Technical File (Grain Malunga): Cement Industry and People Issues in Malawi – Mining & Trade Review (December 2016)

2016-12-malawi-mining-trade-review-technical-file-grain-malunga-cement-industryTechnical File with Grain Malunga: The Cement Industry and People issues in Malawi

Abstract

Cement manufacturing and other construction projects are affected by complex accounting due their belonging to quarrying and manufacturing. Local communities will look at these projects as mining in nature and therefore will seek more benefits associated with mining.  It is important to come up with reasonable levels of community benefits as quarrying for cement manufacturing involves low value minerals such as limestone and clay.

Cement Production Process

Cement manufacturing is a process of combining primary raw materials from quarrying to produce a mineral mixture called clinker that can be ground into powder with specific chemical composition and physical properties called cement (Figure 1).The process begins with extraction of raw materials such as limestone, silica, aluminates and ferric minerals. Aluminates include shale, clay, slags, fly ash, bauxite and granite. Silica comes from sand, clay, claystone, shale, slag, and fly ash. Ferric materials come from iron materials such as iron ores, blast furnace flue dusts, pyrite clinker fly ash.

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The above raw materials are heated in a kiln to extremely high temperature, up to 1500 0C using fuel such as thermal coal. Other sources of heat include natural gas and heavy oil.Table 1 lists just some of the many possible raw ingredients that can be used to provide each of the main cement elements.

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Raw materials required for this exercise should contain very little metallic elements magnesium, sodium, potassium, strontium as they will not burn off in the kiln and will negatively affect the cement quality. In order promote reactivity of the materials their chemical structure and fineness matter hence preference of clays being a good source for silica and alumina.  The raw mix is usually 70% limestone and 30% clay.

A small amount of calcium sulphate (3 percent to 5 percent) is added to the clinker to control setting of cement.This is done before fine grinding in a grinding mill. This minieral can be in form of anhydrite (CaSO4), hemihydrate (CaSO4.1/2 H2O) and gypsum (CaSO4.2H2O). The Other additives may be added in varying proportions to give cement specific properties such as reduced permeability, greater resistance to sulphates and aggressive environments, improved workability, or higher-quality finishes. Table 2 shows typical chemical composition for clinker and Cement.

Effort should be made to put the cement plant within the vicinity of the limestone deposit and clay to be situated not more than 25 km from the plant.

Factors affecting performance of cement industry

There cement industry is affected the following factors:

  • Economic growth of a country influences the growth of cement markets e.g. housing and infrastructure development
  • Profit margin for cement sales are less and there is need to have access to cheap power, high quality limestone and proximity to good markets and other raw materials.
  • The cement industry is very sensitive to legal and regulatory instability. Apart from environmental issues increasing cost of production there is need to guard against unfair competition such as “dumping” of foreign cement products
  • Choice of technology affects cost saving.  There is need keep abreast with new manufacturing processes that can reduce cost of production up to 10% of the overall cost structure.
  • Geographical location of cement plants should take advantage of limestone deposit location and cheap transportation.

People Issues

From the above discussion, it can be observed that cement production is a process that involves quarrying and manufacturing. Quarrying is mainly for extraction of limestone and clay while manufacturing is for raw material blending crushing, calcination (heating) and grinding to produce pure fine cement.

Manufacturing of cement is always thought of as part of mining. Consider grinding mills that produce cement from clinker. These are a manufacturing pieces and can survive with imported clinker. Huge structures of manufacturing plants can be misleading thinking that cement manufacturing is a lucrative business and therefore attracts people’s high expectation of corporate social responsibility (CSR) associated with mining.

Quarrying of cement and raw materials such as clay and iron ore are part of extractive industry or mining. What needs to be taken into account is the value of these raw materials and how they can contribute to local development.

Cost of cement limestone in Malawi ranges from $2.0 to $5.0 per tonne. This means that for a cement plant that produces 1,200 tonnes per day may consume 840 tonnes of limestone per day and about 250,000 tonnes per annum valued at about $1.25 million.  An annual royalty fee (at 5%) of $62,500.00 will be collected. Similarly about 20% clay will be required for mixing with limestone. About 50,000 tonnes of clay per annum will be required at a cost of $6.0 per tonne. An annual royalty fee (at 5%) of $15,000.00 will be realised. The other government revenue will be in form of Income Tax, Value added tax and Pay As You Earn (PAYE) arising from cement manufacturing. Ground rent from the quarries may not be significant. In summary a 1200 tonnes per day plant can generate royalties to government not exceeding $78,000.00 per annum.

The complexity in exercising transparency and accountability comes in due to non-ring fencing of these project cost centres that involve mining and manufacturing. Similarly this is experienced in rock phosphate mining and fertilizer manufacturing. Construction companies are also affected in terms of quarrying and construction where extra commercial activities in sales of aggregate may not be reported in public projects even after their completion. Activities of this nature may be viewed in general as mining with high returns raising people’s expectation in terms of high benefit sharing. It is recommended that mining for manufacturing should be ring fenced to portray two businesses i.e. quarrying company and manufacturing company. Local mining communities will not separate the two activities and may demand more benefit sharing as is obtained in high return mining projects.

Recommendation

In order to manage people’s expectation and illicit financial flows arising from quarrying and manufacturing, it is recommended to set up a corporate entity that manages two subsidiaries; one for mining/quarrying and the other one for manufacturing. This will help protect mistrust in terms of benefit sharing arising from mining and bring compliance to normal government revenue that comes from manufacturing.

References

  1. www.cement.org
  2. www.bgs.sc.uk
  3. www.understanding-cement.com
  4. https://pubs.usgs.gov

***

The article above was initially published in Malawi’s Mining & Trade Review Issue Number 44 that is circulating this December 2016.

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

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