July Newsletter – 27.07.2020
- Pandemic exacts toll on iron-ore sector, but prognosis for recovery is good
- Gold, platinum used in new material to generate hydrogen from salt, polluted water
- Copper price surges to two-year high
- Super Rich Russian Battles Chinese Rival In The Hunt For African Gold
- Tesla’s Lithium & Nickel Sourcing — Australia? Bolivia? China?
- Chinese miners’ deal frenzy seen stalling on regulatory hurdles
- BHP keeps iron ore guidance amid China steel strength
Pandemic exacts toll on iron-ore sector, but prognosis for recovery is good
The iron-ore sector has been considerably affected by the Covid-19 pandemic, with the worst of the repercussions expected this year; however, there are signs of recovery moving forward.
Global iron-ore production is expected to decline by 1.2% in 2020 to 2.23-billion tonnes, according to data analytics and consulting company GlobalData, owing to a myriad of factors across the iron-ore-producing regions, including the Covid-19 pandemic, environmental issues and legislative challenges.
GlobalData senior mining analyst Vinneth Bajaj says that in Brazil, iron-ore production will reach 423.3-million tonnes this year, a growth of 4.5% from 2019, that is owed to the resumption of 40-million tonnes of stalled capacity.
Despite this growth, the country’s operations have been disrupted because of Covid-19, which, combined with heavy rains in the southeastern region, caused iron-ore producer Vale’s output to decline by 23.9% to 59.6-million tonnes in the first quarter of 2020, missing the quarter’s guidance of 63-million to 68-million tonnes.
Owing to this, Bajaj says that Vale has lost its spot as the number one producer in Brazil to global mining group Rio Tinto, which produced 66.8-million tonnes of iron-ore in the same quarter.
Subsequently, in April, Brazil’s National Mining Agency ordered the closure of 47 mining dams because their stability could not be certified. Vale owns more than half of these dams.
Moreover, the country has been heavily impacted on by Covid-19, having recorded the second-highest number of cases in the world as of early June, notes Bajaj.
After 188 workers at the company’s mines tested positive for Covid-19, the Brazilian Labour Court suspended operations at the mines in Itabira Complex on June 6. Owing to the outbreak, Vale scaled down its 2020 iron-ore production guidance by 25-million to 30-million tonnes.
The Itabira Complex has two major mines, Cauê and Conceição e Periquito. Itabira produced about six-million tonnes of iron-ore in the first quarter of the year, and about 36-million tonnes in 2019, accounting for 12% of Vale’s total iron-ore output in 2019.
Bajaj says production in South Africa is expected to drop by 4.8% in 2020.
“The Covid-19 lockdown measures had a heavy impact on the South African mining industry. Nearly 14 iron-ore projects were put on hold on March 27 [when the country first went into lockdown]. Although restrictions eased a little from mid-April, mines could return to full capacity only from the beginning of June,” he explains.
In India, Bajaj notes that delays in the auctioning of mines, scheduled to be held in March,in the state of Odishawill severely damage the country’s iron-ore output in 2020, which is expected to decrease to 205.7-million tonnes, a 12.5% decline compared with 2019.
“The decline will be partially offset by the Indian government’s decision to allow new owners to start and continue operations until they have acquired fresh forest and environmental clearances, which could have taken up to three years. Twenty-two out of about 25 noncaptive iron-ore mines were successfully auctioned by February, while three were put on hold over a pending legal suit from the Supreme Court of India,” he says.
Gold, platinum used in new material to generate hydrogen from salt, polluted water
Researchers from the Czech Republic and Russia have developed a new material that uses gold, platinum and chromium to generate hydrogen molecules from fresh, salt, and polluted water by exposure to infrared sunlight.
The objective behind this development is that the solution becomes another green tool to help tackle the global energy challenge.
In a paper published in the journal ACS Applied Materials & Interfaces, the scientists explain that the material is a three-layer structure with a 1-micrometre thickness. The lower layer is a thin film of gold, the second one is made of 10-nanometre platinum, and the third is a film of metal-organic frameworks of chromium compounds and organic molecules.
“During the experiments, we watered material and sealed the container to take periodic gas samples to determine the amount of hydrogen. Infrared light caused the excitation of plasmon resonance on the sample surface. Hot electrons generated on the gold film were transferred to the platinum layer. These electrons initiated the reduction of protons at the interface with the organic layer. If electrons reach the catalytic centers of metal-organic frameworks, the latter were also used to reduce protons and obtain hydrogen,” Olga Guselnikova, the lead author of the study, said in a media statement.
Subsequent experiments showed that 100 square centimetres of the material can generate 0.5 litres of hydrogen in an hour. This is one of the highest rates recorded for 2D materials.
“In this case, the metal-organic frame also acted as a filter. It filtered impurities and passed already purified water without impurities to the metal layer,” Guselnikova said. “It is very important because, although there is a lot of water on Earth, its main volume is either salt or polluted water. Thereby, we should be ready to work with this kind of water.”
According to the researcher, future work should focus on improving the material to make it efficient for both infrared and visible spectra. This would allow it to perform with 93% of the spectral volume of sunlight.
Copper price surges to two-year high
Copper futures prices rallied on Tuesday after the agreement of a massive economic stimulus plan in Europe, optimism about a covid-19 vaccine and ongoing worries about pandemic-hit supply from top producer South America.
Copper for delivery in September trading in New York changed hands for $2.9750 a pound ($6,560 a tonne) in early afternoon trade, up 2% from Monday’s settlement.
Copper futures prices are on track for the highest close in two years and are now up by more than 50% from the covid-19 lows struck in March.
Top-listed copper miner BHP announced on Tuesday that it expects its copper output to fall by between 5% and 14% in its next fiscal year to end-June 2021.
BHP, which part-owns and operates Escondida in Chile, the world’s largest copper mine, said the expected fall in copper production is due to a reduction in its workforce related to covid-19 restrictions.
The Melbourne-based company now expects 2020-2021 copper output of between 1.48m – 1.65m tonnes, down from 1.72m tonnes produced in the year prior.
In a recent note, Capital Economics points out that output rates have fallen sharply in Chile, Peru and Mexico, which together account for 45% of global production.
Output is now at levels last seen in 2017 during a protracted strike at Escondida, which by itself is responsible for nearly 5% of worldwide production.
Surging Chinese imports
Customs data released last week showed China’s unwrought copper imports (anodes and cathodes) in June rose a stunning 50% from the previous month to 656,483 tonnes – a full 15% above the previous monthly record.
June cargoes were double that of the same month last year as the infrastructure and manufacturing sectors in China, responsible for more than half the world’s copper consumption, rapidly recover following the covid-19 slump.
Over the first half of 2020, imports totalled 2.84m tonnes – up 25% year-on-year and on track to easily beat 2018’s annual record of 5.3m tonnes.
June imports of copper concentrate fell unexpectedly, down 6% to 1.69m tonnes from May, but still up 8.4% from June last year, due to disruptions at mines in Peru, China’s top supplier.
Super Rich Russian Battles Chinese Rival In The Hunt For African Gold
If anyone doubts the universal lure of gold as its price nears an all-time high then consider a China vs. Russia takeover battle for an African gold deposit controlled by an Australian mining company.
While that might sound like a Hollywood movie script it is for real and being played out on the Australian Stock Exchange and in the far north of gold-rich Ghana.
Alexey Mordashov, billionaire and chairman of Severstal PAO, at the World Economic Forum in Davos
Spicing the plot is the lead role being played by Alexey Mordashov, major shareholder in Severstal, a Russian steel and energy business, and a man estimated by Forbes to have a net worth of $19.1 billion.
While steel forms the foundation of Mordashov’s fortune, he has developed a taste for gold, creating a London-based business called Nordgold, which controls three mines and 10 exploration projects around the world, including assets in Burkina Faso and Guinea in Africa as well as Russia and Canada.
Until early 2017, Nordgold was listed on the London Stock Exchange, but Mordashov privatized the business because he believed its value had failed to keep pace with the rising gold price, despite production reportedly rising to more than a million ounces a year.
Tesla’s Lithium & Nickel Sourcing — Australia? Bolivia? China?
Following some of Tesla CEO Elon Musk’s comments regarding battery production during the quarterly Tesla conference call for shareholders last week, I decided to have two long conversations with Howard Klein and Rodney Hooper of RK Equity about the EV battery production and mining industries.
Rodney and Howard provided a wealth of insight into these industries, which I will unpack in a series of articles and podcasts*. If you would like to hear the full, unedited audio recording, become a CleanTechnica member, supporter, or ambassador — the hour-long audio recording will be shared in full this week with our most loyal supporters.
The decision to start ongoing discussions with Howard and Rodney was made for several reasons prior to the Tesla conference call, but the discussions I had with them on Friday and Saturday were especially charged by Elon Musk’s strong comments about the need for more nickel production and because of Tesla’s battery cell production plans in Europe. This article and the embedded podcast* actually just lead into additional articles and podcasts about those matters — articles and podcasts coming out of our Saturday conversation as well as inevitable coming conversations.
Topics such as “the OPEC of battery production” (China), mining policy & politics in the USA, the approach large traditional automakers have been taking and should take with regards to EV battery needs, the challenges and requirements of mining companies, and other topics are discussed in the hour-long audio recording just mentioned. CleanTechnica articles and podcast snippets will cover some of those topics, while others will remain confined to the uncut audio.
Chinese miners’ deal frenzy seen stalling on regulatory hurdles
TORONTO/MELBOURNE, – Growing scrutiny by mineral-rich Australia and Canada may cut short a deal frenzy led by China’s state miners and limit Beijing’s role in gold sector consolidation, bankers and analysts said.
Shandong Gold Mining Co and Zijin Mining Group Co Ltd have driven a wave of acquisitions from the Canadian Arctic to South America to West Africa this year.
Canada and Australia have recently tightened restrictions on investment by state-backed firms, fearing economic dislocation caused by the coronavirus pandemic will make it easier to buy strategic assets. No specific countries have been named under the revised guidelines.
“The concerns are almost entirely (with) China,” said Gordon Houlden, a former Canadian diplomat with extensive Chinese experience who heads the University of Alberta’s China Institute.
The restrictions could also dampen appetite for deals in strategic minerals, bankers and analysts said.
Chinese companies’ bids for Australian lithium companies are facing regulatory pushback while last month China’s Goldsea Group abandoned its pursuit of gold miner Alta Metals after Australia’s Foreign Investment Review Board (FIRB) sought more time to review the deal.
FIRB’s decision is “highly disappointing,” Graeme Testar, director of PCF Capital Group in Perth, told Reuters. “This is gold, it’s not on the critical minerals list.”
The agency said last month it will screen all deals in which a foreign investor buys an interest in a “sensitive national security business” regardless of value. In April it blocked two investments by Chinese miners into the critical minerals sector, such as lithium and cobalt used in high-tech areas like renewable energy, electric vehicle batteries, and defence.
“Australia’s foreign investment framework is open, transparent and welcoming. We welcome investment from any country and in any sector of the economy,” a spokeswoman for Australia’s Treasury Department said.
BHP keeps iron ore guidance amid China steel strength
UK-Australian mining company BHP has maintained its iron ore production guidance at 276mn-286mn t in the July 2020 to June 2021 financial year, but is warning of a double-digit percentage drop in steel production outside of China.
BHP produced 281mn t of iron ore in 2019-20. It operated at a run rate of over 300mn t/yr in April-June but said a major maintenance programme on one of its car dumpers at Port Hedland in the Pilbara region of Western Australia (WA) would impact production in July-September.
China can produce more steel and pig iron in 2020 than in 2019, assuming it can avoid a second wave of Covid-19, BHP said. But it warns that steel production is likely to decrease by more than 10pc outside of China, with utilisation rates falling to 50-60pc in April-June. The weakness in the iron ore market outside of China is less important for price formation than in other commodities, it added.
BHP sells around 80pc of its iron ore to China, initial shipping data indicate. It achieved an average iron ore price of $76.67/wet metric tonne (wmt) fob Port Hedland in January-June, down from $78.30/wmt in July-December 2019. Argus last assessed the 62pc Fe price at $108.95/dry metric tonne (dmt) cfr Qingdao on 20 July, down slightly from an 11-month high of $112.40/dmt on 14 July.
BHP achieved an average grade of above 60pc Fe in April-June for its Jimblebar Fines, after the lower-grade ore weighed on realised prices for July-December. Production from Jimblebar increased in April-June after a weak January-March, with record production at Area C and Yandi during the most recent quarter.
BHP expects its cash costs to be within its guidance of $13-14/t for the 2019-20 financial year. It has returned to normal operating rosters in WA as Covid-19 restrictions are eased and its Perth office has reopened.
BHP ran down its WA stocks during April-June by shipping around 1.4mn t more than it produced on an equity basis.
The company is investing $3.06bn to develop the 80mn t/yr South Flank mine in the Pilbara to replace production from its Yandi iron ore mine, with first output expected in mid-2021. The South Flank iron ore project was 76pc completed as of 30 June and is on schedule and on budget, despite the pandemic.
But the coronavirus outbreak has halted all but critical activities related to the firm’s closed Samarco mine joint venture in Brazil, and work on restarting the mine has slowed. This has reduced the chances of the 24mn t/yr mine, a joint venture with Brazilian mining firm Vale, returning to small-scale operations this year.