Pakistan - Investment Opportunities - Iron Ore Extraction

Roadmap to Extracting Punjab Iron Ore and Conversion to Steel Technical and Commercial StrategyTwo very distinct large scale reserves have awaited development for decades in this province. The projects have not moved beyond early prospecting stage. The abundant availability of this mineral resource in two separate areas of the province needs to be first authenticated through a detailed bankable geological study, followed by development of separate mining strategies for each area. The scale on which mining is anticipated to be undertaken needs to also be determined up front because mining strategies - and associated unit extraction costs - are often scale dependent. Simultaneously, pilot Metallurgical extractive plants and processes need to be developed and subsequently commercialized on a fast track.

2010

Projects Directorate, Punjab Board of Investment & Trade

4/1/2010Copyright ©2010 - Punjab Board of Investment & Trade

Roadmap to Extracting Punjab Iron Ore and Conversion to Steel

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ACKNOWLEDGEMENTS

This paper is the result of intensive consultations carried out by PBIT across the range of stakeholders, businessmen and technical experts in the field. These strategic conversations commenced in November 2009 and concluded in March 2010 and the complete transcript of proceedings is available with PBIT. In particular, PBIT would like to acknowledge the invaluable contributions from the following members, without whose help, this strategic clarity may not have been achieved.

1. Mr Fazal Abbas Maken, Secretary, Commerce & Investment, Government of Punjab2. Mr. Saif Ullah Chattha, Secretary, Department of Mines & Minerals, Government of Punjab3. Mr. S. Ishtiaq Hussain, Manager, Department of Mines & Minerals, Government of Punjab4. Mr. Muhammad Aslam, Manager, Department of Mines & Minerals, Government of Punjab5. Mr. Nadeem Babar, Chairman, Punjab Chief Minister’s Task force on Energy6. Mr. Illyas Cheema, Former Director, NESCOM7. Dr. Waheed Butt, Chemical Engineering Consultant8. Mr. Mian Aziz ur Rehman Chan, MNA and Chairman, Rehman Steel Furnace (Pvt.) Lahore9. Mr. Rehman Aziz Chan, Director, Rehman Steel Furnace (Pvt.) Lahore10. Mr. M. Y. Baig, CEO, IFC11. Mr. Hammad Baig, Director, IFC12. Mr. Muhmmad Nasim Riaz, Consultant, IMC13. Mr. Javed Mughal, Chairman, Mughal Steel14. Mr. Shakeel Ahmed, General Manager, Mughal Steel15. Mr. Ahmed Hussain, Chairman, Batala Steel16. Mr. Tariq Sail, Country Head, Representative of Canadian Investors17. Mr. Waqqas Asif, Hijveri Construction Company18. Mr. Malik Anis Akbar, Chairman, Meridian Marketing19. Mr. Asad Jaleel, Director General, EME (Pvt) Ltd20. Mr. Sarwar Alam, Director Projects, EME (Pvt) Ltd21. Mr. Zahoor Ahmed, Director General, Ittefaq Sons (Pvt) Ltd22. Mr. Ali Akhtar, Principal Consultant, Metallurgicon and Member BoD Al Tawarqi Steel23. Mr. Javed Ahmad, CEO, RDC International24. Dr. Muhammad A. Qazi, Executive Director, PCSIR Lahore25. Mr. Mahmood Akhtar, Group Director, Nishat Group

Moazzam Husain Director General – Projects DevelopmentPunjab Board of Investment & Trade23 – Aikman Road, GOR I- [email protected]


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INTRODUCTION

here are 2 large iron ore reserves located in Punjab. The two have very different geological characteristics. One located in Chichali, near Kalabagh which is low grade iron ore is a surface deposit and other located in Chiniot/ Rajoa which is high grade iron ore

under alluvial cover. Given the very different mineralogical compositions and mining conditions of each, a different development roadmap is proposed for each.

CHICHIALI RESERVES - HISTORY

his deposit is estimated around 500 million tons of low grade iron ore (Fe content 34%)and efforts to develop it are almost as old as Pakistan itself. Initial tests conducted on Chichali iron ore and carried out in USA, Germany and Sweden suggested this ore type is

not amenable to physical beneficiation. This was probably because the ore is in fact chemically (as opposed to mechanically) combined with silica and poses a metallurgical challenge.

The Krupp-Renn process, a direct reduction process was developed in Germany during the 1930’s. By the end of World War II, 38 kilns with an annual capacity of 1 m tons were in operation in several countries. In 1956, PIDC, in consultation with Krupp proposed a Steel Mill based on Chiciali iron ore with a production capacity of 50-70,000 tons of billets to be located at Piran Ghaib near Multan. The proposal was shot down by the Planning Board (predecessor to the Planning Commission) on the grounds that the Krupp - Renn process was not industrially sound and feasible and the scheme was not economically viable.

In 1959, the Government retained the services of J.C Austen of the World Bank to chart out a roadmap to develop the Chichiali reserves. His output, led to investigations being assigned to M/S Kellog of USA. Kellog also maintained at the time, that the ore was not suitable for direct reduction and in fact was averse to the Krupp-Renn process.

Between 1961 - 63, geological studies sponsored by the United Nations Special Aid Fund confirmed the following deposits:

1. 250 m tons of uniform quality iron ore in one block on both sides of Chichali pass2. 150 m tons in Kutch, Ghughlan and Makerwal mines

Encouraged by this finding, in November 1964, a pilot plant trial was carried out on 1500 tonnes of Chichali iron ore after blending it with high grade imported ore. It was conducted by the Institute de Recherches de la Sierrugi Francaise (IRSID) at a conventional blast furnace at Ougree near Liege, Belgium. The trial suggested this ore could be beneficiated through the Acid Blast Furnace Process. This was further confirmed by a full scale industrial test on 15,000 tons

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Chichali iron ore at Salzgitter, West Germany in June 1966, which according to international experts was a complete success. As a result of this breakthrough, in August 1967 a German company reportedly offered to set up Kalabagh Steel Mill of over 0.8 million tonnes per year (mtpy) capacity based on Kalabagh iron ore and imported coal at a then estimated cost of Rs. 1.542 billion (including foreign exchange cost of Rs. 878 million). It is claimed that some European banks also offered loans for this project and that PIDC selected a site with about 80% raw materials available within 11 miles but unfortunately, this project was also shelved.

In April 1968, President Ayub Khan accepted an offer from Premier Kosygin of USSR, during his visit to Pakistan, for the Kalabagh Steel Mill project. Within a month an agreement was signed between PIDC and M/s Tiajpromexport of Moscow. Subsequently, it transpired that Russia did not have the technology, and could not develop a feasibility to produce steel from the Kalabagh iron ore. Instead of reviving the German offers based on local raw materials, the project was converted into a coastal plant design and transferred to Karachi. Pakistan Steel was established with comparatively inferior machinery and based on imported iron ore and coal. Chichiali iron ore reserves were forgotton.

WAY FORWARD – CHICHIALI

n the aftermath of the Oil shock of 1974, both extraction technologies and energy economics have both travelled a long way. Today presents a new paradigm from the time when earlier engineering efforts were made on Chichiali ore. In the view of present day

experts, Chichiali ore would require a 2 stage process: 1) Beneficiation (enrichment) of iron ore and 2) smelting in a blast furnace. Extraction and utilization of silica would be another by product/ activity. Accordingly, this roadmap envisages an onsite mouth of mine beneficiation plant. It will produce beneficiated iron ore for use in integrated steel mills.

We propose to materialize this initiative in stages. In terms of specific action steps:

1. Punjab Mineral Development Corporation (PUNJMIN) will be asked to assist in providing drilling/ excavation services to obtain fresh samples of iron ore. The area and excavation will be selected in conjunction with a panel of mining and geological experts from University of Engineering and Technology (UET), Lahore, with whom, preliminary discussions have been held.

2. These samples will then be taken to UET laboratory and PCSIR for completeinvestigation.

3. Based on these findings, an appropriate metallurgical process and technology will be developed leading to the design of an extractive metallurgical pilot plant. The plant and the extraction process need to be engineered simultaneously and tailored to cater to

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the mineralogical composition of Chichali iron ore. The basic process of beneficiation is physical separation and chemical sintering. Its output is ready-mix charge.

4. On a parallel track, a full blown study will need to be urgently undertaken to re authenticate the reserves and recommend an appropriate, large scale mining methodology. In this, all existing available data will be re examined so that minimal additional drilling and excavation is required. UET has mining, metallurgical and geological engineers. PUNJMIN has the machinery for drilling. Working under the overall supervision of an International geological/ mining consulting company, these three may be asked to develop a scope of work/ working plan and TOR’s for this scoping study and then implement this at minimum cost and in the shortest possible time.

5. Finally a feasibility study for commercial production will be prepared.

The project would doubtless require R & D funding, even if at a modest level. While we propose to generate a donor/ grant assistance request for this we also recommend Punjab government funds be mobilized for immediate implementation so that the studies, pilot project implementation and commercial feasibility study can be completed within 12 months from the date the funds are earmarked.

A detailed GANTT chart will be designed in consultation with the experts mentioned in the acknowledgements section, once the nod on funds availability for pilot plant has been received.

PROPOSED ONE BILLION DOLLAR KALABAGH STEEL MILLS PROJECT

he successful pilot will be commercialized and in all probability will require the local oreto be blended with high grade imported ore in some proportion. Based on this newly designed process and a bankable study of the reserves, a 1.5m T steel mill in Kalabagh is

envisioned.

Location: Mouth of Mine – Minehead. Water availability, gas, energy, labor access, transport and infrastructure.

Size: Minimum 1.5m MT

Energy: Approx. 200 MW pulverized coal based captive power plant at mouth of mine located at Makarwal, 20-30 km from beneficiation plant.

Water: Available

Products/ Byproducts: Beneficiated iron ore. Direct reduced iron (DRI), Pig Iron, Steel, slag cement, tar etc.

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Infrastructure: This is a capital intensive integrated continuous process plant, 24 x 7, round the year. As such highly skilled manpower such as technicians, engineers and labour will be required and a custom housing colony will need to be developed. The area is already well connected with roads. In addition a railway track to the nearest railhead will be laid so KalabaghSteel Mills freight wagons can operate under Pakistan Railway’s open track policy.

HR Planning: The top tier HR would doubtless need to be brought in from the international and local market on competitive market based salaries. In terms of skilled and technical manpower, TEVTA would be requested to design an ongoing curriculum with high degree of practical training at existing steel plants or at a pilot facility located within one of these institutes.

CHINIOT RAJOA RESERVES

n the 1970’s, OGDC conducted an aeromagnetic survey over the pre Cambrian shield area near Sargodha – Chiniot. Subsequently, in 1989 the Geological Survey of Pakistan (GSP)discovered iron ore deposits near Chiniot, in district Jhang after conducting a geophysical

survey. Eleven years later, in 1999-2000, PUNJMIN commissioned RDS consultants to carry out a detailed exploration over a small area in which 14 boreholes were dug. Each borehole struck iron ore at depths between 120 – 160 m below the surface. According to the assessment of this survey, and extrapolations and inferences there from, the following reserves were indicated.

12m MT proven 110m MT estimated 500m MT anticipated

The ore body itself is of the following dimensions:

Length (along-strike) 700 meters

Width 200 meters

Depth (along dip) 330-400 meters

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Based on extrapolation, the study concluded 110 m iron ore reserves at a depth of up to 460 m with mineralogical composition as follows:

Grades Ore Type Fe2O3% Reserves(Million Tonnes)

Smelting Grade Ore Hematite >85 11.513

High Grade Ore Hematite + Magnetite >70 7.885

Medium Grade Ore Hematite 50-70 33.056

Low Grade Ore Hematite + Magnetite 30-50 36.659

Low Grade Ore in Sulphide Zone

Magnetite 30-50 20.717

Total 109.83

The study however stopped short of developing or recommending a mining strategy.


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However, because the iron quality is good (hematite), it has high ferrous content and is therefore of smelting grade, commercial exploitation appears feasible. A detailed techno-economic feasibility study for the wider area (from the earlier PUNJMIN study) must now be undertaken to re authenticate the reserves. The study must also recommend an appropriate, large scale mining methodology. In this, all existing available data will be re examined so that minimal additional drilling and excavation is required.

This is a mega mining project. The challenge is to tap the reserve bed which is located beneath a 70-170m alluvial overburden and a water bed. Agood reference to follow for a technical solution is the Oilsands project in Alberta Canada. This is a similarly challenging project and based on a methodology termed strip mining from top down and mining is in progress in full swing.

WAY FORWARD – CHINIOT/ RAJOA

o drive this forward one step further,mining samples need to be obtained and a pilot plant set up on immediate basis so

that an economical extractive metallurgical process can be devised for commercial production.

A private steelmaker/ fabricator has proposed to build a pilot plant based on the new ITmK3technology. This initiative is being encouraged by PBIT and the Department of Mines and Minerals. The ITmK3 process uses a rotary hearth furnace in which fine iron ore is reduced using pulverized coal. It requires less energy, low capital and O & M costs. Recently, in Minnesota, a pilot demonstration plant of 25,000 tons per year

capacity cost $ 16m to build and has completed successful trials. A 500,000 ton Commercial

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The Geology of the Indian Shield Zone

Pre-Cambrian basement rocks are considered important source rocks for metalliferous ore deposits all over the world. The Sargodha-Chiniot-Shahkot-Sangla hill belt constitutes the northern outcrops of the Indian shield zone.

The Kirana area spreading over Sargodha-Chiniot comprises of two geomorphic features: scattered hills and flat alluvial plains.

The scattered hills represent meta sedimentary rocks i.e. quartzite, slates, tuff etc, and igneous rocks i.e. rhyolite, andesite and sills/dykes of basaltic composition

The Kirana Range starts from Sargodha and travels east passing through the localities of Lalian, Chenab Nagar, Rajoa, Sangla Hills & Shahkot. From here it goes the earth’s surface & crosses the localities of Hafizabad, Sheikhpura, Lahore & before entering India where it makes its exposure once again at Hyderabad Deccan.

These basement rocks are of magmatic origin and contain economical proved deposits of Noble/ Precious Elements, like Gold, Silver, Platinium, Copper & tungsten.


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plant is estimated to cost $ 150m. In this way the investment works out to US $ 300 per ton of installed capacity.

Similarly UET will also be asked to design a technology and build a pilot plant to make steel from Chiniot Iron ore. In both cases PUNJMIN will be asked to provide sample of the ore which these pilot plants at UET and the private one will convert to steel.

Additionally, samples will be sent to relevant institutes in China and Malaysia with a request to help identify the most appropriate technology for conversion to steel. These recommendations together with results of the above pilot plant would help identify the most appropriate and economic technology for the conversion process.

MARKETING

arachi based Pakistan Steel and Al Tawarqi are also immediate potential buyers of this high grade ore. In addition, Punjab’s series of induction and electric arc furnaces have shown interest and willingness to invest in modifying their furnaces to utilize the

indigenous ore (together with a proportion of scrap) instead of pure scrap as at present. One such process is the oxy cup process that utilizes 10-30% scrap and 70-90% iron ore. Finally there is an international market for iron ore. .is

ROADMAP FOR MINING

ET has mining, metallurgical and geological engineers. PCSIR has testing and design facilities.

PUNJMIN has the machinery for drilling. Working under the overall supervision of aninternational geological/ mining consulting company, the three shouldsit together and develop a scope of work/ working plan and TOR’s for this scoping study which will be completed at minimal cost.

Pakistan Steel Mill will be encouraged to develop a suitable technology, in collaboration with the PCSIR and other research laboratories, to utilize

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local iron ore. This can even be done in Government once an appropriate

CONCLUSION

teelmaking is a basic industry, and its primary ingredient, iron ore is

available in Pakistan. Had these reserves been developed a few decades earlier, Pakistan today may well have been a middleincome country with a smaller population and a larger industrial base. Now this roadmap has been prepared in consultation with the leading government and private experts and businessmen mentioned in the acknowledgement earlier. Its implementation by the Punjab Government will lead to noticeably improving prosperity, and exports.

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oadmap to Extracting Punjab Iron Ore and Conversion to Steel

57.791

500.312

53.625

0

100

200

300

400

500

600

India China South Korea

ANNUAL STEEL PRODUCTION MT 2008

Million Metric Tons *Source: World Steel Association

This can even be done in a “win -win” partnership collaboration with the Punjab n appropriate transaction structure is mutually worked out.

teelmaking is a basic , and its primary

ingredient, iron ore is available in Pakistan. Had these reserves been developed a few

oday may well have been a middleincome country with a smaller

and a larger industrial dmap has been

prepared in consultation with the government and private

experts and businessmen mentioned in the acknowledgement earlier. Its implementation by the Punjab

to improving prosperity, increasing industrial competitiveness, and greater self reliance

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South Korea Pakistan

ANNUAL STEEL PRODUCTION MT 2008

*Source: World Steel Association

partnership collaboration with the Punjab transaction structure is mutually worked out.

and greater self reliance

Pakistan - Investment Opportunities - Iron Ore Extraction

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