martin lynch, s.o.n international minerals consulting corp: vietnamese mineral sands production and...
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Martin Lynch, Director, S.O.N International Minerals Consulting Corp (SonMinerals) delivered the presentation at the 2014 Mineral Sands conference. The Annual Australian Journal Mining's Mineral Sands Conference is the key meeting place for Australia's Mineral Sands industry. The event gives delegates the chance to hear from industry experts as they share their perspectives on the hot topics for the mineral sands industry. For more information about the event, please visit the website: http://www.informa.com.au/mineralsandsconferenceTRANSCRIPT
Mar$n Lynch – Director www.sonminerals.com
VIETNAMESE MINERAL SANDS PRODUCTION AND OUTLOOK
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Binh Dinh: mostly ilmenite deposits, low RZ
Thai Nguyen: rock ilmenite
Binh + Ninh Thuan: large, high RZ deposits
Ha Tinh to Quang Ngai: high RZ deposits
The mineral sands sector in Vietnam is best considered as four distinct regions.
The dominant region for ilmenite production is Binh Dinh.
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Ilmenite produc$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.
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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.
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• 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.
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• 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:
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• Decline in demand, especially from China
• The export “bans” on unprocessed ilmenite
• Declining margins
The Vietnamese government is determined to foster domestic TiO2 processing.
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• 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
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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.
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‘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.
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• 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 $170/t and the export tax 40%.
• Many producers are now finding it hard to cover costs.
• In response, as of January 2014, the export tax has been lowered to 30%. Source: Son Minerals cost model
-‐25%
-‐20%
-‐15%
-‐10%
-‐5%
0%
5%
10%
15%
20%
25%
30%
H1 2012 H1 2013 Q4 2013
net revenue on gross revenue
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Two pathways for the Vietnamese mineral sands sector
Ilmenite supplier to China
• The growth path for the industry has been low cost mineral production exported directly to China.
• Many producers see most value in continuing down this path.
• The VN government is steering the sector towards slag and pigment manufacture.
• The aim is to build a major domestic processing and manufacturing industry.
Domestic TiO2 processor
The new Master Plan’s downstream processing targets are very ambitious.
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Period Titanium slag
Synthe$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.
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• 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.
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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
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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