From Mine to Specialty Products: A Discussion of Vertical Integration

As a vertically integrated producer of titanium dioxide and inorganic chemicals, Tronox mines and processes titanium ore, zircon and other materials and manufactures TiONA® and TiKON® titanium dioxide pigment, specialty-grade CristalACTiV™ titanium dioxide products and high-purity titanium chemicals.

We spoke with Jean-François Pasquier, VP, Specialty Chemicals, and Mpho Mothoa, Managing Director, South Africa, to learn more about the linkage between our mining operations in South Africa and our specialty TiO2 and chemicals business.

What would you like people to know about Tronox’s mining operations and the advantages they provide to our specialty chemicals business?

Jean-François Pasquier:
For me, the objective is to emphasize the benefits of vertical integration for Tronox’s customers and more specifically what extra value and new value it can offer for our specialty chemicals business.

I think Mpho and his team are the best illustration of how we show the extra and new value that we are getting from Tronox.

Because we are able to succeed in the development and the execution of our vertical integration strategy, there is no other path we need to look at for a large variety of feedstock for our specialty business. We have been very active at the Thann Plant trialing materials from our Australia and South Africa mining operations. So that’s why having Mpho Mothoa talk with us about vertical integration allows us to get a better understanding. For many people, mining is just digging a hole in the ground and collecting it. My trip last year to South Africa was really an eye-opening trip. You know it’s much more than that, and there’s a lot of technology, a lot of know-how and knowledge, and I think our customers need to have an understanding that mining is not just digging in a hole in the ground.

Mpho Mothoa
I think that’s a very good preamble, Jean-François, and I must say it’s an honor for me to participate in this, and I’m really happy to be to be part of it.

I always say “if it’s not grown, it’s mined”, so we kind of start with it to create a brighter future – it starts with us in the mine and you guys do the finishing in the plants. We start with the sand and it gives us great pleasure to find and see the final product, once it has gone through all of the production and change.

What does vertical integration mean for Tronox?

Mpho Mothoa:
From my perspective, I see vertical integration as the foundation of our operating strategy of delivering safe, quality, low-cost, sustainable tons for our customers. It strategically positions us as a group to be resilient and stable, given the cyclical nature of the industry in which we operate. But if I bring it closer to home from the mining side, which is actually a big advantage for us, it’s that we’ve got a guaranteed off take. Everybody wants to have a guaranteed customer and we’ve got a guaranteed off take, as well as the ability to run at a higher throughput. At the end of the day we offer, through vertical integration, a reliable and stable affordable source of an important input to our TiO2 plants, which is the feedstock that we produce. Another added benefit is that we get zircon and pig iron that comes with it, so that’s how I see vertical integration through mining or feedstock lenses.

What specific benefits does vertical integration bring to the Specialty TiO2 business?

Jean-François Pasquier:
The benefits that vertical integration brings to the TiO2 operations, but also more specifically to our specialty business, are the feedstock options. Whether it’s ultrafine TiO2, the growing specialty anatase materials, or our titanium chemicals product line, like the TiCl4 that we manufacture for the merchant market, it does require some very specific feedstock. Selecting and using feedstock is part of the know-how that is developed at the Thann plant. The mining activity of Tronox is now offering us a larger selection of feedstock than what we had previously. When we were less vertically integrated, we had to rely heavily on external feedstock suppliers and not everything was guaranteed in terms of supply. So there is a duality. Vertical integration for us does secure the access of a larger variety of feedstock from various locations, and it does help us in designing new materials. The supply of the specific feedstock that we need is also secure, and it is especially true at this particular moment when the TiO2 market and feedstock markets are getting tighter. To expand on what Mpho said, he has a guaranteed customer, and I have a guaranteed supplier. I know that he is not going to let me down, so it’s a bit simplistic, but that’s the way I can see it as well. With Tronox, that’s actually the big advantage we have, not only actually from a quantitative point of view, but also from a quality point of view. We made a significant step, we have access to much more feedstock, that offers us new perspectives for developing new solutions for our customers.

What are the steps involved in getting feedstock from a sand deposit to the TiO2 plant?

Mpho Mothoa:
There are various steps that are involved in this. What we do is we dig sand out with a shovel and load it on trucks and send it to the processing plants. This is the process that we are using at our Namakwa mine, while at our KZN operations we are actually achieving the same process, but using hydraulic mining, so no shovel and no truck. Hydraulic mining means that we use high pressure water jets to collapse the sand dunes that have available heavy minerals in them. The resultant slurry is then sent to the processing plants. So at Namakwa, we dig, and it is a dry process. At KZN, it’s a wet process. We use water, then we slurry and we send it to the processing plants. The processing plants are basically similar. The main differences are in the mining. Once the material gets to the processing plant, we then use gravity separation units. The material that we are looking for is very heavy, so we put it on gravity separating machines and in that process we extract valuable heavy minerals for further downstream processing and remains with fines and sand tailings.

The fines are sent to the residual fines storage facility, where we actually store them, while the sand tailings are sent back to the mine to fill the void we created when we dug out of the mine. The backfilling is the first step of our mine rehabilitation process. The available heavy minerals concentrate is put through further processing steps to produce three separate products, namely Ilmenite (46-47% TiO2), Rutile (92-94% TiO2) and Zircon. Rutile gets shipped, as is, mainly to chloride pigment plants, and some ilmenite, as is, goes to sulfate plants. Most of the ilmenite is put through a smelting process where we are using DC arc furnaces to smelt this ilmenite and upgrade TiO2 content from 46-47% to 88% TiO2 slag. The byproduct of that smelting process is high purity pig iron. The high-grade TiO2 slag is then sent to the chloride pigment plants. The high grade slag is solely for internal consumption, while pig iron and zircon are sold to external customers. If you think about it, that could actually be the end of our mining process, however, because we are committed to rehabilitate where we have started mining, we backfill and plant vegetation so that the environment can go back to its original state or even better than we found it.

Is the rehabilitation process specific to Tronox or do all mining companies in South Africa do this the same way?

Mpho Mothoa:
Planting vegetation is not special to Tronox. It is part of our sustainability efforts. We plant similar vegetation as we found it. Before we start digging, we look at what kind of grasses are there, what kind of forestry is there and then remove the vegetation, putting aside the top soil before we begin mining. Once mining is complete, we put back the tailings and then bring the topsoil back, and then start planting the similar seeds so the land returns to its native vegetation state. In other areas, we have rehabilitated the land and have seen the organisms that used to live there returning. We do this to ethically return to the natural environment that was there before us. It’s all about sustainable mining. Most of the mining companies in our line of business are doing rehabilitation. That’s one condition of our license to operate – what we have disturbed, we rehabilitate.

How does a large range of feedstock options benefit the development of specialty TiO2 products?

Jean-François Pasquier:
In terms of what we require from the final product of ultrafine TiO2, there are very critical feedstock properties that we are looking for, so we have to have very critical characteristics. We require some very specific feedstock or mix of feedstocks to achieve the level of impurities or the accurate chemicals content that we need, but also we need that to be extremely consistent due to the specialty nature of our products at Thann. We don’t want to do it only once, we want to do it repeatedly. The consistency is equally important to us as the initial properties. It goes hand in hand. With Tronox’s vertical integration advantage, we now have a better opportunity to get to what we need to and to do it consistently to the satisfaction of our customers – to me that is a very significant improvement in the last two years since Tronox acquired Cristal’s TiO2 operations.

How does Tronox demonstrate its commitment to sustainability at our mining operations?

Mpho Mothoa:
Sustainability is key to our operations, because it is what gives us a license to operate and also gives us the privilege to operate. I look at the privilege to operate as what we actually get from our host communities, so we are coming in, they actually accept us and they give us the privilege to operate. Therefore we have to ensure that they do not experience any negative impact from our operations, but also that they only get the positives from things like employment opportunities that we create, which are actually sustainable employment opportunities. They also get procurement opportunities to supply goods and services that we need for our operations, so when we need to employ people, the first priority goes to the locals. The only place where we go externally out of our host communities is for specialized skills that we don’t have locally and again we do the same approach with our procurement for goods and services. Things like cleaning companies in the plant and offices, we offer those to the communities. Mining and transportation of material, we also limit to local communities. These are just two examples. It’s also the same with infrastructure projects that are sustainable, like building new schools in host communities and supporting schools in STEM subjects, that is science, technology engineering and math. Those are a few examples of the things that we do in a sustainable way for our privilege to operate.

Now on the license to operate side of things, you know from when we start to clear the area for mining, removing vegetation and throughout the production value chain, heritage management, environmental management and social impact are the boxes we tick along the way. Believe it or not, as we mine, we sometimes find artifacts from generations ago. When these are found, we present to the authority that we have found them, and they take them to an appropriate place. As we go through those heritages, environmental and social impacts, we are also monitoring and reporting on them on a daily and monthly basis. Any deviation is immediately reported internally and if necessary also to the regulatory authorities in line with our mining license conditions. Sustainability, environmental and social responsibilities are actually ingrained in how we do business – as I said it is a license to operate for us and a privilege to operate, so our commitment to sustainability is driven primarily by our objective of having year-on-year improvement in our environmental management processes as well as our desire to go beyond compliance. I want to have our operations go beyond compliance and set new benchmarks. In short, our commitment is driven by our desire to go beyond compliance in everything that we do it with regards to environmental and social responses.

What does this mean for you from the specialty chemical side and the sustainability aspect? How does that impact your side of the business?

Jean-François Pasquier:
We are part of a big chain. What Mpho was explaining about sustainability, the environmental sustainability as well as the commitment to the communities, we are also doing in specialty chemicals. A large amount of what we are selling and producing goes to help with the environment. As an illustration, for the improvement of the quality of air, whether to avoid or convert some pollutants before they go into the atmosphere or into products that can literally clean the air for us, we pride ourselves in manufacturing materials out of the feedstock we get from the operations led by Mpho. We design and manufacture products to go further into a better life for people and we’ve been doing that for 40 years now. To me, this is in the continuation of what starts in South Africa, we are part of that big chain. So yes, all of our operations have an impact on people and on the environment, but we are minimizing and can mitigate this impact by offering improvements in various aspects. I feel passionate about it. I would not be very comfortable using feedstock, our most critical raw material, which would not be mined or produced from a sustainable or socially acceptable manner.

Going back to the first question with regards to vertical integration, we do control that because I personally know Mpho. I visited the mines, the upgrading and manufacturing facilities and met with people in the community, so I’m very comfortable with what I saw. We are not buying from someone we don’t know. We are buying from a friend. We are buying from the company, so it’s quite important in terms of sustainability and making sure you don’t only control what you do, I feel I have quite a big confidence and trust in what we are buying to manufacture our products, and I can personally stand in front of our customers to claim that differentiation.

Tronox offers specialty products that improve the quality of life and that are produced at a sustainable and responsible location with raw materials supplied from sustainable and responsible mines and processing plants.

Mpho Mothoa
With those advantages of vertical integration, the added benefit of having a guaranteed customer comes with huge responsibility, and when I talk to my team about this, especially when they’re looking at our product quality, I say to them, “You know, it’s like you’re selling to a family member, so you want to keep them in mind. You know them personally, so you have some stock in it. You want to get it right first time, at the right quality, and be delivered at the right time because any slip up in that process affects all of us immediately.” So if Jean-François doesn’t have the product, because I wasn’t able to get it to him on time, it hits him in the pocket, which hits me in the pocket. It comes with huge responsibility for us and is basically the starting point of our vertical integration strategy. We are up to the challenge, and it’s actually a very good challenge of ensuring we safely make the right product at the right quality the first time and keep it that way.

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