Editorial: Aluminum gets a rise from power crises in South Africa and China

While aluminum has made the headlines during the past couple of years owing to all the mega-mergers among producers, the fifth trading week of 2008 saw prices for the metal stand out, as supply was hit by a double whammy of power outages and smelter closures in major producers South Africa and China.

• Creating havoc throughout the mining sector, South Africa entered its second week of rolling blackouts owing to electrical demand outstripping fixed electrical capacity, while southern China was hit by freak snowstorms that left in their wake power outages and frozen potlines. Chinese power generation is also being constrained by drought and tight thermal coal supplies.

Building on record trading volumes set earlier in the week, aluminum prices hit US$2,738 per tonne on Feb. 1 before pulling back slightly. The normally stable aluminum market remains volatile as speculators weigh the possibility of continued cramped supply, particularly from South Africa, with signs of slowing demand if the U.S. economy cools off as the year progresses. Zinc prices are showing signs of following aluminum’s lead, again owing to disrupted production from South Africa and China.

• Iamgold met its Waterloo as the French government withheld the final permits necessary to start construction of the open-pit Camp Caiman gold mine in French Guiana, one of France’s four overseas departments.

The company is flummoxed, stating that, even after it met all the regulatory requirements, the project was stopped by the French president’s office with no technical, environmental or legal reasons given.

Our impression over the years is that, despite any pro-mining encouragement from lower-level bureaucrats, the French government has little intention of developing French Guiana’s industrial base, for two reasons.

First, France and its European partners have built the US$3- billion Kourou space centre — dubbed “Europe’s spaceport” — for launching the vital Ariane rockets and, for safety and security reasons, want to keep people away. (Kourou’s nearness to the equator makes it ideally placed for launches into geostationary transfer orbit, and launchers profit from the slingshot effect created by the speed of the Earth’s rotation around the axis of the Poles.)

Secondly, French Guiana is France’s one bit of real jungle in the world, and the government has consistently promoted the idea of using “green tourism (as) a prime route for (French Guiana’s) further development.” At the 1992 Earth Summit in Rio, France suggested French Guiana be made a “centre of excellence for the protection of tropical rainforests and ecodevelopment.”

• On the heels of the New York Stock Exchange’s bid for the American Stock Exchange, the CME Group — owner of the Chicago Mercantile Exchange — has launched a bid for Nymex Holdings — owner of the New York Mercantile Exchange.

Nymex shareholders would receive US$36 in cash and 0.1323 of a CME share for every Nymex share. CME says it would maintain trading floors somewhere in the New York City metropolitan area, and it might get Nymex to repurchase the 816 NYMEX memberships for a total price not to exceed US$500 million. Most of the NYMEX’s 136-year-old trading pits would probably be shut down, with substantial job cuts, and the storied Nymex property in lower Manhattan sold.

CME Group was formed from the Chicago Mercantile Exchange’s takeover of the Chicago Board of Trade last year.

• Sulliden Exploration ended January intact, as shareholders rejected Century Mining’s hostile bid, which expired on Jan. 30. Sulliden now says it’s contemplating an aggressive exploration program at the Shahuindo gold property in Peru, subject to the availability of funds and the granting of permits.

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