Copper price bears “overlooking decent fundamentals”

The price of copper came under pressure again on Thursday amid worries about a global economic slowdown, particularly in manufacturing, vital to overall demand for the bellwether metal.

In early afternoon trading in New York, copper for delivery in July was at $2.5475 a pound ($5,615 a tonne), not far off levels last seen in 2017.

“We expect the copper market to be in deficit this year and as a result prices look oversold relative to fundamentals” 

Oxford Economics Commodity Price Forecasts August 2019

Trade worries have dogged copper price bulls for the better part of a year, but more recently weak data from China, the US and Germany, the world’s top three consumers of industrial metals, has intensified the sell off.

The US manufacturing purchasing managers index (PMI) fell to below 50 today, the lowest reading since 2009 and the first sign that slowing growth in the sector may be turning into outright contraction of activity.

China, which imports more than half the world’s copper, posted the weakest industrial output growth in 16 years in July (although at 4.8% expansion year-on-year, still the envy of developed economies), while the month before German industrial production registered its biggest annual decline in nine years.

A new report by Oxford Economics argues that the copper market’s “decent fundamentals are getting overlooked amid the gloomy backdrop for financial markets”:

The latest Copper Study Group data flagged up a 1% fall in global copper mine production in the first four months of 2019. Also, copper is constrained by a weak global pipeline of mine projects, and production in Chile was down 1% y/y in both May and June, partly due to strike action.

Spot treatment charges (which fall during periods of tightness) are currently down 37% y/y.

We expect the copper market to be in deficit this year and as a result prices look oversold relative to fundamentals. 

In another sign of underlying weakness in demand, global copper inventories have been rising steadily after hitting four-year lows in January. Stocks in London Metal Exchange supervised warehouses around the world jumped by 11% over just the past month.

Oxford Economics Commodity Price Forecasts August 2019

Copper stocks have been rising even as stockpiles of other industrial metals, notably zinc and aluminum shrink, and Oxford Economics says “most metal traders attribute the anomalous behaviour of copper as being driven by inventory relocation rather than genuine market weakness.”

The Oxford Economics house view is for the copper price to average around $5,870 a tonne in the fourth quarter this year and climb back above $6,000 early in 2020.

Hudson Resources makes first bulk shipment from Greenland mine

Vancouver-based Hudson Resources (TSXV: HUD) announced Thursday it has made its first bulk shipment from the White Mountain anorthosite mine in Greenland.

Approximately 14,400 tonnes of GreenSpar 250 anorthosite product and 56 tonnes of GreenSpar 90 (98% finer than 90 microns) have been loaded onto the MV Happy Dragon bulk ship and departed for the company’s port facility in Charleston, South Carolina. Sailing time to Charleston is approximately 10 days.

Hudson Resources extracts anorthosite minerals, which yield the hardest feldspar with the highest refractive index, to make its GreenSpar products, primarily used for interior paints and coatings. Other revenue streams for mining anorthosite include feed material for fiberglass, alumina and heat-resistant cement.

The news comes just a week after US President Donald Trump expressed his desire to buy Greenland. The Danish territory has been drawing foreign interest partly due to its abundance of natural resources such as coal, zinc, copper, iron ore and rare minerals.

In July, the company hosted a US state department visit at the White Mountain site, where the delegation was accompanied by CEO Jim Cambon for a tour of the anorthosite operations and also given an update on the its Sarfartoq rare earth project, also in Greenland.

An official opening of the White Mountain mine will be held later this month on August 28. The calcium feldspar mine is permitted for 50 years.

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August 21, 2019
Chris Vermeulen
TheTechnicalTraders.com


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Nouveau Monde receives grant to build graphite processing plant

Nouveau Monde Graphite of Saint-Michel-des-Saints, Quebec, has received a C$4.25 million commercialization grant from the federally funded Sustainable Development Technology Canada program. The funds will be used to build a value-added graphite purification processing plant near the Matawinie mine site.

Exploded view of a lithium ion battery that will provide a market for spherical graphite. (Image: Nouveau Monde Graphite)

This plant is the first phase of a commercial facility capable of producing spherical graphite products. The product will contain less than 500 ppm of impurities. Successful completion will make Nouveau Monde the only producer of spherical graphite in North America. Spherical graphite is used in the anodes of lithium ion batteries.

Nouveau Monde will be using a much greener process than the chemical-laden process used in China where most of the world’s spherical graphite is made. Nouveau Monde’s process uses renewable hydroelectricity generated in Quebec.

The company acquired the high quality Matawinie flake graphite property 150 km north of Montreal in 2015.

(This article first appeared in the Canadian Mining Journal)

South32’s South African coal assets sold to Seriti Resources

Australia’s South32 (ASX, LON, JSE:S32), which has been trying to sell its South African thermal coal operations for almost a year, is finally kissing the fossil fuel goodbye as Seriti Resources has won a bid for the assets.

Final offers, according to Bloomberg, were in a range of $300 million to $350 million. The other contenders included Sibambene Coal, a consortium backed by global energy trader Mercuria, and Exxaro Resources. The South African miner, however, dropped out of the race due to competition issues as the firm is already a major coal producer and supplier to state-owned power utility Eskom.

South32, which spun out of BHP in 2015, separated the unit from the rest of the business in early 2018 with the objective of selling it.

The miner, which spun out of BHP in 2015, has been trying to sell its South African thermal coal operations for almost a year.

Seriti Resources bought Anglo American’s (LON: AAL) New Largo coal assets in 2017 and has said it is on the hunt for more, including South Africa’s Optimum Coal mine, formerly owned by Glencore.

In the past year, top mining companies have been reducing or plainly eliminating their exposure to coal on environmental grounds. Rio Tinto (ASX, LON: RIO), the world’s second largest miner, fully exited the coal sector in March 2018, with the sale of its Kestrel coal mine in Australia to private equity manager EMR Capital and Indonesia’s Adaro Energy for $2.25 billion.

Rival BHP (ASX, NYSE:BHP) followed suit. The world’s No. 1 miner revealed in July that it was mulling options to divest its thermal coal business, which includes assets in Australia and Colombia.

The Melbourne, Australia-based giant took a first step away from thermal coal last year by leaving the World Coal Association (WCA). The miner, which publicly supports the Paris climate accord, cited differences on climate change as the main reason to end its membership in the lobby group.

The trend has triggered an industry-wide reaction. COAL21, an organization set up to research low-emission coal technologies, is funding a $360-billion media campaign aimed at making Australians feel “proud about coal.”

The group, established 15 years ago to research carbon capture and storage (CCS), intends to roll out the campaign across media platforms including television, digital, print, radio and social media in September.

The core message is that the commodity can be made cleaner by capturing the carbon emissions from coal-fired power stations and storing them underground. 

CCS technologies have also received backing from US President Donald Trump, who has pledged to revive coal mining in the country, as well as Congress, which has given tax breaks to those who install carbon capture and storage facilities. 

Lithium prices to remain low as “hype” has met “reality” — CRU

An ongoing avalanche of lithium supply, coming mostly from Australia, as well as cuts to China’s electric-vehicles (EVs) subsidies, is set to keep prices for the coveted battery metal in the single digits for longer than expected, analysts at commodity research group CRU warn.

Prices for lithium carbonate, the most common type used in the batteries that power electric cars, doubled over 2016 and 2017, but have fallen by more than 40% over the past year, crashing through the $10/kg mark at the end of July.

While many market players continue to forecast long-run prices in the mid-teens, based on bullish forecasts for sales of EVs and energy storage systems, CRU analysts remain unconvinced.

Courtesy of Volkswagen | Source: USGS 2019.

Based on previous experience in other commodities, the experts believe that “hype” has met “reality”, adding that refinery bottlenecks and the potential for ramp-up delays in the mining and refining sector are not enough reasons to forecast a quick price recovery.

CRU says that lithium prices will continue to be governed by cost fundamentals, which will keep them in the single-figures. “This is the same message we have continually conveyed to CRU clients since November 2017,” they say.

Cutbacks

The analysts’ view seems to be backed by the main producers. Earlier this month, Albemarle Corp (NYSE: ALB), by the world’s No. 1 lithium miner, postponed plans to add about 125,000 tonnes of processing capacity due to oversupply.

The company has also revised a deal to buy into Australia’s Mineral Resources’(ASX: MIN) Wodgina lithium mine and said it would delay building 75,000 tonnes of processing capacity at Kemerton, also in Australia.

In November, the miner put plans on the back burner to increase output capacity at its operations in Chile beyond 2021. That project would have produced lithium carbonate. 

Chile’s Chemical and Mining Society (SQM), the world’s second largest lithium producer, foresees strong long-term demand for the white metal, but has said it expected sales volume this year to rise slightly from 2018.

Courtesy of CRU Group.

“It is very difficult to predict our sales volume for 2019 and 2020, it depends on supply and demand equilibrium,” the company’s new chief executive, Ricardo Ramos, said in February.

“The timing of the start and the ramp-up of new projects is also difficult to assess,” he noted. 

Lithium carbonate prices in China, the world’s top consumer, have dropped by nearly 20% since the beginning of 2019 to RMB 65,000/t, equivalent to $9.25/kg lithium carbonate equivalent (LCE), according to CRU’s price estimates. Lithium hydroxide has fallen by 30% to RMB 74,500/t.

China is also the biggest supplier of lithium converted products.

“Many market players look to nation’s lithium spot prices as a bellwether of market health and therefore the continued decline of lithium prices has put mounting pressure on the global lithium market,” CRU concludes.

Canada’s Los Andes Copper to build “Chile’s next major mine”

Canadian junior Los Andes Copper (TSX-V: LA) is moving forward with plans to build a 110,000 tonne per day operation, which it believes will be Chile’s next major copper mine.

The company’s Vizcachitas project — a copper-molybdenum porphyry deposit 150 km northeast of Santiago — is one of the largest undeveloped deposits not held by a major mining company.

The proposed open-pit mine and concentrator is located at a relatively low elevation of 2,000 metres above sea level, and is just 65 km from a railway in San Felipe, with connections to the Port of Ventanas and two smelters, located 140 km and 90 km from the deposit.

It also sits in the same mineral belt as Antofagasta’s Los Pelambres, Codelco’s  Andina and El Teniente, as well as Anglo American’s Los Bronces mines.

“The advantageous size and location of the resources allow the development of the project with a potential lower capital investment in infrastructure than most of the presently considered potential new green-field developments,” executive chairman, Fernando Porcile, told MINING.COM.

The Vizcachitas project copper-molybdenum porphyry deposit sits in the same mineral belt as Antofagasta’s Los Pelambres, Codelco’s  Andina and El Teniente, as well as Anglo American’s Los Bronces mines.

After the recent publication of a preliminary economic assessment (PEA) for the project, released in June, management is preparing a prefeasibility study (PFS) that expects to submit by the end of 2020. If all goes well, the company expects the approval process to take about two years.

Based on the PEA, Vizcachitas would be in operations for 45 years and would require an initial investment of $1.87 billion.

Chile’s President Piñera recently submitted to Congress a series of modifications to a bill introduced earlier this year.

The proposed law would set stiffer fines and jail time for serious violations of the country’s environmental rules.

It would also make it a crime to mislead environmental inspectors or to obstruct the enforcement of environmental regulations in the world’s top copper producing country.

Referring to those developments, Porcile said that while the proposed modifications could eventually bring additional difficulties to the approval of projects, they reflect the need for companies to increase their commitment to environmental compliance.

“The mining sector in Chile has been heavily regulated for a long time,” Porcile noted. “These changes are being particularly resented by industries that have not been properly supervised in the past and need to adopt more drastic cultural changes.”

The South American nation is highly dependent on mining and the government is conscious that more projects are needed, said Porcile, who has been in the mining business for more than 50 years.

Copper output in Chile, the leading producing nation, is expected to exceed 6 million tonnes for the first time this year and continue to rise by about 30% over the next 10 years, according to the country’s state copper agency, Cochilco.

Output of the red metal, the agency says, could reach a record of 7.25 million tonnes as early as 2025, thanks mainly to new projects and planned expansions to come online this decade, as Chilean miners confront falling ore grades at older mines.

Production from existing, aging mines, Cochilco notes, will decline by 19% to 4.46 million tonnes annually, but the drop will be offset by new ventures and mine expansions.

The metal’s price has dropped by about 10% since April, following a trend that many commodities have seen amid global economic instability, hunger for the mineral has weakened.

Analysts, however, remain generally bullish about the red metal’s future as China’s push to develop the largest electric vehicle (EV) industry in the world. This effort means Chile’s copper industry, worth $31.5 billion a year, may soon become stage a major comeback.

Canadian government pledges over C$2bn for mine cleanup in North

The Canadian government has announced it will invest C$2.2 billion over the next 15 years for the cleanup of various mine sites in the Yukon and Northwest Territories.

The announcement was made by the Hon. Carolyn Bennett, Minister of Crown-Indigenous Relations, in Toronto on August 19. The new Northern Abandoned Mine Reclamation Program includes eight abandoned mine properties.

The Yukon sites are the Faro, United Keno Hill, Mount Nansen, Ketza River, and Clinton Creek. In the Northwest Territories the list includes the Giant, Cantung and Great Bear Lake projects, the last of which includes several small sites located near each other.

The federal government plans to engage with the Indigenous and northern communities so that they have access to employment and business opportunities associated with the cleanup.

(This article first appeared in the Canadian Mining Journal)

Corvus Gold raises C$1.3m from AngloGold for Nevada projects

Corvus Gold (TSX: KOR) announced Tuesday that it has raised C$1.3 million from a subsidiary of AngloGold Ashanti through a private placement, which was closed at a significant premium of C2.60 per share. The stock was trading at C$1.79 at market open.

Shares of Corvus Gold subsequently surged by as much as 7% during Tuesday’s session to a three-day high of C$1.91. The company’s market cap currently sits at C$209.4 million.

“We believe that the premium paid to the market price in this financing reflects the underling quality of the Corvus assets,” Corvus president and CEO Jeff Pontius commented in a press release.

The Vancouver-based miner intends to use the financing proceeds for ongoing discovery and exploration in Nevada, specifically the Mother Lode and the North Bullfrog projects.

The 100% owned North Bullfrog project covers about 90.5 square kilometres in southern Nevada. The property package comprises a number of private mineral leases of patented federal mining claims and 1,134 federal unpatented mining claims.

Corvus also controls 445 federal unpatented mining claims on the Mother Lode project, which total approximately 36.5 square kilometres.

Together the two projects contain a measured mineral resource of 9.3 million tonnes at an average grade of 1.59 g/t gold, containing 475,000 ounces of gold.