New Energy to acquire project near Codelco’s and BHP’s mines in Chile

Canada's New Energy Metals (TSXV: ENRG) announced that it entered into a letter of intent with certain arm’s length vendors to be granted the exclusive right and option to acquire an initial 70% royalty-free interest in and to certain exploration and exploitation mineral concessions known as the “Exploradora North project.”

The 84,750-hectare project is located in the II and III Regions of northern Chile along the prolific West Fissure fault system between the open-pit Escondida mine, the largest copper mine in the world which is owned by BHP and Rio Tinto, and Codelco’s El Salvador underground copper mine.

In a press release, New Energy explained that Exploradora North is also located immediately north and east of Codelco’s Exploradora deep drilling project, where near-surface resource reported 100 Mt of 0.3 Cu and 0.2 g/t gold.

According to New Energy, Minera Activa, a private Chilean company, recently announced positive results in the Exploradora district, and Brazil’s Vale is also actively drilling to the west of Exploradora North.

To move forward with the acquisition, New Energy Metals, through a wholly-owned Chilean subsidiary, will enter into a formal option to purchase agreement which contemplates that the Vancouver-based firm has to incur in exploration expenditures on the project of at least $15 million within 48 months of the effective date. The company will also have to pay $8.5 million an issue an aggregate of 11,500,000 common shares of New Energy Metals, all of which will be done in different installments or phases.

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Five BHP tailings dams could pose “extreme risk” to communities in event of collapse

The world’s biggest miner, BHP (NYSE: BHP), published risk assessment results on Friday that revealed five of its tailings dams that would be at “extreme risk” of damage to local environments and harm to nearby residents if they failed, the Financial Times reported.  

The Australian miner released risk assessment results in response to pressure from a group of investors that requested information on facilities controlled by nearly 700 mining companies be disclosed.   

The Sydney Morning Herald reported that BHP told investors that 32 of its 67 tailing dams around the world, which hold sometimes dangerous mining by-products were 'high risk' or worse under Canadian Dam Association dam safety classifications 

The Investor Mining & Tailings Safety Initiative in April requested that over 600 resource companies, including major miners, reveal the safety records of their waste storage facilities, following the collapse of Vale’s Brumadinho dam in Brazil in January, which killed hundreds. 

Following the disaster, a group of 96 institutional investors, representing more than $10.3 trillion assets under management, to 683 extractive companies seeking greater disclosure on the management of tailings storage facilities. 

About 100 investors, led by the Church of England Pensions Board and Sweden’s public pension fund, requested that the companies to publish the answers to 20 questions sent, covering issues such as the height and type of dams they have, their capacity, engineering records and safety checks. 

Industry group the International Council on Mining and Minerals (ICMM) said in March it was working with the United Nations Environment Programme (UNEP) and the Principles for Responsible Investment (PRI) to develop new standards. 

BHP said it is establishing a dedicated tailings task force focused on  internal dam management and development of international best practice.

 

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Company Updates From Management – Tue 28 May, 2019

Riverside Resources – Answering Your Questions On The BHP Exploration Agreement

After my last interview with John-Mark Staude, Riverside Resource President and CEO I received a few questions digging into the recent exploration agreement with BHP. We start out with a couple more general questions on Mexico and copper exploration then into some of the finer details of how projects will move through the funding stages.

If you have any follow up questions please comment or email me at Fleck@kereport.com.

Click here to listen to the prior interview when the BHP agreement was announced.

BHP more bullish on long-term EVs prospects

World’s largest miner BHP (ASX, NYSE: BHP) has lifted its forecasts for the global adoption and sales of electric vehicles (EVs), but warns the electrification of the transport sector will proceed only as fast as the development of charging infrastructure.

It now estimates that at least 132 million EVs will be on the world's roads in 2035, and at least 561 million in the middle of the century. These numbers are its "low-case" forecasts, and it also suggested take-up could be higher.

By 2050, BHP expects more than one in four light vehicles on the world's roads to be electric, or 27%, up from its earlier forecast of 21%.

Huw McKay, BHP’s vice president, market analysis and economics, said Tuesday the company estimates EVs comprising at least 7% of the world's light vehicle fleet in 2035, up from 5% in previous estimations.

By 2050, the giant mining company expects more than one in four light vehicles on the world's roads to be EVs, or 27%, up from its earlier forecast of 21%.

McKay attributed the new estimates to declining battery costs and rising interest among automakers, particularly in China.

"Globally established automakers and China's up-and-coming indigenous firms are embracing EVs, with model availability increasing steadily and many self-imposed sales targets instituted," he wrote.

BHP more bullish on long-term EVs prospects

BHP, already the world's second-biggest listed copper miner, has been taken steps towards increasing its presence in the red metal sector and other battery metals markets as of late.

Copper is a key component of the lithium-ion batteries used in the electric vehicles, as well as power inverters and in the charging infrastructure needed to keep them running.

It has also revealed plans to transform itself into the world’s biggest suppliers of nickel sulphate — another key component in lithium-ion batteries that power EVs.

Only last week, chief executive Andrew Mackenzie reaffirmed BHP’s commitment to supply the EV markets by announcing it would not divest its Nickel West operation as previously planned.

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BHP says Jansen potash mine ‘remains attractive option’

BHP on Tuesday admitted to institutional investors it “overinvested” in its Jansen potash project in Saskatchewan where the Anglo-Australian giant has already spent $2.7B over nearly six years.

At a BofA Merrill Lynch mining and metals conference held in Barcelona, CEO Andrew Mackenzie said the company’s “thinking around the project’s initial scope has evolved”:

“However, Jansen remains an attractive option for BHP given its strategic fit, risk-return metrics and the longer-term optionality the initial investment would create.”

Two shafts have been sunk at Jansen, but BHP will have to invest another $5.3–$5.7B to finish phase one construction of the mine which the company said would take fewer than 5 years to complete. BHP has in the past said it would consider selling a stake in Jansen to share capital and risk.

BHP says it can produce potash for around $100 a tonne at the mine. Prices for the crop nutrient at the Vancouver port have improved to $265 a tonne from $215 a year ago. That compares to around $400 a tonne when Jansen was first conceived and record highs more than a decade ago of $870 per tonne.

The deposit can accommodate another three phases – at $4B per phase – that would lift annual capacity to more than 16m tonnes per year, vastly improving the economics of the project.

BHP has long been eager to enter the potash market in Saskatchewan, diversifying its asset base now concentrated around iron ore and copper since disposing of its US oil assets a year ago.

In 2010, Canada blocked BHP's $40 billion hostile takeover bid for Potash Corp (now Nutrien after merger with Agrium) arguing the company's mines are strategic national assets.

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BHP hit by $5 billion suit over 2015 dam failure un Brazil

World’s largest miner BHP (ASX, NYSE: BHP) is facing a $5 billion lawsuit in England, which claims the company was “woefully negligent” in the run-up to the 2015 Samarco dam failure in Brazil, the country’s worst environmental disaster.

The suit, filed by law firm SPG Law, was served to BHP on behalf of 235,000 Brazilian individuals and organizations, including municipal governments, utility companies, indigenous tribes and the Catholic Church.

Claim will be largest group action to be heard in England.

The group action suit describes in detail a series of failures and errors of judgment over several years leading to the disaster, including how the company was aware of escalating safety concerns surrounding the dam’s integrity and how it failed to act upon repeated warnings from independent experts and dam safety advisers regarding recommended safety improvements.

“Driven by concern for declining revenues amidst the falling market price of iron ore, the company took risks, increased production and turned a blind eye to dangers that ultimately claimed lives and destroyed communities,” Tom Goodhead, Partner at SPG Law, said in an emailed statement.

He added the claim will be largest group action to be heard in England.

The collapse of the Fundao tailings dam in 2015, owned by the Samarco joint venture between BHP and Brazil’s iron ore giant Vale (NYSE:VALE), killed 19 and left a trail of destruction for hundreds of kilometres in Minas Gerais and Espírito Santo States, reaching the Atlantic Ocean, 600 kilometres away.

Samarco, which was once the world’s second-largest iron-ore pellet operation, has been shuttered ever since.

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Still a way to go to achieve gender balance in the mining industry

Following the gender session held this at this year's PDAC, where gender balance in the industry and the #MeTooMining initiative were discussed, the Responsible Mining Foundation issued a summary report related to the topic.

The summary is based on a chapter of RMF's 2018 Responsible Mining Index and it presents an assessment on the performance of 30 of the most important mining companies in the world when it comes to the properly integrating women into their workforce.

"The RMI 2018 results reveal that most of the 30 companies assessed show little or no evidence of efforts to strengthen the gender balance of their leadership and governance teams," the summary reads. "The companies scored an average of only 4.5% on the question of implementing interventions to bolster the diversity and inclusivity of their boards and senior management. These results tie in with other research that has shown very low levels of women's participation at these levels."

Chile's Codelco is a good performer when it comes to gender issues as it has established company-wide principles and guidelines on the provision of gender-appropriate bathrooms, changing rooms, work clothes, PPE, and rooms for women workers to express and store breastmilk. Photo by Codelco.

According to the Switzerland-based non-profit, there is also room for improvement beyond board and senior management levels as their estimates suggest that women occupy approximately 10% of jobs in the large-scale mining sector.

"Gender-based bias and discrimination in hiring practices play a role in this, as do work schedules that interfere with family responsibilities and cause social isolation, making mining work unattractive for many women," the RMF document states.

The organization based the previous statement on its experts' believe that there is persistence of old paradigms within the industry, such as the outdated idea that women are not strong enough to work in underground mines.

For instance, the report brings back the fact that South Africa repealed a ban on women underground miners just a decade ago while India did the same only this year.

In the RMF's view, companies stand to benefit from having more women in their workforces. "Higher female workforce participation can also raise attendance and retention rates and reduce organisational risks within businesses. Mine managers cited that greater gender diversity fostered innovation and improved team dynamics and communications."

The NGO refers to managers in companies such as BHP, where there is a plan of action to achieve gender parity in all divisions by 2025, and Newmont, where the plan is to achieve gender parity in senior management by 2030, with a near-term goal of women holding at least 30% of senior roles. Similar targets exist at AngloGold Ashanti and AngloGold American.

The gender chapter in the Responsible Mining Index concludes with a call to increase safety measures for women working in the mining industry, particularly after a Canadian study revealed that almost 40% of women working in mine sites reported having experienced harassment in the last five years.

"It is at the mine-site level where women are most vulnerable to unsafe and hostile working conditions," the dossier reads. "The RMI 2018 results show that the vast majority of the assessed companies are unable to demonstrate that they have systems in place to ensure the provision of gender-appropriate PPE [Personal Protective Equipment] for their women workers: over 75% of the companies assessed scored zero on this question. And while many have policies in place to prevent sexual harassment, 75% of the companies show no evidence of systematic measures to prevent harassment of women workers."

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Iron ore miners should take advantage of high prices and improve their credit scores: Fitch

In a recent report, Fitch Ratings states that the rise in iron prices to over $90/dmt in April should provide cash flow windfalls for global iron ore producers through 2020, even though such prices are expected to eventually stabilize at the ~$75/dmt mark.

The credit ratings and research division of the Fitch Group does not foresee the price of iron ore going below $70/dmt any time soon due to the tighter supply following Brazil’s Vale dam collapse in Brumadinho in January and subsequent idling of mines across the state of Minas Gerais, as well as the heavy rains registered in the northern part of the South American country, which have affected some production in Vale's Northern System. “The idled Brazilian mines represent 93 million metric tons of annual production.”

Supply is also tight due to a series of cyclones affecting Australia, which damaged Rio Tinto’s port and disrupted exports from Fortescue Metals Group and BHP.

In Fitch’s view, Australian companies could lose up to a combined 25 million metric tons of production in 2019, particularly after Rio Tinto and BHP both confirmed that this year’s production would be lower due to the storms.

Fitch says that the absence of significant volumes from projects in 2019 and 2020 is one of the factors providing price support.

Meanwhile, demand is expected to remain constant, particularly that of China, which represents around 60% of global iron ore consumption. This is because the central government has decided to put forward stimulus measures such as reducing value-added taxes and promote further infrastructure development.

Lower supply, healthy demand and higher prices mean extra resources filling up miners’ coffers. According to the market research firm, this should benefit the credit profiles of iron ore producers, particularly that of Vale, which received a BBB-/Rating Watch Negative following the Brumadinho disaster. However, the additional cash flow could also benefit the credit ratings of BHP Group and Rio Tinto, graded with an A/Stable; CAP, which got a BBB-/Stable; Companhia Siderurgica Nacional, that earned a B-/Stable, and Fortescue Metals Group, which got a BB+/Stable.

For Fitch’s experts, miners should not wait to use additional funds to improve their credits because supply is expected to eventually go back to normal as, for example, Fortescue resumed shipments less than a week after port disruptions, while a state court in Minas Gerais partially suspended its injunction halting Vale's Brucutu mine production, which means that some of its annual production of 30Mmt will reach the markets.

“Our iron ore price deck for rating purposes currently stands at $75/dmt for 2019. We expect some of the supply tightness and market dislocation to be transitory, the gap of lost production to narrow, and the price of iron ore to soften in second-half 2019,” the report concludes.

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Top miners back autonomous systems guidelines

BHP, Barrick Gold, Teck Resources and Antofagasta are some of the major mining companies that, together with equipment suppliers and universities, have helped develop global guidelines on automation.

The document, published this week by Canada-based Global Mining Guidelines Group (GMG), outlines a framework for miners to follow when they’re considering adding autonomous equipment to their operations. It also provides a maturity model for companies to emulate as they expand the scope of their unmanned fleets.

Document divides operations into six levels, from zero (entirely manual ) to five (fully autonomous), and assists in the preparation of a business case for autonomous mining for each.

More specifically, the publication divides operations into six levels, from zero (entirely manual operations) to five (fully autonomous operations), and assists in the preparation of a business case for autonomous mining, depending on level and stakeholder needs.

Its advice includes guidance for the slow, phased or fast implementation of autonomous systems, depending on stakeholder needs.

BHP principal, risk and business analysis technology, Chirag Sathe, said the outlined recommendations are relevant even to those who have already embraced autonomy.

“I would say that even though some mining companies have implemented autonomy, it hasn’t been a smooth ride and there are a number of lessons learned,” said Sathe, who also is one of the project’s co-leaders. “This guideline would be a good reference material.”

Although implementing autonomous systems creates new challenges, such as changes to the workforce and the workplace, the authors of the new guideline believe if successfully deployed, the technology adds definite value, with improved safety and efficiency and lower maintenance costs.

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