June Newsletter – 03.06.19
ANNOUNCEMENTS
TOP NEWS
China Gears Up to Weaponize Rare Earths Dominance in Trade War
Bloomberg
Beijing is gearing up to use its dominance of rare earths to hit back in its deepening trade war with Washington.
A flurry of Chinese media reports on Wednesday, including an editorial in the flagship newspaper of the Communist Party, raised the prospect of Beijing cutting exports of the commodities that are critical in defense, energy, electronics and automobile sectors. The world’s biggest producer, China supplies about 80% of U.S. imports of rare earths, which are used in a host of applications from smartphones to electric vehicles and wind turbines.
The threat to weaponize strategic materials ratchets up the tension between the world’s two biggest economies before an expected meeting between Presidents Xi Jinping and Donald Trump at the G-20 meeting next month. It shows how China is weighing its options after the U.S. blacklisted Huawei Technologies Co., cutting off the supply of American components it needs to make its smartphones and networking gear.
“China, as the dominant producer of rare earths, has shown in the past that it can use rare earths as a bargaining chip when it comes to multilateral negotiations,” said George Bauk, Chief Executive Officer of Northern Minerals Ltd., which is producing rare earth carbonate from a pilot-scale project in Western Australia.
The U.S. shouldn’t underestimate China’s ability to fight the trade war, the People’s Daily said in an editorial Wednesday that used some historically significant language on the weight of China’s intent.
The newspaper’s commentary included a rare Chinese phrase that means “don’t say I didn’t warn you.” The specific wording was used by the paper in 1962 before China went to war with India, and “those familiar with Chinese diplomatic language know the weight of this phrase,” the Global Times, a newspaper affiliated with the Communist Party, said in an article last April. It was also used before conflict broke out between China and Vietnam in 1979.
On rare earths specifically, the People’s Daily said it isn’t hard to answer the question whether China will use the elements as retaliation in the trade war.
China is “seriously” considering restricting rare earth exports to the U.S. and may also implement other countermeasures, the editor-in-chief of the Global Times, said in a tweet. An official at the National Development & Reform Commission told CCTV that people in the country won’t be happy to see products made with exported rare earths being used to suppress China’s development.
Minas Gerais signs MoU with tech company to monitor tailings dams
Following the collapse of a dam at Vale’s (NYSE:VALE) Corrego do Feijão iron ore mine back in January, the southeastern Brazilian state of Minas Gerais signed a Memorandum of Understanding with tech company Inmarsat to monitor all tailings facilities in the region.
According to Inmarsat, the plan is to provide the state government with a smart monitoring solution which is based on IoT and satellite technology and can provide real-time visibility of conditions at tailings dams.
The technology relies on connected sensors that gather data related to piezometric pressure, pond elevation, local weather conditions and inclinometer readings. These data are aggregated at the ‘edge’ and transferred via a global L-band network to a cloud-based dashboard.
The information in the dashboard then allows companies, auditors and regulators to make decisions related to safety standards.
http://www.mining.com/minas-gerais-signs-mou-tech-company-monitor-mining-tailings-dams/
Barrick tips US$1B expansion for Pueblo Viejo
Barrick Gold (TSX: ABX) expects to complete a feasibility study next year on an estimated US$1 billion expansion for the already tier one Pueblo Viejo gold operation in the Dominican Republic.
The mine is managed and 60%-owned by Barrick in a joint venture with Newmont Goldcorp.
Having already recommitted Barrick to its Latin American portfolio earlier this year, president and CEO Mark Bristow said the planned investment was further evidence of the partners’ long-term commitment to the social and economic development of the Dominican Republic.
“We look forward to continue making a significant and growing contribution to our communities and other stakeholders and to unlocking the enormous value of its mineral potential while addressing the historical third-party environmental issues,” he said.
Barrick describes a tier one gold asset as a mine with a stated life of plus-10 years with 2017 production of at least 500,000 ounces of gold and 2017 total cash cost per ounce within the bottom half of Wood Mackenzie’s cost curve tools.
Pueblo Viejo produced 581,000oz at an all-in sustaining cost of $623/oz in 2018 and is forecast to produce 550,000-600,000oz this year at an AISC of $610-$650/oz.
The proposal includes an expansion of the mine’s processing plant and tailings capacity and could extend the mine life “into the 2030s and beyond”, Barrick said.
The initial capital investment was estimated at more than $1 billion on a 100% basis.
Bristow said the JV partners had already invested $5.2 billion in Pueblo Viejo, which represented about 20% of the total foreign direct investment in the Dominican Republic over the past 10 years.
The mine started production in 2012.
Barrick shares are down more than 13% year-to-date, having completed its merger with Bristow’s Randgold Resources in January and striking a joint venture in March with Newmont over the pair’s Nevada operations.
COMMODITIES
China buoys coking coal; India looms larger
Fitch Solutions Marco Research has kept its coking coal price forecast of US$195/t stable for 2019.
The market researcher cited strong demand from China’s steel sector, deteriorating US-China relations and the probability of further economic support from the Chinese government for domestic industries for the stable outlook.
On the supply side, production misses from Australia were expected to keep the coking coal market tight in coming quarters.
“Although we are more positive on coking coal prices in the coming quarters than we were a year ago, we continue to maintain our view that prices will ease in the long term, as the Chinese steel sector resumes its slowdown and the demand for Australian coking coal softens,” the research team said.
The Chinese steel sector accounts for two-thirds of global coking coal consumption. Fitch said high-frequency indicators showed that, while the largest importer of Australian coking coal, India, saw an 11.7% year-on-year decline in coking coal imports from Australia in the March quarter, China – the second largest importer of Australian coking coal – increased imports by 35% year-on-year in the same period.
This notwithstanding increased environmental checks at Chinese ports and port delays, as Australian coking coal remained cheaper than imports from the US.
Chinese authorities have also imposed a lower quota on imported coal at specific ports in 2019 than in 2018.
Nevertheless, Fitch said healthy coal import quotas at other ports in the country had buoyed Australian coking coal demand and prices.
Beyond 2020, Fitch expected Australian coking coal prices to continue on a multi-year downtrend, driven by a resumption in the slowdown of the Chinese steel sector and environmental concerns limiting coal imports.
China’s coking coal consumption is expected to stagnate out to 2028, compared to an annual average growth of 5% over the past decade.
According to Fitch, India is already the largest importer of Australian coking coal, accounting for 24% of total imports from the country in 2018. It expects India’s coking coal consumption to grow at a yearly average rate of 5.4% between 2019 and 2028, driven by an equally robust expansion in steel production in the country.
“As a result, India will overtake China as the largest importer of global coking coal by 2025, despite the country only importing half as much as China in 2017.”
Meanwhile, Fitch said China was expected to maintain high domestic coking coal production which would increase from 536Mt this year to 551Mt by 2028. Production in 2028 is expected to be triple that of the second-largest producer, Australia, at 184Mt.
Over the years, China, Australia and Indonesia would slowly lose the global market share of coking coal production to Russia, India and Mongolia. With 157Bt of coal deposits, Russia holds the second-largest recoverable coal reserves in the world.
In the longer term, Fitch believes coal mine production in Russia will be supported by president Vladimir Putin’s efforts to develop the industry. According to the ministry of energy, the Russian government will spend an estimated $123 billion on the coal sector between 2012 and 2030.
https://www.mining-journal.com/bulks/news/1363761/china-buoys-coking-coal-india-looms-larger
LEGAL AND REGULATORY
Malaysia to let Australia’s Lynas to continue running rare earths plant
TOKYO, MELBOURNE (Reuters) – Rare earths miner Lynas Corp will be allowed to keep operating a processing plant in Malaysia, Prime Minister Mahathir Mohamad said on Thursday, ending months of uncertainty over the future of the Australian-based company’s $800 million (633.26 million pounds) plant.
Malaysia had earlier halted the process for renewing Lynas’ licence because of waste disposal concerns.
Lynas is the only significant producer outside China of rare earths, which have military applications and are used in batteries, computers, televisions and many other products.
“We will allow Lynas to carry on because otherwise we are going to lose a very big investment from Australia,” Mahathir told reporters at a news conference in Tokyo. Mahathir is in Japan to attend a business conference.
https://uk.reuters.com/article/uk-lynas-corp-malaysia-mahathir-idUKKCN1T00U2
Zambia turns up the nationalist heat on its copper miners — opinion
Relations between the Zambian government and its copper mining sector have just taken a turn for the worse.
“If it is the will of the Zambian people that we divorce with these mines, then we will do so.”
President Edgar Lungu has swiftly followed through on his threat with a move to liquidate Konkola Copper Mines (KCM), the local operating unit of India’s Vedanta and one of the country’s biggest producers.
What appears to have triggered the move to intervene more directly, however, is KCM’s decision to reduce output at its Nchanga operations.
Government officials have been quick to stress that this does not amount to the nationalisation of KCM’s assets but inevitably it has led to comparisons with the last time the Zambian state took control of its copper sector in 1969.
What followed were years of structural decline as systemic under-investment saw the country’s production collapse from over 700,000 tonnes per year to less than 250,000 tonnes at the end of the 20th century.
The subsequent recovery has returned Zambia to one of the world’s largest producing nations, meaning Lungu’s proposed “divorce” could have significant ramifications both on copper supply and price.
Indeed, the impact is already being felt.
http://www.mining.com/web/zambia-turns-nationalist-heat-copper-miners-opinion/
Mongolia braces for delay of state coal giant’s IPO
Parliament chief says elections could interrupt move to list company this year
TOKYO — The head of Mongolia’s parliament said that plans to list the state company that controls one of the world’s largest coal mines could be delayed.
Gombojav Zandanshatar, chairman of the State Great Hural, told the Nikkei Asian Review in an interview that elections and other factors could impede the market debut of miner Erdenes Tavan Tolgoi this year. He was speaking on the sidelines of Nikkei’s Future of Asia conference, held on Thursday and Friday, in Tokyo.
Previously, Erdenes had unveiled plans to raise up to $3 billion in a public stock offering in Hong Kong within 2019.
Mongolia plans to hold a general election in 2020. And in a by-election this June, more than 10 parties will compete to fill a seat that was left vacant after a parliament member stepped down following a rape allegation.
The Tavan Tolgoi deposit, in the south of Mongolia, holds estimated reserves of nearly 8 billion tons of coking coal. The company last year turned a net profit of 720 billion tugrik ($272.78 million), up more than 50% from the previous year, on revenue of 1.86 trillion tugrik.
Mongolia has been seeking IPOs of state-owned companies. “Privatization through a method of stock exchange will allow everyone to buy a certain share and could be a solution to inequality, which is a serious issue facing Mongolia right now,” Zandanshatar noted.
Aside from reforms of state enterprises, the parliament chairman expressed a desire to “use advanced technology and expand exports of high-quality agricultural goods to Northeast Asia.” Digitizing industries like agriculture and tourism will help drive growth, he said.
Bolivia eyes US$4.3B in projects with mining law changes
Bolivia’s government sees the potential to develop a US$4.3 billion portfolio of base and precious metals projects after it completes changes to the country’s mining law and develops a mining incentive law, Mariana Prado, minister of development planning told Mining Journal.
Prado, a rising star in the administration of president Evo Morales having formerly worked as chief of staff for the vice president’s office, is seen as one of the most influential women in the country. She sees a clear need for foreign investment to modernise the mining sector and generate new production of metals such as tin, nickel, gold, lead, zinc and silver.
“Most mining technology in Bolivia is from the sixteenth century; it is very artisanal and rustic with just one big 21st century mine [Sumitomo’s San Cristobal]. We have to take a jump forward and for that we need partners that bring investment, technology and knowledge, and undertake the activity with social conscience,” she said.
Minister Prado said the government had made a succession of changes to the legal and regulatory regime since 2014 to open the country to foreign investment, and while an early priority was the hydrocarbons sector, investment conditions for mining were now being addressed.
“There was a moment when Bolivia was very anti-private capital but since 2014, president Morales began opening Bolivia up for investment in all sectors with the Bolivian investment law [law 516]. This allowed state companies to form joint ventures with the private sector and allowed arbitration processes to have foreign arbitrators. In 2015, the government passed [law 767] the promotion and investment in hydrocarbon exploration law,” she said.
FINANCIAL
Canadian resource companies investing abroad at record levels
Bloomberg News
Canadian resource companies are choosing to invest abroad at record levels, amid waning global interest in the nation’s energy and mining assets.
Statistics Canada reported Thursday that Canadian-based energy and mining companies invested a net C$15.5 billion ($11.5 billion) outside of the country in the first three months of 2019. The exodus of Canadian capital from the sector in the quarter was almost double the previous quarterly record.
It’s a bad sign for industries already struggling to attract capital. The data suggest that Canadian-based resource companies — who have refrained from large foreign investments in recent years — may now be seeking alternatives outside of Canada.
Investment into Canada’s energy and mining sector from abroad was just C$123 million in the first quarter of 2019, bringing the sum of the last four quarters to C$2.8 billion.
Foreign direct investment into Canadian resource companies has essentially collapsed since oil prices began dropping at the end of 2014. Before that period investment from abroad peaked in 2013 at C$22 billion that year.
For all industries, foreign direct investment in the first quarter fell to C$12.9 billion from C$17.6 billion in the final three months of 2018.
Manufacturing was an outlier, with that sector showing a sharp increase in investment from abroad last quarter.
http://www.mining.com/web/canadian-resource-companies-investing-abroad-record-levels/
INNOVATION AND TECHNOLOGY
ZEN partners with Canadian university to produce low-cost graphene
ZEN Graphene Solutions (TSXV: ZEN) announced that it has signed an initial agreement to in-license certain intellectual properties from a Canadian university that when combined with ZEN’s graphite from the Albany mine, produces low-cost, environmentally-friendly graphene.
In a press release, the company explained that the production process rapidly exfoliates Albany graphite into few-layer graphene or FLG with a conversion efficiency of over 90%.
The Albany graphite project is located near Thunder Bay, in northeastern Ontario. It is a microcrystalline graphite deposit with a completed PEA
“The challenge in the emerging graphene industry has been to produce consistent FLG, available in industrial quantities at prices that permit industrial adoption,” Francis Dubé, ZEN’s CEO, said in the media brief. “We believe that with this exciting new process applied to our unique Albany Graphite product, ZEN Graphene Solutions possesses all the components to solve this challenge within a single vertically integrated company.”
According to Dubé, the company collected 110 tonnes of graphite-mineralized material with an estimated average grade of 6% graphitic carbon during a bulk sample program that was carried out in early 2019.
http://www.mining.com/zen-partners-canadian-university-produce-low-cost-graphene/
COMMODITY PRICES
