More Peru mining production stats

So I put up the post just an hour ago that clearly shows how Peru's exports are riding their luck and immediately (and I mean within half an hour) the "you're just cherrypicking" mail arrives from one the sillypeople that is ignorant to stick up for the corruptos running Peru. So let's first point out this:

Ahhhh I feel better now. Let's plough straight on with the monthly metals production figures for Peru in the period 2006 to date. Starting with copper, the only one that has made some sort of significant move (and I betcha that you can guess when the Cerro Verde expansion came online):

Next gold:

Here's silver:

Here's zinc:

Here's lead:

Here's iron ore:

Here's tin

Here's molybdenum:

All data from Peru's Ministry of Energy and Mining. You see that amazing production expansion? You don't? Oh wow, there's one for owly to comment upon:

China does Mutún, Bolivia

Apparently, there is no foreign investment in Bolivia because of the normal type of scary EvoRedCommieAllGonnaDieRunAndHide etc etc stuff written in your northern propaganda rags (never mind that Bolivia was LatAm's fastest growing economy last year, as EngLang media learned long ago to wisely ignore facts when they don't fit prejudices).

However, the Chinese have not been informed of the all this. Today's hot story from Chinamining is that China wants in on the massive (really....it's very big wow massive) Mutún iron ore project in East Bolivia. Here we go with a straight paste:

The Chinese government has proposed to extend up to US$15 billion in loan to a large scale iron ore mining project in Bolivia, sources reported.

China also intends to set up a joint venture to jointly develop the mine, according to the report.

However, a spokesman at Bolivian government said that the talks with China are still in the preliminary stage. Bolivia is also considering the related proposals raised by enterprises from Korea, Russia and Venezuela, the spokesman added.

According to the spokesman, Sergio Alandia, president of Bolivia's state-owned steel firm ESM, will hold talks with a Korean delegation including Hyundai Steel Co this week.

Bolivia's local newspaper, La Razon, reported yesterday citing Alandia as saying that China is facilitating an iron ore supply agreement with Bolivia and suggests China Development Bank Corp to offer loans to the above iron ore.

Also right now there's a Bolivian delegation in South Korea, invited over by the Seoul brothers to talk about that very same Mutún thing (as featured in IKN55). Strange how you have to resort to blogs to find this out too, innit?

Peru, and a point to the working classes

The Shougang strike is over as of yesterday. Workers at its Marcona iron ore works on the South coast of Peru (specific hole in ground pictured above) had been protesting in a unanimous form since Monday 13th July, so it took 10 days for the Chinese owners to realize they can't treat people outside China they way they treat their own nationals.

Workers wanted a S/10 per day (approx U$3.30) pay rise and Shougang offered them a raise of S/0.70 (about U$0.25) per day. The workforce quite correctly took that as the insult it sounds like, downed tools and didn't cave in under pressure. Here's the final deal:

• A S/3.30 per day rise (approx U$1.10)

• A one-time bonus payment of S/1,300 (approx U$434)

• Meals supplied by the company for workers on duty

• Transport paid for (or partly paid for) by the company.

All in all, I think the Shougang workforce got themselves a good deal. Come the revolution, conmrades......

Peru's metal mining industry: An overview of the year so far

To take my mind off the gawdawfulness of the Argentine soccer team last night I started playing with some Peru ministry figures for the country's mining sector (yes, I know I'm sad...no need to write in on that score). Those numbers became charts and although there is not great insight or revelation here, I think they're pretty useful as a snapshot of the country's industry right now so here we go. All numbers used are either from the Peru Central Bank or its Ministry of Energy and Mines.

First, here's Peru's total exports for the period in question, January 2009 to April 2009. As we can see, metals make up the majority of everything exported by Peru.

Here are some quick stats on the above:

• Total exports Jan-Apr 2009: U$7.09Bn
• Percentage metals in exports: 59.5%
• Percentage gold in exports*: 28.1%

Yep that's right; due to the sinking of copper compared to last year and the value held onto by gold in the period, Au is now Peru's biggest export by far. Also, did you know that nearly all of Peru's production is shipped to Switzerland? I did.

On to the next chart that compares 2008 to 2009. Yep, that's over $2.2Bn in lost exports you're looking at there. but of course, Peru's GDP is growing...............


Next is the breakdown of metals exported in the four months of 2009 and you can see that for all the talk about Peru being the world's biggest silver producer, the third biggest zinc producer and its polymetallic production nature, there are only two metals that really matter; gold and copper. As far as the country's economy goes, the rest are just noise.


Finally, this chart shows just how much metals values have dropped since 2008. The recovery in March/April 2009 compared to January/February is directly related to the recovery in spot copper, of course.

Now we move away from dollar values and look at volumes. The following charts show just how much of each metal has been mined in Peru per month since January 2008. Firstly gold, benefitting from recent production hikes at Yanacocha and Alto Chicama (the two big gold mines in the country):

Now that Cerro Verde is running at full tilt, copper production has been pretty steady.

Zinc production has dropped, probably due to the layoffs and mothballing of smaller mines:

Silver has stayed fairly steady. Buenaventura (BVN), PAAS and other large dedicated silver miners give Ag more stability, even though it's often a by-product more than a product.

Pb production has dropped for the same reasons as zinc; closures and layoffs, with 10,000 miners having been laid off in 2009 (which doesn't affect GDP growth either...oh no)

Tin numbers drooped a little but have remained largely steady:

In iron ore, nearly all the ballgame is Shougang at Marcona in South coastal Peru, so whatever happens there is the country results.

Moly has been hit very hard. Roasting circuits have been turned off and value of Moly sold has dropped by 88% YoY.

So all in all, if it weren't for Switzerland Peru would be in the doo-doo right now. Actually that's a little cynical, because if you're going to be a metals nation and export the stuff to progress and grow, then you couldn't really choose better than to have copper and gold as your big products. Gold has supported the drop in copper all this time, and if the Hoped™ for recovery does indeed happen quickly and world financial winds turn against gold and its safe haven reputation, copper is likely to take up the slack for Peru.

*thanks for the typo pickup, anon

Of Mice and Men and Cardero Resources (CDY)

The best laid schemes o' mice an' men
gang aft a-gley
'To a mouse" (Robert Burns)

Cardero (CDY) (CDU.to) today announced that their deal to sell their Pampa de Pongo iron ore project in Peru with Chinese steelpeople Nanjinzhao has hit a large bump in the road. The $10m deposit that was supposed to have been wired to CDY didn't appear by the alloted 17th May deadline and the company reports that negotiations are ongoing about the final price, as Nanjinzhao don't want to pay the previously mentioned $200m total ticket price for the project due to world market conditions.

Two things to say (that may seem contradictory at first) and then a conclusion

1. I can't say I'm that surprised. Cardero is run by a bunch of promo artists and the Chinese are the only buyers out there. I thought that the Chinese would pay the $10m deposit and then stall on the final $188m settling price and not baulk at this intermediate stage, but that's my bad call.

2. I, dumbass dude with a blog, actually believed them! After the posts written earlier in the year I was sucked in by the story, I did background checking, invested DD time liked what I saw/heard and read and even called it a buy in the newsletter (that now has to suffer a hole in its "closed positions" section of the stocks to follow table). And I'm long CDY today. Not a massive, life-changing position and knowing that the risk was always there, but it doesn't take away the fact that I got it plain vanilla wrong.

Moral of the story: No more heeding siren songs, no more investing on the word of untrustworthy companies, no more bullshit management teams deserving of my $$. The beauty of capital markets is that you get your penance delivered in quick and undeniable form. There's never any way round a 30% or 40% loss, no excuses or "yes, but...." will ever make it disappear. You take the loss, realize you have failed, admit it, remember the dangers of ego in this game and try to reconcile the fact that a monetary loss can turn into a longer-term profit if the lesson of the loss can be learned and incorporated.

So having started with one Scottish poet I'll finish with another that I've already quoted on this blog at a time of philosophical loss-taking. Hugh MacDiarmid, take it away;

We must be humble. We are so easily baffled by appearances
And do not realise that these stones are at one with the stars.
It makes no difference to them whether they are high or low,
Mountain peak or ocean floor, palace, or pigsty.

There are plenty of ruined buildings in the world but no ruined stones

Hugh MacDiarmid, 'On a Raised Beach'

Chart of the day is.....

..iron ore production at Vale (RIO) per quarter since 2007.

This is a follow-up to this post dated January 24th that featured the same subject. At the time I wrote "Gawd help 1q09 and onwards" and as it turns out RIO is going to need all the help Gawd might offer. The 46.9MMT production figure for 1q09 sucked harder than the bilge pump on the Titanic and considering that Chinese iron ore demand has fallen off a cliff again (now the restocking is over) there's no reason to think the rest of 2009 will be anything better.

Think this recession has bottomed out already? I laugh in your face.

Just how bad is the downturn in iron ore production?

Answer: Very bad.

I read this report from BN Americas this week that started like this:

Brazilian miner Vale's (NYSE: RIO) iron ore output in 2008 slipped 0.5% from the previous year to 302Mt, the first time since 2000 the company's production has dropped.

"From 2001-07 iron ore output grew at an average annual rate of 13.4% as a consequence of productivity gains and large investments to increase capacity," Vale's annual production report said, adding that the company shut down several mines in Minas Gerais state due to dwindling demand caused by the financial crisis yada yada continues here

So as the slump only really happened at the end of 2008 the note had caught my eye. "Hmmm...just how bad did it get?" thought your inquisitive numbers wonk, so off I trotted to the RIO website to check out the figures. Now this isn't looking at copper, or nickel or any of the other RIO products, just its core industry of iron ore production. Here's the chart.

Holy Moley, that's one helluva drop in the last quarter, especially when you remember that the cuts didn't even start until November, with the second wave of layoffs happening in the first week of December. Gawd help 1q09 and onwards. And even though Vale manged to beat the clock and raise capital at the right time in 2008, frankly I'd rather hold Osama Bin Laden's dick than RIO shares right now. I mean look at the 12 month chart:

For sure it had the waterfall drop just like all the others, but since November people have actually been buying the stock. So take a look at the five year chart and see where the company can go when things get tougher....and they're going to get tougher.