Mineral Beneficiation Downstream Opportunities and Challenges!

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1 NSTF Science Councils Symposium: Beneficiation of SA s Natural Resources Mineral Beneficiation Downstream Opportunities and Challenges! Peter Craven General Manager, Business Development 17 September 2014

2 Mintek The home of minerals beneficiation!

3 Mintek is one of the largest and oldest mineral and metal technology institutes in the world (80 years old in 2014) is a state-owned Science Council, governed by an Act of Parliament, with a board appointed by the Minister of Mineral Resources focuses on all aspects of minerals processing and beneficiation, with the exception of iron- and steel making and coal processing has a permanent staff of about 750, including 250 engineers and scientists undertakes R&D and furnishes commercial testwork and consultancy services to clients worldwide Has an annual budget of about 50 million: 50% funding from state sources, focused on research 50% commercial income, derived from various services to industry (About 800 commercial projects last year) 3

4 Mintek in numbers 250 scientists and engineers R200m R&D budget R300m technology sales 44 published papers 71 conference publications 3 patent family filings 680 media references 81 interns 65,000 chemical analyses 588 technical reports 60 direct new SMME jobs 100 SMME trainees 47 full-time bursars 80 part-time bursars 720 commercial projects Source: Mintek 2013 Annual Report

5 Mintek operates in the latter stages of the Mining Value Chain Hydrometallurgy & Biotechnology Exploration Mining Concentration Refining Pyrometallurgy Value Addition Council for Geo-Sciences (CGS) Council for Scientific and Industrial Research (CSIR) MINTEK

6 Mintek s extensive R&D underpins its commercial services Mintek spends R250m annually on applied R&D (~50% of its budget) These R&D outputs are transferred to industry either in the form of commercial service work or, on occasion, technology licences Mintek undertakes ~ 800 commercial projects annually, evidence of the high regard industry has for our technology Mintek sells innovation!

7 Mintek s R&D strategy is aligned to the NDP Points specifically identified in NDP: Improved extraction efficiency to extend ore resources Improved energy and water efficiency Beneficiation to downstream, value-added products Mintek s R&D strategy includes these NDP points, and additionally includes: Mining, industrial and consumer waste treatment Small-scale and artisanal mining Improved extraction technologies for precious, base, ferrous and energy minerals

8 Mintek s management of innovation Combination market pull and technology push approach Industry need ascertained from: Commercial testwork activity Industry-specific workshops Participation in networks like SAMMRI Technology opportunities identified from: Mintek internal early-stage research Close relationship with technology vendors Extensive international network Strategy articulated in medium- to long term strategy (Mintek 2020) Highly structured research management process: 8 platforms, based on government priorities, strategic drivers, industry needs Allocation of funding (~R250m) between these platforms Top Down calls for internal proposals in these areas Selection of projects from Bottom Up proposals Cluster project management

9 Mintek test facilities are often operated at industrial scale Tapping of Mintek s test DC furnace

10 Site work is often conducted in very difficult conditions! Copper heap bioleach test facility in Iran

11 Mintek sometimes supplies technology on a turnkey basis Turnkey gold refinery using Mintek Minotaur technology

12 Project example - Cliff Resources Chromite 18 month Canadian ferrochrome project for Cliff Natural Resources to Bankable Feasibility Study level Started with laboratory scale testing Concluded with large pilot smelting campaign Included mineral processing and pyrometallurgy Over 500t of ore tested

13 Project example - Chilean copper heap leach project A 2-year high-temperature heap bioleaching project for one of the largest copper projects in Chile Highly successful technically in demonstrating that copper extraction could be controlled within the desired range

14 Mineral Beneficiation - different meaning to different people Encompasses many different dimensions DMR definition in the Beneficiation Strategy: beneficiation, or value-added processing, involves the transformation of a primary material (produced by mining and extraction processes) to a more finished product, which has a higher sales value To a metallurgist any act of processing the mined ore To an investor anything that adds value to a project

15 Benefit to the national economy is beyond question Creation of decent jobs Foreign direct investment, fiscus contribution and forex earnings Diversification of industry Reduced dependence on depleting resources Transition from resource economy to high-tech economy Skills development Improved livelihoods in proximate communities But There are a number of hurdles that also need to be recognised and overcome

16 Critical determinants for project investment Financing - proximity to financial markets & shareholders Availability of creative assets (entrepreneurial capabilities) Favourable business environment Access to feedstock and other inputs at competitive pricing Access to technology Skilled operational staff Access to markets relationships and proximity

17 Massive difference between. Increasing the sales price of a product As measured by R/unit of product, R/unit of metal contained in product, higher sales revenue, etc and Increasing value to the project investor As measured by ROI, shareholder value, etc Source: Deloitte report Positioning for mineral beneficiation, 2011

18 Proximity to ore resource - often not an economic advantage Internal railage often more expensive than sea-freight Often lack all ingredients (coke, sweeteners, bulk chemicals, etc) WTO limits protective tariffs Close interaction with proximate market often more valuable Proximity to shareholders is advantageous (They prefer investing in their backyard, where they understand the risks) Any successful business needs a clear, material, sustainable competitive advantage!

19 Minerals industry is particularly global Dominated by multinationals Even juniors are increasingly globally disseminated Production landscape has changed considerably over the past 50 years. Mining-minerals processing-smelting-manufacturing chain seldom confined within one country s borders Bauxite alumina aluminium is a good example Strong competition from other resource-rich countries and developed economies to retain downstream industry won t willingly give up market share (EU example)

20 Mining company thoughts on downstream diversification (or vertical integration) For Better appreciation of value in use Move from resource to intellectual assets Price setting control of downstream activities Against Less value in intermediate stages Competing against clients Moving away from expertise base Shareholder expectations Company structures and culture Doesn t diversify portfolio - still exposed to same cyclicity

21 International investor perception of SA as an innovation economy is relatively poor. South Africa rates 53 rd out of 143 countries Source: INSEAD Global Innovation Index 2014

22 Also a negative perception of SA as a competitive economy South Africa rates 53 rd out of 148 countries Source: World Economic Forum, Global Competitiveness Report, 2014

23 SA is second only to Russia in terms of energy usage to generate unit of GDP SA has a large, energy-intensive mining and resource extraction component SA s historical low energy cost has attracted energy-intensive industries (eg aluminium refineries) Need to recognise energy-intensive mineral beneficiation activities, to decide whether these will be of most overall benefit to the economy

24 SA is increasingly short of technical skills Global issue, in both developing and developed world, but worst in Australia and Africa Exacerbated by recent retrenchments of senior, experienced staff in industry Students graduating 2010 Graduates entering industry Source: Cilliers et al, Mineral Industry, Education and Training 2012

25 Thank You