BeneficiationIn Search of a New Trajectory

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Beneficiation-In Search of a New Trajectory
Paul Sorensen Mineral Economics and Strategy
Unit Mintek - South Africa

• Chamber of Mines, Sustainable Development
  Conference,
• Sandton Sun Hotel.
• 17th 18th September 2007.

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Contents

• A brief history lesson
• The world commodities boom
• South Africas role in minerals
• The mining charter
• Beneficiation
• Mineral sustainability resource-industry
  linkages
• Constraints
• Conclusions

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SUSTAINABLE DEVELOPMENT IS 20 YEARS OLD!

• 42nd Session of the General Assembly of the UN
  (1987)
• Our Common Future
• Report of the World Commission on Environment
• and Development

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SUSTAINABLE DEVELOPMENT

• Sustainable Development is not a fixed state of
  harmony (equilibrium) but rather a process of
  change in which the exploitation of resources,
  the direction of investments, the orientation of
  technological development, and institutional
  change are made consistent with future as well as
  present needs.

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Future Needs Where is the oil price going?
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Sustainable development in South Africa-the trade
off.
Coal fired electricity 93.1 CO2 emissions per
capita 7.9 mt Water resources per capita 1168 m3
Unemployment 26.4 (33.9) Piped water 65.7
(24.3) Electricity 52.5 (18.3)
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Real GDP growth of developing countries
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Global GDP Growth Performance and Outlook
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World Commodities Boom
Data Source IISI OECD
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Consumption Patterns(1995-2004)
Chinese growth 211.1 World Growth 49.8
Chinese growth 179.8 World Growth 36.8
Steel
Copper
Chinese growth 280.6 World Growth 135.0
Chinese growth 265.8 World Growth 31.7
Zinc
Nickel
Data Source W/Bureau of Metal Statistics
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How long will it Last?
Data Source IMF.
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Resource-Based Sustainable Development

• South Africa has an extremely rich and diverse
  mineral resource base that has and could continue
  to provide a platform for industrial development
• South Africa also has a strong legislative frame
  work based on the mining charter, for responsible
  mineral development
• The short to medium term potential lies in our
  natural comparative advantage viz. resource-based
  industries
• to create a competitive platform for finished
  products
• promote resource-based capital goods and services
• The challenge is to
• ensure responsible development to the advantage
  of the people
• decrease leakage from the economy
• take greater care of the environment

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South African Mineral Resources
26.4bn tons _at_ Bushveld Complex, could make SA
number one in reserve base
Source USGS (2005)
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The Mining Charter

• Goals
• The overall policy objective is to expand and
  enhance opportunities for HDSA to enter the
  mining industry
• Proactive strategy to foster and encourage
  transformation of the mining industry on
• Ownership
• Management
• Skills development
• Employment equity
• Rural development
• Procurement
• Beneficiation

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The Mining Charter

• Framework
• Governments role is to facilitate this critical
  transformation process
• Market forces and commercial logic will
  ultimately be the determining factor
• The Charter seeks minimal disruption of SA
  industry and its ability to compete in the
  international markets
• All transactions shall be transparent and
  ownership will be achieved/transferred at fair
  market value

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The Mining Charter

• Scorecard Undertakings
• Beneficiation
• Companies can offset the value add above base
  form against equity participation commitments
• Companies will identify current levels of
  beneficiation
• Companies will indicate the extent they can grow
  directly or indirectly beyond base form

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Mineral Sustainability?Resource Industry Linkages
2. SIDE-STREAM Inputs Plant, machinery,
equipment, consumables, services, (export)
1. DOWNSTREAM Beneficiation Value-addition Export
of resource-based articles
Use wasting asset to underpin growth in
sustainable sectors
4. Infrastructural Linkages Puts in critical
infra (energy, water, transport) for other
non-mining economic potential
3. Technological Linkages Nursery for new tech
clusters, adaptable to other sectors
Develop linkages at the same time as extraction
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Minerals Energy Complex (MEC)-existing linkages
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Metals
Chemicals
Manufacturing
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Energy
Mining
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Services
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Business Services
Transport
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SA Beneficiation of Iron Ore A Case Study

• SA Top Ten Minerals by value 2005

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Worldwide Iron and steel flowsheet benefits of
beneficiation
Ore
Pelletize
Smelt
Convert
2 7000
75/t
27.1 Million tons of ore
Cast
Hot Roll
Cold Roll
Semis
9 500
19 000
28 500
670 000
650/t
550/t
1000/t
450/t
Manufactured products
White Goods 6000, Mining equipment 12000/t
2 000 900 people
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SA BeneficiationSteel Market

• Consumption

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SA Beneficiation ConstraintsSteel Market

• Carbon Steel Pricing Hot Rolled Coil Sept 2004

• Cadac has closed its manufacturing base in SA

COMPETITION TRIBUNAL Case no. 08/LM/Feb04
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SA Beneficiation ConstraintsSteel Market

• International competitiveness

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SA Beneficiation ConstraintsSteel Market

• Competition in the primary steel market in South
  Africa is limited by
• geographic isolation
• lack of regional competition
• high transport and related costs
• industry concentration / consolidation at the
  distribution level
• Consequently price setting differentiates between
  two markets
• International (sold at prevailing world prices)
• Domestic (significant markups on world prices)
• The effect of IPP on SA steel prices are
  significant
• 20 higher than EU
• 45 higher than South Korea

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SA Beneficiation ConstraintsSteel Market

• COMPETITION TRIBUNAL - REPUBLIC OF SOUTH AFRICA
• a senior executive at Mittal responsible for
  pricing and marketing policies, testified that
  Mittal offers a number of strategic discounts and
  rebates to its customers i.e. at prices less than
  IPP.
• It appears that the policy is premised partly on
  encouraging firms that beneficiate steel to enter
  export markets and partly to protect its back
  from other products or producers, hence the use
  of the word strategic discount.
• Will an independent controller still have the
  incentive to provide these discounts? He assures
  us that due to their strategic nature they are
  the type of discount policy any controller would
  adopt. In other words they are a function of
  Mittals market position not some sentiment
  infused by patriotic jingoism that only a local
  controller would exhibit.

COMPETITION TRIBUNAL Case no. 08/LM/Feb04
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Conclusions

• In South Africa the economy is dominated by its
  mineral endowment
• In spite of a GDP growth rate of 5, there is
  still high unemployment in South Africa
• Beneficiation of its mineral wealth is the key to
  the sustainability of South Africa for all it
  people
• However side-stream as well as the downstream
  linkages need to be developed to get full value
  out of mineral beneficiation
• If industry and government fulfill their roles,
  the benefits can be extended to all the people

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Thank You