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RBIDZ nyanza light metal soft launch 11

CEO Donovan Chimhandamba. South African ilmenite used to manufacture titanium dioxide pigment in KwaZulu-Natal is on the way to receiving a major value boost. This because ilmenite, a heavy minerals sands derivative, sells at around $300/t on export markets, whereas using it to manufacture titanium dioxide pigment at the Richard Bay Industrial Development Zone will enable it to fetch a ten-times-higher $3 000/t. Planned now is to add value to some of that ilmenite by elevating it into titanium dioxide pigment at the Richard Bay Industrial Development Zone in KwaZulu-Natal, to enable the locally mined mineral to fetch ten times more on export markets.

The first thing the R14-billion Nyanza Light Metals project is trying to achieve is to move Africa’s abundant raw materials up the value curve, Nyanza CEO Donovan Chimhandamba emphasised to Engineering News & Mining Weekly in a Zoom interview. Nyanza is putting together a project for 80 000 t/y of titanium dioxide pigment, which is probably around half of Africa's capacity and just over 1% in terms of the global market. The project highlights the huge opportunity for Africa and South Africa to move up the value curve and start establishing advanced material production companies that make competitive use of locally mined materials.

Nyanza will be sourcing its ilmenite from within South Africa and the region and manufacturing costs could be lowered if a way could be found to blend in the 45-million tons of stockpiled ilmenite-containing slag at Evraz, the former Highveld Steel and Vanadium, in eMalahleni, Mpumalanga, with higher content ilmenite or synthetic rutile from Richards Bay Minerals. Self-generation of 12 MW of solar power supported by battery storage is planned, augmented by cogenerated electricity from the titanium dioxide pigment plant itself once it is in operation.

Already commissioned is a R200-milion product testing and development centre, which is able to provide 700 t/y of titanium dioxide pigment sample to offtake partners. Offtake agreements for more than 60% of the 80 000 t/y capacity have already been signed. While the main plant is being built, the testing and development will be used to train the 850 employees that will be brought in early for upskilling. Africa Finance Corporation of Nigeria and African Export-Import Bank of Egypt are co-funders of the project’s feasibility phase, and a third multilateral international finance institution is going through concluding the agreements.

Senior debt is already oversubscribed, equity players have expressed interest, financial close is likely by year-end and construction is expected to begin next year. Arkein Industrial Holdings is the founding shareholder of Nyanza with 70%, while DBF Capital holds the remaining 30%. At financial close, arrangements with multilateral banks to allow for the conversion of investments into equity or debt are already in place. Currently, the project is run by a project development steering committee.

Engineering News & Mining Weekly: What are the benefits to the South African economy of the local manufacture in Richards Bay of titanium dioxide pigment by Nyanza?

Chimhandamba: In general, Africa has not taken advantage of its abundance of raw materials. It's not only in titanium, but you will find across many minerals we’re generally a miner and maybe some concentration of certain minerals, but with very little value addition. In the titanium space, for example, South Africa, and Africa at large, has an abundance of heavy mineral sands. In heavy mineral sands are companies such as Tronox, Rio Tinto, Base Resources, Masirah Rutile. Some mine heavy mineral sands and then export either ilmenite, zircon, monazite, without any value addition.

We use ilmenite, which Africa currently exports at prices as low as $300/t. It goes to Europe, Asia or America, where it's put through a chemical process by the likes of DuPont spin-off Chemours, which produces titanium dioxide pigment, and we, as Africa, import that at prices of $3 000/t, as an example. When you look at that, I think the first thing we're trying to address as Nyanza is that it’s time more African companies moved our abundant raw materials up the value curve.

With titanium dioxide pigment used in paints, industrial coatings, plastics, papers, inks, foods, medicines, toothpaste and the like, how much of it will be exported by Nyanza and how much used domestically?

As you’ve correctly pointed out, it’s literally in almost everything that we touch from the moment we wake up. The paint for your house, a paint for your car, your toothpaste as a whitener, sunscreen for UV protection, the inks that are used to colour your clothes. It's the most widely used mineral. South Africa currently consumes about 35 000 t of titanium dioxide pigment and all of that is imported. If you put the price at $3 000/t, you can understand the size of what it costs us to import titanium dioxide pigment. If you look at what we're exporting as ilmenite or unbeneficiated material, the number pales in comparison with what we pay, so we end up being a net importer of titanium and yet the titanium comes from our country.

At a continental scale, Africa consumes about 150 000 t/y of titanium dioxide pigment. The global industry is at about seven-million tons in terms of demand and supply, so Africa is still a small consumer when you look at it from that perspective. But if you look at Nyanza now putting together a plant for 80 000 t/y, that's probably around about 50% of Africa's capacity. While it's a phenomenal project, it's just over 1% in terms of the global market. When we started the project in 2011, we had an estimated capital cost of R4.5-billion for just the titanium plant without the infrastructure and utilities. At that time, the exchange rate was R7 to R8 to the dollar and today it is over R18 to the dollar, so today we're looking at financial close for the EPC and production costs of about $500-million, which is R9-billion and that covers not only the titanium pigment plant, but also a sulphuric acid plant that has to be built next to it, plus gas boilers, wastewater infrastructure and solar power and cogen power to manage our energy security.

If you look at the $500-million just for construction, there are still financing costs that we will incur. You have interest during construction and working capital, so we're looking at a peak funding close to $750-million, which is just under R14-billion in today's numbers. I know that R4.5-billion comes from 2011 and I see that number continues to appear, but again, the story remains that we have a huge opportunity as Africa and South Africa to move up the value curve and start bringing in these advanced material production companies.

From which mining companies will you source the ilmenite for the manufacture of titanium dioxide pigment – the Ti02?

In South Africa, there's quite a couple that already mine that. You have Tronox that mines that in KwaZulu-Natal and Richards Bay Minerals, in Richards Bay. Up in Mozambique, is Kenmare and in Madagascar is QIT. The region has multiple sources and depending on the final product we're making, you find different sources give you different kinds of product capability. We will be sourcing locally from within South Africa and the region.

In addition to the ilmenite, I believe you’re going to use titaniferous slag and acid from Evraz Highveld Steel and Vanadium. Tell us about that.

The Evraz Highveld Steel operation used to mine and process titanium ferrous magnetite. That steel operation was extracting iron and vanadium with typically about 30% titanium in the slag waste stream, whereas ilmenites start from 44%, 46% and going as high as 52%. There are more than 45-million tonnes available that have been stockpiled. It would be advantageous if we can find a way of bleeding and blending some of this low titanium content slag with the higher content ilmenite from, for example, Kenmare or maybe switching in with Richards Bay Minerals synthetic rutile, so Evraz, formerly Highveld Steel, presents an opportunity for the country to lower manufacturing costs by bringing in what would typically not have been usable in typical pigment production processes.

What are Nyanza’s energy and logistics plans at a time when South Africa is still experiencing electricity blackouts and rail disruptions?

The advantage we have is these things are happening while we are putting together a project and we have an opportunity to bring in all the required infrastructure upfront. For example, on the energy side, we're putting in 12 MW of solar power. We're also working with the national government and the Richards Bay Industrial Development Zone to look at putting in part battery energy storage solutions. These solutions would also look at trying to convert solar energy to baseload capacity.

In terms of rail and logistics, we’re at the port and we’re working again with the Richards Bay Industrial Development Zone and the Department of Trade, Industry and Competition in terms of connecting the zone to the mainline rail networks. Our rail connections generally are centred on access to the port, but also if we’re going to be moving Highveld Steel slag to Richards Bay, rail becomes quite critical. We cannot look at building the titanium plant, we have to look at an integrated approach where we're bringing in other infrastructure and utilities that we typically should not have been investing in, but in partnership with the government and other institutions, we’re developing these utilities.

Already commissioned is a R200-milion product testing and development centre, which is able to handle 700 t/y of titanium dioxide pigment. Why have you adopted this phased approach?

For customers to sign off trade agreements, they need to have samples, so the first important thing was to be able to produce, not at commercial scale, but at a significant volume, to enable customers to actually offtake and run in their paint formulations, as an example. That gives the customers confidence and because of that, we have managed now to sign some offtake agreements for more than 60% of our capacity. We think we’re in a short market, so there will always be excess demand for pigment. The first thing is to give us the capability. The second thing is that while we’re building the main plant, you need a facility that enables you to train employees. We’re going to have just over 850 permanent employees and probably half of that will be at operator skilled level and those people have to be brought in early to make sure you align or upskill them to what we need.

How is the R14-billion capital cost of the new second phase plant being funded?

In this project feasibility phase, we have investors and banks that have been co-funding with us. We have Africa Finance Corporation, out of Lagos, with assets of just over $11-billion. We have Afreximbank, out of Cairo, which has assets well over $22-billion. They've been co-investing with us, and we have a third multilateral international finance institution, which at this point I’m not allowed to mention, but we're going through some of the conditions and concluding the agreements. Africa Finance Corporation and Afreximbank have been funding the project to where we are and part of the reason why they came in early with us, the founding shareholders, was for them to develop projects in line with what they would want to fund once it's bankable.

The financial close of $750-million, with the players that we have at the table and expressions of interest from other multilateral banks, the senior debt is already oversubscribed and the equity players have also expressed their interest. The signing of the contract gives us the ability to freeze most estimations that we had and finalise the financial model and capital structuring. Over the next six months, what we'll be mainly be focused on is working on the syndication agreements with the banks and hopefully we have financial close by end of this year to commence construction next year.

What is the project’s expected internal rate of return?

I'm not so sure if I should be stating it here, but we're looking at US dollar internal rates of return that are above 20%. Depending on how we contract certain supply agreements, they could swing the number a percentage or two up or down above the 21%.

To what extent has the conclusion of the agreements with East China Engineering, Science and Technology been necessary to drive the project towards financial close and construction?

The $750-million is not small change. Banks can't place that kind of money without the confidence that first of all, we’ll be able to construct and commission the plant, and secondly, we'll be able to operate and maintain the plant. Without East China Engineering Science and Technology, we will not be able to demonstrate that capacity. East China Engineering has, in some cases, built plants in China much bigger than what we're planning to build and are the leading titanium dioxide pigment plant construction and operations company. Signing this signals to the banks that the major risks have been addressed. This will be a typical engineering, procurement construction (EPC) lump sum turnkey approach and then followed by an operations and maintenance (O&M) agreement for a further three years. This sorts out all the technical issues, the concerns, and the doubts that anyone would have had about Nyanza bringing this operation into the market.

South Africa’s Deputy Trade, Industry and Competition Minister Nomalungelo Gina said at the signing that investors are our salvation and that South Africa must be quick in sorting out regulatory blockages. What delays have been experienced by Nyanza?

When we started in 2011, the strategy was more focused on getting Evraz Highveld Steel slag to produce pigment. The challenges with such is that it has never been done before although we've done it at a pilot demonstration scale. When you're looking at such quantums, banks generally prefer to start with proven technologies. We had to revisit our approach and change from starting with the Highveld slag and go the conventional route of using ilmenite with the higher titanium content. Also, Evraz went into business rescue and we lost a few years in trying to carve out an arrangement with a business rescue practitioner and then Covid happened, which did not impact us to the extent that operating companies were impacted because most of the work centred on feasibility studies, engineering designs.

The purpose of doing feasibility studies is to gain more clarity in terms of what you can and cannot do. In the 12 years, probably five years could have been taken out if some of these things had not happened. But projects of this nature generally take time. Since starting to talk to East China Engineering Science and Technology over the last nine months, we have seen the project move at significant pace. Regulatory-wise, I must say the Department of Trade, Industry and Competition, the Richards Bay Industrial Development Zone, and the KwaZulu-Natal provincial government have come to the party in a big way as they see this as a catalytic and transformative project that can drive or stimulate the local economy as well.

When is the production from the main plant set to ramp up?

This is a large project. It's a mini town that we will be building and we're looking at 36 months for construction. Based on what we have signed, East China Engineering Science and Technology will be able to ramp up within eight to 12 months after mechanical completion, so in 36 months we'll be looking at cold commissioning, but then we start to load in the plant and ramping up, so in about 42 to 46 months, we would have ramped up to design capacity.

What has persuaded Nyanza to plan a capacity of 80 000 t/y of titanium dioxide pigment?

In our operation, one of the critical parts is the calcination process. When you look at rotary kilns that are used in our process, once you start getting over 40 000 t capacity, you're operating at levels that not many players operate at. We have two 40 000 t kilns that dictate the capacity. Fifty thousand tons would be too large and going smaller would not provide the best economies of scale. That's what has dictated the 80 000 t.

Have you secured offtake agreements?

As we speak, we have more than 75% or close to 60 000 t of our 80 000t signed up. Eighty-five per cent of it is the large international paint producers. Internationally, paint producers can take huge volumes, whereas in Africa, paint producers take a ton or a container. It’s a disaggregated market, in which you have to work with distributors to consolidate your market. Sales efforts in Africa are a little bit more because you have to deal with a lot of smaller parties. But the pricing in Africa is commensurate with the effort. International customers give confidence to the banks because they’re credit rated and listed but we think once we’re in operation, we'll try and drive much more continental consumption and do a lot more trade within the continent itself.

In the long term, do you ever anticipate that you may list your company on the Johannesburg Stock Exchange?

Listing always comes with its own challenges. When you're still in a growth phase, our view, in the short term, is if we can avoid listing and try and get the operation to steady state, that’s what we would typically do, and the multilaterals we’re working with also prefer these private assets. Once we’re at steady state and we're looking at expansion, we’ll have to revisit our strategy in terms of the capital markets – and also we may create some exit strategy or platform for some of the shareholders. But right now, what you're seeing is the bulk of the shareholders are multilateral financial institutions, which have more patient capital and are looking to ten years plus in our case.


The continent of Africa must industrialise as quickly as it can, Gina stated when she presided over last week’s signing ceremony of contracts to advance a titanium beneficiation project in KwaZulu-Natal.

“Africa must catch up to other industrialised economies,” Gina added as East China Engineering Science and Technology formalised an EPC contract as well as the O&M contract for the pigment plant in the Richards Bay Industrial Development Zone.

“The African Continental Free Trade Area enables us to change the game. Our endowments can be beneficiated on the continent, and be exported as value added products. Nyanza Light Metals represents that direction of downstream beneficiation,” said Gina, who emphasised the need for government officials to keep on improving project speed and turnaround times for investors.

“Investors are our salvation and we must be quick in sorting out regulatory blockages. This is critical for us as government because the spin-offs are far wider than corporate tax benefits. Associated with this project is vital job creation – permanent jobs – once the company operates in full after construction is completed. We will meet on the ground as we will come and do site inspection from time to time,” Gina said in acknowledging the contributions of Nyanza and the government of China. 



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