Copper retreated from 2½-year highs on Friday with futures contracts in New York failing to scale the $3.00 a pound level. Copper’s 2017 year to date gain is still around 18% and the red metal has recovered more than 50% in value after falling to six-year lows below $2.00 a pound in January last year.
After a relatively quiet year in 2016 for supply disruptions (there is around a 6% production swing factor in global output of over 20m tonnes per year) due to bad weather, labour action and other unforeseen events, 2017 has seen several outages at some of the world’s biggest mines.
A a 43-day strike at BHP’s Escondida mine in Chile – the world’s largest with a roughly 300,000t annual production gap to its nearest rival – ended in March and ongoing strike action at Freeport McMoRan’s Grasberg operations in Indonesia have boosted prices.
Last month Chile’s Antofagasta narrowly avoided labour strikes – which would have been the first in the London-listed company’s history – at its Zaldivar and Centinela mines in the South American nation. Together the two mines produce more than 280,000 tonnes of copper per year.
Another potential outage was averted this week however after communities blocking access roads to the Chinese-owned Las Bambas mine high in the Andes removed barricades after the Peruvian government declared a state of emergency in the remote region.
According to a Reuters report locals who were demanding payment for the use of the road near the town of Challhuahuacho did not resist police orders to remove the blockade Thursday and operations at the mine has returned to normal.
Australian operator MMG said production at the mine which started operations in December 2015 was not affected. Output is expected to be between 420,000–460,000 tonnes in 2017 (and not insubstantial quantities of molybdenum, gold and silver) placing the mine in the top five worldwide. In October copper exports from the mine were halted for ten days amid clashes with security forces that left one protestor dead.
How Beijing landed copper’s flagship greenfield project
Chinese authorities carefully engineered the 2014 acquisition of Las Bambas over a period of two years, by making its approval of the Glencore-Xstrata merger dependent on the Swiss-based company’s disposal of the project.
Las Bambas was likely just the curtain raiser for many future Chinese forays outside the country in search of copper sources.
Glencore and Xstrata first announced a merger February 2012 and after much shareholder wrangling and jumping through regulatory hoops China was the last country to approve the deal – a full 14 months later.
There was one, pretty specific, proviso.
Glencore must give up Las Bambas. Or something of equivalent significance for future global copper supply (nothing springs to mind).
The Swiss-based firm had already lavished $4 billion on the Peruvian mine and China took its sweet time to ink a deal.
While negotiations of the sale dragged on for another year Las Bambas was being thoroughly de-risked (compared to the likes of a Conga or Oyu Tolgoi, it appears to have been smooth-sailing) and readied for production by one of the more experienced teams in the global copper …read more
On Friday, the price of gold was bolstered by a weaker US dollar and turmoil on financial markets lifting the metal to its highest level since the election of Donald Trump as US president in November.
Gold futures in New York for delivery in December, the most active contract, touched a high of $1,306.90, in massive volumes of nearly 26m ounces by noon, before paring some of those gains.
The gold price received a boost last week on escalating tensions between US and North Korea, but the safe-haven buying related to the stand-off with the dictatorship soon faded.
While North Korean worries come and go it increasingly looks like Donald Trump will be a consistent source of support given the unpredictability of his presidency
On Friday the attention of gold bulls turned to US domestic matters including minutes from the Federal Reserve, showing little urgency about the pace of interest rate hikes in the US.
Those comments coupled with the lack of progress on fiscal stimulus policy in Washington put pressure on the dollar and yields on US government bonds which usually moves in the opposite direction of gold.
Ole Hansen, chief of commodity strategy at Saxo said on Friday due to “increased risk of US policy paralysis the market is showing accelerated signs of nervousness”:
While North Korean worries come and go it increasingly looks like Donald Trump will be a consistent source of support given the unpredictability of his presidency. This as political frictions between the White House and Congress continues to rumble and President Trump’s administration looks increasingly dysfunctional and isolated.
In late 2016, optimism about the economic impact of a Trump presidency and Republican control of both houses saw the greenback climb to 14-year highs, but sentiment has soured since then.
The US dollar index, measured against a basket of currencies of the country’s major trading partners, fell to below 94 on Friday and the currency is now worth 8.5% less than this time last year.
The US dollar’s all-time peak of 164.7 was reached in February 1985. That coincided with a bottom in the price of gold of $284.25 an ounce.
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The gold miners’ stocks have spent months adrift, cast off in the long shadow of the Trumphoria stock-market rally. … …read more
Brazil’s proposed changes to its mining law and other related regulations are not only triggering a global uproar from environmentalists, which oppose the planned opening of more than 1 million acres of protected land to miners, but also among resources firms with interests in the country.
Both experts and mining companies fear some of the intended modifications would also result in hefty taxes, higher research costs and decrease interest from foreign investors.
Concerns over the new regulations stem from a package of three presidential decrees issued last month.
Their worries stem from a package of three presidential decrees issued last month, which together with updating the country’s legal framework for mining, hikes royalties by as much as 80%.
Taxes on mining revenue will rise by a set rate on diamonds, gold and other materials, while iron ore royalties will increase in tandem with the price of the mineral, gradually growing from 2% if the market price is less than $60 a tonne, to a maximum of 4% if the price rises above $100 a tonne. Other commodities will be affected as detailed by Mondaq:
MP No. 789/2017: modifies the calculation method regarding CFEM, the mining royalty:
Assignor and assignee of mining rights are jointly liable for CFEM existing debts;
The new tax basis will consider the gross revenue of the mineral sale, not including taxes. Currently, the tax basis considers the net sales. The new rules came into effect on August 1st;
Tax rates set forth by law, on a maximum of 4%:
0,2%: gold and diamond, when extracted through small scale mining permission regime, and other gemstones;
1,5%: rocks, sand, gravel, clay and other minerals used in civil construction;
2%: gold and other minerals, except for iron ore; and
3%: bauxite, manganese, diamond, niobium, potassium and halite;
For mining ore: progressive tax rates, according to the international price:
2%: below US$ 60;
2,5%: from US$ 60 and below US$ 70;
3%: from US$ 70 and below US$ 80;
3,5%: from US$ 80 and below US$ 100; and
4%: from US$ 100 on.
The changes that will go into effect in November, if approved by Congress before then, will see some royalties fall, such as those applied to raw materials used directly in construction, which will become 1.5% lower.
The regulations also create a National Mining Agency to replace the National Department of Mineral Production, which is expected to increase transparency and reduce bureaucracy.
Together with updating the country’s legal framework for mining, changes imply hiking royalties by as much as 80%.
“The increase in mining costs is the most important outcome of these changes,” Valdir Farias, chief executive of Fioito Consultoria, a local consultancy firm specializing in mining taxes, told the Metal Bulletin. (subs. required).
The Brazilian Mining Association, which counts the country’s largest miner and world’s No. 1 iron ore producer Vale (NYSE:VALE) among its members, has also expressed its concerns.
According to the industry body, it won’t be possible to cut costs enough to offset the higher levies. “Mining companies feel pressured to pass on this new cost increase to the industrial production chain,” it said in a …read more
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Finland-based supplier Metso announced Friday its decision to split its mineral services business area, which focus on the aggregates industry, as well as mining and recycling customers, into two separate units: Minerals Services and Minerals Consumables.
The changes, which will come into effect at the start of 2018, imply that the new Minerals Services business will deal with spare parts and service solutions, as well as supporting distribution and repair centre infrastructures.
Beginning 2018, the division will be replaced by two separated units — Minerals Services and Minerals Consumables.
The other unit — Minerals Consumables —will focus on wear part businesses, together with the foundries and other manufacturing operations, as well as supply chain infrastructure.
“The new structure will allow a natural split of the services business and a clearer focus to drive further growth for services in close co-operation with the minerals equipment businesses,” President and CEO Nico Delvaux said in the statement.
He noted that the Minerals Capital business segment will remain responsible for the sale of large capital equipment, such as Metso’s mobile and static crushers and screens.
The engineering company has been experiencing tough market conditions following miners’ spending cuts and uncertainty over growth in top metals consumer China.
Last month, it unveiled that mining equipment orders had unexpectedly fallen by 2%, which together high raw material costs, hit its second-quarter profits.
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As global stocks extend losses. …read more
Harmony Gold is likely to buy some of the assets miner plans to offload in the country. …read more
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After a string of down days, the Northern China import price of 62% Fe content ore bounced back on Thursday. According to data supplied by The Steel Index the steelmaking raw material jumped 5.6% to exchange hands for $75.70 per dry metric tonne, not far off 4-month highs hit last week.
The iron ore price is now trading up a whopping 43% from its 2017 lows struck just two months ago as Chinese anti-pollution crackdown on its heavy industries force the country’s steelmakers to chase high quality imports.
Iron ore’s latest rally comes after another furious day of trading on ferrous derivates markets in China. Regulators hiked fees and imposed trading limits last week to dampen speculative activity leading to a slump in prices for steel, iron ore and coking coal but on Thursday the bulls were charging again.
In Shanghai rebar futures – the world’s most traded steel contract – gained over 3% to within shouting distance of 4½-year highs while Dalian coking coal futures surged by its 8% daily uplimit to hit a record high and iron ore advanced as much as 7%.
Premiums for lump rose to just under 18c per tonne (a more than $11 premium over spot prices) after hitting an all time low of just 1.5c in April
China’s steel production last month rose more than 10% compared to last year to a record 74m tonnes as traders worry about a steel supply crunch going into the new year. Beijing wants to cut output by as much as 50% during winter months to fight smog, particularly in its capital city and surrounding areas.
In Hebei province, China’s key producing region, steelmakers have until September 1 to comply with stringent new emissions regulations or would be shut down. Some 120 million tonnes of low-quality steel capacity were shuttered during the first six month of the year.
Beijing’s policies to clean up and consolidate the domestic steel industry is playing into the hands of iron ore exporting countries. Low grade furnaces – particularly those that use scrap – have been outlawed and authorities are also clamping down on sintering plants.
Sintering is a necessary extra step when using low grade ore (domestic Chinese iron content averages only about 20%) and pelletizing plants using fines or iron ore concentrates have also been fingered as polluters by Beijing.
Fines drive the iron ore price and it makes up the bulk of supply, but producers of so-called “lump” ore enjoy a little more breathing room.
Lump ore can be loaded directly into blast furnaces, is easier to handle during transportation and can be shipped during wet seasons (liquefaction can be an issue with the shipment of iron ore fines during wet weather). For steelmakers it cuts pollution and lowers cost and lump now constitutes between 15%–20% of blast furnace feedstock.
Platts reports premiums for lump rose to just under 18c per dry tonne unit (which translates to around a $11.25 premium over spot prices) after hitting an all time low of just 1.5c in April this year. Open interest – …read more
An Argentine court has confirmed criminal charges against eight of nine Barrick Gold (TSX, NYSE:ABX) employees related to their involvement in a cyanide spill at the company’s Veladero mine in 2015, the first of three similar incidents registered at the operation in the past three years.
The company’s managers had been criminally charged by a court in San Juan, where the mine is located, following the incident, but they appealed, seeking dismissal of the charges.
According to the ruling, partly published by local paper Cadena3 (in Spanish), the court rejected the appeals for eight of the nine individuals, for whom the charges of “pollution, negligence and malpractice,” remain. The person absolved was general manager Antonio Adames Reyes, who the court said “lacked of merit” for the charges.
The company said it plans to legally support the executives, as it believes “there is no reason to consider their actions as criminal,” the article says.
Barrick is also being investigated for possible negligence in relation to another spill of cyanide solution at the same mine, in March this year.
Barrick’s spokesperson Andy lloyd told MINING.com, the individuals have not yet faced trial and have not been convicted.
The ruling follows a 145.7m pesos fine (about $9.8 million at the time) Barrick had to pay in January 2016 over the incident. At the time, the company said it had undertaken a plan to strengthen controls and safeguards at the mine, including increased water monitoring.
The world’s No.1 gold producer by value is also being investigated for possible negligence in relation to another spill of cyanide solution at the same mine, in March this year. The separate claim argues the company failed to complete improvements to Veladero, which could have prevented the latest incident, the third of its kind in 18 months.
Earlier this month, federal judges filed a petition to Argentina’s Supreme Court, asking it to clarify who has jurisdiction over the Ministry of Environment’s case against the Canadian gold miner, which sold 50% of Veladero to China’s Shandong Gold Group in April for $960 million.
The mine produced 544,000 ounces last year and has proven and probable mineral reserves estimated in 6.7 million ounces of gold as of December 31, 2016, according to the company’s website.
* This story has been updated to reflect the fact that while the eight Barrick’s employees face criminal charges, they have not yet faced trial nor been convicted.
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In the last couple of years, we have seen the majority of commodities bottom out, finally seeing some signs of life. The majority of the rebounds occurred from late-2015 to early 2016.
Molybdenum led the… …read more