World’s copper producer issues 10-yr and 30-yr bonds to fund mines overhaul

World’s largest copper producer, Chile’s Codelco, issued on Monday 10- and 30-year dollar-denominated bonds to secure funding for its multibillion-dollar upgrade projects only five months after saying it didn’t need to raise money this year or next.

IFR, Refinitiv’s capital markets news service, said the new paper were issued in New York with a price range of between 150 to 180 basis points over equivalent US Treasuries.

The move is part of the state-owned copper giant’s fresh funding strategy that includes taking out loans and selling non-structural assets. 

Codelco borrowed last month $300 million and sold two bonds for a combined $180 million of funding.

World’s copper producer issues 10-yr and 30-yr bonds to fund mines overhaul

It also a 37% stake in natural gas port terminal GNL Mejillones for $193.5 million.

The Santiago-based miner’s change of heart surprised some analysts as chairman Juan Benavides had said in April the company had sufficient funding this year and next to develop planned multibillion mine upgrades, key to maintain its production at current levels.

Ore grades have plummeted at Codelco’s aging mines, prompting the urgent need for overhaul schemes.

The company has already kicked off one of its most ambitious plans — the $5.6 billion conversion of the giant Chuquicamata open pit mine into an underground operation.

The next major mine overhaul is a $5.5 billion new level at El Teniente underground mine, the company’s largest, which fell under new CEO Octavio Araneda’s mandate in his previous role.

Taken from Codelco’s presentation May 2019.

In the company’s pipeline of so-called structural projects are also a $1.3 billion expansion at the Andina mine, a $1 billion upgrade at Salvador and the expansion of Radomiro Tomic, which doesn’t have an estimated capital expenditure yet.

Codelco, which hands over all of its profits to the state, holds vast copper deposits, accounting for 10% of the world’s known proven and probable reserves and about 11% of the global annual copper output with 1.8 million metric tonnes of production.

Osisko Gold grabs Barkerville, creates North Spirit Discovery

Canada’s Osisko Gold Royalties (TSX, NYSE: OR) is buying all the shares it doesn’t already own in fellow miner Barkerville Gold Mines, in a deal valued at C$338 million (about $255m).

The Montreal-based miner said each Barkerville shareholder would receive 0.0357 common share of Osisko for each share of Barkerville held, implying a value of C$0.58/share, based on Osisko’s Sept. 20 closing price on the Toronto Stock Exchange.

The deal gives it access to Barkerville’s touted Cariboo gold project in British Columbia, which Osisko sees as a “potentially world-class asset” with significant infrastructure in place.

“Osisko and Barkerville will take advantage of their combined mine building, exploration, permitting, development and construction expertise to advance the Cariboo gold project,” the company’s chief executive chair of the board, Sean Roosen, said in the statement

The company noted it would fund planned work through available liquidity, future revenue from royalties and streams, project debt as well as outside private equity and joint venture (JV) capital through the creation of a new company aimed to become a resource development and finance firm — the North Spirit Discovery Group.

Earlier this month, the miner announced it was buying fellow Canadian Stornoway Diamond, which has filed for bankruptcy protection.

Osisko also announces the creation of North Spirit Discovery Group, which aims to become a leading resource development and finance company with the assistance of joint venture partners and/or private equity capital.

Osisko, formed in 2014, is a royalty company, which means that it seeks agreements giving it the right to a share of income from mines operated by other companies.

Its primary focus is the North American precious metal offtake market, with more than 135 royalties and a portfolio of resource companies such as a 16.6% interest in Osisko Mining Inc. and a 19.9% interest in Falco Resources Ltd.

IAMGOLD resumes operations at gold mine in Suriname

Canada’s IAMGOLD Corp. (TSX IMG), (NYSE: IAG) has resumed mining operations in the southern pits of its Rosebel gold mine, in Suriname, with full ramp up expected in about a month.

Mine development activities at its 70:30 Saramacca joint venture (JV) project with the government of Suriname have also restarted, the company said.

Operations in the northern pits resumed at the end of August.

The Toronto-based firm had halted work at the mine early last month, following an incident involving police that caused the death of an artisanal miner and left some equipment unusable.

Shortly after, it laid off 325 contractors for the South American mine and lowered its production forecast for the year to between 765,000 to 810,000 ounces of gold, to reflect the operation’s halt.

IAMGOLD said on Monday it was hiring back the dismissed workers and that has reached an agreement with the local community, enabling the haul of Saramacca ore to the mine’s mill in early November.

Rosebel, located in the mineral rich Brokopondo district, about 85 km south of the capital city of Paramaribo, has often been a target for illegal miners. This has led the company to allow some artisanal miners to work on the concession.

The Canadian company owns 95% of the gold mine and the government of Suriname holds the remaining 5%. 

Peruvian government wants to secure $21B in mining investments

Peru’s Minister of Energy and Mines, Francisco Ísmodes, said that the Martín Vizcarra government wants to secure $21 billion in mining investments before the end of its term in 2023.

According to state-owned news agency Andina, Ísmodes said at the mining convention Perumin 34 held in Arequipa this week that of the $57 billion that are expected to be invested in 48 mid to long-term mining projects, at least $21 billion should be in place before Vizcarra leaves office. 

Peru is the world’s No.2 copper producer and sixth-largest gold producer

The minister claimed that mining investments have grown for four years in a row, with the first seven months of 2019 showing a 25% rise when compared to the same period of the previous year. Such transactions have added up to over $3 billion.

“In this context, it is undeniable that we are a country with large mineral reserves. This year, for example, we will reach the best result in terms of copper production when compared to the previous five years. Thanks to the start of commercial operations of new projects such as the Toquepala expansion, we will reach 2.5 million tonnes of fine copper in 2019. By 2022, we will reach 3 million tonnes,” Ísmodes said.

Toquepala is Southern Copper’s (NYSE:SCCO) open-pit mine in the southern Tacna region. Its $1.2-billion expansion allowed the miner to increase the operation’s concentrating capacity to 120,000 tonnes per day from 60,000 tonnes per day.

Peru is the world’s No.2 copper producer and sixth-largest gold producer.

However, according to the Fraser Institute, the country occupies the 14th spot in terms of its attractiveness to mining investors because even though it is ranked 8th when in comes to its geological potential, it takes the 37th spot when it comes to the transparency and straightforwardness of its policies.

“This is why we need to improve our public policies and regulatory framework so that we can boost the competitiveness and sustainability of the mining sector, and become more attractive to investors,” Ísmodes said.

Cobalt price boost as electric vehicle loadings surge

After hitting near decade highs in March last year within a stone’s throw of $100,000 per tonne, cobalt prices fell off a cliff.

Glencore’s decision last month to mothball the world’s largest cobalt mine breathed new life into the market, but so far the response has been relatively muted with the metal still trading in the mid-$30,000s.

Even at these levels, cobalt is a pricy raw material for electric vehicle manufacturers and battery makers have been working hard to find a substitute for cobalt, or at least reduce the required loading.

First generation Nickel-Cobalt-Manganese (NCM111) batteries had a chemical composition of 1 part nickel, 1 part cobalt and 1 part manganese. NCM batteries with lower cobalt content (622, 523 chemistries) are quickly becoming the standard in China, which is responsible for half the world’s electric car sales, and a much greater proportion of EV battery manufacture.

The industry is now fast moving towards even higher nickel content at the expense of cobalt and manganese with the market share of NCM811 increasing rapidly although it still only represents a tiny portion.

Tesla is a proponent of nickel-cobalt-aluminium (NCA) technology which requires less than a third the amount of cobalt and the EV pioneer says the batteries in its latest model already match NCM811.

A new report by Adamas Intelligence suggest despite the ongoing thrifting of cobalt in batteries deployed by EV manufacturers, the per vehicle loading of cobalt jumped by 45% in the first half of this year compared to H1 2018.

The Toronto-based research company, which tracks EV registrations and battery chemistries in more than 80 countries says cobalt deployed per vehicle has gone from 2.1 kg in 2018 H1 to 3.1 kg in 2019 H1. 

Strong battery electric vehicle sales relative to hybrids, plus the Chinese industry’s growing adoption of NCM cathode chemistries in place of lithium ion phosphate (LFP) was behind the increase says Adamas.

Overall in 2019 H1, 7,200 tonnes of battery-grade cobalt were deployed globally in batteries of all newly-sold passenger EVs combined, an increase of 81% over last year according to the report.

Source: Benchmark Mineral Intelligence Cobalt Price Assessment August 2019

Frank Giustra predicts explosive gold market

The price of gold is headed for a new high, and when it does, money will flow to companies, predicts mining mogul and philanthropist Frank Giustra, chairman of Leagold Mining Corp. (TSX:LMC).

“This is going to be an explosive gold market,” he told Kitco News in an interview earlier this month.

“The world is in uncharted waters right now. We’re living in a world with a global debt bubble, and any time you get debt bubbles of this magnitude that are global, that are fuelled by speculation, something’s going to happen.”

That something, he forecasts, is the price of gold hitting $1,900 per ounce – an approximate 27% increase above the spot price for gold midday on September 11.

The prediction comes with a caveat: the potential for gold prices to boom comes in the context of a forecasted global economic bust. 

The mining mogul forecasts the price of gold hitting $1,900 per ounce

Over the last six months – which have seen worsening U.S.-China trade tensions, Brexit complications and an inverted yield curve in markets around the world – the price of gold has risen around 15%, according to data on gold spot prices from goldprice.org on September 11. It’s also up nearly 24% year-over-year.

The year-to-date price appreciation of gold has been sizable, said Sean Coakley, market strategist with Cambridge Global Payments. 

“What we’re seeing is an emergence of fear – fear and a risk-off sentiment – and generally that’s positive for gold relative to, say, equities or bonds,” explained Coakley, calling the shift toward gold-denominated assets and bullion a tactical move on the part of investors.

Gold, he said, is an exceptionally cyclical asset. Its highest peak to date, according to goldprice.org data, was nearly $1,890 an ounce in 2011. It could top that, but there is no guarantee for how long an “explosive” market for gold could last. It could last six to 24 months, which could be a boon to investors and gold streaming companies, though it may not bring many sustainable business benefits to gold producers, said Coakley.

The single most important determinant in the price of gold is global faith – or lack thereof – in the purchasing power of the U.S. dollar, said Rick Rule, president and CEO of Sprott U.S. Holdings.

Gold does well, he said, when investors are concerned about the purchasing power of denominated investments, especially the 10-year treasury note.

“A lot of global investors – even generalists, not gold bugs – look at the 1.5% return on US treasuries and understand that they’re getting a negative real, if not nominal, yield,” Rule said.

“I think it’s accurate to say that the current strength in the U.S. dollar is really a function of the weakness of its competitors, not any underlying strength in the U.S. economy or the ability of the U.S. economy to inspire confidence globally.”

It’s not hard to find those bullish on gold predicting big gains for gold prices in the years ahead, particularly as signs that the global economy is slowing down continue to pile up.

Rule noted that US bonds have been in a 38-year bull market, with bond yields declining since their peak in 1981.

“My own belief is that, given the depreciation in yield, [the bond] bull market is either over or close to over.”  

Rule added that if that’s the case, and you believe that gold trades contrary to expectations of the U.S. dollar, as expressed by U.S. treasury securities, “that would suggest that the gold bull market is either begun or about to begin.”

(This article first appeared in Business in Vancouver)

SL Mining to halt operations at Marampa iron ore mine in Sierra Leone

SL Mining, a subsidiary of US commodity trader Gerald Group, is allegedly planning to halt operations as early as next week to help it offset the impact of a Sierra Leone’s ban on export from the company’s Marampa mine, imposed in July.

Despite an international court recently ordered the West African nation to lift such prohibition, authorities remain firm, claiming that SL Mining has failed to maintain the mine’s agreed work schedule or make royalty payments. 

The company, which rejects the government’s claims, told employers that without being able to export, it was not possible for them to remain in operations.

“The [Sierra Leone’s government] continues to ignore the terms of the London’s court final order, failing to engage in a meaningful discussion with SL Mining,” it said in a letter published by The Sierra Leone Telegraph.

“SL Mining’s sole shareholder, the Gerald Group, has invested a great deal of money and efforts in Sierra Leone over many years and yet, was only allowed to make three successful shipments in a highly favorable market before being struck [by the ban],” it said.

The move would leave more than 1,000 locals on forced leave.

SL Mining’s first iron ore concentrate from Marampa, branded “Marampa Blue’, set sail from Freetown Port on June 16.

Located in the Port Loko District, in the country’s north, SL Mining is engaged in the exploration, development and production of a high-grade iron ore concentrate with >65 percent Fe content.

The company estimates that Marampa, permitted since 2017, holds about 1 billion tonnes of iron ore with a potential lifespan of 30 years.

Following a steady growth until 2012, foreign direct investment in Sierra Leone was severely impacted by an Ebola outbreak.

The country’s economy currently faces serious challenges, the latest World Bank’s report shows. Those issues include falling government revenue as a result of low export and lack of investments in key sectors of the economy, including mining.

Uganda to invite companies to redevelop former copper mine

Uganda attempts to reopen an idled mine estimated to contain 4 million tonnes of copper by inviting international firms to present bids for a production sharing deal.

Once a major copper and cobalt producer, the Kilembe copper mine was abandoned by Canadian firm Falconbridge in the 1970s as the East African nation’s economy deteriorated under the leadership of dictator Idi Amin Dada.

This is not the first time the Uganda tries reviving the mine, near the border with the Democratic Republic of Congo. Previous efforts, however, were thwarted by a commodities downturn a failed 2013 deal with group led by China’s Tibet Hima Mining, which had vowed to invest $175 million in the asset.

The government cancelled the 25-year concession in 2013 on grounds that Tibet Hima had failed to execute its mandate as outlined in the permit. The Chinese firm sued the government and is seeking compensation of at least $33 million in damages.

The country decided to retry bringing Kilembe back to life in April this year. At the time, authorities said 28 companies had expressed interest in the project.

With files from Bloomberg

SolGold’s projects safe after Ecuador courts rejects mining referendum

Doubts around the fate of SolGold’s (LON, TSX:SOLG) projects in Ecuador have been cleared up after the country’s Constitutional Court rejected a fresh request to make mining permits subject to popular approval.

The ruling, covering the southern province of Azuay, said the petition to seek local consultation to ban mining was too broad and potentially misleading. Further, it ruled that any referendum which could result in other nationally enjoyed constitutional rights being restricted, were inadmissible.

It’s the second time a request to hold a referendum about mining is denied, which is seen as a victory for companies seeking to exploit some of the world’s largest untapped reserves of copper.

The decision follows a June verdict that rejected community consultation in Imbabura, the northern province that is home to SolGold’s flagship copper and gold Cascabel project —potentially one of Ecuador’s biggest mines.

The resolutions represent a victory for companies seeking to exploit some of the world’s largest untapped copper reserves. According to SolGold, they also set a “strong precedent” for any future petitions for consultation that imply changes to the country’s constitution.

Azuay province hosts several mining projects, including Canada’s INV Metals’ (TSX-V: INV) Loma Larga gold, silver and copper project. The Toronto-based company said late on Wednesday it would kick off its financing and permitting efforts for its proposed mine, one of five projects deemed strategic for Ecuador by the Ministry of Energy and Non-renewable Resources.

SolGold’s 100%-owned Sharug project, which the Australian miner believes has considerable potential for the discovery of a world-class orebody, is also located in Azuay.

On top miners’ radar

The Cascabel copper-gold project has piqued the interest of major miners, including BHP (ASX, NYSE:BHP). The world’s largest mining company last year acquired a 6.1% stake in SolGold, increasing its exposure to copper.

The move pushed Australia’s largest gold producer, Newcrest Mining (ASX: NCM), to up its holding in the company, consolidating its position as SolGold’s top shareholder.

While Ecuador has gained ground as a mining investment destination in the past two years, existing and future projects risk delays and potential halts due to growing local opposition to the extraction of the country’s resources, a report by Fitch Solutions Macro Research shows.

As mining projects face headwinds from rising tensions, investors’ courage will be tested, the study concluded, which could thwart Ecuador’s plan to attract $3.7 billion in mining investments in the next two years, significantly up from the $270 million it received in 2018.

CHARTS: Mining is riding out US-China trade war

A new report by BMO Global Commodities Research suggest that while overall Chinese trade is struggling if you look beyond headline figures, mining firms have few reasons to worry.

US trade is in freefall and total Chinese imports may be down 5% compared to last year but, says BMO, imports of raw materials and ores “continue their seemingly perpetual upward trend.”

China’s iron ore purchases in August totalled just under 95m tonnes, up 4.2% from July and 6.2% from last year customs data showed, marking the highest level of imports since January 2018.

With both crude oil imports and refined product exports both rising oil is increasingly following metal’s path in this regard.

Iron ore imports are set to reach another record in 2019, with annualized shipments running at 1.12 billion tonnes, despite the fall in output following the deadly dam burst in Brazil in January.

Similarly China’s imports of copper concentrate are up 10.8% in the first eight months of the year compared to same period in 2018. Unrefined copper imports are running at an annualized rate of 21.4 million tonnes, on course to handily beat 2018’s record 19.7 million tonnes. The strong performance come despite zero growth in global copper mine supply.

Imports of bauxite, the primary ore for manufacturing aluminium, are up by more than 30% year to date and and nickel ore shipments to China have expanded by some 15% in 2019.

BMO points out that even the coal trade is buoyant, despite the many import restrictions placed on the fuel by Beijing.

In our opinion, while the trade war has caused many problems for China, it has not shaken the overall commodity business model of importing raw materials, having enough process capacity and ideally exporting a small amount of finished product as an inflation hedge.

With this, Chinese sourcing of commodity raw materials remains highly strategic. Indeed, with both crude oil imports and refined product exports both rising oil is increasingly following metal’s path in this regard.