SKillings Mining Review March 2020

2020 MARCH IN REVIEW

109/03

06

US STEEL FALLS TO 52 WEEK LOW

U.S. steel stocks are out of favor with markets for almost two years now.

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Iron ore prices drop almost 9% in a week despite supply tightening

21

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Contents GLOBAL

AMERICA US Steel Falls to 52-Week Low regardless of Trump’s Tariffs 06 Tata Steel, JSW increase steel price

by Rs 500-800 a tonne 08 The perfect places to mine are still in the developed world, and that’s a problem: Russell 10

Westgold Resources recommences underground gold mining at Big Bell 08

Iron ore retreats on coronavirus fears, but set for weekly rise 13

As major global coal producers get ready to leave S Africa, Lack of

Iron ore prices drop almost 9% in a week despite supply tightening 14 Let’s Mine The Range Let’s Do It Correctly 16

Coal Shipping In Twin Ports Falls To Lowest Level In Decades While Wind Cargo Surges 11

Iron ore prices are down but is demand recovery around the corner 12

Fortescue profit soar on iron ore price jump, but dividend seen conservative 18

US Steel Falls to 52-Week Low regardless of Trump’s Tariffs 06

Iron ore prices are down but is demand recovery around the corner 12

Innovators in Lithium mining secure investment from Bill Gates-led fund 19

funding leaves junior minors ‘stuck 20 Vermillion Gold, Inc. seeks additional four negotiated nonferrous exploration leases on state lands 21

Vermillion Gold, Inc. seeks additional four negotiated nonferrous exploration leases on state lands 21 www.skillings.net | 3

MARCH 2020 VOL.109. NO.03

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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.

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.

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.

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.

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

CHINA FACTOR

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.

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, 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.

FloLevel Technologies www.skillings.net | 7

GLOBAL

AMERICA

Westgold Resources recommences underground gold mining at Big Bell

Tata Steel, JSW increase steel price by Rs 500-800 a tonne

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old 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.

8 | SKILLINGS MINING REVIEW March 2020

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.

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AMERICA

INVESTMENT FLOWS

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.

A

ccording 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.

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.

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 15th place.

What the survey shows for Canada is that uncertainty is a confidence killer among

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.

10 | SKILLINGS MINING REVIEW March 2020

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 20th 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 40th 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

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record 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.

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.

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 www.skillings.net | 11

AMERICA

Iron ore prices are down but is demand recovery around the corner Iron ore prices have slumped on concerns over the effect of the Coronavirus outbreak and the consequences for China's economy.The benchmark S&P Global Platts 62 percent iron ore price dropped about $US10 since the Chinese New Year vacation to hit US83.05 ($123.29) per dry metric tonne.

W

hile the fall had been largely expected since trading resumed last week, it, however, raised concerns about how it would affect the Australian economy, especially Western Australia's, which might receive a big hit to its iron ore earnings.

Head of insight & metals news, Asia-Pacific for S&P Global Platts, Paul Bartholomew told Stockhead that the price drop was because of a combination of the lack of trading activity and the negative view around the coronavirus.

He noted that while logistics issues had been worth watching, they seemed to have improved this week. "Some of the truck transport is pretty sparse at the moment because either the motorists are still on holiday or quarantined," he said.

"There were also bans on collecting cargoes and supplies from the ports, though we know some of that has been loosened now." China had imposed restrictions on the movement of people and goods in the wake of the Coronavirus outbreak and had also extended the holiday period until February 10. Measures adopted to contain

the virus spread could also slow down the loading and discharge rate of raw materials. "We are not expecting demand pickup until probably end of March, as it typically requires some weeks after the New Year to return to normal operating rates, and obviously with the happenings going around the Coronavirus, that is going to push it back possibly a month," Bartholomew explained.

DEMAND RECOVERY

"There will be a lot of pent-up demand, and then you will see mills flying into restocking and actions. "We hope to see the Chinese authorities put a bit of stimulus into the economy, a lot of that will find its way into infrastructure and property construction and other types of fixed asset investment." China may ramp up its stimulation programs to counter the effect of the coronavirus and possibly meet any targets for the final year of its 13th five-year plan.

Although, it isn't all doom and gloom.

The timing of the Coronavirus outbreak occurring during the Chinese New Year may work out better than if it had occurred at any other time of the year. "I think the major thing is that this is happening during a seasonally slow time of the year," Bartholomew clarified.

"It takes some time to generate demand with these projects. It does not happen overnight; there's always going to be a lag time," Bartholomew added. Over the past month, the iron ore players at the junior end of the market have not fared so well, as their share prices dropped between 4 percent and 25 percent of their value.

"He further explained that some of the disadvantages are going to be absorbed by the fact that February is always a quiet month." He added that if things didn't worsen, activities could begin picking up from the end of February to March.

"When the recovery happens, it will be quite swift, and there will be a big pickup," he said.

The most recent iron ore entrant to the ASX, Macarthur Minerals (ASX: MIO), was down 4 percent. The company is exploring for iron ore at its Lake Giles project near Kalgoorlie in Western Australia.

Legacy Iron Ore witnessed the most significant fall, which operates the Mt Bevan iron ore joint venture in the Yilgarn area of WA.

12 | SKILLINGS MINING REVIEW March 2020

Iron ore retreats on coronavirus fears, but set for weekly rise

I

FUNDAMENTALS

• Benchmark 62% iron ore's spot price rose for a fourth straight day to $91.50 a tonne on Thursday, the highest since Feb. 24, SteelHome consultancy data revealed.

ron ore futures in Singapore and China fell on Friday on fears over a potentially deeper international economic downturn due to the coronavirus outbreak. Still, expectations of more policy support for businesses drove prices higher weekly.

to look like a global pandemic." The World Health Organization hasn't recognized it as such; however, the spread of infection, which is already disrupting global business, has accelerated in different parts of the world, such as in Europe and North America.

Iron ore on the Dalian Commodity Exchange closed 2.2% lower at 650 yuan ($93.58) a tonne but jumped 5.4% from last week. Futures on the Singapore Exchange also dropped 1.1% in early trade. Other Chinese Iron derivatives also came under selling Pressure but posted weekly earnings. Singapore minister Lawrence Wong, who co-heads the nation's virus-fighting taskforce, said the coronavirus spreading around the world from China is "starting

"Markets are likely to remain volatile as they regularly re-assess the probable economic impacts largely based on headlines," explained Tapas Strickland, director of economics at National Australia Bank.

The magnitude of the economic downturn will depend on how the outbreak evolves, which remains highly doubtful, the Asian Development Bank said, projecting a global impact of around $347 billion, or 0.4% of global gross domestic product.

• Several mills in China's top steel-producing city of Tangshan plan to halt several mines facilities this month in compliance with anti-pollution production restrictions, industry data provider Mysteel said.

• Chinese warehouses storing steel products are reaching full capacity as the country's inventory of the manufacturing and construction material has increased to a record-high volume because of the coronavirus outbreak-related restrictions, Mysteel said.

• Construction steel rebar on the Shanghai Futures Exchange was down 1.0%, while hot-rolled coil slipped 0.9% and stainless steel dropped 0.4%.

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AMERICA

Iron ore prices drop almost 9% in a week despite supply tightening Latest data revealed on Monday indicates Iron ore prices have dropped 8.6% over the previous five trading sessions despite supply tightening as a result of weather events crimping exports from key exporters Brazil and Australia.

S

&P Global Platts evaluated the 62% Fe IODEX down $7.90/ dmt week on week at $83.90/ dmt CFR China on Friday as expectations faded for a recovery in downstream steel demand in the second quarter while the coronavirus outbreak continues to spread beyond China.

Prices fell despite supply tightening because of a heavy monsoon season in Brazil since December and recent cyclones in Western Australia. Iron ore exports from Brazil averaged 5.22 million mt/week from the initial eight months of 2020, down sharply from 7.2 million mt/week a year earlier. In Australia, exports averaged 15.76 million mt/week, down from 16.37 million mt/week at

the same 8-week period of 2019. Nevertheless, market participants expected the decrease in exports to have a limited effect given the weakness in steel demand and expectations that end-users in China would lower production levels or perhaps stop some capacity.

For many weeks after the Lunar New Year, iron ore prices remained widely supported despite the effect of the coronavirus outbreak in China as many end-users agreed to sustain their procurement and production levels.

Even smaller and more flexible end-users decreased production as steel margins turned unfavorable or corrected their sinter feed to low-cost alternatives, large

14 | SKILLINGS MINING REVIEW March 2020

end-users could not follow suit because of the more complex nature of operating large blast furnaces. As changes to their blast furnace production processes aren't easily reversible, a decision to adjust their sinter feed or reduce production rates would hinge on a longer-term result.

However, Market expectations for large end-users are to begin lowering their production rates in Q2 or to begin unscheduled maintenance periods to manage their production costs as accumulating steel inventory levels now affecting storage space.

LOW PORT STOCKS SHRUGGED OFF

End-user Procurement preferences have been mainly in favor of the portside market to date in 2020, which provides more flexibility in volume than securing seaborne cargoes.

However, Market participants are largely unconcerned even with iron ore port stock levels falling to 121.7 million mt last

Friday from 125.5 million mt on February 7. Port Stock levels are currently not too far off the 114 million-115 million mt levels attained in June-July last year that sparked a buying frenzy for seaborne cargoes, but ultimate-consumer demand this time is weak, a global trader said.

some end-users have paid high premiums to get prompt-loading cargoes out of demand.

PREMIUM HOLDS FOR KEY GRADE

But, despite expectations, the effects of supply would be limited to diminishing end-user demand, a specific level of inflexible demand for some products has been expected to encourage their premium levels.

Market Sources expected premiums for low alumina products to be encouraged regardless of present margins as a result of the coking costs associated with allowing blast furnace feedstock alumina levels to go above standard tolerance levels and lower Brazilian export volumes.

Even though negative steel margins encourage end-users to adopt cheaper sinter feed penalties, end-users are only able to replace a specific proportion of the sinter feed blend. Several traders explained that weather disruptions had affected some products spot supply and

The delayed restart of China's domestic low alumina concentrate production after extended Lunar New Year holidays has increased the effect of Brazil's iron ore exports, which are lower in alumina.

Export and shipment data seen by Platts indicates discharge volumes at Teluk

Rubiah from Brazil in 0.8 million mt in January and 1.2 million mt in February as of February 25. This fell sharply from 1.95 million mt in December and 2.3 million mt in January 2019.

BRBF produced in Teluk Rubiah in Malaysia, or Brazilian Blend fines are an integral part in the sinter feed mix of mills in south China and market sources anticipated premiums to be supported on account of the suppressed volumes and the mills' geographical distance from iron ore mines in China's north.

Many traders said that the other medium grade Brazilian substitutes for BRBF are much less ideal in terms of Sintering quality due to sizing differences and, as such, any available spot BRBF cargoes are very likely to remain in high demand.

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www.skillings.net | 15

AMERICA Minnesota has been mining for four generations. We started digging iron from the earth in the 1890s to build our infrastructure across the country and to use during both world wars. While ago, we got it, cleaned it up, and got the iron on a train or ship to a factory. That is not the way we do it nowadays.

Paul Gazelka is the Minnesota Senate Majority Leader.

Let’s Mine The Range Let’s Do It Correctly As Senate Majority Leader (Senator Paul Gazelka), my heart is from the Iron Range, and I stand for a caucus that expands the state, from suburban Ramsey county to rural Pipestone, from the Warroad's forests to Winona's bluffs. However, I am a graduate of Roosevelt High School in Virginia.

It was inculcated in me how important our way of life is when growing up. We work hard, manage our resources, and help each other out. I am supporting the mining projects on the Range because our way of life depends on well-paying tasks, protecting the environment, and securing a prosperous future for the next generation. And I'm just as disappointed as you are when somebody from the metro attempts to show us how to live.

Lately, a change in leadership from the Senate Democrats removed Senator Tom Bakk from leadership, a sign of the things

to come from the metro-focused DFL caucus: fewer jobs, more delays, and a Range that is just a playground for tourists. That's not exactly what Minnesota needs to keep our economy strong, that's not what I want for a future on the Range.

We're not going to allow the urban core to dictate how you live your lives. We have got your back at the capitol.

Urban Democrats in St. Paul fail to understand two obvious facts when they attempt to prevent Mining. First, Mining belongs on the Range. Second, Mining on the Range is Mining done right.

16 | SKILLINGS MINING REVIEW March 2020

We know we can't mine in a poisonous waste pit these days. We can't use Polluted water for Mining or even leave pollutants behind. We want to make the most of the natural resources we have, and we'll do all we can to keep the soil, water, and air clean today and also for the future. The permitting process from the national and state government has been strict and intense. Polymet and Twin Metals have taken every measure to adapt and ensure that they are meeting the expectations we laid down.

However, a good thing can be taken too far. The delays, lawsuits, and legal battles have been pricey. Not just for the firm's legal fees, but for the Rangers who would benefit from the investment in our workers and our communities. The next generation is leaving the Range since the jobs their grandparents and parents had aren't there for them anymore.

It's affected the state's economy. More tax dollars being put into welfare and assistance, failed economic development grants (remember that chopstick factory?) Schools were closing and rival hockey teams combining due to lack of enrollment. We've been attempting to do something other than Mining for decades, but the Range must do what it does best: provide the natural resources for our future together with good-paying jobs by using the skills and resources that only the Range has.

Also, Minnesota is consistently ranked as a "best of" state. In 2019 alone, we were considered as the second-best for quality of life, the friendliest state according to a travel site, and the third-best state in the country overall by U.S. News & World Report, period. That's the main reason why we need Mining in Minnesota - we

can do it better than anyone else. The Guardian reports some of our popular brands – Apple, Dell, Tesla, Microsoft, and Google – have all been named in a lawsuit over the death of 14 children in the Republic of Congo. These children died while mining for copper and cobalt.

Amnesty International reports that children as young as seven years old work in mines digging for metals without any protection. Foreign Policy magazine emphasized Chinese investments to African mining companies, which have polluted the water source for villages and threaten the extinction of species.

We are concerned about the pollution and potential for disaster here; however, there is a significant difference here in Minnesota, we mandate, regulate, and investigate the best protections for people,

Also, Minnesota is consistently ranked as a "best of" state. In 2019 alone, we were considered as the second-best for quality of life, the friendliest state according to a travel site, and the third-best state in the country overall by U.S. News & World Report, period. water, soil, and air. If we can't find a way to mine here, we will be creating the future on pollution and waste from unwary foreign leaders because we were trying to maintain the moral high ground for ourselves.

We need the nickel, copper, and other metals from the earth for our electric vehicles, cell phones, and emerging technologies. We don't need the child and forced labor, pollution, and deforesta-

tion from other nations. Currently, we are considering just two copper-nickel mines- but Minnesota has the largest cobalt deposit in the United States, cobalt that's vital for lithium-ion batteries. After everything we've put Polymet and TwinMetals through for nickel and copper – if we can't do it, do you think resources in other countries, animals, and the children stand a chance? Let us mine in the Range.

Let's do it correctly. For Minnesota, and also for the world.

www.skillings.net | 17

AMERICA

Fortescue profit soar on iron ore price jump, but dividend seen conservative Australia's Fortescue Metals Group Ltd (FMG.AX) announced a near four-fold leap in half-year gain on Wednesday as it cashed in on higher iron ore prices. At the same time, analysts said a lower-than-expected profit reflected warning on the global economy.

F

ortescue is the second international iron ore giant to announce results this year, as well as the next to offer lower than anticipated payouts, which analysts said reflected a move to maintain cash in reserve given doubts over global economic expansion following the coronavirus outbreak.

BHP Group on Tuesday also reported a slightly lower profit despite a windfall from last year's boost in iron ore prices.

The Net profit for the six months ended Dec. 31 was $2.45 billion, compared with $644 million a year before. The figure was higher than a UBS estimate of $2.37 billion. The Perth-based miner reported an interim dividend of A$0.76 per share, up from A$0.19 per share last year but lower than a consensus forecast of A$0.80 cents. Shares had climbed 1.3% to $A11.20 by 0236 GMT, outperforming its rivals.

"It's a solid, in-line outcome with the dividend slightly light. UBS analyst Glynn Lawcock said that the board is choosing to become conservative, given the doubts over global growth." After the disaster at a tailings dam possessed by former top iron ore producer Vale SA (VALE3.SA) in January last year, iron prices skyrocket, with Dalian Commodity Exchange's front-

month iron ore futures contract DCIOc1 gaining 28% in 2019. Analyst Lawcock said Investors are currently waiting to see if money may be returned when the market holds up this half, a move hinted at by the company.

Chief Executive Elizabeth Gaines told reporters during a revenue call that it isn't uncommon for the Interim to be a bit lower and that we have a stronger fullyear payout ratio.

CONFIDENT' ON CHINA

Fortescue's iron ore shipments and customer payments had not been affected by the coronavirus; although high steel inventories and logistics were a significant headwind for its customers, it was confident that China would meet its growth targets, Elizabeth Gaines said.

China, the world's top steel producer, reported its secondhighest ever yearly imports of the steel-making ingredient in 2019 as Beijing boosted stimulus to avoid an economic downturn, prompting strong demand from the infrastructure and property industries.

18 | SKILLINGS MINING REVIEW March 2020

"We are confident in the strength of the Chinese economy with the government maintaining its dedication to expansion goals led by additional stimulus and infrastructure investment," Gaines added.

China, the world's top steel producer, reported its second-highest ever yearly imports of the steel-making ingredient in 2019 as Beijing boosted stimulus to avoid an economic downturn, prompting strong demand from the infrastructure and property industries.

Fortescue posted record half-year iron ore imports of 88.6 million tonnes last month when it revised down its cost guidance to US$12.75–US$13.25 per wet metric tonne and signaled production would reach the top end of its target range. The company has been increasing the mix of premium feed-in its shipments with the addition of its West Pilbara Fines products, which had enabled it to attain a pricing of 84% of the Platts 62% index for the previous four quarters, it stated.

Gaines said that producers are turning to cheaper and lower grade ore, as steel prices are currently under pressure, Gaines said. "There is no doubt that steel margins are under pressure, which does underpin the strength of our product."

The miner also maintained its forecast iron Ore guidance of shipments at the upper end of the 170-175 million tonne range despite supply interruption in Western Australia. Earlier this Month, Cyclone Damien pressured Rio Tinto to lower its production forecast.

Innovators in Lithium mining secure investment from Bill Gates-led fund

L

ilac Solutions, a mining tech firm aiming to enhance Lithium extraction efficiency and sustainability, has secured $20m in Series A funding.

The investment is led by Breakthrough Energy Ventures, a $ 1bn fund established in 2015 by Bill Gates and some private investors that offer investment opportunities for companies with innovative solutions to tackle the climate crisis.

Other environmentally-minded investors include MIT's The Engine fund and Lowercarbon Capital. Series A funding is a form of investment provided to companies with a workable monetization

plan for their businesses. Lithium-ion batteries are increasingly in demand for powering electric vehicles, an expansion market that could see sales of 44 million electric cars per year by 2030, according to statistics from the International Energy Agency (IEA). Lithium-ion batteries can also be used for storing renewable energy.

Even though there's enough lithium in the ground to meet demand, Bloomberg New Energy Finance estimates less than 1% of the world's lithium deposits will be depleted over the next twelve years, and there are worries production will not meet demand. As demand for the metal increases, some analysts predict a lithium

shortfall by 2023.The current extraction method for lithium is to pump underground residue of briny water to the surface, letting the water evaporate into large salt ponds.

The remains are later treated with chemicals and processed and filtered to leave lithium.

According to Lilac Solutions, this procedure provides a 40% lithium recovery.

The existing method also uses large amounts of water, especially in countries that are already water-stressed. Each ton of lithium extracted from brines requires an estimated 70,000 liters of clean water.

Lilac Solutions states that the current processes for lithium extraction are inefficient, costly, and cannot deliver in volumes necessary for an electric vehicle future. The company is working to commercialize a new ion exchange technology that is more scalable, cheaper, and faster than the existing method.

Let’s show the world what we can do together.

Day by day. Project by project.

Together we’re engineering what’s possible and moving the world forward.

Building a Better World for All of Us Engineers | Architects | Planners | Scientists

sehinc.com/subscribe 800.325.2055

www.skillings.net | 19

GLOBAL

AS MAJOR GLOBAL COAL PRODUCERS GET READY TO LEAVE S AFRICA

Lack of funding leaves junior minors ‘stuck

T

he South African coal market will face more challenges to supply coal to fuel its electricity demand, following the departure of some major global coal producers from the country, sources told S&P Global Platts. Coal majors South32 and Anglo American have sold or are in the process of auctioning their thermal coal operations to Mike Teke's local firm Seriti Group, which with one other miner, Exxaro, is prepared to provide the large majority — approximately 80% to the country's biggest electric public utility company Eskom.

INDIA TO PHASE OUT COAL IMPORTS

Two major changes have recently revealed that obtaining coal to fuel power stations may assert difficulty for South Africa. The first is that South Africa's biggest consumer of thermal coal, India, intends to phase out all thermal coal imports by 2024. The next is Glencore — the largest producer of thermal coal for the seaborne market – announcing its plans to leave the SA coal market, having stated they will allow its coal reserves in the country to deplete in order to meet its Scope 3 goals, which is to reduce greenhouse gas emissions by 30% by 2035.

"In the end, I don't think we'll ever see SA coal export volumes [to India] increase any more compared to the current levels, '' a Dubai-based trader said."I hope I'm wrong, but let us see."

Glencore's total SA thermal coal exports measured 13 million mt in 2019, down a remarkable 25% from 17.3 million mt in 2018, according to the organization's official production report. Sources have noted that only two domestic miners will remain as the major coal producers "will be leaving" the market, "They're cash strapped, they will not be able to receive funding from the bank," a South Africa-based analyst said. Another source added that the only potential funding could be from the government, through its mining company African Exploration, Mining & Finance, then mines would be owned by the government.

For an extended period, the junior domestic miners have faced difficulties gaining funding from banks that are under pressure to cut backing for coal projects, which now stand to dominate coal supply. "Coal is becoming less and less popular globally.

So, nobody wants to spend more money on mining and exploration in case it doesn't have a long term future," a UAE-based trader said.

"It is easy [for the International coal producer to say they are] going to exit, but nobody will walk off without getting paid for their resources. So I cannot see anything happening in a rush."

20 | SKILLINGS MINING REVIEW March 2020

According to official statistics, Southeast Asia, most notably Pakistan and India, accounted for nearly all purchasing of total thermal coal from South Africa, about 70% in 2019, up from 64% in 2018. However, India intends to eventually phase out coal imports and concentrate on renewable energy with the country's energy ministry Pralhad Joshi early, making a public statement that imports of the commodity will be phased out within the next three to four years.

GLOBAL

Vermillion Gold, Inc. seeks additional four negotiated nonferrous exploration leases on state lands environmental screening, a map, GIS data, and a Microsoft Excel data table. The DNR accepted and considered public views about the areas requested for lease. Also, the DNR notified affected local units of government.

The Department of Natural Resources (DNR) will recommend that the State Executive Council approve Vermillion Gold, Inc.'s request for the issuance of four negotiated nonferrous metallic mineral leases in Township 60, Range 24, Itasca County.

V

ermillion Gold holds four active nonferrous metallic mineral leases in Itasca County and eight active leases in St. Louis County. The company initially filed an application with the Commissioner of Natural Resources in 2017 for 25 state

Equipping the mining industry with legal services since 1893.

nonferrous metallic mineral leases in Itasca and St. Louis Counties covering 11,479.64 acres.

On Jan. 8, 2018, information was posted by the DNR about Vermillion Gold's original lease request on its negotiated lease webpage. The posting included information regarding DNR's land use and

NORTH AMERICAN MARKET (LTU) 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.

Vermillion Gold finally amended its lease request to reduce its size. On Feb. 26, the DNR will urge State Executive Council approval of all the leases from the original request. These leases cover 1,668.15 acres, including 1,037.10 acres of county tax-forfeited lands and 631.05 acres of school trust land.

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

fryberger.com www.skillings.net | 21

STATISTICS

November 2019 crude steel production

W

orld crude steel production for the 64 countries reporting to the World Steel Association (worldsteel) was 154.4 million tonnes (Mt) in January 2020, a 2.1% increase compared to January 2019. China’s crude steel production for January 2020 was 84.3 Mt, an increase of 7.2% compared to January 2019*. India produced 9.3 Mt of crude steel in January 2020, down 3.2% on January 2019. Japan produced 8.2 Mt of crude steel in January 2020, down 1.3% on January 2019.

South Korea’s crude steel production was 5.8 Mt in January 2020, a decrease of 8.0% on January 2019.

United States Exports to World of All Steel Mill Products in Thousands of Metric Tons

The World Steel Association (worldsteel) is one of the largest and most dynamic industry associations in the world, with members in every major steel-producing country. worldsteel represents steel producers, national and regional steel industry associations, and steel research institutes. Members represent around 85% of global steel production.

In the EU, Italy produced 1.9 Mt of crude steel in January 2020, down by 4.9% on January 2019. France produced 1.3 Mt of crude steel in January 2020, a 4.5% increase compared to January 2019. The US produced 7.7 Mt of crude steel in January 2020, an increase of 2.5% compared to January 2019. Brazil’s crude steel production for January 2020 was 2.7 Mt, down by 11.1% on January 2019. Turkey’s crude steel production for January 2020 was 3.0 Mt, up by 17.3% on January 2019. Crude steel production in Ukraine was 1.8 Mt last month, down 0.4% on January 2019.

Global crude steel output increases by 3.4%

G

lobal crude steel production reached 1,869.9 million tonnes (Mt) for the year 2019, up by 3.4% compared to 2018. Crude steel production contracted in all regions in 2019 except in Asia and the Middle East. Asia produced 1,341.6 Mt of crude steel in 2019, an increase of 5.7% compared to 2018. China’s crude steel production in 2019 reached 996.3 Mt, up by 8.3% on 2018. China’s share of global crude steel production increased from 50.9% in 2018 to 53.3% in 2019. India’s crude steel production for 2019 was 111.2 Mt, up by 1.8% on 2018. Japan produced 99.3 Mt in 2019, down 4.8% compared to 2018. South Korea produced 71.4 Mt of crude steel in 2019, a decrease of 1.4% compared to 2018.

The EU produced 159.4 Mt of crude steel in 2019, a decrease of 4.9% compared to 2018.

Germany produced 39.7 Mt of crude steel in 2019, a decrease of 6.5% on 2018. Italy produced 23.2 Mt in 2019, down by 5.2% on 2018. France produced 14.5 Mt of crude steel, a decrease of 6.1% on 2018. Spain produced 13.6 Mt of crude steel in 2019, a decrease of 5.2% on 2018. Crude steel production in North America was 120.0 Mt in 2019, 0.8% lower than in 2018. The US produced 87.9 Mt of crude steel, up by 1.5% on 2018. The CIS produced 100.4 Mt, a decrease of 0.5%.

Russia produced 71.6 Mt of crude steel in 2019, down by 0.7% on 2018. Ukraine produced 20.8 Mt of crude steel in 2019, a decrease of 1.2% compared to 2018. The Middle East produced 45.3 Mt of crude steel in 2019, an increase of 19.2% on 2018. Annual crude steel production for South America was 41.2 Mt in 2019, a decrease of 8.4% on 2018.

Brazil produced 32.2 Mt in 2019, down by 9.0% compared to 2018. Turkey’s crude steel production for 2019 was 33.7 Mt, down by 9.6% on 2018. Africa produced 17.0 Mt in 2019, down 2.3% on 2018.Oceania produced 6.1 Mt, down 2.9% on 2018.

22 | SKILLINGS MINING REVIEW March 2020

ADVERTISING INDEX

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CRUDE STEEL PRODUCTION, NOVEMBER 2019. Source – World Steel Association COUNTRY

DEC 2019

DEC % CHANGE 2018 DEC-19/18

2019

Austria

521 e

633

-17,7

7 423

Belgium

650 e

580

12,1

Bulgaria

55 e

55

0,2

Croatia

3 e

14

Czech Republic

361 e

Finland France

% CHANGE

COUNTRY

DEC 2019

DEC % CHANGE 2018 DEC-19/18

2019

% CHANGE

7,8

Mexico

-7,3

18 595

-8,0

7 905

-0,9

United States 7 457 7 478 -0,3

87 927

1,5

595

-10,7

-76,5

65

-52,1

North America 10 002 10 126 -1,2 119 962

-0,8

406

-11,0

4 563

-7,6

186

315

-41,0

3 473

-16,2

918

1 126

-18,4

14 451

-6,1

Chile

2850 e

3 227

-11,7

39 675

-6,5

Greece

120 e

88

36,4

1 376

Hungary

164

160

2,7

1 413

1 708

Germany

Italy

356

-8,4

4 645

-10,0

2 416

2 709

-10,8

32 236

-9,0

120 e

94

28,0

1 095

-4,4

Colombia

100 e

101

-1,0

1 200

-1,6

-6,2

Ecuador

50 e

48

4,5

605

3,7

1 770

-11,0

Paraguay

3 e

3

-0,5

25

-1,1

-17,2

23 245

-5,2

100 e

101

-1,0

1 240

1,9

6 e

5

15,6

65

8,3

Venezuela 1 e 4 -87,5

50

-61,2

South America 3 122 3 421 -8,7

41 161

-8,4

180 e

143

25,6

2 200

-1,3

Netherlands

521

567

-8,1

6 657

-2,3

Poland

750 e

878

-14,6

9 065

-10,8

55

41

32,6

645

-1,3

Spain

760

1 049

-27,6

13 581

-5,2

Sweden

376

402

-6,4

4 721

1,4

United Kingdom

558

535

4,2

7 225

-0,6

Other E.U. (28) (e) 915 e 919 -0,5

10 795

-1,8

European Union (28) 11 357 12 847 -11,6 159 430

-4,9

Bosnia-Herzegovina

70 e

79

-10,6

801

15,2

Macedonia

24 e

27

-11,5

239

-10,1

Norway

40

43

-8,1

621

8,0

Serbia

158

148

6,8

1 929

-2,2

Turkey 2 893 2 886 0,2

33 743

-9,6

Other Europe 3 185 3 184 0,0

37 333

-8,5

Slovenia

Byelorussia

230 e

229

0,4

2 680

8,5

Kazakhstan

350 e

56

525,0

4 085

3,1

20 e

22

-9,1

360

-27,6

Russia

6 000 e

6 184

-3,0

71 570

-0,8

Ukraine

1 561

1 885

-17,2

20 848

-1,2

Uzbekistan 50 e 48 4,2

625

-3,3

C.I.S. (6) 8 211 8 424 -2,5 100 168

-0,6

Canada

Moldova

1 612

326

Luxembourg

985 e

981

0,4

12 790

-4,9

Cuba

25 e

21

16,7

235

4,2

El Salvador

10 e

8

21,4

105

5,9

Guatemala

30 e

26

17,6

310

3,4

Argentina

1 495 e

Brazil

Peru Uruguay

Egypt

574

670

-14,3

7 257

-7,0

Libya

63

55

15,1

606

53,0

South Africa 267 e 423 -36,9

5 666

-10,4

Africa 904 1 148 -21,2

13 530

-6,9

Iran

2 895 e

2 068

40,0

31 900

30,1

Qatar

186

202

-8,0

2 558

-0,7

Saudi Arabia (1)

410

468

-12,3

5 095

-2,8

3 327

2,4

Middle East 3 788 3 030 25,0 42 879

20,5

UAE 297

292

1,5

China

84 265

75 489

11,6 996 342

8,3

India

9 281

9 356

-0,8 111 246

1,8

Japan

7 784

8 463

-8,0

99 284

-4,8

South Korea

5 876

6 163

-4,7

71 421

-1,4

270 e

283

-4,6

3 313

-29,8

1 740 e

2 038

-14,6

22 065

-5,1

300 e

437

-31,3

4 190

-34,6

Vietnam 1 531 1 292 18,4

20 066

43,2

Pakistan Taiwan, China Thailand

Asia 111 047 103 521 7,3 1 327 926

5,9

Australia

449

449

-0,1

5 493

-3,4

New Zealand 57 58 -1,3

667

2,3

6 160

-2,9

Oceania 506 507

-0,2

Total 64 countries (2) 152 121 146 207 4,0 1 848 548

3,5

(1) - HADEED only. (2) - the 64 countries included in this table accounted for approximately 99% of total world crude steel production in 2018. e - estimated

www.skillings.net | 23