January Newsletter – 11.01.2021


  • Cornish Lithium granted rights for offshore exploration
  • Endeavour Silver records highest quarterly production since 2018
  • Six new coal projects in Xinjiang ‘unrelated to drop in imports from Australia’
  • If you stay the course in Zambia, a brighter future awaits for the mining industry, and the Zambian people
  • Goldman proclaims the dawn of a new commodity supercycle: Andy Home
  • TMAC Resources Inc. to be Acquired by Agnico Eagle
  • CGN to take stake in Kazakh U mining company
  • China to accelerate work on iron ore projects in Australia and Africa
  • Iron ore price leaps into 2021
  • Provision In U.S. Government Spending Bill Very Constructive For Uranium Mining Industry

Cornish Lithium granted rights for offshore exploration

Cornish Lithium, a British miner eager to lead the development of an industry for the battery metal in the UK, has been given the green light to explore for the battery metal in geothermal waters off the coast of Cornwall.

The permit comes after a two-year tender process held by the Crown Estate, which manages the seabed surrounding the United Kingdom.

Cornish Lithium will begin its desk-based exploration program to start identifying potential geological targets for later research. It says that physical exploration work is not anticipated for at least four years.

The company is targeting four sites across the north and south coasts of Cornwall, where it plans to potentially extract lithium using a low-impact and environmentally responsible process. Mining lithium from geothermal water allows using the same hot rock water to power up turbines, generating zero-carbon electricity and heat.

The £4 million ($5.4m) project will trial direct lithium extraction (DLE) technology, which removes dissolved lithium compounds from water without the need for the large evaporation ponds, such as those used in South America’s salt flats.

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Cornish Lithium is building a pilot lithium extraction plant in collaboration with Geothermal Engineering Limited (GEL).

Lithium from Chile and Argentina is of higher grade than geothermal sources, but concerns over the sustainability of those operations are weighing on miners’ plans. Giants including Albemarle (NYSE: ALB) and SQM (NYSE: SQM) continue to be questioned as they extract their product from pools of brine beneath Chile’s Atacama desert, the world’s driest.

“Lithium has an important and exciting role to play in helping unlock an electric economy and deliver the UK’s commitment to net zero carbon emissions by 2050,” Nick Everington, Portfolio Manager at The Crown Estate, said in a media statement.

Cornish Lithium recently decided to also begin exploring for other battery metals, such as cobalt and copper.

The area around St. Day and Gwennap was the richest copper-producing region in the world in the 18th and early 19th centuries.

The junior revealed in 2018 that it needed about £5 million ($6.2m) to go ahead with its plans. Since then, it has secured more than £2m ($2.5m) from private backers and it’s already aiming at listing on the London Stock Exchange by 2022.

Cornish Lithium’s efforts come amid the British government’s push to attract more investment into battery factories in order to protect the future of local car plants.

Figures released on Wednesday by the Society of Motor Manufacturers and Traders, the local industry body, showed new car sales in the UK fell by almost 30% to 1.63 million in 2020, the toughest year for the market since 1992.

UK carmakers have three years to source local electric car batteries, following the Brexit free trade deal inked last year. Under the agreement, all European trade in cars and parts will continue to be free of tariffs or quotas after the Brexit transition period ended on December 31, as long as they contain enough content from either UK or EU factories.

Batteries will at first be allowed to have up to 70% of materials from countries outside the EU or the UK. From 2024 onwards, however, that requirement will tighten to 50%.


Endeavour Silver records highest quarterly production since 2018

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Guanacevi mine in Durango, Mexico. Image from Endeavour Silver.

Endeavour Silver Corp. (TSX: EDR, NYSE: EXK) has recorded its highest quarterly production over the last two years from its three underground mines in Mexico: Guanacevi in Durango state, Bolañitos in Guanajuato state and El Compas in Zacatecas state.

Production in Q4 2020 reached 1.11 million silver ounces and 12,568 gold ounces for 2.1 million ounces of silver equivalent. This was higher compared to Q4 2019 due to the continued operational improvements at the Guanacevi and Bolañitos mines.

At Guanacevi, throughput increased 15%, with a 31% increase in silver equivalent grades processed compared to Q4 2019. At Bolañitos, throughput increased 31%, with an 8% increase in silver equivalent grades compared to the prior-year quarter.

The company’s 2020 full year production has also met its original guidance, notwithstanding the government-mandated two-month suspension of operations due to the pandemic. In fiscal 2020, silver and gold production totaled 3.51 million ounces and 37,139 ounces respectively for 6.5 million ounces of silver equivalent.


Six new coal projects in Xinjiang ‘unrelated to drop in imports from Australia’

China’s energy administrators have announced the approval of six construction projects for coal development bases, and the move has little to do with the drop in coal imports form Australia, industry insiders told the Global Times Thursday.

The projects were approved last week and are all located in Northwest China’s Xinjiang Uygur Autonomous Region, according to a notice released by China’s National Energy Administration (NEA) on its website on Wednesday.

With a total investment of 7.998 billion yuan ($1.237 billion), the six projects are expected to jointly produce 15.3 million tons of coal per year, read the notice.

The projects were authorized amid declining supplies from overseas countries including Australia, but they actually have little to do with the import reduction, said coal industry expert Pan Weier, a former official of China’s State Administration for Coal Mine Safety.

“Unlike import-dependent petroleum, China is basically self-sufficient in terms of coal resources,” Pan told the Global Times on Thursday. “The import decreases from Australia or other countries won’t cause a shortage in China’s domestic market.”


If you stay the course in Zambia, a brighter future awaits for the mining industry, and the Zambian people

The impact of the coronavirus pandemic on the mining sector has been like many other industries. Operations stymied through on- site outbreaks. Lockdowns, rightfully ordered by governments to protect public health, made operations profoundly difficult. Match this with competitive commodity prices and it would seem like a depressing cocktail for the mining industry across the board.

The resilience shown by companies and operators should be applauded. Running sites with social distancing measures is not easy. Neither is maintaining equipment. And supply chains are clearly straining. Luckily remote mines have fared well, sparing themselves from dense Covid- 19 out breaks. Certainly, the industry is no stranger to health epidemics, where Ebola proved a testing period for sites in West Africa. That experience has demonstrated its value this year – the industry should be proud of how it implemented social distancing, PPE and rapid testing to great effect. It has also proved how engrained support between private operators and surrounding communities is vital in a time of crisis.

Yet the events of 2020 do beg one question. Where does this leave investor confidence in the sector? It’s only natural many are spooked, and the increasingly gloomy macroeconomic outlook will lead to conservative posit ions and even paralysis for some. But as with all change, big opportunities exist. There are long term investments out there that remain enticing and ultimately will lead to equally attractive returns.


Goldman proclaims the dawn of a new commodity supercycle: Andy Home

LONDON (Reuters) -Will COVID-19 kick-start a new commodities supercycle? Goldman Sachs thinks so.

While last year’s strong rebound in many commodity prices might be viewed as a “V-shaped vaccine recovery”, the bank contends it is just “the beginning of a much longer structural bull market for commodities”.

“Looking at the 2020s, we believe that similar structural forces to those which drove commodities in the 2000s could be at play,” Goldman argues. (“2021 Commodities Outlook: REVing up a structural bull market”, Nov. 18, 2020)

The 2000s were transformative for metal prices, which experienced a tectonic demand boost from industrialisation and urbanisation in emerging nations, China in particular.

Copper, the bellwether of the industrial metals sector, rose from under $2,000 per tonne in 2000 to a record high of $10,190 in February 2011.

But the supercycle hype dissipated over the course of a four-year bear market which only troughed late in 2015, leaving many investors disillusioned with the sector.

No-one has talked much about a commodities supercycle since then, which makes Goldman’s call all the more remarkable.

So what’s a supercycle, why was the last one so short-lived and what makes one of Wall Street’s finest think another one is coming?


TMAC Resources Inc. to be Acquired by Agnico Eagle

TORONTO, Jan. 5, 2021 /PRNewswire/ – Agnico Eagle Mines Limited (NYSE: AEM) (TSX: AEM) (“Agnico Eagle”) and TMAC Resources Inc. (TSX: TMR) (“TMAC”) announced today that they have entered into agreements pursuant to which Agnico Eagle has agreed to acquire all of the outstanding common shares of TMAC (the “Transaction”) at a price of C$2.20 per share (the “Offer Price”) in cash, which represents an increase of C$0.45 per share as compared to the offer price of C$1.75 offered by Shandong under the original Arrangement Agreement, as further described below.

The Transaction is being effected by way of assignment to Agnico Eagle of the arrangement agreement dated May 8, 2020 (the “Arrangement Agreement”) among TMAC, Shandong Gold Mining (HongKong) Co., Limited and its affiliate Streamers Gold Mining Corporation Limited (collectively, “Shandong”) and Shandong Gold Mining Co., Ltd. (together with Shandong, the “Shandong Parties”) in accordance with an assignment, assumption and novation agreement among the Shandong Parties, TMAC and Agnico Eagle dated January 4, 2021 (the “Assignment Agreement”) and the amendment of the Arrangement Agreement under an amending agreement between Agnico Eagle and TMAC dated January 4, 2021 (the “Amending Agreement”).  The arrangement was approved by 97.08% of the votes of TMAC shareholders that were represented at the special meeting held on June 26, 2020; there will be no further shareholders’ meeting in connection with the Transaction.

The total equity value under the Transaction is approximately C$286.6 million.  In addition, in connection with the closing of the Transaction, Agnico Eagle will retire TMAC’s outstanding debt and deferred interest and fees.  The Offer Price represents a premium of approximately 26% to the offer price of C$1.75 per TMAC share that was to be paid by Shandong and a premium of approximately 66% to TMAC’s 20-day volume-weighted average price as at January 4, 2021.


CGN to take stake in Kazakh U mining company

China General Nuclear (CGN) is expected to acquire a 49% stake in Ortalyk LLP, a wholly-owned subsidiary of Kazakh uranium producer Kazatomprom, by mid-2021. The transfer of the stake was part of cooperation agreements signed between CGN and Kazatomprom in 2014, 2015 and 2016.

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In 2014, CGN and Kazatomprom signed a cooperation agreement in the field of nuclear energy, which considers the creation of a joint venture for the production of fuel assemblies in Kazakhstan for Chinese nuclear power plants. The agreement provided for CGN’s undertaking to ensure the sale of 200 tonnes of nuclear fuel assemblies per year for 20 years in China. In exchange for this, the agreement also provided for the establishment of a joint venture to develop a uranium deposit in Kazakhstan with reserves of 40,000 tonnes of uranium, which was expected to be implemented on the basis of Ortalyk LLP.

In 2015, an agreement was signed between Kazatomprom and CGN on commercial terms for the design and construction of the fuel assembly production plant in Kazakhstan and for the joint development of uranium deposits in Kazakhstan.

Subsequent fuel principles agreements and a mining principles agreement were signed in 2016 between Kazatomprom and CGN. In accordance with these, CGN subsidiary CGNPC Uranium Resources Company Limited (CGNPC-URC) committed to buy 200 tonnes of fuel assemblies annually from the Ulba-FA plant within 20 years. Kazatomprom and CGN agreed that subject to Ulba-FA receiving the first fuel assembly contract from CGNPC-URC, Kazatomprom would sell to CGN or its affiliates an up to 49% interest in Ortalyk LLP.


China to accelerate work on iron ore projects in Australia and Africa

China is reportedly planning to build at least two ‘globally significant overseas iron ore mines’ by the year 2025 to boost supply.

The move is part of the country’s plans to boost the metal’s supply and increase its price capacity, reported Reuters citing the Ministry of Industry and Information Technology (MIIT).

According to a five-year plan for the steel sector published by the MIIT, equity output from interests held by Chinese companies in overseas mines should constitute for over 20% of iron ore imports by 2025.

The five-year plan will await public feedback until 31 January.

The plan also calls for more supply of other steelmaking resources such as chrome and manganese.

China is the world’s biggest steel producer. Currently, the country relies on imports for nearly 80% of its iron ore. However, there is no certainty on how much of that is from overseas mines in which the country owns stakes.

China has domestic iron ore mines with a much lower grade compared to top producers like Brazil and Australia. The country owns a stake in Guinea’s Simandou mine.

Reuters quoted MIIT as stating: “China will accelerate construction of large iron ore projects in West Africa and Western Australia.”


Iron ore price leaps into 2021

Iron ore prices started the new year with a bang on Monday as unprecedented demand from China counteracted government calls for sharp cuts in the country’s steel output.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China (CFR Qingdao) were changing hands for $165.29 a tonne on Monday, up 3% on the day.

In December, the steelmaking raw material hit its highest level since September 2011 after gaining nearly 80% during the year.

“Impact from the pandemic (on iron ore) was not as pessimistic as the market expected,” Zhuo Guiqiu, analyst with Jinrui Capital told Reuters:

“The big jump came after Vale lowered its shipments expectations and a robust Chinese steel demand in the fourth quarter.”

China is expected to have forged more than 1 billion tonnes of crude steel in 2020 and imports of iron ore are also running at record levels of more than 1 billion tonnes per annum.


Provision In U.S. Government Spending Bill Very Constructive For Uranium Mining Industry

After threatening a veto, U.S. President Trump finally signed a massive US$2.3 trillion COVID-19 relief and government funding bill on December 27, 2020. The headlines of the legislation included US$600 in direct payments to most Americans and an extension of federal unemployment benefits to the long-term unemployed. Also included in the spending bill is the most constructive development for U.S.- and Canadian-based uranium miners in some time – a US$75 million provision to establish a national strategic uranium reserve.

The law mandates that the U.S. Department of Energy buy uranium from facilities licensed by the U.S. Nuclear Regulatory Commission. Companies owned or controlled by China or Russia can be banned from participation if they “pose a threat to the national security of the United States.”

Establishment of this reserve could signal improving times for uranium miners with mines on American or Canadian soil, such as Ur-Energy Inc. (TSX: URE), Cameco Corp (TSX: CCO) or Denison Mines Corp. (TSX: DML). Even micro-cap miners like Western Uranium & Vanadium Corp. (CSE: WUC) or Anfield Energy Inc. (TSXV: AEC) could eventually begin to produce uranium and sell it into the reserve, as funding for the reserve could continue through the tenure of the Biden Administration. President-elect Biden’s Democratic Party platform specifically cited nuclear technologies as one means to de-carbonize the U.S. electric power sector.



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