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Time to Re-Think your Reclaim Program

Rising precious metals markets and tighter manufacturing cost controls have caused many industrial users of precious metals to re-focus their reclamation programs. No longer are shipments and recoveries handled by the maintenance department; senior management has now stepped in (or should be stepping in) to guide and monitor the process from start to finish.3

Driven largely by a five-fold increase in precious metal values, keen managers are realizing that minor changes in reclaim programs can have large impacts on their balance sheets. Companies must now view their precious metals refiner as a business partner with front door access rather than just a scrap vendor who rings the back door bell.

In the past, all the emphasis had been on making and shipping product and keeping that gross profit margin in double digits. Pressured business owners focused heavily upon sales goals with secondary emphasis on what factors may affect their gross profit margins.

However, the savvy business owner is not afraid to see things differently. He or she can realize that profits exist throughout the plant, without ever having to make a sale. Whether it's getting more out of employees or reviewing the mundane details of manufacturing expense for improvement, they know that successful companies must continuously seek ways to improve.

Thus, it may be time to re-think your precious metals reclaim program. Changes in your existing program can prove to be a real eye opener. Many times, recoveries have increased by one third or higher — simply because of switching refiners or segregating scrap before it leaves the facility. The better records you develop, the better your returns will be. For example, one refinery could increase recoveries by 14 percent or $8,000 for one year. Assuming gross margins of 25 percent, the manufacturer would have to generate $32,000 in new sales to create $8,000 in margins. Switching refiners is much simpler and less costly than having your salesperson chase a new prospect.

Using Precious Metals
The unprecedented swing in precious metal prices has caused many a headache for purchasing managers and cost accountants.

Manufacturing can be hard enough and even harder once you start using commodities. Aside from security issues, greater inventory monitoring is needed as well as a written plan to control scrap. Make precious metal accounting controls top priority.

In a perfect accounting scenario, you always want to match your expenses with your revenues, but who really does that effectively? Generally, this happens only with the larger users of precious metals, where hedging techniques are closely followed.

Unfortunately, smaller users are left to suffer the ups and downs of the markets and get punished through the gross margin.

Once precious metal markets started to take off in 2004-2005, people started to notice that margins were eroding because the volatile precious metals component of their parts were not adjusted to reflect rising markets. Those managers who reacted went to their customers with price adjustments then developed hedging programs. Those who did not react, went to their owners with bad news — deteriorated margins.

Controlling Precious Metal Scrap
Precious metals are easily tradable commodities and, because of their high value and concentrated form, demand constant respect. As such, manufacturers should not treat gold, silver, platinum, palladium, rhodium, and iridium in the same way they treat more traditional recyclables.

Precious metals, during the manufacturing process take on many different guises, and none should be ignored simply due to looks. All reclaimable material contributes to the health of the company whether it's high grade virgin materials, obsolete or spent inks, rags, wipes, sputtering scrap, turnings, source targets, resins, or punching scrap. Never mix high grade scrap with low grade scrap and certainly avoid mixing gold with platinum group metals. Always provide your refiner with a detailed packing slip, noting the types of scrap and weights. Make your own recovery estimates then compare them to your refiner's returns. Investigate the variances and above all, visit your refiner.

The Refining Process
When received by the refiner, material is weighed and the weights are then compared to the packing slip. A lot control number is assigned, and this number follows the material throughout production. It is best if each lot is run separately so materials do not co-mingle. After inspection, the refiner determines the best refining circuit for the material. The physical properties of the material drive the refining circuit, which typically includes incineration, direct melting, chemical stripping or chemical digestion.

The first step for materials generated by the electronics industries is typically incineration to remove valueless materials, such as paper and plastics, as well as VOCs. The loss of precious metals during the incineration process is a common misconception. Once incineration is complete and the material is reduced to the consistency of fireplace ash, it moves on to crushing/ball milling. The ash is ground and crushed to the fineness of talcum powder and then screened for large items like steel rejects or precious metal tailings. Any precious metals that do not screen through are directly melted, sampled and assayed.

The crushed and screened material is then thoroughly blended to achieve homogeneity, and samples are taken. The samples are assayed to determine the percentage of precious metals contained in the sample, and those results are then extrapolated back to the lot weight for final settlement.

Refining fees are generally a combination of two factors. The first fee is directly tied to the value of the recovered precious metals. The refinery retains a percentage of the metal and pays the manufacturer the balance. The second fee correlates to the incoming weight; the refinery will assess a treatment charge per pound or a minimum lot charge.

Selecting your Refinery
The refining industry has shrunk over the past 10 years and very few companies remain. Manufacturers should look for a stable refinery that is committed to the industry. Precious metal scrap should only go to a qualified precious metal refinery.

Qualifications should include a plant visit, review of the refinery's documentation for the U.S. Environmental Protection Agency (EPA), banking references, and reference discussions with fellow business owners within the industry. In addition, if a manufacturer's materials are classified as hazardous waste, the refiner should have a clear understanding of hazardous waste classification rules, container labeling and storage, manifesting, and transportation issues.

Contact: Geib Refining Corp., 399 Kilvert St., Warwick, RI 02886 401-738-8560 fax: 401-732-2841 E-mail: mike@geibrefining.com Web:
http://www.geibrefining.com

 
 
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