October Newsletter – 30.10.18
Behre Dolbear participated in the 2nd Russian-UK Raw Materials Dialogue, in London, on October 24th, 2018. Participants of this very well-attended gathering discussed ways for increasing cooperation in natural resources sector between the two countries. After a long day of talks and panel discussions participants were kindly invited to take a red double-decker bus scenic London tour and concluded the evening in the residence of Russian Ambassador, in his impressive residence in Kensington.
2nd Russian-UK Raw Materials Dialogue
Greeting from Russian Ambassador and Rector of St. Petersburg’s State Mining University.
- About $5B in assets to be sold due to Barrick-Randgold merger
- Saudi miner Ma’aden actively looking for overseas investments
- Nickel sector set for battery-charged party
- This Metal Just Hit a Record. Here’s Why Palladium Is Soaring
- Gold returning to financial system apex?
- Namibia scraps black ownership rules for mining exploration licenses
- Vedanta says will invest $700-$800 mln in South Africa smelter
- Scandium – Extra-terrestrial metal boosted by demands for modern planes and cars
- Western Uranium & Vanadium to re-open the Sunday Mine Complex
- West Kytlim’s 2018 output exceeds estimates
About $5B in assets to be sold due to Barrick-Randgold merger — expert
Up to $5 billion worth of mining assets may be offloaded as a result of the merger between Barrick Gold (TSX, NYSE:ABX) and Randgold Resources (LON:RRS), expected to happen in the first three months of 2019.
According to BMO Capital Markets analyst Andrew Kaip, it is almost certain that the New Barrick will sell a number of non-core assets to position the company as the lowest cost western-based gold producer, but not necessarily the largest.
Largest potential deal would be Barrick’s Lumwana copper mine in Zambia, which could fetch as much as $1.3 billion
Kaip went on flagging a total of 13 mines from South America to Zambia he sees as likely to be sold following the $6 billion-merger. Those assets currently account for 750,000 ounces of gold and 400 million pounds of copper production.
The expert believes the largest potential deal would be Barrick’s Lumwana copper mine in Zambia, which could fetch as much as $1.3 billion. The merged mining company may also sell its 50% stake in Chile’s Zaldivar mine, its majority stake in Tanzania-focused miner Acacia, as well as Randgold’s Tongon, Massawa and Morila assets, Kaip wrote in a report to investors.
Yet, Barrick and Randgold are of the view that their combination will create a new company that will own five of the top-ten tier-one gold assets, namely Cortez, Goldstrike, Kibali (45%), Loulo-Gounkoto (80%), and Pueblo Viejo (60%).
Saudi miner Ma’aden actively looking for overseas investments – CEO
RIYADH, Oct 25 (Reuters) – Saudi Arabian Mining Co (Ma’aden), the Gulf’s largest miner, is actively looking for investment opportunities overseas that would complement and strengthen its business inside the kingdom, the company’s chief executive said on Thursday.
Ma’aden, which mines gold and copper and has in recent years expanded into the production of aluminium and phosphates, is key to Saudi Arabia’s plan to diversify its economy away from hydrocarbons. The government aims to more than triple mining’s contribution to the nation’s economic output by 2030.
The company, which is 65 percent owned by the kingdom’s Public Investment Fund, is looking for joint ventures and acquisitions in Latin America, India and other countries to boost its operations in phosphate fertilisers and base metals.
“Our strategy outside the kingdom will include us looking at options in organic investments, joint ventures and potentially acquisitions where we see good value and where we see good fit with Ma’aden’s existing business,” Darren Davis told Reuters on the sidelines of an investment conference in Riyadh.
“We continue to be very bullish on copper,” he said, adding that the company plans to boost its presence in countries where there are good copper deposits as way to gain the skills needed to develop its domestic operations.
Saudi Arabia’s efforts to build an economy that does not rely on oil and state subsidies involves a shift towards mining vast untapped reserves of bauxite, the main source of aluminium, as well as phosphate, gold, copper and uranium.
Asked about the potential timing of investments, Davis said he would like to see something next year or maybe even sooner, adding that acquisitions will mostly be paid for with cash. The company had 3.8 billion riyals of cash and cash equivalents at the end of September, according to financial statements posted on the Saudi stock exchange website.
Earlier this week, Ma’aden said it signed a contract with South Korea’s Daelim Industrial to build a third ammonia plant at a cost of about 3.35 billion riyals ($893 million) in Ras al-Khair, on the kingdom’s Gulf coast. That is just one of several plants Ma’aden plans to develop for a third phosphate complex estimated to cost 24 billion riyals.
Ma’aden, which is the world’s third biggest producer of phosphate, is likely to start the first phase of this mega project in 2023, he said.
Earlier on Thursday, Ma’aden said its third quarter net profit rose to 518.8 million riyals from 262.6 million a year ago, backed partly by an increase in average realised prices of all its products except gold.
Davis said he was optimistic about the company’s outlook, especially in 2019 when it will operate at full capacity, although he said its debt – long-term borrowing totalled 49.8 billion riyals at the end of September – may weigh on results. Uncertainty over global trade could also dampen growth in the commodity business for some time, he added.
Ma’aden also plans to shift its financing strategy over the medium term away from bank loans, which have been its main source of financing, to the bond market, including sukuk issues, Davis said.
Nickel sector set for battery-charged party
A vibrant Australian Nickel Conference in Perth this week featuring analysts and brokers among the attendees showed belief in the return of the good times for the Australian sector is growing, though there’s one big elephant in the room that’s more or less a hangover from the huge party enjoyed last decade.
And that’s China.
Last time round the nickel price spiking into unchartered territory resulted in the emergence of the Chinese nickel pig iron sector (NPI), a big player in the nickel market to this day.
Such has been the adaption and efficiency of the Chinese NPI players that the Indonesian Morowali Industrial Park built by the world’s largest stainless steel producer, Chinese company Tsingshan, is considered by no less than Glencore as “arguably the lowest cost ferro nickel operation in the world”.
Which is quite a contrast to how the sector was initially perceived (and downplayed), by conventional nickel producers around the turn of the decade.
Back then the NPI sector was viewed as being just a high-cost group of producers only able to swing into action when the nickel price moved to levels well beyond the norm.
Tsingshan et al have effectively put that assessment to the sword.
The question now for the increasingly buoyant nickel sector is can the Chinese swing into action with the laterite resources in places such as Indonesia and Australia and learn to efficiently and cheaply produce the nickel sulphate required by the battery sector?
And in doing so severely crimp the potential nickel price?
The conventional nickel sulphide producers seem to be more or less currently saying two things: no, and even, if yes, so-what?
The ‘no’ argument says high pressure acid leaching processing (with sulphur then added into the mix), is a much, much more complex and costly process than that developed to produce ferro nickel for the stainless steel industry.
The many billions torched by Western developers over the past 20 years or so offers clear proof of the difficulties (and costliness) of HPAL output. Never mind the added cost of then incorporating the required sulphur.
The ‘so-what’ response says the potential exponential growth seen in the battery sector means even if a new generation of Chinese HPAL-type producers emerges, there’s going to be plenty of demand to go around for all suppliers.
There could be an ‘interesting’ decade ahead.
And the incumbents will clearly be hoping it’ll not be ‘interesting’ ala the Chinese curse.
This Metal Just Hit a Record. Here’s Why Palladium Is Soaring
- Prices have been supported by consumers choosing gasoline cars
- Analysts are predicting deep supply deficits in palladium
Palladium, a precious metal widely used in the automotive industry, has hit an all-time high.
The rally has been fueled by concern over shortages and speculators piling in to bet on even higher prices. The majority of palladium is used to make catalytic converters in gasoline automobiles, and there’s increased demand for the metal as consumers increasingly choose gasoline vehicles over diesel.
In a year that’s seen losses for most other commodities, the rally in palladium has been exceptional. It’s the one major metal that’s at an all-time high and prices have almost doubled in the past two years. On Tuesday, the metal advanced 1.8 percent to settle at $1,144.20 an ounce at 5 p.m. in New York. It earlier climbed as much as 2.5 percent to $1,152.54.
Gold returning to financial system apex?
The gold standard was for centuries a global financial norm that ensured the financial system functioned effectively, until it came under threat in the 1930s and was ultimately culled in 1971 by US president Richard Nixon, signalling the official decoupling of the US dollar from gold.
The removal of the gold standard had allowed the unshackling of the global financial system and made the creation of unlimited debt possible, Vulpes Investment Management managing director Grant Williams said at the Silver & Gold Summit in San Francisco.
He suggested the gold standard could be compared to an apex predator such as the grey wolf, which moderated credit expansion in an economy like a wolf preyed on deer, thus keeping the population in check.
“Like the removal of any apex predator from an ecosystem, it might seem at first that there’s no problem, but eventually one will observe a host of imbalances emerge that start to threaten the very existence of the ecosystem,” Williams said.
LEGAL AND REGULATORY
Namibia scraps black ownership rules for mining exploration licenses
WINDHOEK (Reuters) – Namibia has scrapped a requirement for companies seeking mining exploration licenses to be partly owned and managed by black Namibians, the country’s mining industry group said on Friday.
The policy was introduced in 2015 to increase the participation of historically disadvantaged black Namibians in some of the country’s most lucrative business projects, but critics said it threatened the diamond and uranium producer’s ability to attract investment.
The chamber of mines said on Friday the requirements had been set aside by Mines and Energy Minister Tom Alweendo in a letter to the group.
Neither the minister nor officials in his department could be reached for comment.
Hilifa Mbako, the chamber’s vice president, said the decision “was the most important fundamental decision for future investment into Namibia.”
Mining contributed 12.2 percent to the country’s gross domestic product last year.
Under the scrapped policy, the management structure of a company applying for an exploration license was required to have a minimum 20 percent representation of black Namibians.
At least 5 percent of the company also had to be owned by Namibians or by a company wholly-owned by Namibians.
Namibia gained its independence from South Africa in 1990 and the former German colony suffered from apartheid-style rules, with the white minority controlling most of the economy.Mbako said the requirements and uncertainties created by the planned New Equitable Economic Empowerment Framework (NEEEF), a regulation intended to force white-owned businesses to sell 25 percent stake to blacks, had hit investor confidence in Namibia.
Vedanta says will invest $700-$800 mln in South Africa smelter
JOHANNESBURG, Oct 26 (Reuters) – Diversified miner Vedanta is investing up to $800 million in a zinc smelter in South Africa, the head of its zinc unit Deshnee Naidoo said at an investment summit in Johannesburg on Friday.
Andile Sangqu, executive head of Anglo American South Africa, added at the same summit that his firm would invest 71.5 billion rand ($4.88 billion) in South Africa over the next five years.
INNOVATION AND TECHNOLOGY
Scandium – Extra-terrestrial metal boosted by demands for modern planes and cars
An obscure silver-while metal, found in higher concentrations in moon rocks than on earth, holds promise to transform manufacturing of planes and cars and is receiving a strong boost from the boom in battery metals mining.
Addition of the metal to aluminium improves the weight, strength and malleability, dramatically reducing the weight for parts for aircraft, cars or ships and help deliver savings on fuel costs. Vice president for business development and scandium marketing at Clean TeQ Holdings Ltd adds “it’s the single most potent strengthening element you can add to aluminium. Why scandium is so interesting is that if you add very, very small amounts of it – its has amazing impacts”.
The big problem has been a lack of supply. This is being improved by the arrival of new mines that’ll yield scandium as part of the process of producing the cobalt and nickel needed for lithium-ion batteries. Extracting all three materials from a single deposit, rather than focusing only on producing scandium, drastically improves the economics. “It more or less gets a free ride along with the cobalt and nickel,” said Clean TeQ, “The cost of production is significantly less” according to Australian polymetallic developer.
A raft of industries have long been aware of the potential benefits — on a small scale. Alloys using scandium were developed in the 1960s and have been deployed in Russian MiG fighter jets to baseball bats. The material currently is mainly used in solid oxide fuel cells, used to provide uninterrupted power for hospitals or data centers, and has also been deployed for 3-D printing, including for an electric motorcycle.
Wider adoption has proved more difficult, with the sector stuck in a conundrum: global output of scandium had been too small to give potential users such as aerospace companies confidence there’d be a reliable, long-term supply — a factor that’s also kept prices high. Yet without certainty about demand, producers have been unable to commit to developing operations.
Changing demands are creating new requirements, with Japan’s Sumitomo Metal Mining Co. entering production in the Philippines, while United Co. Rusal is studying plans to add scandium output following tests at its Urals smelter.
In Australia, Clean TeQ’s Sunrise mine is intended to be up and running in 2021, while Australian Mines Ltd. and Scandium International Mining Corp.are among others developing assets. Centennial, Colorado-based NioCorp Developments Ltd. is developing a mine in Nebraska.
“As new supply comes online some of the latent demand will be unlocked,” said Will Ayre, a London-based consultant at CRU Group. “The aerospace industry is one of the obvious sectors where scandium consumption might increase dramatically. Tiny reductions in aircraft weight can lead to significant fuel cost reductions.” The current market for scandium oxide is about 15-20t/year, and a switch by the airline industry to replace 30% of aluminum consumption with aluminum-scandium alloys could lift demand to about 80t/year, according to Ayre.
Adoption by the auto sector would be a potential game-changer, according to CRU. Using scandium alloys to replace even a small proportion of aluminum used in vehicles would require enormous volumes, potentially lifting demand to more than 1,800t by 2035 — vastly more than the capacity of current planned projects. It’s more likely that use of scandium in autos will be limited to some high-end vehicles, Ayre said.
Swelling demand and clarity over growing consumption is expected to deliver more stability on prices that have fluctuated between a current level of ~$1,500/kg to as high as $5,000/kg.
There are market parallels in the rise of niobium, with demand surging more than 10x over the past forty years and market value rising from less than $100m to $2bn. “We’re going to end up in the case of scandium with something similar to that we had for niobium,” said Carneiro, who served as CEO of CBMM, known formally as Cia. Brasileira de Metalurgia & Mineracao,
Western Uranium & Vanadium to re-open the Sunday Mine Complex
Western Uranium & Vanadium Corp. (CSE: WUC) announced plans to re-open the Sunday Mine Complex, located in western San Miguel County, Colorado.
The complex extends for 3,748 hectares and consists of five individual mines currently in Temporary Cessation. These are the Sunday mine, the Carnation mine, the Saint Jude mine, the West Sunday mine and the Topaz mine. Last time they were mined was between 2006 and 2009. However, Western said it is commencing a new program with the goals of upgrading the vanadium resource and monetizing these holdings.
“Increased demand for vanadium in high-strength steel and accelerating battery metal demand for vanadium flow battery applications has driven vanadium prices from USD$10 to USD$30 during 2018. This large price increase is driven by a global supply deficit, and most notably new Chinese building code standards requiring vanadium rebar strengthening effective next month (November 2018). China, the world’s largest vanadium producer and vanadium consumer, has exacerbated the supply deficit by becoming a net importer through the consumption of vanadium supply that was formerly available to end users from other countries. Consequently, Western is in discussions with multiple potential customers and joint venture partners who are requesting ore samples,” the company said in a press release.
West Kytlim’s 2018 output exceeds estimates
The West Kytlim alluvial platinum mine, in the Ural mountains of Russia, finished the 2018 mining season with total raw platinum production “well in advance” of company estimates, listed miner Eurasia Mining reported on Thursday.
The mine delivered 165 kg of platinum, or 165% of company estimates, executive chairperson Christian Schaffalitzky reported.