JSC North Urals Dunites is planning to mine dunite as a source of olivine from the Iovinsky deposit in Russia’s Ural Mountains, which promises to be the world’s second largest project of its kind. Vladislav Vorotnikov, IM Correspondent, discovers how the company is dealing with environmental opposition and the challenge of finding new markets.
According to JSC North Urals Dunites (NUD), the company developing Iovinsky, the project, which is located on the Urals’ Mount Konzhak, will have a capacity of 1m tpa from 2019, with the potential to increase this volume to 2m tpa in the future – making it the world’s second largest olivine mine.
NUD’s CEO, Nikolay Kuzmin, believes that this output will be enough to meet demand from Russia’s entire foundry industry and leave some for export. Once the mine is producing at a rate of 1m tpa, the payback period is estimated to be three-to-four years.
Total investment needed to launch mining operations at Iovinsky is estimated at Russian rouble (R) 950m ($13m*), including R150m ($2m) to construct a road to the deposit. Installing access infrastructure has been the most challenging part of developing the project to date, as it faced fierce resistance from environmentalists and local communities throughout its construction.
At 1,570 metres, Konzhak is the highest mountain in the Sverdlovsk region and is considered to be an area of particular natural beauty. It is also the location of a relatively famous marathon, attracting people from all over the world to run the 42km race, which takes place at the end of July every year.
In order to placate the protestors, who threatened to block the entire project, NUD was obliged to allocate additional funding to develop tourist infrastructure in the area, as well as a number of environmental protection measures.
The road, which was started in 2014, was finally finished at the beginning of this year, allowing NUD to progress with building the mine and processing plant, at a cost of approximately R 250m ($3.4m).
The dispute over the Iovinsky access road was one of the most prominent battles between the mining sector and environmentalists in Russia in recent years. In 2014, it spurred a number of social media campaigns, including the “Save Konzhak” movement and several thousand people signed a petition, which was sent to the Ministry of Ecology and Natural Resources, to ban all NUD’s mining plans.
In the end, however, the company managed to convince the ministry that the mine would have a minimal ecological impact. According to Kuzmin, the mine plan does not include any overburden dumps, as the deposit’s mineralisation lies at surface and to depths of just 0.5-2.5 metres, meaning a shallow open pit operation is possible.
Once extracted, ore will be transported to the Karpinsk district, in the vicinity of the Veselovskaya railway substation. A crushing and screening plant is being built 5km from Karpinsk and is due to be commissioned later this year.
“We have deliberately chosen a place remote from Karpinsk city, so as not to cause disturbance from noise or dust. Mineral dust is also our product,” Kuzmin said, explaining that the company plans to capture and sort its processing waste dust.
Opponents of the project argue that similar mining complexes in Russia, for the production of nickel and uranium, for example, have caused considerable ecological destruction, even though it was asserted at the initial stages that these projects would have very little impact on the environment.
“We simply do not believe that manufacturers will organise production as they have said,” Konstantin Kuznetsov, head of the local recreation club at Karpinsk and one of the environmental activists opposed to NUD’s Iovinsky mine, said.
“Many rivers originate in the Ural Mountains. So far, they are clean, but [building a mine] could contaminate the rivers flowing down from the mountains of the Konzhakovsky array, destroying the aquatic ecosystem of the area, which is already in a poor condition, due to the operation of the nearby platinum mine,” Nadezda Zakharova, another activist, added.
Kuzmin, however, insists that all the necessary measures have been taken to ensure the mine will not damage the environment or pose a health risk to humans. “To investigate the [possible environmental contamination] of Iovinsky, we enlisted the services of the Russian Academy of Medical Sciences. We also carried out tests in our own laboratories.
This mineral is completely safe for the body and the environment, so the operation process poses no threat,” he said.
He noted that studies on the mine’s ecological impact will continue up to 2019, until which point the mine will operate on a pilot scale.
Openings for olivine
NUD’s plans to open Iovinsky could significantly alter the supply chains of several Russian industries.
“Olivine is needed for a number of uses,” said Kuzmin. “This is magnesium-silicate raw material with 50% magnesium content, 40% silicon and 10% iron and nickel. Foundries and molding factories have switched from using silica (quartz) sand to olivine, for performance reasons but also because silica sand can cause the disease, silicosis. Using olivine improves casting quality, due to the absence of silica, and eliminates the threat of silicosis among workers.”
According to NUD, there may be political and industrial pressure to prohibit the use of silica sand in the foundry and molding sectors in Russia in the future, which would lead to higher demand for olivine.
“In 2003, the Russian Ministry of Health banned the use of silica sand in sandblasting, because of silicosis,” Kuzmin said. “It was not banned in the casting and molding industry, because the substitute material would have to be imported from Norway and their olivine is too expensive, costing around €400/tonne ($435/tonne).”
The Iovinsky deposit was originally identified as a target for development in 1984, during the Soviet era, and was considered one of the most important mining areas in Russia, owing to its unique mineralogy. However, progress was hampered by the economic crisis that preceded the collapse of the Soviet Union in the late 1980s and start of the 1990s and led to Iovinsky being abandoned.
“The mineral is unique because it is also used in metallurgy and in construction as a concrete filler,” Kuzmin explained. “Dust from olivine processing can be used in feeds compounds increase magnesium levels agricultural animals, as well as for soil oxidation. There has also been some research on using olivine as an absorber in water filters. Next year, we can intensify this testing process and discover a number of new applications for olivine,” he said.
Research performed by NUD to date includes testing olivine as a feed additive for poultry. The recommended concentration of magnesium in poultry food is 3,000-4,000mg/ kg of dry feed and its addition brings a number of benefits to farmed birds, according to Evgany Ermolaevets, CEO of the Surskay poultry farm, which took part in the trials.
“We have previously commissioned studies of the potential of using olivine in the construction of roads,” said Kuzmin. “The results showed that the mineral can be used for this purpose, so we are going to try it in a segment of the road we build to the Iovinsky deposit. If the project is successful, it would be the world’s first olivine road,” he added.
Marketing Russian olivine
According to Kuzmin, NUD’s first priority will be to meet the olivine demand of Russian customers. When the company achieves a stable level of production and can comfortably supply the domestic market, it will shift its focus to exports.
The cost of Russian olivine for foreign customers could be twice the domestic price, but would still be cheaper than prevailing prices paid in Europe, Kuzmin claimed.
He estimates that the initial prices will be roughly equivalent to silica sand and will not exceed €100/tonne, but said that is likely to be revised in future, depending on demand levels and export business.
The company expects it will easily be able to compete with Norwegian exports, which contribute 6.5m tpa dunite to the global market.
Initially, however, NUD plans to sell its olivine in small batches to domestic customers, with a focus on supplying the casting sector.
Vector Vekker, the head of the Karpinsk city authority, said that the Iovinsky deposit contains reserves of more than 1bn tonnes dunite – meaning that the project can sustain mine life of, in theory, up to 1,000 years. NUD has secured a mining licence for an initial 20-year period, but expects to extend this.
According to NUD’s plans, the olivine processing plant will also extract magnesium, silicon, nickel and platinum from the Iovinsky ore, which will deliver by-product revenue for the company, although economic problems have delayed the project’s timeline.
“We were going to launch the plant by the end of 2016, but our schedule has been affected by the devaluation of the Russian rouble,” Kuzmin explained. “Initially, for the processing plant, we were aiming to purchase equipment from the Czech Republic. However, when the rouble collapsed, the cost of this equipment for us in rouble equivalent rose almost three times. As the result, we have had to switch to domestic manufacturers and now hope to launch the processing plant at the beginning of 2017.”
Kuzmin’s “blue sky dream” is to construct an olivine processing plant capable of producing enough magnesium that would eliminate Russia’s need to import this metal from China, and even compete with its Asian neighbour in export markets.
“We are confident that our material will be very competitive on price,” he added.