November 6th, 2024 - The Mine Wire

METALS MARKET

In a reversal of last week, WTI Crude saw a jump back over $70 per barrel as OPEC+ postponed its planned production increase for December. Going in the opposite direction was Palladium which saw a -11.33% decrease, wiping out most of the previous weeks gains.

On Thursday November 7th both the U.S. Federal Reserve and Bank of England are expected to cut rates while China will report on trade numbers.

^{**For our chart above we are taking prices from Tuesday 4pm EST to Tuesday 4pm EST, so not the typical week of Monday through Friday.}

KEEPING AN EYE ON GOVERNMENT DECISIONS

Here are some of the notable government policy moves this week:

• 🇺🇸 Americans have sent Donald Trump back to the White House in the biggest political news of the year. President Trump won the popular vote while Republicans took back control of the Senate and were likely to keep control of the House of Representatives still when we finally went to bed after President Trump’s speech at 2:45am. Certainly many in the mining sector will be cheering as the President has previously shown support for the coal industry, oil & gas, mining in Minnesota and reshoring among other things. Trump is also expected to go hard on China and has suggested a 60% tariff for Chinese imports. So, get out your popcorn as the next few weeks should be very interesting. We are personally very interested to see whether Elon Musk takes up an appointment in government as promised and what type of change that generates. And of course, we would like to see a centralized agency like the former Bureau of Mines to help centralize decision-making and speed up permitting processes while doing so responsibly. What would you like to see? We would love to hear your thoughts at [email protected].

• 🇬🇧 Last week, the United Kingdom’s new Finance Minister, Rachel Reeves, announced the biggest tax increase in three decades. The plan is to raise taxes by $40bn pounds ($52bn) per year in order to fund crumbling public services. The government is taking aim at the wealthy and corporations, while making it clear that they are sparing “working people.” The rate of social security contributions paid by employers will rise by 1.2 percentage points to 15% which will raise an additional $25bn over 5 years. They will also be raising capital gains from 10% to 18% at the lower rate and 20% to 24% at the higher rate. Other targets are changes to inheritance taxes as well as tax paid by private equity executives, non-domiciled residents, North Sea oil and gas firms and users of private jets and private schools. The Finance Minister did extend a freeze on fuel duty and cut a tax on draught beer in pubs which will certainly be popular with the general public. She also mentioned that they have no intention of increasing personal tax rates. We can definitely see why these changes are “Smart Politics”, but wonder whether these changes will stall economic growth in some sectors. (Reuters)

• 🇧🇼 Botswana’s President Mokgweetsi Masisi lost the presidential election last week by a landslide. The opposition Umbrella for Democratic Change party’s leader Duma Boko will become the country’s next President. Masisi’s BDP had been in power since Botswana gained independence in 1966 and this will be the first time another political party will rule. While Botswana has been a beacon of hope within Africa for its standard of living and democratic institutions, it has been crippled by falling diamond prices. The country has seen its unemployment rate rise to 27% and Masisi’s party was accused of not doing enough to diversify the economy. One of the new President’s first tasks will be to lock down an agreement with De Beers. (AP News)

• 🇿🇲 Jito Kayumba, Zambian President Hakainde Hichilema’s special assistant for finance and investment said that, “No entity that currently operates in Zambia today, that currently has a license, will be subjected to any appropriation from the state.” With the country looking to control at least 30% of critical mineral projects, it seems these conditions will only apply to new projects and for the 40 permits reserved for government. Some companies and investors are surely breathing a sigh of relief! (BNN Bloomberg)

• 🇪🇨 Ecuador will reopen and update the country’s mining cadaster within six months in order to combat illegal mining in the country. By the President’s executive order, the registry must contain all records on mining rights, licenses, exploration and exploitation permits regardless of status. (Mining.com)

• 🇨🇦 The Manitoba government released their new critical minerals strategy this week in a 20 page document titled, “Securing our Critical Mineral Future.” The province is aiming to speed up approval times as well as boost indigenous partnerships and economic reconciliation. The government also announced an additional $2m for its Manitoba Mineral Development Fund (MMDF) to be allocated to projects within the province. (Manitoba Government)

• 🇦🇺 Five Western Australian Mining Equipment, Technology and Services (METS) companies have been awarded a total of $1.25m under the Minerals Research Institute of Western Australia (MRIWA) METS Innovation Program. They will each receive $250,000 as part of the government program. (Western Australia Government)

• 🇮🇳 The Indian Government will sell a 2.5% stake in Hindustan Zinc of which it currently owns 29.54%. The sale will generate roughly USD $634m. (Reuters)

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MINING MATTERS FROM AROUND THE WORLD 🌎

• Mineral Resources’ Chris Ellison will be stepping down as Managing Director once a successor is found. Mr. Ellison had proactively settled a tax avoidance settlement with the Australian government, but did not inform the board until a few years later in 2023. A subsequent internal review found that Mr. Ellison had “used company resources for personal benefit.” Unfortunately in this situation, shareholders are going to lose a steady hand in Chris Ellison. With more and more information trickling out, loads of negative media attention and an almost certain regulator review, stepping down is the only choice. Employee motivation and morale are critical for success and any morale authority was shot with the review revelations. Citi sees a further deterioration of the stock price while Morgan Stanley who has worked closely with Ellison sees a potential 50% upside. (Financial Times) & (Forbes)

• Speaking of fraud and internal reviews, Trafigura will make provisions of $1.1bn after an internal review discovered fraud by individuals in its Mongolian petroleum products supply business. "The misconduct included manipulation of data and documents, resulting in inflated sums being paid by Trafigura, and deliberate concealment of overdue receivables," according to a company statement. The company had already booked a $577m charge in the first half of 2023 after discovering that some nickel cargoes it received did not contain the metal. Big Ouch! (Reuters)

• The Securities & Exchange Commission is apparently looking into Freeport-McMoRan’s $3.7bn copper smelter operation in Indonesia and whether the company failed to disclose threats a severe earthquake could have on the operation. The company allegedly ignored the advice of experts and relied on engineering designs that didn’t meet Indonesia’s code for earthquake-resistant buildings. No fault has been found at this time, but regulator investigations are never a good thing. (Mining Weekly)

• 🇰🇷 The Korea Zinc saga continues as the company bought back shares worth $1.5bn at inflated prices to ward off a takeover attempt. Two days later, it said it was issuing $1.8bn worth of stock to raise capital to pay off debt but 20% would be allocated to employee ownership (friendly to management of course!). The regulator is now investigating and so they should be. (Reuters)

• Anglo American (LON: AAL) promised deals in coal in its earnings the other week and here they come. It has agreed to sell a 33.3% stake in a joint venture interest in the Jellinbah East and Lake Vermont steelmaking coal mines in Australia. Anglo currently owns 70% of the joint venture and will sell the 1/3 stake for AUS $1.6bn (USD $1.1bn). BHP has not ruled out making another bid for the miner once its six-month cooling off period is complete. (Reuters)

• 🇲🇬 Speaking of sales, Sumitomo may be looking to offload its stake in its cobalt & nickel mining operation in Madagascar. With issues on the ground and plummeting mineral prices, the company took a 89bn yen (USD $583.72m) write-down at year-end. Currently, Sumitomo holds a 54.17% stake in the Ambatovy mine, while South Korea's Korea Mine Rehabilitation and Mineral Resources Corporation (KOMIR) owns the remaining 45.83%. The project accounted for 25% of the countries total value of exports in 2022. Needless to say, it is an important economic driver for the country. (Ecofin Agency)

• Another Japanese company, Hitachi Construction Machinery’s H-E Parts division, made a purchase of its own and will acquire Indiana based Brake Supply for an undisclosed sum. Brake Supply has more than 400 employees, has been around since 1947 and its business activities include the remanufacturing of components for mining excavators and dump trucks, such as cylinders, fluid power components, wet brakes, and final drives. Congratulations to both companies. (Hitachi Construction Machinery)

• 🇨🇳 Chinese geologists have uncovered a huge manganese deposit in central China, with its overall potential reserve estimated to exceed 220 million tons according to Xinhua. If correct, this would be a big find as it would equate to more than 10% of the known 1.9bn tons of reserves globally. The countries with the largest reserves are South Africa (600m), China (280m), Brazil (270m), Ukraine (140m) and Australia (110m). Manganese is used in Steel, glass-making, ceramics, fertilizers and as a rubber additive. (Xinhua)

• Asante Gold Corporation (CNSX: ASE) announced at $525m financing package that includes stage 1 financing of $325m which includes a completed private placement ($100m), Kinross refinancing ($100m), a Ghanian bond issuance ($75m) and targeting a syndicated gold stream ($50m). The financing will help the company advance its capital projects at its Bibiani and Chirano mines in Ghana while also meeting its financial obligations to Kinross. (Global Newswire)

• Congratulations to Rob Krcmarov who has been appointed Hecla Mining Company’s new President and Chief Executive Officer. Prior to joining Hecla, he served for 13 years on the executive leadership team at Barrick Gold Corporation, including his most recent role as Executive Vice President of Exploration and Growth. Our only question is who is going to forward Mr. Krcmarov The Mine Wire! (Hecla Mining Company)

• Caterpillar (NYSE: CAT) reported earnings on Oct. 30th. Sales and revenues for the third quarter of 2024 were $16.1bn, a 4% decrease compared with $16.8bn in the third quarter of 2023. The decrease was primarily due to lower sales volumes in both construction and the resources sectors. While the stock has seen almost a 3.75% pullback in the past month, it is still up an unbelievable 61% the past year. We wish we had this one in our portfolio, especially after seeing all of their innovative equipment at MINExpo. (Caterpillar)

• Eldorado Gold (TSE: ELD) reported earnings of $331.8m in Q3 2024, an increase of 36% from $244.8m in Q3 2023, primarily due to the higher averaged realized gold price and higher sales volumes. The stock is trading down nearly 10% this past week and while most gold miners are down during the same period, this is higher than most. However, the stock is still up around 49% this past year. (Eldorado Gold)

• Other companies with earnings this past week included Arch Resources (Report), Aura Minerals (Report), Capstone Copper (Report), Centerra Gold (Report), Endeavour Silver (Report), Energy Fuels (Report) and Ivanhoe Mines (Report).

MINING BITS

• 🌕 Orbital Mining Corporation, an early-stage space mining startup started by two Colorado School of Mines graduate students, won $500,000 in NASA’s Watts on the Moon Challenge for its lunar power transmission and storage system. The NASA challenge solicited “breakthrough power transmission and energy storage technologies that could enable long-duration Moon missions to advance the nation’s lunar exploration goals.” The company has received $1.2m in funding from NASA in total and has big ambitions to mine the moon by the end of the decade. (Colorado School of Mines)

• 🇨🇳 In a video that went viral in China the other week, a young Tibetan man shared videos in WeChat of illegal mining activities on the local Tsaruma river. The man went to social media after numerous complaints to various government authorities did nothing to curb the illegal activities. Well, we would love to tell you that his actions sparked government action against the illegal miners, but instead, he and his entire village were detained. Everyone has been released except the whistleblower. A stark reminder of the difference in government policies around the world, the need for ethical and sustainable practices to meet public demand, and therefore, pricing regimes to differentiate between the two practices such as calls for a clean nickel category. (International Campaign for Tibet)

• 🎙️ Interested in the uranium market? We enjoyed listening to this Bloomberg podcast with commodities guru Bob Brackett, head of Americas energy and transition at Bernstein Research as they discuss the revival of nuclear energy and what it means for uranium. We were bullish prior to listening to this and feel extra giddy after listening to Mr. Brackett break it down for the laymen. They also touch on lithium, gold, silver, oil and more. (Bloomberg)

• 🌊 Interested in Deep-Sea mining and the current state of affairs? This Reuters “Practical Law - The Journal” provides an excellent primer on what deep-sea mining is, all of the regulations around it, including specific jurisdictions and their positions, as well as some general concerns investors should consider if entering this space. Interesting fact from the article - the Clarion Clipperton Zone (CCZ), an environmental management area of the Pacific Ocean between Hawaii and Mexico representing about 1.3% of the ocean floor, reportedly contains more nickel, cobalt, and manganese than all land deposits combined. (Reuters)

• 🐚 Crimean scientists have studied the shells of bivalve mollusks — anadara, Black Sea scallop, Mediterranean mussel, giant oyster, and gastropod mollusk rapana to assess the content of rare earth elements (REE) in their shells. It turns out that the shells have the ability to accumulate REE. They were abnormally enriched with scandium, yttrium, lanthanum, europium and terbium. Like seaweed, there could be opportunities in the future to extract these REE’s from the shells assuming the development of a technology that makes it economically viable. (AK&M Information Agency)

• 🦴 We may have saved the best for last but you’ll have to click on the link to see the picture. A prehistoric fossil from 450 million years ago was preserved in fool’s gold. Further, the amazing find lead to a newly identified species of arthropod, looking similar to a shrimp, but a distant relative of modern-day horseshoe crabs, scorpions, and spiders. Very cool. (CNN)

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