Archive for October, 2016

Chinese takeover buy of world’s largest mining project

Saturday, October 29th, 2016

Simandou iron ore mine image www.www-globalcommodities.com

World number two miner Rio Tinto is exiting the world’s largest mining project, by selling its stake in Guinea’s Simandou iron ore  to partner Chinalco, potentially opening up a new path to development for the $20 billion project.

According to a statement by Melbourne-based Rio the deal is worth between $1.1 billion and $1.3 billion payable when Simandou starts commercial production and based on output. Rio says a final agreement could be inked within six months. In February this year Rio wrote down the value of Simandou by $1.1 billion, before deciding to shelve the project.

Rio owns  46.6% of Simandou south; Chinalco’s stake is 41.3% and the Guinea government holds 7.5%. Earlier this month the World Bank’s financing arm – the International Finance Corporation – sold its its 4.6% interest.

With complete control, Beijing-based Chinalco may revive the stalled project with the backing of the Chinese governmentRio has already spent more than $3 billion on the project having first acquired the property in the late nineties. With complete control, Beijing-based Chinalco may revive the stalled project, no doubt with the backing of the central government. In September Chinalco took private its Hong Kong listed mining arm, primarily focused on copper.

China consumes more than 70% of the world’s seaborne iron ore and is on track to import one billion tonnes of the steelmaking raw material this year. Imports have gradually displaced domestic production, pushing dozens of Chinese iron ore mines into bankruptcy.

The shelving of the project has been devastating news for Guinea. Simandou by itself would’ve been the world’s fifth-largest producer at 95 million tonnes per year.

Simandou with over two billion tonnes of reserves and some of the highest grades for direct-shipping-ore in the industry (66% – 68% Fe which attracts premium pricing) has a back-of-the-envelope calculation value of more than $110 billion at today’s prices.

The initial agreement signed in May 2014 called for a new 650km railway across the West African country to Conakry, Guinea’s capital in the north, plus a new deep water port at a conservatively estimated cost of $7 billion; infrastructure investments that would double the economy of the impoverished country.

The impoverished nation, which was one of the worst affected country’s by the recent Ebolo epidemic, and is in dire need of infrastructure to develop other parts of the industry, particularly the export of bauxite, the primary ore used to manufacture aluminum. Bauxite represents some 80% of the country’s export earnings. Chinalco is primarily an aluminum manufacturer.

Simandou’s chequered history

rio-tinto-guinea-simandou-signing-may-2014 image www.www-globalcommodities.com

Rio Tinto held the licence for the entire deposit since the early 1990s, but was stripped of the northern blocks in 2008 by a former dictator of the country.

BSG Resources, a company associated with Israeli diamond billionaire Beny Steinmetz acquired the concession later that year after spending $160 million exploring the property.

In 2010 BSGR sold 51% to Vale for $2.5 billion. The Rio de Janeiro-based company stopped paying after the first $500 million after missing a number of development milestones. Then the new Guinean government under Conde launched a review of all mining contracts awarded under previous regimes and launched an investigation into the Vale-BSGR joint venture.

The Guinea government withdrew the mining permit in April last year, accusing BSGR of obtaining its rights through corruption. BSGR has denied wrongdoing and filed an arbitration request in an attempt to win compensation from the Western African nation.

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Shortly after BSGR’s rights were stripped Rio filed a lawsuit for billions of dollars against both Vale and BSGR in New York courts for what it called a “steal” of its previously-owned concession. Rio alleged BSGR paid a $200 million bribe to Guinea’s former minister using funds from Vale’s initial payment.

The US district court threw out the case in November last year saying Rio “had waited too long to file the lawsuit” under the Racketeer Influence and Corrupt Organizations Act, which calls for a four year time limit.

rio-tinto-simandou-port-visit-conde-900-506 image www.www-globalcommodities.com

 

Henry Sapiecha

US miner on the hunt for rare earths in the Cook Islands

Friday, October 14th, 2016

 

Rising demand for hard-to-find rare earths (REEs) needed for high tech gadgets, green energy and batteries used by hybrid vehicles continues to push mining companies to scour the ocean floors.

The latest of them is Ocean Minerals LLC, a deep sea mining firm based in Houston, Texas, which announced Wednesday that it has inked an agreement with the Cook Islands government for exclusive prospecting and exploration rights around the country’s seabed.

According to Ocean Minerals, a recent study of alternative sources of REEs conducted by Houston-based Deep Reach Technology, indicates there are potential new sources of rare earth elements and scandium in the South Pacific Ocean’s area.

The firm believes it has reserved “the most promising areas,” containing important concentrations of heavy REEs and scandium. The later, when added in small quantities to aluminum, creates a metal alloy extremely light, strong, corrosion resistant, heat tolerant, and weldable.

Texas-based Ocean Minerals LLC believes it has reserved “the most promising areas,” containing important concentrations of heavy REEs and scandium.The use of such an alloy in automobiles and aircraft could yield fuel savings while protecting lives, the company said in the statement.

The announcement comes on the heels of a 15-year contract between India and the International Seabed Authority (ISA), which grants New Delhi exclusive rights to explore for Polymetallic Sulphides (PMS) in the Indian Ocean.

From 2001 to 2014 the United Nations’ ISA issued over 30 exploration permits for the Pacific, Mid-Atlantic and Indian Oceans. Since then, more and more companies have been applying for rights to scour the oceans’ floors.

The heightened interest pushed ISA to update its proposed regulatory framework for deep-sea mining in 2014, which translated into allowing private firms to apply for minerals as well as oil and gas extraction licenses beginning this year.

Scientists have expressed their concern about the potential impacts of deep-sea mining in unique and fragile ecosystems. Through the MIDAS project, a group made up of researchers, industry actors, NGOs and legal experts from 32 organizations across Europe, they are currently gathering data to determine what damage, if any, might be done by mining and so inform regulators of what needs to be put in place to protect the deep sea environment.

The Cook Islands are a chain of 15 islands about 4,800 km south of Hawaii and about 3,200 km northeast of New Zealand. Ocean Minerals’ rights are in the island nation’s exclusive economic zone, or the 200-nautical-mile zone extending from a country’s shores that gives it rights to undersea activity.

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Henry Sapiecha

USA remains just about fully dependent on China rare earths

Friday, October 14th, 2016

Molycorp-Rare-Earths-facility-in-Mountain-Pass-California.-image www.www-globalcommodities.com

A new report BMI Research says the Chinese government will continue to ramp up rare earth metal exports in a bid to regain control of rare earth pricing policy. The country produces more than 85% of the global supply of the 17 elements.

A surge in exports from China  since a ruling by the WTO deemed the country’s export quotas illegal and particularly after the lifting of exports tariffs in May, caused a further slide in prices which have been declining rapidly from peaks reached in 2011.

Among the hardest hit have been dysprosium and cerium, which saw prices fall from $65,865 a tonne and $883 a tonne, respectively in May 2015, to $37,524 a tonne and $685 a tonne by September 2016 , respectively according to BMI.

China’s policy of consolidating domestic producers and processors while encouraging exports saw the sole US producer of rare earths Molycorp fall into bankruptcy in July last year. While Australia’s Lynas has withered the storm, projects in Greenland, which has the potential to rival China’s biggest production centres, Russia, India and elsewhere have struggled to gain traction amid the low price environment.

As a result the US will continue to be beholden to China for more than 90% of its rare earth imports.

us-rare-earth-import-destinations chart image www.www-globalcommodities.com

Henry Sapiecha

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