Zimbabwe could introduce new taxes on its mining sector to help fund July elections instead of borrowing on the debt markets, Finance Minister Tendai Biti said on Wednesday.

Zimbabwe, which is on the verge of bankruptcy, withdrew a request for U.N. election funding last week, saying the United Nations had tried to “interfere” in security matters and the media.

“The fact of the matter is that Zimbabwe does not have the resources for funding the election,” Biti said in a speech in London.

The U.N. loan agreement, thought to be worth $132 million, would have helped fund a viable election for a country that has suffered contested and bloody elections in recent years.

On April 15, Biti said South Africa would offer Zimbabwe a $100 million loan as an alternative, though a treasury spokeswoman said the two governments were only “engaged in ongoing discussions.”

Biti, an ally of Prime Minister Morgan Tsvangarai, who forged an uneasy power-sharing deal with President Robert Mugabe in 2008 after bloody and disputed elections, said he was “not keen to borrow”.

Aside from enacting fuel duties, which came into effect on March 9 and raised $80 million, Biti said he would consider introducing three or four other taxes, including some on the mining sector, likely to affect the world’s two largest platinum miners, Anglo American and Impala Platinum.

Under an “indigenisation” policy, Zimbabwe has been demanding that foreign companies, particularly mining firms but also banks, transfer a 51 percent stake in local operations to indigenous investors.

Mugabe’s ZANU-PF party proposed a legislative amendment this week that would have seized majority stakes in foreign-owned mines before the elections, prompting suspicions the money would be used to fund his campaign.

The amendment, which requires the approval of a parliament dominated by the MDC, to pass is unlikely to go through. (Additional reporting by Nelson Banya in Harare; Editing by Robin Pomeroy)

MINEWEB is an interactive publication, with rolling deadlines through each day, commencing in the Sydney morning,  and concluding, 24 hours later,  in the Vancouver evening.  If you believe your side of an issue deserves inclusion, but has failed to meet one of our deadlines, you are invited to notify the Editor in Chief in Johannesburg, and we will include you in our editing and expanding on our stories. Email him at alechogg@gmail.com

Mining giant Rio Tinto (ASX, LON, NYSE:RIO) expects output from Utah’s Bingham Canyon, its largest copper mine, to fall considerably as a consequence of the landslide that saw 150m tonnes of material fall into the pit.

Announcing its first-quarter production figures on Tuesday, the company said total mined copper production would be about 20% lower this year, falling by 125,000 tonnes to 540,000, due to the collapse of a large section of the pit wall at the Bingham Canyon mine, which supplies about 1% of copper to the global market.

However, the Anglo-Australian group said its two biggest investments —an expansion of its iron ore mines in Australia’s Pilbara region and development of the massive Oyu Tolgoi copper and gold deposit in Mongolia— remain on track.

The miner, in fact, revealed a spike in first-quarter production, which sent the shares up 1.9% to 3,028p in London and received a pre-market gain estimated in 4.6% to $46.40 this morning in New York.

Its share of copper production had grown 6% on the year to 80,500 tons in the three months through March, boosted by higher output from the Escondida mine in Chile, which is operated by BHP Billiton Ltd. (ASX, NYSE:BHP).

Rio is looking to rebuild confidence with investors after a series of writedowns on ill-timed acquisitions. With this purpose, the miner is committed to reducing costs by $2bn this year and by an additional $3bn in 2014. It has also promised investors “significant” cash flow from the sale of non-core assets this year. These include a few Australian coal operations, worth more than $4bn, which were recently put up for sale.

When set against a backdrop of lower potential Chinese demand growth, high bonded inventories and the potential for exports, rallies in prices towards $8,000/t for copper should be shorted, stated London based Barclays in its recent market analysis.

“Copper fundamentals have entered a period where supply is beginning to exceed demand. We expect the market to be in surplus over the next few years which will cap price upside, while downside support will come from Chinese import demand, rising operating and incentive costs and the threat of supply disruption,” Barclays added.

The recovery in copper mine supply began back in the middle of 2012 and has continued to gather momentum since. It has been impressive for both the sheer strength of growth and the continuity of that growth – two trends that have been missing for some time.

According to Barclays view, demand is the wild card for copper fundamentals and prices this year. How much supply growth actually turns into surplus will depend on demand, which so far in 2013 has got off to a slow start but is showing signs of improvement.

Power infrastructure investment in China is expected to become increasingly copper intensive as it focuses more on distribution and transmission.

Furthermore, supply-chain stocks are thin which could provide a boost to consumption later on, though the 750Kt of copper in bonded warehouses could potentially suppress Chinese imports for some time

Barclays expects the pace of mine supply growth to strengthen further with a slew of new projects, such as Oyu Toilgoi in Mongolia (400Ktpy), Los Bronces (355Ktpy) and improved supply at some older mines, such as Escondida.
However, Barclays also believes that the risk of disruption would be higher over the next few years since a larger portion of supply will come from Greenfield projects, which tend to be more susceptible to delays.

More supply will also come from countries with less well-developed mining, transportation, legal and political infrastructures.

By the middle of the decade Barclays believe that there is a growing risk that mine supply growth could fall short of expectations with miners focusing on capital discipline, which is likely to lead to project deferrals and cancellations.

Copper futures for April delivery on India’s Multi Commodity Exchange (MCX) is negative; technical pull back is expected in the evening session and traders may take positions accordingly. Earth quake in China fuelled speculation on a cut in demand prospects at least temporarily reflecting in LME prices.

“The commodity has support at 368, if breaks and sustains below the same then it may touch 361 levels,” said Tarang Parmar, Research Analyst at Commodity Online.

“Resistance for the base metal is seen at 375 and 378 levels,” Tarang added.

MCX copper for April delivery was down by 2.02 percent at Rs.368.40 per kilogram as of 12.21 PM IST on Monday.

The futures on London Metal Exchange (LME) fell amid speculation that earthquake in China’s Sichuan state would damage base metal demand in the near-term before it raises consumption in the reconstruction phase.

“The event adds to the negative sentiment for copper,” Lian Zheng, an analyst at Xinhu Futures Co., said to Bloomberg.

“This may hurt demand first before it boosts consumption in reconstruction. Copper may head to test $6,500,” added Lian.

Concerns over economic growth around the globe have been pressuring the futures movement in the global market.

US existing homes sales data is scheduled to be released later today which may impact investors’ sentiments.

“If one simply looked at operating costs for a guide, it would suggest significant potential downside to copper towards marginal cash costs ~$5,200/t. But we doubt prices will stay below $7,000/t for long before buying support emerges,” stated London based Barclays in its recent market report.

“Also, with market positioning already extremely short (the current CFTC short position is the largest in our records since 1997) further selling appetite may be limited, for now. Instead, the market looks more vulnerable to a short-covering rally,” Barclays added.

Copper futures for May delivery on Globex platform of Comex was seen trading down by 1.97 percent at $3.086 per pound as of 12.23 PM IST on Monday.

In 2014, global refined zinc market may begin tight before moving into a sizeable deficit by 2015 on the back of weakening mine supply, stated a London based Barclays in its recent market analysis.

This year would mark the seventh consecutive annual surplus for the global refined zinc market and the bank expects the stocks-to-consumption ratio to rise to the highest since 1995.

“We do expect consumption growth to recover this year after contracting in 2012. The form the surplus takes would depend on smelter profitability,” Barclays added.

“With contract TCs settled 10% higher and physical premiums also likely to be higher, we believe there will be a bigger incentive for smelters to process concentrate so we expect the surplus to form both in metal and concentrate,” noted Barclays.

The biggest surprise in 2012 was the contraction in Chinese refined zinc production in response to low profitability. This supply response generated a cost-driven downside support for prices around $1,800/t, which implies little downside to prices from here unless there is a further deterioration in global growth expectations.

The bank also expect end-user demand from the property sectors in China and the US to drive consumption growth this year, alongside an improvement in transport.

Another source of demand, financing, is also likely to stay strong, which should keep the spot market tight, physical premiums high and queues at warehouses long.

The medium-term outlook for zinc fundamentals is more bullish, however, driven by a rapid tightening of mine supply. The industry faces steep declines in ore grades at existing and new mines, with the halving of Century’s production in 2014 to 290Ktpy illustrative of this.

A major swing factor to the mine supply outlook is China, where there is little transparency and which has tended to surprise to the upside.

However, according to Barclays view, the current environment in which miners are desperately enforcing capital discipline is likely to exacerbate future zinc mine decline rates and therefore the tightening in supply.

Behold the Valley of the Kings

Pretium Resources’ (TSX:PVG) Valley of the Kings discovery on the Brucejack property in Northern B.C. is just about the best Canadian gold project in the hands of a development company right now. It’s got grade, size, low CapEx and ease of permitting all going for it.

The recent sell off in gold and related equities has taken no prisoners — like most other companies in the market, Pretivm shares have fallen over 60% this year. In light of the downturn, we wanted to get a better sense of the project and the opportunity it offers, so we turned to CEO Bob Quartermain for the Pretivm lowdown. We also had the privilege of getting a better sense of the veteran explorer behind the project along the way.

Pretium’s Quartermain

Born and raised in New Brunswick, Canada, Bob Quartermain developed a passion for the Canadian north as a young man, and has been an exploration geologist focused there ever since. His big break happened in 1980 with the Hemlo gold discovery in Northern Ontario. Quartermain, as project manager, spent three years drilling off the David Bell mine for Teck Resources and contributed to the underground mine plan that would eventually yield one of Canada’s most profitable gold mines.

It was a phone call from the young Quartermain that set off the market frenzy — he and Bruce Durham were the first to recognize the significance of the First Goliath drill core. “You could just see it. It was this moly-rich, sucrosic, beautiful, grayish-blue gold bearing rock. We started opening drill core boxes — and each box contains 15 feet of core — and we ultimately opened up six of them: 90 feet in total, and it was all the same moly-rich rock.”

Watch: The Hemlo Gold Story (CBC)

The young geologist went to the nearest payphone to relay a rough visual assay of 90 feet of 1/4 ounce per tonne gold to his employer Teck. “The person on the other end of the phone didn’t seem so impressed,” Quartermain recalled. But by the time he got back to his hotel room, there were frantic messages for him to call the president of the company.

The market in Vancouver went wild. Soon, penny shares of Hemlo area companies were trading as high as $90. When true assays of the drill core came out to 92 feet of .256 ounces gold, Quartermain’s intuition was validated. From that point on, his company and others trusted him.

After Hemlo in 1985, the humble Maritime geologist took the reigns of Silver Standard, another Teck company. By the time Bob retired in 2010, it was a $2 billion silver producer; it had started at just $1.8 million.

“When I came to Vancouver, I didn’t own a suit, I’d never read a balance sheet, never met a lawyer, and I only knew one broker. But they threw me in the fray of running a junior company, and it panned out, because we focused on sound geology.”  With the backing of investors like Rick Rule and Jim Blanchard, the company grew by exploration and acquisition.

Sound geology is what led Quartermain to purchase the Brucejack property from Silver Standard in 2010. He wanted out of retirement and was convinced it was one of the best gold exploration projects in the world.

Brucejack was sold, along with the neighboring Snowfield project (which contains a staggering 34 million ounces of low grade gold — a proxy on a higher gold price) to Pretivm for approximately $450 million in cash and shares. But the focus has always been on locating the potential high grade gold at Brucejack.

In the two and a half years since the sale, Pretivm has defined a spectacular high-grade resource. “In 2009 we had 400,000 ounces of gold and 16 million ounces of silver at Brucejack. The Valley of the Kings area at that time just had a half a dozen drill holes. Between 2010 and 2012, we drilled 174,000 meters and now have over 8.5 million ounces at 16.4 grammes per tonne gold open at depth and in all directions.”

Quartermain with high grade Valley of the Kings core. Photo: Wayne Leidenfrost

In this day and age, gold projects with the richness and size of Brucejack and the jurisdictional advantage of being in Canada and close to current and former mines like Eskay Creek are rare. Pretivm is in a league of its own among junior companies.

Analysts at BMO seem to agree, commenting that Brucejack is “the right size for the current market environment.” Its underground mine will be finished in 2016; Quartermain says it is projected to cost approximately 600 million dollars and yield over 400,000 ounces of gold per year.

Pretivm clearly beats out the other large-scale gold projects in Canada — almost all of which are low grade, requiring Capex in the multiple billions, which isnt realistic in today’s market environment.

Presently, ten research firms are covering the company with an average target price of greater than $20 per share. Shares in PVG last traded at $6.01.

We contacted economic geologist and editor of Exploration Insights’ Brent Cook to explain this disconnect. Cook told us, “The question everyone has is continuity of the high grade. Bob is addressing that via a bulk sample. The results should answer a lot of people’s questions. I’m actually pretty interested in Brucejack and would love to visit the project this year.”

Results from a 5×5 meter bulk sample from the pay zone at the Valley of the Kings are expected in the second half of 2013. A feasibility study on the economics of Brucejack is also expected early this summer, rounding out the near-term catalysts.

Infrastructure (there is road access), water (they’ll likely generate their own water underground – it’s a wet area), permitting and politics are less of a worry to Quartermain and analysts. Grade continuity is the main focus. If demonstrated, along with expected and positive economics, Brucejack could be one of the few bright spots in the mining industry in 2013.

I asked Quartermain whether his plan was to sell Brucejack or develop it into a mine. He told me his plan is to get the best value possible. “Two years ago, selling the project may have been very likely,” he said. “Right now the major companies are focusing on organic pipelines, and their interest will depend on the bulk sample and feasibility. If they both deliver what we feel they will, the project will be very robust, and we think they’ll be interested.”

The fact that Quartermain built Silver Standard into a profitable precious metals producer makes us confident that if they can’t find a buyer, they can move toward its stated 2016 production commencement timeline on its own.

We chatted for a few more minutes before Bob had to leave Vancouver for Europe, then on to the Middle East to catch up with investors. “It’s important to see the owners of the company, and we like to visit our large investors a few times per year,” he told us.

“There hasn’t been another Hemlo find, and I was fortunate to sit on that discovery. Brucejack may be as significant,” Quartermain said. “I should be so lucky.”

The Prospectors and Developers Association of Canada seem to agree with Quartermain, having awarded Pretivm the 2013 Bill Dennis Award for a prospecting success.

Check out the four-minute video below for a closer look at Brucejack, Pretivm and Quartermain. Also see the company Fact Sheet and Corporate Website for more information.

PDAC 2013 – Bill Dennis – Pretivm from The PDAC on Vimeo.

Mining giant Rio Tinto offered shareholders an apology for its ill-fated takeover of Alcan in 2007, “but urged them to not overlook the good work being undertaken at the company,” reported Peter Ker for The Age Business Day Friday.

Speaking to shareholders at the annual conference in London, Jan du Plessis provided a sober résumé of the deal that led to nearly $30 billion in impairments:

“In hindsight, this project was not only badly timed at the top of the market, but major structural changes over the last year or two have put the global aluminium industry under tremendous pressure…in retrospect, we therefore have to acknowledge that the acquisition has had a significant negative impact on shareholder value and, as our owners, you have every right to expect that we do better.”

The company will hope to get things up and running at Oyu Tolgoi in Mongolia in order to turn the corner in a year that has already seen $14 billion in new impairments

Barclays has revised down its LME lead cash price forecast to $2,450/t from $2,600/t for 2014 as it stated that refined lead market is expected to remain essentially balanced for 2013 and 2014.

The bank expects the deficit of 127Kt in lead to drop further resulting in the said revision of prices.

“The lead market has begun 2013 in soft fashion. LME cash prices have fallen close to 20% from their peak in January this year and, at just over $2,000/t, are at a six-month low,” added Barclays.

While macro pressures have played the key role pushing down on prices, there has been little fundamentally to limit the move.

In China, the domestic refined market remains in a transitional de stocking phase, tackling the significant surpluses built right along the supply chain in H2 12.

Sequential weakness in Chinese domestic concentrate and refined production, as well as lower concentrate imports (and a pick-up in some semi-fabricated lead exports), versus a solid pick-up in battery and e-bike production, have lead to a balanced refined market in 2013 so far.

This dynamic needs to be extended through Q2 to drive a clear-cut re-tightening, however. In terms of Europe and the US, after a period of tightness driven by scrap battery shortages alongside smelter outages in 2012, the situation has eased.

US imports of primary lead from Australia rose sharply at the turn of the year, which has helped ease the sense of scarcity in the region, alongside smelter restarts.

This essentially reflects the base effect of significantly weaker- than-expected Chinese demand in 2012, although Barclays expects firmer growth in 2013-14 driven by improving E-bike/vehicle sector activity.

Barclays also expects Chinese recycling levels to improve (boosting secondary supply), which alongside continued growth in domestic mine output would offer an increasing buffer between demand improvements and concentrate import levels.

“However, we view primary smelter restarts in the ROW as absorbing any deferred concentrate from the Chinese market as well as providing refined tonnage needed to support demand growth alongside losses due to closures such as the155Kt Herculaneum smelter in the US (end of 2013),” Barclays concludes.

Refined nickel cash prices on London Metal Exchange (LME) are expected to average $18,000/t for 2014 which reflects an upward revision to surplus stocks, stated a recent market analysis by London based Barclays.

“We have resultantly upgraded our surplus projection for 2013 to 108Kt and in turn downgraded our LME cash price forecast to an average of $16,766/t versus our previous $17,766/t projection,” Barclays added.

Looking to 2014, base case scenario is for the refined nickel market is also expected to remain in surplus (55Kt). The nickel market had descended into an extreme state of oversupply early this year after a significant 88Kt surplus in 2012.

The INSG reported a 22Kt surplus in January-February alone, and LME stocks have risen by close to 30Kt year-to-date to a new record level, despite strong growth in Chinese unwrought imports and flat refined output ex-China.

LME cash prices have subsequently fallen below $16,000/t in mid-April for only the second period since mid-2009. The fact that LME stocks have continued to rise despite the strong growth in Chinese imports, demonstrates, according to Barclays view, the weakness in stainless demand ex-China, particularly in Europe, with little supply chain restock of note emerging so far this year.

This is an important missing dynamic because Q1 is typically the time of year when this positive nickel demand effect materialises in the stainless steel sector.

In terms of the Chinese market, import strength in the context of record NPI output (supported by the ramping-up of low cost RKEF capacity) reflects financing activity alongside some likely SRB stockpiling, in Barclays view, rather than any clear improvement in domestic stainless activity.

Barclays believes that, there are risks that the nickel market could offer the most significant surprise in fundamental developments. In this respect, it is important to identify the key source of oversupply in the market, namely the on-going expansion of low cost RKEF NPI capacity in China (average $14,400/t cost).

Given its relatively high ore input needs versus higher cost NPI capacity, the risk for the sector is that Indonesian export policy evolves in a more con straining direction than currently expected.

Indonesia provides the overwhelming majority of RKEF ore needs, so, at the very least, limitations on export levels could drive cost inflation in the sector via higher ore prices.

“Our 370Kt NPI (nickel contained) forecast for 2014 hinges on a weak application of the Indonesian export rules – if we are wrong and far more stringent conditions prevail, this could cut our estimate sharply and, in turn, significantly tighten the balance and offer a much more bullish price environment,” Barclays concludes.

The gold price plunged by as much as $145 on Monday, the worst trading day in history and a more than 9% drop on the day.

The gold price fell to $1,355 in mid-morning – down $145 from the Friday close of $1,501 in New York – to a level last seen in January 2011.

Ever-volatile silver exaggerated gold’s drop , giving  up more than 12% or $3.20 to $23.13 an ounce, heading for a close not seen since October 2010.

July platinum futures slumped 5.8% or $85.80 to $1,410 an ounce while palladium was also hard hit, down giving up 7.33% or more than $50 to trade at $658.20 an ounce.

Copper slid to lows last seen in October 2011, but losses for the metals bellwether was relatively contained. Copper was last changing hands for $3.28 a pound, a 2.2% decline from Friday’s close.

The retreat copper and precious metals led to a bloodbath for mining stocks with counters dropping across the board.

Mining’s Big 3, world number one miner BHP Billiton (LON:BHP), Brazil’s Vale (NYSE:VALE) and Rio Tinto (LON:RIO) all lost more than 6% on Monday.

Of the top diversified miners XStrata’s ADRs listed in New York traded was the top loser, down 10.3% while merger partner Glencore International (LON:GLEN) shed more than 6%, Anglo American (LON:AAL) shares moved lower 6.3% and Canada’s Teck Resources (TSX:TCK) was also one of the hardest hit giving up 9.3%.

Copper giant Freeport-McMoRan (NYSE:FCX) declined 8.6%, Southern Copper Corp (NYSE:SCCO) managed to keep losses at 7.7% while fellow South American copper producer Antofagasta (LON:ANTO) dropped just over 8%.
Not surprisingly gold producers were among the worst performers.

Barrick Gold Corp (TSX:ABX) lost 11% bringing the losses over the past trading week for the Toronto-based global number one gold miner to over 23%. Barrick’s pain began before the gold price drop on Wednesday when a court in Chile ordered a halt to work at its massive Pascua-Lama project. Barrick is worth just over $20 billion on the TSX, less than half it was worth in 2011.

Denver-based Newmont Mining Corp (NYSE:NEM) shed 6.8%, while the world’s third largest gold producer behind Newmont, AngloGold Ashanti (NYSE:AU) gave up 9.1%. The Johannesburg-based company’s ADRs listed in New York is down a 40% year to date.

Fellow South African miner Gold Fields (NYSE:GFI) traded down 7.2%. Canadian gold counter Goldcorp (TSX:G) lost 5% while peer Kinross Gold (TSX:K) – which this year overtook Goldcorp as the world fifth largest gold miner in terms of output – suffered a staggering 12% drop on the day. Toront0-based Kinross which has been plagued by production problems is down more than 42% since the start of the year.