Mitrais, Member of CAC Holdings Group

Mitrais Mining Newsletter

September 2019 | Vol. 39

Weekly News

Freeport’s Indonesian Copper Concentrates Export Quota Tripled; Tight Availability Easing

September 16, 2019

Copper miner PT Freeport’s export license for copper concentrates has been tripled by the Indonesian Energy and Mineral Resources Ministry for the March 2019-March 2020 period, Fastmarkets has learned.

PT Freeport has been granted additional export quotas for copper concentrate from Indonesia, bringing annual export volumes to 700,000 wet metric tonnes (wmt) up from an initial quota of 198,282 wmt, local newspaper Jakarta Post reported on Friday September 13.

The ministry’s minerals director, Yunus Saefulhak, said the approval of additional quotas was due to successful optimization schemes at PT Freeport’s Grasberg copper-gold mine in Papua province of Indonesia, according to local media reports.

Market participants told Fastmarkets Freeport has been actively quoting and tendering in the market.

Some of the Grasberg tonnages offered are for nearby delivery in September, while some are for the fourth quarter of this year, sources said.

However, mined concentrate from Grasberg coper mine has a high gold content and is not attractive to most Chinese smelters who do not have the facilities to extract the precious metal. Additionally, many Chinese smelters report being well stocked in raw material feed for cathode production in the third quarter. Therefore, even the material’s prompt delivery and relatively cheaper transport costs owing to Indonesia’s proximity to China have not tempted Chinese buyers.

“The tender [for Grasberg concentrates] has circulated in the spot market for two to three weeks, but no bidders were heard,” one trader source told Fastmarkets.

The company has quoted treatment charges of over $60 per tonne to Chinese smelters, Fastmarkets understands.

Spot Copper Concentrates TCs Gains Support

Offers of Grasberg copper concentrate cargoes in recent weeks, returning Peruvian supply and high stockpiles of raw materials in the major consumption hub of China have all pushed up treatment and refining charges (TC/RCs) – the fees paid to smelters to process concentrates into copper cathode.

Fastmarkets MB’s copper concentrates TC index, cif Asia Pacific stood at $50.30 per tonne/ 5.03 cents per lb on Friday, up by 2.2% from $49.2 per tonne/4.92 cents per lb on August 30.

Supply from Peru has also increased since transportation linking Peru’s Matarani port to copper mines owned by Hudbay, MMG, Freeport and Glencore gradually started to recover following a protest that began in July.

“Previously, we thought the TC rebound was the result of resistance to buying by smelters before the start of annual benchmark negotiations during October’s LME Week to win more bargaining chips,” an active copper trader source said. “But after checking the market, we found a sharp increase of spot availability might be a bigger incentive, not only from PT Freeport and Peru, also tendered supply from other copper mines.”

Tenders for copper concentrates from Grasberg, Escondida, Gibraltar, Black Mountain, Carmen, Chapada as well as Southern Peru Copper Corporation have been offered in the spot market in the past three weeks. But traders have become less active in locking in materials and few tenders have been heard to be awarded so far.

“If hundreds of thousands of tonnes of export quota for Indonesian copper concentrates accumulate in the following quarters, tight spot availability will definitely fade and copper TCs will be supported further,” a second analyst said.


Weekly News

The Improvement of ANTAM’s Corporate Rating And Corporate Sustainable Bond I Year 2011 to “idA/Outlook Stable”

September 13, 2019

PT Aneka Tambang Tbk (ANTAM; IDX: ANTM; ASX: ATM) is pleased to announce the improvement of Corporate Rating and ANTAM Sustainable Bonds I Year 2011 Rating by PT Pemeringkat Efek Indonesia (PEFINDO) from “idA-/outlook stable” to “idA/outlook stable” for the rating period of September 10, 2019 – September 1, 2020. The rating improvement is based on the assessment of Company’s credit profile growth, which is reflecting from the improvement of Company’s cash flow ratio inline with positive outlook on ANTAM’s ferronickel production capacity both from existing ferronickel plant operation in Pomalaa, Southeast Sulawesi and development project of East Halmahera Ferronickel Plant in North Maluku which its production nameplate capacity of 13,500 tons of nickel within ferronickel per annum. The corporate rating improvement was also supported by the ANTAM’s low operating cash costs level in ferronickel processing amid the positive outlook of global nickel commodity growth.

ANTAM’s President Director, Arie Prabowo Ariotedjo said:

“In 2019, ANTAM is targeting solid and positive operational and financial performance growth. ANTAM’s solid financial performance was reflected from unaudited net sales in the first half of 2019 (1H19) which amounted Rp14.43 trillion, increased 22% compared to audited net sales in the first half of 2018 (1H18) of Rp11.82 trillion. ANTAM’s higher profitability was due to production and net sales increase as well as efficiency improvement which led to stable cash costs level. ANTAM is committed to deliver positive returns to shareholders and stakeholders.”

Furthermore from positive outlook on Company’s nickel segment, the Corporate rating improvement was also propped up by ANTAM’s bauxite segment growth, inline with the development of bauxite downstream project through the Smelter Grade Alumina Refinery (SGAR) Development Project in Mempawah, West Kalimantan which will be developed together with PT Indonesia Asahan Aluminum (Persero) (Inalum) with capacity of 1 million tons SGAR per annum (Stage 1).

In July 2019, ANTAM also received improvement of S&P Global corporate credit rating from “B-/outlook positive” to “B/outlook positive”. The rating improvement is based on the assessment of Company’s solid operational performance growth which lead on the positive improvement of Company’s financial structure outlook for the twelve-month period ahead.


Weekly News

Bukit Asam Had a Profit Over IDR2 Trillion Amid the Slow Coal Prices

September 16, 2019

Until the first half of 2019, PT Bukit Asam Tbk recorded an increase in its operational performance. The sales rose to 13.40 million tons, 9.7% increase from the same period the previous year. The increase in sales was supported by the increasing of the Company’s coal production to 12.8 million tons or 14.1% increase from the first semester of 2018 and coal transportation capacity of 11.7 million tons or 5.5% increase from January to June 2018 period.

This Company’s operational performance achievement was highly determined by the management strategy in optimizing export market opportunities to several countries such as India, South Korea, Hong Kong, the Philippines, Taiwan and some other Asian countries, amid the decline in the coal price reference (HBA), and by the success of the optimization strategy of sales of medium to high calorie coal exports to the premium market.

During the first semester of 2019, the Company recorded operating revenues of IDR10.6 trillion, consisting of 53% domestic coal sales, 45% export coal sales and 2% other activities such as electricity, briquettes, oil sales crude palm oil, hospital health services and rental services.

This operating income was influenced by the average selling coal price which dropped by 6.8% to IDR778,821 / ton from IDR835,965 / ton in the first semester of 2018. The decline was caused by the weakening of Newcastle coal prices by 38% and Indonesian thermal coal prices (Indonesian Coal Index / ICI) GAR 5000 by 26% compared to the average price of Semester I 2019.

Until half of 2019, the cost of goods sold was recorded at IDR 6.96 Trillion or 13% increase from the same period the previous year, which was IDR 6.14 Trillion.

The largest composition and increase occurred in rail transportation costs which was in line with the increase in coal transportation volume, mining service costs, production and stripping ratio in the first half of 2019 amounted to 4.6 from 4.3 in Semester 1 2018.

With the revenues and the increased costs, the Company’s net profit reached IDR2.01 trillion with an EBITDA of IDR3.19 trillion.

The Company’s assets as of June 30, 2019 reached IDR23.41 Trillion with the largest composition in fixed assets of 29% and cash equivalents of 23%. Cash and cash equivalents (excluding deposits with maturities of more than six months) owned by the Company amounted to IDR5.29 trillion, 16% decrease as of December 31, 2018 which was IDR6.30 trillion.

The company’s total liabilities amounted to IDR7.16 trillion, of which 60% were short-term liabilities. The total liabilities decreased compared to the liabilities as of December 31, 2018.

This condition caused the cash ratio or cash and equivalent to the Company’s short-term liabilities to be 122%, which signified that the Company had strong liquidity or was very capable of meeting short-term liabilities on time.


Weekly News

The Government Won't Make the Export Ban on Raw Materials Other than Nickel Apply Sooner

September 16, 2019

After making the nickel export ban apply sooner (starting from 1 January 2020), Ministry of Energy and Mineral Resources (ESDM) has not planned to do the same thing with the export of other raw minerals.

This was confirmed by the Director for Mineral Business Development at the Ministry of ESDM, Yunus Saefulhak. “Not yet for others (raw minerals), only nickel,” Yunus said as quoted by on Sunday (15/9).

Unlike nickel, Yunus considers that there is no urgency to make the export ban on other raw minerals apply sooner. As for nickel, the new policy was made in order to secure domestic supply, especially for meeting the needs of the electric car battery industry.

For information, one of the reasons for the new policy on nickel export ban is because the commodity can be processed into cobalt and lithium, which are the raw materials of electric car batteries.

According to Yunus, there are already four large-scale nickel smelter projects for the precursor industry which will produce battery raw materials (Hauyue Bahadopi smelter in Morowali District, Central Sulawesi; QMB Bahodopi smelter in Morowali, Central Sulawesi; PT Harita Prima Abadi Mineral (HPAM)’s smelter; and PT Smelter Nickel Indonesia’s smelter).


Weekly News

East Asia Minerals Update On Production Licence

September 13, 2019

East Asia Minerals Corporation (the “Company”) (EAS:TSX.V, EAIAF:OTCBB) is pleased to announce that the Company has received Tata Ruang (Spatial Plan) approval at an open meeting in Manado on Tuesday, September 11, 2019. The Agreement to the Tata Ruang was signed by a number of government departments including Forestry, Environment, Finance, Mining, Tax and Community Affairs. All of these departments were highly supportive of East Asia Minerals subsidiary PT. Tambang Mas Sangihe the holder of the Sangihe CoW license.

To complete the license upgrade on our Sangihe project, to Operation Production status, the company must hold the Indonesian Feasibility Study (IFS) meeting with the Indonesian Mining Department (ESDM) (which is currently being scheduled) and the completion of the Environmental Impact Assessment meeting (AMDAL). The Tata Ruang approval was the final step required prior to seeking approval of the Environmental Impact Assessment (AMDAL).

Once the meetings are completed, the remaining open item necessary to have the Operation Production License issued, is the payment of a mining tax (Dead-rent). The license upgrade will enable the Company to begin construction of the production facilities and infrastructure at the Sangihe project.

The company had targeted September, to receive the license but the approval process is taking longer than originally anticipated. East Asia’s Indonesian staff is working closely with the Indonesian Mining department for the IFS and the North Sulawesi government on the AMDAL to move these meetings forward as quickly as the government has the ability to perform. The company will make additional announce when the timing of the process becomes known.

The IFS is not a Feasibility Study as defined by CIM as required by NI 43-101 but is required under Indonesian law in order to obtain a licence to construct a production facility. The Company cautions readers that the any production decision made by the Company will not be based on a NI 43-101 feasibility study of mineral reserves that demonstrates economic and technical viability and as such, there may be involved increased uncertainty and various technological and economic risks outlined in the “forward looking statement” below.

Sangihe Project

The Sangihe gold-copper project is located on the island of Sangihe off the northern coast of Sulawesi and has an existing National Instrument 43-101 inferred mineral resource of 114,700 indicated and 105,000 inferred ounces of Gold.  The Company’s 70-percent interest in the Sangihe-mineral-tenement contract of work (“CoW”) is held through PT Tambang Mas Sangihe (PTTMS). The remaining 30-percent interest in PTTMS is held by three unaffiliated Indonesian corporations. The term of the Sangihe CoW agreement is for 30 years upon commencement of the production phase of the project.

On behalf of the Board of Directors of East Asia Minerals,

Terry Filbert,
Chairman & CEO


Weekly News

Japan, Korea, Indonesia raise steel exports to India

September 19, 2019

South Korea, Indonesia and Japan made up 70pc of India’s total steel imports in August, according to steel ministry data, with Indonesia a major supplier of stainless steel to India over the past few months.

The three countries are able to sell lower-priced steel into India as they are exempt from basic customs duties of 10pc and 12.5pc on long and flat products, respectively, because of free-trade agreements. But anti-dumping duties on flat steel imports still apply to some Japanese and South Korean products.

South Korea was the largest steel exporter to India in August with 318,000t, a rise of 35pc on the year. Japan’s steel exports to India soared by 43pc from a year earlier to 137,800t in August. Indonesia exported 143,000t of steel to India in August, from 20,000t a year earlier.

Most of these imports are likely stainless steel products. Indonesia exported 61,000t of stainless steel products to India during April-July, compared with a total 8,000t of stainless steel exports in the entire April 2018-March 2019 fiscal year.

India’s commerce ministry on 7 April launched an anti-dumping duty investigation on imports of stainless steel flat-rolled products from 14 countries, including China, Japan, South Korea and Indonesia. An oral hearing has been scheduled for 15 October.

Meanwhile, steel exports from China to India fell by 8.2pc to 129,100t in August.

India’s total steel imports in August surged by 27.5pc to 856,000t.

Hot-rolled coil (HRC) was the highest-imported steel product from South Korea and Japan in April-July. South Korea shipped 379,000t of HRC to India, while Japan exported 223,000t during the four months. Japanese and South Korean carmakers based in India, as well as white goods companies, are usually the major buyers of steel from these countries.


Weekly News

Bukit Asam's Net Profit Fell by 24.44% in 1H 2019

September 16, 2019

The 13.3% increase in the cost of revenue of PT Bukit Asam Tbk (PTBA) in the first half to Rp 6.96 trillion, reduced the company’s net profit by 24.44% from Rp 2.66 trillion to Rp 2.01 trillion (YoY).

PT Bukit Asam Tbk (PTBA) has just released a performance report for the first semester of 2019. According to the report, PTBA generated Rp 10.61 trillion in revenue, 1.14% higher than the record in the period of January-June 2018 of Rp 10.49 trillion. However, the company’s cost of revenue rose by 13.3%, while its general & administrative expenses also rose by 31% to Rp 793.8 billion. All of these reduced the company’s profit margin by 34.44%.

Coal was still the largest contributor to the company’s revenue, reaching Rp 5.32 trillion. Sales to the State Electricity Company (PLN) being the largest source of revenue. reached Rp 3.2 trillion, followed by sales to PTIP (Rp 1.73 trillion). Meanwhile, third-party revenue fell by 13.44% to Rp 5.11 trillion.


Weekly News

Effort to Conserve the Rare and Endemic Flora of Kalimantan

September 18, 2019

The Arboretum Park Program

Effort to Conserve the Rare and Endemic Flora of Kalimantan

This program, as an implementation of Company Environment Policy related to biodiversity maintenance. This is also the implementation of one of PT Kaltim Prima Coal Mission which is fostering a culture that considers health, safety, and environment in everything we do. The policy implementation has an impact on increasing the awareness and enthusiasm of KPC employees and its contractors to act more environmentally responsible.

This program aims to conserve rare and endemic flora of Kalimantan. It is considered as rare flora since the status is critically endangered, endangered, vulnerable, near threatened and least concern. Meanwhile, endemic flora of Kalimantan is a flora which comes from Kalimantan. Thus, since 2004 until June 2019, KPC has planted 1,370 floras in an area of ± 1.2 ha. The floras consist of 25 types, 4 types are critically endangered, 3 types are endangered, 4 types are vulnerable, 1 type is near threatened, 3 types are last concern, and the rest of 7 types are endemic flora of Kalimantan.

This program has impacts on: 1) sustainability of rare and endemic flora of Kalimantan; 2) improvement of air quality; 3) as a place for practice for students. The sustainability of rare and endemic flora is shown by an increase in the level of biodiversity and plant population per year. The improvement of air quality is in line with the increase of carbon emission absorption. The Arboretum Park is not only a place for practice for students but also the pride of Sangatta community. In addition to the diverse collection of rare and endemic flora, it turns out that the arboretum park can be easily accessed on the Google map mapping system.


Weekly News

Gulf Manganese Corporation Limited - General Meeting Result

September 13, 2019

Gulf Manganese Corporation Limited (ASX: GMC) (“Gulf” or “the Company”) is pleased to confirm that at today’s General Meeting all resolutions contained in the Notice of Meeting were passed on a show of hands.

Resolution 1(a) Ratification of Previous Securities Issue under Tranche 1 of the Placement – Listing Rule 7.1
Resolution 1(b) Ratification of Previous Securities Issue under Tranche 1 of the Placement – Listing Rule 7.1
Resolution 1(c) Ratification of Previous Securities Issue under Tranche 1 of the Placement – Listing Rule 7.1
Resolution 1(d) Ratification of Previous Securities Issue under Tranche 1 of the Placement – Listing Rule 7.1
Resolution 2(a) Ratification of Previous Securities Issue under Tranche 1 of the Placement – Listing Rule 7.1A
Resolution 2(b) Ratification of Previous Securities Issue under Tranche 1 of the Placement – Listing Rule 7.1A
Resolution 3 Approval of the Incentive Plan

In accordance with section 251AA of the Corporations Act 2001 and ASX Listing Rule 3.13.2, the following
information is provided to ASX:

For further information please contact:
Hamish Bohannan
Managing Director




1(a) Ratification of Previous Securities Issue under Tranche 1 of the Placement – Listing Rule 7.1

The instructions given to validly appointed proxies in respect of the resolution were as follows:

For Against Chair Abstain
392,132,605  379,809  6,000,670  2,227,526

The motion was carried as an ordinary resolution on a show of hands.

1(c) Ratification of Previous Securities Issue under Tranche 1 of the Placement – Listing Rule 7.1

The instructions given to validly appointed proxies in respect of the resolution were as follows:

For Against Chair Abstain
390,489,748  2,022,666  6,000,670  2,227,526

The motion was carried as an ordinary resolution on a show of hands.

1(d) Ratification of Previous Securities Issue under Tranche 1 of the Placement – Listing Rule 7.1

The instructions given to validly appointed proxies in respect of the resolution were as follows:

For Against Chair Abstain
390,814,057 1,698,357  6,000,670  2,227,526

The motion was carried as an ordinary resolution on a show of hands.

2(a) Ratification of Previous Securities Issue under Tranche 1 of the Placement – Listing Rule 7.1A

The instructions given to validly appointed proxies in respect of the resolution were as follows:

For Against Chair Abstain
390,814,057 1,698,357  6,000,670  2,227,526

The motion was carried as an ordinary resolution on a show of hands.

2(b) Ratification of Previous Securities Issue under Tranche 1 of the Placement – Listing Rule 7.1A

The instructions given to validly appointed proxies in respect of the resolution were as follows:

For Against Chair Abstain
390,814,057 1,698,357  6,000,670  2,227,526

The motion was carried as an ordinary resolution on a show of hands.

3 Approval of the Incentive Plan

The instructions given to validly appointed proxies in respect of the resolution were as follows:

For Against Chair Abstain
113,849,899 2,283,026 6,000,670 278,607,015

The motion was carried as an ordinary resolution on a show of hands.


Weekly News

Mandiri Pumps $129M Refinancing Fund Into Antam

September 20, 2019

State lender Bank Mandiri announced on Wednesday that it had injected US$129 million into state-owned diversified mining company Aneka Tambang (Antam) to refinance the latter’s business loans.

Mandiri and Antam said in a joint statement that the refinancing scheme changed the loan terms from a fixed interest rate to a floating interest rate. The loan’s due date remains unchanged at June 2024.

Antam president director Arie Prabowo Ariotedjo added in the statement that “with the company’s financial performance growing ever more solid, Antam received an investment credit facility with a more competitive interest rate that can lower the company’s financial burdens.”

Antam, a publicly listed company, last booked Rp 5 trillion (US$354.48 million) in long term bank loans payable in March, according to its first quarter financial report.

“As a major player in the mining sector, Antam needs support to strengthen its production capacity in meeting demand from local industries and international markets,” said Bank Mandiri corporate director Royke Tumilaar.

The mining company is pouring funds to develop, among others, a ferronickel processing plant in North Maluku province and an alumina refinery in West Kalimantan. Once completed, the former plant is expected to produce 13,500 tons of nickel each year.


Weekly News

Merdeka Copper Recorded an Increase in Sales and Profit Performance

September 20, 2019

PT Merdeka Copper Gold Tbk (MDKA) posted a positive performance in terms of sales and profit for the current year in the first half of 2019 compared to the same period last year. The increase in operating revenues came from exports of gold, silver and copper cathode of US$ 191.41 million, while others contributed US$ 361,359.

Based on this year’s midterm financial report, Merdeka recorded operating revenues of US$ 191.77 million, up compared to the same period last year, valued at US$ 114.86 million. Gross profit was also recorded at US$ 86.61 million, up from US$ 64.33 million, operating profit of US$ 78.10 million, growing from US$ 57.64 million. While the current year’s profit was US$ 44.57 million, up from US$ 33.76 million.

In terms of assets, the company recorded total assets of US$ 889.34 million, up from US$ 796.80 million. While the liabilities were recorded at US$ 449.87 million, up from US$ 375.65 million.


Weekly News

Vale Indonesia Targets to Record Total Production Volume of 71,000 Tons by the End of 2019

September 19, 2019

PT Vale Indonesia Tbk (INCO) targets to record total production volume of 71,000 tons by the end of this year.

Senior Manager Communications at Vale Indonesia Bayu Aji said that in the first semester, the company has produced 30,711 tons of nickel in matte.

“We are optimistic that we can achieve the production target, especially after completing the Larona Canal Lining project in the first quarter of this year,” he said as quoted by Kontan, Wednesday (18/9).

The project is a channel maintenance activity in the Hydroelectric Power Plant (PLTA) Larona to ensure that the water supply to the power plant is more stable, so that later it will have a positive impact on energy supply to PT Vale’s nickel processing plant in Sorowako.

In order to pursue the annual production target, he continued, the company continues to innovate to make PT Vale’s operations more efficient. “We operate electric-powered boilers, with 100% of the electricity coming from PT Vale’s own PLTA. Thus, our electric boiler has zero emissions,” he explained.


Weekly News

High-Grade Nickel Ore Key to Filling Indonesia Market Gap — MGB

September 17, 2019

THE nickel industry’s ability to supply high-grade products will be key to exploiting the market opportunity resulting from Indonesia’s nickel ore export ban, the mining regulator said.

“We can capitalize on the opportunity… we have nickel. What worries me is if the market will insist on high-grade nickel,” Mines and Geosciences Bureau (MGB) director Wilfredo G. Moncano told reporters.

The MGB estimates that nickel ore production grew 3% to 11.306 million dry metric tons (DMT) in the first half of 2019.

The United States Geological Survey ranks Indonesia the top nickel producer in 2018 with 560,000 tons, followed by the Philippines with 340,000 tons. Both countries’ top export market for nickel is China.

Mr. Moncano noted that Philippine nickel is mostly lower-grade, but added that international buyers may still have an interest in ores with nickel content of between 1.3% and 1.5%.

Reuters reported on Monday that a major nickel mine in Tawi-Tawi, which produces high-grade ore, has suspended operations indefinitely due to an audit being conducted by the local government.

The audit is part of the preparations to implement the Bangsamoro Responsible Mining Law.

The Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) suspended operations of all four mines in the area in a memorandum order dated Aug. 5.

It said 90% or 2.34 million wet metric tons (WMT) of high-grade ore exported to China came from Tawi-Tawi in 2018.

Mr. Moncano said suspended mining companies should speedily comply with the corrective measures required to resume production.

“If they expedite action on the corrective measures, then on the part of MGB, bibilisan namin namin ang (we will expedite) validation,” he said.

As of August, two companies are awaiting the lifting of MGB suspensions — Zambales Diversified Metals Corp. and Strong Built Mining Development Corp. Five are still complying with an agency resolution dated Nov. 12, 2018 — Ore Asia Mining and Development Corp., Krominco Inc., Mt. Sinai Exploration and Development Corp., Wellex Mining Corp., and AAMPHIL Natural Resources Exploration and Development Corp.

Three companies have had their suspension orders lifted — Berong Nickel Corp., Carrascal Nickel Corp., and Emir Mineral Resources Corp.

Three mining companies are appealing their suspensions to the Office of the President — Claver Mineral Development Corp., Oriental Synergy ining Corp., and Libjo Mining Corp.


Weekly News

Editorial: Indonesia to Ban Nickel Ore in 2020

September 16, 2019

Indonesia has confirmed it will ban exports of nickel ore from January 2020 — two years earlier than expected.

The Southeast Asian nation is the world’s largest nickel ore producer, and the news unleashed a torrent of speculation about supply shortages. Three-month nickel contracts on the London Metal Exchange (LME) surged as high as US$18,850 per tonne — a five-year peak — on Sept. 2.

While 70% of the world’s nickel goes into stainless steel production, the metal is becoming increasingly important as an ingredient in the cathode part of lithium-ion rechargeable batteries in the emerging electric-vehicle market, an industry Indonesia wants to develop.

“The government decided — after weighing all the pros and cons — that we want to expedite smelter building,” Bambang Gatot Ariyono, Director General for minerals and coal at the Energy and Mineral Resources Ministry, told reporters in Jakarta. “So we took the initiative to stop exports of nickel ores of all quality.

“If we continue free exports, [Indonesia’s] proven reserves will be enough only for seven to eight years,” Bloomberg quoted Ariyono as saying. “The technology is advancing, so smelters can process low-grade nickel ores, and they can be used for batteries to help Indonesia meet its electric-vehicle goals.”

The Indonesian government has issued export permits this year for as much as 38.6 million tonnes of wet nickel ore — or about 375,000 tonnes of refined nickel.

Most of Indonesia’s nickel goes to China, where it’s turned into nickel pig iron (NPI).

As a result, Chinese buyers “will be scouring the globe for suitable ore supply,” Colin Hamilton of BMO Capital Markets said in a note, pointing out that “deposits of nickel saprolite for NPI are relatively rare,” and are mostly found in Indonesia, the Philippines and New Caledonia, although China has started importing some from as far afield as Guatemala.

The London-based analyst also forecasts an “accelerated ramp-up” of Indonesian NPI facilities, and domestic NPI production moving from 360,000 tonnes this year to 480,000 tonnes next year.

Olivier Masson, a senior analyst at Roskill, agrees, explaining that Indonesia was successful in expanding NPI capacity after the country last imposed a ban on nickel exports in 2014. (It relaxed it in 2017, allowing miners to export ore grading less than 1.7% nickel content.)

“Indonesia was very successful in attracting NPI capacity after the 2014 ban and nickel production in the country absolutely surged,” he says in an interview from London, “so they want to do the same thing, but for battery-grade material, which will require building hydrometallurgical plants.”

Wood Mackenzie cautions that while the Philippines is seen as the main source of ore to offset Indonesian nickel, some mines in the island province of Tawi-Tawi “are apparently nearing exhaustion.” One of the country’s biggest nickel mines, SR Languyan, is expected to stop producing this year.

The research and consulting firm forecasts the total loss in nickel production from the export ban will be 16,000 tonnes in 2020, 190,000 tonnes in 2021, 112,000 tonnes in 2022 and 85,000 tonnes from 2023 on. It warned that it doesn’t believe the loss in 2021 “can be offset by increases in output elsewhere,” although from 2022, “the bulk of the lost output could be offset by increased output from Indonesia, assuming funds can be secured for the planned expansions.”

BMO is modelling a nickel market deficit of 51,000 tonnes in 2020 and 127,000 tonnes in 2021, compared to its previously modelled, 26,000-tonne deficit in 2020, and 13,000-tonne surplus in 2021.

Nickel has already been one of the best performing commodities on the LME this year. At press time, nickel prices on the LME were US$17,540 per tonne, and Goldman Sachs forecasts nickel prices could spike to US$20,000 a tonne in three months, before falling back to US$16,000 a tonne within a year.

Ironically, the nickel-export ban may have unintended consequences for Indonesia, because it could become a headwind to demand for battery cathode technology using nickel, analysts like Hamilton speculate.

“Of course, the catalyst for bringing forward the ban was President Joko Widodo’s decree that lays out government support for Indonesia to become Asia’s hub for electric-vehicle production,” Hamilton noted. “However, this development — and the nickel price gains accompanying it — are likely to slow the transition to nickel-rich cathode, particularly given that cobalt constraints have eased.

“Moreover, it may give Chinese battery producers such as BYD an opening to push nickel-free, lithium-ion phosphate batteries in China once more, particularly as reduced electric-vehicle subsidies for NMC [nickel, manganese, cobalt] technology has made them more competitive again, for low-range vehicles.”


Weekly News

Ministry of Finance Encourages Geothermal Energy Exploration

September 18, 2019

The Ministry of Finance is encouraging exploration and investment in the geothermal energy sector by preparing risk mitigation through the Government Drilling program.

“This program assists the government in new well exploration which is currently considered costly and risky,” Director General of State Wealth Isa Rachmatarwata said in a discussion in Jakarta, Wednesday. Investing in the country’s geothermal energy is still a stumbling block since the private sector is reluctant to take a risk in exploring power sources, Isa noted.

Keeping that in mind, the government has formulated the so-called Government Drilling program aimed at mitigating risks in each exploration activity, he said.

This program involves three Special Mission Vehicles (SPV) of the Finance Ministry, namely PT Sarana Multi Infrastruktur, PT Geo Dipa Energi, and PT Penjaminan Infrastruktur Indonesia (PII).

The three public service bodies make applicative approaches and adopt industrial governance in finding geothermal energy sources. The measures include planning and budgeting, procurement, operation and execution.

After the energy sources are discovered, they can be offered to investors interested in developing geothermal energy, he said.

“When a well is found and is economically sufficient to generate electricity, it will be offered to parties that are willing to conduct explorations,” he said.

He expressed the hope that the risk of geothermal energy exploration, which is currently considered costly and less attractive to investors, could be reduced.

“This does not mean that private companies are not allowed to find energy sources. They can do it but their numbers are not large if not zero. Therefore, the government is willing to take the initiative to ensure that investment does not run slowly,” he said.


Weekly News

Five Indonesian BUMNs to Work on Mining Projects in Madagascar

September 17, 2019

Five Indonesian State-Owned Enterprises (BUMNs) will be working on mineral and mining transportation projects in Madagascar, as BUMN Minister Rini Soemarno supervised it.

The BUMNs to be involved in the projects encompass PT Timah, as a tin mining exploration company; PT INKA and PT Kereta Api Indonesia, as transportation companies; PT Wijaya Karya, as a construction company; and PT LEN Industri, as an industrial electronic company.

“I am pleased as five BUMNs will have roles to develop Madagascar’s mining sector. This could be considered, thus demonstrating that Indonesians have the capability to compete in the global market,” Rini noted in a statement received in Jakarta, Tuesday.

To initiate the business expansion of BUMNs, Rini held a meeting with Minister of Mining and Strategic Resources of Madagascar Fidiniavo Ravokatra in Antananarivo, Madagascar, Monday (Sept 16), to discuss cooperation between both nations following a discussion at the Indonesia-Africa Infrastructure Dialogue (IAD) 2019 in Bali on August.

The projects will be handled along with Madagascar’s State-Owned Enterprise on mining, Kraoma SA.

As the initial step, Indonesia and Madagascar will have signed a memorandum of understanding to conduct assessments and limited exploration to gauge the potential resources and form of cooperation pertinent to be taken up later.

This partnership is projected to complete the plan of the consortium of Indonesian Railways Development Incorporated for Africa (IRDIA) and Kraoma whose first project pertains to construction to transport chrome products from the Brieville mining area to the port of Tamatave, spanning 220 kilometers.

“The amount of investment and factory building will be aligned with the potential resources and economic aspect of the mining area,” Rini pointed out.


Weekly News

Nickel Climbs as Stainless Steel Producers Prepare for Indonesia Ban

September 20, 2019

Nickel prices climbed on Friday as stainless steel producers bought supplies ahead of a Chinese holiday and an Indonesian nickel ore export ban that could create shortages.

Top supplier Indonesia’s plan to ban exports of nickel ore has been brought forward by two years to Jan. 1, 2020, and the Philippines, the world’s second-biggest ore producer, could suspend five mining companies at the end of this year.

“There have been some anecdotes of stainless mills restocking nickel and that has been positive,” said analyst Nicholas Snowdon at Deutsche Bank in London.

Nickel is mostly used as an alloy in the production of stainless steel.

“Across most sectors, in the week before the Golden Week holiday, you’ll invariably see a bit of raw material restocking, so we have elements of that in nickel alongside the broader potential restocking as we head into the (Indonesia) ban application.”

China celebrates its National Day Golden Week holiday in early October.

Benchmark nickel on the London Metal Exchange gained 2.6% to $17,725 a tonne in official open-outcry trading, on track for its biggest one-day gain in three weeks.

* CHINA RATE CUT: Base metals also gained support from China cutting its one-year benchmark lending rate for the second month in a row on Friday.

* NICKEL INVENTORIES: Nickel stocks in warehouses monitored by the Shanghai Futures Exchange slid 13.6%, weekly data showed on Friday.

* NICKEL SPREAD: The premium of LME cash nickel over the three-month contract climbed to $150 a tonne, near the recent decade high of $163, indicating near-term tightness.

* MARKET DEFICIT: The global nickel market deficit widened to 6,700 tonnes in July from a revised 2,700 tonnes in the previous month, the International Nickel Study Group (INSG) said on Thursday.

* ALUMINIUM OUTPUT: LME aluminum, untraded in official rings, was bid down 0.6% at $1,790 a tonne after data showed that global primary aluminum output rose to 5.407 million tonnes in August from a revised 5.404 million tonnes in July.

* COPPER DEMAND: Fitch Solutions cut its average price forecast for copper to $5,900 a tonne this year and $5,700 in 2020, from previous views of $6,300 a tonne and $6,600 a tonne respectively.

“A drop in Chinese demand has loosened the global (copper) market, while sentiment continues to worsen,” Fitch said in a note.

LME copper was bid up 0.3% at $5,804 a tonne but remained on course for a 2.6% drop over the week, which would mark its steepest weekly fall since the week ended Aug. 2.

* PRICES: LME three-month zinc was bid down 0.2% in official activity at $2,308 a tonne, lead gained 0.9% to trade at $2,114 and tin slipped 0.3% to trade at $16,400.


Weekly News

Indonesia Issues New Guideline on Sanctions for Delay in Smelter Construction and Accelerates the Ban on Nickel Ore Export

September 17, 2019

The Minister of Energy and Mineral Resources (MEMR) recently issued Regulation No. 11 of 2019 (Regulation 11), which accelerates the ban on export of nickel ore with content below 1.7% to 31 December 2019. If a mining company has previously obtained an export recommendation for the period beyond 31 December 2019, the recommendation will only be valid until 31 December 2019. Under the previous regulation, mining companies were allowed to export nickel ore with content below 1.7% until 11 January 2022, subject to the progress of the company’s smelter construction in Indonesia. Regulation 11 still allows mining companies to export washed bauxite with a minimum Al2O3 content of 42% until 11 January 2022, subject to the progress of the company’s smelter construction.

At around the same time, the MEMR also issued Decree No. 154 K/30/MEM/2019 (Decree 154), which sets out further details of how the Government of Indonesia (GOI) will seek to sanction companies that fail to construct, or procure the construction of, smelters in Indonesia within the approved timeline. In addition, Decree 154 also requires the same mining companies to provide an additional surety bond, which can only be withdrawn by the companies after the progress of the smelter construction has reached 75%. The amount of the additional bond is equal to 5% of the export volume being shipped multiplied by the export benchmark price (HPE).

Smelter Construction Obligation

In January 2017, through MEMR Regulation No. 6 of 2017 on Procedure and Requirements for the Granting of Recommendations for Export of Processed and Refined Minerals, as amended by Regulation No. 35 of 2017, the GOI introduced a requirement for a permit to export mineral concentrates and anode slimes for mining companies, and tied this in to the progress of physical construction of processing and refining facilities (smelters) in Indonesia for those companies’ products.

In May 2018, the GOI introduced MEMR Regulation No. 25 of 2018 on the Management of Mineral and Coal Mining Activities, as lastly amended by Regulation 11 (“Regulation 25/2018”), which set out more detail on the export permit enforcement regime. Under this regulation, if a mining company wants to obtain an export recommendation from the MEMR, it must first submit a smelter construction plan. The MEMR will supervise the progress of the smelter construction against this plan every six months, or more frequently. The mining company must submit evidence to the MEMR that it has achieved at least 90% of the progress planned for each six-month period. This is to be determined by an independent verifier reviewing the aggregate progress reached in month five of the relevant six-month period.

Regulation 25/2018 stipulates the following consequences if a mining company fails to achieve this rate of progress:

(a) The MEMR will issue a recommendation to the Ministry of Trade to revoke the company’s export approval.

(b) The company will be subject to administrative penalties, equal to 20% of its cumulative mineral sales revenue offshore.

Regulation 25/2018 does not specify how this 20% penalty on sales revenue would be calculated (e.g., is it 20% of total revenue since the issuance of Regulation 25/2018, since the start of the construction of the smelter, or for the past six months only?)

Under Regulation 25/2018, if a company fails to pay the penalties within one month after the imposition of the sanction, the MEMR or Governor (depending on who issued the company’s mining license) may suspend the company’s activities for up to 60 days. If the company has still not paid the penalties within this period, its mining permit will be revoked.

Who is affected by Decree 154?

Holders of the following mining permits that export certain metal ores are affected by the new Decree:

  • Special Mining Business License for Operation Production of Mineral Metal (IUPK-OP of mineral metal)
  • Mining Business License for Operation Production of Mineral Metal (IUP-OP of mineral metal)
  • Mining Business License for Operation Production specifically for processing and refining (IUP-OP for processing and refining)

What is in Decree 154?

Decree 154 sets out more detail on how the sanctions will be imposed for delays in construction of smelters. It also clarifies that the amount of the penalties payable by the relevant mining company will be 20% of the company’s cumulative export mineral sales revenue during the last six months.

Under Decree 154, if a company fails to meet the 90% milestone, the MEMR (through the Director General of Mineral and Coal) will issue a recommendation for suspension of export approval to the director general in charge of foreign trade affairs.

The company must pay the penalties within one month through a bank, and submit evidence of payment to the MEMR within three days after the payment is made. If the company fails to pay the penalties by the one-month deadline, the MEMR will issue a recommendation to revoke the company’s export approval.

Decree 154 further stipulates that the payment of penalties alone is not enough to allow the company to resume its exports. The MEMR will only issue a recommendation to revoke the export suspension once there is a report from an independent verifier confirming that the company has met the 90% milestone within the past six months. In other words, mining companies are also required to “make up” the delay in construction if they want to resume exports. Decree 154 is not very clear on how to calculate this. But it appears that the intention is the company must provide another independent verifier report confirming that the company has met the 90% milestone by the end of the six-month period. So if the company misses this deadline, there is a possibility that it will not be able to resume its export until the end of the next six-month period.

Under Regulation 25/2018, if there is an event of force majeure that directly causes any delay in achieving 90% of the targeted milestone, the MEMR can issue a written approval confirming that an event of force majeure has occurred, and this approval will become the basis for evaluating the company’s request for an export recommendation. Note that events of force majeure under the Mining Law are limited to wars, civil commotion, rebellions, epidemics, earthquakes, floods, fire, and other acts of God beyond the control of human beings.

Additional Surety Bond

In 2016, the MEMR issued Regulation No. 5 of 2016 on Procedures and Requirements for the Issuance of a Mineral Export Recommendation. This regulation has been replaced by Regulation 25/2018. One of the requirements introduced in 2016 was that mining companies that seek to obtain an export recommendation must deposit a surety bond in an escrow account held in a state-owned bank.

The amount of the surety bond required under the 2016 regulation was equivalent to 5% of the new investment value for the smelter construction, or 5% of the remaining investment value not yet realized (if the construction of the smelter has already started). Regulation 25/2018 also stipulated that the mining company can withdraw this surety bond once 35% of the total construction of the smelter is achieved. If the mining company fails to achieve this target within three months after 12 January 2022, the surety bond will be forfeited to the state.

Decree 154 now introduces an additional surety bond for companies that fail to meet the 90% progress target during a six-month period. These mining companies will need to provide a surety bond, the amount of which is equal to 5% of the export volume being shipped multiplied by the export benchmark price (HPE). It is not very clear which shipping volume will be used by the Government to calculate this additional surety bond, e.g., would it be the volume of the last shipment before the company’s export recommendation is suspended?

Decree 154 states that the mining company can withdraw the bond once 75% of the total construction of the smelter is achieved, as verified by an independent verifier. But the Government can only draw down the bond if the mining company’s mining license is revoked as a result of its failure to pay the administrative penalties discussed above.


With the issuance of Regulation 11 and Decree 154, the Government is seeking to put more pressure on mining companies to accelerate smelter construction. The Government has signaled its willingness to ‘stand strong’ on this issue; earlier this year, it revoked the export recommendation of one mining company, and suspended the export recommendation of five others.


Weekly News

FOCUS: JFX Physical Tin Contract Launch Could Alter Indonesian Tin Trade

September 17, 2019

The Jakarta Futures Exchange (JFX) has launched a physical tin contract in an effort to gain precedence as a global price reference in Indonesia, which – combined with the backing of the country’s trade ministry and largest state-owned tin producer – could mark a significant change in tin business out of the region.

JFX launched its physical tin contract officially on August 21, exporting 1,410 tonnes of tin out of Pangkal Pinang, the capital of Bangka Belitung, Indonesia’s tin-producing region, according to the International Tin Association (ITA).

The inaugural cargo contained material that was reportedly produced by Indonesian state-owned producer PT Timah, which is the country’s largest tin producer.

PT Timah’s backing of the new contract could suggest a paradigm shift in an already hermetic Indonesian production landscape, with private smelting in the region crippled after the suspension of key smelter inspector PT Surveyor back in October 2018.

Since then, tin trade out of Indonesia, which takes place principally on the Indonesia Commodities & Derivatives Exchange (ICDX) before being cleared for export, has dwindled considerably, with just 1,135 tonnes of tin traded for export in August, down by 84.9% from 7,495 tonnes of tin traded in June.

ICDX Under Threat

Indonesian refined tin exports fell by around 32% year on year in August 2019, according to trade ministry data published earlier this month, while export growth for unwrought tin out of Indonesia has fallen by around 22% in January-July this year.

And market participants have grown increasingly critical of the ICDX’s role in Indonesia’s fragmented tin supply picture.

“The ICDX is just PT Timah trading with their London-based counterpart, Indometal. While their [export] numbers might be unchanged, they’ve captured that exchange for their own purpose,” one Europe-based tin trader told Fastmarkets.

JFX had initially planned to launch a physical tin contract in 2013, and while the contract launch had garnered the support of more than 30 private tin smelters in the region, it failed to gain backing from PT Timah until now.

Now, with PT TImah shifting its tin exports to the new JFX tin contract, tin trade out of the region could work differently.

“The [JFX tin contract launch] could mean the death of the ICDX,” a second European tin trader told Fastmarkets. “In itself that might mean nothing, but what it does do is show you that Timah runs the roost in Indonesia, and whether this will see private smelting return is anyone’s guess.”

But while the option of a different trading contract is interesting, this does not help private smelters, who remain unable to export due to regulations set by the central government, other than via one of the country’s exchanges, the ITA said on its website.

“The switch of exchange may have caused the decline in refined tin exports from Indonesia last month, with sources close to Timah citing export license renewals as the cause of the issue. With a new license seemingly acquired, it is likely that material – stockpiled in the interim – will be released to the market,” it added.

Tin’s three-month price on the London Metal Exchange traded in a volatile pattern across the summer months, falling to its lowest level since 2015 at $15,565 per tonne on August 27 before appreciating by around 14% to reach a two-month high of $17,750 per tonne on September 11.

Meanwhile, tin stocks on the LME remain at elevated levels compared with earlier in the year, with on-warrant material now at 6,265 tonnes, up by more than 91% since levels seen in May, when the LME held just 555 deliverable tonnes of tin, its lowest level since 1989.

Price Volatility Threatens Small-Scale Mining

Over 50% of tin mining out of Indonesia takes place artisanally, with small-scale and alluvial mining often occurring illegally and under hazardous conditions predominantly across Indonesia’s Bangka-Belitung islands.

Against a weakening LME tin price, market participants have suggested that the region’s smaller scale mining will suffer first.

“Under such volatile conditions, artisanal miners [in Indonesia] will simply stop coming to work. It’s happened many times before, and it’ll happen again,” a European-based tin producer told Fastmarkets.

“The last time the price got this weak, back in 2015, small-scale Indonesian miners turned to harvesting bird’s nests instead,” the producer added.

Yet against price volatility and collective attempts to control tin’s temperamental price action, other participants believe the introduction of a new tin contract could be make or break for Indonesia’s tin trade industry.

“There will need to be some organization, maybe even some consolidation in mining initiatives out of Indonesia,” a source close to the Indonesian mining industry told Fastmarkets.

“There’s no doubt that Timah have always had some measure of control on mining out of Indonesia, but in the past private smelters have always had a clearer line between inclusion and exclusion. That needs to change,” the source added.


Weekly News

China, Japan Bet on Vale Indo Nickel Smelters to Guarantee Post-Ore Ban Supply

Brazilian multi-metal and mining company Vale has announced plans to build a further two nickel smelters in Indonesia in joint ventures with China and Japan, the deputy chief executive officer of Vale Indonesia said in a Saturday September 14 news interview.

The first scheduled smelter will be built in Pomalaa on Sulawesi Island, in a $2.8 million joint venture with Japanese multi-metal company Sumitomo Metal & Mining Co and will produce battery raw materials for the electric vehicle (EV) industry using high-pressure acid leaching (HPAL).

PT Vale Inco already produces nickel in matte from its lateritic ore integrated mining and processing facilities in the region, the entire production of which is sold under long-term contracts to the Japanese nickel market for further refining.

The second planned smelter will be at Bahadopi, also on Sulawesi, and is still under negotiation with an unnamed Chinese investor.

The operation will produce ferro-nickel, a ferro-alloy containing approximately 35% nickel to 65% iron, to supply the stainless steel industry. Vale Indonesia CEO Febriany Eddy announced that negotiations are due to complete by the end of 2019.

It is unknown how much supply will come online from the new smelting operations or when, but they will ramp up Vale’s faltering nickel production.

The company produced 244,500 tonnes of refined nickel in 2018, down 15.1% year on year. Of that, 72,100 tonnes came from Indonesian nickel operations, which was also down 1.4% year on year.

The joint ventures with Vale’s Indonesian operation may have been formed in a bid to secure supply in the face of Indonesia’s imminent ore export ban, which will come into force in January 2020.

And while a lot has been made of a ramp-up in global nickel production to supply the emerging electric battery market for the automotive transition to EVs, it is Chinese stainless steel production that continues to hold the most significant market share.

China produced 1.2 million tonnes of nickel-containing 300 series stainless steel in June 2019, up 20.4% on the corresponding period in 2018.

China’s 300 series production is expected to rise by 11.7% year on year across 2019, enhancing nickel consumption at a time when China’s nickel ore stockpiles are decreasing.

The region’s refined nickel ore inventories totaled 11.46 million tonnes on July 26, down 90,000 tonnes in just seven days. Low- and middle-grade ore stocks totaled 2.15 million tonnes and 9.31 million tonnes respectively.

And while nickel pig iron, used in 300-series production, stood at 536,000 tonnes in July 2019, up 50.9% on the corresponding period in 2018, a supply gap is emerging.

With Chinese appetites growing, and an estimated 10,000-15,000 tonnes per month of refined nickel supply affected by the ore export ban, China could be keen to guarantee supply to feed its growing stainless steel interest.

Fastmarkets assessed the nickel pig iron, high-grade NPI content 10-15%, contract ddp China price at 1,200-1,220 yuan ($169-172) per nickel unit on Friday September 13. The price has risen continuously for the past two months amid tightening ore supply in China, from $940-970 yuan per nickel unit on July 5, when it had been relatively stable for the prior two months.

Fastmarkets’ spot nickel pig iron, high-grade NPI content, 10-15% ddp China price was at 1,210-1,230 yuan per nickel unit on the same date, up from 950-970 yuan per tonne on July 5, also reacting higher on scarcer supply.


Weekly News

ASIAN NICKEL CONF: Five Things We Learned at the Annual Conference in Jakarta

Fastmarkets looks at the key takeaways from the seventh Fastmarkets Asian Nickel conference in Jakarta, Indonesia, on September 11-12, from who will fill the Asian supply gap from 2020 to emerging demand for nickel from the electric vehicle battery sector.

Indonesian Nickel Ore Export Ban will Create Chinese Nickel Ore Shortfall

China is heavily reliant on nickel ore imports from Indonesia and Philippines. With the ban on Indonesian nickel ore exports coming into effect in January 2020 and the likelihood of the Philippines filling the supply gap small, Fastmarkets estimates China will be short by 240,000 tonnes of nickel units in ore from next year, head of research William Adams said.

“There’ll be less ore sent to China next year, and if the main pressing demand is nickel pig iron (NPI), then investment will flow into NPI projects, rather than high-pressure acid leaching (HPAL) projects,” Adams said.

Nickel demand in China remains largely driven by stainless steel consumption and NPI, made from nickel laterite ore, is one of the key raw materials in stainless steel.

Stainless Steel Remains Dominate Consumer of Nickel

“The stainless steel sector is the most important first-use market, accounting for 70% of nickel usage, but batteries have the potential to make a structural change in the coming years,” Ricardo Ferreira, director of market research and statistics at the International Nickel Study Group (INSG), said at the Jakarta conference.

The International Stainless Steel Forum (ISSF) estimates world stainless steel production increased by 5.9% year on year in 2017 and registered another yearly increase of 5.8% in 2018.

For the first quarter of 2019, global stainless steel production rose by 5.4% quarter on quarter, but edged down by 2.5% from the corresponding period last year, according to ISSF data.

But EV Demand Looks Promising from 2025

An emerging nickel demand driver is the electric vehicles (EV) sector for use in batteries. EV sales will multiply sevenfold by 2025 from 2018 levels, underpinning strong demand for lithium, cobalt, nickel batteries, Fastmarkets’ Adams said.

Fastmarkets MB forecasts that total global EV sales will reach 15-18 million units by 2025, and EVs are expected to account for 14-16% of total car sales globally.

“Nickel content per EV could rise to 50kg by 2025 from 20kg [in 2018] as more nickel is needed to meet the demand of higher driving ranges,” Adams said.

In 2018, global EV sales stood at 2.02 million units and equated to about 2.2% of total car sales, according to the INSG.

The Philippines’ Future Could Lie in Battery Sector

The Philippines is currently Asia’s leading supplier of raw materials used in the production of nickel and cobalt batteries. With the right policies, it could become one of the world’s leading suppliers of battery raw materials, including battery manufacturing, George Bujtor, chief executive officer of Electric Metals Ltd, said during the Asian Nickel conference.

Rich cobalt reserves along with advanced HPAL processes – a method to treat nickel and cobalt ore into battery raw materials – puts the Philippines in a strong position to supply the battery sector, he added.

The Philippines has the fourth largest cobalt resources in the world, totaling 1.35 million tonnes.

“The Nickel Asia & Sumitomo joint venture (JV) owns the key HPAL plants in the Philippines and Sumitomo has the world’s leading technology for HPAL,” Bujtor said.

But It is Unlikely to be a Hub for NPI Production

Conversely, the Philippines is not primed to meet NPI requirements, conference delegates heard.

“There’s no nickel pig iron planning in the Philippines. Indonesia has the whole market and it’s unlikely that there’ll be a nickel pig iron plant ever built in the Philippines because of the low grade [mined product], regulatory turmoil, policy indecision and so forth,” Electric Metals’ Bujtor said at the conference.

Nickel laterite ore exports from Indonesia contain an average nickel content of 1.65%, whereas material from the Philippines averages 1.2% nickel content.


Weekly News

Wind and Solar Energy Now Cheapest Forms of Power in Two-Thirds of the World

Wind and solar energy are now the cheapest forms of power in two-thirds of the world, according to data compiled by BloombergNEF, but there remains a great divide between the wealthy and developing nations.

In its New Energy Outlook 2019, the research firm said the globe will be 50% powered by renewable energy by 2037, with countries such as Australia, Italy, Germany and the United Kingdom anticipated to reach the 50% mark by 2029.

However, developing countries such as India, Indonesia, Thailand and the Philippines will not reach the halfway mark until 2039 or later.

In BloombergNEF’s comparisons, Malaysia is not expected to reach 50% renewable power until 2049.

The firm has credited “sweeping technological advances and more efficient manufacturing” as the reason for wind and solar’s increasingly important role in the global energy mix. However, this is also the reason for the growing divide.

“Wealthy nations can afford to turn their backs on coal, but it remains an easy fallback in countries where electricity is scarce, unreliable or unaffordable,” Bloomberg reported.

Cheapest Power Sources: 2014 to Now

Ten years ago, when wind and solar were just 1% of the US’ energy mix, it would have seemed unrealistic to envision renewables replacing fossil fuels.

Yet, this April marked the first time that renewable energy supplied more power to the US grid than coal, showing that solar and wind have certainly stepped up to the plate.

BloombergNEF’s report compared the cheapest power around the world from five years ago to now.

In 2014, coal was listed as the cheapest form of power for most of the world, followed by gas, with wind energy only being the cheapest in Germany, Denmark and Uruguay.

Solar didn’t even make it on the list.

In 2019, wind energy is still regarded as the cheapest power for Germany, Denmark and Uruguay, along with nine other countries including the US, Canada and the UK.

Meanwhile, solar energy has topped the list as the cheapest energy technology in 2019 for Australia, Chile, Egypt, France, India, Israel, Italy, Saudi Arabia, South Africa, Spain and the United Arab Emirates.

A handful of eastern European countries including Russia have recorded gas as the cheapest form of power in 2019, while coal’s list of countries has more than halved to mostly Asian nations including Indonesia, Thailand, Japan and South Korea.

Low Build Costs Spark Renewables Shift

Electricity generation has traditionally been the world’s biggest source of greenhouse gas emissions, but since 2016, US power plants have given off less carbon dioxide than the nation’s transportation sector, Bloomberg reported.

According to the news wire, wind and solar farms are a major reason for the turnaround, with cheaper parts making these projects more economical to build than coal and gas plants across two-thirds of the world.

“Solar photovoltaic modules, wind turbines and lithium-ion batteries are set to continue on aggressive cost reduction curves, of 28%, 14% and 18% respectively, for every doubling in global installed capacity,” New Energy Outlook 2019 lead analyst Matthias Kimmel said.

“By 2030, the energy generated or stored and dispatched by these three technologies will undercut electricity generated by existing coal and gas plants almost everywhere,” he added.

In the US alone, renewable plants are expected to greatly outnumber non-renewable plants by 2025, although they won’t yet have the same capacity level.

In addition, solar installers and wind technicians are already regarded as the two fastest-growing professions in the nation.

However, China remains the world’s biggest consumer of coal despite hosting the largest capacity of hydro, wind and solar power.

Likewise, coal plants are so cheap to run in Indonesia that the nation is forecast to almost double its coal generation over the next 25 years, Bloomberg reported.

Global Growth Trend

However, BloombergNEF has forecast that by 2050 two-thirds of the world will be run on zero-carbon energy, with wind and solar supplying 48% of global electricity by that time.

Specifically, solar is expected to rise from its current 2% of world electricity generation to 22% in 2050, while wind is anticipated to climb from today’s 5% to 26%.

Hydro is expected to see “very modest growth”, being constrained by resource availability, while BloombergNEF’s research shows nuclear staying “practically flat”.

In addition, the report found batteries, peakers and dynamic demand will help wind and solar reach more than 80% penetration in some markets.

“Around 359GW of batteries are added to the power system to help shift excess generation to times when the wind is not blowing and sun is not shining,” it stated.

Global Investment

According to the report, US$13.3 trillion (A$19.45 trillion) will be invested in new power generation assets over the next 32 years to 2050, with 77% (US$10.24 trillion) expected to go to renewables.

The majority of the investments will be in wind and solar, with US$843 billion estimated to go toward batteries.

This investment total will fund 15,145GW of new power plants between 2019 and 2050, of which 80% is zero carbon.


Weekly News

Indonesian Nickel Ore FOB Quotes Rise to $45-47/wmt

Most Indonesian medium- and high-grade nickel ore suppliers raised their quotes to $45-47/wmt on a fob basis this week, with some offers hitting a high of $51/wmt, SMM learned.

Transactions were done at a maximum of $45/wmt fob, up $2/wmt from a week earlier, but trades to China on a cif basis did not rise this week after substantial gains last week.

Buyers from north China purchased nickel ore with 1.8% Ni at $72-73/wmt cif last week. The trading level was up some $7/wmt, or close to 10% from the prior week.

Last week, nickel ore with 1.65% Ni was quoted at $65/wmt cif, with those for 1.8% Ni materials at $75/wmt.

Sea freight charges for nickel ore, meanwhile, also extended their gains as Indonesian miners rushed to ship nickel ore before the export ban goes into effect from January.

The costs for ocean freight from Indonesia’s Pomalaa to China’s Lianyungang rose $0.5/wmt from the previous to $17.5/wmt this week. The charges stood at $13.7/wmt in the week before Indonesia said that it will restrict nickel ore exports from 2020.

Greater iron ore shipments and the impending cleaner fuel requirements also bolstered ocean freight costs. Dry bulk shipping rates as measured by the Baltic Dry Index are near nine-year highs.


Weekly News

Coal, a Reliable and Cheap Energy Source – Canyon Coal

South Africa must turn its coal resource endowment into revenue, jobs and broader economic development, Canyon Coal Executive Chairperson Vuslat Bayoglu has said.

“Indonesia is predicted to reach almost 800 million t of coal production by 2030, while South Africa is forecast to decline to less than 200 million t. South Africa could easily emulate Indonesia’s success if government, investors and miners band together to provide the sector the industry support it requires,” Bayoglu said.

Bayoglu reminded delegates, comprising coal miners, analysts, investors, service providers and other stakeholders, that coal was a key driver of modernity and innovation.

He outlined the historical and global significance of coal. “The invention of steam engine and all the benefits that flowed from it including the industrial revolutions which benefitted the modern world powers of Europe and United States, undeniably came from the coal and its beneficiation for use in power generation and steel manufacturing.”

Coal mining played a fundamental role in ushering peace and stability to post-WWII Europe by providing stable power and being the key ingredient for the European coal and steel community, which was the precursor to the European Union.

Moreover, the world’s energy demand continues to increase exponentially with analysts forecasting global energy demand to reach 739 quadrillion Btu by 2040 with coal forecast to comprise 161 quadrillion Btu.

Noting the growing global energy demand, Bayoglu highlighted that the spur in demand would be supported by the 1160 coal plants that are planned or under construction in 62 countries worldwide. These new plants would expand the world’s coal-fired power capacity by 43%. This is in addition to the 6678 operating coal mines around the world.

While Europe’s coal demand has dropped owing to the growth of renewables and their existing gas and oil supplies, which South Africa does not have the luxury of having at its disposal.

In Southern Africa there is a growth in coal projects being developed in Botswana, Mozambique, Madagascar, Tanzania, Zambia and Zimbabwe. Moreover, South Africa is far ahead of the other countries in Southern Africa owing to its long history of coal mining, developed infrastructure, and skilled workforce.

Eskom Needs Coal and South Africa Needs Eskom to Succeed

“Eskom is critical to South Africa and every effort is needed to ensure is succeeds. South Africa is heavily reliant on coal as it the cheapest most reliable form of energy. We do not have gas and oil reserves. South Africa has good quality coal, which needs to be produced cost competitively. South Africa also must make the most of its coal resources for the benefit of the country and can continue to generate revenue for the country through export sales,” Bayoglu stated.

The exiting of coal majors, such Anglo American and South32 poses a risk owing to the loss of skills and capabilities to optimally run coal mines in South Africa which could place the supply of much needed coal to Eskom at risk. However, this could also provide opportunities for black-empowered industrialists to enter this space.

GHG Emissions Clarified

According to research undertaken by international energy and sustainability consultancy Ecofys greenhouse gases (GHG) produced by coal miners make up a tiny minority of total global emissions. The major contributors are industry (29.2%), energy (14.5%), land (23.3%), transportation (14.5%), building (18.2%), while coal miners make up just 2.7% of emissions.

“There is a strong lobby against coal that blames all carbon emissions on the coal sector, but we should not be fooled by this. Industrialised countries are seeking to stop coal production after having benefited for generations from coal, while demanding emerging economies give up on coal, while they should rather be asking for cleaner coal technologies,” he highlighted.

Bayoglu pointed out that one such technology to address GHG in coal was carbon capture, which will be key technology to reduce global CO2 emissions, not only from coal, but also natural gas and industrial sources.

Another technology is high efficiency low emission coal that aims to improve the current average global efficiency rate of coal-fired power plants from 33% to 40% by deploying more advanced off-the-shelf technology that could eliminate as much as two gigatonnes of CO2 emissions worldwide.

“Government needs to come to the party and support the industry to sustain jobs and create economic growth as the decline of the coal sector will place the country’s energy sector in jeopardy and threaten the livelihoods of 700 000 people who are dependent on the coal sector. We are appreciative of the Department of Minerals and Energy pro-coal stand, but we need greater support by government and society broadly.

“Coal is important to South Africa and will continue to be very important for South Africa for decades to come and we all need to band together to ensure it receives the support and nurturing it deserves,” Bayoglu concluded.


Mining People on The Move

Nusantara Resources Limited - Neil Whitaker

Asia‐Pacific gold development company Nusantara Resources Limited (‘Nusantara’, ASX: NUS) is pleased to announce the appointment of Mr Neil Whitaker as its new Chief Executive Officer with effect from 26 August 2019.

Nusantara is an ASX-listed gold development company with its flagship Awak Mas Gold Project located in South Sulawesi – Indonesia. The Company is engaged in financing discussions with the intent of moving the projected 100,000 ounce per year1 project into development in 2020.

Neil has over 40 years’ experience in the mining sector and has held operating and senior executive roles with companies such as Anglo American, Western Mining Corporation, Clough Indonesia (Petrosea Tbk) and Newcrest Mining. Neil has extensive international operating experience with a demonstrated background in leading resource companies through the transitional stages of the full project life cycle. Having previously worked in the Asia-Pacific region and more specifically as the Chief Operating Officer for PT Petrosea Tbk (a subsidiary of our Indonesian strategic partner), Neil has relevant experience which will place him in good stead to drive the Awak Mas Gold Project into the next phase towards development.

The role is Jakarta based and we anticipate that the established associations which Neil holds with the Indonesian community and senior government officials, will further strengthen our existing relationships as we look to build a successful and highly regarded operating business.

Executive Chairman, Greg Foulis, will continue in the Executive Chairman role for a short period as Neil establishes himself with the Company.

Nusantara Resources Limited’s Executive Chairman Greg Foulis said, “We are very pleased to have Neil join the team during this exciting time for the Company. I am confident that his significant experience and relevant Indonesian expertise will enable the business to successfully transition into
development and deliver another world class gold mine in the Asia-Pacific region”.


Mining People on The Move

Cokal Limited - Gerhardus (Garry) Kielenstyn

Cokal Limited (ASX:CKA, “Cokal” or “the Company”) advises that Mr Gerhardus (Garry) Kielenstyn has resigned as an Executive Director of the Company, effective immediately.

Mr Kielenstyn has worked with the Company since May 2013 when he was appointed Indonesian Country Manager. During June 2016 he was appointed to the role of the Company’s Chief Operating Officer and in January 2017 as Executive Director.

Mr Kielenstyn has resigned from the Board to attend to his other business interests and for personal reasons. The Board thanks Mr Kielenstyn for his work over the years, and wishes him all the best for his future endeavours.


Mining People on The Move

Gulf Manganese Corporation – Building A Successful Indonesian Smelting Business

The developer of premium Indonesian Manganese Alloys, Gulf Manganese Corporation Limited (ASX: GMC) has appointed highly experienced Mr. Ian Gregory as Company Secretary, as per the latest update on ASX.

Mr. Ian Gregory is a professionally well-connected Director and Company Secretary with more than 30 years of experience in the provision of company secretarial and business administration services. He has previously served as Chairman of the Western Australian Branch Council of Governance Institute of Australia.

On Education front, he has a Bachelor of Business degree from Curtin University and is a Fellow of the Governance Institute of Australia, the Financial Services Institute of Australia as well as a Member of the Australian Institute of Company Directors.

Earlier, Mr. Robert Ierace was serving as Company Secretary; however, due to increasing finance and governance requirements, the company made a decision to separate the finance and secretarial roles in order to strengthen the company’s professional resource base. Consequently, Mr. Robert Ierace is retiring from the position of Company Secretary to focus on his role as Chief Financial Officer.

Gulf to Acquire Strategic Interest in Iron Fortune Pty Ltd

Gulf Manganese Corporation recently made a strategic step to diversify its asset base beyond Indonesia by entering into an agreement to acquire a strategic 20% interest in Iron Fortune Pty Ltd. This is expected to provide Gulf with a first to market exploration opportunity in Timor-Leste. As per the Gulf, Iron Fortune’s strong local relationships and geological knowledge of the region will help the company in growing manganese footprint outside of Indonesia.

To acquire the 20% interest, the company will have to make an initial payment of A$100k for exclusivity while the due diligence process is completed. Both the companies have agreed for coordination in order to develop a work plan and strategic direction. And once the due diligence process is finalised, the company will pay a further A$200k and issue shares worth A$100k; and Iron Fortune will issue Gulf a 20% stake.

As per the financial terms, Gulf will also commit to spending A$300k on the Business by 31 August 2020, and a further $300k in the following 12 months to earn 35% and then 51% interest in Iron Fortune. Once the 51% interest is earned, Gulf will complete a mining study and reach a decision to mine to earn a further 29% interest for a total of 80%. After which, the current shareholders of Iron Fortune will have the right to fund the mining and development costs on a pro-rata basis. In case, Gulf completes the acquisition to 100% of Iron Fortune, the current shareholders will receive a 2.0% Net Royalty on Profit.

As per terms of the agreement, Hamish Bohannan will be appointed Non-Executive Director of Iron Fortune Board.

The company’s management believes that this partnership can significantly de-risk the Gulf’s ore supply chain and help it in expanding its high-quality manganese mining footprint and processing capabilities. It is believed that this will help in the development of Gulf’s Kupang Smelting Hub facility.

The agreement is subject to various conditions, which include:

Gulf undertaking and completing its Due Diligence on Iron Fortune;
Gulf Board approval;
Gulf receiving the necessary regulatory approval (if required);
Confirmation that the Business is in good standing and fully compliant with respect to TimorLeste law and regulations.

Review of Company’s Operations

In the June quarter, the company made substantial operational progress with several key milestones achieved, including the securing of the Company’s Direct Shipping Ore (DSO) licence in May 2019.

In the month of May, the Company’s Indonesian subsidiary, PT Gulf Mangan Grup (GMG) received its Direct Shipping Ore Licence from Indonesia’s Ministry of Trade, allowing GMG to export up to 103,162 tonnes of high-grade manganese ore per year.

During the quarter, key management personnel attended the Vienna’s International Manganese Institute’s (IMnI) annual conference.

Recently, the company vended High-Grade Timorese manganese mine, Putra Indonesia Jaya (PIJ) to its key Indonesian and Singaporean partners and announced its intention to supply the 100% of the ore produced from this mine to Gulf’s operations in Kupang. It is expected that ore supply from the mine will commence in the month of September 2019. By the first quarter of calendar year 2020, the ore supply is expected to increase to around 2,000 tonnes per month.

During the quarter, the company successfully raised A$3.24 million by issuing ~647.20 million shares at $0.005 per share. The company has also agreed to place further 45 million shares at an issue price of $0.007 to Acuity Capital for a total of A$0.32 million in accordance with the Controlled Placement Agreement with Acuity announced on 31 January 2018. As per the company, the funds received from the placements will be used to advance preparations for DSO start-up and for general working capital purposes.

Cash Flow Position

During the June quarter, the company spend $679k of cash on development activities, $485k on staff costs and $624k on administration and corporate costs. The total net cash used in operating activities during the June quarter was around $1.79 million. The net cashflow from investing and financing activities during the quarter was $92k and $5,220k respectively.

The total estimated cash outflows for September quarter is around $1.7 million which includes around $980k to be spent on development, $450k to be spent on staff costs and $280k to be spent on administration and corporate costs.


By ramping up DSO exports over the coming months, the company intends to utilize the generated cash to finalise the commissioning of first two smelting hub furnaces at Kupang, which remain on-track for completion in the first quarter of next year. The company is also advancing discussions with debt funding providers and potential offtake partners to expedite this construction process.

Stock Performance

At the time of market close on 5th August 2019, GMC’s stock was trading at a price of $0.007 with a market capitalisation of circa 34.56 million.



Weekly News

India to Surpass US as World's Second Largest Coal Producer This Year: KPMG

Coal production continues to increase in India and the country is likely to surpass the US as the world’s second largest coal producer this year, according to KPMG partner Niladri Bhattacharjee.

The country is projected to produce roughly 815 million mt in fiscal year 2019-2020, up from 730 million mt in FY 2018-2019, Bhattacharjee said Tuesday at the mJunction Indian Coal Markets conference in Calcutta.

India’s fiscal year runs from April 1 to March 31.

US coal production is projected to total 674 million st (611 million mt) in 2019, down from 755 million st in 2018, according to the US Energy Information Administration.

As India’s economy grows, Indian power demand continues to rise, driving the increase in coal production.

The country has an average kWh/capita rate of 1,149 compared with 4,280 kWh/capita in China and 12,830 kWh/capita in the US, according to a presentation by S Chandrasekhar, the director of operations for Singareni Collieries, one of two government-backed miners in India.

Singareni, also known as SCCL, is projected to produce 67 million mt in FY 19-20, while Coal India, the other government-backed miner, is projected to produce 660 million mt. Commercial mines are projected to produce 83 million mt.

The government has set a production target of 1 billion mt by fiscal year 2024-2025, of which Coal India is projected to produce 880 million mt.

Coal-fired power accounts for 55% of India’s generation, but there is not enough domestically-produced coal to meet demand, said several speakers.

Indian coal imports totaled 173 million mt in 2018, and are projected to increase to 193 million mt in 2019, according to S&P Global Platts Analytics. In 2020, Indian coal imports are projected to total 213 million mt, surpassing China as the world’s largest importer.

The majority of India’s thermal coal imports come from Indonesia and South Africa.

Imports are also used to increase the calorific value of India’s domestic thermal coal, which averages roughly 3,500 kcal/kg.

India remains the main export market for the US, which exported 10.4 million mt of thermal coal to India in 2018 along with 5.1 million mt of metallurgical coal and 3.1 million mt of fuel-grade petcoke.

Most of the US thermal coal and petcoke exported to India is consumed by the country’s brick and cement industries.


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The information contained in this newsletter is intended to provide general information only. Opinions offered in any of the articles/releases contained in the newsletter are those of the individual making the representations and should not be considered to represent the opinion of Mitrais. Nothing in this newsletter is intended to provide legal advice or to be relied on as binding in any dispute, claim, action, demand or proceeding. The news articles/releases in the newsletter may also contain forward looking statements such as but not limited to statements concerning future operations of companies. All forward-looking statements may be subject to certain assumptions, a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied. Readers are cautioned that such statements are not guarantees of future performances and that actual performances and explorations and financial results may differ materially from any estimates or projections. Mitrais accepts no responsibility for the adequacy or accuracy of the information contained in this newsletter, nor the responsibility to update any person regarding any inaccuracy, omission or change in such information.

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