201 (19.08.18)


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NEWS IN BRIEF

Good Week for First Quantum's copper hedge. Prices are falling so quickly that it's in the money. To minimise financing risk at its new Cobre Panama mine the company has sold forward 98,000 tonnes at over $7,150 per tonne. Copper fell to $5,840 this week, thanks to a rising dollar and an escalating global trade war

Bad Week for Russian mining stocks; Andrey Belousov, an aide to Vladimir Putin, has proposed a new 500bn rouble ($7.4bn) tax for mining companies, to bridge the state budget. Belousov named 14 companies that could be paying more, including Alrosa and Norilsk Nickel. Shares fell, knocking $3bn off the wealth of Russian mining bosses

Circling the DRC

Politicians are circling the Democratic Republic of Congo, flying into the country to register for presidential elections, due in December.
    First to fly home was lead opposition candidate Moise Katumbi, the former governor of Katanga province, where the country's copper riches are buried. But he was not allowed to land in Lubumbashi and failed to meet the deadline. There was also Jean-Pierre Bemba, who has been in prison for ten years at The Hague for war crimes that were recently quashed. Stepping off a private plane from Belgium, Bemba was met by thousands of supporters who were dispersed with tear gas and rubber bullets.
    Opposition leaders have said they will unite behind one candidate, but tipped to win the election is former interior minister Emmanuel Ramazani Shadary, a low-profile government loyalist, who is best known for repressing protests against the current president, Joseph Kabila.
    Kabila, who has been in power since his father was assassinated in 2001, has ruled himself out of the election. In private meetings in recent weeks outside Kinshasa, Ramazani Shadary was handpicked as his successor. But elections are already two years overdue and the country is yet to witness a peaceful handover of power.
    Recent elections in Zimbabwe offer a glimpse of the future: hopes of a peaceful vote following the departure of longtime ruler Robert Mugabe were dashed as the military broke up protests and as opposition leaders took to the courts this week, claiming rigging by Mugabe's replacement, Emmerson Mnangagwa.
    The DRC may instead copy Mali, which used volatile elections earlier this month to wave through two key mining deals. As voters went to the polls, Mali's government handed South African gold group Randgold a 50 per cent tax break at its Gounkoto mine, underpinning a planned expansion. And as votes were counted, the president agreed to pay $47m to Canadian gold group B2Gold in exchange for a stake in its new Fekola gold mine. Mali will also pay interest on the deal at 7.5 per cent.
    Turnout was low, and more than 600 polling stations were closed due to violence, but after a runoff, President Keita, 73, was re-elected. “Everyone has more or less accepted the verdict,” said election observers from Paris.

Gold Fields

Gold Fields is having an August horribilis.
    Capital costs at its new Gruyere mine in Australia have gone from $506m to $621m, due to wet weather, and the company's shares fell 12 per cent in Johannesburg on Wednesday after it announced 1,560 job cuts and a restructure at its South Deep mine in South Africa.
    Gold Fields bought South Deep, which has one of the world's largest gold reserves, off Barrick Gold in 2006 for $1.5bn and has since sunk a further $2.3bn, but output reliably falls short of targets and the mine is losing three million rand a day, according to CEO Nick Holland. “We cannot afford to burn the amount of cash that we are currently burning.”
   Job cuts are “the easy way out,” South Africa's mining minister told Reuters. “We want to support them but they come to us after making these announcements. It is deviant behaviour.” Gold Fields is “just postponing the inevitable”, wrote analysts at Nedbank.

Bold Ideas

Barrick Gold's chairman John Thornton and Royal Gold's chief executive Tony Jensen might look like floppy-haired corporate insiders, but both men ran for the hills this month, coming out with ideas that betray their maverick thinking.
    Thornton, who built his career in equity sales, revisited Barrick's $8bn acquisition of copper group Equinox in 2011, saying it was “if not the worst, one of the five worst acquisitions in history.” Debt rose to $16bn and Barrick's shares have never recovered.
    But Thornton revealed a nuance on the deal that could make sense: Barrick could join forces with a large player in the copper market (China, for example) to build new copper operations big enough that their gold byproduct alone would add-up to a large new mine. He kept the details loose, but Barrick would either become a gold streaming company, or a contractor for Beijing. “It makes all kinds of sense.”
    Then Jensen pitched an even better idea on a company conference call. Gold stocks have halved over the last decade, equity is too cheap to issue and insultingly low versus gold in the ground. Rather than slug it out any longer, gold groups could go private. “We would not be surprised,” Jensen said.

 

CONTENTS

“At Any Price”

How an implausibly aggressive mining company in unmarked headquarters uses stockpiles and secrecy to trade its way through riots and revolutions

Coca-Cola's Senator Versus Metal Prices

Johnny Isakson's also known as the senator for Coca-Cola, and one thing's been bothering him lately: metal prices

Franco-Nevada Injects $520m into Oil Deals

Royalty groups are playing an arbitrage between different commodities, says Scotiabank, moving into oil, copper, potash and battery metals

20 Critical Trade Routes

Every transaction in the EU can be traced back to one white factory in east Germany, which sends out metal “blanks” in unmarked lorries