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New era of austerity at BHP -by Barry Fitzgerald (The Australian – May 10, 2013)

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

BHP Billiton’s new chief executive Andrew Mackenzie has launched the world’s biggest resources group on a relentless productivity drive, aimed at improving shareholder returns against a backdrop of fading commodity prices.

Mr Mackenzie formally takes the reins at BHP today, with the Scottish polyglot and sometime saxophone player spending the day at BHP’s iron ore operations in the Pilbara.

He replaces the man who hand-picked him as a likely successor more than five years ago, the vegetarian Afrikaner Marius Kloppers, known as much for his safe hands during the global financial crisis as his idiosyncratic tendencies.

Speaking to The Australian before his first day as chief executive, Mr Mackenzie said there would be no big-bang change in BHP’s strategy. It would evolve over time under his leadership, but securing productivity improvements was the immediate focus, replacing the previous focus on production growth.

“Ultimately, we won’t be changing much of it at all. We will probably just be even more clear that our future prosperity is going to be based on a small number of world-class tier-one orebodies,” Mr Mackenzie said. “We are likely to invest less, and therefore the principal way we intend to grow the returns from our businesses is by driving productivity.”

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Rio Tinto to press on with iron ore expansion plans – by James Regan and Sonali Paul (Reuters India – May 7, 2013)

http://in.reuters.com/

SYDNEY/MELBOURNE, May 7 (Reuters) – Rio Tinto, the world’s No.2 iron ore miner, is set to press on with plans to boost production at its Australian mines by a quarter by 2015, shrugging off pressure to slow spending and conserve cash as the commodity boom cools.

In spite of forecasts of a looming global supply glut, shareholders expect Chief Executive Sam Walsh to tell the firm’s annual general meeting in Sydney on Thursday that it’s full speed ahead with a 70 million tonnes-per-year increase that will take output to 360 million tonnes annually by 2015.

The plan means that a major additional chunk of iron ore production will enter the world market in the next few years and will add to concerns about increased supply that could weigh on a recovery in prices.

“They should continue to expand what is a high margin, high returning project, one of the best returning mining projects in the world, because growth now will mean yield in the future,” said Ben Lyons, who helps manage A$400 million ($409.42 million)at ATI Asset Management, which holds Rio shares.

Rio Tinto’s board is not expected to make a final decision on the expansion plans, estimated to cost up to $5 billion, until later this year.

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Australia cuts benchmark interest rate [Mining in Australia] – by Tavia Grant (Globe and Mail – May 8, 2013)

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.

An overvalued currency, lower commodity prices and cooling investment in the mining sector. These things are not just happening in Canada, they’re also dealing a blow to Australia, which surprised markets by cutting its key interest rate in an effort to bolster its economy.

The Reserve Bank of Australia cut its benchmark rate to a record low of 2.75 per cent Tuesday, citing rising unemployment, “below trend” economic growth and resource-sector investment that’s poised to cool. And it didn’t mince words about the Australian dollar, which it suggests is too strong. As its natural resource sector slows, the central bank is aiming to give a lift to consumer spending and factories.

Canada’s economy is often compared with Australia’s. Both countries are heavily reliant on commodity exports, have triple-A credit ratings and strong currencies. They have similar levels of wealth, as measured by GDP per capita, and relatively small populations spread over a huge land mass.

But though Australia’s rate cut will be closely watched by Canada’s incoming central bank governor, Stephen Poloz, that doesn’t mean this country’s monetary policy will follow suit.

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Rio Tinto to press on with iron ore expansion plans – by James Regan and Sonali Paul (Reuters India – May 7, 2013)

http://in.reuters.com/

SYDNEY/MELBOURNE, May 7 (Reuters) – Rio Tinto, the world’s No.2 iron ore miner, is set to press on with plans to boost production at its Australian mines by a quarter by 2015, shrugging off pressure to slow spending and conserve cash as the commodity boom cools.

In spite of forecasts of a looming global supply glut, shareholders expect Chief Executive Sam Walsh to tell the firm’s annual general meeting in Sydney on Thursday that it’s full speed ahead with a 70 million tonnes-per-year increase that will take output to 360 million tonnes annually by 2015.

The plan means that a major additional chunk of iron ore production will enter the world market in the next few years and will add to concerns about increased supply that could weigh on a recovery in prices.

“They should continue to expand what is a high margin, high returning project, one of the best returning mining projects in the world, because growth now will mean yield in the future,” said Ben Lyons, who helps manage A$400 million ($409.42 million)at ATI Asset Management, which holds Rio shares.

Rio Tinto’s board is not expected to make a final decision on the expansion plans, estimated to cost up to $5 billion, until later this year.

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Australia billionaire spends big on nickel even as glut worries persist – by James Regan (Reuters U.S. – May 3, 2013)

http://www.reuters.com/

Billionaire Clive Palmer earmarks $1 bln to upgrade nickel refinery

SYDNEY, May 3 (Reuters) – Australian mining magnate Clive Palmer is joining Vale, Xstrata and other sector heavyweights pouring money into nickel despite a dire near-term outlook for demand, as they plough on with projects bought on the cheap or as part of corporate takeovers.

Hopeful that appetite will pick up as the global economy improves, they are reluctant to shed assets after investing billions. But that risks deepening a supply glut in the short term and piling more pressure on nickel prices, which have fallen around 13 percent so far this year and were the worst performer on the London Metal Exchange in 2012.

Palmer, a self-described eccentric who is building a replica of the Titanic, plans to spend a hefty $1 billion this year upgrading an ageing nickel refinery in Australia, battling to reduce production costs through steps such as revamping equipment and waste disposal operations.

“The $1 billion … will help make the refinery more efficient in a time of low nickel prices,” said Andrew Crook, a business adviser to Palmer. He declined to give details on operating costs as the Yabulu plant is privately owned. Xstrata Plc, Vale SA, First Quantum Minerals Ltd, China Metallurgical Corp, Sherritt International and Sumitomo Corp are among companies spending heavily to build new nickel mines and processing plants.

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Greenpeace activists board Australian coal ship in reef protest – by Thuy Ong (Reuters U.K. – April 24, 2013)

http://uk.reuters.com/

(Reuters) – Six Greenpeace activists boarded a coal ship bound for South Korea near Australia’s Great Barrier Reef on Wednesday, protesting against the expansion of the rich Australian coal industry and its impact on the World Heritage site.

Environmentalists say the Great Barrier Reef, a popular tourist site worth about A$6 billion (4 billion pounds) a year to the Australia economy, is threatened by dredging, sedimentation and coal port and shipping development.

UNESCO will decide in June whether the reef should be listed as a World Heritage Site in danger. The ship MV Meister was carrying thermal coal from Abbot Point in northern Queensland state, a port that falls within the Great Barrier Reef heritage area, and was still in Australian waters in the Coral Sea when it was boarded en route to Donghae in South Korea.

“They have established a peaceful occupation of the ship,” said Georgina Woods, a climate campaigner on board Greenpeace’s flagship, the Rainbow Warrior.

Activists launched inflatable boats from the Rainbow Warrior and boarded the coal vessel early on Wednesday. A letter was handed to the captain of the ship detailing their reasons for the occupation.

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COLUMN-Asia’s coal appetite still defying forecasts for drop – by Clyde Russell (Reuters India – April 23, 2013)

http://in.reuters.com/

LAUNCESTON, Australia, April 23 (Reuters) – Asia’s coal markets are starting to resemble Waiting for Godot, Samuel Beckett’s absurdist play where the main characters wait in vain for something that doesn’t happen.

In coal’s case, the market is expecting demand, and by extension, prices, to drop amid anticipated slower economic growth in the region and rising electricity generation from alternative sources.

The problem is that so far coal imports by the big three Asian consumers, China, Japan and South Korea, are increasing, defying forecasts for the past several months of an imminent slowdown.

It’s not only that overall coal imports are gaining, it’s also that some suppliers are gaining market share, most oddly Australia, which is one of the highest-cost producers in the region. China’s coal imports jumped 20.2 percent in March from a year earlier to 20.52 million tonnes, and at 63.796 million tonnes are up 27.3 percent in the first quarter from the same period in 2012.

Japan’s imports were 15.821 million tonnes in March, an annual gain of 5.8 percent and the fiscal year that ended in March saw imports total 106.29 million tonnes, a record high and up 4.5 percent on the prior fiscal year.

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Norilsk takes another hit in WA – by Nick Evans (The West Australian – April 15, 2013)

http://au.news.yahoo.com/thewest/business/

Russian mining giant Norilsk Nickel has taken another hit to its Australian assets, announcing further writedowns as it prepares to close its remaining WA mine.

According to an abbreviated set of 2012 financial accounts released by Norilsk late on Friday, the world’s biggest nickel producer has written down the value of its Australian and Botswana mining assets by $US278 million ($264.7 million). The company did not apportion the writedowns.

It spent $7 billion expanding in WA nickel at the height of the mining boom in 2007 and is understood to have now written off the vast bulk of the assets it acquired.

The carrying value of its non-current assets in Australia was put at $US511 million at the end of 2011. That figure is understood to have fallen to about $US350 million by the end of last year.

Media reports in Botswana indicate Norilsk may also be preparing to close its nickel mines there, after senior management decided to mothball its Lake Johnston project, north-east of Kalgoorlie, late last month.

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Australian governments have blown mining boom cash, say economists – by Jessica Irvine (News Limited Network – April 14, 2013)

http://www.news.com.au/

AUSTRALIANS could be sitting on a $300 billion sovereign wealth fund to rival the oil-rich nation of Kuwait if we had banked the budget windfall of the now deflating mining boom.

Instead, exclusive modelling for News Limited reveals successive federal governments have squandered the lot – and then some – in tax cuts, handouts and stimulus spending.

Most economists are tipping Labor’s fifth budget will reveal a budget still deep in deficit – by as much as $10 billion in 2013-14 – as revenues continue to disappoint.

This is despite the mining boom delivering a $290 billion boost to the budget bottom line between 2003/4 to 2016/17, according to modelling by Canberra-based forecasting group Macroeconomics.

The figure represents the difference between actual revenues and the revenues that would have been raised if there had been no commodity price boom.

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Xstrata starts nickel mining in New Caledonia – by Esmarie Swanepoel (MiningWeekly.com – April 12, 2013)

http://www.miningweekly.com/page/home

PERTH (miningweekly.com) – Swiss-listed Xstrata’s nickel division has started production at its Koniambo project, in New Caledonia.

The diversified miner said on Friday that the start of production marked a key milestone for the $5-billion greenfield project, which has been under construction for the past six years and has been a flagship component of Xstrata’s organic growth programme.

“We are on track to deliver the full production rate of 60 000 t/y by the end of 2014 as scheduled, while maintaining excellence in terms of environmental and safety performance at this world-class industrial complex,” said Xstrata Nickel CEO Ian Pearce.

“All components of the mining and smelting process have now been successfully tested, leading to production of metal from Line 1. The production of first nickel metal at Koniambo after six years of complex design and construction is a huge achievement and a source of great pride for all of our employees,” he added.

At the height of its construction, more than 6 000 people were employed in building the project and its associated infrastructure.

First metal production signaled the start of Koniambo as a multi-decade, tier-one asset with long-term cash costs at the bottom of the second quartile, said Pearc.

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Asia, Australia risk mining investment as rankings slip – by Clyde Russell (Reuters India – April 11, 2013)

http://in.reuters.com/

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

LAUNCESTON, Australia, April 11 (Reuters) – Asia-Pacific countries are the best-placed to supply the region’s future commodity demand, but rather than encouraging mining it appears they are making it harder for explorers and producers.

Virtually every key resource-rich nation in the region slipped in annual rankings compiled by the Fraser Institute, a Canadian-based free-market think-tank that surveyed 742 mining companies for its report, released in February.

And it’s not just that Asian commodity producers slipped, the results showed that Indonesia was the worst mining jurisdiction, and was joined in the bottom 10 by Vietnam and the Philippines.

Australia, which prides itself on being a welcoming and secure place to do business, also saw the rankings of five of its six states and the Northern Territory decline, although all remained in the top 50 jurisdictions.

And while China and India are both major commodity importers, they are also significant producers and for them the survey was bleak reading.

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Rinehart gets on board Melbourne’s campaign to lure Rio home – by Stephen Mayne (Crikey.com.au – April 8, 2013)

http://www.crikey.com.au/

It’s not often that Stephen Mayne and Gina Rinehart agree. But they’ve found common ground in urging mining giant Rio Tinto, which has recently slashed its Melbourne workforce, to relocate its headquarters from London to Australia.

Should capital cities get into the business of trying to persuade multi-nationals to shift their headquarters to Australia?

That’s what City of Melbourne is doing tomorrow night as we debate a 10-page motion outlining the case for Rio Tinto to shift its 700-strong London head office to one of the major Australian capital cities.

The Australian Financial Review ran with the story on Saturday but we’re still yet to hear a peep out of the Herald Sun or The Age, even though the motion reveals Rio Tinto has almost completed slashed staff numbers at its Collins Street office in Melbourne from 300 to as little as 25.

The AFR was right to point out Rio Tinto retains 200 staff at an R&D facility at Latrobe University, but they were wrong in quoting an unnamed resources analyst saying the headquarters move was “highly unlikely given 80% of Rio Tinto”s investor base were also located in the UK”.

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Time to bust myths on mining’s impact, raise awareness about benefits – Ian Gould, former Rio Tinto Australia MD – by Christopher Russell (Adelaide Now – April 8, 2013)

http://www.adelaidenow.com.au/

THE public too often views the mining industry as a necessary evil rather than the valuable mainstay of the community it actually is, one of South Australia’s leading businessmen says.

UniSA chancellor and former Rio Tinto Australia managing director Ian Gould said most people realised the resources sector generated a lot of Australia’s wealth.

“But many do not like or understand the industry,” he said. “They just tolerate it; and some of that is in the light of it being a necessary evil.

“Why would this be? Big, foreign, powerful, insensitive, low-tech, 12-hour shifts – sounds terrible. A major cause of environmental degradation, contests over land use with indigenous, conservation, agricultural and grazing interests.

“It doesn’t pay its fair share of taxes, it’s a small employer of Australians but its high salaries and its forcing the exchange rate higher are making other industries uncompetitive. “It undertakes very little training of Australians – instead using 457 visas.”

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Report puts pressure on Cliffs’ WA mines – by Matt Chambers (The Australian – April 05, 2013)

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

US-BASED Cliffs Natural Resources of Cleveland has dismissed suggestions a looming US iron ore supply glut will force it into the $US1.75 billion ($1.67bn) sale of its Koolyanobbing iron ore mines in Western Australia to pay down debt.

In an extraordinarily bearish report from the US last week, Credit Suisse analyst Nathan Littlewood slashed his target price on Cliffs from $US30 to $US10, claiming the company was likely to need to consider selling assets or a multi-billion-dollar equity raising.

“We see the Asia-Pacific iron ore business as the most marketable asset in Cliffs’ portfolio and the most likely to be sold,” Mr Littlewood said.

“The recent Posco bid for Arrium tells us that there is interest from Asian steel mills in Australian iron ore outside of the Pilbara.” Posco walked away from a bid for Arrium, the former OneSteel, late last year when the target would not engage at the offer price.

In 2011, Cliffs agreed to sell its mined-out Cockatoo Island iron ore mine in the Kimberley region of Western Australia to Pluton Resources, leaving as its remaining asset the Koolyanobbing operation, which exports about 11 million tonnes of ore a year from near Esperance.

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COLUMN-Time for Australia to decide if it wants oil refining – by Clyde Russell (Reuters India – April 5, 2013)

http://in.reuters.com/

LAUNCESTON, Australia, April 5 (Reuters) – Is Australia prepared to see all its ageing oil refineries closed down in the face of Asian competition or should the industry be deemed strategic and eligible for government protection?

That’s the question that should be asked after Thursday’s announcement by Royal Dutch Shell that it would close its Geelong refinery in Victoria state and convert it to an import terminal if a buyer couldn’t be found.

Given the parlous state of Australia’s refining industry, it seems closure and conversion is a far more likely outcome for the 55-year-old plant, which can process 120,000 barrels per day (bpd).

If it does close, Geelong will be the fourth refinery to shut since 2003, reducing Australia’s capacity by about 40 percent to just 408,600 bpd by 2015. The country consumed about 1 million bpd of crude in 2011, according to BP’s Statistical Review of World Energy.

This means that if Geelong does close, domestic refineries will be able to meet only 40 percent of 2011 demand levels, and likely considerably less of 2015 demand as consumption is expanding given the heavy use of diesel in remote mining operations.

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