Australia/New Caledonia/Papua New Guinea Mining – Page 106

Australia treasurer would block a Glencore-Rio Tinto merger – by Sonali Paul (Reuters U.S. – April 8, 2015)

April 8, 2015

http://www.reuters.com/

(Reuters) – Australia’s treasurer has told business representatives he would not allow Glencore Plc to merge with Rio Tinto due to concerns about losing tax revenue, a person familiar with his comments said on Wednesday.

Treasurer Joe Hockey said based on the tax implications he had seen from the treasury, he would not allow a Glencore takeover of Rio, Australia’s second biggest miner and one of its biggest taxpayers, the person said. He declined to be identified due to the sensitivity of the issue.

Treasurer Joe Hockey’s office declined to confirm the comments. Four people said Hockey had spoken at a private meeting on March 30 organized by the Business Council of Australia and including members of the Minerals Council of Australia, but three would not give details.

Glencore approached Rio Tinto about a merger last July that would have created a $160 billion mining and commodities trading giant. Rio revealed in October it had rebuffed the approach, but under UK takeover rules, Glencore is now free to make a new bid, following a six-month breather.

“Any takeover would have to go through the normal processes at FIRB (Foreign Investment Review Board),” a spokesman for Hockey said.

Lower coking coal contract price shows downward pressure – by Clyde Russell (Reuters U.S. – April 8, 2015)

April 8, 2015

http://www.reuters.com/

LAUNCESTON, AUSTRALIA – (Reuters) – – Coking coal prices are yet to show signs of bottoming with bearish signals from both contract talks between Australian producers and Japanese buyers as well as Chinese demand.

Hard coking coal for second quarter delivery was settled at $109.50 a tonne free-on-board between producer BHP Billiton and buyer Nippon Steel, Morgan Stanley said in a research noted on April 6.

This was down 6 percent from the previous quarter’s contract and represented a 7 percent premium to the spot price at the time the deal was concluded. The premium to the spot price is in line with prior settlements, with Japanese buyers willing to pay above spot in order to guarantee supplies.

Coking coal, also known as metallurgical coal, is used in steel-making and is traditionally a higher value product than thermal coal used in power generation because it has a higher energy value and fewer impurities.

However, coking coal prices are now down two-thirds from their peak around $300 a tonne in 2011, while benchmark thermal coal prices at Australia’s Newcastle Port have dropped about 55 percent over the same period.

Gina Rinehart’s Roy Hill mine not relying on China – by David Stringer (Sydney Morning Herald – April 9, 2015)

April 8, 2015

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

Asia-Pacific’s richest woman is gearing up to start shipments from her $10 billion iron ore project in Australia. Even with prices at 10-year lows, she’s displaying no lack of confidence in the mine’s success.

Billionaire Gina Rinehart’s ace? Her mine isn’t relying solely on sales to China, the biggest iron ore buyer. This limits the project’s exposure to a market where steel demand is judged to be peaking. Instead, she’s locked in supply contracts with three of the largest iron ore consuming Asian nations outside of China.

“They feel very confident. Roy Hill has a massive advantage in that it has diversified its markets,” Philip Kirchlechner, Perth-based director of Iron Ore Research Pty. said by phone. “They have buyers from three of the other major iron ore importing markets.”

Roy Hill, Australia’s largest single iron ore mine, is on track to commence exports from September, adding 55 million tons a year of output to a market already saturated by a growing surplus. It’s even accelerating the mine’s schedule, seeking to hit its planned capacity at the fastest pace of any project built in Western Australia’s iron-rich Pilbara region.

Tax office pursues BHP Billiton and Rio Tinto over Singapore tax shelter – by Neil Chenoweth (Australian Financial Review – April 6, 2015)

April 7, 2015

http://www.afr.com/

Mining giants BHP Billiton and Rio Tinto are being pursued by the Australian Taxation Office for channelling billions of dollars in profits from iron ore sales through companies that pay almost no tax in Singapore.

While BHP Billiton and Rio TInto are Australia’s largest taxpayers, The Australian Financial Review has obtained documents that show the two mining companies report $2.6 billion a year in profits in their Singapore marketing hubs where they pay tax rates as low as 2.5 per cent.

The arrangements save the two companies more than $750 million a year in Australian tax and the ATO regards it as tax avoidance under the transfer pricing rules. The ATO is pursuing multibillion-dollar claims against each company, says a source with direct knowledge of the disputes.

The exact amounts of the potential tax bills are unclear and both companies have fought the ATO for years and argue their Singapore operations were not set up to reduce tax.

With scores of Australian companies rushing to open their own Singapore operations, the BHP Billiton and Rio Tinto cases shape as key precedents for the ATO, which has been warning of compliance problems with marketing hubs since 2010.

As iron ore slides, China buyers inflict more pain on small miners – by Manolo Serapio Jr (Reuters U.S. – April 7, 2015)

April 7, 2015

http://www.reuters.com/

SINGAPORE, April 7 (Reuters) – Chinese steelmakers are unwittingly helping the world’s biggest iron ore miners tighten their grip on global production by demanding to pay for shipments of the raw material based closely on depressed spot prices.

The three largest and most profitable iron ore producers – Australia’s Rio Tinto and BHP Billiton, along with Brazil’s Vale – have been happy to sell at or near spot despite plunging iron ore prices, while their smaller rivals struggle to make money.

Smaller producers, including some higher cost Australian miners, want to continue with deals based on longer-term averages of prices, looking to hedge against further falls in the market.

But buyers in the world’s largest consumer of iron ore are having none of it, with many Chinese mills demanding cargoes priced as close as possible to their delivery date.

“Pricing moves around with the steel mills. It used to be all based on a monthly average. Now you find the steel mills and traders perhaps trying to anticipate low points and suggesting quotation periods of maybe two weeks,” said Morgan Ball, chief executive of Australian iron ore miner BC Iron Ltd.

Deutsche Bank cuts [BHP Billiton] South32 valuation – by Amanda Saunders (Sydney Morning Herald – April 2, 2015)

April 1, 2015

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

South32, the company being created in the demerger of BHP Billiton, will be in a “perfect position” to pursue acquisitions of up to $US3 billion ($3.9 billion) in Australian coal, and offshore in base metals and manganese – but its stock is likely to trade at just about $2 a share, well short of market expectations, according to Deutsche Bank.

Deutsche mining analyst Paul Young cut his valuation of South32 from $US13 billion to $US11.2 billion after reviewing the more than 1500 pages of shareholder documents on the spin-off released by BHP last month. His valuation for the spin-off falls to $US7 billion when based on current spot prices for commodities.

While the new company’s growth and savings opportunities will be limited, parent BHP with its strong balance sheet has put it “in the perfect position to pursue [value enhancing] acquisitions up to $US3 billion”, Mr Young said.

Also playing in its favour is the fact that the largest miners are selling non-core assets following the fall in commodities prices, and have all but ruled out acquisitions.

South32 is expected to first eye greenfield mining assets, rather than entire companies, according to the analyst report. High up on its list would be Anglo American’s 40 per cent stake, valued at $US1.4 billion, in the maganese group Samancor.

Mining stocks hit as iron ore price slump continues – by Sarah-Jane Tasker and Matt Chambers (The Australian – April 1, 2015)

April 1, 2015

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

Australia’s iron ore miners continue to feel the pain of the brutal slump in the price of the commodity, with falls on the local market in early trading.

As the price of iron ore sits on the cusp of falling below $US50 a tonne, Fortescue Metals Group lost almost 2 per cent of its value after the market opened to sit at $1.92, while Atlas Iron’s stock was off 3.85 per cent at 12.5c.

BHP Billiton, the world’s largest miner, was 1.7 per cent lower this morning at $30.50, while its main rival, Rio Tinto, was off 1.28 per cent at $56.60.

Overnight, Chinese iron ore prices monitored by The Steel Index fell $US1.90, or 3.6 per cent, to $US51 a tonne, representing a record low since the index starting monitoring prices.

When current freight prices of about $US4.50 a tonne are removed, it is the lowest price Australian iron ore has been sold at since March 2006, when prices were still negotiated annually. The price could face a fresh round of negative news today, with China’s official manufacturing index data due.

The Iron Ore Bust into a Housing Boom – by Greg Canavan (Daily Reckoning Australia – March 30, 2015)

March 30, 2015

http://www.dailyreckoning.com.au/

Irony is thick on the ground this morning as we head into a shortened Easter trading week. Just as Sydney property prices go absolutely bonkers, the iron price crashes.

Of course, revenue from the great iron ore boom helped to fuel the housing bonfire, along with regular petrol douses from RBA boss Glenn Stevens. But now, with iron ore crashing, property prices continue to detach from reality. It’s a cheap money driven boom if there ever was one.

In case you missed it, the benchmark iron ore price finished trading on Friday down US$2.22 to US$53.14, a new low. It was another dose of irony that probably knocked the price lower.

Last week, Fortescue Metals [ASX:FMG] Chairman and major stakeholder Andrew Forrest implicitly called on iron ore miners to form a cartel to control the price (and save his company from a slow death). Rio Tinto [ASX:RIO] boss Sam Walsh replied with scorn, which the market interpreted to mean that Rio will continue to dig up as much red dirt as it can. Hence the price crack on Friday.

The comments from Forrest indicate just how much damage the iron ore bear market is having on marginal cost producers. Aussie juniors won’t survive this price rout. It’s just a matter of time before they fold.

A Word From The Editor-in-Chief, March 27, 2015 – by Michael Stutchbury (Australian Financial Review – March 28, 2015)

March 27, 2015

http://www.afr.com/

Andrew Forrest’s eye-popping call for the world’s big iron ore producers to drive the iron ore price back up by capping their production shows what crazy things the desperate can do. Twiggy even made his “national interest” call in Shanghai, among Chinese buyers of the iron ore dug up by his own Fortescue, Rio Tinto, BHP Billiton and Brazil’s Vale and just as he was about to meet Xi Jinping.

The Fortescue founder is a man of bold ambition and enthusiasm: creating the third force in Australian iron ore, enlisting the Pope to help end modern slavery, and pushing Tony Abbott to narrow indigenous disadvantage. He won’t end up behind bars for his latest big idea, but he is calling for what both Joe Hockey and ACCC chairman Rod Sims suggested would be an illegal producer cartel. As our Matthew Stevens asked: What was Forrest thinking?

Twiggy’s call is a spectacular sign of Australia’s big iron ore price squeeze. Forrest became a billionaire in the 2000s by creating Fortescue on the back of the China boom that drove the iron ore price from US$20 or so a tonne to $US180 a tonne. Now supply has belatedly responded to the increased demand, the price has hurtled back into the US$50s. That’s crunching Fortescue’s margins and forced it to keep producing more to keep its head above water.

In fact, in the past four years, Fortescue has boosted output more than Rio or BHP. But that’s just kept driving down the price towards Fortescue’s cost of production.

COLUMN-Forrest’s iron ore cap “harebrained” or clever tactics? – by Clyde Russell (Reuters India – March 27, 2015)

March 27, 2015

http://in.reuters.com/

LAUNCESTON, Australia, March 27 (Reuters) – What’s the real thinking behind Andrew Forrest’s remarkable call for iron ore miners to cap production in order to boost prices?

It’s easy to dismiss the comment by the Fortescue Metals Group founder and chairman as “harebrained,” as did Sam Walsh, the chief executive of Rio Tinto, the world’s second-largest iron ore miner.

It’s possible that when Forrest told an audience on Tuesday in Shanghai that he was happy for iron ore miners to “cap our production right here and start acting like grown-ups”, he was merely having a thought-bubble moment.

But while Forrest, whose company ranks fourth in the world in iron ore output, has a reputation as a charming straight-shooter, it’s hard to imagine that he would be so careless as to float an idea that in all likelihood is illegal and would also bring scorn from his bigger rivals.

There is no doubt that debt-laden Fortescue has been hit harder than Rio Tinto or No.3 producer BHP Billiton by the collapse of iron ore prices, with the Asian spot price .IO62-CNI=SI marking a record low of $54.20 a tonne on Monday, before recovering slightly to $55.50 on Thursday.

Barnett, Rio chief join Rinehart to pan Forrest collusion plan – by Matt Chambers (The Australian – March 27, 2015)

March 26, 2015

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

Gina Rinehart’s Hancock Prospecting has rejected fellow mining billionaire Andrew “Twiggy” Forrest’s call for an Australian iron ore cartel, adding to industry condemnation that has included Rio Tinto chief Sam Walsh calling the scheme “hare-brained”.

West Australian Premier Colin Barnett, who has called for BHP Billiton and Rio to stop flooding the market with excess iron ore and said their strategy was “dumb”, has backed away from the notion of joint action between suppliers, saying it would be illegal.

Mr Forrest, chairman and founder of Perth’s Fortescue Metals Group, has come under investigation from the competition watchdog this week for declaring that Rio, BHP Billiton and Fortescue should unite to cut production to drive prices higher.

The plan, labelled “extraordinary” and “concerning” by Australian Competition & Consumer Commission boss Rod Sims and “absolute nonsense” by Mr Walsh, would benefit Hancock’s Roy Hill project if it pushed prices higher, as Mr Forrest claims it would.

But Mrs Rinehart, the nation’s richest person, rejects the call. “There is nothing Australia can do about price other than be ready for it, and from an Australian perspective that means driving down our costs,” Hancock executive director, and Mrs Rinehart’s right-hand man, Tad Watroba, said yesterday from Hong Kong.

Investors pinning hopes on a nickel comeback – by Barry FitzGerald (The Australian – March 27, 2015)

March 26, 2015

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

Talisman Mining (TLM)

It has got to be of some comfort to the band of ASX-listed nickel juniors that despite the price of the metal not going on with last year’s price rally, their market capitalisations have held up well.

Nickel got to $US21,000 a tonne last year on enthusiasm that Indonesia’s ban on the export of unprocessed ores was a big structural change that meant prices had to head higher. Prices for the steelmaking ingredient did for a while, but are now back at $US13,680 a tonne.

But again, the values of junior producers like Western Areas (WSA), Panoramic (PAN) and Mincor (MCR) have held up well, at least in the sense that they have not given back all of their gains achieved during last year’s price surge.

The fall in the dollar has helped. But the bigger reason seems to be that investors are betting that the nickel price is going to come storming back at some point. Macquarie’s equities desk estimates that the share prices of PAN and MCR appear to be factoring in a nickel price 50 per cent higher than the current price, and in the case of WSA, 27 per cent higher.

COLUMN-Commodity price boom over, volume boom gathers pace – by Clyde Russell (Reuters U.S. – March 19, 2015)

March 19, 2015

http://www.reuters.com/

LAUNCESTON, Australia, March 19 (Reuters) – It’s become conventional wisdom that the commodities boom is over, and while the era of rising prices is gone, figures from the Australian government suggest the surge in volumes is well under way.

Exports of iron ore will jump 22.5 percent between the 2014-15 fiscal year and 2019-20, while liquefied natural gas (LNG) shipments will triple, according to the latest quarterly report from official forecaster, the Department of Industry.

Even the pressured coal sector is expected to post gains, with thermal coal exports climbing 16.6 percent over the period and those of metallurgical grades rising 7.3 percent.

Australia is the world’s top shipper of iron ore and metallurgical coal, number two in thermal coal and soon to take the lead in LNG, once the seven gas projects under construction are completed. But while the report, released on Wednesday, is relatively bullish about the outlook for export volumes, it’s another matter when it comes to prices.

Iron ore will average $60.40 a tonne in 2015, dropping to $56.80 next year before recovering to $64.60 in 2017, the department said. It expects the price recovery to continue to 2020, when it will reach $81.80 a tonne.

‘Terrible timing’: Gina Rinehart bets on iron ore rebound with $13b mine (Sydney Morning Herald – March 18, 2015)

March 18, 2015

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

Gina Rinehart is digging what will likely be the world’s last big iron ore mine for years to come in the Australian outback. The timing couldn’t be worse for the billionaire mining heiress given tumbling prices and oversupply, but the message for other iron ore miners is clear – the fight for survival is going to get more difficult.

Since construction of the $13 billion Roy Hill mine began four years ago in partnership with South Korean steelmaker POSCO , Japan’s Marubeni Corp and Taiwan’s China Steel Corp, iron ore prices have slumped 70 per cent and forecasters see worse to come.

Blueprints for new mines are being abandoned from Australia to Guinea, with a West Africa mine shelved this month after Ivan Glasenberg’s commodities group Glencore conceded there was no prospect for a “profitable development”.

“If someone was to walk up today and say ‘I want to develop an iron ore mine,’ you’d think they were crazy or know something others don’t,” said James Wilson, an analyst for Morgans Financial in Perth.

Analysts blame a massive rise in production on overestimates of China’s appetite for imported ore by sector titans Vale of Brazil, Rio Tinto and BHP Billiton .

Fortescue Pulls $2.5 Billion Bond as Price War Hits Iron Ore – by Benjamin PurvisBrett Foley (Bloomberg News – March 17, 2015)

March 18, 2015

http://www.bloomberg.com/

(Bloomberg) — Fortescue Metals Group Ltd., the world’s fourth-largest iron ore exporter, pulled plans to refinance some of its debt with a $2.5 billion bond as tumbling prices for commodities spook investors.

The stock hit a six-year low in Sydney trading Wednesday, matching the plunge in iron ore and crude oil prices, after the producer said the sale had been scrapped, citing volatile U.S. credit markets and a failure to achieve the terms it wanted.

Iron ore sank 47 percent in 2014 and extended losses this year as surging supplies from Fortescue, BHP Billiton Ltd. and Rio Tinto Group, outpaced demand growth, spurring a surplus just as economic growth slowed in China, the biggest buyer.

“This iron ore capacity war, the race to the bottom was always going to shake the tree and maybe we are starting to see that in earnest,” Evan Lucas, a markets strategist in Melbourne at IG Ltd., said by phone. “And it’s probably going to get worse before it gets better.”

Australia, the world’s biggest exporter of iron ore, on Wednesday cut its price forecast for 2015, saying the raw material will average $60 a metric ton, down from its estimate of $63 in December. Macquarie Group Ltd. overnight cut its forecast for the year by 20 percent to $54.