These ten mines will make money – even if gold price falls to $550

These Top 10 lowest cost gold mines are all below all-in-sustaining costs (AISC’s) $550/oz level and will prove profitable – even if the price falls 50%.

Mining Intelligence looked at costs at primary gold mines and found 10 operations that would still make money, even if gold halves in value from today’s levels. AISC metrics has been taken as a basis of comparison and ranking.

Since the World Gold Council (WGC) published a Guidance on AISC in June 2013, which introduced a transparent standardised production cost estimation metrics intended to be used commonly by the global gold industry, a majority – yet not all – of the leading publicly-trading gold producing companies successfully adopted WGC’s recommendations and implemented AISC to their official reports.

AISC metrics provide a more comprehensive look at mine economics than the traditional “cash costs” approach  that many companies may interpret arbitrarily – and it includes such important expenses as overhead outlays and capital used in ongoing exploration, mine development and production.

With AISC being used as a benchmark of a company’s operating efficiency, it is becoming possible to compare more accurately the top publicly-traded and non-state-owned gold mining companies in terms of their production costs.

The following is a list of active gold operations across the globe, ranked by their average annual AISC report in 2017. The research focus was on primary gold operations, i.e. mines where gold contributed to 80% and more of revenues from operating activities generated last year. The ranking excludes tailings, re-processing operations, mines where the precious metal is produced as a by-product, and operations where companies report gold-equivalent output. Data was compiled from the Mining Intelligence database.

As indicated in the table above, new Nevada gold mines keep “rocking the boat,” and for the second year in a row are well ahead of other competitors in terms of AISC. Another observation  is nine out of ten lowest cost gold operations are open-pit mines, of which five overall and first four in the ranking do employ a highly efficient heap leaching technology to treat their ores and produce gold.

South Arturo – $351/oz.

Barrick’s South Arturo open-pit gold mine is a high-grade oxide deposit amenable for highly efficient heap leaching mineral processing and extraction technology. This deposit is of the prominent Carlin-type widely known as being one of the most productive and cost efficient geological formations worldwide. Barrick processes South Arturo ore at its Goldstrike plant 5 kms south of the mine.

South Arturo gold mine – Image courtesy of Franco Nevada

Long Canyon – $364/oz.

Newmont’s Long Canyon mine is of the same mineralization style as the South Arturo deposit, and the only significant discovery made in Nevada in the last decade. The nature of the deposit, application of a heap leach technology and tapping into existing infrastructure keep costs at Long Canyon at some of the lowest levels in the industry.

Newmont’s Long Canyon Mine

Svetloye – $426/oz.

Polymetal’s Svetloye mine is an open-pit gold operation that located in the far east region of Russia. Despite the remote location and lack of infrastructure, a high-grade ores and heap …read more

Why conflicted copper shows little consensus

I chimed in on the capriciousness of copper in the late spring (Mercenary Musing, May 28, 2018).

Since then, copper prices hit a 3.5 year high at $3.29/lb in early June but then lagged over the summer months. Weakness continues unabated with Friday’s close at $2.86 equating to a 13% loss from its ephemeral high in June:

Strong demand from China includes an all-time record for concentrate imports in September at 1.93 million tonnes and a 15% year-to-date increase in refined copper imports according to the International Copper Study Group (ICSG).

On the other hand, Chinese imports of copper scrap are down over 40% in gross tonnage from last year’s record high; this drop is mainly due to new regulations requiring higher purity scrap. However, the lower tonnage is no doubt mitigated by an increase in copper content. Also, other markets in Southeast Asia have ramped up their processing of lower-grade scrap into refined copper that eventually makes its way into China.

The only macroeconomic factor that has been negative for the price of copper since it reached its pinnacle during the first week of June was settlement of numerous Chilean labor contracts in July and August. Contrary to analyst expectations, there has been no disruption of copper supply in 2018 due to strikes. In fact, the ICSG reports that worldwide copper production was up 5% in the first half of 2018. Despite that increase, there was a small supply deficit over the first half of 2018 at 50,000 tonnes. Depending on the source, year-end projections now range from a deficit of 90,000 to 200,000 tonnes.

The downtick has occurred despite strong fundamentals. World warehouse stocks are dropping, down 50% since the first of April and at lows not seen since early December of 2016.

There is one pending supply disruption. Temporary suspension of Codelco’s smelter operations at Chuquicamata and El Salvador will upgrade antiquated facilities to meet new Chilean environmental standards in mid-December and are expected to last 45 to 80 days.

Chinese copper import premiums have surged to $120 per tonne in late September, a level not seen since 2015. This is further evidence of a tightening supply situation.

So why have copper prices performed so poorly when supply-demand fundamentals have remained strong?

Apparently there is one reason and one reason only for the decline: Hedge fund speculators on both sides of the Pacific are massively net-short copper in the near-term and that has resulted in pronounced backwardation in the futures curve.

After the usual post-Chinese New Year demand increase from mid-February to early March, futures contracts were in contango. But since then, they have been in backwardation from the front month to the third or ninth month out with only a couple of exceptions. Contango occurred prior to the June high and was predicated on an August strike at Escondida. Also, the futures market was briefly in contango in late …read more

Anglo American delays Minas Rio ramp-up

Anglo American (LON:AAL) plans to resume production at its massive Minas Rio iron ore mine in Brazil before year-end, but said a planned ramp-up to 26.5 million tonnes per year is likely to be pushed back to 2021 from 2020.

The company halted production at the mine, its biggest development project, after two leaks in March affected a pipeline that carries the ore to port in Rio de Janeiro state for export. The impact of those incidents in the company’s earnings are estimated to be between $300 and $400 million.

“Everything is on track for us to resume operations in the fourth quarter. It could be in November or December,” Brazil Chief Executive Ruben Fernandes told Reuters on Tuesday.

Two pipeline leaks forced Anglo to halt operations at Minas Rio mine in March, which will come at a cost of $300 to $400 million in losses.

The world’s number four diversified miner bought the iron ore project in Southeaster Brazil during the commodity prices boom of 2007-2008, paying local ex-billionaire Eike Batista $5.5 billion for it. It had to then spent another $8.4 billion, more than twice what was originally projected, to bring Minas Rio to production in 2014.

The deal soon soured as rising global iron ore output overwhelmed demand, causing prices to tumble 80% from their 2011 peak. The miner also saw itself forced to write down the value of the asset by about $4bn, underscoring how the group mistimed its entry into the iron ore sector.

And while prices recovered in 2016 (they climbed 81%), this year’s volatility is bringing into question whether Anglo’s costly bet for iron ore will or will not eventually pay off.

Early this year, the century-old company received approval to proceed with the mine’s third phase, which is considered critical for Minas Rio to reach its full capacity of 26.5 million tonnes of iron ore a year. This is now expected to be achieved by 2021.

The massive mine is Anglo American’s bet on the future of iron ore, but so far it only accounts for a small percentage of the miner’s overall profits as it is still in ramp-up phase, which has taken longer than expected.

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Vale rules out major acquisitions

Brazil’s mining giant Vale (NYSE:VALE), the world’s No.1 iron ore and nickel producer, has ruled out any major acquisitions in the short-term and said it would only invest further in nickel if global prices for the metal improve.

Speaking at the FT Commodities Global Summit in Rio de Janeiro on Tuesday, Vale chief executive Fabio Schvartsman said the company would only consider developing its giant nickel reserves in Indonesia if the price of the metal increased to $20,000 a tonne from its current price of just below $13,000 a tonne.

The metal climbed around 75 percent in the first half of this year, prompting investment in related projects. Vale itself announced decided in June to move ahead with construction of an underground mine at its Voisey’s Bay nickel mine, located in Canada’s Atlantic province of Newfoundland and Labrador.

The company also suspended the sale of a stake in another of its nickel mines — New Caledonia, located on the remote South Pacific island.

Prices have fallen since and remain volatile because of oversupply, despite the metal’s key role in lithium-ion batteries that are used in electric cars.

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Australians find extremely rare mineral in meteorite impact crater

Australians find extremely rare mineral in meteorite impact crater

A group of scientists has discovered one of the rarest minerals on Earth buried deep within what may be the largest-known meteorite impact crater in Australia.

The ultra-rare mineral known as reidite was found by Curtin University researchers in the long buried Woodleigh Crater near Shark Bay, Western Australia, about 750 km. north of Perth.

Reidite only forms in rocks that experience the incredible pressure created when rocks from space slam into the Earth’s crust, the team explains in a paper published in the Geology journal.

The mineral starts as the common mineral zircon and transforms to reidite during the pressure of impact, making it incredibly rare and only the sixth-known crater on Earth where the mineral has been found.

Honours student Morgan Cox, from Curtin’s School of Earth and Planetary Sciences. (Image courtesy of Curtis University.)

The chance find of reidite gave the team new insights into how the Earth responds to the dramatic changes created by meteorite impact, a process that violently lifts deep-seated rocks to the surface in seconds.

According to Curtis University it’s only the sixth time the mineral has been discovered on Earth.

Research supervisor Aaron Cavosie noted the drill core sampled the middle of the impact crater, a region called the central uplift.

The discovery suggest that the Woodleigh Crater may be much larger than previously thought. It has long been buried beneath younger sedimentary rocks, so its size is not yet known and remains debated.

Previous research estimated the crater to be between 60–120km in diameter.

The team from Curtis University is currently using numerical modelling to refine the size of the crater.

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Rio Tinto delays start of Oyu Tolgoi expansion due to technical issues

World’s No.2 miner Rio Tinto (ASX, LON, NYSE:RIO) said Tuesday it will likely have to delay first production from the $5.3 billion underground expansion of its Oyu Tolgoi copper-gold-silver mine in Mongolia, originally scheduled for early 2020.

Delivering third-quarter results, the miner said that while capital costs for the project remained in line with the overall budget, shaft-sinking challenges were “ultimately expected to result in a revised ramp-up schedule”.

Analyst at BMO Capital Markets said in a note to investors they expected Rio Tinto to achieve first sustainable production at the new section of Oyu Tolgoi not earlier than in the third quarter of 2021.

They also said the delay would hit the mine’s free cash flow by about $1 billion between now and 2024, with about $340 million being attributable to Rio Tinto. The company holds a 66% stake in the mine throughTurquoise Hill and the Mongolia’s government holds the remainder.

Turquoise Hill (TSE, NSYE: TRQ), the Rio-controlled company that owns 66 percent of the project, confirmed Tuesday that sustainable production at Oyu Tolgoi would be achieved by the end of the third quarter of 2021, rather than in early 2021. The company attributed the nine-month holdup to challenging ground conditions and delays in the completion of Shaft 2.

First production from the $5.3 billion underground expansion of Oyu Tolgoie achieved by the end of the third quarter of 2021, rather than in early 2021.

Until the completion of Shaft 2, Oyu Tolgoi would experience similar, but not increased, development rates as seen in the third quarter, Turquoise Hill said.

Rio has recently stepped up efforts to find new copper deposits worth of being developed into mines. The company’s board of directors approved the underground expansion of the massive Mongolian mine in the Gobi desert two years ago, but progress earlier this year was very slow due to a series of disagreements between Rio and the country’s government, including differences over taxes owed and a power contract.

In an effort to strengthen up ties with Asian country’s authorities, Rio announced in February the opening of the new office in Ulaanbaatar. Copper and diamond chief Arnaud Soirat told MINING.com in May that the team had also been given the task to conduct fresh exploration aimed at finding the “next Oyu Tolgoi.”

He noted that the company is currently Mongolia’s largest foreign investor, having ploughed so far more than $7 billion into the first phase of its Oyu Tolgoi mine. Soirat said the company will continue to invest over $5 billion in the country, tied to the underground expansion of the giant project, at a rate of $1 billion per year.

Oyu Tolgoi was discovered in 2001 and Rio gained control of it in 2012. Once finished, the extension is expected to lift the mine’s production from 125–150kt this year to 560kt of copper concentrate at full tilt from 2025, making it the biggest new copper mine to come on stream in several years.

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Vanadium price leaps to near-record high

While not as exciting as the transformation in the auto market with the shift to electric vehicles, demand growth from batteries used for renewable energy storage has the potential to have a bigger impact on mining.

One of the prime technologies that could grab market share from lithium ion for large scale storage systems is so-called vanadium redox flow cells.

The rally in vanadium prices is only accelerating with vanadium pentoxide (V2O5) flake used in energy storage systems leaping to $27.50 a pound in China putting it within shouting distance of the all-time high reached in 2005. V2O5 is up more than 550% since September 2016.

Vanadium pentoxide is only a fraction of the overall market and the raw material is primarily used to strengthen steel (today it makes up more than 90% of the market). Ferro vanadium prices jumped 10% just over the past week also hitting a 13-year high to $118 a tonne in Europe. In 2005 vanadium prices briefly peaked at $120 a tonne.

While the long term story for vanadium may be the battery sector, China’s introduction of new rebar standards next month is creating tightness in the market right now

While the long term story for vanadium may be the battery sector, China’s introduction of new rebar standards next month is creating tightness in the market right now.

In a research note BMO Capital Markets, an investment bank, says it anticipates that that Chinese ferrovanadium exports will dwindle over the coming year as domestic demand for the rebar industry continues to rise:

Undoubtedly, current pricing will generate a response from marginal supply and through some substitution with niobium, and is thus a spike price, but we anticipate pricing trading at strong levels compared to recent history over the coming years.

Going with the flow

Vanadium flow batteries have lifespans of over 20 years without capacity loss and are non-flammable. Another advantage over lithium ion is that this type of battery can be charged and discharged simultaneously making it highly suitable for large-scale storage from renewable sources such as solar and wind when connected to an electricity grid.

The amount of V2O5 in a single MWh is just under 10 tonnes. South Africa, China and Russia produce more than 80% of the world’s vanadium, mostly as a byproduct of magnetite mining.

Only around 80,000 tonnes of vanadium was produced last year. Glencore, South Africa’s Bushveld Minerals and Canada’s Largo Resources are major listed producers.

Denver-based uranium producer Energy Fuels recently announced plans to restart its vanadium processing facility (from pond solutions) and is commencing limited conventional vanadium production at its Utah mines. The company’s White Mesa Mill is expected to go into production in November and Energy Fuels estimates the ponds contain roughly 4 million pounds of recoverable V2O5.

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Europe to spend billions on lithium-ion battery plants

europe-to-spend-billions-on-lithium-ion-battery-plants.jpg ev-market-share-2017-1.jpg

One in every twenty Europeans works in the automotive industry and the European Union believes that unless it catches up on battery technology, those jobs are at risk.

That’s why the group is planning to allow state aid for electric battery research and will offer billions to companies willing to build giant plants, it said Monday.

“Public investment in developing the battery industry in the EU is a no-brainer.” — European Battery Alliance. 

“Batteries will be as essential to the automotive industry of the 21st century as the combustion engine was in the 20th century,” Maros Sefcovic, energy vice president of the European Commission, said commenting on the one-year anniversary of the European Battery Alliance (EBA). “If the EU is to maintain its leadership in the automotive sector, but also in clean energy systems, it has to have independent capacity to develop and produce batteries.”

The pieces are in place and the objective is clear —  to reduce reliance on batteries from Asia, particularly, China and South Korea, as European carmakers come under increasing pressure to catch onto the ongoing electric vehicles (EVs) boom.

Battery cell maker Northvolt, which has already begun building in Sweden what will be Europe’s largest lithium-ion battery cell factory, said Monday it would ask the European Investment Bank (EIB) for additional funds to speed up construction.

It also said it had secured a deal with German carmaker BMW and Belgian materials and recycling firm Umicore to design and commercialize a process that would give vehicle batteries a second lease of life as storage products before recycling them.

BMW will provide expertise in battery cell development and Umicore will be responsible for developing active anode and cathode materials and recycling, the companies said.

The EU says partnership like this are set to boom as EBA now offers five types of funding, some of which allow country members to finance 100 percent of research, as long as they involve some cross-border projects.

EU-based battery industry

“The creation of an EU-based battery industry is a long term strategic goal. One which we cannot expect car manufacturers to support on their own,” the European Battery Alliance said. “Given the promise a long term rewards for the EU, public investment in developing the battery industry is a no-brainer.”

To date, there are  260 companies involved across the supply chain and four groups have expressed interest in building a Gigafactory, Sefcovic said.

Other than Northvolt, there are three groups moving forward with plans to build lithium-ion battery plants: French battery company Saft has partnered with Siemens, Solvay, and Manz; Umicore wants a factory to make battery materials in Poland, and Germany battery maker Varta is likely to announce a collaboration with US carmaker Ford.

Asian companies are getting in the game in Europe, too: South Korea’s LG Chem and Samsung are looking to build plants in Poland and Hungary, respectively, while China’s No.1 maker of battery cells for EVs, CATL, will build one in Thuringia, …read more

Mining at Gold Road and Gold Fields JV in Australia to start next month

Mining at the Gruyere project, a joint venture between Gold Road (ASX: GOR) and Gold Fields (JSE, NYSE: GFI) in Western Australia, could begin as early as next month with first gold production expected to come in the second half of next year, the companies said Monday.

Overall project engineering at the 270,000 ounce-a-year project, which is already more than A$100 million over its original budget of A$507 million, is now 96 percent complete, while construction is 71 percent ready, the partners said.

Once at full-tilt the Gruyere is expected to produce 270,000 ounces of gold a year. 

The first stage run-of-mine pad civil works have also been completed, with assembly started on the primary crusher.

Gold Road said favourable weather conditions had allowed contractors to keep up the pace, with up to 630 workers now on site.

“Our own workforce, together with our contractor-partners, are motivated to achieve the first gold production target next year, while maintaining continued focus on safety and quality,” Gold Fields executive VP for Australia Stuart Mathews, said in the statement.

Gruyere is expected to produce between 170,000 and 230,000 ounces of gold next year. Once at full tilt, the mine’s annual output is estimated to be 270,000 ounces.

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More than 400 jobs to go at Glencore’s Hail Creek coal mine

Miner and commodities trader Glencore (LON:GLEN) is cutting 430 jobs, or about 30 percent of the workforce at its Hail Creek coal mine in Queensland, Australia, following a 100-day review that began after it bought the asset from Rio Tinto.

Under the “reconfiguration” of Hail Creek, the two-dragline operation would become a truck-and-shovel mine with a seven-day-on, seven-day-off roster, meaning that employees at the mine would work seven days and take the next seven days off.

The Swiss company also said the majority of the changes will take in place by the second quarter of 2019.

Glencore is already the world’s No.1 exporter of thermal coal used for power stations, and Hail Creek — which was one of Rio Tinto’s last two remaining coal assets — gave it a bigger stake in metallurgical coal used in the making of steel.

In 2017, the mine produced about 9.4 million tonnes of coal, 5.25 million tonnes of which were coking coal and 4.13 thermal.

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3 Big Reasons Chart Expert Believes You Should Own This Gold Stock

Source: Clive Maund for Streetwise Reports 10/15/2018

Technical analyst Clive Maund charts a young gold explorer that he expects to soar.

American Pacific Mining Corp. (USGD:CSE; USGDF:OTC) looks set to soar on the back of a rising gold price, after negative sector sentiment has hammered it down to a silly price.

It’s always nice to pick up a stock that experts are raving about when, by waiting a few months, you can buy it at a little over a quarter of the price it was at earlier when they started talking about it, and such is the case with this one.

You can read about the fundamental story in Why Five Industry Experts Have This Gold Explorer on Their Radar Screens. Technically, the outlook for the stock could scarcely look better, as we will now proceed to see.

Our 8-month chart for the U.S. traded stock shows it from when it started trading back in April. After moving sideways for a few weeks from inception it went into a stubborn and rather severe downtrend that was aggravated by the worsening and terminally negative sentiment towards the sector that persisted until very recently, and only really started to improve last week. Notice, however, how upside volume has started to kick in over the past month and especially in recent days, that has driven both its volume indicators shown steeply higher. This is a very bullish development that usually precedes a change of trend, and there is certainly plenty of scope for this stock to recover after its severe decline of the past five months, and given that it is a prime takeover candidate as made plain in the article linked above, there is potential for the appreciation of the price of this stock to be very rapid indeed, as when a big buyer shows up.

All this means that there are three big reasons to buy this stock. One is that it is cheap, having lost almost three-quarters of its value from inception, two is that it has a highly prospective property in one of the richest gold mining areas in the world, three is that the sector is about to take off higher after a prolonged period of severe depression, and it is a classic takeover candidate. Wait a minute, that’s four big reasons.
American Pacific Mining is accordingly rated an immediate strong buy here. It trades in reasonable volumes on the OTC market and there are a relatively modest 32.5 million shares in issue.

American Pacific Mining website.

American Pacific Mining Corp, USGDF on OTC, USGD.CSX, closed at $0.08, C$0.105 on 12th October 18.

Clive Maund has been president of www.clivemaund.com, a successful resource sector website, since its inception in 2003. He has 30 years’ experience in technical analysis and has worked for banks, commodity brokers and stockbrokers in the City of London. He holds a Diploma in Technical Analysis from …read more

Three Resource Companies: Drilling, Waiting and a Rebirth

Source: Adrian Day for Streetwise Reports 10/15/2018

Money manager Adrian Day looks at three resource companies in his portfolio, one the latest addition with lots of activity; the second, a waiting game; and the third, a re-emergence.

Evrim Resources Corp. (EVM, CN, 1.49) received this past week its eagerly awaited permit to drill the Cuale project, and has already got crews on the property ready to commence the drilling. Evrim is planning a minimum of 3,000 meters comprising 10-15 holes.

Initial drilling will focus on the La Gloria deposit which was the site of the spectacular trench results in the spring, to test the depth of the high-grade mineralization. Drilling will also test four step-out areas.

It could be big!

High-sulphidation systems such as Cuale can grow rapidly. If drilling confirms the high-grade results of the trenches, if the mineralization continues to depth, and if any of the step-outs suggest another high-grade deposit (the last two adding volume to grade) then Cuale could attract interest very quickly. Many senior miners are watching closely. Given the excellent infrastructure and strong political jurisdiction, the 100%-owned project (subject to a 1.5% royalty on precious metals and 1% on base metals) would be worth a multiple of current value if the drilling is successful. We should have results before year end.

Before the permit was received, Evrim has released additional trench results that extended the La Gloria zone both to the northwest and east with consistent mineralization. Soil sampling indicated a larger footprint. All these results were very positive; the “truth machine” (aka known as the drill) now takes over!

Lots of activity on other fronts

Separately, Evrim has been busy on other fronts. Initial drilling has begun at an under-explored project, Cerro Cascaron, in Chihuahua, Mexico, which hosts several gold and silver mines. Junior Harvest Gold is earning into the project by paying for the program.

The company has also reached an agreement with First Majestic on its Ermitaño and Cumobabi projects whereby the options have now been exercised with First Majestic owning 100% of both projects, while Evrim owns net smelter royalties, 2% and 1.5% respectively. First Majestic paid Evrim US$1.5 million as part of the settlement. Drilling at Ermitaño has proven an inferred 40.8 million silver-equivalent ounce resource very close to the mill on First Majestic’s Santa Elena mine, where ore is running out. First Majestic said Ermitaño “has the potential to become a near-term source of production.”

Evrim remains a buy particularly if you do not own it or on any dips. Remember, exploration is by its nature speculative; if the drill program were a complete dud—highly unlikely—the stock would fall back rapidly to its pre-Cuale price, losing half its value overnight. However, the C$125 million market cap is backed by C$14 million cash, the royalty on Ermitaño (with a back-of-the envelope valuation of around $30 million), plus other joint-ventures and …read more