The steel world's search for a commercially viable way of converting fine iron-ore waste into a ferrous-scrap supplement is over, a small new South African company claims.
Coming up with a claimed home-grown solution to a long-standing Holy Grail of the steel industry is Iron Mineral Beneficiation Services (IMBS), which has done enough to convince one of Russia's biggest integrated mining and steelmaking companies to snap up equity in the minnow and agree to pay it royalties as it deploys the South African-developed technology globally.
Interestingly, seed capital for the technology – which has won the nod of OAO Severstal of Russia, South Africa's State-owned Industrial Development Corporation (IDC) and Palabora Mining Company (PMC), a Rio Tinto group company – also has African roots.
Johannesburg-based Jonah Capital, the private equity company of mining personality Sir Sam Jonah, has provided the funding for the patented Finesmelt technology, which IMBS has been developing over the past five years.
"This is indigenous technology and fantastic advertising for South Africa," says IMBS nonexecutive chairperson Juergen Schrempp, who is best known as the former CEO of Daimler-Chrysler and a nonexcutive director of South Africa's pioneering synthetic fuels technology company Sasol.
"We have a competent person's report ( by Coffey Mining) that has not only given us an A+ rating, but which has said that we will be in an A++ position once our commercial plant is working," Jonah enthuses to Mining Weekly in a video interview.
IMBS will make use of the mountain of 240-million tons of magnetite that has been built up over decades at the Rio Tinto/Anglo American-controlled Palabora Mining Company (PMC), located at Phalaborwa in South Africa's Limpopo province.
IMBS CEO John Beachy Head tells Mining Weekly in a video interview the novel technology will enable steelmakers to use superfine waste arisings of iron-ore mining and other mining activities, without the need to agglomerate.
Further, the process does not require the use of expensively priced coking coal and is able to make do with far cheaper thermal coal.
Severstal Russian Steel Division CEO Alexander Grubman describes the technology as a "breakthrough" that has "revolutionary" potential.
"The most important thing is to start the first commercial plant to get the experience and to develop further," Grubman tells Mining Weekly in a video interview.
A 50 000 t/y pilot plant is be built in partnership with the IDC and PMC to convert magnetite fines into metallic-iron briquettes for use mainly as a lower-cost supplement to scrap in electric arc furnace steelmaking.
"We're working with corporate financiers so that every time we put up a 50 000 t/y plant, we fund two more. We're looking at sequential growth and have a non-dilutionary funding mechanism to grow the business organically out of cash flows generated by the plants we put up," Beachy Head tells Mining Weekly.
It is intended that the initial $12-million to $15-million 50 000 t/y capacity will grow in modules to 500 000 t/y, at an estimated cost of $120-million, and then potentially to two-million tons a year of production of the briquettes, which are said to have an iron content of from 93% to 95%.
As technology that has a strong market position is invariably quickly under threat, its rapid deployment is crucial, which is why IMBS has chosen to seek a large strategic partner in Severstal, to help it deploy Finesmelt around the world fast.
The technology has been licensed to a Severstal subsidiary, International Iron Beneficiation Group (IIBG), which will deploy it on a global basis and pay royalties to IMBS.
"When we create projects on a global basis, there will be a foreign currency royalty revenue stream coming into South Africa for the life of those projects," Beachy Head points out.
Severstal's initial investment of $17-million has bought the Russian company a 25,6% IMBS shareholding. Backed by Severstal, IMBS believes that it has a three-year advantage to rollout the technology. IMBS and IIBG want to become operators of iron-making plants as quickly as possible.
"We believe in any situation like this competitors catch on pretty quickly, and hence we've chosen a route of operation rather than selling equipment," Beachy Head explains to Mining Weekly.
The primary use of the $17-million is for IMBS to complete the technology development and to deploy the first metallic iron plant at Phalaborwa.
IMBS will focus on South Africa and deploy iron-making capacity in the South African market to meet demand.
If there is a surplus, that will be exported.
ORE VERSUS METALLIC
The final metallic-iron powder can be cold briquetted for transport. As seaborne logistics will play a role in the transport of the product, the briquetting process will allow larger quantities of iron briquettes to be moved by ship.
In a 180 000 t vessel, this could equate to a load valued at $63-million being moved at the same cost as iron-ore with a value of $18-million.
The current free-on-board selling price for metallic iron is $350/t versus $100/t for iron-ore; $80-million worth of metallic iron compard with only $63-million worth of iron-ore; metallic iron's bulk density is 4,4 g/cm3 versus only 1,8 g/cm3 for iron-ore; and 93% of the metallic product is iron compared with only 63% for iron-ore – at the same shipping cost.
Fundamentally, 1,5 times more iron would be moved; the worth of that iron would be 3,5 times the value of the iron carried in ore, and it would take up only 40% of tthe space, which is significant, Beachy Head points out.
Locally, at the proposed Phalaborwa plant, he sees the biggest issues as the logistics issues of inbound coal and outbound iron product. A shareholder is logistics associate Grindrod Trading, headed by CEO Brendan McIlimurray, who is on the IMBS board.
The real difference of what IMBS does as a business is that it processes what traditionally has been waste.
It is not possible to process super fine iron-ore in the conventional blast-furnace processes whereas it is possible to do so using the Finesmelt technology.
"We take superfine iron-ore dump material as it is. We dry it and we store it. Another significant difference is that we don't make iron using coking coal. We only use standard South African thermal coal.
"We take the volatile content out of the coal, recover energy from that process, mill the coal and store it as char. We then blend the coal and the fines, and put the blend through our process, where we take the oxygen content out of the iron-ore, and create metallic iron.
"Another huge advantage of the way the product has been designed is that we can now beneficiate the product again to a very high-grade powder, which we press into a briquette that has an iron content of from 93% to 95%," Beachy Head explains.
The briquettes are then fed into electric arc furnaces for conversion into steel.
PMC has a surface stockpile of 240-million tons of 58%-iron magnetite raw material ready to put into the process.
Next door at the State-owned Foskor, there is another 60-million-ton stockpile. Around the world there are similar stockpiles.
"We believe that we can make millions upon millions upon millions of tons of metallic iron from this for steelmaking," Beachy Head remarks.
He expects the 50 000 t/y unit on the PMC site to be ready for construction in April 2011. Equipment is expected to be in place by the end of 2011 and commissioning is anticipated in the first half of 2012.
A bankable feasibility study is about to be completed on the 50 000 t/y module and a prefeasibility is under way for the first module to be advanced to a 500 000 t/y commercial unit. The company is fully funded to construct the 50 000 t/y pilot plant. Once this is up and proven, the plan is to build similar plants around the world.
THE GROWING MARKET
Steel consumption, which will be 1,3-billion tons in 2010, is expected to nearly double to 2,5-billion tons a year in the next 15 to 18 years.
The primary steelmaking method is to turn iron-ore into liquid iron in a blast furnace and to make steel from that liquid iron.
The other method is by melting ferrous scrap in electric arc furnaces and the world consume 700-million tons of ferrous scrap this year to make steel through this method.
However, the supply of ferrous is constrained, made up of construction steel that is recycled only every 50 years and automobile steel that is recycled only every ten years.
This has been fine during the prolonged period of steel consumption being static, resulting in scrap supply being stable and well priced.
But with steel consumption growing, supply constraints resulted in the price of scrap rising $780/t in the period running up to the global economic meltdown.
IMBS' thesis is that China is the only country that is still growing blast-furnace steel production; the rest of the world, it says, is going down the electric arc furnace route for environmental and cost reasons.
Against that background, IMBS has developed, patented and is commercialising a technology that makes metallic iron for use as a ferrous scrap supplement - rather than a scrap replacement.
Currently, the dominant player in the making of metallic iron is Venezuela, which uses a very cheap gas to process raw materials coming from South America.
But its contribution is only one million to two million tons of metallic iron a year in a 700-million tons a year market.
EXPENSIVE SOUTH AFRICAN STEEL
Despite having an abundance of iron-ore and coal, the price of South African steel is in the top quartile.
"We cannot understand why South Africa should not have a very competitively priced steel to promote infrastructure growth," Beachy Head comments to Mining Weekly.
IMBS believes that it has a role to play in assisting the company to become more competitive in steelmaking.
"The domestic role that we wee is to provide competitive metallic iron to the market to allow electric steel expansion," he adds.
The advantage of metallic iron is that it allows for less capital intensive investment for single steel plants.
What IMBS would like to bring to the steelmaking opportunity in South Africa is a consistent supply of metallic iron.
Finesmelt has been designed to reduce the reliance on scrap metal, by providing a lower cost, high volume, metallic-iron briquette.
In addition to the benefits of being able to use the fine and superfine iron ore waste in steel production, the new indigenous South African technology also makes viable the on-site construction of moderately sized modular plants, whereas conventional plants must have outputs of a million tons a year or more.
The plants, being modular, can be either constructed on-site to process iron ore that has already been mined or at a steelmakers' production facility where it can be integrated into the process.
Plants are erectable in months, rather than the years required for a major conventional installation, and significant operational savings can be achieved through the use of thermal coal, which is in abundant supply and significantly cheaper than the high quality coking coal required in steel plants.
Also, Finesmelt produces enough thermal energy that if a recovery efficiency of about 30% is achieved, the installation becomes self sufficient from an electricity viewpoint.
IMBS executive Paul Yammin and inventors, Thermopower Process Technology head Derek Oldnall, and Dr Gerhard Pretorius, are founding shareholders and directors.
Thermopower Furnaces has worked hand-in-hand with IMBS through the development phases and IMBS has a research laboratory on Thermopower Furnaces premises, where research, testing and development are all done.
To watch a video in which Funder Sam Jonah, entrepreneur John Beachy Head and buyer Severstal of Russia tell Mining Weekly Online's Martin Creamer of the potential of a new technology that makes use of dump material to create iron units, click here.