Resource World Magazine

8 www.resourceworld.com A U G U S T / S E P T E M B E R 2 0 1 4 Copper's recent performance has been mixed; the price pushed past $3.35 per lb copper during December before sliding to a low in February of $2.92 per lb (all US $). Effective June 20, it stood at $3.07 per lb, according to infomine.com. Ernst & Young (EY) also noted a 10% decline in copper prices on the London Metal Exchange across Q1. This was due to "concerns around decreasing demand from China, copper's largest consumer," according to EY's Q1 2014 Canadian Mining Eye. Further price pressure might be experi- enced. "I think copper could move a little lower as more new mine supply comes on stream around the world," Scotiabank's VP economics and commodity markets spe- cialist, Patricia Mohr, told Resource World. "[But] I think we're approaching a bottom, although perhaps we're not quite there yet." Meanwhile, nickel has gained in the wake of Indonesia's ban on the export of unprocessed ore that started on January 12. The country was the world's top nickel miner in 2013 and accounted for 28% of global production, according to Scotiabank. Nickel stood at $8.32 per lb effective June 20, down from highs in the second week of May of just over $9.60 per lb. However, this is still much higher than its 52-week low of $5.97 per lb, according to infomine.com. "Although nickel prices have moved down a little from their recent highs, I think this largely reflects profit taking by institutional investors rather than any fun- damental change in the market. I expect nickel prices to move irregularly higher," Mohr said. By comparison, molybdenum oxide and ferromolybdenum prices have been ris- ing, taking some support from restrictive export quotas and tariffs on rare earths, tungsten and molybdenum by China. Molybdenum oxide remained at a 52-week high of $14.97 per lb effective June 20 compared with a 52-week low of $9.07 per lb, according to infomine.com. On June 4, Reuters cited a Chinese source with ties to the government that Beijing will have to accept a recent World Trade Organization ruling that its quotas violate the trade body's rules. The government could move to cancel the export restrictions next year, according to the source. Zinc's performance has been buoyed by demand pushing past supply. In its zinc report of June 6, TD Securities predicted a primary zinc supply deficit of around 400,000 tonnes for 2014. This will be fol- lowed by a deficit of 222,000 tonnes in 2015. "Ultimately, while demand isn't going to be particularly stellar, it's likely to outpace supply growth. That means we're going have a deficit this year and most likely next year as well," TD Securities Head of Commodity Strategy, Bart Malek, told Resource World. "If we're right on the supply side then, balance-wise, we're going to need some- what higher prices to balance this market," he said. LME cash buyer three-month zinc stood at $2,175 per tonne on June 20; TD Securities has a target of $2,400 per tonne to be reached before the end of 2014. The price support will assist Canadian exploration and mining companies. "To the extent producers are positively impacted by higher prices, I think it will help. But as always, it will depend very much on where your cost structure is, what your ore bodies look like, where you send the stuff to be smelted," Melek said. In the short- to mid-term, zinc will be supported by continued infrastructure and urbanization spending in China and improved US economic performance. Auto sales in China and the US will assist, as will the reduction in zinc's global min- ing output and the poor performance in China's smelting sector, according to the TD Securities report. Meanwhile, the rate of Chinese GDP growth and the effect this will have on almost all metals and minerals remains a subject of ongoing debate. "We still think that GDP growth in China will be above 7% this year and we still have a forecast of 7.3% growth," Mohr said. "They're putting a lot of money into high-speed railway development and into further infrastructure … They're also putting a lot of emphasis on social housing." Of course there are security risks that can cause headaches. At the time of writ- ing, the situation in Ukraine is still of some concern while Iraq is facing one of the largest insurgencies since the US-led inva- sion. "Insurgents in Iraq [ISIS] have spiked the oil price," Melek said. "[And] the mar- ket worries that, potentially, this spike may well slow down the global recovery." Hopefully, solutions will be found, allowing the mining and metals industry to continue clawing its way clear of the 2013 bear pit. Below follows a selection of some of the various junior, mid-tier and senior mining companies with major interests in copper, nickel, zinc and molybdenum. Atico Mining Corp. [ATY-TSXV; ATCMF-OTC] operates the underground El Roble copper mine in central Colombia. In Q1 2014, the mine produced just below 1.4 million lbs [635 tonnes] copper, with a head grade of 3.01% Cu. It also produced 1,147 ounces gold. At a cut-off grade of 0.72% copper equivalent (eq), the mine's inferred mineral resource stands at 1.58 million tonnes, grading 4.45% copper and 3.17 g/t gold. Mineralization at El Roble is open at depth and along strike, and the company plans to further test the limits of the resource. Avanti Mining Inc. [AVT-TSXV] is developing the Kitsault molybdenum project in northern British Columbia. The previously-producing site had an output of over 30 million lbs molybdenum from 1968-1972 and 1980-1982. On June 13, the British Columbia Ministry of Energy and Mines issued an amendment to Avanti's existing Mines Act Permit (M-10). Approval of the environmental assessment application has been granted and mine construction is now under way. Avanti already has an off-take agreement with ThyssenKrupp Metallurgical Products for 50% of Kitsault's total molybdenum output. Avanti and the Nisga'a nation have signed a comprehensive agreement that will address a number of outstanding Nisga'a concerns in respect of environmen- tal protection, provide economic benefits to the Nisga'a nation (including a NSR royalty of up to 2% based on prevailing molybdenum prices) and resolve all out- standing litigation. Balmoral Resources Ltd. [BAR-TSX]

• Cover