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Yara, CF in talks to create $27-billion global fertilizer giant to rival Canada’s Potash Corp – by Peter Koven (National Post – September 23, 2014)

The National Post is Canada’s second largest national paper.

A potential combination of the world’s two biggest nitrogen producers threatens to break up the established order in the fertilizer industry and create a new dominant player to match Potash Corp. of Saskatchewan Inc.

U.S. producer CF Industries Holdings Inc. and Norwegian firm Yara International ASA announced Tuesday they are in early negotiations to form a US$27-billion giant. It would be the untouchable leader of the nitrogen fertilizer sector, with more than four times as much ammonia production capacity as the next largest rival.

“We’ve had a slew of M&A on the nitrogen side in the last four or five years, but it would be the crowning achievement if these guys get together,” said Spencer Churchill, an analyst at Paradigm Capital. “Because they would be just a dominant force.”

The proposed “merger of equals” got an immediate thumbs-up from investors and analysts, as the two companies appear to be a sensible fit. CF is the dominant producer in the United States, while Yara is a big player in other countries and has a broad distribution network that CF can access. There are possible tax synergies for CF shareholders if the combined company is headquartered outside the U.S. And Yara would benefit from the low natural gas prices CF enjoys in North America.

Nitrogen prices have held up better than potash prices in recent years. As a result, there is speculation a combined CF-Yara could become the flagship investment in the sector, unseating Potash Corp.

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REUTERS SUMMIT-Russia’s Uralkali sees flat H1 potash supply to China – by Polina Devitt and Andrey Kuzmin (Reuters U.S. – September 23, 2014)

http://www.reuters.com/

(Reuters) – Russia’s Uralkali, the world’s largest potash producer, expects volumes to China to remain flat or rise slightly in the first half of 2015, the company’s head of sales told Reuters.

The company hopes to increase the price in the new contract by 10 percent from the $305 per tonne on a cost-and-freight (CFR) basis of the previous contracts, Oleg Petrov said in an interview at the Reuters Russia Investment Summit.

China is the world’s largest consumer of the crop nutrient, and its contracts are seen as a benchmark by most participants in the market. Potash prices are gradually recovering after Uralkali broke a powerful trading alliance with Belarus in 2013.

“The pace of market recovery has exceeded our expectations,” Petrov said. Negotiations over the new contract with China for the first half of 2015 are expected to start in October and to end by January.

“We expect a price rise on contract markets – in China and India; spot market reaction will depend on many factors,” Petrov said at the summit, held at the Reuters office in Moscow. Uralkali’s contract with India lasts until February.

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Merkel’s Taste for Coal to Upset $130 Billion Green Drive – by Julia Mengewein (Bloomberg News – September 22, 2014)

http://www.bloomberg.com/

When Germany kicked off its journey toward a system harnessing energy from wind and sun back in 2000, the goal was to protect the environment and build out climate-friendly power generation.

More than a decade later, Europe’s biggest economy is on course to miss its 2020 climate targets and greenhouse-gas emissions from power plants are virtually unchanged. Germany used coal, the dirtiest fuel, to generate 45 percent of its power last year, its highest level since 2007, as Chancellor Angela Merkel is phasing out nuclear in the wake of the Fukushima atomic accident in Japan three years ago.

The transition, dubbed the Energiewende, has so far added more than 100 billion euros ($134 billion) to the power bills of households, shop owners and small factories as renewable energy met a record 25 percent of demand last year. RWE AG (RWE), the nation’s biggest power producer, last year reported its first loss since 1949 as utility margins are getting squeezed because laws give green power priority to the grids.

“Despite the massive expansion of renewable energies, achieving key targets for the energy transition and climate protection by 2020 is no longer realistic,” said Thomas Vahlenkamp, a director at McKinsey & Co. in Dusseldorf, Germany, and an adviser to the industry for 21 years. “The government needs to improve the Energiewende so that the current disappointment doesn’t lead to permanent failure.”

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NEWS RELEASE: Outokumpu’s Kemi mine celebrates 50-year anniversary

www.outokumpu.com

September 11, 2014 – This September it will be exactly 50 years since Outokumpu made the decision to begin mining operations in its chrome mine in Kemi, Finland. The deposit had been found five years earlier by a local diver, Martti Matilainen. The mining began in 1967, with large-scale mining operations and ferrochrome production to begin next year.

Chrome mine and ferrochrome works were the first steps in Outokumpu’s journey to become the leading stainless steel producer in the world. Today the Kemi mine employs 400 people, and on top if this the nearby ferrochrome works and stainless steel mill in Tornio employ some 2,000 people.

CEO Mika Seitovirta: “The Kemi mine is the only chrome mine in the Europen Union, and it is an essential part of the integrated production chain in the Tornio site. Chromium is what makes steel stainless, and our own chrome mine guarantees us competitive sourcing of chromium for the future. Chrome mine puts Outokumpu in a league of its own, since none of the other stainless steel producers has its own source of chromium. Therefore, the Kemi chrome mine is a unique competitive advantage for us globally.”

The operations of the Kemi mine differ from several other mines because there are enough reserves for mining for several decades. At the moment, Outokumpu mines some 2,4 million tonnes per year. Since there are proved ore reserves of 50 million tonnes and mineral reserves, not yet fully explored, estimated to be some 98 million tonnes, the continuation of the mining operations is therefore guaranteed.

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Potash Corp. Veteran Challenges Uralkali With Russian Mines – by Yuliya Fedorinova (Bloomberg News – September 8, 2014)

http://www.bloomberg.com/

OAO EuroChem, a Russian fertilizer maker building $7.4 billion of potash projects, is gearing up to challenge the dominance of OAO Uralkali with production from its two mines reaching the market in five years.

“We expect we’ll be able to mine the first potash at both mines in late 2017,” Clark Bailey, EuroChem’s mining head, said in an interview. About two more years will be needed to start shipments to external customers, he said.

EuroChem is developing an annual capacity of 8.3 million metric tons of potash, a form of potassium that strengthens plant roots, in two phases at the Verkhnekamskoe deposit in the Perm region and in another two at the Gremyachinskoe deposit in the Volgograd region in western Russia. The company controlled by billionaire Andrey Melnichenko kept its pace even as Uralkali plunged the $20 billion market into turmoil in July last year by ending a marketing venture with Belarus that accounted for 40 percent of worldwide potash exports.

EuroChem, which already produces nitrogen and phosphate nutrients, plans to consume a portion of the potash itself to boost its output of complex fertilizers. Even as it bets on cost advantages such as proximity to a port to take on market leaders, the key to EuroChem’s success in potash could lie in the efficiency of suppliers such as K+S AG (SDF), Europe’s largest.

“While EuroChem’s projects are the only ones at an advanced stage in the industry globally, they’re more likely to take market share from high-cost producers like K+S than from low-cost producers like Uralkali,” ZAO Raiffeisenbank analyst Konstantin Yuminov said by phone.

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UPDATE 1-UK forces energy, mining firms to show foreign state payments – by Silvia Antonioli and Karolin Schaps (Reuters India – August 22, 2014)

http://in.reuters.com/

Aug 22 (Reuters) – Britain announced that energy and mining firms would have to disclose from next year any payments made to governments in countries where they operate as it aims to curb corruption in the natural resources sector.

UK-registered companies will have up to 11 months after the end of their financial year to report payments to Companies House under the new rule, which will take effect from Jan. 1 2015.

“The UK is determined to lead by example, which is why we have introduced reporting requirements on UK-based extractives companies early,” Business Minister Jo Swinson said in a statement.

“Oil, gas and mining can, if well managed, deliver precious economic benefits to the populations of developing countries. Too often, though, the assets from resource-rich countries are not benefiting local people or the local economy.” The announcement on Friday follows a period of consultation with industry and the public on the proposal.

“While these reforms may be a step in the right direction to eradicate corruption, tax evasion and reduce extreme poverty in emerging markets, a disclosure regime is not of itself a cure,” Rachel Speight, a partner at law firm Mayer Brown, wrote in an email to Reuters.

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MiedziCopper loses concessions in Poland – by Northern Miner (August 13, 2014)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry. 

Ross Beaty isn’t the type of businessman who normally airs his grievances in public. But when two of his copper concessions in Poland were apparently revoked by the Polish government, he felt he had no choice.

On July 30 Poland’s Minister of the Environment revoked two concessions awarded to MiedziCopper, a private copper exploration company in which Beaty’s Lumina Capital investment group has a large stake. The ministry also cancelled a third concession that it awarded to MiedziCopper’s rival KGHM Polska Miedzi (WSE: KGH), Poland’s largest copper producer and a company in which the government owns 63.6 million shares or about 31.79% of the share capital.

Beaty alleges that KGHM brought political pressure to bear on the Ministry of Environment to reverse its decision awarding two of the concessions to his group and MiedziCopper is now suspending all new investment in Poland.

MiedziCopper has invested about $35 million on exploration in the country since 2010 and had planned to spend a further $65 million over the next few years. The company continues to hold 11 concessions in the country on which it has carried out extensive geochemical, geophysical, geological and drilling activities.

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Lesson for BC: Mining Politics Can Be Terribly Corrosive – by Kristian Secher (The Tyee.ca – August 11, 2014)

http://thetyee.ca/

Consider Greece, where mistrust of Canadian mine safety helped spark massive revolt.

Friday’s blockade of the Imperial Metals’ Red Chris Mine site by members of the Tahltan Nation brings to mind scenes from another place, where plummeting faith in government safeguards after a rush to profit from resource extraction has fueled not just isolated protests but a full-scale political revolt tinged with violence.

That place is Greece, where two years ago I visited to report on the situation. My destination was the northernmost region of Greece, Halkidiki, the birthplace of Aristotle, embroiled in conflict after Vancouver-based Eldorado Gold scooped up most of the local mining industry and unveiled their billion dollar development plan in the austerity stricken region of Europe’s poorest country.

The gold grab made the empty state coffers in Athens rattle with joy but the people of Halkidiki were not as pleased. They had not forgotten the mess left behind by the previous Canadian owner TVX, (later Kinross Gold), nine years earlier and the prospect of renewed mining operations was not encouraging to the inhabitants of the tourism dependent region known for its pristine forests and sandy beaches.

TVX abandoned their properties in 2002 when Greece’s state council ruled that the potential risks of redeveloping the mines would exceed any benefits from the project. In 2003 ownership of the mining area was transferred to the state for a net sum of 11 million euros (C$16 million).

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Hambro’s Dream of Russian Gold Runs Into Mountain of Debt – by Thomas Biesheuvel (Bloomberg News – August 8, 2014)

http://www.bloomberg.com/

Peter Hambro dared to go where few others would, in search of gold in 1990s Russia. Investors who followed him reaped tenfold returns over eight years through 2010.

A repeat of that rich success now looks far away as Petropavlovsk Plc (POG), the company Hambro co-founded, confronts a mountain of debt.

The company was on the cusp of a place among the blue-ribbon names on London’s stock exchange until it borrowed more than $1 billion to expand production at its mines in far-eastern Siberia, six time zones from Moscow. The strategy unraveled when a dozen years of gains for bullion prices ended abruptly in 2013.

“The worst position you ever want to be in a falling commodity environment is having a half-built mine,” said Cailey Barker, an analyst at Numis Securities Ltd. in London. “It’s very hard to turn the Titanic around. It may be difficult to come back from here.”

In 2010, Petropavlovsk’s market value exceeded $3 billion and it was mentioned as a future member of the benchmark FTSE 100 Index. That’s shrunk to $111 million, dwarfed by about $819 million owed to banks that the company says now effectively control cash flow from its mines.

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Zimbabwe Sees $1.6 Billion Platinum Pact With Russia – by Godfrey Marawanyika (Bloomberg News – August 04, 2014)

http://www.businessweek.com/

A group of Russian partners will next month sign an agreement with the Zimbabwean government to develop a mine on a platinum deposit requiring total investment of about $1.6 billion, the African country’s mines minister said.

OOO VI Holding and state corporations Rostec and Vnesheconombank plan to confirm their participation in the Darwendale project at an event in Harare, the capital, Walter Chidakwa said in an interview.

“The project will naturally involve mining, putting up concentrators to concentrate the ore and they will then put up a smelter, a PGM smelter,” Chidakwa said yesterday.

Darwendale will be developed in phases, the first of which will be the construction of a mine, without a smelter, at a cost of $400 million to $500 million, the minister said. Mining would start next year, initially as an open-pit operation for two-to-three years. Chidakwa and Finance Minister Patrick Chinamasa were in Russia last week for a visit that ended Aug. 2.

“The visit was mainly to go and see members of the consortium, including the bank, and we had very useful discussions, very successful discussions,” Chidakwa said.

Russian Natural Resources Minister Denis Khramov last week met Chidakwa and Chinamasa to discuss possible cooperation in Zimbabwean mining projects, the Moscow-based ministry said in a statement today.

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KGHM Starts Copper Output in Chile After Record Takeover – by Maciej Martewicz (Bloomberg News – July 31, 2014)

http://www.businessweek.com/

KGHM Polska Miedz SA, the copper producer with the largest European output, began production in its Chilean mine, acquired two years ago as part of a record Polish takeover transaction abroad.

The Sierra Gorda mine will operate at full capacity at the start of 2015 and will produce 120,000 tons of copper a year, the Lubin, Poland-based company said in a regulatory statement today. KGHM will also produce 50 million pounds of molybdenum, used to toughen stainless steel, and 60,000 ounces of gold annually in the mine.

KGHM acquired the Sierra Gorda project as part of its $2.9 billion takeover of Canada’s Quadra FNX Mining Ltd. in 2012. The state-controlled company expands outside Poland as it seeks to cut production costs and raise output.

“The start of Sierra Gorda production will help us cut unit cost in the group,” Chief Financial Officer Jaroslaw Romanowski said in an e-mailed statement today. “This is mainly due to additional products from the site, like gold as well as molybdenum, whose price is currently one fourth above what we initially estimated.”

KGHM produced 666,000 tons of copper in its Polish and northern American sites last year at an average cost of $1.85 a pound, which includes $0.53-a-pound impact of Polish copper taxes imposed in 2012. The production cost at Sierra Gorda is estimated at $1.13 a pound, according to its presentation.

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The reindeer herders battling an iron ore mine in Sweden – by Stuart Hughes (BBC News – July 30, 2014)

http://www.bbc.com/news/

Northern Sweden – There are eight seasons in the Sami calendar. Each coincides with a stage in the life of their reindeer.

In the mountains near the border between Sweden and Norway, at the height of the summer season the Sami call Giessie, the reindeer herders mark the newborn calves that are just beginning to roam this land.

For a few short months, the sun never dips below the horizon. It is a way of life that the Sami, Europe’s only indigenous people, have followed for thousands of years. It is now one they say faces an uncertain future. A British company, Beowulf Mining, has been carrying out test drilling for iron ore in the area.

It says analysis of samples from its proposed Kallak iron ore mine are encouraging – the ore extracted from deep beneath the ground appears to be of a high quality.

Kallak is one of the largest known iron ore deposits in Scandinavia that has yet to be exploited. Beowulf is waiting for the Swedish authorities to decide whether to approve its application for a 25-year mining concession.

Eventually, the company hopes to extract up to 10m tonnes of iron ore a year at the mine.

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An embargo on Russia’s Norilsk Nickel would hurt West -French rival – by Gus Trompiz (Reuters India – July 30, 2014)

http://in.reuters.com/

PARIS, July 30 (Reuters) – An embargo against Norilsk Nickel as part of Western sanctions against Russia would hurt nickel users in Europe and the United States rather than Norilsk itself, the head of French mining group Eramet said.

Norilsk, the world’s largest producer of the stainless steel ingredient, has not been targeted so far by western measures aimed at punishing Russia for its support of pro-Moscow rebels in neighbouring Ukraine.

“Nobody expects sanctions against Russia and Norilsk would affect Norilsk’s production since it would sell to China if it couldn’t sell elsewhere,” Eramet Chief Executive Patrick Buffet said during a presentation of Eramet’s first-half results on Wednesday.

“It’s unlikely an embargo by Europe would materialise, because it would be shooting itself in the foot, since Norilsk could ship its production to Asia, creating a shortage in Europe and oversupply in Asia. The consequence would be a jump in physical premiums in Europe and a discount in Asia,” he added.

The most likely scenario for western restrictions against Norilsk would be a U.S.-only embargo, which would push up nickel premiums there but not hit the world market, Buffet added. Nickel prices have already rallied this year after a ban by Indonesia on nickel ore exports curbed supply to China.

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U.K. opens more than half of country to drilling, goes ‘all out for shale’ – by Eric Reguly (Globe and Mail – July 29, 2014)

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.

David Cameron’s long and risky campaign to unleash a shale gas revolution in Britain finally met with success on Monday, when government ministers opened up more than half the country to drilling.

The prime minister and his top deputies had been promoting shale gas for years, declaring that his government is “going all out for shale” as a way to reverse the country’s dependency on imported fuels, create jobs and bring down, or a least slow the relentless increase, of energy prices.

Lately, the crisis in Ukraine added a geo-political boost to their effort. Russia is the top supplier of gas to Europe and much of that gas travels through Ukrainian pipelines.

But the drilling approval has come with severe restrictions that deprived Mr. Cameron of total victory. Drilling in national parks and “areas of outstanding natural beauty” will only be allowed in “exceptional circumstances,” government guidelines dictated. Those circumstances were not immediately clear.

A spokeswoman for the department of communities and local government, publisher of the new drilling guidelines, said “defining exceptional circumstances is not an easy thing to do. It all depends on local communities and local conditions.”

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UPDATE 1-UK watchdog upholds $770,000 fine on “king of mining” banker – by Kirstin Ridley (Reuters India – July 22, 2014)

http://in.reuters.com/

LONDON, July 22 (Reuters) – Britain’s financial watchdog has upheld a 450,000 pound ($768,000) fine on former JPMorgan banker Ian Hannam – a prominent dealmaker once dubbed the “king of mining” – for market abuse after a protracted court battle.

In an effort to clear his name, Hannam had fought to overturn the Financial Conduct Authority’s (FCA) initial findings and fine of 2012. But in May, he lost his appeal in a landmark case that fuelled a high-level debate about how confidential information should be treated during deals.

The former soldier, who became one of London’s most prominent investment bankers renowned for his bulging contacts book and knack for a new idea, was awaiting news about whether the original FCA fine would be upheld – one of the largest levied against an individual in Britain.

Imposing the penalty, the head of the FCA’s enforcement and financial crime division Tracey McDermott urged all financial professionals to pay close attention to a judgment that did not question Hannam’s integrity, but sought to bring clarity to the grey area of what constitutes acceptable business conduct.

“It (the Tribunal judgment) should leave market participants in no doubt that casual and uncontrolled distribution of inside information is not acceptable in today’s markets,” she said on Tuesday.

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