This is The Death Knell For Iraqi Kurdistan’s Independence

By Simon Watkins - Apr 15, 2024, 

The Federal Government of Iraq ordered the speeding up of crucial repairs to its own oil export pipeline into Turkey.

The embargo on oil exports from the KRG remains in place.

From the moment the oil export embargo was imposed on Iraqi Kurdistan on 25 March of 2023, the objective for Baghdad was always to end the region’s semi-autonomous status.



The Federal Government of Iraq (FGI) centred in Baghdad several weeks ago ordered the speeding up of crucial repairs to its own oil export pipeline into Turkey while keeping its embargo on oil exports from the semi-autonomous Kurdistan Region of Iraqi (KRI) based in Erbil in place, a senior source who works closely with Iraq’s Oil Ministry exclusively told OilPrice.com last week. According to a subsequent statement from Iraqi’s Deputy Oil Minister for Upstream Affairs, Basim Mohammed, the pipeline is likely to be operational and ready to restart flows by the end of this month. As repeatedly highlighted by OilPrice.com, from the moment the oil export embargo was imposed on Iraqi Kurdistan on 25 March of 2023, the objective for Baghdad was always to end the region’s semi-autonomous status, which meant destroying all its financial independence, which meant stopping all independent oil sales. As far as foreign oil companies working in Iraqi Kurdistan are concerned, a senior European Union (E.U.) energy security source exclusively told OilPrice.com recently: “Baghdad […] is not concerned whether all [of them] operating there just leave.”

There are several reasons for this view from Baghdad, according to the Iraqi oil and E.U. security sources. Financially, to begin with, the benefits to the FGI in Baghdad of the Kurdistan Region of Iraq are negligible, if not actually negative. “The deal between Baghdad and Erbil for budget payments to be made [from the FGI] in exchange for oil [from the KRI] was intended to provide a benefit for both sides, but it never worked properly, so continuing to allow the Kurds [the KRI] to keep selling oil independently does not benefit Baghdad one dinar,” said the Iraqi source. More specifically, the deal was made in November 2014, and involved the KRI exporting up to 550,000 barrels per day (bpd) of oil from its own fields and Kirkuk via the FGI’s State Organization for Marketing of Oil (SOMO). In return, Baghdad would send 17 percent of the federal budget after sovereign expenses (around US$500 million at that time) per month in budget payments to the Kurds. Even before Russia effectively took control of the KRI’s oil sector in late 2017 through three key deals, as analysed in depth in my new book on the new global oil market order, neither the FGI or the KRI fully lived up to their commitments. After Russia took control, disagreements between the two sides increased, with Moscow looking to create for itself the role of mediator so it could gain further traction for oil and gas developments in southern Iraq as well. “Without the deal working, Baghdad was losing out on billions of dollars a year in revenue from oil sales done independently by the Kurds, so why would it continue to put up with this?” said the Iraq oil source last week.

Legally speaking as well, Baghdad thinks there is no reason why it should, as it believes Kurdistan’s oil exports are illegal and the international oil companies (IOCs) working in the region are complicit in breaking the law. This is founded on its interpretation of the Iraq Constitution, adopted by referendum in 2005. In this, it is clearly stated under Article 111 that oil and gas is under the ownership of all the people of Iraq in all the regions and governorates. Consequently, Baghdad argues, all IOCs that have not so far submitted contracts originally drawn up with the government of the Kurdistan region of Iraq (KRG) for them to be revised now by the Iraq Oil Ministry – so that they can revised in accordance with the Iraq Constitution – have no right to use independent Kurdish routes to export the oil they produce. The KRG, however, believes it has authority under Articles 112 and 115 of the Constitution to manage oil and gas in the Kurdistan Region extracted from fields that were not in production in 2005. “Again, for Baghdad it’s irrelevant whether the IOCs working in the Kurdish region stay or go, as it [the Federal Government] doesn’t benefit at all,” said the Iraq oil source. “If they [the IOCs in Iraqi Kurdistan] want to keep working there then they can apply for updated contracts here [in Baghdad] but if not they can go, as there are plenty of other oil companies that can replace them, and work well with the [Oil] Ministry,” he added.

Politically as well, Baghdad believes there are no benefits at all from having a semi-autonomous Kurdish state in its north. For a start, there remains the constant threat that it might push again for full independence, for which it voted 92 percent in favour in the independence referendum on 25 September 2017, as also analysed in depth in my new book on the new global oil market order. For key Iraqi regional sponsor Iran, and for Turkey and Syria, rising Kurdish independence movements would also pose a distinct threat to the existing regimes, given the size of these populations in these countries. Iran’s Kurdish population is around 9 percent of its total, Syria’s 10 percent, and Turkey’s about 18 percent. Baghdad’s true view of this was shown in the quick and brutal clampdown on the KRI after the massive 2017 vote in favour of full independence. For its superpower sponsor of China, the fractious would-be breakaway Kurdistan Region of Iraq with strong former ties to the U.S. makes the administration of Iraq’s massive oil and gas sector much more difficult. China has been building up its influence in southern Iraq, through multiple deals done in the oil and gas sector that have then been leveraged into bigger infrastructure deals across the south. The apotheosis of Beijing’s vision for Iraq is all-encompassing ‘Iraq-China Framework Agreement’ of 2021. This in turn, was an extension in scale and scope of the ‘Oil for Reconstruction and Investment’ agreement signed by Baghdad and Beijing in September 2019, which allowed Chinese firms to invest in infrastructure projects in Iraq in exchange for oil. The same political concern applies for Russia, even with its strong position in the KRI’s oil sector, which would likely be continued anyway if Baghdad is successful in destroying the region’s remaining independence.

That this remains a core aim of the Federal Government of Iraq was underlined on 3 August last year when Iraq Prime Minister, Mohammed Al-Sudani, stated that the new unified oil law – run, in every way that matters, out of Baghdad - will govern all oil and gas production and investments in both Iraq and its autonomous Kurdistan region and will constitute “a strong factor for Iraq’s unity”. The completion of the ongoing repairs to Baghdad’s own oil export pipeline to Turkey - bypassing any input from the Iraqi Kurdish region at all – clearly signals that the endgame is in sight for it. Baghdad’s 600-mile pipeline was the original Iraq-Turkey Pipeline, running from Kirkuk in Iraq’s north to Ceyhan in Turkey, before it was closed in 2014 after repeated attacks by various militant groups in the region, including Islamic State. It consisted of two pipes, with a nameplate capacity of 1.6 million bpd combined (1.1 million bpd for the 46-inch diameter pipe, and 0.5 million bpd for the 40-inch one). It was only after it was closed that the Iraq Kurdistan regional government oversaw the construction of a new single side pipeline, from the Taq Taq field through Khurmala, which runs into the Kirkuk-Ceyhan pipeline in the border town of Fishkhabur. “With the Kurds cut out of the new pipeline and their own pipeline shut down, the new oil law can move forward, unifying the country’s oil sector as originally intended,” concluded the Iraq oil source.

By Simon Watkins for Oilprice.com

China Tightens Hold on Iraq's Oil with Al-Faw Refinery Nearing Completion

By Simon Watkins - Apr 18, 2024,

PowerChina and Norinco International are the guiding forces behind the development of the Al-Faw Refinery in South Iraq.

China is finishing the Al-Faw refinery perfectly in time to allow it to complete its strategically vital oil project in the critical Iraqi energy hub of Nasiriyah.

Other elements of China’s expansion strategy continue unabated, fusing both commercial advances and military ones across southern Iraq .



Back in early 2018 when rumours were rife that then-U.S. President Donald Trump was going to unilaterally withdraw his country from the ‘nuclear deal’ with Iran, China moved to position itself to occupy the vacuum that would be left in Iran and Iraq, at the very heart of the Middle East. Beijing knew that Iran continued to wield enormous influence over neighbouring Iraq, and that both together were the biggest oil and gas prize in the entire region, in addition to being at the vanguard of the Shia strand of Islam. In Iran’s case, China picked up the pace of negotiations for its all-encompassing ‘Iran-China 25-Year Comprehensive Cooperation Agreement’ concluded later, as first revealed anywhere in the world in my 3 September 2019 article on the subject and analysed in full in my new book on the new global oil market order.

In Iraq’s case, it did the same for the foundation stone ‘Oil for Reconstruction and Investment’ agreement signed by Baghdad and Beijing in September 2019, which allowed Chinese firms to invest in infrastructure projects in Iraq in exchange for oil. This later became broadened and deepened in the equally all-encompassing ‘Iraq-China Framework Agreement’ of 2021. The announcement last week by the General Company for Ports in Iraq (GCPI) that a consortium of Chinese companies has nearly completed the 300,000-barrels-per-day (bpd) oil refinery at Iraq’s key Faw Port is in line with China’s eventual vision for Iraq as one part of a giant Mesopotamian client state including Iran as well.

Although no details were given by the GCPI as to which Chinese companies are involved in the Al-Faw refinery, in the port city of Basra, a source close to Iraq’s Oil Ministry exclusively told OilPrice.com last week that PowerChina and Norinco International are still the guiding forces behind the development. This makes sense, as these two firms signed the original contract in January 2018 to build the refinery at Al-Faw, which together with its 300,000-bpd capacity would also have a petrochemical plant attached to the development. It also perfectly aligns with Beijing’s broad modus operandi in its expansion strategy across the Middle East to combine commercial ventures with a military presence, as alongside its petroleum and mineral resources exploration and development activities, Norinco is one of China’s foremost defence contractors. One of Norinco’s key oil subsidiaries is Zhenhua Oil, which was the company that on 2 January 2021 made a multi-billion-dollar deal with Iraq’s Federal Government in Baghdad to prepay for four million barrels every month for five years to be delivered to China by Iraq’s State Organization for Marketing of Oil (SOMO). As analysed in depth in my new book on the new global oil market order, it was exactly the same strategy to take over Iraq’s oil industry in the south as Russia had successfully used to take over the industry in the semi-autonomous northern region of Iraqi Kurdistan in 2017. So obviously extraordinarily dangerous to U.S. interests in the Middle East and elsewhere was this deal that Washington eventually succeeded in forcing the Iraqis to suspend it.Related: World Oil Demand Jumped To 5-Year Seasonal High in February

This said, other elements of China’s expansion strategy continue unabated, fusing both commercial advances and military ones across southern Iraq. If this strategy sounds familiar, it is precisely the one used by Great Britain in its expansion in the Far East through the East India Company – of which, Chinese President Xi Jinping is a tremendous admirer. After a suitable period had elapsed after the suspension of the omni-toxic Zhenhua Oil prepayment deal, Baghdad approved three potentially far-reaching new infrastructure deals that heavily involved China in the heartland of Iraq. One was for nearly IQD1 trillion (US$700 million) of infrastructure projects in the city of Al-Zubair in the southern Iraq oil hub of Basra. Judging from comments made by the city’s Governor at the time, Abbas Al-Saadi, China’s heavy involvement in Phase 2 of the projects was part of the 2019 ‘Oil for Reconstruction and Investment’ agreement. Another deal was for Chinese companies to build a civilian airport to replace the military base in the capital of the southern oil rich Dhi Qar governorate. The Dhi Qar region includes two of Iraq’s potentially biggest oil fields – Gharraf and Nassiriya – and China said that it intended to complete the airport by the end of 2024. This airport project, it announced, would include the construction of multiple cargo buildings and roads linking the airport to the city’s town centre and separately to other key oil areas in southern Iraq. In the later discussions involved in the 2021 ‘Iraq-China Framework Agreement’, a senior source who works closely with Iraq’s Oil Ministry exclusively told OilPrice.com, it was decided that the airport could be expanded later to be a dual-use civilian and military airport. The military component would be usable by China without first having to consult with whatever Iraqi government was in power at the time, as also analysed in full in my new book on the new global oil market order. The final of the three deals involved Chinese companies building out Al-Sadr City, located near Baghdad, at a cost of between US$7-8 billion, also within the framework of the 2019 ‘oil-for-reconstruction and investment’ agreement.

In this mould, China is finishing the Al-Faw refinery perfectly in time to allow it to complete its strategically vital oil project in the critical Iraqi energy hub of Nasiriyah, at the heart of the some of the country’s biggest oil and gas fields and close to Faw Port’s main export terminal in Basra. According to the Iraq Ministry of Planning, the China Petroleum Pipeline Engineering Company (CPPEC)-led project will act as a storage hub and supply conduit for 3.0-3.5 million barrels of crude oil that will then either go for export out of Basra Port or will be transported to the Al-Faw refinery and through pipelines to other refineries and power plants in central and northern Iraq. It will also act as a logistical command centre for all of China’s extensive oil and gas projects in Iraq and for the build-out of multiple non-oil projects connected to the ‘Iraq-China Framework Agreement’. CPECC is also the very same firm that was awarded a US$308 million engineering, procurement, construction and commissioning contract for the huge Gharraf oilfield. A separate engineering and construction project for Gharraf was also awarded by Baghdad to China’s Zhongman Petroleum and Natural Gas Group. Back in 2015, Zhongman was also awarded a US$526.6 million drilling deal for Iraq’s supergiant West Qurna 2 oilfield. Further emboldened by the effective withdrawal of the U.S. from Iraq at the end of its combat mission in December 2021, the beginning of this year saw PetroChina take over the lead developer role at the neighbouring supergiant West Qurna 1 oilfield from the U.S.’s ExxonMobil. This was followed just a week later by the awarding of a major build-own-operate-transfer contract to a subsidiary of PetroChina to develop the Nahr bin Umar onshore gas field.

Once the Al-Faw refinery has been completed, China will be looking at options for the long-stalled US$11-billion Nebras Petrochemical Project (NPP), following the exit of British supermajor Shell from it in February, according to the Iraq source last week. Although Russia’s Lukoil put together a development proposal for the project before Shell agreed the original memorandum of understanding back in 2012, Beijing now thinks it might be a good fit for its other activities in southern Iraq, particularly as it expands its gas presence as well in the country. China is unlikely to have any issue with Iraq’s ‘commission’ payments – as Western companies have had - although in Nebras’s case these may end up totalling US$4 billion or more. In addition, it remains one of the world’s biggest buyers of ethylene, intended to be one of the major products from Nebras, and developing a world-class petrochemicals sector in Iraq would also give it first rights over other key petrochemicals it needs.

By Simon Watkins for Oilprice.com

Could The U.S. Become Lithium Independent?

By Alex Kimani - Apr 15, 2024

• The McDermitt Caldera, a volcanic crater on the Nevada-Oregon border, houses 20 to 40 million metric tons of lithium deposits.
• 
  
• Last month, the DoE announced a conditional loan of $2.26 billion to Lithium America’s Thacker Pass project in Nevada to be used for the construction of the company’s on-site refining facility.
• 
  
• Despite having some of the world’s biggest lithium resources, the United States currently has limited capabilities to extract, refine, and produce domestically sourced lithium.

Last year, the U.S. made major lithium breakthroughs with the potential to make the country self-sufficient in the critical battery metal for decades. In September, a group of scientists funded by Lithium Americas Corporation (NYSE:LAC) reported that the McDermitt Caldera, a volcanic crater on the Nevada-Oregon border, houses 20 to 40 million metric tons of lithium deposits. For perspective, that volume is nearly double the 23 million metric tonnes found in Bolivia. 

In December, the U.S. Department of Energy announced that it had confirmed that a massive lithium deposit tucked underneath California’s Salton Sea has a resource of more than 3,400 kilotons of lithium--enough to support over 375 million batteries for electric vehicles. Both estimates dwarf the 14 million metric tonnes of lithium resource the U.S. Geological Survey has so far managed to map.

Well, the Biden administration appears to be wasting no time trying to achieve the American dream of energy independence. After a dozen years of engineering, permitting and financing, Australia's Controlled Thermal Resources has finally begun construction of their Salton Sea lithium mine and geothermal power plant. The project will initially produce 25,000 metric tons of lithium hydroxide per year and potentially up to 175,000 metric tons once completed. The plant will also generate 350 megawatts of round-the-clock geothermal power--the DoE estimates that Salton Sea’s  Known Geothermal Resource Area (KGRA) has about 2,950 megawatts (MW) of geothermal electricity generation capacity.

Meanwhile, last month, the DoE announced a conditional loan of $2.26 billion to Lithium America’s Thacker Pass project in Nevada to be used for the construction of the company’s on-site refining facility. 

According to the company, the illite-bearing Miocene lacustrine sediments at Thacker Pass contain extremely high lithium grades (up to ~1 weight % of Li), more than double the whole-rock concentration of lithium in smectite-rich claystones in the caldera and other known claystone lithium resources globally (<0.4 weight % of Li). 

The scientists have hypothesized that the unique lithium enrichment of illite at Thacker Pass resulted from secondary lithium- and fluorine-bearing hydrothermal alteration of primary neoformed smectite-bearing sediments, a phenomenon previously unknown. LAC plans to begin lithium production on the Thacker Pass project in 2026. 

"If they can extract the lithium in a very low energy intensive way, or in a process that does not consume much acid, then this can be economically very significant. The U.S. would have its own supply of lithium and industries would be less scared about supply shortages, "Belgian geologist Anouk Borst has told Chemistry World.

Federal investments by the Biden administration are supercharging America’s domestic lithium supply chain. Last year, Albemarle Corp. (NYSE:ALB) received $150 million to build a new processing plant in Kings Mountain. American Battery Technology Company (NASDAQ:ABAT), Applied Materials (NASDAQ:AMAT) and Cirba Solutions have received a combined $2.8 billion doled out by the administration to support 21 new, retrofitted and expanded?commercial-scale lithium processing and battery recycling facilities.

Bad News For Lithium Bulls

Source: Trading Economics

Despite having some of the world’s biggest lithium resources, the United States currently has limited capabilities to extract, refine, and produce domestically sourced lithium, typically importing nearly half of the lithium it consumes. However, the country could soon become self-sufficient in lithium, thanks to a rapidly-developing technology: direct lithium extraction (DLE).

DLE technologies are capable of extracting up to 90% of lithium in brine, much higher than ~50% extraction rates using conventional ponds. Another major benefit: they are capable of harvesting the metal in a matter of days compared to upwards of one year required to extract lithium carbonate from conventional evaporation ponds and open-pit mines. Direct lithium extraction also comes with an added ESG/sustainability bonus because they are able to recycle their fresh water and limit the use of hydrochloric acid.

Fastmarkets has forecasted that commercial-scale DLE projects could start coming online as soon as 2025 and could supply 13% of global lithium demand by 2030. 

Unfortunately for lithium bulls, a flurry of new mines coming online as well as novel extraction technologies are likely to put lithium prices under extreme pressure. Goldman Sachs has forecast that lithium carbonate supply will grow at a brisk 33% annual clip, outpacing lithium demand which is expected to grow at 25% p.a. 

“Our analysis suggests that DLE will widen, rather than steepen, the lithium brine cost curve with an average project likely sitting in the second or third cost quartile. With resulting additional lithium supply we also see risk that DLE implementation could extend the size and duration of lithium market surpluses/reduce deficits vs. our base case SD balance (without a pull forward of demand with new supply), where ~20-40% of LatAm brine projects implementing DLE (recovery from ~50% to ~80%) could add ~70-140ktpa LCE from 2028+, increasing GSe global raw supply by 8%,’’ according to Morgan Stanley.

Lithium carbonate in China is currently quoted at CNY 112,000 ($15,480) per tonne, struggling to stage a significant rebound since plunging to under CNY 100,000 ($13,820) earlier this year, a two-and-a-half-year low, thanks to a lithium oversupply and sluggish EV demand. EV sales in China in Q1 2024 increased 14.7% Y/Y, slowing from 20.8% in 2023 and well under the triple-digit growth rates commonly seen in late 2022. Experts have warned that the lithium market could remain oversupplied until 2027.

By Alex Kimani for Oilprice.com

Nouveau Monde Graphite breaks ground at Bécancour battery material plant in Quebec

By Amanda Stutt April 16, 2024

Onsite work begins for Quebec concentrator plant. Credit: Nouveau Monde Graphite

When Nouveau Monde Graphite (NYSE: NMG; TSXV: NOU) kicked off construction this month at the site of its planned concentrator plant in Quebec, it was another significant step forward in what is shaping up to be the most advanced graphite cirularity project in North America.

Nouveau Monde Graphite (NGM) last month inked multi-year offtake agreements with General Motors (NYSE: GM) and Panasonic Holdings, with both companies also pledging to invest more in the Canadian miner to help it produce high-quality graphite for the North American market.

China rattled that market when it announced late last year it will require export permits for some graphite products in another bid to control critical mineral supply in response to challenges over its global manufacturing dominance.

China is the world’s top graphite producer and exporter. It also refines more than 90% of the world’s graphite into the material that is used in virtually all electric vehicle (EV) battery anodes.

There is only one graphite mine currently of significance in North America, Lac des Iles mine in Quebec, which is becoming depleted.

While there is a need for 200,000 tonnes of graphite to meet demand, the reality is, the current U.S. supply capability is zero.

NMG aims to raise US$1.2 billion to build its whole project, which it is advancing in three phases, with US$725 million coming from debt and US$475 million from equity. Its goal is to become North America’s first fully integrated source of natural graphite active anode material, which accounts for about half of an EV battery.

Phase one is the Matawinie mine in Saint-Michel-des-Saints, about 160 km north of Montreal, already in operation, with planned production of 103,000 t/y of graphite concentrate over 25 years. Phase two is the Bécancour battery materials plant, with planned production of 43,000 t/y of active anode material.

Aerial view, Matawinie mine in Quebec. Credit: Nouveau Monde Graphite

Phase three is the Uatnan mine and concentrator, with contemplated production of 500,000 t/y of graphite concentrate over 24 years. NMG last year released a preliminary economic assessment (PEA) on the project, at the time a JV with Mason Resources.

Uatnan, also known as the Lac Gueret project, was ranked the third largest graphite project in the world in 2023.

The company acquired the asset 100% in January this year, NMG CEO Éric Desaulniers told MINING.co, adding that 100% of the graphite produced will stay in the US and Canada.

“Mason planned it for 50,000 tonnes per annum for 24 years and now [with] the PEA we've shown, 500,000 tonnes for 24 years, the same block model, same resource, but we're just mining it 10 times faster, 10 times bigger,” Desaulniers said in an interview.

With ground work started at the concentrator for phase three, Desaulniers said the concentrate will be sent as a finished product for Panasonic to use at their planned battery factory in Kansas.

Panasonic also has a plant in Nevada with Tesla, and GM’s U.S. plants in Ohio and Michigan are under construction, with a fourth plant planned in Tennessee, Desaulniers said.

NMG is also working on plans to recycle battery material.

“At this point we don't have any agreements to take back the product to make the full circularity, but that's something we're working on and we're fairly advanced on, on the R&D side,” Desaulniers said.

“Now that we have the optics, we know exactly what each customer wants and they have made a first investment, [with] a second investment in a few months,” he said.

“We have a lot of financial institutions lined up to do the debt and the equity alongside the off takers and then 30 months of construction, and mid 2027 we will be starting to ship product to those customers,” he said.

“We have the two most advanced and largest graphite deposits because we really believe in the full vertical integration.”

Avalon begins PEA for Thunder Bay lithium conversion facility

Preliminary Economic Assessment (PEA)

By Marilyn Scales April 16, 2024 

Avalon is working on a PEA to produce both lithium hydroxide and lithium carbonate for customers in Ontario. 

Credit: Avalon Advanced Materials

Avalon Advanced Materials (TSX: AVL; OTCQB: AVLNF) announced that it has engaged DRA Americas, a 100% owned subsidiary of DRA Global to begin a preliminary economic assessment (PEA) for a lithium hydroxide conversion facility in Thunder Bay, Ont.

The project will be administered under Avalon's wholly owned subsidiary Lake Superior Lithium. The PEA will consider feed sourcing of high-grade lithium concentrates from various sources.

The lithium conversion facility will feature the environmentally friendly Metso lithium conversion technology. This study will include lithium concentrate reagent receiving and storage, processing, and site infrastructure as well as shipping/handling of product and byproduct off site.

The Metso lithium conversion technology is being deployed globally with two currently under construction and expected to be operational from 2025. The Metso innovative technology is an acid-free lithium conversion approach that eliminates the use of hazardous reagents and produces a byproduct that is a mixture of sand and limestone. The byproduct material can be used in the production of construction materials.

In June of 2023, Avalon purchased "a crown jewel" brownfield industrial site in the heart of Thunder Bay. The 100% owned site covers 155-ha and has direct access to all infrastructure needs including access to 80 to 100 MW of electrical power, natural gas, town water and sewer, rail and two on site rail spurs, road access near the Trans Canada Highway, and an open water port on the shore of Lake Superior.

The proposed production level of the facility would be based on similarly designed units and is anticipated to be in the order of 30,000 t/y lithium hydroxide (LiOH) production with an operating life of over 20 years. The facility would be designed to produce both lithium hydroxide and lithium carbonate to address demand.

Avalon CEO Scott Monteith is pleased to see the PEA kick off. "The forecasted battery manufacturing capacity is expected to increase over the coming years as world EV and battery utilization becomes more mainstream. The decision to pursue production of battery grade lithium hydroxide and lithium carbonate is driven by continued strength in lithium battery demand and North American supply chain needs for high quality product produced in North America."

Avalon and its joint venture partner SCR-Sibelco NV is developing its Separation Rapids lithium deposit near Kenora, Ont., while also continuing to advance the Snowbank lithium and Lilypad lithium-cesium projects. The company is also working to develop its Nechalacho rare earths and zirconium project located in the Northwest Territories. This deposit contains critical minerals for use in advanced technologies in the communications and defense industries among other sectors.

Visit www.AvalonAM.com for more information.

Codelco CEO vows to pursue community buy-in over lithium expansion

Reuters | April 16, 2024 | 

CEO Ruben Alvarado and Codelco workers. (Image by Codelco, Facebook).

Chile’s state-run miner Codelco has made progress in negotiating with local communities over lithium mining and will keep working to win their support, chief executive Ruben Alvarado said on Tuesday, a day after several groups in the Atacama salt flat broke off talks.


The world’s top copper producer has been in dialogue with indigenous groups on the details of a new, state-mandated joint venture in the Atacama salt flat with Chile’s SQM, one of two lithium miners in the country.

However, the four largest indigenous groups in the area on Monday said they were pulling out of those talks, citing dissatisfaction with Codelco and SQM, as well as a difference of opinion with other indigenous groups.

Asked about the move, Alvarado told reporters at the CRU World Copper Conference that he recognized the complexity of the negotiations, which he said touched on historical issues.

Many indigenous communities have long decried a lack of investment from the mining industry and said they have felt sidelined by the government.

The government last year promised to host a dialogue with the Atacama Indigenous Council, aiming to reach a consensus over lithium mining in the salt flat.

“We are making progress in that and we are not going to stop working on all kinds of collaboration strategies with the communities,” Alvarado said, following a panel discussion alongside other top copper industry executives in which he emphasized Codelco’s commitment to social issues.

“This case will not be the exception.”


Codelco’s relationship with local communities is being put to the test as Chile, the No. 2 lithium producer, aims to impose more state control over the metal needed for batteries used to power the world’s growing electric vehicle fleet.

In an interview with Reuters on Monday, Codelco chairman Maximo Pacheco said he had visited the Atacama salt flat in recent weeks to speak directly with local communities, who he said were concerned over the water supply in the area.

The groups that broke off talks also took part in December in a protest over the Codelco-SQM deal, saying they felt they were not taken into account in the negotiations. They staged a blockade of one of the roads in the Atacama salt flat, snarling traffic and forcing SQM to halt operations.

(By Daina Beth Solomon and Fabian Cambero; Editing by Josie Kao)

Chile’s president says Codelco output to grow; touts investment climate

Reuters | April 18, 2024 | 

Chile President Gabriel Boric. Credit: Ministerio de las Culturas | Flickr

Chilean President Gabriel Boric told a major copper industry conference on Wednesday he expects production at state-run miner Codelco to grow slowly this year and reach 1.7 million metric tons by 2030, and that he sees copper prices rising.


“The Codelco production will rebound,” he said, offering a vote of confidence for the country’s top copper producer whose output last year hit a quarter-century low, at 1.325 million metric tons.

Boric’s comments came in a surprise appearance at a gathering of top global copper executives and analysts at CESCO Week, which alongside the CRU World Copper Conference, makes up the biggest annual gathering of sector professionals.

At a time when global companies have raised concern about long approval times for new mines and expansions, he said Chile, the world’s biggest copper producer, is dedicated to speeding up the permitting process for mining projects.

He also stressed the need for greater economic distribution of mining industry profits to local communities.

As well, Boric said one of Chile’s strong suits was ensuring long-term security for investors.

“Long-term mining projects work when there is greater certainty, when there are clear rules for all,” he said. “Investments are also based on the perception of trust. And that is something intangible.”


When Boric said he believed this attitude should underscore Chilean policy no matter who is president, the room of nearly 2,000 attendees burst into applause.

He said Canada-based Teck Resources’ CEO Jonathan Price had remarked in a recent meeting that the company might not have invested in copper mine Quebrada Blanca if it had known it would have taken 10 years to get off the ground, but he was proud of the project.

The mine’s expansion last year was among the biggest mining investments in Chile in a decade.

Boric also talked about the government’s efforts to boost lithium production, praising the benefits of public-private partnerships at a time when Codelco is tasked with spearheading such partnerships in Chile’s lithium industry.

A process meant to encourage private investment in lithium kicked off just this week, he said, adding that he expected output of the ultralight metal to double in a decade.

(By Daina Beth Solomon, Alexander Villegas and Ernest Scheyder; Editing by Sonali Paul)

Chile must pass permitting reforms to unblock investment, copper executives say

Reuters | April 16, 2024 | 

Spence copper mine located in the Atacama Desert, in northern Chile. (Image courtesy of BHP).

Chile’s government needs to quickly approve a proposal to streamline permitting for the mining industry to unlock and promote investment in the world’s top copper-producing country, a top executives said on Tuesday.


“In Chile it is urgent to improve the permit system to allow companies to approve large investment projects in a timely manner,” BHP President Americas Brandon Craig said on a panel at the World Copper Conference being held in Santiago.

“This not only applies to new projects, but also to permits needed to optimize current operations,” he added. BHP is a top copper producer and its flagship Escondida mine in Chile is the world’s largest copper mine.

Rio Tinto, which has a 30% stake in Escondida and partnered with state-run Codelco for copper exploration, agreed that more streamlining is needed to boost investment.

“I would like to invest more in Chile, but I need help,” said Bold Baatar, head of Rio Tinto’s copper business. “The more we can streamline the permitting process (in Chile) … I think that would be helpful.”

Mining companies and industry groups have complained about the extensive permitting process in Chile. In January, the government presented legal reforms to streamline permitting for investments, which can currently reach up to 500 requests from various authorities.

The reforms still must be approved by Congress, where the government has faced strong opposition. The government was able to pass a mining tax reform last year, but a major industry request during the debate was to streamline permitting and reduce start-up times for multi-million dollar copper projects, which is Chile’s largest export.

“I hope these reforms are approved quickly so that the industry can unlock large mining investments,” Craig said.

(By Fabian Cambero and Alexander Villegas; Editing by Andrea Ricci and Richard Chang)

Rio Tinto to favour development over acquisition of copper mines — exec

MINING.COM Editor | April 17, 2024 | 

Bold Baatar. (Image courtesy of Rio Tinto | X Feed.)

Rio Tinto (ASX, LON, NYSE: RIO) will prioritize developing new copper mines over acquiring new ones to achieve its goal of producing one million tonnes of the metal annually within the next five years, copper boss Bold Baatar has said.


Speaking at the CRU World Copper Conference in Chile, the executive noted that to boost production from the roughly 700,000 tonnes of copper it currently churns out, Rio is looking mainly at organic growth.

Most of the planned output expansion, Baatar said, will be driven by Rio Tinto’s expansion in Mongolia, Utah, and global exploration efforts, including a partnership with Chile’s owned Codelco, the world’s largest copper producer.

“For us, the focus is organic growth, supply growth and where in projects can we partner rather than necessarily acquiring an existing production,” Baatar, who was recently appointed as Rio’s next chief commercial officer, told reporters in Santiago.

Baatar said Rio would invest more in Chile if the country streamlines its permitting process, not only for new developments, but also for projects to optimize current operations.

Cost-effective

Despite the increasing cost and time required for project development, Baatar believes that building mines is still more cost-effective than buying existing ones, a stance that may disappoint industry watchers betting on a new wave of mergers and acquisitions.

Consolidation in the industry is only logical if it increases the supply of the metal used in wiring, considering the anticipated acceleration in demand growth due to the worlds’ ongoing energy transition, Baatar noted.

“Just bringing one and one together doesn’t add more copper,” he said. “The key question is how can we bring more supply.”

Rising costs to build QB2, Teck’s flagship copper project in Chile, shows how the industry is struggling to expand supply on budget. (Image courtesy of Teck.)

The cost of building new copper mines has significantly increased over the years. In 2000, the average capital needed for a new copper mine sat between $4,000-5,000 to produce a tonne of copper. By 2012, this had risen to $10,000 per tonne, and recent analyses pegged current costs to up to $44,000 per tonne of production.

Robert Friedland, founder and chairman of Ivanhoe Mines, recently estimated the price of copper needed to reach close to $15,000 a tonne and remain there for a long period of time, before the industry can really gear up and build much needed new copper mines.

Baatar, who joined Rio in 2013 and was appointed copper chief in 2021, played a key role in leading the company to successfully complete the underground expansion of the Oyu Tolgoi copper mine in Mongolia.

He takes the post of chief commercial officer in September and industry insiders say he is likely to become Rio Tinto’s next chief executive officer.

(With files from Bloomberg)

Aging copper mines are turning into money pits despite demand

Bloomberg Opinion | April 17, 2024 | 

Chuquicamata mine. Credit: Codelco

Representatives from the world’s biggest copper producers had reason to celebrate when they convened in Santiago on April 15-17 for their annual conference. Global prices for the metal have climbed about 6% over the past year, while those for lithium and nickel have taken double-digit dives.


All three have starring roles in the energy transition, the race to wean economies off planet-warming fossil fuels. But copper has a great many uses besides battery packs—it’s in indoor plumbing, cars and electrical wiring—which has helped buttress prices.

Even the more conservative forecasters see demand growing by a third over the next decade, as governments and businesses step up investments in decarbonization. At the same time, the industry faces numerous obstacles to meaningfully boosting output. The new deposits that are needed to replace maturing mines are getting harder to find and develop, with heightened social and environmental scrutiny and long waits for permits. All of that makes projects more time-consuming and expensive, and also tougher to finance.

To get a close-up look at how the confluence of factors is restraining supply, travel almost 1,000 miles north of Chile’s capital to Chuquicamata, where copper has been mined since pre-Columbian times. (A mummy dating from circa 550 A.D. was unearthed in an old mine shaft in the late 19th century, the apparent victim of a rock fall.)

The world’s largest open-pit copper mine in terms of excavated volume, Chuqui, as locals call it, appears in satellite images as some terraced city buried into the Mars-like landscape of the Atacama Desert. Copper pulled from the 2,350-acre pit has helped turn Chile into the world’s No. 1 supplier of the metal—and one of the most prosperous nations in Latin America.

More than a century of commercial production reduced the amount of ore that can profitably be extracted from the surface, so two decades ago state-run Codelco began drawing up plans to build a modern underground mine at the site to tap the riches deep below.

The company originally envisioned a $2 billion investment. By the time its board signed off on the project in 2014, the budget had risen to $4.2 billion. At the time of the 2019 ribbon-cutting, it had climbed to $5.5 billion. The latest estimate, including related infrastructure, is $7 billion, making it the biggest outlay Codelco’s history.

Behind the budget blowouts is a combination of tricky engineering and geology—building more than 90 miles of tunnels right under an open pit is no mean feat—but there have also been missteps in planning and execution.

The underground portion opened in 2019, pretty much in line with a revised schedule. But because of setbacks, including design adjustments, collapses and glitches with the conveyor belt that transports rock to the surface, the operation won’t reach full production capacity until 2030, at least four years later than planned.

The hiccups caused Chuquicamata’s overall output to dip below 250,000 tons last year, compared with half a million tons in 2010. In an April 15 interview, Codelco Chairman Maximo Pacheco highlighted the complexity involved in what ranks as one of the world’s biggest mining projects. “The rock reacts in a way that we don’t necessarily know exactly how it’s going to be,” he said. “We are in the frontier of knowledge of the technology of underground mining in the world.”

Other miners operating in Chile have run into difficulties on projects designed to extend the profitable life of their assets. Teck Resources Ltd.’s expansion of its Quebrada Blanca copper mine came in at $4 billion over budget. Anglo American Plc has spent at least 14 years doing environmental studies and other paperwork for an around $3 billion overhaul of Los Bronces, its flagship mine in Chile.

“Projects are becoming bigger, the capital intensities are high, and therefore these are very tough decisions,” says Iván Arriagada, chief executive officer of Antofagasta Plc, which pondered an expansion of its Centinela mine for years before pulling the trigger on a $5.4 billion plan in late 2023. The Center for Copper and Mining Studies (Cesco), the Santiago-based research outfit that put on this week’s event, has crunched the numbers and found that the investment needed to produce a ton of copper in Chile has shot up fivefold since 2006.

Around the world, the challenges of building new mines are often even more daunting. Over the past several years, the time from so-called first discovery to first metal has lengthened by an average of four years, to 14, according to Bloomberg Intelligence. The oil industry is going in the other direction, with modern fields such as those off the coast of Guyana taking only five years to come online.

Miners often complain that mountains of red tape are choking development. “It’s permitting gone mad,” says Roque Benavides, chairman of Buenaventura, whose company is active in Peru. In Chile, Peru and elsewhere, major producers have lobbied strenuously for streamlined regulatory frameworks, touting their shift to cleaner and more socially inclusive practices as proof that the industry is moving past its history of environmental damage and ill treatment of local communities.


That message isn’t getting through in many places. In December, Panama’s government shut down one of the world’s largest copper mines following fierce public protests—one reason prices for the metal have outperformed those of other commodities.

Of the top 40 copper projects around the world, 31 face significant social, environmental, regulatory or economic hurdles, according to an analysis by Flashpoint Capital, a merchant bank in Toronto. “Some of these issues are so severe that the viability of developing the projects is questionable,” says Flashpoint partner Colby Mintram.

Those obstacles can drain miners’ enthusiasm for new projects. Goldman Sachs Group Inc. estimates the industry needs to spend $150 billion over the next decade to address a projected 8-million-ton annual supply shortfall. That would require prices to surpass $10,000 a ton, from the current level of around $9,500, Trafigura Group CEO Jeremy Weir told the conference in Santiago this week.

CRU, a metals research and consulting firm based in London, is less bullish about copper demand than many forecasters but still recognizes the supply-side constraints. Mines are getting smaller and more expensive to build, with more than one-third of future projects located in jurisdictions where investors face significant political and regulatory risks, such as Congo. “The stuff is in the ground,” says CRU’s head of base metals, Simon Morris. “It’s whether there’s really the will to do it.”

Chuquicamata stands as a cautionary tale. The stumbles there are one reason Chile’s copper production has sunk to the lowest level in two decades. Many of Codelco’s woes, and those of copper mines the world over, boil down to declining ore quality. Globally, the amount of mineral that can be extracted from a given amount of rock has been halved over the past two decades, from about 1% to 0.5%, as existing mines mature. Meanwhile, exploration has yielded fewer big finds in the past decade or so.

Codelco is now paying the price—along with Chile’s government—for prioritizing payments into state coffers while putting off investments in overhauling depleting mines. Back in 2016 the company was projecting its average annual output would rise to 2.1 million tons through 2040. That forecast has been slashed to about 1.6 million tons, according to a recent company presentation. The difference between the two amounts to enough copper to make 6 million Teslas a year.

Codelco now finds itself in the unenviable position of having to juggle four giant projects simultaneously as part of a $40 billion pipeline—an undertaking few private-sector rivals would ever attempt. Senior management has been responding to the setbacks at Chuqui and other mines by overhauling reporting structures in a bid to improve decision-making. For example, under Rubén Alvarado, who stepped into the CEO job in September, project development has been decentralized, with responsibilities handed back to the various divisions. Management says a gradual recovery is underway as projects get back on track.

Still, Juan Ignacio Guzmán, who heads GEM, a mineral consulting firm in Chile, sees an ongoing risk of disappointments unless the state-owned giant can streamline decision-making. Of Chuquicamata, he says: “If the fundamental organizational problems aren’t resolved, it is only going to keep losing money.”

Pacheco, the company chairman, acknowledges that previous management bit off more than it could chew. “We should never again try to develop four mega projects simultaneously. The country has limited resources. Our company has limited resources, and the complexity of all these projects clearly shows that it’s a better solution going one by one.”

(By James Attwood)

Cobre Panama: How a $10 billion copper mine is now sitting idle in the jungle

Bloomberg News | April 16, 2024 | 

Cobre Panamá operation. (Image courtesy of First Quantum Minerals).

When the group of mining executives arrived at Panama’s regal Palacio de las Garzas, they were ushered past the ornate, wood-paneled ceremonial rooms and straight to the private office of the president.


This was December 2016, before the upswell of anti-mining protests that would throw the country into chaos, and the team from First Quantum Minerals Ltd. were greeted as old friends. After all, they were building the country’s most important project since the Panama Canal had been opened a century earlier.

But as they compared notes on the progress of their Cobre Panama copper mine, the president issued a warning.

First Quantum had lucked into an unusually sweet deal in Panama, he said. Sooner or later, the company would have to agree on new terms with the government and pay more taxes. What was left unsaid: it would be better to do it sooner, under a business-friendly government like his, than to gamble on Panamanian politics.

The stakes were high. The mine was set to be the centerpiece of Panama’s economy, generating between 4% and 5% of its gross domestic product and employing one in every 50 workers in the country. For First Quantum, which had borrowed heavily to construct a mine in the dense Panamanian jungle, it simply had to succeed.

Philip Pascall was unmoved. A swashbuckling Zimbabwean who had built First Quantum from scratch by making bold bets that few others had the stomach for, he brushed aside the president’s warning and quickly moved the conversation away from tax.

It was a gamble that would prove disastrous. Today, the $10 billion mine is sitting idle, shuttered by nationwide protests over a new tax deal signed in October. First Quantum’s share price has plunged by roughly half, and the company is being circled by predatory rivals.


This account of how First Quantum’s flagship investment fell apart is based on interviews with more than a dozen people involved in the project over a decade.

It is in part a tale of First Quantum’s hubris, as the company’s bosses sought to build the mine fast and keep costs low, despite unsettled tax disputes and legal issues. Pascall dismissed private warnings not only from Panama’s government but also from his own advisors that the tax deal put his company in a vulnerable position.

But it is also a story that resonates far beyond the walls of First Quantum’s offices and the borders of Panama, highlighting a dilemma at the heart of the global transition away from fossil fuels. While governments are pushing to secure the raw materials to build electric vehicles, solar panels and high-voltage cables required for the energy transition, few of their citizens want the mines needed to produce them.

The fate of Cobre Panama is one of the central questions facing the miners, traders and hedge fund managers who have gathered in Santiago in Chile for the copper industry’s annual Cesco Week event.

“If I was a copper mining company looking at Latin America, would I want to sink a 50-year operation into one of these countries where there is this rising risk?” said Gracelin Baskaran, a research director and senior fellow for the Energy Security and Climate Change Program at the Center for Strategic and International Studies.

“If the sector is risk-averse, they don’t invest. And if they don’t invest, we don’t have what we need for an energy transition.”
Charismatic leader

Trailblazing projects like Cobre Panama have long been a hallmark of First Quantum’s business. Headquartered in Canada, the company was founded in 1996 by Philip Pascall and his brother Matt.

Philip, who died last year, was a savvy and charismatic leader who forged close ties with key politicians and charmed his way into beneficial arrangements for the company. At 6’5”, he towered over his employees, but he was known within First Quantum as an approachable boss who could spend hours chatting with anyone.

The brothers developed copper mines in countries like Zambia and the Democratic Republic of the Congo, regions with low investment grades where few of its competitors dared to venture. While mines can often take decades to build, the Pascalls cultivated a reputation for getting their projects done ahead of schedule.

In a rare interview in 2013, Philip Pascall described the ethos of his firm to The Australian: “We dare where others don’t, we try new things out, learn from our experiences and have earned a reputation for delivering not only to budget, but before schedule in an industry prone to overrunning both.”

Their boldness was rewarded in the 2000s, as demand from China supercharged the price of copper. By the early 2010s, First Quantum had become a multibillion-dollar success story. With cash to spend and growing ambitions, Philip set his sights on a deposit in Panama, a country until then little touched by the mining industry.

The firm launched a $5.5 billion takeover of the deposit’s owner, Inmet Mining Corp., that quickly turned hostile after the smaller firm twice rejected First Quantum’s approaches.


It was a big bet. First Quantum, which declined to comment on this story, amassed a heavy debt burden to finance construction, narrowly averting a breach on its loan terms. While miners often seek to reduce their risk in uncertain jurisdictions by partnering with other companies, Pascall doubled down, buying out the company’s Korean partner, LS-Nikko Copper Co. Ltd., for $635 million and bringing its total ownership to 90%.

The end result was a $10 billion mining complex larger than the size of San Francisco, isolated in Panama’s tropical rainforest, and capable of producing more than 350,000 tons of copper in a year — enough to build about five million electric vehicles. In an industry where many of the largest deposits have been depleting for decades, it was a rare example of a major new mine.

And the timing seemed fortuitous. China’s industrialization was being supplanted as the major driver of projected copper demand by a new juggernaut — the energy transition. The electric vehicles, charging stations and high-voltage cables needed to electrify the world’s transportation will all require lots of copper. Mining executives started talking about the gap between the amount of copper that would be needed to reach net zero and the anticipated supply from the world’s existing mines. The world would need dozens of new copper mines, they said.
First ore

First Quantum’s success had much to do with its leader, Philip Pascall, and rapport he forged with Juan Carlos Varela, Panama’s president from 2014 to 2019. The two men would dine together, with Philip sometimes supplying wine from his brother’s vineyard in Cape Town.

Varela was eager to see Cobre Panama built. He kept a piece of the first ore rock mined from Cobre Panama in his office. The night before the mine opened in 2019, he joined First Quantum staffers at a luxury resort on Panama’s southern coast to dine on sushi and toast the project’s completion.

Still, the honeymoon wouldn’t last. Even before Varela left office in 2019, Cobre Panama faced increasing scrutiny. The project’s tax requirements were enshrined in an outdated contract struck in 1997 — a time of record-low copper prices — long before the deposit’s value was fully realized. The details of the contract, which First Quantum inherited from the concession’s previous owners, required the miner to pay a 2% royalty rate on minerals revenue — a sweet deal for a metals producer.

Pascall had ignored Varela’s admonitions about the tax deal. In the years before Cobre Panama opened, both Varela and a former Supreme Court justice and board member for the mine’s local subsidiary had pressed Pascall to start arranging a contract that would satisfy the country’s higher tax demands. Insiders at the company said First Quantum’s leadership never acquiesced to Varela’s demands, but Varela didn’t force the issue either, instead allowing First Quantum to proceed with a lenient tax arrangement.

The tax benefits became hard to ignore once the mine opened. In 2019, Cobre Panama’s first full year of operation, the mine’s royalty payments to Panama were a sixth of what First Quantum paid to Zambia for its Kansanshi mine. (In that period, though, Zambia’s tax rate was notably high for foreign mining firms).

The disparities were enough to draw the ire of a new government. When Varela’s business-friendly administration was replaced by the centre-left party of Laurentino Cortizo, the new administration moved to secure a better tax deal for the country.

Cortizo didn’t maintain the same friendly relations with First Quantum. He had steered Panama through a cataclysmic recession caused by the Covid pandemic, that saw employment fall drastically and inflation spike while container ships sat idle in the Panama Canal. Now he needed to refill the government’s coffers, and First Quantum, the country’s biggest investor, became an obvious target.

The government pushed for significantly higher royalties as well as a minimum annual flat tax of $375 million. When the company pushed back, Panama threatened to shutter the mine altogether.

“They were tough negotiations,” said Robert Harding, First Quantum’s chairman. “We were trying to protect our interests and they were trying to protect theirs.”

After long delays and standoffs and over four years of negotiations, the government and company reached a tentative agreement in March last year. First Quantum acquiesced to the bulk of Panama’s demands in exchange for a 20-year extension on the mine’s operating contract.
Hostility brews

To the outside world, it looked like the crisis had been averted. Months passed in relative calm, and the mine kept churning out huge amounts of copper.

Yet on the ground, hostility was brewing. Panama was already seething with discontent over inflation, high unemployment and corruption, and there was long-standing resentment over Cobre Panama’s environmental impact and its contribution to the economy. With a national election looming, the mine became a focal point for all the country’s ills.

In October, when Panama’s congress approved the new contract with First Quantum in what should have been a formality, the decision fueled an uprising of protests that paralyzed large swathes of the country.

One of the driving forces behind the opposition was a powerful and confrontational construction union called Suntracs, which has a history of clashing with companies operating in Panama. The group had sought early on to take part in the mine’s construction, and Suntracs members subsequently stormed the gates of the mine and assaulted employees at least three times between 2015 and 2018. Now Suntracs played a key role in stirring up protests and pushing labor issues to the forefront.

Across the country, protesters blockaded highways and rallied in the cities. Local boats, some of them operated by Suntracs, blocked access to Cobre Panama’s coastal port for weeks, preventing First Quantum and its suppliers’ ships from docking.

As the civil unrest raged, First Quantum had largely lost touch with the government’s decision making, according to employees who spoke with Bloomberg News. The close-knit relationship Philip had once maintained with Varela was virtually absent between Cortizo and Philip’s son Tristan, who had taken over from his father as CEO after overseeing Cobre Panama’s construction as the project’s general manager.

When Cortizo called for a national referendum on the mine’s operating contract in October — a short-lived idea meant to calm mass demonstrations — Tristan Pascall and First Quantum’s other top executives were provided no advance notice. The soft-spoken executive largely conducted damage-control from the company’s London office, eventually visiting Panama briefly in late November following Cortizo’s call to shutter the mine. But Panama’s course was set. The mine produced its last ton of copper in November and has been sitting idle ever since.
Cautionary tale

For the wider mining industry, the story of First Quantum in Panama has become a cautionary tale.

“It’s just a reminder that it’s so, so important that there’s mutual trust, and that what we’re doing is in the interest of all constituents,” said Jakob Stausholm, chief executive officer of Rio Tinto, whose predecessor was ousted after the company irreparably damaged an ancient Indigenous heritage site in Australia. “You cannot run the risk of turning a blind eye to that side of the business.”

In Panama, First Quantum has embarked on a media blitz ahead of presidential elections in May, hoping that it can gain enough popular support to persuade the next government to allow the mine to restart. The company says it’s spending $15 million to $20 million per month to preserve the site, and has committed to reforesting more than 11,000 hectares of Panama’s rainforest — double the area impacted by mining.


Yet some analysts have predicted the shutdown could last a year or longer, while a question mark hangs over who will ultimately own the mine. The project has attracted interest from the likes of Barrick Gold Corp., a much larger mining firm that boasts a history of dealmaking in challenging jurisdictions.

Cobre Panama’s closure was one of the key catalysts behind a global shortage of copper ore currently gripping the industry, which in turn has drawn bullish investors into the market and helped pushed metal prices to the highest point in nearly two years. The mine accounted for roughly 1.5% of the world’s supply of copper.

And the closure of Cobre Panama has intensified warnings from the mining industry that future supplies of metals like copper may not be sufficient to meet the needs of the energy transition. The International Energy Agency has predicted that by 2030, mines in production or currently under construction will only meet half of global demand for battery metals like lithium and cobalt. Copper mines, meanwhile, are projected to meet 80% of global demand in that same time frame.

The operation is “only one example of the geopolitical climate within which today’s copper and other commodity mining operations exist,” said Andrew Kireta Jr., president and CEO of the Copper Development Association, a US-based industry group.

“If we proceed with a business-as-usual approach, these supply constraints and others will impact the US’s ability to meet the projected steep demand acceleration for copper to build out clean energy infrastructure and transition to electric vehicles.”

(By Jacob Lorinc)

Governments must broker local support for mines, industry group says

Reuters | April 17, 2024 |

MINING IS UNSUSTAINABLE

View from above of the pit of an open-pit copper mine in Peru. 

The world’s governments must do more to convince local communities and Indigenous groups to support mines that produce critical minerals needed to power the energy transition and fight climate change, the head of a prominent industry group said.


Mines across the globe increasingly face opposition for religious, ecological or other reasons, with pressure seeming to intensify in the past year after officials in Panama, responding to protests, shuttered a mine that supplies 1% of the world’s copper.

Yet efforts to stem a rise in global temperatures have boosted the use of solar panels, electric vehicles and other technologies that are built with large amounts of copper, nickel and other critical minerals.

If governments are serious about combating climate change, they must find a way for some projects to advance rather than expecting companies and host communities to negotiate between themselves, Rohitesh Dhawan, CEO of the International Council on Mining and Metals, told Reuters on the sidelines of the World Copper Conference in Santiago this week.

“Now that we have governments more actively engaged in increasing the supply of critical minerals … that comes with a responsibility to help broker an effective and trusted relationship between the industry and impacted communities,” said Dhawan, who joined ICMM in 2021 after a career in consulting.

“We can’t have a situation where governments are entirely hands off.”

London-based ICMM, whose 24 members including BHP and Glencore account for roughly a third of the world’s metals production, is reviewing its policy first crafted a decade ago on how miners should interact with Indigenous communities, Dhawan said, in what is known as free, prior and informed consent (FPIC).

“There’s a need for reframing and a need for an honest conversation about where does the responsibility of a mine start and end, and where does the responsibility of government start and end?” Dhawan said.

The review reflects a strategy shift of sorts, with ICMM now pushing governments to bear the full responsibility of obtaining FPIC. Dhawan said industry should instead be responsible for managing a mine’s local impact.

The mining industry, though, should not necessarily build a mine if it receives government approval but not local support, he added. “Everybody benefits when we transition to a low carbon economy, but the impacts are always local.”
Industry leaders

The tension between the rising need for copper and entrenched opposition was a central theme this week at the Santiago conference, which organizers said was attended by more than 500 people.

“Everybody asks for decarbonization, but what we face all the time is absolutely a battle in every permitting process,” said Roland Harings, CEO of Aurubis, Europe’s largest copper producer.

Executives acknowledged the industry has not always had the best reputation, especially after deadly mining accidents in recent years.

“We need to be able to demonstrate that we will partner with host communities in a more responsible and long-term manner,” said Jonathan Price, CEO of Teck Resources, which operates across the Americas.

That was echoed by executives from Codelco, Chile’s state-owned copper giant, as well as BHP and others.

“Mining is good for the world, but it needs to be done well,” said Simon Collins of Australia’s South32, which is developing a zinc mine in the United States that has the support of President Joe Biden’s administration.

(By Ernest Scheyder, Daina Beth Solomon, Julian Luk, Alexander Villegas and Fabian Cambero; Editing by Jamie Freed)