In a seminar for investors held recently, Xstrata gave an outline of its Chrome Division's present and future.

The company emphasized that for cost reduction and stronger competitiveness, it would promote production of ferrochrome in the eastern region by Premus technology, which ensures the company to sizably reduce power consumption and smelting UG2 fines, the byproduct from platinum mining as the main feed in the western region.

Xstrata also mentioned that demand for stainless steel would continue to grow at an annual rate of 6.3% during the 5 years of 2011-2015 as the urbanization in the developing countries like China and India progresses, and as a result, demand for ferrochrome will also grow.

More details given in the outline are as follows:

Chrome Mining
Xstrata owns 5 chrome mines in South Africa with ROM (run of mine) production capacity of 5.30 million tonnes per year. The output from the mines is processed in its smelting facilities, 20 furnaces with annual ferrochrome production capacity of 1.97 million tonnes, the biggest in the world. In addition to the output from the chrome mines, Xstrata expresses its intention to fully utilize the UG2 fines, a byproduct from platinum mining.

Ferrochrome Smelting
Cost reduction in ferrochrome production in the East is mainly by the Premus Technology, which was adopted for the Lion Phase One and proved good production efficiency especially in reducing power consumption down to 2,300 KWh per ton of ferrochrome (3,500 KWh by Outokumpu method, 4,000 KWh by the conventional ACAF, and 4750 KWh by DCAF).

Cost reduction in ferrochrome production in the West is mainly by palletizing UG2 fines, a very efficient way to fully utilize the byproduct from platinum mining. Percentage of pellets in the raw materials of chrome fed to Xstrata's furnaces in the West was between 40% and 50% in 2005, about 80% in 2008 and is planned to reach nearly 100% in 2015. Consequently, power consumption will be reduced to 3,400KWh in 2015 from 3,700 KWh consumed in 2005 and 3,600 KWh in 2011. Reduction in quantity of cokes as reductant is another factor to cut costs. Compared to the consumption of cokes in 2005, it became down to 82% in 2011 and will be 75% in 2015.

Construction of a new palletizing plant at Tswelopele of which capacity is 600,000 tons per year is ongoing and to complete in the second half of 2012 on USD 114 million investment.

Lion Phase 2 of which capacity to produce ferrochrome is 360,000 tons per year is to complete in the first half of 2013. Owing to the company's proprietary Premus technology, about 87% of chrome in the ores is recovered in the ferrochrome produced (cf 67% by the ACAF, 75% by Outokumpu method and more or less 90% by the DCAF).

Lesedi power generation project is being developed jointly with an independent power producer to construct two units of 300MW power generators in two phases, in order to reduce dependence on ESKOM. Supply of power from this project is scheduled to start in 2014 to ramp up to its full capacity in 2016-2018, when more than 60% of the company's requirement of power will be supplied from own power generation.

China, the big appetite
Ferrochrome: China's imports of ferrochrome in 2011 are estimated 2.4 million tonnes, of which 850,000 tonnes from South Africa, 300,000 tonnes from Kazakhstan and 200,000 tonnes from India. Chrome ore: China's imports of chrome ore in 2011 are estimated, 3.75 million tons from South Africa, 1.20 to 1.50 tonnes from Turkey, 0.5 million tonnes from Oman and 0.3 million tonnes from India. China's demand for ferrochrome in 2010 was 3.0 million tonnes and is estimated to increase to 4.0 million tonnes in 2011.

China has little resources of chrome and growth of ferrochrome industry is dependent on availability of traded chrome ores. In addition, the industry is subject to the governmental policies of power supply and environmental control, which could give a substantial pressure on future production.

(Sourced from TEX Report Limited)

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