SA Ferrous Mineral

Value Chains (MVCs)

Strategies

(beneficiation)

Iron Ore Beneficiation Africa

Paul Jourdan

Indaba Hotel, Joburg, March 2014

Note: This ppt is based on the DTI/IDC Ferrous MVC report (2013)

Mining: Concentration, smelting, refining => metal/alloy

Forward Linkages: Intermediate products => Manufacturing; Logistics;

other sectors (agriculture , forestry, fisheries, etc.)

Backward Linkages

Inputs: Capital goods Consumables

Services

Knowledge Linkages HRD: skills formation

R&D: tech development Geo-knowledge (survey)

Spatial Linkages: Infrastructure (transport,

power, ICT) and LED

Fiscal linkages: Resource rent capture &

deployment: long-term human & physical infrastructure

development

Knowledge linkages are a prerequisite for developing the

crucial back/forward beneficiation linkages!

Ferrous MVC and backward linkages for all MVCs

•“Continuous SOC engagement on supplier development and localisation

has led to embedding localisation policies and programmes at Eskom and

Transnet with high localisation thresholds

•An Intra-Departmental Task Team Report on Iron Ore and Steel adopted

by Cabinet, mandating the DMR, DTI and EDD to secure a developmental

steel price; amending the Competition Act, measures to restrict exports of

scrap metals and create competition in steel production

•The National Tooling Initiative created to increase and strengthen the

human capacity and competitiveness of the tooling industry. R200 million

provided by the NSF

•DTI instrumental in the opening of R1 bn Safal Steel metal coating plant

•National Foundry Technology Network established to facilitate the

development of the foundry industry through appropriate skills training,

technology transfer and diffusion of state-of-the-art technologies

•DTI facilitated an iron ore interim supply agreement in December 2012

between Sishen Iron Ore Company and AMSA”

IPAP Iron and Steel Value Chain (IDTT)

Cabinet signed off on proposals of the Inter-Departmental Task Team (IDTT)

on iron and steel. Work in progress includes :

– Finalisation of the Regulations, after public consultation, under the

provision of the International Trade Administration Act and Second Hand

Goods Act, to limit the unencumbered export of scrap metal and to

support domestic producers. Export of scrap closely associated with highly

deleterious cable and metal theft and masking of illegal export of precious

metals. Work led by EDD

– Amendments to the Competition Act, to limit the abuse of dominant

market position in key value chains especially iron and steel and plastics

and polymers and to lower the cost of strategic inputs into manufacturing.

Work led by EDD.

– Build competition in the iron and steel sector by the introduction of at

least one more steel producer. Work led by the IDC is advanced to

include a foreign investor; new technology and strong conditionality's to

ensure developmental ore prices are passed through as a competitive

advantage to manufacturing sector

•Haematite – iron oxide (Fe2O3), mainly mined from the

Transvaal Supergroup;

•Magnetite – iron oxide (Fe3O4), but often containing

economic amounts of titanium and vanadium, mainly

mined from the BC (Bushveld Complex);

•Ilmenite – Ti & Fe oxide (TiFeO3), mainly mined in HMS

(coastal sands), however this MVC will be covered in the

titanium MVC report;

•Chromite – Cr & Fe oxide (FeCr2O4), mined from the

BC;

•Manganese ores (kutnahorite and braunite) – the Mn

ores of the Kalahari Basin (Ghaap Group of the

Transvaal Supergroup,) contain roughly ~42% to 48% Mn

and ~ 15% Fe.

Steel

Steel/coke 2nd largest feedstock into global economy, after crude oil

Vehicles, cap goods, construction, metal products

•Mineral deposits have huge differences in

richness/grade (rents)

•Need competitive tender to get max VA

•Need to tender known assets against % VA

bid

•Only issue prospecting rights over ground

with no known resources

1. Competitive Tender to Maximise Ferrous Minerals VA

•Need to capture resource rents for

reinvestment in skills & infrastructure

•Resource Rent Tax (RRT) of 50% on ROI >

long-bond +7% (“normal ROI”)

•Reduce RRT rate against VA (e.g. 1% for

every 10% new VA

2. Mineral Rents (RRT-VA Offset)

•Need to reserve a portion of select “strategic”

resources for local VA at cost+

•Problem of retrospective application!

•At least then:

•Need to stipulate local competitive pricing

(EPP) with EPP on-obligation on all local VA

customers

3. State “Access” to Minerals Resources for >VA

•Need to raise crude ore export tariffs and lower VA

products tariffs (income neutral)

•Need to apply to all state utilities (SOEs): rail, road,

power, ports & finance on mineral exports

4. State Utility Tariffs to Enhance VA

NPA Proposed Future Tariff Structure

TNPA‟s Port tariffs proposal:

discount >VA

Mineral Percentage

Precious Metals 60%

Ferrous Metals 19%

Energy Minerals 15%

Base Metals 3%

Industrials* 2%

Precious Stones 1%

Total 100%

Proportion of SA’s Minerals by Value

•Kalahari Basin (Kathu, ~3Gt, Transvaal Supergroup) •Bushveld Complex magnetites (~25Gt, with Ti & V) •Zandrivierspoort (~500Mt, Polokwane Greenstone Belt) •Cascades (~1Gt, Mozaan Group of Pongola Supergroup) •Rooiwater (>100Mt (Fe/Ti), Rooiwater Complex – edge of the Murchison Greenstone Belt) •Moonlight (~300Mt, Beit Bridge Complex in the Limpopo Belt) •Delft (~300Mt, Mozaan Group of Pongola Supergroup) •Phalaborwa (300Mt stockpile, Phalaborwa carbonatite pipe) •De Loskop (~300Mt, Polokwane Greenstone Belt) •Kraaipan (~200Mt, Kraaipan Greenstone Belt) •Kromdraai (~180Mt, Lebowa Granite Suite of the BC) •Penge/Thabazimbi (~100Mt, Chuniespoort Group of Transvaal Supergroup)

SA Iron ore Production 2002-2011 (Mt)

Iron Ore Mining in SA, 2008

SA Steel sales, local Consumption, Exports & Imports

No growth

since „74!

Plus stainless steel (Columbus 1Mtpa) in Middleburg

Entity Flat Steel Products Long Steel Products

AMSA 80% 52%

Evraz Highveld 20% (incl exports) 15%

SCAW - 15%

Cape Gate - 12%

Cisco - 6%

Current Producers Market Share

Steel Market Share 2010

Impact of state infrastructure spend on steel consumption

Source IDC 2012

Domestic Steel Consumption

Steel flows in South Africa in 2008

Source IDC 2012

Forecast Regional Steel Demand- 2020

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

SADC GDP (PPP - million of international dollars)

Source IDC 2012

Forecast Regional Steel Demand- 2020

Monopoly pricing (IPP) of steel severely curtails

manufacturing jobs

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700

Import

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Hot rolled coil steel prices, US$/t

Value received on

exports (EPP)

Value received on

local sales (IPP)

Amount that local

customers pay

above exports World export price

Transport costs might be as high as 47%

of the cost of importing flat steel!

Between March 2004 and March 2013 the SA price for

HRC was 41% above the price in China and 15% above

the price in both South Korea and Taiwan.

Coastal (“steel-for-ore” deals)

•E.Cape Integrated Plant based

•Richards Bay Integrated Plant (Cascades)

•MISP

Inland (primarily domestic & regional markets)

•Scaw Expansion for long products (IDC

•Middleburg Plant for flats (Masorini-IDC

•HS&V expansion for flats (alternative Masorini

•Kathu Integrated Plant based

•BC high Ti magnetites (steel mill & pigment plant)

Possible new

plants

Thank You

paulj1952@gmail.com