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Mar$n Lynch – Director www.sonminerals.com
VIETNAMESE MINERAL SANDS PRODUCTION AND OUTLOOK
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AJM 14th Annual Mineral Sands Conference / 4th -‐5th March 2014 Melbourne 2
Binh Dinh: mostly ilmenite deposits, low RZ
Thai Nguyen: rock ilmenite
Binh + Ninh Thuan: large, high RZ deposits
Ha Tinh to Quang Ngai: high RZ deposits
The mineral sands sector in Vietnam is best considered as four distinct regions.
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The dominant region for ilmenite production is Binh Dinh.
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Ilmenite produc$on by region: 2012
0%
10%
20%
30%
40%
50%
60%
70%
Binh Dinh Ha Tinh -‐ Quang Nam
Binh+Ninh Thuan
Thai Nguyen
Binh Dinh 24%
Ha Tinh -‐ Quang Nam 14%
Binh+Ninh Thuan 45%
Thai Nguyen 17%
Ilmenite resources by region: 2012 (excluding Red Sands)
ProducLon is influenced by provincial policies as well as size and quality of resources.
Share of total producLon
Share of total ilmenite resources
Source: MONRE, Sonminerals
Source: MONRE
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Ilmenite production growth has been driven, in large part, by new producers commencing in Binh Dinh.
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ProducLon : 200.000 MT
ProducLon : 60.000 MT
0
5
10
15
20
25
Binh Dinh Ha Tinh -‐ Quang Nam
Binh+Ninh Thuan
Thai Nguyen
Producing companies, by region: 2013
This mode of expansion has created a very fragmented industry structure.
• Vietnam has about 7% global share and has more than 40 producers.
• The largest producer in Vietnam has less than 1% of global market share.
• Ilmenite producLon growth has been driven
by the ready granLng of new mining leases by the Binh Dinh provincial government.
• More stringent rules for licencing and renewing licences is resulLng in this number declining.
Number of companies
Source: Sonminerals
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These companies have established themselves with very low capex.
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• Low costs are essential to profitably mine the low grade ores which are typical in Vietnam.
• Most deposits in Vietnam average less than 1.5% HM – which is below the cut-off grade for most producers outside Vietnam.
• Producers have benefited from low labour costs to achieve very low production costs.
• Chinese traders offer a low cost path to market.
%HM %RZ
Binh Dinh 1.5 3
High RZ provinces 0.8 17 Source: MONRE, Sonminerals
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Vietnam’s ilmenite exports saw a sharp slowdown in 2013.
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• The recent slowdown in China has inevitably had an impact on Vietnamese exports. • A second major impact has been the ilmenite “export halt” of mid 2012.
‘000 tonnes ilmenite
Exports of ilmenite: 2000 to 2013e
-‐
200
400
600
800
1,000
1,200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
China Japan
Source: Global Trade Atlas, Son Minerals esLmates
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Three influences underpin this decline:
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• Decline in demand, especially from China
• The export “bans” on unprocessed ilmenite
• Declining margins
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The Vietnamese government is determined to foster domestic TiO2 processing.
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• This is expressed in the Master Plans. These are drawn up for each industry sector, every five years or so.
• The First Master Plan for mineral sands was released in 2006.
• Under this plan, by 2010 more than 90% of domesLc ilmenite producLon would be processed to slag in domesLc faciliLes.
• To encourage progress in this direcLon, export taxes have been levied.
• And, from Lme to Lme, export restricLons have been imposed.
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A brief history of export bans
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First Master Plan + 20% export tax. Zircon sand exports banned by 2010.
Second Master Plan, ilmenite export tax raised to 40%.
Ilmenite exports halted and export tax raised to 30%
Ilmenite exports halted
-‐
200
400
600
800
1,000
1,200
2006 2007 2008 2009 2010 2011 2012 2013
Source: Sonminerals
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The 2013 export ban has been watered down and appears to have had little effect on exports.
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‘000 tonnes exported
Half yearly exports of ilmenite from Vietnam: H1 2011 to H2 2013
• Since the announcement of the 2013 export halt, government and producers have worked to find a compromise.
• The result is a system of export quotas.
• These quotas were assigned to each company on the basis of their stated stocks on the ground at the Lme of the quote being granted.
Source: Global Trade Atlas, Son Minerals esLmates
0
100
200
300
400
500
600
700
800
H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 H2 2013
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The biggest cause of export decline may be falling margins.
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• The graph shows estimated margins for a Binh Dinh ilmenite mine with HM of 1.2%.
• In 2012 prices were over $250/t and export tax 20%.
• At the end of 2013, prices were $170/t and the export tax 40%.
• Many producers are now finding it hard to cover costs.
• In response, as of January 2014, the export tax has been lowered to 30%. Source: Son Minerals cost model
-‐25%
-‐20%
-‐15%
-‐10%
-‐5%
0%
5%
10%
15%
20%
25%
30%
H1 2012 H1 2013 Q4 2013
net revenue on gross revenue
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Two pathways for the Vietnamese mineral sands sector
Ilmenite supplier to China
• The growth path for the industry has been low cost mineral production exported directly to China.
• Many producers see most value in continuing down this path.
• The VN government is steering the sector towards slag and pigment manufacture.
• The aim is to build a major domestic processing and manufacturing industry.
Domestic TiO2 processor
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The new Master Plan’s downstream processing targets are very ambitious.
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Period Titanium slag
Synthe$c ru$le
Milled zircon
TiO2 Pigment
Ferro Titanium
Titanium metal
by 2020 990 120 195 240 20 20
• The Plan takes a very positive view of the growth prospects for Vietnam and its neighbors over the next decade. • It foresees a threefold increase in ilmenite output (from 2012 levels) by 2020. • Milled zircon production is expected to increase fivefold due to the shift towards high RZ deposits in the Binh+Ninh Thuan region, and the milling of imported zircon sand. • Downstream processing is forecast to rise from about 5% of total ilmenite production to nearly 100%.
Plan targets for annual domes$c produc$on (all figures in ‘000 tonnes)
Source: Second Master Plan
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But progress on downstream processing is very slow.
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• The most recent slag plant was commissioned in 2011.
• Total domesLc capacity slag-‐making capacity is 80kt/a, which could at best process only 15% of naLonal ilmenite output even at current reduced producLon rates.
• There are two new slag plants being seriously considered but neither are yet in the “likely to proceed” category, partly due to the slag price.
• A Vietnamese pigment plant seems a long way off.
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What of the future?
• The naLonal government will conLnue to pursue its downstream processing goals.
• Producers will conLnue to seek concessions to allow ilmenite exporLng.
• Industry consolidaLon should occur slowly, as will technical improvements in mining and processing.
• Deposits with elevated zircon and ruLle will ahract most interest, and as a result the centre of producLon will move from Binh Dinh to Binh Thuan.
• As always, the market price will be the strongest driver of producLon.
Production center of
gravity will move south
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Thank you www.sonminerals.com
Contact us : In Vietnam In Australia Hoanh Son Nguyen MarLn Lynch Chairman Director E: [email protected] [email protected] C: +84 912 019 851 C: +61 439 906 664