September Newsletter – 13.09.18
Behre Dolbear is proud to be a Sponsor of the Asia Mining Club’s Sept 18 lunch event featuring Mr. Sam Riggall, MD & CEO of Clean TeQ Holdings (ASX: CLQ, TSX: CLQ), as speaker. Details available via www.asiaminingclub.org or contact Club Secretary at firstname.lastname@example.org or +852-9191-0630
Mining exploration spending in Australia jumps to 5-year high
Australia is the world’s number two gold producer; the country’s tightening its grip on the trade in iron ore and coking coal; comes in at no 6 for copper; and is set to increase output of mineral-du-jour lithium from the current 38% to nearly half the global total within five years.
That’s the result not only of a rich mineral endowment but massive amounts of money spent on exploration across the continent.
After a sharp drop-off when it became clear that boom times for Chinese economic growth were beginning to taper, new data from the Australian Bureau of Statistics shows the country’s miners and explorers are once again pouring money into the sector.
Mining exploration spending in Australia jumps to 5-year high – spending on gold copper
Graph background image: OZ Minerals
ABS announced this week the country’s mineral exploration expenditure jumped by 26.6% during the second quarter compared to last year to total $563.4m. That’s the highest level since the third quarter of 2013.
Spending on base metals rose at the fastest pace, up 38%, to the highest since the final quarter of 2012. Iron ore exploration also appears to be escaping the doldrums after two quarters of sequential growth (although nothing close to spending from 2011 to 2014 when iron ore was worth double it is now).
Biggest Congo Coltan Miner Resumes Buying After Output Halt
- Output halted for three months over alleged smuggling, attacks
- Congo accounts for quarter of global tantalum production
Societe Miniere de Bisunzu Sarl, the Democratic Republic of Congo’s biggest coltan miner, resumed purchases of the ore after a three-month shutdown at one of the country’s largest deposits.
Output restarted at SMB’s mining permit, comprising seven sites at Rubaya in east Congo, on Aug. 14 and the company began buying the minerals extracted by artisanal diggers on Tuesday, Freddy Nzonga, the company’s director of traceability, said by phone. Production was halted in May following allegations of smuggling and attacks by miners against SMB officials.
“The diggers returned to the sites” last month, Nzonga said. Production is “still quite modest,” he said.
Congo produces more than a quarter of the world’s tantalum, the scarce mineral that’s extracted from coltan ore and used in Apple iPhones and other smartphones as well as armaments and aviation components. Last year, SMB purchased about 1,000 metric tons of coltan ore extracted from its permit area, according to the company. That’s about about half of Congo’s total production, Mines Ministry data show.
Cooper Deal Day Hits With a Flurry of M&A for the Hottest Metal
- Zijin, BHP and Glencore all announce copper transactions
- Copper market is forecast to tighten on electrification demand
“Everyone loves copper and everyone wants to buy it” has been this year’s mining mantra. Today the ball started rolling.
China’s Zijin Mining Group Co. swooped on a huge undeveloped copper mine in Serbia, acting as a white knight to beat out an earlier hostile bid from a Canadian rival. At the same time, BHP Billiton Ltd., the biggest miner, snapped up a stake in one of the world’s biggest undeveloped assets. Glencore Plc also increased its exposure to the metal with a new offtake deal.
Uranium supply crunch may be just around the corner — experts
Production cuts, halted projects and operations, as well as renewed interest from investors has helped drive uranium prices up by 30% in the past four months, but experts remain cautious about the long-term outlook for the commodity.
Decade-low prices have had a negative effect on the profitability of existing mines and a devastating effect on the capacity of early-stage projects to raise the necessary funding to be mine-ready when demand picks up.
“The overall nuclear fuel chain remains a challenging environment, with low prices across the chain weighing on margins for producers and consumers,” BMO analysts Colin Hamilton and Alexander Pearce said in a seminar part of the World Nuclear Association’s (WNA) Symposium, which kicked off in London on Wednesday.
They noted, however, that recent supply cutbacks by major producers — mainly Canada’s Cameco (TSX:CCO) (NYSE:CCJ) and Kazakhstan’s state-owned miner Kazatomprom —, as well as the closure of a number of higher-cost mines, are starting to shift the balance into a deficit for the first time in more than a decade.
Cameco, the world’s largest publicly traded uranium producer, has indefinitely suspended key operations and reduced its workforce across all sites, including its head office.
Kazatomprom, in turn, not only lowered output, but also recently bypassed the spot market by selling a big portion of its annual output production to Yellow Cake, a London-listed investment vehicle planning to buy and store large amounts of the metal in anticipation of higher prices.
LEGAL AND REGULATORY
China’s Zijin to buy Nevsun for $1.41bn after Lundin takeover rejected
Canada’s Nevsun Resources (TSX, NYSEMKT:NSU) has found a new suitor in China’s state-backed Zijin Mining, which has offered Cdn$1.86 billion ($1.41 billion) for the gold and copper miner.
Zijin’s friendly takeover bid values each Nevsun share at Cdn$6, which will be paid in cash, representing a premium of about 21% to the Vancouver-based miner’s close in Toronto on Tuesday.
Zijin’s friendly takeover bid values each Nevsun share at Cdn$6, which will be paid in cash, representing a premium of about 21% to the miner’s close in Toronto on Tuesday
The deal, which beats an earlier hostile bid by Lundin Mining (TSX:LUN), is the latest move by Zijin to expand overseas. In recent years, the gold, copper and zinc miner has snatched assets from Africa to Australia. Last week, the company spent $1.26bn for a 63% in Serbia’s largest copper mining and smelting complex RTB Bor.
Nevsun’s flagship asset is the Bisha copper-zinc mine in Eritrea, but it’s also developing the Timok copper and gold project in Serbia.
“The all-cash consideration of C$6 per share better reflects the fundamental value of Nevsun’s mining and development assets, while also providing an appropriate change of control premium to our shareholders,” Ian Pearce, Nevsun’s chairman, said in the statement. “Zijin is a proven mining industry operator with a $10bn market capitalization and a demonstrated track record of successfully completing international transactions.”
Rio Tinto considers float of Canadian iron ore business as it turns focus to Australia, sources say
Australia’s Pilbara region has lower costs and higher grades
LONDON — Rio Tinto, the world’s second largest listed mining company, is exploring a public listing of its Iron Ore Company of Canada business, banking and industry sources said, as it focuses on boosting revenue from its flagship Australian assets.
Iron ore, which accounts for most of Rio’s profit and is used in making steel, has provided healthy margins for years but the outlook is uncertain as major buyer China is expected increasingly to rely on recycling rather than importing raw material.
Following a commodity price crash in 2015, Rio put a string of assets on the block, mostly in coal, to decrease its debt load. In iron ore, its push to refocus has meant concentrating on Australia’s Pilbara region, where it has lower costs and higher grades.
IOC, 59 per cent owned by the Anglo-Australian miner, 26 per cent by Japan’s Mitsubishi Corporation and 15 per cent by Labrador Iron Ore Royalty Company, is one of Canada’s largest producers of iron ore. It had revenues of US$1.9 billion in 2017.
Leaders in raising mining capital in 2017
Adequate financing is crucial for companies, especially for those working in such a capital-intensive industry as mining. Very few companies working in the Mining & Metals sector, even those with producing assets, can finance their operating, capital, exploration, development, and other expenses with cash-flow generated by commodity sales and other revenue-generating activities.
A majority of mining and exploration companies have to rely on external funding. Various types of financing are available in the form of debt, equity or a combination of both. Alternative sources of funding in the forms of royalty, option, earn-in, off-take, streaming, joint venture, partnership, M&A and other agreements, have become greatly important in the mining industry, too.
Despite the variety of financing types existing on the market, not all of them are equally available to the companies.
Most of the debt funding is available almost exclusively to companies with near term, or current cash-flow from operations, who are developing highest quality assets in safe geopolitical jurisdictions and leading with strong and experienced management.
INNOVATION AND TECHNOLOGY
Luxembourg’s mining-focused Space Agency ready to lift off
Luxembourg, one of the first countries to set its eyes on the possibility of mining asteroids, is officially launching its Space Agency (LSA) next week, which main goal will be boosting exploration and commercial utilization of resources from near Earth objects.
The tiny country, one of the euro zone’s wealthiest, already has a long-standing space industry, which played a significant role in the development of satellite communications a generation ago, including setting up SES (Société Européenne des Satellites), one of the world’s largest satellite services company.
Now the nation want to become Europe’s centre for space mining. That is why, unlike US space agency NASA, LSA will not carry out research or launches. Its purpose is to accelerate collaborations between economic project leaders of the space sector, investors and other partners, Paul Zenners, government counsellor, said in an emailed statement.
The agency, he noted, will also manage all national space programs and the relations with the European Space Agency (ESA), from which the country is a member.
Danakali banks on new investor mood to fund Eritrean mine
LONDON (Reuters) – Fertiliser miner Danakali (DNK.AX) (DNK.L) aims to raise $322 million this year to develop giant potash reserves in Eritrea, industry sources say, banking on Asmara’s warmer ties with Ethiopia to help lure investors.
The project will test the changing mood in the West towards the isolated nation, sandwiched between Somalia and Venezuela at the bottom of the World Bank’s rankings on ease of doing business, and buffeted by accusations of human rights abuses.
There are already signs of a shift. Another miner working in the area, Altus Strategies (ALS.L), has seen an upturn in investor interest in Eritrea and Ethiopia, while mining lawyers cite increased appetite for projects in the Horn of Africa neighbours that fought a war in 1998-2000.
Danakali, which has worked in Eritrea since 2009, finalised a deal to sell its potash and also listed in London in July, barely a month after Ethiopia under its new Prime Minister Abiy Ahmed launched a rapprochement with Eritrea to end decades of hostility.