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An overview of the future production and demand of

ferronickel

Robert Cartman Hatch

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Contents

Hatch
Overview of FeNi market
Demand analysis
Supply analysis
Conclusions

HATCH

Hatch services and sectors

S
E
R
V
I
C
E
S

SECTORS
Hatch Associates Limited, 2009

HATCH

Global reach and resources


8000 people
Canada
Calgary, Alberta
Hamilton, Ontario
Europe
Montreal, Quebec
London, England
3400 Sorel-Tracy, Quebec
Moscow, Russia
Sudbury, Ontario
Mississauga, Ontario
170
Niagara Falls, Ontario
Vancouver, British Columbia
USA
Boston, Massachusetts
Buffalo, New York
Millburn, New Jersey
Monroeville, Pennsylvania
New York, New York
South America
Pittsburgh, Pennsylvania
Antofagasta, Chile
Pleasanton, California
Santiago, Chile
San Francisco, California
Lima, Peru
Seattle, Washington
So Paulo, Brazil
South Africa
Belo Horizonte, Brazil
Johannesburg
Vitoria, Brazil
Richards Bay

700

600
(Yellow indicates regional hub)

Hatch Associates Limited, 2009

India
Delhi

China
Beijing
Shanghai

120

Australia
Brisbane
Gladstone
Mackay
Melbourne
Newcastle

2300

Perth
Sydney
Townsville
Whyalla
Wollongong

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Hatch counts many of the worlds major mining and steelmaking companies
and financial institutions among its core client base
Mining

Steel

Financial institutions

Alcan

ArcelorMittal

ADB

Alcoa

BlueScope Steel

Bank of America

Anglo American

Celsa

Bear Stearns

Assmang

CMC

CIBC

BHP Billiton

Tata/Corus Group

Citibank

De Beers

Evraz Group

Commonwealth Bank

ENRC

Gerdau Group

Credit Lyonnais

Falconbridge

Mechel

CSFB

Impala Platinum

Metalloinvest

Deutsche Bank

Lonmin

Metinvest

EBRD

Newmont Mining

Nucor

HSBC

Norilsk

POSCO

IFC

Placer Dome

Ruukki

JP Morgan Chase

QIT

Severstal

Mellon Bank

Rio Tinto

Shougang

NM Rothschild & Sons

SUAL

TMK

RBS

Vale Inco

U.S. Steel

UBS Warburg

Xstrata

voestalpine

World Bank

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Contents

Hatch
Overview of FeNi market
Demand analysis
Supply analysis
Conclusions

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Annual FeNi production is typically ~250kt, with BHP and Eramet the
largest producers in 2009
Global FeNi production by producer

Global primary Ni production by type


kt

1,600
-0.4%

5.9%

1,400

BHP
21%

Others
19%

-3.5%

1,200
1,000

Antam
5%

800
600

SMM
8%

2009
240kt

Eramet
17%

400
2.7%

-13%

-7%

Anglo
American
8%

200
0
2006

2007
FeNi

Source: ISSF, Hatch

2008

Posco
9%

2009

Other
7

Pamco
13%

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Ni demand is dominated by stainless steel production, particularly in the


case of FeNi. Stainless steel production has fallen since 2006
Global stainless steel production
by series (2004-09)

Ni demand by end-use
Foundry
3%

Other
6%

30

Plating
12%
Stainless steel
57%

25

6.95
8.18

Non-ferrous
14%

6.03
20
Alloy steel
8%

7.28

6.44

6.60

15

FeNi demand by end-use

18.58

Alloy st eel
2%

10

16.23

15.39

16.09

15.35

2.31

2.38

2.67

3.23

2.95

2.60

2004

2005

2006

2007

2008

2009

14.47

5
Stainles s steel
98%

0
200

Source: ISSF, Hatch

300

400

Other

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Contents

Hatch
Overview of FeNi market
Demand analysis
Supply analysis
Conclusions

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Long-term stainless steel production has risen at a CAGR of 4.5% since


1965
Stainless steel production
by series, 2001-09

Stainless steel production


Mt

kt

09

2001

20

20

20

19

19

19

19

19

19

19

19

19

05

5,000

01

10

97

10,000

93

15

89

15,000

85

20

81

20,000

77

25

73

25,000

69

30

65

30,000

20 02

2003

2004
300

Source: Vale, ISSF, Hatch


10

2005
400

2006
200

2007
Other

2008

2009

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Stainless steel production is forecast to continue rising in order to meet


the expected growth in consumption by the developing world
Per capita consumption of stainless steel vs
income per capita for selected countries, 1997-2008

50

Taiwan

Kg per capita

40

30

South
Korea

20

Japan

10

Malaysia

China
0
0

10

20

30

$000 per capita, 2008 (PPP)


Source: Vale, IMF, Hatch
11

40

50

60

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Long-term stainless steel production will move toward 40Mt by 2020.


Further substitution is possible but most of this has already taken place
Stainless steel production

Percentage point shift from 300-series

kt

Appliances Industrial
& C atering applications

40,000

ABC

Tubemaking

Transport

0
0-1%

35,000
1-5%

30,000

5-10%

-20

25,000

5-10%

10-15%

-40
C hange 2001 - 20 08

20,000

300-series ratio

80%

15,000

Potential future change

10,000

60%
5,000

20

2001

20

12

11

20

10

20

09

20

08

20

07

20

06

20

05

20

04

20

03

20

02

20

20

20

01

40%
20 03

2005

2007
% 300-series

Source: ISSF, Hatch


12

2009

2020

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

FeNi faces substitution threats from other refined nickel products and
secondary sources of nickel i.e. scrap
Breakdown of nickel consumption
by stainless steel mills
100%

Breakdown of scrap ratios


by regions
80%

NPI

90%

70%

80%

Scrap

60%

FeNi

70%

50%

60%
50%

40%

40%

30%

30%

Primary

20%

Nickel
Metal

20%
10%

10%
0%
Nickel units by source

0%
2001

P rimary nickel units by


source

2002
Global

Source: ISSF, Hatch

13

2003

2004

USA

2005
Europe

2006

2007

China

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Contents

Hatch
Overview of FeNi market
Demand analysis
Supply analysis
Conclusions

14

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Long-term Ni supply fluctuates between waves of investment, followed by


exploitation

Source: INSG, USGS, LME, Hatch


15

09
20

05
20

01
20

97

Investment
phase

19

93
19

89

85
19

81

Investment
phase

19

77
19

65
19

09
20

05
20

01
20

97
19

19

19

19

19

19

19

19

19

93

0
89

0.0

85

10

81

0.5

77

20

73

1.0

69

30

65

1.5

Investment
phase

19

40

Investment
phase

69

Investment
phase

19

Investment
phase

73

Mt

2.0

Long-term real Ni prices (2008 $)

$000/
tonne

19

Ni production, mined

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

The next wave of investment could add another ~500kt of capacity

Ore type and process

Capacity

Ambatovy

Laterite HPAL

60kt

Barro Alto

Laterite RKEF

36kt

Eagle (?)

Sulphide

10kt (?)

Fenix (?)

Laterite RKEF

23kt

Gladstone (?)

Laterite HPAL

63kt

Goro

Laterite HPAL

60kt

Koniambo

Laterite RKEF

60kt

Nonoc (?)

Laterite - HPAL

40kt (?)

Nunavik

Sulphide

12kt

Onca Puma

Laterite RKEF

52kt

Ramu

Laterite HPAL

31kt

Shevchenko

Laterite Heap

22kt

Tagaung Taung

Laterite RKEF

23kt

Vermelho (?)

Laterite HPAL

46kt

Weda Bay (?)

Laterite HPAL

60kt

Source: Company reports, Hatch

16

2010

2011

2012

2013+

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Nickel is increasingly being extracted from lateritic ores


Nickel production by ore type

Nickel resources by ore type

100%

Sulphides
27%

80%

60%

40%

Laterites
73%

20%

0%

19

9
19 2
9
19 3
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
07
20
0
20 8
09

Sulphides

Sulphides
Source: Hatch

Laterites
17

Lateri tes

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Laterite resources are mainly found in countries that require large


spending on infrastructure

Source: BGS, Hatch

18

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Lateritic ores need to be subdivided into limonites or saprolites in order


to understand the respective mining and processing costs
% content
Depth

Ni

Co

Fe

MgO
Oxides
High Fe, low MgO, low SiO2

Limonite

0.8 1.5

0.1 0.2

40 50

0.5 5

Transition
zone

1.5 4

0.02 0.1

25 40

5 15

Processing Dependent on
presence of clay minerals.
Typically hydrometallurgy
(HPAL, Heap, Caron)

5.5m

Silicates
Low Fe, high MgO, high SiO2
Saprolite

1.8 3

0.02 0.1

10 25

15 35
Processing Pyrometallurgy.
End product (FeNi, matte)
dependent on mineralogy

10m

Bedrock

Source: Mick Elias, Hatch

0.3

0.01

19

35 45

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Summary of nickel ores and their pros and cons

Nickel ore

Laterites

Sulphides

Limonites

High mining costs


Underground mining

Low processing costs

Source: Hatch

Saprolites

Low mining costs

Low mining costs

Surface mining

Surface mining

High processing costs

Falling processing costs

Proven technology

Unproven technology

Proven technology

Often associated with


valuable by-products
(Cu / Pd / Pt)

Protracted startup

Large-scale operations

Expensive materials of
construction

Vulnerable to energy
costs

High acid consumption

Slag disposal

20

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Mining and processing costs will depend on a variety of factors. It is


too simplistic to categorise as laterites vs. sulphides
Resource

Inputs

Higher grade = better

Merchant vs. captive

>1.5% saprolite

Hydroelectricity vs. fossil fuels

Saprolite = proven
processing technology

Hydrocarbons

Project management
Project phasing
Project team continuity
New technologies

Labour availability / skills


Larger size = better
Lower capex per tonne

Infrastructure
Ore mineralogy

Power / Acid / Lime plants

Content of clay minerals


Lower = better

Transportation
Road / Sea / Air

Magnesium content
Lower = less acid consumption
in hydrometallurgy

Conveyors / Pipelines
Difficulty of terrain / climate
Accommodation

SiO2 / MgO ratio


Impacts on choice of end-product

Source: Hatch

Permits / Compensation
21

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Contents

Hatch
Overview of FeNi market
Demand analysis
Supply analysis
Conclusions

22

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Conclusions

Demand

Supply

Stainless steel production to increase

New supplies to arrive from lateritic ores

Approaching 40Mt by 2020

Not just FeNi though

Production increase will offset effects of substitution

FeNi to account for 20-25% of refined Ni production


Compared with 15-20% at present

China/India + other EMs to drive consumption growth

Other things being equal, production costs will rise

Beneficial for local laterite-based suppliers

Increased spend on infrastructure

FeNi likely to supersede NPI

Unproven technologies

Increase in scrap ratio a key threat

Technological advance likely to minimise LT real price rises

Development of collection networks in EMs

23

INFORMA MINING & METALS 2ND EURO NICKEL CONFERENCE, 18-19TH MARCH 2010

Your contacts for further information

Hatch London office

9 Floor, Portland House, Bressenden Place, London SW1E 5BH

+44 20 7906 5100 (switchboard)

Robert Cartman
Consultant


+44 20 7906 5119

Fax

+44 20 7963 0972

Mobile

+44 7813808240

rcartman@hatch-europe.com

Hatch is a member of the HATCH GROUP of companies

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