Fluorspar prices above $200/t seen

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Fluorspar prices above $200/t seen
Allan Seccombe
Posted: Wed, 20 Sep 2006

[miningmx.com] -- THE price of fluorspar is likely to top $200 a tonne and the market is unlikely to stabilise any time soon, said Izak Marais, CEO of Sallies, the company that could be South Africa�s leading fluorspar producer if it overcomes its operational difficulties.

�There are already some sales taking place very close to $200/tonne. The only reason I haven�t sold product at that price is because I haven�t had product available,� Marais told a results presentation in Johannesburg on Wednesday.

�We could have made sales in recent months that would exceed $200. So without doubt $200 is possible,� he said.

The most recent shipment Sallies made was for $173.50/tonne free on board (FOB) from the Durban harbour, he said.

without doubt $200 is possible

The spot market price, which is very seldom applied to Sallies� fluorspar because it has contracts with its customers in Europe and the Far East, is $220/tonne, but contract prices tend to be lower than that, he said.

China, the world�s leading source of high-grade fluorspar, is seeing increased production coming from sources further inland. There have been reports of delays of Chinese shipments to customers, Marais said.

The Chinese are having issues with texture moisture limits (TML), which is resulting in "tremendous delays", said Eric Frawley from New York-based metals marketing company Traxys North America.

He questioned whether prices were as high as $200, saying Chinese acid grade fluorspar was fetching $175/tonne FOB down from $200 earlier this year.

Marais said he was receiving queries from customers prepared to pay $200.

New deposits are coming on stream in China, but most of that production has been accounted for by forward contracts, Marais said.

�There�s absolutely no reason for the market to stabilise,� he said.

Sallies recorded an extremely difficult financial year to end-June 2006.

Marais� presentation on the 2006 financial year was a litany of disasters, ranging from the government delaying the issuing of a new order mining right for a deposit critical to blending plant feed to a drilling contractor not performing, and a nearly crippling shortage of cash that made plant maintenance and operation a nightmare.

There were also very late rains that meant Sallies had to use unclean recycled water that affected recoveries. Payments from a major client, Honeywell in the US, were not forthcoming and are now subject to an international arbitration process.

�It was as if everything had come together to close us down,� Marais said.

Production fell to 85,000 tonnes from 130,400 in 2005.

But, he is confident that the company, after a number of false starts, is on the road to profitability.

Sallies has acquired the dumps and hard rock mine at the defunct Buffalo Fluorspar Mine from 1 August. For a small outlay of capital, some R600,000, output will be boosted by to a steady 4,000 tonnes/month from the 2,000 tonnes in September and 3,000 tonnes in October.

It now has the new order mining right to Buffelshoek, meaning it can now put the optimal blend through its plants. Production at the Witkop operation will climb from 8,000 tonne in August to a steady 12,000 tonnes from October.

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At steady state, Sallies will produce 192,000 tonnes of fluorspar a year. This year, given the ramp up figures, Sallies should produce 170,000 tonnes of fluorspar, well above that of Metorex�s Vergenoeg operation, which produced 155,000 tonnes in the 2006 financial year.

This year production will be roughly 12,900 tonnes a month.

�We break even at 9,500 tonnes a month. For every tonne over that we add R1,000 to our bottom line,� Marais told Miningmx.

Sallies is looking at acquiring another two deposits, one north of Pretoria, where there is a preponderance of small producers. Marais said the attraction of these small deposits was their very high grade. Material would be transported to the Buffalo plant for treatment if Sallies made such an acquisition.

The second prospect is in Australia. The deposit lies on the surface and is close enough to a harbour to mean transport costs are minimal, he said, not naming the harbour.

Sallies will begin a bankable feasibility study into hard-rock mining at Buffalo in the second half of its financial year and the company is to spend about a million rand on exploring its existing deposits this year.

Fluorspar is used to make hydrofluoric acid, which is used is in the ceramics, optical, electroplating and plastics industries. It is also used as a flux in steel furnaces and carbon electrodes. It is also used to make toothpaste, electric arc welders and paint pigment.

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