Gold companies take a shine to China's Silk Road

Date Sep 25 2017 17:36:11 Source:Thomson Reutersc

TIANJIN, China Sept 24 (Reuters) - As far as China's miners are concerned, the modern-day Silk Road is paved with gold.

    Buoyed by a 15 percent rise in the gold price  XAU=  this year, Chinese mining executives in Tianjin this weekend were talking up their ambitions for overseas expansion.

    In doing so they embraced Chinese President Xi Jinping's Silk Road Economic Belt and 21st Century Maritime Silk Road, now being promulgated around the world as the Belt and Road Initiative, the geographical scope of which has not been precisely defined.

    Song Xin, CEO of China National Gold Group Corp, told a session of the China Mining conference on Saturday that his company would "intensify exploration and capital allocation in Belt and Road countries", which he said account for 80 percent of global gold consumption.

    China National Gold has mandated its Canada-based subsidiary China Gold International Resources Corp  CGG.TO , with making overseas acquisitions.

    On China's doorstep, in Mongolia and Central Asia, the company could deploy its proprietary technology for hard-to-extract reserves, Song said, calling on other Belt and Road countries to "enjoy the benefits" of mineral wealth together.

    Investment in overseas gold projects is also a platform to promote the internationalisation of the yuan, he added. 

    Another state-run Chinese gold miner, Zijin Mining Group Co  601899.SS , is already generating half of its revenues abroad, said executive director George Fang.

    Having embarked on a "go global" strategy in 2005, the company already has projects in three countries along the ancient Silk Road, Tajikistan, Kyrgyzstan and Russia, Fang said on Sunday. 

    Based in Fujian in southeast China, the starting point of the ancient maritime Silk Road, Zijin is also active in South Africa, the Democratic Republic of Congo, Australia, Papua New Guinea and Peru, he added.

    Following Zijin's lead, Shandong Gold Mining Co  600547.SS  in April took a 50 percent stake in Barrick Gold's  ABX.TO  Veladero mine in Argentina.

    Emboldened by the moves of its peers, another Shandong miner, Zhaojin Mining Industry Co  1818.HK , has set a three-to five-year horizon to set out along the Silk Road and establish an overseas presence, according to its president, Li Xiuchen.

    But he warned that the lessons learned from the environmental crackdown on mining practices within China should be applied overseas. 

    "If we cannot adhere to the environmental protection standards, we will not be able to do business there," Li said. 

Edited by SHMET

Aluminium producer Norsk Hydro warns of Brazil bauxite shortfall

Date Sep 25 2017 17:35:56 Source:Thomson Reuters

OSLO, Sept 25 (Reuters) - Norwegian metals maker Norsk Hydro  NHY.OL  has warned customers of a shortfall in supplies of bauxite from Brazil, the raw material from which aluminium is made, it said on Monday.

    The Mineracao Rio do Norte (MRN) bauxite mine, where Hydro has five percent ownership and takes a total of 45 percent of the material, is experiencing problems with its tailing systems due to a water shortage caused by dry weather.

    "Hydro has issued a notice of force majeure to its bauxite customers as Hydro will not receive the full contracted volumes," the company said in a statement.

    Production problems are expected to last through the fourth quarter of the year and may stretch into the first quarter of 2018, a Hydro spokesman added.

    "We will do what we can to minimise the impact for clients," he said.

    The production shortfall was mostly related to dry bauxite for the export market and was not expected to affect production at Hydro's own Alunorte alumina refinery, the company said.

    Alunorte transforms bauxite to alumina, which is turned into aluminium at giant smelters. 

    MRN's bauxite output for 2017 will be reduced by about 2 million tonnes, from a previously expected level of 17 million-17.5 million tonnes to around 15 million-15.5 million tonnes, Hydro said.

    The mine, one of the world's largest, is designed for extracting around 18 million tonnes of bauxite per year.

    Brazil is the third-largest producer of bauxite after Australia and China, according to the U.S. Geological Survey. 

Edited by SHMET

China's top smelting province to cut output in several industries in clean air push

Date Sep 25 2017 17:35:39 Source:Thomson Reuters

BEIJING, Sept 22 (Reuters) - Cities in China's eastern province of Anhui are issuing plans to curb production in the steelmaking, non-ferrous smelting, cement and coal-fired power sectors over the coming winter in a drive to meet a politically crucial air pollution target.

    Anhui, a key non-ferrous smelting province, took the initiative to curb output even though it has been excluded from Beijing's winter smog "battleplan" applying to 28 cities in the smog-prone northern region. 

    The step comes after the province failed to meet its target of reducing hazardous air pollutants, known as PM 2.5, in the first seven months of this year.

    In 11 of 15 cities in the province, the average PM 2.5 kept rising despite efforts to eliminate polluting coal-fired boilers and vehicles.

    The city of Tongling, home to one of the country's largest copper smelters, Tongling Nonferrous Metals Group Holdings  000630.SZ , has asked some major cement, smelting, steel pelletising and chemical firms to cut capacity by 30 percent, according to a statement seen by Reuters and confirmed by people with knowledge of the matter.

    The output reduction will take effect from October 1 until the end of this year.

    The statement also identified seven companies in the coke, cement, non-ferrous smelting and stone-mining sectors that must shut during the winter, including projects at two subsidiaries of Tongling Nonferrous Metals.

    "We have received notice from local authorities," said a senior official at Tongling Nonferrous Metals who asked not to be identified as he is not authorised to speak to the media.

    "Environmental protection won't be a temporary method in China, instead, it will be a long-lasting policy," he said.

    Tongling Nonferrous Metals currently has 2.05 million tonnes of copper resources, 1.35 million tonnes of annual copper smelting capacity and 380,000 tonnes of comprehensive copper processing capacity.

    The provincial government asked local authorities to draw up detailed schemes to improve their air quality before the end of August. Some cities, including Xuancheng, Liu'an, Anqing and Chizhou, have published their plans.

    Anhui has pledged to keep its PM 2.5 concentration below 54 micrograms per cubic metre this year. In the first seven months, the average concentration was 58.5, according to data from the local environmental protection department. 

Edited by SHMET

Speculators cut bullish COMEX gold bet from one-year high –CFTC

Date Sep 25 2017 17:35:19 Source:Thomson Reuters

NEW YORK, Sept 22 (Reuters) - Hedge funds and money managers cut their net long position in COMEX gold contracts from a one-year high in the week to Sept. 19, as they also reduced bullish stances in silver and copper, U.S. Commodity Futures Trading Commission data showed on Friday.

    The dealers reduced a net long stance in bullion by 22,284 contracts to 242,650 contracts, the data showed. That marked the first reduction in 10 weeks, coming as traders positioned ahead of statements from the U.S. Federal Reserve.

    They reduced a bullish stance in silver from the highest level in over four months, cutting it by 7,806 lots to 67,341 lots, according to CFTC. 

    The speculators also reduced a bullish bet in copper, cutting it by 21,558 contracts to 99,729 contracts, the smallest net long since July, the CFTC data showed.



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Edited by SHMET

Investors wary as Tanzania moves to assert more control over mines

Date Sep 25 2017 17:34:59 Source:Thomson Reuters

NAIROBI/LONDON, Sept 24 (Reuters) - New laws and a crackdown on mining firms in Tanzania has slowed fresh investment in what has long been seen as one of Africa's brightest mining prospects as companies assess the consequences of government efforts to claim a bigger slice of the pie.

    Takeover bids and exploration plans have been cancelled and workers laid off. The share prices of many firms listed in Australia, Britain, South Africa and Canada with interests in Tanzania have halved as the value of their investments tumble. 

    The tumult follows the passage of three laws in July that, among other things, hike taxes on mineral exports, mandate a higher government stake in some mining operations and force the construction of local smelters to bring Tanzania higher up the mining food chain.

    The regulations aim to stamp out what President John Magufuli, nicknamed "the Bulldozer", has called years of corrupt practices and tax evasion that have robbed the country of revenue from a sector accounting for about four percent of GDP. 

    Many of the changes were first suggested by the political opposition and have proved wildly popular with voters in Tanzania, where GDP per capita is still only $880. 

    International investors are not happy, however, especially because the details remain unclear. Magufuli fired the minister of mining in May and he has not been replaced.

    Junior explorer Manas Resources  MSR.AX  expected to complete its acquisition of the Victoria Gold Project from Cienega Sarl by early 2018, but the company told Reuters it may run out of time if there is no clarity soon.

    "Because of the changes in legislation and the time being taken to implement new regulations, the sector has slowed down to a point where it is impacting exploration activities and our capacity to finalise the deal," said Manas CEO Phil Reese.

    The director of one minerals company said he is shutting his Tanzanian office because he believes the laws will make it illegal for him to recoup the cost of his many unsuccessful exploration projects against the few successful ones, and require him to share his valuable geological data with the government for free. 

    "There will be no nickel and gold exploration in Tanzania for the foreseeable future," the head of another company said.

    Both men asked not to be named to avoid jeopardising their relations with the government.

    One mining services company said it had laid off more than 50 employees in the last 18 months.



    The first serious blow to mining companies this year came in March, when Tanzania banned the export of gold and copper ore over a tax dispute with the country's biggest gold miner, London-listed Acacia  ACAA.L , and to encourage the construction of domestic smelters.

    The government says Acacia, majority-owned by Barrick Gold  ABX.TO , owes $190 billion in tax, penalties and interest for the period between 2000 and 2017. But miners say it would be impossible for listed and independently audited companies to hide billions of dollars in extra revenue. 

    They also argue Tanzania does not produce enough ore to make building a smelter commercially viable. Africa's fourth-largest gold producer, the country is also a source of graphite, diamonds, tanzanite and rare earth minerals. 

    Under the new regulations, the government can force mining and energy companies to renegotiate contracts to give the state at least 16 percent in projects, rising to 50 percent in some cases, and raise export royalties. 

    The move is not so unusual in Africa. South Africa in June raised the threshold for black ownership in miners to 30 percent.

    Increasing shares of royalties is also part of a wider global trend that could lead to permanently higher prices, one mining CEO said, asking not to be identified.

    The Philippines, the world's top nickel supplier, and Brazil, which produces gold, copper, tin and bauxite, are making the same push. 

    "If all the governments want more of a share, commodities prices will reflect that," the CEO said. "But if it's just one government, they might get a bigger share of nothing."

    Miners say the problem in Tanzania is that the laws, passed in less than a week, were pushed through without consultation. 

    They also say it is still unclear how they will be applied - if, for example, the 16 percent will apply only to precious metals or also industrial minerals such as graphite. 

    The mining commission that will oversee the regulations has yet to be formed. A ministry official, who asked not to be named, said it's not clear when it will start work.



    Bigger miners can draw on cash reserves to weather the sudden changes, but junior miners are more vulnerable to investor jitters because funders are quicker to pull out when project capital injections are smaller.    

    London-based Tremont Investment immediately cancelled a bid for Australia's Cradle Resources  CXX.AX  after the laws were passed. Shanta Gold  SHAN.L  cancelled a takeover bid for Helio Resource Corp.  HRC.V  shortly thereafter, also citing the laws.

    The shares of gold miner Orecorp  ORR.AX , whose only other asset is an exploration project in Mauritania, are down 72 percent since March. 

    Junior miner Kibo Mining  KIBO.L  has seen little impact because in addition to gold exploration, it is developing a coal mine to fuel Tanzania's first coal-fired power station.

    Increasing government ownership was sound and warranted, Kibo Mining CEO Louis Coetzee told Reuters, but he lamented the "questionable methodology" of the process.

    The government recently has shifted its attention from precious metals to precious stones, announcing on Sept. 20 that the military would build walls and checkpoints around tanzanite mines and the central bank would buy the stones.

    A parliamentary inquiry team had said on Sept. 7 that it had uncovered massive smuggling of the blue-violet gemstone.

    On the same day, the government confiscated a consignment of diamonds from a mine majority-owned by Petra Diamonds  PDL.L  after accusing the firm of under-declaring the value of the stones by around half. Petra denies the charge.

    Minerals companies and mining analysts said Tanzania could overplay its hand.

    "Minerals may not be mobile but the capital that funds the mines is," said Ben Gargett, head of PricewaterhouseCoopers Australia-Africa practice. "Investors are saying, 'On our risk radar, Tanzania has just gone a lot further down on the list.'"


Edited by SHMET