Mining’s corporate troubles were pushed to the side lines at the close of the month as oil took centre stage with the provisional OPEC production deal. The ‘shrink to survey’ strategies being pursued by many mining companies had been gaining coverage in the absence of fresh news on the Chinese economy or US interest rates.
Concern was expressed by Deutsche Bank, which forecast that capital expenditure by the 80 mining companies in its Mining Survey would fall by 20 per cent this year. Anglo American, which is exiting six commodities to focus on diamonds, platinum and copper, warned that the current run of commodity price rises is unlikely to last. Kinross Gold said that 90 per cent of its exploration budget was going around existing sites
However, there were pockets of new investment. Asa Resource Group’s latest report from its new management team reveals a copper exploration JV in the Democratic Republic of the Congo funded by “one of the largest copper tube manufacturers in the world, Zhejiang Hailiang”.
Gemfields is having great success building its coloured gemstone business, disclosing a 90 per cent increase in profit after tax for financial 2016. Reporting its expansion plans it said it “expects demand for rubies and emeralds to continue to rise through the year.”
SOUTH AFRICA: Anglo American Platinum (Amplats) has joined Impala Platinum and Lonmin in deadlock on negotiations with the National Union of Mineworkers (NUM), which has rejected its latest offer of a 6.75 percent wage rise. The union wants 14.5 percent.
The Supreme Court of Appeal has granted gold mining companies leave to appeal the class action silicosis judgement. The Occupational Lung Disease Group which is submitting the appeal comprises African Rainbow Minerals, Anglo American South Africa, AngloGold Ashanti, Gold Field, Harmony and Sibanye Gold.
TANZANIA: Economic growth is increasing rapidly as a result of strengthening commodity markets and the massive investments being made by President John Magufuli into infrastructure projects. Other drivers are the anti-corruption drive, Economics Profession Humphrey Moshi of the University of Dar es Salaam told Reuters. The central bank expects growth to reach 7.2 per cent this year. Earnings from gold are up from $1.23 billion in Q3 last year to $1.33 billion for the same period in 2016.
GHANA: Disbursement of $116 million by the International Monetary Fund (IMF) should help the government boost the economy ahead of December’s elections. Finance Minister Seth Terkper told Reuters that the funds would help investor confidence. Ghana’s growth slowed sharply from 2013 because of a fiscal crisis and drop in the price of gold. In recent months the economy has been hit by lower oil production due to a technical fault in the main production vessel. However, gold production has been picking up – H1 production was 39 per cent higher – as new mining operations have come on stream.
KENYA: Kenya is making progress with its plan to conduct an airborne survey of its mineral deposits in order to attract mining explorers. Mining Cabinet Secretary Dan Kazungu announced that the ministry has an initial funding of $30 million to start the survey. Kenya has proven deposits of titanium, gold and coal and is believed, says Reuters, to hold significant deposits of copper, niobium, manganese and rare earths. Successive governments have had little success in developing Kenya’s mining potential, Reuters adds, as companies have been discouraged by the poor infrastructure and outdated legal framework.
GOLD: The haven factor again drew funds to gold as fears grew about survival of Germany’s giant Deutsche Bank. The price is also benefitting from nervousness about the dollar ahead of the US presidential election, and the view that the Fed will not rush to raise interest rates even after the election.
PLATINUM: South Africa’s platinum mining industry may face challenges in meeting demand in the medium term due to lack of investment, says international consultants PwC. The existing shafts, it says in its latest industry report, “will barely maintain production at current levels up to 2021.”
COPPER: Prices rose over four percent in September, but the quarter’s performance as a whole was flat. This is reflecting the market’s caution about prices in the face increasing pessimism about the global economy, with the Organisation for Economic Cooperation & Development warning that it will flounder this and next year because of slowing trade growth.
BASE METALS: These all closed the quarter bullishly on the back of the slightly more positive economic data coming out of China over the last few months, and bolstered by tighter supplies and falling inventories.
LEAD: The metal has risen nearly 16 per cent in price in the third quarter, the largest quarterly rise for over a year. Research house CRU is looking for a global deficit of lead concentrate this year of 146,000 tonnes, versus a surplus in 2015.
TIN: Prices have risen by around 17 per cent, the largest quarterly gain since the same period in 2012. Tin inventories at LME warehouses have dropped by more than 50 per cent over the past four months, with “on-warrant” tin levels at their lowest since 1998. Mine suspensions in the Philippines, where the government is carrying out environmental audits, and falling shipments from leading exporter Indonesia are major factors in the price rises.
NICKEL: Prices reached seven-week highs at the close of the month and are nearly 12 per cent higher in the quarter. The potential suspension of a further 20 mines in the Philippines, the world’s top nickel ore producer, has fuelled the rally.
ZINC: As the month closed, zinc’s rally seemed to have lost momentum, partly due to weaker demand from China.
COAL: Prices are expected to continue tonrise as extreme pollution has forced China to close over 200 mines and is limiting production in many more.