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.
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.
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.
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.
More Than Precious: Silver’s Role in the New Energy Era (Part 3 of 3)
Long known as a precious metal, silver in solar and EV technologies will redefine its role and importance to a greener economy.
Silver’s Role in the New Energy Era (Part 3 of 3)
Silver is one of the first metals that humans discovered and used. Its extensive use throughout history has linked its name to its monetary value. However, as we have advanced technologically, so have our uses for silver. In the future, silver will see a surge in demand from solar and electric vehicle (EV) technologies.
Part 3 of the Silver Series comes to us from Endeavour Silver, and it outlines silver’s role in the new energy era and how it is more than just a precious metal.
A Sterling Reputation: Silver’s History in Technologies
Silver along with gold, copper, lead and iron, was one of the first metals known to humankind. Archaeologists have uncovered silver coins and objects dating from before 4,000 BC in Greece and Turkey. Since then, governments and jewelers embraced its properties to mint currency and craft jewelry.
This historical association between silver and money is recorded across multiple languages. The word silver itself comes from the Anglo-Saxon language, seolfor, which itself comes from ancient Germanic silabar.
Silver’s chemical symbol, “Ag”, is an abbreviation of the Latin word for silver, argentum. The Latin word originates from argunas, a Sanskrit word which means shining. The French use argent as the word for money and silver. Romans bankers and silver traders carried the name argentarius.
While silver’s monetary meanings still stand today, there have been hints of its use beyond money throughout history. For centuries, many cultures used silver containers and wares to store wine, water, and food to prevent spoilage.
During bouts of bubonic plague in Europe, children of wealthy families sucked on silver spoons to preserve their health, which gave birth to the phrase “born with a silver spoon in your mouth.”
Medieval doctors invented silver nitrate used to treat ulcers and burns, a practice that continues to this day. In the 1900s, silver found further application in healthcare. Doctors used to administer eye drops containing silver to newborns in the United States. During World War I, combat medics, doctors, and nurses would apply silver sutures to cover deep wounds.
Silver’s shimmer also made an important material in photography up until the 1970s. Silver’s reflectivity of light made it popular in mirror and building windows.
Now, a new era is rediscovering silver’s properties for the next generation of technology, making the metal more than precious.
Silver in the New Energy Era: Solar and EVs
Silver’s shimmering qualities foreshadowed its use in renewable technologies. Among all metals, silver has the highest electrical conductivity, making it an ideal metal for use in solar cells and the electronic components of electric vehicles.
Silver in Solar Photovoltaics
Conductive layers of silver paste within the cells of a solar photovoltaic (PV) cell help to conduct the electricity within the cell. When light strikes a PV, the conductors absorb the energy and electrons are set free.
Silver’s conductivity carries and stores the free electrons efficiently, maximizing the energy output of a solar cell. According to one study from the University of Kent, a typical solar panel can contain as much as 20 grams of silver.
As the world adopts solar photovoltaics, silver could see dramatic demand coming from this form of renewable energy.
Silver in Electric Vehicles
Silver’s conductivity and corrosion resistance makes its use in electronics critical, and electric vehicles are no exception. Virtually every electrical connection in a vehicle uses silver.
Silver is a critical material in the automotive sector, which uses over 55 million ounces of the metal annually. Auto manufacturers apply silver to the electrical contacts in powered seats and windows and other automotive electronics to improve conductivity.
A Silver Intensive Future
A green future will require metals and will redefine the role for many of them. Silver is no exception. Long known as a precious metal, silver also has industrial applications metal for an eco-friendly future.
Visualizing China’s Dominance in Rare Earth Metals
Rare earth deposits exist all over the planet, but the majority of the world’s rare earth metals are produced and refined in China.
China’s Dominance in Rare Earth Metals
Did you know that a single iPhone contains eight different rare earth metals?
From smartphones and electric vehicles to x-rays and guided-missiles, several modern technologies wouldn’t be what they are without rare earth metals. Also known as rare earth elements or simply “rare earths”, this group of 17 elements is critical to a number of wide-ranging industries.
Although deposits of rare earth metals exist all over the world, the majority of both mining and refining occurs in China. The above graphic from CSIS China Power Project tracks China’s exports of rare earth metals in 2019, providing a glimpse of the country’s dominating presence in the global supply chain.
China’s Top Rare Earth Export Destinations
Around 88% of China’s 2019 rare earth exports went to just five countries, which are among the world’s technological and economic powerhouses.
|Export Destination||Share of China's Rare Earth Exports||Top Rare Earth Import (tons)|
|Rest of the World||12.1%||Cerium|
Japan and the U.S. are by far the largest importers, collectively accounting for more than two-thirds of China’s rare earth metals exports.
Lanthanum, found in hybrid vehicles and smartphones, was China’s largest rare earth export by volume, followed by cerium. In dollar terms, terbium was the most expensive—generating $57.9 million from just 115 metric tons of exports.
Why China’s Dominance Matters
As the world transitions to a cleaner future, the demand for rare earth metals is expected to nearly double by 2030, and countries are in need of a reliable supply chain.
China’s virtual monopoly in rare earth metals not only gives it a strategic upper hand over heavily dependent countries like the U.S.—which imports 80% of its rare earths from China—but also makes the supply chain anything but reliable.
“China will not rule out using rare earth exports as leverage to deal with the [Trade War] situation.”
—Gao Fengping et al., 2019, in a report funded by the Chinese government via Horizon Advisory.
A case in point comes from 2010 when China reduced its rare earth export quotas by 37%, which in part resulted in skyrocketing rare earth prices worldwide.
The resulting supply chain disruption was significant enough to push the EU, the U.S., and Japan to jointly launch a dispute settlement case through the World Trade Organization, which was ruled against China in 2014.
On the brighter side, the increase in prices led to an influx of capital in the rare earth mining industry, financing more than 200 projects outside China. While this exploration boom was short-lived, it was successful in kick-starting production in other parts of the world.
Breaking China’s Rare Earth Monopoly
China’s dominance in rare earths is the result of years of evolving industrial policies since the 1980s, ranging from tax rebates to export restrictions. In order to reduce dependence on China, the U.S. and Japan have made it a priority to diversify their sources of rare earth metals.
For starters, the U.S. has added rare earth metals to its list of critical minerals, and President Donald Trump recently issued an executive order to encourage local production. On the other side of the world, Japan is making efforts to reduce China’s share of its total rare earth imports to less than 50% by 2025.
Increasing rare earth mining outside of China has reduced China’s global share of mining, down from 97.7% in 2010 to 62.9% in 2019. But mining is merely one piece of the puzzle.
Ultimately, the large majority of rare earth refining, 80%, resides in China. Therefore, even rare earths mined overseas are sent to China for final processing. New North American refining facilities are being set up to tackle this, but the challenge lies in managing the environmental impacts of processing rare earths.
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