Weekly Nugget

High Metal Prices Could Hinder Energy Transition: IEA

Increasing metals prices puts profits in miners' pockets, but they risk slowing the energy transition to renewables.

EV batteries, solar panels and wind turbines require copper, nickel, cobalt, lithium, and other minerals.

According to the International Energy Agency (IEA), reaching the goals of the Paris climate agreement would quadruple mineral demand by 2040. However a dearth of investment in new mines would substantially raise the costs of clean energy technologies.

New mining projects take on  ~16 years to move from discovery to production and that timeline is unlikely to shorten unless governments show investors they support the development of new mines by making clear that they are serious about the energy transition, the IEA stated.

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New Mining Tax Threatens Miners Profits, Chile

On March 24, Chile’s lower house announced support for a constitutional reform that would introduce a 3-per-cent royalty on the production of copper and lithium to finance environmental and social programs in communities near mining operations.

A later amendment to the proposal outlined that the royalty would rise to a marginal rate of 15% when the copper price rises above US$2.00 per lb., 35% above US$2.50 per lb., and 75% above U$4.00 per lb.

According to the Northern Miner, if approved, mining companies would lose more than a fifth of their gross revenue to the royalty with prices at current levels. This adds to the problems Chilean mines are already facing. 

Old infrastructure, declining ore grades and expensive labor costs put Chile’s copper mines at a competitive disadvantage from the last commodity price super cycle, according to Gustavo Lagos, a professor of mine engineering, at Santiago’s Catholic University.

Around fourteen of the country’s large copper mines have production costs above US$2.50 per lb. If this royalty tax became law, many mines could shutter when prices slip again.

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World’s Largest Jeweler Switches to Man-made Diamonds, Leaving

Pandora has become the first major jeweller to shun mined diamonds by switching to lab-grown diamonds in an effort tomake diamond jewelry more affordable.

The company launched Pandora Brilliance, described as its “first lab-created diamond collection”. The collection includes earrings, necklaces and rings and features lab-grown stones made in the United Kingdom, with prices starting at £250.

In 2020, global lab-grown diamond production grew to between 6 million and 7 million carats. The production of mined diamonds fell to 111 million carats last year, having peaking 152 million in 2017, according to the World Diamond Centre.

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China’s Ganfeng Increases Stake in Bacanora’s Sonora Lithium Project, Mexico

China’s Ganfeng Lithium offered to increase its stake in AIM-listed Bacanora Mineral (LON: BCN) for US$264.5 million.

Ganfeng, which in February announced a plan to raise its stake in Bacanora from 17.41% to 28.88%, will acquire the remaining shares in the company for 67.5p a share, a joint statement said. 

The deal, which values Bacanora at up to around 267-million pounds, follows the announcement of a merger between lithium producers Galaxy Resources and Orocobre last month as demand for the chemical in electric vehicle batteries rose after a three-year downturn.

Bacanora aims to start production at its Sonora lithium project in Mexico by 2023. 

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