AMN - SOUTH AFRICA: Prieska evidence of base metals potential

Article courtesy of Creamer Media's Mining Weekly

There is a “fantastic opportunity” for the South African base metals sector, given the Northern Cape’s mineralisation, the impending global copper supply deficit, the battery technology trends in the automotive and energy sectors and the improved and modernised exploration and mining techniques, according to Orion Minerals CEO and MD Errol Smart.

Speaking at an African Mining Network event during a presentation dealing with Orion’s Prieska mine, titled ‘Developing a 21st Century South African Copper Zinc Mine’, he said it was a sad fact that South Africa had lost the expertise and interest in base metals mining. "We had a very good base metals history. Some of the very first mines in South Africa were copper mines.

“The Northern Cape had a very successful base metals industry up until the 1980s,” he commented, attributing the disinterest in base metals to a “prolonged period of poor regulation”.

Smart pointed out that the geology in the Northern Cape was “still awesome” and that the lack of interest and development in the area created an opportunity, as local explorers and mining companies were now able to use new and proven techniques to exploit underexplored and underdeveloped base metals reserves.

Smart said that, globally, mining and metallurgical techniques had improved so much over the last decade that underground base metals mining had become very economic.

“The economies of scale match that of open pit mining.”

He also noted that the copper market was moving toward a global deficit. “Production is dropping off and demand keeps rising.”

He added that, unlike precious metals, in which a significant portion of demand was determined by the desire for luxury goods or investment products, copper and zinc were necessary to the function of everyday life. 

He cited Maslow’s Hierarchy of Needs, noting that copper and zinc related directly to shelter.

“From discovery to production is a 20-year cycle, and only 1% of discoveries make it into production and become a successful mine . . . the world stopped investing in exploration about 20 years ago and now we’re going to see the negative impact.

“There’s going to be shortfall of supply and it’s going to start in 2022/23 and it’s going to grow and grow.”

Smart noted that July had been the hottest month in recorded history.

Moreover, the 10 hottest years have all occurred in the last 20 years.

“Global warming is a reality ... the big nations have realised that they have to change and one of the changes is moving toward hybrid and electric vehicles.”

Smart added that about 55lb of copper was used to manufacture a normal petrol or diesel vehicle, while about 165lb of copper was needed to produce a modern electric vehicle.

“Twenty years from now, we’re going to need more copper and the copper hasn’t even been discovered yet.”

He noted that Orion's decision to focus on copper was a “logical conclusion” adding that mine developers and investors should not focus on short cycles, because while they impact daily and yearly planning, base metals mining was about “20-, 30-, 40-year cycles ... don’t look at the spikes, don’t look at today, don’t look at the last three weeks. You’ve got to look at the long-term cycles.”

Smart noted that hydrocarbons were being phased out and that, from a renewable energy perspective, about 3.6t of copper was used in a single wind turbine, of which there were hundreds of thousands worldwide, and more being erected every year.

Regarding zinc, “every bit of steel around us contains zinc – without zinc there are no steel structures”, Smart stated.

“We need 230 000 t/y of new zinc production for the next 20 years – that’s the size of Gamsberg,” said Smart, referring to Vedanta International’s new mine in the Northern Cape province.

Smart noted that, based on analysis of the last 35 zinc mines built around the world, after a deposit had been drilled to resource stage, it still took about 13 years to build a zinc mine.

He noted that the difficulty now was that there had been little to no zinc exploration and the “cheap minable deposits aren’t available”.

Further, “we’re sitting in a situation at the moment when there’s a record low of zinc stockpiled in the world”.

While recognising that zinc prices would remain depressed in the short term, mainly as a result of China’s response to the US-China trade war, he affirmed that the current situation was unsustainable and reiterated that there needed to be a focus on long-term trends.

“We need all of the mines that are currently being developed to come into production, otherwise there’s going to be a shortage in the next five years.”

He noted that there was a 400,000t operation in Iran that was expected to come online in three years’ time, but also pointed out that the geopolitical uncertainty around US sanction against Iran meant that the operation could be delayed or mothballed.

Additionally, he cited a Chinese project that was being developed at an altitude of 4,500m – “500m higher than the Mount Everest base camp”.

He added that the machines needed for that particular operation had yet to be developed and that, while he expected this project to eventually enter production, it would not be before 2024.

Smart stated that Orion’s Prieska copper/zinc project was a high-grade deposit, requiring low capital intensity, that could enter production comparatively quickly.

The recently completed bankable feasibility study estimated that the 2.4-million-tonne-a-year operation would require a capital investment of A$378-million, with the 10-year foundation phase expected to produce 189,000t of copper and 580,000t of zinc.

However, he stressed that the only way Prieska could work was if it employed a modernised approach.

Smart pointed out that Mineral Resources and Energy Minister Gwede Mantashe had spent five years working at the old Prieska mine before its closure in the early 1990s, adding that, back then, the mine was described as being “mechanised” despite the fact that it sent 3 000 people using handheld rock drills underground every day.

He noted that the new mine would, in all likelihood, have only 300 people on site, but added that Mantashe understood that “mines of the future” would be more mechanised and would employ fewer people, “because it’s safer ... you’ll notice that the Aussies don’t kill people underground ... because they don’t send anyone underground”.

Smart asserted that there were dozens of mines and projects that should follow Orion’s example, particularly in the Northern Cape, adding that he hoped Prieska became an example for other players in the region.

www.orionminerals.com.au