Our periodic mini-bite series contain news stories, articles and light reports about Bargate or other activities in the industries that we cover.
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A bit about Copper
In the past 5 years, copper has more than doubled in price. As at late April 2021, it was trading very close to US$10,000 per tonne and is predicted to rise to $20,000 per tonne due to low stocks and increased demand, according to analysts at Bank Of America. Other analysts have referred to it as the new oil. Copper is one of the oldest metals known to man and indeed was the first metal traded on the London metal Exchange (LME).
Copper prices per Lbs
Copper has had a wide variety of uses: it was mixed with tin to create bronze which was used as currency and worn as jewellery during the bronze ages. Egyptians also used it to sterilise water and treat infections.
In present times, it can be found in hospital door handles and stair railings due to its anti-bacterial qualities. Copper is also used for wiring as it is a good conductor of electricity. In addition, it has other industrial uses such as electrical product manufacturing, building construction and infrastructure. Copper is one of the key minerals supporting cleaner power production and energy as it is a primary component for the manufacture of wind turbines, solar cells and electric vehicles.
Copper production process
The Democratic Republic of Congo (DRC) is the largest producer of copper in Africa and the 4th largest producer in the world with 1.3 million metric tonnes in 2020. Most of the country’s copper operations are in the province of Katanga which is located on the Central African Copperbelt. The Central African Copperbelt is the world's largest and highest-grade sedimentary copper province, with approximately 200 Mt of contained copper and the world's largest cobalt reserves. It includes the Zambian Copperbelt, the Congolese Copperbelt, and deposits in the North West Province of Zambia.
China Molybdenum Co through its subsidiary, Tenke Fungurume Mining SA, is the largest copper producer in the DRC. Glencore and Ivanhoe Mines also have large copper mines in the country.
Zambia is the 2nd largest producer of copper in Africa, producing 830k metric tonnes in 2020, up 10.8% from the 796k produced in 2019. Copper represents 60 percent of the country’s total exports.
The largest copper mines in the country are owned by Barrick Gold, Glencore and First Quantum Minerals. However, in recent times, the Zambian government has pushed to increase its participation in the mining industry.
Major producers of Copper from 2010 to 2020 (in 1,000 metric tons)
What next for Copper?
The demand for metals like copper is expected to rise tenfold by 2050 according to the World Bank. This demand is strengthened by the crucial role copper plays as a key component to growing sectors such as electric vehicle manufacturing, electronics and renewable energy. According to Bank of America, “the world risks running out of copper” as demand grows much faster than supply. The International Wrought Copper Council (IWCC) expect copper market demand to rise to 24.458 vs supply of 23.95mt leading to a deficit of 500,000t this year. Macro-economic shifts in major producing jurisdictions like Chile and Peru will also impact prices globally.
If the ambitions of the US government under the Biden Administration come to fruition, then the huge infrastructure spending envisaged will likely also raise demand for copper. This should add to the excitement.
However, copper is found in many parts of the world, therefore it is not as exposed to country/political risk as other cleaner energy minerals such as rhodium. In addition, good grade copper is infinitely recyclable: about 50% of the copper used in Europe comes from recycling and this figure is expected to grow as we move towards a greener economy globally, thereby reducing the pressure on the limited supply.
Another win for Ghana?
Twitter’s announcement in April that it will set up its African base in Ghana apparently restarted the ongoing rivalry between the West African country and its not-to-distant neighbour Nigeria, colloquially dubbed the “Jollof” wars. Whether in football, music, rice or the film industry, the love-hate relationship between the two countries has continued for many years.
That is not what this piece is about: this short write-up takes a cursory glance at the mining sector in Ghana. However if you are Nigerian, it is probably best to stop reading here.
Ghana is a well-established mining destination with a few large-scale mining companies operating in the country, including AngloGold Ashanti, Newmont Goldcorp, Gold Fields Ltd and Golden Star Ltd to mention a few. Mining has continued to play a crucial role in the economy and accounts for over half of all foreign direct investment and more than one-third of all export revenues.
With a contribution of around 95% of the country’s mineral revenue, gold is, by far, the most commercially exploited mineral. In fact, Ghana overtook South Africa in 2019 to become the continents largest producer of Gold with over 5 million ounces produced annually. For comparison, Nigeria produced about 500k ounces in 2019 (we did ask that you stop reading!). However, it is worth noting that this represented a 34,900% increase from the 40kg in 2006. It is also important to note that these figures, from various geological surveys, do not capture volumes from the illegal mining trade in places such as Zamfara in Nigeria.
Other notable mineral deposits found in Ghana include manganese, bauxite and diamonds. Ghana also discovered commercial quantities of lithium in 2018, a core component in the rechargeable batteries that run electric vehicles.
Structure of the industry
Private owned companies can obtain rights to minerals through the license application process of the Minerals Commission of Ghana via its Mineral Cadastre Administration System. There is no restriction on foreign ownership although the Government is entitled to a 10% “free-carry” in the rights and obligations of the mineral operations.
The government can also obtain further participation in mineral operations upon agreement with the license holder. Small-scale mining is reserved for locals, as is the case in most African states (at least on paper).
There are two categories of gold mining licenses that can be obtained in Ghana – large scale and small-scale mining lease. Holders of the latter must sell their mined gold to the Precious Minerals Marketing Company (PMMC) or other gold buyers licensed by Government. Gold produced by such license holders are the ones sold locally and purchased by the licenced gold dealers mainly for export or limited refining by refineries in Ghana. Whereas those with large-scale mining licenses do not sell their gold locally. For these, sales have either been by the spot price at the London Metal Exchange or by other Marketing Agreements with overseas refineries with the approval of Government. Exports of gold are regulated by the Bank of Ghana, Ghana Revenue Authority (Customs Division) and the Minerals Commission.
(source: Bargate research; Minerals Commission Ghana)
For a detailed analysis or evaluation of a specific asset in Ghana, contact us @BargateAdvisory
Small (and viable) Gas Plays in Nigeria?
The global shift away from fossil fuels is well and truly on. Big IOCs are falling over themselves to show who is more intent on going green (with a particular penchant for solar and wind power technologies), and international development finance institutions are announcing one after the other that they will no longer provide financial support to overseas fossil fuel energy projects. They, however, mostly mean oil.
Gas, on the other hand, mainly because it is cleaner and is considered a “transition fuel”, still has a fair bit of traction and will do for some time yet. And Nigeria has this in spades.
This very brief note invites the reader to consider just one component of the gas story in Nigeria: the bit that gets flared. According to the Department of Petroleum Resources, about 19% of the 1,7 tscf of gas produced in 2018 was burnt.
That is a fair bit of commercial asset that can be compressed and transported in road tankers, or that can be piped to a power station. Moreover, utilising this gas instead of flaring is a cleaner approach.
The government thinks there is a lot of value to be extracted from this. This is largely why they embarked on a (rather stuttering) gas flare commercialisation programme. The aim of the exercise is to get interested parties to come round and propose commercially viable technologies to utilise these flared gas volumes.
We also think there’s value here (not necessarily in the programme itself which, for reasons mainly surrounding process and logic, has stalled). Small and mid-scale projects are increasingly more commercially viable, particularly with regard to gas-to-liquids (GTL) and small scale liquefied natural gas (LNG) projects. It could be power. It could be methanol. It could be fertiliser. It could even be base oils from a complex GTL process. Associated gas offers an increasing number of opportunities and project development options for low CAPEX projects, particularly from all the stuff currently being burned off at the tip of the gas flare stacks littered across the Niger Delta.
We’d love to discuss, and advise on, these opportunities from soup to nuts. Do get in touch.
Mining and metals
According to the World Bank, production of minerals like lithium and cobalt could grow by 500% in the next 30 years as demand for clean energy technologies continues to grow. For example, a 3MW- capacity wind turbine requires 4.7 tonnes of copper. It is evident that as the world continues its pursuit for cleaner energy, the importance of mining and metals cannot be overemphasized. Africa has a big part to play: Cobalt is one of the core components for the manufacture of batteries for electric vehicles (and those used to store solar power). Around 70% of the world’s cobalt supply is produced in the Democratic Republic of Congo (DRC). The Copperbelt, which lies between Zambia and DRC produces approximately two-thirds of the world’s copper.
Last month, our Managing Director, Ugo Isiadinso, joined Nouman Khalid Al Sayed of the High Aspirations podcast, where the pair discussed mining in sub-Saharan Africa with a focus on Nigeria. This light discussion is accessible to both mining and non-mining professionals. Watch the video here
We are pleased to welcome Nigel Walls as the newest member of Bargate's Advisory Board. Nigel joins with over 30 years' experience in the mining industry and will support Bargate's aggressive growth strategy into the mining industry in sub Saharan Africa. Read his profile here
Rhodium: Is something unusual going on?
Rhodium prices tell an interesting story that is attention worthy. Around this time a year ago, at the close of trading on 21st January 2020, rhodium prices were at US$9,400/troy oz. Just three months earlier, a troy ounce sold at US$5,550. As at the close of trading on 15 January 2021, the price of rhodium is US$21,500/troy oz, twice its price a year ago.
Prices have increased at a monthly average rate of 11% since January 2020, the highest month-on-month average growth occurring in February of 2020 at 33.5%. Average prices so far this month have grown 14.3% from the December 2020 average.
What is rhodium and what is it used for?
Rhodium is one of the six-member family of Platinum Group Metals (PGMs) which include palladium, platinum, iridium, osmium, and ruthenium. Its most common use is for the production of catalytic converters and emission control catalysts particularly in motor vehicles. Typically, about 80% of the mined metal consumed globally is used in the automotive industry and mainly for the reduction of nitrogen oxides in exhaust gases.
Other uses include:
For glass manufacturing, the second most common use for the metal, particularly in producing flat-panel glass and fiberglass;
Electroplating and coating (‘rhodium flashing’) on platinum or gold to provide a reflective surface, or on silver to protect it from tarnishing;
As an industrial catalyst, particularly in chemical reactions of acetic acid, nitric acid, and hydrogenation reaction;
For the creation of alloys, where it is used as an agent with other PGM metals such as palladium and platinum to make the alloys tough and resistant to corrosion;
For optical instrument manufacturing, where plated rhodium is applied;
In mammography systems, as a filter in X-ray production; and as
Neutron detectors in nuclear reactors.
Where do you find it?
South Africa is the largest producer, accounting for over 80% of global supply. Russia is the second largest producer, accounting for under 10%.
Why are prices on the up?
Mining output from PGMs is a main contributor to the price increase. In particular, disruptions in South African production have caused output to drop significantly.
It is estimated that 2020 output from South Africa alone dropped by around 20%, forcing producers to participate more actively in the open market as buyers in order to meet contracted volumes.
Another contributing factor, despite the negative impact of global economic restrictions in response to the Covid-19 pandemic, has been an increase in demand for catalytic converters in the automotive industry. Stringent emission regulations across the globe and growth in automotive manufacturing in Asia have been major contributing factors.
Rhodium prices are known to be volatile. This is not the first time that prices have experienced such spikes, albeit not to current heights even when adjusted for inflation. Its rarity and output dominance by one country imply that any disruptions in South African production could significantly affect supply and prices. Another factor worth tracking is the transition away from fossil fuels, particularly in the automotive market. A faster growth in the manufacturing of electric cars, in addition to more aggressive climate change policy on internal combustion engine emissions, will reduce the demand for rhodium and apply some downward pressure on prices.