Tariffs

AMERICA

US Steel Falls to 52-Week Low regardless of Trump’s Tariffs

• U.S. Steel Corporation (NYSE:X) stock made an intraday low of $8.65 on Tuesday before closing marginally higher for the day. The amount was a new 52-week low for the stock and the lowest closing since the first quarter of 2016. In that quarter, the metal and mining industry fell amid concerns about China's slowdown. • This year, there are concerns about the economy of China amid the coronavirus outbreak. In 2018, President Trump imposed a 25% tariff on steel imports. The tariffs resulted in fewer imports and greater domestic production. However, Steel stocks slumped after the initial euphoria over the tariffs died down.

U.S. STEEL SHARES U.S. steel stocks are out of favor with markets for almost two years now. Last two years, President Trump slapped a tariff of up to 25% tariff on steel imports after they were flagged as a national security risk by the Department of Commerce.

As soon as the tariffs were declared, steel stocks increased sharply. However, as 2018 progressed, they came under pressure.

Each one of the top steel stocks closed in 2018 with massive losses. The stocks underperformed broader markets in 2019. The mining and metals sector has been weak this year amid the coronavirus outbreak.

While the general steel market has been weak, X's underperformance stands out. The company closed with losses last year, although its peers ended the year well. Thus far, the company's stock lost 22.6% in 2020 based on the prices yesterday. Remarkably, the stock hit a fresh new 52-week low in yesterday's trade. Currently, the stock is trading at its lowest level since the first quarter of 2016.

CHINA FACTOR In the first quarter of 2016, there was a downturn in the metals and mining industry amid concerns regarding China's slowdown. Domestic spot HRC (hotrolled coil) prices fell below $400 per ton in what was a cyclical low for the global steel industry.

6 | SKILLINGS MINING REVIEW March 2020 However, while X stock has fallen in the first quarter of 2016, domestic HRC prices are way above the current rates. Nevertheless, the company's revenue was tepid last year.

The company posted a net loss in the fourth quarter. Meanwhile, X will likely post a loss in the first quarter of 2020 as well.

HAVE TRUMP'S STEEL TARIFFS FAILED? It would be easy to repudiate President Trump's tariffs as a failure. All Stocks were currently trading below the price levels when the tariffs were declared in 2018.

However, domestic steel production has improved over the last two years. Imports are remarkably running near multi-year lows. Thus, President Trump's tariffs have resulted in importing substitution. For stock prices and steel prices of domestic mills, a lot of factors are at play, including global factors.

CAN U.S. STEEL STOCKS BOUNCE BACK? Earlier this year, I noted that steel might be a contra play this year. However, Uncertainty on account of the Coronavirus changed the picture. Currently, the Coronavirus is threatening the Chinese economic recovery. Because of this, metal and mining stocks have dropped this year.

Can steel stocks recover back? We'll have to see how soon the Coronavirus gets contained and what steps the government takes to improve the domestic economy. Meanwhile, Steel Dynamics (NASDAQ: STLD) could offer some value at the current price point.

GLOBAL AMERICA

Westgold Resources recommences underground gold mining at Big Bell

Gold miner Westgold Resources (ASX: WGX) has resumed operations at the Big Bell underground mine in Western Australia and expects it to become the "largest single mine in the Murchison region." The underground sublevel cave mining located within Westgold's Cue Gold Operations has been unproductive and flooded since 2003, has, however, resumed operation at the site, the company said.

Westgold initiated the first mass cave blast on Monday paving the way for a planned ramp-up in mine output that targets steadystate production rates by the end of CY 2020". Westgold executive chairman Peter Cook said Big Bell was previously among the largest single mine gold producers in the Australian gold industry.

"Big Bell is critical to Westgold's plans as it represents the past critical part in our Murchison strategy," he added. "Our dominant land area, three working process crops, Over 9-million-ounce resource base and our distinctive position as owner-operator provides the strategic plan to underwrite over 300,000 ounces of production annually in the longer term," Mr. Peter said.

RETURNING BIG BELL TO ITS FORMER GLORY Gold was first discovered around Big Bell in 1910, and a total of approximately 2.7Moz of gold was produced from the region before Westgold claimed ownership. Approximately 1.17Moz of gold was produced from underground Mining from 1995 to 2003.

In 2003, the mine was closed down, and the processing plant was sold a few years later due to technical and economic factors, including a gold price of under $500/oz. Westgold acquired the project in 2011 and 2016; it began re-establishing the mine for a long term, sustainable gold production as part of its Central Murchison gold strategy. The mine has been consistently dewatered, and accessibility drives have been rehabilitated with development extended to permit the extraction of remnants and new ore horizons.

According to Westgold, Big Bell has been restored as a "technology-driven contemporary mine" through the setup of new technology, a more sophisticated ground stress management and support regime, and a better extraction system that's expected to decrease geotechnical risk.

Tata Steel, JSW increase steel price by Rs 500-800 a tonne I ndian steel majors have increased steel prices between $500 and Rs 800 per tonne in the wake of higher input costs and shortage in the global markets as the coronavirus outbreak hit China's steel production.

A senior JSW Steel official said steel prices had been increased between Rs 500-800 per tonne from March 1. "Coal price has moved up by USD 13 a tonne, and iron-ore price has also moved up and remains firm. While, due to the Coronavirus outbreak in China, production in the dragon country is predicted to be reduced," the official stated. The fall in exports from China has opened up Indias export opportunity, particularly to some of the South-East Asian countries.

Refer to the CTMF website for details. SME’s 8th Annual Current Trends in Mining Finance (CTMF) Conference Managing Risk and Identifying Opportunities in a Disruptive World

JOIN US! May 10th - May 13th, 2020 at the Offices of Shearman & Sterling, New York, New York Connecting Mining, Finance and Engineering Executives ™

SME’s 8th annual Current Trends in Mining Finance Conference is intended for senior executives andmining industry executives and specialists including bankers, advisers, analysts, investors, portfolio managers and engineers. Core to the conference will be discussion of the outlook, trends and issues impacting raising capital in the global mining industry. Speakers at the conference and six workshops will discuss case studies about how management and investors use technology and best practices to anticipate, manage and track technical and non technical and financial issues and risks associated with mining projects.

For more information about the conference, the three networking receptions, and four workshops visit: http://community.smenet.org/currenttrendsinminingfinance/home?ssopc=1

Registration is Open ■ Register Early for Discounts ■ Sponsorships are Available

The organizing committee welcomes abstracts from you. Send them to timalch@gmail.com THANK YOU TO OUR SPONSORS! Get noticed! Sponsor SME’s 2020 CTMF conference.

AMERICA

The perfect places to mine are still in the developed world, and that’s a problem: Russell

Developed countries with long histories of success in the market dominate the latest list of the top places to invest in mining, but this probably isn't a good thing. The Fraser Institute's yearly survey of mining companies rated Western Australia State as the most attractive jurisdiction for investment, as it moves up from the number two position earlier, replacing the U.S. state of Nevada, which slipped to the third position.

According to the 2019 survey released on Feb. 25, Finland was ranked the second position followed by Alaska and Portugal, which were ranked fourth and fifth place, respectively. The biggest surprise in the survey of global mining executives is the poor performance of Canadian provinces, with not one managing a top 10 position, with Saskatchewan coming in 11th, Ontario 16th, Quebec 18th, and British Columbia 19th. mining executives, who will be more inclined to look elsewhere to invest if a nation's taxation and regulatory regimes seem to change too often.

Most notably, in developed countries, including Canada, the survey highlights the rising risk of environmental activism. Some of the issues over land claims by indigenous Canadians have roots in concern about environmental damage from mining operations, a scenario that can expand into other jurisdictions in the world.

In the previous survey, Canada had four of its provinces in the top 10 spots. As regards mining attractiveness, Canada has consistently been a powerhouse, and its weakness in the latest survey was attributed to increasing concern about environmental law and risks over land claims and title problems.

What the survey shows for Canada is that uncertainty is a confidence killer among Environmental concerns are one of the significant factors in Australia, particularly in the eastern states such as New South Wales and Queensland, where coal mining attracts and dominates interest from both detractors and supporters. This can be seen by New South Wales slipping to 47th out of 76 jurisdictions for mining attractiveness in 2019, down from the 42nd position, and Queensland dropping two slots to 15 th place.

10 | SKILLINGS MINING REVIEW March 2020 INVESTMENT FLOWS

The climb to the peak of the mining attractiveness index of Western Australia is principally about iron ore and, to a lesser extent, gold. The state is the world's biggest exporter of iron ore, and its top-quality deposits are matched by a government that understands the need to encourage its most important industry.

The top iron ore miners in Australia, BHP Group and Rio Tinto are currently investing sizeable amounts in expanding their operations. BHP is devoting $3.6 billion to its South Flank mine, while Rio is spending $2.6 billion to develop the Koodaideri iron ore project, with both of these projects currently being the largest undertaken by the firms.

Rio is still evaluating the Simandou iron ore project in Guinea, of which it owns 45.05% and is described on the organization's website as a "world-class" deposit. Guinea earned the 20 th spot in terms of mining attractiveness according to the Fraser Institute ratings, which may seem poor in contrast to Western Australia, but makes it the highest-ranked nation in Africa, the next being South Africa in 40 th place.

It can be reading too much into the rankings. Still, it's well worth noting that Rio invested in the top jurisdiction, but nonetheless continued to "work with the Guinea government to explore options" on the Simandou project.

The major challenge for mining firms is that the number of available projects in the top jurisdiction is limited. Even so, some of the best deposits in the world are in places where doing business is risky. Based on the Fraser Institute rankings, Finland and Portugal may have scored in the top five; however, their industries are relative minnows and unlikely to attract substantial investment dollars.

Conversely, some of the best potential mineral deposits are in countries in the bottom 10, including Zambia, Argentina, Tanzania, and the Democratic Republic of Congo.

Coal Shipping In Twin Ports Falls To Lowest Level In Decades While Wind Cargo Surges

Arecord quantity of cargo containing components used for generating wind power moved through the Twin Ports during the 2019 shipping period. The surge in wind traffic comes as DuluthSuperior handled the smallest quantity of coal in over three decades.

Approximately 8 million tons of coal moved through the Twin Ports last year, making it the lowest quantity Duluth-Superior has observed since 1985. Jayson Hron, the spokesperson for the Duluth Seaway Port Authority, said the decline comes as demand for renewable energy sent a record 306,000 freight tons of wind turbines and other components through the port.

"It is becoming more competitive in the power generation price range, and so it is simply making it a more viable, greater demand way of generating power for our nation," said Hron. The cost of renewables like solar and wind has declined in recent years. Moreover, natural gas prices are lower compared to coal as production has reached near-record levels, as stated by the U.S. Energy Information Administration. The agency found utility providers have announced the retirement of over 546 coal-fired plants in the last decade that produce around 102,000 megawatts of electricity. Nemet. Most Recently, Dairyland Power Cooperative declared it's planning to retire a 345-megawatt coal plant in Genoa next year. The company's CEO Barbara Nick cited the inefficiency of the facility and regulators' approval of plans to construct the $700 million Nemadji Trail Energy Center in Superior. The natural gas plant is a joint project with Duluth-based Minnesota Power, and the two providers have said the facility will help them fulfill renewable energy goals.

"It is actually a competition between natural gas, coal, and renewables. Over the last ten years, natural gas has especially been the winner. In the last five years, renewables have really been the winner," said Nemet. "Coal can't compete with either of those." Coal Production in the United States has declined from 1.2 billion tons from 2008 to a projected 597 million tons for the coming year.

Greg Nemet, a public affairs professor at the University of Wisconsin-Madison who researches energy and policy, stated that the transition is something people wouldn't have thought possible until recently. "We have seen plants which were built in the'80s — some even in later — that are being prematurely shut down just because it's much cheaper to make electricity with natural gas and solar, even when you need to build new plants," said The decline has caused the coal mining workforce to drop more than 40 percent. Power Companies are transitioning from fossil fuels for both economic reasons and also to appease investors and states that have set renewable energy objectives. Last year, Wisconsin Gov. Tony Evers, a Democrat, pledged to provide 100 percent carbon-free electricity by 2050.

However, the Trump administration has been trying to help the ailing coal industry. Last year, the U.S. Environmental Protection Agency rolled back attempts from the Obama administration to limit emissions from coal-polluting plants.

Last week, the U.S. Department of Energy also announced up to $64 million in federal funds for projects that would create cleaner coal technologies. However, the agency is providing approximately double that amount for the advancement of solar power projects.

The U.S. Energy Information Administration projects coal will generate less than a quarter of the world's electricity by 2050, while renewable energy sources are expected to grow more than 20 percent during the same time period.