202 (27.08.18)


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NEWS IN BRIEF

Good Week for Century Aluminum; at a ceremony in Kentucky, the company fired-up its Hawesville smelter, America's first restart since Trump slapped import tariffs on steel and aluminium. “This administration remains steadfast in our Made in the U.S.A. Commitment,” said Commerce Secretary Wilbur Ross

Bad Week for Australian iron ore miner Fortescue Metals. Annual profit has halved from $2.13bn to $1.08bn. The company's low-grade, high-impurity product is being discounted by steel groups in China, under pressure to meet stringent new clean air regulations

Glencore's Royalty Unit

It has now been more than a year since news emerged that trading giant Glencore was getting into the royalty game.
    Rather than sell a portfolio of royalties that it has scooped-up over the years, the company turned down bids of around $300m and planned to chase down further deals in battery metals, bulking-up to around $1bn, before spinning-off the new company, listing in London or Canada.
    Since then, it has named the new company BaseCore Metals, stuffed it with some of the sharpest figures in Glencore's corporate finance department and announced a funding agreement with Canadian pension fund Teachers'. Its key royalty, over the Antamina copper mine in Peru, is meanwhile throwing-off revenue: the mine's dollar throughput is up 18 per cent in the last year.
    Yet deals have been conspicuously absent. The showstopper, sources say, is the new unit's internal structure. To justify Glencore's trip into the royalty market, its head office in Switzerland has told BaseCore to lock-in marketing rights. In addition to royalties, it wants to swallow the right to buy a mine's concentrate, pumping tonnage through Glencore's trading desks.
    That makes deals difficult to close. Offtake rights are a valuable piece of the puzzle when it comes to mine owners getting debt funding, leaving Glencore's new royalty group short of its first transaction.
    The market is meanwhile moving: the sector's two dominant players, Franco-Nevada and Wheaton Precious, have been expanding in recent months into royalties outside of precious metals, pocketing agreements in cobalt, oil and natural gas. Newfoundland's Altius Minerals and New York-based Orion have also been snapping-up royalties in potash and battery metals, closing $2.55bn of royalty deals outside of gold and silver, according to new figures.
    “Things are changing rapidly,” says an insider in Canada at one of the largest streaming groups.

Flamingos

The flamingo has put its foot on the car battery market.
    In terse comments to Reuters this week, Chile's water regulator announced plans to create a new water reserve in the Atacama salt flats, potentially limiting companies pumping brine, used to extract lithium.
    The two biggest players in the region, Chile's SQM and American group Albermale, together account for 40 per cent of global lithium production, pumping 100,000 litres of brine from under the flats every minute. That, scientists have said, is “an absurd amount of water”, drying up lagoons, imperilling the flamingoes habitat.
    Technicians for SQM, which announced a jump in its lithium output this week, say they know every flamingo in Atacama by name. But locals who say they used to swim surrounded by pink birds, eating their eggs for breakfast, now only see them printed on maps and tourist brochures.
    SQM, which is planning to triple lithium capacity by 2021, flooding the car battery market with new supply, says it has all the water permits it needs. Albermale declined to comment.

New Gold: Tight

Is New Gold going under? Once touted as Canada's next major gold play, its new Rainy River mine has been hit by ongoing delays, the shares are down 82 per cent in two years and cash flow is getting tight.
    Rainy River was budgeted to cost $885m but New Gold has already sunk over $1bn and with $959m of debt on the balance sheet, is now on the wrong side of covenants on its $180m credit facility.
    New Gold recently refreshed its board, bringing in chairman Ian Pearce, a technical brainbox who built mines for Falconbridge and Xstrata. But Pearce has his hands full as chairman of copper group Nevsun, which is busy trying to fend off a hostile takeover by Lundin Mining.
    Canada's TMAC also needs to get puffing at its Hope Bay gold mine if it is going to make a $30m debt repayment in January.

 

CONTENTS

In Belgrade, Copper Buyers Gather

Mining executives from seven different countries have been dashing round Serbia's capital, trying to put together a large new copper company

From Chicken Nuggets to Gold & Copper: Air Tech Pumps-Up Profits

The world's largest mining companies have begun piping & blasting gas in imaginative new ways that could alter the industry forever

20 Critical Trade Routes

In the 1700s, ships carrying silver used to stop off in the Caribbean; 300 years on and it remains one of the world's trustiest trade routes