Iron ore price soars

Iron ore price soars

The Northern China import price of 62% Fe content ore jumped 6.5% on Tuesday to trade at $59.10 per dry metric tonne according to data supplied by The Steel Index. The most actively traded iron ore futures contract on the Dalian Commodity Exchange advanced 6% to  456.5 yuan ($67) per tonne. The price of the steelmaking raw material is now up more than 10% from year lows hit two weeks ago.

Iron ore price bulls took heart from higher steel prices, but part of the move could also be explained by futures speculators “window dressing” ahead of the end of the quarter reports Reuters:

“High margins after the government’s effort to eliminate low-grade steel are enticing mills to produce more steel, which increases the need for iron ore,” said Zou Mingdong, Shanghai-based steel manager at Zhongcai Merchants Investment Group.

“However, the rising price doesn’t change the fundamental situation of oversupply and weak demand.”

Shares of  the world’s top iron ore miners reacted positively led by Kumba Iron Ore units trading in New York which surged 6.7% on Tuesday. The South African company, controlled by diversified giant Anglo American, produces more than 40m tonnes per year. The stock is worth $3.6 billion in New York and is trading in positive territory for 2017.

Iron ore is expected to continue to soften averaging $58 next year and $54 in 2019

Australia’s Fortescue Metals Group, a pure play iron ore producer, added 3.8% on the Australian stock exchange and some 10% on US over the counter markets. FMG stock is still down by 18% in 2017 and the Perth-based firm is now worth US$11.5 billion on the ASX.

World number one Vale gained 3% in Brazil trading, lifting the Rio de Janeiro-based company’s market capitalization to $43.8 billion after 12.6% gains this year. Diversified giants Rio Tinto and BHP Billiton also advanced, up 3.3% and 2.4% respectively, although the Melbourne-based companies both show declines year to date.

Today’s move in the price goes counter to what most analysts believe is in store for the market which has been in oversupply for more than two years.

Morgan Stanley this week sharply cut its forecast for the iron ore price in the third quarter with the investment bank now seeing an average of $50 over the period, climbing to $55 in the final three months. For the year as a whole Morgan Stanley sees the commodity averaging $63 compared to a year-to-date average of $74.  Iron ore is expected to continue to soften averaging $58 next year and $54 in 2019.

The latest forecast from the Morgan Stanley is more optimistic than predictions in a research note Citigroup released last week.  The bank lowered its price outlook by a fifth saying iron ore will average $48 a tonne in Q4 2017, down from $60 in its previous prediction:

Both analysis blame growing global supply  – most notably from Vale’s S11D mine and Roy Hill in Australia hitting full production – for the weak outlook. According to Citigroup, 2017 will see a surplus of 118m tonnes following a more than 60m tonnes glut last …read more

Gemfields shares collapse on imminent delisting

Shares in Gemfields (LON:GEM) got hammered Tuesday after Pallinghurst Resources, the firm largest shareholder, revealed it has secured support to push ahead with its plans to de-list the emerald and ruby miner.

The news comes only a day after Pallinghurst shareholders voted in favour of selling their stakes to the South African private equity group, in a move that removed the last potential stumbling block and nullified a rival offer from China’s Fosun Gold, a unit of Fosun International.

Pallinghurst Resources aims to buy all the shares it doesn’t already own in Gemfields to perform an overhaul of the miner that includes delisting it.

Gemfields told investors it still believes Pallinghurst’s bid “undervalues” the company and its prospects “as a leading player in the coloured gemstone sector.”

“However, in light of Pallinghurst’s current holding and acceptances exceeding 75%, largely as a result of Pallinghurst concert parties accepting the offer, we are now of the view that Gemfields shareholders should seriously consider whether to accept Pallinghurst’s all share offer,” Graham Mascall, Chairman of the Independent Committee created to review the competing bids said in a statement.

“The alternative is to hold shares in what is likely to become an unquoted Gemfields,” Mascall said.

Pallinghurst already owns a 47% stake in the gemstones producer. Its offer, first presented in May, is open to Gemfields shareholders until July 18.

Gemfields, which owns the luxury Fabergé jewellery brand, is the world’s biggest coloured gems producer, accounting for roughly a third of the world’s emeralds and rubies from two mines in Mozambique and Zambia.

Pallinghurst has stakes in a manganese mine in South Africa’s Northern Cape, as well as in Sedibelo Platinum Mines, an unlisted platinum group metal firm.

Gemfields’ shares fell as much as 13% on Tuesday afternoon, to close 10.88% lower at 31.75p.

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New Gold on track to open Ontario mine in September

Canada’s New Gold (TSX:NGD; NYSE-MKT:NGD) said Tuesday it remains on track to begin operations at its large Rainy River project, located in Ontario, this September, with commercial production expected in November.

“Through the second quarter, our team has both successfully commenced the staged commissioning of our process facility and delivered on our mining plan,” Hannes Portmann, president and chief executive officer said in a statement.

“As the pit has opened up, our operations team has recently delivered further increases in the mining rate, including several days over 130,000 tonnes per day,” he added.

New Gold has said it expects to produce 380,000-430,000 ounces of gold in 2017, potentially higher than the 381,663 ounces it generated last year, boosted by the start of operations at Rainy River.

At full production, the mine is expected to generate an average of 325,000 ounces of gold annually, during its 14-year estimated mine life. In the first nine years of production, Rainy River would be mined as an open pit, after which operations will move underground.

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US Supreme Court rejects New Mexico’s suit against Colorado over mine spill

US Supreme Court rejects New Mexico’s suit against Colorado over mine spill

The US Supreme Court has dismissed a lawsuit by New Mexico’s government claiming that Colorado environmental regulators played a direct role in the 2015 mine waste spill, which polluted nearby rivers.

The leak, containing high concentrations of heavy metals such as arsenic, mercury and lead, was accidentally triggered by a US Environmental Protection Agency’s (EPA) clean-up team working at an old Colorado gold mine.

The court did not provide details about its decision to dismiss the case; it just said most magistrates opposed hearing the lawsuit.

Court did not provide details about its decision to dismiss the case; it just said most magistrates opposed hearing the lawsuit.

New Mexico had argued that Colorado authorities were aware of the risk of a spill and that their “disastrous environmental decision-making” set the stage for the “catastrophic blowout” that polluted a river known for being a source of water for tens of thousands.

According to an EPA report published in January, the total amount of metals dumped into the Animas River following the spill was comparable to four to seven days of ongoing acid drainage from the inactive Gold King mine (GKM).

The agency noted said the spill of 3 million gallons of toxic waste water (more than 11 million litres) that flood from the Animas River in Colorado to the San Juan River in New Mexico, lasted about nine hours, setting a record for mine leaks in the region.

It also found the total amount of metals released into the streams, dominated by iron and aluminum, was comparable to four to seven days of ongoing acid drainage from the dormant mine, or the average amount of metals carried by the river in one to two days of high spring runoff.

It further acknowledged that the concentrations of some metals in the Gold King mine plume were higher than historical mine drainage in the area.

Despite the report, EPA refused later to pay 73 claims totalling $1.2 billion filed by tribes, river-raft companies, farmers and local governments for damages, citing sovereign immunity.

Gold King Mine spill emergency retaining ponds built in 2015. (Image by EPA)

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Iron ore price: BHP starts work on $3.2 billion mine

The Northern China import price of 62% Fe content ore turned weaker again on Monday trading not far off 1-year lows at $55.50 per dry metric tonne according to data supplied by The Steel Index. The price of the steelmaking raw material is now down by more than 40% from its mid-March peak.

While demand from top consumer China has stayed robust – imports topped 1 billion tonnes for the first time last year and continued to grow in 2017 – industry attention has shifted to supply.

The board is expected to consider approval for the $3.2 billion project in mid-2018 and first ore would be targeted in 2021

In a recent research note Citigroup lowered its price outlook by a fifth saying iron ore will average $48 a tonne in Q4 2017, down from $60 in its previous prediction:

Even with prices dropping, global supply continues to rise, according to Citigroup, which forecasts a surplus of 118 million tons in 2017 after a glut of more than 60 million tons last year. Ongoing expansion by large miners, notably Vale’s biggest project S11D and Roy Hill, will probably contribute about 60 million tons of additional supply this year, the bank estimates.

Another indication that demand would not overshoot supply any time soon comes from world number three producer BHP Billiton which said on Monday it’s starting work on replacing depleting resources as it moves from 260mtpa capacity to 290mtpa over the next few years.

BHP on Monday said in a statement it has approved $184m to start work at its South Flank project as production at its Yandi 80-million-tonnes-per-year operation in the Pilbara begins to wane.

The board of the Melbourne-based company is expected to consider approval for the $3.2 billion project in mid-2018 and first ore would be targeted in 2021.

The capital cost for South Flank is expected to be in the range of $30 to $40 per tonne, with expenditure fitting within the company’s Western Australia iron ore division’s previously indicated average sustaining capital expenditure of $4 per tonne over the next five years according to BHP.

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Muppet drops gold price to 6-week low

The gold price started the week on the back foot with an unnerving early fall following a massive sell order that sent the metal to its lowest since mid-May.

Gold futures in New York for delivery in August, the most active contract, dropped to a low of $1,236.50, down 1.5% or $20 an ounce in European trade, a six-week low.

The gold market absorbed a massive $2.2 bln in gold sales in less than a minute and during a period of illiquidity

Source: CME Group

Ross Norman, CEO of gold trader Sharps Pixley, ascribes the sharp decline to a 60 second 56 tonne (1.8m ounces) trade executed at 9am in London:

This bears the hallmarks of a fat finger ‘muppet’ – a trade of 18,149 ounces would be a very typical trade, but a trade of 18,149 lots of a futures contract (which is 100 times bigger) would not be… it leaves us wondering if a junior had got confused between “ounces” and “lots”… or maybe an incorrectly programmed algo ahead of options expiry on COMEX … we just don’t know.

The gold price had recovered much of the lost ground in afternoon trade in New York, exchanging hands for $1,243.60 an ounce.

Norman points out that if the trade, which may also have been carried out by a central bank or a large-scale speculator opening a short position, was indeed an error the gold price bear who made the move is nursing a $36 million loss at this point:

The big take-away though from all this is that the gold market absorbed a massive $2.2 bln in gold sales in less than a minute and during a period of illiquidity … and it ONLY moved the needle 1% lower.

at Sharps Pixley

FLASHBACK: Year to the day of $200 shocker, another strange gold price plunge

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Canada's Mkango to start mining rare earths in Malawi in 2020

Canada’s Mkango Resources (TSX, LON:MKA), one of the very few rare earth producers outside China, plans to start mining from its Songwe Hill mine in Malawi within three years, chief executive William Dawes said Monday.

The company, which has been present in the south-eastern African country for more than a decade, says that by 2021 will be producing 3,000 tonnes of rare earths per year. The figure includes 1,000 tonnes of praesodymium, neodymium, dysprosium and terbium, which are expected to become essential for the manufacturing of batteries, magnets and electric vehicles, Reuters reports.

By 2021, the company expects to be producing 3,000 tonnes of rare earths per year.

Shares in the company shot up after the news and were trading more than 11% higher in Toronto at 1:37PM ET. So far this year, however, they are down about 16.6%.

Demand for rare earth is expected to boom from 2020 onwards as growth rates of top end-use categories including electric vehicles, wind turbines and other hi-tech applications accelerate.

According to a recent report by Adamas Intelligence, a rare metal research firm, the REE market is quickly returning to strong global demand growth for a number of rare earth elements including neodymium, praseodymium, dysprosium, and lanthanum, many of them present in Mkango’s Mali mine.

The resulting rise in price will help “sustain the profitability and growth of today’s dominant producers, and incentivize continued investment in exploration and resource development globally,”Adamas predicts.

The Calgary-based company says its Songwe Hill project is particularly rich in the rare-earth oxides (REO) neodymium, praseodymium, dysprosium and terbium, which account for about 80% of the value in bench-scale test work concentrates produced from the site’s samples.

The firm is also working on a uranium project in the same country — Thambani. Exploration at the site is focused on the radioactive metal and associated tantalum and niobium. However, Mkango is also evaluating the asset’s lithium potential.

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Pallinghurst shareholders back acquisition of Gemfields

Gemfields’ (LON:GEM) largest investor Pallinghurst said Monday it has received support from 96% of its shareholders to buy  remaining interest in the world’s top coloured gems producer.

Gemfields says Pallinghurst’s offer undervalues the company and its prospects as a leading player in the sector.

The London-listed miner told investors it still believes Pallinghurst’s bid “undervalues Gemfields and its prospects as a leading player in the coloured gemstone sector,” and call shareholders to take no action on the offer, which remains open until July 18.

Gemfields has been at the centre of a bidding war between the South African private equity group and Fosun Gold, a unit of Fosun International.

It all began last month, when Pallinghurst tabled a share and cash offer of 38.5 pence per Gemfields share, and a few days later Fosun countered with 45.0p per share.

Gemfields, which owns the luxury Fabergé brand, produces about a third of the world’s emeralds and rubies from two mines in Zambia and one in Mozambique.

Pallinghurst currently has a 41.7% stake in Gemfields. It also has interests in the platinum and manganese sector in South Africa.

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China shuns Indian iron ore in favour of Australia's

Chinese steel mills are turning their backs on India and embracing Australia as a source of higher-grade ore for steelmaking.

According to a report from Macquarie Research, Indian exports of iron ore dropped by 53%, to 23 million tonnes (mt) in May, compared to 49 mt in March. The reason? Lower iron ore prices are making it cheaper for Chinese steel mills to buy higher-grade (more than 57% Fe) iron ore, which makes them more productive.

Iron ore prices have slipped below $60 a tonne on concerns about oversupply and weak demand from steelmakers in China, the world’s top buyer.

The situation in India is reversed from March, when it was reported the amount of iron ore handled by India’s ports more than doubled in the period between April 2016 and January 2017.

The increase in tonnage was partially be explained by a resumption in production from India’s top iron exporting state of Goa in the summer of 2015, led by Vedanta Resources (LON:VED), after an almost three-year hiatus. Most of that ore has been of the lower-grade variety, with competition for lower grades heating up, says Macquarie, “as most steel mills are focusing on higher grades to increase productivity. Chinese steel consumption has been higher than expected and prevailing steel prices provide for respectable profit margins to these mills,” Business Standard reported Macquarie Research saying.

The publication notes that shipments from Goa “have become unviable” with volumes from the east coast getting diverted to domestic markets instead. The Macquarie report expects Indian iron production to grow 8%, but with declining exports, it expects a domestic surplus of 18 mt in full-year 2018, 4 mt more than the 2017 surplus.

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New Brunswick tungsten-moly mine gets environmental green light

Canada could be back to producing tungsten again following the closure of the country’s only tungsten mine in late 2015.

On Friday the owners of the Sisson Tungsten and Molybdenum Mine Project in New Brunswick, eastern Canada, said the Canadian government approved the mine following an environmental assessment.

“Successful completion of the environmental assessment process is an important milestone in the development of the Sisson Mine. The decision reinforces the thoroughness of the environmental assessment submitted by the Sisson Partnership, reflecting our commitment to create a project that will bring economic benefits to New Brunswick while protecting the environment. Our focus now will be on securing offtake and financing to advance the project,” Northcliff Resources (TSX:NCF) President & CEO Chris Zahovskis said in a statement.

Image of Sisson Mine infrastructure, from the 2013 feasibility study, courtesy of Northcliff Resources.

The open-pit mine near Fredericton is being developed by the Sisson Partnership, owned by Northcliff and Todd Minerals Ltd., a subsidiary of the Todd Corporation. It will be operated by Sisson Mines Ltd. The mine would be North America’s only producer of tungsten, whose market is currently dominated by China. The metal also known as wolfram is used to produce electrical wires, as well as X-ray tubes and smartphone screens.

The $579 million project includes a 30,000 tonnes per day processing facility, averaging 557,000 tonnes of ammonium paratungstate and 4.1 million pounds of molybdenum, annually. The mine has 334.4 million proven and probable tonnes of mineral reserves and a minelife of 27 years, states a 2013 prefeasibility study – and is one of the largest tungsten deposits outside China, according to Northcliff.

Photo of tungsten filament in a light bulb by Anderson Mancini, Flickr Creative Commons image. 

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Colombia coal mine explosion kills 13

Thirteen coal miners have died in Colombia after an explosion at an illegal coal mine on Friday.

Eleven miners were originally said to have died and two were missing following a methane gas explosion underground, according to a government statement reported by Reuters. The death toll was later revised to 13. The accident took place in Cundinamarca province, where illegal underground coal mining is reportedly widespread.

In another report by Associated Press, National Mining Agency President Silvana Habib Daza said the mine was operating without permits and lacked proper safety equipment. It added that eight people died at a mine in the same town of Cucunuba in 2008.

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Villagers invade Acacia's North Mara mine in Tanzania

Hundreds of villagers near the North Mara gold mine in Tanzania invaded the mine for several days last week in an attempt to steal gold ore. The armed confrontation between police and villagers is the latest development in an ongoing dispute between the mine owner, Acacia Mining (LON:ACA) and the Tanzanian government.

Security forces arrested at least 66 people, 34 of whom were women used as human shields by groups of armed men who invaded the mine, Reuters reported on Friday. “This week different groups of over 500 people armed with traditional weapons such as machetes and spears invaded the premises of the Acacia mine… they even went to the gold processing plant,” police chief Morris Okinda told reporters. Several police were also injured.

The villagers were reportedly demanding compensation for their land and for alleged pollution caused by the mine.

The villagers were reportedly demanding compensation for their land and for alleged pollution caused by the mine.

The government of Tanzania accuses Acacia of under-declaring revenues and evading taxes worth tens of billion of dollars, local paper The Citizen reported. As a result, a commission recommended that Tanzania demand the repayment of outstanding taxes, review the possibility of increasing government ownership of mines, and continue with an export ban on gold concentrate affecting the company.

Such prohibition was imposed on Acacia Mining at the start of March, when the president announced an export ban on copper and gold concentrates in an attempt to capture more of the value from mining for the country.

The gold producer, which spun off from Barrick Gold in 2010, said in a statement it was disappointed at the findings, adding it “strongly refutes” the “new unfounded accusations.”

Acacia is Tanzania’s largest gold producer with three mines – Bulyanhulu, Buzwagi and North Mara. Mining contributes 3.5% to the gross domestic product of Tanzania, which is Africa’s fourth-largest gold producer. The government, however, wants to increase that piece of the pie by requesting more taxes from the sector. It has been on a drive to add value to its exports rather than send raw materials abroad.

Acacia has repeatedly rejected all allegations of wrongdoing and called for an independent inquiry into the government’s accusations.

In order to provide clear and factual information around the current situation, the company also created a micro-site, with its answers to Tanzania’s allegations, and details of the company’s contribution to the country’s economy.

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