Latin America's Business Information Leader
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Mining Perspectives - a weekly summary
January 9 - January 15 2010
Click to read the online version:
http://www.bnamericas.com/perspectives_home.jsp?idioma=I§or=7&id_email=170282422
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In this issue:
* Weekly Wrap
* Q & A:Recently in production and on its way towards growth
Robert Quartermain (part II)
CEO
Silver Standard
* Coming Up
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** WEEKLY WRAP **
Barrick Gold filed a lawsuit this week against New Gold for exercising its right of first refusal on the El Morro gold project in Chile.
In October Barrick made an agreement with Xstrata to acquire the latter's 70% in the project for US$465mn, a deal that depended on New Gold not exercising its right of first refusal.
However, this month Goldcorp made a deal with New Gold in which it agreed to pay US$463mn for the company to exercise the right and then transfer the 70% to Goldcorp, thus obstructing Barrick's plans to gain control of the stake.
"New Gold is unaware of any fact or circumstance that would support any of the allegations being made by Barrick and believes that the claim is completely without merit," the company said. "New Gold intends to defend this action using all available legal avenues."
New Gold also owns the other 30% of the project.
Located in Chile's northern region III, El Morro has 8.3Moz of gold and 6.3Blb (2.86Mt) of copper in measured and indicated resources.
Also this week in Mining:
Argentina
- The mining ministry of Salta province announced that investments in the sector, in both exploration and developing projects, reached US$75mn in 2009.
The ministry also said that indirect and direct sector employment increased 17% in 2009.
Exports were up 5.5% in volume to 97,991t but dropped 19.1% in value because of the fall in international prices.
Chile
- State copper company Codelco aims to carry out US$2.30bn in investments this year, versus US$2.05bn in 2009.
Of this year's amount, US$1.37bn will go towards advancing "structural" projects aimed at increasing the company's output to 2Mt/y of copper. During the first three quarters of 2009 Codelco produced 1.21Mt from its fully owned mines.
In order to finance its portfolio of projects, Codelco said it might seek funding internationally.
- Antofagasta Minerals has signed an agreement to earn up to 65% in Duluth Metals' Nakomis copper-nickel project in the US state of Minnesota.
Antofagasta agreed to invest US$130mn in the project over three years to earn 40%. If the company completes an economically viable feasibility study it can earn 25% more.
Nakomis has 274Mt grading 0.6% in inferred copper resources and also has nickel, platinum, palladium and gold.
- Workers belonging to union 2 at Chilean non-metallic miner Cosayach blocked access to the company's Cala Cala plant in a protest related to pay negotiations.
Ecuador
- President Rafael Correa signed a presidential decree officially creating the national mining company or Empresa Nacional Minera (ENAMI EP).
Colombia
- Medoro Resources received an NI 43-101 technical report on acquisition target Colombia Gold's Echandia property.
The report shows Echandia holds 1.08Moz gold and 14.2Moz silver in the measured and indicated category plus 274,000oz gold and 3.09Moz silver inferred.
Mexico
- Great Panther Silver increased its production last year by 22% compared to 2008 to slightly more than 2.20Moz of silver equivalent.
- Silver producer Fresnillo, through its Minera Penmont JV with Newmont Mining, said it will not change its bid to acquire Canplats Resources in light of an increased offer by Goldcorp.
In November Goldcorp signed an agreement to acquire Canplats in a deal worth about US$230mn. However, later Minera Penmont trumped the offer but since then Goldcorp has raised its own offer and Penmont's bid is no longer higher.
Canplats' main asset is the Camino Rojo gold-silver project in Mexico, which Goldcorp intends to add to its portfolio in order to expand resources at its nearby Peñasquito mine.
Panama
- Petaquilla Minerals reached commercial production at its Molejón gold mine as of January 8.
Peru
- Century Mining aims to produce 19,000oz of gold this year at its San Juan mine, starting a gradual expansion process to a rate of 30,000oz/y in 2012.
- Investment in mining projects in Peru could reach US$5bn in 2010, considering the estimated US$30bn worth of projects in the pipeline for the next six years, the country's energy and mines ministry (MEM) reported.
Regional
- Yamana Gold approved an exploration budget of US$80mn for 2010.
RESULTS & FIGURES
Chile's copper mine production is expected to rise to 5.73Mt this year from 5.34Mt in 2009 and in 2011 will reach 5.89Mt, according to the quarterly market research report by the country's state copper commission Cochilco.
Global mine output is expected to increase to 16.8Mt this year from 15.8Mt in 2009 and will reach 17.6Mt in 2011.
Peru's mining industry exported US$1.72bn worth of metals and minerals in November 2009, rising 48.7% from US$1.16bn year-on-year, according to the latest figures from the country's central bank.
Endeavour Silver increased its output 11% in 2009 to 2.6Moz silver while gold production rose 66% to 13,298oz.
First Majestic Silver in the fourth quarter of 2009 produced 1.25Moz of silver equivalent, 15% more than in the quarter before and 18% higher than in the year-ago period.
Goldcorp produced 2.4Moz of gold last year, a record for the company and more than its 2.3Moz guidance. Output in Q4 totaled 601,000oz.
Quadra Mining's Franke copper mine in Chile has produced 13.5Mlb (6,123t) of copper, including 4.1Mlb in the third quarter of last year and 9.4Mlb in the fourth.
By Pablo Gaete
Related Companies
* Yamana Gold Inc. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=11279§or=0
* Barrick Gold Corporation - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12053§or=0
* Endeavour Silver Corporation - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12091§or=0
* First Majestic Silver Corp. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12116§or=0
* Petaquilla Minerals - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12174§or=0
* New Gold Inc. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12681§or=0
* Newmont Mining Corporation - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12807§or=0
* Xstrata PLC - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=13720§or=0
* Antofagasta Minerals S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=13783§or=0
* Corporación Nacional del Cobre de Chile - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=14200§or=0
* Comisión Chilena del Cobre - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=14223§or=0
* Goldcorp Inc. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=14663§or=0
* Quadra Mining Ltd. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=14903§or=0
* Century Mining Corporation - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=333826§or=0
* Great Panther Resources Ltd. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=771237§or=0
* Medoro Resources Ltd. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=784174§or=0
* Fresnillo Plc - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=807491§or=0
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** Q & A **
* Recently in production and on its way towards growth
Robert Quartermain (part II)
CEO
Silver Standard
This is the second part of an interview with Robert Quartermain, Silver Standard Resources' CEO. Last week the focus was on the Canadian company's gold production, and the Diablillos project in Argentina, as well as projects in Peru and Mexico. This week we turn our attention to the performance of the Pirquitas mine in Argentina since its commercial startup in December and talk about the fiscal and political situation in Argentina, among other matters.
BNamericas: Since having reached commercial production in December, how has the Pirquitas mine been performing in the last month?
Quartermain: It's been performing well. We have said we aimed to produce 1-1.5Moz of silver in 2009 and once we release our financial statements I'm sure we will be able to show we have achieved that target. The mill and operating team have been working well as they continue to optimize the plant.
We currently are mining oxide material from the top of the pit. We will then move into transitional ore during the first quarter and after that reach the main sulfide ore. The current oxides are showing better results than our test work, so we are pleased about that.
BNamericas: Can you provide more details about the sulfide ore, which is the bulk of what Pirquitas will be mining during its life. When exactly do you expect to reach that material?
Quartermain: The sulfide ore is currently in the process of being exposed. In a few months we will move into the transitional ore. The expectation is that by the end of Q1 we will start to reach the sulfide ore.
BNamericas: What is the average grade of Pirquitas:
Quartermain: About 200g/t of silver.
BNamericas: What is your production guidance for Pirquitas this year?
Quartermain: We aim to produce 7Moz of silver at a cash cost of about US$9.00/oz taking into account byproduct credits from tin. That will be a little less than the nameplate capacity due to the fact that we will be mining the transitional ore this year. In 2011 we aim to produce at the nameplate rate of 8-10Moz/y, therefore our costs should go down at that time.
BNamericas: Will Pirquitas' tin production also go up starting next year?
Quartermain: That's correct. The transitional ore we are going to be mining this year unfortunately does not have as much tin as the sulfides which will be Pirquitas' exclusive focus as of next year. Therefore that factor will also allow us to reduce our costs starting in 2011.
BNamericas: As for costs, have you hedged your currency exchange rates or have you not done that and been able to take advantage of the weak Argentine peso currently?
Quartermain: We have not hedged our currency. We are paid in US dollars and since we are in Argentina and have a lot of fixed costs in pesos, this has been a slight benefit for us. But that will be positive only as long as inflation is kept in check in the country.
It is worth noting that we incorporate an inflation component into our budgets and cost structures when working in Argentina.
BNamericas: Do you have an export tax fiscal stability agreement with the Argentine government?
Quartermain: Yes we have a fiscal stability agreement that was negotiated with the government some time ago.
BNamericas: Does the recent political turbulence in Argentina - the attempt to oust the central bank president - have any impact on your operations or your relationship with the government? Have investors asked this question?
Quartermain: At the upper government levels the officials are focused on balancing their foreign debt as best they can. As for investors, the ones that are more Latin America-focused, they may bring it up but this has not been a topic of widespread conversation.
We are in Jujuy province and ship our concentrate into Chile. Our costs are mostly fixed and we have strong support locally. With close to 600 people on our payroll, we are a large generator of revenues for the province.
BNamericas: With all your advancement at Pirquitas, have you had room to concentrate on your other project in Argentina, Diablillos?
Quartermain: Pirquitas has certainly been our main focus in the country. But at Diablillos we recently carried out more drilling and have moved the resource into the indicated category in order to carry out engineering and metallurgical studies, that will look at the operation from a flotation and leaching point of view.
Those studies will continue this year and we also aim to carry out a scoping study. The mine also has a significant gold credit and could have potential for synergies with Pirquitas.
BNamericas: How far away from Pirquitas is it?
Quartermain: About 250km south.
BNamericas: In light of that distance, what type of synergies do you envision?
Quartermain: They would likely be administrative. Because of size we might be able to negotiate more favorably with suppliers, etc. We expect Diabillos would be similar in size and also be an open pit, so we might also be able to use some of the same equipment for both.
BNamericas: And taking into account that Silver Standard's main focus is Argentina yet it has a large portfolio with projects also in Mexico, Peru and Chile, has the company been able to advance on those efforts in the other countries?
Quartermain: Yes we have. At San Luis in Peru we have completed a minor amount of geotechnical work that will allow us to carry out a feasibility study. It's a small project but a robust one with high gold and silver grades.
At Pitarrilla in Mexico we have a large silver resource and hope to complete a feasibility study by Q4 of this year on that.
In Chile we have the Challacollo project, which is a small silver property. We are doing work to determine how much of a copper resource it also has.
At the Berenguela project in Peru, we are also investigating to see if there is a porphyry copper resource in addition to silver.
BNamericas: How much cash do you have in the bank to advance all these projects?
Quartermain: At the end of September we had US$40mn in cash and about US$27mn in working capital.
By Pablo Gaete
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** COMING UP **
January 17, 2010:Second round of presidential election.
Chile
January 18, 2010:Martin Luther King, Jr. Day, US markets closed.
Regional
January 22, 2010:Vale shareholders due to vote on proposals to incorporate iron ore mining subsidiaries Mineração Estrela do Apolo and Mineração Vale Corumbá.
Brazil
January 27, 2010:New president Porfirio Lobo to be sworn in.
Honduras
February 07, 2010:Presidential and congressional elections.
Costa Rica
February 11, 2010:Vale to hold conference call on Q4 2009 results, which will be released after markets close February 10.
Brazil
February 15, 2010:Washington's Birthday/Presidents' Day, US markets closed.
Regional
February 25, 2010:Date of special shareholders meeting in which Petaquilla Minerals will seek approval to complete a spin out of its infrastructure company.
Panama
April 02, 2010:Good Friday, most markets closed.
Regional
May 31, 2010:Memorial Day, US markets closed.
Regional
July 05, 2010:US holiday marking Independence Day.
Regional
September06, 2010:Labor Day, US markets closed.
Regional
October 03, 2010:Presidential elections.
Brazil
November 01, 2010:All Saints Day, most Latin American markets closed.
Regional
November 25, 2010:Thanksgiving Day, US markets closed.
Regional
December 24, 2010:Christmas holiday (observed), US markets closed.
Regional
Click here to view the most important conferences and events in your sector of interest. http://www.bnamericas.com/conferences_home.jsp?idioma=I§or=7
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Featured Reports
* Cinver: Investment Review - December 2009 Edition - http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1002034§or=0
* Celfin: COMPAÑIA MINERA MILPO (BUY, Initial Opinion): Zinc and Copper Growth Play - http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1004633§or=0
* Cochilco: World Copper Market Review - The Year in Review - http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1000974§or=0
* BCRP - Ingresos del Gobierno General Crecen 1,6% en Términos Reales - http://www.bnamericas.com/research_detalle.jsp?idioma=E&documento=1003395§or=0
* Celfin: Asset Allocation - Pension Funds (November 2009): trending abroad - http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1002614§or=0
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