Infrasors – a mining company in the making
The Lyttelton dolomite mine in Centurion, Pretoria, is Infrasors’ flagship operation. A Delf Silica tanker, one of a fleet of 10 that delivers product to the foundries and other customers. Above: Screening at the Lyttelton dolomite mine. Left: The new Lunar plant at Lyttleton with crusher run stockpile. One of the newer additions to the mining board of the JSE is resources company Infrasors Holdings, which mines dolomite and silica. Though it tends to be seen as either a supplier of construction materials or as an operator of quarries, Infrasors is – in the view of its management – very decidedly a mining company.
Moreover, it has aspirations to expand its activities from industrial minerals into other areas such as iron ore or manganese mining and in fact has a pipeline of potential projects under evaluation. Modern Mining’s Arthur Tassell recently spoke to Stephen Courtney, a founder of the company and the current Commercial Director, and Trevor Robinson, the CEO, for a briefing on Infrasors’ activities and strategy. Infrasors’ two main subsidiaries are Lyttelton Dolomite, which owns and operates the Lyttelton dolomite mine in Centurion, Pretoria, and the Marble Hall mine in Mpumalanga, and Delf Silica, which mines alluvial silica sand in the Bronkhorstspruit area.
The Delf mine only has a remaining life of six years but two development projects, Pienaarspoort and Cullinan, will give Infrasors the capability to remain a major producer of silica for decades to come. Pienaarspoort, a hard rock deposit, will enter production later this year while Cullinan, an alluvial deposit, will come on line in 2011. While some of the group’s operations date back many years (the Lyttelton mine was established in 1938 and the Marble Hall mine in 1911), Infrasors itself is a more recent creation.
It was founded by Courtney and Walter Stander in 2007 and listed on the JSE’s AltX the same year. The capital raised was primarily used to acquire Lyttelton Dolomite and Delf Silica. The recent transfer of the listing to the main board of the JSE took place in January this year and signalled Infrasors’ determination to become a significant player in the mining market.
“The main board listing will increase the tradeability of our shares and give us a broader base of shareholders,” says Courtney. “It will also enhance our ability to raise capital, which is important given our desire to develop new mines.” Is the mining board the right place for Infrasors to be listed? Courtney has no doubts. “We have an exploration division, Inframin, which operates just like any other junior explorer,” he says. “In terms of our mining operations, we’re a conventional open-pit miner, albeit on a relatively small scale at this stage.
We produce Competent Person’s Reports, just like any other mining company, and we are also obliged of course to meet the BEE requirements of the mining industry. In every aspect of our operations, in fact, we are subject to the same rules and requirements as the rest of the mining industry. So, yes, we do definitely see ourselves as a mining company.”
The issue is not just a semantic one for Infrasors. As Courtney points out, being identified as a miner will enhance the company’s ability to expand into new minerals, such as iron ore, manganese, fluorspar and possibly coal. “Dolomite and silica have provided a good base for Infrasors but we regard these commodities as just the start,” he comments. “We have an appetite for growth and we see ourselves as saying this, we don’t want growth just for the sake of growth.
New projects and acquisitions must fit into our operational profile – which is opencast bulk mining – and must also meet our in-house valuation model and criteria.” He adds that Infrasors has no interest in what he terms ‘glamour minerals’ – gold or platinum, for example – and that its focus will continue to be on industrial minerals. “Inframin has a number of projects under consideration already and we are keen to build up our project pipeline even further,” he notes.
He stresses, however, that Infrasors will be cautious in its expansion. “Our policy is that exploration projects must never take up more than around 5 to 10 % of enterprise value,” he says. “In terms of acquisitions of going concerns, the underlying assets must be at least equal to the purchase price net asset value as we have no interest in simply buying goodwill.” Courtney, who is an Irish-born Chartered Accoun-tant, has 20 years’ experience in the world of corporate finance.
Providing Infrasors with the hard technical and professional management expertise needed for an emerging miner is Trevor Robinson, who was appointed CEO in July last year. He has more than 20 years of experience in contract mining, most recently as the MD of Concor Mining. Apart from bringing a new professionalism to Infrasors’ existing mining operations, his skills will also be crucial as the company expands its mining interests. “A major part of our costs lies in the moving of material so obviously we need to make this side of our business as efficient as possible,” he says. “This is an area where I believe I can add value, as success in the contract opencast mining field is all about the efficient utilisation of plant and personnel to ensure that material is moved at the lowest cost per tonne or cubic metre.” In terms of materials movement, Infrasors’ flagship is the Lyttelton mine, which in recent years has been roughly a 1 Mt/a operation.
With South Africa now emerging from recession, Infrasors has invested in an expansion of the mine – at a cost of over R20 million – and will now be able to produce up to 1,8 Mt/a of product, although this level of production is only expected to be reached in 2011. The expansion has involved the upgrade of the existing aggregate plant (known as ‘Sputnik’) and the installation of two new plants known as ‘Pluto’ and ‘Lunar’. The mine has also started to move overburden on the southern and western sides of the pit in order to expose more of the orebody, which will increase the life of mine from 11 years to 37 years. “Operationally, mining the Lyttelton orebody and processing the ore is a fairly straightforward exercise,” states Robinson. “The load-and-haul operation is carried out by a small fleet of Bell ADTs – mainly 35-tonners – working in conjunction with 30 to 40-t excavators while the processing consists of crushing, screening and washing.
We have contractors undertaking the load-and-haul and drill-and-blast but we carry out the processing ourselves with our own employees. Possibly the biggest challenge we face is that we are mining within the outer suburbs of Pretoria, so we have to take great care not to disturb our neighbours. We’ve developed a very close relationship, in fact, with them and we have an environmental forum which meets every month to iron out any problems.
In my experience, it’s unique. Apart from neighbouring businesses and residents, members of the forum include the local council and representatives of the DMR.” The products supplied by the Lyttleton mine are primarily metallurgical dolomite for the iron and steel market and aggregate dolomite for the construction industry. Along with the Marble Hall mine, it is also the main South African supplier of stone dust to the underground coal mining industry.
The stone dust, which is applied to the sidewalls and hanging walls of coal mines and functions as a fire retardant, is produced by a milling plant located at each mine. The Marble Hall mine is a much smaller operation than Lyttelton, with an annual production capacity of 350 000 tonnes. The resource at the site is essentially unlimited – Infrasors says the life of mine is in excess of 1 000 years at the current level of production – but the mine is constrained by a relative lack of demand in the area.
On the silica side, the Delf mine – established in 1995 – mines and beneficiates sand and silica products for use in foundries and in the manufacture of tile adhesives. To a much lesser extent, it also supplies the glass industry, the leisure market (particularly golf courses) and the filler market. Delf operates its own fleet of 10 tankers to transport silica to the foundries and other customers.
The mining operation is simplicity itself with 30-t excavators loading Bell B25 dump trucks and with no blasting being required. Beneficiation consists of washing, screening and drying. Last year three of the existing four dryers were refurbished while a fifth dryer with a capacity of 25 t/h was commissioned. The dried silica capacity currently available is 360 000 tonnes per annum but optimisation of the operation could see this being increased to 500 000 t/a if necessary. Delf is one of South Africa’s two major silica mines, the other being Petmin’s SamQuartz, which is particularly strong in supplying the glass market. As mentioned, Infrasors has plenty of upside with respect to its silica mining, with its two expansion projects, Pienaarspoort and Cullinan, both at an advanced stage.
Pienaarspoort, an amber silica deposit located close to Delf, is well suited to producing products for the metallurgical, foundry and glass manufacturing markets. A feasibility study has been completed, a mining licence has been approved, the rehabilitation guarantee has been paid and the mine and plant design is due to start shortly with production scheduled to start in the second half of this year.
The life of mine is estimated at in excess of 100 years. Cullinan, for its part, was an acquisition made last year. It lies 40 km south of Delf and, once in production, will have a life of mine in excess of 30 years. It will produce a high-quality metallurgical foundry sand, as well as amber grade sand for the glass industry. A small scale mining licence has already been awarded and Infrasors is busy with the regulatory process for a full licence.
Cullinan is scheduled to be in production in 2011. Infrasors, as one would expect, has good BEE credentials, with the Infrasors Empowerment Trust (basically a vehicle to allow Infrasors’ black employees to hold equity in the group) having an equity stake and Lereko Investments, a BEE company, holding a further stake totalling 31% of the issued equity. Its BEE scorecard rating is currently at Level 8 but the company anticipates being at Level 4 in F2011.
The group has traded profitably since inception, with its turnover (in the 12 months to 28 February 2009) being just under R240 million. Nevertheless, it has felt the recession over the past year, with its sales to the foundry industry in particular having suffered. Comments Stephen Courtney: “We’re very healthy. We have R650 million in assets on our balance sheet, R40 million in treasury and we own nearly 2 000 ha of land, all of it unbonded.
In addition, our debt to capital ratio is less than 18 %. In our 2008 financial year, we recorded an operating profit of R76 million. With the deterioration in trading conditions following the global financial crisis of late 2008, this profit dropped to around R39 million in the 2009 financial year. Our figures for the first half of F2010 were also depressed but as markets return to normality in F2011 we expect a recovery.
The South African economy is clearly turning – and bear in mind that all our product is sold locally – and we’re certainly seeing many of the foundries and furnaces that were closed down coming on line again. Overall, we’re confident that Infrasors will show very good growth over the next several years. Moreover we have invested more than R60 million in capex during the downturn. As a result we now have capacity for substantially higher production tonnages at both Lyttelton and Delf.”