Geology Reference
In-Depth Information
processing of Zn ore: during mining, the first step, an effort is made to extract only
material rich in the ore mineral (sphalerite, ZnS); in the second, the sphalerite is
separated in a refinery from the gangue minerals; and in the third, Zn is separated
from the sulfide in a smelter. At each step the price of the product increases,
commonly by several orders of magnitude. Viewed in this way, it would seem
obvious that mineral-producing countries should build refineries and smelters so
that they can export the much more valuable end products and not the raw ore; but,
as explained in Box 2.3, the situation is not that straightforward.
Box 2.3 Debate About the Politics of Exportation: Raw Materials
or Finished Products?
A major dilemma confronts all exporters of mineral products. Should they
export unrefined ore or the refined, pure metal or mineral? At first glance the
answer seems obvious because the value of the refined product is many times
that of the raw ore, and by exporting the latter, the country will earn far more.
In addition, the construction and operation of refineries and smelters
generates employment, industrial infrastructure and domestic expertise that
also are of great benefit to the exporting country.
The counterarguments come from the cost of constructing and operating
the refineries and smelters. In order for the operation of these factories to be
economically sound, the operation must be of a certain size; if the ore
deposits are small, the construction of even a refinery, not to mention a
smelter, is commonly not viable. In addition, a large investment is needed
to construct the factory and many countries do not have funds for investment;
they have to be borrowed and interest has to be paid.
Consider the following example. A deposit of nickel containing 10 mt of
ore with 2% Ni is found in Zimberia, a small country in central Africa. The
deposit contains 200,000 t of Ni of which about 70% can be extracted, given a
total of 140,000 t. If sold as refined metal, the nickel is worth a total of about
two billion euros at current metals prices of about 15,000 euros per tonne. In
the future the Ni price and the amount earned are likely to increase. The raw
ore is sold at about 70 euros per tonne, giving a total value of the unrefined ore
of only 140 million euros, about 7% of the value of the refined metal (These
figures do not take into account the cost of mining, refining and exporting the
ore or metal, which we will ignore in this exercise). The expected lifetime of
the deposit (i.e. the time before it is completely mined out) is 20 years. Other
deposits, may, however, be found in the region in the future.
The total cost of building the refinery and smelter needed to purify the
metal is about three billion euros. Zimberia does not have the money itself
and would have to borrow on the international market. The total cost of
borrowing this money for a period of 20 years is about the same as the capital
amount. Discuss whether it is worthwhile for Zimberia to construct a Ni
refinery so that the country can export refined metal and not the raw ore.
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