Gondwana Junior Miners – Do They Feel Good?

THIS POST WAS ORIGINALLY PUBLISHED FEBRUARY 16, 2011

Gondwana Junior Miners – Do They Feel Good?

That is a really exciting period that we all are living in. Even the nature with its changing climate is reflecting all thrills and shake-ups that are happening today. And I think that major contributor to the world’s development is the “V” part of Nouriel Roubini’s LUV recovery. However, I would suggest to look into new dimension. A geologic term that is quite popular among the pundits: The Gondwana supercontinent that included Antarctica, South America, Africa, Madagascar, Australia, Arabian Peninsula and India.  This picture shows the history:

Source: Gondwana supercontinent underwent 60-degree rotation during Cambrian explosion

Although it was about 500 million years ago – isn’t it ironic that the current world economic order revolves around the same countries? That means something? And in my opinion – that creates a new mining group: The Gondwana Miners – that would definitely influence and shape the next century developments. As an example – there is a news flash that Colombia may increase its coal supply to Europe – which many analysts look at rather skeptical.

The Mining World Order is experiencing profound changes that directly affect the business. Some of the industry gurus have their own view and  pinpoint to the classic ‘commodity cycle’ aspect. However, what happens if this time the cycle would lead to some changes that are established for good???
Here are some major events that, in my opinion are shaping The Mining World Order at this time:

1. The boom in metals and commodities, there is no doubt now that this is the result of “V”-part recovery in Gondwana countries. Emerging markets’ population is driving demand for mining and energy. Iron ore, copper and coking coal are the leaders. In fact, refer to the latest statement by Rio Tinto’s representative More mining demand in next 20 years than in past 10 000 years – Rio Tinto . According to some experts, it will take 10 to 15 years — for global mining supply to catch up to the surge in emerging market demand.

2. This boom results in establishment of huge mining entities: e.g. Mt.Isa Mines – the biggest mining house in the 60-ies had market cap around $4.4 Billion in current USD; while BHP Billiton current number is around $ 250 Billion. In fact some news wires carry their reports under the heading “It is Good To Be a Miner” – referring to the news on tripling profits of Rio Tinto, and other major players. Big mining never had it so good – posts Reuters today in its commentary.

3. More and more pronounced are the concerns about the “critical metals” shortage: rare earth elements, molybdenum, vanadium, manganese, lithium, niobium, cobalt, tantalum, tungsten, indium and others

4. New resource deposits are becoming harder to find and take longer to develop; the most easily accessible resources being already exploited. However a lot of opportunities still exist – in Gondwana – and mining juniors are rapidly exploiting them – acting quick and efficient.

5. Changes in the way mining financing are done. The big companies accumulated lots of cash and it runs out that is more practical to revert to M&A, rather than prospect and develop. And more spice is being added to financing  by the drastic announcements that were made last week: mergers of major stock exchanges – LSE-TSX; Deutsche Borse and NYSE Euronex; Hong Kong Stock Exchange – CBOE (?),  Nasdaq (?); exchanges from Peru, Colombia and Chile are merging; Singapore Stock Exchange –  Australian Stock Exchange. This all will directly affect those miners that are looking into raising money through public offerings. In fact, today’s news wires carry the item that Chinese companies are turning to equity markets, rather than debt borrowing. This process is clearly the itchiest for all mentioned exchanges – the recent days saw many promotional news on each of them – like this one that came out today: Toronto Stock Exchange is an international leader in the mining world6.  The response of the industries that support mining is also noticeable. Consolidation of the law firms takes place –as it was reported today: GLOBAL law firm Clifford Chance has unveiled a merger with two leading Australian practices to give it greater exposure to the booming resources trade with Asia.

So, where are the junior miners in this picture? As usual, I think, that they trying to benefit the most:

• Thoroughly analyze the global market and all changes that are happening in commodities – as the result timely react all these. While big mining houses have a lot of cash, they are pretty limited to expedient execution of their plans; and in many cases they are not interested in small and medium-sized opportunities. Sometimes it happens that the most accessible areas of the world still have small projects that can be consolidated.
• It easier for junior miners to secure financing and do it is a much quicker way form meeting the investors to execution of projects.
• And here is a perfect chance to show up at the Global Market, sell equity or the venture as the whole and start the total mining process cycle with other project.

So, may I finish on an optimistic note: Gondwana junior miners are in the right place and at the right time in the new Mining World Order.

Earthstone Holdings — African Spotlight: Manganese Dioxide

THIS POST WAS ORIGINALLY PUBLISHED MAY 11, 2010

Earthstone Holdings — African Spotlight: Manganese Dioxide

In pursuit of its operational development plans, Earthstone Holdings has substantially stepped up its activities in Africa, and Zambia is being the key focus.

Dr. Surendra Kumar Sarangi M.Sc., Geology, Ph.D., from Geomin Consultants Pvt Ltd is spearheading Earthstone’s efforts in geologic valuation of opportunities in Zambia. To this end a pilot process was established that is operationally testing the sales and delivery procedures for manganese dioxide.  Our pilot site produces manganese dioxide:

It is initially sorted and then transported in the bags to the storage facility at the town of Mansa:

After sorting and testing at the laboratory at the storage facility the ore is being transported by railway to the port of Dar-Es-Salam for the sales to the customers. Although at this time the described operation has a pilot character (nonetheless, with actual sales), we feel that within a few weeks we will be able to start full-scale sales process. Of course this process is a supplement to regular production, and much is being done in this sense. We are in discussions with a number of local producers, and actually a full-sized roll-up process is under development. We are also in agreement with several mining entities that are willingly delivering their ore for our processing and sales. Current plans call for production level of 20,000 tons of manganese dioxide by the end of 2010.
It is only natural that operations in a new country require a solid logistic support. In just a little bit more than two months the Holdings has set up its Lusaka Headquarters in this beautiful part of the city:

Our facilities include a fully equipped office and comfortable guest houses.

The area around our mining operations in Luapula Province (about 800 kms off Lusaka) – the city of Mansa – shall be the hub of local activities. At this time the local headquarters office is under refurbishment – that, besides logistics facility, shall also include comfortable guesthouses and communications hub.

This is only the beginning of our extensive exploration and mining efforts in the country and we will report more in our subsequent posts.

Investments in Mining: South Africa – Part II

THIS POST WAS ORIGINALLY PUBLISHED APRIL 08, 2010

Investments in Mining: South Africa – Part II

South Africa is one of world’s leader in mining. The country has an abundance of mineral resources that  account for a significant proportion of both world production and reserves; while South African mining companies dominate many sectors in the global industry. South Africa’s position as the largest gold producer in the world was lost to China in 2007. Gold now contributes about 5.8% to GDP; precious metals account for 65% of the country’s mineral export earnings and 21% of total exports of goods. In the mining industry about 460,000 people are working, and 400,000 work in suppliers and services.

Source: South Africa Major Business Sectors Compiled by: Swiss Business Hub South Africa

Contribution of mining to the South African economy. The mentioned below Annual Report of The Chamber of Mines of South Africa cites the following:
“Perhaps the best way of illustrating the role that mining plays in the economy is to temporarily “remove” the mining sector from the economy and then to reflect on the actual economic contribution. With mining temporarily removed, the economy would lose:

• about 18% of GDP
• over 50% of merchandise exports
• about 1 million jobs
• about 18% of gross investment (9% directly)
• approximately 30% of capital inflows into the economy via the financial account of the balance of payments
• about 35% of the market capitalisation of the Johannesburg Securities Exchange (JSE)
• 93% of the country’s electricity generating capacity
• about 30% of the country’s liquid fuel supply
• the largest contribution by value to black economic empowerment in the economy
• about 20% of direct corporate tax receipts (R33-billion in 2008).”

According to the data from Department of Minerals and Energy current South African mining operations include:

• 145 diamond mines
• 64 coal mines
• 49 gold mines
• 28 platinum-group metal mines
• 59 different minerals from 993 mines
• Mineral exports to 82 countries

Despite the fact that South Africa’s mining industry is over a century old, it is still not developed to a full range. While holding the world’s largest reserves of gold, platinum-group metals and manganese ore, the country has considerable potential for the discovery of deposits in areas yet to be explored.  Only two strategic minerals – crude oil and bauxite – are not available in South Africa. There are five basic mineral categories that are well developed: precious metals and minerals, energy minerals, non-ferrous metals and minerals, ferrous minerals and industrial minerals.

Those who are interested in geologic aspect, may read a relevant Chapter (Rocks for Crops: South Africa) of  Rock for Crops by Professor Peter van Straaten – that has a wealth of information on mining in various countries of Africa.

The Chamber of Mines of South Africa in their 2009 Annual Report provides a detailed picture of what is going on with mining in the country.  In fact I would highly recommend every mining professional to read this – a very comprehensive analysis of world mining trends and of South Africa’s position. This is a quality document done by the quality staff. As an example, I would like to reproduce the following graph:

As it is mentioned in the Report presently mining is done by the following companies:

Coal: Anglo Operations Limited, Anglo Coal Division; BHP Billiton Energy Coal; Exxaro Resources Limited; Kangra Group (Pty) Limited; Kuyasa Mining (Pty) Limited; Optimum Coal; Sasol Mining (Pty) Limited; Siyanda Coal (Pty) Limited (t/a Koornfontein Mines); Total Coal South Africa; Tweewaters Fuel (Pty) Limited; Umcebo Mining (Pty) Limited; Xstrata Coal South Africa

Base metals/minerals & exploration companies: ASA Metals (Pty) Limited; Delta Mining (Pty) Limited; G&WBase and Industrials (Pty) Limited; Imerys South Africa (Pty) Limited; Randgold and Exploration Limited
Chrome mining: Samancor Chrome
Gold mining: African Rainbow Minerals (Gold) Limited; AngloGold Ashanti Limited; Gold Fields Limited; Harmony Gold Mining Company Limited; Pamodzi Gold
Iron ore mining: Kumba Iron Ore Limited

Platinum mining: Anglo American Platinum Corporation Limited; Impala Platinum Limited; Lonmin Platinum Limited; Ridge Mining

When you go to the Web-sites of mentioned companies via provided here URLs – you may find a lot of information on mining of relevant minerals.

Apart from its abundant mineral reserves, South Africa’s strengths include a high level of technical and production expertise, and comprehensive research and development activities.

Current situation in the industry is interesting. In February 2010, mines minister Susan Shabangu told media that the government will not nationalize the country’s mines ‘in my lifetime’.  It seems that currently  the mining industry is remaining optimistic despite of the youth league’s threats, however Anglo American states that it remains confident in the South African government’s commitment to free market policies. And everyone is waiting for release to public of review of the country’s Mining Charter. Business Monitor International  forecasts that South Africa’s mining sector will reach a value of US$37.38bn by 2014. In the near term, growth should bounce back from the depressed levels of 2009, as the country is likely to be among the first to benefit when the global economy returns to strength.

As usual, some helpful links:

• THE ROLE OF MINING IN SOUTH AFRICA BEYOND 2010
• Rocks for Crops: South Africa
• Geological Society of South Africa (GSSA)
• The Chamber of Mines of South Africa
• Coal deposits of South Africa – the future of coal mining in South Africa by Stephan Schmidt
• South Africa Major Business Sectors Compiled by: Swiss Business Hub South Africa
• South Africa: Summary of Coal’s Industry