May 17, 2020

Base metals and mining industry outlook: 2016

Report
outlook
Zinc
Aluminium
Admin
5 min
Base metals and mining industry outlook: 2016
Thomson Reuters has released its annual GFMS Base Metals Review and Outlook which considers the prospects of base metals in 2016, including updated pric...

Thomson Reuters’ has released its annual GFMS Base Metals Review and Outlook which considers the prospects of base metals in 2016, including updated price forecasts for the base metals complex.

Prices, across the board, are lower intra-year and range from a 12 percent drop for lead to a 34 percent fall for nickel, and while we acknowledge that there is plenty of scope for negative sentiment as global growth fears remain, we have started to look for turning points. The rate of recovery, of course, will vary from metal to metal but fundamentally, we are most bullish on nickel, least bullish on aluminium.

• Related content: Gold industry stock outlook – Will the shine last?

The corporate sector, naturally, has fallen lock-step with the slump in prices. The top ten miners have a combined market value of just over $280 billion which is roughly half what it was some 12 months earlier and almost a quarter of the reading at the peak of the super-cycle in early 2011. Overall, the landscape for the mining sector looks rugged. The clock has turned back commodity prices and revenue to levels last seen in 2008/09, while over the same period debt on the combined balance sheets of the ten miners is more than 50 percent higher. Free cash flow is holding up, but only thanks to drastic cuts to capex, which will partly impact mining flexibility and future growth plans.

• Nickel prices expected to rise nine percent as constraints limit supply whilst demand grows.

• With falling surplus, copper prices to grow four percent on annual average basis, with expectations of significant growth towards the end of 2016.

• Aluminium prices set to struggle as output continues to increase, with expansion of lower cost capacity in China.

• Lead also expected to struggle in 2016.

• Zinc market continues to disappoint currently as deficit fails to materialize again despite mine closures.

It is in this regards that further downside to commodity prices will be much tougher to absorb. The result will be, in our view, better discipline on the supply side with meaningful cuts to marginal cost production which should provide support prices for a number of the base metals. Furthermore, project deferrals and capex cuts will dent future supply growth, and while sentiment remains firmly negative, we are sowing the seeds for the next mining boom, as supply, once again, falls out of sync with global demand growth, albeit at a slower pace this time around. We look forward to substantial price hikes in the medium term, but as for 2016, it will be a largely muted affair, as the rebalancing continues. 

Nickel the standout in 2016, but it’s a field of weak runners

The nine percent increase we forecast for nickel prices next year is predicated on further supply constraint that will coincide this time with stronger consumption from the key stainless steel sector. Demand has been knocked by a prolonged destocking cycle that began in late 2014 and continued into the early months of this year to more than counter lower supply, leaving the market in a forecast 40,000-ton surplus in 2015.

WATCH: [VIDEO] Red-Hot Nickel Ball v.s. Everything

Considerably more than half of the world’s nickel producers are estimated to be losing money, however, and further curtailments look set to come through that will tip the market into a 30,000-ton deficit. While this is unlikely to set nickel alight given that it will make only a small dent in the continued vast inventory overhang, industry watchers will be heartened by the fact that its fundamentals will be moving in the right direction, with further deficits foreseen in subsequent years.

Copper close to bottom

The copper market is close to bottoming out and we expect it to finally turn the corner next year as the surplus contracts to a little more than 100,000 tons. While prices will improve only marginally by four percent on an annual average basis, the gradual upwards slope will see them end 2016 substantially higher than present levels.

While we have been somewhat cautious on the extent to which recent price-related production cutbacks to date will impact copper supply, they will help to reduce the expected surpluses this year and next. Furthermore, as miners continue to react to current weak prices, further supply response is expected, indicating a return to deficit from 2017. Global copper demand growth, which has been crimped to little more than two percent this year will also play a greater part in improving market fundamentals, helped, despite a degree of caution on the figures bandied around, by investment in China’s power network, as well as by the One Belt One Road policy. 

Others to disappoint...again

The prospects for aluminium, zinc and lead in 2016 look comparatively less inspiring than those for copper and nickel. The former will continue to be plagued by the seemingly relentless rise in output. While we are building in slower supply growth next year than this year’s hefty 7.4 percent forecast, which has been fuelled by continued strong expansion of lower cost capacity in China, this will still leave the market in around a half a million ton surplus. With no sign of deficits on the horizon in the medium term, weak prices remain the order of the day for this metal.

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The zinc market has had to contend with disappointment yet again that the closure of some of the world’s biggest mines is not going to result in a substantial deficit again next year and this is reflected in an expected 7.7 percent decline in prices this year, to be followed by a mere 1.5 percent increase in 2016 to $2,030/ton. The shortfalls forecast for this year and next pale into insignificance in light of both visible and “invisible stocks.

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Apr 19, 2021

AngloGold Ashanti establishes BG Umoja JV in Tanzania

AngloGoldAshanti
Geita
Gold
Sustainability
Daniel Brightmore
3 min
AngloGold Ashanti, Geita, Tanzania, BG Umoja
AngloGold Ashanti’s BG Umoja JV has been awarded a $186mn two-year contract for the Nyankanga and Geita Hill underground mining projects in Tanzania...

AngloGold Ashanti, in line with it s strategy to ensure a sustainable contribution to the economies of host countries, has established the BG Umoja joint venture (JV), in Tanzania.

Awarded a $186m two-year mining contract for the Nyankanga and Geita Hill underground mining projects, the 80/20 joint venture is a partnership between Africa Underground Mining Services (AUMS) Tanzania, a subsidiary of Australia’s Perenti Group, and local drilling services and mining- supply company, Geofields Tanzania Limited. 

The partnership is modelled on a similar underground mining joint venture at the Company’s Obuasi Redevelopment Project in Ghana between AUMS Ghana and Accra-based, wholly Ghanaian-owned Rocksure and will help build local specialised mining capacity.

AngloGold Ashanti

“We’re working with our experienced mining contractors to assist in establishing local joint ventures for long-term transfer of sustainable skills, and to continue building on our sustainable local procurement programmes,” commented Sicelo Ntuli, AngloGold Ashanti’s Chief Operating Officer: Africa. 

“AngloGold Ashanti is building sustainable local procurement programmes that will allow it to stimulate economic and social development at all of its operations, evidenced by the significant contribution Geita has made to the fiscus and people of Tanzania.”

AngloGold Ashanti’s annual expenditure with indigenous Tanzanian suppliers has almost tripled to $162mn since 2016. The company’s local team in Tanzania has set itself an ambitious target of 60% to 70% of all expenditures with indigenous Tanzanian companies, by 2025.

Scope 3 Emissions

In addition, AngloGold Ashanti’s Geita Gold Mine has awarded a two-year fuel transportation contract, worth approximately $10.8m a year, to two local contractors - one of which is originally from Geita. This is in line with the mine’s commitment to contribute to the economies of host communities. The Geita-based company was part of Geita Mine’s supply chain capacity building initiative for host community suppliers, a partnership between the Mine and the National Economic Empowerment Council.

To influence Scope 3 emissions, trucks are to be compliant with EURO IV emissions standards, tankers are to be made of an aluminium alloy material to reduce weight and the age of the fleet will be maintained at less than six years.

Diversity & Inclusion

The contractors already employ women fuel tanker drivers, fulfilling the Mine’s requirements for diversity and inclusion. The two contractors both own workshop facilities in Geita town and participate in social initiatives aimed at uplifting the lives of host community residents.

AngloGold Ashanti has been operating at Geita Gold Mine for more than 20 years, with the project initially a single pit mine, evolving now to a predominantly underground operation, employing 5,700 employees and contractors.

Earlier this year, the Government of Tanzania recognized AngloGold Ashanti’s contribution to the economy of the country, awarding it for its outstanding performance in a number of areas, including environmental and safety performance, corporate social investment, the best taxpayer in the mining sector, the runners up in local business content and overall best performer in the mining sector in Tanzania in 2019/2020.

Geita Gold Mine

Geita, one of AngloGold Ashanti’s flagship mines, is located in north-western Tanzania in the Lake Victoria goldfields of Mwanza region, about 120km from Mwanza and 4km west of the town of Geita. It has been in operation as a large-scale mine since 2000.

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