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COLUMN-Everybody but the curve thinks iron ore is going down – by Clyde Russell (Reuters India – April 22, 2014)

http://in.reuters.com/

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

(Reuters) – It’s hard to find any bullish predictions for iron ore prices, with the consensus being that it will drop to below $100 a tonne. Except this isn’t reflected in the financial markets.

The latest bearish signal for iron ore is the decision by an Indian court to allow the mining of 20 million tonnes per annum in the state of Goa, most of which will end up on the export markets.

While this isn’t enough ore to cause prices to slump, it adds to the overall growth in supply, which is widely expected to overwhelm growth in demand, especially as top buyer China’s economy loses some momentum. But despite the bearish outlook, the actual pricing for iron ore, both in the spot and futures markets, is holding up well.

Asian spot prices .IO62-CNI=SI were $113.30 a tonne on Monday, down 15.6 percent so far this year. But they are up 8.2 percent from the year low of $104.70 on March 10 and 31 percent above the 2012 low of $86.70, which was the weakest price for three years.

But more importantly than the spot market, the main paper markets are also showing pricing resilience. The curve for Singapore iron ore swaps <0#SGXIOS:> has a good track record of pointing to turns in market pricing.

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Rio’s Oyu Tolgoi woes deepen – by Matt Chambers (The Australian – April 22, 2014)

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

MONGOLIA has stepped up criticism of Rio Tinto over continuing delays to expansion of the pair’s $US11.5 billion ($12.3bn) Oyu Tolgoi copper and gold mine, revealing a big divide still stands in the way of the profitable second stage of the giant mine.

In a letter to Rio chief Sam Walsh leaked to the Mongolian press at the weekend, Prime Minister Norov Altankhuyag chided Rio over behind-the-scenes moves to declare it was seeking an end-of-year extension to project financing for the $US5.1bn underground expansion of Oyu Tolgoi.

Lenders’ commitments for a $US3.6bn financing package for the stalled expansion expired last month because Rio and the government could not agree on Mongolia’s take from the project, access to water, and a $US2bn cost blowout on the first-stage ­expansion.

The disagreement threatens to derail the underground expansion of the project, which is where most of the value is set to be ­realised. The March 27 letter from Mr Altankhuyag, who has declared Mongolia is ready to wrap up the funding, shows the government is unhappy with Rio’s public statements on the project.

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Indonesian ban on unprocessed ore exports may help Vale – (CBC News Sudbury – April 17, 2014)

http://www.cbc.ca/sudbury/

A new commodities report projects a boost in the price of nickel over the next three years — and that will have an impact on mining companies in Sudbury.

The projected price hike is connected to what’s happening overseas in Indonesia, where that country recently put a ban on exports of unprocessed ore—an effort to encourage foreign investment in domestic refining activity.

The country produces about 28 per cent of the world’s nickel, so its withdrawal from the global market marks a significant drop in supply. Recent nickel prices have reflected this new reality, as it reached a six-month high this week at $8.11/lb.

“I have revised upward my price forecast for 2015 to $9 a pound,” said Patricia Mohr, a commodities specialist with Scotiabank.  “We started this year at prices just a little above $6, so it does represent quite an improvement.”

Miner Vale has operations in Indonesia, but spokesperson Cory McPhee said the company won’t be affected by the ban. “We’re a company that actually produces a refined nickel product in Indonesia,” he said.

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Even in this market, miners see assets worth overpaying for – by Brian Milner (Globe and Mail – April 17, 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.

The bargain-hunters scouring the mining world for dirt-cheap acquisitions must be getting frustrated. The battle for Osisko Mining Corp. in Quebec and a Chinese company’s full-price purchase of a Peruvian copper mine show that softer demand, weaker prices and the pounding many miners have taken in the stock market aren’t pushing producers to part with valuable core assets for chump change.

Miners’ willingness to hang tough suggests the battered sector has reached a bottom. Producers are willing to wait and for good reason – there is an increased willingness among potential buyers to pay top dollar for high-quality assets.

In the Osisko case, Yamana Gold Inc. and Agnico Eagle Gold Inc. have reached a friendly deal to buy the Montreal-based gold miner for $3.9-billion and divvy up its assets. The stock and cash offer works out to $8.15 a share, 11 per cent above a revised bid from Goldcorp Inc.

Goldcorp sweetened its original hostile offer by about $1-billion to $3.6-billion when it became apparent that Osisko wasn’t about to be low-balled on its prized Canadian Malartic mine in Quebec.

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COLUMN-China economic data shows trend to less-intensive commodity use – by Clyde Russell (Reuters U.K. – April 16, 2014)

http://uk.reuters.com/

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

LAUNCESTON, Australia, April 16 (Reuters) – China’s economic growth data contains a short-term positive and longer-term negative for commodity demand in the world’s largest user of raw materials.

The positive is that gross domestic product (GDP) growth of 1.4 percent in the first quarter is soft enough to justify the mini-stimulus spending on infrastructure planned by the authorities.

While many in the market will focus on the year-on-year GDP growth of 7.4 percent being ahead of the market consensus for 7.3 percent, the more important figure is the quarterly outcome. If annualised, this would come in at 5.8 percent, well below the government’s target for 7.5 percent growth.

Even a mini-stimulus that boosts spending on rail and other infrastructure would be positive for demand for major commodities, such as iron ore, copper, crude oil and coal. There are, of course, risks to the short-term outlook in the form of a crackdown on using commodities as collateral for financing deals.

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Canada knew nuclear deal with China could be seen as ‘weak’: Docs – by Carl Meyer (Embassy News – April 16, 2014)

http://www.embassynews.ca/

Briefing notes say even though safeguards changed, non-proliferation policy would still be achieved.

After a major Canadian uranium mining firm landed deals with Chinese state-owned enterprises, the Harper government met several times with the firm and then announced a new protocol to ship raw Canadian uranium directly to China—even though it knew the protocol’s safeguards could be perceived as “weak,” government documents show.

Nuclear disarmament advocates fear the new scheme is an example of commerce driving policy in Ottawa. They say it could set a precedent that countries can establish workarounds to international nuclear security standards if the status quo was seen to be restricting potential trade.

“Commercial interests, as important as they are, must be shaped and constrained by non-proliferation considerations,” said Cesar Jaramillo, program officer for space security and nuclear disarmament at Waterloo-based Project Ploughshares.

But Canada says the deal with China will ensure Canadian uranium is used only for “strictly peaceful, non-military purposes” and that the new requirements are “appropriate to the level of the proliferation risks involved.” The Chinese Embassy also assured Canadians that its nuclear facilities are safe and under control.

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UPDATE 2-BHP and Australian rivals raise iron ore targets as competition grows – by James Regan (Reuters India – April 16, 2014)

http://in.reuters.com/

SYDNEY, April 16 (Reuters) – Australian miners are racing ahead with plans to expand iron ore production to capture more of the Chinese market for the steelmaking ingredient, amid strong competition from the world’s biggest supplier Vale of Brazil.

Efforts to beat already ambitious output targets comes as a crackdown in China on using commodities as collateral to raise cash risks unleashing iron ore sales from tens of millions of tonnes sitting in Chinese port warehouses, pressuring prices.

Fortescue Metals Group Ltd, which is raising production 57 percent this year, says its needs iron ore prices to stay between $110-$120 a tonne for the next 12-18 months in order to pay off a targeted $2.5 billion in debt.

The Australian Bureau of Resources and Energy Economics forecast an average price of $110 a tonne this year but only $103 a tonne in 2015. By 2016, Citigroup sees the price falling to $80.

Iron ore was quoted at $117.10 .IO62-CNI=SI on Wednesday. BHP, the world’s biggest diversified mining company, on Wednesday lifted full-year iron ore production guidance by 5 million tonnes to 217 million as it pushes ahead with new mine work in Australia.

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World Gold Council Press Release: NEW REPORT PREDICTS SUSTAINED STRONG GOLD DEMAND IN CHINA IN NEXT FOUR YEARS

http://www.gold.org/

Follow the World Gold Council @GOLDCOUNCIL and download the full report at http://www.gold.org/supply-and-demand/china-report

New York, 15 April 2014 – A major report published today by the World Gold Council “China’s gold market: progress and prospects” suggests that private sector demand for gold in China is set to increase from the current level of 1,132 tonnes(t)[1] per year to at least 1,350t by 2017[2]. Following the record level of Chinese demand in 2013, which saw the country become the world’s largest gold market, the report suggests that while 2014 is likely to see consolidation, the succeeding years are likely to see sustained growth.

The report examines the factors that have driven China’s rise to become the number one producer and consumer of gold since the market began liberalising in the late 1990s. It also highlights why despite this steep growth in demand, the market will continue to expand, irrespective of short term blips in the economy.

The next six years will see China’s middle class grow by over 60%, or 200m people, to a total of 500 million. Comparing this to the total population of the US, which stands at 319m, puts the size of this new market of affluent consumers, with the propensity to buy gold, in perspective.

In addition to these newly emerging middle classes, rising real incomes, a deepening pool of private savings and rapid urbanisation across China suggest that the outlook for gold jewellery and investment demand in the next four years will remain strong.

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Scotiabank raises nickel price outlook in light of Indonesian export ban – by Craig Wong (Canadian Press/CTV News – April 14, 2014)

http://www.ctvnews.ca/

OTTAWA — Scotiabank is raising its outlook for the price of nickel — a key component in stainless steel — following an Indonesian export ban on unprocessed ore that took effect earlier this year. Nickel prices have been rising following the Indonesian ban that was enacted in an attempt to encourage foreign investment in ore processing in the country.

“While the export ban was announced more than four years ago with an unchanged starting date of January 2014, few market observers, including ourselves, believed that Indonesia would have the resolve to stick with this agenda,” Scotiabank said in a report Monday.

“However, after three months and no signs of the ban being eased or watered down, the nickel market has begun to panic, with prices moving up sharply.”

The bank said it now expects nickel to average US$7.66 per pound this year, up from earlier expectations for US$6.75. Scotiabank also raised its outlook for 2015 to US$9 from US$7 for 2016 to US$10 from US$7.50. The price of nickel was US$6.82 per pound last year.

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Chinese group buys Las Bambas mine for $5.85-billion, giving boost to sector – by Rachelle Younglai (Globe and Mail – April 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.

Glencore Xstrata PLC sold its massive Peruvian copper project to Chinese investors for $5.85-billion (U.S.) in cash, the biggest deal in the mining sector in more than a year and an encouraging sign for an industry that has been hit hard by lower metal prices.

The sale of Las Bambas to a consortium led by state-owned China Minmetals Corp. could inject more life into the mining sector, which has struggled with fears that China’s slowing economy will crimp demand for raw materials.

“This shows you that Chinese companies still really believe in China. Westerners are overreacting to the lower economic growth,” said John Gravelle, mining leader with consultancy firm PricewaterhouseCoopers LLC.

The large Las Bambas copper mine is mostly built and scheduled to start production next year. It is scheduled to produce 400,000 tonnes of copper a year from 2015, equivalent to 12.5 per cent of 2013 imports of copper metal by China. Chinese regulators required the divestiture of the Peruvian asset when Switzerland-based Glencore bought Anglo-Swiss Xstrata.

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China-backed group pays US$6B for Glencore’s Las Bambas copper mine – by Karen Rebelo and Silvia Antonioli (Reuters/National Post – April 14, 2014)

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

A Chinese consortium bought the Las Bambas copper mine in Peru from Glencore Xstrata for US$6 billion, the high end of analysts’ forecasts in China’s biggest acquisition of a mine, showing the strength of its long-term need for copper.

MMG Ltd, the Hong Kong-listed offshore arm of China’s state-owned Minmetals Corp, led the winning bid in partnership with Hong Kong-registered Guoxin International Investment Corp and state-owned investment giant CITIC Group.

Commodity trader Glencore had agreed to sell Las Bambas to secure approval from China’s competition authorities for its takeover of miner Xstrata. Beijing made this condition to prevent the merged group from having potentially too much power over the global copper market.

A Chinese buyer had been considered a virtual certainty since Las Bambas was put on the block, given the deep pockets of China’s state-owned enterprises and its hunger for copper as the world’s top consumer of the metal.

Glencore will receive about US$5.85 billion in cash upon completion of the deal, which compared with analysts’ forecasts between US$5 billion and US$6 billion.

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South Africa more competitive than China in ferrochrome: IFL – by Emma Farge (Reuters India – April 9, 2014)

http://in.reuters.com/

DAKAR – (Reuters) – South Africa should be able to snatch back the top spot in global ferrochrome production from China within five years thanks to cost-cutting, says one of Africa’s biggest producers, International Ferro Metals.

South Africa’s share of world production of the steel feedstock has slumped since 2012 when it fell by 15 percent to 32 percent of the 4.8 million metric tons (5.2911 million tons) produced globally, relegating it to second place behind China.

“South Africa will regain its leading position as top ferrochrome producer in the world. A number of us have reduced our costs so we can place alloy into China cheaper than the Chinese can produce,” said Chris Jordaan, Chief Executive of South Africa-based International Ferro Metals (IFL) (IFL.L).

That could be possible within five years, he said in a telephone interview during the Reuters Africa Summit. “It suddenly makes it much better to smelt material as close to the ore as you can.” A weak South African rand was also helping the country regain competitiveness, he said.

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PRESS RELEASE: Eramet Group: NEW CALEDONIA: AGREEMENT BETWEEN GROUPS ERAMET AND VALE AND SOUTH PROVINCE FOR THE STUDY OF MINING AND BENEFICIATION OF THE NICKEL DEPOSITS AT PRONY AND PERNOD

 Paris, April 7, 2014

NEW CALEDONIA: AGREEMENT BETWEEN GROUPS ERAMET AND VALE AND SOUTH PROVINCE FOR THE STUDY OF MINING AND BENEFICIATION OF THE NICKEL DEPOSITS AT PRONY AND PERNOD.

ERAMET, Vale Canada and New Caledonia’s South Province signed a framework agreement on April 5, 2014 in Nouméa providing for the exploration, study and beneficiation of the nickel deposits at Prony and Pernod in the south of New Caledonia.

This agreement is governed by the Mining Code, passed by the New Caledonian congress in 2009. Under this code, the deposits were classified as “Provincial Technical Reserves”* by South Province on February 12, 2012.

It follows on from the signature by the three entities of a declaration of intent on November 5, 2012 setting out the guidelines of a partnership for the development in New Caledonia of the mineral deposits at Prony and Pernod.

This agreement provides for the creation of a joint venture for the project, owned 34% by South Province, and 33% each by ERAMET and Vale Canada. The joint venture will first undertake the geological exploration works and technical studies required for improving knowledge on the deposits and the operation of the mine.

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The Most Dangerous Coal Mine In The World: Mongolia’s Illegal Nalaikh Pits – by Jacopo Dettoni (International Business Times – April 01 2014)

http://www.ibtimes.com/

ULAANBATAAR, Mongolia — Deep inside the earth, the eyes of blackened miners shimmer under spotlights as they hammer endlessly upon rock, tapping the vein of Mongolia’s largest illegal coal mine. The Nalaikh mine, 40 kilometers (25 miles) from the capital, Ulaanbaatar, is both a vision from the past and a rogue operation from the present.

Coal dust streaks the miners’ cheeks, their hands, their worn clothes. In many cases, whether they know it or not, their lungs are being ruined by coal and nicotine. They risk their lives every time they go into the pits.

Frequently, theirs is a losing bet. The miners here are part of a booming complex of illegal mining in Mongolia, the seamy underside of an expansion of legal mining in the past several years. Fatal accidents take place at a higher rate here than in the infamously deadly China mines, as private operators seek to maximize profits by skimping on safety gear.

The miners crawl in the darkness for hundreds of meters through narrow, rambling passages before reaching the working face, where the new coal is cut. Dug with shovels and picks, the tunnels have few timber supports — a minimum safety standard in any coal mine, and the walls crumble as carts loaded with coal slide up, pulled from the outside by trucks.

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REVIEW: Bre-X – Dead Man’s Story – by Marilyn Scales (Canadian Mining Journal – April 1, 2014)

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

You don’t have to be an industry insider to remember the story of Bre-X – the 200 million oz of gold in the jungles of Borneo that disappeared overnight. The story of the company’s rollercoaster ride – propelled by enormous greed – made headlines all over the world and severely damaging the reputation of Canada’s stock exchanges and mining community.

The facts should be familiar. A junior explorer sets out in a remote part of Indonesia to make a gold mine. They drilled, and released promising results. Investors invested, driving up the Bre-X stock price, and the company suddenly had no shortage of investors. More drilling was done, and even better results were released. The analysts loved the project. Bre-X management made higher and higher contained gold estimates – 20 million, 30 million, 100 million, and finally 200 million oz of gold just waiting to make everyone rich.

Of course, promises of huge riches attracts huge appetites. Bigger companies considered buying out Bre-X and gaining control of the Busang gold. The head of the Indonesian government, Suharto, wanted the pot of gold enough to usurp Bre-X’s claim to the property and asked an American miner to develop the project.

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