Rio Tinto closer to selling $6bn stake in Iron Ore of Canada

Rio Tinto (LON, ASX, NYSE:RIO), the world’s second-biggest producer of iron ore, is closer than ever to selling its $6 billion-stake in Iron Ore Company of Canada (IOC), as it hired investment bank Credit Suisse.

Likely bidders include ArcelorMittal and Teck Resources.

The miner, which owns 58.7% of the Canadian producer, is said to have been already approached by ArcelorMittal and Teck Resources, Canada’s largest diversified miner, Sky News reported.

The alleged sale comes a time when iron ore prices have rebounded — now trading around $68 per tonne.

This is not the first time Rio attempts to offload its interest in IOC. In 2013, then chief executive Sam Walsh tried, but failed to sell it as part of a massive assets disposals the company went through at a time of slumping iron ore prices.

The world’s second largest miner is said to also be exploring a public listing on the Toronto Stock Exchange of IOC, one of Canada’s largest iron ore producers, which last year had revenues of $1.9 billion in 2017.

IOC operates a mine, concentrator and a pelletizing plant in Newfoundland and Labrador, as well as port facilities located in Sept-Îles, in the province of Quebec. It also runs a 418-kilometre railroad that links the mine to the port.

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Gold Fields boss says South Deep lay-offs are ‘last-gasp measure’

South African miner Gold Fields (NYSE, JSE:GFI) planned job cuts at its massive, but struggling South Deep mine is really the company’s “last-gasp measure”, Chief Executive Officer Nick Holland said on Wednesday.

The Johannesburg-based firm revealed Tuesday its intention to axe about 1,560 jobs between employees and contractors to reduce activity and lower costs at the mine —  its only one left in South Africa.

Gold Fields cited mounting losses and regular failure to meet mining and production targets among the reasons for the massive lay-offs.

Gold Fields cited mounting losses and regular failure to meet mining and production targets among the reasons for the move, which could see a third of its labour force gone.

“In the past 12 years, shareholders have received no return at all on their initial investment of 22 billion rand, having seen only an outflow of funds,” Holland wrote in an opinion piece for the Business Day newspaper.

“Every effort has been made to avoid these significant measures, including retrenching 25% of managerial employees late in 2017; approving voluntary retrenchments for employees in the lower A, B, and C bands over the past few years and bringing in Australian and Canadian experts to assist with new mining methodology,” he said.

Holland said the company was aware that the reasons for the layoffs were no consolation to those who will lose jobs. However, he added, the choice was between the announced measures and serious risk to the future of South Deep and its many stakeholders.

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Gem Diamonds big discoveries reach a dozen

Gem Diamonds big discoveries reach a dozen

Africa-focused Gem Diamonds (LON:GEMD) must be getting used to recovering huge precious rocks from its flagship Letšeng mine in Lesotho, as it has just dug up another massive one.

The 138-carat, top white colour Type IIa diamond is 12th diamond over 100 carats the company finds this year, beating the 11 it dug up in 2015.

The largest diamond found this year is a 910-carat  D colour type IIa diamond, about the size of two golf balls, which was named the “Lesotho Legend.”  It became the second largest recovered in the past century and sold for $40 million at an auction in March.

Since acquiring Letšeng in 2006, Gem Diamonds has found now five of the 20 largest white gem quality diamonds ever recovered, which makes the mine the world’s highest dollar per carat kimberlite diamond operation.

At an average elevation of 3,100 metres (10,000 feet) above sea level, Letšeng is also one of the world’s highest diamond mines.

The biggest diamond ever found was the 3,106-carat Cullinan, dug near Pretoria, South Africa, in 1905. It was later cut into several stones, including the First Star of Africa and the Second Star of Africa, which are part of Britain’s Crown Jewels held in the Tower of London.

Lucara’s 1,109-carat Lesedi La Rona was the second-biggest in record, while the 995-carat Excelsior and 969-carat Star of Sierra Leone were the third- and fourth-largest.

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Copper price falls as China investment grows at slowest pace on record

Copper price falls as China investment grows at slowest pace on record

Source: Bloomberg

Copper continued to decline on Tuesday to touch its lowest in 13 months after disappointing economic numbers from top consumer China and the possibility of an averted strike at the world’s biggest mine conspired to push the price of the orange metal lower.

Copper fell 2% to $2.6770 a pound or $5,902 a tonne on the Comex market in New York bringing its losses over just two months of trading to nearly 20% or $1,450 a tonne.

China consumes nearly half the world’s copper and data released today showed fixed investment in manufacturing, real estate and infrastructure for the first seven months came in well below expectations at 5.5% year on year.

In a research note, Capital Economics says on a monthly basis this means that growth recorded its slowest pace on record declining from 5.7% in June to 3% last month.

Sources: CEIC, Capital Economics

The independent researcher says there are further downside risks to the Chinese economy in the coming months because credit growth is still slowing:

The recent strength of exports is also unlikely to be sustained in the face of expanding tariffs and cooling global growth.

Admittedly, infrastructure spending may soon bottom out given the recent shift toward a looser fiscal stance and monetary easing should eventually drive a turnaround in credit growth.

However, these are unlikely to put a floor beneath economic growth until the middle of next year.

Safer supply

Workers at the Escondida mine in Chile, the only copper operation with output of over one million tonnes per year, called off a strike set to kick off on Tuesday, extending negotiations with part-owner operator BHP.

The extension follows five days of closely-watched talks over pay at the mine that have been mediated by the government of Chilean President Sebastian Pinera.

“We’ve managed to clear up the points that had stalled the negotiation. But there are still some important points to be resolved,” the union said in a short statement, without giving further detail.

Anglo-Australian mining giant BHP also said in a statement that it had agreed to extend talks with the union through Tuesday.

In its last known offer more than two weeks ago, BHP offered a signing bonus of about $18,000, plus separate bonuses intended to buy out clauses in a previous contract that allowed for housing benefits and a loan program.

The total package was valued at $27,700, including a salary increase of 1.5 percent.

But the union had asked for a signing bonus almost double that offered by the company, and had requested a salary increase of 5 percent, leaving a wide gap between the two sides.

The union said it would have to take any potential deal on Tuesday back to its members for approval.

A 44-day strike in February-March last year crippled production at Escondida, which BHP expects will produce more than 1.2m tonnes in 2018 (up from 925kt last year).

Source: Company reports, MiningIntelligence, Wood Mackenzie. Notes: Annual copper production 2017 except Codelco’s El Teniente and KGHM Poland operations = 9 months 2017 annualized. KGHM Poland consists of Rudna, Polkowice-Sieroszowice and …read more

Columbus Gold to buy 70% stake in Maripa project from IAMGOLD

Canadian gold exploration and development company Columbus Gold (TSX:CGT) plans to buy up to a 70% interest in IAMGOLD’s (TSX:IMG) the Maripa project, located in French Guiana.

The project is made up of five contiguous exploration permits and has a historic gold production of around 40,000 ounces of gold, mined between 1985 and 1996.

“With mine permitting well underway at the Montagne d’Or gold deposit, the timing was right for this deal on Maripa,” Robert Giustra, Chairman of Columbus Gold, said in the statement.

Maripa is located in eastern French Guiana, 50 km south of the capital city of Cayenne, has the potential to host a significant gold deposit, and unlike many other gold projects in the Guiana Shield, it is located in an area of easy access with a national highway running through most of the project.

Columbus already has a project in French Guiana, the Montagne d’Or Gold Deposit, set to produce around 237,000 ounces of gold per year.

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China's Ganfeng grabs SQM's stake in Argentinean lithium project

China’s Ganfeng Lithium, one of the world’s top producers of the battery metal, has bought Chilean producer SQM’s 50% stake in the Cauchari-Olaroz project, located in Argentina’s Jujuy Province.

The $87.5-million deal gives the Chinese miner a 37.5% ownership in the brine project, slated to begin production in 2020, with the rest held by Canada’s Lithium Americas (TSX, NYSE:LAC). It also stipulates that Ganfeng will pay SQM an additional $50 million if the project’s goals for selling lithium are met, SQM said in a statement.

The $87.5-million deal is the latest Chinese acquisition of a lithium project in South America.

Beijing has been aggressively promoting the use of electric vehicles, whose batteries use lithium, to reduce air pollution and help the local auto industry build global brands.

In May, China’s Tianqi Lithium Corp said it was buying a 24% stake in SQM for $4.1 billion. The sale has not yet been approved by Chile’s antitrust regulator.

Lithium carbonate prices have been drifting lower from highs in December, trading around the $14,000 a tonne according to the latest estimate from the Metal Bulletin. The figure is still more than double the $6,450 per-tonne-price at the beginning of 2015.

Unlike cobalt, another crucial battery ingredient, the so-called “white petroleum” is abundant and existing brine producers in South America have the capacity to quickly increase output. Combined with many hard-rock projects coming on stream in Australia, last year’s roughly 220kt of production could more than triple within less than a decade.

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Lithium boom unlikely to disrupt potash market — analyst

Lithium boom unlikely to disrupt potash market — analyst

While lithium and potash are often found in the same deposits and mined together, analysts believe the increasing number of companies racing to produce the white metal, key ingredient for making batteries that power electric vehicles (EVs) and high tech devices, won’t have an impact in the potash market.

Not all brine-based lithium projects will make substantial quantities of potash — Humphrey Knight, Potash Analyst at CRU.

Several lithium mines produce potash as by-product, which — at least hypothetically — could add a significant amount of supply. But the story is more complex than that, says Humphrey Knight, Potash Analyst at business intelligence company CRU.

“Not all brine-based lithium projects will make substantial quantities of potash. It depends on brine composition and it is up to an individual project’s design to incorporate a potash-production facility,” Knight told MINING.com.

He noted that only brine-based lithium projects, such as those in the lithium triangle in South America, can generate potash by-products. Additionally, Chile’s SQM, one of the world’s largest lithium miners, which also produces potash, is in the process of reducing output of the fertilizer ingredient and focusing on increasing lithium production instead. “In this case, an increased lithium production is denting potash output,” Knight said.

Contrary to those who insist the potash market remains depressed, the CRU expert believes that it’s looking very strong at moment. In 2017, producers in Canada, Russia and Belarus achieved record (or near-record) sales with demand dramatically increasing around 10% over 2016. Although demand has flattened this year, producers are still recording high sales volumes, Knight noted.

Several lithium mines produce potash as by-product, which — at least hypothetically — could add a significant amount of supply. (Source: BMO Capital Markets, companies reports.)

Major price indicators paint a clear picture of the potash industry’s status. South East Asian import prices, for one, are at their highest in more than two years, while in Brazil, the largest potash consumer, import prices are at their highest in over three years.

New projects delivering less than anticipated, and supply restraints (including idling and closures) have also helped keep the market relatively tight.

Changing scenario

Canada’s Nutrien (TSX, NYSE:NTR), the world’s largest potash miner born form the merger of PotashCorp and Agrium, has been forced to divest its stakes in Arab Potash (APC), SQM and Israel Chemicals Ltd (ICL).

The move, required by international regulators to approve the fusion of the two companies, seems to indicate that Nutrien will head towards a more retail-orientated business model, the CRU expert believes.

“It will require the correct approach (i.e. do they set up their own distribution network overseas or purchase an existing one?) to ensure it translates into improved revenue,” Knight said.

New potash projects are coming online in the next five years, notably in Canada, Russia and Belarus.

Looking forward, the analyst said it would be interesting to see what Nutrien does with the relatively high-cost Vanscoy mine, the only one operated by Agrium, and whether it chooses to lower utilization, as PotashCorp did at …read more

About 1,500 jobs to go at Gold Fields’ South Deep as part of restructuring

South African miner Gold Fields (NYSE, JSE:GFI) plans to cut about 1,560 employees and contractors at its massive South Deep mine, as it tries to save the struggling operation, which has the potential to produce for the next 70 years.

South Deep, Gold Field’s only mine left in South Africa, was built to target the world’s second-biggest known body of gold-bearing ore and slow the steady decline in the country’s production. But in the last ten years, the mine has not made any money for its owner. Even worse: in the past five years it has caused the company to lose 4 billion rand (about $282 million).

Gold Fields, which has invested 32 billion rand in South Deep since acquiring it in 2006, said the mine has missed several output targets and caused the company to lose 4 billion rand.

“Despite numerous interventions to address [raising costs, failure to meet production targets and other challenges], including optimizing the mining method, extensive training and skills development, changing shift and work configurations, and outsourcing functions, the mine continues to make losses,” Gold Fields said in a statement.

Shares in the world’s seventh-largest gold miner with operations from Australia to South America, fell in Johannesburg more than 12% in after the announcement to 42.43 rand by 12:30pm. The stock was also down 12.5% in pre-market trading in New York to $2.94.

In addition to letting go 1,100 employees and 460 contractors, the restructuring involves reducing the equipment fleet, scaling back mining in some sections and cutting capital expenditure, Gold Fields said.

The company, which had a target of mining 500,000 ounces of gold a year at South Deep by 2022, noted it was unable to provide new output forecasts until it had finished revising the mine plan.

“This has not been an easy decision and comes after many other initiatives have been attempted where we haven’t seen results,” Chief Executive Officer Nick Holland said on a conference call. “We believe this is the best short-term initiative to resize the operation and look at what a more realistic operation would be.”

The company said it would announce a new plan in February for South Deep mine, which stretches 3km underground and contains the majority of gold reserves left in South Africa, accounting for 60% for the company’s mineral reserves.

With files from Bloomberg.

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Barrick shares bounce on final permits for giant Alaska gold mine

Shares in Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) clawed back some of its earlier losses in after hours trade on Monday after the company and its JV partner NovaGold Resources’ (TSX, NYSE-MKT: NG) announced final federal permits for its massive Donlin project.

Barrick said the US Army Corps of Engineers and Bureau of Land Management issued a joint Record of Decision for Donlin located in Southwest Alaska four months after the publication of the project’s final environmental impact statement, “marking the completion of the multi-year federal environmental review process.”

The Corps issued a combined Clean Water Act Section 404 and Rivers and Harbors Act Section 10 permit to Donlin  and the BLM also issued rights for a natural gas pipeline right of way crossing federal lands.

The Donlin project is one of the world’s largest gold deposits containing just under 34 million ounces of gold reserves. According to the partners all-in costs over the mine’s 27-year life would be around $735 an ounce, boosted by grades of 2.2g per tonne. Donlin would be one of only a handful of mines around the world to produce more than 1m ounces annually.

Bringing the project into production comes with a hefty price tag however, with the mine expected to require a $6.7 billion investment from the two owners, which are developing in assets in a 50-50 partnership.

Barrick, the world’s top producer of gold, fell 3% in regular trading as the gold price declined to its lowest since February last year below $1,200 an ounce. The Toronto-based company is now worth $12.4 billion in New York after a 30% decline in 2018. NovaGold is worth $1.4 billion on US over the counter markets and is trading in positive territory so far this year.

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CHARTS: Warning for bears as gold price drops through $1,200

Warning for bears as gold price drops through $1,200

Gold fell to fresh 18-month lows on Monday as the attractiveness of the hard asset continues to wane on the back of rising interest rates in the US and a strengthening dollar.

December futures trading in New York declined 1.5% to $1,201 a troy ounce, the lowest since February last year and now down more than 12% from its 2018 high reached in January. Spot prices dropped through the psychologically important $1,200 level with a dip to $1,193.15 an ounce.

Gold usually moves in the opposite direction to the greenback and has a strong negative correlation to interest rates as the metal produces no income and investors have to rely on price appreciation for returns.
With speculative short positions at record highs implying trend projection, market participants run the risk of being caught on the wrong side of any reversal
At the same time US stock markets are humming  and gold is trading near its lowest relative to S&P 500 Index futures since the start of the global financial crisis in 2007/2008 according to Bloomberg calculations.

Hedge funds and large-scale speculators active on the gold derivatives market are betting on further declines.

According to the CFTC’s weekly Commitment of Traders data up to August 7 released on Friday speculators pushed the net short position (bets that gold will be cheaper in future) to a record of 63,282 lots or 197 tonnes. Bearish positioning now exceeds levels last seen at the end of 2015 when gold briefly dipped below $1,050.

Retail and institutional investors in other paper markets for gold are also abandoning the metal.

Holdings in SPDR Gold Shares, by far the largest physically-backed gold ETF, last week shrank to the smallest since early 2016 at 786 tonnes. Investors have pulled nearly $2 billion from the New York-based fund so far this year.

A report released earlier this month by the World Gold Council shows gold demand for the first six months of 2018 sank to its weakest in almost a decade on the back of waning investor demand.

July was the fourth straight month of declines in the gold price, the metal’s longest losing streak since 2013.

A note by BMO Capital Markets, an investment bank, released before the latest weakness for gold cautions bears to be wary of complacency:

Volatility in gold prices is at its lowest level since 2001 – when the dot-com bubble was unwinding – such that the last four months have seen steady decline. Historically, when prices have exhibited such a trend it’s been largely due to headwinds from a stronger USD.

In our view, with speculative short positions at record highs implying trend projection, market participants run the risk of being caught on the wrong side of any reversal in price
action with China-US trade friction continuing to escalate.

BMO also asks whether Chinese investors may come to gold’s rescue (again):

The last time we saw gold break out of a steady downward trend was in January 2016, as chaos in Chinese equity markets sparked an equity sell-off and rotation into gold as a safe …read more

First Majestic shares hammered after reporting $40 million-loss

Shares in Canada’s First Majestic Silver (NYSE:AG) (TSX:FR) dropped more than 10% in New York and Toronto on Monday after it posted a second-quarter loss of $40 million, compared to a profit in the same period a year earlier.

The Mexico-focused miner said it had a loss of 22 cents on a per-share basis. Adjusted for one-time gains and costs, losses were 7 cents per share.

First Majestic shares dropped 11.6% to Cdn$ 7.60 in Toronto at 9:55 am and 10.65% to $5.79 in New York by 10:29 a.m. So far this year, the stock has declined nearly 4%.

It also recorded an impairment charge of $31.7 million, or $20.5 million net of tax, related to placing its La Guitarra mine on care and maintenance.

There were some good news in today’s results too. Silver production for the April-June period was 2.8 million ounces, a 27% increase compared to the first three months of the year, thanks mainly to the addition of the San Dimas mine to the company’s portfolio.

The silver miner’s revenue for the period stood at $79.7 million, a 36% increase compared to the first quarter of 2018, but logged mine operating losses of $2.3 million compared to earnings of $1.4 million in the second quarter last year.

In May, the company acquired fellow miner Primero Mining (TSX:P), in a cash and stock deal valued at $320 million, including debt.

With the transaction, first announced in January, First Majestic gained the San Dimas silver-gold asset, a large, world-class operation, which is now the company’s seventh mine in Mexico.

As part of the deal, the company restructured a pre-existing purchase agreement with Wheaton Precious Metals Corp (NYSE, TSX: WPM), the world’s largest pure silver and gold streaming company.

Despite the addition of San Dimas, which contributed $5.1 million in mine operating earnings during its 52 days of operations, consolidated mine operating earnings underperformed the previous year due to a decline in production from the Del Toro and La Encantada mines.

First Majestic also recorded an impairment charge of $31.7 million, or $20.5 million net of tax, related to placing the La Guitarra mine on care and maintenance.

Realized average silver price of $16.74 per ounce, relatively consistent with the prior quarter.

The company owns and operates seven silver producing mines in Mexico, including La Encantada, La Parrilla, San Martin, La Guitarra, Del Toro, Santa Elena and the recently acquired San Dimas.

Silver has been caught in a protracted multi-year slump since the end of the precious metals bull market in late 2012. While some are positive on the outlook for the white metal, based partly on ongoing supply deficits, its future remains uncertain.

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Auto industry’s use of lithium-ion batteries to grow seven-fold by 2025

Auto industry’s use of lithium-ion batteries to grow seven-fold by 2025

The use of lithium-ion batteries by automakers is expected grow seven-fold by 2025, helped mainly by their dropping costs as well as by subsidies and incentives in many countries, particularly in China, to encourage sales of electric vehicles (EVs)

According to Will Adams, Metal Bulletin’s Head of Research for the battery materials, base metals and precious metals markets, demand for lithium-ion batteries will soar to 650 GWh by 2025, from only 70 GWh last year.

The need to store electricity, generated by renewable energy sources such as wind and solar, will also help demand for lithium-ion batteries grow.

The need to store electricity, generated by renewable energy sources such as wind and solar, will also help demand to grow, he said on a report published Monday.

Battery pack costs have fallen to around $200/kWh this year, from around $1 000/kWh in 2010, and may reach a battery cell cost of $100/kWh this year, with its battery pack costs expected to reach that level in 2020.

The $100/kWh price tag for a battery pack is thought to be the tipping point where EV and internal combustion engine vehicles (ICE) costs are similar.

The Metal Bulletin expects many consumers to see EVs as a must-have status symbol well before prices converge and warns that raw material supply may not be able to respond in time.

As it normally takes about seven to ten years to bring a new greenfield mine on line, the need for current production to double, triple or quadruple over that kind of timetable is a tall ask, the report says.

“Given the enormous task ahead, we expect partnerships will have to form to match the right type of supply to the particular demand,” Adams says.

Battery raw material prices, however, will have to stay high enough to spur the massive investment needed to bring new supply on line in a timely manner.

Lithium and cobalt are currently seeing a supply response to the demand shock that came out of China late in 2015, which was triggered when Beijing’s thirteenth five-year plan targeted 5 million EVs on the road by 2020 (later revised to 2 million EVs). This sent battery and EV manufacturers scrambling to build additional capacity.

In lithium, several new projects are either popping out or getting close to begin production, while traditional suppliers — namely South America and Australia —  are increasing output at a steady pace too.

As a result, the Metal Bulletin forecast a lithium surplus of around 7,000 tonnes in 2018 and around 29,000 tonnes in 2019.

It also expects and oversupply for cobalt, another key ingredient in the making of batteries that power EVs, of 4,000 tonnes this year and 9,000 tonnes in 2019.

The irony is that oversupply of lithium and cobalt will likely dent prices at a time when producers need funds to plan new production to be ready in seven or ten years’ time. The Metal Bulletin expects EVs to be cheaper than their ICE equivalents by then, causing an unprecedented demand for lithium-ion batteries.

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