Eldorado gets more Greek mine permits, but standoff persists

Date Sep 18 2017 16:22:36 Source:Thomson Reuters

ATHENS/TORONTO, Sept 15 (Reuters) - Greece granted Eldorado Gold Corp  ELD.TO   EGO.N  two remaining permits on Friday for its Olympias mine, the government's latest attempt to defuse a standoff with the Canadian miner, which has threatened to suspend investment in the country. 

    After Eldorado warned on Monday that it could halt new investment starting Sept. 22, blaming years-long permit delays and a lack of information on an upcoming arbitration, Greece issued key mine permits on Wednesday and detailed arbitration proceedings on Thursday.

    But the Vancouver-based miner continues to insist that it will only reconsider its investment plans after receiving a outstanding permit for a plant in Skouries and the government shows a willingness to engage in constructive talks.

    "This is another positive step forward. However, we are still waiting on the other matters, which we continue to believe can be resolved through good faith negotiations," Eldorado Chief Executive George Burns said in a statement.

    Eldorado shares dipped about 2.4 percent in early trade on Friday, to C$2.83 in Toronto and $2.32 in New York, mirroring broad declines for gold miners. The stock had soared more than 20 percent this week. 

    "We are of the view that Eldorado's recent decision has motivated the European government to scrutinize Greek policy regarding foreign investment, specifically regarding the company," BMO analyst Andrew Kaip said in a note to clients.

    "We see this as a positive event given that the company has invested an additional (approximate) $1 billion in the country since its $2 billion acquisition in 2012."

    Eldorado's investment in northern Greece is among the biggest since the country's debt crisis began in 2009 and has long been viewed as test of its resolve to attract foreign capital. 

    The miner spent nearly $2 billion in 2012 to purchase the Skouries mine along with Olympias and Stratoni projects in Greece.

    But differences have dragged on, notably over compliance with environmental regulations, with local communities divided over Eldorado's projects. 

    Workers fear job losses if the dispute is not resolved, while others worry Eldorado's development plans will destroy the environment and tourism industry.

    On Friday, the energy ministry published approval of Eldorado's technical study to shut down an old Olympias mine, and a installation permit for a paste plant there, making the project fully operational.

    Energy Minister George Stathakis said in parliament Friday that no licences will be issued for Skouries before arbitration begins. 

Edited by SHMET

Gold miners seek safety as political risks rise

Date Sep 18 2017 16:22:07 Source:Thomson Reuters

VANCOUVER, Sept 14 (Reuters) - Canadian miner Eldorado Gold Corp's  ELD.TO  threat this week to freeze investments in Greece after years of frustrating and costly permit delays highlighted the risks the industry faces when it strays away from mining-friendly countries. 

    After moving into higher-risk countries in recent years to mine new deposits, companies are being forced to seek safe havens during a rise in so-called resource nationalism and other political headwinds. 

    From Indonesia and Tanzania to South Africa and Zambia, governments are demanding greater control over mineral riches as

 metals prices rise, often seeking higher royalty payments. In Eldorado's case, the company faces a leftist-led Greek government that publicly backs investment but has powerful insiders that oppose privately owned mining projects.

     A resurgence in resource nationalism, last seen during the decade-long commodities boom ending in 2012, has made safer regions like Canada and the United States more attractive for investment, industry analysts say.

    "Now that prices across most commodities are improving, governments are again turning their attention to this issue," said Anton Ivanyi, consulting firm EY's British Columbia mining and metals sector leader. 

    Last month, U.S. miner Freeport-McMoRan Inc  FCX.N  agreed to cede control of its Indonesian unit after years of wrangling so that it could keep operating its giant Grasberg copper and gold mine.

    Even top-ranked mining regions are jumping on the bandwagon. Gold miners in Western Australia were hit this month with a royalty hike aimed at repairing the state's finances.



    As big, rich deposits of metals get mined out and new ones become harder to find, miners are being forced to widen their search for new mother lodes into regions with higher perceived risks.

    Those risks can range from basic physical security for employees to corruption, security of tenure over projects and tax stability.

    Some miners like Africa-focused gold miner Randgold Resources  RRS.L  have made big profits in higher-risk jurisdictions. But for others, the potential dangers are not worth it. 

    "We concluded many, many years ago that mining is hard enough and you only make life more complicated when you go into jurisdictions where there are a lot of geopolitical concerns," said Sean Boyd, Chief Executive of Agnico Eagle Mines  AEM.TO , a gold miner with operations in Canada, Finland and Mexico.

    Agnico, which is expanding one mine and building a second in the Canadian Arctic to increase production by a quarter by 2020, has more than doubled its share price in the past 2-1/2 years as peers' output stalls or shrinks.

    In the same period, stock of Eldorado, which derives nearly half of its net asset value from its Greek interests, fell by two-thirds. 



    Some recent M&A deals show a flight to safety, including  Eldorado Gold's C$590 million ($484 million) acquisition in July of Integra Gold Corp, which owns a project in the Canadian province of Quebec.

    Quebec, along with two other Canadian provinces, rank among the top 10 most attractive regions globally for mining investment, according to the Fraser Institute's latest annual survey. Nevada, Arizona, Finland, Sweden, Ireland, Western Australia and Queensland round out the rest of the 10.

    Greece ranked 82nd out of 104 in the February survey.

    "Safer" jurisdictions are not without their own problems. For TMAC Resources Inc  TMR.TO , mining in Canada's remote Arctic spells higher costs because of a lack of infrastructure and having to fly in employees.

    Catharine Farrow, the CEO of TMAC, is prepared to shoulder higher costs, over which the company has a degree of control.

    "A government coup or a government deciding they are going to implement a windfall tax, those costs and risks are much higher than anything we can control," Farrow said. 


Edited by SHMET

Gold slips to lowest in nearly 2 weeks, U.S. inflation data in focus

Date Sep 14 2017 17:05:09 Source:Thomson Reuters

Sept 14 (Reuters) - Gold edged down on Thursday to its lowest in nearly two weeks on waning risk aversion, and as the dollar steadied ahead of U.S. consumer inflation data that could offer clues on the timing of further interest rate hikes.  

    Spot gold  was down 0.1 percent at $1,321.24 an ounce by 0620 GMT, after earlier dropping to its lowest since Sept. 1 at $1,318.75.

    U.S. gold futures  for December delivery fell 0.2 percent at $1,325.10 an ounce.

    "It's really just the dollar driving this at the moment and risk-on sentiment. Stock markets continue to make historic highs. It's difficult to hold gold in this scenario," a Hong Kong-based trader said.    

    Asian stocks inched down on Thursday, consolidating after touching their highest in a decade.

    The dollar, which fell to 2-1/2 year low against a basket of currencies and hit a 10-month low against the yen last week, was steady ahead of the U.S. inflation report for August, and a rebound in U.S. producer prices in August had lent some support.

    A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.

    "Better-than-expected producer prices in the U.S. raised the spectre of a stronger Consumer Price Index (CPI) number later today. That could change the market's view on whether the Federal Reserve will increase rates later this year," ANZ analyst Daniel Hynes said in a note.

    Inflation is a key economic factor the U.S. central bank considers when deciding monetary policy. A strong reading could raise expectations for future interest rate increases, which would pressure non-yielding bullion. 

    The Fed has a 2 percent inflation target, and a series of subdued inflation readings have dampened expectations for further interest rate hikes this year.

    "We haven't managed to push higher after North Korea," the trader said, referring to the non-event of a missile launch or nuclear test from the country over the past weekend when it marked its founding day. 

    "Down to the $1,300 levels, it (gold) will start running into some support. You know you can never count them (North Korea) out of the equation."

    A North Korean state agency threatened on Thursday to use nuclear weapons to "sink" Japan and reduce the U.S. to "ashes and darkness" for supporting a U.N. Security Council resolution and sanctions over its latest nuclear test. 

    Spot gold is expected to test a support at $1,313 per ounce, said Reuters technical analyst Wang Tao. 

Edited by SHMET

COLUMN-China rattles critical metals supply chains: Andy Home

Date Sep 14 2017 17:04:42 Source:Thomson Reuters

LONDON, Sept 13 (Reuters) - What have the following metals all got in common? Ferro-silicon, vanadium, tungsten and neodymium. 

    The answer is that all have seen explosive price rises over the last couple of months. 

    Ferro-silicon trading on China's Zhengzhou Commodity Exchange went supernova over the course of August with price, volumes and open interest rocketing to record highs.

    Neodymium  MYSTL-GANZ-NEDO , together with its sister rare earth metal, praseodymium  MYSTL-GANZ-PRAS , has almost doubled in price since the start of the year.                

    Vanadium  VAN-PENT-LON  has done the same in the space of two months, while tungsten  TUN-FERRO-LON  is up by "only" around 60 percent since the start of July. 

    These metals, esoteric but critical for a multitude of manufacturing processes, all have one other thing in common. 

    They are all produced in China and they have all been hit hard by Beijing's environmental crackdown. 

    They are just the most extreme examples of a more general supply shock spreading across the entire global industrial metals spectrum from aluminium to zinc. 




    Chinese premier Li Keqiang pledged to make "our skies blue again" at the annual National People's Congress in March. 

    It was a formal declaration of war on polluters, proving that air quality in China's big cities had moved to the very top of the political agenda. 

    It was also the trigger for waves of inspectors to fan out across the country to target entire industrial supply chains.

    Inevitably, given both the nature of the production process and the breakneck speed of capacity expansion over the previous decade, the metals sector is one of those singled out for special scrutiny.

    "Inspection" sounds a fairly innocuous exercise but in China these environmental checks have proved massively disruptive with metal producers reducing output or closing completely during the inspectors' visit. 

    And quite evidently, those that don't pass the checks don't get to reopen at all until they take remedial action. 

    Consider, for example, this update on last month's inspections on silicon producers in the province of Sichuan from Chinese news provider Shanghai Metal Market (SMM). 

    Average utilization rates in Sichuan, according to SMM, "fell by more than 10 percentage points month-on-month to 43.40 percent in August, and the year-on-year decline was 20.45 percentage points". 

    "Silicon metal producers in Liangshan and Ya'an reported unstable production during the inspections period."

    "In Liangshan, some producers halted operations and production in Ya'an did not recover until late August. Plants in A'ba and Leshan were required to suspend production for unit upgrading to meet environmental production and noise reduction standards". 

    Now, imagine the same thing happening to silicon producers across the whole of China and you start to understand the speculative frenzy that has lifted Zhengzhou futures prices.

    Next, imagine it happening to every metallic supply chain you can think of and you'll understand the systemic impact of Keqiang's blue skies promise.

    The inspectors don't just come once. 

    Even if a plant passes every single check, they'll be back next month just to make sure. And they may well return the month after that, just to be doubly sure.



    Just how much these inspections impact prices is dependent on each individual metal's specific dynamics. 

    Vanadium, for example, was already on something of a roll due to a proposed change to the specifications for Chinese construction steel with implied higher usage of the hardening alloy. 

    The whole rare earths sector, which China dominates, has been undergoing structural changes as Beijing tries to weed out unofficial operators and push bigger players to consolidate. 

    Ma Rongzhang, general secretary of the Association of China Rare Earth Industry, was quoted by China Daily as saying that this year's official rare earths production quota of 105,000 tonnes won't even cover the 180,000 tonnes of neodymium and praseodymium that the electric motor supply chain requires. 

    Rare earths, like vanadium, were already showing early signs of embarking on a bull price run. 

    But the accelerator came at the start of July, when the environmental inspectors started paying their visits. 

    Whatever the starting point, each metal's price path since then has been the same vertical climb.  



    The irony is that most of these critical metals are also in the public eye right now because just about all of them, in one way or another, are going to receive a demand boost from the electric vehicle revolution. 

    But these "green" materials are nothing of the sort when it comes to their own production processes. 

    That's particularly true in China. 

    Sectors such as rare earths production have in the past been plagued by smaller, illegal operators with scant regard for environmental or any other sort of regulatory box-ticking.

    Environmental crackdown goes hand in hand with "unofficial" sector crackdown. Policy makers' aim is to create bigger, better and cleaner national champions. 

    The problem for everyone else, however, is that Beijing's clean-up is closing production and ramping up prices. 

    That should be a warning sign for the rest of the world, which is dependent on China as a major supplier of these metals. Indeed, in a sector such as rare earths, it's just about the only supplier. 

    China is rattling global supply chains across the metallic spectrum right now. 

    It's doing so because of its dominant position in the production of many of the weird and wonderful metals on which 21st century manufacturing depends. 

    Assuming its supply-side reforms play out as intended, it may prove to be a position that becomes ever more dominant.  

Edited by SHMET

Record premium for high-grade iron ore as China toughens smog fight

Date Sep 14 2017 17:04:17 Source:Thomson Reuters

MANILA, Sept 14 (Reuters) - The gap between high-grade and low-grade iron ore shot to a record this week as China's intense environmental clean-up pushed more steel producers to use higher quality material to boost output.

    The increased appetite for higher grade iron ore has helped strengthen the market share of top suppliers Australia and Brazil to more than 80 percent of China's total iron ore imports, forcing shippers of lower grade material to offer steeper discounts to draw buyers.

    Higher quality ore produces more steel for each tonne that is processed, and can reduce emissions as less coke is used in production.

    Iron ore with 62 percent iron content  .IO62-CNO=MB  traded at $76.56 a tonne on Wednesday, a premium of $29.75 over ore with 58 percent iron content  .IO58-CNO=MB , according to prices published by Metal Bulletin.

    That was the highest gap between the two grades since price records that date back to August 2011.    

    "Definitely the inquiries from our clients are now for medium to high-grade iron ore. There's less interest in low-grade," said a Shanghai-based iron ore trader.

    Underlining increased appetite for premium iron ore, China's Dalian Commodity Exchange said on Wednesday it will adjust the quality standards for deliveries of iron ore to meet market demand for high-grade ore. 

    "Steel mills prefer using higher grade iron ore so they can produce more steel," said a trader in Beijing who sells Australian shipments. "Demand is more active than before."

    Steel output in China, the world's largest consumer and producer, surged to a record 74.59 million tonnes in August, trumping the previous all-time monthly high in July.

    An infrastructure push has helped boost Chinese steel demand this year, lifting construction steel prices  SRBcv1  by more than half and fattening producer margins. As authorities shut makers of lower quality steel, those left standing increased output to chase rising prices. 

    The premium on iron ore lump - higher quality ore that can be fed directly to a blast furnace unlike iron ore fines that need to be processed first - hit a record high of about $25 a tonne on Sept. 8, according to Mysteel consultancy.

    As more mills opt for premium ore, suppliers of lower quality material have been deepening discounts, traders said.

    An Australian exporter of lower grade ore to China has increased its discount on cargoes this month to 35 percent off the benchmark price from 30-32 percent previously, said the Shanghai trader. Indian suppliers of low-grade material are also offering similar discounts, he said.  Edited by SHMET