April Newsletter – 06.04.2020


  • As China reopens, Africa’s woes threaten to starve its factories
  • Brazil mining regulator orders closure of 25 Vale dams
  • Chilean copper miners ‘considering production cuts’ – industry association
  • Rusal, Glencore agree aluminium deal worth up to $16.3 billion
  • Indonesia nickel miners urge end to export ban to cushion coronavirus impact
  • Chilean state copper miner Codelco confirms fifth case of coronavirus among workers
  • New Gold Announces Closing of $300 million Partnership with Ontario Teachers’ Pension Plan at the New Afton Mine
  • Coronavirus has lit the fuse on a time bomb in China’s economy: debt
  • Tailings dam spill at Chinese molybdenum miner threatens local water supply


As China reopens, Africa’s woes threaten to starve its factories

On a typical workday, hundreds of thousands of men clad in overalls and carrying safety equipment and headlamps assemble at South Africa’s mine shafts. They crowd into cramped elevators to be lowered miles underground, where they hack at seams of gold or platinum and haul ore in intense heat and humidity. After hours of backbreaking labor, they return to the surface to shower in communal areas, and many share meals and bed down in crowded hostels.

These aren’t typical days.

South Africa on March 26 imposed a three-week lockdown to fight the coronavirus, confining millions in their homes and shuttering most businesses—including the mines that are the first link in a global supply chain that passes through smartphone factories in China and auto plants in Detroit, Turin, or Tokyo, and ends in stores and showrooms around the world.

Even as Asia slowly reopens after its lockdown, factories there risk running short on supplies as the virus spreads to countries that produce vital raw materials. And nowhere is the problem a bigger issue than in Africa, which provides the metals and minerals needed for just about every industrial product, and where countries heavily reliant on trade with China have been suffering from a collapse in commodity prices.


While the number of confirmed coronavirus cases across Africa remains low compared to other parts of the world—some 7,000 cases on a continent of 1.3 billion people—social distancing is a luxury the region can scarcely afford. Most governments lack the resources to enforce effective containment measures, and health systems risk buckling if the disease reaches Africa’s crowded shantytowns and slums.

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Sishen Mine, a Kumba Iron Ore mine in South Africa’s the Northern Cape Province

“For Africa, it will be much harder than you imagine,” said Auret van Heerden, chief executive officer of Equiception, a supply-chain consultancy in Geneva. “They’ve survived Ebola, they cope with malaria and tuberculosis, but I don’t think they’ve had anything quite this infectious.”

The African mines that produce raw materials for factories across the globe are bracing for the arrival of the virus. In South Africa, Kumba Iron Ore Ltd., the continent’s largest iron-ore producer, and Anglo American Platinum Ltd. and Sibanye Stillwater Ltd., the world’s top platinum vendors, have curtailed most of their output. Chrome and manganese mines, which supply ingredients for steel, have been largely shuttered.

In Luabala, a province of Democratic Republic of Congo that is a major provider of copper and cobalt used in rechargeable batteries, mines remain open but the workforce has been limited to essential personnel to minimize the risk of contagion. Tenke Fungurume, a mine owned by China Molybdenum Co., has been put into isolation, with about 2,000 people ordered to stay on-site and avoid “contact with the outside world,” according to a memo circulated to staff.

Even facilities that keep producing risk interruptions in getting their goods to market. In the best of times, Africa’s transport networks are fragmented and inefficient, and its ports and customs services are notoriously slow. Today, most African countries have closed their borders, and several have limited internal travel or imposed lockdowns. While cargo is usually exempted from the restrictions, increased security controls, sanitation measures, and reduced staff at ports and railways threaten severe delays.

Most copper and cobalt from Congo’s mines, for instance, moves via truck through Zambia and then to ports in South Africa and Tanzania. While cargo carriers can still cross into Zambia, new sanitation measures have led to 25-mile backups at the border.


In Kenya, a dusk-to-dawn curfew has resulted in a pileup of goods at ports, driving up freight costs by almost a third, according to Dennis Ombok, chief executive of the Kenya Transporters Association, which represents truck-fleet owners. Even though essential goods are officially exempted, drivers are being harassed by police, Ombok said.

“It’s taking up to three days to clear at the border between Kenya and Uganda,” he said. “The police need to tone down how they’re handling transporters. We’re carrying food and raw materials. These are essential.”

In South Africa, the port of Durban, the busiest in sub-Saharan Africa and serving landlocked Zambia and Zimbabwe, limited operations to essential cargo, and police stopped all trucks carrying other goods for several days. On Thursday, the order was reversed to help ease massive congestion at the port. Amid the confusion, First Quantum Minerals Ltd., which accounts for more than half of Zambia’s copper production, says it has started making alternative shipping plans.

At the main crossing between Zambia and Congo, more than 1,000 trucks carrying food, equipment, and supplies for mines had to queue last week after a partial lockdown came into effect. For now, Zambia has managed to convince the Mozambican government to allow trucks carrying fuel from the port of Beira to exit Mozambique, after they were held at the border.

“With a crisis of this magnitude,” Zambian President Edgar Lungu warned last week, “we shall find ourselves under forced lockdown if all our neighbors shut their borders.”


Brazil mining regulator orders closure of 25 Vale dams

BRASILIA, April 2 (Reuters) – Brazil’s National Mining Agency (ANM) said on Thursday that it would halt operations at 47 mining dams that failed to certify their stability, including at least 25 belonging to the world’s largest iron ore producer Vale SA.

The safety of Vale’s facilities have been under heavy scrutiny after one of its dam collapsed last year, releasing a torrent of mining waste that killed about 270 people. It was the second Vale dam to collapse in four years.

Last October, 54 Brazilian dams failed to certify their stability or file the stability paperwork altogether.

Many of the same dams remain on the list and several new dams operated by Vale or its affiliates were added.

In a statement, Vale acknowledged that its Santana dam in the city of Itabira in Minas Gerais state had failed to register its declaration of stability.

That dam had been placed on a level 1 emergency alert in October last year and has been under 24 hour monitoring since then, Vale said. The company is planning to make structural improvements to the dam in the second half of the year, it said.

Vale said on Wednesday that it continues to institute improvements to its dam oversight system, with 78 of its structures successfully registering stability declarations, and it gave details on planned actions to improve safety at several dams.

Eight new structures had negative stability declarations and will also be put on level 1 emergency alert, Vale said.

Vale said the safety of people and communities downstream from its dams is a priority.

On Wednesday, it also said it was testing alternatives to tailings dams to boost production capacity at its Brucutu mining facility, which includes the Norte/Laranjeiras dam that failed to certify its stability.


Chilean copper miners ‘considering production cuts’ – industry association

SANTIAGO (Reuters) – Copper miners in Chile are considering cutting production amid strict measures to contain the spread of the new coronavirus, an association of companies in the sector has told Reuters.

A report by Sonami, which represents copper miners across Chile, the world’s largest producer, said the realities of the coronavirus were forcing companies to weigh tough decisions.

“We have seen miners go from providing information about the disease and taking preventive measures to halting projects already underway,” the association said in a statement sent to Reuters. “A decrease in production is already being contemplated in some companies.”

Large companies have reduced the workforce at their mines by up to 30% in a bid to cut contagion risks while others, such as state-run giant Codelco [CODEL.UL], the world’s largest copper miner, have suspended expansion and improvement projects.

Sonami said the small and medium-sized companies it represents had been particularly hard-hit since they do not have the financial resources behind them of multinational giants such as BHP, Anglo American, and Antofagasta.

Anglo American told Reuters it would announce any eventual impact on production, but said it “believed that (the impact) would be minimal considering that it could continue processing stock-piled mineral.”

Antofagasta said the temporary reduction in its workforce to date had had a “limited” impact on production but that it planned to review its annual output projections in its first quarter report.

Codelco and BHP did not respond to requests for comment.

Sonami said that some medium-sized miners, already hard hit by softening global copper prices, had begun temporarily closing operations.


Rusal, Glencore agree aluminium deal worth up to $16.3 billion

MOSCOW (Reuters) – Russia’s Rusal has approved a new long-term aluminium supply contract with Glencore worth up to $16.3 billion, it said in a Hong-Kong regulatory statement on Friday.

Swiss trader and metals producer Glencore has long been one of the main clients of Hong Kong-listed Rusal, the world’s largest aluminium producer outside China.

Glencore owns a stake in Rusal parent En+ Group.

The new contract is for 2020-2024 and can be extended for 2025, Rusal said.

It said its board of directors in December approved the deal, which succeeds a previous contract which expired in late 2018. The contract requires approval from Rusal shareholders.

Rusal, which produced 3.8 million tonnes of aluminium in 2019, will supply up to 6.9 million tonnes of the metal to Glencore under the contract, including up to 344,760 tonnes in 2020 and up to 1.6 million tonnes per year in 2021-2024.

“This agreement provides the company with significant volumes of primary aluminium sales at market price with a number of quantitative options,” Rusal said in a separate comment.


Indonesia nickel miners urge end to export ban to cushion coronavirus impact

Jakarta (Reuters) – Indonesia should allow exports of nickel ore to help offset the impact of the fall in exports of processed nickel caused by the coronavirus outbreak, the Indonesian nickel miners’ association (APNI) said in a document seen by Reuters.

Indonesia, once the world’s biggest nickel ore exporter, started banning exports of nickel ore in January as part of efforts to boost expansion of its domestic smelting industry.

But as the coronavirus slowed production and exports of processed nickel, the APNI said a reversal of Indonesia’s nickel ore export ban could help the country to reduce the economic impact of the novel coronavirus.

“Relaxing of nickel ore exports will increase the foreign exchange earnings of the country,” the APNI said in the proposal sent to the Coordinating Ministry of Economic Affairs.

“Export duties for nickel ore can be increased and can be allocated directly to help with coronavirus in the country,” it added.

An official at the coordinating ministry of economic affairs did not immediately respond to a request for comment.

Exports and local absorption of processed nickel have fallen by between 20% and 25% since the outbreak of the coronavirus began late last year in China, Haykel Hubeis, secretary general of the Indonesian Smelter Company Association, told Reuters by telephone.

“Export destination countries for both nickel pig iron and ferronickel are currently experiencing problems related to the outbreak,” Hubeis said.

The coronavirus outbreak has disrupted supply chains globally.


Chilean state copper miner Codelco confirms fifth case of coronavirus among workers

SANTIAGO (Reuters) – Chile’s state-owned Codelco, the world’s largest copper producer, said on Wednesday that a fifth worker has been confirmed as having contracted coronavirus, at its Ministro Hales mine.

The diagnosis of the contract worker was confirmed in the central coastal city of La Serena on his final rest day before starting a new shift at the mine.

“The affected person is in his place of residence, and possible contacts were identified according to the protocols set by the health authority,” Codelco said in a statement.

So far, despite complaints from unions about a lack of social distancing on workers’ buses and in residences, the copper miner has not reported any significant outbreaks among its workers.

Last week, the miner reported its first case as befalling a project contractor at its Andina mine, to which was added a second case of a colleague who shared a bus with him, and a third in at the El Teniente mine smelter who was working from home in the capital Santiago.

A fourth case was recorded of a worker at Codelco´s smaller Salvador division, who was in quarantine after returning from Europe.

The company has vowed to maintain “operational continuity” during the health crisis but admitted that the fall in the price of copper will impact on its ability to generate earnings and puts some of its projects at risk.


New Gold Announces Closing of $300 million Partnership with Ontario Teachers’ Pension Plan at the New Afton Mine

TORONTO — March 31, 2020 – New Gold Inc. (“New Gold” or the “Company”) (TSX and NYSE American: NGD) today reports that it has closed the previously announced strategic partnership with Ontario Teachers’ Pension Plan at the New Afton Mine for upfront cash proceeds of $300 million.

New Gold now has approximately $590 million in total available liquidity, including approximately $390 million in cash and cash equivalents.

About New Gold Inc.

New Gold is a Canadian-focused intermediate gold mining company. The Company has a portfolio of two core producing assets in top-rated jurisdictions, the Rainy River and New Afton Mines in Canada. The Company also operates the Cerro San Pedro Mine in Mexico (which transitioned to residual leaching in 2016). In addition, New Gold owns 100 percent of the Blackwater project located in Canada. New Gold’s objective is to be a leading intermediate gold producer, focused on the environment and social responsibility.


Coronavirus has lit the fuse on a time bomb in China’s economy: debt

  • Beijing has a tough choice to make: tolerate an unprecedented hit to the economy or go for massive stimulus and risk explosive consequences
  • It should beware, a financial virus can be every bit as toxic as a biological one

The coronavirus outbreak  has already taken a great toll on the Chinese economy, with all headline readings pointing towards a record slowdown in growth during the first two months of the year.But there is an even greater danger for what was once the world’s fastest-growing major economy: that Covid-19 will become the catalyst that will bring its many long-simmering problems to the boil. At the centre of these problems is a rising systemic risk in its banking and financial systems caused by a high level of debt accrued over the past decade.

The outbreak could not have occurred at a worse time. The past 10 years have not only seen the economy saddled with this debt, but it has also involved a steady structural slowdown that last year saw the growth rate fall to 6.1 per cent, the lowest in decades. Now, just at the very time the country might consider spending more to prop up that growth rate, a raging pandemic means it will be making much less money than usual.

The latest data from the Chinese Ministry of Finance shows fiscal revenue plunged by 9.9 per cent in the January-February period, the steepest drop since 2009. Overall tax revenue fell 11.2 per cent, driven by a 19 per cent slump in value-added tax (VAT) revenue, the main source of fiscal income. These drops come just as the government has offered a handsome tax cut in response to the pandemic.

Meanwhile, the escalation of the pandemic in the rest of the world will only further weigh on China’s economic growth, corporate profits and personal income. In turn, this will inevitably drag down government revenue in months to come.

Beijing’s proposed stimulus spending will only exacerbate China’s already-massive debt pile, which had reached 310 per cent of gross domestic product by the end of last year, according to the Institute of International Finance. Many economies that have experienced such levels of debt have gone on to suffer a financial crash or economic crisis. China now accounts for about 60 per cent of the US$72.5 trillion emerging market debt.


Tailings dam spill at Chinese molybdenum miner threatens local water supply

BEIJING (Reuters) – China’s northeastern province of Heilongjiang said a tailings dam leak at a molybdenum mine over the weekend threatened to contaminate the local water supply and that it had launched an emergency response.

No casualties were reported, according to a report from the Heilongjiang Daily posted on the Heilongjiang government website.

Tailings dams are the most common waste disposal method for mining firms. China’s Ministry of Emergency Management said only this month it would cut down on their use to reduce safety risks and ease pressure on the environment.

The collapse of a Vale SA tailings dam in Brazil in January 2019 killed more than 250 people.

On Saturday, water containing waste molybdenum ore flowed out of a Yichun Luming Mining Co Ltd pond for tailings – the crushed remnants of ore once valuable minerals have been extracted.

A nearby water plant at risk of contamination was shut down as a result, according to the Heilongjiang Daily report.

As of 1300 local time (0500 GMT) on Sunday, the danger was under control, it added.



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