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Asia Mining

China, Japan scramble for nickel after Indonesian ban – by Polly Yam and Yuka Obayashi (Reuters U.S. – May 8, 2014)

http://www.reuters.com/

HONG KONG/TOKYO, May 8 (Reuters) – Nickel buyers in China and Japan are scrambling to secure supplies as soaring prices and a fear of shortages boosts demand for both refined metal and long-term ore contracts.

The price of nickel ore from the Philippines has more than doubled since late February, as supplies have dried up from rival producer Indonesia, previously the world’s biggest exporter.

China, the world’s largest nickel consumer, has recently increased imports of refined metal to help meet higher seasonal demand, say trader and importers, as the price of commonly used alternative nickel pig iron has soared since the Indonesian ban took effect in mid-January.

Nickel demand may get a further boost from stockpiling by China, with refined imports due to start arriving at State Reserves Bureau warehouses before the end of June, sources with knowledge of the matter said.

“Everybody in China is bullish nickel and everybody is hoarding nickel of any kind,” commodities strategist Ivan Szpakowski of Citi in Shanghai said. China, the world’s largest steelmaker, has turned to laterite nickel ores in recent years to produce nickel pig iron, a cheap, low-grade ferro-nickel – an alloy of iron and nickel – used in stainless steel.

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Bauxite: Will Australia fill Indonesia’s shoes? – by Oliver Probert (Australian Journal of Mining – May 07, 2014)

http://www.theajmonline.com.au/

Indonesia’s move to ban the export of mineral ores has left analyst Wood Mackenzie asking the question: where will China look to satisfy its growing appetite for bauxite?

The analyst’s most recent forecasts indicate that global alumina refinery production will rise to almost 140mt by 2018, which means we’ll see bauxite demand rise by almost 80mt to 350mt. China is the main global player in the aluminium market. It represents 40% of global supply, and 60% of global demand for the metal.

With China’s alumina refinery production forecast to rise by almost 17mtpa by 2018 and a further 40mt by 2030, Wood Mackenzie estimates the Asian giant will consume as much as 240mt of bauxite by 2030.

Until recently, Indonesia was the main supplier of bauxite to China, accounting for around 65% of overall supply last year. But in an attempt to create jobs by encouraging producers to build refineries on mainland Indonesia, the government enforced a ban on mineral ore exports in January.

The ban has created a significant supply gap for China to fill, and while swollen stockpiles and source diversification will soften the blow in the short to medium term, Wood Mackenzie believes the ban could be transformative to the global bauxite market in the longer term.

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Mine M&A Set to Double as China Returns in Coal to Copper Deals – by Elisabeth Behrmann, David Stringer and Brett Foley (Bloomberg News – May 07, 2014)

http://www.businessweek.com/

China, the world’s biggest buyer of metals, is back on the hunt for acquisitions, triggered by a decline in prices and a shift in government policy.

Chinese demand for assets may help fuel a doubling in the number of mining deals worldwide this year, according to Jay Leary, law firm Herbert Smith Freehills’s joint global relationship partner for BHP Billiton Ltd. (BHP), the world’s biggest miner. Copper, iron ore and coal are the top targets, he said.

“Over the past six weeks we have seen a significant step-change in the amount of M&A activity in the mining sector,” Leary said in an e-mail. “Over the next year, we would expect Chinese investors to represent a material proportion of mining global transactions, perhaps as much as 30 percent of transactions.”

Mining acquisitions by Chinese companies surged 63 percent in the first four months of this year and are forecast to accelerate as new rules from today mean most overseas deals under $1 billion don’t need government approval.

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Patchy Power Challenges Indonesia Minerals Goal: Southeast Asia – by Fitri Wulandari and Eko Listiyorini (Bloomberg News – May 07, 2014)

http://www.businessweek.com/

The challenge of supplying power across an archipelago of more than 17,000 islands is complicating Indonesia’s goal of getting more out of its scattered mineral resources.

While almost 80 percent of Indonesia’s electricity capacity is in the islands of Java and Bali, the majority of its most abundant minerals such as bauxite and nickel are found in provinces including Sulawesi, Halmahera and Kalimantan. That’s testing PT Perusahaan Listrik Negara, the state utility, which received requests from 25 companies to supply new mineral-processing plants with power as of last month.

“The problem is smelters are often located in remote areas where power stations and infrastructure are lacking,” Jarman, the director general of electricity at the energy and mineral ministry, said in an interview in Jakarta.

Indonesia, the biggest producer of mined nickel, banned mineral ore exports in January to boost investment in the smelters and refineries needed to process raw materials locally into higher-value commodities. By 2030, the plants needed to turn the nation’s ore into metals will require additional power equivalent to 13 percent of current capacity, putting a strain on the electricity network in Southeast Asia’s largest economy.

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COLUMN-China’s robust commodity imports boosted by stockpiling, financing – by Clyde Russell (Reuters U.S. – May 8, 2014)

http://www.reuters.com/

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

LAUNCESTON, Australia, May 8 (Reuters) – How long can strength in China’s commodity imports co-exist with weakness in other key indicators, such as manufacturing?

If you accept the argument that China can’t continue to import record, or near-record, levels of major commodities while experiencing slowing growth, then one of two outcomes becomes inevitable.

Either commodity imports start to moderate to align more closely with other economic data, such as the HSBC Purchasing Managers’ Index, which fell for a fourth straight month in April, or China’s growth shows evidence of re-accelerating.

So far this year, strength in commodity imports has tended be put down to either one-off factors, or demand unrelated to actual consumption, for example, buying iron ore in order to secure financing to use in unrelated investments.

If these factors are the reason behind the seeming disconnect between natural resource imports and the overall economy, then the most likely outcome will be for imports of crude oil, iron ore, copper, soybeans and other commodities to ease in coming months.

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Indonesia’s gamble on ore export ban starts to hit home – by Ben Bland (Financial Times – May 7, 2014)

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

Ketapang, West Kalimantan – Two hundred huge hauling trucks used to hurtle down the 34km dirt road from Harita’s Air Upas mine to its river port every day, shipping bauxite for China’s resource-hungry aluminium industry.

But work at the sprawling site in Ketapang, West Kalimantan, and dozens like it across Indonesia ground to a halt in January after the government defied lobbying from this powerful industry by implementing a long-planned ban on the export of unprocessed

The move is designed to promote investment in costly domestic processing facilities, but critics, such as the World Bank, say it has damaged investor confidence and is threatening the state finances.

Economic growth fell to its slowest pace in five years in the first quarter as tens of thousands of workers were made redundant and mineral exports, which reached $11bn last year, were halted.

Harita, a family-owned conglomerate, and its contractors laid off nearly 5,000 workers in this poor, remote region where mining has been a key driver of employment since much of the remaining rainforest was obliterated by illegal logging a decade ago.

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China decries Canada’s ‘negative’ investment rules – by Nathan Vanderklippe (Globe and Mail – May 8, 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.

HONG KONG — China’s incoming ambassador, saying Beijing still does not fully trust Canada, called on the federal government to roll back “negative” new foreign investment rules and smooth the way for increased trade with China.

Luo Zhaohui, a veteran diplomat with a love of basketball, will board a plane Thursday for Ottawa, where he will take charge of an international relationship that is as vital to Canada’s economic future as it is fraught with problems.

China has become banker to Canada’s oil and gas industry and buyer of its minerals and lumber, a country whose vast market and deep pockets have stoked lust among Canadian political and business leaders alike. Annual trade has reached nearly $60-billion (U.S.), although that’s “not enough” in the opinion of Mr. Luo, who held out the promise of a China open to buying more of what Canada has to sell.

But mutual suspicion has clouded the relationship even as ties between the two counties have deepened, with Canadian anxiety over the clout of the rising superpower and China bridling at trade and investment restrictions.

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Centerra Gold continues to navigate minefield of Kyrgyzstan politics – by Peter Koven (National Post – May 8, 2014)

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

Centerra Gold Inc. is so used to getting threatened by its host government in Kyrgyzstan that it scarcely blinks anymore.

Over the past couple of weeks, Centerra watched as the Kyrgyz parliament passed a law prohibiting activities (like gold mining) that affect glaciers, and as a government agency suggested the company’s flagship Kumtor mine could be suspended. On top of that, its 2014 mine plan has still not been approved by the state.

If these events happened in another country, mining investors would be running for the hills. But they are so commonplace in Kyrgyzstan that Centerra shares barely budged, remaining around the $5.50 mark so far this week. It is simply the price Centerra has to pay to operate in a country that the Fraser Institute recently deemed the worst mining jurisdiction on earth.

Yet through all the noise, the one constant is that the Kumtor mine continues to run and churn out cash. It has done so for 16 years, with only one brief interruption last year that had anything to do with politics.

“Even though the mine comes under a lot of rhetoric and is used as a political football, they do allow it to continue to operate because it’s such a key part of the country,” Centerra chief executive Ian Atkinson said in an interview.

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China’s Baosteel in $1 billion bid to revive Australia iron ore project – by Sonali Paul (Reuters U.S. – May 5, 2014)

http://www.reuters.com/

SYDNEY – (Reuters) – Chinese steel giant Baosteel Resources and an Australian partner launched a $1 billion takeover bid for Australian explorer Aquila Resources in a move that could help break the grip of mega iron ore exporters Rio Tinto and BHP Billiton.

Monday’s unsolicited A$1.14 billion ($1.06 billion) offer to take over Aquila Resources Ltd (AQA.AX) could open up a new Australian iron ore export region to supply Asian steelmakers, by jumpstarting the $7 billion West Pilbara Iron Ore project (WPIO), half-owned by Aquila.

State-owned Baosteel’s move would be the biggest foray into an undeveloped iron ore project in Australia by a Chinese investor since CITIC Pacific’s (0267.HK) $10 billion Sino Iron project, which began producing last year after massive cost blowouts and delays.

Baosteel, which already has a 20 percent stake in Aquila, said it first invested in the company back in 2009 to help it fund the iron ore project and a separate coking coal mine.

“But after five years we haven’t seen any projects being started. So we have been very patient, but we’ve become frustrated,” chief financial officer Wu Yiming told reporters on a conference call from Sydney.

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UPDATE 2-S.Africa’s Harmony Gold scales back Papua-New Guinea project – by Ed Stoddard (Reuters India – May 6, 2014)

http://in.reuters.com/

JOHANNESBURG, May 5 (Reuters) – South Africa’s Harmony Gold has scaled back the size and expenditure on building its Papua New Guinea Wafi-Golpu mine, enabling it to raise funding for the project, its chief executive said.

The gold and copper project, a joint venture with Newcrest Mining, sits on deposits with a metal content estimated to be worth $85 billion at current prices. The plans unveiled in 2012 called for spending of almost $6 billion to develop it.

The mining firm is now looking at a “significantly lower capex, something that will be well within our reach to fund”, CEO Graham Briggs told Reuters on Tuesday, after Harmony released its results for the March quarter.

“August is the time when we will be able to release more information on that,” he added. Harmony has scaled back its original plans as mining investors globally have shied away from big capital expenditures on projects in the face of rising costs and falling prices.

“The timing of big builds and the raising of that sort of money, and debt levels and shareholder views changed our minds, and now we are talking about a significantly smaller mine,” Briggs said.

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Nickel price rise: too much too soon says new report – by Frik Els (Mining.com – May 5, 2014)

http://www.mining.com/

Indonesia surprised the mining world in January putting into effect an outright ban on nickel ore exports.

After a relatively subdued initial reaction on nickel markets – no-one thought the Asian nation would go through with the ban and when it did, the expectation was that the rules would be water down substantially – the price of the steelmaking raw material is now up 32% in 2014.

Indonesia accounted for around a fifth of global supply at an estimated 400,000 tonnes of contained metal so the potential was there for a big impact on the price.

But record inventories around the globe (hitting 285,000 tonnes in March), massive stockpiling by China’s nickel pig iron producers ahead of the ban, and years of growing mine supply (11% per year since 2009 to 2 million tonnes), kept the price near financial crisis levels by the end of January.

Traders only really entered panic mode when supply from the world’s largest producer Norilsk was also put in danger due to the possibility of sanctions against the Russian company over the crisis in Ukraine.

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Indonesia needs to tackle infrastructure hurdles to build on its youthful potential – by Jim O’Neil (Emerging Markets.org – May 2, 2014)

http://www.emergingmarkets.org/

Jim O’Neill is Visiting Research Fellow to BRUEGEL and Economic Advisor to the International Finance Corporation

Indonesians probably have the most justifiable gripe of any nation, along with Mexico, not to be included in the Bric group that I dreamt up in 2001.

Indonesia has a larger population than two of the four Bric nations, Brazil and Russia, and of course, it has a remarkably youthful population also, with demographic dynamics that give its growth potential a lot of hope in the next couple of decades.

These basic attractions are partly what led me to thinking of the notion of an additional group of emerging economies to focus on: the so-called Mint countries; Mexico, Indonesia, Nigeria and Turkey. Each of these has the potential to be a significant part of the world economy if not quite as important as the Bric economies. I define a Bric in a global context these days, as an emerging economy that if not already 3% of global GDP or more, one that has that clear potential in the next decade or two. For the Mint economies, I think of them as emerging economies that either are, or have the potential to be somewhere between 1%–2% of global GDP.

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Chinalco Mining sets sights on copper projects in Latin America – by Eric Ng (South China Morning Post – April 25, 2014)

http://www.scmp.com/business/commodities

Metal unit keen on copper projects in Peru with its huge potential and friendly environment

Chinalco Mining, the non-ferrous and non-aluminium metals unit of aluminium giant Chinalco, is seeking acquisition opportunities in Latin America for copper projects with long-term return rates of more than 10 per cent.

Chief executive Peng Huaisheng said the region presented more development potential, especially Peru, where the company has been developing the Toromocho copper project since 2007.

“Our understanding is that Peru offers greater potential within Latin America,” he said. “Peru has a strategy to catch up with Chile in metals and mining development, so it provides an overseas-investor-friendly investment environment.”

Chile is the world’s largest producer and resource holder of copper, which is used widely in the power distribution and construction sectors. China imports about 70 per cent of its raw copper ore needs. Hong Kong-listed Chinalco Mining’s US$3.5 billion Toromocho project, about 140 kilometres from Lima, started trial commercial production in December.

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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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Teck Resources Ltd to cut 600 jobs, warns current coal supply is ‘uneconomic’ – by Peter Koven (National Post – April 23, 2014)

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

TORONTO – Steelmaking coal producers have started to slash production in response to lower prices, but Teck Resources Ltd. is warning that a lot more supply needs to be cut by high-cost rivals to bring the market into balance.

“Prices are currently at their lowest level since 2007, and margins are at their lowest level in 10 years,” chief executive Don Lindsay said on a conference call Tuesday. “We continue to be surprised there remains so much uneconomic coal supply on the market.”

Vancouver-based Teck announced on Tuesday that it will cut roughly 600 jobs as it tries to reduce costs and adapt to lower commodity prices, particularly for coal. The company’s realized coal price in the first quarter was US$131 a tonne; by comparison, Teck sold its steelmaking (or coking) coal for an average of US$257 a tonne in 2011.

The market has gotten even worse in recent weeks. The benchmark price for the second quarter is just US$120 a tonne, while spot prices have flirted with US$100.

Prices are falling because of concerns about rising production, slowing growth in China and the fact the Chinese government is closing some the country’s dirtiest steel mills to reduce air pollution.

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