REPOST: China Plans to Create Iron-Ore Mining Giant

China is planning to form a conglomerate of iron-ore mining companies in a bid to limit the country’s dependence on material imports. The Wall Street Journal discusses the feasibility of this strategy and its impact on foreign companies' monopolistic pricing power.  

A worker operates a furnace at a steel plant in China's Anhui province.Image Source: wsj.com

BEIJING—China plans to create a conglomerate of iron-ore mining giants that would in 10 years produce at least half of its domestic ore, in a bid to end its steelmaking industry's dependence on imports of the material.

The government intends to form a large mining group to be led by Ansteel Mining Co., a state-backed company that is the country's largest ore producer. The new group would comprise six to eight mining businesses.

"This marks a strategy for our country to break our reliance on imported ore, and to support the transformation of our steel industry for international competitiveness," the Metallurgical Mines Association of China said in a statement on Thursday. The association is working with the Ministry of Industry and Information Technology to push the project, which wouldn't be completed until around 2025.

China makes half of the world's steel, but depends on global mining giants for most of the iron ore it needs. Imports account for around 70% of the ore used in China's steel production, the association said.

China produces about 1.5 billion tons of ore a year—more than any other country. But its domestic industry is highly fragmented, and its ore is regarded as low-quality compared to that from major producers such as Australia and Brazil, while twice as costly to produce, analysts say.

The government regularly complains about what it describes as the foreign suppliers' "monopolistic" pricing power. In 2010 Beijing played a key role in ending a 40-year-old term-pricing system that was created by these suppliers and that China said was unfairly stacked against buyers. Under that system, three global mining companies—Rio Tinto PLC, BHP Billiton Ltd. and Vale S.A.—met once or twice a year with Chinese state and industry representatives to set prices for most of the world's traded ore.

The shift to more transparent spot prices, however, hasn't yielded significant discounts. Even amid an ongoing economic slump, ore prices are still 9% higher this week than they were in March 2010, when the term-pricing system came to an end, and have been as much as 73% higher, according to data provider The Steel Index.

Consolidating the industry at home could help in giving China more sway over prices, but formidable obstacles remain, analysts say. State-owned enterprises and other big miners, producing more than 10 million tons a year each, currently account for just 35% of output, said Adam Wang, an industry analyst for Beijing-based consultancy CRU Group.

"The consolidation of this industry is going to be difficult, because it's very fragmented, more so than in the steelmaking industry," Mr. Wang said.

More than half of China's ore production comes from small miners producing 3 million tons or less a year, he said.

China's iron ore is also more expensive to produce because it is buried deep, and has half or less the iron content than that in locations such as Australia's Pilbara region. Chinese ore costs around 457 yuan ($75) a ton to produce, compared with $30-$60 a ton for imported ore, said Pan Guocheng, chief executive of ore miner China Hanking HoldingsLtd. 3788.HK +1.75%

This disparity drives China's dependence on foreign ore. Mr. Pan forecast that imports in 2016 would hit 949 million tons, or 77% of its total consumption, up from 72% last year.

China isn't about to turn its back on foreign ore altogether. In January, the country's top economic planning agency called on its steel companies to step up its search for viable iron-ore assets abroad.

Many such ventures in recent years have been plagued with expensive delays, but the National Development and Reform Commission said Chinese steelmakers should keep building stakes in global iron-ore assets in the interests of China's influence and strategic security in global trade.

Richard Fifer has positioned Petaquilla Minerals Ltd. as one of Panama’s leading mining companies through the use of technical alternatives, sustainable practices, and community relations. Learn how the mining magnate pursues his vision of social development and ethical mining practices by visiting this website.

Carmakers find alternative to rhodium

Image source: periodictable.com


One of the rarest metals in the word has been seeing a decline in its value, as car manufacturers attempt to replace expensive metals in manufacturing. Rhodium, one of the material preferences for car catalytic converters, is taking a hit in the market as carmakers like Honda lean on their engineers to reduce reliance on the transition metal.

Catalytic converters help reduce the toxic emissions of vehicles. Given its characteristic resistance to oxidation and high temperatures, rhodium has served as the metal of choice for these car parts. In a 2013 report, auto manufacturers like Honda stated its plan to slash rhodium consumption by 50 percent with the development of new catalysts. The new technology, which was first introduced in the brand’s 2013 Accord model, is expected to roll out with their other models in the coming years.



Image source: bloomberg.com


The shift is well-reflected in the current market value of rhodium. Measured in “troy ounces,” the platinum group metal is now being traded at $1000, a tenth of its value, from $10,000 per troy ounce in mid-2008.

If more car manufacturers turn away from rhodium use, the price of the precious metal will continue to depreciate. On average, the automobile industry accounts for 80 percent of the world's rhodium consumption. If Honda's technology is replicated by others, it will only be a matter of time before the demand from the automotive sector plummets further.



Image source: acf.ua


Richard Fifer of Petaquilla Minerals, Ltd. advocates environmental health and sustainable mining practices. Visit this blog to read more about safe and sustainable mining practices.

A shining regimen: Gold in beauty products

Humanity has a perpetual fascination for gold. As one of the most beautiful metals, gold has become a must as jewelry, decor, or art material. As the uses of gold increased over time, the skincare and cosmetic industries started experimenting with gold as an agent of beautification, recalling the techniques of ancient Egyptian and Chinese civilizations. Gold has been transformed into an active ingredient in beauty products.

Image Source: makeupandbeauty.com

Ancient Egyptian and Chinese queens had integrated gold into their beauty regimens. As gold was regarded as the highest form of metal, it was also thought to be the key to the Elixir of Life and immortality. As such, gold was used by women of influence as the ancient youth serum. They incorporated gold in salves and massaged the metal onto their faces either in the morning or at night. Cleopatra was thought to have slept every night wearing a gold mask to maintain the suppleness of her skin and the glow of her beauty.

Image Source: made-in-china.com

Pure gold is non-toxic and is often used as a decorative agent in food and drink even today. It is considered safe on the skin. Modern cosmetic products are based on this principle, as well on the long-standing idea that the metal has anti-aging and purifying properties. And much like its unchanging value, gold has never gone from the royal boudoirs to the hands of the middle class and the masses. It is as inaccessible for its price today as before.

Image Source: beautyheaven.com.au

Richard Fifer heads Petaquilla, one of the largest producers of gold in Panama. Visit this blog for news and updates about the gold industry.

Alaska's Bokan Mountain: Key to winning the rare earths warfare?

Image source: upenn.edu

At present, the United States obtains most of its REEs (rare earth elements) from China. Economically speaking, import dependence on a single country can raise serious supply disruptions, creating the need to develop domestic sources of rare earths to counter the fragility of the global supply and demand of rare earths, if not to break China’s commanding monopoly on the supply of rare earths.

A recent research on unique mineral deposit on Alaska’s Bokan Mountain may define the domestic supply of REEs in the United States. The rare earths deposit in this region can provide a greater understanding of the geologic setting in which rare earths form. The knowledge on the geologic setting may help mining companies to accurately determine which rocks contain mineable concentrations of critical minerals – a critical step in the processing and manufacturing of rare earths.


Image source: americanresources.org

Alaska is dubbed as an excellent location to explore and develop domestic mineral projects. Alaska's Bokan Mountain is found to contain vast amounts of yttrium and heavy rare-earth elements (HREE) which are critical in producing high-grade magnets used for smart phones, engines and transmissions, and defense and green technologies.

Perhaps the next thing America has to improve on is how to incorporate rare earths metals in mobile phones, and computers, among others in a cost-effective and environmentally benign way. Read more about mining and metals on this Richard Fifer blog.


Image source: mining.com

Hazards of mining: What can be done?

Image Source: latimesblogs.latimes.com

Recently, a Tibetan gold mine made international headlines when a massive landslide buried workers who were sleeping there. Unlike the highly televised plight of the miners in Mexico who were trapped several stories underground for days, this story did not have quite such a hopeful ending, and it has yet again sparked the recurring debate about the dangers of mining.

Image Source: gpssystems.net

The United States Department of Labor has issued several policies about how miners work and how the environment should be maintained, at minimum, to remain safe for all workers. This includes a range of regulations involving every aspect of working in a mine, starting from the worker’s clothing or uniform to the site’s size, location, and housing, storage, or equipment.

Like most professions, safety in mining starts with education. In addition to being trained for the job, miners are also taught how to handle every possible emergency situation and how to survive for long periods of time in the condition of their mines. Although it is impossible to be prepared for every possible bad situation, training workers in basic survival significantly increases their chance of making it out of a desperate situation alive.

Image Source: economist.com

Safety of its workers is a top priority at Petaquilla Minerals, an established gold mining company in Panama. Under the leadership of Richard Fifer, its director and chairman of the board, the company provides its workers with technical advice on occupational and environmental risk protection. This blog offers the latest on the mining industry.

REPOST: What’s Behind the Crash in the Gold Market?

In this article, Christopher Matthews of TIME Business discusses the factors behind the recent crash in the value of gold.


One of the more interesting phenomena to take place in the markets in recent memory has been the seemingly invincible rise in the value of gold. In the decade between 2001 and 2011, the price of gold rose from $256 per oz. to a high of $1,920 — a whopping 650% return for those lucky enough to have timed the trade perfectly.



But since 2011, the gold market has shown signs of weakness, culminating in a multiday crash that began on Thursday and continued into Monday.



According to the Wall Street Journal: 

Gold futures for April delivery fell $140.40, or 9.4%, Monday to a two-year low at $1,360.60 an ounce on the Comex division of the New York Mercantile Exchange. That extended their bear-market descent of more than 20% from their 2011 all-time high. Since Thursday, gold prices have declined by more than $203 an ounce, a record skid since the futures began trading in the U.S. in 1974.

The first thing gold skeptics like Warren Buffett will remind you about the precious metal is that it doesn’t have nearly the utility of other commodities like oil or copper. Sure, we use it for jewelry or dental fillings, but mostly we just let it sit there. In 1998, Buffett famously quipped: “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” It’s true: unlike stocks, gold doesn’t pay a dividend. And unlike oil, it isn’t a vital commodity that powers other parts of the economy.



Though Buffett may be justified in personally shying away from investing in the shiny metal, in other respects he underplays its significance. Gold has held an enduring place in human history, and a central role in international monetary policy from the early 19th century until 1971. The so-called gold standard — a system in which national currencies were ultimately redeemable for a fixed amount of gold — was the law of the land in much of the world until 1971, when Richard Nixon formally severed the convertibility of the dollar. Since that time, governments across the world have been in the peculiar position of having their currency backed by nothing more than faith. For instance, under this system, the U.S. could theoretically print and spend money endlessly, with no fear that its spending of dollars would deplete its stock of gold.



Since 1971, this era of “floating” currencies has been a contributing factor in developed countries’ ability to take on more and more debt, a dynamic that has reached new highs since the financial crisis. The rise of gold in recent years can be explained in part by investors’ understandable lack of confidence in governments’ ability to keep their debt under control, and therefore the value of their currencies high. In fact, central banks across the world in recent years have also diversified their holdings into gold as a hedge against a decline in the value of the dollar.


In addition, it has become much easier for the average investor to invest in gold through exchange-traded gold funds or derivatives.



All of these factors have contributed to gold’s rise, but what about its recent crash? It’s impossible to pinpoint the exact cause of any market correction, and analysts have floated a range of possible reasons, from the Cypriot central bank’s need to sell off some its gold reserves to pay for its bailout to recent data showing weakness in the Chinese economy. But nobody knows for sure why gold is declining in value because it’s nearly impossible to pinpoint gold’s fundamental value. Most assets are valued at the sum of the future income they produce, but of course gold produces no income. It has no inherent value beyond the fact that humans have always valued it.



Gold is often spoken of as a hedge against inflation, but really gold is a hedge against catastrophe. Compact and convenient to transport, it’s the one commodity that you can expect to be valuable no matter the political situation. In other words, gold is a great bet if you think there’s going to be a revolution.



Any student of history knows that change, often violent change, is the one constant that can be relied on. Gold enthusiasts are absolutely right to question whether our current monetary regime of floating currencies — now in its fourth decade — will last. After all, the post–WW II Bretton Woods monetary regime, which came to an end when the U.S. abandoned the gold standard, lasted less than 30 years. And the classic gold-standard era (1871–1913) lasted roughly as long as our current monetary regime. History tells us that change is gonna come; the hard part is figuring out what the change will look like.



Which brings us to the wisdom of investing in gold. While gold enthusiasts may be right to question the sustainability of the dollar’s role as the world’s currency, or government’s ability to keep spending at appropriate levels, that doesn’t necessarily mean that gold is a can’t-miss investment. After all, the most likely result of government overspending is inflation, and even high inflation like we experienced in the 1970s won’t necessarily lead to the collapse of governments or our current monetary order. And if it’s just inflation you are worried about, many assets hedge against inflation — assets that are otherwise safer and easier to value than gold.



As I said before, it’s impossible to pinpoint the exact cause of any market correction, but the severity of the dip in gold is most likely a product of gold’s ill-defined value. If you’re holding gold because of a warranted-but-vague lack of confidence in government’s ability to keep a lid on inflation, I can understand why a slight dip in its value would send you running for the exits. It would make sense to get out of gold and into an inflation hedge that is less speculative.


But let’s not mistake yesterday’s decline for the end of the gold bull run. As the recent brouhaha over the virtual currency Bitcoin has shown, the issues confronting traditional currency have not been resolved. And, unlikely as it may be, the world’s oldest currency may have yet another role to play in the ongoing history of money.
Richard Fifer, father of Panamanian mining, is the chairman of the board of directors of Petaquilla Minerals Ltd., a leading gold mining company. Its website offers more news and information on the mining industry.

Richard Fifer, Father of Panamanian mining, is the chairman of the board of directors of Petaquilla Minerals Ltd., a leading gold mining company. Its website offers more news and information on the mining industry.

REPOST: Is China buying up Africa?

China is slowly but evidently surpassing other developed nations in the business of exploiting renewable energy resources. This article from CNN talks about the country's progress in exploring Africa.

The world's second superpower is pouring billions of dollars into Africa, running oil and mining firms all over the continent.

China is constructing everything from roads and bridges to stadiums and important government buildings.

The headquarters of the African Union, perhaps the most important political building in Africa, was built entirely with Chinese money, to the tune of $200 million.

And while China is aggressively investing in Africa, the U.S. appears to be sitting on the sidelines. China has passed the U.S. to become Africa's biggest trading partner. 

Xi Jinping became China's new leader just two weeks ago and right now Xi is in Africa as one part of his first trip abroad as president.

Africa is the world's fastest growing market and has the world's richest mineral reserves, so obviously there's money to be made. But do the Chinese want more?

Some argue that this is a new form of colonialism – a repeat of Africa's hated past.

Nigeria's central bank governor recently said, “China takes our primary goods and sells us manufactured ones. This was also the essence of colonialism. Africa is now willingly opening itself up to a new form of imperialism."

Many Africans see a thin line between capitalism and colonialism.

Ian Bremmer is the president of the Eurasia Group and he told CNN’s Ali Vleshi that both Africans and Chinese are getting the benefit of this trade and investment

“Clearly the Chinese are not picky where they invest. They typically go places that the West doesn't have as much.”

As a consequence, Bremmer says the Chinese tends to invest in less developed places that are less democratic and more authoritarian. In those regions, the African governments may be seeing a lot of cash, but their people are seeing a lot less.

“The Chinese clearly are getting what they want in the deal either way,” Bremmer said.

Even in more democratic countries, the people may be uneasy with the Chinese presence. Bremmer recounted a Nigerian official who told him that the Chinese were by far the most effective trade partner that the Nigerians had – much more so than the United States because the Chinese write checks, plus they are willing to come in and build infrastructure.

And the African governments may prefer this, because unlike the U.S. investment, China doesn’t come with strings attached.

“In the last couple days, Xi Jinping has been down in Africa and he made it very clear that when China comes to Africa, there will not be any political strings. And he's clearly implying that while the United States wants you to be democratic, they want you to pay attention to human rights. So, my God, the Chinese won't do that.”

But Bremmer said there actually are a different set of strings attached.

“The Chinese quid pro quo typically involves lots of Chinese content, lots of Chinese labor that they're sending over to these countries to work, which hurts local unemployment issues. And of course, the availability of commodities, including food, to be exported to China. There's sometimes a Faustian bargain in these countries.”

It appears to be coming without geopolitical or other strategic interest, other than economic gain for China.

“I think it is ultimately good for Africans because Africa is getting governed better," Bremmer said. "Fifty percent of Africa's 1.1 billion people now live in cities. Their women are getting educated. As that happens, you start to see better demographics. They're more sustainable. There's less poverty, of course, and the government improves. And when the government improves, the investment starts looking less colonial.”

Bremmer said if one day China's investments places like Nigeria come full circle and start looking more colonial, “that government has no one but themselves to blame.”

Few people know mining as well as Richard Fifer does. Read about his work on this website.