July Newsletter – 23.07.19



Vale outlines compensation

Brazil miner Vale SA (BZ: VALE3) has announced compensation for workers and families of those who died when its Córrego do Feijão B1 dam collapsed at Brumadinho in January.

pic1 Behre Dolbear newsletter 23.07.2019

The collapse killed 247 people and 23 were still missing, a Minas Gerais court was told earlier this month as it found Vale responsible for repairing all the damage.

Vale said it would pay BRL400 million (US$106 million) after signing an agreement with the state’s labour ministry (MPT) and said it might adjust provisions in its second quarter results.

It had made a provision of US$247 million in its first quarter results, related to the preliminary agreement signed with the MPT in February.

“Any adjustments to this provision will be reported in the 2Q19 results … including the deposit of BRL400 million by Vale as collective moral damages on August 6th, 2019, that will be available to the court,” the miner said.

Vale specified payments for parents, spouses or partners and children of deceased workers, plus medical insurance benefits, and said the deal provided stability to direct and third-party workers at the mine on the day of the rupture.

Fallout from the disaster put a dent in global iron ore supply, which has seen prices lift above US$120 per tonne.



Nickel price catches battery, export ban fever. Again

Nickel is adding shine to the otherwise lacklustre 2019 industrial metals complex, as expectations of booming demand from electric vehicles and renewed supply worries rev prices to a one-year high.

Nickel is now up 37% since the start of the year, reaching $14,665 per tonne on Thursday in London and jumping 4% in Shanghai to the equivalent of $16,690.

Open interest in Chinese nickel futures is up by half in a fortnight and trading volumes have surged – indicating that the price spike is likely the result of speculation more than fundamentals.

pic2 Behre Dolbear newsletter 23.07.2019

Miners of the devil’s copper are used to wild swings in price. From the lows mid-2017 below $9,000 a tonne to around this time last year, the metal gained 79%, only to slump by nearly a third to its opening levels of 2019. And who can forget that in March 2007, nickel peaked at $51,780 per tonne.


Gold price falls back from 6-year highs

After hitting six-year highs overnight, gold fell back in busy Friday morning dealings as investors indulged in profit-taking ahead of the weekend.

Gold for delivery in August, the most active futures contract trading in New York, touched a high of $1,454.40 an ounce in after-hours trading on Thursday, but gave up all of the day’s gains to exchange hands for $1,427.40 by lunchtime on Friday.

Silver was back at breakeven compared to Thursday’s close by Friday afternoon after reaching a 13-month high of $16.625 an ounce earlier in the day, and is set to end the week nearly 7% higher.

Ross Norman of Sharps Pixley, London’s largest bullion broker, said silver is “at long last joining the party and is authenticating the bull run”.

Gold did the heavy lifting by breaching the 6 year resistance at $1,360, but it was silver’s intransigence that worried.

Rather like the vapours emanating from the Temple of Apollo at the oracle in ancient Delphi, silver’s price action now portends well for gold.

The gold/silver ratio has fallen from 95 to 87 and if you like gold you should positively love silver as there is scope for a further correction.

The gold-silver ratio hit a 26-year high recently, partly explained by the fact that silver’s number one source of demand is an industry where worries about global economic growth is clouding the outlook.


EV Raw Materials in Cornwall

Paul Renken, VSA

Cornwall is in pole position to deliver the raw materials necessary for the EV revolution with the benefit of giving UK businesses, workers, UK manufacturing and consumers a good chance of being a significant player in the provision of ore raw materials and value-added products. The metals and minerals are present and the potential for new minable deposits of a variety of the critical metals is very good. Although the scope and scale of mines to be found will not appeal to some investors, the ‘home grown, mined and made in UK’ nature of the industry will appeal to others, in a similar way to what Sirius Minerals (SXX LN) is doing with its polyhalite deposit in North Yorkshire. The level of UK government conviction to developing and supporting a commercially viable and sustainable battery raw materials industry and the availability of SME risk finance remain hurdles to the speed and intensity of developing this rich mineral potential.

pic3 Behre Dolbear newsletter 23.07.2019



Mongolia seeks to rewrite Oyu Tolgoi deal with Rio

Mongolian legislators will vote next month whether to rewrite a 2015 investment agreement with mining giant Rio Tinto (ASX, LON, NYSE:RIO) for the massive Oyu Tolgoi copper-gold mine, located in the Gobi Desert.

The landlocked country currently owns 34% of the mine, with Canada’s Turquoise Hill Resources (TSE, NSYE: TRQ), which is majority-owned by Rio Tinto, holding the remaining 66%.

While the parliament is leaving the agreement covering the project’s ownership alone, it is likely to approve a series of binding recommendations that would end the 2015 “Dubai Agreement.” The document covers the costly and several times delayed underground expansion of Oyu Tolgoi.

A lawyer involved in Mongolian mining deals, speaking on condition of anonymity, told MINING.COM that critics of the four-year-old deal argue it made changes to the original one, signed in 2009. Thus, they said it should have been subject to full parliamentary approval, instead of receiving only the prime minister’s okay.


Chile a step closer to scrapping copper sales funding for military

pic4 Behre Dolbear newsletter 23.07.2019

Chilean lawmakers have unanimously approved changes to a law that forces state-own Codelco, the world’s largest copper producer, to transfer 10% of its annual export sales to the country’s armed forces.

The ruling, known as Ley Reservada del Cobre (Restricted Law on Copper), has been on the books since 1958 and was strengthened during the 1973-90 military dictatorship of Augusto Pinochet.

The minimum contribution expected is $180 million a year, though in periods with high copper prices, such as during the super cycle at the start of the decade, it increases to nearly $1 billion.

The funding has transformed Chile’s armed forces into one of the most capable in the region, with equipment superior to any other neighbouring country.

The decades-old law has limited the amount of funds Codelco has available for reinvestment at a time when is in the midst of a $39-billion,10-year overhaul of its aging mines.



“[This] supports Barrick’s search for new world-class gold deposits in the DRC”

Barrick Gold (TSX: ABX) president and CEO Mark Bristow has underlined the importance of partnerships as he continues to push for change to the mining code in the Democratic Republic of Congo.

pic5 Behre Dolbear newsletter 23.07.2019

At a media briefing in Kinshasa yesterday, Bristow said 2019 marked the 10th anniversary of acquiring the Moto project which now hosted the tier one Kibali gold mine, a joint venture with AngloGold Ashanti.

He said Barrick had invested in the DRC “without any incentives” but “a clear and equitable” mining code, which was changed last year to include higher taxes and royalties.

The changes prompted an industry outcry but companies including Ivanhoe Mines have been buoyed by recently-elected president Felix Tshisekedi indicating support for foreign investment during a US trip in April.

“We continue to engage with the government on this issue, and were encouraged when the new president, his excellency Felix Tshisekedi, outlined his vision, of attracting foreign investment and developing the industry in a spirit of partnership, to Barrick’s executive chairman John Thornton at a meeting earlier this year,” Bristow said.

“It is this partnership that enabled the creation of Kibali and supports Barrick’s search for new world-class gold deposits in the DRC.”

Barrick said Kibali had contributed US$2.7 billion to the Congolese economy and was on track to meet or beat production guidance of 750,000 ounces of gold this year.

Barrick shares closed down 1.3% yesterday in Toronto but remain near a two-year high.

It is capitalised about C$36.8 billion (US$28 billion).



COMM1 Behre Dolbear newsletter 23.07.2019COMM2 Behre Dolbear newsletter 23.07.2019COMM3 Behre Dolbear newsletter 23.07.2019