April Newsletter – 01.05.18
Glencore faces US$3b freezing orders in DRC
Glencore (LN:GLEN) says freezing orders totalling almost US$3 billion, served by a company affiliated with Israeli businessman Dan Gertler against its subsidiaries Mutanda Mining and Kamoto Copper, may “materially adversely affect” its Democratic Republic of Congo operations.
Ventora Development Sasu served orders in the DRC for $695 million and $2.28 billion, against Mutanda and Kamoto respectively, alleging breaches of royalty agreements.
Gertler was added to the US’s list of specially designated nationals last year and Ventora alleges Glencore’s subsidiaries had indicated they would not make royalty payments to Ventora as a result of Gertler being designated an SDN.
“Glencore denies that Mutanda and KCC are in breach of any of their obligations under their respective agreements with Ventora and AHIL [Africa Horizons Investments Limited] and also entirely rejects Ventora’s calculation of the value of the future royalties allegedly owed to Ventora,” the company said in a statement.
Indonesia’s Grasberg Own Goal
- Freeport shares are falling, but the pain will be felt closer to home.
The most drawn-out deal in the global mining industry looks set for another round.
Freeport-McMoRan Inc. shares have fallen about 21 percent since they opened Monday, headed for their worst weekly performance in almost three years.
The reason is a further wrinkle in the Indonesian government’s attempt to lift its stake in the Grasberg mine on the island of New Guinea, one of the world’s biggest sources of copper and gold and among the most isolated and challenging pits on the planet.
Jakarta and Freeport President Richard Adkerson have been edging closer to an agreement for some time. After insisting he’d never let the government’s stake rise to more than 30 percent from its current 9.4 percent, Adkerson conceded last year that it could increase to 51 percent. A deal to convert Rio Tinto Group’s interest in the project into enough equity to give the government majority control – a neat way of getting around the trench warfare between Freeport and Jakarta – is intended to be finalized within months.
Now there’s a new hitch: A proposed change to the government’s environmental standards around the pit. Under the current arrangement struck in 1994, several billion metric tons of mine waste that’s been dug from Grasberg over the past few decades is dumped straight into the Ajkwa river.
Russia’s Nornickel cuts 2018 output forecast for copper project
MOSCOW, April 26 (Reuters) – Russia’s Norilsk Nickel
(Nornickel) has cut the 2018 production forecast for its new Bystrinsky copper project near the Chinese border due to a problem with equipment which it hopes to fix in the second quarter, it said on Thursday.
Nornickel, part-owned by Russian tycoon Vladimir Potanin and aluminium giant Rusal, said its 2018 output forecast from its main assets was unaffected, amid increased production of all its key metals in the first three months of the year.
“In April 2018, the first batch of copper concentrate ….
at Bystrinsky GOK (Chita Copper Project) was shipped to Chinese customers,” Sergey Dyachenko, Nornickel Chief Operating Officer, said in a statement.
“We have however reduced the 2018 production targets for the supplied equipment, which we plan to sort out in this quarter … Overall, we confirm our 2018 targets for metal production from our own Russian feed,” he added.
What to Watch in Commodities: Aluminum, Shale, Ag Giants, China
- Metals markets primed for more volatility amid supply concerns
- Earnings due from Arconic, shale drillers; China opens up iron
Commodities will wrap up a monthly gain this week, but it’s been a bumpy ride and more turbulence is likely to follow as investors track global trade tensions and dig into the fine print of companies’ earnings. Aluminum remains in focus, almost a month after the U.S. introduced sanctions against United Co. Rusal, then eased off. We’ve numbers from Arconic Inc., and Tuesday sees the deadline for U.S. metals duties to kick in, or be extended.
Gains in crude have buttressed April’s advance in raw materials, and this week will see a slew of data that’ll help investors to get a sense of whether the rally has further to run. Also critical to the outlook will be earnings from a host of major U.S. shale producers, including Pioneer Natural Resources Co. Elsewhere, agricultural behemoths Archer-Daniels-Midland Co. and Bunge Ltd. report their performance. Last, China’s opening up a little bit more, this time in iron ore.
Japan has found a ‘semi-infinite’ deposit of rare earth minerals, enough to supply the world for centuries to come
The deposit in deep sea mud almost 6,000 metres down could be a game changer
Deep sea mud off the coast of Japan contains enough rare earth metals to supply the world for centuries to come, a new study reveals.
The study published this week in Scientific Reports says the deposit, which lies within the Japanese exclusive economic zone, contains 16 million tons of rare-earth oxides, enough to meet the demand for yttrium for 780 years, europium for 620 years, terbium for 420 years and dysprosium for 730 years.
The deposit “has the potential to supply these metals on a semi-infinite basis to the world,” the study said.
Rare earth elements are used extensively in technology such as smart phones, electric and hybrid cars, rechargeable batteries and screen display panels.
The find could be a game changer for major electronics manufacturer Japan which has been at the mercy of the world’s largest supplier China.
In 2010, China cut its export quotas on rare earth minerals by 40 per cent and prices soared. The quotas were later dropped after complaints were taken to the World Trade Organization.
LEGAL AND REGULATORY
Peruvian president advocates for sustainable mining
Peru’s new President, Martín Vizcarra, said Saturday that he was in favour of promoting mining development in his country as long as it is done in an environmentally responsible way.
During a visit to the southeastern region of Puno that has been severely affected by illegal mining operations, Vizcarra said that he is “pro-development” and that all projects that involve bringing progress to the region where they take place will receive his approval.
The President explained that, in his view, development means that mining operations help improve communities’ well-being and quality of life while, at the same time, taking good care of the environment.
“This type of mining should not affect agriculture, biodiversity or water sources,” he told local media covering his trip to the region where Lake Titicaca, the largest in South America, is located.
New York, New York calls for talk about mining’s future
Mining executives, lawyers, bankers and consultants come together again in New York for the 6th annual Current Trends in Mining Finance conference, which starts later this month. Given the continued evolution of the world geopolitical, financial and commodities-supply landscape over the past year, where will their focus be in 2018?
Organizer Tim Alch expects about 250-300 people to attend the April 29-May 2 event, with the audience split into three broad categories: financiers (bankers, investors, private equity, streaming and royalty companies), exploration and mining company executives, and professional advisory services firms (engineering, banking, accounting and legal).
“The difference between today and last year is considerable, in the sense that all these people are extremely busy,” he said. Compared to 6-12 months ago, “there is definitely renewed vigour and interest in the space”, he added.
At least for now, however, the big banks were concentrating mostly on a small number of tier one targets, pushing up prices for these projects and leaving the hot lithium and cobalt markets to strategic investors and equity markets, said Lachlan Broadfoot, who in March became the sixth CEO of 107-year-old mining advisory firm, Behre Dolbear.
“This is potentially the start of something exciting in the mining market, that has the potential to lead to recognition and value being placed upon a differentiated product”
Looking further into the future, Broadfoot said the entry of consumer-facing technology companies into the mining supply chain (see Apple seeking to buy cobalt directly from miners, and Softbank’s investment in a small Canadian lithium company) could herald a new age in which miners secure premium pricing for metals produced in socially and environmentally responsible ways.
“This is potentially the start of something exciting in the mining market, that has the potential to lead to recognition and value being placed upon a differentiated product,” he said, pointing out there is currently no price differential between aluminium — one of the most carbon-intensive of industrial ingredients – supplied to varying environmental standards.
For Broadfoot, the difference between this year’s conference and last is that in 2017 attendees broadly recognized the importance of technology and now companies are actually rapidly deploying tech solutions, and not just the big guys who were able to spend through the downturn.
“Mature is not the right word yet, but the communications systems and the platforms are there now for so many more things to be added, and that’s what’s starting to occur,” said Broadfoot.
He said smaller companies were now seeking to replicate the automation efforts of Rio Tinto and BHP Billiton in Australia, and process improvements of Canadian gold miners Barrick Gold and Goldcorp, among other big miners who had the capital to spend on innovation even while market prices were hampering profit margins.
Stratalis Consulting’s George Hemingway said the ubiquity of cheap and sturdy sensors was in turn enabling a wide swathe of more advanced innovation to occur, including predictive analytics, automation, and remote operational control.
For its part, Rio Tinto says the 45 sensors on each of its 900 haul trucks create about five terabytes of data (in comparison, the Hubble Space Telescope collected 45 terabytes of data in its first 20 years of observations and brings in about 10 terabytes of new data per year).
“If you can’t measure it or monitor it, then you can’t control it or improve it,” said Stratalis’ Hemingway, , who will chair a discussion on mining innovation involving representatives from Caterpillar, IBM, Newmont Mining and Dassault Systèmes.
“There is now a desire and a hope and a belief that technology has matured to a point that it is implementable.
“That has changed the tone of a lot of conversations and the velocity of change that we’re seeing in the industry.”
But with miners typically needing to spend a lot of cash upfront to set up operations intended to operate in a similar way over the course of their life, how can they take advantage of technology that is advancing at such a rapid pace?
“So the companies that find a way to better identify, define and value what’s underground before it’s even looked at, and then to acquire that at a discount and sell it at a premium, will be at an advantage to those that cannot”
“The next wave that everyone is talking about is machine learning,” said Behre Dolbear’s Broadfoot, who said major miners are engaging industrial mathematicians to make sense of their operations.
And as technology became more mainstream in mining — still some years into the future when mines are automated and run by algorithm — then the value proposition of a successful mine operation would also need to evolve, Hemingway said, with success just as reliant on discovery as lean operation.
“So the companies that find a way to better identify, define and value what’s underground before it’s even looked at, and then to acquire that at a discount and sell it at a premium, will be at an advantage to those that cannot,” he said.
“The real difference isn’t that there is some new, magnificent piece of technology, say automation or robotics or drones or even big data and digital that suddenly appeared out of nowhere and is going to change the world. It’s that at this one time the technology has reached a point where finally things that people considered possible are now practical, and the mining industry has decided to take the leap and try them out.”
Both Hemingway and Broadfoot also mentioned trade barriers and rising protectionism — perhaps most notably demonstrated by US president Donald Trump’s recent decision to slap tariffs on imported aluminium — as a key threat.
“It’s certainly slowed the momentum,” Broadfoot said.
“We finished 2017 and entered 2018 with a healthy dose of optimism and in its own way it has already caused a little pause and a recognition, and we always need to be reminded that there’s external factors that can come in a reshape what the narrative is.”
$91m acquisition adds fourth operating mine to Highland Gold portfolio
JOHANNESBURG (miningweekly.com) – Aim-listed Highland Gold on Thursday announced the $91-million acquisition of a producing mine and two licences in Russia’s Chukotka region, where the company already owns the Kekura and Klen development projects.
The assets, which were previously under the management of Highland CEO Denis Alexandrov, should boost Highland’s production by about 11% to 300 000 oz/y.
The acquisition includes the 31 000 oz/y openpit Valunisty mine, about 250 km from the port of Egvekinot. With reserves of 520 000 oz and resources of 1.15-million ounces, the mine will operate for another 11 years.
Highland is also buying assets in the KAS licence area, including the Gorny mine, near the Valunisty mill, the Zhilny deposit and Shakh exploration area.
Sandfire reports another strong quarter
PERTH (miningweekly.com) – Copper/gold miner Sandfire Resources has maintained its full year production guidance, on the back of another strong quarter in the three months to March.
Copper production from the DeGrussa mine, in Western Australia, in the quarter under review reached 15 531 t, compared with the 16 263 t produced in the previous quarter, while gold production was up from 8 130 oz to 10 926 oz.
Copper recovery for the quarter was slightly below the previous quarter on the back of miner plant maintenance shut-downs, which were completed in February and March, which resulted in the treatment of lower-grade ores.
A total of 398 985 to of ore, grading 4.3% copper, was milled during the March quarter, with copper recovery averaging 91%, Sandfire said on Friday.
Full year C1 cash operating costs have also been reduced from between $1/lb and $1.05/lb, to between $0.95/lb and $1/lb, reflecting the improved cost performance at the DeGrussa operation, and higher gold production and prices.