Newsletter 5-02-2024

Newsletter – 5.02.2024

5/02/24                                      WEEKLY NEWSLETTER

Behre Dolbear will be attending 121 Mining Investment in Cape Town, 5-6 February 2024.

Behre Dolbear will be attending Mining Indaba in Cape Town, 5-8 February 2024.

  • Bill Gates, mining and Zambia: Was AI used to find a massive Copper deposit
  • From green hype to bailouts, the nickel industry has imploded
  • Guinea approves joint development deal for Simandou iron ore project
  • Zambia seeks to restructure Glencore debt with new Mopani investor
  • Western miners lag as oil powers enter race for Africa’s critical metals
  • MP Materials and Lynas explore merger amid rare earth market turmoil—report

Bill Gates, mining and Zambia: Was AI used to find a massive Copper deposit

Bill Gates-backed mining start-up- KoBold Metals- which uses Artifical Intelligence (AI) to explore for materials essential to the green-energy transition, said that it has discovered a huge copper deposit in Zambia. KoBold president Josh Goldman said that Mingomba is shaping up to be “extraordinary" as he compared its potential to that of Kakula mine- developed by Ivanhoe Mines Ltd. and China’s Zijin Mining Group Co in Democratic Republic of Congo. Kakula mine produced almost 400,000 tons of copper last year.

“The story with Mingomba is that it’s like Kakula in both the size and the grade” Josh Goldman said, adding, “It’s going to be one of the highest grade, large underground mines.”

San Francisco Bay Area-based KoBold has been drilling at its Zambian permit for a little over a year as the company targets its first output early next decade. It still has not published an updated resource estimate and complete feasibility studies which will inform the decision on whether to build a facility which could cost $2 billion.

KoBold’s shareholders include Breakthrough Energy Ventures – backed by Bill Gates, Jeff Bezos and other billionaires. T. Rowe Price Group Inc., Bond Capital, Andreesen Horowitz and Equinor ASA are also on board.

KoBold isn’t worrying about the low prices currently wreaking havoc with some battery metal projects, the company president said, asserting, “We capitalize the company to be able to make long-term investments. We care enormously what the price of these commodities is in 2035 and we don’t care what it is in 2024.”

Mingomba is the most advanced project in KoBold’s portfolio. The company is also exploring more than 60 other areas and much of the activity centered on Australia, Canada and the US. The firm announced earlier that it had discovered several lithium deposits in locations including Namibia, Quebec and Nevada.

Last year, the company spent close to $100 million on exploration last year and expects to exceed that figure in 2024.

From green hype to bailouts, the nickel industry has imploded

Just 18 months ago, the world’s biggest mining company was in a nickel frenzy. BHP Group, to much fanfare, had struck a deal with Tesla Inc. to supply it with the crucial ingredient for electric vehicles. It was about to go toe-to-toe with Australian billionaire Andrew Forrest for control of one of the globe’s most prospective mines.

Abandoned Kaula-Kotselvaara nickel mine in Russia

For BHP, nickel offered a bright spot. Its management had earmarked the material as a key pillar of growth, a future-facing commodity that would help offset its exit from fossil fuels and let it tap into new demand driven by the world’s race to decarbonize.

Yet things have quickly soured for BHP and other miners. The nickel market has been thrown into chaos after a flood of new supply from Indonesia — the result of huge Chinese investment and major technological breakthroughs. Mines across the world are at risk of closing, others are asking for state bailouts or going bust. BHP, for one, is now weighing up the future of its flagship Nickel West mine in Australia.

Until recently, many of the industry’s biggest names couldn’t have been more bullish about the prospects for nickel. The once-boring metal, traditionally used to make steel stainless, is a crucial ingredient for electric vehicle batteries. A supply shortage stretching for years to come was forecast and mining companies jumped at a great opportunity to burnish their green credentials.

Guinea approves joint development deal for Simandou iron ore project

Lawmakers in Guinea approved on Saturday a joint development deal for its giant Simandou iron ore project involving the junta-led government, Rio Tinto, and Winning Consortium Simandou, the lawmaking body’s spokesperson said.

Simandou, set to be the world’s largest and highest grade new iron ore mine, has been the subject of prolonged negotiations due to its complex ownership structure, delays caused by legal wrangling, Guinea’s political upheaval and difficulties around construction.

The National Transition Council, which acts as parliament under Guinea’s interim regime, voted to approve laws that ratified the agreement, which envisages the completion of construction by end-2024, council spokesperson Mory Dounoh told journalists after the vote.

Rio Tinto owns two of four Simandou mining blocks as part of its Simfer joint venture with China’s Chalco Iron Ore Holdings (CIOH) and the government of Guinea. Rio Tinto holds a 53% stake, while CIOH holds the rest.

Zambia seeks to restructure Glencore debt with new Mopani investor

Zambia is seeking to restructure a $1.5 billion debt owed by Mopani Copper Mines to Glencore, which arose from its acquisition of Mopani in 2021, state-owned mining firm ZCCM-Investment Holdings (ZCCM-IH) said on Friday.

A Glencore spokesperson said discussions on the debt restructure were ongoing.

“No final agreement has been reached,” the spokesperson wrote in an email to Reuters.

The global commodities giant had already written the Mopani debt down to $596 million in 2022, he added, as the copper miner failed to meet production targets, partly due to lack of funding.

Last November, Zambia picked the United Arab Emirates’ International Resources Holdings (IRH) as the new strategic equity investor in Mopani, to take up a 51% stake in return for a $1.1 billion capital injection. IRH’s interest in Mopani will be held through its wholly-owned subsidiary, Delta Mining Ltd.

As part of the deal, IRH, a unit of Abu Dhabi’s most valuable listed company, International Holdings Company (IHC), will provide $400 million as a shareholder loan towards clearing Mopani’s debt. Of that, $300 million is earmarked for the Glencore debt and the remaining $100 million will be used to settle third-party letters of credit secured by Glencore for Mopani.

“The effect of this is that the gross debt owed by Mopani to Glencore … will be replaced by the above shareholder loan owed to Delta of up to $400 million, resulting in an overall net reduction in Mopani debt of over $1.2 billion,” ZCCM-IH said.

Western miners lag as oil powers enter race for Africa’s critical metals

Risk aversion is likely to leave major Western miners lagging in a race to tap Africa’s reserves of critical raw materials that has gathered pace now Middle Eastern oil powers have begun to emulate China’s years of investment on the continent.

Attracting the capital needed to advance copper, cobalt, nickel and lithium projects in Africa will be high on the agenda when executives, bankers and government officials gather in Cape Town, South Africa, for the annual African Mining Indaba beginning on Monday.

For the big listed miners, the problem is convincing board members anxious to keep shareholders onside, an issue China and the state-backed funds from the Middle East with a mandate to diversify from oil and gas do not face.

Major mining companies’ mergers and acquisitions teams have been busy negotiating in countries including Democratic Republic of Congo, the world’s top cobalt supplier, and third biggest source of copper. Potential deals in the country, however, are being held up in the boardrooms of Rio Tinto and BHP Group, two sources with direct knowledge of the matter told Reuters.

The sources said boards were mindful of the shareholder focus on ESG (environmental, social and governance) concerns and past scandals in countries viewed as high risk.

MP Materials and Lynas explore merger amid rare earth market turmoil—report

MP Materials (NYSE: MP) and Lynas Rare Earths (OTCPK: LYSCF; OTCPK: LYSDY) could be considering a merger, the Australian Financial Review reported Friday.

The publication suggests that the two companies may be in talks to merge, potentially forming the world’s largest non-Chinese producers of rare earths.

Both Lynas, with a mine in Western Australia and a plant in Malaysia, and MP, with operations in California’s Mountain Pass, have faced challenges due to plummeting rare earth prices.

Over the past year, MP shares have plummeted by over 50%, while Lynas shares have declined by approximately 40%.

China’s recent ban on the export of rare earth extraction and separation technologies aims to safeguard its market dominance amid speculation about China cutting off supply amid deteriorating US relations.

Last year, Lynas Managing Director Amanda Lacaze told the Australian Financial Review the company consistently receives merger and acquisition proposals. She reportedly emphasized the need for a source of heavy rare earths to complement its Australian operations and fulfill commitments to the US Department of Defense. The latter is funding a Lynas downstream processing plant in Texas.

MP Materials also has backing from the Pentagon, including a contract to boost heavy rare earths supply.


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