South32 to split manganese smelting assets with sale to Sanjeev Gupta group
Sanjeev Gupta is set to expand his Australian empire again, with a deal to buy South32’s troubled manganese smelter in Tasmania.
Sanjeev Gupta is set to expand his Australian empire again, with the British metals magnate cutting a deal to acquire South32’s manganese smelter in Tasmania.
South32, along with minority owner Anglo American, has been reviewing its options on the loss-making smelter for more than a year and today announced a firm agreement to sell them to Mr Gupta’s GFG Alliance for a nominal sum.
The sale will secure the future of the TEMCO smelter in Tasmania, and its estimated 250 jobs, and hands Mr Gupta another ageing smelting asset at a discount, further extending his reach through the steelmaking supply chain.
Mr Gupta confirmed the acquisition on Thursday, saying the TEMCO facility will be an “important upstream addition” that will strengthen the group’s steelmaking capability in Australia and globally.
Mr Gupta’s Whyalla steelworks is one of TEMCO’s key customers, and the smelter acquisition is aimed at securing supply for ferromanganese and silicomanganese alloys for other parts of the British businessman’s global empire.
The move also extends Mr Gupta’s control of the supply chain in Australia. In addition to South Australia’s Whyalla steelworks, his Liberty Primary also owns an iron ore mine supplying the facility, and the Tahmoor colliery in NSW, which supplies it with metallurgical coal.
He has also moved to cement control of renewable energy assets supplying his smelters as part of ambitious plans for his global group to be carbon neutral by 2030. The fact TEMCO is powered by Tasmania’s extensive hydro-electricity network was believed to be a key driver for his move to buy the facility.
“This acquisition will further enhance Liberty’s drive to be self-sufficient and fully integrated across the supply chain, complementing our iron ore production in Whyalla, coking coal in Tahmoor and our Cultana Solar Farm to be built in Whyalla,” he said.
“By investing in key inputs, such as ferromanganese and silicomanganese we are able to generate value across the supply chain to ensure Australia has a sustainable and globally competitive steel manufacturing sector.”
Mr Gupta joined with his father’s SIMEC Group to acquire OneSteel’s Whyalla steelworks and associated mines in the Middleback Ranges for about $700m in 2017, rescuing the facility from being shut down.
The company manufactures steel products and runs a national distribution business and scrap metal recycling division under the InfraBuild brand, along with the operation of electric arc furnaces in western Sydney and Laverton in Victoria.
Several months after the Whyalla deal, GFG bought a controlling stake in Ross Garnaut’s renewables company Zen Energy as part of plans to sanction a $1.5bn green energy program.
The Australian revealed this week that Mr Gupta had split his energy business in two, giving GFG full control over the power generation arm of the company amid ambitions to grow its renewables and battery facilities into a 3000 megawatt-strong supply source for a “green steel” plant at Whyalla.
GFG bought the Tahmoor coking coal mine in NSW from Glencore at the start of 2018.
The deal will see South32 split its manganese smelting assets, as Mr Gupta’s Liberty Group will only buy the TEMCO smelter in Tasmania.
The deal does not include the sale of South32 and Anglo’s mothballed Metalloys smelter in South Africa, which was temporarily closed in response to the country’s coronavirus lockdowns in March and has not yet returned to production.
South32 chief executive Graham Kerr said the transaction was still subject to approval by the Foreign Investment Review Board, but the translation would simplify South32’s own structure while ensuring TEMCO’s future viability.
“Today’s agreement follows an extensive review of options regarding the future of our manganese alloy business. The transaction and our ongoing supply of ore to TEMCO will see the smelter, first established in 1962, continue to operate into the future,” he said.
South32 has been reviewing its options for its manganese smelters for more than a year, flagging their possible sale or closure, citing increased production of the alloys in China and Malaysia — along with increasing energy costs in Australia and South Africa — as key factors putting pressure on its operations.
The sale does not affect South32’s manganese mining operations in Australia, and existing supply agreements to the TEMCO smelter will remain in place.
The sale does not affect South32’s manganese mining operations in Australia, and it is believed the existing supply agreements to the TEMCO smelter will remain in place.
TEMCO employs about 250 Tasmanians and produced 110,000 tonnes of alloys in the 2019-20 financial year, down 29 per cent after the company idled one of the facility’s four furnaces.
The TEMCO facility has four electric arc furnaces and has the capacity to produce about 150ktpa of high carbon ferromanganese and 120ktpa of silicomanganese, both of which are used to produce steel.
Mr Gupta has recently been plagued with questions about the financial stability of his rapidly growing empire, but has also maintained a solid record of reinvesting in the ailing businesses he has bought — mostly from mining majors such as South32 and Rio Tinto.
In June The Australian revealed Mr Gupta was seeking loans worth $175m to keep his Australian operations funded beyond 2021, after pumping at least $115m into them so far in 2020.
At the same time, Mr Gupta announced plans to slash spending by 30 per cent across his global metals and mining businesses in response to the coronavirus-induced global economic slowdown. He also flagged job losses across his broader group, although his Whyalla operations are believed to be exempt from the staffing cuts.
