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Posts Tagged ‘exploration’

Breaking down BHP Billiton’s iron ore production costs

September 29, 2011 2 comments

BHP Billiton organized a site tour of its Western Australia Iron Ore operations this week, providing valuable information about its production costs:

Source: BHP Billiton Site Tour Presentation, September 27 2011

Observations:

  • BHP positions itself in the cost curve around $39/t CIF. Average iron ore price for the year ended June 2011 was $163/t, resulting in a 76% operating margin.

Implications:

  • Combining the data from the two charts above, BHP’s breakdown of total iron ore costs of $39/t CIF China are as follows:
    • US$9.4/t – Contractors
    • US$7.0/t – Secondary taxes & royalties
    • US$4.3/t – Freight, distribution & demurrage
    • US$3.5/t – Depreciation, depletion & amortization
    • US$3.1/t – Fuel & energy
    • US$2.7/t – Raw materials & consumables
    • US$2.7/t – Labor incl. consultants
    • US$0.4/t – Exploration
    • US$5.9/t – Other

©2011 | Wilfred Visser | thebusinessofmining.com

Russia’s ARMZ Buys Mantra for $1.15 Billion

December 16, 2010 Comments off

“Russia’s ARMZ Uranium Holding Co. agreed to acquire Australia’s Mantra Resources Ltd. for about 1.16 billion Australian dollars (US$1.15 billion) in its ongoing bid to acquire low-cost sources of uranium for its parent company, State Atomic Energy Corp., Russia’s largest utility.

At the same time, ARMZ entered an option agreement to flip Mantra to Vancouver-based Uranium One Inc., for the same price it paid. ARMZ agreed to acquire a 51% stake in Uranium One earlier this year, establishing Uranium One as ARMZ’s platform to acquire additional uranium sources for State Atomic Energy. “

Source: Wall Street Journal, December 15 2010

Observations:

  • Canadian miner Uranium One is controlled by ARMZ, which in turn is controlled by State Atomic Energy (or Rosatom), the Russian utility that controls 17% of the world’s nuclear fuel production.
  • Uranium One operates 3 mines in Kazakhstan, with an additional development project in the country, and various exploration projects and an In Situ Leach mine in the United States.

Implications:

  • Rosatom is attempting to secure access to uranium ore as global demand is expected to increase strongly over the next decade. The company is smartly using Uranium One, with its proven mining and processing experience, as a vehicle to produce.
  • Depending on the success of international climate change conventions and the approach to small-scale nuclear energy in these conventions the exploration of uranium deposits might experience a surge. However, as uranium deposits typically have a very different geological composition than gold deposits it will not be easy for the many small gold exploration companies to switch to uranium.

©2010 | Wilfred Visser | thebusinessofmining.com

Joint Venture Finds Gold on Ocean Floor

December 10, 2010 Comments off

“AngloGold Ashanti Ltd.’s marine exploration venture with diamond giant De Beers SA has turned up gold on the ocean floor and continues to hunt for large deposits, the gold producer’s chief executive said Friday.

Two vessels belonging to De Beers are two-thirds of the way through their exploration off the coast of New Zealand and continue to search off South Africa and Canada, Mark Cutifani said in an interview at the company’s Johannesburg head office.

‘We are finding gold, but the key will be finding those areas where the grades [of the gold found] cover the cost,’ he said. ‘We aren’t there yet.'”

Source: Wall Street Journal, December 10 2010

Observations:

  • AngloGold Ashanti and De Beers have teamed up to combine their knowledge of marine mining and gold deposits, hoping to find underwater deposits of gold.
  • AngloGold has put in $40mln for 3 years of exploration, a very small amount compared to the billions spend in the exploration industry on land annually.

Implications:

  • The only implication of the announcement by AngloGold’s executive is that the most interesting places that were explored by the joint venture don’t hold levels of gold that make underwater mining feasible.
  • A successful exploration effort by the JV might cause a strong increase of sub sea exploration efforts. Dredging companies, specialized miners are the most likely actors in this area, as there are very few synergies between undersea mining and traditional mining apart from processing of the dredged/mined material.

©2010 | Wilfred Visser | thebusinessofmining.com

Rio Tinto strengthens its position in China

December 6, 2010 1 comment

“Rio Tinto and Chinalco today signed a non binding Memorandum of Understanding (MoU) to establish a landmark exploration joint venture (JV) in China. The JV will explore mainland China for world-class mineral deposits and is expected to come into operation in the first half of next year. It is intended that between three and five large area exploration projects will be selected for initial focus by the JV, with the potential for additional regions to be added at a later date. Chinalco will hold a 51 per cent interest in the JV and Rio Tinto will hold a 49 per cent interest.”

Source: Rio Tinto press release, December 3 2010

“My second idea revolves around assisting China in the search for world class mineral resources in its own backyard within China. In saying this, let me stress that I recognise China has considerable expertise in this area and that a lot of exploration work is being undertaken in China and that new resources are being discovered here. …

There is no “magic wand” in mineral exploration. Success requires highly experienced people, rich databases, a deep understanding of conceptual orebody models, robust research and development teams, appropriate technology, and good management, to name a few. We believe we can bring that expertise and know-how to bear in helping China to find major orebodies on its home soil. I remain happy to discuss these ideas further.”

Source: Albanese presentation at Melbourne Mining Club Shanghai, August 19 2010

Observations:

  • Rio Tinto will work with Chinalco in an exploration Joint Venture in which Rio Tinto will hold 49% of the shares. The CEO of the JV will be appointed by Rio Tinto.
  • In August of this year mr. Albanese informally invited the Chinese to search for options in which the company could work together.
  • While in Beijing, mr. Albanase also signed an extension of the agreement with Sinosteel to expand the Channar mine in the Pilbara region in Western Australia.

Implications:

  • Rio Tinto has been working hard to establish strong ties with Chinese government and companies. With Chinalco as the largest shareholder it holds a good position. However, the refusal to give Chinalco an even larger share and the conviction of three employees for corruption in China did slow down the process for some time. Mr. Albanese has managed well to regain the momentum of discussion.
  • BHP Billiton has not yet managed to establish a foothold in the Chinese industry. Whether the company deems the political risk in the country too high, the company is scared away by the operational risk of developing infrastructure (most interesting exploration prospects in China are located far in the inland, making transportation to the markets near the coast challenging), or the company simply did not manage to establish the right connections yet is not clear.

©2010 | Wilfred Visser | BUJEZKKNXD3Z | thebusinessofmining.com