Making the grade
Okorusu fluorspar mine in Namibia has weathered all the knocks that life has thrown at it, including the dumping of cheap Chinese products on the western market. Gay Sutton finds out from Mark Dawe how the company has risen to the challenges.
Fluorspar is one of natureÔÇÖs beautiful minerals. Naturally crystallising into clusters of cubic and more complex geometric shapes, it is found in an enormous variety of colours in locations around the world, and has been used since Greek and Roman times for ornaments, drinking vessels and vases. It has also given its name to fluorescenceÔÇöthe ability to emit visible light when bombarded by radiation of a different frequency such as ultra violet light.
Today the mineral has a variety of important uses. Fluorspar refined to greater than 97 per cent purity is sold as ÔÇÿacid gradeÔÇÖ, as it is converted into hydrofluoric acid, HF. This is a key ingredient in the production of refrigerants and organic and inorganic fluorine compounds such as the fluoropolymers used to create PVC and other plastics. Medium grade and low grade fluorspar, meanwhile, is used in processes such as steel and aluminium production and in the manufacture of opalescent glass, enamels and cooking utensils.
The Okorusu Mine in Namibia, originally opened in 1986 by British entrepreneurs, produces top acid grade fluorspar, selling largely to its parent company, the international chemical and pharmaceutical group Solvay SA. It employs around 270 staff and operates several open pit mines as well as metallurgical extraction plants that turn the 35 per cent fluorspar bearing rock into 97 per cent acid grade fluorspar; research facilities where the metallurgical engineers explore avenues for improving the extraction processes; and of course, administration.
In its early years Okorusu grew steadily, and by 1994 was producing around 52,000 tons of concentrate a year which it sold mostly to Europe. However, the mine suffered its first real setback when the Chinese began selling acid grade fluorspar on the western market at hugely reduced prices, and the bottom suddenly fell out of the market. ÔÇ£Prices simply dropped below a level that was sustainable for western producers,ÔÇØ explains Mark Dawe, managing director of Okorusu Mine. ÔÇ£Western mines like ours had to respond by running part of the time on a care and maintenance basis.ÔÇØ
The situation continued until finally the European Community imposed anti-dumping legislation on China which prevented the import into Europe of cheap acid grade fluorspar. Okorusu then enjoyed a new lease of life and its success began to attract attention. In 1996, international chemical and until recently, pharmaceutical giant Solvay, which had acquired the mineÔÇÖs main customer Kali Chemie, began to perceive the strategic value of securing its own supply by acquiring the mine. ÔÇ£We negotiated with Solvay on the deal, and the acquisition went through in 1997,ÔÇØ Dawe says. ÔÇ£Our intention was to embark on a capital reconstruction programme to modernise all the plant and facilities, raising skill levels as well as our metallurgical processing capabilities.ÔÇØ
The improvements went ahead and quickly yielded results. ÔÇ£One of our biggest achievements was to develop a process for removing an impurity called fluor-apatiteÔÇöa phosphate mineral that is contained within the fluorspar ore,ÔÇØ Dawe says. ÔÇ£Cracking the separation of fluorspar from apatite was very significant.ÔÇØ
By 2006 Okorusu had become one of the worldÔÇÖs largest fluorspar mines producing some 132,000 tons of 97 per cent pure acid grade fluorspar concentrate per annum. Production then levelled off at 120,000 tons a year until the financial crisis struck in 2009 and demand dipped dramatically. Dawe, however, believes the downturn in fluorspar demand has also been affected by other factors. ÔÇ£We believe that the reason demand reduced this year was not entirely due to the recession, but was also because the Chinese have again begun dumping finished products on the world markets at a price well below the production costs of western plants,ÔÇØ he says.
The battle is likely to be fought out over the production of new fluorinated carbon lines, the fourth generation replacements for the ozone destructive CFC refrigerant gases that were banned by the Montreal protocol. The products themselves are continuing to evolve as companies such as Solvay attempt to produce refrigerant gases that not only have zero ozone depleting potential but also zero global warming potential.
In spite of this competition from China, Dawe is very upbeat about future demand for fluorspar, and hopes that production next year will be ramped back up to the 120,000 ton a year level in anticipation of stronger sales. ÔÇ£Because we believe the market is coming right again for the low cost producers,ÔÇØ he says.
There are changes on the horizon for Okorusu, however. The Namibian government is planning to implement its own version of black economic empowerment, the Transformational Economic Social Empowerment Framework (TESEF), over the next few years and this is bound to have an impact on mining and investment. ÔÇ£Under the system, a scorecard will track the amount of materials you buy from outside Namibia, which is designed to encourage companies to buy locally. But if you canÔÇÖt find the material locally, you canÔÇÖt buy it locally,ÔÇØ Dawe observes.
The system also calls for the gradual distribution of equity towards the historically disadvantaged Namibians. It will require a delicate balancing act if the country is to retain the interest of outside investors, while progressing the economic and social interests of the local population.
Okorusu has always sought to play a part in the social and economic development of Namibia, and runs a number of interesting programmes. Some 10 years ago it founded an AIDS awareness programme called the Occupational Health Education and Awareness Programme (OHEAP). This programme has been very successful, and its management has been handed over to the Namibian Chamber of Mines, the privately run body that oversees mining throughout the country. Today, the scheme is 50 per cent funded by Okorusu and 50 per cent by USAID and makes a large humanitarian contribution to the people of Namibia.
Okorusu is also very active at a regional level, where it has set up the Otjiwarongo Okorusu Community Trust, funded by five per cent of OkorusuÔÇÖs profits in addition to a fixed amount of 500,000 Namibian dollars a year, regardless of profits. The trust is run by a board comprising members from the town council and the company who decide on a quarterly basis how the money will be spent. ÔÇ£We have provided assistance to schools, kindergartens and medical facilities as well as environmental organisations,ÔÇØ Dawe says.
Through the trust, the company has supported a number of environmental conservation programmes in the local area, and perhaps the most notable of these has a global profile. Otjiwarongo, just 60 kilometres from the mine, supports the largest population of cheetahs in the world, and has earned the title of cheetah capital. Okorusu supports a couple of organisations working with the cheetahs: AfriCat, which is largely funded from the UK, and the Cheetah Conservation Fund Trust (CCFT) which has fundraising branches in the USA, Canada, UK and Japan.
Looking to the future, the mine has proven ore reserves of 10 years with continual exploration extending these reserves well into the future. ÔÇ£We do have a challenging market situation, once again dominated by the Chinese,ÔÇØ Dawe says, however, the company is well placed to fight that battle. ÔÇ£I would say that investing in Namibia has been a very positive experience for all of us at Solvay.ÔÇØ
