Industrial Minerals – Evaluation and Profitability

Abstract

The scope and principal objectives of this paper are to improve our understanding of the industrial minerals sector, especially regarding project evaluation and business profit drivers. Information and discussion is aimed to stimulate debate and hopefully assist towards a more professional approach in development of industrial mineral projects. Industrial minerals are often misperceived by the community, education and research organisations, industry professionals and Governments. They are best defined as mineral products used and consumed in industrial, manufacturing and agricultural applications. Production of industrial minerals may enhance or up-grade their chemical and physical properties, though the mineral remains largely unchanged by chemical processing. Examples include iron ore, potash, borates, ilmenite, silica sand, gypsum and kaolin. Industrial minerals are commonly underrated as the poor cousin to precious metals, base metals, light metals and energy minerals. To the contrary, many small and large industrial mineral companies are highly profitable with long-term 15-30% EBIT / Sales margins and strong returns on capital employed. Successful evaluation and development of industrial minerals must recognise the principles of “Value in Use”. This involves a dynamic interplay between technical, market and commercial factors, including resource characterisation, geo-metallurgy, application tests, process optimisation, customer trials and primary market surveys. Industrial mineral products require consistency of physical and chemical properties, leading to performance in the customers’ application. Keys to profitability include technical understanding, market knowledge, QA / QC discipline, and customer relationships. Success is rarely about having the biggest or cheapest operation, it’s more about consistency, rarity, functionality, market structures, barriers to entry and, ultimately, price leverage. “New Age” raw materials to supply the electronic, battery and sustainable energy industries are considered, including lithium, cobalt, graphite, indium, manganese, scandium, and high-purity quartz. Principal conclusions from this paper are that industrial minerals can be very profitable businesses if managed professionally with an understanding of industry drivers, opportunities and risks.