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Australia/New Caledonia/Papua New Guinea Mining

Iron Ore Bear Market Looms as Supply Swamps Demand: Commodities – by Phoebe Sedgman (Bloomberg.com – April 4, 2013)

http://www.bloomberg.com/

Iron ore is heading toward its first surplus in at least a decade as output expands and Chinese steel mills, the biggest buyers, boost production at the slowest pace in five years.

Seaborne supply will advance 9.1 percent and demand 8.3 percent in 2013, led by exporters from Perth-based Fortescue Metals Group Ltd. (FMG) to Vale SA (VALE5), Morgan Stanley forecasts. A surplus will emerge in 2014 and keep widening until at least 2018, the bank predicts. Prices will slump as much as 34 percent to $90 a ton by the end of December, according to the median of seven analyst estimates compiled by Bloomberg.

Exports of the biggest seaborne cargo after oil are surging the most since 2010 after prices jumped as much as sevenfold in the past nine years. Goldman Sachs Group Inc. expects China’s imports to climb 4 percent in 2013, the least in three years. Its steel output will expand 2.6 percent as the nation’s economy grows at the second-slowest pace in the past decade, according to estimates from Morgan Stanley and economists surveyed by Bloomberg.

“We’ve got a steady lift of supply, mainly out of Australia,” said Tom Price, the Sydney-based analyst at UBS AG who has covered the market for about a decade. “We’ve observed for a couple of years now moderation in demand growth in China. A combination of those two is why we’re bearish.”

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RPT-BHP freezes its mining projects in Gabon -sources (Reuters India – April 2, 2013)

http://in.reuters.com/

(Reuters) – Top global miner BHP Billiton is freezing all its projects in Gabon, mining ministry sources said on Friday, dashing government hopes for sizeable investments in manganese and iron ore production.

A spokesman for BHP could not immediately be reached for comment.

The company holds licences in the Central African country for the mining of manganese at Mounana, 650 km east of the capital Libreville, and at Okondja, 150 km further to the north.

Government officials had also said BHP signed a contract a year ago for the Belinga iron ore mine, in northeast Gabon, edging out China’s Comibel. BHP has declined to comment on this.

“We respect the decision by BHP to freeze its activities in Gabon,” said a senior official at the mining ministry who asked not to be identified. “At the same time this is a blow to the country, which hoped to become the world’s largest exporter of manganese.”

Gabon is the world’s second-largest producer of the mineral, an ingredient in making steel, after South Africa. France’s Eramet has been mining manganese at Moanda in southeast Gabon for some 50 years through its Comilog subsidiary.

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Australian Nickel: a short history – by Simon Cowling* (Australian Government Bureau of Resources and Energy Econmics – March Quarter 2013)

Click here for the original with graphs and charts (pages 114-123): http://www.bree.gov.au/documents/publications/req/REQ_MAR2013.pdf

Nickel, through its various uses, plays a large part in the development of capital infrastructure in economies worldwide. Due to its resistance to corrosion, nickel is primarily used in the production of stainless steel and alloys which are an integral ingredient for many infrastructure projects. To a lesser extent, nickel is also used in the production of nickel-metal hydride rechargeable batteries and electroplating other metals, such as steel for uses in construction and automotive purposes.

Australia is one of the largest nickel suppliers to the world market. The establishment of Australia’s nickel industry, however, has not been straight-forward and the industry has faced numerous challenges. The nickel market is characterised by extreme volatility evidenced by large and rapid swings in demand, production and, ultimately, prices. This review provides an overview of how key events in nickel markets since the 1960s have affected the development of Australia’s nickel industry.

The early days—pre-1965

The Australian nickel industry first emerged at the start of the 20th century with mining starting at the Zeehan field in western Tasmania in 1910. This followed the development of technologies that employed nickel as an alloying agent in steel towards the end of the 19th century (Mudd 2010) Between 1910 and 1938, approximately 568 tonnes of Nickel was intermittently produced from nickel copper sulphide ore extracted from the Five Mile group of mines in Tasmania (Mudd 2007).

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THE MINER’S DAUGHTER: Gina Rinehart is Australia’s richest—and most controversial—billionaire – by William Finnegan (The New Yorker – March 25, 2013)

http://www.newyorker.com/

Australia, thanks largely to the economic rise of China, has been in the throes of a mining boom. The “lucky country,” as it is called, has enormous deposits of the high-grade iron ore required by the steel mills of Asia. In Western Australia, where most of the iron ore resides, the boom has created unprecedented prosperity, along with a small tribe of billionaires.

Georgina (Gina) Hope Rinehart, who owns a company called Hancock Prospecting and has recently been buying up Australian media properties, is the best known of these new tycoons. According to BRW, a weekly business magazine, Gina Rinehart became the richest woman in Australia in 2010, the richest person in Australia in 2011, and the richest woman in the world in 2012, with an estimated net worth of nearly thirty billion dollars.

Rinehart, who lives in Perth—the state capital of Western Australia—is fifty-eight, a widow, and a mother of four. She shuns the press and rarely appears in public. She is sensitive, however, to the media treatment she receives, which is voluminous—she qualifies, by sheer quantity of ink, airtime, Web sites, pop songs, and pub conversation devoted to her, as a national obsession—and often rough. Two things seem to hurt her particularly: the stock news description of her as an heiress, and perceived failures of the press to acknowledge the achievements of her late father, Lang Hancock, whom she adored (when they were not feuding) with a rare intensity.

Lang Hancock was a piece of work. He started out as a rancher, asbestos miner, and prospector in the Pilbara, a vast sweltering wilderness in northwest Australia. (It is pronounced as two syllables: Pilbra.) In November, 1952, according to legend, he was flying in a flimsy little Auster aircraft with his wife, Hope, over the Hamersley Range, an extra-remote fastness in the Pilbara.

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NEWS RELEASE: MINING INDUSTRY EMBRACES TECHNOLOGY AS SKILLED WORKFORCE DIMINISHES, ACCORDING TO BDO STUDY

  • Environmental policy tops domestic regulatory concerns
  • Mining companies are investing resources to stop the spread of water pollution
  • Tax increases, resource nationalism negatively impacting businesses

BRUSSELS – 13 March 2013 – International mining executives are bracing for the negative impact the lack of a skilled workforce will have on their organisations, according to new research published by BDO.

Of the mining executives surveyed, 79 percent feel the lack of a skilled workforce will have a negative impact on their business this year. While environmental policy tops executives’ domestic regulatory concerns, with 34 percent citing it as a potential issue in the year ahead, labour and employment issues are a close second, with 30 percent of executives noting it as a major concern. The survey of 130 C-Level and senior financial executives at mining companies in the United States (US), South Africa, United Kingdom (UK), Australia and Canada sought their insights on regulatory affairs, employment and the environment.

While executives around the globe grapple with labour and employment issues, 63 percent of South African executives note this is their primary concern – twice the survey average – due in large part to high regional unemployment rates and sustained labour unrest driven by working conditions related to wages and social issues.

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Miners quietly confident about the year ahead – by Alex Heber (Australian Mining – March 12, 2013)

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

Grant Thornton has released its latest International Mining Report, surveying 389 mining executives across the globe in an effort to discover their thoughts on industry trends.

What it found is a heightened optimism surrounding business prospects across the board. Behind this optimism is the expectation that commodity prices will continue to rise this year, with 54 per cent of those surveyed indicating to this effect.

“It’s a challenging time for the sector,” Mark Zastre, global industry leader mining Canada, said. “But growth can return; the risk-return equation will change once investors develop a renewed enthusiasm for potential high returns that few other opportunities offer.”

Aiding this growth are significant improvements to processes with automation and technology developments delivering efficiencies.

Miners’ global expansion movements are also improving supply and assisting the discovery of new resources.

Regulation overload

The role government plays in constraining growth and delaying projects across the globe heavily impacts miners’ performance and investor confidence.

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Iron Ore Price Crash Looms, Signalling An End To The Commodities Super Cycle – by Tim Treadgold (Forbes – March 13, 2013)

http://www.forbes.com/

Three of the world’s biggest mining companies are heading for a rough ride over the next few years as the once heavily-promoted commodities super-cycle enters its end game. The price of iron ore is tipped to be the next mineral to suffer a sharp price correction as demand for steel in China dries up.

The glut of iron ore developing in the international market is good news for steel consumers such as car makers and builders but will hit the profits of BHP Billiton, Rio Tinto and Vale, the big three of the seaborne iron ore trade.

Between them those three miners account for about 70% of the iron ore imported by China, which has been both a prolific producer and consumer of steel during its hectic construction boom of the past 20 years.

But, over the past few days a string of gloomy steel production and iron ore price forecasts has trimmed the share prices of all iron ore miners with the potential for worse to come if the price projections are accurate. This seems likely given recent falls in the prices of other industrial minerals, including copper, nickel and zinc.

Rio Tinto, the London-based miner with its best assets in Australia, will be hit hardest by the prospect of the iron ore price falling by up to 50% if gloomy economists outside the industry are right, or a slightly less damaging 33% if one of Rio Tinto’s own senior staff is correctly reading his crystal ball.

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High-achieving First Quantum chief Philip Pascall keeps a low profile – by Matt Chambers (The Australian – January 26, 2013)

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

WHEN the publishers of the Harvard Business Review this month said Origin Energy’s Grant King, at number 88, was the only one of its top 100 global chiefs of 2013 based in Australia, it wasn’t quite right.

Ten spots ahead of the Origin boss, at number 78, is an intensely private mining chief executive and chairman who has built an African-focused $10 billion copper miner from an office in Perth.

From the same office he is now trying to turn his company into a top-five global copper miner through a hostile $C5.1bn ($4.9bn) takeover of Canada’s Inmet.

The man is Zimbabwe-born Philip Pascall, whose 1.3 per cent stake in the copper miner he co-founded is now worth about $120m. The company is the Canadian-listed First Quantum Minerals, whose original shareholders have seen the company grow by $US9bn under Pascall’s tenure and, according to HBR, had total returns of about 2000 per cent in that time.

HBR listed Pascall’s location as Vancouver. But the technical base of First Quantum is West Perth, where the respected process engineer and fellow founder Martin Rowley — a former Bond Group executive — are based.

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Finland ranked as #1 for global mining investment—Fraser Institute Survey – by Dorothy Kosich (Mineweb.com – March 1, 2013)

http://www.mineweb.com/

742 mineral exploration and development companies surveyed by Vancouver’s Fraser Institute say Indonesia is the worst place to do business out of 96 global jurisdictions.

RENO (MINEWEB) – The mining and exploration companies who responded to 2012/2013 Fraser Institute’s Annual Survey of Mining Companies ranked Finland as the best place to do business, while Indonesia was deemed the worst place for mining and exploration companies.

Along with Finland, the top 10-ranked jurisdictions are Sweden, Alberta, New Brunswick, Wyoming, Ireland, Nevada, Yukon, and Norway. All were in the top 10 last year except for Utah and Norway.

The 10 least attractive jurisdictions for investment are (starting with the worst) Indonesia, Vietnam, DRC (Congo), Kyrgyzstan, Zimbabwe, Bolivia, Guatemala, Philippines, and Greece. All of these jurisdictions except DRC Congo, Greece and Zimbabwe were in the bottom 10 last year.

The jurisdiction deemed to have the best current mineral potential assuming current regulations and land use restrictions is Greenland, followed by Finland, Sweden, Nevada and Saskatchewan. The worst is Bolivia.

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Big change needed to save [Australian] nickel producers – by Sarah-Jane Tasker (The Australian – February 25, 2013)

http://www.couriermail.com.au/

THE majority of Australia’s nickel producers continue to struggle to turn a healthy profit, and analysts say there is little relief in sight unless there is a fundamental change, such as BHP Billiton closing its West Australian operations.

While BHP has no plans to close its Kambalda nickel west operations, market observers say it would take that level of industry event to provide any relief to the sector this year.

“BHP doesn’t have to run loss-making operations,” one respected mining analyst said. “They are a 100,000-tonne producer, so it’s a big change for the nickel market if its operations are put on care and maintenance. That would materially change the outlook for the nickel market and could aid the juniors.”

BHP reported last week that underlying earnings before interest and taxes for its aluminium and nickel division had fallen $US219 million ($213m) to a loss of $US285m for the first half.

Western Areas, Australia’s lowest cost producer, reported on Friday a sharp fall in its first-half profit on the weaker nickel price and on the back of a non-cash impairment charge.

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Cyclone intensifies, Australia’s iron ore mines brace – by Rebekah Kebede and James Regan (Reuters.com – February 26, 2013)

http://www.reuters.com/

(Reuters) – A powerful cyclone headed for Australia’s Port Hedland, that has brought half the world’s seaborne-traded iron ore to a halt, has intensified and is set to make landfall late on Wednesday, threatening to flood inland mine operations and rail links.

Weather warnings extend as far as 500 kms (310 miles) inland to the massive mining camps and towns of Tom Price, Mt Newman and Nullagine, operated by Rio Tinto, BHP Billiton and Fortescue Metals Group.

Hardest-hit areas could receive up to 600 millimeters, or 2 feet, of rain in 24 hours, said the Bureau of Meteorology. Such extensive flooding threatens to submerge hundreds of kilometers (miles) of rail lines owned by the miners and used to transport ore to the ports.

“Extreme weather preparations continue across our mining operations in anticipation of the cyclone moving further inland,” BHP said in a statement emailed to Reuters. “Additional operations will be suspended if necessary.”

The Pilbara, a sparsely populated and inhospitable outback part of Australia, is the world’s largest source of iron ore. Australia’s three main iron ore ports, Port Hedland, Dampier and Cape Lambert, were closed on Monday. Offshore oil and gas fields have also been shut down.

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BHP eyes $3.9bn nickel float – by Barry Fitzgerald (The Australian – February 26, 2013)

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

BHP Billiton has cranked up the potential for a $US4 billion ($3.89bn) spin-off of its ailing nickel division by making a big high-grade nickel discovery near its Perseverance mine at Leinster, 375km north of Kalgoorlie in Western Australia.

Industry circles have been buzzing about the new find, which BHP has called Venus after the brightest planet visible to the naked eye. It follows last year’s big nickel-copper Nova discovery in WA by Mark Creasy’s Sirius, the brightest star.

BHP yesterday would not be drawn on the scale of the Venus find, saying that the prospect was still in its early stages of delineation and development, so no guidance on reserves could be given.

However, the company also said that at this early stage, Venus had the potential “to reshape the profitably and direction of the Nickel West business”.

“Venus’s key attributes — mainly its high nickel grades and proximity to existing mining infrastructure — give it clear potential to materially increase Nickel West’s mining inventory and reshape the profitably and direction of the Nickel West business,” BHP told The Australian.

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Sliding doors at Rio reveal BHP’s future – by Robert Gottliebsen (Business Spectator – February 26, 2013)

http://www.businessspectator.com.au/

To understand what the Andrew Mackenzie era at BHP will mean for the Big Australian you have to delve deep into the folklore of Rio Tinto. The Rio Tinto folklore – which I am sure, is correct – never seemed that important until last week, when Andrew Mackenzie became BHP chief executive officer elect.

Yesterday, I showed how different Andrew Mackenzie is to the BHP CEO’s of the last half-century (Mackenzie’s clean break is bigger than you think, February 25) Now I want to tell the story from a Rio Tinto perspective because this remarkable Australian business tale starts with one of our most successful homegrown executives, Leigh Clifford, who joined Rio Tinto in Broken Hill in the early days of his career.

Rio Tinto has always looked at BHP’s ore bodies with envy. For example, BHP’s Mount Newman is a better iron ore body than Rio’s Hamersley. But Rio Tinto productivity and efficiency has always been ahead of BHP. Indeed, several decades ago it was Rio Tinto that tried to arrange a merger of the two iron ore operations because Rio believed it could transform BHP’s efficiency. And in those negotiations BHP was shocked at just how far ahead Rio Tinto was.

Its unfair and incorrect to attribute that productivity difference to one man, but a big contributor to moulding the high-productivity culture of Rio Tinto was Leigh Clifford who first transformed coal operations. Part of Clifford’s Rio Tinto strategy was to build much stronger bonds between workers and the company thus lessening the influence of unions. There is no doubt that Clifford’s role in the transformation of Rio Tinto was a big driver in him rising to become chief executive of Rio Tinto in London.

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[BHP-Billiton’s] Mackenzie’s clean break is bigger than you think – by Robert Gottliebsen (Business Spectator – February 25, 2013)

http://www.businessspectator.com.au/

I have personally known every BHP chief executive (they used different titles) for the last 50 years. During that time there has never been a BHP chief remotely like Andrew Mackenzie. The company is headed for a period unlike anything in the last 50 years of its history and I suspect this is a once-in-100-year change.

BHP shareholders, employees, and Australian governments need to understand what it means to have Australia’s largest company change direction and become more interested in productivity and shareholder distribution than expansion. The directional change is in part a response to what is happening in China (China will spoil Australia’s energy equation, February 22), the demands of shareholders, and the high cost of capital investment in Australia. The directional change by our largest miner will be followed by others, including Rio Tinto, and heralds a far less expansive Australian mining industry.

And remember the BHP board chose Andrew Mackenzie because they have embraced the plan he put to them as he pitched for the top job. During the last 50 years each BHP chief executive has aimed to leave his successor with more resources. Better productivity and shareholder distribution have always been in the agenda but have been swamped by expansion and other issues.

Andrew Mackenzie is aiming at allocating more money to dividends/capital returns plus lower borrowing so new investment projects will have to be very good. Given the high shareholder payouts and lower gearing agendas of BHP, the Big Australian might even find itself short of capital to do what it would have done without hesitation during most of the last 100 years.

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With blood in the water, mining’s great white shark is on the hunt – by Eric Reguly (Globe and Mail – February 23, 2013)

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.

ROME — Beheadings are putting the mining world through something akin to the French Revolution. Mining bosses who landed their jobs in the bubble era – 2006 and 2007 – or did their signature top-of-the-market deals in those years are being fired with alacrity. Or they are announcing their retirements, much to the delight of shareholders grown weary of the value destruction borne of stunningly overpriced takeovers and soaring costs.

The changing of the guard started in the autumn, when Cynthia Carroll said she would quit as chief executive officer of Anglo American. Not long after, BHP Billiton, the world’s top mining company, revealed that it would replace Marius Kloppers, the man who made a wrong bet on shale gas and botched the attempted takeover of Potash Corp. of Saskatchewan (the new CEO is Scotsman Andrew Mackenzie). Last month, it was Rio Tinto boss Tom Albanese’s turn. The biggest sinner of them all, he was knocked off for his boneheaded purchase of Montreal’s Alcan in 2007 for $37-billion (U.S.), most of which has now been written off.

Canadian mining bosses have been frog-marched to the guillotine too – Tye Burt of Kinross Gold and Aaron Regent of Barrick Gold were two of the late 2012 victims. A year earlier, Roger Agnelli was pushed out of Vale, the Brazilian company that paid an eye-watering price for Canada’s Inco.

The last man standing is Ivan Glasenberg, the Glencore International CEO who is about to become the head of the mining and trading colossus to be formed by the merger of Glencore and Xstrata, the Anglo-Swiss miner that owns Falconbridge.

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