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NEWS AT THE CORE 6 June 2005 AS IM WENT to press, French industrial minerals giant Imerys announced a definitive agreement for the $230m. acquisition of global perlite and diatomite leader, World Minerals Inc., from parent Alleghany Corp. The buyer is Imerys USA Inc., a wholly- owned subsidiary of Imerys SA, and the acquisition is subject to relevant anti-trust approvals. Closing of the transaction is expected to occur within six to eight weeks. There have been rumours in the market for several months that Imerys was in the process of finalising a major acquisition, but the scale is still something of a surprise – $230m. in cash for a company with over 20 plants worldwide (see table). IM spoke to the Imerys head of finance and strategy, Jerome Pecresse, who said that discussions with World Minerals had been continuing, “for some time”. Headquartered in Santa Barbara, California, World Minerals reported 2004 sales of $286m. and is mainly involved in the mining, processing and sales of diatomite and perlite, predominantly for beverage filtration, but also as fillers in paints and plastics. Perlite has important additional uses in construction (insulation) and horticulture. Weston Hicks, president and CEO of Alleghany, said, “we are pleased that we have reached an agreement to sell World Minerals to one of the world's leading global minerals companies, which should ensure that the company will prosper over the long term. With the completion of this transaction, Alleghany will have substantial liquidity to be used opportunistically to enhance returns to our shareholders.” Fitting into existing divisions The acquisition moves Imerys into a completely new minerals area it has had no substantial experience with before, and the assets do not obviously fit into one of the existing four main divisions, which include Pigments for Paper, Specialty Minerals, Building Materials, and Refractories/Abrasives. Pecresse agreed that the acqusition would represent a new minerals business area for Imerys. On where the business would be positioned in the current set- up, he commented, “it has not yet been decided where it would fit. We are keeping an open mind and are thinking about it, but we are concentrating on closing the acquisition first”. However, in its official announcement of the deal, Imerys stated that it regards the move as completing “the broad spectrum of the Group's offerings to the paints and plastics markets”, which would suggest the possibility of the assets joining the Performance Minerals sector of its Specialty Minerals division. Alternatively, a new Filtration Minerals sector may be created within Specialty Minerals. An unsettled market Elsewhere in this market, one of the major players is going through a transition of its own. EaglePicher Inc., the parent company of EaglePicher Filtration & Minerals Inc., filed for Chapter 11 bankruptcy protection on 11 April 2005 Imerys to acquire World Minerals Perlite and diatomite added to an increasingly diverse portfolio by Paul Moore, Deputy Editor Surveying at Celite’s Lompoc, California diatomite mine Courtesy World Minerals

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Page 1: Imerys to acquire World Minerals - News 06-05 · industrial minerals giant Imerys announced a definitive ... Asia, and China in ... Industrial Minerals. 8 June 2005 In response to

NEWS AT THE CORE

66 June 2005

AS IM WENT to press, Frenchindustrial minerals giantImerys announced a definitiveagreement for the $230m.acquisition of global perliteand diatomite leader, WorldMinerals Inc., from parentAlleghany Corp. The buyer isImerys USA Inc., a wholly-owned subsidiary of ImerysSA, and the acquisition issubject to relevant anti-trustapprovals. Closing of thetransaction is expected tooccur within six to eightweeks.

There have been rumours inthe market for several monthsthat Imerys was in the processof finalising a major

acquisition, but the scale isstill something of a surprise –$230m. in cash for acompany with over 20 plantsworldwide (see table). IMspoke to the Imerys head offinance and strategy, JeromePecresse, who said thatdiscussions with WorldMinerals had beencontinuing, “for some time”.

Headquartered in SantaBarbara, California, WorldMinerals reported 2004 salesof $286m. and is mainlyinvolved in the mining,processing and sales ofdiatomite and perlite,predominantly for beveragefiltration, but also as fillers in

paints and plastics. Perlite hasimportant additional uses inconstruction (insulation) andhorticulture.

Weston Hicks, presidentand CEO of Alleghany, said,“we are pleased that we havereached an agreement to sellWorld Minerals to one of theworld's leading globalminerals companies, whichshould ensure that thecompany will prosper overthe long term. With thecompletion of thistransaction, Alleghany willhave substantial liquidity tobe used opportunistically toenhance returns to ourshareholders.”

Fitting into existingdivisionsThe acquisition movesImerys into a completely newminerals area it has had nosubstantial experience withbefore, and the assets donot obviously fit into one ofthe existing four maindivisions, which includePigments for Paper, SpecialtyMinerals, Building Materials,and Refractories/Abrasives.

Pecresse agreed that theacqusition would represent anew minerals business areafor Imerys. On where thebusiness would bepositioned in the current set-up, he commented, “it hasnot yet been decided whereit would fit. We are keepingan open mind and arethinking about it, but we areconcentrating on closing theacquisition first”.

However, in its officialannouncement of the deal,Imerys stated that it regardsthe move as completing “thebroad spectrum of theGroup's offerings to the paintsand plastics markets”, whichwould suggest the possibilityof the assets joining thePerformance Minerals sectorof its Specialty Mineralsdivision. Alternatively, a newFiltration Minerals sector maybe created within SpecialtyMinerals.

An unsettled marketElsewhere in this market, oneof the major players is goingthrough a transition of its own.EaglePicher Inc., the parentcompany of EaglePicherFiltration & Minerals Inc., filedfor Chapter 11 bankruptcyprotection on 11 April 2005

Imerys to acquireWorld Minerals

Perlite anddiatomite added

to an increasinglydiverse portfolio

by Paul Moore,Deputy Editor

Surveying at Celite’s Lompoc,California diatomite mine

Courtesy World Minerals

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77June 2005

NEWS AT THE CORE

(see IM May ’05, p.9). As partof the restructuring process,the Filtration & Mineralscompany is thought one of themost likely candidates for anasset sale. However, Imerys isunlikely to make an approachgiven that the World Mineralsdeal is still to be completedand that a combined WorldMinerals/EaglePicher groupwould probably not bepermitted given the dominantmarket share that would result.

Other majors in filtrationminerals include US-basedGrefco Minerals Inc.(Dicalite® range), andGreece’s S&B IndustrialMinerals, which is aEuropean leader in perlitesupply, as well as exportingsignificant volumes to theeastern US market. InChina, the company has a25% stake in Xinyang-Athenian Mining Co. Ltd(XAMCO) in Henanprovince, one of thecountry’s leading producers.

There are several othersmaller players in the USperlite market, includingBasin Perlite and CornerstoneIndustrial Minerals Corp. TheNorth American market isalso highly competitive, whichhas put pressure on pricing inrecent years.

World Minerals assetsWorld Minerals conducts itsdiatomite business throughCelite Corp., the world’s largestsupplier of filter aid diatomite.Headquartered in Lompoc,California, Celite owns, eitherdirectly or through whollyowned subsidiary companies,diatomite mines and/orprocessing plants in the USA,France, Spain, Chile, Peru andMexico. World Minerals alsohas controlling interests, viaCelite subsidiaries, in two jointventures engaged in the miningand processing of diatomite inJilin province, China.

The company’s perlitebusiness comes underHarborlite Corp., also based inLompoc, which is the world’sleading producer of perlite filteraids. Harborlite is also

engaged in the business ofselling perlite ore, and is one ofthe world’s largest merchantproducers of perlite ore. Perliteore for filter aid and certainfiller applications is mined atthe Superior, Arizona mine andexpanded at Harborlite’s six USexpansion plants. Harborlitealso mines non-filter gradeperlite at No Agua, NewMexico, as well as havingexpansion plants in Italy,France, Spain, and SouthAmerica. The Europeanexpansion plants use ore fromthe company’s Dikili, Turkeymine and other mines in centralTurkey, as well as merchant oreproducers in Europe.

Continuing theImerys “growthstrategy”Pecresse told IM, "WorldMinerals is a goodillustration of our growthstrategy in that it is anestablished company whichis a leader in its field. It alsohas the added benefit ofbeing a new business for us".However, this majoracquisition also begs thequestion of where else Imeryscan expand in the future tosatisfy its shareholders that itis continuing to maintain itsoft-stated “growth strategy inindustrial minerals”.

The global silica sand andremaining calcium carbonatemarkets are very much centredon SCR Sibelco and Omya AGrespectively. Equally, theworld’s lime industry remainsdominated by Belgium’sCarmeuse and Lhoist.Approaching “mid-sized” EUmineral players such as SAReverte, Gruppo Minerali, S&BIndustrial Minerals, or France’sDenain-Anzin Minéraux (DAM)would likely raise eyebrowswith regard to EC competitionrules. Turkey still offers anumber of ripe mineralsacquisition targets, particularlyin sodium feldspar, thoughImerys, together with the otherlarge mineral groups, seemsvery focused currently onstrengthening its foothold inAsia, and China in particular.

NNoorrtthh AAmmeerriiccaa CCaappaabbiilliittiieess

USA

No Agua, New Mexico Mine and mill (P)

Antonito, Colorado Loading facility (P)

Superior, Arizona Mine and mill (P)

Utah Deposit (P)

Escondido, California Expansion facility (P)

Green River, Wyoming Expansion facility (P)

LaPorte, Texas Expansion facility (P)

Youngsville, North Carolina Expansion facility (P)

Vicksburg, Michigan Expansion facility (P)

Quincy, Florida Expansion facility (P)

Lompoc, California Mine and processing facility (D)

Quincy, Washington Mine and/or plant (D)

Fernley, Nevada Mine and plant (D)

Mexico

Central Mexico Deposit (P)

Tuxpan Mine and/or plant (D)

Guadalajara Mine and/or plant (D)

EEuurrooppee

Wissembourg, France Expansion facility (P)

Murat, France Mine and/or plant (D)

Hessel, UK (closed April 2004 – someproduction relocated to Barcelona)

Expansion facility (P)

Barcelona, Spain Expansion facility (P)

Alicante, Spain Mine and/or plant (D)

Milan, Italy Expansion facility (P)

Turkey, Dikili Mine and mill (P)

Central Turkey Deposit (P)

SSoouutthh AAmmeerriiccaa

Santiago, Chile Expansion facility (P)

Arica, Chile Mine and/or plant (D)

Arequipa, Peru Mine and/or plant (D)

Ayacucho, Peru Mine and/or plant (D)

Paulinia, Brazil Expansion facility (P)

Note: P/D Perlite/DiatomiteSource: World Minerals Inc., Industrial Minerals

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88 June 2005

In response to the EuropeanCommission’s (EC) recentruling to start provisionalantidumping measuresagainst Chinese imports ofmagnesia refractory bricks,industry officials in Liaoninghave told IM that theyconsider the EU policy to beunfair (see IM May '05, p.6).

The Liaoning RefractoryIndustry Association (LRIA) toldIM: “We think it is an unfairjudgment for the European

Commission to impose aprovisional antidumping dutyon imports of Chinese >80%MgO bricks. Now, most of theChinese magnesia brickproducers are privatecompanies. They havedeveloped fast during the lastdecade, while China hascontinuously perfected amarket economy system. Theynow operate separately andare responsible for their ownprofit or loss. Thus it’s unfair

to deny China’s marketeconomy position withoutconsidering the currentsituation of China. Also, it’sunfair to take a developedcountry as a substitute countryto estimate the proper valueof Chinese productsconcerned.”

The LRIA was referring tosome of the Chinese brickproducers being denied“market economy status”,which could have led to themhaving preferential treatmentand a lower antidumpingpenalty, eg. 11.2% against66.1%. Also, in ECantidumping investigations, itis normal practice to“benchmark” such a tradedispute with the same inanother country. In thisinstance, the EU selected theUSA, but only after initiallychoosing then rejectingTurkey. In the view of theLRIA, this was clearly anunsatisfactory selection.

The LRIA also had strongwords on the role of Vienna-based leading refractoryproducer RHI AG, one of themain lobbyists for the ECruling. The LRIA went on tosay: “The main plaintiff, RHIAG, which has invested inChina for many years, has abetter understanding ofChina’s market economy andoperation advantage, sobringing forward thisantidumping investigationunveiled its operation strategyof monopolisation. Thus theprovisional antidumping dutyon Chinese bricks is in favourof a few European refractorycompanies, and is unfair notonly for Chinese enterprisesbut also for Europeanrefractory consumers. TheLiaoning Refractory IndustryAssociation is firmly againstthe European Commission’sdecision, and Chinesecompanies will appeal againstthe decision to the end.”

IM understands that themonopoly of North Koreanmagnesite production, currentlyresiding under the operationsand control of Korea MagnesiaClinker Industry Group(KMCIG) is about to change.

In order to encourage acertain degree of “competition”and ensure that the mining

companies receive somerevenue, the authorities are tocreate another magnesiasupply company, and possiblymore over the next few months.

First hand reports indicatethat currently some of themining operations are sopoor that they cannot feed orpay staff, a situation that has

negatively impactedconsistent supplies of deadburned magnesia for export.

There are three mainmagnesite mines in NorthKorea – the Dae Hung openpit and the Ryong Yang andPaek Bai (White Rock)underground operations. Thetotal capacity from all three is

about 2.5m. tpa, but DaeHung is the largest at 1.3m.tpa. There are also threeclinker producing plants atDae Hung, Tanchon (suppliedfrom Ryong Yang and DaeHung mines) and Song Jin(supplied from Paek Bai andDae Hung mines). The minesat Dae Hung also have adedicated railway by whichmagnesite ore is delivered tothe plants, and rail is alsoused to deliver clinker to theports.

Hungnam and Kimchaekare the ports used for theexport of clinker. Kimchaekis owned 100% by KMClG.The main export markets forthe Korea Magnesia ClinkerIndustry Group are Japan,Taiwan, Southeast Asiancountries and Europe.Industry consultant IanWilson is to present acompre-hensive review ofthe world's current andpotential magnesiteresources at MagMin 2005,12-14 June, in Vienna (seep.2&3)

North Koreanmagnesia supply

China slamsEU MgO brickantidumpingmove

The Chinese producers see theantidumping measures as unfairgiven the rapid development oftheir industry

The Dae Hung plant shaft kilnsfor clinker productionCourtesy Ian Wilson

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99June 2005

NEWS AT THE CORE

Motim Electrocorundum Ltd,the Hungarian fused aluminaproducer, has reported a“very strong” first quarter of2005. Zoltán Tanyi,managing director, told IM:“The upward trend whichstarted in Q4 2004 has beendriven by the refractorybusiness, whilst the abrasivebusiness has shown amoderate increase”.

Motim reports that it iscurrently running close to itsfull capacity of 50,000 tpa.Of this, 30,000-33,000 tpa iswhite fused alumina, 6,000-7,000 tpa is white fusedmullite, 10,000 tpa consistsof fused spinel grades and1,000-2,000 tpa is fusedzirconia mullite. About 95% ofMotim’s production isexported to the European

Union, North America andAsia. Tanyi added: “Generallyspeaking, the demand isstrong with some signs that incertain areas the trend hasreached or is close to itsculmination point”.

The recent robust demandfor material has allowedMotim to raise prices in aneffort to offset high feedstockand energy costs. Since Q42004, prices have increasedby 5-15% depending on theapplication. The company’sannual agreements forcalcined alumina feedstockinclude at least threedifferent sources includingdomestic supplier MALMagyar Aluminium Rt andhave protected it to somedegree from alumina spotprice spikes.

Motim reportsstrong first quarter

Tianjin-based Huang He CastPlant Co. Ltd (HCP) hasincreased its fused silicaproduction capacity to 900 tpmand has installed a range ofmodern processing equipment.

Using high purity naturalquartz, initial production hadcommenced in 2000 inLianyungang, Jiangsu province,

which amounted to some 300tpm using three furnaces. Lastyear, Huang He installed afurther six furnaces bringingproduction capacity to 900tpm. Moreover, the companyhas also installed a “fullrange” crushing and millingsystem including a hammermill, Barmac crusher, granulate

dressers, zircon/alumina-linedball mill, and air classifiers.

Huang He is targeting therefractory, investment casting,and electronic markets withproducts in -325 mesh, -600mesh, and -1,000 mesh sizes.The typical specification for thefused silica is 99.96% SiO2,115ppm, Al2O3, 32ppm,

Fe2O3, 27ppm, K2O, 26ppm,Na2O, 31ppm, CaO, 6ppm,MgO, and 1.6ppm magnetics.

In the wider economy,Huang He is facing the sameproblems as all Chinesemineral producers andprocessors – further electricalpower price increases and taxrebates wholly cancelled fornearly all minerals andmineral products. Thecompany also producesbrown fused alumina (BFA),white fused mullite and fusedspinel at its other plant inYima City, Henan Province.

A Ukrainian silicon carbide(SiC) producer has failed topersuade the EuropeanCommission (EC) that existing24% anti-dumping duties onits exports to the EuropeanUnion (EU) were outdatedand should be abolished.

Although ZaporozhskyAbrasivny Combinat (ZAC) hadmade price undertakings toavoid paying the duties, itclaimed that the 1996 analysis

behind their imposition wasflawed. ZAC argued that thisanalysis was based onassumptions that former-communist Ukraine was a non-market country, whereas todayit is truly capitalist inorientation.

The Commission, which hadcarried out the originalcalculations, staged a review,but has concluded that despiterecent reforms the Ukraine is

still a non-market country, andhas ordered that the dutiesremain. In its reviewinvestigations last year, the ECfound that although ZAC wasbeing privatised, “companydecisions of ZAC regardinglabour, output and sales werenot made in response tomarket signals reflecting supplyand demand”. Instead,decisions were taken “withsignificant state interference inthis regard”.

Another argument dismissedwas that Brussels should takeinto account ZAC’s prices forsilicon carbide sold to the USA,which the company said

proved it would no longerdump products in the EUregardless of the duties.However, Brussels concludedthat these US sales “were notrepresentative”, dismissingclaims it was “appropriate touse the export prices to theUSA” in calculations.

ZAC also challenged theEC’s use of Brazil as ananalogue ‘market’ country tovalue silicon carbide, sayingthat Russia should have beenused. The Commissionrefused to accept the claim,noting that Russian producershad themselves dumpedsilicon carbide.

Huang He Cast upgrades fused silica plant

EC upholds Ukraine SiC duties

Motim's new warehousing facility, Mosonmagyaróvár, HungaryCourtesy Motim

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1100 June 2005

IN LINE WITH its strategy overthe last few years in focusingon speciality magnesiamarkets, it should come aslittle surprise that Dead SeaPericlase (DSP) of Israel hasdecided to implement anexclusive concentration on themarkets for speciality MgOand withdraw from therefractory grade magnesiamarket. Following internalreorganisation at IsraelChemicals Ltd, DSP becamethe Magnesia Products SBUof ICL – Industrial Products.

Arieh Tabic, Manager forMarketing and SpecialtyProducts, explained to IM:“Refractories has ceased tobe a core business. DSPoperates a highly energyintensive process whichproduces a product ofsuperior chemical purity.These product advantagesare exploited in the marketsfor speciality MgO, such aspharmaceuticals and food,transformer steel, rubber andplastics, as well as providinga superior feedstock forproducers of high puritymagnesium compounds.” Hecontinued: “Formerly oursintered product could exploitthese purity advantages inrefractory applications aswell. However, the changesthat have occurred in therefractory market over the lastdecade have created a

situation [whereby] there areno longer cost benefitadvantages to be obtained byusing sintered MgO producedat DSP; whereas in thespeciality areas DSP's puritycontinues to play a majorrole.”

DSP operates a plant atMishor Rotem, Israel toprocess magnesia from themagnesium chloride-richbrines of the Dead Sea.Utilising the proprietaryAman pyrolysis process, DSPis able to produce very highpurity grades of magnesia.Up until recently thisincluded dead burnedmagnesia for the refractorymarket, typically grading99.3% MgO, zero B, bulkdensity 3.43-3.45 g/cm3,and a periclase crystal size of70-90µ.

In 2003, Roland Mureinik,Manager for BusinessDevelopment, told IM: “Weare producing at muchreduced volumes for nicheapplications in therefractories market thatdemand high purity sintermagnesia.” Of the totalproduction, some 30,000 tpawas caustic calcinedmagnesia (CCM) aimed atthe buoyant specialitymarkets.

The trend continued in2004, when DSP revealedthat it had significantly cut

back its DBM production asa result of market change,and was focusing on tailor-made grades of high purityCCM for thepharmaceuticals,nutraceuticals and flameretardant markets. Last yearMureinik told IM: “Therefractory market haschanged. If you are a topend [DBM] supplier, there isnow no real demand in lightof Chinese dead burned and

fused magnesia grades.”The trend of magnesia

companies diversifying intospeciality markets is one thathas gathered strength inrecent years – promptedmainly by Chinesecompetition and also growthmarkets in the CCM sector.However, there are upperand lower tiers of thespeciality market,characterised by demands onCCM/Mg(OH)2 purity andperformance. DSP is firmlyfocused on the high gradeupper tier of the market. DSPhas made significant effortsand investment in recentyears in order to increaseproduction capacity of itstailor-made speciality grades,as well as to improve productquality and productionefficiency.

Roland Mureinik will beoutlining DSP’s activities andviews on this market atMagMin 22005, 12-14 June,in Vienna, which has alreadyattracted over 150international attendees activein the supply, trading, andconsumption of magnesiaproducts (see p.2&3).

May 2005 saw CausmagInternational, of Young, NewSouth Wales, start the ramp-up phase of its rotary andshaft kilns following a sixweek shutdown earlier thisyear.

Causmag, which producesmagnesium carbonate andcaustic calcined magnesia,needed to reline both itsrotary and shaft kilns withbricks imported from Vesuviusin South Africa, which hadbeen delayed in shipping.

The animal feed season isjust getting underway in

Australia and so Causmag iskeen to get its causticcalcined grades on line assoon as possible. Fullproduction was expected toresume in two to threemonths.

Richard Quadros ofCausmag is giving apresentation at theforthcoming MagMinconference in Vienna (12-14June) entitled “High puritynatural caustic magnesia -offering solutions”. See p.48,49 for full programmedetails.

Causmag rampsup after kilnshutdown

DSP to concentrate on speciality MgOFocus on specialities leads to withdrawal from refractory grades

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1122 June 2005

Finnish minerals processinggroup, Metso Minerals, is tosupply three lime calciningplants to Tai Yuan Iron & Steel(Group) Co. Ltd (TISCO) inChina. The plants are to bedelivered to TISCO’sDongshan quarry, Tai YuanCity, Shanxi Province, withproduction scheduled tobegin in March 2006. Thevalue of the order was notdisclosed.

The turnkey deliveries willinclude all key equipment,process and equipmentdesign, control system,

inspection services, as well asinstallation and start-upassistance. Each lime planthas been designed toproduce 1,000 tpd of lime.With a total productioncapacity of 3,000 tpd, theDongshan quarry will becomethe largest single limeproduction facility in China.

The lime will be used byTISCO as a flux insteelmaking and in theirsintering plant. Theinvestment is part of thecompany’s expansion projectto increase its production of

stainless steel by 1.5m. tpa.Metso said that the market forstainless steels continues toincrease in China as morediversified consumer and hightechnology products aremade in the country.

TISCO is China’s largeststainless steel manufacturerand is among the world's

largest producers of stainlesssteel. In 2004, its turnoverstood at $3,500m.

Metso is the global leaderfor the supply of preheaterlime calcining plants. Thecompany stated that the valueof one lime calcining solutionof this volume is generallyover €10m.

One of Metso’s global preheater lime calcining plants. The new limeproduction facility at Dongshan will be the largest in China,producing 3,000 tpdCourtesy Metso Minerals

Metso awardedmajor Chineselime contract

Revenue increase for AMROn 16 May 2005, rareearths and zirconium productscompany, AMR TechnologiesInc., announced its Q1 2005results for the period ending31 March. AMR reportedrecord revenues of $16.2m.compared to $11.8m. for thesame period in 2004. Rareearths recorded a 43% salesincrease to $12.9m., whilesales in the zirconiumbusiness almost doubled to$2.7m. The Magneticsbusiness, however, had adisappointing quarter withsales at half of last year’slevel.

Profits for the quarter stoodat $47,000 compared to aloss of $143,000 in thecorresponding period of2004. Broken down bydivision, operating income forthe quarter in rare earthsincreased from $768,000 inQ1 2004 to $1.24m., whilethe zirconium businesscontributed $411,000compared to $123,000 in the

previous year. Shipments ofrare earths for the quarterexceeded 1,130 tonnes witha total sales value of$12.9m.

Operating margins in thequarter were adverselyaffected, however, byincreases in raw materialprices – namely rare earthcarbonates, rare earth clays,zircon, zirconium oxychloride,hydrochloric acid, nitric acidand oxalic acid.Transportation and electricitycosts in China have alsoincreased sharply. PeterGundy, chairman and CEOcommented, “we believe thesehigher input costs willcontinue and have raisedprices for some of ourproducts to offset the costincreases”. He also referred tothe cancellation of ChineseVAT rebates (see p.10), whichincludes rare earth exports. “Itwas recently announced thatthe 5% VAT credit on all rareearth exports from China will

be revoked with effect from 1May 2005. We have informedour international customers ofthis change and are currentlynegotiating with them on priceincreases” said Gundy.

During the quarter thecompany also commencedlegal action in the OntarioSuperior Court of Justiceagainst Lynas Corp. inconnection with the acquisitionof AMR shares (see p.19) byanother shareholder whichAMR believed may have beenacting jointly or in concert withLynas in compiling “asignificant block of AMRshares”.

Rare earth“processing trade”bannedCompounding the removal ofthe VAT rebate on rare earthexports is a ban on“processing trade” of rareearths, which becameeffective on 19 May. This isnot, as it sounds, a ban on

exporting rare earths, rather itis a ban on importing rawrare earth ores to makeprocessed rare earthproducts. Similar measuresare being taken with iron ore,pig iron, waste steel, steelingot, and phosphorite ore.

The cost of rare earthmineral ores is alsoincreasing in China. JeffHogan, VP and generalmanager of AMR’s rare earthsand zirconium divisions toldIM that effective 6 May, themajor rare earth miningcompanies in Baotou andSuzhou raised prices by 10%.

The government is hopingthat the processing trademove will help to consolidatethe Chinese rare earthsindustry, leaving only thelarger players with betterenvironmental and safetyrecords. Margins will ofcourse fall, but it is hopedthat by tightening supply,prices of finished products willrise to counter this.

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1133June 2005

NEWS AT THE CORE

BAUXITE PRODUCTION atthe Linden joint venture inGuyana is 20% abovetarget, Cambior presidentand CEO Louis Gignac said

during a conference call.Canadian firm Cambiorowns 70% of projectoperator Omai BauxiteMining (OBMI) in a

partnership with thegovernment, which has a30% stake.

Production of high aluminacalcined bauxite (RASC) – arefractory grade – reached44,000 tonnes from theLinden mine during the firstquarter of 2005. Chemicaland cement grades were alsoproduced. Sales for the firstquarter totaled $7.3m., andthe company implemented aprice increase in January thatwas supported by very strongdemand for its products.

Cambior relocated a 14megawatt power plant to theoperation from its Omai goldmine, which is being wounddown, to ensure reliablepower supply at the site. Therehabilitation of a second kilnat Linden could boostproduction during the secondsemester of the year. Thecompany will also spend upto $20m. to refurbish the

processing plant, improveinfrastructure and obtainmore mining equipment. Thepower plant will also supplythe Government of Guyanafor the Linden community.Power purchase agreementsare in place to reimburse alloperating costs and pay backcapital with a competitivefinancial return.

Cambior anticipatesrevenues of $42m. in 2005from bauxite, including$39m. (approx. 90%) fromthe sale of RASC production.During the 1970s Guyanasupplied 800,000 tpa ofRASC to the refractorymarket, over 80% ofworldwide supply beforebeing edged out of thebusiness by Chineseproducers.

Contributor: Paul Harris,independent businessjournalist, Santiago, Chile.

Omai Bauxite productionabove target

Kiln number 13 at Omai Bauxite’s operation in Guyana.Courtesy Cambior.

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1155June 2005

NEWS AT THE CORE

THE FINAL flow sheetdevelopment of KenmareResources plc’s Momaminsands processing facilityhas indicated that the minewill have a 701,000 tpailmenite capacity. This raisesthe ilmenite productionvolume for the MomaTitanium Minerals project inMozambique by 86,000 tpa,from earlier estimates of615,000 tpa. Meanwhile,Dublin-based Kenmare hasindicated that productionvolumes for zircon and rutileare substantially unchanged.

Construction at the Momamine site is proceeding toschedule and production isexpect to begin in the secondhalf of 2006. The project sitework is currently in the handsof the building contractor andKenmare hopes to take thereins in mid-2006.

In a recent statement,Kenmare Chairman CharlesCarvill said that most of thedesign work and procurementfor the project had beencompleted, while work onseveral major parts of theconstruction project was wellunderway. These include: thehard standing for the dry plant,

a construction pond, a powerline, a 20 km access road, anairstrip, and a road for theconveyor. In addition, plantcomponents bought from BHPin Australia are expected toarrive at Moma in late May,and a new exploration drill hasbeen purchased to carry outdetailed infill drilling and fullinvestigation of the resourcepotential beyond theimmediate mining area.

Carvill said that projectproduct marketing wasprogressing well, withagreements being establishedwith major consumers tosupply sulphate grade ilmenite.These agreements are in theprocess of being converted intofull legal contracts. Thecompany expects the currentlevel of production capacity tobe sold out by the time theoperation commences output.

New sampling unitin AlbertaTitanium Corp. Inc. ofToronto, Canada hasannounced a 12-monthextension to the exclusivityagreement between itself,Syncrude Canada Ltd and amajor titanium dioxideproducer.

The agreement will see thecontinuation of the oil sandsmineral recovery project, inwhich Titanium Corp.processes oil sand tailings,supplied by crude oil producerSyncrude, in order to recovertitanium and zircon at its pilotplant in Regina, Saskatchewan.The plant, the first of its kind,was opened in May 2004.

The tailings are rich inheavy minerals, which

become concentrated duringthe bitumen extractionprocess, and are stored atSyncrude’s Fort McMurray,Alberta facility.

Titanium Corp. is nowproceeding with the design,engineering, and installationof a bulk sampling facility atFort McMurray. The samplingplant will be a small-scale wetmill operation, which willseparate the oil and waterfrom the mineral-bearingsand. This solid material willthen be transported by truckto Titanium Corp.’s Reginaunit for further processing.

The new plant, which willbe built in Australia, isexpected to come on-stream

by late summer 2005 and willoperate for several months.The company estimates atotal capital and operatingexpense of Can$625,000(approx. $495,750). TitaniumCorp. is planning a full-scaleproduction facility for 2007.

Higher ilmenite output estimated from Moma, while Canadian oil sandrecovery project extended

Mineral sandsprojects progress

The dry plant for Kenmare’sMoma minerals sands project,Mozambique.Courtesy Kenmare Resources plc.

Syncrude mines Alberta’sAthabasca oil sands deposit,Canada.Courtesy Syncrude Canada Ltd.

The wet plant gravity circuit at Titanium Corp.’s Regina,Saskatchewan oil sands mineral recovery pilot plant.Courtesy Titanium Corp. Inc.

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1177June 2005

NEWS AT THE CORE

ROCLA Pty Ltd, a majorAustralian producer ofconstruction sands, has failedin its bid to open a 4.5m. tpasand mine on the Kurnellpeninsula on the outskirts ofSydney, New South Wales, only2km north of where CaptainCook landed in 1770.

Rocla is one of thebusinesses of the AmatekGroup, an Australian-basedinternational buildingproducts company. Otherdivisions in Amatek includeStramit and InsulationSolutions. Rocla Quarry

Products is currently involvedwith the extraction, processingand distribution of sand,aggregates and fly ash from19 sites throughout Australia.

The company has extractedand sold fine sand from theKurnell peninsula since 1985and is the sole washed sandproducer in the area, where itcurrently extracts fine sandfrom two adjoining propertiesowned by Besmaw Pty Ltd andConsolidated Development PtyLtd. The existing Kurnelloperations are all majorsuppliers of fine washed sand,

specifically graded for blendingin premixed concrete. Alsoproduced are fill and specialitysands such as bricklaying andplaster sand.

The new mine wouldreplace one of the two existingsources (ConsolidatedDevelopment) which isplanned to cease productionby late 2005, and supplementproduction from the remainingsource. It is proposed toremove some of the existingdune sand by dry extractionmethods. However, the bulk ofthe dune sand would be

allowed to slide into thedredge pond and be mixedwith the underlying deepersand to produce a highquality construction sand.

The New South Walesminister for infrastructure andplanning, Craig Knowles,refused the developmentapplication citing, “concernsover the environment andpublic interest”. He describedthe area as a unique areawith wetlands of internationalimportance and nationalheritage significance statingthat the proposed mine woulddestroy a groundwateraquifer, remove one of thelast remaining sand dunes onthe peninsula and pose anunacceptable risk to theecosystems of the nearbyTowra Point Nature Reserve.

THE CHINESE authorities areyet again placing pressure onprices of exported minerals.On 29 April 2005, theMinistry of Financeannounced that the exportrebate of 5% for exporters ona range of minerals includingmagnesite, talc, siliconcarbide and fluorspar was tobe scrapped completelyeffective 1 May.

The policy was announced justprior to China’s early Maypublic holiday and so causedsome degree of confusionamongst traders and exporters.The move follows the January2004 move by the authorities,which initially reduced theamount of export rebate onselected minerals from their thenlevels of 12-15% depending onthe mineral, down to 5% (seeIM November ’03, p.12)

With the 5% export rebatescancelled, the export pricesof minerals are expected torise, and traders also fearthat the government may“adjust” the VAT rules whichmight further increase theVAT burden on exporters.With minerals and metalsthat have already had theirexport rebate abolished,there is concern that thegovernment may wish tocollect more tax in theregion of 5-25%.

The policy is seen as yetanother move by thegovernment to control, andperhaps reduce, the amount ofraw materials exported overseasfrom China, and use theresources to manufacture more

value added end products (seeIM October ’04, p.23).However, for many of themineral products, the alternativeworldwide sources are limited interms of satisfying overalldemand, so further priceincreases are likely to result.

Fuel increasesannouncedCompounding the rawmaterial prices situation,China has also raised itsdiesel retail prices by 4% toRMB4,509/tonne($545/tonne) on 10 May2005. The fuel increase willimmediately impact the truckfreight market in China,which is already underpressure from stringentgovernment controls onoverloading (see IM June’04. p.15). The authoritiesstated that the price hikewas owing to the high costof crude oil on theinternational market.

Effect of a RMBrevaluationA Chinese currencyrevaluation would also have amajor effect on exporters, by

eroding much of theircompetitiveness. China's GDPincreased 9.5% in the firstquarter of 2005, which led towidespread speculation thatthe renminbi (RMB) will soonbe revalued under pressurefrom the USA, which hasracked up a massive tradedeficit as the dollar hasweakened in recent years.During that time the renminbihas remained pegged atabout 8.28 to the dollar,unchanged since 1995.China now represents by farthe largest country share ofthe US deficit.

However, the Chinesegovernment shows no signsof acting in response topressure. At a meeting withUS Chamber of Commercerepresentatives on 16 May,premier Wen Jiabao said,“the reform of the RMBexchange rate system is amatter of China'ssovereignty and anypressure and speculativeexploitation of the issue orany attempt to turn theeconomic issue into apolitical one will not beconducive to resolving it”.

TTaaxx rreebbaattee ccaanncceelllleedd ffrroomm 11 MMaayy 22000055((pprreevviioouuss rreebbaattee))Dead burned magnesite (5%)Calcined caustic magmesite (5%)Silicon carbide (5%)Fluorspar (5%)Talc (5%)Rare earths related (5%) Rare earth metals and related (13%)Molybdenum ore, refined (13%)

TTaaxx rreebbaattee rreedduucceedd ffrroomm 1111%% ttoo 88%% ffrroomm11 MMaayy 22000055CoalTungsten metal and relatedZinc metal and relatedAntimony metal and relatedTin metal and related

IInnccrreeaassiinngg ccuussttoommss ttaaxx ffrroomm 11 JJuunnee 22000055Yellow phosphors 10% to 20%Ferrosilicon 0% to 5% (temporary)

China drops export rebates again

Australian sand miningapplication blocked

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AVIRECO USA LLC hasestablished a joint venture tobuild a 10,000 tpa titaniumdioxide facility in Binh Thuanprovince, Vietnam.

Avireco owns a 50% stakein the j-v, while its partnersViet-My and MineralDevelopment Co. No. 6(Lidisaco) own 40% and10% respectively. Lidisaco isa subsidiary of the Vietnam

Mineral ResourceDepartment.

In February 2004, theVietnamese governmentapproved plans for the$25m. operation withLidisaco responsible fordevelopment of the project.The aim for Lidisaco was tofind additional investmentvia a j-v with aninternational partner. At this

time, Avireco formed anagreement with AltairNanotechnologies Inc. totest the suitability of its TiO2feedstock using Altair’shydrochloride pigmentprocess (AHPP).

According to local pressreports, construction of thenew TiO2 plant is expectedto begin in the third quarterof 2005, with production

start-up expected in Q3 nextyear. The j-v is in the processof applying for explorationand mining licences for theSon My and Tan Thangmineral sands deposits, alsolocated in Binh Thuanprovince.

Ilmenite embargoMeanwhile also in Vietnam,the government intends toplace an embargo on exportsof ilmenite (53-57% TiO2)from 2008, according to areport by TZMI.

1199June 2005

NEWS AT THE CORE

AMR-Lynas legal action goes to trialTHE ONTARIO SuperiorCourt of Justice has ruledthat the legal applicationbrought by Toronto-basedrare earth materials producerAMR Technologies Inc.against Australia’s LynasCorp. Ltd should go to trial.

AMR is seeking to prevent

Lynas exercising the votingrights attached to asignificant number of itsshares that it claims werebought by a shareholder“acting jointly or in concertwith Lynas in a manner thatdoes not comply with thetakeover bid provisions of

Ontario’s Securities Act”.Lynas is AMR’s largestshareholder with a 19.92%stake.

AMR hopes that the matterwill be resolved before itsannual general meeting ofshareholders on 22 June.However, a spokesperson for

Lynas pointed out that theruling was procedural anddid not offer any courtopinion on the disputes.Lynas vigorously denies theclaim, stating that “AMR isproceeding is without merit”and that it intends to defenditself against the allegations.

CANADIAN companyAtacama Minerals Corp. is todouble iodine productionfrom the Aguas Blancasmining operation in northernChile having completed thepurchase of AtacamaMinerals Chile (AAM Chile)from ACF Minera.

Atacama Minerals paid$11.2m. for the 50% stake inAAM Chile, whose main assetis the Aguas Blancas miningoperation. A payment of$4.5m. will be made within12 months following the closeof the transaction.

Operations at AguasBlancas will bedebottlenecked andoptimised throughout 2005to increase production by

20% from its current 720 tpaof iodine. A demonstration-scale agitated leach plant willbe installed with a view toramping up to commercialscale and switchingproduction to this process.This will double productioncapacity to 1,400-1,500 tpa,Paul Conibear, AtacamaMinerals’ Director told IM.“We will spend $10m. onthis; it will take 16-18months to complete and soby the end of 2006 it will bein production,” he said.Aguas Blancas produced 720tonnes of iodine in 2004.

Atacama Minerals boughtout its partner in the AguasBlancas mine to pursue agrowth strategy that ultimately

includes producing 300,000tpa of sodium sulphate andup to 75,000 tpa of nitrates.

Conibear continued: “Wewant to make incrementalincreases to iodineproduction to get cash flowsup, then put in thedemonstration plant toimprove recoveries of iodine.In parallel, we will develop asmall-scale sodium sulphateplant uses the very highgrade brines produced by theagitated leach process andhead towards a 100,000 tpaplant and up to 300,000 tpawithin three years.”

Iodine prices have risen dueto strong demand from Japanand China for LCD screensand other evolving

technologies. “There is agood future for iodine,” hesaid.

Sodium sulphate will besold in South America withBrazil as the main targetmarket.

Contributor: Paul Harris,independent businessjournalist, Santiago, Chile.

Atacama Minerals to doubleAguas Blancas production

Vietnamese TiO2 plant j-v

Blow out towers and brine pond atAguas BlancasCourtesy Atacama Minerals

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Bemax to extendSnapper minsandsBrisbane, Australia-basedBemax Resources NL haspurchased a minsandsexploration area in the NewSouth Wales (NSW) sectorof the Murray Basin fromIluka Resources Ltd. Thearea comprises the northernsection of ExplorationLicence EL 6024 andcontains an extension ofBemax’s Snapper deposit. Under the terms of theagreement, Bemax willmake a net deferredpayment of A$3.9m. toIluka, and is currentlyawaiting approval of thedeal from the NSWgovernment.The Snapper deposit has ameasured resource of 5.4m.tonnes of contained heavyminerals, and is located 15km from Bemax’s Ginkgomine. The Gingko mine isexpected to becommissioned in late 2005.A mineral separation plantis also under constructionat Broken Hill; designed toprocess material from theGingko mine and theSnapper deposit when itcomes on-stream in 2008.

DKK zirconiaexpansionDaiichi Kigenso KagakuKogyo Co. (DKK), Japan'slargest zirconia producer,is to boost its zirconiaproduction to meetincreasing demand forsolid oxide fuel cells(SOFC) through a totalinvesment of Y4,000m. forthe next three years.The company plans tobuild a new plant on a16,500m3 site of theFukui Technoexport inFukui Prefecture toproduce yttria and scandiastabilised zirconias forSOFCs, with a finalannual manufacturingcapacity of 2,500 tonnes.

NEWS IN BRIEF

NEWS AT THE CORE

2200 June 2005

Saint-Gobain buysDanfeng silicon carbideFRANCE’S Saint-Gobain hasofficially sealed its acquisitionof Chinese silicon carbide(SiC) manufacturer Danfeng.The deal was signed during avisit to Paris by China’s TradeMinister Bo Xilai.

Based in Heilongjiangprovince, Danfeng is China’slargest fine SiC powderproducer. The company hasan output of 15,000 tonnesand has achieved sales ofabout $20m.

The purchase reinforcesSaint-Gobain’s position as theworld’s leading SiC producer(global capacity approx.170,000 tpa) and makes itsHigh Performance Materialsdivision the market leader in

SiC technical powders in Asia.These high performanceceramic products are used ingrit or grain form in suchapplications as semiconductorparts, refractory products andabrasives.

Saint-Gobain has beenpursuing a vigorousacquisition strategy in recentyears. The company alreadyhas a strong presence inChina with several jointventures and partnershipagreements with Chinesecompanies. Some 40 Saint-Gobain subsidiarycompanies operate in thecountry and total Chinesesales in 2004 reached€273m. These subsidiaries

include SiC production atQinghai and brown fusedalumina production atZhengzhou.

OGLEBAY NORTON SpecialtyMinerals Inc. (O-N) has soldthe remaining part of its micabusiness – the Velarde, NewMexico facility – to the PicurisPueblo.

The Pueblo filed anaboriginal title claim in theNew Mexico state court inearly 2004, and sued O-N, inaddition to all othercompanies that have ownedor mined mica at the sitesince mining commenced inthe 1960s.

Tribal potters had used clay

pits in the area to obtainmicaceous clay for theirpottery. Pueblo representativeshad argued that once miningbegan, they had lost access tothese traditional sites and thatthe land should be returned tothem. The mine is located lessthan four miles from the tribalvillage.

According to an AssociatedPress report, the Pueblo hasagreed to drop the legalclaim as part of theacquisition deal, and the NewMexican reported that O-N’s

state mining and reclamationpermit has now beentransferred to the Pueblo,which intends to restore thesite to its natural state and re-establish access to the claypits.

O-N has made no secret ofits intention to withdraw fromthe mica business and sold itsKings Mountain, NorthCarolina mica facility toZemex Corp. earlier this year.Operations at Velarde weresuspended in September2004.

Danfeng has a silicon carbidepowder output of 15,000 tpa.Courtesy Saint-Gobain

O-N sells Velarde mica mine

THE ECOLOGICAL impact ofundersea mineral extractionat the fringes of Europe’scontinental shelf will beassessed by a €15m.international study. TheEuropean Commission isfunding the HERMES project,which involves 36 researchinstitutes and nine smallcompanies from 15 countries,led by the UK’s SouthamptonOceanography Centre.Mineral resources could be

rich where the shelf, whichsurrounds the continent, andextends into theMediterranean and Blackseas, plunges from around200 metres to the abyssalplain at some 4,000 metres.Silica sand, aragonite,phosphates, and sulphur areamong the minerals found oncontinental shelvesworldwide.Unfortunately, said the HERMESleaders, there is little detailed

knowledge of this outer region,especially its ecology, raisingconcerns that exploitation couldpotentially damage barely-understood ecosystems. As aresult, HERMES will use hightechnology communicationsand transport allowing expertsin geology, biodiversity,sedimentology, physicaloceanography, microbiology,biogeochemistry, and socio-economics to explore thesezones.

EC launches undersea mining study

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THE INDUSTRIAL MineralsAssociation - North America(IMA-NA) gathered for itsannual meeting in BonitaSprings, Florida, in April2005. Now in its third year,the association represents90 members, including aneven split of mineralproducers and serviceproviders. Over 150delegates attended themeeting to network, listen topresentations on topicalissues affecting the industry,and simply enjoy the Floridasunshine.

Mine safety awardsTop of the agenda wasrecognising member safetyachievements. The IMA-NASafety Achievement Awardwas presented to individualIMA-NA member companieswith the best reportableinjury rates by size categoryfor the preceding calendaryear. For 2004, the winnerswere: US Borax Inc. for thelarge category (700,000 ormore employee hours); H.C.

Spinks Clay Co. Inc. for themedium category (fewer than700,000 but more than100,000 employee hours);and IMI Fabi LLC for thesmall category (Fewer than100,000 employee hours

IMA-NA and the MineSafety and HealthAdministration (MSHA) alsojointly recognised fiveindividual IMA-NA memberUS mining operations forworking 200,000 employeehours without a singlereportable employee injury.This year’s honoreesincluded: Nugent Sand Co.Inc. for its sand plant inMuskegon County,Michigan; Unimin Corp. forits Red Hill Plant, MitchellCounty, North Carolina;Kentucky-Tennessee Clay Co.for its Langley, SouthCarolina operation; BadgerMining Corp. for itsFairwater plant in Wisconsin;and the US Silica Co. for itsKosse Plant in Texas.

Presenting the awards,John Correll, MSHA deputy

assistant secretary, said:“Mining companies thatachieve excellence in thecontrol of miner injuriesdeserve recognition for theiroutstanding safety effort.This achievement recognitionprogramme seeks to providethat recognition andmotivate others to enhancetheir own safetyperformance.”

The National IndustrialSand Association (NISA)Recognition of ExcellenceAward was presented to TomStark, CEO of Badger MiningCorp., for his long-timecontributions to NISA and theindustrial sand industry.

Climate VisionprogrammeThe meeting offered anideal opportunity toannounce IMA-NA’sparticipation in the USDepartment of Energy’s(DOE) Climate Visionprogramme, a presidentialinitiative launched inFebruary 2002 to reduce US

greenhouse gas (GHG)emissions by 18% between2002 and 2012.

Speaking at the meeting,US DOE representative,Larisa Dobriansky, outlinedseveral ways companies canimplement cost effectivetechnologies and ‘bestpractices’ to reduce energyusage and GHG emissions.These included: usingbiofuels to help reducevulnerability to supplydisruptions; using alternativefuel such as renewableenergy to blunt energy spikes;upgrading grid bottlenecksand adding distributedgeneration such as fuel cells;using clean coal from lowcost domestic sources;improving energy efficiency inbuildings; and upgradingdelivery systems to improveresilience of the energysystem to disruptions.

So far, soda ash, boratesand sodium silicatecompanies have committed toreducing GHG emissionsfrom fuel combustion pershort ton of product by 4.2%between 2000 and 2012.IMA-NA member participantsinclude FMC Corp., GeneralChemical Industrial ProductsInc., PQ Corp., Searles ValleyMinerals, Solvay Chemicals,and US Borax.

Dobriansky told delegatesthat the focus is now onexploring “risk-targetedincentives to tip privateinvestment decisions andaccelerate commercial use ofadvanced technologies toaddress the energy investmentchallenge”.

2211June 2005

NEWS AT THE CORE

IMA-NA 2005meeting

highlightsUS Silica’s Pacific mining operation, Missouri.Courtesy US Silica Co.

US Borax, with borate operation at Boron in California, was presentedwith a safety achievement award at IMA-NA’s annual meeting inFlorida.Courtesy US Borax Inc.

Longwall mining in Solvay’s Green River soda ash operation,Wyoming.Courtesy Solvay Minerals