Omineca stakes 13 more claims at Wingdam, stock soars

Omineca Mining and Metals (TSX-V: OMM) announced Friday that it has staked an additional 36,000 hectares of mineral claims at Wingdam, British Columbia.  

Omineca now holds 100% ownership of over 39,000 contiguous hectares at its Wingdam project, in addition to the placer claims comprising the Wingdam underground alluvial gold recovery project.   Based on the explorer’s geophysical work from 2018-19 and the review of available SKYTem geophysical data and regional geology, Omineca said it has identified multiple targets for its 2020 lode gold exploration program.  

The newly acquired claims significantly expands the inventory of target structures that will be subject to the upcoming exploration and drilling program at the Wingdam gold project

The geological similarities and location parallel to the multi-million ounce gold resource at Osisko Gold Royalties’ Cariboo Gold Project (formerly Barkerville Gold Mines) provides an exciting exploration opportunity, Omineca said in a press release.  

The newly acquired claims significantly expands the inventory of target structures that will be subject to the upcoming exploration and drilling program at the Wingdam gold project.  The program will specifically target disseminated gold mineralization within the phyllite bedrock units as well as gold associated with quartz veining found at Wingdam and the surrounding area, the company said.  

At market close Friday, Omineca’s stock was up 50%. Shares had been traded 294,420 times, more than 20 times the average daily volume of 13,800. The company has a C$7.6 million market capitalization.   

Minera Alamos starts construction on Santana mine in Mexico

Minera Alamos (TSXV: MAI) has started construction of its Santana open-pit heap leach mine in Sonora state and expects to transition from a developer to gold producer this year.

Between now and then it plans to complete a maiden resource for the project.

“The Santana gold project does not have a completed feasibility study or technical report, however, results from the 50,000 tonne bulk heap-leach test completed between 2018 and 2019 were positive and management built the Castillo mine in Mexico in the same fashion,” Kerry Smith of Haywood Securities said in a research note. “For 2020 we model 15,000 ounces of production in a partial year, followed by 35,000 oz. in 2021 with all-in sustaining costs of ~$800 per ounce.”

The mining analyst estimates the initial capital cost for the project will run to $10 million.

Minera Alamos holds two development projects in its project portfolio that can be quickly ramped up to production, with the potential to produce ~100,000 ounces of gold over the next few years

Smith has a buy rating on the stock and recommends “accumulating shares at current levels.” At press time the company’s shares were trading at 28.5¢ and Smith has a 50¢ target price on the stock.

“Minera Alamos holds two development projects in its project portfolio that can be quickly ramped up to production, with the potential to produce ~100,000 ounces of gold over the next few years,” he stated. “The company’s strategy of finding, building and expanding low capex, near-term projects in Mexico is something that the management team has successfully done.”

CEO Darren Koningen was a founding member and vice president of mine development at Castle Gold and played a key role in the development and commissioning of the El Castillo heap leach gold mine in Durango, Mexico. Argonaut Gold TSX: AR) acquired Castle Gold for C$130 million in 2009.

Federico Alvarez, vice president and project development at Minera Alamos, previously worked for Castle Gold and Argonaut Gold as vice president of operations, supervising production at El Castillo. Alvarez also has good connections in Mexico, where he held the position of director of mining affairs for the state of Guanajuato. Miguel Cardona, Minera Alamos’ vice president of exploration, managed exploration for Castle Gold, leading a three-fold increase in El Castillo’s resources from 400,000 oz. gold to 1.2 million oz. prior to its acquisition.

Breccias typically outcrop at surface at Santana and the company is undertaking a systematic review of the entire 8,500-hectare project area to identify additional surface expressions with potential for resources.

During its bulk test mining phase in mid-2018, about 1,000 oz. gold was recovered.

The company recently closed a $6 million financing with Osisko Gold Royalties (TSX: OR) consisting of 30 million common shares at 20¢, giving Osisko an 18.7% stake.

Minera Alamos also owns 100% of the La Fortuna project in Mexico’s Durango state, about 85 km southwest of the city of Culiacan. Based on a preliminary economic assessment, the gold-silver-copper project would have a mine life of five years based on an initial resource starter pit and average annual production of 50,000 equivalent oz. gold.

La Fortuna has measured and indicated resources of 3.5 million tonnes grading 2.78 grams gold per tonne, 16.51 grams silver per tonne and 0.22% copper for contained metal of 309,800 oz. gold, 1.84 million oz. silver and 7,600 tonnes copper.

The company has a market cap of $116 million. Its 406 million common shares outstanding have traded in a range of 10¢ and 32¢ over the last year.

(This article first appeared in The Northern Miner)

Rio Tinto readies to close world’s biggest diamond mine

Rio Tinto’s (ASX, LON, NYSE: RIO) iconic Argyle mine in remote Western Australia, the world’s biggest and the main global source of high-quality pink diamonds, will close in the fourth quarter this year, potentially pushing prices up and spurring exploration.

The planned closure, the company said, will impact its total diamond output for the year. Rio now expects to produce between 12 and 14 million tonnes of rough diamonds in 2020, down from the 17 million tonnes it churned out last year.

The impact on Rio’s balance sheet, however, are expected to be minimal. Diamonds bring in only about 2% of earnings, while iron ore — the company’s main commodity⁠ — accounts for almost 60%.

Miner expects to see production of rough diamonds drop from 17 million tonnes last year to 12-14 Mt in 2020.

Pink diamonds, already rare, are about to get scarcer as Argyle accounts for 90% of worldwide production of the coloured precious rock. The mine has yielded more than 865 million carats of rough diamonds since it opened in 1983 and, so far, there hasn’t been major discoveries or projects capable of measure up to Argyle in terms of production. 

At its peak, the mine produced 40% of world diamond output by volume. It still accounts for all of Australia’s diamond production.

Rio Tinto estimates Argyle’s direct contribution to the East Kimberley in roughly 6% of the region’s gross regional product.

Analysts and auctioneers alike expect prices for the unique diamonds to go up. Pink stones have already been fetching record prices in the past few months and the closure of their mine source could see that trend strengthen.

Rio Tinto readies to close world’s biggest diamond mine
The Argyle Opus, a 2.01-carat Fancy Intense Pink, round brilliant-cut diamond. (Source: Rio Tinto.)

In 2018, the 18.96-carat Pink Legacy sold for $50 million at Christie’s auction house, breaking the world record for price paid per carat for a pink diamond at auction.

At Sotheby’s Hong Kong October sale, one of the star pieces — described as an “exquisite 10.64-carat vivid purplish pink diamond” — sold for just under $20 million. Rio Tinto’s own data show that the prices for their Argyle pink diamonds have jumped by 500% since 2000.

The mining giant said the decommissioning and dismantling the mine would take five year, after which it would monitor the site for a period to be defined.

Battery nickel price regains premium over metal

Much like prices for cobalt, lithium and graphite, nickel feedstock for battery manufacture ended 2019 on a weak note, as a retreat in Chinese electric vehicle sales in the second half of the year and slower than expected transition to nickel-rich battery chemistries hurt demand.

Battery supply chain and megafactory tracker Benchmark Mineral Intelligence’s new nickel assessment details a nearly 9% fall in domestic Chinese prices for nickel sulphate during December.

BHP decided last year to hold onto its Nickel West operations after many attempts to offload it, and is spending hundreds of millions of dollars switching its Australian operations to battery-grade production

The midpoint price for December was pegged at CNY 26,000 per tonne (~$3,770 at today’s rate) for >22% Ni ex-works material, but Benchmark says the price rebounded towards the end of the month on restocking.

At times in the third quarter sulphate actually sold at a discount to class 1 metal in China and for the year, prices are still more than 5% for the better.

Prices for nickel sulphate in the rest of the world also declined at the end of last year but premiums over LME metal prices were steady at the equivalent of $2,000–$2,450 per tonne (>22% Ni CIF Asia) according to Benchmark data.

Nickel metal traded on the LME went on a wild ride in 2019, from $10,715 a tonne it the start of January to above $18,000 in October, before ending the year $4,000 below its peak.

Benchmark says its sources noted premiums for nickel sulphate are expected to remain relatively stable during the first half of 2020 on expectations of further delays at BHP’s Nickel West project.  

BHP decided last year to hold onto its Nickel West operations after many attempts to offload it, and is spending hundreds of millions of dollars switching its Australian operations to battery-grade production.

Last year, less than 10% of nickel ended up in EV batteries with 70% of supply goes into making stainless steel. Global nickel production is less than 2.5 million tonnes per annum.

Rising civil unrest the latest threat to miners

Global miners will have to get ready to deal with the increasing threat from civil unrest, following last year’s succession of dramatic — and in several cases unforeseen — social explosions in almost 50 countries, including highly popular mining jurisdictions such as Chile, Mali, Guinea, Congo and Zimbabwe.

According to risk consultancy Verisk Maplecroft’s quarterly civil unrest index, released on Thursday, turmoil will linger in 2020, as most nations experiencing ongoing bursts of public discontent lack the tools and ability to handle them.

The experts foresee as many as 75 countries having to deal with soaring public rage over a variety of topics, including economic inequality and political roguery during the next six months.

Other jurisdictions, such as Hong Kong and Chile, which saw the greatest increases in risk over the last year, are unlikely to improve over the next two years, Verisk Maplecroft’s predicts.

Courtesy of Verisk Maplecroft | Political Risk Outlook 2020.

As a result, the number of extremely risky countries in the Civil Unrest Index jumped by 66.7%; from 12 in 2019 to 20 by early 2020.

An ‘extreme risk’ rating in the index, which measures the risks to business, reflects the highest possible threat of transport disruption, damage to company assets and physical risks to employees from violent unrest. Most sectors, ranging across mining, energy, tourism, retail and financial services, have felt the impacts over the past year.

The resulting disruption to business, national economies and investment worldwide has totalled in the billions of US dollars, the consultancy says, citing Chile as an example. The first month of unrest in the copper-rich country caused an estimated $4.6 billion worth of infrastructure damage, and cost the Chilean economy around $3 billion, or 1.1% of its GDP, Verisk Maplecroft notes.

Courtesy of Verisk Maplecroft | Political Risk Outlook 2020.

The consultancy detected that a deterioration in some risk factors could serve as an early warning sign in certain jurisdictions. Out of the 11 elements considered in the Civil Unrest Index, subsidy cuts were the single biggest indicator that the risk of civil unrest was growing in Chile, Lebanon and Zimbabwe.

Inflation and the weakening of mechanisms that allow the channelling of discontent before it erupts into unrest also played a role, Verisk Maplecroft says, particularly in Chile, Hong Kong and Zimbabwe.

With protests continuing to rage across the globe, the consultancy expects both the intensity of civil unrest, as well as the total number of countries experiencing disruption, to rise over the coming year.

Agnico Eagle and BMO execute first Tradewind Origins blockchain transaction

Tradewind Markets, a financial technology company enabling physical assets to be settled and mobilized through digitization, has announced the first ever trade using Tradewind ORIGINS, its provenance management solution.

This transaction between Agnico Eagle Mines and Bank of Montreal (BMO), confirmed by the Royal Canadian Mint, marks the first time economic segregation — typically used with carboncredits — and blockchain technology have been used for precious metals supply chain management.

This allows purchasers of Tradewind’s VaultChain products to choose suppliers that meet their requirements, while addressing the market’s need for transparency. 

Economic, social, and governance (ESG) standards for precious metal miners are becoming increasingly important and investors make more decisions based on ESG performance.

“By differentiating their metals, companies are unlocking the latent value of their production”

Tradewinds CEO

 “This is a long-awaited development for precious metals markets, Michael Albanese, Tradewind Markets’ CEO said. “By delivering meaningful data on how, when, and where these assets were sourced we are providing the ecosystem with greater visibility into the precious metals global supply chain. By differentiating their metals, companies are unlocking the latent value of their production.”

Suppliers of precious metals record detailed information about the provenance and supply chain of the products they mine and source using Tradewind ORIGINS prior to delivery to a participating refiner.

Refiners accept delivery of the material, confirm the ORIGINS data provided by the miner or supplier, and embed the information into digital records of ownership on the Tradewind Platform.

Market participants can then trade precious metals credits on the Tradewind Platform, with visibility into the original supplier and refiner of the metal. In this transaction, Agnico Eagle has sold 5,000 ounces of LBMA-good delivery gold from its flagship LaRonde mine, in Quebec, Canada to BMO.

The Royal Canadian Mint will refine gold from Agnico and tag the digital records of ownership with Agnico’s self-reported provenance information, including the origin of the metal, adhering to high ESG standards.

Market risk, economic growth to drive gold demand this year — WGC

The interplay between market risk and economic growth is expected to drive gold demand in 2020, the World Gold Council (WGC) says in their latest market report. The major driving forces include financial uncertainty and lower interest rates, a weakening in global economic growth, and gold’s price volatility.

Last year, gold had its best performance since 2010, rising by 18.4% in US dollar terms. It also outperformed major global bond and emerging market stock benchmarks in the same period. In addition, gold prices reached record highs in most major currencies except the US dollar and Swiss franc.

The WGC expects this trend to continue in 2020 as many of the global dynamics seeded over the past few years will remain generally supportive for gold. In particular, lingering financial and geopolitical risks combined with impending interest rate cuts are likely to bolster gold investment demand.

“The very low level of interest rates worldwide will likely keep stock prices high and valuations at extreme levels. And although investors may not step away from risk assets, anecdotal evidence suggests they are increasing exposure to safe-haven assets like gold as a means to hedge their portfolios,” the WGC elaborates.

Net gold purchases by central banks are expected to remain robust, the WGC added, even if they are lower than the record highs seen in recent quarters. Momentum and speculative positioning may keep gold price volatility elevated as well.

Volatility and expectations of weaker economic growth may result in softer consumer demand in the near term, while structural economic reforms in India and China will support the long-term demand.

The council doe not anticipate a reduction in gold volatility in the near term, but says that should the economic and political environment deteriorate, it may even rise, especially as “gold volatility historically exhibits a positive skew in such circumstances, tending to increase as stocks pull back.”

The WGC points out that as the gold price significantly rose in 2019, so did volatility, but similarly to other assets, it remains well below its long-term trend.

In regards to the recent tensions in the Middle East, the council says investor positioning related to this specific event will likely influence gold’s performance in the near term, but over the medium term, broader financial and geopolitical uncertainty and developments in monetary policy will play a more important role.

Cobalt price: After dismal 2019, could Tesla-Glencore deal spark turnaround?

Annual cobalt production is only around 130,000 tonnes, mostly as a byproduct of nickel and copper mining. Some two-thirds of supply comes from the Democratic Republic of the Congo, where fears about political instability and the challenges of ethical sourcing combine to supercharge supply concerns.

Bloomberg reported Wednesday that Tesla is in talks to buy cobalt from Glencore for its third gigafactory, recently opened in Shanghai, according to people familiar with the matter. Tesla, alongside Google, Apple and others, were sued by a human rights group in December about artisanal cobalt mining in the Congo.

Neither the Swiss miner or the electric vehicle manufacturer, which is targeting production of 150,000 annual units in Shanghai would comment, but should the deal go through it would mark the fifth long-term supply deal made by Glencore over the past year.

If the Glencore–Tesla deal happens it would leave precious little for the spot market in the coming years

In April, Glencore signed a deal with BMW to provide the German luxury vehicle company with cobalt from its Murrin Murrin mine in Australia.

Glencore also signed three other large, long term deals in 2019, with Korean battery manufacturer SK Innovation for 30,000 tonnes (enough to make 2m EVs with today’s cathode technology), Belgian chemicals giant Umicore and China’s GEM, a battery recycler.

Benchmark Mineral Intelligence, a battery supply chain and price reporting company, estimated that even before today’s report that the publicly announced agreements in 2019, alongside private deals, suggest that already “more than 80% of Glencore’s DRC cobalt hydroxide production are locked up in long-term agreements”.

Cobalt price: After dismal 2019, could Tesla-Glencore deal spark turnaround?

Price plunge

If the Glencore–Tesla deal happens it would leave precious little for the spot market in the coming years.

But so far these developments and Glencore’s decision in August to halt operations at its Mutanda copper-cobalt mine in the Congo until at least 2021, have done very little to boost the market.

Considering that Mutanda is the world’s largest cobalt mine and responsible for a fifth of global output, the market response has been more than disappointing, with only a couple of months of rising prices.

Benchmark reports cobalt prices came under renewed pressure in December, most notably for cobalt hydroxide which plunged by more than 10% over the course of the month. 

Cobalt hydroxide is usually produced at mines as part of the primary processing of cobalt ores and typically typically contains 20-40% of cobalt. The Asian import price of cobalt hydroxide was $20,800 per tonne at the end of the year according to Benchmark data. 

That constitutes a 47% drop in price over the last year and compares to price above $80,000 a tonne mid-2018:

The weak price performance over the year has seen significant y-o-y increases in import volumes of cobalt hydroxide into China as refiners look to capitalise on low prices, with Jan-Nov imports in 2019 up 29% y-o-y.

The outlook for the short term is not rosy and Benchmark predicts further weakness in the Chinese market during lunar new year celebrations.

Spot trading will reduce significantly due to the long delivery lead times from the Congo which is typically associated with falling prices says Benchmark.

New energy

Another concern for cobalt bulls is weakness in China, responsible for every other EV sold around the world.

Changes to Chinese subsidies for hybrid and battery-powered vehicles – or new energy vehicles in local parlance – that came into effect mid-June had a dramatic impact on the domestic market.

Official figures released on Monday showed annual EV sales in 2019 dropping for the first time ever to 1.21m units, compared to 60% growth in the previous year.

Iron price rallies as China imports leap to over 1 billion tonnes

Benchmark iron ore prices climbed on Tuesday after trade data showed Chinese imports of the steelmaking raw material topped 1 billion tonnes for the third year in a row as Beijing’s efforts to stimulate the economy pays off.

The Chinese import price of 62% Fe content ore was pegged at $97.03 per dry metric tonne according to Fastmarkets MB, a more than 4-month high. Iron ore prices averaged $91.85 in December.

China’s iron ore purchases in December totalled 101.3m tonnes, up nearly 12% from July and 17% from last year customs data showed, marking the highest level of imports since September 2018.

Iron price rallies as China imports leap to over 1 billion tonnes

Full year iron ore imports was the second best on record at 1.069 billion tonnes, up 0.5% from last year and within shouting distance of 2017’s record 1.075 billion tonnes.

Iron ore peaked in July last year just shy of $126 a tonne, the highest since January 2014, but declined over the summer months as fears of a shortage on the seaborne market receded.

The price of iron ore is up 30% following a dam burst at Vale’s Brumadinho operations in Brazil in January 2019 that killed nearly 300 people. In response, the world no 1 producer initially suspended 93m tonnes of output.

However, the Rio de Janeiro-based company managed to bring much of that capacity back online and ended the year with only around a 5% drop in output to an estimated 310m tonnes.

Before the disaster Vale was flagging strong growth with a medium term target of roughly 400m tonnes in annual production thanks to its $14 billion S11D project that on its own adds 95m tonnes in new capacity.

Copper price rally builds on record Chinese demand

The rally in the price of copper continued on Tuesday after trade data showed Chinese imports of refined metal at the best level since March 2016 and concentrate shipments setting a fresh all-time high.

In afternoon trading in New York, copper for delivery in March hit $2.8745 a pound ($6,337 a tonne), the highest since end-April 2019.

China consumes half the world’s copper, and trade data released overnight showed the country’s imports of unwrought copper totalled 527,000, a 23% jump compared to December last year.

For all of 2019, imports of unwrought copper were still down 6% from a year earlier, falling just shy of 5 million tonnes. Last year China imported a record 5.3m tonnes of refined copper.

December cargoes boosted year-to-date volumes to just under 22m tonnes, an annual gain of 11.6% and the third record year in a row.

Imports of copper concentrate were lower in December compared to the previous month, but continued to rise sharply from December last year, up 32% to 1.93 million tonnes. November was a record month at 2.16m tonnes.

December cargoes boosted year-to-date volumes to 21.99 million tonnes, an annual gain of 11.6% and the third record year in a row.

Despite the strong imports, Bloomberg reported on Monday, inventories at warehouses tracked by the three international exchanges – New York, Shanghai and London – have shrunk by about 37% since July to just shy of 300,000 tonnes, equivalent to just 1.2% of global consumption.

China put in place a complete ban on certain types of scrap copper imports at the start of 2019 on top of a 25% tariff on imports from the United States, one of its main suppliers, instituted in August.

With scrap imports falling by nearly 60% last year and global mine output flat, Chinese smelters found themselves competing for feedstock. Spot treatment and refining charges (TC/RCs) — paid to smelters to process copper concentrate into refined metal — fell sharply last year improving profitability for miners.

Copper price rally builds on record Chinese demand
Source: Reuters

Fundamentally strong

In it’s 2020 outlook, BMO said long-term fundamentals of the copper market “remain intact”:

We still see potential for low- to medium-single-digit growth in demand, helped by increased penetration in areas such as renewable energy and electric vehicles, while the supply side still faces major secular challenges and has a great tendency to disappoint. Moreover, with new assets generally dilutive to the existing asset base, the cost curve continues to steepen over time.

However, miners do like building copper projects, and there are a number of them in the pipeline, which will have to be absorbed. We are drawing ever closer to the point when such projects will be delivered, and thus the current copper deficit is running out of time to yield significantly higher prices.

BMO’s long term price for copper is $3.25 a pound, or $7,165 per tonne. The investment bank also warns that substitution (new aluminium alloys targeting market share in voltage cables) and optimism over long term prices driving further project approvals could limit the tailwinds for the copper market.