Cyanide maker suspends production in Europe as energy costs soar

Sodium cyanide, the world’s largest maker of gold and silver mining materials, was forced to suspend production in Europe after Russia’s invasion of Ukraine sent oil prices soaring. ‘energy.

Czech Draslovka Group said production of the chemical, which is used in the extraction of precious metals from ore, had become unprofitable in Europe, with gas prices in the region at 12 times levels in the United States , compared to only 1.5 times in 2020.

Supply shortages in markets dependent on Europe could be severe, the company said. It has 15% of its production capacity in the region.

“We need to reduce production to a minimum for a temporary period and see what the free economy does,” said chief executive Pavel Bruzek. “The whole of Europe is in a similar situation.”

Cyanide prices have increased by 25-30% in world markets, but in Europe the costs of raw materials (ammonia and caustic soda) and the energy needed to manufacture the finished product have collectively increased by 270% in course of the past year.

In Europe, wholesale gas prices are more than 7 times higher than a year ago. Russia provides 40% of the continent’s supply.

Draslovka is the latest in a series of European industrial energy users to shut down or reduce production due to an energy crisis that was already causing problems across the continent, but has been made worse by the invasion of Ukraine by Russia.

This week, Italian packaging group Pro-Gest suspended activity at six paper mills, Norwegian fertilizer producer Yara cut output at plants in Italy and France, and Spanish steelmakers cut production.

Meanwhile, prices for gold, considered a safe-haven asset, have risen around 10% since early February to near $2,000 per troy ton, a level that could persuade producers to extend trading. mines or relaunch stalled developments.

But Bruzek said miners could face cyanide supply issues and pointed out that mining gold from lower-grade ores requires more cyanide.

Draslovka, which expects to generate more than $450 million in revenue this year, supplies gold mining companies in Turkey, Africa and Latin America.

In December, he completed a $521 million takeover of U.S. cyanide plants acquired from Chemours, which he is keeping open. It has also agreed to buy facilities in South Africa from Sasol, a petrochemical group.

Bruzek said the company diversified in part because it believed energy prices would rise in Europe, although it didn’t expect things to escalate so quickly. “The speed and the scale are startling,” he said.

Francesco Zago, chief executive of Pro-Gest, said one of the problems was the extreme daily volatility in gasoline prices when the company sets prices for its products on a monthly basis.

“We are now paying the price for a lot of choices made in the past,” he said, referring to Europe’s dependence on Russian natural gas.

Mary I. Bruner