GeoProMining looks downstream in “˜exciting” antimony market

Posted on Dec 7, 2011 in GPM in the media

Metal Bulletin
7 December, 2011

GeoProMining is considering moves further downstream in antimony production as it looks to strengthen its position in a market dominated by China.

The company has antimony-gold mining assets in Russia’s Yakutia republic, as well as other base and precious metal operations in Georgia and Armenia.
It produced 2,643 tonnes of antimony in the first half of the year, marking 74% growth from the corresponding period in 2010. It expects concentrates output to increase by around 30% in its 2011-12 production season, group first vp Sergei Nossoff told Metal Bulletin.

While it will continue to develop the mining assets, which were acquired in 2008 and opened in 2010, it is also interested in moves further downstream.

“Antimony is a very exciting metal, with more modern-day applications, and we want to expand further our production, including downstream production,” Nossoff said.

“We’re looking at a number of suitable technology solutions and we are thinking of building a smelter in Russia, close to Europe. There are a number of development routes we’re taking to further expand and feed the European market. It’s a market that you want to do business with,” he said.

To maximise the value realised on its concentrates – which are around 66-67% antimony with a significant gold content – GeoProMining has forged a more direct relationship with buyers in China, he said.

“We got involved in this business and started developing the mines and looking at sales of antimony concentrate. We discovered that between us and the final end user of our product there were maybe seven or eight layers of traders present,” he said.

“So gradually we got rid of them one by one and started dealing with end-product distribution, which improved our profit margins greatly,” he said.

China is the world’s largest producer of antimony, but a ban on new foreign investment in mining, a crackdown on illegal mining and a consolidation of smelting capacity has placed severe constraints on supply in the past two years.

As domestic demand for antimony grows in end-products including fire retardants, batteries and capacitors, the supply of the metal outside China is forecast to grow increasingly tight over the medium term.

Antimony was identified as one of 12 critical raw materials for the EU in a European Commission-backed report published last year, primarily due to the lack of supply outside China.

“It’s clear from the [EU] report that industry and politicians see a lot of future in antimony and other rare earth metals; they need to be strategically preserved and supply should not be dependent on one nation or one producer,” Nossoff said.

“You have a look at substitutes and I believe there aren’t many for antimony, so it’s got that uniqueness and rarity in the world. We’re looking to expand that business and it’s very interesting for us, we’re looking to become an increasingly significant player,” he said.

The company’s antimony assets – the Sentachan and Sarylakh-Surma mines in Yakutia – have some of the highest known ore grades in the world, with a combined grading of 14%, as well as significant gold content.

Collectively, both mines contain more than 5% of global antimony reserves, according to data presented by the company. It has committed more than $30 million in capex to develop the assets, and both have a combined mine life of 17 years.

“We need around 100,000 tonnes of ore to produce 7 tonnes of antimony, which is fantastic. You might need 30 times more ore with a 1% content, but it’s just a phenomenal deposit and we’ve been very lucky,” he said.

“If [a Chinese producer] operate a 1.5 km underground mine and gets around 1% content in the ore, the cash costs will be very high, which pushes up the price for the underlying commodity,” Nossoff told Metal Bulletin.

“Obviously there are a lot of cost efficiencies in buying good-quality concentrate … We believe we have a certain bargaining position even in China that can allow us to get the best price,” he said.

Virtually all the concentrate it produces is sold into China, shipping out of Port Magadan.

While antimony miners in China face declining ore grades, metal producers in the country are now operating at low utilisation levels and are growing more dependent on imported concentrates.

“Their grades are very modest I would say in comparison to ours. What we actually found was that there were three Chinese producers with a lot of downstream capacity [and only 50% is being used],” he said.

“Their owned supplies were 30% in some cases so they’re looking for that extra 20% from other miners or traders naturally,” he said.

China’s growing reliance on foreign concentrates was identified in data presented by Antaike earlier this year, as it warned that the domestic market was in deficit last year. The country imported 27,700 tonnes of antimony in concentrates in 2010, up 146% from 2007.

While GeoProMining recognises value in moving further downstream to maximise value on its output, it is also aware there are risks in becoming an antimony metal producer.

“There’s a danger for us exploring further downstream. From one side it’s attractive because it gives you a complete cycle but on the other side you have to brand the product and develop the product,” he said.

“You’ve got companies like Twinkling Star, which has got its brand known worldwide and … there is never an issue about quality. You’ve also got other producers that also produce good steady downstream products,” he said.

GeoProMining would also welcome the fungibility provided by an official trading exchange, he said.

“Hopefully metal will get more recognition and get officially traded – the LME would be fantastic, or Shanghai. And that would give further quotations rather than fragmented quotations from different sources,” he said.

“Especially after the crisis happened you had $4,000 [per tonne] in one place and $6,000 in another. You can’t be $2,000 apart, it doesn’t make sense,” he said.

Metal Bulletin trioxide-grade antimony prices were $13,000-13,600 per tonne on December 2. It traded as low $4,100-4,300 per kg in early 2009 before soaring dramatically as smelter closures in China began to bite.

© Metal Bulletin