LEADING manganese ore producer Consolidated Minerals (Consmin) has announced that it is in an important transitional year as its Woodie Woodie mine moves from being contractor-operated to owner-operated.
The announcement follows a detailed review of Woodie Woodie’s strategic plan during the first half of 2011, and the company expects the shift will help reduce cash costs at the Pilbara mine.
Ukrainian-owned Consmin, which also owns 90 per cent of Ghana Manganese Company (which in turn owns and operates a manganese operation in Ghana), is one of the top five manganese ore producers in the world.
Record production levels experienced at Woodie Woodie last year confirm this.
Despite Consmin taking a hit last year as the Australian dollar strengthened and manganese prices deteriorated, reaching significant lows in January due to an increase in ore stocks at Chinese ports, the company is encouraged by forecasts of price recovery and improving demand for manganese oxide ore towards the second quarter of this year.
Consmin’s wholly-owned subsidiary Pilbara Manganese owns the Woodie Woodie manganese mine, about 400km southeast of Port Hedland.
The tenements comprise 5500 square kilometres and the current 100sqkm active mining area is referred to as the ‘Woodie Woodie corridor’.
The manganese ore produced at Woodie Woodie is globally recognised for its high manganese and low phosphorus content plus excellent manganese to iron ratios, making it well suited for blending with lower-grade domestic ores in China and the Ukraine.
Woodie Woodie experienced a positive trend in operational performance throughout 2011, reaching record production levels of 392,100 tonnes in the final quarter
and an annualised rate of 1.48 million tonnes: a 19 per cent increase on 2010. Dry metric tonne units (dmtu) increased by 13 per cent to 64.6 million.
Confirming Consmin’s long-term exploration commitment at Woodie Woodie, the company increased its total reserves and resources at the mine by 26 per cent (to 16.7mt) and 48 per cent (to 29.9mt) respectively on the previous year.
Consmin believes this upward production trend to be the result of continued focus on the successful execution of operational efficiency projects across the site.
“We have an ongoing program to improve the efficiency of our mining fleets and the ultimate goal is to come down the cost curve,” Consmin chief financial officer Jackie Callaway said.
“One of the main successes of this program was the execution of recommendations from a comprehensive review of our drill and blast operations that coincided with
the final commissioning of five new drill rigs in early 2011.
“The execution of this project has resulted in improved drilling productivities and sustained reduction in the drill and blast unit cost.”
The Woodie Woodie operation involves open pit mining methods, with the ore blended to maintain consistent product specifications.
According to Consmin marketing managing director Peter Allen, the company markets a unique suite of differentiated products produced from both the Australian and Ghana operations, which are “specifically targeted to meet a variety of specialised metallurgical applications”.
Following a review of the Woodie Woodie strategic plan, the Consmin board approved a recommendation that all load and haul mining operations be directly undertaken by the company.
Consequently, Consmin notified the current waste mining contractor that its contract would not be extended beyond its expiry date of December 31
The new owner-operator mining plan required the company to purchase a range of primary mining fleet throughout the year.
Consequently, it has ordered about $44 million worth of globally-recognised equipment, with delivery of the first tranche due early in the second half of this year.
“The approval and new investment underpins the company’s commitment to reducing and controlling the unit cost base at Woodie Woodie,” Mr Allen said.
Production and exploration 2011 was a successful year for exploration at a number of prospects in the Woodie Woodie corridor, with numerous high-grade intercepts
Consmin spent US$23 million on exploration and development in the region last year, and the company expects to spend a similar amount this year.
Drilling at Extension Cord/Chutney prospect provided four excellent mineralised intercepts with a manganese content greater than 41 per cent and more than 18m in thickness.
At the Plug/Paystar prospect, a short infill program yielded a number of high-grade intercepts that confirmed depth extensions to the Plug deposit, including 15m grading 45 per cent manganese from 98m and 20m grading 40 per cent manganese from 101m.
Drilling at the Whodowe deposit in the north of the corridor delineated surficial manganese mineralisation as well as depth extensions to the main ore body. This included 16m grading 40 per cent manganese from the surface, 14m grading 49 per cent manganese from 3m and 16m grading 47 per cent manganese from 8m.
The Whodowe deposit presents as a near-term opportunity to access additional ore in the event that there are further positive movements in the price for manganese ore during 2012.
Consmin reported that more drilling at the Chutney/Extension Cord prospect was scheduled to take place before June. Regional exploration drilling also continued at Woodie South, with intercepts including 11m grading 39 per cent manganese from the surface. Drilling also took place at Skull Springs, Mt Sydney, and Mt Cooke. Intercepts were calculated using a 25 per cent managanese cut off and included: 11, grading 32 per cent manganese from 0-11m, and 10m grading 49 per cent manganese from 16m to 26m in the same hole at Skull Springs; 7m grading 48 per cent manganese from 34m to 41m at Mt Sydney; and 10m grading 26 per cent manganese from 16m to 26m at Mt Cooke.
The majority of ore mined during the year was from the Greensnake, Demon, Homestead, Rhodes, Lox and Sardine complex of pits. Greensnake, Rhodes and Sardine
will continue to underpin production throughout 2012 and into 2013 as other pits are developed.
“There were very encouraging production outcomes at Greensnake pit, which was a significant producer of ore in 2011, and the stripping project here remains on track to be the backbone of high production from 2013 for a couple of years,” Ms Callaway said.
Woodie Woodie’s close proximity to the Port Hedland port means it is well situated to service high-demand Asian markets such as China.
Last year, Woodie Woodie manganese ore sales were up by 42 per cent to 1.66mt. Consmin believes the change to the new port loading facilities at Utah Point in Port Hedland supported this increase, with shipment sizes almost doubling and loading rates increasing by more than 300 per cent.
Global crude steel production for 2011 increased by 6.8 per cent to 1.5 billion tonnes, with the key Chinese market driving steel production and manganese ore demand reaching 683mt as a result.
Last year, China imported 13mt of manganese ore: an increase of 12 per cent compared to 2010.
“Due to the high quality of Consmin manganese ore and new product developments, demand remained strong over the year as evidenced by our sales, with Australian operations achieving record-breaking shipments of 1.7 million tonnes,” Mr Allen said.
“Despite robust steel production driving record Chinese imports of manganese ore during 2011, the benchmark price in China for imported manganese ore decreased to
US$5.50/dmtu for a 45.5 per cent grade: a 19 per cent drop in price.
“The benchmark price decreased further in January 2012 to US$4.75 for a 45.5 per cent grade.”
Mr Allen said the weakness in prices was largely due to market concerns regarding increasing manganese ore stocks at Chinese ports, which began the year at 3.4mt and peaked at 4mt in the third quarter.
“We are encouraged by improving production levels of Chinese crude steel as production appears set to achieve levels of approximately 700 million tonnes, driving robust demand for manganese oxide ore.” He said the Chinese stainless steel market had seen a soft beginning to the year on end-user demand concerns, which had seen prices of key stainless steel materials such as nickel, ferrochrome and electrolytic manganese metal come under pressure.
“Chinese port stocks have continued to be drawn down to levels under 3 million tonnes, which has resulted in positive market sentiment and a US$0.25/dmtu increase to US$5.00 in the May benchmark price, and a further US$0.15/dmtu increase to US$5.15/ dmtu for June shipments,” he said.
Future Consmin’s priority this year is the switch to full owner-operator status at Woodie Woodie.
“The key focus for the Australian business is to continue to enhance our operations through targeting operational efficiencies as well as implementing a stringent cost
management program, along with the successful transition to a full owner-operator at Woodie Woodie,” Ms Callaway said.
The resignation of former Consmin chief executive officer Glenn Baldwin was announced in the 2011 annual report, released in April this year.
The board has since reviewed the management structure of the company and appointed Paul Muller as the Australian managing director.
Mr Muller, who joined the company in May, has a strong mining operations background and recent relevant experience with transitioning from contract mining to owner-operator status.
By Helena Bogle