May Newsletter – 17.05.2021
- Centerra Gold to launch arbitration against Kyrgyzstan over Kumtor mine
- Largest ever Russian diamond fetches $14.1m at Christie’s
- Ethiopia revokes 27 inactive mining licenses in cautionary move
- Tesla may be partnering with EVE, strengthening move toward LFP chemistries
- China’s copper smelters to cut concentrate purchases
- “China is overproducing, we would expect to see some slowing down in H2” — Ferrexpo CEO
- China vowed to reduce steel output but hasn’t – is it part of a sinister plan?
- Analysts voice scepticism on mining supercycle narrative
Centerra Gold to launch arbitration against Kyrgyzstan over Kumtor mine
Canada’s Centerra Gold (TSX: CG) initiated binding arbitration against the Government of the Kyrgyz Republic in a legal skirmish related to the company’s Kumtor mine.
In early May, lawmakers in Kyrgyzstan passed a bill allowing the state to seize Kumtor for up to three months. The decision was made under the argument that the mine – the largest gold operation in the Central Asian nation – may pose danger to locals and the environment.
A few days later, on May 9, 2021, a district court imposed a $3.1 billion fine on Kumtor Gold Company, which is Centerra’s local unit in charge of running its namesake operation and which was found to have breached environmental laws by placing waste rock on glaciers, according to private civil environmental claims.
The Kyrgyz government also put before the court a series of tax claims that say that the Toronto-based miner owes more than $170 million. This, after the state Tax Service revived previously dismissed claims against Centerra.
Largest ever Russian diamond fetches $14.1m at Christie’s
The Spectacle gave its name to the collection of gems dedicated to the Russian ballet. (Image courtesy of Christie’s.)
The largest diamond ever cut in Russia – a 100.94 carat stone called the Alrosa Spectacle – has sold for 12.84-million Swiss francs ($14.1-million) at Christie’s in Geneva.
Polishing and cutting the rough diamond, discovered by Alrosa (MCX:ALRS) at one of its alluvial mine in Russia’s Far East in 2016, took 20 months.
The emerald-cut, Type IIA, D-Color, internally flawless Spectacle gave its name to the collection of gems, which also included rings, earrings, brooches and other pieces dedicated to the Russian ballet.
Diamond prices are recovering after the pandemic brought the industry to an almost complete standstill in the first half of 2020. Strong holiday sales in the US and positive signs from the Chinese New Year have prompted buyers to replenish their rough stones stocks.
Alrosa, the world’s top diamond miner by output, is only allowed to sell rough diamonds over 10.8 carats at auctions. First, however, it must offer those larger than 50 carats to the Gokhran state repository.
Ethiopia revokes 27 inactive mining licenses in cautionary move
The Tulu Kapi gold project is expected to start operations in late 2022 (Image courtesy of Kefi Gold and Copper.)
Ethiopia has revoked 27 idled mining licenses and sent warnings to three companies as the government looks to kick-start development of its vast mineral resources, a key part of its efforts to plug a large trade deficit and generate foreign exchange.
The announcement increases the number of cancelled licenses in the East African nation to 90, following the withdrawal of 63 permits in December.
It also sends a clear message to companies holding permits in the country but not moving forward.
Ethiopia, which has a mostly artisanal mining industry, is on a quest to woo foreign companies to start projects in the country, which is rich is potash, gold, tantalum, sapphires and construction minerals.
Gold mining has seen record growth in the past year, despite restrictions brought by the global pandemic.
China’s copper smelters to cut concentrate purchases
China’s 15 major copper smelters have agreed to cut their concentrate purchases by 8.8pc this year because of climate change mitigation strategies and depressed treatment and refining charges (TC/RCs), potentially switching to use more copper scrap and blister copper in their production of refined metal.
Overall, the 15 smelters will cut their copper concentrate purchases by 1.26mn t this year, equivalent to around 300,000t of refined metal. On an individual basis, each smelter is required to reduce their purchases by at least 5pc, according to market participants.
Most of the smelters involved are part of China’s Copper Purchase Team (CSPT), with the addition of some privately run smelters, including Xiangguang and Guangxi Nanguo. The CSPT smelters comprise Tongling Nonferrous, Jiangxi Copper, Daye Nonferrous, China Gold, Baiyin Nonferrous, Gansu Jinchuan, Yunnan Copper, Zhongtiaoshan, Yantai Guorun, Zijin Mining, Fuye Heding, and Huludao Zinc’s subsidiary copper smelter.
In terms of carbon emissions, copper smelting is one of the most polluting processes carried out by the non-ferrous metals industry, second only to aluminium production — hence its significance to China’s goal of ensuring that its non-ferrous metals industry’s carbon emissions peak by 2025 and are reduced to zero by 2060.
“China is overproducing, we would expect to see some slowing down in H2” — Ferrexpo CEO
China’s massive physical purchases of iron ore have been the primary driver of the post-pandemic price rally.
Benchmark 62% Fe fines imported into Northern China (CFR Qingdao) hit a new record on Wednesday, up 3.7%, changing hands for $237.57 a tonne, according to Fastmarkets MB.
Chinese crude steel production has grown by 30% over the past five years. China’s commodity exchanges on Monday moved to raise trading limits and margin requirements for some iron ore contracts and reinstated fees on steel futures.
“When you look at steel production in China, I’m not really sure what they are trying to achieve,” Swiss-based commodities trader and miner Ferrexpo’s interim CEO Jim North told MINING.COM.
Expectations that China will tighten environmental rules have added to the bull case.
“They are doing some publicity but overall China is not slowing down,” said North.
China vowed to reduce steel output but hasn’t – is it part of a sinister plan?
China has said one thing, but is doing something different – spelling good news for Australia. But it could all be part of a sinister plan.
Amid a backdrop of rising tensions between Beijing and Canberra, the price of iron ore has continued to skyrocket in recent weeks and currently sits at an all-time high.
Despite Beijing’s various threats and trade actions against all manner of Aussie industries from shellfish to barley, this single factor has resulted in trade flows between Australia and China continuing to reach record highs.
This really is quite strange given the commentary that has been coming out of Beijing in the past six months.
China vowed to reduce steel output
At the end of last year, China’s Ministry of Industry and Information Technology (MIIT) stated that China “must resolutely” reduce steel output to below 2020 levels of production.
Unsurprisingly at the time, the price of iron ore dropped more than 5 per cent, on the expectation from commodity traders that steel production restrictions would be put in place by Beijing to reduce steel output.
Analysts voice scepticism on mining supercycle narrative
Economists are tracking a broad economic recovery across the globe that appears to be gathering momentum and commodity prices are trading at healthy-to-stratospheric levels amid recovering demand from the Covid-19 pandemic, escalating geopolitical tension between the world’s industrial juggernaut China and key mining nations like Australia, and circumstantial supply-side issues.
On May 12 iron ore prices surged to a record US$237.57 per tonne and copper broke out of a decade-long rut on May 7, as metal for delivery in July gained 3.2%, with futures trading at a record US$4.75 per lb. (US$10,470 per tonne) on the Comex market in New York, compared with the 2011 record of US$4.50 lb. (US$10,190 tonne).
Unprecedented infrastructure-focused stimulus packages add a new layer of incremental demand growth to already generally bullish commodity fundamentals, and in recent quarterly conference calls the world’s mining majors boasted of record revenues, cash flow and returns to shareholders.
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