?? Pure Gold Does Not Fear Furnace
CEO.CA Presents the Chairman's Briefing - July 27,?2023
"Pure gold does not fear furnace"
— Chinese Proverb.
Metals/Crypto Prices
No matter how intently one peers into the technical structure underpinning the precious metals, a host of conflicting crosscurrents always seem to foil even the most carefully considered conclusions. Indeed, there are times when up is down, black is white, good is bad, day is night. Or so it seems.
But at this juncture, gold is trading firm on a weaker Greenback and expectations that the Fed only has one round left in the chamber. It could well be that today's widely expected hike of 25 basis points will be the end of this rate-hike harassment cycle (markets see only a 20% chance of another rate hike in September) -?Will Wednesday's rate hike end the Fed's tightening cycle? Gold investors expect it will.
Paul Ashworth, chief North America economist at Capital Economics: "Despite the 'higher for longer' rhetoric from officials, a more marked decline in core inflation and easing in labour market conditions in the second half of this year will eventually persuade the Fed to pivot and cut rates aggressively next year."
Many believe that once a rate hike pivot is confirmed, the metals will motor -?JPMorgan Sees Gold Charging to Records in 2024 as Fed Cuts Rates.
'Falling real yields in the US will be a “significant driver” for the precious metal when the Federal Reserve starts to deploy rate cuts, which should play out in the second quarter of next year, Greg Shearer, executive director of global commodities research, said in an online briefing on Wednesday.'
The Fed will be the first in a string of central banks to trot out interest rate decisions this week—the European Central Bank goes on Thursday and the Bank of Japan on Friday.
A Few Curious Headlines...
Chile faces potentially insurmountable challenges with planned mining overhaul
I was surprised to learn the extent of the challenges Chile faces as it attempts to overhaul its mine plan—a plan designed to include greater environmental and social responsibility. This won't be a slam dunk for Gabriel Boric, the country's millennial president -?How Chile's progressive new plan to mine lithium faces Indigenous hurdles.
There's a lot at stake here. Chile is the world's largest producer of copper and second largest producer of lithium—metals key to our push to electrocute the planet. Where mineable reserves are concerned, Chile boasts the world's largest, 90% of which are located in the environmentally and culturally sensitive Atacama desert.
Boric's bold overhaul of the country's mine plan looks to expand mining with public-private partnerships controlled by a new state lithium company.
"But communities living on or around northern Chile's lithium salt flats, once tightly grouped under a regional council and now often at loggerheads, are skeptical and may prove harder to work with than the government in distant Santiago had planned on. In interviews with Reuters, some community leaders said they would demand more profits be channeled their way, while others said they would resist any new lithium mining at all."
There's another big hurdle with Boric's new plan: It relies heavily on direct lithium extraction (DLE)—a new technology that promises to be more sustainable by reinjecting the brine back into the ground once the Li is extracted—but the process is (commercially) unproven. And the locals have caught on, questioning its viability.
Francisco Mondaca, a civil engineer and head of the environmental unit of the Atacama Indigenous Council:?"What bothers me is that a product is being sold as a sustainable solution for the world when it's not."
One of the mineral-rich areas in the Atacama, Tara salt flat—a biodiverse region that forms part of Los Flamencos National Reserve—is occupied by an indigenous community that doesn't see much difference between the current and previous governments. They're criticizing the Boric administration for announcing its plan before consulting with them.
Cristian Espindola, head of security for the (Tara flat) Toconao community, calls Boric's new mine plan "irresponsible" and a continuation of previous policies. "This method of the Chilean state dealing with native communities never changes," Espindola said.?"When they want to install new mining operations, they roll over communities."
Ramping up lithium production—extracting meaningful measures of the battery metal from the country's vast salt flats—will not be a walk in the park for Boric's administration. These local indigenous groups are far more sophisticated than many think—they've already lawyered up with major-league litigators in anticipation of a protracted legal battle (author's opinion).
Protectionism at its finest (worst?)
Countries like Canada have put their foot down on Chinese mineral rights ownership within their borders. Tearing a page out of the Great White North's (protectionist) playbook, Australia has just blocked the takeover of Alita Resources'?Bald Hill lithium mine?by Chinese-linked Austroid Corporation on advice from its Foreign Investment Review Board -?Australia blocks acquisition of lithium mine by China-linked firm.
Austroid expressed "shock and disappointment" at the decision, saying it has yet to fully grasp the implications concerning the mine's operations going forward—a mine that channels its Li production directly to China. Further: "We are at a complete loss to understand the reasons for this decision, given our full cooperation and detailed responses to any questions asked by FIRB during this process" (Austroid invested significant funds in Bald Hill to get the deposit back into production after it was shut down in 2019).
The West's concern and hence this protectionist attitude: China dominates global critical minerals processing. It?accounts for more than 80 percent of global rare earths production, for example.?Additional scary stuff (oh so very scary to some): China holds significant investments in lithium/mining/processing operations in Australia, Africa, and South America.
SolGold's Cascabel gets the greenlight from the Colombian high command
Last week it was Aris Mining's?Marmato Lower Mine?expansion project; this week it's SolGold's Cascabel.
The Australia-based miner just wrapped up negotiations with Ecuador's government over its underground?Cascabel Mine?located within the Cordillera Occidental of the Ecuadorian Andes of that country -?Ecuador, SolGold seal deal to launch nearly $5 billion mining project.
With measured and indicated resources pegged at 9.9 million tonnes of Cu, 21.7 million ozs of gold, and 92.2 million ozs of silver (is that one fat-f*cker of a deposit or what?), Cascabel is expected to generate $35 billion in exports and roughly $8 billion in royalties and taxes over its initial 26-year operating life. By some measures, Cascabel could eventually rank waaaay high on the production food chain occupying the world's top spot for silver, third for gold, and sixth for copper.
Cascabel has cleared all hurdles along the permitting curve. Construction is set to begin in 2025, production, sometime in 2030.
'Official data showed Ecuador exported about $2.8 billion worth of mining output last year, up by nearly a third compared to the previous year. The country's Fruta del Norte and Mirador mines, plus small-scale mining activities, were cited as major contributors.'
A new wave of M&A in the copper arena?
The critical role copper will serve as we accelerate our transition to a greener global economy can't be overstated. One would think the metal would be screaming higher on the price charts daily, but that's not the case.
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'A fall in copper prices is having a big impact on small to mid-sized miners, forcing many to cut output, and some are now open to raising funds from new investors to ride out the current downtrend, several company executives told Reuters' -?Smaller miners' hunger for cash grows as copper prices fall, sparking M&A bets.
Hudbay Minerals CEO Peter Kukielski: "There are high cost companies that would go out of business if the copper prices fall below $3.50."
With some of the smaller producers on the ropes, cutting back production as a means to survive this current rout (a rout blamed on global economic growth concerns), some of the bigger cashed-up entities—resource-hungry predators looking to bulk up their mineral inventory—may be on the hunt. If so, if you're a mid-sized producer chipping away at a high-quality asset with latent, significant exploration upside, 'you better watch out, there may be dogs about.'
So far this year, we've seen Newmont take a run at Newcrest in a bid valued at $18 billion. We've seen Lundin Mining snag JX Nippon's stake in the Caserone mine in Chile. A little further down the food chain we watched Hudbay Minerals swoop in on Copper Mountain in a deal valued at $439M. All told, 2023's M&A adds up to $22 billion (Reuters calculations).
CEO Kukielski believes that with the lack of large mines up for grabs, the Bigs' will target the small guys to expand production. He says Hudbay is also open to entertaining M&A offers "at the right price."
'An analyst report by Royal Bank of Canada published in June has identified potential acquisition targets, which include Hudbay, First Quantum Minerals, Ivanhoe Mines, and Capstone Copper. First Quantum, Ivanhoe, Capstone did not offer an immediate comment.'
Tanzania ordered to pay up for its greedy indiscretion
A twitchy government without a fair set of values can wreak all kinds of havoc on a junior’s trek along the exploration, permitting, and development curve.
Countries without an established and demonstrable track record of permitting mines to production may all-of-a-sudden pull a fast one. Out of the blue, it might decide to revise its mining codes. It might lead your company down the garden path—encouraging the outlay of millions—and then suddenly raise taxes during the final phase of development. Or bully their way in for a (larger) piece of the action. Or even confiscate the project outright. Case in point...
The International Centre for Settlement of Investment Disputes (ICSID), a part of the World Bank, recently wrapped up arbitration proceedings concerning the United Republic of Tanzania, resulting in a significant award against the opportunistic African nation for 'breach of obligation to a foreign investor' -?Tanzania Ordered to Pay Canadian Mining Company USD 109 Million for Unlawful Expropriation of Ntaka Nickel Project.
The case involved ASX-listed Indiana Resources (majority shareholder in Ntaka Nickel Holdings), Nachingwea UK, and Nachingwea Nickel, who stand to take down US $109.5 million in compensation for Tanzania's blatant expropriation of their?Ntaka Hill Nickel Project.
The advanced stage deposit, located in southern Tanzania, has a resource of some 56.2 million tonnes @ 0.63% Ni, 0.14% Cu, and 0.02% Co.
Not surprizing, Tanzania said it will appeal the ruling because, well, $109.5 million will be difficult to part with.
South American copper exploreco stokes its coffers in a meaningful way
NGEx Minerals, a Lundin Group Cu-Au exploration company, is focused on its mothership?Los Helados Copper-Gold Project, located in Chile's Region III, within the Vicu?a District along the same structural corridor (and just a stone's throw) from the Josemaria and Filo del Sol deposits (TSX-listed Filo Corp, followed closely in these pages, has been delivering some truly spectacular drill holes in recent months).
Los Helados, hailed as one of the largest undeveloped deposits of its kind, boasts 17.6 billion lbs of copper, 10 million ozs of gold, and 92 million ozs of silver. Back in early April,?the company tagged a new discovery along the same structural corridor?- Lunahuasi - with a 60-meter interval grading 7.5% CuEq (follow-up drilling at Lunahuasi tagged 90-meters grading 4% CuEq). Yeah, safe to say the Lundin's are onto something. Again.
Adding validity to the notion that NGEx is the real deal, on July 20, the company announced a weighty $40M raise with the Lundin Family Trusts expressing their intention to take down the entire offering -?NGEx Minerals Announces C$40 Million Private Placement. A slight discount to the market, but no dilutive bells and whistles (no warrants).
Less than 24 hours later, the company dropped the following headline -?NGEx Minerals Increases Private Placement to C$85 Million.
"...?due to strong demand, it has elected to increase the previously announced non-brokered private placement to an aggregate of up to 13,076,923 common shares of the Company at a price of C$6.50 per Common Share for gross proceeds of up to C$85 million."
That's more than double the offering size from a day earlier. And $85M will buy a lot of exploration.
This just in...
"The U.S. banking system is sound and resilient.?Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks."
Ah, well, there it is.
Hits of the Week
The Council of the International Seabed Authority (ISA) ruled out any immediate permission for mining to begin, as expected, after a meeting in Kingston that ended on Friday, but kept open a legal loophole that could allow it to begin next year -?UN watchdog delays deep-sea mining to 2024
Canada’s biggest gold company has been targeted by shadowy Russian cybercriminal group Clop in a massive global data theft incident that has affected hundreds of corporations and close to 20 million individuals -?Barrick Gold targeted by Russian cybercriminal group Clop in global data theft that hit Sun Life, Vancouver transit police
A whopping US$35 million. That’s what the highest paid mining company CEO earned in 2021, according to data collected by Costmine Intelligence, part of The Northern Miner Group -?How much can you make as a mining company CEO? Survey shows highs and lows
When the French capital hosted its first Olympic Games in 1900, swimming competitions took place in the river. Parisians used to bathe in the Seine in centuries past, until it was banned in 1923 due to pollution -?Paris to bring back swimming in River Seine after 100 years
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