January Newsletter – 07.01.2020
- Gold hits highest since 2013 as Goldman backs bullion in crisis
- Mexican president brags that his government hasn’t approved mining concessions
- Copper set for rebound as trade tensions ease
- Top 50 biggest mining companies
- Australia suffers worst of China’s coal curbs after earlier boom
- Rare earths trade between China, Myanmar facing challenges
- China seeks to tackle environmental damage caused by mining
- Mineral supply for green tech should be part of climate negotiations -scientists
- Back to the future: EVs not going away
- Nevada Copper ships first Pumpkin Hollow concentrate
Gold hits highest since 2013 as Goldman backs bullion in crisis
SINGAPORE – Gold surged to the highest level in more than six years as fast-rising tensions in the Middle East stoked demand for haven assets, with Goldman Sachs Group saying that bullion offered a more effective hedge than oil to the crisis. Palladium extended gains to an all-time high.
Bullion neared $1 600/oz as Tehran said it would no longer abide by any limits on its enrichment of uranium following the killing of General Qassem Soleimani. In addition, President Donald Trump said he was prepared to strike Iran “in a disproportionate manner” if it retaliates against any US target.
“History shows that under most outcomes gold will likely rally to well beyond current levels,” analysts including Jeffrey Currie and Damien Courvalin said in a note dated January 6. That’s “consistent with our previous research, which shows that being long gold is a better hedge to such geopolitical risks.”
Mexican president brags that his government hasn’t approved mining concessions
Mexican President Andrés Manuel López Obrador took pride in the fact that his administration hasn’t approved new mining concessions.
During a public event with Indigenous people in the central state of Puebla, López Obrador criticized the five administrations that preceded his for approving concessions that ceded 90 million hectares of land to mining companies. “[But] we have approved zero,” the left-wing politician said.
According to local media, the president -known by his initials AMLO- also said he is not going to betray his people and, therefore, he will not allow the use of fracking to extract oil and gas.
The Mexican leader also announced that he will ask Calgary-based TC Energy (formerly TransCanada) to modify the route of its 287-kilometre long Tuxpan-Tula natural gas pipeline so that it doesn’t cut through the Cerro del Brujo (Sorcerer’s Hill), a mountain considered sacred by the northern Puebla First Nations.
AMLO condemned that the contract signed with TC Energy stipulates that even if the pipeline is not being built, the Mexican state has to pay for it. Thus, he said it was important to renegotiate the deal so that the Canadian company continued building the duct, something that allowed his government to save $4.5 billion.
In response to the president’s speech, Gabino Hernández, representative of the Nahuátl people, asked for mining, hydro, and fracking projects to be banned in the region. According to Hernández, communities are worried about the possible impacts of such operations on the local fauna and water resources.
Copper set for rebound as trade tensions ease
The copper price ended 2019 putting on its best spurt since 2017 and reaching an eight-month high of US$2.81 per pound, lifted by news of a thaw in US-China trade tensions and the promise of a deal between the two tariff-warring nations.
Copper rose 6.7% in December. The month saw an average price of $2.74/lb, improving on an otherwise stagnant 2019 for the red metal, which saw an average price of $2.72/lb, down 20c or 7% from its $2.92/lb average in 2018. Last year was one in which copper’s impetus to rise was checked by the US-China trade dispute, despite a growing tightening in copper supply as evidenced by treatment and refining for copper concentrates falling to lows of $67/6.7c.
Mine supply is reducing as lower grades continue to bite, notably at the emblematic BHP-operated Escondida mine in northern Chile, where production fell 8.4% in the nine months through September 2019 to 870,970 tonnes compared with 950,889t produced in the same 2018 period.
With lower prices and lower production, Escondida’s 2019 profits were below previous years. Escondida saw profits fall 20% to $1.1 billion in the nine months to September 2019 while Chile’s state copper company Codelco saw a 57% drop to $603 million in the same time period.
Lower profits and sub-$3-3.50/lb prices mean copper miners are hesitant to invest in new capacity. However, Chile’s Cochilco copper research agency reported that the country would see $10.4 billion in mining investment in 2020, some 57% more than in 2019, with 85% of that earmarked for copper projects.
“From a more macro point of view, there remains a deep disconnect, relatively speaking, between low prices and low inventories of metal held in warehouses. One does not need to spend a great deal of time doing an in-depth analysis of the markets to see the incongruity, just glance at where inventories were for each [base] metal a few years ago, and where they stand now and you will see our concern,” said copper consultant John Gross in the Copper Journal Monthly Report published in early January.
Peru, meanwhile, expects $6.2 billion in mining investment in 2020 in seven projects, although the majority of that investment will be in precious metals projects and base metals other than copper.
This includes a $579 million brownfield expansion at the Corani silver mine in Puno by Bear Creek Mining to lift its production to 9.6 million ounces a year. In northern Peru, the Yanacocha Sulphides project represents investment of $2.1 billion to optimise tailings storage at the gold mine, which from 2023 will produce 350,000oz/y and 544,000t of copper. Polymetallic miner Buenaventura is also expected to start construction of its San Gabriel gold project in Moquegua with an investment of $431 million.
Glencore subsidiary Minera Antapaccay plans to invest $590 million in the Coroccohuayco copper project in Cusco, which aims to extend the life of the Tintaya mine and see it process 20,000 tonnes per day to produce 105,000tpy of copper.
On the exploration front, Peru’s SNMPE national mining, petroleum and energy association, foresees exploration spend falling in 2020 for a second consecutive year.
“As a result of delays in obtaining permits and the different administrative and bureaucratic obstacles, investment in mining exploration maintains worrying contractual trends. Thus, while in 2018, $413 million in investments were reported, this year we will hardly approach $360 million,” executive director of the SNMPE, Pablo de la Flor, said in a statement.
Exploration expenditure rose to $625 million in 2014.
Top 50 biggest mining companies
MINING.COM’s ranking of the world’s 50 largest mining companies based on market value show a revived industry entering the 2020s but with diverging fortunes for certain subsectors.
At the end of the 2019, the MINING.COM TOP 50 had a combined worth within shouting distance of $1 trillion after adding more than $150 billion in market capitalization over the course of the year.
The top 7 now make up more than half the value of the sector’s top tier as Swiss giant Glencore’s $10 billion annual drop in market cap is more than offset by the gains for the biggest benefactors of palladium’s record run – Norilsk and Anglo American.
Also boosted by nickel’s rally, the Russian company added a remarkable $15 billion on the Moscow exchange last year to become the fourth most valuable miner in the world.
Anglo’s turnaround over the past three years is astounding, going from less than $5 billion in January 2016 to over $40 billion at the end of last year, boosted not only by its stake in AngloPlat but also by iron ore’s resurgence through an interest in South Africa’s Kumba. Iron ore pure play Fortescue Metals was the year’s best performer, jumping 155%, just beating the world’s largest platinum miner.
Australia suffers worst of China’s coal curbs after earlier boom
Australia is bearing the brunt of China’s year-end coal import restrictions, ceding market share to other exporters including Russia and Mongolia, after shipments soared earlier in 2019.
While total purchases by China rose 9% in November from a year ago, Australian shipments to the top buyer sank 31%, according to Bloomberg calculations based on customs data. Imports from Russia jumped 81% while Mongolian cargoes gained 14%. Volumes from the largest exporter Indonesia climbed almost 10%.
The November data signal a shift from the middle of 2019, when Chinese imports from Australia climbed to a record, mainly driven by robust shipments of coking coal. “Traders have been worried since September about import curbs tightening toward the end of the year as annual quotas come close to maxing out,” said Feng Dongbin, chief analyst at China Coal Resource.
AUSTRALIA IS THE WORLD’S BIGGEST EXPORTER OF COKING COAL AND NO. 2 SHIPPER OF THERMAL COAL SO IT’S PARTICULARLY SENSITIVE TO CHINA’S IMPORT POLICY
“This applies especially to ports in northern China where coking coal imports reached a record,” he added. This type of coal is used to make steel and differs from thermal coal, which is used for energy and heating.
Australia is the world’s biggest exporter of coking coal and No. 2 shipper of thermal coal so it’s particularly sensitive to China’s import policy. The nation’s miners also face environmental pressure at home amid devastating wildfires.
Beijing regularly adjusts import limits to balance protecting domestic miners and power plants, although the policy often lacks clarity as there is no official notice. While China has allowed more lower-priced imports this year to ease an economic slowdown, ports including Caofeidian and Jingtang halted customs clearances after imports rose significantly. These ports mainly serve steel mills in the Tangshan region.
Australian coal was subject to delays at Chinese ports early in the year in suspected retaliation for Canberra’s ban on Huawei Technologies Co. Resources Minister Matt Canavan said in September the slowdown was largely resolved.
Rare earths trade between China, Myanmar facing challenges
Following a new closure of the China-Myanmar border in mid-December, Roskill reports that some Chinese rare earths producers and operators in Myanmar have been asked to head back to their country which, in the view of the market analyst, means that supply to the Asian giant may decline in 2020.
According to Roskill, following the initial closure of the border in May 2019, Myanmar’s supply of rare earths oxide (REO) to China declined by 28.7% year-on-year, a figure that may be even lower in the new year. In 2018, the volume of heavy rare earth compounds delivered from Myanmar to China is estimated to have accounted for over 16% of global REO equivalent supply.
SHIPMENTS OF RARE EARTHS BETWEEN CHINA AND MYANMAR HAVE NEVER BEEN RECOGNISED AS “LEGAL” TRADING, WITH ALL DEALS BEING SETTLED IN RMB VIA THIRD PARTY AGENTS
“The existing rare earth compound stocks from Myanmar are unknown, but according to some market participants approximately 1kt REO was delivered into China during the late-October to mid-December period,” Roskill informed in a recent report.
In the document, the market specialist states that the border situation puts pressure on the supply of heavy rare earths, particularly of the elements dysprosium and terbium, as the suspension of southern China’s rare earth operations shows no sign of reversal.
“Spot prices of Dy and Tb have oscillated in line with the opening and closing of the Myanmar border as supply of these low-volume elements quickly tightens,” the report reads. “Roskill expects that significant stocks (including from illegal supply) of mixed and separated compounds are still held by major SOEs and that supply availability will be able to account for 2020 demand.”
LEGAL AND REGULATORY
China seeks to tackle environmental damage caused by mining
BEIJING (Reuters) – China plans to promote investment in repairing environmental damage caused by mining, and wants a mixture of public and private entities to contribute, the Ministry of Natural Resources said on Tuesday.
More than 3.6 million hectares of land in China was used and damaged by mining activities at the end of 2018, the ministry said in a statement on its website.
Until now restoration has been held up by a lack of effective policies to stimulate investment, according to the ministry.
The ministry’s “market-oriented way” for the restoration process aims to encourage the repair and utilization of mine land, including suitable use of abandoned soil and stones left over from mining.
Mineral supply for green tech should be part of climate negotiations -scientists
An international team of researchers published a paper in Science stating that the global low-carbon revolution could be at risk unless new international agreements and governance mechanisms are put in place to ensure a sustainable supply of rare minerals and metals.
According to the scientists, the main risk emerges from the fact that global supplies of cobalt, copper, lithium, cadmium, and rare earth elements needed for solar photovoltaics, batteries, electric vehicle motors, wind turbines, fuel cells, and nuclear reactors tend to be heavily monopolized by a single country, confronted by social and environmental conflict, or concentrated in poorly functioning markets.
“There is a real possibility that a shortage of minerals could hold back the urgent need for a rapid upscaling of low-carbon technologies,” the experts say. Thus, in their article, they made a series of recommendations to help manage the demand for such low-carbon technology minerals as well as limiting the environmental and public health damage of their extraction and processing.
In a summary of the paper, the researchers outline their key suggestions:
- Enhance and coordinate international agreements on responsible mining and traceability in order to establish mineral supply justice.
- Greatly expand the recycling and reuse of rare minerals to extend the lifetimes of products and stretch out reserves.
- Diversify mineral supply scale to incorporate both small and large-scale operations while allowing miners to have control over mineral revenue through stronger benefit-sharing mechanisms and access to markets.
- Focus development donor policies to recognize the livelihood potential of mining in areas of extreme poverty rather than just regulating the sector for tax revenues.
- Stipulate stronger Extended Producer Responsibility for products that use valuable rare minerals. This can ensure that responsibility for the entire lifespan of a product including at the end of its usefulness shifts from users or waste managers to major producers such as Apple, Samsung, and Toshiba.
Materials security of essential minerals and metals to be actively incorporated into formal climate planning including establishing a list of “critical minerals” for energy security.
INNOVATION AND TECHNOLOGY
Back to the future: EVs not going away
The Tesla Cybertruck is not Jon Hykawy’s cup of tea, and it may be a little symbolic of broader issues with electric, or “new energy”, vehicles trying to get more traction in the global auto-market. But the Stormcrow Capital president believes the “thing has a target market” and likely has a future, even if it looks like something from the 1980s movie, Back to the Future.
“The Cybertruck looks like something that should have been unveiled on April 1st and I for one won’t be booking my spot in line,” Hykawy wrote this week.
“But this thing has a target market, just as the original Tesla Roadster did.
“Might [consumers] be put off by the lack of colors and a weird design? Maybe. But is an all-battery design for this type of vehicle stupid? Not at all.
“In spite of Chinese new energy vehicles sales lacking unit growth in 2019, new energy vehicles, generally, are going to be the next great leap forward for the auto industry.
“But like all leaps forward in the auto industry, this will take some serious time. After all, the automatic transmission became a serious option on North American vehicles in the 1970s, but has only recently made strides that render the use of manual transmissions nearly redundant. Lots of engineering and thinking is needed before electrified vehicles will represent the majority of new vehicles sold, and this includes concerns about the availability of critical materials.”
Hykawy said the lithium and other battery minerals investor hadn’t been among those peddling “nonsense … [about] 35% of global automobile sales [being] battery electric vehicles by 2025”. Still, flat sales in 2019 compared with 2018 in the world’s biggest new passenger vehicle market was “not exactly disastrous when compared to Chinese automotive sales generally, or what happens through the cycle of the growth in any new product”.
“No consumer product is immune from general economic conditions, and the growth in new energy vehicle sales to date is going to suffer if both economic conditions and availability of subsidies are going through a downturn.
“Electrified vehicles are one of the only avenues for automobile manufacturers to cut their cost and try to sell to a reluctant younger audience that doesn’t see the same value in owning a car worth essentially 100% of their annual income. While the car makers have been pursuing the building of zero emission vehicles due to regulatory requirement, it is very likely that the new energy vehicle of the future won’t be a large battery connected to an electric motor, because that large battery is simply too expensive.
“No matter what the cost of a very large battery is in future, the fact is that a smaller battery will be less expensive. That isn’t something that is open to debate. A new energy vehicle with a smaller battery doesn’t necessarily need to have less acceleration or poorer options or even be smaller in any way, it just won’t be able to travel as far without recharging. While there is a hangover in the auto industry that the expensive vehicle should have the best appointments and the best performance, cars wrapped around batteries are likely to have to disprove this, simply because a big battery is expensive and heavy, possibly requiring both the amount of optional equipment and performance to suffer.
“Now, whether consumers will be satisfied by vehicles with only 200km or 300km range between recharges is an open question, although many such vehicles have been sold in China. But we also have the option of putting inexpensive range extenders on these vehicles, as in our previous discussions of series hybrid designs.
“Whether these are winning engineering paths is something we will discover over the next decade.”
As for the Cybertruck, “I’m not a pickup fan … [but] maybe [it] can find a home”.
“Of course, how many potential buyers will be driven off by the possibility of everyone calling them [Back to the Future’s Marty] ‘McFly’ on a job site, or asking what size flux capacitor their new truck runs, only time will tell.”
Nevada Copper ships first Pumpkin Hollow concentrate
Following the start of production on December 16, Nevada Copper has shipped the first copper concentrate from its Pumpkin Hollow copper mine, in Nevada, USA.
Having reached these milestones, the company is now focused on ramping up the mine, in Yerington, to reach nameplate capacity in the first half of 2020.
The 2017 prefeasibility study plan for the underground mine outlined a 5,000 t/d project able to produce some 50 MIb/y (22,680 t/y) of copper, 8,000 oz of gold and 150,000 oz of silver over a 13.5-year life at all-in sustaining costs of $1.96/Ib of copper. It also laid the foundations for a larger integrated project that includes open-pit development and could increase throughput to 70,000 t/d.
Matt Gili, Chief Executive Officer of Nevada Copper, said: “Our first shipment of copper concentrate has left Pumpkin Hollow, representing another important milestone as we look forward to continuing our ramp-up to full commercial production in 2020.”
Both Cementation USA and Sedgman USA were involved in the Pumpkin Hollow build, with the former carrying out shaft sinking and underground mine development work and the latter completing the engineering, procurement and construction contract for the surface plant and infrastructure.