</s>Jiangxi Copper Co Ltd said on Wednesday it has set up a Cayman Islands-based fund that will buy mining projects as the Chinese state-owned copper producer sets its eyes on potential bargains as the commodities cycle bottoms.

As China’s largest copper producer reported a 37.9 percent drop in profits due to weak metals prices, it said it had allocated $100 million through its subsidiaries to establish Valuestone Global Resources Fund I in the Cayman Islands with CCB International Asset Management Ltd, part of China Construction Bank Corp.

By Aug. 4, the fund had $150 million in initial funding and was now open to domestic and foreign institutional investors. The aim is to get $300 million in total investment.

Jiangxi didn’t identify what projects it was targeting, but said the fund will capture opportunities arising from low metals prices.

While it is not unusual for banks and hedge funds to use investment arms to buy into mining projects, it is an unusual move for a Chinese government-owned producer and reflects the company’s global ambitions.

“The focus is not to secure supply, it is rather how to make a profit at the bottom of this industry cycle,” analyst Helen Lau of Argonaut Securities in Hong Kong said. “Eventually Jiangxi Copper may participate in operating and investing… but they may ask the (private equity) fund to just flip it.”

The fund may be able to cast its net wider than traditional private equity units, said Lau.

Private equity funds have been on the hunt for deals for the past few years but have largely held back on purchases.

However, Jiangxi’s fund could have greater capacity to develop projects since it is a major producer as well as a stakeholder offering operational know-how and could pay for the offtake, said Lau.

Jiangxi Copper sources only 20 percent of its supply from its own mines. It has said its next step will be to focus on international acquisitions and Lau said the fund will help Jiangxi bolster its international M&A experience.

Jiangxi has had limited success overseas with projects in Afghanistan and Peru, unlike peers such as China Moly and Minmetals.

The Afghani project has been delayed after insurgent attacks that have also hampered nearby infrastructure builds.

London Metal Exchange copper prices have fallen by more than quarter since May 2015 amid concerns about slowing demand from China, the world’s top commodities consumer, and are languishing at around $4,700 per tonne.

For more on this story go to: https://www.pehub.com/2016/08/jiangxi-copper-targets-investors-with-300-mln-global-mining-fund-reuters/</s>There is hope for the big players in the mining industry, amid the crackdown launched by Environment Secretary Regina Paz L. Lopez versus irresponsible mining operations, with over 100 new projects being reviewed by the Duterte administration.

In fact, Environment Undersecretary Mario Luis J. Jacinto said the ongoing mining audit—first thought to be Lopez’s way of curbing mining operations in the country—will eventually benefit large-scale miners who responsibly do business in the Philippines.

Jacinto said the Mines and Geosciences Bureau (MGB) is now reviewing more than 100 mining applications that were put on hold by the Aquino administration.

“We will, on the basis of existing operations, submit our policy recommendations and the directions to take [on the review of new applications]. On the basis of that, then a review of the permitting processes will have to be undertaken and then deliberate decision on how to proceed with it; what is allowed, what should be restricted will be put in place,” he said.

In 2012 then-President Benigno S. Aquino III signed Executive Order (EO) 79 effectively putting on hold the processing of new mining projects until a new revenue-sharing measure has been put in place by Congress.

“We have rich mineral resources, we have large ecosystem, so it is a fragile ecosystem. We have resources that are God-given, so we must make very deliberate decisions on how to best utilize them. And what will be the best land uses for all the areas,” Jacinto added.

The applications for exploration, transport, export and all other mining-related permits including agreements, already reached “hundreds” since the moratorium was imposed, the Department of Environment and Natural Resources (DENR) official said.

“We are now doing the assessment; we are waiting for the results of the audit first then we can take it from there,” Jacinto added.

The government, through the DENR-MGB, is doing an audit on all mining operations in the country, which already led to the suspension of 10 large-scale mines.

“We now expect to get the comments in the audit and the recommendations and then it should turn out to be a good jump-off point for industry monitoring,” Jacinto said.

Data from Chamber of Mines of the Philippines (COMP) showed that the mining sector could infuse around $20 billion to $30 billion to the economy over the next five to 10 years with the inclusion of new projects.

The group’s latest breakdown showed that the combined mining investments expected this year stands at $2.25 billion. The country is also anticipating projects with a combined value of $6 billion in 2017. In 2018 mining investments are expected to go as high as $14.75 billion.

This year, the projects that are expected to be operational are those of Asiaticus Mining Corp. in Davao Oriental and Global Ferronickel Holdings Inc. in Palawan. To be followed by Philex Mining Corp.’s Silangan project in Surigao del Norte, Nadecor’s Kingking project in Davao del Norte, the Balabag Gold-Silver project of TVI Resource Development Philippines Inc., which are all expected to take off in 2017.

In 2018 projects targeted for operation are the Tampakan Mine development of Sagitarius Mines in South Cotobato, the project of Intex Resources in Mindoro, the Masbate gold project of Philsaga Mining Corp., the nickel-mine project of San Miguel Corp., through Philnico in Surigao del Sur, and the Balatoc Mines project of Benguet Corp.

As of now, the sole project expected in 2019 is the Far South East Gold project of Lepanto Mning Corp. in Benguet.

Jacinto advised investors to make sure that they are compliant before investing in mining in the Philippines. “If you put in that kind of investment, then you also make sure that you are compliant. Because it is useless if you put that kind of investment and you are not compliant,” he said.

There are four considerations for mining operations to continue in the Philippines under the Duterte administration, he said.

“It should be technically feasible; it will be environmentally compliant, socially acceptable and financially viable. Any of the imperatives absent, then it means it is not time to mine,” he added.

He said there are companies that existed for almost half a century and they have complied with the highest standard of mining, which other mining companies can emulate.

The mining audit, he said, will be completed by the end of the month. The DENR chief, he said, will always have the final say whether a mining operation should continue or stop, based on the new mining audit criteria.

Jacinto represented President Duterte in the ongoing Mining Philippines 2016 Conference and Exhibition in Pasay City.

During his speech, Jacinto said, while news headlines over the past weeks highlighted alleged environmental violations of miners, suspensions of mining operations and show-cause orders, he sees the audit as “a blessing in disguise to responsible miners who have religiously followed and are compliant of mining and environmental laws, rules and regulations.”

“Those who have clearly violated the terms and conditions of their contracts; taken shortcuts; largely ignored the adverse impact of their operations to their host communities; polluted waterways so essential to the productivity of farmers and fisherfolks; and threatened the very survival of people who should benefit from mining from these economic activities are the ones who have to face sanctions for their

 irresponsible acts,” he said.

Jacinto’s remark referring to COMP participants as “responsible miners” receive loud applause from conference participants.

“It was an excellent speech,” said Jose Leviste, president of OceanaGold (Philippines) Inc.

COMP Vice President for Legal and Policy Ronald Recidoro said apparently, “Jacinto knows the language of responsible miners.”

COMP President Benjamin Philip G. Romualdez remains optimistic of the prospects of responsible miners under the Duterte administration.

Romualdez, the president of Benguet Corp., assured Jacinto that the COMP will follow the law, and we will engage in responsible mining, using only the best practice available to ensure that our host communities and the environment will thrive under our care.

“We are not afraid of the ongoing audit of the DENR. We welcome it! We welcome this purging of illegal and noncompliant mining operations. We have always operated under some of the strictest laws and we believe that if you cannot obey these laws, you should not be in this industry,” he said.

However, he said the mining industry does not need a new law, adding that the existing mining law is one of the best in the world today, because it already integrates stringent rules on the environment and caring for the local communities.

“What is needed is strict and fair enforcement of a stable policy regime that promotes the long term stewardship of our environment and natural resources,” he said.

He said COMP has always maintained the highest standard of professionalism in the conduct of business. “As a highly regulated industry, we seriously follow the Mining Act and all regulatory rules of the DENR.”

Romualdez said of the 21 member-companies of the COMP currently operating today, 17 have already secured ISO 14001 certification for their environmental management systems.</s>What do surging LME copper stocks say about China? Andy Home

LONDON, Aug 26 (Reuters) - A wave of copper is currently washing up in London Metal Exchange (LME) warehouses.

Arrivals of metal have totalled 73,325 tonnes this week, lifting headline exchange inventory to 271,575 tonnes, the highest level since October last year.

There's no big mystery as to where this metal is coming from. Surging arrivals at LME sheds in Singapore and South Korea have broadly corresponded to export flows out of China.

And in part this is no more than a continuation of the stocks rebalancing that has been playing out for several months, a refilling of a depleted LME system from high inventories in China that accumulated earlier this year.

But unlike the mini surge of LME arrivals in early June, there is no obvious bull-bear battle being waged across the front part of the London copper curve.

If no-one is being forced to deliver metal against a short position, the alternative explanation would be that this is China pushing out surplus.

If so, it would mean that copper oversupply, already clear to see at the raw materials stage of the supply chain, is finally starting to take manifest form in the refined metal arena.

It's not unusual for LME copper stocks to trend higher during the dog-days of northern hemisphere summer as manufacturing activity drops a gear.

And, conforming with that pattern, warranting of metal has taken place at a wide variety of LME good delivery points, including Hull in Britain, Bilbao in Spain and several U.S. locations.

But the real stand-out has been the accelerated flows at Singapore, which has received almost 95,000 tonnes since the start of June, and South Korea, which has taken in 103,000 tonnes.

Both countries have also featured prominently in China's export profile over the same period of time.

Customs data shows exports of 89,000 tonnes to Singapore and 76,000 tonnes to South Korea since March, when China's exports first started accelerating. Between them Singapore and South Korea have accounted for almost 60 percent of all outbound flows.

The correspondence between Chinese exports and LME arrivals isn't perfect (see the chart above) but the broad picture is one of metal leaving China and turning up in the most easily shippable LME locations.

The question is whether this metal is being pushed or pulled.

A mini-surge of copper arrivals in the LME system in early June bore all the hallmarks of a distress delivery by a short position holder facing a cash-date squeeze.

What's noticeable about the current flood is that there is no similar tension in the LME spreads.

True, the LME's market positioning reports show a dominant long holding between 50-80 percent of non-cancelled stocks and 40-50 percent of cash positions as of the close of business Wednesday.

But ever since the bull-bear battle of early June the front part of the curve has been trading in benign contango. The cash-to-three months period traded as wide as $27 per tonne backwardation in late May. As of Thursday's close it was valued at $9 per tonne contango.

The very front part of the curve, between cash and the September prime prompt on the 21st of the month has tightened up a little over the last couple of days but is still only quoted at level.

Any pull on extra units to alleviate LME spread stress is currently weak, in other words.

That's not to say there is no gravitational pull at all, rather it has been coming in the form of incentives offered by LME warehouse operators in the Asian region.

That particular magnet, however, only really works if the incentives are competitive in terms of physical premiums, first and foremost in China itself.

Which it seems they are.

Premiums for delivery to China are trading at a soggy $45-50 per tonne over LME cash prices, according to LME broker Triland Metals.

To put that figure into context, remember that Chilean producer Codelco's "benchmark" premium covering 2016 shipments to China was set at $98 per tonne.

Nor is there any obvious indication of tightness within the mainland market, Triland again noting that the domestic premium structure is largely flat against front-month Shanghai Futures Exchange contracts.

All of which tells us that the Chinese market right now seems very comfortably supplied, if not oversupplied, with physical refined copper units.

To the point that LME warehouse operators can probably match if not better Chinese premiums, stimulating a physical arbitrage.

So who is actually moving the material?

Some of it seems to be coming from Chinese smelters themselves, or at least the handful that have clearance to export without paying the export duty.

Modest exports to countries such as Thailand, Vietnam and Bangladesh have no obvious LME arbitrage significance since none of them host LME warehouses.

But there is almost certainly a second stream of exports being shipped by merchants from China's bonded warehouse zones.

Or maybe that should read "re-exports". Copper in bonded warehouses has not yet been subject to China's VAT and can turn around and head back out without any tax penalty, albeit showing up in the customs figures as bona fide "exports".

So if China is pushing out surplus copper, or at least exerting a lesser magnetic pull than that offered by LME warehousers, what does it say about the health or otherwise of Chinese demand?

Not as much as you might think.

China's apparent consumption, a back-of-the-envelope calculation factoring in production, imports and visible stocks movements, jumped by 11 percent in the first half of this year.

Not even the most exuberant bull would argue that real consumption growth was anywhere near that level. The spectrum of estimates is a wide one but the middle ground would be around three percent.

The implication is that there has been significant stocks build, possibly on the mainland, possibly in bonded warehouses and most probably a combination of the two.

China, in other words, is full of copper.

And getting fuller, because the other dimension to this mass stocks relocation is China's own production of refined metal, up almost 10 percent in July and up by around eight percent over the year to date.

That of course is a reflection of the oversupply in the raw materials market and the subsequent flow of concentrates into what is the world's largest smelting and refining base. Imports of concentrate have surged by 35 percent so far this year with the pace accelerating steadily over the last few months.

The tension between this domestic production surge and the strength of import demand was ratcheted up over the first part of this year.

We're now seeing it resolved in the form of higher exports and rising LME inventories.

It is starting to look as if the copper surplus, so obvious in the concentrates market and yet so elusive in the refined market, is now finally taking concrete form in LME sheds in Singapore and South Korea.
Miners in the Philippines criticize the government after a crackdown on mining closed more nickel and copper mines.