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Potash Corp tussle could be win for BHP – by Amanda Saunders (Australian Financial Review – 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.

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Brace for surging BRICs, BHP chief Mackenzie warns – by Scott Murdoch (The Australian – 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.

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Fitch downgrades outlook on BHP Billiton and Rio Tinto on iron ore price (Sydney Morning Herald – 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.

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

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Ignorance pushed iron ore market into ‘dance of death’ – by Tess Ingram (Sydney Morning Herald – June 9, 2015)

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

Former Fortescue Metals Group chairman Gordon Toll says the heads of the world’s largest iron ore miners have exhibited “appalling ignorance of major economic market structures” and have created a global “debacle” that could last for decades.

Mr Toll, who now heads locally-listed magnetite hopeful Royal Resources, served as chairman of Fortescue from May 2005 to March 2007 while the company was in its development phase.

Adding his name to the list of prominent critics of the miners’ expansion strategies, Mr Toll said he was shocked shareholders of BHP Billiton, Rio Tinto, Vale and Fortescue had remained silent while their companies pressed ahead with expansion plans which would depress prices.

“The first thing is why are the shareholders not screaming and I think that’s part of the second thing which is both the executives of these companies and the shareholders are showing massive ignorance of major economics and market structures,” Mr Toll told Fairfax Media.

“I don’t believe Jimmy Wilson or Andrew Harding, any of those people, ever believed they were going to drive the iron ore price down to where they have driven it but that is because they do not understand major economics.”

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Coal Giants Left Unscathed by Growing Divestment Campaign – by Thomas Biesheuvel and Jesse Riseborough (Bloomberg News – June 3, 2015)

http://www.bloomberg.com/

The biggest names in mining have so far found themselves immune to a rapidly expanding campaign that’s seeking to curb the use of the most polluting fossil fuel.

From Norway’s $900 billion sovereign wealth fund to France’s biggest insurer and the Church of England, investors are starting to turn the screw on coal producers by selling down their holdings.

The criteria they use to select candidates for divestment exempts some of the biggest producers, however. That’s because those companies are large, diversified miners and only get a small part of their revenue from coal.

Dodging the divestment bullet, at least for now, are companies such as Glencore Plc, the world’s biggest exporter of coal used in power stations, BHP Billiton Ltd., Rio Tinto Group and Anglo American Plc. Between them they mine more than 350 million tons, about one third of the world’s coal trade.

“There’s a view that if they stop investing in it, or take a stance, that coal will go away,” said Mick Buffier, chairman of the World Coal Association and also an executive at Glencore. “Our view is different. Coal will continue to be needed. It’s going to be used by these developing nations. ”

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COLUMN-Big iron ore miners’ plan to displace everybody else losing steam – by Clyde Russell (Reuters U.S. – June 3, 2015)

http://www.reuters.com/

LAUNCESTON, Australia, June 3 (Reuters) – How well is the plan by big iron ore miners to displace high-cost iron ore from the seaborne and Chinese domestic markets going? Maybe just OK, certainly not great.

Much has been written about how the big three global iron ore miners will use their low-cost, high-output mines to muscle competitors out of the market, thus restoring the supply-demand balance and ultimately justifying the billions of dollars they spent boosting capacity well in excess of demand.

The problem for Brazil’s Vale and the Anglo-Australian pair of Rio Tinto and BHP Billiton <BHP Billiton> is that the signs are this isn’t working perhaps as well as they may have hoped.

Certainly Chinese trade numbers show that Australia in particular has increased market share in iron ore imports, but the momentum may be stalling.

In the first four months of the year, Chinese imports of the steel-making ingredient from Australia were 195.845 million tonnes, or 63.7 percent of the total 307.282 million tonnes.

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Keep Metal Prices Lower for Much Longer – by David Stringer (Bloomberg News – June 3, 2015)

http://www.bloomberg.com/

BHP Billiton Ltd. delivered a sombre warning to global commodity markets that oversupply is very much here to stay. Tumbling prices are creating a testing environment for commodity producers, while demand is slowing to more routine levels amid a transition in China’s economy away from investment-led growth, the world’s biggest mining company’s Chief Executive Officer Andrew Mackenzie said Wednesday.

“In many markets, recently installed low-cost supply can now be stretched to meet growing demand,” Mackenzie said in a speech in Canberra. “Incremental supply, induced during periods of higher prices, will take longer to absorb and this means over-supply may persist for some time.”

Expansion by the biggest iron ore producers, including BHP and Vale SA, will see a global surplus swell to 215 million tons in 2018 from 45 million this year, UBS Group AG estimates. Teck Resources Ltd. plans to idle six Canadian coal operations amid a slump in prices and demand.

“The speed at which prices have returned to long run levels for each commodity has varied as a function of the time taken for low cost supply to come to market,” Mackenzie said.

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The iron ore price equation that makes Fortescue attractive for China – – by Anne Hyland (Australian Financial Review – May 29, 2015)

http://www.afr.com/

CITIC Group and Baosteel Group, which are said to be interested in Fortescue Metals Group, are two of the most politicised companies in China. Baosteel is China’s leader in the steel industry and CITIC was anointed to make significant investments outside China, such as the $10 billion Sino Iron project, which has been described as the worst mining investment in Australia in the past decade.

What is almost certain is that CITIC and Baosteel, which is developing an iron ore project with Aurizon, won’t bid against each other for Fortescue or other resource companies. It would be politically unpalatable in China and it’s typically not what China Inc does.

While there would be a dozen companies in China capable of taking out Fortescue, only one would get the green light, say veteran China observers.

At the Stockbrokers Association conference on Thursday, Li Xinchuang, president of the China Metallurgical Industry Planning Association, firmed up speculation with comments that Fortescue would benefit from a Chinese investor, while saying he didn’t believe the argument that there was a global oversupply of iron ore.

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Forrest fire: Twiggy’s secret bid to salvage iron ore price – by Andrew Burrell and Paul Garvey (The Australian – May 23, 2015)

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

For the second time in five years, Andrew Forrest has been comprehensively out-lobbied, out-manoeuvred and out-muscled in Canberra’s halls of power by his despised rivals BHP Billiton and Rio Tinto.

The billionaire chairman of Fortescue Metals Group is seething at being snookered again by two multinationals he believes are hellbent on pushing him out of business by driving down the iron ore price.

“This won’t be the end of it — he won’t stop now,” said a close ¬associate of Forrest’s after Joe Hockey bowed to the demands of BHP and Rio by announcing on Thursday that there would be no ¬inquiry into the iron ore market.

Another was more blunt: “He will keep going — he actually believes his own bullshit.”

Sure enough, at the crack of dawn yesterday, the indefatigable Forrest hit the national airwaves from Perth in a bid to reboot his campaign, suggesting BHP and Rio had sent “plane loads” of ¬lobbyists to Canberra in recent days to convince the government to call off the planned inquiry.

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Fortescue’s Andrew Forrest maintains iron ore rage – by Paul Garvey (The Australian – May 22, 2015)

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

Fortescue Metals Group founder Andrew Forrest has vowed to continue his calls for greater scrutiny of mining giants BHP Billiton and Rio Tinto, despite the federal government’s official rejection of an inquiry into the iron ore market.

Joe Hockey yesterday declared that the inquiry — originally supported by Tony Abbott — would not go ahead, drawing an angry response from Mr Forrest.

The billionaire mining entrepreneur, who has been campaigning for months for governments to pressure BHP and Rio over their strategy to continue lifting iron ore production, said the “hysterical” lobbying of multinational mining giants caused the inquiry to stall.

In an opinion piece written for The Australian, Mr Forrest questioned what the mining giants had to fear from an inquiry.

“Those that paint me as an interventionist from behind their Singapore tax shields know the iron ore industry is an oligopoly in which the big three each wield more market power than Saudi Arabia in oil and where the barriers to entry are huge and built on decades of subsidies,” he said.

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[Australia iron mining] Friends, countrymen, lend me your ores – by Richard Denniss (Brisbane Times – May 22, 2015)

http://www.brisbanetimes.com.au/

Richard Denniss is an economist and executive director of The Australia Institute.

Australia has a bigger share of the seaborne coal market than Saudi Arabia has of the world oil market. And Australia has a bigger share of the seaborne iron ore market than all of the OPEC counties combined have of the world oil market. Everyone knows that if OPEC doubled their oil supply the world oil price would fall. Yet Australians are being told that our decision to double our iron ore exports between 2007 and 2014 had no impact on the price of iron ore.

Someone is talking crap.

While it’s hard for mere mortals to turn water into wine, it’s easy to turn wine into water. Just take a glass of wine, add a very large quantity of water and, hey presto, you’ve got water. But if you add water, one drip at a time, to a glass of wine, it’s virtually impossible to decide when it stopped becoming wine and started becoming water.

So what’s watery wine got to do with the price of iron ore? Lots.

Between 2005 and 2014 Australia built or expanded almost 400 mines. Not surprisingly, doing so put enormous pressure on the cost of the labour, capital and raw materials need to build them.

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Gloomy Mining Chiefs See Copper-Tinted Light at End of Tunnel – by Firat Kayakiran, Jesse Riseborough and Agnieszka De Sousa (Bloomberg News – May 21, 2015)

http://www.bloomberg.com/

The world’s biggest mining companies haven’t agreed on much lately as they argue about how to deal with a glut of iron ore and coal. When the subject turns to copper, however, they’re on the same wavelength.

Executives of BHP Billiton Ltd., Antofagasta Plc, Rio Tinto Group, Freeport-McMoRan Inc. and Glencore Plc all pointed to copper in comments this month as the one commodity not dogged by oversupply. Demand is proving resilient, according to analysts who cite China’s response to a slowdown in economic growth by sanctioning a number of previously delayed infrastructure projects.

“If you’re looking for a single structural long-term bullish argument for owning a commodity, just look at copper,” said Clive Burstow, who helps manage $44 billion at Baring Asset Management in London.

In an interview last week, the head of the world’s largest mining company painted a gloomy picture for the industry. BHP’s Andrew Mackenzie said that in all the minerals markets in which it operates, any demand increase can too “easily” be met by expanding existing mines. One exception he sees is copper.

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Vale iron ore deal a ‘reminder’ for Australia: Roy Hill – by Tess Ingram (Sydney Morning Post – May 22, 2015)

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

Roy Hill chief executive Barry Fitzgerald has said the iron ore expansion deals Brazilian miner Vale inked with China this week are a reminder Australian producers need to remain competitive in the global iron ore market.

Mr Fitzgerald, the man responsible for the development of Gina Rinehart’s $10 billion Roy Hill mine, joined majors BHP Billiton and Rio Tinto in warning of the Brazilian iron ore producer’s growing competitiveness with its Australian rivals.

“What it does remind me, and it should remind all of us, that we in the mining industry are in a competitive, international business,” Mr Fitzgerald told a Morgans Financial breakfast in Perth on Friday. “What we do needs to reflect the pressures and the actions of our competitors.”

On Tuesday, China agreed to fund Brazilian iron ore giant Vale’s major S11D expansion and invest in huge ships that will transport high-quality ore from Brazil to Asia for a lower cost.

The project, which should be finished next year, is expected to produce 90 million tonnes of high-quality iron ore at a unit cost of $US11 a tonne. Vale also announced this month it would begin shipping a blended product – Brazilian Blend fines – with an iron content of 63 per cent.

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RPT-UPDATE 2-U.S. SEC fines BHP Billiton $25 mln in 2008 Olympics bribery probe – by Jonathan Stempel (Reuters U.K. – May 20, 2015)

http://uk.reuters.com/

BHP Billiton Plc will pay $25 million to settle charges that it violated a U.S. anti-bribery law by failing to properly monitor a program under which it paid for dozens of foreign government officials to attend the 2008 Summer Olympics in Beijing.

The accord resolves U.S. Securities and Exchange Commission charges that BHP, one of the world’s biggest mining companies, violated the Foreign Corrupt Practices Act when it sponsored the attendance of officials who were “directly involved with, or in a position to influence” its business and regulatory affairs.

BHP, which has offices in London and Melbourne, Australia, neither admitted nor denied wrongdoing in agreeing on Wednesday to settle the civil case. It also said the U.S. Department of Justice ended a related criminal probe without taking action, and that all U.S. investigations into the matter are complete.

The SEC said BHP invited 176 government officials to attend the Olympics at company expense, including 98 who worked for state-owned enterprises that were customers or suppliers, under a “global hospitality” program tied to its sponsorship of the games.

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