Commodity Super-Cycle and Decline – Page 24

Worst Still Ahead for Mining Industry After Losing $1.4 Trillion – by Jesse Riseborough, Kevin Crowley and Andre Janse Van Vuuren (Bloomberg News – February 11, 2016)

February 11, 2016

http://www.bloomberg.com/

This year looks even worse for an industry decimated by the commodities slump.

When you find yourself in a hole, the saying goes, stop digging. A simple lesson that arguably has bypassed a mining industry that’s wiped out more than $1.4 trillion of shareholder value by digging too many holes around the globe. The industry’s 73 percent plunge from a 2011 peak is far beyond the oil industry’s 49 percent loss during the same time.

Just how long it will take for the world to erode bulging stockpiles of metals, coal and iron ore was the central debate at the mining industry’s biggest investment conference in Cape Town this week, which attracted more than 6,000 top executives, bankers, brokers, analysts, miners and reporters. Here’s what they concluded.

The Worst Is Yet to Come

[Mining Indaba] China, India and Japan court Africa at the mining table – by Lee Mwiti (Mail & Guardian – February 10, 2016)

February 10, 2016

http://mg.co.za/

This year’s Mining Indaba has been cast as taking place under a pall, but not too much has changed, at least not from the perspective of China, cited for much of the turmoil in the global mining industry.

Chinese government officials here in this South African port city gave away little about the Asian giant’s thoughts about its central role in the turbulence, instead focusing on what they said would be better times ahead in what is a highly-cyclical industry.

Zhao Caisheng, a division director at China’s national land and resources ministry, forecast a strong outlook for mining, on the back of developed economies re-industrialising and increasing spending on capital projects, and emerging economies accelerating the industrialisation push.

COLUMN-Australia’s tough miners want government help; shouldn’t get it – by Clyde Russell (Reuters U.S. – February 10, 2016)

February 10, 2016

http://www.reuters.com/

Feb 10 – When the going gets tough, the tough ask for tax relief. If you are looking for a sign that the end game of the commodity downturn is getting closer, witness the clamour for more support from Australia’s embattled resources sector.

Asking for government help is one of the last steps a mining company can take to stay alive, assuming it’s already exhausted every conceivable cost saving, emptied the pockets of its owners and reached the limits of what its bankers will lend.

The latest call came this week from the Queensland Resources Council (QRC), which said the coal mining industry needs support to keep the remaining 60,000 workers employed, following the loss of 21,000 jobs in the past two years.

Nickel price crushed by weight of ghost stocks – by Andy Home (Reuters U.S. – February 8, 2016)

February 9, 2016

http://www.reuters.com/

LONDON – Another day, another landmark low for the nickel price.

London Metal Exchange (LME) three-month nickel traded down to $7,900 per ton on Monday morning. Forget the troughs of the Global Financial Crisis in 2008. Nickel is now trading at levels last seen in April 2003.

And there may be worse to come.

Might the price of nickel fall below that of copper, which is currently trading on the LME around $4,600 per ton? “Not an inconceivable prospect by any means,” according to one analyst, Leon Westgate of ICBC Standard Bank. (“Commodities Weekly”, Feb. 4, 2016).

Private-Equity Mining Deals Seen Rising in 2016 as Majors Sell – by Jesse Riseborough (Bloomberg News – February 8, 2016)

February 8, 2016

http://www.bloomberg.com/

The value of private-equity deals in the mining industry will rise this year from $3.2 billion in 2015 as top producers seeking to cut the fat amid a global commodity rout offload unwanted operations, according to U.K. law firm Berwin Leighton Paisner.

“The majors are looking to divest a lot more,” Alexander Keepin, head of mining at BLP, said in a phone interview. “There should be a point where the value expectations of the majors and the cash available from the private-equity groups means that there will be more transactions.”

The biggest miners have been battered by the slump in commodity prices that’s forced producers to scrap payouts to investors, sell shares to bolster cash reserves and dispose of lower-quality mines and smelters.

Shark-Cage Diving Out, Austerity In for Global Mining Chiefs – by Jesse Riseborough (Bloomberg News – February 4, 2016)

February 5, 2016

http://www.bloomberg.com/

For two decades, Africa’s biggest mining conference has brought thousands of the industry’s top executives for deal-making, golfing and galas. This year, there’s little to celebrate.

With many miners battling to stay afloat, fewer are willing to shell out 1,140 pounds ($1,641) for the Investing in African Mining Indaba conference in South Africa and business-class airfare. Attendance is expected to be 6,000, about 15 percent less than the record in 2013.

Canadian brokerage GMP Securities Ltd.’s annual Mining Jamboree, which offered activities including shark-cage diving, golfing and wine tasting along with industry meetings, was canceled after the commodities collapse forced spending cuts.

S&P downgrades Glencore to just above junk – by Neil Hume (Financial Times – February 4, 2016)

February 5, 2016

http://www.ft.com/

Standard & Poor’s has downgraded Glencore’s debt to one notch above junk, citing the “challenging outlook” for the mining industry and increasing uncertainty about demand from China, the world’s biggest consumer of raw materials.

The rating agency said Glencore, which has been hard hit by the worst commodities rout in two decades, was now rated triple B minus, from triple B previously.

However, the company is not under review for a further downgrade unlike some of its peers including BHP Billiton. Moody’s, a rival rating agency, put through a similar downgrade of Glencore’s rating before Christmas.

Biggest Mining Rally Since 2008 Propelled by Gloomier Economy – by Luzi-Ann Javier and Thomas Biesheuvel (Bloomberg News – February 4, 2016)

February 5, 2016

http://www.bloomberg.com/

Thank a gloomier-than-expected U.S. economic outlook for the biggest rebound in mining stocks since the global financial crisis.

Pummeled in the past year amid faltering Chinese demand and the prospect of higher interest rates, mining stocks are now surging the most in seven years. Freeport-McMoran Inc. and Anglo American Plc paced gains among major producers, with the Bloomberg World Mining Index’s combined market value swelling by $44 billion in the past two days.

Behind the rally is a sliding dollar amid speculation that global growth may not be strong enough to warrant further central-bank tightening. That makes commodities cheaper in other currencies, boosts the appeal of haven investments such as gold and signals lower credit costs for producers.

Commodities Crash Washes Up In Korea – by Tim Treadgold (Forbes Magazine – February 2, 2016)

February 3, 2016

http://www.forbes.com/

Two of Korea’s biggest companies, Samsung and Posco , are feeling the pain of the commodities-price crash which has devastated the mining and oil industries.

Samsung, a broadly diversified industrial business, has been hit by a loss associated with building an iron ore mine in Australia. Posco, a steel maker, from being an investor in the same mine.

The project causing problems for the Korean corporate giants is Roy Hill, a mine controlled by one of Australia’s richest people, Gina Rinehart.

Goldman: Here’s Why Miners Have It Worse Than Oil Producers – by Tracy Alloway (Bloomberg News – February 1, 2016)

February 1, 2016

http://www.bloomberg.com/

“Things’ll go your way, if you hold on for one more day,” vocal group Wilson Phillips once crooned.

Mining companies seem to have taken those lyrics to heart, opting to maintain production as long as their cash reserves allow and in effect delay a long-awaited resolution in the supply-and-demand balance of dry commodities, according to a new note from Goldman Sachs & Co.

The nature of the metals and mining business—legal considerations combined with an ability to store excess supply for the long haul—means the industry faces a longer shakeout than in the energy sector.

There is a global fire sale of copper and coal mines – by Matt Egan (CNN Money – January 27, 2016)

January 27, 2016

http://money.cnn.com/

There’s a mining fire sale going on around the world.

America’s largest mining company, Freeport-McMoRan (FCX), said Tuesday it plans to sell some of its coveted mines — likely at bargain basement prices. It joins other global mining giants Glencore (GLCNF) and Anglo American (AAUKF), which last year began a mad scramble to raise cash to pay down debt.

Glencore and Anglo American have already started selling copper and coal mines located in Australia, Chile and South Africa. Freeport hasn’t named the mines it could sell.

But how the tables have turned. Just two years ago, business was booming and things were so good that the coal and gold miner Freeport shelled out nearly $9 billion — mostly in debt — to purchase two oil and natural gas companies.

Commodity Markets Outlook Report (World Bank – January 2016)

January 27, 2016

http://www.worldbank.org/

Executive Summary

Commodity prices continued to fall in the fourth quarter of 2015, reflecting abundant supplies, weaker growth prospects in emerging economies, and a strong U.S. dollar. One of the largest declines was in crude oil, which fell from $51 per barrel (bbl) in early October to less than $30/bbl in mid-January.

In addition to concerns about slowing growth in emerging economies, the plunge in oil prices reflected mild winter weather in the northern hemisphere, elevated stocks, resilient U.S. oil production, earlier-than-expected Iranian exports, and unchanged OPEC policy prioritizing market share.

For 2015 as a whole, energy prices plunged by 45 percent from the previous year, while non-energy commodity prices declined by 15 percent. Relative to their peaks in 2011, the main industrial commodity price indices in December were sharply down—two-thirds for energy and more than one-half for metals.

Worst Mining Bet in 2016 Is First Quantum as Rout Fans Debt Fear – by Danielle Bochove (Bloomberg News – January 20, 2016)

January 21, 2016

http://www.bloomberg.com/

In what’s shaping up as the worst month for mining stocks in four years, this Canadian copper producer is handing investors the biggest losses.

First Quantum Minerals Ltd. fell as much as 25 percent to a 12-year intraday low after copper slumped and TD Securities stripped the Vancouver-based company of its buy recommendation.

The shares recovered much of their lost ground later in the session, along with the broader market, ending down 4.6% at C$2.72 on Wednesday in Toronto.

How bad is the commodity downturn? Depends who you ask – by Ian McGugan (Globe and Mail – January 21, 2016)

January 21, 2016

http://www.theglobeandmail.com/

Here is Wall Street’s view of the great oil-and-mining slump: Run for the hills! This is ugly and going to get uglier! Here’s the Bank of Canada perspective: Oh, calm down. By 2020, you’ll hardly remember this kerfuffle.

These are, granted, rather liberal translations, but they do capture the essence of a striking and important contrast in attitudes.

To a large degree, the contrast is about the difference between short-term and long-term thinking. However, the surprise to many people may be just how small the current agony in the oil patch and the mining sector looms when viewed from the perspective of an adaptable national economy.

Dividend cuts expected as top miners struggle – by Ian McGugan (Globe and Mail – January 18, 2016)

January 18, 2016

http://www.theglobeandmail.com/

Two giants of the global mining industry, already beset by plummeting metal prices, now face a new challenge – preparing their shareholders for sharply lower dividends.

BHP Billiton Ltd. and Rio Tinto PLC have both said in the past that they are committed to the payouts, but most observers doubt that sticking to the dividends is practical in today’s bleak environment for commodity producers.

At their current share prices in London, BHP’s dividend works out to a yield of more than 14 per cent, while Rio’s is equivalent to a payout of nearly 10 per cent.