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UNCLAS SECTION 01 OF 04 PRETORIA 000849 
 
SIPDIS 
 
DEPT PLEASE PASS USAID 
DEPT PLEASE PASS USGS 
 
E.O.   12958: N/A 
TAGS: EPET ENRG EINV EIND ETRD ECON SF
SUBJECT: South Africa: Minerals and Energy Newsletter `THE 
ASSAY' - Issue 1, January 2005 
 
REF: A) 2004 PRETORIA 3049, B) 2004 PRETORIA 2998 
 
This cable is not for internet distribution. 
 
¶1. (U) Introduction:  In January 2004, the Economic Section 
of Embassy/Pretoria produced the first issue of a new 
monthly newsletter called `The Assay'.  The purpose of this 
monthly newsletter is to highlight minerals and energy 
developments in South Africa.  This includes trade and 
investment as well as supply.  South Africa hosts world- 
class deposits of gold, diamonds, platinum group metals, 
chromium, zinc, titanium, vanadium, iron, manganese, 
antimony, vermiculite, zircon, alumino-silicates, fluorspar 
and phosphate rock, and is a major exporter of steam coal. 
South Africa is also a leading producer and exporter of 
ferroalloys of chromium, vanadium, and manganese.  The 
information contained in the newsletters is based on public 
sources and does not reflect the views of the United States 
Government.  End introduction. 
 
--- 
Key 
--- 
¶2. (U) Key to some of the terminology and abbreviations used 
is given to facilitate understanding. 
 
BEE (Black Economic Empowerment) - the scheme whereby the 
South African Government promotes black participation in 
business. 
 
-    t = tons, 
-    t/d = tons per day, 
-    c/l = cents per liter, 
-    t/m = tons per month, 
-    t/y = tons per year, 
-    oz = troy ounces (31.1 grams), 
-    cmg = centimeter grams, 
-    mcf = million cubic feet, 
-    tcf = trillion cubic feet, 
-    R = SA currency (rand), 
-    MW = megawatts, 
-    kt = thousand tons, 
-    bbl/d = barrels per day, 
-    MW = megawatts, 
-    PGM = platinum group metals. 
 
---- 
NEWS 
---- 
Aquarius Platinum Lists on JSE 
------------------------------ 
On December 8, after nearly two years in the offing, 
Aquarius Platinum Ltd. (Australia) became the first foreign 
company to list on the main board of the JSE Securities 
Exchange in South Africa, following the relaxation of 
exchange control regulations last year.  The move means that 
Aquarius may now raise capital in South Africa.  The listing 
will enable the Savannah Resources consortium, which has a 
29.5% stake in subsidiary Aquarius Platinum (South Africa), 
to convert its holding into JSE-traded shares in the parent 
company.  Savannah originally paid around $135 million for 
its stake in Aquarius.  Aquarius Platinum wholly owns the 
Kroondal and Marikana platinum mines in South Africa, has a 
50% interest in the Mimosa platinum mine in Zimbabwe, and is 
developing the $122 million Everest South platinum mine in 
South Africa.  Individual South Africans may now buy shares 
in Aquarius on the JSE without the $120,000 foreign exchange 
control restriction they would otherwise face.  More foreign 
listings are expected during 2005, mainly from Australian 
and Canadian mining companies. 
 
------------ 
FERRO-CHROME 
------------ 
Environmental Resistance to Tata Steel 
-------------------------------------- 
Tata Iron and Steel Company (TISCO) plans to construct a 
$100 million, 240,000 t/y ferro-chrome smelter at Richards 
Bay.  However, local environmental groups oppose the 
project, arguing that it will place undue stress on the 
environment and the area's limited infrastructure.  Mondi, 
Anglo American's paper products subsidiary, also opposes the 
smelter on the grounds that the pollution is likely to 
contaminate its paper products, some of which are used for 
food packaging.  Anglo has offered TISCO an alternative site 
in the area (owned by Anglo) but to date nothing has been 
decided.  TISCO believes that construction would create 1800 
jobs and that smelter operations would employ 120 permanent 
workers. 
 
Cheap electricity and the port had originally attracted 
TISCO to Richards Bay. Cognizant of the potential 
difficulties at Richards Bay, however, TISCO has let it be 
known that it has identified alternative locations in 
Australia and Canada.    If given the go ahead for Richards 
Bay, TISCO would begin first phase steel production in 2005 
and reach full production in 2009.  Tata is Asia's first and 
India's second largest integrated private sector steel 
company.  In 2004, it produced more than 4 million tons of 
steel. 
 
          -------------------------------- 
ENVIRONMENTAL IMPACT ASSESSMENTS 
-------------------------------- 
Court Rules Against Government EIA Process 
------------------------------------------ 
On January 26, the Western Cape High Court ruled that the 
Department of Environmental Affairs and Tourism (DEAT) must 
alter Environmental Impact Assessment (EIA) procedures to 
allow stakeholders to review a final assessment if it 
contains new information.  This was the result of a case 
filed by Earthlife Africa, an environmental group opposed to 
the construction of an additional nuclear reactor at 
Koeberg.  Judge Ben Griesel stated that the court's ruling 
had no bearing on the merits of nuclear energy or the 
proposed Pebble Bed Modular Reactor (PBMR).  DEAT has told 
the press that it will appeal the judgment on principle, 
since the ruling has wide ranging consequences for all 
future EIA's.  The PBMR, Ltd. Communications Manager said 
that the new EIA requirement could delay PBMR's project by 3- 
12 months, but should not affect the project construction 
schedule as design and development work continues. 
 
---------------- 
RENEWABLE ENERGY 
---------------- 
High Hopes for New Solar Panel 
------------------------------ 
South African scientists at the Rand Afrikaans University 
(now part of the University of Johannesburg) have developed 
an innovative solar panel that promises to be cheaper than 
current silicon-based panels.  Researchers hope that this 
will make solar energy more affordable, particularly for 
people in rural areas.  The university team, under the 
leadership of Physics Professor Vivian Alberts, has 
developed an industrial method for producing copper-indium- 
gallium-diselenide (CIGS) solar panels.  A pilot production 
facility, already in operation, can reportedly produce a 50- 
watt panel for less than $100. 
 
Alberts believes that large-scale production could bring 
production costs of CIGS panels to less than U.S. 10 cents 
per kWh.  University planning for a full-scale commercial 
production plant has been in process for the past 18 months, 
and is at an advanced stage.  If successful, CIGS solar 
panels may help the South African Department of Minerals and 
Energy meet its target of 10,000 gigawatt hours of annual 
electricity production from renewable sources by 2012 (i.e., 
about 5% of current electricity consumption). 
 
---- 
GOLD 
---- 
Finance Minister Backs IMF Gold Revaluation 
------------------------------------------- 
On January 17, South African Finance Minister Trevor Manuel 
said that he supported a British proposal to revalue 
International Monetary Fund (IMF) gold reserves as part of a 
plan to reduce developing country debt.  Under a 1971 
agreement, most of the IMF's gold is currently valued at 
between $40 and $50 an ounce, about a tenth of the current 
market price.  Proponents of the plan want the IMF to sell 
gold to developing countries at its historical price, and 
then repurchase it at current prices.  They believe this 
could raise about $30 billion for debt relief.  Speaking on 
the margins of a consultative meeting of Tony Blair's 
Commission for Africa in Cape Town, Manuel said that, should 
revaluation take place, South Africa would want to make sure 
that most of the benefits accrued to African countries. 
 
---- 
COAL 
---- 
South African Coal Exports Down 5% 
---------------------------------- 
South Africa's total coal exports decreased 5%, from 71.5 mt 
in 2003 to 67.9 mt, in 2004, despite the fact that coal 
prices were at historical highs.  Richards Bay Coal Terminal 
(RBCT) reported a decrease of 3.5%, from 68.31 mt in 2003 to 
65.94 mt in 2004 - below its 69.0 mt target.   Coal exports 
at the Port of Durban also decreased by 42% in 2004, to 1.05 
million tons, due mainly to increased rail tariffs and 
higher freight rates.  Coal exports out of the Matola Coal 
Terminal in Maputo (Mozambique) decreased by 30% in 2004, to 
937,000 tons.  Companies pointed to rail bottlenecks and 
power outages as the primary culprits. 
 
-------- 
DIAMONDS 
-------- 
Namibia Wants De Beers to Sell Local 
------------------------------------ 
Diamdel, a wholly-owned diamond-marketing subsidiary of De 
Beers, plans to set up trading operations in Windhoek, 
Namibia as soon as it finalizes an agreement with the 
Government of Namibia on rough stone supply to Namibian 
cutters.  The Government of Namibia wants to promote the 
development of a local jewelry industry, including cutting 
and polishing.  Diamdel currently supplies some 500 (mainly 
small) clients, located in the world's leading diamond 
centers with rough stones purchased from De Beers' Diamond 
Trading Co (DTC).  This volume represents a fixed proportion 
of DTC's total sales, the lion's share of which is sold to 
De Beers' `suppliers of choice' (most of whom are former 
`sightholders.') 
 
De Beers Raises Rough Diamond Prices by 3% 
------------------------------------------ 
London-based Diamond Trading Company (DTC), the marketing 
arm for De Beers, raised the price of diamonds by an average 
of 3%, as of January 1.  This announcement followed three 
price hikes last year -- two at 5% each and one at 3%. 
Reasons stated for the price increase included tight 
supplies and the weak U.S. dollar.  The first sale, of ten 
sales for the year, was held from January 10-14 for the 
DTC's 84 sight-holder clients.  The Government of Botswana 
stands to gain $70 million in 2005 as it supplies DTC with 
70% of its rough diamonds.  Botswana's diamond exports in 
2003 were 31 million carats, worth a record $2.4 billion. 
The country relies on the gems for up to 80% of its export 
income, 50% of its government income, and 35% to 40% of its 
gross domestic product.  De Beers is the world's largest 
diamond producer and marketer of uncut diamonds.  The 
unlisted company is 45% owned by resources company Anglo 
American, 40% by the Oppenheimer family, and 15% by the 
Government of Botswana.  The company mines about half its 
diamonds in Botswana. 
 
New Lesotho Diamond Mine Sparkles 
--------------------------------- 
During the past two weeks, the newly reopened Letseng 
diamond mine in the Maluti Mountains of Lesotho has 
unearthed four large diamonds - weighing 366 carats in total 
- that are likely to earn the mine at least $6 million. 
Letseng's claim to world fame is that, at 3,000 meters above 
sea level, it is the highest operating diamond mine in the 
world.  However, at 2.5 carats per 100 tons, it also has one 
of the lowest grades.  This is compensated for by the fact 
that it also produces some of the largest and highest 
quality stones in the world.  Abandoned by De Beers in 1982, 
the Letseng mine was reopened by a joint venture between 
South African companies JCI and Matodzi (a BEE company) just 
over a year ago.  The Lesotho Government owns 24%. 
 
--- 
OIL 
--- 
South Africa to Send Oil Technicians to the Sudan 
--------------------------------------------- ---- 
PetroSA, the South African National Oil Company, is to send 
technicians to the Sudan to determine whether commercially 
exploitable quantities of oil occur in an exclusive 
concession, leased under an agreement signed with the 
Sudanese state oil company, Sudapet.  During the last week 
of December, South African President Thabo Mbeki paid a 
visit to Khartoum where he met his counterpart, Sudanese 
President Omar al-Beshir.  The two agreed to encourage 
cooperation in oil exploration.  PetroSA also concluded a 
capacity-building agreement for the development of technical 
Sudanese staff.  On January 4, PetroSA announced that South 
Africa would send technical personnel to the Sudan to run 
seismic tests on its allocated oil exploration block, and 
that Sudan would send personnel to PetroSA for technical 
training. 
 
---------------- 
FOREIGN BUSINESS 
---------------- 
China Increases Involvement in South African Mineral 
Industry 
--------------------------------------------- --------------- 
- 
China recently acquired a controlling interest in the 
Steelpoort chromite mine in Limpopo Province, which annually 
ships 400,000 tons of chrome ore to China for the production 
of stainless steel.  In another transaction, the Chinese 
industrial consortium, CITIC-ACRE, was awarded the major 
contract, worth $50 million, for the construction of Ispat 
Iscor's (South Africa's major steel producer) new $75 
million coke oven battery expansion project and associated 
gas plant, at its Newcastle works in northern Kwazulu-Natal. 
Areas to watch: China is investigating acquiring SASOL oil- 
from-coal technology. 
 
----------------- 
HEALTH and SAFETY 
----------------- 
Fire at SASOL's NATREF Refinery 
------------------------------- 
On January 23, a gas fire broke out in one of the storage 
tanks at the NATREF refinery in Sasolburg during shutdown 
clean-up operations.  Seventeen people were exposed to the 
fumes, but all were discharged from a local hospital after 
treatment.  This is the third SASOL accident in the past 
three months.  The union, Solidarity, has raised concerns 
about SASOL safety procedures, particularly when outside 
contractors are brought in for maintenance and repair jobs. 
SASOL has appointed U.S. company Du Pont to audit plant 
safety and procedures. 
 
-------------- 
INFRASTRUCTURE 
-------------- 
Kumba and Transnet Sign HOA 
--------------------------- 
On January 26, Transnet, the state-owned transport company, 
and mining company Kumba Resources jointly announced that 
they had signed what amounts to a `quid pro quo' Heads of 
Agreement (HOA).  The agreement provides for a capacity 
expansion of the OREX iron ore rail line from the Northern 
Cape through the Sishen-Saldanha export channel, and for the 
conversion of the existing U.S. dollar-based contract to a 
rand-based one.  The respective boards plan to approve the 
definitive agreement during the first quarter of this year. 
The Sishen-Saldanha export channel currently transports 
about 23 million tons of iron ore a year.  Kumba would like 
to increase the capacity to 29 million tons now and to 41 
million tons by 2008.  According to the HOA, Transnet agrees 
to increase the line's capacity by at least 10 million tons 
to meet Kumba's expansion schedule. 
FRAZER