September Newsletter – 15.09.2020
- Iron ore price jumps to fresh 6-year high on China building boom
- Rio Tinto chief Jean-Sébastien Jacques to quit over Aboriginal cave destruction
- AVZ Minerals well advanced with lithium and tin offtake negotiations
- Vale Indonesia delays smelter rebuild
- Pakistan seeking relief from $5.8B fine over mining lease
- Chinese coal mines face fresh safety checks
- India plans to restrict copper, aluminium imports with an eye on China – sources
- Zimbabwe bans mining in national parks to protect endangered wildlife
Iron ore price jumps to fresh 6-year high on China building boom
Iron ore prices hit fresh six-and-a-half year highs on Monday on the back of a Chinese construction and factory expansion boom.
According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $130.17 a tonne on Monday, up 1.4% from Friday’s peg.
That was the highest level for the steelmaking raw material since mid-January 2014 and brings gains for 2020 to over 41%.
THAT’S THE EQUIVALENT OF EXPANDING BY THE SIZE OF THE ENTIRE ECONOMY OF SAUDI ARABIA, SWITZERLAND OR ARGENTINA EACH YEAR
China is expected to set a growth target of 5.5% in its 2021–2025 economic development plan, the fourteenth five-year plan since 1953.
While that’s down from the 6.5% GDP expansion target in the 2015–2020 plan, the relative size of the Chinese economy today translates to more than $750 billion being added to its GDP each year.
That’s the equivalent of expanding by the size of the entire economy of Saudi Arabia, Switzerland or Argentina each year. And most of the economic activity will be directed to steel intensive industries including domestic infrastructure, housing and transport.
Excavator sales in China – a handy lead indicator for construction activity – are skyrocketing. Caixin reports sales are up 51.3% to just under 21,000 units for the first eight months of the year.
That’s already close to 90% of annual sales in 2019 according to according to the China Construction Machinery Association.
Rio Tinto chief Jean-Sébastien Jacques to quit over Aboriginal cave destruction
Jean-Sébastien Jacques has been Rio Tinto’s chief executive since 2016
The boss of Rio Tinto, Jean-Sébastien Jacques, will step down following criticism of the mining giant’s destruction of sacred Aboriginal sites.
In May, the world’s biggest iron ore miner destroyed two ancient caves in Pilbara, Western Australia.
The company went ahead with blowing up the Juukan Gorge rock shelters despite the opposition of Aboriginal traditional owners.
It sparked widespread condemnation from shareholders and the public.
On Friday, the company said in a statement: “Significant stakeholders have expressed concerns about executive accountability for the failings identified.”
The board said Mr Jacques would remain as the chief executive until March or until a successor was appointed.
Other senior executives, including the heads of the miner’s iron ore and corporate relations divisions, will also leave the company at the end of the year.
The caves – seen as one of Australia’s most significant archaeological research sites – had shown evidence of continuous human habitation dating back 46,000 years.
They sat above about eight million tonnes of high-grade iron ore, with an estimated value of £75m (A$132m; $96m).
Juukan Gorge cave sites, seen before and after the destruction
Australia’s parliament is currently holding an inquiry into the miner’s actions.
Rio Tinto also held its own inquiry earlier this year, after which the company cut bonuses for directors and began attempts at repairing relations with Aboriginal communities.
“What happened at Juukan was wrong and we are determined to ensure that the destruction of a heritage site of such exceptional archaeological and cultural significance never occurs again at a Rio Tinto operation,” said chairman Simon Thompson.
Artefacts found at the caves include a 28,000-year-old animal bone tool and a 4,000-year-old belt made of plaited human hair. DNA testing had directly linked it to the Puutu Kunti Kurrama and Pinikura (PKKP) people – the traditional owners of the land.
AVZ Minerals well advanced with lithium and tin offtake negotiations
Besides negotiating the offtake agreements, the company is also working on plans to develop the Manono Lithium and Tin Project in the Democratic Republic of Congo.
AVZ Minerals Ltd (ASX:AVZ) is in the advance stage of discussions with potential offtake partners for significant volumes of spodumene concentrate, lithium and tin.
The company was also recently accepted as a member of European Battery Alliance, an organisation launched by the European Commission to support the development and growth of the European battery industry.
AVZ’s strategy to ensure a diverse customer base has been further underpinned by the addition of lithium to the European Union’s critical raw materials list.
Financing negotiations for Manono
AVZ’s negotiations related to the financing options for developing the Manono Lithium and Tin Project in Democratic Republic of Congo (DRC) with several entities in Europe, the Middle East and South Africa are progressing well.
The company’s data room has been made available to several entities for some months to allow due diligence on the Manono Project to be completed.
Tenders for the process plant as well as the Kabondo Dianda intermodal staging site, mine-site buildings, crew accommodation, diesel supply and camp catering services packages for the Manono project are currently being adjudicated by the company.
These contracts will be awarded once AVZ’s board makes a final investment decision (FID) to mine Manono.
The company has issued a tender for the rehabilitation of the Mpiana Mwanga Hydro Electric Power Plant (HEPP) with proposals due back by the end of October 2020.
Vale Indonesia delays smelter rebuild
PT Vale Indonesia has postponed to next year a US$90 million upgrade of its Sorowako nickel smelter in South Sulawesi due to COVID-19 related logistical issues.
The Sorowako upgrade, which has been planned since 2017 and was due to take five months, will now proceed in May 2021, Vale Indonesia finance director Bernardus Irmanto told a virtual shareholders’ meeting.
Sorowako has been in operation for over 40 years
A stabilisation of the market next year will enable the company to make regulatory and investment progress on that expansion and on two new smelter projects on Sulawesi island, added Irmanto.
The company is reportedly in talks with Chinese investors over the development of the ferronickel Bahodopi smelter, and with Japan’s Sumitomo Metal over the High Pressure Acid Leaching (HPAL) Pomalaa smelter.
PT Vale Indonesia will make final investment decisions in 2021 for these two new projects, which are currently still at the feasibility study stage, said Irmanto.
Vale Indonesia operates the world’s largest integrated laterite nickel mining and processing operation in Sorowako, located around 600 kilometers north of Makassar City, the provincial capital.
Pakistan seeking relief from $5.8B fine over mining lease
ISLAMABAD — Pakistan is seeking the reversal of a $5.8 billion penalty imposed by an international tribunal for denying a mining lease to an Australian company, saying that paying the fine would hinder its handling of the coronavirus pandemic.
The Reko Diq district in southwestern Pakistan’s Baluchistan province is famed for its mineral wealth, including gold and copper. Prime Minister Imran Khan’s government considers it a strategic national asset, though instead of yielding a bonanza the Reko Diq mining project may cost the country dearly.
The World Bank’s International Center for Settlement of Investment Disputes is considering Pakistan’s appeal against enforcing the penalty over its cancellation of the Reko Diq mining lease for Tethyan Copper Corp., a 50-50 joint venture of Barrick Gold Corp. of Australia and Antofagasto PLC of Chile.
In the meantime, the Baluchistan government has set up its own company to develop the mine: As prices for commodities surge, with gold recently at more than $2,000 an ounce, turning fiasco to fortune is all the more appealing.
Pakistan and Tethyan both have signaled a willingness to discuss alternative solutions, such as a settlement, but the status of any talks on a deal is unclear. Officials on the Pakistan side said they have not been in direct contact and no specific settlement has been proposed.
“Despite the initiation of arbitral proceedings in order to protect its rights, TCC remains hopeful of an opportunity to reach a negotiated resolution to the case,” says a statement on the company’s website issued after the 2019 arbitration ruling.
Asked recently, Tethyan officials said there were no updates.
An official in Pakistan’s attorney general’s office said an out of court settlement with Tethyan Copper Corp. , or TCC, was possible pending a final decision on the award, which might not come until next year.
The Reko Diq case is testing Khan’s ability to use back channel diplomacy to settle disputes and keep alive efforts to lure more foreign investors.
According to details available on Tethyan’s website, the Reko Diq Mining Project was to build and operate a world class copper-gold open-pit mine at a cost of about $3.3 billion. The project could be “a beacon for further investment into exploration and mining sectors in Baluchistan and Pakistan in general,” the company said.
Chinese coal mines face fresh safety checks
China’s domestic coal supply could face disruptions when authorities conduct week-long safety spot checks on coal mines in at least 11 provinces this month.
China’s top three coal producing provinces of Shanxi, Inner Mongolia and Shaanxi are included in the list of provinces where spot checks will be carried out by the country’s coal mine safety administration. Coal mines that are deemed to be hazardous or outdated will be shut down. The checks follow a series of mining accidents involving fatalities in Shanxi and Shandong last month.
The move could exacerbate the country’s supply shortfall given ongoing import curbs, while coal transportation on the crucial Daqin railway has not yet fully recovered from two recent derailments. The Daqin railway, which transports coal from Shanxi to the country’s key coal trans-shipment port of Qinhuangdao, hauled around 1.1mn-1.2mn t/d in recent weeks after the derailments, down from the usual 1.3mn t/d. The railway also scheduled to undergo a 20-25 day maintenance this month that could restrict haulage as operating hours will be reduced.
But the impact of any supply shortfall on coal prices is likely to be cushioned by weak demand. Chinese utilities are now in the shoulder season for spot coal purchases as the country transitions into the cooler autumn period, while winter restocking yet to begin. Daily coal burn data for five of the six coastal utilities are no longer available, but Zhejiang Power’s coal burn on 5 September was 116,000 t/d, the lowest since 26 July.
Stronger hydropower output following recent heavy rainfall has also dampened coal demand. Typhoon Haishen, the latest in a series of storms to affect China, is expected to make landfall in China’s northeast provinces tomorrow. The country’s meteorological administration has warned of torrential rainfall in northeast China this week, which could boost hydropower output even further.
India plans to restrict copper, aluminium imports with an eye on China – sources
NEW DELHI (Reuters) – India is planning to raise surveillance of copper and aluminium imports while developing policies to curb shipments from China and other Asian nations to protect domestic producers, said two government sources and an industry official.
Officials in New Delhi are expected to soon ask importers to register with authorities as a first step towards tighter controls that would require permits for individual shipments of the two metals, government sources said. The sources declined to be identified due to the sensitive nature of the discussions.
The move for greater screening is aimed at pushing economic self-reliance, the federal mines ministry said in a letter to the commerce ministry late last month. The letter reviewed by Reuters refers to Prime Minister Narendra Modi’s push to reduce imports and increase exports of value-added products.
“The purpose of (the) system is to have adequate information … so that an appropriate policy intervention could be devised,” the mines ministry said in the letter.
Government sources said the aim of the tighter surveillance would be to move copper and aluminium imports onto a restricted items list, which would require importers to get a government-issued license for every shipment.
India’s federal mines and commerce ministries did not respond to requests for comment.
“The screening will help us devise policies like adding one or both the metals to the restricted list of goods as we will have enough data to see what is being dumped into the country,” one government official said.
China, Japan, Malaysia, Vietnam and Thailand are among the major exporters of copper, accounting for 45% of India’s $5 billion in copper imports for 2019/20, government data showed.
Zimbabwe bans mining in national parks to protect endangered wildlife
Zimbabwe has officially banned mining in all its national parks, responding to protests after allowing Chinese companies to look for coal in one of the world’s most important elephant reserves. The permits had been allegedly awarded without a previous environmental assessment report.
The Hwange national park
The Zimbabwe Environmental Law Association had filed an urgent request at Harare High Court, claiming mining inside the Hwange National Park would pose severe risks to the biodiversity in the area. Despite their win, they will continue with their claim so to have a legal reassurance in case the government backtracks in the future with their decision.
Hwange is Zimbabwe’s biggest national park. It’s home to the country’s biggest elephant herd, more than 40,000, as well as large pride of lions and buffalo, all popular with tourists. The last black rhino population also lives there, as many endangered species, which environmental organizations argue would be threatened by extractive activities.
The government had given permission to the mining companies Zhongxin Coal Mining Group and Afrochine Smelting to start impact assessments for drilling, geological surveys and road building at two proposed sites inside the Hwange park. Moving ahead with the project would shrink and disturb the habitat of many species and alter safari tourism, a source of income for local people, organizations have argued.
“This is one of the greatest game parks in the world and the mines would be in one of the most pristine areas of the park. The last black rhino population in Hwange Park lives there, so do 10,000 elephants and 3,000 buffalo,” Trevor Lane, who works for the Bhejane Trust in Hwange, told The Guardian. “If it goes ahead it will be an end to the park. It would kill the tourist industry.”
Following the complaints by conservationists, the government first said the companies had been given the mining permits before President Emmerson Mnangagwa came to power in 2015, suggesting there wasn’t much that could be done. Nevertheless, the government decided to change its stand and ban mining in all parks with immediate effect, cancelling permits given to companies across the country.
Information Minister Monica Mutsvangwa was the one to announce the ban on mining in national parks, which was followed by a ban on most river beds. The decision affects mainly Chinese companies, which had been given mining permits in the country. China is a major investor in Zimbabwe and a close ally of the government, which relied on China in recent years to boost its struggling economy.
“Hwange national park is a unique and important enclave. We don’t think there is any tourist who would visit Zimbabwe to check on production of any mine. Tourists are attracted to wildlife. We hope the government will genuinely stay by its word,” said Simiso Mlevu, a spokeswoman for the Center for Natural Resource Governance, in a statement.