| Wednesday, August 12, 2020
Republic of Peru is a country in western South America. It is bordered in the north by Ecuador and
Colombia, in the east by Brazil, in the southeast by Bolivia, in the south by Chile, and in the west by the Pacific Ocean.
Peru's main exports are copper, gold, zinc. (Wikipedia)
|NEWS HEADLINES - MINING AND METALS|
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Teranga’s Wahgnion exceeds planned production by 25%
Thu, 06 Aug 2020 17:53:57 +0000
The company has also raised Wahgnion’s 2020 output guidance to 150,000-165,000 oz gold.
Teranga Gold (TSX: TGZ) has provided an updated life of mine (LOM) plan and issued new 2020 guidance for its Wahgnion gold operation in Burkina Faso as a result of the mine achieving higher than planned production.
Since commercial production began in November 2019, Wahgnion’s processing plant has performed approximately 25% above nameplate capacity for throughput and gold recovery, the company said.
Given the increase in planned production, Teranga has updated the LOM plan to accommodate the higher plant throughput capability, increasing Wahgnion’s average annual production by 25% and reducing the mine life to 10 years.
With the goal of extending the mine life to 15 years, Teranga has initiated a multi-year drilling and exploration campaign around three of the existing deposit areas and at more than a dozen promising targets at Wahgnion.
Teranga has also increased Wahgnion’s 2020 output guidance to between 150,000 and 165,000 ounces, up from earlier guidance of 130,000 to 140,000 ounces. The higher guidance for 2020 is based on mill throughput of between 3.0Mtpa and 3.2Mtpa and total material movement of between 22Mtpa and 26Mtpa, the company said.
“The updated life of mine plan is very good news for Wahgnion, and for Teranga overall,” President and CEO Richard Young commented.
“With production averaging about 150,000 ounces of gold per year through 2025 at reasonable costs and at current gold prices, we expect to generate significantly more net cash flow from Wahgnion in the coming years, compared to the original feasibility study.”
Shares of Teranga Gold were down 2.8% on the TSX by 1:30 p.m. EDT, capping the Toronto-based gold producer at a market value of C$2.6 billion.
Last week, analysts at Canaccord Genuity raised the stock’s price target to C$19.00 from C$17.50 following release of the company’s Sabodala-Massawa gold complex prefeasibility study, which confirmed the Senegal mine as a “top tier” asset.
Gold price breaks new record
Thu, 06 Aug 2020 17:14:20 +0000
Gold reached a new all-time high of $2,069.21/oz Thursday, while gold ETF holdings continue to rise.
Gold extended its record-breaking run on Thursday, driven by expectations of more monetary response as surging coronavirus cases continue to pummel the global economy.
Spot gold rose 1.0% to $2,060.01 per ounce as of 1:00 p.m. EDT after reaching an all-time high of $2,069.21 earlier in the day. US gold futures also rose 1.1% to $2,073.40 per ounce.
“There are mixed signals that the economy is recovering and some of the signs of recovery are relatively superficial as they show aggregate figures and not how medium and small enterprises continue to suffer,” Jeffrey Christian, managing partner of CPM Group, told Reuters.
“We have a very long way to go before we see a proper economic recovery,” he added.
Gold has rallied more than 35% so far this year as it is considered an asset that should hold its value while the covid-19 pandemic and money printing by central banks erode the value of others.
However, the World Gold Council (WGC) cautions that while the price of gold reached all-time highs in nominal terms, it remains below the inflation-adjusted record of $2,800 an ounce.
Gold ETFs dominate demand
Meanwhile, the WGC reported on Thursday that global holdings in gold ETFs reached a new all-time high in July on the back of gold’s latest rally.
Gold-backed ETFs and similar products recorded an eighth consecutive month of positive flows in July, adding 166 tonnes (equivalent to $9.7 billion) and taking total holdings to a record 3,785 tonnes by month-end.
Global net inflows of 899 tonnes ($49.1 billion) to date are considerably higher than previous annual highs, and the trend of inflows has continued in the first few trading days of August as the price of gold breached $2,000/oz.
While all regions saw net inflows in July, North American funds led by a significant margin, accounting for 75% of the global net inflows. The North American region added 118 tonnes ($7 billion) for the month, followed by European-listed funds, which added 40 tonnes ($2.1 billion).
SPDR Gold Shares led all individual funds in terms of inflows, adding 63 tonnes ($3.8 billion), while iShares Gold Trust added 35.5 tonnes ($2.1 billion).
Despite the economic weakness that has significantly hurt jewellery, bar and coin, and technology demand, the WGC believes geopolitical and economic uncertainty remains supportive for gold investment, and with real rates near or at all-time lows globally, the cost of holding gold remains low.
Year to date, gold ETF inflows have already surpassed the largest annual gain of 646 tonnes seen in 2009. Total holdings increased by 31% over the first six months of 2020.
“At present, covid-19 cases appear to be resurfacing, not just in the US but in other countries that had earlier appeared to contain the outbreak. The ultimate effect of this is still very much unknown,” the Council says.
“Ultimately, it could be the behaviour of central banks – with their continued expansionary monetary policy – that drives gold higher, as was a large contributor to the multi-year bull market in the price of gold following the great financial crisis and subsequent quantitative easing.”
(With files from Reuters)
PNG halts Ok Tedi copper mine over covid-19 cases
Thu, 06 Aug 2020 17:10:00 +0000
Papua New Guinea has stopped mining at its the massive Ok Tedi copper-gold mine for at least 14 days.
Papua New Guinea has halted mining at its the massive Ok Tedi copperand gold mine for at least 14 days after seven workers tested positive for covid-19 and the country faces a surge in infections, with local authorities saying they could potentially reach thousands in the next few months.
The cases were recorded despite Ok Tedi Mining shutting down all charter flights in late July.
Oki Tedi Mining said on Thursday that it had traced the infections back to a single worker, who is believed to have contracted the virus from a person who flew from capital Port Moresby to the port town of Kiunga late last month.
“The employee is currently working in our operations, travelling to and from work on buses. It is likely that more people have been infected, giving rise to an unacceptable risk of accelerated transmission within the Ok Tedi workforce,” the mine’s chief executive Musje Werror said in a statement.
Werror said the state-owned mine will use the idled time to implement further contact tracing, testing and isolation procedures with the purpose of limiting any further spread of the virus and resume safe operations as soon as possible.
The 14-day shutdown will have broader economic impacts, the company said. Oki generates a significant amount of foreign currency inflows into PNG and the suspension is likely prevent about $40 million from coming into the country.
The suspension, which began on Wednesday, is also expected to cut the mine’s copper output by about 4,000 tonnes and gold production by about 12,000 ounces, it said.
PNG has now recorded 163 confirmed cases — low by global standards — but with a record jump of 39 in a day, and up from 11 just three weeks ago. There have also been three deaths.
Oki mine, which is 67% owned by the national government and 33% owned by the country’s Western Province, is now strictly limiting the movement of staff between its operations. In addition, it’s seeking support to end for commercial air services into Kiunga.
OceanaGold gets permit for WKP in New Zealand
Thu, 06 Aug 2020 15:40:07 +0000
Company has received the mining permit for Wharekirauponga on the southern Coromandel Peninsula.
OceanaGold (TSX: OGC) announced on Thursday it has received the mining permit for Wharekirauponga (WKP) in New Zealand, granting the company exclusive right to the mineral resource.
The miner purchased the Newmont/Glass Earth interest at WKP – located in the Coromandel Forest Park on the southern Coromandel Peninsula – in 2016, incorporating it into its Waihi operations. WKP currently has an indicated resource of 421,000 oz of gold at 13.4 g/t gold and an inferred resource of 717,000 oz at 12 g/t gold.
“As part of the greater Waihi District Study, the WKP deposit is expected
to deliver significant value for shareholders. We expect to continue
drilling there for several years to come as we advance the project through its life cycle,” said OceanaGold CEO Michael Holmes.
“We are assessing the option of WKP as a state-of-the-art underground mining operation. The Waihi District has the potential to extend Waihi’s mine life to 2036 and beyond while providing meaningful socio-economic
benefits for stakeholders.”
Based on the recently completed Preliminary Economic Assessment (PEA) for the Waihi District, the company envisages underground mining at WKP and first production in 2026, with processing taking place at the existing Waihi plant.
Over the currently estimated life of mine, WKP is expected to produce 190,000 to 230,000 ounces of gold annually.
OceanaGold’s producing operations are in New Zealand and the US – this year’s total production guidance for the company stands at 360,000 oz. to 380,000 oz. at all-in sustaining costs of $1,075 to $1,125 per oz.
The company’s stock was down nearly 2% on the TSE midday Thursday. The miner has a C$2.2 billion market capitalization.
Iamgold lowers Westwood mine reserves
Thu, 06 Aug 2020 14:00:00 +0000
The Canadian miner said Westwood's reserves decreased by 48% to 0.6 million ounces grading 7.1g/t gold.
Iamgold (TSX IMG), (NYSE: IAG) has cut reserves by 48% at its Westwood gold mine in southwestern Québec, Canada, and outlined a “cautious” approach to a long-term plan for the operation.
The Toronto-based miner has been reviewing Westwood for months. In February, it booked a $395 million charge on the mine, which has operated at reduced capacity after an earthquake in late 2019.
Iamgold now says the asset’s total attributable reserves sit at 0.6 million ounces, grading 7.1g/t gold.
“While overall mineral resources have remained largely unchanged, mineral reserves were impacted primarily by more conservative geotechnical assumptions related to specific zones located in higher seismic risk areas,” the company said.
Measured and indicated resources, inclusive of reserves, increased by 6% to 1.56 million ounces grading 10.2g/t, and inferred by 4% to 1.77 million ounces at 8.6g/t.
Iamgold said Westwood would produce between 100,000 to 125,000 ounces of gold a year during a three to four year ramp-up period. After that, the mine is expected to churn out 130,000 to 145,000 ounces of gold annually.
“We have adopted a cautious and empirical based approach that reflects current operational reality, with significant opportunities to improve on the base case,” president and chief executive Gordon Stothart said in the statement.
The figures adjustment come as the company reported second-quarter net income of $25.5 million, or $0.05 per share, compared to a loss of $18.6 million, or $0.04 per share, in the same period last year.
The miner revised once again its 2020 production guidance to 645,000-700,000 ounces of gold.
Iamgold had suspended its annual guidance in March to 700,000 and 760,000 ounces, which then lowered it in May to 685,000-740,000 ounces of gold.
It attributed the revision partly to the temporary suspension of Rosebel in Suriname due to coronavirus-related matters.
“Weaker company 2020 guidance and lower Westwood reserves could be initially viewed as negative, although we expect management will offer strategies to replace these reserves,” BMO analyst Jackie Przybylowski said in a note to investors.
UK to invest in Europe’s first geothermal lithium recovery plant
Thu, 06 Aug 2020 13:30:00 +0000
The project is a collaboration between Geothermal Engineering and Cornish Lithium.
The UK government announced plans to invest, through its Getting Building Fund, in the construction of Europe’s first geothermal lithium recovery pilot plant at a location near Redruth, Cornwall.
The public funds will support a £4-million collaboration between Geothermal Engineering (GEL) and Cornish Lithium at GEL’s deep geothermal project, which aims to demonstrate that lithium can be produced from geothermal waters with a net-zero carbon footprint.
According to Cornish Lithium, the pilot plant will trial environmentally-responsible Direct Lithium Extraction technology, and its suitability to extract lithium from Cornish geothermal waters.
“The optimal DLE technology for Cornish waters is currently being selected, however, the processes being considered utilise technologies such as nanofiltration to selectively remove lithium compounds from the water, rather than relying on evaporation and other less environmentally friendly methods,” the company said in a media statement. “Once the lithium has been extracted, the waters will be returned to depth via injection boreholes.”
Recent tests run by Cornish Lithium and GEL have demonstrated that the geothermal and the lithium resources lying beneath granite rocks in Cornwall are potentially commercially viable, given recent advances in extraction technologies.
“We have made significant strides in establishing the UK’s first deep geothermal power plant. The possibility of developing future sites that include co-production of lithium extraction is very exciting and a great opportunity for both companies and Cornwall as a whole,” Ryan Law, managing director of Geothermal Engineering, said in the press brief.
“We believe Cornwall’s untapped natural resources are significant, and are delighted to be partnering with Cornish Lithium to maximise the synergies between the two technologies in order to unlock this potential.”
The new capital injection comes in addition to the £826,000 that Cornish Lithium recently raised from its shareholders to expand ongoing drilling work.
Chilean government backs renewable hydrogen project for mining vehicles
Thu, 06 Aug 2020 13:15:00 +0000
The Hydra project is led by Engie and Mining3.
Chile’s economic development agency CORFO announced that it will provide approximately $324,000 to help finance low-carbon energy company Engie and research organization Mining3’s Hydra project.
The project aims to design and supply a new powertrain for mining vehicles to run on renewable hydrogen instead of diesel. Its initial phase will be to run a pre-feasibility and engineering study. Then, the plan is to design and manufacture a 100-200kW fuel cell and battery powertrain prototype to test its performance under mining conditions in terms of altitude, dust, and temperature.
“In addition, the project will help establish safety protocols for hydrogen use at scale in the mining industry,” Engie and Mining3 said in a media statement. “These protocols for the industry are critical to the successful deployment of hydrogen in the mining industry.”
According to the organizations involved in the initiative, the end goal of the Hydra project is to scale up the solution to convert mining vehicles of several mining sites in Chile and elsewhere.
Data from Chile’s Ministry of Energy states that renewable hydrogen could help mitigate between 17% and 27% of the country’s greenhouse gas emissions by 2050.
Circular economics, reprocessing waste and mining
Thu, 06 Aug 2020 13:00:00 +0000
As investors and communities pressure the industry to address waste issues, some companies are rising to the challenge.
Mining is an all too often wasteful and polluting industry. However, as investors and the community in general increasingly pressure the industry to address these issues, some companies are rising to the challenge.
It’s somewhat ironic that as mining searches for and digs up valuable new resources, it is often simultaneously spewing out potential resources at the waste end of the operation. Tons of some rare earth minerals for example are locked up in waste dumps because it simply isn’t (or wasn’t) economical to go back and extract them. Either that or they’re too toxic to risk handling without expensive, and advanced, technology.
The Centre for Mined Land Rehabilitation, Sustainable Minerals Institute at The University of Queensland in Australia produced a report in 2019 as part of a project on the ‘circular economy’ in relation to mining. Their estimates around mining waste are interesting – and worrying. Namely, globally large-scale mining projects – some 3,500 of them – churn out one hundred billion (100,000,000,000) tonnes of solid waste between them every year. Translated to imperial tons, that’s over 110 billion tons.
Now, if we were talking about everyday, ordinary household waste it would still be a concern, but we’re not. We are talking about billions and billions of tonnes of often highly toxic waste. Many of the chemicals used to process ore are dangerous and aren’t recovered from the waste before it’s dumped.
Incidentally, speaking of household waste (and for comparative purposes), globally we produce around 1.8 billion tonnes (2 billion tons) of it a year or about 54.4 tonnes (60 tons) per second. global construction industry is predicted to double their waste to 2 billion tonnes (2.2 billion tons) per annum by 2025. Agriculture produces around 1 billion tonnes (1.1 billion tons) of waste globally each year. Both are considered highly wasteful industries yet their figures don’t even begin to compare to mining’s 100 billion tonnes.
It is becoming increasingly apparent that current methods of collecting and storing mining waste are not an ideal long-term solution. Rather, they’re an economically unfeasible, environmental time bomb waiting to go off. The January 2019 disaster in Brazil at one of Vale’s operations has highlighted this yet again. Unfortunately, waste management issues are only going to increase as the need for commodities like rare earths escalates and most in the industry agree something more needs to be done sooner rather later.
What the industry is already doing
Reprocessing tailings dams on operational projects is already common practice in the industry but usually only IF there is enough money to be made from doing so. A good example of this is going back to treat polymetallic tailings produced by gold extraction when there are economic quantities of copper, lead, zinc, cobalt and nickel.
When it comes to historic waste, the situation, unfortunately, isn’t as clear-cut. Quite often, these old waste dumps are an unknown quantity and as such, present some problems. Before any attempt can be made to reprocess one, a resource calculation needs to be done. That costs money. Then the findings have to be presented as a business case to potential investors.That too costs money.
Add in the processing costs and ultimately, if at the end of the day there isn’t a profit to be made, the waste will continue to sit there. Also significantly – an EIT KIC Raw Materials Re-activate project closing workshop held in December 2019 estimated that only around 5% of waste dumps in Europe currently contain enough economically viable minerals to warrant reprocessing them.
So what does one do with the remaining 95%?
While they may not be economically viable in terms of mineral extraction, many do need to be cleaned up (sanitised) because they contain significant amounts of residual sulphides. When these sulphides oxidise it produces acid mine drainage, a serious environmental problem.
Sanitising waste dumps that contain millions of tonnes of material is an expensive exercise though so it invariably doesn’t get done until or unless the situation becomes critical. Companies focus instead on interim measures like containment and the capture of whatever leaches out, which brings us back to where we started.
Namely, that these are not sustainable and that cleaning the stuff up so it can be put back into the ground as clean fill or safely reused for other things is by far the best solution all round.
Even if extracting minerals from a waste dump isn’t profitable in itself, there are still opportunities for the right mind set. It’s a case of looking at it as a multiple win win situation. If a waste dump needs to be cleaned up (most do) and it contains enough of a commodity that, if recovered, would cover costs and perhaps even turn a small profit, then it becomes a combined sanitation and value recovery exercise.
This is exactly what happened at the Kilembe copper mine in Uganda where the tailings are typically around 80% pyrite and cause acid mine drainage. To avoid ongoing problems, the company ran the tailings through a tank bioleaching process to convert the sulphides. During the process, they were able to recover some of the cobalt that was in the tailings. The project was upscaled to convert all 900,000 tonnes of stored tailings with enough cobalt being extracted to pay for the process. Unfortunately though, this will usually only be done when companies can expect the same results as Kilembe and that’s not always going to be the case.
The third approach to dealing with waste reprocessing is to consider it an exercise in sanitation rather than a profit-making venture. The object is to find economical ways to clean the waste so it’s not a potential environmental hazard.
If re-processing to remove viable minerals and get rid of sulphides does this (as was the case at Kilembe), and works out to be cheaper than traditional sanitisation methods, more companies may consider doing it even when there’s no profit in it.
Why would they do it if they can’t make money or at least cover their costs?
One only needs to consider the expense of dealing with the consequences of acid mine drainage and tailings dam failures to see why cleaning waste to stop it becoming a hazardous bone of contention is a very good idea. It’s doing damage control before the damage is actually done.
Vale’s recent experiences could well prompt more companies to consider it in this light! The Brazilian miner is staring at lawsuits, class actions and a cool $4.9 billion US in costs and lost revenue in the wake of its Brumadinho tailings dam failure. Some of its employees are also facing criminal charges.
That’s the doom and gloom side of the story but as the saying goes – every cloud has a silver lining. Spurred on by consumer, investor and public concerns, companies both within and outside the industry are turning their attention to ‘recycling’. It’s all part of the ‘circular economy’ we’re going to hear a lot more about over the next few decades. Wikipedia explains it well – “A circular economy …is an economic system aimed at eliminating waste and the continual use of resources.”
Is recycling alone enough for a circular economy?
In an ideal circular economy, companies will be extracting useful minerals previously considered economically nonviable from their waste. This will help reduce the amount of new ore that needs to be dug up and processed, with flow on reductions in new waste.
At the same time, they will also be removing the dangerous chemicals, potentially for reuse whenever possible, getting rid of sulphides, and leaving only clean ‘dirt’ behind. This clean and dirt should then be able to used as part of the mine’s rehabilitation post mining or for a number of other purposes.
If companies like Comstock and its partners Oro Industries and Mercury Cleanup are any indication then some in the industry are moving in the direction of circular economics. The Nevada-based company is looking at ways of recovering mercury from tailings dumps. Mercury is one of the banes of mining, including artisanal gold mining.
In the past, reports have found this sector of the industry alone uses some 1000 tonnes (1.1 tons) of it. Therefore, any safe and effective way to remove and recycle mercury from waste should get the industry’s attention in a big way. Comstock is planning to use their Comstock Lode gold and silver deposit as a crash test dummy using technology developed by Oro and Mercury Cleanup.
The Comstock Lode is famously the US’s first major silver ore deposit, and also the richest. It was discovered in 1859 and subsequently found to contain significant amounts of gold as well. Over its lifetime, the mine has used some 15 million pounds of mercury and the company plans to treat this in a new pilot plant being constructed with its 2 partners. Should the process pan out, it could play a significant role in how the industry deals with an ongoing and toxic waste issue.
We briefly looked at some of the rare earth minerals and where there are currently easily accessible stockpiles of them in this article. We also posed the question ‘are we mining the wrong things?’ in another article. Our article on stone paper explored one way in which some of that construction waste mentioned above is being put to good use.
(This article first appeared in Mining International Inc.)
New global tailings standard guidelines aim for zero harm
Thu, 06 Aug 2020 12:04:59 +0000
The first ever Global Industry Standard on Tailings Management, aimed at strengthening current best practices around tailings dams in the mining sector.
The Global Tailings Review (GTR) has released the first ever Global Industry Standard on Tailings Management, aimed at strengthening current best practices around tailings dams in the mining sector, with the goal of zero harm to people and the environment.
The standard is the result of a more than one-year process started by the United Nations Environment Program, Principles for Responsible Investment (PRI) and the International Council on Metals and Mining (ICMM) last March.
The guidelines, organized around six topic areas, 15 principles and 77 auditable requirements, add new requirements for independent oversight of tailings facilities design and management. They also outline expectations for more disclosure to the public about tailings facilities, including information about the potential consequences of a failure.
Intended to provide a framework for safe tailings facility management, the standard allows operators flexibility in how to achieve that. For example, it does not prohibit the use of upstream dams, such as the one at Vale’s Feijao mine in Brazil, whose failure in January 2019 killed at least 259 people, and which served as the impetus behind the creation of the standard.
“The catastrophic dam collapse at Vale’s Corrego de Feijao mine in Brumadinho was a human and environmental tragedy that demanded decisive and appropriate action to enhance the safety and strengthen the governance of tailings facilities across the globe,” said Dr Bruno Oberle, chair of the Global Tailings Review, in a release.
“I am particularly pleased to deliver a document which reflects and addresses the complexity and multi-disciplinary nature of sound tailings management.”
The standard applies to existing and future tailings facilities, and covers the entire life cycle from site selection through closure. The GTR notes that mine operators must have “zero tolerance for human fatalities and strive for zero harm to people and the environment from the earliest phases of project conception.”
It also noted that to be compliant with the standard, operators must use “specified measures to prevent the catastrophic failure of tailings facilities and to implement best practices in planning, design, construction, operation, maintenance, monitoring, closure and post closure activities.”
The review was supported by a multi-disciplinary expert panel, with input from a multi-stakeholder advisory group. It also involved extensive public consultations with communities, government representatives, investors, multilateral organizations and mining industry stakeholders.
Speaking for the PRI, which represents $103.4 trillion in assets under management, Adam Matthews, director of ethics and engagement on the investment team for the Church of England Pensions Board, said that people have been calling for a global standard to drive best practice in tailings management for decades.
“It is tragic it has taken the Brumadinho disaster to make this happen, but a unique partnership has come together to address a systemic challenge faced by the mining sector and we are now as committed to make this common practice in all operations,” Matthews said. “For the first time, we have a global standard that goes beyond existing best practice and establishes the most comprehensive standard that investors will hold companies accountable for in their implementation.”
Matthews added that he looks forward to working with all parties to establish an independent entity to oversee the implementation of the standard.
A must for ICMM members
While the standard is voluntary, ICMM members – which include Vale, and which represent about a third of the global mining industry – will be required to implement the standard.
“The standard will be integrated into ICMM’s existing member commitments, which includes third-party assurance and validation, and we are in the process of developing supporting guidance,” said Tom Butler, CEO of ICMM. “Members have committed that all facilities with ‘Extreme’ or ‘Very high’ potential consequences will be in conformance with the standard within three years of today, and all other facilities within five years.”
NGOs such as London Mining Network don’t believe the standard goes far enough and would like to see an independent international tailings dams monitoring body formed, and legally enforceable penalties for non-compliance.
It also points to guidelines released in June and developed by a group of NGOs, community groups and scientists, Safety First: Guidelines for Responsible Mine Tailings Management. The group says the new standard fails to meet 15 of the 16 guidelines set out in that report, which called for banning upstream dams, prohibiting new tailings facilities from being built immediately upstream from communities, and mandating the use of best available technology, such as filtered tailings.
(This article first appeared in the Canadian Mining Journal)
Glencore posts $2.6 billion loss, scraps dividend
Thu, 06 Aug 2020 10:56:00 +0000
The miner and commodities trader will focus on debt reduction.
Miner and commodities trader giant Glencore (LON: GLEN) posted a $2.6 billion loss for the first half of the year and scrapped its dividend, as the coronavirus pandemic dented global demand and lowered prices and production at its mining division.
Despite the virus impact, the Swiss firm managed to remain profitable on an operating basis. Glencore posted $1.5 billion in adjusted earnings before interest and taxes, but booked $3.2 million in impairment charges.
The company said it was putting balance sheet strength ahead of shareholder returns, as net debt climbed 12% to $19.7 billion at the end of June.
The increase in borrowings came as Glencore tapped its credit lines to take advantage of falling oil prices in March and April — it bought cheap crude and sold it on the futures market for a profit. As a result, its marketing business performed especially well, with full-year earnings expected to come in at the top end of its $2.2-$3.2 billion range, after hitting $2 billion in the first half.
Chief executive Ivan Glasenberg said the board had concluded it would be “inappropriate to make a distribution to shareholders in 2020.” Instead, the firm will focus on debt reduction after pouring money into the oil trading business to cash in on volatile price swings.
Christopher LaFemina, analyst at Jefferies, said the decision to cancel the dividend was disappointing in light of the strong performance from the company’s trading arm.
“We believe Glencore has missed an opportunity to send a strong message to the market about its dividend policy being robust through the cycle,” he said.
BMO’s Edward Sterck said the bank expected the trading division’s oil position profit to be booked largely in the second half of the year. “It has clearly unwound some of the positions in H1 whilst still (looking at net debt combined with disclosures) retaining significant exposure,” he wrote in a note to investors.
The mining and metals expert added the move could lead to a beat in expectations for the second half of the year, but noted the market was “not given enough disclosure” to forecast with confidence.
No change in succession plans
Glasenberg, who has led Glencore since 2002, added that covid-19 had not changed the timing of succession plans, but declined to give further details.
The executive, who is the company’s second-biggest shareholder with a 9% stake, according to Refinitiv Eikon data, said in 2018 that he would step down in three to five years. At the time, he added the firm had begun training a small group of front runners to take over the post.
“As we said before covid… once the old guard is changed then I will move on,” Glasenberg said on Thursday, adding that the head of coal trading, Tor Peterson, was still due to leave. Long-time Glencore executive Daniel Mate, who led its zinc business, left last month.
Glencore has been transitioning to a new generation of management over the past couple of years, appointing new division heads to cover marketing and assets for coal, ferroalloys, copper and oil.
The Swiss giant mined 588,100 tonnes of copper in the first half of the year, 11% less than during the same period of 2019.
The company said global mine supply would likely keep hurting because of covid-19 and new projects will experience delays. Aging equipment and declining ore grades are also likely to crimp global supply, Glencore said.
A rebound in demand, led by Chinese factories, would likely continue, “supported by significant economic stimulus measures being undertaken globally,” it said.
Glencore noted that the two key areas of cobalt demand, lithium-ion batteries for mobile phones and electric vehicles (EVs), looked “promising.”
“The growing momentum evident across the [EV] sector, together with a recovery in mobile-phone demand, points to higher future cobalt demand,” Glencore said.
On zinc, the company said it was still too early to tell what the metal’s supply balance would look like this year, with the scale of the pandemic’s effect on supply and demand still unknown.