Current total annual silica consumption in South Africa is approximately 2.7 million tonnes with the metallurgical sector absorbing about 47% of this. There has been steady growth in the glass manufacturing sector and this now accounts for about 27% of total production. The construction sector, which is growing, consumes about 21% and the balance is taken up by the filter media, silica milling and recreational sectors.
SamQuarz is South Africa's largest silica producer, producing 35% of the country's total consumption. The operation has a well-defined and focused marketing programme. It supplies to a number of leading companies: PFG, Consol Glass and Nampak in the glass sector; and Xstrata Chrome, Samancor, the Evraz Group's Highveld Steel and Vanadium operation, Arcelor Mittal and Siltech in the metallurgical industry.
SamQuarz expects to benefit from increased demand from PFG, the sole manufacturer of flat glass in South Africa, which commissioned its second float-line during the last quarter of the year, and from Consol Glass, the largest glass manufacturer in the country, which commissions a fourth furnace at its Clayville factory in 2008.
Government and the private sector are both embarking upon major infrastructural developments - many associated with the World Cup Soccer 2010 event - and SamQuarz expects to be a major supplier of G1 road-building material and other construction products during the next five years.
Anthracite is a carbon-rich, high-quality coal with several fields of use, most commonly:
Anthracite offers a cost-effective alternative to coke and char as a reductant in blast furnaces and smelters, provided that it contains low contaminant levels of sulphur and phosphorus.
Somkhele anthracite and/or the Springlake/Somkhele anthracite blend is an attractive prospect for the metallurgical industry in South Africa which currently imports coke and anthracite from overseas.
The current South African consumption of domestically produced anthracite is 0.84Mtpa. Petmin believes that the potential South African market for anthracite is approximately 2.5Mtpa (1.5Mtpa after excluding the low-smoke/smokeless fuels segment of the market). This belief is based on the potential for high-quality South African anthracite to replace imported coke and anthracite in the metallurgical sector and bituminous coal in the domestic energy sector. At present, metallurgical users are the biggest domestic consumers of anthracite. However, a shortage of high-quality product, particularly for use in the ferrochrome and titanium sectors, has led to reliance on coke and anthracite imports. With Somkhele in production, Petmin is able to take advantage of opportunities in the domestic market to supply titanium smelters with Somkhele product and ferrochrome and ferromanganese smelters with the Springlake/Somkhele blend. This is a particular advantage given South Africa's status as a major worldwide producer of ferrochrome and ferromanganese.
Petmin is also exploring other means of creating additional value from its anthracite assets, for example, through investing in research and development work with a view to the possible development of its fine material for briquetting. In addition, an increasing number of metallurgical applications for Springlake anthracite have underlined the growth potential in the domestic market for the colliery's unblended product. These developments include:
Springlake Colliery supplies an estimated 27% of the domestic demand for anthracite.
Since the start of production, demand for Somkhele's products, characterised by low phosphorus and sulphur and high vitrinite content, has been significant. Given the mine's potential to produce high-quality anthracite well suited to metallurgical applications, the burgeoning South African ferrochrome and titanium sectors are being targeted. Negotiations are in progress with a number of parties for medium- to long-term offtake agreements.
Petmin envisages continued growth in market share over the next five years.
Global production levels of anthracite are estimated to have been approximately 305Mtpa in 2003 with global seaborne trade in anthracite estimated to have been 18 mtpa in that year. Petmin estimates that the global seaborne trade in anthracite was 22 mtpa in 2004. However, due to the increase in production of anthracite from Ukraine, Russia, China and Vietnam, there is currently limited reliable information on current global anthracite production.
Springlake exports anthracite fines to metallurgical and energy consumers and sized products for specialist metallurgical applications. The operation accounts for about 47% of South Africa's anthracite exports. Some 70% of Springlake's exports go to Europe and Brazil, with Brazil being the main destination for the unsized products, and Europe (mainly Belgium and Spain) for sized products. Ireland's domestic heating sector remains an important customer and the mine continues to supply sized products to the growing Indian market.
Somkhele has secured a dollar-based export agreement for 400,000 tonnes of its unsized coal until December 2008.
Petmin believes that the Group's blended and unblended anthracite will be well-placed to access international markets while retaining market position within South Africa.
© 2008 Petmin Limited