April Newsletter – 17.04.2023

  • Kinshasa wants Substantial Earnings from Chinese Companies Mining in its Territory
  • Report: Chinese firm offers $10 billion to mine lithium in Afghanistan
  • Teck takes another hit as Glass Lewis recommends ‘no’ vote
  • LME trial over nickel trading debacle set for June 20-22
  • Hudbay Minerals to buy struggling Copper Mountain Mining for $439 million
  • Mexico’s mining law overhaul could cost $9 bln in coming years, says mining chamber
  • Venezuelan military destroys illegal mining operation in the Amazon

Kinshasa wants Substantial Earnings from Chinese Companies Mining in its Territory

The Democratic Republic of Congo (DRC) is pushing for an audit of the country’s mining contracts with China, which it says heavily favour Beijing. Finance minister Nicholas Kazadi has alleged that these contracts were skewed in favour of Beijing and wants the tax obligations on these companies increased. “Sicomines, it seems, is not keen on paying the $200 million that the DRC is asking for after making huge profits,” Kazadi said, as quoted by the East African newspaper on April 8. “They have to pay…” In February 2023, the impoverished but mineral-rich nation called for an overhaul of a $6.2 billion mining deal with China. This followed President Felix Tshisekedi’s demand for a bigger share of the country’s vast mineral resources than that agreed upon by his predecessor. Sicomines is a mining company owned by both DRC (32%) and China with around 6.8 million tonnes in mineral reserves. It owns most of the 19 mines in the country.


Report: Chinese firm offers $10 billion to mine lithium in Afghanistan

The Taliban-run government in Afghanistan says a Chinese company has expressed interest in investing $10 billion to mine the country’s massive lithium reserves and help construct other infrastructure there.

Shahabuddin Delawar, head of the Afghanistan Ministry of Mines and Petroleum, made the announcement in a statement after a meeting with representatives of the Chinese company, identified as “Gochin,” which offered to extract the Afghan lithium reserves.

Gochin also voiced its interest in developing other infrastructure, including a hydroelectric dam and a new tunnel in the critical Salang gateway connecting eastern Afghanistan with its northern gateway to China and Russia.

Lithium, a key element of batteries that power electric vehicles, mobile phones, and laptops, is driving the world’s transition away from fossil fuels.

Afghanistan is sitting on vast untapped deposits estimated to be worth $1 trillion or more, including what may be the world’s largest lithium reserves.

Months after the US withdrawal of troops in 2021, a delegation of Chinese companies visited the war-ravaged country to explore lithium mining opportunities as the battery industry is fast-changing.

Lithium prices are down 60 percent from last year’s peak, with China’s CATL, the world’s largest electric vehicle battery manufacturer, beginning to produce sodium-ion batteries — a much cheaper alternative to lithium-ion.


Teck takes another hit as Glass Lewis recommends ‘no’ vote

Teck Resources Ltd. took another blow in its defense against Glencore Plc, after influential advisory firm Glass Lewis said shareholders should vote against the Canadian miner’s strategy to split out its coal business.

The Glencore offer represents a reasonably compelling alternative that could warrant discussion and there is no urgency for Teck to have to pursue its separation now, Glass Lewis said in a report.

Teck has rejected two takeover proposals this month from Glencore — which wants to combine both their coal businesses and spin them out together — and is instead pressing ahead with an April 26 vote on its own coal-separation strategy.

Norman Keevil, who holds a blocking vote thanks to Teck’s “supervoting” Class A shares, has rejected a deal with Glencore. However, the company requires approval from both classes of shares voting separately, and the Glencore camp is framing the vote as a referendum on its takeover offer as both sides scramble to win over investors.

Competing proxy advisory firm Institutional Shareholder Services has already recommended shareholders vote against Teck’s plan.

Bloomberg also reported on Friday that Teck’s largest shareholder, China Investment Corp., currently favored Glencore’s coal plan and was considering a vote against Teck’s strategy, although it may require a higher price from Glencore before backing its offer.


LME trial over nickel trading debacle set for June 20-22

A lawsuit bought by Elliott Associates and Jane Street Global Trading against the London Metal Exchange (LME) for cancelling nickel trades will to be heard in a London court on June 20-22, the LME said on its website.

US-based Elliott and Jane Street are demanding damages of $456.4 million and $15.34 million respectively, after the nickel price doubled to more than $100,000 a tonne on March 8, last year, prompting the LME to suspend nickel trading and void transactions made that day.

A judicial review hearing will take place over three days beginning on June 20 to determine whether the LME acted lawfully, the 146-year-old LME said.

A second trial would be held to decide on remedies if the LME was found at fault, it added.

Elliott and Jane Street allege the LME acted unlawfully, breached its published policies, was disproportionate, favoured some market participants over others and violated their rights under the European Convention of Human Rights to the “peaceful enjoyment” of possessions, according to documents filed last July.

The LME, owned by Hong Kong Exchanges and Clearing, is resisting the claims, saying unprecedented market conditions caused a “disorderly” market and that it wanted to protect stability and avoid multiple defaults.


Hudbay Minerals to buy struggling Copper Mountain Mining for $439 million

Hudbay Minerals Inc. says it will acquire Copper Mountain Mining Co., whose mine in British Columbia cut its output nearly in half last year after a series of challenges.

Toronto-based Hudbay’s all-stock deal offers a 23-per-cent premium to Copper Mountain’s 10-day weighted average trading price, and values the company at US$439 million.

It will require approval from two-thirds of Copper Mountain shareholders and a simple majority of Hudbay shareholders, and is expected to close around the middle of 2023.

The deal shows even struggling single-asset copper producers are drawing interest and attracting premiums as demand for green metals heats up during the energy transition.

Hudbay said the combination would create an Americas-focused copper company, with assets in Canada, the United States and Peru. It sees potential to expand Copper Mountain’s production by removing bottlenecks in ore milling and adding other equipment on site.

“This has been going on for about a year,” Peter Kukielski, chief executive of Hudbay, said on a conference call on April 13. “We’ve done very detailed due diligence.”

One analyst on the call, John Tumazos, of Very Independent Research LLC, was skeptical about some of Hudbay’s assumptions, including its projection that Copper Mountain would contribute about US$100 million in earnings before interest, taxes, depreciation and amortization in 2023. He noted that Copper Mountain in 2022 lost about US$25 million in cash flows.


Mexico’s mining law overhaul could cost $9 bln in coming years, says mining chamber

MEXICO CITY — The head of Mexico’s mining chamber on Thursday issued a stark warning against a proposed overhaul of the country’s mining laws, saying this could cost the country some $9 billion in lost investment in coming years and up to 420,000 direct jobs.

The overhaul, proposed by the government last month, would include shortening concessions to 15 from 50 years, tightening rules for water permits and requirements to give back at least 10% of profits to communities and disclose mining impacts.

Mexico is the world’s top silver producer and one of the largest producers of copper and gold. Last year, its government announced the nationalization of the country’s nascent lithium industry, favoring a new state-run miner.

Jaime Gutierrez, the president of the Camimex mining association, said the move would hit investors’ confidence in the market and that though it was prepared to make compromises, it considered certain proposals “completely unviable.”


Venezuelan military destroys illegal mining operation in the Amazon

Venezuelan military destroys illegal mining camp in the Yapacana national park in April 2023.

The Venezuelan military destroyed what they call a “logistic system” of illegal mining, which was operated by criminal groups in the Yapacana national park, located in the southern Amazonas state, near the border with Brazil and Colombia.

In a series of social media posts, the Operational Strategic Commander of the Bolivarian National Armed Forces, Domingo Hernández Lárez, said that the unregulated operation was found in Yapacana’s Caño Grande sector by agents who are permanently deployed in the Amazonas state with the goal of guaranteeing that environmental conservation and protection rules are observed.

“No human activity is allowed in national parks,” Hernández Lárez said. “No human group has the right to destroy forest reserves, parks or national monuments protected by the State. All citizens must adhere to the Fifth Historical Objective of the Homeland.”

The Objective is a six-year program aimed at promoting conservation measures that balance out human activities and the safeguarding of nature.

Among the items destroyed by the military during this week’s incursion were suction pumps, engines, high-pressure hoses and fuel, all used to illegally extract gold from the national park.