Agro Kaolin
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Kaolin Description of the Industry
Kaolin is a broad name given to a range of clay-compound substances made up of Kaolinite and several other minerals. As a compound, the composition of Kaolinite and other minerals and substances varies from sample to sample. Depending on its chemical composition it presents as white to red in colour and has a soft plastic nature.
Due to its geological attributes, it is found close to the ground surface and is extracted through open cast mining methods. It is ranked as one of the top seven industrial minerals in the world (DME, 2005) and is thus used for a wide variety of purposes. Depending on its individual chemical characteristics and the extent to which it is processed, Kaolin is used as filler and input in the manufacture and production of several goods including:
· Ceramics
· Bricks
· Tiles
· Pottery
· Cement
· Paper
· Fibre glass
· Refractories
· Plastic
· Pharmaceutics
· Mineral wool
· Cosmetics
· Paint
· Rubber
· Industrial products
· Light bulbs
· Food additives
· Toothpaste
South Africa has vast kaolin deposits and local mining and production occurs in Potchefstroom, Bronkhorstspruit, Albertina and Mossel Bay and in the Eastern Cape in Grahamstown (Makana Local Municipality).
 Value chain
The previous section revealed how Kaolin is used in a wide range of industrial applications. This is highly dependant on the chemical and physical properties of the kaolin, which means that potential industrial uses are linked to the deposit from which kaolin is extracted. This also has a bearing on the forms of milling, value addition, processing and beneficiation that can be applied to different types of kaolin. Key attributes that determine uses of kaolin include its:
(DME, 2005)
· Purity
· Plasticity
· Particle size, shape and distribution
· Colour
· Salt content
· Abrasiveness
· Texture
· Inertia over the pH range
· Residue percentage
· Oil and moisture absorption
The implication of these factors is that the range of product uses for kaolin from one deposit site may be very different to those of kaolin deposits located elsewhere. Similarly, processing technologies and transformation methods of kaolin are always based on the intended final use of the kaolin. Despite this, a common industry flowchart for the kaolin value chain is presented below:
Figure 1: Kaolin Value Chain
 Step 1: Establishment Before any mining can take place, several preliminary steps have to be undertaken. These relate to the determination of the nature and scope of mining activity that will take place. The quality of the kaolin deposits has to be ascertained, as this has a heavy bearing on all the other subsequent steps and sub-steps in the value chain. Mineral resource models are then crafted to determine possible profitability of a mining project. This includes necessary feasibility studies, business plans, technology assessment and viability evaluations. Compliance with statutory and planning frameworks (including environmental impact considerations) must also be researched and undertaken at this stage. Step 2: Mining
The ground is first drilled and blasted in order to expose the underground deposits of kaolin for open-cast operations. The material is then taken out of the ground using excavators, front end loaders and articulated dump trucks. Extraction of kaolin can take place on a continuous basis (if demand is sufficiently high) or in batches (based on contracts for delivery).
Step 3: Beneficiation
Beneficiation takes place in two phases, the first is primary processing, which is followed by secondary processing. Not all kaolin goes through both phases of processing.
The first step of primary processing is the crushing of the mined material. After that, depending on its intended use and the properties of the kaolin mined, it may be processed through dry or wet methods. Wet processing is more expensive and complicated, but yields material with the highest value-added content. Dry processing is less capital intensive and does not change the nature of the kaolin by a vast amount. Primary processing often occurs on the mining site to reduce transportation and other associated costs. Where inadequate market and economic infrastructure is present, the mined produce may be transported to other locations for primary processing.
In the secondary phase of kaolin processing, it is refined through various value adding processes. These are based on the intended final use of the kaolin. The chemical and physical properties of the kaolin are manipulated and fine-tuned based on the requirements of the end-user (industrial and retail clients).
Step 4: Product Marketing
The kaolin product is then packaged in various forms, including powder, granules and noodles. Once again, this is based on market needs, and the various forms of primary and secondary processing undertaken. Kaolin can be packaged in these forms straight from the first step (mining), after primary processing, or after having gone through all three initial steps.
Global and national market trends
On the international scale, South Africa is a small producer of kaolin ranked 24th in the world and contributing towards 0.4% of global production. In 2004 South Africa produced approximately 82 kilo-tons (kt) of kaolin, importing 15kt and exporting 12kt. In 2004 the kaolin industry had a market capitalisation of R200 million, and generated sales worth R49.5 million. the industry was operating at 54% capacity.
Nationally, production levels have been steadily declining with the number of producers falling from 16 in 1990 to 6 to 2009, partly driven by the following global and national market trends:
· International competition in raw and processed kaolin
· Cheap imports of kaolin based products (e.g. ceramics, tableware, etc)
· Substitution of kaolin driven by technology change to synthetic materials
· High inventory costs
· Commodity price stagnation
· Input cost inflation
· Erosion of profit margins
· End-user price inertia
· A steep fall in demand for crude kaolin
· Industry-wide contraction, consolidation and strategic repositioning
The local kaolin industry does not feature prominently in internationaltrade because of its distance from major industrial hubs of the world (hence high transport costs). This is cemented by the fact that only one of the local producers is certified by the ISO (International Organisation for Standardisation). Imports into the country are driven by the demand for specially processed and refined kaolin; this is due to local production techniques currently not being able to produce the same standard of kaolin.
Area identified and Land availability
The map below illustrates the areas with the most potential for Kaolin mining, linked to the area’s geophysical characteristics. Mineral rights are owned by various land owners and the state. Some land owners own both surface and underlying mineral rights, forming private land. Elsewhere, owners of alienated state land, own only the surface rights while the state holds the underlying mineral rights. The Grahamstown Municipal Authority (now Makana Municipality) owns the mineral rights of their jurisdiction which it leases out on a royalty basis.
Within the Cacadu district, kaolin mining takes place in and around Grahamstown, which is found in the Makana Local Municipality.
Figure 1: Area of Potential for Kaolin Deposits within Cacadu DM
 Urban-Econ GIS, 2010; ECDC, 2008 Industry associations
Although there is no industry association that explicitly deals with kaolin producers and processors; the Grahamstown / Makana based kaolin industry is characterised by good relationships and coordination between stakeholders characterise.
Ceramic artists and those involved in the ceramic industry in the Eastern Cape may affiliate themselves with Cape Ceramics SA.
Geophysical characteristics
Grahamstown kaolin is typified by diverse geological characteristics, meaning that kaolin mined at one mine is often very different in mineral composition to kaolin mined from another mine in Grahamstown. This diversity is expressed through different particle sizes, variations in plasticity and colour. The majority of Makana kaolin is characterised by intermediate plasticity, which means it has good workability traits for use in ceramic and pottery applications. Mining of kaolin is not a capital intensive operation and does not require significant infrastructural commitments. Similarly, processing and beneficiation of kaolin only requires basic infrastructure in the form of reliable electricity, reticulated water supplies, service land sites and well maintained transport routes.
· A PKT Earth International study found that the municipality has sufficient transmission capacity to meet the needs of a beneficiation plant.
· Adequate transport networks are available in Grahamstown, with road and rail linkages connecting Makana Municipality with regional hubs such as Port Elizabeth and East London.
· The municipality however does not have excess water pumping capacity. However as beneficiation does not typically require large amounts of water, alternative water sources such as borehole water and reuse of treated sewage water are viable options.
Human resources
The various phases of kaolin production require the following Human Resources:
Mining Phase:
· Semi-skilled machine operators and drivers of heavy duty transport equipment are required
Such skills are presently available in the Makana area.
Beneficiation Phase:
· Skilled ceramic technologists: Ceramic technologists may be found within the district, through linkages with the Ceramics training institute at the nearby Nelson Mandela Metropolitan University in Port Elizabeth, and with members of Ceramics SA located within the Cacadu District.
· Other skills include product designers, ceramic artists, potters and allied trades.
· Unskilled labour to operate machinery: Unskilled labour is available within the Makana municipality.
· Marketing management skills will also be required.
Product Marketing Phase:
· Marketing and Business Managers: Requires individuals with marketing skills to ensure strong sales of the end-product. Such human resource requirements may be met by graduates of Rhodes University, which is located in Grahamstown.
Expected return on investment
PKT Earth International estimates that beneficiated kaolin operations may expect a long term return on investment of 15% per tonne of processed kaolin. Raw kaolin that has been processed, and appropriately packaged as ready-to use clay can be sold for R4 500/tonne for G1 grade, and R3 000/ tonne to G3 grade. An outline of the capital costs and operating expenses are found as Annexure 1 and 2.
Key constraints · There are compliance measures regarding a new beneficiation venture. Consideration must be taken of the environmental and heritage profile of the Makana area · High start-up and production costs
· Strong competition from both local producers, imported and substitute products
Opportunities
· Kaolin blending and processing plant with beneficiation facilities within Makana LM.
· Manufacture of high-grade clay bricks.
· Establishment of cottage enterprises for production of ceramic products including tiles, tableware, sanitary ware etc.
· Use as an input in paint production and as an input in Aluminium smelting (Aluminium smelter was to be based at Coega IDZ).
· Sale of processed kaolin to external markets.
Useful Contacts"
References
Department of Minerals and Energy Affairs (DME), The Kaolin Industry in South Africa, 2005
ECDC, Grahamstown Kaolin Fact Sheet, 2008
Personal Interviews with local industry stakeholders, 2010
Information Indemnity
§ All information contained within this profile was accurate at time of publishing.
§ The information contained within this report is intended only as an industry profile and does not assume to take the place of information contained within a business plan, pre-feasibility study or feasibility study.
§ The Cacadu District and service providers are not liable for any damages caused by the use of the information contained within this report.
§ The purpose of this profile is to both promote the area for investment and inform investors of relevant issues. It is advised that investors, who wish to pursue an investment within Cacadu DM, should use this profile as a basis to conduct further research.
Annexure 1
The following costs incurred and income received is based on a case example; which outlines the potential budget for a Kaolin enterprise. This functions to provide investors with broad categories of costs experienced, however further research in terms of feasibility studies and business plans will need to be carried out in order to determine the relevant costs and income according to the specific enterprise entered into.
Capital Costs
Capital investment costs vary depending on the level of sophistication and extent of production. A small scale beneficiation plant based on air-flotation operation, with output capacity of 5 tons a day would cost between R1-2 million. More sophisticated operations will dramatically change the order of magnitude of the investment.
Table 1: Capital Inputs
Annexure 2
operating expenses
Depending on the final project concept and the envisaged scope of production, a small-medium sized kaolin beneficiation plant in Makana would create permanent employment opportunities for 5-20 individuals. Employee remuneration in the kaolin sector is in the medium to high echelons in the industrial sector, as some training and skills uptake is involved.
Low grade kaolin (G3) can currently be purchased for R102/tonne, whilst higher grade kaolin (G1) can be purchased for R360/tonne. Kaolin as an input in the beneficiation process makes a marginal contribution to total operating expenses. Energy and transport costs are significant, accounting for up to 30% in terms of final product price. Labour costs too, represent up to 40% of the final product price.
Table 2: Operating Expenses
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