Chinese, DRC gov’ts forge ‘vast Marshall Plan’

A “sign of the times” development highlighted the week in mining ended May 10, the 19th trading week of 2008.

• After almost a year of open negotiations, on May 9 the government of the Democratic Republic of the Congo officially confirmed a US$9-billion “Minerals for Jobs” agreement with the Chinese government. It’s a deal the DRC’s infrastructure minister describes as a “vast Marshall Plan for the reconstruction of our country’s basic infrastructure” and the “foundation on which the growth of our economy is going to be built.”

The agreement will see the Chinese pumping an initial US$3.25 billion into the DRC’s mining sector and another US$6 billion into its infrastructure, especially roads, rail lines, hospitals and hydroelectric power systems. Chinese banks led by Exim Bank of China will provide the financing in return for interests in mineral concessions.

A mining joint venture named Sicomines is being created, which will be owned 68% by various Chinese enterprises and 32% by the DRC’s state-owned miner Gcamines. The DRC government notes that 150 Chinese engineers and technical experts are already in the country to work on the new JV.

The DRC government says the new JV will target “selected dormant deposits” for mine development, such as the Mashamba and Dikuluwe copper and cobalt mines. To get the ball rolling, the Chinese are advancing the DRC government a variety of no and low-interest loans.

Meanwhile, the DRC government is still moving ahead with other infrastructure projects supported by Western powers.

• In contrast to the pullbacks seen in most other metals of late, tin prices hit new record highs, and are now up more than 50% this year. Three-month tin ended the week at US$24,585 per tonne, as supply from the world’s second-largest producer, Indonesia, continued to be squeezed.

• Another big gainer among the commodities was oil, which rose above US$120 per barrel for the first time ever on May 5 and then hit a new high each day for the rest of the week. At its peak, light sweet crude for June delivery hit US$126.40 per barrel on May 12 before finally pulling back below US$125.

• The world’s biggest gold miner, Barrick Gold, unveiled a stellar quarter, reporting record quarterly profits of US$514 million in the first quarter on sales revenue of US$1.96 billion. Barrick produced 1.74 million oz. gold and 87 million lbs. copper during the quarter, and realized US$925 per oz. gold — showing that the company is indeed now leveraged to the gold price after spending so many years as the poster child of gold hedging.

May 2 also marked Barrick’s 25th anniversary as a publicly traded company. The company notes that C$10,000 invested in Barrick shares then would now be worth $322,583. Meanwhile, its market cap in that time span has grown to C$36 billion from C$100 million, as annual gold production rose to 8.06 million oz. in 2007 from 30,000 oz.

• Giving an idea of the huge scale of Canada’s oilsands projects, Finning International’s Canadian division signed a $360-million mining equipment and support services deal with Suncor Energy that included the sale of 22 Caterpillar 797B mining trucks, 19 D11T and 5 D8T track-type dozers, to be delivered by the end of next year.

• The Silver Institute in Washington, D. C., and GFMS released their World Silver Survey 2008, noting that global silver mine production rose 4% in 2007 to 670.6 million oz. silver. Peru ranked as the biggest silver mining country, followed by Mexico, China, Chile and Australia. The survey calculated that cash costs at primary silver mines rose to a weighted average of US$1.52 per oz., driven by higher costs for labour, consumables and energy.

• In an unusual move perhaps signifying a new phase in the M&A game, two U. S. private equity firms are teaming up to buy a Canadian publicly traded mining services firm. JMI Equity and the Carlyle Group are offering a modest premium of C$180 million in cash for Vancouver’s 22-year-old Gemcom Software International, the world’s largest supplier of mining software.

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