Battery Metals

Sierra Metals is one step closer to expanding its Yauricocha mine in Peru.

This week, the miner reported the approval of the Environmental Impact Assessment Study for the expansion of the tailings deposition facility at the polymetallic mine.

The positive answer follows an initial negative issued in December 2016 by Peru’s National Environmental Certification Service to Sierra’s subsidiary Sociedad Minera Corona. The miners were given 15 business days to provide a re-evaluation to the authorities to initiate a review process. The revision resulted in the recent satisfactory outcome.

“Having now received approval for the EIA study at Yauricocha, we can now proceed to obtain a construction permit for the next phase of the tailings deposition facility, and to commence planning for an expanded waste rock facility,” Igor Gonzales, President and CEO of Sierra Metals, said in a media statement.

Gonzalez also said that once the steps are completed, the company will be able to submit an ITS document, which is required for any potential expansion of the mine. The plan is to grow output by 20% to 3,600 t/d.

Yauricocha is an underground operation hosted on an 18,000-hectare land package located in the Yauyos Province of the Lima Department in the central coast of the South American country.

Sierra Metals owns 82% of Sociedad Minera Corona which, in turn, owns 100% of the Yauricocha mine.

The site has been in continuous operation since 1948, initially under the direction of Cerro de Pasco. The mined ore is hoisted through the Mascota production shaft to the 720 haulage level and then transported by rail through the Klepetko tunnel to the Chumpe processing plant.

According to Sierra, the daily mining rate using sublevel block caving and cut-and-fill is approximately 3,000 tonnes, while the Chumpe plant has a daily capacity of 3,000 tonnes of complex ores carrying zinc, lead, copper, silver and gold values.

Yauricocha’s reserves are, in the proven category, 1.8 million tonnes and a little over 7 million tonnes in the probable category.

The National Graphene Institute (NGI) at The University of Manchester has signed an 18 month research project with LifeSaver, a UK-based manufacturer of portable and reusable water filtration systems.

The project will focus on developing graphene technology that can be used for enhanced water filtration, with the goal of creating a proprietary and patented, cutting-edge product capable of eliminating an even wider range of hazardous contaminants than currently removed by its existing high performance ultra-filtration process.

Graphene has emerged as a material with fantastic potential for water filtration and desalination in recent years, with researchers on graphene membranes at the NGI leading the way. Graphene was the first two-dimensional material ever discovered, it is also one of the strongest known natural materials in the world, while retaining high levels of flexibility, conductivity and filtration. By incorporating graphene into its existing market leading water purification technology, LifeSaver hopes to reduce the sieve size of its hollow fibre filtration membrane from the current 15 nanometers (which effectively removes bacteria, microbial cysts and viruses) to about 1-3 nanometers. At that size, LifeSaver products could remove a much wider range of contaminants, such as heavy metals, pesticides, certain chemicals and potentially even nuclear radiation, from drinking water supplies.

“Making a graphene-based portable water filter was our dream, and this collaboration with LifeSaver will enable that dream to be a reality sooner than later,” said Professor Rahul Nair, who will lead the project at The University of Manchester. “This is a great example of a collaborative project where we are trying to combine two independently developed technologies into one, to enhance the quality and availability of drinking water for those who need it most.”

Founded in the UK in 2007, LifeSaver came to life following back-to-back natural disasters: the Indian Ocean Tsunami and Hurricane Katrina to address the resulting need for access to clean drinking water. The first LifeSaver prototype was developed and became the world’s first portable water filter capable of removing the smallest known waterborne viruses. Since that time, LifeSaver has established itself as an effective and long-lasting solution to drinking water issues in the humanitarian sectors, and outdoor enthusiasts.

The University of Manchester is the home of graphene, a material that has captured the imagination of the world. Graphene@Manchester is an ongoing program of activity to ensure that Manchester and the UK play a leading international role in developing the revolutionary potential of graphene. At the heart of Graphene@Manchester is the National Graphene Institute and the Graphene Engineering Innovation Centre (GEIC), multi-million-pound facilities with a commitment to fostering strong industry-academic collaborations.

The price of copper declined for a fifth day in a row on Thursday despite trade data showing Chinese imports of the orange metal growing at a record-setting pace.

Copper for delivery in March hit a low of $2.7535 per pound ($6,070 a tonne) in early trading on the Comex market in New York, down more than 3% in a week.

China consumes half the world’s copper, and trade data released on Thursday showed the country’s copper imports were up sharply in January.

Shipments of unwrought copper came in at 479,000 tonnes last month, up 14% from December and nearly 9% from a year ago. At the current pace annual imports of refined copper are on course to top 2018’s record 5.3m tonnes.

Imports of copper concentrate surged 17% from a year ago to 1.9m tonnes last month. January cargoes were the second-highest monthly total on record and on an annualized basis concentrate imports could exceed 22m tonnes in 2019, beating the record set last year of 19.7m tonnes.

China put in place a complete ban on certain types of scrap copper imports at the start of 2019 on top of a 25% tariff on imports from the United States, one of its main suppliers, instituted in August.

Copper has declined by 17% from its June 2018 high over worries of a slowdown in China and the impact of a trade war with the US, but the longer term prospects for the metal remain rosy.

A panel of analysts polled by FocusEconomics sees copper averaging $6,500 a tonne in the final quarter of 2019, before rising to $6,824 a year later.

Copper rose from a two-week low on Wednesday due to signs of an easing in tensions in the U.S.-China trade conflict, but a lack of a firm resolution kept a lid on the tepid gains. Three-month copper on the London Metal Exchange (LME) ended 0.3 percent higher at $6,125 per tonne, its first rise in five sessions. “There is an element of optimism but the market is a bit more wait-and-see and seems a bit exhausted,” ETF Securities analyst Nitesh Shah said.

“If there is something more concrete from the trade talks – and not just moving timelines around, an actual agreement with a plan – then we might have something more firm from prices.”

TRADE TALKS: U.S. Treasury Secretary Steven Mnuchin said talks with China went well on Wednesday, as the world’s two largest economies try to iron out an agreement to resolve their trade dispute. On Tuesday, U.S. President Donald Trump said he could let the deadline for a trade agreement “slide for a little while”. If a trade deal cannot be reached by the deadline of March 1, U.S. tariffs on $200 billion worth of Chinese imports are scheduled to increase to 25 percent from 10 percent. STOCKS: On-warrant stocks of copper available to the market in LME-registered warehouses were at 74,750 tonnes, close to a 2005 low touched in October. “Copper demand is sufficiently strong to support prices at these levels, slightly above $6,100, but it’s not strong enough to push them further without any major broad-based metal-intensive stimulus in China,” Julius Baer analyst Carsten Menke said. FLOODS HIT ZINC: Floods in Australia’s Queensland state are set to disrupt the rail delivery of zinc exports to the northern port of Townsville, with the line likely to be out of action for at least a month, analysts said on Wednesday. Townsville port ships about 40 percent of Australia’s zinc production, equal to about 700,000 tonnes a year or 5 percent of global supply. ZINC SPREADS: LME zinc stocks are at their lowest since January 2008, but cash zinc was trading at a discount of $6.25 a tonne to the three-month price , down from a premium of $125 in early December, in a sign of weaker immediate demand. TIN: LME tin added 0.8 percent to $21,100 per tonne, after touching its highest since April 2018.

Metal prices have rallied since the beginning of the year — but the price rise has not been uniform. The average prices of copper and zinc rose 3-5 per cent; increase in the price of nickel, iron ore, and steel are in double-digits.

Analysts said the fundamentals in the metal segment are currently supporting a bullish trend. However, sentiments do not support a big rally, as buyers and investors are waiting to see how the apparent trade war between the US and China pan out.

Gnanasekar Thiagarajan, director, Commtrendz Research, said global incidents such as an iron ore mine accident in Brazil last month had caused supply disruptions and had led to the recent rally.

“Such reasons are, however, not sustainable and could fizzle out,” he added.

The dispute over tariffs between the US and China is keeping big buyers away. Some fundamentals, however, support the rally.

For instance, inventory levels in the London Metal Exchange are an important indicator. Commodities such as copper and lead are at a near-decade low. This reflects that demand is high and has led to the rally.

Big buyers, however, will clear only after the tariff war ends.

Sandeep Daga, director, Regsus Consulting, said, “The US-China trade dispute has tested the patience on both sides. Even if no solution is found till March 1, when the new US tariffs for Chinese goods comes into effect, there might be a tentative deal.”

Steel prices are rising along with relevant commodities such as iron ore for the past two-three months because of reports of China’s crackdown on polluting mills and Brazil’s mine accident.

Since the start of the year, prices of hot-rolled steel are up 10.5 per cent, while iron ore is up 22 per cent. Indian steel companies have also raised prices. This trend will last till supply remains in check.

Aluminium is a concern area for global producers as well because prices that went up last year because of US sanctions on Russian manufacturer Rusal is falling again after sanctions were lifted.

Now the price is about $1,850 per tonne, which is below the cost of production. This is the reason why China and other countries are dumping their material, especially aluminium scrap, in India.

Scrap duty in India is low. As a result, imported material is cheap. The government is not raising duties despite demand from industry because it might lead to a backlash in the World Trade Organization.

Nickel, iron ore, steel lead rally as metals gather steam in second half
Domestic companies are selling products in the export market. In the future, only a global price rally could soothe sentiments.

Aluminium prices, however, could rise this year itself, according to KarvY Consultant’s 2019 annual report. “Expected increase in production levels of automobile players in China and Japan” could be cause, says the report.

Copper prices have remained subdued.

Even refining charges, which is real income for Indian copper converters and smelters, are also falling, after they peaked in 2015 in line with global trends. The prices will improve only when copper prices rally.

In the near term, when prices rise, spot-refining changes will go up which companies will benefit depending upon their ratio of spot and contract prices. Since closure of Sterlite’s Tamil Nadu plant, India’s copper imports have increased.

Refining charges go up when copper ore production rises, requiring more smelting for conversation to primary copper.

China will be a major supporter of base metal rally once it is out of its slowdown blues. In the past 12 months China’s manufacturing index has been falling month after month. In a year, it fell from 51.6 to 48.3 in January 2019.

Daga said, “Investors have been sitting at the edge of their seats to get engaged with the markets. Pause in the US rate hike and Chinese stimulus have given them the ‘hope capital’ that they needed. They are merely waiting for the cloud of trade dispute to disperse before deploying their capital in cherry picking undervalued assets. In other words, any sign of a trade deal could bring a positive surprise to financial markets including commodities.”

Was it another false dawn for the nickel market?

Last week’s rally to a five-month high of $13,350 per tonne on the London Metal Exchange has gone into sharp reverse. Nickel was trading back at $12,385 on Tuesday.

The trigger for the price surge was concern that Brazilian producer Vale’s nickel operations would suffer some sort of knock-on effect from the devastating tailings collapse at the company’s Brumadinho iron ore mine.

Such fears have proved unfounded.

So far.

There may still be ramifications for Vale’s Onca Puma ferronickel operations in the state of Para.

But nickel’s ability to rally at all in the current gloomy macroeconomic environment is testament to continued investor interest in the metal’s potential demand boost from the electric vehicle (EV) revolution.

Even after the rapid descent from last week’s highs, nickel is still the best performer among the core LME metals pack. It is up 14 percent since the start of January, compared with zinc’s 10 percent gains.

THE VALE EFFECT

Although most analysts were quick to dismiss fears that Onca Puma would be impacted by the regulatory scrutiny surrounding all of Vale’s tailings dams in Brazil, nickel’s price reaction wasn’t irrational.

Onca Puma, which last year produced 25,000 tonnes of nickel in ferronickel, is itself the subject of a multi-year battle with environmental authorities in Brazil.

A Brazilian court last November ordered Vale to stop mining at Onca Puma and to pay damages to two indigenous tribes that live in the area.

The prosecutor-general’s office said Vale would not be allowed to resume mining until it meets certain environmental requirements and presents plans aimed at mitigating the impact of its operations on locals.

Vale rejects all claims that Onca Puma harms either the environment or the people living nearby and is appealing the court’s decision.

The exact status of operations is uncertain.

A similar order to stop mining was issued in 2015 for the same reasons as now. Back then, Vale maintained ferronickel production by treating stocks of ore.

This long-running dispute may yet come into even sharper regulatory focus if, as seems inevitable, the Brazilian authorities look for a step-change in Vale’s social and environmental impact on its home base.

Moreover, Brazil shows every sign of looking for a fundamental policy reset across the spectrum of its minerals resource sector.

Brazil’s National Mining Agency is talking about banning all tailings dams similar to that which collapsed at Brumadinho.

There are 88 of them, according to Eduardo Leão, a director at the agency.

Lacking any confirmation as to which dams may have to be removed or when, it’s impossible to say what the potential impact might be on other operators.

But it’s worth noting that Vale is not the only nickel producer in Brazil. Anglo American also operates two ferronickel plants with combined production of 42,000 tonnes in 2018.

There may yet be another nickel chapter to Vale’s dam tragedy.

ELECTRIC DREAMS

Lacking any concrete news about what if any impact the Brumadinho dam collapse might have on Onca Puma, the Vale effect on the nickel price has almost completely dissipated.

But nickel’s continued outperformance relative to other metals such as copper is testament that it hasn’t given up on its electric vehicle dreams.

It’s easy to understand why, given the constant drip-drip of nickel-positive news and commentary.

Nickel usage in lithium-ion batteries accounted for just 85,000 tonnes, or 4 percent of global demand, in 2018, according to Simon Moores, managing director of Benchmark Mineral Intelligence.

But demand from electric vehicle batteries “is set to grow by between 30-40 percent a year, making it the fastest growing battery raw material”, Moores told a U.S. Senate hearing on minerals dependency on Feb. 5.

Not only is nickel one of several existing key metallic inputs to EV batteries, but a shift towards high-nickel content in battery chemistry will accelerate usage exponentially.

The so-called NCM811 battery cell technology, comprising eight parts nickel to one part cobalt and one part manganese, is still in its formative years.

But, according to Moores, over 90 percent of new lithium-ion battery capacity plans to use such high-nickel chemistry.

This is the core of nickel’s electric bull narrative, one of a supply chain that is unprepared for a fundamental usage shift away from stainless steel to batteries.

A shift that will be compounded by the need for the “right sort” of high-grade nickel to meet battery-makers’ strict chemical requirements.

The story took a heavy knock towards the end of last year when China’s Tsingshan Group, already a nickel and stainless steel powerhouse in Indonesia, said it planned to build a plant to produce 50,000 tonnes per year of the “right sort” of nickel using a different processing route.

Initial shock has given way to scepticism that Tsingshan can deliver on such an ambitious target any time soon.

There is still an electric buzz in this market and one which, as last week’s mini rally showed, can easily be sparked into life.

CHINESE INVESTORS UNCONVINCED

Nickel has the largest speculative long positioning of any of the core LME-traded metals, according to LME broker Marex Spectron.

As of last Thursday, investors’ collective long position was relatively modest at 8 percent of open interest but still a stand-out relative to the almost complete lack of investor engagement in copper right now or the huge speculative short weighing on aluminium.

Investors’ enthusiasm in London, however, is not being matched in China.

Even though Chinese speculators have a history of trading nickel as a steel derivative, the Shanghai nickel contract shows no signs of spillover from the Dalian iron ore contract, which shot to record highs on Monday.

Indeed, Marex Spectron suggests a pick-up in Shanghai nickel open interest this week may reflect “signs of some speculative short selling”.

As of now, Chinese investors seem a lot more sceptical of the EV bull story for nickel than their Western counterparts.

But last week’s rally is a reminder that on the London market it doesn’t take much to rekindle the EV nickel fires.

They are still smouldering, awaiting the next spark.