May Newsletter – 22.05.2023

    • Congo President heads to China amid mining contract negotiations
    • India to Close About 30 Coal Mines in Next Few Years – ToI
    • Miners in Chile to pay more taxes as long-awaited reform approved
    • Macron says Mongolia to supply critical metals for green push
    • Ivanhoe Electric and Ma’aden finalize terms for exploration JV
    • Here mining companies are fighting harder and harder for dwindling gold reserves
    • Pembridge Resources in trading halt as it seeks liquidation
    • Missing recovery leaves China’s metals bears in charge

Congo President heads to China amid mining contract negotiations

Democratic Republic of Congo President Felix Tshisekedi will visit China next week as the two nations look to conclude the re-negotiation of a $6.2 billion mineral-for-infrastructure deal, people with direct knowledge of the trip said.

It’s the president’s first visit to the country, Congo’s biggest trading partner. The two nations did $21.7 billion of trade in 2022, according to data compiled by Bloomberg.

The trip comes as Tshisekedi prepares for elections scheduled for December. Spokespeople for the president and the government didn’t respond to text messages requesting comment. China’s Foreign Ministry announced on Friday that Congolese Foreign Minister Christophe Lutundula would visit China May 21-24.

Tshisekedi is scheduled to travel to Beijing, Shanghai and Shenzhen May 24 through May 29 with a contingent of government officials including his ministers of mines, hydropower and defense. Besides meeting with counterpart Xi Jinping, Tshisekedi is also scheduled to visit a number of battery, energy, mining and tech companies.

China is the primary destination for most of Congo’s copper and cobalt, a key ingredient in electric-vehicle batteries. The central African nation produces 70% of the world’s cobalt and was tied with Peru as the second-biggest source of copper last year.

In 2008, Congo signed a deal with Chinese state companies to finance $3 billion of infrastructure projects using the proceeds from a $3.2 billion copper and cobalt mine. The landmark agreement was signed at a time when Congo was struggling to secure financing after years of war.

India to Close About 30 Coal Mines in Next Few Years – ToI

The Modi government is looking to reduce the amount of money it spends on coal imports, but it expects coal will be needed to generate energy for at least two more decades.

Around 30 coal mines will close in India over the next three to four years “to pave way for forests and water bodies” and substantially reduce the amount of imported coal, according to a report by the Times of India, which cited remarks by Amrit Lal Meena, the national secretary for coal, on the sidelines of an energy transition working group meeting in Mumbai on Monday.

But he said the 892 million tonnes of coal used in the 2023 financial year would rise to 1.5 billion tonnes by 2030 and would still be ‘sizeably big’ by 2040, although production from the country’s 87 or so remaining mines would allow surplus coal to be exported to Nepal and Bangladesh from 2026.

Miners in Chile to pay more taxes as long-awaited reform approved

La Moneda Palace has housed the presidential branch of Chile’s national government since 1846.

Chilean lawmakers have approved an amended mining royalty bill, in the works for almost two years, which will require companies operating in the country pay more taxes and royalties to the government.

The bill, endorsed by the Senate last week, was approved by a vote of 101 in favour to 24 against on Wednesday evening. It now requires only the signature of President Gabriel Boric, who has publicly backed it, to become law.

The bill sets up a maximum tax rate of around 47% for companies that produce over 80,000 tonnes of fine copper a year, considered high by the industry.

It also imposes a flat-rate ad valorem tax of 1% on miners that produce more than 50,000 tonnes per year, as well as an additional 8% to 26% tax depending on the miner’s operating margin.

Depreciation, as well as supply and work costs, would be taken into consideration in calculating a company’s returns.

Mining companies in Chile, the world’s top producer of copper and the no.2 producer of lithium, currently have a tax burden of 41% to 44% which is what main competitors, such as Peru, impose on large producers.

Macron says Mongolia to supply critical metals for green push

Mongolia has agreed to supply critical metals to France that it needs as part of its shift to a less carbon-intensive economy, Emmanuel Macron said on Sunday during the first ever visit to Ulaanbaatar by a serving French president.

The trip was aimed at boosting ties between the two countries — in particular in relation to the environment, agriculture and the food industry — as well as reducing Mongolia’s dependence on its Russian and Chinese neighbors, according to a statement from Macron’s office.

“We decided to work together to strengthen our energy sovereignty through the supply of critical metals from your country, which has this resource,” he told reporters as he stood alongside Mongolian President Khurelsukh Ukhnaa.

He added that an existing partnership with French nuclear group Orano SA would be key to enabling the extraction of critical metals.

The European Union is trying to secure access to resources that are crucial for its clean-energy and digital transition, such as lithium needed for electric-vehicle batteries. It also wants to reduce its dependence on a handful of suppliers that include China.

Ivanhoe Electric and Ma’aden finalize terms for exploration JV

American mining company Ivanhoe Electric announced the signing of a Definitive Agreement with Saudi Arabian Mining Company Ma’aden finalizing the terms of the transactions announced on January 11, 2023. At closing, Ma’aden and Ivanhoe Electric will form a 50/50 exploration joint venture in Saudi Arabia to explore copper, nickel, gold, silver and other electric metals. Ivanhoe Electric is the operator of the Joint Venture during the exploration phase, and Ma’aden will become the operator for the development of any economically viable deposits found and specifically designated by the Joint Venture.

The Joint Venture will deploy the Typhoon TM geophysical surveying system, which is the brand name for Ivanhoe Electric’s proprietary electrical geophysical surveying transmitter, which can detect the presence of sulfide minerals containing copper, nickel, gold and silver (as well as water and oil). Ivanhoe Electric’s proprietary Typhoon geophysical surveying system in operation at the Santa Cruz Copper Project, located near Casa Grande, Arizona, USA (July 2022). yphoon-powered machines claim to detect minerals buried up to 1.5 kilometres below ground.

At closing, Ivanhoe Electric expects to issue approximately 10.2 million common shares to Ma’aden, representing 9.9% of common shares outstanding, at a purchase price of $12.38 per share for gross proceeds of US$126.5 million. US$66 million of proceeds will go to the Joint Venture to fund exploration activities, including the purchase of three new-generation Typhoon™ machines to be used by the Joint Venture. The remaining US$60 million will be retained by Ivanhoe Electric to advance its portfolio of US mineral projects, and for working capital and general corporate purposes.

As part of the equity private placement, Ivanhoe Electric will grant Ma’aden a top-up right allowing Ma’aden to maintain its 9.9% ownership, and Ma’aden will agree to a five-year standstill limiting its shareholding to a maximum of 19.9%, subject to certain exceptions. Ma’aden will have the right to appoint a nominee to the Ivanhoe Electric board of directors. The transactions are expected to close by the end of Q2 2023 subject to the approval of a supplemental listing application by the New York Stock Exchange and the corporate and regulatory formalities required in Saudi Arabia to incorporate the joint venture entity.

Here mining companies are fighting harder and harder for dwindling gold reserves

According to the US Geological Survey, the US mining authority, the world‘s economically exploitable gold reserves currently amount to 52,000 tons. Measured against the current annual funding, that was enough for a good 14 years. If you add the estimated 64,000 tons that cannot yet be mined at today’s prices and with today’s technology, plus the approximately 205,000 tons that have been mined in the world so far, you come to a total of 321,000 tons of gold.

The extraction of almost all raw materials follows a bell-shaped curve. It reaches its highest point when about half of the deposits have been mined. Therefore, it is quite likely that gold production has reached the upper region of the bell curve and is now starting to fall gradually: so Peak Gold may be behind us. With 3,653 tons, the year 2018 marked the peak of mine production so far.

Pembridge Resources in trading halt as it seeks liquidation

Minto mine camp.

The trading of Pembridge Resources’ shares (LON: PERE) came to a halt on Thursday after the embattled miner said the board had decided to place the firm into creditors’ voluntary liquidation.

The company, whose shares free fell this week on the ceasing of operations at its Minto mine in Canada’s Yukon Territory, said it had engaged insolvency advisers and will call a meeting as soon as possible to formally resolve the company’s voluntary wind up.

The suspension of the Minto copper-gold-silver mine, left Minto Metals (TSX-V: MNTO), in which Pembridge has a 11.2% stake, unable to repay Pembridge about C$2 million ($1.5m) it had borrowed to double water treatment capacity at the operations’ two plants.

The Yukon Government has assumed care and control of the mine site, located within the Selkirk First Nation’s Territory.

Minto Metals also requested for the trading of its shares in Canada to be suspended on Monday. The board’s six members along with two vice-presidents resigned the next day.

The Minto mine had been in operation since 2007 and employed about 180 people.

Pembridge shares closed at 0.23 pence each on Wednesday, prior to their suspension on Thursday morning, and had lost almost 89% of their value year to date.

Missing recovery leaves China’s metals bears in charge

HKEX CEO Nicolas Aguzin addresses LME Asia Metals Seminar delegates during his keynote speech.

The first gathering of the Asian metals community since the pandemic should have been a celebration, fueled by state stimulus and a long-awaited post-Covid rebound for the world’s top commodities consumer. But the resurgence never came.

Merchants, bankers, brokers and fund managers assembled in Hong Kong for the London Metal Exchange’s flagship annual Asian event showed little trace of the ebullience of late 2022, or even of the optimism of early 2023.

At dinners and over drinks throughout last week, they reported lackluster activity to match China’s disappointing economic indicators. Though even informal conversations were more cautious than in past years, given Beijing’s tighter political grip and frayed relations with the West, there was little hint that would change soon — never mind low inventories and the promise of a surge in longer-term metals demand as the global economy goes green.

Not all were gloomy. A handful of influential industry traders and analysts warned a missing recovery, or even a weaker-than-expected start to China’s peak building season, was not a recession. Demand is still expanding in the world’s largest metals consumer, and Beijing may yet step in with meaningful support.