China Eximbank provides export seller’s credit for Lesedi Mine and Ferrochrome Smelting Project

China Eximbank provides export seller’s credit for Lesedi Mine and Ferrochrome Smelting Project On May 22, 2002, International Ferro Metals (SA) Proprietary Limited — also known as International Ferro Metals (SA) (Pty) Limited and IFM SA and IFMSA — was legally incorporated as a special purpose vehicle and joint venture of China’s Jiquan Iron and Steel Company (Jisco) [29.1% ownership stake] and Australia’s AIM-listed International Ferro Metals Limited (IFM) [70.9% ownership stake].

Then, in 2005, China Eximbank issued an export seller’s credit to JISCO, which it in turn on-lent to IFMSA for the Lesedi Mine and Ferrochrome Smelting Project.

In June 2005, IFMSA also signed an off-take agreement with JISCO, in which JISCO agreed to purchase at least 120,000 tons-per-annum (tpa) of ferrochrome on a take-or-pay basis at a market-related price dependent on IFM’s sales to Europe. JISCO also agreed to act as agent for IFMSA to market ferrochrome in China, Taiwan, Japan, and Korea.

The purpose of the ZAR 1.5 billion ($236,413,500) project was to support the construction and development of the Lesedi shaft (mine) and an integrated processing facility — including beneficiation, sintering and palletizing plants and a smelter — in Buffelsfontein.

During the construction phase, the project expected to generate approximately 3000 jobs, with approximately 1000 direct employment opportunities during steady state production. Lesedi shaft is an underground mining operation where chrome ore (ferrochrome) was extracted from the Bushveld Complex. Construction officially commenced on October 17, 2005.

The construction of the integrated processing facility had achieved a 55% completion rate by July 2006. Mining and smelting operations commenced in January 2007.

However, IFMSA’s ferrochrome smelter and Lesedi shaft later fell victim to a combination of economic, regulatory and socio-political factors that included the downturn in the commodity market at the time, a series of stoppage orders issued by mine health and safety inspectors sporadically shutting down the smelter, and unprotected labor unrest.

On August 26, 2015, IFMSA was placed into ‘business rescue’ and its processing and mining activities were suspended. The IFMSA board appointed Trevor Murgatroyd as the business rescue practitioner.

With debt of nearly ZAR 3.8 billion, Murgatroyd developed a business rescue plan that would provide for the sale of the business and assets of IFMSA in three parts.

First, the sale of the ferrochrome smelter to a group company in the Samancor Chrome Limited stable upon the approval of that leg of the transaction by South Africa’s Competition Commission; then the sale of the Lesedi shaft to Samancor Chrome Limited (for ZAR 300 million) upon the approval of the transfer of the mining right by South Africa’s Department of Mineral Resources (DMR); and finally the sale of a sister company of IFMSA.

The sale of the ferrochrome smelter was approved by South Africa’s Competition Commission in May 2016 and the ferrochrome smelter started up again under the banner of a Samancor Chrome Limited subsidiary (known as TC Smelters Proprietary Limited).

The next leg of the business rescue plan became a reality in July 2017 when the DMR approved the sale of the mining right and the Lesedi shaft to Samancor Chrome Limited. The section 11 application was approved by the DMR in record times (just over seven months).