TABLE OF CONTENTS
Ivanhoe Mines Announces 2Q Financial Results and Review of Operations
Puda Coal Announces Strong Second Quarter 2010 Results
Government of Zimbabwe: Mining Sector Poised for Growth
Rossing South Uranium Resource Gets Bigger, Attracting Interest
Tawana Sells Kareevlei Diamond Project
BHP Hostile on $39 billion Potash Corp Bid
Minera IRL Options Peruvian Gold Project
Medoro Completes Second Stage in JV in the Frontino Gold Mines
Farallon Announces Extension of Zinc and Copper Concentrates Contracts
Coral Gold Resources to Begin Drilling at Robertson Property in Nevada
Newcrest Signs Deal to Expand Indonesian Gold Profile
JOGMEC to Explore for Mineral Resources in Kazakhstan
India Looking Closely At Afghan Minerals
Rio Tinto Stands to Benefit in Possible Reopening of Panguna Copper Mine
Ivanhoe Mines announce its results for the quarter ended June 30, 2010. All figures are in US dollars, unless otherwise stated.
Highlights During the Second Quarter and Subsequent Weeks
- Full-scale construction at Oyu Tolgoi copper and gold mine in Mongolia commenced in June 2010 and there are now approximately 4,400 workers at Oyu Tolgoi. Production is expected to commence in mid-2013.
- On May 11, 2010, Ivanhoe released a new Integrated Development Plan (IDP-10) that estimates the Oyu Tolgoi Project in Mongolia should produce more than 1.2 billion pounds (544,000 tonnes) of copper and 650,000 ounces of gold every year for the first 10 years. Peak single-year production from Oyu Tolgoi is estimated at 1.7 billion pounds (800,000 tonnes) of copper and 1.1 million ounces of gold.
- On May 7, 2010, Ivanhoe shareholders approved a shareholders’ rights plan that will ensure fair treatment of all Ivanhoe shareholders during any takeover bid for Ivanhoe’s outstanding common shares.
- In June 2010, Rio Tinto exercised its Series A warrants and Ivanhoe issued 46 million common shares to Rio Tinto for total proceeds of $393.1 million to be used to finance ongoing mine development activities at Oyu Tolgoi. With the transaction, Rio Tinto increased its ownership in Ivanhoe from 22.4% to 29.6%.
- On May 25, 2010, Ivanhoe’s 81%-owned subsidiary, Ivanhoe Australia (IVA-ASX) signed a binding agreement with Barrick (PD) Australia Limited to acquire the Osborne Copper and Gold Operation. The acquisition is expected to close on September 30, 2010.
- On August 12, 2010, Ivanhoe Australia announced that it had successfully completed a A$251 million equity raising, being the institutional component of its accelerated, nonrenounceable, pro rata entitlement offer and an institutional placement.
- During Q2’10, Ivanhoe’s 57%-owned subsidiary, SouthGobi Resources (SGQ - TSX; 1878 - HK), reported coal sales of $17.7 million from its Ovoot Tolgoi mine in southern Mongolia, representing approximately 449,000 tonnes of coal sold to customers in China.
- In July 2010, Ivanhoe’s 50%-owned Altynalmas Gold received an independent National Instrument 43-101-compliant report on the Kyzyl Gold Project that confirmed the economics of Altynalmas Gold’s development plan. The report was prepared by Scott Wilson Inc. of London, England. Fluor Canada has been retained to complete a Feasibility Study for the planned mine.
Puda Coal, Inc. (NYSE Amex:PUDA), a supplier of high grade metallurgical coking coal used to produce coke for steel manufacturing in China and consolidator of twelve coal mines in Shanxi Province announced its 2010 second quarter financial results.
Second Quarter 2010 Highlights
- Second quarter revenue increased 71.5% year over year to $82.3 million
- Gross profit increased 235.2% year over year to $12.1 million
- Gross margin increased to 14.7% from 7.5% a year ago
- Operating income grew 291.0% year over year to $10.4 million
- Net income rose 400.5% to $8.7 million from $1.7 million in the second quarter of 2009
- Excluding non-cash gains related to the fair value of derivative warrants, adjusted net income rose 295.5% to $7.3 million, or $0.36 per diluted share
- Sales of cleaned coal increased 36.5% year over year to 601,000 metric tons (MT)
- Average selling price of cleaned coal grew 25.7% year over year to $137 per MT
- Acquired 100% of the assets and mining rights of the Da Wa Coal and Guanyao Coal mines in Pinglu County for an aggregate purchase price of $42.0 million
- Strengthened its management team with the addition of Irene Cheong as Financial Controller
"Our coal washing operations performed well in the second quarter of 2010, reflecting the continued recovery in the steel industry. Increased volume and a higher average selling price of cleaned coal resulted in a significant increase in our profitability this quarter," commented Mr. Liping Zhu, President and CEO of Puda Coal. "We continued to move forward with our coal mine consolidation projects, acquiring the assets and mining rights of the first two coal mines in Pinglu County. Furthermore, we recently entered into an investment cooperation agreement to develop the remaining coal mines in Pinglu County, which provides us with the capital we need to acquire and develop all six mines simultaneously."
Zimbabwe could experience significant growth in its mining industry by the close of 2010 as indicated by the number of sector expansion projects on the cards, but only on the basis of re-entrenching key macro-economic fundamentals and strengthening of capacity recovery, the Zimbabwe government states in its publication, The Herald.
Growth of the mining sector has this year somewhat circumvented impediments in the broader economic environment, especially those relating to the glut of bottlenecks including power shortages, lack of affordable long-term loans from local banks, minimal external sources of funding, high tariffs and utility charges and Zimbabwe's high-risk country profile.
According to Finance Minister Tendai Biti's mid-term fiscal policy review, the mining sector recorded an upward increase in production in almost all minerals with the exception of asbestos, and the country realised around US$650 million in mining exports as at June 23.
The enhancement in the country's mineral exports so far has been augmented by currency and metal prices trends on the global arena. The US dollar has failed to firm on a consistent basis and metal prices have been buoyed by the soft benchmark currency this year.
Mining is expected to contribute 31 percent to Zimbabwe's Growth Domestic Product, reflecting a downward revision from the initial 40 percent forecast despite the review of royalties on precious metals by the Finance Minister, which has resulted in an increase from 3.5 percent to 4 percent of gross revenue.
The royalties applied to base metals remain unchanged. However, real growth in the mining sector growth could remain in stagnant mode despite the numerous expansion programmes in view of the prevalent illiquidity in the market. Growth is fundamentally dependent on a downward review of Zimbabwe's perceived country risk and as such companies will be able to raise capital to expand their production capacities.
Utilities and local authorities are required to provide efficient and cost effective services. Presently the costs of such services are topping regional averages, with the exception of Angola. Power shortages are also limiting production. A case in point is Zimbabwe's largest gold mine, Metallon was significantly affected by the power crisis as its gold output tumbled by 70 percent attributed to the energy woes.
The country is at present facing a huge power deficit of over 50 percent, as Zesa is only producing 900 megawatts against a national demand of 2000MW and an installed power generation capacity of 2100MW. As the situation stands, any new investment will further impel energy demand.
Barring re-capitalisation constraints, a number of mining firms have proposed to investment in in-house energy projects to preclude the country's electricity shortages. Notwithstanding the macro-economic dispensation, several of the country's top mining firms across the board have indicated significant expansion programmes.
Among the major ones include: Zimplats Holdings Limited recently indicated that the Implementation of Ngezi Phase II Expansion Project commenced and that funding for the project had been finalised.
The project, coming at an estimated cost of US$445 million will consist of a two million tonnes per annum underground (mtpa) mine, two mtpa concentrator module, a 35 000 mega-litre dam and, a nine kilometre ore overland conveyor and 1 125 employee houses.
Included in Zimplats' current expansion drive is the development of Bimha Mine, which the company said was still on course for completion by May 2011. Gold miner Blanket Mine recently pointed out that ongoing expansion drive of its Number 4 Shaft at the mine is continuing with commissioning and ramp-up of production to about 40 000 ounces per annum expected from the fourth quarter of 2010.
Zimbabwe's gold production is continuing to rise. According to recent Chamber of Mines indications, the country is anticipated to achieve between 7 000 and 8 000kg of the precious metal by the end of the year. RioTinto announced that it has begun work on a US$300 million expansion programme for its Murowa diamond mine.
Mwana Africa plc says it requires US$26.3 million for Bindura Nickel Mine to complete the Trojan Nickel Mine project. Also pending for the miner is the re-start of the Bindura smelter and refinery complex. The proposed expansion and mine development projects are indicative of growing Foreign Direct Investment in the local mining industry, which is in stark contrast to investment trends in the sub-Saharan African region.
Zimbabwe's mining sector takes up the larger part of FDI in terms of value. According to the United Nations Development Programme's World Investment Report 2010, individual projects show that the manufacturing sector accounted for 41 percent of green-field investments between 2003 and 2009, in comparison to metals, which constituted 9 percent.
The continued rally in the country's mineral output is set to ramp up economic growth as the sector has since become the linchpin of economy, taking over from manufacturing, which has shown amplified sensitivity to the trappings of the structural weaknesses of a recovering economy.
Australia's Extract Resources, quoted on the Australian, Toronto and Namibian Exchanges (EXT),in which the U.K.'s AIM-listed Kalahari Minerals (KAH) owns 41.14%, has just announced a further big resource upgrade on its very large Rossing South uranium discovery, located around 25 km from the existing Rio Tinto Rossing uranium mine, which has been one of the world's largest uranium mines for the past 30 years. However Rossing South would seem to dwarf the Rossing mine's resource in size - and exploration continues with drilling having taken place on only just over half the former's identified uranium hosting trend.
The Rossing South resource is low grade, but relatively shallow and mostly amenable to open pit mining and a Definitive Feasibility Study is under way and due for completion in Q4 this year - but drilling continues and upgrading of the resource classification and size will continue as this progresses.
The significance of the latest resource estimate of 367 million pounds of contained U3O8 is that it includes 110 million pounds of inferred material from Rossing South Zones 3 and 4 for the first time. Zones 3 and 4 are continuations along strike from Zones 1 and 2. There has been a major transfer of resource in Zones 1 and 2 from the Inferred category to the better Indicated category as infill drilling has enabled this to be recalculated. Now the Indicated resource is put at 257 million pounds of U3O8, a tenfold increase from this category as last reported a year ago. Overall the latest resource increase pulls Rossing South into the global top six in contained uranium - and the largest granite-hosted deposit in Namibia, which is becoming a hotbed of uranium exploration.
Kalahari and Extract refer to the overall project as the Husab Uranium Project and are working towards the development of a major mining operation, but the likelihood is that they will be bought out at some stage by a major mining group - Rio Tinto has a significant stake in both Kalahari and Extract (12.5% and 14.7% respectively) - but there are a number of other significant minority holdings in both companies and there has been much jockeying for position in these holdings over the past couple of years as the significance of the deposit being exposed becomes more apparent. A Japanese trading house, Itochu, has built/is building, an important stake in both companies - it holds 14.9% of Kalahari and is buying 10.1% of Extract through wholly-owned Australian subsidiary Nippon Uranium Resources - and one assumes Rossing South - or Husab - is on the China's radar given that country's huge nuclear power expansion plans.
But, meanwhile exploration continues on Rossing South. Kalahari has reportedly said the company expects the overall resource size to be "north of 500 million pounds of uranium". And Extract controls a much wider area than that around the Rossing South discovery, which also has good uranium potential. The Ida Dome deposit, some 25 km away, also has an estimated 25 million pound resource with drilling continuing - and there is the rest of the Rossing South trend still to be drilled along with additional definition and resource expansion drilling on Zones 2 and 3.
In addition to Rio Tinto's existing Rossing mine, Namibia has a number of other existing uranium mines in production or under development and is set to become one of the world's top three uranium producers - currently Kazakhstan, Canada and Australia - and has already moved past Niger as Africa's top uranium miner.
Diamond mining junior Tawana Resources recently said it has agreed to sell its Kareevlei Diamond Project to Rolatseng Mining for R25m.
"The Kareevlei Project is not considered a core asset going forward," the company said in a statement.
"The proposed sale represents another step in the rationalisation of the company's diamond projects as the board seeks to strengthen its financial position," it added.
The funds derived from the sale will be earmarked for initiatives being considered by Tawana, including but not restricted to gold projects in West Africa.
Tawana said it maintains its interests in iron ore and manganese projects in South Africa, held through its shareholding in Rakana.
BHP Billiton will pitch its $39 billion offer to buy Potash Corp directly to shareholders of the No.1 fertilizer supplier after arranging a massive bank loan that could help it sweeten its now-hostile bid, Reuters reports.
BHP Billiton, already the No. 1 global miner, said recently it would bypass the board and extend its $130-a-share offer to the Canadian company's shareholders, many of whom remain underwhelmed by the price.
Potash Corp's directors have rejected the offer and put a poison pill in place to fend off BHP. Even so, the company has left the door open to a higher bid.
"I would say it would have to get to the $160 to $180 range for there to be a potential for a deal," said Paul Taylor, chief investment officer at BMO Harris Investment Management Inc, which owns Potash Corp shares.
"A fair deal is not at $130 a share," he added.
With its takeover offer -- the largest in any industry this year -- BHP aims to vault to the top of a rebounding fertilizer industry, which suffered during the global economic crisis.
The nutrient, critical for boosting crop yields, commanded more than $1,000 a metric ton during the commodity boom of 2007-08. It has since fallen to about $350 to $375 a metric ton levels.
Still, potash demand is expected to climb steadily as incomes rise in China, India and other emerging economies, and their population growth accelerates. That will put pressure on farmers to grow higher quality food and increase crop yields.
The deal fits into BHP's strategy of building output in low-cost, exportable commodities, particularly those needed in China, its biggest market.
Still, the move for Potash Corp surprised some, as BHP had been expected to focus on its own potash assets, including the planned Jansen mine in the Canadian province of Saskatchewan, which produces about a third of the world's supply and has huge reserves.
A deal would immediately give BHP a 20 percent share of the global potash market. Otherwise, it would not become a major producer until its flagship Canadian deposit hit full capacity in 2021.
BHP said it expected the deal to add to earnings in the second full fiscal year after completion and had arranged financing. It put total funds required for the deal at $43 billion, including options and pension obligations.
BHP is being advised by JPMorgan, TD Securities, Banco Santander, Barclays Capital, BNP Paribas and Royal Bank of Scotland.
Potash Corp is being advised by BofA Merrill Lynch, Goldman Sachs and RBC Capital Markets. The deal could yield potential fees of $170-$190 million to advisers, according to Thomson Reuters data.
Minera IRL is set to expand its exploration footprint in Peru, announcing an option agreement to buy the 3,317ha Killincho gold project from Ingerieria y Tecnologia Minero-Metalurgica SA (ITMM).
Killincho, which covers eight properties in south Peru, is located within the same gold-bearing Sandia geological formation which hosts Minera IRL's 1.3Moz (million ounce) Ollachea project. The company has conducted field evaluations and negotiations over the past 12 months, and now it can begin progressive exploration on the properties.
"The addition of Killincho to Minera IRL's inventory of exploration projects is a further step toward consolidation of a highly prospective land position associated within the gold-bearing Sandia formation in southern Peru", Minera IRL chairman Courtney Chamberlain.
"This is the same slate belt formation which hosts our flagship one-million-plus ounce resource at Ollachea 150 kilometres north west of Killincho. The Sandia formation is emerging as a major new district which hosts a number of impressive gold deposits including Untuca, La Rinconada, Winchomayo and Santa Domingo."
In terms of Killincho's geology the company said that "Three principal gold mineralization styles have been recognized to date. These include gold mineralization in breccia and/or shear zones, intrusive sedimentary rock contacts and quartz veins". Minera IRL also noted that these quartz veins have been selectively mined, on a modest but high-grade basis, by artisanal miners.
The company highlighted that if exploration is not successful on the property, it can terminate the agreement without obligation at any time in the future.
Fairfax featured IRL in its Daily Market Report, saying the deal boosts IRL's exploration potential, and the company can use its success with the Corihuarmi mine in Peru as leverage to pursue potential opportunities.
In a statement, Minera IRL told investors that its pre-feasibility study (PFS) on the Ollachea project remained on track after "excellent progress" was made with data gathering.
Mineral IRL has retained engineering and construction firm AMEC (Perú) S.A. to manage the consolidation of the pre-feasibility study. Another consultant, Coffey Mining, is responsible for the resource estimation and Geoservice Ingenieria S.A.C is managing the study to install the 1.3 km (kilometre) exploration tunnel into the mineralized zone. This report is scheduled for submission to the regulatory authorities in September 2010 with the objective of obtaining all approvals and permits to be in a position to commence the tunnel in the first quarter of 2011.
The company has finished 32 of 39 infill diamond drill holes, bringing the total to 80 for 28,846 meters, with their results being consistent with the geological understanding of the mineralized lenses. The most recent intersections included 15 meters grading 5.69 g/t (grammes per tonne) gold, 13 meters at 6.81 g/t gold, 4m at 3.02 g/t gold and 7 meters at 2.16 g/t gold from hole DDH10-100. Hole DDH10-101 recorded three gold rich intervals including 15 meters at 2.98 g/t gold, 15 meters at 4.16 g/t gold and 4 meters at 3.07 g/t gold, while and hole DDH10-106 returned an intervals of 22 meters grading 3.90 g/t gold including 6 meters at 6.27 g/t gold.
The Minera resource currently stands at 8.2 Mt (million tonnes) grading 4.2 g/t gold for a total 1.1 Moz (million ounces), which would support a 117,000ozpa operation at capital cost of US$156 million over a 9 year mine life at cash costs of below US$400/oz.
Medoro Resources Ltd. Announced that Zandor Capital, S.A. ("JVCo"), its wholly-owned subsidiary, has completed the second in a series of three related transactions by closing the acquisition of the assets of Frontino Gold Mines Ltd. which will ultimately result in Medoro having a 5% joint venture interest in Frontino, as previously announced. The remaining 95% interest will ultimately be held by Gran Colombia Gold, S.A., which will acquire its interest through the third stage in the series of transactions, all as previously announced by Medoro on August 18, 2010.
Pursuant to the terms of the asset purchase agreement in respect of the Frontino Acquisition, the purchase price was COP380,000,000,000 (approximately US$200,000,000) in cash, of which COP15,000,000,000 was paid on March 31, 2010 as a deposit. After the market close on August 17, 2010, JVCo entered into a convertible promissory note with Gran Colombia pursuant to which Gran Colombia lent COP365,000,000,000 to JVCo so that JVCo could complete the second step in the transaction by closing the Frontino Acquisition on August 18, 2010.
Medoro Resources Ltd. is a gold exploration, development and mining company with a primary emphasis on Colombia. The Company operates the producing Mineros Nacionales gold mine located in Zona Baja at Marmato and is conducting an exploration and infill drilling program at its Marmato Project to upgrade and expand its gold resources there in anticipation of developing a large tonnage open pit gold mine there.
Medoro also holds a 100% interest in the Lo Increible 4A and 4B concessions in Venezuela where it is continuing its efforts to obtain an exploitation permit to allow development of these gold properties when circumstances in Venezuela allow. Medoro owns interests in gold exploration properties in Mali in respect of which it is seeking possible joint venture partners to further explore these properties.
Farallon Mining Ltd. announces that it has extended its zinc and copper concentrates contracts for 2 1/2 years with Trafigura Beheer BV Amsterdam, up to December 2014. More favourable terms have been agreed in both contracts reflecting the current market situation and adjusted to Farallon's quality.
For zinc, a fixed treatment charge has been negotiated for tonnage shipped between July 1st, 2010 and March 30th, 2011. From April 1st 2011 to September 30th 2012, a discount over the benchmark treatment charges will be applied to 50% of zinc concentrates production and starting 1st October 2012, a discount over the benchmark treatment charges will apply to 100% of Farallon production of zinc concentrates. In the case of copper concentrates fixed treatment and refining charges apply; however, from August 2011 benchmark treatment and refining charges will be applied.
For more than 2 years, since Farallon started production at the G-9 mine, the Company's concentrates have been shipped to smelters in Korea, China, Japan and Canada. Both Farallon zinc and copper concentrates are "clean" concentrates with unusually low levels of impurities. At the same time, both concentrates are high in precious metals. As a result, all smelters are fully satisfied with Farallon's quality, confirming the positioning of the Farallon brand in the international market.
Dick Whittington said: "We are very pleased to be able to restructure our concentrate off-take contracts and to extend our relationship with Trafigura. This is a key component in getting our products to market on a competitive basis and providing shareholder value at the same time."
Farallon operates the G-9 zinc mine on its Campo Morado Property in Guerrero State, Mexico. G-9 is a 1,500 tonnes per day, underground zinc mine with important by-product credits of copper, gold, and silver. G-9 has total cash costs(1) in the lowest 10% of zinc producers worldwide. The Company is targeting to produce at an annualized production rate of 120 million pounds of zinc and 15 million pounds of copper per year.
Coral Gold Resources Ltd. announced that it will begin drilling 15 diamond drill (core) holes at its Robertson property in Crescent Valley, Nevada.
The program totaling 6700 feet will focus on the Gold Pan and Altenburg Hill Zones and represents the first phase of the core drilling program announced in Coral's February 2, 2010 News Release. Drilling by Coral's contractor Major Drilling is expected to start September 7, 2010 and should take six to eight weeks to complete.
Coral had announced initial results of 9 holes of this year's RC drilling program of 12 holes at Triplett Gulch the final 3 holes of this program will be released shortly.
The company has withdrawn its original application for drilling - the 2010 amendment to the Robertson Plan of Operations when the Bureau of Land Management indicated the Environmental Assessment of the Robertson property needed upgrading. Coral immediately instructed SRK consulting to commence new environmental studies and various field programs such as investigation of endangered species habitats. (Currently Underway)
While the completion of the new comprehensive EA will delay the next phase of the drill program, Coral stands by its on-going commitment to sound environmental management.
Coral was incorporated in 1981 and continues to explore and develop a series of strategic claims along the Cortez Gold trend known as the Robertson Project. Through independent exploration and joint venture partnerships with Amax, and Placer Dome, Coral has established an inferred gold resource of 3.4 million ounces. Ongoing work is aimed at increasing resources through exploration of near surface targets as well as deep drilling to evaluate the potential for Carlin-style deposits below the Roberts Mountain thrust fault. The discovery in 2007 of strongly anomalous gold values in lower plate host rocks at Robertson has further reinforced this potential which includes a number of excellent untested geochemical and geophysical anomalies.
Newcrest Mining, which has the high-grade epithermal gold mines on the Halmahera Islands of Indonesia, is now placing a firm focus on emerging gold projects in the south of Indonesia's large Sumatra Island.
The deal struck is for Newcrest to subscribe for an initial A$2.5 million (US$2.25 million) for 10 million shares in Sumatra Copper & Gold, giving it a 7.1% stake in the company. Attaching options, to be exercised at a higher price within 18 months would increase the stake to 13.2%.
Newcrest can also earn up to a 70% stake in the Tandai gold project by spending US$12 million on exploration over five years, and a minimum commitment of US$1.75 million in the first 18 months.
The Melbourne-based miner is to make a down payment of US$500,000 for an option to acquire 25% in the London company's more advanced Tembang gold project.
Sumatra Copper & Gold said both Tandai and Tembang were projects in areas of extensive epithermal gold systems. Tembang has a JORC compliant resource for a contained 1.64 M oz gold and 19.8 M oz silver.
Tandai is held by Sumatra's 92.5% owned subsidiary PT Bengkulu Ulara Gold, and the principal prospect is Lebong Tandai, a former Dutch underground gold mine that reputedly produced 1.4 M oz gold at an average grade of 15.4 grams/tonne gold and 167 g/t silver.
Tembank is held by PT Dwinad Nusa Sejahtera in which Sumatra has an economic interest of 92.5% through a cooperative agreement with businessman Adi Sjoekri, his family and companies.
The bulk of the first payment of A$2.5 million from Newcrest will be used for deep drilling at Tembang.
State-backed Japan Oil, Gas and Metals National Corp said recently it has agreed with Kazakhstan's national mining firm to explore and develop mineral resources in the central Asian country.
JOGMEC said it has signed a memorandum of understanding for comprehensive cooperation with Tau-Ken Samruk National Mining Company, which focuses on exploration, development and production of nonferrous metals.
"The MOU will allow us to help directly secure stakes in minerals resources as a result of joint exploration and research," JOGMEC said in a statement.
JOGMEC formed a similar agreement with Kazakhstan's Committee of Geology and Subsoil Usage in 2007.
A legal revision which recently took effect gives Japan's national resources procurement arm more flexibility in helping private firms acquire stakes in overseas firms or projects specialising in resources.
Japanese firms are stepping up their procurement of highly strategic raw materials as competition heats up amid robust demand from rapidly growing China and India.
JOGMEC was set up in 2004 to help secure stable supplies of oil, gas and minerals for Japan, including the conducting of field surveys to assist Japanese oil companies.
With the Afghan government moving ahead to tap the nearly $1 trillion worth of mineral resources of iron, gold, copper and cobalt that exist in the country, Indian companies have been invited to join in. While this is expected to enhance and diversify trade ties between the two nations, many Indian corporates are gung-ho that their operations will succeed in Afghanistan, despite the security problems posed by the Taliban.
Recently Afghan minister for minerals, Wahidullah Shahrani, met visiting external affairs minister, S M Krishna, and extended the invitation and Indian companies have been clamouring for a toe-hold in the region.
ArcelorMittal has already held roadshows in Afghanistan. The National Aluminium Company (NALCO), Vedanta Resources, Essar and Hindustan Copper have also lined up to explore Afghan's mining assets.
The Afghan find had sparked off a huge debate in the mining industry. According to a news report, iron is said to account for almost half of the total value of minerals found in Afghanistan, with copper coming in second. The large gold deposits are said to be in the Pashtun areas of southern Afghanistan. The discovery of lithium in this bag of traditional metals has raised a few eyebrows, because of its modern-day use in cellphone batteries and `green vehicle' cells.
Currently, India is the fifth-largest donor to Afghanistan. Indian firms have already been working in Afghanistan and are helping in various sectors encompassing urgent human needs - like construction of roads, dams, schools and hospitals, power transmission lines and even tube-wells. Recently, the Indian government awarded a $250 million contract for constructing the Afghan parliament building to two Indian firms.
India is also looking at the just-inked Afghan-Pakistan trade agreement which is expected to make it easier for Indian companies to export the minerals to India via road. If there are any hurdles, India has also built a road from Nimroz province in Afghanistan to the Chabahar Port on the coast of Iranian Sistan-Baluchestan, as part of its efforts to reduce Afghan dependence on supply routes through Pakistan.
The Indian government is keen to ensure smooth relations with neighbouring countries. As part of its efforts to broaden its base of relations, India is also contemplating teaming up with China and entering into joint initiatives in Afghanistan, to tap the mineral resources. Booming trade between the two countries is expected to touch a new of high of $60 billion this year.
SinoCoking Coal and Coke Chemical Industries, Inc. (NASDAQ:SCOK), a vertically-integrated coal and coke processor, announced that on August 10, 2010, its wholly controlled affiliate Pingdingshan Hongli Coal & Coke Co., Ltd. has entered material definitive agreements to acquire 60% of equity interests of Baofeng Shuangrui Coal Co., Ltd., which operates Shuangrui Coal Mine, and Baofeng Xingsheng Coal Co., Ltd., which operates Xingsheng Coal Mine, for total consideration of approximately $12.4 million. The coalmines, located in Baofeng County, Henan Province, are similar in size, each with 2 million metric tons of estimated coal reserves. Each mining company's annual coal production is currently 150,000 metric tons.
Pursuant to the Agreements, Hongli will the pay the owners of each mining company an aggregate purchase price of $6.2 million in cash, of which approximately $1.5 million was provided as a refundable deposit to examine the financials, licenses, and reserve data. The purchase will be made under the following schedule for each mining company:
1) $1.7 million within 30 business days from the September 10, 2010;
2) $0.7 million within 20 business days from the completion of the transfer of equity interests to Hongli;
3) $0.7 million within six months from the completion of the transfer of equity interests to Hongli;
4) The balance within one year from the completion of the transfer of equity interests to Hongli;
5) If total annual output is less than 150,000 metric tons, Hongli is entitled to an additional 10% of equity interests; and
6) If coal reserves are less than 2 million metric tons, Hongli is entitled to an additional 10% of equity interests.
The foregoing payment terms are expected to be utilized for future acquisitions, and will enable the Company to fund part of the consideration with current cash flow.
Hongli expects to keep current management and staff of both mining companies in place and does not have current plans to expand their production capacity, which eliminates the need for additional capital expenditures.
Hongli will evaluate purchasing the remaining 40% minority interests in the future and expects valuations to be consistent with the initial purchase.
Once equity interests are transferred to Hongli, these acquisitions are expected to start contributing to revenues. Transfer of equity interests is designated by the issuance by the relevant Administration for Industry and Commerce of revised business license.
The entry of the foregoing agreements comes at a time when all coal mining operations in Pingdingshan is in the midst a government-imposed standstill since end of June 2010, brought about by recent mining incidents at two local non-state-owned mining companies. The Company expects the general shutdown to have a significant negative impact on its performance for the fourth quarter ended June 30, 2010, the exact magnitude of which will be determined and reported once the Company completes its data collection and analysis in connection with its reporting obligations. Based on currently available information, the Company cannot anticipate when the moratorium on mining operations will be lifted. At the same time, the Company believes that the current halt on mining operations presents an opportunity to execute its acquisition strategy.
"We are very pleased to complete these first two purchase agreements for mines in Baofeng County," said Mr. Jianhua Lv, Chairman and Chief Executive Officer of SinoCoking, the owner of Hongli. "This is a significant milestone and denotes the first step in our consolidation strategy. As the Chinese government continues its efforts to consolidate small coalmines to improve both production efficiencies and safety protocols, we are well positioned with the appropriate approvals to capitalize on this opportunity. We will continue to leverage our status as a coalmine consolidator in Henan Province to grow both our production capabilities and our reserves, and expect to announce additional acquisitions in the quarter ending December 31, 2010."
Rio Tinto (RTP) has a majority holding in mining company Bougainville Copper, who owns the now defunct Panguna mine, one of the world´s largest copper reserves. Closed down since 1989, the decision to re-open the mine could now be around the corner.
Bougainville is a small island in the pacific. It is home to the Panguna mine, closed down in 1989 during a civil war. It is key to know that the remaining copper reserves in the ground could be mined for at least another 35 years. This is what has now caught the investor community´s interest.
Several developments suggest that the decision to re-open the mine could be made before the end of this year. Such a decision would be of great interest to Rio Tinto, who owns 53.8% stake in Bougainville Copper. Approximately 19.1% is owned by the government of Papua New Guinea, whose government also favors the re-opening of the mine. Bougainville´s president, John Momis, agrees. He knows that the re-opening of the mine would create the jobs and the welfare for his island population.
“It is key to know, that apart from Panguna, Bougainville Copper has secured additional mining rights for 7 other areas on Bougainville”, says Axel. G. Sturm, President of the European Shareholders of Bougainville Copper – a representation of investors in BCL, owning over 4% of the company´s shares. Sturm is convinced the company´s future is bright. And justifiably so! In the 80ies, Bougainville Copper had one of the lowest production costs worldwide. Take this and see copper prices significantly higher today and you can imagine the mine´s potential ROI. However, before production can start necessary investments in infrastructure need to be made. “Improving the infrastructure will take 3 to 4 years and will cost around USD 1.5bn,” says Sturm. He believes that the World Bank could play an active role in financing the project.
McIlvaine Company
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