Avmin to produce superalloys for Rolls-Royce

30 March 2004

Pretoria, Tuesday, 30 March 2004: Avmin Alloys (Avalloy), a division of Anglovaal Mining Limited (Avmin), will produce a variety of high performance alloys, known as superalloys, for the aerospace division of Rolls-Royce plc (Rolls-Royce).

The agreement, which is being finalised, relates to an initial three-year supply of superalloys to the Rolls-Royce casting facilities in the United Kingdom, China and Italy. Subject to successful delivery of the commercial agreement and demonstration of quality, reliability, and delivery standards, the scope will increase to 250 tonnes of cast stick per annum. The Avalloy plant’s full capacity is 4 000 tons. Depending on market conditions and Avalloy’s success in entering other markets, full capacity may be reached within a three-year period. It remains the intention of both Avalloy and Rolls-Royce to extend this agreement beyond a three-year term and that Avalloy will become a long-term preferred supplier to Rolls-Royce.

These superalloys, which are largely nickel-based, retain their strength at high temperatures and are therefore ideal for jet engines, which operate with greater efficiency at higher temperatures.

The Avmin board felt it was essential to seek a strategic alliance before proceeding with the Avalloy project. By forging a technical and marketing association with Rolls-Royce, the board’s criteria was met, and a decision to proceed with the Avalloy project was made.

Avmin started construction of the Avalloy facility at the beginning of 2004 and progress has been good. The Avalloy plant, which will cost an estimated R110 million to build and is located between Johannesburg and Pretoria at the NECSA facilities on the Pelindaba site near Hartebeespoort dam, will produce its first alloy in the second half of this calendar year. Avalloy will create nearly 100 direct and indirect employment opportunities. Avmin started its investigations into the production of superalloys some years back as it produces two of the core mineral elements of superalloys, namely nickel and cobalt (both from Avmin’s Nkomati operation). In addition, South Africa is a net exporter of nickel, which is derived as a by-product from the platinum group metals refining process.

While the proposed agreement covers the supply of alloys to Rolls-Royce in cast ‘stick’ form, significant opportunity also exists for Avalloy to supply wrought products also used in an aerospace engine, as well as in other industrial and electrical applications. Avalloy’s plan is to enter the cast ‘stick’ market and, once successful, produce alloy in wrought form using existing equipment owned by Avalloy as well as other facilities available in South Africa, such as forging equipment.

Avmin chairman Rick Menell commented: “Avalloy will be South Africa’s first, major, producer of superalloys and represents a significant investment in down-stream beneficiation by Avmin. The proposed agreement with Rolls-Royce develops some exposure for Avmin, and South Africa, to the aerospace industry. The Department of Trade and Industry (dti) has, as one of its major growth objectives, the participation of South Africa and South African companies in the world-wide aerospace industry: dti’s aim is to achieve similar success to that of the automotive industry.”

Commenting on the announcement, Ralph Murphy, Rolls-Royce’s director Middle East & African Affairs, said: “We are happy to say that the groups involved have a shared vision of contributing to the prosperity of South Africa. We have negotiated a commercial agreement to buy cast ‘stick’ and assist Avmin as they embark on this ground-breaking initiative for South Africa. We have the operational knowledge, technology and products, to support Avmin in obtaining accreditation and in securing demand as they look to supply new international markets as well as increased skills and employment opportunities for South Africans.”

For further details contact:
Anglovaal Mining Limited
+27 (0) 11 634 0333

Ebrahim Takolia, Investor Relations

Rick Menell, Chairman

+ 27 (0) 83 291 3384