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UPDATE 3-Barrick will not suspend copper mine as Zambia backs down on royalties – by Chris Mfula (Reuters U.S. – April 23, 2015)

http://www.reuters.com/

LUSAKA, April 23 (Reuters) – Barrick Gold Corp, the world’s biggest gold producer, said on Thursday it will not suspend operations at its Lumwana open-pit copper mine in Zambia now that the country’s government has reduced mining royalties.

Zambia’s cabinet set the royalty tax rate for open-pit and underground mining at 9 percent on Monday. The corporate income tax rate will be 30 percent and the mineral processing tax rate will be 35 percent when the law takes effect on July 1.

“We appreciate the leadership and engagement of President (Edgar) Lungu and the government of Zambia on this matter,” Barrick Co-President Kelvin Dushinsky in a statement. “While Lumwana still faces challenges, in light of the government’s recent announcement we intend to continue operations at this time” The changes are yet to be approved by the parliament in Africa’s second-largest copper producer, but are expected to receive support from the assembly.

Zambia decided in January to increase royalties for open pit mines to 20 percent from 6 percent and raise rates for underground mines to 8 percent from 6 percent. The move rattled unions and mining companies and forced the government to review the plan.

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Freeport-McMoRan Crowned With Tarnished Copper – by Tim Maverick (The Wall Street Daily – April 21, 2015)

http://www.wallstreetdaily.com/

The price of the world’s most important base metal, copper, continues to hover near a five-year low as copper miners struggle with waning demand from their biggest customer, China.

The current price, near $2.70 per pound, is down roughly 40% from the all-time highs reached in 2011. China accounts for about 40% of overall global copper demand. But, consumption there has slowed as its once red-hot property market cools.

So, when Freeport-McMoRan (FCX) said that it’s going full speed ahead with a vast expansion plan, investors started scratching their heads. Especially since the company recently announced a dividend cut for the first time in seven years!

The company is already the world’s largest listed copper miner, and its goal is to become the overall No. 1 producer, passing up Chile’s state-owned Codelco.

Competitors in the industry, such as Teck Resources (TCK) and Anglo American plc (AAUKY), are delaying their expansion plans for copper.

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Strike like it’s 2011? Low copper prices loom large over wage talks – by Josephine Mason (Reuters U.S. – April 20, 2015)

http://www.reuters.com/

SANTIAGO – (Reuters) – When Antofagasta Chief Executive Diego Hernandez took the stage at the world’s biggest copper conference last week, he talked about the growing risks mining companies face from rising worker salaries in South America due to staff shortages and strong unions.

What he didn’t mention at the CRU copper conference in Santiago was the far graver immediate labor threat that many of his rivals face: the biggest round of contract negotiations since 2011, and likely the most contentious in years as falling copper prices and deep cost cutting programs strain relations between workers and operators.

The copper market seems to be perilously indifferent to the threat posed by this year’s contract talks at mines including one of the world’s largest, Grasberg in Indonesia, and Antamina, Peru’s biggest, risking a bullish shock if workers move to strike, analysts said.

“I think people are assuming with the change in the market, it’s going to automatically mean unions will be more flexible.  But it could be a very tough situation,” Juan Carlos Guajardo, executive director of Santiago-based mining consulting firm Plusmining, said. Last year, Antofagasta agreed to four-year contracts, including pay increases and cash bonuses, at its mines across Chile.

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Mine Tales: Copper Creek history includes recent discovery – by William Ascarza (Arizona Daily Star – April 19, 2015)

http://tucson.com/

Sometimes referred to as the Bunker Hill district, the Copper Creek district is located on the steep banks of the western slopes of the Galiuro Mountains in southeastern Arizona 75 miles northeast by road from Tucson.

Mining in the area dates back to 1863 with the Blue Bird mine with ore transported to Yuma and sent over to Swansea, Wales, for reduction.

Two decades later, prospectors William N. Miller, Theodore H. Peters and Ely H. McDaniels sought to further develop the outcropping of breccia pipe deposits officially organizing the Copper Creek Mining District in April 1880.

Prior to the 1900s, the focus was on lead-silver ore freighted from Mammoth to Willcox. Ore shipments were later shipped 35 miles northwest of Copper Creek to Winkelman for enhanced transport by the Phoenix & Eastern Railroad.

By the turn of the century, copper mining became prevalent in the area and involved three mining companies, including the Calumet & Arizona, Copper Creek and Minnesota-Arizona Mining Co. Copper concentrates were shipped to the Douglas and El Paso smelters.

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Zambia: Cabinet Slashes Mining Royalties to 9 Percent – by George Mwenya (All Africa.com – April 20, 2015)

http://allafrica.com/

Zambia’s Cabinet today announced new changes to the controversial mining tax, slashing royalties for open cast and underground mining down to 9%.

Under the previous government of President Michael Sata, royalties had been bumped up to 20%, sending chills across the investment community as many multinational mining companies threatened to shut down operations.

Shortly after winning last January’s election however President Edgar Lungu suspended the controversial tax pending the new rules which were proposed today.

The suggestions will still await the approval of parliament with the date off effect set for July, 1st should parliament go ahead with the proposals.

The measures approved by cabinet include the following: Mineral royalty tax rate for open cast mining and underground mining operations will be pegged at 9 percent;

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Copper Miners Eyeing M&A as Red Metal’s Scarcity Sparks Interest – by Javier Blas, Agnieszka de Sousa and Juan Pablo Spinetto (Bloomberg News – April 16, 2015)

http://www.bloomberg.com/

In the world of mining, copper is by far the most sought-after industrial metal.

China is short of it, the mines that form the backbone of current supply are aging, and the few new deposits are positioned in far flung locations such as Mongolia. “Everybody likes copper because there is not much of it,” said Menno Sanderse, a mining analyst at Morgan Stanley.

And yet, mining companies that have long coveted copper assets have been thwarted by an industry tightly controlled by a handful of players. Until now. The news that producers Antofagasta Plc and Teck Resources Ltd. have looked at a potential deal suggests companies may be trying to find ways to break the impasse. Both have said they aren’t currently in merger talks.

“The opportunities for consolidation are real,” Paul Espie, managing director of mining-focused private equity group Pacific Road Capital, which has $800 million in assets, said in an interview Tuesday in Santiago. “It’s an interesting time because valuations are low. We are looking at the consolidation situation in Chile right now.”

The scarcity of new copper deposits, falling grades at mines in Chile, the U.S., Australia and Indonesia, and runaway costs to develop projects combine to make it more attractive to buy a rival than build a new mine.

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Unlikely allies: Mexican miners and farmers unite over toxic spill – by David Bacon (Al Jazeera America – April 15, 2015)

http://america.aljazeera.com/

Outside groups help revitalize a six-year workers’ strike against copper giant Grupo México

CANANEA, Mexico — The pipes have gone silent. Gone is the hum of water flowing through them to the world’s second-largest copper mine, just south of the U.S. border. Instead, in the normally empty desert here, tents and buses line the highway. Dust and smoke from cooking fires fill the air while hundreds of people listen to speeches and discuss the day’s events.

This plantón, or occupation, which began on March 18, has shut down most operations at the Cananea mine, which consumes huge quantities of water pumped from 49 wells across the desert in order to extract copper concentrate from crushed ore.

Many of the people involved in the plantón are miners who have been on strike since 2008, when they walked out because of dangerous working conditions. Two years later, the government brought in 3,000 federal police, drove miners from the gates and occupied the town. Since then Cananea has been operated by contracted laborers recruited from distant parts of the country. But the strike has continued, as miners struggle to survive in this small mountain town where the mine is virtually the only source of work.

Now, for the first time in five years, the mine is again paralyzed. This time, strikers didn’t stop its operation by themselves. Half the people with them are farmers — residents of the Rio Sonora Valley, angry over a toxic spill that upended their lives last August, causing health problems and economic devastation.

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REFILE-As rivers dry up, Chile copper mines turn to the Pacific for water – by Anthony Esposito and Fabian Cambero (Reuters U.S. – April 12, 2015)

http://www.reuters.com/

(Reuters) – Alvaro Badillo remembers a time when his dad would take him fishing in the stream just a stone’s throw away from the dusty streets of their small hometown of Caimanes in central Chile.

Now, like countless communities that dot the arid valleys north of the capital, Santiago, Caimanes is left with a dry riverbed. The culprit? That depends on who you ask.

For many in the town of 1,200 people, the answer lies just a few miles upstream: a 470 foot tall wall that stretches nearly a half-mile straight across the valley. It is the tailings dam for Los Pelambres, Chilean miner Antofagasta Plc’s flagship copper mine, which holds enough leftover processed rock to fill some 140,000 Olympic swimming pools.

For its part, Antofagasta blames an eight-year drought in Chile for the evaporation of already slim water resources, and says the canals it built to redirect rain water have minimized the impact on the stream.

Both sides have findings that support their arguments and are thrashing them out in a court battle that could stop work at one of the world’s biggest copper mines.

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PolyMet CEO: Copper can help Iron Range diversify – by John Myers (Duluth News Tribune – April 15, 2015)

http://www.duluthnewstribune.com/

You could understand why the mood might be dour at the annual Society for Mining, Metallurgy and Exploration conference in Duluth this week. With the price of iron ore less than half what it was when last year’s conference was held, layoffs rampant and foreign steel flooding the U.S.economy, the 600 or more regional mining industry folks gathered here weren’t exactly whooping it up.

But Jon Cherry, president and chief executive officer of PolyMet Minerals, said copper may be the balm that soothes what ails northern Minnesota’s mining industry.

Iron ore that sold for $180 per ton in 2011 and $100 one year ago now is going for about $47. And while Cherry said he understands his brothers and sisters in the iron ore mining industry are facing “difficult challenges” with predictions of sub-$40-per-ton iron ore prices, he was happy to proclaim that “these are exciting times for PolyMet” and copper in Minnesota.

Cherry, the conference’s closing plenary speaker, said his company is projecting that both global supply and demand for copper will remain relatively stable through 2017 before both start to increase. In the meantime, he predicts stable prices, and nothing like the free-fall of iron ore prices, on the horizon for copper.

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Copper Kings Look Past China Wobbles to Looming Scarcity – by Matthew Craze and Agnieszka de Sousa (Bloomberg News – April 14, 2015)

http://www.bloomberg.com/

As forecasters debate copper’s next price move, the world’s biggest producers say they can extend a decade of profits as mines struggle to keep up with demand.

Even with Chinese growth slowing, aging mines will fail to keep pace with electrical equipment demand in developing countries, according to Jean-Sebastien Jacques, head of Rio Tinto Group’s copper business. He joined executives from Codelco, Freeport McMoRan Inc., Antofagasta Plc and Teck Resources Ltd. in Santiago this week for the industry’s annual get-together.

“I see a substantial supply gap opening up by the end of this decade,” Jacques said. “Now is the time to keep investing.”

Copper lost 11 percent in the past year and traded at three-week lows Wednesday after data showed China’s economy grew at the slowest pace in six years. The metal used in wiring and plumbing will avoid following oil and iron ore into a more abrupt slump as an anticipated surplus is erased by mine setbacks, mining executives including Antofagasta Chief Executive Officer Diego Hernandez and Teck CEO Don Lindsay told the World Copper Conference in Santiago.

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Antofagasta sounds warning on Chile copper industry – by Henry Sanderson (Financial Times – April 14, 2015)

http://www.ft.com/intl/companies/mining

Santiago – Chile’s copper industry risks losing its competitiveness, as productivity declines to levels last seen in the early 1990s due to ageing mines and higher labour costs, miner Antofagasta has warned.

Chile, the world’s biggest copper producer, has invested roughly the same amount in its mining industry since 2004 as it did in the previous decade, yet there has barely been any growth in production, Diego Hernandez, chief executive of UK-listed Antofagasta, said in an interview at an industry gathering in the country’s capital.

Between 1990 and 2004 production grew 9.2 per cent annually while productivity almost doubled, he said. “Fifteen years ago Chile still had a competitive advantage in terms of labour as a component of our cash costs,” Mr Hernandez said, noting that labour at the time was cheaper than developed countries such as Australia, Canada and the US but less productive.

“Today we have similar salaries but we kept the same productivity we had before. Now we have a competitive disadvantage,” he said.

The fate of the copper industry is key for Chile, whose economy last year grew by the slowest pace in five years as demand weakened from its biggest customer, China. Chile alone produces about a third of the world’s copper, and in addition to Antofagasta, companies including BHP Billiton, Anglo American and Japan’s Sumitomo Corp all have operations in the country.

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Got copper? New pentagon report spotlights key role of critical metals – by Daniel McGroarty (The Hill – April 12, 2015)

http://thehill.com/

A new national security report has just been released: The 2015 National Defense Stockpile Requirements Report documents projected shortfalls in various metals, minerals and materials required for the U.S. defense industrial base and, in this day of dual-use technologies, the “essential civilian economy.”

In all, the new report details shortfalls that, in classified crises scenarios, would affect 30 metals and minerals – about 1/3 of the naturally occurring elements in the Periodic Table. Many of the metals and minerals used in U.S. defense applications aren’t exactly household names. There’s bismuth, used in defense thermo-electrics to capture ‘waste heat” and channel it back into weapons systems power sources. Weapons builders need iridium – used in aircraft engines, satellites and rocket propulsion– as an alternative to America’s present reliance on Russian supply.

In the case of tellurium, used in thermal imaging and navigation systems, present tellurium production, already sharply limited, will soon drop to zero, increasing U.S. dependency on China, Russia and Japan. Rhenium and molybdenum are essential to high-performance alloys used in jet turbines and other defense systems – as is more cobalt, used in jet engine super-alloys and samarium-cobalt permanent magnets. As the Pentagon study notes:

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Freeport Bets Copper’s No Oil With Growth to Grab Top Spot – by Matthew CrazeAgnieszka de Sousa (Bloomberg News – April 12, 2015)

http://www.bloomberg.com/

Freeport McMoRan Inc. is testing the nerve of the copper industry, and its own investors, with an expansion that has it poised to become the world’s biggest producer at a time of slowing China growth.

The Phoenix-based company will close the gap with current world No. 1 Codelco next year after expanding mines in Peru and the U.S. and as the Chilean state-owned company runs out of profitable ore at a mine in the Atacama Desert.

For those predicting a more precipitous demand slump as China shifts to a consumer-driven economy, Freeport’s growth makes little sense. But for the company — whose 76-year-old Chairman Jim Bob Moffett oversaw the discovery of the world’s biggest copper-gold operation in the jungles of Indonesia 27 years ago — the industry’s aging mines will struggle to keep up with even moderate global demand growth. It’s a view shared by Goldman Sachs Group Inc., Morgan Stanley and Macquarie Group Ltd., which predict shortages emerging beginning 2017.

“They are making the right bet,” said Christopher LaFemina, an analyst at Jefferies LLC, who recommends buying Freeport stock. “If you are going to be leveraged to a commodity price, this is the right one. If you compare to iron ore or coal, copper is better.”

As Freeport readies a $4.6 billion expansion at the Cerro Verde mine in Peru, Chief Executive Officer Richard Adkerson will join a debate on the supply side’s reaction to slowing demand at the industry’s annual get-together in Santiago this week.

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Rumbles from the jungle as Bougainville mine stirs – by Rowan Callick (The Australian – April 13, 2015)

http://www.theaustralian.com.au/

Even the long-suffering Bougainville Copper board, which has witnessed cargo cults, wars, and the closure of its own vast mine, was puzzled when its share price soared 50 per cent a week ago.

For this sudden surge of confidence appeared, oddly, to have been triggered by troubling news for the company — the commencement of a new Mining Act passed by the Bougainville autonomous region’s parliament, which hands back control of all resources to landowners.

The future of the Bougainville mine, which still contains copper and gold worth about $50 billion, is tied up with its complex past, with the long geopolitical shadow cast by the 1989-2001 civil war on the island — and with cargo-­cultist hopes held out by local leaders allied to eccentric foreigners constantly seeking to seize control of the resources from BCL.

The ASX issued a “speeding ticket”, asking the company to explain the April 2 share price leap. BCL replied that it couldn’t. The price had slid back down to 28c by Friday.

The directors of the company, which is 53.58 per cent owned by Rio Tinto, 19.06 per cent by the Papua New Guinea government, and 27.36 per cent by other shareholders, are trying to juggle an enormous range of unknowns and variables, without even the compensating benefits of having a mine to run.

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New reckoning for copper miners now running in the red – by Josephine Mason (Reuters U.S. – April 12, 2015)

http://www.reuters.com/

(Reuters) – Nearly a quarter of the world’s major copper mines are running in the red, even after producers including Codelco and BHP Billiton engage in their deepest cost-cutting in years, according to a Reuters analysis.

A 17-percent slump since last July has pushed copper futures on the London Metals Exchange to under $6,000 a tonne, the lowest since 2009, is the first major test of producers’ margins since the global economic crisis, forcing a new reckoning after five years of relatively consistent profitability.

Codelco, the Chilean state miner that produces about 8 percent of the world’s copper, will review the cost reduction plan at its Salvador mine as it prepares to restart operations there after torrential rains shuttered the complex in March, said a source close to the state-run miner.

The company has an ambitious target to slash total costs by as much as $1 billion this year. Salvador produced copper at a cost of some $11,439 per tonne in the fourth quarter last year, the highest out of 91 mines analyzed by Thomson Reuters unit GFMS as part of its Copper Mine Economics database.

The mines account for more than two-thirds of global output, and almost a quarter of them had production costs late last year above current prices.

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