Rise in Capital Expenditure

There was an encouraging increase in mining capital expenditure in 2018, and announcements during the final two weeks of the year included new mine developments in the DRC, Russia and Scotland.

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Announced capital expenditure in the year to December 14 totaled US$79.8 billion, compared with only US$46.1 billion for all of 2017, according to a recent study by S&P Global Market Intelligence. There were, however, only 212 announced plans in the year to December 14, compared with 242 in 2017.

All regions except for the Middle East had year-to-date announced capital costs that were significantly higher than for 2017. Asia-Pacific and Latin America outstripped the US and Canada to distinguish themselves as the top two destinations for capital expenditure in 2018.

Primary copper properties accounted for the bulk of capital expenditure plans announced in 2018, with spending more than twice that of the full year 2017 at US$31.2 billion. Gold followed, albeit distantly, with the second-largest share of announced capital spending at US$18.7 billion. Doubled year-over-year capital expenditure were also recorded for iron ore, lithium and nickel, at US$4.2 billion, US$6.3 billion and US$2.4 billion, respectively.

Initial capital spending remained the top expenditure type in 2018, more than doubling to US$57.2 billion, from full year 2017's US$26.3 billion. Announced initial capital spending plans grew from 96 to 119 year over year. Announced spending on expansion projects slipped slightly to US$7.9 billion, compared with US$8.1 billion in 2017, while planned mine-life extension costs rose by more than one-half to US$6.5 billion.

Development Announcements

Zhejiang Huayou Cobalt Co. (through subsidiary Congo DongFang International Mining) is investing US$147.2 million on a new copper project in the Democratic Republic of the Congo. The project will have a capacity of 30,000 t/y of electro-deposited copper.

PJSC Uralkali has received approval for construction of its Ust-Yayva mine in the Perm region. The government of the Perm region and the Ministry of Industry and Trade granted Uralkali tax privileges for the project in June 2017. Ust-Yayva is part of Uralkali's Berezniki project.

Scotgold Resources Ltd subsidiary SGZ Cononish Ltd is about to start development of its Cononish gold-silver mine in Scotland, and is targeting first gold production by end-2019 at an average of 23,500 oz/y (gold equivalent).

Meanwhile, Denison Mines Corp. has approved expenditure of C$10.3 million in 2019 on its 90%-owned Wheeler River uranium project in northern Saskatchewan. The budget covers the initiation of an environmental assessment process and engineering studies required to advance the high-grade Phoenix deposit as an in-situ uranium recovery operation. The funds will also allow the company to commence pilot plant testing and exploration activities. Denison plans to complete a feasibility study by the end of 2020 and secure environmental and permitting approvals by 2022 at the latest. Construction is expected to start in 2022, with first production anticipated by 2024.

Speciality Metals International Ltd is in advanced negotiations with Cronimet Holding GmbH for staged development of the former's Mount Carbine tungsten project in Queensland, Australia. As part of the deal, Cronimet will advance US$3.5 million in cash by way of an off-take agreement. Production will start using the 12 Mt of stockpiled material following recommissioning of the tailings-retreatment plant.

Feasibility Studies

A technical and economic feasibility study is underway of behalf of Eramet for its Centenario-Ratones lithium project in Argentina. The French diversified miner said that it will make an investment decision on in the first half of 2019 and potentially start production at the end of 2021. Eramet estimates that a €500 million investment is needed for an operation producing 24,000 t/y of lithium carbonate equivalent.

Independence Group NL's pre-feasibility study at the Tropicana gold joint venture in Western Australia has confirmed that underground mining beneath the Boston Shaker open pits is a technically and financially viable option. The joint venture, which is owned 30% by Independence and 70% by AngloGold Ashanti Ltd, will now move to a full feasibility study on underground development of the Boston Shaker deposit. The study, which is expected to be complete in the third quarter of 2019, will target a production rate of 1.0 Mt/y grading 3.7 g/t to produce an average 100,000 oz/y over a mine life of up to seven years. Full production will be reached in 2021, and the last stopes are scheduled to be mined in 2026. Capital expenditure is estimated at A$95 million.

Operating Improvements

Compañía Minera Doña Inés de Collahuasi SCM, which is owned 44% each by Glencore Plc and Anglo American Plc, is seeking an environmental permit to extend the life of the Collahuasi copper mine in Chile. The project to improve efficiency and raise output will cost some US$3.2 billion. The mine is forecast to produce 545,000 tonnes of copper in 2018.

Vedanta Ltd has announced plans to spend US$8 billion over the next three years to expand the group's output capacity, including a 1.0 Mt/y expansion in aluminium production and an 800,000 t/y boost to zinc output.

The share price of London-listed Wishbone Gold Plc surged 60% on December 19 after it announced that joint venture partner Sion Honduras SA had received a license to operate the plant and equipment at their Honduran mining project. The project was created to provide artisanal miners with appropriate gold-processing equipment. Wishbone will accelerate production over the coming months, and shipments to Dubai are expected in the first quarter of 2019.

Development Funding

First Majestic Silver Corp. is raising US$50 million from the sale of shares to develop the company's existing mines and for additional working capital. First Majestic produced a record 6.7 Moz (silver equivalent) in the third quarter.

Barkerville Gold Mines Ltd has closed the second tranche of a private placement to raise C$29.5 million. The proceeds will be used to fund exploration and development of the Cariboo gold project in British Columbia and for general corporate purposes.

RNC Minerals Corp. is raising C$10.3 million for exploration and development work at the Beta Hunt gold mine in Western Australia. The bought-deal offer and share placement are expected to close around January 16. RNC launched a 40,000 m drilling programme at Beta Hunt in November, targeting a resource update in the second quarter of 2019.

Osisko Gold Royalties Ltd is acquiring a 15.2% stake in Barksdale Capital Corp. for C$3.5 million. Barksdale will use the proceeds to advance its Sunnyside copper project in Arizona and for general corporate and working capital purposes.

Bassari Resources Ltd has finalised a loan agreement with Coris Bank International that includes a drawdown of US$13 million to complete all pre-development requirements for its Makabingui gold project in Senegal and to acquire additional mining equipment needed for production. The project financing will carry a 9% interest rate over an 18-month term.

Pretium Resources Inc. has secured a US$480 million debt facility with the Bank of Nova Scotia, Societe Generale and ING Capital LLC. The loan will refinance its existing construction credit facility for the Brucejack gold mine in British Columbia.

IRC Ltd has secured a US$240 million facility with Gazprombank to refinance the finance facility for its K&S iron ore project in Russia with Industrial and Commercial Bank of China. Meanwhile, Petropavlovsk Plc agreed to defer the demand for repayment of a bridge loan of about US$30 million until February 20, and granted a new temporary loan of about US$27 million to IRC.

Advance Warning

Early stage business-development news announced during the second half of December included an announcement that Rio Tinto and China's Baowu Group are discussing extending the Bao-HI iron ore joint venture in Western Australia's Pilbara region. The JV pertains to the Eastern Ranges mine and Western Range project in the Pilbara. The JV has achieved sales of more than 180 Mt since it was created in 2002, and Rio Tinto has commenced a pre-feasibility study on the Western Range project which is expected to be completed by the end of 2019.

Oxford Mining Co. has been issued a permit by the Ohio Environmental Protection Agency for a surface mine in Perry County, including portions of the Perry State Forest. The new Northern Appalachian operation is expected to produce up to 450,000 t/y of high-sulphur thermal coal for several years. The site was mined in the 1930s and 1940s before the advent of modern-day environmental regulations. Oxford is a subsidiary of Westmoreland Coal Co., which filed for Chapter 11 bankruptcy in October.

VRX Silica Ltd has lodged an application for its first silica sand mining lease on the Arrowsmith North prospect in Western Australia. A drilling programme to increase resources and improve the classification is expected to be completed in the current quarter.

Australian Vanadium Ltd is to undertake a definitive feasibility study on the Gabanintha vanadium project in Western Australia. This follows a pre-feasibility study that outlined a net present value, discounted at 8%, of US$1.41 billion based on a steady vanadium pentoxide price of US$20/lb over the operation's initial 17-year mine life. Total capital expenditure was estimated at US$354 million.

PolyMet Mining Corp. has secured the final state approvals to build and operate its NorthMet copper-nickel-precious metals mine in Minnesota. The company now awaits the US Army Corps of Engineers' decision on a wetlands permit, the only remaining federal permit yet to be obtained.

MOD Resources Ltd announced that positive assays from the A4 Dome target, combined with a preliminary conceptual underground mining study, confirmed the expansion potential for the T3 copper project in Botswana.

Mark Creasy's private gold explorer White Rivers Exploration Ltd, which owns the Kroonstad and Bothaville gold prospects in South Africa, is in talks with "deep-pocketed" companies for potential joint venture development of several of its gold discoveries in the country. This will be in addition to the White Rivers/Harmony Gold JV in the country with Harmony Gold Mining Co.

Red Rock Resources Plc and joint venture partner Gécamines SA have set up a local company in the Democratic Republic of the Congo, Musonoi Mining SA. The joint venture will focus on exploitation of copper-cobalt tailings and dumps near Kolwezi. 

Source: All material is taken from S&P Global Market Intelligence's Metals & Mining database.

Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.