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Vale seeks hold on lowest production cost in industry with US$14.3B S11D

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Vale seeks hold on lowest production cost in industry with US$14.3B S11D

TOP NEWS

Vale seeks hold on lowest production cost in industry with US$14.3B S11D

Vale SA inaugurated the US$14.3 billion S11D iron ore and rail project in Brazil, which will enable it to consolidate its position as the company with the lowest production cost in the industry. At full capacity, the mine will be able to produce 90 million tonnes per annum at a cost of about US$7.70 per tonne, which is 41% less than the current average C1 cost of Vale. The first shipments from the project, which has an expected lifespan of 30 years, are slated for January 2017.

Brazil's corruption investigation over 1.6B reais in mining royalties continues

Brazil's federal police launched a countrywide search for a prominent pastor as it continues its investigation into alleged corruption relating to the payment of 1.6 billion Brazilian reais in excess mining royalties. Silas Malafaia is accused of laundering money through church accounts, as part of a wider scheme reportedly run by a senior Mining and Energy Ministry official.

Exploration budgets fall 21% YOY in 2016, but signs improve

The exploration sector's planned spending remained depressed for a fourth consecutive year in 2016, but the last three quarters have brought signs of optimism for the long-struggling mining industry. S&P Global Market Intelligence calculates that the exploration budgets of 1,580 companies totaled US$6.89 billion in 2016, down 21% year over year. Marking the fourth year of declining budgets, the exploration industry has slashed its aggregate budget by almost one-third since the record-setting high of more than US$20.5 billion in 2012.

DIVERSIFIED

* Amid Rio Tinto's ongoing Guinea payments scandal, the Jeffery P. Weiner Supplemental Trust has filed a class action lawsuit against the company, alleging that the scandal has resulted in losses for owners of its American securities, The Australian Financial Review reported. The lawsuit has named former CEOs Sam Walsh and Tom Albanese, as well as former CFO Guy Elliott and current CFO Chris Lynch, as defendants.

BASE METALS

* Turquoise Hill Resources Ltd. expects the Oyu Tolgoi mine in Mongolia to produce 130,000 tonnes to 160,000 tonnes of copper and between 100,000 ounces and 140,000 ounces of gold in concentrate in 2017. The figures are lower compared to expected 2016 output and are primarily the result of approximately one-quarter less copper head grade and about one-half less gold head grade.

* Freeport-McMoRan Inc. is seeking approval for its US$18 billion plan to transition the Grasberg open-pit copper mine into an underground mining operation in Indonesia by late 2017, Reuters reported. Indonesia has given mixed signals on talks, and it is not clear if Freeport will be able to net a contract extension next year.

* Codelco reached an early wage deal with workers at its Chuquicamata copper mine in Chile after successful negotiations, averting the risk of a potential strike, Reuters reported. Six unions accepted the wage deal that was offered by the state-run copper miner.

* According to a report by Macquarie Research, Chilean copper output has failed to expand and is expected to fall 4.7% this year to 5.5 million tonnes, which would make it 12 years without an increase in production, Metal Bulletin reported. The fall in copper output despite the new projects coming online is attributed to the lack of expansion and poor performance at existing mines, including BHP Billiton Group's Escondida and Codelco's Chuquicamata, where output dropped by a combined 540,000 tonnes from 2006 to 2016.

* Reuters cited Peru's finance minister Alfredo Thorne as saying that the copper miners in the country are accelerating output to take advantage of improved copper prices. In October, copper output surged 38% year over year on the back of increasing production from MMG Ltd.'s Las Bambas and Freeport's recently expanded Cerro Verde mine.

* The U.S. Forest Service and the U.S. Bureau of Land Management denied the renewal of two long-held federal mining leases of Twin Metals Minnesota LLC in the Iron Range region of Minnesota, according to parent Antofagasta Plc.

* Global Ferronickel Holdings Inc., the Philippines' second-largest nickel miner, said it would appeal the "unlawful" cancelation of the environmental permit for its Ipilan nickel project, Reuters reported.

* A state of emergency was imposed after a violent altercation at the Exploracobres copper mine in Ecuador between police and the indigenous Shuar people claimed the life of one policeman, Mining.com reported. The attack involved about 60 people, who claim that the mine's owner has encroached on their territory.

* Artemis Resources Ltd. secured a three-month exclusive option from Fox Resources Ltd. to buy the latter's fully permitted AGIP Radio Hill nickel-copper operations, processing plant and associated mining and exploration tenements in Western Australia for A$3.5 million.

PRECIOUS METALS

* Ivanhoe Mines Ltd. became the latest stock to join the Sanford C. Bernstein coverage universe, with an upside potential of about 300%. "We value the company at C$11.9 per share, using a 10% discount rate and the following long term commodity prices: copper at US$8,200 per tonne, zinc at US$2,700 per tonne and platinum at US$1,286 per tonne," analyst Paul Gait and his team said in a Dec. 16 note.

* Royalty streaming firm Silver Wheaton Corp. is willing to sit back and let the smaller new market entrants take a go at the available opportunities, which are extremely competitive, and then look for opportunities to consolidate, President and CEO Randy Smallwood told Mining Weekly. The company expects to book well over US$600 million in free cash flow at year-end, reflecting strong performance, Smallwood added.

* Gold Road Resources Ltd. closed out its margin gold forward sales facility with the Commonwealth Bank of Australia for a pretax profit of A$11.9 million.

* The validity of the deal for Petropavlovsk PLC to acquire Amur Zoloto LLC from Russian Platinum PLC is set to expire Dec. 31, and the companies do not intend to renew it, Vedomosti reported.

* Gowest Gold Ltd. entered into a definitive prepaid forward gold purchase agreement with PGB Timmins Holdings LP, pursuant to which PGB agreed to advance up to US$17.6 million to finance the development of the Bradshaw gold deposit in Ontario as partial consideration for the purchase of up to 65,805 ounces of gold to be produced from Bradshaw.

* Vango Mining Ltd. entered into a deal with Dampier Gold Ltd. pursuant to which the latter will finance up to A$3 million, or 50% of the capital costs, for the development of the K2 deposit, part of the Plutonic Dome gold project in Western Australia, in exchange for up to 50% of the net profit derived from K2 production over the life of the mine.

* White Metal Resources Corp. signed a letter of intent with Benton Resources Inc. to acquire the Shebandowan gold property in Ontario, which includes 11 claim blocks totaling 150 claim units.

* Sokoman Iron Corp. signed letters of intent to acquire the East Alder and Princess Lake properties, which comprise 50 claims in Newfoundland, from Benton Resources.

* Blackrock Gold Corp. terminated a previously announced earn-in agreement to acquire up to an 80% interest in the Portrero gold-silver project in Durango, Mexico.

* Colibri Resource Corp. signed a letter of intent to acquire private company Canadian Gold Resources Ltd. from Ontop Capital Ltd. in an all-share deal.

* Mexico's environmental authority, SEMARNAT, denied the environmental impact assessment for Argonaut Gold Inc.'s San Antonio gold project in Baja California Sur, Mexico.

* PNX Metals Ltd. completed the first stage of its farm-in agreement with a subsidiary of Kirkland Lake Gold Ltd., earning a 51% interest in 19 exploration licenses and four mineral leases in Australia's Northern Territory. The company also elected to increase its interest to 90% under the second stage of the farm-in.

* Middle Island Resources Ltd. is mulling minimizing or curtailing pre-feasibility work on its Sandstone gold project in Western Australia, after the pit optimization results failed to meet expectations.

BULK COMMODITIES

* Fortescue Metals Group Ltd. CEO Nev Power said things look rough for the company's proposed iron ore blending joint venture with Vale SA, The Australian reported. "We're still in discussions with Vale, but I think it is looking less and less likely we are going to be able to do that transaction, which I think is a real shame," Power said.

* South32 Ltd. expects to produce 7.9 million tonnes of coal in 2017, compared to 8.4 million tonnes this year, from its Illawarra metallurgical coal operation in New South Wales, Australia.

* IRC Ltd. recommenced open-pit mining operations at its K&S iron ore mine in Russia, which will allow a supply of run-of-mine ore to the processing plant in addition to the stored ore stockpiles. The commissioning of K&S is underway, with the mine on track for commercial production by early 2017.

* Some 200 people, which included miners, their families and local government representatives, staged another protest against the closure of Jastrzebska Spólka Weglowa S.A.'s Krupinski mine, which is slated to shut down coal mining operations by the end of the first quarter of 2017.

* Thailand's Central Bankruptcy Court approved a US$1.94 billion debt restructuring plan for Sahaviriya Steel Industries Pcl (SSI), the country's biggest steelmaker, Reuters reported.

* The Queensland government launched new health and safety reforms to protect coal miners from black lung disease. The updated coal health and safety laws will take effect Jan. 1, 2017.

* Global investor-rights law firm, Rosen Law Firm, filed a class action lawsuit on behalf of purchasers of BHP Billiton Group and Vale joint venture Samarco Mineração SA's 10-year notes respectively due 2022, 2023 and 2024, from Oct. 31, 2012, through Nov. 30, 2015, alleging that Samarco failed to disclose the defects at the Fundão tailings dam and ignored warnings about the potential accident.

* Afarak Group Oyj has increased its ferrochrome production capacity by switching one of the furnaces at its Mogale plant from producing silicomanganese to ferrochrome. The Mogale plant has two ferrochrome furnaces in operation and one silicomanganese furnace, with the transition made due to favorable market conditions for ferrochrome.

* Steelmakers in 10 cities in China's Hebei province, including Tangshan, were ordered to cut output as the local government moves to reduce emissions amid a series of pollution alerts, Reuters wrote.

* Potash Ridge Corp. entered into up to a US$11.8 million convertible security funding agreement with an entity managed by the Lind Partners Funding, with proceeds to be put toward advancing the company's Blawn Mountain project in Utah and Valleyfield project in Quebec.

SPECIALTY

* De Beers SA will start flooding the underground workings of its Snap Lake diamond mine in Canada's Northwest Territories in early January 2017 to transition the mine into a long-term phase of care and maintenance, primarily focused on environmental monitoring activities. De Beers said it engaged with interested external parties for the sale of the mine but failed to reach an agreement for the deal.

The Daily Dose is updated as of 7 a.m. Hong Kong time, and scans news sources published in Chinese, English, Indonesian, Malay, Portuguese, Russian, Spanish, Thai and Ukrainian. Some external links may require a subscription.