September Newsletter – 18.09.18
NEWSLETTER
Toronto miner unearths boulder that contains 9,000 ounces of gold in Australia, worth about $15M
“State-owned miner Shandong Gold plans US$768 million in Hong Kong initial public offering” SCMP
Yamana warns Argentina’s looming tax on exports could hit bottom line
How Anglo Quietly Built a Commodity Trader in Glencore’s Shadow
Top cobalt mines ranked by production in 2017
Don’t underestimate lithium-ion battery demand for nickel
Chilean lawmakers study extra tax for copper, lithium mines
“Congo mines minister insists no compromise on new mining code” (Reuters)
In a new environment protection drive, Philippines has announced that it will limit the land that miners can develop at any given time.
Nexa says to invest $1.17 billion in Peru, Brazil in five years
Lundin Mining has hefty M&A appetite for copper, says incoming CEO
Barrick Gold to part with Chief Innovation Officer Michelle Ash
“Mercuria to grow iron ore business with major financing of U.S. mine” (Reuters)
How an Aussie miner and American tech company plan to extract lithium quickly in Argentina
ANNOUNCEMENTS
Behre Dolbear is proud to be a Sponsor of the Asia Mining Club’s September 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 secretary@asiaminingclub.org or +852-9191-0630
TOP NEWS
Toronto miner unearths boulder that contains 9,000 ounces of gold in Australia, worth about $15M
Royal Nickel stock surged 83 per cent
Rare is the story of a modern mining company that unexpectedly strikes a mother lode of gold.
But Toronto-based junior mining company Royal Nickel Corp. announced Sunday night that its employees in Australia at the Beta Hunt mine — which the company has been trying to sell since April — removed a golden boulder like few others in the world: Within a single cube of earth that measured roughly three meters wide, three meters long, and three meters deep, they found 9,000 ounces of gold including two large lumps — all told worth around $14 or $15 million at current prices. That’s equivalent to roughly 40 per cent of RNC’s $35 million market capitalization as of last week.
“It was a nickel mine for years and years,” said Mark Selby, chief executive of RNC. “But we bought it because there were a bunch of gold deposits sitting beneath it.”
“State-owned miner Shandong Gold plans US$768 million in Hong Kong initial public offering” SCMP
State-owned firm controls and operates 12 domestic gold mines, and accounts for roughly 6.6pc of China’s gold output. Funds to be used to partially pay down debt from purchase of Argentina’s largest mine.
Shandong Gold Mining, one of China’s largest miners of the precious metal, is seeking to raise as much as US$768 million in a Hong Kong initial public offering (IPO) to fund overseas expansion.
The company is offering 327.7 million H-shares at between HK$14.7 and HK$18.4 (US$1.87-2.34), according to its filing to the Hong Kong stock exchange.
The state-owned domestic holding company of Shandong Gold is also listed in Shanghai with a market capitalisation of 43.6 billion yuan (US$6.3 billion).
The firm controls and operates 12 domestic gold mines, and accounted for 6.6 per cent of China’s gold output in 2016,. The country the world’s largest producer of the yellow metal.
Officials said it plans use the funds to partially repay US$972 million worth of debt it took on to buy a half stake in the Veladero Mine, Argentina’s largest mine and the second-largest in South America, from Canadian miner Barrick Gold in June 2017.
The market has already been stretched by several mega-sized listings this year, including smartphone maker Xiaomi, telecommunications tower operator China Tower, and food review and delivery giant Meituan Dianping.
The listing also comes as gold prices have become increasingly volatile, and are now in a five-month decline.
The spot gold price has fallen 11 per cent since April, as climbing US interest rates have driven an inflow of capital into the country and into investment in its currency.
To achieve our goal of becoming one of the world’s top-10 gold miners by 2020, we have to expand our international assets. This can only be done by overseas mergers and acquisitions, so we have to open up to the international capital markets
But Li said the company was confident that an upwards trend in gold prices will emerge within the next 12 months, with interest rates steadying in the US by the end of next year.
Increasing geopolitical intensions will also fuel the demand for gold as a safe haven, he added.
The company counts the Shanghai Gold Exchange, the world’s largest spot physical gold exchange, as its top client, making up 73 per cent of its sales in 2017.
Revenue reached 51 million yuan last year, up from 49.1 million in 2016 and 28.8 million in 2015.
The price of the Hong Kong offering will be set on September 20, and shares will start trading eight days later.
CCB International, China Securities International, and ICBC International are joint sponsors of the listing.
Shandong Gold Group, the domestic holding company, will own 46.64 to 47.69 per cent of the firm’s shares after the float, depending on whether an over-allotment option is exercised to increase the IPO’s value.
The company’s gold reserves stand at 339 tonnes.
It has already expanded its operations domestically out of from Shandong, the largest gold producing province in China, to northern regions including Inner Mongolia autonomous region and Gansu province, as well as the southeastern province of Fujian.
Yamana warns Argentina’s looming tax on exports could hit bottom line
Canada’s Yamana Gold (TSX: YRI) (NYSE: AUY) said Wednesday that Argentina’s surprise decision to impose a new tax on all exports could hurt its cash flow, even as the miner is mulling ways to mitigate the impact.
Earlier this month, Argentine President Mauricio Macri and economy minister Nicolás Dujovne announced temporary austerity measures to strengthen the country’s ailing economy.
Yamana, which operates Cerro Moro, Agua Rica and Gualcamayo mines in the country, said it was taking a number of measures to mitigate the financial impact of the new tax.
Among the actions, there is a proposal to impose an export duty of 3 Argentine Pesos per each $1 in exports of goods and services until the end of 2020. With US dollar worth about 37.8 pesos as of Wednesday, companies are looking at a 7.5% tax, which applies to revenues, not earnings, so the impact can be significant.
The Toronto-based miner, which operates the newly-opened Cerro Moro, as well as the Agua Rica and Gualcamayo mines in Argentina, said it was taking a number of measures including adjusting its foreign exchange hedging program due to currency fluctuation in Argentina and other countries.
“Argentina’s export tax has the potential to offset a portion of these benefits,” President and CEO Daniel Racine said in the statement.
http://www.mining.com/yamana-gold-warns-argentinas-looming-tax-on-exports-could-hit-bottom-line/
COMMODITIES
How Anglo Quietly Built a Commodity Trader in Glencore’s Shadow
- Miner now trades more metals and coal than it produces
- Company may consider taking financial bets on metals
Anglo American Plc has quietly become a commodities trader.
In just five years, the century-old miner assembled marketing operations that now sell more metals than the company produces. Yet the trading business gets barely a mention at presentations by Anglo executives or in analyst reports, taking a back seat to mines that produce everything from copper and platinum to diamonds.
Anglo’s move into trading goes against a long-standing industry maxim: miners don’t trade. For much of the last two decades, investors wanted producers’ shares to track soaring metals prices and resisted anything that might get in the way. The orthodoxy was challenged when Glencore Plc broke into the big leagues of global mining with the acquisition of Xstrata in 2013, roughly when Anglo started building its trading unit.
Top cobalt mines ranked by production in 2017
Michael Allan McCrae
Glencore’s Mutanda Mine in the Democratic Republic of Congo produced 23.9 kilotonnes of cobalt in 2017 making Mutanda the world’s biggest producer of the blue metal that is also owned by a publicly-traded company.
Ranking was compiled using data from Mining Intelligence. Annual cobalt production is gathered from publicly-traded mining companies, as well as some state-owned mines. Mining complexes are excluded. Stock exchanges used are TSX, TSX-V, ASX, LSE, LSE-AIM, NYSE and JSE.
China Molybdenum’s Tenke Fungurume came in second and with an asterisk, since cobalt production is based on 2016 numbers when the mine was run by Freeport McMoran, which released the mine’s last production results in its annual report. The Arizona-based copper giant sold Tenke Fungurume in 2016 to China Molybdenum for $2.65 billion. China Molybdenum doesn’t publish cobalt production numbers.
http://www.mining.com/top-cobalt-mines-ranked-production-2017/
Don’t underestimate lithium-ion battery demand for nickel
Metal Bulletin
The focus on lithium-ion batteries seems to reflect supply and demand of lithium and cobalt and the growth rates of EVs and ESS but it would be very wrong not to include nickel. If EVs are to replace petrol/diesel vehicles, they will require battery packs that can deliver the ranges that drivers are used to.
First-generation EVs relied on lithium-ion batteries that were made using lithium iron phosphate (LFP) and lithium manganese oxide (LMO), neither of which used nickel in their chemistries. Since range anxiety has been a factor putting people off buying EVs, the industry has developed batteries that have higher energy densities and therefore greater ranges. These second-generation lithium-ion batteries have a different chemistry, one that use nickel manganese and cobalt (NMC).
China announced earlier this year changes to its subsidies for EVs; these were aimed at EVs that have greater ranges, which encouraged the use of NMC batteries over LFP and LMO. Although all battery chemistries are still used, new models are likely to be designed around NMC chemistries as and when they are developed. As well as NMC, Tesla uses its own lithium-ion battery, which has yet another chemistry – nickel, cobalt and aluminium (NCA).
http://www.mining.com/web/dont-underestimate-lithium-ion-battery-demand-nickel/
LEGAL AND REGULATORY
Chilean lawmakers study extra tax for copper, lithium mines
Reuters
Sept 14 (Reuters) – Chile’s congress is studying a proposal for an additional royalty payment for copper and lithium miners operating in the country to bolster the development of the regions around their deposits, according to a draft seen by Reuters.
The initiative, which was put forward by opposition legislators from mining areas and does not have government backing, proposes a 3 percent tax on the nominal value of extracted metals and would apply to copper miners producing more than 12,000 tonnes of copper a year and 50,000 tonnes of lithium
“The payments must be made annually by the respective miners, for the life of existing mines and in the case of those not yet operational, from the start of extraction to its completion,” the draft said.
It was sent on Thursday evening to the mines and energy committee of the country’s house of representatives, but support for it remains in question since it was put forward by lawmakers from a number of small parties pushing for Chile’s decentralization. It is not thought to have the backing of the government or larger opposition parties.
In 2010, Chile’s government raised mining royalties from between 4 and 5 percent to 4 percent to 9 percent of mining sales on a sliding scale, rising to 5 to 14 percent starting in 2018. The law change was aimed at raising revenues to help the country rebuild after a devastating earthquake in February 2010.
Chile is the world’s biggest copper producer and an important producer of lithium, demand for which is growing.
Mining companies operating in Chile include BHP Billiton Ltd , Glencore Plc, Anglo American Plc, Antofagasta Plc, SQM SA and Albemarle Corp (Reporting by Fabian Cambero; writing by Aislinn Laing Editing by Susan Thoms)
“Congo mines minister insists no compromise on new mining code” (Reuters)
KOLWEZI, Democratic Republic of Congo (Reuters) – Democratic Republic of Congo’s mines minister said on Wednesday that a new mining code signed into law in March that hikes royalties and taxes cannot be called into question.
Addressing a mining conference in the copper and cobalt-mining city of Kolwezi, Martin Kabwelulu called on industry leaders to work to implement the code as it was promulgated by President Joseph Kabila.
Major mining companies including Glencore and Randgold bitterly opposed the code, which axes tax exemptions and hikes royalties and profit taxes. They have been holding out hope it might be watered down in further negotiations.
“It is not the place of any participating party, whether civil society, mining companies or even the government to try to call into question the text governing the mining sector,” Kabwelulu said.
Kabila addressed the conference later, urging all parties to implement the new code. He also called on mining companies to explore beyond their existing concessions, most of which were state-owned before being privatized over the past two decades.
“I call on investors to move beyond the comfort of the land and concessions that were ceded to them by different state companies … to take real risks by exploiting the rest of the country,” he said.
Companies say the new code’s tax hikes and cancelling of 10-year exemptions for existing projects against changes to the previous fiscal and customs regimes breach previous agreements with the government and will deter further investment.
Congo is Africa’s top copper producer and the world’s leading miner of cobalt, a mineral which has seen a surge in demand to manufacture electric car batteries.
Other major mining companies with investments in Congo include AngloGold Ashanti, Ivanhoe Mines, China Molybdenum, Zijin Mining and MMG.
In a new environment protection drive, Philippines has announced that it will limit the land that miners can develop at any given time.
As reported in local media and Reuters, the new rules – set to protect the environment and backed by President Rodrigo Duterte – target 29 of 48 mines operating in Philippines, which are nickel producers supplying ores to the world’s leading market, China.
Mining is a deeply contentious issue in the resource-rich Southeast Asian country after past examples of environmental mismanagement.
The industry group Chamber of Mines of the Philippines said it supports the government order which takes effect September 2018.
According to reports, the new rules stipulate that a 20-metre buffer zone is established inward from the mining tenement boundary near rivers and streams, where metals extraction will be banned.
Nickel miners will be limited to a production area ranging from 50 to 100 hectares at any one time, depending on the size of production and whether they have a processing plant.
The government order will allow mines producing up to 1 million tonnes of nickel ore a year to work on 50 hectares at any one time.
Those producing more can work on 60 hectares up to 100 hectares, while projects with a processing plant will be allowed up to 162 hectares.
Mining companies are required to progressively rehabilitate the same amount of land that was disturbed by mining operations.
Duterte told miners in April to reforest areas where they operate, warning he would revoke their permits if he did not “see trees as tall as he” is in six months.
Miners will be required to put up a 5 million Philippine pesos (US$93,370) performance bond every year as a guarantee that they will comply with the requirement on mine rehabilitation. The bond will be forfeited if they fail to comply.
Nickel ore output fell 10 per cent in the first half of 2018 from a year earlier to 9.43 million dry metric tons, government data showed. Eleven of the nickel mines had zero output during the period because their operations were suspended or they were under maintenance status.
FINANCIAL
Nexa says to invest $1.17 billion in Peru, Brazil in five years
LIMA (Reuters) – Brazilian mining company Nexa Resources plans to invest some $1.17 billion in copper and zinc projects in Peru and Brazil over the next five years, the company’s general manager Ricardo Porta said on Friday.
About $816 million will be invested in Peru, including $555 million in copper projects and $216 million in zinc, Porta said in an interview.
The proposed mine closest to being developed is Aripuana, a $354 million zinc project in Brazil slated to start production in 2020. “We hope to achieve final (government) approval of the project in coming months,” Porta said on the sidelines of a mining conference in Lima.
The Shalipayco zinc project and the Magistral and Pukaqaqa copper projects in Peru would follow, Porta said. Shalipayco would likely start production in 2021, Magistral in 2022 and Pukaqaqa in 2023, he said.
“Between Brazil and Peru we have seven projects,” Porta said, adding that the company’s priority was to raise its reserves, which have been growing at about 5 percent per year.
Nexa operates five mines in Brazil and the Milpo, Atacocha and El Porvenir mines and the Cajamarquilla zinc refinery in Peru.
The company expects to produce 600,000 tonnes of zinc this year, Porta said.
Lundin Mining has hefty M&A appetite for copper, says incoming CEO
TORONTO (Reuters) – Canada’s Lundin Mining Corp (LUN.TO) is on the hunt for copper mines and projects and willing to spend up to $3 billion on mergers and acquisitions, its incoming chief executive officer said in an interview on Thursday.
But Lundin will stick with its strategy of disciplined bids and a focus on low-risk jurisdictions, Marie Inkster said at the company’s Toronto head office.
The base metal miner was recently outbid by China’s Zijin Mining Group (601899.SS) in its hostile takeover offer for Nevsun Resources (NSU.TO).
INNOVATION AND TECHNOLOGY
Barrick Gold to part with Chief Innovation Officer Michelle Ash
In a push towards decentralization, Barrick Gold terminates its CIO position after two years
Barrick Gold will be eliminating the position of Chief Innovation Officer (CIO) from its management team in a move to support decentralization efforts in its various mining operations.
The position is currently held by Michelle Ash, who was appointed to the position in 2016. According to Barrick’s website, Ash “oversees the Company’s strategy for long-term innovation,” driving productivity, optimizing research and development, and looking into alternative business models. In August 2017 Barrick also created the position of chief digital officer and appointed Sham Chotai, formerly the chief technical officer for GE’s water, power and transportation divisions. Chotai will remain in that role.
The company told Reuters on Wednesday that it will keep working on innovation but that more decision-making power would be given to the operators at the mine sites. It has not made an official announcement about the changes.
Barrick reported a $94 million net loss in its second quarter of 2018, and wrote in its report that they completed an “extensive review of all positions sitting above operations, reallocating roles where appropriate, eliminating those no longer required and closing a number of smaller offices.”
The position of CIO was created at Barrick specifically for Ash. In a July 2017 profile, she made it clear to CIM Magazine that innovation was a multi-faceted endeavour, encompassing digital, technical and financial aspects.
PROJECTS
“Mercuria to grow iron ore business with major financing of U.S. mine” (Reuters)
LONDON, Sept 12 (Reuters) – Global commodities trader Mercuria Energy Group is expanding its iron ore business with a $650 million financing package for U.S. producer Mesabi Metallics Co in exchange for a majority stake in the firm, Mercuria said in a statement on Wednesday.
The Geneva-based firm said it had signed a memorandum of understanding with Chippewa Capital Partners that currently owns 100 percent of Mesabi.
Mesabi has a 7 million tonne per year mine-to-plant pelletization project in Minnesota, United States.
Mercuria expects to complete the investment in the fourth quarter of this year.
How an Aussie miner and American tech company plan to extract lithium quickly in Argentina
Valentina Ruiz Leotaud |
Australia’s Lake Resources NL (ASX: LKE) and America’s Lilac Solutions recently announced that they had established a partnership with the idea of developing the Kachi Lithium Brine Project in Argentina.
Lake owns the project, which is located in the northwestern Catamarca province, some 100 kilometres south of FMC’s Hombre Muerto lithium brine operation. Back in 2017, Kachi received results of over 200 mg/L lithium, recorded from near-surface auger brine sampling. The results maxed out at 204 mg/L lithium. Meanwhile, Lilac is the company in charge of providing its ion exchange technology to produce lithium at the 54,000-hectare site.
What sets this partnership apart is that both the miner and the techie claim they can produce lithium carbonate or lithium chloride more rapidly and at a lower cost than others. According to Lilac, this is possible because its system eliminates the need for sprawling evaporation ponds, which are expensive to build, slow to ramp up, and vulnerable to weather fluctuations.
“Even for the world’s best lithium reserves in the Atacama desert, conventional evaporation ponds take many years to ramp up and remain vulnerable to weather volatility. Lilac’s projects will run at full capacity from year one of commissioning and maintain that output regardless of weather or brine chemistry. We have done benchtop testing in other brines and we saw recoveries over 95% in less than 2 hours versus 9-24 months in evaporation ponds,” the company’s CEO, Dave Snydacker, told MINING.com.
http://www.mining.com/aussie-miner-american-tech-company-plan-extract-lithium-quickly-argentina/
COMMODITY PRICES
