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Latin America Mining

Vale base-metals IPO could prove to be a Bay Street bonanza – by Euan Rocha and John Tilak (Globe and Mail – December 4, 2014)

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.

TORONTO — Reuters – Vale to consider base metals IPO only if nickel rallies – by Sarah McFarlane and Eric Onstad (Reuters U.K. – December 5, 2014)

LONDON – (Reuters) – A possible public listing of a stake in the base metals unit of Brazil’s Vale SA (VALE5.SA) hinges on a rally in nickel prices of around 20 percent, its chief financial officer said on Friday.

“We want to see nickel prices above $20,000 per tonne in order to consider such an option, I would say well above,” Luciano Siani said in an interview with Reuters.

Earlier this week Vale, the world’s largest producer of iron ore, said it was considering an initial public offering of 30 to 40 percent of its base metals division, because the unit was undervalued by the market. Benchmark nickel CMNI3 on the London Metal Exchange closed at $16,825 a tonne on Friday after a roller-coaster ride this year.

Siani said that if nickel prices reached $21,000 per tonne and copper $6,600 per tonne next year, the company would meet the lower end of its 2015 target for the base metals unit of $4 billion to $6 billion in earnings before interest, tax, depreciation and amortisation (EBITDA).

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Brazil’s Vale mulling IPO for part of base metals business – sources – by Nicole Mordant and Euan Rocha (Reuters U.S. – December 1, 2014)

http://www.reuters.com/

VANCOUVER/TORONTO – Dec 1 (Reuters) – Brazil’s Vale SA is considering listing part of its global base metals business, two sources with knowledge of the matter said on Monday, as the miner looks to fund capital projects amid a collapse in iron ore prices.

The sources, who asked not to be named as they have not been authorized to discuss the matter publicly, said the world’s top iron ore producer is likely to retain a majority interest in the new entity if it proceeds with the plan.

Vale could outline the plan to list a new entity in Toronto and London as early as Tuesday at an investor day event being held in New York, said one of the sources.

The event at the New York Stock Exchange will be webcast. The second source said there had been significant discussion inside Vale about listing the base metals assets, which have fared better than its iron ore business due to steadier prices.

A Vale spokeswoman in Brazil could not be reached for comment after hours.

Vale’s iron ore business contributed 62 percent of the company’s gross revenue in the third quarter. Outside of iron ore, Vale’s global asset portfolio includes nickel assets in Canada, Indonesia and New Caledonia, coal mines in Australia and Mozambique as well as copper projects in Canada, Brazil and Zambia.

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Globe-Trotting Vale CEO Faces Wall Street as Iron Plunges – by Juan Pablo Spinetto (Bloomberg News – December 1, 2014)

http://www.bloomberg.com/

Vale SA’s chief executive officer says he travels so much that the mining company’s executive jet is among the most flown in Bombardier Inc.’s fleet this year.

“I like to visit all our operations at least once a year but normally I go more than that,” Murilo Ferreira said in an interview at the company’s Rio de Janeiro headquarters on Nov. 26. “I travel a lot, a lot, a lot,” he said in a weary tone.

Ferreira, 61, will board his Global Express XRS jet to visit investors in New York and London this week, adding to the more than 240,000 kilometers (149,000 miles) flown in the first 10 months of 2014. On the agenda? How the world’s largest iron-ore producer will adapt to a collapse in the price of the commodity that prompted analysts to have the bleakest opinions about the stock since at least 1999.

Vale is producing iron ore at a record pace and its base metals unit — which for years experienced delays, accidents and stoppages — is finally starting to contribute to profits. Yet expanding global supply at a time of slowing demand in China, the largest consumer of metals, has pushed down prices of the steelmaking raw material to the lowest in more than five years and made Vale the worst performing major mining stock.

The reaction from Vale, as with other mining companies, has been to cut costs, put lower-return expansions on hold and focus on its most profitable businesses. The company probably will announce tomorrow a $10.4 billion budget for next year excluding research and development expenses, the lowest since 2009 and 25 percent below last year’s approved capital expenditures, according to the average of nine analyst estimates compiled by Bloomberg News.

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‘Deep Down Dark,’ by Héctor Tobar – by Mac McClelland (New York Times – November 20, 2014)

http://www.nytimes.com/

In 1987, a toddler who became known to the world as Baby Jessica fell into an abandoned well in a backyard in Midland, Tex., where she was stuck for 58 hours. Watching the coverage as a 7-year-old, I couldn’t get an answer from the newscasters or my parents that explained why it was taking so long for so many smart grown-ups to solve such a simple problem. Even now, I find it hard to believe that the human race can be outmatched by such a primitive adversary as a hole in the ground.

Crises of faith are the dominant theme of Héctor Tobar’s “Deep Down Dark,” the story of 33 men who were buried for 69 days in a collapsed Chilean mine in 2010. With his exclusive access to the survivors, Tobar, a Pulitzer Prize-­winning journalist, graphically recounts the quandaries that beset the men as well as their families — camped out at the mine’s entrance — the officials and rescue crews as a worldwide audience watched. There is weeping.

There is acceptance of death. There is the miners’ terror, every time the rescue drill stops, that they have been given up for dead. “The silence just destroyed us,” one man told Tobar. “Without a positive sign, your faith collapses. Because faith isn’t totally blind.” Some men find a stronger connection to God (“Omar realizes that the improbable fact of their survival also carries a hint of the divine. To be alive in this hole, against all odds, speaks to Omar of the existence of a higher power with some sort of plan for these still-living men”). Others struggle with whether to pray or to succumb to the darkness and lie down to die.

The hierarchy that gave the miners order in their workday routine is destroyed almost instantaneously. The shift supervisor buckles under the realities of the collapse and abdicates his authority.

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Iron-Ore Giant Vale Sees Rebound as Glut Squeezes Mines – by Juan Pablo Spinetto and Peter Millard (Bloomberg News – November 27, 2014)

 http://www.bloomberg.com/

Iron-ore prices are poised to rebound from five-year lows as Asian infrastructure demand improves and high-cost mines close, according to the top producer Vale SA. (VALE5)

The steelmaking raw material, which slumped 49 percent this year to $68.49 a dry metric ton yesterday, will return to an average range of $85 to $90 next year, Chief Executive Officer Murilo Ferreira said in an interview. Prices jumped 2.2 percent today, the most in seven weeks. Vale isn’t considering slowing its expansions because of slumping prices and is pressing ahead with the $19.7 billion Serra Sul S11D mine and logistics project, the industry’s biggest, he said.

“There was a lot of volatility in prices this year and the market is undershooting at the moment and this will bring about a correction,” Ferreira, 61, said at the company’s headquarters in Rio de Janeiro yesterday. “This correction will come through the closure of many inefficient miners of high cost and poor quality iron ore.”

Vale, Rio Tinto Group (RIO) and BHP Billiton Ltd. are maintaining their expansions betting that higher-cost producers will be squeezed out of the market. The price plunge, including a 20 percent drop in the past three months, is prompting speculation China will close inefficient mines, while Cliffs Natural Resources Inc. is considering shutting a mine in Canada.

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FEATURE-Peru crackdown on illegal gold leads to new smuggling routes – by Mitra Taj (Reuters India – November 25, 2014)

http://in.reuters.com/

Nov 25 (Reuters) – A crackdown on illegal gold mining in Peru has spawned new smuggling routes through its porous border with Bolivia with some gangs using human mules, armored cars and light aircraft to evade capture.

The gold is ghosted across jungles, rainforest and Lake Titicaca on the mountainous border, and is then sold to dealers who process the precious metal for export out of Bolivia’s capital La Paz, Peruvian officials say.

Bolivia, a relatively small gold producer which has commissioned no new large mines in 2014, officially exported 24 tonnes of gold between January and August, data from Bolivia’s statistics agency shows.

That is six times the amount of gold Bolivia’s miners produced in the first seven months of 2014 and more than three times the total amount it exported in all of 2013, illustrating how Peruvian gold is being diverted. Nearly all of Bolivia’s exported gold was shipped to the United States, government data shows.

Peruvian President Ollanta Humala launched a clampdown late last year to tackle a decade-long boom in wildcat gold mining that has destroyed swathes of Peru’s Amazon forest and laced its rivers with mercury.

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Go where it is darkest: When company, country, currency and commodity risk collide! – by Aswath Damodaran (Musings on Markets – November 20, 2014)

http://aswathdamodaran.blogspot.ca/

Aswath Damodaran is a Professor of Finance at the Stern School of Business at NYU.

You learn valuation (and find out how much you don’t know) by valuing businesses and companies, not by talking, reading or ruminating about doing valuation. That said, it is natural to want to value companies with profit-making histories and a well-established business models in mature markets. You will have an easier time building valuation models and you will arrive at more precise estimates of value, but not only will you learn little about valuation in the process, it is also unlikely that you will find immense bargains, because the same qualities that made this company easy to value for you also make it easier to value for others, and more importantly, easier to price.

I believe that your biggest payoff is in valuing companies where there is uncertainty about the future, because that is where people are most likely to abandon valuation first principles and go with the herd. So, if you are a long-term investor interested in finding bargains, my advice to you is to go where it is darkest, where micro and macro uncertainty swirl around every input and where every estimate seems like a stab in the dark. I will not claim that this is easy or comes naturally to anyone, but I have a few coping mechanisms that work for me, which I describe in this paper.

While I enjoy valuing companies with uncertain futures, there are cases where my serenity about valuation is disturbed by the coming together of multiple uncertainties, piling on and feeding of each other to create a maelstrom. In this post, I want to focus on two companies, one Brazilian (Vale) and one Russian (Lukoil), where bad corporate governance, a spike in country risk, currency weakness and plunging commodity prices have conspired to devastating effect on their stock prices.

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Small Brazilian iron ore miners soldier on amid low prices – by Stephen Eisenhammer and Marta Nogueira (Reuters U.S. – November 12, 2014)

http://www.reuters.com/

Nov 12 (Reuters) – Small Brazilian iron ore miners are proving resilient in the face of low global prices, pushing ahead with expansion projects even as that reduces the chance of a quick rebound in prices.

Interviews with five iron ore “juniors” operating in Brazil showed players in this section of the industry, helped by cheap development bank loans and the flexibility to sell locally or abroad, are not being forced out of business at the pace larger rivals hope.

The price of iron ore has fallen 40 percent this year as new capacity from major Australian mining companies entered the market just as Chinese demand growth slowed.

The “big three” in iron ore, Brazil’s Vale, Australia’s BHP Billiton and Rio Tinto, argue the self-inflicted price drop will drive higher-cost producers out of the market, making it possible to retrieve market share and for the price to rise.

But such a process is complicated. Many predicted a similar process when coal prices dropped last year, but coal mines have been slow to close, keeping prices down.

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NEWS RELEASE: Barrick Appoints Executive Project Director for Pascua-Lama

TORONTO, November 13, 2014 — Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) (Barrick or the “company”) today announced the appointment of Sergio Fuentes as Executive Project Director for Pascua-Lama. Mr. Fuentes was most recently Vice President, Projects for Codelco and has nearly 30 years of mining industry experience, with a proven track record of engineering, optimizing and constructing complex mining projects, including high-altitude operations in the Andes.

As Executive Project Director, Mr. Fuentes will focus on optimizing detailed engineering, improving the project’s economics and developing a robust execution plan for remaining construction activities at Pascua-Lama. He will work with the project leadership team to advance Pascua-Lama in an environmentally responsible manner, in compliance with legal and regulatory requirements. In the short term, he will lead the completion of final engineering for the water management system in Chile and will work to reduce ongoing care and maintenance expenditures at the project.

Mr. Fuentes will work closely with Eduardo Flores, Executive Director, Chile and Guillermo Calo, Executive Director, Argentina to ensure alignment of all project activities in both Chile and Argentina and will support the development of enduring partnerships with governments, communities and other stakeholders in both countries.

A decision to restart the Pascua-Lama project will depend on resolution of permitting and legal matters in Chile and improved project economics. The company will only proceed with construction if the project meets minimum return-on-investment thresholds.

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Canada injects $300m in Chile’s copper giant Codelco – by Cecilia Jamasmie (Mining.com – November 12, 2014)

http://www.mining.com/

Export Development Canada (EDC) said Wednesday it has granted a US$300 million loan to Chile’s owned copper producer Codelco to help it with a much needed massive investment program aimed to guarantee the firm’s status as the world’s biggest copper producer.

The Chilean miner will procure goods and services from Canadian companies down the road, particularly small-to-medium sized enterprises.
As part of the agreement, the Chilean miner will procure goods and services from Canadian companies down the road, particularly small-to-medium sized enterprises.

“Such loans have been very productive in the past, especially with Codelco, where they have helped promote Cdn$888 million worth of purchases from more than 150 Canadian companies in the last five years,” a spokesman for EDC told MINING.om.

Jean Cardyn, EDC’s Regional Vice-President in South America said in a statement that the Canadian trade finance agency has identified Chile as a market that holds tremendous promise and potential for growth.

Late last month President Michelle Bachelet enacted a special law to spur the company’s output, which grants Codelco an extra injection of S$4 billion between 2014 and 2018.

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Iron ore and the dangers of living by the sword – by Andy Home (Reuters U.S. – November 11, 2014)

http://www.reuters.com/

LONDON – (Reuters) – The price of spot iron ore has sunk to $75.50 per ton this week, its lowest level since 2009. The scale of the price collapse has been breath-taking. Iron ore has dropped by over 35 percent since the start of the year, a significantly worse performance than any other industrial metal.

But what’s really shocking is that the price is now at a level that until recently was collectively deemed impossibly low. It was only in April that José Carlos Martins, executive officer of ferrous and strategy at Vale, the world’s largest producer of iron ore, told analysts that “one thing is for sure, the price will not go below $110 on a sustainable basis”.

This was not irrational producer exuberance. Martins was only voicing the prevailing consensus view when he went on to argue that “we have many times seen the price going below this level but recovering very fast”. Well, here we are with the price trading not just below $110 but a lot lower still. And sustainably so.

That tells you that something has gone very wrong with the iron ore narrative. This market is in a place it was not supposed to be.

And while big producers such as Vale, Rio Tinto and BHP Billiton are sticking to that narrative, they are now facing the unpredictable consequences of a pricing war they collectively started.

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NEWS RELEASE: Largo initiates exploration program on potential new discovery of chromite and PGMs

Symbol: LGO (TSX.V)

www.largoresources.com

TORONTO, Nov. 10, 2014 /CNW/ – Largo Resources Ltd. (“Largo” or the “Company”) is pleased to announce that it has begun an exploration program for chromite and PGMs (platinum group metals) at its Capivara Prospect which is located in the Maracas region of Bahia, Brazil, but outside of the current mining area of its Maracas Menchen Mine.

Largo has recently discovered a new chromite showing on its Capivara Prospect (Figure 1). The Capivara Prospect lies 32 km north of the Campbell pit at the Maracas Menchen Mine. The original objective was to evaluate the known magnetite horizon which includes high grade vanadium values. While evaluating this magnetite horizon, the discovery was made of a number of zones containing chromite layers with fine grained sulphides. Samples have been collected and submitted to the lab with results pending.

The chromite layers have been traced over an area of 3km (north-south) by 0.5 km (east-west). There are at least two zones of chromite layers from 20 to 25 metres wide at surface. These zones lay 400 metres west of the Magnetite horizon that contains vanadium and anomalous platinum. The chromite layers are hosted in a thick ultramafic sequence including olivine gabbro, olivine pyroxenite and dunite. In the zones, the chromite layers consist of fine-grained massive chromite (˃ 60% chromite) and disseminated sulphides that could potentially contain PGMs. These massive chromite layers are 0.50 metres to 1.0 metre thick separated by material containing lesser chromite (˂ 10% chromite) and disseminated sulphides.

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Disaster down deep — inside the 2010 Chilean mine collapse – by Héctor Tobar (National Post – November 3, 2014)

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

In the San José Mine, sea level is the chief point of reference. The five-by-five-metre tunnel of the Ramp begins at Level 720, which is 720 metres above sea level. The Ramp descends into the mountain as a series of switchbacks, and then farther down becomes a spiral. Assorted machines and the men who operate them drive down past Level 200, into the part of the mountain where there are still minerals to be brought to the surface.

On the morning of Aug. 5, 2010, the men of the A shift are working as far down as Level 40, some 2,230 vertical feet below the surface, loading freshly blasted ore into a dump truck. Another group of men are at Level 60, working to fortify a passageway near a spot where a man lost a limb in an accident one month earlier. A few have gathered for a moment of rest, or idleness, in or near El Refugio, the Refuge, an enclosed space about the size of a school classroom, carved out of the rock at Level 90, that serves as both emergency shelter and break room.

The mechanics led by Juan Carlos Aguilar find respite from the oppressive heat by setting up a workshop at Level 150, in a passageway not far from the vast interior chasm called El Rajo, which translates loosely as “the Pit.” The mechanics have decided to start their workweek by asking Mario Sepúlveda to give them a demonstration of how he operates his front loader. They watch as he uses the clutch to bring the vehicle to a stop, shifting from forward directly to reverse without going into neutral first. He’s mucking up the transmission by doing this, wearing out the differential. “No one ever showed me,” Sepúlveda explains when asked why he’s operating the machine that way. “I just learned from watching.”

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The party is ending for Latin America – by John Paul Rathbone (Financial Times – October 30, 2014)

 http://www.ft.com/home/us

In the past 10 years, South America never had it so good. The continent surfed a global commodity price boom, helped by abundant global capital. In Sir Martin Sorrell’s clever marketing phrase, the 2010s were to be the “decade of Latin America”. Maserati dealerships opened in Bogotá, while Brazil minted 22 millionaires a day . Nor was it only the rich who gained. Poverty fell and, uniquely, social inequality shrank across the continent.

Like all good things, though, the party is ending. As commodity prices fall with China’s slowing economy, there is a new sense of anxiety. Everywhere, countries are vibrating with mildly suppressed panic – and the end of US quantitative easing does not help the mood. As the economic cycle turns, many governments seem confused as to which direction to take. Given how much has been achieved, there is often profound disagreement about what should come next.

Growth is already slowing fast, to just 1.2 per cent for the region this year. As the World Bank warns in its most recent regional outlook: “It is not clear whether the slowdown is bottoming out.” Levels of investment that had reached heights comparable to those in Asia, spurred by the “commodity supercycle”, are falling. Meanwhile, social protest is on the rise – through both the ballot box, as in Brazil’s closely fought election, and direct action, such as last year’s Colombian farmers’ protests or Brazil’s street riots. Everywhere, the region fizzes with social effervescence.

This mood of agitation spans the political divide. At one end of the spectrum lies Venezuela, a spectacularly mismanaged country blessed with the world’s largest energy reserves yet flirting with default, thanks to a state so incompetent that it gives fresh meaning to the word “lemming”.

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‘Please tell people about this:’ London students’ horror at Dominican Republic mines – by Mark Spowart (Metro News – October 27, 2014)

http://metronews.ca/

Three London students were shocked by what they found last winter during a trip to the Dominican Republic. Canadian mining companies, they say, are destroying lives in the country.

“We visited the Barrick Gold mine, and while we were there, we spoke with a woman named Juliana (Rodriguez). She is 82 years old and has lived in the area for all of her life,” Klaire Gain said. “She told us the last four years, which (has seen) Barrick Gold mining in the region, have been the worst years of her life.”

Now, Gain, Claire Morrow and Natasha Jimenez — all recent graduates of the social justice and peace program at King’s University College — are working to show the world what they witnessed. Using their own money, and some brought in through fundraisers, the trio travelled back to the region this summer.

They spent two months living in the area, working on farming co-ops, meeting and talking with as many residents, along with environmental and academic experts, as they could. They also hired former CBC cameraman Mark Visser, and flew him to the region where he filmed more than 100 hours of footage for a documentary expected to be ready by spring 2015.

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