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Lessons from Rio’s Mongolian adventure – by Neil Hume and James Wilson (Financial Times – March 13, 2015)

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

How to minimise the risks of joint ventures with governments

If Rio Tinto could start again with Oyu Tolgoi, a $12.6bn copper and gold mine in Mongolia, what would it do differently? The question is addressed in an academic paper that examines ways to reduce the risks resource groups take when investing in frontier markets.

OT, which has already cost more than $6bn, is expected to be one of the biggest copper producers in the world and to last for decades. However, development has stalled as the Anglo-Australian mining group and the Mongolian government argue over how to pay for the second underground phase.

Rio is refusing to proceed until disagreements over cost overruns and taxes have been ironed out, while the cash-strapped Mongolian government wants to cut its 34 per cent equity stake in the project in return for higher royalties from the mine.

Much is at stake for both sides. For Rio, the expansion of OT will bulk up its copper business and reduce its dependence on iron ore. For Mongolia, it needs cash quickly from the mine to meet spending commitments.

So what can be done to prevent this situation happening again? The paper, written by Henry Steel, a special adviser at Rio, and Stefano Gatti, of Bocconi University Milan, focuses on the investment agreement between Rio and the Mongolian government as a key source of tension.

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Copper faces looming supply gap – Teck Resources – by Simon Rees (MiningWeekly.com – March 5, 2015)

http://www.miningweekly.com/page/americas-home

TORONTO (miningweekly.com) – The level of new copper output will be unable to plug a supply gap that could develop as early as 2017, Canadian diversified miner Teck Resources manager for market research Michael Schwartz told an audience at the Prospectors and Developers Association of Canada 2015 convention.

Teck had calculated that the average yearly rate of copper demand growth would reach 2.7% in the coming years. This equated to about 680 000 t of new supply being required each year, a level producers would be unable to match.

This supply/demand fundamental was in stark contrast with copper’s performance over the past 12 months, with Schwartz noting that Wood McKenzie had recorded a 300 000 t surplus for 2014. “Although we are showing a balanced market to a slight deficit,” he added.

The overhang had been reflected in the red metal’s price, which was currently hovering at around $2.65/lb, compared with a 52-week high of about $3.25/lb. Producers with cost-of-production rates above $2.50/lb would continue to struggle, Schwartz pointed out.

Disruption to output, which offered price support depending on its severity, would become an increasingly important issue as the industry mined lower-grade zones in remoter areas.

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NEWS RELEASE: Ivanhoe Mines’ Exploration Team Receives the 2015 Thayer Lindsley International Discovery Award for the Kamoa Copper Deposit in the Democratic Republic of Congo

Robert Friedland (right) presenting the Thayer Lindsley Award to two members of the Kamoa Discovery Team - Dr. David Broughton (left) and Thomas Rogers (centre).

Robert Friedland (right) presenting the Thayer Lindsley Award to two members of the Kamoa Discovery Team – Dr. David Broughton (left) and Thomas Rogers (centre).

Award Medals Presented at the Annual Conference of the Prospectors & Developers Association of Canada

TORONTO, ONTARIO–(Marketwired – March 3, 2015) – Robert Friedland, Executive Chairman of Ivanhoe Mines (TSX:IVN), and Lars-Eric Johansson, Chief Executive Officer, announced today that members of the Ivanhoe Mines exploration team have received the prestigious Thayer Lindsley Award from the Prospectors & Developers Association of Canada (PDAC) for the discovery of the Kamoa Copper Deposit in the Democratic Republic of Congo (DRC).

The Thayer Lindsley International Discovery Award, which is presented annually by the PDAC, recognizes an individual or a team of explorationists credited with a recent significant mineral discovery or series of discoveries anywhere in the world.

The award honours the memory of Thayer Lindsley, who was inducted into the Canadian Mining Hall of Fame in 1989 and was one of the most accomplished mine finders of the past century.

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Drought in Chile curbs copper production, to trim global surplus – by Eric Onstad and Rosalba O’Brien (Reuters Africa – February 25, 2015)

http://af.reuters.com/

LONDON/SANTIAGO, Feb 25 (Reuters) – A drought in Chile is hampering copper production, a water-intensive business, in the world’s biggest producer of the metal, one more factor that could trim an expected surplus this year.

Both Anglo American and BHP Billiton have said the extremely dry conditions have hit production due to restrictions on water, used for everything from toilets for workers to separating the metals in the ore body from waste rock and tamping down dust that heavy trucks kick up.

“The one caveat or the risk I think that we need to flag… is Chile is still in drought,” Anglo Chief Executive Mark Cutifani told a results presentation last week. “It remains a risk, and in fact it was impacting our operating performance in November and December.”

In some parts of Chile, January was one of the driest since records began, exacerbating a drought that began in 2007, said Chilean meteorologist Claudia Villarroel. Winters in central Chile are becoming drier because of climate change, she added.

Indeed, Anglo’s Los Bronces mine in central Chile has been the worst affected of the company’s mines. It warned that water scarcity at the mine, the world’s sixth-largest copper producer, could cut as much 30,000 tonnes or 4 percent off Anglo’s overall copper output this year.

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Nevada’s new mining mantra: Quality trumps quantity – by Marc Davis (BNW News)(Mineweb.com – February 24, 2015)

http://www.mineweb.com/

A far less glamorous species of ore has become the quarry of a few shrewd mining juniors – copper oxides.

Due to its wealth of prolific gold deposits, Nevada is fondly known as ‘elephant country’ to mining companies – big and small – that hope to hunt down their own epic discoveries. However, it’s a far less glamorous but nonetheless potentially very valuable species of ore that’s lately become the quarry of a few shrewd mining juniors – copper oxides. This strategy reflects the new reality in mining: Quality trumps quantity.

In other words, cash-strapped mining companies nowadays are quite happy to find modestly-sized, relatively high-grade deposits that can be commercialized at a fraction of the cost of huge ‘elephant-sized’ deposits. If these buried riches are near-surface – as is the case with some oxide deposits – the returns can be even more robust due to reduced pre-production expenditures.

Among Nevada’s new breed of ‘quality-oriented’ explorers is Discovery Harbour Resources (TSX.V: DHR). This mining junior recently drilled into what appears to be a near-surface copper oxide skarn deposit near the town of Lovelock in west central Nevada.

This is where an initial drill program has intersected as much as 74.2 feet (22.6 metres) averaging 1.2% copper at a fairly shallow depth at the 2BAR Project. Additionally, sweet spots as rich as 5.6 feet (1.7 metres) averaging 5.89% copper were also encountered within about 100 feet of the surface.

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Copper heading for 1.5 million tonne deficit by 2018 – by Lawrence Williams (Mineweb.com – February 19, 2015)

http://www.mineweb.com/

Bernstein senior analyst, Paul Gait, sees a huge copper supply deficit arising over the next few years.

While most mainstream bank analysts don’t see it – perhaps being too fixated on current spot prices in their analyses – global research and investment management group Bernstein senior analyst, Paul Gait, looks to the medium- and long-term view and sees a massive copper supply deficit building over the next few years and reaching as much as 1.5 million tonnes by 2018.

Speaking at the Natural Resources Forum Latin America meeting held at London’s Royal Institution, Gait also commented that he does not see the China dominated supercycle as being over, but only about a third into its full course. This suggests a major turnaround in the copper price, which is currently languishing at around the $2.60/lb ($5,700/tonne) mark, over the next two to three years.

These are controversial statements going hugely against much current thinking, but he makes some good points on his way to this prediction, but does warn that copper frequently seems to confound analysts’ predictions both on the upside and downside.

At the moment Gait says that cash mining costs are on average close to the copper price itself but that historically base metals, apart perhaps from aluminium, tend to trade at a substantial premium to cash costs – and copper particularly so to normally average 50% above costs.

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Indonesia lifts demand on Freeport to build Papua smelter -media – by Fergus Jensen (Reuters India – February 16, 2015)

http://in.reuters.com/

JAKARTA – Feb 16 (Reuters) – Indonesia has dropped its demand that Freeport-McMoran Inc build a $1.5 billion copper smelter in Papua province, saying a regionally owned enterprise would take on the project instead, website Detik.com reported, quoting the mining minister.

The ministry in December said Arizona-based Freeport, which runs the world’s fifth-largest copper mine in Indonesia, should agree to build the Papua smelter in five years if it wanted a mining contract extension beyond 2021.

The latest decision could ease pressure on Freeport, which has already agreed to a $2.3-billion expansion by 2017 of its copper smelting facility in East Java, currently the only one in the country.

The government has been pushing the company to comply with rules that force miners to process and refine minerals domestically.

“If Freeport is burdened in two locations it would be uneconomical,” Energy and Mineral Resources Minister Sudirman Said said on Sunday, according to the Detik website.

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A company where copper is as good as gold – by David Milstead (Globe and Mail – February 14, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

New Gold Inc. is, as its name suggests, a gold miner. But it’s another metal, copper, that plays a large role at the company – perhaps larger than a casual investor might suspect.

How so? New Gold’s New Afton mine, west of Kamloops, B.C., produces twice as much copper than gold, in dollar terms. That allows New Gold, quite legitimately, to report extraordinarily low company-wide mining costs, much lower than at its properties where gold dominates.

The role of copper at New Gold offers a window into how “byproduct accounting,” as it’s called, can impact miners’ financial statements. And it raises an important point for New Gold’s shareholders: To evaluate the company’s prospects going forward, it’s essential to keep an eye not only on the bullion that gives the company its name, but on the lesser metal that provides New Gold much of its cost advantage.

To be clear: The copper factor is not hidden. Investors can plainly see the effects by carefully reviewing the miner’s reports. New Gold released its preliminary 2014 numbers earlier this month, with full results to come Feb. 20. New Gold reported all-in sustaining costs (AISC), a number designed to capture the true long-term cost of mining, of $845 (U.S.) per gold ounce in the fourth quarter.

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Understanding the copper heart of volcanoes (Science Codex – February 11,  2015)

http://www.sciencecodex.com/

The link between volcanism and the formation of copper ore has been discovered by researchers from the University of Bristol, UK. Their findings could have far-reaching implications for the search for new copper deposits.

With global demand for copper high (the average UK house contains about 200 kg of the metal, mostly in electric cables and transformers) and current reserves relatively limited, finding new reserves is a priority.

The researchers, led by Professor Jon Blundy of Bristol’s School of Earth Sciences, studied giant porphyry copper deposits of the variety that host 75 percent of the world’s copper reserves.

Copper forms in association with volcanoes such as those around the Pacific Ring of Fire but the nature of this association has never been entirely clear. Copper ore is predominantly in the form of copper-iron sulphides so an enduring problem has been how to simultaneously create enrichments in both copper and sulfur. Volcanoes rich in copper tend to be poor in sulfur and vice versa.

To resolve this copper-sulphur paradox, the Bristol team, working in collaboration with BHP Billiton, the world’s largest mining company, drew on observations of modern arc volcanoes, including several in Chile, source of most of the world’s copper, to postulate a two-step process for porphyry copper formation.

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Afghanistan’s dilemma: copper or culture – by Lynne O’Donnell (Associated Press/Regina Leader Post – February 7, 2015)

http://www.leaderpost.com/index.html

Mining could endanger treasures

Treasures from Afghanistan’s largely forgotten Buddhist past are buried beneath sandy hills surrounding the ancient Silk Road town of Mes Aynak – along with enough copper to make the land glow green in the morning light.

An estimated five million tonnes of copper, one of the biggest deposits in the world, could provide a major export for a war-ravaged country desperately in need of jobs and cash. But the potential bonanza could endanger rare artifacts that survived the rule of the Taliban and offer a window into Afghanistan’s rich pre-Islamic history.

“The copper mine and its extraction are very important. But more important is our national culture,” said Abdul Qadir Timor, director of archeology at Afghanistan’s Culture Ministry. “Copper is a temporary source of income. Afghanistan might benefit for five or six years after mining begins, and then the resource comes to an end.”

The government is determined to develop Afghanistan’s estimated $3-trillion worth of minerals and petroleum, an untapped source of revenue that could transform the country. The withdrawal of U.S.-led combat forces at the end of 2014 and a parallel drop in foreign aid have left the government strapped for cash. It hopes to attract global firms to exploit oil, natural gas and minerals, ranging from gold and silver to the blue lapis lazuli for which the country has been known since ancient times.

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[Minnesota] Copper/nickel hearing passionate – by Julia Van Susteren (Mesabi Daily News – February 3, 2015)

http://www.virginiamn.com/

Iron Range nonferrous mining issue in St. Paul

ST. PAUL — Proposed copper/nickel/precious mining on the Iron Range, always controversial and stirring strong passions on both sides, once again visited the State Capitol on Tuesday.

Citizens and mining industry supporters all had their say at a Mining and Outdoor Recreation Policy Committee hearing in the Senate Office Building. The small meeting room was crowded wall-to-wall with attendees, including many anti-mining advocates, supporters of nonferrous projects, and even a few interested lawmakers.

Executive Director of MiningMinnesota Frank Ongaro opened the meeting by citing various economic and long-term environmental benefits mining contribute to the state, local communities and the world.

Representatives from PolyMet, which is in the environmental impact statement process in advance of permitting for its project at the former LTV Mining Co. site near Hoyt Lakes, and Twin Metals Minnesota, which is not as far along for their projects near Ely and Babbitt, further testified about the importance of their ventures.

Representatives of various citizens’ groups argued passionately against the proposed mining projects, citing loss of tourism interest, contamination of pristine environments, and loss of personal property.

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Zambia, the copperbelt under pressure – by Christopher Mwambazi (The Africa Report – January 30, 2015)

http://www.theafricareport.com/

Lusaka – The Zambian government and mining companies are at loggerheads over plans to increase mine royalties, while the people complain they are seeing no benefits.

The Zambian government plans to revise the tax system and raise royalties to triple revenue from the mining sector by 2017 and prevent tax evasion. Some mining firms have already frozen their activities over tax disputes, and others say the new reforms will lead to the closing of mines.

For their part, residents from the Copperbelt say that mining has not led to an improvement in infrastructure and services.

In the 2015 national budget, finance minister Alexander Chikwanda proposed to redesign the fiscal regime by replacing the current two-tier system with a simplified structure resulting in an increase of mineral royalty to 8% for underground mining operations and 20% for opencast mining.

The government would then eliminate the 30% corporate income tax for mining firms. Treasury sources say the new tax formula would help the government to recoup some of the nearly $2bn it believes is lost from the mining sector each year. The proposal is part of a plan to treble revenue collection from the mining sector to $1.5bn by 2017.

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NEWS ANALYSIS: Falling copper price sounds the alarm for base metals miners – by Mark Allix (Business Day Live – January 26, 2015)

http://www.bdlive.co.za/

MOODY’s has changed its outlook for the global base-metals industry to negative from stable, saying this is driven by global economic weakness and falling copper prices.

Copper is an economic bellwether given its use in power supply, plumbing and communications. The low demand and therefore low price of copper indicates the poor health of the global building and construction sectors.

“Slowing growth in China’s GDP (gross domestic product), continued weakness in Europe and falling copper prices have all contributed to our revised outlook,” says Carol Cowan, a Moody’s senior vice-president.

But the international ratings agency says the slowing rate of economic growth in China, especially, does “not bode well” for base metals as China consumes more than 40% of the world’s production. This immediately puts up red flags for SA’s base metals miners, and also for general metals manufacturers in the country. The latter have already endured a long, slow period of decline since 2000.

Broker Imara SP Reid says in its latest report on BHP Billiton that global steel prices are trending downwards. This comes despite the global miner’s guidance for overall mining production growth of 16% over two years to the end of June this year.

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There is no green energy without mining copper: Kovacevic – by Tommy Humphreys (CEO.ca – January 14, 2015)

 

http://ceo.ca/

Electrician turned mining entrepreneur Gianni Kovacevic has two important reminders for investors bailing on the copper sector this morning.

The first is that no force in the world can prevent the ascent of man. Over the next decade, another 500 million people will be lifted from abject poverty, Kovacevic says, putting incredible demand on natural resources, especially copper.

“We in the West have wants, they in emerging markets have needs.” The entrepreneur says 100% of people in poor communities are willing to pay for electricity. His second message is for nature-lovers to wake up about renewable energy and join him as a self-proclaimed “Realistic Environmentalist.”

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Copper takes shine off Rio Tinto result – by Matt Chambers (The Australian – January 20, 2015)

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

MINING giant Rio Tinto has had an uncharacteristically subdued fourth quarter, missing copper guidance and analyst forecasts and not delivering to some expectations on iron ore.

Mined copper output slumped 23 per cent from the previous quarter to 128,300 tonnes, as the big Escondida mine in Chile, which Rio (RIO) owns in a joint venture with BHP Billiton, was hit by water restrictions.

The Rio-operated Oyu Tolgoi copper and gold mine in Mongolia was hit by a fire at the concentrator. Deutsche Bank had been expecting quarterly production of 147,600 tonnes and UBS was predicting 138,900. As a result of the weak quarter, 2014 mined copper production of 603,000 tonnes missed guidance of 615,000 tonnes.

Fourth-quarter shipments (including minor partners’ share) from Rio’s WA-dominated iron ore unit rose 13 per cent to a record 82.2 million tonnes as the company continues to expand its Pilbara region infrastructure and mines.

This brought full-year sales to 302.6 million tonnes, just beating guidance of 300 million tonnes. The quarterly effort missed UBS sales expectations of 83.9 million tonnes but beat Deutsche Bank expectations of 81 million tonnes.

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