An upcoming increase in steel demand should bolster manganese prices, an event that bodes well for Guyana, which, through Reunion Gold Corp., is attempting to become a major manganese producer.
According to the World Steel Association, global steel demand will slow to 3.6 percent in 2012 from a growth rate of 5.6 percent in 2011.
However, the agency expects steel demand to rise 4.5 percent, to 1.49 billion tons, in 2013. A big part of that growth will come from India, which is industrializing rapidly. The association sees that country’s steel consumption rising 6.9 percent this year before accelerating to 9.4 percent in 2013.
Rising steel demand should snap manganese prices out of their current doldrums. That’s because about 90 percent of global manganese output is used in steel production. What’s more, there is no known replacement for manganese in that role.
Higher manganese prices would be welcome news in the South American nation of Guyana, which is on the verge of restarting its manganese mining industry after a hiatus of almost 50 years.
The country last produced the mineral in the 1960s, when a subsidiary of Union Carbide operated a mine at Matthews Ridge in the northwest, near the border with Venezuela. That mine produced 1.66 million tonnes of manganese from 1962 to 1968. However, the sluggish global economy at the time depressed manganese prices, forcing Union Carbide to close the mine.
Timing looks right for the revival of Guyana’s manganese industry
Even though manganese prices have been relatively flat recently, mining the metal in Guyana has nevertheless again become viable, according to the country’s President, Donald Ramotar.
In 2010, the Guyanese government granted Canadian junior miner Reunion Gold Corp. (TSXV:RGD) four prospecting licences to explore for and develop manganese in the area surrounding the old mine at Matthews Ridge. In all, these licences cover 45,729 acres.
The company is now conducting a drilling program to define the size of the manganese deposit. The 1960s mine site included a 12 kilometer series of hills within the ridge that contains the manganese. The primary manganese zone is believed to be 150 to 175 centimeters thick and about 30 kilometers long.
Reunion plans to build a pilot plant at Matthews Ridge by April 2013. It will then send the commercial ore from the site to market and collect feedback from buyers. If all goes according to plan, the company will begin building the mine in August 2013, with full production starting up by the fourth quarter of 2014. In all, the company plans to invest $250 million in developing the mine.
In April, Reunion raised $40.25 million by selling 23 million common shares. It will use these funds to continue its exploration drilling and complete a prefeasibility study.
According to Joachim Bayah, the Chief Operating Officer of Reunion Manganese, the project could take Guyana from zero to among the top five manganese producers in the world. In a January 26 Business Guyana article, he was quoted as saying, “[o]ur initial target is to put on the books 20 million tonnes of concentrate exceeding 40 percent in concentrate terms for manganese by the middle of this year…We think by developing a mine of this size we can put Guyana on the map. If we are able to put out 2 million tonnes of concentrate we will join the league of the top five world producers.”
Guyana aims to burnish its reputation as a mining-friendly country
When Union Carbide pulled up stakes in 1968, it took a lot of well-paying jobs with it. By cooperating with Reunion and other mining firms, the Guyanese government hopes to bring these types of positions back.
“There are a lot of benefits,” said Ramotar, “[t]here is the opportunity to collect a lot of taxes there [at Matthews Ridge], and it will create jobs for people in the region.”
According to Bayah, the company’s exploration program created 300 jobs last year and will create 300 more this year. In all, he said the company will need 1,000 people to build the project and 500 to staff the ongoing operations.
The government is aiming its mining investments at projects that will build roads and other infrastructure. Reunion, for example, is benefiting from a $50 million government investment to improve a 50 kilometer road running from Matthews Ridge to Port Kaituma.
Reunion’s plan also calls for the rebuilding of the railway line between the two communities, because the manganese will be sent to Port Kaituma for shipping overseas. The company has also refurbished an airstrip and several of the facilities and offices at the old Union Carbide mine.
Securities Disclosure: I, Chad Fraser, hold no positions in any of the companies mentioned in this article.