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Co-operation accord underscores China’s global gold market ambitions Deal signed in Vancouver at international gold – by Gordon Hamilton (Business Vancouver – June 23, 2014)

http://www.biv.com/

Summit could increase investment in B.C.’s resource sector

China took an important step June 18 toward playing a larger role in global gold markets that could lead to more investment in British Columbia’s mining sector, according to the head of the country’s gold mining association.

Xin Song, chairman of the China Gold Association, said a co-operation agreement signed in Vancouver between the association and the World Gold Council (WGC) is a sign of China’s determination to become a more active player in the global gold industry. China’s emergence can be expected to have an impact on the B.C. mining sector, he said.

The accord between the Chinese association and the gold council, which represents the world’s largest mining companies, was the highlight of a daylong gold summit on the world’s most valuable metal. It’s the first time the London-based gold council has held such a meeting in North America.

“Why in Vancouver? Because Vancouver serves as the gateway to Asia and the Pacific and is a mining capital,” said Song. “Signing in such a venue has international impact for us.” Song, who is also president of China’s largest gold company, China National Gold, singled out B.C. as a destination for investment.

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Paralysed mining sector waits on fresh faces in Jakarta – by Peter Alford (The Australian – June 25, 2014)

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

ANOTHER large piece of its unfinished business the outgoing Indonesian government will gift to the next administration is the 2009 Mining Law, which five months after implementation has idled most of the non-coal export minerals sector.

Shipping of copper concentrates, zinc ore, bauxite and some other bulk commodities are at a standstill; exploration activity, never robust despite Indonesia’s high prospectivity, has dried; and foreign investor interest is suspended until a new administration clarifies its intentions on the Mining Law.

No significant issue that was in contention when the law was activated in January, four years after the deceptively simple legislation was passed, has been settled.

Both presidential candidates, Prabowo Subianto and Joko Widodo, have endorsed the Yudhoyono administration’s principle of compulsory domestic secondary processing of non-coal mine ­exports. (Coal, which usually ­accounts for more than 85 per cent of Indonesia’s mineral commodity export revenues, was excluded from processing requirements during tortuous negotiations over regulations to give the law teeth.)

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Resurgent China may be a boon to copper – by Scott Barlow (Globe and Mail – June 24, 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.

Stronger than expected economic data from China, specifically new orders for manufactured goods, suggest a tradeable rally in copper miners may be on the horizon.

The HSBC/Markit Flash China Manufacturing Purchasing Managers’ Index is designed to predict the government manufacturing report due for release on June 30. Released Monday, the Flash PMI came in well above expectations and provided a clear positive indicator for official numbers.

The reading of 50.8 for overall Chinese manufacturing activity, significantly above the 50 mark that signals business expansion, represented the first positive data point since December and hints that government efforts to loosen credit conditions are helping boost economic growth.

Manufacturing New Orders, a sub-component of the report, and is the most forward-looking part of the report because it indicates the future level of economic activity. As a result, it can also be used to forecast profits for resource-related companies that benefit from rising levels of Chinese manufacturing. The manufacturing new orders result released Monday was extremely encouraging. At 51.8, the survey result was the strongest in 15 months.

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Rio Disputes Mongolia Claim Over Unpaid Taxes – by Jesse Riseborough and Michael Kohn (Bloomberg News – June 23, 2014)

http://www.bloomberg.com/

Mongolia’s Tax Authority claims a Rio Tinto Group unit operating in the country has unpaid taxes, penalties and disallowed entitlements associated with the $6.6 billion Oyu Tolgoi copper mine development.

Rio’s Turquoise Hill Resources Ltd. (TRQ) says it has paid all taxes and charges required under its accord with the government and has complied with the country’s laws, the Vancouver-based unit said yesterday in a statement. The disputed amount is about $130 million, Ganbold Davaadorj, a director of the mine’s operating unit Oyu Tolgoi LLC, said yesterday in an interview.

“We strongly disagree with the claims in the audit report and are currently reviewing all options to resolve this matter,” Kay Priestly, Turquoise Hill’s chief executive officer, said in the statement. The company may need to seek resolution through international arbitration, it said.

The fresh dispute is evidence of further strains on London-based Rio’s relationship with Mongolia. Recent discord has centered on funding for a second-stage expansion of the mine, delaying the $5.1 billion proposed development.

A feasibility study into the underground expansion is likely to be delayed if the tax dispute isn’t resolved by June 30, Turquoise said yesterday. Missing the study’s deadline would heap pressure on negotiations between Mongolia and Rio to finalize a $4 billion financing package. Commitments from the participating banks are set to expire on Sept. 30.

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COLUMN-China metals probe likely a short-term problem – by Clyde Russell (Reuters U.S. – June 23, 2014)

http://www.reuters.com/

LAUNCESTON, Australia, June 23 (Reuters) – The brouhaha over suspected metal financing fraud at China’s Qingdao port is likely to cause short-term angst, but longer-term gains.

Banks and authorities are now probing allegations of whether a private Chinese metals trading firm was duplicating warehouse certificates in order to use a cargo several times to raise financing.

The immediate impact is likely to be a sharp tightening of lending practices to China-based metals traders, thereby limiting their ability to participate in the market.

Longer-term, it’s likely that China’s massive warehousing sector will come under further scrutiny and may eventually be forced to adopt tighter rules, such as those at facilities regulated by the London Metal Exchange (LME).

While the issue has so far been limited to Qingdao port and to deals involving copper and aluminium, there are concerns the issue may be more widespread and linked to more commodities, such as iron ore and soybeans. While the potential ramifications from the Qingdao warehousing issues are significant, the impact on market pricing hasn’t been so clear as yet.

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China Miners’ Loss Is BHP’s Gain as Iron Prices Slump 44% – by (Bloomberg News – June 20, 2014)

http://www.businessweek.com/

Rio Tinto Group and BHP Billiton Ltd. (BHP), two of the world’s biggest iron ore producers, are benefiting as falling iron ore prices pressure smaller rivals in China to shut down.

The price of iron ore has plunged 44 percent from its February 2013 peak on the back of record output. That’s hurting mining companies in China where 20 percent to 30 percent of mines have closed, according to the China Metallurgical Mining Enterprise Association.

The closures are helping Rio Tinto and BHP which, along with Vale SA (VALE5), already control about two thirds of global seaborne supply from their low-cost mines. About $40 billion a year of iron ore is mined in China, the country that’s also the world’s biggest buyer of the steelmaking component.

“Many smaller mines in China have stopped production due to the falling prices,” said Sarah Wang, a Shanghai-based analyst with Masterlink Securities Corp. “It’s the right time for BHP and Rio to seize the opportunity to boost their market share.”

BHP, the world’s biggest mining company, last month also flagged the closure of some Chinese ore mines.‘ “Most of them are smaller ones, while the bigger ones are also starting to be affected,” Liu Xiaoliang, the association’s general secretary, said in an interview. “Almost 70 percent of the ore processing companies have also closed.”

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UPDATE 1-Indonesia sets mining export tax cut in draft regulation-official – by Wilda Asmarini and Michael Taylor (Reuters India – June 20, 2014)

http://in.reuters.com/

JAKARTA, June 20 (Reuters) – Indonesia is drafting a new mining export tax that would more than halve the base rate to be paid by miners but doubts remain whether it would be accepted by major copper miners and end a five-month-old dispute that has halted concentrate exports.

Indonesia’s main copper concentrate producers Freeport-McMoRan Copper & Gold Inc and Newmont Mining Corp stopped exports in January when the government introduced new mining rules, including an escalating export tax.

The two U.S. companies have previously insisted they should not have to pay any additional taxes because it would violate their current mining contracts, casting doubt on whether even a lower tax rate would be accepted by the miners.

Coal and Minerals Director General Sukhyar said on Friday the new draft regulation meant the export tax would start below 10 percent and would be linked to a company’s progress in building a smelter.

“Yesterday I had discussions with the finance ministry and they said the draft is already finalized,” Sukhyar told reporters, adding that it been agreed by the mining, industry and finance ministries.

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Indonesian miners delay alumina refinery plans on legal uncertainty – by Wilda Asmarini and Yayat Supriatna (Reuters India – June 19, 2014)

http://in.reuters.com/

(Reuters) – Bauxite producers are delaying plans to build alumina refineries in Indonesia due to legal uncertainty over a mineral ore export ban imposed five months ago, government and industry officials said.

Indonesia’s Constitutional Court has yet to decide on a legal challenge against a Jan. 12 export ban on bauxite, nickel and other mineral ores imposed by the government to force miners to build refineries and processing plants.

Before the ban, Indonesian bauxite exports accounted for about 12 percent of global aluminimum production, with China taking the bulk of shipments for processing into alumina, an intermediate stage in the production of aluminium.

As many as five alumina refinery projects are underway in Indonesia, industry officials said, but the legal uncertainty means firms have slowed their construction plans for the refineries, which can cost as much as $1 billion each.

“They are worried if the court allows exports again, bauxite producers will be able to resume shipments of raw materials. Investors want the ban to remain,” Dede Suhendra, Mineral Enterprise Director at the mining ministry, told reporters.

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China’s largest gold miner looks to partner with Barrick, Newmont – by Rachelle Younglai (Globe and Mail – June 18, 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.

China’s state-owned gold mining company is working on potential partnerships with both Barrick Gold Corp. and Newmont Mining Corp., its president said on Tuesday.

If the Asian company is successful, the alliances would bring one or both of the Western miners closer to China, a country that is now the world’s largest consumer and producer of the yellow metal.

“Both sides are making an effort to co-operate in the future,” Xin Song, the president of China National Gold Group Corp., China’s largest gold producer, said in an interview.

For Toronto-based Barrick, the talks represent a step forward, one that could be the beginning of a long-lasting and meaningful union that Barrick’s new chairman John Thornton wants to establish with the Chinese.

When Mr. Thornton was an executive at Goldman Sachs, he started developing relationships with key Chinese policymakers. The investment banker was chosen by Barrick’s founder Peter Munk for his contacts in China to align Barrick more closely with the rapidly growing economy and to further his vision of turning Barrick into a major, diversified miner.

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Anil Agarwal: Vedanta’s bluff billionaire – by James Crabtree (Financial Times – June 15, 2014)

http://www.ft.com/home/us

Anil Agarwal, the founder and majority-owner of Vedanta Resources, hired former Rio  Tinto boss Tom Albanese as his chief executive earlier this year. The move was a statement of intent: Mr Agarwal, a controversial but ebullient Indian billionaire, had long talked of transforming his London-listed conglomerate into a global natural resources giant to rival Rio or BHP Billiton.

It was an ambition the American mining veteran seemed well-suited to help deliver. Even so, Mr Agarwal leaves little doubt which of the duo is now in charge. “You need a visionary,” he says of his own role as executive chairman. “Tom has come from Rio, we are very fortunate to have him,” he continues, “but I am looking at the vision and strategy . . . He is going to look after the operations.”

The statement is typical of the mining mogul’s blunt style, honed during a remarkable three-decade rise. Characterised by rapid growth and bold dealmaking, the ascent has seen the former scrap-metal dealer become one of India’s most prominent self-made industrialists. With revenues of $15bn last year, his interests now range from iron ore and copper to oil and gas, with operations crossing Australia and Zambia, as well as his home country.

Sitting in his office in Mumbai, Mr Agarwal sports a sober blue suit, although his bulky frame and shaven head are offset by light grey stubble, giving him a more rough-and-ready look. After growing up in the rural Indian state of Bihar, he cheerfully admits his spoken English remains a work in progress as well, although he makes his points clearly enough.

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India spy agency says Greenpeace endangers economic security – by Sanjeev Miglani (Reuters India – June 12, 2014)

http://in.reuters.com/

NEW DELHI – (Reuters) – India’s domestic spy service has accused Greenpeace and other lobby groups of hurting economic progress by campaigning against power projects, mining and genetically modified food, the most serious charge yet against foreign-funded organizations.

The leak of the Intelligence Bureau’s report comes as Prime Minister Narendra Modi’s new administration seeks way to restore economic growth that has fallen to below 5 percent, choking off investment and jobs for millions of youth entering the workforce.

Greenpeace denied it was trying to block economic expansion, saying the allegations were an attempt to silence dissent and that it stood for sustainable growth.

The government report is likely to intensify the debate over whether Asia’s third largest economy will pursue the path of fast growth under the Modi administration or try a more balanced strategy that the previous government sought.

It has also turned the spotlight on the role of foreign funded organizations, some of whom said they feared a crackdown by the new regime, seen as more friendly to business.

“A significant number of Indian NGOs funded by donors based in US, UK, Germany and Netherlands have been noticed to be using people-centric issues to create an environment, which lends itself to stalling development projects,” the Intelligence Bureau said.

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Newmont Suspends Indonesian Operations As Minerals Export Issue Remains Unresolved – by Trefis Team (Forbes Magazine – June 9, 2014)

http://www.forbes.com/

Newmont Mining has announced the suspension of operations at its Batu Hijau mines in Indonesia. This follows the halt in production and processing of copper concentrate at its Indonesian operations after its copper concentrate storage facilities were filled to capacity.

The company had halted exports from Indonesia in January, as a law banning exports of unprocessed minerals from the country came into effect. Though last minute changes to the law permitted Newmont to export its copper concentrates, they imposed a 25% tax on exports which would rise to 60% by 2016. The company claimed that this tax violated the terms of its original investment agreement, or contract of work, with the Indonesian government.

The company is engaged in negotiations with the government regarding the export duty, leading to resumption of its exports from the country. The company invoked the force majeure clause of its contract of work, in order to suspend operations, after its storage facility was filled to capacity and production could not be continued.

The suspension of production will impact Newmont’s quarterly and annual results, though the extent of the impact will be determined by the duration for which operations remain suspended.

A law enacted in Indonesia in 2009 banned exports of unprocessed minerals from the country with effect from January12, 2014.

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Non-mining areas key issue in Vale’s contract renegotiation [Indonesia] – by Raras Cahyafitri (Jakarta Post – June 10, 2014)

http://www.thejakartapost.com/

The Energy and Mineral Resources Ministry and nickel miner PT Vale Indonesia are still hammering out issues relating to Vale’s contract renegotiation.

The ministry’s director general for minerals and coal, R. Sukhyar, recently said Vale had agreed to return around 83,000 hectares (ha) of its concession area to the government.

However, he said, both parties were still negotiating to accommodate requests by the local administration regarding the utilization of areas that had not been mined or explored. These areas have been left idle.

A meeting attended by several governors and regents of areas where Vale holds concessions was held last week. According to Sukhyar, local administrations were seeking assurance that Vale’s activities would benefit the regions.

“It’s important to know Vale’s future plans. If they conflict with governors and regents’ plans, we have to settle. In the future, if none of the plans are realized, Vale’s operation can be reviewed,” Sukhyar said.

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Western Investors Might Not Yet Have Redeveloped An Appetite For Resources But China Certainly Has – by Tim Treadgold (Forbes Magazine – May 16, 2014)

http://www.forbes.com/

China is buying resources. The west is selling. Who’s got the timing right? That’s the $64 billion question as interest in mineral resources heats up just as some people expect it to continue cooling.

Over the past 12 months a series of deals has seen Chinese companies soak up surplus assets being offloaded by western companies or, more recently, step up their buying demands by launching unsolicited takeover offers.

The latest raid came on Tuesday when Guangdong Rising made a $1.4 billion, all-cash offer, for full control of the Australian-base copper producer, PanAust. That followed a similar $1.4 billion all-cash offer by China’s biggest steel-maker Baosteel, in conjunction with an Australian rail operator, Aurizon, for the iron ore project developer, Aquila Resources.

Buying Ahead Of A Possible Commodity-Price Recovery

Interesting as the bids are for PanAust and Aquila the more important message for investors is that they are not the only moves by Chinese companies on mining assets, nor are they the only recent examples of corporate activity in the global mining sector which seems to be developing a head of steam despite there being little evidence of a significant recovery in commodity prices.

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Indonesia considers new restrictions on coal output, exports – by Fergus Jensen (Reuters India – June 6, 2014)

http://in.reuters.com/

JAKARTA, June 6 (Reuters) – Indonesia, the world’s top exporter of thermal coal, is considering new regulations to limit coal production and tighten controls on exports, government officials said on Friday, and could introduce the rules by early next month.

The country currently exports around 70 percent of its coal production, much of it to China and India, but the government says output must be capped as domestic demand for the power station fuel is expected to rise by 13 percent this year and next.

“Technically we are already restricting (coal production) through discussions on companies’ work plans and budgets, but formally we need a ministerial regulation on mines,” Coal Enterprise Director Edi Prasodjo told Reuters, referring to an output cap for producers his team is working to release soon.

In March, Prasodjo said Indonesia hoped coal production would remain at or below 421 million tonnes this year, but the government’s ability to restrict output has yet to be proven.

Many of Indonesia’s biggest coal mines, such as Bumi Resources and Toba Bara Sejahtera, are owned by politically connected figures, and with presidential elections fast approaching in July the government may face difficulties imposing new rules on the sector.

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