Rising Costs Forces Barrick Gold to Shut Down Zambian Copper Mine
Barrick Gold Corp. has announced plans to shut down work at its Lumwana copper mine in Zambia after a change in royalty policy. The Toronto-based company said the Zambian government is expected to eliminate corporate tax starting January. 1, but will increase the gross royalty rate from six percent to 20 percent.
"The introduction of this royalty has left us with no choice but to initiate the process of suspending operations at Lumwana," Barrick co-president Kelvin Dushnisky said in a statement.
"Despite the progress we have made to reduce costs and improve efficiency at the mine, the economics of an operation such as Lumwana cannot support a 20 percent gross royalty, particularly in the current copper price environment."
The open-pit mining operation, which supports roughly 4,000 jobs including contract workers, is expected to be closed by the second quarter of 2015. Barrick is expected to record an accounting charge in the fourth quarter of 2014 to reflect the impaired value of Lumwana, which is valued at $1-billion.
The Lumwana mine produced 138 million pounds of copper in the first nine months of 2014. The mine had 6.6 billion pounds of copper in reserves as of the end of last year.
Barrick acquired the Lumwana copper mine in 2011 for $7.3 billion in its acquisition of Equinox Minerals Ltd. Since then, mining cost have risen dramatically, forcing Barrick to cancel expansion plans as well as incur a $3.8-billion charge in the fourth quarter of 2012.
The new policy in Africa comes at a time when copper prices have continued to decline amid slower economic growth in China, the world’s largest copper user.
Barrick has now sold several of its “non-core” mines in recent months as it pared down its portfolio and focuses on its key mines. The gold miner has said it wants to drop its debt to around $7 billion, down about $3.5 billion from where it stands now.
Zambia is currently the second-largest copper-producing country in Africa.
Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”