Is ZincOx - the world's greenest and cheapest zinc producer?
Proprietary technology is the key to ZincOx success in producing zinc from ores and waste products others have found impossible, or too costly, to handle.
Author: Wendy Durham
Posted: Thursday , 11 Jun 2009
mineweb.net
LONDON (Proactive Investors) -
Many metals are easier and cheaper to process when they have been oxidised. Zinc isn't.
Which is why it was a bit of a coup when, back in 1997, Reunion Mining, led by Andrew Woollett and Peter Wynter Bee and aided by Tecnicas Reunidas, successfully perfected a process which could economically extract zinc from oxides at Anglo American's Skorpion deposit in Namibia. Skorpion's complex metallurgy had defeated Anglo, which offered Reunion a 60% earn-in if it could solve the metallurgical conundrum of the non-sulphide deposit and deliver a bankable feasibility study. Today, wholly owned by Anglo American - which bought back Reunion's interest by taking it over - the Skorpion mine is one of the largest zinc mines in the world (150,000 tonnes per annum) and it has the lowest operating cost.
Rather than twiddle their thumbs after Skorpion, Andrew Woollett and his colleagues joined Noel Masson at ZincOx to build on their achievement by applying the technology to other non-sulphide zinc deposits. By 2002, ZincOx had acquired interests in two primary zinc oxide deposits which met their criteria for development: Jabali in the Yemen, and Shaimerden in Kazakhstan.
ZincOx successfully applied Skorpion-style technology to the oxide orebody, in collaboration with JSC Kazzinc, which bought the deposit at the end of 2003 for a down payment of US$7.6 million, followed by annual deferred payments based on the zinc price achieved for the first 200,000 tonnes of production. Commenting earlier this year, executive chairman Andrew Woollett said: ""If the current zinc price of $1,140 were to continue to the end of 2010, the total we will have received in deferred payments will be $61,757,914 for the 200,000 tonnes of eligible zinc." As Shaimerden cost ZincOx less than US$2 million all up, that's a substantial profit, which has helped considerably with the financing of its Jabali mine.
Jabali is being developed by ZincOx (52%) and its Yemeni partner Ansan Wikfs Investments Limited, and hosts a mineable reserve of 8.7 million tonnes of ore at an average grade of 9.2% zinc. Open-pittable, with a low stripping ratio of just 2:1, Jabali will produce an annual output of 70,000 tonnes of zinc oxide - a premium product, much in demand in the ceramics, paint and rubber industries. Processing will be carried out on site, using a blend of technologies developed by ZincOx, including an innovative alkali leaching process. Jabali is fully funded, construction is under way and mining has begun in preparation for commissioning, with production now expected in the first quarter of next year.
Meanwhile, as a result of continual evolution of its process technologies and the shortage of worthwhile primary deposits, ZincOx turned its attention to secondary non-sulphide sources of zinc - and this has opened up the potential of recycling. Many industrial processes produce zinc-bearing waste, but the only one capable of generating enough to make recycling viable is electric arc furnace dust (EAFD), a waste generated in the recycling of scrap steel, much of which is galvanised (i.e. coated in zinc) to protect it from corrosion. During the scrap re-melting process, zinc and other minerals are driven off as a dust, which is filtered out and collected for disposal/re-treatment. EAFD generally contains 18-25% zinc - richer than the average zinc deposit, and with no mining cost! - plus 20-30% iron and 1-3% lead. In the USA alone, over a million tonnes of EAFD is generated annually, contributing to a worldwide total of about 5 million tonnes, much of which is not recycled.
Technology does exist to recover zinc from EADF, but ZincOx has followed a new, more efficient, route. In alliance with Midrex Technologies, Inc - a subsidiary of Kobe Steel - the company has taken the rotary hearth furnace, generally used for extracting pig iron from steel waste, and developed it to handle EADF and produce an initial zinc/iron concentrate. A submerged arc melter then removes the iron which is tapped off and cast into ingots as pig-iron for re-sale back to the steel industry. Slag from the furnace is also tapped and is sold to the construction industry for use as aggregate. The resulting zinc oxide concentrate is then washed to remove chlorides (which conventional zinc smelters cannot tolerate), leaving behind a high quality product for sale back into the steel industry and a washing liquid which can be safely discharged after purification. The entire process is waste-free and effectively "closes the loop" by generating products from steel industry waste for sale back into the steel industry. And, what's more, ZincOx says it does all this with a lower carbon footprint than conventional technologies. As a result, ZincOx won Mining Journal's Outstanding Achievement Award for Sustainable Development in 2007.
The first implementation of this new technology will be the Ohio Recycling Plant (ORP) - a greenfield development close to EADF sources in north-west Ohio and by March 2008 all permitting was complete allowing site preparation to get underway. The project has been awarded local grants and tax incentives, and has access to excellent infrastructure. Almost 200,000 tonnes pa of EADF feed is guaranteed by a strategic relationship with Envirosafe Services of Ohio (ESOI), North America's largest EAFD landfill company, which will enable production of 47,000 tonnes of zinc contained in a crude zinc oxide concentrate, 56,000 tonnes of pig iron and 48,000 tonnes of slag. At US$1,500 per tonne for zinc, and US$310 for pig-iron this would generate EBITDA of approximately US$35 million per annum. ZincOx also owns the 100,000 tpa Big River Zinc smelter complex on the outskirts of St Louis, which it intends to recommission eventually, but will use in the meantime for the washing/upgrading of the zinc oxide concentrate produced at ORP and for toll washing for other products.
Capital requirement for the ORP, including the upgrading of Big River Zinc, is US$174 million. This was financed early in 2008 by a combination of equity and a high yield bond.
The equity component included the remaining deferred payments from the Shaimerden mine, but given last year's fall in zinc prices these are likely to be lower than forecast, and ORP is temporarily on hold until general market conditions improve and ZincOx can source additional finance.
But whilst the ORP may have slowed down, the ZincOx master plan to roll out EADF recycling world-wide is moving ahead rapidly. In Turkey, the world's largest importer of scrap iron, over 250,000 tonnes per annum of EAFD is generated. ZincOx plans to build an EAFD treatment facility identical to ORP at Aliaga, on Turkey's western seaboard (ARP). A site has been acquired, and permitting is well advanced. In Korea, four years of work have culminated in the signing of EAFD supply agreements with all of Korea's steelmakers, which will lead to a 400,000 tpa plant with double the capacity and production output of the ORP and a site is currently being acquired. And in Thailand, although some key EAFD supply agreements have been allowed to lapse due to the delays with ORP, ZincOx has strong links with the Thai mills, and a site has been identified and permitted for the construction of a 200,000 tpa regional treatment plant at Chonburi. All these areas are covered by ZincOx's exclusive access to the jointly-developed Midrex FastMet rotary hearth furnace technology, which puts up a clear bar to entry for competitors. The company is also investigating moves into refining, to produce metal from its zinc oxide output. Big River Zinc could be adapted to this purpose to serve the US, and ZincOx are also looking at a potential refinery based in the Far East at Bintulu, in Malaysia.
It's an ambitious set of plans. But the management has a history of technological success already at two operating mines, with a third on the way. Pilot testing has proved the validity of the EADF recycling concept, and the locations and timetable for roll-out of EADF recycling facilities and, ultimately, refineries to deal with their output is carefully targeted. At a cost of under US$200 million to build, EADF plants are not over-demanding, and with all up op costs of around US$1,000 per tonne, will be economic at any reasonable zinc price.
The only bar to progress is the depressed share price, which has been hit, like all zinc producers, by the depressed price of zinc - although this has improved recently to about £1,500 a tonne. Compared to its glory days in 2007, when the price soared to over £4 per share, today's 67p - although well up from its lows earlier this year - looks niggardly, and the reluctance of the management to raise funds at this level is understandable, though directors have not shown similar reluctance to boost their own holdings at recent prices! The recent financials show that at a market cap of just £51 million, ZincOx is now trading at a discount to its available cash, recorded as £64 million in December. There's a further £92 million of restricted cash earmarked for Jabali, but this is more or less balanced by the debt issued to raise it. And in 2008, the company made a £4.7 million profit even after a £5 million impairment charge.
Perhaps the market has forgotten what Andrew Woollett said in a recent interview: "This will be an exciting period for the company, and marks a watershed in terms of movement from a junior company with relatively modest and limited life cash from Shaimerden to the operator of two major projects in mining and recycling. I think it will put us very firmly on the international zinc map."
Article published courtesy of Proactive Investors - www.proactiveinvestors.co.uk |
