This Week in Critical Minerals – #19
This Week in Critical Minerals – #19
Copper, lithium, and uranium news
Copper
Vale operating licenses suspended in Brazil, then decision reversed. Last Wednesday, the Pará State Environmental and Sustainability office suspended the operating license of Vale’s Sossego copper mine, followed by a similar notice for the Onça Puma nickel mine a day later. The environmental secretary canceled the licenses due to issues with the annual environmental report relating to local communities. A few days later, on Monday of this week, the environmental secretary reversed the decision, granting a temporary injunction giving back the operational licenses for the two mines. Sossego, Vale’s second-largest copper mine in production since 2004, produced 66,800 tonnes of copper in 2023 and has been, for the most part, incident-free. Onça Puma, on the other hand, had its operational license suspended in 2021 for failing to comply with its environmental permit (the issue was resolved soon after). Onça Puma has been undergoing maintenance since Q4 last year as its furnace is being rebuilt and is expected to open up again late in Q1, while Sossego is also expected to undergo maintenance soon.
Zijin to expand Julong mine. Chinese mining giant Zijin Mining has received approval from the Tibet Autonomous Region Development and Reform Commission for the Phase II expansion of its Julong copper mine in Tibet, increasing the amount of ore mined and processed daily from 200K to 350K tonnes. This equates to copper production of 300-350K tpa (and 13K tonnes of molybdenum), up from 154K tonnes in 2023. When construction is completed in late 2025, Julong will be the largest copper mine in China and one of the ten largest in the world. The expansion is expected to cost $2.42B and extend the mine life to 36 years. The company is considering a Phase III expansion to more than double the mine’s output again, placing it as the second-largest copper mine in the world after Escondida in Chile.
First Quantum refinancing. First Quantum Minerals, following the closure of its Cobre Panama mine (by far their largest and most profitable asset), has been short on cash, with many speculating they will need to sell part of their Zambian mines. Early last week, the company announced four measures to increase liquidity and shore up its balance sheet:
$500M copper prepayment agreement with Jiangxi Copper
Extended maturity of its $2.2B corporate bank loan to April 2027
$1B equity bought deal offering led by underwriters RBC Capital Markets, BMO Capital Markets and Goldman Sachs
$1.6B senior notes offering to pay 9.375% due in 2029
Though a substantial influx of capital, with Cobre Panama closed and Ravensthorpe closing soon, the company will have only three producing mines (Kansanshi, Sentinel, and Guelb Moghrein) and a need to invest in growth projects in Africa.
Lithium
Zinnwald expands resource estimate by 445%. Zinnwald Lithium is developing the Zinnwald lithium project in Saxony, eastern Germany. The company released a new mineral resource estimate last week, its first since 2018, detailing a measured and indicated resource of 193.5 Mt grading 0.478% Li2O (contained lithium of 429k tonnes) based on 26,911 meters of diamond core drilling across 84 holes. This places Zinnwald as the second-largest hard rock lithium project in the EU, after Cinovec, a Czech project owned by European Metals and a state utility. Shares of Zinnwald rose more than 40% on the news but have since fallen.
Sayona deliver Moblan feasibility study, Piedmont sells stake. Sayona Mining, an Australian lithium exploration and mining company, released the feasibility study for the Moblan lithium project in Quebec, detailing a post-tax NPV of C$2.2B with an IRR of 34.4%. The initial mine plan would produce 300K tpa of spodumene concentrate over a 21-year mine life, with the ore at an average grade of 1.36% Li2O. The mine and mill would take 39 months to build, with a total CAPEX of C$962M. The study estimates an all-in-sustaining cost of US$561/mt of spodumene concentrate (current price at $910/mt), substantially lower than Sayona’s current operation at North American Lithium (NAL). However, Sayona has been plagued by cost overruns at NAL, so this should be taken with a grain of salt. It is unclear how and if Sayona plans on financing Moblan, given the current low price of lithium and Sayona’s comparably small market cap of A$411M relative to potential CAPEX. Also last week, US-based Piedmont Lithium sold its remaining stake in Sayona for nearly US$40M, most of which was through an off-market block trade to an unknown buyer. In 2021, Piedmont acquired a 19.9% stake in Sayona Mining, a 25% stake in subsidiary Sayona Quebec, and rights to 50% of the offtake of NAL in exchange for a US$12M investment and commitments to fund C$23.5M of the NAL restart.
Uranium
Energy Fuels has a profitable quarter, ramping production. Energy Fuels reported their 2023 results on Monday, detailing an expanding company in uranium, vanadium, and rare earths. The company sold 560K lb of uranium concentrate (U3O8) for $33.28M in 2023 at an average price of $59.42. This translates to a gross margin of 54%, among the highest in the industry. Energy Fuels also holds 685K lb of finished U3O8 and 436K lb of raw material/work-in-progress U3O8 (uranium which has yet to be processed) stockpiled. The company also commenced production at three facilities in 2023 (Pinyon Plain, La Sal, and Pandora); when production is fully ramped in late 2024, the company will produce 1.1-1.4M lb of U3O8 per year. During 2024, the company is also restarting the Whirlwind and Nichols Ranch uranium projects, which, when fully ramped at the end of 2024, will put the company at a run rate of more than 2M lb of U3O8 per year sometime in 2025. With the price of uranium currently at $102/lb, the ramped production and sales from the stockpile will result in much higher margins than those achieved in 2023. The company also realized the sale of the Alta Mesa in-situ recovery project to enCore Energy, first announced in 2022, receiving $120M to fund construction across its uranium and rare earths projects.
