JOHANNESBURG (miningweekly.com) – The three months to the end of June saw spot manganese ore prices rise 56%, driven by the temporary closure of the cyclone-damaged Gemco manganese mine in Australia, Jupiter Mines reported on Wednesday.

The Sydney-listed Jupiter operates South Africa’s Tshipi Borwa manganese mine in the Northern Cape’s rich Kalahari manganese field, which is the single largest manganese mine in South Africa, and the third largest in the world.

The Tshipi mine recorded zero lost-time injuries for the June quarter, and its total recordable injury frequency rate decreased to 0.35, down from 0.52 in the previous quarter.  

“Sales and production performance was very strong during the quarter,” the company headed by CEO Brad Rogers noted in a media release to Mining Weekly.

Sales increased by 35% compared with the March quarter, resulting in full-year sales of 3.55-million tonnes (Mt), which exceeded Jupiter’s previous guidance of 3.3 Mt to 3.4 Mt.

Production also increased by 22% on last quarter, as operations were adjusted to take advantage of the improved manganese prices. Realised prices for the quarter were 24% higher than the previous period.

The cost of production rising 13% on the previous quarter was primarily owing to higher profitability during the quarter leading to an increased royalty rate.

COST OF PRODUCTION

The cost of production on a free-on-board basis was 13% up on the previous quarter, mainly because of a material profitability-boosted increase in South Africa’s royalties, which are calculated on earnings before interest and tax and gross sales.

Tshipi capitalised on the improved manganese price environment to help offset 55%-higher logistics, with both road and rail volumes higher than scheduled, and rail and volumes via Lüderitz in Namibia surpassing plan for the financial year.

Tshipi also exported 171 461 t of low-grade manganese during the quarter.

Tshipi’s earnings before interest, taxes, depreciation and amortisation for the quarter were A$60.4-million, an increase on the previous quarter of A$15.5-million and A$10.4-million.

GLOBAL HIGH GRADE STOCKS

The decline in high-grade stocks has been partially offset by an increase in semi-carbonate manganese ore stocks from South Africa as well as an increase in Ghanaian origin manganese ore, which has historically been used for electrolytic manganese metal production but is now also being sintered for use in ferroalloy production.

Total manganese ore stocks have shown a steady decline through the quarter, and towards mid-June were at a four-and-a-half-year low, translating to less than two months of consumption.

The quantum of stocks held by various market participants in China, as well as the sudden uptick in prices and time lag for seaborne cargoes to arrive in China, has still meant that stocks that were procured at lower prices in previous months could be liquidated profitably at port prices that are lower than prevailing seaborne prices through the quarter.

Silicon manganese (SiMn) prices followed a similar pattern to manganese ore prices during the quarter, given the contribution of manganese ore to the overall cost of SiMn.

With increasing SiMn prices and margins, higher furnace operating rates towards the end of the quarter were recorded, particularly in regions in southern China.

Further downstream, end steel demand has remained lacklustre, which, together with reducing manganese ore costs and high manganese alloy inventory levels, has also put end-quarter pressure on SiMn prices.

With margins in some regions under pressure again, the possibility of reductions in smelters’ operating rates has resurfaced. Should these materialise, a supply-demand rebalance may follow.

MARKET CONDITIONS

Much of the increase in South African ore supply has been from increased exports of low grade manganese ore with manganese contents of 30% to 32%.

Constraints at major manganese ore export port facilities in South Africa may limit any further substantial increase in export volumes in the short term, with congestion at certain terminals in Port Elizabeth and Ngqura impacting berthing times.

On-land logistics solutions are also showing some signs of constraint.

High priced manganese ore arrived in China in July and there may be reluctance amongst Chinese port traders to liquidate this material at current portside transaction levels given the decline in portside prices since the ore was purchased.

While crude steel production figures in China showed a recovery in the June quarter, they are still 1.1% down on January to June compared with the prior corresponding period.

Prices of steel have shown a general decline on weaker demand. This is particularly true for reinforcing bar, as the construction related steel sector is still performing poorly owing to China’s troubled real estate sector.

China’s infrastructure and manufacturing sectors are, however, reporting growth, as is the export steel market from China.

The decline in the production of reinforcing bar between January and June has lowered SiMn demand to 261 000 t.