May 17, 2020

Are low-margin businesses the new trend for mining giants?

Operations
mine sites
Refining
Rio Tinto
Admin
2 min
Are Low-margin businesses the new trend for mining giants?
Struggling with financial pressures, the worlds largest mining companies are losing the ego and exploring new revenue sources such as low-margin busines...

Struggling with financial pressures, the world’s largest mining companies are losing the ego and exploring new revenue sources such as low-margin businesses, encroaching one a segment traditionally done by smaller companies.

According to Bloomberg, for the first time ever, Rio Tinto has started to refine other companies’ copper ore, while Brazil’s Vale has begun mixing minerals to make custom supplies for buyers.

“Everybody is trying to find ways to squeeze out whatever they can,” said Rick de los Reyes, who helps manage $1.5 billion invested in metals and mining at T. Rowe Price. “Everybody is fighting to stay alive.”

• Related content: Rio Tinto aims to cut costs by $1 billion but how?

Commodity prices continue to be a bust in 2015 as iron ore has fallen 22 percent and copper is down 19 percent. Coal has fallen roughly 10 percent so far this year and nickel is down 31 percent.

At Rio Tinto’s smelting facility in Utah, the company has started providing services to other producers, which are paying Rio Tinto a fee to heat up copper ore.

“It is vital that we remain focused on reducing our costs, increasing our productivity and ensuring that we derive the maximum value from our operations,” said Jean Sébastien Jacques, chief executive of Rio Tinto’s copper and coal group.

• Related content: [INFOGRAPHIC] Careers in mining: How to become a Metallurgist

And while low-margin businesses like refining seem natural for large mining companies like Rio Tinto and Vale, the strategy is layered in risk with razor-thin margins. According to some analysts, these downstream activities expose a bigger problem.

“It is probably not the best odds that it will work out real well or they would have been in that business in the first place,” said Michael Ball, portfolio manager with Weatherstone Capital Management, which oversees $675 million. The efforts “speak to the fact that companies believe they’ve got a longer-term issue on their hands.”

However, mining companies may have no other choice.

“The producers can’t just sit on their hands and say they can’t do deals like that,” saidPeter Bradley, Javelin’s chief executive and a former commodities trader at Goldman Sachs. “Otherwise, their industry is going to go away.”

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May 14, 2021

Copper production from top ten companies to increase by 3.8%

Copper
Codelco
First Quantum
Freeport-McMoRan
2 min
Following a marginal slump in copper production due to COVID-19, output from top ten companies set to rise up to 3.8% in 2021 reveals GlobalData analysis

Copper production from the world’s top companies is set to increase by up to 3.8% this year, following a fall of 0.2% in 2020, GlobalData analysis reveals. Last year’s marginal slump saw production drop to 11.76 million tonnes (Mt).

Copper

The initial impact of the COVID-19 pandemic on mining operations was immense, however, six of the ten largest copper producers succeeded in increasing output last year. In 2021, copper production from the top ten copper companies is expected to bounce back, rising by up to 3.8%, to reach 12.2Mt, according to GlobalData, a leading data and analytics company. 

First Quantum

The highest increase in copper production was by Canada’s First Quantum, which, despite all the challenges, reported 10.4% growth in 2020. The company’s Sentinel mine in Zambia and Cobre Panama were key contributors to this growth. While the latter remained under care and maintenance between April and August 2020, it delivered record production levels during the subsequent months.

Copper

Codelco

Codelco, the world’s largest producer of the red metal used in electric vehicles, also bucked the trend.

Vinneth Bajaj, Associate Project Manager at GlobalData, commented: “Despite Codelco reporting over 3,400 active cases during July 2020, the company achieved 1.2% growth in its production in 2020. The company implemented a four-phase plan, as part of the COVID-19 measures, to ensure the health and safety of its employees, while also avoiding any significant impact to its copper output.” 

Freeport McMoRan

Although the overall impact was minimal, declines in production were observed from Glencore (8.2%), Antofagasta (4.7%), BHP (3.9%) and Freeport McMoRan (1.3%). Reduced operational workforces due to COVID-19 measures, lower ore grades and production halts due to maintenance were the key disruptors to output during 2020.

Electric Vehicles

The move towards electric vehicles and clean energy from renewables sources such as solar panels and wind turbines has driven the copper price to all-time highs. Copper has been among the best performers over the last month where metals ranging from aluminum to iron ore have surged to their highest prices in years. The rally is being fueled by stimulus measures, near-zero interest rates and signs that economies are recovering from the global pandemic. 

 

 

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