to478t, and scrap supply declined by 11,8 percent to 828 tonnes. Implied net disinvestmentreturned after an absence of two years with a contribution of 81t to supply.

Total world demand fell by 7,2 percent, to 3 851t, during 2004, solely as a result of the switchfrom 2003’s implied net investment of 699t to implied net disinvestment of 81 tonnes. Producerde-hedging increased by 58,4 percent to 442t, while total fabrication rose by 5,7 percent, to 3164t, mainly due to a 5,2 percent rise in jewellery offtake to 2 610t, and a 11,3 percent increasein electronics demand.

Producers attempted to raise production through acquisitions, mergers and new projects.

Kinross acquired the balance of the Morro do Ouro mine in Brazil from Rio Tinto, its partner inthe joint venture, in December 2004.

During March 2005, production started at the Tulawaka mine, in Tanzania, a joint venturebetween Barrick Gold Corp. (70 percent) and Northern Mining Explorations (30 percent). Themine life is expected to be 4 years, producing an average of between 3,1t and 3,3t annually atan average cash cost of $170 to $180 per ounce.

Also during March 2005, Harmony Gold Mining was granted the licence to develop and mine theHidden Valley project, in Papua New Guinea. The mine is anticipated to produce more than 9,3tof gold, and 139,9t of silver, per annum, from a proven reserve of 59t of gold and 793t of silver.Construction of an open pit mine is to commence in mid-2005, with the first gold poured in early2007.

Wheaton River Minerals’ shareholders approved the merger with Goldcorp on 13 April 2005,after previous merger attempts with Goldcorp by Coeur d’Alene and IAMGOLD during 2004 hadfailed.

DEVELOPMENTS IN SOUTH AFRICA DURING 2004/2005

South Africa’s gold production decreased by 8,8 percent from 373,3t in 2003 to 340,5t in 2004,(Table 2), largely as a result of shaft closures caused by lower grades and the effects of thestrengthening rand. Total sales revenue decreased by 11,3 percent to R29,3 billion, due tosmaller sales volumes and a lower average rand price, despite a higher average dollar price forthe year. Employment in the gold mining sector dropped from 198 466 in 2003 to 180 471 in2004, while total remuneration increased in the same period.

The $1,3 billion takeover of Ghana’s Ashanti Goldfields by AngloGold, and the name change toAngloGold Ashanti, became effective on 26th April 2004.

On 18 October 2004, it was announced that Harmony Gold Mining Company had made anunsolicited and hostile offer for Gold Fields. Harmony’s proposal consisted of two parts: an earlysettlement offer to acquire up to 34,9 percent of Gold Fields’ shares on the basis of 1,275Harmony shares for each Gold Fields share, and a subsequent offer for the remaining GoldFields shares not tendered in the early settlement offer, including the Gold Fields shares ownedby Norilsk Nickel. Harmony acquired 11,8 percent of Gold Fields during the early settlement offer,which closed on 26 November 2004, but failed to accumulate significantly more shares, even

30

after the offer was extended to 20 May 2005. Harmony has subsequently disposed of some ofits shares, but decided to retain a 5,4 percent stake in Gold Fields.

Durban Roodepoort Deep changed its name to DRDGOLD in December 2004. On 22 March2005, the company provisionally liquidated Buffelsfontein Gold Mines, the holding company ofthe North West Operations. This was preceded by the suspension of operations at North WestOperations’ no. 5 shaft following an earthquake on 9 March 2005. Then, a week later, DRDGOLDdiscontinued mining at the no. 2 shaft, following a further tremor.

The name of The Afrikander Lease changed to Aflease Gold and Uranium Resources with effectfrom 28 January 2005. On 22 February 2005, Aflease announced the sale of 26 percent of itsmining assets to a BEE consortium consisting of five companies and the Aflease EmployeesTrust. The first gold was poured at the company’s newly developed Bonanza South mine, nearKlerksdorp, on 29 June 2005.

On 4 February 2005, the Placer Dome/Western Areas JV’s South Deep twinshaft complex wasofficially commissioned. The R4 billion project commenced in 1994, and consists of two concreteshafts - a main shaft and a ventilation shaft. The main shaft is the deepest single-drop shaft inthe world at nearly 3km, and gives direct access to one of the world’s largest identified gold orereserves of approximately 1 730 tonnes.

Sub Nigel Gold Mining Company announced on 14 June 2005 that it had commenced goldproduction at its Spaarwater Mine, after thirteen years of the mine being on care andmaintenance.

OUTLOOK

Total world gold supply is expected to rise by three to four percent in 2005, resulting from amarginal increase in mine production, and higher net official sector sales of between 500 and550 tonnes. Scrap supply is forecast to change little from 2004’s level, unless the gold priceadvances further and more rapidly than expected.

Demand for investment purposes, as well as for fabrication, is forecast to grow in 2005, despitethe higher gold price. Producer de-hedging is expected to continue during 2005, but at a reducedrate.

Investment demand is expected to be the most important price driver in 2005, causing prices toestablish fresh highs, perhaps even approaching the $500/ozt level.

Local gold production during 2005 is expected to decline to some 307t, whilst the price in randterms is expected to achieve an average of R87 800 per kg.

TABLE 1: WORLD GOLD RESOURCES AND MINE PRODUCTION, 2004

COUNTRY RESERVE BASE# PRODUCTION°t % Rank t % Rank

South Africa 36 000 40,1 1 340,5 * 13,8 1 USA 3 700 4,1 5 261,8 10,6 2 Australia 6 000 6,7 2 258,4 10,5 3 China 4 100 4,6 3 217,3 8,8 4 Russia 3 500 3,9 6 181,6 7,4 5 Peru 4 100 4,6 3 173,2 7,0 6 Canada 3 500 3,9 6 128,5 5,2 7 Indonesia 2 800 3,1 8 114,2 4,6 8 Other 26 000 29,0 - 786,7 32,0 - TOTAL 89 700 100,0 2 462,2 100,0

Sources: # USGS, 2005, pp 72 - 73 ° Klapwijk, et al, 2005, pp 39 - 40* DME, Directorate Mineral Economics

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TABLE 2: SOUTH AFRICA’S GOLD PRODUCTION, EXPORT SALES VALUE ANDRESERVE BANK HOLDINGS,1995 - 2004

YEAR PRODUCTION TOTAL RESERVE BANK HOLDINGS* SALES VALUE

t R ‘ 000 t R ‘ 000 1995 523,8 23 465 184 132,1 5 400 951 1996 498,3 26 467 548 118,0 5 903 486 1997 490,6 24 904 737 124,1 5 102 744 1998 465,1 24 294 641 124,4 6 059 288 1999 451,2 24 990 413 122,4 6 276 370 2000 430,8 25 272 141 183,5 10 981 926 2001 394,8 29 011 598 177,9 17 302 131 2002 398,5 41 222 165 173,6 14 989 624 2003 373,3 33 052 899 123,6 9 798 7412004 340,5 29 329 871 123.9 8 886 591

Sources: South African Reserve Bank, 1996 - 2005DME, Directorate Mineral Economics

Note: * Gold holdings at year-end

TABLE 3: SOUTH AFRICA: BREAKDOWN OF PRODUCTION BY GOLD FIELD, 2003 AND2004

GOLD FIELD GOLD PRODUCTION 2003 2004

t t West Wits Line 128,8 118,2 Free State 92,0 80,7 Klerksdorp 81,1 71,2 West Rand 26,9 25,1 East Rand 13,1 12,8 Evander 11,2 11,5 Central Rand 7,2 7,5 Other 6,4 6,9 By-product* 6,6 6,6 TOTAL 373,3 340,5

Note: * Platinum and base metal mines

TABLE 4: SOUTH AFRICA: BREAKDOWN OF PRODUCTION BY PROVINCE, 2003 AND2004

GOLD FIELD GOLD PRODUCTION 2003 2004

t t Gauteng 165,2 156,2 North West 98,2 85,0 Free State 92,0 80,7 Mpumalanga 14,9 15,6 Limpopo 2,7 3,0 KwaZulu/Natal 0,2 - Northern Cape 0,1 - Western Cape - - Eastern Cape - - TOTAL 373,3 340,5

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TABLE 5: SOUTH AFRICA’S GOLD MINES: EMPLOYMENT AND REMUNERATION, 2000 -2004

YEAR NUMBER OF EMPLOYEES* REMUNERATION Total Male Female Total Male Female

R ‘ 000 R ‘ 000 R ‘ 000 2000 216 210 212 872 3 338 9 809 412 9 586 193 223 220 2001 201 698 198 324 3 374 10 904 390 10 674 641 229 749 2002 199 378 195 839 3 539 11 323 540 11 080 912 242 628 2003 198 466 194 905 3 561 12 496 399 12 219 422 276 977 2004 180 471 176 871 3 600 12 626 850 12 337 091 289 759

Note: * Average number of employees in service

TABLE 6: LONDON GOLD PRICE+, 2004

MONTH AVERAGE# HIGH* LOW* AVERAGE#

$/ozt $/ozt $/ozt R/ozt January 414,14 428,20 399,75 2889,22 February 404,80 416,00 392,25 2738,45 March 406,58 423,70 390,35 2686,45 April 403,46 427,25 382,75 2651,85 May 384,52 394,30 373,50 2603,78 June 392,17 404,25 382,30 2511,73 July 398,27 408,55 386,20 2436,51 August 400,73 410,60 390,60 2598,15 September 405,29 415,65 396,30 2650,95 October 420,34 429,15 411,25 2684,10 November 439,22 453,40 422,20 2655,08 December 442,50 455,75 433,90 2538,95 2004 409,33 455,75 373,50 2637,10

Sources: # South African Reserve Bank, 2005* London Bullion Market Association, 2005

Note: + London AM & PM fixings

REFERENCES

Klapwijk P, Walker P, et al, 2005. Gold Survey 2005: GFMS Ltd, London, 121 ppLondon Bullion Market Association, 2005. Internet Website: http://www.lbma.org.ukSouth African Reserve Bank, 2005. Internet Website: http://www.reservebank.co.za US Geological Survey, 2005. Mineral Commodity Summaries, 2005: Internet Website:http://www.usgs.gov

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PLATINUM-GROUP METALSA S Conradie

GLOBAL DEVELOPMENTS DURING 2004/2005

Global supplies of platinum, palladium and rhodium rose by 10,6 percent to 463,9t in 2004, dueto increased supply from all the producing countries, but especially Russia. World demand forthese three metals grew by 10,7 percent to 433,0t, caused primarily by a 21,8 percent increasein demand for palladium.

World platinum demand improved by 0,8 percent in 2004 to reach 204,7t, driven by strong salesto the autocatalyst industry. Purchases of platinum for use in autocatalysts rose by 7,3 percent,to a record high of 109,2 tons.The 14,1 percent rise in European demand was powered by higherdiesel car sales and tightening diesel emissions standards. In Japan the growth in sales was dueto a combination of new demand from the heavy-duty diesel sector in response to new emissionsstandards, and an overall increase in inventories held by vehicle manufacturers. Demand forplatinum from the global jewellery industry dropped by 12,4 percent in 2004, to 68,4t, as thevolatility and strength of the platinum price led to a 19,2 percent reduction in demand fromChinese jewellery manufacturers. Industrial demand for platinum climbed by 10,9 percent to47,6t, as the use of the metal in the glass industry, hard disks and chemical catalysts increased.Net demand for physical platinum investment products improved to 1,2t last year, as a result ofhigher sales of large bars in Japan. Supplies of platinum grew by 4,2 percent to 205,6t in 2004,as the expansion of production in South Africa accelerated and North American outputrecovered. South African platinum production reached a record high of 159,9t in 2004, anincrease of 7,7 percent compared with 2003. Platinum supplies from North America recoveredafter a relatively poor 2003, increasing by 30,5 percent to 12,0t, while Zimbabwean outputclimbed by around 5 percent. However, after significant sales from stocks the previous year,shipments from Russia dropped by 19,0 percent, to 26,4t, to closely reflect the level of mineproduction.

During 2004, demand for palladium increased by 21,8 percent to 205,3t, primarily as a result ofthe rapid development of palladium jewellery manufacturing in China. Autocatalyst demand forpalladium climbed by 10,4 percent, to 118,5t, as US automakers bought more metal, having rundown stocks the previous year, and substitution for platinum in gasoline autocatalysts continued.Demand for palladium in electronic applications grew by 6,1 percent to 29,7t, influenced bystrong sales of electronic goods and the low palladium price. In 2004, jewellery demand for themetal soared to 28,6t as a result of the remarkably rapid development of palladium jewellerymanufacturing in China. Jewellery, consequently, overtook the dental sector as the third largestmarket for palladium. Demand for palladium in dental alloys improved by 3,0 percent, to 26,4t, in2004, largely due to the low and relatively stable palladium price. Palladium demand in theremaining other applications jumped by 46,9 percent, to 18,5t, in 2004. This was primarily aresult of a surge in sales of palladium bullion bars and coins to North American investors. Totalsupplies of palladium increased by 18,9 percent, to 237,3t, as substantial sales of Russian metalfrom stocks augmented that country’s supplies by 28,8 percent, to 118,2 tons. Production ofpalladium in South Africa grew by 9,6 percent, to 78,0t in 2004, while North American shipmentsclimbed by 12,8 percent, to 32,8 tons.

Demand for rhodium rose by 19,4 percent, to 23,0t in 2004, largely due to a 17,1 percent rise indemand from the autocatalyst sector. Overall use of the metal in autocatalysts grew strongly inEurope and Asia as average rhodium levels increased ahead of tighter emissions legislation.Demand from the glass industry also increased markedly, reflecting the rapid expansion of liquidcrystal display (LCD) glass manufacturing capacity in Asia. Purchases of rhodium for use inchemical, electrical, glass and other applications jumped by 28,6 percent, to 3,4t, in 2004. Totalrhodium supplies in 2004 decreased by 6,0 percent, to 21,1t, as South African production, andsales from North America and Russia, were lower.

Demand for ruthenium climbed by 9,2 percent in 2004, to 21,0 tons. Use of the metal in chemicalapplications fell, but this was outweighed by a strong increase in purchases by the electronicsindustry. Demand for iridium increased by 9,4 percent last year, rising to 3,6t, as a result ofgreater consumption of iridium-based catalysts by the chemicals industry. Supplies,

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predominantly from South Africa, were again more than sufficient to meet improved demand forthe two metals.

With platinum supplies closely matching demand in 2004, speculative investment by funds wasthe primary influence on the price. This was especially so during the first seven months of theyear when the platinum price moved in a range between $767/ozt and $937/ozt. From mid-August onwards the trading range narrowed, with the price fluctuating between $820/ozt and$880/ozt for most of the remainder of the year. Increased demand for physical metal providedsupport when the price dropped towards the lower end of this range, whilst fund profit takingtended to cap rallies towards the upper end. The average London price for the year was$845,75/ozt, compared with $691,86/ozt in 2003.

The palladium price climbed to over $240/ozt during the first three weeks of 2004, themomentum being provided by fund buying of palladium derivatives. It reached $333/ozt in April,supported by a surge in Chinese purchases of metal for jewellery manufacturing. However, withplenty of metal available to cover both speculative and end user demand, the price collapsedwhen funds started taking profits. From July to the end of November, the metal traded between$205/ozt and $235/ozt, but ended the year at $184/ozt, after another round of speculative profittaking and substantial offers of metal on the London fixings. The average price in 2004 was$230,03/ozt, compared with $200,61/ozt in the previous year.

The price of rhodium climbed to $900/ozt in March, before slipping back to around $800/ozt.When metal was withdrawn from the leasing market, the price reached $1 525/ozt in August,before greater offers of spot metal resulted in the price easing back to end the year at $1 330/ozt.As a result of speculative buying, the iridium price surged from $87/ozt to $230/ozt during thefirst quarter of 2004, whilst the price of ruthenium jumped from $41/ozt to $75/ozt. The price ofboth metals then lost ground, iridium falling back to $170/ozt and ruthenium to $68/ozt, by theend of the year.

Although the Russian parliament passed a law in February 2004, declassifying information aboutPGMs, it was not until March 2005 that President Putin signed a decree permitting the releaseof the data. Russian producers would now be able to publish data on mineral reserves,production, stocks and sales of PGMs, but information on stocks of PGMs held in the StateTreasury (Gokhran) and the Central Bank will remain secret for at least the immediate future.

At North American Palladium’s Lac des Iles mine, the first ore production from the newunderground section is expected in the fourth quarter of 2005. The operation is due to reach fullcapacity, of 2 000t of ore per day, in early 2006.

DEVELOPMENTS IN SOUTH AFRICA DURING 2004/2005

PGM production increased by 7,4 percent, to 286,2t, in 2004 from 266,5t in 2003. Production ofplatinum and palladium increased to 159,9t and 78,0t, respectively, while production of rhodiumfell by 0,4 percent to 16,7 tons.

During July 2004, Barplats announced the re-opening of the Crocodile River mine, after Implatshad suspended mining operations in November 2003. On 18 May 2005, Barplats announced thesale of a 26 percent stake in the company to the Gubevu Consortium, for R172,8 million.

In September 2004, SouthernEra Resources reorganised its businesses, with a new company,Southern Platinum Corporation, acquiring the former’s PGM and gold assets. On 15 June 2005,Lonmin completed the acquisition of Southern Platinum, which has a 91,5 percent stake inMessina, for $190 million. Lonmin also reached an agreement with Implats to buy out the latter’sconcentrate purchase agreement with Messina for $15 million plus the delivery of a fixed quantityof metals in concentrate until mid-2006. The Messina mine was renamed Lonmin PlatinumLimpopo.

During February 2005, Implats announced plans to develop two shafts, no. 16 and no. 20, at itsImpala mine, at a cost of R6,6 billion. This development would contribute to the company’sobjective of producing 34,2t of platinum per annum from this mine over the next 30 years. On 7

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June 2005, Implats and African Rainbow Minerals (ARM) announced their decision to developthe R1,2 billion Two Rivers mine. The joint venture is held 55 percent by ARM and 45 by Implats,with production planned at 6,8t of PGMs per annum.

During February 2005, Anglo Platinum announced its decision to further cut its productiontargets for 2006, to between 84,0t and 87,1t of refined platinum, as a result of the rand’s strengthagainst the dollar. This new target contrasts with the figure of 90,2t set in 2003 as a target for2006. On 30 May 2005, Anglo American Platinum Corporation changed its name to AngloPlatinum.

OUTLOOK

Autocatalyst purchases of platinum are expected to rise once again during 2005, but the increasewill be less pronounced than in 2004. Jewellery demand may also improve, although this willdepend heavily on the level of Chinese purchases. Supplies of platinum are set to increasefurther in 2005, although not as rapidly as in 2004, as the rate of growth in South Africanproduction slows. The platinum price is forecast to achieve an average of $860/ozt for 2005.

Demand for palladium in 2005 is forecast to remain at the same level as in 2004, as autocatalystdemand for palladium is expected to be stable. On the supply side, South African production ofpalladium should increase once again as platinum output continues to rise, while North Americansales are expected to fall short of 2004’s high level. The average palladium price for 2005 isforecast at $190 per ounce.

TABLE 1: WORLD PLATINUM-GROUP METALS RESOURCES AND SUPPLY, 2004

COUNTRY RESERVE BASE * SUPPLY t % Rank kg % Rank

South Africa 70 000 87,7 1 286 157 ° 57,8 1 Russia 6 600 8,3 2 147 897 @ 29,9 2 Canada 390 0,5 4 26 949 @ 5,4 3 USA 2 000 2,5 3 18 400 * 3,7 4 Other 850 1,1 - 16 049 @ 3,2 - TOTAL 79 840 100,0 495 452 100,0

Sources: * USGS, 2005, pp 124 - 125° DME, Directorate Mineral Economics@ Kendall, 2005, pp 48 - 52

Notes: ° Production@ Platinum, palladium and rhodium only* Platinum and palladium production only

TABLE 2: SOUTH AFRICA’S PLATINUM-GROUP METALS PRODUCTION AND SALES,1995 – 2004

YEAR PRODUCTION EXPORT SALES Mass Value (FOB)

kg kg R ‘ 000 R/kg 1995 183 097 175 158 6 572 506 37 523 1996 188 636 183 962 7 428 137 40 379 1997 196 604 187 167 8 403 862 44 900 1998 199 953 193 502 11 602 274 59 959 1999 216 479 198 713 13 964 729 70 276 2000 206 770 198 944 24 645 761 123 883 2001 228 747 193 354 29 381 009 151 954 2002 236 641 207 637 30 459 188 146 695 2003 266 458 241 262 25 553 565 105 916 2004 286 157 259 716 29 526 670 113 688

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TABLE 3: WORLD PLATINUM-GROUP METALS PRICES, 2004

MONTH AVERAGE PRICE ($/ozt) Platinum* Palladium* Rhodium° Iridium° Ruthenium°

January 851,32 216,27 508,81 87,00 42,25 February 846,21 235,04 572,32 96,27 49,02 March 899,54 268,99 811,30 209,04 71,40 April 880,43 295,46 812,77 227,94 65,05 May 809,43 246,03 816,67 214,56 61,05 June 807,35 228,93 871,11 210,00 60,00 July 809,33 220,37 973,53 206,73 60,00 August 847,39 215,51 1295,90 205,00 64,23 September 847,90 211,35 1196,65 202,86 68,45 October 842,82 218,18 1268,60 196,33 81,05 November 854,30 213,83 1307,47 193,73 79,55 December 849,34 191,95 1329,91 177,43 71,38 2004 @ 845,75 230,03 981,73# 186,32# 64,68#

Sources: * @ Kendall, 2005, pp 42, 44, 45° Johnson Matthey, 2005

Notes: * London Platinum and Palladium Market daily fixings° Average of all Johnson Matthey base prices # Average of Johnson Matthey European base prices

TABLE 4: SOUTH AFRICA’S PGM MINES: EMPLOYMENT AND REMUNERATION, 2000 -2004

YEAR NUMBER OF EMPLOYEES* REMUNERATION Total Male Female Total Male Female

R ‘ 000 R ‘ 000 R ‘ 000 2000 96 273 94 717 1 556 4 373 273 4 277 586 95 687 2001 99 571 97 856 1 715 4 915 313 4 806 010 109 303 2002 111 419 109 266 2 153 5 936 849 5 782 971 153 878 2003 127 673 124 954 2 719 7 243 123 7 021 803 221 320 2004 150 629 147 197 3 432 9 063 872 8 742 997 320 875

Note: * Average number of employees in service

REFERENCES

Kendall, T, 2005. Platinum 2005: Johnson Matthey plc, London, 52 ppJohnson Matthey, 2005. Internet Website, http://www.platinum.matthey.comUS Geological Survey, 2005. Mineral Commodity Summaries, 2005: Internet Website,http://www.usgs.gov

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SILVERAshok Damarupurshad

GLOBAL DEVELOPMENTS DURING 2004

SupplyAccording to the World Silver Survey 2005, produced by GFMS for the Silver Institute, worldsilver mine production (Table 1) at 19 731 t (634.4 Moz) in 2004, was 4 percent lower than thatof 2003 (18 940 t or 609 Moz). By country, large increases in output in Australia (up 16 percent to 2 236t), Russia (up 9,5 percent to 1 179 t) and China (up 7,8 percent to 1 984 t), and moderateincreases in output in Peru (up 4,6 percent to 3 061 t) and Mexico (up 4,5 percent to 3 085 t)outweighed declines in production in Kazakhstan, Poland, Canada and South Africa. Primary(main product) silver mines accounted for about 30 percent (5 863 t) of total mine output, anincrease of 9 percent relative to 2003. About 70 percent of silver is produced as a by-productfrom the mining of other metals, such as gold, lead-zinc and copper, and hence, silver’s fortunesdepend on the vagaries of these metal markets. By-product silver output totalled 13 868 t in2004.

The world’s top 10 silver-producing countries, viz., Mexico, Peru, Australia, China, Poland, Chile,Canada, the USA, Russia and Kazakhstan produced 17 461 t, or 88 percent, of total mine outputin 2004 (Table 1). Mexico maintained its position as the foremost silver-producing country,followed closely by Peru, with Australia in third position.

TABLE 1: WORLD RESERVES AND MINE PRODUCTION OF SILVER+, 2004

COUNTRY RESERVES PRODUCTION kt % Rank Moz t % Rank

Mexico 40 7,0 3 99,2 3 085 15,6 1 Peru 37 6,5 4 98,4 3 061 15,5 2 Australia 37 6,5 4 71,9 2 236 11,3 3 China 120 21,1 2 63,8 1 984 10,1 4 Poland 140 24,6 1 43,8 1 362 6,9 5 Chile na - 42,8 1 331 6,7 6 Canada 35 6,1 5 40,6 1 263 6,4 7 USA 80 14,0 3 40,2 1 250 6,3 8 Russia 12 2,1 6 37,9 1 179 6,0 9 Kazakhstan na - 20,6 641 3,2 10 South Africax 10 1,8 9 2,2 68 0,3 20 SUBTOTAL 511 89,6 561,4 17 461 88,5 Others + na 59 10,4 73 2 271 11,5 TOTAL 570 100 634,4 19 731 100

Sources: USGS, 2005, Pg 51World Silver Survey, 2005x Directorate: Mineral Economics

Note: + Metal contentna not available

In 2004, total silver supply (mine production, government sales, scrap recovery, implieddisinvestment and producer hedging) declined by 0,7 percent to 27 284 t (Table 2), according toGFMS. Scrap contributed 20,6 percent (5 633 t), to silver supply – a decline of 1,4 percent,compared with 2003.

In 2004, the gap between fabrication demand and conventional supply (mine production andrecycled scrap) narrowed to 659 t, chiefly attributable to a 2-percent decrease in fabricationdemand from 26 543 t to 26 024 t. As is customary, the deficit was bridged by selling fromaboveground stocks, predominantly from government inventories, which GFMS estimated at 1919 t, a significant drop of 30 percent compared with the 2 743 t recorded in 2003.

DemandAccording to GFMS, fabrication demand amounted to 26 024 t in 2004, which represented adecline of 2 percent relative to 2003, despite higher silver prices during the year. Consumption

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of silver is accounted for by the three main sectors, i.e. industrial applications, photography, andjewellery and silverware. The industrial sector is still the largest consumer of silver, absorbing 11418 t, or 43,9 percent of fabrication demand, followed by the jewellery and silverware (29,6percent or 7 698 t), photography (21,6 percent or 5 630 t), and coinage sectors (4,9 percent or1 278 t).

World industrial demand’s rise by 4,7 percent in 2004 to 11 418 t was due mainly to gains in theelectronics sector in Japan and the US, and the silver brazing-alloys sector in China. Electricaland electronics applications account for nearly half of industrial silver demand, consuming 5 177t in 2004.

Jewellery and silverware fabrication fell by 9,7 percent to 7 698 tons. According to GFMS, muchof this fall was blamed on the 1 018t drop in Indian offtake, due to the 30 percent rise in the localprice and a poor monsoon.

The photographic sector declined for the fifth consecutive year in 2005. The rise in the popularityof digital photography is being blamed for this deterioration.

The use of silver in the minting of coins and the fabrication of medals grew by 14,8 percent to 1278 t in 2003. Much of the growth was attributed to higher minting in Portugal, Spain, Canadaand the USA.

PriceThe silver price was one of the best performers of all metal prices in 2004, rising by an averageof 36 percent over 2004 to a 17-year high, outperforming gold, platinum and palladium in theyear.

Prices fluctuated in a range of between $5,80/ozt and $7,50/ozt for most of 2004, with the highestmonthly average of $7,49/ozt being achieved in November (Table 3). The year average improvedfrom $4,88/ozt in 2003 to $6,65/ozt in 2004.

According to GFMS, there were three key features underpinning the higher prices in 2004:a surge in investment;a decline in net government sales; andthe higher fabrication demand.

DEVELOPMENTS IN SOUTH AFRICA DURING 2004

South Africa’s silver mine production continued to decline in 2004 and totalled 71 643 kg, whichwas marginally down on the 2003 output of 79 782 kg. Silver production occurred as a by-productof 17 gold mines, one lead-zinc mine, one copper mine and two platinum-group metal mines.

Gold mining’s contribution decreased slightly from 24 935 kg in 2003 to 22 535 kg in 2004 (Table4). Output from lead-zinc mining declined moderately from 47 290 kg to 39 405 kg. Output fromthe Palaborwa copper mine improved to 8 180 kg in 2004, but output from the PGM mines, at 1523 kg, was about half of that recorded in 2003 (3 059 kg).Local sales volume of refined silver in 2004, increased to 4 810 kg from 3 583 kg in 2003 (Table5). Local sales value rose from R4 659 419 to R7 483 062, because of the rise in domestic salesvolume and the improved prices during 2004. The average 2004 local sales unit price, at R1556/kg, was moderately up on that of 2003 (R1 300/kg), due to the higher international pricesand despite the appreciation of the Rand against the US dollar.

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TABLE 2: WORLD SUPPLY OF, AND DEMAND FOR SILVER, 2003 AND 2004

SECTOR 2003 2004 CHANGE t % t % %

Supply Mine Production 19 010 69,2 19 732 72,3 3,8 Official Sector Sales 2 743 10,0 1 919 7,0 -30,0 Old Silver Scrap 5 711 20,8 5 633 20,6 -1,4

TOTAL SUPPLY+ 27 464 100,0 27 284 100,0 -0,7 DemandFabrication:Industrial & Domestic 10 902 41,1 11 418 43,9 4,7 Photography 6 000 22,6 5 630 21,6 -6,2 Jewellery & Silverware 8 529 32,1 7 698 29,6 -9,7 Official Coins 1 113 4,2 1 278 4,9 14,8 TOTAL DEMAND+ 26 543 100,0 26 024 100,0 -2,0 DEFICIT -1 823 -659 41,7 -63,8

Source: World Silver Survey, 2005Notes: + Excludes hedging (i.e. the forward selling of silver and the use of silver loans as a means of financing a mining operation) and implied

disinvestment (which is the statistical deficit).

TABLE 3: SILVER PRICE: MONTHLY AVERAGE LONDON SPOT PRICE, 2002–2004

SILVER PRICE MONTH 2002 2003 2004

$/ozt $/ozt $/ozt January 4,52 4,81 6,32 February 4,42 4,65 6,44 March 4,53 4,53 7,23 April 4,57 4,49 7,06 May 4,72 4,74 5,85 June 4,89 4,53 5,86 July 4,92 4,80 6,31 August 4,54 4,99 6,66 September 4,55 5,17 6,40 October 4,40 5,00 7,10 November 4,51 5,18 7,49 December 4,63 5,63 7,12 YEAR AVERAGE 4,60 4,88 6,65

Source: The Silver Institute, 2005

TABLE 4: SOUTH AFRICA’S BY-PRODUCT SILVER PRODUCTION BY SOURCE, 2003AND 2004

SOURCE 2003 2004 MASS MASS

kg % kg %Gold mines 24 935 31,3 22 535 31,5 Lead-zinc mines 47 290 59,3 39 405 55,0 Copper mines 4 498 5,6 8 180 11,4 PGM mines 3 059 3,8 1 523 2,1 TOTAL 79 782 100 71 643 100

Source: Directorate Mineral Economics

Note: Totals may not add up due to rounding

In 2004, the export sales mass of silver dropped from 97 536 kg to 71 784 kg apparently due tothe lower output, and the absence of inventory sales. Silver is exported as refined metal, incopper and lead concentrates, anode slimes and as silver matte. The export sales valuedecreased from R106,6 million to R94 million. The average export sales unit price rose from R1092/kg to R1 309/kg, due to the higher international prices, despite the appreciation of the Randagainst the US dollar.

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DRAFT LEGISLATION

In the first half of 2005, the Department of Minerals and Energy drafted new legislation,provisionally titled the Precious Metals Bill, to provide for the acquisition, possession, processing,domestic fabrication and disposal of precious metals. This Bill when enacted will repeal Chapter16 of the Mining Rights Act, 1967, which is the current legislation governing possession, dealingin, processing, and fabrication of precious metals. Effectively, this new Bill proposes thederegulation of silver in South Africa, as the metal has been excluded from the definition of“precious metal” in the Bill.

TABLE 5: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OF SILVER+,1995–2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES* Mass Mass Value Mass Value

t t R ‘000 R/t t R ‘000 R/t1995 174,3 14,6 8 695 595 616 149,4 60 253 403 300 1996 168,7 18,0 12 786 711 464 137,6 70 227 510 528 1997 144,0 8,1 5 897 729 759 179,3 96 364 537 387 1998 144,5 12,9 12 724 986 395 130,6 101 293 775 597 1999 152,0 6,5 6 852 1 060 987 154,3 146 408 948 954 2000 144,1 12,8 14 398 1 125 033 155,8 155 539 998 206 2001 109,6 4,0 4 767 1 182 307 122,5 136 956 1 118 468 2002 113,1 4,1 6 663 1 619 868 114,1 162 012 1 419 376 2003 79,8 3,6 4 659 1 300 424 97,5 106 556 1 092 883 2004 71,6 4,8 7 483 1 555 730 71,8 93 995 1 309 416

Notes: + Metal content* Silver is exported as refined metal, in copper and lead concentrates, anode slimes, in and as silver matte

OUTLOOK

SupplyThe world mine supply outlook for 2005 is for a moderate increase due to the better outlook forbase metal prices in general, and further upside potential for the gold price. At many by-productmines worldwide, capacity is expected to increase marginally; however, no significant newcapacity is expected to come on line.

In Mexico, the expansion at Fresnillo was completed in the 4th quarter of 2004, and is expectedto raise the mine’s silver output from 983 tons to 1 110 t in 2005.

Looking further ahead, Bolivia’s silver production could be boosted substantially should ApexSilver’s San Cristobal project, which hosts some 450 million ounces of silver, be developed.Although still at the feasibility stage, Apex expects it to be the world’s biggest open-pit silver mine.In Argentina, Sunshine’s Purquitis project could also come on line in the near future, and will bethat country’s largest silver mine, producing about 11 million ounces at full capacity. In October2004, Silver Standard acquired 100 percent of Sunshine Argentina and announced recently thatit would update the initial feasibility work undertaken by Sunshine, in 2005 and 2006.

Other projects in the feasibility stage include Coeur d’Alene’s San Bartolomé ($135 million cost)project in Bolivia, Silver Standard’s Bowdens ($50 million cost ) project in Australia, and PanAmerican Silver’s Alamo Dorado ($45 million cost) project in Mexico (Raw Materials Group,2005).

Much of the short- to medium-term growth in silver capacity will depend on gold and base metalprojects going ahead, which will be influence by future developments in these metal markets.Projects could also be accelerated by an improvement in the silver price.

An increase in supply from scrap is expected in 2005 because of the improvement in prices.However, government sales are expected to be lower in the coming years as there areindications that release from Chinese official stocks is slowing.

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DemandThe upswing in global economic activity (industrial production) should lead to an increase insilver fabrication in 2005. The industrial applications sector, more specifically the electrical andelectronics sector will continue to be the mainstay of silver fabrication. By country, demand isexpected to increase in China and Japan.

Over the short to medium term, GFMS forecasts that new (technology) uses of silver will lead toincreased offtake. These include fuel cells, silver-based wood preservatives andsuperconductivity. On the negative side, photographic consumption is expected to decline. Thecontinued development of cheaper digital equipment, producing better quality prints, suggeststhat demand in this sector will continue to fall.

Jewellery and silverware off-take is price sensitive, as they tend to be items of discretionaryspending. In India, usage in jewellery may pick up as fabricators and consumers begin to adjustto higher prices, especially if there should be a better monsoon season in 2005. However, ill-timed surges in the silver price at times of traditional high demand could have a negative effect.

Market balance and pricesThe favourable supply/demand fundamentals for silver will help support prices in 2005. Theoutlook for investment demand (especially if a silver Exchange Traded Fund or ETF is launchedin the year) and fabrication demand is positive for prices. An improvement in the silver price in2005 is dependent on growth in world GDP and levels of industrial production; strong growth inGDP would ensure growth in the electronics industry.

Recently, investors and speculators have been attracted to the silver market. Their participationin the market has led to greater volatility, but could result in a higher year-average in 2005. Priceswill probably fluctuate in a range between $6,00/ozt and $8,20/ozt and attain an average price ofbetween $6,70 and $7,70 per troy ounce for the year.

REFERENCESGFMS Ltd, 2004-5Raw Materials Group, 2005The Silver Institute, 2004-5The Silver Institute, 2004. World Silver Survey 2004; accessed on the Internet, June 2005

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COALXM Prévost, LA Msibi

DEVELOPMENTS DURING 2004/2005

The twelve-month period comprising the second half of 2004 and the first half of 2005 has beena very good period for the world coal industry and a particularly exciting one for South Africa’scoal producers. Big companies, with large assets in South Africa as well as in other majorproducing and exporting countries such as Australia, Colombia and Indonesia, and the junior,small-scale and economic empowerment (BEE) companies, all benefited from good coal pricesand the excellent environment for growth. (Fig. 1).

FIGURE 1: SOUTH AFRICAN COAL REPORT PRICE INDEX JANUARY TO SEPTEMBER2005.

In 2004, North America and the European Union both increased their production by 3,6 percent,while Asia Pacific and Russian output increased by 13,4 and 18,3 percent, respectively. Worldhard coal production thus increased by 9,4 percent. Asia Pacific’s improved output was mainlydue to China, Australia, Indonesia and India’s combined 325,1 Mt production increase. In SouthAfrica, production increased by 5 Mt or 2,0 percent. However, expected new projects and mineexpansions did not materialise, mainly as a result of industry’s adjustments to the new mininglaws.

TABLE 1: WORLD COAL RESERVES, PRODUCTION AND EXPORTS, 2004

RESERVES+ PRODUCTION# EXPORTS#

COUNTRY Mt % Rank Mt % Rank Mt % RankChina 62 200 13,0 3 1 956,2 42,3 1 86,6 11,5 3 USA 111 338 23,2 1 932,5 20,1 2 43,4 5,7 7 India 90 085 19,0 2 373,2 8,1 3 1,6 0,2 12 Australia 38 600 8,1 5 285,2 6,2 4 218,4 29,0 1 South Africa 28 599 6,0 6 242.8 5,2 5 67,9 9,0 4 Russia 49 088 10,2 4 209,9 4,5 6 65,2 8,6 5 Indonesia 740 0,1 12 129,1 2,8 7 107,4 14,2 2 Poland 14 000 2,9 9 100,0 2,2 8 19,6 2,6 10 Kazakhstan 28 151 5,9 7 82,9 1,8 9 22,0 2,9 9 Ukraine 16 274 3,4 8 62,4 1,3 10 2,8 0,4 11 Colombia 6 230 1,3 10 56,6 1,2 11 51,7 6,8 6 Canada 3 471 0,7 11 29,2 0,6 12 27,1 3,6 8 Other 29 995 6,3 174,8 3,7 41,2 5,5 TOTAL 478 771 100 4 629,2 100 754,9 100

Sources: + BP Statistical Review of the World Energy June 2005# Coal Information 2005, International Energy Agency* DME, Directorate Mineral Economics, Richards Bay Coal Terminal, Matola Terminal, Bluff Mechanical Appliance

Notes: Totals may not add up due to rounding

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Although prices have decreased from record high of $ 70,95/t in June 2004 to a low of $ 47/t inAugust 2005, Richards Bay Coal Terminal (RBCT) FOB prices have been maintained at levelsabove $ 42/t and the trading price in September was $ 47,18/t, while in Europe, landed steamcoal prices CIF for Amsterdam-Rotterdam-Antwerp (ARA) were $ 57,59. This has promptedproducers to export as much coal as possible, with the RBCT shareholders using their fullentitlement to the terminal and the new BEE companies using the Coal Industry Task Team(CITT) allocation. Recently, one of the main difficulties has been infrastructure constraintscaused by the lack of Spoornet’s coal trains availability, but this hurdle will soon be overcome byan expanded railing capacity shaped to feed the old RBCT and the new South Dunes CoalTerminal (SDCT). The new expansion plans announced 2 Nov 2005 are for an extra 20 Mt/a.

Note: $ mean US$ unless stated otherwise.

FIGURE 2: PLATTS COAL TRADER INTERNATIONAL PRICES AUGUST 2004 TO AUGUST2005

According to the International Coal Report and other international market sources, prices willremain within their present range (between $ 40 and $ 60) into the foreseeable future.

During the last couple of years, the new BEE coal mining companies have expanded in numbersas well as in production per mine. As a result of the Mineral and Petroleum ResourcesDevelopment Act (MPRDA) implementation, in May 2004, companies with large coal reserves inthe country have made more of their non-core assets available to BEE entrepreneurs. The lattercompanies, assisted in their endeavours by the DME and more particularly the CITT, now control16 percent of the country’s coal production. With the consolidation of a number of new deals andjoint ventures, already approved but not yet in public domain, this figure will likely increase to 24percent. With the implementation of SDCT and additional export capacity of 20 Mt/a, it isforeseen that more BEE mines will be able to be begin production. Current export capacity for2008 will be 92 million tons per annum.

The study of present and future coal potential for export, as well as for the inland market is beingcompiled by a consultant with the assistance of all the BEE mines, the RBCT shareholders andthe support of the DME. The results will be available not later than November 2005.

The full Clean Coal Technologies (CCTs) in South Africa will be implemented when the newmines and power stations needed to supply more power to the grid are developed and built.CCTs are based on the science of coal combustion. They will lead to an improved understandingand characterisation of conventional combustion processes, to enable the development oftechniques that control and reduce solid, liquid and gaseous emissions, to improve operatingefficiency and to identify methods for the effective utilisation of combustion by-products. SouthAfrica, a member of the International Energy Agency Clean Coal Science (CCS) Agreementsince April 2003, has overseas access to all the CCS resources and projects. South Africanresearch scientists can co-operate with their colleagues in this area. Given the right technology,no longer will coal be a threat to the environment and it will remain the world’s mayor energysource.

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In 2004, exports decreased by 3,5 Mt (5 percent) due to coal export infrastructure constraints.With the decrease of the rand/dollar exchange rate, from R8,68 in January 2003, to R6,75 inJune 2005, more of the industry’s potential profits were reduced.

In 2004, run-of-mine (ROM) coal production increased by 4 Mt to 307 Mt, compared with 2003.Some 242 Mt of this production were of saleable quality – 5 Mt more than the previous year.Output by coalfield was: Witbank 173 Mt, Highveld 61 Mt, Waterberg 35 Mt, Free State 23 Mt,Ermelo 13 Mt, Utrecht 0,1 Mt, Nongoma 0,8 Mt, Vryheid 0,8 Mt, Soutpansberg 0,4 Mt, Kangwane0,04 Mt and Kliprivier 0,09 Mt. (Table 3).

As in previous years, the Witbank Coalfield remained the predominant producer and in spite ofthe large amount of producing mines located in there, it still has not reached its production peak.Most of the large producers, as well as small ones, are viewing this coalfield as offering the mostpotential for future projects.

FIGURE 3: 2004 RUN-OF-MINE PRODUCTION

Coal mines discarded 65 Mt of waste products, 2 Mt more than in 2003. Almost 91 percent of thesaleable coal production was supplied by mines controlled by the six larger mining groups, viz.Ingwe (BHPBilliton), Anglo Coal, Sasol, Eyesizwe, Kumba Resources, and Xstrata.

FIGURE 4: 2004 COAL PRODUCTION BY MINING COMPANY

Mpumalanga’s total coal production (56 mines) represented 80 percent of the total ROM coal;while Limpopo Province’s 2 mines produced 11 percent and the Free State’s 2 mines produced7 percent. KwaZulu-Natal’s 4 remaining mines produced the remaining 1 percent.

During 2004, opencast mines provided 52 percent of the ROM production. The remaining 48percent was produced by bord-and-pillar (37 percent), longwall (6 percent) and stooping (5

45

percent). The eight largest collieries, with an output of more than 10 Mt/a each, produced 150Mt; three large mines (more than 5 Mt/a), produced 20 Mt; 16 medium-sized mines (more than2 Mt/a) produced 47 Mt; nine smaller mines (less than 2 Mt/a) produced 14 Mt; and the remaining29 smallest mines (less than 1 Mt/a) produced 12 Mt. The three anthracite collieries’ produced1,2 Mt, (Table 4) the same as last year. During 2004, the coal-mining industry’s labour forceincreased from 47 000 to 52 000 workers.

In 2004, South African coal was exported to 34 countries; 82 percent to the EuropeanCommunity of which Spain, Great Britain, Italy, Germany and France were the largest customers.Once again, South Africa’s coal exports to Europe increased whereas exports to Asiadecreased. There is still the possibility that South African steam coal exports to Asia might returnto former levels due to a sudden increase in demand for our export coal by countries in theregion, especially India. (Table 4).

In 2004, 67,9 Mt of coal were exported through RBCT and the throughput of the other twoterminals, Durban and Maputo, was 1,0 Mt and 0,9 Mt, respectively. From April 2005, 15 BEEsand two “common users” (CU) obtained a RBCT export allocation of 3 Mt/a for the period2005/2006. (Table 5).

Of the 246 Mt coal sold during 2004 (Table 5) about 27,5 percent was exported, worth R14,5billion. The remaining 72,5 percent sold inland (178,4 Mt) was worth R13,6 billion. The electricitysector consumed 110 Mt, the synthetic fuels sector used 41 Mt, plus 5 Mt utilised as feedstockfor chemicals, whereas the industrial sector, including mining, consumed 9 Mt, the metallurgicalindustry used 7 Mt and merchants bought 7 million tons.

FIGURE 5: 2004 INLAND COAL SALES BY USER

In 2004, the local market prices were relatively stable. The metallurgical price went up by 6,5percent, industry’s price by 6 percent, synthetic fuels by 5,5 percent and coal for powergeneration (Eskom and others) by 4,5 percent. Prices for the Merchant and Domestic sectorremained the same.

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TABLE 2: Economic Empowerment Mines and Common Users (RBCT-CITT ExportAllocation)

Company Mine Province Siding Anker Coal Elandsfontein/Golfview Mpumalanga Oostbank/Camden Black Gold Coal Eastside Colliery Mpumalanga Endulwini Resources Black Wattle Mpumalanga Uitkyk Eyesizwe Coal New Clydesdale Mpumalanga Bezuidenshoutsrus Ilanga Coal Mines Leuufontein 48-IS Mpumalanga Imbani Resources Carolina Colliery Mpumalanga Carolina Ingcambu Investments Thutsi Mine Mpumalanga Camden Kumba Coal Grootegeluk/Leeuwpan Limpopo Ellisras Leeuw Mining Vaalkrans Mpumalanga Vaalkrans Mashala Resources Wesselton Mpumalanga Mmakau Mining Dorstfontein Colliery Mpumalanga VanDyksdrift Shanduka Resources Savmore Colliery Mpumalanga Panbult Polmaise Colliery Polmaise Mpumalanga Broodsnyersplaas Tweewaters Fuel Springlake Colliery KwaZulu Natal Woestallen Colliery Woestallen Colliery Mpumalanga Zinoju Investments Magdalena KwaZulu Natal Talana

Some of the larger planned investments, which will expand coal production and exports, thatwere awaiting the completion of the new coal terminal (South Dunes or RBCT Phase V) projectwill be implemented now.

The major projects being implemented now are:

• Kumba Resources is planning to open a new coal mine to supply steam coal to a new powerstation in the Waterberg. The country needs new coal-fired power stations built regularly tosatisfy its long-term electricity-generation needs. Eskom has strongly emphasized that coalstill has a major role to play in electric generation. Kumba’s presence in the Waterberg areacould make a major contribution to the supply of South Africa’s power requirements. As itsassets in the Waterberg have inferred resources to sustain mining for 400 years. TheWaterberg contains more than 50 percent of South Africa’s remaining coal resources. Thisproject would create more employment in the Limpopo Province and avoid theenvironmental problems, which would be created by building another power station in theCentral Basin viz. the Mpumalanga and Gauteng Provinces;

• RBCT’s Phase V expansion project is on track. Phase V will increase RBCT’s capacity from72 Mt/a to 92 Mt/a. The CITT is also assessing, on behalf of Spoornet, whether SouthAfrican coal reserves are able to maintain this level of exports for the long term;

• Isibonelo, a new Anglo Coal colliery, made its first delivery of coal to Sasol on July 2005. The$65 million colliery started production on time and on budget. A production of 5 Mt/a ofthermal coal will be supplied by this colliery to Sasol Synfuels when it reaches full productionnext year. Both Anglo Coal and Sasol are developing the 200 Mt Kriel South coal reservesin the Mpumalanga Province. In July 2003 an agreement was reached to establish a newopencast operation in the northern portion of the coalfield. Access to the southern portionof Kriel South was granted to Sasol. It is expected that the operations will secure coal outputfrom the Kriel South reserves for Sasol for 20 years;

• The world’s largest steel producer, Mittal Steel officially opened a pulverised coal injection(PCI) plant for blast furnace No.5 at the Newcastle Steel Works, in KwaZulu-Natal. This plantwas completed at a total cost of R204 million ($30 million). Its main advantage is that therequired quality for PCI is available locally from the Grootegeluk mine in the LimpopoProvince. This allows Mittal Steel to purchase coal in rand compared with imported cokingcoal, which is purchased in dollars. The introduction of the PCI will therefore permit thereduction in hot metal costs by some R60/t ($8.80/t). Fine coal can also replace the plant’sreliance on oil, tar, and natural gas as fuel;

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• Transnet and Eskom are contemplating a R1,6 billion mini heavy-haul corridor linking thecoalfields of Mpumalanga to Eskom’s power stations i.e. Majuba and Tutuka in KwaZulu-Natal and Mpumalanga. The line would effectively be an extended siding, from the main coalcorridor, with dedicated rolling stock, which will run from Mpumalanga to the RBCT inKwaZulu-Natal. Eskom view this as essential to deal with rising electricity demand. Currently,coal is trucked to Majuba from several collieries, while Tutuka gets its coal from NewDenmark Colliery. Apparently Eskom favours the rail solution that will transport about 12Mt/a rather than a conveyor belt or pipeline. This will take hundreds of trucks off the roads.Eskom initiated the rail project but it was decided in discussion with government that itshould be handed over to Spoornet, which will fund and build it as part of its R40-billion suiteof investment projects over the next five years. Eskom has made an announcement of itsplan to build a greenfield power station in the area of the existing Matimba power station.This coal-fired station is expected to cost between R17 billion and R20 billion. Eskom plansto bring the first unit into commercial production in 2010;

• Kumba Resources has announced two approved coal projects. The projects are at twomines, Grootegeluk and Leeuwpan, situated in Limpopo and Mpumalanga Provinces. Theprojects will require a combined capital expenditure of R411 million. The first, requiring aninvestment of R320 million, will further beneficiate coal at Grootegeluk to generate 0,7 Mt/aof semi-soft coking coal and will increase the present total output to 2,5 Mt/a. This coal willbe supplied to Mittal. The project should be completed by July 2006. The second project isto expand production at the Leeuwpan coal mine near Delmas, which will require aninvestment of R91 million. Kumba is also planning to unbundle into two separate companies:coal and base metals operations and the iron ore assets. A number of Anglo’s South Africanbase metal assets will be injected into Kumba, which will then merge with Eyesizwe Coal;

• Endulwini Resources, a BEE company, in partnership with London listed Bisichi Mining, haspurchased Ingwe’s Pegasus coal reserves near Witbank. This reserve containsapproximately 12 Mt of high quality low sulphur coal, which will be mined opencast in a jointventure with Ezimbokodweni Mining. Endulwini Resources owns 51 percent inEzimbokodweni and Bisichi 49 percent. About R150 million will be invested in thedevelopment of the opencast mine over the next two years and 250 new jobs will be created.Ezimbokodweni will produce 1,5 Mt/a, to increase the total production of EndulwiniResources to more than 3 Mt/a. This company has also purchased the Groenvlei coalreserve;

• BHP Billiton’s $280 million Klipspruit Colliery in Mpumalanga, which opened in 2004 wasshelved, until Ingwe is confident that a turnaround in costs can be secured. Higher unit costson the back of increased consumables, a rise in the deployment of contractors and majormodifications were reported. The project was included as part of the group’s multibilliondollar portfolio last year, and was suppose to come into full production in 2007. According toBHPB the project needed to be reconsidered in view of the unstable foreign exchangesituation. It was concluded that the focus was currently on the Ingwe improvement plan untilit begins showing benefits. Also, Anglo Coal and BHP Billiton are rethinking their project inthe Western Complex area, which will lead to new studies, involving assets from bothcompanies;

• Motjoli Resources, an BEE company is about to start a new coal mine, located inMpumalanga, following the R18 million acquisition of mining rights previously held byHolfontein Investments. The mine will be a JV between Motjoli, which holds 51 percent andan Australian company, GVM Metals. Motjoli plans to start mining in two years time. Themine is expected to produce 1Mt/a, of which two thirds will be exported and the remaindersold to Eskom.

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TABLE 3: SOUTH AFRICA’S SALEABLE COAL PRODUCTION, LOCAL SALES ANDEXPORTS, 1995–2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Value (FOR) Mass Value (FOB)

Mt Mt R’000 R/t Mt R’000 R/t 1995 206,2 146,0 6 339 003 43 59,7 6 478 785 109 1996 206,4 146,3 6 798 340 46 60,2 8 111 640 135 1997 218,6 157,2 7 624 905 48 59,0 8 499 823 144 1998 224,9 168,5 8 847 273 53 67,0 9 559 090 147 1999 222,3 154,6 8 305 568 53 66,2 9 234 328 142 2000 224,1 154,6 8 772 310 57 69,9 11 185 460 160 2001 223,5 152,2 9 564 521 63 69,2 16 956 659 245 2002 220,2 157,6 11 773 123 75 69,2 19 366 998 280 2003 239,3 168,0 13 212 837 79 71,5 13 490 623 189 2004 242,8 178,3 13 606 151 76 67,9 14 472904 213

TABLE 4: SOUTH AFRICA’S ANTHRACITE SALEABLE PRODUCTION, LOCAL SALESAND EXPORTS 1995–2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Value (FOR) Mass Value (FOB)

Mt Mt R’000 R/t Mt R’000 R/t 1995 2 137 524 91 836 175 2 017 292 428 145 1996 2 466 488 98 215 201 2 203 403 030 183 1997 1 997 575 124 405 216 1 648 289 989 176 1998 2 064 636 143 215 225 1 376 267 600 1 94 1999 1 919 510 130 040 255 1 080 229 602 213 2000 1 618 515 130 438 253 1 125 224 747 200 2001 1 607 470 150 797 320 970 283 805 292 2002 1 305 392 148 953 379 759 286 970 378 2003 1 206 181 181 265 394 584 172 202 295 2004 1 247 545 224 882 412 917 235 667 257

TABLE 5: SOUTH AFRICA’S BITUMINOUS COAL SALEABLE PRODUCTION, LOCALSALES AND EXPORTS, 1995–2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Value (FOR) Mass Value (FOB)

Mt Mt R’000 R/t Mt R’000 R/t1995 204,1 145,5 6 247 168 43 57,6 6 186 357 107 1996 203,9 145,9 6 700 125 46 58,0 7 708 610 133 1997 216,6 156,7 7 442 077 47 57,3 8 209 834 143 1998 222,2 167,8 8 704 058 52 65,7 9 291 490 146 1999 221,6 154,5 8 148 878 53 65,1 9 175 726 141 2000 222,5 154,1 8 319 975 56 68,8 10 960 713 160 2001 222,1 152,1 9 413 724 62 69,2 16 956 659 244 2002 218,9 157,2 11 624 170 74 69,2 19 080 028 279 2003 238,1 167,6 13 031 572 78 71,0 13 318 421 188 2004 241,5 177, 8 13 381 268 75 67,9 14 237 236 212

The DME’s project to calculate the coal reserves and resources for the country has again beendelayed and the final report will only be available by the end of the first quarter 2006.

The effect of the rand/$ exchange rate, from an average of R7,58 in 2003 to R6,45 in 2004 andR6,20 in first half 2005, and decreased by 8,1 percent from 2004 to 2005 has caused a net lossof revenue of R2,5 billion in 2004, and R342 million by June 2005. Although the internationalindex prices in dollars increased by 64,2 percent from 2003 to 2004, the RBCT FOB rand pricesincreased by only 12,7 percent in 2004. The 2005 (first half) RBCT FOB rand prices increasedby 32,9 percent, compared with 2004.

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OUTLOOK

The main coal issues in South Africa in 2005 are;

• the recently implemented MPRDA and its implications as a vehicle to release unused coalreserves, now owned by government to new coal entrepreneurs;

• access to potentially economically viable reserves, previously part of the major coalcompany’s portfolios, now being released as part of the application of the Mining Charter;

• new coal mining infrastructure (rail and port) including all other relevant coal extraction andbeneficiation requirements, needed to make our coal products more accessible to the localand international markets;

• the rise of the importance of the implementation of clean coal technologies.

Government and industry’s co-operation will ease problems caused by the re-shaping of theindustry and coal will remain the country’s cheapest energy source for a long time. The industry’sinland market provides the basic revenue to the mines, while the export market supplies the extraincome that allows local coal prices to remain low and stable.

The present outlook for the coal industry is very optimistic. With implementation of some of theoutstanding coal projects, including the RBCT Phase V expansion by 2006-7, mergers and JVsalready in the pipeline, coal production and exports should increase by 10 to 15 percent. The re-assessment of the remaining coal potential in the Central Coal Basin will give many economicempowerment companies the reserves needed to enter the industry.It is expected that more energy from coal will be essential to feed new power stations, plus theincreasing popularity of South African coal exports to the EC, Far and Middle East, will oncemore create the opportunity for old and new coal mines to increase production and keep theinland coal prices at levels affordable to the industry. South Africa’s very low electricity cost hasbeen our trump card in the past to attract industrial development. Electricity prices need toremain relatively low to lure foreign industries to South Africa.

REFERENCES

BP, 2003. Statistical Review of World Energy Jun 2005, 40 ppMcCloskey’s Coal Report, issues MCR 109 – MCR 118McCloskey Daily Coal News 2004 - 2005DME, Directorate Mineral Economics. Operating and Developing Coal Mines in SA 2004, 66 pp.Mining Weekly Online: Various articles 24/09/2004 - 19/07/2005 www.miningweekly.co.za.OECD International Energy Agency. Coal Information 2005 www.iea.org.Platts International Coal Report, issues 674 to 731.Platts International Coal Report Coal Statistics, issues Jun 2004 to Sep 2005.Platts Coal Trader International, daily issues 2004, and 2005.Prévost, XM Mining Weekly: The Waterberg Coalfield pp 20-23 May 2005Prévost, XM ABSA Review of World Energy Situation: SA Coal in the World Context Jan 2005.Prévost, XM. MEETI Energy Policy and Management Programme: Coal as an Energy Source,Jhb, June 2005.Prévost, XM. Wits Dept. Mining Eng. GDE Economic Deposits of Southern Africa Coal: CoalReserves & Resources, Jhb July 2005.Prévost, XM. Wits Dept. Mining Eng. GDE Coal in the Metallurgical Industry: Metallurgical Coalin SA, Jhb August 2005.South African Coal Report: From the Coal Face, issues Jan 2004 to Jul 2005.South African Coal Report: Monthly Newsletter, issues Nov 2004 to Aug 2005.South African Coal Report. South African Coal Statistics 2005, 166 pp.World Coal: issues January 2004 – June 2005

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HYDROCARBON FUELSLebohang Musi

DEVELOPMENTS DURING 2004/2005

In 2004, world oil production increased from 78,2 million barrels per day (b/d) to 80,3 million b/d,a growth of 4,5 percent.Total proven world oil reserves estimates have been increased to 1 188,6billion barrels; at the current rate of output, production could probably be sustained for another40 years. Some 61,7 percent of the world’s proven reserves are in the Middle East, which pumpsnearly one third of the world’s crude, with 74,9 percent of the reserves in the Organisation ofPetroleum Exporting Countries (OPEC) (Table 1).The Middle East and North and South Americaaccount for almost 60 percent of the total world oil output.

There have been reports that oil reserves are steadily diminishing and this coupled to theincrease in demand for oil, has resulted in extraordinary oil price hikes. This has encouragedsubstitution of oil by other fossil fuels- natural gas and coal. Natural gas and coal consumptiongrew by 3,3 percent and 6,3 percent, respectively.

The demand for oil grew by 2,5 million b/d in 2004 representing the biggest growth since 1976.This is more than double the 10-year average rate. The level of spare capacity has been reducedfrom 3 million to 1 million b/d to accommodate the high demand.

In the past 10 years, the top oil producing countries in non-OPEC have been unable to replacetheir production with new discoveries. The IHS Energy consultants reported that, about 45percent of the world’s discovered oil had been consumed by the end of 2003. The world’s oilfields have produced about 650 billion barrels of oil to date.

In 2004, world natural gas production increased by 2,8 percent to 2,6 trillion cubic metres (m3).Netherlands, Russia, Norway and other European countries have seen increased production thathas offset the ongoing decline in UK’s output.

World natural gas consumption increased by 3,3 percent in 2004 compared with a 10-yearaverage of 2,3 percent. The US has the largest market for natural gas in the world but itsconsumption has stagnated due to high prices, which grew by 7 percent and industrialrestructuring. There was a 4,0 percent growth in gas consumption in countries outside the USwith the largest gains in Russia, China and the Middle East.

In 2004, world gas reserves increased to 179,53 m3. It is estimated that known reserves aresufficient to sustain future production at current rates for the next 66 years.

AN OVERVIEW OF SOUTH AFRICA’S HYDROCARBON FUELS

South Africa’s liquid fuels supply is derived from refining crude oil imports (over 60 percent),Sasol synthetic fuels derived from coal (about 25 percent) and Mossgas’s refinery productionbased on PetroSA’s production (8 percent).

Most of the crude oil is imported from the Middle East and Africa, with Saudi Arabia, Iran andNigeria as the main suppliers. The national oil and gas company PetroSA has two main oil-producing fields, Oribi and Oryx. Oribi produces 15 000 b/d and Oryx 10 000 b/d. These oil fieldsare located offshore Stilbaai, Mossel Bay and George, Western Cape.

Petronet is building a R3 billion pipeline project, which will run between Durban, Johannesburgand Pretoria. The pipeline is scheduled to come on stream in 2010.

Currently, Sasol produces 150 000 b/d of oil products, nearly all produced from coal-to-fuelplants. The company aims to produce approximately 500 000 barrels of gas-to-liquid (GTL) perday by 2016 from offshore ventures. Sasol formed a joint venture with Sasol-Chevron andChevron-Texaco to establish the four GTL centres, which will be in Qatar, Nigeria, Australia andIran. The GTL technology converts gas into petroleum products including low sulphur diesel.

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Mvelaphanda Holdings has established a new oil and gas exploration company called Ophir,which is active in at least six African countries namely Gabon, Tanzania, Nigeria, Libya,Equatorial Guinea and Saharawi Arab Democratic Republic (SADR). Its other entrepreneurialactivities involve the quest to attain a 10 percent stake of Ibhubesi gas field off South Africa’swest coast, a 4 percent stake in a joint venture exploring the Nigeria-Sao Tome joint developmentzone and a 75 percent stake in the UK’s Rover Energy, which has an exploration block inSomaliland.

BP Southern Africa and its broad-based empowerment partners, the Mineworkers’ InvestmentCompany (MIC) and WDB Investment Holdings has sold its commercial and industrial fuelsmarketing business to Masana Petroleum Solutions, which is a black owned company, for R265million.

Sasol and Engen formed a joint venture to establish the biggest South African Black EconomicEmpowerment (BEE) liquid fuels company called Uhambo Oil. The company will be a leadingfuel refinery, marketing and distribution business, with the capacity to produce more than 13-million cubic metres of petrol, diesel and kerosene per annum.

TABLE 1: WORLD RESERVES AND PRODUCTION OF OIL AND NATURAL GAS, 2004

PROVED RESERVES PRODUCTION OIL GAS OIL+ GAS*

(bbl x 109) % (m3 x 1012) % (1 000 bbl/d) % (m3 x 109) % OPEC COUNTRIES Algeria 11,8 1,0 4,55 2,5 1 933 2,1 82,0 3,0 Indonesia 4,7 0,4 2,56 1,4 1 126 1,4 73,3 2,7 Iran 132,5 11,1 25,57 15,3 4 081 5,2 85,5 3,2 Iraq 115,0 9,7 3,17 1,8 2 027 2,6 0,0 0,0 Kuwait 99,0 8,3 1,57 0,9 2 438 3,1 9,7 0,4 Libya 39,1 3,3 1,49 0,8 1 607 2,0 7,0 0,3 Nigeria 35,3 3,0 5,00 2,8 2 508 3,2 17,7 0,7 Qatar 15,2 1,3 25,78 14,4 990 1,2 20,6 0,8 Saudi Arabia 262,7 22,1 6,75 3,8 10 584 13,1 64,0 2,4 UAE 97,8 8,2 6,06 3,4 2 667 3,3 45,8 1,7 Venezuela 77,2 6,5 4,22 2,4 2 980 4,0 28,4 1,0 Subtotal 890,3 74,9 86,72 49,5 32 941 41,2 434,0 16,2

OTHER SELECTED COUNTRIES Argentina 2,7 0,2 0,61 0,3 756 1,0 44,9 1,7 Australia 4,0 0,3 2,46 1,4 541 0,6 35,2 1,3 Brazil 11,2 0,9 0,33 0,2 1 542 2,0 11,1 0,4 Brunei 1,1 0,1 0,34 0,2 211 0,3 12,1 0,4 Canada 16,8 1,4 1,60 0,9 3 085 3,8 182,8 6,8 China 17,1 1,4 2,23 1,2 3 490 4,5 40,8 1,5 Ecuador 5,1 0,4 0,0 0,0 535 0,7 0,0 0,0 Europe & Eurasia# 139,2 11,7 64,02 35,7 17 583 22,0 1 051,5 39,1 India 5,6 0,5 0,92 0,5 819 1,0 29,4 1,1 Malaysia 4,3 0,4 2,46 1,4 912 1,0 53,9 2,0 Mexico 14,8 1,2 0,42 0,2 3 824 4,9 37,1 1,4 Norway 9,7 0,8 2,39 1,3 3 188 3,9 78,5 2,9 Oman 5,6 0,5 1,00 0,6 785 1,0 17,6 0,7 United Kingdom 4,5 0,4 0, 59 0,3 2 029 2,5 95,7 3,6 USA 29,4 2,5 5,29 2,9 7 241 8,5 542,9 20,2 Other 27,2 2,4 8,14 3,7 778 1,1 24,1 0,7 Subtotal 298,3 25,1 92,8 50,5 47 319 57,7 2 257,6 83,1 Total 1 188,6 100 179,53 100 80 260 100 2 691,6 100

Source: BP Statistical Review of World Energy, June 2005 pp. 2, 3, 4, 6, 9, 20, 22Notes: + Includes crude oil, shale oil, oil sands and natural gas liquids and excludes liquid fuels derived from other sources such as coal

* Excludes gas flared or recycled# Europe & Eurasia

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OUTLOOK

South Africa has a small gas industry, but with the availability of gas from Mozambique, and thepossible discovery of offshore reserves, the industry could experience rapid expansion. TheBinational Gas Pipeline Commission has been established and its main function is to facilitatethe movement of gas between Mozambique (Temane and Pande gas fields) and South Africa. Infuture, gas will probably become the feedstock of choice in the energy industry. Worldwide, thedemand for gas is forecast to grow by 60 percent 2020 when it will supply 18 percent of the totalworld energy demand. Sasol will be injecting 120 million gigajoules per annum of natural gas intoSouth Africa from Mozambique for the next 25 years. The gas flow commenced in March 2004.The pipeline will increase gas’ contribution as a primary supply of energy in South Africa from1,5 percent to 4 percent. The government of Mozambique will be receiving a maximum of 5percent royalty on all quantities of gas produced.

The South African petroleum industry is expected to invest R4 to R5 billion to eliminate pollutioncaused by the refineries of Sasol, Shell, Total, Caltex, Mossgas, Engen, Tepco and BP. Therefinery industry had planned to lower the sulphur level of diesel from 0,55 to 0,3 percent in 2002and further reduce it to 0,03% by 2006. It is also expected that, between 2006 and 2008, the useof unleaded petrol will have risen significantly. The Department of Minerals and Energy (DME),furthermore, aims to increase the portion of electricity generated from renewable resources toan optimistic target of 5 percent, by 2012.

REFERENCES

www.atimes.com/atimes/Global_Economy/GE04Dj03.htmlwww.eia.doe.gov/pub/oil_gas/petroleum/feature_articles/2004Business Report May 11, 2005Engineering News May 12, 2005Business Day August 11, 2005Business Day September 14, 2005

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URANIUMAshok Damarupurshad

WORLD DEVELOPMENTS DURING 2004

Mine productionAccording to the World Nuclear Association (WNA, July 2005), after declining marginally for thelast two years, world mine production of uranium jumped by an impressive 12,9 percent, from 35635t U (42 024t U3O8) in 2003 to 40 248t U (47 464t U3O8) in 2004 (Table 1).This was due chieflyto the restoration of full production in Canada, Australia and Namibia, and to the production risesin Kazakhstan and Uzbekistan. The increase in production was also stimulated by the steadilyrising prices in the second half of 2003 and during 2004.

According to the WNA statistics (Table 1), significant rises in mine output were recorded inNamibia (up 49,2 percent to 3 038t U), Australia (up 18,6 percent to 9 011t U), Uzbekistan (up26,9 percent to 2 016t U), Kazakhstan (up 12,7 percent to 3 719t U) and Canada (up 10,9percent to 11 597t U). Moderate to marginal declines were registered in the Czech Republic(down 8,8 percent to 412t U), Brazil (down 3,2 percent to 300t U) and South Africa (down 1,6percent to 746t U).

Canada (29 percent) and Australia (22 percent) together produced over half (51 percent) ofworld’s mine production of uranium. Canada remained the top producer (11 597t U) in 2004,helped by the restoration of full production at McArthur River. Second-ranked Australia’sproduction, at 9 011t U, was about two-and-half times that of third-ranked Kazakhstan (3 719t U),which has been ramping up production over the last few years.

Africa’s uranium mine output, made up of production from Niger (3 282t U), Namibia (3 038t U)and South Africa (746t U) accounted for 17,6 percent of World output in 2004 – a moderateincrease relative to 2003, thanks mainly to the doubling of production in Namibia.

According to the WNA, the share of total output by mining method in 2003 was as follows:underground 40 percent, open pit 27 percent, in situ leach 21 percent and by-product output 12percent. Production by in situ leaching has been increasing over the last decade at the expenseof underground mining.

TABLE 1: WORLD RESOURCES AND PRODUCTION OF URANIUM, 2004

COUNTRY URANIUM PRODUCTIONRESOURCES* RAR# Rank 2003 2004 (kt U) t U t U % Rank

Canada 439 3 10 457 11 597 28,8 1 Australia 989 1 7 596 9 011 22,4 2 Kazakhstan 622 2 3 300 3 719 9,2 3 Niger 71 10 3 143 3 282 8,2 4 Russiane 158 7 3 150 3 200 8,0 5 Namibia 213 5 2 036 3 038 7,5 6 Uzbekistan 93 9 1 589 2 016 5,0 7 USA 102 8 779 846 2,1 8 Ukrainee 42 12 800 800 2,0 9 South Africa 295 4 758 746 1,9 10 Chinae 47 11 750 750 1,9 11 Czech Republic 4 21 452 412 1,0 12 Brazil 143 6 310 300 0,7 13 SUBTOTAL 3 218 35 120 39 717 98,7 Others 319 515 531 1,3 World Total 3 537 35 635 40 248 100

Sources: * OECD Nuclear Energy Agency & IAEA, 2001-3+ World Nuclear Association, Market Report, 2004-5

Notes: # Reasonably Assured Resources (RAR) recoverable at < $80/kge Estimated

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More than 80 percent of world production was accounted for by only eight companies, viz,Cameco (8 038t U), Cogema (5 317t U), Energy Resources of Australia (4 349t U),KazAtomProm (3 718 tU), WMC (3 694t U), Rossing (3 038t U), Priargunsky (3 000t U), andNavoi (2 050t U).

The largest producing mine in 2004 remained Cameco’s McArthur River in Canada (7 200t U)followed by ERA’s Ranger mine (4 356t U) in Australia.

Demand and total supplyUranium is the fuel used by nuclear power reactors to generate electricity by the process ofnuclear fission. According to the IAEA, in 2004, there were 438 such reactors operating in 31countries accounting for 16 percent of the world’s electricity. WNA estimated that these reactorswith a combined capacity of about 364 GWe (Gigawatts of electricity) required 66 658t U in 2004(Table 2), a moderate increase relative to 2003.

The dominant feature of the uranium market is that uranium consumption continues to exceedmine production by a significant margin. This deficit is filled from several secondary sources,including government and other civilian inventories, reprocessed spent fuel, and the blendingdown of highly enriched uranium (HEU) from nuclear weapons.

The deficit between uranium mine production (40 248t U) and estimated nuclear reactorrequirements (66 658t U) was thus 26 410t U in 2004. Therefore, in 2004, mine productionaccounted for 60 percent of total supply, an increase of 5 percent relative to 2003, whilesecondary sources accounted for 40 percent.

TABLE 2: WORLD NUCLEAR POWER REACTORS AND URANIUM REQUIREMENTS2004-2005

COUNTRY NUCLEAR REACTORS URANIUM REACTORS URANIUMELECTRICITY OPERABLE REQUIRED OPERABLE REQUIRED

GENERATION 2004 2004 2004 2005 2005 billion % of No MWe (t U) No MWe (t U)kWh elec

USA 788,6 20 103 97 485 22 353 103 97 587 22 397 France 426,8 78 59 63 473 10 181 59 63 473 10 431 Japan 273,8 29 54 45 521 7 661 54 46 342 8 184 Germany 158,4 32 18 20 643 3 704 17 20 303 3 708 Korea (South) 124,0 38 19 15 880 2 819 20 16 840 3 011 Russia 133,0 16 30 20 793 3 013 31 21 743 3 409 UK 73,7 19 27 12 082 2 488 23 11 852 2 409 China 47,8 2,2 n/a n/a n/a 9 6 587 1 352 Spain 60,9 23 9 7 584 1 629 9 7 584 1 622 Canada 85,3 15 17 12 080 1 692 17 12 080 1 796 Sweden 75,0 52 11 9 429 1 536 11 9 459 1 536 Ukraine 81,1 51 13 11 268 1 512 15 13 168 1 531 Belgium 44,9 55 7 5 728 1 163 7 5 728 1 163

SUBTOTAL 2 373,3 367 321 966 59 751 375 332 746 62 549 Others 245,3 71 41 169 6 907 64 33 431 5 808 World 2 619 16 438 363 135 66 658 439 366 177 68 357

Notes: % of elec percent contribution to national electricity productionMWe: Megawatt net (electrical as distinct from thermal)kWh kilowatt-hour

Sources: World Nuclear Association, 2005IAEA, 2005, for nuclear electricity production and % of electricity

World consumption of nuclear power (Table 2) increased moderately to 2 619 billion kWh(kilowatt-hour). The United States continued to dominate the market in 2004; its uraniumrequirements totalled 21 741t U in 2003. The US nuclear industry represents a third of globaldemand and generally a larger proportion of the spot market. Other major uranium consumingcountries in descending order were France, Japan, Germany, South Korea and Russia (Table 2).

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PriceNUEXCO uranium spot prices started 2004 trading in a narrow range of between $14 -$16/lbU3O8 (Table 3). As the year progressed, rising demand, driven mainly by the economic boom inChina (in particular the rapid urbanisation and the consequent need for expansion of electricalpower supply capacity), saw prices improving steadily.

In December the average price was $20/lb U3O8, leaving the year average at an encouraging$18/lb U3O8 above the so-called “plausible” price ($15/lb U3O8) for a mine output of about 40 000t/y U3O8 (Uranium Information Centre, 2004).

TABLE 3: NUEXCO SPOT URANIUM PRICES, 2002-2004 (MONTHLY AVERAGES)

MONTH 2002 PRICES 2003 PRICES 2004 PRICES ($/l b U3O8) ($/lb U3O8) ($/lb U3O8)

January 9,58 10,15 14,77 February 9,72 10,10 15,90 March 9,95 10,10 17,02 April 9,83 10,20 17,75 May 9,90 10,98 17,75 June 9,90 10,90 17,86 July 9,90 10,91 17,90 August 9,85 11,25 17,90 September 9,81 11,57 19,05 October 9,76 12,33 20,08 November 9,76 12,97 20,20 December 11,16 13,41 20,43 YEAR AVERAGE 9,93 11,24 18,05

Source: Metal Bulletin, 2002-4

Spot prices have doubled since early 2003, and explanations vary, but include the followingfactors:• Commodity inflation caused by a weakening US dollar relative to major mining-country

currencies, during the period.• Depleting commercial uranium inventories.• Mine production is unlikely to expand at a sufficient rate to replace falling secondary

supplies, in the next two years.• Uncertainty over the timing and magnitude of secondary supplies on the commercial market

(Stephen Kidd, 2005).• Rising demand in China, India and Russia.• A more positive outlook for nuclear power due to the implementation of the Kyoto Protocol

and the start of Emissions (reduction) Trading (nuclear electricity avoids the emission of100s of millions of tons of CO2 produced through coal-fired electricity generation)

The spot market accounts for only 10-12% of total sales. The majority of trade is via 3-7 yearterm contracts negotiated directly between producers and utilities, but with prices often at a smallpremium to the prevailing spot prices.

DEVELOPMENTS IN SOUTH AFRICA DURING 2004

In 2004, South Africa’s uranium production totalled 888t U3O8 (746t U), a decrease of 0,6percent compared with the 894t U3O8 (751t U) recorded in 2003. Production was recovered asa by-product of gold mining.

South African production in 2004 was a mere 12 percent of its historic peak in 1980 (6 147t U).

Only one gold mining company, AngloGold Ashanti produced uranium in South Africa in 2004.The company’s Vaal River Operations was the tenth largest producing mine in 2004, accountingfor 1,9 percent of world production. AngloGold Ashanti announced that it planned to increaseuranium output in the coming years due to the favourable price.

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According to statistics provided to the Directorate: Mineral Economics, South Africa’s entireproduction of uranium is exported by NUFCOR (Nuclear Fuels Corporation) and no domesticmine sales were reported in 2004.

Export statistics show that South Africa exported 787 tons of uranium and uranium compounds(HS code 28.44.10) worth about R204 million during 2004.

OUTLOOK

SupplyWorld mine production of uranium, encouraged by the higher prices, is set to increase in thecoming years. Prices are currently at a level that is higher than the marginal operating costs ofmost mines. In 2005, world mine production is estimated to increase moderately to 42 000t U (49530t U3O8), driven mainly by increases in Canada, Australia and Kazakhstan.

Looking further ahead, two new uranium projects are due to come into production within the nextfew years, in Canada. With the better market conditions, Cameco’s Cigar Lake is on track toproduce 7 000t U from 2007 and Cogema’s Midwest mine will produce 2 200t U from 2006.Thereare also reports that an application has been made to increase production at Cameco’s McArthurRiver mine from 7 200t U (2004) to 8 460t U.

Uranium production in Australia is also set to increase. There are plans to increase production atWMC Resources’ Olympic Dam copper-uranium mine dramatically to about 12 700t U per year.Another two mines could come into production in the near future, viz., Honeymoon (projectedproduction of 900t U/year) and Jabiluka, where production will be phased in to match the declineof the Ranger Mine.

In South Africa, Aflease plans to start production at its uranium-gold operations near Klerksdorp,at a rate of 479t U3O8 from 2007.

Supply from secondary sources from a whole host of public and private sources will continue tobe an important component of supply for many years to come. Non-mine supplies are expectedto account for between 40-45 percent of world requirements during the next few years.

DemandConsumption is expected to increase by 2,5 percent to 68 357t U in 2005 due to an expectedincrease in demand in Asia and Eastern Europe Also of importance are generating capacityupgrade programmes in Europe and the USA and generally higher reactor load factors, whichtranslate to an increase in uranium consumption.

The World Nuclear Association expects World nuclear capacity to grow to 379 GWe by 2010, andto 405 GWe by 2020, representing an annual average growth rate of 0.7 percent.

Markets and PriceIn 2005, uranium prices are expected to fluctuate in a higher range of between $20,00/lb U3O8

and $28,00/lb U3O8 underpinned by the need for additional primary production to meet uraniumrequirements. Consultants, International Nuclear Inc., expect that uranium prices will continue torise through 2006, but then begin to moderate from 2007, with relative stability over the period2010-2018 as new primary production fills the anticipated supply gap.

Increasing production from Canada, Australia and Kazakhstan, combined with continuingconversion of nuclear weapons, will provide sufficient uranium to meet short-term demand, whichis expected to expand by a little over 1 percent/annum.

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REFERENCES & BIBLIOGRAPHY

BP, Statistical Review of World Energy, 2004International Nuclear, Inc. (2004). The Market for Uranium: An overview of Supply, Demand andPrices 2004-2025, 10pp.Metal Bulletin, 2002-2004NEA/IAEA, 2001/3. Uranium - Resources, Production and Demand: OECD, Paris, 362 ppUranium Information Centre, 2004-5World Energy Council, 2002-5World Nuclear Association, 2002-5

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NONFERROUS METALS AND MINERALS OVERVIEW

J W Perold

INTRODUCTION

South Africa is endowed with relatively large reserves of most of the major nonferrous metalsand minerals, except for aluminium of which no commercially exploitable reserves exist. Theworld reserve rankings for seven of South Africa’s nonferrous minerals range between first andsixth.

Most of the orebodies from which the nonferrous metals are mined are polymetallic. Most PGMmines in the Bushveld Complex also produce copper, nickel and cobalt and the PhalaborwaCarbonatite produces copper and nickel.The total nonferrous mining/mineral industry is relativelysmall, consisting of some nineteen mines and seven refineries.

DEVELOPMENTS IN 2004/2005

World economic growth moderated in the second half of 2004, but still expanded at a rate of 5,1percent for the year as a whole. This solid expansion helped to support increases in internationaltrade volumes and commodity prices, enabling economic growth in most emerging markets aswell as in developing countries to exceed expectations. Countries in the emerging Asian regionagain outperformed most other economies, with China and India recording exceptional growth.Real output growth in Africa, with its mix of agricultural and mining exports, also recorded agrowth acceleration in 2004.

Lead, copper and aluminium prices soared in the first half of 2004 as some producers sufferedstrikes, which against a background of low stocks exacerbated physical tightness in the market.The weaker dollar, record oil prices, at times above $50 per barrel, and strong demand fromChina also encouraged the buying of stocks and price rises which saw copper and other basemetals reach highs in 2004 not seen for many years.

In October 2004, copper approached its 10-year high at $3 122/t and averaged $2 866/t for theyear - 61 percent higher compared to 2003. In the same month, nickel rose to $15 326/taveraging $13 819/t or 44 percent higher than in 2003. Aluminium peaked at $1 767/t on 9 Julyand averaged $1 719/t or 44 percent higher. Zinc rose to $1 105/t in March 2004 and averaged$1 048/t or 27 percent higher. Lead increased to an astonishing $1 039/t in July and averaged aphenomenal 71 percent higher at $881/t. The tin price also increased sharply during 2004fluctuating in the upper $8 500 per ton.

Available data suggest that global growth remained somewhat hesitant in the first half of 2005.Little progress was made in resolving key imbalances and problems, which characterise theinternational economic landscape. The magnitude of the saving and fiscal shortfall in the UnitedStates, the lethargic pace of Europe’s economic expansion and the inflexibility of some Asianexchange rates featured among these largely unresolved issues.

Furthermore, the extended period of high oil prices (+$50/barrel) in the first half of 2005 and thelikelihood of these high prices continuing for the rest of the year, has the potential to threaten thesustainability of economic growth and, therefore, base metals demand. In July 2005, oil priceswere still fluctuating in the upper $50’s/barrel and base metal price hikes seemed to have halted.High energy prices affects the margins of base metal producers as diesel is a major input costwhile a weakening dollar shrinks the revenue of base metal producers especially those in SouthAfrica and Australia.

Important base metal developments in South and southern Africa were:

• Lion Ore, a junior Canadian mining company bought into Nkomati Nickel mine in LimpopoProvince. Lion Ore and African Rainbow Mining jointly own 50 percent of Nkomati. Lion Orewants to increase the output of the mine through the introduction of its new processingtechnology;

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• Zambia’s copper production has been booming over the past two years, taking output toabove 400 kt/annum – levels not seen since the Copperbelt boom in 1969. Of the sevenmajor players on the Copperbelt, Metorex, a South African company, controls the Chibulumamine in where it intends spending $35 million on development. Metorex also acquired acobalt plant in Zambia, situated close to the DRC border, in order to process ore from itsRuashi-Etoille project in the DRC, starting with the processing surface dumps;

• Lion Ore has also invested in Tati Nickel mine, Botswana, to apply it’s new processingtechnology in order to increase nickel output;

• China’s decision on 22 August 2005 to abolish an 8 percent tax rebate on imported aluminahad boosted the chances of the Canadian producer, Alcan establishing the long-awaited $2billion (R12,9 billion) aluminium smelter at Coega near Port Elizabeth. Alcan has indicatedthat it is assessing the smelter, which will produce 660 kt aluminium per annum.

In 2004, the total sales value of South Africa’s primary nonferrous metals and minerals, excludingtitanium and zirconium minerals (Tables 1 and 2), increased by 28,8 percent or R1, 36 billion, toR6,07 billion. The increase resulted from the exceptional commodity price hikes.Total nonferrousprimary sales including zirconium and titanium minerals also increased by R600 million to R8,2billion, representing 6,6 percent of the country’s total primary mineral sales valued at some R125billion.

Total primary nonferrous mineral and metal, including titanium and zircon minerals wereexported to the following regions: Europe (44,5 percent), Pacific Rim Countries (29,2 percent),North and Central America (18,3 percent), South America (6,7 percent), Middle and Near East(0,8 percent) and Africa (0,4 percent).

TABLE 1: SOUTH AFRICA’S PRODUCTION AND SALES OF PRIMARY NONFERROUSMETALS AND MINERALS, 2003

COMMODITY PRODUCTION LOCAL SALES EXPORT SALES TOTAL SALES(FOR) (FOB)

Mass Mass Value Mass Value Mass Valuet t R’000 t R’000 t R’000

Antimony (mic) 5 291 276 5 475 5 020 63 649 5 296 69 124Cobalt ++ 271 19 3 053 241 36 238 259 39 291Copper# 120 920 76 074 1 073 733 46 408 567 502 122 482 1 641 235Lead (mic) 39 941 339 1 284 44 053 108 600 44 392 109 884Nickel ++ 40 941 24 040 1 647 922 16 088 1 081 275 40 128 2 729 197Titanium minerals ** ** ** ** ** ** **Zinc (mic) 41 239 39 971 121 906 * * 39 971 121 906Zirconium minerals ** ** ** ** ** ** **TOTALx 248 504 140 719 2 853 373 111 810 1 857 264 252 529 4 710 639

Notes: mic metal-in-concentrate

++ Metal-in-concentrate and metal# Metal-in-concentrate, blister, anode and cathode copper** Classified* Nilx Excludes titanium and zirconium minerals

In 2004, total sales of processed nonferrous metals and minerals (Tables 3 and 4) excludingtitanium slag increased by 20,1 percent or R1,82 billion to R10,9 billion compared with 2003.Thisincrease was attributable to the higher sales volume of aluminium as well as higher commodityprices for the processed commodities.

Total processed nonferrous metals and minerals, including titanium slag, were exported to thefollowing regions in order of importance: Pacific Rim Countries (31 percent), North America andCentral America (30,1 percent), Europe (22 percent), Africa (12,1 percent), Middle and NearEast (3,8 percent) and South America (0,9 percent).

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TABLE 2: SOUTH AFRICA’S PRODUCTION AND SALES OF PRIMARYNONFERROUS METALS AND MINERALS, 2004

COMMODITY PRODUCTION LOCAL SALES EXPORT SALES TOTAL SALES(FOR) (FOB)

Mass Mass Value Mass Value Mass Valuet t R’000 t R’000 t R’000

Antimony (mic) 4 967 213 3 723 4 762 66 149 4 975 69 871Cobalt ++ 309 19 5 671 310 83 232 328 99 903Copper# 102 574 83 934 1 542 829 29 299 483 293 113 233 2 026 122Lead (mic) 37 485 Nil Nil 30 958 120 599 30 958 120 599Nickel ++ 39 851 24 989 2 129 682 17 725 1 513 381 42 741 3 653 062Titanium minerals ** ** ** ** ** ** **Zinc (mic) 32 001 31 519 107 630 Nil Nil 31 519 107 630Zirconium minerals ** ** ** ** ** ** **TOTALx 217 187 140 674 3 799 535 83 081 2 266 654 223 727 6 066 189

Notes: mic metal-in-concentrate++ Metal-in-concentrate and metal# Metal-in-concentrate, blister, anode and cathode copper** Classifiedx Excludes titanium and zirconium minerals

TABLE 3: SOUTH AFRICA’S PRODUCTION AND SALES OF PROCESSED NONFERROUSMETALS AND MINERALS, 2003

COMMODITY PRODUCTION LOCAL SALES EXPORT SALES TOTAL SALES(FOR) (FOB)

Mass Mass Value Mass Value Mass Valuet t R’000 t R’000 t R’000

Antimony trioxide 6 097 300 583 5 785 12 612 6 085 13 195Aluminium metal 734 787 299 303 3 320 629 497 892 4 981 081 797 195 8 310 710Titanium slag ** ** ** ** ** ** **Zinc metal 112 462 86 027 596 361 27 640 164 948 113 667 761 309TOTALx 853 346 385 630 3 917 573 531 317 5 158 641 916 947 9 076 214

Notes: ** Classifiedx Excludes titanium slag

TABLE 4: SOUTH AFRICA’S PRODUCTION AND SALES OF PROCESSED NONFERROUSMETALS AND MINERALS, 2004

COMMODITY PRODUCTION LOCAL SALES EXPORT SALES TOTAL SALES(FOR) (FOB)

Mass Mass Value Mass Value Mass Valuet t R’000 t R’000 t R’000

Antimony trioxide 5 822 233 451 5 629 12 008 5 863 12 459Aluminium metal 866 074 341 747 3 724 359 610 702 6 380 404 952 449 10 104 762Titanium slag ** ** ** ** ** ** **Zinc metal 105 384 96 033 736 808 11 710 44 832 107 743 781 640 TOTALx 977 280 438 013 4 461 619 694 668 6 437 244 1 066 055 10 898 863

Notes: ** Classifiedx Excludes titanium slag

OUTLOOK

Overall the fundamentals for base metals and minerals are quite positive because of stronggrowth rates that are expected in East Asia, especially in China where the economy has beengrowing at a rate of nearly 10 percent in the first quarter 2005. Also, the longer lead-time neededto bring mines on stream will contribute to a favourable price environment in the coming years.

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There has been a lack of investment in mining projects because the capital-intensiverequirements of exploration and development as well as the lead-time to finally bring a mine intoproduction have discouraged investors. It has been noted that in Chile where many big copperproducing mines are now maturing, fewer new mine projects are being developed.

This situation is also further exacerbated in the case of certain minerals such as nickel andcopper where the barriers to development seem to be much higher than for zinc. Future nickelproduction will probably come from the development of new laterite deposits for which the scaleof the development, to make them economically viable, translates into extremely high capitalcosts. Similarly lower grade copper deposits will have to be developed to meet future demandtranslating into higher capital costs. Development of such projects also requires more time dueto their complexity, which is often compounded by their remote locations. In the case of zinc, thebarrier to entry is lower due to the smaller size of new zinc mines. As a result, the zinc industrywill remain fairly open to new entrants.

As a result of the expected continuation of strong demand, all nonferrous mineral and metalprices are expected to continue their upward trend albeit not as strongly as in 2004. Forecastsof annual average price increases are: zinc increasing by 24 percent to $1 300/t; aluminiumincreasing by 13 percent to $1 940/t; nickel increasing by 5,4 percent to $14 568/t; leadincreasing by 2,5 percent to $909/t; and copper increasing by 1,5 percent to $2 909/t. Cobalt’saverage price is anticipated to decrease by 8,9 percent to $22/pound as large volumes ofintermediary cobalt has flowed from the DRC to China, tipping the market into a modest surplus.

The Mineral Economics Directorate of the Department of Minerals and Energy forecasts that,total export revenue growth for primary nonferrous metals and minerals will grow by 1,4 percentover the 5 year period 2005 to 2009, most of which will be attributed to growth in the exportrevenue of nickel (Table 6). The improvement in lead’s performance will be attributed to anincrease in annual output from the Black Mountain mine.

The outlook for South Africa’s export revenue from processed nonferrous metals and minerals,excluding titanium slag (Table 7), is less promising. Growth over the period 2005 to 2009 maydecline by 1,4 percent as a result of aluminium exports reaching a plateau on the assumptionthat Alcan’s aluminium smelter project at Coega might be shelved.

TABLE 6: FORECAST OF SOUTH AFRICA’S EXPORT REVENUE FROM PRIMARYNONFERROUS METALS AND MINERALS, 2005 – 2009 ($’MILLION FOB REAL2004 TERMS)

Year Antimony° Cobalt++ Copper# Lead° Nickel++ TOTALx

2004* 10,2 16,5 74,9 18,7 234,6 354,9(2,9) (4,6) (21,1) (5,3) (66,1) (100)

2005 7,4 13,0 50,8 24,6 277,1 372,9(2,0) (3,5) (13,6) (6,6) (74,3) (100)

2006 5,6 14,9 46,8 35,1 260,0 362,4(1,5) (4,1) (12,9) (9,7) (71,7) (100)

2007 5,6 16,1 45,4 35,4 308,7 411,2(1,4) (3,9) (11,0) (8,6) (75,1) (100)

2008 5,6 10,7 43,6 36,2 308,0 404,1(1,4) (2,6) (10,8) (9,0) (76,2) (100)

2009 5,6 9,0 37,8 36,7 297,0 386,1(1,5) (2,3) (9,8) (9,5) (76,9) (100)

GROWTH** -9,5 -9,6 -10,8 11,9 4,0 1,4

Notes: ° Metal-in-concentrate++ Concentrates and metal# Concentrates, blister, anode and cathode copperx Total export revenue excludes titanium and zirconium minerals* Actual, converted from rand to dollar at a rate of R6,4499/$. Figures in brackets represent percentages of total nonferrous metal and mineral

export revenue** Annual growth rate, compounded, from 2004 to 2009

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TABLE 7: FORECAST OF SOUTH AFRICA’S EXPORT REVENUE FROM PROCESSEDNONFERROUS METALS AND MINERALS, 2005 – 2009 ($’MILLION FOB REAL2004 TERMS)

Year Antimony Aluminium Zinc TOTALx

trioxide metal metal 2004* 1,9 989,2 16,6 1007,7

(0,2) (98,2) (1,6) (100) 2005 1,0 1 164,0 23,4 1188,4

(0,1) (97,9) (2,3) (100) 2006 0,9 1080,0 24,0 1104,9

(0,1) (97,7) (2,4) (100) 2007 0,9 1050,0 23,1 1074,0

(0,1) (97,8) (2,3) (100) 2008 0,9 960,0 24,2 985,1

(0,1) (97,5) (2,4) (100) 2009 0,9 900,0 24,0 924,9

(0,1) (97,3) (2,4) (100) GROWTH** -11,7 -1,6 6,3 -1,4

Notes: x Total export revenue excludes titanium and zirconium mineral products* Actual, converted from rand to dollar at a rate of R6,4499/$. Figures in brackets represent percentages of total nonferrous processed metal

and mineral export revenue** Annual growth rate, compounded, from 2004 to 2009

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ALUMINIUMLA Themba

INTRODUCTION

Aluminium is the most abundant metallic element in the earth’s crust, and most of the productionis derived from bauxite ore. Alumina is extracted from the bauxite by a dissolution processinvolving caustic soda digestion at high temperatures, and subsequently smelted to producealuminium. Alumina feedstock for smelters in South Africa and Mozambique is imported fromAustralia.

MAIN MARKETS

Aluminium consumption is segmented into five main sectors, viz. transportation, construction,packaging, electrical engineering and general engineering .

DEVELOPMENTS DURING 2004/2005

World bauxite resources were estimated at 76,5 billion tons in 2004. The global distribution ofbauxite mineral resources was South America (24,8 Mt), Africa (20,4 Mt), Asia (12,8 Mt),Oceania (9,9 Mt) and rest of the world (8,5 Mt).

World refined aluminium production increased by 7,2 percent to 30,0 Mt in 2004 (Table 1).Refined aluminium producers in order of importance were China (6,84 Mt), Russia (3,59 Mt),Canada (2,71 Mt), the USA (2,51 Mt), Australia (1,89 Mt) and Brazil (1,46 Mt). South Africa’srefined aluminium output was 0,89 Mt, ranking eighth in the world.

During 2004, world refined aluminium production by region was Asia (9,76 Mt), Europe (8,84 Mt),America (7,47 Mt), Oceania (2,24 Mt) and Africa (1,71 Mt). Refined aluminium productionincreased in all regions except America, with a 4,0 percent decline, as follows: Asia 19,3 percent,Africa 20,4 percent and Oceania 2,3 percent. Although Asia achieved a 1,56 Mt increase inrefined aluminium production, a major producer, China, imposed restrictions on aluminiumprojects because of rising prices of alumina imports and energy costs. Drought and highelectricity cost forced the Beijin government to withdrew power subsidies, compelling companiesto cut aluminium smelters’ output.

Russian Aluminium (RUSAL) invested $3 billion in a joint venture with Kazakhstan EurasianIndustrial Association to secure sources of alumina for an aluminium smelter project. AlsoRUSAL allocated a $3 billion investment for a feasibility study towards developing a 600 kt perannum aluminium smelter in Seberia, in the Irkustsk region, which has abundant energyresources. Construction of the aluminium smelter will start in 2006 and completion is scheduledin 2009.

World refined aluminium consumption increased by 8,1 percent to 29,5 Mt compared with 2003.Europe and America achieved relatively low increases of 5,3 percent to 8,4 Mt and 4,2 percentto 7,7 Mt respectively , while Asia’s consumption grew by 13,1 percent. Aluminium consumptionin Africa and Oceania decreased by 2,9 percent to 345 kt and 4,2 percent to 368 kt, respectively.

In 2004, the average LME aluminium settlement price was $1 715,38/t, a significant 19,8 percentincrease relative to 2003. The monthly average price rose from $1606,83/t in January to $1730,15/t in April before declining to $1 623,80/t in May. It then gradually increased to a maximumof $1 849,55/t in December.

South Africa’s primary aluminium output increased by 17,8 percent to 866 kt (Table 2) in 2004,following the completion of the Hillside Three Expansion Project at Richards Bay. Localaluminium demand increased from 299 kt to 342 kt, or 14,4 percent. Refined aluminiumconsumption in the construction, packaging and general engineering sectors market was strong.Exports of aluminium also rose by 22,7 percent to 611 kt compared with 2003.

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Canadian aluminium producer Alcan with 45 percent share inherited the proposed $2,5 billionCoega Aluminium Smelter Project from the French company Pechiney; which plans to process660 kt refined aluminium per annum. The Industrial Development Corporation with a 15 percentshare remains positive that the one-year delayed project will go ahead. Eskom intends to provideelectricity on favourable terms to a Coega aluminium smelter as an incentive to encourage Alcanto proceed. If Alcan gives the go-ahead the construction phase will commence at the end of2005 and the first refined aluminium output is expected in 2008.

Both BHP Billiton expansion projects, at Mozal and the Hillside aluminium smelters inMozambique and South Africa respectively, commenced production ahead of schedule and casttheir first aluminium ingots in 2003, with production gradually increasing throughout 2004.

TABLE 1: WORLD ALUMINIUM SMELTER CAPACITY, PRODUCTION AND EXPORTS, 2004

COUNTRY SMELTER PRODUCTION EXPORTSCAPACITY

kt kt % Rank kt % Rank China 6 500 6 837 22,8 1 1 679 9,6 3Russia 3 420 3 594 12,0 2 3 630 20,8 1Canada 2 800 2 709 9,0 3 2 592 14,9 2USA 4 120 2 505 8,3 4 344 2,0 11Australia 1 850 1 889 6,3 5 1 540 8,8 4Brazil 1 400 1 457 4,9 6 818 4,7 6Norway 1 180 1 322 4,4 7 1 485 8,5 5South Africa* na 864 2,9 8 647 3,7 7India 695 861 2,9 9 51 0,31 8Germany na 675 2,2 10 413 2,4 9UA Emirates na 642 2,1 11 164 0,9 15Venezuela 640 631 2,1 12 390 2,2 10UK na 560 1,9 13 336 1,9 12Bahrain na 524 1,7 14 353 2,0 11France 440 451 1,5 15 148 0,8 16Spain na 398 1,3 16 103 0,6 17 New Zealand na 350 1,2 17 316 0,9 13Netherlands na 326 1,1 18 610 3,5 8Other na 3 428 11,4 - 1 800 10,3 -TOTAL 34 100 30 023 100 - 17 419 100 -

Sources: WBMS, 2004, pp 12, 15USGS, 2004, p 21* DME, Directorate Mineral Economics.

Source: WBMS, 2004, p 13

FIGURE 1: WORLD PRIMARY ALUMINIUM CONSUMPTION BY REGION, 2004

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FIGURE 2: WORLD PRIMARY ALUMINIUM PRODUCTION AND SMELTER CAPACITY, 1994 –2004

Sources: WBMS, 2004, p 12USGS, 2004, p 21DME, Directorate Mineral Economics.

TABLE 2: SOUTH AFRICA’S PRIMARY ALUMINIUM PRODUCTION, LOCAL SALES ANDEXPORTS, 1995–2004

LOCAL SALES EXPORT SALES YEAR PRODUCTION Mass Value (FOR) Value (FOR)

kt kt R’000 R/t kt R’000 R/t 1995 229 120 898 699 7 510 85 550 610 6 788 1996 570 102 743 663 7 311 533 3 370 993 6 270 1997 673 124 1 027 271 8 291 567 4 063 688 7 166 1998 677 123 1 082 405 8 759 512 3 685 392 7 200 1999 689 136 1 272 373 9 375 543 4 197 552 7 732 2000 674 145 1 775 862 12 111 492 5 090 396 10 361 2001 663 230 2 848 074 12 365 476 5 661 712 11 904 2002 707 253 3 573 821 15 504 522 7 037 008 13 504 2003 735 299 3 320 292 11 095 498 4 981 081 10 004 2004 866 342 3 724 359 11 898 611 6 380 404 10 448

Note: Unit values calculated before rounding of mass and rand valuesSource: DME, Directorate Mineral Economics.

FIGURE 3: SOUTH AFRICA’S ALUMINIUM PRICE AND LME CASH SETTLEMENT PRICE(MONTHLY AVERAGES), 1997 – 2004

Sources: Metal Bulletin, Jan 1997 – Dec 2004DME, Directorate Mineral Economics.

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OUTLOOK

In 2004, the world aluminium market remained tight as demand rose to 30,0 Mt and outstrippedthe 29,8 Mt supply. The same under-supply scenario is expected in 2005. Several aluminiumsmelters will close in China, which is expected to reduce world-refined output by 800 – 1000 kt.

Despite planned new aluminium production capacity that is planned to meet an annual averagegrowth is 2,9 percent aluminium demand over five years, additional capacity will not be enough.Smelter capacity will increase by 3 Mt to 34 Mt in 2005, global production is forecast to grow by4,5 percent to 31,2 kt, but demand will grow by 5 percent to 31,4 kt. The average aluminium pricein 2005 is expected to be $1 940/ton.

Alcoa and Alcan are in 50 percent joint venture with the Republic of Guinea, in a project toproduce 1,5 Mt alumina per annum, and output is scheduled for 2008.

In South Africa , primary aluminium production is forecast at 860 kt and 900 kt, during 2005 and2006 respectively, as production from the commissioned Hillside Three Aluminium Smeltermatures.

In the South Africa Development Community (SADC), aluminium production is primarily fromMozambique and South Africa, and expected to reach 1 200 kt in 2005. An increase in aluminiumproduction is expected in 2008 from the Coega Aluminium Smelter Project, if Alcan gives the go–ahead.

FIGURE 4: SOUTH AFRICA’S PRIMARY ALUMINIUM EXPORTS BY DESTINATION, 2004

Source: DME, Directorate Mineral Economics.

FIGURE 5: SOUTH AFRICA’S EMPLOYMENT AND REMUNERATION: PRIMARYALUMINIUM INDUSTRY, 1994–2004

Source: DME, Directorate Mineral Economics.

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REFERENCES

Metal Bulletin, Jan 2004 – Jan 2005.Metal Bulletin Research, Jan 2004 – June 2005.Africa.iAfrica.com.African business aluminium smelters drawn to Third World, May 200.U.S Geological Survey, 2004 Mineral Commodity Summaries, January 2004: Internet Website: http://www.usgs.govWorld Bureau of Metal Statistics, 2004. World Statistics Yearbook 2004: Ware, Herts, pp 11, 12,13,15

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ANTIMONYL Maphango

INTRODUCTION

Stibnite (Sb2S3) is the economic ore of antimony. Stibnite is often found associated with othersulphide minerals and antimony is also produced as a by-product of smelting ores of othermetals, primarily gold, silver and copper. Secondary antimony is produced from recycled scrap,particularly antimonial lead battery scrap. Antimony metal is used as a hardener in lead forstorage batteries, and it is also used in solders and other alloys. Antimony trioxide is the mostimportant of the antimony compounds and is mainly used as a flame-retardant in textiles,plastics, adhesives and building materials, and as a filler and decolouriser in glass, plastics andceramics. Other applications are in semiconductors for making infrared detectors, diodes andHall-effect devices.

DEVELOPMENTS DURING 2004/2005

During 2004, world mine production of antimony decreased marginally by 0,16 percent to 154,57kt compared with 2003 (Table 1). The major producers were China (126,00 kt), followed by CIS (16,78 kt), South Africa (4,97 kt), Bolivia (2,48 kt) and Australia (1,80 kt). China contributed 81,5percent of world total output.

Republic Gold announced that a significant antimony deposit graded at 2,5 percent had beenfound at its Northcote Project in Queensland, Australia. In China, production returned to fullcapacity (24 kt/annum) at Hsikwangshan Twinkling Star Co’s Lengshuijiang City facilities incentral Hunan Province. The local government of the Guangxi Autonomous Region, southwestChina, announced that it had granted China’s state-owned Minmetals Group the right toredevelop its Nandan antimony mines, which are the largest in China. Minmetals is to undertakea geological feasibility study at the mine area, which may take a year to complete. The LingyeSmelting lead project with projected capacity of 100 kt per year is expected to commenceproduction at the end of 2006. The plant will also recover bismuth, antimony and gold.

Concern over high-bismuth antimony from China prompted Metal Bulletin to adjust itsspecification to reflect a benchmark quality. Effective 1 October 2004, the MB price quotationspecifies antimony having maximum bismuth content of 100 parts per million.

The shortfall of antimony in China, the major factor causing the escalation in price, was attributedto the following:• Depletion of stockpiles due to the closure of mines by the government following flooding in

Nandan Province;• acute shortage of low-bismuth metal which led to a premium for good-quality material;• rising demand (about 20 percent annually) for antimony in China owing to the growing

manufacturing sector and reduction of tax rebates, which have led to less antimony beingexported;

• lack of investment in China’s antimony industry.

South Africa is a significant producer of high-grade antimony concentrates, accounting for 3,3percent of the world’s production. Consolidated Murchison mine in Limpopo Province is the onlyproducer of antimony in South Africa. The mine supplies concentrate to an adjacent plant,Antimony Products, which produces crude antimony trioxide for refining overseas. The mine alsoproduces gold (about 1 000 kg per year) as a by-product. The remaining life of the mine isapproximately seven years, which could be extended by five years if the Monarch shaft isdeepened.

During 2004, South Africa’s antimony concentrate production decreased by 6,1 percent to4 967t, compared with 2003 (Table 2). Local sales of antimony concentrate decreased by 22,8percent to 213 t while exports reduced by 5,1 percent to 4 762t. Antimony trioxide productiondecreased by 4,5 percent to 5 822t. Domestic sales of antimony trioxide decreased by 22,6percent to 233t, while export sales fell by 2,7 percent to 5 629 tons.

In 2004, the average annual MB antimony price was $2 713/t, 16,1 percent higher than in 2005.

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TABLE 1: WORLD RESERVES AND PRODUCTION OF ANTIMONY CONCENTRATES,2004

COUNTRY RESERVE BASE PRODUCTION kt* % Rank t* % Rank

China 2 400 61,5 1 126 000 81,5 1 CIS 770 19,7 2 16 780 10,8 2 South Africa 250 6,4 4 4 967 3,3 3 Bolivia 320 8,2 3 2 476 1,6 4 Australia x - - 1 800 1,2 5 Mexico x - - 595 0,4 6 USA 90 2,3 5 501 0,3 7 Guatamala x - - 400 0,3 8 Peru x - - 400 0,3 8 Canada x - - 100 <0,1 10 Other 75 1,9 549 0,3 - TOTAL 3 900 100,0 - 154 568 100,0 -

Sources: USGS, 2005, p 23WBMS, 2005, p 18DME, Directorate Mineral Economics.

Notes: * Metal content in concentrates and oresx Not specified, but estimates have been included in Other

TABLE 2: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OFANTIMONY MIC, 2000 - 2004

YEAR PRODUCTION LOCAL SALES (FOR) EXPORT SALES (FOB) Mass Mass Value Unit Value Mass Value Unit Value

t t R’000 R/t t R’000 R/t 2000 3 710 350 3 620 10 342 4 146 25 905 6 248 2001 4 827 228 2 771 12 154 4 500 26 830 5 962 2002 5 746 330 6 774 20 527 5 519 65 103 11 796 2003 5 291 276 5 475 19 838 5 020 63 649 12 679 2004 4 967 213 3 722 17 476 4 762 66 149 13 891

Note: Unit values were calculated before rounding of mass and rand values

OUTLOOK

In 2005, global output of antimony concentrate is expected to remain at the same level as newprojects resulting from investment in antimony mining to take advantage of the robust antimonymarket, are still in the development stage. Therefore, output in China is forecast to remainunchanged. Current trends suggest that antimony prices could exceed $3 500/t, as the shortageof supply is continuing to squeeze the market. The antimony industry will remain vulnerable tovolatile prices, however, the implementation of new blast furnace restoration technologies inChina, particularly by the smaller producers, will ease price fluctuations.

Although antimony’s applications in batteries are increasing, battery technology changes(including maintenance free batteries) and recycling have reduced the volume of primaryantimony consumed per battery. Future demand growth will depend on consumption of antimonytrioxide in flame-retardants, spurred on by tighter fire regulations and building codes. Othergrowth areas include the use of antimony trioxide in polymerisation catalysts in plastics, andsodium antimonite in certain glass grades.

In 2005, South Africa’s antimony concentrate production is expected to remain at the same levelwhile trioxide output is forecast to decline by 14,3 percent to 4 990 tons.

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TABLE 3: SOUTH AFRICA’S ANTIMONY MINES: AND REMUNERATION, 2000 – 2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 2000 1 203 36 406 2001 1 245 43 215 2002 1 384 47 829 2003 1 428 61 421 2004 1 308 62 024

REFERENCES

DME, Directorate Mineral Economics. Fortnightly Comment, Antimony’s allure regained, 17 June2005Metal Bulletin, Jan 2003 – December 2004, Internet Website, http://www.metalbulletin.comWorld Bureau of Metal Statistics, 2005. World Statistics Yearbook: 2005U.S. Geological Survey, 2005 Mineral commodity Summaries, January 2005: Internet Website, htt://www.usgs.govU.S. Geological Survey, 2005 Mineral Industry Surveys, August 2004: Internet Website,htt://www.usgs.govAmerican Metal Market, Find Articles Jan 2004 – June 2005: Internet Website,http://www.findarticles.comMetorex Groups 2005: Internet Website, http://www.metorexgroup.com

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COBALTA J Harding

DEVELOPMENTS DURING 2004/2005

World DevelopmentsEstimated world mine production of cobalt decreased by 3,1 percent to 46 900t (Table 1) in 2004from a revised figure of 48 400t in 2003; world refined production, on the other hand, rose by 10,2percent to 47 913t (Table 2). The DRC was the largest producer by country contributing 23,5percent (11 000t) to newly mined output, followed by Zambia with 19,2 percent (9 000t) andAustralia with 14,9 percent (7 000t). Canada (9 457t) was the top producer of refined cobalt whileChina (8 000t) and Finland (7 893t) ranked second and third, respectively. China’s refined cobaltoutput, which has steadily been moving up through the world production ranking order since2000, was boosted by a massive increase of 148 percent in 2003 followed by another big rise of75 percent in 2004.

TABLE 1: WORLD RESERVES AND MINE PRODUCTION OF COBALT*, 2004

COUNTRY RESERVE BASE MINE PRODUCTIONe

Mt % Rank kt % Rank D R Congo 4 700 36,2 1 11 000 23,5 1Zambia 680 5,2 4 9 000 19,2 2Australia 1 700 13,1 3 7 000 14,9 3Canada 350 2,7 5 5 200 11,1 4Russia 350 2,7 5 4 800 10,2 5 Cuba 1 800 13,8 2 3 400 7,2 6New Caledonia 860 6,6 7 1 500 3,2 7Brazil 40 0,3 8 1 300 2,8Morocco na 1 300 2,8South Africa^ 15 0,1 309 0,7Other 2 505 19,3 2 091 4,5 TOTAL 13 000 100,0 46 900 100,0

Sources: USGS, January 2005, p51^ Mineral Economics Directorate

Notes: e Estimate* Metal Content© Cuba’s mine production exported to Canada# New Caledonia production exported as concentrate

Total refined cobalt production amounted to 47 913t in 2004, an increase of 10,2 percentcompared with total refined output in 2003. An additional 1 632t was released from stockpile bythe USA’s Defence Logistics Agency (DLA), making a total of some 49 545t available to themarket during 2004.

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TABLE 2: REFINED COBALT PRODUCTION BY COUNTRY, 2003 AND 2004 COUNTRY

2003 2004 RANK* t t

Canada 8 697 9 457 1 China+ 4 576 8 000 2 Finland 7 990 7 893 3 Zambia 6 620 5 791 4 Russia 4 654 4 524 5 Australia 3 839 3 879 6 Belgium 1 704 2 947 7 Morocco 1 431 1 593 8 Brazil 1 097 1 155 10 D R of Congo 1 200 735 11 India 255 545 12 Japan 379 429 13 South Africa 271 309 14 France 181 199 15 Other 586 457 TOTAL 43 480 47 913 Source: Cobalt News, April, 2005, p 2

Notes: + Chinese production excludes Umicore production in China, which is included in Table 3

Major changes in membership of the Cobalt Development Institute (CDI) occurred in 2004. GiantRussian mining company Norilsk Nickel was accepted as a new member while the DRC’sGecamines lost its longstanding membership.

Decreasing concentrate availability was largely responsible for the decline in Chambisi Metals’cobalt production (Table 3). In contrast, the significant increase recorded by Umicore was theresult of the company responding to higher cobalt prices, while Inco’s rise in output reflected areturn to normal levels of production after a protracted strike affected company productivity in2003. Increased output from CTT, a subsidiary of Morroccan mining group MANAGEM,extended the steady growth in production levels recorded by the company during the previousfive years.

TABLE 3: CDI MEMBER COMPANIES’ REFINED COBALT PRODUCTION,2003 AND 2004

COMPANY COUNTRY 2003 2004 RANK (t) (t)

OMG Finland 7 990 7 893 1 Falconbridge Canada 4 556 4 670 2 Norilsk Russia 4 654 4 524 3 Chambisi Zambia 4 570 3 769 4 ICCI Canada 3 141 3 225 5 Umicore Belgium 1 704 2 947 6 QNI Australia 1 800 1 900 7 CTT Morocco 1 431 1 593 8 Inco Canada 1 000 1 562 9 Sumitomo Japan 379 429 10 Eramet France 181 199 11 TOTAL 31 406 32 711

Source: Cobalt News, April, 2005, p3 *

DLA sales amounted to 1 077t during 2003. Cobalt stocks totaled some 1 243t in DLAwarehouses at the end of 2004, down 555t from accumulated stocks in 2003, which means thatstockpiles could be exhausted in 2005 if selling continues at the authorized rate of 2 700t perannum.

World cobalt mine production is mainly a byproduct of either nickel or copper mining. Currently,about 36 percent of global cobalt output is a byproduct of nickel production. Nickel productionfrom a spate of new projects is expected to increase over the next decade and with the currenttendency to produce cobalt irrespective of price or demand for the metal, these new projectsalone could well supply some 75 percent of the annual anticipated increase in cobalt demand.

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Chinese economic growth currently remains the main driver of worldwide demand for the metal.Cobalt demand in China amounted to 9 376t in 2004 and prospects look good for continuing highlevels of consumption in an economy that has grown at an average annual rate of 9,4 percentsince 1978 and is anticipating annual GDP increases of above 7 percent per annum in thecoming decade.

Chinese resources of cobalt-bearing ore, however, are insufficient to satisfy domestic demandand cobalt processing facilities therefore depend on imported concentrates. Most of theseoriginate in the DRC and supplies could be in jeopardy should the cobalt price fall below $12/lb.Bearing in mind that China’s appetite for cobalt-bearing material could be sustained for sometime to come, $12/lb could provide crucial support at the lower end of the cobalt price range forthe foreseeable future.

During 2004 batteries overtook superalloys as the largest consumer of cobalt by sector (Fig, 1).Batteries now account for 21 percent of worldwide cobalt consumption. Superalloys captured 20percent of the market while the balance was attributed to: catalysts and ceramics/enamels etc,(11 percent each), hard materials and tyres-adhesives etc, (10 percent each), magnets (7percent) and feedstuffs-electrolysis-recording etc, (6 percent).

FIGURE 1: MAJOR USES OF COBALT IN 2004

Source: Cobalt Development Institute (CDI)

Cobalt is an important constituent of rechargeable Li-ion batteries which during the last few yearshave been replacing Nickel Metal Hydride (NI-MH) batteries in mobile phones, portable PCs andportable electronic devices. Rechargeable batteries accounted for about $6 billion of the $35billion battery market in 2004. Japan used to dominate the booming rechargeable battery market,but since 2001 the country has seen its market share being steadily eroded by risingconsumption levels in China and Korea. Japan’s market share has fallen from 82 percent in 2001to 65 percent in 2004.

Cobalt prices remained exceptionally buoyant during 2004 scaling levels close to those seenduring the last major bull market of the mid-1990s (Table 4). Strengthened by a sudden rise indemand at the end of 2003, the cobalt price for 99,8 percent material averaged $26,07/lb for themonth of January 2004. The price peaked in February at $27,61/lb and monthly averagesremained significantly above $20/lb until November, dropping to $17,98/lb in December. Duringthe first half of 2005 market activity subsided considerably largely due to lower demand fromChinese battery manufacturers. The average monthly price of high grade material has thereforetrended lower slumping to $14,27/lb in June. In 2004, 99,8 percent cobalt attained an annualaverage price of $24,15/lb, which more than doubled the 2003 average of $10,77 per pound.

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TABLE 4: COBALT PRICES+, 2002 - 2005

MONTH 2002 2003 2004 2005 $/lb $/lb $/lb $/lb

January 7,54 7,60 26,07 18,98 February 7,17 7,91 27,61 18,30 March 6,80 9,12 27,54 16,16 April 6,88 9,54 26,88 17,55 May 8,64 9,81 25,93 16,80 June 7,50 10,53 25,65 14,27 July 7,08 10,65 25,08 August 6,31 10,83 24,18 September 6,90 10,56 23,55 October 6,51 10,88 22,19 November 6,66 13,86 17,18 December 6,54 17,98 17,96 AVERAGE 6,67 10,77 24,15

Source: + Metal Bulletin

Note: Average Metal Bulletin free market buying and selling price for 99, 8 percent cobalt

Developments in South Africa and AfricaCobalt is produced as a by-product of six platinum-group metal mines and one nickel mine inSouth Africa. Cobalt production rose by 13,8 percent to 308 929 kg in 2004 (Table 5). Local salesvalue increased by 86 percent to R5,7 million despite a drop in local sales mass of 616 kg andexport sales revenue rose by 86,0 percent to R83,2 million. Because of the strengthening of therand between 2003 and 2004, earnings in US dollars from export sales of cobalt are even morestriking recording a massive increase of 169 percent to $12 9 million from $4,2 million in 2003.

During May 2005, South African junior mining company Metorex increased its stake in theRuashi – Etoile copper-cobalt mine in the DRC to 61 percent, paying $3 million to SentinelleGlobal Investments, also domiciled in South Africa. The company has an option to raise itsinvestment in Ruashi to 67 percent in May 2006 at a cost of $4,5 million. Metorex also has accessto about 3,2 million tons of stockpiled material at Ruashi - Etoile in Katanga province close to theZambian border.The project has an expected life of fifteen years and will produce between 7 000tand 10 000t of copper and between 1 100t and 1 300t of cobalt per annum. During the first halfof 2005, Chambishi Cobalt’s smelter in Zambia was reduced to 87 percent of its capacity as aresult of a protracted refurbishment programme at its Luanshya mine. The reduced feed to thesmelter is expected to last until September 2005.

OUTLOOK

After expanding spectacularly at around 30 percent per annum over the last five years, the cobaltmarket is expected to slow down to some 6 to 7 percent during the next five years. However, thekey to future cobalt price prospects in a very price sensitive market is the outlook forrechargeable batteries, currently the largest consumer of cobalt.

Over the next 10 years cobalt-bearing Li-ion batteries should increase their share of the marketat the expense of NiMH batteries. It is anticipated that this growth will be driven largely bygrowing demand for cellular phones and portable electronic equipment such as PCs.Furthermore, the stronger growth in demand will also hasten the shift in the main market forthese products from Europe, Japan and the USA to China, India Asia, the Middle East andEastern Europe. Cobalt is also a component of batteries being manufactured to power hybridmotor vehicles. Hybrid vehicle market penetration is projected to increase to 10 to 15 percent ofthe vehicle market by 2014.

The subdued superalloy market is unlikely to remain weak for much longer. Airbus and Boeingare predicting a return to growth conditions in the aerospace market, which could be in the orderof 8,5 percent per year between 2005 and 2020. Another more long-term growth sector is in gas-to-liquid technology where cobalt is used as a catalyst in the process that converts natural gasinto easily transportable liquid products.

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An average annual price of about $16,00/lb is forecast for 98,8 percent grade cobalt in 2005.Over the longer term, the metal could trade higher (up to $20/lb) during the next three years, butthe expected increased production coming on stream thereafter could trigger a fall in the price.Nevertheless, on the back of continuing Chinese demand for cobalt ore the price is unlikely tofall below the support level of $12,50/lb for the foreseeable future.

REFERENCES

Cobalt News ,April, 2005, London, pp 2 - 4U,S, Geological Survey, Mineral Commodity Summaries, January 2005: Internet Website,http://www,usgs,gov

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COPPERLA Themba

DEVELOPMENTS DURING 2004/2005

World copper mine production increased by 5,9 percent compared with 2003 to 14,5 Mt (Table1). Major copper producers in descending order were Chile (5,42 Mt), USA (1,16 Mt), Peru (1,04Mt), Australia (0,85 Mt), Indonesia (0,82 Mt) and Russia (0,75 Mt). Zambia and South Africa werethe leaders in Africa’s copper mine production at 410 kt and 86kt, respectively.

The large increase in production that occurred in Chile was attributed to a phase-four expansionproject at BHP Billiton’s Escondida, ramping up output to 237 kt, and increasing annualproduction by 400 kt to compensate for falling grades. Since 2001, intermittent stoppages inproduction at Escondida reduced output by 160 kt and at Caldeco by 100 kt. Peru had the largestyear-on-year increase of 16,4 percent output.

Global refined copper consumption was 16,4 Mt in 2004, representing a 6,4 percentimprovement compared with 2003. The high copper prices, driven by low inventory levels inrefined copper, encouraged reversal of cutbacks that were initiated prior to 2004, and addedalmost 1 Mt to supply in 2004. All regions experienced significant increases in copperconsumption; the highest copper consuming region was Asia (7,74 Mt) driven by China’sconsistent appetite for copper at 3,2 Mt. Refined copper consumption in other regions were asfollows: Europe (4,56 Mt), America (3,74 Mt), Africa (Oceania (0,17 Mt) and Africa (0,16 Mt).

Global copper consumption grew by 5,7 percent in 2004, with increases in the USA (7,0 percent),Asia (6,8 percent), China (5 percent) and Western Europe (1 percent).

The world copper market was very tight as demand outstripped supply. The refined copperproduction deficit totalled 344 kt in 2003, which increased to 719 kt in 2004. The scarcity ofcopper concentrates forced several Chinese copper smelters to close temporarily.

The London Metal Exchange (LME) copper settlement price averaged $2 865/t in 2004, amassive 61,1 percent rise compared with $1 779/t in 2003. The LME copper price averages at$2 423/t in January, increased to $3 009/t in March before declining to $2 687/t in June, and thengradually rose to the year-maximum of $3 145/t in December.

Improved demand for copper and the fall in LME warehouse stock levels from 950 kt in 2002,432 kt in 2003, to 49,4 kt in 2004, contributed to the rise in copper prices. The average SouthAfrican price was R19 235 per ton in copper mine production or 23,7 percent higher than in 2003.

Metorex South Africa discontinued the O’Okiep copper slag treatment operation and closed theMaranda zinc-copper mine in South Africa and the Chibuluma copper mine in Zambia. HoweverMetorex upped its funding for the Ruashi – Etoile copper mining project in the DemocraticRepublic of Congo to R250 million.

At Palabora Copper Mine in South Africa, the introduction of the underground block cavingmining system has proven to be problematic, and bottlenecks at ore withdrawal points wereencountered. Secondary breakage mechanisms (crushers) were installed to alleviate theseconditions. The run-of-mine production has decreased from 82 kt per day (open pit) maximum tothe present 30 kt per day (underground operation).

In 2004, South Africa’s mine production was 102,57 kt and the refined metal production totalled91,50 kt representing decreases of 15,1 percent and 17,9 percent, respectively, compared with2003. Local sales mass increased by 10,3 percent to 83,9 kt whereas export sales massdecreased by 36,9 percent to 29,3 kiloton.

OUTLOOK

Global copper mine output is expected to continue to rise by 8,0 percent to 15,66 Mt in 2005,following expansions and restarting mining areas put on hold in various major copper mines in

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Chile, the USA Australia and Indonesia. High copper prices have also motivated smaller coppermines to increase copper concentrate production. Canadian First Quantum Minerals with a 44,0percent share ownership in Mopani Copper mine in Zambia is planning to source 170 kt copperconcentrates in the Congo. This will contribute to the anticipated increase in Zambia’s copperproduction to 500 kt in 2005.

World refined copper production is anticipated to increase by some 3,0 percent. Global copperconcentrate is expected to be in surplus in 2005, because of limited copper smelter capacity.Furthermore, shutdowns of numerous copper smelters due to planned maintenance willaggravate copper concentrate bottlenecks and reduce refined copper output.

World copper demand is forecast to grow by 4,5 percent in 2005. Improved copper demand willbe driven by global economic growth, led by the economic recovery in the US and Japan. Inaddition, ongoing Gross Domestic Product (GDP) growth in China at the rate of 8,0 percentannually will lead to an increasing copper usage in improving standards of infrastructure,construction, housing and consumer goods.

As global copper supply will struggle to keep up with demand, and the London Metal Exchangecopper inventory is anticipated to decline to low levels, it is expected that the annual averageLME copper price will increase to $ 3 004/t in 2005.

TABLE 1: WORLD RESERVES, MINE PRODUCTION AND EXPORTS OF COPPER, 2004

COUNTRY RESERVE BASE* PRODUCTION* EXPORTS#

Mt % Rank kt % Rank kt % RankChile 360 38,3 1 5 417 37,4 1 2 975 36,0 1 USA 70 7,4 2 1 160 8,1 2 435 3,8 5 Peru 60 6,4 4 1 036 7,2 3 440 3,9 4 Australia 43 4,6 5 854 5,9 4 387 3,4 7 Indonesia 38 4,0 7 823 5,7 5 88 7,5 10 Russia 30 3,2 9 745 5,1 6 508 4,5 3 China 63 6,7 3 608 4,2 7 80 0,7 14 Canada 20 2,1 10 563 3,9 8 609 5,4 2 Kazakhstan 20 2,1 10 462 3,2 9 391 3,4 6 Zambia 35 3,7 8 412 2,9 10 339 3,0 8 Mexico 40 4,3 6 399 2,8 1 1 107 0,9 9 South Africa+ 13 1,4 14 86 0,1 18 29 0,4 11 Other 110 15,7 – 1 923 13,3 – 3 079 27,1 – TOTAL 940 100,0 – 14 488 100,0 – 11 351 100,0 –

Sources: WBMS, 2005, pp 24, 27, 31, 32USGS, 2004, p 57+ DME, Directorate Mineral Economics.

Notes: * Metal content# Metal content of concentrates, blister, anode and refined copperTotals may not add up due to rounding

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TABLE 2: SOUTH AFRICA’S AND LME CASH SETLEMENT COPPER PRICE, 2003–2004(MONTHLY AVERAGES)

S A COPPER PRICE LME CASH SETTLEMENT PRICE MONTH 2003 2004 2003 2004

R/t R/t $/t R/t $/t R/t January 16 294,2 13 301,23 1 647,7 14 302,0 2 423,6 16 766,2 February 16 306,1 15 244,2 1 683,8 13 975,5 2 759,5 18 678,0 March 15 889,7 16 356,3 1 659,0 13 338,4 3 008,7 19 885,7 April 16 564,9 19 038,3 1 587,5 12 239,6 2 948,7 19 324,9 May 15 281,5 16 911,1 1 648,3 12 642,5 2 733,5 18 538,9 June 15 775,1 17 610,2 1 686,5 12 323,4 2 686,7 17 288,9 July 15 138,2 15 841,6 1 710,0 12 910,5 2 806,7 17 205,9 August 14 695,3 16 335,3 1 760,3 13 008,6 2 846,1 18 378,7 September 14 815,8 16 428,3 1 789,5 13 099,1 2 894,9 18 955,5 October 14 902,9 18 199,3 1 920,5 13 366,7 3 012,3 19 254,0 November 15 242,9 16 953,4 2 055,4 13 832,8 3 122,9 18 919,5 December 15 764,7 16 785,2 2 201,3 14 411,2 3 145,4 18 030,5 YEAR AVERAGES 15 555,9 19 235,80 1 779,14 13 370,90 2 865,8 18 435,5

Sources: Business Day, Jan 2004–Dec 2004Metal Bulletin, Jan 2004–Dec 2004

TABLE 3: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OF COPPER,1995–2004

YEAR PRODUCTION LOCAL SALES EXPORT SALESValue Unit Value Mass Value Unit Value

kt kt R’ 000 R/t kt R’000 R/t1995 162 81 888 337 10 919 80 784 808 9 825 1996 152 77 779 367 10 074 77 709 370 9 267 1997 153 83 919 194 11 104 77 762 354 9 861 1998 166 74 711 048 9 604 86 770 802 8 912 1999 144 68 667 943 9 825 77 723 591 9 381 2000 137 76 975 095 12 807 49 598 509 12 338 2001 141 70 966 874 13 751 63 827 874 13 043 2002 130 80 1 381 519 17 197 51 761 829 14 909 2003 121 76 1 073 734 14 114 46 567 502 12 229 2004 103 84 1 542 829 18 381 29 583 293 16 495

Note: Unit values were calculated before rounding of mass and rand values

TABLE 4: SOUTH AFRICA’S COPPER MINES: EMPLOYMENT AND REMUNERATION,2000–2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 2000 4 112 355 010 2001 5 742 442 852 2002 5 107 343 2602003 4 952 438 181 2004 4 043 494 533

REFERENCES

World Bureau of Metal Statistics, 2005. World Metal Statistics Yearbook 2005: Ware, Herts, pp75 U.S. Geological Survey, 2004. Mineral Commodity Summaries, July 2004: Internet website:http://www.usgs.gov

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LEADL Maphango

DEVELOPMENTS DURING 2004/2005

In 2004, world lead mine production decreased slightly by 1,3 percent to 3,06 Mt compared with2003 (Table 1). China was the leading producer (0,95 Mt), followed by Australia (0,64 Mt), theUSA (0,44 Mt), Peru (0,31 Mt) and Mexico (0,13 Mt). Africa contributed 3,4 percent to the worldoutput and Morocco (46,0 kt) was the major producer in Africa followed by South Africa (37,5 kt).South Africa’s lead mine production declined by 6,2 percent to 37,5 kt (Table 2). This reductionin production was caused by the depletion of a portion of the Broken Hill orebody at BlackMountain mine, which contained higher-grade ore. In 2004, South Africa’s lead concentrateexports decreased by 29,7 percent to 44 kt compared with 2003.

World refined lead metal output increased marginally by 1,1 percent to 6,8 Mt. The leading threeproducers of refined lead were China (1,81 Mt), USA (1,27 Mt) and Germany (0,41 Mt), followedby Japan, Australia, UK, Mexico, Canada, Korea Republic, and Italy. Significant increases inproduction occurred in China (15,9 percent) and Germany (15,1 percent).

In 2004, production of refined lead by region was Asia (2,88 Mt), America (2,01 Mt), Europe (1,55Mt), Oceania (0,28 Mt) and Africa (0,10 Mt). Africa’s refined lead output in 2003 decreasedsignificantly by 26,8 percent because of a huge decline of 59,0 percent in Morocco’s production.Output in Asia rose by 9,6 percent to 2,88 Mt, offsetting the reductions in other regions. Asia andAmerica dominated the refined lead market contributing 42,2 percent and 29,5 percentrespectively to global output.

World consumption of lead metal grew by 4,1 percent to 7,08 Mt compared with 2003. Productionof lead metal in the western world was 4,59 Mt in 2004, 186 kt lower than in 2003, while demandimproved from 5,29 Mt in 2003 to 5,37 Mt in 2004, representing an increase of 1,5 percent.Consumption of refined lead metal in China increased by 14,1 percent to 1,35 Mt. The majorfactors driving growth in the lead metal market were the higher use in China for vehicle fleetexpansion, production of automotive batteries, and investment in the telecommunication andinformation technology industries. The decrease in LME stock levels during 2004, bearstestimony to this growth. LME lead metal stocks decreased steadily from 88,5 kt in January to40,5 kt in December 2004, representing a decline of 54,2 percent.

South Africa’s secondary lead metal production decreased by 1,2 percent to 64,1 kt during 2004(Table 2). Refined lead consumption, including imports, increased by 2,5 percent to 80,7 kt.South Africa imported 16,6 kt of lead metal, reflecting an increase of 20,3 percent compared with2003.

The LME price started at $758,38/t in January and reached a maximum of $974,90/t inDecember 2004 (Table 3).The average annual lead cash settlement price in 2004 was $886,63/t,reflecting an impressive increase of 72,2 percent compared with 2003. The record high pricesresulted from strong demand in China and diminishing stock levels. South Africa’s annualaverage price was R5 638,14/t in 2004, 47,4 percent higher than the previous year. During theyear, South Africa’s monthly average lead price followed a similar pattern to the LME prices,starting with a minimum of R4 534,44/t in January and reaching a maximum of R6 150,12/t inOctober before decreasing slightly to R5 880,93/t in December 2004.

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TABLE 1: WORLD RESERVES, MINE PRODUCTION AND EXPORTS OF LEAD, 2004

COUNTRY RESERVE BASE# PRODUCTION# EXPORTS##

Mt % Rank kt % Rank kt % Rank China 36 25,7 1 951 31,1 1 448 17,6 2 Australia 28 20,0 2 642 21,0 2 475 18,7 1 USA 20 14,3 3 438 14,3 3 354 13,9 3 Peru 4 2,9 5 306 10,0 4 299 11,8 4 Mexico 2 1,4 7 128 4,2 5 25 1,0 1 5 Canada 9 6,4 4 77 2,5 6 151 5,9 5 Ireland 1 0,7 8 65 2,2 7 64 2,5 10 Sweden 1 0,7 8 55 1,8 8 97 3,8 7 India 1 0,7 8 51 1,7 9 - - - South Africa* 3 2,1 6 38 1,2 13 31 1,2 14 TOTAL 140 100,0 - 3 058 100,0 - 2 539 100,0 -

Sources: ILZSG, May 2005USGS, 2005* DME, Directorate Mineral Economics.

Notes: # Metal content## Metal and contained metal

TABLE 2: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OF LEAD*,1995 - 2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Mass Value (FOR) Mass Value (FOB)

kt t R’000 R/t kt R’000 R/t 1995 88 1 958 3 509 1 792 86 98 286 1 142 1996 89 62 132 2 122 87 191 136 2 206 1997 83 - - - 86 153 771 1 791 1998 84 2 244 6 370 2 839 77 116 029 1 514 1999 80 4 379 13 190 3 012 67 90 758 1 346 2000 75 6 610 19 755 2 989 76 104 300 1 372 2001 51 5 949 22 147 3 716 50 92 825 1 862 2002 50 4 882 22 923 4 782 41 88 833 2 214 2003 40 339 1 284 3 789 44 108 600 2 470 2004 37 - - - 31 120 599 3 895

Notes: Metal-in-concentrateUnit values calculated before rounding of mass and rand values

TABLE 3: SOUTH AFRICAN AND LME SETTLEMENT PRICES (MONTHLY AVERAGES),2003 AND 2004

SOUTH AFRICAN LEAD PRICE LME CASH SETTLEMENT PRICE MONTH 2003 2004 2003 2003 2004 2004

R/ton* R/ton* $/ton R/ton $/ton R/ton January 3 987,03 4 534,44 444,60 3 859,84 758,38 5 246,40 February 3 878,15 5 294,78 475,83 3 950,86 888,47 6 013,70 March 3 959,19 6 021,85 456,67 3 673,41 886,48 5 879,84 April 3 684,04 5 903,96 437,38 3 370,80 753,67 4 939,33 May 3 377,51 4 978,28 463,50 3 552,82 808,89 5 485,97 June 3 574,29 5 510,16 468,02 3 698,62 871,32 5 607,03 July 3 707,13 5 606,91 514,78 3 885,61 939,59 5 758,47 August 3 903,09 5 779,42 496,52 3 670,38 921,79 5 952,46 September 3 683,18 6 003,29 521,27 3 818,09 935,45 6 124,30 October 3 828,22 6 150,12 587,33 4 089,99 932,76 5 958,10 November 4 108,35 5 993,54 622,33 4 187,47 967,80 5 860,80 December 4 207,16 5 880,93 692,07 4 509,46 974,90 5 588,42 AVERAGE 3 824,78 5 638,14 515,03 3 855,61 886,63 5 701,23

Sources : ILZSG, May, 2005* Fry’s Metals, 2005

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TABLE 4: SOUTH AFRICA’S LEAD/ZINC MINES: EMPLOYMENT AND REMUNERATION,2000 – 2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 2 000 1 346 97 955 2 001 1 812 114 422 2 002 1 780 122 659 2 003 1 772 127 268 2 004 1 593 115 082

OUTLOOK

According to the International Lead and Zinc Study Group (ILZSG), global lead mine productionis forecast to increase by 10,8 percent to 3,37 Mt in 2005, due to expected rises in production inAustralia (23 percent), China (12 percent) and Europe (11,5 percent).

World refined lead metal output is anticipated to reach 7,09 Mt in 2005, 3,7 percent higher thanin 2004. This growth will be led primarily by expansions in China and Europe. For the first time infive years, the Group is expecting the European lead metal output to increase in 2005 by 8,8percent.

Lead metal demand in China is predicted to increase by 8,1 percent to 1,46 Mt; this would be themain driving force behind an anticipated 2,5 percent rise in world consumption to 7,25 Mt. Thestrong demand is being stimulated by the expansion of the automobile sector in China.Consumption in both Europe and the USA is expected to be similar to that of 2004, owing to ashift in battery manufacturing to lower cost producing countries in recent years.

Chinese net exports of refined lead metal to the West are expected to decline by 6 percent to380,0 kt. in 2005.

South Africa’s lead mine production is forecast to rise by 10,7 percent to 41,5 kt during 2005, dueto increasing tonnage that will be hoisted. Lead-in-concentrate exports are projected to reach54,6 kt in 2005, 76,1 percent higher than in 2004. Secondary lead production is anticipated toimprove to 66,5 kt, 2,4 kt more than in 2004.

REFERENCES

International Lead and Zinc Study Group, LZ/SC/594 of May 2005.International Lead and Zinc Study Group, Lead and Zinc Market Review and Outlook for 2005.International Lead and Zinc Study Group, Monthly Bulletin on Lead and Zinc Statistics, May2005.Metal Bulletin Research, Base Metals Monthly, May 2005.U.S. Geological Survey, 2005 Mineral Commodity Summaries, January 2005: Internet Website,htt://www.usgs.gov

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NICKELA J Harding

DEVELOPMENTS DURING 2004/2005

World nickel mine production grew by 3,4 percent to reach 1295,4 kt in 2004. Russia was onceagain the largest producer by country contributing 18,5 percent to total world output, followed byAustralia and Canada with 14, 6 and 14,4 percent, respectively (Table 1). Among the five topglobal producers, Russia, Australia and Canada recorded expanded output while productiondeclined in Indonesia and New Caledonia. The most significant growth in mine productionoccurred in Canada with total output climbing to 186,5 kt from 162,8 kt in 2003, an increase of14,6 percent.

Total world refined production increased by 4,5 percent to 1 254,3 kt. Russian production ofrefined metal grew by marginal 2 kt to 262 kt compared with 2003; Australian output fell by 3.6percent while Canadian production jumped by 21,8 percent to 151,5 kt. The refined nickel marketwas dominated by Russia, Japan, Australia and Canada.These four countries accounted for 56,3percent of total world refined production, while China, maintaining its current reputation as theworld’s most dynamic industrial growth centre, increased its refined output by 12,2 percent to72,6 kilotons.

TABLE 1: WORLD NICKEL RESERVES, MINE AND REFINED PRODUCTION, 2004

COUNTRY RESERVE BASE MINE PRODUCTION REFINED PRODUCTIONMt % Rank Kt % Rank Kt % Rank

Russia 9,2 6,5 7 240,0 18,5 1 262,0 20,9 1Australia 27,0 19,0 1 188,6 14,6 2 123,3 9,8 4Canada 15,0 10,5 3 186,5 14,4 3 151,5 12,1 3Indonesia 13,0 9,1 4 142,7 11,0 4 7,3 0,6 18New Caledonia 12,0 8,4 5 118,2 9,1 5 43,0 3,4 9Colombia 1,1 0,8 11 75,0 5,8 6 48,8 3,9 8Cuba 23,0 16,2 2 71,0 5,5 7 39,6 3,2 11China 7,6 5,3 9 63,0 4,9 8 72,6 5,8 5South Africa* 12,0 8,4 5 39,9 3,1 9 39,9 3,2 10Brazil 8,3 5,8 8 36,0 2,8 10 26,2 2,1 14Dominican Republic 1,0 0,7 12 29,5 2,3 11 29,5 2,4 13Botswana 0,9 0,6 13 25,2 1,9 12 12Greece 0,9 0,6 13 21,7 1,7 13 18,1 1,4 15Venezuela 0,6 0,4 15 18,0 1,4 14 18,0 1,4 16Philippines 5,2 3,7 10 17,0 1,3 15Zimbabwe 0,3 0,2 16 7,6 0,6 16 13,3 1,1 16Finland - 49,6 4,0 7Norway - 71,4 5,7 6

Japan - 169,6 13,5 2UK - 38,5 3,1 12France - 12,1 1,0 17USAOther 5,1 3,6 20,0 1,6TOTAL 142,2 100,0 1279,9 100,0 1254,3 100,0

Sources: USGS, Mineral Commodity Summaries, January 2005 (for Reserve Base)International Nickel Study Group, 2005 (for production data)* Mineral economics Directorate

Notes: All data refer to nickel content

Some 67 percent of the primary nickel produced each year is consumed in the production ofstainless steel. Demand for nickel, therefore, depends mainly on the health of the stainless steelindustry, which in turn is tied to the performance of the global economy. Despite a 30 percentincrease in the oil price during the latter half of the year, real world economic growth averagedabout 5,1 percent in 2004. Emerging economies, such as China, India, Malaysia, Indonesia andThailand accounted for most of the rise in global GDP, but significant expansions also occurredin the USA and the CIS, while in Japan and the EU, the economic growth rate was less than threepercent.

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Global stainless steel output climbed by 7,8 percent to reach 24,6 Mt in 2004: thus maintainingits 6 percent average long-term surge since 1950. Expansions in production continued stronglyin China, where a 32 percent year-on-year increase was recorded, while South Korea and Indialifted their output sharply with increases by 17 and 11 percent, respectively. The Asian region asa whole averaged 11,8 percent growth in stainless steel production compared with 2003; inWestern Europe and Africa 6,2 percent more stainless was fabricated, while the Americasrecorded a 3,4 percent increase. Central and Eastern Europe provided the only negative notewith output declining by 35,4 percent.

Worldwide nickel usage increased by 2,5 percent in 2004. Japan, with total consumption for theyear at 190 000t, remained the main nickel-using country but two other Asian countries, Chinaand South Korea, consumed over 100 000t of primary nickel during the year. Other majorcountries with a high consumption of nickel were the USA (151 600t) and France (106 000t).

The nickel price was subjected to more volatility during 2004 than in 2003. Continuing itsmeteoric rise which began in earnest in August 2003, the average monthly nickel price escalatedto a peak of $15 327/t in January 2004; however, after the end of February the price plungeddramatically to a low-point of $11 114/t in May as consumers were reluctant to pay the highprices and switched to non-nickel containing ferritic grades. The price nevertheless surged againduring June and July in response to low nickel stocks being reported at the end of May and finallysettled down to an average of $13 698/t in December 2004. During the first half of 2005, the priceresumed its strong upward trend, once again on the back of falling nickel stocks, with the monthlyaverage exceeding $16 000/t in May. The average annual price for 2004 was $13 817/t whichrepresents a substantial increase of 43,5 percent on the average of $9 628/t recorded in 2003(Figure 1).

FIGURE 1: MONTHLY AND ANNUAL AVERAGE NICKEL PRICES, 1999 - 2004

Nickel prices have risen to their highest levels since 1989. The higher prices were associatedwith excessive volatility which has raised fears among nickel producers that nickel-bearingstainless austenitic steels could be replaced in some applications. Significant moves towardssubstituting ferritic for austenic stainless have already been made, especially in Japan, Chinaand India, where series 200 stainless steels, which also use some manganese instead of nickel,are being substituted for 304 grade austenitic steel. The high volatility in price has promptedsuggestions that a producer price for nickel should be re-introduced.

A new source of demand for nickel is the application of nickel-metal hydride (NiMH) batteries topower gasoline-electric hybrid vehicles. Demand for gasoline-electric hybrid vehicles has beengrowing in the main industrialized economies since the beginning of the new millennium as aresult of political pressure to reduce the levels of pollution being emitted by conventionalautomobiles. During 2004 rising oil prices have accelerated the demand for more gasoline-hybridvehicles and at least four automobile manufacturers are believed to be planning to use NiMH

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batteries to power their gasoline-electric hybrid vehicles for the 2006 and 2007 model years.Furthermore, battery modules being developed at the new facility in Springboro, Oklahoma, arebeing manufactured for a variety of applications in addition to the transportation market.Nickel is mined in roughly equal amounts from sulphide and laterite ores. The main sulphidedeposits, which are usually exploited by underground methods, occur in Russia, Australia,Canada and South Africa (mainly associated with platinum-group metal deposits), whereaslaterite ores, located principally in Western Australia, New Caledonia, Indonesia, Colombia,Cuba, Venezuela, Brazil and the Dominican Republic, are worked as open-pit mines.

Despite the technical and financing difficulties experienced with high-pressure acid leachtechnology plants (HPAL) some three to four years ago, the consistently higher nickel prices forthe last two years has resulted in a significant number of new nickel projects being announcedamong which HPAL technology features prominently. The HPAL plants were developed to exploitabundant low-grade laterite ores in Western Australia. Murrin Murrin is one of these Australianprojects that had barely managed to achieve 70 percent of its full capacity by 2003 even thoughit was commissioned some five years ago. Murrin Murrin’s is now expected to reach its full designcapacity by about 2007. Another Western Australian laterite project previously considereddubious is BHP Billiton’s Ravensthorp, which is expected to come into full production in 2007 or2008. Other laterite projects from which future production can be anticipated are Moa Bay inCuba, Goro in New Caledonia and Chinese-financed Ramu in Papua New Guinea.

A sulphide project that has long been awaited is Inco’s massive Voisey’s Bay sulphide deposit inLabrador. This project was originally slow-tracked because of the expected onset of new lateriteproduction, but its progress was also protracted by legal and titular problems with regulatoryauthorities. The construction of a mine began in mid-2002. Progress remains on track and it isnow slated to achieve full capacity with an annual output of 50 000t of nickel in 2007.

TABLE 2: SOUTH AFRICAN PRODUCTION AND SALES OF NICKEL, 1995 – 2004

YEAR PROD LOCAL EXPORT TOTALMass Mass Value (FOR) Mass Value (FOB) Mass Value

Kr Kt R’1000 R/kg Kt R’100 R/kg Kt R’10001995 29,8 13,5 381 736 28,3 16,7 469 783 28,1 30,2 851 5191996 33,9 10,3 332 536 32,2 21,4 650 944 30,5 31,7 983 4801997 34,8 13,2 394 607 30,0 20,4 609 243 29,6 33,6 1 003 8501998 36,7 14,8 376 398 25,4 22,6 598 311 26,5 37,4 974 7091999 36,2 19,2 653 027 34,1 16,2 494 716 30,5 35,4 1 147 7432000 36,6 20,8 1 188 509 57,2 15,3 862 468 56,5 36,1 2 050 9772001 36,4 22,2 1 102 557 49,6 14,3 707 130 49,5 36,5 1 809 6872002 38,5 22,6 1 579 025 69,9 15,9 1 060 113 66,6 38,5 2 639 1382003 40,8 24,0 1 647 922 68,5 16,1 1 081 275 67,2 40,1 2 729 1972004 39,9 25,0 2 139 683 85,6 17,5 1 513 381 85,3 42,7 3 653 062

Developments in South Africa and AfricaNickel production in South Africa is mostly derived as a by-product of platinum-group metal(PGM) mining, with a very modest portion arising from copper mining. Nickel as the primaryproduct is mined at only one operation, Nkomati Nickel, which is small by world standards andaccounts for about 13 percent of total South African nickel output. In 2004 local sales massincreased by 4,2 percent to 25,0 Kt, most of which was consumed in South Africa’s expandinglocal stainless steel production, while nickel exports sales in mass terms climbed by 8,7 percentto 42,7 Kt. Domestic sales of nickel improved in value by 29,8 percent to R2,14 billion reflectingbumper returns due to a runaway nickel price. Export sales revenue also excelled risingimpressively by 40 percent to R 1,5 billion. However, expressed in dollars, the currency in whichexports are earned, export sales performance was even more impressive climbing by 64,2percent to $234 636 as gains in the dollar price of nickel on the international marketoutperformed the mitigating effect of a stronger rand-dollar exchange rate.

During 2004, Lion Ore Mining International acquired 50 percent of Nkomati Nickel in a strategicshareholding agreement which will allow production from the mine to be expanded three-foldfrom its current 5 500 t/a to 16 500 t/a in 2008. Since it was established in 1997, Nkomati hasfocused its main operations on a high grade nickel ore body averaging about 2,2 percent nickelthat will be largely depleted by 2007. The joint venture between Lion Ore and Nkomati’s owner

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African Rainbow Minerals (ARM) will enable it to mine a considerably lower grade but muchlarger orebody using Lion Ore’s Activox processing technology and thus increase the life of themine by an additional 16 years.The same processing technology has been applied in Botswana, where Lion Ore has acquired85 percent of the Tati Nickel Mine which includes a 43,4 percent stake bought from AngloAmerican in 2002. Here the two ore bodies involved are the Selkirk and Phoenix deposits. Thehigher grade Selkirk deposit has been worked out and current operations are targeting the muchlower grade Phoenix orebody also using the Activox process. This new open pit mine is expectedto have a life-of-mine lasting until to 2014.

Zimbabwe’s Bindura Nickel Corporation (BNC) has announced plans to add another nickel mineto its current stable of mines, the Trojan, near the town of Bindura and Shangani, southwest ofGwere; the new mine, Hunter’s Road, is anticipated to come on stream in 2011 with a life-of-mineof at least 11 years.

Impala Platinum and Dynatec Corp have formed a 50-50 percent joint venture to developDynatec’s Ambatovy Laterite project in Madagascar. A feasibility study completed on Ambatovyindicates a potential output of 60 000 tons per annum of nickel and 5 600 tons per annum ofcobalt. The JV agreement proposes the construction of a $230 million refinery adjacent toImpala’s existing one which is located in Springs, Gauteng, to process the mine’s production.

OUTLOOK

Due to cutbacks in world stainless steel production from about the middle of the year in responseto the prevailing high nickel prices, the nickel market is generally expected to end 2005 insurplus. The magnitude of the anticipated surplus varies according to the decline in estimateddemand from sectors other than stainless steel. By mid-year the only area of positive growth wasChina with consumption having fallen elsewhere. Current estimates of a surplus vary from 6 000tto as much as 50 000 tons.

Despite the large number of new projects announced on the back of the high prices attained in2004 and early 2005, the outlook for the nickel market remains positive. The current surplus inthe nickel market is believed to be temporary as many of the new projects will come on streamonly after 2006 and take time to ramp up to full production. The nickel price is expected toaverage about $14 500 in 2005.

Most of South Africa’s nickel production is tied to platinum-group metal mining and thereforefuture growth in its output will be largely determined by decisions taken by the major platinumminers to exploit new reserves. Since 2003, some projects have been delayed because of thestrong rand and with the average rand-dollar exchange rate expected to be slightly stronger in2005 than 2004, the climate affecting the rate of new project development remains unchanged.Nkomati is planning to triple its production by 2008 which should be easily absorbed byanticipated domestic expansions in stainless steel production. In addition to Columbus Stainless,there is also the possibility that a new stainless steel plant may be built not too far into the future.

REFERENCES

U,S, Geological Survey, 2005, Mineral Commodity Summaries, January 2005: Internet Website,http://www,usgs,govInternational Nickel Study Group in Mining Journal, London, June 17, 2005, pp 16–19

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TITANIUM L A Themba

INTRODUCTION

Titanium occurs in heavy mineral sands deposits on shores of lakes, rivers and oceans.The mostimportant economic titanium minerals are rutile, ilmenite, leucoxene and anatase. Titaniumdioxide content of ilmenite deposits ranges from 35 to 65 percent, while rutile concentratescontain 92 to 95 percent TiO2. In South Africa, ilmenite is upgraded by smelting, which separatesthe iron content, to produce a titanium slag with TiO2 content of up to 85 percent. In Australiailmenite is upgraded by hydrometallurgical methods to produce synthetic rutile.

PROPERTIES AND MAIN MARKETS

Titanium dioxide pigment accounts for 94 percent of world demand for titanium and 3 percent isused to produce titanium metals and metal alloys. The pigments are ultra-white, highly refractiveand absorb ultra violet light, and the bulk of production is used in paint and plastics. Titaniummetal has a high strength-to-weight ratio, and is used in the aerospace industry. Because of itsnon-toxicity and inert properties, other titanium applications include foods, pharmaceuticals(tooth-pastes, sun-screens, and cosmetics), and prostheses.

DEVELOPMENTS DURING 2004/2005

World titanium mine production was 4 800 kt in 2004 (Table 1), almost unchanged compared with2002 and 2003. Major producers in descending order of importance were Australia, South Africaand Canada, which collectively accounted for 60,0 percent of global titanium output. Minorproducers of titanium were Norway (7,8 percent), USA (6,9 percent) and India (5,9 percent).

World titanium feedstock demand exceeded supply in a tight market as full utilisation ofconsumption capacity in titanium plants was unable to sustain inventories. In Asia- Pacificregion’s titanium consumption grew by 9 percent of which China accounted for more than half.Chinese titanium pigment production was 460 kt in 2004, and an additional 218 kt were imported.

During 2004, Iluka Resources, on heavy studies of embarked heavy minerals projects in theMurray Basin, in the state of Victoria, Australia and are at various stages of geologicalexploration, feasibility studies and development.The two mineral sands deposits which comprise,the A$270 million Douglas project are at an advance stage and production is scheduled to startin the first half of 2006 and 2007, rising to a total combined annual production level of 180 kt ofrutile. Furthermore, first production is expected in the second half of 2007 from the mineexpansions at Kulwin, Woornack and Rownack in the northern Murray Basin.

During 2004 in South Africa, Australian Mineral Commodities (MRC) continued to conductexploration and development of the Xolobeni Mineral Sands Project and Tormin Mineral SandsProject. Xolobeni Mineral Sands in the eastern Cape is a 364 Mt resource with 5 percent valuableheavy minerals content and is expected to produce 400 kt concentrates over 25 years life-of-mine. MRC has submitted the Mineral Rights Application to the Department of Minerals andEnergy; and if successful the outcome will dictate the mining and development scheduled tocommence in 2008 and 2009. The Tormin Mineral Sands deposit is located on the west coast ofSouth Africa. Exploration discovered deposits of the heavy minerals, ilmenite, zircon, rutile andleucoxene. Feasibility studies will commence in 2005.

In Malawi, 2 billion tonnes heavy minerals sand-dunes deposits are located on shores of LakeMalawi. Feasibility studies are in progress on the proposed $304,0 million titanium project thatinvolves mining 500 kt ilmenite concentrate annually from Senga Bay and Makanjila as smelterfeedstock, to produce 250 kt titanium dioxide slag.

In Mozambique, Kenmare Resources’ development of the Moma titanium mine in NampulaProvince is continuing and production will start production in the last quarter of 2006. It isanticipated that the titanium mine will produce 700 kt ilmenite, 60 kt zircon and 17 kt rutileannually over a 20-year period. The mine will employ 436 workers and an additional 1500 in

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ancillary and support services and contribute 2,5 percent towards GDP in Mozambique.During 2004, the titanium market was tight, with higher prices as demand outstripped supply.Theprices of different titanium products were: titanium slag $ 470/t; ferro-titanium $2 500/t andtitanium metal sponge $31 500/t.

TABLE 1: WORLD RESERVES, MINE PRODUCTION TITANIUM, 2004

COUNTRY RESERVE BASE PRODUCTION Mt % Rank kt* % Rank

Australia 250 19,2 1 1130 23,5 1South Africa* 220 16,9 2 1090 22,7 2Canada 12 0,9 7 720 15,1 3Norway 60 4,6 4 350 7,3 4Ukraine 13 1,0 6 290 6,2 6USA 59 4,5 5 300 6,3 5India 210 16,2 3 250 5,2 7Other 476 36,7 - 670 13,9 -TOTAL 1300 100 4 800 100

Sources: BGS, 2004, p 304 - 305USGS, 2004, p 191 - 192* DME, Directorate Mineral Economics.

OUTLOOK

Global titanium feedstock output is forecast to increase by 3 percent in 2005 as new greenfieldand brownfield projects will be established mainly in China. The capacity of major titaniumpigment production according to region is North America (1,73 Mt), Europe (1,43 Mt) and China(571 kt) and is expected to run at full capacity to reduce the production shortfall. It is estimatedthat China’s titanium pigment output will reach 900kt in 2010.

World demand for titanium is being, driven by strong pigment demand from China and India.Economic recovery will raise demand for titanium feedstock during the United States paintseason and pigment producers are expected to continue to operate at full production capacity.

Historical events had impacted negatively on the market for titanium metal since the World TradeCentre attack in 2001, specifically the aerospace industry. The emergence of SARS and the Iraqiwar stifled economic recovery. Demand for titanium sponge in the USA, the world’s largestmarket, decreased by 34 percent in 2002 and milled products by 30 percent. This situation has,however, changed and the titanium metal market will be driven by the aerospace industry withimproved global demand expected to peak at 75 kt by 2007.

Analysts envisage strong demand for titanium feedstock in tight supply conditions, which isanticipated to boost prices above average in 2005 and 2006. Additionally, world titaniumfeedstock capacity constraints and low stocks levels will induce intermittent price spikes. Pricesof ilmenite and rutile are expected to reach a maximum of $140/t and $600/t respectively. In2005, annual average titanium metal sponge prices are forecast at above $31 500 /t in 2005 andferro-titanium prices at $2 600 per ton.

REFERENCES

Metal Bulletin, June 2001 – December 2004Metal Bulletin Research, Jan 2003 – June 2004U.S. Geological Survey, 2004. Mineral Commodity Summaries, January 2004: Internet Website:http://www.usgs.govWorld Bureau of Metal Statistics, 2005. World Statistics Yearbook 2005: Ware, Herts, pp 64 Mining Review Africa Issue 1, 2005. Titanium Projects Could Help Develop The Nacala Corridor:Internet website: http://www.miningreview.comAll Africa Review,2005. Moma Titanium Project on tract: Internet website:http://www.allafrica.com MBendi Information for Africa, 2005. South Africa – Mining: Heavy minerals mining: Internetwebsite: http://www.mbendi.co.za

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ZINCL Maphango

DEVELOPMENTS DURING 2004/2005

World zinc mine output was 9,64 Mt in 2004, a marginal increase of less than a percentcompared with 2003 (Table 1). China was the leading world producer (2,26 Mt) followed byAustralia (1,30 Mt), Peru (1,21 Mt), Canada (0,79 Mt), the USA (0,74 Mt), Mexico (0,46 Mt) andIreland (0,44 Mt). In Africa, zinc mine production improved to 0,35 Mt in 2004 compared with 0,26Mt in 2003, contributing 3,6 percent to global output.

Zinc mine output in Europe rose by 1,8 percent to 1,0 Mt in 2004. Zinc mine output by country indecreasing order of magnitute was Ireland (0,44 Mt), Sweden (0,20 Mt), Russian Federation(0,18 Mt) and Poland (0,15 Mt).

Global refined zinc output increased by 2,9 percent to 10,2 Mt in 2004. The largest producer ofrefined zinc was China (2,52 Mt), followed by Canada (0,81), Korea Republic (0,67 Mt), Japan(0,64 Mt), Spain (0,53 Mt), Australia (0,47 Mt), Germany (0,36 Mt), the USA (0,35 Mt), Mexico(0,34 Mt) and Kazakhstan (0,34 Mt). Zinc stock levels on the London Metal Exchange (LME)amounted to 629 kt in December 2004 from 740 kt in December 2003, representing a decline of15,0 percent.

World consumption of zinc metal increased by 6,5 percent to 10,5 Mt in 2004. The majorconsumer of zinc was China (2,47 Mt), followed by the USA (1,25 Mt), Japan (0,62 Mt), Germany(0,51Mt) and Korea Republic (0,48 Mt). Consumption was driven mainly by growth in China andEastern Europe. China has moved from being a net exporter of zinc metal to become a netimporter due to higher domestic demand. Consumption of zinc metal in China increased by asignificant 14,6 per cent to 2,47 Mt compared with 2003.

In 2004, western world refined zinc metal supply was 6,67 Mt, slightly up by less than onepercent, whereas demand grew by 4,7 percent to 7,43 Mt. The excess demand was met bydeclining stock levels and imports of refined zinc.

The Anglo American Skorpion zinc mine and refinery started commercial production in May 2004after being commissioned in September 2003. The zinc refinery plant is the only one in southernAfrica that produces zinc ingots. Skorpion produced 119,2 kt of zinc during 2004.

Kumba Resources and American Mineral Fields are preparing to conduct a feasibility study tomanage the Kipushi zinc mine in the Democratic Republic of Congo. Kipushi, with a totalresource base of 26 Mt grading 19 percent zinc and 2 percent copper, is expected to producebetween 30 kt and 50 kt of zinc concentrate per year.

South Africa’s zinc mine output fell by 22,3 percent to 32,0 kt in 2004 (Table 1). The decrease inproduction was due to the closure of Metorex’s Maranda operation in July 2004. Refined zincmetal output was 105,0 kt in 2004 (Table 3), representing a reduction of 6,3 percent comparedwith 2003, owing to lower concentrate grades which affected stable production. Imports of zincconcentrate by Zincor rose by 12,3 kt to 69,3 kt in 2004 compared with 2003, while exports ofzinc metal diminished by 41,7 percent to 16,1 kt. Domestic demand strengthened from 86,0 kt to90,9 kt in 2004.

Zincor, a division of Kumba Base Metal Ltd is the only zinc refinery in South Africa, and most ofthe zinc metal it produces is consumed locally. Zincor sources its zinc concentrate from RoshPinah in Namibia and Black Mountain in Northern Cape. Kumba Resources’ Rosh Pinah mineproduced a record 124 kt of zinc concentrate in 2004, an increase of 14,8 percent compared with2003. This significant increase was due to higher feed grades, de-bottlenecking and improvedefficiency on the mine.

The average LME zinc cash settlement price in 2004 was $1 047,76/t, 26,5 percent higher thanin 2003 (Table 5). Zinc metal prices traded above the $1 000,00/t level for most of the year,starting at $1 017,00/t in January. Zinc prices were slightly below $1 000,00/t in July, August and

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September, but rose to a maximum of $1180,21/t in December. The strengthening was due tofavourable market conditions in the zinc industry worldwide, as demand increased and stocklevels fell. This trend is expected to continue in 2005. In 2004, South Africa’s average zinc pricewas R6 899,71, 10,8 percent higher than in 2003. Zinc prices were fairly steady during the yearwith a high of R 7 520,07/t in March 2004 and a low of R6 244,12/t in August 2004.

OUTLOOK

World zinc mine production is anticipated to increase by 5,2 percent to 10,15 Mt in 2005.Countries that are expected to drive this growth are Australia, China, India, Ireland, Greece, theRussian Federation and Sweden; the only significant decrease in output will occur in Canada.

World refined zinc output is forecast to rise by 3,3 percent to 10,49 Mt in 2005, despite areduction in Europe due to expected downscaling of Umicore’s operation in France. Theexpansion projects at Vedanta’s Hindustan Zinc operation will boost production of refined zincmetal in India by a significant 28 percent. Increases in output are also envisaged in China, Japan,Kazakhstan and the Republic of Korea.

China’s net imports of refined zinc metal are predicted to be more than 100 kt in 2005. China willsource most of its imports from Kazakhstan as has been the case in recent years.

World consumption of refined zinc metal in 2005 is forecast to increase by 2,4 percent to 10,7Mt, due mainly to China’s strong demand, which is expected to grow by 8,7 percent to 2,7 Mt in2005. It is anticipated that consumption during 2005 in both Europe and the USA will be similarto that of 2004.

South Africa’s zinc mine production is expected to increase by 3,1 percent to 33,0 kt in 2005, asmore ore will be hoisted. It is anticipated that Kumba Resources’ Rosh Pinah zinc mine inNamibia will increase output by 8 percent to 134,0 kt in 2005.

Refined zinc metal production in South Africa is forecast to rise by 4,4 percent to 109,6 kt in2005. Refined zinc metal consumption is expected to reach 109,9 kt in 2005, 19,0 kt more thanin 2004. The Skorpion zinc mine and refinery operation is scheduled to reach full capacity at 150kt zinc metal per year, contributing about 4 percent of Namibia’s GDP. Anglo American will exportabout 90 percent of production to Asian, European and North American markets, with theremaining 10 percent to be delivered to South Africa.

TABLE 1: WORLD RESERVES, MINE PRODUCTION AND EXPORTS OF ZINC, 2004

COUNTRY RESERVE BASE# PRODUCTION# EXPORTS##

Mt % Rank kt % Rank kt % Rank China 90 20,0 1 2 264 23,5 1 224 3,1 11 Australia 80 17,4 3 1 298 13,5 2 1 285 17,6 1 Peru 20 4,3 7 1 209 12,5 3 992 13,6 2 Canada 31 6,7 5 791 8,2 4 842 11,5 3 USA 90 19,6 2 739 7,7 5 746 10,2 4 Mexico 25 5,4 6 462 4,8 6 251 3,4 9 Ireland - - - 438 4,6 7 445 6,1 5 Kazakhstan 35 7,6 4 384 4,0 8 - - - India - - - 341 3,5 9 - - - South Africa* 15 3,3 8 32 0,3 25 16 0,2 24 Other 72 15,7 - 1 677 17,4 - 2 494 34,2 - TOTAL 460 100,0 - 9 635 100,0 - 7 295 100,0 -

Sources: ILZSG, May 2005USGS, January 2005* DME, Directorate Mineral Economics.

Notes: # Metal content## Metal and contained metalTotals rounded and may not add up

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TABLE 2: SOUTH AFRICA’S PRODUCTION AND SALES OF ZINC METAL – IN -CONCENTRATE 1995 - 2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Mass Value (FOR)+ Unit value Mass Value (FOB) Unit Value

kt kt R’000 R/t kt R’000 R/t 1995 74 76 159 089 2 090 - - - 1996 77 74 209 671 2 833 - - - 1997 71 70 273 788 3 912 - - - 1998 70 66 255 313 3 847 - - - 1999 70 65 287 045 4 422 - - - 2000 63 59 309 406 5 246 - - - 2001 61 56 278 101 4 943 - - - 2002 64 58 290 799 4 985 - - - 2003 41 40 121 906 3 050 - - - 2004 32 31 107 630 3 415 - - -

Notes: Unit values calculated before rounding of mass and rand values+ FOR Gauteng

TABLE 3: SOUTH AFRICA’S PRODUCTION, AND SALES OF REFINED ZINC 1995- 2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Mass Value (FOR)+ Unit value Mass Value (FOB) Unit Value

kt kt R’000 R/t kt R’000 R/t 1995 99 97 374 991 3 857 2,8 10 411 3 752 1996 101 96 413 841 4 332 7,7 34 900 4 549 1997 108 98 597 940 6 110 11,4 66 383 5 837 1998 107 91 514 865 5 660 12,1 67 254 5 540 1999 108 87 488 860 5 600 27,7 178 843 6 469 2000 103 92 746 249 8 114 11,6 110 635 9 517 2001 109 89 667 062 7 495 23,0 173 627 7 517 2002 111 95 797 929 8 399 18,3 149 914 8 192 2003 113 86 596 361 6 934 27,6 164 948 5 976 2004 105 91 627 081 6 900 16,1 108 550 6 711

Notes: * Include imported refined zincUnit values calculated before rounding of mass and rand values+ FOR Gauteng

TABLE 4: SOUTH AFRICA’S LEAD/ZINC MINES: EMPLOYMENT AND REMUNERATION,2000 – 2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 2000 1 346 97 955 2001 1 812 114 422 2002 1 780 122 659 2003 1 772 127 268 2004 1 593 115 082

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TABLE 5: SOUTH AFRICAN AND LME CASH SETTLEMENT PRICES (MONTHLYAVERAGES), 2003 AND 2004

MONTH SOUTH AFRICAN ZINC PRICE LME CASH SETTLEMENT PRICE 2003 2004 2003 2003 2004 2004 R/ton* R/ton* $/ton R/ton $/ton R/ton

January 6 790,61 6 505,91 789,69 6 855,77 1 017,00 7 035,50 February 6 502,93 7 222,35 785,15 6 519,18 1 087,68 7 362,07 March 6 366,12 7 520,07 790,95 6 362,32 1 105,78 7 334,42 April 5 797,67 7 467,01 754,75 6 571,46 1 032,72 6 768,14 May 5 942,33 6 971,02 775,65 5 945,51 1 028,29 6 973,97 June 6 241,31 7 251,08 790,64 6 248.19 1 021,45 6 573,13

July 6 248,92 6 756,04 827,54 6 246,36 988,36 6 057,36 August 6 038,82 6 244,12 817,88 6 045,93 975,81 6 301,29 September 5 980,00 6 473,40 818,18 5 992,84 975,18 6 384,42 October 6 257,16 6 715,62 897,96 6 253,12 1 064,95 6 802,47 November 6 163,84 6 930,06 914,53 6 153,59 1 095,64 6 634,98 December 6 367,76 6 739,78 977,76 6 370,99 1 180,21 6 765,32 AVERAGE 6 224,79 6 899,71 828,39 6 297,11 1 047,76 6 749,42

Sources : ILZSG, May, 2005* Zincor, 2005

REFERENCES

International Lead and Zinc Study Group, LZ/SC/594 of May 2005.International Lead and Zinc Study Group, Lead and Zinc Market Review and Outlook for 2005.International Lead and Zinc Study Group, Monthly Bulletin on Lead and Zinc Statistics, May2005.Metal Bulletin Research, Base Metals Monthly, May 2005.U.S. Geological Survey, 2005 Mineral Commodity Summaries, January 2005: Internet Website,htt://www.usgs.gov

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ZIRCONL A Themba

INTRODUCTION

Zircon occurs in some igneous and metamorphic rocks in the form of two economic minerals,the silicate (ZrO2.SiO3) and the oxide baddeleyite ( ZrO2). Since Palabora Mine in South Africastopped producing baddeleyite in 2002, the Kovdor mine in Russia is the only producer ofbaddeleyite.

EXTRACTION AND MAIN USES

Zircon is recovered from heavy mineral sand deposits where it is usually associated with ilmeniteand rutile. It is separated from rutile by its electrostatic properties by means of dredgers and high-intensity magnetic separators.

Zircon is consumed in five main markets: the ceramic industry, tiles and sanitary-ware opacifiers,zirconia and zirconium chemicals, refractory and foundry (steel /glass) industries, and televisionand computer glass screens and tubes (figure 1).

DEVELOPMENTS DURING 2004/2005

During 2004, global zircon production was 0,95 Mt. (Table 1), representing a 5,3 percent risecompared with 2003. Major zircon producers were Australia (0,45 Mt) and South Africa (0,30 Mt),respectively.

In the United States, the Green Cove Springs heavy minerals mining operation was mined out in2004, but the remaining isolated deposits are still being mined on a small scale. Lulaton,Georgia’s new mining and processing operation was commissioned to supplement the country’soverall zircon production. The Concord mine was expanded and a new mineral sands mine wasopened in Virginia.

South Africa’s zircon production was 0,30 Mt in 2004, an increase of less than one percentcompared with 2003. Zircon producers were Anglo American’s Namakwa Sands in the WesternCape and Richards Bay Minerals and Ticor South Africa in KwaZulu-Natal.

World zircon demand exceeded 1,0 Mt and Asia and the Pacific region accounted for 42 percent(Figure 2) of consumption, mainly because of China’s 9 percent economic growth. Europeconsumed 35 percent of world supply, as demand for ceramics increased in Spain, Italy andTurkey. World consumption of zircon by region was Europe (405 kt), North America (171 kt),Japan (66 kt), China (248 kt), Asia – Pacific (161 kt) and the rest of the world (101 kt). Globaldistribution of zircon consumption by end-use is shown in Figure 1.

In Australia, Iluka Resources advanced the A$270 million Douglas Mineral Sand project atMurray Basin to the development of stage-1 mine and heavy-minerals separation plant. ByDecember 2004, the estimated total resource stood at 39 Mt and 487 Mt with a heavy mineralgrade of 15,8 percent and 10,6 percent, respectively. The Douglas Mineral Sands and Bemax’sPooncarie projects combined are expected to produce 180 kt rutile and 150 kt zircon by 2007.

In Gambia, Carnegie Corporation of Australia and the Chinese company Astron have formed a1:1 joint venture, to develop a heavy minerals mining project. Almost 12,6 kt zircon concentratewas processed and shipped to China for grade evaluation in early 2005. Annual concentrateproduction at a level of 240 kt zircon and 1 200 kt ilmenite is scheduled to commence in thesecond half of 2005.

In Kenya, Canadian Tiomin Resources has invested C$25 million in geological exploration,engineering and feasibility and environmental studies for four heavy minerals resources projectsat Kwale, Vipingo, Kififi and Mambrui. The most advanced project at Kwale revealed contains anestimated resource of 254 Mt mineral sands, of which 38 Mt is measured and 216 Mt indicated.In early 2005, a 21 year mining license and lease for Kwale project was signed with the Kenyan

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government and development is expected to commence during the last quarter. The firstproduction of 10 Mt per year is scheduled for the second quarter of 2007, at levels of 7,5 Mtilmenite, 1,75 Mt rutile and 0,84 Mt zircon.

Mozambique’s Corridor Sands has three shareholders viz. Southern Mining Corporation of SouthAfrica (36 percent), Western Mining Resource of Australia (54 percent) and IndustrialDevelopment Corporation of South Africa (10 percent). The cost of the first phase is $ 495 millionwhile the total project cost is $1 billion. It is planned to build eight furnaces over a period of 12years to smelt ilmenite to titanium slag and the resource is sufficient for a period exceeding 50years. The first production of 0,26 Mt ilmenite and 0,75 Mt zircon is expected in 2007. KenmareResources confirmed that it will commission the Moma project in Mozambique in 2006; it willproduce 700 kt of ilmenite per annum and a large tonnage of zircon as a by-product.

During 2004, the zircon market was tight as demand outstripped supply, resulting in priceincreases from $ 450/t to $ 570/t. Price increases for different zircon products varied; sandconcentrate increased by 15 percent, ceramics grade zircon by 12 percent, while milledopacifier-grade rose by 11 percent. Various price ranges for zircon products are shown in Tables2 and 3.

TABLE 1: WORLD RESERVES, MINE PRODUCTION AND EXPORTS OF ZIRCONMINERALS, 2004

COUNTRY RESERVE BASE PRODUCTION EXPORTS Mt % Rank kt % Rank kt % Rank

Australia 30,0 41,7 1 450,0 47, 1 1 80,3 13,0 2South Africa 14,0 19,4 2 302,0 31.6 2 370,6 60,0 1USA 5,3 7,4 4 100,0 10,4 3 36,4 5,8 3Ukraine 6,0 8,3 3 35,0 3,7 4 - - naBrazil 4,6 6,4 5 22,0 2,3 5 - - naIndia 3,8 5,2 6 20,0 2,1 6 na na na China 3,7 5,2 7 15,0 1,6 7 1,2 0,2 17Other 4,1 5,7 - 11,0 1,2 - 110,7 19,2 -TOTAL 72,0 100 - 955,0 100 - 620,0 - -

Sources: BGS, 2004, p 304–305USGS, 2004, p 191–192 (Production)

Notes: All figures refer to ZrO2

TABLE 2: ZIRCON SAND, FLOUR AND OPACIFIER PRICES, APRIL 2001 TO JUNE 2004

Shipping terms Pricing April 2001 April 2002 June 2003 June 2004 SandFob Australia US$/t bulk 330–390 365 –410 450–500 450 – 570Fob South Africa US$/t bulk 350–400 360–410 450–500 450 – 570Fob US US$/t bulk 350–400 350–410 450–500 450 - 570Flour (95% passing 45µm)Fob Europe US$/t bagged 470–530 510–540 450–550 550 - 620Fob Asia US$/t bagged 510–550 450–550 540–600 550 - 680 Micronised (d50 5 µm )Fob Europe US$/t bagged 540–580 600–630 680–720 680 – 750Fob Asia US$/t bagged 580–610 610–660 690–760 680 – 790

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TABLE 3: PRICES FOR FUSED MONOCLINIC ZrO2 AND BADDELEYITE IN US $/t

Monoclinic zirconia 2001 2002 2003 Refractory/ abrasive grade 2 400 - 2 800 2 000 - 2 400 2 150 - 2 550Ceramic pigment grade 2 700 - 3 200 2 400 - 3 500 2 550 - 3 650Structural/ electronic grade 3 200 - 4 700 3 100 - 4 500 3 250 - 4 650High Purity advance ceramic grade 17 000 - 25 000 15 000 - 25 000 15 200 - 25 200Stabilised zirconiaRefractory grade 3 700 - 4 200 3 000 - 4 200 3 150 - 4 350 High Purity Advance ceramic grade 30 000 - 75 000 20 000 - 70 000 20 200 - 70 200

FIGURE 1: WORLD CONSUMPTION OF ZIRCON BY END-USE IN 2004.

Source: TZMI Database

FIGURE 2: WORLD CONSUMPTION OF ZIRCON BY REGION IN 2004.

Source: TZMI Database

OUTLOOK

The establishment of new mines and expansions to increase zircon availability could not alleviatethe tight zircon market in 2004. Annual demand growth at a rate of 3 percent is expected whichwill exceed supply in 2005 and a deficit is likely to occur. Irrespective of the several zirconprojects that are planned and projected to come on-line between 2005 and 2007, the additionalsupply would and not halt the declining world production. Further reasons for a shortage ofzircon will be declining grades and a consequent reduction in production, relocation of miningand mineral processing equipment and mine closures. The major new mining projects at Kwalein Kenya and the Douglas Sands in Australia are expected to produce 0,85 Mt and 0,75 Mtrespectively, but will only come into production in 2007.

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Pacific Rim zircon demand is expected to rise, led by China’s strong growth in the ceramics andrefractory industries. Europe’s prospects for zircon demand are positive especially in Italy, Spain,Turkey and Iran.

In this anticipated undersupplied zircon market, zircon prices will continue to soar at a rate of 20percent per annum, from $ 500 – $ 750 per ton by the end 2005. An unabated increase in priceswill also force zircon-consuming industries to seek substitute material or technologies.

REFERENCES

Metal Bulletin, Jan 1995–June 2004Metal Bulletin Research, Jan 2001–June 2004U.S. Geological Survey, 2003. Mineral Commodity Summaries, January 2004: Internet Website:http://www.usgs.govIndustrial Minerals, February 2005. Mike O’Driscoll. Zircon no pacifier to market squeeze.World Bureau of Metal Statistics, 2004. World Statistics Yearbook 2002: Ware, Herts, p 75.

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FERROUS METALS AND MINERALS - OVERVIEWMpumzi Bonga

INTRODUCTION

South Africa is the world’s largest producer of chromium and vanadium ores and a leadingsupplier of their alloys. It is also a major producer of iron and manganese ores and an importantsupplier of ferromanganese, ferrosilicon and silicon metal. The combined sales revenue of bothprimary and processed ferrous minerals in 2004 amounted to R28.27 billion ($4.38 billion), 17.8per cent of the total value of all primary and processed mineral sales in the country, while exportsales of these commodities generated R21.4 billion ($3.32 billion) in revenue, 18.5 per cent ofthe value of all total mineral exports (Table 1). The increased contributions, although only bysmall margins, of both export and total ferrous mineral sales revenue in 2004 compared with2003, is testimony to the growing importance of ferrous metals in South Africa’s mineral industry.

Ferrous mineral ores were produced at some 24 mines and their added-value ferro-alloys at 23metallurgical works during 2003. Over the last decade, chromium, manganese and vanadium,have been increasingly processed to higher levels of added value than iron, with the bulk of thegrowth in iron production being exported in the form of iron ore.

South Africa’s ferrous minerals contributed $1 242 million (5.0 percent) to total mineral sales(primary plus processed) and $750million (4.2 percent) to total mineral exports in 2004.

DEVELOPMENTS DURING 2004

World demand for ferrous minerals surged in 2004 helped mainly by continuing double-digitannual growth in Chinese crude steel production. World steel production rose to a new record of1 037.5 million tons, some 7 percent higher than the previous record of 969.3Mt attained in 2003(Fig. 1). In China, output increased by over 22.5 percent to 272.4 Mt, accounting for 26.3 percentshare of world production.

World crude steel production continued to increase during the first half of 2005, and was 7percent higher in the first half of this year compared with the same period last year. Global steelmaking capacity amounted to 1 184Mt in 2004 with an average capacity utilization rate at 88percent. The main growth occurred in Asia, with China increasing its output by more than 25percent.

Chinese imports of iron ore climbed by 40.3 percent in 2004. The benchmark contract price foriron ore rose by 71.5 percent in 2005. The bull market for iron ore also boosted the dollar or europrices of other ferrous commodities: average manganese ore prices increased by 62.9 percentand silicon metal prices went up 3.3 percent, while high carbon ferromanganese average pricescame down by 32.8 percent and the average EU silicomanganese price dipped by 36.6 percentin 2005. Chrome ore prices have ranged upwards by 20 to 30 percent, depending on grade, andcharge chrome increased by 62 percent.

Vanadium prices also increased sharply- up 135 percent for ferrovanadium while vanadiumpentoxide rose by 170 percent despite the strong currency in 2004, resulting in a 107 percentrise in revenues despite lower tonnages compared with 2003. The combination of a rise in theexport mass of manganese alloys and higher prices of most ferro-alloys boosted the totalearnings for processed ferrous minerals by 38.8 percent compared with 2003. Domestic sales ofthe processed products recorded a 95.8 percent increase in earnings, while local sales tonnagewas up by 5.6 percent.

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FIGURE 1: WORLD CRUDE STEEL MONTHLY PRODUCTION, 1998-2004

Source: International Iron and Steel Institute, monthly statistics; Website, http//www.worldsteel.org

The growth in domestic sales of primary and processed ferrous minerals in 2004 is an indicationof the increasing trend to produce value added products in South Africa. The higher annualgrowth rate of local sales revenue in comparison with that of export sales recorded for bothprimary ferrous minerals as well as ferroalloys during the ten year period from 1995 to 2004confirms this trend. Over this period export sales earnings of ferrous minerals have risen at a rateof 2.65 percent per annum, whereas local sales of ferrous minerals have climbed at a rate some3.64 percent per annum. Over the same period ferro-alloy revenues have increased at annualrates of 12.29 and 16.77 percent, for export sales and local sales, respectively.

In order to stay competitive and retain market share in the rapidly expanding market for iron orein the Far East, Kumba Resources, South Africa’s largest iron ore producer, has committed toexpanding its Sishen iron ore mine and develop the Sishen South deposit.The Sishen ExpansionProject (SEP), which will see iron ore, output expanding from the current 36 Mt/a to 47 Mt/a by2009 to meet growing global demand seems to be on track. Kumba has signed an agreementwith Transnet which will result in Kumba spending R3 billion to expand output while Transnet willinvest R4.5 billion to upgrade rail and port infrastructure. Capacity is expected to increase to 41Mt/a by 2007/08. Despite the fact that no large player (like Alcan or Pechiney) has yet committeditself to building an aluminium smelter at the port of Ngqura near Port Elizabeth, construction isgoing ahead while the state and industry are exploring the possibility of using this port as analternative to accommodate the extra iron ore tonnages that may exceed the capacity of theupgraded Orex- Saldanha route. Consideration is also being given to moving manganese oreexports from Port Elizabeth to this port.

The upward trend in employment on ferrous mines, which began in 2002 and continued into2004, as employment rose by 20.6 percent to 17 122 from 14 196 (Table 2). Total remunerationrose by 11.7 percent to R1.3 billion and the average annual earnings decreased by 7.4 percentto R75 050 per employee compared with 2004 (Table 2).

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TABLE 1: SOUTH AFRICA’S PRODUCTION AND SALES OF PRIMARY AND PROCESSEDFERROUS MINERALS, 2003 AND 2004

COMMODITY PRODUCTION LOCAL SALES EXPORT SALES TOTAL SALES Year kt Kt R’000 Kt R’000 Kt R’000 Iron ore 2004 39 322 12 430 1 145 599 24 745 3 439 885 37 175 4 585 485 2003 38 086 12 079 1 060 635 24 076 3 130 436 36 155 4 191 071

Chrome Ore 2004 7 645 6 736 1 366 675 513 318 893 7 249 1 685 569 2003 6 436 6 318 973 838 502 177 880 6 820 1 151 718

Manganese Ore 2004 4 281 2 093 656 434 2 403 1 082 285 4 497 1 738 719 2003 3 501 1 794 614 393 1 957 852 983 3 751 1 467 376

Ore Subtotals 2004 51 248 21 259 3 168 708 27 661 4 841 063 48 921 8 009 773 2003 48 992 20 192 2 648 866 26 535 4 161 299 46 726 6 810 165

Chrome Alloys 2004 2 965 486 1 849 168 2617 9 903 486 3 103 11 752 654 2003 2 813 301 886 219 2640 7 658 552 2 941 8 544 771

Manganese Alloys2004 985 192 932 019 754 4 329 260 945 5 261 280 2003 921 193 633 653 707 2 534 220 900 3 167 873

Silicon Alloys 2004 191 93 501 509 104 658 216 197 1 159 726 2003 184 85 414 429 106 672 867 191 1 087 296

Vanadium2004 23 3 715 916 16 1 674 785 18 2 090 701 2003 27 1 108 667 19 1 072 477 20 1 181 144

Alloy Subtotals 2004 4 164 774 3 998 612 3 491 16 565 747 4 263 20 264 361 2003 3 945 580 2 042 968 3 472 11 938 116 4 052 13 981 084

Ferrous Totals 2004 55 412 22 033 7 167 320 31 152 21 404 810 53 184 28 274 134 2003 52 936 20 772 4 691 833 30 008 16 099 415 50 778 20 791 249

TABLE 2: SOUTH AFRICAN FERROUS MINES: EMPLOYMENT AND GROSSREMUNERATION 2000-2004

YEAR EMPLOYEE REMUNERATION Number R’000 R’000/ employee

2000 12 725 812 558 63.86 2001 12 049 891 800 74.01 2002 13 288 975 984 73.42 2003 14 196 1 150 981 81.07 2004 17 122 1 285 022 75.05

OUTLOOK

Despite attempts by the central bank to cool its overheated economy towards the end of the firsthalf of 2004, China remains the biggest factor likely to drive demand for ferrous minerals andtheir alloys in the coming decade. This country is rapidly becoming a major consumer nation andwith still some 65 percent of its population yet to be urbanized, it should it should remain thelargest consumer of ferrous metals for many years ahead. The commodities most affected will beiron and manganese ore for steel production and ferrochrome for stainless steel.

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The forecast of ferrous minerals export revenue until 2009 is based mainly on projections for ironore, as it will account for the biggest share (75.4 percent) of total ore sales during the forecastperiod. In order to keep pace with future Chinese demand for iron ore to satisfy its ever increasingsteel production and remain globally competitive, South Africa’s current iron ore export industry,almost entirely based in the Northern Cape, needs to expand its output more rapidly than thecurrent rate. Iron ore export revenue is expected to grow at a rate of about 4.8 percent perannum from 2005 to 2009 while the forecast for total ferrous ores is 4.0 percent per annum.

The forecast of processed ferrous minerals export revenue to 2009 is dominated by chromealloys, accounting for 62 percent of the share of total earnings, with manganese alloyscontributing 25 percent and earnings from manganese and vanadium products relatively small incomparison. The export revenue of chrome alloys has grown at an average rate of 8.8 percentper annum over the last ten years while that of manganese alloys grew at an average of 5.5percent annually. Chrome alloys, with substantial installed and modernized surplus capacity, arein a strong position to increase their market share whenever weak cyclical prices force high-costworld suppliers to exit the business. Overall ferrous processed mineral export earnings areexpected to approach $2.0 billion in 2009.

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CHROMIUMN Kweyama

INTRODUCTION

World chromite ore reserves are largely concentrated in Southern Africa. No less than 84percent of the total is associated with the Bushveld Complex of South Africa and the Great Dykeof Zimbabwe (Table1). Together they supply 47 percent of world ore output, although they onlyaccount for 11 percent of global ore export. Both countries concentrate on adding value to theore, and therefore export predominantly beneficiated products especially ferrochrome (Table 2).

TABLE 1: WORLD CHROMITE ORE RESERVES, PRODUCTION AND EXPORTS, 2004

COUNTRY RESERVE BASEu PRODUCTION+ EXPORTS+

Mt % Rank kt % Rank kt % Rank South Africa* 5 500 72,4 1 7 645 44,5 1 513 11,4 4 Kazakhstan 320 4,2 3 3 290 19,1 2 764 17 3 India 67 0,9 5 2 948 17,2 3 910 20 1 Zimbabwe 930 12,2 2 621 3,6 4 0 0 - Finland 120 1,6 4 579 3,3 5 # # #

Brazil 17 0,2 7 462 2,6 7 128 2,8 7 Turkey 20 0,3 6 506 2,9 6 442 9,8 5 China # # - 197 1,1 8 731 16,2 2 Albania # # - 158 0 10 59 1,3 8 Iran # # - 183 1 9 183 4,0 6 Other 626 8.2 1464 8 770 17,1 TOTAL 7 600 100,0 17 153 100,0 4 500 100,0

Sources: u USGS Mineral Commodity Summaries, 2002 and 2003(For Reserve Base)+ Derived from ICDA Statistical Bulletin, July 2005* Mineral Bureau

Notes: # Included under ‘Other’

South African production and export data excludes the chromite tailings accumulated overseveral years after extraction of platinum-group metals from the UG 2 reef.

DEVELOPMENTS IN 2004/2005

World DemandIn 2004, 85 percent of chromite output was converted into ferrochrome for metallurgicalapplications. The remaining 15 percent of the ore produced was used in the refractory, foundryand chemical industries accounting for 7,5 percent, 2,8 percent and 4.4 percent respectively.

Stainless steel production accounts for more than 90 percent of ferrochrome consumption andis the primary influence of world chrome demand. An average growth trend of 4 percent perannum has characterized stainless steel production for four decades, with the trend approaching6 percent over the last six years.

In 2004, world stainless steel melting production reached an all time high of 24,9 Mt, which is upby 9,4 percent from 22,8 Mt in 2003. In 2004 Asia outpaced all other regions in stainless steelproduction growth recording a 13,8 percent increment while Europe and Africa realised a 4,1percent increase and US output expanded by 3,5 percent. Unusually high economic growthrates in the developing economies of Asia and Eastern Europe underpinned the recent growthpatterns. Growth was mainly driven by Asia, with China recording an exceptional growth rate of40 percent year on year.

The stainless steel market was tight during the year with high prices and escalating surcharges.Mills in Europe had to minimize their off peak stoppages which traditionally fall in the thirdquarter. The fourth quarter saw strong global output growth of 9,3 percent. Nickel pricemaintained its firm tone throughout the year while scrap shortages resulted in strong demandand prices of stainless steel’s main alloying materials, nickel and ferrochrome.

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TABLE 2: WORLD CHROMIUM FERROALLOY PRODUCTION AND EXPORTS, 2004

COUNTRY PRODUCTION+ EXPORTS kt % Rank kt % Rank

South Africa* 2 965 45 1 2 617 54 1 Kazakhstan 969 14,7 2 820 17 2 Zimbabwe 218 3 7 360 7 3 India 527 8 4 239 4 4 China 697 10,6 3 97 2 6 Finland 264 4 6 31 0 9 Russia 352 5 5 219 4 5 Japan 13 0 11 3 0 10 Brazil 206 3 8 0,3 0 12 Sweden 128 1 9 71 1 7 Norway 0 0 - 0,5 0 11 Turkey 39 0 10 41 0 8 Other 197 3 361,2 7 TOTAL 6 575 100,0 4 819 100,0

Sources: + Derived from ICDA Statistical Bulletin, July 2005* DME, Directorate Mineral Economics.

Notes: Gross mass of high, medium and low carbon ferrochrome and ferro-silicon-chrome

WORLD SUPPLY

World chromite ore production advanced by 15 percent to 17,1 Mt in 2004 an increase of 15,5percent above 14,8 Mt in 2003, in response to a shortage of scrap and strong ferrochromeprices. Halfway through the year China experienced an excess of ore stocks which resulted inaccelerated ferrochrome production. World ferrochrome output expanded to 6,5 Mt in 2004, amodest 4 percent rise from 6.3 Mt in 2003. Eastern Europe and Asia were major contributors toferrochrome output growth due to their export performance. China and Albania recorded a 23and 19 percent hike in charge chrome exports respectively, while Russia and Kazakhstanexperienced a combined 20 percent surge in foreign trade.

South Africa’s ferrochrome production increased by 5 percent to 2,9 Mt in 2004, a modestexpansion despite strong demand which indicate limited flexibility in adjusting capacity toincrease output. In the beginning of 2004, the world’s largest chrome chemical plant in Chinawas closed due to environmental concerns. The shut-down countered the effect of the ban onthe use of chromic acid on timber treatment by the Environmental Protection Agency, andensured a tight supply conditions in the chemical chrome market.

WORLD PRICES

According to the Industrial Minerals publication, published by Metal Bulletin in London, the pricesof metallurgical chromite grade in 2004 traded in a range of $65 - $75/t in the first half of theyear. During the second half the price range advanced to $75 – 95/t. Strong demand formetallurgical grade negatively affected supply to the foundry, chemical and refractory markets,with price ranges rising to $170 - $190/t, $125 - $150/t and $100 - $120/t respectively.

The third and fourth quarter of 2004 saw the first roll-over in charge chrome prices since 2003 ina range of $0,72 - $0,74/lb. High charge chrome prices resulted from the strong rand and thehigh cost of inputs. Strong price display in the face of tight supply is evident in the pricebehaviour in terms of the local currency. The effective charge chrome rand price in the last twoquarters of 2004 was equivalent to R 5 000/t c.i.f. which exceeded the previous all time high ofR4 000/t c.i.f. in 2002.

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TABLE 3: SOUTH AFRICA’S PRODUCTION AND SALES OF CHROMITE ORE 1995 - 2004

YEAR PROD. LOCAL SALES EXPORT SALES TOTAL SALES Mass Value (FOR) Mass Value (FOB) Mass Value

kt kt R’000 R/kg kt R’000 R/kg Kt R’000 1995 5 085 3 798 359 973 95 1 148 247 033 215 4 946 607 006 1996 5 078 3 608 404 921 112 1 353 429 838 318 4 961 834 759 1997 6 162 4 913 575 588 117 1 288 424 626 330 6 201 1 000 214 1998 6 480 5 093 575 798 113 859 335 766 391 5 952 911 564 1999 6 817 5 815 694 220 119 841 310 370 369 6 656 1 004 590 2000 6 662 5 689 718 930 126 1 090 360 794 331 6 779 1 079 724 2001 5 502 4 598 625 023 136 931 377 286 405 5 529 1 002 309 2002 6 436 5 300 786 979 148 651 314 380 483 5 951 1 101 358 2003 7 405 6 318 973 837 154 501 177 880 354 6 820 1 151 717 2004 7 645 6 736 1 366 675 203 513 318 893 622 7 249 1 685 568

SOUTH AFRICA

South Africa’s chrome ore output expanded by 3,2 percent from 7,4 Mt to 7,6 Mt in 2004.Capacity constraints limited the ability of local chromite producers to respond to strong worlddemand (Table 3).

Chromite ore export mass reversed its declining trend by achieving two percent growth from2003 reaching 0.51 Mt in 2004 from 0,50 Mt. Escalating ore prices resulted in a correspondingexport revenue hike of 79 percent in 2004 from R1,7 billion in 2003 to R3,1 billion. Although totalore sales mass increased by 6,3 percent from 6,8 Mt to 7,2 Mt in 2004, total sales value realiseda growth of 46 percent from R1,1 billion to R1,6 billion in 2004 consistent with the overheatedmarket suffering from supply constraints

Ferrochrome local sales mass and value increased by 60 percent from 0,3 Mt to 0,4 Mt and 125percent from R0,8 billion to R1.8 billion respectively, underpinned by strong consumer demandin the local economy. Export sales mass for ferrochrome recorded a slight decline, but a strongprice performance during the year resulted in a 30 percent increase in export value from R7,65billion in 2003 to R9,9 billion in 2004.

The combined revenue from chrome ore and ferrochrome sales reached an all time high of $2billion in 2004, a 56 percent improvement from $1,28 billion in 2003. Frequent steep priceadjustments and firm demand were the main factors behind this performance. Data shown inTables 1 and 3 does not include the use of previously mined UG2 dump material in recent yearsto complement newly mined ore feed in local ferrochrome production.

Hernic is building a 78 MVA closed furnace and a 350 000t/y Outokumpu pelletising and sinteringplant at a cost of R 429 million, to be commissioned at the end of 2005. Merafe Resources hasacquired a 50 percent interest in the chrome reserves previously owned by Samancor in theWonderkop joint venture. Merafe also purchased 50 percent and 26 percent of Kroondal andMarikana mine reserves, respectively. The above transactions will raise Merafe’s stake in theXstrata-Merafe joint venture to 17.5 percent by July 2006.

TABLE 4: SOUTH AFRICA’S PRODUCTION AND SALES OF FERROCHROME 1995 - 2004

LOCAL SALES EXPORT SALES TOTAL SALES YEAR PROD. Mass Value (FOR) Mass Value (FOB) Mass Value

kt kt R’000 R/kg kt R’000 R/kg Kt R’000 1995 1 517 112 238 853 2 100 1 355 2 851 299 2 105 1 467 3 087 152 1996 1 478 111 224 062 2 020 1 415 2 589 764 1 830 1 526 2 813 826 1997 1 940 139 279 647 2 019 1 633 3 306 948 2 025 1 772 3 586 595 1998 2 025 142 300 333 2 115 1 650 3 904 556 2 367 1 792 4 204 889 1999 2 155 160 322 877 2 018 1 897 3 885 708 2 048 2 057 4 208 585 2000 2 574 185 431 748 2 332 2 119 5 461 517 2 578 2 304 5 893 264 2001 2 141 170 399 012 2 347 1 976 4 717 028 2 387 2 146 5 116 040 2002 2 351 218 631 996 3 000 2 190 6 078 759 3 000 2 408 6 710 756 2003 2 813 300 886 219 3 000 2 640 7 658 552 3 000 2 941 8 544 771 2004 2 965 486 1 849 168 4000 2617 9 903 486 4000 3103 11 752 654

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OUTLOOK

Growth in China’s stainless steel consumption is expected to remain at high levels in line with itsoverall economic growth rate in 2005. However, a slowdown in world economic growth isexpected as a result of under-performing EU economies and persistently high energy costs.Therefore it is forecast that growth in stainless steel will approach 7 percent.

In 2004 stainless steel prices remained at elevated but stable levels. Escalating nickel pricesraise prices for the final consumers, resulting in a higher proportion of ferritic grades, which donot contain nickel, in stainless steel production. The anticipated reduction in output by EUproducers is expected to bring demand and supply into balance, resulting in stable prices andreduced surcharges in 2005.

Weak world economic fundamentals are expected to result in a slower growth of above 5 percentin demand for chromite ore and ferrochrome in 2005 from the record level output in 2004.Additional production capacity of both ore and ferrochrome towards the end of 2006 will resultin excess supply negatively affecting prices. The rand to dollar exchange rate will stronglyinfluence the extent of price adjustment in the ferrochrome market. Supply discipline will becrucial in maintaining healthy price levels, as it is possible that the rand will remain strong in themedium term.

TABLE 5: SOUTH AFRICAN CHROMITE MINES: EMPLOYMENT AND REMUNERATION 2000 - 2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 2000 5 425 332 768 2001 5 026 379 309 2002 5 404 338 778 2003 5 775 419 223 2004 6744 468 414

REFERENCES

ICDA Statistical Bulletin in 2005ICDA News 2004 - 2005Chrome Market Spotlight, 2004 - 2005Tex Report 2004 - 2005Industrial Minerals 2004 - 2005

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IRON OREMpumzi Bonga

GLOBAL DEVELOPMENTS DURING 2004/2005

PRODUCTION

World iron ore production increased by 11 percent to reach 1 200 Mt in 2004 from 1 100 Mt in2003 (Table 1). Increased production was reported in all major producing countries exceptCanada. Earlier peaks in world production occurred in 1989 (910 Mt), 1997 (925 Mt) and 2 000(970 Mt). Brazil remained the largest producer at 270 Mt, with Australia in the second place at241 Mt. India and China achieved the largest year on year increases of 22 percent and 19percent, respectively. Australia’s production grew by 14 percent, Brazil’s by 10 percent, followedby Ukraine, Russia and Kazakhstan, each of which recorded increases of approximately 6percent.

According to output by region, although Africa recorded the lowest increase of 1,7 percent, SouthAfrica increased its production by 3,6 percent. The contribution of developing countries to totalglobal iron ore production in 2004 remained at 55 percent, the same as in 2003, while the CIScontributed 15 percent. On a comparable grade basis China increased its share of worldproduction by 12 percent, or 146 Mt, its third consecutive annual increase surpassing thecountry’s previous highest contribution level of 125 Mt in 1997.

TRADE

Total world exports increased for the third successive year reaching 634 Mt, up 8,5 percent asinternational iron ore trade reached a new record. Developed market economies accounted for40 percent of iron ore exports, the CIS for 7,5 percent, while the developing countries accountedfor 51 percent in 2004. Despite being the second biggest producer, Australia was the leadingexporter at 211 Mt with the largest producer Brazil in second place at 201 Mt. The third mostimportant exporter, India increased its exports for the fifth consecutive year to 63 Mt, followed byCanada and South Africa with 22,5 Mt and 25 Mt, respectively. Japan’s imports increased by 1,9percent to 134,9 Mt, but China surpassed Japan as the number one importer (208 Mt)accounting for 32 percent of total world imports, 40 percent up on the previous year. Collectively,China, Japan and Republic of Korea accounted for 59 percent of total world imports, while theEU accounted for 26 percent.

Seaborne iron ore trade grew at approximately 13 percent to 590 in 2004 on the back of highdemand from Asia, particularly China. Freight rates were stubbornly high due to increase ironore imports resulting from the expansion of the Chinese steel industry as well as higher coaldemand worldwide which put pressure on freight capacity. Port congestion led to long waitingtimes which reduced the availability of shipping capacity while the total fleet has not beengrowing at the same pace as demand for new capacity.

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Table 1: WORLD RESERVES, PRODUCTION AND EXPORTS OF IRON ORE, 2004

COUNTRY RESERVE BASE* PRODUCTION EXPORTS Mt % Rank Mt % Rank Mt % Rank

China# 15 000 9,4 3 145,7 12,2 4 - - Brazil 11 000 6,9 5 270,5 22,6 1 200,9 31,7 2 Australia 25 000 15,6 2 241,0 20,1 2 210,7 33,3 1 CIS 63 000 39,4 1 181,3 15,1 3 48,6 7,7 4 India 4 000 2,5 7 120,6 10,1 5 62,7 9,9 3 USA 14 000 8,8 4 54,7 4,6 6 8,4 1,3 9 South Africa 1 500 0,9 9 39,3 3,3 7 24,7 3,9 5 Canada 2 500 1,6 8 28,1 2,4 8 22,5 3,6 6 Sweden 5 000 3,1 6 22,3 1,9 9 17,4 2,8 7 Venezuela 1 500 0,9 9 20,0 1,7 10 9,3 1,5 8 Other 18 000 11,0 74,7 6,0 28,3 4,3 TOTAL 2004 160 500 100 1 198,2 100 633,5 1002003 1 100 581,0 100

Sources: USGS, 2003 (for Reserve base ) UNCTAD Trust Fund on Iron Ore, 2004 DME, Directorate Mineral Economics.

Notes: * Iron content# China produced 300 Mt of low grade ore, which has been converted by a factor of 0.47 to a world equivalent average iron content of 146.6 Mt

by UNCTAD

PRICES

Iron ore contract prices for 2004 were settled in April 2004 at around 18 percent higher than in2003. Negotiations for 2005 started in December with the first agreement being reached inFebruary 2005 at an unprecedented 71,5 percent increase on 2004 between supplier of BrazilCRVD and Japa’s Nipon Steel. The world’s largest iron ore producing company CVRDmaintained its role as price setter during negotiations in 2005, as has been the case for the lastfive years; however, BHP Billiton, initially demanding an additional 8,5 percent freight premium,caused the negotiations to drag on into April but eventually dropped these demands to settle atthe same level of increase as other suppliers. Despite protestations by some steel makers,increases in pellet prices were even higher at 91 percent for DRI and 87 percent for blastfurnaces.

The average annual increase in the contract price of iron ore in 2005 was the highest ever withprice levels approaching those of the 1970s and 1980s. Due to the persistently high prices beingdemanded by iron ore producers, a tendency has emerged among steelmakers to look forcaptive mines for diversification as well as future security of supply. Although sport prices werehigh in 2004, they were lower compared with 2003. India, due to its relative proximity to China,is able to take advantage of the high Chinese demand with freight rates that are around 20-30percent lower than major competitors.

LOCAL DEVELOPMENTS DURING 2004/2005

In April 2004, Anglo-Dutch steel producer Corus Group and Kumba Resources signed a five yearcontract to supply Sishen iron ore at a rate of 2,6 Mt per year increasing progressively to 3,3 Mtper annum by 2008/2009. Sishen South, situated 70 km south of Sishen mine, will depend onan additional development to rail and port infrastructure for its expansion. In 2004 Kumba andTransnet signed an agreement, whereby Transnet will invest R4,5 billion to upgrade rail and portfacilities to handle the additional output resulting from a committed R3 billion expansion atKumba’s Sishen mine which will raise production by 12 Mt per annum, a considerable part ofwhich will be exported to China. Transnet plans to upgrade the capacity of the Orex rail line andthe port of Saldanha to handle exports of 41 Mt/a by 2007/08. An alternative Sishen-Ngquraexport route is also being explored to cater for extra volumes since the eventual total output fromSishen and Assmang is expected to exceed the capacity of the upgraded Sishen-Saldanharoute.South Africa’s iron ore production rose by 3,3 percent from 38,8 Mt in 2003 to 39,3 Mt in 2004(Table 3) mainly as a result of increasing demand for fine Sishen ore from Chinese mills.Consequently, export sales went up 2,8 percent to 24,75 Mt, with the Pacific Rim countries

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accounting for almost 65 percent of export volumes. Local consumption increased by 2,9 percentto 12,43 Mt, reflecting a stronger domestic market during the year, while local sales valueincreased by 8.0 percent to R1 145,6 million, and revenue from export sales revenue went up9,9 percent despite the strong rand. Total sales mass grew by 2 percent while the total value ofsales rose by 9.4 percent. The average local price grew by 4,5 percent because of the higherdomestic consumption while the export unit price increased by 6,9 percent due to higher annualinternational iron ore prices.

Kumba Resources, now a subsidiary of Anglo-American, is under pressure to find BEE partneras required by both the Mining charter and the Mineral and Petroleum Resources developmentAct of 2002 promulgated in May 2004. Kumba is therefore expected to announce anempowerment partner shortly, and ARM is a potential candidate to buy into Kumba to reduceAnglo’s majority stake to the previously agreed level of 49,5 percent. The change in Kumba’sownership in favour of Anglo has cost Kumba its share of the $1,6 billion Hope Downs Project inAustralia after its partner, Hancock Prospecting, decided to exercise a first right of refusal interms of a breach of the JV agreement which precluded new ownership of the company; thisaction was supported by the Western Australia’s government regulatory authorities. As a resultHancock Prospecting has paid over A$234 million (R1,2 billion) to Kumba and Rio Tinto hasstepped in as the new JV partner in the Hope Downs project. Hope Downs has reserves of 450Mt with total resources estimated at around 850 Mt. Kumba has meanwhile turned its attentionto the Falane project in Senegal, a deposit with indicated resources that could see it produce 10to 15 Mt per year over a period of 20 years.

The competition Commission has allowed LNM to raise its stake in Mittal Steel (formerly Iscor)to above 50 percent despite protestations from organised labour and the IDC. The state gavethis take-over the go ahead after it secured an undertaking from LNM that a more benigndevelopmental pricing model would be used for local sales. Mittal Steel has thus far failed toimplement such a new pricing structure. In the interim, Government, impatient with Mittal’sdelaying tactics, has revoked antidumping duties protecting Mittal against cheap steel importsfrom Russia and the Ukraine and is also considering lifting the 5 percent duty currently applicableon imports.

TABLE 2: WORLD CRUDE STEEL PRODUCTION, 2004

COUNTRY PRODUCTION Mass 2004/2003 Growth % Share Rank

Mt China 272,5 24,0 25,8 1 USA 98,5 5,2 9,3 3 Japan 112,7 2,0 10,7 2 Russia 64,3 4,6 6,1 4 Germany 46,4 3,6 4,4 6 South Korea 47,5 2,6 4,5 5 Ukraine 38,7 4,9 3,7 7 Brazil 32,9 5,7 3,1 8 Italy 28,3 5,6 2,7 10 India 32,6 2,7 3,1 8 Other 280,2 25,6 Of which SAfrica 9,5 4,2 1,0 19 TOTAL 1054 100 9,3

Source: IISI,2004

Efforts to restructure the iron ore mining industry in the Northern Cape to optimise theexploitation of the remaining resources of iron ore in the Kalahari Field have been revived aftertalks between Assmang and Kumba were indefinitely postponed when the two could not agreeon certain issues at the beginning of last year. These two major players each have unminedresources adjacent to the other’s current operations. The purpose of the discussions was forthese companies to swap their adjacent rights for the purpose of rationalising future miningactivities but they could not agree on a suitable method for evaluating these remaining high gradedeposits.

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TABLE 3: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OF IRONORE, 1995-2004.

YEAR PRODUCTION LOCAL SALES EXPORTS SALES Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1995 31 944 11 157 384 407 34 21 847 1 273 479 58 1996 30 828 10 443 400 928 38 19 328 1 290 756 67 1997 33 224 11 157 466 635 42 20 730 1 619 345 78 1998 32 964 11 654 517 058 44 22 093 1 973 948 89 1999 29 512 9 102 484 584 53 21 095 1 721 421 82 2000 33 707 10 745 595 643 55 21 397 2 469 106 115 2001 34 757 11 373 684 202 60 23 519 3 444 701 146 2002 36 484 11 057 1 009 107 91 24 303 4 304 611 177 2003 38 085 12 079 1 060 635 88 24 076 3 130 436 130 2004 39 322 12 430 1 145 600 92 27 745 3 439 885 139

OUTLOOK

Growth in the iron ore industry is expected to continue in 2005 with China as the growth enginedriving both the steel and iron ore businesses. China’s crude steel production in the first quarterof 2005 was already 106 Mt, up 31 percent from 81 Mt in 2004 and therefore based on acomparison with the performance in 2004 when iron ore imports shot up by 44 percent to 208,1Mt from 148,1 Mt in 2003, crude steel output in 2005 should exceed the record of 1054.6 Mt setlast year. World demand for iron ore could also reach new heights in 2005, in fact China’s hugeappetite for imported ore is likely to be the dominant factor determining future short-to medium-term growth trends in global iron ore seaborne trade.

China has adopted a two pronged strategy to secure its needs for iron ore imports by• Investing in joint ventures in iron ore production abroad• Securing long term contracts at certain price levels.Given the vigour with which these measures are being pursed it appears that the Chinese haveno intentions of slowing down their steel production and therefore iron ore consumption is boundto rise as the authorities attempt to move development to the yet under developed regions of thecountry. If this happens, fears of overheating the country’s economy would prove baseless asfurther industrialization will ensure job creation and increase spending power. Since attempts bythe Chinese authorities to moderate growth succeeded in achieving a soft landing for theeconomy last year, the short and long-term outlook for both the iron ore and steel industriesseems to be promising.

The future performance of South Africa’s iron ore industry is inextricably tied to changes in theexchange rate of the rand against the dollar, which is a function of economic and political factors,and infrastructure. The strengthening of the currency lately seems to have dampened the paceof growth of the iron ore and related industries as shown by the postponement of certain projectsthus curtailing job opportunities that these projects may have introduced. Nevertheless,international prices could show improvement in 2006, thus benefiting ore producers, irrespectiveof exchange rate developments, as steel producers compete for ore supplies after ore producershave supplied their customers tied up in long-term contracts. Furthermore, the expansion inrolling stock to cater for transporting additional tonnages of iron ore from mines to harbours forexport, as well as expansion of export facilities at ports to handle these larger volumes, is likelyto help South Africa regain some or all of the market share lost due to lack of rail and portinfrastructure. South Africa, whose share of the Chinese iron ore imports used to be 12 percentbut had shrunk to 6 percent in 2004, stands to gain if the infrastructure development programmecan be accelerated.

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TABLE 4: SOUTH AFRICA’S MANGANESE MINES EMPLOYMENT AND REMUNERATION,1997 – 2003

YEAR EMPLOYEES TOTAL REMUNERATION R’000 2000 5 019 345 814 2001 5 022 379 713 2002 5 389 457 804 2003 5 961 523 607 2004 7 142 575 174

REFERENCESTHE TEX REPORTUNCTADIISI,2004

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MANGANESEMpumzi Bonga

DEVELOPMENTS DURING 2004/2005

WORLD DEMAND

World crude steel production rose to 1054,6 Mt in 2004, representing a 9,4 percent improvementon the 964 Mt produced in 2003. With the exception of Oceania (Australia & New Zealand),annual output increased in all manganese producing regions, with China experiencing thehighest growth of 23,2 percent from 222,4 Mt to 272,4 Mt. Chinese contribution to global crudesteel production increased from 20 percent in 2003 to 25 percent in 2004, while crude steelproduction in Japan increased by a modest 2,0 percent and African production went up by 1,2percent. Brazil became the eighth largest producer, displacing India to ninth position. During thefirst four months of 2005, Chinese crude steel production remained the dominant driver of worlddemand for manganese ore and alloys, but lower steel prices brought about by stricter Chinesegovernment controls in the steel market and weakening global demand resulted in a slump,which started in April and deteriorated in May and appeared set to last until September 2005.Chinese crude steel production totalled 29,73 Mt in May 2005, up 37,5 percent from the yearbefore while its cumulative total from January-May 2005 totalled 136,15 Mt, up 27,4 percentcompared with the same production in 2004 and manufactured steel products went up 25,4percent to 127,4 Mt.

The buoyant world steel market resulted in manganese ore demand eclipsing supply during thesecond and the last quarters of 2004 driving spot prices of the commodity up sharply. Suppliersresponded by increasing production capacity to satisfy the surging demand, particularly fromChina, which has increased its imports of both low and high-grade manganese ore. Supply-demand situation for manganese has been extremely cyclical since 2003 with deficits andexcesses in production alternating quarterly to the extent that an 89 kt deficit at the end of 2004was translated into a surplus of 140 kt during the first quarter of 2005.

TABLE 1: WORLD MANGANESE RESERVE BASE, MINE PRODUCTION AND EXPORTS,2004

COUNTRY RESERVE BASE# PRODUCTION EXPORTS Mt % Rank kt % Rank kt % Rank

China 100 2,0 4 3 420 11,5 4 * * 8 South Africa+ 4 000 80,0 1 4 280 14,4 1 2 420 18,5 2 Australia 75 1,5 5 3 481 11,8 2 2 827 21,6 1 CIS 560 11,2 2 3 450 11,6 3 1 125 8,6 6 Gabon 150 3,0 3 2 460 8,3 6 2 212 16,9 3 India 36 0,7 7 2 035 6,9 7 338 2,6 7 Brazil 56 1,1 6 2 676 9,0 5 1 534 11,7 4 Ghana * * 92 0,3 9 1 520 11,6 5 Mexico 9 0,2 8 233 0,8 8 * * 8 Iran * * 89 0,3 9 0* - - Other 14 0,3 7 128 25,7 1 143 8,5 TOTAL 5 000 100 29 347 100 13 119 100

Sources: USGS, 2003 (for Reserve base ) + DME, Directorate Mineral Economics.

Notes: # Manganese content * Included under “Other”

WORLD SUPPLY

In response to the increasing demand from steel manufacturers, global manganese oreproduction rose by 24,2 percent from 23,6 Mt in 2003 to 29,3 Mt in 2004 (Table 1) which equatesto a content of 10,3 Mt of contained manganese (Mn). In 2004 the production of high grade(>44%Mn) manganese ore increased by 30 percent while medium grade (30-44%Mn) went up15 percent and low grade (<30%Mn) remained unchanged relative to 2003 production figures.World manganese ferro-alloy production improved by 9,3 percent to 10,6 Mt (Table 2).

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Production capacity for manganese ore increased by 6,4 percent from 29,6 Mt in 2004,to 31,5Mt in 2005, as major producers expanded their production capacity in anticipation of higherdemand. The following factors contributed to the high demand for manganese ore :Anticipated rise in world crude steel production outputThe increase to 9,5kg of manganese units consumed per metric ton of crude steel produced.Growth in production capacityA sharp rise in world demand for ferromanganese alloys.

TABLE 2: WORLD PRODUCTION AND EXPORTS OF FERROMANGANESE ANDFERROSILICOMANGANESE, 2004

COUNTRY PRODUCTION EXPORTS kt % Rank kt % Rank

China 4 009 37,8 1 826 17,3 2 CIS 2 324 21,9 2 1 290 27,1 1 South Africa+ 769 7,2 3 759 15,9 3 France 173 1,6 10 168 3,5 6 Japan 514 4,8 6 8 0,1 10 Norway 569 5,3 5 584 12,3 4 India 587 5,5 4 106 2,2 8 Brazil 412 3,9 7 150 3,1 7 South Korea 264 2,5 9 55 1,1 9 Australia 277 2,6 8 199 4,2 5 Other 724 6,8 621 13,2 TOTAL 10 621 100 4 766 100

Sources: Metal Bulletin Research, 2003 + DME, Directorate Mineral Economics

WORLD PRICES

Japanese consumers usually negotiate prices with their Australian and South African suppliersat about the end of the first quarter of each year. Contracts for 2005 were fixed at $3,99 permetric ton unit (Mtu which refers to 1 percent of a ton of contained manganese), an increase of63 percent on the 2004 price of $2,45 per metric ton unit. This is a new contract price, exceedingthe 1990-1991 price of $3,35 per metric ton unit. The second high price reflected high demandfor the commodity, long-term contracts signed between China and major suppliers at highercontract prices of $4,0 per metric ton unit and the higher Mn units consumed in producing onemetric ton of crude steel.

The average price of high carbon ferromanganese (HCFeMn) in Europe rose to ¤971/t in 2004,an increase of 90,4 percent over ¤505/t in 2003. However during the first half of 2005, prices wentdown dramatically averaging some ¤652 per ton. Although the average Europeansilicomanganese price went up from ¤534/t in 2003 to ¤965/t in 2004, during the first half of 2005the price has averaged only ¤612 per ton.

SOUTH AFRICA

South African manganese ore production rose by 22,3 percent to 4 282 kt in 2004, and exportsincreased by 22,3 percent to 2 403 kt (Table 3). The local sales value increased by 6,8 percentto R656,4 million in 2004, while export earnings rose 26,9 percent to R1,082 billion in 2004 dueto higher sales driven by strong demand.

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TABLE 3: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OFMANGANESE ORE, 1995 - 2004

YEAR PRODUCTION LOCAL SALES EXPORTS SALES Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1995 3 199 W 239 889 W 1 589 452 204 284,5 1996 3 240 W 246 209 W 1 648 537 665 326,3 1997 3 121 W 308 526 W 1 773 578 603 326,4 1998 3 044 W 321 337 W 1 680 634 027 377,4 1999 3 122 W 319 308 W 1 569 615 190 392,2 2000 3 635 W 368 604 W 1 845 863 512 468,0 2001 3 266 W 423 621 W 1 528 877 819 575,0 2002 3 322 W 583 603 W 1 539 1 042 952 678.0 2003 3 501 W 614 393 W 1 956 852 983 436.0 2004 4 282 W 656 435 W 2 403 1 082 285 450,0

Note: W Withheld

The reversion of custodianship of all South Africa’s mineral resources to the state has seenmining companies re-applying for mining rights while some investors have formed partnershipswith BEE companies to apply for prospecting and mining permits. This could permit the entry ofa third significant manganese player, in addition to Samancor and Assmang. Recently , it wasreported that prospecting rights to certain Northern Cape farms containing manganese havebeen awarded to three BEE groups resulting in a loss of a potential resource of 350 Mt forAssmang (a subsidiary of ARM) where the old order rights were vested. Renewal of these oldorder rights by the company would have required ARM to have a 51 percent BEE partner interms of the new Mineral and Petroleum Resources Development Act of 2002.

Although South Africa holds 80 percent of the world manganese resources it accounts for onlyabout 22 percent of the global ore export market. As the South African government’s drive formore domestic beneficiation of manganese ore gains momentum, its share of the world exportmarket of manganese ferro-alloys increased as the country supplied 26 percent of the world highcarbon ferromanganese and 9 percent of the silicomanganese (figures 1&2), in 2004, asignificant improvement on the 17 percent and 7 percent , respectively supplied in 2003.

FIGURE 1: WORLD MANGANESE ORE RESERVES

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FIGURE 2: WORLD SUPPLY OF HC FERROMANGANESE BY COUNTRY

FIGURE 3: WORLD SUPPLY OF SILICOMANGANESE BY COUNTRY

TABLE 4: SOUTH AFRICA’S HIGH AND MEDIUM-CARBON FERROMANGANESEPRODUCTION, LOCAL SALES AND EXPORTS, 1995 – 2004

YEAR PRODUCTION LOCAL SALES EXPORTS SALES Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1995 507 173 63 804 100 352 1 573,0 567 543 952 268 1 678,0 1996 548 458 69 234 129 356 1 868,4 450 086 880 763 1 956,9 1997 498 759 49 322 101 714 2 062,0 453 597 861 348 1 898,9 1998 542 120 75 971 156 223 2 056,4 433 432 856 393 1 975,8 1999 527 106 101 089 213 870 2 115,7 421 636 855 597 2 029,2 2000 596 873 134 483 292 110 2 172,4 458 131 1 101 710 1 975,8 2001 523 844 131 009 329 750 2 517,0 405 876 1 232 009 3 035,4 2002 618 954 161 639 530 166 3 280,0 475 645 1 805 324 3 795,0 2003 607 362 150 843 493 599 3 272,0 437 181 1 352 433 3 093,0 2004 611 914 152 914 783 993 5 127,0 445 683 2 495 947 5 600,0

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TABLE 5: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OF OTHER*MANGANESE ALLOYS, 1995- 2004

YEAR PRODUCTION LOCAL SALES EXPORTS SALES Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1995 277 625 29 714 60 924 2 050,0 277 007 645 654 2 330,8 1996 294 034 38 965 89 459 2 296,0 211 404 683 973 3 235,4 1997 326 238 47 328 117 052 2 473,2 266 313 830 646 3 119,1 1998 308 845 49 918 130 452 2 613,3 298 512 979 022 3 279,7 1999 307 545 42 819 127 316 2 973,3 227 488 854 154 3 754,7 2000 310 400 42 704 119 369 2 795,1 221 850 977 552 4 406,1 2001 259 176 37 705 121 337 3 218,1 210 359 1 099 792 5 228,2 2002 315 802 35 293 122 736 3 495,0 215 259 1 256 592 5 840,0 2003 313 152 41 860 140 054 3 345,7 270 225 1 181 787 4 373,3 2004 373 928 38 971 148 026 3 798,4 307 821 1 833 313 5 956,0

Note: * Individual product details withheld for reason of company confidentiality

Total manganese alloy production in South Africa (Tables 4 and 5) increased by 7,1 percent in2004 to 985,8 kt, while exports increased by 6,5 percent to 753,5 kt. Total sales value increasedby 65,9 percent to R5,26 billion, while export earnings went up by 71,2 percent to R4,33 billion.

TABLE 6: SOUTH AFRICA’S MANGANESE MINES EMPLOYMENT AND REMUNERATION,1997 – 2003

YEAR EMPLOYEES TOTAL REMUNERATION R’000 1998 2 723 114 340 1999 2 458 117 887 2000 2 281 133 976 2001 2 001 132 778 2002 2 495 179 203 2003 2 460 208 150 2004 3 236 241 433

OUTLOOK

World crude steel output is increasing at an accelerating rate, particularly in China, it seems thatChina should be able to maintain sustainable growth of 7-8 percent per annum over the nextdecade. In line with the International Manganese Institute (IMnI) that world steel production willreach 1 245 Mt by 2010 with China accounting for 33 percent or 413 Mt of the total output, Chinais already producing a quarter of the global output. The prediction that Chinese steel productiongrowth will subside from more than 20 percent to 5 percent per annum after 2005 has yet tomaterialise, as growth for the first half of 2005 is already at 27,4 percent.

While the drive by Chinese authorities to enforce environmental compliance among ferro-alloyproducers and the stated intention to remove the subsidies that currently encourageoverproduction, seem to be gaining momentum, producers are reported to have made attemptsto export more tonnage in order to beat the deadlines for removing these incentives. Furthermoreit is expected that the production of manganese alloys (ferromanganese and silicomanganese)will drop drastically as China’s lower prices make production unprofitable for some Chineseproducers as this was evidenced by the drastic reduction towards the end of last year and thebeginning of 2005. These measures, however, may upset the world supply-demand balance tosuch an extent that ensuing shortages may lead to an upward spiral in prices. The outcome willdepend largely on how strictly the authorities enforce their environmental regulations as well ascontrol over excessive production of manganese alloys.

REFERENCES

THE TEX report (2004 - 2005)The International Manganese Institute (2004 - 2005)The International Iron and Steel Institute (2004 - 2005)

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SILICONMpumzi Bonga

DEVELOPMENTS DURING 2004/2005

World DemandWorld demand for silicon depends on international markets for aluminium castings and for siliconchemicals. Demand for ferrosilicon is closely allied to developments in the global steel industry.South Africa is a minor role-player supplying 7,6 percent and 3,8 percent of world exports ofsilicon metal and ferrosilicon, respectively (Tables 1 and 3)

World refined aluminium consumption grew by 8,1 percent to 29,5 Mt in 2004 compared with2003. Wold crude steel production grew by 9,4 percent in 2004, reaching a record level of 1054,6Mt, thus leading to a strong demand for ferrosilicon.

TABLE 1: WORLD PRODUCTION AND EXPORTS OF SILICON METAL, 2004

COUNTRY PRODUCTION+ EXPORTS Mt % Rank Mt % Rank

China 385,1 29,2 1 545,0 42,3 1 USA 184,7 14,0 2 58,0 4,5 5 Brazil 180,7 13,7 3 202,0 15,7 2 Norway 179,4 13,6 4 176,0 13,7 3 CIS 112,1 8,5 5 139,1 10,8 4 France 108,2 8,2 6 - 1,3 9 South Africa 50,5 4,9 7 57,0 4,4 6 Canada 44,8 3,4 8 42,0 3,3 7 Other 59,4 4,5 9 17,4 2,8 7 TOTAL 1 319 100 1 288 100

Sources: + Data estimated (silicon content) from information supplied by various bureaux

SILICON METAL IN 2004

Estimated global output improved to 1 319 kt in 2004 from an estimated 1 182 kt in 2003. As aresult of the improved demand, South Africa’s production of silicon metal increased by 3,3percent to 50,5 kt (Table 2). Despite dollar earnings rising by a significant 16,3 percent in 2004,due to the stronger rand, export receipts in rands decreased by 0,8 percent from R392,6 millionto R389,4 million. Likewise, although contract prices improved by 13,2 percent in 2004, from anannual average of $1 386/t in 2003, to $1 586,5/t in 2004,the average export sales unit price fellby 12,0 percent from R9 630/t in 2003 to R8473/t in 2004 (Table 2).

TABLE 2: SOUTH AFRICA’S PRODUCTION AND SALES OF SILICON METAL, 1995 - 2004

YEAR PRODUCTION LOCAL SALES EXPORTS SALES Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1995 30.1 3,8 16 366 4 303 25,7 115 323 4 494 1996 28.5 3,0 18 922 6 260 24,5 148 358 6 055 1997 34.0 3,0 21 487 7 240 31,9 202 837 6 359 1998 32.6 2,2 16 951 7 705 38,7 270 860 6 999 1999 35.8 1,2 8 493 7 271 33,1 237 754 7 179 2000 40.6 1,4 9 493 6 691 41,0 274 498 6 702 2001 39.4 2,2 15 215 7 002 39,4 313 627 7 956 2002 42.5 4,3 38 586 8 486 29,7 320 007 10 766 2003 48.5 5,7 49 713 8 739 40,8 392 582 9 630 2004 50.5 8,8 65 414 7 403 45,9 389 430 8 473

FERROSILICON IN 2004

World ferrosilicon production increased by 2,3 percent to an estimated 3 717 kt in 2004, whileexports increased to nearly 1 760 kt. The USA and EU imposed antidumping duties on importsof ferrosilicon from Russia and China in 2004 thus driving up prices of these commodities,

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particularly in those two major markets. Although the Chinese authorities have revised import taxrebates on several ferro-alloys, the 13 percent rebate on ferrosilicon remained unchanged in2005.

Asian spot prices of ferrosilicon rose by 32,6 percent from $611 per ton in 2003 to $810 per tonin 2004 as a result of constraints in supply from Chinese ferrosilicon producers, coupled with avery strong domestic market in China. Spot prices for the first six months in USA averaged$836/t, while EU spot prices were about ¤639/t. Prices have remained flat for the first half of2005.

South Africa’s total sales of ferrosilicon dropped by 1,7 percent in 2004 to 142 kt, of which 59percent was sold into the local market, predominantly to the steel industry (Table 4). Export salesmass dropped to 57,8 kt, a 12 percent decline.

TABLE 3: WORLD PRODUCTION AND EXPORTS OF FERROSILICON, 2004

COUNTRY PRODUCTION+ EXPORTS Mt % Rank Mt % Rank

China 1 554,0 41,8 1 694,0 40,7 1 CIS 7 91,7 21,3 2 352,0 19,1 2 Norway 308,5 8,3 3 187,0 14,5 3 USA 163,5 4,4 4 60,0 1,0 5 South Africa # 139,8 3,9 5 57,8 3,8 7 Brazil 138,5 3,7 6 85,0 4,1 4 France 74,3 2,0 7 37,5 1,6 8 Iceland 52,0 1,4 8 68,0 3,1 6 Other 495,7 13,2 219,1 12,1 TOTAL 3 717 100 1 760,0 100

Sources: + Data estimated (in silicon content) from information supplied by various bureaux # Directorate Mineral Economics

TABLE 4: SOUTH AFRICA’S PRODUCTION AND SALES OF FERROSILICON, 1995 - 2004

YEAR PRODUCTION LOCAL SALES EXPORTS SALES Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1995 92,7 57,4 135 250 2 356 50,5 118 677 2 356 1996 87,3 61,7 172 015 2 788 30,3 99 814 2 788 1997 102,2 70,9 223 698 3 155 47,5 141 019 3 155 1998 108,4 61,9 203 824 3 293 48,0 163 989 3 293 1999 106,0 60,0 201 832 3 364 46,4 153 633 3 364 2000 108,5 70,6 242 824 3 441 36,6 120 402 3 441 2001 107,6 65,9 245 946 3 733 31,4 110 771 3 733 2002 141,7 79,5 325 226 4 092 73.0 306 851 4 203 2003 135,3 79,0 364 716 4 618 65,7 280 285 4 267 2004 140,6 84,3 436 095 5 174 57,8 268 786 4 648

OUTLOOK

World steel production should increase further this year to reach the 1,2 billion ton mark by 2007.China, which is already producing 25 percent of global output is eventually expected to accountfor almost 33 percent of world crude steel output. Primary aluminium production also expectedto continue with its upward trend. This increase in steel and primary aluminium production willresult in higher demand for both silicon metal and ferrosilicon in 2005 and so Chinese productionis expected to reach record levels as it has enormous silica resources as well as massiveinvestment in ferro-alloy plants. However the continued dominance of export markets by suppliesfrom China is under threat from the imposition of antidumping duties by the USA and EU.

Shortages of Chinese ferrosilicon as a result of these antidumping duties may lead to disruptionsin supply in the West and thus keep markets in deficit. Further market tightness can be expectedas a result of the rise in domestic demand resulting from strong growth in Chinese crude steelproduction. The 5 percent reduction in export rebate may prevent the Chinese from exporting on

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the same scale as last year forcing them to concentrate on the domestic market. However,Chinese dominance of the markets might continue despite the reductions as the export rebateremains high at 13 percent.

South African producers of both silicon metal and ferrosilicon are expected to take advantage ofthe potential shortfall in supplies by increasing output in order to capture some of the market lostto Chinese and Russian suppliers as a result of antidumping duties imposed by the West.However, there are constraints that will limit their capacity to increase exports, such asinfrastructure (rail and harbour) and lack of raw materials. Spoornet’s undertaking to expandinfrastructure may boost the drive for more exports.

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VANADIUMN KWEYAMA

INTRODUCTION

Vanadium is an important alloying element which confers specific properties on a range ofdifferent steels. Two thirds of vanadium production is derived from bi- or co-product sources.Approximately 90% of the total vanadium output is used in the form of ferrovanadium by steelmakers, with most of the balance consumed in titanium alloys, other non ferrous metals and asa catalyst in chemical applications.

Growth in demand for vanadium has been slightly higher than that of steel although there havebeen few new applications for many years. Most of the growth has been through an increase invanadium content used in special steels.

TABLE 1: WORLD VANADIUM RESOURCES AND PRODUCTION, 2004

COUNTRY RESERVE BASE+ PRODUCTION Kt % Rank kt % Rank

South Africa* 12 000 31 2 23,3 49 1 China 14 000 36 1 13,2 28 2 Russia 7 000 18 3 10 21 3 U. S. A 4 000 10 4 Nil 0 Other 1 000 2 1 2 TOTAL 38 000 100,0 47.5 100,0

Sources: + USGS, Mineral Commodity Summaries, January 2004 (for Reserve Base)* Minerals Beureau (SA Reserves to a depth of 50 m below surface)

Notes: All data in metal content includes production and exports from non-mining sources

DEVELOPMENTS DURING 2004/2005

World DemandSteel production exceeded the one billion ton milestone in 2004, rising from 969 Mt in 2003 to arecord level of 1057 Mt, an increse of 9 percent. An average annual growth rate in output of 5,7percent was achieved between 2000 and 2004, with China accounting for 56 percent of worldcrude steel expansion. China’s steel output grew by another 50 Mt in 2004 a 22 percent increasecompared with 2003. Production in the US and Europe showed a modest improvement over2003. Vanadium alloy prices have more than trebled since 2003 as a result of strong demandfrom Chinese steel producers. Increased activity in the construction sector towards the end of2004 prompted the return of Chinese buyers to the vanadium market, initiating one of thesteepest price rises in the history of vanadium.

World Supply World production of vanadium was dominated by South Africa (49 percent of world output)followed by China (27 percent ) and Russia (21 percent) (Table 1). Although China is reputed tohave a larger reserve base than South Africa, the quoted resource for South Africa. has not beencalculated to its full exploitable extent and the grade of ore is believed to higher in SA

The following events influenced the demand supply balance

• In January 2004 China passed a regulation requiring the use of high grade rebar inconstruction was passed into law, boosting vanadium demand and simultaneously reducingthe export capacity.

• Xstrata decided to close their Windimurra plant in Australia and Vantech vanadium plant inSouth Africa both plants had been placed on care and maintenance in 2003.

• Vanady Tula of Russia attempted to acquire the ferrovanadium conversion unit from Nikom,used to convert vanadium pentoxide into ferrovanadium, thus restricting the availability offerrovanadium to steel producers.

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Supply tightness became more pronounced in the last quarter of 2004 as Chinese producerPangang experienced furnace disruptions delays and Highveld Steel encountered logisticalproblems, resulting in bullish sentiment and creating an expectation of future high prices.

World PricesVanadium prices started 2004 on a firm tone, based on the growing world economy and strongChinese demand. In May 2004, the monthly average price of ferrovanadium and vanadiumpentoxide peaked at $27,29/kg and $6,09/lb respectively. By midyear, however, demand forvanadium had declined sharply, reflecting the effect of tight credit lines in China and sufficientstock levels held by buyers. This negative trend was reversed in the third quarter as steel makerslifted production and long-term contract buyers re-entered the spot market, seeking protectionfrom future price increases. By December the monthly price averages for ferrovanadium andvanadium pentoxide had increased to $48,33/kg and $ 9,47/lb, respectively. Average annualprices for 2004 rose considerably, with the spot price for ferrovanadium rising by over 135percent from $11,47/kg in 2003 to $27,04/kg, while vanadium pentoxide shot up to $6,00/lb in2004 from $2,21/lb in the previous year, an increase of over 170 percent.

DEVELOPMENTS IN SOUTH AFRICA

Vanadium output fell by 14 percent from 27 Mt in 2003 to 23 Mt, in 2004 as a result of the plantclosures and the high inventory levels accumulated from previous years. Local sales mass,however continued its dynamic growth trend from 2003 realising a 135 percent leap from 1,1 Mtto 2,6 Mt in 2004 in response to the boom in construction spending and strong vanadiumdemand for chemical applications in the domestic market (table 2).

TABLE 2: SOUTH AFRICA’S PRODUCTION AND SALES OF VANADIUM, 1995 – 2004

YEAR PROD. LOCAL SALES EXPORT SALES TOTAL SALES Mass Value (FOR) Mass Value (FOB) Mass Value

T t R’000 R/kg T R’000 R/kg t R’000 1995 14 122 361 15 540 43 12 739 366 732 29 13 097 382 272 1996 14 740 286 18 025 63 14 322 560 355 39 14 608 578 380 1997 15 590 313 25 996 83 15 723 848 183 54 16 036 87 4179 1998 18 868 223 28 332 127 17 531 245 014 71 17 754 273 346 1999 17 612 240 18 747 78 15 871 893 309 56 16 111 912 056 2000 18 021 300 24 848 83 15 865 755 006 48 16 164 778 854 2001 18 184 269 20 121 75 17 262 886 248 51 17 532 906 369 2002 25 227 395 36 015 91 19 954 114 5036 57 20 249 1 181 051 2003 27 172 1 119 108 666 97 18 816 1 072 477 57 19 935 1 181 144 2004 23 302 2 637 415 915 158 16 275 1 674 785 103 18 913 2 090 701

Notes: Mass data is given in units of vanadium contained . Internal domestic consumption of vanadium slag and fused pentoxide or trioxide is eliminatedfrom both production and sales data to avoid double and triple counting. These figures, therefore apply to production and sales of the final productwhich is sold after processing yield losses. The production and export data includes all exported slag and fused pentoxide, which may have ayield loss of 2,0 kt of vanadium during further processing overseas. In world supply terms these outputs might regularly be counted once, or twicemore as overseas production, overstating the markets

Revenues from local sales almost trebled, recording a value of R415 million in 2004, a staggering284 percent improvement from R108 million in 2003. Revenue significantly outperformed outputgrowth in local sales mass, indicative of the strong price performance during the period. Thispattern is also evident in total sales; while total sales mass recorded a negative growth of 5percent in 2004 down from 19 Mt in 2003 to 18 Mt, total revenues rose by a massive 107 percentin dollar terms showing an exceptional price performance despite the strong rand.

OUTLOOK

The short-term outlook for vanadium is promising, given the strong demand anticipated fromChina. The price is expected to remain at elevated levels in 2006 as a result of supply tightness.Should high prices persist in the medium term, convergence between the price of ferrovanadiumand pentoxide is possible. Consistently high vanadium prices will encourage investment inconversion technology by steel makers. This should minimize supply disruptions resulting in astable market and contribute to the long-term economic health of the industry.

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Local steel demand will accelerate as infrastructure projects by parastatals and the private sectorgain momentum. The softening tendency of the currency will further boost revenues fromvanadium production. Demand for vanadium will continue to expand rapidly in China in responseto growth in steel production, but the anticipated negligible growth in steel production in Europeand the USA will limit growth in vanadium demand. However strong demand growth from Chinashould ensure a record output level in 2005.

TABLE 3: SOUTH AFRICAN VANADIUM MINES: EMPLOYMENT AND REMUNERATION,2000-2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 2000 1 467 163 315 2001 1 240 155 202 2002 1 221 153 779 2003 1 219 173 687 2004 1 081 163 900

REFERENCES

ICDA News October 2003 - April 2005Tex Report January 2004 - June 2005USGS Mineral Commodity Summaries January 2005

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INDUSTRIAL MINERALS OVERVIEWJ Duval

INTRODUCTION

On the local market the industrial minerals sector has been performing satisfactorily for the pastsix years (1998-2004), in real terms (see graph 1).

The value of industrial mineral exports remained fairly level from 1998 to 2001, but since thenhas declined gradually to the 2004 level of R1,05 billion.

The building and construction industries were responsible for the upswing in local sales, andreduced phosphate rock exports the main factor influencing export sales.

PRODUCTION AND SALES (TABLE 3)

Industrial minerals contributed 4,9 percent of total mineral sales in 2004, i.e. 14,1% of total localmineral sales and 1,2 percent of mineral export sales.

On the local market sales of industrial minerals increased by14,6 percent, nominal value, in 2004compared with 2003, and by 13,8 percent in real terms.

Local sales have been on a healthy upward trend since 2001, largely as a result of increasingbuilding and construction activity.

Export sales are decreasing, caused mainly by decreasing export of phosphate rock. Foskor hasincreased production as well as treatment capacity, resulting in greater local production ofphosphoric acid.

COMMODITY COMMENTS

Local and export sales volumes of andalusite increased by 6 025t and 37 643t respectively,leading to an increase in total sales value of R56 million in 2004 over 2003. The andalusitemarket has been in the doldrums for some time, but is related to the steel industry, whichaccounts for the improvement in the market.

Local sales of limestone show a marginal increase over the previous year. The quantity oflimestone going into the manufacture of cement has dropped slightly. The major reasons for thisare an increase in the use of pozzelanics, improved plant efficiencies and a possible overhangof cement supplies caused by transport difficulties in the previous year.

The value of exported granite decreased substantially (52,4%), compared with the previous year,although the volume exported decreased only marginally. The main reason for this is that majorproducers are now selling their product ‘free on rail’ or ‘free on mine’, meaning that their

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customers are now paying all transport costs. Previously these costs were factored in to adelivered or FOB price. The strength of the rand and a strongly competitive international markethave also had a negative effect the earnings of stone exporting companies.

Apart from flint clay and kaolin, sales of clay minerals, increased in 2004, with plastic claysgenerally used for bricks and tiles, leading the way.

Sulphur production, sales and import figures are difficult to interpret. It appears that localproduction is greater than total sales, and yet sulphur is imported. Production includes sulphurin all forms (SAF), an example of which is sulphur in sulphuric acid. Elemental sulphur isimported and used in the manufacture of acid. It appears that imported sulphur in locallyproduced sulphuric acid may be reported as local production, leading to inflated local productionfigures. Further attention is to be paid to this matter.

Aggregate and sand sales increased by 36,2% in volume and 40,9% in sales value in 2004 inrelation to 2003, which suggests that price increases have not been excessive.

TABLE 2: SOUTH AFRICA’S PRIMARY INDUSTRIAL MINERALS PRODUCTION ANDSALES, 2003

COMMODITY PRODUCTION LOCAL SALES (FOR) EXPORT SALES (FOB) TOTAL SALES Quantity Quantity Value (R) Quantity Value (R) Quantity Value (R)

1. General Andalusite 164 921 44 163 53 515 154 130 029 166 735 556 174 192 220 250 710 Asbestos # 6 218 10 286 623 4 469 64 27 806 10 687 16 714 429 Barytes # 355 149 100 * * 355 149 100 Calcite # 673 964 471 * * 673 964 471 Feldspar 57 738 57 445 29 943 117 * * 57 445 29 943 117 Fluorspar ** ** ** ** ** ** ** Gypsum 394 069 426 845 20 832 429 * * 426 845 20 832 429 Kieselguhr ** ** ** * * ** ** Limestone & lime 21 267 241 17 502 080 1 198 800 443 15 805 9 200 812 17 517 885 1 208 001 255 Magnesite ** ** ** ** ** ** ** Mica 1003 470 1 723 716 470 2 673 135 940 4 396 851 Mineral pigments 764 1 080 678 043 * * 1 080 678 043 Perlite ** ** ** * * ** ** Phosphate rock+ 2 642 970 2 664 947 ** 249 697 ** 2 914 644 ** Pyrophyllite ** ** 22 964 857 ** 14 583 728 ** 37 548 585 Salt 441 306 467 454 84 112 704 418 70 136 467 872 84 182 840 Silica 2 311 540 2 069 738 165 095 803 884 1 198 847 2 070 622 166 294 650 Sulphur 613 892 480 154 237 782 942 32 485 21 799 274 512 639 259 582 216 Talc 6 719 7 735 4 051 168 * * 7 735 4 051 168 Vermiculite 182 802 6 522 5 113 837 163 342 144 759 394 169 864 149 873 231

2. Dimension and building stone Granite 78 471 47 824 056 384 741 718 745 749 463 212 766 569 805 Sandstone 1 823 1 599 619 1 553 2 988 793 3 376 4 588 412 Siltstone 792 646 850 20 30 000 812 676 850 Slate 40 677 9 020 551 * * 40 677 9 020 551

3. Clays Attapulgite 14 585 14 473 6 750 304 * * 14 473 6 750 304 Bentonite 145 060 74 357 31 210 345 11 023 3 728 000 85 380 34 938 345 Plastic clays # 7 372 831 79 749 136 * * 7 372 831 79 749 136 Flint clay 53 279 59 958 23 439 627 2 362 2 968 166 62 320 26 407 793 Kaolin 86 365 72 948 40 572 838 12 018 8 900 593 84 966 49 473 431

4. Aggregate & sand 32 587 337 1 356 071 074 * * 32 587 337 1 356 071 074

5. Miscellaneous 957 338 222 250 476 421 1 207 814 643 TOTALS 4 390 237 029 1 355 286 410 5 745 523 439

Sources: DME, Directorate Mineral Economics+ Foskor, 2003

Notes: All quantities are in metric tons, unless otherwise specified* Nil ** Classified, included under Miscellaneous # Not available

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TABLE 3: SOUTH AFRICA’S PRIMARY INDUSTRIAL MINERAL PRODUCTION AND SALEs2004

COMMODITY PRODUCTION LOCAL SALES (FOR) EXPORT SALES (FOB) TOTAL SALES Quantity Quantity Value (R) Quantity Value (R) Quantity Value (R)

6. General Andalusite 234 625 50 188 64 429 853 167 672 211 719 329 217 860 276 149 182 Asbestos # 586 1 144 844 * * 586 1 144 844 Barytes # 276 116 046 * * 276 116 046 Calcite # 452 625 561 * * 452 625 561 Feldspar 53 044 65 702 38 112 271 * * 65 702 38 112 271 Fluorspar ** ** ** ** ** ** ** Gypsum 452 271 459 032 18 782 841 * * 459 032 18 782 841 Kieselguhr ** ** ** * * ** ** Limestone & lime 21 961 335 17 704 965 1 230 366 879 16 075 9 673 424 17 721 040 1 240 040 303Magnesite ** ** ** ** ** ** ** Mica 901 55 274 350 766 4 072 002 821 4 346 352 Mineral pigments 512 985 757 962 20 43 628 1 005 801 590 Perlite ** ** ** * * ** ** Phosphate rock+ 2 735 150 2 484 392 ** 267 653 ** 2 752 045 **Pyrophyllite ** ** 34 715 822 ** 11 683 431 ** 46 399 253 Salt 394 775 406 654 74 055 286 * * 406 654 74 055 286 Silica 2 400 169 2 168 056 195 580 646 649 1 006 857 2 168 705 196 587 503 Sulphur 633 417 390 036 201 706 166 68 918 47 676 647 458 954 249 382 813 Talc 8 115 8 134 4 364 627 * * 8 134 4 364 627 Vermiculite 196 893 7 287 6 228 895 178 774 150 943 505 186 061 157 172 400

7. Dimension and building stone Granite 145 443 149 029 262 381 699 342 283 532 527 142 491 312 794 Sandstone 2 483 1 125 985 2 5041 1 345 689 4 987 2 471 674 Siltstone 793 652 440 * * 793 652 440 Slate 47 534 10 663 285 47 534 10 663 285

8. Clays Attapulgite 20 419 20 233 8 962 286 * * 20 233 8 962 286 Bentonite 55 859 75 464 35 662 483 10 529 5 956 098 85 993 41 618 581 Plastic clays # 9 945 049 118 700 774 * * 9 945 049 118 700 774 Flint clay 53 367 59 848 23 643 618 3 703 3 786 640 63 351 27 430 258 Kaolin 81 901 67 766 42 879 971 8 834 5 066 307 76 600 47 946 278

9. Aggregate & sand 44 436 785 1 910 432 095 * * 44 436 785 1 910 432 095

10. Miscellaneous 8 52 314 406 256 905 927 1 109 280 333 TOTALS 5 033 229 192 1 052 163 016 6 085 392 208

Sources: DME, Directorate Mineral Economics+ Foskor, 2004

Notes: All quantities are in metric tons, unless otherwise specified* Nil** Classified, included under Miscellaneous# Not available

IMPORTS OF PRIMARY INDUSTRIAL MINERALS (TABLE 4)

The total value of imported, primary industrial minerals decreased by 9,8 percent in 2004, inrelation to the previous year. The pattern and quantity of imports remained fairly constant. Thequality of industrial minerals may vary considerably, and this can make price comparisons fromyear to tear, in R/t terms, very misleading. It must also be borne in mind that imports frommembers of the South African customs union are not reflected in Table 4. Salt imports are far inexcess of those stated, with most salt imports sourced from Namibia. Soda ash imports are notreported, as all come from Botswana and no figures are available.

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TABLE 4: SOUTH AFRICA’S IMPORTS OF PRIMARY INDUSTRIAL MINERALCOMMODITIES, 2003–2004

COMMODITY 2003 2004 Mass Value (FOB) Mass Value(FOB)

t R R/t t R R/t Salt (25.01) 4 871 1 700 729 349 3 168 4 480 461 1 414 Iron pyrites (25.02) 1 033 905 280 877 575 632 085 1 099 Sulphur (25.03) 622 590 275 408 471 442 554 000e 251 419 142 454 Graphite natural (25.04) In powder or flakes (25.04.10) 1 447 4 925 510 3 405 1 387 4 726 369 3 408 Other (25.04.90) 134 1 576 565 11 794 40 152 798 3 820 Sand (25.05) Silica & quartz sands (25.05.10) 1 738 1 729 234 995 462 1 130 227 2 446 Other (25.05.90) 1 555 3 577 782 2 301 961 3 937 425 4 097 Quartz (25.06) 400 1 110 365 2 779 263 922 249 3 507 Kaolin (25.07) 11 562 24 925 434 2 156 15 946 23 562 233 1 478 Bentonite (25.08.10) 5 930 15 135 037 2 552 5 816 13 209 558 2 271 Fuller’s earth (25.08.20) 272 1 202 374 4 414 190 1 048 108 5 516Fire clay (25.08.30) 4 12 431 3 225 8 563 7 049 Other clays (25.08.40) 954 3 372 648 3 536 1 114 3 522 654 3 162Alumino-silicates (25.08.50) 20 81 598 4 084 195 270 123 1 385 1 385 Chalk (25.09) 4 698 5 654 152 1 203 6 604 7 179 597 1 087 Phosphate rock (25.10) 142 517 57 353 417 402 133 069 38 211 551 287 Barytes (25.11.10) 3 245 4 351 504 1 341 3 056 7 007 676 2 293 Kieselguhr (25.12) 5 002 14 975 372 2 994 4 594 10 670 018 2 323 Natural abrasives (25.13) 1 750 8 010 353 4 577 1 544 5 573 400 3 610 Slate (25.14) 8 679 16 774 505 1 933 15 552 24 745 374 1 591 Marble (25.15) 597 1 968 342 3 295 810 3 251 275 4 014 Granite (25.16.12) 22 519 25 235 601 1 121 5 943 13 931 728 2 344 Dolomite (25.18) Calcined (25.18.20) 816 1 154 440 1 415 700 1 715 724 2 451 Agglomerated (25.18.30) 223 338 743 1 321 120 422 182 3 518 Magnesite & magnesia (25.19) 55 253 81 928 532 1 483 53 706 77 305 766 1 439 Gypsum (25.20.10) 1 931 2 731 692 1 415 2 624 3 039 289 1 158Limestone (25.21) 194 186 386 961 162 1 037 704 6 406Slaked lime (25.22.20) 10 250 11 770 024 1 148 8 607 8 635 467 1 003Asbestos (25.24) 1 470 4 133 542 2 812 1 359 4 114 356 3 027Mica (25.25) 375 1 021 315 2 726 495 846 608 1 710Steatite (25.26) 5 388 12 230 582 2 270 5 480 11 713 495 2 137Cryolite (25.27) 0,6 7 201 12 288 1 11 397 11 397Sodium borates (25.28.90) 2 043 4 270 033 2 090 1 903 2 999 637 1 576Perlite (25.30.10) 16 121 5 953 514 369 8 374 5 795 578 692TOTAL 595 712 708 537 277 645

IMPORTS OF MANUFACTURED INDUSTRIAL MINERAL COMMODITIES (TABLE 5)

Similarly to primary industrial mineral imports, the import of a selection of manufacturedindustrial mineral commodities decreased by 12,5 percent in 2004, in comparison with theprevious year.

Imports of ceramic products were the most significant, increasing by 28,3 percent to just morethan R1 billion. Imported articles of asbestos cement increased by 35,0 percent to R41,4 million.It seems ironic that, for health reasons, asbestos mining has ceased in South Africa and thatasbestos bearing cement imports are increasing.

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TABLE 5: SOUTH AFRICA’S IMPORTS OF MANUFACTURED INDUSTRIAL MINERALCOMMODITIES, 2003–2004

COMMODITY 2003 2004 Value (FOB) Value (FOB)

R R Articles of stone, plaster, cement, asbestos, mica or similar materials 505 327 411 562 327 447 Building stone (68.02) 93 988 575 132 596 336 Worked slate & articles of slate (68.03) 6 269 745 4 542 418 Millstones and grindstones (68.04) 58 061 110 58 900 173 Natural abrasive powders (68.05) 121 242 091 131 136 954 Slag wool, rock wool & similar mineral wools (68.06) 100 679 658 122 921 243 Articles of asbestos-cement (68.11) 30 777 794 41 411 087 Fabricated asbestos fibres (68.12) 4 732 748 4 105 818 Friction material (68.13) 76 036 306 75 804 183 Worked mica & articles thereof (68.14) 13 539 384 13 516 553 Refractories 734 666 127 763 372 041 Of siliceous fossil meals (69.01) 3 834 217 5 915 430 Other bricks (69.02) 382 728 305 453 680 845 Other refractory ceramic goods (69.03) 348 103 605 303 775 766 Ceramic products 835 586 726 1 071 811 007 Ceramic building bricks (69.04) 943 038 2 029 121 Roofing tiles (69.05) 6 345 123 3 633 827 Ceramic pipes (69.06) 84 433 443 379 Unglazed ceramic (69.07) 23 799 135 40 285 044 Glazed ceramic (69.08) 284 649 061 378 265 943 Ceramic wares for laboratory (69.09) 311 885 858 361 406 758 Ceramic sinks (69.10) 38 253 318 54 565 556 Tableware (69.11) 73 880 683 101 044 196 Ceramic tableware (69.12) 70 192 209 100 850 779 Ceramic articles (69.13) 19 917 228 22 635 495 Other ceramic articles (69.14) 5 636 640 6 650 909 Glass and glassware (70.00) 331 882 915 313 264 671 TOTAL 2 407 463 179 2 710 775 166

Source: RSA, Commissioner for South African Revenue Service, 2004– 2005

Note: Codes in brackets refer to subchapters of the Harmonised System

EMPLOYMENT

TABLE 6: SOUTH AFRICA’S INDUSTRIAL MINERALS MINES AND QUARRIES:EMPLOYMENT, REMUNERATION AND REVENUE GENERATION, 1999–2004

YEAR EMPLOYEES REMUNERATION REVENUE GENERATION Total R/employee R/employee R’000 Nominal Real* Nominal Real*

1999 15 582 642 684 41 245 53 807 267 594 349 093 2000 14 578 663 958 45 545 56 414 284 837 352 811 2001 13 950 709 638 50 870 59 593 337 663 395 567 2002 13 877 755 940 54 474 58 462 382 515 410 521 2003 14 915 858 603 57 566 58 366 381 134 386 433 2004 16 053 1 003 450 62 509 62 509 350 288 350 288

Notes: * CPI deflated

Excludes employees and remuneration where the industrial mineral commodities are by-products of other mineral sectors.

The improving trend in the total number of employees in the industrial mineral sector that startedin 2003 has continued in 2004, with a 7,6 percent increase. Improved data collection mayaccount for some of the increase. Average remuneration per employee has also improved (16,9percent). Average wages in this sector are comparable with those in the gold and platinumsectors (R70 000 and R60 000 per employee respectively).

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AGGREGATE AND SANDVN Agnello

INTRODUCTION

The sand and aggregate industry comprises some 520 registered operating quarries and sandextraction operations in South Africa. In 2004, 369 operators submitted production returns – anet increase of 55. This is estimated to represent approximately 50 percent of all sand andaggregate producers in South Africa, and about 80 percent of total volume.

The South African construction sector is a R72-billion industry, employing a workforce of morethan 310 000 and can be divided into three main sub-sectors, a) civil engineering andconstruction, b) residential building and c) non-residential building.

A complex set of factors determines demand in the construction industry, these include:fluctuations in interest rates, population growth, migration patterns, urbanisation, housingsubsidies, income growth, building costs and property prices, property taxes and public policiesrelating to housing and procurement practises. It is often said that a healthy construction sectoris indicative of a healthy economy, while a lacklustre industry reflects a depressed economy.

In the following, local sales refer to sales within South Africa, regional sales refer to sales inSADC countries (excluding South Africa) and exports to sales beyond SADC borders.

DEVELOPMENTS DURING 2004/5

In 2004, production of sand and aggregate in South Africa increased by 36,4 percent to 44 437kt. Major production increases (greater than 35 percent) at leading sand and aggregateoperators, which includes Gomes Transport, Denver Quarries, Maccsand, Coegaskop West, St.Lukes Quarry and some Holcim and Lafarge quarries, have boosted sales significantly.

There were notable increases in sales to Kempton Park, Randburg, Roodepoort, Pretoria andenvirons, Midrand, Durban and environs, Durbanville, Somerset West and the southern Cape.Since 2001, sand and aggregate sales by volume, have increased 17,3 percent year-on-year(Table 1). Local sales value improved by 40,9 percent to R1 910,4 million, with a unit valueincrease of 3,4 percent to R43,0/t. Anomalous sand tonnages in 2003 have been attributed tothe removal of incorrectly coded sand data from the database. The increase in aggregate andsand consumption indicates a strengthening in domestic infrastructural activity, especially in themaintenance and extension of road, rail, air, and harbour transport services, and in water andenergy capture and distribution, as well as in domestic, industrial, and commercial building andconstruction (Table 2).

TABLE 1: SOUTH AFRICA’S LOCAL SALES OF AGGREGATE AND SAND, 1997–2004

YEAR COARSE+ FINEx TOTAL Mass Value (FOR) Mass Value (FOR) Mass Value (FOR)

kt R’000 R/t Kt R’000 R/t kt R’000 R/t 1997 26 055 751 128 28,8 7 020 74 021 10,5 33 075 825 149 24,9 1998 26 546 788 072 29,7 6 163 61 802 10,0 33 828 857 352 25,3 1999 22 321 693 301 31,1 6 271 55 727 8,9 29 341 767 322 26,2 2000 22 434 743 015 33,1 6 236 60 258 9,7 28 597 804 817 28,1 2001 21 360 776 511 36,4 6 184 63 736 10,3 27 632 832 238 30,1 2002 22 106 880 469 39,1 6 810 78 249 11,5 28 916 958 718 33,2 2003 26 852 1 281 263 47,7 5 735 74 808 13,0 32 587 1 356 071 41,6 2004 35 953 1 781 943 49,6 8 484 128 489 15,1 44 437 1 910 432 43,0

Notes: + Includes crusher sandx Natural sandUnit values calculated before rounding of mass and rand values

Domestic cement consumption showed an upward trend of 17,4 percent for 2004. A strongincrease in brick sales (and shortages) for 2004 confirms this upward trend of infrastructuralactivity. However, regional cement sales and exports shrunk by 1,1 and 41,7 percent respectively

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– cement export sales represent less than 2,5 percent of total supply.In 2004, moderate price increases were introduced throughout the sand and aggregate industry(Table 3); of the top 30 producers, 10 operators increased prices by at least 10 percent, whilstanother 8 operators increased prices by 5-10 percent. Strong demand, the intermittent shortsupply of bricks, building blocks, galvanised sheet metal and other construction materials, as wellas rising fuel, transport, maintenance and compliance costs, have forced producers’ and builders’input costs to escalate exponentially over the last few years. This has had a knock-on effect onbuilding contracts and tendering in the construction industry.

Several mining projects in Angola; road, bridge and low-cost housing developments in Namibia,Botswana, Swaziland, Malawi and Mozambique will augment short-term forward books. Howevercross-border activity has tapered down over the last two years, primarily through rand volatilityand the default on contractual payments by several African countries. Further abroad, the MiddleEast, the Far East, Australasia and recently South America are offering potential for largecontracts/ tenders for South African construction companies.

Government’s proposed R165 billion investment programme, which includes improving transportinfrastructure, services and the road network, the taxi redevelopment programme, communityinfrastructure, integrated settlements, prison and hospital upgrades, police station and courtfacilities, peri-urban, rural and municipal upgrades, the Dept. of Public Works’ planned buildingupgrades, educational colleges and revamps, water resource infrastructures and housing roll-outplans should be a tremendous boost to the construction industry in the immediate future.

In the private sector, short and medium-term developments include the implementation of largeinvestment programmes such as nuclear and ethanol projects, mine expansions within theplatinum and ferrochrome industries, Sasol’s Project Turbo and localised up-marketdevelopments of residential dwellings, estates, hotels, casinos, shopping centres, conventioncentres and office parks. Further, Eskom and Transnet’s proposed multi-billion roll-out plan augurwell for the industry.

TABLE 2: APPROVED AND PLANNED CONSTRUCTION PROJECTS OF VALUE GREATEROR EQUAL TO R1 BILLION, 2004/2005

Current projects • Hibberdene Harbour project, power station development (Richard’s Bay), Durban Port

upgrade, King Shaka Airport, Riverhorse Valley and Simbithi Eco-estates, Ocean View Hotel(KwaZulu-Natal)

• Blue IQ projects, Motor Industry Development Plan, Alexandra Renewal Project, InnovationHub, Melrose Development node, Cosmo City Housing Development (Gauteng)

• Berg Water Scheme (Western Cape) • Coega International Development Zone and Port of Ngqura (Eastern Cape) • Maputo Corridor project and Sasol Pipeline (Mozambique)

Possible future projects • Mine and plant expansions (platinum, gold and nickel, new collieries, heavy mineral sands) • New Limpopo Dam (Limpopo Province) • Braamhoek pump-storage scheme (Free State border) • Gautrain, Africa theme park, Tshwane International Convention centre, Tshwane Inner City

Programme, Temba water scheme, provincial government precinct (Gauteng) • Aluminium smelter and Coega stainless steel plant (Eastern Cape) • Dube Tradeport, pulp mill upgrades (KwaZulu-Natal) • Saldanha port expansion, N2 Gateway project (Western Cape) • Recommissioning and construction of new power stations (locations unspecified) • Namibian, Swazi and Mozambican road upgrades

In 2004, Government contributed 19,0 percent to total gross fixed capital formation (GFCF),public corporations 10,8 percent and private business 70,2 percent. In 2004, GFCF (in nominalterms) improved from R163,4 billion to R178,7 billion, attaining a growth of 9,4 percent comparedto 9,0 percent in 2003. GFCF figures may prove misleading, as large structural and mechanicalcomponents are also included. Nevertheless, construction works has excelled with real annual

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growth of about 10 percent. The government has a stated objective to expand GFCF from 19percent of 25 percent of GDP in the next 8 years. The fast-tracking of regulated, governmenttenders through public-private partnerships (PPP) will address some of the country’s multi-billionrand infrastructure backlog.

In 2004, the civil engineering industry contracted by 3,3 percent in nominal terms to R17,2 billion(local revenues only). The cumulative number of tenders declined by 7,6 percent over the 12month period up to the first quarter of 2005, whilst the value of contracts awarded increased by20,5 percent and average annual employment levels declined by 8,2 percent. An annualisedgrowth of 8 percent (real) has been predicted for the civil engineering industry for 2005.

In 2004, 254 construction companies were liquidated, a year-on-year decrease of 19,4 percent.Working conditions remain difficult, although the number of new company registrations hasgrown exponentially to 1 200 per month, from an initial 540 per month in 2000. The businessconfidence of contractors in the residential sector has improved significantly, whilst theoversupply of office space has curtailed demand for non-residential building projects, althoughtendering has been fiercely competitive.

TABLE 3: SOUTH AFRICA’S LOCAL SALES OF AGGREGATE BY SIZE, 2003–2004

SIZE 2003 2004 Mass Value (FOR) Mass Value (FOR) Kt R’000 R/t kt R’000 R/t

26 mm or more 2 202 108 234 49,1 2 846 133 157 46,8 13–26 mm 7 434 425 858 57,3 9 960 594 482 59,7 <13 mm 2 348 122 888 52,3 2 539 143 653 56,6 Base course (G1-G3) 3 076 141 431 46,0 3 184 164 087 51,5 Sub-base (G4-G7)+ 2 900 91 838 31,7 4 075 132 050 32,4 Crusher-run 3 156 144 107 45,6 869 39 615 45,6 Crusher sand 6 048 263 741 43,6 8 301 382 192 46,0 Natural sand 5 735 74 808 13,0 8 484 128 489 15,1 Other* 2 800 125 044 44,7 4 178 192 707 46,1 TOTAL 32 587 1 356 071 41,6 44 437 1 910 432 43,0

Notes: * Includes refuse, waste, soil, granulated slag, filter media, steel slag, boulders, rock chunks, calcrete, gravel, sandstone and shaleUnit values calculated before rounding of mass and rand values

Recent trends in the sand and aggregate industry include: the reworking of mine waste dumpsas substitutes for borrow pit material; the use of pelletised, recycled waste materials (such asdredge sludge, treated sewage, incinerator bottom ash, household waste, demolition debris andreclaimed asphalt pavement); the construction of noise berms along highways; andenvironmental applications (soil-erosion control programmes and water treatment). Further, theuse of industrial by-products, such as lightweight aggregates (foamed slag, sintered pulverisedfly ash and granulated discarded rubber tyres) and dense aggregates (granulated blast-furnaceslag and heavy minerals) are sought-after, efficient, cheaper alternatives for both constructionand cement manufacturing. A sustainable alternative to the ‘re-gravelling’ of rural roads is the useof stabilisers, dust inhibitors, concrete inlays and low-coast seals.

The number of people employed in aggregate and sand quarries and pumping operationsincreased by 20,6 percent compared with 2003, and total remuneration increased by 25,6percent (Table 4). Average earnings per employee increased by 4,2 percent.

New initiatives include skills programme (collated Adult Basic Education and Training material forconstruction workers) and large funding allocations for the National Skills Fund, which have beenearmarked for the training of small and medium-sized construction companies. A lack of capitaland inadequate technical and administrative support has stymied several BEE initiatives. TheConstruction Industry Development Board (CIDB) and the National Federation are pro-activelyaddressing ‘fronting’ – the falsifying of empowerment credentials – in all facets of the constructionindustry.

The CIDB’s Register of Contractors, the Supply Chain Management Procurement System andthe Public and Municipal Finance Management Acts will boost credibility and integrity within the

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industry. Several technical delays have postponed the finalisation and the release of anempowerment charter and scorecard for the construction industry, although the charter will beready by December 2005. Industry associations, such as the Aggregate Sand ProducersAssociation of South Africa (ASPASA), have encouraged a ‘best-practice’ approach for all sandand aggregate contractors and operators.

Illegal operators, mainly in sand extraction, ignore legal processes and regulations and undercutauthorised producers. Other problems in the construction industry include: the lack of real BEEgrowth; the intermittent use of substandard materials in RDP houses (and associated badworkmanship); health risks such as HIV, tuberculosis and silicosis; unrealistic tendering byinexperienced contractors; sporadic shortages of labour, technical skills and building materials;the 3 000 unrehabilitated borrow pits throughout South Africa; illegal and fly-by-night sandoperators; and the anti-competitive use of borrow pits by municipalities, provincial authorities andillegal operators. The DME, ASPASA and other industry associations are addressing theseproblems pro-actively.

OUTLOOK

Further consolidation of operations is expected in the construction and civil engineering industry,with fewer though larger contracts awarded, and the value of some larger contracts will increasesignificantly. It is expected that the increase in tender activity will continue, especially with smallertenders where the focus is on empowerment. This may lead to increased competition amongstthe medium-sized and larger contractors as their contracts and profit margins diminish. A floodof public sector tenders in the near future may boost business confidence and profitssubstantially, but could create further building material scarcities and, thus, higher building costs.

Maintenance and improvement of South Africa’s infrastructure, especially low-cost housing,ports, rail and roads, is key to sustained growth in the local construction industry. Non-residentialbuilding activity is expected to increase significantly during the next few years. Strong growth of5,0 percent has been forecast for the industry as a whole for the 2005 period, in-line with currentGDP projections. GFCF is expected to attain levels of above 9,0 percent growth in the next 3years, with government increasing its GFCF share up to 21 percent in 2008.

A continued upswing in the residential sector is anticipated with mass property developmentexpected to continue well into 2006. Macro-projects such as the Gautrain, Cosmo City, Bergriverwater scheme and the successful World Cup soccer bid will affect medium to long-terminfrastructural spending positively. Cross border activities are expected to grow considerablythrough 2006 to 2007. Only through sustained investment in current and future infrastructuraldevelopments will South Africa be able to achieve high levels of economic growth.

TABLE 4: SOUTH AFRICA’S AGGREGATE AND SAND QUARRIES: EMPLOYMENT AND REMUNERATION, 1999–2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 1999 4 055 157 556 2000 3 636 158 447 2001 3 655 169 407 2002 3 564 181 750 2003 3 961 217 299 2004 4 777 272 968

REFERENCES

Business Day articles, January 2005 – July 2005Cement and concrete review 2004, CNCI Construction and Civil Engineering report, Who Owns Whom, August 2005Engineering News articles, January 2004 – July 2005 E. Snyman (Industry Insight) in personal communication P. Blaauw (SAFCEC) in personal communicationState of the Civil Industry 2004, SAFCEC

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ALUMINO-SILICATESN. Tshabalala

INTRODUCTION

Kyanite, andalusite, and sillimanite are anhydrous alumino-silicate minerals that have the samechemical formula, Al2SiO5, but differ in crystal structure and physical properties. Each maycontain varying amounts of impurities such as manganese and iron. Alumino-silicates are usedprimarily in the making of refractory materials. Refractories are heat-resistant materials used inhigh-temperature applications such as furnaces, boilers, ladles, and kilns, in the metallurgical,glass, chemical, cement, and other industries.

There is a wide range of substitutes for alumino-silicates, particularly in high-grade refractoryproducts. Important controlling factors that determine alumino-silicate demand include purity,cost of alternative products, and its reactivity as a kiln liner and the changing technology in steelproduction.

INTERNATIONAL DEVELOPMENTS IN 2004/2005

Major alumino-silicates producers are South Africa, France, China and the USA (Table 1) with atotal world output of 632kt. In the period from end of 2003 up to the end of 2004 there has beenan increase of andalusite production in South Africa and China.

Growth has to a certain extent been curtailed by stagnant product prices (consumers paying theabsolute minimum for refractory linings), whilst production costs are on the increase due toescalating energy and freight costs as well as higher performance requirements fromconsumers. Chinese producers seem to have achieved stability, following a long period whenlocal producers were selling products at prices lower than their own production costs. Alumino-silicate sales are rising in China, driven by the rapid growth in the steel producing industry,manufacturing sector and rising prices.

The iron and steel industry is the major consumer of alumino-silicate minerals and products, bothlocally and internationally. In Europe and America, the purchase of finished steel products hasled to a decrease in consumption of alumino-silicates.

TABLE 1: WORLD PRODUCTION AND EXPORTS OF ALUMINO-SILICATES, 2004

COUNTRY TYPE PRODUCTION+ EXPORTS kt % Rank kt % Rank

China A, K, S 211+ 33,4 2 57 14, 8 3 South Africaø A 235 37,2 1 130 33,7 1 Zimbabwe K 4 0,6 6USA K 90e 14,0 3 123 31,8 2 France A 63 10,0 4 46 12,0 4India K, S 28 4,0 5 <1 <1,0 6 Other A, K, S 0,6 0,1 30 7,7 5 TOTAL 632 100 30 100

Sources: BGS, 2005, pp 64Ø DME, Directorate Mineral Economics

Notes: + For 2003, or latest availableA AandalusiteK KkyaniteS Silimanitee EstimatedTotals may not add up due to rounding

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LOCAL

South Africa is the world’s leading producer of andalusite. Major supplying companies areSAMREC, Rhino Minerals (both are part of the IMERYS SA Group) and Andalusite Resources(which came on stream at the end of 2002).

In 2004, andalusite production rose from 165kt to 235kt. Local sales increased by 6 kt to 50 kt in2004, due to the strong demand from the local iron and steel industry. Exports are also on therise (Table 2), primarily because of steady demand in Europe.

Major andalusite consumers expect high performance and quality at continuing low prices. Therehas been no major price change since 2001 (Graph 1). In South Africa andalusite miningcompanies have created more employment opportunities and the number of employees,especially for women, has been rising steadily over the past 5 years (Table 3).

TABLE 2: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OFANDALUSITE,1995 – 2004

YEAR PRODUCTION LOCAL SALES EXPORTS Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1995 206 62 32 062 518 149 83 208 560 1996 234 62 39 737 638 159 116 143 7331997 251 65 49 071 751 161 124 958 776 1998 236 53 41 595 792 144 118 291 8201999 137 42 34 405 824 109 91 246 840 2000 183 46 40 527 890 130 117 886 9072001 193 46 45 456 985 133 130 089 798 2002 165 46 45 456 1 051 112 118 064 1 056 2003 165 44 53 515 1 212 130 166 736 1 282 2004 235 50 64 430 1 284 168 211 719 1 263

Notes: Local sales include inter-mine salesUnit values calculated before rounding of mass and Rand values

FIGURE 1: AVERAGE ANDALUSITE PRICES, 1999 - 2004

TABLE 3: SOUTH AFRICA’S ALUMINO-SILICATE MINES: EMPLOYMENT, 2000–2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 2000 317 19 883 2001 306 21 320 2002 281 23 813 2003 280 24 627 2004 363 27 652

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OUTLOOK

Although South Africa achieved sales of andalusite in 2004, rising costs and stagnant pricesresulted in local producers trying to force prices up by holding back their high quality products.This could also be an attempt to curb the problem of inferior foreign refractory products beingfavoured over local products. It remains to be seen whether this tactic works.

Over the long term, the international markets are likely to remain oversupplied resulting in a fairlybleak outlook.

REFERENCES

Industrial Minerals, 2005

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DIMENSION STONED Naidoo

INTRODUCTION

Dimension stone is a term applied to naturally-occurring rock that may be cut, shaped or selectedfor use in blocks, slabs, sheets or other construction units of specific shapes or sizes. It iscommonly used for the cladding of buildings, curbing, paving, flagging and revetting for itsarchitectural or engineering properties; also in memorials, particularly tombstones. Theconstruction sector accounts for over 80 percent of world consumption, with the funerary,monumental industry accounting for 15 percent, and various special applications for around 3percent.

South African dimension stone production consists mainly of granitic rock with slate andsandstone making up the balance. The term “granite” is applied very loosely in the industry, andis used to describe almost any medium-to coarse-grained igneous or metamorphic rock. Greyand black norites, trade named “black granite”, all from the Bushveld Igneous Complex (B.I.C.),form the backbone of the South African dimension stone industry. Red (B.I.C.) granites whichare, true quartz-bearing granites, and greenish metamorphic rock (e.g. Olive Green, MontanaGreen and Verde Bitterfontein) from the Namaqualand area are also well established oninternational markets.

INTERNATIONAL DEVELOPMENTS

Total world raw quarry production is estimated at 75 million tons, with processing waste of 30million tons, yielding net production of approximately 45 million tons. China leads with estimatedproduction of 14 million tons (raw), followed by Italy and India with estimated production of 7,8million tons and 7,5 million tons respectively. Production in Iran is estimated at 7,3 million tons.China and India have experienced increased production while production in Italy is decliningslowly.

LOCAL DEVELOPMENTS

There was consolidation in the industry in 2004, as a result of Kelgran’s poor financialperformance. Kelgran Limited’s associated company Kelgran Investments (Pty) Ltd whichhoused Kelgran’s quarrying interests was taken over by JVK Srl (JVK) – a joint venture betweenFinstone Srl (Luxemborg) and RED Graniti Spa (Italy). As a result of the acquisition, JVKassumed control of all aspects of Kelgran’s quarrying interests. Kelgran now sells directly to localclients but JVK purchases the balance of production for export giving Kelgran the advantage ofnot duplicating international marketing structures. Finstone Srl (Luxemborg) has two subsidiariesin South Africa, Finstone SA and Marlin Holdings, the latter which houses the quarrying interestsof the Finstone Group.

South Africa sold 575 kt of dimension stone (527 kt of granite and 48 kt of slate) in 2004, valuedat R502 million, a 13 percent increase in mass compared to 2003. Local sales amounted to 193,9kt, an increase of 60 percent compared to 2003. Natural stone is gaining popularity in the localmarket, with the most growth in domestic and monumental applications. As a result of the effectof the strong rand on exports, Finstone South Africa has focussed heavily on promoting finishedgoods in the local market. The Garankuwa thin slab facility now sells 70 percent of its productionto the local market. In addition, the Minaco costruction division sources local material foroverseas projects.

South Africa’s exports amount to about 380 kt; 29 percent directed to Italy followed by China andBelgium, which account for 15 and 13 percent respectively. The Department of Minerals andEnergy’s export statistics show that 42 percent of exports are directed to Switzerland but inreality, sales are invoiced to Swiss-based block trading companies such as Dorking AG andMultistone. In 2004, export earnings decreased significantly by 50 percent.This was due to grouprestructuring at Finstone and the strong rand. Finstone now sells to Dorking SA (Pty) Ltd on afree on truck or free on rail basis. Dorking is then responsible for the transport costs to the port,where previously this cost was carried by the quarrying company and reported in quarrying

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companies’ sales figures to the Department.The four most important varieties of granite produced in South Africa are Rustenburg Grey,African Red, Belfast Black and Olive Green. The supply/demand balance for Rustenburg exhibitsinelastic behaviour as a result of price sensitivity and the ease of substitution with othermaterials. At current pricing levels, Rustenburg is slightly oversupplied hence putting pressure onpricing, and at current exchange rates may lead to closure of quarries, particularly smalloperations without the financial backing to survive through the difficult times. Olive Greensupply/demand is balanced at current levels. The market for green coloured materials is probablyin decline overall. The market for African Red is substantially less than it was several years agodue to changes in fashion trends as well as competition from other red materials from India andChina, but there are indications of a recovery.

In 2004, Finstone moved its Impala granite processing plant from Brits to Marikana,consolidating its operations at the Marikana granite facility. The Impala plant site was occupiedby Wanli Stone in August 2004, under a 60:40 joint venture between Wanli Stone and MarlinCorporation. The Wanli Stone Group (Xiamen Wanli Stone Co. Ltd) is one of the leading privatecompanies in the Chinese natural stone industry, with a number of quarries and eight processingplants throughout that country. The intention is to use small blocks of granite, which are generallydifficult to sell, and waste material to manufacture tombstones, garden furniture, basins andkitchen sinks. The operation employs 50 people. Modern Chinese equipment is used in the plantalthough all operations, other than design, are manually controlled. Quality control inspectionsare carried out right through the production process.

OUTLOOK

While the stone industry is growing internationally, current exchange rates make South Africanmaterial particularly uncompetitive. Exclusive materials will still be able to find markets, but thesemay be at reduced volumes as customers switch to alternatives due to pricing. If a material verysimilar to Rustenburg was discovered in, say China or India, it could all but wipe out Rustenburgproduction (in the same way that Zimbabwe Black and some Indian materials have led to currentBelfast Black production being less than 10% of peak levels), although yields from the Belfastquarries had declined dramatically as economic reserves were depleted.

TABLE 1: SOUTH AFRICA’S GRANITE PRODUCTION, LOCAL SALES AND EXPORTS,1995–2004

YEAR PRODUCTION* LOCAL SALES EXPORTS Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1995 718,1 91,5 35 580 389 626,6 304 314 486 1996 708,7 84,8 37 482 442 623,9 425 965 683 1997e 764,0 88,0 39 610 450 676,0 525 634 778 1998 743,9 74,3 38 134 513 669,6 485 709 725 1999 636,5 66,5 33 105 498 570,0 600 033 1 053 2000 951,2 99,5 47 334 477 844,8 627 687 743 2001 846,7 85,6 39 836 465 761,1 677 698 890 2002 705,8 75,2 37 229 495 630,6 837 332 1 328 2003 463,2 78,5 47 824 609 384,7 718 746 1 868 2004 527,1 145,4 149 029 1025 381,7 342 284 897+

Notes: * In the absence of available data, production is taken to be equal to total sales volumee Estimated because Marlin and Kudu did not submit full returns for 1997+ FOR/FOM, see local developments, paragraph 3Unit values calculated before rounding of mass and rand values

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TABLE 2: SOUTH AFRICA’S SLATE PRODUCTION, LOCAL SALES AND EXPORTS,1995–2004

YEAR PRODUCTION* LOCAL SALES EXPORTS Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1995 24,5 18,3 7 413 405 6,2 5 796 939 1996 31,0 20,1 12 085 602 10,9 8 872 814 1997 32,2 21,0 13 007 319 11,2 9 390 840 1998 29,1 22,4 11 979 534 6,7 5 846 872 1999 32,1 29,6 8 487 287 2,6 2 443 938 2000 25,9 25,7 6 450 251 0,2 277 1 408 2001 23,2 23,0 7 313 315 ** ** 2002 24,8 24,8 8 434 340 0,02 27 1 356 2003 40,7 40,7 9 020 222 ** **2004 47,5 47,5 10 663 224 ** **

Notes: * In the absence of available data, production is taken to be equal to total sales volume** NilUnit values calculated before rounding of mass and rand values

TABLE 3: SOUTH AFRICA’S DIMENSION STONE QUARRIES: EMPLOYMENT, 2000–2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 2000 2 563 82 010 2001 2 580 88 115 2002 2 742 96 131 2003 2 570 80 367 2004 2 356 91 807

REFERENCES

Montani C, 2004, Stone 2004 : World Marketing HandbookBradley F, 2004, Marble-Stat 2004I Ashmole / L Celori May (Finstone South Africa), personal communication

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FLUORSPARD Naidoo

INTRODUCTION

Fluorspar is the commercial name for the mineral fluorite (calcium fluoride, CaF2), which whenpure consists of 51,1 percent calcium and 48,9 percent fluorine. Commercial fluorspar is gradedaccording to quality and specification into acid grade (min. 97 percent CaF2), metallurgical grade(min 80. percent CaF2) and ceramic grade (80 - 96 percent CaF2). Approximately one half ofworld production is used in the production of hydrofluoric acid (hydrogen fluoride, HF), a keyintermediate in the production of a wide range of organic and inorganic fluorine based chemicals.Approximately one third is of metallurgical grade and used as a flux in steelmaking to reduce slagviscosity, reduce melting point and remove impurities from steel. Metallurgical grade fluorspar isalso used in the production of aluminium, as aluminium fluoride (AlF3) is a component of themolten bath in the electrolytic reduction of alumina to aluminium metal. Ceramic grade fluorsparis used in the glass and ceramic industries. Smaller quantities are used in the manufacture ofmagnesium and calcium metal and welding rod coating.

WORLD RESERVES AND PRODUCTION

China dominates the world’s fluorspar industry, with 23 percent of world reserves and 56 percentof world production. Mexico with 8,3 percent of world reserves and South Africa with 16,7 percentof world reserves are responsible for 15,4 percent and 5 percent of world production respectively.

Total world production increased by 4,4 percent to 4,75 Mt in 2003 compared with 2002. Most ofthe increased production was from China and Mexico (Table 1).

INTERNATIONAL DEVELOPMENTS

In 2004, China reduced its fluorspar export quota to 750 000 tons. This continues the trend ofrecent years as China attempts to reduce exports in order to supply the rapidly increasingdomestic market. The average export license fee in 2004 was in the $55 – $60 per metric tonrange. With effect from 1 May 2005, the Chinese Ministry of Finance, with the approval of theState Council, cancelled the 5 percent export rebate on fluorspar with the intention of curbingexports and pushing up prices.

PRICES

Prices for acid grade fluorspar increased marginally in 2004 after a significant increase in 2003.The June 2005 price of Chinese acidspar (filtercake, dry basis, CIF US Gulf) was $225 – $235per ton, South African acidspar price (filtercake, FOB Durban) was $157 – $167 andmetallurgical grade material (Chinese, min 85% CaF2, bulk CIF Rotterdam) was sold at $185 –$195.

LOCAL DEVELOPMENTS

South Africa’s production of fluorspar increased by 13,0 percent to 265 kt in 2004 as a result ofimprovements to Vergenoeg Fluorspar Mine (completed in late 2003) and Witkop Fluorspar Mine(completed in September 2004). The production increase in South Africa was motivated by thereduction of China’s export quotas. Witkop’s capital expansion project raised output to 180 000tons per annum, making it South Africa’s largest producer. The full effect of the plant expansionwill be seen in 2005.

Although world acidspar prices increased in 2004, local profits were offset by the strong rand,leading to Metorex, Vergenoeg’s owner, reporting a 10 percent reduction in the mines profit, toR9,3 million, for the financial year to June 04. Sallies, Witkop’s owner, reported a net loss ofR15,6 million for the same period. Sallies loss for the 6-month period to 31 December 2004 wasR23,2 million, attributed to its long-term contract with Honeywell signed in 2000, in terms ofwhich prices were subject to a price cap of $116/ton. Spot prices have increased significantly inthe past year but Sallies could not take advantage from this. The company initiated negotiations

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with Honeywell with a view of either suspending the contract until such time as the exchange rateallowed it to be executed profitably, or renegotiating the terms. The contract was successfullyrenegotiated and supplies to Honeywell, which were suspended in February 05, have beenrenewed.

South Africa’s export sales in 2004 increased by 10 percent to 233 kt as a result of higher globaldemand, while local sales increased by 10 percent to 23 kt as a result of increased sales ofmetallurgical grade fluorspar. Vergenoeg commissioned a dedicated gravel production plant in2004, supplying metallurgical grade gravel to the local market. Hand-cobbed ore is fed to a smallscreening plant which yields high-quality metspar gravel sized at between 7mm and 60 mm, foruse in the local steel and cement industries.

OUTLOOK

Work continues on new projects in Australia and Vietnam and capacity upgrades in Kenya andSouth Africa. Increased production is expected from Mongolia, which has large reserves but inthe past has exported most of its material to Russia and Ukraine. Vergenoeg Fluorspar Mineintends increasing sales of acid-grade product to 150 000 tons per annum by 2006.

Prices are expected to strengthen as a result of the buoyant market.

TABLE 1: WORLD RESERVES, PRODUCTION AND EXPORTS OF FLUORSPAR, 2003

COUNTRY RESERVE BASEx PRODUCTIONx

Mt % Rank kt % RankChina 110 22,9 1 2 650 55,8 1 Mexico 40 8,3 3 730 15,4 2 South Africa 80 16,7 2 235 5,0 3 Russia 18 3,8 4 170 3,6 4 Mongolia 16 3,3 5 190 4,0 5 Spain 8 1,7 7 130 2,7 6 France 14 2,9 6 105 2,2 7 Kenya 3 0,6 9 100 2,1 8 Morocco na - - 75 1,6 9 Namibia 5 1,0 8 80 1,7 10 Other@ 186 38,8 290 6,1 TOTAL 480 100,0 4 750 100,0

Sources: x USGS, 2005, pp 62 – 63

Notes: Totals may not add up due to roundingna Not available@ Includes Brazil, Morocco and USA

TABLE 2: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OFFLUORSPAR, 1995 – 2004

YEAR PRODUCTION LOCAL SALES EXPORTS Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t1995 196 29 7 728 268 167 59 849 359 1996 202 28 8 545 300 165 80 525 487 1997 207 36 11 192 309 183 92 380 506 1998 237 21 9 142 435 153 89 696 586 1999 218 34 11 665 344 197 130 092 661 2000 213 36 13 369 371 147 100 218 680 2001 286 91 54 680 603 259 220 223 850 2002 227 34 18 423 537 210 205 687 980 2003 235 21 16 225 767 211 153 309 727 2004 265 23 18 247 793 233 183 329 787

Note: Unit values calculated before rounding of mass and rand values

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TABLE 3: WORLD ACIDSPAR PRICES, 2003 – 2005

PRICE RANGE ($/t) Jun ’03 Dec ’03 Jun ’04 Dec ‘04 Jun ‘05

Chinese, dry basis,CIF US Gulf 148 - 154 165 -170 195 - 205 195 - 205 225 - 235

Mexican, FOB Tampico,bulk, wet filter cake 105 - 125 105 - 125 105 - 125 120 - 135 130 - 150 South African, dry basis, bulk, FOB Durban 105 - 125 105 - 125 125 - 140 129 - 145 157 - 167

Source: Mineral Price Watch, 2003 - 2005

TABLE 4: SOUTH AFRICA’S FLUORSPAR MINES: EMPLOYMENT AND REMUNERATION,2000 – 2004

YEAR EMPLOYEES TOTAL PRODUCTIVITY REVENUE REMUNERATION GENERATED

R’000 t/employee R’000/employee 2000 314 17 337 677 361 2001 414 22 219 691 664 2002 392 23 491 579 565 2003 327 22 161 719 518 2004 366 22 832 724 557

REFERENCES

USGSBGSMineral Price WatchSA Mining, February 2005 Metorex Limited, Annual Report 2004 Sallies Limited, Annual Report 2004 / Interim Results 31 December 2004

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LIMESTONE AND DOLOMITEVN Agnello

INTRODUCTION

It is estimated that world production of limestone is of the order of 5 billion tons per year. Thisfigure includes limestone used as dimension stone and as aggregate, as well as that used in thecement, chemical and agricultural industries. World lime production is estimated at greater than200 million tons per annum, and lime ranks as the fifth most commonly used chemical, aftersulphuric acid, nitrogen, oxygen and ethylene.

The terms, lime and lime products, refer to quicklime (CaO) and slaked lime (Ca(OH)2).The term,lime, is frequently used incorrectly to describe limestone products, such as agriculturallimestone.

Cementitious products are derived from a blend of limestone, aggregate, shale, sand and silica;these products are used as masonry cements, ready mix cements, mortars and plasters in theconstruction industry. In South Africa the principal use of limestone is in the manufacture ofcement, followed by metallurgical applications (as a fluxing agent in steel making), themanufacture of lime and agricultural uses. Limestone and dolomite are not as widely used inSouth Africa for aggregate or dimension stone as elsewhere in the world. Lime, limestone anddolomite products are used in the following applications:

• Agriculture – animal feed, fertilizers, pH control, fungicides• Construction – mortar, cement, whitewash, building stone• Manufacturing – glass, food processing, steel refining, papermaking, leather applications• Metallurgy – steel refining, fluxing, neutralizing agents, flocculation, causticization• Other industries – water treatment, purification, bleaches, adhesives, Ca-supplement in

food, explosives, oil spill clean up, medicines and insulation.

DEVELOPMENTS DURING 2004

The market for cementitious products in South Africa is divided into civil engineering and buildingsectors. In the civils sector, a 3,1 percent decrease in turnover for 2004 is indicative ofconsolidation and a temporary lull in large-scale infrastructural spending. The completion and/ornear-completion of harbour and waterfront projects (Durban, Richards Bay and Ngqura portupgrades); building projects (Constitution Hill, Cape Town Convention Centre and JohannesburgInternational Airport extensions, various estate and mass-property developments) and tourist-related projects (especially in the Western Cape), highway projects (N4 Bakwena PlatinumProject) and dam projects (Baviaanspoort Sewage Works, Mohale Dam), point to renewed shortand medium-term investment in infrastructural activity within the country (see Aggregate andSand, Table 2). Industry expectations have not been met as a result of delays in major capitalprojects, particularly in mining, petrochemicals and the public sector.

In 2004, limestone and dolomite production in South Africa increased by 3,3 percent comparedwith the previous year (Table 1), while local sales increased by 11,6 percent (by mass). Theaverage sales value of limestone has little significance, other than as an indication of cost ofproduction, as the bulk of sales are in the form of intercompany transfers to in-house cement orlime plants. Local consumption of limestone is on an upward trend, approaching levels lastachieved in 1997 (and pre-1990).

In 2004, local sales of lime increased by 10,6 percent to 1,7 Mt. Exports of lime and limestoneproducts (by mass) decreased by 16,0 percent to a new low of 9,5 kt – this is attributed to thedecline in ferrochrome production at Zimbabwe Alloys, a major importer of these products. Otherexport markets, such as the sugar, gold and copper industries, which require lime products, haveall been affected by production stoppages related to power cuts, fuel scarcities and raw materialshortages in Zimbabwe.

Sales of limestone for the manufacturing of cement decreased by 2,0 percent by mass, in 2004(Table 2). In 2004, sales of metallurgical grade carbonates increased by 2,9 percent compared

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with 2003 – an upturn in local and world steel consumption has boosted sales in the last year.Agricultural limestone and dolomite sales recorded a 4,9 percent drop in sales to 889 kt for 2003.Low aglime volumes have been attributed to a downturn in end-user consumption: low grainprices, excess supply as well as cheap maize imports have resulted in farmers cutting costs onsoil conditioners and remediants.

TABLE 1: SOUTH AFRICA’S PRODUCTION AND LOCAL SALES OF LIMESTONE ANDDOLOMITE FOR NON-AGGREGATE USE, 1997–2004

YEAR PRODUCTION LOCAL SALES Mass Value (FOR)

Kt Kt R’000 R/t 1997 21 212 18 242 705 124 38,7 1998 19 742 17 037 708 318 41,6 1999 19 030 15 205 738 386 48,6 2000 19 279 14 898 778 917 52,3 2001 18 946 15 110 901 551 59,7 2002 20 738 16 901 1 055 733 62,5 2003 21 267 17 502 1 198 800 68,5 2004 21 961 17 705 1 230 367 69,5

Note: Unit values calculated before rounding of mass and rand values

TABLE 2: SOUTH AFRICA’S LOCAL SALES OF LIMESTONE AND UNCALCINEDDOLOMITE BY APPLICATION, 1997–2004

YEAR CEMENT METALLURGICAL AGRICULTURAL OTHER Mass Value (FOR) Mass Value (FOR) Mass Value (FOR) Mass Value (FOR)

Kt R’000 R/t Kt R’000 R/t Kt R’000 R/t kt R’000 R/t 1997 11 533 130 185 11 2 324 91 750 39 710 23 055 32 2 151 151 982 71 1998 10 541 118 456 11 2 067 84 871 41 865 29 801 34 2 100 169 625 81 1999 10 074 132 375 13 1 998 85 247 43 836 29 055 35 927 156 396 169 2000 9 794 136 004 14 2 131 96 379 45 653 26 205 40 969 170 403 176 2001 9 700 156 639 16 2 038 90 442 44 799 36 497 46 974 185 487 190 2002 11 218 188 653 17 2 088 98 690 47 993 49 281 50 1 017 230 879 227 2003 11 893 216 148 18 1 972 104 861 53 935 53 732 57 1 110 260 981 235 2004 11 655 226 517 19 2 029 106 120 52 889 52 740 59 1 155 277 015 240

Note: Unit values calculated before rounding of mass and rand values

In 2004, the local sales mass of hydrated lime for water purification increased, although sales forchemical and other applications decreased in mass by 28,9 and 37,3 percent respectively – thiswas partly compensated for by year-on-year price increases of at least 6,5 percent (Table 3). Inthe quicklime sector, consumption in pyrometallurgical uses grew moderately, whilst sales (bymass) in chemical applications grew by an unanticipated 27,2 percent. Several lime producershave renegotiated long-term contract prices with major consumers, as rail tariffs, wage increasesand energy prices continue an upward spiral. Cement producers face similar challenges.

Local sales of cement (by mass) increased by 17,4 percent to 10,7 Mt, with the Eastern andWestern Cape recording growth of at least 24,8 percent during 2004. Regional cement sales(sales to Botswana, Lesotho, Namibia and Swaziland) decreased by 1,1 percent to 1,0 Mt;however sales to Namibia increased by 5,1 percent In 2004, exports comprised 2,4 percent or280 kt of total sales, which is significantly less than the 6,2 percent (595,7 kt) achieved in 2002.Some cement companies are actively seeking export markets, although rand volatility has hurtexport sales over the last 2 years. In 2004, primary consumers such as blenders, readymixproducers and concrete product manufacturers showed the largest volume increase (Table 4).

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TABLE 3: SOUTH AFRICA’S LOCAL SALES OF HYDRATED LIME AND QUICKLIME,2003–2004

LIME PRODUCT, 2003 2004#

BY SECTOR USE Mass Value (FOR) Mass Value (FOR) Kt R’000 R/t Kt R’000 R/t

Quicklime Pyrometallurgical 838,1 241 540 288 864,1 249 616 289

Chemical 625,8 249 288 398 795,7 259 650 326 Hydrated lime Water purification 21,9 19 744 900 24,6 20 130 819 Chemical 40,9 20 778 508 29,1 16 725 574 Other 44,0 30 702 698 24,6 18 315 745

TOTAL 1 570,9 562 051 358 1 738,1 564 437 325

Notes: Unit values calculated before rounding of mass and rand values # Lime exports amounting to 9 487 tons valued at R4,8 million were recorded for 2004

TABLE 4: SALES TONS BY END-USE SECTOR FOR CEMENTITIOUS PRODUCTS,2002–2004

End-use Sector 2002 2003 2004 Percent change y-o-y for 2004

Concrete Product Manufacturers 1 621 599 1 676 503 1 968 461 18,3 Readymix Producers 1 190 036 1 274 538 1 547 340 21,4 Resellers 4 776 806 5 067 927 5 889 771 16,2 Civil Construction (Direct) 409 222 428 944 366 949 -14,5 Building Construction (Direct) 665 579 648 150 704 425 8,7 Mining 232 785 252 490 241 840 -4,2 Blenders 508 294 606 380 780 609 28,7 Other 219 367 220 294 236 605 7,4 TOTAL 9 623 688 10 163 170 11 736 000 15,5#

Source: Cement & Concrete Institute – Market Review 2004Notes: # Figures include statistics for Swaziland, Namibia, Botswana and Lesotho

Factors such as securing market share, strategic acquisitions and the need for sustained growthhas led some South African construction companies to focus on lucrative contracts offered inother African countries and overseas (see Aggregate and Sand). Additional factors that areaffecting the construction industry negatively, include the temporary stagnation in non-residentialbuilding activity, capacity constraints in government infrastructural spending, skilled labourshortages and high building costs.

Planned expansions have been initiated by Natal Portland Cement (additional 600 kt capacity,costing R700 million), Lafarge (additional 1 Mt, costing R1 billion) and PPC’s multi-plant upgrade(1 Mt total, costing R1,36 billion). Holcim have not announced any major plant upgrades as yet.High demand and localised cement shortages have forced producers to recommission specificprocessing and distribution plants to reduce lead times.

Cement plant and operational upgrades include: improving crushing/ grinding capacities,advanced pre-heater kilns; pre-heater retrofits and additional precalciners; water injectionsystems and bag filters instead of electrostatic precipitators; the installation of grate cooler andkiln off-gas systems; value-based management initiatives; supply-chain optimisation; outsourcingof distribution logistics; uniform procurement systems; increased automation through softwareand hardware upgrades; real-time statistical analysis; and smart fleet management. Theconversion of coal-fired kilns to accept scrap tyres and other waste-derived fuels as an energysource will replace a significant portion of the 1,2 Mt of coal used for kiln-firing in cementproduction.

In the cement market, consumption trends include: a significant growth in “blender” sales andready-mix production, at the expense of site-mix production; a move away from CEM II to CEMIII and CEM V products; and a strong increase in pozzolanic fillers (particularly granulated slagat the expense of fly ash).

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Technological advancements include: new concrete durability tests, high-strength cements,plasticisers with added workability, water-reducing admixtures, new reinforced concretes andstope-support packs, more efficient tilt-up methods, sealing gels for concrete waterproofing,durable concrete inlays for asphalt road replacement, textile concretes, high-tech refractoryconcretes, fibre-reinforced shotcrete and low viscosity self-compacting concrete.

Bi-annual quality audits, continuous safety, health and environmental programme (ISHE) audits,‘best practice’ initiatives and quality assurance schemes for the whole construction industry(including ready-mix concrete producers and other blenders) will boost the credibility andintegrity of this industry. In 2004, the number of employees in limestone and dolomite quarriesincreased by 5,7 percent over the previous, and total remuneration increased by 12,9 percent(Table 5). Labour productivity decreased by 2,3 percent whilst average earnings per employeeimproved by 17,3 percent.

OUTLOOK

In South Africa, limestone and dolomite production is influenced more by local demand than bythe availability of resources. Additional interest rate cuts, GDP growth of 5 percent, stableinflation and renewed fiscal spending on infrastructure by the Dept. of Public Works andprovincial authorities and municipalities, will increase consumer confidence and affect cementdemand positively (see Aggregate and Sand).

In the private sector, positive developments include the implementation of large investmentprogrammes by platinum, ferrochrome and nickel producers, Sasol’s Project Turbo, as well asmarket residential dwellings, hotels, casinos, convention centres, shopping centres, and officeparks. Real growth of 8,0 percent has been forecast for the civil engineering sector for 2005.

Proposed plant expansions will push the cement industry’s current capacity up by 2,6 Mt to 15,6Mt, although this may fall short of the forecast 16,7 Mt capacity needed in 2010. A growth rate of5 percent per annum has been forecast for the domestic cement industry over the next 2 years,whilst regional growth is set to reach a maximum of 1,5 percent.

Acid water treatment solutions based on the use of lime and/or limestone have shown greatefficiencies and cost-effectiveness in the testing phase, and may significantly affect the sales ofthese commodities in the short to medium-term. Agricultural consumption of dolomite andlimestone is generally unpredictable, although depressed maize prices will negatively affectaglime producers over the next 2 years.

Improved efficiencies and trading conditions for steel producers will boost metallurgical-gradecarbonate sales by at least 2 percent over the next 2 years. Strong demand and fewer technicalspecifications and contractual obligations, have persuaded several carbonate producers tosupply aggregate instead of metallurgical markets.

Future cement plant upgrades will focus on reducing heat consumption, improving productionoutput, lowering unit costs and reducing stack emissions. Substantial growth is expected incement and concrete additives, concrete rail sleepers and poles, modular textured masonry andplastic reinforced and corrosion-resistant cement.

Pulverised limestone will increase its market share significantly as a cheaper alternative toquicklime. Ground calcium carbonate is expected to increase its dominance in filler and‘whitening’ applications, particularly in the paint and paper industries.

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TABLE 5: SOUTH AFRICA’S LIMESTONE AND DOLOMITE QUARRIES: EMPLOYMENT,REMUNERATION AND PRODUCTIVITY, 1999–2004

YEAR EMPLOYEES TOTAL REMUNERATION LABOUR PRODUCTIVITY R’000 t/employee

1999 2 754 163 726 6 910 2000 2 668 173 138 7 227 2001 2 557 179 388 7 410 2002 2 518 190 668 8 236 2003 2 166 185 540 9 819 2004 2 289 229 923 9 594

REFERENCES

Business Day articles, January – July 2005Cement and concrete review 2004, CNCI Construction and Civil Engineering report, Who Owns Whom, August 2005Engineering News articles, January 2004 – July 2005 E. Snyman (Industry Insight) in personal communication P. Blaauw (SAFCEC) in personal communicationState of the Civil Industry 2004, SAFCEC

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PHOSPHATE ROCKD Naidoo

INTRODUCTION

South Africa is largely self-reliant in supplying the domestic demand of phosphate rock.Phosphate rock is needed for the production of phosphoric acid and downstream phosphatefertilisers as well as de-fluorinated calcium phosphates for animal feeds. Foskor is South Africa’ssole supplier of high quality and high-grade beneficiated phosphate rock to the local industry, andis a wholly-owned subsidiary of the Industrial Development Corporation. The company has amining division with production facilities in Phalaborwa and phosphoric acid and fertiliser plantsat Richards Bay.

INTERNATIONAL DEVELOPMENTS

Phosphate rock production is undertaken in around 30 countries, with the top five – the UnitedStates (25,6 percent), China (17,9 percent), Morocco (16,8 percent), Russia and Tunisia –accounting for nearly 75 percent of total world output. World phosphate rock productionincreased marginally to an estimated 137 Mt in 2003. There was increased production ofphosphate rock in China, Russia, Australia and Egypt.

TABLE 1: WORLD RESERVES AND PRODUCTION OF PHOSPHATE ROCK, 2004

COUNTRY RESERVE BASEx PRODUCTIONx

Mt % Rank kt % Rank USA 4 000 8,0 3 35 000 25,6 1 China 13 000 26,0 2 24 500 17,9 2 Morocco# 21 000 42,0 1 23 000 16,8 3 Russia 1 000 2,0 7 11 000 8,1 4 Tunisia 600 1,2 10 7 890 5,8 5 Jordan 1 700 3,4 5 6 760 4,9 6 Brazil 370 0,7 11 5 600 4,1 7 Israel 800 1,6 8 3 210 2,4 8 South Africa* 2 500 5,0 4 2 640 1,9 9 Syria 800 1,6 8 2 430 1,8 10 Australia 1 200 2,4 6 2 290 1,7 11 Senegal 160 0,3 12 1 470 1,1 12 Other 3 180 6,4 10 800 7,9 TOTAL 50 000 100,0 137 000 100,0

Sources: x USGS, 2005, p 122 – 123* Foskor, 2003

Notes: # Including Western SaharaTotals may not add up due to rounding

LOCAL DEVELOPMENTS

South Africa’s production of phosphate rock increased by 3,5 percent, to 2 735 kt in 2004 (Table 2). The higher production was a result of rectification work undertaken at Foskor’s Extension 8project at the mine. Foskor’s endeavours to ramp up to full acid production is dependent on theavailability of wagons and locomotives from Spoornet, a major factor currently constraininggrowth in production. Total phosphoric acid production increased by 12 percent to 1 Mt and localsales increased by 33 percent to 381kt in 2004, due to increased production and local sales fromSasol Nitro. Phosphoric acid exports increased by 20 percent to 523 kt in 2004, largely due toincreased exports from Foskor.

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TABLE 2: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OFPHOSPHATE ROCK, 1995 - 2004

YEAR PRODUCTION LOCAL SALES EXPORTS Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1995 2 822 1 873 ** ** 1 404 ** ** 1996 2 655 1 894 ** ** 953 ** ** 1997 2 732 1 998 ** ** 902 ** ** 1998 2 739 1 909 ** ** 830 ** ** 1999 2 957 2 521 ** ** 994 ** ** 2000 2 796 2 417 ** ** 779 ** ** 2001 2 420 2 591 ** ** 555 ** ** 2002 2 803 2 532 ** ** 349 ** ** 2003 2 643 2 665 ** ** 250 ** ** 2004 2 735 2 484 ** ** 268 ** **

Sources: Foskor 2004

Note: ** Classified

Foskor sells 1 Mt per annum of phosphate rock to domestic fertiliser manufacturers. Prior to May2004, the local phosphate rock price was based on the international dollar price of diammoniumphosphate, FOB, US Gulf, and merchant grade acid, CFR India. This price was approximately 35percent cheaper than import parity (the cost of importing the product).

As a result of losses suffered over the past two financial years, caused by the strong rand,depressed prices, increased freight and raw material costs, Foskor has attempted to align itsdomestic phosphate rock price with import parity. With the recent local price (FOR, Phalaborwa)in the region of $54 per ton and the import parity price approximately $72 per ton (CFR, India),this attempt caused an outcry in the local fertiliser industry. Foskor has since relented, but hopesto move towards import parity pricing in the near future. However, a final decision may bedependent on the recommendations of a Department of Trade and Industry study on importparity pricing in general.

Coramandel Fertilisers, one of the leading producers of fertiliser in India, has acquired a 2,5percent stake in Foskor with the option of increasing to 16,5 percent. The deal includes abusiness assistance agreement. In 2003, Foskor acquired 5 percent in Godvari Fertilisers,owned by Coramandel. The stake in Godvari guaranteed Foskor a minimum combined supply of200 000 tons per annum of phosphoric acid to Godvari and Coramandel.

Foskor acquired Sasol Nitro’s phosphoric acid plant for R95 million during 2005. In terms of thedeal between the Industrial Development Corporation, Foskor’s owner, and Sasol, Foskor is totake over Sasol Nitro’s productions and storage assets whilst Sasol will retain the gypsumdisposal dumps but will allow Foskor to deposit gypsum on the dumps for four years. After thisFoskor will take over the dumps or Sasol will close and rehabilitate them. The sale is, inter alia,subject to the approval of the Competition Commission.

OUTLOOK

The phosphate market is expected to tighten over the next five years as demand outpacessupply. The International Fertiliser Industry Association has predicted that worldwide demand forphosphate fertilisers will grow at a rate of 2,5 percent per year during the next five years.Continued growth in world population and the need for dependable food supplies ensures theimportance of phosphates.

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TABLE 3: SOUTH AFRICA’S IMPORTS OF PHOSPHATE ROCK, 1995 - 2004

YEAR IMPORTS (FOB) Mass Value

kt R’000 R/t1995 482 54 646 113 1996 496 70 049 141 1997 557 104 459 188 1998 424 92 830 219 1999 281 72 228 257 2000 331 94 092 285 2001 172 66 312 385 2002 231 114 052 494 2003 143 57 353 401 2004 133 38 211 287

Source: RSA, Commissioner for South African Revenue Service, 1995 – 2004

TABLE 4: SOUTH AFRICA’S EXPORTS OF PROCESSED PHOSPHATES, 1995 - 2004

YEAR EXPORTSkt P2O5

Phosphoric Monoammonium Diammonium Superphosphates Totalacid phosphate phosphate

1995 308,4 18,7 88,9 121,9 537,9 1996 242,1 37,5 98,6 109,2 487,4 1997 202,7 26,4 47,2 60,4 336,7 1998 215,4 23,6 78,3 50,8 368,1 1999 328,0 49,0 82,0 12,7 471,7 2000 752,9 52,7 72,4 208,0 1 086,0 2001 627,4 59,7 55,7 176,4 919,2 2002 511,4 9,3 114,0 172,5 806,7 2003 574,2 115,4 27,9 172,9 890,4 2004 679,7 82,7 21,4 69,8 853,6

Note: Calculated from data published by: RSA, Commissioner for South African Revenue Service, 1995 – 2004

TABLE 5: WORLD PHOSPHATE ROCK PRICE, 2000- 2004

YEAR PRICE+

$/t2000 36,1 2001 34,7 2002 36,2 2003 36.1 2004 37,3

Source: Phosphorus and Potassium, 1999 – 2004

Note: + Average annual price, FOB, US Gulf

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TABLE 6: WORLD PHOSPHORIC ACID PRICE+, 1995 – 2004

YEAR US GULF NORTH AFRICA$/t (FOB) $/t (FOB)

1995 294 339 1996 311 350 1997 330 358 1998 337 366 1999 320 359 2000 260 320 2001 250 310 2002 250 305 2003 250 305 2004 250 305

Source: Fertilizer International, 1995 - 2004

Note: + Average annual prices

REFERENCES

USGSFoskor Annual Report, 2004Fertiliser International, 2005

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SPECIAL CLAYSVN Agnello

INTRODUCTION

In 2003 (the year for which the most recent world statistics are available), the USA dominatedclay production, with 35,1 percent of the world kaolin production and 39,4 percent of combinedworld bentonite and attapulgite output (Tables 1).

During 2004, South Africa’s total sales of special clays (excluding flint clay), amounted to 182,8kt, valued at some R98,5 million (Table 2). Attapulgite recorded significantly higher productionlevels, while kaolin output decreased marginally during the year. Campaign mining has skewedbentonite production totals: only 55,9 kt was mined in 2004 compared to 145 kt in 2003. Value-added kaolin, chamotte (calcined flint clay) and some bentonite were exported, but all othercrude clays were sold domestically.

The total value of local sales of all special clays amounted to R87,5 million in 2004, and the totalexport value was R11,0 million. Kaolin superseded bentonite as the most important special clay,contributing 48,7 percent to the total sales value, whilst bentonite and attapulgite contributed42,2 percent and 9,1 percent by value, respectively.

TABLE 1: WORLD PRODUCTION OF KAOLIN AND BENTONITE, 2003

KAOLIN BENTONITEI

COUNTRY PRODUCTION COUNTRY PRODUCTION Kt % Rank kt % Rank

USA 8 010 35,1 1 USA 6 700 39,4 1 UK 2 097 9,2 2 China 1 290 7,6 2 Brazil 2 300 10,1 3 Greece 1 200 7,1 3 China 1 600 7,0 4 Turkey 841 5,0 4 Korea, Rep. Of 1 100 4,8 5 Spain# 742 4,4 5 Mexico 798 3,5 6 Mexico 617 3,6 6 Germany 738 3,2 7 Japan 543 3,2 7 Vietnam 600 2,6 8 Russia 500 2,9 8 Iran 593 2,6 9 Germany 479 2,8 9 Czech Republic 582 2,6 10 Italy 475 2,8 10 Spain 450 2,0 11 India 450 2,7 11 Malaysia 426 1,9 12 Brazil 421 2,5 12 South Africa 86 0,4 27 South Africa 160 0,9 15 Other 3 425 15,0 – Other 2 562 15,1 – TOTAL 22 800 100,0 TOTAL 17 000 100,0

Source: BGS, 2005, pp 8-9, 41-42

Notes: + For 2003 or latest available. Includes re-exportsI Including attapulgite and Fuller’s earth# Including sepioliteTotals may not add up due to rounding

TABLE 2: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OF SPECIALCLAYSI, 2004

COMMODITY PROD. LOCAL SALES EXPORT SALES TOTAL SALES Mass Value (FOR) Mass Value (FOB) Mass Value

kt kt R’000 kt R’000 Kt R’000 Kaolin 81,9 67,8 42 880 8,8 5 066 76,6 47 946 Attapulgite 20,4 20,2 8 962 0 – 20,2 8 962 Bentonite 55,9 75,5 35 662 10,6 5 956 86,0 41 619 TOTAL 158,2 163,5 87 505 19,4 11 022 182,8 98 527

Notes: I Excludes flint clay Totals may not add up due to rounding

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KAOLIN

International The major kaolin exporters, in descending order, were the USA, UK, Brazil, China and the CzechRepublic. One of the major world producers of high-quality grade special clays, Imerys, has acontrolled production capacity of nearly 5 Mt per year. Other major kaolin producers includeHuber Engineering Materials and Engelhard (both in the USA) and CADAM and Para Pigmentos(PPSA) in Brazil.

Kaolin consumption is heavily influenced by the paper market (and indirectly by print advertising),which accounts for 45 percent of world demand. In 2004, worldwide printing and writing paperproduction totalled an estimated 110 kt, a 5,3 percent increase over 2003. Paper-grade kaolinproducts are used in coating and filler applications to enhance the printability, appearance andvalue of paper and board products. In 2004, most clay producers reported gross sale increases,although profit margins have been limited by higher energy and raw material costs, increasedresearch and development expenditures (especially for filler-fibre composite materials) and highfreight tariffs. The 1st quarter of 2005 saw all major kaolin producers increase kaolin prices by 4– 8 percent.

Product diversification, the relocation of production and manufacturing units to low-cost centres(e.g. major capacity increases in Brazil by Imerys, CADAM and PPSA), strategic internationalpartnerships and further consolidation in the kaolin industry and its main consumer, the paperindustry, have positioned major role–players to accommodate escalating production andtransport costs.

In the paper industry, kaolin has lost significant market share to carbonate filler and coatingproducts, such as ground calcium carbonate (GCC) and precipitated calcium carbonate (PCC).Carbonates offer unparalleled brightness, blue tints and high solids runnability. Nonetheless, co-pigment products, double coating systems and the superior printability and high gloss of qualitykaolin, have allowed producers to re-capture some market share in the paper industry. Renewedthreats to the kaolin industry include Speciality Minerals Inc.’s new PCC plant in Walsum,Germany that has a plant capacity of up to 500 kt per annum of coating-grade PCC products.

LocalLocal sales of kaolin decreased by 7,5 percent, from 72,9 kt in 2003 to 67,8 kt in 2004 (Table 3).Sales of crude and milled kaolin, by volume, decreased by 22,4 percent and 2,0 percentrespectively. Washed kaolin sale volume increased by 9,5 percent in 2004 (Table 4). The averagelocal price of kaolin increased by 13,9 percent to R633/t (FOR). Washed kaolin exports shrunkto 10,6 kt in 2004, while 15,9 kt of kaolin was imported. Imported products include micronisedkaolin and paper coating-grade products.

TABLE 3: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND IMPORTS OF KAOLIN,1997–2004

YEAR PRODUCTION LOCAL SALES EXPORTS Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1997 164,4 168,0 40 086 239 22,1 25 816 1 171 1998 138,3 160,0 38 603 241 24,9 27 488 1 110 1999 123,2 116,4 34 276 294 17,5 27 146 1 550 2000 89,2 80,4 32 071 399 16,4 27 466 1 680 2001 83,5 71,3 32 219 452 15,7 31 491 2 009 2002 86,7 79,4 37 332 470 17,8 53 254 2 988 2003 86,4 72,9 40 573 556 11,6 24 925 2 156 2004 81,9 67,8 42 880 633 15,9 23 562 1 478

Sources: RSA, Commissioner for South African Revenue Services, 1998–2005

Notes: Import figures also include “other kaolinitic clays”Unit values calculated before rounding of mass and rand values

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In the last 10 years, local kaolin sales have shrunk from about 180 kt per annum to 70 kt perannum – a decline of 61 percent (Figure 1). A technological changeover in local papermanufacture necessitated the substitution of kaolin fillers by GCC and PCC. From April 2005, nolocal kaolin will be used in any paper manufacturing. Declining consumption trends have alsobeen attributed to: GCCs replacing most kaolin fillers in paint, plastic and rubber applications, theuse of plastic clays and fireclays in ceramic bodies and refractories, the use of attapulgite andpetroleum by-products as binders in fertiliser compounds; the mass exodus of local whiteware,earthenware and tableware producers (due to high production costs and cheap, importedfinished articles); high-quality kaolin imports for chinaware and high-end ceramics; the use ofother alumina-based products such as pyrophyllite and bauxite for electroceramics; and theexploitation of other low-cost fillers such as talc, dolomite and limestone.

TABLE 4: SOUTH AFRICA’S LOCAL SALES OF KAOLIN BY TYPE, 1997–2004

YEAR LOCAL SALES EXPORTS Mass Value (FOR) Mass Value (FOR) Mass Value (FOB)

kt R’000 R/t kt R’000 R/t kt R’000 R/t 1997 91,4 3 650 40 11,2 2 834 253 65,4 33 602 514 1998 76,0 2 825 37 38,0 10 825 285 45,9 24 952 544 1999 51,0 2 308 45 21,3 6 171 290 44,2 25 797 584 2000 32,9 2 775 84 5,3 1 551 290 42,1 27 746 660 2001 29,2 4 058 139 5,0 1 441 290 37,1 26 720 720 2002 43,1 9 595 222 4,8 1 387 290 31,5 26 351 836 2003 36,2 9 287 257 5,1 1 482 290 31,6 29 804 942 2004 28,1 8 387 298 5,0 1 453 290 34,6 33 040 955

Note: Unit values calculated before rounding of mass and rand values

FIGURE 1: KOALIN CONSUMPTION IN SOUTH AFRICA, 1990 AND 2004

In contrast to declining trends in most ceramic applications, kaolin demand for tiles andsanitaryware has increased significantly in the last few years due to capacity increases in theceramics industry, a major increase in bathroom upgrades by middle-income home-owners andnew product ranges in specialised ceramics, tile and sanitaryware components. Profits havebeen maintained through cost-cutting initiatives and an increase in exports – local kaolin isexported to over thirty countries worldwide. Pro-active research and the development of nichemarkets are bearing fruit for some producers. However, no kaolin producer in South Africa sellsa coating-grade or calcined product. Most producers are employing new, low-cost technologiesto add value to their products, which include: improved fine milling techniques, the use ofwhitening additives, moisture inhibitors, driers and better packaging.

Good quality kaolin reserves, mostly located in the Western Cape, have been sterilised by rapidurban expansion, unfavourable location in terms of primary local markets, transport factors, theproximity of prestige wine farms and environmental compliance costs.

BENTONITE

International The dominant global producers of bentonite are American Colloid Co., S & B Industrial MineralsSA (formerly Silver & Barytes Ores Mining Co.), Sud Chemie and Spanish-based companies

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Bentonitas Especiales SA, Tolsa SA and Sepiol SA. The major applications of bentonite are forcat litter, metallurgical (foundry sands and pelletising) and the oil industry. The last 5 years haveseen a further consolidation of producers and either stagnation or decline of mature markets,particularly in Western Europe and the USA. Several bentonite companies are focussing onpotential deposits, products and markets in Eastern Europe, the CIS and China, and are eitherinvesting directly or shifting traders and marketing agencies to these countries.

Local There are three operating, bentonite mines in South Africa; the Cape Bentonite Mine (owned byEcca Holdings) near Heidelberg, Western Cape; the Ocean Bentonite Mine and BlauwboschMine (both located near Koppies, Free State and owned by G&W Base & Industrial). A 61,8percent production decrease in 2004 has been attributed to campaign mining implemented at theKoppies operation in 2003 (Table 5).

Local sales of bentonite increased significantly to 75,5 kt in 2004, whilst average local pricesdecreased by 12,6 percent to R473/t. In 2004, total imports amounted to 24 kt, used mostly asa pelletising agent in ferrochrome production and to a lesser extent in paint, paper and wine-clarifying applications. Ferrochrome, foundry, drilling muds, civil and oil bleaching applicationsaccount for 91% of bentonite consumption (Figure 2). The local bentonite market hasexperienced an annualised growth of 6,8 percent from 1990 to 2004.

TABLE 5: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OFBENTONITE, 1997–2004

YEAR PRODUCTION LOCAL SALES EXPORTS Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1997 75,5 52,0 17 800 342 0 – – 1998 48,4 55,5 17 231 311 0 – – 1999 49,3 55,2 17 192 312 0,5 52 103 2000 90,1 62,5 21 378 342 0 – – 2001 108,3 51,8 19 793 382 0 – – 2002 101,1 67,8 32 916 485 10,0 4 065 408 2003 145,1 74,4 31 210 420 11,0 3 728 338 2004 55,9 75,5 35 662 473 10,5 5 956 566

Note: Unit values calculated before rounding of mass and rand values

FIGURE 2: BENTONITE CONSUMPTION IN SOUTH AFRICA, 1990 AND 2004

ATTAPULGITE

Currently, there are two full-time and two seasonal attapulgite producers in South Africa. Themain use of attapulgite is as pet litter, but there is also strong demand for attapulgite as a carrierfor pesticides and animal feeds and as a pelletising agent. Both production and local salesincreased significantly in 2004 – 20,2 kt of mostly crude attapulgite was sold (Table 6). It isimportant to note that the addition of a relatively new producer has skewed statistics as fromyear-end 2001. Much vertical integration exists in the industry, as the final, processed attapulgiteproduct is often sold by sister companies at prices greater than R3000. Import replacement is akey growth market for attapulgite.

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FLINT CLAY

There are only two producers of flint clay in South Africa, Refractory Minerals (a subsidiary ofSAMREC) and Vereeniging Refractories (VERREF). However, there are other producers of flint-like clays whose products compete with those of Refractory Minerals. Local sales by value of flintclay increased by 5,4 percent to R23,6 million in 2004 (Table 7). Over 70 percent of flint clay iscalcined and sold as chamotte, with a small amount (less than 5kt) exported in 2004. Flint clayis used primarily in the refractory industry in kiln linings, crucibles and condensers, and to alesser extent in water purification. Recent developments include the award of a largeinternational contract to VERREF to supply Chilean copper smelters with refractory lining bricks.

TABLE 6: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OFATTAPULGITE, 1997–2004

YEAR PRODUCTION LOCAL SALES EXPORTS Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1997 9,4 9,4 3 787 402 45 24,6 546 1998 7,8 7,7 3 164 409 187 128,0 684 1999 7,0 6,8 2 993 442 151 118,7 784 2000 10,3 8,6 3 447 400 0 – – 2001 9,2 5,8 3 224 549 20 11 574 2002 13,3 11,0 5 883 535 0 – – 2003 14,6 14,5 6 750 466 0 – – 2004 20,4 20,2 8 962 443 0 – –

Notes: Unit values calculated before rounding of mass and rand values

TABLE 7: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OF FLINTCLAY, 1997–2004

YEAR PRODUCTION LOCAL SALES EXPORTS Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t 1997 91,7 106,7 17 980 168 6 2 860 452 1998 82,8 86,5 19 218 222 1 99 417 1999 88,9 90,4 20 586 228 0 – – 2000 48,5 53,1 21 539 406 0 – – 2001 47,2 57,1 20 087 352 0 – – 2002 ** ** 21 543 ** 0 – – 2003 ** ** 22 440 ** ** 2 968 ** 2004 ** ** 23 644 ** ** 3 787 **

Notes: ** ClassifiedUnit values calculated before rounding of mass and rand values

REMUNERATION

Total remuneration for all bentonite, attapulgite, flint clay and kaolin quarries increased by 11,0percent to R27,8 million in 2004 (Table 8). Expansions in the bentonite and attapulgite industryhave compensated for retrenchments at several kaolin operations and the labour force has beenrising since 2001. Labour productivity improved by 2,9% over the last year.

TABLE 8: SOUTH AFRICA’S KAOLIN, BENTONITE, ATTAPULGITE AND FLINT CLAYQUARRIES: EMPLOYMENT AND REMUNERATION, 1999–2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 1999 435 14 769 2000 412 15 010 2001 396 16 056 2002 423 22 246 2003 444 25 045 2004 479 27 804

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OUTLOOK

Extensive research has led to the development of industry specific clay products, which sell atpremium prices. Marginal growth is expected in western bentonite markets such as cat litter,foundry sands and pelletising. High oil prices have encouraged many companies to bring forwardoil exploration projects, with current trends suggesting that consumption of drilling muds willincrease significantly. In Europe and the USA, growth markets include detergent and civilengineering applications, whilst in Asia, cat litter and bleaching/oil refining applications showtremendous potential in the short- and medium-term. New growth markets include water andeffluent treatment and pharmaceutical applications.

World markets for kaolin products are generally mature, and there are few opportunities fornewcomers to enter the market (both locally and internationally). Future growth in kaolinconsumption will be driven by an increasing demand for high-gloss, fine papers. Predicted annualgrowth for world kaolin demand is set at 0,5 – 1 percent, whilst GCC and PCC annual growth isexpected to be 3 – 4 percent. It is estimated that in the next 5 years, 6 Mt of new printing andwriting capacity will come on stream in China. Glossing clay product sales are expected to growsignificantly, as more Chinese paper manufacturers are using coated wood-free machines.Global paper production is expected to grow at an average of 3,2 percent per year. High growthrates are expected in Asia (4,4 percent per year), Europe (3,0 percent) and North America(1,7%). Two new growth markets are fuel cell applications and nano-composite technologies.

Further consolidation, strategic acquisitions (especially of Brazilian and Chinese operations) andtrans-continental alliances are expected in the clay industry, as well as in associated industries,such as paper, petroleum, cat litter and fillers. This will increase clay demand, improve profitmargins and reduce excess capacities of several global companies within these markets. Currentchallenges that international kaolin producers face include 1) the continuous demand for betterquality kaolin products, 2) limiting production, raw material, energy and transport costs and 3)the threat of other functional, commercial fillers such as synthetic white pigments, chalk,limestone, talc, GCC, PCC and pyrophyllite.

Sales of South African special clays, mainly to local consumers, depend on growth in the nationaleconomy. In the medium- to long-term, the industry should benefit from the expected expansionin industrial manufacturing and in industries that consume special clays, although the strong randhas made certain export routes uncompetitive. Clay prices are very sensitive to transport costs,toll fees and fuel price increases, which result in price increases. Beneficiation, small-scalemining and compliance costs are other important aspects influencing future developments in thespecial clays industry.

It is expected that other white mineral substitutes will be increasingly competitive in kaolin fillerapplications. Some local ceramic producers have developed new foreign markets and increasedtheir production capacities accordingly. Strong growth (and increased clay consumption) isexpected in this industry in the next two years, although cheap imports from China, Brazil andIndia are damaging local ceramic and clay producers’ markets. Locally, future technologicaldevelopments will be around superfine and nano-fine size fractions, narrow particle distributions,improved functionality, moisture removal and better packaging.

New, favourably located deposits need to be explored and delineated to unlock kaolin potentialin South Africa. Real growth can be maintained through smart advertising, competitive pricing,further research and development and an increase in consumer demand, particularly fromsanitaryware, tile and refractory producers.

According to domestic industry sources, bentonite output is expected to grow by about 4 – 6percent annually over the next two years, based on a local demand increase of about 4 percentper year and significant growth in exports. Bentonite consumption trends suggest that bentonitewill become the most important special clay, by value and volume, produced in South Africawithin the next year. Growth will be focused on the foundry and pelletising industries; throughputin the ferrochrome industry is expected to double within the next four years as seven newpelletising units are scheduled to be built from August 2005 onward, although market saturationmay be reached in the next five years. Other niche markets that show strong growth include civil/environmental (particularly import replacements, water retention and treatment), medicinal,

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aquamarine, nano-plastics, fibre technologies, pulp and paper manufacturing and compositematerial manufacturing. The two largest deterrents to significant real growth in niche markets are“consumer mindset and ignorance”.

Flint clay is likely to experience continued competition from high alumina refractories, as well asgrog (recycled chamotte) that can be inexpensively regenerated. Industry sources have indicatedthat cheap imported products may replace local flint clay in water purification applications.Cat litter, animal feed and pelletising applications are expected to provide strong demand forattapulgite. Several producers have or will be increasing their plant capacities in the next year.Two possible new entrants into the attapulgite industry may compete with established producers.Synthetic resins and adsorbents, which retain their efficiencies for at least 12 years, may provethreatening to the attapulgite adsorbent market in the medium- and long-term.

REFERENCES:

Engineering News, Feb 2004 – July 2005Industrial Minerals, July 2003 – July 2005Mineral Price Watch, Feb 2004 – July 2005

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SULPHURD Naidoo

INTRODUCTION

Sulphur is a non-metallic element, the fourteenth most abundant element in the earth’s crust, aswell as being an important constituent of plant and animal life. Owing to the application of itsmajor derivative, sulphuric acid, sulphur is one of the most important commodities in theindustrial sector. Sulphuric acid consumption is regarded as one of the best indicators of anation’s industrial development.

INTERNATIONAL DEVELOPMENTS

In 2003, world production of sulphur in all forms (SAF) increased by 4,7 percent to 61,0 milliontons. The major producers were USA, Canada and Russia (see Table 1).

According to the International Fertiliser Association, consumption of elemental sulphur in 2004rose by seven percent, to 45,2 Mt due to firm fertiliser and industrial demand.

PRICE

Prices stabilised in 2004 and the FOB Vancouver price was in the $60 per ton range. The onlyunstable factor was freight rates which were underpinned by the flood of raw materials intoChina. This tied up shipping that otherwise would have been used for dry bulk trade, includingsulphur. However, by March 2005 there was an upward trend in prices led by escalating Chinesedemand, and technical problems with sulphur loading systems in Canada.

LOCAL DEVELOPMENTS

In South Africa elemental sulphur is recovered from pyrites, metal sulphide smelter gases, coaland crude oil. As sulphuric acid is the form in which more than 85 percent of SAF is used, mostelemental sulphur is converted to sulphuric acid.

South Africa’s production of SAF increased by 2 percent, to 633 kt in 2004 (Table 2). Sulphur wasrecovered as a by-product from four oil refineries, one synthetic fuels producer, three gold mines,six platinum mines, one zinc mine and one copper mine. Sulphur recovery from oil refineriesincreased by 9,2 percent, to 288 kt in 2004, as a result of measures taken to meet the 2006deadline for clean fuels specifications. These specifications require, among other things, that themaximum level of sulphur in petrol and diesel be reduced from 0,1 percent to 0,05 percent and0,3 percent to 0,05 percent respectively, by January 2006.

There were marginal decreases from gold, copper and zinc mines, while output from PGM minesincreased significantly by 180 percent. This was largely due to increased production of sulphuricacid from Rustenburg Platinum Mines, owned by Anglo American Platinum (Angloplat). In 2004,Angloplat successfully upgraded its Waterval Smelter in order to reduce its sulphur dioxideemissions. As part of the Anglo Platinum Converting Process (ACP) project and technologyupgrade, an entire new acid plant has been constructed to convert the sulphur dioxide intosulphuric acid. There was a marked increase in the fixation of sulphur dioxide through the newacid plant, resulting in a 72 percent decrease in sulphur dioxide emissions from the WatervalSmelter when compared to 2003.

South Africa’s imports of crude sulphur decreased by 11 percent, to an estimated 554 kt in 2004.This was a result of decreased imports from Sasol Nitro which shut down one of its sulphuricacid and phosphoric acid plants in December 2003 owing to the increased cost of importingsulphur, depressed world phosphoric acid prices and the strong rand.

OUTLOOK

Booming demand is expected from China and India as both countries endeavour to feed theirgrowing populations. Major capital expenditure on fertiliser plants is planned. Spending on

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sulphur consumption for Asian fertiliser production continues to grow with plenty of room for evenmore growth.

Elemental sulphur consumption is expected to increase to 46,7 Mt in 2005.

TABLE 1: WORLD PRODUCTION OF SULPHUR- IN-ALL-FORMS, 2003

COUNTRY PRODUCTION kt S %

USA 9 600 15,5 Canada 9 030 14,6 Russia 6 600 10,7 China 6 090 9,9 Japan 3 310 5,4 Saudi Arabia 2 400 3,9 Germany 2 360 3,8 Kazakhstan 1 930 3,1 United Arab Emirates 1 900 3,1 Mexico 1 610 2,6 Iran 1 360 2,2 Chile 1 300 2,1 Korea Republic 1 300 2,1 Poland 1 180 1,9 France 1 000 1,6 Other 10 830 17,5 TOTAL 61 800 100,0

Source: USGS 2005, pp 162 – 163

TABLE 2: SOUTH AFRICA’S PRODUCTION OF SULPHUR-IN-ALL FORMS, 2003 AND2004

SOURCE 2003 2004 MASS MASS

t % t % Oil refineries 264 077 43,0 288 435 45,5 Gold mines 175 621 28,6 165 207 26,1 Copper mines 108 137 17,6 104 264 16,5 Zinc mines 58 881 9,6 55 291 8,7 PGM mines 7 177 1,2 20 221 3,2

613 893 633 418

TABLE 3: SOUTH AFRICA’S PRODUCTION, CONSUMPTION, AND LOCAL PRICE OFELEMENTAL SULPHUR, 1995 - 2004

YEAR PRODUCTION CONSUMPTION* PRICE For acid production Non-acid use

kt kt kt R/t (FOR) 1995 233 673 87 265 1996 232 693 106 299 1997 256 678 100 326 1998 178 763 84 375 1999 139 662 88 439 2000 184 682 98 420 2001 123 695 100 450 2002 170 706 105 504 2003 264 856 110e 617 2004 288 700 115e 674

Sources: Producers and consumers

Notes: * Consumption includes importse Estimate

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TABLE 4: SOUTH AFRICA’S PRODUCTION AND LOCAL SALES OF PYRITE, 1995 – 2004

YEAR PRODUCTION LOCAL SALES Mass Value (FOR)

kt S kt S R’000 R/t S 1995 158 152 63 488 418 1996 184 161 77 326 480 1997 167 163 97 194 596 1998 152 173 89 565 564 1999 141 144 85 408 593 2000 146 142 90 687 638 2001 150 158 97 704 619 2002 183 182 96 946 531 2003 176 173 88 359 512 2004 165 155 66 128 428

Note: S Contained sulphur

TABLE 5: SOUTH AFRICA’S IMPORTS OF SULPHUR, 1995 – 2004

YEAR CRUDE/UNREFINED SUBLIMED & OTHER+ TOTAL Mass Value (FOB) Mass Value (FOB) Mass Value (FOB)

kt R’000 R/t kt R’000 R/t kt R’000 R/t 1995 602 118 577 197 1,000 3 844 3 844 603 122 421 149 1996 526 88 040 167 0,770 1 620 2 103 527 89 660 203 1997 540 85 505 158 0,659 1 527 2 317 541 87 032 170 1998 531 95 347 180 0,291 995 3 419 531 96 342 161 1999 697 142 193 204 0,244 756 3 098 697 142 949 181 2000 700 201 465 288 0,228 995 4 362 700 202 460 289 2001 678 107 640 159 0,151 954 6 318 678 108 594 160 2002 569 194 579 341 91 35 220 387 660 229 799 348 2003 623 275 408 442 118 68 124 577 741 343 532 464 2004 554e 251 419 454 156 53 984 346 710 308 403 434

Source: RSA, Commissioner for South African Revenue Service, 1995 – 2003

Notes: + All forms of sulphur other than those specifically referred toe EstimateTotals may not add up due to rounding

TABLE 6: SOUTH AFRICA’S PRODUCTION AND CONSUMPTION OF SULPHURIC ACID*,1996 – 2004

YEAR PRODUCTION FROM CONSUMPTION FOR Pyrite Elemental Other Total Fertilisers Mining Industrial

sulphur use kt kt kt kt kt kt kt

1996 481 2 099 339 2 919 2 144 195 328 1997 470 2 054 324 2 848 2 085 182 287 1998 457 2 216 121 2 794 2 242 169 299 1999 423 2 031 200 2 654 2 317 179 289 2000 423 1 938 211 2 654 2 834 161 277 2001 241 1 840 146 2 227 2 089 150 270 2002 250 2 010 170 2 430 2 500 165 280 2003 176 2 517 194 2 867 2 878 170e 290e

2004 165 2 123 200 2 488 2 409 180e 300e

Sources: Producers and consumers

Notes: * 100% H2SO4

e Estimate

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TABLE 7: WORLD SPOT PRICES OF ELEMENTAL SULPHUR, 2001 – 2004

MONTH PRICE RANGE*$/t

2001 2002 2003 2004 Feb 22 - 24 27 - 32 37 - 56 58 - 66 Apr 22 - 24 27 - 32 48 - 81 58 - 66 June 14 - 15 27 - 35 48 - 81 58 - 66 Aug 14 - 15 27 - 40 55 - 60 58 - 66 Oct 14 - 18 37 - 42 55 - 64 58 - 65 Dec 14 - 18 37 - 56 58 - 66 58 - 65

Source: Sulphur, 2000 – 2004

Note: * End of month spot price, FOB, Vancouver, Canada.

REFERENCES

Sulphur, 2005USGS, 2005President’s Report, Fertiliser Society of South Africa

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VERMICULITEVN Agnello

INTRODUCTION

Vermiculite is an hydrated phlogopite mica that which exfoliates or expands into worm-like piecesupon heating. The name vermiculite is derived from the Latin vermiculare – to breed worms.

Vermiculite is non-combustible, insoluble in water and organic solvents, has good insulatingproperties and is safe and easy to handle. Due to its inherent stability, vermiculite is being usedincreasingly in health and safety applications.

Untreated vermiculite is commonly used in wall plasterboard. Exfoliated vermiculite is usedextensively as a lightweight aggregate in fireproofing, thermal insulation, cementitious coatings,fireproofing in steelworks and foundries, acoustic plasters, horticultural growth media and as afertilizer carrier. Ground vermiculite is used as filler in brake linings.

The increase in bulk volume of commercial grades is 8 to 12 times, but individual vermiculiteflakes may exfoliate as much as 30 times. The bulk density of crude vermiculite or vermiculiteconcentrate is in the range of 640-1120 kg/m? and exfoliated or expanded vermiculite is in therange of 64-160 kg/m?.

Crude vermiculite from Palabora Mining Co. (PMC) near Phalaborwa, Limpopo Province,consists of golden-brown flakes, which are classified into five size grades for specific markets.

Being non-combustible and insoluble in water or organic solvents, vermiculite is safe and easyto handle, making it suitable for a wide range of different applications. Due to its inherent stability,vermiculite is being used increasingly in applications where health and safety are of primeimportance.

Vermiculite is a member of the phyllosilicate group of minerals, formed by the weathering ofphlogophite or biotite. While it has little use in its natural state, exfoliated vermiculite is extremelylight, and used in lightweight concrete or plaster, for thermal and acoustic insulation as a packingmedium, a horticultural carrier as a filler or extender in paper, paint or plastics, and in coatingand film- forming applications.

DEVELOPMENTS DURING 2004/2005

InternationalMajor vermiculite mines are located in South Africa (PMC), Zimbabwe (Samrec), Brazil (UniaoBrasiliera de Mineracao), the USA (Virginia Vermiculite Ltd and W.R. Grace & Co.), Russia (JSCKovdorslyuda) and Australia (Australian Vermiculite Industries). In 2004, South Africa ranked firstin world output of vermiculite (41,0 percent) followed by the USA (20,8 percent) and China (14,6percent) (Table 1). Asbestos class-action lawsuits have negatively affected US vermiculiteproduction over the last 4 years – this has allowed Chinese producers to capture a greaterportion of US markets, particularly W.R. Grace & Co.’s marketshare. Chinese exports have grownby at least 40 percent in 2004.

TABLE 1: WORLD RESERVES, PRODUCTION AND EXPORTS OF VERMICULITE, 2004

COUNTRY RESERVE BASE PRODUCTION EXPORTS Mt % Rank kt % Rank Kt % Rank

South Africa 80 40,0 2 197 41,0 1 178 94,6 1 USA 100 50,0 1 100 20,8 2 10 5,3 2 China na – 70 14,6 3 na Russia na –- 25 5,2 4 na Brazil na –- 25 5,2 5 na Zimbabwe na –- 169 3,3 6 na Other 20 10,0 47 9,8 na TOTAL 200 100,0 480 100,0 188 100,0

Source: USGS, 20052, pp 184 - –185

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In June 2004, Regis Resources began vermiculite production from a mine in southern Ontario,Canada. Major vermiculite mines are located in South Africa (Phalabora), China, Brazil,Zimbabwe and the United States. In 2003, South Africa ranked first in world output of vermiculite(41,3 percent) followed by the USA (22,6 percent) and China (11,3 percent) (Table 1). US production declined by 33 percent from anestimated 150 kt in 2001 to 100 kt in 2003. This decline is almost certainly related to allegationsthat some vermiculite-based products contain asbestos.

Canadian junior international mining and investment company, International BusinessInvestments Corp., which already owns the Namekara vermiculite plant in Uganda, has signedan option agreement to acquire the Mica Peak vermiculite claims in Clarke County, Nevada.Namekara has 5 million tons of proven reserves of high-grade coarse vermiculite, and the life ofthe mine has been estimated at more than 100 years.

LocalSouth African vermiculite production increased by 7,7 percent to 197 kt in 2004 (Table 2). Localsales and exports masses have improved by 12,3 and 9,5 percent respectively over the sameperiod. Strong vermiculite demand has been attributed to construction, fireproofing andinsulating applications. New health and safety legislation implemented in the USA and Europehave indirectly boosted demand. PMC has also revolutionised its mine and plant processingmethods over the last 18 months, this includes: improved selective mining, fine tuning andstreamlining of all product streams, doubling yield rates, lowering logistical costs, reducingemployee numbers and focusing on high quality, consistent products.

In 2004, South Africa exported 96 percent of total production, mainly to consumers in Europe(51percent) and North America (34 percent). There has been no change in the dollar price rangefor the last 2 years, i.e. $160 to $260/short ton, FOB Rotterdam. The average rand export price(FOB) decreased from R886/t to R 844/t. The local currency’s strong appreciation against the USdollar has had a negative effect on profit margins.

TABLE 2: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OFVERMICULITE, 1995–2004

YEAR PRODUCTION LOCAL SALES EXPORTS SALES Mass Value (FOR) Mass Value (FOB)

kt kt R’000 R/t kt R’000 R/t1995 221,7 10,3 1 200 117 204,9 88 813 4331996 196,0 10,4 1 275 122 171,4 88 886 5191997 211 9,7 1 351 140 184,8 99 136 5371998 221,3 6,6 1 130 171 222,8 138 702 6231999 217,8 6,1 1 517 250 186,5 120 046 6442000 208,8 5,7 3 191 555 195,0 132 501 6802001 157,0 5,9 3 686 624 154,0 125 096 8142002 210,0 6,5 4 498 692 170,0 205 681 1 2082003 182,8 6,5 5 114 784 163,3 144 759 8862004 196,9 7,3 6 229 855 178,8 150 944 844

Note: Unit values calculated before rounding of mass and rand values

Though international consumers prefer coarser vermiculite grades; PMC, through an extensiveresearch and development (R & D) programme has been able to find receptive markets for itsfiner fractions. The majority of R & D on local vermiculite products and applications is done inToulouse, France, and Australia. Plant and exfoliating technologies are developed in-house atPMC, Phalaborwa.

Internationally, PMC vermiculite products are highly acclaimed due to their excellent “springback”properties, low sodium content, overall consistency, superior performance in fireproofingapplications and the asbestos-free nature of the product. In September 2004, independenttesting in Europe confirmed (once again) that local vermiculite is asbestos free. Polarised lightmicroscopy examinations did not detect any amphibole or chrysotile asbestos fibres present inany of the samples of vermiculite, nor did X-ray diffractometry detect any crystalline silica in anyof the samples.

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In 2004, the labour force was reduced by 23,8 percent (Table 3), accompanied by an increase of27,7 percent in total remuneration. In the past three years total remuneration has increased by76,7 percent, with the number of employee back to the same number as in 2001.

South Africa ranks first in terms of output of vermiculite. Phalabora Mining Company is the onlyproducer, operating a mine in Limpopo Province. Moreover, South African vermiculite is replacingasbestos in brake linings, while being used as an absorbent for industrial spill clean-up operation.A key contributor to maintaining this large market share is the quality of South Africanvermiculite. The technology used in the extraction is on par with that used internationally, butmoderniszation is being looked at. PMC is working with local users to promote increasingbeneficiation of raw material, thereby increasing the foreign exchange potential of the industry.

World vermiculite reserves are estimated to be 50 ,000,000million tons (enough for the next 100years at current usage rates), with the reserve base being 200,000,000t million tons. The majorreserves in the USA are in Montana, South Carolina and Virginia. In South Africa 90 percent ofthe reserves are located in the Phalaborwa complex.

Phalabora’s vermiculite has been found to be the ideal raw material for boards manufacture. Theimpact of this development will have a significant effect on sales volumes in the future.

World demand for vermiculite is expected to increase, driven by developments of newapplications for the commodity. Worldwide the greatest challenge to vermiculite use arises fromincidents in the US, where mineral contaminated with asbestos was mined in the past. Phalaboravermiculite has repeatedly been proved asbestos-free through independent testing.

Logistics continues to be an important component in the industrial minerals market and thegeographic location of Phalabora relative to the end customer contributes almost 70 percent ofthe delivered costs of vermiculite. Ocean freight rates were successfully contained and remainedflat for the year. Rail transport during the year presented significant challenges for the logisticsteam as the local rail service provider struggled to meet the demands.

Traditional producers are increasingly under threat from cheap suppliers from countries such asChina. China has increased its production by 38 percent in 2002 and is becoming a threat to thevermiculite market. However, the developments of specialiszed products and their increasingapplication by existing consumers (for examplee.g. building materials) will go some way tocounter that challenge.

TABLE 3: SOUTH AFRICA’’S VERMICULITE MINE : EMPLOYMENT, REMUNERATIONAND PRODUCTIVITY, 1999 – 2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 1999 218 13 662 2000 250 19 750 2001 295 25 893 2002 379 25 558 2003 369 36 989 2004 281 45 765

OUTLOOK

Perlite substitution is a real threat to vermiculite producers in horticultural, fireproofing andconstruction markets. In the medium to long-term, the Libby Mine asbestos lawsuits will have adetrimental affect on USA local vermiculite sales. However, as a major exporter to the USA,South Africa has not been affected by the negative publicity and lawsuits. US consumption ofvermiculite concentrate is forecast to increase moderately by 1-2% per annum, in-line withconstruction trends. Consumption of vermiculite concentrate in Western Europe is expected toremain unchanged between 2006 and 2009, although more stringent health, safety andcompliance regulations may boost sales.

The economic boom in South East Asia bodes well for local vermiculite exporters, with anexpected, annualised growth of between 3 and 7 percent. Several new niche markets may triple

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local vermiculite production totals, if current field trials prove successful. Heat retention andretardant applications will increasingly become more commonplace as end-users focus more onhealth, safety, environmental compliance and improved process efficiency.

In the short and medium-term, local consumption is expected to increase by at least 4 percentper annum as product awareness, improved marketing and greater substitution of otherinsulative products is realised.

Though only a few players govern world vermiculite production, current trends suggest that low-cost production centres in China and Africa will grow rapidly in the next 5 years.

Growth markets for vermiculite include high performance automotive gaskets and seals, catalyticconverter mats, high temperature coatings for woven glass and ceramic fibre products,condensation control paints; upgrading the fire resistance of organic foams and other polymersystems, nuclear waste cleanup, water and soil detoxification and the containment of industrialspills.

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STATISTICS FOR OTHER INDUSTRIAL MINERALSVN Agnello, D Naidoo, N Tshabalala

1. NATURAL ABRASIVES

TABLE 1: SOUTH AFRICA’S IMPORTS OF NATURAL ABRASIVES, 1997–2004

YEAR IMPORTS Mass Value (FOB)

t R’000 R/t 1997 440 1 285 2 920 1998 1 827 3 233 1 770 1999 1 462 4 569 3 125 2000 923 3 472 3 762 2001 1 090 3 696 3 390 2002 1 590 7 695 4 840 2003 1 750 8 010 4 577 2004 1 554 5 573 3 586

Source: RSA, Commissioner for South African Revenue Service, 1998–2005

2. BARYTES

TABLE 2.1: SOUTH AFRICA’S PRODUCTION AND LOCAL SALES OF BARYTES, 1997 –2004

YEAR PRODUCTION LOCAL SALES Mass Mass Value (FOR)

t t R’000 R/t 1997 2 071 5 421 1 793 331 1998 610 4 566 1 693 371 1999 2 844 3 533 2 388 676 2000 1 628 4 577 3 083 674 2001 - 353 155 438 2002 - 470 183 391 2003 - 355 149 420 2004 - 276 116 420

TABLE 2.2: SOUTH AFRICA’S IMPORTS OF BARYTES, 1997 – 2004

YEAR IMPORTS Mass Value (FOB)

t R’000 R/t 1997 1 980 2 378 1 201 1998 1 421 2 243 1 579 1999 1 716 2 725 1 558 2000 2 423 3 196 1 319 2001 2 254 3 722 1 651 2002 2 925 5 329 1 822 2003 3 245 4 352 1 341 2004 3 056 7 008 2 293

Source: RSA, Commissioner for South African Revenue Service, 1998–2005

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3. DIATOMACEOUS EARTH (KIESELGUHR)

TABLE 3: SOUTH AFRICA’S IMPORTS OF DIATOMACEOUS EARTH, 1997 – 2004

YEAR IMPORTS* Mass Value (FOB)

t R’000 R/t 1997 4 506 6 581 1 460 1998 4 175 6 942 1 663 1999 4 621 9 089 1 967 2000 4 272 9 572 2 241 2001 3 772 11 857 3 144 2002 4 788 20 406 4 262 2003 5 002 14 975 2 994 2004 4 594 10 670 2 323

Source: RSA, Commissioner for South African Revenue Service, 1998–2005

Notes: * Production statistics are not published because there is only one producer

4. FELDSPAR

TABLE 4.1: WORLD PRODUCTION OF FELDSPAR, 2003+

COUNTRY PRODUCTION kt % Rank

Italy 2 972 19,8 1 China 2 000 13,3 2 Turkey 1 862 12,4 3 Japan 1 100* 7,3 4 USA 800 5,3 5 Thailand 780 5,2 6 France 671 4,4 7 Spain 550 3,7 8 Korea, Rep. 477 3,2 9 Czech Republic 421 2,8 10 Egypt 350 2,3 11 Mexico 346 2,3 12 India 308 2,1 13 Germany 233 1,6 14 Other 2 145 14,3 - TOTAL 15 000 100,0

Source: BGS, 2005, pp 24

Notes: + Where 2003 figures were not available, latest figures have been used* Includes weathered granite, feldspar

TABLE 4.2: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OFFELDSPAR, 1997 – 2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Value (FOR) Mass Value (FOB)

Kt Kt R’000 R/t kt R’000 R/t 1997 68,1 48,0 15 671 326 2,6 1 668 637 1998 56,4 32,0 13 052 408 1,4 1 072 745 1999 59,3 40,0 15 002 375 1,4 1 053 763 2000 67,0 52,2 20 686 397 0,8 825 1 091 2001 66,1 70,6 27 016 382 1,2 1 665 1 333 2002 66,6 61,0 26 334 432 0,5 822 1 591 2003 57,7 57,4 29 943 521 - - - 2004 53,0 65,7 38 112 580 - - -

Notes: Unit values calculated before rounding of mass and rand values

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5. GRAPHITE

TABLE 5: SOUTH AFRICA’S IMPORTS OF NATURAL GRAPHITE, 1997 – 2004

YEAR IMPORTS Mass Value (FOB)

t R’000 R/t 1997 1 980 2 378 1 201 1998 1 421 2 243 1 579 1999 1 716 2 725 1 558 2000 2 423 3 196 1 319 2001 1 940 7 602 3 918 2002 1 533 7 751 5 056 2003 1 447 4 926 3 404 2004 1 427 4 879 3 419

Source: RSA, Commissioner for South African Revenue Service, 1998–2005

6. GYPSUM

TABLE 6.1: WORLD PRODUCTION OF GYPSUM, 2003

COUNTRY PRODUCTION kt % Rank

USA 16 000 16,2 1 Spain 12 000 12,1 2 Canada 9 025 9,1 3 Iran 8 400 8,5 4 Mexico 6 986 7,1 5 China 6 900 7,0 6 Thailand 6 500 6,6 7 Australia 3 900 3,9 8 France 3 500 3,5 9 India 2 881 2,9 10 Other 22 869 23,0 - TOTAL 99 000 100,0

Source: BGS, 2005 pp 29 – 30

Notes: + 2003 or latestTotals may not add up due to rounding

TABLE 6.2: SOUTH AFRICA’S PRODUCTION, LOCAL SALES, AND CONSUMPTION OFNATURAL GYPSUM, 1997 – 2004

YEAR PRODUCTION LOCAL SALES CONSUMPTION FOR CEMENT#

Mass Value (FOR) kt kt R’000 R/t kt

1997 366 356 15 977 45 377 1998 486 482 22 579 47 368 1999 514 441 20 497 47 347 2000 413 426 17 239 40 346 2001 383 381 17 651 46 352 2002 422 438 20 014 46 370 2003 394 427 20 832 49 391 2004 452 459 18 783 41 452

Source: CNCI Review 2005

Notes: # Includes synthetic gypsum. The total is derived from regional cement sales, with the assumption that 38,5t gypsum/1 000t cement is consumed.Unit values calculated before rounding of mass and rand values.

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TABLE 6.3: SOUTH AFRICA’S IMPORTS OF GYPSUM AND GYPSUM PLASTERS, 1997 –2004

YEAR GYPSUM GYPSUM PLASTERS Mass Value (FOR) Mass Value (FOB)

t R’000 R/t kt R’000 R/t 1997 2 641 2 118 802 6 126 4 280 699 1998 3 957 3 616 914 5 099 5 028 986 1999 2 361 3 893 1 649 5 351 4 662 871 2000 2 565 5 633 2 196 5 669 5 018 885 2001 1 741 2 039 1 171 5 422 7 809 1 440 2002 1 861 2 909 1 564 4 893 7 021 1 435 2003 1 931 2 732 1 415 5 256 6 560 1 248 2004 2 624 3 039 1 158 4 761 6 365 1 337

Source: RSA, Commissioner for South African Revenue Service, 1998 – 2005

7. MAGNESITE

TABLE 1: WORLD RESERVES AND PRODUCTION OF MAGNESITE, 2003

COUNTRY RESERVE BASE+ PRODUCTION Mt % Rank kt % Rank

China 3 000 54,5 1 10 000 45,5 1 Turkey 160 2,9 4 3 224 14,7 2 Russia 730 13,3 3 2 600 11,8 3 Slovakia 30 0,5 8 933 4,2 4 Austria 20 0,4 11 766 3,5 5 Spain 30 0,5 8 517 2,4 6 Greece 30 0,5 8 500 2,2 7 Australia 120 2,2 5 473 2,2 8 Korea, DPR 750 13,6 2 450 2,1 9 India 55 1,0 7 323 1,5 10 Brazil 65 1,2 6 269 1,2 11 Netherlands * – – 260 1,2 12 Canada * – – 165 0,8 13 South Africa 3 – – 86 0,7 14 Iran * – – 70 0,4 15 Other 500 9,1 – 1 232 5,6 – TOTAL 5 500 100 22 000 100

Sources: BGS, 2005, pp 46USGS, 2005, pp 101

Notes: + Contained magnesium* Reserve base figures unavailable Totals may not add up due to rounding

TABLE 7.2: SOUTH AFRICA’S PRODUCTION AND LOCAL SALES OF MAGNESITE ANDDERIVED PRODUCTS, 1997–2004

YEAR PRODUCTION LOCAL SALES Mass Mass Value (FOR)

t t R’000 R/t 1997 66,3 103,0 21 573 209 1998 64,8 110,0 22 060 201 1999 63,7 138,3 21 119 153 2000 63,0 92,4 20 156 218 2001 36,5 70,2 26 979 384 2002 87,2 113,6 25 379 223 2003 86,1 131,3 30 511 232 2004 65,9 123,2 25 978 211

Notes: Unit values calculated before rounding of mass and rand values

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TABLE 7.3: SOUTH AFRICA’S IMPORTS OF MAGNESITE AND MAGNESIA, 1997–2004

YEAR MAGNESITE MAGNESIA Mass Value (FOR) Mass Value (FOB)

Kt R’000 R/t kt R’000 R/t 1997 1,9 3 166 1 652 70,1 56 352 803 1998 3,9 3 780 953 69,0 71 829 1 041 1999 3,4 3 423 995 54,2 58 193 1 073 2000 2,7 3 857 1 436 55,8 64 616 1 158 2001 2,9 5 561 1 922 50,8 74 292 1 462 2002 13,4 18 243 1 363 46,4 95 144 2 052 2003 15,3 17 030 1 116 40,0 64 898 1 624 2004 11,6 15 007 1 292 42,1 62 299 1 480

Source: RSA, Commissioner for South African Revenue Service, 1998–2005

8. MICA

TABLE 8.1: WORLD PRODUCTION OF MICA, 2003

COUNTRY PRODUCTION kt % Rank

USA 78,6 28,1 1 China 66,2 23,6 2 Korea, Rep 33,6 12,0 3 Canada 30,0 10,7 4 France 17,0 6,1 5 Spain 11,8 4,2 6 Russia 10,0 3,6 7 Finland 9,3 3,3 8 India 4,2 1,5 9 Malaysia 3,6 1,3 10 Taiwan 3,2 1,1 11 Other 12,6 4,5 - TOTAL 280,0 100,0

Source: BGS, 2005, pp 48

Notes: + For 2003 or latest availableTotals may not add up due to rounding

TABLE 8.2: SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OF SCRAPAND FLAKE MICA, 1997 – 2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Value (FOR) Mass Value (FOB)

Kt Kt R’000 R/t kt R’000 R/t 1997 1 423 815 1 502,7 1 844 387 1 584,9 4 095 1998 1 556 801 1 192,6 1 489 334 1 481,5 4 436 1999 1 010 894 1 363,1 1 525 263 1 212,4 4 610 2000 525 1 188 2 005,3 1 688 488 2 193,7 4 495 2001 937 960 ** ** 664 ** ** 2002 880 390 ** ** 481 ** ** 2003 1 003 470 ** ** 470 ** ** 2004 901 55 ** ** 766 ** **

Notes: * Withheld for reasons of company confidentialityUnit values calculated before rounding of mass and Rand values

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TABLE 8.3: SOUTH AFRICA’S IMPORTS OF MICA, 1997 – 2004

YEAR IMPORTS* Mass Value (FOB)

t R’000 R/t 1997 599 520,2 868 1998 838 765,0 913 1999 441 553,3 1 254 2000 214 543,3 2 539 2001 313 882,2 2 818 2002 270 1 286,0 4 763 2003 375 1 021,3 2 720 2004 495 846,6 1 709

Source: RSA, Commissioner for South African Revenue Service, 1998–2005

9. MINERAL PIGMENTS

TABLE 9: SOUTH AFRICA’S PRODUCTION AND SALES OF MINERAL PIGMENTS,1997–2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Value (FOR) Mass Value (FOB)

Kt Kt R’000 R/t kt R’000 R/t 1997 1 397 1 235 507 410 110 274 2 491 1998 1 352 1 405 583 415 42 124 2 957 1999 216 1 593 647 406 60 135 2 254 2000 568 1 954 870 445 - - - 2001 852 2 116 860 406 126 180 1 430 2002 282 1 023 446 435 - - - 2003 764 1 080 678 628 - - - 2004 512 985 758 769 20 44 2 181

10. POTASH

TABLE 10.1:WORLD POTASH RESERVES AND PRODUCTION, 2003

COUNTRY RESERVE BASEx PRODUCTIONx

Mt K2O % Rank kt K2O % Rank Canada 9 700 57,1 1 9 140 32,2 1 Russia 2 200 12,9 2 4 653 16,4 2 Belarus 1 000 5,9 3 4 229 14,9 3 Germany 850 5,0 4 3 563 12,6 4 Brazil 600 3,5 5 395 1,4 12 Israel 580 3,4 6 1 958 6,9 5 Jordan 581 3,4 7 1 177 4,1 6 China 450 2,7 8 440 1,6 10 USA 300 1,8 9 1 100 3,9 7 Spain 35 0,2 10 506 1,8 9 UK 30 0,2 11 621 2,2 8 Chile 50 0,3 12 420 1,5 11 Other 625 3,7 - 1 420 0,1 - Total 17 000 100,0 28 400 100,0

Sources: x USGS, 2004, pp 126 -127+ BGS, 2005, p 59

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TABLE 10.2:SOUTH AFRICA’S IMPORTS OF POTASH, 1997 – 2004

YEAR POTASSIUM POTASSIUM POTASSIUM TOTALCHLORIDE SULPHATE NITRATE

kt K2O R’000 kt K2O R’000 kt K2O R’000 kt K2O R’000 1997 137,2 114 905 17,3 30 018 18,1 52 323 172,6 197 246 1998 142,8 154 182 15,1 33 914 14,9 66 615 172,8 254 711 1999 255,8 176 707 16,1 19 539 33,1 65 803 305,0 262 049 2000 299,6 245 063 18,6 26 136 32,1 65 531 350,3 336 730 2001 243,5 231 835 25,8 42 257 40,5 94 951 309,8 369 043 2002 304,9 362 295 25,3 55 835 39,0 101 411 369,2 519 541 2003 245,8 197 952 31,2 47 621 35,2 80 245 312,2 325 818 2004 276,8 253 155 22,6 30 776 40,0 99 972 339,4 383 903

Source: RSA, Commissioner for South African Revenue Service, 1998 – 2005

Note: Up to 10 percent of the imports were probably for non-fertiliser uses

11. PYROPHYLLITE

TABLE 11: SOUTH AFRICA’S PRODUCTION AND EXPORTS OF PYROPHYLLITE, 1997 –2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Value (FOR) Mass Value (FOB)

Kt Kt R’000 R/t kt R’000 R/t 1997 10 610 ** 7 734 ** ** 11 520 ** 1998 11 500 ** 8 599 ** ** 11 679 ** 1999 13 277 ** 10 400 ** ** 16 468 ** 2000 11 989 ** 14 389 ** ** 25 409 ** 2001 14 047 ** 18 098 ** ** 18 607 ** 2002 15 587 ** 22 965 ** ** 14 584 ** 2003 14 350 ** 24 541 ** ** 8 876 ** 2004 35 152 ** 34 716 ** ** 11 683 **

Note: ** Classified

12. SALT

TABLE 12.1:SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OF SALT,1997 – 2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Value (FOR) Mass Value (FOB)

Kt Kt R’000 R/t kt R’000 R/t 1997 320 405 65 894 163 3 462 175 1998 352 480 68 552 143 2 242 121 1999 358 490 71 876 147 2 328 154 2000 346 487 74 543 153 1 119 113 2001 355 420 75 445 180 1 76 70 2002 429 450 82 770 184 <1 23 860 2003 441 467 84 113 180 1,2 140 114 2004 395 407 74 055 182 <1 70 168

Note: Unit values calculated before rounding of mass and rand values

169

TABLE 12.2:SOUTH AFRICA’S LOCAL SALES AND EXPORTS OF COARSE SALT, 1997 –2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Value (FOR) Mass Value (FOB)

Kt Kt R’000 R/t kt R’000 R/t 1997 280 23 647 85 1 106 75 1998 353 27 733 78 1 105 79 1999 365 31 120 85 2 189 101 2000 362 31 332 86 <1 90 94 2001 299 31 161 104 1 76 70 2002 315 36 132 115 <1 23 86 2003 386 43 222 112 <1 70 168 2004 357 42 572 119 - - -

Notes: Unit values calculated before rounding of mass and rand values< less than

TABLE 12.3:SOUTH AFRICA’S LOCAL SALES AND EXPORTS OF PROCESSED SALT, 1997– 2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Value (FOR) Mass Value (FOB)

Kt Kt R’000 R/t kt R’000 R/t 1997 125 42 246 337 1 356 293 1998 127 40 820 323 <1 137 281 1999 152 40 756 327 <1 140 525 2000 124 43 211 347 <1 29 324 2001 121 44 285 367 - - - 2002 135 46 638 345 - - - 2003 81 40 990 506 - - - 2004 49 31 315 639 - - -

Notes: Unit values calculated before rounding of mass and rand values< less than

TABLE 12.4:SOUTH AFRICA’S SALT MINES: EMPLOYMENT AND REMUNERATION, 1999 –2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 1999 959 18 844 2000 948 19 234 2001 880 21 662 2002 860 22 170 2003 864 26 566 2004 823 30 782

13. SILICA

TABLE 13.1:SOUTH AFRICA’S PRODUCTION, LOCAL SALES AND EXPORTS OF SILICA, 1997 – 2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Value (FOR) Mass Value (FOB)

Kt Kt R’000 R/t kt R’000 R/t 1997 2 463 2 345 112 578 48 930 298 320 1998 2 223 2 097 114 224 54 2 191 1 375 627 1999 2 170 1 872 107 776 58 2 558 731 286 2000 2 137 2 080 119 284 57 718 591 822 2001 2 127 2 211 130 650 59 482 636 1 320 2002 2 251 2 253 158 964 71 1 038 1 742 1 679 2003 2 311 2 070 165 096 80 884 1 199 1 356 2004 2 400 2 168 195 581 90 649 1 007 1 551

170

TABLE 13.2:SOUTH AFRICA’S SILICA MINES: EMPLOYMENT AND REMUNERATION, 1999– 2004

YEAR EMPLOYEES TOTAL REMUNERATION R’000 1999 630 26 888 2000 558 28 024 2001 550 28 957 2002 540 29 101 2003 565 33 468 2004 720 41 525

14. TALC

TABLE 14.1:SOUTH AFRICA’S PRODUCTION AND SALES OF TALC, 1997 – 2004

YEAR PRODUCTION LOCAL SALES EXPORT SALES Mass Value (FOR) Mass Value (FOB)

Kt Kt R’000 R/t kt R’000 R/t 1997 12 574 11 664 4 424 379 56 31 555 1998 11 328 8 649 3 137 363 104 58 558 1999 7 873 9 095 4 645 511 96 53 555 2000 5 600 8 869 4 541 512 40 24 588 2001 3 030 9 024 4 081 452 16 10 610 2002 2 511 12 395 4 552 367 - - - 2003 6 719 7 735 4 051 524 - - - 2004 8 115 8 134 4 365 537

TABLE 14.2:SOUTH AFRICA’S IMPORTS OF TALC, 1997 – 2004

YEAR IMPORTS Mass Value (FOB)

t R’000 R/t 1997 6 328 8 999 1 422 1998 6 670 9 996 1 499 1999 5 021 8 704 1 734 2000 4 213 8 130 1 930 2001 4 114 9 079 2 207 2002 5 522 2 519 456 2003 6 000 7 063 1 177 2004 5 480 11 713 2 137

Source: RSA, Commissioner for South African Revenue Service, 1998 – 2005

171

DIRECTORATE: MINERAL ECONOMICSRECENT PUBLICATIONS

(UPDATED 7/11/2005)

REVIEWS

South Africa’s Mineral Industry, 2003/2004South Africa – Invest in an Intense and Diverse Mineral Industry (2005)

INFORMATION CIRCULAR

MB Bulletin (Tri-mester)

STATISTICS

Mineral Production and Sales Statistics (Monthly and Annually)

BULLETINS

B1/2004 Minerals – South Africa: Statistical Tables 1982-2003

REPORTS

R37/2002: The Tantalum Market (A micro-economic analysis)

R38/2002: A Review of the Dimension Stone Industry in South Africa, 2002.

R39/2005: Investment in South Africa’s Mineral Sector, 2005

R40/2002: Possible Financial Sources for Small-to- Junior Empowerment Mining Companies

R41/2003: An Overview of South Africa’s Mineral Based Fertilizers, 2003.

R42/2003: An Overview of South Africa’s Primary Industrial Mineral Imports and Exports,2003.

R43/2003: A Review of the Dolomite and Limestone Industry in South Africa

R44/2004: The Silica Industry in the Republic of South Africa

R45/2005: An Overview of the South African Iron, Manganese and Steel Industry during theperiod 1984-2003

R46/2005: Bentonite, Pyrophyllite and Talc in SA

R47/2005: The Kaolin Industry in South Africa, 2005

R48/2005: South African Ferrous Minerals Production Trends, 1994-2003

R49/2005: Dolomite and Limestone in SA: Supply and Demand, 2005

H2/2004: Precious Metals Trade - General Information Handbook, 2004.

DIRECTORIES

D1/2005: Operating Mines and Quarries and Mineral Processing Plants in the Republic ofSouth Africa, (2005)

D2/2005: Operating and Developing Coal Mines in the Republic of South Africa, (2005)

172

D3/2003: Operating Gold Mines and Recovery Plants in the RSA, (2003)

D4/2002: Salt Producers in the Republic of South Africa, (2002)

D6/2003: Platinum-group Metal Mines in South Africa, (2003)

D7/2004: South African Diamond Handbook and Operating Diamond Mines Directory (2004)

D8/2005: Ferrous Mineral Commodities Produced in the Republic of South Africa, (2005)

D9/2005: Producers of Dimension Stone in South Africa, (2005)

D10/2004: Producers of Nonferrous Metal Commodities in South Africa, (2004)

D11/2004: Producers of Industrial Mineral Commodities in South Africa, (2004)

D12/2005: Operating and Developing Black Empowerment Mining Companies in the Republic of South Africa, (2005)

D13/2004: African Mining – Mining Companies Government Department and RelatedOrganizations

D14/2003: Producers of Sand and Aggregate in the RSA, (2003)

173

USEFUL ADDRESSES

DEPARTMENT OF MINERALS AND ENERGY

HEAD OFFICE

The Director-General www.dme.gov.za Mineralia CentrePrivate Bag X59 234 Visagie Street0001 Pretoria Pretoria

Tel: (012) 317 8000Telefax (012) 320 4327

BRANCHES

Mine Health and Safety Inspectorate www.dme.gov.za/mhs

Energy Branch www.dme.gov.za/energy

Mineral Development Branch www.dme.gov.za/minerals

MINERAL DEVELOPMENT REGIONAL DIRECTORATES

The Regional Manager: Mineral Regulation - Eastern CapePrivate Bag X6076 Auto and General Towers 6000 Port Elizabeth 6th, 13th , 14th Floor

190 Govan Mbeki AvenuePort Elizabeth

Tel: (041) 585 3862/4/6Telefax: (041) 585 3881

The Regional Manager: Mineral Regulation - Free StatePrivate Bag X33 Prestasi Building9460 Welkom cnr Ryk and De Kaap Streets

Welkom

Tel: (057) 391 1300Telefax: (057) 352 2270

The Regional Manager: Mineral Regulation – GautengPrivate Bag X5 209 Smit Street2017 Braamfontein Braamfontein

2107

Tel: (011) 358 9700Telefax: (011) 339 1858

The Regional Manager: Mineral Regulation – KwaZulu/NatalPrivate Bag X2014 Talana Building3000 Dundee 26 Beaconsfield Street

Dundee

Tel: (034) 212 1807Telefax: (034) 212 2721

174

The Regional Manager: Mineral Regulation – MpumalangaPrivate Bag X7279 ReceiverofRevenue Building1035 Witbank cnr Paul Kruger and Botha Avenue

Witbank

Tel: (013) 656 1448Telefax: (013) 690 3288

The Regional Manager: Mineral Regulation - Northern CapePrivate Bag X6093 29-31 Currey Street8300 Kimberley Kimberley

Tel: (053) 830 0800Telefax: (053) 832 5631

The Regional Manager: Mineral Regulation - Northern ProvincePrivate Bag X9467 101 Dorp Street0700 Polokwane Polokwane

Tel: (015) 287 4700Telefax: (015) 287 4729

The Regional Manager: Mineral Regulation - North-WestPrivate Bag A1 Senwes Hoofkantoor, No 12570 Klerksdorp Charl De Klerk Straat

Klerksdorp

Tel: (018) 464 1631Telefax: (018) 462 9036

The Regional Manager: Mineral Regulation - Western CapePrivate Bag X9 Customs House, 4th Floor8012 Roggebaai Lower Heerengracht

ForeshoreCape Town

Tel: (021) 419 6105Telefax: (021) 419 6260

The Regional Manager: Mineral Regulation – RustenburgPO Box 150 Tlhapane House0309 Tlhabane Tlhapane Shopping Centre

Tlhapane

Tel: (014) 565 6417Telefax: (014) 565 6424

The Regional Manager: Mineral Regulation – SpringbokPrivate Bag x14 Andia Building8240 Springbok Voortrekker Street

Springbok

Tel: (027) 712 2546Telefax: (027) 712 1959

175

DEPARTMENT OF TRADE AND INDUSTRY

HEAD OFFICE

Department of Trade and IndustryPrivate Bag X84 www.dti.gov.za DTI Campus – Block E0001 Pretoria Cnr Esselen & Meintjies Streets

Sunnyside, Pretoria

Tel: (012) 394-3612Telefax: (012) 394-4612

PARASTATAL ORGANISATIONS

Council for GeosciencePrivate Bag X112 www.geoscience.org.za 280 Pretoria RoadSilverton Silverton0001 Pretoria Pretoria

Tel: (012) 841 1911Telefax: (012) 841 1221

CSIRP O Box 395 www.csir.co.za Meiring Naude RoadBrummeria Brummeria0001 Pretoria Pretoria, 0184

Tel: (012) 841 2911Telefax (012) 349 1153

CSIR - Mining Technology (Miningtek)P O Box 91230 www.csir.co.za/miningtek cnr Carlow & Rustenburg Avenue2006 Auckland Park Mellville

Johannesburg

Tel: (011) 358 0000Telefax: (011) 726 5405

EskomP O Box 1091 www.eskom.co.za Megawatt Park2000 Johannesburg Maxwell Drive

Sunninghill Ext 3Sandton

Tel: (011) 800 8111Telefax: (011) 800 4299

MintekPrivate Bag X3015 www.mintek.co.za 200 Hans Strijdom Drive2125 Randburg Randburg

Tel: (011) 709 4111Telefax: (011) 793 2413

Petro SAPrivate Bag X1 www.petrosa.co.za Portswood Square, Dock RoadV & A Waterfront V & A Waterfront8002, Cape Town Cape Town, 8001

Tel: (021) 417 3000Telefax: (021) 417 3144

176

NECSAP O Box 582 www.necsa.co.za Church Street, West Extension0001 Pretoria Pelindaba, Brits District

Tel: (012) 305 4911Telefax: (012) 305 3111

The Industrial Development Corporation of SA Ltd(IDC) www.idc.co.za 19 Fredman DriveP O Box 784055 Sandton2146 Sandton

Tel: (011) 269 3000Telefax: (011) 269 3116

The South African Diamond BoardP O Box 16001 5th Floor2028 Doornfontein S A Diamond Centre

240 Commissioner StreetJohannesburg

Tel: (011) 334 8980/6Telefax: (011) 334 8898

OTHER MINERAL-RELATED ORGANISATIONS

Aggregate and Sand Producers Association oF South Africa (ASPASA)PO Box 61809 www.aspasa.co.za Chamber of Mines Building2107 Marshalltown 5 Hollard Street

MarshalltownJohannesburg

Tel: (011) 498 7265Telefax: (011) 498 7269

Chamber of Mines of South AfricaPO Box 61809 www.bullion.org.za Cnr Sour & 71 Marshall Street2107 Marshalltown Marshalltown

Johannesburg

Tel: (011) 498 7100Telefax: (011) 834 1884

Copper Development Association (Pty) LtdP O Box 14785 www.copper.co.za 53 Rendell Road1422 Wadeville Wadeville

Germiston

Tel: (011) 824 3712Telefax: (011) 824 3120

Federation of SA Gem & Mineralogical SocietiesP O Box 17273 www.fosagams.co.za 30 Van Wouw Street0027 Groenkloof Groenkloof

0181

Tel: (012) 460 7562Telefax: n.a

177

Ferro Alloy Producers Association (FAPA)P O Box 1338 www.seissa.co.za Metal Industries House2000 Johannesburg 42 Anderson Street

Johannesburg

Tel: (011) 833 6033Telefax: (011) 838 1522

Metal Merchants Association 92 Buckingham AvenuePO Box 413299 Craighall Park2024 Craighall

Tel: (011) 788 9587Telefax: (011) 788 9587

Metorex (Pty) LtdP O Box 2814 www.metorexgroup.com 2nd Floor2132 Saxonwold Cradock Heights

21 Cradock AvenueRosebank

Tel: (011) 880 3155Telefax: (011) 880 3322

South Africa Stainless Steel Development Association (SASSDA)P O Box 4479 www.sassda.co.za Mutual Place Building, 2128 Rivonia 3rd Floor

Cnr Rivonia Boulevard & Mutual RoadRivonia

Tel: (011) 803 5610Telefax: (011) 803 2011

Steel and Engineering Industries Federation of SA (Seifsa)P O Box 1338 www.seifsa.co.za Metal Industries House2000 Johannesburg 42 Anderson Street

Johannesburg

Tel: (011) 833 6033Telefax: (011) 838 1522

The Institute of Mine Surveyors of SAP O Box 62339 www.ims.org.za Chamber of Mines Building, 2107 Marshalltown Room 509

5 Hollard StreetMarshalltown

Tel: (011) 498 7682Telefax: (011) 498 7681

178

The South African Institute of Mining and MetallurgyP O Box 61127 www.saimm.co.za Chamber of Mines Building, 2107 Marshalltown 5th Floor

5 Hollard StreetMarshalltown

Tel: (011) 834 1273Telefax: (011) 838 5923/ 833 8156

SELECTED SOUTH AFRICAN MINING COMPANIES

Anglo American Plc (South African Corporate Office)P O Box 61587 www.angloamerican.co.uk 44 Main Street2107 Marshalltown Marshalltown

Johannesburg

Tel: (011) 638 9111Telefax: (011) 638 2455

Anglo Platinum LtdP O Box 62179 www.angloplatinum.com 55 Marshall Street2107 Marshall town Marshalltown

Tel: (011) 373 6111Telefax: (011) 373-5111

Anglogold AshantiPO Box 62117 www.anglogold.com 11 Diagonal Street2107 Marshalltown www.anglogoldashanti.com Johannesburg

Tel: (011) 637 6000Telefax: (011) 637 6624

The Associated Manganese Mines Of South Africa LimitedPO Box 783580 www.avmin.co.za 24 Impala Road2146 Sandton Chislehurston

Sandton

Tel: (011) 779 1000Telefax: (011) 779 1017

Billiton plc (African Regional Office)P O Box 61820 www.billiton.com 6 Hollard Street2107 Marshalltown Johannesburg

2001

Tel: (011) 376 9111Telefax (011) 838 4716

De Beers GroupPrivate Bag x01 www.debeersgroup.com Cnr Crownwood & Diamond Drive2135 Southdale Crown Mines

Tel: (011) 374 7000Telefax: (011) 374 7700

179

Durban Roodepoort Deep, LimitedPO Box 390 www.drdgold.com EBSCO House 41700 Maraisburg 299 Pendoring Ave

Blackheath, Randburg

Tel: (011) 219 8700Telefax: (011) 476 2637

Foskor LimitedPO Box 1 27 Selati Weg1390 Phalaborwa Phalaborwa

Tel: (015) 789 2006Telefax: (015) 781 5861

Gold Fields LimitedPostnet Suite 252 www.goldfields.co.za 24 St Andrews RoadPrivate Bag X30500 Parktown2014 Houghton Johannesburg

Tel: (011) 644 2400Telefax: (011) 484 0626

G&W Base and Industrial Minerals (Pty) LtdPO Box 14052 www.gwbase.co.za 155 Immelman Road1422 Wadeville Wadeville

Tel: (011) 824 2710Telefax: (011) 824 2721 / 2720

Harmony Gold Mining Company LtdPO Box 2 www.harmony.co.za Block B, Randfontein Office Park1760 Randfontein Cnr of Main Reef Rd & Ward Ave

Randfontein

Tel: (011) 411 2000Telefax: (011) 692 3879

Hernic Ferrochrome (Pty) LtdPO Box 4534 www.hernic.co.za 103 De Kroon0250 Brits Brits

Tel: (012) 381 1100Telefax: (012) 381 1111

Impala Platinum Holdings LtdPO Box 61386 www.implats.co.za Old Trafford 42107 Marshalltown Isle of Houghton

Boundary RoadHoughton

Tel: (011) 481 3900Telefax: (011) 484 0254

Mittal Steel SAP O Box 2 www.mittalsteel.com Delfos Bldv1900 Vanderbijlpark Vanderbijlpark

Tel: (016) 889 2488Telefax: (016) 889-9111

180

Lonmin PlatinumPO Box 98811 www.lonmin.com Northdowns2152 Sloane Park 17 Georgian Crescent

Bryanston EastJohannesburg

Tel: (011) 516 1300Telefax: (011) 516 1310

Marlin Corporation LtdPO Box 60043 www.marlin.co.za 21 Impala Road2010 Benmore Chiselhurston

Sandton

Tel: (011) 775 5000Telefax: (011) 883 3601

Palabora Mining Company LtdPO Box 65 www.palabora.co.za Copper Road1390 Phalaborwa Phalaborwa

Tel: (015) 780 2000/2911Telefax: (015) 781 0448

SamancorP O Box 61820 www.bhpbilliton.com 6 Hollard Street2107 Marshalltown cnr Hollard & Marshall Street

Johannesburg

Tel: (011) 376 9111Telefax: (011) 838 4716

SamrecPO Box 8118 www.imerys.com Sanlam Ewigt 2590046 Centurion West Street

Centurion

Tel: (012) 643 5880Telefax: (011) 643 1966

SasolP O Box 5486 www.sasol.com 1 Sturdee Avenue2000 Johannesburg Rosebank

2196

Tel: (011) 441 3111Telefax: (011) 788 5092

Xstrata SA (Pty) LtdPrivate Bag X 82288 www.xstrata.com 44 Vanadium Street0300 Rustenburg Rustenburg

0300

Tel: (014) 590 6000Telefax: (014) 590 6002

181

TERTIARY INSTITUTIONS

Universities - Training in Metallurgy and Minerals Processing:

1. University of the Witwatersrand

School of Chemical and Metallurgical EngineeringContact Persons: Prof H Potgieter hermanp@prme.wits.ac.za

Mrs Mala Raghununan mala.r@prme.wits.ac.za

2. University of Pretoria

Department of Metallurgical Engineering and Materials ScienceContact Person: Prof Chris Pistorius pistori@postino.up.ac.za

3. University of Cape Town

Department of Chemical EngineeringContact Person: Prof Cyril O’Connor ctoc@chemeng.uct.ac.za

Department of Mechanical Engineering, Materials Science ProgramContact Person: Prof B Tait btait@ebe.uct.ac.za

4. University of Stellenbosch

Department of Process EngineeringInstitute for Mineral Processing and Intelligent Process SystemsDirector: Prof C Aldrich Tel: (021) 808-4487 /4712

Universities – Technology and Comprehensive:

1. Tshwane University of Technology

Department of Chemical and Metallurgical EngineeringContact Person: Dr Hilda Chikwanda ChikwandaHK@tut.ac.za

2. University of Johannesburg

Department of Extractive MetallurgyContact Person: Mr. Des Bell dbell@mail.twr.ac.za

Department of Engineering MetallurgyContact Person: Dr. Didier Nyembe didinyem@mail.twr.ac.za

3. Vaal University of Technology

Department of Metallurgical EngineeringContact Person: Mr Frans du Toit fransd@vut.ac.za

182

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