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The Case for Toll Milling in Peru

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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:

  1. Test and select ores from artisanal miners to see what is worth purchasing
  2. Buy ores from a variety of miners and build relationships.
  3. Prices are set at time of purchase and are at discount to market.
  4. 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.

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Uranium

Charted: Global Uranium Reserves, by Country

We visualize the distribution of the world’s uranium reserves by country, with 3 countries accounting for more than half of total reserves.

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A cropped chart visualizing the distribution of the global uranium reserves, by country.

Charted: Global Uranium Reserves, by Country

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

There can be a tendency to believe that uranium deposits are scarce from the critical role it plays in generating nuclear energy, along with all the costs and consequences related to the field.

But uranium is actually fairly plentiful: it’s more abundant than gold and silver, for example, and about as present as tin in the Earth’s crust.

We visualize the distribution of the world’s uranium resources by country, as of 2021. Figures come from the World Nuclear Association, last updated on August 2023.

Ranked: Uranium Reserves By Country (2021)

Australia, Kazakhstan, and Canada have the largest shares of available uranium resources—accounting for more than 50% of total global reserves.

But within these three, Australia is the clear standout, with more than 1.7 million tonnes of uranium discovered (28% of the world’s reserves) currently. Its Olympic Dam mine, located about 600 kilometers north of Adelaide, is the the largest single deposit of uranium in the world—and also, interestingly, the fourth largest copper deposit.

Despite this, Australia is only the fourth biggest uranium producer currently, and ranks fifth for all-time uranium production.

CountryShare of Global
Reserves
Uranium Reserves (Tonnes)
🇦🇺 Australia28%1.7M
🇰🇿 Kazakhstan13%815K
🇨🇦 Canada10%589K
🇷🇺 Russia8%481K
🇳🇦 Namibia8%470K
🇿🇦 South Africa5%321K
🇧🇷 Brazil5%311K
🇳🇪 Niger5%277K
🇨🇳 China4%224K
🇲🇳 Mongolia2%145K
🇺🇿 Uzbekistan2%131K
🇺🇦 Ukraine2%107K
🌍 Rest of World9%524K
Total100%6M

Figures are rounded.

Outside the top three, Russia and Namibia both have roughly the same amount of uranium reserves: about 8% each, which works out to roughly 470,000 tonnes.

South Africa, Brazil, and Niger all have 5% each of the world’s total deposits as well.

China completes the top 10, with a 3% share of uranium reserves, or about 224,000 tonnes.

A caveat to this is that current data is based on known uranium reserves that are capable of being mined economically. The total amount of the world’s uranium is not known exactly—and new deposits can be found all the time. In fact the world’s known uranium reserves increased by about 25% in the last decade alone, thanks to better technology that improves exploration efforts.

Meanwhile, not all uranium deposits are equal. For example, in the aforementioned Olympic Dam, uranium is recovered as a byproduct of copper mining occurring at the same site. In South Africa, it emerges as a byproduct during treatment of ores in the gold mining process. Orebodies with high concentrations of two substances can increase margins, as costs can be shared for two different products.

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