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By John Helmer in Moscow

The IMR takeover of Shaft Sinkers is the second major asset purchase in SA for a trio of Kazakh businessmen.

THE decline in mining stocks and metal prices is unlikely to hurt SA’s specialist in shaft and tunnel excavation for mines, Shaft Sinkers MD Rob Schroder says. Johannesburg-based Shaft Sinkers has won a $270m contract, its first in Russia, to dig one of two shafts at a new potash mine being developed south of Moscow by the Eurochem group.

“The market has been reflecting a rapid increase in demand over the last 12 months,” Schroder told Business Day in a recent interview.

“Not only due to the commodity boom, but to resources in general. Hydro-electrical schemes with their shaft requirements, as well as long-term nuclear storage facilities for waste, are also coming to the fore.”

Schroder says he expects no slowdown in demand. “It is our experience that as the shafts being sunk are all long-term projects (generally between three and five years), the answer must be no.

“These shafts are generally for expansion or ore reserve replacement. However, should mine construction for resources decline, then other commodities, hydro-electrical power schemes, etc, will take over.”

Shaft Sinkers says it has about two-thirds of the global market for shafts of 1000m in depth or deeper.

The breakthrough last month in Russia was fortuitous, Eurochem spokesman Vladimir Torin said.

“We searched the global market for a company specialising in what we needed, and found Shaft Sinkers by ourselves. We then negotiated directly, sending Alexander Tugolukov, our technical director, to SA to study the operation.

“They are the largest shaft constructors in the world,” Torin said, “so the choice was obvious.”

Schroder adds: “The Eurochem project is certainly one of great significance in terms of our strategy. We have, however, completed other projects of this nature overseas before; but this would be the deepest shaft currently outside South African borders.

“Our flagship project in SA is currently the Impala-17 shaft complex, where we are sinking three shafts simultaneously in excess of 1300m deep, with diameters ranging between 6,5m and 10m. In terms of value, the Eurochem project is in line with projects of similar scope.”

Eurochem is one of Europe’s largest diversified fertiliser producers with nitrogen, phosphate, and complex fertiliser mixed products in its portfolio.

The group’s Kovdorsky mine, in the northwestern Kola region, is producing about 5-million tons of iron-ore concentrate per year; 2,5-million tons of phosphates (apatite); and more than 8000 tons of baddeleyite (zirconium oxide). Eurochem’s turnover for last year was almost $3bn.

The new mine, however, is Eurochem’s first move into potash production. According to the company’s sources, the company will move from zero now to planned production of 2,3-million tons of potash by 2012, and 4,6-million tons by 2015.

The project, located at what is called the Gremyachinskoye deposit, is expected to come on stream in four years’ time.

The capital expenditure estimate includes more than $600m for two shaft contractors, Thyssen Schachtbau, based in Germany, as well as Shaft Sinkers.

The mining plan calls for innovations on the standard potash mine approach.

Tugolukov told Business Day two shaft contractors had been selected “with a kind of socialist emulation between them to determine who will do the job better, quicker and cheaper. These tactics may also be used on our Verkhnekamskoye deposit to cut the timing of mine development and construction from the conservative seven to eight years to about five to six years.”

The skip shaft for production is to be built by Thyssen Schachtbau using the standard technology of freezing soils to a depth of 350m. An opening contract for this element of the project has been signed for à205m. Thyssen was the first company to build a Russian potash mine in 1932.

Shaft Sinkers is to build a latticed shaft using cement grouting.

Schroder says that instead of freezing, which involved drilling 500m-deep holes and freezing the ground before sinking the main shaft through frozen ground, Sinkers uses another method.

“We cover-drill up to 42m ahead of ourselves. If we intersect water or running sands, we pump cement or resin grouts into the material, until it solidifies. Then we drill and blast through,” he says.

This technique at Gremyachinskoye is only the second time it has been used in a potash mine ; the other is at Boulby in the UK.

“Although this is our first venture into Russia,” Schroder says, “we have sunk shafts throughout the world with the exception of North America. We specifically bring our grouting techniques, used successfully in the majority of these other projects, and are certain this will bring significant time and cost savings for this project.”

Eurochem believes the second shaft can be sunk at a 25% savings in time and cost, compared with conventional techniques.

In addition to Russia and the UK, according to the company’s website, Shaft Sinkers is, or has recently been, active in much of southern Africa — Lesotho, Zambia, the Democratic Republic of Congo, Namibia, Zimbabwe, Tanzania, Botswana, Swaziland, Ghana, Sierra Leone, and Mali.

Further afield it has dug in Australia and Brazil.

Schroder says the company plans to expand its presence abroad.

Shaft Sinkers is no longer South African-owned and controlled, however.

Last year, the company management and minority shareholder Bridgette Radebe, through Mmakau Mining, negotiated with the Kazakhstan-based resource group, Eurasian Natural Resources Corporation (ENRC), to take a controlling stake in Shaft Sinkers, through a UK-registered affiliate, IMR.

Mmakau sold the stake in Shaft Sinkers that resulted in IMR’s majority holding. The transaction price was not disclosed.

ENRC is listed in London, and is owned by three controversial Kazakh magnates, Patokh Chodiev, Alexander Machkevich and Alijan Ibragimov.

Schroder was asked to clarify how Shaft Sinkers is controlled by IMR and its parent, ENRC. He responded that IMR holds 54%, Radebe’s Mmakau 36%, and Holgoun Industries 10%.

Holgoun Industries is owned by Holgoun Investment Holdings, whose principals are Vanessa Gounden and Sivi Gounden.

Anglo American founded Shaft Sinkers as an in-house mine service unit in 1961. Forty years later, it sold the company to management and AMCO Investments of the UK. The black empowerment arrangement with Radebe followed two years later, in 2003.

The IMR takeover of Shaft Sinkers was the second major asset purchase in SA for the Kazakh trio. The first was the acquisition of Kermas, which in turn gave IMR control of Samancor Chrome. That deal was reviewed in 2006 by SA’s Competition Tribunal, and approved.

The Competition Tribunal did not review IMR’s takeover of Shaft Sinkers last year. The deal did receive approval from both the competition authorities and the Reserve Bank.

When ENRC listed on the London Stock Exchange late last year, the initial public offering prospectus of ENRC referred to IMR.

Although the listing appears to have occurred after Shaft Sinkers had already been acquired by IMR, there is no reference in the ENRC document to Shaft Sinkers as a subsidiary. On the other hand, the prospectus appears to suggest that ENRC has consolidated and fully absorbed IMR. Schroder was asked to clarify the organisational links, and the division of business opportunity and responsibility, between Shaft Sinkers and ENRC. He declined to say.

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