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Posts Tagged ‘palladium’

China seals African platinum deal

May 27, 2010 Comments off

“China is set to make its second largest investment in Africa outside the energy sector by ploughing $877m into South Africa’s platinum industry. The agreement signed last week adds intensity to China’s ambitious drive to sustain its economic boom by securing Africa’s natural resources.

For the first time, Beijing will take a direct stake in the continent’s platinum reserves, the majority of which are in South Africa. Jinchuan, a Chinese state-owned mining company, is to acquire a 51 per cent stake in Wesizwe, a junior South African platinum developer, for $227m (€185m, £158m).

The China Development Bank will then raise another $650m in project finance to develop its flagship Frischgewaagd-Ledig platinum project, near Rustenburg, west of Pretoria. After the mine is built, Jinchuan will take all of its platinum produced, according to a long-term supply agreement.”

Source: Financial Times, May 26 2010

Observations:

  • Platinum and paladium are mainly used as catalysts in the car industry and in jewellery. Over 75% of the total production of platinum is coming from South Africa.
  • After the investments by Rio Tinto, Chinalco, Vale and CIF in Guinea and Niger last month, this deal signifies the next billion of FDI in the mining industry in Africa.

Implications:

  • The involvement of the China Development Bank in this project is special. It increases the buying power of the Chinese (mostly state-owned or controlled) miners even further, accelerating the Chinese control over Africa’s natural resources.
  • Demand for precious & rare metals is increasing as many of them are used in high-tech applications. A significant part of the rare metal resources is located in Asia, but China will still increase its efforts of securing access over deposits over-seas. As the diversified miners do not really have an incentive to join this race, high-tech producers from the western world should be looking for ways to secure their supplies of critical inputs in the long term.

Norilsk Nickel back on to solid ground

May 24, 2010 Comments off

“When former KGB officer and state tourism chief Vladimir Strzhalkovsky was appointed chief executive of Norilsk Nickel more than a year ago, investors worried about his lack of experience in the mining industry.

But the tough cost- cutting he has embarked on is highlighting the potential advantages of his former career, as the world’s biggest nickel miner emerged from the crisis with a big lift in net profits that reached $2.65bn last year, far above forecasts.”

Source: Financial Times, May 24 2010

Observations:

  • Administrative & labor cost at Norilsk Nickel went down 36% in 2009.
  • Strzhalkovsky deems a merger with Rusal to add little value to Norilsk’s shareholders.
  • Norilsk will try to sell its majority stake in the American palladium & platinum miner Stillwater Mining.

Implications:

  • Rigorous cost cutting has reestablished Norilsk as a low cost producer. Nickel prices fell in 2007 and have only partly recovered last year. As revenues have decreased, the only option for the company to keep a health margin was to cut costs. With a positive outlook for nickel prices in the future, this is a lasting competitive advantage.
  • Few companies will be interested in buying the stake of Stillwater Mining. The company was making a loss last year and it is very hard to achieve operational synergies for most integrated miners as they don’t have a strong presence in the area of Montana.