Transcript Beneficiation - Amazon Web Services

• “..specific (RDP) policies aim to expand the
competitive advantage already enjoyed by the
mining and capital and energy-intensive mineral
processing and chemical industries that lie at the
core of the economy and which provide the bulk of
the country's foreign exchange”
• The “RDP must strengthen and broaden upstream
and downstream linkages between the burgeoning
mineral-based industries and other sub-sectors of
industry.”
• Pricing of mineral inputs: “Where conglomerate
control impedes the objectives, anti-trust policies
will be invoked”.
• “an effective review of the minerals rights regime,
lowering the cost of critical inputs including
logistics and skills in order to stimulate private
investment in the mining sector, and setting up a
state-owned mining company that … promotes
beneficiation, as well as greater utilisation of the
mineral resource base of the country for
developmental purposes, including potentially
through a sovereign wealth fund.”
• “Refocusing the beneficiation strategy to support
fabrication (stage 4) (rather than only smelting and
refining, which are both capital and energy
intensive), including stronger measures to address
uncompetitive pricing of intermediate inputs, such
as where appropriate, export taxes on selected
mineral products linked to clear industrial
strategies.”
• “if the mineral endowments are used to facilitate
long-term capabilities, these resources can serve as
a springboard for a new wave of industrialisation
and services for domestic use and exports”;
• “attention will be devoted to stimulating backward
linkages or supplier industries (such as capital
equipment, chemicals, engineering services),
especially as demand is certain, there is an
opportunity for specialised product development,
and the product complement is diverse. They are
also more labour absorbing than typical
downstream projects. Such products have the
potential for servicing mining projects globally”
• “The (growth) differentiator is how much the country
invests in human capital, product development and
technology.”
• Minerals in the ground belong to the people as a
•
•
•
•
whole and should benefit the economy as a whole;
The state must capture the mineral resource rents
and deploy them in developing long-term physical
and human infrastructure (inter-generational equity);
Mining must catalyse broader industrialisation
through the realisation of all the economic linkages:
• Backward Linkages into capital goods, services &
consumables;
• Forward Linkages into manufacturing, energy and
infrastructure
Destructive monopoly pricing of mineral feedstocks
must be stopped! Minerals must be available for
transformation at facilitatory prices, all along the
mineral value chains.
Investment in STEM skills and RDI is critical for
realising the vast beneficiation opportunities.
What is Beneficiation?
•
Narrow definition:
– Value-added above a “base” state (ore, concentrate, metal)
Broader definition:
– Total domestic VA (value-addition), excluding all imported inputs.
•
∑VA =
imports +
local VA
Mining
∑VA =
Imports +
local VA
Concentration
∑VA =
Imports +
local VA
Smelting
∑VA =
Imports +
local VA
∑VA =
Imports +
local VA
∑VA =
Imports +
local VA
Refining
Semis
Manufacturing
Ore exports
Bene= ∑SA_VA
Conc exports
Bene= ∑SA_VA
Alloy exports
Bene= ∑SA_VA
Metal exports
Bene= ∑SA_VA
Beneficiation is the sum of local VA in
the exported product =
VA in all inputs plus the VA in the process.
=
Semis exports
Bene= ∑SA_VA
Manu. exports
Bene= ∑SA_VA
both backward and forward linkages!
Two approaches to DOWNSTREAM BENEFICIATION:
1) “Supply-side” Methodology:
Starts from the national mineral
endowment and then develops
strategies for their beneficiation.
(This generally appears to be the
DMR approach in “A Beneficiation
Strategy For The Minerals Industry
Of South Africa”)
2) “Demand-side” Methodology:
Identifies critical mineral inputs
into the economy needed for rapid
job creation and then develops
strategies for the cost-effective
supply of those mineral feedstocks.
For rapid Job Creation,
the domestic demand
driven methodology is
preferable, except for
minerals with potential
“producer power”. The
DTI/IDC value chains
approach reflects this.
The Principal Mineral-Based Feedstocks for rapid
JOB CREATION
Critical feedstocks in the economy-
Manufacturing:
Energy (electricity):
Steel/alloys, polymers (from coal, HCs), base metals
(Cu, Zn, et al)
Coal, natural gas (and CBM, shale gas), radioactive
minerals, limestone (emissions)
Infrastructure:
Steel, copper, cement (from limestone, gypsum, coal)
Agriculture:
Nitrogen (from coal, gas), phosphate, potassium and
conditioners (e.g. limestone, sulphides)
Plus -
SA has ample resources for the cost-effective
production of all of these critical feedstocks for
downstream job creation!
Producer power:
8
Finally, where SA has potential producer power,
there could be increased downstream
(beneficiation) potential: e.g. PGMs
Beneficiation:
Maximising
the Mineral
Economic Linkages:
Mineral
Based
Development
Spatial Linkages:
Infrastructure (transport,
power, ICT) and LED
Backward
Linkages
Inputs:
Capital goods
Consumables
Services
Mining: Concentration,
smelting, refining => metal/alloy
Knowledge Linkages
Forward Linkages:
Intermediate products =>
Manufacturing; Logistics;
other sectors (agriculture ,
forestry, fisheries, etc.)
Fiscal linkages:
Resource rent capture &
deployment: long-term human
& physical infrastructure
development
HRD: skills formation
R&D: tech development
Geo-knowledge (survey)
Knowledge linkages are a prerequisite for developing
the crucial back/forward beneficiation linkages!
“Deepening” the resource sector linkages: development of the
resource inputs & outputs industries is critical ,
Finland: 1970 on primary
commodities (pc- mining & forestry)
inverted U-curve,
shifts
to 1998
Finland:but
e.g.
Forestrymanufacturing
curvegoods
(mfgrew capital
resources
inputs
&
(machinery)
& value-added
outputs/beneficiation).
exports (wood
manufactures, pulp/paper)
Thru’on
investment
in R&D!
Chile: 1970
manufacturing
Ucurve (ISI), but shifts to 1998
primary commodities (mining &
agriculture) curve, after opening up
its economy (coup) in the 70’s.
Finland managed to shift from a 1970 resources (pc) trajectory to
a 1998 manufactures (mf) trajectory, through the development of
its resources inputs (machinery) and outputs (value-addition)
sectors (source Palma, G. 2004)
International Lessons: Norway
(Norway hydrocarbons: OG21 tech strategy)
Prolong the life of the resources, migrate to
exports of resource techs and value-added
products: survive beyond resource depletion!
>Tech exports
>Gas VA
R&D
HRD
Statoil
75k
Extraction
ex-linkages
>recovery
>resources
Minerals often have large Resource Rents (unearned)
Resource Rent = Return on Investment (ROI) > minimum ROI to effect the
investment
Use Resource Rents to dramatically increase beneficiation and jobs!
Time t
= Demand > Supply: limited
resources
= better deposit
S
t
a
t
e
M
i
n
e
r
Resource
Rents =
“luck” rents
(unearned)
“Normal” ROI
Tax (CIT)
Labour
Inputs
(purchases)
Impose Resource Rent Tax (RRT) of 50% on ROI > normal SA ROI
Allow reduction of RRT rate through greater beneficiation (offsets)
Constraints to SA up- & down-stream beneficiation
• Lack of coherent state beneficiation strategy across
•
•
•
•
•
•
the critical ministries (DTI, DMR, EDD, Treasury, DST,
et al). Each department has its own strategy;
Monopoly pricing (IPP) of mineral feedstocks by venal
companies (Sasol, AMSA, et al) destroys downstream
opportunities;
Disappearance of national mining technology
development (RDI) capacity (demise of COMRO and
exit of Mining Houses) has severely compromised the
upstream capital goods cluster;
Shortage of STEM skills due to problematic schooling
pipeline (matric maths & science graduates);
Lack of local content, value-addition and RDI
requirements in Mining Licenses;
Lack of mineral value addition incentives such as tax
incentives/offsets (RRT);
Constrained National budget to facilitate (need RRT)
Towards a National Beneficiation Strategy?
1. Ensure tight coordination of ministries (DMR, DTI, DoE,
DST, EDD, DPE, Treasury, at al) to maximise the linkages
through strategy alignment. PICC-type structure?
2. Amend the MPRDA objectives to include the maximisation
of the developmental impacts of mining, to allow for
backward and forward linkages conditionality and
minimum RDI spend in mining licenses (local content,
value-addition milestones and local RDI spend);
3. Amend the MPRDA to cater for a category of “strategic
minerals” (critical feedstocks into job-creating sectors)
with extraction and pricing conditions (especially steel
and coal/gas);
4. Introduce a Resource Rent Tax (50% on returns above
normal ROI) with deductions for greater beneficiation
(local content and further value addition);
5. Public tender (“price discovery”) of all known unconcessioned mineral assets against developmental
goals (up- & down-stream beneficiation);
State beneficiation levers lie in ownership of mineral resources!
Beneficiation: Backward Linkages Strategies
• Impose local content milestones (year 5, 10, 15,
20) and RDI targets (3%VA/an) in all mining
licenses;
• Introduce RRT and allow RRT offsets against
greater local content;
• Ensure harmonised minerals and industrial
strategy- create strong cluster (“PICC” for MEC?);
• Base the BEE purchase requirements in the Mining
Charter on the BEE proportion of local value
added, not total (imported) value;
• Establish beneficiation SEZs (e.g. Pt Valley);
• Invest in the development of upstream
technologies (rebuild COMRO) and STEM skills
(fund from RRT);
Downstream Beneficiation Strategies:
• Introduce domestic pricing controls on “strategic mineral
feedstocks” at EPP or cost plus reasonable return on
investment (ROI);
• Align beneficiation strategies- strong state coordination
through a “MEC” ministerial cluster;
• Impose beneficiation milestones in mining licenses at 5,
10, 15 & 20y (NGP proposes: ~50% in 20 years);
• Develop an RRT – value-addition offsets scheme;
• Impose a small export tariff on select raw mineral exports
to encourage beneficiation, where viable;
• Establish new steel producers to sell at EPP in domestic
market and discipline current IPP abusers;
• Ban all scrap metal exports (reserve for domestic use);
• Producer Power- PGMs: Introduce single-channel exports
to facilitate downstream beneficiation;
• Establish “Beneficiation SEZs”;
• Support beneficiation technology and skills development;
• Link utility tariffs to value-added (transport, energy, etc.);
• Develop regional power solutions (HEP, gas, etc.).
Beneficiation - Knowledge Linkages Strategies
• Rebuild a mining technology development capacity
as a PPP with the mining companies, mining capital
goods cluster and the state;
• Set minimum local RDI spend (%VA/an) and STEM
HRD spend in all mining licenses;
• Dramatically increase funding for R&D (from RRT);
• Dramatically increase funding for STEM HRD (from
RRT): school maths & science, STEM graduates
and technicians/artisans;
• Make engineering & science degrees free
(notional state loan only).
• Discourage exit of tech skills- Convert state
tertiary education subsidies into a notional “loan”
(payable on exit).
Regional Integration: We must increase our
market to compete globally
• Progress the extension of membership of the
Southern African Customs Union (SACU) to increase
market for linkages industries;
• Consider the formation of a SADC free trade zone
for iron/steel, petrochems and energy (similar to
ECSA- 1951 Treaty of Paris, precursor to the EU);
• Invest in long-term trade infrastructure across the
southern African region (NGP- from RRT),
• Include regional producers in Producer Power
strategies (e.g. PGMs);
• Develop and support a regional mineral inputs
strategy;
• Develop a regional HEP strategy;
• Develop a regional gas utilisation strategy;
The regional mining capital goods market is
larger than the EU’s!
Share of diversified manufacturing exports, by region
Source: Roberts 2011
Mining Capital Equipment Exports to Africa have grown 400% ($ million)
Source: Kaplan 2011
Note that this excludes mining based services. The export of mining-based services is extensive and growing very rapidly.
SIMS Indicative JOB CREATION Guesstimates (400k to 1 million)
ACTIONS
IMPACTS
Build SMC (State Minerals
Company) for Strategic
Minerals & BEE
JOBS in new mines &
linkage sectors, >BEE
Forensic audit of mineral
rights “conversions”
Categorisation of SA into
“Known” & “Unknown”
geo-terrains (CGS)
Up- & downstream
JOBS. Grow B-B BEE.
JOBS in HRD, R&D
Introduction of
a 50% Resource
Rent Tax (RRT)
Amend MPRDA to
impose linkages
conditions on licenses
Introduce small export
tax on select crude
mineral exports
JOBS in New Mines &
Expanded production
JOBS across the
economy
JOBS in construction &
infra. inputs industry
Fiscal Stability (JOB
protection in slumps)
Lower royalties to 1%
JOBS in Up- and
Downstream
(manufacturing &
services) Industries
Develop new EPP iron
ore & steel project:
JOBS in LED (local &
sending communities)
Ban scrap metal exports
JOBS in expanded
production & new mines
Amend MPRDA for
“Strategic Minerals”
w/pricing conditions
JOBS in manufacturing
Apply IPP rail & power
tariffs to IPP abusers
JOBS in agric & Lower
agric product prices
Poss. nationalisation of
obdurate IPP suppliers
Invest in Mineral
Infrastructure (PPPs)
JOBS across the
economy
Amend Exchange
Control Regs for sales of
“precious metals”
JOBS in construction &
infra inputs industries
JOBS in PGM-based
industries (H2 economy)
High
Low
1000’s
1000’s
Remove Mineral Export Constraints:
10% increase in mineral exports (CGE model)
20% increase in mineral exports (CGE model)
30% increase in mineral exports (CGE model)
• +10% Beneficiation VA
• +20% Beneficiation VA
• +10% local content VA
• +20% local content VA
• EPP Iron & Steel
• EPP Polymers
• EPP Base metals
• EPP Cement
• EPP Other (NPK, etc.)
Coal @ cost plus (reduce energy costs)
New HRD investment (teachers/bursars)
New R&D invest (license & SWF) & geo-survey
3 Pilot Beneficiation Hubs
Mineral Infrastructure Upgrades
Mineral Asset Auctions
SMC
Greater regional exports/imports
Regional trade infrastructure
PGM VA Strategy
New Mines (& EPP steel project)
95
191
286
40
70
20
30
90
80
20
20
30
20
30
5
45
4
55
15
80
6
14
100
50
100
150
20
40
10
15
60
50
10
10
10
10
15
3
20
2
25
5
40
3
7
50
TOTAL (1000's)
1000
400
Intervention/Action (2-5y)
1.Much greater coordination of key Ministries (DTI, DMR,
DOE, DST, Treasury, DPE, et al) through a strong MEC
Cluster with tight coordination (PICC type structure?);
2.Eliminate abusive pricing (IPP) of our resources!
3.Introduce a RESOURCE RENT TAX (RRT) of 50% (ROI>15%)
and use it to drive value-addition through RRT deductions
for downstream and upstream beneficiation;
4.Amend MPRDA for license linkages conditions (up- &
downstream VA and HRD & RDI spend) and, for “strategic
minerals”, with extraction and pricing conditions;
5.Investment in STEM skilling (incl. school maths & science),
tech development (RDI) and geo-sciences (geo-mapping
for future resources) from RRT receipts.
6.Maximise the development impact of mineral resources
through Public Tender (price discovery) of all known
unencumbered mineral assets;
7.Establish a Presidential task team to drive beneficiation.
We have the vision, the tools and
resources to make it happen!
Thank You
Ke a leboga
Ngiyabonga
Dankie
Inkosi
Extra slides
PPC T&I Beneficiation Aug 2014
Hartwick’s Rule on inter-generational equity
in the extraction of finite resources
National COMPARATIVE advantage
Resources Depletion
Capture Resource Rents
(mining finite resources)
Invest rents in long-term
National COMPETITIVE
advantage
Beyond finite resources
= inter-generational equity
Capture
RESOURCE
RENTS
Finite
Mining
Human &Sustainable
Physical
development
Infrastructure
(beyond
Invest (skills,
rents inpower,
transport,
resources)
competitive water, ICT)
advantage:
STEM SKILLS
INFRA: ICT,
transport,
power, etc.
IPAP 2014/15: Beneficiation Initiatives
Mineral Beneficiation (Upstream and Downstream)
•
Leveraging state tariffs for mineral value addition
Viability of an Iron/Steel and Titanium Pigment Industrial
Complex
Development of Resources Capital Goods Development Plan
•
•
•
•
Leveraging the government’s CAPEX and OPEX programmes
Promoting localisation in the private sector
National Tooling Initiative
National Foundry Technology Network
•
•
Plastics (coal/gas MVC)
Plastics trade policy measures
•
Strategy to leverage opportunities presented by SA’s shale gas
resources
The Saldanha Bay IDZ/SEZ (HC capital goods)
•
•
Metal Fabrication, Capital & Rail Transport Equipment
Plastics, pharmaceuticals, chemicals and cosmetics
Upstream and Midstream Oil and Gas (HCs)
•
Transversal Interventions
• Public Procurement, Industrial Financing, Developmental Trade
Policy, Competition Policy, Innovation and Technology, Special
Economic Zones (SEZ) Regional integration
South Africa is well-endowed with mineral resources
South Africa’s Mineral Reserves, World Ranking, 2009 Production &
Nominal Life (assuming no further reserves) at 2009 Extraction Rates
Mineral
RESERVES
%World
*
16.7
72.4
7.4
2.4
17
12.7
0.8
Rank
*
3
1
6
6
2
1
13
PRODUCTION 2009
Mass %World Rank
0.265
60.2
1
3
1.6
3
6.762
*
1
250.6
3.6
7
0.089
*
*
0.18
3.5
5
197
7.8
5
55.4
3.5
6
Alumino-silicates
Antimony
Chromium Ore
Coal
Copper
Fluorspar
Gold
Iron Ore
Mt
kt
Mt
Mt
Mt
Mt
t
Mt
Mass
51
350
5500
30408
13
80
6000
1500
Iron Ore - incl. BC
Mt
25000
~10
*
55.4
3.5
6
Lead
Manganese Ore
Nickel
PGMs
Phosphate Rock
Titanium Minerals
kt
Mt
Mt
t
Mt
Mt
3000
4000
3.7
70000
2500
71
2.1
80
5.2
87.7
5.3
9.8
6
1
8
1
4
2
49
4.576
0.0346
271
2.237
1.1
1.2
17.1
2.4
58.7
1.4
19.2
10
2
12
1
11
2
Titanium- incl. BC
Mt
400
65
1
1.1
19.2
2
Uranium
Vanadium
Vermiculite
Zinc
Zirconium
kt
kt
Mt
Mt
Mt
435
12000
80
15
14
8
32
40
3.3
25
4
2
2
8
2
0.623
11.6
0.1943
0.029
0.395
1.3
25.4
35
0.2
32
10
1
1
25
2
LIFE
Years
192
117
813
121
146
444
30
27
451
61
874
107
258
1118
65
364
698
1034
412
517
35
Source: SAMI 2009/2010, DMR 2010; and Wilson & Anhaeusser 1998: “The Mineral Resources of South Africa”, CGS Pretoria (for BC- Bushveld Complex)
The in-situ value of South Africa’s mineral
resources is estimated at an astounding $6.24
trillion (2012). By value they comprise:
Mineral
Percentage
Precious Metals
60%
Ferrous Metals
19%
Energy Minerals
15%
Base Metals
3%
Industrials*
2%
Precious Stones
1%
Total
100%
Source: EcoPartners 2012, www.ecopartners.co.za
Main Formations & Bodies
• The Witwatersrand Basin: Gold (>90% of current production),
as well as considerable resources of uranium, silver, pyrite &
osmiridium;
• The Bushveld Complex: PGMs with associated copper, nickel &
cobalt. Also, chromium (chromite seams) and vanadium &
titanium bearing magnetite (iron ore) seams, as well as
industrial minerals, such as fluorspar & andalusite;
• The Transvaal Supergroup: Large resources of manganese &
iron ore;
• The Karoo Basin: Considerable bituminous coal & anthracite
resources;
• The Phalaborwa Igneous Complex: Copper, phosphate,
titanium, vermiculite, feldspar & zirconium;
• Kimberlite pipes: Diamonds (also occur in secondary alluvial,
fluvial and marine deposits);
• Heavy mineral sands: Titanium (ilmenite & rutile), zircon and
magnetite, mainly in coastal paleo-dunes;
• Bushmanland Group: lead-zinc with copper & silver.
Only a few areas are
endowed with mineral
assets: Most parts of SA
have little on no
economic minerals!
Source: www.cgs.gov
Global Context (demand)
Global Minerals Intensity of GDP (steel proxy)
Source: Adapted from http://advisoranalyst.com
However,
In addition to the beneficiation embodied in the final
exported product (∑VA = all up/downstream VA), there is
also indirect “beneficiation” to the wider economy through
building the national factor & infrastructure endowments.
Justin Lin argues that “a developing country can change its
industrial and economic structure by changing its endowment
structure” consisting of both its factor endowments (land/natural
resources, labour, and physical & human capital) and its
infrastructure endowments: both hard/tangible infrastructure and
soft/ intangible infrastructure (institutions, regulations, social
capital, value systems, etc.).
Thus, indirect beneficiation in the wider economy includes:
•Building the knowledge linkages (human capital & tech)
•Building the spatial linkages (hard infrastructure)
However, in order to change the factor and infrastructure
endowments, the resource rents need to be reinvested in
building them. = Fiscal Linkages
= the 5 key beneficiation
1. FISCAL: Capture &
5. FORWARD
invest of resource rents
Use depleting assets
(RRT) in long-term
to change national
economic physical &
human infra (inter- endowment structure
generational)
2. SPATIAL
Value-addition:
(beneficiation)
Export of resourcebased articles
4. KNOWLEDGE
Linkages (HRD & R&D):
“Nursery” for new tech
Puts in critical infraclusters, adaptable to
3. BACKWARD
structure to realise other
other sectors
Inputs: Capital goods,
economic potential &
consumables,
could stimulate LED
HRD, R&D
services, (also export)
Narrow “beneficiation” = forward linkages;
Total product beneficiation = back- & forward linkages (∑VA),
Total economy-wide beneficiation = all the linkages
MVCs and Mineral Deposit Variability
• Mineral deposits embody a massive variation in resource
rents (returns above those necessary to attract investment =
average return on investment: ROI), much greater than any
other sector except for hydrocarbons (oil and gas).
• In SA ROI in mining varies from average (ca 15%, e.g. marginal
gold deposits) to several hundred percent (e.g. iron and
manganese ore deposits) = resource rents.
• Consequently it is difficult to design a minerals regime with
generic linkage conditions (local content, value-addition, skills
formation, etc milestones) that will efficiently maximise the
potential development impact of all deposits over time.
• In general, a mineral regime will set minimum linkage
development obligations in order to make investment into
marginal deposits attractive.
• The best way to flush out the maximum linkage development
that any specific mineral deposit could support, would be to
get a market response through the public tender of the
property against linkage development commitments (a form of
developmental “price discovery”).
Hybrid free mining (FIFA) and tender system
Define 3 Types of Mineral Terrains:
1.Unknown
Mineral assets
Exploration
Terrain (FIFA)
Exploration License
(Mining Licence Automaticity)
Resource Rent Tax
“Mining Charter” type
socio/labour conditions &
Minimum up- & downbeneficiation milestones
2.Partially
Known
Geo-Reserve
Terrain
•Further geo-survey:
CGS SMC, or subcontractors
•Risk exploration for
future step-in rights.
3.Known
Mineral assets
Delineation
Terrain (Auction)
Public Tender on:
• Tech & Fin Capability
• Rent share (tax)
• Up/downstream
beneficiation
• Infra development
• HRD & R&D, tech transfer
Mining Concession/Licence
Hybrid free mining (FIFA) and tender system
Define 3 Types of Mineral Terrains:
1.Unknown
Mineral assets
2.Partially
Known
3.Known
Mineral assets
However,
this hybridDelineation
Geo-Reserve
Terrain (Auction)
Terrain
regime requiresPublic Tender on:
Exploration License
•Further geo-survey:
substantial
amendments
CGS SMC,
or subResource Rent Tax
contractors
“Mining Charter” typeto the MPRDA!
socio/labour conditions &
•Risk exploration for
Exploration
Terrain (FIFA)
(Mining Licence Automaticity)
Minimum up- & downbeneficiation milestones
future step-in rights.
• Tech & Fin Capability
• Rent share (tax)
• Up/downstream
beneficiation
• Infra development
• HRD & R&D, tech transfer
Mining Concession/Licence
Using a natural comparative advantage
to develop a competitive advantage
Finland: The mature forestry industrial cluster 1997a
FORWARD LINKAGES
BACKWARD LINKAGES
1. Specialized inputs
Chemical and biological
inputs (for production of
fibres, fillers, bleaches)
2. Machinery and equipment
For harvesting (cutting,
stripping, haulage)
For processing (for
production of chips,
sawmills, pulverization)
For paper manufacture
(30% of the world market)
3. Specialized services
Consultancy services on
forest management
Research institutes on
biogenetics, chemistry and
silviculture
Source: Ramos 1998 p111
(CEPAL Review, #68, 12/1998);
NATURAL COMPARATIVE
ADVANTAGE
Abundant forestry reserves and
plantations
(400-600m3 per capita)b
SIDE LINKAGES
Related activities
Electricity generation
Process automation
Marketing
Logistics
Environment industries (paper)
Mining (sulphuric acid)
1. Roundwood
Sawnwood
Plywood (40% of the world
market)
2. Wood products
Furniture
For construction
3. Wood pulp
4. Paper and cardboard
Newsprint
Art paper (25% of the world
market)
Toilet paper
Packaging
Special products
a: Generates 25% of Finland’s exports;
b: Compared with 25-30m3 per capita in the rest of the world.
(SA has a similar comparative advantage in minerals)
Linkages in the SA PGM industry and the
relationship between firms (Lydall 2011)
Backward beneficiation
Forward Beneficiation
Finland: Minerals Sector Purchases and Sales 2007
INPUTS
Chemicals industry
Machine industry
Energy Supply
Transport
Business services
Other sectors
Imports
Labour costs
Cost of capital
OUTPUTS
Paper Industry
Chemicals Industry
Building materials
Industry
Metals Processing
Industry
Construction
Other domestic
sectors
Exports
Hernesniemi,
H, Berg,
B, Rantala,
O & Suni
P: Kalliosta
Kullaksikummusta
InSource:
2011 The
Research
Institute
of the
Finnish
Economy
(ETLA)
Klusteriksi:
Suomen
mineraaliklusterin
vaikuttavuusselvitys,
2011of
completed
a major
study
on the broader
economicETLA
impact
their minerals sector and showed a 6:1 employment generation
(50% abroad) in other upstream and downstream industries,
due to their well-developed mineral linkages.
expl. capital goods
• geophysical
• drilling
• survey
• etc.
mining capital goods
• drilling
• cutting
• hauling
• hoisting, etc.
processing cap. goods
• crushers/mills
• hydromet plant
• materials handling
• furnaces, etc.
Refining Cap. Goods
•Smelters
•Furnaces
•Electro winning cells
•Casters
Exploration
Mining
Mineral
Processing
Smelting &
Refining
exploration services
• GIS
• analytical
• data processing
• financing
• etc
mining services
• mine planning
•consumables/spares
• sub-contracting
• financing
• analytical, etc
processing services
• comminution
• grinding media
• chem/reagects
• process control
• analytical, etc
Refining services
•Reductants
•Chemicals
•Assaying
•Gas & elec supply
Resources inputs sector (up-stream) has a
comparative advantage in:
Fabrication Cap.goods
•Rolling
•Moulding
•Machining
•assembling
Fabrication
(manufacturing)
Value adding services
•Design
•Marketing
•Distribution
•Services
Markets: Sub-Saharan Africa & World GDP Growth
SSA GDP Growth (constant prices, % change)
8
7
6
5
4
3
2
1
0
2000
-1
2001
2002
Sub-Saharan Africa
2003
2004
2005
2006
2007
2008
2009
2010
2011
2010
2011
World
SADC GDP (PPP - million of international dollars)
1000
900
Source: IMF, World Economic Outlook (WEO) Database, October 2012
800
700
600
500
400
300
200
100
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Regional Trade Strategies are Critical to Growing the Backward MVCs
Estimates of further downstream beneficiation in South Africa, (2007 data)
Source: Adapted from Migdett 2010 and ANC SIMS 2012
MINERAL
Mine production (2007),
sales & jobs
304 tons (R78 billion sales,
186 000 employees, etc.)
248 mt (R44.2 billion sales,
60 439 workers)
Local beneficiation (sources: JM, DMR, SASOL, Rand Refinery, GFMS, PPC,
Lafarge, Mittal Steel,
PGMs
Manufacture & export of 16.2 million platinum catalytic converters (15% of world share),
4000-5000 jobs and R22 billion in export value
Coal
Final product – 201 929 GWh of electricity (86% of SA’s electricity supply), value created
R40 billion, 30000 jobs (in Eskom).
Final products : Synfuels 7.3 mt valued at R29 billion; Gas sales 112.9MGJ at R2.7 billion;
Polymers 1.73 mt at R9.4 billion; Solvents 1.72 mt at R13.8 billion; Olefins & surfectants
2.2mt at R22.6 billion; Other (waxes, fertilisers, etc) R13 billion; 31 860 jobs, R98 billion in
sales, R17 billion in taxes (link to iron ore below)
Gold
254 tons (R38 billion in sales, ~400 tons refined at Rand Refinery (490 jobs), 7.4 tons of jewellery fabricated employing
169 057 employees)
2800 people , 8.4 tons of coins fabricated employing 100 people & 4300 jobs in wholesale
& retail of gold jewellery.
Iron ore
42.1 mt (R13.4 billion in
~6.4 mt of local steel production (4.2 mt flats & 2.1 mt long products). 4.4 mt local sales &
sales, 13 858 employees)
1.4 mt exported with total revenue of R29 billion and 10 000 employees.
Diamonds 15.25 mc (R10 billion, 20 000 1.2 mc imported (cost R14.9 billion), 13.9 mc exported (value R13.2 billion), local sales
workers)
valued at R4.9 billion (value of cut diamonds valued at R6.3 billion), 2000 cutters.
Nickel
37.9kt (valued at R9 billion)
Stainless steel production, ~650 kt stainless produced worth R12 billion. About 150kt used
locally. (jobs?)
Copper
117.1kt (valued at R5.8
Tubing and wire industry (jobs?)
billion)
Manganese 6 mt (valued at R3.6 billion)
Manganese alloys
1mt produced. 0.2mt sold locally &0.8mt exported, total sales value R6.5
billion.(jobs=2000). Chemical products (jobs?)
Industrial
Total sales value of R7.5
Cement industry, 14.2 million tons of local production of cement+/- R20 billion industry
minerals
billion
Fertiliser industry (600kt of fertiliser consumed locally - potash, phosphates, limestone)
(jobs)
Chromite
9.7mt (valued at R3 billion)
Chrome alloys –

3.5mt produced, 0.4mt sold locally, 3mt exported, total sales R17.5 billion (jobs?)
Chemicals and refractories
Further Beneficiation
Jobs (SIMS)
Producer Power
=~7-14k jobs
Cost+ coal to Eskom
=~10-20k jobs
EPP polymers
=~50-80k jobs
TOTALS
=~200-500k jobs
(incl. removal of infra
constraints)
About R213 billion ~about Rough sales value created of about R157 billion (conservative)
450 000 workers
minimal
EPP steel
=60-90k jobs
minimal
EPP Ni (included in base
metals) =~10-20k jobs
EPP Ni (included in base
metals) =~10-20k jobs
• >Mn alloys
• 200 series SS
= ~10k jobs
EPP cement =~10-20k jobs
EPP NPK =~10-30k jobs
• >Cr alloys
• >Ferritic SS
• >200 Series SS
=~5-10k jobs
Combine State & Union Holdings to exert
control over supply into domestic economy?
IDC, PIC, CEF, DPE,
SMC, etc.
(Special Purpose Vehicle:
(pension fundscurrently under fund
managers)
)
Private
Shareholders
However, the monopoly pricing (IPP) of steel
severely curtails manufacturing jobs
Hot rolled coil steel prices, US$/t
World export price
Value received on
local sales (IPP)
Amount that local
customers pay
above exports
Value received on
exports (EPP)
Transport costs might be as high as 47%
of the cost of importing flat steel!
Source: Iscor 2004 in DTI presentation to the Portfolio Committee of Trade & Industry, 24 Aug 2010
Fertilisers: Grain production Costs in SA
Source: Corné Louw 2011,
Fertilisers constitute 30-50% of grain/oil seeds input costs,
and the IPP-EPP differential is 30% to 50% :
Competitive fertiliser prices could have a significant impact
on both job retention and expansion in the agricultural sector
Total employment in agriculture in South Africa, 1968-2010
Around 1 million jobs have
been lost since 1970,
aggravated by monopoly
fertiliser pricing!
Source: Sandrey, R. et al. (2011),
Putative Coal/Gas MVC Strategies
• Use state ownership of coal mineral rights to apply costplus domestic polymer/fertiliser pricing conditions on
Sasol;
• Regulate polymer/fertiliser prices against a basket of
international prices (ICISLOR, Platts, Harriman);
• Strengthen the Competition Act to allow for the effective
imposition of competitive pricing in the domestic market
(amend the Competition Act)
• Introduce competition through state facilitation of new
players by the reservation of suitable coal/gas resources
for tender against new capacity at EPP or cost plus into
domestic market;
• Increase state control of Sasol (currently 26% owned by
the IDC & PIC) to >50%, through a strategic alliance with
the Union pension funds;
• Use state infrastructure tariffs (energy, transport) to
leverage competitive prices from Sasol.
PGM MVCs
Platinum and palladium resources in other countries, compared to South Africa
Source: Cawthorn R.G. 1999
Pt 75% & Pd 50%
Case for producer power to effect price stability
and greater value addition?
Titanium Mineral Concentrates World Mine Production & Reserves 2012
Mine production:
2011
2012
Reserves
Reserves %
Australia
Brazil
Canada
China
India
Madagascar
Mozambique
Norway
960
45
750
660
330
280
380
360
940
45
700
700
550
280
380
350
100000
43000
31000
200000
85000
40000
16000
37000
15.4%
6.6%
4.8%
30.8%
13.1%
6.2%
2.5%
5.7%
South Africa
1110
1030
63000
9.7%
Sri Lanka
Ukraine
Vietnam
Other countries
World (ilmenite)
31
300
550
40
6100
60
300
500
40
6200
NA
5900
1600
26000
650000
NA
0.9%
0.2%
4.0%
100.0%
Australia
Brazil
India
Mozambique
Sierra Leone
440
3
24
6
64
480
5
25
8
100
18000
1200
7400
480
3800
42.9%
2.9%
17.6%
1.1%
9.0%
South Africa
122
131
8300
19.8%
Ukraine
Other countries
World (rutile)
World (ilmenite & rutile)
56
18
8730
6700
60
17
8830
7000
2500
400
42000
700000
6.0%
1.0%
100.0%
Ilmenite:
Rutile:
However, SA potentially has 70% of global reserves in the
Bushveld magnetites!
• MVCs should encompass all the SA value in the final consumed or
exported product, i.e. both local content and beneficiation;
• Little MVC headway has been made, principally due to widespread
monopoly pricing (IPP) of mineral feedstocks and the decline in
upstream industries and R&D due to exit of the old “Mining Houses”;
• Nevertheless there appears to be strong case for MVCs, particularly
the critical feedstocks in job-creating sectors: manufacturing, energy,
agriculture and infrastructure, as well as minerals where SA has
potential producer power, and in inputs industries (capital goods);
• Regional markets (economic integration) could facilitate beneficiation
(economies of scale), particularly in inputs industries (local content);
• MVCs could gradually transform SA’s comparative resources
advantage into a competitive advantage, especially the local content
(capital goods & services) dimension;
• Wide-ranging instruments could be available to the state to facilitate
beneficiation, including conditions on mining licences, anti-trust
legislation, incentives, HRD and R&D, but many will require
amendments to current legislation;
• There appears to be substantial potential for downstream
beneficiation in the ferrous, coal/gas, PGM and titanium job-creating
value-chains (MVCs).