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Latin America Mining

UPDATE 2-Vale Q1 profit falls despite big cost cuts – by Jeb Blount (Reuters U.K. – April 25, 2013)

http://uk.reuters.com/

RIO DE JANEIRO, April 24 (Reuters) – Brazil’s Vale SA , the world’s second-largest mining company, reported an 18 percent slide in first-quarter net profit as bigger-than-expected cuts in operating costs failed to offset lower sales and a hit from taxes and foreign exchange.

Despite the drop, the result beat analysts expectations and may help boost Vale’s stock as the company responds to investor calls for a tighter reign on spending amid concerns over weaker metals prices as growth in China slows.

Net income of $3.11 billion in the three months ending March 31 beat the $2.71 billion average estimate of eight analysts surveyed by Reuters and reversed a fourth-quarter loss, Vale’s first quarterly loss in a decade.

The result was still down on $3.79 billion a year earlier, and 25 percent below the average $4 billion quarterly profit the world’s largest producer of iron ore has recorded for the previous 11 quarters.

The lackluster outcome may add to nervousness that a decade-long mining boom led by ravenous Chinese demand for steel and other metals is ending, despite a rebound in iron ore prices after a steep drop last year. Like rivals BHP Billiton and Rio Tinto , who have been cutting costs and shunning expensive acquisitions, Vale slashed planned 2013 investment 24 percent in December.

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Vale’s former iron man sets sights on Africa – by Silvia Antonioli and Clara Ferreira-Marques (Reuters U.K. – April 23, 2013)

http://uk.reuters.com/

LONDON (Reuters) – At the helm of Brazil’s Vale for a decade, Roger Agnelli turned the conservative iron ore producer into a global heavyweight. Now, he is back in the game.

The 53-year-old, ousted from Vale two years ago, is betting on the world’s hunger for resources, Africa’s potential and his team’s ability to operate where others fear to tread.

“You have a lot of financial guys looking to invest, looking for opportunities,” said the former banker, sitting back in the library of a smart central London hotel. “But guys who go into the middle of the forest, into the middle of the desert to implement a project, those are still scarce.”

Agnelli set up AGN Participacoes, a holding company, shortly after leaving Vale, to invest in biofuel. Last July, he teamed up with billionaire Andre Esteves’ investment bank BTG Pactual to set up B&A Mineracao, a mining group focused on fertiliser, iron ore and copper, in Latin America and Africa.

That $520 million venture – one of a handful of investment ventures set up by an outgoing generation of mining executives – has already put its cash to use, investing $160 million in fertiliser projects and copper.

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Barrick rebellion: With gold miner’s stock in the dumps, investors push back – by Peter Koven (National Post – April 20, 2013)

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

This has been the worst month in Barrick Gold Corp.’s modern history. It is about to get worse. On Wednesday, the Toronto-based gold miner will be greeted by some very frustrated shareholders at its annual meeting. The company does not usually face hostility from investors at its AGMs, but this year appears to be different.

Virtually everything has gone wrong for Barrick lately. And as gold began a steep descent last week and the company’s key project was partially halted, the stock price plunged 33% in six days. It is an gut-wrenching freefall for a company of Barrick’s size and it takes the stock to its lowest levels since 1993 when gold averaged just US$360 an ounce.

Remarkably, an even bigger source of investor ire emerged on Friday. Seven of Canada’s largest pension funds announced that they are opposing the US$11.9-million “signing bonus” that Barrick paid to co-chairman John Thornton last year, and plan to vote against the entire compensation committee. Mr. Thornton received a whopping US$17-million in 2012, and he was not the only beneficiary of Barrick’s largesse. Chairman Peter Munk (US$4.3-million), chief executive Jamie Sokalsky (US$11.4-million) and “ambassador” Brian Mulroney ($2.5-million) all received big pay hikes despite a bad year for the stock price.

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Huge Barrick mine in Chile faces long delay as obstacles pile up – by Alexandra Ulmer (Reuters U.S. – April 16, 2013)

http://www.reuters.com/

SANTIAGO, April 15 (Reuters) – Barrick Gold Corp faces some tough legal obstacles to complete its up to $8.5 billion Pascua-Lama gold mine after a recent court decision, and even the possibility that its Chilean environmental permit might
be canceled.

In the latest of several recent blows to the country’s mining and power industries, a Chilean court last week suspended
construction of the mine, which straddles the border of Chile and Argentina, while it weighs claims by indigenous communities that the mine destroys pristine glaciers and harms their water supply.

The ruling is one of several challenges facing Pascua-Lama, which was originally touted as one of the world’s largest and
lowest-cost gold mines. Experts say there is a risk that the unpopular project faces months, or even years, of legal limbo, damaging Chile’s investor-friendly reputation.

Moreover, politicians are unlikely to intervene during an election year on behalf of the project, a hot potato in Chile. “Pascua-Lama’s legal path looks difficult,” said Luis Cordero, law professor at the Universidad de Chile. “If the company isn’t able to adequately negotiate a plan to meet (demands), its permit could be revoked.”

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Barrick’s Pascua-Lama mine setback signals larger shift in Chile – by Pav Jordan (Globe and Mail – April 12, 2013)

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.

A ruling from a Chilean court to halt work on the world’s most ambitious gold project marks a growing backlash against the industry in one of the world’s most mining-friendly areas.

The Pascua-Lama gold and silver project straddles the Andes mountain range between Chile and Argentina and is slated to go into production this time next year, if project owner Barrick Gold Corp. can convince an appeals court in the northern town of Copiapo – population 167,000 – that it isn’t polluting the water supplies of indigenous communities.

The ruling represents a rare injunction against a mine that has been more than a decade in the making, having cleared regulatory hurdles including environmental permitting in Chile and Argentina. It’s also the latest instance of a Chilean court hearing a complaint against a project already cleared by environmental authorities.

Chile has long been viewed as a miner’s Utopia, complete with some of the richest mineral reserves on the planet as well as one of its most mining-friendly, stable governments, but some say it has become so saturated with projects that its infrastructure is straining at the seams and communities are becoming alarmed. The shift comes amid a growing wave of resource nationalism, which has touched most of the world’s mining jurisdictions.

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Barrick’s woes in Chile deepen as Pascua Lama is suspended – by Pav Jordan (Globe and Mail – April 11, 2013)

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.

Barrick Gold Corp. has suspended construction in Chile on its massive Pascua-Lama gold and silver project, responding to a court order that further delays work on a mine already a year behind schedule and billions of dollars over budget.

Barrick stock fell 8.6 per cent to a new 52-week low of $24.81 per share on Wednesday after the appeals court said Pascua-Lama should be halted amid allegations the project is polluting precious groundwater and rivers in the Atacama desert region, one of the driest areas on earth.

The allegations have not been proven in court, but they mark the latest roadblock to a project that has been more than a decade in the making, enduring intense environmental scrutiny that has reverberated from Santiago to Toronto.

The complaints are also another instance of communities demanding more control over their environment amid building resource nationalism.

Less than a year ago, Barrick raised the development price tag on Pascua-Lama to more than $8-billion, compared to estimates of around $3-billion when the company launched the project in 2009. A significant portion of higher costs were attributed to a year-long delay in building the mine.

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Copper miners forecast years of surplus – by Jack Farchy (Financial Times – April 10, 2013)

http://www.ft.com/home/us

It is hard not to be impressed by Escondida’s scale. From one edge of the world’s largest copper mine, the huge trucks crawling up the other side nearly four kilometres away look like ants scurrying up and down an anthill.

Every year, the mine’s 171 trucks move twice as much earth as was excavated to build the Panama Canal. “Did we think it would be so big? No, we didn’t,” says Edgar Basto, who runs the mine for BHP Billiton, the world’s largest mining group.

But Escondida is big – and growing: BHP has plans to relocate another plant to allow the mine to expand even further. As a result, after several years of falling production, the mine is on track to boost output by 20 per cent in the year to June.

The story is echoed across the copper industry. After a decade of struggling with ageing mines and troublesome new projects, the world’s copper miners are boosting supplies at the fastest rate in a decade.

“A lot of projects were stalled at the back end of 2008. We’re now getting the full effects of the catch-up phase,” says Richard Wilson, chairman of metals at Wood Mackenzie, a consultancy. But investors are not cheering the miners on.

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Prolonging the Life of the World’s Biggest Copper Mine – by Marianela Jarroud (Inter Press Service News Agency – April 10, 2013)

http://www.ipsnews.net/

RANCAGUA, Chile, Apr 10 (IPS) – El Teniente, the world’s largest underground copper mine, has already been in operation since 1905, but the state-owned National Copper Corporation of Chile (CODELCO) wants to keep it running for another 50 years.

This, however, will require the acquisition of cutting-edge technology and an investment of 3.278 dollars – roughly equivalent to the total amount invested in the mine since it was first opened. El Teniente is located in the Andes mountain range, 150 kilometres south of Santiago. In 2010, it accounted for 25 percent of CODELCO’s total copper production.

The entire copper industry was nationalised in 1971 and is a major source of revenue for Chile, the world’s leading producer of the metal. The current production in Level 8 at El Teniente is 137,000 tons per day (TPD), which translates into 434,000 tons of fine copper a year.

But the copper is running out in this section, which only contains enough reserves to last until 2025. This is why CODELCO is undertaking the New Mine Level project, to reach the 2.02 billion tons of copper reserves located deeper down, at an altitude of 1,880 metres and 100 metres beneath El Teniente. The goal is for the new level to enter into operation in 2017.

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Mining Investment Won’t Switch from Chile to Peru – by Marianela Jarroud (Inter Press Service News Agency – April 2, 2013)

http://www.ipsnews.net/

SANTIAGO, Apr 2 2013 (IPS) – The Chilean government has warned of the potential flight of mining and energy investments to Peru because of court rulings that have paralysed large-scale mining projects in the north of the country. But this fear is unfounded, at least in the short term.

Peru and Chile are in the top ten world destinations for investment in non-ferrous metal exploration, according to the Metals Economics Group, which collects information about the industry. In its 2013 report it places Chile fifth and Peru sixth, while Latin America heads the ranking of regions, receiving 25 percent of exploration investment capital.

Chile is the world’s top producer of copper and the country with the largest reserves for future extraction. Mining investment is concentrated mainly in the north, near the borders with Peru, Bolivia and Argentina, where mines are estimated to consume 80 percent of the area’s electricity.

Against a backdrop of rising energy demand, industry owners have expressed concern about several court rulings and administrative decisions against mining projects.

One high-profile case was that of the Castilla plant, a project of the MPX Energia company owned by Brazilian billionaire Eike Batista, that was to be the largest coal-fired generating plant in South America.

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‘Warning’ strike at copper giant Codelco sparks fear of supply disruptions – by Pav Jordan (Globe and Mail – April 9, 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.

A one-day strike at state copper miner Codelco of Chile may mark just the beginning of supply disruptions in a country producing about a third of the world’s copper.

Union workers at Codelco, which operates seven mines and expects to produce about 1.7 million tonnes of copper in 2013, launched the 24-hour strike on Tuesday with demands for better working conditions and pensions and an end to the use of sub-contractors.

While largely symbolic, the strike coincides with the CRU/CESCO week in Santiago, one of the world’s largest mining conferences dedicated to the copper industry.

Chile is the world’s largest copper producer. It is also host to such global mining giants as BHP Billiton Ltd., Anglo American PLC and Canada’s Teck Resources Ltd. It is a chief supplier to No. 1 consumer China. Codelco alone supplies more than 10 per cent of annual global supply.

The strike comes also as candidates launch presidential campaigns for elections in November, when Chile’s left will try to wrest power back from the right after conservative president Sebastian Pinera in 2010 ended 20 years of leftist rule.

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CORRECTED-CESCO-Joint ventures seen boosting Chile’s copper exploration – by Julie Gordon (Reuters U.S. – April 9, 2013)

http://www.reuters.com/

(Reuters) – Chile could boost copper exploration by encouraging state-owned giant Codelco, the world’s biggest producer of the metal, to partner with private mining companies, industry executives said on Monday.

Chile sits on the world’s largest copper reserves and is also the world’s largest producer of the metal, but aged, tired deposits dragged Codelco’s output last year to its lowest level since 2008, while costs soared 40 percent on the year.

Codelco, and its smaller peer ENAMI, own large swathes of land with copper reserves which they are not currently exploiting.

To capitalise on these properties, the state-owned companies should form joint ventures with smaller firms to explore these assets, said Cristian Quinzio, a director of the Centre for Copper and Mining Studies (CESCO).

“We should encourage state-owned companies to put more mining properties into private company hands through partnerships,” Quinzio told an exploration forum in Santiago.

“Those companies should be leaders in promoting joint ventures – directly calling tenders or taking actions to invite mainly junior companies to explore, while still maintaining the buyback option – just in case.”

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CESCO-ANALYSIS-Labor unrest during electoral year could jolt Chile copper – by Alexandra Ulmer and Fabian Cambero (Reuters India – April 8, 2013)

http://in.reuters.com/

SANTIAGO, April 8 (Reuters) – The costly port strikes that recently hit top copper producer Chile and detained an estimated 9,000 tonnes of the red metal’s exports per day were an unwelcome reminder for miners of the risk of labor action during an electoral year.

For copper powerhouse Chile, 2013 was set to be its year. With massive investment in troubled mines paying off, a rare
new deposit slated to come on line at the end of 2013 and fairly smooth contract negotiations at two key mines, Chile’s copper output seemed all set to reach a record 5.596 million tonnes.

But that was overlooking Chile’s hotly contested presidential election in November and the labor unrest it can
galvanize as unions seek to make their issues heard.

Leading copper miner Codelco is facing a potential 24-hour strike in all its divisions this month, and industry players now fear conflicts could flare up in more of the Andean country’s mega mines.

“This is going to be an intense year,” one Chile-based trader said. At stake is a third of the world’s copper supply. The potential uptick in labor unrest will likely be a major talking point on the sidelines of the CESCO/CRU copper conference in Santiago this week.

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Truckless $20 Billion Venture Seen Key to Vale Revival: Freight – by Juan Pablo Spinetto (Bloomberg.com – April 2, 2013)

http://www.bloomberg.com/

Vale SA (VALE5) is replacing trucks with 23 miles of conveyor belts and building a second railway through the Amazon to cut costs and retake the title of world’s second- largest mining company by value from Rio Tinto Group (RIO).

Vale’s Serra Sul project, part of the Carajas mining complex in northern Brazil, is the industry’s most expensive project ever at almost $20 billion. It will also be the first major iron-ore venture to fully replace in-mine trucks with conveyor belts, according to the miner. The project, which has absorbed $1.8 billion in investment so far, will allow Vale to reduce mine-to-port costs at Carajas to about $15 per ton, half the company’s current operational cost.

Vale, the world’s third-largest miner by value, is seeking to recover ground in the seaborne iron-ore market that it has lost to Australian rivals since 2007. The Serra Sul project will aid Vale shares as it cut costs per ton by tapping richer grades with improved technology, said Jonathan Brandt, an equity analyst at HSBC Holdings Plc.

“It’s quite an impressive project,” Brandt, who visited the venture in September, said in an interview from New York. “It should substantially lower their average cost per ton.”

Brandt, the second-most-accurate Vale analyst on the Bloomberg Absolute Return Rank (VALE), estimates the company will be able to extract, process and deliver ore to the Ponta da Madeira port for export at $20 to $23 per ton once all costs are included. That would be among the cheapest iron-ore operations in the world, he said.

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First Quantum starts cost-cutting at Cobre Panama mine, suspends SNC-Lavalin contract – by Pav Jordan (Globe and Mail – April 3, 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.

First Quantum Minerals Ltd. has suspended engineering contracts with SNC-Lavalin Group Inc. and other partners at Cobre Panama, taking a first swipe at cutting costs on the massive copper project acquired with the takeover of Inmet Mining Corp.

SNC-Lavalin said in a statement on its website that it was de-booking suspended and terminated work related to the process plant at Cobre Panama worth $120-million in anticipated services revenues.

“Subsequent to this acquisition, a joint venture led by SNC-Lavalin International Co. Inc., a member of SNC-Lavalin Group Inc., and including GyM S.A. and Techint International Construction Corp, has received a notice of suspension from Minera Panama S.A. (a subsidiary of Inmet) related to the majority of the work to be performed under its EPCM contract for the balance of plant of the Cobre Panama copper mine, “ the Canadian engineering firm said.

It did not state the value of business affected at engineering partners GyM S.A. and Techint. International Construction Corp.

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Cuba hopes to keep nickel output above 60,000 tonnes – by Marc Frank (Reuters U.S. – March 26, 2013)

http://www.reuters.com/news/us

HAVANA, March 26 (Reuters) – The Cuban nickel industry plans to produce around 62,000 tonnes of unrefined nickel plus cobalt in 2013, according to local and foreign company reports, following the closing of one of three processing plants last year.

The provincial radio station of Eastern Holguin, Radio Angulo, reported on Monday evening that the Cubaniquel-owned Ernesto Che Guevara plant in Moa, after experiencing production problems over the last few years, was now running up to speed.

The station quoted the plant’s manager, Rogelio Polanco Fuentes, as stating, “the plant is in condition to meet this year’s plan of 23,700 tonnes.”

Canadian mining company Sherritt International, a joint venture partner with Cubaniquel in the only other open plant, the Pedro Soto Alba, also in Moa, recently reported 2012 output as 38,054 tonnes and said it expected a similar performance in 2013.

State monopoly Cubaniquel and Sherritt are also partners in a Canadian refinery where output from the Pedro Soto Alba plant is shipped, and after refining is marketed by yet another venture between them.

China and Europe also purchase Cuban nickel products, the country’s most important exports and one of its top foreign exchange earners after technical services and tourism.

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