Apr. 8, 2015


Gareth Clifton

Mozambique

Gareth Clifton

Mozambique Manager, Kenmare Resources Plc.

"The strategy is basically to maximize the price we can get under current highly challenging market conditions."

BIO

Gareth Clifton is from the UK. He holds a degree in Economics from the University of Exeter and an MSc in African Studies from the University of Edinburgh. He joined Kenmare Resources as Mozambique Manager in 2001 having worked as General Manager for UTi Mozambique. He has been involved in the development of the Moma Titanium Minerals Mine from the exploration phase until today.

What is the current status of the Moma mine?

We completed the expansion works in 2013 and are now just about ramped up to full, expanded capacity, having invested approximately $400 million. With this expansion we have seen a significant QoQ increase in production since mid 2013. The overall expansion increased our installed capacity from 800,000 tons per year of ilmenite to 1.2 million tons. We are currently close to producing at that level.

What are your strategies for achieving solid results, despite the low price of zircon and titanium?

The strategy is basically to maximize the price we can get under current highly challenging market conditions. Indeed, with the expansion our cost per unit has decreased. We are essentially a fixed-cost business, so for each extra ton we produce the cost per ton declines as our variable costs are limited, and the production increase, as we have seen over the past 12 months, has reduced our cost per ton quite significantly.

How would you describe the current global demand for titanium and ziconium?

Demand is weak and it has been for the past 12-18 months. This is mainly due to a destocking process evident in the pigment market. Yet we are confident that there will be a significant recovery in prices. At the moment we supply approximately 8-10% of global ilmenite demand.

“The strategy is basically to maximize the price we can get under current highly challenging market conditions."

How have your export destinations evolved since we last spoke two years ago?

Europe and the US remain the key export destinations. A fair volume of zircon is going to China; it will take an increasing amount of ilmenite, too. We have a few other destinations that are quite significant, such as Saudi Arabia. We export to around 35 countries in total, but the main ones are still the US for ilmenite, Europe for zircon, and China for ilmenite and zircon.

How would you describe the company's contribution to the socio-economic development of the country?

Currently, we employ about 1,650 permanent staff, of which around 1,500 are nationals. We are the largest taxpayers in the north of the country. Additionally, have a significant CSR program, featuring a range of activities that we implement in the local community. In 2013 we spent somewhere in the region of $80-90 million, locally, in Mozambique.

How do you expect the LNG project to impact the region?

The oil and gas projects will bring challenges as well as benefits. The key for us, on the positive side, will be the prospective electricity generating plant, which will add to network stability, and the electricity stability is a very important factor. It is going to bring some challenges as well: the infamous Dutch disease, I think we are going to see salaries of qualified nationals in particular going up quite significantly and that is going to put cost-pressures on everyone, not just us, but all businesses in Mozambique.

What should be done from the public and the private sector to make the most of the support mining industry in the country?

The key factor is the supply of electricity. You cannot process anything without power and, at the moment, the network in the north of Mozambique is not able to delivery additional power, and this will be the case for the next four or five years until a new second line is built. So, my view is that Mozambique, once it establishes an adequate power distribution infrastructure, will be able to benefit more than today from its natural resources. For example, it would be possible to install pigment plants, synthetic rutile plants, or whatever was required to spur value added. Currently, we simply export the ilmenite, rutile, and zircon.

What is your 10-year outlook on the future of the mine in Mozambique?

We will renew our concession in 2029. We have 100+ years of mine life. We would expect prices to recover quite strongly in 2015. We have a large deposit, and there is a considerable opportunity for a further increase in production. We have already done some work on what we would need to do for a Phase III to increase production further. At the moment it is not something we are actively working on due to the market situation; however, if the improvements we expect in the market situation come to fruition then those plans would be dusted off and I would certainly like to see Phase III within the next 10 years.

© The Business Year - April 2015

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