BHP – Page 34 – Republic of Mining

Glencore and BHP Fall to Lowest in Years as Miners Shunned – by Jesse Riseborough and Thomas Biesheuvel (Bloomberg News – August 12, 2015)

August 12, 2015

http://www.bloomberg.com/

Glencore Plc and BHP Billiton Ltd. shares fell to the lowest in at least four years as investors continued to shun mining companies on concern Chinese demand for commodities is waning.

The FTSE 350 Mining Index of 14 producers fell for a second day to the lowest since March 2009. BHP, the world’s biggest miner, dropped to a six-year low while Glencore slid as much as 7 percent to the lowest since it started trading in 2011.

Commodity prices are near a 13-year low and this year’s 18 percent plunge in the Bloomberg World Mining Index wiped almost $200 billion off the value of the biggest producers. China, the biggest raw-materials user, this week devalued its currency in a move that supports exports and makes imports more expensive. That further spooked investors already concerned that consumption is falling as the country’s economy expands at the slowest pace in a quarter of a century.

“This is coming at a time when the market is capitulating anyway,” Marc Elliott, an analyst at Investec Plc in London, said by phone, referring to the weakening yuan.

Brazil the winner from the Andrew Forrest way – by Matthew Stevens (Australian Financial Review – August 10, 2015)

August 10, 2015

http://www.afr.com/

The only way Australia and its miners would benefit from any form of co-ordinated iron ore production constraint would be if Brazil could be convinced to add its name to our cartel.

But even with Brazil’s unlikely and illegal embrace of a cartel, the net gains for Australia would be marginal and fleeting, says the most authoritative and technical analysis conducted yet on Andrew Forrest’s contention that Australia’s economy is being abused by its biggest iron ore miners, Rio Tinto and BHP Billiton.

Forrest and his company Fortescue continue to rail about planned expansion, under which both their Pilbara competitors will add about 20 million tonnes to production over coming years, while Gina Rinehart introduces another 55 million tonnes to an already bloated global system.

Having initially taken the Forrest bait on the idea of some sort of market review, governments state and federal promptly backed off after some unusually blunt criticism from the likes of BHP boss Andrew Mackenzie.

But that didn’t settle things for good old Brian Fisher. Fisher is the economist who ran the Australian Bureau of Agriculture and Resource Economics during its pomp as government’s commodity industry number cruncher, and now directs his own firm, called BAEconomics.

Nickel West just might be the biggest loser – by Barry FitzGerald (The Australian – August 6, 2015)

August 5, 2015

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

Mylanta and Panadol were in short supply as the 1700 mining types pushed through the final day of the Diggers & Dealers bash. “Go hard or go home” seemed to be mantra.

But while sympathy was in short supply for those delegates who had badly timed their runs, there was much on offer for our biggest miner, BHP Billiton.

Not that BHP was out and about. While it operates the Kalgoorlie nickel concentrator and smelter, BHP operatives are only seen in the shadows, if at all.

Anyway, BHP’s Nickel West division — the one that wasn’t good enough to shove in to the South32 spin-off — is doing it tough, real tough, as a result of the crash in nickel prices.

Talk around the conference is that it would be no surprise if Nickel West was losing tens of millions of dollars a month — that’s right, a month — at current prices for the stainless steel ingredient of $US4.86 a pound.

Mining Giants’ Push for Iron Ore Tests Mettle of Smaller Miners – by Rhiannon Hoyle (Wall Street Journal – July 22, 2015)

July 22, 2015

http://www.wsj.com/

The four biggest iron-ore suppliers accounted for 71% of all iron-ore shipments in 2014, and they aren’t slowing down

SYDNEY—Big Mining is tightening its grip on the iron-ore market.

As industry giants such as Rio Tinto PLC and BHP Billiton Ltd. dig up ever more of the steelmaking ingredient for export, the resulting supply glut has caused prices to slump. But the majors’ tactics are helping them squeeze out smaller rivals, increasing their oligopoly’s share of global trade in the ore.

The world’s four biggest iron-ore suppliers—Rio and BHP along with Brazil’s Vale SA and Australia’s Fortescue Metals Group Ltd.—accounted for 71% of the world’s iron-ore shipments in 2014, up from an average of 65% from 2009-13, according to Citi estimates. The bank now reckons that market share for the four could rise to 80% by 2018.

There is no sign the majors are ready to pull back.

BHP to open new coal mine in Borneo amid concern for orangutans – by Peter Ker (Sydney Morning Herald – July 22, 2015)

July 22, 2015

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

If you thought Shenhua and Adani had raised hackles with their plans to develop new coal mines in controversial parts of Australia, you ain’t seen nothing yet.

In a move likely to enrage environmental campaigners, BHP Billiton quietly flagged on Wednesday that it would soon start production of coal at the Haju mine in Indonesian Borneo. Haju will initially produce about 1 million tonnes of coal a year, which is pretty small compared to the coal mines BHP already operates in Queensland.

But Haju could be the start of a much larger coal project for BHP in Indonesian Borneo known as IndoMet, which is believed to have potential to produce around 5 million tonnes of coal per year, if it is ever fully developed.

That remains a big “if” given the depressed prices for coal, but Wednesday’s confirmation that first production will begin within 12 months will be a blow to environmental campaigners who have lobbied BHP and its joint venture partner Adaro Energy for the best part of a decade to abandon the project.

BHP Billiton’s coal king Mike Henry digs in for a challenging time – by Matt Chambers (The Australian – July 18, 2015)

July 20, 2015

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

After 25 years working in and around the mining industry, Mike Henry has been given his first major role managing operations. And it’s a beauty.

In January, the former BHP Billiton marketing boss was made coal president, heading the mining giant’s lowest-margin business at a time when forecasts and prices for the commodity seem to be getting relentlessly worse and in which chief executive Andrew Mackenzie says he will not allocate capital.

But the 48-year-old Henry, who is regarded by company-watchers as a potential internal candidate to succeed Mackenzie, sees plenty of positives.

“I like a challenge and there’s lots to like here,” Henry tells The Weekend Australian from BHP’s coal headquarters on the Brisbane River. “In the first half (of 2014-15), we generated a 2 per cent return on capital and 2 per cent of BHP’s earnings before interest and tax,” he says, explaining coal’s current limited prospects for investment funds.

“My job is to take what we have and make sure that we’re getting the most we possibly can out of it.

Vale’s designs on China add to Rio, BHP drive for more iron ore – by James Regan (Reuters U.S. – July 15, 2015)

July 16, 2015

http://www.reuters.com/

SYDNEY – As Rio Tinto and BHP Billiton ship more iron ore than ever to China, the Australia mining giants face a fightback from Brazil’s Vale for market share that threatens to drive already weak prices even lower.

Rio Tinto and BHP, which will release quarterly production data this week and next, have been racing to keep up exports to boost profits while lower prices eat into margins.

They now face stiffer competition from Vale, which is also working its mines harder, after the world’s biggest producer won approval for its giant Valemax ships to unload in China, cutting down on freight costs.

With a capacity of 400,000 tonnes each, the 34 Valemaxes are the world’s biggest bulk carriers and twice the size of vessels used by Rio and BHP, but a ban on entering Chinese ports had severely curbed the cost efficiencies of the larger ships.

“BHP and Rio have been looking to raise volumes in this environment to maximize every tonne,” said Morgans Financial analyst James Wilson.

Iron ore miners unprepared for challenges, warns BHP – by Paul Garvey (The Australian – July 14, 2015)

July 14, 2015

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

Australia’s iron ore miners are unprepared for the massive exploration challenges ahead of them, BHP Billiton’s head of iron ore exploration has warned.

Speaking at the AusIMM iron ore conference in Perth on yesterday, BHP’s Joe Knight said current exploration methods would be unable to discover and define the quantity of new ore bodies needed to sustain the Pilbara’s soaring iron ore output.

The Pilbara is home to three of the world’s four largest iron ore miners — BHP, Rio Tinto and Fortescue Metals Group — and exports almost 800 million tonnes of ore a year.

That figure is set to grow to about 965 million tonnes a year by 2017, Mr Knight said, based on the current publicly announced plans of the region’s miners and explorers.

At that rate, Mr Knight said, companies would struggle to replace their mined resources unless they evolved their approach to exploration, given the forecast annual production was the equivalent of more than three so-called “tier one” iron ore deposits.

Debt Load Digs Into Mining Industry – by Rhiannon Hoyle (Wall Street Journal – July 12, 2015)

July 13, 2015

http://www.wsj.com/

Resources firms borrowed heavily to supply China; now boom is ending, prices are down

SYDNEY—When Australia’s richest person, Gina Rinehart, needed cash last year to build a massive iron-ore mine called Roy Hill in northwest Australia, five export-credit agencies and 19 banks teamed up to provide the US$7.2 billion required, sealing the largest project-financing deal in industry history.

The loan deal struck to fund the mine, cut into a vast red plain deep in the Australian Outback, now looks like the high point of a multiyear pileup of debt in the global mining sector.

As forecasts predicting endless growth in China’s appetite for raw materials became a matter of industry faith, mining companies borrowed extensively to build networks of pits, railway lines and port terminals. Megadeals abounded as a merger-and-acquisition frenzy took hold. Cheap borrowing costs, thanks to low global interest rates, fueled the splurge.

Now, as China’s hunger for resources ebbs and mining companies’ profits suffer amid falling commodity prices, those debts have become an albatross around the industry’s neck.

BHP Billiton and Rio Tinto ready for iron ore’s ‘new normal’ – by Amanda Saunders and Tess Ingram (Australian Finacial Review – July 9, 2015)

July 9, 2015

http://www.afr.com/

Australia’s big two iron ore miners, Rio Tinto and BHP Billiton, believe the commodity will continue to be a “wealth generation machine for Australia” and expect volatility to recede, despite the heavy price falls in recent days.

Iron ore may be headed for $US40 a tonne after crashing through $US45 on Wednesday night, dropping more than 10 per cent in a single day. But Rio and BHP say they are well prepared for the possible new normal in prices.

Rio Tinto iron ore boss Andrew Harding told The Australian Financial Review that the iron ore price “is moving around its long-term average after coming off an unprecedented high that was never sustainable”. “We are seeing a pattern play out now that is entirely consistent with the history of all internationally traded commodities,” he said.

OPTIMISM LONG-TERM

The miner has cut costs, and prepared its iron ore division “to manage these fluctuations over the long term”. He maintains that the “long-term picture for iron ore remains sound”, and the commodity will “continue to be a wealth generation machine for Australia”.

Iron Ore’s Bear Market May Deepen as Clarksons Forecasts $40 – by Jasmine NgDavid Stringer(Bloomberg News – July 7, 2015)

July 7, 2015

http://www.bloomberg.com/

Iron ore will probably extend declines after falling back into a bear market on Monday as low-cost supplies from Australia and Brazil are set to expand further this half while demand stumbles in China.

Prices may drop toward $40 a metric ton, according to Clarksons Platou Securities Inc. A deepening slowdown in China’s steel industry and higher iron ore exports from the largest miners are weighing on prices, said Sanford C. Bernstein & Co.

Iron ore’s return to a bear market highlights that the same factors of surging supply and stalling demand growth, which dragged prices to a decade-low early April, remain at the forefront. Recent losses followed figures showing inventories in China rebounded, while exports in June from Australia’s Port Hedland were at a record. The Minerals Council of Australia on Tuesday defended local miners’ policy of adding output, saying cuts would be a failed strategy that would aid competitors.

“Momentum is clearly negative and that is going to be hard to reverse in the immediate short term,” Paul Gait, an analyst at Bernstein in London, said in an e-mailed response to questions. “The revealed preference of the miners is for volume over value, for tons ahead of price.”

Potash Corp tussle could be win for BHP – by Amanda Saunders (Australian Financial Review – June 29, 2015)

June 29, 2015

http://www.afr.com/

A takeover tussle between two of the world’s biggest potash players could have an unlikely winner: BHP Billiton.

Analysts say a deal between Canada’s Potash Corp and Germany’s K+S will mean the remaining players in the market have increased pricing power over the next decade.

BHP has its foot on a potash megaproject called Jansen in Canada, which CEO Andrew Mackenzie has said is the best potash asset in the world.

But BHP is yet to decide whether to develop it could hinge the success of exploration and acquisitions in its other two key growth commodities: oil and copper.

Mr Mackenzie told The Australian Financial Review this month that BHP may have to choose between copper, potash and conventional oil in about five years, and could take on partners or exit one of the plays to protect its progressive dividend.

Deutsche mining analyst Paul Young said a Potash Corp deal with K+S would probably be positive for BHP.

Brace for surging BRICs, BHP chief Mackenzie warns – by Scott Murdoch (The Australian – June 11, 2015)

June 11, 2015

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

BHP Billiton chief executive Andrew Mackenzie has warned Australian miners to expect a surge of competition from rival countries selling to China, as the Asian giant strengthens business and diplomatic ties with a number of mineral-producing nations.

In Beijing, Mr Mackenzie told The Australian China’s growing relationship with Latin America, especially Brazil, could be a risk to Australia’s export levels in future.

Mr Mackenzie said Australian producers needed to ensure their Chinese customers were confident that security of supply would not be affected over the next few years.

Mr Mackenzie chaired a high-level meeting with Premier Li Keqiang and 14 top global chief executives at the Great Hall of the People on Tuesday to examine China’s economic transformation. The Chinese government has put in place an official target for the economy to grow by 7 per cent this year.

Fitch downgrades outlook on BHP Billiton and Rio Tinto on iron ore price (Sydney Morning Herald – June 11, 2015)

June 11, 2015

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

Rating agency Fitch downgraded its outlook on BHP Billiton and Rio Tinto from stable to negative, after revising down its price assumptions for iron ore, copper and nickel earlier this month.

BHP Billiton, the world’s largest mining firm, held its A+ rating but Fitch said on Wednesday the spin-off last month of some of its assets into a new company named South32 would have a marginally negative effect on its credit rating in the near term, weighing on projected free cashflow generation.

The outlook downgrade on A- rated Rio Tinto, the world’s second-largest mining firm, was on the back of weaker price expectations for iron ore, its main product.

“Although Rio Tinto benefits from a leading iron ore cost position, the high percentage of revenue and (earnings) generated by that single commodity exposes the company to significant risks,” Fitch said in a statement.

The rating agency confirmed its negative outlook on BBB- rated group Anglo American.

BHP Billiton’s Andrew Mackenzie defends coal in battle with gas (Australian Financial Review – June 9, 2015)

June 11, 2015

http://www.afr.com/

The Group of Seven’s ultimately unremarkable commitment to phase out fossil fuels over the next 85 years only partially reveals the dynamics of commercial self-interest and tactical first-world politics that have successfully driven a wedge between big petroleum and diminishing coal.

The idea that gas sits as a transition fossil fuel that will smooth the world’s embrace of a low carbon future has long been part of the seaborne gas industry’s pitch for long-term relevance. But it is a view that now clearly distinguishes the drillers from the miners in the debate over how the world should manage its carbon dioxide problem.

Pretty plainly, folks like Woodside chief executive Peter Coleman are saying that the gas industry has been weak-kneed about differentiating nice clean gas from its dirty cousin in carbon, thermal coal.

Coleman’s pitch to the World Gas Conference in Paris last week was strident, almost convincing and very certainly crowd pleasing. Nuclear-fuelled Paris, you see, sits at the epicentre of the rapidly shifting tectonics of coal.

France is making a rapid exit from the coal cycle.