September Newsletter – 01.09.2020
- Copper price leaps 26-month high on strong Chinese rebound
- Warren Buffett’s Berkshire Hathaway buys stakes in 5 Japanese investment companies
- Barrick to appeal lost challenge over PNG mining rights
- Vale opens ‘green’ grinding hub in China
- Copper price to extend rally on “signs of Chinese panic buying”
- Ok Tedi to restart operations in September
- South Korea seeks to exit Africa mining JV despite rising nickel demand
- Hop in a Clear Kayak and Explore Chungju Hwalok Donggul
- Money trail points to bribery in mine dispute
Copper price leaps 26-month high on strong Chinese rebound
Copper easily cleared the pivotal $3 a pound level on Monday as the recovery in the Chinese economy, the world’s top consumer of the metal, gains momentum.
Copper for delivery in December trading on the Comex market in New York changed hands for $3.065 a pound ($6,757 a tonne) in early afternoon trade, the highest since June 2018. Monday’s move brings gains for 2020 to 10% and a mouthwatering 58% since the covid-19 lows struck in March.
“Prices still have the potential to increase, but in the short-term they will be floating around,” analyst He Tianyu of CRU Group told Reuters, expecting a price rally from mid-September at the earliest, when the traditionally strong copper season kicks in.
Parallels to GFC
Jonathan Barnes of Roskill said in a recent report the copper price will likely rise further towards the end of 2020, and that the current environment has strong parallels to the rebound in the copper price after the global financial crisis, thanks to massive stimulus efforts by Beijing.
On the Shanghai Futures Exchange, the bellwether metal racked up its fifth straight month of gains in August, which is the longest winning streak since 2009.
Copper hit a low of $1.32 a pound in January 2009, then surged to $3.55 by April of the next year on its way to an all-time peak just shy of $4.58 (more than $10,000 per tonne) in February 2011.
Roskill believes that while the effects of covid-19 could decrease world consumption of the metal by 3%–4% this year, the drop in mine output and scrap flows has been greater.
A key gauge of Chinese economic activity released on Monday showed continuing expansion of the country’s manufacturing and services sector in August.
Warren Buffett’s Berkshire Hathaway buys stakes in 5 Japanese investment companies
Warren Buffett’s Berkshire Hathaway Inc. took stakes of slightly more than 5% in five of Japan’s most venerable corporate names with big investments in energy.
Berkshire BRK.B, -0.23% disclosed the investments in Mitsubishi Corp. 8058, +3.12% , Mitsui & Co. 8031, +1.98% , Sumitomo Corp. 8053, +1.85% , Itochu Corp. 8001, +1.41% and Marubeni Corp. 8002, +1.22% just before the Tokyo stock market opened Monday.
Shares in the five companies surged at least 5% and in some cases more than 10%, helping drive the overall Nikkei Stock Average NIK, -0.00% up 2% in intraday trading Monday. Berkshire didn’t say how much it spent to acquire the stakes. Based on the companies’ Friday closing prices, a 5% stake in each would collectively be worth about $6 billion.
The five are often called trading companies, but investment company might be a more precise description. All have stakes in a variety of businesses including interests in energy and mining. Mitsubishi and Itochu each control a major convenience-store chain in Japan.
“I am delighted to have Berkshire Hathaway participate in the future of Japan and the five companies we have chosen for investment,” said Buffett in a statement. He said the five companies “have many joint ventures throughout the world and are likely to have more of these partnerships.”
Barrick to appeal lost challenge over PNG mining rights
SINGAPORE (Reuters) – Barrick Gold Corp (ABX.TO) has lost a court challenge in Papua New Guinea over rights to a highlands gold mine and intends to appeal to the country’s Supreme Court, the miner said on Tuesday, prolonging a dispute that has halted output as gold prices soar.
Papua New Guinea refused to extend Barrick’s lease over the remote Porgera mine in April, and this week the National Court dismissed Barrick’s request for a review of that decision.
“The company disagrees with numerous grounds outlined in the ruling,” the miner said on Tuesday in a statement issued by Barrick Niugini Ltd, which operated Porgera as a joint-venture between Barrick and China’s Zijin Mining Group (2899.HK).
Barrick Niugini “intends to urgently appeal the ruling to the Supreme Court,” the statement said. It was not clear whether any appeal had yet been filed.
The dispute over the lease has stopped production at Porgera, which last year turned out nearly 600,000 ounces of gold. It comes at a time when investor nerves over the COVID-19 crisis has sent the gold price to a record high. [GOL/]
Both sides appear to be settling in for a protracted fight.
Papua New Guinea’s Prime Minister, James Marape, has said the lease was not extended owing to environmental and community concerns.
A new lease has been granted to Kumul Minerals Holding Ltd, a state-owned firm, he said in a Facebook post on Sunday.
Barrick has said it will challenge that move, too, and it has launched a separate complaint with the World Bank’s International Centre for the Settlement of Investment Disputes.
Vale opens ‘green’ grinding hub in China
Brazil-based miner Vale has inaugurated a grinding hub at Ningbo port in China’s Zhejiang Province that will use a cleaner solution for pellet production.
The Shulanghu grinding hub has three production lines creating a nominal capacity of 3 million tonnes per year, the company said.
The first product to be produced under Vale’s partnership with the Ningbo Zhoushan Port Group will be a high-grade ground iron ore fine called GF88, which uses Vale’s Carajas 65%-iron fines (IOCJ) as a raw material.
“[GF88] provides an excellent environmental-friendly solution for pellet production and supports steelmaking clients with the challenge of reducing their carbon footprint,” noted the press statement.
The production of GF88 does not require fuel and water, so it does not generate tailings or wastewater.
Marcello Spinelli, Vale’s executive director of ferrous minerals, said via video-link to the inauguration ceremony: “Vale is enriching its product portfolio to better meet China’s increasing demand for quality, environmental performance and innovation in a new era. GF88 is a truly ‘green’ mineral product.”
Stricter environmental controls in China are expected to lead to mills lowering their sintering of iron ore fines, and increasing their pellet mix. Ningbo Zhoushan Port is China’s largest iron ore transfer base.
“GF88 enjoys high iron content, low impurities and low loss-on-ignition characteristics,” added Spinelli. “It also deploys a unique, innovative and environmental-friendly production process, which has no need for heating or water and generates no tailings. With the launching of GF88 in China, together with other high-quality iron ore products and blends, Vale will continue to contribute to China’s greener future”.
Copper price to extend rally on “signs of Chinese panic buying”
Copper once again cleared the psychologically important $3 a pound level on Thursday on the back of falling inventories, booming Chinese demand and pandemic hit supply from South America, the US and Africa.
Copper for delivery in December trading on the Comex in New York exchanged hands for $3.0120 a pound ($6,605 a tonne) in morning trade, bringing gains for 2020 to more than 8% and a mouthwatering 52% since the covid-19 lows struck in March.
“CHINA IS IMPORTING MORE REFINED METAL FROM NEARLY EVERY COUNTRY SUGGESTING A STRUCTURAL SHIFT NOT A TEMPORARY CHANGE”
A new report from Roskill suggests the rally in copper – which has surprised many with its speed – has further to go.
Jonathan Barnes, associate consultant for copper at the London-based metal and minerals research firm, says while the effects of covid-19 could decrease world consumption of the metal by 3%–4% this year, the drop in mine output and scrap flows has been greater.
Signs of panic buying
The effect of this is most visible in the fall in stocks around the world.
Total visible stocks globally, which include those on exchanges and bonded warehouses in China fell by 40% from March to end-July to below 600,000 tonnes. Inventories in LME warehouses are at 13-year lows.
China is responsible for more than half the world’s copper consumption and the country is sucking up copper at record-setting rates.
Ok Tedi to restart operations in September
Ok Tedi Mining Ltd (OTML) plans to restart its operations in the week of 14 September, almost six weeks after it suspended operations due to a number of COVID-19 cases that were reported in Tabubil, Papua New Guinea.
The company made the announcement after it initiated a contact tracing, testing and isolation program at the mine site.
To date more than 3,000 samples have been collected with 143 positive COVID-19 cases identified in Tabubil. Employees and contractors who have tested positive have been isolated in controlled accommodation facilities and are all asymptomatic. Eighteen of these cases have since recovered.
OTML Managing Director and Chief Executive Officer Musje Werror said, “The testing program has provided us critical information and after careful assessment we are now better informed to restart operations without compromising the health and safety of our employees, contractors and communities.”
Mr Werror added that the COVID-19 pandemic has caused significant challenges to the business but has also presented opportunities for OTML to review and change the way it operates.
A major change necessary to commence operations is a change to the employee roster panels to accommodate 14-days isolation at designated Entry Point Centres. Returning employees and contractors are required to have a negative test result before they can travel to site and commence work.
South Korea seeks to exit Africa mining JV despite rising nickel demand
State-run Korea Resources Corp. has embarked on a plan to sell its stake in a loss-making nickel mining joint venture in Madagascar, Africa, after the ruling Democratic Party put forward a motion to ban the cash-strapped institution’s direct investment in overseas projects.
The planned sale, announced early this month, would mean South Korea’s exit from one of the world’s three-largest nickel mines, at a time when demand for nickel, a core raw material for rechargeable batteries, is on the rise from the burgeoning electric vehicle (EV) industry.
Korea Resources has pumped 2.2 trillion won ($1.9 billion) in the joint venture (JV), Ambatovy, since acquiring a 33% stake in the venture in 2006.
In June, a ruling party lawmaker proposed a bill to restructure Korea Resources’ businesses and ban its direct overseas investments. If the bill is passed, the state-run agency will have to divest of existing mining projects, not only in Madagascar, but also copper mines in Mexico and Panama.
“After the bill was submitted again, we kicked off the process to sell our foreign projects,” said a source from Korea Resources.
The restructuring proposal, including a merger with another state-run institution — Mine Reclamation Corp. – was put forward in the previous parliament. But it was rejected in 2018, in the face of opposition from politicians and residents of closed mine areas. They worried a merger would deteriorate the financial conditions of Mine Reclamation.
Hop in a Clear Kayak and Explore Chungju Hwalok Donggul
I wanted this summer to be one of excitement and exploration. My bucket list included surfing, rafting, hiking and river tubing, but the longer-than-usual rain season (not to mention a streak of rainy days), put a damper on my plans.
Severe weather, no matter what the season, can definitely affect travel, so I had to be careful what activity of my list I chose to check off. This is why my determination to have an adventure led me towards Chungju Hwalok Donggul, or the Chungju Jade Cave in North Cheungcheong province, for an underground kayaking experience.
Visitors here get the unique opportunity to explore Chungju Hwalok’s LED-illuminated passageways both on foot and in a kayak. There was heavy rain on the day I visited, but that didn’t matter inside the cave. Getting out and enjoying a nice day trip despite the weather made the nearly-two-hour drive from Camp Humphreys through Chungju’s scenic countryside worthwhile.
Hidden gem of Chungju
The cave itself used to be a mine and is now considered one of Asia’s biggest former mines. It was carved out over centuries by Korean miners and is 8.2-kilometres long with its deepest depth reaching 711 meters. Visitors can explore the cave by foot on a leisurely stroll through the 800-meter-long passageways. The course is flat and there are no stairs, so all visitors young and old can easily navigate the cave.
I paid 6,000 won (or about $5) for the entrance fee and then an extra 3,000 won for the kayaking experience. Plan ahead and bring a sweater and long pants as the cave stays between 51 to 60 degrees Fahrenheit year-round. Some of the passageways were pretty large like a highway tunnel, but there were other with low ceilings so watch out and avoid hitting your head on these.
Each section of the cave has a different theme. I saw many taking a rest in the portion known as the Health Therapy Room and enjoying the heated stools in the cool cave. Rusty giant mine hoists that used to drag minerals out of the cave are one of the other spectacles you’ll find after passing the therapy room.
Eventually, you’ll enter a mining-experience spot where you can try your hand at working in a mine. And you’ll notice signs pointing out the presence of bats, so look up and you’ll see these critters sleeping above.
Money trail points to bribery in mine dispute
An inquiry panel looking into kickback allegations involving an Australia-based gold mining firm and Thai state officials has found documents that might prove the company had paid bribes to the officials, according to graftbuster Supa Piyajitti.
Ms Supa, a member of the National Anti-Corruption Commission (NACC), said the panel has obtained emails showing the financial routes of the alleged bribes with money being wired to Hong Kong and Singapore.
The anti-graft official was giving an update on the inquiry into the allegations that Kingsgate, the parent company of Akara Mining Co or Akara Resources Plc, paid bribes to Thai state officials to secure concessions and authorisations needed for gold mine explorations and operations in the provinces of Saraburi, Phetchabun, Phichit and Phitsanulok — allegations which the company strongly denies.
The investigation into alleged corruption was launched in October 2015 when the NACC received information supplied by the Australian Securities and Investment Commission.
News of the alleged corruption first surfaced earlier that month after reports in the Australian media including an article in The Sydney Morning Herald.