Barite Processing 3p55v

Natural and Applied Sciences Journal, Vol. 9 No. 1 2008 Available online at www.naasjournal-ng.org.

AN OVERVIEW OF BARITE EXPLOITATION OPPORTUNITIES AND COST IMPLICATIONS OF ESTABLISHING A MEDIUM-SCALE BARITE PROCESSING PLANT IN NIGERIA 1

K.K. Nwozor and 2E.M. Chukwunenye Department of Geology, Anambra State University, Uli,. E-mail: [email protected]

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Nigerian Geological Survey Agency, Abuja, Nigeria.

Abstract Opportunities abound in Nigeria for medium and large-scale investments in barite mining, processing and marketing. The known reserves are in Cross River, Nassarawa, Plateau, Taraba, Benue, Gombe, Zamfara, Ebonyi and Adamawa States. They occur as vein infilling materials associated with Lead-Zinc mineralization in both Precambrian Basement and Cretaceous sedimentary rocks of the Lower and Middle Benue valley and generally have specific gravities in the range of 3.5 - 4.4. Estimated demand for barite in Nigeria is in excess of 255,000 metric tonnes per annum while the foreign market s for over 650,000 metric tonnes. The major consumers in Nigeria are the multinationals in the upstream oil sector and chemical products companies. The few processing plants in the country produce a little above 40,000 metric tonnes per annum creating a wide supply gap currently bridged by massive importation of this very essential commodity. The viability and profitability of a medium scale barite processing plant in Nigeria is not in any doubt. With a crusher of 75 metric tonnes per hour capacity, a market price of N40,000 per tonne of processed barite; the plant evaluated in this study at an annual capacity of 142,000 metric tonnes can generate a profit of about N3.6 billion at 60% capacity utilization representing the commissioning year. This figure will increase to N4.2, N4.8, N5.4 and N6.0 billion at 70%, 80%, 90% and 100% capacity utilization representing the second, third, fourth and fifth years of operation respectively. Although the initial working capital is high, the plant has the advantage of quick returns on investment. The huge capital outlay for the acquisition of necessary equipment and vehicles is attenuated by the high demand of processed barite and the price disparity between the raw mineral and the finished product. Introduction Barite is the natural form of the sulphate of barium (BaSO4). It is a fairly dense industrial mineral used in oil drilling operation. It is also a major raw material in paints, paper, rubber, plastics, glass, match, leather processing, tobacco, fertilizer, radiological and pharmaceutical industries depending on the specific gravity and the percentage of other constituents or inherent impurities. Generally, barites occur as hydrothermal veins and sub-aqueous exhalative Hibbard, (2002). In some cases, marine phosphatic concretions are often biogenetically converted in a non marine environment to barite Medrano and Piper, (1997). Like most hydrothermal deposits, inclusions are common in barite Roeder, (1984).

The specific gravity of barite ranges from 3.0 - 4.4. The higher the specific gravity, the wider its application especially in the oil drilling industry where the required API gravity is 4.2. It gives pale green flame colour under propane flame test and green or yellow when tested with ultraviolet light, Hibbard, (2002). Barites from different sources in Nigeria vary in their specific gravities. Even samples from the same mine have yielded different weights but these disparities in specific gravity are harmonized by blending barites of very high specific gravity with those of relatively lower specific gravity to meet the API gravity requirement of 4.2. Occurrence and Reserve Estimation

An Overview of Barite Exploitation Opportunities and Cost Implications of Establishing a Medium-Scale Barite Processing Plant in Nigeria

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Natural and Applied Sciences Journal, Vol. 9 No. 1 2008 Available online at www.naasjournal-ng.org.

Large deposits of barite have been discovered in different parts of Nigeria MMSD, (2008). These include Biase, Ikom, Obubra, Yala in Cross River State; Azara, Keana and Wuse in Nasarawa State; Langtang South, Wase and Shendam in Plateau State. Others are in Ibi, Aloshi, Wukari and Kumar in Taraba State; Ador, Buruku, Gboko, Gurna, Makurdi, Ushongo in Benue State. Appreciable deposits also occur in parts of Adamawa, Gombe

and Zamfara States while recent reports also suggest some deposits in Ebonyi State. In Azara alone, eighteen barite-bearing veins have been investigated with five of these veins containing reserves of about 730,000 metric tonnes with specific gravity of 3.8 4.5. The deposits in Cross River State are estimated to be about 2.0 million metric tonnes while that of Ibi and Aloshi is in excess of 750,000 metric tonnes.

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Estimated Total National Demand The major consumers in Nigeria are multinationals in the upstream oil sector. The mineral is a major component needed critically in deep water drilling. The total national demand of Barite in Nigeria is about 255,000 metric tones Chukwunenye, (2006). The few processing plants in the country produce a little above 40,00 metric tones per annum creating a wide supply gap

currently bridged by massive importation of this very essential commodity.

Method of Study The study involved literature review of barite occurrences in Nigeria and industrial applications of the mineral. Insights were obtained from the experiences of workers in some of the existing

An Overview of Barite Exploitation Opportunities and Cost Implications of Establishing a Medium-Scale Barite Processing Plant in Nigeria

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Natural and Applied Sciences Journal, Vol. 9 No. 1 2008 Available online at www.naasjournal-ng.org.

companies in the country currently involved in the mining, processing and distribution of the commodity. The cost analysis involved key assumptions based on economic realities of the industry. For instance, a barite/impurity ratio of 3:1 with 5% production loss at a cost of N20,000 per ton of raw barite and market price of N40,00 per ton of processed barite is the prevailing industry guide for grades, Chukwunenye, (2006). Cheaper variants equally exist. For the take-off working capital, it is assumed that should be regular supply of raw barite for at least one month, enough funds to pay utility bills, supplies, istrative overheads and plant maintenance costs for the first two months and workers salaries for the first three months. The computations were done and tabulated using process and standard costing principles. Factory Location/Infrastructural Consideration Since the know deposits are in Cross River and Middle Belt regions of Nigeria; Calabar or any of the relatively developed middle belt settlements can conveniently host the plant. Germane to this is the need for road networks, communication facilities, banking services, power supply, water availability and security. Any choice location ought to be a nexus between the geologic deposits and the finished products market. Calabar has the advantage of access to the Atlantic Ocean and enjoys proximity to the hub of upstream activities in the Niger Delta. The processing plant can

occupy a total land area of 30,000 square meters consisting of a mineral dump yard, Mineral Processing Hall, Engineering Workshops, istrative Block, Fuel Dump and a Warehouse. Other structures include Generator House, Water boreholes, security post, staff quarters, canteen and perimeter fencing. Process Flowchart and Machinery The process flowchart for barite production starts with the mining of barite and possibly the transpiration of raw barite from other mines to the factory site to supplement local production. This is followed by physical removal of impurities, primary crushing, secondary crushing, jigging, blending/milling and bagging. The process model incorporates scrappers, primary crushers to reduce the big boulders to pebble size. The secondary crusher reduces the minerals to smaller sizes before the gravitational separation at the jig. The jig comprises a mesh of known sizes which is vibrated at regular intervals by a system of electric motors and transported to the sieve by conveyor belts. The jigging separates the less dense materials (impurities) from the denser barites. The jigged barite is sent to the mill. The mill pulverizes the mineral into powdery form. The specific gravity of the mineral is upgraded during milling to meet the API gravity requirement of 4,2. This is called blending. The product is conveyed to the bagging, packaging and or branding machines. The required machinery includes:

An Overview of Barite Exploitation Opportunities and Cost Implications of Establishing a Medium-Scale Barite Processing Plant in Nigeria

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Natural and Applied Sciences Journal, Vol. 9 No. 1 2008 Available online at www.naasjournal-ng.org.

Plant/machinery Scrappers Crushers Heavy Duty Generator Gravitational Jigs Milling/Bagging Machine Water/Gravel Pumps and Hoses Bucket loader Dump Trucks Trucks/Trailers Water Reservoir Underground Fuel Tank Weigh Bridge Water tanker Staff bus Service Cars

Quantity 1 2 1 2 1 3 1 4 6 2 2 1 1 1 4

Cost Analysis The broad objective of a process costing system is the ascertainment of cost of a product for the purpose of stock valuation and profit measurement ACA, (2003). The project cost and fiscal analysis are broadly domiciled in the estimated Capital and Recurrent Expenditures. Capital Expenditure The table shown the costs of fixed assets such as land acquisition, Royalties, plant and machinery and other immovable assets. Asset Land Acquisition/Royalties Buildings Engineering Installations Fixtures/Fittings Capitalization Crushers Generator Milling Machine The Gravitational Jig Excavator/Bucket loader Dump Trucks Trucks and Trailers Weight bridge

Quantity 30,000 m2

2 1 1 1 4 6 1

Cost (N’000) 7,000 64,000 3,000 200 30,000 30,000 5,000 8,000 5,000 23,000 20,000 36,000 200

An Overview of Barite Exploitation Opportunities and Cost Implications of Establishing a Medium-Scale Barite Processing Plant in Nigeria

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Natural and Applied Sciences Journal, Vol. 9 No. 1 2008 Available online at www.naasjournal-ng.org.

Water Borehole Fuel Dump Fuel Tanker Staff bus Service Cars Contingencies

1 1 2 1 1 4

2,500 1,800 3,000 3,000 4,400 5,000

Recurrent Expenditure Factored into recurrent expenditures of the barite plant are personnel costs, equipment maintenance, fuelling, cost of haulage from mines to factory, medicals, utility bills and other contingencies. Wage Bill With an initial monthly wage bill of N500,000 and a projected annual increase of 5%, a five year personnel cost is as shown: Capacity Utilization 60% 70% 80% 90% 100% st nd rd th 1 YR 2 Yr 3 YR 4 YR 5th YR Labour (N’000) 6,000 6,300 6,615 6,945.75 7,293.04 Estimated Power Demand Equipment

Electric Motors for Hopper Conveyor Belt Electric Motors for the Primary Crushers Electric Motors for Secondary Crushers Electric Motors for the Jig Electric Motors for the Jig Conveyor Belt Electric Motors for the Milling Conveyor Belt Giant Electric Motor for the Milling Machine Total

Qty

2 4 4 2 2 1 1

Unit (Hp) capacity

50 80 80 20 20 20 100

Demand (Hp)

100 320 320 40 40 20 100 940 (705Kw)

The estimated power rating of the equipment at site is put at 940 Hp (705 kW). Assuming a N5.00 per hour cost for 1.0 kilowatt, the sum of N3525.00 will be needed to keep the plant running for an hour. For a daily shift of 8 hours for a year and two respectively, utility cost is computed as follows: Capacity Utilization 60% 70% 80% 90% 100% Utility/Annum (‘000) 5076 5922 6768 7614 8460 Utility/2yr (N’000) 16920 Cost of Mining Raw Barite The cost of producing and hauling one tones of raw barite from the mines to Annual cost at stratified plant capacities are computed as: Capacity Utilization 60% 70% 80% 90% Raw Barite (tones) 120,000 140,000 160,000 180,000 Cost (N’000) 2,400,000 2,800,000 3,200,000 3,600,000

An Overview of Barite Exploitation Opportunities and Cost Implications of Establishing a Medium-Scale Barite Processing Plant in Nigeria

the plant is put at N20,000,00. 100% 200,000 4,000,000

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Natural and Applied Sciences Journal, Vol. 9 No. 1 2008 Available online at www.naasjournal-ng.org.

Cost of In-Plant Processing The barite-impurity ratio is 3:1 with estimated production loss of 5% the process cost will be evaluated as: Capacity Utilization 60% 70% 80% 90% 100% Input (tones) 120,000 140,000 160,000 180,000 200,000 Output (tones) 85,500 99,750 114,000 127,500 142,500 Cost of Supplies Estimated cost of empty polypropylene bags is N25.00 each with a litre of fuel at N8.00. Since each bag is for 50 kg of barite, 1000 kg or 1 ton will therefore require 20 bags such that cost of supplies will be computed as shown in the follow up table: Capacity Utilization 60% 70% 80% 90% 100% No.(‘000 litres) 1714 1995 2280 2556 2850 Fuel (‘000 litres) 18 21 42 27 30 Cost of bags (N’000) 42,750 49,875 5700 63,900 71,250 Cost of fuel (N’0000) 1440 1680 1920 2160 2400 Total Supply Cost (N’000) 44,190 51,555 58,920 66,060 73,650 Depreciation Value Considered to depreciate as production and time progress are land and building, plant and equipment as well as office furniture. Assuming a depreciation value of 10%, 20% and 15% for these assets respectively, depreciation can be computed as shown: Capacity Utilization 60% 70% 80% 90% 100% Building (N’000) 8100 7290 6561 59,04.9 53,14.4 Plant/Equipment (N’000) 50,740 40,592 32,473.6 25,978.88 20,783.10 Furniture (N’000) 450 382.5 325.13 276.35 234.9 Total (N’000) 59,290 48,264.5 39,359.73 32,160.13 26,332.40 Cost of Production When all inputs and factors are summed, the cost of producing a unit (1ton) of processed barite is computed as in the follow up table: Capacity Utilization Raw Material (N’000.000) Labour (N’000) Utility (N’000) Maintenance (N’000)

60% 2400 6000 1566 600

70% 2800 6300 1827 600

80% 3200 6615 2088 600

90% 3600 6945.75 2349 600

An Overview of Barite Exploitation Opportunities and Cost Implications of Establishing a Medium-Scale Barite Processing Plant in Nigeria

100% 4000 7293.04 2610 600

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Natural and Applied Sciences Journal, Vol. 9 No. 1 2008 Available online at www.naasjournal-ng.org.

Supply (N’000) Factory Overhead (N’000) Operations (N’000) Depreciation (N’000) Total cost (N’000) Unit cost

44190 2,452,356 600 2,452,956 59290 2,512,246 29.4

51555 2,860,282 600 2,860,882 482,64.5

58920 3,268,223 600 3,268,823 39,359.73

2,909,146.5

3,308,182.73

29.1

29.01

Productivity and Projected Earnings The cost of raw materials, utility, supplies and maintenance will double for a two-shift production schedule while the wage bill is estimated to increase by 6% representing the percentage of Capacity utilization One shift production Two shifts production One shift revenue (‘000.000) Two shifts revenue (N’000 000)

60% 8550 171,000 4275 8550

70% 99,750 19,9500 4,987.5 9975

66060 3,675,954.75 600 3,676,554.75 32,160.13 32,160.88 29.0

7,3650 408,153.4 600 4,084,153.04 26,332.40 4,111,085.44 28.8

production staff factored in the entire work force of the plant. The processed barite produced is evaluated at a selling price of N50,000.00 per tone. Both output of finished product and expected revenue to be generated by the plant over a fiveyear stratified production capacity of one and two shifts uninterrupted daily work schedule are as tabulated:

80% 114,000 228,000 5700 11,400

90% 127,800 25,5600 6390 12,780

100% 142,500 285,000 7125 14,250

Estimated Income Statement for one Shift Schedule Capacity utilization Revenue (N’000) Production cost Profit/loss

60% 4,27,5000 2,512,246 1,762,754

70% 4,987,500 2,909,146.5 2,078,353.5

80% 5,700,000 3,308,182.73 2,391,817.27

90% 6,390,000 3,708,714.88 2,681,285.12

100% 7,125,000 4,111,085.44 3,013,914.56

Estimated Income Statement for Two-Shift Schedule Capacity utilization Revenue (N’000) Production cost (N’000) Profit/loss (N’000)

60% 8,550,000 4,875,060 3,674,940

70% 9,975,000 5,758,963.5 4,216,036.5

80% 11,400,000 6,565,483.23 4,834,516.77

90% 12,780,000 7,373,251.01 5,406,748.99

An Overview of Barite Exploitation Opportunities and Cost Implications of Establishing a Medium-Scale Barite Processing Plant in Nigeria

100% 14,250,000 8,183,298.92 6,066,701.08

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Natural and Applied Sciences Journal, Vol. 9 No. 1 2008 Available online at www.naasjournal-ng.org.

Discussion As shown in the tables, the viability and profitability of a barite processing plant in Nigeria is not in any doubt. With a crusher of 75 metric tones per hour capacity, the plant can generate a profit of about N3.6 billion at 60% capacity utilization representing the commissioning year. This figure increases to N4.2, N4.8, N5.4 and N6.0 billion at 70%, 80%, 90% and 100% capacity utilization representing the second, third, fourth and fifth years of operation respectively. Although the initial working capital is high, the plant has the advantage of quick returns on investment. The huge capital outlay for the acquisition of necessary equipment and vehicles is compensated by the high demand of processed barite and the price disparity between the raw mineral and the finished product. The cost of production of the mineral will decrease with the procurement of haulage vehicles for easy transportation. Since the cost of haulage for 3 tones raw barite is put at N100,000, when trailers are purchased, this amount will significantly reduce to just the cost of fuelling and maintenance of the vehicles and will bring down the working capital. The cost of the raw material varies according to the grade or percentage composition of barium sulphate or in specific gravity. In the context of this analysis, the price of N20,000 is used for the grade. Other lower grades can be purchased at much lower prices and blended with the grade to increase profitability. To ensure regular supply of raw barite, the investor can commission small-scale and artisanal mining operation in different locations. By funding the mining operations to some extent, the raw material can be procured at a mutually advantageous cost not necessarily dictated by the usually overbearing market forces. Since production and earnings are directly proportional to working hours, steady source of raw material has to be guaranteed. Further to this, t venture agreements can be entered into with largescale producers of raw barite for maximum supply. Summary and Conclusion Barite resources and reserves of Nigeria provide vast opportunities for both medium and longterm investments. With a stable democratized polity, enabling economic environment and readily available market, investments in this sector are guaranteed of geometric returns in profits. The known reserves are in Cross River, Nassarawa, Plateau, Taraba, Benue, Gombe, Zamfara, Ebonyi and Adamawa States. They occur as vein infilling materials associated with Lead-Zinc mineralization in both precambrian basement and cretaceous sedimentary rocks of the Lower and Middle Benue valley and generally have specific gravities in the range of 3.5-4.4. At a market price of N40,000 per tone of processed barite, the plant evaluated in this study has commissioning year potential for a profit of N3.6 billion at an annual capacity of 142 metric tones and may reach up to N6.0 billion at full capacity utilization. It is worthy of note that even if the price of processed barite fluctuates due to market forces, the viability and profitability of this venture is guaranteed. A barite processing plant can also be adapted in processing talc and kaolin, two important industrial minerals that equally abound in Nigeria in close proximity with the barite deposits. Moreover, the cost of setting up a barite processing plant can be much lower than the values projected here depending on the capacities of the machines, size of factory, manpower requirement, number of vehicles and other considerations that may not be necessary for a medium scale enterprise. An Overview of Barite Exploitation Opportunities and Cost Implications of Establishing a Medium-Scale Barite Processing Plant in Nigeria

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Natural and Applied Sciences Journal, Vol. 9 No. 1 2008 Available online at www.naasjournal-ng.org.

Finally, the policy thrust of the Nigerian government is geared towards a private sector driven economy with ive framework for small and medium scale enterprises. The barite processing plant is sure to create wealth, provide employment and reduce poverty while guaranteeing returns to investors and shareholders. References ACA Practice Kit, (2003). Cost ing Intermediate Paper 8. Wyse Publishing, Lagos. Pp. 144-337 Chukwunenye, M.E., (2006). Design and Cost Estimates of a Prototype Small-Scale Barite Processing Plant. Barites Consulting Nigeria, Unpublished Memoirs: 26P. Hibbard, M.J., (2002).Mineralogy: A Geologists Point of View. McGraw –Hill Inc, New York. Pp. 41-515. Medrano, M.D and Piper, D.Z., (1997). FeCa Phosphate, Fe-Silicate and Mn-Oxide Minerals in Concretions from the Monterey Formation, Chemical Geology 138: 9-23. Microsoft, (2005). Encarta Encyclopaedia. MMSD Nigeria, (2008). Barites Exploration Opportunities in Nigeria. Ministry of Mines and Steel Development, Abuja. Pp 1-7. Roedder, E., (1984). Fluid Inclusions. Reviews in Mineralogy, Vol 12. Washington D.C: Mineralogical Society of America.

An Overview of Barite Exploitation Opportunities and Cost Implications of Establishing a Medium-Scale Barite Processing Plant in Nigeria

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