Jun 23, 2010 - In a remote area of Mozambique's northern coast, one of the largest mining projects of its kind is nearing full production. But it has not reached this point without a few setbacks.
Kenmare Resources' Moma mineral sands venture represents the biggest mining investment completed in the country to date, involving a total outlay so far of about $540m.
Already gearing up for a 50 per cent expansion in output, it is aimed to be one of the lowest-cost world suppliers of titanium-bearing minerals - ilmenite and rutile and the high-value mineral zircon. The first two are mainly used to make titanium dioxide pigment a whitener for paints, paper, plastics, cosmetics, toothpaste and food items while zircon has important uses in ceramic glazes and refractory metals.
The mine concession, to the northeast of the town of Moma, is the main focus of Kenmare, an Irish-based company traded on both the Dublin and London stock exchanges.
Reserves in its licence area were initially put at 14m tonnes, enough to last 20 years. But the company now cites a figure of more than 20m tonnes of proven and probable ilmenite reserves, and larger deposits just to the south add further estimated resources of 140m tonnes, suggesting a potential life of 100-150 years.
As output built up last year, an unexpectedly sharp fall in demand and world prices raised questions about the venture's prospects. The company showed a pre-tax loss of $30m for 2009, its second year of exports from Moma. BHP Billiton, the Anglo-Australian mining giant, meanwhile pulled out of a huge inland mineral sands project in southern Mozambique, for which the government is expected to seek a fresh investor.
However, the market has since strengthened and Kenmare is pressing ahead with its expansion in expectation of a future shortfall in world supply.
Mozambique was known to possess heavy mineral sands since colonial times, but they were never exploited until the Moma project started up. The inaccessibility of the area presented daunting logistical obstacles. Heavy equipment and almost all construction supplies had to be landed on the beach. The project required building roads, accommodation, a landing strip and, since the area was unconnected to the electricity grid, a 170-kilometre power line. The minerals are shipped from a dedicated jetty, where they are loaded on to a barge to be transferred at sea to an ocean-going vessel.
A village of mud and thatch houses had to be razed and its inhabitants rehoused. The company has taken on a social development plan for the immediate area, but has faced an influx of new arrivals. It is engaged in improving education and health facilities. A doctor flies in every two weeks.
"At the moment the nearest health post is 12 kilometres away, and you've got to get on a canoe to get to it," says Gareth Clifton, Kenmare's Mozambique manager. He warns that the company cannot replace basic public services throughout the area. "We're not the government," he says.
He describes the mine's impact on the environment as "fairly benign". The operation involves dredging an artificial pond, which is gradually moved through the area together with a concentration plant floating on pontoons. The land left behind is then rehabilitated. No chemicals are used in the process of separating the minerals.
Raising local skills levels is one the hardest challenges. More than a third of the 540 full-time employees come from outside the area including about 120 expatriates, mostly South Africans and work on shifts of six weeks on and two weeks off, being ferried in and out by charter aircraft.
The company has promoted spin-off activities for local communities, ranging from an egg farm to a sewing workshop making calico bags for mineral samples.
Despite the practical difficulties, Kenmare believes it has advantages over its nearest competitors, with a smaller investment outlay than Rio Tinto at a similar project in Madagascar and lower energy and transport costs than Rio Tinto and BHP Billiton's long-running mineral sands joint venture at Richards Bay in South Africa.
Destined mainly for the US and Europe, the minerals produced at Moma already ranked last year as the country's sixth largest export, after aluminium, electricity, tobacco, sugar and gas.
Kenmare is set to invest another $200m, after recently raising $270m in new equity through a placing and open offer. Its plan is to exploit its current reserve at a faster rate, with a phased transfer to the new deposits from about 2018. Annual output of ilmenite, the bulk of total volume, is set to rise from 800,000 to 1.2m tonnes. Production of zircon is due to reach the initial target by the end of the year. But the start-up for rutile has been held back because of problems with equipment bought from a closed mine in Australia, the leading producer.
Analysts expect the Moma venture to supply about 7 per cent of the world market this year.
Kenmare Resources' Moma mineral sands venture represents the biggest mining investment completed in the country to date, involving a total outlay so far of about $540m.
Already gearing up for a 50 per cent expansion in output, it is aimed to be one of the lowest-cost world suppliers of titanium-bearing minerals - ilmenite and rutile and the high-value mineral zircon. The first two are mainly used to make titanium dioxide pigment a whitener for paints, paper, plastics, cosmetics, toothpaste and food items while zircon has important uses in ceramic glazes and refractory metals.
The mine concession, to the northeast of the town of Moma, is the main focus of Kenmare, an Irish-based company traded on both the Dublin and London stock exchanges.
Reserves in its licence area were initially put at 14m tonnes, enough to last 20 years. But the company now cites a figure of more than 20m tonnes of proven and probable ilmenite reserves, and larger deposits just to the south add further estimated resources of 140m tonnes, suggesting a potential life of 100-150 years.
As output built up last year, an unexpectedly sharp fall in demand and world prices raised questions about the venture's prospects. The company showed a pre-tax loss of $30m for 2009, its second year of exports from Moma. BHP Billiton, the Anglo-Australian mining giant, meanwhile pulled out of a huge inland mineral sands project in southern Mozambique, for which the government is expected to seek a fresh investor.
However, the market has since strengthened and Kenmare is pressing ahead with its expansion in expectation of a future shortfall in world supply.
Mozambique was known to possess heavy mineral sands since colonial times, but they were never exploited until the Moma project started up. The inaccessibility of the area presented daunting logistical obstacles. Heavy equipment and almost all construction supplies had to be landed on the beach. The project required building roads, accommodation, a landing strip and, since the area was unconnected to the electricity grid, a 170-kilometre power line. The minerals are shipped from a dedicated jetty, where they are loaded on to a barge to be transferred at sea to an ocean-going vessel.
A village of mud and thatch houses had to be razed and its inhabitants rehoused. The company has taken on a social development plan for the immediate area, but has faced an influx of new arrivals. It is engaged in improving education and health facilities. A doctor flies in every two weeks.
"At the moment the nearest health post is 12 kilometres away, and you've got to get on a canoe to get to it," says Gareth Clifton, Kenmare's Mozambique manager. He warns that the company cannot replace basic public services throughout the area. "We're not the government," he says.
He describes the mine's impact on the environment as "fairly benign". The operation involves dredging an artificial pond, which is gradually moved through the area together with a concentration plant floating on pontoons. The land left behind is then rehabilitated. No chemicals are used in the process of separating the minerals.
Raising local skills levels is one the hardest challenges. More than a third of the 540 full-time employees come from outside the area including about 120 expatriates, mostly South Africans and work on shifts of six weeks on and two weeks off, being ferried in and out by charter aircraft.
The company has promoted spin-off activities for local communities, ranging from an egg farm to a sewing workshop making calico bags for mineral samples.
Despite the practical difficulties, Kenmare believes it has advantages over its nearest competitors, with a smaller investment outlay than Rio Tinto at a similar project in Madagascar and lower energy and transport costs than Rio Tinto and BHP Billiton's long-running mineral sands joint venture at Richards Bay in South Africa.
Destined mainly for the US and Europe, the minerals produced at Moma already ranked last year as the country's sixth largest export, after aluminium, electricity, tobacco, sugar and gas.
Kenmare is set to invest another $200m, after recently raising $270m in new equity through a placing and open offer. Its plan is to exploit its current reserve at a faster rate, with a phased transfer to the new deposits from about 2018. Annual output of ilmenite, the bulk of total volume, is set to rise from 800,000 to 1.2m tonnes. Production of zircon is due to reach the initial target by the end of the year. But the start-up for rutile has been held back because of problems with equipment bought from a closed mine in Australia, the leading producer.
Analysts expect the Moma venture to supply about 7 per cent of the world market this year.
