Australia/New Caledonia/Papua New Guinea Mining – Page 114

Nickel region on edge as BHP looks for exit – by Paul Garvey (The Australian – August 23, 2014)

August 22, 2014

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

AS a lifelong resident of the Kambalda region, shire president Mal Cullen has watched the fortunes of the town wax and wane in line with the price of the nickel that has been pulled out of the ground there for almost 50 years.

The residents of Kambalda, in Western Australia’s Goldfields, have become accustomed to the volatility of the nickel price and the impact it can have on their lives. But just as the nickel price appeared to be starting to emerge from years in the doldrums, BHP’s decision to get rid of its assets in the region has brought a new level of uncertainty to the town.

BHP surprised the market when it opted to exclude its Nickel West division from the spin-off it announced this week, with BHP chief executive Andrew Mackenzie instead saying the group would push ahead with a long-running trade sale that is yet to flush out a deal. The assets were deemed to be too mature and too marginal to be lumbered into the spin-off. The failure to find a new owner so far, coupled with their exclusion from the spin-off, leaves the assets looking like the orphan that nobody wants.

For the people of Kambalda and the smaller nickel miners that feed ore into the Nickel West concentrator and smelter, the idea the operations could be shut down altogether is difficult to comprehend.

Ex BHP chairman says cycles move and he’s a happy shareholder – by Simon Evans (Sydney Morning Herald – August 21, 2014)

August 22, 2014

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

Former BHP chairman Jerry Ellis, who led the miner during one of its darkest periods in the late 1990s before it pursued a merger with South Africa’s Billiton, says the company is performing well and maintains the 2001 merger was a good move.

Mr Ellis says BHP needed its cash flows strengthened at the time, but the situation had now changed and the “cycle has moved on”.

He was chairman of BHP from 1997 to 1999 after joinng the board in 1991. He was also a former boss of the BHP ¬Minerals division and an active promoter of a decision by BHP to pay $3.2 billion for Magma Copper in the United States in 1996.

It ultimately proved to be a disastrous purchase when copper prices slumped dramatically and heavy writedowns were needed. Many analysts blame that acquisition for weakening the company to a point where it needed to pursue a merger.

“I’m a shareholder and very pleased with the way the company is travelling,’’ he said on Wednesday. BHP Billiton on Tuesday officially confirmed a $14 billion demerger plan where it is spinning off many of the assets Billiton brought to the table in the 2001 merger.

“I think [former chairman]Don Argus summed it up very well. At the time BHP needed the cash flow from the Billiton assets,’’ Mr Ellis said.

End of Australia’s mining boom threatens Pilbara Cities plan – by Jamie Smyth (Financial Times – August 20, 2014)

August 21, 2014

http://www.ft.com/home/us

Port Hedland, Australia – In a dusty industrial estate next to the world’s biggest iron ore port in Western Australia’s remote Pilbara region, business has never been so bad.

“The rents got so high in the town that when the boom ended, businesses began to die off everywhere,” says Jo Woodward, owner of Jems, a ramshackle building with an eviction notice stuck to its padlocked gate that was recently Port Hedland’s only legal brothel. “Nothing is selling here now.”

The demise of Jems, and of many other Pilbara businesses that have closed their doors following the end of the country’s mining investment boom, suggests Australia may struggle to realise one of its flagship projects.

Port Hedland and neighbouring Karratha grew rapidly during a decade-long boom as workers flooded into the Pilbara to construct the iron ore mines, railways and ports needed to feed Chinese demand for steel.

UPDATE 4-China says Australian tycoon’s attack “irrational and absurd” – by Ben Blanchard, Jane Wardell, Sonali Paul and Adam Jourdan (Reuters India – August 21, 2014)

August 21, 2014

http://in.reuters.com/

BEIJING/SYDNEY, Aug 21 (Reuters) – China’s foreign ministry has condemned a verbal attack by Australian mining mogul and politician Clive Palmer as irrational and absurd, after the businessman described China’s government as “bastards” who shoot their own people.

The Australian government has rebuked Palmer, who holds the balance of power in the parliament’s upper house. Foreign Minister Julie Bishop said she planned to contact the Chinese embassy to stress that the Australian parliament does not share Palmer’s “abusive” views.

“Palmer’s words about China in recent days are totally irrational and absurd. We strongly condemn them,” Ministry of Foreign Affairs spokesman Qin Gang said in a statement posted on the ministry’s official website late on Wednesday.

Qin’s statement came after a prominent Chinese newspaper, the state-run Global Times tabloid, said Australia should be taught a lesson. “China cannot let him off, or show petty kindness just because the Australian government has condemned him,” it said in an editorial in its Chinese and English editions.

“China must be aware that Palmer’s rampant rascality serves as a symbol that Australian society has an unfriendly attitude toward China.”

RPT-COLUMN-Reliance on cost-cutting the real BHP story – by Clyde Russell (Reuters India – August 20, 2014)

August 20, 2014

http://in.reuters.com/

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

LAUNCESTON, Australia, Aug 20 (Reuters) – BHP Billiton’s plans to spin-off unwanted assets may have received a tepid welcome from investors, but the real news from the mining giant’s results is the limits to cost-cutting.

Delving into BHP’s results presentation on Tuesday shows the company has been successful in cutting expenses, with a 12 percent cut in cash costs at the flagship Western Australian iron ore operations, while the Queensland coal business recorded a 24 percent drop.

BHP said its productivity-led volume and cost efficiencies were $2.9 billion in the year to end June 2014, beating its target by $1.1 billion. Given the company’s net income for the period was $13.4 billion, the $2.9 billion in savings represents about 22 percent of the profit, which certainly looks impressive.

The problem comes when you start to look at the savings achieved, the potential for further cost-cutting and the likely trajectory of commodity prices.

BHP said it produced a record 225 million tonnes of iron ore in the 2014 financial year, which resulted in revenue of just under $23 billion, or roughly 34 percent of the group’s total revenue.

Australia rebukes mining tycoon over abusive attack on China – by Jane Wardell and Ben Blanchard (Reuters India – August 19, 2014)

August 19, 2014

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Aug 19 (Reuters) – Australian mining mogul and politician Clive Palmer was rebuked by the government on Tuesday for a tirade against China, in which he described its government as “bastards” who shoot their own people and want to take over the country’s resources.

Treasurer Joe Hockey said the remarks aired on Australian television on Monday were “hugely damaging”, noting that Palmer had benefited personally from doing business with China.

“Do not bring down the rest of Australia because of your biases,” he said. “They are a business partner for Australia, they’re our biggest trading partner, they buy a lot of our produce, and in doing so they help to lift the quality of life for everyday Australians.”

China is Australia’s biggest trade partner with two-way trade approaching $150 billion, representing more than 20 percent of Australia’s total trade.

Palmer, who holds the balance of power in the Australian parliament’s upper house, is currently locked in a legal battle with Chinese firm CITIC Pacific over cost blowouts and disputed royalty payments at an iron ore port in Cape Preston in Western Australia.

Rio and BHP tighten grip on world iron ore – by John Addis (Sydney Morning Herald – August 18, 2014)

August 19, 2014

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

Mexican drug cartels have been diversifying into the iron ore business, smuggling ore worth about $US1 billion a year into China. But it’s the emergence of a more legitimate cartel – one run largely by Australians – that should worry China more.

Rio’s latest result shows how powerful the big three global producers have become. The company’s results for the six months to June 30, with underlying earnings rising 21 per cent to $US5.1 billion ($5.47 billion), are remarkable given that iron ore prices actually fell 20 per cent over the period.

After slashing costs, capital expenditure and debt, management hinted at higher dividends and more buybacks. If the mining boom is supposed to be over, no one told Rio Tinto.

The really interesting element to the result concerned production increases. Although lower iron ore and coal prices stripped $US1.4 billion from underlying earnings, volume increases, particularly in iron ore, offset that fall by more than $US900 million. All up, iron ore contributed more than 90 per cent of total profit.

With China slowing and the country’s government frantically shifting spending away from capital expenditure towards consumption, which dampens demand for ore, Rio Tinto and BHP are expanding output.

COLUMN-BHP Billiton demerger shows how good a deal Billiton got – by Clyde Russell (Reuters U.K. – August 18, 2014)

August 18, 2014

http://uk.reuters.com/

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

LAUNCESTON, Australia, Aug 18 (Reuters) – BHP Billiton’s plan to demerge its unwanted aluminium, nickel and manganese assets underscores just what a fantastic deal shareholders in the old Billiton got when the two joined in 2001.

When Australia-based BHP joined forces with the London-listed, but largely South African, Billiton, a diversified natural resources giant was created.

At the time it was largely viewed as a deal that favoured Billiton shareholders. BHP shareholders got about 58 percent of the merged entity, while Billiton’s got 42 percent, meaning that BHP paid about a 20 percent premium to Billiton shareholders, according to a March 19, 2001 report in the Wall Street Journal.

With the Aug. 15 news that BHP Billiton’s board favours a demerger, the 2001 deal comes full circle. While it’s unlikely to be an exact match, the bulk of assets proposed for the new spin-off company will be those that Billiton brought into the 2001 merger.

Billiton’s main assets in the 2001 merger were the Hillside and Bayside aluminium smelters in Richards Bay on South Africa’s east coast, the Mozal smelter in neighbouring Mozambique, and energy coal mines in South Africa.

UPDATE 1-Rio Tinto to review stake in closed Papua New Guinea copper mine – by Sonali Paul (Reuters India – August 18, 2014)

August 18, 2014

http://in.reuters.com/

MELBOURNE, Aug 18 (Reuters) – Rio Tinto is set to decide on its stake in a long-dormant copper mine in Papua New Guinea’s Bougainville after the passage of a new mining law on the island, with the company possibly pulling out of the project after a quarter of a century.

The interim mining law converts Bougainville Copper Ltd’s mining lease into an exploration lease. That can be converted to a mining lease if approved by the autonomous province’s government, which now controls resources on the island.

“In light of recent developments in Papua New Guinea, including the new mining legislation passed earlier this month by the Autonomous Bougainville Government (ABG), Rio Tinto has decided now is an appropriate time to review all options for its 53.83 per cent stake in Bougainville Copper Limited (BCL),” the company said on Monday.

Rio Tinto declined to comment on what was the most likely outcome of its review or how soon a decision would be made. Selling its stake would be an option.

A secessionist rebellion on Bougainville in 1989 stopped mining at BCL’s Panguna mine. The mine produced some 3 million tonnes of copper and 9.3 million ounces of gold over 17 years.

UPDATE 5-BHP Billiton set to spin off unwanted assets – by Sonali Paul and Silvia Antonioli (Reuters U.K. – August 15, 2014)

August 18, 2014

http://uk.reuters.com/

MELBOURNE/LONDON, Aug 15 (Reuters) – Diversified mining company BHP Billiton declared its preference for a demerger of its aluminium, manganese and nickel assets on Friday, setting the stage for the formation of a separate business that could be worth at least $12 billion.

BHP said its board was considering a spin-off at meetings ahead of its annual results announcement next week. An Australian newspaper said those plans were well advanced and would include the Nickel West business that the world’s biggest miner has been trying to sell.

“A demerger of a selection of assets is our preferred option,” the company, which has a market capitalisation of $185 billion, said in a statement to the Australian stock exchange. BHP has long aimed to sell or spin off its manganese, aluminium and nickel assets, which contribute little to its earnings. Simplifying the company would “generate stronger growth in cash flow and a superior return on investment”, it said on Friday.

Some of the largest shareholders in BHP welcomed the announcement. “It’s good to see BHP taking the lead in the sector on this. It reassures you as a shareholder. It makes me more willing to have it as a significant bet within my fund,” said Christopher Moore, portfolio manager of Fidelity Global Industrials Fund.

Australian state approves $2 bln rail line for Adani coal project – by Sonali Paul (Reuters India – August 14, 2014)

August 14, 2014

http://in.reuters.com/

MELBOURNE – Aug 14 (Reuters) – India’s Adani Mining has won state approval to build a rail line for its $15 billion Carmichael coal project in Australia, it said on Thursday, bringing it a step closer towards making a final decision on whether to go ahead with the massive scheme.

The state of Queensland approved the A$2.2 billion ($2 billion) North Galilee Basin Rail project, a 300 kilometre (186 mile) railway to connect the Carmichael mine and potentially other mines in the untapped Galilee Basin to the east coast port of Abbot Point.

Despite analysts’ views that Adani’s project would be unprofitable at current coal prices, the company said it remained committed to pushing ahead with it to supply coal to power stations in India.

“Adani looks forward to continuing to work with our project partners and all levels of government to see this through,” Adani Mining, the Australian arm of Adani Enterprises, said in a statement.

Adani recently signed an agreement with POSCO Engineering & Construction Co Ltd to build the rail line. Costs and other details of the contract are due to be set by the end of this year.

COLUMN-Australian coal miners running out of costs to cut – by Clyde Russell (Reuters India – August 13, 2014)

August 13, 2014

http://in.reuters.com/

Aug 13 (Reuters) – Coal miners in Australia have spent the past two years desperately cutting costs in a bid to survive falling prices, but this strategy is running out of steam.

While coal miners have been successful in lowering costs, they still haven’t managed to do it anywhere near as fast as prices have declined, and now the scope for further costs reductions is limited.

It’s likely that mining costs will start to rise again in the next year or two as the current round of cost-cutting has led to under-investment and a focus on extracting the easiest, or cheapest, to mine coal.

While coal miners are by nature a tough bunch, the prevailing sentiment at this week’s Coaltrans Australia conference in Brisbane was that prices need to increase soon or more mines will have to be shut, or placed on care and maintenance.

Data from consultants CRU illustrates the problem for coal miners in Australia, which is the world’s largest exporter of coking coal used in steel-making, and number two in thermal coal used in power plants.

This shows that mining costs have fallen, but only marginally, with site costs in New South Wales state dropping from around $65 a tonne in 2012 to $63 a tonne this year, while those in the other major producing state, Queensland, fell from about $61 to $60.

Nickel’s 56% Rally Spurs Mine Restarts Amid Ore Ban – by Phoebe Sedgman and Ben Sharples (Bloomberg News – August 12, 2014)

August 12, 2014

http://www.businessweek.com/

Indonesia’s ban on nickel ore exports is resonating globally as prices climb to the highest since 2012, prompting companies from Avebury Nickel Mines Ltd. to Poseidon Nickel Ltd. to restart operations at idled mines.

Avebury, based in Perth, plans to reopen a deposit in Tasmania six years after it was mothballed. Poseidon is preparing to resume production at a mine in Western Australia, while Panoramic Resources Ltd. may restart mining at its Copernicus deposit in the same state. More producers globally may reactivate facilities as prices extend gains, according to OAO GMK Norilsk Nickel, the world’s largest supplier.

Nickel, used to make stainless steel, rallied as much as 56 percent this year to $21,625 a metric ton after Indonesia halted ore exports in January to compel investment in local processing plants. While the restarted mines such as Avebury’s will add to supplies, the additional production won’t be enough to prevent the global market from dropping into a deficit, with Goldman Sachs Group Inc. to BNP Paribas SA forecasting higher prices.

“Australia is certainly at the forefront of the potential for restarts,” said Stephen Briggs, a metal strategist at BNP Paribas in London, the second most-accurate nickel price forecaster in the eight quarters to June, according to rankings compiled by Bloomberg. “Nickel is one of my top picks,” he said in an Aug. 4 interview, describing $25,000 as plausible.

Check your optimism at the door – by Robin Bromby (The Australian – August 11, 2014)

August 11, 2014

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

WALL Street finished the week on a surge of optimism that Ukraine was looking more benign.

Yeah, sure. But, even in the unlikely event that Vladimir Putin will now pull back, there are the small matters of Gaza, Iraq and, for our miners in West Africa, the Ebola breakout. Add to that headlines wondering whether the bull run is exhausted and signs of increasing volatility among mineral commodities, and perhaps we might conclude that Wall St is clutching at straws.

Deutsche Bank doesn’t see Russia backing down, noting that even with sanctions Moscow continued to build troop numbers near the border, has signed a big oil co-operation deal with Iran and has ordered retaliatory measures against the West.

In addition, says Deutsche, there has been excessive leverage during the recent equities run-up. Weak hands have been driving prices, and now these have been forced to sell.

Zinc, the supposed star at present, has shed 5 per cent since late July and copper is down 4.9 per cent on the year. BNP Paribas reports that mine capacity growth for copper is expected to rise by 31 per cent by 2017.

Goldman Sachs weighed in with a forecast of iron ore averaging $US80 a tonne in 2015, Bloomberg describing it as a potential “rout”.

BHP Billiton’s thirst triggers an outback water fight – by Sarah Martin (The Australian – August 9, 2014)

August 8, 2014

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

SHANE Oldfield kicks the red rocks on his vast, dry pastoral lease north of Marree where he raises organic Angus beef for export.

The outback Clayton Station in northern South Australia has always been marginal farming land. With an average of 10cm of rain a year the property is dependent on water from the Great Artesian Basin in dry years.

“We are living in a desert, and without the basin we are non-existent,” Mr Oldfield says. “We haven’t had a decent rainfall since February 2012, so without the Great Artesian Basin we wouldn’t be here.”

But while accustomed to battling drought, the Oldfields now have another fight on their hands. The water level of the basin is dropping dramatically, raising fears that the pastoral land will become unviable.

The culprit, they say, is BHP Billiton, which pumps all of its water from the basin to its Olympic Dam mine and the Roxby Downs township 250km away. “BHP aren’t going to own up to the fact that they are sucking the guts out of the basin,’’ he tells The Weekend Australian.

“But they are. They want the water from this country because without the water they can’t mine, and the GAB water is the cheapest water they are ever going to get.”