Personal copy; not for onward transmission

Reliability is the point

Capral courted
for Kurri Kurri
The recent buoyancy in the aluminium tive side, a five-year alumina supply
market after a prolonged period of contract has been reached with Kaiser
depressed prices has done no harm, Aluminum & Chemical Corp., effective
whatsoever, to Capral Aluminium Ltd’s as from January 1, next year. Analysts
chances of selling its Kurri Kurri estimate the value of Kurri Kurri at
smelter in New South Wales. Capral about A$350 million. Capral has
(formed in 1994 following the decision appointed the investment bank ABN
by Canadian aluminium producer Amro to advise it on its corporate http://www.ensival-moret.com
Alcan to sell its 73.3%-owned restructuring, and for those parties
Australian division) intimated last interested in purchasing the smelter,
November that the smelter would be the company expects to provide a
sold when it announced plans to split its
smelting and downstream businesses
detailed memorandum on the opera-
tions later this month.
Inside
into separate operations (MJ, Capral has declined to name suitors
November 19, 1999, p.417). The sale but a number of big aluminium produc-
• Gold deposit survey (p.76)
decision was confirmed in Sydney this ers are believed to be in contention,
Tuesday when the Capral board including Alcoa Inc. of the US and • African issues (p.79)
announced that it was exploring the Pechiney of France. Both companies
possibility of a sale as part of a corpo- already have significant aluminium
rate restructuring plan, adding that it interests in Australia, although
• BHP hit by injunction (p.91)
had received expressions of interest in Pechiney is regarded as a less likely
Kurri Kurri from a number of potential buyer by analysts who suggest it might • PGM jockeying for
buyers. be more inclined to increase its existing position (p.94)
The 150,000 t/y capacity smelter 36% interest in the nearby 380,000 t/y
located in the Hunter Valley was ear- capacity Tomago smelter. The French
marked for a A$250 million, 50,000 t/y company has been in talks with CSR • JCI Gold merger off (p.99)
expansion but the plan was shelved last Ltd which is intending to divest its alu-
year, partly because of uncompetitive minium interests. CSR owns 70% of
electricity prices. The facility purchas- Gove Aluminium which holds a 36.5% activities was well received in the mar-
es its electricity needs under short-term stake in Tomago. ket place and the company’s share price
contracts and the uncertainty about Confirmation that Capral intends to jumped by seven cents during early
future electricity prices could impact sell Kurri Kurri and focus on its down- trading on Tuesday, to reach a high of
adversely on the sale price. On the posi- stream fabricating and distribution A$2.13. ■

in the most recent quarter it still

JOURNAL No worries managed to produce only minimal
amounts of high-grade nickel and Africa is certainly ‘elephant country’ for
exploration although the targets are not always

London, for nickel cobalt. However, during the month

of December output did improve,
obvious. To coincide with the Indaba Conference
in Cape Town, the ‘focus’ articles in this week’s
February 4, 2000 continued on p.76 Mining Journal address African issues.
Volume 334 The latest news from Western Australia
No. 8568 on the progress of the new generation of
lateritic nickel deposits, which employ
pressure acid leaching technology to
treat the ore, should do little to under-
mine the current strength of the nickel
market. Technical problems have
delayed the various Australian projects
from reaching their design capacities
and the shortfall in expected output is
partly responsible for pushing the cur-
rent nickel price to a 4E-year high above
US$8,900/ t (this issue, p.94).
The biggest of these operations,
Anaconda Nickel’s A$1.03 billion
Murrin Murrin project, is designed to
produce 45,000 t/y of nickel and 3,000
t/y of cobalt at a cash operating cost of
US$1.14/lb. Initial output began last
Established 1835 May, five months behind schedule, and
ISSN 0026-5225
http://www.mining-journal.com
 COMMENT
Editor
Roger Ellis B.Sc., C.Eng.

Two to tango
orruption in the international mining ed on the interviewees’ perceptions of bribe
Deputy and Finance Editor
Richard Morgan M.Sc., DIC, C.Eng.

C industry is a bit like adultery: we all

know it happens but it is seldom dis-
cussed in public. Those that campaign
paying by companies from 19 leading
exporting countries in their dealings in the
14 countries surveyed. The interviewees
Assistant Editor: Mineral Markets
Andrew Thomas M.Sc., DIC
Assistant Editor: Industry in Action
against corruption argue that it is precisely were also asked the sources from which Dominic Mercer M.Sc., DIC, FGS
this lack of willingness to air the issue, their perceptions were formed; 79% cited
albeit perhaps from a misguided desire to press and media reports, 67% conversations Production
protect an industry’s collective reputation, with colleagues and friends, and 56% per- Susan Roberts
that allows the practice to flourish. In the sonal experience. Eileen Smith
mining sector, the consequences for the The ‘cleanest’ foreign investors (of the 19 Advertising
host country could include the awarding of countries about which the interviewees Michael Bellenger
licences, contracts etc., on less than opti- were asked) are to be found in Sweden, fol- Frank Gordon
mal terms, and the circumvention of the nor- lowed by Australia and Canada. At the foot Shelley Hannan
mal conditions designed to serve the inter- of the table are Taiwan, South Korea and
ests of the population, such as environmen- China. The most corrupt industry sector is Marketing
tal safeguards, labour practices and proper public works and other construction; fol- Gareth Bowers
taxes. The main consequence for the law- lowed by arms; power (including energy); Carole Hoy
abiding majority in the mining industry is a and general industry (including mining). The
short-term competitive disadvantage from least corrupt sector is agriculture.
Executive Director
refusing to participate. The author of the bribe-payers’ survey,
Chris Hinde Ph.D., C.Eng.
Although cases of corruption are exposed Fredrik Galtung, reports a high degree of Mining Journal, published weekly, is available only as part of a
subscription with Mining Magazine and Mining Annual Review.
in the media, it seems a fair assumption that statistical correlation between the inter-
the majority go unnoticed. One way for the viewees with regard to the averages on Annual Subscription:
anti-corruption campaigners to bring the which these rankings are based. However, £247 (US$440)
issue more generally into the open, without Mr Galtung does concede that the industry © Mining Journal Ltd 2000
making allegations that could end in the rankings are partly a function of the 14
courts, has been to publish league tables of countries in which the survey was conduct- Member of the Audit Bureau of Circulations
corruption. These have in the past tended to ed. The industry rankings are also affected
focus on countries where taking or demand- by the structure of the industries and the WORLD GOLD
ing bribes is rife, partly to shame govern- pattern of foreign investment: sectors in Paul Burton ACSM, M.Sc., MBA
Helen Payne M.Sc., DIC
ments there into acting. which high-value deals with large up-front
Recognising, that every bribe taker needs payments are common, and in which offi- MINING MAGAZINE
John Chadwick B.Sc.
a payer, Transparency International (TI)*, a cials have high discretionary powers are Des Clifford B.Sc.
non-governmental organisation based in generally more prone to bribery.
SUPPLEMENTS/REPORTS
Berlin, has this year added a bribe-payers’ The survey also includes a section on
Sean Mulshaw Ph.D., DIC, C.Geol.
survey to its five-year-old corruption percep- unfair, as opposed to illegal, business prac- Austin Wheeler B.Eng.
tions index (bribe-takers’ survey). TI derives tices, such as using diplomatic pressure in
MINING ENVIRONMENTAL MANAGEMENT
the bulk of its funding from governmental support of an exporter, or tying deals to aid. Tracey Khanna M.Sc., MCSM
institutions and foundations, but also Unfair is defined as anything that might
CONSTRUCTION PUBLICATIONS
receives donations from the private sector influence a contract to be awarded other
Ian Clarke B.Sc.
and includes several mining and related than the contract’s merits (even if the recip- Alan Kennedy B.Sc.
companies, such as Rio Tinto, Placer Dome, ient country gains in other ways). Here, the Mike Smith HND (Min.)
BHP, Bechtel and IAMGOLD, among its US scored decisively worst, followed by RESEARCH SERVICES
many supporters. France and Japan. The least prone to unfair Iris Moncrieff
The bribe-payers’ index was compiled practice is Switzerland. TI ascribes these Editorial Consultant & Chairman
from research conducted by Gallup results mainly to the political clout of the Michael West B.Sc., F.Eng.
International with 779 business executives worst-scoring countries and, in the case of
Managing Director & Publisher
and other professionals in 14 selected the US, to firm legislation against bribe-pay- Lawrence Williams B.Sc., C.Eng.
emerging-market countries. The survey con- ing causing resort to other means.
cerned only serious corruption (ie not petty *TI International Secretariat. Tel: (+49 30) 34 38 20 0.
corruption at airports etc.), and concentrat-

LEADING INDICATORS
Fax: 34 70 39 12. E-mail: ti@transparency.org

MJ
THE MINING JOURNAL LTD
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on week Low Max/Min on week Low Max/Min London EC2A 2HD
Share Indices Feb 2 (%) (%) HSBC Indices Feb 2 (%) (%)
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Australian All Mining 704 n/a 69 771-558 Smaller Mining Companies 53 –1.4 67 59-42 E-mail: editorial@mining-journal.com
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Brent Blend (dated) $27.06 –0.6 99 $27.25-9.83 *100 on 31.12.89 †100 on 31/12/85 Web Home Page: www.mining-journal.com

74 Mining Journal, London, February 4, 2000

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Mining Journal, London, February 4, 2000 75

 MINING WEEK

North America-based companies it finds ahead of target, with output in December

Gold prospects – a that, compared with its previous surveys,
US-based Homestake has become a partici-
reaching 537 t. At design capacity, Bulong
should produce 9,000 t/y of nickel, and the
global survey pant in far more gold prospects (13), largely projected output for 2000 is around 8,000 t,
as a result of its acquisition of Plutonic plus 700 t of cobalt.
Arizona-based Mining Investment Service Resources in Australia, and Argentina Gold Meanwhile, Heron Resources, one of sev-
(MIS) has recently published a 112-page in Latin America. Barrick Gold Corp. of eral second-generation lateritic nickel pro-
report* on worldwide gold exploration in Canada is also well represented, especially ducers, says it intends to produce up to 500 t
which it considers 970 greenfield gold in Latin America, and is mentioned 13 times of nickel this year from ore mined from its
deposits distributed in 88 countries. The in the survey’s project listings. MIS also Goongarrie lode, which will be run through
prospects are in various stages of explo- points out that Barrick is one of the few the nearby Cawse processing plant on a
ration but in most cases there are sufficient international mining companies currently tolling basis. Heron envisages annual pro-
data to establish a resource estimate. For exploring in China. Placer Dome ranks in duction of 12,000 t beginning in about three
each prospect, MIS has examined location, third place with 11 deposits currently being years’ time.
tonnage, grade, contained gold and owner- explored and MIS believes that recent The prevailing strong nickel prices are
ship. moves suggest that Placer is strengthening giving all producers a strong incentive to
North America ranks first among regions its position in Southeast Asia. Newmont raise output and to re-examine operations
in terms of the number of identified Mining Corp., with 11 exploration previously closed because of poor market
prospects, with 301 deposits divided prospects, is also in the top tier, and these conditions. This week, Australia’s biggest
between the US (126) and Canada (175). four companies have been joined by TVX nickel producer, WMC, said that it has
Australasia ranks second with 282 deposits, Gold, with nine direct prospects and two raised annual production above 100,000 t,
followed by Latin America with 195. indirect interests. and that it will make a decision within the
Compared with a survey conducted by MIS Outside North America, the Anglo next month or so on whether or not to
one year previously, Australasia has posted American group, the world’s biggest gold reopen mothballed operations which have
the biggest rise in the number of prospects, producer, is directly exploring 13 gold been idled over the past two years at the
with an increase of 17. Australia is the most prospects and Rio Tinto ranks near the top company’s Kambalda operations. These
important country in this region, with 168 with 12 prospects. Normandy Mining of could add a further 10,000 t/y and raise
deposits. Other significant countries in the Australia is identified as a significant new- Kambalda’s combined annual output to
region include the Philippines with 25 comer, with 10 prospects. In Africa, Ashanti 20,000 t. The five small, but high-grade,
deposits, Indonesia, with 24, China (15) Goldfields of Ghana has been identified as mines under review are Wanaway, Blair,
and Papua New Guinea (12). the front-runner with 11 prospects although Otter-Juan, Long/Victor and Mariners.
Elsewhere, the European region boasts Randgold Resources has become a “worthy Last year, as a result of a major failure at
100 prospects whilst Africa has 92. Western competitor” in the region. its Kalgoorlie smelter, WMC’s nickel out-
Africa has shown the most robust growth in The MIS report profiles 38 significant put fell back to an annualised 78,000 t/y. A
recent years within the African region, with gold companies accounting for output of major rebuild at the smelter was necessary
Ghana contributing 19 prospects, Burkina some 39 .1 Moz (in 1998), almost 50% of and, according to Peter Johnson, WMC’s
Faso 10, Mali eight and Ivory Coast four. total world gold production in that year. general manager for nickel and gold, the
The MIS report examines the tonnage for MIS says it is noteworthy that many of the opportunity was taken to install a new
each prospect and considers this against a companies identified are increasingly hearth and to complete a new hooding pro-
world average size of deposit, calculated to adopting a global perspective when it comes ject on the converters – in the past, air pol-
be 26.6 Mt. On this basis, Latin America to gold exploration. ■ lution from the smelter has periodically led
easily outstrips all other regions with an to its temporary closure. Commenting on
average of 50.6 Mt. The average tonnage for nickel prices, he said that “everywhere in
Europe is 27.7 Mt, whilst the Australasian No worries for nickel the world is profitable at the moment, even
average is 23.4 Mt. North America has an Continued from p.73 the socialist producers are making money”,
average of 19.4 Mt and Africa just 8.8 Mt. but Mr Johnson cautioned against over-
Amongst individual deposits, Newmont reaching 600 t of LME-grade nickel and 53 t whelming the market by rushing in with
Mining’s Batu Hijau deposit in Indonesia of high-grade cobalt, and Anaconda says it marginal production. ■
possesses the largest tonnage identified in expects the project to “commence cash posi-
the study, at 1,495 Mt followed by the tive operations during the current quarter”.
Aldebaran deposit in Chile, with 1,000 Mt. The company also says that the ‘robustness’ Western Australia’s
The smallest tonnage identified in the sur- of the process has been demonstrated and industrial minerals
vey is the Santa Rosa deposit in Cost Rica, that plans for a rolling expansion to 100,000
with a little over 4,000 t. t/y continue. Best known as Australia’s most important
A more important criterion is the amount There is better news from Centaur con- producer of iron ore, nickel, gold and dia-
of contained gold. On this measure, which is cerning its Cawse project, where output this monds, Western Australia is also a very sig-
a simple combination of tonnage and grade, year is scheduled to reach full capacity of nificant producer of industrial minerals.
MIS finds the European region in first place 10,000 t/y of nickel and 2,500 t/y of cobalt. The state includes 29 commodities in this
with a deposit average of 3.2 Moz. The aver- In the December quarter, processing was category and has relaxed the strict defini-
age for Latin America is nearer 1.2 Moz, 11% above forecast, with production of tion of industrial minerals (all non-metallic,
almost twice the average for North America 1,237 t of nickel and 272 t of contained non-fuel minerals extracted and processed
(0.72 Moz). MIS estimates the world aver- cobalt representing gains of 43% and 39% for industrial end-uses) to include gallium,
age at 1.05 Moz. respectively compared with the September tantalum, titanium minerals, vanadium
The MIS analysis of ownership throws up quarter. Centaur reports that cash operat- and zirconium.
some interesting pointers. Examining ing costs fell 17% to US$1.64/lb after cobalt As a contributor to world production, the
credits of US$13.12/lb. state supplies 34% of diamonds (by
*Further details of the study can be obtained from Mining At the third project, Preston Resources’ weight), 29% of zircon, 27% of rutile and
Investment Service, 6336 Oracle Road, Apartment 326-386,
Tucson, Arizona 85704, US. Tel: (+1 520) 575 8467. Fax: 219
Bulong operation, December quarter nickel 15% of ilmenite. At the end of 1998, the
6430. production reached 1,329 t, more than 100 t merger of RGC and Westralian Sands to

76 Mining Journal, London, February 4, 2000

 MINING WEEK

form Iluka Resources Ltd established the production levels and tailings management Africa, particularly in the case of Anglo,
latter as the world’s second biggest producer problems. There was a more positive devel- which has long been the symbol of South
of titanium minerals, accounting for rough- opment, however, with news early last year African economic power.
ly one third of the global market. that a Japanese titanium minerals compa- New companies have profited from those
According to Western Australia’s ny, ISK, had finalised a joint venture with deposits which were too small to interest the
Department of Resources Development Itochu Australia to develop a mineral sands mining houses. Kalahari Goldridge (now
(DRD) in its recently published 1999 mine at Dardanup, with a planned produc- merged with Harmony) and the Afrikander
review of industrial minerals, in 1998 the tion of 100,000 t/y of ilmenite plus minor Lease operation are prime examples.
sector contributed A$2.1 billion, or more rutile and zircon. Among the more senior companies is
than 10% of WA’s total revenues from min- Colin Barnett, WA’s Minister for Metorex, with a base metals, coal and
erals and petroleum, far in excess of South Resource Development, says that industrial industrial minerals portfolio which has
Australia (A$245 million), Queensland minerals are important, both for the invest- attracted Canadian capital and grown
(A$221 million in 1997/98) and New South ment opportunities that they provide and rapidly.
Wales (A$196 million in 1997/98). for the jobs that the sector generates – South African investment abroad has
Despite the onset of lower prices for a about 4,800 people are employed directly, accelerated and AngloGold, having com-
number of mineral commodities during often in remote areas, and many more are pleted its major internal restructuring,
1998, record values were achieved for employed in support services across a wide made an offer for Australian gold producer
exports of industrial minerals such as salt, range of business areas. ■ Acacia. Mr Ericsson concludes that more
tantalite and mineral sands, whilst Argyle aggressive bids can be expected from Anglo.
Diamonds posted a 48% jump in sales to Some of the smaller South African compa-
A$622 million. Gypsum is reported as South African review nies are also making their debut on the inter-
another success story, with a fivefold national scene. Examples are Harmony buy-
increase in sales to A$18.3 million. The latest ‘South African Minerals Review’ ing into the Canadian gold mine Bisset,
The DRD regards the prospects for (1998-99) has been published by the Metorex taking a share in Chibuluma in
industrial minerals as remaining “extreme- Minerals and Energy Policy Centre*. The Zambia, and Durban Roodepoort Deep’s
ly positive”, and it highlights the potential author, Magnus Ericsson from Stockholm- long fight for Australian gold producer,
of WA’s first vanadium project, at based Raw Materials Group, notes that Hargraves Resources.
Windimurra, near Mt Magnet, where con- more than five years after the ANC came to The shifting focus of the South African
struction of the processing plant was com- power, the final uncertainties about the mining companies will not leave a vacuum
pleted last October. There are other vanadi- South African mineral policy seem to have at home. The empty space is being filled
um projects under consideration, by disappeared and a new mineral legislation both by emerging local juniors (particularly
Tanganyika Gold and Dominion Mining at could soon be promulgated. However, he with black entrepreneurial participation)
Balla Balla in the Pilbara region, by concludes that the changes will probably and by gradually more and more estab-
Greater Pacific Gold at Gabinatha, and by not be as dramatic as initially expected. lished and senior international mining com-
Australian Gold Resources at its Youanmi The most important part of the new min- panies. A second phase of restructuring,
deposit near Windimurra. erals policy is the announced change to a after the first major entrants Placer Dome
In July last year, the world’s leading tan- system of state-held mineral rights. The and Xstrata (active in ferroalloys), will
talite producer, Sons of Gwalia, commis- ANC government is clearly in the interna- probably be new players coming in and
sioned its Wodgina plant upgrade at a cost tional political mainstream in setting as its forming alliances with the emerging local
of A$1.5 million. This will boost annual long-term objective to have “all mineral companies, whether owned by the new black
capacity to 300,000 lb (136 t) of contained rights vested in the state for the benefit and elite or by white entrepreneurs.
tantalum pentoxide. The company is also on behalf of all the people of South Africa”. The review concludes that, provided the
considering expanding its Kemerton silica The proposal has naturally met with many announced policy changes are carried
sand mine from 400,000 t to 700,000 t/y. angry and nervous protests from the current through with caution, it is probable that
Feasibility studies into the Mt Weld rare mineral rights holders. It is clear, according foreign investors will more than make up for
earths and tantalum projects have been to Mr Ericsson, that government will treat the spread of South African mining inter-
continued by Ashton Mining and Lynas this contentious issue with great care. The ests around the world. Paradoxically one of
Gold, and Lynas is funding the next stage of most recent policy document and signals the most important safeguards of stability
the studies, spending A$3.2 million to earn a from the government discussions certainly will be the quickly growing new class of
35% stake. The A$75 million project could suggest a more cautious approach than was black mining entrepreneurs. They will not
be operational by 2001, and could supply expected, one that is more pro-industry than want to see their emerging empires lost. But
10% of the world’s rare earths requirement. the political statements made prior to the all new investors will be highly sensitive to
WMC Resources, meanwhile, is con- first democratic elections in 1994. economic and political changes, and the role
structing an A$11 million, 45,000 t/y capac- The review notes that a second phase of of South Africa’s ‘new foreigners’, Anglo
ity talc mill at its Three Springs operation restructuring of the South African mining and Billiton, will remain crucial.
in the southwest of the state, with initial industry has started, with new participants, • The South African Code for Reporting of
production due in March. In the far north, both local and foreign, entering the stage. Mineral Resources and Mineral Reserves
near Port Hedland, Sovereign Resources is The first phase of structural change in the (SAMREC Code) has now been produced
considering a A$78 million manganese pro- South African mining industry came to an after more than two years of deliberation by
ject which would produce both electrolytic end in early 1999 when Anglo American the SAMREC Committee under the aus-
manganese dioxide and manganese sul- moved its headquarters to London. Most pices of the South African Institute of
phate. corporate restructuring had been completed Mining and Metallury (SAIMM), chaired
On a disappointing note, the beginning of by then and the internal structures over- by Ferdi Camissani. Essentially the same as
1999 saw the closure of a major mineral hauled. Mr Ericsson says that it is surpris- the highly regarded revised Australian
sands operation, BHP’s Beenup mine, ing how little discussion the loss of the JORC Code, the SAMREC Code has been
where commissioning had only begun in major companies has provoked in South formally recognised by the Johannesburg
1997. The mine had been expected to pro- Stock Exchange which is enforcing it within
*Available for US$250 from: Minerals and Energy Policy
duce 600,000 t/y of ilmenite plus 20,000 t/y Centre, Johannesburg, South Africa. Tel: (+27 11) 403 8013.
the JSE reporting rules. The code will be on
of zircon, but was closed because of poor Fax: 403 8023. E-mail: info@mepc.org.za sale from the SAIMM by mid-March. ■

Mining Journal, London, February 4, 2000 77

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78 Mining Journal, London, February 4, 2000

 AFRICA FOCUS

I
n addition to its normal circulation, to over 7 Mt of copper, 20 Mt of aluminium,
this week’s Mining Journal is being dis-
tributed to delegates at the Investing in
African Mining (Indaba) conference being
held at the Cape Sun Intercontinental
Investing 0.9 Mt of nickel and 2.5 Mt of zinc. All this
additional metal has had to be absorbed by
Western markets. Also, in its desperate
search for foreign exchange, the country
Hotel, Cape Town, South Africa on
February 8-10, 2000. The following com-
ments are drawn from some of the papers
in Africa exported significant quantities of scrap and
stockpiled metal, which simply added to the
metallic surge swamping the markets at
being presented at this annual event. that time. The FSU also sold some 2,000 t of
Setting the scene for delegates, as usual, power producing and consuming significant gold in the early part of the decade.
will be David Williamson*, with a paper tonnages of all the major metals required Unfortunately, immediately after the
entitled ‘An Optimistic Start to the New for the sustenance of such a large, albeit demise of the Soviet Union, the world econ-
Millennium’. In his presentation, Mr inefficient, economy. However, between omy went into recession, further adding to
Williamson will note that, until recently, 1989 and 1998, the FSU’s demand for cop- the glut of metals on world markets.
most metal markets have been experiencing per and aluminium fell by 83%, and for Industrial production in the US remained
a period of prolonged price weakness which, nickel and zinc by 73% and 75%. virtually unchanged from 1989 to 1992, and
at the low point of the cycle, reduced real Yet, in its desire to earn foreign exchange, did not really advance strongly until 1994.
prices to their lowest levels in decades. This almost at whatever cost, production from The same is true of Germany, whilst Japan
price weakness followed a period where met- the FSU has declined only modestly in the is still experiencing industrial production
al production growth coincided with the case of copper and aluminium, whilst it has levels little changed from a decade earlier.
economic crisis in Asia. Inventories rose sig- risen in the case of nickel. As a result, the Hence, because of the fundamental changes
nificantly, thereby allowing consumers FSU turned from being just a moderate in the FSU, combined with the recession in
to perceive, correctly, that there would be exporter of these metals to becoming a sub- the early part of the decade, industrial con-
no immediate metal supply shortages. stantial exporter immediately after the sumers were allowed the luxury of knowing
However, Mr Williamson believes that met- Soviet Union collapsed. In the case of cop- that there were no real metal shortages.
al prices, including gold, might now be set per, exports from the FSU increased by This was reflected in the metal markets,
for an extended period of price strength. 700,000 t/y, for aluminium by 2 Mt/y and where prices declined in the early 1990s and
The reasons for Mr Williamson’s predic- for nickel by about 115,000 t/y. remained subdued to 1994. At that time, in
tion go back ten years to the collapse of the Compared with the decade prior to its anticipation of a global recovery, metal
Former Soviet Union (FSU). He notes that, collapse, Mr Williamson calculates that prices recovered dramatically.
although now a distant memory, there was a during the past decade the additional metal
time when the Soviet Union was a super- exported by the FSU to the West amounted *Managing director, David Williamson Associates Ltd.

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Mining Journal, London, February 4, 2000 79

 AFRICA FOCUS

However, just as the mining industry economic malaise in the region, Latin
gathered strength on the back of declining Implication for Africa America again emerged as the recipient of
inventories, the global economy was again most mining interest, with five countries in
shaken by the Asian crisis, not to mention As noted in the Mining Journal Emerging the top six. Moreover, Africa managed a
the continuing economic stagnation in Markets supplement of October 22, 1999, creditable four countries in the top ten. The
Japan. The shock that this caused to the the Asian financial crisis of 1997 had a dra- mining executives did register concern over
world economy, and in particular to percep- matic effect on the economies of most devel- Asia, however, with Indonesia being the sole
tions regarding the knock-on effect of the oping countries. It played havoc in south- representative from the continent in the top
crisis, caused metal prices to plummet once east Asia and Russia throughout 1998, set ten rated emerging mining countries.
again as demand faltered and production back the progress achieved in Latin The South American bloc found itself
continued to climb. As it happens, the actu- America and, in the most seriously affected competing with an African bloc consisting
al effect of the Asian crisis was not as great countries, wiped out the fruits of decades of of South Africa (ranked 5th), Ghana (7th),
as originally feared and was mitigated by economic growth. In its wake, growth in the Tanzania (8th) and Namibia (10th posi-
the driving strength of the US economy, developing world slowed from almost 6% in tion). South Africa has moved up in the
where growth in demand countered the 1996 to less than 2% in 1998, and for the executive ranking from 7th position in 1998,
reduced demand from the former South first time in ten years growth in the develop- 9th in 1997 and a lowly 15th in 1996. Ghana
East Asian ‘Tiger’ economies. ing countries was less than in the developed has remained in a remarkably stable 7th
In his paper, Mr Williamson notes that, countries. position for the past four years. The ranking
as if this was not enough, the mining sector With this depressing scenario for the of Burkina Faso (13th), Cote d’Ivoire
suffered in early 1997 the psychological economies of developing countries, the (14th) and Botswana (15th) emphasises the
shock resulting from the Bre-X scandal in financial pump-priming role of mining com- strengthening interest in Africa. Angola
Indonesia. This gigantic fraud decimated panies is enhanced. Because their choice of was ranked 17th overall but the opinions of
the junior mining sector and virtually elimi- investment location is limited by the distri- the executives polled were sharply divided
nated that market for exploration funding. bution of mineral deposits, mining execu- over the country’s mining potential.
However, as the industry enters a new tives are perhaps less likely to be influenced
millennium, the outlook for metal markets by current market trends than company Mining Journal canvassed the chief executives of the major
mining corporations, asking them to rank the top ten
appears exceptional. Mr Williamson notes executives in other industries. emerging countries (out of a list of 50) which they, personal-
that, for the first time in years, all the major This relatively robust outlook was evi- ly, believed offered the best opportunities within the next
economies are enjoying strong growth, and five years for the development of profitable mines. In their
dent from the fourth Mining Journal survey evaluation they were asked to consider geological potential,
this rare coincidence of positive economic of emerging countries, published in the current property values, ease of doing business, the operat-
factors should stimulate metal demand for Emerging Markets supplement three ing environment and individual countries’ political stabili-
ty.
the foreseeable future. months ago (see box below). Despite the

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80 Mining Journal, London, February 4, 2000

 AFRICA FOCUS

risk; too few companies have adopted a The implications of the Turnbull Report
Risk management holistic approach, considering the entire are potentially far-reaching. Many non-UK
range of risks, from the market to economic, based companies will be forced to comply
One of the reasons for differences of opin- political, operational and, increasingly, rep- owing to their London listing. Already, the
ion over a country’s mining potential is that utational. European Union has shown interest in
of the perception of political and business Of course, the other side of the risk ‘coin’ proposing similar guidelines elsewhere in
risk in the region. This increasingly impor- is reward, or opportunity, and companies Europe. Australia and New Zealand have
tant element of mining companies’ opera- that successfully link the two are often suc- co-operated to produce what is probably the
tions will be addressed at the Indaba confer- cessful in their enterprises. All enterprises most comprehensive code for risk identifica-
ence in a paper by Tara O’Connor#. She must take risks to stand any chance of tion, evaluation and management.
notes that a hundred years ago miners making money, and an entirely risk-averse An effective methodology to identify,
would happily take enormous personal risks firm is very unlikely to be profitable. evaluate and manage risk is crucial to min-
to explore in hostile environments – some- Appreciation of risk will help understand ing companies if they are to ensure proper
times with spectacular rewards – but this is the returns, while an awareness of risk will risk control. There are literally hundreds of
more or less impossible in the increasingly assist board members and senior manage- methodologies to choose from: quantitative,
regulated and accountable world of the 21st ment to plan and allocate resources effec- qualitative, subjective, objective, academic,
Century. Only the most foolhardy will enter tively. software-based and instinct-driven. There is
into a new enterprise without first properly Ms O’Connor notes that many firms are not one that will fit all corporate cultures,
weighing up the consequences. operating in environments where national however. Each company has its very own
Yet risk is a notoriously difficult concept authorities are at least beginning to recom- specific tolerances, capabilities and atti-
to define properly. Ten individuals will all mend clear standards on risk assessment tudes towards risk. The most effective
have different perceptions of what risk and management and, in some cases, to methodologies are those that are easy to
means to them, and how risk should be require them. In the UK, for example, a understand, straightforward to use, widely
approached. In the business sense, risk is report produced in 1999 by the Turnbull applicable, and with clearly useful outputs.
perhaps a threat that a company will not Committee on corporate governance Hard-pressed country managers are much
achieve its corporate objectives – though, of requires all companies listed on the London more likely to use a more straightforward
course, not all risks are equal in their impact Stock Exchange to report annually on pro- process that allows for a relatively high
and importance to a particular company. cedures for risk identification, evaluation degree of experience and subjectivity, than a
Traditionally, businesses have focused and risk control from 2000. The report highly complex, ‘scientific’ approach.
too much on market, financial and credit specifically sets out that such reviews To meet this need, Control Risks has pro-
should cover all relevant risks – not just nar- duced its own methodology. This has been
#Regional manager, Africa, Control Risks Group Ltd. rowly defined financial ones. developed from its own 25 years experience

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Mining Journal, London, February 4, 2000 81

 AFRICA FOCUS

as well as benchmarking best practice from the date of signing until the end of the
risk management around the world. It is Project finance scheduled repayment period) of ten years or
designed to be used when focusing on a spe- sometimes more are available, even for
cific project, but can be applied to a wider Another paper being presented at the those in certain emerging markets.
business, or even a country. A summary of Indaba conference is by Alex Panko+, enti- Third, by going non-recourse, the debt
these risks in Africa is contained in the tled ‘Back to basics – the re-emergence of obligation on a sponsor’s balance sheet can
adjoining article (this issue, p.84). mining project finance’. Mr Panko notes be removed, thereby helping to free-up cred-
Most companies’ ultimate objective in that mining project finance has suffered it lines and borrowing capacity for other
their risk management processes is to know along with the industry itself in the past things, such as the truly huge mining deals;
and understand all the risks that are faced three years, which has witnessed the Bre-X for acquisitions, when acting quickly can
by a particular business. While this is clear- scandal; the Asian and Russian financial mean the difference between success and
ly well beyond the remit of most analysis, crises; a slump in basic commodity prices; failure; for reserving balance sheet capacity
this process can be replicated on a smaller a marked decrease in global exploration for unforeseen opportunities; when needing
scale. Many companies organise large-scale spending; a wave of industry consolida- to consider the financing position of fellow
workshops and brainstorming sessions to tions, mergers and acquisitions; and contin- sponsors; or when the financing involves a
collate a wide range of internal views about uing political crises in a number of emerging mining project as part of a much larger deal.
the risks that a business faces, and question- mining regions. Fourth, project finance (by definition)
naires and checklists of risks are usually Some banks have concluded that mining has to involve a flexible approach from
part of this process. is all together too risky, and that the only lenders. This is because each individual
However, a detailed checklist called the mining projects that would get financed in financing is usually tailor-made for the indi-
‘Basic Menu of Risks’ is the foundation of the future would be those undertaken by the vidual project. Loan repayments have to be
this process in Control Risks’ methodology. very largest mining companies, with terms flexible, and are usually structured to
The main benefit of using a checklist is to and conditions reflecting their balance reflect anticipated project cash-flows. In
promote the spread of a common under- sheets and credit ratings. All of this puts addition, ‘borrowing base’ mechanisms can
standing about business risk, as any pressure on banks worldwide to focus on link the provision of additional funding to
attempt to generate a consolidated picture return on equity, rather than market share the proving up of additional reserves.
of risk will be frustrated if agreed terminol- and, as a result, the mining project finance Fifth, the workload involved in obtaining
ogy is not recognised by all. market has indeed contracted. Mr Panko the requisite finance can be shared with the
The menu document comprises eight fun- believes that there are probably fewer than arranger of a project finance facility. For
damental categories of risks that could real- ten ‘serious’ mining banks left. example, a suitably qualified arranger or
istically impact upon a project. Each risk Mr Panko argues that, because mining is arrangers can save a sponsor the expense of
category includes around 10-20 risk events a capital intensive business, and the sector appointing a separate financial adviser,
or processes; some appear under more than itself is highly cyclical and anything but through balancing the desires of lenders
one category. The categories also include a stable, it makes sense to deal with banks with the commercial realities of a project.
column of ‘Actors’ (such as criminals, ter- which thoroughly appreciate the mining Sixth, a syndicated project financing,
rorists, business partners, vested interests, industry, and have the size, experience, and which is required for the larger project loans,
corrupt officials, regulatory bodies, and so sufficiently flexible approach to share the can often open doors to new banks. In addi-
on). A third column comprises the Channels burden – and not just be good to you when tion, a strong syndicate of quality banks
or Causes of a risk taking place (eg, social commodity prices enable everyone to make helps give a project and its sponsor(s) a cer-
problems, political crisis, mismanagement, a decent living. tain degree of commercial acceptability.
fraud and nepotism in the legal system). Whilst those companies with sufficient Seventh, project finance can help save
resources and critical mass will continue to costs, as construction will invariably
The main elements are: grow and finance new projects through a involve one or a number of fixed-price con-
1. Identification. A workshop team compris- combination of cash-flow and cheap credit tracts with associated penalty and bonus
ing country risk analysts and other consul- lines, there will always be circumstances for clauses attached. This in turn helps ensure
tants uses Control Risks’ eight-section companies such as these to seek project that costs are realistically forecast and
Basic Menu of Risks to identify the risks finance for the development of a new mine, closely adhered to.
that could realistically impact upon a pro- and, of course, project finance is likely to Finally, in certain situations, project
ject. Ideally, additional risk areas such as remain the main vehicle for smaller and financing can be structured to enable a
market risk and credit risk are added, giving medium-sized mining companies to expand small sponsor to maximise ownership and
a comprehensive overall picture. and develop. minimise dilution. There will always be a
2. Evaluation. The team then measures the The true definition of project, or non- certain price to pay for this, not least being
impact of a risk on a project (in terms of recourse, finance is that the borrowing is only the premium attached to a fixed-price con-
financial and operational impact), against repaid from project cash-flows, and the pro- struction contract with third party contrac-
its likelihood of occurring, using an ject assets represent the only security avail- tors, and usually some form of additional
Impact:Likelihood Matrix. This stage will able. Thus it is important to emphasise that: equity-based remuneration for the arranger.
highlight the risks that need detailed assess- First, lenders will be effectively sharing However, Mr Panko notes that small spon-
ment and management. project and political risks with the sponsor sored projects will only get financed in the
3. Assessment. Next, a detailed written for, once the project has been fully con- current climate if the project economics are
report or briefing, focusing on significant structed and has passed a number of perfor- exceptional, political risk is fully covered,
risks identified and evaluated in the first mance (or completion) tests, the bank will and the sponsor can clearly demonstrate a
two stages, is produced. This typically no longer have any financial recourse to the highly visible means of coping with capital
includes a section on the essential political, project sponsor. cost overruns or construction delays.
security and operational contexts, and Second, as project finance is tailored to In his paper to the Indaba conference, Mr
detailed discussion of how and why the vari- the characteristics and lifespan of a particu- Panko observes that many potential inter-
ous risks could impact on a project. lar project, it can be available for longer national investors are not so much hostile as
4. Recommendations. Lastly, recommenda- repayment terms than simple corporate
tions on priorities for immediate manage- loans. For the right project and sponsor, +Global sector co-ordinator (metals & mining), Dresdner
ment and longer-term strategy are given. transactions involving a commitment (from Kleinwort Benson.

82 Mining Journal, London, February 4, 2000

 AFRICA FOCUS

indifferent to Africa, and many mean South country and its mining industry. Although tries are continuing to make foreign invest-
Africa when they talk about the continent. Hartley was a very difficult mine to run, ment more attractive. It is very encourag-
Africa suffers generally from a shortage of analysts believe the political and economic ing to see numerous mining companies
skilled workers, and an infrastructure which climate in Zimbabwe and the increasing ill- using project finance to develop a range of
is almost non-existent. will and political interference by the govern- mining and metals operations, with recent
Moreover, after a gap of a few years, polit- ment towards the company was the decid- examples being Barrick’s Bulyanhulu gold
ical instability in the region has once again ing factor in the withdrawal. Hartley’s mine in Tanzania; Billiton’s Mozal alumini-
ignited, with chaos in the Democratic sophisticated trackless mining technology um smelter in Mozambique; Randgold
Republic of Congo pulling in many neigh- required skilled and experienced staff, and Resources’ Morila gold project in Mali;
bouring countries. Angola’s civil war has delays in granting visas to experienced Goldfield’s Tarkwa gold mine in Ghana;
flared up, as have those in Ethiopia, and expatriate staff contributed to the failure. and Avmin’s Chambishi copper-cobalt pro-
Sierra Leone, Lesotho and Namibia have Ghana had been the role model for emerg- ject in Zambia.
also had their conflicts, and the relationship ing African countries, and Ashanti A golden opportunity for Africa has to be
between South Africa and Zimbabwe Goldfields was an indigenous company of the privatisation of state assets, with
remains frosty. All this has convinced inter- which black Africa could be proud. The Zambia’s ZCCM being the most obvious
national investors that Africa is a dangerous country’s enlightened economic climate example. It is also pleasing to see
place in which to operate. Throw in the attracted other mining companies, and Mozambique, one of the poorest countries
AIDS epidemic and the culture of corrup- countries such as Tanzania looked to Ghana in the world, inviting international energy
tion, and potential investment looks even when drawing up legislation to encourage and mining companies into the country
more unstable. foreign investors to help them exploit their with a regime that is highly business friend-
own mineral wealth. Ashanti’s reported dif- ly (and a supplement on Mozambique is due
ficulties are a sad development for African to be published with the Mining Journal
African low points mining as a whole, especially as the prob- shortly). Tanzania is also hoping to use its
lems were not due to political risks attached gold-mining industry to prime the local
Mr Panko notes the failure of the Hartley to doing business in Africa. economy. Although opinions on South
platinum project in Zimbabwe and Africa remain divided, it will continue to be
Ashanti’s hedging problems as being partic- a beacon for the continent.
ular low points during the past year for the African high points Investor opinion in the ‘West’ still tends
African mining industry. Hartley was the to view all of Africa as being too insecure
largest single private sector investment in Mr Panko notes that, despite the contin- and politically unstable for mining invest-
Zimbabwe since independence in 1980, and uing bad press about Africa, mining project ment, which experienced explorationists in
the withdrawal of BHP has shaken the financings are still being done, and coun- Africa know is generally not the case.

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Mining Journal, London, February 4, 2000 83

 AFRICA FOCUS

A
frica remains a difficult investment Francophone countries such as Gabon,
environment for foreign companies.
Across the region, levels of armed
crime continue to rise, while government
Renaissance Cameroon or Congo (Brazzaville) may face
significant obstacles as French and regional
companies use their close contacts with
efforts to control corruption are proving
ineffective. Few countries are making
major strides forward to improve their
postponed existing governments to make entry diffi-
cult for others.

infrastructure and, although IMF and 2. Security of personnel/assets

World Bank pressure is reducing the size of cated and time-consuming to resolve. Only The security environment is a major con-
public sector bureaucracy, this has yet to in large-scale productions, where the project cern for investors and businesses operating
translate to an improvement in policy-mak- is crucial to the economy (oil and mining in sub-Saharan Africa. The nature of the
ing and implementation. Many of these sectors), are companies able to exercise threat varies from direct attacks on compa-
issues were addressed by Charlie Weeks in some influence over contractual issues. ny assets and personnel while operating in a
the December 1999 issue of Control Risks However, even in these sectors, some gov- war zone to kidnap and crime. A difficult
Group’s Regional Risk Forecast. The follow- ernment intervention in business activity is security environment disrupts business
ing is an edited version of that article. inevitable. activity and makes it difficult to recruit
Governments may exercise formal con- Companies will be at increased risk of skilled staff.
trol, but in too many countries, companies breach of contract in countries where a Crime (ranging from petty theft to armed
operate in a shadowy zone between the for- major change in government is likely. Key robbery) remains high across the region.
mal state and the influence of ‘big men’, and partners in the venture may lose influence Austere economic policies, rapid population
local regional and ethnic tensions that or the new government may decide to growth and slow economic development
determine the stability of the operating reform policy in a sector and consequently marginalise large sections of urban popula-
environment. revise existing contracts and agreements. tions. Continued conflict increases the sup-
Investors will continue to look at hydro- A number of companies which agreed ply of weapons, while governments fail to
carbons, minerals and agriculture as the contracts with General Abdulsalami invest in law and order. As such, crime poses
main recipients of foreign direct invest- Abubakar’s transitional government in a risk to most business activity in sub-
ment, though investment in power, water Nigeria, and paid up front, lost this money Saharan Africa, and particular areas of risk
and telecommunications facilities will also when President Olusegun Obasanjo took to expatriates are major cities across the
increase. power. Changes in government over the next region – Johannesburg, Nairobi, Lagos and
Africa’s renaissance will depend on the 12 months that could impact on contract Abidjan. Crime also pervades ports and air-
success of the region’s major economies. security are likely in Congo (DRC) and ports, and is a primary concern on mine and
There have been a few positive develop- Sierra Leone. factory sites. It can seriously hamper busi-
ments that could have a major impact on Another factor that threatens security of ness activity. However, on balance, even in
the region over the next few years. The first contract is inconsistency of policy decisions. extreme situations such as unloading
is the re-entry of Nigeria into the interna- This is most likely where the formal institu- exports at Dar es Salaam or operating in
tional community. Nigeria has its best tions are weak and political power is highly central Johannesburg, adequate precau-
chance in many years of fulfilling its posi- personalised, and therefore strongly depen- tions can reduce the risk from crime to a rea-
tion as one of Africa’s two World Bank- dent on a leadership’s whims. The countries sonable level.
designated strategic markets. The other where these risks are greatest are Gabon Conflict undermines business operations
strategic market – South Africa – has suc- and Liberia. In other countries, for example across a vast swathe of Africa from eastern
cessfully managed the transition of power Zimbabwe or Kenya, where the judiciary is Uganda to Angola on the Atlantic coast.
away from Nelson Mandela, and is embark- more independent and effective, the risks to The impact of conflict on business activity
ing on the reform and consolidation of its contracts are reduced. However, if contract depends on the nature of the conflict and on
economy. Economic harmonisation and disputes emerge in these countries, govern- the specific project being undertaken.
growth in the franc zone also provides rea- ment rulings on disputes can prove difficult Although the oil and mining industries will
son for optimism. If the conflicts in to reverse. continue to operate in Angola, they may
Ethiopia and Eritrea and central Africa can In an environment where African face increasing stress on their operations
be resolved, this hope could fuel Afro- economies are slowly deregulating but from continued conflict. Oil companies in
optimism. where ‘big men’ (such as Uganda’s former the country have been little affected by the
military head and President Yoweri resumption of civil war but, during 2000,
Museveni’s brother Salim Salek, and, in will remain wary of the threat of a UNITA
Regional risks Nigeria, former President Ibrahim rebel attack on oil assets, either onshore
Babangida) dominate the political environ- at Soyo or Cabinda, or against offshore
Over the next year the principal risks to ment, hostile local vested interests can assets that are within range of artillery or
companies operating in Africa will be: block contracts. This is a risk across the missiles.
region, but particularly for investors enter- In Congo (DRC) instability as a result of
1. Security of contracts ing sectors traditionally controlled by regional Hutu/Tutsi tensions, the de facto
Whether investing in the private or public domestic ‘big men’. partition of the east into Rwandan and
sector in sub-Saharan Africa, breach of con- In the rapidly deregulating telecommuni- Ugandan spheres of interest and tensions
tract is a major threat to business activity. cations sector, control of GSM mobile tele- between Rwanda and Uganda as they com-
Investors may not be able to rely on local phone network licences and the local mobile pete for assets, such as diamonds and gold,
partners to honour their commitments and phone market has often been given to those mean that it is unlikely that major foreign
may face unsolicited demands for addition- close to the local ‘big men’. Existing interests in the mining sector will be con-
al payments. In the worst cases, companies investors may also face continued bureau- verted into realisable projects. Although the
may find that contracts are arbitrarily cratic problems and security issues as local conflict has reached a stalemate, the with-
revoked after they have invested significant players use underhand tactics to gain drawal of Zimbabwean troops could funda-
capital. Companies are often left with little greater influence in the domestic market. mentally alter the balance of power in the
recourse to arbitration. Contract delays Nationality can also have an impact. war, enabling rebels to capture Mbuji-Mayi
and disputes can be costly, as well as compli- Non-French based companies entering and Lubumbashi rapidly. Although they are

84 Mining Journal, London, February 4, 2000

 AFRICA FOCUS

unlikely to target foreign companies, per- Hutu Interahamwe operate, their limited companies operating in Africa are opera-
sonnel and assets in the frontline would be understanding of the potential value of tional. The principal problem is corruption,
at incidental risk. hostages can lead to hostages being killed. which increases production costs (by up
The conflict between Ethiopia and Four tourists were killed in the Rwenzori to 50%) and delays production, while also
Eritrea will cause instability in Somalia, mountains (western Uganda) in August contravening international legislation and
Kenya and Djibouti in 2000. Although the 1998 and eight tourists were killed in putting company reputations at risk.
main conflict will end, hostility between Bwindi National Park (south-western Incidents of corruption range from daily
Ethiopia and Eritrea will lead them to sup- Uganda) in March 1999. payments to police at roadblocks, to facili-
port opposition groups in the other country. By contrast, in the troubled Niger delta, tatory payments to bureaucrats in return
Eritrea is likely to offer support, in particu- local communities have learnt how to use for speedy hassle-free completion of admin-
lar for the Oromo Liberation Front (OLF). hostages to gain practical rewards and make istration procedures, to payment of highly
Both countries are also likely to continue to political points. Local communities regular- influential key players to arrange contracts
support rival warring factions in Somalia’s ly take local and foreign workers hostage for and provide high level protection to pro-
anarchic struggle. Somalia is expected to periods of up to three weeks and hostages jects. Corruption also means that reliance
remain off-limits to foreign business in are seldom harmed. In the past 18 months on legal redress for commercial disputes
2000. Foreign investors will have to take the intensity and frequency of kidnaps have can be problematic – companies will contin-
increasing note of zones of instability in the risen to the extent that hostage-taking ue to avoid African courts wherever possi-
Horn of Africa that could threaten the secu- occurs on an almost weekly basis. ble.
rity of assets and personnel. In South Africa, a new phenomenon of There is certainly a greater global aware-
The risk of kidnap is spreading across purely criminal abductions derived from ness of the need to clamp down on corrup-
Africa, but varies in terms of intensity, the Nigerian Advance Fee Fraud or ‘419’ tion. A number of countries are making
motive and security of personnel. There is a scam is emerging. Abduction will remain a high-profile efforts to clean up their con-
growing awareness of the potential value risk to companies in all the current war, low- tract tendering procedures. In Kenya, Civil
of taking hostages. In mid to late 1999 there intensity conflict and high crime zones of Service Minister Richard Leakey is leading
were high-profile kidnaps in Sierra Leone, Africa in 2000. Countries where rebels are anti-corruption efforts, in Nigeria President
Liberia, Nigeria, Uganda and South likely to kidnap foreigners in 2000 include Olusegun Obasanjo is undertaking a similar
Africa. Angola, Liberia, Sierra Leone, Somalia, campaign, and in Côte d’Ivoire revelations
In war-torn areas, kidnaps are generally eastern Ethiopia and Congo (DRC). of ministerial corruption involving EU aid
carried out by rebel groups who want to put are fuelling international pressure for
across their particular message and to gain 3. Operational and economic obstacles reform.
provisions and supplies. In some areas, such Aside from contract difficulties and securi- These efforts should result in a marginal
as Uganda, where groups such as the ethnic ty of personnel and assets, the main risks to improvement for companies operating in

This announcement appears as a mattter of record only This announcement appears as a mattter of record only
August 1999 September 1999

THE BROKEN HILL PROPRIETARY COAL & ALLIED INDUSTRIES LIMITED

COMPANY LIMITED
C&A
BHP has acquired
has sold its interest in the
the NSW Coal Assets of
Moura Coal Mine Rio Tinto Limited
held by BHP Mitsui Coal Pty Ltd
together with the remining interest
to in the Howick Coal Mine from
PEABODY RESOURCES LIMITED Mitsubishi Development Pty Ltd
and
MITSUI COAL HOLDINGS PTY LIMITED The consideration was comprised
mostly of Coal & Allied shares
The consideration obtained by and had a market value of
BHP Mitsui Coal Pty Ltd was
A$361,500,000
A$89,000,000
The undersigned acted on behalf of Coal & Allied
The undersigned acted on behalf of BHP

A member of the A member of the

Resource Finance Corporation Group Resource Finance Corporation Group

When it comes to resources...

we thrive between a rock and a hard place

SYDNEY +61 2 9250 0000 PERTH +61 8 9322 1822

Mining Journal, London, February 4, 2000 85

 AFRICA FOCUS

HOTSPOTS IN 2000

these countries. However, in South Africa

the corruption trend is on the way up as the
interlinking of organised crime and corrupt from relations with governments because
business practices criminalises business and the governments control these sectors.
politics. Companies will have to develop Economic risks could have an impact on
their anti-corruption strategies and will the general business environment and cause
need to implement them when operating in difficulties for foreign businesses. Over the
sub-Saharan Africa. ances, such as in the oil industry in Nigeria. next 12 months, commodity, mineral and oil
The oil and mining industries will remain These risks are normally triggered by a prices will remain the most important
the sectors most vulnerable to reputational combination of local and international determinant of economic prosperity.
risks. These risks are triggered by human media and non-governmental organisation The prolonged suspension of IMF aid (or
rights abuses such as the use of child labour, activity. prolonged negotiations with donors) fuels
major environmental damage, excessive From a business point of view, exporters economic problems and can lead to a rise in
corruption charges and the use of contro- and investors will worry less about the political and social tensions. When relation-
versial private security firms. They can lead macroeconomic risk to their projects and ships with donors break down, governments
to consumer boycotts in Western markets, more about the operational and security are usually forced to implement politically
punitive actions by Western governments obstacles to doing business in the region. As difficult reforms designed to reduce public-
and company morale problems. This also most investment is in the primary sector sector deficits in order to restore favour
makes companies a target for local griev- (agriculture and mining), the risk stems with donors. This can cause unrest.

86 Mining Journal, London, February 4, 2000

 AFRICA FOCUS

Most civil law countries define the State’s

French-speaking Africa: sovereignty over subsoil natural resources in
their constitution and legislation. The own-

securing mining investments ership of the minerals is directly attached to

the State’s sovereignty.
The administrative nature of the rights

I
nvesting in the mining sector in French- distinct unilateral act of state granting granted by the State to private parties is
speaking Africa has been a rather chal- exclusive mineral rights to a party. justified by the fact that the minerals
lenging endeavour in recent years. The Furthermore in civil law countries, ‘min- exploited are a matter of public interest.
paradox of investors with a legal tradition ing’ and mines refer to a certain class of min- The most important consequence of the
so radically different from that of the host erals defined by law. These minerals are con- application of administrative law is the
countries is difficult to tackle. Indeed, most sidered to be of public interest. Their classi- granting of discretionary powers to the
mining companies are established in coun- fication is of a legal nature only and has State. These State powers have an immedi-
tries with a common law tradition. These nothing to do with their geological charac- ate impact on the quality of the security of
issues were addressed in a recent report by teristics. All other minerals which are not the mining rights and subsequently on the
Stephane Brabant* and Natalie Stevens#, classified as mines fall under the category of risk attached to the investment.
of which this is a heavily-edited extract. quarries. Only the minerals qualified as The stumbling block will be the granting
These differences are true not only for ‘mines’ are under the State’s jurisdiction, of discretionary powers to the State:
Australian, Canadian and American com- whereas the minerals classified as quarries • Decision to grant or refuse mineral rights.
panies but also for South African and remain under the jurisdiction of the owner • Prior authorisation of the State is required
English mining companies. While the latter of the surface. for the transfer of the mining rights to third
have a long tradition of mining in English- Common law jurisdictions do not draw a parties or for any transfer of interest in the
speaking Africa, they are often unfamiliar distinction between private and public exploitation title. This can cause problems
with the conditions applicable to mining (administrative) law to anywhere near the when using mining titles to secure loans.
investments in French-speaking Africa. same degree as in civil law systems. In prac- • Control of the mining activities: mining
This has to do not only with a language bar- tice this means that the State enters into a must be carried out in an efficient manner.
rier but, more fundamentally, with a differ- contract with the mining company and that State even has the power to withdraw min-
ence in legal tradition – a common law tradi- this contract is subject to private law. The ing titles under certain circumstances.
tion in the English-speaking countries and a application of private law is essential when Mining taxation has been a key feature in
civil law tradition in the French-speaking considering the rules governing the rela- the process of mining policy reforms in West
countries. The fact that the same wording tions between the two parties and possible Africa. While some countries in French-
can be used with different meaning in the remedies. speaking West Africa adopted new mining
two legal regimes illustrates this difference. In the civil law tradition, the State’s taxation legislation in the early or mid
Another essential difference is the role of the essential role is the protection and promo- 1990s, many are now considering simplify-
State and the rules governing its relations tion of the public interest. This means that ing their taxation systems. Governments
with the private investor. The nature of the the State is not a legal entity subject to the have become aware of the increased interna-
State’s jurisdiction also affects the issue of common laws applicable to private parties tional competition for mining investment as
mineral ownership. (private law) but that it is subject to a spe- total mining investment has fallen. They
Misunderstandings can occur when min- cific set of rules known as administrative have been advised to adopt tax systems that
ing companies use terminology based on law. Again, this distinction is of particular are based on ‘ability to pay’, ie based on
their understanding of their own legal sys- relevance when considering remedies. profits. Resources have also been dedicated
tem to fit a different system. This can be Administrative law will be enforced by to providing mining taxation systems that
particularly problematic when assessing the administrative courts. are transparent and workable.
security of the right to mine and of the legal In practice, this means that the counsel of In conclusion, mining investors are con-
rights over the minerals. Considering the the mining company negotiating a mining fronted with the differences between civil
increasing role of project finance in mining agreement in French-speaking Africa must law and common law in all mining countries
investments, transparency in the title is verify the constitutionality of the agree- which hold a historic tie with what used to
more necessary than ever, and it is the lack ment to reduce the risk of future challenges. be a civil law colonial power, such as
of such transparency that can make deals In recent years, with the increased inte- Belgium, France, Italy, Spain, Portugal
collapse. gration of French-speaking African nations and, to some extent, Holland. It is obvious
To illustrate the dangers attached to the in the international business community, that a mining investment in countries such
business vocabulary of the mining industry, harmonised investment rules, such as those as Australia, Canada or the US is a different
consider the notion of mining title. For com- of the OHADA treaty or the ICSID conven- endeavour to a mining investment in Africa
mon law mining investors, mining title and tion, have been adopted. This does not in many respects. This difference is due
mining agreement are equivalent: a mining mean that national states are distancing essentially to reasons of culture and, in
agreement generally constitutes a full min- themselves from their prerogatives as public French-speaking Africa (and other civil law
ing title under common law, and concerns authorities but rather that they are jurisdictions), it is accentuated by lan-
only the exploitation of the minerals (as acknowledging the need to define a level guage, legal tradition and the role of the
opposed to exploration). In civil law, mining playing ground where the interests of pri- State, which is especially critical in the field
rights have a dual nature. They are subject vate investors such as mining companies of natural resources. ■
to administrative and private law. This and host states can meet.
means that, in these regimes, a mining Extractive industries were initially devel- Herbert Smith Herbert Smith
20 rue Quentin Bauchart Primrose Street
agreement alone does not provide a valid oped by multinational enterprises with the Exchange House London
mining title. A mining agreement cannot sanction of the colonial power. With the 75008 Paris, France EC2A 2HS, UK
establish a mining right fully binding on the recognition of Permanent Sovereignty over Tel: (+33 1) 5357 7070 Tel: (+44 20) 7374 8000
State but has to be supported by a mining Natural Resources (UN GA Res 1803 Fax: (+33 1) 5357 7080 Fax: (+44 20) 7374 0888
title which, in a civil law system, involves a (XVII) 1982), newly independent states Email:stephane.brabant@herbert.smith.com
*Partner in Paris office of Herbert Smith.
affirmed their sovereignty over natural
Website: www.herbertsmith.com
# Consultant in London office of Herbert Smith. resources.

Mining Journal, London, February 4, 2000 87

PDAC 26/1 2/2/00 2:33 pm Page 1

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Canadian Institute of Mining,Metallurgy and Petroleum

Canada’s leading minerals

associations proudly present
MM2000. Not to be missed
by minerals industry

&
International Convention
Trade Exhibition
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professionals, this event will
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PATRON SPONSORS:
 INDUSTRY IN ACTION

Barrick can gain an option to Chinese polymetallic Minco notes is regarded as the
Exploration acquire an interest in the properties
by buying 2 million shares in TNR for results
premier laboratory in China. Check
assaying is carried out by Chemex
a total of C$800,000, 90% of the Minco Mining and Metals Corp. is Labs Ltd of Canada.
proceeds of which are to be used in the carrying out a drilling programme at Teck Corp. effectively took control
AngloGold’s exploration of the properties by the the White Silver Mountain of White Silver Mountain last year,
end of this year. The option will be to polymetallic property in China. The and has the option to earn a 70%
Canadian venture . . . purchase another 2 million shares in diamond-drill holes are targeting interest in Minco’s interest in Gansu
AngloGold Ltd’s North American TNR for a total of C$1.4 million by mineralisation below current mining Gayin, a joint-venture company held
subsidiary has signed a letter of January 31, 2001, and to spend a activities, with results as shown by Minco and Baiyin Non-Ferrous
intent with Vancouver-based further C$1 million on La Ortiga below. Metals Co., the Chinese operator of
Rubicon Minerals Corp. to option the and/or C$1 million on any of the Samples are analysed in China by the mines below which the White
latter’s Red Lake gold property in other properties by the end of 2002 to the Institute of Geophysical and Silver Mountain ground lies MJ, July
Ontario. Rubicon holds a large land earn a 60% interest. Geochemical Exploration, which 16, 1999, p.42).
position in the Red Lake gold district, The previous agreement between
and is targeting the Dorion-McCuaig Orko and TNR has been dissolved, Hole Interval Cu Pb Zn Au Ag
corridor, a 2.5 km x 1 km zone with TNR and Orko issuing and (m) (%) (%) (%) (g/t) (g/t)
believed to contain high-grade gold buying shares in each other, and Orko XT6-08 347.1-348.9 1.89 4.38 18.73 2.64 223.66
mineralisation (MJ, April 30, 1999, retaining a 4% net smelter return on XT6-09 343.2-344.8 1.25 3.92 14.82 3.04 160.97
p.312). the relevant properties.
In its first involvement north of
the US-Canadian border, AngloGold Billiton seals Maya 55% of Spinifex’ interest in the gold zones have been delineated at the
can earn a 60% interest in the properties by spending A$14 million property, the Father Brown,
property by spending US$3 million agreement on exploration and paying A$15 Adoikrom and Dabokrom zones,
over five years, and will spend Maya Gold Ltd of Canada reports million over three years. which are partially linked.
US$300,000 in the first year. that Billiton plc has signed formal The Adoikrom target has been
AngloGold can earn a further 10% by agreements covering Maya’s E drill-tested over a 300 m strike-length
paying Rubicon US$250,000 within Triunfo copper-gold property in
Nalunaq and 225 m down-dip length, and has
90 days of earning its 60% interest. Honduras, outlined in a letter of mineralisation an average gold grade of 4.1 g/t, over
Rubicon will be the manager of the agreement signed last year (MJ, July a 12 m thickness. The Father Brown
joint venture until the first US$1 30, 1999, p.81). William Green,
extended . . . and Dabokrom zones have also been
million has been spent. Maya’s president, notes that the Crew Development Corp. reports systematically drilled, demonstrating
finalisation of the deal “has taken that exploration last year at its 50%- that the two zones are joined, to give
. . . and Alaskan longer than expected”, but he is owned Nalunaq gold property in a total strike length of 800 m and a
pleased to have established the southern Greenland has extended the 200 m down-dip extent. The majority
ventures partnership with Billiton. Mr Green high-grade gold mineralisation found of mineralisation is in sulphides,
AngloGold has also signed a letter expects to be able to proceed in an outcropping vein system. The although there may be some laterite
agreement with Blue Desert Mining immediately with exploration at the property was the subject of a positive mineralisation at Dabokrom. Hwini-
Inc., covering the junior’s Gobi, property. prefeasibility study by MRDI last Butre covers around 20 km of the
Mojave and Sahara gold properties in year (MJ, April 2, 1999, p.242), and Ashanti gold belt, and is located
the Pogo area in Alaska. Blue Desert Spinifex continues at the company acquired Nalunaq in a about 3 km from Takoradi-Sekondi.
reports that the Gobi and Mojave recent takeover of Mindex ASA, the
properties together cover about 109 Nyakafuru previous operator (MJ, January 7, Paradigm discovery
km2 of ground immediately southwest Continuing drilling operations at the p.16). Nalunaq contains three defined
of the Pogo property owned by Nyakafuru gold property in Tanzania mineralised areas, the Target, for Goldfields
Teck/Sumitomo (MJ, March 19, are returning more intersections of Southern and Upper blocks. A drilling Goldfields Ltd of Australia has found
1999, p.192). An initial exploration gold mineralisation for 80%-owner programme completed last year a new gold mineralisation zone at the
programme has delineated two Spinifex Gold NL. The Australian indicates that mineralisation in the Paradigm prospect in Western
stream sediment geochemical company is investigating numerous Target block continues beyond the Australia. Paradigm is part of the
anomalies in gold, tellurium, mineralised structures in the existing 300 m adit, and that in the Carbine property, in turn part of the
antimony and bismuth. The Sahara northern portion of the tenement, Southern block, high-grade Zuleika exploration programme, near
property, east of Pogo, also contains a with the following better recent mineralisation exists, open along Kalgoorlie. The Paradigm area lies
stream sediment geochemical results: strike. west of Paddington, where reverse-
anomaly in gold, antimony, tellurium The outcrop of the mineralised circulation (RC) and diamond
and arsenic. Hole Interval Au vein system extends for over 2 km, drilling (DD) intersected the
Under the terms of the agreement, (m) (g/t) and channel samples returned gold following better results:
AngloGold will spend US$750,000 on NPRC140 109-126 2.91 grades of up to 50.2 g/t over 0.91 m,
each of the three properties and make NPRC143 72-79 20.99 at a 300 g/t Au cut-off. Nalunaq is Hole True thickness Au
cash payments to earn a 60% interest NPRC153 85-136 4.90 located 40 km from Nanortalik, and 6 (m) (g/t)
in each. Blue Desert reports that NPRC157 82-106 6.11 km from an ice-free, deep-water fjord. CARC004 1.7 25.95
formal agreements are in the process The balance of the property is held by CARC016 4.0 31.85
of being drawn up. The structures are shear zones, NunaMinerals, a government-owned CADD003 4.0 31.08
characterised by string foliation and company. CADD004 3.0 68.04
TNR agrees Barrick prominent quartz and carbonate
deal mineralisation. Gold occurs
contained in sulphides. Spinifex
. . . Hwini-Butre Mineralisation at Paradigm is
contained within three parallel
TNR Resources Ltd has signed a geologists report that drilling to date drilling laminated and brecciated quartz
letter of agreement with Barrick Gold indicates that mineralised quartz Crew Development Corp., 51%- veins beneath 30 m of barren
Corp. on several of its Argentinian veins have a sygmoidal geometry. The owner of the Hwini-Butre gold overburden, and is covered by a
gold properties. The deal covers La exploration effort to date has been property in Ghana, reports that a supergene gold-enriched blanket 2-11
Ortiga, El Fierro, Valle del Cura, Las concentrated mainly upon areas recent drilling programme has m thick at the base of the overburden.
Carachas, La Brea, Ranchillos, Rio being worked by artisanal miners. outlined significant gold
Blanco, Pena Negra and Cateo 23 Spinifex last year revised its joint mineralisation, which Crew regards
properties, some of which are the venture with Ashanti Goldfields as having good potential for
Strathcona
subject of an earlier joint-venture concerning Spinifex’ commercial production. Crew’s joint- draws blank
agreement with Orko Gold Corp. Buckreef/Rwamagaza and Kitongo venture partner, St Jude Resources of
(MJ, January 22, 1999, p.37). An properties (MJ, July 2, 1999, p.4), Canada, has been exploring at the 54
at Blackhawk
exploration programme at Ortiga after Ashanti experienced difficulties km2 concession since 1997, and International Gold Corp. (IGC)
identified two volcanic-hosted gold caused by its hedging book (MJ, reported gold mineralisation reports that its consultant, Strathcona
targets, one silicified, and the other a November 5, 1999, p.361). The intersections in the middle of last Mineral Services, has completed its
breccia. revised deal allows Ashanti to earn year (MJ, July 9, 1999, p.20). Three assessment of sampling and assay

Mining Journal, London, February 4, 2000 89

 INDUSTRY IN ACTION

procedures carried out upon material expanding reserves at Cerro of the facility has the capacity to evaluating kimberlites throughout
from the Blackhawk property in Yanacocha, Carachugo, Chaquicocha produce 5,000 t/y of zinc, and a the world.
Idaho. IGC’s subsidiary, Intergold and La Quinia. The reserve base second production line of similar
Corp., reported remarkable drilling includes silver for the first time, capacity would be added in the Hearne kimberlite
results from the property last year, estimated at 356 Moz, and including future. Iran is in the process of
using a technique developed 312.8 Moz from a remodelling of the opening up its mining sector to resource
especially for the Blackhawk samples Cerro Yanacocha deposit. Reserve foreign investment (MJ, October 22, Mountain Province Mining Inc.
by AuRIC Metallurgical calculation used a gold price of 1999, p.329). (MPM) reports that its contractor,
Laboratories LLC. Subsequent tests US$325/oz; a US$300/oz price reduces Monopros Ltd, a De Beers subsidiary,
by independent sample laboratories reserves to 31 Moz. Puthep phase 1 has completed a resource calculation
were unable to replicate the results, Yanacocha produced 1.66 Moz of and valuation of the Hearne
and Intergold commenced legal gold in 1999, and plans are in place for begins kimberlite pipe, part of the AK/CJ
proceedings against AuRIC, and in 1.75 Moz of production this year. Pan Australian Resources NL has diamond property in Canada’s
addition against Dames & Moore, Yanacocha is 51.35%-owned by started the first phase of a feasibility Northwest Territories (MJ, July 16,
which had evaluated the AuRIC Newmont and 43.65%-owned by study of the Puthep copper project 1999, p.42). A total of 856 ct of
process. Buenaventura, with International near Loei, in Thailand. The company diamonds was recovered from 469 t of
The Strathcona audit used Finance Corp. holding the remaining signed a joint-venture deal with Hearne kimberlite, which comprises
Lakefield Research and Activation 5%. Padaeng Industry last year (MJ, two parts, subdivided by internal
Laboratories to assay samples from September 3, 1999, p.181), and geological differences. The resource
previous core-drilling and surface Lomas Bayas completed due diligence towards the estimate for the pipe at present is 6.86
samples collected by Strathcona end of the year (MJ, December 10, Mt at 1.71 ct/t, valued at US$65/ct.
personnel at Blackhawk. Neither development 1999, p.464). The first phase of the The value estimate is an increase over
laboratory could find gold above The Lomas Bayas mine manager, feasibility study will involve infill the previous estimate of US$44/ct.
minimum detection levels in the Robert Bennett, is quoted in El drilling and associated metallurgical MPM notes that De Beers will
samples, and Strathcona concludes Diario as saying that the Fortuna de work to elevate all of the present combine relevant values and grades
that gold and silver are not present in Cobre project near the copper-gold mineral resource (116 Mt at about with information from the 5034 pipe
economic quantities in the rhyolitic mine in Chile is likely to begin 0.4% Cu in indicated and inferred and results from current tests on the
lavas at Blackhawk. IGC additionally construction next year. Fortuna de categories) to indicated status. The Tuzo and Tesla pipes in order to
retained Mineral Services in the UK Cobre, located 3 km from Lomas proposed drilling programme develop a deposit model. Any decision
which, using OMAC Laboratories Ltd Bayas which is owned by Boliden, has comprises 257 drill-holes, including to proceed to a feasibility study will
and CSMA Consultants Ltd, been undergoing feasibility studies for 42 diamond core holes and 215 be dependent upon the model.
confirmed the Strathcona results. more than a year (MJ, May 15, 1998, reverse-circulation holes. A drill-core Exploration drilling on other parts of
Intergold has now ceased exploration p.382). The newspaper reports that and drill-chip relogging programme the AK/CJ claims will begin after
at Blackhawk. development of the deposit, has begun, re-evaluating drilling results of the 1999 sampling
estimated to contain 848 Mt at carried out between 1993 and 1995. programme are assessed. Monopros is
Devon gold 0.24% Cu, is expected to cost about Pan Australian notes that the earning a 60% interest in the
US$300 million, and is projected to PUT 1 deposit, which contains a properties.
intersected produce about 90,000 t/y of cathode resource of 84 Mt at 0.42% Cu, lies
Minmet plc reports that its 78%- copper. The deposit possesses within an area demarcated as Fimiston takes full
owned subsidiary Crediton Minerals favourable metallurgy, including Forestry Reserve, under the
plc has intersected gold significant amounts of water-soluble management of the Royal Forested Julia Creek interest
mineralisation at the Crediton copper, and has a stripping ratio of Department (RFD) of Thailand. An Fimiston Mining NL has increased its
property in Devon, England. A five- 0.5:1 (waste:ore) environmental impact assessment is holding in the Julia Creek vanadium
hole drilling programme, totalling The mined material could be an essential part of the feasibility property in northern Queensland to
106.5 m, intersected elevated gold transported to the Lomas Bayas study, and all land access issues are 100%, after issuing 6.33 million
values in basalts, as well as higher operation for processing, or, reported to be progressing with the shares to the vendors. The company
grades of mineralisation in carbonate alternatively, a new complex could be assistance of Padaeng and the co- previously held a 51% controlling
veins. The company regards the built at Fortuna. Lomas Bayas began operation of the Department of interest, and the deal cancels the
carbonate veins as the result of a operations over a year ago (MJ, May Mineral Resources and the RFD. farm-in agreement completed in
secondary mineralisation phase that 8, 1998, p.361), with targeted December 1998, and also cancels
remobilised gold in the host rock, production of 60,000 t/y of copper. In Fimiston’s liability to pay A$1.5
depositing up to 1.39 g/t Au over 0.45 its September 1999 quarterly report, Jericho revalued million upon commencement of
m and 1.54 g/t Au over 0.27 m. The Boliden noted that the complex was Tahera Corp. reports that separate commercial production from the
mineralisation was encountered operating at an average 81% of revaluations of its Jericho diamond tenements.
within 12 m of surface. production capacity, with 14 days project in the Nunavut territory of Julia Creek is an oxide resource of
Crediton will now extend its search above 90% design capacity. Canada by its consultant WWW 80 Mt, containing 200,000 t of V2O5
to other sites within the Crediton International Diamond Consultants within 15 m of the surface, covering
Trough, although Jeremy Metcalfe, Codelco to invest (WWW IDC), and SRK Consulting an area 10 km x 2 km. The
chairman of MinMet, emphasises and its associate, M.M. Oosterveld, mineralised material is a limestone-
that “this is still early days, and we US$600 million have increased the estimated value of clay (80:20) mix of marine sediments.
have a considerable amount of further Chile’s Mining Minister, Sergio diamonds from the Jericho Metallurgical testwork has produced
exploration work ahead of us before Jimenez, says that the government kimberlite. De Beers’ Central Selling 99.9% pure Class A ammonium
we can draw any final conclusions”. has approved investment totalling Organisation, in 1996/97, placed a metavanadate (MJ, July 23, 1999,
US$600 million for the country’s value of about US$65/ct on diamonds p.58).
mining industry. A large part of the from Jericho, and in the recent
Development money will be spent on an expansion
at state-owned Codelco’s Radomiro
studies, WWW IDC put the value at
35% higher, and SRK 14% higher.
Remodelling raises
Sigma resources
Tomic copper complex, which is The prefeasibility study carried out
scheduled to cost US$220 million, and by SRK Consulting for Tahera on the McWatters Mining Inc. reports that
Yanacocha raises is designed to increase copper project (MJ, December 3, 1999, a revision of the deposit model at the
production from the current 180,000 p.450) used the CSO estimation, but Sigma gold mine near Val d’Or in
reserves by 60% t/y to 250,000 t/y (MJ, September 24, recommended that a revaluation be Quebec has resulted in an increase of
The reserve estimate at Yanacocha in 1999, p.237). done. resources to 28.3 Mt at 2.19 g/t Au, at
Peru, the largest gold mine in South SRK and its associate Mr a 0.5 g/t Au cut-off grade. The
America, has been increased by 60% Iranian zinc plant in Oosterveld reviewed the revaluation company has been working towards a
compared with the end-1998 figure, to completed by WWW IDC predominantly open-pit operation at
32.9 Moz. The exploration and mine operation (US$84/ct), and recommends the use the Sigma-Lamaque complex
geology teams at Minera Yanacocha Iran’s state radio reports that a zinc of an average value of US$74/ct for (previously underground) over the
drilled over 165,000 m in 1999, smelter has begun test production on calculations. Tahera notes that Mr past 12 months, and a revision of the
bringing Cerro Quilish and El Tapado the island of Qeshm. According to Oosterveld was employed by De deposit model was undertaken with a
into reserves from resources, and Reuters, the US$5 million first phase Beers between 1961 and 1994, view to bulk-mining. The company

90 Mining Journal, London, February 4, 2000

 INDUSTRY IN ACTION

describes as a breakthrough the January 28, p.63). The two sides have Northparkes accident Mykolayivsky, has stopped supplying
recognition of vein patterns which been in dispute at Tara for some time feed for the plant. Dmitry Checkin,
allowed a larger-scale model to be (MJ, July 23, 1999, p.55). details Krasnoyarsk’s spokesman, says that
constructed than the one used to The death of four employees at North the company has found new sources
calculate resources last year (MJ, 22 feared dead in Ltd’s Northparkes copper-gold mine within the former Soviet Union and
October 29, 1999, p.347). in New South Wales was caused by an also from outside.
The new model was confirmed by Chinese mine air blast, not a partial mine collapse
drilling and continuing mining in the China’s Xinhua news agency, together caused by an air blast, as described in
open pits, and geostatistical work by with China Daily, reports that an an earlier article in Mining Journal.
. . . Novokuznetsk
Geostat International has further accident at the Xuzhou Dahuang The company has published stopped from
supported the model. McWatters is
presently examining the possibility of
Mountain coal mine in Jiangsu
Province, eastern China, has probably
preliminary details of the tragic
incident in its half-yearly report. The
exporting . . .
applying the Sigma model to the killed 22 miners. The tragedy in situ portion of the orebody Reuters reports that a Russian
Lamaque open pits. occurred on January 11, when water suddenly caved into the air void regional court has prevented
broke through a section 320 m between the broken material and the Novokuznetsk Aluminium, the
underground. A total of 63 employees uncaved in situ ore. The event caused country’s fifth largest producer, from
Production were trapped by the water, as it cut off
escape routes. Rescue efforts had
a rapid displacement of air in the void
up through the collapsing orebody,
exporting its products. The ruling is
part of insolvency proceedings
saved 41 miners by January 16, with and through an exploration drive, against the company, which has
14 reported killed, and a further eight which was connected to the main outstanding debts to a local energy
Injunction stops BHP still missing. The likelihood of finding
the missing miners was regarded as
decline, the ventilation shaft and the company. MIKOM, the company
hoisting shaft. The air was forced which controls Novokuznetsk, has
contracts slim. through these exits at extremely high had its accounts frozen, but has
The Australian Federal Court issued speed. managed to persuade its suppliers to
an injunction on January 31 against Two vehicles, containing the four continue shipments to the smelter.
BHP, preventing the company from
Rio Tinto output employees, were destroyed by the air Novokuznetsk has appealed against
offering and entering into individual Rio Tinto reports that refined copper blast, killing the workers the ruling, and is continuing
contracts with members of its Pilbara production increased in the December immediately. Two of the employees production.
workforce, employed by BHP Iron quarter, as well as for the 1999 were contracted, and two were
Ore (BHPIO). The company is to calendar year, although material Northparkes workers. The company . . . Nordural’s pot
appeal against the decision, and mined decreased. Refined output rose notes that a further 57 workers were
states that the injunction “would not by 10% to 104,300 t compared with successfully brought to the surface by problems . . .
impact (upon) BHPIO’s the previous December quarter, and mine rescue units. The 60,000 t/y Nordural aluminium
determination to continue to seek by 19% to 388,200 t for the year smelter in Iceland is experiencing
changes in work arrangements at its (compared with 1998). Mined output Kanowna Belle helps malfunctions in eight of its 120 pots.
Pilbara operations.” The ruling was decreased by 1% to 211,800 t in the Nordural is a subsidiary of Columbia
passed after unions representing December 1999 quarter compared Delta record Ventures Corp. Bjorn Hogdahl,
employees at BHPIO submitted that with the December 1998 quarter, and The increase of ownership to 100% of Nordural’s managing director, says
there was a serious arguable case that for the year, a 3% drop to 859,800 t the Kanowna Belle gold mine in that the problems have affected
“BHP had breached the law ... by was noted. The company attributes Western Australia (MJ, October 1, production, and extra costs are to be
inducing employees to leave their the decrease in mined output to an 1999, p.264) helped Delta Gold Ltd to expected.
union ... and by breaching a term of expected fall in output from the raise production to record levels for Mr Hogdahl accepted that the
the Contract of Employment which Grasberg joint venture in Papua New the fifth successive quarter. The pots, which were commissioned
provides that BHP should honour Guinea, which produced an company has now produced over 2 between 12 and 18 months ago, would
collective bargaining and not enter “exceptional contribution” in 1998 Moz of gold in total. The Eureka gold not normally be expected to go wrong
into individual contracts”. (MJ, October 23, 1998, p.329). operation in Zimbabwe has completed so soon, and consequently the plant
BHP rejects claims that it has Aluminium production increased commissioning, and initial gold was not prepared for problems. This
discriminated against employees, and by 9% in the December quarter and recoveries are meeting targets. The will mean that it will take longer than
also rejects the argument that it had also in the calendar year, compared mine produced over 9,000 oz in the normal to put the malfunction right.
sought to de-unionise the workforce with the relevant periods in 1998. In December quarter, and is scheduled
through the offer of individual total, 143,600 t were produced in the to produce 29,000 oz by the end of
“workplace agreements”. The December quarter, and 557,800 t in June. The company has announced
. . . Venezuelan
company posted individual contracts the whole year. The company plans to open further new mines in the aluminium output
to workers at its Pilbara operations attributed the rise to higher early months of this year (MJ,
last year (MJ, January 21, p.42). production at smelters, and the December 24/31, 1999, p.503). drops
company’s increased stake in The Venezuelan state-run aluminium
Tara mediation Comalco. Bauxite production rose by Mining ban backed complex produced 570,000 t in 1999,
29% in 1999 to 8.5 Mt compared 2.8% less than in 1998. Two
agreed with 1998, and in the December by Sierra Leone production lines at the Alcasa smelter
Outokumpu Oy has agreed to a quarter, a 12% increase was achieved, The cessation of mining in Sierra were shut down, and the larger
facilitation process for the resolving of to 2.3 Mt. Leone, ordered by former rebel leader Venalum smelter increased output,
the long-running dispute at the Tara Foday Sankoh last week, has been but not sufficiently to cover the
zinc mine in Navan, Ireland. The HWE wins Jamaican endorsed by the government, after a shortfall.
process is to start no later than period of uncertainty (MJ, January The country has been trying to
February 5, and was requested by the mining contract 28, p.55). Information Minister, encourage foreign investment to
Ministers for the Environment and Henry Walker Eltin (HWE) of Julius Spencer, says that the upgrade the ageing facilities for some
Local Government, Enterprise, Trade Australia reports that it has been declaration by Mr Sankoh was time (MJ, August 20, 1999, p.142).
and Employment, and Marine and awarded a US$73 million bauxite “definitely in consultation with
Natural Resources. All three mining contract in Jamaica. The the President” (Ahmed Tejan Birim-Ashanti deal
Ministers recently met separately contract, with Aluminium Partners Kabbeh).
with local senior management and of Jamaica and Jamalco, will run for sealed
union leaders. Outokumpu has agreed five years, and is the first for HWE in Krasnoyarsk expects The agreement between Birim
that no further contract workers will the Caribbean, and the first in Goldfields Inc. and Ashanti
be engaged pending the completion of bauxite. The contract will begin in steady output . . . Goldfields Co. Ltd regarding Birim’s
the facilitation process, and that only April, with a capital requirement of Russia’s second largest aluminium Mampon gold deposit in Ghana,
training will be given to contract about US$10 million. Jamaica’s producer, Krasnoyarsk, expects to outlined last year (MJ, October 1,
workers previously due to begin Prime Minister, P.J. Patterson, produce a similar amount this year to 1999, p.263), has been completed.
training and employment. recently announced that the country last year’s output, despite alumina Ashanti will now assess the near-
The workers at Tara last week is to upgrade its alumina refineries, supply problems. The company surface portion of the deposit for
rejected a productivity plan put together with Alcoa (MJ, January 28, produced 841,039 t in 1999, but the mining and processing at its Obuasi
forward by management (MJ, p.64). facility’s main supplier, operation.

Mining Journal, London, February 4, 2000 91

We can see clearly now, the rain has gone

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92 Mining Journal, London, February 4, 2000

 TECHNOLOGY TODAY

survive are the ones who can obtain Moxy Trucks As, N-6440

Emerald
pure minerals for the lowest cost ... Elnesvågen, Norway. Tel: (+47) 7126
This trip is all about prospecting – 8500. Fax: 7126 8550. E-mail:
but in this case, we’re prospecting for moxy@moxy.no Website:
microbes rather than actual www.moxy.no
minerals”. Dr Hobbs says that the

fingerprinting project will be exploring exactly the

same sort of systems as those that
formed orebodies such as Broken Hill
and Mt Isa.
Integrated belt
weigher for
Although the technology for mine equipment status. PlantScape is The term ‘extremophiles’ has been
fingerprinting gold has been available best described as a hybrid system coined for the microbes being sought surface miner
for some time (MJ, February 28, that merges the best features of because they live at the very upper
1997, p.168), it is only more recently distributed process control and end of the temperature and pressure Chile’s Atacamas Mineras has
that the concept of finger printing has programmable logic controllers, conditions under which life is able to selected two surface miners from
been applied to emeralds. Gaston integrating batch, sequential and survive. They thrive in extreme Wirtgen to meet the challenges
Giuliani, a geologist at the Centre de discrete control functions including situations, and Dr Peter Franzmann posed by mining a 1.5 m thick
Recherches Petrographiques et SCADA, safety systems, building, of CSIRO Land & Water says that caliche deposit in northern Chile.
Geochimiques-CNRS in France, has security and access control in one because they operate at very high Prior to the development of the
used the analysis of oxygen isotopes system. Jining will use the system for temperatures they are extremely project, Atacamas made an
to pinpoint the origin of particular real-time data collection, efficient at what they do – which assessment of the profitability of
emeralds. transmission and analysis, as well as includes extracting minerals like mining the deposit with surface
Mr Giuliani and fellow researchers to display records of the main copper, gold, zinc, nickel, manganese miners, and Wirtgen supplied the
at CNRS used an electron microprobe production process, equipment and lead from the mineral-rich company with a 2100SM unit for
to test an emerald from a Roman condition, and process parameters of fluids emanating from the which the conveyor belt had been
earring, and four others from the the entire mine. hydrothermal vents. The aim of the fitted with a belt weigher supplied
treasury of the Indian potentate the Honeywell Control Systems Ltd, project is to see whether the microbes by Pfreundt GmbH & Co. KG. The
Nizam of Hyderabad that were cut in Honeywell House, Arlington can be used in large-scale mining assessment on a 250 m x 50 m
the 18th Century. The emeralds were Business Park, Bracknell, RG12 1EB, operations as part of a process to portion of the deposit demonstrated
believed to have been produced from UK. Tel: (+44 1344) 656 000. Fax: extract metals from sulphide ores. Dr that the surface miners were the
mines in Austria, Egypt and 656 240. E-mail: Hobbs believes the microbes might most appropriate method of mining
Pakistan. Comparisons with samples uk.infocentre@honeywell.com enable Australia’s miners to exploit the deposit.
from various emerald-producing Website: www.honeywell.com/uk lower grade ore deposits, extract The fitting of a belt weigher offered
regions around the world metals more cheaply, clean up waste Atacamas Mineras a number of
demonstrated that the Roman stone streams and even improve mine advantages over a volumetric
came from the Swat-Mingora region
of Pakistan, and one of the Indian
Seabed safety. calculation of the conveyed quantities
based on mining width, depth and
stones came from Afghanistan. microbes for specific weight. The specific weights
However, the three other Indian
emeralds appear to have originated mining? Moxy wins of the mined material vary and the
belt weigher provided the operators
from Colombia. This, says the design award with precise measurements displaying
researchers, demonstrates how In April this year, scientists from the weight of material mined in
quickly the high quality emeralds Australia’s Commonwealth Scientific The Norwegian design council has tonnes or as a rate of tonnes per hour.
from Colombia spread around the and Industrial Research Organisation awarded Moxy Trucks’ MT36 The use of the belt weigher also
globe once they were exploited by the (CSIRO) are to launch a pioneering articulated haul truck a Good Design prevented the overloading of trucks
Spanish conquistadores in the search for active volcanic vents on the Award, its highest honour. In making and allowed an accurate gauge of
sixteenth century. seabed of the Manus Basin, north of the award, the design council material moved should contractors be
Centre de Recherches Papua New Guinea. They will be considers the design, function and used to transport the material from
Petrographiques et Geochimiques- searching for some extraordinary life ergonomics, materials used, the surface miner. In addition, the use
CNRS, 15 Rue Notre Dame des forms that can survive in boiling construction and production, form, of the belt weigher allowed the
Pauvres - BP 20, Vandoeuvre-les- water and which dine on minerals marketing communication and operator to optimise mining depth as
Nancy, 54501, France. Tel: (+33 3) that contain copper, gold and nickel. general impression. well as auger drilling and power
8359 4213. Fax: 8351 1798. Website: The aim is to investigate whether The MT36 can carry a 33 t payload consumption. As a result of the test,
www.crpg.cnrs-nancy.fr these organisms can be utilised in in its specially designed sloping body. Atacamas Mineras plans to use two
mineral processing. It features a permanent six-wheel 2100SMs to produce 5,000 t of caliche
A team of biologists and mineral drive and a free-swinging rear tandem a day.
Yankuang researchers will sail from Cairns in
Queensland in the CSIRO research
bogie which ensures the best possible
ground contact in all conditions. The
Pfreundt GmbH & Co. KG,
Ramsdorfer Strasse 10, D 46354
chooses vessel Franklin. The seafloor search
will be conducted in an eerie
unit is powered by a Scania DSI 12,
water-cooled, direct-injection diesel
Südlohn, Germany. Tel: (+49 2862)
98070. Fax: 980799.
Honeywell landscape of smoking undersea engine that generates 272 kW and
chimneys – the vents for mineral complies with US/Californian
China’s Yankuang Group has fluids pumped from deep within the emission regulations. Moxy’s award-winning MT36
awarded Honeywell Control Systems earth’s mantle, shattered mineral
a US$1.45 million contract to supply columns resembling ancient ruins and
an integrated monitoring and safety ‘hills’ carpeted with bacteria and
system at its Jining No. 3 organic hydrates – compounds which
underground coal mine in Shandong can only exist at the extreme
Province. The mine, which produces pressures of the deep sea.
5 Mt/y of prime quality, low sulphur The project has been initiated by
coal, has elected to use Honeywell’s Dr Bruce Hobbs, chief of CSIRO
PlantScape SCADA system. Exploration and Mining, Dr Rod
According to Honeywell, the Hill, chief of CSIRO Minerals and Dr
system consists of a PlantScape Dave Dekker of CSIRO Exploration
SCADA system with operator & Mining. Dr Hobbs says the goal is
stations and an engineering station. to find particular microbes that can
This interfaces with process logic be used to process minerals on dry
controllers (PLCs) for the land, and so develop more efficient
underground and surface monitoring and cleaner ways to win metals.
of temperatures, wind velocities, air “When times are tough in the
pressures, remote gas sensors and minerals industry, the miners who

Mining Journal, London, February 4, 2000 93

 MINERAL MARKETS

that have applications in rechargeable bat-

Platinum pipped
teries, catalysts and capacitors.
Total stocks of nickel are now at their
lowest levels since about 1990, a time when
the price was around US$5.00/lb. HSBC

to the post points out that, with stocks at such low lev-
els and demand being so strong, supply dis-
ruptions could trigger a rapid rise in price.
On the supply side, Macquarie notes that
It was a close race between platinum and Macquarie says that its latest stainless steel Russian exports of nickel have shown a
palladium to the US$500/oz mark this production figures indicate that global marked slowdown. The bank says that
week. Despite being neck and neck it was stainless steel output in the final quarter of Russian exports from January to November
palladium’s continued good form – building 1999 rose by 13.2% and was over 15% year- 1999 were 190,100 t, a year-on-year fall of
on strong industrial demand and supply on-year higher in November and December. 3.2%. However, Norilsk has said that its
uncertainty – that allowed it to take the A recent report from HSBC points to this output was up by 1.8% in 1999. This, says
lead and clear the barrier first. Platinum trend continuing. It forecasts that stainless Macquarie, may point to a recovery in
closely followed, and as Mining Journal steel demand may rise by 15% in 2000, and domestic demand.
goes to press both seem to have paused for says that rapid rises in stainless steel prices Further support for the price, at least in
breath and are running neck and neck at indicate a recovery in end-use demand the first half of the year, is being lent by the
US$502.50/oz. rather than stock building. Demand from continued teething problems being experi-
While at first sight the strength in both other less important sectors also continues enced at the Australian lateritic nickel pro-
metals may be viewed as a result of similar to be strong. Inco has recently decided to jects (this issue, p.73). Additional support
factors – erratic supplies from Russia, invest in its special products group to may be provided by potential labour prob-
strong demand from automobile manufac- increase its output of special nickel products lems at Inco’s Sudbury operation, when its
turers and a sprinkling of speculative inter- labour contract expires in May, and in
est – the lease rates for platinum and palla- August by the expiry of Falconbridge’s
dium are markedly different. The platinum LME PRICES & STOCKS labour contract. ■
one month lease rate is well in excess of 60%
at present, indicating an extremely tight
illiquid market. According to Precious
Prices (a.m.)
Tonne basis
COPPER Grade A
Feb 3
Buyers Sellers
Jan 27
Buyers Sellers Sound fundamentals
Metals Monthly Monitor the platinum lease Cash....................... $1,789
Three months ......... $1,826.5 $1,827
$1,790 $1,818.5 $1,819.5
$1,856.5 $1,857
for zinc
rate has risen steadily since the middle of TIN
1999; in June it averaged 5.6% (average Cash....................... $5,790 $5,795 $5,765 $5,770 Over the past month the three-months zinc
Three months ......... $5,825 $5,830 $5,825 $5,830
London fixing price US$356.80/oz) and by LEAD
price has slumped. After closing 1999 at
October it was 51.2% (average London fix- Cash....................... $453 $454 $463 $464 US$1,235/t it has gradually slipped lower
Three months ......... $471 $472 $479.5 $480
ing price US$421.10/oz). The same cannot ZINC Special high grade
until last week, under the weight of long-liq-
be said for palladium; in June 1999 the one- Cash....................... $1,101 $1,101.5 $1,126 $1,127 uidation by traders and funds disappointed
Three months ......... $1,120 $1,121 $1,150 $1,151
month lease rate averaged 3% (average ALUMINIUM Higher grade
by the market’s failure to breach the key
London fixing price US$336.70/oz) and in Cash....................... $1,720.5 $1,721 $1,716 $1,717 resistance level of US$1,245/t, it fell to
Three months ......... $1,700 $1,700.5 $1,712 $1,712.5
October it spiked to 13.2% (average Alloy US$1,150/t on Friday and has continued
London fixing price US$386.9/oz). It has Cash....................... $1,375 $1,380 $1,395 $1,398 lower this week. The situation was not
Three months ......... $1,415 $1,420 $1,435 $1,437
since fallen to the current rate of around NICKEL helped by rising LME stocks, particularly
9%, indicating that palladium’s price is a Cash....................... $8,920 $8,930 $8,480 $8,490 in Singapore where Chinese material has
Three months ......... $8,940 $8,950 $8,520 $8,525
reflection more of supply and demand fun- SILVER been placed on warrant, and in Trieste
damentals than of a tight market. Cash....................... $5.08 $5.12 $5.16 $5.21 where, according to Macquarie Equities,
Three months ......... $5.18 $5.22 $5.26 $5.31
In addition to being aided by worries over metal from Kazakhstan and controlled by
future Russian supplies, palladium from LME warehouse stocks on February 2 Glencore has been placed on warrant.
Russia is still very scarce on the spot mar- and turnovers for the month of January Despite these factors, the outlook for zinc
ket. For platinum, Norilsk chairman Yuri Stocks Stocks Turnovers in the longer term remains sound. Despite
(t) (Jan 26) (t)
Kotlyar says that the company expects to the recent increase, to 290,775 t, zinc stocks
COPPER 804,125 812,500 36,329,925
receive its export quotas sometime between on the LME remain at relatively low levels
TIN 10,335 10,315 818,645
now and the middle of February. ■ as do producer and consumer inventories.
LEAD 189,575 187,025 6,703,850
Furthermore, the metal is being supported
ZINC SHG 291,975 290,150 17,808,875
by solid demand. According to London-
Nickel to target ALUMINIUM HG
Alloy
793,200
83,980
781,150
82,800
58,310,575
1,175,840 based metal broker Brandeis, demand is
US$10,000/t? NICKEL 42,210 42,786 2,907,324 exceeding its base case level of 2% and is
SILVER 45,000oz 45,000oz 115,000oz particularly strong from the European gal-
A boom in stainless steel demand, falling vanising sector. In the US, Brandeis says
London Metal Exchange official averages
LME stocks, a slowdown in Russian exports for January were: growth remains firm despite a forecast of a
and continued problems with the Australian Cash Three months Settlement sharp slowdown in growth to 1%.
laterite projects may propel the nickel price COPPER Grade A $1,843.59 $1,880.98 $1,843.98 One cloud on the horizon is China. In the
to over US$10,000/t by the end of March, TIN $5,924.75 $5,960.75 $5,927.75 past it has exerted a major influence over
says Macquarie Equities in a recent report. LEAD $471.71 $487.89 $472.08 the zinc price with its numerous producers
In the meantime the price has risen to its ZINC rapidly increasing exports to take advan-
highest level for over four years, with fund Special high grade $1,178.43 $1,199.43 $1,178.80 tage of any price strength and effectively
buying being a major force in the current ALUMINIUM HG $1,680.28 $1,688.03 $1,680.70 providing a cap for the market. In 1999,
Alloy $1,387.39 $1,430.41 $1,389.13
rally. China’s ability to produce zinc metal was
NICKEL $8,309.50 $8,383.00 $8,313.75
Stainless steel accounts for around two- boosted by a ban on the export of concen-
thirds of primary nickel demand and SILVER $5.10 $5.20 $5.13 trates in July and metal exports rose by

94 Mining Journal, London, February 4, 2000

 MINERAL MARKETS

37.7% to 527,142 t in 1999. This already the end of the month offers were in the (SX/EW) technology have resulted in lower
high level of imports limits China’s ability US$3.20-3.30/lb range. selenium production. For nearly three years
to cap the price. In addition, the start-up of Production problems at Mexico’s selenium has been an unprofitable commod-
several galvanising lines in China will help Industrias Peñoles, the world’s largest bis- ity and several producers and toll refiners
boost domestic demand for zinc which has muth producer, which had caused the sharp have stopped treating tank-house slimes.
in the past lagged behind growth in output. increase in prices during 1999 appeared to Union Minière ceased making commercial
As a result of these and other develop- be over as the company confirmed that out- grade selenium and its stocks are now near-
ments, Brandeis remains confident that the put was expected to return to levels similar ly depleted. Phelps Dodge reportedly is pro-
zinc price will average around US$1,213/t in to 1997 when Peñoles produced 1,028 t. ducing 50% of its normal output while
2000, with the market largely balanced for Cobalt was quiet following the Christmas Asarco’s production has dropped by about
much of the year. Macquarie is more opti- holidays although as with other metals 25% because of the shutdown of the elec-
mistic, forecasting a 2000 average of there had been some interest for prompt trolytic tank house at Amarillo, Texas.
US$1,268/t with the market showing a material around the year end, particularly Noranda lost a month’s worth of production
small deficit for the year. ■ for high-grade cobalt, with sales as high as because of the strike at Kidd Creek last July
US$15.00/lb being reported. So far this and stoppages for maintenance.
year, prices have remained relatively stable, Traditional copper-smelting operations
Selenium perhaps easing a little towards the end of
the month despite indications that prices
are also expected to produce less selenium
because of the ore feeds. Noranda projects
sparkles could go higher in the near term. Russian
grades were available at just below
that its selenium production this year will
be only 70% of 1999 levels given its refinery
With the exception of selenium and to a US$13.00/lb with Zambian 99.6% purity and feed estimates. Those companies that
lesser extent gallium, most minor metals priced at around US$13.00-13.50/lb. stopped producing selenium altogether are
suffered during January. The expectation The continued availability of cobalt from not likely to restart. On the demand side the
had been that the Chinese would withdraw the US Defense Logistics Agency (DLA) outlook is positive. Demand from automo-
from the market in the run up to their New appears to be a factor in holding prices at tive and architectural glass sectors has
Year holidays in early February and it was more stable levels. The DLA has authority increased and new applications are being
in anticipation of this that many buyers had in fiscal year 2000 to sell 6Mlb of cobalt and developed. Most importantly, China’s sele-
stocked up with metals during December. in January the offering was for 649,459 lb of nium requirements have improved and with
Unfortunately the opposite happened and granules and rondells in an unusually nar- little domestic production the country is
the Chinese made aggressive offers, particu- row and uniform grade range when com- dependent upon imports particularly from
larly for metals already in warehouse pared with most solicitations in the past. Japan. ■
Rotterdam, or for materials soon to arrive, All of the cobalt on offer was between
so that they could turn the metal into cash 99.301% and 99.375% in purity. Earlier in LONDON PRICES
before the New Year holiday. As a result all the month the DLA announced that for the
the metals of which China is a major first time in two years negotiated bid sales Metals Feb 3
exporter slipped in price. of cobalt will be held in coming months. The Aluminium (US producer) 63.00-66.00 c/lb d/d
Antimony $1,150-$1,200/t cif
Antimony was the typical example, with first of these bids will be in March with oth- Arsenic (Rotterdam 99%) $0.30-$0.40/lb
ers scheduled in June and September. The Bismuth Bismuth $3.20-$3.60/lb cif
prices at the end of December having moved Cadmium (99.99%) $0.15-$0.20/lb cif
from the lows of around US$1,100/t, back up negotiated bids will offer 1 Mlb in each .. (99.95%) $0.13-$0.18/lb cif
Chrome (UK 99%) $10.00-$11.00/lb
close to US$1,300/t. However, the month compared with the usual 600,000 lb Cobalt (99.8%) $13.50-$14.00/lb net
to be offered in the rest of the monthly sales. .. (99.3%) $13.00-$13.50/lb net
announcement that Chinese exports of anti- Germanium $610-$660/kg
mony products were likely to remain Gallium prices were firmer as consump- Gold £175.14($286.50)/oz
Indium $150-$170/kg
unchanged in 2000 at 40,000 t disappointed tion is still increasing while stocks of metal Iridium (J Matthey price) $415/oz
have fallen over recent years after de-stock- Magnesium (Norsk Hydro Euro. prod.) e2.45/kg*
the market. It had been hoping that the .. (US Free mkt, 99.8%) $2,400-$2,480/t*
Chinese antimony industry would reduce ing encouraged by stagnant prices through Manganese
metal (99.7%) $940-$1,020/t
exports and so give some much needed sup- most of 1999. Mercury (99.99%) $128-$138/flask
The growth in demand from semi-conduc- Nickel $4.05-$4.06/lb
port to prices. The Chinese export figure Osmium $400-$450/oz
includes concentrates and trioxide and if tor and other electronic applications shows Palladium (J Matthey price) $507.00/oz
.. (Free market) $502.00-$507.00/oz
confirmed in February it would deny the no sign of slowing. Demand is increasingly Platinum (J Matthey price) $505.00/oz
being focused on the higher quality 6 & 7N .. (Free market) $500.00-$505.00/oz
market any chance of establishing a price Rhodium (J Matthey price) $1,975/oz
recovery. Certainly most Chinese sellers quality metal for which prices are now in the Ruthenium (J Matthey price) $62/oz cif
Selenium $2.50-$3.00/lb cif
were keen to off-load material and offers range US$550-570/kg. Use in light emitting Silver $5.26/oz
diodes and microwave components of mobile Tellurium (UK lump & powder
were soon back down below US$1,200/t, 99.95%) $4.00-$6.00/lb net
although it was expected that during the phones is particularly important. Gallium Tin (Kuala Lumpur) RM21.78/kg
actual Chinese holidays in early February nitride diodes have also had promising trials Ore & Oxides Feb 3
the market would at least stabilise owing to for use in street lights. This has led to a near Antimony (60%) $8.50-$9.00/t unit, cif nom*
a drop in Chinese activity. The outlook for absence of commercial grade 4N quality for Beryl (10% BeO) $75-$80/s ton unit BeO cif*
Chrome (Transvaal, Friable 40%) $50-$70/t, fob*
the rest of the year, however, does not look which prices are now established close to .. (Turkish, concs 48%) $65-$70/t fob*
US$500/kg. Columbite (min. 65% comb. oxides) $3.00-$3.80/lb cif*
good. Ilmenite (54% TiO2) A$95-A$110/t fob
Bismuth prices continued their downward Selenium is the other metal improving in Lithium ores (Petalite 4.2% Li2O) $250/t fob*
(Spodumene>7.25% Li2O) $385-$395/t fob*
spiral on the back of lower-priced offers price, largely as a result of increased Manganese ore (48-50% Mn,
Chinese consumption. From historically max. 0.1% P) $1.81-$1.90/t unit fob*
from China. Producers elsewhere appeared Molybdenum
to be competing with each other for con- low levels seen during 1999 of around oxide (conc 55-57%) $2.55-$2.60/lb
Rutile (Aust. 95-97%
sumer business, offering around US$3.60/lb. US$1.50/lb, prices have been moving steadi- TiO2) A$725-A$800/t fob (bulk)
ly upwards in the last few months and a Tantalum oxide (60% cif N. Euro port) $26-$32/lb
Those traders caught with material were Uranium (Nuexco unrestricted/restricted
also forced to drop their offering price. As a surge in interest early in January pushed U3O8) $7.60/$9.40/lb
Vanadium (98% V2O5) $1.60-$1.70/lb cif
result of the large quantities already in the prices through the US$3.00/lb level. Wolframite (65%) $40-$45/t unit
Copper production cuts and the increased Zircon sand (std 66-67% ZrO2) A$500-A$600/t fob (bulk)
market there was little interest to take up
use of solvent extraction/electro winning * Source: Metal Bulletin
the additional material from China and by

Mining Journal, London, February 4, 2000 95

 MINING AND METALS REPORT
(Incorporated in the Republic of South Africa)
(Registration Number 59/03209/06)
FOR R USSIA/CIS

REPORT FOR THE QUARTER ENDED 31 DECEMBER 1999

Interfax Russian News Agency has established a reputation as
the leading information source for Western companies involved in the
mining and processing of metals and minerals across the former Soviet
Quarters ended 18 months Union. The Interfax Mining and Metals Report provides the information
needed to successfully monitor critical operational issues for your
ended ventures in the former Soviet Union.
31.12.99 30.09.99 31.12.99
•• complete coverage of the ferrous, non-ferrous, precious, and base metals industries ••
Ore milled - metric tons (000) 157 200 1 627 •• updates on joint venture activities •• tender anouncements ••

Yield - grams per metric ton 8.11 7.04 7.90 •• laws and regulations •• exploration and development ••

Gold production - kilograms 1 274 1 408 12 846

Ore milled - short tons (000) 173 220 1 793

Yield - ounces per ton 0.237 0.205 0.230
To order a FREE sample Mining and Metals Report,
Gold production - ounces 40 960 45 268 413 008
call +1 (303) 825-1510, or fax your request to +1 (303) 825-1513.
Cash costs of production
INTERFAX-AMERICA, INC.
- per metric ton milled R343.55 R329.00 R370.33 1675 Larimer St., Suite 600
- per kilogram produced R42 336 R46 732 R46 904 Denver, CO 80202, USA
tel +1 (303) 825-1510
- US$ per ounce $215 $238 $240 fax +1 (303) 825-1513
www.interfax-news.com
Rm Rm Rm
Profit from gold 19.1 7.0 646.0
(Loss)/Profit before tax and
exceptional items (1.4) 9.3 489.2
(Loss) after tax (28.9) (152.5) (54.6)
geoDrilling International
As forecast the Joint Venture has begun to realise the benefits
of the restructuring which was completed in September 1999.
Cash costs reduced to R 42 336/kg from R 46 732/kg in the The leading drilling magazine
previous quarter ($215 from $238 per ounce). Attributable gold
production decreased from 1 408 kg to 1 274 kg (40 960 oz.) News
due to a marked decrease in low grade surface tonnage Technical articles
milled. Overall grade therefore increased from 7.04 g/t to Site reports
8.11 g/t. The average spot gold price for the quarter rose to New technology
R 59 961/kg (R 51 370/kg), contributing to an increase in Comment
attributable profit from gold to R 19.1 million from R 7.0 million. International coverage
Joint Venture management has been able to significantly raise
productivity by 65% in terms of grams of gold per employee Subscribe today for only £32 / US$57
from the previous quarter, and it is expected that these levels
will be maintained.

During the quarter the hedge book was restructured at a net PO Box 10, Edenbridge, Kent TN8 5NE, UK
cost of R 58.4 million. Tel: +(44 1732) 864333 Fax: +(44 1732) 865747
subscriptions@mining-journal.com
Johannesburg 3 February 2000 www.geodrill.com

All figures are unaudited. The quarterly report has been mailed to shareholders.
Copies of the report may be obtained from the London Secretaries, MJ A Mining Journal Publication
JCI (London) Limited, 6 St James's Place, London SW1A 1NP.

96 Mining Journal, London, February 4, 2000

 MINING FINANCE

this asset contributed A$70.5 million to

North relies on operating earnings during the six-month

period, representing 37% of the consolidat-
ed total (North’s 65% joint-venture inter-

iron ore volumes

est falls to 53% when minority interests are
deducted). These operating earnings from
Robe River were 27% lower than in the first
half of 1998/99, as sales fell by 6% to 9.5
The Australian-based natural resources Sweden, benefited from higher prices and Mt. Lower prices were exacerbated by the
group North Ltd recorded a sharp fall in greater throughput, offsetting lower grades. strength of the Australian dollar. The
operating earnings (before interest and tax) Part of the improvement from Alumbrera group’s 56.1%-owned subsidiary Iron Ore
for the six months to December 31, 1999, to was due to the recoupment of amortisation Co. of Canada (IOC) contributed A$33.7
A$189.6 million, 29% less than in the corre- charges made in 1998/99, following a write- million (100% consolidated basis), a fall of
sponding period in 1998. Around half of the down in the value of North’s investment, 41%. IOC’s sales of concentrate fell by 14%
fall in the total was due to the sale during along with those of the other partners, after to 2.6 Mt but pellet sales rose by 20% to 5.4
the period of North’s Warman pumps busi- the ore reserves were restated (MJ, August Mt.
ness to Weir of the UK (MJ, September 17, 27, 1999, p.165). The outlook for iron ore sales volumes at
1999, p.223) and the group’s 50% interest in Exploration, development and corporate both divisions “continues to be strong”,
the Kanowna Belle gold mine to Delta Gold expenses were reduced by 23%, to A$38.4 with IOC’s sales book full for the 2000 cal-
NL. Sales revenue fell by 24%, to A$833.5 million, and interest charges were more endar year, but earnings have been adverse-
million. than halved, to A$13.8 million, reducing the ly affected by lower prices. The deteriora-
The balance of the fall in North’s operat- fall in pre-tax profit. The lower interest tion in operating earnings was reduced at
ing earnings for the first half of the current charges were the result of the application of Robe River in the second quarter of the first
financial year was due to a deterioration in the proceeds from the Warman and half and IOC recorded higher earnings com-
the operating earnings of the group’s iron Kanowna Belle sales to the repayment of pared with the December quarter of 1998,
ore operations and its Northparkes copper- long-term debt, which fell by 56% during as higher sales volumes and cost controls
gold mine in New South Wales. The latter the six months, to A$462.1 million. Net took effect. Nevertheless, the iron ore oper-
suffered a fatal accident towards the end of profit was A$334.0 million, a more than ations continued to receive pressure from
the period (this issue, p.91), and reopened four-fold rise, owing to abnormal gains lower prices, down by 13% at Robe River
on January 20. The uninsured losses have (post tax) of A$234.3 million from the quarter-on-quarter. North notes that cur-
been fully taken into the first-half accounts. Warman sale, A$14.2 million from rent price negotiations feature suppliers
These adverse factors were partially off- Kanowna Belle and a A$28.2 million tax “seeking pre-Asian crisis rates” and
set by a firm move into profit by the 25%- credit from the restatement of deferred tax Japanese customers “pursuing price
owned Bajo de la Alumbrera copper-gold following the change in the corporate tax decreases”.
mine in Argentina, and smaller gains from rate. Subsequent to the end of the reporting
North’s uranium (68.4%-owned Energy North describes its 65%-owned Robe period, seven Japanese steel mills issued let-
Resources of Australia) and zinc operations. River iron ore operations in Western ters of intent to purchase Marra Mamba ore
The latter, 100%-owned Zinkgruvan in Australia as the group’s “powerhouse”, and from Robe River’s West Angelas project.
The deal covers 8 years, starting at 5 million
dry long tons (1 long ton = 2,240 lb) in
SHARE PRICES AND EXCHANGE RATES 2002/03, rising by 1 million long tons per
year to 8 million long tons in year four. The
Company Feb 2 Change Local US$ mill. Company Feb. 2 Change Local US$ mill.
Local 5-day % % hi-lo Mkt cap. Local 5-day % % hi-lo Mkt cap. product mix will be one third lump, two
57.953 –1.0 72 8,720 100 1,493
thirds fines. Construction of the West
Alcan Aluminium (C$) ..... 8.5 00.00 00 Norilsk Nickel (Rb).......... 228.40
74.66 8.6
13 00.00 00
Alcoa ($) .......................... 00.00 –0.3
72.13 0.0 71 26,427
00.00 00 Normandy Mining (A$) ... 1.01 –2.9
00.00 0.0 9
00.00 1,121
00 Angelas mine and rail-link will take 27
Anglo Amer. Plat. (R)....... 193.00
00.00 4.3
0.7 96
00.00 6,659
00 Norsk Hydro (NK) .......... 3.29 –4.1
00.00 0.0 60 10,615
00.00 00
Anglo American (£).......... 36.20 –2.8 53 23,716 North Ltd (A$) ................ 3.16 –2.2
00.00 0.0 52
00.00 1,537
00
months from the receipt of final approvals,
AngloGold (R) ................. 314.00 0.3
0.0 00.00 4400 4,911 Outokumpu ‘A’ (e) ........... 12.90 –4.4
00.00 0.0 66
00.00 1,561
00 with existing port facilities at Cape
Anglovaal Mining (R) ...... 00.00 –1.9
51.50 0.0 80
00.00 883
00 Pasminco (A$) ................. 1.49
00.00 0.0 38
00.00 1,070
00
Antofagasta Holdings (£) 4.30 –6.3 86 1,313 Pechiney ‘A’ (e)................ 72.00
00.00 5.1
0.0 83
00.00 5,706
00 Lambert also being upgraded to handle the
Arch Coal ($) ................... 8.69
00.00 –3.5
0.0 2
00.00 332
00 Phelps Dodge ($).............. 58.88
00.00 0.4
0.0 55
00.00 4,403
00
Ashanti Goldfields ($) ...... 2.75 0.0 0 309 Placer Dome (C$) ............ 12.80 –4.5
00.00 0.0 2
00.00 2,878
00
additional exports.
Ashton Mining (A$) ......... 0.78
00.00 –4.9
0.0 66
00.00 169
00 Potash Corp. of Sask. (C$) 76.15 –3.8
00.00 0.0 40
00.00 2,848
00 The levelling out of iron ore operating
Asturiana de Zinc (e)....... 00.00 –8.5
10.80 0.0 41
00.00 423
00 PT Tambang Timah (Rp) 00.00 –7.9
3775.00 0.0 2
00.00 250
00
Barrick Gold (C$) ............ 00.00 –1.5
23.50 0.0 2
00.00 6,419
00 Reynolds Metals ($) ......... 67.81
00.00 2.2
0.0 67
00.00 4,288
00 earnings in the December quarter was
BHP (A$) ........................ 00.00 –3.3
18.80 0.0 70 21,275
00.00 00 Rio Algom (C$)................ 19.25
00.00 4.6
0.0 45
00.00 806
00
Billiton (£) ...................... 3.17 5.6 71 10,865 Rio Tinto plc (£) ............. 11.60 –2.1
00.00 0.0 56 19,766
00.00 00
reflected in the operating earnings of the
Boliden (C$) .................... 4.40
00.00 1.1
0.0 78
00.00 325
00 RJB Mining (£) ............... 0.30
00.00 0.0 7
00.00 70
00 whole group, which fell by just 13% com-
Cameco (C$) .................... 20.15 2.0
00.00 0.0600 1000 800 Sumitomo Met. Min. (¥) . 00.00 –10.2
265.00 0.0 13
00.00 1,398
00
Cleveland-Cliffs ($) .......... 00.00 –2.5
27.38 0.0 4
00.00 303
00 Teck ‘B’ (C$) ................... 12.70
00.00 0.4
0.0 39
00.00 943
00 pared with the corresponding quarter in
Cominco (C$) .................. 00.00 11.5
30.00 0.0 80
00.00 1,771
00 WMC (A$) ...................... 8.00 –1.8
00.00 0.0 77
00.00 5,874
00
CVRD (BR) .................... 00.00 –1.3
47.00 0.0 91 10,506
00.00 00 Xstrata (SF) .................... 1728.00
00.00 0.5
0.0 96
00.00 1,210
00
1998, to A$95.6 million (before interest and
De Beers (Linked Uts) (£) 00.00 –0.1
17.22 0.0 78 10,690
00.0010,244 tax). Quarterly earnings before tax, minori-
Emp. Min. Mantos Blancos (ChP) 00 –6.8
10.25 86 313 Share prices and exchange rates are intra-day Wednesday.
Eramet (Eur)................... 53.80 –5.6 78 1,260 100 in the high/low column indicates that the share is trading ty interests and abnormal items rose by
Falconbridge (C$)............ 25.80 5.7 90 3,153 at a high, 0 that it is at a low, based on local prices over the
Freeport-Mc. C&G ($) ..... 00.00 –1.1
17.44 0.0 68
00.00 2,758
00 past 52 weeks. 7.5% to A$73.1 million, as the cuts in inter-
Gold Fields Ltd (R).......... 00.00 –3.2
25.60 0.0 43
00.00 1,852
00 Currencies February 2 est charges and overheads took effect.
Grupo IM Mexico (MP)... 00.00 –1.1
52.40 0.0 84
00.00 3,440
00
Hindalco (Rs) .................. 852.00
00.00 2.5
0.0 63
00.00 1,456
00 Value of £ $(US) The asset sales have helped to position
HZL (Rs)......................... 00.00 –3.2
13.70 0.0 30
00.00 133
00 $ (US) ................................................... 0.057
1.61 —
1.00 North to build its core business. The group
Iluka (A$)........................ 3.76
00.00 –2.3
0.0 40
00.00 535
00 $ (Australian)........................................ 0.2.51
2.52 0.00
1.57
IMC Global ($) ................ 17.25
00.00 0.7
0.0 31
00.00 1,975
00 $ (Canadian) ......................................... 0.00
2.33 0.00
1.45 currently has no drawings under its US$735
Impala Plat. (R) .............. 276.00
00.00 6.2
0.0 97
00.00 2,904
00 Ringgit (Malaysian) Fixed official rate .. 6.10 3.80
Inco (C$) ......................... 29.00
00.00 3.8
0.0 64
00.00 3,635
00 Franc (Swiss) ........................................ 0.00
2.66 0.00
1.66 million debt facility, and plans to raise up to
Industrias Peñoles (MP) .. 25.50
00.00 3.4
0.0 29
00.00 1,070
00 Krona (Swedish) ................................... 0.00 0.00
Iscor (R) .......................... 26.55
00.00 0.2
0.0 89
00.00 1,081
00 Yen .......................................................
14.09
0.00
8.77
0.00
A$700 million through the issue of debt
174.15 108.44
KGHM (Zt) ..................... 00.00 –1.3
29.50 0.0 9300 1,389
00 Rand (SA) ............................................ 0.00
10.06 0.00
6.26 securities in the Australian market. The
Lonmin plc (£) ................. 7.21
00.00 6.8
0.0 99
00.00 1,849
00 e (Euro) ............................................... 0.00
1.65 0.00
1.03
MIM Holdings (A$)......... 1.43
00.00 –2.7
0.0 70
00.00 1,556
00 e1=Mk5.94573
Markka (Finnish) ................................. 0.00 0.00 group states that its “growth focus will con-
Minsur(PS)...................... 6.58
00.00 –3.8
0.0 63
00.00 118
00
Mitsui Min. & Smlt. (¥) ... 00.00 –4.5
578.00 0.0 51
00.00 2,876
00 e1=FF6.55957
Franc (French)...................................... 0.00 0.00 tinue to be in iron ore”, where it believes
Newmont Mining ($)........ 19.88
00.00 2.6
0.0 26
00.00 3,331
00 e1=DM1.95583
Deutschmark ........................................ 0.00 0.00
that it has a competitive advantage and the
Noranda Mining(C$) ....... 00.00 –0.3
18.25 0.0 45
00.00 3,102
00 Source: Bloomberg
skills “to continue adding value”. ■

Mining Journal, London, February 4, 2000 97

 The Geological
Information System
Randfontein Estates Limited
(Incorporated in the Republic of South Africa)
(Registration number 01/00251/06)
for the ANDES
(“Randfontein”) Geology • Deposits • Infrastructure

REPORT FOR THE QUARTER ENDED 31 DECEMBER 1999 on CDRom

Quarters 18 Months
ended ended
31.12.99 30.09.99 31.12.99
Ore milled - t’000 1 926 1 839 13 329
Gold produced - kg 7 124 6 194 39 228
Available from:
Gold price received - R/kg 55 511 58 875 57 740
Cash operating costs - R/kg 49 689 51 164 50 343 Marketing Dept,
Gold sales 395 459 364 670 2 265 022
The Mining Journal Ltd,
60 Worship Street,
Cash operating costs 353 981 316 909 1 974 837
London EC2A 2HD, UK
Profit before tax 14 583 (2 226) (281 709)
Net earnings after tax 7 195 (5 184) (177 489) Tel: +44 (0)171 216 6060
Bid for Randfontein Estates Limited Fax: +44 (0)171 216 6050
On 6 January 2000, Harmony Gold Mining Company Limited
Email: marketing@mining-journal.com
(“Harmony”) made an offer for Randfontein. Harmony’s initial offer
was revised upwards to ensure that the transaction was supported
and recommended by Randfontein’s previous Board. The first closing
date of the offer is 14 February 2000. All commercial conditions
relating to Harmony’s bid have been fulfilled, with only regulatory MJ
approvals being awaited. To date 34.9% of the Randfontein shares The Mining Journal Limited
L'ENTREPRISE AU SERVICE DE LA TERRE

have been acquired by Harmony.

Change of management
A new board of directors was appointed on 14 January 2000 and
Harmony took management control of Randfontein the following day.
Other than the changes noted in the commentary hereafter, Harmony
has had no input into the operational results reported. Therefore it
COMPETITIVENESS IN METALS
deems it inappropriate to comment thereon. the impact of public policy
Management agreement
The consulting management agreement entered into between JCI
Gold Limited and Randfontein was cancelled by the previous A major study by an international panel of experts on
directors of the company, retrospectively from 1 July 1998 for a the inpact of public policy on competitiveness in
consideration of R140 million. Copper, Lead, Zinc, Aluminium, Tin and the Advanced
Evaluation of hedgebook as at 31 December 1999 Materials. The study also examines the role of public
In accordance with IAS an amount of R336.6 million has been policy in Mineral Exploration.
accounted for, for the mark to market unrealised losses of
certain speculative gold derivatives, held by the company at
Editors:
31 December 1999.
Merton J. Peck
Restructuring of the hedgebook since 15 January 2000 Hans H. Landsberg
The new Randfontein Board, having concluded a detailed John E. Tilton
investigation of all the gold hedging positions of Randfontein, have
found them to be completely inappropriate for the company. Of the Fully indexed and referenced: over 300 pages
2.7 million ounces of gold that were committed to forward sales and ISBN 0 900117 59 1
call options, 1.7 million ounces were unencumbered at a total cost of
US$10 million. There are no remaining forward sale contracts or call Price:
options for the calendar years 2000 to 2001.
Change in accounting policy £31 or US$57 by airmail
The results for the current quarter have been prepared on the basis
that no recognition is given to gold in process before the concentrate Available from:
stage. The results for the prior period have been restated accordingly. Mining Journal Books Ltd
Capital Expenditure
P.O. Box 10,
Edenbridge, Kent,
During the quarter capital expenditure amounted to R27.7 million
TN8 5NE England
(September 1999: R35.8 million).
Tel: (+44 1732) 864333
Johannesburg 27 January 2000 Fax: (+44 1732) 865747
Copies of the report may be obtained from the London Secretaries,
JCI (London) Limited, 6 St James's Place, London SW1A 1NP

98 Mining Journal, London, February 4, 2000

 MINING FINANCE

came into production at the start of last pany’s current hedging position for 2000
Franco-Nevada’s year. The balance will be used to fund explo-
ration at Wassa and on projects in Ghana,
includes a put and call option collar on
57,500 oz of palladium at US$326/oz and
buying power tops Uganda and Ireland. US$418/oz respectively; a very minor
C$1 billion Wassa produced 87,000 oz between com-
missioning last January and the end of
option position in platinum; and a forward
sales contract covering 20,000 oz of plat-
The Toronto-listed royalty specialist and 1999, but gold recoveries from its heap- inum at an average US$404/oz.
gold producer Franco-Nevada Mining leaching solution have been lower than Capital expenditure for the three months
Corp. Ltd achieved net earnings of C$22.0 anticipated. The feasibility study envisaged amounted to US$60.1 million, bringing the
million in the three months to December 31, output of 94,000 oz in 1999, and this fore- annual total to US$194.3 million. Cash flow
1999, 35% more than in the corresponding cast was later raised to 130,000 oz (MJ, from operations in 1999 amounted to
period of 1998. This brings the total for the November 27, 1998, p.430). Material mined US$67.8 million, and US$79.5 million was
first nine months of the company’s current during 1999 is estimated to have contained drawn from Stillwater’s US$175 million
financial year (to March 31) to C$75.3 mil- 185,000 oz. Test work has shown that there credit facility. This resulted in a reduction
lion, a gain of 56%. Revenues for the nine- are no metallurgical barriers to achieving in Stillwater’s cash resources of US$47.0
month period were C$166.8 million, an 81% the gold-recovery levels originally forecast, million, to US$2.8 million, over the course
improvement, and cash flow was up by and Glencar reports that the problem is one of the year.
34%, to C$102.3 million, boosting working of slow movement of the solution through Development of the new East Boulder
capital and other liquid assets to just over the heaps. The ore mined during the first mine continued during the quarter, with the
C$1.0 billion. Franco-Nevada remains free year has a higher clay content than the rest tunnel-boring machines working from the
from debt. of the orebody, and this factor has been existing operations achieving their best
The gains over 1998/99 were achieved compounded by topographical constraints monthly total in December (945 m com-
despite a slightly lower realised gold price, which have necessitated stacking heaps one bined). Capital expenditure for the current
which affected revenue from the wholly- on top of another. year is forecast at US$200 million.
owned Ken Snyder mine in Nevada. The The phase 2 heap leaching area is expect- Commissioning of the new mine remains on
mine produced 185,000 oz of gold and equiv- ed to be completed by the end of next schedule for 2001. ■
alent during the nine months. Franco- month, offering a greater spraying area
Nevada benefited from “strong operating which will allow a full primary, secondary
performances” from the mines in which it and rinse cycle to be used. This should in JCI Gold merger
has its main royalty interests. turn maximise the amount of gold in solu- abandoned
Subsequent to the end of the period under tion delivered to the gold recovery plant.
review, Franco-Nevada took advantage of Glencar believes that the effects of these The plan to merge the various listed compa-
weakness in the share price of Aber positive measures will bring gold recoveries nies in the JCI Gold Ltd group, prior to
Resources Ltd to increase its interest to in line with the original forecasts “over moving its domicile to Toronto, was formal-
14.3% from the 9.6% acquired at the start time”. ■ ly cancelled this week. Vaughan Bray, the
of last year (MJ, January 29, 1999, p.67). acting chief executive of Western Areas Ltd,
The recent price dip was caused by permit- which was to have been the merger vehicle,
ting problems with respect to Aber’s 40%- PGM prices help confirmed the withdrawal of the ‘schemes of
owned Diavik diamond project (MJ, expanding Stillwater arrangement’ through which the merger
January 28, p.55). was to have been effected. The decision fol-
HSBC investment bank reports that The recent excitement in the platinum and lows the successful takeover two weeks ago
Franco-Nevada has indicated that it might palladium markets (this issue, p.94) came of one of the group companies, Randfontein
consider a friendly takeover of Aber, after the end of the December quarter for Estates Ltd, by Harmony Gold Mining Co.
although the preferred option would be to the US producer, Stillwater Mining Co. Ltd, an independent producer, amidst reve-
convert its interest to royalty. Franco- Nevertheless, the strength in prices leading lations of controversial defence tactics by
Nevada also earlier established, at relative- up to this week’s records was well under way the then chief executive of Western Areas,
ly low cost, a significant profits interest in during last year, resulting in a more than Brett Kebble (MJ, January 21, p.33).
the Voisey’s Bay nickel project (MJ, doubling of earnings for Stillwater for both Mr Bray said that the board of Western
October 23, 1998, p.334), another major the three months to December 31, 1999 and Areas had considered proceeding with the
Canadian mining development with a trou- the full year. Stillwater received an average merger plan without Randfontein, but con-
bled permitting history. ■ of US$424/oz for palladium and US$440/oz cluded that this option was not feasible.
for platinum in the December quarter, com- First, the new company would not have ade-
pared with US$254/oz and US$357/oz quate “critical mass” (Randfontein was to
Glencar rights issue to respectively in the corresponding quarter of have provided the bulk of cash flow in the
cover Wassa shortfall 1998.
Palladium and platinum production dur-
early years while Western Areas’ South
Deep project was developed). Second,
The Dublin-based junior gold producer ing the December quarter were down very Consolidated African Mines Ltd (CAM),
Glencar Mining plc plans to raise net pro- slightly (with the grade), at 83,000 oz and the company through which the Kebble
ceeds of £4.5 million through a rights issue 24,000 oz respectively for the quarter, but family controls the JCI group, had indicat-
of 30.4 million shares at £0.16/share. the price rises more than offset this factor. ed that it would not now support the acqui-
Shareholders will be offered seven new ordi- Revenue rose by 50%, to US$45.7 million, sition by Western Areas of Randgold &
nary shares for every 15 already held. The and net profit was 142% higher, at US$13.4 Exploration Co. Ltd, in which CAM holds
rights issue, fully underwritten by Davy million. 25%. Mr Bray said that it is too early to
Corporate Finance of Dublin and Williams The received prices were comfortably in give a clear indication of Western Areas’
de Broë of London, is scheduled to be com- excess of the average spot prices for the peri- future corporate strategy in the aftermath
pleted by April 10. Some three quarters of od, confirming that Stillwater has overcome of the merger collapse.
the proceeds will be used to provide addi- the problems it had in previous rallies when The decision to abandon the merger coin-
tional working capital for Glencar’s 59.4%- earlier hedging at lower prices forced the cided with the release of the initial findings
owned Wassa gold mine, in Ghana, which company to miss out on the gains. The com- of the committee of independent directors

Mining Journal, London, February 4, 2000 99

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 MINING FINANCE

of Western Areas, chaired by Mr Bray, The committee was assisted by KPMG as lion for the aborted merger, partially offset
regarding the events leading up to Mr its financial adviser, and has instructed the by a R31.3 million recoupment of foreign
Kebble’s resignation. The committee dis- latter to continue with a more detailed exchange losses. The restructuring of the
covered that Western Areas had provided a investigation into share dealings during the hedging book, which now has a marked-to-
temporary loan of R111 million to Durban relevant period by JCI-Randgold group market value of around minus US$50 mil-
Roodepoort Deep Ltd (DRD) (a company companies and by any staff who had access lion, was done to bring the programme in
not in the JCI group but chaired by Mr to inside information. KPMG is also to line with the company’s expected produc-
Kebble’s father Roger). At least part of this review Western Areas’ structures for corpo- tion and risk profile.
loan was used to buy shares in the JCI- rate governance. The committee’s initial Gold production totalled 40,960 oz for the
Randgold group, including Randfontein. findings noted a failure on the part of those quarter, 9.5% less than in the September
The funding was arranged by Brett Kebble, members of senior management who quarter. However, cash operating costs fell
without the knowledge of the rest of the became aware of the DRD loan to question by 9.7%, to US$215/oz, largely as a result of
Western Areas board. Mr Kebble had no the authority to proceed without board productivity improvements following a
authority to authorise this funding, and the approval or the purpose for which the funds major rationalisation, completed last
committee concludes that this act was “a were to be used. September, including a 35% reduction in
serious breach of corporate governance”. Meanwhile, Western Areas has reached the labour force (MJ, August 13, 1999,
However, the committee found no evi- agreement in principle with DRD for the p.132). The company’s operating profit
dence of any undisclosed dealings in repayment of the unauthorised R111 mil- from gold amounted to R19.1 million, com-
Western Areas shares by any group compa- lion loan (plus interest), over the next three pared with R7.0 million in the preceding
nies or executives (also the subject of a regu- to six months, and Mr Bray said that the three months.
latory probe), although Mr Kebble did buy company “does not expect to suffer any Randfontein, now under Harmony’s
66,000 shares during the offer period which loss” on the loan. However, the aborted JCI management (MJ, January 28, p.65),
he disclosed. Randgold & Exploration also Gold group merger has cost some R90 mil- recorded net earnings of R7.2 million in the
sold short 160,000 shares in Harmony, lion, about half of which will be borne by December quarter, compared with a loss of
which sale was incorrectly booked to DRD Western Areas and the balance by other R5.2 million in the preceding three months,
by the stockbroker. Randgold told the com- group companies. both periods including restructuring costs,
mittee that this sale was made to hedge any Western Areas also issued its results for and the operating profit totalled R27.5 mil-
fall in value of Harmony options held by the three months to December 31, 1999 this lion in the December period, a fall of 35%
Randgold. (A sale could also have weakened week, posting a net loss of R28.9 million. owing largely to higher amortisation
Harmony’s share price and could thus have The loss included a R58.4 million charge to charges. Gold production rose by 15%, to
reduced the premium value of the share restructure the company’s gold hedging 229,100 oz, and operating cash flow totalled
alternative in its offer for Randfontein.) book and exceptional charges of R51.4 mil- R41.5 million, a fall of 13%. ■

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Mining Journal, London, February 4, 2000 101

 MINING FINANCE

ings performance in the December quarter. The average spot price for the three months
SPCC receives late Net earnings totalled US$9.7 million, com-
pared with US$3.4 million in the corre-
was US$0.79/lb, compared with US$0.70/lb
in the December quarter of 1998. SPCC’s
boost from prices sponding quarter in 1998, as sales revenue by-products also helped: a 6.3% rise in the
rose by 15% to US$172.1 million. Copper average silver price, to US$5.23/oz, com-
Southern Peru Copper Corp. (SPCC), sales volumes were flat, at 200.9 Mlb pounding a 9.5% rise in sales, to 942,000 oz,
owned 54.3% by Grupo Mexico SA de CV, (91,100 t), and the improvement was basi- and an 8.4% rise in the average molybde-
finished 1999 with a relatively strong earn- cally the result of the higher copper prices. num price, to US$2.59/lb, boosted a near
doubling of sales, to 3.3 Mlb.
The metal price recovery came late in
1999, and the average prices of all three
metals for the full year were lower than in
1998, resulting in a 6.9% fall in sales rev-
“Holderbank” Management and Consulting Ltd, enue. Net earnings for the whole of 1999
is the central services organisation of were 46% lower, at US$29.4 million. Copper
“Holderbank”, one of the world leading sales in 1999 were fractionally lower, at
suppliers of cement, as well as aggregates 749.9 Mlb, although mined production was
(gravel and sand), concrete, employing 12% higher, at 745.6 Mlb, reflecting the
40,000 people in more than 60 countries. completion of the Cuajone mine expansion
in the early part of the year.
Commenting on the expansion pro-
Our group “Systems Engineering”, which is gramme, Oscar Gonzalez Rocha, SPCC’s
responsible for the evaluation of raw materials new general director appointed by Grupo
deposits and their planning, has a vacancy for Mexico, said that the contribution from the
an experienced: Cuajone expansion fell 80 Mlb short of
expectations in 1999, as heavy rain in the

Mining Engineer March quarter and metallurgical problems

with the ore each took their toll. The expan-
sion reached full production in the June
quarter. Meanwhile, the expansion of the
Applicants should have practical experience in
Toquepala solvent extraction-electrowin-
optimised deposit exploitation and quarry ning facility was completed in the
planning, as well as in mining software in the September quarter, increasing its capacity
areas of industrial minerals and aggregates by 26% to 124 Mlb/y.
(surface mining). A proficient command of However, Mr Gonzalez Rocha was less
English is essential for daily operations in our specific with respect to the modernisation of
internationally active company. Knowledge of the Ilo smelter, where recent reports from
Grupo Mexico have indicated possible cuts
German, Spanish and French would be of
in the US$875 million budget (MJ, January
advantage. 21, p.49). He merely reiterated the general
plan to “continue modernisation ... to
The successful applicant will manage and improve production through the implemen-
co-ordinate projects in the above mentioned tation of better technology, to comply with
areas, which will incorporate frequent travel all environmental regulations”, noting that
abroad. the strategy would make “the best utilisa-
tion of (SPCC’s) financial resources”. ■

We offer you an interesting and responsible

position. Market news
If you are looking to enter an international Gabriel Resources Ltd, listed on the
platform, and are interested in this demanding Canadian Venture Exchange, is to make a
private placing of 7.0 million common
and diversified position, then we look
shares at C$2.30/share, subject to regulato-
forward to receiving your application to be ry approval. T. Hoare Canaccord will act as
sent to the following address: agent, for a commission of 6% of the gross
proceeds of C$16.1 million, plus 350,000
broker’s warrants, exercisable at
C$2.30/share. The net proceeds will be used
mainly to help fund a bankable feasibility
“HOLDERBANK” study of Gabriel’s Rosia Montana gold pro-
ject in Romania, and for exploration expen-
diture on the company’s other projects.
Ms. G. Müller Gabriel received a positive prefeasibility
“Holderbank” study of Rosia Montana at the end of last
Management and Consulting Ltd. year (MJ, December 24/31, 1999, p.501).
5113 Holderbank, Switzerland ■ The Australian-based gold producer
Goldfields Ltd has announced an all-cash
takeover offer for an Australian-listed

102 Mining Journal, London, February 4, 2000

 MINING FINANCE

exploration company, Gilt-Edged Mining ■ Australian-listed Union Capital Ltd has

NL. Goldfields will make the offer of secured agreement to place 14.4 million Crossword winner
A$0.42/share through its 87.7%-owned sub- ordinary shares, at A$0.20/share, with a Our congratulations go to L. M. Juckes,
sidiary Goldfields Kalgoorlie Ltd. The offer number of European institutional investors. of North Yorkshire, UK, who wins a free
values Gilt-Edged at a total of A$34.6 mil- The proceeds will be divided between annual subscription to Mining Journal for
lion, and represents a premium of 17% over Union’s information technology business sending in the first correct solution drawn
on January 31.
the company’s share price immediately pri- and its Mehdiabad zinc project in Iran
or to the Goldfields announcement this (MJ, June 25, 1999, p.473). Last week, 1 2 3 4 5 6 7 8

Thursday. Goldfields’ move follows an Union was listed on the Third Market
P R E C A M B R I A N P A L
increased offer from Croesus Mining NL. Segment (an over-the-counter market) of L L T O S U O A
9 10

Gilt-Edged has exploration properties in the Frankfurt Stock Exchange, and its U N D E R O P T I M I S E D
the Eastern Goldfields, west and north of shares will be traded through the XETRA N O I K H E I L
11 1 12
Kalgoorlie, which Goldfields argues would system. Union is already listed in Berlin. G E RM A N I U M R A NG E
fit well operationally with its Kundana and ■ The boards of both Wheaton River I A E U A G S
13 14 15
Paddington mines. Goldfields’ offer is con- Minerals Ltd and Kit Resources Ltd have NU D I S T S S E T S
16 17
ditional on an acceptance level of at least recommended that shareholders approve G O T O A R
18 19 20
50.1%, plus the usual requirements under merger of their respective companies T A L C S Y R I NG E
21 22
such circumstances regarding the retention through a ‘plan of arrangement’. The merg- P W T O O T S
23 24 25
of existing assets. er, on the basis of one share in the new com- E K A T I S H R I N K A G E
■ The Australian-based natural resources pany for every share in Wheaton River and S D S T E I M T
26 27
group Broken Hill Proprietary Co. Ltd 0.408 shares in the new company for each T R E A T M E N T G R I S T
(BHP) has arranged a refinancing of rolling share in Kit, was proposed at the end of last L R I A O H N L
28 29
stock used by the Mt Newman joint ven- year (MJ, December 3, 1999, p.455). The E I S C O N C E N T R A T E
ture, an iron ore mining operation in the recommendations follow reviews by com-
Pilbara region of Western Australia. The mittees of independent directors of both
FINANCE MANAGER
lease-back arrangement will release A$179 companies, which conclude that the Our client has an immediate requirement for a senior
million in cash, which BHP will use to exchange ratios are fair to both sets of finance professional for their Zambian joint venture.
Applicants should be available at short notice and have
reduce debt, and will also result in a book shareholders. significant exposure to the mining industry, especially
in the management of all financial aspects of operating
profit of A$31 million in its financial ■ Irish-based Ivernia West plc, owner of a joint ventures in developing countries. Employment
accounts. Mt Newman is 85% owned by 50% interest in the Lisheen zinc mine in will initially be on a short-term contract basis but
should lead on to employment on a long-term basis.
BHP, with Mitsui-Itochu Iron Pty Ltd County Tipperary (MJ, September 17, Please send an up to date CV, quoting Ref No 4488 to: Dennis
Thomas, Thomas Mining Associates, P.O. Box 2010, Lancing, West
holding 10% and CI Minerals Australia Pty 1999, p.213), has appointed RBC Dominion Sussex BN15 8HZ, UK. Tel: +44 1903 753511. Fax: +44 1903 753510.
E-mail: dennis@thomasmining.prestel.co.uk
Ltd 5%. Securities to advise the company regarding
■ Eldorado Gold Corp., listed in Toronto a possible listing on the Toronto Stock
and on the Canadian Venture Exchange, Exchange. ■
has completed a private placing of 9.5 mil-
lion special warrants for gross proceeds of
C$8.5 million. Each special warrant com- MINING/GEOTECHNICAL ENGINEER to develop Your Mining Information Source
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104 Mining Journal, London, February 4, 2000