Beneficiation rhetoric debunked: SA does process its metals into final products – for now

One of the narratives that has become ingrained in ANC circles and promoted by the likes of Minerals and Petroleum Minister Gwede Mantashe is that South Africa’s mining sector is exporting raw ore rather than processing the minerals and ­metals it extracts.

But that is simply not true, as a recent media and analyst visit to Valterra Platinum’s processing facilities on the outskirts of Rustenburg made gin-clear.

“There is quite a bit of chat around the mining industry needing to beneficiate, and you can’t just paint the entire industry with the same brush,” ­Valterra CEO Craig Miller said during a Q&A at the conclusion of the tour.

“We actually beneficiate the product to its very end state. It’s a platinum bar, and from that you can make a platinum ring, but that’s the jeweller’s responsibility. Predominantly, the PGM [platinum group metals] producers in South Africa beneficiate them to the final product.”

This was on full display at the precious metals refinery (PMR) of Valterra, formerly Anglo American Platinum, before its demerger in May of this year.

It was an eye-opening experience as we witnessed the later stages of the production process. There were several technical demonstrations and presentations that flew over my head, but the final stage – when platinum or palladium is melted, poured and then cooled, with the end product in this case being a bar – was both visible and tangible.

The initial product is not perfectly bar-shaped, and a few of the ones that we saw emerge from the process resembled a rectangle with a bulge jutting out from the top.

These bulges were expertly sliced off, with the offcuts destined to be melted again into another bar. 

Holding a platinum bar in your hand is a revelation. Platinum is extremely dense, making it much heavier than metals such as gold. The bars were the size of a large chocolate bar, but they weighed as much as 4.7kg.

At the spot price for platinum that day, I reckoned I was holding an item worth about $230,000 – the most expensive thing I have ever gripped in my hand.

No metal, please

But there was no prospect of sneaking one out. Few outsiders get to visit the heavily guarded facility and security was airtight.

We had been told beforehand not to wear anything metal and to declare any metal we might have for medical reasons in our bodies or mouths. The only exceptions were wedding bands and reading glasses.

In my case, the personal protective gear I had been issued had a flaw. A security officer noticed that my shirt had metal buttons and I had to remove it to go through the scanning process to leave the premises. I had a T-shirt underneath so I didn’t have to go topless. 

This was a much lengthier process than going through airport security, which is why access is so limited. It’s not conducive to industrial tourism.

But the visit underscored Miller’s point that metals in South Africa are being processed into final products. Valterra also has a base metals refinery that we visited, where, among other things, its nickel is processed to the cathode stage – ready for industrial use – and the end product is registered on the London Metal Exchange.

The sheer scale of the operations was also breathtaking. At the smelting and converter plant, from the vantage point of a raised platform, we saw a massive bucket-shaped ladle on a pulley system pour a red-hot blend of metals resembling lava into a circular mould protruding from the floor – one of dozens.

The enclosed area was the size of a huge airport hangar and when we were allowed on the floor – only the operator with a handheld control device is allowed there when the ladle is in operation – the moulds were still emitting heat and the substance inside looked like lava in its cooling stage.

Over the past two decades, the PMR has refined 100 million ounces of PGMs plus a bit of gold – accounting for 30% of global PGM primary production. It was commissioned in 1989, and this raises a pertinent question: who would commit capital to build a smelter or refinery on this scale in South Africa today?

Well, the blunt answer is nobody in their right mind. For starters, such operations are power-intensive and with Eskom’s tariffs surging, even solar and wind projects – which don’t come cheap either – will be hard-pressed to fill the gap to keep such a plant running smoothly.

South Africa’s power costs have surged eightfold since 2008 and producers here now face energy costs that are 50% higher than their Chinese competitors, according to a recent report by the investment service Discovery Alert. By some estimates, the pricing gap is even bigger.

This goes a long way towards explaining why South Africa’s ferrochrome industry has gone belly-up and in effect moved to China, and its steel industry has also collapsed.

And mining production, including for PGMs, is also declining in South Africa after years of underinvestment, removing any remaining incentive to build new plants to process the stuff.

There are also many other deterrents to such investments, including mounting concerns about water infrastructure and supply, policy uncertainty and a slow-growth economy that remains scarred by sky-high levels of unemployment and poverty – along with the potential for social unrest that comes with such baggage.

South Africa is processing metals and it is misleading to suggest otherwise. But it is also in an advanced stage of deindustrialisation.

Operations such as Valterra’s may indeed one day be open for public tours – as museums of an industrial past. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.