Diamond markets under pressure – Rapaport

Rapaport published a report stating that diamond markets are under pressure as profit margins have tightened and the trade war with China has fueled uncertainty.

The international firm revealed that the RapNet Diamond Index, known as RAPI, for 1-carat diamonds fell 0.7% in May and is down 1.7% since the beginning of the year.

RAPI is the average asking price in hundred $/carat of the 10% best-priced diamonds, for each of the top 25 quality round diamonds offered for sale on the Rapaport Diamond Trading Network.

Stones weighing 3 carats saw the most dramatic change, with a 4% drop in May and a 9.8% drop since the beginning of the year.

To try to boost sales, polished suppliers are offering technology and source verification as a value-added service

Diamonds of 0.30 carats sunk by 3.7% in May and 9.4% since the start of the year, while 0.50-carat rocks fell 1.7% last month and 2.9% year to date.

"There is good demand for 0.60- to 1.99-carat, F-J, VS2-I1 diamonds. Buyers are insisting on well-cut stones. Polished below 0.50 carats is slow due to excess supply, weak Chinese demand and tight Indian liquidity," the report reads.

According to Rapaport, this state of affairs has pushed cutters to operate at lower capacity as they try to reduce inflated inventory, while manufacturers are rejecting high-priced rough stones that have made polished production unprofitable.

"De Beers and Alrosa are carefully managing production and price levels amid this year’s slow rough demand," the document states.

In the view of the firm's chairman, Martin Rapaport, if the trade does not change its business practices and adapt to new realities, the diamond industry will suffer "extreme financial and regulatory disruption."

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Gold demand up 7% in Q1, boosted by central banks, India

Global demand for gold grew to 1,053.3 tonnes in Q1, up 7% year-on-year, according to the latest report by the World Gold Council. A big reason for the stronger demand is central banks, which continued to buy gold for diversification and liquidity purposes. Another is improvement in the India market.

Central banks around the world bought 145.5 tonnes of gold this quarter, the largest increase in global reserves since 2013 (179.1 tonnes). The buying volume also comfortably exceeded the five-year quarterly average of 129.2 tonnes.

An uptick in demand for gold jewellery also contributed to the stronger Q1 gold demand. Much of this growth came from India, the world's second-biggest gold consumer, where a lower rupee gold price in late February/early March coincided with the traditional gold-buying wedding season to lift jewellery demand up to 125.4 tonnes, the highest since Q1 2015.

This could continue on heading into the second quarter. The Hindu calendar shows 37 auspicious dates for weddings in Q2, compared with just 21 in the second quarter a year earlier. Indians will also celebrate Akshaya Tritiya on May 7, when buying gold is considered auspicious.

"Prices are attractive. In the second quarter we might see a surge in demand due to Akshaya Tritiya and higher auspicious days for weddings," said Somasundaram PR, the managing director of WGC's Indian operations.

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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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India’s 2019 elections bode well for mining sector — report

India is currently holding its Lower House general elections and Fitch’s Solutions’ Country Risk team expects Prime Minister Narendra Modi’s National Democratic Alliance, led by the Bharatiya Janata Party (BJP), to win the most number of seats, but fall short of a simple majority in the Lower House.

Under this scenario, Fitch forecasts in its latest industry trend analysis, India's mining sector would see solid growth in the coming years, boosted by the Bharatiya Janata Party's friendly policies towards mining, vast mineral reserves and improving commodity prices.

Policy continuity of Modi's reforms in the mining industry would drive substantial positive changes despite slow implementation, the analysts say. Since coming to power in 2014, the Modi government has enacted a series of liberalising reforms in an attempt to increase foreign investment into the sector.

Modi's re-election would also safeguard the new National Minerals Policy (NMP) approved in March 2019, according to which the government aims to increase the production of major minerals by 200% in seven years.

The possibility of an opposition win by the Indian National Congress poses risks to Fitch’s forecast, as the party has promised to better enforce the Forest Rights Act in their manifesto.

The results of the election will be released May 23.

Read Fitch’s full report here.


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India’s state copper miner plans $800m expansion

Indian state copper miner Hindustan Copper is in the initial stages of an $800 million expansion program, Resources Monitor reported Tuesday.

Currently, Hindustan produces around 40,000 tonnes of copper per year, but the company plans to increase production to around 200,000 tonnes by 2025.

Construction is underway at a major new underground mine in the state of Madhya Pradesh, according to Resources Monitor, and expansions are planned at its operations in the states of Jharkhand and Rajasthan.

Hindustan Copper’s production of 40,000 tonnes is only a small proportion of the 650,000 tonnes that India used last year domestically in the electrical, construction and transport industries, the report reads.

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30 countries face higher resource nationalism risk — report

According to global risk consultancy Verisk Maplecroft's latest Resource Nationalism Index (RNI) report, a total of 30 countries have registered a significant increase in resource nationalism risk metrics over the past year, 21 of which are considered major producers of oil, gas and minerals. The RNI is aimed to measure the risk of expropriation, the imposition of more stringent fiscal regimes, and the pressure for companies to source goods and services from local providers. Countries are also rated and ranked based on these risk metrics.

Specifically, the RNI report names Russia and the Democratic Republic of Congo (DRC) as the two notable movers on the list, with both being downgraded to 'extreme risk' to indicate that the risk of governments taking greater control of natural resources is the highest. In DRC's case, the risk bump was mostly a byproduct of its new Mining Code, which allowed more government interventions and oppressive fiscal terms for existing operators. Eight countries now have the 'extreme risk' rating (starting from highest risk): Venezuela, DRC, Tanzania, Russia, North Korea, Zimbabwe, Swaziland and Papua New Guinea.

Government interference poses threat to operators

Although outright expropriation has become a less likely scenario than before, government measures such as tax pressures, changing contractual terms and strict regulations can still make countries difficult to operate in.

Africa has long been recognized as a high-risk jurisdiction. It has gotten worse over the past year as 10 nations experienced growth in risk factors, according the RNI report. Other countries such as Mexico, India, Malaysia, Turkey and Iraq also saw increased risks as governments took measures to erode the revenues of operators.

Improvement in Zimbabwe, Ecuador

On the upside, the RNI report shows that 24 nations have seen improvements in their index performance, including Zimbabwe (joint 5th), Vietnam (25th), Ecuador (46th) and Guinea (94th). Even though Zimbabwe is still far away from what is considered a stable mining destination, its score has improved thanks to a new government regime that has been actively encouraging foreign investment. The country boasts the world's second largest platinum and chromium reserves, according to Verisk Maplecroft, and could attract meaningful investment from abroad and even shed its 'extreme risk' tag.

Ecuador has made more significant progress. Since President Lenín Moreno came to power in 2017, Ecuador has jumped from ranking 3rd and ‘extreme risk’ in the Resource Nationalism Index two years ago to 46th and ‘medium risk’ in 2019.

Read the full report here. 

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Diamond prices sliding – report

A report made public today by Rapaport states that polished-diamond prices softened in January, with 1-carat stones falling by 0.4% last month and 1.8% compared to January 2018, while 3-carat gems fell by 1.8% last month and 5.9% compared to last year.

Smaller diamonds saw a less steep decline in prices as 0.5-carat rocks fell by 0.3% in January 2019 and 0.1% when compared to last year, and 0.3-carat diamonds dropped by -0.8% in price last month and -4.1% year-on-year.

The analysis is based on the RapNet Diamond Index or RAPI, which is the average asking price in hundred $/ct. of the 10% best-priced diamonds, for each of the top 25 quality round diamonds offered for sale on RapNet – Rapaport Diamond Trading Network.

According to the firm, the reasons behind the sliding prices are that the US restocking proved slower than expected after the holiday season and the vacation that Far East buyers took ahead of the Chinese New Year.

“Although polished prices declined in the second half of 2018, inventory levels have remained high: The number of diamonds on RapNet as of February 5 was 26% higher than a year ago, coming to 1.5 million. In January, rough trading was slow, as De Beers and Alrosa left prices unchanged,” the document reads.

Focus in India

Rapaport also reports that bank credit to India’s diamond trade declined by up to 30% in the past year and currently stands at $5 billion to $5.5 billion. Several situations are behind this drop, among them the fact that bankers decided to raise the industry’s risk profile following the $2 billion alleged fraud of Punjab National Bank by jewelers Nirav Modi and Gitanjali Gems.

Besides that scandal, credit-granting went down because state-owned banks are adopting a more conservative approach across all industries in response to a rise in non-performing assets in the country and, in parallel, the rupee was depreciated by 12% against the US dollar in 2018, which reduced credit in dollar terms since Indian credit lines are set in rupees.

“Indian diamantaires need to improve transparency and profitability to gain favor with the banks. A shift to a more conservative lending environment in India will exert additional pressure on the trade in 2019 but will be a positive development in the long term. With reduced bank credit, businesses will have less money to spend on non-profitable rough, helping to shift their mindset away from turnover and toward bottom-line profits,” Rapaport states.

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Vedanta says Anglo American stake buy meets Gov’t criteria

Vedanta, the London-listed natural resources company controlled by one of India’s richest men, said Monday its foreign subsidiary Cairn India Holdings’ $200 million investment in Anglo American (LON:AAL) met all governance requirements.

The company, India’s largest miner and No. 1 iron ore exporter, said the deal was made on an arms-length basis in December 2018, adding it provided “significantly higher” returns compared to other overseas cash management investments that would typically return around 2%.

Moody’s has placed Vedanta on review for potential downgrade following last week's controversial investment in Anglo American.

The statement comes after shares in the company lost a fifth of their value on Friday as investors were sceptical of the deal struck by Volcan, Indian billionaire Anil Agarwal’s family trust.

On Thursday, Vedanta said Cairn India had paid $208 million to buy a stake in Anglo American from its parent Volcan Investments, as part of its "cash management activities".

The unit also agreed to make deferred payments aggregating $353 million until October 2020, Rating agency Moody’s said on Monday, which makes the investment bigger than many had realized.

Moody’s, which has a non-investment grade rating on Vedanta, has placed it on review for a possible downgrade following the purchase.

In a note to investors, the rating agency said the deal was a means to “fund the risk appetite of its shareholder”, and a clear indication of the company’s willingness to deploy cash at Vedanta to support Volcan interests.

Agarwal’s decision last year to take its company private was seen by some as a prelude to a potentially broader deal with Anglo American, the world's fifth-largest miner by market value,

Volcan Investments holds around 19% in Anglo American.

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Codelco and Ennomotive challenged engineers to find creative uses for copper-graphene nanocomposite

Following the development of a copper-graphene nanocomposite that adds 3% graphene to pure copper, Codelco Tech, a subsidiary of the world’s top copper producer, and engineering innovation firm Ennomotive chose three people to lead the creation of applications where the new material can be practically used.

One of the people leading the new applications is Julio Casal Ramos, an engineer from Venezuela currently living in Chile.

Casal Ramos has worked on finding ways to strengthen packaging materials so, with that experience under his sleeve, he came up with the idea of replacing copper alloys in mechanical systems where friction occurs with the stronger and more durable copper-graphene nanocomposite.

“Cu/G allows the replacement of the copper/bronze alloy since it improves the strength of the pieces, reduces their need for maintenance, and increases their lifespan. This is really useful in systems with fixed parts subjected to constant friction efforts caused by the mobile part’s slippage. According to recent studies, another benefit of this nanocomposite is its natural lubrication properties,” he said.

Engineer Julio Casal.

The nanocomposite can be also used in smart fabrics. This idea was brought onto the table by Fernanda Monasterio, a chemical engineer from Argentina who has worked in the field of material research and development.

According to Monasterio, the use of Cu/G, compared to just copper, would improve the mechanical strength while reducing the amount of material used in a fabric that is supposed to illuminate, heat, and/or transport electricity or data. “The market for these textiles is expected to reach $4.72 billion in 2020,” the engineer said.

Creating better absorption of lithium in batteries while reducing their cost is another application for the copper-graphene nanocomposite, Vivek Nair found.

Nair is an Indian engineer living in Singapore and leading Clean Carbon Technologies. He is currently in a quest to develop lithium-sulfur battery packs that have two times the energy density and performance of NMC811//Graphite batteries. By using Cu/G, the researcher was able to achieve an energy density of the battery of 1500 Wh/Kg – 2000 Wh/Kg.

“Being from the energy storage domain, I quickly got the idea of using the material to make batteries with higher energy density and rate capabilities,” he said.

The engineers presented their solutions at a challenge organized by Codelco Tech and Ennomotive to find ideas on potential applications in which the use of the new nanocomposite translates into a technical/economic improvements to existing materials.

In a press release, the companies informed that the challenge lasted for six weeks and received entries from 65 engineers from 15 countries, with Casal Ramos, Monasterio and Nair taking the first spots. The winners share a $15,000 prize and receive the backing of both firms to bring their solutions to market.

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Global copper market under supplied, demand on the rise — report

Global refined copper consumption will register steady growth over the coming years, driven by demand from the power industry, rising electric vehicle (EV) production and a positive global economic growth outlook, a new copper supply and demand outlook by Fitch Solutions shows.

Fitch forecasts that global copper demand will increase from 23.6mnt in 2018 to 29 .8mnt by 2027, at 2.6% annual growth.

But the global copper market will see persistent undersupply in the coming years, as global consumption, driven by China's power and infrastructure sectors and increasing EV production, continues to outpace supply growth, Fitch warns.

Based on Fitch’s complied data, global refined copper demand will outpace production and the market will be in deficit over the next few years. Fitch specifically forecasts the global refined copper balance to register a deficit of 247kt in 2018, and to remain under-supplied through to 2021.

Mining companies are searching worldwide for copper projects amid the forecasts that demand for the red metal will significantly outstrip supply from 2020 (there are 300kg of copper in an electric bus and nine tonnes per windfarm megawatt).

That is the short-term forecast, but over the long term, Fitch expects the global copper deficit to shrink, and predicts that the market will shift to oversupply, as copper producers invest in new projects and output increases.

China's refined copper production is expected to maintain steady growth as producers take advantage of elevated prices, and Fitch predicts China remains a driver of global copper production growth, to increase copper production from 8.8mnt in 2018 to 11.4mnt by 2027, averaging 3.1% annual growth, and that China's copper producers will prove more profitable than foreign competitors, supported by strong domestic demand. In the short term, Fitch expects China’s economy to cool gradually in 2019 due to softening investment activity as credit and fiscal spending growth slows.

Chile, the world’s second largest refined copper producer, will benefit from strong copper prices and President Sebastián Piñera’s foreign investment-focused agenda. Fitch points out that Chile's Codelco produced 875kt of copper in H118, up 2% y-o-y, and forecasts the country’s refined copper production to return to growth due to rising prices and a solid project pipeline.

India is expected to emerge as a star on the global copper production growth stage, supported by government initiatives to increase output and lower the costs of production. Fitch forecasts India’s refined copper production to increase from 925kt in 2018 to 1.8mnt by 2027, averaging 7.3% annual growth. A downside risk, Fitch points out, are the protests, some violent, and the subsequent closing of Vedanta Resources' Sterlite copper smelter on environmental grounds.

Fitch maintains a muted outlook for US copper demand growth over the coming years due to its view that President Trump's infrastructure package will fall short of current mainstream expectations.

Read the full report here.

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