September Newsletter – 09.09.19


Billionaire Friedland-backed miner picks up iron ore deposit in Guinea

CHART: Gold price suffers biggest fall in six years

Cameco may cut uranium output further as demand stalls

WPIC lowers platinum surplus forecast, notes healthy demand

North American thermal coal outlook turns sour

DRC Mining Code: Addressing the elephant in the room

White House Considering Direct Purchases of U.S. Mined Uranium

Fortescue raises $600m to fund debt


Billionaire Friedland-backed miner picks up iron ore deposit in Guinea

pic1 Behre Dolbear newsletter 09.09.2019

Billionaire Robert Friedland-backed High Power Exploration (HPX) has secured rights to develop a massive iron ore deposit in Guinea left undeveloped for years by its previous owners.

The US company, run by the Canadian mining icon, said the decision allowed it to buy a 95% stake in Nimba, owned until now by BHP, Newmont Mining and France’s Orano.

Nimba, located on the border with Liberia, is just one of the world’s richest iron ore deposits found in Guinea, holding around 1 billion tonnes of the steelmaking ingredient.


The West African country is also host to the famed Simandou project, which Rio Tinto, Vale and billionaire Beny Steinmetz’s BSG Resources fought over for years. However, Guinea has never exported a tonne as it lacks infrastructure to transport the ore to local ports.

Using a much shorter route through neighbouring Liberia would be cheaper and faster. The government, however, has repeatedly said ore should shipped via the country’s own ports. It has so far made an exception by allowing Niron Metals’s Zogota mine to send production by rail to Liberia and ship from there. It is not clear whether HPX has secured a similar rail deal.

The Vancouver-based firm plans to produce between 1 million to 5 million tonnes in a first phase, with a view to increasing output to at least 20 million tonnes. Under the deal, Guinea’s government will receive a 15% stake in Société des Mines de Fer de Guinée (SMFG), the company that owns Nimba. The government will also get two seats on SMFG’s board.

pic2 Behre Dolbear newsletter 09.09.2019

CHART: Gold price suffers biggest fall in six years

The gold price plunged in early morning trade on Thursday, in one of the worst trading sessions in dollar terms in gold market history.

The gold price dropped to $1,514.30 an ounce in mid-morning – down 3% or $46.10 an ounce from the Thursday’s settlement of $1,560.40 on the Comex market in New York.

The trades that crushed December-delivery gold in morning trade came in three short bursts of 1moz-plus sell orders, forcing bulls back on the defensive after a nearly 10% rally since the beginning of August.

Gold regained some of its footing by lunchtime Thursday, still more than 2% down on the day, after 55 million ounces of gold had exchanged hands in total in New York. That’s equivalent to half a year’s global gold production.

The gold futures market has been quiet in recent years, but today’s wild swing is in dollar terms the biggest fall in the price since 2013 when gold was trading at almost exactly today’s levels in the mid-$1,500s.

pic3 Behre Dolbear newsletter 09.09.2019


Cameco may cut uranium output further as demand stalls

Since the 2011 Fukushima nuclear disaster, Japan, Germany and other countries have closed dozens of reactors, which has depressed demand for nuclear fuel and forced miners to close or mothball mines as uranium prices plunged.

From a $140/pound high in 2007 and about $70 just before Fukushima, uranium fell to a low of $18/lb in 2016 and has since recovered slightly to $25 today UXXc1 as miners cut output.

A World Nuclear Association (WNA) report released on Thursday showed that world uranium production dropped from 62,200 tonnes in 2016 to 53,500 tonnes in 2018, with Canada, the world second-biggest producer, cutting output in half to 7,000 tonnes.

“We are not restarting mines until we see a better market and we may close more capacity, although no decision has been taken yet,” Cameco CEO Tim Gitzel told Reuters at the WNA’s annual conference.

pic4 Behre Dolbear newsletter 09.09.2019

WPIC lowers platinum surplus forecast, notes healthy demand

The World Platinum Investment Council (WPIC) has adjusted its platinum supply forecast for this year downward from a 375 000 oz surplus to a 345 000 oz surplus.

The WPIC stated in its latest Platinum Quarterly report, released on Friday, that refined production should grow by 5% this year, as some mining projects ramp up, but mostly owing to the refining of metal built up in the processing pipeline in 2018.

Recycling is forecast to grow by 3% as an increase in platinum recovered from autocatalysts more than offsets a decrease in jewellery recycling owing to the low platinum price.

The WPIC reports that total supply and mine supply of platinum in the second quarter of the year were 1% lower year-on-year and 2% lower year-on-year, respectively. This was owing to pipeline movements in Russia and South Africa.

North American thermal coal outlook turns sour

Multinational ratings agency Moody’s Investors Service expects North American energy coal producers’ profitability to worsen in the coming 12-18 months, prompting it to adjust its thermal coal sector outlook from neutral to negative.

pic5 Behre Dolbear newsletter 09.09.2019

Moody’s expects coal sector EBITDA to decline more than 3% over the next 12 months. Weighing on the assessment was a substantive drop in thermal coal export prices, while economic, environmental and social factors continued to weigh on demand from utilities, VP and senior credit officer Benjamin Nelson said.

“Coal producers’ profitability will worsen significantly over the next 12-to-18 months, driven by a substantive decrease in export prices for thermal coal, particularly in Europe, combined with meaningful open contract positions for some producers in 2020,” Nelson said.

The combination of a now-weakened export market and the significant retirement of coal-fired power plants in 2018 was creating an oversupplied domestic market and could drive prices even lower, especially if natural gas prices remained “very low” and coal producers attempted to maintain production near current levels, he added.

The longer-term outlook for North American thermal coal is also becoming increasingly stressed, as a confluence of economic, environmental and social factors weigh heavily on demand from utilities.

Moody’s projects thermal coal volumes to drop significantly over the next decade as utilities switch to natural gas and renewable energy, which continues to benefit from government subsidies.


DRC Mining Code: Addressing the elephant in the room

It’s a little over a year since the new Mining Code was signed into law in the Democratic Republic of Congo (DRC), but how much has it impacted mining companies operating in the country and can it be a win-win for both industry and government?

GERARD PETER spoke to industry experts on the sidelines of DRC Mining Week 2019 about their views of the impact of the code.

When former DRC President Joseph Kabila announced the new Mining Code in 2018, it sent shockwaves through the industry as new taxes or ‘super profits’ and an increase in royalties had mining companies crying foul.

Major companies, including Barrick Gold, Glencore and Ivanhoe Mines were defiant and started the Mining Promotion Initiative (MPI) to oppose the new code. Despite this opposition, the code was legislated in June 2018.

When the country elected Felix Tshisekedi as its new president earlier this year, it created further uncertainty along with a sliver of hope that the code could be reviewed.

However, the new leader soon made his intentions crystal clear: the new Mining Code is here to stay and mining companies have to adopt to the new operating conditions.

That said, Tshisekedi has left the door open for engagement with mining companies saying that government wants to produce ‘win win’ contracts, although his rhetoric around how he would go about doing this is still hazy.

Without doubt, the new Mining Code was the trending topic at this year’s DRC Mining Week, with the big questions being: What has been its impact on the industry and is a ‘win-win’ for both industry and government possible?

PwC assurance and advisory partner for Francophone Africa Jean Jacques Mukula explains: “We have no choice – the code is the law. As such, it needs to be beneficial to both industry and government.”

Can the DRC Mining Code benefit mining companies and government?

Mukula acknowledges that when the code was first tabled, there were many contentious issues but now the topics of discussion are different a year after implementation.

“Now, the discussions revolve around the provisions of some terms of the code and during our discussions at DRC Mining Week, it was agreed that there needs to be ongoing engagement amongst government, civil society and mining companies. I believe if this cooperation exists, then the code will be beneficial to all.”

Meanwhile, Luke Mumba, head of community and responsible mining development at Eurasian Resource Group (ERG) Africa adds that because the DRC plays such an important role in the company’s international operations, it is important that it is engaged with all stakeholders in the country.

Already, the company’s operations have been affected by the implementation of the new code. At the end of February, ERG temporarily shut one of its Boss Mining assets, placing it on care and maintenance while it completes a feasibility study on the construction of two processing facilities, resulting in significant job losses.

“While there are challenges, we understand the need for the changes that have taken place,” adds Mumba.

“However, at the same time one needs to understand that investing in mining is a slow process that demands time and plenty of resources and we plan our operations on the assumption that there is stability in the country and that it is not an ever-changing environment.”

White House Considering Direct Purchases of U.S. Mined Uranium

  • Government pondering ways to help flagging domestic industry
  • ‘The president intends to take bold action,’ executive says

The White House is considering a plan that would have the government directly purchase uranium from U.S. producers as it contemplates ways to revive the flagging domestic mining industry.

A group set up by President Donald Trump to study the issue is considering a request by the nuclear industry to use the Defense Production Act, a 68-year-old Cold War-era statute once invoked by President Harry Truman to help the steel industry. The plan calls for requiring the government to buy American uranium to replenish their stockpiles and for other purposes, Paul Goranson, chief operating officer for Energy Fuels Inc., said in an interview.

Energy Fuels and Ur-Energy Inc. unsuccessfully petitioned the White House to put quotas on foreign imports of uranium. The concept of direct government purchases of U.S. uranium was among ideas discussed during a roundtable with administration staff and the nuclear industry at the Old Executive Office Building earlier this week, Goranson said.

“They seem receptive to direct purchasing of material,” Goranson said. “The president intends to take bold action on this. It’s got his attention now.”


Fortescue raises $600m to fund debt

PERTH ( – Iron-ore major Fortescue Metals has completed a $600-million bond offering that will be used to partially repay its $1.4-billion of outstanding debt, due in 2022.

The miner raised the capital through the issue of senior unsecured notes at an interest rate of 4.5%, maturing in September 2027.

CEO Elizabeth Gaines on Friday said that following the record financial results for the 2019 financial year, and the strong start to the 2020 financial year, the ongoing strength of Fortescue’s performance had resulted in the successful execution of the senior unsecured note offering.

“Fortescue’s balance sheet is structured on investment grade terms which have allowed us to take advantage of market conditions to extend the maturity profile of Facebook’s debt at a low cost.

“In addition, we are in negotiations to extend the balance of the 2022 term loan while maintaining optionality and flexibility to ensure the long term sustainability of our operations, invest in growth and development and continue to deliver returns to our shareholders.”

Fortescue is also in negotiations with its existing term lenders to extend the term loan maturities of the remaining $600-million to 2025, on the same terms and conditions. The balance of the term loan of $200-million will be repaid from operating cash.


comm1 Behre Dolbear newsletter 09.09.2019comm2 Behre Dolbear newsletter 09.09.2019comm3 Behre Dolbear newsletter 09.09.2019