Skillings March 2019

2019 MARCH IN REVIEW

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Vol:108.No:03

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MINING PROFESSIONALS AND THE CHANGING WORKFORCE P 06

EXPECTED RECOVERY IN COPPER REFLECTED BY FINANCES P 12

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...From the Editorial Desk MARCH 2019 VOL.108. NO.03

T

CEO, Larry Lehtinen, estimated an operating life of at least 25 decades, and hoped that the mine would remain productive much longer. Premier Dwight Ball spoke about the mining sector's importance as a lifeline for rural Labrador communities such as Wabush, acora

referencing the expected positive financial effect

of an energetic mine

on other regional businesses. Wabush Mayor, Ronald Barron said the statement marks a"great day" for the community, confirming his optimism on the mine's potential during those difficult years following its closing. Hundreds of people lost their jobs once Cliffs Natural Resources Inc. closed the Scully mine in 2014, after nearly 50 years of being in operation.

Skillings Mining Review publishes comprehensive information on global mining, iron ore markets and critical industry issues via our monthly magazine, weekly E-newsletter, annual mining directory and real time website.

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At the moment, Cleveland-based Cliffs Natural Resources Inc. blames increasing prices and falling commodity costs for the closing. "The job begins now, the hiring procedure begins now," Ball said. "The restart of the Scully mine is a milestone achievement for the mining industry in our province."

The Labrador town of Wabush is in for a boost this year as one of Canada's biggest iron ore mines restarts production. Premier Dwight Ball went to Wabush last Tuesday to announce the official reopening of the Scully mine and the subsequent hiring for 260 new jobs during the next few weeks.

Minnesota-based Tacora Resources Inc. bought the mine and its own assets in July 2017. Ball said the mine would observe an estimated production rate of roughly six million tonnes of concentrate per year. "There is ore coming from the floor and hence it makes sense to get it out," Barron said. "This mine is not merely bringing life back to Wabush but also to Labrador west."

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March 2019 SKILLINGS MINING REVIEW | 3

IN THIS ISSUE

MINING PROFESSIONALS AND THE CHANGING WORKFORCE P 06

P 16

CLEVELAND-CLIFFS’ YEAR OF GREAT P 18 EXPECTATIONS

ESSAR STEEL HISTORY OF

TROUBLE, TROUBLE, AND MORE

COMMENTARY

IRON ORE

commentary...............................................................03

Northeastern Minnesota taconite plants

COAL

had a rock-solid season.............................................11

Coal Mining Careers Do-Over.....................................15

STEEL

COPPER

Deadline critical: missed by Essar............................14

2019 comment period on mineral leases ................10

Essar Steel History of Trouble,

OBSERVATION: Expected Recovery in

Trouble, and More......................................................16

Copper reflected by Finances....................................12

MINING INDUSTRY SHIPPING

COVERSTORY

Cleveland-Cliffs’ Year of

Mining Professionals and

Great Expectations.....................................................18

the Changing Workforce............................................06

MINING INDUSTRY NEWS

IRON RANGE REGION

Minnesota Governor Tim Walz optimistic

ArcelorMittal USA Becomes Managing

about his government finding...................................20

Partner for Hibbing Taconite Co................................05 Statistics.............................................................. 22/23

4 | SKILLINGS MINING REVIEW March 2019

Mining People............................................................ 21

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IRON RANGE REGION

ArcelorMittal USA Becomes Managing Partner for Hibbing Taconite Co.

C

hicago-based

ArcelorMittal USA will now act as Managing Partner of Hibbing Taconite Co. at Minnesota's Iron Range, that provides iron ore via lake freighters to ArcelorMittal's steel mills in northwest Indiana.

“Accepting the role of Managing Partner demonstrates ArcelorMittal's continued commitment to Hibbing Taconite while ensuring long-term supply of quality iron ore to our key operations in USA," ArcelorMittal USA President and CEO, John Brett said.

The steelmaker, with a vast majority ownership stake in the eight-million ton capacity iron ore mine in northern

Minnesota, said it plans to make no compromise to the mine's operations, manufacturing volumes or ownership.

U.S. Steel also includes a 14.7 percent interest from the mine.

The Hibbing Taconite Company mine opened in 1976 and produced 7.7 million tons of magnetite ore last year. Brett confirmed his complete functional overview of this mine during

the next eight months when ArcelorMittal assumes the new position. Infact, the company plans to honour Hibbing Taconite, that currently employs about 735 hourly and salaried workers and a labour contract between the United Steelworkers unions.

"ArcelorMittal is responsible for a significant portfolio of raw materials and mining assets across the planet, producing more than 62 million tons of iron ore this past year alone," Brett stated. "This includes our Minorca mine operation situated only 30 minutes northeast of the Hibbing property."

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March 2019 SKILLINGS MINING REVIEW | 5

COVERSTORY

Mining Professionals and the Changing Workforce We must have balanced hiring and retention - so it is not a revolving door where we attract women and they do not stay.

At the fiscal year end in June 2018, the number of women at BHP only climbed 1.9 percent, leading some in the business to question the usefulness of placing such an ambitious goal.

B

HP introduced the goal in 2016 and said it had launched

workforce.

at senior management levels. One of the mining companies in the FTSE 350 index of miners has been led by a woman in market capitalization, and another woman was appointed by Switzerland-based Glencore to its board.

The mining has not a good impact on industrial development regarding the hiring of females in industry, especially

For a business to be truly successful by increasing its workforce, it must consider its past objectives. Shorter

initiatives to boost the hiring

of women and allow more flexible working across its

26,000- strong

6 | SKILLINGS MINING REVIEW March 2019

shifts, such as six-hour times, and remote working can allow women to work while their children are in school, she explained. "We must have got balanced hiring and retention -- so it is not a revolving door where we attract women and they don't stay," she said.

Considering setting up the goal, BHP has hired 2,000 women compared to 500 men.

As a consequence, the number of women as a proportion of their workforce has been increased from 17.6 percent to 22.4 percent. Athalie Williams, chief people officer in the

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enhance the diversity in hiring, Ms. Williams said, as it will enable the BHP to hire more people from different industries.

Ms. Williams said it was difficult to make certain women stayed longer at BHP and even it wasn’t feel that they needed to leave to raise a family. The turnover of women at BHP is higher than men at 9.7 percent, compared with 6.5 percent.

Anglo-Australian firm said "I believe we will get that and we are on track".

"For us, it's given the distance to get conversations and to understand the way our organization works in a way we wouldn't have done if we hadn't set the target," she said.

BHP already uses autonomous trucks in its Jimblebar iron ore mine in the Pilbara in Australia and wishes to have “highly automated operations” globally by 2025. Glencore stated that his global workforce has 14% female ratio and going to rise up to 40%. Mentorship programs industry’s retention The systemic obstacles in maintaining the business can be greater than that which can be mended by mentorship, and addressing those problems at the

workplace can improve an organization's existing culture.

“Our objective is to change the concepts of women regarding this mining business," WIM/WiN-SK seat Anne Gent stated in February. "We also attempt to encourage the women already present in the mining sector to understand their entire potential.”

She returns the favor by reaching out to high school women and talking to them about their potential.

"I feel that the most important thing is to recognize who deserves the aid," explained McAndless. "There would be few persons who just simply not willing to say or do anything. They would just like to experience the technology programs... .and at the end, they are going to say, “Alright, I’m not comfortable here”.

M s . Wi l l i a m s d e fe n d e d B H P ' s decision, a plan that has not been replicated by other large mining companies. “ We w i l l n e e d t o h ave m o r e women being promoted up through the management ranks to executive and the board level, pay parity across all functions, and most importantly diversity of culture and inclusion to ensure that we retain these skilled professional women and maintain an attractive position in industry” The increased use of technology and automation in mining will probably

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March 2019 SKILLINGS MINING REVIEW | 7

COVERSTORY

“I really don't think that I'm likely to get any hope” Holly Burton, a leadership mentor for females in male-dominated industries along with a former mining engineer, states mentorship is insufficient to challenge a workplace culture which hasn't been adapting to women”.

"If something occurs consistently over the span of six months to a year, it is not only the context," Burton explained.

“There is always a message that is put forward to females: Well, perhaps it's just you personally, or you're just being overly sensitive”.

Saliba knows the advantages of having a mentor, while she joined the team. Mentorship applications have been developed along with familiar strategies to overcome any issues. But diversity advocates they are not sufficient to solve the bigger problems.

Mining organizations seek to dig nearby Native communities to get good signal impact and benefits agreements (IBA), which may include a preferential hiring clinic for Native employees. These places are basically laborious beyond the trades with very little opportunity.

Sometimes the infrastructure isn't the good place for Native American workers. "They know a whole lot about what they are getting themselves into, and this is a substantial part of the transition from the learning area into the job."

For individuals entering the business, with a mentor may permit them to make connections fast and provide assurance that there's a person they

8 | SKILLINGS MINING REVIEW March 2019

could get advice from if they need it.

Based on Statistics of Canada, females made up just 17 percent of the mining workforce. First Nations, that represent four percent of the workforce, made up just six percent of the mining market.

"There is a great deal of work put into recruiting,'' Burton stated. “And that we do not see too much work done, or efficiently, there is a need to give attention to working of the females we have in the business. We have got a huge issue with this”.

“It is very hard to recruit, particularly when you're dealing with limited number of possible candidates who would be in a position to be hired for a long-term foundation,” stated Hodgkins.

Certainly, if these relationships continue long enough, an individual will start to observe a culture of mentorship from people who preceded.

Similarly, First Nations teams have their particular barriers in adjusting with the mining sector that goes beyond recruiting.

She arguments with some 2013 studies by the journal Social Forces that exemplifies this point. As per research of women, 15 percent of women wind up leaving their professions. Saliba's

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mentor Patrick McAndless, an expert coach, utilizes his years of expertise in the business to direct pupils developing their potential livelihood. He states mentorship may be an important tool for maintaining their capabilities, in addition bringing the possibility of students to go into the mining business.

"I believe mentoring is good and valuable and they ought to take actions, but it really cannot be the beginning and end of diversity programming" Hodgkins ran a 2016 research into a corporate-sponsored train-to-work plan to incorporate young Native people to skilled trade places in Alberta's oil sands, which comprised of a monthlong internship at a nearby mine.

He discovered that investment to the communities helped to break the job barrier.

the engineers could go within the initial six months at the same job. They stated it was a coincidence, which she had been being sensitive when confronted.

More lately, Women in Mining and Atomic Saskatchewan (WIM/WiN-SK) obtained $163,000 in the International Minerals Innovation Institute in February to finance. It became possible due to mentorship program, that joins women working in the market with males� the champions," and motivates pupils to combine the business.

POWER is one of the several mentorship programs throughout the business.

Women are supported by the Interna-

tional Women in Resources Mentorship Programs from around the globe with mentorship and training programs.

Goldcorp's Building Choices program has graduated over 1,800 females and intends to aid women in their professions through training, growth, and mentorship.

The mentorship program culminates with a welcome reception on 29 June 2018 where participants paired with their mentors. The program last for a period of 12 months over which mentees exposed to group workshops, one on one sessions and ongoing regular contact and guidance from KPMG mentors.

"It was present in the area for quite a while, and growing the relationships with local communities is a significant part of the achievement in hiring the individuals in that area," he explained.

Burton recalls a few episodes from back when she had been a mining engineer who amuses her from continuing her career path. According to her,

We thrive on challenges golder.com

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March 2019 SKILLINGS MINING REVIEW | 9

COPPER

2019 comment period on mineral leases On Dec. 20, 2018 the federal Bureau of Land Management announced its strategy to officially renew two mineral rents for 10 years to Twin Metals Minnesota, a subsidiary of the Chilean mining giant Antofagasta, which will be vying to construct a huge underground copper-nickel mine near Ely, Minn., just outside the Boundary Waters Canoe Area Wilderness.

A

t precisely the exact same time, the

BLM also published a 34-page environmental evaluation and gave the people until Jan. 22 to weigh in about the agency's plans to renew the leases.

But the following day, on Dec. 21 at midnight, the partial government shutdown started. As a result, agency staff haven't been accessible to answer questions, environmental groups say, and advice couldn't be accessed by them on the proposition on government websites for many days.

In a press release encouraging mining supporters to publish comments, Twin Metals stated the mineral rents are the"base" of its underground coppernickel mining job and "their renewal is essential to the continuing design and submittal of a formal mine project proposal to both state and national agencies," which the company has said it plans to submit sometime in 2019.

Mining backers have argued that the

10 | SKILLINGS MINING REVIEW March 2019

suitable time to assess whether Twin Metals can function safely is from the environmental review and permitting phase, which would be triggered when the business submits a mine plan.

But mining opponents, including the Campaign to Save the Boundary Waters, the Wilderness Society, Center for Biological Diversity, and National Parks Conservation Association, assert that is too late. They say scientists should first find out whether the Boundary Waters' watershed is an proper spot for mining.

Those groups have asked the bureau to extend the comment period by an initial two weeks - until March 25 2019.

"A rushed process is insufficient to understand the consequences of lease renewal on one of our country's most treasured public lands," the groups wrote in their letter to the BLM, urging the agency to "proceed carefully and take sufficient time to fully engage the

public, the Forest Service, the scientific community, Native American tribes as well as others that will be affected by the choice.�

Minnesota's U.S. senators, Amy Klobuchar and Tina Smith, have also requested at least a 60-day comment period. So have U.S. Reps. Betty McCollum, Ilhan Omar and Dean Phillips of Minnesota, who asked the BLM to prepare an Environmental Impact Statement to more thoroughly examine the consequences of a potential mine to the Boundary Waters' sensitive ecosystem.

The Bureau of Land Management hasn't reacted to the requests.

The Trump government's proposal to renew the leases was the last of several reversals of transfers that the Obama administration had taken to block potential copper-nickel mines, such as Twin Metals, on national land within the watershed of the Boundary Waters.

In late 2016, in the waning days of the Obama government, the U.S. Forest Service and the Bureau of Land Management withdrew Twin Metals of its leases and started a procedure to prohibit mining in the landmark for 20 years, citing the possible risks of sulfide ore copper-nickel mining into an "irreplaceable" wilderness region.

In addition to reinstating and moving to renew the leases, the Trump government also resisted the environmental study of the proposed 20-year mineral withdrawal.

Signs supporting mining and the Boundary Waters Canoe Area Wilderness, Derek Montgomery for MPR News.

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Northeastern Minnesota taconite plants had a rock-solid season

Minerals Tax Office. It's a roughly 800,000-ton increase from the 37.7 million tons produced in 2017 and about 9.5 million tons over 2016 when a few of those taconite plants were idle and 29 million tons were produced.

Production is expected to stay steady in 2019, with a slight increase of approximately 100,000 tons above this year's 38.5 million tons, according to the Minerals Tax Office. Iron ore pellets produced at Northeastern Minnesota taconite plants would be the primary ingredient used to make steel.

K

Johnson, president of the Duluth-based Iron Mining A ssociation of M innesota explained that "Some of the facilielsey

ties are trying to incorporate new and different pellets to the area , which is also helping the industry stay healthy,"

And by doing that, “we are integrating new kinds of (steelmaking)

”That’s a very positive sign,” said Kelsey Johnson. It's a healthy trend that has been a consistent uptick as demand for American-made, nationally produced steel increases. Facilities continue to make capital improvements to become more productive and create new products that are higher-value, While, “Tariffs placed on unfairly traded imported steel have also benefited the industry and increased demand for American made, domestic steel,” She said.

to our base. We will continue to improve investments in the facilities, and many are already doing their best to diversify their products and secure long-term contracts with their customers." Iron ore pellet production at the plants will reach 38.5 million tons this season, according to the Minnesota Department of Revenue

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March 2019 SKILLINGS MINING REVIEW | 11

COPPER

OBSERVATION

Expected Recovery in Copper reflected by Finances To get a concept of where mining executives are allocating their capital, we've combed through the past five years of reports from the eight major diversified miners that have a real choice of where they invest their cash — BHP Group, Rio Tinto Group, Vale S.A, Anglo American Plc, Glencore Plc, South32 Ltd., Vedanta Resources Plc and Teck Resources Ltd.

A

lt h o u g h m i n e r s ' ov e r a l l capital spending has shrunk, base metals copper, zinc and

aluminum form a larger share of the budgets .

H owever ,

the enforced diet

doesn't apply equally to all commodities.

Copper

signs of recovery. Mining executives continue to be ridding the sackclothand-ashes of "disciplined capital allocation," which they took up to atone to the vast amounts of wasted money throughout the market's last peak.

is currently eating up an outsize

share of budgets right now, with just shy

$8 billion invested by our group of companies over the 12 months through June.

of

The tendency underlying all this is the manner capital spending dropped following the boom in the early part of the decade and is yet to show strong

12 | SKILLINGS MINING REVIEW March 2019

Ask mining companies that which of the mineral resources will see good long-term demand and they will naturally answer, "Everything."

However, a closer look at spending can give the lie to this outlook - and emphasize the times when they're putting their money where their mouths are.

Right now, “This Base” indicates that

the recent gloomy prognosis for copper might not survive. Over a third of capital spending by large diversified miners is being dedicated to the metal at the moment, up from levels of 20 percent or less early in the decade.

That represents a substantial wager that forecast shortages for copper over the next decade will materialize. Zinc, aluminum, and platinum-group metals are currently running red-hot, also — but fertilizers, petroleum and iron ore seem to be fatally out of vogue.

The flip in zinc and aluminum is much more conspicuous. These two elements are running more or less the exact same degree in dollar terms, despite the fact that capex as a whole is about a third of what it had been in 2013, whereas spending on copper is still well down from five years ago.

Platinum-group alloys are in a similar scenario, suggesting that the recent

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record high for palladium is much more than just a one-off. For all Glencore's predictions about a rosy future for fossil fuels, its expansion capital spending in coal and petroleum has all but dried up.

Looking at capital spending is not a pure measure of miners' tastes. The leading spender of the industry, BHP, has an overstated effect on the general picture. The ebbing of its own vast expenditures on oil under pressure from shareholders such as Elliott Management Corp. accounts for the majority of the fall in that class, despite ongoing outlays by Teck and Vedanta.

Its escape from the potash fertilizer business, along with Vale movement

from crop nutrients accounts for the majority of the spending decrease in that area. Also, the slowing of iron ore spending from a $21.3 billion yearly run-rate to $5.3 billion between December 2013 and June 2018 is almost entirely tied down to BHP, Vale and Rio Tinto, with a little assistance from Anglo American.

Investment Capital plans remains a useful corrective at those times when miners are attempting to sell you a story they do not really buy themselves.

Despite optimistic clamours made by several miners about nickel during its run up to more than $15,000 a metric ton in June, no one is really spend-

ing money to grow more of it — with the exception of Glencore, whose Koniambo deposit has the virtue of being unusually high-quality, therefore able to survive periods of weak pricing.

Likewise, thermal coal is yet to truly pick itself up from the spending amounts plumbed in 2015 and 2016, despite prices that touched a five-year high this year. A segment that accounts for 30% of Ebitda and over fifty percent of revenue, Glencore only managed to get about ten percent of the organization's growth capex in 2017. That sounds like a business being run for only money, rather than one with a growing future.

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March 2019 SKILLINGS MINING REVIEW | 13

STEEL

Deadline critical: missed by Essar Mesabi Metallics was meant to begin construction on a highend iron ore processing plant in Nashwauk by Dec. 31, 2018.

However, a review by the Department of Natural Resources (DNR) discovered that work had not been achieved, according to Barbara Naramore, the DNR's assistant commissioner.

Essar Steel Minnesota’s half-built mining site near Nashwauk, Minn. (Bob King. 2015)

M

esabi was trying to resur-

Essar Steel site , and they

rect the prior

M innesota

face penalties worth millions after missing the important state deadline.

”Under

the conditions of the state

mineral leases, failure to meet this deadline results in a doubling of imports and rents due to this state,"

Naramore said. "We have informed Mesabi Metallics of the schedule under which these increased payments are expected.”

The rents will double to $120,000 each quarter. From the end of 2019, rents and full-year royalties will now be a total of $12 million. Mesabi admits the work on the value-added centre wasn’t

14 | SKILLINGS MINING REVIEW March 2019

completed by the deadline, according to spokesman Darin Broton. The company hopes to talk about the obligations with the DNR in more detail in the coming weeks, and reveal what design and engineering work has been completed on the value-added high-grade ore centre. This plant is expected to be constructed adjacent to a half-built taconite pelletizing plant which Mesabi hopes to complete.

The deadline is the most recent drama in a 12-year saga to build brand new iron ore mining and processing centers in Nashwauk. Under Essar Steel Minnesota, milestones were missed by the project. The state demanded economic development loans be repaid.

Essar Steel Minnesota, already $1 billion in debt, filed for bankruptcy.

Under the direction of the Chippewa Capital Partners team, Mesabi Metallics bought Essar Steel Minnesota assets from bankruptcy in 2017. The nation granted mining licenses to Mesabi after they promised to put $650 million into the project. Broton says the former deadlines were made with a different management group and before Mesabi faced lawsuits along with other issues that have come into play. Control of Mesabi changed in Aug. 2018 from Tom Clarke to Nubai Global Investments (former partners in Chippeway Capital).

Mesabi also stated in September that Mercuria, a Swiss energy and commodity company, was going to buy majority control of the company. The deal would also give Essar Global, the Nashwauk mine’s former owner, a stake in the business.

In addition, Mesabi is addressing court challenges regarding the mineral rights to its Nashwauk land from Cleveland-Cliffs, another mining company using properties on the Iron Range.

Broton stated Mesabi has filed a new building schedule to the DNR but still expects to finish the whole $2.6 billion project by the end of 2019. Naramore said it was to be seen exactly what Essar's renewed involvement can mean for resolving remaining bankruptcy issues, or for any changes in leases or permits. She said that although the DNR has been in discussions with Mesabi, it's not had any contact with Essar Global or even Mercuria.

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Coal Mining Careers Do-Over

C

NBC followed the narrative of an ex-miner, Tony Bowling, who attended community college for 10 months to become an electric lineman, following the shut down of his coal mining plant .

Bowling stated,"I'm making more money now than I ever did at the mines."

and conserve the coal industry. Coal's requirement is decreasing unlike that of automobile production which tends to increase with population and will do so until America makes the investment to transition into public transport. Part of the issue, according to a CNBC post, is that coal is priced very low to justify extraction right now, owing to an increase in fracking, the rising number of environmental laws and a growing emphasis on renewable energy sources.

Perhaps it’s time for others to follow suit and consider pursuing alternate career paths. It is crucial for the present and prospective generations of Kentucky to plan ahead for a coal-free future instead of remaining stuck in an obsolete tradition.

Over the years, Kentucky’s coal production has diminished to less than half its manufacturing. Infact, in 2017, Kentucky’s mining job rate dropped from 17,000 to 6,600, at the exact same time as in 2010. It came as a massive blow to a place that was historically known for being impoverished. This data, together with the promise of growing mining jobs, influenced eastern Kentuckians to vote for President Donald Trump in the 2016 elections.

The Kentuckians believed that coal could make a similar comeback that automobile manufacturing made in Michigan (doubling the exports from $30 billion in 2009 to $60 billion in 2017).

Contrary to certain negative opinions, a change to alternate fuel sources does not mean that Kentucky would be left out of the economic growth. Some companies are currently implementing solar panels on older strip-mining websites, thus paving the way for safer, cleaner environments, not only for those currently living near these websites but also for those who could solve some of Kentucky's struggles with project opportunities. Change isn't always a bad thing.

Furthermore, the east and west parts of Kentucky are working to diversify their workforces, but are not moving fast enough. There needs to be more strain on producing jobs in new locations instead of just working to attempt

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March 2019 SKILLINGS MINING REVIEW | 15

STEEL

Essar Steel History of

Trouble, Trouble, and More After paying off about $1.7 billion in several complex debt transactions around the world, India’s Essar Global is back in the picture in the $2 billion iron ore mine and processing site in Nashwauk.

E

G lo b a l

i s t h e pa r e n t

c o mpa n y o f

Essar Steel

ssar

M innesota , which filed for 2016 following a

bankruptcy in

decade of delays and difficulties with funding the

2016,

N ashwauk

project .

In

the nation took the unusual

E ssar S teel to pay back its economic-development loans, step of asking

company missed many job milestones and owed thousands of dollars. The Nashwauk plant, which could produce countless long-term jobs, still remains only half-built. because the

In late 2016, a California investment company named SPL Advisors took control of the job and changed the company name to Mesabi Metallics.

Virginia entrepreneur Tom Clarke and his Chippewa Capital Partners bought the Essar Steel assets from bankruptcy.

Shortly after.

Clarke sold a vast majority share of their company to Nubai Global Management, a company in the British Virgin Islands, but remained on with management responsibilities.

But, by late last summer, Virginia entrepreneur Tom Clarke and his Chippewa Capital Par tners were pushed out, and a series of lawsuits were hurled between Clarke and Nubai, with a majority share of the company awarded to Nubai Global Management.

Along with fights between Clarke and

16 | SKILLINGS MINING REVIEW March 2019

www.skillings.net

Nubai Global Management, the project has also generated other sore spots and prompted more lawsuits. Clarke sued competitor Cleveland Cliffs on its handling of the matter.

Cleveland Cliffs, in turn, sued the DNR, whining that it expected to carry more than the mining permits of the Nashwauk property and adjoining property it afterwards purchased next door. That situation is still making its way.

In September, Nubai and Mesabi officials met with former Gov. Mark Dayton and assured him that they'd complete the Nashwauk project. Mesabi told Dayton that it pledged to spend $400 million on iron ore processing and the mine complex, and had committed $250 million to the project, ensuring it would be substantially completed by December 2019.

project and explained Mesabi Metallics would still control and operate the project and own a "considerable chunk".

assistant commissioner of the Department of Natural Resources (DNR) spearheading the Nashwauk project.

"Mesabi still owns all of the resources," Broton said. State officials said that they look forward to dealing with new owners who would honor their commitments, and stated they are waiting for more information and had more questions than answers.

"The state mineral rents and the DNR [mining] permits are currently held

by Mesabi Metallics and/or Chippewa Capital Partners. Any alterations to the leases or licenses would need to be approved by the DNR. And we've received no such requests involving Essar Global."

"What this [Essar debt repayment] may mean for the resolution of remaining bankruptcy issues and for investment at the Nashwauk project remains to be seen," said Barbara Naramore, the

Essar’s half-built $2 billion Nashwauk mining and processing facility project

Soon after, Nubai and Mesabi introduced a new wrinkle: Swiss trading firm Mercuria Energy would buy a majority stake in the Nashwauk job by the end of 2018. It assured Dayton that Essar would not be among its partners from the Iron Range job, although Mercuria had ties to Essar Global.

But, Mercuria Energy said at the time that Essar nevertheless had monetary obligations tied to this bankruptcy.

Mercuria pledged at least $650 million toward the Nashwauk job.

Mesabi Metallics spokesman Darin Broton said this week that he could not comment on if the Mercuria deal has closed and was unsure how the Essar bargain would play out. He had stated in September that Essar would not be a �decision maker or investor" in the

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March 2019 SKILLINGS MINING REVIEW | 17

MINING INDUSTRY SHIPPING

Cleveland-Cliffs’ Year of Great Expectations Charging a premium to reflect lower transportation costs explains the continuous profits made by Cleveland-Cliffs over the past couple of years. However, these gains were quickly eaten up by expenses. This is just another component of the business where Cleveland-Cliffs' direction changed things considerably.

I

n less than five decades , the company trimmed its debt burden by over half and carried a signif-

icant quantity of money on the balance sheet.

There are two things to keep in mind here. First, the cyclical nature enables companies to always trade at a discount in the market. Purchasing in the middle of a commodity boom makes money disappear faster than any other approach. Second, the rise in steel tariffs makes way for a possible increase in the overall demand and

18 | SKILLINGS MINING REVIEW March 2019

prices even if those tariffs were to go away. Despite these modifications, Cleveland-Cliffs’ stocks continue to trade as though nothing has changed.

Investors are waiting for Wall Street to catch up and begin evaluating this inventory in its current state. Will 2019 be the year this happens? Let us dive deep into what’s working in favour and against Cleveland-Cliffs, and if its stock is worth a purchase today.

The price of iron ore started declining in 2010 when the Chinese commodity boom began to wane. To make things

worse, the Cleveland-Cliffs’ management made certain business decisions to acquire questionable assets.

Iron ore is a relatively inexpensive product on foundation, but its weight and transportation costs cannot be neglected. With mines in the U.S. that produce a quality grade of iron ore comparatively close to facilities of need, Cleveland-Cliffs is able to realize higher costs per ton sold to an identical ore coming from places like Brazil.

Additionally, it only signs contracts with customers that guarantee consistent volumes. This indicates that what's under the hood in Cleveland-Cliffs is vastly different from the way things were prior to the new management team taking over. But despite the motor tune-up, it still remains an ugly

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investment on the outside. Iron ore is a commodity business in which demand and prices are incredibly sensitive to economic cycles.

With a bloated balance sheet and an unprofitable business, the CEO of Cleveland-Clifs, Goncalves and his leadership team decided to clean the house.

After years of trimming the balance sheet, shuttering resources and advertising, the company is back on its feet. Its net debt is less than half of what it once was, and focusing on its high-margin operations in the U.S. has restored profitability.The debate for Cleveland-Cliffs is two-fold. Firstly,

the rapid changes made over time are enough to confirm that the company is in great shape to handle the ups and downs of this commodity cycle.

Secondly, the inventory is incredibly cheap at the moment with definite stock value despite a potential decline in the iron ore industry.

Instead of resources in multiple nations and investments in iron ore, metallurgical coal, and alloys commonly used in the steelmaking process, the company has shifted focus to its core activity: producing iron ore from the U.S. to market to local steelmakers.

Today, its shares trade in 2.7 times the earnings, and the management's forecast for 2019 gives a positive outlook for the price of high-quality iron ore pellets.

The company will still have the ability to report a small profit despite missing these forecasts by a considerable sum.

NORTH AMERICAN MARKET (LTU)

Equipping the mining industry with legal services since 1893.

A combination of focused operations on its profitable U.S. company and a complete cleanup of the balance sheet has done wonders to Cleveland-Cliffs' income statement. Today, Cleveland-Cliffs’ business looks like what it was a couple of years ago.

Company

IRON ORE PRICE REPORT

Ore Type

Pellets, FOB Michigan Mines Pellets, FOB Cleveland-Cliffs Inc. Minnesota Upper Lakes Port Source: CLEVELAND-CLIFFS INC. Cleveland-Cliffs Inc.

Even the company's name was changed in 2017 to reflect this focus.

Per Iron Unit

Per Gross Ton at 64%

Per Ton at 64% Reporting Date

$1.28

$81.92

12/31/17

$1.42

$90.88

12/31/17

· Mineral purchase agreements, leases and options · Land assembly and mineral rights acquisition · Severed mineral registration and title work · Environmental permitting and compliance ° MINING & MINERALS LAW °

›› Paul Kilgore ›› Paul Loraas

(800) 496-6789 or fryberger.com

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March 2019 SKILLINGS MINING REVIEW | 19

IRON ORE

Minnesota Governor Tim Walz optimistic about his government finding The Minnesota Governor, Tim Walz, said he is optimistic about his government finding common ground and helping people come together on the problem.

W

e've mined the Iron

Range

for quite a long time, in

Mankato and utilize either the border waters or northeast Minnesota."

on the process. "Yes, we are, because we now understand the materials we have and that's extremely important in the energy market from solar panels to electric vehicles."

cooperation with environ-

mental communities . challenging.

There

It

has been

are people who

tell me mining can't and never will

Walz is currently speaking at the debate between those in opposition and those in service.

be accomplished.

I hear you, I hear you. We all know that these are flash issues from Ely, down to individuals who reside in

20 | SKILLINGS MINING REVIEW March 2019

In view of the future of mining in Minnesota, the current Governor and his administration are ensuring the public is advised and placing focus

"We must have the most rigorous and well-defined environmental impact statements, in adherence to science and in accordance to the procedure. This will help us build public confidence, irrespective of our readiness.�

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MINING INDUSTRY PEOPLE GoldMining Inc. announced the appointment of Dr. Ken Wang to its advisory board.

Dr. Wang is a former Managing Director and the Head of Natural Resources for both

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he has been at the forefront of the global mining industry, intimately involved in the successful completion of more than $100 billion of investment banking transactions in mining and other sectors.

Titan Mining Corporation announced the closing of a senior secured credit facility with the Bank of Nova Scotia, and the appointment of Naomi Johnson as Vice

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President, Community Relations. Naomi Johnson joined Titan in April 2018 and is

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March 2019 SKILLINGS MINING REVIEW | 21

STATISTICS

March 2018 Crude Steel Production

By John Edward, Associate Publisher

W

steel, up by 1.0% on March 2017. France produced 1.4 Mt of crude steel, up by 1.5% compared to March 2017. Spain

orld crude steel produc-

quarter of 2017. North America’s crude

produced 1.3 Mt of crude steel, down by

64 countries reporting to the World Steel Association (worldsteel) was 148.3 million tonnes (Mt) in March 2018, a 4.0% increase compared to M arch 2017. W orld crude steel production was 426.6 Mt in the first three months of 2018, up by 4.1%

steel production in the first three months

4.1% on March 2017. Turkey’s crude steel

of 2018 was 29.5 Mt, an increase of 1.9%

production for March 2018 was 3.4 Mt, up

compared to the first quarter of 2017.

by 7.6% on March 2017. The US produced

to the same period in 2017.

tion for the

compared

7.3 Mt of crude steel in March 2018, an China’s crude steel production for

increase of 5.3% compared to March 2017.

March 2018 was 74.0 Mt, an increase

Brazil’s crude steel production for March

of 4.5% compared to March 2017. India

2018 was 3.1 Mt, up by 7.6% on March

produced 9.2 Mt of crude steel in March

2017. The crude steel capacity utilisation

2018, up 5.3% on March 2017. Japan

ratio of the 64 countries in March 2018 was

produced 9.1 Mt of crude steel in March

74.5%. This is 2.2 percentage points higher

Asia produced 294.1 Mt of c rude

2018, an increase of 2.2% compared to

steel, an increase of 4.6% over the first

March 2017. South Korea’s crude steel

than March 2017. Compared to February 2018, it is 0.9 percentage points higher.

quarter of 2017. The EU produced 43.1

production was 6.1 Mt in March 2018,

Mt of crude steel in the first quarter of

an increase of 4.7% on March 2017. In

2018, up by 0.9% compared to the same

the EU, Italy produced 2.3 Mt of crude

Statistics based on World Steel Association Report released on April 25, 2018. 

Preliminary USGS Iron Ore Statistics for November 2017

By John Edward, Associate Publisher

A

U.S. G eological S urvey (USGS) report by Mineral Commodity Specialist Christopher A. Tuck, U.S. mine production and shipments of iron ore in November 2017 were 4.47 million metric tons (Mt) and 4.33 Mt respectively.

Average daily production of iron ore was 149,000 metric tons (t), 7% greater than that of October and ccording to the

27 % greater than that of November 2016.

Average daily shipments of iron ore were 144,000 t, slightly less than those in October and 3% greater than those in November 2016. Mine stocks at the end of November 2017 were slightly greater than those held at the end of October 2017 and slightly less than those held at the end of November 2016. U.S. exports of iron ore totaled 943,000 t in November 2017, 9% less than those in October 2017 and 27% less than those in November 2016. U.S. imports of iron ore totaled 320,000 t in November 2017, 45% greater than those in October and 11% greater than those in November 2016. 

22 | SKILLINGS MINING REVIEW March 2019

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CRUDE STEEL PRODUCTION, MARCH 2018. Source – World Steel Association MARCH 2017

% CHANGE MARCH – 18/17

1,030 e

1,175

4.7

20 e

15 e

16

25.0

El Salvador

10 e

5e

8

Guatemala

25e

25 e

1,750 e

MARCH 2018

FEB 2018

1,230 e

Cuba

MARCH 2018

% CHANGE MARCH – 18/17

13,354

15,038

0.5

Total - Other Europe

3,645

3,290

3,425

6.4

33.3

Total - C.I.S. (6)

8,101

7,675

8,621

-6.0

22

12.6

Total (64 countries)

148,330 131,791 142,681

4.0

1,535 e

1,701

2.9

-

-

-

-

7,261

6,446

6,894

5.3

e – estimate | r – revised Monthly Crude Steel Production in the 67 Countries included in the report, in thousands of metric tons. The 67 countries included in this table accounted for approximately 99% of total world crude steel production in 2017.

10,296

9,056

9,816

4.9

U.S. RAW STEEL PRODUCTION

474

417

392

20.8

Brazil

3,065

2,714

2,848

7.6

Chile

110 e

85 e

109

0.7

Colombia

125 e

90 e

117

7.0

Capability Utilization Rate

Production

MARCH 2017

15,111

Ecuador

55 e

45 e

46

19.6

April 28, 2017

1,754

-1.9

74.8

29,723

1.6

75.5

Paraguay

1e

2e

1

66.7

Previous Year

1,721

1.9

73.8

29,252

-

74.4

115 e

100 e

104

10.4

April 21, 2017

1,788

0.2

76.3

27,969

5e

5e

4

25.0

1.6

75.6

40 e

25 e

49

-17.9

Previous Year

1,721

3.9

73.8

27,531

-

74.4

Total - South America

3,990

3,483

3,669

8.7

April 14, 2017

1,784

- 1.2

76.1

26,181

1.4

75.5

Egypt

650 e

583

528

23.1

Previous Year

1,721

3.7

73.8

25,810

-

74.4

Libya

30

48

49

-39.3

April 7, 2017

1,805

1.6

77.0

24,397

1.3

75.5

-

-

-

-

Previous Year

1,721

4.9

73.8

24,089

-

74.4

South Africa

527 e

491 e

545

-3.1

Total - Africa

1,207

1,122

1,122

7.6

2,350 e

2,120 e

1,635

43.7

239

152

240

-0.4

Saudi Arabia (HADEED only)

425 e

385

376

13.0

Total - Middle East

3,262

2,859

2,534

28.7

73,980 64,930 e

70,800

4.5

Mexico Trinidad and Tobago United States Total - North America Argentina

Peru Uruguay Venezuela

Morocco

Iran Qatar

China

North East

207

214

213

218

4.7

Great Lakes

657

667

685

683

2,000

0.0

Midwest

163

165

159

166

90,475

97,979

4.3

Southern

652

666

653

660

482

90,475

429

12.3

Western

75

76

74

78

47

52

47

0.5

1,754

1,788

1,784

1,805

529

477

476

11.1

5.3

Japan

9,082

8,296

8,888

2.2

South Korea

6,095

5,415

5,823

2,000 e

1,810 e

102,190

Total - Oceania

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WEEK ENDING

DISTRICT

4/7

8,764

New Zealand

WEEKLY U.S. RAW STEEL PRODUCTION BY DISTRICT 4/14

8,434

Australia

In thousands of Net Tons – Source - American Iron and Steel Institute * Percent Change is a comparison between a given week and the previous week.

The % change figure in the previous year row refers to the change from a given week compared with the corresponding week of the previous year.

AISI’s estimates are based on reports from companies representing about 50% of the Industry’s Raw Steel Capability and include revisions for previous months.

4/21

9,227

Total - Asia

WEEK ENDING

Year-to-Date Production

4/28

India

Taiwan, China

Weekly Production

Percent Change*

Canada

Total - European Union (28)

FEB 2018

Percent Change*

COUNTRY

Production

COUNTRY

Total

In thousands of Net Tons – Source – American Iron & Steel Institute.

March 2019 SKILLINGS MINING REVIEW | 23