Showing posts with label Rio Alto. Show all posts
Showing posts with label Rio Alto. Show all posts

Saturday, November 10, 2012

Miner Rio Tinto says fresh China stimulus unlikely soon

China's incoming leadership change is unlikely to spur fresh economic stimulus measures anytime soon, according to global miner Rio Tinto, which sells tens of millions of tons of iron-ore, copper and coal to China annually.

"The forces for a big stimulus are pretty limited," Rio Tinto chief economist Vivek Tulpule told reporters.

Earlier rounds of stimulus helped drive global iron-ore and coal prices to record highs. This in turn translated into soaring profits for the likes of Rio Tinto and other mega-miners, including BHP Billiton and Xstrata .

Since then, an economic downdraft has seen Chinese growth slow for seven successive quarters and left 2012 on course to be the weakest full year of growth since 1999 – albeit at a 7.7% clip that is the envy of developed economies.

The Chinese Communist party's week-long congress is due to anoint a new generation of leaders, but is also an opportunity for senior officials to hash out or defend policies.

Rio Tinto expects economic growth in China to rise to at least 8% in 2013 and average 8% to 9% to 2015, a more bullish view than the global miner's main rivals.

China is scheduled on Friday to release a string of data, including industrial output and retail sales, expected to show modest growth recovery in the world's No.2 economy.

Rio Tinto, the world's No.2 iron-ore miner, sees Chinese growth picking up from below 8% this year as a new government in Beijing relaxes restrictions on real estate investment and pushes infrastructure spending, which will drive demand for steel and in turn iron-ore, its chief economist said.

"On balance we're seeing some green shoots and an expectation next year that the GDP growth rate will have an 8 in front of it, at least 8%, maybe on the low side of that," Tulpule said.

Among those green shoots, he pointed to recent data showing a pick-up in containers in ports and rail cargo turnover in September, a rise in housing sales, and an increase in credit from new financing sources.

Rio is sticking to its view outlined earlier this year for Chinese growth to average 7% to 8% from 2015 to 2020 and slowing to 5% to 6% growth beyond 2020, but said it was likely to be a volatile path towards slower growth as the Chinese economy evolves from being investment driven to consumer driven.

"There are some uncertainties about the future," he said.

By comparison, top global iron-ore miner Vale now sees China's economy growing at 6% to 7% a year over the rest of this decade. BHP Billiton sees China's annual growth averaging 7% to 8% over the next decade.

Rio Tinto sees Chinese steel production peaking at one-billion tons a year around 2030, slightly later than earlier forecasts for it to peak at that level around 2025.

Tulpule warned that if the US failed to find a solution to the "fiscal cliff" it would not only shave US demand for commodities, but would have a bigger impact in terms of contagion in financial markets, which would hit activity on the London Metal Exchange, where trading of metals like copper and aluminium has been driven by speculation.

The fiscal cliff refers to a $600-billion package of automatic spending cuts and tax increases due to take effect early next year unless Washington can negotiate a deal.

But Tulpule said the net impact on bulk commodities, like iron ore, would be limited because if Chinese growth slowed sharply as a result of the US fiscal cliff, we would likely see China step up stimulus spending swiftly.

"If we don't, then I think we would start to see some negative effect on bulk markets," Tulpule said.

Edited by: Reuters

Thursday, May 3, 2012

Junior focus: Rio Alto gold grade double mine plan – but not high grading

Rio Alto's President and CEO Alex Black speaks with Mineweb about its success and prospects as it hits boilerplate production at its La Arena gold project in Peru.

Rio Alto Mining's (TSX: RIO) early success in bringing the La Arena gold deposit in Peru into production. Rio Alto poured gold about a year ago and is now on track to churn out some 150,000- to 160,000-ounces this year. Total cash costs have been low more or less from the get-go, in the $600 per ounce gold range, and are expected to stay that way this year. In its last quarter, Rio Alto's biggest yet, it produced 56,000 ounces gold and more than doubled cash holdings to $71 million.
What struck one as much or more so than outright gold output from the last quarter was grade. Basically it was double mine plan. Rio Alto mined 1.3 million tonnes @ 1.37 g/t gold versus an expected 2.2 million tonnes @ 0.69 g/t from the La Arena gold/copper deposit, which holds some 1.5 million ounces of gold in measured and indicated resources in an oxide cap (in sulphides below there is an additional 313 million tonnes @ 0.24 g/t gold and 0.29 percent copper which it might mine during a second phase).

The big drop in ore production below mine plan was due both to the bump-up in grade and unusually heavy rains during the quarter, which slowed leach pad expansion. Thus Rio Alto shifted its mining efforts to waste removal. Ore tonnes mined were approximately 871,000 tonnes less than plan, while waste removal exceeded plan by 694,000 tonnes.

"Some people thought we were high grading," Alex Black, Rio Alto president and COO, told Mineweb over the phone from Peru where he is based. High grading refers to a usually short-sighted mining technique that bypasses lower grade ore in favour high grade stuff, something that inevitably hurts down the line when the good ore is gone and you're forced to mine - at higher cost - what you had once passed over.
But Black said high grading was not at play at La Arena. Rather, he said, preproduction "we knew there would be some sort of grade kick." It was just a matter of how much of a grade kicker would come. The cause, Black said, are high-grade structures within the La Arena deposit. The high grades therein are not reflected well in the resource, much of which is based on drilling by previous operators. Chief among these was Cambior before Iamgold took it over back in 2006.

Now, Black said, Rio Alto is trying to get a handle on mine reconciliation. To do so Rio Alto is conducting a geostatistical study that should be done sometime in the fourth quarter and help Rio Alto better model grades.
A tantalizing question remains, however; will the high-grade kicker continue? Black is realistic in response. High-grade structures, stringers in the deposit that have bumped up gold grade, could continue deeper - or not. "We just don't know," he said. That is why Rio Alto plans to update its model yearly, to reflect any changes to the deposit model as mining progresses.
Another side to Rio Alto's success in its start up at La Arena is ore processing. "It leaches like a dream," he said. Metallurgical testwork predicted it would, but Black noted there is always uncertainty about any preproduction metallurgical testing: the question of whether it will translate to commercial reality. It has.
Rio Alto's success so far has translated into cashflow and some will wonder what Rio Alto will do with its growing dollars should high gold prices remain high and production continue according to plan.
A dividend is one option. Black was non-committal but did not take it off the table. "We've got to think about that," he said, noting dividends are a relatively recent phenomenon in the gold mining sector. Rio Alto would look at whether to issue one on a "case by case basis," he said. Perhaps shareholders will have some say on the matter as they increasingly look to dividends as an important way to fill a void that was once filled by a higher premium on gold stock.
Cash of course will also fund Rio Alto's inhouse portfolio of projects. Black noted they hold some 27,000 hectares at La Arena, a smidgen of which accounts for mining operations. He said there was "plenty of potential there."
Yet he also pointed to the junior marketplace. With the fall of so many junior market caps it may seem a bargain basement shop replete with worthless trinkets and the odd, surprising, treasure like a Rolex mixed up in a box of plastic Mickey Mouse watches.
Such opportunities, whether in the form of acquisitions, mergers or joint-ventures are all possibilities, Black said. "There's plenty of potential in the market," he said. Rio Alto could go after them or opportunity could come to it. "There are all sorts of things that could happen," Black said.
According to Black, there is interest in Rio Alto by other companies, though where that might lead is anyone's best guess. As is typical for any junior miner, Rio Alto has let others take a peek into its operation more closely. "We've opened the door to people that want to take a look," Black said.
Black also observed that acquisitions seem difficult to sell to the market these days. Looking to recent events in the gold sector Black described takeovers this way. "Damned if you do, damned if you don't." Thus it would seem he treads carefully in weighing Rio Alto's options in pursuing growth.
One thing that is hard to escape notice: Rio Alto's stock chart. Over the past few years it has a nice steep up-curve. For much of last year Rio Alto hovered around C$2 per share. This year it peaked over C$4.60, having since come down to the low C$4s.
While Rio Alto's shareprice has declined over the past six months, in a relative world it must be said to have some sticking power as part of a broader investment landscape that has dumped risk and resource stocks.

The obvious reason behind its market resilience is that Rio Alto started full-scale mining last year and turned out a strong performance. Investors like that.
Some of the sticking power, however, may also come thanks to a more surprising source: Peruvian pension funds. Rio Alto trades in both Lima and Toronto and Black noted that since Rio Alto graduated to the big board in Toronto from the Venture exchange, its shares have become an eligible target for Peruvian pension funds.
"The various pension funds are starting to buy our stock," Black said.
Pension funds in Peru are active in the resource sector and to illustrate their hunger for resource investments Black used Volcan Compañía Minera, a Peruvian mining powerhouse, as a prime example. Pension funds are minority shareholders in Volcan and what's more in a recent $600 million bond issue by Volcan Black said the pension funds bought all the paper. "It shows appetite for the right story," Black said.
Rio Alto is not near Volcan in size, but Black said this is not scaring off the pension funds. You might think they would eschew smaller companies and small share blocks in favour of more giant-sized investments like the Volcan bond issue. However Black said the pension funds are willing to buy in smaller blocks on the open market.

Source: Mineweb