Mining majors are disposing of assets to ensure returns and maintain credit ratings, exemplified last week by global mining and marketing major Glencore selling out of copper in the Philippines and nickel in the Dominican Republic and Côte d’Ivoire for $290-million.
Simultaneously, it was announced that China’s Shenhua is among six parties assessing bids for Rio Tinto’s $4-billion thermal coal business.
Also reporting was Berwin Leighton Paiser (BLP), which revealed that in the six months to June 30, private-equity firms had done more than 61 mining deals, mainly in gold and totalling $1.76-billion.
Investec Securities commented that the many asset sales could well be indicative of the commodity cycle having turned for the better.
Juniors are also engaged in disposals, exemplified by the ASX-listed Equatorial Resources selling its Republic of Congo iron-ore project for A$5-million cash, plus a 2% royalty, and Lemur Resources buying up three of JSE-listed Sable Metals and Minerals’ South African vanadium interests, also with a royalty retention, this time at 1.75%.
Royalty retentions, BLP noted, have become regular features of current transactions. Equatorial MD John Welborn, the former Wallaby rugby lock, who has had to scrum down repeatedly with lower- ing iron-ore prices, is holding on through royalty retention as is Sable.
BLP mining co-head Alexander Keepin reported that 20% of the private-equity transactions included the right to buy a percentage of the physical gold.
The World Gold Council (WGC) is optimistic that there will be an increase in demand for physical gold in the second half of this year, when it expects a seasonal demand increase in India and gold’s lower price to feed through into stronger consumer demand. Against the background of second quarter (Q2) gold demand falling 12% to 915 t, the People’s Bank of China has lifted its gold holdings by 57% to 1 658 t, which the WGC sees as an overwhelmingly positive signal for gold.
In platinum, Aquarius is making a second bid to sell its Blue Ridge mine after it said in October a sales deal with China National Arts & Crafts had fallen through, which Investec describes as an interesting development, owing to various other mining assets in South Africa in the process of being sold to Chinese buyers.
“We watch with interest to see if these other deals ever complete,” Investec commented.
Meanwhile, the re-establishment of diplomatic relations between Cuba and the US after 54 years has rekindled fresh hopes that Cuba’s mining and petroleum industries will benefit from potential US investment in these sectors. Cuban Ministry of Energy and Mines general mining director Juan Ruiz Quintana has told Mining Weekly that restoring diplomatic relations between the US and Cuba, including the revocation of the economic blockade, will create a generally favourable investment climate in Cuba, as this will result in the country’s risk profile rating improving.