Serbia mining, copper exploration, the report: The new foundry is being built without sufficient raw materials reserves, Bor state copper company drives toward the state of bankruptcy or complete privatization?

, Mining

It is certain that national project of renewal and revitalization of Mining and Smelting Basin Bor where several million dollars were invested are going to experience fiasco. It’s not 150, but 450M USD.

The construction of the new foundry in Bor will not cost 150 million dollars like it was primarily planned. It will cost three times more, maybe even 500 million. It won’t be able to work even when it is completed because mine complex Bor does not have raw materials i.e. copper concentrate of appropriate quality. This is how the realization report of Bors’s metallurgic giant sounds in the shortest version. This giant supposed to recover not only Bor but the whole Bor’s region, even wider – to be the one of ground stones for reindustrialization in Serbia.

Is this the reason for totally sudden termination of foundry’s work because this is the project of national importance, construction inspection came last week and determined that not all licenses are provided for the construction. There are no licenses because not all required projects are done, so the construction inspection gave a deadline of 60 days to correct “noticed mistakes”.

Sources are creditable, but nothing less creditable situation experts say that the “key” is not in licenses at all, but everything about them is correct. Something much bigger is being hidden.

Dr Mile Bugarin, Deputy Director of Institute for Mining and Metallurgy in Bor claims that the whole idea for construction of the new foundry is very problematic. “It is same as to construct a house construction from the roof, not ground”, Bugarin says for Novi Magazin.

All began 4 to 5 years ago, when solution for taking over of MSB by state was made, after several unsuccessful privatization attempts. State should finance construction of the new foundry as the weakest link in the production chain and, what was especially important, the biggest pollutant. “The construction of the new factory will cost 135 million dollars- it was said at the time; Today this price reached incredible 450 million”, Bugarin says.

Even this triplication is not the biggest problem.

Imagined foundry is far from the optimal solution. Its capacity is projected for procession of 400.000 tons of concentrate and production of 80.000 of cathode copper annually. “There are no examples for constructing the foundry of lower than million tons’ capacity i.e. 200.000 tons of copper in the whole world. The reason is completely simple- smaller foundries are expensive for construction and maintenance, in other words, they are not rentable. The furnace with lower capacity, but higher than ours, for production of 120.000 tons of copper was built in Iran in 1983- our interlocutor says.

This is not the biggest problem either. Bor doesn’t have enough raw materials not even for the production of 80.000 of metal i.e. copper concentrate in both senses. There is no material in quantity or quality sense. 400.000 tons of concentrate is required for production of 80.000 tons of copper in the new foundry and 21% of metal the least is found in concentrate. That is just technology. Production stops with less metal in concentrate.

Bor produced 32.000 tons of copper last year and 180.000 tons of concentrate. Only 80.000 of 180.000 tons was with 21% of copper (17.000 tons of metal is produced from it); the rest 100.000 tons had only 9-14% of metal. This concentrate is unusable in this foundry from technological reasons. If the foundry is finished by the end of the year like it was planned, it still won’t be able to work because of the lack of good quality materials.

Branko Kecman, Director of the Company Aqua Bor sent letters to addresses of Mladjan Dinkic, Minister of Finance and Industry and Milan Bacevic, Minister of Natural resources. He informed them about the problems in MSB Bor business and gave them suggestions for production process optimization. The mine Cerovo is specially emphasized because the percent of copper usage from the mineral is only 45% and the concentrate we get contains only 16% of metal because of which we use around 2 million dollars monthly.

“If we want to approach production of 250.000 tons of concentrate with 21% of metal, we need to invest around 500 million dollars in the mines and flotation”, Bugarin added. Bud not at once because time and money are required for opening of new mines.

Somebody will maybe think now- ok, why not to import concentrate? Haven’t we been doing this way so far?

Correct, we have been, but we don’t do it anymore because there is no free concentrate on the market. “Foundry capacities in the world are currently 30% higher than production of copper concentrate; this difference is even bigger in Europe. 10 foundries produce 600.000 tons of copper annually and use only 60% of its capacities. This condition lasts for several years. Therefore long-term agreements are being concluded and concentrate is being paid in advance, even 3 years earlier”, Bugarin explains.

The cause of this enormous purchase for concentrate in the last ten years is lower amount of metal in the mineral on the one side and very low price on the other side. This price was approaching about 1.700 dollars per ton from 1970 to 2005. This surely influenced on neglecting the mining production i.e. the wealthiest mines to be exploited only.

Purchase for copper in the world suddenly jumped then, thanks to China and India before all and so increased the price, too. The price was 8.000 dollars per ton. According to estimations, the price achieved its “historical” maximum and it will only decrease in the next couple of years. Therefore, MSB Bor is required to be lead smartly and curiously, not to use poor mineral maximally and not to use basin for getting political points. 50 million EUR is being lost in MSB Bor yearly- Bugarin claims. The example is again Cerovo where production of one ton of copper cost 12.000 dollars, even 50% over its market price. But, if we can construct a cannel without water, why can’t we construct a factory without materials?

This is not end of problems for Serbian citizens. They shall pay attention to the next fact. Bor Combine’s debt has grown from 600 million to 1,5 billion EUR since 2008. Despite all used assets, copper production is increased for only 14.000 tons, achieving 32.000 tons. MSB produced 150.000 tons 25 years ago.

We have recently been witnesses to the conflict of two syndicates about that who will be primary to MSB. They fight, but they don’t understand that they are on Titanik at the moment.

Mine reservoirs (in millions of tons)

Mine                     Amount

Borska reka             250

Krivelj                     100

Majdanpek              100

Cerovo                    50

Total                        500

We could have heard recently a lot of times how mineral reservoirs in Bor’s basin handle with billion tons. These are so called geological reservoirs which are not sure to succeed in these conditions- we shall use these minerals on economically rentable way because of low mineral content on the one side and high exploitation expenses on the other side.

Horrible inefficiency

Kecman points at the article in factory magazine MSB Bor Kolektiv from the end of February. MSB produced almost 10.000 tons of copper, 500 kg of gold and 2 tons of silver from its own resources one decade ago i.e. in 2003. The price of one ton of copper was arount 1.800 dollars that year, gold price was 270 dollars per ounce (1 ounce = 31 g) i.e. 8.650 USD per kg and silver price was 5 dollars per ounce i.e. 160 dollars per kg. The copper price from last couple of years is about 8.000 dollars, gold price 56.000 dollars and silver almost 1.000 dollars. If the metal price was ten decades ago same as in 2012, MSB Bor would achieve income of 110 million dollars with same production in 2003 (80 million for copper, 28 million for gold and 2 million for silver).

The loss of MSB Bor in 2003 was little more than 52 million dollars. Production from that year and current price would make 35 million dollars’ profit even it produced three times less copper. MSB Bor 32.000 tons of copper, 900 kg of gold and 5,5 tons of silver were produced in MSB Bor last year. These data clearly show that economical and technological efficiency of MSB Bor are extremely low despite huge investments” Branko Kecman says.

What is even more important, this seriously put into question further investments because it is irrational spending of money from Serbian citizens, taxpayers, so the question is how does the state as the authority over operational management of MSB Bor tolerate this wasteful behavior and relation towards money of Serbian citizens.

Source; Serbia Energy/Media center Bor/Agencies/Novi Magazin