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Prepared for the Ministry of Energy, Industry & Minerals (MEIM) in Saudi Arabia MEIM VRO Knowledge Sharing Session Minerals & Mining: Basics, Global, Regional and KSA - specific context Document for discussion March 20 th , 2018

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Prepared for the Ministry of Energy, Industry & Minerals (MEIM) in Saudi Arabia

MEIM VRO Knowledge Sharing Session

Minerals & Mining: Basics, Global,

Regional and KSA-specific context

Document for discussion

March 20th, 2018

2

Agenda

1 Why we are here

2 Minerals & Mining landscape: Basics, Global, Regional and KSA-specific context

3

The objective of the M&M knowledge sharing session is to increase the

awareness level of this critical sector and its contribution to the economy

Source: MEIM VRO, Arthur D. Little analysis

Why we are here

“Minerals & Mining Landscape in Saudi Arabia”

MEIM VRO

Knowledge Sharing SessionM&M Sector OverviewBasics, key definitions, value chain

M&M Global / Regional TrendsMajor players, future trends, deep-dives on

selected commodities relevant to the Kingdom

M&M Landscape in Saudi ArabiaAmbition, GDP contribution, targets, initiatives,

quick wins, key considerations, success factors

Q&As / Panel DiscussionRecap of key messages, required support

50minutes

30minutes

30minutes

10minutes

4

Agenda

2 Minerals & Mining landscape: Basics, Global, Regional and KSA-specific context

2.1 M&M overview: basics, key definitions, value chain

2.2 M&M: Global and Regional trends

2.3 M&M landscape in Saudi Arabia: current state and Strategy 2035

2.4 Q&A: Recap of key messages

5

M&M overview: basics, key definitions, value chain

What do we plan to cover in this chapter?

M&M overview: basics, key definitions, value chain

Provide you with an overview of mining operations and overall Life Cycle

of a Mine

Discuss what we consider by the Minerals and Mining Landscape

Go through a deep-dive case study throughout the Mining Value Chain:

how to mine iron ore and produce iron ore pellets

Discuss examples of Mining Value Chains for other Metals / Minerals

6

Mining is a high impact, long-term and big business

M&M overview: basics, key definitions, value chain

Equipment this big.... in mines this big....to produce something

this big

$30m-$120m $$$$$$5m-$75m/yr

7

which can get very messy !

Note: Red Hills Lignite Mine in Choctaw County Mississippi

Source: Mississippi Development Authority

M&M overview: basics, key definitions, value chain

whilst doing this..... but leaving this

8

and is hardly the cleanest way to do business....

Note: Cerrejon site in colombia – picture on left shows multi-seam operation, picture on roght shows a reclaimed portion of the site

Source: Mining Technology; BHP

M&M overview: basics, key definitions, value chain

from noise and dirt..... to peace and tranquility

Beauty is in the eye of the beholder

9

Stages and Costs in the Life Cycle of a Mine

Source: Hartman & Mutmansky 'Introductory Mining Engineering' 2002; Behre Dolbear

M&M overview: basics, key definitions, value chain

Prior to Mining Actual Mining Post Mining

Prospecting Exploration Development Exploitation Reclamation

Search for Ore mineral

deposits

Direct or Indirect

Methods

Locate favorable

location

Air – aerial

photography, satellite

imagery

Surface – ground

geology, geophysics

Spot anomaly, analysis

and evaluate

Defining extent & value

of ore body

Sample (drilling or

excavation)

Estimate tonnage &

grade

Value Deposit

Feasibility study – make

decision to abandon or

develop

Opening up ore deposit

for production

get mining rights

file environmental

impact/ technology

assessment

construct

transportation access

system

locate surface plant,

construct facilities

excavate deposit

(strip or sink shaft)

Large scale production of

ore from mine

factor in choice of

method (geologic,

geographic, economic,

environmental, social,

safety)

type of mining

method (surface or

underground

monitor costs &

economic payback

Restoration of Site

removal of plant and

buildings

reclamation of waste

and tailing dumps

monitoring of

discharges

1-3 yr 2-5 yr 2-5 yr 10-30 yr 1-10 yr

$0.2m-$10m $1m-$15m $10m-$500m $5m-$75m/yr $1m-$20m

10

M & M landscape: key commodities

M&M overview: basics, key definitions, value chain

Final products – iron ore

fines, lumps and pellets

used in steelmaking

Iron ore Pellets are the

Focus of the following

detailed mining example

(excluding precious

metals)

Aluminum

Copper

Lead

Nickel

Tin

Titanium

Zinc

Gold

Silver

Platinum, including

Platinum Group

Metals:

– ruthenium

– rhodium

– palladium

– osmium

– iridium

17 elements / metals,

including:

Cerium (Ce)

Dysprosium (Dy)

Erbium (Er)

Europium (Eu)

Gadolinium (Gd)

Chemical raw

materials

– Apatite & Halite

Metallurgical raw

materials

– Refractory clays

& Limestone

Construction

materials

– Granite &

Ceramic

Non-metallic non-

ore raw materials

– Industrial

crystals, Precious

& Semiprecious

stones

Iron ore groupMajor non-

ferrous metalsPrecious metals

Rare-earth

elements / metals

Major non-

metallic minerals

11

Global Mining landscape: key numbers

M&M: Global and Regional trends

Iron Ore Alumínio

Copper Zinc Nickel Gold

0

4,000

2,000

6,000

Kt

Rusal

3,601

Rio Tinto

3,380 3,361

18% 25%40% 41%

13% 37%31% 40%25% 30%27% 40%

0

200

300

100

295

Mt

BHP

245

Rio TintoVale

Aluminum

2

0

1

3

Glencore

1.226

Mt

1.7371.831

Codelco Freeport-

McMoran

0

100

2,230 Mt

200

300

Kt

Vale

260

MMC Norilsk

Nickel

BHP

154

0.0

1.5

1.0

0.5

1,0731,100

350

Kt

Nyrstar

764

Hindustan

Zinc

Korea Zinc

Group

0.0

2

4

6

Anglogold

Ashanti

Moz

4.9

Barrick

Gold

Newmont

3.63

200

0

100 90

141

BHP

Current Capital Stock (US$ B) – November 2017

Rio TintoVale

53

57,600 Kt

3,100 t2,250 Kt11,900 Kt19,400 Kt

%

Top 3

EBITDA1

Margin

285

Worldwide

Production

Top global mining companies (2017)

5.52

Glencore

52Aluminum

Corp. of China

Top 3 companies per ore represented ~15-40% of the 2016 worldwide production depending on commodity

12

Iron and iron ore products

What is iron ore? Types of iron ore products

M&M overview: basics, key definitions, value chain

Source: ADL analysis

Iron ...

… is a metallic element found in rocks and

minerals

… shows a colour range from dark grey to

rusty red

… is usually extracted in open-cast mines

… is identified as Fe on periodic table of

elements

… composes ~ 5% of world's crust

… is ranked fourth in abundance in earth's

crust and

… is second most abundant metal (after

aluminium)

… makes up 0.006% of human body

(blood)

… is mainly mined by Vale, BHP and Rio

Tinto

Lumps with particles > 4.75mm

Fines and lumps separated from same ore by

screening and sorting

Higher-grade lumps can be directly fed into

blast furnace, in particular interesting at high

steel demand

Pellets are made from fine iron ore concentrate,

rolled with binder in balls and passed through

furnace (diameter: 9.55–16mm)

Highest productivity, in particular desirable at high

demand

Fines with particles < 4.75mm

Need to be sintered before charged to blast

furnace

Many steel makers have own efficient sintering

plants installed (should run at high capacity)Fines

Pellets

Lumps

13

Chemical structure: Fe3O4

Ore body usually of very low grade (~20 – 30% Fe)

Magnetite must be upgraded to make it suitable

for steelmaking

Once upgraded, magnetite concentrate has a higher

iron content than hematite and can be sold at a

premium

Accounts for approximately 50% of global iron ore

production

Production is prevalent in North America, China, the

CIS and Europe

Magnetite

Open pit mine operations and terminology: Magnetite vs hematite

M&M overview: basics, key definitions, value chain

Chemical structure: Fe2O3

Ore body usually of very high grade (58 – 65% Fe)

Hematite, known as DSO (Direct Shipping Ore), is

crushed and screened prior to shipping into lump and

fines.

Lump is directly fed into the blast furnace, whilst

the fines are converted to either sinter or pellets prior

to addition to the furnace

Production is prevalent in Australia (more than 95% of

total production)

Source: Mineral Engineering Technical Services report; ADL analysis

Hematite

14

Open pit mine operations and terminology

Section through an open pit in an idealized tabular ore body

M&M overview: basics, key definitions, value chain

FINAL PIT OUTLINE ACTIVE PIT OUTLINE

Berm

Inte

rval

Berm Width

Berm

Slope

Angle Pit Floor

Crest of

Bench

Toe of

Bench

Bench

Bench

Face

Bench

Slope

Angle

Bench

Height

Overall Pit Slope Angle

Ore body

Footwall

Structure

Governed by specifications

of operating machines and

by mining regulations

Berm is governed by

geotechnical configuration

of the slope

Haul Road width governed

by required capacity of

road and type of haulage

unit

Term explanation

in glossary

Road and Ramp Width

Source: SME Mining Engineering Handbook

15

Iron ore processing operations

What are pellets and why they are important

Pellets are created by balling very fine ore with a

suitable binder, then burning the resultant balls into

spheres of nominally 8-20mm diameter

Pellets may also contain fluxes to aid smelting.

Pellets are used in blast furnaces as an alternative to

lumps, fines and sinter

Size standardization – uniform size range which is

between 8-18mm 63-68% iron content

A high and uniform porosity of 25-30% allows fast

reduction and high metallization rates

High and uniform mechanical strength, even

under thermal stress in reducing atmospheres

Easy handling and transportation- it has lower

degradation under abrasive influences and thus it is

more transportable. It has also good resistance to

disintegration

Approx. 35-40% less heat required than sintering

Uniform chemical composition & very low loss on

ignition

Pellets Why pelletize?

M&M overview: basics, key definitions, value chain

Source: Mineral Engineering Technical Services report; ADL analysis

16

This is how the typical overall value chain looks like

Pit value chain Mill value chain

M&M overview: basics, key definitions, value chain

Source: ADL analysis

PlanningDrilling

blastingExcavation Haulage Railroad Crushing

Benefi-

ciation

Pelleti-

zing

17

Iron ore – open pit mining value chain: Pit Value Chain

M&M overview: basics, key definitions, value chain

PlanningDrilling

blastingExcavation Haulage

Production

GoalExplore and find ore with enough

iron content, plan pit shape to

extract ore of a quality needed

Break up ore to make it soft

enough for excavation, crush the

ore

Load ore into the truck. Separate

ore from topsoil and other waste,

not allow big stones to go into

production

Transport ore or topsoil to the

assigned destinations

Key

competences

Geological testing, mine process

planning, pit shape design, road

building

Drilling, explosives loading,

blasting, coordination with

planning, equipment service and

repair

Rock breaking, excavation,

loading, equipment service and

repair

Truck alignment, truck service

and repair

1 2 3 4

PreparationDrill planning Truck checksProspecting1a 2a 3a 4a

Excavation

site assessmentExploration

Drill bench

preparationLoading and trucking1b 2b 3b 4b

ExcavationDrilling Ore quality checkMine planning1c 2c 3c 4c

Future drill

bench preparationBuilding the pit

Loading the

explosivesWaste stockpiling1d 2d 3d 4d

Defining extent &

value of ore body

People and

equipment evacuation

Dry magnetic

separation1e 2e 4e

Drilling site

preparationBlasting Lump ore stockpile1f 2f 4f

Source: ADL analysis

18

Iron ore – open pit mining value chain: Mill Value Chain

Railroad Crushing Beneficiation Pelletizing

Production

GoalTransport ore long-distance to

further processing

Break the ore into small pieces

for further processing and

screening them for desired size

Produce iron concentrate of 68%

by removing non-ore particles

from material

Produce and harden pellets of the

right size that could be efficiently

transported and used in steel

making

Key

competencesRailway building, locomotive

service and repair

Crushing, screening, equipment

service and repair

Grinding, magnetic separation,

desliming, tail management,

equipment service and repair

Agglomeration, screening firing,

equipment service and repair

5 6 7 8

MillingPrimary crushing FilteringDump car arrival

& loading5a 6a 7a 8a

Wet magnetic

separation

Loading quality check

& transportationSecondary crushing

Raw material

preparation5b 6b 7b 8b

ClassificationGrinding AgglomerationUnloading5c 6c 7c 8c

DeslimingGrinding Screening6d 7d 8d

Firing8eWaste management7e

Thickening7f

M&M overview: basics, key definitions, value chain

Source: ADL analysis

19

Pit Value Chain starts with planning

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Drilling

blastingExcavation Haulage

Production

GoalExplore and find ore with enough

iron content, plan pit shape to

extract ore of a quality needed

Break up ore to make it soft

enough for excavation, crush the

ore

Load ore into the truck. Separate

ore from topsoil and other waste,

not allow big stones to go into

production

Transport ore or topsoil to the

assigned destinations

Key

competences

Geological testing, mine process

planning, pit shape design, road

building

Drilling, explosives loading,

blasting, coordination with

planning, equipment service and

repair

Rock breaking, excavation,

loading, equipment service and

repair

Truck alignment, truck service

and repair

2 3 4

PreparationDrill planning Truck checksProspecting1a 2a 3a 4a

Excavation

site assessmentExploration

Drill bench

preparationLoading and trucking1b 2b 3b 4b

ExcavationDrilling Ore quality checkMine planning1c 2c 3c 4c

Future drill

bench preparationBuilding the pit

Loading the

explosivesWaste stockpiling1d 2d 3d 4d

Defining extent &

value of ore body

People and

equipment evacuation

Dry magnetic

separation1e 2e 4e

Drilling site

preparationBlasting Lump ore stockpile1f 2f 4f

Planning1

PlanningDrilling

blastingExcavation Haulage

20

1a 1b 1c

Planning: Before the mining job starts

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Prospecting Exploration Mine planning

Requirement is to have a mental image of the

target—the deposit being sought

A fundamental aspect of ore search revolves

around the question of where ores were

formed and what is their style of occurrence.

Search for deposits should be done for surface

indications of ore mineralization by

– Air – aerial photography, satellite

imagery

– Surface – ground geology, geophysics

(magnetic, electromagnetic, gravity)

– Spot anomaly, analysis and evaluate

– Explorational models

Goal is to define the extent & value of ore

body

Geologic maps and geologic mapping are

fundamental to exploration. They provide the

basis for recognizing geologic target conditions

Use exploration methods including sample

drilling or excavation for

– Estimating tonnage & grade

– Valuing the deposit

Laboratory support is needed for sample

analysis

Greenfields exploration – virgin/under

explored terrain, high risk, high cost

Brownfields exploration – near mine

exploration, lower risk, lower cost

Sophisticated techniques and software are

used to model the ore body and plan the pit

size, depth and layout

Appropriate mining technique is selected

Infrastructure requirements are finalized

– Size and balance of mining equipment

fleet

– Scale of processing and treatment plants

– Sources of energy and water

– Logistics issues

Long-term plan of a pit is done either

internally or externally

Pit sizes and shape could be determined by

local regulator

PlanningDrilling

blastingExcavation Haulage

21

Planning: Pit planning and drilling preparation

Source: ADL analysis

M&M overview: basics, key definitions, value chain

1d 1e 1fBuilding the pitDefining extent of ore

body in a specific pit area

Drilling site

preparation

Clearing the site of trees and shrubs

and then removing the stumps and

roots

Installing erosion and sediment

controls

Building ditches, diversions, terraces,

and down drains.

Installing mining lighting if necessary

Building roads

Building other necessary infrastructure

(rail, ports, processing mills)

Sample/pattern drilling and/or

excavation on a pre-determined grid

spacing is done to more accurately

delineate ore reserves

Estimating possible tonnage, grade of

ore, amount of topsoil, strip ratio from

specific place in the pit

Communication with mine operations

to be done for further planning

Levering the ground in the pit with

graders

Building and levering path for drill

machines

Clearing the bench

PlanningDrilling

blastingExcavation Haulage

22

Strip ratio is an important parameter for every pit

Source: Open Pit Mining 101: What You Need To Know, Goldman Sachs; ADL analysis

M&M overview: basics, key definitions, value chain

PlanningDrilling

blastingExcavation Haulage

The strip ratio refers to the amount of additional waste material that must be

removed in order to provide a ton of ore to the processing plant.

Because of the vertical advance of a pit downwards, all the material from a

bench must be removed before the following bench can be excavated.

Material classified as ore by definition has sufficient mineral abundance to

generate a notional profit when allowing for mining, processing and

administration charges.

The strip ratio is an inherent and unique parameter of each mine, which can

greatly impact the cost (and therefore profitability) of extracting ore.

Intrinsic continuity/complexity of the mineralization

– Unique for every ore body

The overall pit slope

– Not only ore should be moved but also material surrounding it

– Pit designs are driven by profit optimization process

– Given an average mine life is greater than five years the economics of a

project can change substantially during that time and so will pit design

Strip ratio

Factors driving strip ratio

23

Ore body

1

5

43

21

5

4

3

2

1

5

4

3

2Stripping

volume

Time

Ore body

Stripping

volume

Time

11

7

5

4

3

2

6

5

4

3

2

6

7

1

5

4

3

2

6

7

Ore body

1

6

4

3

2

1

6

5

4

3

21

7

54

3

2

65

Stripping

volume

Time

Dis

ad

va

nta

ges

Ad

van

tages

Meth

od Each bench of ore is mined in sequence, and

all the waste on the particular bench is

removed to the pit limit

The operating working space available

All equipment n the same level

No contamination from waste blast above

the ore

Equipment requirements are at minimum

towards the end of the mine’s life

Overall operating costs are a maximum

during the initial years of operation when

maximum repayment of capital

The working slopes of the waste faces are

essentially maintained parallel to the overall

pit slope angle

Allows for maximum profit in the initial

years of operation and greatly reduces the

investment risk in waste removal for ore to

be mined at a future date

There is an impracticality of operating a

large number of stacked, narrow benches

simultaneously to meet production needs

Waste is removed at a rate approximated

by the overall stripping ratio. The working

slope of the waste faces starts very shallow,

but increases as mining depth increases

From an advantage and disadvantage point

of view, this method is a compromise that

removes the extreme conditions of the

former two stripping methods.

Equipment fleet size and labor requirements

throughout the project life are relatively

constant

Strip ratio impacts profit significantly: 3 mining methods

Source: SME Mining Engineering Handbook; ADL analysis

M&M overview: basics, key definitions, value chain

Declining stripping ratio

method

Increasing stripping ratio

method

Constant stripping ratio

method

PlanningDrilling

blastingExcavation Haulage

24

Ore is extracted by drilling and blasting

Source: ADL analysis

M&M overview: basics, key definitions, value chain

PlanningDrilling

blastingExcavation Haulage

Excavation Haulage

Production

GoalExplore and find ore with enough

iron content, plan pit shape to

extract ore of a quality needed

Load ore into the truck. Separate

ore from topsoil and other waste,

not allow big stones to go into

production

Transport ore or topsoil to the

assigned destinations

Key

competences

Geological testing, mine process

planning, pit shape design, road

building

Rock breaking, excavation,

loading, equipment service and

repair

Truck alignment, truck service

and repair

3 4

Preparation Truck checksProspecting1a 3a 4a

Excavation

site assessmentExploration Loading and trucking1b 3b 4b

Excavation Ore quality checkMine planning1c 3c 4c

Future drill

bench preparationBuilding the pit Waste stockpiling1d 3d 4d

Defining extent &

value of ore body

Dry magnetic

separation1e 4e

Drilling site

preparationLump ore stockpile1f 4f

Planning1Drilling

blasting

Break up ore to make it soft

enough for excavation, crush the

ore

Drilling, explosives loading,

blasting, coordination with

planning, equipment service and

repair

2

Drill planning2a

Drill bench

preparation2b

Drilling2c

Loading the

explosives2d

People and

equipment evacuation 2e

Blasting2f

25

Iron ore is extracted and fragmented by

drilling and blasting: Drilling part

Source: SME Mining Engineering; ADL analysis

M&M overview: basics, key definitions, value chain

2a 2b 2cDrill planning Drilling

Mine surveyors manage the pit drill

map

Pit is examined

Drill holes are surveyed and laid out

Distance between holes is planned to

be around 6-10 meters depending on

soil hardness

Bench is cleaned by excavator and

levered by bulldozer

Power lines are built in case electrical

drills are used

Drills are transported to the drill site

Drilling speed varies around 5-10 m

per minute

One to two people operate a drill

Holes drilled are 10-20 meter deep

usually drilled in a single pass

After drilling is done hole length and

drilling quality to be examined

PlanningDrilling

blastingExcavation Haulage

Drill bench

preparation

26

Iron ore is extracted and fragmented by

drilling and blasting: Blasting part

Source: SME Mining Engineering; ADL analysis

M&M overview: basics, key definitions, value chain

PlanningDrilling

blastingExcavation Haulage

2d 2e 2fLoading the explosives Blasting

Liquid explosives are usually used

Special trucks load explosives into the

drill holes

Filling with explosives is done from the

bottom of the hole to avoid air jams

Detonators should be installed in a

way to maintain the desired firing

order and time

Power lines in the blast area are

dismantled

Equipment is evacuated to the safe

part of the pit, Evacuation distance

depends on the amount of blasting,

company's policies and regulation

People are evacuated from the pit

Blast!!!

Mine surveyors check the blasting

results determining ore and waste soil

Reblasting is needed sometimes if the

blast quality is not good enough

Depending on the blast results check

excavator operator could assign

destination to trucks when haulage

starts

People and

equipment evacuation

27

Drill holes for explosives used to break rock prior to excavation

Most drills are diesel, however there are several electrical models

The drilling of large diameter holes is done predominantly with

rotary blast hole drills

High pulldown loads require a heavy tower structure

Main Players What it is typically used for and how

After acquisition

of Bucyrus in mid

July 2011

Prices range from $2.5m to $5m

Open pit drilling: equipment overview

M&M overview: basics, key definitions, value chain

Source: Companies' brochures; ADL analysis

PlanningDrilling

blastingExcavation Haulage

28

Most companies offer a complete range of products including

– Different types of detonators (non-electric, electric, electronic)

– Explosives bulk system

– Explosives delivery systems

– Blast based services – systems that manage the blasting from

blast planning to assessing blasting results

Explosives are delivered to the drill hole by Mobil Manufacturing

Units (MMUs) and either pumped or augerered inside the hole

Explosives could sensitized – filled with air bubbles or other agent

and non-sensitized

Depending on explosives type and weather conditions explosives

can stay inside the hole before blasting up to 3-4 weeks

Explosives solutions overview

Main Players What it is typically used for and how

M&M overview: basics, key definitions, value chain

Source: Companies' brochures; ADL analysis

PlanningDrilling

blastingExcavation Haulage

29

Excavators load ore into trucks

Source: ADL analysis

M&M overview: basics, key definitions, value chain

PlanningDrilling

blastingExcavation Haulage

Haulage

Production

GoalExplore and find ore with enough

iron content, plan pit shape to

extract ore of a quality needed

Transport ore or topsoil to the

assigned destinations

Key

competences

Geological testing, mine process

planning, pit shape design, road

building

Truck alignment, truck service

and repair

4

Truck checksProspecting1a 4a

Exploration Loading and trucking1b 4b

Ore quality checkMine planning1c 4c

Building the pit Waste stockpiling1d 4d

Defining extent &

value of ore body

Dry magnetic

separation1e 4e

Drilling site

preparationLump ore stockpile1f 4f

Planning1Drilling

blasting

Break up ore to make it soft

enough for excavation, crush the

ore

Drilling, explosives loading,

blasting, coordination with

planning, equipment service and

repair

2

Drill planning2a

Drill bench

preparation2b

Drilling2c

Loading the

explosives2d

People and

equipment evacuation 2e

Blasting2f

Excavation

Load ore into the truck. Separate

ore from topsoil and other waste,

not allow big stones to go into

production

Rock breaking, excavation,

loading, equipment service and

repair

3

Preparation3a

Excavation

site assessment3b

Excavation3c

Future drill

bench preparation3d

30

Site is cleaned by

bulldozers and graders

Road us built or

repaired if necessary to

give access to drill

machines

Soft material will be

fragmented more by the

cutting action of the loading

machine

Material is loaded into

arriving trucks

The bigger the shovel and

truck the more effective

the excavation process

Most effective is loading

truck with 2-4 passes

Road is rebuilt after the

blast

Power lines are rebuilt in

case electrical excavators

are used

Excavator check is

performed

Excavator is transported to

the site

Boarders of excavator job

are determined

Big stones are taken away

Topsoil and other waste is

loaded by excavator and

removed by trucks

Excavation process overview

Source: ADL analysis

M&M overview: basics, key definitions, value chain

PlanningDrilling

blastingExcavation Haulage

PreparationExcavation site

assessmentExcavation

Future drill

bench preparation3a 3b 3c 3d

31

Excavation in pictures

Source: ADL analysis

M&M overview: basics, key definitions, value chain

PlanningDrilling

blastingExcavation Haulage

Electric shovel removes big

stones from excavation siteElectric shovel bucket

Shovel crushes mining material

with the bucket

Shovel loads the bucketShovel loads

material into truckExcavation site from above

32

What it is typically used for and how

Acquired Bucyrus in July

2011 to get full line of

electric and hydraulic

shovels

Prices range from $3m to $12m

Hydraulic shovels overview

M&M overview: basics, key definitions, value chain

Source: Companies' brochures; ADL analysis

PlanningDrilling

blastingExcavation Haulage

A mining shovel is a specialized piece of heavy excavating

equipment typically used to dig and load ore

Shovels used in iron ore mining are hydraulic (mostly

diesel operated) and electric

In 1997 hydraulic excavators matched electric shovels for

the first time in annual bucket capacity shipped. The ratio

is now 3 or 4 to 1 in favor of hydraulics

Main Players

33

Trucks take ore to the mill, conveyor or rail

Source: ADL analysis

M&M overview: basics, key definitions, value chain

PlanningDrilling

blastingExcavation Haulage

Production

GoalExplore and find ore with enough

iron content, plan pit shape to

extract ore of a quality needed

Key

competences

Geological testing, mine process

planning, pit shape design, road

building

Prospecting1a

Exploration1b

Mine planning1c

Building the pit1d

Defining extent &

value of ore body1e

Drilling site

preparation1f

Planning1Drilling

blasting

Break up ore to make it soft

enough for excavation, crush the

ore

Drilling, explosives loading,

blasting, coordination with

planning, equipment service and

repair

2

Drill planning2a

Drill bench

preparation2b

Drilling2c

Loading the

explosives2d

People and

equipment evacuation 2e

Blasting2f

Excavation

Load ore into the truck. Separate

ore from topsoil and other waste,

not allow big stones to go into

production

Rock breaking, excavation,

loading, equipment service and

repair

3

Preparation3a

Excavation

site assessment3b

Excavation3c

Future drill

bench preparation3d

Haulage

Transport ore or topsoil to the

assigned destinations

Truck alignment, truck service

and repair

4

Truck checks4a

Loading and trucking4b

Ore quality check4c

Waste stockpiling4d

Dry magnetic

separation4e

Lump ore stockpile4f

34

Important value driver.

The time to perform truck checks and

consequences of car breakdown have

huge impact on truck availability and

consequently on utilization and

productivity

Truck is aligned with the excavator

Loading is done by excavator

Truck driver is assigned with final

destination (topsoil to the storage or

to the ore quality check)

Assignment could be done

automatically by mine management

system or by operator

Truck stops under special mechanism

to check the ore quality

Check is based on magnetic properties

of ore

Depending on the ore quality the place

of truck unloading is determined

This could be waste stockpile,

magnetic separation machine or lump

ore stockpile

Trucking process overview (I)

Source: ADL analysis

M&M overview: basics, key definitions, value chain

PlanningDrilling

blastingExcavation Haulage

4a 4b 4cTruck checks Ore quality checkLoading and haulage

35

Trucking process overview (II)

Source: ADL analysis

M&M overview: basics, key definitions, value chain

For top soil or low quality ore truck is

redirected to the waste stockpile

Stockpiles are determined by mine

plan

After unloading truck returns to the

pit

For below average quality ore truck is

unloaded at dry magnetic separation

station

Ore is crushed, screened and than dry

magnetic separation takes place

After processing ore unloaded by

conveyor belt to the lump ore

stockpile, while waste is removed to

the waste stockpile

Could be performed immediately after

excavation or at the mill

Ore in unloaded from the truck or

transported from dry magnetic

separation machine

Ore during unloading is mixed in a way

to maintain average amount of iron in

% to keep ore quality constant for mill

processing

PlanningDrilling

blastingExcavation Haulage

4d 4e 4fWaste stockpiling Lump ore stockpileDry magnetic

separation

36

Trucks are used to carry ore from the pit to the mill or

transportation station

Mining trucks are often the largest portion in terms of $ spent per

ton of ore processed of

equipment spending in a mine

Truck maintenance and repair are among the main issues in open

pit mining

Prices range from $1m to $6m

Trucks overview

Main Players What it is typically used for and how

M&M overview: basics, key definitions, value chain

Source: Companies' brochures; ADL analysis

PlanningDrilling

blastingExcavation Haulage

37

Railway is one of the ways to transport ore to the mill

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Crushing Beneficiation Pelletizing

Production

GoalTransport ore long-distance to

further processing

Break the ore into small pieces

for further processing and

screening them for desired size

Produce iron concentrate of 68%

by removing non-ore particles

from material

Produce and harden pellets of the

right size that could be efficiently

transported and used in steel

making

Key

competencesRailway building, locomotive

service and repair

Crushing, screening, equipment

service and repair

Grinding, magnetic separation,

desliming, tail management,

equipment service and repair

Agglomeration, screening firing,

equipment service and repair

6 7 8

MillingPrimary crushing FilteringDump car arrival

& loading5a 6a 7a 8a

Wet magnetic

separation

Loading quality check

& transportationSecondary crushing

Raw material

preparation5b 6b 7b 8b

ClassificationGrinding AgglomerationUnloading5c 6c 7c 8c

DeslimingGrinding Screening6d 7d 8d

Firing8eWaste management7e

Thickening7f

Railroad5

Railroad Crushing Beneficiation Pelletizing

38

Railroad considerations

Railways is very capital intensive way of transportation

Only long term operations can support railway building

Loading station location is important because relocation

takes time and is expensive

Additional step of unloading from the truck and loading into

dump car is needed

Steep inclines with railways are not possible

Most mines do not use rail transportation to the mill

Best practice is to have in pit crusher and use conveyor belt

for pit to mill ore transportation

Railway is widely used to transport ore long distances to the

port

Railroads are widely used in mining in CIS

Railroad transportation: process overview

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Locomotive with dump cars arrives

to the mill

Ore is unloaded directly into the

crushing machine

Ore is loaded into the dump car by

excavator or front loader

Quality of ore loading should be checked

Very important not to overload the

dump car and load it evenly to avoid

overturning of the dump car on its way

Ore loading is checked

Locomotive transports ore to the

mill

Railroad Crushing Beneficiation Pelletizing

5a 5b 5c

Dump car arrival

and loadingOre unloading

Ore quality check

and transportation

Best practice

39

Railroad transportation in pictures

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Railroad Crushing Beneficiation Pelletizing

Train arrives

to the loading place

Shovel loads ore into the dump car

Wheel loaders are also used for that

Shovel loads ore into the dump car

Wheel loaders are also used for that

There could be many train lines on

different levels in different parts of the pitOre on a way to the mill Ore unloading into crusher

40

Railroad5

Ore should be crushed before beneficiation

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Railroad Crushing Beneficiation Pelletizing

Beneficiation Pelletizing

Production

GoalTransport ore long-distance to

further processing

Produce iron concentrate of 68%

by removing non-ore particles

from material

Produce and harden pellets of the

right size that could be efficiently

transported and used in steel

making

Key

competencesRailway building, locomotive

service and repair

Grinding, magnetic separation,

desliming, tail management,

equipment service and repair

Agglomeration, screening firing,

equipment service and repair

7 8

Milling FilteringDump car arrival

& loading5a 7a 8a

Wet magnetic

separation

Loading quality check

& transportation

Raw material

preparation5b 7b 8b

Classification AgglomerationUnloading5c 7c 8c

Desliming Screening7d 8d

Firing8eWaste management7e

Thickening7f

Crushing

Break the ore into small pieces

for further processing and

screening them for desired size

Crushing, screening, equipment

service and repair

6

Primary crushing6a

Secondary crushing6b

Grinding6c

Grinding6d

41

Crushing: process overview

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Railroad Crushing Beneficiation Pelletizing

Particles reduced to

several mm in size

After fine crushing final

screening takes place

Small enough particles

are transported by

conveyor belt to

beneficiation plant

Vibrating screens are used

for screening

Several stages of screening

is used to make the whole

process more effective

Big particles are separated

from small particles

Small enough particles are

sent for further processing

Big particles are send back

for recrushing

Cone crusher is used for

primary crushing

Unloading could be done

directly from the dump car into

crusher

Big particles (more than 1-1.5

meters) should be avoided as

they could damage the crusher

Primary crushing produces

particles of 150mm from

size of up to 1200mm

One cone (crusher main spare

part) could be used to crush

around 4 million tons, after

which it should be changed

Cone or jaw crushers are

used here

Secondary crushers are less

productive because of more

fine crushing, so more of

them should be used to

process same amount of ore

Transportation is done by

conveyor belt

Particles of size up to

200 mm are crushed to

the particles of size 50

mm

Primary

crushing

Secondary

crushingScreening Fine crushing6a 6b 6c 6d

42

Crusher is a piece of equipment that is used to reduce the intensity of solid

materials by using the external force to overcome the cohesion between

solid materials' molecules.

Mobile crushers are usually used on the pit and crushed material is

transported by conveyor belt to the mill, while stationary crushers are

installed at the mill.

There are several types of crushers that are used for different types of

material and during different stages of crushing. Among other types there

gyratory, cone, jaw, vertical impact and roll crushers

Screens separate a flow of material into grades, these grades are then either

further processed or go back to another stage of crushing

There are several types of screens used for different purposes

Main Players

Crusher vary from $1m to $6m depending on

type, size, capacity and specification

Crushers & screens overview

What it is typically used for and how

M&M overview: basics, key definitions, value chain

Source: Companies' brochures; ADL analysis

Railroad Crushing Beneficiation Pelletizing

43

Beneficiation increases iron content to 68-70%

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Railroad Crushing Beneficiation Pelletizing

Railroad5 Pelletizing

Production

GoalTransport ore long-distance to

further processing

Produce and harden pellets of the

right size that could be efficiently

transported and used in steel

making

Key

competencesRailway building, locomotive

service and repair

Agglomeration, screening firing,

equipment service and repair

8

FilteringDump car arrival

& loading5a 8a

Loading quality check

& transportation

Raw material

preparation5b 8b

AgglomerationUnloading5c 8c

Screening8d

Firing8e

Crushing

Break the ore into small pieces

for further processing and

screening them for desired size

Crushing, screening, equipment

service and repair

6

Primary crushing6a

Secondary crushing6b

Grinding6c

Grinding6d

Beneficiation

Produce iron concentrate of 68%

by removing non-ore particles

from material

Grinding, magnetic separation,

desliming, tail management,

equipment service and repair

7

Milling7a

Wet magnetic

separation7b

Classification7c

Desliming7d

Waste management7e

Thickening7f

44

Beneficiation: process overview (I)

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Railroad Crushing Beneficiation Pelletizing

Ore is moved to a grinder to

make a right consistent size for

further beneficiation process

Water is added at the stage

Grinded ore is easier to beneficiate

Several stages of grinding are usually

undertaken during beneficiation

process to make sure that all ore is

evenly grinded

Magnetic separators exploit the

difference in magnetic properties

between the ore minerals and are used

to separate magnetic mineral

from non-magnetic gangue

Water is added at this stage

Several stages of wet magnetic

separation are used between grinding,

classification and desliming procedures

Particles are classified according

to their size several times

Hydro cyclones are used for

classification

The oversize material is returned to

the grinding, while the undersize

proceeds to beneficiation steps

7a 7b 7cGrinding ClassificationWet magnetic separation

45

Beneficiation: process overview (II)

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Railroad Crushing Beneficiation Pelletizing

The goal of desliming is to

remove slimes from larger

particles with the aid of water

sprays

The process is based on a physical law

stating that particles of different sizes

sink with different speed

All the waste goes into tails

Water is added in the process

Waste from magnetic separation

and desliming includes tailings

that consist mostly of silicate rock

Ore content in tailing is measured to

make sure that it is not too high

These wastes are usually pumped into

special natural or human built tailing

impoundments

Final concentrate travels to

thickeners

Main goal of thickening is

removing water

The underflow from the thickeners is

pumped to a concentrate storage tank

On exit product contains

approximately 67% of iron and 9% of

water

7d 7e 7fDesliming ThickeningWaste management

46

Beneficiation process in pictures

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Railroad Crushing Beneficiation Pelletizing

Grinder Sketch of magnetic separator operation

Beneficiation mill Magnetic separators in operation

47

Mills are used to mill ore into small particles to allow further

processing

Ball mills: use metallic balls as grinding media, suitable for

regrinding or final grinding

Autogenous (AG) mills – do not need balls; use crushed ore as

grinding media; suitable for any stage of grinding

Semi autogenous (SAG) mills use both balls and ore as grinding

media, suitable for any stage of grinding

Rod mills use rods as grinding media. Suitable for final grinding

producing excellent results, however they need fine input

Main Players What it is typically used for and how

Grinder prices vary a lot from $1-2m to $10-12m

for AG/SAG mills depending on type, size,

capacity and specification

Grinding mills overview

M&M overview: basics, key definitions, value chain

Source: Companies' brochures; ADL analysis

Railroad Crushing Beneficiation Pelletizing

48

Pellets are fired to get necessary strength and qualities

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Railroad Crushing Beneficiation Pelletizing

Railroad5

Production

GoalTransport ore long-distance to

further processing

Key

competencesRailway building, locomotive

service and repair

Dump car arrival

& loading5a

Loading quality check

& transportation5b

Unloading5c

Crushing

Break the ore into small pieces

for further processing and

screening them for desired size

Crushing, screening, equipment

service and repair

6

Primary crushing6a

Secondary crushing6b

Grinding6c

Grinding6d

Beneficiation

Produce iron concentrate of 68%

by removing non-ore particles

from material

Grinding, magnetic separation,

desliming, tail management,

equipment service and repair

7

Milling7a

Wet magnetic

separation7b

Classification7c

Desliming7d

Waste management7e

Thickening7f

Pelletizing

Produce and harden pellets of the

right size that could be efficiently

transported and used in steel

making

Agglomeration, screening firing,

equipment service and repair

8

Filtering8a

Raw material

preparation8b

Agglomeration8c

Screening8d

Firing8e

49

Pelletizing: process overview

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Railroad Crushing Beneficiation Pelletizing

Pellets are screened

by roller screens for

separating undersized

and oversized pellets

to meet the size

specification

Undersized or oversized

pellets crushed and

returned to the balling

drums

Agglomeration is a process

when concentrate forms soft

pellets in a way snow sticks

together

Green pellets are formed either

in pelletizing discs or drums.

Drums are usually being

connected to roller screens used

for separating undersized pellets

which are returned to the drum.

Green pellet size can be precisely

adjusted by varying the

circumferential speed, feed or

water addition rates.

Desired size is 6-14mm

Disc filters are used to

dewater concentrate after

thickening procedure

Dewatering is needed for

further processing

Moisture content in

concentrate after disc vacuum

filter is around 9-11%

Pellet mass is prepared by

mixing ore with agents and

sometimes water

Small amounts of binding

agents such as bentonite

(approximately 0.5 %) help

formation of the pellet

Limestone, olivine and

dolomite (1–5 %) give the

pellets the proper physical and

metallurgical properties

needed in further processing.

Proportions should eb

maintained to avoid over or

under agglomeration

FilteringRaw material

preparationAgglomeration Screening8a 8b 8c 8d

50

Pelletizing in pictures

Source: ADL analysis

M&M overview: basics, key definitions, value chain

Railroad Crushing Beneficiation Pelletizing

Flow of grate-kiln-cooler

system

Flow of straight grate

system

Cross sectional sketch

of rotary kiln

Empty gratesPellets loaded into wagons

for shipping

Ready pellets on conveyor

belt

51

Only 6 out of 87 metal elements are "non-ferrous metals"Overview of main metal groups within standard periodic table

Source: research

M&M overview: basics, key definitions, value chain

Non-metal or unknown

chemical propertiesMetalloids

Non-ferrous

metals

Refractory

metals

Platinum

group metals

Rare earth

metalsOther metals

Focus of this presentation

57–71

89–103

1

H

34

Se

35

Br

36

Kr

15

P

16

S

17

Cl

18

Ar

6

C

7

N

8

O

9

F

10

Ne

2

He

53

I

54

Xe

85

At

86

Rn

114

Uuq

115

Uup

116

Uuh

117

Uus

118

Uuo

32

Ge

33

As

14

Si

5

B

51

Sb

52

Te

84

Po

Nickel

28 Ni

Copper

29 Cu

Zinc

30 Zn

Alumi-

nium

13 Al

Tin

50 SnLead

82 Pb

Niobium

41 Nb

Molyb-

denum

42 MoTantalum

73 Ta

Tungsten

74 W

Rhenium

75 Re

Ruth-

enium

44 Ru

Rhodium

45 Rh

Palla-dium

46 Pa

Osmium

76 Os

Iridium

77 Ir

Platinum

78 Pt

Scandium

21 Sc

Yttrium

39 Y

Lath-anum

57 La

Praseo-

dymium

59 Pr

Cerium

58 Ce

Neo-dymin

60 NdSama-rium

62 Sm

Prome-

thium

61 Pm

Europium

63 Eu

Terbium

65 Tb

Gado-

linium

64 Gd

Dyspro-

sium

66 Dy

Erbium

68 Er

Holmium

67 Ho

Ytterbium

70 Yb

Thilium

69 Tm

Lutetium

71 Lu

3

Li

11

Na

19

K

37

Rb

55

Cs

87

Fr

4

Be

12

Mg

20

Ca

38

Sr

56

Ba

88

Ra

22 Ti

40

Zr

23

V

24

Cr

25

Mn

26

Fe

27

Co

31

Ga

43

Tc

47

Ag

48

Cd

49

In

72

Hf

79

Au81 Tl

83

Bi

104

Rf

105

Db

106

Sg

107

Bh

108

Hs

109

Mt

110

Ds

111

Rg

89

Ac

90

Th

91

Pa

92

U

93

Np

94

Pu

95

Am

96

Cm

97

Bk

98

Cf

99

Es

100

Fm

101

Md

102

No

103

Lr

Lanthanides

Actinides

113

Uut

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

1

2

3

4

5

6

7

Period

Group

80

Hg

112

Cn

52

Non-ferrous metal value chain can be broken into four steps

1. Chemical compounds such as oxides, chlorides, sulfates, carbonates with metal content between 30 and 60% depending on purity and type of compound

Source: research and analysis

M&M overview: basics, key definitions, value chain

Wire rods

Billets

Ingots

Slabs

Cables

Wheels

Packages

Automotive and aerospace

Commercial transportation

Mining/recycling Metal productionEnd product

manufacturing

Metal processing

Primary Secondary

Aluminum

Copper

Nickel

Zinc

Lead

Tin

Cu concentrate

(30–40% Cu)

Ni concentrate

(10–20% Ni)

Zn concentrate

(~50% Zn)

Copper cathode

Ferronickel (20–26% Ni)

Nickelmatte (70–75% Ni)

Nickel metal

Nickel salts1

Zinc cathode

Wire rods

Billets

Cakes

Ingots

Copper wires

Tubes/rods/bars

Plates/sheets/strip

Alloys (e.g., brass,

bronze)

Electrical motors

Electronics

Cables

Plumbing

Ingots, sheets, pellets, powder

High-purity Nickel salts1

Stainless steel

Various alloys

Electroplated steel

Galvanized steel

Galvanized alloys

Slabs

Ingots

Alloys (e.g., brass)

Aluminum cathode Bauxite concentrate

(~60% Al)

Pb concentrate

(50-60% Pb)

Sn concentrate

(~60% Sn)

Lead cathode

Tin cathode

Rods and wires

Ingots

Rods and wires

Ingots

Alloys (e.g., bronze)

Batteries

Cable

Pipes

Sheets

Radiation shields

Pipes and figures

Coins

Sheets

Aluminium wires

Tubes/rods/bars

Plates, sheets, strip

53

Mining: Non-Ferrous ores often contain other metals

Source: USGS minerals yearbooks 2010; research and analysis

M&M overview: basics, key definitions, value chain

Aluminum (Al)

Copper (Cu)

Nickel (Ni)

Zinc (Zn)

Lead (Pb)

Tin (Sn)

Gold, Silver

Cobalt (in African copperbelt)

Iron, Cobalt, Carbon

Copper, Lead, Iron

Zinc, Silver, Copper

Excluding

secondary refining

Mining: Australia, China, Brazil

Refining: China, Russia, Canada

Mining: Chile, African Copperbelt, SEA

Refining: China, African Copperbelt, Japan

Mining: Indonesia, Australia, Canada

Refining: China, Japan, Australia

Mining: China, Peru, Australia

Refining: China, Canada, Japan

Mining: China, Australia, US

Refining: China, Australia, Canada

Mining: China, Indonesia, Peru

Refining: China, Indonesia, Peru

Metal Often occurring with Top producing countries

54

Description

Processed

metals/ ore

types

Extraction of metals from ores/concentrates

through application of heat

Four main types:

– Smelting (i.e., melting ores),

– Roasting (i.e., oxidizing ores),

– Calcining (i.e., separating ores),

– Refining (removing impurities from metal)

Extraction of metals through application of

chemicals to dissolve material

Three main steps:

– 1. Leaching (i.e., separation of valuable metal

from ore),

– 2. Solution purification (i.e., extraction of

metal from leaching liquid)

– 3. Metal extraction (i.e., final stage of

purification)

Copper (cuprite, azurite, malachite)

Nickel (pentlandite, limonite, garnierite)2

Zinc (hemimorphite, smithsonite)

Aluminium (Karst, silicate)

Copper (chalcopyrite, chalcoite)

Lead (galena, anglesite, cerussite)

Tin (cassiterite)

Zinc (sphalerite)

Non-Ferrous metals: two general types of ore processing

1. Roasting process makes sulfide ores treatable by hydrometallurgical process 2. Typically flowsheet partially pyrometallurgy and hydrometallurgy

Source: research and analysis

M&M overview: basics, key definitions, value chain

PyrometallurgyTraditional route for sulfide ores

HydrometallurgyTraditional route for non-sulfide ores1

55

Metal production: Typical processes from mine to metal (I)

1. SX = Solvent extraction

Source: research and analysis

M&M overview: basics, key definitions, value chain

Aluminium (Al)

Process step

(Resulting) material

Nickel (Ni)

Mining/crushing Calcination Smelting Electrolytic refining

Sodium aluminate Pure alumina Cryolite-alumina Al cathode

Mining/crushing Floatation Smelting SX1/Electrowinning

Sulphide ore Ni concentrate Nickel matte Ni metal

Mining/crushing Leaching Solvent extraction Electrowinning

Non-sulphide ore Leach solution SX raffinate Ni metal

Mining/crushing Floatation Smelting Electrolytic refining

Sulphide ore Cu concentrate Blister/anode Cu cathode

Mining/crushing Leaching Solvent extraction Electrowinning

Oxide/roasted ore Leach solution SX raffinate Cu cathode

Copper (Cu)

Typical process (simplified)Metal

56

Metal production: Typical processes from mine to metal (II)

Source: research and analysis

M&M overview: basics, key definitions, value chain

Zinc (Zn)

Lead (Pb)

Tin (Sn)

Typical process (simplified)Metal

Process step

(Resulting) material

Mining/crushing Floatation Smelting Electrolytic refining

Sulphide ore Zn concentrate Product sinter Zn cathode

Mining/crushing Leaching Solvent extraction Electrowinning

Oxide/roasted ore Leach solution SX raffinate Zn cathode

Mining/crushing Floatation Smelting Electrolytic refining

All ore types Pb concentrate Anode Pb cathode

Mining/crushing Floatation Smelting Electrolytic refining

All ore types Sn concentrate Anode Sn cathode

57

Agenda

2 Minerals & Mining landscape: Basics, Global, Regional and KSA-specific context

2.1 M&M overview: basics, key definitions, value chain

2.2 M&M: Global and Regional trends

2.3 M&M landscape in Saudi Arabia: current state and Strategy 2035

2.4 Q&A: Recap of key messages

58

M&M: Global and Regional trends

What do we plan to cover in this chapter?

M&M: Global and Regional trends

Discuss the Global mining landscape and key numbers

Analyze the major Worldwide trends influencing the Minerals & Mining

sector. Do a specific deep-dive into new technologies and understand how

they affect it.

Understand the Global outlook on the Minerals relevant to the Kingdom

and its Strategy 2035

59

Global Mining landscape: key numbers

M&M: Global and Regional trends

Iron Ore Alumínio

Copper Zinc Nickel Gold

0

4,000

2,000

6,000

Kt

Rusal

3,601

Rio Tinto

3,380 3,361

18% 25%40% 41%

13% 37%31% 40%25% 30%27% 40%

0

200

300

100

295

Mt

BHP

245

Rio TintoVale

Aluminum

2

0

1

3

Glencore

1.226

Mt

1.7371.831

Codelco Freeport-

McMoran

0

100

2,230 Mt

200

300

Kt

Vale

260

MMC Norilsk

Nickel

BHP

154

0.0

1.5

1.0

0.5

1,0731,100

350

Kt

Nyrstar

764

Hindustan

Zinc

Korea Zinc

Group

0.0

2

4

6

Anglogold

Ashanti

Moz

4.9

Barrick

Gold

Newmont

3.63

200

0

100 90

141

BHP

Current Capital Stock (US$ B) – November 2017

Rio TintoVale

53

57,600 Kt

3,100 Mt2,250 Kt11,900 Kt19,400 Kt

%

Top 3

EBITDA1

Margin

285

Worldwide

Production

Top global mining companies (2017)

5.52

Glencore

52Aluminum

Corp. of China

Top 3 companies per ore represented 13-40% of the 2016 worldwide production depending on commodity

60

Worldwide trends of special importance for the mining sector

(we will focus on technology innovation)

M&M: Global and Regional trends

Changes and challenges Explanation

Change in the geographic distribution Shift towards less favorable geographies with higher political risk, less access to

infrastructure and higher logistic requirements

Volatility and cyclicality Increasing flexibility requirements to generate good financial results regardless of cycles

Suppliers cutting back on technology research in downturns

Raw materials and supplies shortage Decreasing tier 1 deposit discovery

Decreasing quality of existing deposits

Increasing water constraints

Constrained energy availability

Limited equipment supply

War for talent Widening processes engineering staff and geoscientists shortage

Increasing importance of brand image

Increasing use of ties to academic bodies and research institutes

Consolidation and M&A wave Increasing M&A activity

Main players are becoming larger

Increasing importance of operating efficiency to remain independent

Technology innovation Further technological innovations expected, driving further productivity increase (specially

by increasing final value)

Increasing environmental pressures Increasing public, legislative & customer pressures

Emerging environmental policies on water & energy consumption, local footprint, CO2

emissions, rehabilitation

Increasing safety & health standards

Changing ways of marketing commodities Ways in which commodities are marketed change significantly

Detailed on the

following slides

61

Consolidation of control room functions in

centralized remote operations centre for real-time

visibility across several operations & optimized labour force

Digital experimentation underway to solve the issues, 6 are particularly relevant

for Minerals & Mining

M&M: Global and Regional trends

Identify ore quality of rocks with sensors to allow sorting out

waste and optimize processing.

Autonomous operations

Ore sensing & sorting 3

Remote monitoring on a specific set of machines

parameters to identify issues early on and achieve optimal

performance

1Remote condition monitoring

Using data collected from sensors & advanced self learning

algorithms to predict when maintenance needed or

optimize process

Predictive analytics2

Remote operations centre4

Increasingly intelligent & complete online shop of equipment,

parts & services that offers extreme ease of ordering for

customers

E-commerce (for equipment, parts & services)5

Use of unmanned vehicles e.g. autonomous trucks, drill

and haul

6

62

Two versions of online vibration monitoring available:

– Basic – Having variety of vibration & temperature sensors &

the system is integrated to also show vibration &

temperatures data

– Advanced – Additional measurement to allow for early failure

detection based on monitoring of irregular process operations

Employing “Collect, Analyze, Act" architecture

Providing an interface to Avantis enterprise asset

management & other plant-wide systems

Schneider acquired Avantis software through the purchase of

Invensys in 2014 and now offering software as a service

Flsmidth providing online

condition monitoring for its gear unit

Schneider offering

Avantis condition manager

“FLSmidth comes to condition monitoring a bit late. I would consider

Schneider being the leader in condition monitoring. They

have the right approach and are quite ahead in implementation.”

Former Global Product Development director, Minerals

Processing, FLSmidth

Remote condition monitoring: best-in-class example is offering integrated

solution

M&M: Global and Regional trends

Source: Company websites, ADL Internal Resource Center, Expert interview, Desktop research

Collect data from

equipment & related

processes

Analyze the data

based on rules defined

with customers

Act upon the results by giving

warnings, notifications or

automated work requests

63

Through predictive analytics, Joy is able to share

rewards with customers through payments based

on the performance of the equipment and the output

of the mine

Schneider’s avantis

Offers integrated predictive solution

Joy global is using

predictive analytics to grow services

Longwall System

contains 7,000 sensors,

which turn into

actionable information

Predictive Analytics: development coming from OEMs, mining companies & start-

ups (1/3)

Avantis PRiSM can diagnose equipment issues days,

weeks or months before failure by recognizing

patterns in sensor data

M&M: Global and Regional trends

Source: International Mining; HBR; Company website

Smart Services

predicts potential

failures in near real

time on components

Performance alerts can

be sent directly to the

machine operator, the

mine control center,

and to the Smart

Services team

Identify issues well before

any traditional value

based alarm would be

raised

Machine

learning is the

key component

needed for

predictive

solutions

64

Predictive Analytics: development coming from OEMs, mining companies & start-

ups (2/3)

Rio Tinto is using predictive analytics to yield savings in maintenance

M&M: Global and Regional trends

Source: Desktop research, expert interview

“We use predictive analytics on our trucks and get 5000-

8000 additional running hours per engine compared

to following manufacturer maintenance schedule. We are

able to know 5-6 months before a machine would

break.”

“We decided to develop the capability ourselves

with data collected as OEMs do not have clear

business model with predictive analytics. OEMs

make money with services and parts, they have no

incentive to lower our maintenance need.”

“If OEMs can sell their products as a service, then

predictive maintenance makes sense instantly.”

Former Head of Innovation, Rio Tinto

RioTinto launched big data Analytics Excellence Centre in 2015

The Centre will assess data collected from sensors & enable

experts to predict and prevent engine breakdowns and

other downtime events

It expects $200 million saving a year over the next three

years in maintenance costs with predictive analytics

65

Predictive Analytics: development coming from OEMs, mining companies & start-

ups (3/3)

Uptake is CO-developing

predictive diagnostic with caterpillarOther starups entering the space

M&M: Global and Regional trends

Source: Desktop research

Caterpillar and Uptake formed partnership in

2014 to develop proprietary software for

predictive diagnostics & optimized fleet

management

The solution expected to yield as much as 90%

reduction in downtime and repair costs from

malfunctioning machine for a customer in Caterpillar

case study

Rapidminer has developed a cloud

platform where machine learning

and analytics techniques can be

applied to various types of data sets

Predikto focuses on delivering end-

to-end predictive analytics SaaS

software for predictive maintenance

and optimization

Mtell is focusing on predictive

maintenance software and analytics

in verticals such as Oil & Gas

66

Remote operations center: both OEMs & mining companies are centralizing

control center

Flsmidth providing

remote control services in minerals

Mining companies are using

remote center to Optimize site operations

M&M: Global and Regional trends

Source: Company websites, Desktop research, ADL Internal Resource Center

Rio Tinto is using a centralized operations centre in Perth to

analyse data and optimize processes of the mines in

Pilbara, Australia

Codelco Mining built a remote operations center in 2015

with the help of Honeywell, indicated to increased

production by 2% and reduced operating costs by

$150M

Control centre in CPH that can remote- monitor equip. in

plants globally via online computer communication with 24/7

support

Services offered free-of-charge to customers with the key

benefit of instant services without travelling time & cost

– Customers can also request Advanced trouble shooting &

Remote maintenance & optimization

However, the monitoring process is still relatively manual –

room for increased automation

“”FLS remote control processes are still pretty manual. They have

lots of knowledgeable people and still rely too much on them. They

should increase the automated calculation loop in the processes to

take out human involvement.”

Former Global Product Development director, Minerals

Processing, FLSmidth

Can you find a nice pic here pls?

67

MINESENSE is developing

fast mineral sensing technology

Ore sensing & sorting: huge value potential with strong investment from OEMs

& start ups

Tomra is partnering with

OEMs & mining companies

M&M: Global and Regional trends

Source: Company websites, Desktop research, ADL Internal Resource Center

Startup company Minesense is developing mineral sensing

technology to identify ore quality in real time with high

frequency electromagnetic spectroscopy and X-ray

The sensing technology can be installed on truck shovels or

conveyor belts

The company has received $17.5M of VC funding to date

Tomra, sorting technology provider, has partnered with Outotec

to provide a turnkey sensor-based sorting solution

released in 2015 to remove waste from the ore feed in

crushing and grinding circuit

Tomra is also working with RioTinto to scale up Rio's iron ore

and copper sorting technologies to have each machine

capable of sorting 1,000 tons of rock per hour

“The “Mine of the Future” will be selective-mining and real-

time ore grade sensing & sorting is in the center of

that.”

Newmont

“There is awful lot of value to be extracted by

optimizing comminution process using better data

on mineral characteristics.”

RioTinto

68

eCommerce: B2B companies are implementing online platforms & piloting with

automatic ordering

In 2014, Wärtsilä launched an online platform:

– My installations - customers can view their installed base

– Parts - customers can view their order history, search for

spares in catalogues and ask for quotations

– Support - customers can browse for technical information,

make a warranty claim or ask for technical support

Symmedia’s “Parts” is an intelligent spare parts store, that links

with operator’s production machines

Based on the machinery data, “Parts” automatically creates an

intelligent shopping cart with order suggestions

– “Parts” can be connected to the ERP system of the

manufacturer

ENGEL Austria, a manufacturer of molding machines, has

partnered with Symmedia & is now offering a complete

service portal for the customers

Wärtsilä´s online services intelligent online shop

M&M: Global and Regional trends

Source: Company website

“Through the online link to the machine our shop knows which parts

of the respective machine ever come into question, and which

have been replaced in the past.“

Vice President, Engel

ENGELs spare parts catalogue uses

the CATALOGCreator® that has a

feature of presenting all spare

parts in 3D

69

Key selected products for Saudi Arabia: how the relevant global markets are

performing and what are the industry perspectives?

M&M: Global and Regional trends

AIuminium

57.6Mt

Phosphate Fertilizers P2O5

~50Mt

Global production (2016)

Note 1 Note 2

Copper

19.4Mt

Note 3

70

Aluminium (Al): strong growth and excellent future perspectives

M&M: Global and Regional trends

Source: Ma’aden report, ADL analysis

AI

57.6Mt

Global

productionRecent price dynamics (past 12 months) Potential future outlook

Global aluminium market

deficit will likely reach around

2 mn tonnes per annum over

the course of 2018-21

Global aluminium demand

CAGR is forecasted at 4-5%

pa over 2017-21 (driven by

advances in end use – Al in

vehicle bodies and enhanced

use of Al in electricity

distribution infrastructure

China to progressively reduce

overcapacity issue – it’s

already actively cutting

production, also due to

declining profitability issue

Aluminium price averaged US$ 2,012/tonne (LME), up 24% vs. Q3 2016

and up 9% vs. Q2 2017

LME prices should be supported by Chinese central government’s supply

reform policies

Note 1

71

Diammonium phosphate [(NH4)2HPO4]: careful optimism

M&M: Global and Regional trends

Source: Ma’aden report, November 2017; ADL analysis

Phosphate fertilizers – P2O5 based fertilizers include Monoammonium Phosphate (MAP), Diammonium Phosphate (DAP), Concentrated Superphosphate (CSP), Superphosphate

(OSP), Ammonium Polyphosphate (APP) and others.

P2O5

50 Mt

Al phosphorous

fertilizers

(monoammonium,

diammonuim and others)

Global

productionRecent price dynamics (past 12 months) Potential future outlook

South America demand was lower due to high inventory levels but Indian

subcontinent demand picked up in Q3 which supported the late Q3

price improvement

On the supply side, US saw supply dip due to Hurricane Irma and limited

Chinese exports

Note 2

Further supply from

Moroccan and Wa’ad Al

Shamal project ramp-ups may

soften prices in the coming

quarters

But there’s a clear future

demand growth of about 2%

over the next 5 years for

phosphorous fertilizers,

however production

capacities are also expanding

with similar pace

72

Copper (Cu): very strong medium-term outlook

M&M: Global and Regional trends

Source: Ma’aden report, Deutsche Bank Markets Research 2017, ADL analysis

Cu

Note 3

19.4Mt

Global

productionRecent price dynamics (past 12 months) Potential future outlook

Copper prices increased by 26% during the nine months period of 2017

compared to same period last year

One of the reasons – temporary closure of several major mines due to

strikes (in Chile and Indonesia)

Robust long-term outlook for

copper, with forecasted

supply deficit by 2020 driven

by strong demand and supply

offset by depletion and

closures

Copper prices are forecasted

at to further increase by 15-

17% in 2018 and by 5-7%

more in 2019

A greater deficit is expected

in 2018 of 295kt (255kt

previously)

73

Agenda

2 Minerals & Mining landscape: Basics, Global, Regional and KSA-specific context

2.1 M&M overview: basics, key definitions, value chain

2.2 M&M: Global and Regional trends

2.3 M&M landscape in Saudi Arabia: current state and Strategy 2035

2.4 Q&A: Recap of key messages

74

M&M landscape in Saudi Arabia: current state and Strategy 2035

What do we plan to cover in this chapter?

M&M landscape in Saudi Arabia: current state and Strategy 2035

Discuss the Kingdom’s Minerals & Mining landscape

Understand the current state of the sector and ambitious Strategy 2035

Define the key challenges and issues, as well as the ways to tackle them

75

Saudi Arabian Minerals & Mining landscape: overview

Minerals & Mining: Saudi Arabia

Contribution

to GDP

Reserves

Production

Regulation

Major players

Growth plans

SAR ~65 Billion ($17B) in GDP in 2016 (2.8%)

~65,000 direct jobs

48 minerals

Especially rich with Aluminium, Phosphate rock, building materials, Gold / Copper

Especially strong in Aluminium and Phosphate value chains (up to 2% of WW production),

as well as building materials (>2% of WW production)

Significant untapped reserves of Gold, Copper and Zinc

Ministry of Energy, Industry & Mineral Resources

Increased contribution to GDP: by 2020 ~3.5%, by 2035 ~5.5%

Focus on Aluminium, Phosphate, Gold, Copper, Zinc, Steel

Ma’aden

76

Minerals & Mining Strategy 2035: Vision, Targets, current status

Minerals & Mining: Saudi Arabia

Develop mineral value chains to become the third pillar of Saudi industry by capitalizing

on KSA’s mineral endowment and domestic demand to deliver GDP diversification and

job growth depending on mineral resources and domestic demand and making use of

global markets

Grow total sector GDP impact by 58 USDb to 75 USDb

Reduce net imports by 10+ USDb/year

Increase annual government revenue by 2.9 USDb

Create 265,000 new jobs

Develop remote areas creating 40k jobs

Recommendation from NIPLD program committee meeting to approve the

strategy

Next steps: Integration with NIDLP and start of implementation

Targets

Latest Status

Ambition

77

Notes: 1) For all commodities, except gold, which is measured in tons

Source: Arthur D. Little analysis based on SNL Mine Economics

Minerals & Mining: Saudi Arabia

Group CommodityKSA production

ktons1

% of global

productionKey players 2035 KSA plan

CAGR

2016-35

Aluminium

value chain

Aluminium

Alumina

Bauxite

Phosphate

(fertilizer)

production

Phosphate rock

Nitrogen (Ammonia)

Sulfur

Building

materials

Cement

Gypsum

Pumice and Pumicite

Gold and

base metals

Gold (tons)

Copper (Cu content)

Zinc (Zn content)

Iron ore /

Steel

Iron ore

Steel

869

1,700

4,000

4,000

4,100

4,900

480

1,900

61,900

30

20

6

0

5,000

1,800

26,667

91,000

52

300

300

24,000

8,000

1.5%

0.7%

2.8%

1.5%

2.9%

7.1%

1.5%

1.4%

1.5%

0.2%

0.1%

0.3%

0.0%

0.3%

2.1%

10.5%

3.9%

11.7%

15.3%

12.9%

n.a.

8.4%

Ma'aden

Industrial

Minerals

Al-Ittefaq Steel

Products

Ma'aden

Ma'aden

Saudi Cement

Yanbu Cement

Yamama Cement

20+ companies

Going forward, the government is planning a significant growth in the production of gold,

base metals, steel and phosphate rock, which would require further investments

78

KSA has been exploiting its significant reserves of bauxite and phosphate rock

intensively than world average; gold and base metals are lagging behind

Notes: 1) For all commodities, except gold, which is measured in tons 2) Based on estimates

Source: Arthur D. Little analysis based on SNL Mine Economics, Arthur D. Little analysis

Minerals & Mining: Saudi Arabia

Group CommodityKSA reserves

ktons1

% of global

reserves

RPR

KSA

RPR

globalComments

Aluminium

value chain

KSA has been exploiting bauxite

reserves intensively than world average

Bauxite

Phosphate

(fertilizer)

production

Phosphate rock

KSA has been exploiting phosphate

reserves intensively than world average

Gold and

base metals

Gold (tons) KSA has been behind the world average

in gold as well as base metals

production compared to its reservesCopper

(Cu content)

Zinc

(Zn content)

Iron ore /

SteelIron ore

Currently, KSA is not producing any iron

ore; imports are the only source for

steel production

210,000

680,000

469

6,0002

8,0002

383,000

0.8%

1.1%

2.7%

1.0%

0.8%

0.2%

10753

~2x

261170

~1.5x

18200

~11x237

400

~11x2

1874

~4x

76n.a.

79

Current sector overview: mainly developed segments across the value chain,

with certain exceptions

Minerals & Mining: Saudi Arabia

Iron and Steel

Bauxite and

Aluminium

Gold

Zinc / Copper

Titanium

Building

materials

Phosphate

Midstream (smelting, metal

manufacturing)

Downstream (semi-

finished and fabricated

products)

Upstream

Iron ore mining Crude steel production Flat and long rolled products

Bauxite / Alumina AluminiumExtruded and flat-rolled

products

Ore Ingots Gold wire

Copper and zinc ore mining Copper cathodeCopper wire products

Galvanized products

Ilmentile or rutile Titanium dioxide Paints, milled products

Limestone Mining Clinker production Cement

Phosphate rock Phosphate acid DAP

Developed segment Developing segment Underdeveloped segmentLegend

80

Strategy 2035: key numbers (1/2)

Minerals & Mining: Saudi Arabia

Iron and Steel

2035: forecasted downstream output2035: forecasted midstream output

Direct reduced iron: 20 M tons

Crude steel: 24 M tons

Bars: 10.7 M tons

Billets: 12 M tons

Slabs: 7.2 M tons

HRC: 5.1 M tons

Seamless pipes:

0.9 M tons

Phosphate 7.8 M tons of final product (DAP)

Base metals 300 K tons of copper cathode

300 K tons of zinc

Cement 91 M tons

Aluminium 1.8 M tons

Can sheet: 540 K

tons

Wire: 360 K tons

Foil: 80 K tons

Extrusion: 459 K

tons

81

Strategy 2035: key numbers (2/2)

Minerals & Mining: Saudi Arabia

Ceramics Wall / floor tiles: 7.3 M tons

Sanitary ware: 300 K tons

Clay pipes: 484 K tons

Sodium

compounds

Sodium chloride: 4.9 M tons

Sodium dichloride: 2.2 M tons

Sodium carbonate: 0.9 M tons

Gold 1.67 M troy ounces (52 tons)

Glass Fiber glass: 620 K tons

Float glass: 1 M tons

Container glass: 970 K tons

Silicon

Titanium

Ferrosilicon: 67 K tons

Metallurgical silicon: 147 K tons

Polysilicon: 19 K tons

Titanium slag: 1 M tons Titanium dioxide: 500 K tons

Titanium sponge: 40 K tons

2035: forecasted downstream output2035: forecasted midstream output

82

Sector growth: key challenges and proposed solutions

Minerals & Mining: Saudi Arabia

Saudi Arabia is under

explored

Key business cases are

challenging

Few local players to develop

key projects

Sub-optimal impact on Saudi

society

Relatively low fiscal revenue

contribution

Low local content contribution with low

jobs attractiveness to Saudi citizens

Low mineral value chain fiscal contribution

Weak control of mining activity

Most critical projects are capital-intensive

Few players can withstand high CapEx

projects

Limited infrastructure present in remote

areas impacting project capital costs for

mine development

Exploration spend is well below global

average levels with few juniors active in

sector today

Slow licensing turnaround time

Accelerating exploration

Enhancing business case viability

Enhancing industry structure to

promote sector development

Improving value chain social

benefits

Boosting sector fiscal revenue

contribution

Challenges Challenge description Solutions

83

Agenda

2 Minerals & Mining landscape: Basics, Global, Regional and KSA-specific context

2.1 M&M overview: basics, key definitions, value chain

2.2 M&M: Global and Regional trends

2.3 M&M landscape in Saudi Arabia: current state and Strategy 2035

2.4 Q&A: Recap of key messages

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Dr. Jaap Kalkman

Managing Partner,

Global Energy & Utilities

+971 55 559 4332

[email protected]

Ryan Al Nesayan

Principal,

Energy & Utilities

+966 50 000 1984

[email protected]

Ilya Epikhin

Principal,

Global Energy & Utilities

Metals & Mining

+971 58 902 8692

[email protected]