June Newsletter – 15.06.18
ANNOUNCEMENTS
TOP NEWS
Russia’s Polyus big step closer to building world’s largest new gold mine
Russian gold miner Polyus on Thursday provided an update on its Sukhoi Log project, one of the world’s largest untapped gold deposits. The news sent units of the company trading over the counter in the US up 3% for a market value of some $8.5 billion.
Polyus in May completed the scoping study and verification drilling programme at Sukhoi Log, located in the Irkutsk region of eastern Siberia, and is now entering the pre-feasibility stage with a study out early 2021.
The Moscow-based company, the world’s 7th largest listed gold producer, said it planned to make a final investment decision on Sukhoi Log, by 2020-2021 with a target for production start-up around 2026.
“We have made serious progress in the development of Sukhoi Log during the last 14 months following the acquisition of the licence,” chief executive Pavel Grachev said. “We see it as a cornerstone of the future development of Polyus.”
Polyus expects average annual production of around 1.6 million ounces with total cash costs of a stingy $420-470 per ounce
The company said it expected the capital outlay for construction to be $2 billion to $2.5 billion. Around $30 million will be spent on geological and engineering studies per year in the run-up to board approval for the project.
Polyus said the proposed Sukhoi Log processing plant would treat an average of 30 million tonnes of ore a year. It said it expected average annual production of around 1.6 million ounces with total cash costs of a stingy $420-470 per ounce.
That would place the proposed Sukhoi Log mine number at number two in terms of annual output behind state-owned Muruntau in Uzbekistan (which does not release production figures). Potential life of mine is pegged at 35 years.
The Polyus power play for gold mining’s top tier
Sukhoi Log’s green fields hide 58m ounces of gold. Image: Gennady Vursiy Polyus Gold
The deposit was discovered in 1961 by the Bodaybo expedition and extensively explored by Soviet geologists in the 1970 to the 1990s.
In total over 320,000m of drilling have been carried out, including by a team from Canada’s Placer Dome (now Barrick Gold) in the late 1990s.
Polyus said it sees strong correlation of the results of verification drilling and the historical exploration data.
Polyus estimates resources at Sukhoi Log (which translates to “dry gully” in English) of 58m ounces of contained gold grading 2.0 g/t gold.
http://www.mining.com/russias-polyus-big-step-closer-building-worlds-largest-new-gold-mine/
Rwanda Targets Quadrupling of Mine-Export Earnings by 2024
Bloomberg
Rwanda targets a quadrupling of mineral-export revenue by 2024 as new projects come on stream, the Rwanda Mines, Petroleum and Gas Board said.
The state-run agency expects 13 new mining blocks to start operating between July and June 2019, it said in a statement emailed Wednesday from the capital, Kigali.
Earnings may increase to $600 million in the fiscal year that begins July 1, climbing to $800 million by 2020 and $1.5 billion by 2024, it said. Income last year was $373 million.
Rwanda exports minerals including gold, cassiterite, coltan and wolfram.
COMMODITIES
Copper slides as fears about supply disruptions wane
Reuters Staff By Pratima Desai
LONDON, June 11 (Reuters) – Copper prices slid on Monday as fears about output disruption at the Escondida mine in Chile receded, but worries about supplies from Vedanta’s copper smelter in India and a softer dollar provided some support.
Benchmark copper on the London Metal Exchange was down 1.1 percent at $7,234 a tonne at 0922 GMT. Last week, the metal used widely in the power and construction industries touched $7,348, its highest since January 2014.
“Labour negotiations to agree a new contract before the end of June are the big factor. Copper prices will unravel if there is no strike, back towards $6,900/$7,000,” said Societe Generale analyst Robin Bhar.
“Vedanta’s sterlite smelter closure points to some tightening, we don’t know how long it’s going to be closed for. We would expect Vedanta to challenge the ruling in court.”
ESCONDIDA: The union at BHP’s, Escondida copper mine in Chile said on Friday it saw a “favorable scenario” for reaching a deal on a new labour contract with the company, citing higher copper prices.
In a letter to its members published on its website, the union at the world’s largest copper mine said BHP has promised to respond to its recent proposal for a new contract by 1900 GMT on Monday.
VEDANTA: The Indian state of Tamil Nadu ordered the permanent closure of a copper smelter controlled by Vedanta Resources in May after 13 people protesting to demand its shutdown on environmental concerns were killed.
Copper price rallies to highest since January 2014
Copper price surges to highest since January 2014
Striking Escondida workers clash with police March 2017 (Image: Telam | YouTube)
Copper’s stunning rally this week continued in New York on Thursday with the metal touching a high of $3.32 a pound ($7,310 a tonne), the highest since January 2014, before paring some of those gains as worries about labour-related supply disruptions in key producing regions resurface.
Workers at the Escondida copper mine in Chile, the world’s top producing mine by a country mile, fired an opening salvo in contract talks with part-owner and operator BHP that makes a quick resolution highly unlikely.
Negotiations still left to resolve – including Escondida – represent about 2.6 million tonnes out of global copper supply
The union represents about 2,500 workers at the mine. Bloomberg interviewed union spokesman Carlos Allendes in Santiago on Wednesday:
“The company would be wrong to remain stubborn in its position that workers should earn less to give that money to shareholders.
“Workers have been educating themselves, we know the mine, the processes and our benefits inside out and they can’t fool us anymore”
The union is demanding a one-time bonus equivalent to 4% of dividends distributed to BHP shareholders in 2017.
Workers have been educating themselves, we know the mine, the processes and our benefits inside out and they can’t fool us anymore.
That works out to about $34,000 per worker. It would be the biggest bonus payout to mineworkers ever in Chile and comes on top of a general wage increase of 5%, which is more than double the inflation rate in the South American nation. BHP has until next Friday to respond.
Due to its size, Escondida can on its own change global copper supply dynamics.
BHP, which owns 57.5% of the mine and partner Rio Tinto 30%, has spent nearly $8 billion expanding the mine (including a $3.4bn water plant) in the past five years to maintain output above one million tonnes. 2018 guidance is 1.18–1.23mt, up more than 30okt compared to last year.
That means Escondida, in production since 1990, is responsible for nearly 5% of the world’s primary copper supply.
Last year’s walkout lasted 43 days and ended only when workers invoked a legal provision that allows them to extend their existing contract by 18 months (to end July).
These charts show just why copper price fundamentals are so strong – top 10 copper mines 2017 production
The 2017 strike at Escondida was the longest in Chile since the 74-day action at state-owned Codelco’s El Teniente mine in 1973, which took place shortly before the military coup that overthrew socialist President Salvador Allende.
http://www.mining.com/copper-price-surges-highest-since-january-2014/
LEGAL AND REGULATORY
Brazil’s President to change mining regulations as early as next week
Brazil’s President Michel Temer is set to issue a decree next week introducing key changes to current mining regulations, aimed at making the country’s industry more competitive and sustainable.
The executive order will technically be a reinterpretation of 50-year-old regulations, rather than a new law, Adriano Trindade, attorney specializing in mining rules from Pinheiro Neto Advogados told MINING.com.
Mining is regulated in Brazil by the Mining Code enacted in 1967 and by its Regulations of 1968. While the code has been amended several rimes, the regulations have remained the same. Last year, Temer attempted to enact a new Mining Law by issuing a Provisional Measure that had to be voted by Congress in 120 days, but this period lapsed and lawmakers neither approved, nor rejected it.
President Michel Temer will issue a decree next week introducing key changes to mining rules dating back to the 1960s.
Instead, other two other provisional measures were approved and later signed into law. One of them created the National Mining Agency, an autonomous regulatory agency for the mining sector, in a move aimed at accelerating slow licensing approvals in Brazil.
The other change introduced higher mining royalties. Iron ore producers now pay a 3.5% royalty instead of the previous 2% as a result. That amount is calculated of gross revenue instead of net revenue as is previously done, which would notably increase collections. Gold royalties, in turn, were set at 1.5%, up from the previous 1%.
http://www.mining.com/brazils-president-to-change-mining-regulations-as-early-as-next-week/
Congo mining code regulations signed into law – aides
Reuters Staff
* No changes made to text of regulations
* Code sets Congo on collision course with mining firms (Adds legal advisor making clear no changes made)
By Fiston Mahamba
KINSHASA, June 9 (Reuters) – Regulations to implement Congo’s new mining code have been signed into law with no changes, advisers to the prime minister told Reuters on Saturday, despite objections from mining firms that have been threatening legal action.
Prime Minister Bruno Tshibala signed the regulations into law overnight, his adviser Patrick Mutombo Buzangu told Reuters by telephone, but gave no further details.
The prime minister’s legal counsel Anita Lwambwa later confirmed that none of the changes being demanded by the mining industry had been made.
Congo mining regulations to be signed into law on Friday – mines minister
DAKAR (Reuters) – Democratic Republic of Congo’s prime minister will sign into law on Friday regulations to immediately implement a new mining code without any concessions to industry demands that key provisions be amended, the mines minister said on Thursday.
The move could set off a legal battle between the government and major mining companies operating in Congo, including Glencore (GLEN.L) and Randgold (RRS.L), which threatened legal action against the government last week if their concerns about tax hikes and the elimination of exemptions were not addressed.
“The code will be applied as it was promulgated!” Mines Minister Martin Kabwelulu told Reuters in a text message.
Glencore faces third Congo legal challenge this year
Congolese-American businessman and convicted fraudster Charles Brown has brought back a lawsuit against Glencore (LON:GLEN) the company considered dead, becoming the third court challenge the mining and commodities giant faces this year for control of its DRC mines.
Brown, one of the founders of Mutanda Mining — the world’s No.1 cobalt producer —, claims he’s owed $1 billion in compensation for a 19% stake he previously held in that company, and which was allegedly sold to Glencore in two fraudulent transactions, in 2007 and 2012.
The legal battle is the latest drama in the Congo after British regulators revealed in May they would open a formal bribery investigation into Glencore’s deals with Dan Gertler, an Israeli mining tycoon implicated in the payment of bribes to the country’s President Joseph Kabila.
http://www.mining.com/glencore-faces-third-congo-legal-challenge-year/
FINANCIAL
Cobalt 27 announces first-ever streaming deal for battery metals
Financial Post
‘It brings immediate free cash flow into the business’ — to the tune of about $30M a year from Ramu’s cobalt and nickel
Toronto-based Cobalt 27 Capital Corp. on Tuesday announced it will pay $145 million for the right to the cobalt and nickel from the Ramu mine in Papua New Guinea, in what marks the first streaming deal of its kind in the battery metals space.
The company, which announced an US$80-million credit facility earlier this month and US$185 million in equity financing in March, said it will not take on any new debt for the deal — a sign of the market interest for companies with exposure to battery metals as automakers prepare to increase electric vehicle manufacturing.
“This completely transforms our company because it brings immediate free cash flow into the business,” said Anthony Milewski, chairman of Cobalt 27.
It would put Cobalt 27 in line to receive the revenue from the sale of 450,000 pounds of cobalt and 2.25 million pounds of nickel per year — about US$30 million at current prices.
The price of cobalt on the London Metals Exchange has risen more than four-fold to above US$90,000 per ton from under US$22,000 in 2016. Much of the demand is connected to predictions that automakers are about to shift to manufacturing electric vehicles, en masse, and cobalt is a key component of the batteries.
INNOVATION AND TECHNOLOGY
Northvolt begins building Europe’s largest lithium-ion battery plant
Battery cell maker Northvolt began building Friday what will be Europe’s largest lithium-ion battery cell factory in Sweden after receiving environmental permits earlier this week.
The company aims to reduce reliance on batteries from China and South Korea as European carmakers come under increasing pressure hurry up and catch onto the ongoing electric vehicles (EVs) boom.
Batteries are the biggest single cost of an EV and companies such as VW have called for the creation of a European supplier to compete with dominant Asian players such as Panasonic, LG Chem and China’s CATL.
The first section is expected to start production in late 2020, generating eight gigawatt cell capacity per year.
Former Tesla executive Peter Carlsson, co-founder and chief executive of Northvolt, wants the northern Sweden factory to rival the scale of the US electric carmaker’s Gigafactory in the Nevada desert, targeting annual cell production equivalent to 32 gigawatt-hours by 2023.
The first section of the factory, in Skellefteå in the north of Sweden, is expected to start production in late 2020, generating eight gigawatt cell capacity per year.
“Northvolt has initiated a process to support the funding required for investments in buildings, materials and equipment that will take place in the next phase until the first part of the factory is completed,” Carlsson said in the statement.
http://www.mining.com/northvolt-begins-building-europes-largest-lithium-ion-battery-plant/
PROJECTS
How an Environmental Disaster Changed Brazil’s Mining Industry
Bloomberg
- Metal companies have had to change how they react to accidents
- Samarco disaster gave mining a ‘bad image’: ex-Vale executive
The future of some of the world’s biggest mining operations remains mired in uncertainty after a fatal dam spill helped transform Brazil’s relatively light corporate scrutiny into a legal minefield.
The 2015 disaster at the Samarco iron-ore mine, which left 19 dead, precipitated a cascade of legal issues and challenges for the still-shut venture owned by Vale SA and BHP Billiton Ltd. Mining’s reputation in Brazil was further tarnished this year when an alleged waste-water leak at the world’s largest alumina refinery, owned by Oslo-based Norsk Hydro ASA, led to a court-ordered 50 percent production curtailment.
The Samarco accident, considered Brazil’s worst environmental disaster, has made prosecutors and judges more critical of companies, say lawyers including Clovis Torres. The former Vale executive, who played a key role in the legal proceedings when the Samarco partners launched cleanup and compensation efforts, says officials are looking at mining and metal operations much more closely in Brazil even though the laws haven’t changed.
COMMODITY PRICES
