Argentina is slowly coming to its senses with its relationship with the mining industry. The most important is not what we can read in the government proclamations, but the real progress on the ground. Goldcorp reports about its progress with Cerro Negro Gold-Silver mine in Argentina and that operating in the country is getting easier. FT reports that "Repsoil poised to sign $5bn compensation deal with Argentina." "...the settlement is also likely to provide a boost to Argentina, which is trying to rebuild its credibility with international investors ..."
Companies on our watch list should enjoy the better valuations with the improved investment climate in Argentina. McEwen Mining has exploration properties in the area of Goldcorp's Cerro Negro Gold-Silver mine, operating J/V on the San Jose mine with Hochschild Mining in Santa Cruz and world class Los Azules Copper project in San Juan. TNR Gold is involved with McEwen mining in Los Azules copper project with its back-in right and holds shares of McEwen mining.International Lithium is working on Mariana Lithium brine project in Salta with Ganfeng Lithium strategic partner from China. Lumina Copper is looking for a buyer on its Taca Taca copper project in Salta as well.
"Copper M&A is heating up and now Australia's largest unmined copper deposit is in play. Rob McEwen should be using this momentum now in the market place and put Los Azules copper deposit on the industry radar screens. TNR Gold and McEwen Mining will be very well positioned for this upturn in the market place. CRB index is breaking out and increasing M&A activity is signalling that the bottom is in place for the resource sector. Meanwhile McEwen Mining has breaking out to the upside above CAD3.0 with Gold in a breakout mode."
"Copper M&A is heating up and following Chinese quest for the long term secured supply of Copper Hudbay is bidding for one of the most promising Copper projects in the U.S. Increasing M&A activity confirms that the bottom for the mining stocks is in and industry insiders are looking for the best assets before the general public will drive the prices up.
Glencore is talking about the higher Copper prices to come and they are not alone in this industry observation. McEwen Mining and TNR Gold will get now more attention to Los Azules copper project, as we have discussed yesterday, and Lumina Copper will be in M&A play as well with its Taca Taca copper deposit in Argentina."
"FT reports about very interesting developments around the Las Bambas Copper mine in Peru. To sell this prize copper asset was always the condition for Chinese approval of Xstrata and Glencore merger. Chinese are ready to put their hands on it, but now, apparently, Glencore is talking about higher Copper prices and better economics of the project, which can affect the sale.
All this new information bodies very well for McEwen Mining and TNR Gold with their Los Azules Copper project in Argentina. Actually Xstrata was involved in that project as well. Timing of the deal on Las Bambas is very important - before it was scheduled for September and now talks could be concluded this month. Copper market M&A is heating up and the major players are ready to make their bets already."
"It looks like the shift in Argentina for the better is happening for real this time. Rob McEwen has discussed it in his recent presentation and that in his opinion "we have seen the low in Argentina after a lot of disappointment". Shevron special Shale Oil deal, repayment to Repsol and now Yamana Gold investment are certainly the things we would like to see now after elections. Lumina copper is holding above CAD5.00 these days and McEwen Mining and TNR Gold should benefit from Los Azules copper revised valuation now."
"With Chinese economy in the recovery mode quest by Chinese companies for the best mining assets is ongoing worldwide. Lumina Copper is getting some bids today again and Los Azules copper will be getting on the investors' radar screens with the changing political landscape in Argentina again."
In September, McEwen Mining announced an updated PEA for the Los Azules Copper project. The results from the PEA demonstrate that Los Azules has the potential to become one of the largest, lowest cost copper mines in the world. In addition, there remains excellent exploration potential to further expand the size of the existing mineral resource. Highlights from the PEA are shown below:
- Pre-tax Net Present Value of $3.0 billion (8% discount rate) and an Internal Rate of Return of 17.7%.
- Annual copper production during years 1-5 to average 258,000 tonnes (568 million lbs), which would have placed it in the top 3%1 of copper mines in the world during 2012. Life of mine annual copper production to average 171,000 tonnes (377 million lbs) over 35 years.
- Indicated resource of 5.4 billion pounds of copper (grading 0.63% Cu) and 0.8 million ounces of gold (389 million tonnes with a cut-off grade of 0.35% Cu) and Inferred resource of 14.3 billion pounds of copper (grading 0.46%) and 2.6 million ounces of gold (1,397 million tonnes with a cut-off grade of 0.35% Cu).
- Initial capital costs to construct the mine and process plant have been estimated at $3.9 billionwith a payback on a pre-tax basis has been estimated at 3.8 years at $3.00/lb copper and$1,300/oz gold.
1 Based on internal market data.
The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.
The PEA has been filed under the Company's profile on SEDAR (www.sedar.com) pursuant to the requirements of Canadian National Instrument 43-101 and is also available on the Company's website - www.mcewenmining.com."
All slides are from McEwen Mining presentations.
By Samuel Williams - Friday, February 14, 2014
Vancouver-based Goldcorp's (TSX: G, NYSE: GG) Cerro Negro gold-silver project in Argentina's Santa Cruz province remains on track to start production in mid-2014, capital management VP Russell Ball told a conference call to discuss the company's 2013 results.
Goldcorp has made "significant progress" at the project, with gold production for this year expected at 130,000-180,000oz.
The US$1.6bn-1.8bn initial capital budget remains unchanged, Ball said. While the recent devaluation of the Argentine peso, which Ball said was of about 25%, will be "positive" for capital costs in the short term, it remains "too early to quantify" the impact, given uncertainty over future inflation.
Engineering, procurement and construction management at the processing plant is about 78% complete, Ball said, with some 285,000t ore stockpiled at the end of last year at an average grade of 10.5g/t gold and 206g/t silver.
In October, Goldcorp said it was delaying spending at Cerro Negro, which was previously expected to begin production by the end of 2013, and upped initial capital costs from US$1.35bn to the current estimates.
Operating in Argentina "may be a little easier" in future, Ball told the call, as the country has eased some of its restrictions on moving money out of the country, while the devaluation of the peso is also positive for Cerro Negro costs.
Additional costs resulting from import restrictions are "largely behind us," CEO Chuck Jeannes added, as the company has already imported nearly all the equipment needed.
Goldcorp also has the Alumbrera mine in Argentina, which produced 117,500oz gold and 90.6Mlb (41,095t) copper in 2013, down from 136,600oz and 112Mlb in 2012.
The company also has mines and projects in Mexico, Chile, Guatemala, the Dominican Republic, the US and Canada."
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