May Newsletter – 14.05.19



Exclusive: Brazil’s Vale to spend $2.5 billion on technology to prevent mining dam disasters

RIO DE JANEIRO (Reuters) – Brazil’s Vale said on Thursday that it plans to invest $2.5 billion over the next five years in technology that removes the need for tailings dams, the waste facilities responsible for two deadly mining disasters in the past four years.

The funds will be mainly used to convert Vale’s Carajas mining complex in northern Brazil to disposing of 100 percent of its tailings through dry processes, Vale’s director of ferrous planning and development, Fabiano Carvalho Filho, said in an email response to questions from Reuters.

Overall, the world’s largest iron ore exporter is aiming to boost the use of so-called dry processing to 70 percent of its output by the end of 2023, from 60 percent today.

Of the 17 processing lines of Plant 1 at Carajas, 11 are already dry and the remaining six wet lines will be converted by 2022, Carvalho Filho said.

In addition, the funds will be used in two projects in Brazil’s mining heartland of Minas Gerais, he said. One is a new processing complex for iron ore and the other is a previously operational mine which Vale is seeking to reactivate.

Vale said the investment is not directly related to the Brumadinho disaster, which left 237 confirmed dead, or the 2015 collapse of another dam at the Samarco joint venture with BHP Group Ltd, that killed 19 others and also caused what is widely considered the worst environmental disaster in Brazil’s history.

The dry tailings spending plan is part of an existing program under which Vale has invested almost $17.5 billion over the last 10 years, Carvalho Filho said.

Mark Wellesley-Wood, KEFI Minerals Chair, Suddenly Passes Away

LONDON (Alliance News) – KEFI Minerals PLC on Monday reported the sudden passing of Chair Mark Wellesley-Wood.

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The gold exploration and development company expressed its deepest sympathies to Wellesley-Wood’s family.

The company’s Managing Director Harry Anagnostaras-Adams will resume the role of executive chair, which he held prior to Wellesley-Wood’s appointment.

“Wellesley-Wood was a gentleman of the highest integrity and discipline, a true professional who made a great contribution to the industry internationally over decades and to our company in recent years,” KEFI Minerals said in the statement Monday.


Without U.S.-China trade war, copper price would be higher -Antofagasta chairman


A trade war between the United States and China is depressing the price of copper and the red metal would be 5% to 15% higher without the dispute, the chairman for Chile’s Antofagasta Plc told a Chilean newspaper on Sunday.

“Without the commercial war, I am convinced that the price of copper would be between $3.20 and $3.50 per pound,” Jean-Paul Luksic said in an interview with El Mercurio.

Despite a rebound on Friday on hopes of an agreement between Washington and Beijing, the value of copper registered its fourth consecutive weekly decline. It is currently about $3 per pound.

Luksic said that the market has good prospects, but the red metal is hurting more than it should be.

The bruising trade war, which has slowed the global economy, is clouding the outlook for demand from top metals consumer China.

“As long as this uncertainty persists, the low prices will continue,” said Luksic, who will also lead the Asia-Pacific Economic Cooperation Summit in Santiago this year.

Financing deals, deficit to buttress physical aluminium prices

LONDON (Reuters) – Aluminium tied up in financing deals and collateral for loans, shortages and inventory draws will sustain prices in the physical market even as funds expecting sluggish demand sell derivatives.

Financing deals involve buying aluminium now and selling it forward for a higher price and profit after storage and interest costs have been deducted. These deals are often on a monthly basis and rolled over, but traders say some recent deals go out to December 2019 and March 2020.

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World’s coal miners may be digging themselves into another glut

Bloomberg News

A global push to dig new mines for steelmaking coal is drawing warnings that a supply glut could push the industry from a boom to a bust, mirroring the brutal 5-year price slump that ended in 2016.

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Coal’s use to generate electricity has declined precipitously in the U.S. despite a revival push by President Donald Trump. That’s left metallurgical coal as the only part of the industry still thriving, with strong global demand and barely-growing supply combining to double the seaborne price since 2016 to more than $210 a metric ton.

Earlier this week, Consol Energy Inc. joined at least five other miners from the U.S., the U.K. and Australia in planning major new projects. It’s an aggressive strategy that has some worried the industry may end up boosting output too much too quickly, just as consumption slows. If so, prices could crater.

“The supply-demand balance in the space is very tight,” said Scott Schier, an analyst at Clarksons Platou Securities Inc. The industry could handle one or two new projects, he said, but “if more and more tons start coming online, it would be concerning.” Consol Energy Inc. joined at least five other miners from the U.S., the U.K. and Australia in planning major new projects. It’s an aggressive strategy that has some worried the industry may end up boosting output too much too quickly, just as consumption slows. If so, prices could crater

Demand for met coal climbed 17 percent from 2015 through 2018, according to Bloomberg Intelligence. That helped soak up a glut that peaked in 2014 when global consumption of 284 million tons was outpaced with a total supply of 313 million tons.

Peabody Energy Corp., the biggest U.S. coal company, has already expanded output by acquiring the Shoal Creek mine in December, and says that the Alabama facility was the top contributor to earnings in the first quarter. The St. Louis-based company paid 387 million for the site and expects to recover that in less than two years.

Australia, Guinea, Indonesia to lead bauxite mining up to 2029

Following a decline in global bauxite production in 2018, consultancy company Fitch Solutions says global bauxite production this year is being driven by new projects coming on line in Guinea and Australia, as well as a ramp-up in production in India and Indonesia.

Australia holds 12 of the 29 new bauxite projects in Fitch’s mines database, which is more than any other country. Fitch forecasts Australian bauxite production to grow by 15% this year, compared with 4% in 2018.

“While bauxite accounts for less than 5% of Australian mining value, the country is the global top producer, accounting for an estimated 28.8% of total global output as of 2018. Australia will remain a top bauxite exporter to China, although the country may lose some market share over the coming quarters to returning Indonesian supply,” says Fitch.

Indonesia’s bauxite production picked up after the country ended the ban on mineral ore exports, which was implemented in 2014, two years ago. The country is starting to reclaim its share of bauxite exports to China, supported by its closer proximity to and lower-cost production than Australia or Guinea.

Fitch quotes Bloomberg data, which indicates that Indonesian bauxite production increased by about 533% year-on-year from January 2018 to August 2018.

Fitch forecasts Indonesia’s bauxite production growth to register a yearly average growth rate of 8.1% between 2019 and 2028.


Big Four miners languish amid demand, ESG, capex concerns

LONDON (Reuters) – The world’s biggest diversified miners have yet to see their share prices reflect their role as providers of the minerals needed for a shift to a low-carbon economy.

Mining companies provide minerals such as cobalt used in electric vehicle batteries and copper for increased electrification, and the sector’s balance sheets are in rude health.

Still, many investors are wary. Concerns include the demand outlook from China, the world’s biggest consumer of metals; the sector’s history of wasting shareholders’ money on mergers and acquisitions that never deliver returns; and a patchy record on environmental, social and governance-related (ESG) issues.

Reminders of the dangers include a disaster in Brazil at a Vale tailings dam in January that killed an estimated 300 people, and a U.S. corruption investigation into Glencore, announced in April.

Refinitiv data shows the Big Four diversified miners – Rio Tinto, BHP, Anglo American and Glencore – trading at a lower forward 12-months price-to-earnings multiple than Britain’s FTSE 100.

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“All the large mining companies are trading on high free cash flow yields relative to the broader market when you adjust for capital spending on growth projects,” said Nick Stansbury, head of commodity research at Legal & General Investment Management (LGIM).

Nevada Copper inks $115m deal to construct Pumpkin Hollow

Nevada Copper Corp’s (TSX: NCU) announced a series of deals on Wednesday to finance its 100%-owned Pumpkin Hollow copper project through to completion targeted for the final quarter of the year.

The company HQ’ed in Reno, Nevada entered into a $115 million credit agreement with Germany-based KfW IPEX-Bank and also announced a public share offer and concurrent private placements to raise $30m, two off-take agreements with European metal companies Aurubis and Concord Resources and a working capital facility worth $35m.

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“We are pleased to be working with our respective offtake partners and working capital providers as we bring the underground project into first production later this year,” Matthew Gili, Nevada Copper’s CEO said in a release.

The execution of the underground project is progressing at a strong and steady pace with both underground development and surface works on track. Further, we have responded to our shareholders and intend to accelerate our exploration program both at the Open Pit and our newly-defined targets around surface mineralization contained in the recently expanded land position,” Gili said.

At market close on Wednesday, Nevada Copper’s shares were priced at 40 Canadian cents on the TSX. The company has a C$261 million market capitalization.


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