Process and Economic Considerations in Copper...
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Process and Economic Considerations in Copper Metallurgy Frank Crundwell CM Solutions (Pty) Ltd January 2006
Transcript of Process and Economic Considerations in Copper...
Process and Economic Considerations in Copper Metallurgy
Frank CrundwellCM Solutions (Pty) Ltd
January 2006
CM Solutions (Pty) Ltd – what we do
• Consultancy• Economics• Metallurgy (autoclave and process sizing and performance)
• Professional Development• Finance for Professionals• Professional Development topics
• Technology• HotHeap™• Stickibugs™• Redostat™• AweSym™
New Technologies in Copper Hydrometallurgy
The Economics of Processing Copper Concentrates
New Technologies in Copper Hydrometallurgy
• Tank and Autoclave Leaching Processes– Bacterial leaching
• BioCOP - BHP Billiton’s bacterial process developed in joint venture with Codelco
– Pressure leaching processes• Phelps Dodge• Anglo American
• Heap Leaching– HotHeap™– Stickibugs™
Tank Leaching Technologies
Bacterial Leaching
Fairview
South Africa
The largest BIOX™ operation
960 t/day of sulphideconcentrate
Capex: $25 million
Opex: $66/t
Sansu
Ghana
History of BIOXTM
Pilot Plant
Laboratory
Commercialisation
Demonstration
1984: 750 kg/d Pilot
1991: 35 t/d Fairview
1994: 720 t/d Ashanti1993: 115 t/d Wiluna
1992: 40 t/d Harbour Lights
1995: 960 t/d Ashanti1996: 158 t/d Wiluna
1998: 60 t/d Tamboraque
1986: 10 t/d Fairview1990: 100 t/d Sao Bento
Pha
se
20001970 1980 1990
New Tank Leaching Technologies
BioCOP: Bioleaching
of copper sulphides at
80°C
The copper sulphide
itself is the valuable product
Heap Leaching
• Used extensively in copper
• South Western USA and Chile
• Oxide ores, using a simple acid reaction
• More recently applied to sulphide ores
• Application of heap leaching and SX/EW is widely regarded as reviving the US copper industry
• Huge potential for application to copper sulphides
• Cost advantages
• Ore bodies have sulphides underneath them
Heap leaching offers significant cost advantages
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Heap Leaching Operations
New Heap Leaching Technologies
• HotHeap™– Improve efficiency by getting heaps hot
• StickiBugs™– Improve efficiency by getting bacterial into the
heap
Energy processes within a heap
Conduction
RadiationConvection Evaporation
Aeration
Water
Boundary conditionsIrrigation
Transport processes within the heap: conduction, water advection and gas advection
Energy generation by leaching reaction
Reaction generates
heat in heap
Aeration and evaporation Boundary conditions
The accumulation of heat in the heap is determined by the balance of the leaching rate, the water transport rate and the gas transport rate (combined with the conditions giving the boundary conditions).
The HotHeap™ control system ensures success
Temperature
Aeration
WaterHotHeap™
control system
The HotHeap™ control system automatically balances the two advection processes (water and gas) to maximize the accumulationof heat within the heap
HotHeap™ is a process to get heaps hotHeap temperature profile
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Chalcocite/Covellite leaching
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HotHeap process could make sulphide heap leaching the preferred process
HotHeap™ dynamic control gets heaps hot
Average heap temperature
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StickiBugs™
• Copper sulphide heap leaching has a cost advantage of 10 – 15 US¢/lb Cu over conventional processes
• However, the industry has experienced slow start-up and poor performance for bioleaching operations:
• The reasons are mainly concerned with bacterial management:
– Inoculation is not practised– SX raffinates do not contain many active bacteria– Acid curing sterilises naturally-occurring bacteria
The StickiBugs™ answer
• Bacteria are prepared with limited polysaccharides, so that theyare non-sticky.
• This allows bacteria to be inoculated throughout the heap.
• Once we are sure that there is good penetration, we can easily change conditions so that polysaccharide production begins again.
StickiBugs™ Flowsheet
Agglomerationdrum
Bio-heap
PLS pond
SX
EW
Sulphuric acid
Crushed oreAgglomerated ore
Solvent extraction raffinate
Inoculum solution
StickiBugsTM
Benefits of effective inoculation
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Time (days)
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Sterile control
StickiBugs™ simulations:Fe, S & Fe+S oxidisers
Industry & MineLaboratory practice
Copper extraction improved by 5 %Iron (pyrite) extraction improved by 8 %
Iron & sulphur oxidisers equally effective
Benefits of effective inoculation
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Time (days)
Fe e
xtra
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Sterile control
StickiBugs™ simulations:
Fe, S & Fe+S oxidisers
Industry & Mine
Laboratory practice
Enhanced pyrite oxidation rate has many benefits
Bacterial adhesiveness
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Baseline for S
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CO2 limitation
Summary – New Technologies
• HotHeap™ has the potential to make bioheapleaching highly efficient and controlled
• StickiBugs™ has the potential to improve the efficient and more predictable
The Economics of Processing Copper Concentrates
Economic context
Process Economics
Competition, strategy and research investment
Change in the Industry Structure
• Deep recession in copper industry in early 1980s
• Forced high-cost producersto restructure operations and cut costs in order to survive:– Labour costs cut through labour flexibility and multitasking– Adminstrative costs reduced– New production technologies, especially hydrometallurgical
processing of oxides (leaching, SX/EW)
• Cost cutting strategy and new production technology has re-structured the industry
• Massive impact on flattening the cost curves
Cost curves
Impact of flat cost structure
• Consolidation– Five main producers accounted for 39% of
production in 1990– By 2001 the top five accounted for 50%
• Mergers and acquisitions• Anglo/Minorco/Desputada• Phelps Dodge/Cyprus Amax• BHP/Billiton/RioAlgom• Noranda/Falconbridge
Declining real prices
Overall, the cost strategy has destroyed value
Value margin = ROIC – Cost of Capital
Economic context
Process Economics
Competition, strategy and research investment
Processing routes for copper concentrates
Intermediate market: Concentrate may be
sold to custom smelters or traders.
Sulfide Resources Concentration
Smelting and Refining
Copper Cathode to Market
Leaching SX & EW
Intermediate market: Concentrate may be
sold to custom smelters or traders.
Sulfide Resources Concentration
Smelting and Refining
Copper Cathode to Market
Leaching SX & EW
• Miners (concentrators) compete with each other on basis of ore quality and quantity.
• Because there are independent smelters, processing is not basis for competition between miners.
Trade in copper concentrates
• Concentrate sold on basis of toll contract called TC/RC contract(treatment and refining charges)
• TC/RC is the earnings to the smelters• Negotiated between copper miners and independent smelters• Not correlated with copper prices
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Date
TC/R
C P
rice
(US
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)
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Date
TC/R
C P
rice
(US
c/lb
) TC/RC prices are generally low
Smelters seeing an increasing price volatility
Difficult environment to invest in smelting, particularly in the West
Making an investment decision
• Invest if the asset generates more cash than the cost of the investment.
• Need to account for the time value of money by using net present value (NPV)
Investment)ratediscount1(
FlowCashNPVN
1it
ii−
+= ∑
=
Capital costs
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osts
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Smelter
Hydromet
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osts
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Smelter
Hydromet
Smelters are generally more capital intensive
Operating costs
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Ope
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Smelter
Hydromet
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Smelters are generally more energy efficient
Net Present Value
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NPV
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Hydromet
Smelter
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NPV
(US
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pa)
Hydromet
Smelter
Neither smelters nor the competing hydrometprocesses are economically viable
NPV strategy space for a particular project
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osts
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BioCOPBioCOP
and SX/EW
Smelting
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Leaching and
SX/EWSmelting
and refining
Considerable uncertainty in prices
• High volatility in TC/RC prices
• Is the NPV methodology sufficient?
• What about more sophisticated analysis?
Economic context
Process Economics
Competition, strategy and research investment
Two sides of Uncertainty
Bad ‘news’ Good ‘news’
Economic uncertaintyCorrelated with economyExogenous - learn by waitingDelays investment (NPV>0?)
Technical uncertaintyNot correlated with economyEndogenous - learn by doingIncentives for starting business (NPV<0?)
Investment:: Governed by the ‘bad news’ principle - desire to avoid the consequences of bad news (fear)
Abandonment: Governed quantitatively by the ‘good news’ principle (hope)
Decision Making on Allocation of Capital using Real Options
Options are contingent decisions
Yes - InvestPresent Own real
option
time
No - do nothingAn opportunity to make a decision
after events unfold
Future Event Did the price go
up or down?
Yes – Build mine
Invest in feasibility study
time
No - do nothing
Is the FS favourable?
Wait and see if the FS is favourable
Uncertainty → Volatility
Cone of Uncertainty Probability
Val
ue
Time
“The future will be better tomorrow” - George W Bush
What is a Real Option?
An option on a non-traded asset, such as an investment project, or a mine, or an oil exploration lease where the decision is contingent
Options in capital budgeting
Delay a project (wait and learn)
Expand a project (follow-on investments)
Abandon a project
Real options allow managers to add value by acting to amplify good fortune or to mitigate loss
Real options to invest in process plant
• A firm must make an irreversible decision to invest in a project.
• The value of the project is uncertain: volatility in TC/RC prices.
• Should the investment be made, and when?
• The opportunity to invest is an option – the firm has the right, but not the obligation, to decide to invest in the project.
• The opportunity is not available to all market players, and therefore has value.
• The value is derived from the flexibility the firm has to make decisions based on its own opportunities.
Option value and project value
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Strategic valueProject value
Exercise price
Option value
Decision making
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Val
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Invest when price hits here
(b)
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NPV
(b)
Buy option but do not invest
Only spend this much on the
option
While the option method often seems lenient on the decision to acquire the option, it is very tough on the decision to acquire the project!
Strategic value
Due to uncertainty in prices, option approach says there is value in doing research.
However, it also says that investment is highly unlikely –prices should go to 60 c/lb before investing
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Option, or strategic value
Project value
Exercise price
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Option, or strategic value
Project value
Exercise price
Real options valuation
• Strategic net present value (real options)
– Attempts to account for uncertainty (or volatility) in market projections, and values the options that management has to determine strategy.
– Options are to change your mind, defer decision, mothball operation, re-open operations etc
optionsNPVNPVStrategic +=
Sources of competition and cooperation
• A large number of new processes have been announced in the last 5 years.
• BHP Billiton and Codelco have teamed up under the banner of Alliance Copper to develop BioCOP.
• Phelps Dodge and Placer have teamed up to develop a pressure leaching facility at Bagdad, Arizona.
• Outokumpu, the developer of the industry’s leading technology, flash smelting, has announced the piloting the HydroCopper.
• In addition, there are at least 15 other processes, each with slightly different conditions and chemistry.
• Can these processes compete with smelting?
• Why invest money in research in hydrometallurgy?
Lots of strategic value in research
The value in research is due to high volatility and low prices –which favourminers and not smelters.
The research is not meant to be implemented – it is meant as a competitive weapon in the negotiation of TC/RC prices
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Valu
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Project value
Research value
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Project value
Research value
Competition
Intermediate market: Concentrate may be
sold to custom smelters or traders.
Sulfide Resources Concentration
Smelting and Refining
Copper Cathode to Market
Leaching SX & EW
Intermediate market: Concentrate may be
sold to custom smelters or traders.
Sulfide Resources Concentration
Smelting and Refining
Copper Cathode to Market
Leaching SX & EW
Non competitive between miners, hence co-operation and collaboration
Highly competitive between miners and smelters
Why would a miner develop a concentrate process?
Competition between miners on basis of ore quality and tonnage
Swing production – the switch option
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TC/R
C P
rice
(US
c/lb
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Price
Operating period
Mothball Price
Re-activate Price
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TC/R
C P
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Price
Operating period
Mothball Price
Re-activate Price Monte Carlo simulation showed that this strategy had significant value, but is very dependent on the mothballing and re-activation costs
Concluding remarks
• There does not appear to be a new processing technology for concentrates that is a clear winner from an economic perspective.
• In spite of this, there is significant value in mining companiesdoing hydrometallurgical research.
• The origin of the value of hydrometallurgical research is from its competitive threat to smelting operations.
• Real options analysis complements NPV analysis. This shows that capital investment decisions should be delayed until the price is P*. This is much more stringent than the NPV > 0 rule.
• Heap leaching is not the same because we do not produce a concentrate.
