Singapour: Les prix du pétrole reculaient mardi en Asie, sous l'effet d'un indice gouvernemental chinois montrant une contraction en août de l'activité manufacturière de la deuxième économie mondiale.
In New York trade on Monday copper for delivery in December consolidated its recovery from six year lows hit last week, trading at $2.34 in late afternoon.
That's up some 6% from an intra-day trough of $2.20 per pound or around $4,850 a tonne set last week which was the lowest since July 2009 and down 30% over the past year.
Last week Freeport-McMoRan (NYSE:FCX) became on the first major copper miners to announce its slashing production to cope with the depressed copper price.
Freeport plans to cut capital spending for 2016 by almost a third, reduce copper sales by about 150 million pounds per year in 2016 and 2017 and lower unit site production next year by 20%.
But its programme of cuts which sent its share price soaring in New York after the news ran into trouble on Monday. A union that represents workers at Freeport's 51%-owned El Abra mine in Chile said it was considering action after 700 workers, half the total number of employees, were let go over the weekend.
Reuters quotes Gustavo Tapia, head of the Chile Mining Federation union, dismissed the fall in the copper price as a "cyclical issue" and said multinational companies had sufficient profits to ride it out.
The remainder of El Abra which last year produced 166,000 tonnes of refined copper is owned by Chile's state-owned Codelco which is itself on an aggressive cost cutting drive.
"Codelco has just resolved a three-week dispute with contractor workers across its operations, which cost some 17,000 tonnes in lost output," according to the news wire.
Codelco announced half year results on Friday that showed profits dropping by a third to $875 million despite an increase in production of 5.5% compared to last year.
Codelco is hoping to cut costs by around $1 billion this year and is 60% on its way to achieve that target.
Chile produces nearly a third of the world's copper.
Image by Corrie Barklimore<</a>/em>
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The Gold Report: In a recent article, you argued that investors in the West will find their way to gold when the new reality dawns on them that losing a bit of money to preserve the rest is "a good deal." Please explain further.
Jayant Bhandari: What has to happen does not have to happen right away. Everyone in the world is flocking to the U.S. dollar. It offers liquidity, but eventually the U.S. dollar will become too expensive. When that starts happening people will look for other opportunities to safeguard what they own, and gold is something that will become increasingly visible.
TGR: How long is the U.S. dollar going to continue its ride?
JB: The U.S. dollar could do well for quite a period of time because while the U.S. is sinking, everything else is sinking faster. The European Union is in worse shape. Most of the developing countries, apart from China, are in horrible shape. They consume pretty much everything that they create. The U.S. dollar, despite all that is going on, remains one of the better currencies.
TGR: You also relate gold buying to how in India people buy gold and cattle—not necessarily because these are excellent investments but rather that these things will ultimately lose less value than other investments.
JB: A lot of people buy gold because of inflation but I don't think that's the reason why Indians, people in the Middle East and people historically in China have bought gold. As I mentioned in that article, the return from 300 million cattle in India is about minus 50–70%, depending on the kind of cattle. People invest in negative yield investments because they have few options in these societies. But that is what's increasingly happening in the West. It started with the European bond market. This morning I see Swiss bonds trading at a negative yield, which tells me that this society is no longer offering people opportunities to make money by investing. When that starts happening people do what they have to do to safeguard whatever they can safeguard.
TGR: You present a rational argument for buying and holding gold. Yet you buy and sell precious metals equities, mostly small-cap gold and silver equities, which carry more risk than owning gold. Why are you active in this space?
JB: The reason I'm in the junior gold equity market has almost nothing to do with gold per se. These are two different beasts: gold is gold and gold equities and gold mining is a business. When I invest in a mining company or a junior mining company, I assume a very low gold price, something generally lower than the spot price, and then I do a valuation based on that price. Now, when I enter the gold market I presume that gold will go up and if gold actually goes up it will trigger a higher valuation of these equities. I am increasingly more optimistic about gold and as a result I think this will underpin an increase in buying volume and investment in the junior mining space.
TGR: Is the junior mining market largely undervalued given current metal prices or is it fairly valued?
JB: There are still lots of useless companies in the junior market, most of which are "lifestyle" companies. Yet the market fall has resulted in the fall in the share prices of some very good companies, too. That's where the future value is and where money will be made.
TGR: What do you mean by lifestyle companies?
JB: Junior mining companies exist in an interesting space. The CEO often decides his salary, expenses and what kind of accountability he wants. If he chooses, he essentially has a company credit card to live the life that he wants, and regulations cannot help you there because as long as they are expenses, and the CEO signs off on those, they are legally legitimate. This is a lifestyle company.
TGR: In a different opinion piece on JayantBhandari.com you wrote, "The real problem with the junior mining industry is that investors have lost faith in those who run these companies." Are you willing to name some management personnel that you still have faith in?
JB: The mining industry as a whole has done a horrendous job of creating value for investors. Over the last 15 years the gold price has gone up four or five times, but the share prices of most of these companies is lower than it was when gold was $250 an ounce. However, some management teams have done a good job. One name is Ross Beaty, who has consistently created value for investors. Osisko Gold Royalties Ltd. (OR:TSX) is working on an entity called Oban Mining Corp. (OBM:TSX), which is in the process of merging with Eagle Hill Exploration Corp. (EAG:TSX.V), Ryan Gold Corp. (RYG:TSX.V), and Corona Gold Corp. (CRG:TSX). I have known Oban President and CEO Jose Vizquerra for a long time. Oban has a fabulous group of competent people who can easily raise money, even in this market. The new company will have about $65–75 million ($65–75M) in cash. This is an ideal marriage of companies with projects and technical skills with companies with cash. Corona Gold and Ryan Gold are cash-rich companies. Oban, meanwhile, is backed by some of the best technically qualified people in Canada.
Another company is Callinex Mines Inc. (CNX:TSX.V; CLLXF:OTCQX), which is run by President and CEO Max Porterfield and Chairman Mike Muzylowski. The company is backed by some good financiers and recently raised about $3.4M for a drill program.
First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:FSE), which has made a friendly takeover bid for SilverCrest Mines Inc. (SVL:TSX; SVLC:NYSE.MKT), is run by President and CEO Keith Neumeyer, who also helped found the company. He's done a great job and has started another company called First Mining Finance Corp. (FF:TSX.V).
Novo Resources Corp. (NVO:TSX.V; NSRPF:OTCQX) is a company in Australia with a very small but high-margin gold deposit run by President and CEO Quinton Hennigh. And Minaurum Gold Inc. (MGG:TSX.V), run by President and CEO Darrell Rader, has raised about $2.875M and is about to start exploration drilling. There are lots of good companies in the space, even today.
TGR: What are some red flags for you when you're working out junior mining company valuations?
JB: I usually spend one or two hours talking face to face with management. I have seen again and again that a lot of decent people managing junior mining companies are essentially financially illiterate. You want people who understand the business but who are also decent people. It takes a while to get an understanding of how they process information. I want to see if they are rational people. If they talk rational things with me, I'm prone to assuming that they are honest people. Honesty is usually the best way to create a name for yourself and make money. I have confidence giving my money to such management people in the hope that they will do a good job with it.
TGR: Most people don't have the opportunity to sit and talk with management. How do they get this information?
JB: You don't always have to sit with the management or visit the property, but you should only buy these companies using a worst-case valuation. For example, if my worst-case valuation of a company is $1/share and I can buy shares in that company for about $0.20, then perhaps I have enough margin of safety not to have to visit the project or meet the management. But I still need to be reasonably sure about the public profile of such management teams.
TGR: What are some common errors made by junior mining investors?
JB: People invest without really knowing what they are doing. They think that a $0.05 stock is cheaper than a $0.50 stock. That's completely irrational. You have to multiply the share price by the shares outstanding, and that is assuming that the two companies have exactly the same kind of projects. Other people over-glorify company management. Do not expect management to turn around the impossible. Try to rationally value these projects. Try to understand where these projects are situated, whether they are economic, and whether the locals approve of a project in that area. I was looking at a project in Argentina. It's a fabulous project with fabulous grade but the locals are completely against it, so it will likely never be a mine. There's a series of things you should understand and connect and then make a worst-case valuation on these companies before you invest.
TGR: Anything else?
JB: Patience is big. Don't chase a stock. I have seen feeding frenzies in this market and that sort of activity will eventually return. When the feeding frenzy starts people don't think in terms of valuations. They ignore things like jurisdictions, which are also important. A project in the Democratic Republic of Congo (DRC) versus a similar project in Canada would have completely different risk profiles and thus completely different valuations. Investors should always try to understand what is underpinning the valuations of these stocks, royalty structure, tax structure and how much money will go to local governments. All these costs should be factored into the valuation.
TGR: What discount do you use for a high-risk country like the DRC versus a low-risk country like Canada or the United States?
JB: I typically use a 20% discount rate and use metals prices that are lower than spot prices.
TGR: Did you use a 20% discount rate when the markets were better in, say, 2010?
JB: No, but by not doing that I stayed vested in the market when I should have left the market in 2011. We all make mistakes but if the industry is trading at a discount rate of 5% or even in the future, I will no longer be invested in the junior mining space.
TGR: In different articles you have said you expect 20% returns from your junior mining equity investments. How did you determine that number?
JB: It's a very risky business. Unfortunately, investing in any kind of stock market is risky because you're handing your money to someone you don't necessarily know. My overall return in a portfolio will be much less than 20%, but the 20% leads to a buying decision for me. That's how I built my portfolio.
TGR: Once a company has appreciated 20%, do you sell?
JB: No, I might not sell until much later. My selling is decided by the kind of discount rate the market is using to value projects. I'm going to buy based on a 20% discount rate, but I intend to sell using a valuation based on a 5% discount rate—if the market is using a 5% discount rate to value projects.
TGR: You have written that 5th grade math skills are sufficient to be a successful investor in the junior mining space. You even suggest taking a spreadsheet and plugging in some numbers to help investors figure things out. Please take us through that process.
JB: It's amazing how simple math can make you a lot of money in the junior mining industry. There are two shells that are arbitrage situations based on cash. One is Kobex Capital Corp. (KXM:TSX.V). It's trading at $0.54/share but has about $0.70/share in cash. Another shell company is Probe Metals Inc. (PRB:TSX.V), which is trading at $0.36/share but has $0.51/share in cash.
There is also an interesting arbitrage situation in the acquisition of CB Gold Inc. (CBJ:TSX.V) by Batero Gold Corp. (BAT:TSX.V). CB Gold is trading at $0.045. For each share of CB Gold you will get $0.0275 in cash and 0.3056 shares of Batero Gold. Remember, at $0.075/share, Batero is trading at nearly a 50% discount to its cash value, providing an early investor another phase of upside based on cash value. Just be mindful that CB Gold is very illiquid and I prefer to give only limit orders. If you miss a trade, there will always be more opportunities coming up to be exploited.
Another arbitrage opportunity is First Majestic Silver merging with SilverCrest Mines. At the current share prices there's a 4% arbitrage opportunity, but if you buy SilverCrest there's a possibility that a better takeover offer might come for SilverCrest, in which case you'll not only position yourself to benefit from the arbitrage opportunity, but perhaps benefit from a sweetened takeover bid for SilverCrest.
TGR: Do you think First Majestic CEO Keith Neumeyer would get into a bidding war?
JB: He might actually, but as a SilverCrest shareholder I have nothing to lose either way. My guess is that the merger will go through and I'll make 4% in arbitrage, but this is truly another ideal marriage. First Majestic needs cash and SilverCrest has excess cash. This is a case where two plus two is more than four.
TGR: Are there others?
JB: PNO Resources Ltd. (PNOPF:OTCMKTS) and Sandspring Resources Ltd. (SSP:TSX.V) are merging. Sandspring's share price is $0.07. The value of PNO Resources based on the merger ratio is $0.195. However, PNO is trading at $0.15/share, so there is about 30% arbitrage upside. This is truly primary school math. People should be doing this.
Alpha Exploration Inc. (AEX:TSX.V) is merging with Lakeland Resources Inc. (LK:TSX.V). The arbitrage upside is close to 50%. The risk is that the arbitrage upside might get dissolved by the time the merger is over and you can't short either entity. My clients are interested in these kinds of situations. That's how I am surviving.
TGR: Are there any arbitrage situations outside the precious metals equities space?
JB: Sprott Asset Management has made a hostile takeover move via its Sprott Physical Gold Trust (PHYS:NYSE.MKT; PHY.U:TSX) and Sprott Physical Silver Trust (PSLV:NYSE.MKT; PHS.U:TSX) to acquire Central Gold Trust (GTU:NYSE; GTU.UN:TSX) and Silver Bullion Trust (SBT.U:TSX). Sprott Physical Gold Trust is trading close to its net present value (NPV) whereas Central Gold Trust and Silver Bullion Trust are trading at about 6.5% discounts to their respective NPVs. There's another fund held by the same group called Central Fund of Canada Ltd. (CEF:NYSE.MKT; CEF.A:TSX), and that is trading at an 11% discount to NPV. By investing in these three funds you get gold and silver at about a 7–11% discount to the spot prices for these metals. These funds usually trade at a premium to spot metals prices in a bullish market, so you might even make money when a bullish environment returns.
TGR: You mentioned Callinex and Minaurum earlier. Those are not arbitrage situations. What do you see in those names?
JB: Callinex is run by CEO Max Porterfield, whom I have known for almost 10 years. The company just raised $3.4M in an equity financing. Its Flin Flon and Pine Bay projects are close to HudBay Mineral Inc.'s (HBM:TSX; HBM:NYSE) 777 mine in northern Manitoba. There is a historical resource not updated to current standards and the rock could be trucked to HudBay's 777 processing plant. That is where I see the upside in owning Callinex Mines—it has good projects right next to HudBay's 777 mine. Callinex Mines has already started exploration drilling with the money it raised.
Similarly, Minaurum Gold is another small company. It has raised $2.875M, backed by directors David Jones and Peter Megaw, who are well known in Mexican mining circles. I have known CEO Darrell Rader for a long time. He runs things from a small office in Vancouver, so it has low general and administrative expenses. Minaurum will soon start drilling its properties in the Guerrero Gold Belt in central Mexico.
TGR: Minaurum is trading at around $0.075/share. What would you say to shareholders who might be frightened by the low share price?
JB: Unfortunately this has been the problem with early-stage exploration companies. Their share prices have fallen a lot. Minaurum was trading at more than $0.60/share but that doesn't necessarily change the valuations of its projects. When other people are disinterested in a stock, I get more excited about the stock because I should be buying when others are selling.
TGR: Are there other companies you would like to talk about today?
JB: I am on the board of a company called Gold Canyon Resources Inc. (GCU:TSX.V). Gold Canyon has 4.4 million ounce (4.4 Moz) Indicated gold deposit in Canada. Another 0.7 Moz is in the Inferred category. At the share price of $0.115, my view is that it's one of the cheapest gold companies in the mining space today, but as I'm a non-executive director of the company, take my view with a pinch of salt.
TGR: Please leave us with one piece of junior mining market wisdom.
JB: The quality of management is extremely important. In the past I have owned companies that had cash value three, four or five times more than the share price of those companies, and over a period of time the financially illiterate management team destroyed its cash advantage. I no longer tempt myself by investing in companies that offer me very good valuations unless the management is exceptional. That is truly the key.
TGR: Thank you for talking with us today, Jayant.
Jayant Bhandari has been an Asia-based institutional investor adviser for the last three years. Prior to that he worked for six years with U.S. Global Investors in the United States, a boutique natural resource investment firm, and for one year with Casey Research. Prior to his involvement in the investment industry he established and managed Indian subsidiary operations of two European companies. He received his Master of Business Administration from Manchester Business School (UK) and holds a Bachelor of Engineering from SGSITS (India). He frequently writes on cultural, political and social issues for several publications.
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DISCLOSURE:
1) Brian Sylvester conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report and The Life Sciences Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Callinex Mines Ltd. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
3) Jayant Bhandari: I own, or my family owns, shares in all the companies mentioned in this interview. I personally am, or my family is, paid by the following companies mentioned in this interview: Gold Canyon Resources Inc. (as Director's fees). My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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ISIS, ISIL or the Islamic State's propaganda arm released a new video over the weekend claiming the group is minting gold currency.
Called “The Return Of The Gold Dinar,” the Islamic State describes the new currency of gold coins as a blow against America's “financial system of enslavement”, “the piece of paper called Dollar” which “was imposed on the rest of the world”.
Released by the Islamic State’s al-Hayat Media Center, the video is narrated in English, likely in an effort to reach western audiences reports Vocative.
The video also attacks capitalism, describing it as “one of the great forms of corruption that the earth came to witness.” If the coin is indeed made of gold, the ISIS mint may be wise to create smaller denominations in future.
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The Fed, QE4, Interest Rate Hikes, and THE FED! Peter Schiff thinks the Fed has finally reached the end of the rope and the so called recovery is about to come to an end.
Watch Interview with Peter Schiff
Talking points from this week's interview –
• What is the next move by the Fed – interest rate hikes or QE4?
• The trigger that Peter believes will cause the Do$$ar to drop?
• Is a 2008 style crash right around the corner?
• Why the Chinese stock market is dropping?
• Gold or Gold Stocks, which moves first?
* Peter Schiff is one of the few non-biased investment advisors (not committed solely to the short side of the market) to have correctly called the current bear market before it began and to have positioned his clients accordingly. As a result of his accurate forecasts on the U.S. stock market, economy, real estate, the mortgage meltdown, credit crunch, subprime debacle, commodities, gold and the dollar, he is becoming increasingly more renowned.
BY COLLIN KETTELL
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New York: Pour la troisième séance de suite, les cours du pétrole ont fortement augmenté lundi à New York, achevant contre toute attente le mois sur une hausse grâce à des informations indiquant que l'Opep envisagerait de discuter des cours avec les autres pays producteurs.
On Monday, the gold price continued to drift sideways as a measure of calm returned to global equity markets and the focus shifted back to a recovering US economy.
In afternoon dealings on the Comex market in New York, gold futures with December delivery dates lost $0.70 to $1,133.40 an ounce in quiet trade.
Gold is still well above a more than five-year closing low of $1,084 struck August 5 as China's economic woes and shock currency devaluation sent ripples through markets. But the safe haven buying amid the panic on markets did not materialize to the extent many bulls had hoped.
One explanation why bullion did not attract money fleeing equities and bonds can be found in the positioning by hedge funds on the New York futures market.
In late July and early August in the run up to the wild swings on global markets, large speculators on Comex – referred to as "managed money" – entered bearish positions not seen since at least 2006, when the Commodity Futures Trading Commission first began tracking the data.
According to the CFTC's weekly Commitment of Traders data for the week to August 18 speculators' short positions – bets that gold could be bought cheaper in the future – were cut by more than a million ounces to 10.4 million ounces (295 tonnes); down from record levels of more than 330 tonnes hit last month. At the same
At the same time a modest number of long positions were added which means speculators held a net long or bullish position, albeit a small one, for the first time in three weeks.
In the latest data up to Tuesday – the day after Black Monday – last week these short positions were cut by a further 22% which was accompanied by a 845,000 rise in long ounces which saw the net position increase nearly four-fold.
Saxo Bank explains in a research note on Monday from Ole Hansen, the Danish bank's head of Commodity Strategy, why this movement is a bearish indicator for the gold price:
Delving into the data we find that most of the jump in net-long was driven by another big clear-out of short positions. This put to rest, at least for now, the belief that the rally was driven by safe haven demand. It also helps to explain why the price action so quickly turned negative with short sellers having fresh ammunition to pounce after having cut bearish bets by one-third during August.
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The diamond-mining Kono district was once dominated by rebels who used civilians as slaves. (Image from WikiMedia Commons)
An American-Belgian citizen has become the first businessman ever arrested for suspected involvement in the illegal trade of “blood” diamonds during Sierra Leone's civil war.
Michael Desaedeleer was detained on Friday in Spain, following years of criminal complaints against him filed by residents of Sierra Leone, whose internal conflict in the 1990s left over 50,000 people dead.
According to Civitas Maxima, an aid organization that offers legal representation to war crimes victims, Desaedeleer is accused of partnering with former Liberian President Charles Taylor and rebel groups in Sierra Leone in the district of Kono, where civilians were used as slaves to mine in diamond pits.
"This is another significant step forward in our collective efforts at ensuring accountability for the crimes that occurred during the conflict in Sierra Leone," Center for Accountability and Rule of Law Executive Director Ibrahim Tommy said in a statement. "No one should be allowed to get away with participating in serious offenses such as enslaving people and forcing them to mine for diamonds."
"This is a landmark case, the first of its kind, and it will help to raise awareness of the pivotal role played by financial actors in the trade of mineral resources that fuel armed conflicts in Africa and elsewhere," Director of Civitas Maxima Alain Werner said in a statement.
The 64-year-old, who will be handed to Belgian authorities shortly to face trial, is also accused of trafficking such gems to neighbouring Liberia, from where Taylor sold them in order to finance the rebellion in Sierra Leone that led to the 1991-2002 war.
In 2012, the International Criminal Court in The Netherlands jailed Taylor for 50 years, after found guilty of arming his country’s rebels in return for blood diamonds.
Desaedeleer’s arrest comes after years of campaigning by those that were enslaved during the civil war. A criminal complaint was first filed in 2011 against him by Sierra Leoneans in Brussels, which led earlier this year to the issuing of the EAW, and ultimately his detention on Friday.
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New York: Les marchés du pétrole s'inscrivaient en nette hausse lundi en fin d'échanges européens, à la suite d'une révision à la baisse des chiffres de production américains et d'informations sur le souhait de l'Opep de discuter de la chute des cours avec d'autres producteurs.
Tesla Motors’ CEO Elon Musk unveiled in May a new division, called Tesla Energy, focused on the production of batteries (Image from archives)
U.S. Rare Earth Minerals (OTCQB:USMN) said Monday management was “surprised” to read all over the news an alleged supply agreement with Tesla Motors (NASDAQ:TSLA), which would give the electric car maker a key and continued sources of base material utilized to produce lithium-ion batteries for its electric vehicles.
The firm noted it is not currently engaged in the specific mining and sale of lithium, however it acknowledged it was “exploring” its options.
“USMN has no agreements of any kind with Tesla Motors Inc," said in a statement acting chairman and CEO Larry "Bear" Bonafide. He added that USMN had no part in the "misleading" press release and would take no responsibility for it.
On Friday, mining company Bacanora Minerals distributed a new release saying that Tesla was building a $5 billion battery factory in Nevada, which aims to reduce battery costs by 30% or more, partly by bringing in in-house materials suppliers provided by U.S. Rare Earth Minerals and Bacanora.
The questioned statement added that the deal between Tesla and the two companies would give the electric car maker access to below-market-rate lithium in exchange for minimum purchase amounts over a five-year period.
It also claimed that two companies in partnership with Tesla have rights to land in northern Mexico, where lithium can be obtained from mineral-rich clay.
Neither Tesla nor Bacanora Minerals were available for comments at the time this story was written.
(Featured image: Tesla Motors corporate headquarters in Palo Alto California by Windell Oskay)
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Paris: Les prix des carburants ont fortement baissé la semaine dernière en France, celui du gazole atteignant même son niveau le plus bas depuis plus de cinq ans, entraîné par le repli des cours du pétrole brut, selon des chiffres officiels publiés lundi.
New York: Les cours du pétrole ont ouvert en baisse lundi à New York, victimes de prises de bénéfices après la forte hausse de la semaine dernière, et d'inquiétudes renouvelées sur la demande venue d'Asie.
Porgera gold mine in Papua New Guinea (Image courtesy of Barrick Gold)
Canada’s Barrick Gold Corp. (TSX:ABX) said Monday it has received US$298 million cash from China’s Zijin Mining Group, which bought half of Barrick’s interest in the Porgera mining operation last May.
The company, the world's No.1 gold producer, said it would use the money to reduce its debt by at least $3 billion by the end of this year.
The deal is part of a long-term strategic cooperation agreement between Barrick and Zijin to collaborate on future projects and joint investments, leveraging the strengths of each company.
Today’s announcement means that the Chinese firm now owns 50% of Barrick (Niugini) Ltd., which has a 95% interest in the Porgera gold mine, in Papua New Guinea.
Zijin is China's No.1 gold producer and the 2nd largest large copper producer. It also has a portfolio of producing and development assets in its home country, Tajikistan, Mongolia, Russia, Australia and Kyrgyzstan.
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Mildred Lake oil sands surface mine. (Image courtesy of Canadian Oil Sands )
Canadian Oil Sands (TSX:COS), the main owner of the giant Syncrude oil sands project, has halted production after the fire that damaged equipment at its synthetic crude oil processing facility in northern Alberta.
The company said the fire, which happened early Saturday and was extinguished without any injuries, affected pipes connected to a water treatment unit at Syncrude’s heavy oil upgrader on the site of its Mildred Lake oil sands surface mine. The cause of the blaze remains under investigation.
The operation is a 326,000 barrel-per-day mining and upgrading project, where oil sands bitumen is upgraded into refinery-ready synthetic crude.
Canadian Oil Sands holds a 37% stake in Syncrude Canada and six other companies own the rest, including Suncor Energy Inc, Imperial Oil Ltd, Nippon Oil subsidiary Mocal Energy Ltd, Murphy Oil Corp, China’s Sinopec, and CNOOC subsidiary Nexen.
Aside from plunging crude-oil prices, Canadian Oil Sands is facing a number of other challenges. It recently swung to a loss and was affected by unplanned equipment outages and Moody’s Investors Service’s decision to cut its credit rating last week.
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Paris: Les cours du pétrole perdaient du terrain lundi dans les échanges européens, les investisseurs engrangeant des bénéfices après une forte hausse hebdomadaire à New York et Londres et s'inquiétant d'une éventuelle baisse de la demande en or noir.
moscou: Le géant pétrolier russe Rosneft a publié lundi un bénéfice net en baisse mais largement supérieur aux attentes au titre du deuxième trimestre, marqué par une chute des cours des hydrocarbures en partie compensé par l'affaiblissement du rouble.
Singapour: Les cours du pétrole baissaient lundi en Asie sous l'effet de prises de bénéfices après le rebond important de l'or noir en fin de semaine dernière.
Kazakhstan will continue to dominate the world's production of uranium up until 2025, according to Kazatomprom, the state-owned entity that mines and explorer for uranium, and also produces atomic power in the former Soviet republic.
Developing a new development strategy for the next decade, Kazatomprom says it will preserve the company's leading position as extractor of natural uranium, by developing existing mines, building new ones and introducing technologies to improve efficiencies and reduce the costs of uranium extraction:
“One of the strategic directions of Kazatomprom is the business diversification in all subsequent stages of front-end nuclear fuel cycle,” said Kazatomprom. as reported by Trend News Agency, based in Azerbaijan. “The company plans to gain access to services for the conversion, enrichment and fabrication of nuclear fuel for nuclear power plants.”
Kazakhstan became the world’s largest uranium producer in 2009; since then, its domestic uranium industry has dominated global competitors. In 2012, Kazakhstan eclipsed its closest pursuer, Canada, by more than twofold in annual uranium production.
According to the World Nuclear Association, two thirds of the world's uranium comes from mines in Kazakhstan, Canada and Australia. As of May 2015, Kazakhstan produced 41 percent of the nuclear fuel, followed by Canada at 16 percent and Australia at 9 percent. In 2014, Kazakhstan increased its uranium production by 1.5 percent, to 22,829 metric tons, says Trend News Agency.
For more on Kazakhstan and uranium, including an analysis of production capacity, click here
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An explosion over the weekend at Syncrude's Mildred Lake site has not resulted in any injuries but operations have been affected, according to news reports.
The blast happened early Saturday morning, said a spokesman from the Alberta Energy Regulator, who told The Globe and Mail that "all workers, are safe, no product has been released and no offsite odours have been detected." The explosion caused a fire at the plant's upgrade complex and was put out by Syncrude firefighters, according to a company spokesman.
The extent of the damage is not currently known. According to the Syncrude spokesman a "process incident" led to the fire and that the company knows where the blaze started. There have not been any impacts on wildlife or waterbodies, Alberta Energy Regulator's Ryan Bartlett told the Globe.
The Mildred Lake site extracts bitumen from oil sands and turns it into crude oil through a closed-loop cycle with the Aurora mine located about 40 kilometres north of the site. According to Syncrude: "Hot water, reclaimed from waste heat produced at the Mildred Lake upgrader, is sent via pipeline to the Aurora mine where it is used to extract the bitumen from the oil sand. The cooler water is then returned, along with the bitumen, to the upgrader at Mildred Lake. Here, the bitumen in processed into crude oil and the water reheated and again returned to the Aurora."
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Resolute Mining (ASX:RSG) had some good news to share with investors last Thursday, as the Australia and Mali-focused gold producer announced a new resource estimate.
The company said its total JORC-compliant gold reserves (proven and probable) increased by 12 percent to 5.3 million ounces, which it largely attributed to a prefeasibility report released in June at its flagship Syama gold mine in Mali, which is moving to an underground operation. Despite experienced mine depletion as at result of meeting full-year 2015 production of 328,684 ounces, Resolute still managed to increase reserves by 200,000 ounces. Total gold resources stand at 9 million ounces.
The news played well on the Australian stock exchange, with investors bidding up the stock 4 percent on Friday to 25 cents a share.
Underground reserves at Syama were upgraded to 2.3 million ounces at 2.8 grams per tonne as a result of recent diamond drilling results, which will extend the mine's life until 2028 according to Resolute. At its Bibiani mine, also in Ghana, Resolute increased resources to 1.9 million ounces at 3.7 g/t gold. Bibiani would be an underground operation and a feasibility study on the project is currently underway.
Along with Syama, Resolute Mining also mines gold from its Ravenswood gold mine in northeast Queensland. The $170-million market cap company is an established gold producer with over 25 years continuous production according to its website. Resolute Mining expects to produce 315,000 ounces of gold next year at cash costs of $990 per ounce.
Highlights from the press release:
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Alger: Le Premier ministre algérien Abdelmalek Sellal a affirmé samedi à Alger qu'il ne fallait ni s'alarmer ni s'endormir face à la baisse des prix du pétrole qui ont fait perdre au pays la moitié de ses recettes extérieures.
Washington: A deux jours de son départ pour l'Alaska pour un voyage centré sur le climat, Barack Obama a défendu samedi sa décision très controversée d'autoriser Shell à mener des forages dans la mer des Tchouktches.
Last week when we covered rebound targets in the precious metals sector we also discussed the importance of Gold’s performance in real terms. It can be a leading indicator for the sector at key turning points. Since then precious metals sold off in aggressive fashion alongside global equity markets. However, Gold against equities gained materially. This is something to keep an eye on as it hints that a trend change is boiling under the surface.
In the first chart we look at Gold in nominal terms and against various equity markets.
Gold has pulled back after its rebound from $1080/oz to $1160/oz. It has resistance at $1160 and $1180 and support at $1080 and around $1000. We continue to believe Gold’s most likely path is down to $1000/oz before the bear market ends.
Although Gold’s rebound from $1080 could be over, its outperformance of stocks could be starting. We plot Gold against the all-country index (ACWI), the NYSE and emerging markets. Gold relative to each market gained roughly 20% from the start of the month through Monday. Gold relative to emerging markets already broke out to a new high while relative to the others Gold tested important resistance.
The equity markets have rebounded strongly this week but it is not much of a surprise given the previous sharp decline. We posted a chart a few days ago that argued for a bounce. The strong bounce over the past few days has not changed the broader technical condition which is negative.
Below we plot the NYSE, ACWI and EEM with their 400-day moving averages. The first two lost the 400-dma only a few weeks ago. Each has rebounded but traders and investors should be advised that as the market nears previous resistance it becomes susceptible to another leg down. If new lows are on the horizon then we would turn our attention to NYSE 8500 and ACWI $46 which mark a confluence of strong support. Emerging markets have led this move lower and have more downside potential. If the US market has new lows ahead of it then EEM has downside risk to the low to mid $20s.
Gold breaking its downtrend against equities could be the last thing that needs to happen for its bear to turn to bull. Another move lower in equities could trigger that break. We’ve written about how Gold has already bottomed against foreign currencies and how it's nearing an all time high against commodity prices. However, Gold relative to the equity market continued to decline and make new lows right alongside Gold in nominal terms. There has been a strong negative correlation for four years. The relationship as of a few weeks ago may have begun to shift in Gold’s favor. If that continues in the weeks and months ahead it certainly would have positive implications for precious metals and precious metals companies. As we navigate the end of this bear market consider learning more about our premium service including our favorite junior miners which we expect to outperform into 2016.
Jordan Roy-Byrne, CMT
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In New York trade on Friday copper for delivery in December continued to fight back from six year lows trading at $2.35 in late afternoon.
That's up more than 6% from an intra-day trough of $2.20 per pound or around $4,850 a tonne set set earlier in the week which was the lowest since July 2009 and down 30% over the past year.
Chile's Codelco announced half year results on Friday that showed profits dropping by a third to $875 million at the state-owned copper miner, the world's number one producer of the metal.
Sharply lower molybdenum and copper price was only partially offset by a 5.5% rise in copper production to 910,000 tonnes in the six-month period despite some disruption due to flooding.
The rise in output was thanks higher production at its El Teniente and Gabriela Mistral mines and expansion projects like Minestro Hales despite which blunted the impact of a 35,000 tonne decline at Chuquicamata.
El Teniente, the world's largest underground copper operation and the sixth biggest by reserves, is like the giant company's other mines facing declining ore grades.
CEO Nelson Pizarro said Friday 2016 will see another sharp drop in grades while the company expects the price to remain stuck around $2.50 a pound reports Platts News:
"It does not look like it will be a year to be smiling. Next year is going to be very tough," the executive said.
"We can see that this situation should turn around at some point in late 2016 or in the first half of 2017," he said.
Codelco is hoping to cut costs by around $1 billion this year and is 60% on its way to achieve that target.
A huge chunk of the cost savings came as a result of a much lower peso against the US dollar. Lower power and labour costs helped the company push down cash costs by 11% to $1.40 a pound compared to 2014 and 18% versus 2013. All in costs were reduced by 15% to $2.05 during the first half.
Pizarro said had it not been for the organization's aggressive cost containment plan – which includes a freeze on executive salaries – profits would be only $272 million for the period.
Codelco is in the midst of executing a $25 billion investment plan aimed to expand its aging mines and search for new high-grade deposits.
Despite spending $5 billion every year for the next five years, Pizarro expects "no significant gain" in production for its efforts with annual production staying around the 1.6 million tonne mark until 2017 when it could reach 1.7 million tonnes.
Image of Captain Copper, superhero created to teach kids about the metal, courtesy of Codelco.
Pile 'em high
SEE ALSO:
The real reason the copper price is being crushed
Hidden inventory and the Chinese carry trade
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This month has seen something that happens not very often: it appears to be the early stages of a global stock market crash. For the moment investors are in shock, seeking reassurance and keenly intent on preserving their diminishing assets, instead of reflecting on the broader economic reasons behind it. To mainstream financial commentators, blame for a crash is always placed on remote factors, such as China’s financial crisis, and has little to do with events closer to home. Analysis of this sort is selective and badly misplaced. The purpose of this article is to provide an overview of the economic background to today’s markets as well as the likely consequences.
The origins of a developing crisis are deeply embedded in the financial system and date back to the invention of central banks, and more particularly to the Bretton Woods Agreement, which was the basis of the post-war monetary system. In the 1940s government economists were embracing the new Keynesian view that Say’s law, the law of the markets, was irrelevant and supply and demand for goods and services could be regarded as independent from each other, and crucially, savings should be redirected into immediate consumption and replaced as a source of investment finance by a more flexible approach to money and credit.
Keynes wanted a new super-currency, which he called the bancor. Instead the world got the dollar and the “full faith and credit” of the US government expressed through her considerable gold reserves. While central banks could swap dollars for gold at $35 per ounce, there was no effective restraint on the issuance of dollar-money and credit. It allowed America to finance the Korean and Vietnam wars without resorting to domestic taxation. When those dollars-for-export returned home in the late sixties, the run against dollars and in favour of gold began, leading to the Nixon Shock, when the US finally consigned the Bretton Woods Agreement to the dustbin of history.
From the 1970s the dollar continued in its role as the world’s reserve currency without any gold convertibility at all. As a deliberate policy the US government tried to remove gold’s status as money by simply denying it had any such role. The propaganda persists to this day, expressed as progress in the development of government-issued currencies. Having thus disposed of the shackles of sound money, money and credit were expanded to pay for sharply higher oil prices in the early 1970s, and made available for Latin American borrowers without meaningful constraint. This was followed by an accelerating loss of the US dollar’s purchasing power in the second half of that decade.
The expansion of money and credit since Bretton Woods corrupted business calculations in the same way as fractional reserve banking had done over the previous hundred years, but with the additional feature of unfettered expansion of raw money. Instead of periodic banking crises, which liquidated bad and excessive debts, banks were supported and debts were allowed to accumulate over successive credit cycles. Not even the increases in interest rates in the late-seventies, designed to halt runaway price inflation, saw total debt contract.
The consequences of these monetary and credit excesses up to the end of the last century were growth in financial speculation. This culminated in the dot-com boom, which was on a similar bubble-scale to the stockmarket excesses of 1927-1929, and arguably was fuelled by the same degree of public speculation recorded in the Mississippi and South Sea bubbles three hundred years ago. Stock markets were only rescued from the subsequent fall-out by the unprecedented actions of the Fed in 2001-2003, which reduced the Fed Funds Rate to 1%, laying the foundations for the housing bubble of 2005-2007. And as we all know, it was the collapse of this secondary bubble that led to the financial crisis that took down Bear Stearns and Lehman Bros.
According to the McKinsey Global Institute, global debt increased from $142 trillion in 2007 to $199 trillion at the end of 2014. This was admittedly a slower rate of growth than 2000-07, but the difference can be accounted for by the expansion of central bank base money and the higher average level of rolled-over interest rates during the earlier period. Separately, shadow-banking debt has also grown as a source of short-term financing. It remains the case today that financial instability is the consequence of excessive debt, and the global financial system is inherently more risky today than it was at the time of the Lehman Crisis.
Reliance on debt as an economic driver is the other side of the expansion of the total quantity of money. This can only continue so long as people accept that money maintains its objective exchange-value.
Since the late 1970s the major central banks, led by the Fed, have wrested control of interest rates from markets on the supposition that economic activity and price inflation can be managed by varying them at the state’s behest. The policy is very different from the way interest rates are set in free markets. The philosophical bias behind state management of interest rates, that borrowers are more deserving than lenders, has a long history, dating long before Shakespeare’s Shylock. Since central banks have controlled interest rates they have always favoured borrowers over savers, with the predictable result that global debt has expanded without the underlying production to support it. And without earnings set aside from production, debt cannot be repaid, so it must default.
Preventing this default has become a growing problem and is the primary task facing central banks. Household, corporate, government and financial sectors are all exposed to debt default, ensuring political and business considerations will allow no alternative outcome. The only means central banks can employ is the creation of yet more money, and to foster the expansion of bank credit at an ever-increasing pace, a remedy that was spectacularly confirmed as effective by the Fed’s management of the Lehman crisis and the rounds of quantitative easing that followed. Zero interest rates have ensured that compounding unpaid interest is kept to a minimum, but at the same time they have encouraged yet more unproductive borrowing. Markets are signalling that we are arriving at a new financial crisis, and soon it will be time to unleash the monetary weapon again.
Each crisis is of a greater magnitude than the previous one. The trigger undermining the global debt problem this time is a sharp slowdown in global production. Without the fig-leaf of increasing productive output, the precariousness of the global debt problem has become all too evident to ignore, even for perpetual optimists.
Equity markets are telling us that the debt crisis is now upon us again. The detailed course that events will take from here cannot be predicted, but we can be certain that over the coming months governments will be ready to move heaven and earth to prevent a deepening crisis, by any means at their disposal. In this respect the lesson of the Lehman crisis is that flooding the system with money and guarantees of more money actually works. Gone will be any pretence of monetary discipline, gone will be any pretence of higher interest rates, and gone will be any constraint on the issuance of yet more debt. A crisis of malinvestment has become a crisis of the financial system, and will soon become a crisis of currencies. We can be increasingly certain that debt will be extinguished not by debtors reckoning with creditors, but by the debasement of money, and that this outcome becomes the unstated objective of policy makers.
It is an important conclusion. In effect, it posits that the only solution open to central banks is the deliberate destruction of their own currencies, not on the drip-feed basis that has existed since the Bretton Woods Agreement, but by a more deliberate acceleration. We cannot judge whether this will work one more time, postponing a final crisis. But we can see the circumstances ahead of us more clearly, and we can more easily imagine central bankers being drawn into repeating the mistaken policies of Rudolf Havenstein, president of Germany’s Reichsbank in 1921-1923. In predicting this final crisis for any country that treads down the path of government corruption of its money, the economist von Mises described its manifestation as a crack-up boom, the boom to end all booms, when ordinary people finally realise the worthlessness of government currency and dump it as rapidly as possible for anything they can get hold of. The last vestiges of the currency’s objective exchange-value evaporate.
The hyperinflation of fiat money and the prospect of a final collapse in its purchasing power is becoming an increasingly probable outcome of the financial events unfolding today. That much can be deduced from sound economic theory, and is confirmed by historical records of similar crises. We can also expect this outcome to be made certain by the misguided faux-science of macroeconomics, which bases itself on the denial of Say’s law and which badly misleads government policy-makers.
Only this time the threatened currency destruction will be global, because where the dollar goes, and the dollar is still the reserve currency, so we all go.
An article by GoldMoney’s Head of Research, Alasdair Macleod
Disclaimer: The views and opinions expressed in the article are those of the author and do not necessarily reflect those of GoldMoney, unless expressly stated. Please note that neither GoldMoney nor any of its representatives provide financial, legal, tax, investment or other advice. Such advice should be sought form an independent regulated person or body who is suitably qualified to do so. Any information provided in this article is provided solely as general market commentary and does not constitute advice. GoldMoney will not accept liability for any loss or damage, which may arise directly or indirectly from your use of or reliance on such information.
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New York: Pour la deuxième séance de suite, les cours du pétrole ont fortement monté vendredi à New York, achevant la semaine sur leur plus forte hausse hebdomadaire depuis 2011 face à l'atténuation des craintes pour la demande et l'économie mondiale.
A new lithium project in northern Mexico has received the first seal of approval to supply the Tesla Motors Gigafactory.
London-based Bacanora Minerals and Rare Earth Minerals have received the go-ahead to supply lithium hydroxide to Tesla's lithium-ion battery megafactory from its clay deposit in Mexico's north-west should the new project reach production.
Tesla have agreed a 5-year lithium hydroxide contract to "purchase agreed minimum tonnages with estimate forecasted maximum tonnages to be determined following delivery of future production orders".
While no volumes were revealed, Bacanora explained that its planned processing plant capacity will have a minimum lithium hydroxide output of 35,000 tpa and a maximum of 50,000 tpa.
Tesla expected to consume majority
In Benchmark's estimates, should the product pass Tesla's specification and quality control tests, the company could consume as much as 80% of the project’s total output. It is an expectation that Bacanora would keep some tonnages for the spot market.
It is also expected that Tesla's deal would be at a significant discount to market prices such is the scale of the order. Should Tesla regularly purchase over 10,000 tpa of lithium hydroxide, it will be the largest battery consumer in the world…Continue reading for free > click here for Benchmark's Blog.
> Hear about lithium, graphite and the battery supply chain at Benchmark's free seminars: http://ift.tt/1Kg3yZ0
> For more lithium market information email: info@benchmarkminerals.com
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The iron ore price has held up well
The benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin added $2.20 or 4.1% at $55.50 a tonne, according to data provided by The SteelIndex.
The advance in the Metal Bulletin's benchmark 62%-index at the ports of Qingdao-Rizhao-Lianyungang in China was $2.11 to $56.04 while lower grade 58% fines jumped $2.25 a tonne to $49.01, a 4.8% gain on the day.
Iron ore has regained all the ground lost on Monday and is trading just over 26% higher from record lows hit July 8.
Chinese steel prices have also recovered from record lows hit on Tuesday when the most traded rebar contract on the Shanghai Futures Exchange came close to dropping through the $300 a tonne level.
The People's Bank cut rates this week and introduced other policy measures in an effort to shore up the slowing economy, particularly in the property sector which accounts for a quarter of China's economy and a large proportion of steel demand.
Many observers believe further pro-growth measures could be announced in October when the country's next development blueprint will be discussed by party leaders.
But some steel producers inside the country appear to be skeptical of the impact on manufacturing and industry, given Beijing's shift away from investment-led growth in favour of a consumption and services-based economy.
Platts News quotes a large steelmaker in Hebei province as saying the measures were "geared toward helping the equity markets recover, and not toward helping manufacturing, so it was unlikely that steel and iron ore players would receive more aid."
"Banks are not inclined to extend new loans with more attractive interest rates to these lossmaking industries," the steelmaker added.
"The rate cuts are going to take some time to flow down to the manufacturing industries. It is not immediate," a source at a Zhejiang-based mill said. "We aren't getting any new loans from our bank, so there is no impact for now on improving our ability to buy seaborne iron ore."
Beijing already has a number of programs in place to boost activity and especially the raw materials sector.
The $160 billion infrastructure bonds plan it launched earlier this month is set to release the first batch of $48 billion.
This initiative follows a $173 billion recapitalization of the country's two largest development banks in two rounds in April and July as part of its ambitious "New Silk Road".
The post Iron ore price rallies again appeared first on MINING.com.
While gold consolidated its recent gains, silver was sold down this week along with other metals and energy. The whole commodity complex suffered badly in the stock-market fall-out, before a sharp bear-squeeze across commodity markets pushed silver, copper and oil sharply higher yesterday (Thursday). Silver is now down 6.8% on the year and gold 5%. Prices were slightly firmer this morning in Asian trade, before the European opening.
Storm-force winds blew through all markets, with substantial falls in equities after last weekend. As it became clear that the falls would be contained for the moment, the US dollar rallied and US Treasury yields increased from the panic lows. This recovery in general sentiment led to weakness in precious metals generally.
The sharp fall in silver is hard to justify in anything other than purely speculative terms. While the last Commitment of Traders Report (18th August) for the US futures market showed Managed Funds short positions were slightly less extreme, they are still very high, as shown in our next chart.
We will get updated COT figures this evening, but it is reasonable to suppose that some of the long positions in this category have been closed with open interest falling about 7,000 contracts. There may have been some producer hedging as well. The net position, longs minus shorts, is our next chart.
The chart confirms speculators in the form of hedge funds were still extremely bearish as a crowd mid-month and there is little evidence this sentiment has changed this week.
Anecdotal reports are of significant shortages of physical gold and silver, despite the negative sentiment in futures markets. Demand for coins and retail bars in the US has cleaned out the dealers, particularly for silver, and in London availability of sovereigns continues to be tight. Western markets for gold in particular must be reflecting the strains imposed upon it by continuing Asian demand, which has led to progressive destocking of vaulted gold for the last three years.
The next chart shows how China’s public demand for physical gold, the largest identifiable physical market, has grown over recent years.
In the first seven months of 2015, 1,464 tonnes were taken up by the public, an annual rate of over 2,500 tonnes. If the average monthly growth seen in the first half persists, total deliveries could be somewhat more. World mine production according to the US Geological Survey in 2014 was only 2,860 tonnes, including China’s own output of 450 tonnes, putting this one market in context. Other Asian countries are also buyers, notably India which is back in the market for an estimated 1,000 tonnes this year.
These two nations alone are taking out about 150-200 tonnes more than is mined, and while there are also scrap supplies to consider, maybe about 500 tonnes globally, scarce bullion stocks in the west are still being depleted.
The public response throughout Asia to currency instability could be the most important influence on the gold price in coming months. Traditionally, when currencies come under stress the public reaction is to step up gold purchases, in which case backwardations will persist and premiums in Asian markets will rise.
I shall tweet the latest weekly demand figure for China later today when available on @MacleodFinance.
Next week
Monday. Japan: Capital Spending, Vehicle Sales, Construction Orders, Housing Starts. Eurozone: Flash HICP. US: Chicago PMI.
Tuesday. Eurozone: Manufacturing PMI, Unemployment. UK: BoE Mortgage Approvals, Net Consumer Credit, Secured Lending, M4 Money Supply. US: Flash Manufacturing PMI, Construction Spending, IBD Consumer Optimism, ISM Manufacturing, Vehicle Sales.
Wednesday. Eurozone: PPI. US: ADP Employment Survey, Non-Farm Productivity, Unit Labour Costs, Factory Orders.
Thursday. Eurozone: Composite PMI, Services PMI, ECB Deposit Rate. US: Initial Claims, Trade Balance, ISM Non-Manufacturing.
Friday. US: Non-farm Payrolls, Private Payrolls, Unemployment.
Weekly market report by Alasdair Macleod, Head of Research, GoldMoney
The views and opinions expressed in the article are those of the author and do not necessarily reflect those of GoldMoney, unless expressly stated. Please note that neither GoldMoney nor any of its representatives provide financial, legal, tax, investment or other advice. Such advice should be sought form an independent regulated person or body who is suitably qualified to do so. Any information provided in this article is provided solely as general market commentary and does not constitute advice. GoldMoney will not accept liability for any loss or damage, which may arise directly or indirectly from your use of or reliance on such information.
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Sentinel mine. (Image courtesy of First Quantum )
Canada’s First Quantum Minerals (TSX:FM), Zambia's largest foreign investor, has kicked off production at its $2.1 billion Sentinel copper mine, amid low metal prices.
The Vancouver-based miner aims to produce 280,000 to 300,000 tonnes of the red metal a year, but warned commercial production levels at Sentinel will be reached only after state power utility Zesco connects the mine to the power grid, which is expected to happen in September, according to Reuters.
Earlier this month, First Quantum 's local subsidiary Kalumbila Minerals Limited (KML) said it would have to lay off about 1,480 workers after a reduction in its power supply curbed production.
Zesco has limited supplies after water levels at its hydro-electric plants dropped due to drought.
The copper processing plant at Sentinel was impacted by the restrictions, and operations were temporarily halted as a result.
KML, majority owned by First Quantum, is developing the Trident Project which comprises the Sentinel copper mine and Enterprise nickel mine plus associated infrastructure at Kalumbila in north-western Zambia.
The job losses would affect both Zambians and expatriates, KML said, warning of more cost cuts if electricity supplies were not secured.
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The Tujuh Bukit project reflects both the attractions and difficulties facing foreign companies working in Indonesia's mining sector.
Situated on the southeastern tip of Java, Tujuh Bukit is large, with the potential to produce annually at least 300,000 ounces of gold, 1 million ounces of silver and 100,000 tonnes of copper.
Phase 1 mining will be open cut, to produce gold and silver. Construction is to commence by mid-2016. Phase 2 mining will be underground, to produce copper and gold.
Tenders for the Phase 1 processing plant (to include crushing, grinding and heap leaching) have been invited from three companies: FLSmidth (a global company with its head office in Denmark); Como Engineers of Australia; and PT Contromation Energi Services of Indonesia.
The project offers considerable opportunities for local and foreign suppliers, consultants and contractors.
But it has a chequered history.
Between 1991 and 2007, exploration of the area was undertaken by an Indonesian company in conjunction with several different foreign companies.
Responsibility for the project was taken over by Australian company, Intrepid Mines, in 2007. However, the tenements concerned were controlled by an Indonesian company, PT IMN. Following a change of ownership in 2012, PT IMN suspended exploration activities at Tujuh Bukit and Intrepid Mines was evicted from the site.
Intrepid Mines pursued several legal and administrative avenues to regain control of the site; these were unsuccessful and the company reached a settlement with the owners of the project in 2014.
Tujuh Bukit is now in the hands of the Indonesian company, PT Merdeka Copper Gold. Intrepid Mines is pursuing a copper project in Zambia.
Indonesia is the world's largest exporter of thermal coal (used for electricity production); a major world producer of tin and nickel; and the location of one of the world's largest copper mines, Grasberg.
Reflecting its resource strength, the country is a major drawcard for foreign mining and mining-service companies. For example, Australian mining-service companies have a greater presence in Indonesia than in any other country outside Australia.
Indonesia's attractiveness is likely to continue, notwithstanding the difficulties faced by Intrepid Mines and some other mining companies there.
And notwithstanding policy changes that are sometimes unwelcome, such as the recent tightening of requirements for Indonesian ownership of mines and the recent introduction of the requirement that nickel, copper and most other mineral products be processed before being exported.
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Londres: Les cours du pétrole reprenaient le chemin de la hausse vendredi en fin d'échanges européens, soutenus par un regain d'optimisme sur les marchés financiers, même si l'offre mondiale pléthorique continuait de lester les prix.
The McArthur River mine is one of the world's largest producers of lead, zinc and silver. (Image courtesy of Glencore)
Glencore (LON:GLEN) may soon be forced to shut down its McArthur River zinc mine in Australia unless it improves its environmental record and increases a financial bond covering rehabilitation of the site, authorities said this week.
The warning came after Australia’s Northern Territory officials asked the company to release figures about lead contamination around the site, under the Freedom of Information Act.
But Glencore has struck back, claiming the data reported in the documents was out of date.
"Some of that information in fact is six or 12 months out of date and no longer reflects the current operating status of McArthur River," Glencore Zinc chief operating officer Greg Ashe said at a mining conference this week, Australian Broadcast Corporation reports.
The executive added that Glencore has made improvements since the data reported in the documents was collected.
Smoke, traces of lead in fish
For months, residents near the zinc mine — one of the world's biggest — have complained about the potentially toxic smoke plumes and acidic run off coming from one of the mine’s waste rock dump. In October last year, an environmental assessment found nine out of 10 fish in a nearby creek had elevated and unsafe lead levels.
The NT Department of Primary Industries also found that cattle that wandered onto the site tested positive for lead above the safe limit of human consumption. As a result, hundreds were quarantined or destroyed, as acknowledged by the company in a statement this week.
The company has until Oct.1 to provide authorities with fresh data.
Only two years ago, Glencore was granted approval to increase the rate of mining from 2.5 million tonnes of ore annually to 5 million tonnes and the yearly yield of zinc and lead bulk concentrate from 360,000 dry metric tonnes to 800,000 dry metric tonnes.
It also lifted the mine's scheduled closure date by nine years to 2036.
McArthur River mine is one of the world's largest producers of lead, zinc and silver.
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