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Aluminium/Bauxite

COLUMN-Indonesia to make it even harder for foreign miners – by Clyde Russell (Reuters India – April 23, 2014)

http://in.reuters.com/

Clyde Russell is a Reuters columnist. The views expressed are his own.

LAUNCESTON, Australia, April 23 (Reuters) – Indonesia’s decision to start cancelling investment treaties with 62 countries has passed with little comment, but the move may have a greater impact than the recent banning of mineral ore exports.

Indonesia last month kick-started the process of terminating all of its bilateral treaties by notifying the Netherlands that its agreement to protect and promote investment would end in 2015, and signalling that the others would end as soon as possible.

The agreements, which are common between states, protect the rights of investors in each other’s country, and typically include clauses about fair treatment, no expropriation and guarantees that profits can be repatriated.

Most importantly for many investors in countries like Indonesia, with its patchy record on legal certainty, is the right of appeal to the Washington-based International Centre for Settlement of Investment Disputes (ICSID).

Among the countries that have treaties with Indonesia are major foreign investors including China, India, Australia, Britain, Singapore and Russia. However, the United States and Japan are among nations that don’t have agreements.

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UPDATE 1-BHP Billiton weighs spin-off of unloved assets – by Sonali Paul (Reuters U.K. – April 1, 2014)

http://uk.reuters.com/

MELBOURNE, April 1 (Reuters) – BHP Billiton is weighing a range of options to simplify its portfolio of assets, including a possible spin-off of unwanted businesses such as aluminium and nickel into a separate company, the top global miner said on Tuesday.

“We continue to actively study the next phase of simplification, including structural options, but will only pursue options that maximise value for BHP Billiton shareholders,” the company said in a statement.

Chief Executive Andrew Mackenzie has said over the past year that the company plans to focus on its large iron ore, copper, coal and petroleum businesses, while selling off smaller, less profitable operations.

The company’s statement on Tuesday came shortly after The Australian Financial Review newspaper reported that BHP was considering spinning off non-core assets into a separate company, offering shares to existing shareholders.

BHP shares rose as much as 2.2 percent to a three-week high after the report. They last traded up 1.7 percent at A$37.10 in a weaker broader market. Spinning off a company with non-core assets would allow BHP to pare down at a time when it may be difficult to find buyers willing to pay a good price. It could also help flush out a buyer.

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COLUMN-Indonesia nickel, bauxite ban yet to hit China – by Clyde Russell (Reuters U.S. – March 27, 2014)

 http://www.reuters.com/

(The opinions expressed here are those of the author, a columnist for Reuters.)

(Reuters) – Indonesia’s ban on exporting unprocessed nickel and bauxite has been in force for more than two months, but the impact has yet to fully show up in Chinese imports.

China’s trade data for February shows nickel ore imports from Indonesia were about 3.1 million tonnes, down only 2.5 percent from the same month a year earlier.

Indonesia’s ban on exporting unprocessed minerals took effect on Jan. 12, and while there have been some moves to relax restrictions on copper and other ores, the total ban on nickel and bauxite remains.

Nonetheless, Indonesia’s share of China’s total nickel imports in February was 87 percent, showing the world’s biggest buyer of commodities hasn’t made a marked shift as yet to alternative suppliers.

In the first two months of the year China imported 9.2 million tonnes of nickel ore from Indonesia, a 29.1 percent jump over the same period in 2013.

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INSIGHT-Russia’s leading role in the Indonesian mining revolution – by Randy Fabi and Fergus Jensen (Reuters U.S. – March 23, 2014)

http://www.reuters.com/

JAKARTA, March 24 (Reuters) – Russia’s two metal giants have emerged as big winners from Indonesia’s new mining law, after leading a drive to get Jakarta to stick to its controversial mineral ore export ban in the face of opposition from miners and Asian buyers.

In its six-month lobbying campaign last year, United Company Rusal and Norilsk Nickel delivered a blunt message to Indonesian officials: We will only invest billions of dollars in smelters if you ban bauxite and nickel ore exports.

The effort seemed to have paid off, despite a denial by Indonesia that it was influenced. When the law came into effect this year, Indonesia enforced a water-tight export ban for only two major minerals – nickel ore and bauxite.

The halting of $3 billion of annual nickel ore and bauxite exports has already lifted the price of nickel and helped support aluminium, boosting the fortunes of Rusal and Norilsk, the world’s top aluminium and nickel producers, respectively.

At the same time, it has strengthened the case for the pair to invest billions of dollars in Indonesia to build smelters to replace costly capacity in Russia, a key part of a recovery plan for struggling Rusal and in line with Indonesia’s own aims to earn more from its minerals resources.

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Activists allowed to reappeal Rio Tinto’s Kitimat smelter permit – by Justine Hunter (Globe and Mail – March 14, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

VICTORIA — The B.C. Supreme Court has granted environmental activists a chance to overturn the environmental permit for the $3.3-billion upgrade of the Rio Tinto Alcan smelter in Kitimat.

Last April, the provincial Ministry of Environment authorized Rio Tinto to increase sulphur dioxide emissions, paving the way for the massive modernization and expansion project. There are more than 2,400 construction workers on site, and the project is already over budget.

The opponents, including two environmental organizations as well as a handful of local citizens, want Rio Tinto to install sulphur dioxide scrubbers, which could add more than $150-million to the upgrade. The process removes sulphur dioxide from the stacks.

Two environmental groups, along with residents of both Terrace and Kitimat, sought to appeal the permit, saying the smelter upgrade would threaten human health and the environment in the Kitimat-Terrace airshed.

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Floating hotel draws workers to NW Canada boom town – by Julie Gordon (Reuters U.K. – March 12, 2014)

http://uk.reuters.com/

VANCOUVER – (Reuters) – Hundreds of construction workers in booming northern British Columbia will take up residence this week in unique digs on board a cruise ferry revamped into a floating luxury hotel.

The aging ship will help relieve a housing shortage in one busy Canadian port town already bursting ahead of a promised energy boom that could last more than a decade.

The Silja Festival – a Baltic ferry made over as the Delta Spirit Lodge – will spend at least a year docked outside Kitimat, British Columbia, where it will provide housing for about 600 workers in town for Rio Tinto Alcan’s $3.3 billion smelter-upgrade project, which is expected to wrap up in 2015.

After that, the ship’s owners hope more contracts will float their way as major energy companies like Chevron Corp, Petronas and Royal Dutch Shell push ahead with proposed liquefied natural gas export (LNG) projects along Canada’s Pacific coast.

“This kind of investment would never occur without the kind of mega-opportunities that are growing in the Pacific Northwest,” said Andrew Purdy, vice president of Bridgemans Services Ltd, the privately held company behind the hotel.

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Indonesia’s export ban to curb China aluminium expansion – by Melanie Burton (Reuters India – January 31, 2014)

http://in.reuters.com/

SYDNEY, Jan 31 (Reuters) – China has found an inadvertent ally in its efforts to slim down a bloated aluminium sector, with Indonesia’s ban on exporting metal ores set to boost costs of the raw material bauxite and pile more pressure on struggling smelters.

Beijing has been issuing broadbrush rules aimed at reining in overcapacity in sectors such as aluminium and steel for about a decade, but plans have usually been thwarted by resistance from local governments anxious to boost growth.

In the aluminium sector, ageing and inefficient smelters are already grappling with rising power prices, but now face potential bauxite shortages after Indonesia halted ore shipments on Jan. 12, as part of efforts to make miners process minerals at home.

China is the world’s biggest aluminium producer and curbing expansion could ease a global surplus of the metal and even lead to the country resuming sizeable imports of refined aluminium. It is also likely to provide support to the price of a metal that has been depressed for years.

“(Indonesia’s ban) will have a huge impact on the Chinese aluminium industry in the medium term,” said Citi China commodities analyst Ivan Szpakowski.

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Rio Tinto in talks to sell Quebec aluminum plant – by Josephine Mason (Reuters U.S. – January 27, 2014)

http://www.reuters.com/

NEW YORK – Jan 27 (Reuters) – A small Canadian aluminum producer is in talks to take over Rio Tinto Alcan’s aluminum casthouse in Shawinigan, Quebec, rescuing the plant from closure at the end of this year, the fund’s project leader told Reuters on Monday.

Sotrem, a company based in Saguenay, Quebec, that makes aluminum foundry alloys and deox, a type of aluminum used to remove oxygen in steel production, is leading the deal to buy the plant, said Yvon D’Anjou, who is in charge of the project.

“We expect to come to a consensus in the next few months,” said D’Anjou. He is familiar with the plant, having worked as head of business development at Alcan until 2008, he said. A spokesman for Rio Tinto confirmed in an email that the company has entered exclusive negotiations for the sale of the casthouse, but did not give any further details.

Under a plan drawn up by Sotrem, the casthouse would produce 35,000-40,000 tonnes per year of small-diameter extrusion billet, a niche product used to make gas cylinders and scuba diving tanks, D’Anjou said.

That capacity could increase to 60,000 tonnes in the next two years if there was demand. The smelter on site, which Alcan shut towards the end of last year, is not included in the deal, he said. 

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Detroit auto show: Ford unveils mostly aluminum F-150 (Associated Press/CBC News Business – January 13, 2014)

http://www.cbc.ca/news/business

Some call it a game-changer. Some just shake their heads. Either way, Ford’s new aluminum-clad F-150 is such a radical departure from past pickup trucks that it dominated talk at the opening of the Detroit auto show.

Ford Motor Co. unveiled the 2015 F-150, whose body is 97 per cent aluminum, on Monday. The lighter material shaves as much as 300 kilograms off the 2,200-kilogram truck, a revolutionary change for a vehicle known for its heft and an industry still reliant on steel. No other vehicle on the market contains this much aluminum.

“It’s a landmark moment for the full-size pickup truck,” said Jack Nerad, editorial director for Kelley Blue Book. The change is Ford’s response to small-business owners’ desire for a more fuel-efficient and nimble truck.

“You’re either moving ahead and you’re improving and you’re making it more valuable and more useful to the customer or you’re not,” Chief Executive Alan Mulally told The Associated Press in a recent interview.

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COLUMN-Indonesia bauxite ban slow-burn issue for aluminium – by Clyde Russell (Reuters U.S. – January 14, 2014)

http://www.reuters.com/

Clyde Russell is a Reuters market analyst. The views expressed are his own.

LAUNCESTON, Australia, Jan 15 (Reuters) – The immediate impact of Indonesia’s ban on exporting unprocessed mineral ores has been felt in nickel markets, but the slow burn, and potentially larger, may be in aluminium.

London Metal Exchange three-month nickel jumped 7.4 percent between the close on Jan. 9 and Jan. 14, when it ended at $14,340 a tonne. In contrast, London aluminium futures barely nudged up 0.6 percent over the same three-day trading period, and the benchmark contract in Shanghai weakened by 0.6 percent.

It may well be that the market is accurately reflecting more immediate concern over the supply of nickel, since Indonesia supplies about 13 percent of the world’s mined nickel.

But the likelihood is that any loss of Indonesian cargoes will act merely to lower the available surplus of nickel, suggesting that the current rally may not be sustained. However, the story with aluminium may be slightly different, at least over the medium to long term.

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Indonesia to China: Stop Buying Our Stuff – by Bruce Einhorn, Yoga Rusmana, and Eko Listiyorini (Bloomberg News – January 13, 2014)

http://www.businessweek.com/

Indonesian mines account for about 20 percent of the world’s nickel supply and a hefty chunk of the bauxite (used to make aluminum). China has been importing ever-larger amounts of these and other minerals from its Asian neighbor. Ironically, the more the Chinese buy, the angrier Indonesians become: Rather than purchasing refined minerals from Indonesia, China imports the raw rocks and does the processing itself, thus depriving Indonesians of jobs and tax revenue.

Miners took more than 250,000 tons of nickel out of Indonesian mines last year but processed only about 16,000 tons in-country, exporting the rest. Meanwhile, China refined more than half a million tons.

To make matters worse, through much of last year, China stockpiled Indonesian ore to hedge against any action the government in Jakarta might take to encourage more of the value-added work to stay home. The stockpiling makes Indonesian officials even more irritated. “I just returned from China, and I saw with my own eyes there are 3 million tons of bauxite and 20 million tons of nickel over there,” Industry Minister M.S. Hidayat told reporters on Jan. 8. “That’s what we want to stop.”

Indonesian President Susilo Bambang Yudhoyono is taking action do just that.

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Alcoa unit pleads guilty to Bahrain bribery – by Joe Mankak (USA Today – January 9, 2014)

 http://www.usatoday.com/

PITTSBURGH (AP) — A subsidiary of Alcoa pleaded guilty Thursday and, along with the parent company, will pay a total of $384 million in penalties for bribing officials in the kingdom of Bahrain through a London-based middleman.

A company official on Thursday entered the plea on behalf of Alcoa World Alumina, which will pay $223 million in fines and criminal penalties for violating the anti-bribery provisions of the Foreign Corrupt Practices Act. The law governs the conduct of American businesses abroad.

Parent company Alcoa must guarantee those payments and on Thursday also agreed to a separate $161 million civil penalty for related Securities and Exchange Commission violations. “Alcoa lacked sufficient internal controls to prevent and detect the bribes, which were improperly recorded in Alcoa’s books and records as legitimate commissions or sales to a distributor,” the SEC said in a news release.

The U.S. Justice Department said Alcoa World Alumina earned $446 million in profits by using the middleman to cut a long-term deal to sell raw materials to Aluminum Bahrain BSC, through other affiliated companies, including Alcoa of Australia.

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Walsh’s steely resolve for change of culture helps Rio Tinto turn around – by Andrew Burrell and Paul Garvey (The Australian – January 4, 2014)

http://www.theaustralian.com.au/business

SOON after arriving in London a year ago to begin his reign as chief executive of Rio Tinto, Sam Walsh took a stroll from his Kensington home to check out an antiques fair at nearby Sloane Square.

The avid collector of milk jugs — he has more than 350 of the cherished antiques stashed away in his other house in Perth — was in his element as he prepared to browse the collectables. “I walked up to the very first stand and picked up a Royal Worcester milk jug,” recalls Walsh. “And the lady looked at me and said, ‘Australian accent, interested in milk jugs, we know who you are — we’ve been expecting you!’ ”

Walsh roars with laughter when telling the story, partly because he cheerfully revels in the fact his passion for delicate milk jugs breaks all the stereotypes of the knockabout mining industry. But he knows too that it’s much harder to be anonymous — even at an antiques fair — when you’re running one of the biggest companies in one of the world’s financial capitals.

It’s even harder, it may be suggested, when you’re trying to lead the turnaround of a company that had spectacularly lost its way under predecessor Tom Albanese, culminating in more than $US14 billion in writedowns as a result of the failed 2007 acquisition of Canadian aluminium producer Alcan and the disastrous takeover of African coal play Riversdale Mining in 2011.

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Australian bauxite miners are pinning their hopes on a new market in China – by Kathryn Diss (Australian Broadcasting Corporation – December 19, 2013)

http://www.abc.net.au/news/

Australian bauxite miners are pinning their hopes on a turnaround in the struggling industry, with a new market likely to open up in China.

Indonesia has long satisfied China’s growing hunger for bauxite to feed its aluminium smelters, which has prevented Australian companies from entering the market.

Now that might change, with Indonesia expected to endorse tough, new restrictions on exports from January. Peter Kopetz from Stockbroking agency State One Capital says he has been closely watching the bauxite price increase in recent months.

“Some of the projects which maybe were marginal beforehand are becoming more economic as the price goes up and we’ve seen a gradual price increase over the last 12, 24 months and we see that continuing,” he said.

“There’s a push for Australia to become a more prominent player in the bauxite industry; we’ve got the quality, we’re close to China and of course we can supply long-term the raw materials to whatever china needs.”

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Massive investment will complete Kitimat smelter project – by Richard Gilbert (Journal of Commerce – December 9, 2013)

http://www.journalofcommerce.com/

Rio Tinto is planning to invest US$2.7 billion to complete the modernization of its aluminium smelter in Kitimat, B.C., while the company is cutting back on capital spending at projects around the world.

“For nearly 60 years, the smelter has been a major impetus for the economic development of northwest British Columbia,” said Jean Simon, president, primary metal, Rio Tinto Alcan.

“We are very proud to announce this US$2.7 billion investment to complete the modernization project. This is one of the largest private investments in B.C.’s history and it will ensure the sustainability of the aluminium business in Kitimat for decades to come.”

Rio Tinto announced on Dec. 1 that the US$3.3 billion Kitimat modernization project will be completed in 2014.
The project involves the demolition of several buildings on the site of the existing smelter and clearing space for a new plant.

The project began in 2011 and will create 2,500 jobs during the peak period of the construction phase.

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