The London Metal Exchange (LME) is partnering with Fastmarkets to develop the reference price for its planned lithium futures contract, which will help analysts and executives to get a full sense of the global market for the key ingredient in the making of the batteries that power electric vehicles (EVs).
Unlike for copper or other metals used in the making of EVs, there currently is no traded price for lithium.
“In recent years there has been unprecedented price volatility in the lithium market, driven particularly by explosive electric vehicle (EV) battery demand,” the exchange said.
Unlike for copper or other metals used in the making of electric vehicles, there is no traded price for lithium.
The move, it added, comes after industry players, including producers, end-users and several leading automotive firms, urged the LME to develop effective lithium price-risk management tools.
“This global strategic partnership will develop a definitive roadmap aimed at providing a pricing mechanism for lithium that can be utilized throughout the supply chain and will support the development of risk-management tools for the industry,” Fastmarkets said in a separate statement.
Last year, the LME asked companies that assess prices of battery-grade lithium to submit proposals to supply a reference for cash-settled contracts it planned to launch in the fourth quarter of this year.
Today, however, the exchange only said it would continue “to gauge appropriate timing” for a launch.
Currently, producers negotiate contracts with buyers, but the terms of the deals are not made public.
The LME, the world’s oldest and largest market for industrial metals, said it selected Fastmarkets because their prices were used widely across the industry.
The agency already provides the global benchmark for the cobalt market — another key battery raw material.
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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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GlobalData said overall, the total volume of completed capital raising deals decreased from 378 in Q4 2018 to 273 in Q1 2019, a 27.8% decline.
In contrast, however, during the same period, the number of announced deals increased from 226 to 268, an 18.6% rise noted Vinneth Bajaj, senior mining analyst at the independent analytics firm:
“The slowing Chinese economy alongside the ongoing China-US trade war has weighed on the completion rate of mining capital raising activities."
According to the report the largest of the completed deals during the first quarter 2019 was the $1.3B capital raised by Chilean state-owned copper giant Codelco which offered international bonds due in 2049. This was followed by India’s Tata Steel which raised $967m in a private placement of shares.
India, China, Chile, Canada, and Switzerland were the five largest countries globally in terms of deal value, accounting for over 81% or US$9.2bn of the global total.
Robust mining M&A
A recent report by GlobalData showed overall deal value of mergers and acquisition in the sector in Q1 2019 grew by 6.3% to $22.5B from $21.2B in the same period last year. Deal volume decreased by 8.7% from 358 in Q1 2018 to 327 deals in Q1 2019.
Among advisers CIBC topped the list, with the Canadian bank advising on two deals worth $18.7B edging out M. Klein & Company. Cravath Swaine & Moore and Davies Ward Phillips & Vineberg shared first place among M&A legal advisers.
The four firms worked together, advising Barrick Gold (which last year bought Randgold Resources) on its attempted takeover of Newmont Mining launched in February.
The all-share mega-merger did not materialize, but the two gold miners did combine their operations in Nevada to create the world’s largest gold mining complex with annual production of more than 4m ounces. Newmont's acquisition of Goldcorp closed in April.
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A worker at Codelco’s El Teniente operation was hit by a rock and died on Sunday, Chile’s state miner informed.
In a media statement, the world’s No.1 copper producer lamented the passing of 58-year-old Pedro Enrique Mena Bolvarán, who belonged to the company’s Mining Division.
According to Codelco, the causes that prompted the rock to fall down at the Pilar Norte mine are under investigation.
“As soon as the accident took place, activities in the area were halted and emergency protocols were activated. First aid personnel came to the rescue and practiced CPR for over 30 minutes. However, their efforts were unsuccessful and they ended up confirming the worker’s passing. Authorities were also informed about the incident,” the miner’s statement reads.
The company emphasized that it maintains its commitment to improving safety measures and occupational health standards in its different operations.
El Teniente is the world’s biggest underground copper mine and the sixth largest by reserve size. It is located 80 kilometres south of Santiago in the Andes mountain range.
At present, the facility is undergoing an extensive $3.4 billion-expansion project called El Teniente New Mine Level project to extend its productive life by 50 years.
Unionized workers at Codelco’s Chuquicamata operation rejected on Saturday the miner’s final contract negotiation offer and announced that on Tuesday and Wednesday they will be voting on a proposal to go on strike.
In a communiqué made public via social media, the union’s leadership said the proposal presented to them by the world’s No. 1 copper producer was a 'joke' aimed at suppressing workers’ legitimate aspirations.
“It is clear that the company didn’t take into consideration the four axes, which were the foundations of this process, where two of them implied zero cost for the company. With this [proposal], it was confirmed that the administration’s goal is to impoverish and divide workers and punish those that have fought for workers’ demands in a fiercely and committed fashion,” the statement reads.
The proposal made by Chile’s copper giant to its workers includes bonuses of about $14,150 per worker but eliminates the early signing bonus and maintains the idea -from a previously rejected scheme- of a 1.2% salary readjustment.
Given that this was Codelco's final proposal, employees say that the protest action is the logical next step. However, the plan to go on a strike has to be approved by more than half of the 3,200 workers that belong to the three unions operating at Chuquicamata, so union reps are asking employees to show up to the polls.
Sindicatos llaman a votar la Huelga pic.twitter.com/0sgEq6gsRw
— Sindicato 1 Chuquicamata (@1_sindicato) May 25, 2019
“We also hope that the administration reconsiders both its behaviour and the value it attaches to its workers because the future of this negotiation and of Chuquicamata itself depends on them,” the brief states.
Chuqui -as workers call Codelco’s flagship mine- together with the nearby Radomiro Tomic mine produced 653,000 tonnes of the company's total 1.8 million tonnes of output last year.
At present, the state-owned miner is seeking to transform the 100-year-old open-pit deposit at Chuquicamata into an underground mine by 2020, when mining at the open-pit ends.
The $5.6 billion-switch is part of Codelco’s 10-year, $39-billion overhaul of its core assets, and it is expected to extend the mine’s life by at least 40 years. Annual production after the transition has been completed is projected to be 320,000 tonnes of fine copper and 15,000 tonnes of molybdenum.
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Chile’s Codelco, the world’s No. 1 copper producer, has dismissed reports of a predicted 40% drop in production over the next two years due to declining ore grades and the switch of its flagship Chuquicamata mine to underground from open pit.
Instead, the mining company says it’s following a detailed plan that will allow it to keep copper output at current levels of around 1.7 million tonnes a year over the next decade.
"Codelco's mine plan is based on existing mines and projects , which will progressively and systematically replace our current operations,” it said in a statement.
Media reports Thursday said production at Chuquicamata would drop to around 182,000 tonnes by 2021 from 459,000 tonnes this year.
State-owned miner says it’s following a detailed plan that will allow it to keep copper output at current levels of around 1.7 million tonnes a year over the next decade.
The fall would impact Codelco's total production by around 4%, the articles stated.
The state-owned copper miner said that since mining at the open-pit mine ends in 2020, which is when the underground section begins commercial operations, it will able to keep productive capacity unchanged.
The $5.6 billion-switch of Chuquicamata to underground cave mining from open pit, part of Codelco’s 10-year, $39 billion-overhaul of its core assets, is expected to extend the mine’s life by at least 40 years.
Annual production from “Chuqui” — as it’s often referred as — after it has fully transitioned to underground extraction is projected to be 320,000 tonnes of fine copper and 15,000 tonnes of molybdenum.
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.
Chuquicamata and the nearby by Radomiro Tomic mines produced 653,000 tonnes of the company's total 1.8 million tonnes of output last year, which was almost 4% less than in 2017.
Production decline, together with lower copper prices and higher costs, saw the company's annual profits drop by a third last year to $2 billion, not counting paper losses worth almost $400 million, as it wrote down the value of its assets, including its Ventanas smelter and the open pit at its Salvador division.
Global production declined 2.4% in February 2019, when compared to the same month last year, with 1,515kt (19,749ktpa) of contained copper produced globally.
Chile led the pack with output down 7.1 % y/y to 415.9kt (5,412ktpa) while Peru, the second main global producer, saw its output fall by 5.1% y/y to 176.1kt (2,296ktpa).
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Chile’s Chemical and Mining Society (SQM), the world’s second largest producer of lithium, expects demand for key component in the batteries that power electric vehicles and cell phones to grow at “double-digit rates” this year.
Reporting quarterly earnings, the Chilean miner said that despite prices being affected by new supply entering the market, the commodity will remain strong thanks to rising demand.
SQM believes more supply for lithium carbonate and lithium hydroxide is needed and that demand for these products will continue to grow at “double-digit rates in the future”
The company believes lithium consumption could grow about 17% in 2019 to at least 315,000 tonnes, compared to the less than 260,000 tonnes it totalled last year.
SQM, however, saw earnings for the first three month of the year drop by nearly one-third due to the slump in lithium prices, but also higher royalties at its operations in Chile, considered to be the highest in the world.
Chief executive Ricardo Ramos said the company, which is expanding its lithium carbonate and lithium hydroxide capacity, sees operational flexibility as the key component of its strategy.
SQM last year struck a deal with the government to more than triple production by 2025 in exchange for paying sharply higher royalties and offering discounted lithium to domestic value-added producers of battery components.
The company expects to produce 60,000 tonnes of lithium this year, with sales volumes reaching between 45,000 and 50,000 tonnes.
By 2020, SQM predicts that sales volumes would jump 30% over 2019, reaching approximately 65,000 tonnes.
Once the company completes an ongoing $400 million-plant expansion, it expects to produce as much as 180,000 tonnes of lithium carbonate from its Salar de Atacama operations in Chile, overtaking US-based Albemarle as the world's top lithium miner by 2022.
Chile, which holds about 52% of the world’s known lithium reserves, last year lost its top lithium producer crown to Australia.
The country, however, is working on reversing that situation. It predicts that lithium will soon become its second largest mining asset, behind copper. The commodity is currently the country's fourth biggest export.
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Zambia’s Chamber of Mines delivered Thursdays further signs of a major global undersupply of copper about to hit the market by announcing that the country’s output of the metal could be as much as 100,000 tonnes lower than last year.
The industry lobby group attributed the expected drop in production to changes to mining taxes introduced in January, which is driving companies to cut output.
“The new tax regime forced miners to do the unthinkable – cut production – because many cannot afford to continue producing as before,” it said in a statement.
Zambia, Africa’s second largest copper producer, churned out 861,946 tonnes of the metal last year. In the first three months of this year, the nation’s copper output fell by 11.3% to 195,244 tonnes, compared to the previous quarter, the Bank of Zambia said earlier this week.
Copper output in Africa’s second largest producer could decline by as much as 100,000 tonnes this year, adding to recent, sharp declines at the world’s main producing nations.
The world’s main copper producing nations have been showing output declines this year, according to the latest monthly bulletin from the International Copper Study Group (ICSG).
Global production declined 2.4% in February 2019, when compared to the same month last year, with 1,515kt (19,749ktpa) of contained copper produced globally.
Chile, the world’s No.1 producer of the metal, led the pack with output down 7.1 % y/y to 415.9kt (5,412ktpa) while Peru, the second main global producer, saw its output fell by 5.1% y/y to 176.1kt (2,296ktpa).
Despite weaker copper production so far this year, ICSG data indicates a small surplus in February of 74kt with refined usage down 14% y/y, totalling 1,758kt (22,917ktpa).
Industry analysts at CRU believe that is undeniable that global demand for copper will soon surpass supply, the world may not need as many new mines as originally forecast.
Over the past year there has been board approval for several high-profile expansions and new projects that are due on-stream over the next five years.
CRU says the coming online of major projects, including Anglo American’s Quellaveco (2022), Teck Resources’ Quebrada Blanca expansion (2021) and First Quantum’s Cobre Panama (already in production) should momentarily eliminate the gap between supply and demand.
The research group now expects 900,000 tonnes a year more mine copper supply by the early 2020s than at this time in 2018.
The EV effect
While the effect on copper demand from the electric vehicles (EVs) sector is expected to be important, the consensus is that it will not meaningfully impact on demand until the second half of the 2020s, CRU says.
The red metal is a key component in the lithium-ion batteries used in EVs, as well as power inverters and in the charging infrastructure needed to keep them running.
Data released by the International Copper Association (ICA), an industry-funded body, shows more than 40 million charging ports will be needed over the next decade, consuming an extra 100,000 tonnes of copper a year by 2027.
From those stations, at least 3 million will be built in China by 2030, according to the study.
Consumption from the car industry will also weigh on demand, but later. An average gasoline-powered car uses about 20 kg of copper, mainly as wiring. A hybrid needs about 40 kg and a fully electric car has roughly 80 kg of copper (176 pounds).
It means that, in the next decade, global copper demand will increase between 3 and 5 million tonnes, experts predict. Once electric vehicles become popular, they estimate demand to reach 11,000,000 tonnes of new copper for EV’s alone.
Copper is also a key element in green technologies and renewables, which despite being adopted at a fast pace, they still represent only a minor percentage of the world’s total energy production.
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