June Newsletter – 24.06.19
Peabody, Arch form ‘extraordinary JV’
A planned joint venture between US coal majors Peabody Energy and Arch Coal will combine five coal mines in Wyoming and Colorado into a single operation capable of producing more than 60% of the Powder River Basin’s thermal coal output.
Under terms of the JV, Peabody’s North Antelope Rochelle mine (NARM) and Arch’s Black Thunder mine will be consolidated in what Peabody called “an extraordinary joint venture.” Underpinning the combination, Peabody has the lowest-cost position among major PRB producers and Arch has some of the highest-quality coal in the basin.
The deal also consolidates the companies’ western coal mining operations in an ailing thermal coal market.
According to the US Energy Information Administration (EIA), cheap shale gas, renewable energy and flat consumption have cut coal use in the country. According to agency data, US power plants have cut coal consumption by about 40% over the past decade, with a 19% drop expected in 2019 alone.
Aside from combining the neighbouring NARM and Black Thunder mines in Wyoming, Peabody’s Rawhide and Caballo mines will be part of the JV, as well as Arch’s Coal Creek mine. In Colorado, the consolidation extends to Peabody’s Twentymile and Arch’s West Elk mines.
Overall, the mines produced about 206 million tons of coal in 2018 and the JV would give them access to about 3.4 billion tons of reserves.
Gold mining stocks on a tear
Gold gathered momentum on Thursday sending the shares of gold miners higher across the board.
Gold for delivery in August, the most active futures contract trading in New York, settled at $1,396.90 an ounce. That’s up nearly $50 an ounce or 3.6% from yesterday’s settlement and the highest since September, 2013.
Barrick Gold, until last year the world’s no 1 gold miner in terms of ounces produced, jumped 5.7% in more than three times usual volume of shares traded. Barrick is trading at the highest since October 2017 and is now worth $27 billion in New York.
Newmont Goldcorp ended the day 3.4% higher for a market value just short of $31 billion. Newmont absorbed Vancouver-based Goldcorp this year and the combined company is targeting output of 8.4m ounces this year, 2.8m ounces more than Barrick’s forecast production in 2019.
Supreme Court’s Virginia uranium ruling hints at limits of federal power
June 18 (UPI) — Virginia has the authority to ban uranium mining under state law, even as the federal government regulates the processing of nuclear fuel under the Atomic Energy Act, the Supreme Court has ruled.
Neil Gorsuch, joined by the court’s longest-serving and newest conservatives — Clarence Thomas and Brett Kavanaugh — rejected the idea that Congress’ plan for nuclear enrichment could override Virginia’s decision to prohibit uranium mining altogether. On that point, these three conservatives were in sync with three of the court’s liberals, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan. This remarkably diverse coalition agreed that the “commonwealth’s mining ban is not pre-empted” by federal authority. Chief Justice John Roberts filed a dissent.
I have been involved in this case, Virginia Uranium, Inc. v. Warren, in its various iterations for more than a decade. Before joining the faculty at the University of Virginia School of Law, I worked with the Southern Environmental Law Center, an environmental advocacy organization that had raised grave concerns about a proposed uranium mine near the city of Danville.
All three of the opinions published in Virginia Uranium, Inc. v. Warren are likely to prove significant in future environmental battles — both in the courts and in the court of public opinion.
On one level, the justices sketched out the court’s evolving views on the proper balance between federal regulatory power and the rights of states in setting their own policies. Their opinions also challenged some common assumptions about how grass-roots environmental advocates can pull together winning political coalitions.
The Bull Case for Energy Metals Going into 2019
The rapid emergence of the world’s renewable energy sector is helping set the stage for a commodity boom.
While oil has traditionally been the most interesting commodity to investors in the past, the green energy sector is reliant on the unique electrical and physical properties of many different metals to work optimally.
To build more renewable capacity and to store that energy efficiently, we will need to increase the available supply for these specific raw materials, or face higher costs for each material.
‘Standout’ drill hit at Chile project
Copper hopeful Hot Chili claims to have delivered “one of the world’s standout copper-gold porphyry drill results” from the Cortadera target in Chile as it continues to talk to “several large domestic and international groups” about funding acquisition of the prospect.
The hit of 622m grading 0.6% copper and 0.2 grams per tonne gold from 204m depth (including 188m at 0.9% copper and 0.4gpt gold from 516m), was, according to Hot Chili, “comparable to some of SolGold’s early discovery drill results, which outlined the beginnings of a bulk tonnage, high grade zone at depth on its world-class Cascabel copper-gold deposit in Ecuador”.
Meanwhile, Hot Chili has attained a 90-day extension to payment of US$3 million of the first $5 million due near the end of August.
Under a deal signed late in February with a private Chile group, Hot Chili could acquire Cortadera for $30 million in staged payments over 30 months, with the first $5 million due within six months.
Hot Chili started the current quarter with A$3 million cash and was budgeting to spend $1.3 million in the June period.
Hot Chili is hoping Cortadera can be part of a major copper mining development, incorporating the nearby Productora deposit that the company has been working-on for the best part of a decade.
INNOVATION AND TECHNOLOGY
Renewables set to power up
“New energy” will account for up to half global electricity demand in 2050, requiring US$10 trillion of new investment in solar, wind and battery storage capacity, Bloomberg New Energy Finance projections indicate.
A BNEF report released this week says significant cost cuts in wind, solar and battery storage can help increase the contribution of renewables to global grid power to nearly 50% by the middle of the century, with total worldwide electricity demand expected to increase by 62% in this time.
“Our power system analysis reinforces a key message from previous New Energy Outlooks – that solar photovoltaic modules, wind turbines and lithium-ion batteries are set to continue on aggressive cost reduction curves, of 28%, 14% and 18% respectively for every doubling in global installed capacity,” said New Energy Finance lead analyst, Matthias Kimmel.
“By 2030, the energy generated or stored and dispatched by these three technologies will undercut electricity generated by existing coal and gas plants almost everywhere.”
The report suggests coal’s place in the global power mix will decline, from providing 37% of electricity today to 12% by 2050. Oil’s role as a power-generating source could become almost non-existent.
Rio Tinto looks at developing Simandou again — report
Rio Tinto (ASX, LON: RIO) is mulling options to develop the giant Simandou iron ore deposit in Guinea, which almost sold last year to its partner in the project Aluminium Corp of China, or Chinalco, as it is known.
People familiar with the matter told Bloomberg on Thursday that the world’s No. 2 miner has rehired consultants to work with its own team on how it would be possible to export ore, should the mine be developed.
Guinea has always said that Simandou’s output would have to be shipped via the country’s own ports. This means that the project would have to include a 650km trans-Guinean railway line and a port, which could push the total investment needed to a whopping $23 billion.
Simandou is one of the world’s richest reserves of high-grade iron ore, holding an estimated 2 billion tonnes of the steelmaking ingredient. It’s also one of the most easily exploitable iron ore fields outside of Australia’s Pilbara region and top producer Vale’s Brazilian home base.
At full production, the concession would export up to 100 million tonnes per year – that’s a third of Rio’s total capacity at the moment – and would catapult the company past Vale as world number one iron ore miner.