Tuesday 2nd June 2020

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Posts tagged ‘guinea’

Robust or bust

May 7th, 2020

Will supply chain challenges culminate in a long-overdue crisis?

by Greg Klein | May 7, 2020

It might take premature complacency or enormously good fortune to look back and laugh at the Early 2020 Toilet Paper Panic. But from today’s viewpoint, bumwad might be the least of our worries. There won’t be much need for the stuff without enough food to sustain life. Or water. Medicine, heat and electricity come in handy too.

Sparsely stocked supermarket shelves have been blamed on hoarders who thwart the industry’s just-in-time system, a process credited with “robust” reliability when not challenged by irrational buying sprees. Consumer concern, on the other hand, might be understandable given the credibility of official positions such as Ottawa’s facemask flip-flop and initial arguments that closing borders would actually worsen the pandemic.

Will supply chain challenges culminate in a long-overdue crisis?

A North Vancouver supermarket seen in mid-March. While
stockpiling has abated, supply lines show signs of stress.
(Photo: Steeve Raye/Shutterstock.com)

Meanwhile Canadian farmers worry about the supply of foreign labour needed to harvest crops, dairy farmers dump milk for lack of short-distance transport and deadly coronavirus outbreaks force widespread closures of meat and poultry plants across Canada and the U.S.

Highlighting the latter problem were full-page ads in American newspapers from meat-packing giant Tyson Foods. “The food supply chain is breaking,” the company warned in late April. “Millions of animals—chickens, pigs and cattle—will be depopulated because of the closure of our processing facilities.”

Within days the U.S. invoked the Defense Production Act, ordering meat plants to stay open despite fears of additional outbreaks. 

Just a few other pandemic-related food challenges in Canada include outbreaks at retail grocers, a shortage of packaging for a popular brand of flour and an Ontario supermarket warning customers to throw away bread in case it was tainted by an infected bakery worker.

Infrastructure supplying necessities like energy, fuel, water and communications faces pandemic-related challenges of its own, including availability of labour and expertise.

Supply chain complexity has been scrutinized in The Elements of Power: Gadgets, Guns, and the Struggle for a Sustainable Future in the Rare Metal Age. One example from author David S. Abraham was the electric toothbrush, a utensil comprising something like 35 metals that are sourced, refined and used in manufacturing over six continents.

Dissecting a 2017 smartphone, the U.S. Geological Survey found 14 necessary but mostly obscure elements. As a source country, China led the world with nine mineral commodities essential to mobile devices, and that list included rare earths in a single category.

In a recent series of COVID-19 reports on the lithium-ion necessities graphite, cobalt, lithium and nickel, Benchmark Mineral Intelligence stated: “From the raw material foundations of the supply chain in the DRC, Australia, Chile and beyond, through to the battery cell production in China, Japan and Korea, it is likely that the cells used by the Teslas of the world have touched every continent (sometimes multiple times over) before they reach the Model 3 that is driven (or drives itself) off the showroom floor.”

Will supply chain challenges culminate in a long-overdue crisis?

Consumers might not realize the complex
international networks behind staple items.

Or consider something more prosaic—canned tuna.

That favourite of food hoarders might be caught in the mid-Pacific, processed and canned in Thailand following extraction of bauxite (considered a critical mineral in the U.S.) in Australia, China, Guinea or elsewhere, with ore shipped for smelting to places where electricity’s cheap (China accounted for over 56% of global aluminum production last year). Then the aluminum moves on to can manufacturers, and transportation has to be provided between each point and onward to warehouses, retailers and consumers. Additional supply chains provide additional manufactured parts, infrastructure, energy and labour to make each of those processes work.

Still another supply chain produces the can opener.

Daily briefings by Canada’s federal and provincial health czars express hope that this country might “flatten the curve,” a still-unattained goal that would hardly end the pandemic when and if it’s achieved. Meanwhile the virus gains momentum in poorer, more populous and more vulnerable parts of the world and threatens a second, more deadly wave coinciding with flu season.

And if one crisis can trigger another, social order might also be at risk. Canada’s pre-virus blockades demonstrated this country’s powerlessness against a force not of nature but of self-indulgence. Even a cohesive, competent society would have trouble surviving a general infrastructure collapse, a scenario dramatized in William R. Forstchen’s novel One Second After. When transportation, communications, infrastructure and the financial system break down, so do a lot of people. Dangerous enough as individuals, they can form mobs, gangs and cartels.

How seriously Washington considers apocalyptic scenarios isn’t known. But prior to the pandemic, the U.S. had already been taking measures to reduce its dependency on China and other risky sources for critical minerals. Now, Reuters reports, COVID-19 has broadened American concerns to include other supply chains and inspired plans for an Economic Prosperity Network with allied countries. Questions remain about the extent that the West can achieve self-sufficiency and, in the U.S., whether another administration might undo the current president’s efforts.

Certainly globalist confidence persists. The Conference Board of Canada, for example, expects a slow return of supply chain operations to pre-pandemic levels but a renewed international order just the same. “Global co-operation is needed not only to tackle the health crisis, but also to restore trust in global supply chains and maintain the benefits that the growth in global trade has brought over the last two decades.”

Will supply chain challenges culminate in a long-overdue crisis?

New cars leave the manufacturing hub and disease
epicentre of Wuhan prior to the pandemic.
(Photo: humphery/Shutterstock.com)

One early COVID-19 casualty, the multi-continent diamond supply chain, already shows signs of gradual recovery according to Rapaport News. Despite mine suspensions, “there is more than enough rough and polished in the pipeline to satisfy demand as trading centres start to reopen. Belgium and Israel have eased lockdown restrictions, while India has allowed select manufacturing in Surat and special shipments to Hong Kong.”

Also struggling back to its feet is global automotive manufacturing. Writing in Metal Bulletin, Andrea Hotter outlines how the disease epicentre of Wuhan plays a vital role in making cars and supplying components to other factory centres. “If ever there was a masterclass in the need to disaster-proof a supply chain, then the COVID-19 pandemic has provided a harsh reminder to the automotive sector that it’s failing.”

So regardless of whether apocalyptic fears are overblown, there are lessons to be learned. As Benchmark points out, COVID-19 has disrupted “almost every global supply chain to such a profound extent that mechanisms for material sourcing, trade and distribution will likely never be the same again.”

In the meantime, a spare can opener or two might be prudent. Or maybe several, in case they become more valuable than bullion.

High profits or low profits, tensions with governments rise

November 28th, 2013

by Ana Komnenic | November 28, 2013 | Reprinted by permission of MINING.com

High profits or low profits, tensions with governments rise

 

The conflict between Romania and Canada’s Gabriel Resources TSX:GBU may be this year’s most high-profile dispute between a mining company and a state. The government has issued a semi-rejection of Gabriel’s plans to build Europe’s largest gold mine, and the company has threatened to sue for $1 billion.

But Rosia Montana is just one example of an increasingly common problem for the resource extraction industry. Since the beginning of the commodities boom more than one decade ago, clashes between companies and governments have been rising.

According to a recent report by Chatham House, the number of disputes that have resulted in international arbitration has increased tenfold for the oil and gas sector and fourfold for the mining industry. And in many parts of the world, these conflicts will only escalate, the report predicts.

Looking back at the 1990s, it seemed as if major disputes between governments and international companies in the oil, gas and minerals sectors would be over, lead researcher Paul Stevens said in an interview posted on the Chatham website.

“Exactly the opposite has been the case,” Stevens said. In fact, research shows that as the price of commodities has gone up, so have the number of conflicts.

High profits or low profits, tensions with governments rise

During the supercycle, commodities prices soared to record highs. Companies put billions toward mega mining projects—some of the biggest the world has ever seen. Barrick Gold TSX:ABX pumped billions into the Peruvian Pascua Lama project. Rio Tinto NYE:RIO launched its massive Simandou iron ore project in Guinea and has already spent $3 billion on it.

The extraction frenzy gave rise to some very high expectations from the public, governments and companies, which in turn led to clashes over how to split the bounty.

“Companies and governments are always competitors when it comes to the distribution of mineral and hydrocarbon revenues and profits,” the report reads.

And disputes are costing investors: Chatham estimates that three recent expropriations affecting Repsol, Rio Tinto and First Quantum Minerals TSX:FM have cost investors about $13 billion.

The reverse may not be true

But today’s low prices offer no relief. Tensions today are “raising questions about the long-term future of the extractive sector,” researchers write. Chatham warns that as companies respond to slumping prices by scaling back, delaying and even cancelling some projects, tensions with governments may rise.

“Higher prices have brought more disputes but the converse may not be true—falling prices could add more fuel to the fire,” Stevens said, as reported by Reuters.

Governments will increasingly adopt the “use-it-or-lose-it” mentality if projects don’t proceed as planned.

In addition to the inherently vulnerable nature of a government-extractive company relationship, the sector is also subject to increased scrutiny. A combination of various factors including fears over climate change, environmental degradation, resource security—especially in regard to water—have put resource companies under a microscope.

“The increasing level of scrutiny from multinational NGOs and the speed and reach of global communication mean that the spread of ideas and access to information about how projects should be conducted will influence local and national demands,” the report reads.

Going forward

The researchers advise caution going forward. The best option, Chatham writes, may be to “go slow” and for both sides to offer more flexibility.

“While economic and political pressure to develop resources quickly will be high, in some countries the best option may be to ‘go slow.’ The emphasis should be on building the capacity to regulate companies, generate employment opportunities and manage revenues in tandem with the resource sector.”

Improving dialogue—both with legislators and civil society—simplifying tax codes and introducing various measures to raise standards of governance are key.

Meanwhile, companies are encouraged to bring their environmental practices and transparency standards in line with “international best practice.” It’s also particularly important for firms to engage all levels of government, including regional and municipal bodies that could be most affected by a project.

Finally, Chatham recommends the creation of a high-level international ombudsperson to try to manage some of these conflicts before relations break down.

“At the heart of the problem is the absence of a practical formula or a benchmark to determine an equitable distribution of revenues between the state and companies in extractive ventures,” researchers found.

Ultimately, managing these projects is important for both sides—a government whose budget depends on the resource industry and a company that has bet billions of dollars on a project’s success.

“It’s also important for markets. Because in some ways if the conflict is not managed, this threatens future supplies of oil and gas and minerals,” Stevens said.

Reprinted by permission of MINING.com

Guinea strikes $5-billion mine deal with Abu Dhabi, Dubai

November 25th, 2013

by Cecilia Jamasmie | November 25, 2013 | Reprinted by permission of MINING.com

Guinea reached a $5-billion deal on November 25 with the emirates of Abu Dhabi and Dubai to develop a bauxite mine and alumina refinery in a fresh attempt to revitalize the West African nation’s natural resources sector.

The agreement, reports Reuters, includes $1 billion for extraction and exports of bauxite to the United Arab Emirates’ aluminum plants. It also involves a $4-billion aluminum refinery and a port.

The pact modifies a previously planned project and highlights a need in the Gulf to obtain raw materials to feed the recently created Emirates Global Aluminum, a national champion for the UAE company, set to become the world’s fifth-largest producer of the metal.

Under the deal, Guinea Alumina Corp—an Abu Dhabi-Dubai joint venture—will develop a bauxite export mine and a port, to be operational by 2017, and an alumina refinery with an initial capacity of two million tonnes a year. Commercial production from the refinery is estimated to begin in 2022.

Guinea is one of the main producers of bauxite, the raw material used in aluminum production, and mining has long been seen by the country as having potential to deliver much-needed income. However some of the country’s resources that are considered among the world’s largest, such as the Simandou iron ore deposit, have not been touched yet because of both financial and political reasons.

Reprinted by permission of MINING.com