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COLUMN-China PMI may not signal rising commodity demand – by Clyde Russell (Reuters India – September 3, 2013)

http://in.reuters.com/

(The author is a Reuters columnist. The opinions expressed are his own.)

(Reuters) – Commodity producers and traders have no doubt been cheered by the recent recovery in China’s key manufacturing sector, but the boost may be more to sentiment than actual demand.

This is because there is a fairly weak correlation between movements in China’s official Purchasing Managers’ Index (PMI) and imports of key commodities such as crude oil, iron ore and copper. There is a far better correlation between China’s imports and the price of these commodities.

This suggests that while stronger, or weaker, industrial growth helps set the direction for imports, the actual size of the movement in imports is more related to price.

The official PMI rose to a 16-month high of 51.0 in August, beating market expectations for a reading of 50.6, with the breakdown showing better conditions across the factory sector, including the key export orders category.

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China leads in resources buy-ups – by Paul Garvey (The Australian – August 31, 2013)

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

An analysis by The Weekend Australian found that Chinese interests bought $5.4 billion worth of Australian-owned mining and energy assets during the 2013 financial year, eclipsing Japan and Canada as the most active foreign investor in the sector.

While overall foreign acquisitions in Australia’s mining and oil and gas industries halved during the year, reflecting steep falls in both commodity prices and resource stocks, China’s investments in the mining sector held steady from 2012 levels.

The ongoing corporate activity challenges the notion that Chinese companies feel unwelcome when investing in Australia, following controversies over mining deals in recent years such as the blocked Chinese acquisition of OZ Minerals’ Prominent Hill mine and Chinalco’s failed deal to buy into Rio Tinto’s West Australian iron ore operations.

Comments during the week by Kevin Rudd, in which he said he was anxious about an “open-slather approach” to foreign investment, have reignited concerns about perceptions of hostility from Australia towards Chinese investment.

While the Prime Minister’s comments did not refer to China, they have been criticised by industry groups as “borderline xenophobic” and as likely to send a negative message to Chinese investors.

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Fears grow about Reko Diq Gold mines…Baloch senator says deal offered to China; government denies – by Shaheen Sehbai ([Pakistan] The News International – August 28, 2013)

http://www.thenews.com.pk/

WASHINGTON: While major world mining and investment companies are preparing to invest big time, big money in Balochistan, specially in the mining sector, suspicions and doubts that the biggest gold mine of Reko Diq may be quietly handed over to China as part of the growing economic ties are also coming to the fore.

Official and business circles have been wondering for some time what will happen to the multi-hundred billion dollar Reko Diq gold and copper mines after the world’s largest mining company, Barrick Gold of Canada, was thrown out of Pakistan by the Supreme Court of Pakistan during the PPP regime.

But after the recent visit of high level government delegation to China and a flurry of quick MoUs and super-paced exchange of visits, an important leader from Balochistan, former Senator Sana Baloch has alleged publicly that the government has promised these mines to China in a year or so.

While the Government leaders strongly denied any deal or any promise made during the Beijing visit, an official Pakistan Government statement assuring that the Reko Diq mines will be given to the highest bidder in an international tender is still awaited.

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UPDATE 1-Indonesia may loosen export ban on metal ores – by Rieka Rahadiana and Fergus Jensen (Reuters India – August 28, 2013)

http://in.reuters.com/

Aug 28 (Reuters) – Indonesia will push for a relaxation of its controversial 2014 ban on metal ore exports amid a scramble to support the rupiah and restore confidence in Southeast Asia’s largest economy.

Indonesia is the world’s top exporter of nickel ore, coal and refined tin and its mining industry contributes around 12 percent of gross domestic product (GDP).

However, the ban on unprocessed mineral exports from January 2014 has hit the industry and uncertainties over the country’s mining rules have dented its credibility with foreign investors.

If approved, the reversal of mining policy will upset metal industries banking on a tightening of ore shipments that have increased significantly in the lead up to the ban. However, some in parliament doubted the government would manage to overturn the rule.

Under the proposed revision, mining companies with smelters under construction would be allowed to continue to export unprocessed minerals, but would be charged a progressive duty on the shipments depending on how close to completion their projects are, Industry Minister Muhammad Sulaeman Hidayat told reporters.

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Centerra reports ‘progress’ in talks over Kumtor mine in Kyrgyzstan – by Peter Koven (National Post – August 24, 2013)

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

TORONTO – After months of political turmoil, Centerra Gold Inc. may finally be closing in on a resolution to one of the mining industry’s most volatile disputes. Reports out of Kyrgyzstan suggest the government and Centerra are nearing agreement on a joint venture to operate the Kumtor mine. The Kyrgyz prime minister said they are discussing a 50-50 split of the project, according to one report.

Centerra cautioned that no deal has been reached, and warned investors not to speculate on the potential terms of a settlement. However, it indicated that talks with the government over its flagship mine are going well. The two sides have been discussing a transaction that would convert the government’s 32.7% stake in Centerra into a direct stake in the project.

“Centerra believes that progress has been made in those discussions,” the company said in a statement Friday. A settlement would be a relief for investors, who have feared the prospect of outright nationalization of Kumtor for more than a year.

The trouble started in June of last year, when a Kyrgyz parliamentary commission released an 800-page report on Kumtor that accused Toronto-based Centerra of massive environmental destruction.

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Mining Industry Lukewarm on Changes[Indonesia] – by Tito Summa Siahaan (Jakarta Post – August 24, 2013)

 http://www.thejakartapost.com/

The mining industry has welcomed government plans to stimulate investment in the sector but flagged as concerns the preservation of a 20 percent tax on mining exports and a lack of policy detail.

As part of a package of policies announced after a cabinet meeting on Friday, companies in natural resources, including nickel, bauxite and copper, will be eligible for tax holidays and allowances.

The government also plans to relax its mineral export quotas, which determines the proportion of resources that are not quarantined for domestic consumption.

Agus Suhartono, the vice chairman of the mineral entrepreneurs association Apemindo, said the government’s policies demonstrated priorities in conflict with the industry’s.

“Mining companies don’t have a problem with the quota,” said Agus, adding that the industry had increased output volumes despite the quota system. Indonesia Mining Association executive chairman Tony Wenas agreed, citing the growth in the nation’s nickel exports, which stood at 40 million tons for the first half of this year, up from 26 million tons in the same period in 2012.

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Indonesia Allows More Metal Ore Shipments Before 2014 Export Ban – by Eko Listiyorini and Widya Utami (Bloomberg News – August 23, 2013)

http://www.businessweek.com/

Indonesia said that it will allow more shipments of unprocessed mineral ores for the rest of this year by dropping quotas before an export ban comes into force as planned in 2014. A 20 percent tax on exports will be retained.

“This is a temporary policy, until the 2014” ban on unprocessed ores is in place, Finance Minister Chatib Basri said in Jakarta today. “We see that the restriction or quota has caused a drop in exports revenue.”

Southeast Asia’s biggest economy unveiled a policy package today after a record current-account deficit and worse-than-estimated economic growth and inflation data prompted investors to sell stocks and drove the rupiah to its weakest level since 2009. The country is the largest exporter of refined tin and thermal coal.

“Commodity prices remain weak, the mining sector’s profitability is declining rapidly, and government receipts through royalties and taxes would have suffered if the government had not taken any measures,” said Xavier Jean, a Singapore-based director of corporate ratings at Standard & Poor’s. “This is not coming as a surprise.”

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COLUMN-Mongolia, Rio Tinto playing high stakes on copper mine – by Clyde Russell (Reuters U.S. – August 19, 2013)

http://www.reuters.com/ 

Aug 19 (Reuters) – Is Rio Tinto’s dispute with the Mongolian government over the expansion of the Oyu Tolgoi copper and gold mine the signal that the nation’s commodity boom is over, or is it just a hiccup?

Certainly, Mongolia’s reputation as a desirable investment destination and one of the few remaining countries ripe for developing natural resources has taken a battering recently.

Rio Tinto, the world’s second-largest mining company, said on Aug. 14 that it will cut 1,700 jobs at Oyu Tolgoi after a $5 billion expansion of the project was put on hold last month.

The dispute is over how the expansion gets financed, and the Mongolian parliament has been recalled from its summer recess for an emergency session to try and deal with the matter.

But the real issue is how long it will take for Mongolia to get significant amounts of money from the mine, which is slated to boost the economy by 35 percent by 2020. 

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Indonesia to see declining revenue from mineral – by Amahl S. Azwar (The Jakarta Post – August 16, 2013)

http://www.thejakartapost.com/

The government is preparing to see a decline in revenue from the mineral sector as the ban on the exports of unprocessed mineral ore is expected to take effect next year, a top official has said.

The restrictions on raw ore exports is aimed at giving added value to the mining products as well as moderating mineral exploitation.

The Energy and Mineral Resources Ministry’s coal and minerals director general, Thamrin Sihite, said on Thursday the country needs to tame the overexploitation of minerals in a bid to protect its resources.

“It is very crucial for us to control the current production to ensure the sector will be sustainable,” he said.

According to the 2009 Mining Law, miners will have to process their mineral ore at their own smelters or at independent smelters as of January 2014, before exporting their mineral production.

Miners that do not have a smelter or are reluctant to process their raw minerals at other smelters will be banned from shipping their unprocessed ore overseas.

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UPDATE 1-Job cuts ahead as Rio puts Mongolian expansion on hold (Reuters India – August 14, 2013)

http://in.reuters.com/

LONDON, Aug 14 (Reuters) – Rio Tinto said on Wednesday it would have to cut up to 1,700 jobs in its Mongolian operation, after a more than $5 billion underground expansion of the giant Oyu Tolgoi copper mine was suspended.

The expansion was put on ice last month as the global miner said the Mongolian government wanted parliament, currently in recess, to approve financing for the project. Mongolian Prime Minister Norov Altankhuyag said last week that Rio did not need to seek parliamentary approval for the development’s package.

The delay marked the latest bump in the road for Rio at one of its biggest projects – and one of the world’s largest untapped copper deposits – which started exporting from an open pit mine in July after two last-minute hiccups in securing government approval.

Mongolia has raised concerns about the costs of the Oyu Tolgoi expansion and the potential that rising expenditure will delay when it starts receiving its share of profits.

The government has also complained that locals are not well represented in the management of the project. A Rio spokesman said that the delay was now being implemented.

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Is the rally in global miners too good to be true? – by Ansuya Harjani (CNBC Asia – August 14, 2013)

http://www.cnbc.com/

Even as global resource stocks have had a stellar run-up in the recent weeks, driven by signs of stabilization in China’s economy, cheap valuations and short covering, questions are building over the sustainability of this trend.

Shares of large-cap mining companies such as Australia-listed BHP Billiton and Rio Tinto and U.K.-listed Vedanta have rallied between 11 percent and 14 percent since mid-July.

“There has been a lot of trading money coming into the space by longer-term investors who have wanted to buy the mining space, but haven’t had the clarity because of China, falling commodity prices,” Chris Weston, senior investment strategist at IG Markets told CNBC. “But the easy money has been made. The question now is how much more upside do we think there’s going to be,” he said.

According to Weston, further gains are likely in the near term given improving sentiment around the global economy. But beyond that, he says the outlook for mining stocks remains unclear, pointing to the risk of a selloff in commodities once the U.S. Federal Reserve begins to taper monetary stimulus and potential oversupply in resources such as iron ore in 2014.

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Glencore cuts budget for $5.9 billion Philippine project – by Erik dela Cruz (Reuters U.S. – August 13, 2013)

http://www.reuters.com/

MANILA – (Reuters) – Glencore Xstrata (GLEN.L) will cut up to 920 jobs and slash spending at its $5.9 billion Tampakan copper-gold project in the Philippines, one of several future mines under review since the company was formed in a record-breaking takeover.

Tampakan, a challenging project in a restive region of the southern Philippines, has not been officially put up for sale.

But, like many of the big-ticket mining projects previously held by Xstrata, it is under review by its new owners and is one of four projects Glencore has said it could sell to appease Chinese regulators’ concerns over its dominance in copper – if it is unable to sell the Las Bambas mine in Peru.

Sagittarius Mines Inc, which is 62.5 percent-owned by Glencore, said on Tuesday it had revised its work plan as the project still faced “substantial development challenges” – including a ban on open-pit mining in South Cotabato province.

That means it is unlikely to hit an already revised 2019 target for first production. “No investment decision can be made until the current project challenges are resolved and necessary approvals obtained,” Sagittarius spokesman John Arnaldo said.

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FBI arrests seven in $140 million penny stock fraud – by Bernard Vaughan (Reuters U.S. – August 13, 2013)

http://www.reuters.com/

NEW YORK – (Reuters) – Federal prosecutors said on Tuesday they arrested seven people in a more than $140 million international penny stock scheme that involved fraudulently inflating share prices and trading volumes.

Two people charged, including the alleged mastermind, remain at large, according to the office for the U.S. Attorney for the Eastern District of New York.

The fraud generated funds from investors in about 35 nations through various brokerage and bank accounts, according to a statement from the office of U.S. Attorney Loretta Lynch in Brooklyn.

The arrests, made in five states and in Canada, followed one of the largest international penny stock investigations ever conducted by the U.S. Department of Justice and the FBI, according to the statement.

“As alleged in the indictment, the defendants used our securities markets as a platform from which to run elaborate fraudulent schemes to victimize unsuspecting investors across the globe,” Lynch said in a statement. “Where others saw citizens of the world, the defendants saw a pool of potential marks.”

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UPDATE 1-Freeport says Indonesia export ban may cut copper output – by Fergus Jensen (Reuters India – August 13, 2013)

http://in.reuters.com/

Aug 13 (Reuters) – Freeport-McMoRan Copper & Gold Inc’s Indonesian subsidiary warned that output from Grasberg, the world’s second-biggest copper mine, could be cut by a ban on unprocessed ore exports that takes effect next year.

The Indonesian government is pushing miners, especially foreign-owned operations such as Freeport’s Grasberg, to add more value within the country.

Freeport, which on Tuesday signed two memorandums of understanding with Indonesian companies planning to build smelters that would process its ore, said it might seek a way around the rules during its contract renegotiation with the government.

The company currently processes only around 40 percent of its ore mined in Indonesia at one smelter in East Java, PT Freeport Indonesia Chief Executive Rozik Soetjipto said on Tuesday, but the law now requires it to smelt all of the ore in Indonesia from January 2014.

“If there is no dispensation from the government… our mining capacity will need to be reduced … It’s very complicated,” Soetjipto said at a news conference in Jakarta.

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Mining the Gobi: The Battle for Mongolia’s Resources – by Bernhard Zand (Spiegel Online International – August 7, 2013)

http://www.spiegel.de/international/

Mongolia is over four times the size of Germany, with nearly 3 million inhabitants and a GDP of $10 billion (€7.5 billion) in 2012.

British-Australian mining corporation Rio Tinto employs 71,000 people in more than 40 countries and is worth about $60 billion.
These two unequal partners — a poor, potentially rich nation and the second largest mining corporation in the world — have joined together to mine one of the globe’s largest deposits of copper and gold. But will they be capable of distributing this wealth fairly?

The mine in question lies an hour’s flight south of the Mongolian capital Ulan Bator, near the border with China. There is enough copper in the ground here to build the Statue of Liberty more than 800,000 times over. Once the planned mine goes into full operation, it could increase the country’s GDP by a third. It could, at least in theory, bring prosperity to this country where many people still live in simple yurts and huts.

But in practice, the transaction between this global corporation and this country that is poor but rich in raw materials looks quite different. In fact, the project serves as a prime example of what is happening in a growing number of newly industrialized and developing countries.

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