China leads in resources buy-ups – by Paul Garvey (The Australian – August 31, 2013)

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

An analysis by The Weekend Australian found that Chinese interests bought $5.4 billion worth of Australian-owned mining and energy assets during the 2013 financial year, eclipsing Japan and Canada as the most active foreign investor in the sector.

While overall foreign acquisitions in Australia’s mining and oil and gas industries halved during the year, reflecting steep falls in both commodity prices and resource stocks, China’s investments in the mining sector held steady from 2012 levels.

The ongoing corporate activity challenges the notion that Chinese companies feel unwelcome when investing in Australia, following controversies over mining deals in recent years such as the blocked Chinese acquisition of OZ Minerals’ Prominent Hill mine and Chinalco’s failed deal to buy into Rio Tinto’s West Australian iron ore operations.

Comments during the week by Kevin Rudd, in which he said he was anxious about an “open-slather approach” to foreign investment, have reignited concerns about perceptions of hostility from Australia towards Chinese investment.

While the Prime Minister’s comments did not refer to China, they have been criticised by industry groups as “borderline xenophobic” and as likely to send a negative message to Chinese investors.

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Prospecting under cover: Frontiers of exploration research – by Kip Keen (Mineweb.com – August 28, 2013)

http://www.mineweb.com/

In Part II of Mineweb’s series on exploration trends, Kip Keen turns to the Deep Exploration Technologies Cooperative Research Centre in Australia and talks paradigm shifts.

HALIFAX, NS (MINEWEB) – So the success rate falls. Now exploration money buys fewer discoveries. This was one of the key insights Richard Schodde, of Minex Consulting, discussed in Part I of this interview series on exploration trends. The rate of discovery used to correlate well with increases in spending, in part because the deposits were easier to find. More boots on the ground. More rocks chipped. More ore deposits discovered.

But now the boots are more expensive to pay for and many of the surface rocks, especially in developed countries, have already been kicked forcing exploration to go deeper and become more extensive. Meantime, labour costs, until recently that is, were sky-rocketing amid intense competition to secure services.

To some degree, as the market cools, a process unfolding for a couple years now, the cost of exploration gets cheaper as, for example, geologists lower their rate of pay and drilling contractors cut down margins to get contracts. But it can only go so far. That much is clear now as discoveries, especially in developed countries, come at depth and require increasing geological expertise to find and more drilling.

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The Big Australian should strike a deal with Rio Tinto – by Terry McCrann (Melbourne Herald Sun – August 27, 2013)

http://www.heraldsun.com.au/

ALUMINIUM was the ghost at the BHP Billiton profit feast last week.

Although the aluminium, manganese and nickel division generated more than $9 billion of revenue, it contributed just $164 million of EBIT (earnings before interest and tax).

Compare and contrast that with the jewel in the BHPB crown – iron ore, which on a little more than double that revenue, at $20 billion, contributed more than 67 times as much EBIT, or $11.1 billion.

Incidentally, I never – and I’m equally certain, neither would most other commentators – have ever thought, in the good old days pre-China, that we’d end up describing lumpy, plentiful, iron ore as the ‘jewel” in anyone’s crown.

That it is, certainly in the corporate crowns of BHPB and Rio Tinto. It’s also made multi-billionaires of Gina Rinehart and Andrew Forrest. In contrast, aluminium ain’t going to make a billionaire of anyone. Thanks to China continuing to smelt uneconomically, aluminium has a knack of turning billionaires, corporate or otherwise, into mere millionaires.

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Australia’s mining boom rolls on for Chinese entrepreneur in the outback – by James Regan (Reuters U.S. – August 25, 2013)

http://www.reuters.com/

SYDNEY – (Reuters) – Former Chinese commodities trader Jerry Ren, who is quietly building a mining empire in the Australian outback, scoffs at talk the resources boom is over. For him its just moved north.

As some mining firms clock up billions of dollars in losses, Ren has secured millions of acres of exploration rights in Australia’s most remote regions that could soon make him a billionaire, helped by his connections in the world’s biggest consumer of minerals China.

Ren, now an Australian resident, has already been dubbed the “$900-million-dollar-man” for his estimated net worth. “There’s still plenty of money and opportunity in Australia if you know where to look,” says Ren, the son of a steel mill engineer who grew up in the shadow of the Great Leap Forward, Mao Zedong’s disastrous attempt to modernize China’s economy.

Ren’s privately held Australian Oil & Gas company holds a 75 percent stake in exploration rights covering 70 million acres, 25 percent of Australia’s Northern Territory, or an area larger than Afghanistan.

Under-exploited by heavy hitters like BHP Billiton (BHP.AX) and Rio Tinto (RIO.AX) as Australia’s last boom took shape further south in established iron ore and coal fields, Ren has had a near-free run to stake his claims in the Territory.

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Barrick Gold Corp. to sell three mines in Australia for $300 million (Canadian Press/Toronto Star – August 23, 2013)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Barrick Gold Corp. has agreed to sell off three high-cost mines in Western Australia to South Africa-based miner Gold Fields Ltd. — a move analysts say will free Barrick up to focus on more profitable operations.

Barrick said it will receive about $300 million from the sale, which is subject to customary closing conditions, including approval by Australia’s Foreign Investment Review Board.

The company said the three mines that comprise the Yilgarn South assets produced a total of 452,000 ounces of gold in 2012 and a further 196,000 ounces in the first half of this year.

Kerry Smith, an analyst at Haywood Securities, said selling the higher-cost mines will reduce Barrick’s operating expenses and have only a minimal impact on the company’s production volumes. “By eliminating those three mines out of their portfolio, it frees their management up to spend more time on other assets that actually make more cash,” Smith said.

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Barrick Gold sells mines to Gold Fields as part of restructuring – by James Wilson and Andrew England (Financial Times – August 22, 2013)

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

London/Johannesburg – Barrick Gold has started its promised restructuring by selling a trio of Australian gold mines to industry rival Gold Fields.

The $300m sale will help the Canadian miner’s stretched balance sheet and will switch Gold Fields’ main production focus away from western Africa to Australia, where it will bundle assets with its existing mines to try to lower costs.

Barrick, the world’s largest gold miner by volume, flagged the possible sale of the Yilgarn South mines earlier this month, when it posted an $8.6bn quarterly loss. The loss was linked to writedowns to asset values because of the fall in the price of gold this year.

The three mines at Yilgarn South produce 452,000 ounces of gold annually, equivalent to about a quarter of Gold Fields’ annual output. Barrick said the sale would not change its plan to produce between 7m and 7.4m ounces this year.

Nick Holland, Gold Fields’ chief executive, said there was “considerable opportunity for cost synergies” between the Lawlers mine, one of the Yilgarn South group, and its adjacent Agnew mine.

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Iron ore boom vs. Rudd’s doom – by Barry Fitzgerald and Paul Garvey (The Australian – August 16, 2013)

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

ON the hustings and in his campaign ads, Kevin Rudd has been calling the mining boom over.

“The truth is in 2013 the China resources boom is over,” the Prime Minister said on July 11. At the leaders debate on Sunday: “The truth is, with the ending of the decade-long mining boom, we face new economic challenges.” At almost any media opportunity, the mantra is repeated. But he must have forgotten to tell the Chinese — the world’s biggest buyer of mineral commodities.

Ever since returning as PM on June 26, the price of iron ore — Australia’s biggest export by a big margin — has not looked back as Chinese steelmakers frantically restock on the expectation that while there is a slowdown in the country’s infrastructure and urbanisation boom, an economic growth rate of more than 7 per cent on an already greatly enlarged economy means it still needs to suck in vast amounts of the steelmaking raw material.

Iron ore has surged by 26 per cent, or $US29.80 a tonne, to $US142.80 a tonne since Mr Rudd returned to the Lodge and began mapping a re-election strategy that in part at least, links the claimed end to the mining boom to Australia’s ballooning budget deficits.

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COLUMN-Australia’s coal industry enters the final stage of grief – by Clyde Russell (Reuters India – August 14, 2013)

http://in.reuters.com/

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

Aug 14 (Reuters) – Australian coal miners have been in mourning over the rapid loss of profitability and expansion opportunities, but the industry is entering the final stage of the grieving process.

The five stages of grief, as described by Swiss-American psychiatrist Elisabeth Kubler-Ross on how people face events like terminal illness, are denial, anger, bargaining, depression and acceptance.

While not all of the attendees at the annual Coaltrans Australia conference this week have got past the depression stage, most were looking at how the industry deals with the reality of its myriad of issues.

These include an apparent structural shift to lower prices for the foreseeable future, rising public opposition to mining on the back of a well-funded and organised environmental lobby, lack of capital available for new projects, still high labour costs and an increasing burden of government red and green tape.

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Rio Tinto Coal Fight Burns in Australia – by Rebecca Thurlow and Robb M. Stewart (Wall Street Journal – August 12, 2013)

http://online.wsj.com/home-page

Court Hearing Approaches on Whether to Allow Mine’s Expansion BULGA, Australia—For 30 years, the coal mined in this remote Australian town has fired power plants as far away as Tokyo and Shanghai. More recently, it has been generating heat of a different kind: local opposition to a mining project that would feed Asia’s demand for resources.

Rio Tinto RIO.LN +0.77% PLC is fighting to salvage plans to expand a coal mine near Bulga in New South Wales state—among the company’s biggest in the country—after losing the first round of a legal challenge brought by residents who claimed dust and noise from the project would wreck their community. Rio Tinto has warned that 1,300 jobs could be at risk if its appeal—due to be heard from Wednesday—fails in a Sydney court.

Mining officials say more than Rio Tinto’s proposed investment of 600 million Australian dollars (US$552 million) is at risk in the dispute. Australia accounts for one-third of global coal exports, but the industry is under stress as China’s cooling economy sends prices of the fuel to three-year lows. Already 10,000 coal-mining jobs have been lost as companies such as BHP Billiton Ltd. BHP.AU +2.42% and Glencore Xstrata GLNCY +0.80% PLC respond to weaker demand by closing mines or cutting output.

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Decade-long Australia mining boom turns to bust (The Associated Press/Las Vegas Sun – August 10, 2013)

http://www.lasvegassun.com/

The Australian mining boom built over a decade on Chinese hunger for energy and raw materials is turning into bust for many business owners as China’s cooling growth reverberates through a country accustomed to winning from the rise of an Asian economic giant.

Endowed with vast mineral resources, Australia has been the envy of the Western world for avoiding recession during the global financial crisis while other wealthy countries drowned in debt. But the country now faces a potentially painful transition as it weans itself off a heavy reliance on its two biggest exports, coal and iron ore.

Australia’s dilemma underscores that China’s long run of supercharged growth has given it enough weight in the world economy to create not only winners, but losers too when its own fortunes change.

Trade between Australia and China equaled 7.6 percent of Australia’s $1.5 trillion economy last year, a dramatic threefold increase from a decade earlier, according to an Associated Press analysis of trade data. During that time, mining companies gushed multibillion dollar profits while jobs as mundane as maintenance commanded salaries above $120,000.

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Australian Broadcasting Corporation Interview with BHP Billiton CEO Andrew Mackenzie (Australia Broadcasting Corporation – August 8, 2013)

http://www.abc.net.au/

Click here for extended interview: http://www.abc.net.au/7.30/content/2013/s3820498.htm

Transcript

LEIGH SALES, PRESENTER: You may recall last night that during a discussion with the Prime Minister, we ran a brief excerpt of an interview with the head of the world’s biggest mining company BHP chief executive Andrew MacKenzie. We had to hold over the full interview because of the need to make time for Kevin Rudd.

So as promised last night, here’s more of what Mr MacKenzie had to say when he joined the program.

Mr McKenzie, I’d like to start by getting your views on some broad economic questions. Do you think that Australia is transitioning out of the resources boom?

ANDREW MACKENZIE, CHIEF EXEC., BHP BILLITON: Not at all. I think maybe some of the best days are ahead of it. I believe, obviously as you’re hinting, that the resources industry has been pivotal to Australia, but as we go forward, demand continues to increase and everything is for Australia to play for.

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BHP Billiton CEO, Andrew MacKenzie Speech to the Asia Society on August 7, 2013

http://www.bhpbilliton.com/home/Pages/default.aspx

For a detailed interview of BHP Billiton CEO Andrew MacKenzie by Australia Broadcasting Corporation, click here: http://www.abc.net.au/7.30/content/2013/s3820498.htm

I am delighted that so many of our shareholders and friends from business, government, the media and elsewhere have joined us today. Welcome to you all.

I would also like to mention two individuals in the audience. First, one of BHP Billiton’s longest serving employees – Eric Gray. Eric is a maintenance supervisor at our Illawarra coal operations and is celebrating 45 years with the company. And second, Martin Ferguson, who needs no introduction. A special welcome to you both.

I am honoured to lead this tremendous, Australian company and pleased to be making my first Australian speech here in Melbourne; a city my wife, Liz, and I are delighted to now call home. We recently purchased a house in Richmond and I have adopted St Kilda as my AFL team. Richmond, anyway, has proved to be a terrific choice.

Melbourne is a city with a rich mining history, a history of which BHP Billiton is proud to be a part. Our global headquarters have been in Melbourne since 1885 and next month we will relocate to Collins Street, where our company first began.

Now speaking of our history, one of my fellow Scots, George McCulloch, was vital to BHP’s formation in the late 19th century as manager of the Mt Gipps station in New South Wales. George organised a group of pioneers to sink the first shaft at Broken Hill, which led to the development of BHP’s first and famous ‘Big Mine’.

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Australia and Canada: Two resource-driven economies on divergent paths – by Richard Blackwell (Globe and Mail – August 7, 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.

Australia’s central bank has cut its key interest rate again, to a record low, underscoring concern that a global commodity slump and slower growth in China will weaken its resource-based economy.

The country is trying to kickstart consumer and business spending with the cuts because the mining sector has peaked and capital spending in that industry is falling, while economic growth posted by the country’s key trading partner, China, is slowing.

That’s a cautionary tale for Canada, which has a similar resource-based economy, dependant on exports. Weaker commodity prices help to explain, for example, a near-one-third drop this year in the share price of Vancouver-based Teck Resources Ltd., which ships about 15 to 20 per cent of its coking coal output to China.

Still, there are enough differences between the two countries, economists say, to insulate Canada from the economic turbulence facing our antipodal cousin.

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Miners won’t get a leg-up from state – by Malavika Santhebennur (Mining Australia – August 5, 2013)

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

Gold and nickel miners will not get a lifeline from West Australian premier Colin Barnett, who said he will not be handing out royalty assistance to those affected by falling commodity prices.

Barnett argued modifying royalties due to price variation was not a good idea, saying the cyclical nature of the mining industry is a well known fact. “I know this is a tough time and some of the high-cost producers struggle. [But] at the end of the day the state government owns the minerals and companies pay the equivalent of 10 per cent of the value of the mineral. I think that’s a pretty good price.”

Miners, small and large, have had to cut the fat from their companies as commodity prices fall. They have been curtailing capital expenditure, cutting jobs and slashing operational costs.

BHP recently slashed 100 jobs across its six Nickel West operations in WA in May. The company said many operational roles will feel the brunt. The company also flagged in July it will move service contracts in-house in the Pilbara as it looks to cut contractors to cut costs.

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Barrick looks to cut high-cost mines – by Tim Kiladze (Globe and Mail – August 2, 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.

After its second major writedown in just six months, Barrick Gold Corp. is trying to wooing back shaken investors by focusing on assets closer to home.

The world’s largest gold miner announced a hefty $8.7-billion (U.S.) after-tax impairment charge, leaving the company with a second-quarter loss of $8.6-billion.

Barrick also slashed its dividend by 75 per cent as part of its second quarter earnings. In response to the losses, the Toronto-based company plans to shed, suspend or shut high-cost mines and continue to cut costs.

Chief executive officer Jamie Sokalsky said he is considering changes to his lineup of high-cost mines, most of which are in Africa and Australia. On a conference call Thursday, he said is already “well-advanced in a process to sell certain Australian assets.”

The miner will also continue to slash expenses where possible, having already cut or deferred $4-billion in capital spending over the past year, half of which came in the first six months of 2013.

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