Feeding the growth of Asia:

Emerging sources of manganese ore

Kevin Fowkes

Ferroalloy Industry ConsultantFerroalloy Industry Consultantwww.kevinfowkes.com

29th March, 2011

Global demand for manganese ore

(million tonnes contained Mn)

Global demand for Mn ore has doubled in the last 10

years; Chinese share of demand has more than doubled

10

12

14

16 13.9

Mt

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0

2

4

6

8

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Rest of world

China

24%

52%

7.4

Mt

Manganese demand will grow in line with

steel output, possibly faster

• All steel contains manganese – there is no effective substitute for its role in

de-sulphurising steel

• Manganese has become increasingly important for its alloying properties

• Key trends in both developing and developed world have been positive for

consumption of manganese per tonne of steel:

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consumption of manganese per tonne of steel:

− Steel demand growth in China has been infrastructure / construction-

led, hence based on structural steels which are generally high in Mn

− Trends towards higher strength flat steels in the automotive sector has

increased Mn consumption per tonne of steel in Europe, USA, Japan

• Average Mn content of steel has risen from 0.70% in 2000 to 0.77% in 2010

Global demand for manganese ore

(million tonnes contained Mn)

Base case scenarios for steel consumption growth

indicate demand for 18 million tpy of Mn ore by 2020

14

16

18

20

13.9

Mt

18

Mt

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0

2

4

6

8

10

12

14

Rest of world

China

24%

52%

7.4

Mt

Global production of manganese ore

There has been a significant shift in manganese ore

supply structure, in response to the growth of demand

80%

90%

100%

Other

Ghana

Kazakhstan

Total production

11.5 MtTotal production

14.1 Mt

3% 8%

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0%

10%

20%

30%

40%

50%

60%

70%

2005 2010

Kazakhstan

Ukraine

India

Brazil

Gabon

China

Australia

South Africa17%25%

23%16%

Global production of manganese ore

There has been a significant shift in manganese ore

supply, in response to the growth of demand

80%

90%

100% 3% 8%

Key changes:

Big increase in supply from non-

traditional sources

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0%

10%

20%

30%

40%

50%

60%

70%

2005 2010

17%25%

23%16%

Supply of ore from Chinese

mines is diminishing

Significant increase in supply

from South Africa

South

Africa

South

Africa

World Mn ore

reserves

19%

World Mn ore

resources

South Africa accounts for 75% of identified global

resources of manganese ore

Africa

Other

countries

Africa

Other

countries

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Source: USGS

75%

Most Mn ore in S.Africa is in the Kalahari basin. New

operations will be based on lower grade carbonate ore

High-grade ore, up to 48% Mn

Mostly controlled by established

producers (Assmang and BHP Billiton)

Kalahari

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40 km

Lower-grade carbonate ores,

avg. 34-38% Mn

Vast undeveloped resources

Kalahari

manganese

basin

SOUTH AFRICA

MAP OF THE KALAHARI MANGANESE BASIN

Many of the new South African Mn ore entrants are

backed by leading Mn and steel industry groups

• United Manganese of Kalahari – already in productionPart owned by Renova, which owns Transalloys smelter

In production since 2008, now producing at close to full capacity

• Kalagadi Manganese – in developmentPart owned by ArcelorMittal

Underground mine in Kalahari plus smelter in Coega

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• Asia Minerals – in developmentExisting smelters in China

• Tsipi – in developmentShareholders include Privat, OM Holdings and Pallinghurst

• Amari – in developmentSupported by Sinosteel

The leading new entants all aim to begin production

between 2011-2013

South African production of manganese ore

(million tonnes contained Mn)

If the majority of planned projects go ahead, South

African manganese ore output could double by 2020...

4

5

6

7

3.5 Mt

6 Mt*

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0

1

2

3

4 3.5 Mt

2.0 Mt1.5 Mt

* equates to around 15 million tonnes on a gross wet tonne basis

... but Mn ore exports from South Africa will be

constrained by rail and port capacity for the next decade

• Manganese ore for export from the Kalahari mines travels to Port Elizabeth

down a rail line that is at full capacity. The manganese export terminal at the

port is also capacity constrained

• This has already leading to rationing of rail paths between producers, with

increasing pressure from the new mines coming on-stream

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increasing pressure from the new mines coming on-stream

• Current plans propose a new rail link and port terminal by ~2017. This may

make it challenging for new entrants to ramp up as planned from 2011-13

• Trucking of Mn ore from the Kalahari has risen substantially and will

inevitably increase further. This comes with its own constraints in terms of

cost, road/truck capacity and environmental/safety pressures

27%23%

“Other” sources of Mn ore, 2010:

Myanmar

245,000t*

Others

217,000t*

“Other” sources now make up 8% of Mn ore output.

75% of this came from six particular countries

25%11%

5%

4%

5%

*contained Mn basis

Malaysia

231,000t*Indonesia

105,000t*

Cote d’Ivoire

44,000t*

Vietnam

35,000t*

Namibia

45,000t*

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Production of manganese ore

(thousand tonnes contained Mn)

These six countries have increased output

by 600,000 tonnes since 2006

500

600

700

800

Namibia

Vietnam

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0

100

200

300

400

500 Vietnam

Cote d'Ivoire

Indonesia

Malaysia

Myanmar

• Key suppliers have so far been Myanmar and Malaysia. This is low grade ore

<35% Mn – a relatively cheap direct replacement for depleting Chinese

domestic ores. Vietnam ore similar to this

• Namibia, Cote d’Ivoire and Indonesia – higher grade ore

Observations on emerging Mn producing countries

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• Typically open pit, very small scale operations, low mining cost

• Transportation is the largest cost element

• Myanmar and Vietnam truck ore into China

• Cote d’Ivoire, Namibia, Malaysia and Indonesia – many operations becoming

large enough to use bulk shipping

• Many producers are actively supported by consumers in China, who are eager

to find competitive replacement for low-grade Chinese domestic ore

• Production costs are low

• Most deposits have not been properly explored

Will Mn ore production in these emerging countries

continue to increase? Most likely yes

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• Most deposits have not been properly explored

• Partners may invest in exploration, expanding production and overcoming

logistical problems

• Operations subject to external/political factors in unstable countries

• Look out for more new entrants, especially in Africa – eg Zambia, Burkina

Faso, D.R.Congo

Chinese consumption of manganese ore

China got 70% of its Mn ore from imports in 2010,

compared with 30% ten years ago

70%

80%

90%

100%

Imported

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0%

10%

20%

30%

40%

50%

60%

70%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Domestic

• Chinese Mn ore remains plentiful, but grades and quality have declined

sharply

• Usefulness of Chinese domestic ore in ferroalloy production becoming

increasingly limited – much is now only suitable for producing Mn metal

China got 70% of its Mn ore from imports in 2010,

compared with 30% ten years ago

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• Import penetration will continue to increase – high grade ores from

established sources, lower grade ores from emerging sources

• Expect MRS production to increase in China – a way of utilising poor

domestic ores for ferroalloy production

• Many mines have stockpiles of “fines” or “low grade” product which they

have considered unprofitable or unmarketable

• Sintering of fines at the mine site – needs capital investment and carbon

• Some low grade ores can be jigged up to a marketable quality

There is much potential for increasing Mn ore

output by increasing recoveries

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• Some low grade ores can be jigged up to a marketable quality

• MRS could be a solution for high Fe ores – but need a smelter close by

• Transportation cost is the key

• South Africa has 75% of known global manganese resources – it will have to

play a big part in meeting increased global manganese demand

• New entrants in South Africa coming on stream but will likely be constrained

in the medium term by logistical bottlenecks

• Supply of ore from non-traditional producing countries likely to continue to

To conclude...

How will Mn ore supply meet increasing demand?

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• Supply of ore from non-traditional producing countries likely to continue to

increase

• Most new entrants will supply lower grade – future high grade supply largely

dependent on ability of established producers to expand

• Potential for increased recoveries and MRS – especially if prices rise

Thank you for your attention today