Massive R6.5bn mining investment for Richards Bay
10 April 2019 | Web Article Number: ME201914242
RIO Tinto has approved the next stage in the development of Richards Bay Minerals (RBM) in South Africa through the construction of the Zulti South project.
The $463-million (R6.5-billion) investment is aimed at sustains RBM’s current capacity and extending mine life. Rio Tinto’s share of the investment is $343 million.
RBM currently operates four mines in the Zulti North lease area, a mineral separation plant and smelting facility. The Zulti North orebody grade is declining, hence the Zulti South mine is required to maintain the output of high margin zircon and rutile, and provide sufficient ore to support TiO2 sales.
The Zulti South mine (Phase 1) will underpin RBM’s supply of zircon and ilmenite over the life of mine. Construction is scheduled to start in mid-2019, subject to the granting of all necessary permits, with first commercial production expected in late 2021. The investment will be fully self-funded from RBM’s cash flows, with no additional debt or recourse to Rio Tinto. The project is expected to deliver an internal rate of return of 24%.
Rio Tinto Chief Executive Jean-Sébastien Jacques said, “Rio Tinto has a long history in South Africa, and today’s investment underscores our commitment for the coming decades and beyond. Zulti South is one of the best undeveloped minerals sand deposits in the industry, and will significantly extend RBM’s position as a world-class, first-quartile asset. The long-term fundamentals of the market remain strong, and production from Zulti South will commence in time to fill a widening supply gap, ensuring RBM’s position as a leader in the sector, and delivering strong returns to our shareholders.”
Rio Tinto Energy & Minerals chief executive Bold Baatar said, “RBM is an outstanding business, South Africa’s largest mineral sands producer and, equally importantly, a fully beneficiated metallurgical complex. We not only mine, but produce value-added products for customers around the world. We are proud of the value we create, and retain, in South Africa. This is underscored by our position as KwaZulu Natal’s leading taxpayer, paying $79 million in taxes and royalties in 2018 alone.
“Our investment in Zulti South will ensure we maintain our contribution to the province and our partner communities. We want to recognise the support from the Government of South Africa, the KwaZulu Natal provincial leadership and, most importantly, the invaluable support of our host communities – Mbonambi, Sokhulu, Mkhwanazi and Dube – in securing the future of this world-class business.”
The UK Department for International Trade (DIT) has welcomed the announcement. Secretary of State for International Trade Dr Liam Fox MP said: “I strongly welcome the news confirming Rio Tinto’s further investment into South Africa. Their investment highlights the global outlook of UK based companies and the UK’s lead in responsible mining development.
“DIT is committed to supporting UK based businesses expand operations overseas, and we’re pleased to support Rio Tinto in this project which will create jobs and drive prosperity at home and abroad.”
British High Commissioner to South Africa Nigel Casey MVO said: “We’re delighted by this vote of confidence by Rio Tinto in South Africa and its mining sector. We have been working hard over the last year to support existing and potential UK investors in South Africa, in support of President Ramaphosa’s drive to increase investment here. Our joint work will continue, in the run up to the London Africa Investment Summit announced by our Prime Minister in Cape Town last August, which will take place later this year or in early 2020.”
The Prime Minister’s Trade Envoy to South Africa Andrew Selous MP described the investment as a “vote of confidence in the overall UK-South Africa trade and investment relationship and will increase prosperity in both our countries”.
Her Majesty’s Trade Commissioner for Africa Emma Wade-Smith OBE said the announcement “demonstrates the UK’s commitment to promote a responsible, sustainable and values-driven approach to investment on the African continent, to create inclusive growth and mutual prosperity.
“As part of this commitment, the UK Government supports UK companies doing business in Africa as part of our ambition to further increase the flow of investment into Africa. The UK currently holds over £45bn of investment stock in Africa and we intend to grow this, with the intention to become the largest G7 investor in Africa by 2022,” she said.
RBM is South Africa’s largest mineral sands producer, predominantly producing rutile, zircon, titania slag and high purity iron.