JOHANNESBURG (miningweekly.com) – An electricity tariff proposal by South Africa’s State-owned power utility Eskom is supporting the continued operation of the Lion ferrochrome smelter in Limpopo province, Glencore-Merafe Chrome Venture has announced following its recent electricity tariffs engagements with Eskom.

However, a viable tariff solution has still not been arrived at for the Wonderkop and Boshoek ferrochrome smelters in the North West province and in the absence of a power solution being achieved for Wonderkop and Boshoek, both of these ferrochrome smelters will be placed on care and maintenance from January 1.

Glencore-Merafe Chrome Venture described the review undertaken to assess the feasibility of the proposal as being comprehensive and while the proposal remained subject to further approval processes, analysis indicated that it supported only the continued operation of Lion, which is the most efficient of the ferrochrome smelters.

“Unfortunately, it does not provide a sustainable solution for the long-term viability of the Boshoek and Wonderkop smelters,” Glencore-Merafe Chrome Venture noted in a release to Mining Weekly.

As a result, formal retrenchment notices are proceeding. Voluntary severance package approvals began on December 1, with certain of these notices and approvals remaining conditional until December 8.

Should a viable solution not be received from the government by December 8, these notices and approvals would automatically take effect and become binding.

Furthermore, in the absence of a viable solution, Wonderkop and Boshoek would be placed on care and maintenance from the start of the New Year.

Importantly, Glencore-Merafe Chrome Venture continued to be unequivocal about its commitment to engaging with all stakeholders and emphasised its actively exploration of other viable options to safeguard jobs and maintain operational sustainability wherever possible.

In August, Mining Weekly reported that Glencore-Merafe Chrome Venture was working with the South African government to find solutions amid not one of the ferrochrome smelters being operative, although Lion was expected be brought back into operation following maintenance.

Glencore Alloys produces chrome ore and then beneficiates it into ferrochrome product but is finding that it is getting most value by exporting chrome ore rather than adding value to the ore by producing ferrochrome, which should be a five-times value multiplier compared with chrome ore.

Moreover, beneficiation is a job-creation cornerstone, so closing all the smelters is not good for South Africa.

A negotiated price agreement, which is a flat rate, had, at that stage, been secured from Eskom, which eliminated the need to continue to shut down during winter months when tariffs are high.

What is being sought now by Glencore-Merafe Chrome Venture is electricity that is cheap enough for ferrochrome smelting to be competitive, as well as smelter inclusion into special economic zones, and the elimination of illegal mining of chrome ore, which accounts for about 10% of exports.

Taking 10% of the chrome units out of the market by stopping chrome crime would benefit the industry, which is well aware of the benefit of beneficiation. More South African beneficiation means more revenue, more jobs and less logistical pressure.

Also, capital investment in the new lower-energy SmeltDirect technology that slashes power needs will be taken up if there is more industry certainty.