Mining
The Case for Toll Milling in Peru
The Case for Toll Milling in Peru
Gold toll milling infographic presented by: Montan Mining
Peru is South America’s largest gold producer and exporter. Worldwide, the country also has the fifth highest gold production.
2014 production: 5.44 million oz (5.4% of global production)
2014 Global production: ~100 million oz
However, the Peruvian government estimates that illegal mining accounts for about 20% of gold exports. This mining is done by tens of thousands of artisanal, small-scale miners who use metallurgical processes from centuries ago.
Mercury Rising
Illegal mining has environmental and safety repercussions. One of the largest concerns about artisanal mining is how gold is processed from ore. Many of these miners use mercury for this – a vastly dated technique.
Overexposure to mercury can cause neurological damage, such as negatively affecting cognitive thinking, memory, attention and language.
Formalization
To tackle the growing environmental concerns and also capture $305 million in lost taxes, Peru has moved to regulate the industry.
The government wants to ensure that permitted mineral processing facilities using modern technology only purchase feed material from permitted miners.
So far 80,000 of 150,000 miners have applied to be formalized.
The Toll Milling Business Opportunity
Artisanal miners need to sell their ore to licensed processing facilities. Owners of licensed facilities with experience as mineral buyers can make money by safely and economically processing feed for artisanal miners through toll milling.
How the model works:
- Test and select ores from artisanal miners to see what is worth purchasing
- Buy ores from a variety of miners and build relationships.
- Prices are set at time of purchase and are at discount to market.
- Process ore shortly after and sell gold back to the market.
The Risks of Traditional Gold Production
The costs of mining itself have escalated, with cash costs soaring in recent years. Combined with dropping gold prices since 2012, this has put many producers under the gun.
However, companies using the toll milling model have been able to outperform. This is because toll milling has several benefits:
Advantages in Risk:
- Not dependent on one source of ore.
- Commodity price fluctuations have less impact.
- Margins are protected.
- No cost of production, only cost of processing.
Advantages in Capital:
- Path to cash flow is shorter.
- Payback period is shorter.
- Less permitting and development challenges faced.
- Less capital intensive.
- Scalability.
How Big is the Market?
Peru’s gold production of 5.44 million oz (2014) at the average gold price ($1266.40) is worth US$6.9 billion.
The artisanal market is estimated to be 20% of this for 1.1 million oz, or $1.4 billion.
This mean’s just Peru’s artisanal market is similar in size to the total markets in Mexico, Tanzania, or Chile.
With only a few publicly traded toll millers in that market and thousands of more artisanal miners in Peru yet to be formalized, the market has big potential. Compare this to the above markets, where thousands of companies are vying for the same finite resources.
Copper
Brass Rods: The Secure Choice
This graphic shows why brass rods are the secure choice for precision-machined and forged parts.
Brass Rods: The Secure Choice
The unique combination of machinability and recyclability makes brass rods the secure choice for manufacturers seeking future-proof raw material solutions.
This infographic, from the Copper Development Association, shows three ways brass rods give manufacturers greater control and a license to grow in the competitive market for precision-machined and forged products.
Future-Proof Investments in New Machine Tools
A material’s machinability directly impacts machine throughput, which typically has the largest impact on machine shop profitability.
The high-speed machining capabilities of brass rods maximize machine tool performance, allowing manufacturers to run the material faster and longer without sacrificing tool life, chip formation, or surface quality.
The high machining efficiency of brass leads to reduced per-part costs, quicker return on investment (ROI) for new machine tools, and expanded production capacity for new projects.
Supply Security Through Closed Loop Recycling
Brass, like its parent element copper, can be infinitely recycled.
In 2022, brass- and wire-rod mills accounted for the majority of the 830,000 tonnes of copper recycled from scrap in the United States.
Given that scrap ratios for machined parts typically range from 60-70% by weight, producing mills benefit from a secure and steady supply of clean scrap returned directly from customers, which is recycled to create new brass rods.
The high residual value of brass scrap creates a strong recycling incentive. Scrap buy back programs give manufacturers greater control over raw material net costs as scrap value is often factored into supplier purchase agreements.
Next Generation Alloys for a Lead-Free Future
Increasingly stringent global regulations continue to pressure manufacturers to minimize the use of materials containing trace amounts of lead and other harmful impurities.
The latest generation of brass-rod alloys is engineered to meet the most demanding criteria for lead leaching in drinking water and other sensitive applications.
Seven brass-rod alloys passed rigorous testing to become the only ‘Acceptable Materials’ against lower lead leaching criteria recently adopted in the national U.S. drinking water quality standard, NSF 61.
Learn more about the advantages of brass rods solutions.
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