The ProMet Dadi âOREXâ Iron Ore Value-In-Use (VIU) Model has been developed over a number of years as a tool for calculating the value of iron ores based on actual integrated steel plant operating parameters and conditions rather than purely commercial considerations. This methodology is used by all major iron ore producers to gain an edge in the market.
In essence the Model calculates the breakeven price of a new ore based on an assessment of existing operating practices and conditions in a given steel plant or more generically, in a specific target market. In other words, if a new ore replaces other ores in a given sinter mix or BF burden, the model calculates the maximum price that can be charged for the new ore without increasing the BOF crude steel operating cost.
We define iron ore VIU as follows:
VIU = the value of an ore based on actual operating conditions, calculated at breakeven crude steel operating cost
The Model allows for evaluation of sinter fines, lump ore, concentrate or pellets for different markets and various plant configurations.
The Model comprises three different models, one each for the Sinter Plant, Blast Furnace âBFâ, Hot Metal Pre-treatment âHMPTâ and Basic Oxygen Steelmaking Furnace âBOFâ. The BOF crude steel variable operating cost is calculated taking into account all interactions from sintering through to steelmaking.
A base case OPEX is first calculated for a given steel plant or set of operating conditions. The new test ore is then substituted into the sinter mix or BF burden, initially at zero value. This is followed by an iterative optimisation of the sinter mix or BF burden to accommodate the new ore within preset parameters. The ore VIU is then calculated incorporating the cost effects of all changes to the operating parameters.
Value to Client
The Model calculates the true value of an ore in a specific ore blend (e.g. the ore may be complimentary to the blend and have added value). This presents critical intelligence to the iron ore producer in price negotiations, allowing them to maximise revenue.
In a pre-production scenario, the model is useful in calculating a realistic ore price for financial modelling based on typical iron and steelmaking practice in target markets.
Thus the OREX model provides the following benefits to our clients to:
- Place a value to the ore in price negotiations with potential customers;
- Support for the early stage discussion of blending options to assist in financial evaluation and marketing efforts; and
- Better target their products to potential customers.