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Latin America Mining

UPDATE 1-Guatemala seek 2-year moratorium on new metal mining – by Mike McDonald (Reuters U.S. – July 10, 2013)

http://www.reuters.com/

(Reuters) – Guatemala President Otto Perez asked the country’s congress on Wednesday to impose a two-year moratorium on new mining licenses to calm tensions in mostly indigenous communities opposed to the industry.

“We are bringing a bill to congress in which we declare a two-year moratorium,” Perez said in a speech late Tuesday night. “We are asking congress to not give any more metal-mining licenses.”

In May, Guatemala’s government declared an emergency in four towns, suspending citizens’ rights to protest in an area where people died during demonstrations against the Escobal silver mine belonging to Canadian miner Tahoe Resources Inc.

Tahoe Resources received the final operating permits in April for its Escobal mine. The company’s top executive, Kevin McArthur, has said he does not expect the project to be affected by the moratorium request.

Government officials said they hope the request for the moratorium will also encourage congress to consider reforms to Guatemala’s mining law, including a proposal presented last year to hike mining royalties from 1 percent of a company’s gross income to 5 percent.

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The growing political risk to miners posed by water shortages – by Will Thomson (Mining.com – July 9, 2013)

http://www.mining.com/

In response to the growing global demand for metals and minerals, the mining industry has stepped up exploration and development of mines in various inhospitable places the world over. Though this trend has recently reversed in the wake of softening global demand, 136 new projects were announced in 2012, according to Ernst & Young. Despite the soft medium-term global economic outlook and rapidly decreasing capital expenditures by major miners, the long-term demand expectations of the developing world remain high, and thus so too does the need to continue exploration for metals and minerals in the world’s far-flung places.

Unsurprisingly, the development of difficult resource deposits has occurred in increasingly sensitive environments, far from the infrastructure necessary to meet the immense challenges of large-scale mining operations. One of the most common risk factors mining firms are faced with, in the frontier and emerging economies where these new deposits have been found, is a lack of the rivers, lakes, and water sources that are so important to a successful mining operation.

Access to a secure and stable water supply is essential for most mining operations, as water plays a vital role in every step of the mining process, from initial extraction to the refinement of ore. Water is often used to separate high value metals and minerals from the rock that ore is found in, is used to cool drill bits, and is essential for dust control. For mines that focus on the some of the world’s most important resources, such as gold and copper, water is a necessity. As the easy-access deposits of such valued resources have become increasingly scarce, and reliance on low-quality ores has increased, so too has the demand for water for the mining and refinement process.

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Chavez’s 70% Gold Bet Unravels as Reserves Plunge: Andes Credit – by Charlie Devereux & Corina Pons (Bloomberg News – July 4, 2013)

http://www.bloomberg.com/

The bet on gold that former Venezuelan President Hugo Chavez made in the final years of his life is collapsing at the wrong time for his country.

Chavez, who argued that Venezuela should move away from the “dictatorship of the dollar,” stockpiled more than 70 percent of Venezuela’s foreign reserves in gold by 2012, the highest percentage among all emerging-market countries and more than 50 times that held by neighbors Colombia and Brazil, according to the World Gold Council.

After rewarding Venezuela with a rally of almost 400 percent in the past decade, gold has tumbled 25 percent this year, helping drive the central bank’s reserves to an eight-month low and compromising the government’s ability to repay foreign debt. The yield on Venezuela’s dollar-denominated bonds has risen 62 basis points, or 0.62 percentage point, to 11.84 percent in the past month, compared with an average increase of 57 basis points for other countries in Latin America.

“Venezuela’s reserves have taken a big hit,” Francisco Rodriguez, an economist at Bank of America Corp., said by phone from New York. If current gold price levels continue, “then you will see an increase in perception that Venezuela’s capacity to pay is weakening.”

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Editorial: This is what a washout looks like [Barrick Gold] – by John Cumming (Northern Miner – July 3, 2013)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry. Editor John Cumming MSc (Geol) is one of the country’s most well respected mining journalists. jcumming@northernminer.com

Barrick Gold is the world’s leading gold company, and its Pascua-Lama gold-silver megaproject under construction on the Chilean-Argentine border is its leading development project. And so the gold industry watches in dismay as the major grapples with the project’s ballooning capital costs and construction delays, slumping gold prices, writedowns, job cuts and a pummelled share price.

At the time of writing, Barrick’s shares trade for only $15.29 — or US$14.69 — off 56% this year alone, and 74% since their peak in April 2011. Here again, Barrick is the leader of the gold sector that has seen overall share price declines around 50% this year.

Barrick has also led in terms of corporate-suite excess, with the pink-slipped minions at head office bearing the brunt. Fired CEO Aaron Regent was paid US$12 million last year, mostly as severance, while the whole management team pulled in an astonishing US$57 million, up 148% year-over-year. In April, Barrick shareholders finally had enough, and there was heated opposition to the $17-million pay package offered to incoming co-chairman John Thornton, a former president of Goldman Sachs.

Barrick may yet prove to be a leader in accumulating unwieldy debt and tabling enormous writedowns as Pascua-Lama moves forward. At the end of the first quarter, Barrick had US$2.3 billion in cash and US$15 billion in debt.

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NEWS RELEASE: Vale obtains installation license for [Brazil iron ore project Carajás] S11D – (July/03/2013)

http://www.vale.com/en/Pages/default.aspx

Vale informs that it has obtained the installation environmental license (LI) to the iron ore project Carajás S11D, the highest grade and lowest cost world-class project in the industry. With the issuance of the LI, Vale’s Board of Directors approved the complete S11D program, comprised of investments in the mine, processing plant, railway capacity and port.

The LI was issued by Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis (IBAMA) and is part of the project’s second phase of licensing, which authorizes the plant construction. S11D is the largest project in Vale’s history and also in the iron ore industry, being a major lever for value creation, production capacity growth and for maintaining Vale’s undisputed leadership in the global market in terms of volume, cost and quality. A high value-adding project.

The total capex for S11D is US$ 19.671 billion, estimated at a 2.00 BRL/USD exchange rate, encompassing: the development of mine and processing plant (US$ 8.089 billion) and logistics (US$ 11.582 billion).

The project has a nominal capacity of 90 million metric tons per year (Mtpy) of iron ore with proven and proved reserves of 4.240 billion metric tons with an average ferrous content of 66.7%, low impurities and estimated cash cost (mine, plant, railway and port after royalties) of US$ 15.00 per metric ton (at a 2.00 BRL per USD exchange rate). S11D is expected to start-up in 2H16 and to deliver full capacity production in the 2018 calendar year.

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Special Report: Why Brazil’s new middle class is seething – by Paulo Prada (Reuters U.S. – July 3, 2013)

http://www.reuters.com/

SÃO GONÇALO, Brazil (Reuters) – André Tamandaré isn’t supposed to be so angry. Over the past decade, the 33-year-old high-school dropout has moved into his own house, got a steady job and earned enough income with his longtime girlfriend, Rosimeire de Souza, to lead their two kids into Brazil’s fast-rising middle class.

Now a public health worker in a sprawling suburb east of Rio de Janeiro, Tamandaré is the kind of citizen that Brazil’s government thought was fulfilled. Instead, he is one of the more than one million people across Latin America’s biggest country who have hit the streets in a wave of mass protests.

Brazilians are railing against poor public schools, hospitals and transport. They are protesting soaring prices, crime and corruption. They are lambasting a political class so self-satisfied that it failed to see, much less address, the mounting dissatisfaction that led to the protests.

Combined, the concerns reflect growing unease among Brazil’s nearly 200 million people that the country’s long-promised leap into the developed world has fallen short once again.

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In La Rinconada, Peru, searching for beauty in ugliness [gold mining] – by Marie Arana (Washington Post – February 28, 2013)

http://www.washingtonpost.com/

Gold. The Aztecs killed for it. The Inca enslaved whole populations for it. Spain sent legions of marauding conquistadors up and down the Americas in a hallucinatory hunt, believing that gold was so abundant that chieftains rolled in it, washing away the glittering residue in their daily morning swims.

Down the centuries, the quest for El Dorado has held the South American continent in thrall, luring generations of fortune hunters to its far reaches, from 1st-century warlords to 21st-century adventurers. The earth beneath them has not disappointed. The geologic exuberance known as the Cordillera of the Andes has yielded a fount of treasure: the emeralds of Boyaca, the silver of Potosi, the gold of Cajamarca.

Indeed, when Pizarro conquered Cajamarca in 1532, he demanded a roomful of gold from the emperor Atahualpa; when it was produced, he chopped off the Inca’s head and established a new kind of Golden Rule. So it was that a mineral became king and a craze began.

Nowhere has Peru’s frenzy for gold been so fevered as in the mountains that surround Lake Titicaca. And nowhere has that fever been so intemperate as in a town tucked into a glacial aerie: La Rinconada, the highest human habitation in the world.

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Environmental headwinds buffet BHP in Colombia – by Brian Robins (Sydney Morning Herald – July 1, 2013)

 http://www.smh.com.au/

In the wake of heightened environmental sensitivities to the activities of mining companies in Latin America, BHP Billiton’s plans to expand a nickel mine in Columbia have been blocked.

Governments in the region from Chile to Argentina have forced several global mining companies to rethink mine applications in response to growing criticism over the industry’s rising incursions.

Late last week, Colombia’s environmental licensing authority, Autoridad Nacional de Licencias Ambientales, turned down a request from BHP Billiton’s Cerro Matoso nickel mine to expand the site, according to wire reports. Cerro Matoso is the second largest producer of ferro nickel globally.

The request was denied because existing environmental permits cannot be modified to enable mining projects to be expanded, the environmental authority said.

The BHP Billiton project, which has operated for many years, produced more than 47,000 tonnes of nickel last year. The mine taps a laterite nickel deposit that is used as feedstock at a ferro-nickel smelter nearby. Most nickel is used to produce stainless steel.

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Barrick may wipe out retained earnings with huge Pascua-Lama writedown – by Peter Koven (National Post – July 3, 2013)

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

Barrick Gold Corp. is poised to wipe out all of its retained earnings for the second time in less than four years.

An anticipated writedown of US$4.5-billion to US$5.5-billion on the bungled Pascua-Lama project would eliminate the US$3.9-billion in retained profits that the gold giant reported at the end of the first quarter. Back in 2010, Barrick wiped out more than US$2.2-billion of retained earnings when it took a US$5.2-billion charge to close out its hedge book.

It is highly unusual for a company of Barrick’s size and profitability to be in this position twice in such a short time. And while these are non-cash charges, experts said they point to a troubling trend of poor decision-making and oversight at the world’s largest gold producer.

“The writedowns impact them in perception,” said George Topping, an analyst at Stifel Nicolaus.

The red ink could be a lot bigger when the company reports second quarter earnings in four weeks. Barrick warned of other possible impairments last Friday, and analyst Greg Barnes of TD Securities estimated they could total close to US$10-billion.

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Brazil’s Vale: Outlook for Iron Ore Hasn’t Changed – by Paul Kiernan (Wall Street Journal – July 1, 2013)

http://online.wsj.com/home-page

RIO DE JANEIRO–Brazilian mining giant Vale SA VALE -1.36% hasn’t seen China’s appetite for iron ore weaken despite the recent tumult in global markets and hopes to follow through with costly expansion plans despite skepticism from some quarters.

Slowing Chinese growth and the possible withdrawal of easy-money policies in the U.S. have sent the dollar higher against other currencies such as the Brazilian real and raised concerns about demand for commodities. Worries about the world’s second-largest economy have weighed particularly heavily on Vale’s shares, which are trading near four-year lows.

But Jose Carlos Martins, Vale’s executive director of ferrous minerals and strategy, said the company has felt “no negative impact in terms of demand” and sees a silver lining in the recent depreciation of the Brazilian real. Vale, the world’s number three mining company and top producer of iron ore, mines the key steel ingredient in Brazil and sells most of it abroad, at dollar-denominated prices.

“Putting everything together–the positive and negative effects of all this confusion–the truth for us is that we haven’t had big changes in the scenario for iron ore,” Martins said in an interview. He noted China’s renminbi is “one of the only currencies in emerging countries that hasn’t suffered,” meaning Vale’s costs relative to Chinese iron-ore producers have declined.

Still, Vale’s preferred shares are down 34% this year, having underperformed Brazil’s Ibovespa stock index as well as rival mining majors BHP Billiton BLT.LN -0.12% and Rio Tinto RIO -1.42%.

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Analysis: Latest Barrick mine delay fans price tag fears – by Julie Gordon (Reuters U.S. – June 30, 2013)

http://www.reuters.com/

TORONTO – (Reuters) – Barrick Gold Corp (ABX.TO) has slowed spending at its Pascua-Lama project in South America, delaying first output to 2016, but that may not be enough for the its shareholders, who worry that the final price tag may creep beyond what the mine is worth.

While the flagship development, which straddles the border of Chile and Argentina, is one of the richest untapped gold deposits in the world, the string of delays and budget overruns have been a nightmare for world’s top producer and its investors.

“They should walk from Pascua-Lama,” said John Ing, president of boutique investment and research firm Maison Placements, adding that the embattled miner also needs to divest non-core assets, cut exploration spending and slash hefty board salaries if it wants to turn its fortunes around.

Barrick said late on Friday that it would re-sequence construction of the controversial project to target first production by mid-2016, deferring some $1.5 billion to $1.8 billion of planned capital spending in 2013 and 2014. The company has not updated the market on capital costs, last projected to be up to $8.5 billion.

The delay was in-line with a scenario that Credit Suisse analyst Anita Soni outlined earlier this week, as the bank downgraded Barrick to ‘Neutral’ from ‘Outperform’.

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Barrick faces new setback, more pressure – by Brent Jang (Globe and Mail – July 1, 2013)

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.

VANCOUVER — Barrick Gold Corp. has gained some breathing room with its decision to delay development of its Pascua-Lama project, but the company faces pressure to shrink its global mining operations amid tumbling metal prices.

Barrick says first production from the South American gold and silver venture will be postponed by more than 18 months, as the Canadian company forecasts taking a writedown of up to $5.5-billion (U.S.) on the project.

Toronto-based Barrick said it has opted to vastly scale back capital spending this year and in 2014 on the project, which is located in the Andes mountains and straddles the border between Chile and Argentina. While construction of the $8.5-billion project has suffered another setback, the venture remains strategically important to the world’s largest gold producer, analysts say.

“With all this talk about what Barrick could look like in the future, Pascua-Lama will be key to the company’s future operational performance, especially if Barrick wants to shed high-cost mines,” said Chris Thompson, a Vancouver-based mining analyst at Raymond James Ltd.

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PRESS RELEASE: Barrick Provides Updates on Pascua-Lama Project

June 28, 2013

All amounts expressed in US dollars unless otherwise indicated

TORONTO — Barrick Gold Corporation (NYSE:ABX) (TSX:ABX) (Barrick or the “company”) is providing the following updates on the Pascua-Lama project in Chile and Argentina with respect to construction re-sequencing, capital expenditures and impairment testing.

Schedule Re-sequencing and Reduction of 2013-2014 Capital Spending

The company has submitted a plan, subject to review by Chilean regulatory authorities, to construct the project’s water management system in compliance with permit conditions for completion by the end of 2014, after which Barrick expects to complete remaining construction works in Chile, including pre-stripping. Under this scenario, ore from Chile is
expected to be available for processing by mid-2016.

In line with this timeframe, and in light of challenging market conditions and materially lower metal prices, the company intends to re-sequence construction of the process plant and other facilities in Argentina in order to target first production by mid-2016 (compared to the previous schedule of the second half of 2014).

Re-sequencing the project primarily entails a reduction in project staffing levels as construction is extended over a longer period of time to coincide with the availability of ore from Chile in mid-2016.

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The misery only gets worse for Barrick Gold – by Darcy Keith (Globe and Mail – June 26, 2013)

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 misery at Barrick Gold Corp. is only getting worse, with the stock today sinking to its lowest level in more than two decades amid plunging bullion prices and as Credit Suisse backed away from an earlier gutsy recommendation to buy its beaten-down shares.

Analyst Anita Soni downgraded Barrick to “neutral” from “outperform,” and dramatically cut her price target, as Credit Suisse lowered its price forecasts for gold. It now sees bullion averaging $1,452 (U.S.) an ounce in 2013 and $1,390 in 2014, down from earlier forecasts of $1,580 from $1,500, respectively.

But Ms. Soni also made clear it’s not just the gold price that is hurting the outlook on Barrick, but rather a “confluence” of factors that also includes uncertainty over the Pascua-Lama project, high debt levels relative to peers, and potential write-downs. These “in isolation would likely have been weathered, but in combination reduces the risk/reward profile for the company.”

“We are reducing our rating until the company provides clarity on the path for Pascua and for handling asset sales and its financial leverage,” Ms. Soni said. She expects Barrick will provide some clarity on Pascua-Lama, located on the Chilean-Argentian border, before third-quarter results are released in late October.

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Goldcorp – Marlin Mine: Special focus – by Will Daynes (BE Mining – June 7, 2013)

http://www.bus-ex.com/

Sustainable opportunities

While Guatemala’s enormous mining wealth is no longer the well-kept secret that it once was it is still an industry very much in its infancy. Through its Marlin Mine operations, Montana Exploradora de Guatemala, a subsidiary of the Canadian firm Goldcorp, is working to ensure the country will soon be able to unlock its potential.

Possessing a land mass of almost 109,000 square kilometres, the Central America country of Guatemala shares its borders with Mexico, Belize, Honduras and El Salvador, as well as the Pacific coastline to the Southwest and a part of the Caribbean coastline to the east.

Boasting a diverse history, a rich and distinctive culture, and areas of immense natural beauty, Guatemala has, in more recent times, become just as well known for its enormous gold potential. Indeed in 2007 one mine alone processed some 1.7 million tonnes of mineral with an average gold content of 4.55 grams per tonne and 84.31 grams of silver per tonne, further confirming the country as a mining destination of particular interest.

Possessing a stable, macroeconomic backdrop, Guatemala is fast earning a reputation as having perhaps the greatest future mining potential of any Central American country. Other factors that are helping to attract the interest of international investors include the free movement of goods and trade, and a local labour force with a reputation for being hard working, fast learners.

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