By Mark S. Kuhar
There have been a number of recent developments in China, Taiwan, Korea, Japan and Mongolia. For example, BHP is seeking to create the world’s biggest iron ore hub.
BHP Group’s start-up of production at its $3.6 billion South Flank project in Australia – combined with existing operations at the site – will create the world’s biggest iron ore hub. It may also help temporarily cool a hot market.
Iron ore futures were trading below $200 a ton after China’s cabinet expressed concerns about the surge in prices, calling for more effort to curb “unreasonable” gains and prevent any impact on consumer prices. The meeting, chaired by Premier Li Keqiang, also called for a crackdown on speculation and hoarding.
Commodities have tumbled as international markets are gripped by inflation fears and the authorities in Beijing continue to try to jawbone and manage prices lower.
South Flank has been built to replace the depleting Yandi mine – and together with the existing Mining Area C – will form a hub with annual production of 145 million tons a year. South Flank’s higher quality product will also lift the average iron ore grade across BHP’s Pilbara operations. In the short-term, there was potential for a squeeze higher in BHP’s ore exports as South Flank and Yandi operated in tandem, although the overall physical impact on the market was likely to be small, said Peter O’Connor, mining analyst at Shaw & Partners.
The start of production of 80 million tons a year at South Flank, matching Yandi, comes at a time when top exporters Australia and Brazil have been challenged in meeting strong demand from Chinese steel mills. Pilbara shipments were down 6% in April compared to the year-ago period, while Brazil’s exports were flat, according to Bloomberg Intelligence. BHP’s current guidance is for annual production at the upper end of its range of 276 million to 286 million tons.
Almonty updates progress at Korean site
Almonty Industries Inc. updated progress at its Korean site. The concrete batch plant is now completed. This plant will provide service to all underground mine development and to the surface construction.
The renovation of the administration office in the town of Sangdong is completed. Electing to renovate the old Sangdong post office instead of building a new construction on the mine site saved the company more than US$500,000 and compiled better with its ESG in having an actual presence in the town, which allows more direct access to the company for the local community.
The site levelling, road and drainage diversion can now be completed with all permits in place. This will commence in May 2021. Originally the company had intended to conduct the road and drainage diversion in April but on further cost analysis it was established that by also including the site leveling the company would save a further US$300,000 by utilising the same company to do all three items at the same time rather than incurring mobilisation and demobilisation costs twice.
Two members of its Portuguese geology/mine development team have now returned to Portugal after a five week stay in Korea. The 12,500-drilling design program for Almonty Moly has now been completed. It was decided an in person visit by the Almonty Portugal team was warranted to ensure this program was researched and designed to the highest possible standard to ensure maximum transparency for its 43-101 and JORC reports. The company will now move forward with this confirmation drilling.
Almonty Chairman, President and CEO Lewis Black commented, “Securing the best financing was paramount for all shareholders. But now we must ensure that we build smart and cost efficiently. The great upside value secured with the financing we have obtained must now be protected during the build phase. The Almonty team is first and foremost a five-generation operational team and this will serve all shareholders well in maximizing the funding and value we have secured. Our approach has always been to analyse if we can do things better and more cost effectively; to make every dollar count. During the whole build process and into operations we will continue to constantly look to remain lean and efficient. We now start an 18-month journey of construction and transition.”
Aspire Mining focused on advancing site engineering in Mongolia
Aspire Mining Ltd focused on advancing site engineering and logistics solutions for its Ovoot Coking Coal Project in Mongolia as it sat out the COVID-19 pandemic lockdown.
The company remains confident that the local community is supportive of mine development and is awaiting the first opportunity to reconvene a meeting required to present its detailed environmental impact assessment (DEIA) for comment and acceptance.
The final draft of the report has been completed but there is a regulatory requirement for consultation with and approval by the local community before it can be submitted to the Ministry of Nature, Environment and Tourism (MNET) for final approval.
The Ovoot Coking Coal Project contains a JORC 2012-compliant total coal reserve of 255 million tonnes of high quality (fat) coking coal, which can be used to blend with other coking coals to produce coke, an essential component of producing steel using the blast furnace production route.
This type of coal is in increasing demand in China, Mongolia’s southern neighbour, particularly as China’s relationship with Australia is strained which impacts the amount of coal imported from Australia.
During the March quarter, the company received eight proposals in relation to conducting a FEED study on CHPP infrastructure and five proposals on conducting a FEED study on ERT infrastructure.
The vendors, who submitted these proposals, included reputable and experienced firms from Mongolia, Europe, China and Australia, as well as combined national-international consortium submissions.
At the end of the quarter, the evaluation process to select vendors to complete both FEED studies was in progress and a separate announcement will be made on the award of these contracts in the current quarter.
As correct tractor selection is a critical aspect to minimise transportation unit costs, a leading Australian logistics engineering specialist is evaluating the performance of various potential tractors to be utilised across the intended route between the mine and rail terminal.
Key areas of focus include determining the maximum gross combination weight that each tractor can pull across the route within the target timeframes and the expected fuel consumption.
For each tractor, key configuration details such as final drive ratios are also being investigated.
Output from the study will also be used as input into trailer design (targeting payload efficiency via optimising trailer combination within defined maximum gross combination masses) and final road design (where trade-off between road capital costs and transportation operating costs can be made).
Having avoided community transmission of COVID-19 until late in 2020, Mongolia is now battling the significant spread of COVID-19 infections with high case numbers, with Tsetserleg soum, Khuvsgul aimag, officially confirming its first cases of COVID-19 on 11 March 2021.
In response, Aspire Mining delivered equipment to Tsetserleg soum hospital on 28 March to support COVID-19 prevention and detection measures, including protective clothing, sanitiser, surgical gloves and COVID-19 rapid test kits.
As part of COVID-19 control measures, the Tsetserleg soum and Khuvsgul aimag are currently prohibiting entry of non-residents to their respective territories.
Entrée Resources updates Oyu Tolgoi project in Mongolia
Entrée Resources’ Oyu Tolgoi project in Mongolia includes two separate land holdings: the Oyu Tolgoi mining licence, which is held by Entrée’s joint venture partner Oyu Tolgoi LLC and the Entrée/Oyu Tolgoi joint venture property which is a partnership between Entrée and OT LLC.
On 12 May 2021, OT LLC’s 66% shareholder Turquoise Hill Resources Ltd. provided an update on underground development on the Oyu Tolgoi mining licence:
The COVID-19 situation in Mongolia remains fragile and subject to rapid change despite a widespread vaccination program. OT LLC is constantly adapting to the changing circumstances to prioritise the health and safety of its employees.
During the first quarter 2021, the Oyu Tolgoi underground project was impacted by COVID-19. Measures implemented by OT LLC including restrictions on travel from Ulaanbaatar to the site, have significantly impacted the number of workers that remain on site to continue underground development.
Turquoise Hill expects that COVID-19 restrictions will continue to impact underground construction and development in the second quarter 2021 and is working with OT LLC and Rio Tinto International Holdings to monitor and assess the situation.
On 9 April, Turquoise Hill announced that it has reached a binding agreement with Rio Tinto on a funding plan to complete the construction of Lift 1 of the Oyu Tolgoi underground project, including Lift 1 of the Hugo North Extension deposit on the Entrée/Oyu Tolgoi JV Property. Successful implementation of the Heads of Agreement is subject to achieving alignment with the relevant stakeholders in addition to Rio Tinto (including existing lenders, any potential new lenders and the Government of Mongolia), market conditions and other factors.
Achievement of the technical criteria required for a mid-2021 commencement of the undercut on the Oyu Tolgoi mining licence remains on track. However, the exact timing of the undercut is under increasing pressure due to the rapidly evolving recent COVID-19 impacts. Non-technical criteria, including confirmation of necessary regulatory and legislative approvals required by the Government of Mongolia are still pending and are critical elements for consideration to proceed with the decision to commence the undercut. Turquoise Hill is working with OT LLC and other stakeholders to ensure that important aspects for a successful project are met prior to commencing the undercut.
At the end of the first quarter 2021, cumulative underground development progress is 56,264 equivalent metres with cumulative conveyor to surface advancement of 13,832 equivalent metres. Progress in March was impacted by COVID-19 restrictions and controls and Turquoise Hill anticipates that development rates will continue to be impacted into the second quarter 2021. Although development work has slowed, almost all of the development required for the commencement of the undercut is complete.
Ongoing work suspensions continue to affect progress on Shafts 3 and 4 and the overall impact of these delays is under review. Progress remains dependent on mobilizing key vendors and additional sinking resources into country and cleared from quarantine. Additional shaft sinking specialists are in Mongolia and were expected to arrive on site in May.
Shafts 3 and 4 are not required to support Panel 0 commencement, however they are required to support production from Panels 1 and 2 during ramp up to 95,000 tonnes per day.
Tigers Realm Coal offers first quarter update
During the March quarter, Tigers Realm Coal (TRC) mined 208 kt of ROM coal and delivered 62 kt to Port. 146 kt was hauled to TRC’s intermediate stockpile near the location of the future Coal Handling and Preparation Plant (CHPP.) The decrease of coal mined compared to the December quarter was due to severe weather conditions in January, February and March, including snowstorms and strong winds. The quarterly average stripping ratio decreased from 5.3:1 in the December quarter to 3.7:1 due to concentrating our mining activities at Seam 3.
CHPP works are continuing on schedule. The CHPP equipment was expected to be in Vladivostok, Russia, for customs clearance by the middle of May. Detailed engineering works and preparation for civil construction are well underway.
During the March quarter, TRC started preparation for the 2021 shipping season, including maintenance of the conveyor and loading system in the port, initial dredging works as well as the necessary minor repairs on the fleet and cranes. Most port personnel started to arrive in Beringovsky in April.
During the first quarter of 2021, sales activities were confined to booking one vessel – a 100-kt geared ice class vessel for H2 May loading, and one sale into China of T1 thermal coal (for the above cargo). This vessel should set a new record for both vessel and cargo size at TRC’s port of Beringovsky.
The Asian coking coal market remains severely disrupted by the Chinese import ban on Australian coal. This has changed seaborne trade flows for coking coal and effectively split the market into two segments with two different price structures – China (the non-Australian Supplier’s Market), and the rest of the world (where Australian coking coal is in oversupply). The main beneficiaries of this situation are Indonesian and Russian coal suppliers operating through east coast ports.
The Chinese spot metcoal market has been very strong for U.S., Canadian and Russian coal, with recent CFR prices around $220/t whereas the rest of the world has seen weaker pricing. Prices for Peak Downs, the Australian benchmark coking coal, have been rangebound between c. $100-$110/t FOB all year.
In thermal coal markets, Q1 2021 prices bounced back strongly on winter demand in China, which faced some of its coldest weather in many years, compounded by supply chain disruption in Indonesia due to heavy rain and tightness created by the Chinese demand for non-Australian coals.
MINING BRIEFS
- Illegal mining of rare-earth minerals has surged in an area controlled by a junta-linked militia since the 1 February military coup in Myanmar, according to local reports. The mining is taking place in northern Kachin state on the border with The Irrawaddy. They say mining has increased by at least five times in Pangwa and Chipwi townships amid the political turmoil, with a rapid influx of Chinese workers.
- Beijing’s top economic planning agency has put Australia on notice, throwing the spotlight on trade tensions by announcing China’s intentions to diversify its supply of iron ore. In a monthly report, the National Development and Reform Commission recommended Chinese firms boost domestic exploration for the steelmaking input, explore overseas ore resources and widen their sources of imports. Adding iron ore, Australia’s biggest export earner, to the raft of curbs already in place on commodities like coal and wine could be a risky move, energy research and consultancy firm Wood Mackenzie told Bloomberg – given the near-record prices and China’s dependence on Australia’s high-quality supply for about two-thirds of its imports. All but one of the biggest exporters of iron ore to China are Australian miners – BHP, Rio Tinto and Fortescue Metals Group.
- China’s steel industry is blaming the concentrated ownership of Australia’s iron ore mines for the soaring ore price and is calling for Chinese government intervention. “We believe that the supply side is highly concentrated and the market mechanism is not working, so we call for the authorities to play a bigger role in the event of market failure,” said Luo Tiejun, vice president of the China Iron and Steel Association, told an industry conference.
- Oyu Tolgoi LLC and Rio Tinto, in partnership with the Mongolian University of Science and Technology, launched a joint project to build and develop the capability of geotechnical and mining professionals in Mongolia. Rio Tinto Mongolia and Oyu Tolgoi will provide $2.75 million in funding for the project, which will run until the end of 2025. The initiative was officially launched with a cooperation agreement signed by Kh. Amarjargal, country director of Rio Tinto Mongolia; Armando Torres, chief executive officer of Oyu Tolgoi LLC and B. Ochirbat, president of the Mongolian University of Science and Technology.
- Even in a global pandemic, steel capacity additions throughout Southeast Asia have continued to rise. In 2020, 5 Mt was added; 60 Mt more is planned by 2030. This extra capacity is led by Chinese investment, largely through the blast furnace route. It is being predicted that blast furnace production in the region will surge and elevate demand for iron ore and metallurgical coal.
- Steppe Gold Limited announced its financial results for the quarter ended 31 March 2021. Steppe Gold President and CEO Bataa Tumur-Ochir commented, “We are very pleased to report another strong quarter of mining and stacking at our ATO project and, most importantly, a zero accident safety record at the project. We have now mined over 1.8m tonnes of ore with 1.4m tonnes stacked on the leach pad. With a new fixed crusher in place this summer, we are planning a record year for stacking in 2021. We paused production in the first quarter with prevailing cold weather conditions and we resumed leaching in early April with a successful gold pour in late April.”
BHP