Mineral Processing in Developing Countries: A Discussion of Economic, Technical and Structural Factors

62 Pages·1984·1.695 MB·English

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Hin~rill ProC:~55ind
D~V~lopine (ounfri~5
A DISCUSSION OF ECONOMIC, TECHNICAL AND STRUCTURAL F AC TORS
A United Nations Study
prepared by the Department of Technical Co-operation
for Development
United Nations Secretariat
A Speciallssue of Natural Resources Forum
~
Published in co-operation with the United Nations
by Graham &T rotman
Published in 1984 by
Graham & Trotman Ud.
Sterling House
66 Wilton Road
London SW1 V 1DE
in co-operation with the United Nations
© United Nations, 1984
ISBN 918-0-86010-500-8 ISBN 918-94-011-8106-8 (eBook)
DOI 10.1001/918-94-011-8106-8
Acknowledgement
Ivor Herbert, Lorraine Ruffing and Stephen Zorn assisted in the preparation ofthis study.
This publication is protected by International Copyright Law. All rights reserved.
No part of this publication may be reproduced, stored in a retrieval system, or
transmitted in any form, or by any means, electronic, mechanical, photocopying,
recording or otherwise, without the prior permission ofthe copyright holder.
The views and opinions expressed in these papers are those of the authors and
do not necessarily reflect those of the United Nations.
Contents
INTRODUCTION 1
1 MINERAL PROCESSING IN DEVELOPING 2.1.5 Semi-fabrication
COUNTRIES - ADVANTAGES AND 2.1.6 Demand for aluminium
DISADVANTAGES Internal demand in developing countries
World demand
1.1 The Present Situation 3
2.2 Processing Technology 19
1.2 Benefits to be Gained from Local
2.2.1 Alumina production
Processing 3
Alkaline processes
1.2.1 Resource based industrialization
Pedersen process
1.2.2 Reducing dependence
Acid leaching
1.2.3 Development of national capacity
Combined acid and salt
1.2.4 Transfer-price manipulation
leaching processes
1.2.5 Economic rents
2.2.2 Aluminium production
1.2.6 Access to capital
Carbothermal reduction
1.3 Barriers to Local Processing of Use of other reductants
Minerals 6 Purification processes
1.3.1 Tariffs and other trade limitations Other electrolytic processes
1.3.2 Non-economic factors
2.3 The Cost of Processing 21
1.3.3 Marketing problems
2.3.1 Alumina production
1.3.4 Effects of technology
Capital costs
1.3.5 Economies of scale
Operating costs
1.4 Economic Analysis ofProcessing Revenue
Projects 9 2.3.2 Aluminium production
1.4.1 Capital costs Capital costs
1.4.2 Transport costs Operating costs
1.4.3 Environmental costs Revenue
1.4.4 Energy costs
2.4 Energy Use 23
1.4.5 Complementary inputs
1.4.6 Labour costs 2.5 Av ailability of Aluminium Technology 26
1.4.7 Infrastructure
1.4.8 Externalities
1.4.9 New vs. expansion projects
1.4.10 Conc1uding remark
3 COPPER
2 BAUXITE, ALUMINA AND ALUMINIUM
3.1 The Present Situation 27
2.1 The Present Situation 15 3.1.1 Copper reserves
2.1.1 Bauxite reserves 3.1.2 Copper ore and concentrate production
2.1.2 Bauxite production 3.1.3 Smelting and refining of copper
2.1.3 Alumina production 3.1.4 Semi-fabrication
2.1.4 Aluminium production 3.1.5 Demand for copper
3.2 Copper Processing Technology 30 4.2 Iron and Steel Technology 41
3.2.1 PyrometaUurgy 4.2.1 Direct reduction steel-making
Reverberatory furnace smelting 4.2.2 Conventional steel production
Electric furnace smelting
4.3 Steel Processing Costs 42
Flash furnaces
4.3.1 Capital costs
Continuous smelting
4.3.2 Operating costs
3.2.2 Hydrometallurgy
4.3.3 Revenue
CLEAR process
4.3.4 Economic factors
Sherritt-Cominco process
Anaconda Arbiter process 4.4 Energy Use in Iron and Steel 43
Cyprus copper process
3.2.3 Comparison of different processes 5 ECONOMIC FACTORS AFFECTING THE
LOCATION OF PROCESSING IN
3.3 Economics of Copper Processing 33
DEVELOPING COUNTRIES
3.3.1 Capital costs
3.3.2 Operating costs 5.1 Capital Requirements 47
3.3.3 Concentrate sales vs. building a
5.2 Sources of Finance 48
smelter
5.3 Labour Requirements, Labour
3.4 Copper Rod Production 34
Intensity, Labour Share in Total Costs SO
3.i
Energy Use in Copper Processing 35
5.4 Raw Materials Requirements 51
4 IRON AND STEEL 5.5 Transport Costs 51
4.1 The Present Situation 37 5.6 By-products 53
4.1.1 Iron ore reserves
5.7 Energy Requirements and Av ailability 54
4.1.2 Iron ore production
4.1.3 Agglomeration
NOTES 57
4.1.4 Pig iron and steel production
4.1.5 Demand for steel
Internal demand in developing
countries
World demand
Introduction
This study ex amines the faetors which affeet the Conferenee on Industrialization, made the
loeation of mineral proeessing in developing following points:
eountries. These ean be divided into two broad
"National industrialization policies should
eategories. The first of these eneompasses
stress the objeetive of inereasing the extern al
eeonomic and teehnieal elements affeeting the
autonomy of the developing regions and countries,
basic vi ability of a projeet.1 These include eapital,
with special attention to the promotion of
skilled labour, raw materials, eomplementary
exports . .. (and) also seek to inerease the value
inputs, energy, eeonomies of seale, teehnological
added to raw materials being proeessed and
ehange, growth in demand, proximity to export
exported.
markets and transport eosts. The seeond eonsists
In the light of the foregoing, it is proposed that
of struetural elements including sourees of finanee
national industrialization policies should: (a) prp
and teehnology, trade and investment and
mote integrated industrialization based on the
taxation policies.
potential of eaeh eountry; (b) stimulate by various
The desirability of inereasing the extent of
me ans the intensive use of natural resourees, both
proeessing of natural resourees in the developing
through the promotion of employment policies
eountries has been emphasized in many inter
and through the formulation of sehemes which
national declarations. For example, the United
favour the processing of available raw materials.,,3
Nations General Assembly, the United Nations
Conferenee on Trade and Development Among the reasons stated by the developing
(UNCTAD), the United Nations Industrial De eountries for see king to inerease proeessing of
velopment Organization (UNIDO), the Organiza raw materials are: (a) national strategies for in
tion for Eeonomic Co-operation and Development dustrialization based on the use of loeal raw
(OECD) and the Commission of the European materials; (b) the need to lessen dependenee on
Eeonomic Communities (EEC) have all sup the industrial eountries; (e) the development of
ported measures to promote loeal proeessing of skills that ean also be used in other seetors of the
raw materials in developing eountries.2 A state economy; (d) the ability to enjoy more of the
ment on this issue, by the 1974 Latin Ameriean eeonomic rents resulting from raw material pro-
TABLE 1
Mineral Processing Chains
Stage
Mineral 1. Mining-Beneficiation 2. Smelting 3. Refining 4. Semi-Fabrication
Bauxite Bauxite ore-dried Alumina", Aluminium" (billets, ingots) Rods, tubes,
bauxite sections
Copper Ore-concentrate Blister Refined copper Rods, tubes,
ore (cathodes, section
billets,
ingots, bars)
Iron Ore-pellets Pigiron Crude steel Billets, blooms
ore sinter (ingots) slabs
a Bauxite is refined to alumina which in turn is smelted to aluminium.
1
2 INTRODUCfION
duction; and (e) the opportunity to obtain invest pyrometallurgy and hydrometallurgy of copper ,
ment capital which might not otherwise be and the use of the blast furnace combined with
available. the basic oxygen furnace (B.O.F.) or direct re
The term 'mineral processing' embraces all duction combined with electric arc furnace for
those activities between the production of ore steel are rather weIl known. However, in all
from amine and the manufacture of a product for projects process modifications must be made to
final consumption.4 However, it is impractical for match the quality of local inputs and requirements.
most developing countries to consider processing The issues associated with mineral processing
of minerals beyond the stage of refined metal in developing countries have been the subject of a
ingot or basic ferro-aIloy, unless a domestic number of other reports.7 This study pays particu
market of sufficient size exists for economic pro lar attention to energy requirements, the availa
duction of semi-fabricated products.5 Accordingly, bility and cost of technology and capital costs.
this study concentrates on the production of Energy is a growing concern of industrializing
refined copper , aluminium ingot, crude steel, and nations, since mining and mineral processing are
selected intermediate products. The basic proces energy-intensive.8 An important question , there
sing chains involved are shown in Table 1.6 fore, is the impact that energy requirements and
It is widely believed that mining and mineral availability might have on the location of process
processing methods such as the Bayer process for ing facilities in developing countries.
alumina, the Hall-Heroult process for aluminium,
1 Mineral Processing in Developing Countries
Advantages and Disadvantages
1.1 THE PRESENT SITUATION industries. Many petroleum-producing countries
have adopted industrialization plans based on
The most recent worldwide survey of mineral
export-oriented refining and the use of natural
processing9 by the United Nations Industrial
gas as a feedstock for petrochemical productS.14
Development Organization showed that, as of
One of the major arguments for increased
1977, the developing countries as a whole ac
processing of natural resources, even where a
counted for an average of some 20-30% of
strategy of production for domestic industry is not
mineral processing capacity (Table 2).
immediately feasible, concerns the supposed link
age or 'ripple' effects. These are often said to be
1.2 BENEFITS TO BE GAINED FROM of two general kinds:
LOCAL PROCESSING (a) availability of the product, for local use as
weil as for export, and the stimulation of linked
1.2.1 RESOURCE-BASED INDUSTRIALIZATION
activities, where local processing of a product
Increased local processing of natural resources, makes possible primary production of another
and especially of minerals, has become an element product (where, for example, the processing of
in developing countries' proposals for a New phosphate rock generates a demand for sulphuric
International Economic Order. In view of the acid);
10
limited success in the developing countries of (b) indirect effects outside the primary-product
import-substitution strategies and of the limited sector itself in the use of infrastructure, supply of
number of countries which have been able to equipment, and fiscal impacts.
15
pursue export-oriented strategies based on manu Processing projects may not all be ac
facturing or assembly operations, resource-based companied by the desired linkage effects. It may
industrialization strategies have been given in be the case, for example, that a small economy
creasing attention by developing countries. Two cannot support a manufacturing industry based
variations of these strategies have been tried. One on local raw materials simply because the market
assumes that more processing and hence more involved is too smalI.
added value from primary product exports will
speed development.11 The other concentrates on 1.2.2 REDUCING DEPENDENCE
the use of agricultural and natural-resource Further processing of natural resources is often
products not primarily for export, but for domestic seen as a me ans of reducing a country's depen
consumption. This strategy has been attempted in dence on other countries. 1 Several aspects of
the People's Republic of China and in the dependence have been identified:
Democratic Republic of Korea. In non-centrally (a) trade dependence, in which developing
planned countries, the approach has sometimes countries' ability to import desired consumer and
been advocated, but never wholly put into prac capital goods depends on the export of primary
tice.12 Some countries have been pursuing both products;
strategiesY For example, Chile and Venezuela (b) financial dependence, in which the produc
have undertaken more processing of copper and tion of raw materials and the construction of
iron ore, both for export and for use in domestic infrastructure associated with that exploitation
3
4 MINERAL PROCESSING IN DEVELOPING COUNTRIES
TABLE2
Developing countries' share in mineral processing capacity
(1977)
Developing countries' share (per cent)"
Mine Intermediate Metal
production processingb productionC
Bauxite-aluminium 62 26 13
Copper 53 39 27
Iron-steel 40 9
Lead 34 24
Nickeid 42 27
Tin 88 72
Zinc 29 15
Source: UNIDO, 1980. Mineral Processing in Developing Countries. United
Nations, New York.
"Excludes the USSR, Eastern Europe, and the centrally-planned economies
of Asia.
b Intermediate stages are alumina and blister copper . For other metals,
either no distinct intermediate stage exists (lead, tin and zinc), the inter
mediate stage is almost universally associated with final-stage processing
(iron and steel), or the intermediate stage is difficult to define with precision
because of the variety of processes used (nickel).
Products are aluminium ingot, refined copper, crude steel, refined lead,
C
refined nickel and ferro-nickel, tin metal, and slab zinc.
dMine production includes some products (e.g. nickel matte from
Botswana) which are partially processed but would not be marketable
without further processing. Metal production reflects nickel content of final
products.
have been financed by capital from external management as is gene rally the case in mineral
sources; processiog. Forward linkages (i.e. ioto semi
(c) technological dependence, in which capital fabricated products or even to the metal stage)
goods embodying foreign technologies are mayaiso risk technological obsolescence, since
imported; competing producers may develop more efficient
(d) managerial dependence; technologies. The development of continuous
(e) market dependence.17 casting in the copper industry illustrates this type
The impact of strategies that emphasize pro of risk.18 The same kind of risk exists in the
cessing of raw materials is not clear-cut. For extraction of minerals, but may be less acute
example, additional processing may weH improve because extraction technology is changing less
a country's balance of payments by adding value rapidly than processing technology.
to exports, but at the same time will tend to The impact of further processing on market
increase dependence on export earnings to finance dependence varies according to the commodity
the capital goods and other imports required for involved and the extent of processing. In some
processing. Similarly, because efficient resource cases (e.g. production of refined copper or alu
processing activities are more often large-scale minium ingot) processing will widen the market
and capital-intensive, their immediate impact ing options of producer countries, since there are
may be to deepen the financial dependence of many more metal fabricating companies than
capital-importing countries. Along the same lines, there are sm elters and refiners. Integration into
technological and managerial dependence are forward processing can also be the means to pro
likely to be increased where a country must mote loyalty among consumers by meeting special
import processing technology, equipment and needs. However, there are long periods when the
ADVANTAGES AND DISADVANTAGES 5
sale of refined met als is highly competitive at low scope for plant to operate using older technology
prices with surpluses ending up in terminal in order to generate more employment per unit of
markets. At the same time, the raw material output. 19 This conclusion is reinforced by re cent
buyers (smelters and refineries) may be paying increases in energy costs, as older processing
high premiums to keep their capital-intensive technologies are considerably more energy
plants operating at reasonable levels to minimize intensive than new processes.
losses. Relatively high productivity, combined with
the low share of wages in total costs, have made
1.2.3 DEVELOPMENT OF NATIONAL CAPA CITY
mining and mineral processing companies willing,
Mining and mineral processing produee relatively in the re cent past, to agree to workers' demands
little direct employment, in relation to the capital for high wages. The creation of such high-wage
deployed. enclaves in a sm all developing economy may lead
A UNIDO study estimated the amount of to rural-urban migration, as workers leave their
capital investment adjusted to a 1980 basis re jobs to seek work in the high-wage sector , even if
quired toerea·te one job in mineral processing as they also TUn the risk of a considerable period of
between US$200 000 to more than $1.5 million unemployment. 20
(Table 3).
1.2.4 TRANSFER-PRICE MANIPULATION
Even if it is wished to increase employment in
mineral processing industries, there is little scope Where both mining and mineral processing oper
for substituting labour for capital. Most techno ations are under the same corporate ownership,
logical change in processing has been aimed at processing facilities in the developing country
increasing the efficiency of raw material use. may reduce the company's opportunities to opti
Given the high share of raw material costs and the mize profits and tax payments through transfer
relatively low share of labour eosts in the value of priee manipulation. In the bauxite-aluminium
finished metal products, espeeially in developing industry, for example, the six largest trans
countries where wage rates are lower than in the national eorporations account for 66% of world
industrialized nations, there is little ineentive to wide alumina refining eapacity and 54% of
foeus on labour-eapital substitution. The avail aluminium smelting eapacity.21 The price paid to
able evidenee suggests that, sinee most innovations bauxite mines by refineries has often been estab
in aluminium and copper proeessing have signifi lished by the corporation in order to minimize its
cantly increased resource recovery rates as weIl as worldwide tax li ability . Similarly, in the ease of
an inereased capital-Iabour ratio, there is little copper , a significant amount of trade in unpro-
TABLE3
Employment in mineral proeessing
Output per Capital cost
man-year per job
Process (tons) (1980 US dollars)d
Alumina refining 800 667000
Aluminium smelting 90 312000
Copper smelting-refining 140 450000
Steelmaking 200 210 000
Lead smelting-refining 225 202000
Nickel processing (sulphides) 150 1 540000
Tin smelting 20 205000
Zine smelting 200 410 000
Source: UNIDO, 1980, Mineral Processing in Developing Countries, p. 76.
a Costs ad justed to a 1980 basis by using Marshall and Swift index of mining
and milling costs, as published in Chemical Engineering.
6 MINERAL PROCESSING IN DEVELOPING COUNTRIES
cessed and partially-processed material has been tion in demand results from changes in the
conducted between units of large transnational demand for mineral-containing finished consumer
corporations, although the industry has become goods and capital equipment, and producers,
markedly less concentrated in the past decade. whether of raw materials, primary metals, or
finished goods, must react to these changes in
1.2.5 ECONOMIC RENTS
demand either by continuing to produce at full
A producer of refined metal has a wider range of capacity and accepting a dedine in prices, by
potential customers than does a producer of un cutting back production, or through strategies
processed or semi-processed material. Most containing elements of both. There is no evidence
markets where unprocessed minerals are bought to show that these business-cyde induced fluctua
are highly concentrated. Non-ferrous metal tions are less severe in the case of primary met als
smelters and steelworks, as indicated below, have than in the case of ores and concentrates.
important economies of scale. Often their large
1.2.6 ACCESS TO CAPITAL
size dictates the purchase of supplies from several
different mines. The limited number of such A final reason for a developing country to pursue
processing facilities can reasonably be expected to 'downstream' processing of minerals may be that
work to the advantage of the processor as pur foreign capital is easier to obtain for such a
chaser. In contrast, refined met als and minerals project than other kinds of investment funds.
are bought by a wide variety of industries. Certain industrialized nations wh ich are heavily
In the case of copper , there are about 20 dependent on mineral imports are prepared to
independent copper smelters wh ich are prepared provide public funds for programmes which help
to buy concentrate from independent mines. to assure long-term supplies. For example, the
Copper concentrate purchase contracts are governments of France, the Federal Republic of
usually based on the London Metal Exchange Germany and Japan have all subsidized their
price for refined copper , but payments are arrived mining and mineral processing companies'
at only after complicated deductions for smelting foreign investment ventures so long as such
and refining charges, and impurities. In contrast, projects induded a mechanism for export back to
the producers of refined copper in international the capital-supplying country. 24 Foreign investors
trade have a great number of potential customers. in such ventures may be willing, as a condition for
Trade in refined metal is normallyon the basis of obtaining access to the raw materials, to accept
a contract which specifies quantities, chemical host government insistence on the establishment
specifications, delivery and payment terms, of local processing facilities, especially where
usually on the basis of London or New York there are substantial home-government sub si dies
Metal Exchange prices. If a supplier of refined and tax concessions involved. However, the bar
copper is unable to find a customer, he can always gaining advantage which developing countries
dispose of his product directly on the exchange, have as a result of importing nations' desire to
an option not open to producers of concentrate. assure their own supplies may be considerably
The above argument does not necessarily less throughout the 1980s than in the mid-1970s at
imply that refined metal prices would increase as the height of international concern over raw
a result of additional processing facilities in the material supplies.25
developing countries, but that such development
could in principle obtain for the mineral
1.3 BARRIERS TO LOCAL PROCESSING
producing countries some of the gains otherwise
OFMINERALS
accruing to processors in the consuming countries,
though such gains may not be very large.22 Neither A good deal of the discussion of mineral process
may processing through to final metal stage stabil ing in developing count ries has focused on
ize the export earnings of mineral producers, 'barriers' or obst ades to the development of
since the major cause of price instability in processing facilities. 26 These barriers can be seen
minerals markets is variation in demand, in re as policies wh ich have resulted in a lesser degree
sponse to business cyde fluctuations.23 This varia- of processing in Third World count ries than