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JIMMY MOYAHA: The Deputy Minister of Trade, Industry and Competition announced that there’s a project that the government has been working on for quite some time. The project contracts have now gone through. It looks as though a lot of green lights have come through and we’re going to potentially see the first titanium dioxide pigment manufacturing plant in South Africa, possibly in Africa. It’s going to be an 80 000 tonne per year plant in terms of production.
I’m joined on the line by the CEO who is going to be heading this up, the CEO of Nyanza Light Metals, Donovan Chimhandamba. Good evening, Donovan. Thank you so much for your time.
How significant was today, and how significant has it been to get to the point where we’re at now, considering that this has been a 12-year journey for you?
DONOVAN CHIMHANDAMBA: Thanks for having me. Well, it’s been quite a long journey. If you look at projects of this nature, they generally require quite a lot of upfront feasibility studies at work to get to a point where you can actually define the business case. So in the 12 years that we spent [on this] we’ve spent over $30 million in doing feasibility studies to figure out how best we can enter this titanium value chain.
What’s underpinning our story basically is it’s the same sad story that Africa has – where we have a lot of these minerals and they’re just exported in their raw form without any mineral or value addition. So what we’re doing is to say, instead of exporting the raw [materials] … we would like now to play in the value chain. And that’s where the 12 years has been spent.
The significance of what we have signed now is that we’ve selected an engineering, procurement, and construction (EPC) contractor that has over 60 years of experience.
They’ve built more than 31 of these titanium dioxide treatment plans.
Having them inspires confidence to the capital markets, the investors and the multilateral banks that are on board. So this signals a significant milestone that allows us now to chase the last pieces in terms of trying to get to financial close and commence with construction.
JIMMY MOYAHA: That being said, Donovan, this was effectively sort of phase one out of the way getting to this point. What are we looking at in terms of the next phases? Is there a timeline to going live and starting, and construction, and that sort of thing? You mentioned a couple of other pieces still needing to be put in place. What are the next steps here?
DONOVAN CHIMHANDAMBA: Once you have the EPC, the engineering procurement construction contractor, together with the operations and maintenance contract, you are now able to freeze your financial numbers, your modelling. You are able now to finalise all your other contracts. That allows the banks to actually finalise the funding terms and how they are structured for you.
That timeline? We’re probably looking at a six-month period. So up to probably the end of this year we would be working with the banks to achieve financial close, which basically means all the funding will be freely available unencumbered for us to commence with construction in Q1 next year.
JIMMY MOYAHA: And what does this mean? We can discuss obviously the impact it’ll have on jobs and that sort of thing down the line, but let’s understand that this has been, as you rightly mentioned, 12 years of feasibility studies – big, big research – and a lot has gone into ensuring that this comes to fruition. But what is this plant going to be capable of doing and providing at an economic level before we look at the jobs and the other additional effects?
DONOVAN CHIMHANDAMBA: I’ll give you a very simple example that we sometimes use.
If you look at Africa, including South Africa, we probably have more than 45% of the world’s ilmenite, which is basically the raw mineral ore that contains titanium dioxide. That’s traded from the continent at prices as low as $300 a tonne.
Then we export that; it goes to Europe, Asia, and other countries where they have these advanced chemical plants. And we import back what is called a titanium dioxide pigment at values of $3 000 a tonne.
So from $300 to $3 000 is where Africa loses.
Now, just to understand what ‘pigment’ is – we just throw the word around, the name – it’s basically what’s used in making architectural coatings and paints. So every time when you’re painting your house that’s titanium dioxide pigment. When you look at your car’s paint, and even in FMCGs [fast moving consumer goods], it’s used in things like the whitening of milk, in manufacturing of plastic. So it’s a chemical that’s widely used in almost every-day applications that we touch.
So at an economic size level, with the size of the plant that we’re doing, 80 000 tonnes, together with other by-products, you’re looking at probably gross revenues in the region of $300 million per year just on our operation.
But there is significant stimulation to the supply chain, the value chain, because you get a lot of suppliers’ chemicals that come, and we need to be functioning quite well for us to be able to produce efficiently and export competitively.
JIMMY MOYAHA: And how is the project currently set up? We know that from an O&M side of it, an operations and maintenance side of it, Nyanza is responsible for that. The contract sits with you. As you mentioned, from an EPC side of it – that sits with I believe East China Engineering [Science and Technology]. Who owns the project? Who oversees all of that? Who ensures that the benefit is passed through into the economy?
DONOVAN CHIMHANDAMBA: As it stands right now, there are four investors who’ve been funding the development of the project.
So it’s us [and] the funding company called Arkein Capital Partners or Arkein Industrial Holdings, that started the projects. And then we also then onboarded DBF Capital Partners, who were instrumental in owning a continental bank called Bank IPC [International Bank of Commerce]. And then we now also have multilateral banks, such as African Export-Import Bank. We also have Africa Finance Corporation, and we are busy concluding or finalising with an international finance institution out of the US. So those are largely the funders.
At the same time we have a joint committee that drives the project itself.
JIMMY MOYAHA: So there are a lot of stakeholders involved, and a lot of critical people that are making sure that this project does succeed and does actually bear fruit for the local economy, as well as for the international economy.
Donovan, before I let you go, I wonder if you could possibly just speak a bit more about the beneficiation benefits of the actual setup and what it means. You gave an indication on the cost or the margins in between, and what the business could eventually do from a numbers perspective.
But above that, sustainability-wise and looking at the potential for increased job creation, is it a situation where – given that the resource and the commodity itself sits on the African continent – we can replicate this type of plant somewhere else in the country, somewhere else on the continent further down the line?
DONOVAN CHIMHANDAMBA: Yes. First of all, we obviously have a competitive advantage in terms of the raw minerals that we have. That’s the first advantage that we have.
But when you look, for example during geo construction, we are obviously going to create more than 2 000 jobs during construction. And once we are fully operational we’re looking at 850 people permanently employed. With the size of the peak funding, we are looking at probably $750 million.
And you can repeat or scale up by doubling the size, because we have the resources.
So it’s not a once-off something. When we have the capacity and capability, we are obviously looking at doubling the capacity once we have the first operation running.
And then from an ESG [environmental, social and governance] perspective, this will probably be the most modern advanced plant in the world. East China Engineering Science and Technology that we’re working with have built 31 of these plants. They’ve great experience; they’ve designed this plant for high energy efficiency.
So you’ll find that, first of all, any energy source we use is renewable or clean. We have no coal. We have totally decarbonised in terms of the plant and in terms of environmental performance standards. We are compliant to the IFC [International Finance Corporation] Performance Standards. So you’re going to get a very modern advanced plant – [which is] how our people are now building these plants in the new modern world.
JIMMY MOYAHA: Donovan Chimhandamba, CEO of Nyanza Light Metals, thank you so much for the context. Thank you so much for giving some light in terms on how big this project can be, and how significant it can be. We wish you all of the best and we wish you all of the successes in making it a sustainable project for our economy and for the African continent.
