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Australia/New Caledonia/Papua New Guinea Mining

Nickel at Two-Year High as Vale Ordered to Suspend Plant – by Agnieszka Troszkiewicz (Bloomberg News – May 8, 2014)

http://www.bloomberg.com/

Nickel reached a two-year high in London after Vale SA suspended activity in New Caledonia, stoking concern supply might fall short of reviving demand.

The suspension at the plant was ordered after a spill, according to the island archipelago’s Southern Province government. Nickel surged 41 percent in London trading this year after leading global miner Indonesia barred exports of raw ores in January. The potential for sanctions against Russia also aided prices, according to Societe Generale SA.

“Clearly with the nickel market already tightening on Indonesia and possible sanctions against Russia, this is adding to the general sense that the market is facing a supply shortage over the coming months, if not years,” Robin Bhar, an analyst at Societe Generale in London, said by phone today.

Nickel for delivery in three months gained 4.5 percent to $19,487 a metric ton by 1:48 p.m. on the London Metal Exchange after touching $19,786, the highest level since March 2, 2012.

The spill was yesterday and operations were suspended, Cory McPhee, a Vale spokesman in Toronto, said by e-mail today.

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Glencore Xstrata plumbs new depths at nickel mine – by Neil Hume and James Wilson (Financial Times – May 6, 2014)

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

Glencore Xstrata has revealed further problems with one of the “greenfield” projects it inherited through its takeover of rival mining group Xstrata, underlining the difficulties of developing large mines from scratch in far-flung locations.

Koniambo, a nickel mine on the Pacific island of New Caledonia, has been dogged by cost overruns and delays since it was approved by Xstrata seven years ago.

The budget has risen from $3.8bn to more than $6bn, and production forecasts have been revised several times.
Glencore had expected output to reach 26,000 tonnes of nickel this year, rising to 55,000 tonnes in 2015.

But in a trading statement released on Tuesday, the Swiss-based company said Koniambo had produced just 1,000 tonnes of nickel in the first quarter of 2014 because of problems with power supplies and maintenance. “Forecast full-year production levels are being reviewed in light of the quarterly operational performance and the start-up experiences to date,” Glencore said in a statement.

Koniambo is one of several instances where Glencore has had to revise the engineering plans left by the previous Xstrata management team.

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Fortescue Metals to diversify beyond China – by Jamie Smyth (Financial Times – May 6, 2014)

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

Fortescue Metals Group, one of the “big three” Australian iron ore miners, is expanding its customer base beyond China as global investors fret over how a slowdown in Chinese economic growth will affect steel demand.

Nev Power, Fortescue’s chief executive, said the company was supplying some customers in South Korea, and wanted to trial iron ore sales to Japan and across Asia.

“We will keep an open mind as other economies such as India develop. The Taiwanese are developing a steel mill in Vietnam so there is starting to be diversification. I think there are opportunities for us,” he said.

The price of iron ore – used in steelmaking – suffered one of its biggest one-day falls in March over fears that a cooling Chinese economy would damp demand for the raw material at a time when production reached record highs.

Iron ore prices fell again last week following a warning by Vale, the Brazilian miner, that supply had outstripped demand for the first time in a decade due to softening China demand. Mr Power said price volatility was being driven by the rundown of high stock levels at Chinese ports, and Beijing’s recent crackdown on iron ore import loans.

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China’s Baosteel in $1 billion bid to revive Australia iron ore project – by Sonali Paul (Reuters U.S. – May 5, 2014)

http://www.reuters.com/

SYDNEY – (Reuters) – Chinese steel giant Baosteel Resources and an Australian partner launched a $1 billion takeover bid for Australian explorer Aquila Resources in a move that could help break the grip of mega iron ore exporters Rio Tinto and BHP Billiton.

Monday’s unsolicited A$1.14 billion ($1.06 billion) offer to take over Aquila Resources Ltd (AQA.AX) could open up a new Australian iron ore export region to supply Asian steelmakers, by jumpstarting the $7 billion West Pilbara Iron Ore project (WPIO), half-owned by Aquila.

State-owned Baosteel’s move would be the biggest foray into an undeveloped iron ore project in Australia by a Chinese investor since CITIC Pacific’s (0267.HK) $10 billion Sino Iron project, which began producing last year after massive cost blowouts and delays.

Baosteel, which already has a 20 percent stake in Aquila, said it first invested in the company back in 2009 to help it fund the iron ore project and a separate coking coal mine.

“But after five years we haven’t seen any projects being started. So we have been very patient, but we’ve become frustrated,” chief financial officer Wu Yiming told reporters on a conference call from Sydney.

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Driverless mine trucks heading for east coast – by Matt Chambers (The Australian – May 5, 2014)

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

DRIVERLESS mining trucks that are becoming more common in iron ore mines in Western Australia’s Pilbara region are expected to appear in NSW and Queensland in the next 12 months under plans being hatched by BHP Billiton.

The autonomous trucks, which cut costs by reducing the need to house, feed and employ four drivers, would be trialled at BHP coalmines, BHP coal president Dean Dalla Valle said.

BHP has followed the lead of rival Rio Tinto in introducing the robot trucks into the big iron ore mines in the Pilbara, but after coalmine trials in New Mexico, it is taking the lead in bringing them to the east coast, something Rio has not yet proposed to do.

“We’re looking at two opportunities in coal to do the same thing, in Queensland and NSW,” Mr Dalla Valle told The Australian. “There’s no doubt it will happen, and I’d like to think that within 12 months we will be running trials.”

BHP last month indicated its late-mover status in automated equipment was not a reluctance to employ the technology. It said it was extending a robot truck trial at its Jimblebar iron ore mine to the nearby Wheelara mine.

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The global business of mining [opinion] – by Cole Latimer (Australian Mining – May 2, 2014)

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

You can walk on to most sites around Australia and find Aussies, Kiwis, Americans, British, Irish, South Americans, Canadians, and South Africans. And they’ll be using American, Japanese, Chinese, German, Italian and Russian equipment. It is an industry that encompasses the entire world like very few others do.

And it was this global alignment, coupled with the ability to tap into market opportunities, that helped Australia through the devastating global financial crisis in a way that many other countries couldn’t do due to their inability to access the same markets.

The mining boom, right after this devastating financial event, put Australia in an enviable position globally. But as the mining boom slows down, what does this mean for Australia, seeing we spent much of this century focused on just digging minerals up and exporting them?

Well, luckily for our nation we also spent a large chunk of this last century developing our skills and technology.

Australia may not be a mining manufacturing powerhouse like the US, Japan, or Russia, but we are damn good at mining, and even though our productivity has been dropping and become stagnant over the last few years, that hasn’t stopped the nation from making innovative technology and developing smarter ways in which to mine.

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China’s need for steel will sustain ore miners: Rio – by Andrew Burrell (The Australian – May 2, 2014)

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

RIO Tinto iron ore boss Andrew Harding says iron ore prices will remain strong for at least another 10 to 15 years, declaring he pays no attention to short-term fluctuations in the price of the key export commodity.

Speaking at the In the Zone conference at the University of Western Australia, a bullish Mr Harding said the most important indicator for iron ore was the rate of urbanisation in China, which buys 60 per cent of the world’s seaborne iron ore.

With the iron ore price slipping to $US105.40 ($113.53) yesterday — a 20-month low — and prompting a sharp fall in iron ore miners’ shares, some analysts have forecast a return to prices well below $US100 in coming months as increased supply hits the market and Chinese economic growth slows.

That would hit the profits of Rio and its Pilbara iron ore rivals BHP Billiton and Fortescue Metals Group. It would also eat into the coffers of the cash-strapped federal and West Australian governments.

The three big iron ore miners have pulled back on their future expansion plans, preferring to preserve cash and boost productivity rather than commit to multi-billion-dollar greenfields projects.

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World’s heaviest haul railways defining the Pilbara then and now – by Ben Collins (Australian Broadcasting Corporation – May 2, 2014)

http://www.abc.net.au/northwestwa/?ref=banner

Iron ore trains are one of the unsung heroes of the Pilbara’s mammoth industry. Leading the world in heavy haulage, these trains also track the history of the region.

It was an inauspicious dawn of the rail age in Australia’s north western Pilbara region. But what began with short tramways and a problematic narrow gauge line from Port Hedland to Marble Bar over one hundred years ago, eventually became the lifeblood of Australia’s economic engine room.

As in many North West towns established in the late 1800s, tramways were built to service the early ports at Cossack and Balla Balla in the Pilbara. A more substantial railway, though still just narrow gauge, was built from Port Hedland to Marble Bar to service goldmining and the pastoral industry. The 114 mile railway was completed in 1912, and proceeded to run at a loss for 39 years until the last train came to a halt in 1951.

But a new era of heavy haulage standard gauge railways burst into existence with a flood of iron ore mines in the 1960’s. The first earthworks for the rail bed began in 1965 as iron ore mining permits and sales contracts were put in place for the Goldsworthy iron ore deposit. Construction proceeded at a cracking pace with over 100 kilometres completed and the first train running by May 1966. The line was then extended by 67 kilometres to the Shay Gap iron ore mine in 1972.

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No surprise mining taxes [Australia] please: Rio head – by Kim Christian (Sydney Morning Herald – May 1, 2014)

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

Rio Tinto’s head of iron ore Andrew Harding has warned Australia should not squander its reputation as a stable place to do business.

As the iron ore-focused miner began legal action in the US against its Brazilian rival Vale, Mr Harding urged the Australian government not to introduce surprising tax changes which could deter foreign investment.

“It really does startle an organisation,” Mr Harding told a business lunch in Perth. “Australia’s not the only place you can mine iron ore. “There’s an awful lot of high grade iron ore sitting in Africa, and for a whole lot of instability reasons it hasn’t been mined to date.”

His comments come as Rio Tinto filed a lawsuit in the US District Court against Brazilian miner Vale and an Israeli company over the rights to develop the massive Simandou iron ore deposit in Guinea in west Africa.

Rio alleges billionaire Beny Steinmetz and his company BSG Resources bribed officials and conspired with Vale to steal mining rights to the multi-billion tonne Simandou deposit but it has not specified the amount of damages it is seeking. Mr Harding said a period of volatile industrial relations and iron ore supply disruptions in Australia several decades ago had opened the door for Brazil to build the biggest iron ore business in the world.

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Red dirt in Red Square: Mining World Russia – by Cole Latimer (Australian Mining – April 28, 2014)

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

As the Mining World Russia exhibition wraps up, Australian companies are looking to head home and count their successes at the show, and in the country. Speaking to a number of Australian companies which participated in the Austmine and Austrade developed trade mission and the exhibition as well, they said it was a positive experience and has helped them get a foot in the door of one of the largest mining markets in the world.

The trade mission was carried out as a political storm grew in the background, however this didn’t work to deter miners, who were focusing on the longer term goals of taking Australian experience and technology into new and willing markets.

But why Russia? According to Palaris’ Joe Carr “Russian miners are currently seeing a requirement for technical expertise that they just don’t have here,” which includes high end products and experience that many Australian mining and METS companies have.

Bradken added that “there is a real desire for better technology and equipment in the country,” with Gekko’s Nigel Grigg explaining that previously Russia operated with smaller equipment, but lots of it, so now they are looking to larger, single pieces of machinery or technology”.

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Timing mining of Asia food boom – by Stirling Larkin (The Australian – April 26, 2014)

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

THE so-called “mining to dining’’ boom is expected to be a significant driver of deal flow in the Asia-Pacific not only for the next decade, but also quite possibly through to 2030 at least. Such changes as a move from minerals to food take a while for many commentators and investors to get used to, as the evidence of previous changes shows.

For instance, some of the most successful international investments made around 2004 spotted how important massive capital expenditure in China was going to be to mining and energy companies in Australia and Canada.

The sectors had underperformed in the 1990s and in 2004 commentators were looking the wrong way, failing most particularly to recognise this sea change and the imminent correlation between Australian and Canadian supply, and Chinese demand.

Those who did see this opportunity yielded strong returns in those following years. The Australia in China’s Century conference, hosted by The Australian, will discuss how important these investments were for the economy and how they have advantageously positioned us for future Chinese and regional opportunities.

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China’s war on smog will put the reins on global coal demand – by Jeff Rubin (Globe and Mail – April 24, 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.

China’s pollution epidemic has finally spurred the country’s leadership to declare a war on smog. It’s about time. Chinese citizens are angry about what’s going into their lungs, while a recent government report says pollution has left 16 per cent of the country’s land unfit for use.

Much of that pollution can be traced back to the billowing smoke stacks attached to China’s fleet of coal-fired power plants. If Beijing is indeed sincere about taking the fight to pollution, then these ageing plants will be on the front line. Global coal producers are already sitting up and taking notice.

China relies on coal for roughly three-quarters of its power generation. Its coal-fired power plants combust nearly as much coal as the rest of the world put together. Coal prices, for their part, are already tumbling in part due to a slowdown in China’s economic growth. Spot prices at Newcastle, Australia, the world’s largest thermal coal exporting terminal, have plunged from a monthly average high of $142 a tonne in January 2011 to $78 a tonne last month.

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BHP still sees [Pilbara] greenfields – by Andrew Burrell (The Australian – April 23, 2014)

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

BHP Billiton iron ore boss Jimmy Wilson has dismissed suggestions that the era of multi-billion-dollar greenfields iron projects in the Pilbara has come to an end, even as the mining giant focuses on extracting efficiencies rather than building new mines.

Mr Wilson also refused to be drawn into forecasting the iron ore price amid fears it could tumble in response to patchy Chinese economic data. He said few ¬people had any idea about the outlook for Australia’s most valuable export commodity.

Speaking at the opening of BHP’s $US3.6 billion ($3.9bn) Jimblebar mine near the town of Newman, Mr Wilson said he and his team had “impressed ourselves” by boosting production forecasts from its West Australian operations from 207 million ¬tonnes per annum to 217mtpa for this financial year.

The improved outlook had been achieved through operational improvements, productivity gains and technological innovation rather than any major capital spending. But Mr Wilson rejected suggestions that Jimblebar, along with Gina Rinehart’s $10bn Roy Hill project, could be the last greenfields mines of the Pilbara iron ore boom.

He said the reluctance by miners to allocate billions of dollars towards new mines was driven by the fact that Chinese raw steel production had slumped from a growth rate of 24 per cent almost a decade ago to as low as 3.4 per cent in coming years.

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Iron ore price fears raise earnings alert – by Barry Fitzgerald (The Australian – April 23, 2014)

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

FEARS that iron ore prices are set to crumble in response to patchy Chinese economic data and the unfolding 20 per cent annual surge in exports from the Pilbara have re-emerged, forcing investors to place the earnings outlook for leading producers on high alert.

Prices for the key steelmaking raw material were sent sharply down on Monday and were lower again in Chinese futures trading yesterday.

Monday’s fall as measured by The Steel Index was $US3.20 or 2.7 per cent to $US113.30 a tonne. The sharp fall comes just as the producers and investors had grown relaxed on iron ore’s near-term price outlook after it had worked its way back from this year’s low of $US104.70 on March 10.

The latest fall was put down to the rise in stockpiles at Chinese ports to near record levels, along with another easing of bans in India, which have kept as much as 50 million tonnes annually off the seaborne market.

India’s Supreme Court lifted a ban on iron ore mining in Goa but restricted output to 20 million tonnes a year. It follows the lifting of bans in the biggest producing state, Karnataka, capped at 30 million tonnes a year.

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Rio’s Oyu Tolgoi woes deepen – by Matt Chambers (The Australian – April 22, 2014)

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

MONGOLIA has stepped up criticism of Rio Tinto over continuing delays to expansion of the pair’s $US11.5 billion ($12.3bn) Oyu Tolgoi copper and gold mine, revealing a big divide still stands in the way of the profitable second stage of the giant mine.

In a letter to Rio chief Sam Walsh leaked to the Mongolian press at the weekend, Prime Minister Norov Altankhuyag chided Rio over behind-the-scenes moves to declare it was seeking an end-of-year extension to project financing for the $US5.1bn underground expansion of Oyu Tolgoi.

Lenders’ commitments for a $US3.6bn financing package for the stalled expansion expired last month because Rio and the government could not agree on Mongolia’s take from the project, access to water, and a $US2bn cost blowout on the first-stage ­expansion.

The disagreement threatens to derail the underground expansion of the project, which is where most of the value is set to be ­realised. The March 27 letter from Mr Altankhuyag, who has declared Mongolia is ready to wrap up the funding, shows the government is unhappy with Rio’s public statements on the project.

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