November Newsletter – 12.11.18
ANNOUNCEMENTS
TOP NEWS
SEC Adopts Rules to Modernize Property Disclosures Required for Mining Registrants
Washington D.C., Oct. 31, 2018 — The Securities and Exchange Commission today announced that it has voted to adopt amendments to modernize the property disclosure requirements for mining registrants, and related guidance, under the Securities Act of 1933 and the Securities Exchange Act of 1934. The amendments will provide investors with a more comprehensive understanding of a registrant’s mining properties, which should help them make more informed investment decisions. The amendments also will more closely align the Commission’s disclosure requirements and policies for mining properties with current industry and global regulatory practices and standards.
Under the final rules, a registrant with material mining operations must disclose specified information in its Securities Act and Exchange Act filings concerning its mineral resources, in addition to its mineral reserves. Current Commission rules and guidance permit the disclosure of non-reserve estimates only in limited circumstances. Requiring the disclosure of mineral resources in addition to mineral reserves will provide investors with important information concerning the registrant’s operations and prospects.
“The final rules will modernize the Commission’s mining property disclosure regime by improving the quality and reliability of information provided to investors and by harmonizing disclosures with international standards, including removing the restriction on disclosure of mineral resource estimates that may have placed U.S. registrants and investors at a disadvantage,” said SEC Chairman Jay Clayton. “We appreciate the valuable input that we have received from a diverse group of interested parties that helped inform the Commission and shape the final rules.”
The final rules include several other requirements designed to further the protection and understanding of investors. The final rules also reflect a number of changes to the rules proposed in June 2016 in response to commenters.
The final rules provide a two-year transition period so that a registrant will not be required to begin to comply with the new rules until its first fiscal year beginning on or after Jan. 1, 2021.
https://www.sec.gov/news/press-release/2018-248
“Alaska voters rejected [the candidate] who opposed development of … Pebble”
Northern Dynasty Minerals (TSX: NDM) shares closed more than 27% higher yesterday as it pointed to Alaska voting in pro-development governor Republican Mike Dunleavy in the US mid-term elections.
“In electing Dunleavy, Alaska voters rejected the candidacy of a Democratic challenger who opposed development of the Pebble Project,” the company said.
It also highlighted that voters had rejected Ballot Measure 1, which was known as the Stand for Salmon initiative, and had been seen as a vote against the Pebble project.
The controversial project, which is described as the world’s largest undeveloped copper and gold resource, has been on a rocky journey with strong opposition from environmentalists, indigenous people and commercial fishermen.
A long-running legal battle with the US Environmental Protection Agency was settled in May last year, allowing for a normal permitting process with the company saying it would plan a smaller development.
Then a possible joint venture with First Quantum Minerals was terminated in May, following Anglo American withdrawing from a partnership in 2013 and Rio Tinto bowing out in 2014.
First Quantum had been considering a US$150 million, four-year option to earn up to 50% of Pebble for $1.35 billion, however Northern Dynasty said the pair had been unable to reach agreement on the option and partnership transaction.
In a September update, Northern Dynasty said the US Army Corps of Engineers had released the scoping document for the ongoing Environmental Impact Statement assessment, which was an integral part of permitting Pebble.
Northern Dynasty shares had started the year around C$2.77 and fell to a 52-week low of 55c after the First Quantum news.
They gained 20c yesterday to 93c to capitalise it close to $291 million.
Glencore’s Congo Unit Halts Sales of Radioactive Cobalt
Bloomberg
- Katanga finds uranium in cobalt supplies at its Kamoto mine
- Expects revenue to be hit until sales restart next year
Glencore Plc’s unit in the Democratic Republic of Congo will temporarily suspend sales of cobalt from its Kamoto mine after detecting low levels of radioactivity in supplies.
Katanga Mining Ltd., controlled by Glencore, said Tuesday it will build an ion exchange system to remove uranium, which is expected to cost about $25 million and be ready by the end of the second quarter. In the meantime, it’ll stockpile the vital battery ingredient while continuing to mine both cobalt and copper.
Key Insights
The suspension comes at a convenient time for cobalt producers because there are mounting concerns that too much is currently being mined. There has been a supply-side response to a spike in cobalt prices, fueled by bullish expectations of growth in electric vehicles.
Katanga accounts for about a quarter of Glencore’s African cobalt production, with 6,500 metric tons of the metal being mined in the first nine months of the year. Glencore produced 25,700 tons in Congo in that period.
Glencore has been ramping up cobalt supply this year amid a boom in batteries, boosting production by 44 percent in the first nine months.
COMMODITIES
Cosco Shipping to order 25 capesize vessels to move bauxite from Guinea to China in Dry Bulk Market
International Shipping News
According to a Wall Street Journal report, Chinese Cosco Shipping Cop. is in discussion with shipyards in China to order about 25 large ships to ship bauxite from the West African country of Guinea to China for using in the alumina refineries.
The development is an extension of a plan by state aluminium major Aluminum Corp. of China (Chalco) to invest US$700 million in Guinea’s Boffa bauxite project to secure supply of the raw material over the next decade. Cosco is working towards increasing its fleet on the back of a long-term contract it signed with Chalco to move bauxite to China from Guinea.
Guinea has the potential to be the largest Bauxite supplier in the world with 7.4 billion bauxite reserve which is about 25% of the world’s total bauxite reserves. The country accounts for 95% of African bauxite production and 15% of world bauxite production. Lately, with the increase of alumina and bauxite demand from China, and mining bans in countries like Malaysia and Indonesia, there is a renew interest in Guinea bauxite. Aluminium firms from the U.S., China, Middle East and Russia are trying to procure its massive bauxite-ore deposits.
“Cosco is looking for seven ships at the start and the tally will likely be more than 25 vessels…They will move around six million (metric) tons of bauxite in the first phase, which will more than double as mine production rumps up,” a source said.
According to shipyard officials Cosco would order capesize vessels, the biggest ships that move commodities such as bauxite and iron via sea route and the order would cost around $1.5 billion.
Chalco announced in May that it will initially invest $164 million in a bauxite mine, a mining port and transportation facilities at Boffa, a coastal town in Guinea.
The order by Cosco Bulk Shipping, the dry-bulk arm of Cosco Shipping, is set to be completed next year and the first ships will be delivered in 2021. The company wants to depend on its own fleet rather than procuring chartered ships from foreign owners.
Chalco has been involved in Guinea mining since 2012 as a partner of Anglo-Australian miner Rio Tinto at the Simandou iron-ore project, in which it holds a 40% stake. Now it is venturing into bauxite mining to procure bauxite for its aluminium operations.
Source: AI Circle
LEGAL AND REGULATORY
How to avoid the resource curse? Take 6 years to approve deals
Bloomberg News
Afghanistan selected preferred bidders for three gold and copper mines in 2012. It took the war-torn nation six years to finally sign the contracts.
Afghan President Ashraf Ghani announced the deals in the past few weeks. The government took time to finalize the agreements because it wanted to ensure they were transparent and will help eliminate corruption in awarding contracts, Ghani said in an interview in his office in Kabul. After his election, Ghani ordered his administration to review 14 mineral and oil contracts that had stalled. We are now ready to take the jump forward on securing major investments – Afghan President, Ashraf Ghani
Harnessing “natural wealth around the world has been rarely successful. Most of the time it’s been called the curse of the natural resources,” Ghani, 69, said. “We were focused on avoiding this.”
The nation is losing mining revenue to militants and armed illegal miners. The large scale looting of the resources — which in 2010 the Pentagon said could be worth $1 trillion — and the country’s inability to secure the assets means Ghani’s government has to depend on aid from the U.S. and other nations to provide services to its citizens and fight insurgents. The administration raised just $92 million from the mining industry last year.
http://www.mining.com/web/avoid-resource-curse-take-6-years-approve-deals/
FINANCIAL
FLSmidth lifts orders, upbeat on mining trends
Danish manufacturer FLSmidth & Co says its increased order intake for mining and cement capital equipment and services won’t change its full-year revenue and profit guidance this year, but is indicative of better underlying conditions in its two key markets.
The company said its overall order intake level in the September quarter was its highest in six years at US$1.098 billion, led by two big cement plant bookings.
“Even adjusting for the large orders, the order intake increased about 25% compared to Q3 last year, mainly driven by growth in both mining and cement capital business,” FLSmidth said.
For the first nine months of this year order intake is up 25% year-on-year at US$2.64 billion, while revenues are up 2% yoy at US$2.038 billion. EBIT for the period was up 2% yoy at $123 million.
FLSmidth said its current DKK17.2 billion (US$2.64 billion) order backlog was in its best shape for three years.
Mining capital equipment and service accounts for 44% of the company’s revenues and about 24% of its current EBITA.
“Despite a considerably stronger mining order intake in 2018 compared to Q1-Q3 last year, mining revenue fell slightly in Q3 2018 due to the time lag between order intake and revenue,” FLSmidth reported.
INNOVATION AND TECHNOLOGY
PROJECTS
Anglo Finds Returns Outweigh Risks as It Renews Africa Focus
Bloomberg
- Mining giant investing in exploration, extending life of mines
- South African operations are Anglo’s top cash generators
Anglo American Plc is going where larger rivals fear to tread, returning to its African roots to tap mineral assets with compelling returns.
The storied mining company, founded by Ernest Oppenheimer in Johannesburg a century ago, is devoting a third of its exploration budget to the continent, including searching for copper and cobalt in Angola and Zambia. In South Africa, it’s investing in platinum, diamond and iron-ore mines that are spitting out cash.
Anglo Doubles Down in Southern Africa
Main exploration and investment projects across region
The London-based company is betting that Africa can deliver a portfolio of new ore bodies, even as BHP Billiton and Rio Tinto Group largely shun the continent and focus on returning cash to shareholders. It’s a reversal of Anglo’s almost two-decade retreat from a continent that long weighed on its shares, but the miner retains a higher tolerance for risk in what used to be its backyard.
“They are working toward projects that can form the pipeline 30 years from now,” said Hunter Hillcoat, a London-based analyst at Investec Securities Ltd. “Anglo is the only one working there and they have better comfort within the region, geographically.”
After a collapse in commodity prices in 2015, the mining blue-chip talked about selling assets in South Africa, the home of its biggest diamond, iron ore and platinum mines. Early last year, Anglo confirmed that plan was dead. While exiting some higher-cost operations, its remaining mines in the country are the company’s biggest cash contributors.
Glittering Prize
Now Anglo is doubling down on those assets: it plans to spend $2 billion developing underground deposits at Venetia, the biggest investment in a South African diamond mine in decades. Another $4 billion will be invested in iron ore, manganese and coal over the next five years.
“South Africa punches above its weight,” Anglo Chief Executive Officer Mark Cutifani said earlier this year.
Anglo’s shares have gained 13 percent this year, making them the best performers on the 11-member FTSE 350 Mining Index. The stock was up 3.2 percent as of 10:02 a.m. in London.
Further north, changes to Angola’s mining code have persuaded Anglo to add copper exploration to its diamond prospecting activities. The Angolan government has identified an extension of the Copperbelt, the world’s largest resource of the metal that stretches from Zambia through the southern part of the Democratic Republic of Congo.
“We are applying for exploration concessions to explore for base metals,” said James Wyatt-Tilby, a spokesman for Anglo.
While Anglo exited its Zambian copper mines more than 16 years ago, a four-fold increase in prices has spurred the company to reconsider the prospects. The mining company is also more at ease than its rivals with the tough tax regimes found in places such as Zambia, said Ben Davis, an analyst at Liberum Capital.
“Anglo would like to have more exposure in the region but first they have to find the assets,” Davis said.
What Anglo is Up to in Southern Africa
Kumba Iron Ore Africa’s top iron ore miner is extending lifespan of giant Sishen mine in South Africa beyond current 13 years.
Venetia Diamonds De Beers unit is spending $2 billion to develop underground operation to tap an estimated 94 million carats of diamonds.
Anglo American Platinum World’s biggest platinum producer is investing about $1 billion to boost output at Mogalakwena mine and could develop Der Brochen deposit.
Unki Mine Zimbabwe Anglo assembled Zimbabwe’s only PGM smelter at mine on world’s second-largest platinum reserves.
Namibia Diamonds Namdeb venture adding sixth marine mining vessel as Anglo seeks to tap an estimated 80 million carats of gems.
Botswana Diamonds De Beers venture is deepening Jwaneng to extend the mine’s life and extract a further 50 million carats.
Zambia Anglo exploring for base metals in Zambezi west area.
Angola Anglo seeking permits to explore for base metals.
South Africa Anglo has been granted 23 licenses for diamond exploration.
COMMODITY PRICES
