Mining giant Xstrata has said it will spend R4.9 billion (€510 million) to boost capacity of ferrochrome production and cut costs with a more energy-efficient smelter in South Africa.
Xstrata, one of the world's biggest producers of ferrochrome, has approved the second phase of expansion at its Lion ferrochrome complex, which is struggling to meet power needs.
Under the plans, a new smelter will be built with a capacity of 360,000 tonnes per year, boosting the group's overall ferrochrome capacity to over 2.3 million tonnes.
It is expected that the project will reduce overall costs of ferrochrome production by around six per cent.
The expansion is expected to create more than 1,000 jobs, with another 1,800 jobs to be generated during the construction phase. Construction is scheduled to begin in the first quarter of 2011, with commissioning planned for the first half of 2013.
Xstrata's joint venture partner, Merafe Resources, has the option to participate in the expansion at a level of 20.5 per cent.
Commenting on the decision, Xstrata’s chief executive officer Mick Davis said: “This expansion further enhances Xstrata’s leading position in the ferrochrome market and will allow the Group to benefit from anticipated growth in global demand for stainless steel.
“The Venture’s management team has already, through the first phase of this expansion, demonstrated its ability to deliver projects on time and on budget. I am confident that the team is equally committed to the expansion’s second phase.”
Xstrata Alloys’ chief executive, Peet Nienaber, said: The Lion smelter development is...the first major investment of its kind for South Africa since the government announced the amended Mining Charter, which strives to extract maximum benefit for the country through fixed investment, new and sustainable job creation, beneficiation, enhancement of South Africa’s export earnings and contribution to the National Fiscus.
“The expansion will also allow us to significantly increase procurement from BEE enterprises, support the growth of new local enterprises and develop technical skills. These are some of the key pillars of the amended Mining Charter.”
Headquartered in Zug, Switzerland, Xstrata’s operations and projects span 19 countries. Xstrata Alloys’ operations are based in South Africa.
