Industry Trend Analysis - Projects By Geography: Asia & Africa To Remain Bright Spots - JULY 2017


BMI View: Asia and Africa will emerge as capex hotspots as miners prioritise these regions for the limited greenfield projects in which they will invest over the coming years. Within Asia, Australia will lead as strong ore reserves sustainability, advanced technology and infrastructure, supportive government regulation and minimal political and economic risks make the country an attractive investment destination .

Globally, Asia and Africa will emerge as capex hotspots as miners prioritise these regions for the relatively limited projects in which they will invest over the coming years. According to our Global Mines database, as of June 2017, Asia tops the list with 500 greenfield projects and brownfield expansions under its belt, followed by Africa with 254 such projects. In comparison, Europe, Latin America and North America together account for 540 such projects in total. Asia will remain a destination of choice for miners owing to the availability of high ore grades and low labour costs globally. Within Asia, Australia will lead as strong ore reserves sustainability, advanced technology and infrastructure, supportive government regulation and minimal political and economic risks characterise the country. Nevertheless, a substantial portion of the projects in Australia's pipeline remain in the announced/feasibility study stage, of which many projects may not reach commercial production in the foreseeable future as miners continue to cut down costs and lower capex.

Asia & Africa To Rule
Select Regions - Number Of Mining Projects By Phase
Note: As of June 2017. Source: BMI Global Mines Database

Australia To Remain Mining King With Strongest Global Project Pipeline

Although Australia holds the world's largest project pipeline, we expect a number of these projects will not come to fruition over our forecast period. A significant portion of the projects in the sector's pipeline are in the announced/feasibility study stage, leaving them at greater risk of being stalled as miners' remain focused on cost-cutting and lower spending. Despite this, a few project bright spots remain in the sector. Australia's copper ore production growth will be supported by projects such as BHP Billiton (BHP)'s expansion at its Olympic Dam, Sandfire Resources' DeGrussa copper mine and the Carrapateena project developed by OZ Minerals Ltd. Australian bauxite production growth will also accelerate over the next few years despite competition from Indonesia as a result of expansion plans by Rio Tinto and Alcoa, allowing the country to remain the largest global producer of bauxite.

Australia Remains Most Popular Destination
Countries With Largest Number Of New Mining Projects
Note: As of June 2017. Source: BMI Global Mines Database

Gold Projects To Make Canada Shine

Canada ranks second on the number of new projects in our global mines database, after Australia, chalking up a total of 188 new projects compared to 64 existing operations. Most of the new projects are gold projects, as prices continue to climb and Canada's stable operating environment continues to attract miners. Gold exploration firms in Canada will increasingly attract investor interest as Canada's vast gold reserves will support growth opportunities. We expect junior firms in particular to gain investment attention and ramp up merger activity. Major international gold miners will also look to increase exposure to Canada. Barrick Gold and Goldcorp, the largest and second largest Canadian gold producers in terms of output, respectively, will continue to dominate the country's gold sector benefiting from low-cost production.

Canada - Key Gold Mining Deals
Deal Type Target Firm/Seller Acquirer Key Asset Value (USDmn)
Source: Company Announcements, Bloomberg
Acquisition Thompson Creek Metals Centerra Gold Mount Milligan copper, gold (BC) 1100
Acquisition Newmarket Gold Kirkland Gold 770
Merger Lake Shore Gold Corp Tahoe Resources - 552
Acquisition Kaminak Gold Corp Goldcorp Coffee Gold project (Yukon) 316
Acquisition Claude Resources Silver Standard Resources Seabee Gold operation (Saskatchewan) 221
Acquisition True Gold Mining Endeavour Mining Corp - 146
Acquisition Tamaka Gold Corp First Mining Finance Corp Goldlund project (Ontario) 51.4
Acquisition Niogold Mining Oban Mining Marban project (Quebec) 41.9
Investment Auryn Resources Goldcorp Committee Bay (Nunavut), Homestake Ridge (BC) projects 26.5
Asset sale Chalice Gold Mines Ltd First Mining Finance Corp Cameron gold operations (Ontario) 15.2
Acquisition Adventure Gold Probe Metals - 12.6
Asset sale Balmoral Resources Wallbridge Mining Fenelon gold project (Ontario) 2.6
Investment Probe Metals Goldcorp Val-d'Or East gold project (Quebec) 2.3
Investment Independence Gold Goldcorp - 1.1

Projects In Latin America To Suffer From Stronger Currencies

Miners in Latin America will contend with several key political and operational risks as the region gradually recovers from the commodity price bust over the coming years. Miners will also face elevated costs and tightening environmental regulations due to concern over water usage and contamination. Additionally, most countries in Latin America, with the exception of Brazil will see their real exchange rates appreciating in the coming years, to the woes of mining companies operating in the region. Apart from Brazil, these very countries offered miners significant cost savings in previous years as their currencies followed a depreciating track. According to our Global Mines database, Peru, Brazil, and Chile are amongst the top 10 countries globally with the largest number of new projects. However, the number of new projects in these countries is not greater than the number already in operation, signalling miners' slowing interest in the region. Major miners operating in these countries include Vale, Anglo American, Alcoa, ArcelorMittal, Codelco, BHP, Glencore, and Rio Tinto.

Real Exchange Rates For Brazil To Depreciate
Select Latin American Countries - Real Effective Exchange Rate, Index
f = BMI forecast. Source: BMI

Strong Project Pipeline In Africa Despite Risks

Chinese and Indian outbound mining investment will ensure Africa's project pipeline remains resilient over the coming years, due to the region's vast mineral reserves and low production costs. According to our Global Mines database, Africa has 245 new projects in the pipeline compared to 172 projects in operation, ranking second globally after Asia. Nevertheless, while our overall outlook on Africa's mineral sector remains positive due to the sector's low production costs and high grade reserves, both operational challenges and regulatory uncertainty will pose the greatest challenges to miners operating within Africa over the coming years. Chinese and Indian firms will increasingly invest in African countries, such as Mozambique and the Democratic Republic of the Congo (DRC), rather than South Africa. South Africa's investment attractiveness will decrease due to both ongoing power shortage and labour unrest, which will increase operational challenges within the country. According to our global mines database, Botswana, Guinea and Cote d'Ivoire have the largest ratio of new projects compared to existing ones, coinciding with the fact that miners operating in these countries will be the biggest benefactors as these countries will see the biggest falls in their currency strength.

Global - Largest Greenfield Projects
Country Commodities Mine Primary Company Secondary Company Capex (USDmn) Notes
Note: Correct as of June 2017. Source: Company announcements, BMI Global Mines Database
Philippines Copper King-King Nationwide Development Corporation - NADECOR (60%) St. Augustine Gold and Copper (40%) 2040 Commercial production is expected to commence by 2017; Average production - 62.6kt/yr; Proved and Probable Reserves - 617.9mnt
Philippines Gold King-King Nationwide Development Corporation - NADECOR (60%) St. Augustine Gold and Copper (40%) 2040 Commercial production is expected to commence by 2017; Average production - 236.2koz/yr; Proved and Probable Reserves - 617.9mnt
Philippines Nickel Mindoro Intex Resources (100%) 2050 Proved and Probable Reserves - 126.3mnt; Estimated production - 53kt/yr
Australia Nickel Wingellina Metals X (100%) 2200 Estimated Production: 40kt/yr; Reserves: 168.4mnt
Kazakhstan Copper Bozshakol KAZ Minerals (100%) 2200 February 2016 - First copper concentrate output from Bozshakol; Construction work started in 2013; Estimated capacity - 100kt/yr; Resources - 1.2bn tonnes
Russia Coal - Coking Tyva (Centralniy) Severstal (100%) 2300 Estimated resources - 639 mnt; Production to start in 2018; Potential output - 7.5mnt of coking coal concentrate
Canada Copper Casino Western Copper Corporation (100%) 2460 March 2016 - Project has been referred to a panel review in January 2016 and the request has been approved from environment minister in March 2016; Bankable feasibility study completed; Commercial production expected in 2019; Proved and Probable Reserves - 965mnt
Peru Copper Galeno Minerals and Metals Group (60%) Jiangxi Copper (40%) 2500 The project is expected to produce 144kt/yr of copper concentrates over a 22-year mine life; Expected to start production in 2016
Brazil Iron Ore Jiboia Mineracao Minas Bahia - MIBA (100%) 2600 Estimated production - 25mnt/yr
China Coal - Thermal Dahaize China Coal Energy (100%) 2610 The project, being developed by China Coal Shaanxi Yulin Energy & Chemical Company Limited, a subsidiary of China Coal Energy, has a production capacity of 15mnt/yr
Australia Coal - Coking Belvedere Vale (100%) 2814 Production capacity: 10mnt/yr
Canada Iron Ore Hopes Advance (Nunavik) Oceanic Iron Ore Corporation (100%) 2850 Proven Reserves - 763.3mnt; Estimated production - 10-20mnt/yr; Expected start date - 2017
Brazil Iron Ore Pedra de Ferro Eurasian Resources Group (100%) 3000 June 2014 - Bahia Mineracao (Bamin) has granted the operating license for the project; Estimated production 20mnt/yr with an average grade of 66-68% iron; Reserves - 470.5mnt
Mexico Gold El Arco Southern Copper Corporation (100%) 3000 Reserves - 9.1mnt; Estimated gold production - 105koz/yr; Currently under advanced exploration stage
Mexico Copper El Arco Southern Copper Corporation (100%) 3000 Reserves - 9.1mnt; Southern Copper Corporation is owned by Grupo Mexico (88.57%) and minority stakeholders (11.43%)
Canada Iron Ore Duncan Lake Century Global Commodities (65%) Augyva Mining Resources (35%) 3043 Estimated production - 41mnt/yr; Measured and Indicated Resources - 1,050.5mnt
Pakistan Copper Reko Diq Barrick Gold (37.5%) Baluchistan Development Authority (BDA) (25%) , Antofagasta (37.5%) 3300 Reserves - 2.7mnt
Chile Gold NuevaUnion Teck Resources (50%) GoldCorp (50%) 3500 November 2015 - Goldcorp and Teck Resources have completed the combination of their respective El Morro and Relincho projects into a 50:50 joint venture, paving the way for a prefeasibility study to start in H217; NuevaUnion will have a 32-year lifespan and produce an average of 315koz/yr of gold, over the first decade
Chile Copper NuevaUnion Teck Resources (50%) GoldCorp (50%) 3500 November 2015 - Goldcorp and Teck Resources have completed the combination of their respective El Morro and Relincho projects into a 50:50 joint venture, paving the way for a prefeasibility study to start in H217; Reserves - 1.2mnt
Liberia Iron Ore Putu Severstal (100%) 3500 April 2015 - Severstal will be unable to bring the project online, if it does not get a partner; Estimated resources - 4.4bn tonnes; Production to start in 2017-2018, Potential output - 20-30mnt/yr of concentrate
Australia Iron Ore Central Eyre (Warramboo) Iron Road Limited (100%) 4000 May 2017 - South Australian government has awarded Iron Road a mining lease and development approval for the mine; Reserves: 3700mnt; Estimated Production: 21mnt/yr; Mine Life: 25yrs
Australia Coal - Thermal South Galilee AMCI (Alpha) Pty Ltd 4200 March 2016 - Bandanna Energy, 50% owner of the mine, is liquidated; December 2014 - The project has been given the greenlight by the Queensland government; Expected Production: 19mnt/yr; Reserves: 218mnt
Afghanistan Copper Aynak China Metallurgical Group Corporation (75%) Jiangxi Copper (25%) 4400 Reserves: 60mnt
Cameroon Iron Ore Mbalam-Nabeba Sundance Resources (100%) 4700 January 2016 - The company has postponed the development of mine after China Gezhouba Group Company, selected to build the project's key port and rail infrastructure, did not sign the contract due to low ore prices; Mine will commence production in 2018 with an estimated annual production of 40mnt/yr in the initial 12 years; Reserves - 436.3mnt
Congo-Brazzaville Iron Ore Zanaga Zanaga Iron Ore Company (50%) Glencore (50%) 4700 May 2014 - ZIOC released the results of the Feasibility Study, which confirm attractive project economics of a staged development approach. Stage One consists of a 12mntpa operation, with Stage Two expanding the operation by 18mntpa to produce a total 30mntpa of iron ore over a 30 year mine life. Production is slated for 2016-17; Reserves: 2070mnt
Chile Gold Caspiche Exeter Resource (100%) 4800 Measured and Indicated Resources - 1,403.6mnt
Chile Copper Caspiche Exeter Resource (100%) 4800 Measured and Indicated Resources - 39.6Moz
Peru Copper Michiquillay Milpo (100%) 4800 September 2015 - Milpo expects to receive approval for its plan to develop the project by the end of 2015; Anglo American withdrew from the concession in December 2014, after having worked on it since 2007; Estimated copper production - 187kt/yr
Canada Gold Galore Creek Teck Resources (50%) NovaGold Resources (50%) 5200 Proved Reserves: 1.1Moz; Development of the project is currently on hold and there is no significant field activity planned for 2016
Canada Copper Galore Creek Teck Resources (50%) NovaGold Resources (50%) 5200 Proved Reserves: 0.4mnt; Development of the project is currently on hold and there is no significant field activity planned for 2016
Australia Iron Ore West Pilbara Baosteel (50%) POSCO (24.5%) , AMCI Group (25.5%) 5700 December 2015 - Partners have halted work on the feasibility study on the project in light of the slump in iron prices; Proved and Probable Reserves -780mnt; Projected production rate of 40mnt/yr
Philippines Gold Tampakan Indophil Resources (100%) 5900 August 2016 - Environment review is in final stage; Resources - 17.6Moz
Philippines Copper Tampakan Indophil Resources (100%) 5900 Average planned copper production of 450kt/yr over the first five years of operation, with average life-of-mine copper production rate of 375kt/yr for rest of years of operation
Australia Coal - Thermal China Stone MacMines Austasia (100%) 6000 The mine will produce 55mnt/yr at its peak; First open cut coal production is scheduled to commence in late 2017 and first saleable coal in 2018
Chile Copper Cerro Casale Barrick Gold (75%) Kinross Gold Corp (25%) 6000 Proved Reserves - 229.7mnt; Approval of the Environmental Impact Assessment was received in January 2013
Peru Copper Quellaveco Anglo American (81.9%) Mitsubishi Corporation (18.1%) 6000 The feasibility study is expected to be completed in 2015; Proved Reserves: 951.4mnt
United States Copper Resolution Rio Tinto (55%) BHP Billiton (45%) 6000 Estimated peak annual production - 454kt; Resources - 1.8bn tonnes
United States Copper Nokomis (Twin Metals) Antofagasta (100%) 8180 Prefeasibility study completed in July 2014; Indicated Resources - 550mnt
United States Nickel Nokomis (Twin Metals) Antofagasta (100%) 8180 Prefeasibility study completed in July 2014; Indicated Resources - 550mnt
Chile Copper Pascua Lama Barrick Gold (100%) 8500 Proved Reserves - 31.9mnt; March 2016 - The Project has been shuttered since 2013, when a Chilean court ordered the company to halt construction over environmental concerns