Chile Quake Death Toll Rises To 723

The eighth trading week of the year ended with a bang, as central Chile was hit on Feb. 27 by an extra-powerful earthquake that registered 8.8 on the Richter scale.

• As has been widely reported, the epicentre was 115 km northeast of the worst-hit city, Concepcion, and 325 km southwest of Santiago. At presstime, the death toll had risen to 723, but was leveling off.

The number of dead was relatively low considering the severity of the quake, thanks to Chileans’ preparedness and good building construction practices.

More than most industries, the international mining community has extensive contacts with Chileans and expats working in the country, and so the hours and days after the quake were filled with anxious phone calls, emails and text messages, as people checked up on family, friends and colleagues.

Mining operations generally were spared significant damage, since most of the mining in Chile is carried out in the regions stretching from Santiago all the way north to Iquique. Electrical blackouts and fluctuations were some of the biggest problems for mine operators, as central Chile’s power systems were partially damaged.

With Chile ranking as the world’s largest copper producer at 35% of global mine output, copper traders jumped into action at the bad news. Though, with the quake occurring in the wee hours of Saturday morning local time, the actual bounce in copper prices was relatively muted by Monday when the damage had been more fully assessed.

In all, cash copper prices rose about 5% on the Monday and Tuesday to close at US$7,358 per tonne on March 2, but that’s still under the US$7,500 mark seen in mid-January.

• Molybdenum, that poster child of the boom-and-bust cycle, has been on the upswing again. Moly oxide prices are now at US$17.25 per lb. once more after trading at US$15 per lb. in mid-February and scraping through late 2009 at US$11-12 per lb.

On Feb. 22, the London Metal Exchange launched trading in molybdenum and cobalt futures contracts, with US$5.7 million total value traded on the first day, made up of 9 moly lots worth US$2.1 million and 90 cobalt lots worth US$3.6 million.

The 3-month bids were US$37,500.00 per tonne for moly and US$39,950 per tonne for cobalt. On May 21, it gets more interesting as the moly-cobalt exchange becomes a cash market, too.

Subsector leader Thompson Creek Metals showed just how stomach-churning the moly business can be in its latest quarterlies, which saw fourth-quarter revenue fall 42% to US$106.2 million from a year earlier due to a 43% decline in moly product prices to US$12.37 from US$21.72 per lb.

And yet, the company still squeezed out a profit of US$26 million in the recent quarter, and is looking for a much-improved financial performance in 2010 as the global economy returns to normal growth rates and moly demand recovers its upwards trajectory.

• Miners in South Africa are again struggling with major electrical power issues. While a couple of years ago it was rolling blackouts and enforced rationing, now it’s large cost increases being instituted in the coming years.

The state power regulator NERSA has just approved rate increases by state-owned power generator Eskom of 24.8-25.9% over each of the next three fiscal years, though this is much less than Eskom’s initial request of 45% increase each year. The country’s powerful mining unions are particularly angered over the rate increases and are now threatening court and strike action.

• The Oyu Tolgoi copper-gold mega-project in Mongolia moved another big step forward, as Rio Tinto boosted its stake to 22.4% in project developer Ivanhoe Mines by acquiring 15 million shares at $16.31 per share, or US$232 million.

Ivanhoe will hand the money right back to Rio Tinto to buy key mining and milling equipment, including two large, 38-ft-diameter, semi-autogenous grinding mills, four ball mills, re-grind mills, crushers, motors, gearless drives, conveyors and flotation cells.

Ivanhoe is now sitting on a consolidated cash position of US$1.3 billion.

• Chariot Resources’ up-and-down copper adventure in coastal Peru is coming to a conclusion, with Hong Kong-based China Sci-Tech Holdings tabling a friendly all-cash bid of 67¢ per share, valuing the Ulli Rath-led copper developer at around $255 million.

Last September, Rath and his board fended off dissident action led by Lukas Lundin, and promised to step up the search for a buyer. The Lundin-led shareholders, which include Lundin Mining, now support this latest transaction.

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