Twitter

Commodity Super-Cycle and Decline

Billionaire Facebook Backer Buying Commodities That Made Him – by Yuliya Fedorinova (Bloomberg News – April 10, 2017)

https://www.bloomberg.com/

The Russian tycoon who made $1.4 billion with an early bet on Facebook Inc. and still owns a stake in Uber Technologies Inc. is returning to the sooty old commodities industry that first made his fortune.

Alisher Usmanov, 63, said he’s been investing in natural-resource producers as they rallied last year following three years of declining prices. The Bloomberg World Mining Index of shares jumped 38 percent in 2016 as concerns eased over China’s economy and prices for metals rose, with companies such as Fortescue Metals Group Ltd., BHP Billiton Ltd. and Anglo American Plc surging.

“Last year showed that commodities companies such as BHP Billiton, Fortescue and traditional companies of the oil and gas sector are also able to offer high returns on investment,” Usmanov said in an interview in his Moscow office, without disclosing which companies he’s bought stakes in.

Read more

Top 50 biggest mining companies – by Frik Els (Mining.com – April 3, 2017)

http://www.mining.com/

MINING.com and sister company IntelligenceMine’s ranking of the world’s 50 largest mining companies based on market value continues to show an industry in recovery.

At the end of the first quarter this year the top 50 companies had a combined worth of $842 billion. In total these companies’ added $258 billion in market capitalization over the past 12 months and a good fifth of those gains occurred in 2017.

As with any ranking, criteria for inclusion is a contentious issue. We decided to exclude unlisted and state-owned enterprises at the outset due to a lack of information. That of course excludes giants like Chile’s Codelco, Uzbekistan’s Navoi Mining which owns the world’s largest gold mine, Eurochem, a major potash firm, trader Trafigura, top uranium producer Kazatomprom and numerous entities in China and developing countries around the world.

Read more

Miners are spending again, but only to stand still – by Clyde Russell (Reuters U.S. – March 31, 2017)

http://www.reuters.com/

SINGAPORE – The rally in commodity prices last year is starting to filter through to higher spending by miners, but the nature of how they are loosening the purse strings betrays the view that companies are still cautious about the outlook.

Mining service providers are generally one of the first groups to suffer cutbacks when prices turn down, but equally they are among the first beneficiaries when things turn around.

In the five years of declining prices from 2011 to 2015, mining companies universally tried to survive by stripping costs out of their operations, with many eventually even cutting sustaining capital. It’s this spending that is coming back into the market, according to several participants at this week’s Mining Investment Asia conference in Singapore.

Read more

Miners to spend $21 billion on exploration by 2025 – by Cecilia Jamasmie (Mining.com – March 29, 2017)

http://www.mining.com/

An undeniable and ongoing rebound in commodity prices could take global mining spending in exploration up to as much as $21 billion by 2025, a level of funding last seen in 2012 according to S&P Global Market Intelligence, but which is necessary to sustain the industry’s growth.

While prognosticating that far into the future can inevitably lead to inaccuracies, Stan Wholley, President for the Americas at CSA Global — the world’s second-largest mining sector consultancy — said that such a hefty investment is essential.

“As deposits get harder and more expensive to find and after such an extended period of inactivity in the exploration space, I believe we need to be back at the levels seen in 2012 to replace resources and reserves required to sustain growth,” he told MINING.com.

Read more

Swedish Miner Says Donald Trump Doesn’t Hold Key to Metal Prices – by Hanna Hoikkala and Niklas Magnusson (Bloomberg News – March 28, 2017)

https://www.bloomberg.com/

The operator of some of Europe’s largest copper and zinc mines expects President Donald Trump’s plans to spend on U.S. infrastructure to have much less impact on base-metal prices than the needs of burgeoning middle-class populations in emerging markets.

That’s because projects in the U.S. and other developed countries simply won’t use enough zinc or copper to have any significant impact on prices, Lennart Evrell, chief executive officer of Sweden’s Boliden AB, said in a March 22 interview. When poorer and less-developed countries decide to build transport and power networks they consume far more of these materials, he said.

“The U.S. is not big enough when it comes to commodities,” Evrell said. “It may be a very big economy, but when it comes to need for base metals, it’s more about the earlier stages of a country’s development, and the U.S. is not in that phase. We believe the driver behind the recent metals price increases is the rest of the world, and not Trump, as prices fell roughly as much after his election as they had gained in conjunction with his election.”’

Read more

Miners Regain Mojo to Spark $18 Billion in Exploration Hunt – by David Stringer (Bloomberg News – March 24, 2017)

https://www.bloomberg.com/

A rebound in exploration by global miners could see spending hit $18 billion by 2025 with China the front runner in the search for a new generation of giant discoveries.

Exploration budgets are rising after they plunged to an 11-year low of about $10 billion last year as mining companies slashed costs in the wake of a collapse in prices, according to Richard Schodde, managing director of Melbourne-based MinEx Consulting Pty, an industry adviser.

“We are coming out of the bottom of the cycle. I actually see the opportunity for the exploration sector to regain its mojo and quickly deliver a pipeline of good discoveries,” Schodde said in an e-mailed response to questions. “It’s catch-up time for the industry.”

Read more

$5.5 billion private capital ready to invest in mining – by Frik Els (Mining.com – March 20, 2017)

http://www.mining.com/

According to a new report by private capital tracker Preqin, overall fundraising for natural resources investment actually declined declined by a fifth in 2016 to the lowest since 2012.

Coming off a record 2015, 74 funds raised a total of $60bn in 2016 for investment in natural resources, which includes metals and mining, water, timberland and energy. Private providers of capital include pension funds, sovereign wealth funds, endowments, family offices and others.

In 2015 mining and metals made up a paltry portion of funds raised with three funds closing on $1.1 billion in 2015. Last year five funds managed to raise $2.1 billion. 2012 was the peak year for mining fundraising with $4.6 billion of capital commitments from investors.

Read more

PDAC Take-Away. Optimism for gold and mining in general – by Lawrence Williams (Sharps Pixley.com – March 20, 2017)

https://www.sharpspixley.com/

The annual Prospectors and Developers Association of Canada (PDAC) Convention is truly something special. Although unable to attend this year I have been watching reports on the event with considerable interest as it is very much a bellwether of the mineral exploration sector – and that is itself a great indicator of the strength, or otherwise, of the global mining industry and where it is headed. This year’s PDAC took place from March 5th-8th inclusive.

I had been attending the PDAC since 1977 and it has always been one of the industry’s highlights. Back then the whole event took place in the Royal York Hotel and attendance rose to around 7-8,000 at its peak before it transferred to the nearby Toronto Convention Centre, since when it has grown enormously to become what is probably the world’s biggest annual mining event.

Numbers of attendees peaked four years back at around 32,000 when the industry – and gold mining in particular – had been riding high, although had been beginning to turn down. Gold exploration and mining has always been the principal driver of PDAC sentiment – and attendance.

Read more

Anglo’s Billionaire Investor Puts Mining on Cusp of M&A Era – by Jesse Riseborough, Dinesh Nair and Thomas Biesheuvel (Bloomberg News – March 17, 2017)

https://www.bloomberg.com/

Anil Agarwal’s surprise move into Anglo American Plc suggests the mining industry may be on the cusp of a new wave of deals.

For years, Anglo has been the subject of takeover speculation and during the worst of the commodities crisis it seemed on the verge of a breakup. It spent last year getting back on firmer footing, but the 2 billion pound ($2.4 billion) investment by one-time Anglo suitor Agarwal has sparked the return of speculation about the company’s future.

“I’m pretty sure every investment banker in London is running around, dusting off old pitch books and going to every major in town,” Paul Gait, an analyst at Sanford C. Bernstein Ltd. in London, said by phone. “This feels to me a little like the last cycle, when the first mover precipitated a round of consolidation.”

Read more

‘This time isn’t different’: Miners must learn lessons of the last boom-bust cycle – by Sunny Freeman (Financial Post – March 7, 2017)

http://business.financialpost.com/

As the mining industry gingerly approaches what could be the start of a new, improved commodity cycle, analysts at the 85th Prospectors and Developers Association of Canada convention in Toronto warned companies to heed lessons from the last crash, lest they repeat their boom-cycle follies.

“This time isn’t different,” warned Mark Fellows, director at U.K.-based Skarn Associates, noting that the impact of the cyclical nature of the industry isn’t going away and miners are an industry of price-takers, having little direct influence over the value of the commodities they produce.

That’s why, he said, those preparing for a price upswing must be more prudent than before as global economic uncertainty persists, especially given that the last boom-bust cycle was particularly extreme.

Read more

Flush with cash, global miners promise prudence, dividends – by Nicole Mordant (Reuters U.S. – March 1, 2017)

http://www.reuters.com/

HOLLYWOOD, FLA. – For the first time in four years, the world’s biggest miners are awash in cash, riding a wave of cost cuts and a recovery in raw material prices from coal to zinc last year.

But instead of using their newfound bounty to unveil lavish growth plans, as they did in 2012 just as metals prices started plummeting, the cash is going to more sober uses this time: paying dividends and slashing debt.

Spending on growth projects ranks third in priority, delegates and companies said at a mining industry conference in Florida this week. That raised the prospect of limited mine production increases that could support commodity prices especially for copper and zinc.

Read more

Column: Big miners poised to fall into debt trap? – by David Fickling (Bloomberg News/Sudbury Star – February 28, 2017)

http://www.thesudburystar.com/

(Bloomberg Gadfly) — The world’s miners went on one hell of a binge five years ago, and they’ve been dealing with the hangover ever since. Even the worst overindulgence passes into memory eventually, though, and last week the industry emerged blinking into a bright new day.

At BHP Billiton Ltd., Vale SA, Rio Tinto Group and Anglo American Plc, combined net debt fell by almost $15 billion between June and December, compared with a $3.7 billion reduction across the previous three-and-a-half years. Free cash flow in the December half rose more than sevenfold from a year earlier, to its highest level since 2011. Capital spending dropped to the lowest point in a decade.

Executives rolling out these results did their best to project an ascetic air. Having set fire to a mountain of capital during the boom, they were keen to remind shareholders they were now reformed characters.

Read more

Mining exploration spending drops to 11-year low – by Frik Els (Mining.com – February 23, 2017)

http://www.mining.com/

A new report by SNL Metals and Mining on Corporate Exploration Strategies in 2016 shows an industry still caught in a deep downturn after four years of sharp declines. According to SNL, part of S&P Global Market Intelligence, 2016 exploration budgets at the 1,580 companies covered by the study totalled $6.9 billion, the lowest in 11 years.

Other measures show the extent of the damage to the sector: The average 2016 exploration budget was $4.4 million, the lowest since 2009, and the median budget was $800,000, the smallest in more than a decade.

Spending was dominated by the industry’s largest companies with just the top 10 companies were responsible for over $1 of every $5 spent on exploration – mainly for copper and gold – worldwide last year.

Read more

Ivan Glasenberg keen to tell the world he is back on top – by Neil Hume and David Sheppard (Financial Times – February 24, 2017)

https://www.ft.com/

The morning after announcing a return to profit that capped a dramatic turnround for Glencore, you could have forgiven Ivan Glasenberg, the mining and trading company’s billionaire chief executive, for enjoying a lie in.

Not so. By 5.45am on Friday, the 60-year-old was in the lobby of his hotel in London’s Park Lane, limbering up for a run with a select group of analysts and other associates who were much younger than him.

After a brisk 7km around Hyde Park — clocking 4m 48s/km — he dashed off to a breakfast meeting with investors. By the evening Ivan, as he is universally known in the commodities industry, was preparing to head to Florida to attend a mining conference.

Read more

Miners Enjoy Fastest Comeback in a Decade on Surging Profits – by Kevin Crowley and David Stringer (Bloomberg News – February 21, 2017)

https://www.bloomberg.com/

The speed of the mining recovery is faster than anything that’s been seen in the past decade. BHP Billiton Ltd. and Anglo American Plc on Tuesday reported the biggest profit increases since at least 2007 on deep cost cuts and rebounding metal prices. The earnings exceeded analysts estimates and highlight mining’s dramatic reversal of fortune in the past year.

The industry is coming back from a crisis that forced some of the top metal producers to sell assets, cut costs and rein in spending after years of over-investment. Metal prices have largely recovered from the downturn and several of the biggest mines are profitable, instead of bleeding cash.

“You can see how cash generative this business can be,” Paul Gait, an analyst at Sanford C. Bernstein Ltd. in London, said by phone. “I think 2017 is a year of strategic re-positioning and rethinking.”

Read more