Iran’s potential in bauxite and alumina markets
Panthea Geramishoar, IMIDRO
1
Aluminium Wonder Series: recession after story
Fundamentals dismissed!
• 2008 -2014 Premiums rose from nothing to the only viable reason to keep
on producing!
Market in Contango, still to be?
• 2009-2014 Physical shortage + Highest ingot volume in warehouses than
ever!
Commodity financing with Aluminium, a Fun Profitable Practice
• 2009-2011 Rising inventories + Rising Prices!
• 2014-2015 Falling inventories + Falling prices!
Aluminium and Great Expectations:
• First shortage in almost a decade, continues to this year , 7-month shortage
487 kt , y-o-y demand growth global 15.8% China 35% (WBMS 2015)
Westmetall.com
2
Great Expectations:
Unrequited Love for A Metal
Underperformance and tight margins
Half a decade of highest
demand rate between all
metals for now and
future, demand level far
from saturation
(Jim Lennon of Red Door Research 2015, RioTinto 2011)
3
Dual sensations for a challenging metal
Heartwarming Promises for the future
6.7%
Aluminium and Great Expectations:
• Demand for semis to
reach 107 mtonnes in 2022
• Aluminium use in NA
automotive from 2400
ktonnes in 2012 to 4550
ktonnes in 2025
(CRU, Hydro, Ducker Worldwide, Alcoa,
2014)4.2%
3.8%
Aluminium persistent underperformance
Macquarie Commodities research (2013)
3.7%
Ni
Steel
Cu
Al
Aluminium demand growth 1950-2010:
the best ever, Jim Lennon, Red Door Research, 2015
4
The Privileged - The Protected - The Pioneers
Power is Key, What about Bauxite and Alumina?
Aluminium VIP Club
• Cheap abundant energy is a
Aluminium
and Great
Expectations:v
natural privilege
- Middle
East,
Russia.
• Receiving subsidies is a
protection - China.
• Innovation for cost control is
what pioneers do-Top producer
companies, Alcoa, Rusal, Hydro.
The
other
one-third
Others, 35
of the Power, 36
costs
Alumina, 29
Aluminium opex CRU(2010)
5
Alumina market determinants:
Around 80% of global markets still making profits!
(CRU2015-rounded)
Million tonnes
3
• Surplus in the market …
shrinking towards a tighter
market?
0
2013
360
2014
Q1 2015
Q2 2015
Q3 2015
Alumina Market Balance & Prices
CRU 2015
350
340
330
320
310
300
290
280
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Alumina $/tonne
• Yet price trends since 2013
show an overall increase,
mainly happened in 2014 when
China’s y-o-y imports rose near
40%
1
-1
Aluminium and Great Expectations:
• 2015 falling prices due to
falling aluminum prices and
weaker market
2
Q3Q4
13Q1
13Q2
14Q3
14Q4
14Q1
14Q2
15 15
6
The importance of being bauxite,
A plain boring commodity for some good years
• Market in balance for long when Indonesian ban on bauxite brought it into shortage
• Low operation rate of projects, 7 of 81 projects have become operational (CRU 2014)
• Phenomenal alumina capacity addition in China with 24-36% of annual growth since 2008
• First inter-basin bauxite shipment from Guinea to China in 2012
330
supply
demand
230
180
130
80
Bauxite Market balance
CRU,USGS,IMIDRO
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
30
2000
million tons
280
2001
Aluminium and Great Expectations:
7
Aluminium Industry; A Transformer
Focus on bauxite and alumina
1955
• Commercially - not geographically-
1971
1979
Bauxite
Alumina
Alumina
Bauxite
2
5
integration has been the norm
23
12
19
28
37
recently, Vertically integrated
11
46
14
8
aluminium complexes Obsolete
26
16
7
11
5 12
… More opportunities for producers
Alcoa
Alcan
2
4 4 8
Reynolds
Kaiser
like Iran with no bauxite reserves
Pechiney
Alusuiss
• Lower market intensity in bauxite and
Others
alumina;
Others’
or Expectations:
Third-party
21
Aluminium
andshare
Great
23
26
3
28
4
5
10
sources significant rise
25
11
12
More Diversity
5
19
27
12
14
9
• Yesterday, those with metal
17
11
9
9
production produced most of bauxite.
Ashapura
Group, 3
Today, there are Independent Bauxite
Alumina
BHP2010
LTD, 7
AWAC
Alcoa,
Suppliers.
Billito
(Alcoa),
10
• Nevertheless, Old habits die Hard; today’s
n, 6
18
others,
others, 34
Chalco, 12
40
big aluminium producers are still the
Chiping
CBA, 2
Xinfa, 6
major players in bauxite and alumina
Chalco,
East Hope
5 2
markets like yesterday.
Nalco,
Gr., 2
Weiqiao,
Vale, 4
UCRusal
,5
RioTinto
Alcan ,
13
Hydro,
2
4 3
Vale,
Hydro, 3
UCRusal,
10
RioTintoAl
can, 98
Secured Bauxite for Big Players
Minimum 50% of aluminium producers are bauxite mine
shareholders
International
Companies
BHP Billiton
RioTinto Alcan
Affiliated bauxite mine
Share
Independent
companies
Affiliated bauxite mine
Share
Boddington - Australia
86%
Noranda
St.Anne-Jamaica
51%
Trombetas- Brazil
15%
Exploration-Guinea
-
1mine-Sierra Leon
100%
New project -Guinea
50%
New project -Cameron
45%
5 mines - India
100%
New project -Cameron
45%
2 mines- China
100%
New project-Guinea
NA
CBG-Guinea
22%
Trombetas- Brazil
12%
Gove-Australia
100%
Weipa- Australia
Aluminium and Great
Expectations:100%
Alcoa
UC Rusal
Norsk Hydro
Chalco
Juriti/ Trombetas /Pocos de
Caldas - Brazil
NA
CBG-Guinea
22%
Clarendon- Jamaica
45%
Jamalco-Jamaica
55%
Several mines- Suriname
100%
Kinda-Guinea
100%
Fria-Guinea
100%
2 mines-Jamaica
NA
1 mines - Guyana
100%
2 mines- Brazil
50-60%
7 mines - China
100%
New projects- Vietnam/Laos
NA
Vimetco
Dubal
Hindalco
China Power
Investment
Mb Research Bauxite and Alumina market
outlook 2012
9
Iran; A few facts
Rich in Resources, energy and mines
Developing industries
(Iran Mine House 2015, World mining Congress Report 2015, *
including mineral-fuel)
• Value-added share of mines and
Aluminium
and Great
mining industries
36% Expectations:
of GDP and 36%
of Tehran Stock Exchange market value
(IMIDRO 2015)
• Second economy in MENA of 406
billion $
(World Bank-Sep2015)
• Cheap
skilled
workforce:
Iran
7.120.000
IRials/month
or
210
dollars/month - China 150-336$/month
(Iranian Supreme Council of Employments, Dezan Shira &
Associates, 2015)
IMF, WorldBank 2015
5
0
2012
-5
2013
2014
2015e
2016e
2017e
-10
-15
GDP%
-20
investment%
-25
Commodity
Production
000 tonnes
Ranking
16,300
14th
Aluminium
354
17h
Copper
193
20th
Cement
67,000
4th
974 (units)
18th
Reserves
Ranking
157 billion bbl
4th
34 tcm
1st
-30
Steel
Iran Rankings
mineral resources: 37 billion tonnes of
proved mineral reserves , 10th producer
of global minerals*, 8th in value*
Iran GDP
10
(Imidro, Bp2014)
• Among world’s top 10 countries in
Passenger car
Commodity
Crude Oil
Natural Gas
10
Loosing billions, Iran sanctions cost US
economy 175 b$, Europe 150 b$
National Iranian-American Council, 2015
11
Our mission is to define and develop projects of mines and mining
industries; capital-intensive, hi-tech, high-risk, in underprivileged
areas …… Job Creation
During 13 years since we started, the following
have been achieved and planned:
Aluminium and Great Expectations:
12
IMIDRO cares about aluminium:
1- Great demand prospects for aluminium: BIW revolution and beyond
2- Abundant cheap energy at hand
3- A good and a better scenario for local demand: 1 to 2 million t in 2025
Current primary aluminium cap is 487 ktonnes.
Projects by
IMIDRO
Capacity
000 tonnes
Year of
start-up
Cost
Million
Euros
Iralco’s Phase I *
120
1967
NA
Iralco’s Phase II
110
2006
254
Hormozal
147
2009
500
Almahdi I
110
1997
500
Salco I
300
2018
1200
Jajarm
36.6
2016
138
Total Guaranteed
823.6
-
2600
Almahdi II
350
Under study
Chabahar
350
Under study
Total
1523
-
Aluminium and Great Expectations:
-
*Before IMIDRO
Total Primary Aluminium Production 000 tonnes
2014
2016
2025
354
800
1500
13
With Iran’s goals set to become a mega aluminium
producer , what are the strategies for bauxite?
Caspian Sea
Thinking beyond
1.5 million tonnes with
South Pars natural gas
field’s potentials
Persian Gulf
Qatar
14
Iran doesn’t have major bauxite reserves!
The only noticeable mine; Jajarm 20MT
• Total (proved, probable and possible) bauxite reserves of Iran
30 million tonnes = 20 million Jajarm refinery’s property + 10 million owned
by private sector
Jajarm has 7 million tonnes proved reserves
Caspian Sea
• Jajarm bauxite , 19 zones in different provinces*
Golbini, Zou, Tagoni, Sangtarash, Gano, Tash, Mandoon,
Dashtedeh (east and west), Shahmirzad, Bolbolooyeh,
Darsinoheh and some minor mines in
Jajarm
provinces Semnan, Khorasan, Kerman,
Yazd, Kohkilooyeh
*Exploration is underway and new reserves could be found.
• Current annual consumption
of 700 k tonnes of alumina in
the smelters is provided 36% by
Jajarm refinery and the rest is imported.
15
16
Iran Alumina Company
The first in the ME and the only in Iran
Plant Features
Capacity
280,000 tonnes
Contractor(s)
Built by Technoexport of Czech Republic and finished in 2001
unable to operate the plant due to technical issues
Commissioned by NFC of China in 2003 by imported bauxite
Technology
Bayer from diasporic bauxite
Total Capex
343 million US$ (2002-2003 $ index)
Water Usage (y)
1.5 million m3
Power Demand
20 MW
Production
2014 tonnes
Consumables per year
251,000
Material
000 Tonnes used
Price realized* $/tonne
Bauxite
800
22
Limestone
306
3
Caustic Soda
57
150
* Free market dollar 32700 Iranian rials
17
Iran Alumina Company
One of the few businesses making a good profit!
Financial
2010
2011
2012
2013
2014
2015
IRials
4,300,000
5,000,000
10,920,000
13,240,000
12,200,000
13,000,000
US$
405
367
420
414
373
390
Exchange Rate (1 US$)
10600
13600
26000
32000
32700
33500
Profit/Sales ratio
22.6%
25.7%
54.2%
50.5%
NA*
NA*
Alumina price
local sale
realized
* Not announced or available yet
Profit Doubled
• Rial depreciated deeply against US dollar since 2011. Sanctions + State
Subsidy Reform Phase I
• The Opex rose 100% nevertheless a big proportion of the inputs (bauxite,
lime, caustic, water, power, labor) is local and didn’t rise with dollar.
• Jajarm alumina’s sales price is set as a % of aluminium LME which is dollar
based and when changed to local currency with new higher rates brought
triple profits.
18
Jajarm Aluminium
Capacity
Technology
Capex
Commissioning
36.6 ktonnes Phase I
will reach 110 ktonnes in phase II
SY 200 kA - NFC China
138 million dollars
2016
36.6 ktonnes
aluminium
smelter
19
Supply chain strategies for Iran aluminium industry
• Most of major aluminium
producers have been 100%
owner
or
major
shareholders of bauxite
mines and refineries
• To produce 1.5 mtonnes
of aluminium Iran needs 3
mtonnes of alumina…….
2750 ktonnes deficit
• Necessity
to
secure
bauxite and/or alumina
Project
Capacity
000 Tonnes
Capex
million US$
Persian Gulf Alumina
1600
(2×800)
alumina
870
(phase I)
SBDT Mine Guinea
4000
bauxite
505
Nepheline Syenite
200
alumina
680
Even after all supply chain projects
accomplished, still there is need for
1 million tonnes of imported alumina
20
Persian Gulf Alumina
• Capacity 800 ktonnes to be increased to
1.6 mtonnes
• Defined to compensate for part of Iran’s
shortage in aluminium raw materials
• Ore to be supplied from SBDT in Guinea
Conakry
•Aluminium
Site allocated
IMIDRO’s Parsian
and GreatinExpectations:
Energy-Intensive Special Zone, next to
huge gas reserves of South Pars fields
• Feasibility studies complete, first done
by NFC China in 2004 and again by Corus
in 2006
• Tender held in 2013 to get international
EPC contractors build the plant yet
stopped for two reasons: 1- SBDT
Guinean bauxite in a state of suspension,
2- Finances
21
SBDT, Tale of the Two Countries
SBDT Company (Iran 51%-Guinea 49%)
1990-1991
1992
Agreement between the ministries of Iran and Guinea for exploration,
excavation, energy and transport
A 25-year contract between the two governments was signed to develop
Bauxite reserves of Dabola and Tougue by establishing SBDT(Societe des
Bauxites de Dabola et Tougue)
Aluminium and Great Expectations:
1997
The Leguetera mine’s concession in Dabola with 5626 m2 including 14
reserves and 590 million tonnes of bauxite was given to Iran, approved by
Guinean parliament
2002-2006
Imidro was established and owned the 51% of SBDT
The idea of transporting bauxite with pipeline instead of rail was studied
and approved for the project
2006-2014
Little progress with the project due to indecision and high risks
2015
The updated bankable feasibility study is being done by an international
consortium
The 25-year agreement of SBDT was renewed by the Guinean government
22
Guinea bauxite concessions
Aluminium and Great Expectations:
23
Dabola and Tougue Reserves: 834 million tonnes
Al2O3 (%)
SiO2 (%)
Reserve
(Mt)
Leguetera
47.1
0.74
73.1
Tek-Goral
45.46
1.38
98.7
Tek-Deyal
40.86
2.47
52.1
Dabola Deposit
Tiniki
42.21
0.76
10
Aluminium
and Great
Expectations:
Kondepilly
44.56
1.29
13.3
Matia
40.08
3.31
47.9
Leguetera
(300×300m)
47.18
0.8
11.9
Total Proven
307 million tonnes
Possible
143 million tonnes
Al2O3 (%)
SiO2 (%)
Reserve
(Mt)
Nipe
45.90
1.76
43.8
Kima B
45.92
1.52
77.6
Kima C
45.44
1.64
58.5
Kima D
43.94
1.57
57.2
Tongoul
45.16
2.62
10.3
Pontiolo
47.35
2.02
136.1
Tougue Deposit
Total Proven
383 million tonnes
24
SBDT 4 million tonnes per year; Imidro is looking for
partners and investors
A package with PGAlumina
Capex
m US$
Project
Mine
111
Pipeline (325 km, 16 inches pipe, pumping stations)
182
Aluminium and Great Expectations:
Port (filter plant, jetties)
100
Indirect, contingencies
112
Total
505
Energy Usage
Heavy Fuel Oil to be imported
Diesel oil to be imported
Water from Tinikisso Dam
25 MW
23500 tonnes/y
10000 tonnes/y
4.3 Mcm/y
25
Thank You for Your Attention
26