TABLE OF CONTENTS
Rio Tinto Eyes Recovery in Iron Ore Production
Chinese Money to Open New Iron Ore Projects
Sable Mining Africa Raises $125 million
Gold Fields to Up Output at South Deep Mine
Shandong Contracts with MoUs for Brazilian Iron Ore Project SAM
ABB Order from Chinalco for Toromocho Copper in Peru
Ground Broken For New Crystal City Iron Smelter
London Mining Acquires International Coal Company
Big New Coal Ports Being Built in India
Vinacomin Obtains Loan to Boost Coal Production
OM Holdings Aims to Triple Manganese Output by 2012
POSCO Nippon and JFE May Seek Stake in Maules Creek Coal Project of Aston
Karara Mine to Begin Production in 2011
Xstrata to Extend Life of Black Star Zinc Mine
Peabody Raises Bid for Macarthur Coal
Strong demand from China and a recovery in iron ore production at its principal Australian mine, led Rio Tinto to recently nudge its full-year production forecasts upwards.
“In the first quarter, most of our operations continued to run at capacity,” said Tom Albanese, chief executive of Rio Tinto.
“Chinese demand grew strongly and we saw some recovery in OECD markets, but we are still cautious about short-term volatility. The long-term outlook remains very strong and we are now ramping up our growth projects with sustained investment in our iron ore business and the start of development of Oyu Tolgoi [in Mongolia].”
In the first quarter of 2010, iron ore production rose by 39 per cent compared with the previous year to 43m tonnes. However, the group faced an untypical comparator, given that production in the first quarter of 2009 was affected by two separate shutdowns in operations of a fortnight each at the Pilbara mine in Australia due to heavy rains.
Rio Tinto is now targeting production of 234m tonnes of iron ore from its Canadian and Australian mines, slightly ahead of the 230m tonnes the company forecast in January. This would mark a 7 per cent increase on 2009, when the company produced 217m tonnes of iron ore.
Recently, Rio Tinto decided to follow its competitors Vale and BHP Billiton and scrap the 40-year old annual negotiations of iron ore prices with steelmakers, and instead shift to quarterly contracts.
However, production did not increase for all metal ores. Mined copper production fell 16 per cent due to lower-quality copper ore coming from two mines in Indonesia and the US.
Following agreement with the Mongolian government last month, Rio Tinto will begin development of a joint copper and gold mine at Oyu Tolgoi, with production expected to begin in 2013.
Production of the aluminium ore bauxite rose 18 per cent compared with the first quarter last year, while production of other aluminium ores remained unchanged from last year.
New iron ore mining projects are seeking and finding China backers as steeply rising prices add urgency to the country’s quest to secure fresh supplies.
Last month’s doubling of contract iron ore prices was pushed through by BHP Billiton and Vale, which supply China’s steel mills from the two nodes of iron ore exports: Australia and Brazil.
But China financing stands to open new iron ore provinces like west Africa and Russia, potentially easing the dominance of Vale, BHP and Rio Tinto.
African Minerals, the exploration company chaired by Frank Timis, the entrepreneur, agreed a deal on April 1 with China Railway Materials Commercial Corp to develop the Tonkolili iron ore deposit in Sierra Leone.
CRM, a state-owned steel trader, is taking 12.5 per cent of the company’s shares for £168m ($258m).
The money will be spent building the first phase of Tonkolili, which will thereafter supply CRM with agreed amounts of iron ore for 20 years.
In the neighbouring state of Guinea, Rio Tinto has brought in Chinalco, its largest shareholder, to jointly develop Simandou, an iron ore deposit in a remote corner of the country.
Chinalco would contribute $1.35bn to project costs.
Chinese companies were the perfect partners to bring west Africa’s iron ore deposits into production, Graeme Hossie, chief executive of London Mining, said.
London Mining was in discussions with China groups about its iron ore projects and had had a lot of interest, Mr Hossie said.
The company is reviving Sierra Leone’s Marampa mine, whose first phase enters production next year, and building an iron ore mine in Greenland.The East China Mineral Exploration and Development Bureau agreed on March 26 to buy Brazil’s Itaminas iron ore project for $1.2bn.
As much as the record-high prices for iron ore stand to antagonise China’s steel industry, the world’s biggest, it also encourages other state-owned organizations like banks to build new mines as quickly as possible. They can share in the profits of an expensive commodity as well as stabilising Chinese supply.
Chinese groups are also planing a key role in developing the infrastructure needed to open up new supplies of iron ore by building ports and railways.
China’s infrastructure industry is even more important than its banks in opening up new supply. The secret hinge of any iron ore projects’ viability is the infrastructure attached. Companies like China Railways Engineering Corp have a track record of efficiency in African countries like Guinea, where Rio’s Simandou project requires hundreds of kilometers of railway and a port, in addition to the mine itself.
South Africa's fourth biggest gold producer, DRDGOLD Ltd, reported a 4 percent rise in gold production for the third quarter, and said it would start exploration for gold in Zimbabwe.
The company, a mid-tier, unhedged gold producer, said the higher output resulted from improved gold mining at its Blyvoor underground operations and production build-up at its Ergo mine, which it would seek to further increase in the coming months.
DRDGOLD's output in the third quarter to end-March rose to 62,404 ounces, the company said in a statement.
Headline earnings, the key profit measure in South Africa, stripping out capital, non-trading and some extraordinary items, fell to 0.4 cents per share after accounting for some impairments, from 1.4 cents in the second quarter.
DRDGOLD reported an 11 percent increase in cash operating profit for the quarter at 96.9 million rand, while cash operating unit costs fell 1 percent to 221,400 per kg.
The average rand gold price received during the quarter was just 1 percent higher at 269,980 a kg. South African gold mining companies sell their gold in dollars and pay costs in rand.
South Africa-focused DRDGOLD, which has a mix of assets, including underground mines, surface re-treatment operations and exploration, said it planned to explore in Zimbabwe.
The company said preparations for an initial 28-week programme of exploration of the Leny claims, jointly held by DRDGOLD and Zimbabwe partner Chizim Investments (Chizim), have begun.
Limited mining will take place during exploration, with any recovered gold helping to offset exploration costs.
Chizim conducted limited exploration of two Leny veins in 2009, which showed grades varying between 5-25 gramms of gold per tonne, DRDGOLD said.
"The exploration company we have contracted has already started establishing a site in the area, which is a gold mining territory near the town of Norton southwest of Harare," Niel Pretorius, the company's chief executive officer told Reuters.
He said DRDGOLD had a 50/50 split with the Zimbabwean company, Chizim.
Sable Mining Africa Limited, the AIM listed resource investment company, has announced that it has raised $125 million to develop coal assets and build a portfolio of coal and iron ore assets in Africa
By placing 290,024,126 new ordinary shares in the capital of the company with new and existing institutional shareholders at a price of 28 pence per Placing Share, the firm has raised funds that will provide the company with a cash position in excess of $160 million.
The company has said that the funds will be used to rapidly progress its coal interests in South Africa, held through its interest in Delta Mining Consolidated Ltd (‘DMC’).
It also plans to acquire, advance and develop further assets in coal and iron ore which meet the investment criteria of the company.
The Board is currently evaluating a number of opportunities in sub-Saharan Africa to expand the portfolio base of the company and build shareholder value.
Sable Mining CEO, Andrew Groves, said: “We received a very strong response to our fund raising, which I believe emphasizes the appetite and understanding that the investment community has for our ability to create value by identifying and advancing resource assets in Africa.
“Our inaugural investment in DMC represents the first step in our rapid development strategy aimed at utilizing our operational abilities and building a sub-Saharan Africa focused resource company, with world class assets.”
Gold Fields (GFIJ.J), the world's No. 4 gold producer, has started deepening a shaft at its South Deep mine in South Africa, one of the world's largest gold mines, in a bid to boost output.
South Africa's Gold Fields said in a statement recently it would deepen the ventilation shaft, which will enable the mine to build up to its full production target of between 750,000-800,000 ounces of gold per year by the end of 2014.
Gold Fields, which has mines in South Africa, Ghana, Australia and Peru, expects the entire group's output for the third quarter to be about 800,000 ounces.
Gold Fields' annual gold output is 3.6 million ounces.
The group has allocated 8.5 billion rand ($1.16 billion) to develop South Deep before the end of 2014.
"The South Deep capital programme is well resourced and tightly managed," Nick Holland, Chief Executive Officer of Gold Fields said.
"We have made good progress nearing the end of the second year of our six year programme and we are confident that we will achieve our full production target by the end of 2014."
Holland said South Deep, one of the company's newest operations acquired in 2007, was on track to become one of the world's most productive, mechanised deep level gold mines.
The mine, with about 30 million ounces, has one of the largest reserves bases of any gold mine.
The shaft will be extended from its current depth of 2,760 meters to 3,000 meters. The deepening and equipping of the shaft, which includes ore storage silos and conveyor belts at shaft bottom, a new rock winder and new headgear, is set to be completed by July 2012, the company said.
Chinese steel producer Shandong Steel has signed MoUs with Shandong based Xinwen Mining Group and Hong Kong based Honbridge Holdings to jointly develop the SAM iron ore project in Brazil.
According to the agreement reached by the three parties, Xinwen Mining Group will be responsible for the prospecting and preparation work before the start of the project and for negotiations on coordination of iron ore exploitation after the start of formal operation of the project. After the completion of prospecting activities, Shandong Steel will invest in the exploitation of the project. The details regarding the amounts of the investments by the two Shandong-based companies have not been made available.
The Brazil based SAM iron ore project, previously owned by the South American VNN Company, has a reserve of 6.2 billion tonnes of specular hematite iron ore, located in the state of Minas Gerais.
In March this year, Honbridge Holdings obtained the exploration rights for the project, which is expected to have an annual capacity of 25 million tonnes of iron ore concentrate.
ABB has won USD 50 million order from Minera Chinalco Peru to supply electrification and automation systems for the new Toromocho copper mine and concentrator plant. This is ABB’s second order from the mine as last year it won a separate order to supply 3 gearless mill drive systems. They will be the world’s largest and highest altitude gearless mill drive systems.
The processing plant at Toromocho will be located at an altitude of 4,500 meters in central Peru, in the Morococha mining district 140 kilometers east of Lima, the country’s capital. The concentrator will produce approximately 1 million tonne per year of copper concentrate with byproduct silver and molybdenum trioxide.
The St Louis, Missouri area is getting an economic boost with a billion dollar plant creating thousands of jobs in Crystal City.
Local dignitaries turned the first shovels full of dirt for a new iron ore smelter at the site of the former PPG plant in Crystal City. The Wings Enterprises smelter will produce pig iron pellets, used in the steel recycling process.
Wings Enterprises will occupy a site that'd been vacant since the Pittsburgh Pate and Glass plant closed in 1990, after close to 120 years of operation.
Wings will produce a magnetite type of iron; the ore now mined only in Brazil and Eastern Europe. Wings owner Jim Kennedy said there were hundreds of millions of tonnes of it at Wings Pea Ridge mine near Sullivan, MO. It will be piped to the new plant in Crystal City, refined and shipped to steel mills by river and rail.
Kennedy said "Long term going to make us competitive with everybody, including Brazil. Our finished product on the river here will be lower than the cost of a lower quality pig iron product imported from Brazil. So we can compete and we can compete globally."
He said the new plant will produce 4 million tons of pig iron pellets every year, the raw material for them in such a pure state coming out of the ground, there's not as much pollution involved in processing the ore, there will be no giant smokestacks or chimneys at the smelter.
He said about 1000 people will work on its construction; there will be about 650 full time jobs at the smelter, about 350 more at the mine.
London Mining the UK based developer and operator of mines to supply the global steel industry announced that it has acquired the remaining 80% of International Coal Company that it does not already own for an initial consideration of USD 5.5 million cash and 3.5 million newly issued London Mining shares, with potential further consideration of up to USD 8.5 million and up to 6.3 million shares payable subject to the satisfaction of performance conditions.
The performance conditions are linked to EBITDA and CAPEX targets for the coke ovens and to the delivery over time of attractive coking coal and port opportunities. The newly issued 3.5 million London Mining shares that form part of the initial consideration will be issued on closing of the transaction, which is expected within 15 days of this announcement. The acquisition is conditional on ICC becoming the registered owner of certain land rights. The sellers are Pacific Overseas Investments Ltd., SIHL Investments International Corporation, Talman Alliance and Executive Players Inc.
Highlights
1. Acquisition of remaining 80% of ICC for an initial consideration of USD5.5 million cash and 3.5 million shares
2. Potential further consideration of up to USD 8.5 million cash and up to 6.3 million shares payable subject to performance conditions
3. ICC will be the platform for a London Mining Colombian coking coal business
4. ICC consists of coking coal concessions, a low volatile coking coal mine development project (Invercoal) and a permitted coke oven project
5. Targeted production of 250ktpa of coking coal within 18-24 months and up to 400ktpa of coke with first coke production within 12 months
6. Expected CAPEX to be approximately USD 40 million over next 18 months
7. London Mining intends to enhance its board through the appointment of Graham Mascall to the Board as a non-executive director from 1 May, 2010
The acquisition of ICC further supports London Mining’s strategy of becoming a mid tier supplier to the steel industry and will provide London Mining with the platform to develop a Colombian coking coal business. The coking coal industry in Colombia is currently fragmented and under-invested, and London Mining believes it is one of the first well-capitalised international investors to invest in this region. Colombia is an emerging coking coal region, with production levels at around 3 million tonne per annum and estimated total reserves of 2 billion tones.
ICC will provide near-term coke and coking coal production, deliverable logistics solutions and scalable coking coal production. London Mining’s acquisition of ICC will allow immediate funding of the construction of the coke ovens following detailed preparatory work already carried out by ICC.
Reuters reported that the speed with which large, private, fully mechanized ports are springing up in India is making coal producers and traders think again. Suppliers had until recently doubted India could import the coal it will need because most of its ports were small and shallow and government port expansions were running late.
The international perception of India's coal ports has been of a collection of mostly small, old, terminals which cannot take standard coal 150,000 tonne capsize vessels but are mostly limited to 50,000 to 75,000 tonne panamaxes or handysize.
These small ports can take up to a week to discharge, are plagued by delays and have poor road and rail links to end users. But the slew of private ports under construction or expansion and their sheer size has taken the international coal market by surprise.
India will need more imported coal to make up for its domestic shortfall for the next 20 years. In 2010-2011 India will import 81 million tonnes.
India is also building a host of state and private coal fired power plants plus private merchant power plants which sell power to local industry on a spot basis and could need as much as 200 million tonnes of imported coal within the next several years to feed these.
The Indian government's aim is to expand major state ports to handle 1.5 billion tonnes of total cargo by 2012 but plans are behind target, a gap being filled by the private sector.
Vietnam National Coal Mineral Industries Group will supply Japan with as much as 1.5 million tonnes of steelmaking coal a year in return for a five year, USD 150 million loan from the nation’s state lender.
According to a statement on the Vietnamese government, the interest rate offered by Japan Bank for International Cooperation is lower than the normal commercial rate of 30% for the whole term. It’s the first loan the state owned miner, known as Vinacomin, has taken from the Japanese government.
Mr Tran Xuan Hoa general director government said that Vinacomin has substantial need of capital to fund its coal production projects in coming years. The group plans to sell as much as $500 million of bonds overseas this year and expects to sign funding agreements worth USD 200 million with seven lenders.
Source: Bloomberg
Channel News Asia recently reported that OM Holdings is aiming to triple its output of manganese by 2012 to at least 3 million tonnes.
OM Holdings has also agreed to buy a 26% stake in a South African mining company for about USD 58.48 million. And OM Holdings wants to raise its profile in the manganese production market as one of the world's top five producers of the element.
With a current output of 1 million tonnes of manganese, OM Holdings is looking to triple the number by 2012. This means it will then produce 10% to 15% of the world's supply of manganese.
To give it a leg up, OM Holdings is buying a 26% stake in South African based Ntsimbintle Mining for USD 58 million. Last month, it also bought a 15% stake in the Norwegian iron ore producer Northern Iron.
Mr Low Ngee Tong executive chairman of OM Holdings said that "With all these investments and acquisitions, we will continue to increase our investments in these two portfolios. So hopefully in 3 years' time, our increased portfolio will lead OM Holdings to increase our bottom line at least by double in the next 3 to 5 years' time."
OM Holdings is also focusing on Asia for growth. 98% of its products now go to East Asia, which includes China, Japan, Korea and Taiwan. The company said China now accounts for up 90% of the group's profits. And it's looking to diversify by turning its attention to Southeast Asia.
An Australian coal explorer seeking to list this year Aston Resources Pty Ltd said that POSCO, Nippon Steel Corp and JFE Holdings Inc are among companies in talks to buy a stake in its Maules Creek project.
Mr Todd Hannigan COO of Aston said that more than 20 companies are in discussions to buy a stake and first round bids are expected next month.
He told “This will be the largest new source of supply into the semi-soft coking coal market. This is why we’ve got the steel mills like Posco, Nippon Steel and JFE so interested in buying a joint venture stake in Maules Creek.”
He told that Aston may sell as much as 25% of the project, which will produce both steam and coking coal.
Brisbane based Aston bought Maules Creek last month for AUD 480 million from Rio Tinto Group unit Coal & Allied Industries Ltd.
Aston is expected to start trading around June, the newspaper said.
Maules Creek is in New South Wales, 15 kilometers from the rail line connecting to the export harbor of Newcastle. The project may cost AUD 270 million to bring to production, with first coal shipments expected in late 2012.
Source: Bloomberg
The Karara mine is located in Western Australia, approximately 225 kilometers east of the Geraldton Port. The mine is one of the few magnetite projects currently under development in Australia. It forms part of the development of a Mungada haematite project located approximately 15 kilometers from the Karara magnetite deposit. The project is jointly owned by Gindalbie Metals and Ansteel, a major Chinese steel and iron ore company.
The mine will begin production in 2011. Economic and technical viability of the mine was established in a bankable feasibility study conducted in September 2007. Exploration and resource definition drilling of the mine has also been completed.
1. Reserves
The Karara mine contains approximately 1.4 billion tonnes of recoverable and over two billion tons of estimated reserves. Indicated reserves in the magnetite phase of the project total 1,417 tonnes at 35.5% of Fe, 43.2% SiO2, 1.25% Al2O3, 0.09% P and 0.58% LOI. Inferred reserves total 437 tonnes at 35.1% of Fe, 43.9% SiO2, 1.44% Al2O3, 0.09% P and 0.71% LOI.
2. Geology
The Karara mine is hosted within the Yalgoo Singleton Archaean greenstone belt. The belt is characterized by a huge magnetite banded ironstone formation unit that extends over a strike length of more than 3 kilometers. The western branch of the unit is over 400 meters wide and more than 350 meters deep. The eastern limb is comparatively narrower and outcrops as a chain of 100 meters wide haematite enriched hills along an adjacent north south trending fault.
The BIFs create a series of isolated peaks and ridges in an otherwise plain landscape. Iron is hosted within the Windanning Formation as a sequence of several jasperlitic BIF and grey white chert units that lay above the Gabanintha Formation. The deposit is up to 150 meters thick and is substantially dominated by interbedded layers of shales and BIF. Dolerite and kaolinite clays are also found in irregular areas within the deposit.
3. Production
The mine will produce annually in excess of 30 million tonnes of iron products over its life of more than 30 years. Production will be carried out in a phased manner. Phase I, scheduled for the H1 of 2011, will produce 2 million tonnes of haematite per annum. Phase II will begin in August 2011 and will include the production of around 8 million tonnes per annum.
4. Mining
The mine will be mined through conventional open pit methods including drilling, blasting, loading and haulage. The open cast pit will be nearly 3,400 meters long, 1,300 meters wide and 300 meters deep. The pit will be gradually stripped of topsoil and overburden to get access to the ore. Drilling will be carried out using hydraulic hammer drills. Mixed explosives will be supplied directly to the drill holes via purpose-built trucks.
The mine will be mined through conventional open-pit methods including drilling, blasting, loading and haulage. Blasting will be carried out using ammonium nitrate-based explosives. To support a mining rate of nearly 45 tonnes per year, explosives in the order of 12 kilo tonnes per year will be used. Excavated ore and waste will be loaded using hydraulic excavators into rear dump off highway haul trucks. Loading will be carried out on 4m benches. Haul trucks will transport the loaded ore along the pit ramp directly to the processing plant.
The first year of mining will largely oversee removal of overburden and mineralized waste rock with minimum ore excavation. Following this, magnetite ore will be excavated simultaneously from different depths within the pit. The pit will be gradually extended northwards. To optimize the development of the pit and ensure that ores of consistent grade are sent to the processing plant, mining will take place at several levels and in assorted ore grades.
Source: mining-technology.com
Xstrata said it is planning to spend $130m to extend an open-cut zinc mine in north-west Queensland. The extension will add another four years of life to the Black Star Open Cut at Mount Isa.
The Black Star extracts ore from underground mining areas. Xstrata Zinc Australia CEO Brian Hearne said the company is looking to mine about 4.6 million tons of ore from the mine.
The extension is yet to be approved by the company’s executive committee.
Peabody Energy, the US group in a three-way tussle for Australia’s Macarthur Coal, recently made its third attempt in two weeks to buy the company, raising its cash bid to A$4.1bn ($3.8bn).
The offer, up from Peabody’s previous A$3.6bn bid, trumps a A$3.64bn shares-and-cash bid from New Hope, another Australian coal producer. It also came before Macarthur shareholders are due to vote on a trio of deals with Noble Group that would give the Hong Kong-based commodities trader close to 25 per cent of Macarthur’s shares.
Macarthur’s shareholders have been asked to back a near A$1bn takeover of Gloucester Coal, an Australian group that is 88-per cent owned by Noble. Peabody has said that it would withdraw from the battle for Macarthur if that deal is approved.
Xstrata, the Anglo-Australian miner, could also enter the fray after news broke last week that it had contacted Macarthur’s three biggest shareholders about its own proposal. Peabody’s initial bid was worth A$13 a share or A$3.3bn but its latest A$16 a share bid underlines its desire to acquire one of Australia’s largest independent coal companies.
Australian coal companies are in demand after coal prices surged more than 50 per cent in the past year on the back of China-fuelled demand.
Macarthur is the world’s biggest producer of seaborne pulverised coal. Its board is due to meet on Friday to consider its position. It had quickly dismissed all previous approaches as inadequate and highly conditional, but Peabody’s latest bid is expected to warrant serious consideration.
As part of its proposal, Peabody said it was willing to provide Macarthur’s three major shareholders – China’s Citic and steelmakers ArcelorMittal and Posco who collectively own 47.4 per cent – with an “opportunity to retain their economic interest in Macarthur should they so desire”.
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