April Newsletter – 16.04.19



Newmont shareholders give a solid approval to $10B takeover of Goldcorp

Shareholders in US gold giant Newmont Mining (NYSE:NEM) have almost unanimously approved the miner’s proposed $10B takeover of Canada’s Goldcorp (TSX:G) (NYSE:GG), a deal that creates the world’s largest gold producer by output, robing Barrick of its recently cemented supremacy.

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More than 97% of the votes were in favour of the transaction, first announced in January, and which is expected in the second quarter of the year.

The resounding approval comes only a week after Goldcorp’s investors also gave the deal their thumbs up.

“We thank Newmont’s shareholders for their overwhelming support for this compelling value creation opportunity as we build the world’s leading gold company,” Newmont’s chief executive, Gary Goldberg, said in the statement.


Iron Ore Thunders Higher as Mine Dams Closed, Exports Collapse

  • Barclays increases price forecast as ‘market flips to deficit’
  • Benchmark spot ore prices climb to the highest in two years

Iron ore’s supply-driven rally picked up pace on Wednesday, with futures topping $90 a ton, amid increasing concern the crisis at Brazil’s Vale SA will be drawn out as regulators ordered dozens of dams to be shut.

Futures for benchmark material rallied as much as 4.1 percent in Singapore, while spot ore climbed to a two-year high and the contract for high-grade ore extended gains above $100 a ton. Barclays Plc raised price forecasts on expectations for a global deficit.

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The seaborne market has been roiled this year after top producer Vale suffered a dam breach in January, spurring mine suspensions and concerns there’ll be a shortage. The catastrophe drew increased scrutiny on mining practices from the authorities, with the nation’s regulator now ordering 56 tailings dams to be closed. Iron ore’s rally has been given an additional boost as a cyclone in Australia disrupted flows from Rio Tinto Group and BHP Group.

“There’s no doubt that events in Australia have a short-term impact as, after all, supply has dropped,” CRU Group analyst Richard Lu said via WeChat. “However, in the long term, the market is still preoccupied with whether Vale can restart operations,” said Lu, adding that mills in China aren’t yet worried about supply and are unlikely to buy cargoes at elevated prices.

Still, the dislocation is showing up in export figures and pummeling freight rates. Shipments from Brazil sank to 22.18 million tons in March, the lowest for that month in more than a decade. The Baltic Exchange Capesize Index has lost 95 percent since Jan. 24, the day before the dam disaster.

In Brazil, 39 of the 56 dams ordered to close lacked documentation attesting to their stability, while 17 were judged to be unstable, according to Eduardo Leao, director at country’s National Mining Agency. Twenty are owned by Vale.

In Australia, both Rio and rival BHP have said the cyclone will crimp output, with Macquarie Group Ltd. estimating the latter is likely to miss production guidance. Shipments from Australia sank more than 70 percent in the week to March 29 as the cyclone struck, Global Ports data in AHOY show.

The benchmark price traded 3.7 percent higher at $91 in Singapore, following a three-day, 7.3 percent advance. Spot ore gained 2.8 percent to $92.65 a ton, the highest since February 2017, according to Mysteel.com. Miners’ shares rallied again in Sydney, with BHP, Rio and Fortescue Metals Group Ltd. all gaining.

UBS Group AG expects iron ore prices to moderate in the medium-term as supply recovers, and scrap consumption in China rises, it said in a report emailed Wednesday. It forecasts a price of $83 a ton this year.

Barclays sees iron ore averaging $75 this year, up from its previous outlook of $69, as the market flips to a 31 million ton deficit, analyst Ian Littlewood wrote in a note. “Iron ore has enjoyed a stellar start to the year, buoyed by supply disruptions,” Littlewood said. “Higher prices are now justified.”


Vale says BSG ordered to pay it $1.25B

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SAO PAULO – Vale SA said on Tuesday a London arbitration court had ordered BSG Resources Limited to pay the iron ore miner $1.246 billion related to a dispute between the companies over a joint venture in Guinea.

The joint venture intended to explore for iron assets at the Simandou prospect, but the concession was revoked in 2014 by Guinea’s government.


MMG’s subsidiary in Peru reaches deal with blockaders at Las Bambas copper mine

Following a mediation session led by representatives of Peru’s national government, Indigenous leaders and executives from Minera Las Bambas, a subsidiary of China’s MMG, reached an agreement that puts an end to a 2-month long conflict at Las Bambas copper mine.

Both the miner and the community expressed their willingness to sit down and solve the conflict by revisiting the terms of a series of agreements that were signed when MMG took over the operation and by assuming new commitments.

Amongst those new commitments, the Nueva Fuerabamba community agreed to restore free transit on the national highway called Corredor Minero del Sur, which cuts through their farmland. The use of the road by the mining company sparked the conflict, as protesters were saying that the government illegally turned the road into a national highway to be able to ink a deal with MMG.



Lithium giant lifts outlook with 2018 fizzle in rear-view mirror

Bloomberg News

Two months after disappointing the market with its annual results, the world’s second-largest lithium miner said expansion plans had gone better than expected and that sales would likely beat its forecasts for this year.

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Santiago-based Soc. Quimica y Minera de Chile SA will exceed its sales target of just under 50,000 tons of lithium as output ramps up at its operations in the Atacama salt flat, according to the company’s commercial vice president of lithium and iodine Felipe Smith.

“We are ready to offer more product to the market,” Smith said in an interview in Santiago on Thursday. “We have a better than expected position in production and inventories after we reached more stable production following the expansion.”

SQM, whose operation sits on top of the world’s largest lithium reserve, almost doubled its production capacity in 2018 to 70,000 tonnes per year to respond to a booming demand.

SQM, whose operation sits on top of the world’s largest lithium reserve, almost doubled its production capacity in 2018 to 70,000 tons per year to respond to booming demand for the mineral essential to power the rechargeable batteries used in electric vehicles. Yet, the company’s shares posted the biggest decline in more than a year in February after reporting disappointing results and projecting lower-than-expected sales volumes. That is now changing again.

“Every ramp up has a lot of hiccups and adjustments we need to do,” Smith said. “We feel now we are in a better position to start looking for additional volume in terms of sales and this is our goal — we hope to exceed the initial sales plan.”



How to avoid flawed minerals-for-infrastructure deals like DR Congo and China’s Sicomines pact

It was confidently billed at the time as the “deal of the century”. The Sino Congolaise des Mines (Sicomines) was the most significant Chinese investment project in Africa when it was agreed in 2007.

The infrastructure agreement gave Chinese partners mining rights to cobalt and copper in the Democratic Republic of Congo (DRC). These minerals are used in electric vehicle batteries and electronics, including smartphones and laptops. In exchange, China agreed to build much-needed infrastructure projects such as urban roads, highways and hospitals.

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In addition to new infrastructure, the Sicomines deal was expected to provide a significant boost to the DRC’s economic growth. The view was that the agreed volumes of mineral production would contribute to higher levels of exports, tax revenue and inflow of US dollars.

The Sicomines deal was expected to provide a significant boost to the DRC’s economic growth but a decade on it has not.

More than a decade on, the Sicomines deal has not lived up to expectations. There have been infrastructure project delays as well as unexpected costs. There have also been problems associated with poor quality roads and infrastructure and inadequate environment and social impact studies. On the economic front, mineral exports from the DRC have indeed risen steeply. But sharp cyclical fluctuations show that the country is heavily reliant on both the Chinese market and the price of a few minerals. In addition, the Sicomines deal won exemption from taxes until infrastructure and mining loans were fully repaid. This means that the DRC will not receive any substantial income from the agreement in the foreseeable future.

The Sicomines agreement demonstrates one of the main problems with deals of this nature. It never included any guarantee of the actual value that the Congolese population would get in exchange for the country’s main source of wealth.


Lydian to regain access after long-running blockade

Lydian International (TSX: LYD) shares shot up more than 38% on Friday after it announced an Armenian court had ruled in favour of the company regaining access to its under-construction Amulsar gold project.

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Lydian said the court had ordered police to remove trespassers, who had blockaded the project since June 22 last year, and assure free access to Amulsar.

It said the April 10 court ruling supported Lydian’s complaint against local police, who had said there was no basis for the removal of protestors, their vehicles, tents and trailers.

“This is a long overdue step that we hope will become an important milestone towards the abolishment of unlawfulness and discrimination that Lydian has been facing since June 2018,” president and CEO João Carrêlo said.

Lydian said on Friday the court’s ruling was effective one month after the date of publication unless appealed and at that point, the blockade remained in place.



The Strange Beauty of Salt Mines


Although salt is abundant here on Earth, it still requires extraction from stone deposits or salty waters. The process of mining that salt can produce interesting landscapes, including deep, stable caverns, multicolored pools of water, and geometric carvings. Some of these locations have even become tourist destinations, serving as concert halls, museums, and health spas. Collected here are images of salt mines and evaporation ponds across the world, above and below ground.

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