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Asia Mining

Many Mines Put Up for Sale, but Buyers Are Scarce – by Scott Patterson and John W. Miller (Wall Street Journal – May 28, 2015)

http://www.wsj.com/

Drought of deals reflects low commodity prices, low quality of assets on the block

Miners across the world want to sell off their mines, but they have a problem: Almost no one wants to buy them.

Some veteran bankers in the mining industry say they are seeing the longest drought of deals in their careers. The rut is caused by a commodity price rout with little sign of recovery, low-quality assets on the block and a focus on shareholder returns—not acquisitions—from industry giants like BHP Billiton PLC and Rio Tinto PLC.

Deal volumes in 2014 fell 23% to 544 from the previous year, the lowest amount since 2003 and the fourth straight year of declines, according to Ernst & Young. Deals during the past decade peaked in 2010, when 1,123 were completed amid a China-fueled boom in prices. In the first quarter of 2015, the value of mergers and acquisitions in the mining industry globally fell 18% to $5.9 billion, from $7.2 billion a year ago, Ernst & Young said.

The paucity of mining deals, amid a broadly roaring M&A market, comes as prices for commodities such as iron ore, aluminum and copper are trading at near six-year lows. Other metals like nickel and zinc are being weighed down by lackluster demand.

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Barrick investors welcome Chinese tie-up, debt reduction moves – by Nicole Mordant and Euan Rocha (Reuters U.S. – May 26, 2015)

http://www.reuters.com/

VANCOUVER/TORONTO – Barrick Gold Corp’s first step to long-promised partnerships with China, as well as progress in reaching an ambitious debt-cutting goal, are turning skeptical investors warmer toward the world’s biggest gold miner.

Barrick said on Tuesday it would sell a stake in its Porgera mine in Papua New Guinea mine to China’s Zijin Mining Group, and form a strategic partnership with Zijin. The moves marked an initial push in Executive Chairman John Thornton’s plan to forge closer ties with China, the world’s biggest producer and consumer of gold.

The former Goldman Sachs executive’s radical overhaul since taking Barrick’s reins a year ago, including eliminating the position of chief executive, had raised eyebrows among investors. Many also complained about his outsized signing bonus, lack of access, and most recently his 36 percent pay rise.

But a clearer strategy unveiled in February to slash Toronto-based Barrick’s mountain of debt, while seeking close links with China, looks to be winning approval.

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COLUMN-“Cautious optimism” abounds in Asia commodities – by Clyde Russell (Reuters Africa – May 28, 2015)

http://af.reuters.com/

SINGAPORE, May 28 (Reuters) – There appears to be an outbreak of “cautious optimism” in the Asian commodities sector.

It was easy to lose track of the number of times the phrase popped up in presentations and conversations at four major commodities conferences in the region in the past two weeks.

However, defining what people meant by being cautiously optimistic was somewhat more challenging, although the common thread was a view that the worst is over for commodity prices, and the sector is once again worth looking at from an investment perspective.

Of course, it’s easy to dismiss participants at the SGX Iron Ore Forum and the Asia Mining Congress in Singapore, the Asia Oil & Gas Conference in Kuala Lumpur and the LME Week Asia in Hong Kong as talking their books, or at least to their hopes.

But what will be key is how the expectations of better times ahead translates into action. From a pricing perspective, there was widespread acknowledgement that the likelihood of strong rallies was very low, rather what producers, traders, buyers and investors are forecasting is a gradual grind higher as rising demand eats away the supply overhang created by over-investment in mines.

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China cash lining up for Fortescue Metals Group – by Matthew Stevens, Amanda Saunders and Julie-anne Sprague (Australian Financial Review – May 25, 2015)

http://www.afr.com/

Chinese-linked companies have applied to the Foreign Investment Review Board seeking permission for an investment involving Fortescue Metals Group.

Australia’s third-largest iron ore producer has held discussions with China’s largest steel producer, Baosteel, and China’s largest conglomerate, CITIC, about a recapitalision to shore up its balance sheet.

It is unclear if the applications to FIRB are from CITIC or Baosteel but sources said there is interest in Fortescue from one or more companies which are Chinese or part-Chinese owned.

There are no moves to take over Fortescue. Instead, the companies are interested in buying a stake or increasing an existing stake, sources said. A deal could involve the partial selldown by the company’s founder, chairman and biggest shareholder, Andrew Forrest.

Fortescue and Baosteel already work closely. In June 2012 the two companies merged their magnetite iron ore assets in the Pilbara into a venture called FMG Iron Ore Bridge, which is 88 per cent controlled by the Perth company and 12 per cent owned by the Chinese steel giant.

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Barrick Gold Corp, Ivanhoe Mines Ltd sell stakes to China’s Zijin in Papua New Guinea, Congo mines – by Peter Koven (National Post – May 26, 2015)

The National Post is Canada’s second largest national paper.

Canadian miners Barrick Gold Corp. and Ivanhoe Mines Ltd. have both struck deals with Chinese miner Zijin Mining Group Co., which is investing a total of US$710 million in their projects.

Zijin, one of China’s largest gold and copper producers, will buy half of Barrick’s 95 per cent stake in the Porgera gold mine in Papua New Guinea for US$298 million. And it will buy just under half of Ivanhoe’s 95 per cent stake in the Kamoa copper project in the Democratic Republic of Congo for US$412 million.

The two transactions are the direct result of work by John Thornton and Robert Freidland, the respective chairmen of Barrick and Ivanhoe. Both men have very deep business ties to Asia.

Thornton, who became Barrick’s chairman last year, has put a priority on forming partnerships with Chinese companies, and negotiations with Zijin have been going on for several months. There were also talks around Zijin becoming a partner on the failed Pascua-Lama project, though no agreement has been struck to date.

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Sweden to relocate entire city to meet China’s energy needs – by Dominic Hinde (Washington Times – May 24, 2015)

http://www.washingtontimes.com/

KIRUNA, Sweden — To feed China’s growing appetite for raw materials, this venerable mining town 90 miles north of the Arctic Circle is poised to become a cutting-edge Tomorrowland as it prepares to move buildings, residents and even a century-old wooden church to a new location a few miles away.

“These will be the first to go,” said Kjell Torma, editor of KirunaTidningen, the local newspaper, pointing to a row of red brick apartment blocks surrounded by construction fences. “If you want a cheap kitchen fan or some radiators, get in there.”

Over the next 10 years, Kiruna officials plan to demolish the apartments and most other buildings in this town of 18,000 residents and then rebuild them as far as three miles away — all part of an ambitious $375 million project to make way for the expansion of a giant iron mine as demand from China has suddenly made extraction here worth the investment.

But officials aren’t constructing an exact duplicate of Kiruna, founded in 1900 as the most northerly town in Sweden. With funding from Sweden’s state-owned mining company — Luossavaara-Kiirunavaara AB, or LKAB — officials in Kiruna aim to create one of the most environmentally friendly cities in Europe.

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NEWS RELEASE: Barrick Announces Strategic Partnership with Zijin Mining Group

All amounts expressed in US dollars unless otherwise indicated.

TORONTO, May 26, 2015 — Barrick Gold Corporation (NYSE:ABX)(TSX:ABX) (“Barrick” or “the company”) today announced that it has formed a strategic partnership with leading Chinese mining company Zijin Mining Group Co., Ltd (“Zijin”).

As a first step, Zijin will acquire 50 percent of Barrick (Niugini) Limited (“BNL”), the company which owns 95 percent of and manages the Porgera Joint Venture gold mine in Papua New Guinea. In addition, Barrick and Zijin have signed a long-term strategic cooperation agreement which outlines the intent of both companies to collaborate on future projects and joint investments, leveraging the strengths of each company.

“A twenty-first century mining company with global reach and the intention to become an industry leader must, by definition, have a distinctive relationship with China. This is particularly true in our industry, where China has become both the largest producer and consumer of gold, and a major source of capital and expertise for the mines of the future,” said Barrick Chairman John L. Thornton. “Our partnership with Zijin is the first step in a long-term strategic relationship with one of China’s leading mining companies—a multi-faceted partnership that will provide significant opportunities to work together on an ongoing basis as we continue to create value for our respective owners.”

“A strategic partnership with Barrick is an excellent fit for Zijin and a powerful combination as we look to expand our business globally outside of China. Our companies have complementary expertise and experience and share a common vision for creating long-term value for our owners,” said Zijin Chairman Chen Jinghe.

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Mongolia to be transformed by giant Rio Tinto copper mine – by Andrew Critchlow (The Telegraph – May 23, 2015)

http://www.telegraph.co.uk/

Land of Genghis Khan to become global copper superpower after mega deal to build giant underground Oyu Tolgoi mine

On the face of it, Mongolia – a landlocked and wild land – hasn’t changed much since Genghis Khan and his Golden Horde pillaged their way across Asia in the 13th century. The country’s population is still predominantly made up of nomadic herders living in yurts and drinking airag – fermented mare’s milk.

But this is all about to change after an agreement was reached between the government and Rio Tinto last week to develop one of the world’s largest copper and gold mines at Oyu Tolgoi, which literally means Turquoise Hill. The development of the mine is expected to trigger a rush to exploit $1  trillion (£638bn) worth of mineral resources that are thought to exist in the country and drag its mainly agrarian society into the modern age.

Signs of this transformation are already apparent on the streets of the capital Ulan Bator where around 40pc of the country’s 2.8m population now live. Skyscrapers and new office developments across the city are confronting signs of the impending change that the arrival of the mining industry will bring. Oyu Tolgoi is at the forefront of this new era, which according to the Chimediin Saikhanbileg, the prime minister, will “benefit Mongolian citizens for generations to come”.

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Indian PM breathes life into Posco’s stalled project – by Ajoy K Das (MiningWeekly.com – May 21, 2015)

http://www.miningweekly.com/page/americas-home

KOLKATA (miningweekly.com) – South Korean steel major Posco’s plans for securing iron-ore resources for its $12-billion Indian investments have been thrown a lifeline through the intervention of Indian Prime Minister Narendra Modi.

The project, which has been hanging fire for over a decade, was given a nudge following the Prime Minister’s two-day Seoul summit with Korean President Park Geun-hye, followed by a meeting with Posco CEO Kwon Oh Joon earlier this week.

Senior officials in the Steel Ministry said that the Indian Prime Minister held a series of talks on bilateral economic issues with Korean political and business leaders, but Posco investments, almost on the verge of being scrapped, did not specifically figure during this visit.

This initially was considered a disappointment, as Posco’s plans to set up a 12-million-tonne-a-year steel plant in the eastern Indian port town of Paradip, in Odisha, linked to the Khandadhar iron-ore reserves, represented the single largest foreign direct investment in the country, the official said.

However, soon after his return, Modi was reported to have pushed for several initiatives aimed at getting the stalled project off the ground.

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China Grows Its South America Influence After Commodity Bust – by Juan Pablo Spinetto and David Biller (Bloomberg News – May 19, 2015)

http://www.bloomberg.com/

China’s interest in Latin American isn’t just about oil and agriculture anymore. As Premier Li Keqiang tours Brazil, Colombia, Peru and Chile for the first time, China is taking advantage of cheaper prices as the commodities super-cycle ends to fast-track its influence in a region that supplies everything from crude to soybeans and copper.

High on the shopping list? Infrastructure, power and banking — credit-hungry industries that would help promote growth. Among the more than $50 billion in mostly financing deals announced in Brazil Tuesday was a plan by China’s BYD Co. to build a solar-panel factory, while China’s fifth-largest bank is taking over Brazilian lender Banco BBM SA.

“Latin America as a whole has more difficulties while at the same time China has increased capabilities,” said Paulo Vicente, a professor of strategy at Fundacao Dom Cabral business school in Rio de Janeiro. “So the environment is ripe for a wave of Chinese acquisitions or investments.”

Chinese companies announced 37 deals and investments in Latin America in the past 12 months, a 37 percent increase from the previous year, according to data compiled by Bloomberg. China is looking to step up investment as its demand for Latin American commodities slows.

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UPDATE 4-Rio Tinto, Mongolia end stand-off to build huge copper mine – by Terrence Edwards and Sonali Paul (Reuters U.S. – May 19, 2015)

http://www.reuters.com/

ULAN BATOR/MELBOURNE, May 19 (Reuters) – Mongolia and Rio Tinto have reached an agreement paving the way for work to resume on a stalled $5 billion underground copper mine that is expected to drive growth for both the country and the global miner.

The Oyu Tolgoi project, which started producing from an open pit mine two years ago, is the biggest single foreign investment in Mongolia, and resolution of the disputes over the second phase has revived hopes for a string of other stalled mining projects.

Rio Tinto’s Turquoise Hill Resources arm owns 66 percent of Oyu Tolgoi, while the Mongolian government owns the remainder. Rio is operator of the project, located in the Gobi desert near Mongolia’s border with China.

Vancouver-based Turqoise Hill shares leapt by as much as 11 percent to C$5.80 on the Toronto Stock Exchange on Tuesday after Rio Tinto announced the agreement on Monday which it said was signed by itself, Turquoise Hill and the government of Mongolia.

Turqoise Hill shares were last trading at $5.49, 4.8 percent higher on the day. “There is no doubt that moving forward with the Oyu Tolgoi project will improve the investment climate in Mongolia,” Prime Minister Chimediin Saikhanbileg said in a statement.

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China is a global economic and political power. Soon, it will be a military one, too – by J.L. Granatstein (National Post – May 15, 2015)

The National Post is Canada’s second largest national paper.

A few days ago, the Office of the Secretary of Defence in Washington issued its annual report on Military and Security Developments Involving the Peoples Republic of China 2015. This is a sobering document, appearing within days of a contingent of Chinese People’s Liberation Army soldiers marching past Russian leader Vladimir Putin and China’s President Xi Jinping in Moscow’s huge Victory Day parade. At the same time, and for the first time, Chinese navy ships are engaging in live-fire exercises in the Mediterranean Sea alongside Russian warships.

The authoritative U.S. document notes that Beijing’s defence expenditures continue to increase by 9.5 per cent a year, as they have done for the past decade. The Defense report concludes that China remains focused on the possibility of conflict in the Taiwan Straits — it has 400,000 soldiers, sailors and air personnel in the area — and in the East and South China Seas, with substantial military buildups also continuing there.

The South China Sea archipelago of the Spratly Islands, claimed by Beijing, are undergoing extensive “land reclamation,” China creating what is now a 2,000 acre landmass out of what were hitherto essentially underwater shoals.

Naval vessels will soon be able to dock there, and an airstrip is all but certain to be constructed. As the South China Sea is thought be ripe for mineral and oil exploitation and as parts of it are claimed by several Asian nations, this is a dangerous flashpoint, an area where Beijing’s “low-intensity coercion” can be expected to increase. In response, the Philippines and Vietnam are doing “land reclamation” projects of their own.

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BCSC clears short seller Jon Carnes of fraud in Silvercorp case – by Peter Koven (National Post – May 15, 2015)

The National Post is Canada’s second largest national paper.

Short seller Jon Carnes has been cleared of fraud allegations by a British Columbia Securities Commission panel, which found his attacks on Silvercorp Metals Inc. were not prohibited. The panel did, however, raise serious concerns with his conduct.

“While we may find Carnes’ conduct unsavory, we do not find it was clearly abusive to the capital markets,” the panel said in its decision. The panel added that it is “not our role to sanction conduct we find morally unsupportable.”

In an interview Thursday evening, Carnes said he was “relieved” by the decision. “That’s always the right word to use in a situation like this,” he said.

He added that he still believes Silvercorp is the party the BCSC should have been targeting, and he thinks the commission should be held “accountable” for its allegations against him. He also disagreed with assertions that there was anything “unsavory” about his actions.

Carnes, a hedge fund manager better known by the pseudonym “Alfred Little,” is one of many short sellers that accused Chinese companies of fraud a few years ago and helped to get them de-listed from North American exchanges.

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Insight – Global glut threatens West African iron ore ambitions – by Umaru Fofana (Reuters U.K. – May 15, 2015)

http://uk.reuters.com/

PEPEL, SIERRA LEONE – Red piles of iron ore and rusting railway wagons in the deserted stockyard at the port of Pepel bear silent witness to a crisis engulfing Sierra Leone’s mining industry and threatening others across West Africa.

The conveyor belt out to the jetty on the slow-moving Rokel river has remained idle for most of the past few months as only a handful of ships have anchored at the moribund port.

At the height of the commodities boom last decade, West African countries became magnets for miners seeking untapped iron ore, diamonds, gold, bauxite and other minerals.

In Pepel, locals anticipated an economic surge for their civil war-ravaged country when London-listed firm African Minerals (AMLZF.PK) started shipping ore four years ago from its Tonkolili mine.

Discovered in 2008 and lying some 200 km (124 miles) to the northeast, Tonkolili is one of the world’s largest iron ore deposits.

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Indian Prime Minister Prods Coal Monopoly – by Raymond Zhong and Niharika Mandhana (Wall Street Journal – May 13, 2015)

http://www.wsj.com/news/world

Narendra Modi seeks to boost output by cutting red tape and sparking competition

BEJDIH, India—Prime Minister Narendra Modi wants to end decades of crippling electricity shortages and turn this country into a manufacturing dynamo. Coal India Ltd. is standing in his way.

At the state-run behemoth’s mine here, men still move coal in baskets on their shoulders. At another project, electricity is so unreliable miners descend in a steam-powered elevator. One giant mine that opened last year runs at a fraction of capacity because a rail line to haul its coal is mired in bureaucracy.

Committees and economists have long studied how to whip Coal India, the world’s largest producer of the fuel, into shape. Labor unions and their allies oppose ideas such as breaking the company into smaller units or privatizing it.

Mr. Modi is taking a gradual approach, centered on what officials call the Billion-Ton Plan: an attempt to double the company’s output in five years by stepping up investment and untangling administrative obstacles.

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