The Beneficiation Economics Directorate is responsible for developing and implementing strategies that address constraints to the local beneficiation of minerals, in so doing promoting value addition in South Africa. The directorate provides assistance to entrepreneurs in the mineral beneficiation sectors for small- and medium-enterprise (SMMEs) development, with a special focus on historically disadvantaged South Africans. It also interacts with relevant stakeholders to actively encourage investment in mineral beneficiation projects.

What is mineral beneficiation?

Beneficiation, or value-added processing, involves the transformation of a primary material (produced by mining and extraction processes) to a more finished product, which has a higher export sales value.

Beneficiation involves a range of different activities including:

• Large-scale, capital-intensive activities, such as smelting;
• Sophisticated refining plants; and
• Labour-intensive processes, such as craft jewellery and metal fabrication.

Each successive level of processing permits the product to be sold at a higher price than the previous intermediate product or original raw material and adds value at each stage.

Mineral beneficiation in South Africa

The concept of beneficiation is not new in South Africa, but it took major steps forward during the 1990s. During this period, the South African mining sector changed from being a predominantly primary commodity exporter to becoming a world exporter of processed minerals. South Africa, for example, produced 2.9Mt of ferrochrome (used in stainless steel production) in 2004 and accounted for 45 percent of world production of this alloy.

This transition resulted from the construction of a number of large-scale, resource-based investment projects such as Columbus Stainless, Hillside Aluminium, Namakwa Sands and Saldanha Steel, in addition to the continuing expansion of ferro-alloy production. This first stage of beneficiation, which is characterised by capital-intensive plants with low employment levels engaged in the production of mass intermediate products, now accounts for nearly 90 percent of the total minerals revenue with the other 10 percent coming from entirely beneficiated minerals.

Despite these developments, South Africa still has the potential to further raise the level of beneficiated mineral output, particularly in the production of finished goods.

The government has committed to the promotion of local beneficiation through legislation. The Mineral and Petroleum Resources Development Act of 2002, Act 28 of 2002 includes provisions that will ensure that the Minister of Minerals and Energy promotes the establishment of secondary and tertiary mineral-based industries, aimed at adding maximum value to mineral raw materials, where economically justifiable.

The South African Mining Charter of 2004 specifically stipulates that mining companies will be able to offset the value of the level of beneficiation achieved by the company against its HDSA ownership commitments.

The Diamonds Amendment Act 2005, Act 29 of 2005 [PDF, 420KB] and the Diamonds Second Amendment Act 2005, Act 30 of 2005 [PDF, 216KB] have been enacted to facilitate the beneficiation of diamonds in South Africa, by making diamonds more accessible for local cutters and polishers. To this end, a State Diamond Trader is established to purchase rough diamonds from diamond producers and sell them to the local cutters and polishers for manufacturing in the country. The Precious Metals Bill also proposes changes that will facilitate growth in value addition through increased access to the raw materials, for both platinum and gold.

Production and sales figures - 2004/5

Export revenue comprised 74,8 percent of total sales of these processed minerals in 2004. Total sales revenue increased by 27,0 percent compared to 2003, from R27,8- billion to R35,3 billion.

When expressed in dollar terms, an increase of 48,6 percent was recorded from $3,7 billion in 2003 to $5,5 billion in 2004.

The biggest contributors to export sales were:

• Chromium alloys (37,5 percent);
• Aluminium (24,1 percent); and
• Manganese alloys (16,4 percent).

The value of local sales of processed mineral products increased by 29,0 percent, from R6,9 billion in 2003 to R8,9 billion in 2004.

Aluminium, with a 41,5 percent contribution, was the major revenue earner in 2004, with chrome alloys, manganese alloys, zinc metal and phosphoric acid also contributing substantially. Vanadium total sales increased by 75,0 percent from R1,2 billion in 2003 to R2,1 billion in 2004.

Two provinces, KwaZulu-Natal and Mpumalanga contributed more than 67 percent of the total processed minerals sales revenue in 2004. Aluminium and titanium slag dominate the KwaZulu-Natal contribution, while more than two-thirds of Mpumalanga's total sales were derived from chromium alloys. These two provinces dominated both the export and local sales revenues, with respective combined contributions of 70,4 and 66,3 percent. No beneficiation of the selected minerals occurred in the Eastern Cape, the Northern Cape and the Free State.

Source: SAMI 2004 - 2005