April Newsletter – 30.04.19



Brazilian miner Vale files $1.2 bln lawsuit over Guinea project

RIO DE JANEIRO, April 24 (Reuters) – Brazilian miner Vale SA has filed a lawsuit in the United States against BSG Resources Ltd to force the firm to pay Vale $1.2 billion, as mandated by an arbitrator, the company said on Wednesday.

Earlier in April, Vale said a London arbitration court had ordered BSG to pay $1.246 billion related to a dispute between the companies over a joint venture in Guinea. (Reporting by Gram Slattery)


Guinea boosts power output to foster bauxite refining

Guinea expects to boost its energy production capacity by nearly four-fold over the next six years as it pushes mining companies to refine their bauxite output locally, the energy minister said on Friday.

The West African nation, Africa’s biggest producer of the aluminium ore, is in the midst of a mining boom that has seen bauxite output explode, mainly on the back of demand from China. It now accounts for more than half of China’s bauxite imports.

Seeking to use the mining sector to fuel economic development, the government is pressuring mining companies to commit to building facilities that will refine bauxite into higher value alumina, which is used in smelters to produce aluminium. Seeking to use the mining sector to fuel economic development, the government is pressuring mining companies to commit to building facilities that will refine bauxite into higher value alumina

“Mines are, quite simply, development. And the mines can’t develop without energy,” Cheick Taliby Sylla said on the sidelines of a mining conference in Guinea’s capital, Conakry.

Guinea currently has power production capacity of just 658 megawatts. Much of the country has no access to electricity, and even the capital experiences frequent blackouts.

Experts have therefore questioned the feasibility of establishing a power-thirsty refining sector.

But Sylla said several projects in the pipeline will significantly boost output in the near future.

“By 2025, we will have around 2,600 megawatts in terms of total production,” he said. “We can dedicate a quantity to (the mining companies) … We will guarantee that supply of energy.”


Expect cascade of mining M&A — PwC’s Braunsteiner

Despite unfavourable market conditions, the mining industry is staging a comeback thanks to highly publicized multi-billion mergers and acquisitions targeting mostly the gold sector.

The aggregate valuation of all miners listed on the Toronto Stock Exchange (TSX) declined by 12.7% in 2018, to $253.9 billion, compared with a 10.8% decrease in the market capitalization of the entire TSX market, says PwC in its ​Canadian Mine​ report published Thursday.

Liquidity also fell for the second year in a row, with the volume and value of TSX mining shares trading down by 21% and 20%, respectively.

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However, Dean Braunsteiner, PwC Canada National Mining Leader, believes 2018 marked a turning point for the mining industry.

“While recent mergers were a sign of a wave of consolidation that will help companies better compete for capital, we can expect even more M&A activity in the near future,” Braunsteiner says. “That creates a cascading effect of further deals as companies sell off non-core assets, which brings new opportunities for management teams to build the next big Canadian mining company.”

After years of speculation around how the sector could regain power, followed by a period of internal restructuring, companies are now focusing on opportunities, PwC ​Canadian Mine​ report states.

Growth was heavily powered by potash and gold. Nutrien overshadowed the top 25 during its first year of operation as the merged entity of Potash Corp. and Agrium. With a market capitalization of approximately $40 billion, it was almost twice as large as No. 2-ranked Barrick Gold. Yet, gold remained the most dominant commodity among the top 25, with 21 companies having exposure to the precious metal, up from 19 a year earlier, PwC notes.

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EV battery nickel use climbs

Nickel use in electric vehicle batteries has doubled year-on-year, according to research consultancy Adamas Intelligence.

Adamas said this week that 104% more nickel was deployed in new passenger EV batteries in February, up 104% year-on-year.

Manganese deployment was up by 96% and cobalt deployment was up 87% for the same period.

“While usage of all three cathode metals saw major gains from February 2018 through February 2019, nickel enjoyed the greatest gains on account of the auto industry’s ongoing shift from no or low-nickel cathodes, such as LFP or NCM 111, to varieties with higher concentrations of nickel, such as NCM 523, NCM 622, and NCM 811,” Adamas said.

Batteries are still only estimated to account for less than 5% of global nickel demand.

The Tesla Model 3 accounted for more than 400 tonnes of nickel use in February, followed by the Nissan Leaf, Tesla Model X, Tesla Model S and Hyundai Kona.


No wall of copper mine supply, bank says

Latest analysis by Bank of America Merrill Lynch analysts suggests new copper developments will not swamp the market and create oversupply any time soon.

The analysts do not expect ‘base case’ projects moving through the development phase now to upset long-term copper market balance.

They were aware of market concerns about an avalanche of supply creating surpluses and price weakness, but said: “We disagree.

“The mining industry has faced persistent headwinds, reflected in this year’s global mine supply likely reaching 20.5 million tonnes, barely up from the 20.4Mt seen in 2016.”

BofAML said disruptions had over the past five years reduced global supply by a minimum of 2%.

The recent disruption at MMG’s Las Bambas copper mine was a case in point.

When Xstrata launched the project, it planned for a slurry pipeline to the port. This was scrapped when the Chinese operator acquired the site and recent road blockages prompted MMG to reduce this year’s output target to 450,000t from up to 485,000t previously.

The team also pointed to the common trend of overly optimistic project schedules, saying the consensus in 2008 was that global copper mine output would exceed 20Mt by 2011, a level reached in 2016.

The BofAML team expects the ‘base case’ supply growth scenario to account for half of global supply growth in 2020. Yet new production is already needed to offset output losses at existing mines by 2021.

The bank suggested investors were sceptical about sinking money into copper projects because new mines in general had lower headgrades and higher capital intensities.

Average mine grades had fallen from 1.31% in 2000 to 0.94% in 2018, raising operating costs by around US$1,200/t (54c/lb) and slowing the enthusiasm to develop new mines. Similarly, average capital intensity had also been trending higher because miners were increasingly having to invest in remote regions.

The bank pointed out the Oyu Tolgoi mine in Mongolia was a good example. Rio Tinto noted the site had to be started “from scratch” at a total capex of $12 billion, which equated to a capital intensity of just below $20,000/t ($9.07/lb).

The list of ‘probable’ projects, to which BofAML assigns a 75% probability weighting of adding material production, reflect only relatively small output increases, except for Ivanhoe Mines’ Kamoa-Kakula project in the Democratic Republic of Congo.

“Units from these sites are actually required to offset output losses at existing operations,” the bank’s analysts said.

They also pointed out the cupboard of ‘possible’ projects was “huge”, but they did not include these projects in their models.

“Keeping in mind a lifecycle during which a project transitions from scoping study to PEA and then feasibility studies, many sites, particularly the larger ones, are unlikely to start up imminently.”

BofAML noted one example was Taca Taca in Argentina, with First Quantum deferring a decision on developing the $3 billion mine indefinitely despite CEO Clive Newall previously saying the project was the easiest in its development pipeline.


Explosions threatening lithium-ion’s edge in a battery race

Bloomberg News

Another lithium-ion battery has exploded, this time at an energy-storage complex in the U.S.

At least 21 fires had already occurred at battery projects in South Korea, according to BloombergNEF. But this latest one, erupting on Friday at a facility owned by a Pinnacle West Capital Corp. utility in Surprise, Arizona, marked the first time it has happened in America since batteries took off globally.

Local regulators are now demanding answers, companies are investigating the cause, and analysts are wondering: Could more blazes threaten the future of lithium-ion — the only technology that has proven capable of bringing battery storage into the mainstream?

“If these fires continue to occur, it doesn’t bode well for the industry in the short term and the storage market will almost certainly slow down,” said Ravi Manghani, an analyst at Wood Mackenzie Power & Renewables. “As other technologies mature and costs fall, it would certainly erode lithium-ion’s advantage.”

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Independent review of tailings storage facilities launched

The International Council of Mining and Metals (ICMM), the Principles for Responsible Investment and the United Nations Environment Programme have decided to co-convene an independent review of mine tailings storage facilities in response to the recent Brumadinho tragedy in Brazil.

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Professor Bruno Oberle will chair the review, and a multi-stakeholder advisory panel will also be appointed, consisting of non-governmental organisations, international bodies and responsible investors.

The chair will also be able to draw on the experience of an expert panel of tailings and dam specialists drawn from academia and industry.

The review will be informed by evidence and lessons from the Brumadinho disaster, as well as other mine tailings dam failures and ultimately establish an international standard for the safe management of tailings storage facilities that can be applied to all tailings dams globally.

The chair will oversee every aspect of the review and prepare a report to be published by the end of the year.



Argentina expects $29B in mining investments in 2019

The Argentinian Chamber of Mining Entrepreneurs issued a report this week stating that it expects mining industry investments to reach $29 billion and employ about 80,000 people in 2019.

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According to the group, the mining sector is experiencing continued growth and has become the sixth most important sector when it comes to exports.

“At the Chamber we work day in and day out to create synergies with the states, contribute to better public policies, professionalize the relationship between public and private entities, and create a political and social dialogue that generates a shared vision of a sustainable industry,” Marcelo Álvarez, First Vice-president of the Chamber, said when presenting the report to the local press.

Álvarez’s presentation was made at the launching of Arminera, an international mining expo taking place in Buenos Aires in May.

At the event, the executive also said that the Argentinian mining industry is working hard to comply with a program called “Towards sustainable mining,” which provide companies with concrete tools on how to operate in a transparent fashion and following international environmental and sustainability standards.


Ivanhoe to fast-track DRC mine into production after CITIC invests $454m

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Ivanhoe Mines (TSX:IVN) is ready to finish building its giant copper mine in the Democratic Republic of Congo after its largest shareholder pumped an additional C$612 million (about $454m) into the Canadian company.

China’s state-owned CITIC Metal is paying C$3.98 per share, a premium of 29% over Ivanhoe’s last closing price. The investment, the second major one in less than a year, paired with the Vancouver-based miner’s current cash balance of about $512 million, will increase the company’s total cash on hand to C$1.3 billion ($1 billion), the parties said.

“The investment announced today will comfortably provide Ivanhoe with the equity cushion required to fast-track Kamoa-Kakula’s six million-tonne-per-annum Phase 1 mine to production,” billionaire Robert Friedland, the company’s founder and executive chairman said in the statement.

If fully developed, the Kamoa-Kakula mining complex could produce 382,000 tonnes of copper a year during the first 10 years, climbing to 700,000 tonnes after 12 years of operations

Friedland, who made his fortune from the Voisey’s Bay nickel project in Canada in the 1990s, has said the capacity of the project’s first phase could later be easily tripled. He believes Kamoa-Kakula has the potential to become the world’s second-largest copper mine.

“CITIC Metal has been a shareholder in Ivanhoe Mines for eight months now, and in that time, CITIC has seen what we already know — that the Kamoa-Kakula is unquestionably the best copper development project in the world,” Friedland said.



Using Blockchain to Help Fight Conflict Minerals

Startups and big companies are relying on the technology to better track shipments of metals, from mines to factories worldwide.

Tantalum, tin, tungsten, and gold, often grouped together in mining industry jargon as 3TG, are vitally important to the industrial economy, used in high-tech products from smartphones to jets. But these conflict minerals, as they’re known, frequently follow a sketchy path from mine to factory, coming from mines whose profits flow to violent militias, criminals, and even terrorists. As human-rights groups step up pressure on big companies to better police the provenance of raw materials in the $600 billion industry, Nathan Williams says he can help.

He’s chief executive officer of Minespider, a startup that’s using blockchain, the technology at the heart of Bitcoin, to better track shipments of metals as they move from mines to smelters and then on to factories worldwide. Blockchain, a database file from which information can’t be deleted, is infinitely expandable to accommodate new entries. Williams has adapted the technology to create files that can be attached to gold ingots, pallets of tin, or truckloads of tantalum and tungsten as QR code labels. The codes ultimately provide manufacturers with proof their metals come from relatively peaceful places such as Peru, rather than, say, a rebel-run mine in war-torn Congo. “There’s a shift,” Williams says, “from the concept of ‘I can sell metal anonymously’ to ‘I must include a story with my metal.’ ”



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