Kalagadi seals R2.2bn AfDB loan to build Hotazel project

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Londiwe Buthelezi

The women-led Hotazel project of Kalagadi Manganese has secured a R2.2 billion loan from the African Development Bank (AfDB) after a pool of investors that had agreed to fund it, including a couple of banks, pulled out in 2011.

The loan facility, announced at the Investing in African Mining Indaba yesterday, was enabled by a pool of foreign investors, including Chinese firms, but Kalagadi said it was looking locally for further funding.

The loan will fund the integrated mining and beneficiation project at Hotazel in the Northern Cape.

The Hotazel project is divided into three parts – the mine, a sinter processing plant and a smelter to be built in Coega, Eastern Cape.

The mine itself will produce 3 million tons of manganese ore a year on completion and this will be beneficiated to 2.4 million tons of high grade manganese sinter. The sinter plant, which was hot commissioned last month, is now producing more than 2 000 tons a day.

A large part of the loan – R1.4bn – will be used to finance the further development of the mine and the sinter plant and the rest will be used to partly finance the development of a smelter at the coast.

“There is also a standby facility that will finance the smelter when it reaches the stage of bankability,” AfDB chief investment officer Haidara Alhassane said.

Kalagadi chief executive Thulo Malumise said the smelter’s feasibility study had been concluded and the company aimed have the plant up and running in two to three years.

The value of the smelter was estimated at between R5bn and R7bn and Kalagadi executive chairwoman Daphne Mashile-Nkosi said the company had already signed a framework agreement with one company that would provide funding to the value of R7bn.

When complete, the smelter will produce 320 000 tons of high-carbon ferromanganese a year.

A take-off agreement for the ferromanganese has been signed with JSE-listed Metmar and Kalagadi is finalising plans for the first shipment with Transnet Freight Rail.

Mashile-Nkosi said electricity supply constraints would not be a problem for the smelter as Coega had a dedicated supply from the Disa power station.

The loan facility is the first mining beneficiation project that the AfDB has become involved in within South Africa.

The agreement was initially signed in 2011, but the AfDB said the loan had not been dispersed because all other financing parties, “including many banks”, had pulled out when Kalagadi could not provide the guarantees that they wanted.

“Since the time when the banks pulled out of the transaction, the sponsor of the project was able to show commitment not just by words but by putting actual funding into the project,” Alhassane said.

He said the AfDB did not look at Hotazel as a project, but rather as the sort of story that it would like to see more frequently.

The Kalagadi loan has an 11-year term. Its interest rate was not disclosed, but Alhassane said the loan was priced on commercial terms and had a two-year grace period.

He said the AfDB had a view that it could add value to its developmental loans by stretching their maturity period.

Although the development bank has provided loans for beneficiation projects in other parts of Africa, it said the Kalagadi loan was the largest to date and it was happy to look at more beneficiation projects in South Africa.


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