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Mining: Copper’s reputation tarnished (The Africa Report – January 20, 2015)

http://www.theafricareport.com/

Between the infrastructure deficit, revisions to the mining code, instability and Gécamines’ dodgy deals, copper is losing some of its conductivity with investors.

The year 2013 was a record breaker for the Democratic Republic of Congo (DRC), which produced an estimated 913,000tn of copper, a third more than in 2012 and its highest level for many years.

The government had predicted that copper output would be even higher in 2014, topping 1m tonnes, but a chronic and debilitating shortage of electricity has put paid to that. Annual copper output for 2014 looks like it may be less than 900,000tn.

Investors are also worried about long-delayed changes to the mining code and militia activity in Katanga Province. The electricity crisis is immensely frustrating to international mining companies operating in Katanga, all of whom were promised adequate power by the Société Nationale d’Electricité (SNEL) when they invested.

Tired of endless arguments with SNEL, the big companies went to prime minister Augustin Matata Ponyo to voice their concerns. In January 2014, he told companies that SNEL would ration power and that companies would have to restrain their expansion programmes.

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Zambia presidential hopeful vows to revise ‘penal’ mining tax (Yahoo News – January 19, 2015)

http://news.yahoo.com/

Lusaka (AFP) – A leading contender in Zambia’s presidential elections, Hakainde Hichilema, on Sunday vowed to review a new ‘penal’ mining tax regime that has spooked investors in the copper-rich nation.

Zambia tripled mining royalties to 20 percent from six percent on January 1, putting the government at loggerheads with mining firms already buckling under a fall in global commodity prices.

Hichilema, a wealthy businessman and leader of the United Party for National Development (UPND), is seen as a frontrunner in elections on Tuesday, along with the ruling Patriotic Front candidate Edgar Lungu.

Hichilema says he will build an investor-friendly Zambia and review the “terrible, penal” tax if elected to succeed former president Michael Sata, who died in October. “Anything that damages industry, that damages growth, we will deal with that,” the British-educated economist told AFP in an interview.

“One aspect (that is) unacceptable is the introduction of the mineral royalty at 20 percent, which is basically a turnover tax, it does not recognise the cost of production,” he said.

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Copper joins commodity slump amid worries over global economy – by Rachelle Younglai (Globe and Mail – January 15, 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.

The commodities rout has spread to copper, sending the industrial metal into a tailspin on growing fears of a weakening global economy. The red metal plunged 5.2 per cent to $2.55 (U.S.) a pound, a price not seen since 2009, when financial markets were in the grip of a global economic crisis.

Copper has been sliding for a few years amid a slowing Chinese economy and an increasing surplus of the metal. But the sudden and sharp drop on Wednesday – copper lost as much as 8 per cent before recovering slightly – shocked markets already reeling from oil’s free fall.

“It’s difficult to find any fundamental reason for the dramatic slump except fears about demand have been underlined by the growth outlook lowered by the World Bank this morning,” said Robin Bhar, head of metals research at Société Générale.

The World Bank cut its economic forecast for this year and said the stronger U.S. economy would not be enough to boost global growth.

Copper, used in all sectors from construction and power generation to cars and electronics, has long been viewed as a bellwether for the world’s economic health.

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Copper tumble risks hampering Glencore’s takeover ambitions – by Silvia Antonioli (Reuters U.S. – January 14, 2015)

 http://www.reuters.com/

LONDON, Jan 14 (Reuters) – A sudden plunge in the price of copper pulled the shares of global miner Glencore to their lowest level on record on Wednesday and risks frustrating any intention to make a fresh move on larger rival Rio Tinto.

Copper prices slid to their lowest in 5-1/2 years after a downward revision to global growth forecasts by the World Bank and shares in Glencore lost as much as 12 percent to 236.20 pence on Wednesday. Glencore, among the large diversified miners, has the largest exposure to copper.

If sustained, the steeper fall in copper prices compared with that of iron ore so far this year, might derail any potential move by Glencore to take over Australian miner Rio Tinto , which is heavily exposed to iron ore.

After Glencore’s first takeover approach was rebuffed by Rio last summer, the market was widely expecting Swiss-based Glencore to make another attempt this year. The steeper fall last year in prices of iron compared with base metals made Rio a more affordable target for Glencore.

That has been partially reversed this year. Copper has lost almost 12 percent of its value, while iron ore has lost less than 5 percent.

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Copper Tumbles Most in Six Years Amid Commodity Collapse – by Alex Davis and Chanyaporn Chanjaroen (Bloomberg News – January 14, 2015)

 http://www.bloomberg.com/

Copper tumbled the most in almost six years as it followed other metals lower amid a collapse in commodities.

Lower energy costs and demand weakness amid worse-than-expected economic data in China are driving prices down, according to Goldman Sachs Group Inc. Consumption in the world’s biggest user will grow at the slowest pace since at least 2009, Deutsche Bank AG estimates. Prices slumped as much as 8.6 percent in London today and fell by the daily limit in Shanghai.

Commodities have sunk to the lowest level in more than 12 years, led by a rout in energy prices, after a decade-long bull market led producers to boost output and a stronger dollar diminished their allure to investors. Oil’s 60 percent decline since last year’s peak is cutting costs for mining companies and bolstering speculation the glut will worsen. Copper is the worst performing non-energy raw material this year on the Bloomberg Commodity Index (BCOM), which fell to the lowest since August 2002.

“People have seen oil prices decline so much and now they’re targeting other commodities,” Ivan Szpakowski, an analyst at Citigroup Inc. in Hong Kong, said in an interview with Bloomberg TV today. Copper is falling faster than most other commodities because “it’s the one that is played by the macro investors and by people who are looking at the broader picture rather than commodity fundamentals.”

Copper for delivery in three months on the London Metal Exchange dropped as much as $506.75 a metric ton to $5,353.25, the lowest since July 2009. The metal was trading 5.2 percent lower at $5,555.25 a ton by 12:49 p.m. in London.

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Zambia pressed to reverse mining royalty hike – by Geoffrey York (Globe and Mail – January 12, 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.

JOHANNESBURG — Zambia’s government is under mounting pressure to reverse a royalty hike that could trigger thousands of layoffs at a copper mine owned by Barrick Gold Corp., but a rollback is unlikely until after an election this month, analysts say.

Trade unions, business groups and opposition politicians are pressing for a reversal of the sharp increase in the royalty rate on open-pit mining in Zambia. At least 12,000 jobs are in jeopardy across the mining sector in Africa’s second-biggest copper-producing nation, according to the Chamber of Miles of Zambia.

“It has created a lot of anxiety among Zambian workers,” said Nevers Mumba, one of the three leading presidential candidates in the Jan. 20 election. “Other investors could pull out of Zambia,” he said in an interview.

“There’s a risk of a run in that sector. I’m concerned about the ripple effect – it could have a terrible impact.” Under the new tax regime, which took effect on Jan. 1, the royalty on open-pit mining has tripled to 20 per cent, compared to the previous rate of 6 per cent.

Barrick and First Quantum Minerals Ltd. are among the Canadian mining companies that will be heavily affected by Zambia’s higher royalty rates. Barrick and First Quantum are two of the biggest foreign investors and private employers in Zambia.

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Miners face challenge tapping copper opportunities – by James Wilson (Financial Times – January 6, 2015)

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

The giant Chilean Escondida mine produces more copper than anywhere on earth. Some 1.2m tonnes emerge from the BHP Billiton-run facility each year. For the largest miners, Escondida also serves as a key measure for world copper output.

To meet global demand over the next decade, the industry “will have to add the equivalent of a new Escondida every 15 months”, says Jean-Sebastien Jacques, head of copper at Rio Tinto, which owns a minority stake in the mine. First Quantum, a mid-tier copper miner, says that if China, India and Brazil were to reach EU levels of copper use by 2020, it would imply nine new Escondidas.

Such predictions explain why big UK miners are talking up their growth potential in copper, even though worries over Chinese demand have driven the price of the metal to its lowest since 2010.

Both Rio and BHP believe the copper market is oversupplied now but will tighten from 2018, with growing deficits. “The copper story remains very strong,” says Mike Henry, BHP’s president for marketing.

Some of the UK’s pure-play copper miners are investing heavily in growth. Antofagasta expects to lift annual output from its Chilean mines from 700,000 tonnes last year to 900,000 tonnes by 2018. Kaz Minerals is building two mines in Kazakhstan.

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Chilean mining firms nervous about impending labor reforms – by Fabian Cambero (Reuters U.S. – December 22, 2014)

http://www.reuters.com/

SANTIAGO – Dec 22 (Reuters) – Mining firms in Chile, the world’s top copper producer, say the government has left them in the dark over a new labor bill to be delivered to Congress this month, undermining the confidence of investors grappling with low metal prices.

President Michelle Bachelet’s socialist government says it wants to modernize collective contract negotiations and strengthen unions, though it has been vague on details. Senators close to the government have said it could seek to limit mining companies’ ability to replace workers during strikes.

The labor reform is part of a battery of measures aimed at reducing Chile’s gaping wealth gap, and Bachelet faces a tricky balancing act as mining accounts for half of Chile’s exports.

Mining companies fret the reforms will jack up labor costs and increase the power of unions in a country where strikes are relatively uncommon.

“It’s not the moment to implement a radical labor reform because we have had too many changes and each change creates uncertainty,” said Diego Hernandez, president of Antofagasta Minerals.

State-run Codelco and private firms like BHP Billiton, Anglo American, Glencore, and Antofagasta are all juggling weak copper prices, due to slacker demand from China, and surging costs.

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Obama signs mining land swap measures into law – by Dorothy Kosich (Mineweb.com – December 22, 2014)

http://www.mineweb.com/

Two copper projects in Arizona and Nevada will now advance to the next stage as the National Defense Authorization Act has now become law.

The NDAA includes land swaps that benefit the Resolution Copper Project in Arizona. Rio Tinto Copper’s CEO says the passage of the land exchange at Resolution will help it establish the full potential of the resource and provides a clear road map to commercial development.

President Barak Obama has signed the National Defense Authorization Act (NDAA) into law, which includes riders containing the largest public lands package since 2009, which includes land swaps that benefit the Resolution Copper Project in Arizona and the Pumpkin Hollow Copper Project in Nevada.

A joint venture of Rio Tinto and BHP Billiton allows for the exchange of 2,400 acres of federal land at Oak Flat around the deposit for 5,400 privately owned acres of land held by Resolution Copper including riparian habitat on the lower San Pedro River.

The high-value conservations land were identified through the input from the U.S. Forest Service, the Bureau of Land Management, the Audubon Society and others. The swap consolidates ownership of the land where the mine will be developed and operated.

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Mining company says it’s committed to Superior’s success – by Emily Bregel (Arizona Daily Star – December 21, 2014)

http://tucson.com/

The mining company seeking to acquire a copper deposit just outside Superior wants to help the town prepare for life after the ore body is depleted and the mine shuts down.

“We want to help them be sustainable and self-sustaining,” said Vicky Peacey, Resolution Copper Mining’s senior manager for environment, permitting and community. She notes that the mine has contributed to the town’s efforts to revitalize and has supported the chamber of commerce, local schools and recreation groups. “It’s not just about mining. It’s about diversifying.”

Leaders in the mining town of Superior — who voted last year to revoke the town’s written support for the Resolution mine — agree with the company on that point, at least.

Town attorney Steve Cooper said Superior could become a tourist destination, based in part on the outdoor recreation and natural beauty surrounding the mining town.

“The area in and around Superior is beautiful,” he said, describing a plan to build a trail along Queen Creek from the Oak Flat campground to the Boyce Thompson Arboretum to the west. “We want to basically try to make the town a multi-business community, versus having a one-employer town.”

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NEWS RELEASE: Barrick to Suspend Operations at Lumwana Following Passage of New Mining Royalty

TORONTO, ONTARIO–(Marketwired – Dec. 18, 2014) – Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) today announced that the company will initiate procedures to suspend operations at the Lumwana copper mine in Zambia following the passage of legislation that raises the royalty rate on the country’s open pit mining operations from six percent to 20 percent.

The new taxation regime, which is expected to go into effect on January 1, 2015, eliminates corporate income tax, but imposes a 20 percent gross royalty on revenue without any consideration of profitability.

“The introduction of this royalty has left us with no choice but to initiate the process of suspending operations at Lumwana. Despite the progress we have made to reduce costs and improve efficiency at the mine, the economics of an operation such as Lumwana cannot support a 20 percent gross royalty, particularly in the current copper price environment,” said Co-President Kelvin Dushnisky .

“We sincerely regret the impact this will have on our people, as well as the communities and the businesses that depend on Lumwana, and we remain hopeful that the government will consider an alternative solution that will allow the mine to continue operating,” said Co-President Jim Gowans .

In the meantime, the company will initiate procedures to transition Lumwana to care and maintenance. Major workforce reductions are planned to commence in March, following the legally required notice period.

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Poland’s KGHM has talks with Canadian rival over permit dispute – by Adrian Krajewski and Anna Koper (Reuters India – December 17, 2014)

http://in.reuters.com/

WARSAW – Dec 17 (Reuters) – Europe’s second largest copper producer KGHM has held talks with Canadian-owned rival Miedzi Copper about two disputed Polish concessions which are the subject of a legal battle, KGHM said on Wednesday.

Miedzi Copper filed a case in a Polish court against the government after two copper permits it had been awarded were withdrawn by the government following a challenge from KGHM, which itself wanted to develop the concessions.

“KGHM management met with Miedzi Copper management,” KGHM spokesman Dariusz Wyborski said. “We’re aiming at a solution that’s best for us, Miedzi Copper and the region.”

He said further geological studies on the concessions would be carried out “to accurately reflect on the possibilities sketched out at the meeting.” He did not elaborate. Miedzi Copper declined to comment.

KGHM, part state owned and the only miner producing copper in Poland, has previously said it challenged the award of the permits to Miedzi copper because it had spent time and money researching the permits, adjacent to areas it is already mining.

The government said the permits were withdrawn because of shortcomings in the way the bidding process was administered.

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After conquering iron ore, BHP and Rio move to dominate in copper – by James Regan (Yahoo Finance/Reuters – December 14, 2014)

http://finance.yahoo.com/

SYDNEY, Dec 15 (Reuters) – Rio Tinto and BHP Billiton are amassing vast copper holdings in a push to capture a greater chunk of the $140 billion world market, apparently aiming to squeeze out high-cost producers just as they did in the global iron ore business.

Separately and in joint ventures, Rio and BHP intend to mine millions of additional tonnes of copper, despite seeing an oversupplied market for the next few years.

“For both companies, this is about wielding the greatest influence possible over the global marketplace,” said Gavin Wendt, senior resources analyst for Sydney-based consultants MineLife.

“Having said that, unlike in the highly concentrated iron ore space where the focus is squarely on one market owned in large part by Rio and BHP – China, copper is sold much more widely, leaving room for smaller producers to stay in the game,” Wendt said.

Several smaller producers contacted by Reuters declined to comment, saying it was too early to gauge the impact of the expansions. There have been no suggestions that BHP and Rio are working in concert to seize overriding control of global copper supply.

A worldwide supply surplus of 300,000 tonnes is forecast in 2015 by Australia’s Bureau of Resource and Energy Economics, equivalent to half a year’s output by South Korea.

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Take Glencore’s bullish metal forecasts with a grain of salt – by Kip Keen (Mineweb.com – December 12, 2014)

http://www.mineweb.com/

Glencore makes some worthwhile points on impending metal deficits – but they’re aggressive.

HALIFAX, NS (MINEWEB) – Glencore summarized its particularly bullish outlook on both copper and zinc – two important commodities it mines and trades – in a rather thorough presentation it gave at a recent investors day. All 193 pages here. At the very least, it makes for good reading if you want an overview of multiple metal and energy sectors in terms of supply and demand. Among its predictions two metals stand out: copper and zinc supply deficits.

Copper first.

Glencore gets very bullish and opposes the big research organizations about their views of a coming surplus. A major copper deficit is in the cards instead, Glencore says.

That should be readily apparent in an equation it puts out there on slide 72. It cuts down surplus forecasts for 2015 from a slew of global mining operations – ones relied upon by the likes of Wood Makcenzie, among others such as Brookhunt and the International Copper Study Group (ICSG) – to revise a 390kt surplus (by the ICSG and Brookhunt) – to a 1.4 million to 1.6 million tonne deficit.

Now Glencore’s a bit vague in its equation and numbers and it’s surely aspirational. It tallies 1.8 mt in certain/likely/maybe copper market revisions in terms of supply from mines around the world to deduct from that predicted 390kt surplus. It announces, “=Deficit of 1.4 – 1.6 Mt for 2015?”

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NEWS RELEASE: KGHM International: A Legacy of Responsible Mining – by Robert Spence (Mining Global – December 10, 2014)

http://www.miningglobal.com/

As a wholly owned subsidiary of KGHM Polska Miedź S.A., KGHM International (KGHM-I) is focused on its operating assets, working to advance its growth pipeline. The company operates a group of projects spread across North and South America including four open-pit mines and two underground mines.

One of the most advanced and responsible initiatives the company has undertaken is the implementation of a mine-for-closure operating plan at its KGHM-I Carlota (“Carlota” or “the company”) mine.

Responsible mining initiatives

Permitted in 1997, the Carlota project is a 100 percent owned open-pit, heap leach mine producing roughly 25 million pounds of copper annually. Located in Arizona, the mine became one of the first copper mines designated and permitted under modern environmental legislation within the National Environmental Policy Act (NEPA).

Since the inception of the mine, Carlota has been pursuing a goal of responsible environmental stewardship and excellent community relations. The company has implemented a mine-for-closure plan that follows suit with the Arizona environmental regulations as well as Federal guidelines. The key component of mine-for-closure is incorporating closure activities into the mine plan during operations and continuing copper production while conducting closure.

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