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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The mining industry’s best hope for survival has some flaws – by Tim Kiladze (Globe and Mail – April 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.

It has come to this: the largest gold deal in a year is one where no premium is paid and no cash is exchanged.

During the commodity boom, miners of all stripes were scooped up at prices sometimes worth over 50 per cent of their market values. Three years after the bull run ended, Alamos Gold Inc. and AuRico Gold Inc. have proposed merging in a share-for-share deal worth $1.5-billion (U.S.) that contains no takeover premium whatsoever. The motivation is to combine finances and assets to make it through this storm.

To some, the deal is a beacon of hope. ‘Mergers of equals,’ as they are known, have been pitched like crazy for the past few years – multiple investment bankers stressed to me that this very combination has been pitched six ways to Sunday – but for the longest time, no two companies would take the bait. Now that two intermediate miners are finally acting on the idea, Bay Street hopes it will spawn more deals.

You can understand the optimism. Many dealers still hope to drum up business from miners – AuRico alone has 16 research analysts who cover the name – and they are looking for any sign that the tide is turning.

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Alamos Gold Inc, AuRico to merge their gold businesses in $1.5-billion friendly deal – by Peter Koven (National Post – April 14, 2015)

The National Post is Canada’s second largest national paper.

TORONTO – The friendly merger between Alamos Gold Inc. and AuRico Gold Inc. fills needs for both companies: Alamos has money and wants a mine, while AuRico has a mine and needs money.

The two Toronto-based gold miners announced a US$1.5 billion transaction on Monday to create a significant mid-tier gold producer. The all-stock deal is a true “merger of equals” with shareholders of each company owning 50 per cent of the new entity (which will retain the Alamos name).

This is one the rare deals that everyone seemed to like, as Alamos shares jumped 6.6 per cent to $7.90 on Monday, while AuRico’s jumped 8.2 per cent to $4.09. It’s a zero-premium merger, so there is a chance an interloper will jump in with a bid for one or both companies. However, hostile bidding wars have been extremely rare in the gold mining space over the last couple of years as prices have been low and companies have been very cautious.

Alamos and AuRico have talked on and off for years, according to an industry source. This turned out to be the ideal time to strike a deal: Their market values are almost identical, and a merger will help them gain scale and lower their cost of capital to help deal with a rough gold market.

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NEWS RELEASE: Statement by Rob McEwen- Cartel Confusion: Clarification of Statement

TORONTO, ONTARIO–(Marketwired – April 13, 2015) – “Responding to numerous media reports, I want to make it perfectly clear, that neither I nor any member of McEwen Mining’s (NYSE:MUX)(TSX:MUX) management team in Canada or in Mexico have had any regular contact with, or have any relationship with, cartel members.

“On Thursday April 9, 2015 at 11:40 am EST I was interviewed on television by Andrew Bell of Business News Network about the recent gold theft from our El Gallo mine. During the interview, I was asked: ‘Is it a dangerous part of Mexico (at our mine site)?’

“I answered: ‘It hasn’t been. I mean the cartels are active down there. Generally we have a good relationship with them.’

“My answer was related to gaining access to properties we wish to explore. It is our policy to contact all property owners or impacted community members in an area to seek their permission and ascertain the appropriate timing to enter their properties to conduct mineral exploration. We respect their wishes as any good neighbor and responsible miner would.

“Unfortunately, my use of the words, ‘good relationship’, was careless and has created the entirely false impression with Mexican media that we have regular contact with criminal elements in their society. This is simply not true. I wish to apologize sincerely for any misunderstanding my words may have caused.

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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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NEWS RELEASE: ALAMOS GOLD AND AURICO GOLD TO COMBINE CREATING LEADING INTERMEDIATE GOLD PRODUCER

TORONTO, ONTARIO–(Marketwired – April 13, 2015) – Alamos Gold Inc. (“Alamos”) (TSX:AGI)(NYSE:AGI) and AuRico Gold Inc. (“AuRico”) (TSX:AUQ)(NYSE:AUQ) are pleased to announce that they have entered into a definitive agreement to combine their respective companies (the “Merger”) by way of a plan of arrangement, creating a new, leading intermediate gold producer (“MergeCo”).

The Merger combines two top-quality, highly-complementary asset portfolios, including two long-life, cash flow-generating gold mines: AuRico’s Young-Davidson mine in Ontario, Canada, and Alamos’ Mulatos mine in Sonora, Mexico. The transaction is structured as a merger of equals with a transaction equity value of approximately US$1.5 billion.

Under the terms of the Merger, holders of Alamos shares will receive, for each share held, 1 MergeCo share and US$0.0001 in cash, and holders of AuRico shares will receive, for each share held, 0.5046 MergeCo shares. Upon completion of the Merger, former Alamos and AuRico shareholders will each own approximately 50% of MergeCo (named Alamos Gold Inc.).

In addition, a new company (“SpinCo”), to be named AuRico Metals Inc., will be created to hold AuRico’s Kemess project, a 1.5% net smelter return royalty (“NSR”) on the Young-Davidson mine, AuRico’s Fosterville and Stawell royalties, and will be capitalized with US$20 million of cash. Upon completion of the Merger, MergeCo will own a 4.9% equity interest in SpinCo. The remaining shares of SpinCo will be distributed 50% each to former Alamos and AuRico shareholders.

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Iron ore in fresh crisis as forward prices crumble – by Henning Gloystein and Manolo Serapio Jr. (Reuters India – April 10, 2015)

http://in.reuters.com/

SINGAPORE – (Reuters) – Iron ore is veering to a new crisis as prices for future delivery of the commodity slide 30 percent in the space of a month, and its outlook is now more bearish than oil and more dire than ever for miners struggling to just stay in business.

Prices of the steel-making ingredient for immediate delivery have slumped 60 percent over the past year as demand particularly from China slowed rapidly.

Despite the crumbling cash market, miners had been able to hedge future production at prices well above spot levels. Indeed, a month ago, miners could still sell 2017 output at close to $70 a tonne even as April 2015 prices fell below $60 for the first time in more than five years.

Forward iron ore prices have since tumbled below $47 for deliveries all the way until the end of 2017, depriving nearly all miners of any chance of establishing hedges at or above breakeven levels during that period.

A combination of factors brought about the recent capitulation in forward prices, most notably news that China plans to subsidise its iron ore sector to protect its flagging steel industry. Subsidies would help keep mines open and keep supplies flowing.

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Mexican gold mines beset by robberies, kidnappings – by Rachelle Younglai (Globe and Mail – April 9, 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.

For the third time this year, gold miners in Mexico have come under attack, highlighting the perils of mining in the country.

McEwen Mining Inc. became the latest victim, when armed robbers looted about $8.4-million (U.S.) worth of gold this week from the Canadian miner’s refinery in the Mexican state of Sinaloa.

The Toronto-based company said none of its employees were seriously injured, nor were its facilities damaged, when the approximately 900 kilograms of gold ore was stolen. The ore is expected to contain 7,000 ounces of gold, but it is unclear how the thieves will process the rocks.

The robbery comes about a month after four of Goldcorp Inc.’s Mexican employees went missing after leaving the company’s Los Filos mine. Three of the four have since been found dead, the Canadian company said. A Reuters report said the bodies were found in a mass grave and showed signs of torture. The fourth employee was released with minor injuries.

The kidnappings took place in Guerrero, a southern Mexican state where 43 students were seized en route to a protest last year and are presumed murdered.

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Illegal mining in Latin America: Minecraft (The Economist – September 16, 2014)

http://www.economist.com/

BONANZA, a tropical town in north-eastern Nicaragua, has attracted gold miners since 1880. Still true to its name, it yields over a thousand kilos of the metal every year. But it is a dangerous place. Last month heavy rain triggered a landslide, trapping 29 miners inside. Seven still remained unaccounted for by the time rescue workers abandoned the search.

The miners who died in Bonanza were informal workers, working on the basis that they sold any gold they found to Hemco, a Colombian-owned company which formally operates the concession. Informal mining is not necessarily illegal, but whether operating on the fringes of, or far outside, the law, workers run great risks. Twelve wildcat miners died in Colombia in May after a landslide at an illegal gold mine. In July eight died in Honduras.

Gold is not the only commodity to lure unlicensed prospectors but it has a particular appeal. Its price more than doubled between 2008 and 2011 (it has since come down again). In Madre de Dios, a jungle region in south-east Peru where 97% of local gold production in 2011 came from illegal mining, miners can earn $75 a day, up to five times the amount they might expect as a farm labourer. In Colombia nine out of ten gold mines are unlicensed. Low start-up costs mean miners can work in very small groups—although organised criminal groups also operate illegal mines at much bigger scale. Mercury, which is typically used to separate gold from ore, is cheap and readily available.

It is not only those underground who face danger. In Colombia, armed groups have muscled their way into the mining business, using violence to settle their disputes.

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Teck Resources Ltd, Antofagasta Plc deny merger talks – by Peter Koven (National Post – March 30, 2015)

The National Post is Canada’s second largest national paper.

Investors got excited at the prospect of a merger between Teck Resources Ltd. and Antofagasta PLC on Monday, but any deal would likely require major compromises by the families in control of each company.

Vancouver-based Teck is controlled by the Keevil family and Japanese firm Sumitomo Metal Mining Co. through multiple-voting shares. Antofagasta is under the thumb of Chile’s Luksic family, which owns 65% of the shares.

Both companies denied they are in merger talks, but Bloomberg reported that they held early-stage negotiations.

A merger would create a dominant copper producer with more than one million tonnes of output per year, vaulting it into the top five producers worldwide. It would also reduce Teck’s reliance on coking coal, where it is is facing very weak market conditions.

Their valuations are quite similar, as Teck is worth $11-billion while Antofagasta is worth slightly above $13-billion. Any deal is likely to be all-stock or very close to it, which puts the family share ownership in the spotlight. No deal will happen unless the families endorse it and loosen their respective grips on the companies.

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Southern Copper Cancels Peru Project Over “Anti-Mining Terrorism” (Latin American Herald Tribune – March 30, 2015)

http://www.laht.com/index.asp

LIMA – Southern Copper Corp. has decided to cancel its Tia Maria copper project in southern Peru because of “anti-mining terrorism” in the area.

“After evaluating the complete politicization of the (Tambo) Valley and the lack of decisiveness by the relevant authorities … I’m here to announce the cancelation of the Tia Maria project and the total withdrawal of our investment from the Arequipa region,” Southern Copper’s spokesman in Peru, Julio Morriberon, told RPP Noticias radio.

The announcement will be made official by top management via the “relevant procedures before the relevant agencies,” he said. “We’ve done our best as a company and as people to carry out a project that was going to bring great benefits for Tambo and for Peru,” Morriberon said.

Southern Copper, a unit of Mexico City-based Grupo Mexico, had been planning to invest some $1.2 billion in the construction of Tia Maria, which has an estimated mine life of 18 years and had been projected to produce 120,000 metric tons of copper cathodes annually from the start of operations in 2016.

The project had been halted for two years after peasant protests in 2011 in the small town of Islay left three dead and 44 wounded, and as a result the Peruvian government did not award construction permits until the beginning of this year.

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 Teck, Antofagasta Said to Explore Copper Mining Merger – by Matthew Campbell and Dinesh Nair (Bloomberg News – March 30, 2015)

http://www.bloomberg.com/

(Bloomberg) — Teck Resources Ltd. and Antofagasta Plc are exploring a merger that would create one of the world’s largest copper producers, people with knowledge of the matter said.

The companies have held early-stage talks, and any agreement hinges on the approval of the families that control both miners, the people said, asking not to be identified discussing private information. There’s no guarantee they will reach a deal, which would be primarily stock based, the people said.

Teck shares in Toronto rose as much as 15 percent Monday, the most since April 2009 and were trading at C$20.03 ($15.78) as of 3:13 p.m. local time.

A combination of Teck, based in Vancouver, and London-based Antofagasta would be the first major mining transaction since an across-the-board slump in commodity prices hammered the industry. Both companies have extensive copper operations in Chile which could be combined by a merger, potentially reducing costs. Representatives for both companies declined to comment.

With a market value of about C$11.3 billion, Teck is Canada’s third-largest mining group after Goldcorp Inc. and Barrick Gold Corp.

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Petrobras Nominates Vale CEO as Its Next Chairman – by Will Connors and Luciana Magalhaes (Wall Street Journal – March 27, 2015)

http://www.wsj.com/

Brazilian state-run oil company is in the midst of a widespread corruption scandal

RIO DE JANEIRO—Brazil’s government on Friday nominated the chief executive of mining giant Vale SA as the next board chairman of state-run oil firm Petroleo Brasileiro SA, disappointing those who were looking for sweeping changes at the oil company that has been devastated by a kickback-and-bribery scandal.

Murilo Ferreira’s nomination will be voted on at the next Petrobras shareholders meeting on April 29. If approved, as expected, he will succeed Guido Mantega, Brazil’s former finance minister, who has headed the Petrobras board since March 2010. The company on Thursday said that Luciano Coutinho, head of the country’s development bank, known as BNDES, will serve as interim chairman of Petrobras until next month’s board vote.

A career employee of Vale, which was state-owned until 1997, Mr. Ferreira is a trusted ally of President Dilma Rousseff. His appointment isn’t likely to shake up a board that has served as a rubber stamp for the policies of her ruling Worker’s Party, investors and analysts said.

Critics have faulted Ms. Rousseff for using the oil giant to advance her administration’s agenda, including forcing the company to subsidize fuel for consumers and do business with Brazilian suppliers, moves that have cost the oil giant billions.

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Copper price falls as Chile brings 1.6mt back on line – bt Frik Els (Mining.com – March 27, 2015)

http://www.mining.com/

Some 1.6 million tonnes of copper capacity is being restarted in Chile following torrential rains in the north of country which halted production at a number of the country’s largest operations.

The price of copper in New York fell on the news with May futures trading on the Comex market giving up 1.8% to $2.756 a pound. Copper is down 7.6% compared to a year ago, but up sharply from five-and-half-year lows struck in January.

Chile is responsible for a third of the world’s mined output of copper with many of the largest mines located in the Atacama desert. Before the unusual weather this week, a drought was reducing production as a result of water restrictions imposed by the authorities. In April 2014 a major earthquake also temporarily halted output at a number of large mines.

State-owned giant Codelco confirmed it had restarted mining operations at its Chuquicamata, Ministro Hales, Radomiro Tomic, Gabriela Mistral, and Salvador mines after a three-day hiatus due to the state of access roads, power problems and safety concerns following the downpours.

Codelco was forecast to produce 1.6 million tonnes of copper this year – already down 5% from 2014 – and the affected mines represented some 60% of the Santiago-based company’s production capacity.

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Corporate Brochure: Vale leading with innovation and out of the box thinking (Endeaver Magazine – January 2015)

http://www.littlegatepublishing.com/category/business-profiles/

Headquartered in Brazil, Vale is a global mining company that has set themselves a mission to transform natural resources into prosperity and sustainable development. Standing as the second largest producer of nickel, they are also the leaders in the production of iron-ore and present in over thirty countries across the world. The company’s footprint is as indelible as the minerals they mine and with their recent construction of the Valemax ships, their footprint is set to deepen and extend even further.

“Our operations span five continents,” Claudio Alves, Global Director Sales and Marketing says, “And are diversified across several sectors including metals, coal, fertilisers, logistics, shipping, energy and mining.”

“The industry is one of the most important in the world,” he says, “And it is up to Vale to establish parameters to determine how we conduct ourselves ethically and sustainably.”As the head of marketing and sales, Claudio is a key figure in a highly competitive and at times, controversial industry.

With much being said about the ethics of sourcing and mining limited minerals from the earth, what is seldom mentioned is that ores and the refinement of them provides vital materials for a number of indispensable items such as mobile phones, computers and even large-scale airplanes. Manufacturers of these valuable assets rely on companies like Vale to provide them with high quality ore, which Vale takes great care to source ethically and sustainably.

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