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Rio Tinto green-lights US$5.3B Oyu Tolgoi expansion; Lawsuit filed against Samarco executives; Gerdau to up steel exports

Greenhouse gas and gold mines Nearly 1 ton of CO2 emitted per ounce of gold produced in 2019

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Essential Metals & Mining Insights - August 2020

State of the Market: Mining Q2-2020


Rio Tinto green-lights US$5.3B Oyu Tolgoi expansion; Lawsuit filed against Samarco executives; Gerdau to up steel exports

TOP NEWS

RioTinto green-lights US$5.3 billion Oyu Tolgoi copper mine expansion

Rio Tinto, TurquoiseHill Resources Ltd., and the Government of Mongolia have approvedthe next development stage for the Oyu Tolgoi copper-gold mine in Mongolia. Thedevelopment of the underground mine will start in mid-2016 following the approvalof a US$5.3 billion investment by the partners and the recent granting of all necessarypermits. First production is expected in 2020, and full ramp up to produce over500,000 tonnes of copper per year is expected in 2027.

Brazilianprosecutors file lawsuit against 14 former, current Samarco executives

Prosecutors in Minas Gerais state announced at a press conferencethey had filed a lawsuit against 14 former and current executives of . The prosecutionclaims the executives knowingly withheld key information about the Mariana tailingsdam collapse, as well as about two additional mudslides that occurred in Januarythis year, daily O Globo reported.This comes as the country's Federal Court of Appeal ratified the 15-year agreement entered into by the - and -owned joint venture.

Gerdauto increase steel exports to 30% of production in 2016

Gerdau SAplans to increase the proportion of steel it exports to 30% this year to countera slump in domestic demand, daily Valor Econômicoreported.

DIVERSIFIED

* Prosecutors in Minas Gerais state announced at a press conferencethey had filed a lawsuit against 14 former and current executives of . The prosecutionclaims the executives knowingly withheld key information about the Mariana tailingsdam collapse, as well as about two additional mudslides that occurred in Januarythis year, daily O Globo reported.

* Brazil's Federal Court of Appeal ratified the 15-year agreement entered into by - and -owned joint venture SamarcoMineração for the rehabilitation of the damage caused by the Samarco dam disaster.

* The sale of Vale's 40% share in Mineração Rio do Norte SA, or MRN, to Norsk Hydro ASA, which owns 5% of the company, is not materializing,despite the memorandum of understanding signed in 2015. Vale CEO Murilo Ferreirareportedly said it has not come to an agreement with the "entity that is currentlya partner at MRN," without explicitly mentioning Hydro, so the Brazilian minerhas decided to "begin discussions with a third party," Valor Econômico reported.

* Rio Tintowill see its near-term debt trimmedby US$1.5 billion after purchasing US$141 million of debt under its Dutch auctionoffer, and US$1.36 billion under the any and all offer, which ended late April.The Dutch auction offer was oversubscribed May 4 and the company will not acceptmore of these securities beyond US$141 million.

* Rio Tinto's incoming CEO, Jean-Sébastien Jacques, plans tofocus on productivity improvements across the company amid "challenging timesfor the sector" and for the mining giant, Mining Weekly reported. "We cannot be complacent just because we haveTier 1 assets. We must always challenge ourselves to be more productive, more performance-drivenand more proactive in our engagement with stakeholders and society," Jacquessaid.

* Meanwhile, The Wall Street Journal quoted current CEOSam Walsh as saying the company plans to complete work on the Oyu Tolgoi underground copper mine expansion project,as well as the development of the new Silvergrass iron ore project, part of HamersleyConsolidated operations, in "the relative near-term."

* Separately, Walsh commented on Rio Tinto's reversal on its decision to move payment terms for suppliersand contractors to 90 days from 45 days after facing criticism from suppliers andpoliticians and said it was a "misjudgment." The proposed extended termwas "based on information that turned out to be incorrect," MiningNews.netwrote. "Under new contract negotiations, we will ask our larger and multinationalsuppliers to consider 60 or 90-day terms, but this will not be imposed on any business,"a company representative noted.

BASE METALS

* Rio Tinto, TurquoiseHill Resources Ltd., and the Government of Mongolia have approvedthe next development stage for the Oyu Tolgoi copper-gold mine in Mongolia. Thedevelopment of the underground mine will start in mid-2016 following the approvalof a US$5.3 billion investment by the partners and the recent granting of all necessarypermits. First production is expected in 2020, and full ramp up to produce over500,000 tonnes of copper per year is expected in 2027.

* First QuantumMinerals Ltd., which is selling its Kevitsa mine for US$712 million, is nearly out of its liquiditycrisis, Financial Post reported,citing company executives. President Clive Newall said, "We're in the middleof a process, but we've already done the hard part."

* Antofagasta Plcunit Antofagasta Minerals SA'sLos Pelambres coppermine will invest US$20 million to definitely close down its Cerro Amarillo tailingsdeposit, which, due to a limits modification in 2008, was mapped in Argentine territoryinside Glencore Plc'sEl Pachon projectin San Juan province, triggering a legal dispute between both companies. The agreementwas signed last week by authorities of San Juan. However, the dispute between Glencoreand Los Pelambres will continue in parallel, daily Diario El Día reported.

* A Chilean law which mandates state miner Codelco to transfer 10% of its export sales to the country'sarmed forces, is "absurd" and provides grounds for "dishonesty,"Codelco Chairman Oscar Landerretche said in an interviewwith TV network TVN. The Chilean government had announced the full disclosure ofthe law this week; however, the disclosure was suspended at the last minute.

* Rio Tinto-controlled Turquoise Hill recorded first-quarternet income attributableto owners of US$118.9 million, up from net income of US$96.2 million posted a yearago. Revenue, meanwhile, increased 18.9% on a quarterly basis to US$422.7 million,which reflects higher gold prices partially offset by lower volumes of copper-goldconcentrate sales.

* Thompson CreekMetals Co. Inc.'s net income for quarter ended March 31 reached US$35.1million, swinging froma loss of US$87.2 million a year earlier. In the first quarter of this year, thecompany booked unrealized noncash foreign exchange gains of US$59.4 million, comparedto year-ago losses of US$88.2 million, primarily on intercompany notes. Revenuesfell to US$97.4 million, from US$123 million a year earlier. During the quarter,sales volumes for copper and gold were 15.0 million pounds and 44,391 ounces, respectively,up from sales of 14.8 million pounds of copper and 36,750 ounces of gold a yearago.

* BMR Group Plcsaid its environmental social impact assessment for its tailings retreatment processand the construction of its planned pilot and main treatment plants in was approvedby the Zambia Environmental Management Agency.

* Strategic MineralsPlc said it plans to conducta three hole maiden drilling program on its Hanns Camp, part of its Laverton projectin Western Australia, targeting a strong electromagnetic conductor beneath nickelsulphide-copper anomaly.

* OZ Minerals Ltd.is expected to announce today the expansion of its South Australia-based copper project,which could increase the cost of the project to about A$1 billion, TheAustralian reported.

* Lorraine CopperCorp. and Teck ResourcesLtd. have agreed to terminatethe deal involving the sale of Teck's 51% joint venture interest in the copper project inBritish Columbia. The sale would have seen Lorraine securing full ownership of theproject upon closing.

PRECIOUS METALS

* Sibanye GoldLtd. is looking to purchase more platinum assets following its acquisitionof such properties from Anglo AmericanPlatinum Ltd. and AquariusPlatinum Ltd. in 2015, Reuters reported. The company is also seeking gold companies abroadand could invest in coal.

* Claude ResourcesInc.'s first-quarter net earnings increased 17% year over year to C$6.0 million, or 3 Canadiancents per share. The company produced 20,672 ounces of gold, the second-highestquarterly production in its history.

* AngloGold AshantiLtd.'s Ghanaian unit has filed a request for arbitration with the International Centrefor Settlement of Investment Disputes against Ghana, arguing that the country hasfailed to protect its Obuasigold operation from illegal miners.

* Hecla MiningCo. swung to a lossattributable to shareholders of US$756,000 in the first quarter of 2016, from aprofit of US$12.4 million a year earlier, due to foreign exchange effects. Salesfor the quarter increased 10% year over year to US$131.0 million on record silverequivalent production of 12.0 million ounces, partially offset by lower prices.Hecla revised its 2016 silver output forecast and now expects production of 15.0million ounces, from 13.5 million ounces to 14.0 million ounces previously.

* McEwen MiningInc. reported consolidated netincome of US$13.0 million for the quarter ended March 31, up from US$6.0million booked a year earlier. The company sold 40,578 gold equivalent ounces, comparedto sales of 37,682 gold equivalent ounces in the same period of 2015.

* Great PantherSilver Ltd. swung to a netloss of C$4.5 million in the first quarter from year-ago profit of C$3.6million as revenue fell by 9% to C$18.5 million. The net loss was primarily attributableto a C$6.1 million net foreign exchange loss while the reduction in revenue wasdue to 16% lower metal sales.

* Endeavour SilverCorp.'s first-quarter net income increased 35% on a yearly basis to C$1.8 million while EBITDAfell 47% to C$8.6 million. Revenue also fell by 19% to C$41.5 million due to lowersilver production and lower silver prices but earnings improved due to lower operatingcosts.

* Newcrest MiningLtd. hedgeda further 200,000 ounces of gold expected over the 2018 and 2019 financial yearsfrom its Telfergold project in Western Australia, at an average gold price of A$1,773 per ounce.

BULK COMMODITIES

* Gerdau SAplans to increase the proportion of steel it exports to 30% this year to countera slump in domestic demand, daily Valor Econômicoreported.

* BlueScope SteelLtd. has completed the recently announced offering of US$500 million worth of 6.5% senior unsecurednotes due May 15, 2021.

* Kommersant reported that VEB is actively searchingbuyers for the mining and metallurgical assets controlled by the bank. Accordingto sources, these include assets of Industrial Union of Donbass and Russian coalcompany Sibuglemet Holding.Evraz Plc has formallycontrolled Sibuglemet since the end of 2015.

* Jindal Steel& Power Ltd. Managing Director Ravi Uppal said the company is indiscussions to off-loadcertain noncore assets to raise about 30 billion Indian rupees. Jindal Steel's debtpile has reached 460 billion rupees, and the company hopes that such a move wouldhelp it trim its liabilities by over 35% to under 300 billion rupees in the nextfour years, the official said.

* AK Steel HoldingCorp. plans to increasecurrent spot market base prices for all carbon flat-rolled steel products by atleast US$60 per tonne, effective immediately.

* Mechel OAOis seeking to restructureits 17, 18 and 19 series of ruble bonds with a nominal value of 15 billion Russianrubles, equivalent to US$228 million. The Russian coal and steel group is proposingchanges to the current payment schedule and the order of determining the couponrate for future periods for all three series of bonds.

* The Czech government would take over payment of wages and severanceto workers of New World ResourcesPlc unit OKD asif the company is unable to do so in accordance with the law, Puls Biznesureported, citing Industry Minister Jan Mladek.

* Churchill MiningPlc was advised by the tribunal secretary of the International Centrefor the Settlement of Investment Disputes that a wire transfer totaling US$200,000has been received from Indonesia, which the ICSID understands to be thepayment of the country's share of the fifth advance of related fees and expenses.

SPECIALTY

* Sociedad Quimicay Minera de Chile SA and LithiumAmericas Corp. executives met with officials of the Argentine governmentand the province of Jujuy, where they plan to develop their joint lithium projectCauchari-Olaroz.Construction will start in the first half of 2017, with an estimated investmentranging between US$500 million and US$600 million. Production will start no laterthan 2019, with the aim to reach a full capacity of 40,000 tonnes per year of lithiumcarbonate equivalent, Reuters reported.

* Separately, SQM filed an invalidation appeal against the permitsgranted to Rockwood Holdings Inc.to increase lithium production in northern Chile, before the environmental regulatoroffice in Antofagasta region. In a 47-page document, SQM claims the agency violatedenvironmental law when approving the license, daily Diario Financiero reported.

* The supervisory board of PJSC ALROSA recommended that shareholders approve paymentof dividends for 2015 at the rate of 2.09 Russian rubles per ordinary share, Vedomostireported. Payments will total 15.39 billion rubles.

INDUSTRY NEWS

* Luxembourg, which announced in February that it was planningto become a global center for asteroid mining, has been approached by several spaceagencies and companies about a potential collaboration, Deputy Prime Minister EtienneSchneider said. The country is working on a joint mission with U.S. firm Deep SpaceIndustries to develop technologies that might be used to deploy robotic explorersto probe asteroids after 2020, London's Financial Times reported.

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