July Newsletter – 09.07.18



Labor talks at BHP´s Escondida mine in Chile enter ‘home stretch’

Dave Sherwood, Antonio De la Jara

SANTIAGO, July 6 (Reuters) – Labor negotiations at BHP Billiton Plc Escondida copper mine in Chile, the world’s largest, are entering into the final three weeks before a 30-month contract expires at the end of July.

The closely watched talks come little more than one year after failure to reach a labor deal at the sprawling deposit led to a 44-day strike that jolted the global copper market.

BHP and the union have reached agreement on about one-fifth of the “points of interest,” raised by either party, according to an internal union document seen by Reuters that summarized progress in negotiations during the month of June.

The union filed its demands with the company on June 1. The proposals include a one-time bonus equivalent to 4 percent of dividends distributed to shareholders in 2017, or between approximately $34,000 and $40,000 per worker, depending on the exchange rate and other factors. The union also requested a 5 percent increase in workers’ salaries.

BHP´s initial response on June 11 made no mention of either salary adjustments or the signing bonus.

A Reuters point-by-point review of sticking points suggested the two parties were yet to reach a consensus in several areas. Carlos Allendes, a union official, confirmed to Reuters that they were “far from agreement” and accused BHP of “stubbornness.”

Patricio Vilaplana, Escondida’s vice president for corporate affairs, told reporters on Thursday the company was “calm” about the negotiations and the union has shown “good faith” at the negotiating table.




Copper’s Collapse Deepens as Trump Escalates Spat With China


⦁ LME price in biggest weekly drop since 2015 as tariffs imposed
⦁ Copper suffering most given role as economic bellwether: ABN

Copper’s flashing a powerful warning about expectations for global growth as the trade war between the world’s two biggest economies escalates.

Prices have lost more than $1,000 a metric ton since touching a four-year high on June 7 in the steepest four-week loss since 2011. Copper fell with most metals Friday as President Donald Trump slapped tariffs on $34 billion of Chinese imports, prompting the Asian country to retaliate in kind.

“Metal prices have dropped tremendously in the past few weeks, and investors are very nervous about whether this will escalate into a full global trade war,” Casper Burgering, senior sector economist at ABN Amro Bank NV, said by phone from Amsterdam. “That nervousness is reflected in the copper price especially, given its role as a barometer of the global economy.”

Copper fell 1.1 percent to $6,270 at 2:39 p.m. on the London Metal Exchange, heading for the biggest weekly slump since 2015. Prices are down 13 percent in the past month.



Thermal coal prices hit 6-year high

Benchmark seaborne thermal coal prices jumped to $120.10 per tonne on Thursday, its highest level since November 2012, thanks to tight supply in key Asian export regions. Measured from lows hit end-2015, early 2016 coal used in power generation has gained 140%.

Strong consumption in China, despite ongoing efforts by Beijing to reduce reliance on coal for electricity generation, and restocking from the spot market by Japanese utilities have buoyed prices.

Import demand from China has been supported by hotter than average temperatures, weak hydro power output, and limited growth in domestic supply, the Australian dept of resources said in its quarterly report released this week.

Supply in South Africa has been diverted to domestic power-generating facilities, impacting exports. In May this year prices at the African nation’s Richards Bay terminal topped $100 for the first time since April 2012 and was trending higher again this week at $106.25.



Indians are falling out of love with gold — and millennials are partly to blame
The younger generation is more focused on buying smartphones than gold
Financial Post

Indians’ love affair with gold is cooling.

Imports slumped more than 25 per cent to 54 metric tons in June from a year earlier, a person familiar with the information said, asking not to be identified as the figures aren’t public. Overseas purchases plunged 40 per cent to 343 tons in the first half from a year ago, according to data from Finance Ministry officials compiled by Bloomberg.



Platinum price plunges to 14-year low

The price of platinum plunged more than 5% to touch $811.10 an ounce on New York futures markets on Monday, the lowest since July 2004.

Platinum is also trading not far off a record discount to sister metal palladium which was pegged at $938 an ounce, and to gold which also continued to slide on Monday trading at a new low for this year of $1,241 an ounce.

Platinum’s prospects have clouded significantly over the past couple of years.

The move away from internal combustion engines – particularly diesel-powered vehicles – is slashing longer-term demand for the metal.

More immediately the likelihood of a full scale trade war between the US and Europe over cars has seen hedge funds abandon the metal in droves.

On derivatives markets managed money investors such as hedge funds have cut bullish bets on platinum to record lows
On derivatives markets managed money investors such as hedge funds have cut bullish bets on platinum to record lows. Large scale speculators now hold the biggest net short position – bets that the metal can be bought cheaper in future – since government started collecting the data in 2006.

The autocatalyst market represent more than 40% of platinum end user demand and Europe’s car manufacturers where diesel made up around 50% of the market (but as a percentage of new sales has plummeted) are the top industrial consumers of platinum.




S. Africa Seeks Re-Opening of Shuttered Mines to Boost Economy


⦁ Minerals department visited 11 areas for mine charter feedback
⦁ Government published latest Mining Charter draft last month

South African mines that are on care and maintenance are bad for the economy and the issue is being raised with the Minerals Council, Mineral Resources Minister Gwede Mantashe said.

The Department of Minerals and Energy has been to 11 mining areas to obtain feedback on the mining charter, Mantashe said at the opening of Sasol Ltd.’s Shondoni Colliery in Secunda in Mpumalanga province.

The government published the latest draft of the Mining Charter on June 15 after months of negotiations with companies, labor unions and communities. The set of rules is aimed at redistributing the country’s mineral wealth more equally among South Africans to make up for racial discrimination during apartheid.



Firms urged to follow Mercedes-Benz in Indian mica supply transparency

NEW DELHI, July 5 (Thomson Reuters Foundation) – Campaigners urged automakers on Thursday to be more transparent in how they source the mineral mica, which adds a shimmer to cars, after Mercedes-Benz boosted efforts to ensure its India supply comes from legal mines free from child labour.

German carmaker Daimler, owner of Mercedes-Benz, announced in June it was increasing inspections and transparency in its sourcing of mica – used to add a shimmer to its cars – to prevent child labour, forced labour and inhuman work conditions.

It audited three mica mines in India, from where it sources the prized mineral, and “discovered and assessed isolated abuses and took corresponding measures” such as dropping one operator from its supply chain.

“The mining of glimmer has repeatedly been connected with child labour in India. The company consistently pursues such indications … Therefore Mercedes-Benz Cars has decided to make the supply chain transparent,” it said in a statement in late June.




Bankers Have Gone AWOL in the Race to Build More Lithium Mines

⦁ Lenders stay away from industry that needs $12 billion by 2025
⦁ Banks worry about opaque prices and failures of early projects

After clinching a deal with a Chinese battery maker in 2016, James Brown figured bankers would be eager to fund his new lithium mine. Altura Mining Ltd. was racing to ship the raw material from Australia to the world’s biggest electric vehicle market as demand was surging.

Instead, while lithium prices kept rising, Brown spent a Christmas holiday cold-calling lenders and jetted around the globe to raise the money. Eventually, Minneapolis-based Castlelake LP, a private equity firm, helped arrange $110 million in bonds. But there was a catch: an interest rate as high as 15 percent, or almost double what banks normally charge for more conventional mining ventures.

“We’d been trying banks we’d known for years,” said Brown, Altura’s managing director, who previously spent 22 years with coal producer New Hope Corp. “They said: Guys we love it, we just don’t have a mandate (for lithium). If you came to us with coal, gold or iron ore, you’d have no worries.”



Japan’s Mitsui may raise its stake in Vale: executive

TOKYO (Reuters) – Japanese trading house Mitsui & Co (8031.T) may boost its stake in Brazil’s Vale SA (VALE3.SA) if other shareholders sell part of their holdings, a senior executive said, giving it greater influence over the iron ore giant’s management.

Several Brazilian pension funds and BNDESPar, the investment arm of state development bank BNDES have been considering the sale of part of their stakes in Vale, equating to about 3 percent of the miner’s shares in total and worth up to 8 billion reais ($2 billion).





Savannah raises cash for Portugal lithium project

Aim-listed Savannah Resources has raised £12.5-million for the development of its Mina do Barroso lithium project, in northern Portugal, providing funding for the project through a feasibility study to a final development decision early next year.

The company has raised £11.5-million in cash through an oversubscribed placing of shares at 9p each to new and existing investors and has received a letter of intent from major shareholder al Marjan for a further £1-million.

Savannah CEO David Archer said this week that the fundraising had attracted significant UK institutional shareholder attention, with several material tier-one institutional investors having participated.

The company is fast-tracking the Mina do Barroso project, which it believes has the potential to be the leading European producer of spodumene lithium. A recently completed scoping study outlined an 11-year operation, producing 175 000 t/y of spodumene concentrate at 6% lithium oxide.