NSTF Science Councils Symposium:

Beneficiation of SA’s Natural Resources

Mineral Beneficiation … Downstream Opportunities and Challenges!

Peter Craven General Manager, Business Development

17 September 2014

Mintek – The home of minerals beneficiation!

3

• is one of the largest and oldest mineral and metal

technology institutes in the world (80 years old in 2014)

• is a state-owned Science Council, governed by an Act of

Parliament, with a board appointed by the Minister of

Mineral Resources

• focuses on all aspects of minerals processing and

beneficiation, with the exception of iron- and steel making

and coal processing

• has a permanent staff of about 750, including 250

engineers and scientists

• undertakes R&D and furnishes commercial testwork and

consultancy services to clients worldwide

• Has an annual budget of about €50 million:

– 50% funding from state sources, focused on research

– 50% commercial income, derived from various services

to industry (About 800 commercial projects last year)

Mintek ……

Mintek in numbers

250 scientists and

engineers

R200m R&D

budget

R300m technology

sales

44 published

papers

71 conference

publications

3 patent family

filings

680 media

references

65,000 chemical

analyses

588 technical

reports

60 direct new

SMME jobs

100 SMME

trainees

80 part-time

bursars

47

full-time bursars

720 commercial

projects

81 interns

Source: Mintek 2013

Annual Report

Mintek operates in the latter stages of the Mining Value Chain

Exploration Mining Concentration Refining Value

Addition

Pyrometallurgy

Hydrometallurgy

& Biotechnology

MINTEK

Council for

Geo-Sciences

(CGS) Council for Scientific and Industrial Research (CSIR)

Mintek’s extensive R&D underpins its commercial services

• Mintek spends R250m annually on applied R&D (~50% of its budget)

• These R&D outputs are transferred to industry either in the form of

commercial service work or, on occasion, technology licences

• Mintek undertakes ~ 800 commercial projects annually, evidence of the

high regard industry has for our technology

Mintek sells innovation !

Mintek’s R&D strategy is aligned to the NDP

Points specifically identified in NDP:

• Improved extraction efficiency to extend ore resources

• Improved energy and water efficiency

• Beneficiation to downstream, value-added products

Mintek’s R&D strategy includes these NDP points,

and additionally includes:

• Mining, industrial and consumer waste treatment

• Small-scale and artisanal mining

• Improved extraction technologies for precious, base,

ferrous and energy minerals

Mintek’s management of innovation

• Combination “market pull” and “technology push” approach

• Industry need ascertained from:

– Commercial testwork activity

– Industry-specific workshops

– Participation in networks like SAMMRI

• Technology opportunities identified from:

– Mintek internal early-stage research

– Close relationship with technology vendors

– Extensive international network

• Strategy articulated in medium- to long term strategy (Mintek 2020)

• Highly structured research management process:

– 8 “platforms”, based on government priorities, strategic drivers, industry needs

– Allocation of funding (~R250m) between these platforms

– “Top Down” calls for internal proposals in these areas

– Selection of projects from “Bottom Up” proposals

– Cluster project management

Mintek test facilities are often operated at industrial scale

Tapping of Mintek’s test DC furnace

Site work is often conducted in very difficult conditions!

Copper heap bioleach test facility in Iran

Mintek sometimes supplies technology on a turnkey basis

Turnkey gold refinery using

Mintek Minotaur® technology

Project example - Cliff Resources Chromite

• 18 month Canadian ferrochrome project for Cliff Natural Resources

– to Bankable Feasibility Study level

• Started with laboratory scale testing

• Concluded with large pilot smelting campaign

• Included mineral processing and pyrometallurgy

• Over 500t of ore tested

• A 2-year high-temperature heap bioleaching project for one of the largest copper

projects in Chile

• Highly successful technically in demonstrating that copper extraction could be

controlled within the desired range

Project example - Chilean copper heap leach project

• Encompasses many different dimensions

• DMR definition in the Beneficiation Strategy:

“…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”

• To a metallurgist – any act of processing the mined ore

• To an investor – anything that adds value to a project

“Mineral Beneficiation” - different meaning to different people

Benefit to the national economy is beyond question

• Creation of “decent jobs”

• Foreign direct investment, fiscus contribution and forex

earnings

• Diversification of industry

• Reduced dependence on depleting resources

• Transition from resource economy to high-tech economy

• Skills development

• Improved livelihoods in proximate communities

But There are a number of hurdles that also

need to be recognised and overcome

Critical determinants for project investment …

• Financing - proximity to financial markets & shareholders

• Availability of creative assets (entrepreneurial capabilities)

• Favourable business environment

• Access to feedstock and other inputs at competitive pricing

• Access to technology

• Skilled operational staff

• Access to markets – relationships and proximity

Massive difference between ….

Increasing the sales price of a product

As measured by R/unit of product, R/unit of metal contained in product, higher sales revenue, etc

and

Increasing value to the project investor

As measured by ROI, shareholder value, etc

Source: Deloitte report – Positioning

for mineral beneficiation, 2011

• Internal railage often more expensive than sea-freight

• Often lack all “ingredients” (coke, sweeteners, bulk chemicals, etc)

• WTO limits protective tariffs

• Close interaction with proximate market often more valuable

• Proximity to shareholders is advantageous (They prefer investing in their

backyard, where they understand the risks)

Proximity to ore resource - often not an economic advantage

Any successful business needs a clear,

material, sustainable competitive advantage!

Minerals industry is particularly “global”

• Dominated by multinationals

• Even juniors are increasingly globally disseminated

• Production landscape has changed considerably over the past 50

years. Mining-minerals processing-smelting-manufacturing chain

seldom confined within one country’s borders

• Bauxite–alumina–aluminium is a good example

• Strong competition from other resource-rich countries and

developed economies to retain downstream industry – won’t willingly

give up market share (EU example)

Mining company thoughts on downstream diversification (or

vertical integration)

For • Better appreciation of “value in use”

• Move from resource to intellectual assets

• Price setting – control of downstream activities

Against • Less value in intermediate stages

• Competing against clients

• Moving away from expertise base

• Shareholder expectations

• Company structures and culture

• Doesn’t diversify portfolio - still exposed to same cyclicity

International investor perception of SA as an “innovation

economy” is relatively poor ….

Source: INSEAD Global Innovation Index 2014

South Africa rates 53rd out of 143 countries

Also a negative perception of SA as a “competitive economy”

Source: World Economic Forum, Global

Competitiveness Report, 2014

South Africa rates 53rd out of 148 countries

SA is second only to Russia in terms of energy usage to

generate unit of GDP

• SA has a large, energy-intensive mining and resource extraction component

• SA’s historical low energy cost has attracted energy-intensive industries (eg aluminium

refineries)

• Need to recognise energy-intensive mineral beneficiation activities, to decide whether these will

be of most overall benefit to the economy

SA is increasingly short of technical skills

• Global issue, in both developing and developed world, but worst in Australia and Africa

• Exacerbated by recent retrenchments of senior, experienced staff in industry

Students graduating 2010 Graduates entering industry

Source: Cilliers et al, Mineral Industry, Education and Training 2012

Thank You www.mintek.co.za