Righto money. Mine is another in Darva special
from the lats. Now you JD, you're telling me
this fellow is he's bought coal assets in South Africa?
I'm thinking coal. I'm thinking South Africa.
That just reminds me of CRE insurance coal experts and
African experts in the one building.
It's the logical connection, isn't it?
Adam Batista is the coal expert. Tari is the African expert and
when they're thinking they're not an expert, Dave Harrison
walks around and says you're a fucking expert.
That's the that is the office morale.
So. That's the thing.
They're experts in every geography, in every commodity,
aren't they? And construction and
construction. Did I just hear a website
slogan? Good work JD, thanks, looking
forward to seeing him. The savvy now.
JD who have we got for this Indaba episode?
So this is our lucky last interview from Indaba Maddie.
We are sharing a chat that we did with a guy called Wusslat
Bao Glue. He, he runs a private business.
So you probably have never heard of them called Mina in South
Africa. And there's, there's a couple
reasons why we wanted to, to chat to him.
Obviously we were in South Africa.
We'd been in the country for over a week at that point and we
were very curious in how mining is done.
You know, there's a huge mining history in the country across
lots of commodities. So, you know, you hear lots
about S com, the power utilities about, you know, permits,
rights, all these kind of things, ownership and how it's
sort of structured and the sort of challenges the industry has
faced over the past few decades. So we thought why not speak with
someone who actually operates there, who runs mining
companies, who has bought significant assets from the
likes of Rio Tinto, coal assets you mentioned in the intro
there, Maddie. So that plus a whole host of
other reasons running a private business versus running a public
company. We thought for all these kind of
reasons why not just get someone that's done it and is continuing
to to do it in that, in that geography, in that part of the
world and how it sort of differentiates from operating in
Australia. And yeah, this is the the result
of that and came to share it with the money miners.
JD, you can't make the intros too good 'cause now I want to go
past this. That was sensational.
Not too sure about that, but yeah, let's let's share the chat
with this let and hopefully the money miners pick up a a thing
or two about operating in a different part of the world like
Trev and I did from the the conversation.
Right, let's repeat. JD, we're at in Darba and we're,
we're sitting down with Wuslat, who runs a, a mining investment
and, and mining company that I think our audience would
probably be unfamiliar with. But that's not, that's not
because you don't have a, you know, a decent sized footprint.
It's just that you're private and you focus in South Africa
and you also focus on commodities that people, people
are shy to talk about too in other ways.
But thank you so much for, for sitting down.
We're keen to talk about Minar. We're keen to talk about, you
know, how you're seeing the investment landscape in South
Africa and especially from, from your specific Yeah point in the
world. Yeah, thank you, Travis.
Look, South Africa is action a great jurisdiction for mining.
If you look at what we are rich in South Africa, especially
PGMS, Chrome, manganese, coal, anthracite, iron ore, obviously
it's not as sizable as as Australia in terms of iron ore,
but we got a, we got some big assets, especially Kumba is, is
massive like they do. Again, it's relevant in terms of
Chrome, in terms of iron ore. But when it comes to manganese
and Chrome, we are the largest, We got the largest ores deposits
in the, in the world and we are the largest producers in the
world. We are competing with Australia
in terms of in terms of manganese.
But I believe Australian mines are, are coming to an end at
some point. And Sarav Castle has got massive
manganese deposits. We've got Site 32 invested in
South Africa heavily in terms of manganese.
And we also have Asmang. It's a big company.
They, they, they've got large operations, but it's a very
vibrant industry in terms of producing manganese.
PGM is obviously we are the again, largest producer in the
world. So all these, if you look at the
companies that are playing the investment business in South
Africa, they, they invest in South Africa, that shows that
this country is actually something good, which is
attracting people. And the one of the most
important that we have here, we got rule of law.
So we got democracy, we got rule of law, we got freedom of
speech. So we got security of tenure.
So people come and invest and, and because investors don't like
noise and we don't have noise inside Africa, people are
focusing on the investments. You know, the people are
focusing on like optimization and their priorities.
Yes, we got certain rules like like economic employment, which
is good to address the past like imbalance.
And as long as you comply, government is very friendly,
minister is very friendly and minister of minor resources.
And I think it's a, it's a really good jurisdiction and
it's something, it's very important jurisdiction for the
mining companies because like I said, certain commodities,
certain minerals, we're really, we're really big and we're
really, we've got really large deposits.
For a second, we just double click on that point you just
mentioned with the the black empowerment groups.
I think it's really important for the Aussie listeners to
understand and a sort of 32nd recap.
You see these companies, you know, listed here that might be
at an asset level, at a company level, but there'll be a 26%
interest. Can you just quickly highlight
that? And then I think the the follow
on will be the other look. We looked at also different
jurisdictions to, to sort of like to, to invest in
opportunities in different jurisdictions and Latin America
have got similar, similar rules in you can find the same thing
in in Middle East. Like if you invest, you want to
invest in Saudi Arabia, you find certain rules like that you need
to get a partner, a Saudi local partner in, in South Africa.
This has been ongoing for for a long time like they to be able
to get a license in mining, mining, right, especially you
need to get a 26% B partner, which is owned by a company
which is owned and controlled by historically disadvantaged S
Africans. So I look at from from this
perspective, like for instance, if you look at my business, I
mean, I managed to be successful because of the B rules, B laws,
because I grew my business with my partners, with my, with my
local South African partners. So some people can or might see
it is a burden, but I actually see it as an opportunity.
For listed companies, obviously it's a different story, but for
listed companies, there are a lot of actually ease that
government creates. For instance, if you want to
sell your company, you don't need to get the company's
shares, You don't need to get menaces approved.
So it's not like something that's an obstacle to do
business in South Africa. Yes, 26% shareholding will be
given to a local business, but that local business or local
entrepreneurs, they add value to your business.
They help you to grow your business.
They help you to, to get like to get certain things for the
Transnet, our, our railway lines, our ports, you know,
wherever state is involved, they go and unlock the opportunity.
So it's not all doom and gloom. It depends on from where you're
looking at. Like your angle, I am looking at
it as a positive thing, but some people might be looking at it as
a different. But I mean, the reality is
companies with the right local partners, they actually prosper
and they, they, they have a good growth trajectory.
So from my perspective, it's a positive thing.
It's not a negative thing. What's the thinking supporting,
you know, Menard's strategy where you you're ultimately
looking to take controlling shareholdings in, in, in, in
these mining companies? And it's, it's a largely
operatorship model, but not quite as well.
There's, there's this sort of like, yeah, this, this
interesting kind of philosophy of investment which we don't see
heaps of in, in the private mining investment landscape.
So we, we, we got two, we are doing two things.
One is we apply for prospecting, right and and we go and drill
and if you find a deposit, then we developed the the mine.
That's what we did in coal successfully four or five times.
And some of them we are rehabilitating already that we
depleted. And then the other one is like
we buy assets that are unwanted by the majors or by other mining
companies. Like an example is we bought a
mine from Rio Tinto, it's called Zuland Enter site colouring and
we successfully mined it for 9 years.
It's an underground enter site mine.
It's important for for the local industry and for the also job
creation. We bought a mine from a Spanish
company called Kangra Operational and they it has been
in operation since 1957. We successfully carried on
operating and we started new edit shafts to to go underground
to increase the life of mine. I think where we add the value
is more about like being agile and then like reducing the
overheads, making it efficient and optimizing it quickly.
So that like we, we really save the cost and we make the mine as
the low cost operator, low cost mine.
Because when the commodity prices go down, whatever
commodity is that it doesn't matter.
Let's say it's, if it's coal and the coal price goes down, then
we don't close the mine. We just carry on as long as the
mine doesn't lose money. And if we can, let's say we
break even, then we carry on. And you can only do that if
you're the lowest cost producer. If you're the lowest cost,
you're going to be shutting down last.
So with the majors, this is more difficult because I mean running
a major mining company like VHP Billiton or Rio Tinto, I mean
it, it is not that easy. It's like almost like running a
country. I mean, if you, if you look at
their revenue, if you look at their, their responsibilities
operating in different jurisdictions.
So these are like things that you can't actually undermine.
But as a smaller mining company, let's say mid tier mining
company, we are easily being agile and we're easily making
decisions. And we actually finished the red
date 78 million drill made so that like we, we make decisions.
Did I just hear a random in the background?
JD say 17,000,000 drill meters I think.
It's a bit of an echo. I think I heard that.
Who was? Who was you were there?
Who was someone who was talking Swick at in Darba?
People from high above mate. Well well it has to be probably
someone from Swick cause Swick are the only people that know
what 17,000,000 drill meters looks.
Like on the way to 18? Well Can you imagine how quick
they're going to get there with deep X punch in 2000m plus
holes? Could have passed it already.
Oh mate, Parenti knows what's going on 'cause Swick are part
of Parenti now. So it's true.
You want the historical skills of Swick passed down to you?
Go become a Swick driller. You want to say the Swick
drilling skills on showcase? Get Swick to drill your diamond
holes underground. You go to underground driller
back to. It.
The opportunity to buy the assets from the majors only
comes about because of, you know, their strategy on mass to
like divest their South African assets by and large.
Like is that is that a is some of the the philosophy behind the
investment kind of capitalizing on having, you know, the local
wheel and capability to actually operate in South Africa on, on
mines that you actually think are lower cost?
Look, it depends. Like in the case of Rio Tinto,
for instance, Rio sold that mine because it was too small for
them, OK, it was nothing and they had a fatality in that year
and the CEO said what is this? And then they said, look, this
is Andrew that mine, why do we have it?
And they said because it came through the transaction that
they made in Mozambique and he wanted that to be divested.
So that was a. Bad memories there.
Exactly. Lots of money to be lost in that
asset. But but I agree with you.
Like for instance, in the case of BHP, they made a decision not
to do much in, in Africa, right. Maybe they got the luxury to to
do that because they've got really great assets in the Tier
1 assets in the right and good jurisdictions, like let's say
first of all jurisdictions, but Rio Tinto carries on running
richest Bayman rules, which is a great asset.
Which I think they've tried to sell, though they did run a sale
process at some point. No, not, I don't know that maybe
maybe they, they might have done it in the past, but they're,
they're successful. Look, it's challenging.
It's not easy. It's, it's again in a, in a
difficult area because there are a lot of community challenges.
But at the end of the day, Rio keeps that asset and they, they
carry on running it successfully.
They make money out of it. That's why they're running it.
They've got like local partners and they're happy to actually
recently invested in opening new areas to mine that's called
Zulti S to mine heavy descent mineral sands and then they
will, they will smelt it in their operation.
So I think different companies have got different reasons,
different jurisdictions to operate in different
jurisdictions. And also it's a it's linked to
the leadership of the company as well, because some leaders are
have a different view about certain jurisdictions.
Sometimes board doesn't doesn't stop them to, to, to go ahead.
Sometimes board stop them. But at the end of the day, I
mean, Anglo Americans still a big investor in South Africa.
I think Anglo is the flagship company of South Africa in
mining. Blanco is active in South
Africa, big ferrochrome assets, Chrome assets, coal.
They're very big in coal. They have a manganese mine.
So we got a lot of big platinum players like Impala Platinum
know them all these guys like yeah, I don't think we are short
of investment in South Africa, but but certain companies
decided not to, not to do much in South Africa, yeah.
You, you mentioned Richard, Richard's Bay and I think one of
the, the hats you wear is on on the board of the, the, the coal
export terminal is that. One of the directors of BCT.
One, one of the, you can't talk about investing in mining in
South Africa without talking about the, the infrastructure
constraints. And you know, it's something I
think you, you probably have a lot of opinions on when it comes
to just the interplay of power rail kind of kind of port,
where, where, where is investment at?
And what are the, you know, what are the, what are the real
constraints in actually wanting to like grow the, the, the
outcomes of the mining industry here?
Look, we, we had some challenges in terms of power.
The previous administration, they decided not to focus on
burning coal, but they rather heavily invested in renewable
energy. And we saw that like it.
Our base load needs to come from somewhere but not from renewable
energy because renewable energy will never produce space, but
the current technology that human beings or humanity has.
So this administration has been running ESCOM successfully
without having any load shedding.
Lately. We had some issues about 2-3
days ago, we started having some load shedding.
But I think, I think they carry on like maintaining the power
stations. So ESCOM is, is at least like in
the right direction. The challenge with ESCOM is like
they need to know next what they're going to do next.
Because when the coal fleet is retired, are they going to burn
gas? Where is the gas going to come
from? Are are we going to build
nuclear capacity? Who's going to invest in nuclear
capacity is going to be state or is it going to be private public
participation? So or are they going to build
new coal-fired power stations? Is that going to be done with
the again partnership with private companies or are they
are they going to build it? Can they get finance for
building a coal-fired fire station?
So they are discussing these these things and actually
current administration are really competent and they know
what they're doing. They have generation background
and I think we're on the right track in terms of escort
Transnet is we look, we have the infrastructure, we've got
railway lines as large as Germany as as long as Germany
has to track. Yes, some of the track needs
maintenance, we need that. But at least like you don't need
to go and invest in rail track, you need to invest in rolling
stock. So currently their challenge is
they don't have enough rolling stock capacity.
They've got some signalling issues on the lines and they
have got massive challenge with the cable theft.
But the cable theft was always there like it's a, it's a social
issue. So what they are doing
currently, which is the right thing with the guidance from
presidency, they are allowing third parties to be able to buy
their own rolling stock and then create their own capacity.
So there's actually a deadline on 7th of February.
We, we will as a company submit as well to create our own
capacity to move coal, to move enter side to different ports
and to also move manganese wooden South Africa to our new
acquisition that we bought from Semenko, that's our 32 Anglo JV,
the Ferra manganese asset. So that third party excess is
critical for South Africa. If they can run that process
successfully, I think that's going to unlock a lot of
potential on the rail side. So on the ports, private ports
like RVCT works perfect I think. And I believe RVCT is one of the
best call terminals in the world. 91,000,000 tonne per
annum capacity, practically 81,000,000 tonne they can do
easily. But the rail capacity is is 5055
million which is which is a disappointing thing.
But then the trans that run ports which is there's a company
called Transit Port Terminals, they have got some challenges
and they started the process like for the container terminal
lost two years ago for instance. So I think transit
administration understands what the challenges are and they are
planning to put certain ports into the market to reach to have
a private public partnership. I think they will still keep the
control of the ports, but they will allow the third parties to
invest and then to run the port on a on a long term contract.
So I think at least we have challenges, but at least there
are solutions to that and Transnet and Escom and
Presidency understand the challenges that they're trying
to address them. Firstly, you spoke to the point
earlier of the, the rich mineral endowment in the country.
And when you, you look across the spectrum and Trav and I were
lucky enough to to get a view of that there.
But PGMS and a few of the other medals in a bit of a tough spot.
And then you've also got this relatively commodity agnostic
approach to what you look at what you invest what, what are
the commodities that are sort of standing out where you think
there's opportunities in. And you're, I mean to add to
that, you have the the point of a lot of other participants not
being interested in South Africa, which makes it better
for a buyer too. Look, maybe let's let me do an
analysis about like what's happening because things change
very fast. Like, I mean, if you look at the
sentiment now in the world and if you look at the sentiment how
it was about a year ago, it's completely different.
But let's start with PGMS. So PG Ms. obviously very
critical in catalytic converters for combustion engines.
And for some reason, which I don't understand, and I mean,
when I say this, they think that I'm criticizing them, but I am
saying that and I, I couldn't get an answer.
So Angler, for instance, they went out and they said, no, I
mean, green energy, this green energy that it's not when you
say that like they, they offloaded, they call assets and
then they, they said that they will focus on copper and they
will focus on other, other assets, other outside copper.
They have PGMS, which is very big for them, right?
And they've got diamonds. So when you say that like green
energy, then you're saying that, OK, you're against combustion
engines when you say that where is your PGMPGMS going to be
consumed? I mean, I'm sure they had so
many discussions about that and they decided, OK, we should go
with this copper and green energy thing.
And I guess one, that's one of the biggest reason BHP showed
interest in angle to buy because they're interested in a copper
assets. But on the other hand, I think
this all these green energy initiatives created a problem
for PGM producers, OK, they tried to make a vehicle that
could burn hydrogen. I think they're still working on
it. But at the end of the day, that
affected the whole demand. And, and the reality is like
electric vehicle revolution is going to affect that demand.
But there's also another reality.
If you look at what happened with all these auto
manufacturers in the world, like they are delaying their
programs. Mercedes, for instance, I know
very closely they said they're not going to go to electric
vehicles completely in a certain time.
They're extending that deadline because there's not enough
minerals to go there in the world.
So and there are other challenges like you need to have
an infrastructure on how do you charge the cars?
Like for instance, if you use a electric vehicle in South
Africa, where would you where would you charge your car at
home? Maybe with coal-fired power
coming from a coal-fired power station of Escom.
So I mean, so when the auto manufacturers delay their their
plans, that would mean actually more product for PGM mines to be
sold, but PGM prices are depressed.
So now if you think about it like if somebody brings me a PGM
project, would I look at it maybe if it's underground?
No, I can tell you now underground PGM project is going
to be very expensive to develop and it's going to be expensive
to operate as well. So I wouldn't look at the PGM
project because first of all, South Africa doesn't have many
open class PGM mines, Anglo as Mohala Kwane, but maybe
Zimbabwe, which comes with with other challenges because I mean,
it's not an easy country to operate, but PGMS is difficult
to invest at the moment. OK, Chrome ferrochrome is used
in stainless steel. OK.
So you can't make stainless steel without ferrochrome.
But if you look at the steel industry in the world, like
China last year produced over a billion tonne of steel and it is
actually 60% of the world's steel produced by 1 country.
So they need all the manganese and all the ferrochrome or all
the Chrome that's made in South Africa so that they make
ferromanganese and ferrochrome and use it in steel
manufacturing. So now when you look at
manganese and Chrome, then you need to look at what is
happening in China. And steel doesn't look good at
the moment because there's not enough consumption in China.
They actually flooded the Indian market and Indians are famous
with being a low cost reducer. So now Indian companies are
asking the government to put tariffs on Chinese product
because they can't compete with China's at discounted steel.
So China is considering cutting their steel production.
I heard and read about 20% and 20% will mean the second biggest
producers whole production like 200 million tons and that's
India. OK so now if you look at the
picture then it doesn't look good for manganese and Chrome
because it depends heavily on China and Chrome is actually
even worse because it depends on heavily on stainless steel and
stainless steel production is not as big as steel production.
So but then let's open apprentices and say if there's
any disruption, look at what happened with Jemco right when
they had a problem with the logistics, then manganese prices
shut up. Very briefly, it was amazing.
It was like a a three-week price spike and then all of a sudden
prices come back down. Exactly.
So now actually prices are a little up now, but they're
waiting for the market is waiting for China and Saturday
to understand like what's going to happen with the with the
manganese. Manganese and Chrome are heavily
linked to steel. Then if you if you look at coal,
coal is like it's linked to everything.
Obviously. I mean, it peaked, the coal
consumption peaked last year and I mean.
Doesn't doesn't it peak every year?
Just keeps it's. Picking up yeah, agreed, agreed.
And I mean, look, it's, it's a lot of it's a, it's a very big
industry for Australia because Australia is close to China and,
and Japan. These are like massive consumers
of coal and especially Japan, good quality coal and not only
steam coal, but also cooking coal.
So it's a massive industry for Australia and it's a massive
industry for South Africa because I mean, coal mining
industry is the second biggest employer in the in the mining
industry. So PG Ms. employ about 185,000
people and coal is employing about 9595 thousand people.
So it's it's a massive industry for South Africa.
But if you look at the global things like what's happening in
Europe, what's happening in, in in the east.
So China carries on building coal-fired power stations.
India carries on being coal-fired power, building
coal-fired power sessions. And Europe says no to call.
I mean, I was I, I learned from my German colleagues in October,
I was in Vienna at a conference, but they closed German
government closed a coal-fired power session, which is 1 year
old in Hamburg, OK with the latest clean called
technologies. And they say it's all political
reasons. So now and if the government is
doing that, I don't understand the logic now.
I gave this example in, in, in one of the conferences.
So we got the same sky, right? So if you emit in England or if
you emit in China, it goes to the same sky.
So then what is the purpose of like deferring the the emission
or taking the emission from UK and then everything in China,
it's the same. It doesn't matter.
So I don't understand the logic of this, like shutting down
coal-fired power sessions and then pushing the manufacturing
and pushing the production to China, and then you end up like
buying everything from China. So coal to me looks very
interesting. OK.
And if there's any disruption, we saw what happened between
Ukraine and Russia and it went to $400.00 a tonne, which is
like unimaginable, but it happened.
So the energy commodities cannot absorb any disruption.
It's like because it's our lives, like without power, we
can't work, we can't operate. There's no Internet, there's no,
there's no water, there's no electricity.
So I think coal has got a good future.
This is my personal view, cooking coal linked to steel,
but we don't have a lot, a lot of cooking coal in South Africa.
We, we got no production. Actually, it's some coming from
critiquic that goes to Arcelor Mittal, that's all.
And our north-south Africa is not a big player.
Obviously Australia is the biggest player and Brazil is the
second biggest. So we are price takers in South
Africa, but and our our resources are also depleting.
So we got maybe another 10 years of life at Cumba, but not not
beyond that unless they do new exploration.
So currently all the commodities look challenging.
But again, I mean, you know, every commodity has its cycle.
So if you if you get an asset and then if you catch one or two
cycles, then you really make good money.
So I think it's going to be difficult to actually say that
like, OK, this is the right commodity to to invest.
But I guess if you buy an asset at the right price and catch the
right cycle, then you can make a serious amount of money.
That, that's a fascinating point.
Just going deeper on, on coal transactions, we saw a number
over the last three or four years on our sort of side of the
world in, in Australia, the, the multiples that they traded on
got sort of better and better over time.
What, what sort of view did you have of those transactions?
I'm not sure how much attention you paid to them, but again, it
was the, the majors, what you spoke to earlier offloading, but
that price was getting higher. Do you reckon it sort of reached
a a sort of ceiling on the multiples that they'll trade at?
Look, I think majors were some of them were were happy like
they, they, they sold their assets at a really good price.
I think one of them is Saturday too.
They sold one of their assets at a very at a very good price.
They sold Illawarra. Illawarra sold their portfolio
PHP. I think it's a success story for
for Saturday too. Look, you know, the the
interesting part is like, I think this is part of the human
beings. There is a cult mentality about
coal at the moment. OK, yeah.
It's like no matter what, we must get out no matter what.
But they don't. I mean, and it's interesting
like you, you, you find this in a boardroom with with highly
educated people. They're not, it's not applying
their minds. They just let go with the
sentiment. And I don't know who creates the
sentiment. Maybe the banks, maybe the, the,
the, the companies like BlackRock and them, I don't
know. But I mean, I see that BlackRock
has changed now. Maybe there's a new chief in
town because of that. They, they have to change.
But at the end of the day, the, the banks, insurance companies,
they all have this kind of sentiment and that pushes mining
companies, executives think, start thinking about, about in a
cult way. But the reality is like, I think
there are certain companies that offloaded their assets and they
made good money. And some companies are not
really, they don't care about like making money or not making
money because they just want to get out of that business.
But in reality, I, I think, I mean a jurisdiction like
Australia, think about it, it's the geology is there,
infrastructure is there. I mean, you guys have got a
company called Horizon Railway Line company.
I think new new QLD. Sorry.
Which? Which which?
Which province is that from like?
They've got most of their infrastructure in Yeah in
Queensland, but. What was it?
Queensland's company. They've got rail all through
the. Well, apparently they they
privatize the company. I I read their story.
It's a private company listed on the Australian stuff.
Moving like 250, three, 100 million tons of or a year or a
product a year, it's amazing like and the ports, yes, you've
got challenges with the ports. We always say see the queues and
the ports, but at the end of the day, I mean Australia is
actually moving out hundreds of millions of tons of iron ore and
coal and all the other commodities that you guys are
mining. So in a jurisdiction like
Australia, I think there will always be a customer for a coal
asset, there'll always be a customer for a coal asset, as
long as the quality is right. It can be steam coal, it can be
cooking coal. And I think there's there's
money to be made in coal. How do you think about the the
substitution of a in South Africa and then across the
world, you know, with natural gas in, in some parts being
very, very competitively priced, is that put a put a ceiling on
on? Yeah, look, we're the global
land. Handling LNG or natural gas is
like not that easy because like if you're producing and if
you've got your own pipeline that's yes, fine, fine, you can,
you can do that, you can distribute it.
But South Africa, South Africa system is not designed according
to that because we don't have gas here, even though some
people are saying that they found gas, But I mean, finding
gas and making it commercial viable is a different thing.
What people don't understand is the following.
They should go and read like look at United States journey.
They started in 1974 and it took 30 years for them to
commercialize it. They're, they're, they're
mining, they're extracting the gas from the, from the rock, but
it, it took a long time to, to drill horizontally and then get
the, the, the, the trapped gas in the, in the rocks.
So if you have an asset in South Africa, that doesn't mean that
you're going to start like generating gas tomorrow.
And then you can, you can burn gas in, in, in 12 months time.
It's, it doesn't work like that. People need to understand that
that different dynamics of making gas fields work.
And sometimes it doesn't work. So if you don't have the gas
resource, then you rely on getting LNG like Germany.
So Germany was relying on on Russian gas.
And when there is a conflict and they're in trouble, like then
they created the LNG receiving facilities.
Now they're in trouble again. Now Trump is actually telling
them, listen, if you don't buy American gas, I'm going to, I'm
going to put tariffs on you. So they are between Russia and
US because they decided not to build nuclear and they decided
to stop their coal-fired power sections.
Under normal circumstances, they should have not done.
They shouldn't. They should have not closed the
coal-fired power sections and they should build nuclear power
sections. So they were worried about the
safety. But France is full of nuclear
power sections. If anything goes wrong, God
forbid in France with any nuclear fired power sections,
it's going to affect the whole Europe, right?
Everywhere UK up to Greece, everybody's going to be
affected. So again, I don't understand the
logic. But in a country where you got
gas, if you got the pipeline, I think it's no brainer.
Or if you build gas fired power stations around the coast, you
bring gas in the form of LNG. But then you are dollarizing
your your power price because you are relying on gas in in
dollars. And then you are actually also
relying on another country. If anything goes wrong, then
you're in trouble. Yeah.
Will we see nuclear in South Africa?
Maybe it it, it, it's not a bad idea actually, because it's a
good source. We, we got one here in Cape Town
in it's called Danafontaine. It's in Danafontaine.
It's called Coburg and it has been run by a French company
successfully for years, and it powers the city, powers the the
area, which is critical. The the one interesting thing
about like South Africa's history with it's kind of, you
know, down downstream production, so that ferrochrome
smelters have kind of idled in a lot of cases.
There's not much ferrochrome smelting anymore, except I think
there might be two left. Then Glencore.
Glencore has got three and some Anchor has got one.
Ferro manganese is, you know, the other one where I think
you've recently acquired from South from Symancorp their met
alloys business with a view of, you know, restarting or
reestablishing with different technology the, you know, fair
manganese production. But but I presume treating you
the manganese or that you you you mind yourself.
How did how did South Africa get to the place where a lot of this
smelting like kind of just just vanished or evaporated or, or
was no longer commercial and like what would it actually take
to to come back? So look, because we have the
largest Chrome and manganese also in the world, it is logical
to produce the ferromanganese and ferrochrome in South Africa.
But what happened over the years?
Some of the ferrochrome smelters were put in, put on care and
maintenance. Some of them are shut down
completely. Currently Glencore and Samancor
Chrome, they carry on producing ferrachrome and on the ferromang
in each side, there's only one side that's called it's a Cato
Ridge operation of S Meng. But they're apparently closing
in three months time. So how did we come to this point
is the following. First of all, ESCOM started
failing to give them power. When you don't have consistent
power, you can't run this matter and an S com increase the prices
in an in a high-priced environment, you become
uncompetitive. OK.
And also what happened is like over the years, China wanted to
buy ore, raw ore and then they wanted to benefitiate in China
because every Ferro Chrome or ferro manganese smelter means in
China means Chinese job. And South Africa unfortunately
missed the train in this whole thing because of especially the
unavailability of power and the high price of power.
And obviously Transnet played a role because they didn't give
the service to Chrome and Ferro Chrome and Ferro Manganese
services properly and ended up like having a situation where
producing Ferra manganese or Feracom in South Africa became
very, very expensive. So what we are trying to do at
the moment is we have first of all SAT 32 was actually
maintaining the asset Metalos and we made a deal with SAT 32
Anglo JB Samancorp Manganese to give them the credit like they
really kept asset in in a good condition.
So they have 4 furnaces and they had the care and maintenance
team and I was not expecting less.
But I can tell you now they started it too serious about
these kind of things. And when they do a deal they are
for them they are they are offloading an asset.
But for them the legacy is critical.
So they don't want to leave something.
That they harm the environment or they harm the community.
I think that. They're on the hook for it if if
it does right, even even post sales I.
Mean we, we, we saw companies they don't care about these kind
of things, but I mean my experience with S 32 and Rio
Tinto was that they're really serious about these kind of
matters after health and safety of their people, the second most
important thing is that making sure that environmental issues
are at the like at their focus. So they have 4 furnaces, 50 MW
each and like to run a furnace and it was the largest
ferromanganese asset in the world when they put it on care
and maintenance in 2020. And obviously when they put it
on care and maintenance, that market went to to China.
They they carried on producing ferromanganese and they also had
and by the way like two of the furnaces was built in 2015 and
they, they put it on care meters in 2020, quite quite young,
quite like new. They have A50 MW gas fired power
station on site. And the idea is like initially
we would like to start, start the furnaces with S compower and
get the capacity if you can get from Transnet to take the ore to
the plant and then to take the product to the port if you
can't. And we would like to create our
own capacity on the rail. But at some point we would like
to start creating our own power from coal.
And it's going to be very controversial because people
think that there'll be no funding for coal, coal-fired
power stations in South Africa. Yes, maybe not local, but I
believe that there will be money to be invested in coal-fired
power capacity. We would like to create 600
megawatts and 200 will be used in the plant.
And then we can, we can sell the rest to the to the grid.
But if I come back to you, what you asked, the main reason why
they went into trouble all these ferro alloy smelters was because
of power unavailability, power price, transit not performing,
delivering. And also in some instances DTI
didn't protect them with the tariffs.
I mean, some people criticize that like because that's, that's
protectionism. But at the end of the day, if
you have to, you have to protect your industries.
Otherwise you export the jobs to to China.
So you, you, you, you think that there should be greater, great,
greater tariffs imposed on the export of of these products to
China. No, not, not really.
Like when I say tariffs, it could have been more about like
say for instance, local companies like Arcelor Mittal
and they need to use ferrochrome or ferro manganese instead of
like buying it from local companies, they might end up
buying from India or China. So I'm talking about that, that
that kind of tariff because I mean looking for tariff, for
instance, for exporting your ore.
I think it's a bit like controversial because it will
then it will defeat the purpose of like creating jobs because I
mean, if you stop like moving less, if you stop, if you start
moving less ore, that will mean that you're going to start
losing jobs. So I'm, I'm not for it.
I'm against it like, but but maybe protecting the imports
coming from India and China in terms of Ferrer alloys could
have been important. But it's irrelevant now because
Arcelor Mittal, which is the biggest steel manufacturing in
South Africa, is in trouble. They already said that they're
going to stop producing long steel and there's a big kind of
discussion around that. But the reality is not they're
not doing well because again, the steel price is not good.
Steel industry in the world is not doing well at the moment.
In what sort of, you know, ballpark figures with the, you
know, with the tariffs at that time being appropriate?
I mean we've generally have a free market approach the way
we've seen these things and it can be a bit of a slippery
slope. How do you how do you kind of
see an appropriate level? For me, are you, are you asking
for now or for the for the past? Had you recommended at the time
to put a a tariff on imports from India or what have you?
Look, the The thing is like it's, it's almost like like
textiles. Think about it like if you
produce textiles in Cape Town and if you still allow Chinese
to to supply textile cheap because I mean, let's say a
factory can produce 100,000 shirts here in China, they
produce 100 million. How do you compete with it's
impossible. So how do you create the
capacity in South Africa to, to to do your own things like which
will result in creating jobs. So it's the same thing like if
your local steel manufacturers steel produces by ferromanganese
and ferrochrome from China or from India, then then you need
to decide they maybe put like a 10% or 15% or 5%, whatever it is
tariffs so that like your local guys become competitive, OK.
Looks like thank you so much for for joining us.
We've yeah, really appreciated your insights and.
It was a good chat. Wicked thank.
You. Thank you, mate.
Thank you. There we go, mate.
What do you reckon? Loved it?
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