MAY 2018

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CONTENTS
03 Comment
05 News
MINING TRUCKS, TYRES & HAUL ROADS
58 Tips for a Longer Life
10 Industry View Darren Flint (UK) and Diego Garcia (Colombia), Kal Tire’s
Mining Tire Group.
SPECIAL REPORT
12 Iron Ore: Comparing Apples and Oranges 63 Avoid Tanking Risks
Josh Swank, Philippi-Hagenbuch Inc., USA.
Alex Griffiths, Wood Mackenzie, UK.
CONVEYOR SYSTEMS MINING SOFTWARE & PLANNING
18 Performing North of the Arctic Circle 66 Transforming Operations with Digitalisation
Michael Kainola and Katherine van Nes, Hatch, Canada.
Daniel Grimes (ContiTech Scandinavia AB, Sweden) and
Stephan Weisgerber (ContiTech Finland Oy). 69 Underground Deposits, Solved
23 Endless Elevating Options Marcelo Arancibia, Maptek, South America.
Amy Duncan, Dos Santos International, USA. 73 The Path to the Viurtual Mine
27 Collecting Dust Mark Bese, Dassault Systèmes, Canada.
Joe Kiolbasa, Donaldson Company, USA. 77 Ready...Set...Crush
31 Reclaiming Control Rhonda Knotts, Modular Mining Systems, Inc., USA.
James Cone Jr (CN Two Harbors, USA) and Michael Gawinski UNDERGROUND MINING
(Rulmeca Corporation, USA). 80 Blast Off
34 A Step Forward Nicole Lyman, Dyno Nobel, USA.
Karol Bartodziej, FAMUR, Poland.
ROOF BOLTING
39 A Case of Mistracking
83 Raise the Roof
Kevin Fales, Flexco, USA.
Patrycja Janiszewska, Mine Master, Poland.
CRUSHING, SIZING & GRINDING SURFACE MINING
43 Transforming Mining Operations
86 Change in the Air
Marjut Lindroos, ALLU, Finland.
Matt Eul, Vermeer, USA.
46 Powering Progress
Mark Barr, Komatsu, USA. SURFACE DRILL-AND-BLAST
89 Bounce Back
LUBRICATION AND WEAR PROTECTION Caitlin McKinnon, Motion Metrics, Canada.
51 Smooth Operator
93 At Full Blast
Sarp Degirmenci, ExxonMobil, EAME.
Murali Nagarajan and Chris Batten, Orica, Australia.
55 Under Control
96 A Progressive Process
Del Williams, EonCoat, USA.
Rob Derries, RCT, Australia.
101 Driving Forward with Data
Neville Judd, Hexagon Mining, Canada.

ON THE COVER
The new P&H Gen3 L-1350 wheel loader, shown operating at a coal mine in the Wyoming, features proprietary
switched reluctance (SR) technology from Komatsu. Through continued advancement of SR, the company is
meeting customers’ needs for improved efficiency, reduced fuel usage and lower cost per tonne.
To learn more, visit: www.mining.komatsu

Copyright © Palladian Publications Ltd 2018. All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior
permission of the copyright owner. All views expressed in this journal are those of the respective contributors and are not necessarily
follow connect like join the opinions of the publisher, neither does the publisher endorse any of the claims made in the advertisements. Printed in the UK.
@Mining_review Global Mining MiningReview Global Mining Uncaptioned images courtesy of www.shutterstock.com
Review Review
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Comment
P
alladian Publications is thrilled to introduce its newest

STEPHANIE magazine, Global Mining Review!

Brought to you by the team at World Coal, the leading

ROKER publication for the international coal industry, Global Mining

Review aims to provide in-depth insight into the mining and

DEPUTY minerals processing sector, worldwide.

As I write, the mining industry is making a steady recovery.

EDITOR
Over the last three years, the sector has been gathering
momentum, with the number of new projects and investment
opportunities rising.
Last year, British Columbia’s mineral and coal exploration
market increased for the first time since 2012 following
the global mining crash. This comeback has led to the
MANAGING EDITOR
2018-scheduled restart of operations for the Myra Falls copper-zinc-lead mine in Central
James Little Vancouver Island.
[email protected] In Asia, SRK Consulting recently expressed optimism about the region’s mining prospects, as
DEPUTY EDITOR the market continues to emerge from a prolonged downturn.
Stephanie Roker
[email protected]
The US supply chain is becoming more reliant on raw material imports (copper, silver, zinc
and lithium). As such, 57% of voters believe that US regulations and laws should be reformed to
EDITORIAL ASSISTANT
Claire Cuddihy encourage more domestic mining, according to a recent National Mining Association poll.
[email protected] Queensland Resources Council Chief Executive Ian Macfarlane has projected Australia’s gold
ADVERTISEMENT DIRECTOR exports to reach AUS$19 billion by 2019/2020. He also noted that “the Production Index has
Rod Hardy increased by AUS$2.5 billion – or 17% – over the previous quarter. We are also seeing growth in
[email protected]
zinc, copper, lead, aluminium, gold and silver.”
ADVERTISEMENT MANAGER On 11 April, a Memorandum of Understanding (MoU) was jointly signed by Morocco and India.
Ryan Freeman
[email protected] The MoU intends to strengthen the countries’ co-operation in the mining and geology fields.
Global mining companies are also likely to reap the benefits of a spike in nickel and lithium
PRODUCTION
Ben Munro demand for battery electric vehicles and other rechargeable products.
[email protected] With these market outlooks and upcoming projects in mind, it’s evident that the launch issue
WEBSITE MANAGER has come at the perfect time.
Tom Fullerton This issue of Global Mining Review presents case studies on major mining projects worldwide,
[email protected]
as well as detailed technical articles covering underground and opencast mining, minerals
DIGITAL ASSISTANT EDITOR
Nicholas Woodroof processing and materials handling. And that’s not all – the issue also shines light on current
[email protected] industry trends, such as Wood Mackenzie’s contribution on p.12. The company’s special report on
SUBSCRIPTIONS the emerging two tier iron ore market is especially prominent following the iron ore crash in 2015.
Laura White Other technical features include:
[email protected]
„„Surface drill and blast.
ADMINISTRATION „„Mining trucks and tyres.
Nicola Fuller
[email protected] „„Rock bolting.
„„Crushing, sizing and grinding.
„„Conveyor systems.
„„Lubrication and wear protection.
GLOBAL MINING REVIEW (ISSN No: 2515-2777) is „„Mine software and planning.
published quarterly by Palladian Publications Ltd.

Annual subscription (monthly) £50 UK including Thank you for your support, and I hope you find this issue as interesting and informative as
postage, £60 overseas (airmail). Claims for
non-receipt must be made within four months of we do!
publication of the issue or they will not honoured
without charge.

Palladian Publications Ltd, 15 South Street, Farnham, Surrey, GU9 7QU, UK

t: +44 (0)1252 718999 // f: +44 (0)1252 718992 // w: www.globalminingreview.com
WORLD NEWS
USA Anaconda copper mine taken off EPA’s Emphasis List of Superfund sites

O
n 16 April, the US Environmental Protection rock areas and contaminated process areas.
Agency (EPA) released an updated Administrator’s On 5 February, Pruitt and Nevada Governor Brian
Emphasis List of Superfund sites. The list Sandoval signed a National Priorities List Deferral
represents sites identified by the regions with concurrence Agreement to defer the site to Nevada. Under deferral,
from the Administrator that will benefit from his targeted, cleanup at the mine must achieve the same level of
immediate and intense attention. The updated list no human health and environmental protection as a site on
longer includes the Anaconda copper mine in Nevada, the NPL and must meet all applicable federal and state
as cleanup activities progress and completion of specific requirements. EPA will review whether remedies proposed,
milestones and timelines have benefited from the selected, and implemented by the State and Atlantic
Administrator’s influence. Richfield are protective and will retain responsibility for the
“We are making tremendous progress expediting sites response actions on tribal land.
through the entire Superfund remediation process,” said Nationwide, the updated Emphasis List no longer
EPA Administrator Scott Pruitt. “The updated Emphasis List includes the San Jacinto River Waste Pits in Texas. In
reflects our commitment to addressing Superfund sites as addition to the Casmalia site in California, the Delaware
quickly and safely as possible.” Sand & Gravel Landfill site in Delaware, and St. Regis Paper
Pruitt has visited the Anaconda copper mine as part Company site in Minnesota were also added to the list to
of his effort to ensure timely decisions for cleanup of the spur action. The updated Administrator’s Emphasis List,
sites to protect the health and environment of surrounding like the initial Emphasis List, identifies Superfund sites that
communities. will benefit from Administrator Pruitt’s direct engagement.
The Anaconda copper mine site covers more than The Emphasis List is intended to be dynamic. Sites will
3400 acres in the Mason Valley, in Lyon County, central move on and off the list as appropriate. At times, there may
Nevada, approximately 65 miles southeast of Reno. The site be more or fewer sites based on where the Administrator’s
includes groundwater contamination, tailings piles, waste attention and focus is most needed.

AUSTRALIA Fosterville gold mine to be supplied with a reverse osmosis plant by Veolia Water
Technologies

V
eolia Water Technologies has been awarded the The mine is currently experiencing a significant increase in
contract to design and supply a reverse osmosis gold production due to recent exploration.
plant to reduce the chloride levels in the produced The Fosterville gold mine plans to implement a water
water stream at the Fosterville gold mine in Victoria treatment plant to treat mine water for reuse within their
(Australia). The water treatment plant solution is intended process water circuit. Veolia Water Technologies has been
to help its operator, Kirkland Lake Gold, meet its operations awarded the contract for the design and supply of a reverse
license conditions in a sustainable way. osmosis plant to reduce the chloride levels <500 mg/l.
Kirkland Lake Gold is a mid-tier gold producer which According to the company, the reverse osmosis plant
operates mines in Canada and Australia. The company will consist of multimedia and carbon filtration followed
owns and operates the Fosterville mine, which is a high by primary reverse osmosis and reject recovery reverse
grade, low cost underground gold mine, located 20 km osmosis.
from the local city of Bendigo. The Fosterville mine features The water treatment plant is planned to be operational
extensive exploration potential and low cost production. in 2019.

GLOBal mining review // May 2018 5

WORLD NEWS AUSTRALIA Queensland Resources Council welcomes new
safety legislation
Diary
Dates T
he Queensland Resources Council (QRC) has welcomed the initiative of a State
Parliamentary Committee to visit mine operations as part of its inquiry into safety
legislation for the sector.
“I welcome the initiative of the all-party Parliamentary Committee to visit mining
Future of Mining regions – Moranbah [on 17 April] and Mount Isa [on 18 April],” QRC Chief Executive Ian
14 - 15 May 2018 Macfarlane said.
Sydney, Australia
http://www.future-of-mining-sydney.com/ “The resources sector is so vital to Queensland’s economy and communities across
the State. Latest data shows, the resources sector generates one in every AUS$6 in the
ResourceStocks Sydney Queensland economy, supports one in every eight jobs in the Queensland workforce, and
16 - 17 May 2018
Sydney, Australia earns more than half of Queensland’s AUS$70 billion exports.”
http://www.aspermont.com/event/ “The fact is the continued growth of the industry – and the continued growth in
article/1178949/resourcestocks-sydney- opportunities for Queenslanders that it can provide – depends on a stable regulatory
2018-16th-17th-2018
environment to sustainably develop the state’s coal, mineral and gas reserves, and draw
Euro Mine Expo new investment and create new jobs for Queenslanders.”
12 - 14 June 2018 “The safety of the men and women working in the resources sector is of fundamental
Skellefteå, Sweden
https://www.euromineexpo.com/about/ importance to the QRC and its members. The industry is committed to working with
the Government and the Members of Parliament to ensure safety of all workers remains
The Mining Journal 30 paramount.”
26 - 27 June 2018
London UK
http://www.theminingjournal30.com/
RUSSIA Mechel’s BelAZ trucks employed to restore iron ore
Electra Mining
10 - 14 September 2018 volumes at mining plant
Johannesburg, South Africa

M
https://www.electramining.co.za/ echel PAO, one of the leading Russian mining and metals companies, has
Conveying and Handling of Particulate reported the leasing of 10 BelAZ trucks in the framework of agreements signed
Solids 2018 with State Transport Leasing Company (STLC).
10 - 14 September 2018 The agreements signed with STLC for supply of heavy duty trucks total approximately
London, UK
http://www.constableandsmith.com/ RUB 900 million. The financing term is five years. The BelAZ trucks were acquired in the
events/chops-2018/ framework of the programme on preferential financing of export industrial products
made in Belarus.
BULKEX18
17 - 19 October 2018 The new mining equipment with a 90 t load capacity arrived at the production site
Nottingham, UK of Korshunov mining plant, which is part of Mechel’s mining division. The first six BelAZ
https://bulkex.co.uk/ trucks have already been assembled and begun working in the plant’s Rudnogorsky Open
International Mining & Resources Pit.
Conference (IMARC) According to the company’s technical revamping programme, over 90 mining and
29 October – 1 November 2018 auxiliary equipment units, including trucks and excavators, will be supplied to the
Melbourne, Australia
https://imarcmelbourne.com/ company’s mining facilities in 2018. In 2017, over 100 new equipment units were added to
the fleet of Mechel’s mining companies.
Mechel Mining Management OOO’s CEO, Pavel Shtark, noted: “New BelAZ trucks will
enable us to begin restoring iron ore mining volumes at Korshunov mining plant.”

6 May 2018 // global mining review

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WORLD NEWS
GLOBAL Battery technology advances cause lithium market to boom

A
ccording to a recent report by Allied Market Research, the R&D companies, such as Cameo Resources Corp., Albemarle
global lithium ion battery market is expected to reach Corp., Sociedad Química y Minera de Chile S.A., FMC Corp. and
US$46.21 billion by 2022 and at a CAGR of 10.8%. The Panasonic Corp.
increasing adoption of rechargeable products such as portable As demand for lithium ion batteries increases, the
devices and electric vehicles are primary drivers for the market. components of the batteries will also increase heavily. Such
Currently, portable devices control the majority of the lithium batteries are mainly comprised of lithium and cobalt, which
ion market share, but in the coming years, electric vehicles are is also expected to see an increase in demand during the
expected to be the biggest market driver. The popularity of transitional phase into electric vehicles. Wood Mackenzie
electric vehicles is growing due to its reduced environmental analysts forecast cobalt demand to outpace lithium growth.
impact, which led governments to aggressively encourage Cobalt demand has seen a substantial increase as prices from
developments in the industry and companies to invest in 2016 - 2017 doubled, and in February prices were up 133% yr/yr.

AFRICA Siemens’ automation equipment and industrial networks welcomed in Africa

C
urrently, one of the most debated topics influencing “We are proud to be supporting Anglo American Platinum to
innovation is digitalisation and its impact on the advance skills and opportunities in Africa,” explains Sabine
future of employment. It is met with equal parts Dall’Omo, CEO for Siemens Southern and Eastern Africa.
excitement and trepidation. No matter how you look at it, Gary Humphries, Anglo American Platinum’s Executive
digital transformation and a truly connected global economy Head for Processing, said: “Siemens and Anglo American
is already upon us. Platinum have been in partnership since 2010 and we have
Siemens has provided automation equipment and industrial seen approximately 298 artisans successfully trained and
networks to assist Anglo’s Engineering Skills Training Centre qualified at this centre. This vital contribution by Siemens to
(ESTC). One of the pillars of digitalisation is industrial networks ESTC will significantly contribute towards the development
and security and it is crucial that these engineers understand of the human resource capabilities of our artisans and will
the role of this technology in the future of mining. help broaden the thinking of the students to explore new
There is an opportunity, especially in Africa, to embrace new career capabilities. We celebrate the handover of the Siemens
and exponential technologies combined with human talent Simatic Wall and look forward to the role it will play in training
to accelerate industrialisation and drive economic growth. the current and next generation of skilled artisans.”

CANADA Copper Mountain finalises acquisition of Altona Mining Ltd

C
opper Mountain Mining Corp. has announced the in Queensland (Australia), and a large mineral land tenure
closing of its acquisition of Altona Mining Ltd (Altona). position in a highly prospective area in Queensland, a mining
As part of the acquisition, the company issued 0.0974 friendly jurisdiction.
of a Copper Mountain share for each Altona ordinary share, Alongside this transaction, the company has appointed
resulting in a total of 53 538 984 Copper Mountain common Alistair Cowden to the Board of Directors.
shares being issued, of which 44 368 605 will trade as CHESS Jim O’Rourke, President and CEO of Copper Mountain
Depository Instruments on the Australian Stock Exchange welcomed Alistair to the Board, commenting: “Alistair
under the symbol C6C. and his team have done an outstanding job in assembling
Copper Mountain has recently added 100% of an exceptional mineral land package in a prolific mineral
Altona’s assets to the Copper Mountain Group, including belt that we believe will provide long-term value to all
AUS$30 million in cash, a permitted development project shareholders.”

8 MAY 2018 // global mining review

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 industry view
PROJECTS OVERVIEW OF THE GLOBAL MINING INDUSTRY
GlobalData Mining

F
ollowing several years of declining commodity prices, Australia: Wodgina lithium mine, Mount Morgans gold project
limited new mine developments, mine closures and growing and Dugald River. Elsewhere, there were two major coal projects
environmental constraints, the commodity markets finally in China, both owned by Yanzhou Coal Mining Co Ltd with a
showed signs of improvement during late 2016. The upturn in combined annual capacity of 22 million t. Elsewhere, there were
prices across all major commodities during 2016 also became major projects in Mexico, Indonesia and Russia. In total, these top
one of the prime factors for the commencement of many new 10 projects have a combined annual capacity of 78 million t.
projects during that year. Looking ahead, the number of new mines commencing could
According to GlobalData, a leading data and analytics more than double in 2018. There are 85 potential projects, with a
company, there were 88 mine commencements in 2016, combined annual ROM capacity exceeding 200 million t and total
comprising 236 million t of annual run-of-mine (ROM) capacity development CAPEX of over US$50 billion, due to commence
and a total development CAPEX of over US$30 billion. Of these, operations in 2018. Of these, 12 are located in Australia and 10 in
the largest share were in Australia, with 16 mines, followed by six Russia. China, the US, Brazil, Canada, Indonesia and Republic of
each in Russia and the US, and five each in Brazil, Mexico, India Guinea have four each, and Mexico, India, Chile and South Africa
and South Africa. Major projects included those belonging to Vale each have three. Some 24 of these projects have a minimum life
SA and CODELCO, with two apiece with combined ROM capacities of over 20 years, and seven will continue producing for at least
of 83.8 million and 12 million t, respectively; while National four decades once commenced. Precious metal projects are the
Thermal Power Corporation’s thermal coal mine that commenced most represented: over 30 projects are due to produce precious
operations in May 2016 has an annual capacity of 15 million t. metals as either a primary or a secondary commodity, while 20
Developments were then more moderate in 2017, with only 38 will produce base metals and a further 10 coal projects are due to
projects commencing operations during the year, representing commence in 2018.
over 100 million t of annual ROM capacity and total CAPEX of The top 10 projects scheduled to commence operations in
US$12 billion. Of those 38, again most were in Australia (nine), 2018 are: Grasberg Block Cave, Ogodzhinsky, Cauquenes, Pachra,
followed by five in Canada and three each in the US and China. Of Eagle Gold, GAC project, Gross project, Sissingue, Polyak Eynez
the 38, some 15 projects had underground operations. and Gamsberg. These projects have a combined annual capacity
The more moderate scale of developments can be attributed of over 150 million t with an average initial life of almost 20 years.
to mining companies continuing to focus on curtailing excess 1Q18 saw five projects commencing operations: Lorena and
capacity and reducing operating costs, as, whilst rising, Bald Hill projects in Australia; Prestea in Ghana; Sissingue in Ivory
commodity prices were still viewed with uncertainty, particularly Coast; and Silvertip property in Canada.
given a drop in the second quarter for many key commodities. At the end of 1Q18, according to the Mining Intelligence Center,
As a result, many development projects that were scheduled to there were 2608 development projects worldwide. Of these, over
commence operations in 2017 were delayed and rescheduled for 700 projects were undergoing definite feasibility studies, 730
2018 or later. projects were at the prefeasibility stage, and almost 400 projects
The largest new projects that commenced in 2016 and 2017 were under construction. The remainder were in other stages
were primarily gold, silver and coal, as well as copper, followed of development including regulatory approvals and design and
by lead and zinc. Other significant developments were in engineering. Australia dominates the list with 18% of the total,
lithium, platinum, diamonds and iron ore, despite little upward followed by China (12%), India (11%), the US (6%) and South
movement in iron ore prices. Africa (5%).
The largest project to commence in 2017, by ROM, was New
Gold Inc.’s Rainy River gold project, with another Canadian For more information, please contact [email protected]
project in the top 10, the Donkin coal project. Three were in or visit www.globaldata.com.

10 May 2018 // global mining review

12 May 2018 // global mining review
Alex Griffiths, Wood Mackenzie, UK, discusses the emerging two tier iron ore
market and what we should look out for in the future.

T
here is a strange thing happening in the iron ore challenge; some to take advantage, others to mitigate
industry. The world is starting to realise that it is loses. They will need to move quickly as the two tier
not like other commodities. market is here to stay.
There is a two tier market for iron ores emerging. The
premium for high grade ores averaged 23% in 2017 – the Who knows what iron ore is?
average for the five years prior was 9%. Likewise, low When you buy gold, you know what you will get will be at
grade producers had the burden of a 17% penalty – far least 99.9% gold. Even when you buy fuel, you know that
more severe than the five year trailing average of 11%. the mix of chemicals you receive will power your car,
Iron ore producers are beginning to respond to the assuming you picked up the right nozzle at the pump.

global mining review // May 2018 13

 But for those amongst us – and I am sure there are nn Stricter environmental policies in China.
not many – who have purchased a shipment of iron nn A new focus on productivity in China.
ore recently, things are a little more complex. Not all nn Different supply and demand dynamics for
iron ores are suitable for all furnaces. That is why, different ore groups.
before buying, you will have agreed on the
specification of at least 16 chemical elements, as well Stricter environmental policies in China
as a variety of physical properties and sizing Early last year, the Chinese government got serious
specifications for your cargo. And upon delivery, your about closing down illegal steelmaking capacity.
cargo will almost certainly not match any of the Unreported and unregulated scrap-based induction
agreed properties to the degree of accuracy specified. furnaces, which were typically unsafe and
When the market talks about ‘iron ore’, it is environmentally non-compliant, were some of the
referring to an index of 62% Fe, 4% SiO 2 and 2.25% first to shut. Legal, blast furnace-based steelmakers
Al 2O3; an index that does not match any product – consumers of iron ore – began to produce the steel
available in the market. But it is close to the required to meet the demand vacuum created. This
advertised specification of some of the most widely provided a boost for iron ore prices.
available products – although, again, individual Having closed 115 million t of steel capacity in
cargoes will not match the nameplate specification. 2016 and 2017, China’s Ministry of Industry and
Upon delivery of your iron ore cargo, if it deviates Information Technology is now looking for a further
negatively from the agreed specification, you will 35 million t of capacity to shut in order to achieve
have to incur additional costs when feeding that ore targeted closure of 150 million t by 2020. Those in
in to your blast furnace. Some ores may not be the firing line are likely to be small scale, polluting
appropriate for your furnace at all. For example, mills. Those that cannot afford the capital
elevated Al2O3 – as is typical with low grade Indian expenditure to install desulfurisation units in order
fines from Goa – can affect the slag viscosity at some to become environmentally compliant.
facilities to such an extent as to shut the furnace This means that a growing volume of production
down permanently. Can that even be called an ‘ore’? will come from larger-scale mills with greater
On the other hand, should you be lucky enough to efficiency and higher productivity.
get a better ore than agreed upon, you might still be
put out by the extra effort required to ensure your A new focus on productivity in China
furnace gets a consistent feed. That is why the In a similar vein to the sudden charge for
market rewards consistency. environmental compliance, the Chinese government
As we know, the market applies premiums and is now encouraging steelmakers to improve the
discounts to products that deviate beyond productivity of their operations. Under a new
reasonable boundaries from agreed specifications. ‘capacity swap’ scheme, steel mills can install larger
There are three iron ore price indices commonly furnaces and build new steel projects to replace
referred to by various agencies: outdated small furnaces or to move away from city
n n A low grade 58% Fe index. centres.
n n The standard or ‘medium’ 62% Fe index. In many instances, smaller basic oxygen furnaces
n n A high grade 65% Fe index. will be replaced one to one by scrap-based and
environmentally friendlier electric arc furnaces. For
This article will refer to these broad, and often example, Taiyuan Iron and Steel is replacing a 180 t
unsuitable, definitions throughout the text. basic oxygen furnace (BOF) with a new 180 t electric
In addition to these, there are further premiums arc furnace (EAF). But EAF gains are not systemic;
for physical properties, such as lump and pellet. scrap availability is still inadequate to support a
Recently, we have seen the premiums for superior large-scale shift.
ores grow and harsher penalties for lower grade Instead, the main trend of the capacity swap
products. The world is starting to realise that when programme will be the closure of smaller, inland hot
you buy iron ore, you do not always get iron ore. metal capacity to the opening of larger, coastal blast
If this phenomenon is to remain a feature of the furnace installations.
market, we can no longer simply refer to ‘the’ iron But, there is a small caveat. Because blast
ore price. We must increase the specificity as to what furnaces are less environmentally friendly than EAFs,
type of iron ore we are referring too. So, will to swap capacity to a new blast furnace, mills must
premiums and discounts fall back in line with ensure that the new capacity represents a 20%
long-term averages or are they here to stay? reduction over the old capacity.
In this scenario, high grade iron ore will be the
Will the two tier iron ore market winner. The new facilities will look to offset their lost
endure? nameplate capacity by increasing efficiency using
It is thought that a tiered pricing structure is a high quality raw materials. For every tonne of hot
feature of the market that is here to stay. There are metal made using solely 65% Fe ores, 12% less total
three reasons for this: feedstock tonnage is required than when feeding

14 May 2018 // global mining review

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 58% Fe ores. And more of the gap can be filled by US$3.41/t sold. Cliffs’ operating costs were some
using premium coking coals. US$16/t higher than Atlas, and Cliffs does not hedge
You can make steel faster and more efficiently as actively as Atlas. The negative revenue prompted
when using high grade iron ore. the company to announce that it would shut the
operations this year rather than exhausting the
Different supply and demand dynamics for reserves.
different ore groups So, what can low grade iron ore producers do to
Between 2000 and 2014, Chinese steel production respond to the two tier market, particularly low
grew by an average of 14% a year. Chinese blast grade producers whose revenues are at risk in the
furnaces were hungry for iron ore; seemingly any ore face of increasing discounts? There has already been
would do. a few notable responses:
If we split all iron ores into the three basic n n Vedanta – plan to wash Goan ore to increase Fe
categories – high, medium and low grade – a far content from 56% to 57.7%, as well as lowering
higher volume of low grade ore supply came online the Al 2O3 content.
to feed this demand. Low grade ore went from n n Roy Hill – plan to install beneficiation circuits to
holding a 10% share of the market to gaining a 24% upgrade sub 62% Fe material.
share. n n FMG – increasing wash plant capacity to upgrade
Now, with Chinese demand stagnating and a ore grades, as well as reducing operating costs.
renewed focus on higher grade ores, low grade ore is n n BHP – replacing Yandi with higher grade South
in over supply. Flank.
We see evidence of low grade oversupply at
Chinese ports. Port stocks are at record levels, On the other end of the quality spectrum, Vale is
reaching 150 million t in January 2018. That is a taking advantage of high grade premia by:
40 million t increase over 12 months. A higher n n Producing record tonnages.
proportion of stocks than ever before, 60%, are held n n Tweaking mine plans to maximise ore quality.
by traders. Although visibility on port grades is hazy, n n Planning to increase pellet output – the Sao Luis
anecdotal evidence suggests that low grade material pellet plant and Tubarao I and II are all due to
is building up in stocks held by traders. And traders restart in 2018.
are finding it hard to shift.
By contrast, high grade iron ores are in relative Grange Resources, a Tasmanian-based pellet
under supply. Very few large-scale projects of producer, is also benefiting from elevated premiums.
material grading above 62% Fe have come online in Average realised sales prices rose by 20% year on
recent years. year (y/y) in 4Q17, to US$106/t excluding freight. The
The situation is starting to change – Vale’s S11D company also increased pellet production by 15%
project is ramping up quickly. And, if Anglo American y/y. The good news has prompted the company to
gets the permits in place to advance its Minas Rio blow the dust off its Southdown magnetite project in
project, it will help to balance this section of the Western Australia, which stalled in 2012. Could
market further. projects like these be in the green as the two tier
But as discounts for low grade products endure, it market takes hold?
will not be enough to force out large-scale supply of
sub 58% Fe material. Additionally, demand for What should we look out for in the
higher grade ores will continue to outstrip supply. future?
The two tier iron ore market is here to stay. We can expect to see an increasing role of
technology in the beneficiation of what have
Why does it matter? traditionally been direct shipping ores. Miners are
The effects of the two tier market are already going to have to work smarter in order to maximise
beginning to bite. Despite a relatively healthy 62% their product quality. We will also see an increase in
iron ore benchmark price in 2017 averaging US$71/t, capital expenditure as producers look to lower costs
not all producers were better off than the previous and raise grades.
year when prices averaged US$58/t. Investment in the iron ore industry has
In 4Q17, Atlas Iron – a producer of material plummeted since 2012. From a peak of almost
assigned to the low grade basket – achieved a US$50 billion, total CAPEX fell last year to an
realised sales price of just US$47/t CFR China. With estimated US$13 billion.
full cash costs of US$48/t, Atlas lost a dollar for The two tier iron ore market will help reverse that
every tonne sold in the quarter. The loss comes trend this year, as we expect a rise in project
despite the use of a comparatively mature hedging investment and M&A activity.
strategy. So, next time you talk about ‘the’ iron ore price,
Despite having a product with a slightly superior take the time to specify which basket of iron ores
Fe grade, Atlas’ West Australian peers, Cleveland you are referring to. Not all iron ores are created
Cliffs Asia Pacific Iron Ore, fared even worse losing equal.

16 May 2018 // global mining review

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