06

August

2018

Impala Platinum to reduce production and mining footprint

South African platinum mining company Impala Platinum is set to reduce its mining footprint from 11 to six and cut production to 520,000oz platinum per annum as part of its restructuring plans. The company has taken this decision as a result of a significant decline in the price of platinum, as well as sustained high mining cost inflation. It plans to improve its competitive position, profitability and financial returns.

Impala currently employs 40,000 people and produces 750,000oz of platinum a year. The decision will affect 13,000 jobs within two years across its operations. According to the company, the restructuring efforts will cost $201m during 2019 and 2020, which will be funded by selling inventories and through internal cash resources.

Implats CEO Nico Muller said: “The only option for conventional producers today is to fundamentally restructure loss‐making operations to address cash‐burn and create lower‐cost, profitable businesses that are able to sustain operations and employment in a lower metal price environment.

“While employee rationalisation is inevitable in a restructuring process of this nature, due care will be taken to ensure that job losses are minimised as far as possible through a range of job loss avoidance measures. This major transformation will be phased over a two year period to ensure that we are able to mitigate the various implementation risks and socio‐economic impacts.”

The group also noted that it will reduce its exposure to higher‐cost, less flexible, labour‐intensive operations to improve flexibility and capacity as part of the restructuring efforts. The company will also close operations at Impala Rustenburg’s uneconomic shafts in a phased approach and plans to focus future mining activity on profitable and longer‐life assets.

Furthermore, the Platinum Group Elements (PGE) mill grade will increase from 4.09g/t in this financial year to 4.25g/t in fiscal 2021, as well as the Merensky:UG2 ratio will increase from 42% to 50%. The company will also reduce replacement capital from $61.33m per annum in the current fiscal 2018 to $8.97m in the 2021 financial year followed by to zero in the 2023 financial year.

06

August

2018

RenGold signs mining sublease agreement to expand Ecru project

Exploration company Renaissance Gold (RenGold), which specialises in gold and silver, has signed a ten-year mining sublease agreement with Newmont USA (Newmont Lease) to expand its Ecru Project in Lander County, Nevada.

The agreement will see Renaissance Gold lease approximately 1,120 acres of mineral rights adjacent to its claims on its Ecru project, which is located in the Cortez area on the prolific Battle Mountain-Eureka trend of gold deposits.

The agreement also includes an option to extend the lease for an additional five years as well as extend it further until mining, development and processing operations are being conducted on the property on a continuous basis.

As part of the deal, Renaissance Gold will make annual payments to Newmont as advance royalty payments to be offset against any future royalty obligations during mining operations. Under the agreement, Newmont will hold a 0.875% net smelter return (NSR) on the leased ground.

Renaissance Gold president and CEO Robert Felder said: “We are very pleased to have completed the Newmont Lease and bring this prospective ground into our project. We are now in a position to most effectively test the targets on the project, exploring for Carlin-type gold mineralisation in this world-class district.”

In addition, the Newmont Lease area lies within the area of interest of an investment agreement that the company signed with S2 Resources on 31 July last year. The lease will be included in the existing earn-in terms of S2 Resources agreement, under which S2 will maintain the Newmont Lease during the term of its investment agreement.

Furthermore, the agreement will extend the existing geophysical coverage to the Newmont Lease ground in the coming weeks in a move to offer maximum data for the siting of the planned initial deep stratigraphic/reconnaissance drilling. The drilling operation is scheduled to commence in the fourth quarter of this year over the now expanded Ecru property.

03

August

2018

23 out of 27 mines found to comply with regulations in Philippines

A review of 27 mines in the Philippines has found that only 23 of them are compliant with state regulations and will therefore be allowed to continue operations, while the non-compliant mines could face closure. The Philippines is currently second-largest producer of nickel in the world.

A government-appointed panel issued the final report following a review of the mines that were ordered to be closed or suspended last year, reported Reuters. Mining is considered to be a contentious topic in the Philippines given that environmental mismanagement were reported in earlier instances.

Environment and Natural Resources Secretary Roy Cimatu noted that a decision is expected to be taken soon regarding the four mines that were found to be non-compliant.

Mines and Geosciences Bureau head Wilfredo Moncano told Reuters: “The Department of Environment and Natural Resources (DENR) will meet to decide whether to pursue the closure or give them a second chance.”

Cimatu did not disclose the names of the four nickel mines that failed to comply. The final decision on the mines will be taken by Philippines President Rodrigo Duterte. In 2016, Duterte warned mining companies that they would have to follow stringent environmental rules or face closure.

Mining sector’s contribution to the Philippines’ economy is less than 1%. Only 3% of the country’s nine million ha of mining projects have been identified to contain high mineral reserves. The country has 50 operating mines, including 30 that primarily have nickel ore. Most of the country’s nickel ore is exported to China, where it is used in the production of steel.

03

August

2018

La Mancha to invest $125.7m for 30% stake in Golden Star

Investment firm La Mancha Holding has reached an agreement to acquire a 30% stake in Canadian gold miner Golden Star Resources by investing $125.7m in the company via a private placement.

Golden Star currently operates the Wassa and Prestea underground mines in Ghana and the new arrangement will allow the company to form a strategic partnership with La Mancha in order to fast track the development of these sites. The company will issue 163.2 million common shares to La Mancha under the placement initiative.

The investment is expected to enable Golden Star to bolster its balance sheet and offer a strong platform for the pursuit of organic growth opportunities. Golden Star will leverage the investment to expedite exploration and mineral reserve definition drilling at Wassa Underground, Prestea Underground and the Father Brown satellite deposit.

Golden Star Resources president and CEO Sam Coetzer said: “La Mancha has a strong track record of creating sustainable shareholder value and their previous investments demonstrate their ability to identify compelling growth opportunities at an early stage. The transaction also de-risks our balance sheet and lends us a platform to participate actively in the consolidation of the African gold mining industry.”

The investment represents La Mancha’s latest gold company partnership following its previous strategic collaborations with Endeavour Mining in West Africa and Evolution Mining in Australia.

La Mancha CEO Andrew Wray said: “We have worked closely with Golden Star to understand the potential of its asset base and to agree this transaction, which will help to unlock the value of the world-class Wassa and Prestea ore bodies through accelerated exploration and resource definition drilling, and the injection of development capital to fast-track the expansion of high-margin production at both operations.”

Golden Star expects to produce approximately 230,000oz to 255,000oz from its two underground operations this year. The company recently reported an increase of 147% to Wassa Deep’s inferred underground resources to a total of more than five million ounces of gold.

03

August

2018

Anglo American closes New Largo coal project sale in South Africa

Multinational mining company Anglo American, via its subsidiary, has completed the divestment of the New Largo coal project in South Africa.

The transaction covers the sale of Anglo American Inyosi Coal’s interest in the New Largo thermal coal project and the Old New Largo closed colliery, known collectively as New Largo, to the New Largo Coal Proprietary, which is owned by Seriti Resources and Coalzar.

Seriti and Coalzar are majority owned by historically disadvantaged South Africans (HDSAs) and the Industrial Development Corporation SOC (IDC). The R850m ($65m) deal was originally announced in January.

Anglo American South Africa deputy chairman Norman Mbazima said: “I am delighted to announce the completion of the sale of New Largo to a majority black-owned-and-managed company. As we said upon announcing the sale in January, Seriti, Coalzar and the IDC together have excellent operating and management capabilities to develop and operate New Largo optimally and sustainably into the future.

“This sale marks the completion of our long-standing strategy to exit our Eskom-tied coal assets and is yet another milestone in the sustainable transformation of the South African mining industry.”

The project’s principal asset is its approximately 585 million tonnes (Mt) coal resource, which the company claims is well-positioned to supply Eskom’s new Kusile power station.

Anglo American reportedly generated underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $4.6bn within the first six months of this year, as well as $1.6bn of attributable free cashflow.

The company also reduced its net debt to $4bn, representing an 11% reduction since the end of 2017.

02

August

2018

South African residents protest sand mining on safety grounds

Local residents in the South African town of Verulam have protested against a mining permit that could be granted to Phumalanga Mining (PTY) to conduct sand mining operations near the Umdloti River due to concerns about the environmental damage and risks to personal safety the project could cause.

The country’s Department of Mineral Resources (DMR) is considering granting permission to begin operations in residential areas around the river after PTY had held meetings with members of the public to discuss the proposed operations and no objections were raised. Badsha Adam, the principal of the Umdloti Primary School, which is located 500m away from the proposed site, has since withdrawn his consent for the project, claiming he had been ‘misled’ by the company.

“I was approached by an individual with a person whom I think was the applicant [for the permit],” he said. “They told me that the company wanted to develop the area through sand mining. They went on to say that it was not going to affect my school because they will be digging sand at the banana plantation, which is far away from my school.

“They told me that they were seeking an application for sand mining and needed permission from the residents,” he continued. “A couple of months later, a resident, Hayley Govender, informed me that mining which I consented to was going to take place close to my school. I then withdrew from my initial consent. I was misled.”

More than 100 residents have signed a petition calling for the permit not to be granted, claiming that disruptions to the natural bridge over the river, which has no footbridges, would disrupt local farmers who rely on the strip of land to plant crops and endanger children who have to cross the bridge to reach the primary school would be at risk of falling into the river and drowning.

Eugene Shangase, the owner of PTY, has said that the majority of the community has been supportive of the project and that Govender has been the only significant opposition.

“She went and mobilised the community and told them to raise objections after we held a meeting,” said Shangase. “I think she is jealous because she and her husband applied for a permit a long time ago and they started digging sand. We had door to door interviews with the public about the proposed sand mining operation, and none raised objections.”

Sand mining, the extraction of sand to be used in manufacturing, can be one of the more environmentally damaging mining practices as it removes topsoil and vegetation from patches of land. Illegal sand mining operations have long been found in South Africa, so the DMR’s final decision could set a precedent for future sand mining projects in the country.

02

August

2018

Chilean miners vote to strike at world’s biggest copper mine

Workers at the world’s biggest copper mine, the BHP-owned Escondida operation in Chile, have voted to reject a new wage offer and go on strike following the end of their 30-month contract. A total of 2,330 union members voted on strike action, with 1,955 in favour of striking and 370 accepting BHP’s new contract, alongside four blank votes and one spoiled ballot.

The workers said in a statement: “We hope that given this clear wish to reject the company’s offer, which has been expressed in a mature and democratic way by our bases, the company will see the need to find an agreement that recognises our rights.”

Last week BHP reportedly offered the workers an increase of 1.5% to their salaries, in addition to a signing bonus of $18,000. The workers themselves, however, asked for a signing bonus closer to $36,000 and a raise of 5%, leaving considerable distance between the two sides.

The miner’s union says BHP has raised the production threshold needed for workers to be given bonuses from 96% of the mine’s potential output to 98%, a demand that workers claim will lead to increased health and safety risks as workers are pushed towards the higher target. The proposed new contract has driven an addition wedge between unions and BHP as its signing bonus and related benefits were also offered to non-union workers; the unions called this ‘discriminatory’.

The value of copper has struggled recently following US President Trump’s trade war with China, which has placed a 25% tariff on $200bn of Chinese goods and the threat of industrial action at the Escondida operation has continued to push the value lower. The price of copper reached $6,010/t this week, down 18% from a four-year high in early June. Industrial action at the Escondida mine, which produced 5% of the world’s copper in 2012, will likely continue this trend.

Earlier this week, workers at Codelco’s Chuquicamata copper mine, which produces the second largest volume of copper behind the Escondida operation, went on strike to protest what they considered to be the unfair dismissal of two workers.

02

August

2018

Rio Tinto exits coal with sale of remaining Australian assets

Rio Tinto exits coal mining in Australia by selling its remaining assets in Queensland for £3.95bn. The assets sold include interests in the Hail Creek coal mine and Valeria coal development project to Glencore for $1.7bn.

Rio also divested its 80% interest in the Kestrel underground coal mine, which is 40km north-east of Emerald in central Queensland and produces coking coal, to a consortium comprising EMR Capital and PT Adaro Energy for a consideration of $2.25bn.

Rio Tinto chief executive J-S Jacques said: “The sale of our remaining Australian coal assets delivers exceptional value to our shareholders. Once again, I would like to thank the many people across Rio Tinto and the communities in which we operate who have contributed to the coal business.”

Last year, production from the Kestrel mine stood at 5.1 million tonnes (Mt) of saleable coal. The mine is estimated to have marketable reserves of 146Mt and mineral resources of 241Mt.

As a result of the assets sale, the company revised its production guidance for this year to 4Mt of hard coking coal and 2.5Mt of thermal coal. The company posted underlying and net earnings of $4.4bn and free cashflow of $2.9bn for the first half of this year.

Rio has been engaged in divesting its coal assets in the country. Last year, the mining major sold its wholly owned subsidiary Coal & Allied Industries to Yancoal Australia for $2.69bn. In June this year, Rio completed the divestment of its entire 75% stake in the Winchester South coal development project in Queensland to Whitehaven Coal for $200m.