May Newsletter – 09.05.2023

  • Ivanhoe Mines pursues DRC-Zambia commercial border plan
  • Australia’s exports to China hit record highs as barriers ease
  • 200 and counting global financial institutions are exiting coal
  • China pledges closer ties with Mongolia on trade, train links, tackling sandstorms
  • Copper mine flashes warning of ‘Huge Crisis’ for world supply
  • Vedanta Resources repays $800 million loans to StanChart
  • Why the Fight for ‘Critical Minerals’ Is Heating Up

Ivanhoe Mines pursues DRC-Zambia commercial border plan

Ivanhoe Mines Executive Co-Chair Robert Friedland and President Marna Cloete, together with Chairman Guy-Robert Lukama Nkunzi and General Manager Placide Nkala Basadilua of Gécamines have announced the signing of an off-take and financing term sheet to return the historic Kipushi zinc-copper-lead-germanium mine to production.

In addition, Ivanhoe is pleased to provide an update on construction activities for the restart of the ultra-high-grade zinc mine, which is on track for first concentrate in the third quarter of 2024.

Ivanhoe Mines’ President, Marna Cloete commented:

“The off-take and financing milestones are critical deliverables that allow us to return Kipushi to production by the third quarter of next year. Most importantly, these agreements reflect the strength of our partnership with Gécamines and our commitment to the people of the Kipushi community and the DRC.

“The Kipushi underground mine will be the world’s highest-grade major zinc operation, with an average grade of approximately 36% zinc over the first five years of production.

“We will also endeavour, with our partner Gécamines, to continue exploring Kipushi, including copper-rich and silver-rich zones. Kipushi soon will join Kamoa-Kakula as another tier-one production asset in our portfolio, and mark the next step as we execute our plan to emerge as the world’s newest diversified major mining company.”

Ivanhoe Mines’ Executive Co-Chair, Robert Friedland added:

“In partnership with Gécamines, we are closing in on a monumental achievement to return the great Kipushi Mine to production. When Ivanhoe Mines acquired its interest in Kipushi almost 12 years ago, the mine was flooded and in a dilapidated state.

Australia’s exports to China hit record highs as barriers ease

Exports of Australian goods to China hit $12.71bn in March, up nearly one-third from year earlier.

Australia’s exports to China surged to record highs in March as the Asian giant sucked in more iron for its steel industry and lowered barriers to thermal coal shipments amid thawing diplomatic relations.

Data released on Thursday showed exports of Australian goods to China hit 19 billion Australian dollars ($12.71bn) in March, a rise of 31 percent from a year earlier and pipping the previous peak from mid-2021.

The jump helped lift Australia’s total trade surplus to its second-highest on record at 15.3 billion Australian dollars ($10.2bn), a boon to mining profits and tax receipts.

Export volumes of iron ore lumps and iron ore fines to China jumped 24.3 percent and 17.7 percent respectively from a month earlier, data from the Australian Bureau of Statistics showed.

Shipments of thermal coal to China surged 125 percent by volume in March from February, offsetting a drop in exports to Japan.

Beijing effectively ended an unofficial ban on Australian coal in January, allowing customs clearance for the first time since 2020 when it launched trade curbs on a series of Australian products as ties froze in the early days of COVID.

200 and counting global financial institutions are exiting coal

Energy transition efforts are accelerating worldwide, and it is leading to tectonic shifts in all sectors across the global economy. While in the real economy, the energy sector is leading the transformation, the financial sector is also fast re-evaluating and redefining its role in a world where capital today is seen in the colours of green and brown.

There are two prominent trends redefining capital markets. First, there is the shift away from high emissions fossil fuels due to accelerating climate action and improved viability and accessibility of clean energy technologies. Second, there is an increased understanding of climate risk as a source of systemic risk to the global financial system. Both these trends are also supported by the climate movement spearheaded by stakeholder activism which includes policy analysts, climate campaigners and climate scientists globally. The response to both trends has been a diversification away from fossil fuels such as coal. A growing number of financial institutions (FIs) globally are fast establishing policies to exit coal in a bid to decarbonise their operations and commit to net zero targets.

Despite record profits for several of the largest coal mining companies globally over the last two years, the momentum of coal exclusion policies indicates that financial markets do not see their exposure to coal as a great long-term investment. The outperformance of the MSCI World ex Fossil Fuels Index over the MSCI World Index from November 2010 (index start date) to March 2023 underlines that investors recognise the long-term destructive impact of fossil fuel companies on wealth.

China pledges closer ties with Mongolia on trade, train links, tackling sandstorms

China and Mongolia are “good neighbours, good friends and good partners”, Chinese Foreign Minister Qin Gang said, agreeing to deepen ties on issues ranging from the economy, railways and other infrastructure to fighting sandstorms.

Meeting his Mongolian counterpart Batmunkh Battsetseg in Beijing on Monday, Qin said China was ready to synergise development strategies and promote its Belt and Road Initiative with Mongolia.

The pledge comes as China seeks to diversify its trade routes and boost ties with Russia via its landlocked northern neighbour. Ulaanbaatar also plays a pivotal role in a joint 2016 plan to develop the China-Russia-Mongolia economic corridor, a key segment of Beijing’s belt and road strategy.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

Copper mine flashes warning of ‘Huge Crisis’ for world supply

Accompanied by tinny taped music and overall-clad workers, Rio Tinto Group executives and Mongolian officials gathered a kilometre beneath the freezing Gobi Desert earlier this year to open one of the world’s richest underground copper mines.

It was a celebration four decades in the making.

Oyu Tolgoi, in southern Mongolia just north of the Chinese border, is key to Rio’s efforts to move beyond its dependence on iron ore and expand in copper, the metal that underpins the clean energy transition. It’s also a vast deposit whose corporate, political and technical vicissitudes offer a glimpse of the red metal’s troubled future.

As demand for copper surges, supply is increasingly likely to come from mines like this one on the arid steppe: expensive, technically complex, outside traditional copper jurisdictions and operating under the eye of governments jealously guarding their natural resources.

“There’s a huge crisis,” says Doug Kirwin, one of the earliest geologists to work at the deposit that became Oyu Tolgoi, or Turquoise Hill, named after the area’s rocks, stained by oxidised copper.

“There’s no way we can supply the amount of copper in the next 10 years to drive the energy transition and carbon zero. It’s not going to happen,” adds Kirwin, now an independent consulting geologist. “There’s just not enough copper deposits being found or developed.”

Vedanta Resources repays $800 million loans to StanChart

Billionaire Anil Agarwal’s Vedanta Resources Ltd. said it has repaid $800 million worth of loans, another move that could assuage concerns about its liquidity after surging interest rates intensified pressure on low-rated borrowers with heavy debt loads.

Anil Agarwal, founder and owner of Vedanta Resources

The London-based firm has repaid three facilities, which were taken from Standard Chartered Bank in London and Hong Kong, the company said in an exchange filing. The repayments released the encumbrances created on the shares of its unit Vedanta Ltd., it said.

Vedanta Resources has relied on hefty dividends from its Indian units, taking up record amounts last financial year, to honor its near-term liabilities. The market now focuses on how the mining giant will service its dollar notes due this month and an even bigger debt pile coming due in 2024, when close to $2 billion of bonds will mature.

The company had paid all loans and bonds due last month, cutting its gross debt to $6.8 billion, it said in a statement in April.

Why the Fight for ‘Critical Minerals’ Is Heating Up

Over more than a century, oil companies have developed a vast industrial network to extract, refine and deliver their product to customers around the world. Sourcing the materials needed to build an alternative, less carbon-intensive economy presents a whole new set of challenges. China has tackled these successfully for more than a decade, making it the undisputed leader in the “critical minerals” used in electric vehicle batteries, solar panels and wind-turbine magnets. If the US and Europe are going to have a chance of challenging its dominance in such clean technologies, they need to catch up fast.

1. Why “critical” minerals?

Nations have long sought to protect supplies of materials they deem vital to their industrial and military capabilities. About 50 metallic elements and minerals currently meet those criteria in the US and European Union. Most were chosen for their role in building the infrastructure required to reduce carbon emissions blamed for climate change, a mission that’s backed by hundreds of billions of dollars in subsidies and tax breaks. Those materials include:

Lithium, graphite, cobalt, nickel and manganese — used predominantly in EV batteries

• Silicon and tin — EVs, smart grids, power meters and other electronics

• Rare earths — wind-turbine magnets, EVs

• Copper – grids, wind farms, EVs

2. Why is sourcing them a challenge?

While many critical minerals can be found in a raw state in large quantities across the globe, extracting and refining them into a usable form can be costly, technically challenging, energy intensive and polluting. China dominates the entire value chain in many of these products, accounting for more than half of the world’s production of battery metals including lithium, cobalt, and manganese, and as much as 100% of rare earths. Even in less rarefied metals such as copper, forecasts of massive demand growth have sparked a realization that there might not be enough to go around. In 2023, the EU categorized copper and nickel as critical raw materials for the first time, even though there are plenty of friendly producing nations across the world. Senators are lobbying for the US to do the same for copper.