Yamana’s stock hits three-year high on strong 2019 results

Precious metals miner Yamana Gold’s (TSX:YRI; NYSE:AUY) stock reached a three-year high of $4.31 a share on Friday following the release of its fourth quarter and full year 2019 results.

Annual gold production was 900,339 ounces, while silver production reached 10.6 million ounces, both exceeding the company’s 2019 guidance. Output in the fourth quarter was 221,595 ounces and 2.97 million ounces for gold and silver respectively, in line with plan.

The gold producer also had a strong year for cash flow growth, with cash flow from operating activities increasing by 29% to $521.8 million and free cash flow rising by 63% to $219.8 million.

The gold miner has now increased its yearly dividend cumulatively by 150%

In the fourth quarter alone, cash flow from operating activities exceeded the average of the three preceding quarters by 91%.

The growth in free cash flow contributed to a sharp rise in its cash balance, which increased to $158.8 million at the end of the fourth quarter, from $98.5 million a year earlier.

Yamana also managed to nearly halve its net debt in 2019, significantly strengthening its balance sheet and financial flexibility.

For the full year, net income totalled $225.6 million compared with a loss of $297.7 million in the previous year. Fourth quarter net earnings came to $14.6 million, from a loss of $61.4 million a year earlier.

“Our operations executed extremely well, with Jacobina posting record fourth quarter and full-year production and El Peñón enjoying its strongest quarter since we rightsized the operation three years ago,” CEO Daniel Racine commented.

“Minera Florida also performed well, particularly in the month of December, something we believe is a sign of things to come. We are carrying this momentum into 2020 using our improved financial flexibility to further reduce debt, advance our organic growth projects and exploration program, and continue to increase shareholder returns.”

Owing to its strong operational and financial results throughout the year, the company has rewarded shareholders with its first quarterly dividend of $0.0125 a share, in line with its previously announced 25% increase to the company’s yearly dividend.

The gold miner has now increased its yearly dividend cumulatively by 150% to $0.05 a share, from $0.02 a share in the second quarter of last year.

The company’s current market capitalization stands at $3.94 billion.

Sirius last-minute attempt to avoid Anglo’s takeover fails

Sirius Minerals (LON:SXX), the British junior struggling to build a huge fertilizer mine beneath the North Yorks Moors national park, revealed on Friday it had been studying an alternate deal to the planned takeover by Anglo American (LON:AAL), adding that all of them have fallen through.

The fertilizer company evaluated over the past week a plan to raise $680 million put forward by a consortium of financial investors, but talks didn’t go anywhere. Unless shareholders approve Anglo American’s £405 million (about $524m) deal, the company at the risk of going under administration or liquidation, Sirius said in a statement.

The London-based developer once again called investors to back Anglo’s takeover proposal, as all attempts to find bank financing to complete its Woodsmith fertilizer project have failed.

Anglo’s offer of 5.5p a share is equivalent to one-third more than the targeted company’s market value the day before the proposed takeover was made public.

Sirius was worth more than $2.3 billion 18 months ago, before announcing in September its funding plans had failed, adding it only had enough cash to last another six months. 

The company has already raised £920 million ($1.2bn) to develop Woodsmith and received the backing of thousands of local retail investors, but needs a further $3.8bn to turn it into the world’s biggest producer of polyhalite, a multi-nutrient fertilizer.

Long time coming

Anglo’s lifeline didn’t come out of the blue. The major, which is looking to retreat from thermal coal, has hinted the bid for Sirius Mineral had been in the works for months.

“We are unashamedly transitioning our portfolio to later cycle products that we believe the world will need as it goes forward,” chief financial officer, Stephen Pearce, said on a call last month.

The executive noted Anglo had identified the project as being of potential interest “some time ago” due to its quality in terms of scale, resources and costs.

If successful, the takeover would mark a comeback to the fertilizer sector for Anglo, which owned some phosphate assets in the past but in recent years has focused on “four pillars” — copper, iron ore, diamonds and platinum.

It would also add a second major project to Anglo’s $5bn Quellaveco copper mine in Peru, at a time when most rivals are reluctant to expand.

“We fundamentally believe part of our responsibility is to keep an eye on growth over all the aspects of different time frames,” Pearce added.

The Woodsmith mine, poised to be one of the world’s largest in terms of the amount of resources extracted, is set to generate an initial 10 million tonnes per year of polyhalite, a multi-nutrient fertilizer, containing four of the six key elements needed for plant growth (potassium, sulphur, magnesium and calcium).

Sirius’ shareholders will vote on whether or not to accept Anglo’s lifeline on March 3.

Prospects brighten for Northern Dynasty Pebble mine on leaked draft study

A leaked draft of an environmental impact statement (EIS) on Northern Dynasty’s (TSX: NDM) proposed copper-gold mine in Alaska has brighten up its prospects, suggesting nearby terrestrial freshwater resources and downstream fisheries could co-exist with the project.

While the US Army Corps of Engineers’ document is not final, it could mean the government is closer to issuing a long-sought permit for the $100 billion copper-gold mine in the Bristol Bay, southwest Alaska.

Shares jumped up as much 9.4% to 70 cents on the news on Wednesday, to close at 69 cents, the highest value so far this year.

If permitted, the $100 billion copper-gold Alaska project would be North America’s largest mine

If permitted, Pebble would be North America’s largest mine, according to a study by the Center for Science in Public Participation. Current resource estimate includes 6.5 billion tonnes in the measured and indicated categories containing 57 billion pounds of copper and 71 million ounces of gold, 3.4 billion pounds of molybdenum and 345 million silver ounces.

Northern Dynasty said the draft document is currently under review by various regulatory agencies, including the US Environmental Protection Agency (EPA) and Alaska tribes. It also said that all data gaps have been filled and that the final EIS is slated for release by mid-year.

Pebble’s development has been surrounded by controversy and delays, including the EPA’s decision in 2014 to propose restricting the discharge of mining waste and other material in the area.

Criticism prompted the Vancouver-based company to submit a new, smaller mine plan that includes lined tailings, and discard the use of cyanide in the gold extraction process.

Pebble began moving forward after the change in US administration. In July last year, Northern Dynasty scored a big win after the EPA scrapped the proposed restrictions on mining operations in Alaska’s Bristol Bay, which prevented the project’s consideration.

Prospects brighten for Northern Dynasty Pebble mine on leaked draft study
The Pebble project is located about 200 miles (320km) southwest of Anchorage in the Bristol Bay region. (Image courtesy of Northern Dynasty.)

For decades, explorers and developers have been attracted to resources-rich southwestern Alaska, known for holding significant deposits of gold, copper, molybdenum and other minerals near the headwaters of two rivers flowing into Bristol Bay.

But conservationists, local activists, fishermen and federal regulators have argued that industrial, open-pit mining operations to extract the lode threatens the region’s thriving sockeye salmon fishery.

Coronavirus could reduce China’s battery storage production by 10% in 2020

China’s battery storage production capacity could reduce by as much as 10% to 237 gigawatt-hour (GWh) in 2020 compared to the pre-coronavirus 2020 forecast, research firm Wood Mackenzie said in a note on Wednesday.  

Based on operational and announced capacity, this represents more than 26 GWh of production for 2020. More capacity could be affected if delays persist, WoodMac said.  

With the escalation of the coronavirus outbreak, the Chinese government took several measures to minimise human-to-human transmission, which have affected battery cell production. 

Affected provinces were expected to contribute 162 GWh of battery cell production in 2020 prior to the coronavirus outbreak, equivalent to 61% of China cell manufacturing capacity

 “The restriction of labour movement will hurt auto manufacturing in Hubei province, and heavy manufacturing industries in provinces such as Shandong, Jiangsu, Zhejiang, Fujian, Anhui and Guangdong,”  WoodMac’s senior research analyst Le Xu said. 

“These provinces were expected to contribute 162 GWh of battery cell production in 2020 prior to the coronavirus outbreak, equivalent to 61% of China cell manufacturing capacity, Xu added.  “In addition, battery cell factories were also suspended for the past two weeks, including Tesla’s Gigafactory in Shanghai, as a result of the extension of the Chinese New Year holidays as announced by the government.” 

 Tight battery cell supply could slow down the cost decline of EV manufacturing and energy storage systems. 

Australia and China were expected to grow an additional 1 GW capacity for storage deployments in 2020 pre-coronavirus outbreak. Utility-scale front-of-the-meter storage deployments drive both markets’ growth for renewables-plus-storage installations to reduce curtailment and ancillary services participation. Tight battery cell supply could cause delay risks to storage deployments, Woodmac said.  

“China’s BYD is a key supplier to UK storage markets, so its production loss in Q1 2020 could impact UK developers,” Xu added. “Also, Chinese lithium-iron phosphate batteries have received renewed attention in the U.S. market following supply chain tightening in South Korea in 2018. Developers who may have turned to the less-expensive technology may find their supply, unfortunately, affected again.” 

Pretium’s production outlook for Brucejack drops, so does stock

Pretium Resources (NYSE, TSX: PGV) reported its 2019 results and production outlook for 2020 on Wednesday, revealing that it expects to produce 325,000. to 365,000 oz. gold a year while it mines the Valley of the Kings zone, a significant drop from the 525,000 oz. long-term output rate forecast last year.

Pretium said the change in the production outlook is due to lower estimated gold grades.

Gold production of 354,405 oz. from the Brucejack mine last year at all-in sustaining costs (AISC) of $888 per oz. is in line with earlier forecasts.

The miner said it expects to release an updated life of mine plan by the end of March, which will include a resource and reserve update for Brucejack.

Pretium said the change in the production outlook is due to lower estimated gold grades

Last year, the mine generated $184.2 million in free cash flow, allowing the company to reduce its total debt by $180.4 million.

This year, with 325,000 oz. to 365,000 oz. of gold expected, AISCs are forecast at $910 to $1,060 per oz. which includes costs related to ongoing lateral development and one-time sustaining capital items.

The NI 43-101 compliant report updated reserves for Brucejack to 16 million tonnes at 12.6 g/t gold for a total of 6.4 million oz., primarily comprised of the 5.8-million oz. Valley of the Kings zone.

Pretium also said its is planning a leadership transition. Meanwhile, Joseph Ovsenek will remain at the helm.

At market close Wednesday, Pretium’s stock was down over 21%. The days trades reached nine million, over seven times the average daily volume. The company has a $1.3 billion market capitalization.

(A version of this article first appeared in the Canadian Mining Journal)

Harmony takes South Africa’s top gold miner crown from AngloGold

Harmony Gold (JSE: HAR) (NYSE: HMY) has emerged as the new top producer of the yellow metal in South Africa, as rival AngloGold Ashanti (NYSE: AU) (JSE: ANG) sells it the last remaining assets in the country. 

The $300 million deal, agreed on Wednesday, marks AngloGold exit from its home country to focuses on more profitable mines in Ghana, Australia and the Americas

For Harmony, the acquisition of AngloGold’s Mponeng mine and surface assets will allow it to sustain growth and replace capacity currently coming from its Masimong and Unisel mines, which are running out of ore.

It will also boost gold production by about 350,000 ounces a year to more than 1.8 million ounces.

The company’s chief executive officer, Peter Steenkamp, has repeatedly stated that South Africa is its main investment target, even as the country’s gold industry faces mounting challenges, including geological and safety aspects of extracting ore from the world’s deepest mines.

Steenkamp is betting on recreating the successful strategy applied after it bought Anglo’s Moab Khotsong mine in 2017. Half of that money has already been paid back, he said.

Mponeng, the world’s deepest mine, generated 265,000 gold ounces in 2018. Output from the surface operations, which extract the precious metal from ore dumps, totalled 171,000 ounces. Those South African assets accounted for about 13% of AngloGold’s production that year.

More to come…

Barrick beats forecasts, hikes dividend by 40% as gold prices soar

Barrick Gold (TSX: ABX) (NYSE: GOLD) posted on Wednesday a better-than-expected quarterly profit and gave investor a more than welcome 40% dividend increase thanks to strong gold prices.

The world’s second largest producer of the yellow metal said adjusted net earnings in the three months to December reached $300 million, or 17 cents a share, up from $264 million recorder in the previous quarter. Analysts’ average estimate was 14 cents a share.

The results, along with Barrick halving its deb to $2.2 billion over the course of 2019, allowed the miner to declare a dividend of 7 cents a share, up from 5 cents in third quarter, payable on March 16.

“The board believes the dividend increase is justified by the significant reduction in net debt and strong balance sheet, together with the growth in free cash flow supported by a robust 5-year plan which we have shared with the market,” executive vice-president and chief financial officer, Graham Shuttleworth, said in a statement.

Gold prices increased about 18% last year, as investors sought safe-haven assets due to global uncertainty triggered by the long-drawn out trade war between the United States and China.

Barrick has also benefited from the $1 billion fetched through asset sales since chief executive Mark Bristow took the helm in January 2019.

More to come…

Medallion receives US Department of Defense related inquiries for REE product

Vancouver-based Medallion Resources (TSXV: MDL), which is pursuing North American production of rare earth magnet metals, has received inquiries from several rare earth element (REE) refineries interested in receiving specifications and potential volumes of the company’s REE concentrate product.

These refineries are considering their response to the US Department of Defense’s recent Funding Opportunity Announcement (FOA), directed toward light REE processing and separation, the company said.

Medallion’s product, a light rare earth concentrate enriched in the magnetic metals neodymium (Nd) and praseodymium (Pr), is in short supply outside China

Medallion’s proposed US-based REE process plant is designed to provide feedstock for separation by either existing or future refining facilities. The plant will use monazite sand, an REE-rich byproduct mineral that is abundantly available within the US. The company’s proprietary process extracts a REE chemical concentrate from high-grade monazite sand in a clean, safe and automated operation without the need for mining or upgrading.

The FOA is seeking proposals to establish or enhance domestic light REE processing and separation capacity under the Defense Production Act (DPA). The estimated government funding contribution for this project is up to $40 million for accepted proposals and requires matching funding.

Medallion’s product, a light rare earth concentrate enriched in the magnetic metals neodymium (Nd) and praseodymium (Pr), is in short supply outside China. In fact, Beijing prohibits its export to ensure value-add stages are completed within China.

About the Defense Production Act

Over the last few years, under direction from Beijing, six state-owned enterprises have consolidated the bulk of the Chinese domestic rare earth mining and processing capacity and now dominate that marketplace. China currently controls about 85% of global rare earth production.

The Trump administration has expressed strong support for the US military to become less reliant on foreign-sourced materials and processing technology. A key area of concern has been the high concentration of supply of rare earth products from China, and the lack of a robust US supply alternative in the short to medium term.

In July 2019, The White House issued presidential determinations under Section 303 of the Defense Production Act of 1950 – Title III, that “domestic processing, separation, production of REEs is now essential to the national defense”. This permitted the federal government to incentivize the domestic (US and Canada) rare earth industrial base accordingly, which includes this current Light REE FOA.

Earlier, shares of Medallion jumped more than 10% to a six-month high of C$0.13 on the news. The company’s market capitalization is C$4.9 million.

Agnico Eagle grabs stake in Finish explorer to access key asset

Agnico Eagle (TSX, NYSE: AEM) is set to take a 9.9% stake in Finland-focused Rupert Resources (TSX-V: RUP) to gain access to the junior’s flagship Pahtavaara gold project, located 50 km away from the Canadian company’s Kittila mine.

The Toronto-based miner, which also has operations in Canada and Mexico, will invest C$13.1 million (about $9.8m) in the Finish explorer through a non-brokered placement at 85c per unit. The deal is expected to help unlock the potential of Pahtavaara and validate Rupert’s exploration in the region.

“The new investment is expected to fund Rupert’s exploration campaign for at least 12 months and may lead to synergies in the event Rupert’s projects progress to the development stage,” the company’s chief executive, James Withall, said in a statement.

As part of the transaction, Agnico Eagle subscribed to 15.3 million in a non-brokered private placement at a price of 85 cents per unit. The senior gold company, in operations since 1957, was also granted certain ownership rights, including the right to nominate one person to Rupert’s board.

The explorer contiguous land package is located in the centre of a region which hosts Agnico’s 200,000-ounces-a-year Kittila operation — Europe’s largest gold mine. The underground mine produced 189,000 ounces of gold in 2018 with cash costs of $835 per ounce of gold.

BHP becomes the world’s largest copper producer

BHP Group on Monday became the world’s largest copper miner based on production after Chile’s copper commission announced a slide in output at state-owned Codelco.

Hampered by declining grades Codelco production declined by 5.6% or about 100,000 tonnes last year.

Overall, Codelco, nationalized in the early 1970s, churned out 1.706 million tonnes of copper, the lowest level since 2008, when output was at 1.55 million tonnes.

Codelco, nationalized in the early 1970s, churned out 1.706 million tonnes of copper, the lowest level since 2008.

At that time, the giant Ministro Hales mine, which contributes between 180,000 and 200,000 tonnes of copper a year, had not yet begun operation.

Last month, the world’s number one mining company, BHP (NYSE:BHP) reported robust six months to end December numbers from its copper operations, including at Escondida in Chile, the world’s largest copper mine.

For the first six months of BHP’s financial year, output was up 7% year on year to 885,000 tonnes with Escondida contributing more than 600,000 tonnes.

In the six-months to end-June 2019, Melbourne-based BHP produced 864,000 tonnes bring the calendar year output to 1.749 million tonnes.

The Anglo-Australian giant kept guidance for its 2020 financial year unchanged at between 1.705 million and 1.820 million tonnes.

BHP may struggle to hang onto the crown despite spending $2.5 billion to expand its Spence mine in Chile.

Freeport-McMoran’s Grasberg mine in Indonesia returns to full production after a transition to underground mining in 2022. US-based Freeport produced 1.47 million tonnes of copper in 2019.

Codelco itself is in the midst of an ambitious, 10-year, $39 billion investment drive to open new projects and overhaul older mines so it may well catch up too.