204 (04.11.18)


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NEWS IN BRIEF

Good Week for gemstone miner Gemfields, which pulled an emerald the size of a brick out of its Kagem mine in Zambia. Weighing 5,655 carats (1.1kg), the company has named it Lion. “The health of carnivores is widely regarded as a good indicator of the health of the wider eco-system.”

Bad Week for hedge funds shorting copper group HudBay; activist investors are pushing for an overhaul but the shares popped 27 per cent higher on Thursday thanks to a bumper quarter at its Constancia mine, Peru. Revenue of $363m came in 18 above analyst forecasts. “We executed well,” said CEO Alan Hair

Wedding Bells for Barrick

Investors in Canada's Barrick Gold and London-based Randgold Resources are due to vote this week on an $18bn tie-up between the two companies, rejecting or waving through the biggest gold deal for seven years.
First reported by mining blog IKN, and after three years of on-off talks, the two groups want to create the world's biggest and most forceful company in gold, producing 6.5m ounces each year, $10bn of revenue and $5bn of pre-tax earnings.
The deal marries Randgold's founder Mark Bristow, who has never reported a writedown or a quarterly loss, with Barrick's vast operations in Nevada, putting Bristow at the helm of the world's chunkiest gold assets. But it also pushes Barrick into Africa's toughest countries, including Mali and the D.R.C., and hits dividends and free cash flow for Randgold’s investors, who have to approve the merger by a majority of 75 per cent.
The agreement is “re-energising for me”, according to Bristow, who had open-heart surgery last year. “I said I needed one more big gold mine to get me to the end of my career and this is one big gold mine.” Aged 59, he is still younger than many CEOs in the industry, but says he only plans to do another five years at the top. “Then I will crystallise my investment. This is not a job, it’s a business.”
Shares in Randgold and Barrick are up 20 and 35 per cent since their proposed merger was announced, giving a green light to bankers and brokers pushing deals elsewhere in the industry. Mining may now see a “wave of consolidation”, Macquarie analyst Michael Siperco told Bloomberg.

Snowy Kyrgyzstan

In the snowy mountains of Kyrgyzstan, a cold, silent standoff has taken hold at one of the world's most valuable gold mines.
With half a million ounces of production each year and all-in costs of $662 per ounce, the Kumtor mine, owned by Canada's Centerra, has some of the highest cash flow margins in the industry. But it is attracting unwanted attention.
London-listed Chaarat says it has offered to buy the mine, and would give 50 per cent of cash flow to the Kyrgyz government, tabling a $2bn offer for the whole of Centerra, including its Mount Milligan copper mine in Canada, when its initial overtures were rejected.
At first glance, the proposal is barely credible: Chaarat has been vocal in saying it plans to roll-up gold assets across Russia and central Europe, but its longstanding finance director recently resigned during a modest $100m fundraising that was downsized. The company is though backed by wealthy Swedish investors and chief executive Artem Volynets, a wily and ambitious Russian who is close to metal investor Oleg Deripaska, Russia's richest industrialist.
Chaarat says it has now withdrawn its proposal, because Centerra “refused to engage with us.” But by publicly outlining the offer, appears to be trying to drive a wedge between Centerra and Kyrgyzstan’s government, which has been pushing for a bigger chunk of Kumtor's cash flow.
Volynets’ advisers in London meanwhile see the situation as ongoing. “Chaarat is the best platform for the Kumtor gold mine from an industrial logic point of view,” Volynets told The Globe & Mail.

 

QUOTE OF THE WEEK

“Smart contract functionality is a natural solution for private-ordering and commerce in space.”

Planetary Resources, an asteroid miner, has been acquired by a blockchain investor, the company announced this week


CONTENTS

Fizz-Pop-Bang: Inside the World Gold Council

How the world’s largest gold companies clubbed together to open-up India and China: “we did a lot of lobbying”

Highs & Lows of a Gold Mining Broker in London

“We’ll take the lot,” says Cedric Middleton over lunch in his favourite pizzeria, plus: Greg Smith & Klaus Eckhof

20 Critical Trade Routes

At an airport in Africa, $130m of gold bars are bagged-up in plastic and stuffed in the hold of an Air France flight to Paris