Gap between No. 1 and 2 copper miners widens as Codelco output drops 5.3%

Chile’s Codelco, the world’s second largest copper miner, has fallen further behind BHP (ASX: BHP) in the top producers of the metal’s rank, after reporting that its output for 2019 had fallen by 5.3% to 1.588 million tonnes.

BHP, the world’s biggest mining company, churned out last year 1.749 million tonnes of copper and expects to produce between 1.705 million and 1.820 million tonnes in 2020.

The Chilean miner, which hands all its revenue over to the state, attributed the drop in production to unusual bad weather in the first half of the year, strikes at its Chuquicamata mine and operational issues.

Profit for the year fell 17% compared to 2018 to $1.34 billion, while direct cash costs increased 1.8%.

Codelco said the poor financial results were a combination lower gross margins, the downward tendency of copper prices, a reduction in physical sales of the metal and molybdenum and weak results obtained from associated investments,

Colin Hamilton, managing director of commodities research at BMO Capital Markets, had anticipated earlier this week that the copper company would soon have to sell non-core assets.

“Any thoughts of shutting unprofitable operations, however, are off the agenda for now given the need to ensure employment,” he wrote in a note to investors.

Hamilton also noted that Codelco was looking increasingly unlikely to be the world’s largest copper miner from this year forward, as depletion and restrictions prove to be headwinds that are too strong.

The escalating number of Chileans infected with the novel coronavirus forced the company on Wednesday to suspend some key projects, including work being carried out to finish transforming Chuquicamata into an underground mine, and early stage projects at Rajo Inca and Traspaso Andina.

The halted projects are part of a 10-year, $40 billion ongoing plan to upgrade its aging mines and keep up production rates. The scheme, however, could further jeopardized by the effects of the measures taken to deal with the global pandemic crisis.

“Although the country’s government has taken proactive measures to contain the economic and health impacts of the covid-19, the ripple effects of a copper supply shock remain to be seen,” Mariano Pablo Machado, senior Americas analyst at global risk consultancy Verisk Maplecroft, said this week.

Codelco operates seven mines and four smelters, all in Chile. Its assets account for 10% of the world’s known proven and probable reserves and about 11% of the global annual copper output.

Petra Diamonds halts 2020 production target on covid-19

Struggling Petra Diamonds (LON:PDL) has had to halt its production outlook for fiscal 2020 as is closing its mines in South Africa for a mandatory 21-day lockdown aimed at tackling the worsening coronavirus pandemic.

The scaled-back operations will be monitored and managed according to the new procedures put in place to protect the health and safety of all staff, it said.

Petra noted that after the lockdown period is up, it would be possible to ramp operations to steady-state production levels within a relatively short timeframe.

Petra had been already hit by weak diamond market conditions and power issues in South Africa, where it has two of its three mines.

The company, which had been already hit by weak diamond market conditions and power emergencies in the home country, had said in July it expected to produce 3.8 million carats during fiscal 2020.

Petra Diamonds also said it was in “active talks” with a South African lender for near-term financing.

The company has tried to turn around its fortunes after piling up debt to expand its flagship Cullinan mine in South Africa, where the world’s largest-ever diamond was found in 1905. The renowned open-pit mine produces about a quarter of the world’s gem quality diamonds, and the vast majority of blue stones.

The company’s share price collapsed to a record low amid falling diamond prices that forced it to write down the value of its mines in September by almost $250 million.

The financial struggles prompted the miner to launch a restructuring that ended in November with a number of organizational changes.

Petra also owns the Koffiefontein diamond mine in South Africa and Williamson in Tanzania, which remains in full operations.

South Africa’s lockdown to hit Anglo American output

Diversified miner Anglo American (LON: AAL) said on Friday that South Africa’s 21-day lockdown to slow down the spread of the novel coronavirus will impact its iron ore and coal guidance the most.

The company, founded in South Africa more than 100 years ago, said production at its Kumba Iron Ore mine will drop by up to 3 million tonnes this year, while thermal coal output will be reduced by 1.5 to 2 million tonnes.

It noted that the rail and port logistics infrastructure to support the export of both commodities is expected to continue to service the operations during the three-week period.

Production at the company’s Kumba Iron Ore mine will drop by up to 3 million tonnes this year.

Anglo also lowered output of platinum and diamonds, but the National Union of Mineworkers (NUM) told Business Maverik the fact the company is keeping its mines open, though with less employees, was a “reckless and inhuman” pursuit of profit.

Venetia diamond mine, run by the group’s subsidiary De Beers, will operate with staff levels cut to 25%. Mogalakwena,  the world’s largest palladium mine outside Russia, and Mototolo platinum mine continue to operate with a reduced workforce and production, subject to further planning, Anglo said.

Three platinum operations — Amandelbult, Modikwa and Kroondal —as well as the Mortimer and Waterfall smelters, are being placed onto care and maintenance, it said.

Anglo American said most of its major operations in other countries had so far not been materially impacted. However, it has extended a slowdown in construction at its Quellaveco copper mine in Peru and paused work in its recently acquired Woodsmith polyhalite project in Britain.

With governments from Africa to Latin America issuing lockdown orders, disruptions to operations and supply chains are affecting the outlook for industrial and precious metals

Work is grinding to a halt and operations at mines are being temporarily suspended as companies move to enact measures to protect against the spread of covid-19.

Trevali halts Canadian zinc mine amid covid-19 outbreak

Trevali Mining (TSX:TV) has stopped production at its Caribou zinc-lead-silver mine in Canada’s New Brunswick province as challenges presented by the spread of covid-19 have added to woes posed by weak conditions in the zinc market.

“This decision is no reflection on the quality of our team or the operating conditions in New Brunswick, and while the operation is paused, we will study a multitude of options in the Bathurst region to maximize value and reduce the overall cost structure of Caribou,” president and chief executive, Ricus Grimbeek, said.

Challenges presented by the spread of covid-19 have added to woes posed by weak conditions in the zinc market, said Trivali.

Trevali expects to incur one-time costs of $5 million over the next two months related to moving the mine into care and maintenance mode, with costs after that of about $500,000 a month.

Zinc’s primary market is for strengthening steel. In 2016, commodities analysts began warning of a looming zinc shortage and soaring prices. In 2018, it hit $1.60 per pound, but it has since dropped to about $1 per pound.

The slump in prices, combined with high concentrate treatment charges, has made mine operations at Caribou uneconomic at this time, said Trivali.

The Vancouver-based miner will provide “transition assistance” to its workforce of about 370 in addition to severance, though no specifics were provided. 

Long-term zinc demand is expected to recover soon as renewable energy, electric vehicles and a global decarbonization and electrification move should drive demand for industrial metals up.

Trivali has doubled in size since acquiring two zinc mines from Glencore (LON: GLEN) in 2017, bumping it to mid-tier miner status, with a global head count of about 2,000.

Besides Caribou, the company has three other zinc mines — Santander in Peru, Rosh Pinah in Namibia and Perkoa in Burkina Faso.

Barrick unveils 10-year plan to become world’s most valued gold miner

Barrick Gold (TSX: ABX) (NYSE: GOLD), the world’s second largest gold miner, has unveiled a 10-year production plan aimed at becoming the most valued bullion company.

The strategy, outlined in its first annual report since its merger with Randgold Resources, includes boosting Barrick’s production to about 5 million ounces of gold a year, with the bulk coming from its North American operations.

President and chief executive officer, Mark Bristow, said Nevada Gold Mines — its recent joint venture with Newmont (NYSE: NEM) — would be the “value foundation” of its business moving forward.

“Already the world’s largest gold mining complex, it holds enormous potential for growth,” he said.

Bristow warned the new guidance might be impacted if operations were disrupted due to efforts to slow the spread of the covid-19.  He called the pandemic “a global disaster which is changing the way we work and live in a radically disruptive process with currently no clear end in sight”.

In the past year, Barrick has been focusing on its tier one assets and has reported strong performance across the group, particularly at Cortez mine in Nevada and Veladero in Argentina.

It has also boosted production at Kibali, Congo’s biggest gold mine, which last year beat its production guidance of 750,000 ounces of gold by a substantial margin, delivering a new record of 814,027 ounces.

Porgera in Papua New Guinea has tier one potential but faces many challenges in the form of legacy issues and an unruly neighbourhood,” Bristow said, adding the mine had exceeded guidance and the company continued to negotiate a 20-year lease extension with the government.

The executive, who took the helm in January 2019, said the work done over the past year had equipped Barrick to move to the next level.

“All in all, I am confident that we are more than capable of delivering on our promise: to build the world’s most valued gold company,” he said. Bristow  noted that Barrick’s definition of value was more wide-ranging and included factors such as economic benefits, the care with which it treated its people, communities and environments, its strategic focus on long-term sustainability and returns for investors.

Sumitomo halts mines in Bolivia, Madagascar

Japan’s Sumitomo Corp. became on Thursday the latest major diversified miner to temporarily suspend operations at some of its mines to prevent the spread of the novel coronavirus.

The measure affects the company’s San Cristobal silver-zinc-lead mine in Bolivia and Ambatovy nickel mine in Madagascar, as all-day or night curfews have been imposed in those countries.

It excludes any facilities that require continuous operation, such as power plants.

Bolivia declared on Wednesday a national health emergency and extended its borders lockdown to April 15 from March 31. It has also tightened restrictions on movement, permitting only one person per household to go out between the hours of 7 am and noon on weekdays.

At least two cities in Madagascar have been in strict lockdown since March 20 and any transport, except for goods, is forbidden.

There are now more than 2,400 confirmed cases of covid-19 across Africa and growing warnings that the pandemic will cause major challenges for the continent’s under-resourced health services.

Centamin operations in Egypt unchanged despite covid-19

Egypt-focused gold miner Centamin (LON:CEY) (TSX:CEE) said on Wednesday that operations at its Sukari gold mine remained unaffected by covid-19, and that it had stockpiled enough critical supplies to last until the end of June.

The company, which rejected a takeover approach by Canada’s Endeavour Mining (TSX:EDV) earlier this year, said early action taken at Sukari has helped prevent contagion. The measures include a ban on non-essential travel, workforce education, and setting checkpoints at the airport where workers fly into, as well as at the community centre and mine gate.

Egypt’s borders are closed until April 15, but goods and supplies can still cross, Centamin said.

“As of 24 March 2020, Centamin has no cases of covid-19 amongst its workforce and has experienced no material disruption to operations, supply chain or gold shipments,” it said in the statement.

The company, however, has postponed publication of its full year 2019 results “for a minimum of two weeks”, following the request issued on March 21 by the UK’s Financial Conduct Authority (FCA).

A mounting number of miners are being forced to suspend or limit production and processing as governments worldwide implement emergency measures to slow down the spread of the coronavirus.

Egypt’s borders are closed until April 15, but goods and supplies can still cross, Centamin said. It added that is fully stocked with critical supplies for the next three months.

Coronavirus to prompt Codelco lose world’s top copper miner spot

Chile’s copper miner Codelco is set to lose its position as the world’s top producer of the metal this year, as delays in upgrades and expansion projects caused by measures to stop the spread of the novel coronavirus add to the impact of low prices, lack of funding.

The miner, which hands all its revenue to the state, was in the midst of implementing a $40 billion, 10-year modernization of its mines, aimed at maintaining output despite rapidly falling ore grades.

A sustained drop in copper prices — down 22% so far this year — and the lack of readily available government funding while the country deals with ongoing unrest, has cast doubts on Codelco’s ability to keep up production rates.

The impact of the current pandemic will negatively tip the scale, experts say.

Colin Hamilton, managing director of commodities research at BMO Capital Markets, anticipates the miner will have to sell non-core assets. “Any thoughts of shutting unprofitable operations, however, are off the agenda for now given the need to ensure employment,” he notes.

The analyst also sees potential delays at the key El Teniente mine’s new level, which is expected to boost mine’s production to 500,000 tonnes a year, positioning it among the world’s five largest copper operations.

“While operationally the company continues to surprise on the upside, Codelco is looking increasingly unlikely to be the world’s largest copper miner from this year forward, as depletion and restrictions prove to be headwinds that are too strong,” Hamilton says, adding that the impact of the current pandemic will negatively tip the scale.

With the electoral calendar likely being pushed back into the last quarter of the year — including April’s highly-anticipated constitutional referendum — and bleak prospects for short-term economic recovery, Chile’s position as a leading investment destination will face yet another critical test, says Mariano Pablo Machado, senior Americas analyst at global risk consultancy Verisk Maplecroft.

Although the country’s government  has taken proactive measures to contain the economic and health impacts of the covid-19, the ripple effects of a copper supply shock remain to be seen, Machado says.

“Disruption in mining will cascades throughout the scarcely diversified economy and it can have a long-lasting impact if the state’s policies fail to deliver the intended stimulus,” the expert says.

According to BMO’s figures, the implications of the current quarantine-led restrictions in top copper producing nations, particularly in Chile and Peru, remain manageable.

“If we take total Chilean and Peruvian production of ~8mtpa copper contained, the current two-week quarantine would affect ~310kt of copper,” Hamilton estimates. “Currently, we are taking these losses within our disruption allowance, which at 1.4mt is roughly 50% higher than we would run in a ‘normal’ year, to account for the risk to supply chains this year.”

Codelco operates seven mines and four smelters, all located in Chile. Its assets account for 10% of the world’s known proven and probable reserves and about 11% of the global annual copper output with 1.8 million tonnes of production.

Mining in Ecuador comes to a halt as Gov’t orders to stay home

Miners in Ecuador are temporarily halting all activities in the country after the government urged everyone to stay home.

After infecting a majority of Latin American nations, the novel coronavirus has now reached Ecuador’s Galapagos Islands, a UNESCO World Heritage site, with four testing positive.

Australia’s SolGold (LON, TSX:SOLG), which is developing the Cascabel copper-gold project, believed to be one of the largest copper-gold porphyry systems ever discovered, said on Wednesday it had reduced operations across the country.

Chief executive officer, Nick Mather, said the company was actively monitoring employees and will continue to do so for the next two weeks. It also noted that only essential personnel were currently present at the different sites.

Cornerstone Capital Resources (TSX-V: CGP), which holds 22.2% direct and indirect interest in Cascabel, also announced a suspension of activities, but noted certain aspects, including the Alpala prefeasibility study, continued to move forward based on the “substantial” information already gathered from site.

The Ottawa-based exploration company also said exploration at its Miocene project in Chile has also been suspended by farm-in funding partner and operator Newcrest Mining (ASX: NCM) to protect employees and contractors.

Ecuador has attracted a flurry of interest from big miners eager to increase their exposure to copper. The highly conductive metal is in demand for use in renewable energy and electric vehicles, but big, new deposits are rare.

The Andean nation is moving forward with plans to move from an explorer hotspot to mining exporter as its only large-scale copper mine shipped its first large cargo in November.

The South American country plans to attract $3.7 billion in mining investments between 2019 and 2020, up significantly from the $270 million it received in 2018.

Gemfields swings to profit in 2019 but future uncertain

Precious gemstones miner Gemfields (LON: GEM) said on Tuesday that it expected to record $39.1 million in net profit after tax for 2019, compared to a net loss of $60.4 million in the previous year.

The company, which returned to trading on the AIM — the London Stock Exchange’s market for juniors —  last month, also said it wasn’t sure whether scheduled auctions will take place in 2020 due to coronavirus.

“Due to the current global travel restrictions, the company cannot be certain when or if the ruby and emerald auctions scheduled for the coming months will take place,” it said.

Emeralds and rubies miner is unsure whether scheduled auctions for 2020 will take place due to coronavirus.

Gemfields said its Montepuez mine in Mozambique, the world’s richest known ruby deposit, generated revenue of almost $122 million in 2019 versus $127.1 million the previous year. Kagem emerald mine, in Zambia, recorded $79 million in revenue last year, up from $60.3 million in 2018.

One of the reasons behind the company’s improved performance is the recent suspension of a 15% export duty by Zambia, which resulted in an impairment reversal of $21.6 million against Kagem, which provides more than one-fifth of the world’s emeralds.

Gemfields also sold its remaining shares in Jupiter Mines, a steel feed company. Ownership of the shares stemmed from a previous company structure, when it was known as Pallinghurst Resources. This earned Gemfields $30.4 million during the period, to which was added $2.6 million in dividend flow from Jupiter prior to its sale and $4.6 million in market gains due to the rise in Jupiter’s shares on a mark-to-market basis.

The company’s luxury Fabergé jewellery brand revenues slipped last year to $10.5 million, down from $13.4 million in 2018.

The effect of the novel coronavirus pandemic in the company’s upcoming auctions is not the only challenge Gemfields has had to face this year. In early February, 11 illegal miners died at Montepuez following a series of tunnel collapses over three days.

About 800 people had trespassed in previous days and, despite mine staff’s warnings, began undercutting the outer edge of the Maninge Nice 3 mining pit, which led to several ground collapse incidents.

Weeks later, attackers torched a vehicle and injured at least three workers and a security contractor.

Montepuez is located in the northern Cabo Delgado province, one of Mozambique’s poorest regions, home to many unemployed young people.

The mine has faced incursions in the past, and Gemfields last year chose to pay £5.8 million (about $7.6m) to community members residing near the Mozambican mine, in a “no admission of liability” move that settled a claim of human rights abuses brought against it by locals.