Weak global prices for metals highlight importance of cheaper smelting processes

Since the last quarter of 2014, it has been investors’ dream to see metal commodities record decent prices on the bourse and finally become “highly tradeable” as they were last year. But the quandaries coming from various parts of the globe have been suppressing this dream to an extent that it has already become the everyday scenario on the London Metals Exchange (LME).

That’s why mining producers and even steelmakers are now capitalising on the possibilities of cutting down market prices through the help of processing plants that offer cheaper service. There are also entities — national governments from different countries or miners themselves, for instance — spending money on research and development in hopes of discovering cheaper processing methods.

“ The downstream companies are paying attention and they buy the raw materials to manufacture these disruptive technologies. Supply chain visibility is rising. With commodities it is more of a logistics game, with critical minerals is a processing game — this is where they are fundamentally different,” Simon Moores, managing director of London-based Benchmark Mineral Intelligence, told The Gold Report in an interview published on Equities.com.

Even Amur Minerals (London AIM: AMC) , which remains one of the few metal mining companies that manage to maintain their share prices at high levels amid weak global metal prices, has chosen to build its own processing plants before selling its ore in the market.

“Mining will best be performed using a combination of underground and open pit productions, power will be generated on site, a substantial access road upgrade can be supported and the construction of own smelter and refinery,” said Amur CEO Robin Young.

Young also said that apart from increasing Kun-Manie Reserve’s mine life to 15 years, building own smelting facilities could also enhance the company’s revenue threefold.

“This increased scale indicates that the construction of a captive smelter is likely to be highly beneficial to Amur. A near tripling of the EBITDA— an increase of US$3.48 billion [AU$4.93 billion] compared to US$1.17 billion [AU$1.66 billion] under a toll option with a nickel price of US$7.50 [AU$10.62] per pound or US$16,530 [AU$23,416] per tonne — from contract smelting is highly encouraging,” he added

Researchers at the Western School of Mines hope that the new palladium processing method they discovered could soon replace traditional smelting machines that make the ore more expensive on the market.

This new discovery could also help smaller deposits that are impossible to extract using traditional smelting and refining methods, which means it could boost the country’s processed ore production should it becomes a staple part of every palladium miner’s operations.

The process, which the researchers called “direct leaching,” is said to be capable of recovering economic levels of platinum metal. This also involves “biological leaching,” in which copper and nickel typically found in platinum are efficiently removed or separated from the ore. Also, the researchers admit that the study needs more improvements to make it more economically viable and market-ready.

But economists and analysts agree that the salvation of the metals segment relies heavily on China, as its local steel makers’ resumed consumption habit could bring the metals market to its old, stable shape.

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