July Newsletter – 29.07.19



Anglo plans $1 billion buyback after bumper iron ore profit

Bloomberg News

Anglo American Plc plans to buy back up to $1 billion of shares after the diversified miner reaped bumper profits from its iron ore business, more than offsetting declines in diamonds and copper.

Anglo is the first to report earnings among the handful of giant miners that produce iron ore and investors have been preparing for big windfalls. The steelmaking ingredient surged to the highest in more than five years after a deadly Brazilian dam collapse and operational setbacks in Australian caused a supply shock.


The buyback represents a shift for Anglo, which has been focused on repairing its bruised balance sheet and investing in growth while the world’s biggest producers handed massive amounts of money back to shareholders in recent years. The company’s net debt stands at $3.4 billion.

Cutifani said that after paying more than $3 billion in dividends since restarting the payments in 2017, and investing in growth, the buyback was a way of rewarding shareholders who wanted a different kind of return.

“For us it’s not about a short-term sugar rush,” Cutifani said. “It’s about getting the balance right and creating the world’s best mining business over the short, medium and long term.”

Anglo shares rose as much as 2.1% in early trading and were 1.7% higher at 8:05 a.m. in London.



Indonesia’s Timah set to double refined tin output -director

  • Indonesia’s Timah estimates around 70,000 T output in 2019
  • Timah sees EV industry boosting tin demand
  • Timah explores rare earth business

PANGKALPINANG, Indonesia, July 25 (Reuters) – Indonesia’s largest tin miner PT Timah expects to more than double its refined tin production this year but has started taking steps to slow down output, a senior company official said on Thursday.

Timah estimates output to reach around 70,000 tonnes this year, said Alwin Albar, operational director at Timah.

The increase follows a change in regulations last year that allowed the company to acquire output from illegal miners within their concessions.

“We are actually trying to hit the brakes amid this sluggish tin market,” Albar said in an interview in Pangkalpinang on Bangka Island.

Company data showed Timah produced 33,444 tonnes of refined tin in 2018.

He said activities at the company’s Batu Besi mine in neighbouring Belitung island has now been cut to eight hours from a normally non-stop 24-hour operation.

Prices of tin in London has dropped to below $18,000 per tonne this month, down from one-year highs at $21,800 a tonne in February.

In 2018, Timah’s average selling price was $20,205 per tonne.


US and Australia team up against China’s dominance in rare earths

Japan also joins bid to lessen Beijing’s ability to wield minerals in disputes

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SYDNEY — An Australian rare-earth producer has enlisted an American partner to help it chip away at China’s dominance in supplying minerals that are crucial to making smartphones, missiles, batteries for electric vehicles and a long list of high-tech products.

Lynas, the world’s only major rare-earth producer outside China, has signed a deal with Texas-based Blue Line to set up a separation facility in the U.S. Operations could begin in 2021.

“In fact, the only heavy rare earth separating plants in the world are located in China,” Lynas CEO Amanda Lacaze said in an interview with Nikkei. “But heavy rare earths are essential.”

Japan is also expanding its cooperation with Lynas, thus creating a three-nation alliance in the sector that parallels the Asia-Pacific region’s security landscape, where the U.S., Japan and Australia are allied to confront China’s military expansion, an industry source noted.

China has used its rare-earth dominance as a weapon in previous trade disputes and has signaled that it could do so again in its current fight with the U.S.


Diamond market weakness prompts De Beers to curb supply

De Beers, the world’s biggest diamond miner by value, is scaling back production plans for this year as it tries adjusting to a brewing industry crisis that’s hitting prices and lowering demand for precious stones.

The Anglo American unit said a range of factors, including ongoing trade tensions between the United States and China, contributed to a 27% drop in earnings during the first half of the year.

Polished diamond and midstream rough diamond demand were impacted by retail store closures and destocking in the US, the world’s biggest market for diamonds, De Beers has said.

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Elsewhere, sales were impacted by the trade tensions, protests in Hong Kong and a stronger US dollar, which particularly affected China and the Gulf.

De Beers said it expected the impact of ongoing challenges to be short term, and predicted a healthier industry outlook over the long term.

The company, once the monopoly supplier of precious stones, has been combating increasing competition from laboratory-made diamonds by producing its own at a lower cost than its peers.

Cheaper diamonds, which are often small and low quality, are selling for less now than six years ago. And when it comes to synthetic stones, De Beers’ entry in the market is creating a big price gap between mined and lab diamonds, pressuring rivals that specialize in synthesized stones at the same time.

A 1-carat man-made diamond sells for about $4,000 and a similar natural diamond fetches roughly $8,000. De Beers’ new lab diamonds will sell for about $800 a carat. That’s a fifth of the price of existing man-made stones and one-tenth of the cost of buying a similar natural gem.



Colombia nears digital cadastre launch

Mining Journal

Colombia’s ANM National Mining Agency remains on track to launch a digital mining cadastre in the fourth quarter which it believes will dramatically improve sector administration efficiency, an official has told Mining Journal.

The new system will contain all relevant information pertaining to mining titles including areas of restriction, national parks, socio-economic area of the locality and historical exploration information where it exists. It will allow concession holders and those requesting concessions to file all their documents electronically by uploading PDF files rather than having to file them in person as is currently the case.

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“With the new system, you can draw your polygon and it will immediately tell you the area that is free to contract, the economic capacity you need to substantiate and the documents you need to provide in support of your application,” the official said.

The new system will still have a human review of documents but the ANM believes it will reduce review times from the current 9-12 months to 1-3 months.

A key goal of the ANM is to reduce the ability of speculators to game the system and retain effective control of concessions without making surface canon payments on performing any work through an endless exchange of documents which continually postpone the date when they have to sign a concession contract.

“We will be able to make decisions quicker and where people don’t pay move to revoke their claims for non-performance,” the official said.



Hong Kong stock exchange operator tightens regulation of back-door listings with new rules

HKEX drops profit requirement after concerns expressed during two-month public consultation

New rules effective from October 1

Bourse operator Hong Kong Exchanges and Clearing has tightened the regulation of so-called back-door listings with the introduction of rules that go into effect from October 1, according to the conclusion of a public consultation released on Friday.

In a back-door listing, a company that has gone public sells its major assets or shareholding, enabling a new buyer to secure listing status without going through the application process. New buyers usually inject their businesses into the existing entity, which has in some cases compromised the quality of listings.

The new rules ban listed companies from selling major assets or shareholding within three years after change in ownership. If a company sells its major shareholding to another firm, the stock exchange will monitor its acquisitions over the next 36 months.

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Should the listed company keep selling its existing business or assets, and keep buying new businesses or assets from its new shareholders within the three-year period, the exchange will view this activity as an attempt by the new buyers to secure listing status by circumventing the new listing requirements.

If the exchange considers this a back-door listing, it will review the new buyer’s fitness against all listing criteria.

The change in rules is aimed at cleaning up problematic corporate behaviour at the Hong Kong bourse, Asia’s second-largest stock market, and enhancing market quality and investor protection.

“The rule changes are a positive step forward for the whole market, and will not restrict legitimate business activities, business expansion or diversification of listed issuers,” said David Graham, HKEX’s head of listing.


Freeport reports net loss

Mining Journal

Copper major Freeport-McMoRan (NYSE: FCX) has reported a US$72 million net loss for the June quarter, as costs increased and production fell as the Grasberg operation in Indonesia transitions to underground.

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Jefferies analyst Christopher LaFemina said the company was at a “turning point”, saying it had under-performed and was under-owned “due to problems in the rear view mirror”.

Freeport’s net loss equated to 5c per share, compared with a net income of $869 million or 59c per share for the previous corresponding period.

Freeport had flagged the likelihood of a 5c/share loss in an update at the start of this month, when it reaffirmed its April 2019 sales guidance of 3.3 billion pounds of copper and 0.8 million ounces of gold.

Unit net cash costs for PT-FI, Freeport’s Indonesian subsidiary which operates Grasberg, increased to $2.15 per pound of copper for the period, compared with credits of 77c/lb a year earlier.

The company said during the quarter, PT-FI had started extracting ore from the Grasberg block cave, which had been historically mined from the openpit, and started production from the Deep Mill Level Zone (DMLZ).

It also said PT-FI was seeking government approval for an export quota increase, having fully used its approved quota of about 180,000 dry metric tons of concentrate for the current period, which expires on March 8, 2020.

PT-FI expected to receive approval during the third quarter, Freeport said.

The company reported net cash available of $2.2 billion at June 30, and consolidated debt of $9.9 billion.

“One key takeaway from Freeport’s conference call today is that management is increasingly confident in the operational outlook for Grasberg and is also confident that it will deliver operational upside in the Americas due to an increased focus on technology and innovation,” LaFemina said yesterday.

He reiterated a Buy rating and raised the share price target from $15.50 to $16.50.

Freeport closed up about 2.5% to $11.94 in New York yesterday, capitalising it at $17.3 billion.



China disrupting world’s diamond sector, tapping sophisticated technology to produce cheap knock-offs

  • Synthetic diamonds to become a bigger share of fine jewellery market
  • China already makes the lion’s share of ‘lab grown’ diamonds

China is taking on the world’s diamond miners, using sophisticated technology to offer increasingly cheap and real-looking knock-offs that threaten to upend the lucrative fine jewellery market.

The technological disruption seen in medicine, autos, banking and countless other sectors is spilling over into diamonds, where an oligopoly of just four miners controls more than 60 per cent of production, according to consultancy Bain & Company.

It is happening as China taps the know-how it developed in becoming the world’s biggest maker of synthetic diamonds used primarily in the industrial cutting tools market.

By doing so, China now makes 56 per cent of the world’s gem-quality synthetic diamonds, far outpacing second-placed India.

While synthetic diamonds right now only account for 3.5 per cent of the world’s diamond jewellery, the share could grow to six per cent in four years, and even more later, says Paul Zimnisky, a New York-based independent diamond sector analyst.

“In the last few years some Chinese producers have been upgrading existing equipment to produce larger, better-quality synthetic diamonds for use as jewellery,” Zimnisky said. “China already has the infrastructure in place which allows for high production scalability of higher-quality synthetic diamonds, as existing high-pressure high-temperature equipment is upgraded.”


Phytomining is a thing in Australia

Researchers at the University of Queensland have been working on developing a phytomining technology that allows them to harvest metals from the living tissue of a group of plants known as hyperaccumulators, which retain metals in high concentrations after absorbing them through their roots.

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These plants absorb metals from mining wastes, which are normally stored in tailings facilities and contain valuable metals such as cobalt. In the view of researcher Philip Nkrumah, these waste accumulations represent some of the largest untapped resources globally.


“Phytomining is an innovative solution because it complements the global supply chain for critical minerals like cobalt while promoting the circular economy by utilising mining waste,” Nkrumah said in a media statement. “Some species of plants can contain up to 1% of cobalt or 4% of nickel in their shoots, translating to more than 25% metal in their ash which is dubbed ‘bio-ore’.”

Besides cobalt, plants such as Australia’s native legume New Holland Rattlepod, which grows around MMG’s Dugald River mine, have shown zinc hyperaccumulation.

According to Nkrumah, the high purity of bio-sourced metals makes them especially suited for applications in the electrochemical industry, like producing rechargeable batteries.



Drilling ‘exceeding expectations’ at Ascendant’s zinc project in Portugal

Mining Journal

Zinc-focused Ascendant Resources (TSX: ASND) says 2019 drill results at the Lagoa Salgada VMS project in Portugal are “exceeding expectations” as it aims for a resource update this quarter and a preliminary economic assessment by year-end.

The latest highlights included 9.1m at 16.52% zinc-equivalent and 24.9m at 21.09% Zn-eq in the gossan and sulphide lenses respectively, in the North Zone of the LS West Region.

The company is now planning an IP survey on an 8km gravity anomaly identified in the LS North and East regions, following the “tremendous success” of correlating drilling results to anticipated mineralisation from IP surveys in the LS West Region.

“Lagoa Salgada is proving to be an exceptional VMS host; this is especially apparent as seen by the high-grade and significant intervals of the 2019 drill results,” president and CEO Chris Buncic said.

Ascendant’s June quarter results were above expectations and budget, following record throughput and production of 24.6 million pounds Zn-eq at its El Mochito zinc mine in Honduras.

Assuming fixed metal prices over the past 2.5 years, production on a Zn-eq basis has increased consecutively every quarter for all 10 quarters of Ascendant’s ownership, the company said last week.

In Portugal, Ascendant has the option to earn up to 80% of Lagoa Salgada, which currently has a measured and indicated 7.84 million tonne resource grading 8.38% Zn-eq and an inferred 12.82Mt at 6.37% Zn-eq.

The company’s shares have fallen from C83c to a 52-week low of 32c last week.

They closed unchanged yesterday at 41c to capitalise Ascendant at $31.6 million (US$24  million).


Jervois plans for production at Idaho Cobalt in 2021

With the eCobalt Solutions merger complete, Jervois Mining of Melbourne, Australia, is making plans for commercial production at the Idaho cobalt operation (ICO) in the second half of 2021. A 12-month construction period is anticipated.

Jervois is assembling a team to produce a feasibility study for the ICO. A summer drill program will provide information to support final tests, to enhance geological confidence of the resource, and for a 1,090-t/d concentrator. Jervois expects the concentrator to be equipped with SAG milling.

At the same time, Jervois intends to undertake a scoping study of producing refined cobalt and copper from ICO concentrate. Such a refinery in the state would improve project economics, increase investment, and provide jobs.

Both studies are to be complete in Q1 2010.



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