Industry Trend Analysis - Mining - Weekly Projects Round-Up & Developments - MAR 2018

  • The US gold sector will register steady production growth over the coming years, on the back of improving gold prices and both greenfield and brownfield projects.
  • China's iron ore sector will see more mine closures as historically low iron ore prices will price out high-cost domestic miners. Import growth will slow in 2018 as steel production slows within the country, re-balancing economic growth away from heavy industry to services.
  • We have revised up our average iron ore price forecast for 2018 from USD50/tonne to USD55/tonne, as prices remain elevated following a stronger-than-expected rally in late 2017. We expect iron ore prices to decline in subsequent years as Chinese economic growth refocuses away from heavy industry to services, dampening global demand for iron ore.

Key Developments: Americas

US: New Projects To Support Gold Growth - The US gold sector will see steady production growth, supported by rising prices and a solid project pipeline. We forecast the country's gold output to increase from 6.9moz in 2018 to 7.5moz by 2027. Several junior miners will continue to advance gold projects in the US. In November 2017, Corvus Gold reported an increase in resources at the USD224mn North Bullfrog project, Northern Vortex Mining released the preliminary economic assessment of the USD61.6mn Moss project, and Rye Patch Gold reported drilling results at the USD49.1mn Florida Canyon project. Additionally, top US gold miner Newmont Mining will also develop the Twin Creek underground expansion, which will reach commercial production in 2018.

Price Recovery To Spur Near-Term Growth
Global Gold Price (USD/oz) & US Gold Production (moz)
e/f = BMI estimate/forecast. Source: USGS, Bloomberg, BMI

Key Developments: Asia

China: Slowing Steel Production, Environmental Regulations To Weigh On Iron Ore Output - China's iron ore production will edge lower over the coming years, as weak iron ore prices and tightening environmental regulations force higher-cost operations offline. We forecast the country's output to decline slightly, from 1,294mnt in 2018 to 1,236mnt by 2027. Following record iron ore import levels in 2017, increasing by 89.7% y-o-y over the first 10 months of the year, China's iron ore imports will slow over the coming quarters in line with slowing steel production. We forecast China's steel production growth to decelerate to 1.2% in 2018 and 0.8% in 2019, from a robust 5.0% estimate in 2017. In addition to a muted outlook for the steel sector, tightening environmental standards in the country will curb iron ore growth. In September 2017, Chinese officials announced that they will cancel about a third of the country's iron ore mining licences, mostly belonging to small polluting mines as part of Beijing's efforts to improve air quality, affecting about 1,000 mines.

In terms of imports, while we expect the overall volume growth of China's iron ore imports to decelerate, the country's tightening environmental standards will keep demand for high-grade iron ore relatively strong, putting a premium on prices. For instance, the spread between China iron ore import prices, of 66% and 58% iron content, increased from USD30.4/tonne at the beginning of 2017, to USD47.3/tonne as of January 2018.

China's Output To Decline
China - Iron Ore Production (mnt) & Growth (% y-o-y)
e/f = BMI estimate/forecast. Source: National Bureau of Statistics, BMI

Key Developments: Global

Global: Iron Ore Prices To Lose Steam - We expect tin prices to head lower from current spot levels, but remain largely elevated in the coming months. The rally in prices between December 2017 and February 2018 was driven in large part by increasing tightness in the market, following months of price under-performance relative to other base metals. As an example, stocks in London LME warehouses dropped from 2.3kt on December 1 2017 to 1.8kt as of February 8 2018, while stocks on the Shanghai Futures Exchange dropped from 7.5kt to 4.9kt over the same period. Furthermore, high-frequency Bloomberg data indicates that the global market remained in deficit as recently as of November 30 2017, thus providing a floor to prices in the short term. However we think prices will lose some steam in the coming months, as we expect an uptick in global production from China and Indonesia to put a halt to a three-month average deficit, which widened from 694kt in October to 1,811kt in November 2017. We therefore believe attempts to break a key resistance level at USD22,000/tonne will not succeed for now. We forecast the global tin market deficit to reach 2.6kt in 2018, only slightly above the 2.5kt shortfall witnessed in 2017.

Iron Ore Imports To Continue Slowing
China - Domestic Crude Steel Production (% y-o-y) & Iron Ore Imports, 3-month average (% chg y-o-y)
Source: China Customs, Bloomberg, BMI
Project Development - Weekly Project Round Up
Source: Company announcements, BMI
Country Company Mine Commodity Update
Argentina Advantage Lithium, Orocobre Cauchari Lithium Advantage Lithium has released the positive results of drilling and pump tests on the project
Australia Terramin Australia, Environmental

Copper Recovery
Kapunda Copper Have completed the maiden in situ recovery resource estimate of 47.4mnt of copper for the project
Australia Pilbara Minerals Pilgangoora Lithium Has announced the results of a pre-feasibility study for expansion of the project
Australia Westgold Resources, S2 Resources Polar Bear Gold Westgold Resources has executed a binding Heads of Agreement with S2 Resources to acquire its 100% stake in the project
Australia Westgold Resources, S2 Resources Norcott Gold Westgold Resources has executed a binding Heads of Agreement with S2 Resources to acquire its 100% stake in the project
Australia Westgold Resources, S2 Resources, Shumwari Eundynie Gold Westgold Resources has executed a binding Heads of Agreement with S2 Resources to acquire its 80% stake in the project
Australia TerraCom Blair Athol Coal - Thermal Has upgraded the reserves of the project to 18mnt of coal
Australia Ausgold Katanning Gold Has started a reverse circulation drilling programme at the project
Burkina Faso Avocet Mining, Balaji Group, Government of Burkina Faso Inata Gold Avocet Mining has completed the sale of the project to Balaji Group
Burkina Faso Middle Island Resource, Tajiri Resources Reo Gold Middle Island Resources has executed a Heads of Agreement with Tajiri Resources for the sale of its 100% stake in the project
Chile Hudbay Minerals, Southern Hemisphere Mining Llahuin Copper, Gold Southern Hemisphere Mining has signed an option agreement with Hudbay Minerals to acquire up to 70% interest in the project
Greenland Alba Mineral Resources Inglefield Land Copper, Gold, Nickel, Zinc Has been granted a mineral exploration licence at the project
Ireland Conroy Gold and Natural Resources Clontibret Gold Has started a drilling programme at the project
Papua New Guinea Anglo American, Highlands Pacific Star Mountains Copper, Gold Highlands Pacific will regain 100% of the project after Anglo American announced to withdraw from the joint venture
Russia Highland Gold Mining Belaya Gora Gold Has announced the results of a pre-feasibility study for the mine
South Korea Bluebird Merchant Ventures, Southern Gold Kochang Gold Bluebird Merchant Ventures has signed an agreement with Southern Gold to develop and reopen the project
Sudan Orca Gold Block 14 Gold Has received water permit from the Government of The Republic of the Sudan for the project
United States Aquila Resources Back Forty Gold, Zinc Has announced an updated mineral resource estimate of 16.6mnt in the measured and indicated category for the project
United States Integra Resources DeLamar Gold Has reported a maiden resource of 0.7Moz of gold at the Florida Mountain deposit, a part of the project
Zambia BMR Group, Jubilee Metals Group Kabwe Lead, Zinc Mining Cadastre Department of Zambia has issued a mining right termination notice for the project