Year-End Mining Update

November 25th, 2016 by

As 2016 nears the end of the year, it’s a good opportunity to review some of the recent headlines in the precious metals mining sector.

While some of the big names in the industry are selling off portions of their business, miners in Africa and China are looking to boost their production through a variety of means.

Freeport Sale

grasberg mine

Grasberg mine. Alfindra Primaldhi / CC BY 2.0

The major multinational miner Freeport-McMoRan (FCX) is considering an initial public offering (IPO) for its Indonesian operations as part of an agreement with the government of Indonesia to divest about a third of its ownership over the next several years. The state currently owns close to 10% of the Indonesian subsidiary but has been pushing for greater control over the processing and refining of the metals it extracts.

The company’s new chief executive, Chappy Hakim, indicated to reporters that the IPO would seek to spin off a 10.64% stake in Freeport Indonesia. Both the firm and the government have agreed that an IPO is preferable to finding an individual buyer.

In addition to the sale, Freeport hopes to invest a reported $18 billion in converting its largest mine in Indonesia, the massive Grasberg gold and copper mine, from a open-pit project to an underground mine. However, the government still must approve the IPO and give the green light on Freeport’s extension at Grasberg, which expires in 2021.

Zimbabwe Eyes Higher Output

The African nation of Zimbabwe has a similar goal as Indonesia in regard to controlling more of the refining of metals within the country (rather than merely exporting the raw minerals out of the country). Toward this goal, it appears that the country’s chamber of mines will ease or eliminate altogether an export tax on platinum ore because miners like Amplats (AMS) and Impala Platinum (IMP) have agreed to build smelting facilities in Zimbabwe.

These changes are anticipated amid a rise in precious metal production from the country. Through the first nine months of 2016, platinum and gold output from Zimbabwe have already exceeded their 2015 levels, totaling 10.8 metric tonnes and 16.2 metric tonnes year-to-date, respectively.

China Expands Reach

gold-mine

A preliminary agreement has been struck between China’s largest mining firm, Aluminum Corporation of China (ACH), and the government of Peru for an expansion of the company’s Toromocho copper mine located in the country. The firm is more commonly known as Chinalco. In the first quarter of this year alone, the mine produced over 31,000 tonnes of copper ore. Chinalco is additionally expected to invest more than $1 billion into the Toromocho project.

China has purchased an increasing number of foreign mines in order to dominate the production side of the commodities sector, as it is already the world’s top consumer. In fact, there are rumors that a Chinese ownership group has been pursuing the purchase of one of the largest Australian gold mines, the Kalgoorlie Super Pit, as well. Reportedly, the interested Chinese buyer has offered $1.3 billion for Barrick Gold’s (ABX) 50% stake in the historic Kalgoorlie project. On an annual basis, the mine produces roughly 800,000 troy ounces of gold.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.