NEW SMELTER APPROVED TO EXPAND FERROCHROME PRODUCTION CAPACITY BY 25%
Zug, Tuesday 9 December 2003
Xstrata plc announces approval for the construction of a 330,000 tonne ferrochrome smelter in South Africa, which will raise Xstrata Alloy's annual production capacity to some 1.63 million tonnes of ferrochrome, representing about one-third of current global capacity. The Lion project, which is expected to commence production early in 2006, will be located on the site of Xstrata's existing Vantech facility in Mpumalanga Province, in close proximity to Xstrata's Thorncliffe chrome ore mine and Helena chromite ore deposit. The capital cost of ZAR1.25 billion will benefit from the utilisation of infrastructure and services that are available as a result of diminishing magnetite ore reserves at Vantech.
The Lion Plant, which will consist of two 63MVA closed submerged arc furnaces, will utilise Xstrata's exclusive “Premus Technology” that has been developed and successfully implemented by Xstrata Alloys at its Lydenburg plant. The Premus process, which is a substantial modification of the highly efficient closed furnace and pelletising technology, is expected to deliver operating costs around 20% below alternative technologies due to significant substitution of anthracite for coke and power costs that are between 25% and 45% lower per tonne of ferrochrome produced than the industry's prevailing Conventional, Outokumpu or DC Arc processes. The project has been designed with potential for additional low-cost brownfield expansion to one million tonnes of lower Silicon ferrochrome product in two further phases of around 330,000 tonnes each.
Xstrata Chief Executive Mick Davis said: "This project underscores Xstrata's commitment to organic growth in its core business units and our confidence in the ability of the Xstrata Alloys team to enhance their industry leading position as the world's largest and most efficient ferrochrome producer going forward. The excellent returns that this project will deliver to shareholders, even at a time when the strength of the Rand has put so many South African mining projects in jeopardy, is an affirmation of the exceptionally low capital and operating costs that our Premus Technology can deliver. This new facility and the combination of our ground-breaking technology and proven operating excellence provide us with an unrivalled base from which we can expand ferrochrome expansion to meet the needs of the market for years to come.”
Peet Nienaber, Chief Executive of Xstrata Alloys, said: "This project will secure on-going, low-cost capacity to meet the ever increasing need for ferrochrome of our customers, which is being driven by outstanding growth in demand for stainless steel. Critically, the project will further reduce the Group's average cost of production and its requirement for expensive reductants, while increasing output of a premium lower silicon product that is highly valued in the market. In addition to reducing capital costs, the location of the project will allow Xstrata Alloys to optimise its ore reserve supply across its Eastern and Western operations.”
Discussions are underway with empowerment groups in South Africa regarding their possible participation in the Lion Project.
ends
Xstrata contacts
Marc Gonsalves Telephone +44 20 7968 2812 Mobile +44 7775 662 348 Email mgonsalves@xstrata.com
Brigitte MattenbergerTelephone +41 41 726 6071 Mobile +41 793 811 823 Email bmattenberger@xstrata.com
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Prospero Financial
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Notes for Editors
For further information, please visit www.xstrata.com
Xstrata Alloys is the world's largest producer of ferrochrome, with current annual production capacity of 1.3 million tonnes from its three chrome mines and 15 furnaces at three production facilities in South Africa (representing approximately 25% of global ferrochrome production). In its last full financial year in 2002, the chrome business of Xstrata Alloys reported turnover of US$290 million and operating profit of US$56 million. Operating profit fell to US$16 million in the six months to end June 2003 on the back the stronger South African Rand, and increases in the cost of reductants (principally coke) and ore.
South Africa holds some 70% of the world's reserves of chromite ore and currently accounts for around 65% of global ferrochrome production. The major end market of ferrochrome is stainless steel, which consumes 90% of all ferrochrome produced. Stainless steel melt has grown at an average of around 4.5% per annum for the past 10 years, with production expected to rise from some 21.5 million tonnes in 2003 to approximately 26 million tonnes by 2007.