There are two mining related events on in London today—Mines and Money's first day (of three)—and MineAfrica (just today)—luckily they are not being held so far apart as to make attending some of both impossible. So far today I have taken in talks from Frank Holmes and John Meyer at the former event—both presenting a relatively optimistic picture for mining over the next few years—Holmes looking at what he terms the E7 countries—for the most part those with the largest populations and enormous growth potential as witnessed by China's huge urbanization programs, which have totally transformed the country's economy—and the feeling that this process could be underway in the others too. Holmes also felt that gold and gold stocks have been hugely oversold and is looking for a turnaround here.
From Mines and Money, a quick journey to MineAfrica and to hear Robert Friedland's take on the industry over the next few years. Obviously Friedland was talking his Ivanhoe book with his very positive views on Africa in general and on his Platreef, Kamoa and Kipushi Projects—the first in South Africa and the next two in the Democratic Republic of Congo—in particular. As expected he was hugely positive on all three—Platreef as a game-changer for the platinum sector, Kamoa as one of THE copper projects of the future as a far higher grade option than most, if not all, other major known new copper projects and Kipushi as having huge high-grade zinc mining potential, but with copper, gold and silver also.
But perhaps it was his overall view of what lies ahead in metals demand through to the end of the decade which was the most interesting part of his talk. The supercycle is alive and well he reckons.
On platinum, pollution in countries like China and moves to reduce this through a big crackdown on polluting vehicles—requiring platinum and palladium in large quantities—and fuel cell powered vehicles now under development in Japan and Korea which he sees as providing a better solution to nonpolluting vehicles that the electrically propelled cars and trucks, largely due to much greater range and far faster refuelling options. He sees these uses for platinum accelerating through the end of this decade into the next, particularly if there is a fuel-cell driven vehicle revolution with each even small vehicle requiring an ounce of platinum in its power unit construction.
In the Platreef deposit in South Africa, Friedland has found a huge, and importantly thick, deposit of PGM-bearing material amenable to open pit mining. He also noted that the nickel, copper and gold in the deposit would possibly be sufficient to cover the mining and processing costs thus leaving the platinum group metals to effectively be mined for free! No conclusive figures were provided on this, but Friedland does have the track record of finding remarkable deposits—as witness Oyu Tolgoi, Voiseys Bay and Fort Knox.
On copper, it is not only its use in general industry which he sees as important, although the huge and continuing growth in the world's most highly populated countries will of course lead to ever continuing growth in demand, but also new uses, as in employment as a hugely efficient anti-microbial in hospitals and other public places. Stainless steel he says is 'loved' by bacteria and viruses, whereas copper surfaces kill them!
Looking at copper supply and demand trends, while supply will continue to rise along with global population and urbanization trends, head grades at the world's major copper mines are showing a consistent downward trend, while cut-off grades are rising thus desperately squeezing supplies into a crisis situation as the current decade draws to a close. He reckons the world will need as much copper in the next 20 years as in the past 120! An unsustainable situation without the development of huge new deposits like Kamoa.
Friedland's Ivanhoe recently produced a preliminary economic appraisal of the deposit—and in truth although the grade and tonnages looked very impressive the projected rate of return, and the high capital costs to build even the initial stage mine did not look quite so impressive given that potential financiers will likely continue to maintain doubts about the potential political stability of the DRC. But this is at current copper prices. Under the Friedland scenario copper prices will rise sharply through the second half of the decade thus transforming the economics. He sees 2017/2018 as seeing a worldwide coordinated era of major growth. Whether he can raise the capital to bring this project into production in the time scale envisaged may thus depend on Friedland's powers of persuasion but these are legendary!
His final major project, Kipushi, is targeting what Friedland reckons to be a huge ultra high grade zinc orebody, in an old mine which was also known for producing high grade copper as well as gold and silver. Friedland says that in his opinion this is the highest grade mine in the world! The old mine is being dewatered and this will shortly have been pumped out to a level where this big believed-to-be high grade zinc orebody can be accessed.
Friedland says he is hyper-bullish on zinc, again not only for uses in traditional industrial scenarios, but also as a fertilizer additive where the correction of a zinc deficiency in the soil can hugely increase crop yields—particularly in china where this has already been recognized.
Overall the Friedland project hype continues, with Ivanhoe apparently containing three of the world's potentially richest deposits of platinum group metals, copper and zinc. It sounds almost too good to be true. But again, consider his track record. He does have a propensity for finding megadeposits on a world scale and understanding developing usage potential before many others recognize this. He's not always been right, but if his assessment is correct he has three more potential mines to add to his ongoing success story. We shall see how these projects develop over the next few years and how well his supply and demand forecasts pan out. Don't write it all off as just hype!