dallas horadam, metalytics: making the grade
DESCRIPTION
Dallas Horadam, Director, Metalytics delivered this presentation at the 2012 FeTECH conference, the leading forum for technical developments evolving around the exploration, mining and beneficiation of iron ore. FeTECH 2013 will focus on the economics of processing and the beneficiation of iron ore. In light of the slowdown in demand for iron ore and pricing decreases, the need to process more efficiently and cost effectively is a challenge. The conference will take a closer look on how we can achieve greater value from the iron ore supply chain, with topics addressing optimisation and streamlining processes, applying improved technologies, understanding the ore body and how to properly characterise it, knowing the steelmakers needs. For more information and to register, please visit the conference website: http://www.informa.com.au/fetechconference.TRANSCRIPT
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Metalytics Pty Limited (“Metalytics”) is a consultancy based in Sydney, Australia that provides specialist advisory services in resource sector economics. The information contained in this presentation is intended to be general information for attendees of Fe TECH 2012, 26 & 27 September 2012.
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Specialist resource sector economics advisory servicesbased in Australia
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Iron Ore and Steel
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Metallurgical & Thermal Coal
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market analysis
market forecasts
product price analysis
project economics
capex
operating costs
expert witness
Making the Grade
The Unfolding Story – Supply & Grade
Outlining the Drivers
Pricing Evolution & Emerging Roles Of Beneficiated Products
IRON ORE SUPPLY & CHANGING PRODUCT GRADES
The unfolding story…
Seaborne trade continues to be driven by China
Source: Metalytics Iron ore Briefing Service
Seaborne Iron Ore Exports
Source: Metalytics Iron ore Briefing Service
Australia’s share is incrementally increasing
Seaborne Exporters
New players and Chinese diversification of sourcing have reduced The Big 3’s share
Source: Metalytics Iron ore Briefing Service
China’s iron ore supply –Australia the leading source in 2012
Imports from more than 60 countries
References: UNCTAD, Tex Report,
Mysteel, Metalytics
China’s iron ore import mix
Fines ~ 67% Lump ~ 19% Concentrates ~ 9% Pellets ~ 5%
Some trends and patterns
Tweaking back of ore specifications
Low grade Indian spot supply
Lower Fe grade ores from higher gangue rather than LOI
Phosphorus levels drifting up
Other contaminants including sulphur, metals, alkalis appearing
Index price specifications for low-grade 50-54%Fe
RESOURCE GRADES VMILL REQUIREMENTS
The Drivers …
Grade Transition of the Majors
Australia
Nominal grades from 63-64%Fe to 61-62%Fe
Blended products
62%Fe products but with high calcined Fe & CID products
Drivers –
husband high-grade Brockman reserves
utilise lower grade resources
Brazil
Lowered specifications in 2009 vs. 2006
Offers mid-grade 63%Fe and even high silica 60%Fe
Recent new direction to quality and premium
Drivers – falling grades, rising processing
Global Resources
Global production approaching 2Bt a year, yet resource inventories are rising
Producers exploring and exploiting a wider range of ores to extend mine life and meet production goals
Common strategy for new projects –
initial DSO followed by long life beneficiated ore
Initial returns, low capex, sometimes high cost
Return to product quality strategy – Vale, Cliffs
Regional Resources for Future Production
Source: MetalyticsNote: West Africa based
on country averages
Big Three Reserves
Source: Metalytics based on Company Reports
Vale’s Tale of Two Regions
Source: Metalytics based on Company Reports
Some Mill Drivers and Considerations
Cost
Energy consumption
Productivity – sintering and blast furnace
Quality – physical and chemistry
Consistency
Lower grade supply generates need for higher grade to adjust the blend
Optimisation of complementary characteristics
No perfect ore in all respects
Value – highly variable and depends on market
conditions
MECHANISMS & ROLES OF BENEFICIATED PRODUCTS
Pricing Evolution
A change in how ore is evaluated
Annual negotiations Index-based formulas derived from spot
Reflects: short-term supply & demand
speculation
Homogenised prices around the world
freight netbacks
quality differentials – per 1% Fe
varies with the market $2-6/t per 1%Fe
negotiated pellet and lump premiums
Market assessment of VIU under current market?
Other grade products
Reference Index grade 62%Fe
Range of ore grades covered:
52%Fe, 58%Fe, 63.5%Fe, 65%Fe.
Provides options for price referencing
Concentrates priced against a suitable Index
Discounts for pellet feed have disappeared
The value of quality varies with the market
Source: Metalytics
Australian Reference Fines FOB Prices – real 2012 terms
Source: Metalytics
data and forecasts
Prices in perspective
Making the Grade
o With some exceptions – limited high grade DSO
o ‘Casting the net wider’ to lower-grade ore for volume & mine life
o Definition of ‘DSO’ broadening – includes some beneficiation
o Common strategy: start DSO –> beneficiated ore for long project life
o Processing, processing efficiency & effectiveness rising importance
o Quality strategies for price premium – Vale, Cliffs
o Aim to complement low-grade – correct blend chemistry – extract value
o Market needs – recovery with slower growth but a different price regime
o a range of ore ‘ingredients’ to optimise the cost/performance balance
o Global sourcing – cost, consistency, reliability of supply
o No perfect ore
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