Paul Jourdan Up and Downstream Linkages in The Mineral Value Chain
Paul Jourdan Up and Downstream Linkages in The Mineral Value Chain
Paul Jourdan Up and Downstream Linkages in The Mineral Value Chain
Linkages in the
Mineral Value Chain
Mineral Value Chain Opportunities
TIPS- Industrialisation and the Mining Economy,
Paul Jourdan, UJ, June 2016
Resource Endowment:
Blessing or Curse?
Could be a curse (Dutch Disease, corruption, et al)
However, could be a blessing!
Minerals could provide wide-ranging opportunities to
build inputs industries and to provide key mineral-based
feedstocks into the rest of the economy
Downstream
Linkages
Induced impact
Energy
130
110 Agriculture
90
70
Metals
50
30
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
Source: CoM 2015
AU: Africa Mining Vision (AMV)
“Transparent, equitable and optimal exploitation of mineral resources to
underpin broad-based sustainable growth and socio-economic development”
“A knowledge-driven African mining sector that catalyses & contributes to the
broad-based growth & development of, and is fully integrated into, a single
African market through:
Down-stream linkages into mineral beneficiation and manufacturing;
Up-stream linkages into mining capital goods, consumables & services
industries;
Side-stream linkages into infrastructure (power, logistics; communications,
water) and skills & technology development (HRD and R&D);
Mutually beneficial partnerships between the state, the private sector, civil
society, local communities and other stakeholders; and
A comprehensive knowledge of its mineral endowment.”
AMV recognises the critical importance of establishing the seminal mineral
linkages, whilst the resource is still extant! [SA still to align to AMV]
What is Beneficiation?
• Narrow definition:
• Value-added above a “base” state (ore, concentrate, metal/alloy)
• Broader definition:
• Total domestic value-addition (excluding all imported inputs)
Intermediate
Mining Concentration Smelting Refining Manufacturing
products
Ore exports
Bene= ∑VA Conc exports
Bene= ∑VA Alloy exports
Bene= ∑VA Metal exports
Bene= ∑VA Int. exports
Beneficiation is the sum of local VA in Bene= ∑VA Manu. exports
Bene= ∑VA
the exported product =
VA in all inputs plus the VA in the process.
= both backward and forward linkages!
Resources provide opportunities for up-, down- & side-stream linkages: MVCs
expl. capital goods mining capital goods processing cap. goods Refining Cap. Goods Fabrication Cap.goods
• geophysical • drilling • crushers/mills •Smelters •Rolling
• drilling • cutting • hydromet plant •Furnaces
• survey • hauling • materials handling •Moulding
• etc. • hoisting, etc. • furnaces, etc. •Electro winning cells
•Machining
•Casters
•assembling
Fabrication
Exploration Exploitation Processing Refining
(manufacturing)
exploration services mining services processing services Refining services Value adding services
• GIS • mine planning • comminution •Reductants •Design
• analytical •consumables/spares • grinding media
• data processing • sub-contracting • chem/reagects •Chemicals •Marketing
• financing • financing • process control •Assaying •Distribution
• etc • analytical, etc • analytical, etc •Gas/elec supply, etc. •Services, etc.
Mining offers numerous opportunities along the minerals value chains (MVCs)
Upstream/backward Linkages
Opex impact of a large platinum mine in NW Province (R mn 2011)
Source: Mtegha & Leeuw 2016 (in press) Sample of 150 suppliers
SA Mining Methods Where
Where
we are we want
to be
PtKoz
What it means…
Reserves • Mechanisation restores
Total Resources profitability to >80%
=763 Mt • Restores 11 years life
Total Reserves=
• 24/7 mechanisation restores
104 Mt
profitability to >95%
• Restores 15 years life
Cutoff grade
>60% of Mineral Reserves are currently uneconomic, at today’s prices and costs, using
conventional mining methods, resulting in sales, closures, capital curtailment & impairments.
SADC ex-RSA
SA is losing imports of
market share in ~$2bn/y
the rest of the
[1] See Figure 23
SADC
ex-coal
Manufacturing; 77,2
Key Mineral-Based Feedstocks for Domestic Development:
“strategic mineral feedstocks”
Manufacturing Steel/alloys, polymers (from coal, HCs),
base metals
Energy (electricity): Coal, natural gas (and CBM, shale gas),
limestone
Infrastructure: Steel, copper, cement (from limestone,
gypsum, coal)
Agriculture: NPK: Nitrogen (from coal, gas), phosphate,
potassium, conditioners, et al.
Each of these key strategic feedstocks require national (&
regional) development strategies to ensure that they are
supplied
37
to downstream industries at export parity prices
STRATEGIC REGIONAL MINERAL FEEDSTOCK VALUE CHAINS
UPSTREAM MINING/MINERAL STRATEGIC DOMESTIC FEEDSTOCKS DOMESTIC CONSUMPTION
World Platinum Production 2014 World Diamond Production 2014 World Cobalt Production 2014
Source: USGS MCS 2015 Derived from KPC 2015 Source: USGS 2015 MCS
SADC: Potential Producer Power MVCs (fabrication for export)
Conclusions: Downstream/forward mineral linkages
1) Need to identify strategic mineral feedstocks into domestic sectors
(manufacturing, infra., agric.) & competitive domestic prices (EPP):
2) SA Steel Crisis (vdB Pk, Vereeniging, HS&V, et al): Need plan to make plants
competitive (recap)– DTI/EDD Steel Task Team;
3) Establish dedicated beneficiation SEZs – ORTIA JMP, Springs PGM SEZ,
Nqgura, R.Bay, S.Bay, et al;
4) Develop a regional (SADC) strategic feedstocks strategy, with equalisation
mechanisms, to stimulate downstream manufacturing, infra. & agriculture;
5) Explore using (regional) potential producer power to stabilise prices and
leverage downstream beneficiation;
6) Regional Long-term Power Strategies – SADC: low-cost & lower-carbon gas
(Rovuma Basin gas, >150TCF, Congo Basin HEP >150GW);
Tackling the SADC “variable geometry” challenge,
to realise the mining linkages to kick-start
industrialisation and equitable G&D
Extra-regional exports
Dispersed secondary
(scrap) plants (e.g. steel
mini-mills, non-ferrous
smelters)
Dispersed conversion/
fabrication plants
(plastics, profiles, etc.)
SF SF
SF
SF SF
SF
SF SF
SF Al
SF SF
SFSF
Al Al
SF
SF SF
Conceptual SADC
Steel Strategy
Conceptual SADC
Fertiliser Strategy: K
Plants located on P P
N
resources P?
P?
P
P?
K?
P
N
N Nitrogen
P Phosphate
K Potassium
K?
Blending P?
Imports
Possible eastern-centre
SADC gas grid
NG
Strategies to Realise the Huge
REGIONAL MVC Opportunities
• 50% eligibility
Africa • All states ex-SADC
• 50% – 90%
SADC RMCs
• 1/GDP/cap
• 100%
Host RMC • VA in host RMC
Local/Regional content of 80% for services; 70% for consumables & 60% of capital goods
would underpin the SADC inputs sector and dramatically reduce over-invoicing of costs
RMC: Regional Member Country
GDP/cap Relative Relative Relative Wealth
Relative Wealth
RMC Wealth 0- Wealth 0-75% 50%-90%
(2013 kUS$) 0%-40%
100% (VCF) (inputs)
Angola 5783 40% 30% 16% 66%
Botswana 7315 23% 18% 9% 59%
DRC 484 97% 73% 39% 89%
Lesotho 1126 90% 68% 36% 86%
Madagascar 463 97% 73% 39% 89%
Malawi 226 100% 75% 40% 90%
Mauritius 9478 0% 0% 0% 50%
Mozambique 605 96% 72% 38% 88%
Namibia 5693 41% 31% 16% 66%
South Africa 6886 28% 21% 11% 61%
Swaziland 3034 70% 52% 28% 78%
Tanzania 913 93% 69% 37% 87%
Zambia 1845 83% 62% 33% 83%
Zimbabwe 953 92% 69% 37% 87%
Seychelles* 16186 0% 0% 0% 50%
*Note: Seychelles excluded from weighting: GDP/cap outlier and no mining or minerals VA sector
3. Proposed Regional VCF for back- & forward linkages
4. Proposed intra-SADC Mining Inputs/feedstocks
Logistics Compensation Scheme?
→ To compensate for RMC mining inputs suppliers logistics cost (inputs and delivery)
and key feedstock suppliers intra-SADC logistics costs greater than regional average;
→ To “level the playing field” for inputs producers and feedstocks consumers;
→ To ameliorate the bambazonke effect.
Regional inputs 1. SADC Mining & • Regional inputs to
Regional average Regional average
(>65% R-LC*)
logistics into
cost ($/t-km) Processing Inputs SADC mining
delivery &
cost ($/t-km)
mining/processing
for regional inputs Supplier (>65% R-LC*) processing
for regional inputs & SADC mining &
manufacturers
(>65% R-LC*) into 2. SADC Key Feedstocks • key
Region key (>65%
feedstocks processing
(inputs suppliers)
resources inputs Supplier (intermediates feedstocks into
R-LC*) to SADC firms
suppliers (ASIC) & semis, >65% R-LC) customers
SADC (ASDC)
economies
To ameliorate
the variable 4. REC Linkages 5. 2. Regional-Local
Logistics Equalisation Regional Content
geometry of STEM
Logistics costs above R-LC credits at 50-
RMCs, need REC average skilling 90%, @ 1/GDPpc
instruments strategy
that favour
less developed 3. REC Mining VA VCF
RMCs!
PFS, Debt & Equity @
1/GDPpc
Realise the regional feedstocks and
market to grow the minerals linkages
Need a Regional
Mining Vision (RMV)
Thank you
Paulj1952@gmail.com 61
Extra Slides
Capital Equipment: SA market share in SADC
Average (2012-2014) US$ Bn SA %
Botswana 1.22 67%
Madagascar 0.41 7%
Malawi 0.41 26%
Mozambique 1.79 40%
Namibia 1.48 67%
Tanzania 2.07 10%
Zambia 2.56 39%
Zimbabwe 1.31 47%
Angola 0.26 6%
DRC 0.54 48%
Source: Yedit Fessahaie 2016 (from COMTRADE)
....but losing out to competition (capital equipment)