March 16, 2006, 17:10:21
Market Overview, February 1-15
    PGM Prices
In January-February 2006, the market saw almost synchronous movements in prices for platinum and palladium. In January platinum went up by US$3 g, from US$31.6 g to US$34.7 g, the prices for palladium were US$1.6 g up, from US$8.5 to US$10.5 g. Then, in the first half of February 2006, Pt and Pd prices slightly decreased followed by resumption in the prices growth. In end-February Pt and Pd prices were fixed at US$33.8 g and US$9.2 g respectively. The Pt and Pd prices in January averaged at US$33.1 g and US$8.8 g respectively. February saw US$33.5 g for Pt and US$9.3 g for Pd.
PGM News
Lonmin enhances PGM output in Q4 2005.
UK's Lonmin enhanced PGM output in Q4 2005 to 11.3 t from 8.6 t a year ago. Platinum production increased from 4.6 t in Q4 2004 to 6.1 t in the same quarter 2005. According to ceo at Lonmin, the company keeps moving to its main target of 31.1 t/y Pt and 59.1 t/y PGM.
Lonmin plans to expand smelting and refining capacities.
Lonmin announced its plans to expand smelting and refining capacities by about one third by the year of 2010. Today, the company is capable to produce some 40 t/y Pt and 77.8 t/y PGM. By 2010, the capacities are expected to grow to 54-62 t/y Pt and 110-125 t/y PGM. Based on preliminary estimates, the expansion will cost US$300 M. In February 2006, Lonmin proceeded with the feasibility study estimated at US$10 M. The study completion is scheduled for February 2007.
Operating profits double in Zimplats.
In Q4 2005, Zimbabwean Zimplats' operating profits doubled compared with Q3 2005, from US$6.7 M to US$13.6 M. Growth in operating profits was due to surged realized prices for PGM in Q4 2005. Platinum prices went up to US$30.8 g from US$27.6 g in Q3 2005 while palladium was up from US$5.8 g to US$7.8 g and rhodium up from US$66.5 g to US$93.2 g. The Q4 growth in operating profits could be even higher if it were not hampered by PGM production cuts. Platinum production was down from 0.71 t to 0.7 t with PGM output reduced to 1.41 t from 1.44 t.
Anglo Platinum plans to increase Pt output in 2006.
South Africa's Anglo Platinum plans to increase Pt output in the current year to 84-87 t from 76 t in 2005. The previous year was not bright for the company with only a 2% growth, or 1.6 t, was reported in platinum production.
Eastern Platinum to become a major buyer of South African Barplats.
Eastern Platinum, Canada, signed an agreement to acquire 69% of Barplats' shares from three major shareholders for the company's 288.6 M shares (or about C$400 M) plus C$27.7 M. Barplats owns the Crocodile River mine. In 2006 financial year (July 1, 2005-June 30, 2006), the mine is expected to produce nearly 4.0 t PGM with plans for 2007 financial year of 5.9 t PGM and 7.8 t PGM for 2008.
Implats boosts Pt production.
South African Implats reported rise in Pt production in Q2 2005 by 6.6% compared with the same period 2004, or from 27.4 t to 29.2 t. PGM production was 5.7% up year-on-year reaching 56.0 t in 2H 2005. The company is planning to raise its annual Pt output to 71.5 t by 2010 through PGM capacities expansion at Zimplats and PGM production growth at its mines in South Africa.
Stillwater Mining plans to complete Norilsk Pd sale in 1Q 2006.
Chairman of USA' Stillwater Mining board reported the company would complete the sale of palladium received from MMC Norilsk Nickel in 1Q 2006. Despite the sales of 13.7 t Pd from Norilsk, net losses of Stillwater Mining were US$13.9 M. In 2005, revenues from Norilsk's palladium sales amounted to US$87.3 M, so, in the current year one may expect a substantial growth in Stillwater Mining's losses.

JVBG

March 16, 2006, 16:59:06
Market Overview, February 1-15
    Cobalt Prices
Prices for cobalt were steadily coming down during January and the first half of February 2006 with decrease in prices for 99.8% Co much more dramatic than that is in 99.3% Co. Within January 3-February 10, 2006, 99.8% Co cheapened by US$5 kg, from US$32.6 kg to US$27.6 kg, while 99.3% Co by only US$1.3 kg. Until the end of February Co prices were going up thus resuming the upward trend with 99.8% Co raising at a higher rate than 99.3% Co. In late February, 99.8% Co price was at US$29.1 kg and 99.3%Co at US$26.9 kg.
Cobalt News
Cobalt market saw 2,000 t supply deficit in 2005.
According to the last estimates of Cobalt Development Institute (CDI), Co supplies grew by 52,000 t compared with 49,500 t a year earlier. Demand for the metal in 2005 was reported at 54,000 t which led to a 2,000 t deficit on the market. The rechargeable batteries sector saw the most significant growth in Co consumption. In 2002, its share in world's consumption was 9% while in 2005 it accounted for 22%, the level of superalloys, the formerly largest sector of cobalt consumption.
China witnesses Co consumption and production growth.
In 2005, China became the largest world's producer of cobalt accounting for 30% of world's refined cobalt production, or 16,000 t with ? Co produced from imported concentrates (nearly 90% from DRC), CDI reports. Annual growth rates of Chinese Co consumption have been 25% in recent years. In 2005, the value of 12,000 t allowed China to be ranked as the second world's largest Co consumer giving the first place only to Japan. Approximately, half of China's Co consumption accounts for the rechargeable battery sector.

JVBG

March 16, 2006, 16:50:30
Market Overview, February 1-15
     Copper Prices
Copper prices at LME had been continuously growing since the first days of 2006 and reached new peaks with US$5,145.5 t Cu fixed on February 7. This was followed by a downward correction and the price decreased to US$4,839 t. In end-February, the combined Cu stocks were at the level of 195,000 t with 109,000 t accounted for the LME. For comparison: the combined exchange Cu stocks in early year were at 156,000 t, with 92,000 t of which attributed to the LME. Monthly Cu prices averaged at US$4,734 t in January and US$4,982 t in the consequent month.
Copper News
Zambia increases copper output.
The refined copper production in Zambia in 2005 totaled nearly 500,000 t compared to less than 400,000 t a year ago. Earlier, Zambian Minister of Mining Industry said the domestic copper production in 2005 would probably reach 550,000 t though the problems with fuel and strikes pressurized Cu output to 500,000 t Ni. Plan for 2006 is 600,000 t Cu and that is for 2007 to achieve 750,000 t. The latter figure was last seen in Zambia in the 1970-s, then the output had been steadily declining.
Codelco launching new Chuquicamata refinery.
At the beginning of 2006, Chile's Codelco announced start-up of new refinery Chuquicamata ?2 which is due to reach full capacity in the nearest future. The commissioning is part of the program on expansion and modernization of the Codelco Norte division. Refinery ?2 is to replace old refinery ?1 which operated since 1915 and then closed in early 2006. The start-up of refinery ?2 will allow Cu output to be enhanced by 30% compared to the old operation. In total, Codelco is planning to spend about US$6 bill. within the period till 2018 for the expansion and modernization program of Codelco Norte and to enlarge refined copper output in the division by 400,000 t/y Cu. For reference: in 2004 Codelco Norte produced 983,000 t Cu.
Codelco proceeds with construction of Gaby mine.
In February 2006, Codelco proceeded with construction of the Gaby mine, Chile, capable to produce 150,000 t/y of SX-EW copper. Capital costs will amount to about US$900 M. Gaby's reserves contain 584 Mt of oxide ore grading 0.41% Cu. The start-up is scheduled for 2008. The ore reserves will provide a 14-year operating life with the planned production of 1.9 Mt Cu.
Cu production in Chile to grow by 5.7% in 2006.
According to Sonami, Association of Chile's mining industry, Cu production in the country in 2006 may grow by 5.7% compared to 2005, or from 5.3 to 5.6 Mt. The increment of Cu output is unlikely to bring to a fall in prices. Sonami forecasts copper prices at US$3,640-3,860 t in 2006.
Strike at Codelco's operations completed.
The 16-day strike of contract workers at Codelco's El Teniente and Andina has come to an end. The company never agreed to pay bonuses (500,000 peso, or US$941) required by its workers.
Japanese copper smelters still in negotiations on TC/RC on 2006 future contracts.
Japanese companies Pan Pacific Copper and Sumitomo Metal Mining failed to agree with BHP-Billiton on TC/RC on 2006 futures and the talks will be resumed in March 2006. BHP-Billiton offered TC/RC at US$92 t and US$0.20 kg Cu respectively while the Japanese insisted on US$95 t and US$0.21 kg Cu.
BHP-Billiton going to sell Tintaya mine.
Because of the protests of local people BHP-Billiton is going to sell Tintaya, the third largest mine in Peru. Potential buyers include Southern Copper Corp. (formerly Southern Peru Copper Corp), Rio Tinto, Phelps Dodge and Xstrata. The final decision on the sale will be made in mid-2006. Tintaya's capacity is about 110,000 t of Cu-in-concentrate plus 34,000 t of SX-EW Cu annually.
Investments in Chile's mining and metallurgical industry going up.
According to the Chilean State Copper Committee, or Cochilco, investments in domestic mining and metallurgical industry will total some US$18.9 bill. in 2005-2009, including US$11.5 bill. for Codelco, the world's largest state copper producer, and US$4.7 bill. as private investments of the companies in Chile's copper industry. This will enable the Cu output to be increased by a quarter compared to 2005, or from 5.3 Mt to 6.7 Mt.
First copper mine in Vietnam commissioned.
The mine and smelting and refining complex Sin Quten (10,500 t of refined Cu/a) is scheduled to come on stream in Q4 2006. This is the first Cu mine in Vietnam. According to the Vietnamese news agencies, construction of the mine and smelting complex has been completed. The complex will cover approximately a half of annual Cu consumption in the country which is about 20,000 t per year and is basically covered by Cu imports from China and Japan.

JVBG

March 16, 2006, 16:38:57
Market Overview, February 1-15
    Nickel Prices
Since the very beginning of the year Ni prices had been going up despite the growth in exchange stocks. By late January, they exceeded US$15,000 t compared to US$13,500 t on January 3, 2006 while stocks increased by 1,000 t within the same period. In February, the market saw a downward correction in prices on the back of a relatively significant stocks reduction. In end-February the LME metal prices were fixed at US$14,900 t with stocks reported at 34.7 kt. Cash Ni prices averaged US$14,555 t in January and US$14,979 t in February
. Nickel News
Brook Hunt revised its estimated Ni consumption for 2005.
The analytical bureau Brook Hunt revised its 2005 Ni consumption estimate downwards. In November 2005 issue of Nickel Metal Service, the bureau predicted a slight 0.6% growth in 2005 nickel consumption compared with the previous year. Interestingly, Gipronickel Institute's Marketing Department predicted a less than 1% decrease in 2005 Ni demand earlier than Brook Hunt (see Nickel Overview 2005).
Inco reveals 2005 production and financial results.
In 2005, Canada's Inco produced 221 kt Ni compared to 236 kt a year ago. The production plan for 2006 is 256,000 t Ni including 14,000 t to be processed on tolling by USA-based OMG. Voisey's Bay's output of Ni-in-concentrate may come to nearly 54,000 t in 2006. In the same year Inco expects to produce 38,000 t of refined nickel from the concentrate. The proprietary rich Ni concentrate from Voisey's Bay will help decrease after-credit costs from US$5.85 kg Ni in 2005 to US$5.30 kg Ni in the current year.
Inco' sales in 2005 totaled US$4,518 M compared to US$4,278 M a year earlier. In contrast, net profit fell from US$855 M to US$811 M. The strengthened Canadian dollar (against US dollar) and increased rates for electric power and gas in Canada led to decline in net profit.
Falconbridge reports its production and financial results in 2005.
Falconbridge's Ni production in 2005 amounted to 114,000 t, including 85,000 t produced by INO Division and 29,000 t by FeNi plant Bonao, Dominican Republic. In 2006, the company plans to produce 115,000 t Ni with growth mainly due to Bonao (where the output is expected to reach 30,000 t Ni).
INO's cash operating costs after credits (C1) rose to US$7.8 kg Ni in 2005 compared with US$5.4 kg Ni a year earlier. A number of factors including growth in Canadian dollar rate against US dollar, enhanced energy costs in Canada and poor ore processing at Raglan contributed in the growth. Nickel production costs in Bonao in 2005 grew to US$10.6 kg Ni compared to US$9.2 kg a year ago. Rise in prices for crude oil from US$42.34 per barrel in 2004 to US$55.63 per barrel in 2005 was the main factor of increasing costs. According to Falconbridge, costs for oil accounted for 73% of total operating costs in Q4 2005. Oil in Bonao is treated at proprietary processing plant to produce fuel for power plants, diesel fuel for vehicles and equipment, and naphtha for reduction smelting.
Jinchuan reports production results.
The largest Chinese Ni producer Jinchian, produced 90 kt Ni, 161 kt Cu and 4.5 kt Co in 2005 compared with 73 kt Ni, 130 kt Cu and 2.2 kt Co in the previous year. The 2006 plan includes 102,000 t Ni, 220,000 t Cu and 6,000 t Co.
Eramet revealed its production results.
Eramet produced 59.6 kt Ni in 2005, over 8% more than in 2004 (55.2 kt Ni). The initial production plan for 2005 was 65,000 t Ni though a 19-day strike in November 2005 impeded accomplishment of the plan. The company is planning to produce 68,000 t Ni in 2006.
Liberty Mines to start sulphide ore supplies to Jilin.
Canadian geological company, Liberty Mines, announced its readiness to start mining of sulphide Ni ore at preproduction stage in Redstone mine, Canada, located in Sudbury. The ore will be supplied to Jilin Jien Nickel Industry, the second largest Ni producer in China. Jilin in its turn is going to finance construction of processing plant at the Redstone mine (US$4 M). In 2005, Jilin Jien's Ni production was no more than 3,000 t Ni in cathodes and nickel foam, according to Antaike.
Posco plans construction of FeNi plant in New Caledonia.
Posco, the largest stainless steel producer in South Korea, is planning to construct a 30 kt/y Ni-in-FeNi plant in New Caledonia in association with SMSP, France. Posco intends to invest US$352 M to get a 49% share in the FeNi plant, the rest will belong to SMSP. The plant's commissioning is scheduled for December 2008. In spring 2005, Posco signed the memorandum of understanding with Indonesia's Antam and was ready to construct a FeNi plant of similar capacity in Indonesia. Today, Posco produces 2.05 Mt/y of slabs. In addition, commissioning of a new 600 kt/y stainless steel plant in China is planned in September 2006. Posco requires about 90,000 t Ni annually to produce stainless steel.
PT Antam' FeNi plant ?3 comes on stream.
Antam announced commissioning of FeNi plant ?3 with 15,000 t/y Ni capacity. Capital costs totaled US$320 M. By mid-April this year the plant is expected to reach its designed capacity. Currently, Antam's combined capacities of three FeNi plants are 26,000 t/y of Ni-in-FeNi. The production plan for 2006 includes 20,000 t Ni with about 25,000-26,000 t Ni expected in the next year.

JVBG

December 23, 2005, 13:59:20
Market Overview, November 16-30
    PGM Prices
In the second half of November Pt prices maintained their growth nearly touching psychologically important US$1,000 oz (the maximum price for platinum for the last 25 years). Fuelled by platinum, prices for palladium as its substitute in a number of sectors kept growing slowly but steady. On November 21, Pd price was at US$8.6 g, the maximum value since April 2004.
In end-November platinum prices (London afternoon fixing) were fixed at US$31.5 g and those for palladium at US$8.3 g.
PGM News
Aquarius Platinum launched Everest.
On November 30, Australian Aquarius Platinum announced launching of Everest located in Eastern Bushveld. The mine with its 11-12 year life will reach full capacity (7 t/a PGM in concentrate) by end-2006.

JVBG

December 23, 2005, 13:55:27
Market Overview, November 16-30
     Copper prices
In the second half of November copper prices hit a new record (US$4,420 t) ever seen at LME with growth in LME copper stocks had no principal impact on prices. Thus, the monthly cash price in November averaged at historically record US$4,269 t; for comparison, in October the copper price was fixed at US$4,060 t. As of the end of November 2005, cumulative exchange Cu stocks (three exchanges) went up to 149.8 kt from 141.6 kt in mid-month. The Cu stocks at Shanghai exchange increased to 75.3 kt in late November compared with 73.7 kt at LME. Until autumn 2005, copper stocks at the LME were higher than those at Shanghai.
Copper News
ICSG revises forecasts.
According to the last forecast of International Copper Study Group (ICSG), the market deficit in 2005 will come to 122,000 t (the previous forecast deficit as of March 2005 was estimated at 260,000 t Cu). Copper mining in 2005 is predicted at 14.98 Mt, some 695 kt less than ICSG expected in March 2005. Refined copper production in 2005 is now forecast at 16.34 Mt, 831 kt higher compared with the previous estimates. Refined copper consumption in 2005 will most probably drop to 16.45 Mt, 920 kt less than ICSG predicted in March 2005.
In the next year, a bulk in the market now is expected to come to 295 kt compared with the previous forecast of 93 kt with copper mining in 2006 at 15.74 Mt (5.1% growth from 2005) and consumption of 17.36 Mt (5.5% growth from 2005). In the first eight months this year the market deficit was fixed at 114 kt compared with 765 kt a year earlier. According to ICSG's estimates, within January-August this year copper consumption reduced to 10,923 kt from the same period last year (11,625 kt). Unlike consumption, mining and refined copper production were up from 9,378 kt to 9,676 kt and from 10,397 kt to 10,809 kt respectively with secondary copper production remained at 2004 level of about 1,370 kt.
Copper consumption in China to reach its peak in 2015-2020.
Head of Chinese Jiangxi's copper trading unit said Cu consumption in China would reach its peak of 7.2 Mt within 2015-2020. For comparison, Cu consumption in 2004 was 3.6 Mt. Average annual growth rates of China's copper consumption will decrease from 19.7% in 2000-2004 to 7,5% in 2005-2010 and to 3% in 2010-2020. Even provided a drop in Cu consumption growth rates in China to 3% per year they will be higher than average values of world's copper consumption within the last 35 years (about 2.7% y-o-y). The decrease in China will result from completion of electrification process.
So far, electric power sector in China accounts for 45% of total consumption which is roughly equivalent to 1.6 Mt/y Cu.
Nippon Mining anticipates rise in Cu concentrates deficit in Asian Region.
Japanese Nippon Mining anticipates Cu concentrates deficit in Asian region will rise to 3.3 Mt Cu in concentrate by 2010 compared with 1.8 Mt in 2004. To cover the deficit, Cu concentrates import to Asian region will have to be increased by 1.5 Mt Cu in concentrate by 2010. The growth in deficit is mainly attributed to China where refined copper production in 2004-2010 is expected to go upwards from 2.2 to 3.7 Mt. Within the same period Cu consumption in China will grow by 75% to 6.3 Mt (from 3.6 Mt).
TC/RC on spot deals resume their upward trend.
TC/RC on spot deals have reached US$160-170 t concentrate and US$0.35-0.38 kg Cu respectively since mid-November. A slight decrease was followed by resumption in TC/RC growth mainly because of two factors. According to traders, during 2005 many smelters accumulated considerable stocks of Cu concentrates and now are keeping themselves from concentrate purchases on the spot market. Another factor is the accident at the smelter Birla Copper in India in late November this year that forced its owner India's Hindalco to announce force majeur for supplies of concentrate to the smelter. Analysts say the situation will cause growth in Cu concentrate supplies (approximately by 70 kt) on the spot market in the nearest future.
TC/RC on futures to decrease in 2006.
According to most traders, TC/RC on futures will be down to US$92.5 t of concentrate and US$0.20 kg Cu in 2006 compared with US$85 t and US$0.19 kg Cu respectively.
In October, TC/RC on 2006 futures were forecast at US$100 t and US$0.22 kg respectively.
BHP-Billiton planning 4 time expansion at Olympic Dam.
BHP-Billiton is planning to expand capacity of Olympic Dam, the copper-uranium mine in Australia, from 235,000 t/y Cu t and 4,500 t/y of uranium oxide to 1,000,000 t/y Cu and 30,000 t/y of uranium oxide. The mine expansion will be implemented in two stages, to 500,000 t (Stage 1) and to 1,000,000 t (Stage 2). The expansion to 1,000,000 t/y Cu will make the mine one of the largest in the world while 6-time expansion will favorably affect production costs as the uranium oxide prices are growing and will remain strong in the coming 5-10 years.

JVBG

December 23, 2005, 13:06:40
Market Overview, November 16-30
    Cobalt Prices
After a long-continued depression since August 2005, prices for 99.8% Co resumed their upward move on November 18. The main reason of the prices growth was predicted cobalt production cuts at Nikkelverk. By the end of November prices for 99.8% Co went by US$4.6 kg up to US$32.9 kg, with growth in prices for 99.3% Co was less significant, from US$25.7 kg to US$27.2 kg. The gap between 99.8% Co and 99.3% Co seen in May 2005 at only US$0.5 kg again rose to US$5.9 kg.
The average monthly prices for 99.8% Co and 99.3% Co were US$30.3 kg and US$26.7 kg respectively, the minimum monthly average prices for the metal since November 2003.
Cobalt News
Deficit in cobalt market expected at 2,000 t in 2005.
According to Michael Hawkins, general director of Cobalt Development Institute (CDI), cobalt supplies in the market will be restricted in the nearest two years with consequent commissioning of a large number of laterite projects capable to produce an order of 11,200 t/y Co. Regarding the long-term outlook (after 2008) new capacities are scheduled to come on stream (approximately 28,300 t). The Co production will grow not only due to laterite projects but Cu-Co deposits in DRC such as Tenke Fungurume.
CDI general director says cobalt consumption in 2005 will total 54 kt compared with 50 kt a year earlier. Cobalt supply in 2005 is expected at 52 kt compared with 50 kt in 2004.
Michael Hawkins noticed the metal consumption in China would grow at very high rates; within 1997-2005 it went up from 1,000 to 9,500 t/y Co. Rechargeable batteries and catalysts are the main sector of the metal consumption.
Nikkelverk decreased planned output.
Canadian Falconbridge announced the metals output of Nikkelverk refinery, Norway in 2005 would be 2,000 t Ni and 250 t Co lower than planned. Earlier the company intended to produce 85,000 t Ni.

JVBG

December 23, 2005, 12:36:49
Market Overview, November 16-30
    Nickel Prices
Nickel prices were growing in the second half of November supported by positive news from Falconbridge, including rumors of a possible strike at Falcondo to start on Dec. 1 2005, revision of forecast Ni production downwards at Nikkelwerk refinery (by 2,000 t) and decline of the French Government's offer to finance the Koniambo project. Regarding other news, the strike at Eramet's ferronickel plant Doniambo and Implats' withdrawal of Ambatovy project also pushed up the prices. As a result, cash Ni prices at LME rose by US$1,000 t, to US$12,605 t on November 30. The prices grew on the back of a continued rise in LME stocks by 2.3 kt (from 20,700 to 23,000 t) in the last half of November.
Meanwhile, the average Ni price was fixed at US$12,116 t compared to US$12,403 t in October 2005.
Nickel News
Inco announced first supplies of Voisey's Bay concentrate.
On November 16 this year, Inco announced first supplies of nickel concentrate from Voisey's Bay to the company's own smelters in Ontario and Manitoba, Canada. The concentrates will be shipped to Quebec then transported by rail to the smelters. First metallic nickel is planned to be produced by Inco (from Voisey' Bay concentrate) in 1Q 2006. (Reference: Voisey's Bay was commissioned in mid-September 2005.) In 2006, Inco plans to produce about 50,000 t of refined nickel from Voisey's Bay concentrates. The concentrates will replace the purchased material (mostly, Australian) and offset decrease in Ni mining at the proprietary Canadian mines.
Strike at Doniambo underway.
Doniambo, Eramet's FeNi plant in New Caledonia has been operating at minimum capacity since the second fortnight of November. Employees involved in the trade union blocked the entrance to the plant's territory for ore-loaded transport and let no trucks with finished products leave the plant's area (ferronickel, high-grade matte). Only 17 people have an access to the plant who maintain production at minimum level as full stop may damage furnaces and cause accidents at the operation.
The Doniambo production plan for 2005 includes about 65,000 t Ni in ferronickel and high-grade matte. The Q3 results demonstrated that the plan had been already questioned. Now, given the strike Ni output will be even lower than expected.
Implats plans exit from Ambatovy project.
South African Implats informed Canadian Dynatec and Japanese Sumitomo, partners in the laterite project Ambatovy (Madagascar), about its plans to exit from the project. According to Implats' top officials, the main reason was the decreased expected profit from Ambatovy. Implats managed to agree on the exit terms. The company will have to pay about US$25 M as compensation.
Capital costs for the project are estimated at US$1.9 bill according to the feasibility study completed in end-February 2005 provided intermediates production and further processing at Implats' refinery Springs. The project capacity is 60,000 t/y Ni and 5,600 t/y Co. Cash operating costs after cobalt credits (US$22 kg) totaled less than US$1.5 kg Ni. Production is expected to start in late 2008 with the mine life of 27 years. Proven and probable ore reserves subject to open mining contain 125 Mt grading 1.04% Ni and 0.099% Co.
Implats and Dynatec each had 37.5% in Ambatovy, the remaining 25% belonged to Sumitomo. We suppose after Implats withdrawal Dynatec and Sumitomo will start looking for a new partner capable to finance its share in the project and possibly to treat mixed sulphides to produce refined metal using own capacities.
Labor contract expires in Falcondo.
The three-year labor contract between employees at Falcondo, Dominican Republic and the company's authorities expired on November 30, 2005. New labour contract has not been approved yet, though despite this fact the operation continues working at full capacity. Most probably, the workers will not go on strike. Discussions on the new labour contracts are underway between the parties. The officials say they are about to sign a new contract.
Falcondo (75% owned by Falconbridge) possesses the 28 kt/y Ni-in-FeNi ferronickel plant Bonao in Dominican Republic. About 1,500 employees are engaged at the plant including 1,200 contract workers. As a rule, strikes are inevitable here when concerning labor disputes and signing of new labor contracts.
CVRD acquired 93% of Canico Resources shares.
On June 28, 2005 Brazilian CVRD announced acquisition of 93% of Canico Resources shares. The remaining 7% of the shares are planned to be acquired by CVRD before December 8 this year.
Koniambo questioned.
Canada's Falconbridge declined the French government's offer to finance the FeNi plant Koniambo in New Caledonia. Earlier the French government proposed a US$450 M loan plus tax remissions (US$630 M) as share of SMSP. Koniambo is 49% belonged to Falconbridge and 51% to New Caledonia' SMSP. According to Falconbridge, the company will try to find a new equal partner rather than money-lender to implement the project. If the company fails to find such a partner the project implementation will be questioned.
The bankable feasibility study on Koniambo was completed in end-2004. The capital costs are expected to amount US$2.2 bill. Koniambo is capable to produce 60,000 t/y FeNi. Cash costs will total about US$3.6 Ni. Commissioning of the project was planned for 2009-2010.
In our opinion, one of the key factors of the company's decision is the expected merger with Inco. Following the announcement we put the project implementation under question. First, Inco produces no ferronickel; second, Inco has control over all nickel plants; and third, the company plans to commission two large-scale Ni projects with combined capacity of 110 kt/year Ni plus expansion of PT Inco. Thus, the start of Koniambo in 2009-2010 is not among the priority tasks. Furthermore, when Koniambo comes on stream the market will see a significant bulk of supplies. So, the project will aggravate the situation.

JVBG

December 23, 2005, 12:36:49
Market Overview, November 16-30
    Nickel Prices
Nickel prices were growing in the second half of November supported by positive news from Falconbridge, including rumors of a possible strike at Falcondo to start on Dec. 1 2005, revision of forecast Ni production downwards at Nikkelwerk refinery (by 2,000 t) and decline of the French Government's offer to finance the Koniambo project. Regarding other news, the strike at Eramet's ferronickel plant Doniambo and Implats' withdrawal of Ambatovy project also pushed up the prices. As a result, cash Ni prices at LME rose by US$1,000 t, to US$12,605 t on November 30. The prices grew on the back of a continued rise in LME stocks by 2.3 kt (from 20,700 to 23,000 t) in the last half of November.
Meanwhile, the average Ni price was fixed at US$12,116 t compared to US$12,403 t in October 2005.
Nickel News
Inco announced first supplies of Voisey's Bay concentrate.
On November 16 this year, Inco announced first supplies of nickel concentrate from Voisey's Bay to the company's own smelters in Ontario and Manitoba, Canada. The concentrates will be shipped to Quebec then transported by rail to the smelters. First metallic nickel is planned to be produced by Inco (from Voisey' Bay concentrate) in 1Q 2006. (Reference: Voisey's Bay was commissioned in mid-September 2005.) In 2006, Inco plans to produce about 50,000 t of refined nickel from Voisey's Bay concentrates. The concentrates will replace the purchased material (mostly, Australian) and offset decrease in Ni mining at the proprietary Canadian mines.
Strike at Doniambo underway.
Doniambo, Eramet's FeNi plant in New Caledonia has been operating at minimum capacity since the second fortnight of November. Employees involved in the trade union blocked the entrance to the plant's territory for ore-loaded transport and let no trucks with finished products leave the plant's area (ferronickel, high-grade matte). Only 17 people have an access to the plant who maintain production at minimum level as full stop may damage furnaces and cause accidents at the operation.
The Doniambo production plan for 2005 includes about 65,000 t Ni in ferronickel and high-grade matte. The Q3 results demonstrated that the plan had been already questioned. Now, given the strike Ni output will be even lower than expected.
Implats plans exit from Ambatovy project.
South African Implats informed Canadian Dynatec and Japanese Sumitomo, partners in the laterite project Ambatovy (Madagascar), about its plans to exit from the project. According to Implats' top officials, the main reason was the decreased expected profit from Ambatovy. Implats managed to agree on the exit terms. The company will have to pay about US$25 M as compensation.
Capital costs for the project are estimated at US$1.9 bill according to the feasibility study completed in end-February 2005 provided intermediates production and further processing at Implats' refinery Springs. The project capacity is 60,000 t/y Ni and 5,600 t/y Co. Cash operating costs after cobalt credits (US$22 kg) totaled less than US$1.5 kg Ni. Production is expected to start in late 2008 with the mine life of 27 years. Proven and probable ore reserves subject to open mining contain 125 Mt grading 1.04% Ni and 0.099% Co.
Implats and Dynatec each had 37.5% in Ambatovy, the remaining 25% belonged to Sumitomo. We suppose after Implats withdrawal Dynatec and Sumitomo will start looking for a new partner capable to finance its share in the project and possibly to treat mixed sulphides to produce refined metal using own capacities.
Labor contract expires in Falcondo.
The three-year labor contract between employees at Falcondo, Dominican Republic and the company's authorities expired on November 30, 2005. New labour contract has not been approved yet, though despite this fact the operation continues working at full capacity. Most probably, the workers will not go on strike. Discussions on the new labour contracts are underway between the parties. The officials say they are about to sign a new contract.
Falcondo (75% owned by Falconbridge) possesses the 28 kt/y Ni-in-FeNi ferronickel plant Bonao in Dominican Republic. About 1,500 employees are engaged at the plant including 1,200 contract workers. As a rule, strikes are inevitable here when concerning labor disputes and signing of new labor contracts.
CVRD acquired 93% of Canico Resources shares.
On June 28, 2005 Brazilian CVRD announced acquisition of 93% of Canico Resources shares. The remaining 7% of the shares are planned to be acquired by CVRD before December 8 this year.
Koniambo questioned.
Canada's Falconbridge declined the French government's offer to finance the FeNi plant Koniambo in New Caledonia. Earlier the French government proposed a US$450 M loan plus tax remissions (US$630 M) as share of SMSP. Koniambo is 49% belonged to Falconbridge and 51% to New Caledonia' SMSP. According to Falconbridge, the company will try to find a new equal partner rather than money-lender to implement the project. If the company fails to find such a partner the project implementation will be questioned.
The bankable feasibility study on Koniambo was completed in end-2004. The capital costs are expected to amount US$2.2 bill. Koniambo is capable to produce 60,000 t/y FeNi. Cash costs will total about US$3.6 Ni. Commissioning of the project was planned for 2009-2010.
In our opinion, one of the key factors of the company's decision is the expected merger with Inco. Following the announcement we put the project implementation under question. First, Inco produces no ferronickel; second, Inco has control over all nickel plants; and third, the company plans to commission two large-scale Ni projects with combined capacity of 110 kt/year Ni plus expansion of PT Inco. Thus, the start of Koniambo in 2009-2010 is not among the priority tasks. Furthermore, when Koniambo comes on stream the market will see a significant bulk of supplies. So, the project will aggravate the situation.

JVBG

December 6, 2005, 10:02:37
Market Overview, November 1-15
    PGM prices
Platinum prices in mid-November achieved US$31.1 g, the maximum value since March 1980. The historical peak value of US$33.7 g was fixed in early March 1980. Many foreign analysts say the platinum prices may approach to their 1980 record and even hit it. The Pt prices rise promoted growth in Pd prices with maximum since June 3, 2004 on November 15 (US$7.9 g).
PGM News
Stillwater Mining's losses reported at US$9.1 M in 3Q 2005.
Despite a sale of 3.4 t Pd from the stocks of the metals received from Norilsk Nickel in 2003, net losses of American Stillwater Mining in 3Q 2005 were reported at US$9.1 M compared with US$0.9 M in 3Q 2004. The surged losses were attributable to decrease in value of sales of the metals produced by Stillwater, as well as to risen depreciation and writing-off costs.
The increased losses were accounted for rise in PGM output from 3.67 to 3.98 t in comparable quarters. In addition, the company sold 0.34 t Pd, 0.56 t Pt and 0.09 t Rh produced from spent autocatalysts compared with 0.34 t Pd, 0.68 t Pt and 0.09 t Rh in 3Q 2004. Sales of palladium received from Norilsk Nickel in 3Q 2004 were almost the same as in 3Q 2005 (3.4 t). As of September 30, Stillwater had 5.4 t of palladium from Norilsk. In terms of the same sale volumes palladium will be depleted by 1Q 2006 with further losses of US$20.4 M at current 3Q sale prices (about US$6.1 g).
Johnson Matthey issued next Platinum Interim Review.
According to Johnson Matthey estimates, the platinum demand in 2005 grew by 2.9% compared with 2004, from 226.9 t to 233.6 t with platinum supply rose by 3.1% to 229.8 t within the same period, from previous 222.8 t. As a result, the market saw a lowered platinum deficit in 2005 of about 3.8 t compared with 4.1 t a year earlier. The growth in platinum demand was primarily observed in autocatalysts sector (as diesel automobiles are becoming more and more popular in Western Europe, Japan and USA), electronic industry (due to increase in production of rigid computer disks) and glass industry (with its expanded LCD output). The market saw the most dramatic drop in Pt demand in jewelry, sensible to price upward movements. According to Johnson Matthey, the Pt market has been in supply deficit since 1999 totaling about 80 t within the recent seven years. (We find the figure unrealistic).
Demand for palladium in 2005 grew by 7.9% compared to 2004 (from 218.2 to 235.4 t) with the metal supplies reduced by 2.7% (from 262.6 to 255.6 t) within the same time. This brought to a bulk of 20.2 t in 2005 compared with excess 44.4 t a year earlier. The demand growth for palladium in 2005 was mainly attributed to jewelry where the metal is applied for production of white gold, a relatively cheap substitution for Pt jewelry.

JVBG

December 6, 2005, 09:57:39
Market Overview, November 1-15
    Cobalt prices,br> Prices for cobalt remained depressive in November with 99.8% Co declining from US$29.2 kg to US$28.3 kg and further weakening of 99.3% Co from US$27.0 to 25.7 kg. In the first half of November, 99.3% Co was cheapening at a higher rate than 99.8% Co. This helped widen the price gap to US$2.6 kg by mid-November compared to US$2.2 kg in late October.
Cobalt News
Operational profit of OMG's Co unit six times declined.
In 3Q 2005 operational profit of OMG's Co unit declined 6 times compared to the same quarter last year, from US$39.1 M to US$6.5 M. Sales within comparable periods reduced by 25% to US$129.3 M from US$163.3 M. Sales of Co products for the period fell by only 6% to 13.1 kt (from 13.9 kt). Meanwhile, refined cobalt production was 8% up, from 2.1 to 2.2 kt. Despite a drop in Co prices from US$51.2 kg in Q3 2004 to US$29.6 kg in the same quarter of 2005 stocks reduced quite slightly in dollar equivalent, from US$233.8 M in 3Q 2004 to US$196.9 M in 3Q 2005.
DRC government approves fulfillment of Tenke Fungurume.
USA's Phelps Dodge got a permit from DRC government to develop the Cu-Co project Tenke Fungurume, located in Catanga province. The deposit's resources include 547 Mt ore containing 3.5% Cu and 0.27% Co suitable for open mining. According to the feasibility study, prepared by the engineering company SNC-Lavalin based in Canada it is expected to mine 85 Mt of oxide ore during 15 years and to construct a plant with capacity of 100,000 t Cu and 8,000 t Co. Capital costs for the project will total some US$40 M.
Within 11operational years the open copper mine produced about 400,000 t Cu. The operations were interrupted with the start of civil war in the country that has lasted for over 10 years.

JVBG

December 6, 2005, 09:51:59
Market Overview, November 1-15
     Copper prices
By mid-November copper prices rocketed to US$4,320 t Ni, a third record within the last two months. Meanwhile, the metal stocks remained almost at the same level as early in the month. Cumulative copper stocks covering the three stock exchanges grew to 141,600 t compared with 113,000 t at the beginning of the month. The end of the 4-month strike in Asarco resulted in no decrease in copper prices. Moreover, the scandal at LME fuelled copper prices which are storming new peaks now.
Copper news
19-week strike comes to end in Asarco.
The strike involving 1500 members of United Steelworkers employed at Asarco's operations was announced over in mid-November with the previous labour contract extended to end-2006. The strike cut the company's production plan from 220,000 to 150,000 t Cu. Being in unstable financial state, Asarco even had to resort to Chapter 11 of Bankruptcy Code. The workers interrupted the strike and came back to their operations to return Asarco its profitability in terms of buoyant Cu prices.
Trader's escape caused scandal at LME.
Rumors have it that one copper trader, Liu Qibing by name, working for Chinese State Reserve Bureau opened short positions at LME for 200,000 t Cu to close on December 21, 2005 counting on profits from decreased prices. Though, the upward trend did not change and the trader had to disappear. Fuelled by rumors, prices reached new peaks in the middle of November. SRB applied to the Chinese government for permission to export 200,000 t Cu, which is the evidence of that scandalous sale.
Historically, the scandal is not the first at LME. In 1996, Japanese Sumitomo lost US$2.6 bill due to operations of one trader.
Geological survey costs grew to eight-year peak.
According to the estimates of Metal Economist Group (MEG), geological survey costs for non-ferrous metals deposits grew to their maximum of US$5.1 M for the period since 1997 (when MEG started publishing such data), 34% higher compared to the year of 2004. The most significant growth in geological costs was observed in Latin America, in Mexico and Peru.
In 2006, MEG expects continued growth in the costs if metal prices remain at the current level.
Cochilco rises forecast prices for copper.
Chilean State Copper Commission (Cohilco) rose its forecast for 2005 to US$3,580-3,660 t from previous US$2,600-2,690 t.
Mopani Copper Mines to expand production to 240,000 t by 2007.
Chief executive of Mopani Copper Mines (Zambia) said copper production would grow to 140,000 t in the current year, to 203,000 t in 2006 and 240,000 t in 2007.
Note that until recently Mopani Copper Mines' plan was 185,000 t Cu but due to the fuel supply problems in the country it was decreased to 140,000 t.
Yunnan Copper plans to double production by 2010.
Yunnan Copper, the third largest copper producer in China is planning to increase copper output in the nearest years and become the second Cu producer in China. For that it is planned to expand copper production to 320,000 t in 2005, to 350,000 t in 2006, 400,000 t in 2007, and 600,000 t Cu in 2010. The expansion involves construction of new mines in Yunnan and increase in Cu concentrate output from current 90,000 t/y to 300,000 t by 2010.

JVBG

December 6, 2005, 09:43:37
Market Overview, November 1-15
    Nickel Prices
Having reached their minimum of US$11,500 t within the period since May 2004 Ni prices varied in the range of US$11,500-12,000 t in the 1st half of November. Regarding nickel stocks at LME, the market saw their growth by 1,800 t, from 18,400 t to 20,200 t.
Nickel news
Western World's analysts decrease forecast Ni prices.
Macquarie Bank decreased forecast Ni prices for 2006-2007. The 2006 forecast was revised downward by 22% to US$11,600 t, and that is for 2007 by 6% to US$12,670 t. The long-term forecast for nickel (after 2007) remained unchanged at US$8,830 t. Macquarie Bank reports the main reason of decreased forecasts was the reduced stainless steel production. Two thirds of primary nickel consumption are accounted for the sector.
This is not for the first time when foreign analysts reduced forecast Ni prices. Quite recently they predicted US$12,000-15,000 t Ni for 2006. In LME Week of October 31, 2005 CRU forecast US$9,400 t Ni for 2006. In its forecast presented at the seminar 'Regional market conditions and prospects' held in mid-March 2005 Gipronickel Institute supposed US$8,000 t Ni in 2006. One may doubt in the accuracy of the forecast but we were among the first who predicted the downward trend in prices.
MEPS expects growth in stainless production.
According to MEPS' last forecast, world's stainless steel production in 2006 will grow by 4% as compared to 2005, from 25 to 26 Mt. In the current year the growth in stainless production is expected only in two countries, China and India. Global production will increase by 2.5% to 25 Mt (24.4 Mt in the previous year).
The reduced stainless steel production in most countries was mainly attributed to large volumes of producers' inventories and extremely high prices for raw materials, primarily, for such alloying components as nickel, molybdenum and titanium. This caused a significant rise in release prices for stainless steel and consequent lower demand. Stainless producers had to cut their production plans for 2005. Totally, the reductions in industry were estimated by CRU analysts at 900,000 t. MEPS assesses a 650,000 t fall in Western World's stainless output excluding China.
New potential Ni concentrate producer to enter the market.
In September 2005, Australian Mirabela Nickel completed the preliminary feasibility study for Santa Rita, the sulphide nickel project located in Brazil. It is planned to produce nearly 15,000 t/y Ni in 12-14% concentrate containing low sulphur and talc, with recovery rate to concentrate of 70-72%. The inferred resources of Santa Rita deposit contain 47 Mt ore at 0.62% Ni and 0.16% Cu including 37 Mt ore suitable for open mining. Capital costs are estimated at US$120 M. The bankable feasibility study is planned to complete in February 2007. (Information about a potential purchaser of nickel concentrate from Santa Rita is not available.)
In addition to its sulphide deposit Santa Rita, Mirabela Nickel intends to start supplying saprolite ore from Mirabela Saprolite deposit in Brazil (about 400,000 t ore per year). The deposit's reserves to be open-mined contain 1.4 Mt ore grading 2.3% Ni. At present, Mirabela Nickel is negotiating with Japanese FeNi plants and Pobuzhskiy ferronickel plant to supply saprolite ore with contracts planned to be signed by end-2005. Capital costs for the project will amount to only US$2 M due to the developed infrastructure near the Mirabela Saprolite deposit. In terms of current nickel prices one should expect a 3-month pay-back period for the project.
Canico Resourses' management recommends shareholders approval of CVRD bid.
On November 11, Brazilian CVRD made a second bid to acquire Canada's Canico Resources. CVRD raised the value of shares to be purchased by 19%, from 17.5 to 20.8 CDN, 53% higher than the average Canico Resources' share rate within the last 30 trade days. The company's total value has been estimated at 940 M CDN (US$790 M). The bid is valid until November 28, 2005. Canico Recourses' top officials recommended their shareholders to approve CVRD's proposal. The first bid made by CVRD in September 2005 at 17.5 CDN per share was declined by the company.
Canico Resources owns Onca-Puma, the laterite project in Brazil. In last August Canico completed the bankable feasibility study for the project. Capital costs for Stage 1 (one furnace, 1.28 Mt ore per year) are estimated at US$762 M. It is expected to produce some 30,000 t Ni in FeNi. Production is scheduled to start in 2008. Both acquisition of Canico Resources and commissioning of proprietary Ni project Vermelho will help CVRD to reach 75,000 t Ni/year by 2009.

JVBG

November 18, 2005, 16:47:44
Market Overview, October16-31
     PGM prices
The platinum prices failed to hit a 25-year record achieved in the first half of October. Though, the record was repeated as after a slight drop the Pt prices approached US$30.2-30.3 g in the third week of October. A significant growth in Pt prices favored palladium ones in London to move upward to US$7.3 g by end-November. It should be noted that so high prices were not seen since July last year.
Industrial news
Lonmin's Pt production grew by 17%.
In Q3 2005, Pt production of UK's Lonmin grew by 17%, from 8.2 t in the same period of 2004 to 9.6 t. Palladium production rose by 15%, from 3.9 t to 4.5 t and that of rhodium by 30%, from 1.3 t to 1.7 t. Totally in 2005 fiscal year Lonmin produced 28.5 t Pt, 12.7 t Pd and 3.7 t Rh compared to 2004 fiscal year (28.6 t Pt, 12.3 t Pd and 3.5 t Rh). Lonmin plans to increase Pt output to 34.2 t/y by 2008.
Afplats seeks US$292 M for Leeuwkop.
UK's African Platinum seeks SAR1.9 bill. (US$292 M) for its PGM project Leeuwkop located in Western Bushweld, South Africa. Production at Leeuwkop may total about 9.3 t/y PGM in concentrate for over 20 years. The final feasibility study for the project is planned to complete in the first half of 2006. The deposit's resources contain 1,555 t PGM+Au. Mining is scheduled to start in 2010.

JVBG

November 18, 2005, 16:44:48
Market Overview, October16-31
    Cobalt prices
Prices for cobalt suspended their decrease with 99.8% Co and 99.3% Co fixed at US$29.2 kg and US$27.0 kg respectively. The difference between 99.8% and 99.3% cobalt reduced to US$2.2 kg, the lowest value since June 2005.
Cobalt news
Cobalt production at Chambishi to grow by 8% this year.
Chambishi Metals (Zambia) reported Co production at the Chambishi plant would grow by 8% from 3,700 t in 2004 to 4,000 t in the current year.
Compass Resources intends to start Co production in Australia in 2006.
Australian geological company Compass Resources is planning to start Co production from polymetallic oxide project Browns Copper in Australia. The deposit's resources (measured + indicated + inferred) are about 40 Mt of ore containing 1.29% Cu, 4.52% Pb, 0.11% Co, 0.12% Ni and 0.13 g/t Au. During 12 years of the mine life, Browns Copper is planned to produce about 10,000 t/y Cu, 1,000 t/y Co, 700 t/y Ni in metallic form by SX-EW method. Capital costs for the project are estimated at US$40 M.

JVBG

November 18, 2005, 16:40:40
Market Overview, October16-31
    Copper prices
Cash Cu prices at LME stormed new peaks in the second half of October. Thus, on October 20, 2005, cash Cu price was fixed at US$4,180 t, the absolute record ever seen at LME. The previous record of US$4,132 t was reached in the first half of October 2005. Copper stocks at LME continued decreasing though at lower rates than in the first half of the month. The LME stocks reduced by 3,100 t compared with 12,600 t in the first half of October. In contrast, the cumulative exchange stocks at LME, Comex and Shanghai grew by 8,000 t, from 105,000 to 113,000 t mainly due to a significant growth in Cu stocks at the Shanghai Exchange.
Industrial News
HSBC forecasts bearish copper prices next year.
According to the last forecast of HSBC bank, the average annual Cu price at LME will come to US$3,509 t in 2005, followed by a move downward to US$3,086 t in 2006. HSBC reports the current year will bring 15.24 Mt of mined Cu (incl. SX-EW) and 16.81 Mt of refined Cu. The metal consumption of 16.88 Mt in 2005 will move the market into a 73,000 t deficit. In 2006 the bank expects increase in Cu mining to 16.46 Mt and refined production to 17.96 Mt; provided the expected Cu consumption of 17.7 Mt this will result in a bulk of 263,000 t.
HSBC forecasts an excess of 165,000 t in 2007 and its further increase to 239,000 t in 2008. The three-year long bulk (2006-2008) will lead to a further decline in Cu prices.
Four-week strike at Kidd Creek comes to an end.
On October 30, 2005, employees at Kidd Creek, members of Canadian Auto Workers, concluded a new three-year labour contract with 82.5% out of 617 employees voted for the document. The labor contract provides a 2% growth in wages in the first two years and a 1% growth in the third year, thus, making a total wage increase of 5% for the three years. A one-time paid sum may amount to about C$1,500 per employee.
Capital costs on Spence to exceed those planned by 10%.
According to BHP-Billiton (Australia-UK), capital costs on Spence, the Cu project in Chile, will grow by 10% to US$1,100 M due to surged prices for construction materials and strengthened peso against US dollar. The production is scheduled to start in late 2006. The project's design capacity is 200,000 t/y of cathode copper.
CVRD started construction of second Cu mine.
Brazilian CVRD approved the construction of the new open Cu mine 118 Project located in Brazil. Capital costs for the project are estimated at US$232 M. The mine is planned to produce 45,000 t/y of cathode copper via SX-EW. The project will come on stream in late 2007 - early 2008. The deposit's reserves contain 78 Mt of oxide ore grading 0.85% Cu which allows the mine to be exploited for 15 years.

JVBG

November 18, 2005, 16:32:21
Market Overview, October16-31
    Nickel prices
The market saw a further decline in Ni prices in the 2nd half of October landing to US$11,600 t on Oct. 25, the lowest price since May 2004. The consequent buoyant correction in prices failed to overcome US$12,000 t Ni. On 31 October, cash Ni prices at LME were seen at US$11,950 t.
With regard to LME stocks, their continued growth (3.6 kt) within the 2nd half of October brought to 18,200 t, from previously seen 14,600 t. Note that the growth rate accelerated compared with the 1st half of October, or September. In the first fortnight of October the stocks grew by only 0.5 kt with the growth in September of about 4,000 t.
Industrial News
Bulk in Ni market may reach 30,000 t in 2005.
According to the last forecast of International Nickel Study Group (INSG), the bulk in Ni market may reach 30,000 t in 2005. Nickel production in 2005 is expected to rise by 3.2% to 1.29 Mt, from 1.25 Mt in the previous year, with consumption likely to increase by 0.8%, from 1.25 to 1.26 Mt. In the next year INSG predicts excess supplies of 10,000 t with 4.7% production growth to 1.35 Mt and 6.3% increase in consumption, to 1.34 Mt.
Inco launched demonstration hydrometallurgical plant in Argentia.
Canadian Inco, the largest Western World's nickel producer, launched a demonstration hydrometallurgical plant (Argentia, Newfoundland) in October 2005 to process concentrates from its sulphide Ni deposit Voisey's Bay. The 1/100 demonstration plant is capable to produce about 550 t/y of electrolyte Ni and 23 t/y Co. Nickel concentrate production at Voisey's Bay commenced in October 2005. Before the hydrometallurgical plant in Argentia comes on stream in 2010-2011, Ni concentrates from Voisey's Bay will be shipped to Inco' smelters in Sudbury and Manitoba. The new full-scale plant in Argentia has capacity of 50,000 t/y of electrolyte nickel, 2,300 t/y Co, up to 7,000 t/y of copper products and 32,000 t/y of copper concentrates. In accordance with the agreement between the company and Newfoundland and Labrador's government, within 25-30 years (Voisey' Bay mine life) Inco shall return the whole tonnage of nickel and cobalt taken from Voisey's Bay for processing at the plant in Argentia. Ni and Co shall be returned as concentrate and/or intermediate product. According to our estimates, within 2005-2011 Inco will take out about 400,000 t Ni in concentrate from Voisey's Bay. With the mine life of 25 years the company will have to give back 21,000 t/y Ni.
Alferon privatized ferronickel plant in Kosovo.
Alferon, a unit of Eurasian Natural Resources, one of the largest world's private M&M companies, acquired the ferronickel plant in Kosovo for 33 M euro (about US$40 M). In compliance with the terms of the won tender, Alferon shall provide 1000 working places and invest US$20 M in the plant in the first three years after the acquisition.
The FeNi plant in Kosovo was constructed in 1984. It reached its peak in production (6,800 t/y of Ni in ferronickel) in 1989. Damaged during NATO bombardments, the operation was shut down in 1998.
Antam's ferronickel plant ?2 achieved 90% capacity.
In the second half of October, Indonesian Antam announced resumption of commercial production at its FeNi plant ?2. The plant reached 90% capacity, or 5,500 t Ni in FeNi within the week after start. Plant ? 2 was halted in March 2005 due to operational problems. Maintenance costs for the operation amounted to US$6.95 M. The unplanned suspension led to decrease in Antam's forecast Ni production in 2005 from 10,200 t to 7,400 t of Ni in ferronickel (including 0.6 kt Ni smelted on toll for Pamco).
In early 2006 Antam plans to start production at its FeNi plant ?3 with capacity of 11,000 t Ni/y thus bringing the combined capacity of Antam's three FeNi plants to 26,000 t Ni/y.

JVBG

October 20, 2005, 10:26:23

    Inco launches C$12 bill. friendly merger of Falconbridge.
Inco, the second world's producer of refined nickel, announced October 11, 2005 a friendly merger of Falconbridge, a major Canadian nickel producer.
Inco offered C$34.00 per share or 0.6713 of the company' share plus C$0.05 in cash thus giving about C$34.29 (with the current Inco share rate at Toronto Exchange of C$51.01). Meanwhile, Falconbridge' share price fixed at C$30.82 by the moment the bid was announced rocketed to C$34.3 at the end of the day. Falconbridge's shareholders may opt for any better alternative provided that Inco plans to spend for the take-over no more than C$2.87 bill. and 201M shares. The friendly take-over bid is open within 60 days. To make a deal, more than two thirds of all Falconbridge' shareholders shall vote for the bid. Inco' and Falconbridge' shareholders will receive 54% and 46% respectively of the new company' shares.
If the merger takes place it will create a new company with US$24 bill. market capitalization. The new Inco will be the fifth largest M&M company in the world after BHP-Billiton, Rio Tinto, Anglo American, CVRD and Alcoa, and the world's leading nickel producer with about 330,000 t/y Ni (and 600,000 t/y Cu) accounting for 25% of global Ni production (and 3.6% of world's Cu production) in 2005. In addition, the new Inco will take a leading position in the world's total Ni reserves in sulphide and laterite ores.
By 2009, Ni output is planned to amount to 450,000 t/y (about 30% of world's production) with Cu output to arrive at 1.2 Mt/y by 2011. According to Inco's ceo Scott Hand, the new company will be very well diversified. Based on 2005 results, about 50% would be accounted for Ni sales, approximately one third for Cu, 10% for Al, and the rest for Zn, Co and precious metals. The merger will also lead to cost savings due to optimization of personnel and feed flows, as well as reduction in doubling structures. The merger is expected to save some US$350 M by late 2007. All in all the savings will total about US$2.5 bill after taxes.
The deal is to be accepted by the governments of Canada, USA, and EU. According to the company, the procedure may take nearly three months. To accelerate the process and push aside any possible obstacles, Inco is ready to sell its Nikkelwerk refinery in Norway and some of its marketing units (if required) when the deal is completed. Inco is also prepared to provide the refinery with intermediate products as it was the case of Falconbridge. Many observers say Xstrata is unlikely to make a take-over counteroffer to Falconbridge. Recently Xstrata acquired 19.9% in Falconbridge for C$2 bill. then increasing its share to 20.01%. Now, Inco's bid price is 21% higher.
Sources: companies' press releases

JVBG

October 20, 2005, 09:56:11
Market Overview, September 16-30
    Cobalt Prices
In the second half of September the Co prices resumed their decline after a short period of strong prices in the first fortnight of the month. The price for 99.8% Co fell by over US$1 kg, from US$35.9 kg to US$34.8 kg, while 99.3% Co was traded at US$30.6 kg, US$0.6 kg lower compared to US$31.2 kg.
Industrial News
Phelps Dodge enters DRC.
American Phelps Dodge acquired 70% in Tenke Fungurume, the Congolese Cu-Co project. The remaining 30% share belongs to the Canadian explorer Tenke Mining. Tenke Fungurume resources include 574 Mt of ore subject to open mining with Cu and Co contents of 3.5% and 0.27% respectively.
Based on the preliminary feasibility study fulfilled by SNC-Lavali (Canadian engineering company) it is expected to mine 85 Mt of oxide ore during 15 years; plans also include construction of a plant capable to produce 100,000 t Cu and 8,000 t Co annually. We think the project may take a leading position among the low cost Cu-producing operations.
It remains unclear yet when the final feasibility study is completed. Nor is the date of commissioning known.
For more than 10 years DRC has been at civil war. So, to speak about the terms and chances of the project realization is out of the question.
Cu-Co project in Australia
The Chinese investment company Shanghai Shenxin Investment signed a memorandum of understanding with the Australian research company Havilah Resources according to which Shanghai Shenxin receives 10% in Mutooroo, the Cu-Co deposit provided that the company will invest A$5 M (A$3.8 M) in the feasibility study and pay 2 million Australian dollars to Havilah Resources to carry out geological survey. If Shanghai Shenxin launches the project in a commercial scale its share will grow to 50%. Shanghai Shenxin Investment will make a decision about the future involvement in the project when the feasibility study is completed.
The deposit's resources are preliminarily estimated at 8.4 Mt ore containing 1.9% Cu and 0.2% Co suitable for open pit mining. There are plans to construct a mine with throughput of nearly 1 Mt ore per year and capacity of 1-2 kt Co and 8-15 t Cu in concentrate per year.

JVBG

October 20, 2005, 09:48:39
Market Overview, September 16-30
    PGM Prices
The price for platinum nearly touched US$30 g by the end of September compared with US$29.5 g seen in the mid-month, with palladium prices went up to US$6.2 g, from US$6.0 g. On the whole, the Pt price in September 2005 averaged at US$29.4 g, up from US$28.9 g in the previous month. The prices growth was mainly fueled by decline in Anglo Platinum' scheduled production.
Industrial News
Mimosa undertakes further expansion.
Australia's Aquarius Platinum and South African Implats arrived at decision to increase the capacity of the Mimosa mine (Zimbabwe) from 4.2 to 5.2 t PGM in concentrate per year (or up to 2.7 t/y Pt). For that, it is planned to expand processing throughput from 120 to 150 kt/month of ore with feed planned to come from the South Hill orebody. Capital costs are estimated at US$14 M. The works will commence in October 2005 and complete in May 2006 with the designed capacity planned to be reached in June 2006. The expansion will not have any impact on the mine's current production rate. Note that it is the forth expansion of the Mimosa mine.
Anglo Platinum reduces its production.
According to South Africa's Anglo Platinum, the accident occurred on Sept. 7, 2005 at the Polokwane Smelter (SA) will lead to a 5.8% decline in Pt output in the current year (from 80.9 to 76.2 t). Earlier Anglo Platinum stated that the accident would not cause any reductions in PGM output. Though, the company had to reconsider its plans on September 20.

JVBG

October 20, 2005, 09:43:00
Market Overview, September 16-30
    Copper prices
Cash copper prices at the LME grew from US$3,725 t to US$3,950 t with the LME stocks rising to 83.3 kt from 81.3 kt. Cumulative exchange Cu stocks (LME, Comex, Shanghai Exchange) reduced by 11 kt, from 131 kt to 120 kt. The LME average cash price for copper was fixed at US$3,858 t compared with US$3,798 t in August 2005 and US$2,892 t in September 2004.
The growth in Cu cash prices (to nearly US$4,000 t) was mainly due to a threatening strike in Falconbridge's Kidd Greek, where the 3-year labor contract expired on September 30. In 2005, Kidd Greek is scheduled to produce 130,000 t Cu.
Industrial News
Tintaya increases output to designed capacity.
BHP-Billiton's Tintaya mine in Peru is scheduled to produce 90,000 t Cu in concentrate and 38,000 t cathode Cu in 2005 despite a one-month interruption. The mine did not work from May 25 to June 20 because of the protests of local people demanding BHP-Billiton to enhance investments in the mine's region from US$1.5M to US$20M annually. The previous US$1.5M-per-year investment contract was signed only two years ago.
In 2004, Tintaya produced 82,000 t of copper in concentrate and 36,000 t of cathode copper (SX-EW).
Farmers' protests not to affect Monterrico Metals' plans.
According to Monterrico Metals (the UK), protests of farmers in Peru will not affect the future of the Rio Blanco project. In summer 2005, the farmers living in the region of the Rio Blanco deposit went on strike demanding to close the project concerning about potential soil and water pollution caused by the mine's future operation. The company is planning to complete the feasibility study on the project which will include environmental impact assessment. The capital costs are preliminary estimated at about US$915 M. Monterrico Metals intends to start mining in Rio Blanco by late 2008. The mine is capable to produce 220,000 t Cu in concentrate and 2.5-3.0 kt Mo in concentrate annually. During laboratory tests, recoveries to concentrate amounted to 90% Cu and 50% Mo. The Rio Blanco orebody contains rhenium which is also planned to be sold by Monterrico Metals.
Outokumpu sold 16.1% in Boliden.
In September 2005, Outokumpu sold 46.7 M shares of Swedish Boliden for 180 M euro (US$218 M) to institutional investors. After the sale, Outokumpu's interest in Boliden was down to 31.9%. In late 2003, Boliden and Outokumpu swapped their assets. As a result, Boliden received a 100% share in Outokumpu's mining production plus smelters and refineries while Outokumpu got a 49% share in the new Boliden plus Boliden's unit producing Cu semi-products and the Contech engineering division.
Xstrata found concentrate for Mt Isa.
According to Swiss Xstrata, the Roseby deposit in Australia will become an ideal Cu concentrate source for the Mt Isa smelter also located in Australia as the reserves of Ernest Henry (Australia) are depleting in 2012-2013. The Roseby deposit belongs to Australian Universal Resources and is located some 100 km from Mt Isa.
It is planned to mine 7-10 Mt of ore annually and to produce 50,000-70,000 t/y Cu in concentrate and 0.6-0.7 t Au. So far, Xstrata owns 13.2% in Universal Resources. The share will grow to 51% provided the company will spend US$10-15 M for geological survey and feasibility study. It is also planned to complete the feasibility study for the Roseby project (Australia) in Q1 2006. The deposit's resources are 60.6 Mt of ore containing 0.77% Cu.

JVBG

October 20, 2005, 09:34:57
Market Overview, September 16-30
    Nickel Prices
In the second half of September cash Ni prices at the LME dropped to their 2005 minimum of US$13,410 t (on September 28). Last time so 'low' prices were seen in December 2004. Note that it was for the first time that 3-month Ni prices at the LME exceeded the cash ones by US$100 t. As a result, the LME Ni cash prices in September amounted to US$14,228 t compared with US$14,893 t in August 2005 or US$13,277 t in September this year.
Ni stocks at LME continued their growth within September 16-30, up by 2.4 kt, from 10.8 kt to 13.2 kt. In the first half of September the metal stocks grew only by 1.4 kt.
Industrial News
Capital cost went up by 28% in Ravensthorpe.
According to BHP-Billiton (Australia-Great Britain), capital cost in Ravensthorpe, Australia will grow by 28%, from US$1.4 to 1.8 bill. Construction works in Ravensthorpe now require US$1.34 bill., up from US$1.05 bill. About US$460M will be spent for the Yabulu expansion, the earlier sum was US$350 M. Among the main reasons of higher capital costs are increased prices for consumables (by US$132M), higher contractors' costs (by US$108M), strengthened Australian dollar (by US$88M) and the growth in constructors' wages (by 28%, or US$72M).
Ravensthorpe is planned to produce up to 45,000 t/y Ni and 1,500 t/y Co in mixed Ni-Co hydroxides using the HPAL technology for about 25 years. The deposit's proved reserves suitable for open mining total 125 Mt of ore containing 0.73% Ni and 0.032% Co.
Hydroxides are to be transported to BHP-Billiton's Yabulu refinery which plans to increase capacity from 32 to 77 kt/y of metallic Ni based on the feed from Ravensthorpe. Despite the higher costs the commissioning of Ravensthorpe was not transferred. Production of mixed hydroxides will start in 2Q 2007 with first metallic Ni from Ravensthorpe's feed is expected in 3Q 2007. The operation will reach its design capacity by the second half of 2008.
Bulk of stainless slab capacity may achieve 7.8 Mt by 2010.
According to International Stainless Steel Forum, one may expect a 7.8 Mt bulk in stainless slab capacities by 2010, compared to excessive 3.5 Mt in 2004 and 4 Mt in 2005 mainly due to ambitious plans of the companies to construct new stainless steel plants in the Asian region, primarily, in China.
CVRD made C$790 M offer to Canico Resources.
Brazilian CVRD offered C$790 M (about US$670 M) or C$17.5 per share to Canada's Canico Resources, 29% higher than the average weighted value of the company in a bid announced 30 trading days earlier.
Meanwhile Inco, the largest Canico Resources' holder, says the price is too low for the company. On September 30, Canico Resources' shares were rated at C$19.9 per share.
Canico possesses the Onca-Puma laterite project in Brazil. In August 2005, the company completed the feasibility study according to which capital costs for Stage 1 (one furnace, 1.28 Mt/y ore) were estimated at US$762 M. The designed output is 30,000 t/y Ni in ferronickel. Production is scheduled to start in 2008.
Inco produces first concentrate in Voisey's Bay.
On September 15, Inco announced start of production of Ni sulphide concentrate from Voisey's Bay (Canada). The product will feed Inco' smelters in Ontario and Manitoba. The first concentrate supplies are scheduled for November 2005. Voisey's Bay production plan for 2006 includes 50,000 t of Ni in concentrate, nearly the designed capacity. In the forthcoming years, the company intends to enhance production to 60,000 t/y Ni in concentrate owing to the mining of richer ore.

JVBG

August 26, 2005, 11:36:09
Market Overview, August 1-15
    PGM
The prices for platinum varied within the narrow range of US$28.9-29.4 g in the first two weeks of August with their coming back to the Aug. 1 values of US$29.1 g at the end of the period. The Pd prices slightly decreased from US$6.2 g (Aug.1) to US$5.9 g (Aug. 15) during the same time.
Industrial News
Zimbabwe government follows South Africa
. In August 2005, Zimbabwe government submitted a draft law (to the Parliament), according to which foreign metallurgical companies must sell part of their mining and metallurgical production assets located in Zimbabwe to local black empowerments. In the next two years, the share of local black investors shall come to 20% with the consequent growth to 25% in 7 years and to 30% in 10 years. It is not clear, how the investors will manage to get money as the country has been in economic crisis for already 25 years with famine threatening to break out in the nearest time. More likely, foreign investors will have to give the shares free or to sell them to local 'investors' on very preferential terms.
Anglo Platinum and Xstrata founded JV.
South African Anglo Platinum and Swiss Xstrata founded Mototolo JV to develop the PGM deposit Thorncliffe Farm in Bushweld, South Africa. It is planned to construct a mine and processing plant. The capacity of the project is 4.1 t/y Pt and 2.5 t/y Pd in concentrate. Capital costs are estimated at SAR1.35 bill (US$200 M). It is planned to mine 200,000 t/a ore containing 3.74 g/t PGM within the period of 20 years. Construction works are scheduled to start in Q3 2005 with first concentrate expected in Q4 2006 and full capacity in Q3 2007. All produced concentrate is likely to be processed by Anglo Platinum.

JVBG

August 26, 2005, 11:31:37
Market Overview, August 1-15
    Cobalt
The Co prices continued growing in the 1st half of August after lending to their minimums in June-July 2005. In the first fortnight of August, prices for 99.8% Co went up by more than US$3.5 kg to US$35.3 kg, for 99.3% Co to US$30.8 kg, by nearly US$2 kg.
Industrial News
Umicore closes Co refinery in South Africa.
Belgian Umicore plans to close its cobalt refinery Roodepoort in South Africa as part of the optimization of Co business structure. The company intends to sell the plant to a third-party company if any is found. The plans also include capacity doubling at the Co refinery Yi Hao (China). Totally, the steps will increase Umicore's combined capacity from 3.5 to 5 kt/a Co.

JVBG

August 26, 2005, 11:17:13
Market Overview, August 1-15
    Copper
Copper prices fluctuated between US$3,692 and 3,801 t in the first fortnight of August. Even a substantial growth of Cu stocks at LME caused no decrease in prices. The LME copper stocks went up to 52.6 kt, by 21 kt, while accumulative stocks (LME, Comex, Shanghai exchange) showed a 25 kt growth, from 75 to 100 kt.
We think the strike at Asarco's operations being one of the reasons of extremely high copper prices together with the continued deficit of red metal on the market.
Note some decrease in backwardation from US$230 t in early month to US$180-190 t two weeks later.
Industrial News
Xstrata acquired 19.9% in Falconbridge.
Swiss Xstrata acquired 19.9% of Falconbridge's shares from Canadian Brascan for US$1.7 bill. According to CEO, it was only the first step of Xstrata on its way to get control over Falconbridge or even to take over the company. According to Canadian laws, when buying over 20% shares simultaneously, a company-purchaser shall offer remaining 80% shares to all the company's shareholders. However, the rate of Falconbridge's shares is currently very high which so far has turned Xstrata away from further steps.
After unsuccessful attempts of Xstrata to acquire Australian WMC Resources, this potential purchase looks very perspective. Like WMC Resources, Falconbridge has large copper and nickel assets. In addition, the company possesses Al and Zn operations (which is not the WMC's case).
Falconbridge and Noranda merged in February this year but the name of the company was preserved. In 2005, the new Falconbridge is planning to mine 496,000 t and produce 551,000 t of refined copper; Xstrata will produce 176,000 t of copper in concentrate and 238,000 t of refined Cu.
Copper production grows in China.
In the first 7 months 2005, the refined Cu production in China grew by 18%, to 1.4 Mt compared with the same period of the previous year. A rise in refined copper production in the country is resulted from sharply increased Chinese import of Cu concentrates. In the 1st half 2005, Cu concentrates import to China went up by 49%, to 1,825 kt, as compared to the same period last year. Though, copper semiproducts growth was not so substantial. Within January-July 2005, Chinese Cu semiproducts output increased by 9% from the same period 2004, to 2.76 Mt.
TC/RC on cash deals continue declining.
In the 1st half of August, TC/RC continued declining due to the growth in demand for Cu smelters' copper concentrates. In August, several Chinese copper smelters concluded contracts with immediate supply of Cu concentrates at TC/RC US$136-138 t and US$0.3 kg compared to US$200 t and US$0.44 kg in May 2005.
Jiangxi Copper plans to expand Cu capacity by 75%.
Jiangxi Copper, the largest Chinese Cu producer, plans to increase Cu output to 700 kt/y by 2009, from 400 kt/y scheduled to produce in 2005.
Jiangxi is going to spend over US$1.2 bill for capacity expansion and acquisitions of new mines outside the country to secure feed materials.
Asarco's operations still on strike.
About 1500 employees working at American Asarco's copper operations are still on strike started on July 1, 2005 when members of United Steelworkers failed to agree with the company's management on terms of a new labour contract. Asarco produced 15,000 t Cu in 2004 with 180,000 t scheduled to produce in 2005. However, this is due to the strike that the plans will hardly be realized.

JVBG

August 26, 2005, 11:02:04
Market Overview, August 1-15
    Nickel
The first two weeks of August saw growth in Ni prices by nearly US$1,500 t, from US$14,110 to 15,500 t in spite of increased Ni stocks at LME to 8.1 kt, from 7.1 kt. We think, it is due to speculative metal purchases and fund activities that the Ni prices have gone up as no positive news came to the market within the period. Quite the contrary, majority of stainless steel producers reported a high level of finish product stocks, low demand and plans to reduce stainless steel output. In addition, INSG expressed its view on the bulk in Ni market in the first six months 2005.
Industrial News
Ni market was near balance in H1 2005, according to INSG estimates.
The Ni market experienced a slight bulk of 10,000 t in the first half 2005, according to Sven Tollin, head of Statistics Department at International Nickel Study Group. Total Ni consumption in the world grew merely by 1%, whereas output increased by 3% in H1 2005. Swen Tollin expects decrease in Ni consumption in Q3 2005 mainly due to the reduction in stainless output, though he could give no exact data. INSG expects the whole bulk in the market is likely to reach 50 kt in 2005. Among the reasons of oversupply are drop in primary Ni consumption in the stainless sector and growing scrap supplies. In April 2005, INSG predicted the metal market would come to balance in 2005.
Sumitomo acquired 25% in Ambatovy.
Sumitomo acquired 25% in the Ni laterite project Ambatovy, Madagascar. Nowadays, Canadian Dynatec and South African Implats own 37.5% each in the project, a 25% share belongs to Sumitomo. According to the feasibility study completed in late February 2005, capital costs of Ambatovy are estimated at US$2.25 bill, provided a US$330 M refinery will be constructed on Madagascar. The project is capable to produce 60 kt/y Ni and 5.6 kt/y Co. Cash operating costs after Co credits (US$22 kg) amount to less than US$1.5 kg Ni. Production is planned to commence by late 2008 with the mine life of 27 years. Proved and probable ore reserves subject to open-pit mining are 125 Mt containing 1.04% Ni and 0.099% Co.
In our opinion, the refinery is most unlikely to be constructed on Madagascar after Implats' and Sumitomo's acquisitions as the companies bought the shares to provide feed for their own nickel refineries (Implats' Springs in South Africa and Sumitomo's Niihama in Japan) planning capacity expansions.
Niihama producing 45,000 t/y Ni intends to increase the capacity to 60,000 t/y due to the expected growth in feed supplies.
By 2009, Sumitomo may produce over 55 kt of nickel in intermediate products (high-grade matte, hydroxide and mixed sulfides) with about 12.5 kt Ni in hydroxide per year from Goro (New Caledonia), 18,000 t/y Ni in high-grade matte from PT Inco (Indonesia), 15,000 t/y Ni in mixed sulphides from Ambatovy and 10,000 t/y Ni in mixed sulphides from Rio Tuba (Philippines).
Canico Resources completed feasibility study.
In August 2005, Canadian Canico Resources completed the feasibility study on Onca-Puma, the laterite project in Brazil. Capital costs for Stage 1 (first furnace, 1.28 Mt/y ore) are estimated at US$762 M. Stage 2 (second furnace, mining to increase to 2.56 Mt/y ore) is planned to commence two years after the first furnace startup with the capital cost of US$352 M. The Stage 1 capacity is expected at 30,000 t/y Ni in ferronickel (25% Ni content). Costs are estimated at US$3.5 kg Ni. Following startup of Furnace 2, Ni-in-FeNi production will reach 53 kt in the 6-7th year of operation with the consequent gradual decline caused by decrease in ore grade. The average Ni output for the first 20 years of operation will amount about 40,000 t Ni in FeNi per annum with operation life of 34 years. Measured and identified resources of Onca-Puma deposits are estimated at 98.6 Mt of ore containing 1.7% Ni (1% Ni in cut). The operation is planned to come on stream in early 2008.

JVBG

March 4, 2005, 13:40:45
Market Overview, January
    Prices for platinum and palladium
The average prices for platinum and palladium were at US$27.6 g and US$6.0 g respectively in January 2005, slightly up by US$0.8 g for Pt and US$0.3 for Pd.
The 2004 average prices totaled US$27.2 g Pt and US$7.4 g Pd.
According to 18 international analytical agencies, the 2005 average prices are predicted at US$26.2 g and US$6.5 g for platinum and palladium respectively.
PGM News
North American Palladium increases PGM output.
In 2004, Canada's North American Palladium produced 9.6 t Pd, 7% more compared to 2003 (9.0 t Pd). In 4Q 2004, the company produced only 2.5 t Pd, 21% less compared to the same 2003 period due to lower grade of ore. North American Platinum is planning to produce about 2.5 t Pd in 1Q 2005 with likely increase in output as late as at the end of the year after the commissioning of a new underground mine.
Lonmin and Inco formed joint venture for PGM explorations.
Britain's Lonmin, the third platinum producer in the West World, and Canadian Inco, the largest West World's Ni producer, signed an agreement Jan. 19 to form a joint venture to carry out explorations in Sudbury, Canada. According to the agreement, Lonmin is entitled to explore in the area of six Inco's mines and going to spend US$10 M for explorations within 3 years.
Furnace ?1 resumed operating in Lonmin.
In late January, Lonmin announced resumption of furnace ?1 operation after its shutdown in last November caused by an accident. According to Metal Bulletin, the maintenance cost US$4-6 M. Note, that this is the second failure of furnace ?1 in the last two years. The first, more serious accident occurred in December 2002. The maintenance lasted about a year and was completed by December 2003.
ARM intends to sixfold increase PGM output by 2008.
African Rainbow Minerals (ARM), a South African black empowers company, intends to sixfold increase PGM output from 3.1 t in 2004 to 18.6 t in 2008. Today, ARM owns 55% in the Two Rivers PGM mine (the remaining 45% share belongs to Impala), 50% in the Modikwa mine (other 50% owned by Anglo Platinum), and the Nkomati Ni/PGM mine. The Modikwa's capacity is 5 t/y of refined platinum with Two Rivers capable to produce 3.7 t/y though the date of Two Rivers' commissioning is still unknown.
Platinum market to be nearly balanced in future.
According to Impala (South Africa), the platinum market will be nearly balanced in the coming 4-5 years with a 3 t bulk of supply/deficit and 2005 platinum prices fluctuating between US$26.5-28.1 g. Analysts at the British Virtual Metals say the range of platinum prices in 2005 will extend to US$24.5-32.2 g with average annual prices of US$26.8 g.

JVBG

March 4, 2005, 11:33:31
Market Overview, January
    Cobalt prices
In January 2005, cobalt prices remained unchanged with some corrections at the end of January. Prices for 99.8% Co appeared to slightly decrease as compared to the early month while those for 99.3% Co were up.
The prices for 99.8% Co and 99.3% Co averaged US$53.3 kg and US$50.2 kg respectively in 2004.
According to AME's analysts forecasts made in November 2004 the average cobalt price in 2005 is going to considerably lower to US$39.7 kg.
Cobalt News
Falconbridge forecasts supply bulk to reduce in 2005.
According to the latest Falconbridge's forecast (January 2005), a bulk of cobalt supply in 2005 will reduce to 60 t compared with 435 t a year earlier. The decrease will result from a significant growth in cobalt demand in West World and China. Rates of Co supply growth will remain behind the demand.
Metorex plans to become a major Co producer.
In October 2004, Metorex increased its share in Congolese Ruashi Mining to 68%. Ruashi Mining owns rights to mine Ruashi and Etoile, as well as rich Cu-Co orebody Ruashi. The Ruashi project will be implemented in 2 stages. For Stage 1, the feasibility study has been carried out in cooperation with Bateman and GRD Minproc. The reserves of stockpiled oxide ore are estimated at 3.2 Mt containing 1.9% Cu and 0.6% Co. Cu/Co concentrate will be produced in Kongo with further refining at the Kabwe plant, Zambia, also owned by Metorex. Design capacity for Stage I should amount in 8-9 kt/y of metallic copper and 1,000 kt/y of cobalt in salt. Total capital costs for Stage I including the feasibility study for Stage II are estimated at US$40 M. The production will come on stream in 2006.
Stage II includes open mining and processing of Ruashi's rich oxide ore via leaching (31.9 Mt at 3.5% Cu and 0.35% Co). It is supposed to construct SX/EW capacities in Ruashi with metallic copper and cobalt production. The Ruashi plant is considered feasible since the electric power costs USc0.6 kW in DRC and USc3.2kW in Zambia. Annual production for Stage II will approximately total 43,000 t/y Cu and 3,500 t/y Co. Capital costs for Stage II are estimated at US$110 M.
OMG stopped Big Hill for planned maintenance.
American OMG announced January 18 the planned stop of the Big Hill smelter (DRC) for 2-3 month maintenance. The plant is capable to produce 5000 t/y Co, though recently it operated at 70% capacity (300 t/month). The 3 month stop would lead to losses of about 1,000 t Co.
Jim Mooney left OMG.
Jim Mooney left OMG (Outokumpu Mooney Group) January 18 as CEO. Mooney founded the company in 1991 and since then held a position of CEO within 16 years. The company faced problems in 2002 when they had to write-off US$100 M due to depressed cobalt prices and the reserves devaluation. The 2003-2004 financial results were to be released with major delays on October 31, 2004 but the date was further delayed. Currently, the recent years results of OMG are being audited.
DLA failed to sell cobalt.
In late January 2005, 78.8 t 99.9% Co in cathodes and 83.8 t 99.4% Co in granules and rondels were put on sale by the DLA. On February 1, the DLA (Defense Logistics Agency) stated no bids for cobalt were made.

JVBG

March 3, 2005, 14:59:07
Market Overview, January
     Copper prices
The LME cash prices for copper averaged at US$3,170 t in January 2005. Cumulative exchange stocks (LME, Comex, Shanghai) were fixed at 119,000 t in late January with 45,700 t accounted for LME which is down from 129,000 t and 49,400 t respectively at the very beginning of the year. The LME copper prices fluctuated between US$3,072 t (Jan. 5) and US$3,275 t (Jan. 31).
Late in the month backwardation went up to US$191 t from US$100 t seen in early January; such growth is typical of the metal deficit at a moment.
Cash copper prices at LME averaged at US$2,870 t in 2004. According to 12 foreign analytical agencies, the 2005 average price is predicted at US$2,753 t.
Industrial News
Codelco to invest US$1.9 bill. in 2005.
Chile's Codelco is planning to invest US$1.9 bill. in accordance with the program of copper production increase to 2.2 Mt by 2010, compared with 1.75 Mt in 2004. In 2004, as one of the stages of the program Codelco completed capacity expansion at El Teniente from 350 to 480 kt/y of Cu in concentrate. Besides, the company intends to invest US$900 M in construction of the new mine Mansa Mina with capacity of 188 kt/y Cu in concentrate. Due to the fact that the mine will be introduced in Codelco Norte, the division's production will grow to 1.1 Mt/y Cu. In addition, it is planned to expand the Vantanas smelter-refinery complex from 400 to 800 kt/a Cu. A year ago, the complex was acquired by Codelco for US$400 M from Chilean Enami.
Copper production increases in Zambia.
Copper production is increasing in Zambia. In 2004, the country produced 400,000 t Cu, 14% up from 2003. The production is planned to increase to 550 kt Cu in 2005. The final target of the Zambian government is to restore the production to the 1970-s levels when the country produced 750,000 t Cu.
TC/RC continued rising.
Treatment and refining costs (TC/RC) on cash deals continued rising in January 2005. Early in the month, a Chinese copper smelter signed a contract to supply 10,000 t of Cu concentrates at TC/RC of US$140 t/US$0.31 kg, slightly up from US$135 t/US$0.30 kg in last December. Having reached the historical minimum of US$0 t and US$0 kg in April with circulating rumors of negative TC/RC, the costs started growing in May 2004. Growth in copper concentrates supplies and force majeure faced by a number of companies aggravated by the absence of some major smelting companies in the market led to the 9-year peaks in the 2nd half of 2004. (According to analysts at Brook Hunt, copper-in-concentrate consumption dropped by 500,000 t due to accidents and force majeure situations.)
Noranda likely to construct new copper mine in Argentina.
Canadian Noranda should make a decision in 2005 to construct the new copper mine El Pachon in Argentina, the company stated in January. The mine is planned to produce 200,000 t/y Cu in concentrate and 3,000 t/y Mo in concentrate during 20 years with the capital cost of US$1.15 bill. The El Pachon deposit's reserves are estimated at 724 Mt ore (0.62% Cu and 0.015% Mo) suitable for open-pit mining.
Olympic Dam increases copper output.
WMC Resources' mining and metallurgical complex Olympic Dam fixed its record 224,800 t Cu in 2004 (compared with 160,000 t a year ago) after capacity expansion was completed by end-2003. In 2005 it is planned to produce 220-230,000 t Cu. Now, the company is considering plans to further increase Olympic Dam's capacity from 250,000 t/y to 500,000 t/y Cu. To realize that, the company is going to raise its mill's throughput to 40 Mt/y ore and start opencast mining in addition to underground operations. The feasibility study for Olympic Dam's expansion will be completed by early 2006, with expansion costs preliminarily estimated at about AU$6 bill (US$4.6 bill.).
China increases copper output responding domestic consumption.
China is maximizing copper output due to rapidly growing domestic consumption of the metal. The country is suffering shortage of domestic feed and has to import large tonnages of copper concentrates and scrap. According to Chinese customs statistics, the country imported 3.1 Mt of copper scrap in the first ten months 2004, including 42% from Japan and 17% from the USA. The China Regeneration Metals Institute reports the Chinese import of copper scrap may exceed 3.6 Mt in the 12 months of 2004. According to AME's data, the 2004 refined copper production in China amounted to 2 Mt compared with 1.8 Mt a year earlier. In 2005, the output is likely to achieve 2.2 Mt of refined copper. According to the largest Chinese trading company China Minmetals, the country's copper production capacity will increase by 500,000 t.
Jinchuan produced 120,000 t Cu in 2004 with plans to achieve 150,000-170,000 t in 2005 and 250,000 t in 2006.
Jiangxi Copper intends to produce 450,000 t Cu in 2005 compared with 400,000 t in 2004 while Jilong Copper is increasing Cu production capacity from 150,000 t/y to 210,000 t/y by May 2005.
Tongling completed mine expansion.
Tongling Nonferrous Co, China completed expansion of the Dongguashan mine and launched concentrate production in October 2004. Design capacity of the mine is 34,000 t/y of concentrate. In 2005, it is planned to produce 18,000 t. The mine is located near Shizashan, another company's mine producing about 10,000 t/y. In 2004, Tongling should produce 380,000 t of cathode copper. Commissioning of Dongguashan will slacken in a way the company's dependence on concentrate imports.
Phelps Dodge reached record profits.
American Phelps Dodge, the second largest world Cu producer, registered US$1.05 bill profits in 2004 compared to US$95 M last year. Copper production in 2004 remained almost at the last year level (1.14 Mt in 2004 compared with 1.12 Mt in 2003). The growth in profits is mainly accounted for buoyant metal prices and increasing moly production (to 24,000 t), the 2005 production plan being 1.22 Mt Cu.
Jiangxi Copper to construct copper rolled wire plant.
Jiangxi Copper, the largest Chinese Cu producer, made a decision to construct a new Cu rolled wire plant with capacity of 220,000 t/y. Production is planned to come on stream as early as in mid-2006. Note, that the metal consumption in China continues growing fueled by rise in commercial production. Actually, a half of copper consumption in China accounts for power sector where the metal is mainly consumed as wire.

JVBG

March 3, 2005, 14:40:00
Market Overview, January
    Nickel Prices
The average price for nickel was at US$14,505 t in January 2005, with LME stocks reduced to 17,000 t in the late month compared to 20,900 t seen early in the year. The prices fluctuated from their lowest US$14,100 t on Jan. 21, to maximum US$15,000 t on Jan. 12.
Cash nickel prices at LME totaled US$13,852 t in 2004. According to twelve foreign analytical agencies, the 2005 metal prices are predicted to touch US$13,040 t.
Industrial News
Second attempt to acquire WMC.
Swiss mining and metallurgical company Xstrata made the second bid for Australian WMC Resources' shareholders to purchase all company's shares for A$7.2 per share. The first bid for WMC was announced in November 2004 when Xstrata offered A$6.35 per share (US$5.7 bill.). However, the board recommended their shareholders to turn down the proposal since according to them the company's value was higher. The independent auditor firm Grant Samuel estimates the fair price of WMC' shares at A$7.17-8.24.
Titan closed Armstrong mine.
Australian Titan Resources had to write off A$13.7 M due to premature shutdown of the Armstrong mine. According to the long-term agreement, mined ore from the sulphide mine was transferred to WMC Resources' Kambalda mill for toll processing. The low grade of Armstrong's ore impoverished recoveries and grade of produced nickel concentrate. As a result, WMC Resources rejected to process the material. Attempts of Titan Resources to reach the agreement with a Chinese company were no success. The company had previously planned to produce 128 kt of opencast ore containing 1.78% Ni and 339 kt of underground ore at 2.25% Ni.
Mincor to open its forth Ni mine.
In early January 2004, Australian Mincor announced commissioning of the 4th Ni mine, Marines, located in Kambalda, Australia, the second mine launched by the company for Ni ore mining in the last half of the year. In January it is planned to mine 1000 t of ore. All the mined ore is processed on toll at the Kambalda mill and sold to WMC based on the long-term agreement. Mincor is successively increasing Ni production with 8.7 kt Ni produced in the 2004 financial year (July 1, 2003 - June 30 - June 30, 2004), and 11,000 t Ni and 15,000 t Ni planned to produce in 2005 and 2006 respectively.
Sherlock Bay Nickel acquires bioleaching technology.
In January 2005, Australia's Sherlock Bay Nickel signed a contract with Titan Resources for supply of bioleaching technology to process sulfide nickel ore at the Sherlock Bay mine. The mine is most likely to be the first Ni operation using the bioleaching process.
In September 2004, Sherlock Bay Nickel, Australia completed the feasibility study for the project. The capital costs amount to US$22.7 M. It is planned to produce 2 Mt of opencast ore to process via bioleaching within 4 years. Mining is expected to start in mid-2005. Cash operating costs after by-product credits are preliminarily estimated at US$2.8 kg Ni. Time of recovery to hydroxide totals 37 days with 83.5% recovery rate and the through recovery value of about 75%. The mine is capable to produce 8,850 t/y Ni in hydroxide. Measured resources of the deposit are 8 Mt ore containing 0.53% Ni, 0.10% Cu, 0.01% Co.
First supplies announced from Coral Bay.
In January 2005, Sumitomo Metal Mining, the major shareholder of Philippine JV Coral Bay Nickel, announced first supplies of mixed Ni-Co sulfides from Coral Bay to the company's Niihama refinery, Japan.
Note, that Coral Bay Nickel's capacity is 10,000 t/y Ni and 700 t/y Co in mixed sulfides. The plant processes poor laterite ore from Rio Tuba (Palawan, Philippines) using pressure sulphuric acid leaching. Ore reserves total nearly 16 Mt.
Baosteel and Taiyuan acquired 20% in Jinchuan.
In January 2005, Baosteel and Taiyuan, the leading Chinese stainless steel producers, each acquired a 10% share in Jinchuan. The cost of the deal is US$118 M. In our opinion, the stainless producers are trying to ensure regular nickel supplies for stainless steel production. Quite a similar behavior is seen among the Japanese copper smelters buying minor shares in copper mines to provide themselves with feed supplies.
Jinchuan is the largest Ni producer in China accounting for nearly 95% of Ni output. In 2004, the company produced 73,000 t Ni with 90,000 t of the metal planned to produce in 2005.
Dynatec increased its share in Ambatovy to 100%.
Canadian Dynatec purchased a 47% share in the Ni laterite project Ambatovy, Madagascar, from Phelps Dodge for 20.9 M company's shares, the company announced January 31. Nowadays, Dynatec has a 100% share in the project while Phelps Dodge holds 9.99% of Dynatec' shares.
The Ambatovy project plans to employ the process of pressure sulphuric acid leaching. Trials performed at the mini-plant in January and March 2004 showed very successful results. The Co and Ni recovery rates totaled 96% with the acid consumption of about 220 kg/t ore. The bankable feasibility study for Ambatovy was completed neither by mid-2004, nor by the end of the year as planned earlier, nor was it over at the beginning of 2005. Now, the feasibility study is scheduled to complete within Q1 2005. According to the company, production will start in mid-2007 though the commissioning will be possibly delayed. The announced project capacity is 60,000 t/y of Ni metal and 5,000 t/y of Co metal within 20 operating years. The Ambatovy's resources total 190 Mt ore containing 1.1% Ni and 0.1% Co.

JVBG

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