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Australia/New Caledonia/Papua New Guinea Mining

BHP CEO defends iron ore strategy as best play in gloomy market – by Silvia Antonioli (Reuters U.S. – October 23, 2014)

http://www.reuters.com/

LONDON – (Reuters) – BHP Billiton’s chief executive said its strategy of high-volume iron ore production was the best way to profit in a gloomy market, defending a plan that has come under growing criticism for depressing prices.

Iron ore, the biggest earner for global miner BHP Billiton, has lost about 40 percent of its value this year, reaching five-year lows, as big increases in new supply from top three miners Vale, Rio Tinto and BHP have exceeded lackluster demand.

Analysts expect the price decline to continue in the next few years under the weight of extra supply.

BHP has said it intends to boost production at existing assets by 65 million tonnes to 290 million a year by June 2017 and plans to cut its production costs to overtake rival Rio Tinto as the cheapest iron ore supplier to China.

“The lowest-cost producer has a right to continue to produce at very high margins in a free market,” BHP Chief Executive Andrew Mackenzie told reporters after the company’s annual general meeting in London.

“We have always been of the view that the iron ore market is more likely to decline than rise, and therefore producing the maximum amount we can now is very sensible.”

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Iron ore giants win first round in global battle but knockout unlikely – by Clyde Russell (Reuters U.S. – October 23, 2014)

http://www.reuters.com/

LAUNCESTON, Australia – Oct 23 (Reuters) – There is now no doubt that the big three global iron ore miners are producing record amounts in their bid to dominate the industry. The question remains, what will happen if they succeed?

Anglo-Australian giants Rio Tinto and BHP Billiton both reported record output in their latest quarterly reports, and affirmed they were on track to boost production even further.

Top producer, Brazil’s Vale is also increasing output, with Brazilian trade figures showing iron ore exports rose 16.7 percent in September from August to 33 million tonnes.

These figures show that the output side of the plan to dominate global seaborne iron ore trade is going quite well for the big three.

In the case of BHP and Rio Tinto, they are well-placed to continue to put pressure on competitors based in their home turf of Western Australia state, as well as those in other parts of the world.

With the lowest cash costs, in the region between $20 to $30 a tonne, and plans to strip out even more costs, they can survive and prosper even if iron ore prices remain weak.

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All Female E-Mail at BHP Shows Mine Shift From Boys’ Club – by David Stringer (Bloomberg News – October 22, 2014)

http://www.bloomberg.com/

The e-mail Jacqui McGill received from one of her teams at a BHP Billiton Ltd. (BHP) coal mine in northern Australia contained great news: output delays were down 75 percent in a year.

That wasn’t the only reason she let out a whoop of excitement. “I did my little yeehaw, because every single person on the e-mail was a woman in a production role,” said McGill, asset president for two of the world’s biggest mining company’s operations in Queensland’s Bowen Basin.

“That’s the first time that’s happened in my career,” McGill, an industry veteran of more than 20 years, said of the July e-mail. “I have plenty of men in my business in senior roles, but I thought, that’s critical mass.”

Mining remains the most male-dominated business, with men holding more than 90 percent of executive positions. That’s starting to change, as retiring employees help open the $1 trillion industry’s door to female successors.

“It lags behind, it’s historically been male,” U.S. Labor Secretary Tom Perez said Sept. 10 in an interview in Melbourne. “They are missing out on great talent. They are missing out on recruiting some of the best and the brightest.”

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Iron Ore Risks Extending Collpapse on Supplies: Moody’s – by Phoebe Sedgman (Bloomberg News – October 20, 2014)

http://www.bloomberg.com/

The collapse in iron ore prices may have further to run as global supply increases and steel-demand growth slows, according to Moody’s Investors Service, which said it may reduce ratings on producers.

About 300 million metric tons of new and expanded supply will come on stream over the next few years, analysts including Carol Cowan said in an e-mailed report received today. Global steel-production growth in 2014 remains muted with China, the key driver of consumption, continuing to slow, Moody’s said.

Iron ore tumbled 39 percent this year after companies including Rio Tinto Group (RIO), BHP Billiton Ltd. and Vale SA raised low-cost output in Australia and Brazil, spurring a global glut. The market is in the midst of a transition without precedent in recent commodity history as supply surges and some higher-cost mines are displaced, according to Macquarie Group Ltd.

“Iron ore prices have collapsed,” Moody’s said in the report, which was dated Oct. 17. “With slowing global steel-production growth rates, iron ore prices remain vulnerable to the downside and we expect continued volatility.”

Ore with 62 percent content delivered to Qingdao, China, posted a third straight quarterly loss in the three months to September, and dropped to $77.97 a ton on Sept. 29, the lowest level since September 2009.

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BHP won’t rush to follow Rio to automate as its manned trucks beat robots – by Matt Chambers (The Australian – October 20, 2014)

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

BHP Billiton’s mining truck drivers are outpacing their robotic counterparts when it comes to efficiency and loading at West Australian iron ore mines, indicating the miner is a long way from any decision to follow rival Rio Tinto in a large-scale driverless truck rollout.

For a little more than a year, BHP has been trialling Caterpillar autonomous trucks at its newest Pilbara region iron ore mine, Jimblebar.

The trial was recently extended to March and a decision to add three more trucks to the nine-truck fleet was taken.

But despite autonomous Caterpillar trucks making up a little over a third of the 25 trucks at the overperforming Jimblebar — the mine came on early, ramped up quicker than expected and will now produce more than flagged — they are only moving 16 per cent of the dirt and ore.

The fact annual truck hours in the manned fleet across BHP iron ore have grown from 4500 to more than 6000, a one-third improvement, is a big factor.

“We’ve seen a very material improvement in the manned truck productivity level,” BHP iron ore mines boss Eduard Haegel said at the company’s Perth office last week.

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BHP Billiton leads miners’ retreat from supersizing – by James Wilson (Financial Times – October 19, 2014)

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

More trucks, more shovels, bigger holes in the ground: the mining sector has been supersizing itself for years, convinced that going large was also the way to earn outsized profits.

But the conviction that size alone matters may no longer hold true, with “diseconomies of scale” a significant factor in mining’s waning productivity, according to a report based on interviews with industry leaders.

The problems caused by growing corporate complexity were among the factors that BHP Billiton, the world’s most valuable mining group by market capitalisation, pointed to when it decided on a big company break-up this year.

Andrew Mackenzie, chief executive, said he was worried by diseconomies of scale at BHP, which is to spin off about $15bn of non-core assets into a separate company. BHP will subsequently run just seven mining projects and five petroleum fields.

However, it is not just unwieldy companies that are a concern, according to the report by EY, the consultancy. It finds that individual mining operations are sometimes getting too large to manage as effectively as companies would like, thereby contributing to the productivity problems plaguing the sector.

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New nickel laterite processing method could halve processing costs and ‘revolutionise’ industry – by Tara de Landgrafft (Australia Broadcasting Corporation Rural – October 16, 2014)

http://www.abc.net.au/news/rural/

The company behind a new method of extracting ore from nickel laterite deposits expects the process to revolutionise the nickel industry.

Direct Nickel, the company responsible for inventing the new processing method, believes it will cut production costs in half. Nickel latertite is used to strengthen metals such as stainless steel.

Due to its lower grade and its distribution across large areas, it is traditionally quite expensive to extract. Almost three-quarters of the world’s nickel deposits are nickel sulphide and up to a third of those are based in Australia.

Conventional extraction uses sulphuric acid in the treatment plant, however Direct Nickel’s technology uses the lower cost and, the company claims, a more environmentally friendly Nitric acid instead.

Technical director Graham Brock says it’s breakthrough technology. He says treatment plants are expected to cost around half that of current HPAL processors and treatment costs would be around $2 to $3 a pound. “[That’s] probably about half or less the capital and about half the operating costs,” he said.

“So we see this very much as breakthrough technology that will in fact change the way nickel laterites are treated.”

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RPT-Australia’s coal sector defies all comers to keep on mining – by James Regan (Reuters India – October 14, 2014)

http://in.reuters.com/

SYDNEY, Oct 10 (Reuters) – Australian coal output is hitting record highs and producers are pressing on with plans to open new mines, defying prices at five-year lows, environmental opposition and trade restrictions imposed by some of the country’s most important foreign buyers.

China, the world’s top coal importer, on Thursday announced it would impose import tariffs to help ailing domestic miners who have been hit by rising costs and plunging prices.

Glencore Plc, one of Australia’s biggest miners, estimates up to a third of Australia’s coal sector is running at a loss, yet collieries are flooding countries such as China and Japan with million of tonnes of coking coal used to make steel and thermal coal to generate power.

In many cases miners are finding it cheaper to run in the red than shut owing to so-called “take or pay” contracts that require payment of haulage fees whether or not any coal is shipped.

The fees were last set in 2009, when coal prices were much higher and still providing healthy profit margins. “Now it simply costs more to mine and ship the coal than we can sell it for,” said an executive at a mid-sized coal company who did not want to be named because of the sensitive nature of his company’s running costs.

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BHP Billiton And Rio Tinto Risking A Monopoly Investigation – by Tim Treadgold (Forbes Magazine – October 14, 2014)

http://www.forbes.com/

Two of the world’s biggest mining companies, BHP Billiton and Rio Tinto , might be attracting the attention of government anti-monopoly and trade regulators in attempts to protect their share of the world iron ore market.

A powerful Australian politician warned earlier today that both miners ran the risk of breaching international trade rules by deliberately expanding to thwart competition.

Colin Barnett, head of the Western Australian state government, said that the directors of BHP Billiton and Rio Tinto should be worried about how European and World Trade Organization regulators might react to recent statements from some of their executives.

Time For The Directors To Be Nervous

“If I was sitting around a board table in one of those big companies I’d be pretty nervous about what the WTO and European regulators would think about this,” he said.

“It’s a precarious area they’re going into.” The problem, as Barnett sees it, is that BHP Billiton and Rio Tinto might be behaving in a monopolistic way — a timely observation given that a day earlier the Nobel prize for Economics was awarded to a French academic who specializes in the behavior of monopolies and oligopolies.

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Nursing juniors Australians beat Canadians – by Kip Keen (Mineweb.com – October 13, 2014)

http://www.mineweb.com/

Is it timing, spending or just having guts?

HALIFAX, NS (MINEWEB) – Maybe it’s an Australian knack for stomaching awful things. Vegemite. Bloodied juniors.

Richard Schodde, Managing Director of MinEx, a small but powerful mining research firm out of Australia, always has some interesting slides in his presentations. In one of his latest he drew a picture of the diverging fate of two patients: ASX and TSX/TSXV exploration juniors.

Australia and Canada have long dominated global exploration (though China is rising.) But the Australians – nursing deep wounds to be sure – are still faring much better than Canadians.

The comparison drew Schodde, on the road in New York, into a 30-minute talk on Friday morning before his hotel’s house-keeping kicked him out of his room.

The basics

Proportionally-speaking, Australian exploration juniors have healthier (albeit still very stressed) cash reserves than Canadians.

That the juniors are in an abysmal state, cash-wise, will come as no surprise to anyone following the sector. But the yawning gap between ASX and TSX/TSXV juniors may.

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NEWS RELEASE: Antipodean version of Ontario Mining Association’s SYTYKM celebrates its first winners

This article was provided by the Ontario Mining Association (OMA), an organization that was established in 1920 to represent the mining industry of the province.

An e-mail received recently from the Land Down Under has served as a reminder that the launch of season seven of the Ontario Mining Association high school video competition So You Think You Know Mining is just around the corner. “Inspired by your initiative, South Australia’s first Dirt TV winners have been announced. I am sure you’ll enjoy the winning entry,” said SACOME (South Australian Chamber of Mines and Energy) in the e-mail message.

The 2014-2015 version of SYTYKM will be offering prize money of $42,500 to Ontario high school film makers, up from $40,000 in season six. The deadline for entries is being set at March 30, 2015. Watch the OMA website www.oma.on.ca. Further details will be provided soon.

Now back to the Southern Hemisphere. Earlier this year, Jason Kuchel, Chief Executive of SACOME, said that on a visit to Toronto he was so impressed with SYTYKM that he knew he had to adopt it at home.

“The SYTYKM competition’s growth over recent years is remarkable and truly inspirational,” added Mr. Kuchel. “The competition works on so many levels, including building community awareness of the benefits of the sector, increasing understanding of career opportunities among high school children and addressing the science and arts curriculums with a practical, real-world example that is also a lot of fun.”

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Why are iron ore prices falling so quickly? – by Eric Reguly (Globe and Mail – October 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.

ROME- Iron ore mines are to Australia what the oil sands are to Canada. The Aussie iron ore business is enormous, capital intensive, profitable and has an insatiable customer – China – just as the oil sands can depend on the United States to consume almost all of its output. The Aussie and Canadian industries share another trait: falling prices.

The value of both iron ore and oil is plummeting. But the similarities end there. Oil is falling because of excess supply and waning demand in the Western world, in good part because zombie Europe is on the verge of a new recession. But global demand for iron ore is still climbing, if at a somewhat slower pace than last year. So why are iron ore prices falling, and why are they falling so much faster than oil?

The price for iron ore in China, the world’s biggest consumer of the material used to make steel for everything from office towers to dishwashers, is down about 30 per cent this year (compared to a 20-per-cent drop for oil). The spot price for iron is off about 40 per cent, though it bounced back a few bucks this week to reach $83 (U.S.) a tonne.

Iron ore is falling even though Chinese demand for steel is up about 5 per cent year on year, while demand for imported iron ore is up 15 per cent or so, outpacing import demand in 2013.

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Freeport’s Indonesia copper mine must improve safety or face more protests – union – by Michael Taylor and Dennys Kapa (Reuters U.S. – October 8, 2014)

http://www.reuters.com/

JAKARTA, Oct 8 (Reuters) – Workers at Freeport-McMoRan Inc’s giant Indonesian copper mine are seeking face-to-face talks with local management following a fatal accident, and may plan a further mine blockade or strike action, a union official said.

Hundreds of angry protestors blocked access for two days last week to the open-pit area of the Grasberg copper complex, where production has been halted following the death of four workers on Sept. 27. The open pit accounts for more than half of the mine’s output.

Fresh protests, blockades or strike action could be triggered if workers’ safety concerns and other demands were ignored, said Albar Sabang, a senior official at a Freeport union, potentially hindering copper exports.

“Production is important but safety is number one,” Sabang told Reuters, adding that protesting workers had demanded a meeting on Oct. 11-12 with Freeport Indonesia CEO Rozik Soetjipto. “If the demands are not met they will plan to do another protest,” he said.

The Indonesian government is investigating the accident, which involved a collision between a light vehicle carrying nine people and a haul truck, and has laid out a number of required work changes for open-pit mining to resume.

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Australian National University dumps mining stocks as global ‘divestment campaign’ focused on universities starts to gain traction in Australia – by Babs McHugh (Australian Broadcasting Corporation Rural – October 7, 2014)

http://www.abc.net.au/news/rural/

A global campaign to get funds and investors to sell their shares in fossil fuels appears to be gaining traction in Australia. There have been announcements by religious, educational and super funds on so called ‘divestment’ of these stocks in recent days.

Over the weekend the Anglican Diocese of Perth decided to sell shares and holdings it has in fossil fuel companies. Bishop Tom Wilmott, who is also the chair of the Anglican Eco Commission, says it plans to put funding into renewable energy investments instead.

“I’m not a financial person, I’m not an accountant, I’m a Bishop and it is for the trustees themselves to determine if they will move from fossil fuel exposed industries and shares into renewables.

“But just take for example the return on coal; over the last two years coal has gone from $125 a tonne to $65, and in the international market the smart money is moving into renewables as well.

“Two weeks ago the Rockefeller family announced they were moving out of petroleum into renewables. Now when a big organisation like that moves from fossil fuels to renewables, you can see where the direction is.”

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Junior exporers find way to survive – by Barry FitzGerald (The Australian – October 7, 2014)

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

The way veteran minerals economist Richard Schodde from MinEx Consulting sees it, the junior explorers are the cockroaches of the market in that they seem to be able to survive nuclear winters.

Which is just as well, given that there has been no joy for the sector on the commodity price front of late.

The economist in Schodde backs up his assessment that the juniors are supreme survivalists with some hard numbers from an in-depth study, all of which is posted on MinEx’s website (http://www.minexconsulting.com/publications.html).

Basically, Schodde says that most junior companies will weather the current downturn. Shareholders might not be enjoying the experience but at least their bits of paper will continue to be worth something. Pick the right juniors, and they could even make serious money.

In the study, Schodde compiled data on the cash position and market capitalisation status of no fewer than 1980 junior companies in Australia, Canada and other mining market jurisdictions. It showed that one in five Australian junior explorers have less than $200,000 in the bank. The good news in that for ASX-listed players is that the story in Canada is worse, with 50 per cent of the juniors there having less than $200,000 in the till.

Schodde says that while bank balances may be depleted, a more important metric for assessing ongoing viability is to look at a company’s market cap.

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