Gold price rebounds 2% as Goldman reiterates $3,000 target
Bullion has declined about 7% from a record last month, with losses accelerating after Trump’s victory.
Executives, investors and government officials met in Cape Town at the African Mining Indaba, the continent’s biggest gathering of one of its most essential industries.
Tailings dams in focus. All the big miners spoke about wanting to ensure the safety of their dams after the Vale’s disaster in Brazil. Anglo American gave a surprising prediction that it wants to reach a point where it can operate without tailings. Ford calls cobalt a “unique case.” The carmaker is seeking to reduce its dependency on the key battery material. Barrick Gold has already started engaging with the new administration in the Democratic Republic of Congo, and CEO Mark Bristow said he’s still expecting to break a deadlock with Tanzania over Acacia Mining.
Zambia is prepared to make temporary concessions on the recent changes to its mining taxes if companies can show they need it, said Mines Minister Richard Musukwa. Mining companies in Zambia, Africa’s second-biggest copper producer, have warned that the tax hikes will harm the industry.
“We are ready to engage and listen to them, analyze their technical submissions, and if we are given compelling reasons and if we see beyond reasonable doubts, we will make temporary rebates,” Musukwa said in an interview. While the government is holding firm on the new tax law, there are positive discussions with companies including Glencore Plc’s Mopani Copper Mines and First Quantum Minerals Ltd., he said. “We can’t bring tax measures that are going to kill the golden goose that lays the eggs.”
Anglo American Plc and Rio Tinto Group are seeing promising results from exploration work in Zambia, Musukwa said. Anglo has returned to prospecting in Africa’s second-largest copper producer after exiting its Zambian copper mines more than 16 years ago.
While cobalt supply should keep pace with demand for use in rechargeable batteries, the situation might get “tricky” over the next three to five years, said Ford Motor Co. senior manager for energy storage strategy and research Ted Miller.
“I fully anticipate we’re going to keep a lot of pressure on that cobalt production,” he said. “Today it looks feasible but it’s a scenario we’re going to have to watch.”
Ford has been reducing the proportion of cobalt it uses to lower its dependency on the metal and wants to collaborate at all parts of the supply chain, even down to the miners of the metal, he said. While the company doesn’t see the need to participate in mining, or have direct cobalt offtake agreements, that could be re-evaluated in the future.
“Cobalt is a unique case. One of the things we’re not used to in our industry is driving a commodities market and at this point cobalt is really driven by battery production,” he said. “Now that battery production is going to be dominated by automotive, that puts us in an awkward position.”
Saudi Arabian Mining Co. would “carefully” look at investing in fertilizer assets outside the Kingdom and is also interested in copper opportunities, said Chief Executive Officer Darren Davis.
“We love copper, we think copper’s a great mineral to be in,” he said. Back home, “we still believe that Saudi Arabia has lots more to give geologically,” Davis said. “There’s a lot more upside, not just for us, but others as well.”
Mining companies must earn the trust of their host governments by keeping their promises, said B2Gold Corp. CEO Clive Johnson. While it’s not always the case, he suggested that some producers have brought trouble on themselves by failing to do so. One of the contributors to B2Gold’s success at its Fekola mine has been a good relationship with the government of Mali, he said.
“If you disappoint a government you are disappointing a country,” Johnson said. “It really is paramount that we show these governments that we are worthy of their trust.”
Commenting on the potential for mergers and acquisitions, Johnson said the company is more focused on its existing growth prospects.
Investor interest in gold has increased this year and there are signs of safe-haven flows returning to the metal, said World Gold Council Chief Market Strategist John Reade. Gold has become less connected to the dollar and buying in futures markets and exchange-traded funds has helped drive the metal higher, he said.
Randy Smallwood, CEO of Wheaton Precious Metals Corp., agreed with Reade. “There has been a turn on investor interest on the gold side,” he said. “We have seen a change in the market and things are looking very promising.”
South32 Ltd. believes struggling South African power utility Eskom SOC Holdings Ltd. needs an equity investment from the government, as well as aggressive cost reduction in the short term, the miner’s chief operating officer, Mike Fraser, said. South32, which is one of Eskom’s key coal suppliers, is looking for a buyer for its thermal-coal operations in South Africa. The emphasis is on ensuring the local business is black-owned, which will give it an advantage in securing coal-supply contracts and mining rights, Fraser said.
Anglo American Plc wants to reach a point where it can operate without tailings, a waste product from mining, said Chief Executive Officer Mark Cutifani. Changing the way Anglo mines is a matter of survival, he said.
The company is developing new ways to crush ore before it separates metal from waste rock that uses less water.
“We have to turn having a mine in a community from being a negative to being an unarguable positive,” he said. Otherwise, “we won’t be given the opportunity to develop the resource.”
Rio Tinto Group’s technical teams are working to consider what more the company can do to ensure the safety of its tailing dams following the disaster in Brazil, said Simone Niven, the miner’s head of corporate relations. Niven said the company issued new tailing standards in 2015 and its dams are subject to independent third party reviews. The company operates about 30 tailing dams.
Barrick Gold Corp. Chief Executive Officer Mark Bristow said the miner has already started engaging with the new administration in the Democratic Republic of Congo, after President Felix Tshisekedi was sworn in late last month. Mark Bristow met Tshisekedi’s chief of staff and his advisers on Jan. 29 and discussed the country’s new mining rules that were introduced by the president’s predecessor and have been strongly opposed by the industry.
They addressed “the ongoing debate about what is the appropriate mining and fiscal regime for the country as a whole and the different regions,” Bristow said at a press briefing. “We’ll find a solution. I have no doubt.”
Barrick’s Bristow said he’s still expecting to break a deadlock with Tanzania that’s crippled the company’s Acacia Mining Plc unit, but refused to give a timeline for any deal.
“We’ll bring this standoff to an amicable resolution,” Bristow said. ‘It’s important to do that.’’
Bristow said he expects the agreement to fit within an earlier framework hammered out by Barrick Executive Chairman John Thornton and the country’s president that involves a $300 million payment to Tanzania and an equal split of the economic benefit from its gold mines.
Barrick is “paranoid” about its tailing dams after Vale’s recent disaster, Bristow said. The dam collapse killed at least 110 people and leveled part of the city of Brumadinho. Barrick reviews all its sites quarterly and believe its tailings dams are in reasonable shape, Bristow said.
It’s essential that authorities get to the root of the problem as soon as possible and review the best practices for tailings, Bristow said. Having third parties inspect and sign off on things such as tailings dams doesn’t abdicate management from responsibility. “The responsibility never leaves the executive team” Bristow said.
Employment in South Africa’s mining sector shrunk by 11 percent, or 56,366 jobs, in the past five years, according to lobby group Minerals Council South Africa. That includes a net loss of 11,217 in 2018, largely thanks to cuts in gold and platinum workforces, according to the group’s latest Facts and Figures publication, published Monday. The sector’s costs rose by an average of 6 percent.
(By Felix Njini, Thomas Biesheuvel and William Clowes)
