Newsletter 29-4-2024

Newsletter – 29.04.2024

29/04/24                                      WEEKLY NEWSLETTER
  • World’s biggest energy traders are returning to metals markets
  • Saudi Arabia set on securing lithium for EV ambitions
  • BHP mega bid and $10,000 copper expose mining’s biggest problem
  • Saudi Arabia's Mining Boom: Expected Wealth to Top $2.5 Trillion
  • Panama completes process of mining concession cancellations
  • American Rare Earths rejects $400 million SPAC takeover offer

World’s biggest energy traders are returning to metals markets

Some of the world’s biggest energy trading companies are returning to metals, years after getting burnt in the notoriously difficult markets.

Vitol Group, Gunvor Group and Mercuria Energy Group are among the traders building out their metals teams, as they look to deploy capital generated by record profits.

The shift comes as forecasters turn increasingly bullish on copper, aluminum and other metals, where long-anticipated production shortfalls are starting to take shape. Many commodities houses also see strong links between metals usage and power markets — another growth area for traders.

The energy giants are entering a sector that’s proven difficult to trade in the past, and one that’s largely dominated by two players: Glencore Plc and Trafigura Group. Their arrival could challenge smaller-scale metals traders, which have struggled to turn a profit in recent years as soaring energy prices and supply chain disruptions crimped demand from manufacturers.

“For the oil traders, there’s a whole energy transition story, but they’ve also got the cash to take significant positions,” said Kristofer Tremaine, chief executive officer of Kimura Capital, a lender to the commodities sector. “A lot of metal traders should be worried – they’re going to lose a lot of market share.”

Saudi Arabia set on securing lithium for EV ambitions

RIYADH, April 28 (Reuters) - Saudi Arabia is committed to sourcing lithium from overseas as it looks to produce EV batteries and invest in the electric vehicle sector, a senior minister said in an interview, noting attempts to secure domestic supplies were at an early stage.

Saudi Arabia, whose economy has for decades relied on oil, has spent billions attempting to turn itself into a hub for EV manufacturing as part of defacto ruler Crown Prince Mohammed Bin Salman's attempts to diversify the economy.

"Lithium is a very important mineral that happens to be part of a very important part of the supply chain, especially for batteries," Minister of Industry and Mineral Resources Bandar Alkhorayef told Reuters in an interview on Sunday.

"I wouldn't imagine that we would live without it," he said on the sidelines of the World Economic Forum's special meeting in Riyadh.

Saudi Arabia has begun to explore extracting lithium from sea water and from salinated discharges from the kingdom's oil fields in cooperation with Aramco, but it did not know yet if these initiatives would be successful.

BHP mega bid and $10,000 copper expose mining’s biggest problem

Escondida in Chile, the world’s largest copper mine.

Copper’s surge to $10,000 a ton just days after the bombshell news that BHP Group is trying to buy Anglo American Plc is highlighting a core disconnect at the heart of the industry: miners just aren’t building enough mines.

The biggest producers all want to increase copper output to take advantage of rising demand in electric vehicles, grid infrastructure and data centers. BHP has made its $39 billion proposal to buy Anglo American in large part because the world’s biggest miner wants to grow in copper.

Yet, that bullishness still isn’t translating into the huge investments involved in developing new pits and shafts and associated infrastructure. A successful takeover would make BHP the biggest copper producer with about 10% of the market, but it won’t make any difference toward meeting the world’s supply needs.

Production from existing mines is set to fall sharply in the coming years, and miners would need to spend more than $150 billion between 2025 and 2032 in order to fulfill the industry’s supply needs, according to CRU Group.

“Copper looks like the last remaining supply risk for the EV industry,” said Bernard Dahdah, senior commodities analyst at Natixis SA. “In a net-zero scenario, we’re going to need a vast amount of copper, and we’re going to need a different strategy to boost supply.”

The question of supply has been the driving force for copper’s 16% rally this year. Unlike the last time that prices hit $10,000, copper demand is relatively tepid for now and the physical market is well supplied.

Saudi Arabia's Mining Boom: Expected Wealth to Top $2.5 Trillion

The mining sector in Saudi Arabia is undergoing a significant transformation that will transform it into a key pillar for the nation's economic diversification efforts outlined in Vision 2030.

The Kingdom's abundant mineral wealth, estimated at SAR9.4 trillion ($2.5 trillion), presents a crucial opportunity to expand non-oil revenue streams alongside the oil and petrochemical industries, reported the Saudi Press Agency on Wednesday.

To accelerate exploration and development, the Kingdom has increased its estimated mineral wealth and invested SAR682.5 million ($182 million) in exploration incentives by the end of 2023. This commitment was reinforced by the issuance of 152 new industrial licenses by the Ministry of Industry and Mineral Resources in January 2024 alone. The licenses include 20 for non-metallic mineral products and 19 for activities related to manufacturing formed metal products, excluding machinery and equipment.

According to a report by the National Industrial and Mining Information Center, the 152 industrial licenses issued since the beginning of 2023 contributed to bringing the total number of operating and under-construction factories in the Kingdom by the end of January 2024 to 11,672. These factories represent a combined investment of SAR1,539 trillion.

Recent discoveries, including significant gold reserves along a 100 km stretch in the Mansoura and Masara mines, further emphasize the vast untapped potential of Saudi Arabia's mineral wealth. These mines boast a projected annual production capacity of 250,000 ounces of gold.

Panama completes process of mining concession cancellations

Panama said on Thursday that it has completed the process of cancelling and annulling all metal mining concessions.

In November 2023, the Central American nation enacted Law 407, a mining moratorium in response to protests that erupted following the signing of a new contract between the government and the local unit of First Quantum Minerals, Minera Panamá.

“Compliance with Law 407 that established the mining moratorium for metallic materials has been fully [completed]. The [commerce and industries ministry] complied with its implementation,” minister Jorge Rivera Staff told newspaper La Prensa.

The minister noted that some companies are preparing legal actions against the annulment of their concessions.

In March, the ministry reported to the national assembly that 82 applications for metallic minerals exploration had been rejected to comply with the law, as reported by La Prensa.

American Rare Earths rejects $400 million SPAC takeover offer

Halleck Creek rare earths project in Wyoming.

American Rare Earths (ASX: ARR) said it won’t sell its subsidiary Wyoming Rare in an all-share deal valued at $400 million that a NASDAQ-listed special purpose acquisition company (SPAC) proposed on Friday.

Wyoming Rare holds the 2.3-billion-tonne Halleck Creek rare earth project, which was named by Mining Intelligence last year as one of the world’s top 10 rare earth projects measured in total rare earth oxides (TREO).

Explorers are combing Wyoming for these materials so it could become America’s answer to China’s grip on the market. The United States has only one producing rare earths mine, Mountain Pass in California, owned by MP Materials (NYSE: MP).

Australian-headquartered American Rare Earths published last month the results of a scoping study for Halleck Creek, which confirms its potential to become a world-class rare earth elements project.

Based on a mineral resource estimate updated in February, Halleck Creek holds 2.34 billion tonnes grading 3,196 parts per million (ppm) TREO, including neodymium and praseodymium oxides, for 7.48 million tonnes of contained TREO. This includes 1.42 billion tonnes in the measured and indicated category.

The new figures represent a 128% increase over an estimate last year at a grade of 3,295 ppm TREO.


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