Anglo American set to sell Australian coal mines to boost returns – by Arash Massoudi, James Wilson and Neil Hume (Financial Times – January 22, 2015)

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

Anglo American is eyeing the sale of a cluster of coal assets in eastern Australia as the miner struggles to boost shareholder returns during a slump in commodities prices, people familiar with the matter said on Thursday.

The UK-listed miner, one of the world’s largest coal producers, is preparing to sell five mines in Queensland and New South Wales as part of a $3bn-$4bn asset disposal programme ordered by Mark Cutifani, chief executive.

Large mining companies including Vale and BHP Billiton are looking to dispose of or spin off non-core assets as they battle falling commodity prices and declining share prices. They are also under pressure to boost returns to investors. For Anglo American, a sale of assets would help strengthen its balance sheet.

Mines including Dawson and Foxleigh would be primed for a possible sale, the people close to the situation said. One of these people added that Bank of America Merrill Lynch was working with Anglo.

The miner said in December that it was selling the Callide mine as well as Dartbrook. Anglo and Bank of America declined to comment. The mines earmarked for potential sale produce coal used for steel making or power generation.

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Coal’s King Canute moment – by Cole Latimer (Australian Mining – January 22, 2015)

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

As the coal price continues to falter and major pro­ducers are hit drastic action is being taken to reverse the tide.

The commodity has faced a massive decline. It has fallen in price by more than a third in a year from December 2013 to December 2014, as Chinese demand waned and a projects came online, flooding the market and causing excessive supply problems.

The Bureau of Resources and Energy Economics (BREE) said Australia exported 181 million tonnes of metallurgical coal in 2013-14, with this expected to increase to 185 million tonnes in 2014-15, while thermal coal exports are tipped to top 196 million tonnes in 2014-15.

Queensland alone managed to export 216 million tonnes of both thermal and coking coal for 2014, setting new export records.

Making matters worse for miners in Australia is the supply coming online from other competitors such as Indonesia, Colombia and South Africa, further flooding the market, while Russia has plans to quadruple its coal output levels by 2030.

At the same time, rising natural gas production in the United States means thermal coal will be diverted from domestic American markets where it is used as an energy source, to export destinations – particularly Asia.

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Gold Comes To The Aid Of A Beleaguered Mining Industry – by Tim Treadgold (Forbes Magazine – January 21, 2015)

http://www.forbes.com/

Gold loves a crisis, which is why ongoing troubles in Europe helped push its price back through the $1300 an ounce level earlier today but, to see a gold rush magnified by a currency shift, take a look at what’s happening in Australia.

Down there a gold boom has broken out thanks to the effect of the falling Australian dollar on the gold price with the country’s gold miners also enjoying the benefits of cheaper fuel which is one of the biggest costs, especially in open pit mines.

The triple-whammy of a rising U.S. dollar gold price, falling Australian dollar and cheaper diesel fuel which is used in most mine-site equipment has boosted the Australian stock exchange gold index by 58% over the past 10 weeks.

Some of Australia’s leading gold mining companies have outperformed the index with Newcrest, the biggest ASX-listed gold stock, rising by 61% and the most successful explorer and deal-maker, Northern Star, rising by 137%.

The lift-off point for Australian gold was November 6 last year, the day after the U.S. dollar gold price bottomed at $1142/oz. On that day Newcrest shares were selling at A$8.51 on the ASX. Northern Star was at A91c. The exchange rate was US87.33c and Brent crude oil was at $83 a barrel.

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COLUMN-BHP, Rio production show scale of commodity price challenge – by Clyde Russell (Reuters India – January 21, 2015)

http://in.reuters.com/

LAUNCESTON, Australia, Jan 21 (Reuters) – The latest production reports from mining giants BHP Billiton and Rio Tinto hammer home an uncomfortable truth: No matter how much output increases and costs are cut, falling commodity prices triumph.

Both BHP and Rio Tinto released reports this week that met market expectations and re-affirmed production guidance for the world’s top two mining companies.

While it’s no doubt positive for the Anglo-Australian miners that they are successfully executing plans to boost output while containing costs, the numbers make for some sobering reading.

Rio Tinto, the world’s second-largest iron ore producer after Brazil’s Vale, said it expected to mine 330 million tonnes of the steel-making ingredient at its Western Australia mines in 2015 on a 100 percent basis, up from 280.6 million tonnes last year. (www.riotinto.com)

The average price achieved in 2014 was $84.30 a tonne, Rio Tinto said, which would yield revenue of about $23.65 billion, on a 100 percent basis from the Pilbarra region. Rio Tinto’s actual share of that would be about $18.95 billion, as some of its mined output accrues to partners.

And given the structural oversupply in the market and muted demand growth from top importer China, it seems unlikely that the price will rally significantly in 2015.

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Nickel miners shrug off sluggish prices – by Paul Garvey (The Australian – January 22, 2015)

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

NICKEL miners Western Areas and Panoramic Resources have shrugged off the sluggish nickel price with respective pieces of good news, with Western Areas flagging a big improvement in its guidance for 2015 and Pan­oramic surging on the back of a new discovery.

Western Areas said production costs at its high-grade Flying Fox and Spotted Quoll mines in Western Australia had fallen to their lowest in four years, clearing the way for the company to upgrade its guidance at its half-year result.

Each pound of nickel produced by Western Areas cost the company $2.23, compared with its guidance for the full year of between $2.70 and $2.80 a pound.

The lower production costs reflected higher nickel grades, a renegotiated contract with mining contractor Barminco, and optimisation efforts by the operations team.

Net cash at the company increased from $44.7 million to $53.7m, despite the falling nickel price and the payment of a dividend during the quarter. Western Areas executive director David Southam said the miner had outperformed during the December quarter.

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Rio Tinto Digs Up Record Volumes of Iron Ore in Australia – by Rhiannon Hoyle (Wall Street Journal – January 19, 2015)

http://online.wsj.com/home-page

Output Adds to a Global Glut that Has Driven Down Prices

SYDNEY— Rio Tinto PLC dug up record volumes of iron ore in Australia last year, adding to a ballooning global glut that has driven down prices of the commodity to their lowest level since 2009.

On Tuesday, Rio Tinto reported an 11% rise in full-year production of iron ore to 295.4 million metric tons, slightly ahead of its target of 295 million tons. The Anglo-Australian mining company also produced more copper despite the softening price of the industrial metal.

Rio Tinto has been expanding its operations in the Pilbara iron-ore mining hub of northwest Australia in a bet that China will need more of the commodity to make steel for its skyscrapers and for industries such as auto manufacturing, even as its economy slows. China buys three in every five tons of iron ore traded by sea, with Australia its biggest supplier.

But the strategy of swamping the market with more iron ore it isn’t without its critics, including Glencore PLC, which approached Rio Tinto’s board about a takeover in July. Several major banks, including Citigroup and UBS, recently scaled back their forecasts for iron-ore prices. Citi now estimates a full-year average of just US$58 a ton this year.

Executives at Rio Tinto, which runs the world’s No. 2 iron-ore business by volume, behind Brazil’s Vale SA, shrug off the impact of rising supplies. They say the scale of Rio Tinto’s business and ore quality allows the company to produce material profitably and at a significantly lower cost than competitors.

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COLUMN – A few rays of sunshine break through coal’s storm clouds – by Clyde Russell (Reuters India – January 19, 2015)

http://in.reuters.com/

LAUNCESTON, Australia – The new year has started positively for Asian coal, with prices rallying from a 5-1/2 year low, Chinese imports jumping to the highest in 11 months and renewed merger and acquisition interest.

While these are undoubtedly welcome developments for a sector that has witnessed four years of falling prices, there are still serious questions as to whether these swallows really do indicate a summer of good fortune ahead.

The spot price of thermal coal at Australia’s Newcastle port, an Asian benchmark, rose to $62.91 a tonne in the week ended Jan. 16, up 3 percent from $61.04 the prior week, which was the lowest since April 2009.

The obvious caveat here is that prices are still some way below the breakeven point for many miners in top exporters Australia and Indonesia, and it will take weeks of sustained gains to bring the sector as a whole back into the black.

Chinese imports were 27.22 million tonnes in December, the highest since January last year, again a positive sign but not enough to mask that imports for 2014 as a whole were down 10.9 percent to 291 million tonnes, the first annual drop in a decade.

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Australian mining boom subsides with China’s economy – by Don Lee (Los Angeles Times/Duluth News Tribune – January 17, 2015)

http://www.duluthnewstribune.com/

KARRATHA, Australia — Joe Norton, a large man with a sunburned face, digs into a plate full of beef, potatoes, carrots and Brussels sprouts at Searipple, a mobile-home camp in Australia’s western frontier.

It isn’t the tastiest food in the world, the 54-year-old says, but it’s free, provided by his employer, iron mining giant Rio Tinto.

So is most everything else in his life: all of his meals, a manufactured house with microwave and flat-screen TV, a round-trip ticket every Friday to fly home, and not the least, his $180,000 salary.

Not bad for a man with an eighth-grade education doing semi-skilled work on railways transporting iron ore.

Yet the gig probably won’t last a lot longer, Norton reckons. Some of his fellow miners already have been sent packing as the company downsizes its contracted workforce. “They’re cleaning the fat,” he said.

With China’s slowing economic growth, one of the biggest mining booms in Australian history is over, leaving behind a trail of jobless workers and struggling local businesses in places such as Karratha, which thrived in recent years but now is at risk of becoming a ghost town.

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Anglo American release a video about women in mining – by Vicky Validakis (Australian Mining – January 16, 2015)

 

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

Anglo American has released a video aimed at showing the opportunities open to women at its mining operations. The video features women working at Anglo’s metallurgical coal operations discuss how they made their way into the mining industry.

Gabrielle Horn, an automotive electrical apprentice, said she was working in hospitality when she saw an ad by Anglo in the local newspaper. “My dad encouraged me to apply and I got to choose what position I wanted,” Horn said.

“I love coming to work, things change every day so it’s always a different situation.” Claire Stevens, a technical services superintendent at Grasstree mine, said she actively sought a role in an underground mine because she was fascinated with how it worked.

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COLUMN-Big iron ore miners supply strategy working partially – by Clyde Russell (Reuters U.S. – January 13, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, Jan 14 (Reuters) – China’s record imports of iron ore in December capped a year of strong growth, while also proving that the strategy of the big miners is at least partially working.

China brought in 86.85 million tonnes of the steel-making ingredient in December, bringing the total for 2014 to 932.5 million tonnes, a gain of 13.8 percent over the previous year.

The jump in iron ore imports isn’t because China is producing more steel, with output of crude steel rising a mere 1.9 percent in the first 11 months of 2014 over the same period in 2013, according to official figures.

It’s also not because huge stocks of iron ore are being built up in warehouses, with inventories monitored by the Shanghai Futures Exchange SH-TOT-IRONINV dropping to 99.85 million tonnes in the week to Jan. 9, the lowest in 11 months.

The most logical explanation is that the 47-percent decline in the Asian spot iron price in 2014 .IO62-CNI=SI is displacing some high-cost Chinese domestic output.

This has been the strategy of the big three iron ore miners, Brazil’s Vale and the Anglo-Australian pair of Rio Tinto and BHP Billiton.

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What’s wrong with BHP Billiton? – by Amanda Saunders (Australian Financial Review – January 7, 2015)

http://www.afr.com/

What is wrong with BHP Billiton? Well, a lot, according to Bernstein’s senior mining analyst, Paul Gait. London-based Mr Gait says the Big Australian is “a colossus with feet of clay” in a 54-page note that puts BHP through the wringer.

His views are understood to be in line with those held by pockets of the market in London. BHP shares have taken a hammering there in the past five weeks, falling 13 per cent since the start of December to 1324.50 pence on Tuesday. In Australia, BHP has plunged 29 per cent since August to $28.11.

BHP does not deserve the valuation premium it enjoys over its “high-quality” peers, particularly arch-rival in iron ore, Rio Tinto, Mr Gait said.

And he said it is doubtful BHP is ¬willing to take responsibility for capital discipline, including withholding supply. He accuses the mining giant of “hubris” over its potash strategy.

BHP has a set of some of the highest quality, best-run assets in the game across its four pillar commodities – iron ore, copper, coal and petroleum. That quality, combined with low operating costs and broad diversification have made BHP a “must-own” mining stock.

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Iron ore won’t reach $US100 per tonne again, says BHP Billiton – by Philip Wen (The Age – December 12, 2014)

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

Shanghai: Mining giant BHP Billiton says iron ore prices are unlikely to eclipse $US100 a tonne again, with expectations of steel consumption growth in China slowing further next year.

“I’ve learnt never to say never and there’s always short-term variations, but I think that if you use basic economics … certainly $100 seems high,” BHP’s president of iron ore Jimmy Wilson told reporters in Shanghai on Thursday.

“It’s hard to see that significant bump [in demand] that we’ve seen coming from China happen again.” BHP’s senior management group, including chief executive Andrew Mackenzie, was in Shanghai to celebrate the shipping of its one billionth tonne of iron ore to China.

The first shipment departed from Port Hedland in 1973. “It took nearly 30 years for BHP Billiton to ship 100 million tonnes of iron ore to China and then only 12 more years to reach the one billion tonne milestone,” Mr Mackenzie said.

The milestone was testament to China’s extraordinary rate of development, he said. At current rates the next 1 billion tonnes milestone would take just five years to reach.

But though imports into China have surged, prices have nearly halved, dropping under $US70 a tonne for the first time in five years. The drop comes amid a supply glut brought on by aggressive expansion by major miners Rio Tinto, BHP and Vale – even as Chinese economic growth cools.

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COLUMN-Big miners’ coal M&A activity points to price bottoming out – by Clyde Russell (Reuters U.S. – December 11, 2014)

http://www.reuters.com/

LAUNCESTON, Australia, Dec 11 (Reuters) – If you were looking for a sign that coal prices have finally bottomed out, then the ramping up of merger and acquisition activity is often a good indicator.

Just as major mining companies tend to buy assets at inflated prices at the zenith of the market, they tend to sell them at discounts at the nadir.

In the past few days, a flurry of announcements have hit the headlines, including Anglo American’s proposed sale of coal assets in Australia and South Africa, and Peabody Energy and Glencore agreeing to form a joint venture at neighbouring mines in Australia’s Hunter Valley basin.

The M&A activity hasn’t been limited to Australia and South Africa, with Brazil’s Vale selling a stake in its Mozambique mine to Japan’s Mitsui, and Consol Energy saying it plans to pursue an initial public offering of some of its U.S. thermal and coking coal assets.

Companies tend to use obfuscatory language in the announcements of these deals, often resorting to terms such as “unlocking shareholder value” or “maximising synergies,” but behind the spin is often the simple message that the assets are loss-making and the pain on the bottom line has become too much to bear, or if they are profitable, they aren’t providing enough of a return on capital.

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Glencore boss slams iron ore sector (The Australian – December 11, 2014)

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

DOW JONES NEWSWIRES – The chief executive of mining giant Glencore, Ivan Glasenberg, again criticised the industry for its over-investment in certain commodities, telling investors that “fortunately we don’t produce iron ore.”

Mr Glasenberg’s apparent distaste for the key steelmaking ingredient comes despite Glencore’s approach earlier this year to Rio Tinto, one of the world’s largest iron ore producers, over a potential tie-up. The approach was rejected and under UK company rules Glencore can’t revive the talks until later next year.

Mr Glasenberg has criticised mining rivals such as Rio and BHP Billiton for continuing to invest in and ramp up iron ore production even though the commodity’s price slumped this year. Speaking at the company’s investor day, he said the reason prices had fallen was that “we’ve all invested too much, we’ve increased supply and unfortunately a big amount has gone in the iron ore market.”

The comments came as benchmark iron ore slid to $US68.90 a tonne overnight, just over 1% above its five-year low. Glencore said it would continue to take a disciplined approach to expanding its production capacity, amid the recent fall in commodity prices.

Mr Glasenberg said “capital misallocation, not a lack of demand, remains a key issue for the sector resulting in a clear need to differentiate by commodity.”

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The 2015 Energy Outlook Series: Coal – by Vicky Validakis (Australian Mining – December 8, 2014)

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

Coal has had a tumultuous 12 months but will 2015 be any better? Coal prices declined steadily in the first months of 2014 in response to a combination of in-creased supply and lower import demand from China.

Australian benchmark contract prices for high-quality metallurgical coal settled at $US120 in the September quarter, a price that left many coal operations unprofitable.

Thermal coal fared even worse, with Newcastle free on board spot prices averaging US$73 a tonne in the first eight months of 2014, down 16 per cent year on year. The price glut mean something had to give, and 2014 was the year the coal industry decided to restructure its workforce leading to massive job cuts.

Australian Mining estimates that more than 2500 jobs in the coal sector were cut as mining companies either downsized their operations or shut them down completely.

The Integra coal complex in the Hunter Valley was an early victim of coal’s fall from grace, as Vale announced in May that it would close the operation, taking 500 with it.

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