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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