The paradox of value addition in platinum mining: What are we not being told?

19 Nov, 2017 - 02:11 0 Views
The paradox of value addition in platinum mining: What are we not being told?

The Sunday News

Platinum Mining

Butler Tambo
IN last week’s article I looked at the contribution of mining to the Zimbabwean economy with a focus on the economy’s reliance on exporting raw ores and how this has cost the country dearly in terms of economic diversification and the much needed revenue flows to the fiscus and ended by looking at some areas that can easily be addressed if the country is to benefit from its vast mineral resources.

This week I will focus on the value chain in precious metals with a focus on platinum mining and why value addition in this sector has tended to benefit South Africa more and the developed world even more lucratively and yet Zimbabwe which has the second largest platinum reserves in the world has little if anything to show for this rich endowment.

Platinum Group Metals (PGMs) production in Zimbabwe

The country has the second largest known deposits of PGMs in the world with three mines operating namely Zimplats in Selous (Ngezi), Mimosa in Zvishavane; and Unki in Shurugwi. The three companies have more than 8 000 tonnes of PGM resources with Zimplats owning the majority of the reserves and resources (80 percent), followed by Unki (approximately 12 percent) and lastly Mimosa (8 percent).

The mine produces 4Es which include platinum, palladium, gold and rhodium. However, copper, nickel and cobalt are the other by-products of PGM refining. The value addition process for the PGMs includes mining, concentration, smelting, converting and the converter matte which is exported to South Africa for refining.

Export trends in the precious metals sector in Zimbabwe

Research shows the contribution of exports of various metals to Zimbabwe’s fiscus and these include, pearls, precious stones and metals (43 percent); nickel and articles thereof (26 percent); ores, slag and ash (20 percent) and Iron and Steel (8 percent). The high share of the pearls and precious metals is attributable to gold and PGMs export. The significant share of nickel and articles thereof is attributable to the production of refined nickel from Bindura Nickel Corporation (BNC) in Bindura and Empress Nickel Refinery in Kadoma. There is however, great potential for the iron and steel industry which awaits the resuscitation of Ziscosteel whose sad story of re-operationalisation I have dealt with extensively in my previous writings in this column. The export trends for metals and metal products for the period 2008-2012 shows there was significant growth in exports of pearls, precious metals and stones (from US$10 million to US$1,4 billion), nickel and articles thereof (from US$180 million to about US$500 million), ores, slag and ash (from US$120 million to just under US$400 million) and iron and steel (US$100 million to US$150 million). Export growth in the metals and metal products is very attractive and investment into expansion of projects in this sector has the potential to significantly improve the national economy. Thorough value chain analysis of precious metals, base metals and the ferrous group of metals is therefore critical.

Primary Product Characteristics of PGMs

The Zimbabwe Economic Policy Analysis and Research Unit in a 2014 report entitled Engineering and metals industry value chain analysis gives a thorough analysis of the PGM mining and its by products and they note that the platinum-group metals (PGMs) are extremely scarce by comparison, to other precious metals, which is due both to their low natural abundance and to the complex processes required for their extraction and refining.

Relative to the other precious metals the PGMs have high technological properties which they possess. The six PGMs, ruthenium (Ru), rhodium (Rh), palladium (Pd), osmium (Os), iridium (Ir), and platinum (Pt), together with gold (Au) and silver (Ag) have been considered to be “precious” metals.

They are all sufficiently ductile and malleable to be drawn into wire, rolled into sheet or formed by spinning and sampling. Valuable for their resistance to corrosion and oxidation, high melting points, electrical conductivity, and catalytic activity, these elements have wide industrial applications. The major uses are found in the chemical, electrical, electronic, glass, and automotive industries. However, the application of platinum group metals in the automotive industry is fairly recent, resulting from emission-control legislation in the USA.

The primary inputs or raw materials for processing platinum group metals are: ore, milling consumables (steel balls), matte, oxygen, flotation reagents (frothers, collectors, modifiers, and regulators), smelting fluxes and other chemicals, and energy (coke, electricity and generators). PGMs are also obtained as by-products from nickel-copper refineries in Zimbabwe from the RioZim Empress Nickel Refinery, which treats matte from Botswana. The products from the extraction of the PGMs in Zimbabwe are (1) PGMs concentrate (product from froth flotation), (2) PGMs matte (PGMs concentrate from smelting) and (3) PGMs by-product of base metal refining.

The chemical reagents are required to facilitate the chemistry in the extraction of PMGs. PGMs refining or separation of the metal elements is being done in South Africa. The mineral processing activities rely heavily on electricity to fuel the various energy requirements for mineral extraction and with Zimbabwe having some of the most expensive electricity relative to the region, production costs for most of the miners become higher in the country hence their preference to value add in South Africa.

There are only three major companies that process PGMs in Zimbabwe. Of the three firms, two process up to a froth flotation concentrate, and export the concentrate to South Africa for smelting and refining. The other firm processes up to the converter matte, after smelting the froth flotation concentrate, and the company exports the converter matte to South Africa for refining to recover the metal products. All the companies therefore do not cover all functions of the value chain.

Ownership Structure of PGM value chain and feasibility of Zimbabwe tangibly benefiting from value addition

In order to evaluate the power dynamics in the value chain, it is necessary to study the three major PGMs processing companies in Zimbabwe. Zimplats the major actor is owned by Impala Platinum which owns more than 70 percent of the share. Mimosa is owned by Mimosa Investments of Mauritius, with links to Aquarius Platinum of South Africa, whilst Unki Mine is owned by Anglo American Platinum, all MNCs or regional companies. Therefore the PGM value chain is a global one cutting across continents and regions, with primary production occurring in Zimbabwe, secondary processing including refining taking place in South Africa and Europe while much of the fabrication and end products are manufactured in Europe, North America and Asia, closer to the major end markets. Regionally three mining companies in South Africa control more than 10 percent in the region’s PGM production namely Anglo Platinum, Impala Platinum and Lonmin. Anglo American is the major shareholder (75 percent) of Anglo Platinum, which produces 40 percent of world production. Additional players in the region include Northam, Aquarius Platinum and Barplats play less significant role while several junior exploration companies exist.

Globally, the PGM Industry is represented by the International Platinum Association, whose members include the largest mining companies such as Anglo Platinum, Norilsk Nickel and Impala, as well as downstream actors like BASF Catalysts LCC28 (USA/Germany), Ishifuku Metal Industry Co. Ltd. (Japan), Johnson Matthey Plc. (UK), Tanaka Kikinzoku Kogyo K K (Japan), UmiCore SA (Belgium) and W C Heraeus GmbH (Germany).

There exist three major channels through which mining and processing companies sell their products to downstream customers. Actors have direct supply contracts with fabricating companies, as well as with large end user companies, mainly car manufacturers. A portion of the supply was also sold through spot markets, like the London Platinum and Palladium Market and the Exchange Traded Funds of the Zurich Kantonal Bank in Switzerland.

The Anglo American Group and Johnson Matthey Company had a special marketing agreement where Johnson Matthey was responsible for marketing the Anglo Plats products. The major fabrication companies downstream of the supply chain are Johnson Matthey (UK), BASF (Germany/US), Tanaka (Japan), UmiCore SA (Belgium), Heraeus (Germany), Toyota Motor Company (Japan), Honda Motor Company (Japan). Since Zimbabwean’s PGM sector is owned by the major global players including Anglo American, it implies that the sector belongs to a global value chain. The setup is therefore quasi-hierarchical with buyers in developed countries influencing the quantity, quality and price of the goods. This therefore makes it near impossible for the Government to arm twist platinum miners to value add the PGM meaningfully locally so that employment can be created and revenue flows can be boosted to the fiscus and in light of this I will in next week’s article explore ways of making platinum beneficial for Zimbabwe’s tottering economy.

-Butler Tambo is a Policy Analyst who works for the Centre for Public Engagement and can be contacted on [email protected]

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