Mines and Money London 2011
This post concludes the archives of my Global Mining and Financing Issues Blog that I was running 2009-2011. At this time the Blog was visited daily - I got over 300,000 pageviews from all over the world. The Mines & Money 2011 show was my last effort with Earthstone Holdings, after that - I moved to other businesses in Indonesia (one other Blog in Indonesia, though not a big one, was Oil and Gas Issues in Asia (2013) where I covered some topical issues). I do hope that this archive may be of a use for scholars and professional, since some information presented is more or less actual. I witness the interest now with daily hits on my archive pages.THIS POST WAS ORIGINALLY PUBLISHED AUGUST 01, 2011Mines and Money London 2011December 6-7, 2011, Earthstone sponsored Mines and Money London 2011 Conference at Business Design Centre, Islington, London. It is well known that London is one of the financial centers of the world, and this event served its purpose for the global mining industry to cultivate long term partnerships with its mining stakeholders and investors. Despite negative economic news from the Eurozone and the ongoing banking crisis, a lot of investors were present at the Conference. That shows that miners appear to offer good investment potential in a market where other sectors are suffering.Earthstone opened the Plenary Session with the corporate presentation - this report planted the seeds in minds of many investors and industry professionals that followed up with their visits to Earthstone’ Meeting Room As a Special Guest for Earthstone, the delegation of Mali Ministry of Mines, headed by Honorable Amadou Cisse, was attending the show. Corporate top management and officials from Mali were engaged in a number of fruitful negotiations and discussions with investors and mining professionals on development of mining projects in West Africa
THIS POST WAS ORIGINALLY PUBLISHED AUGUST 01, 2011Mining 101: Reserves and ResourcesA recent publication of U.S. Geological Survey Mineral Commodity Summaries 2011 lists a comprehensive data on major commodities – worldwide and in the USA.As an example, here is the latest data on iron ore: Besides all factual data, there is a nicely complied APPENDIX C—Reserves and Resources, that in concise language explains salient notions that are associated with these two terms.“Reserves may be considered a working inventory of mining companies’ supply of an economically extractable mineral commodity. As such, magnitude of that inventory is necessarily limited by many considerations, including cost of drilling, taxes, price of the mineral commodity being mined, and the demand for it. Reserves will be developed to the point of business needs and geologic limitations of economic ore grade and tonnage. For example, in 1970, identified and undiscovered world copper resources were estimated to contain 1.6 billion metric tons of copper, with reserves of about 280 million metric tons of copper. Since then, about 400 million metric tons of copper have been produced worldwide, but world copper reserves in 2010 were estimated to be 630 million metric tons of copper, more than double those in 1970, despite the depletion by mining of more than the original reserves estimate.”I recommend to download the brochure, as it is a useful and handy reference material in everyday operations for miners.
Mining News on Internet – July 2011 Ranking
THIS POST WAS ORIGINALLY PUBLISHED JULY 17, 2011Mining News on Internet – July 2011 Ranking Continuously monitoring industry news, I noticed that at this time the use of Internet by miners is rather modest. In fact I was in discussion with organizers of a mining conference in London last May to make a presentation on this issue, however, they thought better of it (not important issue) and it never happened. Indeed when one Googles the words -- it is obvious, as compared to other industries – almost 2.5 times less hits, than for oil and gas (to say nothing about agriculture):To get a well-defined picture, as to what sources are available now, I have performed the search with top 3 Internet search engines, and have located 31 information resources that are currently available with up-to-date information on mining. I have used Alexa Internet Service – based on its results I have compiled the following ranking.The "Traffic Rank" measures the site’s popularity and is calculated using a combination of average daily visitors to the site and pageviews over the past 3 months(as of July 16, 2011). The site with the highest combination of visitors and pageviews is ranked #1. The “Audience” column is representing (if available) Alexa’s results on biggest share of visitors to this site.Position Title Traffic Rank Country Audience 1 Commodity On Line 33,895 India India, Asia 2 InfoMine 36,968 Canada USA, Canada 3 MBendi: Information for Africa 53,123 South Africa South Africa 4 MineWeb 64,354 Intl., South Africa USA, Ecuador, Netherlands 5 Mining Weekly 117,865 Canada South Africa 6 www.mining.com 128,875 Canada Canada 7 Metal Miner 237,349 Intl., USA Mexico 8 British Geological Survey 253,040 UK UK, Europe 9 Mining Technology 269,314 UK USA, UK 10 www.miningne.ws 400,814 Intl., South Africa Australia, India, Pakistan 11 Mining Journal 628,450 UK USA, South Africa 12 Northern Miner 637,081 Canada Canada 13 Mining Nerds 658,020 USA USA 15 Minesite 778,126 UK 16 AMM 896,495 USA USA 17 Mining Top News 949,122 Intl. Indonesia 18 Mining News 1,102,436 Australia Australia, South Africa 19 Pit and Quarry 1,512,516 USA - 20 Iran Mining 1,870,869 Iran 21 Republic of Mining 1,902,411 Canada Canada 22 Roskill 2,283,230 UK - 23 Resource Information Unit (RIU) 3,186,075 Australia Australia 24 Engineering and Mining Journal 3,476,302 Intl., USA - 25 Mining World 3,514,410 UK - 26 Intierra 4,920,386 USA - 27 Canadian Mining News 5,717,895 Canada - 28 BuySellMines 6,787,744 Indonesia - 29 Miners News 7,691,755 USA - 30 mining-info.com 8,253,688 Intl. - 31 Investment In Mining And Mineral Exploration 9,497,388 USA - 32 Asian Mining 19,029,650 Australia - Analyzing the data, it is obvious, that there are three white spots on the international mining map: Europe, South America and MENA countries. There are no specialized mining information sites for these areas (or probably they are – but not prominent on the Web). Interesting exception is the #20 Iran Mining – the only MENA country, noticeably represented in the search engines and having a decent traffic.Probably the readers may submit more entries to the table – and I hope I can update it????P.S. I humbly inserted this Blog, which surprisingly for me is at its 28th position….. Update.All of a sudden I got the mail with reference to a good Australian mining information resource:Mining IQ- a mining guide and mining learning portal and an international online community focusing on providing mining professionals with mining industry knowledge, information and an online networking and communication platform. Alexa provides the traffic rank as 3,237,697, which is around 23rd in my ranking. Notable observations: A mining podcast pageSome notable discussions:Mineral Exploration SuccessInvesting in Mining Resources: Industry Q&A with Mark ClarksonInvestment in Rare EarthsIndustry Q&A: How Can Mining Companies Increase Their Finance Chances?
Investing in Iron Ore - New Input from PwC
THIS POST WAS ORIGINALLY PUBLISHED JUNE 06, 2011Investing in Iron Ore - New Input from PwC PricewaterhouseCoopers just released its new report: Mine 2011: The game has changed. This is another source of valuable mining statistics that helps strategic decision making. These documents (this is already the 8th) “provide a comprehensive analysis of the financial performance and position of the global mining industry as represented by the Top 40 mining companies by market capitalisation.” Some comments are already available on the Internet:Resources boom to keep rollingTop mining firms seeing lower profit margins - PwCAnd many more to come…I just want to point some noticeable elements:First, there is a growing confidence among the management of the companies: “the CEOs hold a higher degree of confidence in the future than we have seen in the last few years.” But there are expectation for volatility. And some other:“A comparison of net assets to the market capitalisation of the Top 40 shows that net assets have remained at 35% of market capitalisation, demonstrating that market capitalisation has only increased by the profits the industry has generated and retained in 2010.” “Strengthening demand for primary resources, predominantly from emerging economies, has been the big story for 2010. End user need for minerals shows no sign of letting up…” “Despite record revenue and net profit, margins continue to be impacted by increased operating expenses. “Recent events however have indicated a growing trend towards the vertical integration of yesteryear. Vertical integration strategies vary, but recent trends show that it has been largely upstream as metals companies and end-users seek to add mining assets, and miners add infrastructure, reintroducing the question of ‘what makes a mining company’? Countinuing my earlier discussion about investing in iron ore producers, here we see a good comparison of commodity process, which comes very handy, if as investor, you are facing a decision – where to invest: And the other one, with this note “Coal, copper and iron ore account for 63% of Top 40 revenue (2009 - 60%) generated this year. Iron ore revenues increased by $35.8 billion in the year and represented 20% of total revenues, up from 15% in the prior year.”: In fact, this goes in line with the ideas that expressed in my previous postA lot of other valuable information is represented in the report that may be downloaded here.
Indonesia – Mining and Investments with 2014 Global Update
THIS POST WAS ORIGINALLY PUBLISHED MAY 20, 2011Indonesia – Mining and Investments with 2014 Update Emerging markets offer a great opportunity for investors. Indonesia is one of the most prominent countries among this list. One of the interesting questions, that is prominent now is – after investing in China and India – what countries would be in the top pick by investor community? It seems that for now Indonesia is a solid candidate for this list.In my recent posts I tried to cover some of the issues:Investing Coal Mining Business in IndonesiaIndonesia next Asian stop for buyout firmsInvestments in Indonesia: BKPM Head talks to Jakarta Post As well as some of the recent investment announcements regarding iron ore are in Iron Ore in Indonesia: Much Ado About …? Recently I was invited to be a Guest Speaker at the FUTURE MINING 2011 INDONESIA conference in Bali, Indonesia, where I will speak about investors’ attitude towards the country. So in this small post I would like to make some outline of presentation.The Doing Business 2011 report, released by the International Finance Corporation, ranked Indonesia 121st out of 183 countries in terms of ease of doing business, down six places from last year. This is general approach, but let us look at the mining business. Mining activities in Indonesia have a long history which was initiated during Dutch colonial back date to the eighteen century, whereby the Indonesian archipelago was so called “Dutch East Indie’s territory”. Tin mining in Bangka Island and gold mines in Bengkulu and West Java Provinces were opened by the Dutch during those period in 1930 the Dutch Government introduced “Mijn Politie Regleement No. 341″. After the political changeover in 1965/66, the Government of the Republic of Indonesia enacted Law No 11 of 1967 concerning Basic provision on Mining, to replace Law No 37 Prp of 1960 concerning Mining. Subsequent 2009 Mining Law brought a new dimension to mining activities in the country.In recent years a number of big deals in investments into Indonesian mining as reported:Vallar - a $3bn investment for a 25% in Bumi ResourcesBP has decided to expand its coal-bed methane operations in Indonesia through four new production-sharing contracts. Polo Resources recently executed two $3m convertible loan issues with regional partners to fund development and due diligence costs in relation to coking coal and iron ore opportunities.Last year I have reported in my Blog post Mining Investments - WHERE NOT TO INVEST by Behre Dolbear on the rankings; this year we have a new ranking list. In 2006 Indonesia was ranked 22, this year it is 18. “Indonesia’s composite score rose the most, by 6 points from 21 to 27, reflecting improved economic, mining, and tax policies, management of corruption and the rupiah gaining strength.” - writes Behre DolbearI completely agree to the Behre Dolbear methodology, where the following salient parameters are considered when analyzing investor attractiveness:The country’s economic systemThe country’s political systemThe degree of social issues affecting mining in the countryDelays in receiving permits due to bureaucratic and other delaysThe degree of corruption prevalent in the countryThe stability of the country’s currencyThe country’s tax regime2014 Update The new Behere Dolbear document for 2013 is available at this link. So, here is the updated table: Some observations from the report: “Despite the market’s low activity during former recessionary cycles, there are now significant investments occurring in locations that were once deemed unviable due to the perception of high political risk.”"…capital available to many African projects continues to increase relative to past years.Countries that have remained stable and those that address corruption and social issues have benefited from increased investment and production.""Asia at large and Australia have continued to attract new investment although government participation in the mining sector has increased in part through government-backed companies.""The Middle East region continues to see more mining, minerals, and metals investments as the region’s nations continue to strive to diversify and expand their economies." I have also compiled a short summary of the document: On Indonesia - I would recommend to read the latest post Indonesian Oil and Gas Sector: Legal Framework from SSEK - of the best and leading Indonesian legal firms.
Expanding Mining Worldwide: Political Risks
THIS POST WAS ORIGINALLY PUBLISHED APRIL 16, 2011Expanding Mining Worldwide: Political Risks The changing world brings a lot of changes in the way the natural resources business is conducted. It is now obvious that many companies are looking for new markets that promise new achievements in their quest for adding value – thus they go to the areas of the world that are not exactly encouraging for miners. Thus, the most imperative tasks today is to understand and correlated the risks and measure them across the favorable outcome. In this short post I would like to discuss some ideas in regards to one of the most important risks factors in mining – political.Ernst & Young in their annual report Business risks facing mining and metals just touch one of the aspects of the issue: “Resource nationalism. Mineral-rich countries are ensuring that they are extracting sufficient economic rate for the right of a mining company to exploit that resource. In some instances, governments are looking to replace other areas of lost revenue with further imposts on the mining and metals sector.” Source: Business risks facing mining and metals Yet in 2006 Ben Cattaneo, Practice Leader, Mining & Metals, Control Risks, in his presentation Managing Political Risk in Mining Operations provided this graph, that in my opinion is still factual Now, with all recent and continuing events, the political risks seem to be increasing in their importance. Willis Group Holdings - a leading global insurance broker that is handling risk management and reinsurance in their Willis Mining Market Review 2010 note: “The mining industry is among the most vulnerable to Political Risks in emerging markets. Due to its importance to host economies, mining projects can easily become flash-points for nationalist debate, often leading to governmental expropriations, licence cancellations and contract “reviews”. These experiences are familiar to commodity producers in many countries, especially as resource nationalism resurfaces.” This is good analysis with some specific case studies (including DRC).A week ago PwC released a presentation: Political Risks in Mining. PwC Mining Minds: Monthly executive Breakfast Series. 7 April 2011, Robert Johnston and Divya Reddy, Global Energy & Natural Resources. Source: Political Risks in MiningThis presentation discusses the natural resources and political risks, the key components being: geopolitics, global trends, legislation, regulation, rate-making, comparative analysis, and other. In particular, the authors note that politically risky countries dominate gold and copper supply jurisdictions. They also introduce the frontier markets, as less politically stable places that provide an uncertain operating environment for mining companies, as examples: Madagascar, Mongolia, DRC and others. “Mining companies must, and generally do, treat the management of their relationships with government as a top priority. Governments are, in most cases, a long-term partner in a mine, even if they do not hold an equity interest.” – This is statement for the October 29, 2010 Mining Journal’s Special Report Staying on side. Mining companies use a range of tools to avoid disputes. It in detail analyzes the policies and methods that foreign governments are using in their dealings with mining companies.“Investment protection should be one of the main considerations when structuring a new investment (alongside tax, financing and regulatory considerations), especially in a country deemed to be high-risk.” Alongside with the suggestions from this article there is another way: Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, which provides Political Risk Insurance (PRI) to investors in emerging markets against non-commercial risks, including currency transfer restrictions; expropriation; war, terrorism and civil disturbance; and breach of contract. I would not go into details, that can be found at the Agency’s Web-site, but I recommend to look into the projects that are supported by MIGA at their MINING SECTOR PAGE (or download the brochure that explains their mining projects), and read the Blog Post on possible political risks in Africa in the view of latest world events. And here are some useful documents that I recommend to read: Old problems remain, new ones crop up: Political risk in the 21st century, Jo Jakobsen, Norwegian University of Science & Technology, NTNU, NO-7491, Trondheim, Norway – more theoretic paper Business risks facing mining and metals by E@YManaging Volatility Risk in mining investment decisions by Deloitte Measuring and mitigating risk in mining operations Political Risk Insurance Critical for Global Mining Projects By MIGAManaging Political Risk in Mining Operations Ben Cattaneo Practice Leader, Mining & Metals, Control Risks Political risk and the mining sector Tanya Costello Associate Director, Control RisksBankable feasibility studies for mining projects D. S. Evans, Sr. Partner, CSC Project Management Services Calgary Mitigating Political Risk In International ProjectsChallenges to Cross-Border Investments in Mining in Africa
Iron Ore Miners – Can We Get Financing? - with Update
THIS POST WAS ORIGINALLY PUBLISHED APRIL 27, 2011Iron Ore Miners – Can We Get Financing? - with Update Today iron ore seems to be an extremely hot commodity – that is a big demand. Hundreds of documents are produced daily that describe various aspects of this ore – everything associated with it. In my shot post I would like to give an update on the most burning issue for miners – can we get money to fund our iron ore project? At the first glance, it seems that – without any doubts – lots of investors are willing to invest. However, there are lots of projects that are very sound itself, but here come a substantial intricacy in conveying our message to investor.In my Blog earlier I touched a number of issues, associated with the work that miners should do to prepare the company for sale/investment:Want to Sell a Mining Property? - CONSULTANTS' ROLESWant to Sell a Mining Property? Due DiligenceMining Companies: Where to Get Money?Mining Companies: Where to Get Money? - An Eyeball on InvestorsMining Companies: Where to Get Money? - Investor PresentationDeloitte: Develop a New Mining StrategySeeking Alpha on Iron Ore BasicsThere are a lot of materials that are helpful in preparation for investor discussions. An extremely interesting document that has a lot of advice was recently released by The Boston Consulting Group: Value Creation in Mining Companies . That is a very cognitive reading material for mining professionals (in particular the “Value Creating Questions for Mining Executives”). I would however, pinpoint one of the suggestions for the Junior Mining companies: “COMPANIES THAT DEVELOP THE INTELLIGENCE AND AGILITY TO PLAY IN THE JUNIOR MARKET WILL GAIN A CLEAR EDGE”.Indeed, intelligence and agility – these are the sources for success. Talking about intelligence – what is the picture with iron ore?Back in August 2010 International Business Times stated: most investors in this sector are ignoring a more important medium term trend, the looming oversupply of iron ore as new mines and expansions come on stream. (Iron Ore: Watch The Emerging Glut). Here is also a well-known graph form McKinsey: Today, we have this news: SHANGHAI, April 27 (Reuters) - Global supply and demand conditions for iron ore may reverse sooner than expected after a years-long investment frenzy, the chief of China's leading steelmaker said. "In the last decade, iron ore has turned into a crazy stone from an ordinary stone," Baosteel Group chairman Xu Lejiang was quoted as saying by the Shanghai Securities News. The current cycle was coming to an end and massive investment over the past 10 years would soon translate into an iron ore supply surge, said Xu. (China's Baosteel warns of end to iron ore investment frenzy – paper) The more gloomy picture comes here:“Iron ore reserves at present seem quite vast, but some are starting to suggest that the maths of continual exponential increase in consumption can even make this resource seem quite finite. For instance, Lester Brown of the Worldwatch Institute has suggested iron ore could run out within 64 years based on an extremely conservative extrapolation of 2% growth per year.”Indeed, there is a lot of discussions recently on new areas for iron ore mining:Barents Region investment boomFor instance iron ore mines, that are now increasing production and new opening in all four countries; LKAB in Gällivare-Kiruna increase the production, Sydvaranger in Kirkenes has re-opened an old mine, Northland mining company are opening new mines in the Swedish-Finnish border areas around Kolari and Pajala, while Russia’s Severstal invests in the iron-ore mines in Olenogorsk.An interesting discussion is proposed in this piece by The International Resource Journal: Are we on the way to Pilbara Two in West Africa?. This is rather speculative announcement regarding Rio Tinto : “moves were made to suggest that majors in the nation’s iron ore province could be considering shipping out to look for more favourable ground, and West Africa appeared to be the destination up for discussion.”By RBC Capital Markets’ calculations, planned African projects total at least 500 Mt/y, at an all-in capital cost of over $50 billion over the next eight years. (African iron ore projects: potential for new supply).And other exciting comparison: that concerns Africa and Artic Circle deposit: "London-based Rio Tinto (NYSE: RIO) claims that the Simandou deposit in the West African country of Guinea – which it controls with a 53% stake – is the largest iron ore deposit in the world. Reserve estimates for Simandou, however, are only 2.25 billion tons, which is less than Baffinland’s 4-billion-ton-potential but more than Baffinland’s “official” estimate of 854 million tons."For those, interested to invest in iron ore mining companies, a good example is presented by MoneyWeb: The Investment Case - Kumba Iron Ore. “As a focused, iron ore-mining business, Kumba has benefited from the more than five-fold increase in the price of this resource over the last ten years” – with detailed structure of investments.Top Metal: Iron Trumps Copper - this is the item of the ANNUAL SURVEY OF GLOBAL MINING INVESTMENT that is published in the latest ASIA Miner March/April 2011 issue“Iron ore investment has surpassed that of copper with a project pipeline of $162 billion—compared with $155 million for copper— while gold and nickel are at much lower levels ($83 billion and $69 billion, respectively) distantly followed by the sector, valued at $15–$20 billion, in which uranium, lead/zinc and PGMs are to be found. Iron ore outpaced the other metals in terms of new investment, registering an increase to $28 billion. New gold project investment totaled $7 billion and copper to just under $6 billion in 2010.The average iron ore project investment was almost $1.3 billion, up from $750 million, while the average gold project has remained steady at $204 million. Ir on ore’s share of total new investment announced in 2010 increased again after a decline in 2009, reaching 47%. The continuing demand growth for steel and the concomitant high prices paid for iron ore point to a strong increase in iron ore production in the next three to five years.”And some more news URLs:African iron ore glowsBHP to spend $9,5bn on Australian iron-ore and coal expansions Rio Tinto in $1 bn iron ore investments in Australia, CanadaStrike while the iron is hot - and overview of iron ore mining companiesAnd finalizing my brief overview: Is iron ore the new gold? – that was the question that was raised by one of the investor consulting Website.“There are several ways to play iron ore. One is to invest in a global metals exchange traded fund. The other is to invest in the big three iron ore producers listed above individually (the three collectively control over 65% of the market) or the third, for those with the stomach to do it, is to invest in junior iron ore companies- big upside, big risk…”Thus, to be or not to be? Can iron ore miners get funds for their projects? Or this is too risky ?Think about intelligence and agilityUPDATE: "How long until the window on rising iron-ore prices closes? Global demand is driving prices higher and shipping costs are at historic lows. But only companies poised to get into production quickly will be able to capitalize." This is from just published interview Geordie Mark: Global Demand for Iron Ore on Rise
Seeking Alpha on Iron Ore Basics
THIS POST WAS ORIGINALLY PUBLISHED APRIL 10, 2011Seeking Alpha on Iron Ore Basics Today the Seeking Alpha publishes a very informative material on iron ore: The Important Factors to Consider When Investing in Iron Ore by James Duade. In my opinion, this is very useful for both investors and mining companies, as the author pinpoints some crucial facts."... the market is beginning to see quite a few new mining companies spring up. For instance earlier this month we saw a Canadian IPO for an iron ore company in the Ukraine called Black Iron. Additionally, some iron ore firms are starting to attempt to develop deposits in relatively remote areas like Zone Resources (ZRESF.PK) in Northern Canada. This article will look at some of the more technical aspects that an investor should consider when conducting their diligence on a firm in the iron ore sector. The goal is to give investors a few tools that they can use to make intelligent decisions about the positions they decide to take."Besides, explaining the iron ore basics, Mr. Duade also mentions hematite, taconite and magnetite -- and those companies that are major producers. Also worth reading is the discussion of Platts Iron Ore Benchmark index.Overall, the material is not something very new and exciting for the mining gurus, but for the investment purposes -- it is worth reading."Intelligent investors will pay close attention to the location of the mine, the cost per ton--including transportation of the iron to port--and the type and grade of the iron product the firm is selling."You may read it at this link.
Zinc Mining – is it Worth To Invest?
THIS POST WAS ORIGINALLY PUBLISHED APRIL 09, 2011Zinc Mining – is it Worth To Invest? “Zinc supply is constrained in the near term by a depletion of large mines and a lack of similarly sized and quality mines ready to replace them. We predict a strong outlook for juniors in the near future, particularly for projects that can be out into production in the years between 2013 and 2020. During this time, we predict that new mine openings will at best keep pace with mine closures, keeping supply flat while demand continues to grow.” This is the summary of a noteworthy document Global Zinc Drivers by Oreninc – a small U.S. research firm providing independent, relative full-sector coverage of micro-cap equities. The company analysts believe that in the 2012-2016 there would be “a global renaissance” in zinc mining, and to prove it they provide this graph: Due to the imminent closures of many of the largest zinc mines in the world, over the next decade the current projects on the drawing board are only going to be able to keep supply relatively flat, not increasing. The red, blue, and green bars show the relative amount of production expected to be gained and lost, and the purple bar shows the net change in zinc supply for that year.Source: Global Zinc Drivers by OrenincCredit Suisse in their note Think zinc! gives a detailed analysis of trends in zinc market: “Overall, zinc could be in a very strong structural demand position in the longer term” – “zinc is a new iron ore” – states the note and gives the following graph Source: Credit Suisse, Think zinc!These valuations were made at the beginning of 2010, and initially 2011 supports the data: “The recovery in global demand in 2010 was met by a strong rebound in refined zinc production of 10% as concentrate availability and prices improved. This trend looks set to continue, with gains for both mine and refined production likely over the next few years” – this is statement of a recent post of The Economist’s EIU. However, there would be a moderate growth:“The zinc price remains above the bottom of its historical range in real terms compared to inventories as weeks of consumption. With inventories high and capacity utilisation below full effective rates, the fundamentals do not justify current price levels. In a surplus market, the marginal cost of production would normally be expected to be a key determinant of prices. Our cost analysis suggests that marginal cost at the 90th percentile of the cash cost curve is roughly $0.65/lb. While we believe sufficient closures to balance the market would likely occur at prices higher than $0.65/lb, the analysis points to downside risk in the near term. We forecast an average price of $0.97/lb in 2010, $0.90/lb in 2011, $0.90/lb in 2012, $1.00/lb in 2013 and $1.30/lb in 2014. Our long-term price forecast is $0.90/lb in 2010 US$.” --- RBC Capital Markets Over the last months zinc prices plunged – “Indeed, zinc was the only major LME-traded metal to record a price decline in 2010” – notes Reuters. In March 2011 it was the lowest performing metal at LME; and analysts are talking about an oversupplied market. This current situation is examined in detail in Zinc Price Falls on Substantial Surplus, at the same time pointing that “zinc concentrate is in a deficit going forward”. Understanding the current situation, I still think, that regarding the well-known commodity cycle phenomenon, in the long run investment in zinc production will turn profitable – and the proof of it may be the latest news item: “Minmetals Resources seeks copper, lead, zinc assets as top priority”.And at the end of my short post, more information for the miners, that are thinking about development of zinc production: AME Mineral Economics provides this interesting table on Zinc Mine costs:Our Lead & Zinc Mine Production Cost Report covers operational data over a 10- year time span, representing around 85% of Western World zinc output and 82% or world lead production. The multi volume analysis estimates production costs in 25 countries, including many of the major facilities around the world. Cost estimates, covering the production process from concentrate or finished metal are provided A detailed analysis of specific of zinc and gold mine costs is made in presentation Introduction to Nyrstar Mining. And a comprehensive source is World Mine Cost Data Exchange that provides mine cost spreadsheet models and operating cost information based on verifiable engineering and production data and peer review by mining industry analysts from around the world. Here are also some useful links: Financing a Giant Zinc-Lead Mine in Changing Markets by Selwyn Resources detailed analysis of market, etc. NYRSTAR 2008 International Zinc Conference Presentation – market analysis The International Zinc Association (IZA) 2008 market Study on the South and Southern African Zinc Market
Gondwana Junior Miners – Do They Feel Good?
THIS POST WAS ORIGINALLY PUBLISHED FEBRUARY 16, 2011Gondwana Junior Miners – Do They Feel Good?That is a really exciting period that we all are living in. Even the nature with its changing climate is reflecting all thrills and shake-ups that are happening today. And I think that major contributor to the world’s development is the “V” part of Nouriel Roubini’s LUV recovery. However, I would suggest to look into new dimension. A geologic term that is quite popular among the pundits: The Gondwana supercontinent that included Antarctica, South America, Africa, Madagascar, Australia, Arabian Peninsula and India. This picture shows the history:Source: Gondwana supercontinent underwent 60-degree rotation during Cambrian explosionAlthough it was about 500 million years ago – isn’t it ironic that the current world economic order revolves around the same countries? That means something? And in my opinion – that creates a new mining group: The Gondwana Miners – that would definitely influence and shape the next century developments. As an example – there is a news flash that Colombia may increase its coal supply to Europe – which many analysts look at rather skeptical.The Mining World Order is experiencing profound changes that directly affect the business. Some of the industry gurus have their own view and pinpoint to the classic ‘commodity cycle’ aspect. However, what happens if this time the cycle would lead to some changes that are established for good???Here are some major events that, in my opinion are shaping The Mining World Order at this time:1. The boom in metals and commodities, there is no doubt now that this is the result of “V”-part recovery in Gondwana countries. Emerging markets’ population is driving demand for mining and energy. Iron ore, copper and coking coal are the leaders. In fact, refer to the latest statement by Rio Tinto’s representative More mining demand in next 20 years than in past 10 000 years – Rio Tinto . According to some experts, it will take 10 to 15 years — for global mining supply to catch up to the surge in emerging market demand.2. This boom results in establishment of huge mining entities: e.g. Mt.Isa Mines – the biggest mining house in the 60-ies had market cap around $4.4 Billion in current USD; while BHP Billiton current number is around $ 250 Billion. In fact some news wires carry their reports under the heading “It is Good To Be a Miner” – referring to the news on tripling profits of Rio Tinto, and other major players. Big mining never had it so good – posts Reuters today in its commentary.3. More and more pronounced are the concerns about the “critical metals” shortage: rare earth elements, molybdenum, vanadium, manganese, lithium, niobium, cobalt, tantalum, tungsten, indium and others4. New resource deposits are becoming harder to find and take longer to develop; the most easily accessible resources being already exploited. However a lot of opportunities still exist – in Gondwana – and mining juniors are rapidly exploiting them – acting quick and efficient.5. Changes in the way mining financing are done. The big companies accumulated lots of cash and it runs out that is more practical to revert to M&A, rather than prospect and develop. And more spice is being added to financing by the drastic announcements that were made last week: mergers of major stock exchanges – LSE-TSX; Deutsche Borse and NYSE Euronex; Hong Kong Stock Exchange – CBOE (?), Nasdaq (?); exchanges from Peru, Colombia and Chile are merging; Singapore Stock Exchange – Australian Stock Exchange. This all will directly affect those miners that are looking into raising money through public offerings. In fact, today’s news wires carry the item that Chinese companies are turning to equity markets, rather than debt borrowing. This process is clearly the itchiest for all mentioned exchanges – the recent days saw many promotional news on each of them – like this one that came out today: Toronto Stock Exchange is an international leader in the mining world6. The response of the industries that support mining is also noticeable. Consolidation of the law firms takes place –as it was reported today: GLOBAL law firm Clifford Chance has unveiled a merger with two leading Australian practices to give it greater exposure to the booming resources trade with Asia.So, where are the junior miners in this picture? As usual, I think, that they trying to benefit the most:Thoroughly analyze the global market and all changes that are happening in commodities – as the result timely react all these. While big mining houses have a lot of cash, they are pretty limited to expedient execution of their plans; and in many cases they are not interested in small and medium-sized opportunities. Sometimes it happens that the most accessible areas of the world still have small projects that can be consolidated.It easier for junior miners to secure financing and do it is a much quicker way form meeting the investors to execution of projects.And here is a perfect chance to show up at the Global Market, sell equity or the venture as the whole and start the total mining process cycle with other project.So, may I finish on an optimistic note: Gondwana junior miners are in the right place and at the right time in the new Mining World Order.
Investing in Africa: Botswana Power Sector
THIS POST WAS ORIGINALLY PUBLISHED MARCH 16, 2010Investing in Africa: Botswana Power Sector According to many analysts Botswana has a reputation of being the best managed and among the most economically successful countries in Africa; with credit rating being the highest of any African nation. The Government of Botswana is committed to creating an attractive climate for foreign investment. There are no foreign exchange controls, no legal distinctions are made between domestic and foreign companies, profits, capital, dividends and interest can be freely remitted without limitations, foreigners can invest in the stock exchange and nationalization of property is forbidden by the constitution. Most foreign investment is in the mining sector.In the mining sector the diamond one is critical to the economy – it accounts for 30% of GDP and 50% of government revenue. Botswana historically relied on imports to meet its growing demand for power (in 2008 the peak demand was 500 MW and projections for 2012 are around 600 MW). In 2008, 80% of the electricity supplied in Botswana consisted of imports from adjacent countries, South Africa, being the major supplier. The remaining 20% is generated by the country’s only generation plant, Morupule A, an old and quickly becoming obsolete plant. Quite recently a new 70 MW APR diesel power station was commissioned near Francistown. Coal generates virtually all the electricity. There are no indigenous sources of oil, hydro power or natural gas. The electrification rate in the country is 39% – which was the huge step in development. Of all the energy that is consumed, coal accounts for 31.5% of the total, oil 36.5% and biomass 33.1%.Morupule coal field is the major energy source – it has estimated 9 bln tons of reserves. So, trying to resolve the energy, various efforts are now under way. CIC Energy is developing the Mmamabula Energy Project which involves constructing a coal fired power facility and a coal mine. In March 2009, it signed a contract with the Shanghai Electric Group to construct a 1,200 MW power plant. It is expected to be completed in 2014. Morupule B Project was launched in February. Its first objective will be achieved by adding 600 MW new capacity through 4 units of 150 MW each, adjacent to the existing Morupule A power station, and associated transmission lines and substations.Botswana’s own resource options include coal, solar, and prospective coal bed methane. This good table is provided in the World Bank document I do recommend all investors to read this document – it has a lot suggestion for investments in Botswana energy.And some useful links:BOTSWANA MORUPULE POWER PROJECT Botswana Power Corp
Uranium Mining in Africa
THIS POST WAS ORIGINALLY PUBLISHED DECEMBER 18, 2010Uranium Mining in Africa Today’s news carries out this report about the latest events in uranium mining in Niger:Radioactive spill at AREVA Uranium mine in Niger"Johannesburg, December 17, 2010 – Greenpeace has today received and verified reports that since December 11th, more than 200,000 litres of radioactive sludge from three cracked waste pools has leaked into the environment at the SOMAIR uranium mine in Niger, operated by French energy company AREVA..." Those interested, may download the Greenpeace Report: AREVA’s radioactive legacy in the desert towns of Niger that among other issues discusses the current state of world uranium mining, which is shown on this map from the publication:
Zambia: Update on Mining Operations - Part IV
THIS POST WAS ORIGINALLY PUBLISHED JULY 03, 2010Zambia: Update on Mining Operations - Part IV In this part of our series I try to focus on Chinese involvement with Zambia’s mining. This is a big story itself, in the light of China’s plans in Africa. In its latest issue the TIME magazine mentions: “China is not the only nation that has noticed the opportunities in Africa, but it is the one that has taken them most seriously, in ways that may change not just the region's economic landscape but its political one too.” I highly recommend to read this TIME article – it has a good analysis of Chinese intentions in Africa.These are some news items that are worth to mention:The Post Newspapers Zambia on 02 June reports that that Chinese investments in Zambia have reached about US $2 billion. These all went into mining sector and in Multi – facility Economic Zones (MFEZ). Part of the $2 billion – about $300 million – has gone into the development of the Mulianshi MineThe Steel Guru reported that on May 12 the China Development Bank Corporation announced that it will provide $5 billion USD of loans to companies involved in Zambia’s mining sector as part of the agreements signed between the two countries since 2007.In May Lusaka Times reported that China Non-Ferrous Metal Company’s Luanshya Copper Mines is going to recruit 1,000 employees for the beginning of production at the Muliashi open pit mine, taking the total number of workers to more than 3,000. CLM also plans to make an additional investment of more than US$150 million to rehabilitate infrastructure at Luanshya Copper Mine this year. Luanshya is planned initially to produce annually 11,000 tons of ore. The second open pit mine – Muliashi - is expected to have production capacity of 500,000 tons of copper ore per year.Within the limits of my Blog, I want to trace China’s activities in Zambian mining industry. These activities are very prominent when you travel from Johannesburg to Lusaka – about half of each flight is filled with Chinese, many of them barely speaking English.The biggest Chinese company that operates in Zambia is China Nonferrous Metal Mining (Group) Co., Ltd. (CNMC) that is under the management of the State-owned Assets Supervision and Administration Commission of the State Council. This is a pioneer among Chinese enterprises to implement the “going abroad” strategy and to carry out international investment and cooperation in nonferrous metal mineral resources. Among other projects, we have to mention the following Zambian ones.Operational:Chambishi Copper Mine,Chambishi 150,000-ton copper smelterChambishi Leach PlantChambishi Sulfuric Acid PlantLuanshya Copper Mines (started copper production on March 26, 2010 with investment of $ 300M USD) The projects under construction and development include:Zambia-China Economic & Trade Cooperation Zone,Western ore body of Chambishi Copper MineHere is how the TIME magazine illustrates China’s involvement in Zambian mining:Chambishi Copper Mine was obtained by CNMC through an international bid in 1998, at which time CNMC also obtained the use right to 41 sq. kms of land on the surface of the mine for a term of 99 years. The mine, with resources including 5 million tons of copper and 120,000 tons of cobalt, and involving a total investment of $ 160M USD, is the first and, to date, the largest nonferrous metal mine overseas approved by Chinese government for development and construction. Construction began in July 2000 and the mine opened for production on schedule in July 2003.Chambishi Copper Smelter whose designed annual capacity is 150,000 tons of blister copper bears total investment exceeding $310 M USD. The smelter started construction in November 2006 and commenced production by the end of 2008. This project will further improve industrial chain of Chambishi Copper Mine, create nearly 1000 jobs and increase the local export volume by $450M USD. In general, CNMC’s investment in Zambia has exceeded US$ 400 million. This is how the smelter looks.Sino-Metal Leach Zambia Limited and Sino-Acid Products Zambia Limited -- In order to utilize the resources and infrastructure of Chambishi Copper Mine, Sino-Metal and Sino- Acid with total investment of $25M USD was built as an extension of nonferrous metal industrial chain. Sino-Metal and Sino-Acid commenced production on Sept. 8th, 2006, with 300 personnel.In April it was reported that the Zambian Government has signed a $600M USD agreement with China Non-Ferrous Metals Limited (CNMC) for the extraction of copper from the Mufulira Tailings dams to breathe economic life into the liability that was left over during the privatization of the Zambia Consolidated Copper Mines-Investment Holdings (ZCCM-IH) assets. This agreement covers tailings dams 8 and 10 reprocessed. Sino-Metal Leach Zambia Limited will run the Mufulira Tailings project but this will be dependent on the results of the feasibility studies to be conducted at a cost of $5 million. Another Chinese company that in January 2010 acquired a substantial part of Albidon Ltd. is the largest nickel producer in Asia – Jinchuan Group. Albidon is an Australian exploration company with its activities is focused on the Munali Nickel project in Zambia, that has the Enterprise deposit and a number of other nickel prospects in the Munali Intrusion, the most advanced of which is the Voyager prospect along strike to the north of Enterprise. Albidon’s license holdings in southern and eastern Zambia also have potential for substantial uranium deposits. Albidon’s investor presentation from 2008 is located here. It has good pictures of Munali project like this one: In April 2010 Jinchuan arranged a $20M USD working capital loan facility for Albidon – which resulted in resuming of Munali mine operations and the increase of operational output.
Zambia: Update on Mining Operations - Part III
THIS POST WAS ORIGINALLY PUBLISHED JUNE 28, 2010Zambia: Update on Mining Operations - Part III We are continuing with the review of mining companies that operate in Zambia.Glencore International AG is a privately held commodity trader, headquartered in Baar, Switzerland.Mopani Copper Mine is an integrated copper and cobalt producer located in the Copperbelt of Zambia.This JV shareholders are:Glencore International AG - 73%First Quantum Minerals Ltd - 16.9%ZCCM Investments Holdings Plc - 10%This June it was reported that Mopani Copper Mines has invested more than USD 1 billion in its operations. Investments in operations in Kitwe and Mufulira mines in the past 10 years has exceeded investment by privatized mines in Zambia.Mopani's operations consist of four underground mines, a concentrator and a cobalt plant in the town of Kitwe and an underground mine, concentrator, smelter and refinery in the town of Mufulira. The capacity of the Mufulira Copper Smelter is being expanded in a phased approach to 870,000 tons of concentrate by the end of 2010. The current capacity with the new Isa smelt furnace is 650,000 tons of concentrate.Also, the company has four SXEW plants (Solvent Extraction and Electrowinning), two at Mufulira and two at Nkana. The feed is sourced from both in-situ leaching, vat leaching and heap leaching. Glencore's initial interest was acquired through a subsidiary in 2000Production capacity255,000MT Copper metal2,200MT CobaltNumber of employees 7,800A very interesting essay on Mufulira Mine can be viewed here. It has this mapAlso for social network fans – here is a link to Mufulira Facebook pageZambezi Resources Limited (Zambezi) is exploring for and developing copper and gold projects in Southern Zambia. Zambezi has identified seven major project areas, which it is actively exploring. The projects have been identified as Iron Oxide Copper Gold (IOCG) type deposits and also shear-hosted gold deposits. These projects are contained within eight prospecting licenses covering an area of over 16,000km². Zambezi currently retains 100% ownership of its projects, although Zambia's abundant mineral endowment has lead Zambezi to seek joint venture partners to assist with funding exploration on some of its projects.Zambezi listed on the London Stock Exchange’s AIM in July 2004, raising £2.5 million. Since then Zambezi has raised an additional £14 million on AIM through subsequent placements, including a strategic placement to Glencore. In July 2007, Zambezi successfully listed on the ASX through an IPO, raising an additional A$15 million.An outdated (2008) Corporate brochure maybe downloaded hereZambezi’s relatively mature exploration portfolio and the removal of the retention license option in Zambia in early 2008 severely constrained Zambezi’s strategic options. ZRL voluntarily suspended trading on the ASX on 30th October 2008 and on AIM on 3rd November 2008 in order to secure the finances of the Company. The Company’s story and current status can be viewed at this delisted Web-site.More coming soon…UPDATE:I would like to pinpoint to today's long piece in the Zambian Watchdog: What is happening to Konkola Copper Mines? This has a very detailed critique of the Zambian mining industry and concludes with the following: "Government should immediately review the entire regime governing the mining sector and to avert the boiling social crisis and despondency that has engulfed the Copperbelt. This will also allow realistic financial benefits to accrue to the country and its citizens. The country should be allowed to collect a credible share of revenue from this wealth. Government has a duty to protect the rights of workers, to provide social service to local communities, and to be an effective regulator in order to protect the environment."
Zambia: Update on Mining Operations – Part II
THIS POST WAS ORIGINALLY PUBLISHED JUNE 24, 2010Zambia: Update on Mining Operations – Part II In continuation of our previous post we are looking at major mining companies in Zambia. Equinox Minerals Limited is an international mining company that is dual listed on the Toronto Stock Exchange and the Australian Securities Exchange (Symbol: 'EQN'). Since 1999 it is operating a 100% owned large scale Lumwana copper mine. Situated 220 km west of the Zambian Copperbelt, Lumwana is now a major open-cut copper mine -- at initial design capacity, Lumwana will process in excess of 20 million tons of ore per year, mined at an average life of mine strip ratio of 4.2:1. Lumwana ore, which is predominantly sulphide, is treated through a large conventional plant, producing a copper concentrate for sale to local and international offtakers. In 2008, Equinox completed a uranium feasibility study (UFS) investigating the onsite treatment of discrete, high grade uranium mineralization contained within the Lumwana mine copper pitshells. The UFS confirmed the potential viability of onsite uranium treatment, producing about 2 million pounds of uranium per year over a six to seven year period.The Latest corporate presentation (of June 21, 2010 can be downloaded at this link ) describes all corporate activities in the country, and has this brief overview:The Company is reporting that Lumwana production for the first two months of Q2-2010 totaled 29,733 tons (66 M lbs) of copper in concentrate - a 46% increase on the average monthly production results of Q1-2010 and a 83% increase on the average monthly production results for the corresponding period Q2-2009. Equinox has maintained its full-year production guidance of 135,000 tons of copper in concentrate for this year, at a cash cost of $1,35/lb.The Company has begun studies into a phased capacity expansion at Lumwana mine. This will examine an initial expansion to 24-million tons, which Equinox believes could be achieved with limited additional spending and within an 18-month timeframe, followed by a further increase to an eventual 35-million tons a year. First Quantum Minerals Ltd., a growing mining and metals company, is engaged in mineral exploration, development, mining and refining. The Company produces LME grade "A" copper cathode, copper in concentrate, gold and sulphuric acid. First Quantum's common shares are listed for trading on the Toronto Stock Exchange in Canada (symbol "FM"), the London Stock Exchange (symbol "FQM") in the United Kingdom. First Quantum is a member of the S&P/TSX 60 index.Investor presentation contains major data on all projects, including the following: Kalumbila Exploration Projects (100%), ZambiaAcquired for cash and shares valued at approx. US$260M in January 2010Main asset is a controlling interest in mineral prospecting licenses covering 2,850 km2on the periphery of the Kabombo DomeIncludes the Kalumbila copper deposit —undergoing infill drill program to establish indicated resource on the open-pittable mineralization identified by drill results to date Also includes the Kawako nickel and the Kawanga uranium prospects Kansanshi Copper-Gold Mine, Zambia80% owned, in ZambiaLocated in the North Western ProvinceAchieved commercial production in 200513-year estimated mine life; 20-year including inferred resourcesExtensive drill program to update reserves and resources estimate completed Bwana Mkubwa Copper SX\EW Plant, Zambia100% owned, in ZambiaProduces copper cathode and sulphuric acid Currently processing the Lonshi oxide ore at an output level of approximately 800 tons per month The company is fast-tracking development of the Kalumbila copper project, which it acquired last year through the takeover of Kiwara Plc. The project could be producing as early as 2013 and could churn out as much as 150,000 tons of copper a year. A very cognitive story on Kansnashi mine was recently produced by the Vancouver Sun (A bittersweet story in Zambia).More to follow…..