Namibia Economist (Windhoek)
15 February 2008
Posted to the web 15 February 2008
By Chamwe Kaira
UraMin will open its uranium mine at Trekkopje in July, Managing Director Bert Leathley said this week. The firm expects to export its first yellow cake at the end of 2009 through Walvis Bay, Leathley told the Economist. He said US$920 million will be spent on capital expenses to bring the mine into production. The company expects to produce 8.5 million pounds of uranium oxide per year, making it Namibia's biggest uranium mine.
Leathley however said that the export markets for the uranium oxide were yet to be confirmed.
The firm was currently in discussions with NamPower over power supply, he said. NamPower is faced with a deficit in supply and recent press reports have indicated that power supply to new mines may only be available in 2009.
Leathley also said the desalination plant, which is being jointly built with NamWater, will be completed in the second quarter of next year. The first stage is an N$250 million seawater intake and a pipeline to bring the water from the Atlantic Ocean to the shore three kilometres north of Wlotzkasbaken.
The second is an US$110 million desalination plant for UraMin, and a second one for NamWater costing approximately the same amount.
He said a decision on whether the company will list on the Namibia Stock Exchange, like other uranium companies, has not been taken. Xemplar, Forsys, Deep Yellow and Paladin Energy have all listed in the country.
The company's 100%-owned and 129,000-hectare Trekkopje Project is located about 65 km north-east of Swakopmund.
The project has an estimated resource of 502 million tonnes of uranium oxide at a grade of 0.013%. Trekkopje is expected to become one of the world's 10 largest uranium mines when it achieves production, and will also be one of the top five low-cost, open pit uranium operations.
UraMin is a subsidiary of Areva, the French mega nuclear reactor builder.
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Namibia Economist (Windhoek)
15 Feb 2008 at 01:18 PM GMT-05:00
Posted by Carel van der Merwe at 15.2.08
Strange rumblings on the near side of Katanga Mining's indirect deal with Chinese interests, via Gécamines.
Author: Barry Sergeant
Posted: Sunday , 10 Feb 2008
Katanga Mining (KAT CN, C$14.25 a share), has announced the strange details of a strange Chinese-related deal, after raw facts on the story crept into markets at the end of last month. Katanga Mining, which has just merged with Nikanor, has refuted the notion that it was forced into the transactions.
After requests for comment, Katanga Mining on 29 January issued a statement to the effect that two of the so-called Dima Pits, which include Dikuluwe, Mashamba East and Mashamba West, would be transferred to DRC-parastatal Gécamines. The Dima pits form part of Katanga Mining's substantial assets in the Democratic Republic of the Congo, which lie, in turn, adjacent to Nikanor's assets.
Katanga Mining's statement followed shortly on the astonishing news, attributed to Congolese Mines Minister Martin Kabwelulu, that he had signed a loan deal with China which could lead to the development of "Gécamines' Mashamba [West] and Dikuluwe copper/cobalt projects". Katanga Mining's statement contained zero information on what quid pro quo it had received for the deal, indicating that the deal had been rushed through.
Now for the quid pro quo: Gécamines is to "replace" the Mashamba West and Dikuluwe deposits by 1 July 2015 "with other deposits having a total tonnage of 3,992,185 tonnes of copper and 205,629 tonnes of cobalt", or "pay over time, beginning 1 July 2012", a total of US$825m from Gécamines royalties and dividends received from Katanga Mining.
In a nutshell, Chinese interests - such as Sinohydro Corporation and China Railway Engineering Corporation - will invest around $3bn in infrastructure, and $3bn into the mining deposits, which are held as to 32% Gécamines and 68% as to the Chinese consortium. Then there is a further $3bn earmarked by the Chinese consortium for future investment in infrastructure.
Based on an unpublished document, the Gécamines-China mining JV includes cuvette ("basin") Mashamba, cuvette Dima, Synclinal Dik Colline "D", Kolwezi, containing in total 8.1m tons of copper, and 203 000 tons of cobalt. The deal also includes "a trouver" (literally, "has to find", like the latest deal with Katanga Mining) "Au" (gold), in an amount of 372 tons. The total value of the metals indicated is given as $3bn.
For many decades Gécamines (and its predecessor) ran Luilu, the substantial hydrometallurgical facility now owned by Katanga Mining. The plant was fed with concentrate feed from KOV (now in Nikanor) and Dikuluwe-Mashamba as oxides, and from Kamoto underground (Katanga Mining) as sulphides. (The Kamoto open pit and KOV lie alongside each other, with the inevitability that Katanga Mining and Nikanor were always going to merge.)
In days gone by, the sulphides were roasted to sulphates and then leached together with the oxides. Sulphate was then mixed with water to form sulphuric acid; as such, the wonderful system under discussion had a net acid consumption of zero. Such a system would be no small advantage in the modern world, given shortages of sulphuric acid.
Now that Katanga Mining has merged with Nikanor, the combined entity possesses both the oxides from KOV and the sulphides from Kamoto, once again allowing processing to proceed with zero net acid consumption. This would have made it a lot easier to swallow the deal that Gécamines has struck with Chinese interests.
Posted by Carel van der Merwe at 12.2.08
By Ronald D'Britto
11 Feb 2008 at 08:30 AM GMT-05:00
MUMBAI (CommodityOnline.com) -- Tin has risen to the highest since at least 1989 on the London Metal Exchange. Tin prices have climbed on speculative buying since mid-July, seemingly following the path of LME lead and nickel.
However, with LME stocks rising steadily, demand down in year-on-year terms and easing Indonesian supply, there is indication that the gains wouldn't be fundamentally justified.
The Key Fundamentals Propelling Tin
1. Supply Crunch - Indonesian and Bolivian
Indonesia is the world's second-largest tin producer after China. PT Timah and PT Koba are the Indonesia's first and second-largest tin producers respectively.
Indonesia clamped down on dozens of small smelters last October for tax evasion and violation of environmental regulations, among other issues. Indonesia's crackdown on illegal mining and smelting on the island earlier in the year resulted in the closure of several small smelters and reduction in output by bigger companies such as Koba Tin.
Bolivia's state-controlled Huanuni Mining Co. was hit by strike action, and further tension is expected in the mining industry as President Evo Morales seeks to increase control.
The government seized the Vinto smelter from Glencore as part of a drive to control a greater share of the Andean country's mineral wealth.
2. Hedge funds and Speculative Interest
Tin rose to the highest since at least 1989 after one company held as much as nearly half of the stockpiles monitored by the London Metal Exchange. Tin's gains were probably because of buying from funds.
Several hedge funds active in tin and further speculative interest is expected on current prices: LME figures show only two market players holding 70% to 88% of all tin stocks.
3. Tightened Indonesian Export Regulation
Indonesia, the world's second-largest producer of the metal, tightened export regulations and registered all mining companies in a bid to curb illegal output. The government tightened rules on the domestic shipment of ore in a bid to prevent cargoes being sent overseas illegally. The rule, signed 30 April, is effective from 1 July.
From 23 February, only companies with licenses and that have paid royalties have been able to export refined tin. Indonesia started cracking down on illegal tin mining in October.
4. Amiss PT Koba Production
PT Koba Tin, the country's second-largest tin miner, halted shipments after three directors were held by police investigating illegal ore purchases.
The Koba Tin unit stopped collecting ore from small miners amid a police probe into whether it bought ore from unauthorized miners.
Koba declared force majeure, allowing the company to cancel delivery due to unforeseen circumstances.
Used in cans and electronic soldering, tin demand grew last year as electronics manufacturers increased the tin component of solder to substitute for lead, a poisonous metal.
Ronald D’Britto is an Associate Manager, Multi-Commodity Exchange of India
By arrangement with www.commodityonline.com
Posted by Carel van der Merwe at 11.2.08
New Era (Windhoek)
11 February 2008
Posted to the web 11 February 2008
This year marks a century of diamond mining in Namibia. Since the early years of the 20th century, when these precious gems were discovered on the coast, the diamond mining industry has gone through many phases, starting with labour-based mining methods to highly mechanised and technology-driven operations on land.
Stories abound of how fortunes were made and lost along Namibia's diamond coast. These are tales of romance and adventure, accounts of the activities of those who blazed the mining trail: their hardships, sufferings and disappointments - but also their successes.
The history of the diamond in Namibia dates back to more than a century ago. At that time, Adolph Lüderitz, a merchant from Bremen in Germany, acquired the coastal strip in the southern Namib, roughly from Hottentot's Bay to the Orange River. Lüderitz was never to know what wealth lay under the sand. For in 1886, on a boat trip to the mouth of the Orange, his boat capsized and he drowned. His territorial rights were transferred to a company called the Deutsche Kolonial Gesellschaft für Südwestafrika (DKG).
It is said that after a voyage to the South West African coast in 1897, the master of a sailing ship, Captain R Jones, returned to Cape Town with a parcel of diamonds. He fell ill and died before he could revisit the place where he had found the stones. In 1898 two diamonds were picked up in the interior, near Berseba and Gibeon, but kimberlite pipes in the vicinity proved to be barren. Diamonds were also found near the coast in 1905 and 1906.
However, it was not until April 1908 that significant deposits of diamonds were discovered. The first find was made near the Grasplatz railway siding, some 10 km south-east of Lüderitz. Subsequently, the first prospecting licences were taken out on April 8, 1908 by a railway foreman, August Stauch.
Because of Namibia's unique colonial history, the history of diamond mining is intertwined with the colourful history of the country. Legendary men such as Zacharias Lewala, who made the first diamond discovery in 1908, and Stauch, the enterprising railway supervisor who became a millionaire diamond merchant overnight, add a colourful dimension to the men and women who, in different powerful ways, helped shape Namibia.
A century later, many other dreams have come true. Namibia's natural resources are no longer the exclusive preserve of a few. As one of Namibia's major natural resources, diamonds have created approximately 4000 jobs and contribute around 10 percent to the country's gross domestic product. The industry has brought and continues to bring real improvement to the daily lives of Namibians. In addition, the diamond industry and the Namibian Government have partnered to create a local cutting and polishing industry to further expand the country's economy and provide revenue for more families and communities in Namibia.
Today, diamond-mining operations increasingly focus on the marine exploitation of offshore deposits. This evolution was necessitated by the fact that diamond deposits on land are gradually being exhausted. With the introduction of new technologies, it is now possible to carry out sophisticated offshore mining operations in a cost-effective and profitable manner.
During the early 1900s, German prospectors were the first to attempt diamond exploration south of the Namib-Naukluft Park, a nature reserve Park near the coastal town of Lüderitz.
Lewala, a worker on the Lüderitz-Aus railway line, made the first diamond discovery at Kolmanskop in 1908. Before the impending diamond rush to the area, Lewala's supervisor, Stauch, staked several mining claims there. One such claim, 182 km south of Lüderitz in Ida's Valley (near Bogenfels and Pomona), proved to be a major find.
The German Government branded the area north of the Orange River to Walvis Bay as a Sperrgebiet: "forbidden territory". The small mining town of Kolmanskop (now a ghost town) was established east of Lüderitz, and at its zenith during the mid 1910s, the Sperrgebiet coastline accounted for 20 percent of the worldwide diamond supply.
- In 1920, two years after World War I, Germany relinquished its control of Namibia
to the Government of South Africa. In February that year, acting on behalf of the
Anglo American Corporation, Ernest Oppenheimer acquired control of nine mining
companies including the company owned by Stauch and amalgamated them into
the Consolidated Diamond Mines of South West Africa (CDM).
- In 1923, the South West Africa Administration and CDM concluded the Halbscheid Agreement, which accorded CDM sole mining rights in the Sperrgebiet.
- In 1928, the discovery of Namibia's vast marine-terrace diamond reserves just north
of the Orange River mouth slowed production further up along the coastline, and
by 1956, the town of Kolmanskop had been deserted and replaced by Oranjemund.
CDM then transferred its headquarters from Lüderitz to Oranjemund.
- In 1931, De Beers Consolidated Mines bought out Anglo American's interest in
CDM. By 1975, CDM had become a wholly owned subsidiary of De Beers.
- At the time of Namibia's Independence in 1990, the De Beers Centenary AG
was formed. Based in Switzerland, De Beers Centenary AG headed a group
of companies that incorporated the international interests previously held by
De Beers Consolidated Mines Ltd. CDM was one of those companies.
- In 1994, in terms of an accord concluded with the Namibian Government, CDM
was reconstituted as the Namdeb Diamond Corporation (Pty) Ltd, and represented
an equal partnership between the Government and De Beers Centenary AG.
The colourful history of the diamond industry is best captured by a poem Some Dreams Come True by Elizabeth Norton:
Did someone say he'd seen some dreams come true?
Were these the luckless dreams of those who touched
The rainbow's resting place; whose fingers clutched
The empty sky; whose El Dorado blew
Past the horizon's rim where thirsty sand
Makes shifting sepulchres for broken hearts?
Or those of men whose fortune seems to start
Like fountains in a rich and friendly land?
How happy he who knows his dream is true,
And truth his happy dream; who toils and asks,
Receives, and cherishes the prizes won
Nor envies more. And such names being few,
Let us record them, and their chosen tasks,
Their faithful battles fought, their journeys done.
Considering that these were colonial times, it is astounding that Zacharias Lewala's name was mentioned at all. For this piece of honesty we have to thank August Stauch, who clearly was not the type of man to take credit for the achievement of others. He made certain that the correct version was related, and employed Lewala in a prime and highly conspicuous job that of being his carriage driver.
Noli & Katali (1989)
Zacharias Lewala is generally credited with the discovery of diamonds in Namibia. However, very little is known of this legendary man. He had apparently been shovelling sand against the embankment of the line at Kolmanskop, when he spotted a small crystal. One version suggests that Lewala had worked in a diamond mine at Kimberley and recognised the stone for what it was.
According to Olga Levinson in Diamonds in the Desert (1983), after his discovery, Lewala was taken into Stauch's employ as the driver of his horse carriage.
After the First World War broke out, Lewala was repatriated by the Minnenkammer, together with all the other so-called Cape Coloureds employed on the diamond fields. According to Levinson, the Lüderitzbucht Chamber of Mines and the Deutsche Diamanten Gesellschaft chartered the Mincio, a sailing ship, to take around 2500 workers back to Cape Town. It is very likely that Lewala was one of its passengers, but there is no record of this. Sadly, nothing more is known of this important figure in Namibia's history.
The Diamond Merchant
Stauch, having found that thin coarse gritty sands between bedrock outcrops in the area also contained diamonds, pegged off large areas without attracting much attention.
Schneider & Miller, Namibia Review,
In 1907, August Stauch, an employee of the Deutsche Kolonial Eisenbahnbau und Betrebsgesellschaft was appointed Railway Supervisor at Aus to oversee the section of rail between Grasplatz and Kolmanskop. His responsibilities included keeping the line clear of the ever-encroaching dune sand.
Stauch is said to have been deeply fascinated by the desert and its environs. Contrary to popular opinion at the time, he was convinced diamonds were likely to be found beneath the desert sand; so he bought two prospecting licences from the Deutsche Kolonialgesellschaft für Südwestafrika (DKG).
At one point Stauch is said to have instructed his workers to be on the lookout for 'pretty stones' - in other words, diamonds (Levinson 1983:115). Several days later, one of his workers, Zacharias Lewala, found just such a stone - and it was subsequently confirmed to be a diamond. On receiving news of the find, Stauch went to the site where Lewala had discovered the stone and tested the crystal by successfully scratching the glass of his watch with it - not knowing that glass can be as easily scratched by other crystals.
As rumours of the discovery spread, and encouraged by the find, Stauch quietly pegged off further claims for himself. After the find was officially confirmed, diamond fever raged - and soon the entire area was swarming with prospectors and fortune-seekers.
To increase his capital, Stauch founded a syndicate with two directors of the Railway undertaking, who were stationed at Lüderitz. They advanced the necessary money to form an enterprise styled as Die Koloniale Bergbaugesellschaft, which prospected for diamonds.
Early in 1909, Stauch struck it lucky again. Alerted by a worker who had stumbled on a deposit of diamonds lying as thick as 'plums under a plum tree', he and a certain Dr Scheibe established that there were even richer deposits in the Pomona area, about 150 km south of Lüderitz. The discovery is said to have occurred shortly before dark. The diamonds were strewn around in such abundance that Stauch and Scheibe went on picking them up by moonlight.
Following his sudden wealth, Stauch returned to Germany - only to come back some months later, unable to shake off the lure of the desert and the 'pretty stones'.
At the end of the First World War, South West Africa was no longer a German colony but a mandated territory under the then League of Nations. Due to the changing political environment, and fearing his assets would be confiscated, Stauch decided to sell all his diamond interests to a company that had arisen from the amalgamation of several smaller companies: the Consolidated Diamond Mines (CDM), headed by Ernest Oppenheimer. Diamond mining in Namibia was under the sole control of CDM, and later its parent company, De Beers, until 1995, when a 50/50 partnership was established between the Government of an independent Namibia and De Beers Centenary AG to form the Namdeb Diamond Corporation (Pty) Ltd.
Posted by Carel van der Merwe at 11.2.08
By: Liezel Hill
Published: 8 Feb 2008 - 21:27
TSX-listed Katanga Mining has agreed to sell two deposits, Mashamba West and Dikuluwe, in the Democratic Republic of Congo (DRC) to State-owned mining company Gécamines for up to $825-million.
Katanga said on Friday that Gécamines will either replace Mashamba West and Dikuluwe, which form part of Katanga's Kamoto property, with other deposits, containing 3,99-million tons of copper and 205 629 t of cobalt, by July 1, 2015, or start paying the purchase price of $825-million by 2012, from royalties and dividends in the Kamoto Copper Company (KCC), which it co-owns with Katanga.
The value of the deposits was determined from a 2006 feasibility on the property, but is subject to review by the companies.
The announcement follows press reports that the two deposits were included in an agreement between the DRC government and China.
Reuters reported on January 28 that, in exchange for Chinese loans, Gécamines, China's Sinohydro Corp and China Railway Engineering Corp would create a joint mining venture with rights to the two mining concessions.
KCC has agreed to fund and assist with exploration, to help Gécamines find replacement deposits, and Gécamines will pay the exploration funds back to KCC out of its revenues from the company.
The Mashamba West and Dikuluwe deposits were not scheduled to start producing oxide ores until 2020 and 2023 respectively, Katanga said on Friday.
The company recently completed a merger with former rival Nikanor, enabling the company to consolidate Katanga's Kamoto mine and Nikanor's nieghbouring KOV operation, which were previously part of the same mine complex, to create a single site operation.
The merged company aims to be the world's largest cobalt producer, and Africa's largest copper producer.
Meanwhile, Katanga and other miners with assets in the DRC are still waiting for the outcomes of a review into mining contracts in the country.
On Tuesday, Mines Deputy Minister Victor Kasongo said the review had exposed levels of irregularities that far exceeded its expectations.
He said that all contracts would now have to be renegotiated by different degrees.
Posted by Carel van der Merwe at 9.2.08
Gecamines to slash $2bn in debt (Source: Miningmx)
[miningmx.com] -- GECAMINES, the Congo’s state-owned base metals company, would reduce $2bn in debt this year involving cutting thousands of jobs and lifting its own copper production, said CEO, Paul Fortin. Gecamines would aim for 27,000 tonnes of copper, the 2007 forecast it failed to reach.
Gecamines would call for tenders on copper and cobalt exploration tenements near Kolwezi, Lubumbashi and Likasi within four months, Fortin told Miningmx on the sidelines of the Africa Mining Congress in Livingstone, Zambia.
Gecamines was also weighing an initial public offering and a listing on a Canadian or European bourse, but this is a long way off still, he said.
Gecamines missed its 2007 copper production target of 27,000 tonnes, reaching just 22,000 tonnes. This was despite spending $60m on refurbishing equipment in Likasi in southern Congo.
“If I’m very lucky, I will get to 30,000 tonnes this year,” said Fortin. “But my production chain is very insecure and that’s what’s killing me. It’s too fragile for me to make reliable predictions.”
Gecamines will spend a further $10m from cash flow in improving the plant and equipment this year.
$1bn in debt
“I’m not satisfied that we’ve optimised the investment we made last year and this year production and workforce motivation will come under a lot more focus,” he said.
Gecamines has reduced its debt levels “a little”, but this would be the year it will receive close attention because the management team has been freed up from negotiating a $9bn Chinese transaction to bring a 400,000 tonne copper mine into production from 2011.
There is $1bn in sovereign debt, which Fortin needs to engage the London Club to reduce. A further $400m lies in inter-company debt between Gecamines and state rail and power utilities for example. Fortin said he wanted to negotiate a cancellation of that debt as well as the credit it had extended to those entities.
The final $600m lies in commercial debt and Fortin wants to negotiate a “significant discount” in repayments of it.
“It’s all very easy to say, but it’s not that easy to organise,” he said, adding talks on the three debts had not yet started.
The workforce will be reduced to 5,000 people this year from about 8,800 currently.
As part of the Chinese deal, which included that country’s railway, power and bank, Gecamines will be paid $100m, about half of which will go towards setting unpaid salaries accumulated over the years.
Fortin hopes that when workers are up to date with salaries, some will migrate to the better paid private sector.
“When I compare production and number of employees to other companies operating in Congo, I’m way off line. It can continue continue for a little while longer, but not much. Now we are a social service, but we must become a business.”
The proposed listing of Gecamines was in the early stages, and would have to be formalised within Gecamines management before it is presented to 100% shareholder, the government, Fortin said.
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While the government could continue to hold a majority stake in Gecamines it would have to be independently managed to secure investor trust, he said.
Asked about the value of Gecamines, its assets and partnerships with a host of mining companies, Fortin pointed out the company was able to raise $9bn on the strength of its orebodies and the appetite from China for metal.
The three Chinese partners will pay $3bn towards infrastructure development in the Congo and another $3bn for building a mine at Kolwezi.
Once the mine is in production, a further $3bn will be spent on infrastructure around the country. In exchange, the Chinese receive an orebody with some 10 million tonnes of copper.
The joint venture vehicle is 68% Chinese owned and the remainder held by Gecamines.
To invite tenders
Gecamines will issue an invite to tender for exploration tenements held by Gecamines, Fortin said. “I don’t have the cash. If I did, I wouldn’t put these out to tender,” said Fortin.
“We are putting out to tender tenements where there are good indications of mineralization,” he said.
Gecamines wants the joint venture exploration partnerships to be different to what had been agreed in previous agreements. “I want these joint ventures to be more 50/50 and joint management. That kind of this,” he said. The tenements are virgin ground.
[miningmx.com] -- THE Zambian government has warned the mining and exploration sector that it would lose the right to develop mineral-bearing properties if it failed to develop them timeously.
The state would also implement its new royalties and taxes, increased to 3%, equally over all mining companies regardless of whether previous agreements existed.
These messages were delivered in a speech prepared by President Levy Mwanawasa and delivered by his deputy, Vice President Rupiah Banda at the third Africa Mining Congress, Livingstone, Zambia.
Banda also said government would talk to mining companies that have uranium to form partnerships to exploit those deposits as the state turns its focus more firmly to energy.
As part of that drive towards securing the country’s energy sources, the government is to repeal and replace the Petroleum Exploration and Production Act to clear the way to exploit potential oil and gas deposits within the country, Banda said.
“My country is ready to gives companies the opportunity to invest in the petroleum sector,” he said.
It will call for bids once the act has been changed this year to ensure there is more flow-through of profits to civil society than under the previous legislation.
While there are uranium prospecting licences in issue, none have yet been issued for mining. The government has drafted International Atomic Energy Agency-approved regulations that will be enacted with the new Mines and Minerals Act this year.
Equinox, Albidon and Omega Corp were singled out by the president as those having uranium potential and which the government wanted talk to about taking equity stakes in their projects.
Omega Corp is nearing the end of its feasibility study into a uranium prospect in the Kariba province and government officials would engage the company at the conference about an official acquisition of an equity stake.
Equinox has uranium by-product at its Mwana project and the government has told it to stockpile the uranium-bearing material until an agreement with the state could be thrashed out. Equinox too is not far off completing a feasibility study into mining uranium.
“They are planning to move into mining development and this move will present an opportunity to partner Equinox on uranium mining and processing,” Banda said. Talks would be held at the congress.
Use it or lose it
The Zambia government is implementing a “use-it or lose-it” policy as it tries to shake out those sitting on unused prospecting tenements. “We have conducted a general audit of all tenements to find out whether the licence holders are complying with the Act,” Banda said.
“We have commenced a procedure cancelling licences of defaulters to pave the way for other investors take up those tenements.”
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“The government is determined to open the Zambian landscape to investors and we are cancelling licenses of those not complying with the Act regardless of whether they are holders of small or large-scale mining rights.”
There is a moratorium until March 15 this year to allow defaulters to comply with the law.
The government would make no differentiation in applying new fiscal reforms to companies that had taken over previously privatised companies or those that had started new projects.
One mining executive, who declined to be named, said later the new royalty and tax regime was “one of the world’s worst” and that it altered the way the company views its projects. He stopped short of saying the projects would not go ahead.
By Sherilee Bridge
Johannesburg - Transformation of the diamond pipeline by diamond giant De Beers over the past few years has lowered the barriers to entering the diamond industry, De Beers managing director Gareth Penny said on Wednesday.
Speaking at the Mining Indaba, Penny said diamond industry transformation had been effected by the group's disposal of some of its South African mines and the repositioning of its asset portfolio.
Among the bigger transactions concluded last year by De Beers Consolidated Mines, the South African arm of the global diamond giant, was the one billion rand sale of its historic Cullinan Diamond Mine to a consortium of companies led by AIM-listed diamond mining junior Petra Diamonds.
De Beers has also disposed of the Dancarl Mine in the Barkley West district of the Northern Cape, the Koffiefontein mine in the Free State and its Kimberley underground mines - all to Petra.
This has left De Beers with just a handful of mines, including its Venitia mine near Musina in Limpopo province and Voorspoed mine in the Free State, which Penny said had both just received their licence conversions.
It also left De Beers more focused.
Penny said the company had also "fundamentally" restructured its partnerships in exploration, and concentrated its new business development.
"Our principle exploration focus was in the Democratic Republic of the Congo, Angola, Botswana, Russia and South Africa," said Penny, adding that De Beers spent $100 million on exploration annually.
"Forty-five new kimberlites were discovered in 2007," he said.
Having revisited its exploration partnerships, De Beers said it now had 57 joint ventures and 42 partners across the world.
But only four new mines were currently under development - two in South Africa and two in Canada.
Moving from the supply side to demand side of the business, De Beers has taken a decision to shift its London diamond sorting facility to Botswana where Penny says doing business is much cheaper.
On the subject of beneficiation, Penny warned that there "were many challenges to be faced", primarily because of a lack of skills.
Despite this, by 2009 roughly $1 billion will have been supplied across southern Africa for value-adding purposes.
Petra Diamonds said the industry was seeing "unprecedented" market conditions.
The company said the market, worth an estimated $14 billion in 2007, was expected to grow to just under $18 billion in 2011.
Glencore wants £50 a share equivalent for Xstrata holding (Source: Mineweb)
UK Sunday newspaper reports that major Xstrata shareholder, Glencore, is looking for £50 a share equivalent for its Xstrata holding in possible merger with Vale.
Posted: Sunday , 10 Feb 2008
LONDON (Reuters) -
Xstrata shareholder Glencore is concerned about the terms of a proposed 50 billion pound ($97.5 billion) merger between Xstrata and Brazilian miner Vale , The Sunday Telegraph reported.
Glencore, headed by financier Ivan Glasenberg, has expressed concerns about key structural and tax issues, the paper said, without identifying its sources.
Swiss trader Glencore, which holds just over 35 percent of Xstrata, according to Reuters data, wants shares in the merged company rather than cash, the paper said.
It added that Glencore had opened negotiations over price, asking for the equivalent of 50 pounds per share from Vale.
Hedge funds with positions in Xstrata say Vale has indicated that it is prepared to pay between 40 and 45 pounds a share, the paper said.
Xstrata's shares closed just short of 39 pounds on Friday.
Glencore and Xstrata could not immediately be reached for comment.
(Reporting by Rachel Sanderson, editing by Will Waterman)
Glencore mulls future of Xstrata stake – report (Source: Mining Weekly)
By: Liezel Hill
Published: 7 Feb 08 - 21:38
Swiss commodities trader Glencore is seeking advice from Citigroup and Morgan Stanley on options for its 35% stake in diversified-miner Xstrata, the UK's Financial Times reported on Thursday.
Brazilian mining group Companhia Vale do Rio Doce (Vale) is believed to be preparing a takeover bid for Xstrata and Glencore is thought to want a significant premium and a large cash element before it agrees to a deal with Vale, the article said, without citing sources.
The move indicated that Glencore had yet to decide whether or not to support a possible bid for Xstrata from Vale, the Financial Times said.
Glencore Parries Attacks on Secrecy as Debt Rises (Update1) (Source: Bloomberg)
By Saijel Kishan and Simon Casey
July 30 (Bloomberg) -- The two truckloads of metal that rolled out of Glencore International AG's Mopani Copper Mines in Zambia in February never made it to their destination at the Indian Ocean port of Durban, South Africa. Hijackers got to the trucks first, overcoming both the drivers and the satellite tracking system designed to disable the vehicles remotely in the event of an emergency.
``It's a growing problem,'' says Shaun Sinden, general manager of ESO Trucking in Johannesburg, which has been moving minerals across Africa for 30 years. Glencore, the world's largest commodities trader, faces risks ranging from robbery to strikes to government confiscation. The closely held Baar, Switzerland-based company operates on six continents and produces and trades billions of dollars of oil, coal, metals and grain every day.
Glencore also owns a controlling stake in publicly traded Xstrata Plc, the world's fifth-biggest mining company by revenue, and 12 percent of Moscow-based United Co. Rusal, the biggest aluminum producer.
``Glencore is probably one of the best-run companies that, really, no one has ever heard of,'' says Phil Roantree, who helps manage 24.8 billion pounds ($50.4 billion), including Glencore debt, at New Star Asset Management in London.
Glencore was founded in 1974 by former fugitive financier Marc Rich, who sold out to the current owners in 1994. Rich was indicted in 1983 by U.S. Attorney and future New York City Mayor and presidential candidate Rudolph Giuliani for tax evasion and buying oil from Iran in violation of U.S. sanctions. He was pardoned in 2001 by President Bill Clinton, whose wife, Hillary, is also running for president.
Tin Mine Seized
Earlier this year, the 10,000 miners Glencore employs at Mopani went on strike to demand a pay raise. Around the same time, the Bolivian government seized a Glencore tin mine. In Russia, one of Glencore's partners in a $1 billion oil venture is under investigation for ``illegal business activity.'' And Glencore, after being accused in 2005 by a United Nations commission of paying ``illicit surcharges'' to Saddam Hussein for Iraqi oil in 2001-02, is awaiting the conclusion of a Swiss criminal investigation into such payments. The company denies any wrongdoing.
Glencore, which is now owned by a corps of senior executives, has, for most of its history, kept public disclosures to a minimum. As recently as 2003, its Web site consisted of a single page bearing its logo and address. Ivan Glasenberg, a coal trader under Rich who has been chief executive officer of Glencore since 2002, gave his last published interview -- to an industry publication called Metal Bulletin -- in 2003. He refused to allow any of his employees to be interviewed for this article and denied access to his trading floors and industrial plants.
Close to the Vest
``Glencore is a company that plays its cards close to its chest,'' says Jonathan Pitkanen, an analyst at Aviva Plc's Morley Fund Management Ltd. unit in London, which oversees 55 billion pounds in fixed-income assets, including Glencore debt. ``The fact that they don't give out that much information is a negative.''
The veil, however, is now lifting because Glencore is eager to secure its sources of metal, coal and oil by buying commodity producers -- and it is issuing debt to do so. Glencore has raised $6.5 billion in the bond markets since 1996, when it first sold debt, forcing it to disclose financial details to investors and rating companies.
Moody's Investors Service and Standard & Poor's both give Glencore bonds and bank loans their lowest investment-grade rating, citing the risks it takes in Russia, the company's continuing penchant for secrecy and the allocation of most of its earnings to a company profit-sharing plan that is a drain on cash flow. The profit-sharing plan now holds $12.6 billion, according to a May Glencore earnings report, up from $10.9 billion in 2006.
$116 Billion in Revenue
The fund has grown along with Glencore's profits. Net income in the first quarter surged 84 percent to $1.9 billion, according to the May report. Revenue in the quarter rose 21 percent to $30 billion. Net income for 2006 was $5.3 billion on sales of $116 billion. Glencore's annual profit has increased more than fivefold since Glasenberg, 50, took the helm five years ago.
Glencore -- the name is an abbreviation of ''global energy commodity resources'' -- has 2,000 employees in 50 offices in more than 40 countries, according to the company's Web site. Most of them work out of Glencore's trading offices in Baar, Switzerland; London; Singapore; and Stamford, Connecticut. Its Baar headquarters is in the Swiss canton of Zug, home to many global commodity companies taking advantage of the canton's low taxes and Swiss secrecy laws.
Glencore's industrial subsidiaries employ 50,000 people in 14 countries, according to a February presentation to prospective bond buyers. In addition, the company operates more than 100 ships and runs 50 oil tank farms worldwide. Glencore says on its Web site that 3 percent of the world's oil is sold by its traders. Customers for its metals include Sony Corp., the world's largest video-game console maker, and Volkswagen AG, Europe's biggest carmaker.
The fact that Glencore is a private company allows it to make fast trading and acquisition decisions. ``They don't spend much time in shareholder meetings,'' says Morgan Stanley CEO John Mack. ``They spend their time doing business. They can move very quickly with zero bureaucracy.'' Mack, 62, has known South African-born Glasenberg since Mack was CEO of Zurich-based Credit Suisse Group from 2001 to '04.
Last year, Glencore formed a commodity derivatives trading unit with Credit Suisse, through which the two firms are trading oil and metals futures contracts.
The executive team under Glasenberg is notable for its youth. Chief Financial Officer Steven Kalmin is 36 and joined the company in 1999. The co-heads of the aluminum division, Steven Blumgart and Gary Fegel, are both 34. The oil unit is run by Alex Beard, 39.
``The management at Glencore are among the most savvy and intelligent people around,'' says Dwight Anderson, 40, founder of Ospraie Management LLC, a $7 billion commodities hedge fund in New York that trades in the same markets as Glencore. ``They have a culture that doesn't put up with mediocrity.''
Glencore doesn't take job applications for senior positions. ``They tend to grow their own talent, and all are steeped in the shared corporate culture,'' says David Sassoon, who worked with Glencore Chairman Willy Strothotte as a metals trader in the 1970s and now runs Chempro, a metals company in Lucerne, Switzerland. ``On the occasions where executives leave or retire, the replacement appears to be conducted with the minimum of fuss, and the business appears to continue to hum along.''
Former employees say Glencore traders maintain a grueling schedule, traveling constantly to every corner of the globe, organizing shiploads of metals and tanker fleets of oil. When they're not traveling, they're on their BlackBerries at all hours, negotiating prices and moving shipments from one location to another, says one former Glencore trader who now runs his own commodities firm and who can't be identified because he signed a confidentiality agreement when he left Glencore.
Another ex-Glencore trader says that the long days and constant pressure to do deals drove him out of Glencore in the early 1990s at the age of 40.
For a decade, Glencore's top priority has been to buy up assets to use in trading. It has spent $10 billion on acquisitions since 1995 and has been especially busy in the past year. In August 2006, it paid an undisclosed amount for a 51 percent stake in a 75,000-barrel-a-day oil refinery in Colombia. Colombian partner Ecopetrol SA said in April that it would invest $2 billion in the plant along with Glencore to double production. The price of crude oil has almost tripled in the past five years and traded at $76.67 a barrel on the New York Mercantile Exchange today.
From Russia to Congo
In March, Glencore agreed to merge its aluminum assets in Russia with those of OAO Russian Aluminium and OAO Sual Group, forming United Co. Rusal, which is headed by Russian billionaire Oleg Deripaska.
In June, Glencore paid 150 million pounds for 25 million shares, or 12 percent, of Nikanor Plc, a London-listed company that owns and plans to rehabilitate an abandoned mine in the Congo. Glencore agreed to buy all of the mine's copper and cobalt.
Glencore's sister company, Zug-based Xstrata, which mines coal, copper, gold, vanadium, zinc and other metals in 18 countries, has also been on a buying spree. In the past four years, Xstrata has spent $30.7 billion on acquisitions. Its biggest purchase: $18 billion to acquire Canadian nickel-mining company Falconbridge Ltd. last year.
Glencore holds a 34 percent stake in Xstrata, worth $20.6 billion as of July 27. Glencore Chairman Strothotte, 63, is also chairman of Xstrata, and Glasenberg is a member of Xstrata's board. Xstrata CEO Mick Davis, 49, was a lecturer at the University of the Witwatersrand in Johannesburg when Glasenberg was a student there in the 1970s.
Xstrata's stock has risen five-fold in value since its 2002 initial public offering in London. On July 27 it closed at 3,077 pence, up 21 percent this year.
In 2004 Standard & Poor's lowered Glencore's corporate credit and bank loan rating one level to BBB-, the lowest investment grade, citing political risk the company had taken in Russia as one reason. Moody's also gives Glencore debt its lowest investment-grade rating, Baa3. In a March report, Moody's said it wanted to see more transparency in Glencore's financial reporting.
After taking a new look at Glencore in September 2006, S&P refused to raise its rating, saying one factor was the company's ``aggressive'' profit-sharing plan, which awards most profits to the approximately 450 employees with an equity stake in the company.
Under that program, 85 percent of net income is allocated to the owners, according to a March presentation to bondholders. Glencore's top 12 managers own 31 percent of the $12.6 billion fund, with none holding more than 10 percent. The rest is held by other managers.
$325 Million Payout
If they left the company today, each of the top executives would walk away with an average of $325 million, while Glencore's other owners would bank an average of about $20 million. Employees receive the payments over five years after leaving the company.
On July 3, S&P revised its outlook for Glencore to ``positive'' from ``stable'' without raising its rating. It cited improved transparency, high metal prices and record Glencore cash flow of more than $1 billion in the first quarter as reasons for the revision, and said there would be a possibility of raising Glencore's debt rating by one level ``in the near term.''
Xstrata has net debt of $13.6 billion, according to the company's financial filings, equal to 21 percent of its market capitalization. That compares with a ratio of 4.6 percent for Australia's BHP Billiton Ltd., the world's largest miner, and 3.7 percent for South Africa's Anglo American Plc, the second biggest, according to data compiled by Bloomberg.
``It's been more aggressive in M&A than other companies,'' says Alex Herbert, an analyst at Standard & Poor's in London. S&P gives Xstrata debt a BBB+ credit rating, the third-lowest investment grade.
Investors who buy Glencore debt earn a healthy risk premium. The 850 million euros ($1.17 billion) in 5.25 percent notes that Glencore issued in October 2006 sold at a premium of 169 basis points over the German bund maturing July 4, 2013, a benchmark for European debt. The spread had narrowed to 92 by June 6; as of July 11 it was 124 basis points. (A basis point is 0.01 percentage point.)
Companies with similar triple-B ratings yielded 77 basis points over government debt on July 11, according to an index compiled by JPMorgan Chase & Co.
``I have been very happy with the performance of Glencore's bonds,'' says Cornel Bruhin, senior portfolio manager at Zurich- based investment house Clariden Leu AG, which oversees 128 billion Swiss francs ($104 billion), including Glencore bonds. ``In the past, you did not find many companies in the investment-grade world offering such a high spread.''
In February, after a road show that took Glasenberg and Kalmin to three British cities, Glencore sold 650 million pounds of 12-year bonds with a coupon of 6.5 percent, 175 basis points over U.K. government debt with a similar maturity. The bonds were 11 times oversubscribed.
Xstrata stock, meanwhile, has a ``buy'' rating from 14 of 21 equity analysts tracked by Bloomberg. ``At current commodity prices, Xstrata's cash flow is huge, and that net debt is shrinking rapidly,'' says Nick Hatch, an analyst at Investec Securities in London. ``People are not concerned about it.''
Glencore started life 33 years ago as Marc Rich & Co., founded by Rich after he spent 21 years working for Philipp Brothers, then the world's biggest commodities trader. Within a few years of its founding, Marc Rich & Co. was vying with Philipp Brothers for the rank of top commodities trader, according to The Story of Metal Trading, a 2003 book by traders Helmut and Peter Waszkis (Metal Bulletin, 296 pages, 24.95 pounds). Philipp Brothers, renamed Phibro, is now the commodities-trading unit of Citigroup Inc.
Marc Rich's Company
Rich, 72, fled to Switzerland after his 1983 indictment and was never tried. Two companies associated with him that were also indicted pleaded guilty to tax charges and racketeering and paid $200 million in fines, according to Rich's Web site.
Rich continued trading from his base in Zug until he sold his company for an undisclosed amount to its senior traders in 1994, according to Rich's Web site. He went on to found a new company, Marc Rich Holding GmbH, through which he now invests in real estate and hedge funds.
Rich's immediate successor was Strothotte, one of his company's top metals traders, who joined Marc Rich & Co. in 1978 after working in Germany for trading firm Frank & Schulte. Under the new name Glencore, Strothotte began the process of converting the company from a pure trading organization into the multinational industrial corporation it is today.
Producers and Traders
``Owning assets enables Glencore to see the whole production chain,'' says Ian Hannam, London-based managing director of capital markets at JPMorgan Cazenove Ltd., which is a banker to Glencore and advised on Xstrata's IPO. ``It gives them a clear view of supply and demand across the commodity markets. The information they obtain in real time, on the ground, gives them a strategic advantage.''
Glasenberg took over as CEO in 2002. Former colleagues and acquaintances describe him as an intense worker and demanding boss. Morgan Stanley's Mack says Glasenberg travels extensively to examine the company's mines and other facilities and to talk to customers. ``Ivan is very aggressive and understands the commodities business better than anyone I have ever met,'' Mack says. ``He's a hands-on manager. He doesn't have the number three, four or five person going down into Africa. He goes himself.''
Glasenberg, who was once a competitive walker, and who completed two Swiss triathlons at the age of 43, graduated in 1981 from the University of the Witwatersrand with a degree in accounting. He earned his accounting certification at Levitt Kirson, a firm in the South African capital.
``He was the best in his year,'' says Len Furman, a managing partner at Levitt Kirson who trained Glasenberg. ``He was studious, extremely loyal and took his job very seriously. He would have become a partner had he stayed.''
Glasenberg moved on to the University of Southern California, where he earned a master of business administration degree in 1983. The following year, he joined Marc Rich & Co, working in the company's coal department in South Africa for three years and in Australia for two. He moved to Asia in 1989, where he managed the company's Hong Kong and Beijing offices. He became head of the coal department two years later.
``He got to the top by merit,'' says Graham Beck, the 77- year-old founder of Johannesburg-based coal-mining company Kangra Coal Ltd., a Glencore customer when Glasenberg started out as a coal trader. ``He developed good relationships with people; he understood them. Relationships are key in this business.''
The Xstrata Connection
Glasenberg has stepped up the aggressive acquisition program started by Strothotte, both at Glencore and Xstrata, which is a key part of Glencore's global supply chain. Glencore has a 20-year contract with Xstrata to buy coal from its Australian and South African mines.
Glencore also buys Xstrata-produced ferrochrome and vanadium, both materials used in the production of steel. And after Xstrata bought Falconbridge, Glencore contracted to buy nickel and cobalt from the former Canadian company's mines.
Glencore has recently learned about the risks of owning its own production in Russia. In 2005, the company bought stakes in several units of OAO Russneft for $972 million, according to an August 2006 bond prospectus. Glencore also loaned Russneft, Russia's seventh-largest oil company, $554 million, which was to be repaid via the company's cash flow.
Trouble in Russia
Russneft is controlled by billionaire Mikhail Gutseriev, who founded it in 2002. In June, the Moscow Arbitration Court froze Russneft shares, which are unlisted, pending a request by the Russian Federal Tax Service to have some of the company's stock confiscated, according to court spokeswoman Maria Raben.
In November, prosecutors filed criminal cases against managers of three Russneft units for illegally exceeding a government oil production quota, according to Interior Ministry spokeswoman Irina Dudukina.
All of this puts Glencore's interests at risk, says Mikhail Galkin, head of fixed-income research at MDM Bank in Moscow, which tracks Russneft's bonds. ``There is reason for Glencore to be concerned,'' Galkin says. ``Any tax claims with regard to Russneft's units will negatively affect Glencore's equity and debt interests in Russneft.''
Mikhail Khodorkovsky, CEO of OAO Yukos Oil Co., was convicted of tax violations in 2005, after which the Russian government auctioned off his company, with most of it bought by state- controlled OAO Rosneft and OAO Gazprom.
Emerging Market Risk
Galkin predicts that if Russneft's assets are sold, investors such as Glencore will be compensated. ``It's against the government's interest to inflict damage on outside investors,'' he says.
The nightmare Glencore worries about in Russia has already happened in Bolivia, where the government seized a Glencore tin mine earlier this year, with President Evo Morales saying the Swiss company had underpaid for it. Glencore, with the help of the Swiss government, is negotiating to get the mine back. Meanwhile, in April, Glencore won an auction to buy tin produced at the mine.
``What happened there happens in many emerging markets,'' says Daniel Linsker, an analyst at Control Risks Group, a London- based firm that advises companies on security and political dangers. ``The government is happy to give concessions to companies to attract investment when commodity prices are low. When prices rise, those in power then accuse those companies of foreign exploitation.''
At home in Switzerland, Glencore executives await a conclusion to the criminal probe stemming from the report of the Volcker commission, formally called the Independent Inquiry Committee into the United Nations Oil-for-Food Program. The commission was headed by former U.S. Federal Reserve Chairman Paul Volcker, 79.
Cited by Volcker Report
Jeannette Balmer, a spokeswoman for the Office of the Attorney General of Switzerland in Bern, says 33 companies are being investigated for making payments to the Iraqi government in violation of UN sanctions. Balmer refuses to name them, citing Swiss secrecy laws.
The 2005 Volcker report names Glencore as one of four oil- trading companies that acceded to Saddam Hussein's demand that surcharges be paid, in violation of sanctions, for access to its oil riches. A separate report in 2004 by the U.S. Central Intelligence Agency says Glencore paid a total of $3.2 million in surcharges.
``All four traders had some of the surcharges paid to Iraqi- controlled bank accounts through other agents and entities,'' the Volcker report says.
In a written response to questions from Bloomberg News, Glencore says, ``With the exception of formally authorized contacts for the execution of oil shipments under the approved UN oil-for-food program, Glencore had no contact with the Iraqi government or government officials.''
During the past several years, Glencore has acted more than ever like a publicly traded company. A person familiar with the company says it has even considered selling stock to the public. The bond prospectuses the company has issued since 2003 give an unprecedented amount of data on revenues, profits and Glencore's many partnerships with commodity producers. Glencore executives now meet with credit analysts.
Glasenberg has also tried to satisfy the rating companies on the question of Glencore's profit-sharing program. In 2004, he agreed to subordinate employee payouts to the debt owed bondholders in the event of a default. In March, the company announced that 10 percent of the payments from the profit-sharing fund would be in the form of a hybrid security, which combines features of debt and equity and which stretches payments for those who leave with an equity interest in the company over a longer period.
``The hybrid is definitely a step in the right direction for the company,'' says Felix Freund, a fund manager at Frankfurt- based Union Investment GmbH, which oversees 140 billion euros and holds Glencore's debt. ``It has given us more comfort.''
It could also undermine one of the keys to Glencore's success: the motivation of the hundreds of young traders eager to make their first $20 million before they are 40 and pursue a less- hectic life elsewhere.
To contact the reporters on this story: Saijel Kishan in London at; Simon Casey in London at .
Angola's Endiama sees higher diamond output in 2008 (Source: Reuters)
By Paul Simao
CAPE TOWN, Feb 7 (Reuters) - Angola's state-owned diamond firm Endiama said on Thursday it expected to produce more than 10 million carats in 2008, continuing a robust expansion that began after the end of a civil war in 2002.
The Luanda-based firm produced 9.7 million carats in 2007.
"We are forecasting production of more than 10 million carats this year," Tiago Dias, head of strategic planning and investments for Endiama, told Reuters in an interview at the Indaba Africa mining conference in Cape Town.
Dias said most of the production would again come from Luanda Norte and Luanda Sul, the northeastern provinces that are the traditional diamond-producing areas in the country, though he added that exploration was proceeding elsewhere.
Angola, Africa's third largest diamond producer and the world's fifth biggest in terms of value, has explored only about 40 percent of the territory believed to have potential for diamond mining.
The provinces of Bie, Malanje and Uige have been identified as among the areas that should be explored.
Arranging financing for exploration of diamonds is one of the key challenges facing Endiama and the Angolan government, which is presiding over an oil-fuelled economic boom.
Endiama's efforts to expand exploration is seen as key to diversification of the country's economy from the oil sector.
The lion's share of Angola's diamond production comes from alluvial deposits -- stones found in and around rivers -- but Endiama has high hopes for major discoveries of gems in shafts of volcanic rock, known as kimberlites.
"The future of the diamond industry in Angola is in the production of kimberlites. We think there is very big potential," said Dias, who predicted that Angola could soon surpass South Africa among the ranks of top diamond producers.
South African mining giant De Beers, 45-percent owned by mining group Anglo American Plc (AAL.L: Quote, Profile, Research), has invested in such a concession in Angola's northeastern region. Other foreign firms have also expressed interest in exploration there.
But kimberlite exploration and mining is a time-consuming and expensive undertaking that has forced Endiama to look to companies such as De Beers and BHP Billiton (BLT.L: Quote, Profile, Research) (BHP.AX: Quote, Profile, Research) for financial and technical assistance.
Poor infrastructure -- Angola's roads, ports and rail links were destroyed during its 27-year civil war -- also remain a barrier to a diamond exploration boom in the southwest African country.
Dias conceded that transportation problems were a concern, though he noted that the government in Luanda was working to build and repair roads, railways and airports.
(Editing by Chris Johnson)
Gold ETF investment may increase 30% this year (Source: Mineweb)
As gold continues to set record highs, the World Gold Trust, the sponsor of the world’s largest gold ETF, forecasts a 30% increase in their gold ETF products this year.
Author: Atul Prakash
Posted: Friday , 08 Feb 2008
LONDON (Reuters) -
Investment in gold Exchange Traded Funds (ETFs) promoted by the World Gold Council could surge almost 30 percent in 2008, if bullion prices continue to set record highs, a top fund official said on Thursday.
Gold ETFs, listed on stock exchanges around the world, offer investors exposure in the underlying commodity without taking physical delivery.
Sponsors of such funds buy a matching amount of the commodity and keep it in bank vaults. Interest has exploded recently as gold prices hit record highs above $930 per ounce.
"If all of the components that have been driving the price of gold remain in place, you could easily see our global product suite at 1,000 tonnes within a year," Stuart Thomas, managing director of World Gold Trust Services, told Reuters.
World Gold Trust is the sponsor of U.S.-listed streetTRACKS , which is the world's largest gold ETF. It accounts for 80 percent of 781 tonnes of gold -- worth over $22 billion -- held by several gold funds promoted by the World Gold Council.
Other key global gold ETFs, including Barclays' iShares COMEX Gold Trust and ETF Securities' ETFS Physical gold, have so far accumulated about 100 tonnes.
"Continued flows of new money into GLD would suggest that nothing has changed in the eyes of the average investor. People are still concerned about the weakness of the U.S. dollar, a weakening U.S. economy, an uncertain election and continued turmoil in the Middle East," Thomas said.
"The inflows have been a function of the price of gold, as I believe that GLD has achieved the status of a proxy for gold for many investors," he said in a phone interview from New York.
Spot gold hit an historic high of $936.50 an ounce on Feb. 1 and was at $905.70 by midday in Europe on Thursday. The metal has gained 12 percent this year on top of a 32 percent jump in 2007.
Inflows into StreetTRACKS, which grew nearly 40 percent in 2007 in volume terms, jumped to a record high of 652.56 tonnes in the middle of January, as investors flocked to the product attracted by a gold rally. The fund now holds 631.15 tonnes.
GROWING RETAIL BASE
Thomas said there had been a shift in the ETF's investor base since the launch of the product in November 2004, with more and more retail investors taking part now compared with predominately institutional investors at the beginning.
"Retail assets tend to be 'stickier' assets. I believe the retail investors have been buying gold not just for tactical reasons but as a valuable component of a well-diversified portfolio, which is a much longer-term view and not necessarily susceptible to short-term price fluctuations," he said.
About half the investor base now comprised retail players, he said, but added that pension funds remained slow in adopting gold as an alternative asset within their portfolios.
He said ETFs provided significant advantages for the average investor in terms of access, security and cost.
Thomas said there could be some withdrawal from the fund in case of a drop in gold prices, but the decline was not likely to be steep.
"I don't see gold falling back to $700 an ounce given the associated mining costs. Furthermore, while there would be a reduction in GLD assets, I personally believe that they would not be that great given the investor profile."
(Reporting by Atul Prakash; editing by Peter Blackburn)
By: Matthew Hill
Published: 8 Feb 2008 - 10:36
World number-one diamond producer De Beers on Friday reported a $521-million loss for 2007, after it suffered $965-million of impairment costs at its Canadian operations - mainly because of strengthening of this currency against the US dollar, and higher fuel and equipment costs.
This was compared with an attributable after-tax income of $394-million. In 2006, De Beers made a $730-million profit.
Underlying earnings increased by 14% to $483-million, while earnings before interest, taxation, depreciation and amortisation for 2007 stood at $1,21-billion, which was marginally less than the previous year's figure of $1,23-billion.
This was largely owing to lower diamond sales, which were down 3% year on year.
February 6, 2008, 19:47
Rusal’s co-owner Viktor Vekselberg has no doubt that the merger of the aluminum giant with Norilsk Nickel will succeed. However, the deal is far from completion.
Russia’s largest aluminum producer Rusal is well-known for its aggressive acquisition strategy and is now aiming to merge with metals giant Norilsk Nickel.
Rusal has already received permission from the federal anti-monopoly service to buy Mikhail Prokhorov's 25-per-cent stake in Norilsk.
Key Rusal shareholder Viktor Vekselberg says it’s the first step towards creating a merged metal giant.
“The merger is very good for all participants. We’ll create a very large player and I’m sure we will succeed,” Vekselberg claimed.
But a 25-per-cent stake in Norilsk Nickel is not enough to complete a merger, and Rusal is now looking to take Vladimir Potanin's 30-per-cent stake.
However, Potanin has rejected the offer.
Experts say any confrontation between Rusal’s chief Oleg Deripaska and Vladimir Potanin is on a purely business basis. Potanin is not against the idea of the merger, but doesn’t agree with the terms on the table.
Market watchers say the Kremlin, which has an informal voice in big deals, hasn’t indicated whether it would prefer Rusal and Norilsk Nickel to merge, leaving Deripaska and Potanin the chance to resolve the matter without political pressure.
By: Jade Davenport
Published: 6 Feb 2008 - 17:13
The Burundi government was proactively promoting foreign investment in its small and largely underdeveloped mining sector.
Addressing delegates at the Mining Indaba, the Burundian Minister of Water, Energy and Mines Samuel Ndyiragije said that the government was making a substantial effort to develop the economy by giving high priority to the exploration of its mineral resources.
Ndyiragije further stated that a number of facilities and advantages would be available to mining companies and foreign investors that would be prepared to invest in either exploration activities or mining projects.
Although Burundi was formally known an as agricultural nation and did not have a tradition of mining activities, Ndyiragije stated that Burundi had substantial deposits covering a wide spectrum of minerals.
These included nickel, gold, uranium, cobalt, copper, platinum, vanadium, niobium, tantalum, tin and tungsten. Other natural resources included rare earth oxides, peat, arable land, hydropower, kaolin and limestone.
In addition to this, Ndyiragije stated that Burundi was thought to have small amounts of oil reserves.
“The preliminary works with two drills, have shown possibilities of finding oil resources in the depth of the base of Lake Tanganyika.”
He told delegates that several companies were already actively exploring in Burundi, focusing on the countries extensive gold, vanadium and copper-cobalt deposits.
However, Ndyiragije warned that the biggest challenge facing the development of a mining sector in Burundi was the country’s shortage of energy.
Currently, Burundi imported most of its electricity from energy, although Ndyiragije added that Burundi hoped to be interconnected to the Ugandan and Tanzanian national electricity grid in the near future.
Posted: Wed, 06 Feb 2008
[miningmx.com] -- GOLD “guru” Martin Murenbeeld – chief economist for DundeeWealth Economics - has turned even more bullish since his last assessment given to the Denver Gold Forum in September.
Murenbeeld now reckons there is a 40% probability that gold will end 2008 at a price above $1,000/oz which is his highest ever call on the metal.
His predictions on gold’s performance over the past three years have been remarkably accurate although his estimates for last year ended up below what actually happened because of gold’s surge over the last three months of 2007.
Murenbeeld had predicted an average price of $674 for 2007 and that the metal would end the year at $707. As of the Denver conference his predictions were bang on but gold then took off to end the year at $836 giving an average of $695 for 2007.
Murenbeeld commented that; “I was bullish on gold but not bullish enough because the sub prime crisis happened then the European Central Bank pumped a whole lot of money into the system. Gold reacts far more quickly to money supply movements than it does to inflation.
“However, like any good economist, if you did not like my previous prediction, well, I’m back for another crack at it,” Murenbeeld quipped.
His latest “probability-weighted” call on the metal is for gold to average $901 during 2008 and end the year at $925. His longer-term forecast is for gold to average $961 during 2009.
Murenbeeld derives his numbers from three models which look at low, middle and high price scenarios for gold to which he allocates probabilities.
His upper-end model for gold this year allocates a 40% probability of the metal averaging $975 during 2008 and ending the year at $1,015. This scenario also predicts an average price of $1,075 for 2009.
Some gold market forecasters would view Murenbeeld’s assessment as conservative but there’s a reason for that.
Murenbeeld believes the gold price may have gotten ahead of itself temporarily and could pull back in the short term. He also argues that, while gold is in a long-term bull trend, it’s possible the metal could retreat for up to a year before resuming the upward trend.
He listed eight factors driving the gold price higher. Some of the key ones are that monetary reflation in under way in various major economies while the US dollar continues to devalue against other world currencies.
Foreign holders of US dollar reserves are looking to diversify their asset bases while Murenbeeld believed that, despite having reached record levels, “gold is cheap.”
He said that, while the US dollar could stabilise or even strengthen against the Euro over the next few months, it was likely to devalue against Asian currencies, in particular the Chinese renmimbi (RMB).
“We have to break our myopic focus on the Euro and look more at the Asian currency complex. Asian countries hold some $3.2 trillion of the $6 trillion worth of US dollar foreign exchange reserves. China alone holds $1.5 trillion.
“That is a key imbalance in the world economy. It should never have been allowed to happen.”
Murenbeeld said Asian currencies were likely to strengthen against the dollar which had important implications for gold because, unlike Europe, Asian countries were large consumers of gold which would become cheaper for them to buy as their currencies strengthened.
Murenbeeld also reckoned these countries would look to diversify their asset base by selling some other dollar reserves and buying other assets such as gold. He believed this was already happening in the OPEC countries which were spending some of their dollar oil revenues on gold .
He believed gold was cheap when the price was looked at in terms of gold’s historic relationship to the price of oil and financial assets as well as in terms of “real” value.
While gold has broken through the $900 level Murenbeeld said that it would have to reach $2,295 to match its 1980 value in real terms when it last peaked at $850.
GMA seeks secondary listing, may be TSX
Posted: Wed, 06 Feb 2008
[miningmx.com] -- GMA Resources is likely to begin a secondary listing – most likely on the Toronto bourse – before June this year as its CEO Doug Perkins tries to lift the AIM-traded group’s shares to 20 pence and clear the way for acquisitions.
Production has started at the Amesmessa heap leach gold project in southern Algeria and full production will be reached in the second quarter of this year, Perkins told Miningmx on the sidelines of the Mining Indaba in Cape Town.
Full production for the year is estimated at 77,000 oz, which is well below the 100,000 oz Perkins told Miningmx a year ago the total Algerian project could deliver.
then I’m on the hunt
The change between then and now is that the Tirek carbon-in-leach project has been suspended until a 10,000 tonne stockpile of material with a grade of 10 grams/tonne or more is built up.
This could take a while.
“It’s more likely that we’ll build another heap leach mine before we get to build the CIL plant,” Perkins said.
There are plans to expand production at the project, but Perkins declined to be drawn on the scale, saying: “Speak to me in six months time.”
GMA has cast an eye over projects in Mali and Central African Republic but rejected them for various reasons. On the radar screen are potential projects in West Africa, an Arab country and possibly something in Latin America, which Perkins described as "challenging, but the valuation is too high."
“My short-term goal is to get the share price to 20 pence (from 12 pence now) and then I’m on the hunt,” Perkins said.
“I had better have a new project before the end of 2008 otherwise I’ll lose my crack team,” he said, referring to the team that established the Amesmessa mine.
“We are looking for distressed operations that need to be fixed,” he added. Exploration projects that have drilled out resources would also be considered.
GMA wants a secondary listing and has considered Johannesburg, Dubai and Euronext, but the preference appears to be the TSX Venture Exchange.
“I just know the Canadians will go nuts for a company like this,” Perkins said.
Cash costs are at $500/oz, with 10% of that coming from a two-year training programme to give workers at the project the necessary skills. Securing skilled workers has proved to be difficult because the project is deep in the desert.
Once the training has been completed and the company increases the ounces it produces at the project, it will reduce the costs, a high proportion of which are fixed, he said.
Posted: Wed, 06 Feb 2008
[miningmx.com] -- IMPALA Platinum’s R3bn Marula Merensky project in Limpopo and a host of other early-stage projects being planned by platinum producers and juniors were likely to be abandoned or delayed due to lack of power commitments from Eskom, Business Report said on Wednesday, citing the company.
Bob Gilmour, an Impala Platinum spokesperson said any new projects that had not received power guarantees from Eskom were unlikely to go ahead for the foreseeable future as Eskom had no more power available for new projects.
“Any project in the local mining sector that is at feasibility stage is unlikely to get power,” Gilmour said.
Gem Diamonds Acquisitions Pay-off in 2007
Letseng Sales +81% (Source: Rapaport)
By Avi Krawitz Posted: 02/04/2008 08:38
Gem Diamonds claimed its acquisition spree in 2007 was already paying off as production rose at most of its operations.
The company spent some $404 million on acquisitions in 2007, most notably on Kimberley Diamond Company (KDC) in Australia, and including operations in Botswana, Indonesia, and the Democratic Republic of the Congo (DRC.)
The strongest performance for the year, however, came from Gem Diamonds’ flagship Letseng mine in Lesotho, where sales grew 81 percent to $152 million. Production at the mine increased 35 percent to 73,916 carats for the year, the company determined.
Letseng, which is 70 percent owned by Gem Diamonds and 30 percent by the Lesotho Government, produced five diamonds greater than 100 carats during the year, including the 493-carat Letseng Legacy which sold for $10.4 million.
The company also reported that it sold 45 carats of diamonds for $3.1 million, or $68,000 per carat, at its January 2008 Letseng tender, which included a 26 carat pink diamond going for $2.6 million.
Gem said it would be ready to start commission of a second plant at Letseng in the first quarter of 2008, which would reach full capacity in the second quarter.
Following the completion of its Kimberley acquisition in November, Gem's first tender of diamonds from the Ellendale mine, yielded $14 million from 63,500 carats, or $220 per carat.
During the second half of calendar 2007 -- 254,657 carats of diamonds were mined at Ellendale. KDC had reported production of 378,026 carats for the fiscal year ending June 30, 2007.
Gem’s Indonesia-based Cempaka alluvial channel, which it gained from its acquisition of BDI Mining in May, produced 14,594 carats in the second half of 2007, and 23,034 carats during the full year.
Gem, which owns 80 percent of Cempaka, revised the sales channel for the project and held its first tender from the property in January 2008, selling approximately 15,000 for $4.96 million, or $331 per carat.
The company also sold its first diamonds from the Mbelenge Mine in the DRC, a parcel of 2,986 carats for $247,838, or $83 per carat. During 2007, Gem also sold three parcels totaling 16,652 carats for $1.46 million, or $88 per carat, from its Lubembe Project in the DRC.
Gem plans to start trial mining at its third DRC project, the Longatshimo Project in the third quarter of 2008.
Diamond exploration projects are also underway in Angola, Botswana, and the Central African Republic.
CEO Clifford Elphick said the company was profitable and had a positive cash flow moving into 2008.
“Operations have generally performed ahead of expectations and problem areas are being addressed,” Elphick said. “We are examining how to capture additional margin for the company over the complete range of exceptional diamonds that the mines under our control produce.”
Shares of Gem Diamonds were up 5.9 percent to GBP 951.50 in early Monday afternoon trade in London.
"Cobalt price running wild on predicted big supply shortfall"
"Cobalt investment contract launched by Credit Suisse"
Cobalt price will drop as new mines come on stream in DRC (Source: Mineweb)
Analyst Robert Baylis from Roskill Information Services expects the cobalt price to fall to around $15 a pound as new mines come on stream in the Democratic Republic of Congo.
Posted: Tuesday , 05 Feb 2008
CAPE TOWN (Reuters) -
Cobalt prices should drop from their recent lofty levels as new production comes on stream from the Democratic Republic of Congo and other countries, a mining analyst said on Monday.
Cobalt , which is used to make batteries, superalloys and other industrial products, could drop to about $15 a pound as a result of mining projects in the DRC, predicted Robert Baylis, senior analyst with Roskill Information Services Ltd.
"If they do come on stream ... then we expect it to probably to drop to around $15 a pound," Baylis said in a presentation to the annual Indaba Africa mining conference in Cape Town.
Cobalt prices on the spot market in Europe are hovering around $49 per lb, on strong demand and scarce supplies.
This is an all-time high, according to Reuters data and the U.S. Geological Survey's website, but some veteran minor metals traders say cobalt for a short time traded at $50 a pound in 1978.
While some traders expect that cobalt prices could possibly go higher as the U.S. Defense Logistics Agency exhausts its stocks of cobalt, Baylis said that new production could help take the foam off the frothy market.
He forecast that up to 6,000 tonnes of new cobalt production could be added to global supply by 2010, continuing to rise after that point. Current annual production is about 58,000 tonnes.
Some of the new output would come from the DRC, where there are a number of nickel-cobalt mining projects expected to begin production. An increase in cobalt output from Zambia, which is experiencing a mining boom, also could top up supply.
"In the past the DRC and Zambia propped up the market, There is no reason why that can't be the case again," Baylis said.
(Reporting by Paul Simao, editing by Michael Roddy)
Based on a mixture of macro and demand drivers that have already propelled gold prices and are intensifying, Citigroup raised its gold price forecasts for 2008-10, including a test of $1,000/oz.
Author: Dorothy Kosich
Posted: Wednesday , 06 Feb 2008
RENO, NV -
Citigroup has raised its gold price forecasts by 20% to $900 - $950 - $1,000 ounce for 2008 to 2010-slightly below spot prices and the futures curve--and raised its earning per share estimates for Newmont and Barrick.
Citigroup metals analysts John H. Hill and Graham Wark said they expected a test of the $1,000/oz.
In an analysis published Monday, Citigroup raised EPS estimates for Barrick and Newmont, based on higher gold prices and an estimated $3.50/lb copper price in 2009. While current year Citigroup's EPS estimates for Barrick remain at $1.88 and $1.48 for Newmont, Citigroup raised its 2009 EPS estimate from $2.45 to $2.71 for Barrick and from $2.02 to $2.56 for Newmont.
Despite the strong gold price, the analysts asserted that "from the equity perspective, gold has arguably come too fast, too fast. We do not believe that the equities discount anything close to current gold prices, or the futures curve."
In their analysis Hill and Wark said, "We believe gold has entered a new investment-driven phase, amid a much more hospitable macro environment. While gold prices have been rising since 2002, this was largely due to the pull from pro-cyclical basic materials and oil in a benign of unbalanced macro environment. Now, with discourse dominated by credit crisis, derivatives dislocations, currency debasement, inflation, and self-reinforcing financial negatives threatening U.S. recession and synchronous global slowdown, gold is entering friendly territory."
Noting that scrap flows and physical selling pressure have been light, hill and Wark suggested that "Asian markets are becoming acclimated, and that much of the available scrap was flushed out in 2003-06."
Citigroup is not making an effort to "predict the highs/lows, or short term trajectory given the macro overlay. Corrections are expected along the way, and buying on weakness is recommended-which seems to be the central lesson of the past five years."
Nevertheless, Citigroup declared that "an extremely hospitable macro environment" exists for gold "and believe the ongoing investment-driven demand phase will continue for gold, particularly as the broader investor base is not yet fully involved."
The analysts identified several key factors to watch in gold commodity data and the company reporting cycle including:
1) The pace of scrap selling in response to the gold rally, which should continue in the 1,000 tpy range;
2) Eastern physical investment in coins/bars versus Western investment in electronic/paper gold;
3) Central Bank selling, which is running close to the 500 tpy CBGA II quota and has been somewhat marginalized as a price driver;
4) Mining company de-hedging, with the two remaining major hedgebook owners possibly taking action; and
5) A wave of new mining taxes, royalties, asset expropriations, and project delays related to ‘competing claims for cash flow.'
Citigroup's analysis suggested that central bank sales are likely to undershoot quotas in 2008 and 2009. "We believe the likelihood of IMF sales are low," Hill and Wark said.
The analysts said they expect gold company de-hedging to continue, "particularly from the two major companies that hold over half the remaining contracts. We would not be surprised if significant new de-hedging was revealed during the 4Q reporting cycle. Yet, the pace of de-hedging is likely to slow given smaller aggregate positions. This will modestly increase available physical supply.' They noted that de-hedging has routed 300 to 400 tpy gold from gold mines, back into central bank vaults. "This is good for the gold price, but is reaching natural limits."
Citigroup estimated that principal gold ETF holdings are at record levels of 845 tonnes, worth over $25 billion.