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Copper to stay tight on long path to new supply, top miner says

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Copper to stay tight on long path to new supply, top miner says

One of the world’s biggest copper companies has good and bad news for buyers hit with the highest prices in almost a decade.

On the bright side, prices are already well above the incentive level for new projects that would help ease the supply squeeze. Unfortunately, it can take twice as long to build mines now than in the past, meaning the market wouldn’t see that new supply for eight to ten years.
That’s the view of Raul Jacob, chief financial officer of Southern Copper Corp., which wants to tap more of the industry’s biggest reserves to almost double output by 2028 and, possibly, become the world’s largest producer.

To be sure, Southern Copper has its hands full in terms of projects in Peru and Mexico and isn’t looking to accelerate the build-out in any meaningful way. But other companies probably will given copper prices are well above $4 a pound versus last year’s average of $2.80, Jacob said. He put the incentive price for new projects at $3.25 to $3.50 a pound.

“If this price level holds, we should see announcements of new projects coming in the market,” Jacob said in an interview Monday. But the lags from decision to production will make the copper price cycle “a little bit longer than in the past.”

The next generation of copper mines will have to contend with lower ore quality that can push up costs while adhering to higher environmental and social standards.

That’s part of the reason Southern Copper won’t be accelerating its expansion plans to tap higher prices. Projects take “as long as they need to be safe,” he said. “You shouldn’t cut corners to get there.”

The company, like its peers, is awash with cash. Current copper prices indicate a record year of earnings before items in the $5 billion range, Jacob said. While the spending priority continues to be its project pipeline, Southern Copper will look at acquisition opportunities that come along and make recommendations to the board, he said.

“Valuations would be higher because of the better price environment, but at the same time our own valuations will be higher,” Jacob said. With a balance sheet that he said “is probably underutilized,” Southern Copper trades at 24 times estimated earnings, well above its peer group’s median ratio.

In terms of the type of opportunities that might interest the company, he said it would all come down to asset quality.

“We feel comfortable in Latin America and very comfortable and positive about copper,” he said.

Bloomberg News (By James Attwood)

Gold price to decline on cyclical recovery, higher yields – report

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Gold price to decline on cyclical recovery, higher yields – report

Gold prices have trended lower since the start of 2021, amidst rising US treasury yields and an increasingly positive outlook for the economic recovery.

Investor sentiment towards gold has also continued to ease significantly in recent months following the rally recorded in H120 and the peak in prices reached in August last year.

Gold prices could remain supported over March-April as inflation will likely pick-up and could rise faster than bond yields sending real bond yields even in more negative territory, market analyst Fitch Solutions predicts in its latest industry report, adding that this will likely push real interest rates lower in the near term, temporarily boosting the appeal for gold.

Fitch forecasts gold prices could see some volatility in the coming weeks as financial markets assess incoming inflation readings.

However, the analyst believes gold prices will trend lower on a six-to-twelve-month horizon given its expectations for bond yields to rise this year and as macroeconomic uncertainty eases.

As such, Fitch is revising down its 2021 gold price forecast, to an average of $1,780/oz from $1,850/oz previously.

A key gold driver to monitor in the coming weeks will be rising inflationary pressures. Fitch’s Macro team expects inflation to pick up over the coming months but believes that it will only be temporary as base effects will start to wear off around Q321 and that significant slack in the economy exists.

This helps to underpin the analyst’s view for gold prices to remain supported in the near term, before they ease later in the year as inflation pressures fade and as bond yields continue to rise. However, Fitch notes that a stronger-than-anticipated rise in inflation readings or inflation expectations could provide significant a temporary tailwind to gold as it is traditionally seen as a hedge against inflation.

Prices will be driven by both upside and downside pressures in 2021, but Fitch believes the balance weighted to the downside. The analyst’s forecast implies prices will trend lower overall this year and in 2021, the average price will be similar to the $1,773/oz average in 2020.

Fitch maintains its forecasts for 2022 and beyond, expecting gold to trend lower in the coming years as monetary policy continues to normalise, and as the US Fed raises interest rates and winds down its balance sheet.

Fitch continues to hold a below-consensus view on gold prices, in 2021 and beyond.

Mining.com

Ministerial Powers To Grant Tax Incentives Prone To Abuse: ZELA

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Ministerial Powers To Grant Tax Incentives Prone To Abuse: ZELA

The granting of tax exemptions to Great Dyke Investment (GDI) reflects unlimited ministerial powers which can be abused if there are no ‘clear and published guidelines’ on the granting of tax incentives, a local environmental lobby group has said.

Donald Takudzwa Nyarota

In an analysis of the tax exemption policy, the Zimbabwe Environmental Law Association (ZELA) said the lack of transparency and access to information in the mining sector fuels suspicions and makes it difficult to estimate the potential revenue loss.

ZELA said the GDI tax exemption saga is complicated by the lack of public disclosure of the beneficial registry, a situation that can lead to corruption and money laundering’ and fuel Illicit Financial Flows (IFFs).

“Given the opaqueness of the extractive sector, it is very difficult to identify the persons who control the platinum mining project. Secretive corporate structures and anonymous business entities scattered in various jurisdictions are a breeding ground for tax evasion and profit shifting to tax havens.

“There are risks of Illicit Financial Flows (IFFs) in the project as it is alleged that the biggest shareholder of the Landela Mining Venture Limited (Sotic International) is linked to Mauritius, which is a known tax haven.

“The major challenge is that negotiation and performance monitoring of contracts or agreements that the government sign with foreign investors is secretive prompting the public to suspect that the deals are targeted to benefit the investors at the expense of the country and a sense that the burden of taxation is unfair. To increase contract transparency, parliament should exercise its oversight role through contract performance monitoring and during approval of agreements with foreign entities and organisations.

“Parliament’s oversight is critical in ensuring that bad deals are avoided as both government and corporate negotiators will be aware that there is a third eye watching. The parliament must access the contract signed with the Russians and investigate it,” said ZELA.

ZELA said while the Minister of Finance may grant tax incentives to investors, he can also use discretionary powers without due diligence, as could be the case with this exemption, which raises transparency concerns.

“As it stands, the agreement in terms of which the exemption was made, was not made public by the government thus limiting the ability of citizens and CSOs to hold the government to account. So it is difficult to say that there was merit in government granting the income tax exemption because there is no public disclosure of the terms and conditions that were agreed upon.

“The sheer size, at least on paper for now, of the investment and its potential to provide huge economic benefits to the country could have significantly influenced the decision to warrant the project a Special mining lease.

“However, the discretionary powers given to the Minister and President ( in case of the Mines and Minerals Act) to grant tax exemptions can be easily abused in a political and economic context where contract disclosure is lacking and where political actors may hold economic interests or intend to benet from the tax exemptions.

“Dyke Investment a tax incentive is not clearly stated. The good intentions of this exemption can be theoretically deduced. However, the possible abuse of discretionary powers can also be deduced. The discretionary powers given to the Minister may lead to unjustifiable tax exemptions,” read part of the statement.

The Ministry of Finance and Economic Development granted a 5-year tax exemption GDI on the 27th of January 2021 through a Statutory Instrument 26/20211 cited as Income Tax (Exemption from Income Tax) (Great Dyke Investments (Private) Limited) Notice, 2021, effective from 1 January 2021.

The move will see the platinum mining company being exempted, on three fronts, from paying, income tax for a period of ve years, forego paying resident shareholders’ tax payable on dividends paid to its shareholders resident in Zimbabwe, and any additional profits tax.

ZELA called for the Ministry of Finance to ‘urgently develop Guidelines on granting incentives for investors including those for the mining sector, or if the guidelines already exist, they should publish them to promote transparency and accountability’.

263Chat

China says domestic competition hurting rare earth prices

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China says domestic competition hurting rare earth prices

China’s rare earths, a group of 17 minerals used in military equipment and consumer electronics, are being undersold due to “vicious competition” domestically and face low resource utilisation, the country’s industry minister said on Monday.

Prices for some rare earths in China, such as praseodymium-neodymium – used in rare earth magnets – have spiked to multi-year highs this year amid strong demand from the electric vehicle sector.

However, prices for other rare earths mined simultaneously, such as cerium and lanthanum, used in catalysts for oil refining, remain depressed due to abundant supply.

CHINA RAISED ITS RARE EARTH OUTPUT QUOTAS FOR THE FIRST HALF OF 2021 TO RECORD LEVELS

“Our rare earths did not sell at the ‘rare’ price but sold at the ‘earth’ price… because of competitive bidding, which wasted the precious resource,” Minister of Industry and Information Technology Xiao Yaqing said during a news briefing.

A heavy reliance on China, the world’s top producer of rare earths, has led the United States to order a review of its supply chain for the minerals.

Shipments of rare earth magnets from China to the United States hit 585 tonnes in December, the highest since at least 2016, according to Chinese customs data. China’s overall rare earth exports last year were the lowest since 2015 amid coronavirus-hit demand overseas.

China’s industry ministry proposed in January tightening regulation of the rare earth sector, including a stipulation that importers and exporters abide by foreign trade and export control laws.

“Government should play a role in maintaining market order, loosen what can be loosened and control what should be controlled,” said Xiao, who previously served as head of state-owned metals group Chinalco, the parent of one of China’s biggest rare earth producers.

The minister said some companies were producing excessive amounts of rare earths, causing environmental issues and leading to low resource utilisation rates.

China raised its rare earth output quotas for the first half of 2021 to record levels.

Meanwhile, China lacks high-level rare earth products, Xiao said, adding the country “should learn from Japanese enterprises in this regard.”

Reuters

Zimplats to increase smelting capacity

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Zimplats to increase smelting capacity

PLATINUM mining group, Implats, says it is undertaking feasibility studies to set up a fourth concentrator at Zimplats ahead of envisaged increased output from Bimha Mupani mine expansion projects.

The Johannesburg Stock Exchange-listed group owns Zimbabwe’s largest platinum miner, Zimplats, which is based in Mashonaland West province.

Implats chief operating officer, Gerhard Potgieter, said for some time now, the Zimplats smelter has been operating at 6,5 million tonnes capacity a year from four mines and three concentrator plants.

“So, the expansion of Zimplats comes with a need for further beneficiation capacity.

“Longer term, we’ve acknowledged the fact that we are constrained as far as our smelting capacity in Zimbabwe is concerned and we are busy with studies for further furnace there,” he said in an audio recording shared by the mining weekly website.

“It’s not only a furnace that goes with it and it’s quite a substantial capital investment to be made.

“We have started with a feasibility study on this, it’s early days but we have acknowledged the fact that we need more capacity in Zimbabwe.”

Meanwhile, Zimplats has recorded a 79 percent increase in sales revenue for the half year ended December 31, 2020 after receipting close to US$675 million.

The mining firm reported the jump was largely a result of increases in average metal prices and volumes of metal sold, which was US$2 241 compared to US$1 494 per six element (6E) ounce in the same period in 2019.

Volumes were 19 percent higher in the period under review after the group shipped 301 225 ounces compared to 252 748 in the same period in the preceding year.

“Half year revenue increased by 79 percent to US$674,9 million compared to the same period last year, largely driven by increases in average metal prices and volumes of metal sold,” said the mining concern in its directors’ report and condensed consolidated interim financial statements.

“The gross revenue per ounce for the half year at US$2 241 was 50 percent higher than the US$1 494 for the same period last year. 6E ounces sold increased by 19 percent to 301 225 ounces compared to 252 748 achieved in the same period last year.

“Cost of sales at US$297,4 million was 24 percent higher than the same period last year, mainly due to increase in sales volumes, and the resultant increase in royalty and commission costs,” it said.

As a result of the changes, share-based payments were higher due to improvement in the Impala Platinum Holdings Limited share price as well as an increase in gross profit margin at 56 percent, which signalled a 20 percentage points increase from 36 percent achieved in the previous year.

 

Business Weekly

Breaking: Vice President Kembo Mohadi resigns

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Breaking: Vice President Kembo Mohadi resigns

The vice president of the Republic of Zimbabwe Mr Kembo Mohadi has resigned with immediate effect.

The Vice President has tendered his resignation to H.E Emmerson Dambudzo Mnangagwa President with immediate effect.

Breaking: Lockdown regulations eased

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Breaking: Lockdown regulations eased

 

Exemption letters no longer required

Industry to re-open in line with WHO guidelines

Businesses to close at 7 PM

Curfew now from 10 PM to 5:30 AM

Schools advised prepare for re-opening

SME to open in adherence to #COVID19 -19 measures 

Schools, varsities prepare to reopen 

Inter-city travel resumes 

Funerals attendance remain 30 people

Social gatherings allowed and limited to 50 people

Bars, Night clubs, gyms remain closed

Golden Valley Mineworkers fear radiation from full-body scans

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Golden Valley Mineworkers fear radiation from full-body scans

Mineworkers at Golden Valley Mine in Kadoma have been submitting complaints to the Zimbabwe Diamond and Allied Minerals Workers Union (ZDAMWU) raising fears of radiation from full-body scans at the mine.

By Shantel T Chisango

Speaking to Mining Zimbabwe, ZDAMWU General Secretary Justice Chinhema said workers are fearing for their health due to the body scans they are going through at the mine.

“We have cases of workers fearing a full-body scan that is being installed at Golden Valley Mine in Kadoma raising concerns of radiation,” said Chinhema.

Mr. Chinhema said that his association engaged with the Radiation Protection Association of Zimbabwe (RPAZ) over the effects of the scanning machines.

RPAZ promised ZDAMWU that they will monitor the machines and assured them that there are safe with no side effects.

“We engaged with the Radiation Authority over its effects, and they responded saying they will be monitoring and assured us that it’s not harmful,” Chinhema said.

Mr Chinhema further said that miners are lacking knowledge on radiation, hence there is a need to educate miners about everything there is to know about radiation.

“Had it not been that the country is currently hit by the Covid-19 pandemic, possibly some training would have taken place,” said Chinhema.

ZDAMWU is an organisation that helps in addressing challenges being faced by current, retired workers in the Zimbabwe mining industry.

About Golden Valley

Golden Valley mine is a gold-producing mine located in Patchway, approximately 18km from the City of Kadoma. It is currently owned by John Mack company with Head office located in Harare.

Mines Bill awaits minister’s approval

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Mines Bill awaits minister’s approval

Mines and Mineral Bill is awaiting the Ministry of Mines and Mining Development Minister’s approval for it to be forwarded to Parliament, Parliamentary Portfolio Committee on Mines Chairperson has said.

By Shantel T Chisango

Speaking to Mining Zimbabwe, Parliamentary Portfolio Committee Chairperson Honourable Edmond Mkaratigwa said the Mines Bill is long overdue. He said the bill was supposed to have been out in September of 2020, and the Mines Minister can hasten the process by approving the Bill.

He further said if the Bill gets approved, it will not take the Parliament more than three months to pass the bill because Parliament Presiding officers have been awaiting the Bill for a long time.

“As Parliament and Committee Chairman we are yielding to ensure that the bill is released as early as possible.”

Mkaratigwa, in addition, applauded small-scale miners and all stake-holders including Civil Society Organisations (CSOs) for not tiring from putting pressure on the responsible officials in a bid to make the Bill be released quickly.

He went on to say that this year will yield results and will be good for miners.

“I can confidently say this year is the year for miners,” Mkaratigwa said.

The Bill has the key for the country’s short-term and long-term economic vision, said Mkaratigwa.

Zimplats to expand concentrator capacity to support US$290m platinum mine project

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Zimplats to expand concentrator capacity to support US$290m platinum mine project

Impala Platinum is to expand processing capacity at Zimplats in order to support a US$290 million investment at Zimbabwe’s largest platinum mine.

Development of two Zimplats mines, Bimha and Mupani, will add another 180,000 ounces, and this extra output will need extra concentrator capacity, officials say.

“That (investment) will add another 180 000 ounces in a shallow, mechanised, low-risk operation. The cost involved with that is R4.3 billion (about US$290 million) over the next four to five years,” Implats CEO Nico Muler said in a call with press on Thursday.

Implats COO Gerhard Potgieter said the Zimplats smelter has been operating at 6.5 million-tonne capacity a year from four mines and its three concentrator plants. With the added output from the Bimha and Mupani mines, the company will need more capacity for processing.

“So, the expansion of Zimplats must come also with the need for further beneficiation capacity. As the new Mupani mine ramps up, it will be the fifth mine and, together the Bimha mine, it will be growing into a significant size of the production so much so that this current project will take it to 6.7 million tonnes,” said Potgieter.

“So, the first thing we have to do is to provide a fourth concentrator unit at the operation, so that we can concentrate those tonnes. Unfortunately, the smelter at Zimplats is at full capacity, which means that the first step from that would be those concentrates having to come to our Rustenburg operations and be treated here.”

Implats says it is also looking into investing in additional smelter capacity, which is the next stage of the processing chain.

“Longer term, we’ve acknowledged the fact that we are constrained as far as our smelting capacity in Zimbabwe is concerned, and we are busy with studies for a further furnace and the sulphur abatement that goes with it. It’s quite a substantial capital investment to be made and we’ve started with the feasibility studies on that. It’s early days, but we’ve acknowledged the fact that we need more capacity in Zimbabwe,” Potgieter said.

Previously, Zimplats said Mupani is expected to have a life-of-mine of 34 years, and increase Zimplats’ resource by three million ounces. Full production is expected in 2025, the company said last year.

Bimha, which once accounted for half of Zimplats production, collapsed in 2014, cutting some 70 000 of pgm output. The company had to re-develop the mine while it switched to open cast to recover output.

 

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