Turning challenges into golden opportunities

Certain gold-producing African countries are considering establishing local refineries. However, there is a risk that some may harbour a romanticised notion of the business. While the business is ‘worth its weight in gold,’ it is only through proper planning and thorough implementation that challenges could be turned into opportunities.

By Jimmy Swira

In recent years, there has been an upswing in resource nationalism in certain gold and other mineral-producing countries on the African continent, resulting in steps being taken to effect drastic changes to mining rights. The politicians driving the move posit that mining rights have been overtaken by events, and so changes are long overdue.

‘In-Country Beneficiation’

Consequently, countries are amending mining rights to ensure that they extract more value from their minerals than they currently do. One of the areas they have identified niche opportunities in is the “in-country beneficiation” of minerals, particularly in the gold refining and manufacturing of jewellery and other products. However, the main challenge is that currently, most resource-rich countries do not have local capacity in the area of gold refining, let alone conducive conditions for refining industries to flourish, with the exception of South Africa. As a result, the bulk of the gold is exported to refineries overseas, which, in effect, is “offshoring” the refinery industry.

For this reason, the countries are aiming for the gold to be refined locally. Some of the options they are exploring are the establishment of state-owned entities or outfits in which the state has a controlling stake.

While the fervour in countries is admirable, one would ask: What would it take to establish a sustainable gold refinery in Africa?

Project Viability

Two specialists are eager to share their views with Mining Business Africa on the viability of a refinery in Africa. Their views are gathered from a combined experience of over fifty years in the gold refinery business.

Chris Horsley is a consultant to high-profile organisations in the gold sector, who previously served as Executive Head: Technical and Advisory, amongst other positions, at Rand Refinery for more than two decades. On the other hand, Vic Hills is the Principal Consultant at V W Hills Mineral Processing Consulting CC, Cape Town.

Not a new discussion

First of all, before delving into the matter, Hills draws attention to the fact that the discussion on “in-country” beneficiation is not new in Africa’s gold mining and refining industries. “In-country beneficiation has been talked about for about the last twenty-five years, particularly in West Africa, which is now the most prominent gold-producing region in Africa,” he says, adding that he hopes to see new ventures succeeding through meticulous planning and sound implementation.

Scrupulous Planning and Implementation

Relating to meticulous planning and sound implementation, Horsley mentions the following important areas: a Comprehensive feasibility study; Plant design, and the optimising of operations for specified inputs and outputs and for a robust metal accounting methodology; and the need for responsible upstream and downstream supply chains.

1. Feasibility Study

The primary step in a feasibility study is to be thoroughly versed in the regulations governing the global gold refining business and how the planned refinery will navigate as a new entity. “Mining companies have to understand the most important aspects of this notion of upgrading newly mined gold or secondary gold to a beneficiated product. Mainly, the product must be able to be sold into the international gold market to realise the inherent value of the gold for investment and monetary trade. And for this to happen, the gold must be accredited by the recognised exchanges and certifying bodies in the market. Typically, these are centred in London, Shanghai, Singapore, Tokyo, Dubai and New York, to name some of them,” Horsley points out.

So, even gold that is refined “in-country” to a purity of at least 99.50% will need to be re-refined by a refinery that has accreditation to a body like the LBMA (London Bullion Market Association) or the DMCC (Dubai Multi Commodities Centre). Without this accreditation, the gold cannot be traded on the international market and thereby realise its full value in monetary terms.

Unfortunately, this is often a step that governments overlook in their drive to establish a gold refinery in their respective countries. Besides basic regulations, Horsley tells mines to be aware of the following information before embarking on a project:

• The location, size, and shape of the desired market for refined gold, for example is the gold to be used for local jewellery manufacture or exported into the international market

• On a global basis, gold refining capacity far exceeds the supply of newly mined and secondary gold input.

• The size and capacity of the refinery that is to be established.

• The type of gold that is to be refined, e.g., newly mined gold, artisanal gold, secondary material, or gold scrap.

• The volume of gold of each type that is to be treated.

• The characteristics and nature of the gold supply chain to the refinery and after the gold has been refined.

• The weighing, sampling, and assaying of the incoming gold, in-process materials, and final products. The methodology used is very important.

2. Design

After a thorough feasibility study has been carried out, a crucial step is designing a refinery that operates efficiently, cost-effectively, and is environmentally friendly. The adage: “Look before you leap may” sound like a cliché, but it is as relevant as ever. Particularly, Horsley brings attention to the following realities:

• Financially, the actual refining step is financially very marginal. Revenue incentives are found in the degree of “value-add” to the refined gold.

• The disposal methodology of the final effluent streams (gaseous, liquid) from the refining process is vital. Residual gold can be entrained in these streams.

• One of the most critical steps in the design of the plant is the control of the metal balance across the process, efficiencies of >99.98% are necessary.

• It is necessary to minimise the work-inprogress gold inventory and the time it takes to refine the incoming gold. Control of the inventory is a necessary part of managing the metal balance.

3.

Optimising Output

Last but not least, the bottom line in any refinery is to efficiently maximise the output. The convoluted part is how to put a handle on this task. While there may be numerous approaches to optimising operations to meet the desired output levels, Horsley suggests the following steps: Minimising the gold inventory pipeline; Keeping process efficiencies close to 100%; and processing incoming gold as fast as possible so that it can be dispatched to the customer quickly. Furthermore, the use of suitable technologies is central to the successful operation of refineries. Thanks to advances in research and development, there are several innovations at the disposal of refinery asset owners. Among the available technologies that can be adopted, Horsley suggests Miller Chlorination for larger volumes, as well as wet chemical processes for smaller volumes and easier process control.

4. 4. Responsible upstream and downstream supply chains

Last but not least, refiners are strongly advised to understand and take steps to comply with the appropriate standards and guidelines issued by amongst others, the LBMA, OECD, DMCC and the World Gold Council.

Encouraging success

By and large, Hills hopes plans by certain countries to establish sustainable refineries bear fruit. He is encouraged by African countries that have implemented the above-mentioned steps thoroughly. The established refineries can produce gold bars and other products of 9950 fineness and above. This gold is used by jewellery manufacturers to produce their wares, coin, medallion manufacturers and others who use the gold for various decorative and industrial purposes. “Hopefully, the models of those successful ventures are being replicated in other countries. However, enhanced proper prior due diligence is critical, and then challenges can be turned into golden opportunities.”