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2010


   Roadmap to
   Extracting Punjab Iron
   Ore and Conversion to
   Steel
   Technical and Commercial Strategy
   T...
Roadmap to Extracting Punjab Iron Ore and Conversion to Steel




                                        ACKNOWLEDGEMENTS...
Roadmap to Extracting Punjab Iron Ore and Conversion to Steel




INTRODUCTION




T
      here are 2 large iron ore reser...
Roadmap to Extracting Punjab Iron Ore and Conversion to Steel


Blast Furnace Process. This was further confirmed by a ful...
Roadmap to Extracting Punjab Iron Ore and Conversion to Steel


       the mineralogical composition of Chichali iron ore....
Roadmap to Extracting Punjab Iron Ore and Conversion to Steel


CHINIOT RAJOA RESERVES




I
    n the 1970’s, OGDC conduc...
Roadmap to Extracting Punjab Iron Ore and Conversion to Steel


                                               However, be...
Roadmap to Extracting Punjab Iron Ore and Conversion to Steel


plant is estimated to cost $ 150m. In this way the investm...
Roadmap to Extracting Punjab Iron Ore and Conversion to Steel
 oadmap


win” partnership collaboration with the Punjab Gov...
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Development Roadmap for Punjab Iron Ore and Opportunities in Steel Manufacturing

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Commercial and investment opportunities exist for two very distinct large scale reserves that have awaited development for decades in this province. The projects have not moved beyond early prospecting stage. The availability of this mineral resource in two separate areas of the province needs to be first authenticated through a detailed bankable geological study, separately in
each. This will be followed by development of separate mining strategies for each area and the scale on which mining is anticipated to be undertaken because mining strategies - and associated unit extraction costs - are often scale
dependent. Simultaneously, pilot Metallurgical extractive plants and processes need to be developed and subsequently commercialized on a fast track.

Published in: Investor Relations

Development Roadmap for Punjab Iron Ore and Opportunities in Steel Manufacturing

  1. 1. 2010 Roadmap to Extracting Punjab Iron Ore and Conversion to Steel Technical and Commercial Strategy Two very distinct large scale reserves have awaited development for decades in this province. The projects have not moved beyond early prospecting stage. The availability of this mineral resource in two separate areas of the province needs to be first authenticated through a detailed bankable geological study, separately in each. This will be followed by development of separate mining strategies for each area and the scale on which mining is anticipated to be undertaken because mining strategies - and associated unit extraction costs - are often scale dependent. Simultaneously, pilot Metallurgical extractive plants and processes need to be developed and subsequently commercialized on a fast track. Projects Directorate, Punjab Board of Investment & Trade 4/1/2010 Copyright ©2010 - Punjab Board of Investment & Trade
  2. 2. Roadmap to Extracting Punjab Iron Ore and Conversion to Steel ACKNOWLEDGEMENTS This paper is the result of intensive consultations carried out by PBIT across the range of stakeholders, businessmen and technical experts in the field. These strategic conversations commenced in November 2009 and concluded in March 2010 and the complete transcript of proceedings is available with PBIT. In particular, PBIT would like to acknowledge the invaluable contributions from the following members, without whose help, this study may not have been possible. 1. Mr. Saif Ullah Chattha, Secretary, Mines & Minerals Department, Government of Punjab 2. Mr S. Ishtiaq Hussain, Manager, Mines & Minerals Department, Government of Punjab 3. Mr. Muhammad Aslam, Manager, Mines & Minerals Department, Government of Punjab 4. Mr Nadeem Babar, Chairman, Chief Minister’s Task force on Energy 5. Mr. Illyas Cheema, Former Director, NESCOM 6. Dr. Waheed Butt, Chemical Engineering Consultant 7. Mr. Abdul Aziz Chan, Chairman, Rehman Steel Furnace (Pvt.) Lahore 8. Mr. Rehman Aziz Chan, Director, Rehman Steel Furnace (Pvt.) Lahore 9. M. Y. Baig, CEO, IFC 10. Mr. Hammad Baig, Director, IFC 11. Mr. Muhmmad Nasim Riaz, Consultant, IMC 12. Mr. Javed Mughal, Chairman, Mughal Steel 13. Mr. Shakeel Ahmed, General Manager, Mughal Steel 14. Mr. Ahmed Hussain, Chairman, Batala Steel 15. Mr. Tariq Sail, Country Head, Representative of Canadian Investors 16. Mr. Waqqas Asif, Hijveri Construction Company 17. Mr. Malik Anis Akbar, Chairman, Meridian Marketing 18. Mr. Asad Jaleel, Director General, EME (Pvt) Ltd 19. Mr. Sarwar Alam, Director Projects, EME (Pvt) Ltd 20. Mr. Zahoor Ahmed, Director General, Ittefaq Sons (Pvt) Ltd 21. Mr. Ali Akhtar, Principal Consultant, Metallurgicon 22. Mr. Javed Ahmad, CEO, RDC International 23. Dr. Muhammad A. Qazi, Executive Director, PCSIR Lahore 24. Mr. Mahmood Akhtar, Group Director, Nishat Group Moazzam Husain Director General – Projects Development Punjab Board of Investment & Trade 23 – Aikman Road, GOR I- Lahore moazzam.husain@pbit.gop.pk 2
  3. 3. Roadmap to Extracting Punjab Iron Ore and Conversion to Steel INTRODUCTION T here are 2 large iron ore reserves located in Punjab. The two have very different geological characteristics. One located in Chichali, near Kalabagh which is low grade iron ore is a surface deposit and other located in Chiniot/ Rajoa which is high grade iron ore under alluvial cover. Given the very different mineralogical compositions of each, a different development roadmap is proposed for each. CHICHIALI RESERVES - HISTORY T his deposit is estimated around 500 million tons of low grade iron ore (Fe content 34%) and efforts to develop it are almost as old as Pakistan itself. Initial tests conducted on Chichali iron ore and carried out in USA, Germany and Sweden suggested this ore type is not amenable to physical beneficiation. This was probably because the ore is in fact chemically (as opposed to mechanically) combined with silica and poses a metallurgical challenge. The Krupp-Renn process, a direct reduction process was developed in Germany during the 1930’s. By the end of World War II, 38 kilns with an annual capacity of 1 m tons were in operation in several countries. In 1956, PIDC, in consultation with Krupp proposed a Steel Mill based on Chiciali iron ore with a production capacity of 50-70,000 tons of billets to be located at Piran Ghaib near Multan. The proposal was shot down by the Planning Board (predecessor to the Planning Commission) on the grounds that the Krupp - Renn process was not industrially sound and feasible and the scheme was not economically viable. In 1959, the Government retained the services of J.C Austen of the World Bank to chart out a roadmap to develop the Chichiali reserves. His output, led to investigations being assigned to M/S Kellog of USA. Kellog also maintained at the time, that the ore was not suitable for direct reduction and in fact was averse to the Krupp-Renn process. Between 1961 - 63, geological studies sponsored by the United Nations Special Aid Fund confirmed the following deposits: 1. 250 m tons of uniform quality iron ore in one block on both sides of Chichali pass 2. 150 m tons in Kutch, Ghughlan and Makerwal mines Encouraged by this finding, in November 1964, a pilot plant trial was carried out on 1500 tonnes of Chichali iron ore after blending it with high grade imported ore. It was conducted by the Institute de Recherches de la Sierrugi Francaise (IRSID) at a conventional blast furnace at Ougree near Liege, Belgium. The trial suggested this ore could be beneficiated through the Acid 3
  4. 4. Roadmap to Extracting Punjab Iron Ore and Conversion to Steel Blast Furnace Process. This was further confirmed by a full scale industrial test on 15,000 tons Chichali iron ore at Salzgitter, West Germany in June 1966, which according to international experts was a complete success. As a result of this breakthrough, in August 1967 a German company reportedly offered to set up Kalabagh Steel Mill of over 0.8 million tonnes per year (mtpy) capacity based on Kalabagh iron ore and imported coal at a then estimated cost of Rs. 1.542 billion (including foreign exchange cost of Rs. 878 million). It is claimed that some European banks also offered loans for this project and that PIDC selected a site with about 80% raw materials available within 11 miles but unfortunately, this project was also shelved. In April 1968, President Ayub Khan accepted an offer from Premier Kosygin of USSR, during his visit to Pakistan, for the Kalabagh Steel Mill project. Within a month an agreement was signed between PIDC and M/s Tiajpromexport of Moscow. Subsequently, it transpired that Russia did not have the technology, and could not develop a feasibility to produce steel from the Kalabagh iron ore. Instead of reviving the German offers based on local raw materials, the project was converted into a coastal plant design and transferred to Karachi. Pakistan Steel was established with comparatively inferior machinery and based on imported iron ore and coal. Chichiali iron ore reserves were forgotton. WAY FORWARD – CHICHIALI I n the aftermath of the Oil shock of 1974, both extraction technologies and energy economics have both travelled a long way. Today presents a new paradigm from the time when earlier engineering efforts were made on Chichiali ore. In the view of present day experts, Chichiali ore would require a 2 stage process: 1) Beneficiation (enrichment) of iron ore and 2) smelting in a blast furnace. Accordingly, this roadmap envisages an onsite mouth of mine beneficiation plant. It will produce beneficiated iron ore for use in integrated steel mills. We propose to materialize this initiative in stages. In terms of specific action steps: 1. Punjab Mineral Development Corporation (PUNJMIN) will be asked to assist in providing drilling/ excavation services to obtain fresh samples of iron ore. The area and excavation will be selected in conjunction with a panel of mining and geological experts from University of Engineering and Technology (UET), Lahore, with whom, preliminary discussions have been held. 2. These samples will then be taken to UET laboratory for complete investigation. 3. Based on these findings, an appropriate metallurgical process and technology will be developed leading to the design of an extractive metallurgical pilot plant. The plant and the extraction process need to be engineered simultaneously and tailored to cater to 4
  5. 5. Roadmap to Extracting Punjab Iron Ore and Conversion to Steel the mineralogical composition of Chichali iron ore. The basic process of beneficiation is physical separation and chemical sintering. Its output is ready-mix charge. 4. On a parallel track, a full blown study will need to be urgently undertaken to re authenticate the reserves and recommend an appropriate, large scale mining methodology. In this, all existing available data will be re examined so that minimal additional drilling and excavation is required. UET has mining, metallurgical and geological engineers. PUNJMIN has the machinery for drilling. Working under the overall supervision of an International geological/ mining consulting company, these three may be asked to develop a scope of work/ working plan and TOR’s for this scoping study and then implement this at minimum cost and in the shortest possible time. 5. Finally a feasibility study for commercial production will be prepared. PROPOSED ONE BILLION DOLLAR KALABAGH STEEL MILLS PROJECT T he successful pilot will be commercialized and in all probability will require the local ore to be blended with high grade imported ore in some proportion. Based on this newly designed process and a bankable study of the reserves, a 1.5m T steel mill in Kalabagh is envisioned. Location: Mouth of Mine – Minehead. Water availability, gas, energy, labor access, transport and infrastructure. Size: Minimum 1.5m MT Energy: Approx. 200 MW pulverized coal based captive power plant at mouth of mine located at Makarwal, 20-30 km from beneficiation plant. Water: Available Products/ Byproducts: Beneficiated iron ore. Direct reduced iron (DRI), Pig Iron, Steel, slag cement, tar etc. Infrastructure: This is a capital intensive integrated continuous process plant, 24 x 7, round the year. As such highly skilled manpower such as technicians, engineers and labour will be required and a custom housing colony will need to be developed. The area is already well connected with roads. In addition a railway track to the nearest railhead will be laid so Kalabagh Steel Mills freight wagons can operate under Pakistan Railway’s open track policy. 5
  6. 6. Roadmap to Extracting Punjab Iron Ore and Conversion to Steel CHINIOT RAJOA RESERVES I n the 1970’s, OGDC conducted an aeromagnetic survey over the pre Cambrian shield area near Sargodha – Chiniot. Subsequently, in 1989 the Geological Survey of Pakistan (GSP) discovered iron ore deposits near Chiniot, in district Jhang after conducting a geophysical survey. Eleven years later, in 1999-2000, PUNJMIN commissioned RDS consultants to carry out a detailed exploration over a small area in which 14 boreholes were dug. Each borehole struck iron ore at depths between 120 – 160 m below the surface. According to the assessment of this survey, and extrapolations and inferences there from, the following reserves were indicated.  12m MT proven  100m MT estimated  500m MT anticipated The study however stopped short of developing or recommending a mining strategy. 6
  7. 7. Roadmap to Extracting Punjab Iron Ore and Conversion to Steel However, because the iron quality is good (hematite), it has high ferrous content and is The Geology of the Indian Shield therefore of smelting grade, commercial Zone exploitation appears feasible. A detailed techno- Pre-Cambrian basement rocks are economic feasibility study for the wider area considered important source rocks (from the earlier PUNJMIN study) must now be for metalliferous ore deposits all undertaken to re authenticate the reserves. The over the world. The Sargodha- study must also recommend an appropriate, large Chiniot-Shahkot-Sangla hill belt scale mining methodology. In this, all existing constitutes the northern outcrops of available data will be re examined so that minimal the Indian shield zone. additional drilling and excavation is required. The Kirana area spreading over Sargodha-Chiniot comprises of two This is a mega mining project. The challenge is to geomorphic features: scattered hills tap the reserve bed which is located beneath a and flat alluvial plains. 70-170m alluvial overburden and a water bed. A good reference to follow for a technical solution is The scattered hills represent meta the Oilsands project in Alberta Canada. This is a sedimentary rocks i.e. quartzite, similarly challenging project and based on a slates, tuff etc, and igneous rocks i.e. rhyolite, andesite and sills/dykes methodology termed strip mining from top down of basaltic composition and mining is in progress in full swing. The Kirana Range starts from WAY FORWARD – CHINIOT/ RAJOA T Sargodha and travels east passing T o drive this forward one step further, through the localities of Lalian, Chenab Nagar, Rajoa, Sangla Hills & mining samples need to be obtained and a Shahkot. From here it goes the pilot plant set up on immediate basis so earth’s surface & crosses the that an economical extractive metallurgical localities of Hafizabad, Sheikhpura, process can be devised for commercial Lahore & before entering India production. where it makes its exposure once again at Hyderabad Deccan. A private steelmaker/ fabricator has proposed to build a pilot plant based on the new ITmK3 These basement rocks are of technology. This initiative is being encouraged by magmatic origin and contain PBIT and the Department of Mines and Minerals. economical proved deposits of The ITmK3 process uses a rotary hearth furnace in Noble/ Precious Elements, like Gold, which fine iron ore is reduced using pulverized Silver, Platinium, Copper & tungsten. coal. It requires less energy, low capital and O & M costs. Recently, in Minnesota, a pilot demonstration plant of 25,000 tons per year capacity cost $ 16m to build and has completed successful trials. A 500,000 ton Commercial 7
  8. 8. Roadmap to Extracting Punjab Iron Ore and Conversion to Steel plant is estimated to cost $ 150m. In this way the investment works out to US $ 300 per ton of installed capacity. Similarly UET will also be asked to design a technology and build a pilot plant to make steel from Chiniot Iron ore. In both cases PUNJMIN will be asked to provide sample of the ore which these pilot plants at UET and the private one will convert to steel. Additionally, samples will be sent to relevant institutes in China and Malaysia with a request to help identify the most appropriate technology for conversion to steel. These recommendations together with results of the above pilot plant would help identify the most appropriate and economic technology for the conversion process. MARKETING Karachi based Pakistan Steel and Al Tawarqi are also immediate potential buyers of this high grade ore. In addition, Punjab’s series of induction and electric arc furnaces have shown interest and willingness to invest in modifying their furnaces to utilize the indigenous ore (together with a proportion of scrap) instead of pure scrap as at present. One such process is the oxy cup process that utilizes 10-30% scrap and 70-90% iron ore. Finally there is an international market for iron ore. .is ROADMAP FOR MINING U ET has mining, metallurgical and geological engineers. PUNJMIN has the machinery for drilling. Working under the overall supervision of an international geological/ mining consulting company, the three should sit together and develop a scope of work/ working plan and TOR’s for this scoping study which will be completed at minimal cost. Pak Steel Mill will be encouraged to develop a suitable technology, in collaboration with the PCSIR and other research laboratories, to utilize local iron ore. This can even be done in a “win - 8
  9. 9. Roadmap to Extracting Punjab Iron Ore and Conversion to Steel oadmap win” partnership collaboration with the Punjab Government once an appropriate transaction an structure is mutually worked out. CONCLUSION Steelmaking is a basic industry, and its primary ingredient, iron ore is available in Pakistan. Had , these reserves been developed a few decades earlier, Pakistan today may well have been a today middle income country with a smaller population and a larger industrial base. Now this ncome base roadmap has been prepared in consultation with the leading government and private experts and businessmen mentioned in the acknowledgement earlier. Its implementation by the Pun Punjab Government will lead to noticeably improving prosperity, increasing industrial competitiveness, and greater self reliance and exports. ANNUAL STEEL PRODUCTION MT 2008 600 500.312 500 400 300 200 100 57.791 53.625 1 0 India China South Korea Pakistan Million Metric Tons *Source: World Steel Association 9

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