Russian fluorite: Future or failure?

By IM Staff
Published: Monday, 03 October 2016

The future of Russia’s fluorite sector could all depend on whether the world’s second largest aluminum producer, Rusal, decides to rejuvenate its largest fluorite facility in the country’s far east. Without such decisive action by the domestic industry’s leader, other smaller projects will struggle to survive, writes Vladislav Vorotnikov, IM Correspondent.

This year, Russian aluminium giant Rusal is expected to close its Yaroslavsky Mining Works (YMW), a facility that has for the past few years been responsible for more than 90% of Russia’s fluorite output. YMW produces around 240,000 tpa fluorite from two deposits in Primorsky Krai in the far east of Russia.

Rusal’s main aluminium business is under pressure from weak global prices for the metal, forcing the company to review its assets, including its fluorite operations, which have become less competitive in recent years.

The company uses the fluorite it mines in its own cryolite plants to produce products for aluminium making, including aluminium trifluorine, sodium fluoride and hydrofluoric acid.

According to data from the country’s Ministry of Surface Resources, Russian demand for fluorite concentrates is currently around 400,000 tpa. Around 65% of this is imported, mainly from China, Mongolia and Kazakhstan. 

The main reason Rusal decided to halt operations at YMC is that the cost per tonne to produce fluorite from the project is 50-70% higher than in other countries, making it more economical for fluorite consumers to rely entirely on imports.

Russia’s government insists that YMW will be closed only temporarily for modernisation, allowing Rusal time to revise its operations, reduce its workforce and attempt to cut production costs. According to this plan, it is expected that YMW will be recommissioned within two-to-three years, by which time Russia is expected to have identified and developed a number of new fluorite deposits to provide feedstock for the Rusal plant.

Main fluorite deposits in Russia 
Source: Russian Federal Agency for Subsurface Use 

The future of YMW

Russia has significant fluorite reserves and a history of mining the mineral, but the industry has been struggling for the last five years. Most or all Russian fluorite producers are loss-making and unless competitiveness can be significantly enhanced, it is likely to be difficult to justify new investment in fluorite mines. 

Although the long-term plan for YMW has been spelled out by Rusal, what will happen to the facility in the immediate future remains unclear. The governor of Primorsk Oblast, Vladimir Miklushevsky, recently pointed out that the local authorities had an obligation to support the continuation of the works and have allocated significant sums of public money for this purpose. As a result, Rusal cannot simply shut the plant overnight without incurring substantial fines and risks being stripped of its right to develop the site.

"A possible scenario for resolving the situation prior to the resumption of YMW’s fluorite operation is temporarily converting the plant for the production of zinc," Miklushevsky said. "The other option is the development and introduction of new technology for processing mineral ores. However, so far Rusal has not provided a clear answer on this issue. If they intend to continue to play for time, I will ask the Russian government to intervene."

Miklushevsky added that he has discussed the YMW issue with Rusal’s management several times over the last few months and that the company has promised operations at the facility will be halted for no longer than 18 months. 

According to Miklushevsky, under current plans, modernisation of the works should be finished by the end of 2017, when Rusal will at least partially restart mining and processing, although the company has so far not specified an exact timeframe. 

"Today, products manufactured at the facility cannot be used by cryolite plants, their main consumers, because of their high cost and low quality," Rusal stated. "In order to change this situation, YMW requires full modernisation." YMW is currently the only Russian manufacturer and supplier of fluorite concentrate required for the production of aluminum fluoride, which in turn is used for production of primary aluminum. The plant covers more than 60% of Rusal’s demand in this type of raw material, according to Rusal.

In 2010, Rusal considered producing zinc concentrate at YMW, since zinc can be mined at the Primorsk deposit as a by-product. Netherlands-based commodity trader Trafigura expressed an interest in participating in this scheme, but after a year of deliberation Rusal decided not to proceed with the project. In 2011, the company announced plans to launch production of fluorite pellets for metallurgical plants, in addition to the fluoride powder already being manufactured at YMW, but this scheme was also subsequently abandoned.

Approximate estimates indicate that modernising YMW to allow for the production of zinc and fluorite pellets alongside fluorite powder would require investment of at least $1bn, a tall order for a company whose profitability is already under significant strain.

The YMW project’s chief geologist, Valery Saenko, believes that Rusal needs to learn from Chinese fluorite producers. "I have visited Chinese fluorite deposits and seen how they manage to manufacture products at lower cost than in Russia, even at smaller and lower grade deposits," he said.  "They are exploiting more than 1,000 small deposits with a similar total resource base to Russia, but unlike Russia, China currently accounts for 37% of world fluorite production."

Table 1: On-balance reserves of fluorite
in Russia 
Source: Russian Federal Agency for
Subsurface Use 

Other Russian fluorite projects

Russia has around 40 identified fluorite deposits, mostly in Siberia and the Far East, containing a total of 29m tonnes fluorite. To date, only a handful of these with high grade mineralisation have been developed since around 90% of deposits have fluorite contents of less than 30% and half of these contain less than 15% fluorite, rendering them uneconomical to exploit. Many also have poor infrastructure and logistical links.

In addition to the YMW site, Rusal also owns licences for the Pogranichnoe and Voznesenskoe deposits in Russia’s far east, which have combined resources of 22m tonnes ore with a fluorite content of 35.16% and 42.17% respectively.

"Most of the country’s fluorite industry is not ready for commercialisation," said Alexei Skrinnik, chief geologist at the Russian Institute of Geology and Mineralogy at the Russian Academy of Science. "With fluorite contents of 15-25%, there is no sense in developing such deposits at current global prices." 

"They might become interesting for investors in 20 or 30 years’ time, when the major deposits have been exhausted, while the development of the global economy will boost the demand for this type of mineral," he added.

Such assessments have not deterred some developers, however. Preparations for mining fluorite are currently underway at the Ermakovsky fluorite-beryllium deposit in the Republic of Buryatia in eastern Siberia by local company, Yaruuna Invest. In the Republic of Bashkortostan in southern Siberia, Suran Co. is exploring the Suransky fluorite deposit, while at the Shahmatnoe deposit in Trans-Baikal Krai, on the border with Mongolia and China, a group of local investors have nearly finished drawing up a funding plan for a fluorite mine.

Collectively, these projects are slated to have a capacity of 60,000-80,000 tpa fluorite pellets and powder. The average fluorite content of the deposits’ ores is about 35% and their backers have the opportunity to install the most modern technology to extract and process the mineral.

Denis Sokolov, a representative of the Russian Ministry of Surface Resources, said that Russian researchers are working to enhance the country’s fluorite expertise. "Scientists at the Siberian Institute of Mineralogy have developed a unique system for complex processing of fluorite-beryllium ores to produce both elements at very low cost," he said. "Having a strong technological base is the most important part of a fluorite project, because the aim is not simply to launch production, but to make it profitable."

According to a spokesperson for the local government of Trans-Baikal Krai, the development of the Shahmatnoe deposit has official backing. "This part of the country has no metallurgical plants, but borders China and is within reach of the ocean ports at Vladivostok, so can export its raw fluorite," they said. "Given the recent devaluation of the Russian rouble, this could be quite an attractive supply source for some importers". 

Russia’s second largest producer of fluorite, Ros-Shpat Co., based in the Republic of Pervomaisky, recently disclosed plans to fund a large expansion of its mining operations until 2020. However, the company is believed to have significant debts and its management has been embroiled in a fraud investigation and therefore Ros-Shpat’s future is uncertain.

Much depends on whether Rusal proceeds with the modernisation of YMW, since a large, state-of-the-art plant could sustain other fluorite mines in Siberia and the Far East with its feedstock requirements. If the company fails to reopen YMW, it is possible that the entire industry could collapse, unless other developers successfully reduce production costs to make Russian fluorite competitive with Chinese and Mongolian sources, or prices for fluorite rise significantly in the 
next few years.