January Newsletter – 13.01.2020



  • Canada and US finalise critical mineral collaboration plan
  • Is digitalisation delivering value for mining companies?
  • BHP looks to India for coal growth as China demand declines
  • ESG Stamp May Help Slash Funding Costs, Lithium Producer Says
  • Sirius buy to put pressure on Anglo’s free cash flow – Moody’s
  • Central Banks Continue “Remarkable” Gold-Buying Spree
  • Apple pushes recycling of iPhone with ‘Daisy’ robot
  • Rubicon reports 38% increase in Phoenix resources


Canada and US finalise critical mineral collaboration plan

Canada and the United States have finalised their joint action plan to collaborate on minerals they deem critical – including uranium and rare-earth elements – delivering on the June 2019 commitment by Prime Minister Justin Trudeau and President Donald Trump.

The US last year stepped up efforts to ensure it relies less on rare earth minerals from China, after the Asian giant suggested using them as a leverage in trade negotiations.

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With a rich minerals sector, Canada is well positioned to supply the US with rare-earth elements and already supplies about one-quarter of its southern neighbour’s uranium needs.

In fact, Canada supplies 13 of the 35 minerals that the US has identified as critical. The country is the largest supplier of potash, indium, aluminium and tellurium to the US, as well as the second-largest supplier of niobium, tungsten and magnesium.

These critical minerals are used for defence, manufacturing, and high tech industries.

The newly finalised action plan will guide cooperation in areas such as industry engagement, efforts to secure critical minerals supply chains for strategic industries and defence, improving information sharing on mineral resources and potential and cooperation in multilateral fora and with other countries.

The action plan will also promote joint initiatives, including research and development cooperation, supply chain modelling and increased support for industry.

“By finalising the Canada–US joint action plan on critical minerals collaboration, we are advancing secure access to the critical minerals that are key to our economic growth and security — including uranium and rare earth elements — while bolstering our competiveness in global markets and creating jobs for Canadians,” commented Canadian Natural Resources Minister Seamus O’Regan.

Last month, Canada announced that it joined the US-led, multi-country energy resource governance initiative, which aims to promote secure and resilient supply chains for critical energy minerals.

“Canada’s partnership in the initiative is an early demonstration of our commitment to cooperate with the US under the broader action plan,” a government statement noted.

Experts from both countries will convene in the coming weeks to advance joint initiatives to address shared mineral security concerns.


Is digitalisation delivering value for mining companies?

Technology, digitalisation and data planning are three modern buzzwords in the mining industry.

Tech companies are investing in the next digital solutions. In response, mining companies are creating new roles as they embark on a journey of digitalisation, while training institutions are making sure the industry has a skilled workforce for the future.

Despite the efforts to ensure a smooth and productive transition into the digital environment, are mining companies equipped to create value from digitalisation?

There has been significant investments already made in “digital” yet we still see mine planning mayhem is stealing the headlines, budgets are blowing out and operational decisions that can end up destroying value, according to RPMGlobal regional general manager Asia, Russia and Australasia Michael Baldwin.

Baldwin, speaking at a Technology – Mine Optimisation session at the International Mining and Resources Conference (IMARC) in Melbourne, boldly challenges the audience with the following questions.

“Is digital actually delivering? Is it making our operations better? Is it delivering value to the industry for the amount of money that we’ve put in?” Baldwin asks.

“The first thing I’ll say upfront is, technology, as in all areas of life, doesn’t always make things better.”



BHP looks to India for coal growth as China demand declines

The world’s biggest miner BHP (LON: BHP) is looking to India’s fast-growing economy and its accelerating steelmaking output as a way to help offset the declining Chinese coal demand in the new decade, The Sydney Morning Herald reported.

China’s consumption of iron ore and coal – key steelmaking ingredients and Australia’s two top exports – led to a windfall in 2019 for the world’s top miners and added a boost to the Australian government’s federal budget.

But Chinese demand is projected to ease in the face of lower margins, weakening  global growth and the ongoing US-China trade war.

Meanwhile, BHP projects Indian steelmaking is on course to grow by 7% per year over the next decade. India’s yearly output of over 100 million tonnes of steel has now surpassed Japan to become the world’s second-largest steelmaking country.

“A lot of other markets are big but mature,” BHP vice-president of market analysis Huw McKay told the paper.

“India is big but it’s barely got started.”


ESG Stamp May Help Slash Funding Costs, Lithium Producer Says

Complying with environmental, social and governance standards could mean significant savings when it comes to financing projects related to lithium, a key component of electric car batteries.

That’s because companies adhering to those measures can attract commercial banks looking to provide funding for ESG-aligned projects instead of relying on private lenders or specialty credit mining funds, said Ana Cabral-Gardner, chief strategy officer at Sigma Lithium Resources Corp., a Canada-listed mineral exploration firm that has operations in Brazil.

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“What ESG is doing for us is opening the project financing category to Sigma,” Cabral-Gardner, a former Brazil-based investment banker who previously worked at Goldman Sachs Group Inc. and Barclays Plc, said in a telephone interview. Other debt financing alternatives for lithium mines are “600 to 1,000 basis points more expensive.”

Project financing through banks could be signed at a spread of 450 to 500 basis points over Libor while other sources such as credit funds would offer a spread of about 950 basis points plus equity incentives, which could add another 400 basis points, she said.

Private lenders or specialized mining finance firms typically demand equity warrants or similar equity-linked incentives on top of interest payments, Cabral-Gardner said. In bank-led project financing, borrowings are guaranteed by the cash flows of the asset, which are ring-fenced from the company’s balance sheet.

Banks worldwide have committed to the mobilization of trillions of dollars to help address climate change and other ESG-eligible uses. In Canada alone, the country’s largest banks plan to bring C$600 billion in funding for sustainable projects over the coming years.

“We have received enormous attention from banks that do have ESG as a key principle,” said Cabral-Gardner, who is managing negotiations with at least four banks including one Brazilian and one Japanese lender. Sigma Lithium Resources is aiming to sign off on financing for a specific project by the end of March, she said.

The company is looking to build a commercial production plant in Brazil, where it has been running a pilot project for over a year. Sigma is also providing lenders business projections alongside the plant’s ESG credentials, said Cabral-Gardner.



Sirius buy to put pressure on Anglo’s free cash flow – Moody’s

Successful acquisition of Sirius Minerals by diversified miner Anglo American could be accommodated within the latter’s current Baa2 rating with ratings agency Moody’s but would increase Anglo’s financial risk profile for a number of years, the agency said on Friday.

This, Moody’s explained in a statement, was driven by the material capital investment needed over the next few years to complete the Sirius polyhalite mining project, in North Yorkshire, in the UK.

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Anglo and Sirius earlier this week confirmed that Anglo had made an offer to buy Sirius at 5.5p a share.

“While the exact amount and timing of investments required for the completion of the Sirius project is uncertain at this point, we note that Anglo stated during the first two years after an offer is successfully completed, development work on the project is expected to be broadly in line with Sirius’ revised development plan, which indicates that peak capital investments would occur only after 2021,” Moody’s elaborated.

As Anglo will be facing peak investment requirements in 2020 and 2021 for its Peruvian Quellaveco copper mine project, the agency said that accordingly, the company “might not face peak investment for both projects simultaneously but potentially a multi-year period of elevated capital investments”.


Central Banks Continue “Remarkable” Gold-Buying Spree

Central banks continued their remarkable gold-buying spree in November and remain on pace to eclipse 2018’s near-record purchases.

According to the latest numbers from the World Gold Council, central banks added 27.9 tons on a net-basis to official gold reserves in November. That brings the yearly total for 2018 with one month left to calculate to 570.2 tons, 11% higher than the same period in the previous year.

In 2018, central banks purchased just over 650 tons. According to the WGC, that was the highest level of annual net central bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second-highest annual total on record

The World Gold Council bases its data on information submitted to the International Monetary Fund.

Turkey led the pack for the third straight month, adding another 17 tons of gold to its reserves in November. The Turks have leapfrogged the Russians as the number-one gold-buyer in 2019 with over 181 tons added to their hoard. Turkish consumers are also flocking to the yellow metal. According to Bloomberg, gold demand was up 3.7% in the first nine months of 2019. The country’s government has loosened rules governing gold imports to meet the growing demand.

Russia added another 9.7 tons of gold to its reserves in November. That brings its total gold purchases to nearly 149 tons so far in 2019. Russia’s quest for gold has paid off in a big way. The Russian Central Bank’s gold reserves topped $100 billion in September thanks to continued buying and surging prices.

The Russians have been buying gold for the last several years in an effort to diversify away from the US dollar.  Russian gold reserves increased 274.3 tons in 2018, marking the fourth consecutive year of plus-200 ton growth. Meanwhile, the Russians sold off nearly all of its US Treasury holdings. According to Bank of America analysts,  the amount of US dollars in Russian reserves fell from 46% to 22% in 2018.

After pausing for a couple of months, Kazakhstan got back into the gold-buying business in November, adding 4.6 tons of gold to its stash.

Other gold-buying central banks in November were Mongolia (2 tons) and Thailand  (0.1 ton.)

Columbia was the only big seller, divesting itself of just over 5 tons of gold in November.

For the second month in a row, the People’s Bank of China did not report any gold purchases.  It’s not uncommon for China to go silent and then suddenly announce a large increase in reserves.

The World Gold Council called the scale of central bank gold purchases in 2019 “remarkable.”

Following the 50-year high in 2018, few (including us) expected the buying strength we have seen.”

The central bank gold-buying spree is expected to continue into 2020 as countries continue to create a hedge against geopolitical risk and diversify their reserves away from the US dollar.



Apple pushes recycling of iPhone with ‘Daisy’ robot

AUSTIN, Texas (Reuters) – Apple Inc APPL.O is trying to change the way electronics are recycled with a robot that disassembles its iPhone so that minerals can be recovered and reused, while acknowledging rising global demand for electronics means new mines will still be needed.

The Cupertino, California-based company says the robot is part of its plan to become a “closed-loop” manufacturer that does not rely on the mining industry, an aggressive goal that some industry analysts have said is impossible.

Many mining executives note that with the rising popularity of electric vehicles, newly mined minerals will be needed on an even larger scale, a reality that Apple acknowledges.

“We’re not necessarily competing with the folks who mine,” said Lisa Jackson, the company’s head of environment, policy and social. “There’s nothing for miners to fear in this development.”

Inside a nondescript warehouse on the outskirts of Austin, Texas, Apple’s Daisy robot breaks apart iPhones so that 14 minerals, including lithium, can be extracted and recycled.

Apple is already using recycled tin, cobalt and rare earths in some of its products, with plans to add to that list. The company last month bought the first commercial batch of carbon-free aluminum from a joint venture between Rio Tinto (RIO.AX) and Alcoa (AA.N).

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Rubicon reports 38% increase in Phoenix resources

Rubicon Minerals has reported a 38% increase in measured and indicated resources via an updated mineral resource estimate for its Phoenix gold project in Red Lake, Ontario, Canada, and has commenced a feasibility study which is due for completion in the second half of 2020.

The update includes a M&I resource of 3.9 million tonnes grading 6.45 grams per tonne for 811,000oz contained, and an inferred resource of 2.1Mt grading 6.97g/t for 464,000oz contained at a 3g/t cut-off grade and a US$1,400/oz gold price.

“The expansion of the M&I mineral resource estimate above 800,000oz has given us the confidence to begin mine planning and engineering work at the Phoenix gold project, with the goal of demonstrating the project’s commercial viability,” said president and CEO George Ogilvie.

Measured gold resources increased 41% compared to the 2019 estimate, indicated resources 37% while inferred resources fell 14%, mainly as a result of the 2019 oriented infill drilling programme which aimed to improve confidence in the mineral resource estimates above the 976m level. All (M&I) mineral resources sit above this elevation. The measured resources grade fell 7%, while the indicated grade increased 5% and the inferred grade increased 7%.

The current inferred mineral resource estimate extends down to the 1,403m level, which Rubicon believes presents an opportunity to further expand the M&I mineral resource estimate at depth with additional drilling.

The company said future infill drilling had the potential to upgrade between 1-1.6Mt of mineralised material grading between 5.5-7.5g/t at depth to a mineral resource estimate. It also believes it has the potential to upgrade a portion of the 190,000oz of inferred resources between the 976m and 1,098m levels to at least the indicated category, which could be added to the feasibility mine plan. Rubicon has initiated this drilling.

Feasibility study

Work on the feasibility study among other things, will focus on upgrading the tailings management facility (TMF), including the design of an ammonia treatment plant and tailings analysis for final paste backfill design for the underground.

Rubicon has a fully operational hoist, civil and earthworks in place, electric substation and distribution system, a 200-person camp, and an existing TMF which includes a water treatment plant.

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The new M&I mineral resource estimate is to the 976m depth level, well above the underground ramp bottom development of 1,403m level contemplated in the 2019 preliminary economic assessment, a level which could result in a lower total underground sustainable capital development in the feasibility study.

“I am also encouraged to see that the M&I mineral resource estimate currently only extends down to the 976m level, which could mean significantly lower sustaining capital development requirements in the mine plan of the feasibility study compared to the 2019 PEA,” Ogilvie said.

Shares in Rubicon Minerals opened Tuesday almost 3% higher at C$1.05, valuing the company at $91 million.



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