Martin Lynch, S.O.N International Minerals Consulting Corp: Vietnamese Mineral Sands production and...

Mar$n Lynch – Director www.sonminerals.com

VIETNAMESE MINERAL SANDS PRODUCTION AND OUTLOOK

AJM 14th Annual Mineral Sands Conference / 4th -‐5th March 2014 Melbourne 2

Binh Dinh: mostly ilmenite deposits, low RZ

Thai Nguyen: rock ilmenite

Binh + Ninh Thuan: large, high RZ deposits

Ha Tinh to Quang Ngai: high RZ deposits

The mineral sands sector in Vietnam is best considered as four distinct regions.

The dominant region for ilmenite production is Binh Dinh.


Ilmenite produc$on by region: 2012

0%

10%

20%

30%

40%

50%

60%

70%

Binh Dinh Ha Tinh -‐ Quang Nam

Binh+Ninh Thuan

Thai Nguyen

Binh Dinh 24%

Ha Tinh -‐ Quang Nam 14%

Binh+Ninh Thuan 45%

Thai Nguyen 17%

Ilmenite resources by region: 2012 (excluding Red Sands)

ProducLon is influenced by provincial policies as well as size and quality of resources.

Share of total producLon

Share of total ilmenite resources

Source: MONRE, Sonminerals

Source: MONRE

Ilmenite production growth has been driven, in large part, by new producers commencing in Binh Dinh.


ProducLon : 200.000 MT

ProducLon : 60.000 MT

0

5

10

15

20

25

Binh Dinh Ha Tinh -‐ Quang Nam

Binh+Ninh Thuan

Thai Nguyen

Producing companies, by region: 2013

This mode of expansion has created a very fragmented industry structure.

•  Vietnam has about 7% global share and has more than 40 producers.

•  The largest producer in Vietnam has less than 1% of global market share.

•  Ilmenite producLon growth has been driven

by the ready granLng of new mining leases by the Binh Dinh provincial government.

•  More stringent rules for licencing and renewing licences is resulLng in this number declining.

Number of companies

Source: Sonminerals

These companies have established themselves with very low capex.


•  Low costs are essential to profitably mine the low grade ores which are typical in Vietnam.

•  Most deposits in Vietnam average less than 1.5% HM – which is below the cut-off grade for most producers outside Vietnam.

•  Producers have benefited from low labour costs to achieve very low production costs.

•  Chinese traders offer a low cost path to market.

%HM %RZ

Binh Dinh 1.5 3

High RZ provinces 0.8 17 Source: MONRE, Sonminerals

Vietnam’s ilmenite exports saw a sharp slowdown in 2013.


•  The recent slowdown in China has inevitably had an impact on Vietnamese exports. •  A second major impact has been the ilmenite “export halt” of mid 2012.

‘000 tonnes ilmenite

Exports of ilmenite: 2000 to 2013e

-‐

200

400

600

800

1,000

1,200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

China Japan

Source: Global Trade Atlas, Son Minerals esLmates

Three influences underpin this decline:


•  Decline in demand, especially from China

•  The export “bans” on unprocessed ilmenite

•  Declining margins

The Vietnamese government is determined to foster domestic TiO2 processing.


•  This is expressed in the Master Plans. These are drawn up for each industry sector, every five years or so.

•  The First Master Plan for mineral sands was released in 2006.

•  Under this plan, by 2010 more than 90% of domesLc ilmenite producLon would be processed to slag in domesLc faciliLes.

•  To encourage progress in this direcLon, export taxes have been levied.

•  And, from Lme to Lme, export restricLons have been imposed.

A brief history of export bans


First Master Plan + 20% export tax. Zircon sand exports banned by 2010.

Second Master Plan, ilmenite export tax raised to 40%.

Ilmenite exports halted and export tax raised to 30%

Ilmenite exports halted

-‐

200

400

600

800

1,000

1,200

2006 2007 2008 2009 2010 2011 2012 2013

Source: Sonminerals

The 2013 export ban has been watered down and appears to have had little effect on exports.


‘000 tonnes exported

Half yearly exports of ilmenite from Vietnam: H1 2011 to H2 2013

•  Since the announcement of the 2013 export halt, government and producers have worked to find a compromise.

•  The result is a system of export quotas.

•  These quotas were assigned to each company on the basis of their stated stocks on the ground at the Lme of the quote being granted.

Source: Global Trade Atlas, Son Minerals esLmates

0

100

200

300

400

500

600

700

800

H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 H2 2013

The biggest cause of export decline may be falling margins.


•  The graph shows estimated margins for a Binh Dinh ilmenite mine with HM of 1.2%.

•  In 2012 prices were over $250/t and export tax 20%.

•  At the end of 2013, prices were $170/t and the export tax 40%.

•  Many producers are now finding it hard to cover costs.

•  In response, as of January 2014, the export tax has been lowered to 30%. Source: Son Minerals cost model

-‐25%

-‐20%

-‐15%

-‐10%

-‐5%

0%

5%

10%

15%

20%

25%

30%

H1 2012 H1 2013 Q4 2013

net revenue on gross revenue


Two pathways for the Vietnamese mineral sands sector

Ilmenite supplier to China

•  The growth path for the industry has been low cost mineral production exported directly to China.

•  Many producers see most value in continuing down this path.

•  The VN government is steering the sector towards slag and pigment manufacture.

•  The aim is to build a major domestic processing and manufacturing industry.

Domestic TiO2 processor

The new Master Plan’s downstream processing targets are very ambitious.


Period Titanium slag

Synthe$c ru$le

Milled zircon

TiO2 Pigment

Ferro Titanium

Titanium metal

by 2020 990 120 195 240 20 20

•  The Plan takes a very positive view of the growth prospects for Vietnam and its neighbors over the next decade. •  It foresees a threefold increase in ilmenite output (from 2012 levels) by 2020. •  Milled zircon production is expected to increase fivefold due to the shift towards high RZ deposits in the Binh+Ninh Thuan region, and the milling of imported zircon sand. •  Downstream processing is forecast to rise from about 5% of total ilmenite production to nearly 100%.

Plan targets for annual domes$c produc$on (all figures in ‘000 tonnes)

Source: Second Master Plan

But progress on downstream processing is very slow.


•  The most recent slag plant was commissioned in 2011.

•  Total domesLc capacity slag-‐making capacity is 80kt/a, which could at best process only 15% of naLonal ilmenite output even at current reduced producLon rates.

•  There are two new slag plants being seriously considered but neither are yet in the “likely to proceed” category, partly due to the slag price.

•  A Vietnamese pigment plant seems a long way off.


What of the future?

•  The naLonal government will conLnue to pursue its downstream processing goals.

•  Producers will conLnue to seek concessions to allow ilmenite exporLng.

•  Industry consolidaLon should occur slowly, as will technical improvements in mining and processing.

•  Deposits with elevated zircon and ruLle will ahract most interest, and as a result the centre of producLon will move from Binh Dinh to Binh Thuan.

•  As always, the market price will be the strongest driver of producLon.

Production center of

gravity will move south


Thank you www.sonminerals.com

Contact us : In Vietnam In Australia Hoanh Son Nguyen MarLn Lynch Chairman Director E: [email protected] [email protected] C: +84 912 019 851 C: +61 439 906 664

Martin Lynch, S.O.N International Minerals Consulting Corp: Vietnamese Mineral Sands production and...

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