Category Archives: Minerals & Metals

complex copper concentrates

Copper concentrates come in two “flavours” – Clean and Complex.

Clean copper concentrates have more than 20% copper and possibly gold and silver and low levels of the deleterious elements As, As, Bi, Cd, Cl, F, Pb, Hg, U and Zn. In addition, asbestos (referred to as fibre) is present in a small number of mine product streams. The Complex Concentrates have high levels of one or more deleterious elements. Each of the deleterious elements will have a threshold level in the offtake contract where the smelter will charge a penalty in addition to the treatment and refining charges. The penalty accommodates the increased costs of disposal and safe disposal.

Typical copper concentrate penalties.  Courtesy, AME Group
Typical copper concentrate penalties. Courtesy, AME Group

There is frequently an upper limit for some deleterious elements, above which the smelter may refuse to accept the concentrate. 

The most common deleterious element in copper concentrates is arsenic. Globally 65% of copper concentrates have less than 0.1% As. Above 0.2% arsenic, copper concentrates are considered to be Complex Concentrates and will be charged penalties. In the last decade, as new mine copper production has slowed the quantities of Complex Concentrates entering the market increased significantly while smelter capacity for these concentrates has declined.

Complex concentrates from Marcapunta in Peru (8% As), Chelopeche in Bulgaria (6% As) and Chuquicamata in Chile (1.2% As) have been the main producers. They have been joined more recently by production form Toromocho in Peru (1% As) and Ministro Hales in Chile (4% As).

Smelting Treatment Options

Prior to the 1990s there were many smelters that would accept copper concentrates with high deleterious element concentrations. However due to environmental concerns, liability concerns, tightening regulations and smelter closures at La Oroya in Peru, San Luis de Potosi in Mexico, Tacoma in the USA, Rönnskär in Sweden, PASAR in the Philippines and Kosaka in Japan, the number of smelters that will now regularly accept Complex Concentrates has declined very significantly.
Smelters that will now accept Complex Concentrates include Tsumeb in Namibia, Altonorte in Chile, Guixi in China and Horne in Canada. For complex concentrates that contain more than 1% arsenic, the Dundee Precious Metals smelter in Namibia at Tsumeb is now the only smelting option.

Altonorte is a custom copper smelting operation located near the port of Antofagasta in northern Chile. The smelter has the capacity to process 1,160,000 tonnes of copper concentrate per year. This operation is supplied with copper concentrates by third parties
Altonorte is a custom copper smelting operation located near the port of Antofagasta in northern Chile. The smelter has the capacity to process 1,160,000 tonnes of copper concentrate per year. This operation is supplied with copper concentrates by third parties

Most of the smelters which would previously accept high arsenic concentrates utilised roasters to fume of the Arsenic to produce arsenic trioxide (for which there is a limited market) and calcined copper with much reduce arsenic levels. Only Tsumeb still operates such a process facility.

Codelco installed an Outotec Partial Roaster (a fluid bed roaster) at its Ministro Hales mine
Codelco installed an Outotec Partial Roaster (a fluid bed roaster) at its Ministro Hales mine

Codelco installed an Outotec Partial Roaster (a fluid bed roaster) at its Ministro Hales mine in 2013 to reduce the as content of the copper concentrates. It is located close to Codelco’s Radomiro Tomic and Chuquicamata operations. Initially the project comprised an open pit mine, a 50 kt/d mill to produce 163 kt/a Cu and 287 t/a silver over a 14-year mine life. The ore contains a significant amount of arsenic (around 1.6-1.9% As) that results in production of concentrate with arsenic content just above 4%. To reduce the arsenic levels, a 550 kt/a fluid-bed roaster was constructed to safely process copper concentrate and recover arsenic for further confinement. In addition to calcine and sulphuric acid, the roaster produces flue dust (around 4% volume) containing 22% Cu.

Hydrometallurgical Treatment Options

There are a number of hydro-metallurgical treatment options (few of which have achieved commercial success) which do not involve roasting where the objective is to produce a residue containing arsenic in a form which is stable within a tailings dam. These process routes include atmospheric leaching, bio-oxidation and pressure leaching. Dundee Precious Metals prior to its acquisition of the Tsumeb smelter had attempted to permit a pressure oxidation circuit at its Chelopeche mine in Bulgaria but faced opposition for the usual socialist “ecological” groups.

Chelopeche Mine, Bulgaria
Chelopeche Mine, Bulgaria

Teck Aurubis have trialled their proprietary high pressure oxidation technology, CESL, on concentrates with up to 10% arsenic and report greater than 99% deportment of arsenic to leach residues.  Arsenic components in the residue have been identified as ferric arsenate and scorodite – both of which are considered the most stable forms for arsenic fixation. Teck Aurbis have achieved >97% copper and >90% Au and Ag recovery, LME grade copper cathode and gold and silver Dore production.

CESL residue stability test Courtesy: Teck Aurbis
CESL residue stability test Courtesy: Teck Aurbis

Blending Options

Due to the limited capacity and high costs of the smelters capable of accepting high arsenic concentrate, blending of clean and complex concentrates to produce a product that is below the smelter deleterious element thresholds has become a significant business opportunity. Generally, this is below the 0.5% Chinese threshold and the main blended concentrate target is Chinese smelters.


In 2014 Codelco set up a strategic alliance with Ocean Partners to blend high-As copper concentrate from its Ministro Hales mine with clean third-party concentrate bought in by both companies, at Ocean Partners’ concentrate blending facility in Taiwan.


In the near term it appears likely that the percentage of concentrates subject to arsenic penalties will increase, as will the percentage of Complex Concentrates in the market. In response to this Glencore has opened a new copper concentrate blending facility in Taiwan and a number of Chinese smelters are looking at locating blending and scrap processing operations in the region.

copper concentrate markets surprise

While copper futures trade in largely directionless, trading in a tight range there has been considerable action in the concentrate markets.

Reuters reports that the 10-member China Smelters Purchase Team (CSPT) has set treatment and refining charges at $55.00 per tonne and 5.5 cents per lb respectively for third-quarter deliveries. This is a significant move down from $92 and 9.2 cents in Q1 2019. This suggests considerable tightness on the copper concentrate supply side and could spell some grief and likely closures for higher cost smelters.

According to the International Copper Study Group (ICSG)  the issues with the supply side are the dearth of new mine production combined with lower head grades in Chile and markedly lower output at Grasberg where the operation is in the process of transition from open pit to underground.

Mine Production

ICSG in its latest study concludes that world mine production declined by about 1% in the first four month of 2019, with concentrate production declining by 0.5% and solvent extraction-electrowinning (SXEW) by 2.5%:ICSG in its latest study concludes that:

  • What little growth there was during the period was offset by declines in Chile and Indonesia;
  • Chilean production declined by 3.2% due to lower head grades;
  • Indonesian concentrate production declined by a massive 50% due to a transition from open pit to underground operations are the Freeport McMoran operations in Irian Jaya;
  • While DRC and Zambian production staged significant 11% production growth in 2018, production in the reporting period only managed 2.8%;
  • Production in Peru, Australia, China and Mongolia increased in response to improved grades and recoveries;
  • Mine production increased by 3% in Africa, 2% in North America and 6% in Oceania but declined by 4% in Asia , 1.5% in South America and 3% in europe.

Refined Production

ICSG in its latest study concludes that world refined production remained unchanged in the first four month of 2019 with primary production (electrolytic and electrowinning) declining by 0.2% and secondary production (from scrap) increasing by 0.5%. The decline in world production was due to:

  • A 33% decrease in Chilean electrolytic refined output due to temporary smelter shutdowns whilst undergoing upgrades to comply with new environmental regulations;
  • A decline of 33% in India’s production that was negatively impacted by the shutdown of Vedanta’s Tuticorin smelter in April 2018;
  • A 23% decrease in Zambian refined output due to power supply interruptions, smelter outages and the introduction on 1st January 2019 of a 5% custom duty on copper concentrate imports;
  • Reduced output in major producing countries including Germany, Japan, Peru and the United States due to smelter maintenance shutdowns.

Refined copper declines during the period were offset by growth in Chinese output and increases in Australia, Brazil, Iran and Poland . These declines during the period were offset by growth in Chinese output and increases in production due to recovery from production constraints in 2018.

ICSG concludes that:

  • World refined copper balance in the first 4 months of 2019 saw a 150,000 deficit;
  • China’s bonded stocks are thought to have increased by 140,000 tonnes, compared with the same period in 2018;
  • Copper stocks held at LME, COMEX and SHFE totalled 417,600 tonnes an increase of 19% over the prior period
  • The average LME price was down 2.7% from the may average

Hungarian Government Announces Public Tender for the Recsk Cu-Au Deposits & Assets

Hungarian National Asset Management Inc., (“MNV”) has announced the public tender for the Recsk Deposit and assets in Hungary.

The Recsk Cu-Au-Pb-Zn-Ag-Mo property in Hungary hosts arguably one of the largest and highest-grade undeveloped copper-gold porphyry and skarn systems in Europe.  With 240,000 metres of drilling, two 8 metre internal diameter, 1,200-metre-deep, concrete lined shafts and 9 kilometres of underground development, the Recsk deposit is estimated to contain 5.6 million tonnes (12 billion pounds) of copper and 4 million ounces of gold. 

Distribution of Copper and Molybdenum on the 700mRL, showing surface drillholes (black), development (blue) over intrusion thickness and thickness of volcanics. Copper grades of greater than 0.2% have been mapped over a strike of 2 kilometres and a width of 800

Recsk_Tender_Review_20180927.1

Cmi Capital Limited

Cmi Capital is available to assist a suitable party to participate in the tender.  Cmi Capital held extended discussions with the Government of Hungary prior to the announcement of the tender and as such has a unique understanding of the deposit and the political and economic environment.  Cmi Capital or an associated corporation seeks a long-term concentrate offtake agreement on commercial terms and may at its sole discretion provide up to US$250 million in an offtake pre-payment repaid from production with the usual customary terms and conditions following completion of an advanced economic & technical study.

 

Free Carried Interests in Mining Projects, States Need to Rethink the Strategy

Natural Resource Governance Institute has issued a report on revenues received from listed mining companies in Ghana.  As many who have done the cashflow analysis have long known that a free carried interest, funded out of cashflow is a less than effective tool for garnering rent from resource projects. Projects can often take many years to repay capital and if this period corresponds with low or stagnant commodity prices then dividend payments may be low.  In effect the state is fully exposed to commodity price and operational risks.  A better solution is a competitive royalty, fee and taxation environment which is adequately regulated. 

One of the issues with a carried interest is that this often involves representation on the board of the operating entity and as such creates immediate conflicts of interest for directors and heated domestic competition for these positions.   That said, there are often political arguments for a carried interest, arguments about national interest.  In addition it has been argued that being represented on the board of the operating entity allows governments to “keep an eye on” the operator.  A better solution is robust oversight by a suitably trained and funded Department of Mines.

ghana-gold-mining-revenue-analysis-company-disclosures

In Ghana the majority of international mining companies, including Asanko Gold, Golden Star Resources, Endeavour Mining, Kinross Gold, Perseus Mining and Xtra-Gold Resources, have disclosed payments-to-governments reports under the Extractive Sector Transparency Measures Act (ESTMA) in Canada. In addition Gold Fields, AngloGold Ashanti and Newmont Mining have made voluntary disclosures regarding the payments they make to the Ghanaian government.

Data were sourced from companies complying with the Canadian, Extractive Sector Transparency Measures Act (ESTMA).

In 2017 nearly three quarters of the payments to Ghanaian government entities by ESTMA companies in the gold sector arose from royalties, with five companies paying a total of USD 57 million. A further 22 percent of the payments from these ESTMA companies were in the form of corporate income tax. While six operating companies paid royalties in 2017, only two, Kinross Gold Corporation and Endeavour Mining paid corporate taxes.

2017 gold mining payments to governments by payment type from ESTMA companies (USD in millions)

Ghana’s Vice President Mahamudu Bawumia has questioned the utility of the government’s 10 percent equity interest in mining operations, stating at the IMF’s Regional Economic Outlook for sub-Saharan Africa, that the lack of revenue generated from the government’s equity share was because “many of the mining companies say they are not making profits to pay dividends but they keep mining, notwithstanding the fact that they are unprofitable.”3

The government of Ghana holds these shares and the non-tax revenue unit of the Ministry of Finance collects the revenues. The government is provided this equity interest without having to make financial contributions to the development or operations of the project. The government has equity share interests in every gold mining operation in the country bar those owned by Newmont Mining or AngloGold Ashanti following the signing of updated mining development agreements. In the case of AngloGold Ashanti, the government has a stake of 1.55 percent in the global company AngloGold Ashanti Limited.

The NRGI report concludes that “the payments-to-governments disclosures made by international mining companies operating in the country suggest that if revenue generation is the primary purpose of this state equity participation, then the government may want to reconsider this approach”.  This has been evident to many in the industry for a very long time.  

The Big Bonanza – “the richest mineral discovery in world history”

To the Daily Alta California, it was “the great discovery of the age”.  After emerging from the underground at the California Mine on the Comstock Lode Dan de Quille called it “the richest mineral discovery in the world’s history” and he named it The Big Bonanza.    In a field of exceedingly high-grade mineralization the Big bonanza would generate immense wealth.

Virginia city circa 1870

“Not a pebble in the crosscut was worth less than US$600 per ton and no small sample could be reasonably assayed for fear of grabbing a sulphuret nodule that would run the chunk into the thousands of dollars a ton.”  Bear in mind these are 1870 dollars, likely worth US$20,000 per tonnes in today’s dollars.

“Sometime in the first half of 1875, as cross cuts on the 1,500 foot level reveled that the ore body did indeed span the entire length of the California mine, John Mackay must have realised that The Big bonanza would make him one of the richest men in the world.”

Virginia city circa 1870

Pyrargyrite silver ore from the Comstock Lode, Storey Co., Nevada, U.S.
Chris Ralph/Nevada Outback Gems

The Bonanza King is a well researched history of the Comstock Lode and characters involved.   The book underlines the importance and occasional reward for focused hard work in the industry.   Strongly recommended for mining folks.

Pyrargyrite is a sulfosalt mineral consisting of silver sulfantimonide, Ag3SbS3. Known also as dark red silver ore or ruby silver, it is an important source of the metal.

Additional Reading

Bonanza Ores of the Comstock Lode, Viginia city, Nevada, Economic Geology, 1922

Review in the WSJ by Patrick Cooke

Crouch, Gregory. The Bonanza King: John Mackay and the Battle over the Greatest Riches in the American West.   

Morgan Stanley predicting lithium carbonate prices to fall by 45% to 2020

Morgan Stanley report today that they expect lithium carbonate prices to drop from the current level of US$ 13,375/t to US$ 7,030/t by 2020.  This is far lower than the consensus view after lithium prices surged 100% in the last 2 years.

Substantial supply increases are driving their forecast, with Morgan Stanley reporting that the largest producers in Chile are planning on adding 500,000 tonnes per year in new mine supply by 2025.  This supply would swamp the anticipated growth in demand from battery production.  Indeed Morgan Stanley predict that the lithium market will go into surplus in 2019… and stay there.

The firm has downgraded two of the largest producers, Albemarle Corporation (NYSE: ALB) and Sociedad Quimica y Minera S.A. (SQM: NYSE SQM)  which are planning to bring an additional 200,000 tonnes of lithium on stream by 2025.  This will cement the position of Chile as the largest global producer with a  >30% share.

Most of the lithium hopefuls listed on western stock-exchanges have used lithium carbonate prices in the range of US$11,000 and 13,500/t in economic studies and the majority of these projects would struggle if prices were to tumble.  Given the rush to lithium of recent times and the nature of commodity markets we suspect that Morgan Stanley are likely correct.  Even a dramatic increase in market penetration for electric cars (which now seems increasingly unlikely given the growing trend away from government subsidies) would do little to change the supply demand dynamic in the coming few years unless the fall in price is sufficiently steep as to stop or delay some of the larger projects now being contemplated.  Now that is always a possibility.

An exception may be spodumene producers like Pilbara Minerals Limited (ASX: PLS) which showed a >50% return on investment in a planned expansion at a spodumene price of US$550/t, a 60% discount to the current spot.

Drillhole cross-section Pilgangoora lithium mine

 

 

3D Animations – Recsk Cu-Au Deposits, Hungary

Following the publication of the paper (noted below) on the epithermal portion of the Recsk metallogenic system in Hungary here are 3D models from the entirely concealed Cu-Au mineralized intrusive bodies and related Cu-Au skarns and outbound Zn-Pb replacement bodies.

Ore Mineralogy and Fluid Inclusion Constraints on the Temporal and Spatial Evolution of a High-Sulfidation Epithermal Cu-Au-Ag Deposit in the Recsk Ore Complex, Hungary

A 3D fly-though of the Recsk Cu-Au deposit showing the drilling, channel samples and interpolated copper grade shells.  A full set of 100 metre spaced section steps through the deposit from north to south over several kilometres.

A section through the Recsk deposit with drilling and copper grade shells.  The section is 200 metres thick and the 0.3% grade shell is 800 metres high and 1,000 metres wide.  The Cu-Au skarn mineralisation can be seen dipping gently away from the large intrusive body.  The intrusion is open at depth below 1,200 metres. The top of the 10.3% copper grade shell is approximately 400 metres below the surface.

This 3D Model is based upon 156,000 metres of surface drilling over 35 square kilometres, 9km of underground development and 90,000 metres of underground drilling.

The Recsk metallogenic centre consists of a deep and entirely preserved mineralised intrusive and intermediate and high sulphidation epithermal deposits exposed at surface.  The epithermal deposits are located close to the apex of the intrusion.  The diorite intrusion is hosted by a thick sequence of Eocene carbonates unconformably overlain by a volcanic edifice.  Adjacent to the intrusion the carbonates host thick Cu-Au skarns.  Outbound of the Cu-Au skarns, Zn-Pb replacement bodies have been intersected in wide spaced drillholes.  In this video we present a section through the deposit.  The 3D model is based upon 156,000 metres of drilling from surface, 9 km of underground sampling on the 700 and 900 metre levels and 89,000 metres of underground diamond drilling.  Underground access was provided by two 1,200 metre deep shafts, 2,000 metres apart.  The shafts have an 8 metre internal diameter and are concrete lined.  No mining has been undertaken at the deeper Recsk mineralisation aside from bulk metallurgical sampling.

 

 

Ivanhoe Mines Releases PlatReef DFS with a 14% IRR

Ivanhoe Mines has released its much anticipated DFS on its US$1.544 billion Platreef 4 Elements (4E-platinum, palladium gold and rhodium) project in South Africa (DFS yet to be released on Sedar).

Ivanhoe #2 shaft sink in progress

Key features of the Platreef DFS include:

  • Indicated Mineral Resources at a  2 g/t 4E COG are 346 million tonnes at 1.7 g/t Pt, 1.7 g/t Pd, 0.1 g/t Rh and 0.3 g/t Au for 42 million ounces of Pt, Pd, Rh and Au with an additional 53 million ounces in Inferred Resources;
  • Mineral Reserve containing 17.6 million ounces of platinum, palladium, rhodium and gold;
  • Development of a large, mechanized, underground mine with an initial 4 Mtpa concentrator and associated infrastructure with plans to increase production incrementally to 12 MTPA;
  • Planned initial average annual production rate of 476,000 ounces  of Pt, Pd, Rhand Au(3PE+Au), plus 9,500 tonnes of nickel and 5,900 tonnes of copper in concentrates;
  • 174 kt of concentrate will be produced at 38 g/t Pt, 39.1 g/t Pd, 2.4 g/t Rh, 5.3 g/t Au, 3.35 Ni and 5.5% Ni;
  • Estimated pre-production capital requirement of approximately US$1.544 billion, at a ZAR:USD exchange rate of 13 to 1.
  • After-tax Net Present Value (NPV) of US$916 million, at an 8% discount rate.
  • After-tax Internal Rate of Return (IRR) of 14.2%.

The 14% IRR is less than appealing and they only got there by using some snappy metal prices:  US$1,250 per ounce (current price $945) for Pt, $815/Oz ($835) for Pd, $1,300/ozs ($1,270) for Au and $1,000/oz ($900-990) for Rh.

Net total cash cost + SIB capital (2017 mines in production and selected projects), US$/3PE+Au oz.

So how to finance this project.  Ivanhoe owns 64%, their Black Economic Empowerment (BEE) partner 26% and a Japanese consortium 10%.  New legislation would see the BEE percentage increase to 30% and that has to be financed.  Given the evolving political uncertainty in SA there might be some investor hesitation for a project in that country and which has a 14% IRR.  We will watch with the usual interest.