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Latin America Mining

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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UPDATE 1-Brazil’s Vale beats iron ore forecast, takes nickel crown – by Stephen Eisenhammer (Reuters U.S. – February 19, 2015)

http://www.reuters.com/

Feb 19 (Reuters) – Brazilian miner Vale SA said on Thursday it produced 319.2 million tonnes of iron ore in 2014, beating its forecast for the year, as it begins to boost production after years of stagnation.

Vale, the world’s largest producer of iron ore, produced 83 million tonnes of the steelmaking ingredient in the fourth quarter, an increase of 2 percent from the same period a year earlier.

Full-year iron ore production rose 6.5 percent compared with the previous year, breaking through the 300 million-tonne-a-year mark, where it has been practically frozen since 2007. Vale had forecast output of 312 million tonnes for the year.

The growth in production will be more than offset by falling iron ore prices, which fell by half last year as a massive increase in Australian capacity coincided with a slowdown in China, the main market for iron ore.

Vale took the crown for the world’s biggest producer of nickel from Russia’s Norilsk Nickel, reaching 275,000 tonnes of the ingredient used to make stainless steel in 2014. That was its best performance since 2008, despite falling short of guidance.

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Light at the end of the tunnel – by Kip Keen (Mineweb.com – February 13, 2015)

http://www.mineweb.com/

Mineweb’s Kip Keen speaks at Mexican Roundup, sharing some hopeful thoughts about the junior market.

These are Kip Keen’s prepared remarks as the keynote speaker at Mexican Roundup in Hermosillo, Mexico:

Thank you Jackie Stephens, Mexican Roundup and GlobeXplore for having me. Ok. Buenos dias y lo siento.

I’m going to talk about the state of the mining industry. I promise, at least in the end, this won’t sound like a eulogy, at least as far as juniors are concerned. But first: What a year it’s been.

Just when you thought the mining sector, as a whole, had suffered its worst blows halfway through the year, 2014, it took some more.

By mid last year we had already been through a wave of impairments taken after overpriced boomtime acquisitions – Kinross on Redback Mining and Fruta del Norte; Barrick on Pascua; and so on.

The price of iron ore – the lifeblood of the large diversified miners – already was down by nearly half from close to $200/tonne in 2012 to about $100/tonne in the first half of 2014.

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Diamond profit helps Anglo American amid commodities downturn – by Neil Hume and James Wilson (Financial Times – February 13, 2015)

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

Surging profit from diamonds last year brought some relief for Anglo American, which reported a $2.5bn net loss for 2014 after taking a large writedown on its flagship iron ore project.

Anglo on Friday reported a robust performance by De Beers, the diamond miner and marketing group that it bought in 2011, because of strong gem demand in the US and Asia.

By contrast the steep drop in the price of iron ore, used in steelmaking, led Anglo to take a $3.8bn pre-tax impairment in the value of Minas-Rio, a Brazilian project blighted by cost overruns and delays. The mine was the subject of $5bn of impairment charges in 2012.

Benchmark iron ore prices have halved over the past year, affecting Anglo’s anticipated earnings from Minas-Rio. The FTSE 100 group spent $5bn to buy the mine and almost $9bn to develop it, before starting to ship ore in October.

The problems at Minas-Rio contributed to a loss of confidence in Cynthia Carroll, Anglo’s previous chief executive. Anglo also wrote down the value of some coal projects within $4.2bn of impairments outlined at its 2014 results. The miner said underlying group earnings came to $4.9bn last year, down 25 per cent compared with 2013.

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Mexican mining kidnap victims found safe – by Dorothy Kosich (Mineweb.com – February 10, 2015)

http://www.mineweb.com/

Although the Media Luna project kidnap victims have been recovered by Mexico authorities, analysts are still taking aim at Torex Gold Resources.

Torex Gold Resources (TSX:TXG) traded down Monday after news broke late Friday about the abduction of local community members near Torex’s Morelos mine project, located in the Guerrero state of Mexico, where 43 student teachers were reportedly kidnapped and allegedly burned to ashes in Cocula in southern Guerrero last year.

At least 12 people were reported kidnapped in Cocula Friday, according to the Associated Press. Initially there were conflicting reports concerning how many where taken and whether some of the victims worked for Media Luna, a subsidiary of Toronto’s Torex Gold Resources.

However, Bloomberg reported on Monday that Mexican security forces have freed 10 of the victims who had been abducted. Acting on information from Cocula residents, the Mexican army and federal police found 13 people spread out among three locations. At least two of the group allegedly helped carry out the kidnappings. One person was treated for gunshot wounds.

In a statement issued Friday, Torex Resources said only one of the 12 missing community members actually worked directly for the Media Luna gold project as a laborer, while three others work for contractors to the project.

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Tahoe to Buy Rio Alto for $1.09 Billion to Add Peru Gold – by Simon Casey and Liezel Hill (Bloomberg News – February 9, 2015)

http://www.bloomberg.com/

(Bloomberg) — Tahoe Resources Inc. agreed to buy Rio Alto Mining Ltd. for about C$1.35 billion ($1.09 billion) to add the La Arena mine in Peru in the gold industry’s biggest takeover in almost 10 months.
The cash-and-stock offer is valued at C$4 a share, or 22 percent more than Vancouver-based Rio Alto’s Feb. 6 closing share price, both companies said Monday in a statement.

Unlike many other precious-metal miners struggling amid recent commodity-price declines, Tahoe has gained financial strength after its Escobal silver mine in Guatemala started commercial production in January. The Reno, Nevada-based company’s cash balance jumped more than eightfold in the first three quarters of 2014. It announced its first dividend payment in November.

The enlarged company will have no net debt and its market capitalization will appeal to a larger group of institutional investors, attract more coverage from analysts and improve share trading liquidity, Tahoe and Rio Alto said.

“The combination would arguably create an intermediate multi-mine producer with low production costs, a strong balance sheet with net cash, and with a genuine growth profile,” said Daniel Earle, a Toronto-based analyst at TD Securities Inc.

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NEWS RELEASE: Excellon Announces Management Changes

TORONTO, ON–(Marketwired – January 27, 2015) – Excellon Resources Inc. (TSX: EXN) (OTC: EXLLF) (“Excellon” or the “Company”), Mexico’s highest grade silver producer, is pleased to announce key additions to its management and technical advisory team. In an ongoing effort to continually improve operations and realize further efficiencies at the Platosa mine, the Company has engaged a team of water management consultants, including Multiurethanes Ltd., Hydro-Ressources Inc., and Technosub Inc.

Multiurethanes Ltd. is a technical services company specializing in support services for grouting operations in heavy civil construction, utility and mining industries. The company is led by Peter White, a Mining Engineer and renowned grouting specialist with over 30 years of experience in international mining projects in Canada, United States, Mexico, South America, Europe and Asia.

He is an expert in controlling major water inflows and troubleshooting difficult grouting projects. Mr. White has supervised and designed grouting programs for several well-known companies including, Vale, Goldcorp, KGHM, De Beers, Nyrstar, Pan American Silver and Agnico Eagle Mines.

Hydro-Ressources Inc. is led by Michael Verreault, a hydro-geologist and expert in optimizing water management and mine dewatering. He has worked on several projects using groundwater recharge, numerical simulation, tracer test and hydro-geological studies in groundwater and surface water. Mr. Verreault has worked on several notable projects for Goldcorp, Osisko and Iamgold and on Cameco’s Cigar Lake deposit.

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Sherritt CEO Says Cuba Holds Promise for the Patient – by Liezel Hill (Bloomberg News – January 27, 2015)

http://www.bloomberg.com/

The head of Sherritt International Corp. (S), the biggest foreign investor in Cuba, said industries from mining to infrastructure are ripe for development as the island nation moves tentatively to open up trade with the U.S.

The Toronto-based company, which has been mining nickel in Cuba for two decades and generates about 75 percent of its revenue there, has talked to the government about possible new investments in Cuba over the longer term, Chief Executive Officer David Pathe said.

“There’s huge opportunities for infrastructure in Cuba,” Pathe said in an interview in Bloomberg’s Toronto office. “There’s still a big power-generating deficit in Cuba, and there are other resource opportunities.”

U.S. and Cuban diplomats concluded what both sides called encouraging talks last week on restoring ties after the two countries unexpectedly said last month they would begin steps to normalize relations after a half century of U.S. trade and travel restrictions.

There are other ore bodies and “quite vast” nickel reserves on the eastern end of the island where Sherritt has been operating, and the Cuban government has indicated it’s interested in foreign investment in mining, Pathe said.

“We’ve talked to them about things that we might be able to do there over the longer term,” he said. “There could be more interest from international companies.”

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COLUMN-Big iron ore miners supply strategy working partially – by Clyde Russell (Reuters U.S. – January 13, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, Jan 14 (Reuters) – China’s record imports of iron ore in December capped a year of strong growth, while also proving that the strategy of the big miners is at least partially working.

China brought in 86.85 million tonnes of the steel-making ingredient in December, bringing the total for 2014 to 932.5 million tonnes, a gain of 13.8 percent over the previous year.

The jump in iron ore imports isn’t because China is producing more steel, with output of crude steel rising a mere 1.9 percent in the first 11 months of 2014 over the same period in 2013, according to official figures.

It’s also not because huge stocks of iron ore are being built up in warehouses, with inventories monitored by the Shanghai Futures Exchange SH-TOT-IRONINV dropping to 99.85 million tonnes in the week to Jan. 9, the lowest in 11 months.

The most logical explanation is that the 47-percent decline in the Asian spot iron price in 2014 .IO62-CNI=SI is displacing some high-cost Chinese domestic output.

This has been the strategy of the big three iron ore miners, Brazil’s Vale and the Anglo-Australian pair of Rio Tinto and BHP Billiton.

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Goldcorp Inc warns of massive writedown of up to US$2.7B on Argentina mine – by Peter Koven (National Post – January 13, 2015)

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

Goldcorp Inc. expects to record a massive writedown of up to US$2.7 billion on its new Cerro Negro mine in Argentina due to ongoing political and economic challenges in that country.

The Argentine government has made life extremely difficult on foreign mining companies by restricting the imports of goods and services and implementing exchange rate controls that limit companies’ ability to convert Argentine pesos into U.S. dollars. Inflation is also very high; Goldcorp previously said that every time it brings a dollar into Argentina at the official exchange rate, suppliers and contractors treat it at the “unofficial” rate, which is almost 70% higher.

The ultimate cost of the impairment, which will be reported in Goldcorp’s fourth quarter earnings, should fall between US$2.3 billion and US$2.7 billion, the Vancouver-based miner said on Monday night.

Goldcorp did not see these problems coming back in 2010, when it paid $3.6 billion to acquire the Cerro Negro project. Chief executive Chuck Jeannes has said that he expects the challenges to gradually fade over time. Construction costs at Cerro Negro ran far over budget, but the mine finally reached commercial production at the start of January. It is expected to be a major cash flow generator for Goldcorp, with production of up to 475,000 ounces this year.

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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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Fool’s Gold: The limits of tying aid to mining companies – by Marco Chown Oved (Toronto Star – December 15, 2014)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Barrick Gold’s massive mine in Peru has sped up community development, including schools and a hospital. So why are so many locals still jobless and poor?

QUIRUVILCA, PERU—Towering atop a pedestal in the main square, a golden statue of a miner with his headlamp and jackhammer gleams in the morning sun, a monument to the mineral wealth on which this town was built.

The Quiruvilca mine opened almost 100 years ago, and its blackened wooden structures still loom on the mountainside above the rooftops. But a century of mining copper, silver, zinc and gold brought little development to this remote settlement, nestled in a steep valley more than 4,000 metres up in the Peruvian Andes. The roads weren’t paved; many people didn’t have electricity.

Nine years ago, another mine opened, operated by Toronto-based Barrick Gold, the world’s biggest gold mining company. It has paid hundreds of millions of dollars in taxes and royalties and the new-found wealth is visible everywhere. The local government has brought power to virtually everyone in town and is now hooking up remote villages. Through an infrastructure-for-taxes program, Barrick has constructed roads, a police college, a hospital and a school. A new highway has cut travel time to the coast from eight hours to 3.5.

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Slowdown in China Bruises Economy in Latin America – by Eduardo Porter (New York Times – December 16, 2014)

http://www.nytimes.com/

SANTIAGO, Chile — Few people are as intensely worried about the slowing Chinese economy as Latin Americans. Not only does China buy nearly 40 percent of Chile’s copper, but its once-insatiable demand helped push copper prices from $1 to $4 a pound.

Meanwhile, Beijing plowed billions into Peruvian mines and fisheries and spent billions more buying soybeans from Argentina and Brazil. And it propped up the Venezuelan government to the tune of $50 billion in loans, to be paid in shipments of oil.

China’s voracious hunger for Latin America’s raw materials fueled the region’s most prosperous decade since the 1970s. It filled government coffers and helped halve the region’s poverty rate.

That era is over. For policy makers gathered here last week for the International Monetary Fund’s conference on challenges to Latin America’s prosperity, there seemed to be no more clear and present danger than China’s slowdown.

“The commodity boom allowed governments and companies to avoid hard choices,” Andrés Velasco, Chile’s finance minister from 2006 to 2010, told me. “For goodness’ sake even Argentina grew by 5 to 6 percent per year for almost a decade.”

Copper is back under $3. As commodity prices continue to swoon, driven in large part by China’s weaker demand, the going will get much tougher.

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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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Vale SA: Overview of the world’s largest iron ore company – by Annie Gilroy (Market Realist – December 17, 2014)

http://marketrealist.com/

Operations

Vale SA (VALE) is a Brazilian multinational diversified metals and mining company. It is the world’s largest producer of iron ore and iron ore pellets and the world’s second-largest producer of nickel. It also produces manganese ore, ferroalloys, coal, copper, PGMs (platinum group metals), gold, silver, cobalt, potash, phosphates, and other fertilizer nutrients.

Vale has mineral exploration operations in 11 countries around the globe. It operates infrastructure systems in Brazil and other regions of the world, including railroads, maritime terminals, and ports that are integrated with its mining operations.

Its main operations are divided into four main lines of business:

  • Bulk materials – iron ore and pellets, manganese, ferroalloys, and coal
  • Base metals – nickel, cobalt, copper, PGMs and other precious metals
  • Fertilizer nutrients – potash, phosphate, and nitrogen fertilizers
  • Logistics infrastructure – railroads, maritime terminals, distribution centers, and ports
  • We’ll discuss these in detail in subsequent parts of this series.

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