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ECONOMIC OVERVIEW August 2018
storm clouds and sugar hits

Across the board commodity markets were weaker in July, hurt by trade tensions, cooling Chinese data and a stronger US dollar. Equity markets, trade headlines and currency markets did little to support commodities. The outlook for commodities in August looks mixed. A strong Chinese demand outlook on the back of a government-supported infrastructure push will support construction whilst ongoing protectionist measures and a strong US currency market will provide headwinds.

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ALUMINIUM August 2018
Krasnoyarsk

The Krasnoyarsk complex is the largest capacity smelter owned by Rusal. With over 90% of site production coming from old and comparatively energy inefficient Söderberg cell technology, the company has continued investing in the smelter. An upgrade of cells to its proprietary Eco- Söderberg technology has improved its production efficiency and significantly reduced smelter emissions. China’s One Belt One Road initiative may impact the smelter with cheap aluminium production from large, modern smelters in Western China likely to impinge on Krasnoyarsk’s sales into Europe as China’s access into the market improves.

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COPPER August 2018
Las Cruces

The low-cost, high-grade Las Cruces mine and copper cathode producer is approaching the end of its life but the operation may be extended if technology being developed is feasible. Despite a high strip ratio, First Quantum Minerals’ Las Cruces falls within the cheapest quartile of the copper mine cash cost curve due to very high copper grade of >5% and high recovery of around 90% from the use of a vertical fluid flow atmospheric leaching reactor.

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EVENT August 2018
International Metals & Ores Conference 2018

AME Research was honoured to attend and be the major sponsor of the International Metals and Ores Conference, held by the China Metallurgical information and Standardization Institute (CMISI) on the 6-7th August 2018 at the Chang An Grand Hotel, Beijing, China.

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IRON ORE August 2018
Sino Iron

CITIC’s Sino Iron project is China’s biggest single investment in Australia at an estimated capex of US$12bn. With a capacity of 24Mtpa of magnetite concentrate it is more than three times the size of the biggest iron ore mine in China and will support CITIC’s steel operations in China. The project has had a difficult gestation. Construction commenced in 2007 at an initial capex of US$3.5b with first shipments in 2013 but production has not yet reached capacity.

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LNG August 2018
Abadi LNG

The revised Abadi LNG project appears as a final compromise between Inpex and the Government. The plan features a greatly expanded 9.5Mtpa onshore facility in return for a seven years extension on the Masela PSC gas fields to 2035, yet to be confirmed. The economics of the larger facility translates into our estimated, base-load capacity cost of US$1,465/tpa; notably we estimate this to be around 25% less costly per unit than the former 7.5Mtpa configuration.

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METALLURGICAL COAL August 2018
North Goonyella

North Goonyella is expected to be Peabody’s most profitable operation across its Queensland metallurgical coal portfolio in 2018, delivering a cash margin of around US$84/t off approximately 2Mt of hard coking coal exports. This has not always been the case, with North Goonyella recording several cash losses in the past ten years due to persistent geotechnical issues and difficulties with its longwall top coal caving system.

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NICKEL July 2018
Cerro Matoso

Cerro Matoso is the world's second largest ferronickel operation, producing approximately 40ktpa of nickel in ferronickel. Declining ore grades, which result in higher operating costs and lower ferronickel product grade, have been offset in the short term by the successful ramp up of mining at the higher-grade Esmeralda deposit which saw 2017 ore grades average around 1.7% nickel.

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OIL & GAS August 2018
Elgin-Franklin

The Elgin-Franklin development exemplifies the complexity of high temperature and pressure projects where reservoir pressures and temperatures are approximately 14,500psi and 190°C, respectively. Requiring high levels of recurring expenditures for its capital assets, the extent to which breakeven costs are being driven by operational costs is representative of the engineering requirement of the operation.

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OIL REFINERIES August 2018
Galveston Bay

The 571kbpd Galveston Bay is one of the largest oil refineries in the US and has undertaken several reforms in order to achieve its concept of high transportation fuel yield, which AME estimates at 75%. Sharing much of the site benefits of Marathon's two refining sites that were integrated in 2017, the complex offers an increased flexibility to resourcefully source both sweet and sour crudes.

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STEEL August 2018
Zhanjiang

Baowu’s 9Mtpa Zhanjiang plant is one of the largest and most modern operations in China. Two 5,050m³ blast furnaces and three 350t basic oxygen furnaces, some of the largest in China, deliver efficiency gains. Dedicated port facilities see the site enjoy lower transport costs. These factors combine to deliver a competitive advantage in terms of costs and market proximity, particularly for high-end hot rolled and cold rolled flat products.

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THERMAL COAL August 2018
Moolarben

Moolarben is Yancoal’s flagship growth operation, consisting of both open-cut and underground operations in New South Wales' Western Coalfield. With 2018 saleable production anticipated to increase 21% year on year to 15Mt, AME expects Moolarben to be in the top ten lowest-cost coal mines in Australia at US$45/t FOB.

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ZINC August 2018
Santander

Santander was once the jewel in Trevali's crown. However, since Trevali's acquisition of the larger Rosh Pinah and Perkoa mines in 2017, the operation has taken a back seat. Suffering from falling grades, reduced mill throughput and lower by-product credits, Santander has fallen from a second-quartile cash cost producer in 2016 to a fourth-quartile producer in 2018.

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