Russia’s magnesia production
capacity is set to almost double by 2018, with the
implementation of several new mining projects in Siberia and
the country’s Far East.
A number of recent market studies show that
Russia is currently facing growing demand for refractory
products, which are the main market for deadburned magnesia
(DBM) and fused magnesia (FM).
Historically, the country has imported about 30%
of its magnesia needs from three main destinations –
China, Kazakhstan and Ukraine. However, at the beginning of
2015, import volumes collapsed, due to the decline in the value
of the Russian rouble against most hard currencies, making
imports prohibitively expensive. At the same time, the conflict
in Ukraine resulted in an almost complete cessation of magnesia
imports from this country.
"Russia currently has about 35% of world
resources of magnesium oxide (MgO), while the leader of
[Russia’s magnesia-producing] companies, Magnezit
Group, owns and develops only 18.6% of all [domestic]
reserves," Galina Sklyarov, a senior fellow of the Far East
department of the Russian Academy of Science, which recently
conducted research into the Russian magnesia industry, told
IM.
"As the result, the deficit in refractory
products [has for a] long time has been covered [by] imports,
which last year accounted for about 30% of the total market
share."
Shift to net exporter
According to preliminary estimates from the
Russian Ministry of Subsoil Resources, by 2018, the emergence
of new projects in Russia will enable the country to not only
abandon imports of magnesia, but also to launch its own
exports. Initially, these will go to China, from the large
deposits in the Jewish Autonomous District (AO) in
Russia’s Far East, as well as to countries in
South East Asia, where the ministry sees growing demand for
magnesia.
Estimates also show that the total reserves of
magnesite in Russia will be sufficient to meet the
country’s growing needs for the next 80 years.
However, the industry still faces logistical challenges, as the
most promising reserves are concentrated in the eastern region,
such as Krasnoyarsk Krai, Irkutsk Oblast and Jewish AO, while
the main consumers of magnesia products in Russia are located
in well-populated western and central parts of the country.
Initial projections suggest that the
implementation of the new magnesite mining projects will boost
Russian output to around 1.4m tpa by 2020, while total domestic
demand by that time will only be around 0.9m tpa.
Experts at the Russian Academy of Sciences also
note that, in recent years, demand for magnesia has grown
rapidly in step with the replacement of open-hearth furnaces
for basic oxygen furnaces and electrically-heated furnaces
between 2013 and 2015, which in turn boosted the demand for
high-quality refractory products. This trend is expected to
continue during 2016-2017 and will increase the demand for
material with a minimum MgO content of 43% and impurities of
not more than 4% calcium oxide (CaO) and 2% silicon dioxide
(SiO2) – a trend which could push prices
up.
New market entrants Savinksy
In the coming years, Magnezit may lose its
monopoly status in the Russian magnesia market. It is expected
that its main competitor may turn out to be whoever finances
the development of the Savinsky magnesite deposit in Siberia,
which has total proven reserves of 2bn tonnes, accounting for
around 75% of Russia’s total magnesite reserves
and making it one of the largest magnesite deposits in the
world.
Magnesia production at Savinsky previously
commenced in 1999, but in 2000 the mine was shut down, when the
investor behind the project violated a number of conditions of
the investment agreement.
The Russian government is currently preparing the
asset for tender. According to sources familiar with the
matter, it is likely that the right to develop Savinsky will be
obtained by a consortium of Russian and of foreign
companies.
Located in a relatively undeveloped area of
Siberia, the project is expected to have elevated logistical
costs. It is assumed that the new investment agreement for
developing the deposit will be concluded by the end of 2015,
with an initial investment budget of at least $350m, part of
which will be spent on the construction of the necessary
infrastructure in the region.
The building of a beneficiation plant and other
facilities will take the overall capacity of the project to an
anticipated 250,000-300,000 tpa.
Heimen-Dalni Vostok
Another magnesia production project in Russia is
being developed by the joint Russian-Chinese company,
Heimen-Dalni Vostok, in the Jewish AO Far East part of the
country.
The total capacity of the project, which should
be launched by the end of 2015, is slated at 150,000 tpa
magnesite.
According to Andrew Lomov, chief engineer for
Heimen-Dalni Vostok, the company has already invested Chinese
renminbi (Rmb) 1.5bn ($245m*) in developing the
deposit.
Like the Savinsky deposit, Heimen-Dalni
Vostok’s project is located in a
sparsely-populated and underdeveloped part of Russia. According
to initial estimates, the construction of a power transmission
line to serve the project would cost the company a further
$245m. Accordingly, it decided to construct a thermal power
plant near the deposit to supply the project’s
energy.
Proven reserves at the Jewish AO deposit are
estimated at 11.6m tonnes magnesite, however the geology of the
region has been poorly studied to date, and in future this
figure could be raised.
North Korea
It has been suggested that Russian companies can
obtain the right to develop magnesite deposits in North
Korea.
The Russian government is reportedly in
negotiation with North Korean leaders to explore the
country’s mineral reserves in exchange for the
supply of second-hand military aircraft.
Sources close to the negotiations say that the
total reserves of magnesite in North Korea are around 6m tonnes
and a number of Russian companies have already expressed an
interest in participating in their exploitation, should the
unconfirmed deal go ahead.
Magnezit to boost capacity
As well as the addition of magnesia capacity by
new market players, the leading existing producer, Magnezit
Group, is currently implementing a new magnesia project
at the Talsky deposit in eastern Siberia.
The company is expected to begin mining at Talsky
in mid-2015, ramping up to full capacity by the third quarter
of 2016. This will add to the capacity of two other Siberian
mines named Kirigiteyskiy and Satkinsky, which Magnezit already
operates.
The Satkinsky mine is thought to contain some of
the highest grade ore in the country. Caustic calcined
magnesia (CCM) produced from the deposit grades up to 98% MgO
and contains a minimum level of impurities. The Talsky deposit
has magnesite resources at around 100m tonnes and is planned to
be put into operation by 2018-2019. Total capacity for the new
plant is estimated to be around 200,000 tpa CCM and up to
100,000 tpa FM.
Total capex for the project is pegged at Russian
rouble (R) 7bn ($129.5m). This includes spending on
infrastructure, as the project is located in a remote area of
Siberia.
The company started developing the project in
2010, with the Satkinsky mine and a new 100,000 tpa CCM
beginning operations back in 2013. A new production complex at
the project is set to begin production in 2018-2019.
Talsky’s development will
include the construction of a multiple hearth furnace (MHF)
with a total capacity of 100,000 tpa CCM and a new smelting
plant for the production of FM, with annual output of 100,000
tpa. The project will be realised in two stages of 50,000 tpa
FM in each.
"Development of magnesia production at [the]
Talskaya deposits will create a high quality resource base for
the new complex for deep processing of magnesia, the
construction of which our company has also initiated at the
Motyginsky District of Krasnoyarsk Krai," said
Magnezit’s CEO, Sergei Odegov.
Given its investment in this project, it is
expected that Magnezit will be able to maintain its leading
position in the Russian market, even if all of the other
projects mentioned are implemented. However, the
company’s total share of Russian magnesia
production is likely to decrease from more than 90% in 2014 to
about 65-70% by 2020.
New production of amorphous
magnesia
As well as magnesite mining, Russia is also
hosting a project to produce amorphous MgO from mineral wastes
using new technology developed by Russian researchers with the
support of JSC Lithosphere.
This venture began in 2010 and had produced
around 40,000 tonnes magnesia as of 2014.
The production process has been developed by
scientists at Voronezh and Belgorod State Universities and is
based on a complex method of waste processing, which involves
the use of specially designed organic molecules.
"This technology is unique because it lets the
producers deal with the problem of waste processing and
increase the final production volume," Vyacheslav Sirota, head
of the Centre for Structural Ceramics and Engineering
Prototyping of Belgorod State University, one of the leaders of
the research, told IM.
"The content of useful substances that remain in
mineral wastes is 30%. With the new technology, we extract 28%
of useful elements from waste. These are magnesium carbonate or
amorphous magnesia."
According to Sirota, the final product will be
supplied to local refractories producers as well as
manufacturers of animal feed and cosmetics.
The project has already received a government
grant for the equivalent of $2m, which the authors of the study
plan to use to launch a trial complex for the processing of
amorphous magnesia with a total capacity close to 13,000 tpa in
July 2015. The complex will be located in Belgorod Oblast,
while mineral wastes will be supplied by JSC Lithosphere, which
is currently developing the Khalilovo magnesite deposits in the
Ural Mountains.
"This technology will not only let us increase
recoverability of the base material by 30% compared to the
current rate, but also will allow [companies to] process wastes
into competitive products," Sergey Smirnov, CEO of JSC
Lithosphere, said.
The team behind the recycling project believes
that, in the coming years, the technology may be of interest to
other investors developing magnesia projects in Russia, since
the technology for extracting of amorphous magnesia can
substantially increase the profitability of these
businesses.
*Conversion made April 2015