JOHANNESBURG (Reuters) -South Africa’s African Rainbow Minerals (ARM) said on Wednesday that its jointly owned Beeshoek iron ore mine will be placed on “care and maintenance” after its sole customer, the ailing steel producer ArcelorMittal South Africa, ceased purchases.
Care and maintenance means that the Beeshoek mine is being temporarily shut down as the owners evaluate further options to resume operations if market conditions change.
Mining operations at the mine ceased at the end of October, and about 622 permanent workers will be let go effective November 30, the South African miner said in a statement.
Beeshoek, operated by Assmang – a joint venture between ARM and international miner Assore – stopped deliveries to ArcelorMittal in late July following the expiry of a long-term contract in June, ending a decades-long supply relationship.
ArcelorMittal South Africa had continued buying iron ore on a month-to-month basis but halted purchases altogether on July 27.
ARM said an extensive review of operational, commercial and financial alternatives failed to identify a viable path forward for the ageing mine, which has legacy infrastructure and a cost base heavily reliant on ArcelorMittal’s offtake.
“In the absence of a sustainable offtake arrangement, Beeshoek Mine is no longer economically feasible to operate,” the group said in a statement.
It added that consultations with unions under South Africa’s Labour Relations Act have been completed and the Department of Mineral and Petroleum Resources has been notified of the shutdown.
The decision confirms a warning issued in August, when Assmang told unions it was considering closure after ArcelorMittal unexpectedly declined to sign a new three-year supply contract.
ArcelorMittal South Africa is grappling with weak domestic demand, high electricity costs, poor freight logistics and competition from Chinese imports and mini-mills.
It has also deferred the closure of its long steel plants in Newcastle and Vereeniging as it continues talks with the South African government and labour representatives.
($1 = 17.3125 rand)
(Reporting by Sfundo Parakozov and Nelson Banya;Editing by Emelia Sithole-Matarise)
