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Mbanje investments leaving mining in the dust in SA

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Mbanje investments leaving mining in the dust in SA

There are fears that a surprising growth in dagga investments is taking away much-needed capital from mining in South Africa.

That’s because dagga stocks deliver better short-term returns.

Industry players say mining’s struggles to fend off the challenge from dagga reflect investors’ poor view of the industry.

Dagga companies are setting up projects in Lesotho while other countries, including Zimbabwe and South Africa, are planning to issue licences.

This is forcing mining companies to look for new ways to sell the merits of their projects.

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Gold shines in world market

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Gold shines in world market

Gold’s allure shows no sign of waning as Asian consumers don more jewelry, investors spurn currencies and Swiss vaults bulge with the alternative investment, top gold executives said at the Reuters Mining Summit this week.

“People are buying gold because they don’t want to buy euros, they do not want to buy the dollar. It is going to the Middle East. It is going to India and it is going to China. Those are the big markets right now, and Turkey,” said Pierre Lassonde president of the world’s largest gold producer Newmont Mining Corp (NEM.N).

Jewelry accounts for around 70 percent of gold demand but other rival luxury and status goods also compete for their share of the consumer purse. Despite this, the ability to adorn and invest remains a strong enticement for consumers.

Gold, as a classic hedge against global investors’ worries about inflation or geopolitical instability, has been a beneficiary of the dollar’s three-year decline through the end of 2004, while a rising disposable income in China and India has supported demand.

“Gold jewelry is a lifestyle purchase … China and India will be buoyed by increasing disposable income,” said number 3 gold producer Barrick Gold Corp’s (ABX.TO) CEO Greg Wilkins at the summit at Reuters office in New York.

India’s traditional position of being the world’s biggest consumer of gold may see some decline as the burgeoning middle class of this Asian nation shifts to other investments.

“The demographics are changing and the access to alternatives is changing … India is going to be a tough market to maintain that position,” said Peter Tomsett, chief executive of Canada’s Placer Dome Inc.PDG.TOPDG.N, the world’s fifth-biggest gold producer.

India imports more than two-thirds of its annual demand of about 700 tonnes a year to feed the demand for gold bangles, necklaces and hair ornaments often procured as items to ensure financial security.

But Barrick’s Wilkins said consumers continued to buy gold sometimes opting for a lower grade.

“Whereas in China and India, it’s as much adornment value as it is investment value,” said Wilkins.

Lassonde too was optimistic, encouraged by the prospect of the revaluation of China’s currency.

“If we see a revaluation with the renminbi (yuan), I would think that gold sales in China are going to increase even more substantially,” he said.

“Then India revalues, and all of the countries that are competing against China are all going to revalue which is going to make gold even more attractive in Asia,” said Lassonde.

PLATINUM TWINKLES

The China effect was also being felt in the platinum jewelry market, said Keith Rumble, CEO of the world’s number 2 platinum producer, Implats (IMPJ.J)

“The swing factor, the Chinese jewelry market, is holding up remarkably well at these sort of price levels. Beyond our expectation, that is for sure. Even though it has slipped by 10 percent to 15 percent over the last year, but we still think that is a good result,” said Rumble.

Reuters

Russian miner to invest over $360m in Guinea mine

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Russian miner to invest over $360m in Guinea mine

Russian miner Nordgold (LON:NORD) has received a fresh 15-year mining permit for its Lefa mine in Guinea, where it plans to invest more than $360 million to continue developing the asset, one of the country’s largest gold producing mines.

The new licence, effective from March 21, is valid until 2034, in line with Lefa’s current life-of-mine.

Nordgold, which spun off of Russian steelmaker Severstal in 2012, acquired the mine in 2010 and has already invested over $1 billion in Guinea, according to the statement.

Nordgold acquired the Lefa mine in 2010 and has already invested over $1 billion in Guinea.

Lefa is one of the largest gold mines in Guinea, employing about 1,200 people and providing over 730 indirect jobs.

The operation, said Nordgold, has contributed almost $12 million to empowering the local communities and it intends to continue doing so, with the aim of improving people’s living conditions for the life-of-mine and beyond.

In 2017, the Lefa’s production increased 7%, churning out a total of 208,800 ounces. Overall, the company produced 968,300 ounces of gold from its nine operating mines, earning revenues of .22 billion.

Nordgold, which collected many of its major assets during the 2008-2009 financial crisis, also operates in Russia, Kazakhstan and Burkina Faso.

Mining.com

FPR working on identifying suppliers

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FPR working on identifying suppliers

FIDELITY Printers and Refiners (FPR) said it is finalising the process of selecting companies who will supply mining equipment to beneficiaries of its Gold Development Initiative Fund (GDIF) as it moves to address challenges of inadequate machinery among small-scale miners.

FPR was hoping to sign a Memorandum of Understanding (MoU) with selected mining equipment suppliers by end of last month as part of its efforts of ensuring that appropriate machinery was delivered to beneficiaries of its loan facility. FPR general manager Mr Fradreck Kunaka said the company was still finalising a few legal processes which are a prerequisite for every company hoping to tender equipment suppliers.

“The whole process of identifying suppliers is still underway. In December 2018, as Fidelity Printers and Refiners we underwent the Procurement Regulatory Authority of Zimbabwe (PRAZ) training which requires us to comply with certain provisions of the Public Procurement and Disposal of Public Assets Act (Chapter 22:23) before tendering for equipment suppliers and we are still working on that.

We received quite a number of applications when we posted the advert last year and we are yet to shortlist them. The ultimate objective is to phase out the inefficient stamp mill technology as well as use of mercury in the recovery of Gold by 2020 in line with Minamata Convention on Mercury,” said Mr Kunaka.

He said the value of equipment is determined by the miner’s requirements and it takes two to four weeks for the miner to receive the equipment.

“The value of equipment is determined by the loan applications from the miners. Based on miners’ requirements, equipment worth can be ascertained. The period varies with the type of equipment that is being purchased, as some types of equipment require to be manufactured after payment has been received. Some other type of equipment the miner collects from supplier soon after payment. In general with all loan requirements satisfied it takes between two weeks to a month for the miner to receive the equipment,” he said.

Mr Kunaka also said that the company had follow up mechanisms put in place to curb abuse of the loan facility.

“There are regional mining consultants who are based in the various regions and they do all the monitoring on the ground,” he said.

The Sunday News

DRC’S Mutanda Mine to cut workforce

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DRC’S Mutanda Mine to cut workforce

Glencore is cutting the workforce at its Mutanda copper and cobalt mine in the Democratic Republic of Congo to lower costs before a possible shift in production methods, according to people familiar with the matter.

The company is studying the economic viability of those deposits, given rising production costs and an uncertainty political environment in Congo

Labour unions met on Friday to discuss the job cuts, which will affect contractors and expatriate employees, the people said, asking not to be identified as the matter is private. No Congolese nationals are affected.

The layoffs come as Glencore considers a plan to stop mining oxide ores at Mutanda — the world’s largest and richest source of cobalt — and invest in new methods to extract the metals from sulfide deposits. The company is studying the economic viability of those deposits, given rising production costs and an uncertainty political environment in Congo.

Relations between miners and the Congolese government have been strained following a revision to the mining code that tripled the royalties levied on cobalt. Mutanda is a crucial source of employment and tax revenue for Congo. The cuts to the mine’s workforce were reported earlier by the Financial Times.

Late last year, Glencore halted exports of cobalt from its neighboring Katanga mine after ores were found to be radioactive. The miner last week said it expects a large part of its cobalt output from Katanga will only be sold next year.

Bloomberg News

RioZim suspends operations again

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RioZim suspends operations again

Zimbabwean gold miner RioZim said on Friday it had suspended production at its three mines for the second time in four months because the central bank had failed to pay it in U.S. dollars for part of its gold deliveries.

Gold producers in Zimbabwe sell their output to central bank subsidiary Fidelity Printers and Refiners and are supposed to be paid 55 percent of their earnings in U.S. dollars. The remainder is paid via electronic dollars into their bank accounts.

Big mining companies say the acute shortage of dollars, which has also sapped supplies of fuel and medicines, hampers their ability to expand production and start new projects.

RioZim, which is 95-percent owned by local shareholders, is Zimbabwe’s second biggest gold producer and last October threatened legal action to force the Reserve Bank to pay it more dollars for part of its output.

The gold miner said since December, it had experienced “significant and persistent” delays in dollar payments, affecting its viability.

“Consequently, the company has recently been forced, once again, to involuntarily suspend production across all its three gold mines pending full payment of its foreign exchange proceeds,” RioZim said in a statement.

The company said it continued to engage the Reserve Bank but if negotiations failed, it would shut its mines indefinitely.

Central bank Governor John Mangudya did not respond to calls for a comment.

Zimbabwe adopted the U.S. dollar in 2009 to tame hyperinflation, but is facing acute dollar shortages and that has sent prices of basic goods spiralling and inflation rising to double digits.

Mines Minister Winston Chitando said on Monday Mangudya would soon introduce a monetary policy tool to alleviate the foreign currency shortages that have affected miners.

Gold is the country’s single largest export earner and production reached an all time high of 33 tonnes in 2018 from 27 tonnes the year before, official data shows, driven by record output from small scale producers.

Big mining companies say the acute shortage of dollars, which has also sapped supplies of fuel and medicines, hampers their ability to expand production and start new projects.

Reuters

Zambia’ Mopani Copper mines suspends operations

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Zambia’ Mopani Copper mines suspends operations

Glencore’s Zambian unit Mopani Copper Mines Plc said on Friday it had suspended operations at its Mindola north shaft after three workers were killed in a fire accident.

Mopani is one the biggest mining companies in Zambia — Africa’s No. 2 producer of the metal — with an output of around 100,000 tonnes a year. It was not immediately clear how much production would be lost owing to the suspended production.

Reuters

SA Harmony Gold expects drop in earnings

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SA Harmony Gold expects drop in earnings

South Africa’s Harmony Gold said on Friday its earnings per share for the first half of the year could be up to 97 percent lower than this time last year.

The gold miner said a 915 million rand ($67 million) depreciation charge, lower derivatives gains and unfavourable currency conversion hit earnings, while costs also rose 6 percent.

Headline earnings per share – a key profit measure in South Africa that strips out one off items – were expected to be between 83 percent and 97 percent lower than the first half of 2018, Harmony said in a trading update.

However, Harmony said its production rose by 34 percent year-on-year, contributing to its operational free cash flow, thanks to its investments in two mines.

One, Hidden Valley, reached commercial levels of production in June 2018, prompting the larger depreciation and amortisation charge.

Reuters

 

Congo copper mine world’s second largest

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Congo copper mine world’s second largest

Billionaire Robert Friedland, founder and executive chairman of Ivanhoe Mines (TSX:IVN), said Wednesday his copper project with Chinese partners, Zijin Mining and Crystal River Global in the Democratic Republic of Congo “definitely”  has the potential to become the world’s second-largest red metal mine.

“Kamoa-Kakula will become the world’s second-largest copper mine with peak annual production of more than 700,000 tonnes of copper metal,” Friedland said in a release announcing the results of an independent pre-feasibility study (PFS) for the project.

If fully developed, the Kamoa-Kakula mining complex could produce 382,000 tonnes of copper a year during the first 10 years, climbing to 700,000 tonnes after 12 years of operations.

The mining veteran, who made his fortune from the Voisey’s Bay nickel project in Canada in the 1990s, said the capacity of the project’s first phase, estimated at 6 million tonnes of ore a year, could later be tripled.

Mine grades at Kamoa-Kakula, the PFS shows, will average 6.8% copper over the initial five years, and 6.4% in the first decade, with production starting in early 2021. First, Friedland needs to raise more than $1.1 billion, but he said he’s already in talks with China-based financial institutions.

“The mine is getting built,” Friedland said. “The first operation will be able to finance two further mines and a smelter (…) That is mind-boggling and we’ve never seen that before.”

Ivanhoe Mines has been working on Kamoa-Kakula for ten years with its joint-venture partner Zijin — which acquired a stake in the Canadian miner in 2015 through a wholly-owned subsidiary — and the Congolese government. The project is also backed by China’s state-owned Citic Metal, Ivanhoe’s largest shareholder.

Not a surprise

Friedland’s words didn’t come as a surprise for those following the project’s progress. Only last week, Ivanhoe announced what it called an “unprecedented” intersection in a shallow, flat lying deposit at the asset.

Kakula, the mine likely to be built first, is projected to have an average grade of 6.8% copper over the initial five years, and 6.4% in the first decade — higher grades than Anglo’s Quellaveco project in Peru or Teck ’s QB2 in Chile.

For Paul Gait, analyst at Sanford C. Bernstein, the results from drill hole DD1450 at Kamoa North were “nothing short of extraordinary.” In a note to investors, he said the released figures show higher copper grades than the 0.5% to 0.6% detected at Anglo American’s Quellaveco project in Peru or Teck Resources’ QB2 project in Chile.

They confirm, he said, that “the broader Kamoa-Kakula region is by far the most important and exciting mining project in the world today.”

If fully developed, the mining complex could produce 382,000 tonnes of copper a year during the first 10 years, climbing to 700,000 tonnes of copper after 12 years of operations. More importantly, Friedland said, Kamoa-Kakula could restore the DRC to its historical position as one of the world’s top copper producing countries.

Shares in Ivanhoe jumped on the news, trading 13% higher in Toronto to C$3.28 at market close.

Year-to-date, the stock is up about 27%, valuing the company at about C$3.3 billion ($2.5B).

Mining.com

Gem Diamonds from Lesotho mine drops

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Gem Diamonds from Lesotho mine drops

Last year was a momentous one for Africa-focused Gem Diamonds (LON:GEMD), as it recovered a record number of huge precious stones from its flagship Letšeng mine in Lesotho, the world’s highest-dollar-per-carat diamond mine.

In Q4 2018, the company recovered three of the 15 diamonds over 100 carats — a new record for the London-based miner.

The most important one, the 910-carat “Lesotho Legend”, was unearthed early in the year and the company fetched $40 million for the diamond, one of the largest ever discovered.

Carat recovery, however, dropped in the fourth quarter by 17% to 29,523 ct, which was not enough to ruin the company’s positive year, in which carat recovery actually increased by 11% when compared to 2017 to 126,875 ct.

Gem Diamonds unearthed three of the 15 diamonds over 100 carats it found in 2018 in Q4, but carat recovery dropped by 17% to 29,523 ct in the period.

The average price of diamonds found in the period was just $1,259 per carat, almost half the value for the full year, the company said. The highest price obtained was $64,067 per ct for a 4.06-carat pink diamond – also the top sum achieved during 2018.

Investors reacted negatively to the results. Gem shares fell 2.8% to 105.50 pence in London trading after their release.

Since acquiring Letšeng in 2006, Gem Diamonds has found five of the 20 largest white gem quality diamonds ever recovered, which makes the mine the world’s highest dollar per carat kimberlite diamond operation.

At an average elevation of 3,100 metres (10,000 feet) above sea level, Letšeng is also one of the world’s highest diamond mines.

The biggest diamond ever found was the 3,106-carat Cullinan, dug near Pretoria, South Africa, in 1905. It was later cut into several stones, including the First Star of Africa and the Second Star of Africa, which are part of Britain’s Crown Jewels held in the Tower of London.

Lucara’s 1,109-carat Lesedi La Rona was the second-biggest in record, while the 995-carat Excelsior and 969-carat Star of Sierra Leone were the third- and fourth-largest.

Finding diamonds worth mining is becoming a problem throughout the industry. Prices for the smallest and cheapest gems have been dropping due to oversupply, shrinking miners’ profits.

Late last year, some of Rio Tinto’s (LON, ASX: RIO) customers refused to buy cheaper diamonds, while Anglo American’s De Beers, the world’s top diamond producer by value, had to cut prices and offer concessions to buyers.

Mining.com

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