Agencia de Informacao de Mocambique (Maputo)
2 February 2009
Maputo — The mining of titanium bearing heavy sands in the southern Mozambican district of Chibuto has been put on hold, and may not go ahead for years, if at all.
The giant multinational mining corporation, BHP-Billiton, which controls Corridor Sands Ltd, the company with the prospecting rights, has announced that its pre-viability study "reached the conclusion that the value that can be obtained from this deposit is inadequate to justify its development at this moment".
The BHP-Billiton release, received by AIM on Monday, states that "consistent with our disciplined analysis for allocation of capital, all projects remain under review until approved for the development phase".
Although the pre-viability study for Corridor Sands does not conclude until 31 March, BHP- Billiton believes that its findings so far do not justify the start of mining.
At first sight this may seem strange, since Chibuto was reported to hold the largest deposit of titanium bearing sands anywhere in the world. However, the current global recession will certainly cut demand for titanium ores, even in the Chinese market.
The project also faces electricity and transport problems. BHP-Billiton abandoned the original plan of building a titanium smelter in Chibuto, and opted to process the ore in Maputo province, where it is already the major partner in the MOZAL aluminum smelter.
But processing titanium ores uses enormous amounts of electricity, and southern Africa is running out of power. Until new sources of electricity come on stream (such as the proposed new dam at Mpanda Nkua on the Zambezi), it is difficult to see where BHP-Billiton could obtain the power for a smelter. This same problem has already held up approval for a second extension to the MOZAL smelter.
Processing the ore in Maputo means moving it there, presumably by rail. But the Chibuto deposit is about 70 kilometres from the Limpopo line that runs from Maputo to Zimbabwe. A new branch of the railway (or possibly a new road) would have to be built.
Doubtless these are among the concerns leading BHP-Billiton to put the whole project on hold. But it is not pulling out of Chibuto altogether. The release said that BHP-Billiton "will wait for the renewal of its exploration licence for possible future developments of the project" - which kicks the ball into the court of the Ministry of Mineral Resources which deals with mineral licences.
A source in the office of Mineral Resources Minister, Esperanca Bias, cited in Monday's issue of the Maputo daily "Noticias", said that BHP-Billiton had already requested an extension of the licence. "In the meeting we had with the project proponents in mid-December, they assured us that in 2010 they would request the mining concession, and within three years after that all the steps would have been taken to begin effective operations".
The Ministry said it had received no information from BHP-Billiton that the project would be halted, and the staff laid off.
16 people in the Maputo Corridor Sands office are receiving redundancy notices. This comes as no surprise, given the end of the studies which this office was handling. But Corridor Sands workers in Chibuto also say they are receiving redundancy notices.
The Chibuto district government, which has seen Corridor Sands as a potential source of significant employment in the district, has not received any official communication from BHP-Billiton about the future of the project.
The icing on the bitter pill is that BHP-Billiton says it is currently exploring, with the Industrial Development Corporation (IDC) of South Africa (which holds 10 per cent of the shares in Corridor Sands) and the Mozambican government "the best way of continuing a programme of support to the community of Chibuto over the next two years". Such support "might include more advanced primary health care and community development based on agricultural projects".
It was estimated that Corridor Sands would create 1,750 jobs in the construction phase, with 475 permanent jobs for Mozambicans in the operational phase.
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