Turquoise Hill’s (NSYE: TRQ) stock tanked over 42% on Tuesday, after releasing its Q2 2019 report, revealing costs for the expansion of its Oyu Tolgoi could increase by up to $1.9 billion.
The estimated cost was initially pegged at $5.3 billion.
Vancouver-based Turquoise Hill is owned 50.8% by mining giant Rio Tinto. Rio issued a separate statement Tuesday, saying difficult ground conditions could raise the estimated costs of the copper-gold mine’s expansion, and warning the project could be delayed potentially over two years.
First production is now expected between May 2022 and June 2023.
On a trading day that saw volume reach 49.8 million on the Nasdaq, nearly 10 times the averagevolume, Turquoise Hill’svalue was pushed down to $1.2 billion.
It is an all-time low for the company, whose market capitalization once sat at over $6 billion.
Continued strong global demand for steelmaking coal, especially in China and India, may be behind two new coal mine proposals in British Columbia.
Conuma Coal Resources Ltd. recently filed an application with the B.C. Environmental Assessment Office (EAO) to expand its current operations in the Chetwynd-Tumbler Ridge area, and Australian coal miner Allegiance Coal Ltd. (ASX:AHQ) is now in the early stages of an environmental assessment for a new mine near Smithers, in north west B.C.
Exports of met coal from B.C. hit $7.4 billion in 2018, according to BC Stats, surpassing the value in 2011, when coal exports peaked at $7.1 billion.
Current met coal prices are around $190 per tonne, and companies are now pushing forward expansions and greenfield projects
Following a steelmaking coal price crash between 2015 and 2016, the value of coal exports from B.C. dropped by more than half, from $7 billion in 2011, when met coal prices reached close to US$300 per tonne, to $3 billion in 2015.
Current met coal prices are around $190 per tonne, which may explain why companies are now pushing forward expansions and greenfield projects.
“The market can definitely absorb the production of the mines,” said Wood Mackenzie coal analyst Tony Knutson. “We need new projects going forward. There has been a lack of investment.”
Conuma is the U.S. company that rescued three idled met coal mines in 2015 when it acquired them from Walter Energy, which went bankrupt following the coal price crash.
One by one, Conuma reopened all three former Walter Energy mines, which now employ close to 1,000 workers. The company now plans to develop a fourth mine, called the Hermann project, as a satellite to its Wolverine mine. Last week, Conuma applied to the EAO for permission for the new pit, located 26 kilometres from the Wolverine operation.
The additional pit would add seven years to the Wolverine processing plant, to give it a total lifespan of 22 years. Conuma says the new pit would produce 1.5 million to three million tonnes of met coal per year.
Under a previous owner, Western Canadian Coal Corp., the Hermann mine was permitted in 2005 but was never developed.
“We expect that we would be mining and producing coal in probably the end of the first quarter of 2021,” said Conuma CEO Brian Sullivan.
As for Allegiance Coal, its flagship development project is the Tenas mine – also known as the Telkwa – near Smithers. The mine would produce 240,000 to 900,000 tonnes of coal per year and would employ 240 miners.
That is a small operation compared with Teck Resources (TSX:TECK.B), which produces 26 million tonnes per year at its mines in B.C. and Alberta, or even Conuma, which produces about six million tonnes annually.
“That one’s interesting because it’s not one of the typical mining areas right now,” Knutson said. “It’s not a traditional area for coal mining, but it doesn’t mean it can’t be.”
The Tenas project has access to rail and ports, which is a “huge” advantage, Knutson said.
The company filed a project description last year and will file a formal EAO submission in the fourth quarter of this year. It does not expect a permitting decision until early 2021.
With the 2015 crash still fresh in mind, the industry no doubt will be keeping a close eye on China and India, as well as its competitors. One of the things that precipitated the price crash of 2015 was an oversupply of met coal, mostly from Australia.
Knutson said Wood Mackenzie expects coal prices to temper somewhat, to about $150 per tonne, which is still strong enough to support the development of new mines. He doesn’t expect the kind of sudden price crash of 2015 that shocked the industry.
Whereas China is the biggest market for met coal, India is expected to become a major market in the longer term.
“India will drive the long-term coking coal demand globally,” Knutson said. “They’re kind of doing what China did before in building up their infrastructure. It takes a lot of coking coal and steel.”
As for Teck, B.C.’s biggest met coal producer, the company is winding down two of its mines – one in B.C. and one in Alberta.
Its Coal Mountain mine in the Elk Valley is now in care and maintenance and is being decommissioned, having exhausted its coal reserves. Teck also plans to close its Cardinal River mine in Alberta next year.
That will leave the company with four operating mines in B.C. in the Elk Valley, which still has an abundance of coal. It also owns the Quintette mine near Tumbler Ridge, which has been in care and maintenance since 2000. Teck planned to restart it in 2014, but it put that project on hold.
Southern Copper Corp (NYSE:SCCO), the world’s fifth largest
producer of the red metal in terms of output, is once again facing community opposition
to its long-delayed $1.4 billion Tia Maria copper project in Peru.
Locals staged Monday a massive protest, blocking a portion
of the country’s main coastal highway to obstruct access to the mine site,
located in the southern region of Arequipa.
While the blockage has now been lifted, opponents continue to press the government to revoke the construction permit awarded to Southern Copper only a week ago, local paper El Comercio reports.
Tia Maria has been derailed twice – in 2011 and 2015 – because of deadly protests by farmers who fear the proposed open-pit mine will damage crops and affect water supplies in the southern region of Arequipa.
The protests against the massive project echo other fights
between anti-mining groups, farmers and mining companies in Peru over the last
few years. Most of them centre around who gets to use precious water supplies
in the country’s bone-dry areas.
Southern Copper estimates that Tia Maria will produce
120,000 tonnes of copper a year during an estimated 20-year lifespan.
World’s No.2 miner Rio Tinto (ASX, LON, NYSE:RIO) is once again in deep trouble in Mongolia, but this time is not related to the government questioning the legitimacy of the ongoing underground expansion of its giant Oyu Tolgoi copper-gold-silver mine, but the costs and schedule of the project.
The company revealed on Tuesday that difficult ground conditions could blow out the estimated cost of the expansion (currently pegged at $5.3 billion) by as much as an additional $1.9 billion.
First sustainable production is now
expected between May 2022 and June 2023, though Rio said a final estimate
cost and schedule would be announced in the second half of 2020.
Ground conditions are more challenging than expected and we are having to review our mine plan.
Stephen McIntosh, Rio Tinto.
The mining giant noted the update would reflect the “preferred mine design approach” since changes to planned underground infrastructure such as the ore handling system and access ramps have to be considered.
Ground conditions are more
challenging than expected and we are having to review our mine plan.
“Delays are not unusual for such a large and complex project, but we are very focused as a team on finding the right pathway to deliver this high value project,” Rio Tinto group executive, growth and innovation, Stephen McIntosh, said in the statement.
The company also said it was reviewing the carrying value of the project and could announce an impairment charge when it announces half-year results next month. Rio has also agreed to build a power plant to supply the mine, which will make the final cost of the project even higher.
New mine design
Turquoise Hill (TSE, NSYE: TRQ), the Rio-controlled company that owns 66% of Oyu Tolgoi, said they have already identified a number of mine designs to address the stability risks associated with the original expansion design.
The companies have been using block-caving
mining at the asset. Although technically challenging, it’s deemed as one of
the most cost-effective mining methods for extracting ore buried deep below the
For block-caving to effectively work,
weak and fractured rock needs to collapse under pressure from gravity. Rio
Tinto chief executive Jean-Sébastien Jacques had previously mentioned that rock
collapses too easily at Oyu Tolgoi.
“Starting a block cave correctly is critical to its long-term safety and viability. Analysis suggests that the current mine design carries stability risks leading to a number of alternative mine designs being considered with work currently at the conceptual study phase,” Edward Sterck, analyst at BMO Capital Markets, said in a note to investors. “The alternative plans may require relocation of critical underground infrastructure and a change in mining sequence.”
The company’s board of directors approved the underground expansion of the massive Mongolian mine in the Gobi desert three years ago, but progress has been slow due to a series of disagreements between Rio and the country’s government, including differences over taxes owed and a power contract.
“Current information indicates that Oyu Tolgoi mineral reserves will not be materially impacted by the Hugo North mine design options being considered; however, ongoing reviews will be considered as the work progresses,” the Canadian miner said in a separate statement.
Oyu Tolgoi was discovered in
2001 and Rio gained control of it in 2012. Once finished, the expansion is
expected to lift the mine’s production from 125–150kt this year to 560k tonnes
of copper concentrate at full tilt from 2025, making it the world’s
third-largest copper mine.
The world’s top diamond producer by output, Alrosa (MCX:ALRS), reported unearthing a gem-quality rough diamond weighing 63.15 carats from the Zapolyarnaya kimberlite pipe of the Verkhne-Munskoye depositlocated in Yakutia.
In a press release, Alrosa revealed that the crystal has an octahedral shape with small chips on the edges and tops. The diamond is also transparent with a yellow hue.
In February, Alrosa unearthed a rough diamond weighing 98.8 carats at Zapolyarnaya
Even though the rock is not a record-breaker, it is amongst the largest ones found in the area. The first large gem-quality diamonds of the Verkhne-Munskoe deposit were a 51.49-carat crystal, mined immediately after the official opening of the site in the fall of 2018, and a 98.8-carat diamond recovered in February 2019.
Not too long ago, Alrosa discovered that the Verkhne-Munskoye deposit is more prolific than previously thought. The discovery followed a series of tests the miner ran back in March to clarify the diamondiferous nature of the northwestern part of the Zapolyarnaya pipe. In five days, the company extracted 239 diamonds larger than 8 carats, which represented more than 3.5% of the number of diamonds extracted during the experiment.
According to Alrosa, these figures exceed the data for other pipes.
The Verkhne-Munskoye deposit is situated 170 kilometres from the town of Udachny and currently is the Russian firm’s largest investment project.
The deposit hosts four kimberlite pipes, Zapolyarnaya, Deimos, Novinka, and Komsomolskaya-Magnitnaya, which are expected to generate about 1.8 million carats of rough diamonds per year for more than 20 years.
South African platinum miner Anglo American Platinum (Amplats) announced today that it has launched a joint venture with Canada’s Platinum Group Metals Ltd. (TSX: PTM) to accelerate the development of next-generation battery technology using platinum and palladium.
The join venture, named Lion Battery Technologies Inc., subsequently entered an agreement with Florida International University to further advance a research programme that uses platinum and palladium to unlock the potential of lithium air and lithium sulphur battery chemistries in order to increase their discharge capacities and cyclability. Lion Battery will gain full rights to all intellectual property developed and lead commercialization efforts.
Last year the university secured a patent for a magnetic battery technology that can quickly power and recharge devices as small as a smartphone or as large as an electric car.
“This new generation of lightweight, power batteries has the potential to grow to scale on the back of the attractiveness of battery electric vehicles and other applications,” Amplats market development head Benny Oeyen said.
“Owing to considerably higher energy density, lithium oxygen and lithium sulphur batteries can perform better, by orders of magnitude, than best-in-class lithium-ion batteries that are currently on the market,” Oeyen added.
The new venture is also reviewing several additional and complementary opportunities focused on developing this battery technology.
Both Amplats and Platinum Group Metals believe that the development of this technology will help them secure a long-term, sustainable demand for the platinum and palladium metals they produce.
MINING.com by Canadian Mining Journal Staff - 23h ago
The Mining Association of Canada and the Prospectors and Developers Association of Canada have issued a joint recommendation as the provincial and territorial mines ministers meet this week. The industry associations are urging government action to restore global competitiveness to the Canadian mining industry.
Felix Lee (Image: Prospectors and Developers Association of Canada)
The call to action was released on behalf of the Canadian Mineral Industry Federation, a partnership of 20 national, provincial and territorial associations.
The CMIF is proposing a series of actions that reflect the six strategic directions identified in the Canadian Minerals Metals Plan published earlier this year by Natural Resources Canada. In short, these are the areas that must be supported:
Economic development, regulatory certainty and investment attractiveness;
Advancing the participation of indigenous peoples in all levels of the minerals industry;
Environmental responsibility and solutions;
Science, technology and innovation, including geographical mapping and studies;
Strengthening ties with local communities to ensure people have the skills to engage in the mineral industry; and
Global leadership in market access, business conduct, and development activities.
“Without the vital support of governments to achieve the recommendations by CMIF, Canada’s exploration and mining industry – one envied the world over for its mineral wealth and abundance of exploration and extraction expertise – will continue slipping from its position of dominance,” warned PDAC president Felix Lee.
MINING.com by Canadian Mining Journal Staff - 1d ago
Transition Metals of Sudbury, Ontario, has reported that excellent grades have been drilled at its Highland gold property in the Cape Breton Highlands, 60 km northwest of Sydney. The best hole, 19-TMC-RC, returned 16.15 g/t over 4.0 metres within an intersection of 8.0 metres averaging 5.90 g/t gold.
These grades came from six recent shallow drill holes in the 6A zone, 2 km east of the Main zone. Assays are pending for another 22 holes.
Transition Metals says the Highland property covers a cluster of high grade gold occurrences. The property is easily reached by a major road and network of logging roads. The company is seeking a partner to advance the project.
MINING.com by Canadian Mining Journal Staff - 1d ago
Toronto-based Anaconda Mining is considering the idea of expanding the pit at the Pine Cove gold mine, part of its Point Rousse project near Baie Verte. Expansion at this mine would delay development of the Argyle gold deposit into 2020.
The company cites the successful infill and expansion drilling it did recently as the reason for this consideration. The Pine Cove geology is well understood and the mine is adjacent to the processing plant. Expansion would require a low capital investment. Moreover, additional mining at Pine Cove would increase the permitted in-pit tailings storage capacity.
With the Pine Cove expansion and the Argyle delay, Anaconda adjusted its 2019 guidance downward to 16,000 to 17,000 oz. of gold. The initial numbers were 19,000 to 20,000 oz.
Under the deal with Orkun Group Sarl, secured by Avesoro’s subsidaries, Burkina Mining Company and Netiana Mining Company, the mine is expected to deliver increased production at reduced costs in the second half of the year.
Contract will enable Avesoro to significantly reduce its future mining costs at Youga gold mine.
The Canadian junior recently had
to cut annual output guidance for both the Youga and New Liberty mines by
30,000 ounces because of operational challenges experienced earlier in the
Orkun is expected to move 800,000-900,000 bank cubic metres
of material per month at $3.75-4.26/bcm to deliver at least 120,000 tonnes of
ore a month to the Youga ROM pad.
The service provider will progressively buy Avesoro’s mining
fleet, and invest in expansion (this year) to improve production rates. It is
also taking over fleet maintenance straight away.
“This contract will enable Avesoro to significantly
reduce its future mining costs at Youga,” Avesoro chief executive officer,
Serhan Umurhan, said
in the statement.
“Outsourcing the mining activity will also enable us to
reduce our direct employee headcount and overall business complexity thereby
reducing general and administrative costs.”
Avesoro intends to apply the same model at its New Liberty mine,
The company acquired Youga, about 180 km southeast of the
capital Ouagadougou, adjacent to Burkina Faso’s border with Ghana, in 2016.
The licence contains seven open-pit deposits and a 1.1 million tonne per
year carbon-in-leach processing facility.