HIGH-GRADE NI-CU-PT-PD-ZN-CR-AU-V-TI DISCOVERIES IN THE "RING OF FIRE"
NI 43-101 Update (September 2012): 11.1 Mt @ 1.68% Ni, 0.87% Cu, 0.89 gpt Pt and 3.09 gpt Pd and 0.18 gpt Au (Proven & Probable Reserves) / 8.9 Mt @ 1.10% Ni, 1.14% Cu, 1.16 gpt Pt and 3.49 gpt Pd and 0.30 gpt Au (Inferred Resource)
Message: Rock Chromite - World Markets Outlook Superb!
Rock Chromite - World Markets Outlook Superb!
Just da way I see dat!
HardRock
=========================== All tight for chromite
Unrelenting global demand for chromite is squeezing special grade chromite supply and pushing prices to unforeseen heights Alison Tran, Asia Correspondent
Supply of world chromite (chrome ore) has come under severe pressure over the past year driven by robust demand for ferrochrome used in ferroalloy production, ultimately used to make stainless steel. With the metal industry hungry for raw material, residual supplies that typically serve non-metallurgical markets (known as “special grades” for the refractory, chemical, and foundry sectors) are selling out. Over 90% of the world’s chromite production is converted into ferrochrome for metallurgical applications, a figure that dwarfs supply to non-metallurgical markets. Out of a total global chromite annual output of about 19m. tonnes, the refractory industry accounts for about 1% while 3% each is consumed in the foundry and chemical industries. Given that most chromite is produced by vertically integrated ferrochrome producers, the amount of material available to supply non-metallurgical markets is dictated by the fluctuating requirements of the metallurgical industry. Over the past year, unrelenting demand for ferrochrome for ferroalloy production and a shortage of material has created a deficit, working wonders for deficit, working wonders for prices, and of course suppliers’ profits. “Chromium 2007”, the conference organised last month in Beijing by the International Chromium Development Association (ICDA), provided much anecdotal evidence of this. Alluding to the current buoyant market conditions, Jim Cochrane, CEO of the Eurasian Natural Resources Corporation (ENRC), Kazakhstan, welcomed the “many happy faces” in his opening address. Whilst producers were upbeat with many price negotiations taking place on the wings, purchasers of chromite on the other hand, were frantically making enquiries for additional sources of supply.
Supply sells out
Leading traders of non-metallurgical chromite from South Africa, source of over 50% of the world’s chromite, report that they have been inundated with requests and are sold out of material for several months in advance. “We are trying to support our markets in the best way we can,” said Michael Lillja, sales agent for Samancor Chrome. “Although we have not reduced our tonnages this year, prices are definitely rising”. The supply crunch has come at a time when demand for chromite for non-metallurgical applications is gaining momentum. According to statistics from the ICDA, consumption by both the metallurgical and foundry industries increased by about 10% in 2005 – metallurgical from 16.2m. tonnes to 17.9m. tonnes, and foundry from 494,000 tonnes to 542,000 tonnes. Refractory consumption increased by 19.5% in 2005 from 101,000 tonnes to 125,000 tonnes. The chemical industry consumed less chromite with a decrease
S
CHROMITE
All tight for chromite
Unrelenting global demand for chromite is squeezing special grade chromite supply and pushing prices to unforeseen heights Alison Tran, Asia Correspondent
Chromite ore and concentrates production by end use sectors, 1999-2005 (tonnes)
End Uses 1999 2000 2001 2002 2003 2004 2005 Metallurgical 13,061,408 13,752,459 10,768,124 12,688,135 13,825,627 16,253,943 17,878,073
Refractory 106,263 157,882 162,472 127,861 118,143 101,012 125,462
Chemical 704,009 815,154 1,000,390 863,645 768,027 752,735 595,200
Foundry 396,890 318,011 345,105 431,761 420,321 494,761 541,974
Total 14,268,570 15,043,506 12,276,091 14,111,402 15,132,163 17,602,451 19,140,709
Source: International Chromium Development Association (ICDA)
June 2007 33
CHROMITE
of 21% from 752,000 tonnes to 595,000 tonnes. In 2005 total chromite consumption increased by 8% from 17.6m. tonnes to 19.1m. tonnes. The accompanying table shows how production patterns have increased over time.
Stainless soars
Largely to blame for the current supply and demand imbalance is growth in the stainless steel industry, which accounts for more than 90% of ferrochrome consumption. Global stainless steel output was estimated to have reached almost 28m. tonnes in 2006, a 14% increase over 2005. Driving growth has been China which produced 5.3m. tonnes of stainless steel in 2006, a massive 68% increase over 2005. This year, Chinese capacity continues to rise in all areas of stainless steels. Soaring prices of nickel, a constitutent of widely used austenitic steel, has resulted in more demand for ferritic steel which consists of iron and chromium (min. 10.5% Cr) and contains no nickel. Japanese mills are also operating at high utilisation rates and are seeing strong demand. Analysts estimate that China will increase stainless steel output by an additional 2m. tonnes in 2007. This means that about 800,000 tonnes of additional ferrochrome will be needed, which will put further pressure on supplies of chromite. According to a presentation given at last month’s ICDA conference by Tu Kun of Minmetals, China imported 4.32m. tonnes of chromite in 2006. In Q1 2007, China had already imported 1.33m. tonnes of chromite, a 100% increase over last year. If imports continue at such a pace, China looks set to import a total 5m. tonnes of chromite this year, up 16%.
Premium prices
The growing difference between supply and demand is driving prices up almost monthly for non-metallurgical grades. Latest prices of South African chromite ore (wet bulk, FOB north West Province) are $240-260/tonne for foundry grade (45% Cr2O3), and $255-275/tonne
for refractory grade (46% Cr2O3). This
compares to $185-210/tonne and $225- 245/tonne respectively at the start of the year. Higher foundry grade prices have had a domino effect on chemical grades (46% Cr2O3) as they are often coproduced
with foundry grades and in tight market conditions are used interchangeably. During April-May 2007, prices for chemical grade hit the $210/tonne mark, up from a range of $165-173/tonne in January 2007. The accompanying chart shows how pricing have been moving upwards over the recent years. Now, with metallurgical grade spot prices rising sharply, it is obvious which market producers are choosing to supply. To secure material, non-metallurgical chromite consumers are having to match metal prices, or face going without material. Zelda du Preez, chief executive officer of Rand York Minerals Pty, exclusive sales agent for Xstrata, said: “Consumers have no choice but to pay higher prices, or they simply will not get material”. It is understood that Rand York has now sold out of material and is turning away new orders.
Indian tariffs
A number of other factors have pushed prices higher in recent months. In India, the government imposed a tariff on the export of chromite and concentrate of Rs2,000/tonne ($44/ tonne) which took effect 1 March 2007. The measure, which came in response to a domestic shortage, has placed added pressure on already tight world supply especially to China, which consumes 30% of India’s total chromite output. Until now, India has been the supply source of choice owing to comparatively lower prices. Chinese ferrochromium producers usually blend Indian chromite with material from other sources. Now these are on a par, if not higher, than South African material. With effect from April 2007, prices of concentrates rose from $200/ tonne to $347/tonne FOB. Tata Steel suspended exports and domestic sales of ore to ferrochromium producers in order to supply its own projects.
0 50 100 150 200 250 300 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 May-07
Chromite, Transvaal, Chemical grade, 46% Cr2O3, FOB Transvaal, wet bulk, $ per tonne
Chromite, Transvaal. Foundry grade, 45% Cr2O3, FOB Transvaal, wet bulk, $ per tonne
Chromite, Transvaal, refractory grade, 46% Cr2O3, FOB Transvaal, wet bulk, $ per tonne
Key:
Price history of South African chromite special grades 2003-07
Source: Mineral PriceWatch
June 2007 35
CHROMITE
South African export ban threat
To make matters worse, talk of an imminent ban on the export of raw unbeneficiated chromite from South Africa has led to some panic buying in the market lately. The concern came after the Deputy President Phumzile Mlambo- Ngcuka said that the government was planning new legislation preventing South African chromite producers from exporting unbeneficiated chromite. Domestic ferrochrome producers, notably Xstrata and Merafe, have been lobbying the government this year, arguing that short chromite supply is detrimental to the country’s ferrochrome producing capabilites. South Africa’s raw chromite exports to China increased from 760,000 tonnes in 2005 to 1m. tonnes in 2006. Given that beneficiated chrome is ten times more valuable than unbeneficiated chrome, South Africa is understandably concerned about losing added value benefits as well as employment opportunities, through uncontrolled export of raw chromite ore. Xstrata claims that its South African ferrochrome operations lost 16% of market share in 2006 because of chromite exports to China. In an appeal, Xstrata referred specifically to Samancor Chrome, the country’s largest ferrochrome producer. It is understood that Samancor had been exporting significant tonnages raw material to China as its own smelters were running at full capacity. Kermas has admitted to exporting chromite raw material to China, but has said this has now ceased. The company has started to sell what surplus of chromite it has to other local ferrochrome producers for further beneficiation in South Africa. Although traders have said that nonmetallurgical grades would not be directly impacted, the mere mention of a possible ban sharply increased metallurgical grade chromite prices by $20/tonne in mid- March 2007 which had a knock-on effect for chemical grade prices. At last month’s chromium conference in Beijing, opinions were mixed about whether an export ban would actually be imposed. Certain industry participants maintained that with South African furnaces running at full capacity last year, it was understandable that ferrochrome producers exported chromite to China given the high prices and overwhelming market demand. One South Africa-based chromite producer said: “The general feeling was that in the grand scheme of world politics, a ban is unlikely to be implemented in the near future.”
Sources of supply
Perhaps one of the main challenges for purchasers of non-metallurgical chromite is that consumers do not have a huge choice when it comes to supply. Production is concentrated in just a few countries, notably South Africa which produces about 50% of the world’s chromite, followed by India and Kazakhstan producing about 20% and 15% respectively. South Africa is by far the main supplier of non-metallurgical grades, with smaller tonnages provided by the Philippines, Turkey, Pakistan, India, and Iran. The latter two principally produce for the domestic market. What is more, the market in South Africa is dominated by a few key producers, Xstrata SA Chrome Venture and Samancor Chrome, both based in South Africa. Just over 20% of world chromite ore production is traded. Most chromite producers are vertically integrated into ferrochrome production. While certain ferrochrome producers sell direct to end users, they allot residual amounts, usually determined on a quarterly basis depending on market needs, to a handful of independent traders which play an important role in supplying material to non-metallurgical markets, these include: Rand York Minerals Pty Ltd, Independent Mineral Distributors Pty Ltd, South Africa; Plomp Minerals Services BV, the Netherlands; Cofermin Rohstoffe GmBH, Minelco GmbH, Germany, among others.
Changing trade trends
As a result of market pressures, importing countries are revising their import strategies. Addressing the pertinent issue of future supply Wang Min, vice minister of Land & Resources, said that China was: “Intensifying its development activities and working out a mutually beneficial mining strategy to source chromite from diversified sources to secure supply for phenomoneal steel industry growth”. Wang mentioned Albania, Russia, Turkey, and Tibet as future sources of increased chromite supply. For the first quarter of the year, the amount of chromite imported from India to China dropped considerably, whilst the amount imported from South Africa remained the same (860,000 tonnes). Exports from Turkey increased markedly and this year about 80% of the country’s exports will be destined for China.
Adjusting to market demand
China’s changing sourcing strategy is already having an impact on supply of non-metallurgical chromite as producers adjust output to meet the growing demand. A case in point is Turkish chromite producer, Bilfer Madencilik AS. The
company traditionally supplies most concentrates to the refractory and foundry industries. Owing to high demand from metallurgical industries, Bilfer is to now reopen some of its mines which closed over a decade ago owing to the then low chromite prices and low cut of grades. Sözer Özel, president and CEO, said: “Due to the high demand and high prices of metallurgical chrome products, we are in a stage to increase our production and selling some of our stocked refractory products to metallurgical industries”.
World chromium ores & concentrates production 2005
Country Production (tpa)
Albania 170,000 Australia 70,334 Brazil 616,534 China 220,000 Cuba 34,000 Finland 572,000 India 3,442,880 Iran 223,563 Kazakhstan 3,581,242 Madagascar 140,847 Myanmar 3,000 Oman 18,386 Pakistan 46,359 Philippines 36,070 Russia 772,000 South Africa 7,502,762 Sudan 21,654 Turkey 688,377 Vietnam 90,000 Zimbabwe 614,720 Total 18,900,000
Source: British Geological Survey
June 2007 37
CHROMITE
Another major incentive in supplying the metallurgical market relates to the extra processing involved in producing material for refractory and foundry industries. Özel said: “The production of chromites and concentrates used in the refractory or foundry industry needs extra processing and results in loss of chrome units during the production process. This means extra costs and not all chromites or concentrates that undergo extra processing can be used in refractory or foundry industries”. He added: “During 2006, the price of refractory and foundry grades was 30-100% more expensive (depending on products) than metallurgical grades. What we are experiencing now, is that refractory and foundry buyers are not ready to digest the possible refractory and foundry prices comparatively to metallurgical prices. I think that, in the coming months nonmetallurgical grade prices also will settle at certain levels but not with premiums 30- 100% as it was in 2006.” Mid-May 2007, Turkish chromite units (per 1% of Cr2O3) for the metallurgical
market were selling at $7.5-8.5/ Cr2O3 unit
depending on quality and size (bulk, FOB Turkish ports) with lumpy high grade ores fetching the highest prices.
Supplier highlights
The following are some highlights from leading suppliers (producers and processors) of chromite.
South Africa
South Africa is the world’s largest producer of chromite and a leading supplier of ferrochrome. Reserves are located in the Bushveld Igneous Complex (BIC), a saucer-shaped deposit in the northern and north-eastern provinces of South Africa. Chromite is mined along the eastern and western rims of the complex.
Assmang Ltd
Assmang Ltd is essentially a ferrochrome producer. Apart from a regular small-scale offtake of chemical grade concentrate, the company only sells chromite products on an ad hoc basis. “Whilst we did have a plan to produce foundry material, we decided not to proceed after having determined that our output of suitably sized material would be very small, essentially due to the crystal size in the ore”, said Alistair McAdam, chrome sales manager, Assmang. The chrome division consists of the Dwarsrivier chrome mine and the Machadodorp ferrochrome works both in Mpumalanga. All the chromite production from Dwarsrivier Mine is now sourced from the new underground mine as the opencast reserves were exhausted in 2005. Production from underground is gradually increasing towards the current design capacity of 100,000 tpm chromite. Dwarsrivier Mine is specifically geared to deliver quality metallurgical chromite to Machadodorp, although the beneficiation plant can also produce chemical and foundry grades.
Samancor
Samancor Chrome is one of the largest producers of chromite in the world. In 2005, Samancor Chrome’s two shareholders, BHP Billiton and Anglo American PLC, sold the company to the Kermas Group for $469m. The Kermas Group is a producer and trader in ferrochrome and chrome chemicals, with activities in Russia, Germany and Turkey. Samancor Chrome’s mines are located on the eastern Eastern Chrome Mines (ECM) and Western Chrome Mines (WCM) limbs of the Bushveld Igneous Complex north of Johannesburg. Typical production levels amount to some 3m. tpa of saleable chromium ores for both internal consumption (approximately 2.3m.tpa) and local and export sales (approximately 700,000 tonnes). Most non-metallurgical grade chromites are sourced from the WCM business unit. In 2005, WCM produced 229,634 tonnes of foundry grade chromite, while Samancor’s Eastern Chrome Mines’ output was 66,785 tonnes. Samancor’s total chromite production was 3.2m. tonnes, of which 309,667 tonnes was chemical grade, and 48,600 tonnes was refractory grade. Samancor Chrome supplies a broad range of foundry sands having a silica content <1% and chromium content >46.0%, and specifies AFS (American Foundry Standard) ranges of between 46- 60 with typical acid demands of between 5-3 for pH 3-5. The pH of Samancor’s foundry grades is typically between 8-9.5. Samancor Chrome also produces a significant tonnage of chemical grade product for use by the chrome chemical industry, where it is the feedstock for the production of sodium dichromate. This grade has a low silica content and has been well-accepted by the industry. The company is currently undertaking a feasibility study for a chrome chemicals plant to be built in Middleburg, which, if approved, would require a R800m. investment.
Xstrata
Xstrata South Africa operates five chromite ore mines. In 2005, the company produced
Assmang Ltd’s chrome division consists of the Dwarsrivier mine and the Machadodorp ferrochrome plant both in Mpumalanga, pictured here. Dwarsrivier Mine is specifically geared to deliver quality metallurgical chromite to Machadodorp, although the beneficiation plant can also produce chemical and foundry grades. Courtesy Assmang Ltd.
June 2007 39
CHROMITE
3.6m.tonnes of chromite ore, compared with 4.2.m. tonnes in 2004. Rand York is the exclusive sales agent of Xstrata and markets the company’s non-metallurgical grades. Rand York dries and repacks material from Xstrata in its own bags and sells on to end users. The company is focused mainly on the export markets. Once dried and bagged, much of the material is transported to Durban, South Africa where the material is stored and most of the exports take place.
International Ferrometals Ltd (IFM)
International Ferrometals Ltd (IFM), an Australian company, operates the Buffelsfontein mine and ferrochrome smelter facility situated in South Africa’s Bushveld, north-west of Johannesburg. IFM aims to be one of the world’s lowest cost ferrochrome producers through the use of the latest mining technology and integrated mine and processing plants. Two furnaces have been installed enabling a production of 267,000 tpa of charge ferrochrome. The first batch of IFM’s ferrochrome was shipped in the first quarter of this year. Newly established Itshe Resources (Pty) Ltd has the exclusive marketing rights for the foundry and chemical chromite grades produced by IFM (see News at the Core).
Kazakhstan
Kazakhstan is the world’s second largest producer of chromite. Eurasian Natural Resources Corporation (ENRC) is the country’s leading producer. It owns Donskoy Ore Mining & Processing, one of the largest chromite mining and processing enterprises in the world. About 30% of its total chromite production is used to produce chromium chemicals. Aktyubinsk Chromium Chemicals Plant (ACCP) is one of Kazkhstan’s main chemical chrome producers. The company has produced sodium dichromate since 1957, chromic acid since 1965 and chrome sulphate from 1970. ACCP is located in the Aktyubinsk region of west Kazakhstan.
India
India is the world’s third largest producer of chromite ore. The country produces about 3.5-4m. tpa of chromite ore. The government’s recent decision to impose a hefty export tax is aimed at securing supply for domestic ferrochrome production. Most production is located in the state of Orissa where the majority of chromite is used in the domestic ferrochrome industry. There are about 20 mines of chromite ore in India mostly government owned. Chromite produced in Orissa practically meets all the requirements of the industries located in different parts of the country which include chemical manufacturers and refractory plants. Some important leaseholders are Tata Iron & Steel Co. (TISCO), Orissa Mining Corp. (OMC), FACOR Alloys Ltd, Mishralal Mines, BC Mohanty and Sons, IDC of Orissa Ltd., Indian Metals & Ferro Alloys Ltd (IMFA), and Indian Charge Chrome Ltd (ICCL).
Philippines
Chromite production increased in volume and value by 30% and 42%, respectively in 2005, according to the Mines and Geosciences Bureau/Department of Environment and Natural Resource. Growth was due to an increase in production volume and value of refractory and metallurgical chromite ores. Both Benguet Mining Corp. and Krominco Inc. increased production volume. CRAU Minerals Resources Corporation and Heritage Resources & Mng. Corp. suffered “production deficits”.
Turkey
Turkey is a growing supplier of chromite to the Chinese ferrochrome markets. Chromite is mined seasonally from May to end November owing to harsh winter conditions at high altitudes where most of the open pit chrome mines or concentrators are located. One of the leading producers of chromite is Bilfer Madencilik AS. The company supplies most of its concentrates to the refractory and foundry industries. One of its largest customers is RHI AG to whom it supplies about 2,000 tpa of refractory grade chrome used in sliding door applications. Turkish chromite is priced at a premium because of its high opening rate (99%). Sözer Özel, president and CEO, said that demand for foundry grade chromite in Turkey for precision castings was growing at an annual rate of about 10%. Other producers include: Dedeman Madencilik Sanayi ve Ticaret AS,
New supply projects
China’s current commodity vortex is making the case for investing in chromite increasingly compelling. A number of projects which aim to increase supply of raw material to non-metallurgical markets are in the pipeline (see News at Core for further details):
Lanxess
In May 2007, the only chrome chemicals producer in South Africa, Lanxess (formerly Bayer AG), announced that 80m. tonnes of “extra ore reserves have been found” in its Rustenburg chromite mine in North West Province, South Africa. Lanxess is currently drawing up a concept for mining these additional volumes and has already invested 5m. in measures to improve efficiency and safety at the site.
Chromex Mining
In another development, Chromex Mining Plc, a dedicated chrome company established to acquire, control, and expand chromite mining and processing facilities, announced in April that is has now completed a bankable feasibiliuty study (BFS) to mine chromite ore at the Mecklenburg Project, situated on the Eastern limb of the Bushveld Complex in the Limpopo Province of South Africa, an area with a long history of chromite mining.
Oregon Resources
In the USA, Oreogon Resources Corp., owned by the Industrial Minerals Corp., is proceeding with the development of a heavy minerals project in Oregon which includes the production of chromite ore from a surface mine. Listed on the Australian Stock Exchange in November 2006, Industrial Minerals Corp. has been established primarily for the purpose of developing the project.
40 June 2007
CHROMITE
Eti Elektrometalurji AS General Management, and smaller producer Hayri Ogelman Mining Co.
Brazil
Brazil produces about 600,000 tpa of chromite, only a small percentage of which (less than 10%) is exported. Most is consumed by the domestically produced ferrochromium, demand for which is growing on the back of expansion of the local stainless steel industry. Magnesita SA produces refractory grade chromite for the production of direct bond and re-bond chrome containing bricks for the domestic steel industry.
CMMP
CMMP, a leading French minerals producer, processes around 5,000 tpa of chromite at its Picardy plant. Chromite is just one of a number of minerals the company processes which include zircon, mica, iron oxide, vermiculite, and rutile. In terms of volume, chromite is CMMP’s largest processed product after zircon and mica. Chromite processed by CMMP is used to supply the glass, ceramics, foundry, and brakes market. Joëlle Briot, director, said: “We are selling outside France more and more. This is a slow movement : all these markets are very conservative”. CMMP is in “very good health globally with a lot of projects coming on stream.” Briot said that CMMP’s turnover in 2006 was up 30% on 2005. Commenting on recent movements in chromite prices Briot said: “We see today more an increase in price, than a shortage in quantity. I hope that the prices will not increase too much, in order not to have our European industry suffer too much more in world competition with Asian industries : if chromite prices are the same for everybody, safety, environmental, and labour regulations are not yet the same everywhere.”
Mineralmahlwerk Hamm GmbH
Mineralmahlwerk Hamm GmbH (MMW), established in 1961, is a high performance mineral processor, mainly for the refractory and foundry minerals, and for almost all the large European trading companies. MMW has a production capacity of over 200,000 tpa and utilises four crushing plants and nine combined grinding and sieving plants. MMW operates a dedicated chromite processing plant where the imported wet bulk material from South Africa is dried, coarse particles screened off, and very fine dust particles (<0.063mm) are removed by air separator. On average, MMW processes around 30,000 tpa of chromite.
Markets
If Asian growth prolongs the industrial metals rally, there should be room to support new material on the market for non-metallurgical grades. Despite the high prices at present, chromite suppliers say that they are not experiencing any drop in demand. The attractions of chromite are many and economic substitues are few.