Australia/New Caledonia/Papua New Guinea Mining – Page 113

Big iron miners too bullish on steel growth, says Chinese expert – by Matt Chambers and Barry FitzGerald (The Australian – September 22, 2014)

September 22, 2014

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

BHP Billiton and Rio Tinto are over-estimating long-term Chinese steel production growth and iron ore prices are unlikely to rise from current depressed levels, according to a senior representative of China’s steel industry.

Li Xinchuang, deputy secretary-general of the China Iron and Steel Association that represents China’s biggest state-owned steel mills, said Chinese steel production, now at about 800 million tones per year, could not grow beyond 900 million tonnes.

“That will be the peak level, we understand it cannot go over 900 million tonnes — we think roughly 800 million to 870 million,” Mr Li said on the sidelines of the International Mining and Resources Conference in Melbourne.

BHP and Rio, who are increasing iron ore production and putting pressure on prices, are both forecasting Chinese steel production will peak at 1 billion tonnes per year or more. “It cannot, trust me, I have been in the business 30 years,” he said.

Asked whether BHP and Rio misunderstood China, Mr Li said: “Maybe they keep that story for investors, I don’t know.” Mr Li, who is also president of the China Metallurgical Industry Planning and Research Institute, said the figure was based on previous steel use rates when industrialised nations like the US and Japan peaked in their steel use.

Axiom eyes legal win over Japanese giant Sumitomo – by Sarah-Jane Tasker (The Australian – September 23, 2014)

September 22, 2014

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

AUSTRALIAN-listed minnow Axiom Mining is confident of winning its “David versus Goliath” battle with Japanese giant Sumitomo Metal Mining to develop one of the world’s largest nickel laterite deposits.

Axiom chief Ryan Mount is undaunted by his battle opponent, a metals major and Japan’s No 2 copper producer, and is hopeful that when the judge delivers his decision this week on the project, in the Solomon Islands, Axiom will win.

In what has been the longest-running and most expensive case on the Solomon Islands, Sumitomo has fought to be recognised as the developer of the nickel asset, after it was taken off the Japanese giant and given to Axiom by the traditional owners of the land.

Analysts have estimated that Axiom has spent more than $10 million on its court action. They have also outlined that Sumitomo spending millions to challenge Axiom’s ownership of the Isabel project was a clear indication that the asset was of great significance to a major company.

“It was worth pursuing. It will be of significant value to our shareholders. We feel confident as to our rights on this matter,” Mr Mount said. “We didn’t initially believe it would take this long.”

Gold price low and heading lower – by Evan Schwarten (Sydney Morning Herald – September 19, 2014)

September 19, 2014

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

Gold prices are set to fall to a multi-year low as the US Federal Reserve winds back stimulus and contemplates lifting interest rates.

Gold has fallen to its lowest level since January and analysts say the slide is likely to continue, putting a number of Australian gold producers under threat.

The metal has fallen from more than $1,300 an ounce in August to around $1,220 and CMC Markets chief market strategist Michael McCarthy expects it to move towards its multi-year-low of $1,180 within weeks.

And he doesn’t expect that level to hold in the longer term. “With the fundamentals running against it and no sign of inflation, it’s hard to see what will hold it and we could be looking at new multi-year lows,” he said.

The key factor pushing gold prices up in recent years has been the US Federal Reserve’s economic stimulus program, which has pushed the US dollar lower and boosted demand for safe haven investments like gold and bonds.

But the Fed will completely wind back its asset purchases in October and is expected to start lifting interest rates in 2015, which is bad news for gold.

As heat leaves mining, rest of Australia gets to breathe – by Wayne Cole (Reuters India – September 19, 2014)

September 19, 2014

http://in.reuters.com/

Sydney – (Reuters) – Australia’s miners face tough times amid a meteoric fall in the price of their cash cow, iron ore, but there are plenty of reasons to believe the rest of the economy can weather the storm and perhaps even profit from it.

Instead, the cool down in mining should be a relief since it offers breathing space for the 90 percent of the economy that doesn’t involve digging up resources – much of it sucked up by China, Australia’s major export market.

“Essentially we were told we had to make way for the miners – so put up or shut up,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital.

“Now mining is fading the rest of the economy can rebalance. We’ve had relief on rates, debt servicing costs are down, home prices are up and the Aussie dollar should ease over time,” he added. “Really, we should be celebrating.”

That is not to belittle the contribution of mining, or China’s importance, to the economy. The hundreds of billions spent on resource projects helped Australia sail through the global financial crisis relatively unscathed, and extend its enviable record of avoiding a recession for 23 years.

That investment is also fuelling a sharp rise in export volumes, which is helping temper the drag from falling prices which has seen iron ore shed 37 percent so far this year.

Rinehart rejects talk of Korean raid on Roy Hill – by Andrew Burrell (The Australian – September 16, 2014)

September 15, 2014

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

GINA Rinehart’s Hancock Prospecting has rejected speculation that Korea Development Bank is planning to buy a 5 per cent stake in the magnate’s flagship $10 billion Roy Hill iron ore project in the Pilbara.

A report published yesterday by a Seoul-based industry journal said the state-owned bank was planning to purchase the stake in partnership with Korean pension fund firms and insurance companies for 170 billion won (about $180 million).

The market value of Roy Hill is likely to have slumped in recent months given the weaker outlook for iron ore prices, which have plunged to $US82 a tonne, although the low-cost Roy Hill project would still be profitable at current prices. The report in the Korea IT Times appeared to suggest that Korea Development Bank would buy the stake from Hancock Prospecting.

“There is absolutely no truth to the report,” said a spokesman for Hancock Prospecting, Mrs Rinehart’s private company. Hancock Prospecting owns 70 per cent of Roy Hill, while Japan’s Marubeni has 15 per cent, South Korea’s Posco holds 12.5 per cent and Taiwan’s China Steel Corp has 2.5 per cent.

Sources said Posco would be an unlikely seller of its stake after chief executive Oh Joon-Kwon last month praised Roy Hill as a key asset for the Korean company.

Miners face threat of coal ban – by Sarah-Jane Tasker (The Australian – September 15, 2014)

September 15, 2014

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

AUSTRALIA’S thermal coal miners, already struggling to turn a profit, could be further hit with an import ban on lower quality coal by China.

The price of thermal coal has come under renewed pressure amid fears that the economic powerhouse would implement quality-based restrictions on coal imports, which could impact almost half of Australia’s exports to the Asian giant.

Macquarie analyst Stefan Ljubisavljevic has outlined that while he remained sceptical that the proposed ban on high-ash, high-sulphur material would be enacted, on a “worst-case-scenario” basis it was Australia’s miners that would suffer.

The ban, proposed by the China National Coal Association and being scrutinised by the National Development and Reform Commission, would prohibit all coal imports above 15 per cent ash and 0.6 per cent sulphur.

“Based on Wood Mackenzie data, almost half of all Australian exportable thermal coal would not meet a 15 per cent ash and 0.6 per cent sulphur cut-off. As a result, implementation of this draft ban would, in our opinion, put at risk about 40 million tonnes per annum of Australian coal volume,” Mr Ljubisavljevic said.

The Macquarie analyst said that if the ban was enacted, the best-case scenario for the thermal coal market would be that exports from Russia and Indonesia would simply be redirected to China from other destinations.

Iron ore market risks ‘disaster’ – by DOW JONES NEWSWIRES WITH A STAFF REPORTER (The Australian – September 8, 2014)

September 9, 2014

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

Mining companies will aggressively pursue increased output in the face of continuing weakness in the iron ore price, though with forecast demand not expected to keep pace with production, one analyst is warnings of a potential “disaster”.

Rio Tinto and BHP Billiton in Australia, and Vale in South America — the world’s top three iron ore miners — are ramping up production in a bet that their enormous efficiencies of scale will allow them to profit, even though prices are now less than half what they were four years ago. The companies are also betting that the lower prices could force higher-cost competitors out of the market, giving them more pricing power in the long run.

The iron ore price has been in a slump for most of the year, with its latest fall on Friday seeing a new five-year low at $US83.60 a tonne.

Already Cliffs Natural Resources has hired bankers to sell its mines in Australia because it has difficulty competing with the major players. “The big three are in control, and there’s not much you can do about it,” Lourenco Goncalves, chief executive of the Cleveland-based company, said in an interview.

The developments are being closely watched by steelmakers in China, South Korea and Japan, the world’s top three importers of iron ore, the key ingredient in making steel. Should the big players, which account for more than 60 per cent of all seaborne trade of the mineral, tighten their control of the market, they could exert greater pressure during price negotiations.

Iron ore giants eating little guys now, but cannibalism looms – by Clyde Russell (Reuters U.S. – September 3, 2014)

September 3, 2014

http://www.reuters.com/

Clyde Russell is a Reuters columnist. The views expressed are his own.

LAUNCESTON, Australia – (Reuters) – There was maybe more than a touch of hubris in Rio Tinto boss Sam Walsh’s recent comment that it’s time for other iron ore producers to “really feel the consequences” of the current low price.

The chief executive of the world’s No.2 iron ore miner was speaking after his company’s first-half results last month, basically delivering the message that Rio Tinto is going to keep going full-steam ahead on its iron ore expansion plans.

Walsh, along with the bosses of top iron ore miner Vale and No.3 BHP Billiton, is betting that their low-cost, high volume model will force smaller competitors to the wall, leaving them the undisputed kings.

Perhaps he should have a word or two with the chief executives of coal miners, which, oddly enough, includes himself given Rio Tinto’s extensive coal assets.

When the price of both thermal and coking coal started to decline in mid-2011, the word from the industry was that this wasn’t too big a surprise, but no need to worry as Chinese demand will ensure prices don’t fall too far, and all the new capacity brought on and planned will be profitable.

Mining overregulation curbing key to our future, says Rinehart – by Barry FitzGerald (The Australian – September 4, 2014)

September 3, 2014

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

Billionaire iron ore magnate Gina Rinehart believes the Abbott government has more to do after fulfilling its election promise to axe the carbon and mining taxes.

A strong critic of the now-abandoned mining tax on the iron ore and coal sectors, Mrs Rinehart said “overregulation and the high costs of approvals and compliance remain as huge impediments’’.

Writing in her regular column in Australian Resources and Investment, out today, Mrs Rinehart said that mining should not be seen as a dirty word, but as an industry critical to Australia’s future. “Unfortunately it is an industry facing problems,” she said.

“We can’t afford to overregulate and overburden industry if we want to remain competitive and maintain our standard of living. “ We should instead be focused on making our country’s exports sustainable in the world markets, for the benefit of Australians and Australia’s future.”

Mrs Rinehart — Australia’s richest person and the major shareholder in Fairfax Media — said low-cost nations, particularly in places like Africa and parts of Asia, were seeking out investors to develop their resources.

Iron ore slide to $US75 will hit Australian suppliers: analyst – by Paul Garvey (The Australian – September 3, 2014)

September 3, 2014

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

IRON ore prices will fall to as low as $US75 a tonne next year and begin knocking out Australian sources of supply, a leading commodities analyst has warned.

Ian Roper, a former analyst with Rio Tinto who now works out of Shanghai for CLSA, has made further cuts to his iron ore price outlook in response to a stronger than expected ramp-up in supply by Australia’s iron ore miners.

Mr Roper now expects the iron ore price to fall to $US75 a tonne by September 2015, compared to his previous forecast for prices to drop to $US80.

The benchmark iron ore price has already fallen by more than 37 per cent this year to around $US87.10 a tonne.

While smaller iron ore miners are hoping that high-cost Chinese iron ore production will put a floor under the price and stop the price slide, Mr Roper argued that prices would continue to fall and flagged closures would spread to international iron ore suppliers including Australia.

He said iron ore was likely to follow a similar path to the coal price, which has been hovering at lows for two years as marginal mines battle to stay in production. Mr Roper also argued Chinese steel mills would be reluctant to shut their own iron ore production capacity.

Mine sleuths keen for their nickel – by Paul Garvey (The Australian – September 2, 2014)

September 2, 2014

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

BILL Amann and Adrian Black have been involved in many of the key nickel discoveries in Australia’s recent history, but the pair has one major regret: not loading up with shares in the companies for which they were working.

The exploration resumes of the two geology and geophysics consultants make for impressive reading. Their consultancy, Newexco, was involved in the early stages of major nickel discoveries such as Western Areas’ Spotted Quoll and Flying Fox deposits and the barnstorming Nova nickel discovery of Sirius Resources.

Their work has helped create billions in shareholder wealth, but their exposure to those riches has generally been limited to their consulting fees.

Now the pair is backing themselves to continue their magic run of exploration success, and have opted to ease their long-held policy of not taking shares in their clients.

The Newexco founders are taking shares in little-known company Mining Projects, a minnow gearing up for a nickel exploration program east of Kalgoorlie. So far, Mining Projects has found little love beyond the technical boffins — it has a paltry market capitalisation of just $10 million.

Australia avoids commodity ‘Dutch Disease’, for now – by Clyde Russell (Reuters U.S. – August 28, 2014)

August 28, 2014

http://www.reuters.com/

LAUNCESTON, Australia – (Reuters) – The resource boom is often cast as both villain and hero in Australia, being simultaneously recognized as a major driver of the country’s wealth but also as a destroyer of traditional industries.

Two recent research papers have highlighted this dual nature of investment boom in iron ore, coal and liquefied natural gas (LNG), and taken together show that while Australia has benefited hugely from China-led demand for commodities, the risks seem to be mounting.

First, the good news. Australia has largely avoided the dreaded “Dutch Disease” over the past decade, according to an Aug. 22 research report from the Reserve Bank of Australia.

“Dutch Disease” was coined by The Economist magazine to describe the negative impact of a booming resource sector on other parts of the economy, using the discovery of natural gas off the Netherlands and the subsequent decline of that nation’s manufacturing as the eponymous example.

Over the decade to 2013, the resource boom boosted real per capita household disposable income by 13 percent, raised real wages by 6 percent and lowered the unemployment rate by 1-1/4 percentage points, the Reserve Bank researchers said.

While this was the good news from the investment of hundreds of billions of dollars in boosting commodity output, the central bank also found that the appreciation of the Australian dollar weighed on industries exposed to trade, such as manufacturing and agriculture.

UPDATE 1-Australian state to sell around $2 bln in assets as mine boom ends – by James Regan (Reuters India – August 28, 2014)

August 28, 2014

http://in.reuters.com/

SYDNEY, Aug 28 (Reuters) – The state of Western Australia on Thursday said it planned to sell government-owned assets, including part of the Port Hedland shipping terminal, for an estimated A$1 billion to A$2 billion ($1.9 billion) as its resource-heavy economy adjusts to the collapse of a decade-long mining boom.

The move will precede other unspecified sales of land and assets that could fetch another A$4 billion to A$5 billion over the next two or three years, said state premier Colin Barnett.

Barnett, said his priority was to reduce debt and regain a triple-A credit rating for Western Australia. He once hailed the state as the economic engine for Australia, but it is now struggling to pay its bills.

“These are the first assets we will open up to the market. They have been identified as priority assets for sale,” Barnett said in a statement.

Moody’s this week downgraded Western Australia’s credit rating to Aa1 from Aaa. “The ratings downgrade reflects the state’s ongoing deficit position, the deterioration in its debt metrics, and a growing risk that this trend may not be reversed soon,” the ratings agency said.

Glencore, Jinchuan frontrunners to buy BHP’s Nickel West – by Sivia Antonioli and Polly Yam (Reuters U.S. – August 27, 2014)

August 28, 2014

http://www.reuters.com/

LONDON/HONG KONG – (Reuters) – Commodities trader and miner Glencore (GLEN.L) and Chinese nickel producer Jinchuan Group are the frontrunners to buy BHP Billiton’s (BHP.AX)(BLT.L) Australian Nickel West division, two sources close to the situation said.

BHP, the world’s largest mining company, announced plans last week to spin off businesses worth an estimated $16 billion but said that Nickel West in western Australia would not be part of the demerged group.

Chief Executive Andrew Mackenzie has said the company was in talks with potential buyers for all or part of Nickel West.

Estimates of the value of Nickel West vary greatly, with some analysts and industry sources putting it at anything up to $1 billion and others tagging negative figures to an asset they say is burning cash. “It’s a race between Glencore and Jinchuan now,” the first source said.

Jinchuan is “very interested” in Nickel West and plans to ship about 30,000 tonnes of nickel concentrate to China if it takes over the business, said the China-based second industry source, who had been briefed about the plan but declined to be named because of the sensitive nature of the matter.

BHP Billiton set to expand Pilbara iron ore operations – by Matt Chambers (The Australian – August 25, 2014)

August 25, 2014

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

BHP Billiton chief executive Andrew Mackenzie says iron ore prices are unlikely to climb back above $US100 a tonne but the company is readying to spend an extra $US3.25 billion ($3.5bn) to bring more ore on to the market in a bigger-than-expected expansion of its West Australian mines.

As iron ore prices last week slid to about $US90 a tonne and approached five-year lows, Mr Mackenzie said he was not counting on a price floor forming.

At the same time, in a declaration largely lost amid BHP’s plans for a $US14bn spin-out of non-core assets, the world’s biggest miner says it is looking to expand its Pilbara iron ore mines and ports to annual capacity of 290 million tonnes a year.

This is up from a previous target to grow to 270 million tonnes and at a forecast capital cost that is dramatically lower than guidance given to analysts a year ago.

“We would say it is quite unlikely that we would see prices north of $US100 a tonne, so our forecasts are obviously based on something below that,” Mr Mackenzie told British media when asked if there might be a price floor around current price levels.