Showing posts with label Brazil. Show all posts
Showing posts with label Brazil. Show all posts

Wednesday, February 27, 2013

Vale Q4 loss $2.65bn, twice as deep as forecast

Brazilian mining giant Vale on Wednesday posted its first net loss in ten years in the fourth quarter after taking charges for tax judgments and underperforming mines, a loss twice as big as analysts' expectations.

Vale lost $2.65-billion in the three months ending December 31, compared with a profit of $4.67-billion a year earlier, according to a securities filing. It was the company's first quarterly loss since the third quarter of 2002.

The result was bigger than the $1.27-billion average loss estimate in a Reuters survey of analysts. Vale, the world's second-largest mining company, is the largest producer of iron-ore and second-largest producer of nickel.

Net sales, or sales minus sales taxes, fell 19% compared with a year earlier to $11.72-billion, close to the $11.30-billion net sales outlook in the survey.

Earnings before interest, taxes, depreciation and amortisation, fell 97% from a year earlier to $257-million.

Edited by: Creamer Media Reporter

Friday, February 1, 2013

Anglo writes down US$4bn on Minas-Rio project

Anglo American plc has written down the value of its Minas-Rio iron-ore project in Brazil by US$4 billion after significant increases in capital expenditure.

To reach phase one capacity of 26.5Mt/y, the project is now slated to cost US$8.8 billion, an US$800 million increase on its November 2012 guidance and more than 300% up on its original estimate of US$2.7 billion.

The project has been hit by huge cost overruns linked to the development of the mine, as well as delays in obtaining licences.

“Despite the difficulties, we continue to be confident of the medium and long term attractiveness and strategic positioning of Minas-Rio and we remain committed to the project,” Anglo’s chief executive (CEO) Cynthia Carroll said.

Anglo said the impairment does not consider any potential value from future expansion to 90Mt/y.

The projected first ore on ship (FOOS) date recently changed from late 2013 to late 2014, and the company has put in place a US$600 million contingency fund to ensure that the new deadline is hit.

Anglo has had a difficult year, with strikes in South Africa hitting platinum production.

In April, Carroll will be replaced as CEO by Mark Cutifani, head of AngloGold Ashanti.

Thursday, January 31, 2013

Anglo American takes $4bn hit on Brazil Minas Rio

London-based mining giant Anglo American (LON:AAL) confirmed Tuesday it will take a $4 billion writedown on the value of its flagship Minas Rio iron ore project in Brazil due to delays and mounting development costs.

The company said its capital expenditure on the project was now expected to hit $8.8 billion, more than three times the $2.6 billion projected back in 2007. It also revealed that its forthcoming full-year results would be hit by the impairment charge.

“We are clearly disappointed that the diversity of challenges that our Minas Rio project has faced has contributed to a significant increase in capital expenditure,” said outgoing CEO Cynthia Carroll.

“Despite the difficulties, we continue to be confident of the medium and long-term attractiveness and strategic positioning of Minas Rio and we remain committed to the project, ” she added.

Of the 300-odd licences required for the project, only 17 are left outstanding, added Carroll, who will be replaced by AngloGold Ashanti’s (NYSE:AU) CEO, Mark Cutifani, at the end of March.

Minas Rio is one of Anglo's major capital allocation fiascos of recent years and was largely responsible for Carroll's deteriorating image.

The company acquired its first stake in the project in 2007 and took control the following year after sealing a $5.5 billion deal with Brazilian billionaire Eike Batista's MMX.

So far Anglo has spent $5 billion on developing it and said last year that total development costs could exceed $8 billion – more than three times original estimates.

The project was intended to help diversify Anglo’s assets, which at that point was heavily dependent on South Africa for the bulk of its revenue. Instead it turned out to be a bruising top-of-the-market deal.

Falling profitability and worries about Minas Rio has weighed heavily on Anglo's stock.

The $39 billion counter is down just under 30% over the past year, compared to peers BHP Billiton, Rio Tinto and Xstrata, which have been trading mostly flat.

Shares in the group were trading high in London on Tuesday afternoon, climbing 2.75% to 1,924.00 at 2:33 pm GMT.

Anglo American will release its 2012 results on February 15.

Wednesday, January 9, 2013

Indian companies hunt for iron-ore in Brazil

Stung by the crisis in iron-ore mining at home, the Indian Steel Ministry has initiated bilateral talks with Brazil in an effort to seek ore resources in the Amapá province for Indian companies.

Iron-ore miner, NMDC, steel producer Rashtriya Ispat Nigam Limited (RINL) and MOIL Limited (formerly Manganese Ore India Limited) have started the process of acquiring Brazilian iron-ore assets, an official in the Steel Ministry said.

“Government-to-government bilateral talks have started following the Steel Ministry secretary’s visit to Brazil, last November. Current talks revolve around seeking the Brazilian government’s facilitation in identifying operating iron-ore mines in which the Indian companies could participate as strategic investors,” the official said.

“In fact, in response to inputs provided by the Brazilian government, NMDC has identified two operating reserves in the Amapá province of Brazil and due diligence on them will commence shortly,” the official added.

The focus on Brazilian iron-ore reserves was linked to the Steel Ministry's goading of Indian steel producers to seek raw material assets overseas in the wake of a rising trend of raw material imports and increasing shortages of accessable privately mined iron-ore, the official said.

In the wake of a clampdown on illegal mining and a Supreme Court order closing down iron-ore mines across the provinces of Goa and Karnataka, Indian companies were forced to import nine-million tons of ore during April to October 2012, with imports expected to continue to rise owing to the fact that total production during 2012/13 was not forecast to exceed 72-million tons.

According to Steel Ministry officials, Indian steel producers would have faced the ironic situation of rising ore import dependency despite a domestic resource of 28.52-billion tons, with overseas asset acquisition becoming a medium-term imperative to maintain growth in steel production.

The officials cited the example of RINL, which despite being owned by the government and completing a $2.5-billion investment to ramp up steel making capacity to 6.3-million tons a year from three-million tons a year, had not been allocated iron-ore reserves for captive mining despite submitting several applications over the years.

Edited by: Esmarie Swanepoel

Tuesday, December 11, 2012

Mining investments in Brazil's Legal Amazon to hit US$26.9bn by 2016 - Ibram

Brazil's Legal Amazon region is set to receive about 56bn reais (US$26.9bn) in investments from the mining sector for development and expansion projects, including extraction and processing, according to national mining institute Ibram.

The new mining opportunities include the expansion of the Carajás mine, copper enterprises near the municipality of Parauapebas and the Alumina Rondon project, local press reported.

States that stand to benefit are Mato Grosso, Tocantins and Amazonas, where about 60 small mineral exploration companies scour the underground for gold deposits in the Tapajós river area, according to Ibram.

However, the main obstacle for a sustainable mining expansion in the Legal Amazon is the lack of infrastructure. Most projects will require mining companies to invest in rail networks, ports and highways, leading to increased project costs.

"The country's growth acceleration plan PAC forecasts the development of transport infrastructure in the Legal Amazon, including waterways, but there are projects that require more urgent action," Ibram CEO José Fernando Coura said, adding: "Besides the federal government, state and local authorities are important partners when contributing to local and regional development."

The lack of skilled manpower is another obstacle. To deal with this issue, some mining companies are seeking partnerships with professional associations such as the national industry confederation (CNI) and the national industrial training service, Senai, according to the institute.

Covering more than 5Mkm2 (59% of Brazil's territory), the Legal Amazon officially includes all seven states of the North Region (Acre, Amapá, Amazonas, Pará, Rondônia, Roraima and Tocantins), as well as mid-western Mato Grosso state and most of northeastern Maranhão state.

Monday, November 5, 2012

Glencore in bid for Anglo's stake in Brazilian iron-ore unit

Glencore is one of the bidders for Anglo American's majority stake in the Amapa iron-ore operation in northern Brazil.

Other bidders in the second phase of the sale process include Russian steel producer Severstal, privately owned mining group Zamin, and Australia’s Centaurus.

The project has been deemed noncore and has been on the block since last year by Anglo American.

A sale of the 70% stake in Amapa would be good news for Anglo, whose CE resigned recently. Cynthia Carroll quit due to investor pressure about, among other factors, delays and cost overruns at the Minas Rio operation. Selling Amapa would allow Anglo’s Brazilian team to focus on Minas Rio, which is central to recover ing the miner’s underperforming shares.

An internal valuation last year put Amapa’s value at $1.5b n, but that value is expected to have dropped significantly as the iron-ore price has weakened.

Friday, November 2, 2012

Brazil's Usiminas posts bigger-than-expected Q3 loss

Usinas Siderúrgicas de Minas Gerais on Thursday posted a bigger-than-expected loss for the third quarter as weak iron-ore sales and surging one-time expenses weighed down results at Brazil's largest maker of flat steel products.

Usiminas, as the Belo Horizonte, Brazil-based company is known, lost a net 124.85-million reais ($62-million) in the third quarter, wider than the expected shortfall of 91.5-million reais in a Reuters poll of 11 analysts. Usiminas had lost a net 86.51-million reais in the second quarter.

The company had earned 154.03-million reais in net income a year earlier.

Net revenue and costs rose at the same 5.1% pace on a quarter-on-quarter basis, indicating that the impact of selling more products in Brazil, where flat steel is sold at a premium relative to imports, was offset by higher costs stemming from a higher output of value-added products.

Net revenue, which totalled 3.38-billion reais in the quarter, beat the 3.25-billion reais forecast in the poll.

Sales, general and administrative expenses rose about 10% on a sequential basis, driving losses wider at Usiminas, the company said in a securities filing. One-time items, including an increase in transportation contract costs and provision for some contingencies, more than doubled.

Earnings before interest, taxes, depreciation and amortization, a gauge of operational profitability known as Ebitda, plummeted 36% as performance in the mining and steel units was disappointing. Ebitda totalled 150-million reais in the period, below the 213.6-million real estimate in the poll.

Ebitda at the mining unit fell to 36% of revenue in the third quarter from 47% in the prior three months. The steel unit saw its Ebitda margin down to 2% from 6% in the second quarter.

Edited by: Creamer Media Reporter

Thursday, October 25, 2012

Brazil's gold reserves rise for first time since Dec 2008

Data on the IMF's website show that Brazil increased its gold reserves for the first time since December 2008 at a time when investors raised holdings in ETPs to a record.

 

Author: Nicholas Larkin and Glenys Sim

Brazil increased its gold reserves for the first time since December 2008 at a time when investors raised holdings in exchange-traded products to a record.

Brazil's holdings expanded 1.7 tons last month to 35.3 tons, data on the International Monetary Fund's website showed. Turkey's holdings increased 6.8 tons and Ukraine added 0.3 ton. Russia's reserves fell by 2.2 tons, Belarus by 1.5 tons, Czech Republic by 0.3 ton and Kazakhstan by 0.4 ton, the data show.

Central banks have been expanding reserves after the metal climbed the past 11 years and investors held a record tons in bullion-backed exchange-traded products this month, data compiled by Bloomberg show. Nations bought 254.2 tons in the first half of 2012 and may add close to 500 tons for the year, the London-based World Gold Council said in August.

"We expect strong buying by central banks to continue," said Dan Smith, a commodities analyst at Standard Chartered Plc in London. "They will be encouraged by lower prices and continued worries about inflation and currency risks."

Turkey's bullion holdings have increased due to it accepting gold in its reserve requirements from commercial banks.

Gold for immediate delivery rose 0.8 percent to $1,715.10 an ounce by 10:24 a.m. in London and has gained 9.7 percent this year. It's averaged $1,751.31 so far this month, the third- highest ever.

"If a central bank like Brazil decides to enter the gold market, it will keep buying for a longer time horizon until an optimal share of gold holdings to total asset is reached," said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. "This constant demand is price supportive."

Source: Bloomberg

Monday, October 22, 2012

New study says Brazil is about to flood export markets with iron ore

By Frik Els

Benchmark 62% spot iron ore entered China's Golden Week holiday at $104.20 a tonne, but as traders returned they quickly chased the price of the commodity to within shouting distance of $120.

After three days of losses – the price of the commodity fell again on Monday to $113 – it appears China's iron ore bulls are having second thoughts.

Iron ore's rise from less than $40 only five years ago has been on the back of an incredible ramp up in demand from China – the world's second largest economy today uses up around 60% of global supply as it pushes out steel at rate of two million tonnes per day.

But the other side of the equation – supply – could start having a bigger impact on the price as new projects come on stream.

World number one producer Vale today reiterated its production forecast of 312 million tons of iron ore for 2012 and is working on expanding existing sites for an additional 170 million tons of iron ore per year.

Brazil as a whole is slated to produce 820 million tonne of iron ore in 2016, a more than 60% jump from today's levels according to Ibram, an industry research house in the South America country.

While number two and three of iron ore's troika – Rio Tinto and BHP – have slowed investment in new iron mines, production in Australia is still on track to reach 750 million tonnes – almost all of it for export – in the not too distant future.

The global seaborne iron ore trade is around 1 billion tonnes today and is growing at less than 2%. And China also has 100 million tonnes of ore in stockpiles sitting at ports.

Chinese demand could pick up again – infrastructure spending is continuing unabated – but that may not be enough to absorb all the new output.

Thursday, October 4, 2012

Vale to halt output at Brazil iron ore pellet plants

Brazil's Vale said on Thursday that it plans to suspend operations at three Brazilian iron-ore pellet plants and increase output of lower-value mine products as world steel demand slows.

The closures remove capacity responsible for nearly a fifth of the company's pellet output in the first six months of the year.

With the pellet plant operation suspended, Vale said in a statement that it will adjust mine output to produce more sinter feed and less pellet feed. Vale's Sao Luis and Tubarao I and Tubarao II pellet plants will go off line starting on October 8.

"The company's decision to shut down some of its pelletizing facilities is a clear indication of the deterioration in the market for high quality iron ore products," said Leonardo Correa, Pedro Grimaldi and Luiz Fornari, Barclay's mining company analysts in a e-mailed report to investors on Thursday.

Vale preferred shares, the company's most-traded class of stock rose 0.95% to 35.02 reais in Sao Paulo at Thursday's close.

Pellet feed, like sinter feed, is a form of concentrated iron ore. Pellet feed, though, is filtered to cut water content before being mixed with clay and other materials at a pellet plant. Pellets can be fed directly into a steel blast furnace.

Sinter feed needs additional processing before being used to make steel.

Vale's decision makes economic sense, Correa and his colleagues said because the extra price that pellets earn in the market are close to the $30/t that Vale pays to transform raw pellet-feed iron ore into pellets.

"Sinter feed usually generates higher (profit) margins," the analysts wrote.

Demand for iron-ore has fallen in recent months as China's economy cools, US economic growth remains sluggish and European debt problems limit investment. Since May 1, iron-ore on the Chinese spot market has fallen 28% to 104.20/t, according to Steel Bulletin.

World steelmaking capacity is about a third greater than demand, according to Brazil's state development bank BNDES. Vale, which produces more than a quarter of the world's seaborne, intercontinental iron-ore exports, is reviewing its investment plans after a plunge in iron-ore prices.

The three Vale pellet plants produced 4.93-million tons of pellets in the first half of 2012, Vale said, or about 18% of its 26.95-million tons of pellet output in the first half.

In the same period Vale produced 150.5-million tons of iron-ore.

"This is in response to the evolution of the composition of demand for raw materials by the steel industry during the economic cycle which has shown a reduction in demand for pellets," the statement said.

Edited by: Creamer Media Reporter

Thursday, September 6, 2012

Vale makes financial provision for tax dispute

Brazil’s Vale has announced they have made available $539 million to cover potential losses related to a tax and royalty dispute with the government.

The extra provision was made after Vale decided it will likely lose an attempt to deduct the cost of transportation from the value used to determine royalty payments on minerals

Vale has set an amount of 1.41 billion reais against the government's claim.

Although the amount is not enough to cover the full claim, it is a fair amount already set aside.

A commodities boom over the past decade prompted Brazil's federal, state and municipal governments to seek greater control and revenue from natural resources. The government has signaled that it hopes to resolve the dispute with Vale over royalties by the end of the month.

An Analyst with Morgan Stanley & Co, said, "We believe Vale's decision to provision a larger amount related to a dispute on past royalties suggest we are getting closer to a settlement,"

"While we do not think the charge comes as a total surprise to the market, the number does seem on the low end of recent estimates," he said, adding that he thinks a potential settlement could be "marginally positive" for the stock.

Vale preferred shares, the company's most-traded class of stock, closed down 2.93 percent at 32.12 reais in Sao Paulo, its biggest decline in nearly two weeks. The stock, which has fallen to its lowest levels in nearly three years, is on track for its worst decline in three weeks.

Monday, August 20, 2012

Brazil to regain iron ore top spot from Australia in 2017 says Vale

Brazil will overtake Australia and regain its position as the world's top iron ore exporter in 2017 after a giant new Amazon mine owned by Vale SA starts operations, Vale's investor relations chief said on Tuesday.

The reversal will be sealed by the addition of new mines in Brazil, including Vale's 90 million-tonne-a-year Serra Sul mine at its Carajas complex in Brazil's northern Amazonian state of Para, investor relations director Roberto Castello Branco told investors in Rio de Janeiro.

Serra Sul is expected to start operations in 2016.

While Rio de Janeiro-based Vale remains the world's largest producer of iron ore, Australia, led by BHP Billiton Ltd and Rio Tinto Ltd, used its proximity to China, the largest consumer of iron ore, to overtake Brazil in 2008 in the 1-billion-tonne-a-year seaborne market.

Vale, the world's second biggest mining company, and other Brazilian iron ore producers such as MMX Mineracao e Metalicos SA, Cia Siderurgica Nacional and Ferrous do Brasil have struggled to expand iron ore production as quickly as Australian rivals.

Half of the 400 million tonnes of world iron ore exports expected to be added by 2015 will come from Australia and only 30 percent from Brazil, according to Ferrous, which plans to increase output sixfold to 17 million tonnes by 2017.

Brazil, which once had about half the seaborne market, now has about a third and Australia about half.

Ferrous does not see Brazil regaining its top spot from Australia. In 2015, Brazil is expected to export about 444 million tonnes or a third of the seaborne market, according to Ferrous and Barclays. Other Ferrous estimates put the total at 370 million tonnes.

In 2015 Australia is expected to export 693 million tonnes or half of the world total. The addition of 90 million tonnes from Serra Sul would still leave Brazil in second place.

Brazil's environmental laws are some of the world's toughest and its bureaucracy is slow. Getting clearance for new mining, rail, port and other infrastructure projects can take as much as two years longer in Brazil than in Australia, Jaime Nicolato, chief executive of Ferrous do Brazil, said in July.

Vale, which is partially controlled by the employee pension fund of Banco do Brasil SA, a government-controlled bank, is reluctant to criticize Brazilian bureaucracy or environmental laws. Castello Branco said the company needs to improve its own planning systems.

"We don't like to blame others for our failure to secure an environmental license (to open a mine)," Castello Branco said, referring to the notoriously slow Brazilian bureaucracy. "We have highly competent teams that are proactive and eager."

Source: Reuters

Wednesday, July 4, 2012

Brazil's Vale Mining To Build Its Largest Iron Ore Mine

Brazil's Vale Doce said it received an environmental license to build its biggest-ever iron ore mine --- an Amazon region project that holds about one trillion US dollars of reserves at current prices.

The S11D mine, an extension of the company's giant Carajas complex, is expected to cost US$8.04 billion to build. It will produce 90 million metric tons of iron ore and begin operations in 2016, Vale said.

Vale, which puts out about 300 million tons a year, is the world's largest producer of iron ore. S11D's design capacity is equal to nearly 10% of the world's annual exports of the principal raw material for steel.

S11D will help Vale maintain production and exports, replacing output from ageing mines in Brazil's Amazon and Minas Gerais regions.

It will also consolidate Carajas -- part of the company's Northern System of mines, railways and ports -- as Vale's most important iron-ore district.

The expansion will also help Vale keep up with Australian rivals BHP Billiton Ltd and Rio Tinto Ltd in meeting growing demand from China, the world's largest steelmaker and largest customer for iron ore.

Vale, BHP and Rio Tinto, known as iron ore's "Big Three", produce about 70% of the world's sea-borne iron ore exports of about 1 billion tons a year.

The preliminary license from Ibama, Brazil's environmental protection agency is the first major hurdle in a series that Vale needs to clear to bring the mine into production.

The S11D project has faced delays as the company investigated potential risks to local plants and animals and studied potential archaeological sites in and around the proposed mine site.

Vale said the new mine will use far less power and emit fewer greenhouse gasses than conventional open-pit mines.

Friday, June 15, 2012

Brazil freezes new mine claims pending reform - Mining Lobby

The Brazilian government has stopped granting new mining claims as it drafts an overhaul to half-century-old regulations for the sector, the president of mining lobby Ibram said on Thursday.

For the past four years, the government has been working on a draft bill that would rewrite Brazil's 50-year-old mining code. It wants to raise royalty payments and impose stricter deadlines for developing claims, along with other changes.

"Mining in Brazil is paralyzed because the claims to mineral rights are totally suspended," Ibram president Jose Fernando Coura told Reuters.

He said that new claims for concessions have been frozen since the end of 2011 or early this year, but the National Mineral Production Department (DNPM), which regulates the mining sector, only formally informed Ibram two weeks ago.

As regulation now stands, concession holders can sit on potential mineral deposits without exploring or developing them for years. The government wants swifter development of the mineral deposits and less speculative claims that concession holders can flip after a few years on the expectation of rising metals prices.

Concession holders are individuals or companies that submit mining claims.

Coura said thousands of claims are waiting for approval at the DNPM, which has angered applicants.

A DNPM representative contacted by Reuters had no comment.

Source: Reuters

Thursday, June 14, 2012

Belo Sun cracks 5m ounces gold in Brazil

Resources are rising for Belo Sun, with a few maiden deposits adding to ounces and catching some analyst attention

Belo Sun Mining (TSX: BSX) sweetened the resource pot with first time ounce estimates on a few small but high-grade gold deposits, seen as open pit worthy, that push its total resource count to over five million ounces gold at the Volta Grande project in Para state, Brazil.

Belo Sun already had sizeable resources with about 2.9 million ounces gold @ 1.69 g/t in measured and indicated resources and a further 2 million ounces @ 1.7 g/t gold in inferred resources.

Now Belo Sun adds some small but higher grade deposits, known as the South Block deposits, to those resources. Belo Sun reported 309,700 ounces gold @ 2.64 g/t in inferred resources, which were modeled as accessible via open pit mining, and a further 46,900 ounces @ 3.82 g/t gold in deeper inferred resources.
Taken altogether that pushes Belo Sun's global resources to around 5.2 million ounces gold.
As Canaccord noted in a commentMorning Coffee, the new resource within the projected open-pits are a fair shade better - by more than 50 percent - than the larger open pit resource at Volta Grande.

"If the grades hold following additional drilling, if the strip ratio is reasonable and if the metallurgy is good, this could have a positive impact on the economics at Volta Grande," noted Canaccord in the Morning Coffee.

Belo Sun is working towards a prefeasibility study of the Volta Grande project, due out later this year.

Bureaucratic hurdles slowing down Brazil iron-ore projects

As iron-ore miners continue to expand production in Brazil, Standard and Poor’s (S&P) recently warned of project delays, citing difficulties in obtaining environmental permission, labour constraints and delays in obtaining funding.

Brazil had in recent years significantly increased its role as an iron-ore producer, stepping-up production from about 150 000 t in 2001, to just below 350 000 t in 2011, with a number of new projects slated to enter production from 2014.

Some of the new developments include global mining companies, such as Anglo American expanding its operations in Brazil, and domestic steel producers CSN and Usiminas seeking to integrate existing steel production and export the commodity.

S&P said CSN already has a considerable iron-ore operation that produces a total of 28-million tons a year and it plans to increase production to 70-million tons a year at the Casa de Pedra mine and to 33-million tons a year at the Namisa mine by 2015.

This also includes the construction of a port facility and expansion of its railroad operation, MRS Logística. Among the newcomers is MMX of the EBX Group, which is currently operating a small mine with eight-million-tons-a-year capacity, and has already received the installation licence to begin construction of an additional 21-million tons a year.

However, S&P primary credit analyst Rafaela Vitoria said companies tend to underestimate the execution time of projects in Brazil.

For example, at the end of 2010, Vale's Serra Sul project had a start-up estimate for the second half of 2014. However, in April Vale announced it would now only be by the second half of 2016. Vale said it expected the government to grant its initial licence by the end of June, but did not expect to receive the final installation licence for the actual construction of the mine until a year later.

“Even expansion projects, such as Carajás 40, which are presumably easier to implement than new projects, have experienced delays. For instance, Vale had to delay the Carajas expansion's start-up date one year and now projects it to open at the end of 2013,” Vitoria said.

LICENSING SNAG

S&P observed that the environmental licensing process in Brazil was one of the significant constraints.

The rating agency said companies generally expected it would take six months, to a year to obtain the licences, but that it was actually taking one to two years, given the government agencies' constraints in processing the licensing.

Local authorities have begun requesting compensation investments, such as the conservation of larger areas, infrastructure developments, and even social programmes, which may result in construction delays and cost overruns.

Further, most iron-ore projects in Brazil involve not only the actual mine sites, which are in the middle of the country, but often the infrastructure to transport the ore to the ports on the country’s coast.

“These railroad- or pipeline-transport systems average 400 km to 500 km in length and typically pass through different states and jurisdictions, thereby increasing the complexity of state approvals,” S&P said.

Despite the regulatory hiccups companies experience in developing the country’s resources, S&P said it expected investment in new projects and expansions to continue “as long as there are natural resources available”.

The agency explained that delays in the initial planning were less of a credit concern, since cash disbursements were low at that stage and had little impact in the controlling company’s cash flow.

“However, after construction begins, the impact of budget increases on cash flow and the potential for higher-than-expected debt burdens can become a credit concern for these companies,” S&P said.

The company added that Brazil holds some of the most significant high-grade iron-ore deposits in the world that can be extracted and exported at relatively low cost. This would help Brazilian iron-ore producers to stay afloat, even if the price of iron-ore falls below $100/t in the long term.

Monday, June 4, 2012

Junior roundup: Sunward, Almaden, Santa Barbara, Excellon, Gold Reserve

Sunward Resources (TSX: SWD) has completed an updated mineral resource estimate for its Titiribi gold project in Colombia's Antioquia department, the company said in a statement.

Based on a cut-off of 0.3g/t gold, Titiribi currently hosts 275Mt of measured and indicated resources averaging 0.52g/t containing 4.58Moz of gold. Including copper, the gold-equivalent resource is 6.28Moz.

In the previous NI 43-101-compliant resource statement issued in September 2011, the figures stood at 143Mt grading 0.48g/t gold and 0.15% copper for 2.20Moz gold and 3.50Moz gold-equivalent.

Sunward has had up to 11 drill rigs active at Titiribi, primarily drilling at the Cerro Vetas and Chisperos mineralized zones. Drilling is continuing, the company said.

Vancouver's Almaden Minerals (TSX: AMM) reported further results from the on-going four-drill exploration program on its Tuligtic gold-silver project in Mexico, with holes drilled in the Ixtaca North Zone.

Highlights include 126m at 1.21g/t gold and 63.0g/t silver, including 10.5m grading 3.61g/t gold and 162g/t silver, and 8.75m at 4.09g/t gold and 229g/t silver, the company said in a statement.

Almaden has four drills operating on the Tuligtic project, and said it plans to continue drilling throughout 2012.

Vancouver-based Santa Barbara Resources (TSX-V: SBL) announced trench and other channel sampling results from its flagship Sancos gold project in the Ayacucho region of Peru.

New trench results have been received from sampling at the Sancos Central and Sancos Northwest high-sulfidation epithermal gold targets, the company said in a release. A total of 51 outcrop samples were collected, ranging in width from 2.5m to 11.5m with assay values from 0.01g/t to 4.71g/t gold, the company said in a statement.

Excellon Resources (TSX: EXN), which has the Platosa silver-lead-zinc mine in Mexico's Durango state, announced that CEO Jeremy Wyeth has resigned from the company to pursue other interests.

Spokane-based Gold Reserve (TSX- V: GRZ) notified holders of its 5.50% senior subordinated convertible notes due 2022 that the company is now offering the restructuring arrangement it previously offered holders of 87.8% of the notes to all remaining noteholders.

Gold Reserve has the Las Brisas gold-copper project in Venezuela.

Friday, June 1, 2012

Ponto Verde to reach steady state by June

Iron-ore producer South American Ferro Metals (SAFM) would reach a steady-state production of between 20 000 t and 24 000 t of concentrate by mid-June this year, after commissioning the first-stage concentrator at its Ponto Verde mine, in Brazil.

The newly commissioned concentrator would process fines materials discharged from the beneficiation plant. To date, this material has been stockpiled on site, and some 450 000 t of inventory has been built.

SAFM CEO Philip Hopkins said that the proceeds from the sale of the concentrate would have a material positive impact on the company’s monthly cash flow, while also reducing the project’s environmental footprint and lowering the yearly waste management costs.

The Stage 1 concentrator also eliminates the need for the current settling pond arrangement for full water management and ore recovery.

A second-stage concentrator was under final study, with the board approval expected in the third quarter of this calendar year.

“The team on the ground in Brazil continues to make impressive progress, despite the heavy rains in late 2011 and earlier this year,” said Hopkins.

He noted that while construction had been under way, the Ponto Verde team had also continued to optimise the existing operations with the installation of a cone crusher and by achieving the highest daily and weekly production rates.

The cone crusher, which was installed in the secondary crushing unit, was commissioned early in May, and assisted in achieving record daily production of 5 720 t on May 17, and record weekly production during the same seven-day period.

“We are delighted with this performance, particularly as we progress our plans to expand Ponto Verde to eight-million tons a year run-of-mine throughput, based on the definitive feasibility study, which is now well under way,” said Hopkins.

The Ponto Verde operation reached its 1.5-million production capacity in September last year, and was selling its iron-ore product into the domestic market.

Source: Creamer Media Reporter

Sunday, May 27, 2012

Jambreiro moves closer to development - Centaurus

Brazilian iron-ore developer Centaurus Metals has received government approval for the final exploration reports on the three key tenements of its Jambreiro iron-ore project.

The National Department of Mineral Production’s approval paved the way for Centaurus to lodge the economic exploration plan, which effectively represented the start of the approvals process to secure the grant of a mining lease for the project.

Centaurus said on Friday that it would lodge the economic exploration plan over the next few weeks.

MD Darren Gordon noted that the approval of the final reports supported the quality of the exploration work undertaken by the company, and provided a strong degree of confidence that the government was satisfied with the quality of work undertaken as a basis for a future mining operation.

“We will now work towards finalising the economic exploration plan for the Jambreiro project and lodging this in the next couple of weeks to kick off the mining lease application process, and a further key step on the path to production.”

Gordon noted that after the economic plan was lodged, it could take up to six months before the mining lease was formally approved through Brazils' gazetting process.

He added that a significant component of the approval would be driven by the timining of the environmental approvals process. Centaurus lodged its key environmental approval document in March this year.

The environmental approval document was based on a three-million-ton-a-year operation, although the project was initially planned to start production at a rate of two-million tons a year.

Source: Creamer Media Reporter

Sunday, May 20, 2012

Vale Loses to Australia as Mine Laws Curb Market Share

By Juan Pablo Spinetto

Vale SA (VALE5), the world’s largest iron-ore producer, is poised to lose market share to Australian rivals Rio Tinto Group (RIO) and BHP Billiton Ltd (BHP) as Brazil imposes stricter environmental rules on new mining projects and labor costs soar.

Brazil’s share of the seaborne iron-ore market may sink to 27 percent by 2016, down from 31 percent now, as the country boosts capacity by 188 million tons, according to data compiled by Bloomberg. Australia will probably add about 502 million tons, taking its market share to 50 percent from 41 percent.

Vale, based in Rio de Janeiro, delayed the $8 billion Carajas Serra Sul expansion and at least three other projects in Brazil last year amid environmental permit issues, higher costs and labor shortages. The company also cut its 2015 iron ore output estimate by 10 percent to 469 million metric tons and is weighing asset sales as it focuses on metals production.

“We are becoming less competitive,” Jose Fernando Coura, president of the Brazilian Mining Institute, said by telephone from Brasilia. Getting approval for a new project is “a Calvary because you need to go through 350,000 institutions,” he said.

BHP, based in Melbourne, said April 18 that fiscal third-quarter iron-ore output surged 14 percent as it expands mines and ports in Australia. London-based Rio Tinto’s production gained 9 percent to 45.6 million tons, while Vale’s dropped 2.2 percent to 70 million after bad weather hurt operations.

Miners are boosting output to meet Chinese demand as the country’s growth stokes demand for steel in automobiles, appliances and construction. Chinese steel production reached a record in March amid the ramp up of new plants.

 

Australian Ore

Australian iron ore output may climb to 940 million tons by 2016, compared with an expected 519 million tons for its South American rival, according to Bloomberg data.

Vale rose 2.6 percent to 35.70 reais in Sao Paulo on May 18. The stock has fallen about 18 percent in the past twelve months, more than the 13 percent decline of the Brazilian benchmark Bovespa Index. (IBOV) BHP, the world’s biggest mining company, lost 29 percent in Sydney during the same period while Rio Tinto fell 32 percent.

China’s steel demand will remain positive until at least 2025 and production will rise to about 1.1 billion tons by 2025 from about 700 million tons currently, BHP said in March. The company is more than doubling its iron ore capacity by 2020 and this year got initial approval to expand its export harbor in Western Australia, where most of the country’s ore is mined.

 

Australia Investment

“The investing environment in Australia is a little bit friendlier than in Brazil from a political, environmental and permitting standpoint,” said Andrew Cosgrove, a Bloomberg Industries analyst in Princeton, New Jersey. “Brazil may not be seen as the source of new supply in the future that a lot of people are expecting.”

Brazil, which counts iron ore as its key export product, shipped 330.8 million metric tons last year, 107 million less than Australia. The gap between the two has widened since 2008, the year the country overtook Brazil as the largest exporter.

Australian exports will grow 12 percent this year to reach 493 million metric tons, the country’s Bureau of Resources and Energy Economics said in a March 21 report. Brazilian exports will gain 6.4 percent in 2012, it said.

Vale’s Carajas Serra Sul project, which is expected to increase capacity by 90 million metric tons, is two years behind schedule, the company said Nov. 28. Vale is expecting to get a preliminary environmental license for the project by June.

 

‘Licenses to Maintain’

“We obtained licenses to maintain,” Vale Chief Financial Officer Tito Martins told reporters May 18. “The difficulty that arose is getting licenses to expand.” Vale’s permit to operate its N5 Sul pit, granted in January, was the first license the company obtained in the Carajas region, where the company has its biggest mine, in 10 years, Martins said.

Vale isn’t the only company grappling with project delays and challenges in obtaining licenses in Brazil. Anglo American Plc (AAL), based in London, was ordered by the authorities to stop construction at its Minas Rio project, the company’s biggest, six times. The reasons for the stoppages included protecting the area’s artistic and cultural heritage.

“This is a painful process, but we go through it,” Paulo Castellari, the head of Anglo’s iron-ore unit in the Latin American country, said of the Brazilian permitting processes in an April 5 interview from Rio de Janeiro.

The company last month also had a license to install a power line at the project suspended by a Minas Gerais state court. Anglo failed to fulfil some of the conditions to obtain the permit, prosecutor Francisco Francisco Chaves Generoso told the court in a civil lawsuit.

 

Higher Costs

In December, Anglo raised its cost projection for at least the fourth time to as much as $5.8 billion, more than double the figure planned when the company agreed to buy the assets. The company has followed all legal requirements for environmental licensing on the project, which remains on track to begin shipments in the second half of next year, according to London-based spokesman James Wyatt-Tilby.

Mining projects in Brazil may become less profitable because of planned legislation. The government is drafting new rules to increase royalties on the extraction of iron-ore and other minerals.

Vale last year stopped publishing a long-term iron-ore output forecast after cutting its 2015 estimate. Rio Tinto, the world’s second-largest iron-ore exporter, has embarked on a plan to boost output capacity by more than 50 percent in Western Australia, reaching 283 million metrics tons in 2013, with a plan for a further increase to 353 million tons by the first half of 2015, it said in February.

Still, Vale’s low production costs and the high quality of its iron ore may prevent it from losing the lead in the market, according to Alan Glezer, an equity analyst at Banco Bradesco BBI SA.

“The company has the lowest production costs and has an iron ore of high quality, so they have a privileged position as the market expands,” he said by telephone from Sao Paulo.