207 (31.01.19)


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NEWS WRAP

Good Week for mining in Mali; gold output rose 23 per cent in 2018 to 60.8 tonnes, thanks to two new mines, Fekola and Komana, owned by Vancouver-based B2Gold and London's Hummingbird Resources. A third new operation, owned by Australia’s Resolute Mining, will boost output again in 2019

Bad Week for gemstones. After a dismal 2018, diamond giant De Beers has reported a 25 per cent drop in sales. New mines and record output, plus the emergence of lab-grown gems in jewellery counters across the high street, has sucked air out of the market, leading to a disappointing Christmas

$10bn Bid for Goldcorp

2019 began with a bang: Newmont Mining has bid $10bn for Canada's Goldcorp, the largest deal the gold market has ever seen.
Investors panned the agreement. It needs “drastic surgery”, one analyst told Bloomberg. “I can’t see why Newmont did it,” one banker told the Financial Post. There are no overlaps between the two companies, which will be left juggling 19 mines on 5 different timezones. To manage the unwieldy group, Newmont will add two new bureaucracies, in Vancouver and Miami, though it says it plans to extract $100m of savings.
Even if it hit that figure, bankers point out, paying a $1.7bn premium, it will be many years before Newmont recoups any cash from the deal. Even worse, its management has minimal experience in underground mines, which account for the bulk of Goldcorp's cash flow. With a combined market cap of $28bn, “there doesn’t seem to be much rationale aside from creating a bigger company.”
$2.2bn was knocked off Newmont's shares in New York in two days, blocking it from upping its bid if a rival offer emerges. Benefits to Goldcorp are also hard to find: of the two groups, it has the lower costs. Advisers in Toronto are crunching spread sheets to see if they can find an alternative with industrial logic. Brokers say the situation is “competitive.”

Trump Steel

In corporate America, Trump's 25 per cent steel tariff is flowing to the bottom line. US steel group Nucor reported a $1bn jump in profit this week, posting the highest sales in its history. “The best way to sum up 2018 is this,” said CEO John Ferriola. “It was a record year for Nucor. We posted record earnings per share and record revenue, and we shipped a record amount of steel.”

Dam Burst in Brazil

260 people are missing and 99 confirmed dead after a dam burst at a mine in Brazil owned by mining company Vale, its second dam collapse in four years. “There must be punishment,” said Brazil’s Vice President Hamilton Mourao. “If there was any malpractice, recklessness or negligence on the part of someone inside the company, this person has to answer criminally.”
Vale's CEO has said the company will now spend $1.3bn decommissioning all its mines that use the same dam technology, lowering output up to 10 per cent. Its total liabilities will be so large, “this calls into question the financial viability of Vale going forward,” one lawyer told Reuters.
Shares in Vale, the world’s largest iron ore miner, fell 25 per cent. Global iron ore prices rose. Rescue efforts are ongoing. “These businessmen, they only think about themselves,” said an employee searching for his brother.

POT:TSX

Canada's $1.8 trillion economy is built on its mining wealth and one of its largest mining companies is PotashCorp, the world's dominant potash producer. But cannabis stocks are more popular these days and the company's most sought after asset turned out to be its ticker, “POT”.
After a $36bn merger and name-change, 40 companies bid for POT on Toronto's Stock Exchange. With a combined market cap of over $30bn, dozens of companies have flipped from gold exploration to growing and 2,400 people now work in Canada's cannabis industry, legalised by Prime Minister Justin Trudeau last year, versus half a million in mining.
“Once people get over buying cryptos and biotech and cannabis stocks they're going to start looking at gold again,” gold boss Rob McEwen told Bloomberg.

 

QUOTE OF THE WEEK

“Don’t change horses at a river crossing.”

Russia’s ambassador to Guinea, the world's largest bauxite producer, has urged president Alpha Conde to change the constitution and stay on for another 5 years


CONTENTS

Ivan Glasenberg’s Spaghetti Business

For more than 12 months Glencore’s CEO was pocketing dividends from gnocchi and bow-tie pasta twirls

Every Day in China

A daily snapshot of how life has changed in the 20 years since China was invited to join the World Trade Organization

Gold Bonanza at Red Lake

IBM’s Watson and Toronto-listed Great Bear are hitting bonanza-grade discoveries in one of Canada’s most prolific gold camps

20 Critical Trade Routes

How $54bn of iPhone sales are kept going by one mine in the California desert: “Our products are in everything around us”



UPS & DOWNS

$2.2bn

Newmont’s shares lost over $2bn in two days in New York after it announced a $10bn tie-up with Goldcorp; to manage the enlarged portfolio it will add new bureaucratic hubs in Miami and Vancouver