Sierra Rutile Sierra Rutile: Dry eyes over mineral sands · over mineral sands Sierra Rutile ......

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December 2015 INDUSTRIAL MINERALS 23 Ti/Zr news Mineral Sands A five hour drive from Freetown, Sierra Leone’s capital and main transport hub, lies Sierra Rutile Ltd’s 200,000 tpa mineral sands operation in the country’s southern province. Based around the tributaries of the southwest flowing Freedom Pampa River, the area mined by Sierra Rutile has been the focus of mineral exploration since the early 1960s. e London- listed miner was founded as a private enterprise in 1971 and since it began mining rutile and other associated heavy minerals in Sierra Leone in the late 1970s, the company has focused on dredge-based wet mining. Its visibly dated 1,000 tph floating dredge platform is the most prominent expression of the company’s historical production method, which is now being phased out in favour of a more modern and efficient dry mining process. is is an important shift for Sierra Rutile. “e future of this company is not in wet mining,” says John Sisay, the company’s Sierra Leone-born CEO. “My view of Sierra Rutile in five years consists of multiple dry rutile concentrate plants located around each mine site,” he explains. Life after Ebola For a mining business based in one of the countries that became synonymous with the West African Ebola epidemic of 2014-2015, proving that it can push on with planned upgrades unhindered by the ravages the disease has wrought on Sierra Leone’s domestic economy, is crucial to maintaining the confidence of stakeholders. In Sierra Leone, 8,704 people were infected by Ebola during the recent outbreak and 3,589 died as a result, according to the latest figures from the World Health Organization (WHO), which declared the country Ebola free on 7 November 2015. During the height of the crisis, Sierra Rutile’s operations and its efforts to protect its staff from the spread of Ebola came under sharp scrutiny. “While Sierra Rutile experienced no cases of Ebola and all our employees stayed safe, there was considerable strain on our people and operations were, at times, impacted by indirect issues associated with the outbreak,” Sisay admits. Logistics challenges were among the outbreak difficulties the company faced during the epidemic. Several ships refused to dock in the country while new cases of the disease were being confirmed and Sierra Rutile was often forced to charter private freight planes to ensure essential machinery parts were delivered to its site. Neil Gawthorpe, Sierra Rutile’s marketing director, told IM that some of the miner’s customers demanded that meetings with company representatives only take place after one full incubation period – or 21 days – had passed since the staff were last in Sierra Leone. “Customers had two hour meetings with us and would ask questions about country risk for one hour and 45 minutes of that session,” said Sisay. Sisay is weary of parrying alarmist questions about Ebola. “It’s self-evident when you’re here with the country in front of you that the risks aren’t big,” he said. Indeed, the indomitably-positive CEO believes that Sierra Leone has emerged stronger from the epidemic than it was before. He estimates that, without Ebola, the healthcare infrastructure of Sierra Leone could have taken another five to 10 years to develop to its current status, which it owes to the intervention of foreign agencies and charities like the UK’s Department for International Development (DFID), Medecins Sans Frontieres and the UN. e influx of foreign aid workers also created a need for accommodation, meaning that the hotels many predicted would be left empty as a result of a hiatus in tourism are doing brisk business. While the short-term effects of the outbreak were undeniably severe and traumatising for Sierra Leone, including plummeting tourism revenues, late-night curfews and a faltering economy, when IM visited Sierra Rutile’s operations in October 2015, regular checks on vehicles passing between the country’s regions were by far the most visible legacy of the epidemic. Drying up Now that the company can concentrate fully on its mining asset without having to concern itself with warding off Ebola, Sierra Rutile going full steam with the development of its dry mining capabilities. One of the key reasons Sierra Rutile wishes to move from wet to dry mining, despite a recent three-year, $3m 95% part refreshment of its wet concentration plant, is optionality. “You can’t reduce operating rates at the dredge – it’s either on, or it’s off,” Gawthorpe explains. Sierra Rutile: Dry eyes over mineral sands Sierra Rutile Sierra Rutile’s mineral sands dredge, capable of extracting 1,000 tph mineral sands ore. “It looks like a hulk of metal but it gets the job done,” Gawthorpe said. Billboards advising citizens on what action to take if they suspect Ebola are commonplace throughout Freetown and regional population centres. It may be operating in a country recently ravaged by Ebola and in an industry where prices have been sliding for the three years, but Sierra Rutile Ltd isn’t shedding any tears yet. James Sean Dickson, Reporter, travelled to Sierra Leone to visit the company and discover why it continues to be optimistic about the mineral sands sector. James Sean Dickson, Flickr. James Sean Dickson, Flickr.

Transcript of Sierra Rutile Sierra Rutile: Dry eyes over mineral sands · over mineral sands Sierra Rutile ......

Page 1: Sierra Rutile Sierra Rutile: Dry eyes over mineral sands · over mineral sands Sierra Rutile ... Heavy mineral concentrate is then brought back via truck to the mineral separation

December 2015 INDUSTRIAL MINERALS 23

Ti/Zr news Mineral Sands

A five hour drive from Freetown, Sierra Leone’s capital and main transport hub, lies Sierra Rutile Ltd’s 200,000 tpa mineral sands operation in the country’s

southern province. Based around the tributaries of the southwest

flowing Freedom Pampa River, the area mined by Sierra Rutile has been the focus of mineral exploration since the early 1960s. The London-listed miner was founded as a private enterprise in 1971 and since it began mining rutile and other associated heavy minerals in Sierra Leone in the late 1970s, the company has focused on dredge-based wet mining.

Its visibly dated 1,000 tph floating dredge platform is the most prominent expression of the company’s historical production method, which is now being phased out in favour of a more modern and efficient dry mining process.

This is an important shift for Sierra Rutile. “The future of this company is not in wet mining,” says John Sisay, the company’s Sierra Leone-born CEO. “My view of Sierra Rutile in five years consists of multiple dry rutile concentrate plants located around each mine site,” he explains.

Life after EbolaFor a mining business based in one of the countries that became synonymous with the

West African Ebola epidemic of 2014-2015, proving that it can push on with planned upgrades unhindered by the ravages the disease has wrought on Sierra Leone’s domestic economy, is crucial to maintaining the confidence of stakeholders.

In Sierra Leone, 8,704 people were infected by Ebola during the recent outbreak and 3,589 died as a result, according to the latest figures from the World Health Organization (WHO), which declared the country Ebola free on 7 November 2015.

During the height of the crisis, Sierra Rutile’s operations and its efforts to protect its staff from the spread of Ebola came under sharp scrutiny.

“While Sierra Rutile experienced no cases of Ebola and all our employees stayed safe, there was considerable strain on our people and operations were, at times, impacted by indirect issues associated with the outbreak,” Sisay admits.

Logistics challenges were among the outbreak difficulties the company faced during the epidemic. Several ships refused to dock in the country while new cases of the disease were being confirmed and Sierra Rutile was often forced to charter private freight planes to ensure essential machinery parts were delivered to its site.

Neil Gawthorpe, Sierra Rutile’s marketing director, told IM that some of the miner’s customers demanded that meetings with

company representatives only take place after one full incubation period – or 21 days – had passed since the staff were last in Sierra Leone.

“Customers had two hour meetings with us and would ask questions about country risk for one hour and 45 minutes of that session,” said Sisay.

Sisay is weary of parrying alarmist questions about Ebola. “It’s self-evident when you’re here with the country in front of you that the risks aren’t big,” he said.

Indeed, the indomitably-positive CEO believes that Sierra Leone has emerged stronger from the epidemic than it was before. He estimates that, without Ebola, the healthcare infrastructure of Sierra Leone could have taken another five to 10 years to develop to its current status, which it owes to the intervention of foreign agencies and charities like the UK’s Department for International Development (DFID), Medecins Sans Frontieres and the UN.

The influx of foreign aid workers also created a need for accommodation, meaning that the hotels many predicted would be left empty as a result of a hiatus in tourism are doing brisk business.

While the short-term effects of the outbreak were undeniably severe and traumatising for Sierra Leone, including plummeting tourism revenues, late-night curfews and a faltering economy, when IM visited Sierra Rutile’s operations in October 2015, regular checks on vehicles passing between the country’s regions were by far the most visible legacy of the epidemic.

Drying upNow that the company can concentrate fully on its mining asset without having to concern itself with warding off Ebola, Sierra Rutile going full steam with the development of its dry mining capabilities. One of the key reasons Sierra Rutile wishes to move from wet to dry mining, despite a recent three-year, $3m 95% part refreshment of its wet concentration plant, is optionality.

“You can’t reduce operating rates at the dredge – it’s either on, or it’s off,” Gawthorpe explains.

Sierra Rutile: Dry eyes over mineral sands

Sierra Rutile

Sierra Rutile’s mineral sands dredge, capable of extracting 1,000 tph mineral sands ore. “It looks like a hulk of metal but it gets the job done,” Gawthorpe said.

Billboards advising citizens on what action to take if they suspect Ebola are commonplace throughout Freetown and regional population centres.

It may be operating in a country recently ravaged by Ebola and in an industry where prices have been sliding for the three years, but Sierra Rutile Ltd isn’t shedding any tears yet. James Sean Dickson, Reporter, travelled to Sierra Leone to visit the company and discover why it continues to be optimistic about the mineral sands sector.

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“We’ll have a lot more flexibility than we already have currently after the dry mining transition is complete. Turning off one unit will be fine.”

Dredge-sourced material has dropped from 60-70% of the company’s output two years ago, to around 50% today, following the commissioning of the 500 tph Lanti dry mine in 2013, and the miner is intending to retire the dredge between 2018 and 2020.

“Dry mining will give us the opportunity to exploit much smaller deposits,” Gawthorpe adds. “There are probably some non-categorised areas that have mineable and profitable grade characteristics that can be extracted using this approach.”

For dredge mining to take place at Sierra Rutile’s site, dams are built across areas intended to be mined. Once the land area is covered by water, the dredge unit moves in. A series of buckets scoop out the near-surface ore material, at which point it is processed by the floating wet concentrator. The concentrator removes fines and much of the silica sand content and sends it on to a tailings area. Heavy mineral concentrate is then brought back via truck to the mineral separation plant.

Inside the separation unit, density separation removes heavy minerals from lighter, typically silica-based minerals, while further along the processing chain, electrostatic sorting provides an effective method of separating rutile, which conducts electricity, from ilmenite and zircon, which do not.

For ilmenite, which has a ferrous component to its chemical composition, magnet-based separation is employed.

One advantage of moving to dry mining will be the ability to ignore or reduce processing costs associated with low grade areas of deposits. Presently, the dredge unit is unable to avoid low grade areas as the material still needs to be removed for it to move forward over new areas. Failure to extract the low grade material would result in the barge becoming beached.

Abubakar Karim Barrie, Sierra Rutile’s technical services manager, said that much of

The company’s recent reduction in resource tonnages are related to the shift to dry mining. “The cut-off grade is higher than zero, as is the case with the dredge,” he explained.

The switch to dry mining is not without its challenges, however. Sierra Leone is a tropical country with seasonally high rainfall, and the water table lies around 3-4 metres below the surface. Barrie told IM that slope stability studies were being carried out to ensure that the water table, combined with lightly consolidated sands, do not present an operational risk, even if mining continues to the current maximum depths of around 16-17 metres. This may be managed via a network of canals and pumping stations.

GangamaAt the forefront of Sierra Rutile’s wet-to-dry aspirations is the 888,000 tonne rutile Gangama project. While little more than a hole in the ground today, Gangama is on track to produce 500,000 tpa mineral sands ore at an aggregate grade of 1.19% rutile by Q2 2016, after following a $44m capex investment. A second

investment of $33m could see another 500 tph ore plant added to bring production to over 90,000 tpa ore. The mine life of Ganama will depend on production rates, but is estimated by the company to be between 20 and 40 years.

At Gangama, Sierra Rutile will operate its own mining fleet of haulage vehicles and a concentrator, located close to the highest grade area of the resource. The company believes that this will result in lower unit costs and higher initial production rates.

Direct experience from the already operational Lanti dry mine has resulted in several optimisations, including a planned integrated waste handling facility, a single large scrubbing unit, increased design flexibility that can adapt to changing ore characteristics and a direct tip feed system.

Gangama’s plant will also be utilised after the deposit is exhausted consuming material from other resource areas, according to Gawthorpe.

Also in the pipeline is the $126m Sembehun project, which contains a 3.6m tonne rutile resource. Currently undergoing a prefeasibility study, Sembehun has the potential to produce 74,000 tpa rutile for 19 years. Mining licences for the business’ assets run until 2039 and are easily extendable, Barrie told IM.

Although zircon is a higher value mineral sand product than rutile or ilmenite, Gawthorpe does not believe that improved zircon separation would justify the initial investment required. “We’ve looked into it, but it’s just not worth it – it would cost around $35m to construct a separation plant unit alone.” Gawthorpe said, adding that this figure was only a rough estimate.

PowerPowering the mineral separation plant (MSP), dredge and wet concentrator, are four large warehouse-contained internal combustion engines running on heavy mineral oil. With three engines operating at a time owing to maintenance periods, 27mW capacity is

The dredge’s bucket scoops bring mineral sands ore up from below the waterline for processing.

Workers at the Gangama project site. The interior of Sierra Rutile’s MSP.

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generated, though only 12mW is required by Sierra Rutile’s current operations.

The company’s power costs have been cut from $0.20/kWh one year ago to $0.13/kWh today, owing to lower international oil prices.

With wages accounting for around $45m each year, the largest proportion of the company’s expenditure, the business has a fixed cost base of around 60%.

Shift to market-led businessIn addition to capacity enhancement and potential to leverage economies of scale, Sierra Rutile intends to transition to a marketing-led company, Gawthorpe told IM. This shift in strategy will see the company produce material at a rate that it thinks matches the prevailing market demand. “This is different to our current strategy of selling what we produce,” Gawthorpe explained.

Specialist resources bank Investec doubts the importance of this strategy, however. “We expect that Sierra Rutile will mine all it can sell and is unlikely to attempt any sort of producer discipline,” the bank said, after visiting the company’s mine site.

Sierra Rutile is unlikely to increase production much beyond 200,000 tpa for the foreseeable future, as this would hit the limit of the MSP’s current operational capacity. Any greater production volumes would require substantial investment in the plant, Gawthorpe told IM.

The company currently ships rutile in 6,000-20,000 tonne amounts, delivered from its own port to a larger shipping port by 1,500-2,000 tonne capacity push barges. Free along side (FAS) shipment arrangements are used, meaning that the costs for Sierra Rutile once the barges arrive next to the ship.

Mineral sands pricesFollowing a spike in 2012, prices for titanium dioxide (TiO2) feedstocks, which include ilmenite, rutile and leucoxene, have subsided as a substantial slice of demand was destroyed.

Sierra Rutile expects titanium mineral sand prices to remain flat into the first half of 2016, followed by modest rises from the middle of the year. Gawthorpe said that he anticipates titanium sponge markets will recover before the welding industry, followed by an increase in pigment sector consumption. “[I am] not expecting any phenomenal things to happen on pricing until 2017,” he said.

“There was 100 days’ worth of TiO2 inventory in pigment manufacturer warehouses – this is now down to 60 days, whereas the normal is about 40,” Gawthorpe explained. He told IM that many premium products are no longer commanding higher prices, thanks to the current soft market conditions.

Industrial grade rutile, a product offered by Sierra Rutile that is unsuitable for pigment markets owing to its lower particle size than regular grade rutile, is used in flux-cored wire for the welding industry. This material used to command a 10% pricing premium over pigment grade rutile when prices were high, according to Gawthorpe. However, the current situation is an improvement on the past, when industrial grade rutile was simply screened and discarded.

Today, prices are roughly the same for both products, as long-term pricing damage was also caused by the market spike of three years ago, Gawthorpe said. “Only 20% of applications require chloride-route pigment, whereas around 60% can use either chloride or sulphate-route. Chloride material used to get a premium in every application, but 2012 prices led to substitution research.”

The company considers its rutile to be a premium product over rutile sourced from other, coastal deposits. Lower metal ion impurities relating to its ore’s river-based genesis, combined with its high angularity, result in a product that is favoured by consumers for its potential to create a higher-quality end product with less waste, according to Gawthope.

Barrie explained that the distance between the original gneiss source rock of the rutile and the placer deposits in which the mineralisation is now contained is relatively short, and, combined with a lack of oceanic re-working, this has resulted in its more angular particle shapes. Often, lateritisation at the surface of the deposits, caused by the intensely wet and warm tropical climate, results in an increased concentration at the surface, Barrie added.

Sector viabilitySierra Rutile believes that the ramifications of the present market slump could be far-reaching.

While pigment manufacturers in particular currently enjoy low feedstock prices, the company says that the effect that these prices may have on supply beyond the industry’s immediate horizon is beginning to worry purchasers.

“One customer in particular said that they’d like to pay more, because the market isn’t sustainable in the long term with these prices,” Gawthorpe said. “But they don’t want to pay more while their competitors continue to pay low prices.”

For rutile markets to recover fully, the TiO2 industry must also heave itself out of depression. As Gawthorpe stresses, pigment is unlikely to lead a recovery, but will rather lag improvements in other markets.

“For TiO2 feedstock markets, ilmenite stockpiles are a problem,” Gawthorpe explained. “Production and demand are otherwise roughly equal.”

He admitted that the company has received “a few comments” regarding its moves to increase production in an oversupplied market. “Our peers are more diversified,” Gawthorpe said. “We’re probably the only single-play rutile company and all our decisions have to be based around this simple fact. We would not be expanding production if client demand for our high grade product were not there.”

Sierra Rutile intends to “lock-in” a significant proportion of its volumes for 2016, but will not sign any long-term contracts for the moment. “Longer term contracts can be signed when pricing improves,” Gawthorpe said. This is despite Sisay’s assertion that the business can cope with rutile prices at or even below current levels.

Investec noted that while the company may “cope” with lower prices, “the outlook (…) in terms of profitability and cash generation is now reliant primarily on improved product pricing.”

“We see only limited capacity to reduce operating cost further,” the bank added.

Individual one tonne bags of rutile concentrate at Sierra Rutile’s main production site.

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