January Newsletter – 07.01.19



Blackwater founder launches fund to invest in electric car battery metals

Blackwater founder Erik Prince aims to raise as much as $500 million to invest in metals needed for making the batteries that power electric vehicles (EVs), the Financial Times reports.


Prince, who besides starting the controversial private security company is known for have been an informal campaign adviser to US President Donald Trump, said the fund will bring unexplored deposits into production and then sell them to large miners after four to five years.

The fund will focus mainly on cobalt, copper and lithium assets located mainly in Africa and Asia, Prince told FT.com.

“For all the talk of our virtual world, the innovation, you can’t build these vehicles without minerals that come from generally weird, hard-to-access places,” he said.

Metals such as cobalt, lithium, nickel and copper have seen demand soar in recent years as the shift away from cars powered by fossil fuels gains momentum and mining companies are investing billions of dollars into developing deposits of those key commodities.

Experts expect the need for the commodity from battery makers alone to jump 650% by 2027, while overall demand is forecast to rise more than threefold in the next nine years.

Prices, however, are projected to drop in the early 2020s as a result of an ever-rising number of projects expected to come online.



Barrick’s New CEO Says Gold Industry Shake-Up Is Just Starting


  • Barrick starts trading in New York and Toronto after merger
  • Combined company is led by Randgold’s CEO Mark Bristow

Barrick Gold Corp.’s new chief executive officer has a message for the gold industry: This is just the start of a big shake-up.

Barrick agreed to buy smaller rival Randgold Resources Ltd. in a $5.4 billion deal announced in September. As part of the agreement, Randgold’s CEO, Mark Bristow, became the chief executive of Barrick, the world’s biggest gold miner.

“Without a doubt, this industry needs transformation,” Bristow said in an interview from New York, where the combined company started trading Wednesday. “We believe we have started that. We’re going to end up with a blue-chip business and on the way we’re not going to be sitting on our hands should there be other opportunities.”

By combining the two companies, Barrick says it will run five of the 10 best gold mines in the world, with operations from Nevada to South America and Mali and the Democratic Republic of Congo. The deal happened at a time when gold mining has fallen out of favor with many investors after a year of lackluster bullion prices and a recent history of costly takeovers and mine developments that racked up debt but didn’t pay off.



Commodities Cap Another Dismal Year as 2019 Offers Tough Test


  • Raw materials head for 12% tumble this year on risks to growth
  • Manufacturing in China shrank this month amid U.S. trade war

Commodities had another poor year in 2018, hurt by substantial losses in energy and base metals, and raw materials will head into January burdened by concerns global economic growth is poised to slow.

The Bloomberg Commodity Index, a gauge of returns on 22 raw material futures, is heading for a 12 percent drop this year after hitting the lowest since April 2016 earlier this month. It’ll be the seventh annual fall in 11 years.



Gold Miners Are ‘Laughing’ Through the Best Rally in a Decade


  • Bullion prices poised for sixth straight gain as silver climbs
  • Gauge of gold-mining share advances to the highest since May

December’s cheer is carrying into 2019 for gold-mining companies.

A gauge of mining shares is extending gains after its best December since the financial crisis as investors flee to haven assets amid a slump in the broader equities market and a U.S government shutdown. The BI Global Senior Gold Valuation Peers jumped as much as 2 percent Thursday to the highest since May, with bullion set for a sixth straight advance.

‘‘The yellow metal is in demand due to the fact that almost everyone is looking for safe-haven assets,’’ Naeem Aslam, chief market analyst at Think Markets U.K. Ltd., said by email. “Gold miners are laughing all the way because the entire landscape has become more attractive.”



Zambia says mines have failed to show impact of higher taxes


LUSAKA (Reuters) – Mining companies operating in Zambia have failed to show how higher taxes introduced this year will affect their profitability despite objecting to the new framework, a senior government official said on Thursday.

The country, Africa’s second-largest copper producer, increased its sliding scale for royalties of 4 to 6 percent by 1.5 percentage points from Jan. 1 and introduced a new 10 percent tax when the price of copper exceeds $7,500 per tonne.

Zambia also plans to replace value-added tax with a sales tax by April to help bring down mounting public debt.

The Chamber of Mines said last month that as a result of the changes, more than 58 percent of Zambia’s copper producers would be loss-making at current prices.

Paul Chanda, permanent secretary for mines, said his ministry had asked individual mining companies to provide financial models by Friday last week on how the new taxes would impact them, but none had done so.

“We wanted them to show how the new taxes will affect production and profitability but so far we haven’t received anything,” Chanda told Reuters.


China’s Zijin plans selling $1.2B worth of shares to fund Nevsun takeover


China’s No.1 gold producer Zijin Mining plans to issue 8 billion yuan (about $1.2 billion) worth of shares in Shanghai to finance the acquisition of Canada’s Nevsun Resources (TSX, NYSEMKT:NSU), the biggest overseas purchase since the Beijing-backed miner went public in Hong Kong in 2003.

Zijin aims to sell up to 3.4 billion A shares to investors in China, in a plan which is subject to shareholder and regulatory approval, it said in a filing to the Hong Kong bourse.

Zijin aims to sell up to 3.4 billion A shares to investors in China, a plan subject to shareholder and regulatory approval

The news comes only days after Nevsun announced Zijin had succeeded in its $1.86-billion friendly takeover bid for the company, with about 89.37% of the total issued and outstanding Nevsun shares tendered to the offer of $6 per share in cash by the Dec. 28 deadline.

The offer has now been extended until Jan. 7 to allow the remaining shareholders to tender their shares.


Top 3 reasons to avoid running project cost estimates in-house

Cost estimating is a niche practice in any industry; however the mining business brings unique challenges. Cost estimating must be considered at nearly every stage of a project’s development to inform investors and to de-risk decisions.

Investors need the comfort of knowing that project decisions are as unbiased as possible, from the first resource definition through to development. Exploration and mining companies need the ability to make go/no-go decisions based on a sound combination of technical merit and economic understanding.

Given these needs, it is in the best interests of companies to select third party entities to conduct their cost estimates. What is this cost to the company? It may very well exceed the cost to have an outside group perform the cost estimate, as well as critical time lost.


Independence is, by far, the number one reason to use third parties for cost estimating. Governments and investors alike often require the independent, unbiased approach offered by a third party.

Cost of Cost Estimates

There are real costs associated with conducting project cost estimates in-house. These costs are directly related to the time required for gathering cost data and the subsequent process of developing a spreadsheet-based model for reasonable estimates. An individual dedicated 100% to the task of gathering costs and developing estimates may require months to complete the job, especially if the evaluator has not estimated costs for a project before. What is this cost to the company? It may very well exceed the cost to have an outside group perform the cost estimate, as well as critical time lost.


Most mining engineers and many geologists and investment professionals are capable of conducting mine cost estimating tasks; however, it should be considered that unless these professionals are routinely involved in the process, aspects of the project may be missed in the estimate or the time involved with completing the task only serves to exacerbate the cost of cost estimates. Cost estimators that are well versed in the niche will be more thorough and less likely to make costly mistakes or omissions. They are also more likely to be efficient and expedient.

Superior third-party consultants have mining industry experience and are comprised of a team of experts with practical knowledge in geology, engineering, mine development, mineral processing, cost estimating, and economic analysis. They also have an inherent understanding of the broader implications for quality cost estimates in the early stages of project development.



Renewables Beat Coal in Germany Power Mix for First Time

  • Wind, solar, biomass, hydro overtake coal in power production
  • Surge in solar capacity, decline in coal drive changes

Renewable energy muscled out coal to become Germany’s biggest source of electricity for the first time last year, helped by a surge in solar panel installations and coal-plant closures.

Wind, solar, hydro and biomass produced just over 40 percent of Germany’s electricity in 2018, overtaking coal’s 39 percent share, according to the Fraunhofer Institute. An almost 20 percent increase in solar capacity, the shuttering of older coal plants and favorable weather conditions conspired to help green sources edge ahead.


The balance of electricity generation is watched closely by the government, which has seen its greenhouse emissions reductions goal for the end of the decade slip out of reach despite billions of euros in investment in renewables in recent years.


Mud near this small Japanese island could change the global economy

(CNN)A small island in the Pacific Ocean is the site of a huge discovery that could change Japan’s economic future. How huge? One economist called it a “game changer.” The researchers who helped find it said it had “tremendous potential.”

It’s mud. A whole bunch of mud — an estimated 16 million tons, to be exact. And in that mud, there are massive, “semi-infinite” stores of valuable rare earth minerals.

Rare earth minerals contain rare earth elements (located here on the periodic table) that are used in high-tech devices like smartphones, missile systems, radar devices and hybrid vehicles. For instance, yttrium, one of the metals included in this recent discovery, can be used to make camera lenses, superconductors and cell phone screens.

According to a new paper published by a team of Japanese researchers, this huge patch of mineral-rich deep sea mud lies near Minamitori Island, a small island 1,200 kilometers (790 miles) off the coast of Japan.


China currently holds a tight grip on the rare earth minerals — controlling about 95% of global rare earths production as of 2015. Because of this, Japan and other countries rely on China to set prices and availability.

However, Japan has complete economic control over the new supply, and the study said all indications are the new resource “could be exploited in the near future.”

Even though Minamitori Island is more than a thousand miles away from the Japanese capital, it is still technically a part of Tokyo, in the village of Ogasawara, and falls within Japan’s economic borders.

While the discovery is exciting, experts point out there’s a long way to go before the staggering store of resources can actually be extracted and used. Tom Crafford, the Mineral Resources Program Coordinator at the USGS, tells CNN the mineral-rich mud will be difficult to reach. “The water gaps here are on the order of five or six kilometers, in the range of 16,000 to 20,000 feet,” he says. “That’s pretty severe. You’d really require some very sophisticated technology to operate at these kinds of depths.”