Australia/New Caledonia/Papua New Guinea Mining – Page 104

Glencore CEO says rivals’ strategy tipping mining sector into crisis – by Silvia Antonioli (Reuters U.K. – May 12, 2015)

May 12, 2015

http://uk.reuters.com/

LONDON – The head of mining and commodity trading giant Glencore said on Tuesday the strategy of rival companies to oversupply the market regardless of demand had hit the mining sector’s credibility and tipped it into a confidence crisis.

Chief Executive Ivan Glasenberg has criticised competitors such as Anglo-Australian BHP Billiton (BHP.AX) (BLT.L) and Rio Tinto (RIO.L) (RIO.AX) several times for flooding the market with new, low-cost, iron ore supply which critics says has sent prices into a downward spiral.

“The mining sector is suffering a crisis of confidence,” he said in a presentation at an investor conference in Barcelona. “Oversupplying markets regardless of demand is damaging the credibility of the industry,”

He said mining had been the worst performing sector over the last twelve months, with commodity prices, share values and credit ratings all impacted. Investment flow has also weakened and was now about $60 billion below its 2012 peak, when the commodity supercycle turned sour, Glasenberg said.

Iron ore, oil, nickel and thermal coal were the hardest hit commodities in the last year.

Mining heavyweights seek to build mid-tier gold producer in $190M Newmarket-Crocodile merger – by Peter Koven (National Post – May 12, 2015)

May 12, 2015

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

TORONTO – Several mining industry heavyweights have teamed up in a deal they hope will be the first of many as they seek to build a new mid-tier gold producer.

Newmarket Gold Inc. and Crocodile Gold Corp. announced a friendly $190 million merger on Monday that will give Newmarket control over most of the combined board and management team.

Crocodile is an established gold producer in Australia, while Newmarket is little more than a shell company at present. However, Newmarket boasts some very big names on its board, including entrepreneurs Lukas Lundin, Randall Oliphant (of New Gold Inc.) and Raymond Threlkeld (of Rainy River Resources Ltd.). The company’s plan is to use the Crocodile mines as a platform to buy more high-quality gold assets under the “Newmarket” name.

“There is lots of competition for assets, but that’s why we put this team together,” Newmarket chief executive Doug Forster said in an interview.

Fortescue founder asks Australians to fight Rio, BHP iron ore plans – by James Regan (Reuters U.S. – May 11, 2015)

May 11, 2015

http://www.reuters.com/

SYDNEY – May 11 Fortescue Metals Group Chairman Andrew “Twiggy” Forrest on Monday called on Australians to urge the government to stop expansion plans by iron ore miners Rio Tinto and BHP Billiton, saying they were jeopardizing the economy.

The plea by the billionaire philanthropist and founder of the world’s fourth-biggest iron ore miner was condemned by the national mining lobby, the Minerals Council of Australia, for threatening to set the country on an “interventionist path.”

Forrest has accused Rio and BHP of over-producing to drive out competitors from the $60 billion-a-year Chinese import market despite Fortescue quadrupling its own production in the last seven years.

“These big companies say they must flood the market next year and the year after and the year after even though it will crash the price further,” Forrest said in an editorial in Sydney’s Daily Telegraph. “Every time they say this the price falls again.”

Iron ore prices .IO62-CNI=SI are trading off their lows at $60.50, but still 55-percent under last year’s peak. For every $1 price fall, the Australian economy lost A$800 million ($632 million) in foreign income, according to Forrest.

Vale to divide and conquer by lifting high-grade iron ore output – by James Wilson (Financial Times – May 10, 2015)

May 11, 2015

http://www.ft.com/intl/companies/mining

Vale is keen to build up its supply of higher-quality iron ore in a move that could increase pressure on some rival producers in the global market for the steelmaking commodity.

The Brazilian miner is one of a quartet of companies that dominate the global market in iron ore, where prices have plummeted over the past year as a glut of supply — mainly from Australian producers — has encountered weakening Chinese demand.

Vale’s recent indications that it would be prepared to hold back some supply have helped to arrest the slide in the iron ore price, while underpinning a rally in the company’s shares in the past month.

In an interview Luciano Siani, chief financial officer, did not rule out Vale cutting its growth plans for next year. The miner expects to produce 340m tonnes of iron ore this year and has previously estimated that 2016 output will be 376m tonnes.

However, Mr Siani said Vale would be likely to “push to the fullest” its production of the highest grade of iron ore, which commands a premium price from steelmakers. By contrast Vale would be more likely to “manage” its more “standard” iron ore supplies, he said.

COLUMN-Iron ore reality check shows small, but significant change – by Clyde Russell (Reuters U.K. – May 4, 2015)

May 4, 2015

https://uk.finance.yahoo.com/

LAUNCESTON, Australia, May 4 (Reuters) – It’s time for a reality check all round in the iron ore market.

In recent weeks there has been a strong rally in prices, tentative signs that the headlong expansion of capacity will be reined in, calls for a producer cartel of some sorts and a small miner scrappily hanging on in the face of seemingly overwhelming adversity.

All of this makes for great drama and news headlines, but also should lead to questions and analysis as to whether anything has actually changed in the iron ore market.

The first reality check is that despite the near 27 percent rally in the spot Asian iron ore price between April 6 and April 27, the price remains extremely weak.

Iron ore ended last week at $56.20 a tonne, having retreated from the $59.20 reached on April 27, leaving the steel-making ingredient down 21 percent so far this year. It’s also roughly half of what it was this time last year and not much better than a quarter of the record $191.90 a tonne in February 2011.

Rio Tinto CEO says iron ore demand still strong in Asia – by Vicky Validakis (Australian Mining – May 4, 2015)

May 4, 2015

http://www.miningaustralia.com.au/home

Rio Tinto CEO Sam Walsh says commodity markets must remain open as debate continues to rage over his company’s iron ore strategy.

Speaking in Seoul, Walsh said when the commodity cycle became tough, there was a temptation to turn inward. “But we must keep our minds and our markets open,” Walsh said.

“There is a temptation to be parochial, to believe that artificial and temporary barriers will alleviate the pain of awkward transition — when to the contrary, being parochial may delay necessary change or amplify the response required.

“We can see such requests and pleas for new barriers, from some in government and some in business.”

While Walsh did not tie his comments directly to iron ore or the company’s Pilbara mines, they came at the same time FMG’s chairman Andrew Forrest had another go at Rio for its plans to ramp up production.

With iron ore prices down to around $US57 a tonne, major miners BHP and Vale announced revised plans to limit some production.

Vale ups stakes in iron ore war – by Stephen Bartholomeusz (The Australian – May 1, 2015)

May 1, 2015

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

Of far greater consequence to Rio Tinto, BHP Billiton and Australia than Andrew Forrest’s complaints about their volume and cost-driven iron ore strategies is what the “other” major seaborne producer does in response to the crash in iron ore prices.

They might be encouraged by the commentary that accompanied Vale’s first-quarter results overnight.

The Brazilian group is the larger of the three major seaborne iron ore producers and is in the midst of an ambitious and expensive ($US17 billion) program to increase its production by 40 per cent, to almost 460 million tonnes a year from last year’s 327 million tonnes.

As with all the other producers, Vale is slashing costs to try to dampen the impact of the dive in iron ore prices and was able to proclaim that, for the first time in its history, cash costs were less than $US20 a tonne. A significant component of the $US13 a tonne reduction in cash costs was a 20 per cent, or $US4.50 a tonne, fall in freight costs.

Vale has traditionally been competitive with Rio (RIO) and BHP (BHP) in production costs and its ore is generally of higher quality. Its disadvantage has been distance from China and the impact that freight costs have had on its landed costs.

Rio Signals Ready to Step Up on Dealmaking as Market Bottoms – by David Stringer (Bloomberg News – May 1, 2015)

May 1, 2015

http://www.bloomberg.com/

With the mining sector seen nearing the bottom of the cycle, Rio Tinto Group signaled to analysts it’s ready to resume mergers and acquisitions.

The company is prepared to look for a deal if it can secure the right asset at the correct valuation and win investor backing, Morgan Stanley said after an analysts’ meeting this week with Chief Financial Officer Chris Lynch.

An acquisition would be Rio’s first since 2012, according to data compiled by Bloomberg. As asset valuations get pushed lower, larger producers may be changing their attitude toward deals, according to Argo Investments Ltd.

“If they can buy tier-one assets at valuations that are closer to the bottom of the cycle, then that’s not a stupid thing to do,” said Jason Beddow, chief executive officer of Argo Investments, which manages about A$5 billion ($4 billion) in Australia and holds Rio shares.

The value of completed mining deals fell in 2014 to $51.3 billion, the lowest annual total in 10 years, according to data compiled by Bloomberg.

Iron ore wars get personal as Rio tells Fortescue to get its house in order – by Michael Smith (Australian Financial Review – April 30, 2015)

May 1, 2015

http://www.afr.com/

Fortescue Metals founder Andrew Forrest has not been shy about telling Rio Tinto and BHP Billiton how to run their iron ore operations. Rio Tinto’s iron ore boss Andrew Harding is now offering Forrest some advice of his own: get your own house in order and leave us alone.

“The response to that is to fix your own business – not give business advice to others, and definitely not create an environment in Australia where this long-term strategy, which is good for the country, and good for the company, is cast into question,” Harding said in an interview with The Australian Financial Review.

The comments highlight the growing tension between the nation’s three big iron ore producers as the debate about how to manage supply and demand in a low-price environment spills over into the political arena.

It is not the first time Harding has defended the strategy to run the company’s mines at full capacity. But the campaign on both sides is intensifying and becoming more personal.

Harding has made it clear Rio Tinto is not going to blink. He doesn’t believe BHP Billiton has either, despite some contrary interpretations of last week’s decision to defer infrastructure spending at Port Hedland.

Cliffs Natural Resources ‘can’t wait’ to exit ‘horrible’ Australian iron ore business – by Peter Ker (Sydney Morning Herald – April 30, 2015)

April 30, 2015

http://www.smh.com.au/

US miner Cliffs Natural Resources says the seaborne supply of iron ore to China is a “doomed, horrible business”, and declared it can’t wait to finish mining in Western Australia.

Speaking after a decision to cut jobs and close one of its three iron ore pits in Western Australia, Cliffs chief executive Lourenco Goncalves said big miners like BHP Billiton and Rio Tinto were trying to scare the iron ore market into pessimism with their expansion plans, but could no longer afford those expansions.

Cliffs’ Koolyanobbing operations in Western Australia made a slim profit of $0.26 per tonne during the March quarter, and the Cleveland-based company responded by reducing the remaining life of the operation from 4.5 years down to 3.5 years.

“The seaborne market is doomed, is cursed, is a place not to be in. I can’t wait to get out of Australia,” said Mr Goncalves. “As soon as I get to the end of life of mine in Australia, I’m out of there … I can’t wait to get out of the seaborne trade and let the Australians take that horrible business on their own hands.”

Ailing Fortescue begins job cuts, hits out at rivals BHP and Rio Tinto – by Andrew White and Andrew Burrell (The Australian – April 30, 2015)

April 30, 2015

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

Andrew Forrest has accused his two larger rivals, BHP Billiton and Rio Tinto, of jeopardising the budget by driving the iron ore price lower as his Fortescue Metals Group began cutting jobs.

Mr Forrest said the price would be driven lower unless the major producers checked their planned increase in production and stopped saying they intended to continue “oversupplying’’ the market.

“If we don’t get responsibility coming into the future actions and the current statements of the very multinational companies that derive their fortunes from our own land then the iron ore price will continue to fall, the budget will be thrown into jeopardy, the deficit will grow and our standard of living will fall,’’ Mr Forrest told broadcaster Alan Jones yesterday. “And it’s all completely avoidable. None of this had to happen.’’

Mr Forrest has refused to back down on calls for the producers to agree on slowing capacity expansion, despite attention from the Australian Competition & Consumer Commission over the possibility of collusion.

Iron ore streak extends to nine days – by Daniel Palmer (The Australian – April 29, 2015)

April 29, 2015

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

Iron ore has continued its march back toward $US60 a tonne in offshore trade amid rising hopes for more stimulus out of Beijing.

At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US59.20 a tonne, up 0.9 per cent from its prior close of $US58.70 a tonne.

The gains extend a withering run for the commodity that has come as a surprise to many, with a surge of over 25 per cent from its 10-year low of $US46.70 a tonne earlier this month. Much of this recovery has come in the past nine trading days, with iron ore last seeing a red session on April 15.

The developments have allowed for a strong bounce in stock prices within the iron ore sector, with BC Iron and Fortescue Metals leading the way.

The two WA-based miners endured a rare negative session yesterday during the current iron ore streak, with stock in both firms sinking around 5 per cent by the close as the broader market moved lower. Another lift in the commodity’s price overnight, however, leaves them primed to recover much of those losses during today’s trade.

COLUMN-Iron ore rallies on small BHP output deferral? Ridiculous – by Clyde Russell (Reuters U.S. – April 23, 2015)

April 27, 2015

http://www.reuters.com/

LAUNCESTON, Australia, April 23 (Reuters) – While it’s well-known that markets can have irrational short-term moves, the 4 percent jump in Asian spot iron ore on Wednesday must be a more extreme case.

Spot iron ore .IO62-CNI=SI jumped to $52.90 a tonne from $50.80 on April 20, continuing its rally from the record low of $46.70 reached on April 2.

On the surface the catalyst for Wednesday’s spike was BHP Billiton’s announcement that it would defer an expansion of its output of the steel-making ingredient from 270 million tonnes a year to 290 million tonnes.

The future loss of 20 million tonnes from a market that’s oversupplied by multiples of that amount clearly isn’t a sound basis for a price rally. What it does show is a market where many participants are keen to call a bottom, and are happy to grasp onto any positive news as justification for a price rally.

It also shows that many in the market weren’t really reading into this week’s quarterly production reports from BHP Billiton, Rio Tinto and Brazil’s Vale.

Neither Labor nor Liberal has handled WA’s mining boom well – by Larry Graham (Western Australia Today – April 23, 2015)

April 23, 2015

http://www.watoday.com.au/

Western Australia has a serious problem it needs to deal with. When confronted with unprecedented growth in the mining industry, WA could take the easy political option of spending up big and business as usual, or the more difficult path of others in similar circumstances by putting the windfall revenue away for a rainy day.

When the Barnett Government belatedly opted for a sovereign fund, they chose the one of the worst possible models – and Labor opposed the entire concept. What this bellowed was that neither side of politics understood what was going on around them.

The end results of successive WA governments’ mismanagement of the unprecedented growth are more reminiscent of Nauru than of a progressive economy. It’s easy to jump into political hyper-talk mode and blame the GST and falling iron ore prices for our budgetary woes, however both these events are cyclical and predictable.

With regard to the GST distribution, the recent brouhaha has been a boon to the Premier and the media, but a quick peek at the WA Treasurer Christian Porter’s one and only budget will show that GST revenue has not yet fallen to the levels he predicted in May 2011.

UPDATE 4-BHP blinks as iron ore prices fall, delays output boost – by James Regan (Reuters U.S. – April 22, 2015)

April 22, 2015

http://www.reuters.com/

SYDNEY, April 22 (Reuters) – BHP Billiton is slowing down its expansion plans in iron ore, the first big miner to pull back as a global supply glut sends ore prices tumbling.

The world no. 3 producer said it would delay an Australian port project that would have boosted output by 20 million tonnes and buoyed annual output to 290 million tonnes by mid-2017.

While BHP’s pullback is small compared with overall seaborne iron ore trade of around 1.3 billion tonnes, it is viewed as significant given BHP’s position as an efficient producer.

“It is probably more a symbolic posturing position by BHP, but it also likely signals the bottom of the iron ore market, given this action is being taken by one of the lowest cost producers,” said Mark Pervan, head of commodities for ANZ Bank.

Some analysts said the move suggests BHP expects ore prices to rise later in the decade, when it hopes to control a greater share of the global seaborne trade than it does now.