NSTF Science Councils Symposium:

Beneficiation of SA’s Natural Resources

Mineral Beneficiation … Towards a Broader Definition

Marian Lydall Head, Market Development

17 September 2014

What is “Mineral Beneficiation”?

• Increased use of the term over the past decade

• Encompasses multiple meanings & concepts

• Highly emotive, suggestive of future possibilities,

transformation & change

• Common definition:

“…beneficiation, or value-added processing, involves the

transformation of a primary material (produced by mining

and extraction processes) to a more finished product,

which has a higher sales value” (DMR, Beneficiation Strategy, 2011)

SA’s macroeconomic imperatives

• SA’s mineral industry one of the richest & largest in

the world

• Significant contributor to GDP, jobs & exports

• BUT: o SA remains a resource-based exporter of raw & semi-

processed minerals/metals

o Increasing manufactured exports, but off a very low base

o HR base weak except for a few niche competencies

o Minerals are finite, susceptible to real price decline, cyclicity & substitution, and harder to access cheaply & safely

Diversification needed to reduce such instability &

reinvigorate growth dynamic

Changing global dynamics emphasis need for “doing

more with what you have”…

• Globalisation & fragmentation of value chains o Mines located in proximity of resource; fabrication plants

close to end-users

• Advances in communication & reduced

transport costs o Raw materials can be accessed from anywhere in the

world

• Rise of competitor economies o China, Brazil, Indonesia, India, Korea etc.

A rich mineral endowment no longer

sufficient to attract FDI & guarantee growth

Success in this new environment requires a dual

approach to development

• Capitalising on comparative advantages

While…

• Simultaneously developing & advancing competitive advantages

• Requires adopting a broader, more holistic view of “value addition/value adding processing”…

Value addition = All direct & indirect activities in

domestic markets capable of engendering economic, technical, social & environmental advancement in all stages of the value chain

Lessons on how to do this can be drawn from successful

mineral resource-based economies

• Success stories = Finland, Sweden, US & Canada • Industrialisation success underpinned by:

o Proactive, coordinated & committed approach to macroeconomic growth

o Long-term & sustained investment in education, innovation & entrepreneurship across sectors

o Capitalising on all direct and indirect resource industry linkages to facilitate endogenous growth

Source: Industrialisation innovation paths (Kamal, 2011)

Maximising mineral beneficiation objectives through industry

linkage development

3.

Upstream/Backward

Linkages

1.

Downstream/

Forward

Linkages

2.

Sidestream/Horizontal

Linkages

4.

Lateral

Migration/

Technological

Linkages

Downstream Linkages – Common definition of “beneficiation”

• Short- to medium-term potential: o maximise natural comparative advantages to facilitate growth of basic

industries (e.g. iron ore, coal)

• Medium- to long-term opportunity: o Use intermediate products generated to develop a platform of inputs or

industrial feedstocks for component and OEM exports

“Downstream linkages” – Arise from the transformation of the raw material through the

production process using local resources (labour or capital), to a more finished product

that has a higher value than the sale of the raw material for export.

The Mining Value (‘Beneficiation’)

Chain

“Value added” through sequential downstream

beneficiation

• Advancing from one stage to another in the beneficiation chain is not automatic, nor is the degree of value added absolute

• Dependent on: o Commodity o Price escalation o Elasticity of demand o Production process o Other indirect costs drivers

10

2. There is additional benefit to the SA economy in the form of

Sidestream Linkages…

“Sidestream/lateral linkages” = Related & supporting industries critical

for the operation & competitiveness of the minerals industry

Mining

Industry

3. Potentially much greater benefit can be derived from Upstream

Linkages

“Upstream/backward linkages” – Goods & service inputs used in each stage of the value

chain. Growth dependent on: companies’ procurement practices, R&D infrastructure, trade agreements,

exchange rate trends, etc

Established base of expertise in SA = Unique source of competitive advantage

Value added impacts of backward/upstream linkages

• Full potential of sector often misunderstood

• While innovation in supply of equipment & services is not considered to be ‘moving up the value chain’ in the conventional sense, 4 types of value are created:

o Economic – expansion of new & existing businesses o Social – Employment creation, increased national competitiveness

o Technical – Increased knowledge capital, improved product /system

development

o Environmental – Greater efficiency of activities

However, if sourcing, adaptation/development takes place off-shore, the opportunity for capitalising on such

spillovers is lost

Upstream/backward linkage value added potential: Global

Finland Canada Australia Global

70-90% of tech in

new UG mine

sourced locally / from

Sweden

Sales from Northern

Ontario’s mining

supply sector =

CAN$5.6 bn in 2010

Sales from

Technology Service &

Supply Industry =

A$12 bn in 2011

Demand for mining

input supplies ~US$47

bn in 2008 (Infomine)

Mining technology

exports = €1.5 bn in

2008

22,000 jobs across

3,295 suppliers (2010)

50% of 1,669 firms

exporting = A$2.5 Bn

in sales (2011)

2012 mining capex =

~US$200 bn; ongoing

project capex =

US$900bn (of which

~50% will spent on

inputs)

Inputs cluster

employed 40% more

people than core

mining industry

CAMESE: 1 direct job

in mining extraction =

2-4 indirect jobs in

mining supply

211,000 employees in

sector (3.7% total

national jobs

compared to 1.6% in

mining)

Aftermarket sales

equally important:

• Atlas Copco – 60%

• CAT – 53%

• Metso – 50%

• Weir – 60%

Local upstream/backward linkages associated with mining

• Steady growth in demand for intermediate inputs: R129 bn (1992) to R169 bn (2012) in real terms

• 2012: R235bn spent by mining sector on inputs; R75bn on capex

• 80% of inputs sourced locally

• Suppliers geographically concentrated in Gauteng – Mixture of small local firms and large MNCs

• High degree of tradability: 20-50% exported (R30 bn in 2012) with sub-Saharan Africa emerging as a significant export destination

• BUT, growth, especially exports, constrained by: o Logistics o Access to finance o Competition, particularly from foreign imports o Limited resources for R & D o Shortage of appropriate skills

Source: IDC, 2013

Then there is the opportunity for Technological/Lateral

Migration Linkages

“Lateral migration/Technology linkages” – Harnessing the underlying generic know-how

embodied in the technologies and products developed to support & sustain the mining

sector for use in other (unrelated) applications

• Examples:

Kone Oy (Finnish) Elevators mining hoists cranes high-tech hospital & laboratory equipment

Sensor technology for oil exploration aerospace (de-icing) quality control in polymer fibre

manufacturing

Instrumar Ltd (Canada)

Lodox Systems (SA)

X-ray scanner for security at De Beers hospital trauma units imaging modality of

choice in mortuaries

The multiplier effect of all mineral-based linkages is significant

Going forward…

• Government support & recognition for broadening mineral-based

linkages is increasing: o New Growth Path o National Development Plan o DMR Minerals Beneficiation Strategy o DTI IPAP 2014/15 o MIDGETT o SACEEC, SAMPEC o Various task teams & studies exploring how to ‘make it work’

• Further proactive stakeholder engagement is essential to ensure all

expectations understood, & full economic, social, technical and

environmental benefit of the minerals sector is realised

“It is where and how effectively factors are deployed that proves more

decisive than the factors themselves in determining international

success” (Porter , 1990: 15)

Thank You www.mintek.co.za