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By John Helmer in Moscow

Drilling into SA diplomatic communiqués comes up empty for manganese and platinum

An unusual meeting of South African (SA) and Russian government ministers two weeks ago in Moscow has triggered recriminations in Pretoria and Moscow. These follow the refusal of SA officials to clarify an upbeat description of co-operation in mining projects, which Russian sources deny.

Nkosazana Dlamini-Zuma, SA’s Foreign Minister, who headed the delegation to Moscow on February 12-13, claimed there has been commercial progress in the Russian-SA relationship. The evidence for that, according to an official communiqué issued in Pretoria on February 13, is the activity of a single, well-known Russian oligarch, Victor Vekselberg, who owns the Renova group. Dlamini-Zuma said in the communiqué she personally “welcomed progress with regard to Joint Venture Manganese Project by the Renova Group and South African company Pitsa ya Setshaba and wished the company well in the second phase of the project. ”

Renova refuses to provide details of its investment and exploration spending in South Africa, since the award of licences to Heuningdraii and Mooidraai in the Kalahari Manganese Field (KMF) in 2005.

Last month, on February 14, Renova said that through its local venture, United Manganese of Kalahari (UMK), it had won an additional prospecting licence area. The public announcement did not identify the location, name of prospect, or payment for the licence. But Renova did make a new spending promise, claiming it plans $200 million (R1.5 billion) to develop the deposit next year and sell manganese ore on the market, according to spokesman, Alexey Belokrys; he doubles as deputy head of Renova’s overseas projects.

About 80% of the world’s commercially mineable manganese ores are located in the KMF, in the Northern Cape province, where Samancor mines at sites around Hotazel. Together, Samancor lifts more than 3 million tonnes of ore per annum. At a nearby plant, this is processed into ferro and silicomanganese. According to Samancor, it produces between 300,000 and 420,000 tonnes annually.

In addition, Assmang, which is jointly controlled by African Rainbow Minerals (ARM) and Assore, mines more than 1.5 million tonnes of manganese ore from the Nchwaning and Gloria mines in the same region. Assmang reports producing more than 200,000 tonnes of manganese alloys per year annually. It is in the middle of a capital expenditure programme of R748 million to more than double its manganese output by 2010.

The big SA miners claim they have seen little evidence of Vekselberg’s spending; they also claim that Renova has been offering its prospects for sale to other mining companies. As the majors see no reason to encourage competition to lift the output (and lower the price) of manganese in the Kalahari, no-one has been buying.

Mineweb has reported that the original Vekselberg mining scheme was part of a global push to take control of the Nikopol manganese refinery in the Ukraine, one of the world’s largest refiners of the steel hardening alloy. That was lost to a Ukrainian metals figure, Igor Kolomoisky, who then sued Vekselberg and his partners on racketeering claims in the US. By the time Nikopol was lost, and the suit settled out of court, the incentive for Renova to spend Russian money in the Kalahari had evaporated.

But Vekselberg’s promises to spend large sums in SA remained, and were Renova’s drawing-card in its relations with the ANC financiers and DME officials. According to a report by Vicki Robinson and Stefaans Brunner in the Guardian & Mail, November 10, 2006, Renova gave UMK $10 million, but then transferred title to its interest offshore to Renova Manganese Investments, a company incorporated in the Bahamas: http://www.mg.co.za/articlePage.aspx?articleid=289526&area=/insight/insight_national/

For money to fund Vekselberg’s promises to mine the ore, build a local refinery, and add capacity on the rail track between the minehead and the plant, Renova has been negotiating with SA lenders and investors, mitigating his exposure to SA political risk. Bateman was one of the local go-betweens for financing identified by Renova.

According to the Brunner report of November 2006, Vekselberg — by then a member of President Thabo Mbeki’s advisory council for international investment, and also chairman of the SA-Russia Business Council — “positioned himself to be ‘Mr South Africa’ in Russia, and ‘Mr Russia’ in South Africa, straddling both business and diplomacy.”

The passage of time has produced little tangible value, plus the scandal sheets. Last month in Moscow, Yury Trutnev, the Minister of Natural Resources and co-chairman of the SA-Russia inter-government commission for trade and economic cooperation (ITEC) chided the Business Council for “insufficiently active work”, according to a ministry press release issued on February 19.

Asked about the manganese mining rights, Renova spokesman Alexei Belokrys told Mineweb: “I suspect what [you] want to write this time: that Renova didn’t invest in the project enough money, although it promised. This is not true. We don’t intend to participate in this.” Financial reports for the Kalahari operations since 2005, promised by Renova, have not been made available.

Renova’s sensitivity reflects the four-year scramble for manganese mining rights that has involved Adam Fleming, the former chairman of Harmony Gold; Roddie Fleming, a one-time financial advisor to Vekselberg’s aluminium company, SUAL; Mendi Msimang, the treasurer of the African National Congress (ANC); Phumzile Mlambo-Ngcuka and Lulu Xingwana, then minister and deputy minister, respectively, of the Department of Minerals and Energy (DME); and a string of companies tied to the ANC – Chancellor House, Dirleton Minerals and Energy, Kalahari Resources, and Pitsa ya Setshaba.

An investigation by the Institute for Security Studies, Cape Town, published in November 2006, and the report in the Mail & Guardian, identified these companies as funding fronts for the ANC; particularly the faction backing Mbeki against presidential challenger Jacob Zuma. This has been denied by the ANC.

Thabo Mafoko is deputy ambassador at the SA Embassy in Moscow. Unusually for the second post in the Embassy, Mafoko was not appointed from the diplomatic service, but from the Department of Minerals and Energy (DME) in Pretoria. He, and other DME officials, have been involved with Vekselberg’s manganese mining venture in the Kalahari from the beginning. Mafoko was asked to clarify what progress Dlamini-Zuma was referring to in her comment last month; what expenditure she and he know to have been made by the Renova-Pitsa group in their Kalahari licence areas, and why a minister of state should endorse a commercial project about which SA manganese minining companies have expressed opposition. Mafoko refused to respond. He has not been inactive in Moscow – Pretoria sources credit Mafoko with promoting the African diamond trade in Russia.

Renova also casts doubt on the veracity of Dlamini-Zuma’s claim to progress in the mining sector.

According to the communiqué from Pretoria, “the constructive outcome of a visit by a high level delegation from the Department of Minerals and Energy to Russia as part of the current ITEC deliberations was noted. Strengthened co-operation between Russia and South Africa on platinum group metals was also raised.”

Renova owns a holding called Ural Platinum, with an alluvial source of platinum, some prospecting activities in eastern Russia, and a refinery in central Russia. The mining company has been for sale for some time. A Renova source told Mineweb he knows nothing about the purported co-operation in the SA platinum sector.

Norilsk Nickel, Russia’s leading mining company, and the world leader in platinum, palladium and nickel, told Mineweb it knows nothing about Dlamini-Zuma’s claim, and has no concrete interest in SA platinum co-operation.

Trutnev, Dlamini-Zuma’s Russian counterpart on the inter-government committee, was also at a loss to explain what the reference to platinum means. His spokesman said the ministry believed the platinum interest “may be” Renova’s, and that Renova had participated in the latest round of meetings with the SA delegation. But the source said there is no signed agreement yet, and this is not expected this year.

In uranium prospecting and nuclear energy – areas of high priority, according to several ITEC communiqués – Mineweb reported last October the active Russian interest in SA cooperation in potential mining projects, construction of new reactors, transfer of Russian enrichment technology, and long-term uranium fuel supplies: http://www.mineweb.com/mineweb/view/mineweb/en/page38?oid=38880&sn=Detail

This sector too has involved Renova.

But the plan for nuclear sector co-operation has collapsed this year, following the SA Government’s decision to exclude the Russian reactor builder, Atomstroyexport, from an agreement to bid for multi-billion dollar Eskom contracts.

Referring to a report of trouble in the SA-Russian relationship currently circulating in Pretoria, Deputy Director-General of the Foreign Ministry Gert Grobler conceded on February 26 there is a ” list of questions, allegations and insinuations that obviously… involves a number of government departments and that I would not like to comment on this at that point because it needs further consultation with these departments who are accused or allegations are made.”

According to Grobler: “the relations between Russia and South Africa are in fact very good.”

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