Copper miner's $10B bet comes to life in Panama jungle www.mining.com

The world’s largest new copper mine rumbled to a start this week in the Panamanian jungle, poised to supply a global market that’s tipping into deficit and gives First Quantum Minerals Ltd. a chance to prove its $10 billion investment was worth all the trouble.

Cobre Panama, a vast mining and processing complex near Panama’s Atlantic coast, processed its first ore on Monday, a half century after the deposit was discovered. At full production in 2021, it will turn Vancouver-based First Quantum into a top copper producer alongside giants like Freeport-McMoRan Inc. and BHP Group.

It’s been a long time coming. For 50 years the deposit had remained tantalizingly but steadfastly out of reach.
For Panama, it’s the biggest investment ever outside the canal and makes the Central American country a key supplier to a copper market facing labor unrest and governments grasping for greater takes. The $6.3 billion project will be able to ship its concentrate, thanks to the Panama Canal, to just about any smelter in the world.

“This establishes a new jurisdiction for mining,” Tristan Pascall, the project’s general manager, said in an interview at the facility shortly before the first ore passed through its mills. “There aren’t many projects coming on.”

Past failures
It’s been a long time coming. For 50 years the deposit had remained tantalizingly but steadfastly out of reach.

“Possibly vast beds could rival Panama Canal as economic asset to country,” the Star & Herald, a local English-language newspaper, trumpeted on the front page of its May 1, 1968 edition after a United Nations survey team discovered the deposit.

Past attempts to develop it all met with failure. The terrain undulates like an egg carton — impossible to navigate for colossal mining equipment. When it rains, as it often does, the soil turns into a maddening toothpaste-like clay. A Japanese consortium of seven companies and Teck Resources Ltd. abandoned it. In 2013, First Quantum took it on after a C$5 billion ($3.8 billion) takeover of Canadian rival Inmet Mining Corp., which had spent two decades on the project with little to show for it. Most in the mining industry had written off Cobre Panama.

‘Too-hard box’
“It was a project that all the major mining companies had put in the too-hard box,” says Clive Newall, co-founder and president of First Quantum.

It seems they were wrong.

In the six years since, the Canadian miner has managed to level the daunting terrain, at times filling in trenches 60 meters deep. It built a deep-water port where mining trucks the size of a suburban house can roll in fully assembled off ships. It built a coal-fired power plant and Panama’s third road connecting the Atlantic and Pacific Oceans.

Kjell Anzelius, 85, the only surviving member of the original U.N. survey team, began seeing stories about the mine in the news last year. When he realized that the deposit he’d helped discover was on the cusp of production, he hopped on a plane from his home in Sweden.

Debt concerns
“It took me two days to find them,” he said of the First Quantum office in Panama City. But once he met the country manager, he found himself on a helicopter ride to the site where once impenetrable jungle he’d hacked with a chainsaw had been converted into a state-of-the-art complex.

“I’m more surprised than anything else,” he said by phone from Sweden. “I always had a feeling it would cost too much money to establish a mine there.”

It’s a remarkable milestone for a company that less than three years ago had more debt trading at distressed levels than any other metal or mining company. First Quantum expects Cobre Panama to produce 150,000 tons this year and ramp up to as much as 350,000 in 2021. That would bring its global production (including other mines in Zambia, Turkey, Mauritania and Finland) to about 900,000 tons per year.

“Every company’s preferred route is to start relatively small, but this one, you needed scale out of the gate.”
“They have a very attractive portfolio of assets,” says Bloomberg Intelligence analyst Richard Bourke, noting the company’s enterprise value of $15 billion doesn’t yet reflect that a $6 billion project is starting up. “Seven, eight years ago, at the start of the super cycle, people were spending a lot more for assets that were definitely more speculative than this one.”

‘Needed scale’
First Quantum’s approach at Cobre Panama (cobre is Spanish for copper) has been an all-in bet. In part, that’s because the deposit’s low grade meant it couldn’t be developed more cautiously piecemeal. “Every company’s preferred route is to start relatively small,” Newall said. “But this one, you needed scale out of the gate.”

The company built the world’s biggest processing complex in a single location, which will ramp up to a capacity of 85 million tons a year. It’s spending more upfront on costly electrification, calculating that over the 40-year project life, it’ll recoup the investment in savings: the massive trucks used to haul rock uphill normally consume 400 liters an hour of diesel. Yet hitched to an electric trolley system like an urban streetcar, each will use only 40 liters an hour at double the speed, and require 30 percent less maintenance, Pascall says.

Trade tensions
Those are long-term calculations that dispense with short-term uncertainties — of which the company faces several. First Quantum still shoulders a hefty debt burden after nearly defaulting on loans in 2016. It’s locked in a $7.9 billion tax dispute with the government in Zambia. The company’s share price is still down more than 50 percent from its 2011 peak.

More broadly, U.S.-China trade tensions threaten to upend copper’s otherwise bullish outlook. While the metal’s fundamentals are strong — inventories are near their lowest since January 2015 and the pipeline of projects is at its weakest in decades, according to Wood Mackenzie — a trade war could depress industrial activity and the demand for copper.

Any disruption to Cobre Panama’s output could deepen supply shortages. CRU Group analyst Robert Edwards estimated in November that global production will trail consumption by over 200,000 tons in 2021 and the deficit could widen to more than 300,000 tons by 2023.

‘Difficult place’
“The world is a difficult place right now,” Newall says. The company is hedging its copper production until Cobre Panama reaches full production. “Three years ago, we probably would not have been hedging — we’d be quite confident that the world would keep spinning on the same axis around the sun.”

(By Natalie Obiko Pearson)

Trade Unions request PM to focus on interest rate cut www.zgm.mn

Prime Minister Khurelsukh Ukhnaa and the Minister of Labor and Social Protection Chinzorig Sodnom received the representatives of the Confederation of Mongolian Trade Unions (CMTU) yesterday. The CMTU officials requested the PM to focus on lowering the interest rate.

After highlighting the fact that the economy grew by 6.4 percent and the improving budget balance under the Extended Fund Facility program of the International Monetary Fund, the PM noted to focus on distributing the benefits of the economic growth to the public by increasing wage and pension. He addressed, “The average salary of the public sector reached MNT 916,000, a 27.5 percent growth since 2016. Under the trilateral agreement, the minimum wage has been set at MNT 320,000. This raised the salaries of about 100,000 workers by 33.3 percent. Furthermore, the Cabinet has acknowledged the CMTU suggestion on setting minimum pension age in line with the life expectancy and lowered it to 60 for men and 55 for women, from the initial plan of 65 for men and 60 for women. The Government is prioritizing to strengthen social justice, improve accountability and discipline of the public sector, and economic growth.”

In turn, the President of the CMTU Amgalanbaatar Khayankhyarvaa requested the PM to further raise wage and implement social partnership in provinces and rural areas as agreement on the 2019-2020 Labor and Social Consensus. He then asked the PM to promote employment and cut the interest rate.

Later on, a spokesperson of the trade union of Uvs province suggested the PM to conduct a study on a 5-10 year intensified development and highlighted the importance of non-collateral discounted loans for small and medium-sized enterprises (SMEs).
Trade Union of EMC suggests employee stock option

A spokesperson of the trade union of the Erdenet Mining Corporation (EMC) suggested granting the 10 percent of the company’s stake as stock options to employees in order to boost productivity and set an example for both stateowned enterprises and private entities.

• CMTU President requests the PM to further raise salaries.

• Trade union of Uvs province suggested the PM to conduct a study on a 5-10 year intensified development and highlighted the importance of non-collateral discounted loans for SMEs.

• PM expresses to further study the suggestions and make effort in implementing them.

PM Khurelsukh responded, “Unless we move away from the heavy dependence on the mining sector, Mongolia could face another economic crisis. Therefore, the Cabinet is prioritizing the development of SMEs, animal husbandry, and farming. The biggest challenge is unemployment. The State will support business entities. It is important that we govern our natural resources. Thus, we will nationalize the illegally privatized assets. Establishment of the oil refinery will help reduce the foreign exchange outflow and cut domestic oil prices. As for all your suggestions, we will further study these matters and make effort in implementing them.”

Mongolia’s hourly wage to reach USD 1 www.news.mn

Mongolia has raised its monthly minimum wage to MNT 320,000 (129.8 U.S. dollars); this came into effect from 1 January, 2019. The monthly wages of more than 100 thousand people were increased by 33.3 percent.

US narcotics by post to Mongolia! Three arrested www.news.mn

The Mongolian police arrested three people on Tuesday in the middle of a criminal operation to transport a large amount of narcotics in Ulaanbaatar.

Writer D.Uriankhai nominated for the Nobel Prize www.montsame.mn

Ulaanbaatar /MONTSAME/ Mongolian Academy of Sciences (MAS) has received an invitation to nominate a candidate for the Nobel Prize in Literature for 2019 from the Nobel Committee of the Swedish Academy.

Mongolia-China-Russia economic corridor benefits all sides: official www.xinhuanet.com

ULAN BATOR, Feb. 14 (Xinhua) -- The Mongolia-China-Russia economic corridor is beneficial for all three parties, a senior Mongolian official has said.

Solar Empowerment of Nomads in Rural Mongolia www.greenoptimistic.com

Solar power is not only an environmentally friendly alternative, but in many cases the only available source of energy.

Mongolia, Cuba to Boost Bilateral Relations www.plenglish.com

Ulan Bator, Feb 14 (Prensa Latina) Mongolia''s State Secretary Davaasuren Damdinsuren and Cuba''s ambassador in Ulaan Bator, Raul Delgado, agreed Thursday on the need to boost bilateral cooperation.

Google outlines $13bn US investment www.bbc.com

Google plans to spend more than $13bn (£10.1bn) this year, as it builds data centres and offices across the US.

National Development Agency to cooperate with Japan’s Mizuho Bank www.montsame.mn

Ulaanbaatar /MONTSAME/ On February 12, Chairman of the National Development Agency (NDA) B.Bayarsaikhan signed a Memorandum of Understanding with Kazuhiro Toyoda, General Manager of Global Project Finance Division at Mizuho Bank, Ltd. of Japan.