March Newsletter – 30.03.2020
ANNOUNCEMENTS
Dear Friends and Colleagues,
COVID-19
Behre Dolbear sincerely hopes this message finds you and your loved ones safe and well. Behre Dolbear sends our thoughts to all who are impacted by the global pandemic and your safety and well-being are our highest priority.
We are following the precautionary safety measures and guidelines provided by our National and Regional Governments worldwide. Our offices all continue to operate as normally a possible, but in most cases we are working remotely to comply with “social distancing” guidelines. It may not always be possible to respond to all our calls due to these measures, emails will be the best means to reach us and we will be checking our phones and voicemail periodically.
NEWSLETTER
- Mining could be enormous post-virus stabiliser – Minerals Council
- Mine closure impact on global copper supply – report
- South Africa lockdown to hit Anglo American output
- Chile’s copper miner Codelco suspends construction projects over coronavirus
- First Quantum eyes stake sale in Panama mine -sources
- Russian tycoon buys 49% of Elga coal project, talks to Mechel on 51%
- Coronavirus crisis could slow the rate of energy transition, Rystad says
- Peru uncovers organized crime network laundering illegally mined gold
- Japan’s JX to cut operations at Chile’s Caserones copper mine by 40% amid pandemic
Mining could be enormous post-virus stabiliser – Minerals Council
JOHANNESBURG (miningweekly.com) – The mining industry could be an enormous asset in stabilising and growing the economy post the coronavirus crisis – but the right economic and regulatory circumstances would have to prevail, Minerals Council South Africa stated in a weekend media release.
Post coronavirus, South Africa would need to adopt and implement a set of comprehensive structural reforms to materially improve the country’s competitiveness rankings, grow productivity, generate much higher levels of fixed investment – greater than 25% of gross domestic product (GDP) compared with the current 19% of GDP – raise economic growth, and start reducing unemployment and poverty.
It would only be through the implementation of the necessary economic reforms that the ratings agencies would again take South Africa back to investment grade.
Minerals Council South Africa was reacting to the decision of the last of the three main ratings agencies, Moody’s, to cut South Africa’s credit rating to a level below investor grade.
“The Moody’s decision does not come as a surprise. With Moody’s having changed the outlook to negative in November as well as lowering our economic growth forecast recently, South Africa was already close to the edge.
“The negative union response to the 2020/1 National Budget effort to cutback fiscal spending was not helpful. And the situation has, of course, been hugely exacerbated by the impact of the coronavirus lock-down, and the virus’s impact on our main trading partners,” the council stated, adding that the downgrade was largely as a result of government’s own making over an extended period.
South Africa had been placed in the downgrade situation. As a result of its failure to implement a comprehensive package of economic structural reforms, such as quickly enabling private sector investment in power generation, not cutting the expensive and wasteful umbilical cord of State ownership and support to non-strategic disastrously run State-owned organisations like South African Airways, and the fiscal crisis caused by nine years of corruption and State capture. The fact that not even one of the protagonists involved in the disastrous State capture project had been prosecuted was concerning.
Mine closure impact on global copper supply – report
The collapse of the copper price and the containment measures taken for the coronavirus pandemic are posing a significant risk to global copper mine supply and project development, Nick Pickens, research director at Wood Mackenzie said in a note this week.
Day-by-day, mining companies are announcing revised plans to comply with new restrictions.
“For now, temporary closures will be absorbed by our mine disruption allowance,” Pickens said. “In a scenario where there are wholesale closures of mines in Peru and Chile for 15 days, we would see 1.5% wiped from global annual supply. It would take 45 days to reach our full-year mine disruption allowance.”
“IN A SCENARIO WHERE THERE ARE WHOLESALE CLOSURES OF MINES IN PERU AND CHILE FOR 15 DAYS, WE WOULD SEE 1.5% WIPED FROM GLOBAL ANNUAL SUPPLY”
Open pit in Constancia.
Nick Pickens, research director, Wood Mackenzie
“At this stage, we are not assuming mine supply from these countries will stop in its entirety. However, we believe there is a significant risk that disruptions will escalate, and breach 5% this year.”
Low prices could hamper mine restarts and new projects. The copper price is currently trading below the 90th centile of the industry cost curve (223 c/lb). Temporary closures and construction deferrals have accelerated due to virus containment. However, a sustained period of lower prices could make these more permanent.
Cost deflation will help to ease margins, Pickens said.
“Our mark-to market analysis suggests that at current market oil prices and exchange rates, the 90th centile of the C1 plus capex cost curve will fall by nearly 25 c/lb when compared to 2019. Furthermore, a prolonged period of lower average oil prices will have a more extensive deflationary influence for other raw material costs, and the impact could be more significant.”
Supply disruptions, directly relating to coronavirus
In recent days, the reach of coronavirus has rapidly expanded from key regions of copper demand – China and Europe, to key regions of supply – the Americas. Peru has enforced widespread quarantine, and some mines are now thought to be on temporary care and maintenance.
“In Chile, a state of catastrophe has been declared. We have also seen temporary cutbacks and risks to suspensions in Canada, the DR Congo and Australia,” Pickens said.
In Peru, the government has taken measures to prevent the spread of the pandemic throughout the mining industry. Mining companies have been asked to only mobilise critical employees to mine sites, to implement an emergency plan adapted to the circumstances, and to ensure health protection for a 15-day period, from 19 March.
Critical employees might comprise those who work in environmental or safety functions such as water treatment plants, ground stability, tailings monitoring, underground ventilation and security, Pickens said.
This would mean that mining operations would effectively go under care and maintenance for 15 days. Large operations that have followed this measure include Cerro Verde and Constancia.
https://www.mining.com/mine-closures-pose-risk-to-global-copper-supply-report/
South Africa lockdown to hit Anglo American output
Diversified miner Anglo American (LON: AAL) said on Friday that South Africa’s 21-day lockdown to slow the spread of the coronavirus will impact its iron ore and coal guidance the most.
The company, founded in South Africa more than 100 years ago, said production at its Kumba Iron Ore mine will drop by up to 3 million tonnes this year, while thermal coal output will be reduced by 1.5 to 2 million tonnes.
Anglo noted that the rail and port logistics infrastructure to support the export of both commodities is expected to continue to service the operations during the three-week period.
PRODUCTION AT THE COMPANY’S KUMBA IRON ORE MINE WILL DROP BY UP TO 3 MILLION TONNES THIS YEAR
Anglo also lowered output of platinum and diamonds, but the National Union of Mineworkers (NUM) told Business Maverik the fact that the company is keeping its mines open, though with fewer employees, was a “reckless and inhuman” pursuit of profit.
Venetia diamond mine, run by the group’s subsidiary De Beers, will operate with staff levels cut to 25%. Mogalakwena, the world’s largest palladium mine outside Russia, and Mototolo platinum mine continue to operate with a reduced workforce and production, subject to further planning, Anglo said.
Three platinum operations — Amandelbult, Modikwa and Kroondal —as well as the Mortimer and Waterfall smelters, are being placed onto care and maintenance, it said.
https://www.mining.com/south-africas-lockdown-to-hit-anglo-american-output/
Chile’s copper miner Codelco suspends construction projects over coronavirus
SANTIAGO, March 25 (Reuters) – Chile’s Codelco, the world’s largest copper miner, said on Wednesday it would temporarily suspend construction on some projects in a bid to halt the spread of coronavirus, as the company´s unions ratcheted up pressure for more safety measures.
In a statement Codelco said the 15-day suspension applied to remaining work being carried out to make Chuquicamata an underground mine, and projects at an early stage at Rajo Inca and Traspaso Andina.
“This measure has no impact on the production of the respective divisions – which maintain operational continuity with the greatest possible sanitary safeguards – but allows for a decrease in people circulating,” Codelco said.
The announcements follow an open letter from the Federation of Copper Workers, an umbrella group for Codelco´s unions, demanding the state miner consider a full, preventative quarantine, including halting labor at all mine operations.
The group warned it would take action on its own if the miner did not implement more drastic measures to protect workers immediately.
“We will not rule out a call to our workers … to walk off the job in an effort to mitigate the impacts (of the outbreak),” the federation said in the statement.
Though many operations have been automated at Chile´s largest deposits, mines remain labor-intensive and workers at remote sites in the Andes mountains congregate for meals and transportation, complicating sanitary safeguards.
First Quantum eyes stake sale in Panama mine -sources
LONDON/TORONTO, March 24 (Reuters) – Miner First Quantum Minerals is considering selling a minority stake in its flagship Cobre Panama copper mine to reduce debt, two banking sources familiar with the discussions said.
First Quantum’s possible move comes as global miners scramble to bolster finances strained by the coronavirus pandemic, which has battered stocks and copper prices. First Quantum shares are down more than 50% this year.
Total investment in Cobre Panama up to 2019 stood at $6.3 billion, according to the company.
With a market capitalization of $2.4 billion, First Quantum trades around three times its earnings before interest, taxes, depreciation and amortization, compared to an average of eight times for mining companies. Its net debt at the end of 2019 stood at $8.8 billion.
The Canadian miner will have to do more than refinance its debt after talks to sell down its Zambian mines stalled because of the outbreak, said one of the sources.
Russian tycoon buys 49% of Elga coal project, talks to Mechel on 51%
MOSCOW (Reuters) – Russian businessman Albert Avdolyan has reached an agreement to buy a 49% stake in the major Elga coal project in Russia from Russian lender Gazprombank (GZPRI.MM), the bank said in a statement on Monday.
Avdolyan’s company A-Property is still in talks to buy the remaining 51% in the project from Russian steel and coal producer Mechel (MTLR.MM). For Mechel, Elga is the biggest growth asset, but it confirmed last week that it was in talks to sell it to reduce the debt burden.
Elga, one of the world’s biggest coking coal deposits, requires further investments to develop. Mechel’s net debt stood at 400 billion rubles ($5 billion) at the end of 2019, mainly to Gazprombank and another bank, VTB.
The businessman may reach an agreement with Mechel by the end of April and become the owner of 100% in the project, two sources familiar with talks told Reuters on Monday.
Mechel is in debt restructuring talks with its creditors, and these discussions directly depend on the result of its Elga negotiations, Mechel said last week.
It was not clear how much funding Avdolyan was offering Mechel for the stake.
Gazprombank and Avdolyan did not disclose the price of their deal on Monday.
Coronavirus crisis could slow the rate of energy transition, Rystad says
Oil & Gas 360 Publishers Note: Here is one you would not have seen coming last year. The fast moving renewable market being slowed down, and coal production going up. Key takeaway from this article: China’s coal mines are back to full production as they are needing to feed the economy as oil imports have had a problem.
The COVID-19 pandemic has shaken energy markets to the core this year, creating incredible volatility for fuel prices. The one energy source that hasn’t blinked though is coal, a fuel that may come out stronger through the current crisis, a Rystad Energy analysis shows.
The price of coal was already depressed before the coronavirus crisis, and the demand curtailment in China during the lockdowns was accompanied by a domestic production drop, balancing the market, Rystad said on Friday.
Oil, which is used as a fuel in coal mining, has grown cheaper and is seen by Rystad Energy as reducing coal output costs by a few dollars per ton.
Peru uncovers organized crime network laundering illegally mined gold
A massive operation involving more than a thousand law enforcement officers in five regions has led to the arrests of 18 people accused of belonging to a criminal network called Los Topos, or The Moles, laundering illegally mined gold.
Four of those under investigation are listed in the mining formalization registry,with their documents used to legitimize the transport of large quantities of gold.
The Peruvian Ministry of Energy and Mines says those who abuse their mining formalization status will be removed from the registry.
But law enforcers investigating the network say the government’s repeated extension of the deadline for miners to register allows opportunity for more such abuses of the system.
A major operation across five regions of Peru has seen 47 prosecutors and 1,200 police officers arrest 18 people who, according to Peruvian authorities, were members of a criminal organization known as Los Topos (Spanish for “The Moles”), who focused on the illegal mining and trading of gold.
Simultaneous raids were carried out in nine tunnels located in Parcoy district, Pataz, in the northern region of La Libertad, leading to the regions of Piura, Lima, Ica and Arequipa. The operation successfully revealed the process used by criminal organizations to launder gold mined from prohibited sites.
The authorities also unmasked the front used by this criminal group to shield its operations via the Ministry of Energy and Mines’ Integral Registry of Mining Formalization (REINFO). Members of Los Topos used the registration details of four people who were in the process of being formalized as artisanal miners in order to transport the goods and authenticate the gold.
The group used this front to launder high-purity gold illegally mined from huge tunnels dug into the hills of the Retama and Fernandini areas in Parcoy, which were hidden inside buildings built on the mountain slopes.
Japan’s JX to cut operations at Chile’s Caserones copper mine by 40% amid pandemic
TOKYO, March 24 (Reuters) – JX Nippon Mining & Metal said on Tuesday it cut its operation at Caserones copper mine in Chile as it reduced the number of workers from March 22 to comply with government’s measures to limit movement of people to curb the spread of coronavirus.
The Japanese miner, which is under JXTG Holdings, said it will decide how long this reduced operation will continue depending on the local virus conditions and instructions from the government.
COMMODITY PRICES
