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LEAD ORE PROCESSING AND EXPORT IN NIGERIA
For the benefit of those who need to know, an attempt would be made to define mineral and metal ore. Mineral is an inorganic substance found in nature with a characteristics chemical composition and in some cases, of definite crystal structure. The earth crust contains rocks of different composition with different physical properties. Some are hard, some are soft. Rocks are the materials which the earth's upper crusts are made of. Rocks are themselves composed of minerals. Minerals are naturally occurring elements like gold, or a compound such as iron oxide.
If a rock contains a mineral from which a metal can be extracted at a profit, it is call an ore. For example, lead ore.
Uses:
Depending on the mineral that can be found in the rock, the ore can be subjected to various uses. This is due to the fact that the rocks are of different composition hence different physical properties. Lead is a major constituent of Lead- Acid battery. Lead is used as a colouring element in ceramic glazes, notably in the colors red and yellow. Lead is used as projectiles for firearms and fishing sinkers because of its density. Low cost compared to alternative products and ease of use due to relatively low melting point. Lead is also used in high voltage power cables as sheathing material to prevent water diffusion into insulation.
The Market:
The market for lead ore especially the overseas market in China is large, expanding and sustainable because of the numerous uses of ore. Buyers usually would like to secure steady source of supply of these products. An exporter that is able to secure a contract at the right price would have an uphill task meeting the demand of the buyer because the output from the mines in Nigeria is low due to the use of crude implement.
You can imagine a situation whereby the daily need of the factory of the buyer is 600/MT and the exporter would struggle to supply 500/MT on a monthly basis.
A detailed analysis of the cost and profit for the export of lead ore 50% is given below.
For Lead Ore 50%: International Market
Cost of 1 ton of Lead Ore 50% at site = N40, 000/MT
Cost of 60 tons = N2, 400,000
Cost of 2% PB =N108,000 {When price is $600 and Quantity 60 tons}
Cost of transportation to site of Crushing/loading = N10,000/3 tons
Cost of 60 tons =N200,000{ Please do know that this cost can be eliminated if the site is accessible}
Cost of Crushing @ N40/Bag = N48, 000 {Since 1 ton = 20 bags of 50 KG each}
Cost of packaging = N5000
Cost loading to the truck @ N20/ Bag = N24, 000
Cost of transportation to Warehouse/Port = N180, 000/30 tons=N360, 000/60 tons
Cost of Testing =N100, 000
Cost of Freight = N78, 000/20 FT Container {since 20 tons= one 20 FT container, N78, 000 * 3 = N234, 000
Warehousing = N100, 000
Deposition Fee = N150, 000 {Returnable after shipment of goods}
Agent Fee = N80, 000
Miscellaneous = N100, 000
Total = N3, 909,000
It is important that the exporter confirms the prices given above before going into the business because the prices of lead ore and the other services mentioned are not stable.
With a good arrangement with the forwarding agent, the exporter can eliminate the cost of warehousing and deposition fee by choosing another shipping company with good freight cost.
The miscellaneous expenses cannot be more than N70, 000 but just to be a safe side, let put it at N100, 000.
As previously stated, the price of lead ore is usually a function of the lead content in the ore and also the LME price.
For this analysis, we would assume that the lead content is 50% and exporter was able to sign a contract at the price of $600/MT and Pro Rata at $13.7/1%.Given that we are dealing with 60 tons, below are the calculations
60 * $600/MT = $36,000
@ $1= N150
$36,000 = N 5,400,000
Profit = N 5,400,000 - N3, 909,000
= N 1,491,000
This is the basic profit the exporter would make as profit without returning of the cost of 2% PB and Deposition Fee.
Knowing that the Lead content is not stable and say the actual lead content is 56% and Pro-Rata at $13.7/1%, the calculation would now be:
{56-50}% = 6%
6% *$13.7= $82.2
$600 + $82.2
= $682.2 * 60 tons = $ 40,932
@ $1=N150
= N6, 139,800
Profit = N6, 139,800 - N3, 909,000
= N2, 230,800
For Lead Ore 50% (Local Market): In the local market, delivery is usually done on Ex-warehouse basis .That is, the cost of talking the goods to the warehouse of the buyer.
The distance of the warehouse from the mine usually affects the price. Delivery can also be at site .This is a situation where the buyer is buying at the mining site of the exporter/miner. Ex-warehouse price are usually in Naira and and if the destination to be delivered to is Lagos. The price ranges from N65,000/MT - N80,000/MT depending on the negotiating skills of the seller and on the lead content.
If the seller was able to get an LPO for lead ore 50%, N65, 000/MT and Pro-Rata at N1000/1%,
Below would be the calculation
Cost of 1 ton of Lead Ore 50% at site = N40, 000/MT
Cost of 60 tons = N2, 400,000
Cost of transportation to site of Crushing/loading = N10, 000/3 tons
Cost of 60 tons =N200, 000{Please do know that this cost can be eliminated if the site is accessible}
Cost of Crushing @ N40/Bag = N48, 000 {since 1 ton = 20 bags of 50 KG each}
Cost of packaging = N5000
Cost loading to the truck @ N20/ Bag = N24, 000
Cost of transportation to Warehouse/Port = N180, 000/30 tons=N360, 000/60 tons
Miscellaneous = N100, 000
Total = N2, 677,000
Price of goods to Lagos =N65, 000 /ton= N65,000 * 60 tons = N3,900,000
Profit = N3, 900,000- N2, 677,000
= N 1,223,000
If the actual lead content is 56% and Pro-Rata at N1000/1% {56-50}%
6% * 1000 = N6000
N65, 000 + N6000
= N71, 000
N71, 000 * 60 tons = N4, 260,000
Profit = N4, 260,000 - N2, 677,000
= N1, 583,000.
The investor can choose to export the product to China or Europe where the product would be refined to get lead ingot amongst other product and sold at a higher price.
The policy of the Federal Government of Nigeria to make solid mineral sector one of the major contributors to the GDP of the nation from the present position of less than 1% is a positive sign.
Quality is the key word for the success or failure of this business .The investor must contract the services of experience firms to handle the sourcing of the product from the miners.
For a detailed Feasibility study report, which contains the contact details of buyers and sellers, profit and cost analysis for zinc and copper ore, other investment opportunities in the solid minerals like operating a mine and processing of solid minerals, managing export operations, please do contact me for further details.
*Please note that as at the time of writing this article the local currency exchange rate is about N148/$1.
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LEAD ORE PROCESSING AND EXPORT IN NIGERIA
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