New projects set to boost Russian magnesia production

By IM Staff
Published: Monday, 27 April 2015

Russia has historically depended on imports of magnesia for its refractories and other downstream industries, but the development of new projects in Siberia, the Far East and potentially North Korea could see the country become a net exporter of the mineral by 2020, Vladislav Vorotnikov, reveals.

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