MINING UPDATE

The Telegraph reported that International Coal Ventures Limited, which is mulling a late bid for Riversdale Mining, is looking at three other mine acquisitions, including one in Australia. ICVL is also looking at picking up stakes in mining firms listed on the Australian, Canadian and the US bourses as well as being a private equity investor for assets in South Africa, Mozambique, Zimbabwe and Indonesia.

However, ICVL, set up by PSUs Steel Authority of India Limited, Coal India Limited, NTPC, RINL and NMDC, will not join hands with TATA Steel to mount a bid for Riversdale. Rio Tinto has offered USD 3.9 billion for Riversdale.

Mr CS Verma chairman of SAIL and ICVL said that "We have asked our merchant bankers to study the deal. We have cash but have to take a strategic decision on the Riversdale project."

Mr Verma indicated that a joint bid with the TATAs, who hold a 24% stake in Riversdale, was not being considered.

He added that "We are looking at two to three proposals, including one in Australia."

Sources said that ICVL was talking to mine owners in Australia, Indonesia and Uzbekistan but chose not to comment till binding deals emerge.

Mr Verma said that "We have about INR 10,000 crore with us and are backed by cash rich companies, which can pool resources and then also leverage money at low rates with their balance sheets. So funds are not a problem."

Meanwhile, Coal Ventures Investment, a SPV of ICVL, is seeking merchant bankers who will help it to garner strategic investment in shares in stock exchange limited companies producing met coal, PCI coal and steam coal anywhere in the world, but preferably in Australia, Canada and the US.

World's Top Copper Miner Codelco Sees Strong Metal Prices Continuing

Global No. 1 copper producer Chile's Codelco said recently its 2010 output dipped but should be steady this year, and expects strong Chinese demand, Japan's recovery after a natural disaster, as well as new uses to stoke demand.

Codelco said profits surged 47 percent to $5.8 billion in 2010, with a rise in copper prices to record highs more than compensating for a 0.8 percent fall in production from 2009 to 1.688 million tonnes.

CEO Diego Hernandez told a news conference he sees output at around 1.7 million tonnes this year, saying Codelco's smelter and refinery business may continue to perform badly in coming years and that problems with some operations could hit output at its Gaby mine.

The state-run miner expects prices to remain high for some time as it warned that geopolitical risks, aging mines, lower ore grade and the complexity of new projects posed a challenge for world supply.

And reconstruction after Japan's devastating earthquake and tsunami should lead to increased demand, Hernandez said, saying high prices were also stoking scrap copper.

Hernandez also sees copper demand benefiting from alternative uses in the future.

He sees potential future demand in the hundreds of thousands of tonnes for applications for copper in hospitals due to its antibacterial qualities. Electric cars and wind farm towers are seen boosting demand in the nearer term.

Franco-Nevada Reports Major Growth in 2010 Results, Increases Dividend 60%

Franco-Nevada forecasts revenue this year to be between US $325 million to $350 million this year, using consensus commodity price assumptions of US $1,400 gold, $1,750 platinum, $575 palladium and $80 oil.

However, the company warned its expenses will be significantly higher in the first quarter of the year, as transaction costs associated with the acquisition of Gold Wheaton will be expensed under International Financial Reporting Standards (IFRS).

On March 14, the company and Gold Wheaton completed a plan of arrangement in which Franco-Nevada acquired all of the shares of Gold Wheaton that it did not already own. Franco-Nevada issued 11,654,127 common shares and paid C$259.5 million in cash to shareholders of Gold Wheaton.

During 2010 the company earned 81% of its royalty revenue from precious metals with gold contributing 74% and PGMs contributing 7%.

"With respect to our existing portfolio, the company expects overall growth in revenue based on consensus commodity prices," Franco said. Among the factors contributing to this growth is higher production at Palmarejo, which is expected to have higher gold production this year of which Franco-Nevada will receive 50%.

Franco-Nevada also expects to benefit from higher average PGM prices at Stillwater.

However, the company also anticipates lower production from Barrick's Goldstrike and Gold Quarry operations, as well as lower royalty percentages from Quadra FNX Mining's Robinson interest.

Meanwhile, Franco expects to benefit from strengthening oil prices, as well as new or full year contributions from its interests in Tasiast, Duketon, Lounge Lizard, Hislop, Holt, Hemlo, Bronzewing, Admiral Hill, Ity and White Dam.

For Fiscal 2010 Franco-Nevada reported an adjusted net income of US $58.9 million, an 84% increase over the adjusted net income of $32 million reporting during Fiscal 2009.

ArcelorMittal Emerging As World's No 5 Iron Ore Miner

ArcelorMittal, the transnational steelmaker (market value: USD 56bn), is about to separate out its mining business into its own division, due to changes in global reporting rules. Of interest is the possible surprise that the group is likely to emerge as the world's No 5 iron ore miner. Seaborne iron ore, after all, is arguably the world's most profitable franchise, Mineweb reported recently.

According to an exhaustive report by RBC Capital Markets, at the end of the first quarter 2011, when ArcelorMittal reports mining assets separately, AM Mining could rank as the fifth largest iron ore producer globally, through forecasts to 2015. This year, RBCCM reckons AM Mining could have the second-largest EBITDA contribution to the group (22%), and account for more than 50% of AM group growth capex (capital expenditure).

This could have interesting repercussions within the group: RBCCM anticipates that with mining assets reallocated from steel divisions to AM Mining, management will be forced to re-evaluate performance metrics across the group. For a group owned to the tune of 40% by one person, ArcelorMittal has come a long way in a relatively short time: internal change has been the order of the day for years.

According to RBCCM's analysis, "with small incremental volume improvements in existing operations and the steady volumes coming on from Liberia, we look for a steady climb toward 75% self sufficiency until 2015 (excluding any further acquisitions)". This would leave the group with significantly less raw material exposure and leave coal as a focus going forward. ArcelorMittal is already more than 80% self-sufficient in coke needs, but it still remains less than 20% self-sufficient in coking coals.

ArcelorMittal's current plans to grow iron ore volumes so significantly greater than coal are not necessarily intentional, argues RBCCM, "but are more a reflection of what is achievable in the current market environment; however, the significant growth of 108% forecasted until 2015 in saleable iron ore production volumes at AM Mining, compared to growth of iron ore, still included in the steel divisions of just 36%, and the total coal production growth of nearly 20% during the same timeframe clearly states the priority for the next four to five years".

Through organic growth and acquisition, ArcelorMittal intends to raise the level of iron ore self-sufficiency to at least 75% by 2015. On RBCCM's numbers, ArcelorMittal could reach a self-sufficiency rate of 78% by 2015 on absolute production (plus long-term contracts) volumes of 100mt.

This volume would rank AM Mining as the fifth-largest iron ore producer globally, ranking behind Vale, Rio Tinto, BHP Billiton and Fortescue - in that order. Of significance, says RBCCM, "it looks to us like it would rank ahead of Anglo American on production volumes (excluding long-term contracts)". To give AM Mining's projected iron ore production some perspective, Vale, the leader, anticipates growing its iron ore output from 311,000 tonnes this year to more than 500,000 in 2015.

ArcelorMittal has earmarked about USD 4bn of capital expenditure for its mining division for the next four to five years, in order to grow the division.

ISS Proxy Group Favors Equinox Minerals' Bid for Lundin Mining

Institutional Shareholder Services has endorsed Equinox Minerals' Cdn$4.8 billion cash-and-shares hostile bid for Lundin Mining Corporation.

In a note to its clients, ISS said, "Based on a review of the terms of the transaction, in particular reasonable strategic rationale, apparently manageable risks and absence of governance concerns, shareholder approval is warranted."

Equinox CEO Craig Williams recently called the transaction "strategically compelling and offers substantial benefits for Equinox shareholders, including geographic and project risk diversification, immediate cash flow and earnings accretion, and superior leverage to the near term copper price cycle derived from creating one of the highest quality, high growth copper portfolios."

However, Lundin's board has recommended its shareholders reject Equinox's bid in favor of a proposed C$9 billion, all-share friendly merger between Lundin and fellow Canadian Inmet Mining, which would create the new company Symterra.

Special shareholder meetings for Lundin and Inmet have been scheduled for April 4, 2011.

AFRICA

Gold Found Close to Surface at Tanzania Project - Caneco

Canada's Canaco Resources Inc said drilling at its fully-owned Handeni gold project in Tanzania has shown there are gold deposits close to the surface.

The Africa-focused mineral exploration company said it found near-surface gold mineralization over a 240 metre strike length while drilling at Kwadijava area in the Handeni region.

The Handeni gold district in eastern Tanzania contains numerous gold discoveries over several hundred kilometres.

"These results give us confidence that the robust mineralization at Magambazi is also present at Kwadijava," Chief Executive Andrew Lee Smith said in a statement.

The Kwadijava area is 6.25 kilometres northwest of Magambazi.

The company said the successful drilling at Kwadijava shows there could be satellite bodies of gold mineralization in the area surrounding Magambazi.

Newmont's Board Approves Funding for West Africa’s Akyem Gold Project

Gold producer Newmont Mining Corp's board has approved funding for its estimated 7.2 million ounce Akyem gold reserve project, the company said in a statement recently.

Newmont's director for investor relations Monica Brisnehan declined to say how much funding was approved, but pointed to previous numbers released by the company in February which estimated capital expenditure for the project at between $700 million to $1 billion.

The company has said the Akyem reserve is one of West Africa's underdeveloped resources and has the potential to double gold output from the region.

"Right now for Akyem, we have 7.2 million ounces in reserves as of December 31, and 0.3 million ounces in non-reserve mineralisation," Brisnehan said.

Newmont had estimated annual production output at 400,000 - 550,000 ounces in the first five years of production, a boost to Ghana, Africa's second-biggest gold producer after South Africa with 2,97 million ounces in 2010.

The company said it expected production to come online either late in 2013 or early 2014.

AMERICAS

Puerto de Mejillones to Build Copper Concentrates Dock

It is reported that the operator of northern Chile region II Mejillones bulk cargo port terminal, Puerto de Mejillones expects to inaugurate a new copper concentrates dock by October 2013.

The port operator plans to invest USD 50 million to develop the new facility, which will be built at the terminal's dock number 2 and currently used solely for the handling and delivery of sulfuric acid for mining operations in the region.

Dock number 1 currently handles the loading of copper and other mineral concentrates. Construction is scheduled to start in the first quarter of 2012 and the initiative is designed to handle the expected increase in copper concentrates shipments in the region.

The spokesperson said the increasing number of copper projects in the pipeline, together with the end of the useful life of several oxide ore operations that will convert to sulfide operations is expected to bring copper in concentrates output in Chile to 4.7 million tonnes per year by 2014 of which 1.5 million tonnes per year will be contributed by region II.

The company has already completed the basic engineering for the new facility and has submitted an EIA to the environment ministry (MMA).

The dock will have capacity to handle 2.2 million tonnes per year of mineral concentrates.

Western Copper Working with Regulators to Permit Yukon Copper Mine

Western Copper (WRN.TO) has begun engineering studies to determine whether it can modify plans that pushed regulators to reject its request for a water use license at its Carmacks copper project in Canada's Yukon Territory.

A recent court ruling in the northwestern territory upheld the Yukon Water Board's decision to reject Western Copper's plans, forcing the exploration company to go back to the drawing board.

The Vancouver-based company said it is now working with regulators on what changes it should make to get the Carmacks project fully licensed.

"We expect that over the next few months we will complete these evaluations and chart a path forward to get a water license for the Carmacks project," Chief Executive Dale Corman said in a statement.

Carmacks is a small project that is expected to produce about 32 million pounds of copper a year over a six-year mine life. Western Copper's flagship asset is its Casino copper-gold project in the Yukon.

ASIA

Puda Coal to Acquire Remaining Coal Mines of Pinglu Project Phase II

Puda Coal Inc a supplier of high grade metallurgical coking coal used to produce coke for steel manufacturing in China and a consolidator of twelve coal mines in Shanxi Province announced that Shanxi Puda Coal Group Co Ltd a 90% subsidiary of Puda Coal entered into coal mining rights and mining assets transfer agreements with three coal mines located in Pinglu County, Shanxi Province, on December 28th 2010, Pinglu County Anrui Coal Industry Co Ltd, Pinglu County Chuntouao Coal Mine and Pinglu County Xiapingcun Coal Mine.

On September 28, 2009, Shanxi Coal was approved by the Shanxi provincial government to consolidate certain coal reserves in Pinglu County, Yuncheng City, Shanxi Province. The assigned coal reserves are owned by eight coal mines with good operating track records prior to their mandatory shut down under the Shanxi province Coal Mine Consolidation Program and Xiapingcun Coal, a permanently closed small mine with a mining area of 0.7 square kilometers.

Pursuant to the agreements, Shanxi Coal will pay an aggregate purchase price of CNY 250,000,000 (USD 37.43 million) for Anrui Coal, CNY 140,000,000 (USD 20.96 million) for Chuntouao Coal and CNY 61,200,000 (USD 9.16 million) in cash, of which CNY 18,530,000 (USD 2.77 million) for Xiapingcun Coal.

Under each agreement, Shanxi Coal agrees to pay 50% of the purchase price within three days of signing, 40% of the purchase price within 30 days after assets transfer is completed and the mining permits and property deeds are transferred, and the remaining 10% of the purchase price six months after the mining permits and property deeds are transferred. Anrui Coal, Chuntouao Coal and Xiapingcun Coal will be responsible for canceling or terminating their respective employment contracts (or labor relationships) with their staff, paying all unpaid wage, premium and welfare expenses, and bearing all of the expenses caused by the cancellation or termination of the employment contracts.

Upon completion of the transfer of the mining rights and mining assets under the above agreements, Chuntouao Coal will be closed down and its underground coal reserves together with the reserves of Xiapingcun Coal will be consolidated into Anrui Coal. These coal reserves include higher quality thermal coal and coking coal.

Shanxi Coal plans to place all the purchased assets of Anrui Coal, Chuntouao Coal and Xiapingcun Coal into Shanxi Pinglu Dajinhe Anrui Coal Industry Co Ltd a newly established project company. Dajinhe Anrui Coal is one of the three project companies set up by Shanxi Coal in connection with Phase II of the Pinglu Project. After consolidation and improvements, Dajinhe Anrui Coal's annual capacity will be 900,000 metric tons. The Company expects to complete the consolidation and restructuring within twelve months after the closing of the asset acquisitions.

Phase II of Pinglu Project will be co-developed by Shanxi Coal, Mr. Zhao Ming and Mr. Gao Jianping (the "co-developers") based on the Investment Cooperation Agreement signed on August 1st 2010. Under the Investment Cooperation Agreement, Shanxi Coal, Mr Zhao and Mr Gao will each contribute 40%, 30% and 30%, respectively, of the total investment needed for the consolidation and construction of Pinglu Project Phase II. The parties will share the profits based upon the above investment contribution percentages and bear the risks and losses in connection with the project which will be limited by the amount of investment contributed by each party. The co-developers authorized Shanxi Coal to control and manage Phase II of the Pinglu Project.

Mr Liping Zhu CEO of Puda Coal said that "We have now successfully acquired two coal mines of Phase I of the Pinglu Project, four coal mines under Phase II of the Pinglu Project and entered into definitive agreements to acquire the remaining coal mines under Phase II of Pinglu Project. In addition, we entered into an agreement to purchase the coal reserves and assets of Xiapingcun Coal, which will enable us to acquire all the coal reserves under the Pinglu Project. Our project team continues to make significant progress with the application process for construction permits and we look forward to commencing construction and restructuring.”

Xinjiang Hops Wins 5 Exploration Licenses

Xinjiang Hops’ subsidiary, Alashankou Hops, won exploration licenses for five mines from Xinjiang Uygur Autonomous Region Department of Land and Resources.

The five mines have areas of 24.66 square kilometers, 28.44 square kilometers, 14.08 square kilometers, 11.09 square kilometers and 43.66 square kilometers. The licenses to explore the five mines are valid from October 15 2010 to October 15 2013.

Kazakhs Launch Rare Earths-From-Uranium-Tailings Project with Sumitomo

Kazakhstan plans to join the race to supply rare earth metals to a global market squeezed by Chinese export cuts when it launches a project with Japanese trader Sumitomo Corp to treat uranium tailings in 2012.

Summit Atom Rare Earth Co, co-owned by Kazakh state uranium miner Kazatomprom, plans to start producing 1,500 tonnes a year of rare earth oxides, Kazatomprom said in a written reply to questions.

It will also embark on the search for more deposits in the vast Central Asian state and nearby countries.

Japan and other consumers of rare earth metals are rushing to secure alternative supplies after China announced last year it could sharply reduce exports of the 17 elements used in high-tech consumer products from iPhones to electric car motors.

China, which produces 97 percent of the world's rare earths, slashed export quotas last year, saying it needs to protect its reserves from reckless exploitation. Its stranglehold on supply has driven prices up ninefold in the last year.

"This has, in turn, kickstarted dozens of rare earth projects worldwide that would previously have been considered uneconomic," Kazatomprom said.

Kazatomprom is also forming a joint venture with Japan's Toshiba Corp while in neighboring Kyrgyzstan, Canadian junior miner Stans Energy Corp plans to relaunch a mine that supplied 80 percent of the Soviet Union's rare earths.

In particular demand are heavy rare earth elements, especially dysprosium and other metals used in magnets, a sector where global demand has grown 15 percent annually over the past 10 years.

"The heavy rare earth race is on, and the first to produce -- and to be able to continue to produce volume -- will be the big winner," said Jack Lifton, a Detroit-based metallurgist and founder of Technology Metals Research.

Kazatomprom said the Summit Rare Earth joint venture would process tailings from a disused plant in the western Kazakh city of Aktau and export rare earths mainly to Japan and Europe.

Kazatomprom said representatives of Japan, South Korea and several European Union member states had approached it with proposals to work together on new rare earth projects.

Kazakhstan, the world's largest uranium miner, is potentially highly prospective in rare earths, but has yet to define a detailed and guaranteed resource base.

Lifton, with nearly 50 years of experience in the business, said the quality of company working in Kazakhstan could be a telling factor in the country's success against potential rivals in rare earths, such as South Africa, Australia and Canada.

Dysprosium, along with europium, terbium, yttrium and neodymium, is among the metals that Stans Energy says are most in demand from its Soviet-era Kutessay II mine in Kyrgyzstan.

"Many of the companies that previously purchased oxides and metals from our processing complex are contacting us, wondering when they'll be able to buy product again," said Robert Mackay, president and chief executive of Stans Energy.

With sufficient financing, the Kutessay II pit could begin small-scale production in about 18 months, he said. "At a larger scale, a more likely scenario is 24 to 30 months," he added.

The mine, 140 km (88 miles) from the Kyrgyz capital Bishkek, is one of the few places outside China with a history of mining rare earth metals, and Mackay said a skilled labor pool of former employees still lived nearby.

Stans Energy, which was granted a mining license by the new government of Kyrgyzstan, this week issued a resource estimate compliant with Joint Ore Reserves Committee (JORC) standards.

Mackay said the company was considering two options: early production at a rate of about 500 tonnes per year of rare earth oxides, metals and alloys; or expanding the mine's potential to between 1,500 and 2,000 tonnes per year.

AUSTRALIA

Yanzhou Coal Mining to Inject CNY 5 billion in Australian Unit

China Knowledge reported that Yanzhou Coal Mining Co Ltd, China third largest coal producer by market value board had granted approval to a plan to inject CNY 5.9 billion or AUD 909 million into wholly owned Yancoal Australia Pty Ltd.

The coal producer said in a statement that the capital injection will help the Australia subsidiary repay debt and optimize its balance sheet. The capital increase is also part of Yanzhou Coal's effort to list the unit in Australia by the end of 2012.

Yanzhou Coal Mining said after the capital injection which is subject to approval from Chinese regulators, the Australian unit asset liability ratio will fall to 72.34%.

Yancoal Australia which successfully completed the acquisition of Felix Resources Pty Ltd in late 2009 has five coal mines in operation and three exploration projects in Australia.

Outotec Wins Process Technology and Service Contract in Australia

Finland’s Outotec has signed a contract worth more than €15 million to deliver key process technologies and services for Sandfire Resources' DeGrussa copper/gold concentrator in Western Australia.

Outotec will supply SAG and ball mills, flotation cells, thickeners and a concentrate filter over the next 11 months. The contract includes commissioning and long term service agreements for maintenance and operational spares.

BHP to Spend $9.5bn to Expand Australian Iron Ore, Coal Ops

BHP Billiton said it has approved $9.5 billion of capital investments to expand Australian iron ore and coal mining projects, in the first details the global miner has given of a planned $80 billion in investments over five years.

The world's biggest miner has decided to expand its own operations and infrastructure rather than chase ambitious takeovers, after three failed takeover bids, as it scrambles to meet rising demand from Asia.

The top global miner said it would invest $6.6 billion in a total investment of $7.4 billion to continue production growth in the company's western Australian iron ore operations.

Investment will include the development of the Jimblebar mine, rail links and additional berths and ship loaders at its Port Hedland site.

BHP said it had also approved three key metallurgical coal projects at its Bowen Basin site in Queensland.

BHP will put in $2.5 billion of the total $5 billion investment, which will see the new Daunia mine developed, its Broadmeadow mine's life extended by 21 years and the stage three expansion of its Hay Point coal terminal.

BHP Billiton also recently announced approval of a US $400 million investment to expand Hunter Valley Energy Coal in New South Wales, Australia.

The expansion, known as the RX1 Project (RX1), will enable Mt Arthur Coal’s run-of-mine thermal coal production to increase by 4 million tonnes per annum (mtpa), to approximately 24 mtpa. RX1 is substantially a mine only expansion without an associated increase in coal preparation plant capacity.

RX1 is expected to deliver first production in the second half of the 2013 calendar year. In addition to the employment generated by the project during construction, the RX1 expansion is expected to generate approximately 300 new, full time jobs.

BHP Billiton owns 100 percent of Mt Arthur Coal through Hunter Valley Energy Coal Pty Ltd.

EUROPE

EU Plans New Transparency Rules for Mining Groups

Europe is set to impose mandatory transparency measures for mining and forestry companies, requiring them to detail their financial relationships with foreign governments, recently reported in the Financial Times.

The EU internal market commissioner said in an interview with the publication that the move would come as Brussels revised existing rules on transparency this autumn. He said that new transparency obligations covering money flows such as tax payments and royalties to foreign governments were likely to extend beyond extractive industries such as mining and energy, and cover other primary materials businesses, such as forestry.

The US has already included similar requirements in its Dodd-Frank reform legislation. European countries – including the UK – have been pushing Brussels to take a similar line in an effort to crack down on corruption.

Alacer Gold Announces 182% Increase in Ҫӧpler Project LOM Production

Alacer Gold (TSX: ASR), formerly Anatolia Minerals and Avoca Resources, announced recently a preliminary feasibility study has increased life-of-mine production by 182% at the Ҫӧpler gold-copper project in Turkey.

The PFS prepared by Samuel Engineering of Greenwood Village, Colorado increases Ҫӧpler's production from 1.3 million ounces of gold to 3.7 million ounces. Proven and probable gold reserves were increased from 2.2 million to 4.6 million contained ounces in the study.

Alacer's board has instructed management to immediately proceed with a detailed feasibility study, which is forecast to be completed in the second half of 2012.

With the addition of the sulfide project, Ҫӧpler mine life would be increased to 16 years. The PFS estimated the sulfide project would require a US$410 million initial capex including $66 million in contingency funds.

"The prefeasibility study demonstrates that resources can be covered to profitable recoverable ounces and opportunities still exist to improve the economic performance of the sulfide project," said Alacer CEO Edward Dowling. "Our objective now is to complete the full feasibility study on the sulfides."

Ҫӧpler poured its first gold on Dec. 22, 2010. At the end of February 2011 there were 67,000 ounces of gold on the heap leach pad. Over the next few months, Alacer plans to commission the crushing and agglomeration circuits and expects to ramp up to commercial production. Average annual gold production at Ҫӧpler is expected to be 175,000 ounces.

The sulfide circuit at Ҫӧpler is expected to recover 2.5 million ounces of gold and 91 million pounds of copper from 33.1 million tonnes of sulfide ore. Initial production from the sulfide circuit is expected to start two years after final feasibility.

The company plans to produce 800,000 ounces of gold annually by 2015.

McIlvaine Company

Northfield, IL 60093-2743

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