BLOQUE: PROCESOS METALÚRGICOS Conferencia magistral Dr. Phillip Mackey President P,J ,Mackey Technology INC Miércoles 18 de setiembre, 2013

1. INNOVATIONS IN METALLURGY WITH A CASE STUDY OF Pb SMELTING IN PERU Phillip J. Mackey PERUMIN - 31st Mining Convention Arequipa, September 16th to 20th, 2013

2. “Peru is a Mining Country”
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We must not forget that metallurgy is as much a part of mining as digging ore out of the ground. As you will see in the logos here developed by our predecessors, smelting is part of the mining cycle. Peru must be a mining country in the true sense of the word. This presentation will talk about developing a Pb smelting industry in Peru

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 Population growth, with water and food crisis looming
 Electric cars gaining further attention
 New African opportunities
 Waning of the climate debate, emergence of sensible climate science
 Slow recovery in the U.S. but an overall decline of U.S. world influence
 Surge in the economies of China and India
 Growing importance of South America
 Political conflict and unrest
Some World Trends
All these trends mean change…..
So change is very much part of life, and there is also change
in the mining/smelting industry ……. as will be discussed....

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What are the ten top issues that mining companies worldwide will face during the next 50 years?

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1.Loss of market capitalization, lower share prices (market does not buy the industry’s “long term growth strategy”)
2.Importance of emerging markets (China, India, etc)
3.One critical key to the future will be the ability of a company to bring on new metal supply through the right projects ( capital discipline)
4.Relentless demand will be there – the % increases in growth may not be as high as before
5.Balancing productivity and profitability:
Position on cost curve a primary focus (= cost reduction)
Role of technology – technology & innovation can lower
costs (also requires detailed understanding of data and processes)
Some Immediate Issues Affecting Mining Companies
In part taken from.“ Review of Global Trends in the Mining Induistry-2013, Price Waterhouse, www.pwc.com

6. …..and a prediction……….
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1.At present, world mining companies send huge amounts of non-ferrous metal concentrates to China for smelting…..copper, zinc, lead……….
2.This large scale “mining-custom smelting model” is likely not sustainable due to issues including….higher labour costs in China, energy costs, environmental controls, possible difficulties/concerns on shipping some materials (like Zn, Pb, etc), other environmental aspects....
3.It is considered that over say about the next decade, concentrates will more and more be treated at the country of origin or another convenient country (but still, China will remain a key player in the industry) Peru needs to plan now for future changes. This situation will be discussed later in this presentation regarding developing a modern Pb smelting industry in Peru

7. Latin America Overview
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•Part I - Innovations in metallurgy
Important for keeping low on the cost curve
Types of innovation – examples
Discussion
•Part II – Case Study of new Pb smelting industry in Peru
Considerations involved, requires some innovative thinking
Plan of action
•Part III- Conclusions
Outline of Presentation

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World Growth in Metals 1800 to 2010
Up until about 1900,
Pb was the most
important non-ferrous
metal
Growth of all metals
will continue

10. The white curve plots the trend of Cu concentrate to custom smelters, 1970 to 2010 The box (yellow curve) shows this trend from 1700 to beyond 2000
1970
1980
1990
2000
2010
0
20
40
60
80
100
YEAR
CUSTOM SUPPLY, %
Source: P.J. Mackey
This reveals the trend is cyclical. The same type of trend would also apply to Pb concentrates

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•Different results require different actions
•Different actions require different thinking
•Different thinking requires generous listening
Change…… (e.g., establish a modern Pb smelting industry in Peru)

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 To look is one thing
 To see is another
 To understand what we see is still another
 But to ACT on what we understand is really what it’s all about, isn’t it?
* Paul Hersey (1931-2012) – A leading US authority on training and development in leadership
Paul Hersey’s quote*

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All major technical developments in mining and metallurgy
have occurred as a result of successful innovative
developments
This has been carried out by operating companies,
equipment suppliers, research institutes of various types
and universities
There need not be “one best place” to carry out
development….it depends on the strategy and approach of
people involved
What has innovation done for us

14. What innovation has done for the energy requirement to produce copper (by smelting)
Since 1900, energy consumption has dropped by a factor of about 30 times. (flotation, use of large reverbs, later use of O2) Energy at present time ~ 12,000 MJ/t Cu, 70-80% is electricity, as compared to mostly fossil fuel in the past
Decreasing trend of energy consumption in Cu Smelting over the last four centuries (as MJ/t Cu - feed to metal)
Source: Coursol et al. Energy in copper smelting, CIM, 2011

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1.Creative-”Flash of Insight”
Examples
Noranda Process – 1963 (copper smelting),
Top Smelting Lance - (1971) - ISASMELTTM, Ausmelt
Gravity separator (in mineral processing)
2.Innovative Adaptation (also called “incremental innovation”)
Examples
Outokumpu flash smelting -1947 (Cu, Pb and Ni)
SAG milling
Use of oxygen for smelting
Establish a modern Pb smelting industry in Peru
Two Broad Types of Innovation

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1.In the 1960s, the mainstay of smelting was the large reverberatory
furnace, with converter slag returned to the furnace for slag cleaning
2.The soon-to-be-inventors did ground-breaking tests that showed
returned converter slag had an extremely short residence time in the furnace, yet slag was still effectively cleaned of copper
3.The inventors deducted that since the slag residence time was low yet effective, why not combine smelting and converting in the same vessel and still keep the same short residence time for slag cleaning
4.Thus was born the Noranda Process, the world’s first commercial
plant for continuous smelting and converting
A Flash of Insight - The Noranda Process (N.Themelis and P. Spira - 1963)

17. Innovative Adaptation-Outokumpu Flash Smelting (Bryk et al. - 1947)
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1. The idea “flash smelting” of fine concentrate
in a gas stream had been known and used
since the 1930s
2.Outokumpu in the 1940s, wishing to utilize
the chemical heat of smelting (instead of
using scarce electric power as used pre-war),
chose to adapt the 1930s flash smelting ideas
to their own requirements.
3.Thus was born the Outokumpu Flash Smelting Process, the world’s first commercial plant for smelting to a medium grade of matte and utilizing the heat for smelting
St Jacques furnace, 1930s

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“ The reasonable person adapts himself to the world.
The unreasonable person tries to adapt himself to the world.
All progress comes from the unreasonable man.”
George Bernard Shaw
British Writer (1903)
The Path to Progress (e.g., establish a modern Pb smelting industry in Peru)

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Note: Mine production
represents about 44%
of output, bal. is recycled Pb
Peru provides about 5 % of world mined Pb but no Pb metal*
Source: Hassall et al, Pb-Zn 2010, CIM/TMS
Global Pb Production
With Cerro re-starting,
this is a simplification

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Ranking of Pb mine output by country
Source: USGS, Washington, USA, 2012

21. Metal price trends Highly volatile since 2005
Metal price trends - highly volatile since 2005,will likely remain so Long Term Pb price ~US$2,100/mt
Lead
Source: ILZSG, 2012

22. Pb mine output in China increasing
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Source: ILZSG, 2012

23. Falling Pb and Zn Ore Grades
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Source: ILZSG, 2012

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All lead metal used in Peru is imported metal* Chances are that 1 car in 20 in Peru has lead in the battery originally mined in Peru, the concentrate was shipped elsewhere for smelting and then the metal was re-imported in the battery. A case could be made for some Pb smelting in a modern plant to be done in Peru. Such a plant could also treat secondary Pb (batteries)
* With Cerro re-starting, this is a simplification

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It requires some 50 Litres of fuel oil to ship 1 tonne of Pb concentrate to China thereby adding unnecessarily to greenhouse gas emissions
The typical Peruvian Pb miner receives much less than 100% of conc. value

27. Considerations Regarding a Modern Peruvian Pb Smelting Industry
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Economics of any new plant to be in the first quartile of the cost curve
This requires world-class technology for a new plant, start small
Benefits include:
Security of processing (refer to news report last month that Yunnan will halt Pb smelting – next slide)
Labour costs are on the rise in China, Smelting Charges will likely increase in future. Storage of concentrates at the ports can be problematic
Shorter payment period
Saves on freight costs (which will likely increase in future), shipping will increasingly require stringent environmental safeguards seriously affecting the present “mining-custom smelting model”
Reduces industry greenhouse gases - it requires ~50 Litres fuel oil to ship 1 tonne of Pb concentrate from Peru to China

28. China’s Yunnan Tin Will Halt Lead Smelting After Price Declines (Bloomberg News - Aug 23, 2013 )
Chinas Yunnan Tin Co said it would idle its lead smelter because lower
prices for the metal have made it unprofitable.
The plant, with 100,000 metric tons of annual capacity, will stop operating
this month, according to a statement from the company, which is based in
Kunming, Yunnan province. Output this year from the smelter will drop to
about 60,000 tons from a previous estimate of 90,000 tons, Board Secretary
Pan Wenhao said today by phone.

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Create an industry - Government “Pb Task Force” Essential to have industry support, market driven Group to carry out benchmarking survey- Industry trends Role of China (growth, but… trend of increasing costs, etc, concerns over shipping Pb, storage at ports, etc) Technology Review (Top Lance, SKS, other….) Economics, financial and country issues, possibility of a Japanese style JV plant in Peru, etc Consideration given to also processing secondary Pb (batteries) Consider Peru setting up a Canadian “CANMET-like Government metallurgical laboratories (to retain Government expertise) Prepare recommendations
Possible steps Peru can take to establish a world class Pb smelting industry

30. Leadership and Expertise Applies to a company as well as a country
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“ Obviously, our leadership does not and should not necessarily have the technical expertise needed to make some of the decisions we need to make.
However, we have people who do have the expertise and top management needs to ask the right questions of these people to understand the technical implications of our decisions.”
Roger Ackerman, Corning Chairman and CEO, 1998

31. Generous listening
Comfort with uncertainty
Prioritization
Turning complexity into simpler parts and most
importantly……….
Capacity to enlist others into action
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Critical Thinking Components (in looking at a new “mining-smelting” model)

32. Modern Pb smelting Technologies (all these technologies are environmentally clean)
Top Smelting Lance (Australia)
ISASMELTTM
Ausmelt/Outotec
Flash Smelting (Finland)
SKS/Bottom Oxygen Blowing (China)
Kivcet (Russia)
QSL (USA)
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33. ISASMELTTM Pb Smelting
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Source: Xstrata Technology brochure, 2012

34. SKS/Bottom Blowing under consideration at Port Pirie, Australia
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Source: Port Pirie web site

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Schematic flow diagram Pb Smelting

36. Some new/re-opened Pb smelters
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Source: ILZSG, 2012

37. Conclusions
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1. Since successful introduction of “innovation” requires
an “atmosphere of change”, openness to new approaches
is essential ( for setting up a modern Pb smelting industry)
2. There is potential for an innovative approach to Pb
smelting in Peru. Issues and considerations as regarding
achieving this were outlined in the presentation
3. A number of modern Pb smelting technologies are now
available for clean, environmentally safe operations
4. A tentative “Plan of action” was developed for discussion

38. One last thought
Strategies and technologies only deliver promises.
People and processes deliver results.
Deloitte & Touche Advertising
“Peru is a Mining Country”
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39. Acknowledgements
I wish to acknowledge the support of Bertrand De Windt, ICM-Peru Chair and also Perumin in helping to make this presentation possible
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40. MUCHAS GRACIAS
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