Steven Michael – Segue Resources

ONE OFF THE WOOD: Managing director of South Africa-focused manganese play Segue Resources, Steven Michael walked into the front bar of The Roadhouse this week, slammed a big black rock on the bar and proclaimed, “That’s manganese, Wally and we’ve got plenty of it!”.

Steven, can you give us a quick run-down on the Emang Manganese project and Segue’s involvement in it?

Segue Resources is farming into the Emang manganese project. We’re going for 30 per cent of the project by spending 14 million rand on the initial drilling program.

That will be completed this month, by the first quarter of 2012, and will culminate in a maiden Resource for the project.

We will then move into the second phase where we will spend up to 21 million rand on a feasibility study and that will take us to a 51 per cent stake in the project.

You have just completed a two million dollar raising. Is that how you will be funding all this upcoming activity?

Most of the two million dollars we recently raised will go into completing the initial drilling program, making payments to vendors, and commencing the scoping study stage of the feasibility study.

Where is the Emang project located?

It is in the Postmasburg region of South Africa, about two and half hours north of Kimberley.

It was the original manganese field of South Africa and produced consistently from around 1925 through to the mid-1980s.

It was typified by, what is nowadays called, medium to high-grade manganese of around 36 to 40 per cent manganese combined with reasonably high levels of iron, anywhere from 10 to 15 per cent, up to 20 per cent iron.

What happened to halt production there in the 1980s?

The manganese producers, which were predominantly Asmang and Billiton, discovered the Kalahari field, which is about 100 kilometres to the north.

The Kalahari field is higher-grade manganese of around 40 to 45 per cent manganese and very low iron, about five per cent iron.

Is that much different to Postmasburg?

Where Kalahari differs from Postmasburg is that most of the manganese mineralisation at Postmasburg sits at surface, or within the first 15 to 20 metres of surface.

The Kalahrai field is more of a dome structure, so Asmang and BHP have got the near-surface and outcropping mineralisation, but the newer entrants to that field, such as Aquila and Jupiter Mines, their projects are all 100 to 200 metres below surface.

Typically projects there are underground and therefore do need the higher grade to justify development.

Was entering Postmasburg a conscious decision or were you just looking for a project and it raised its hand?

It all began with some of the previous directors of Segue Board being involved with a company called ZYL, which is a South Africa-based anthracite coal company.

Through their connections in South Africa they became aware of the project.

I guess what attracted Segue, and myself, to the project was the fact that, even though it was located in Postmasburg, which is considered the second best location for manganese in South Africa, it is near surface and close to infrastructure, we have roads, rail and water all nearby.

In South Africa the biggest challenges usually involve infrastructure.

Therefore, if you’re developing a project that entails moving big tonnes of ore, you are going to struggle as you are going to have to wait for new infrastructure to be put in place.

How do you envisage moving your tonnes around the country?

We are currently assessing three options.

The cheapest solution would be to use the existing bulk rail to port system.

That has the greatest limitations, which is why we are also assessing a road haulage option, which is our third favoured option.

The final solution, and the one that is probably our most favoured, or tying for first, at this stage, is containers.

There has been a lot of work done on the use of containerised bulk movements. It started in the chrome sector and is now moving into manganese.

That would still involve utilising a rail option?

It would be a different train line than that for the bulk shipping.

There is a dedicated train line that runs from Postmasburg to Port Elizabeth, the main bulk export terminal. There are a number of shipping terminals in South Africa capable of taking containers.

What we could end up doing is loading containers onto a flatbed truck to be shipped to a rail terminal, which is just one kilometre away, and from there to Bloemfontein, from where they can be shipped to any container terminal in South Africa.

How does that option stack up against the bulk rail option?

To transport a container from site onto a ship is more expensive than using a bulk rail wagon.

But, getting a container from South Africa to China is cheaper than using bulk shipping methods because container traffic is, presently, predominantly in the direction from China to South Africa.

They are completing the return voyage almost empty and welcome the extra freight.

When you announced the raising you said that a JORC compliant Resource for Emang could be due for delivery as soon as the end of the first quarter this year. Is that still on schedule?

Yes. Having said that it has been delayed, it was due at the end of last year.

That delay came about for a couple of reasons, the first being we had decided on having all our assays carried out by the ALS Laboratory in Vancouver.

There was an issue with the laboratory in Johannesburg, which meant we had to go to Vancouver, and that added about three weeks on the turnaround time on our samples.

What was the second reason?

When we formulated our initial timeline and budget, we expected to have around 600 assays to be completed.

We have actually intersected a lot more manganese that what we had expected.

Our drilling has intersected manganese in about 80 per cent of all of our drill holes.

We were expecting that figure to be around 50 per cent and that we would intersect manganese at widths of around eight metres.

We have had manganese hits in some holes over 30 metres thick.

Hitting extra manganese is not a bad problem to have.

It’s not a bad problem at all but it meant that we had generated around 1500 samples to be assayed rather than the 600 we had originally bargained for.

So, twice as many samples and a three week turnaround for results instead of one has put us back a bit, but I think it will be well worth the wait.