2011 marked one of the greatest years of change the vermiculite
industry has ever seen. What had traditionally been a small and
relatively stable market, suddenly transformed into one of
tremendous interest for a number of developers. Spurred by news
that production from South Africas Palabora - the
worlds leading producer - was diminishing, and eager to
fill the gap created by Chinas Xinlong Vermiculite Co.,
Ltd when it (temporarily) shut its doors, developers outlined
production plans that would have seen the current global
production, of approximately 580,000 tpa (USGS - 2011), almost
double. As Graham Ellicott, chairman of The Vermiculite
Association, told IM at the time:
Theres more going on in the industry now than there
has been in the last 30 years.
| Brasil Minerios Sao Lus
mine in Goania, Brazil
The proof though, will be in the
pudding, as Chinas Xinlong is now back up and running,
and Palabora has suggested that its plans could be to increase
production, rather than curtail it. Whether producers and
developers will be able to reach their production targets, will
all depend on demand from buyers whose confidence has been
rattled by the aforementioned market instability.
Vermiculite is one of three
ultralightweight aggregates (perlite, vermiculite and pumice),
accounting for 0.6m tonnes of the worlds 14.5m tonnes
consumption in 2009, where perlite took 3.5m tonnes, and pumice
10.3m (Roskill Information Services). In 2009, the
minerals main end markets were in construction,
insulation and horticulture, where vermiculite production was
concentrated in South Africa (41% of world output in 2009), the
US (21%) and China (21%). The scene now though, is changing,
and the global output breakdown could look quite different in
the next couple of years, particularly in Brazil, where new
entrant Brasil Minerios is growing fast.
Brasil Minerios Ltd (Minerios) produced nearly 70,000 tonnes of
vermiculite in 2012, and has earmarked an ambitious expansion
plan, that, if successful, will see its production rise to
200,000 tpa by 2016.
The company is producing
vermiculite at its So Lus De Montes Belos mine near
Goinia in central Brazil, and holds the mining rights to
the worlds largest undeveloped known vermiculite
deposits, in Catalo, Gois state. It is hoping to
start up its Catalo mine near the countrys capital,
Braslia, in 2013.
Minerios produced 35,000 tonnes
vermiculite at its So Luis De Montes Belos mine in 2010,
and topped its estimates for 2011 production, of 55,000 tonnes,
by 15,000 tonnes.
Next year, we are looking to
grow to 100,000 tonnes, exactly as we expected, Wilton
Machado, CEO, told IM.
While ambitious, it seems that
Minerios plans to reach its desired production of 200,000
tpa might not be unrealistic, at least in terms of the
operations potential. Market participants have lauded the
operation, describing it as unique, and praising its
Wilton [Machado] has done a
fantastic job with Brasil Minerios. His use of a hybrid wash
screen followed by dry winnower which produces an exceptionally
clean product at reduced production costs, is unique in the
industry, Eric Moeller, head of the Nanoparticle
Consultancy, told IM.
Moeller added though, that the
company has limited coarser sizes - potentially a key drawback
in a market where coarse grades are king.
Of its current production, Minerios
exports 60% and sells 40% domestically. Of the exports, 40% are
being sold into Europe, 40% into North America, and 20% into
the Middle East. The company exfoliates between 30-40% of its
John Addison, managing director of
Nanoparticle Consultancy, added to IM:
Its a good system, it seems to be working very
well. Theyre going into some new areas of the mine,
theyve left the old area and opened a new pit.
Theyve got good reserves there, and more importantly,
there are few signs of fibrous minerals in that area.
Although it seems that in terms of
infrastructure at the mine, the company is well positioned to
progress, logistics could yet prove a challenge. As Jose Luiz
Fernandes, company spokesperson explained to
IM: Roads are a problem in Brazil - we
use a lot of trucks. Barges and rail systems are also
underdeveloped in Brazil.
| Vermiculite from Palabora
The ports are also a problem.
However, as the country imports and exports more, the
infrastructure is fast-improving.
While Minerios infrastructure
and Brazils sound and growing economy look like they will
bode well for the company, its ability to reach full production
will hinge not only on the difficult-to-predict demand, but
also on the fortunes of established and emerging competitors,
many of which have been somewhat enigmatic in recent
Gulf Industrials coarse advantage
The situation for Ugandan miner Gulf Industrials is quite the
inverse to Palabora. In terms of its mineral composition, the
deposit of Ugandan miner Gulf Industrials is perhaps one of the
most prospective in the industry. 21% of the companys
deposit is constituted of large grades (+5.60mm) of
vermiculite, and 30% is of medium grade (+2.00mm). This could
prove to be an invaluable asset to the company, as, generally
speaking, the coarser the vermiculite grade, the higher the
price. As the companys CEO, Mark Arnesen, observed to
IM: You cant turn micron into
large, but you can turn large into micron.
A deficit of coarse grades globally
has been one of the major contributors to soaring vermiculite
prices in 2011. Palabora conceded that it was struggling to
keep up with global demand for coarser grades, tightening
supply further, and a major gap emerged for a developer to plug
In June last year, Gulf targeted
the production of 130,000 tpa vermiculite from its Ugandan
deposit by 2013. Such a level would require a hitch-free and
aggressive expansion plan, particularly as the company has not
yet reached its name plate capacity of 30,000 tpa, which it
initially forecast to have online by September 2011.
Arnesen told IM:
We want to get production up to our name plate capacity
of 30,000 tonnes. There are certain things we need to complete
first though. We hope to have this capacity online by the end
of the second calendar quarter [of 2012].
Another objective is to
complete a feasibility study to bring production up to 80,000
tpa by the addition of a 50,000 tpa plant. We hope to complete
and present this study by the end of June. This year is crucial
for those things.
| Green grass growing vermiculite
A landlocked country, one of the principal challenges of mining
in Uganda will be the logistics of getting the product away
from the mine. Gulf plans to integrate both rail and road into
its logistics plan, but for now, it is relying on roads to
transport its product.
At present, all of our
product is being transported by truck, and the roads need a lot
of repair, Arnesen revealed.
Crucially though, the railway
is being upgraded. New financing has been raised by RVR, and
they will be keen to have the line operating as soon
Arnesen explained that other
challenges for the company will be to negotiate a Mining
Agreement with the Ugandan government, as well as training
locals to work at the mine, which has until now been a
Weve also had issues
with the electricity grid, so were looking to install a
stand-by generator, which, although more expensive to run will
provide improved reliability.
Coarse grades pricing power
While developing suitable infrastructure to support the
companys ambitious expansion plans will undoubtedly be a
challenge, evidence has already emerged that if and when the
company gets significant production online, it will continue to
be in pole-position to command premium prices for its
In 2011, vermiculite prices surged
from $230-450/tonne (South Africa, bulk, FOB Antwerp), to a
range of $400-850/tonne. This unprecedented rise was driven by
a number of factors, but the consensus was that a scarcity of
short grades was a key contributor.
One consultant told
IM: Gulf would be in a good position to
get premium prices for the large grades, because there is a
general undersupply worldwide.
Nanoparticles Moeller added:
Coarse grades remain constrained worldwide, which is
causing the pricing to continue to rise for those
Gulf hiked its vermiculite prices
by an average of 12% for the period between 1 March 2012 and 28
February 2013. This itself is indicative of the pricing power
of coarser grades - 12% is quite a substantial rise in a market
for which prices have been relatively flat since last
Palabora production falls in 2011
South African miner Palaboras concession last year that
the company is feeling the squeeze as its deposit at its
Limpopo mine diminishes, sent ripples through the industry.
Palabora has for years been the worlds largest
vermiculite producer, so any news that it might lose its crown
has spurred others to lay their claims as heir to the throne.
Machado of Minerios has said that the Brazilian project is:
The natural replacement for Palabora.
Palaboras vermiculite sales
fell year-on-year, from 2009-2010, from 183,000 tonnes to
179,000 tonnes. Sales continued to decline in 2011, falling
another 9%. The company sold 163,00 tonnes in 2011, which it
attributed to: operational maintenance performed to
improve safety, the impact of wet weather on ore feed in the
first quarter and the impact of a two-and-a-half week furnace
refractory maintenance plan, lower ore feed grades and
excessive ore moisture due to wet weather in the fourth
In October last year Rio Tinto and
Anglo American, which held a 57.7% and 16.8% stake in the
company respectively, decided to sell their stakes in
Chief executive of Rio Tinto
Copper, Andrew Harding, said: Rio Tinto is no longer the
natural owner of Palabora due to the limited opportunity to
significantly expand copper mining.
Since the announcement, speculation
has been rife that French conglomerate Imerys would be a
perfect-fit suitor for the operation. One vermiculite producer
told IM: The only possible buyers would
be Imerys, which owns a mine in Zimbabwe, or Greek perlite
However, as yet, no such approach
has been made, so the future of the deposit remains to be
Palabora fights back
Despite its declining vermiculite production in recent years,
Palabora has suggested that its plan may actually be to
drastically increase its production in the future, rather than
see it slip further.
Herbert Hanke, Palaboras
general manager of marketing, sales and logistics, told
IM in January this year: Were
currently undertaking a study which considers the production of
300-400,000 tpa vermiculite. From some simple drilling,
weve seen that our possible reserves could far exceed our
proven 24-year mine life, at 200,000 tpa.
Since that time, market sources
have confirmed the eligibility of such an expansion,
demonstrating that there is the potential for new life in the
Palabora has got untouched
areas they could work in to. Also, theyve got the right
to the material from the phosphate tailings. [South African
phosphate producer] Foskor has the rights to any of the
phosphates in the vermiculite deposit, and vice versa: Palabora
has the rights to any vermiculite in the phosphate works,
vermiculite consultant Addison told IM.
I think Palabora could
probably up their production, but theyre going to need to
put in more plant infrastructure.
Chinas Xinlong back in business
As if all the aforementioned expansion plans werent
enough to rejuvenate the vermiculite market, Chinas
Xinjiang Weili Xinlong Vermiculite Co. has set out its
intentions to increase its vermiculite production to as much as
150,000 tonnes in 2012.
According to Melissa Zhang,
commercial director of Paris-based CMMP, which markets
Xinlongs products, the company produced 80,000 tonnes in
The supply influx could make
competition very stiff indeed in the global market, and goes a
long way to show just how much the shape of the market has
changed in the past year or so.
Fingers crossed on fine grade demand
While coarser grades have ruled the roost in commanding high
prices for vermiculite in recent months, producers have been
holding out for a resurgence in demand for finer grades.
Xinlongs closure in 2010 shook buyer confidence, with
some end markets turning away from vermiculite and on to other
materials - such as perlite and pumice - to integrate into
Now though, increased fine grade
utilisation in end use products for markets such as insulation
and brake pads, has been tipped to strengthen demand.
Vermiculite demand will
increase. From talking to various industrial users, Ive
learnt that they will increase their tonnage substantially.
Fire proofing is one of the key drivers, said
End users need to guarantee
quality and supply of material. This has been difficult in
recent years, given Xinlongs closure, however, now supply
is looking to become more stable it is possible that investors
will develop new product lines that utilise vermiculite,
Micron grades of vermiculite can be
used to absorb mine water, as well function as an effective
replacement for zeolites in iron exchange columns.
If new products can be
developed that utilise micron, their value will increase
exponentially. If I were younger, Id be commissioning
research in the development of these products. Relatively
little research has been done in vermiculite utilisation,
A spokesperson for vermiculite
producer Brasil Minerios, told IM: We
have clients that are changing day-by-day. End markets are
moving to finer grades, people are finding innovative ways to
utilise cheaper grades.
Ned Gumble, of US producer Virginia
Vermiculite, which produces between 40-45,000 tpa vermiculite,
concurred that increased fine grade utilisation was a likely
He told IM:
We have been hearing that there has been some increased
utilisation of finer grades recently. We have not yet seen any
appreciable change but remain optimistic.
Machado of Minerios
added: Gypsum boards that use
vermiculite are emerging as a new market. Their use will be
more intensive. This could become an area of very strong demand
for vermiculite. it will be the finer sizes of vermiculite used
in this area.
Construction hits demand
A sharp decline in the US and European construction sectors
have had an inevitable knock-on effect on vermiculite
Alison Saxby, of Roskill
Information Services, told IM: The weak
construction sector is impacting demand, particularly in Europe
and North America. This has also been coupled with a resistance
to higher prices, especially for coarse grades which is
In Asia and Oceania the
largest application for vermiculite is in now in horticulture.
The region now accounts for around one third of world
vermiculite consumption, which is where most growth in demand
will be found this year and next.
Virginias Gumble concurred:
While demand for our grades has been relatively stable,
the construction products related markets have much room for
Price forecasts mixed
While producers and analysts have shown minor discrepancies in
conservatism over price forecasts, the consensus seems to be
that, for now, and after their unprecedented surge in 2011,
prices have levelled out.
As one producer forecast to
IM: I expect price stability. I think
demand has met a point of equilibrium. I dont expect any
surprises with price rises.
Another, though, forecast the
overcapacity could exert a downwards pressure on prices. The
producer told IM: Prices are a moving
target, given inflationary pressures too. Certainly whats
happening in the oil world is reflective of pricing pressures
on products here, particularly operations such as ours which
are wet processed.
The extra supply has got to
put a downward pressure on pricing at some point in time. I
think the other factor in there is transportation costs,
especially with fuel prices where they are today. Thats
going to significantly impact on all the producers.
Another market analyst concurred
that new supply will keep prices in check. The source said:
Price rises in 2012 will probably be curbed by a
combination of increasing output from China, Uganda and Brazil
and the economic situation in Europe. Prices for expanded
grades will continue to be affected by high energy
Quality control adds pressure
Quality control measures are expected to increase
producers costs. Fibrous minerals have been (often
notoriously) associated with vermiculite extraction, and,
following the widely-reported asbestos contamination at WR
Graces now 20-year-closed vermiculite mine, producers are
implementing more stringent measures than ever to ensure a
clean, uncontaminated product.
One source explained to
IM: Quality control measures will
ultimately affect prices. Buyers are becoming more particular
about what they buy. There are issues about organic chemicals
in vermiculite such as dioxins and arsenic. If someone says
that a certain vermiculite product has five parts per million
arsenic, then for whatever reason other people may find that
That said, Im not sure
prices are going to get very much higher in the future because
various producers are increasing their production. Some have
not shifted their price significantly over the last year or so.
They are taking the longer view; if they have a large, loyal
customer base they dont want to upset them by drastically
Market in the balance
Despite a highly volatile, and in many cases highly optimistic,
year for vermiculite in 2011, renewed economic uncertainty has
reined in expectations of a sure-fire explosion in demand. In
the coming months, it will be a watch-and-wait market. It seems
impossible that there will sufficient demand to support the
combined new production earmarked by all producers.
Overcapacity is a very real threat to the market, where demand
is already quite weak in some major sectors (such as
construction). If all the above-discussed plans were to come to
fruition, more than 500,000 tpa vermiculite could be injected
into the market. A dose which, for at least some producers,
could prove lethal.