International Media Resource Articles – Page 677

Australia treasurer would block a Glencore-Rio Tinto merger – by Sonali Paul (Reuters U.S. – April 8, 2015)

April 8, 2015

http://www.reuters.com/

(Reuters) – Australia’s treasurer has told business representatives he would not allow Glencore Plc to merge with Rio Tinto due to concerns about losing tax revenue, a person familiar with his comments said on Wednesday.

Treasurer Joe Hockey said based on the tax implications he had seen from the treasury, he would not allow a Glencore takeover of Rio, Australia’s second biggest miner and one of its biggest taxpayers, the person said. He declined to be identified due to the sensitivity of the issue.

Treasurer Joe Hockey’s office declined to confirm the comments. Four people said Hockey had spoken at a private meeting on March 30 organized by the Business Council of Australia and including members of the Minerals Council of Australia, but three would not give details.

Glencore approached Rio Tinto about a merger last July that would have created a $160 billion mining and commodities trading giant. Rio revealed in October it had rebuffed the approach, but under UK takeover rules, Glencore is now free to make a new bid, following a six-month breather.

“Any takeover would have to go through the normal processes at FIRB (Foreign Investment Review Board),” a spokesman for Hockey said.

Lower coking coal contract price shows downward pressure – by Clyde Russell (Reuters U.S. – April 8, 2015)

April 8, 2015

http://www.reuters.com/

LAUNCESTON, AUSTRALIA – (Reuters) – – Coking coal prices are yet to show signs of bottoming with bearish signals from both contract talks between Australian producers and Japanese buyers as well as Chinese demand.

Hard coking coal for second quarter delivery was settled at $109.50 a tonne free-on-board between producer BHP Billiton and buyer Nippon Steel, Morgan Stanley said in a research noted on April 6.

This was down 6 percent from the previous quarter’s contract and represented a 7 percent premium to the spot price at the time the deal was concluded. The premium to the spot price is in line with prior settlements, with Japanese buyers willing to pay above spot in order to guarantee supplies.

Coking coal, also known as metallurgical coal, is used in steel-making and is traditionally a higher value product than thermal coal used in power generation because it has a higher energy value and fewer impurities.

However, coking coal prices are now down two-thirds from their peak around $300 a tonne in 2011, while benchmark thermal coal prices at Australia’s Newcastle Port have dropped about 55 percent over the same period.

Gina Rinehart’s Roy Hill mine not relying on China – by David Stringer (Sydney Morning Herald – April 9, 2015)

April 8, 2015

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

Asia-Pacific’s richest woman is gearing up to start shipments from her $10 billion iron ore project in Australia. Even with prices at 10-year lows, she’s displaying no lack of confidence in the mine’s success.

Billionaire Gina Rinehart’s ace? Her mine isn’t relying solely on sales to China, the biggest iron ore buyer. This limits the project’s exposure to a market where steel demand is judged to be peaking. Instead, she’s locked in supply contracts with three of the largest iron ore consuming Asian nations outside of China.

“They feel very confident. Roy Hill has a massive advantage in that it has diversified its markets,” Philip Kirchlechner, Perth-based director of Iron Ore Research Pty. said by phone. “They have buyers from three of the other major iron ore importing markets.”

Roy Hill, Australia’s largest single iron ore mine, is on track to commence exports from September, adding 55 million tons a year of output to a market already saturated by a growing surplus. It’s even accelerating the mine’s schedule, seeking to hit its planned capacity at the fastest pace of any project built in Western Australia’s iron-rich Pilbara region.

Norilsk Sees Africa Cutting Platinum Output on Spending – by Yuliya Fedorinova (Bloomberg News – April 7, 2015)

April 8, 2015

http://www.bloomberg.com/

OAO GMK Norilsk Nickel sees South African output of platinum-group metals declining in the next several years as the Russian mining company leads investors in creating a $2 billion palladium fund.

“Investments in a vast amount of projects in South Africa were delayed and it’s hard to expect an increase in output in the region,” Anton Berlin, head of strategic marketing at Norilsk, said in an interview on Monday. “Most likely, it will even fall.”

This year, South African output will recover to match its 2013 level of 4.4 million ounces of platinum and 2.4 million ounces of palladium following a sharp decline caused by five months of strikes in 2014, he said.

Production of platinum and palladium, which are mined from the same deposits and used in automobile catalytic converters, has been lower than demand since at least 2012. Opaque stockpiles held by hedge funds have contributed to price volatility, according to Norilsk.

More than 1 million ounces of potential output were lost during strikes in South Africa that ended in June, according to research by Johnson Matthey Plc. The platinum market had a deficit of almost 1 million ounces last year, which should narrow to 500,000 ounces this year, according to Norilsk’s estimates.

Steel ‘dumping’ blamed for Iron Range layoffs – Jon Collins (Minnesota Public Radio – April 1, 2015)

April 8, 2015

http://www.mprnews.org/

Politicians and mining company officials are blaming unfair foreign competition for more than a thousand recent layoffs in the state’s iron ore industry.

U.S. Steel announced Tuesday that it would idle part of its taconite plant in Mountain Iron, Minn., starting on June 1. Earlier last month U.S. Steel announced plans to idle a plant in Keewatin, which will result in more than 400 layoffs. Magnetation also recently announced that it was closing an Iron Range plant and laying off more than 40 people.

The closing of plants and mills comes from a glut of steel supplies and the steady decline of prices over the last few months.

Following news of the most recent plant closing, Rep. Jason Metsa, DFL-Virginia, blamed the low prices on “foreign countries for dumping state-sibsidized steel on American shores.” U.S. Steel officials have also pointed to illegal trade practices by Chinese companies.

Dumping is a frowned upon international trade practice, said Tony Barrett, a professor of economics at the College of St. Scholastica. It’s when a company sells steel abroad for cheaper than the cost to produce it because they don’t need to make the same level of profits as American steel companies.

Barrick open to sell-offs and joint ventures in debt drive – by James Wilson (Financial Times – April 5, 2015)

April 8, 2015

http://www.ft.com/intl/companies/mining

Barrick Gold is open to a wide range of asset sales and joint ventures as it tries to cut debt by $3bn and rebuild its reputation with investors, its chairman has told the Financial Times.

In his first interview since taking over as chairman almost 12 months ago, John Thornton, pictured below, said he could imagine Barrick ceding operational control of some assets — for example to Mick Davis, the former Xstrata chief executive who plans to re-enter the mining sector at the head of a private equity vehicle.

Barrick would also bring long-term investors into a group of its mines as minority partners, Mr Thornton said.

“There is a lot of incoming inquiries . . . of all kinds of stripes and sizes. We feel confident about hitting the $3bn number,” he said.

Mr Thornton’s comments show the range of options being considered to turn round Barrick, still the world’s largest gold miner by volume but one of the worst-performing large miners of the past two years. Barrick, which has a $13bn market capitalisation, has been hit by steep falls in the price of the precious metal and has suffered billions of dollars of writedowns since 2012 on poor acquisitions and stalled projects.

Tax office pursues BHP Billiton and Rio Tinto over Singapore tax shelter – by Neil Chenoweth (Australian Financial Review – April 6, 2015)

April 7, 2015

http://www.afr.com/

Mining giants BHP Billiton and Rio Tinto are being pursued by the Australian Taxation Office for channelling billions of dollars in profits from iron ore sales through companies that pay almost no tax in Singapore.

While BHP Billiton and Rio TInto are Australia’s largest taxpayers, The Australian Financial Review has obtained documents that show the two mining companies report $2.6 billion a year in profits in their Singapore marketing hubs where they pay tax rates as low as 2.5 per cent.

The arrangements save the two companies more than $750 million a year in Australian tax and the ATO regards it as tax avoidance under the transfer pricing rules. The ATO is pursuing multibillion-dollar claims against each company, says a source with direct knowledge of the disputes.

The exact amounts of the potential tax bills are unclear and both companies have fought the ATO for years and argue their Singapore operations were not set up to reduce tax.

With scores of Australian companies rushing to open their own Singapore operations, the BHP Billiton and Rio Tinto cases shape as key precedents for the ATO, which has been warning of compliance problems with marketing hubs since 2010.

As iron ore slides, China buyers inflict more pain on small miners – by Manolo Serapio Jr (Reuters U.S. – April 7, 2015)

April 7, 2015

http://www.reuters.com/

SINGAPORE, April 7 (Reuters) – Chinese steelmakers are unwittingly helping the world’s biggest iron ore miners tighten their grip on global production by demanding to pay for shipments of the raw material based closely on depressed spot prices.

The three largest and most profitable iron ore producers – Australia’s Rio Tinto and BHP Billiton, along with Brazil’s Vale – have been happy to sell at or near spot despite plunging iron ore prices, while their smaller rivals struggle to make money.

Smaller producers, including some higher cost Australian miners, want to continue with deals based on longer-term averages of prices, looking to hedge against further falls in the market.

But buyers in the world’s largest consumer of iron ore are having none of it, with many Chinese mills demanding cargoes priced as close as possible to their delivery date.

“Pricing moves around with the steel mills. It used to be all based on a monthly average. Now you find the steel mills and traders perhaps trying to anticipate low points and suggesting quotation periods of maybe two weeks,” said Morgan Ball, chief executive of Australian iron ore miner BC Iron Ltd.

As beneficiation debate rages, experts insist focus must be on niche sectors, upstream manufacturing – by Jade Davenport (MiningWeekly.com – April 2, 2015)

April 7, 2015

http://www.miningweekly.com/page/americas-home

JOHANNESBURG (miningweekly.com) – The contentious debate surrounding South Africa’s beneficiation strategy and how best it should be undertaken has been placed under the glare of the spotlight again and has served to intensify tensions between government and the mining industry over continuing mineral policy uncertainty.

The debate flared up again in February follow- ing Mineral Resources Minister Ngoako Ramathlhodi’s announcement at the Mining Indaba that government intended to investigate the possibility of imposing developmental pricing on key strategic minerals and compelling producers of precious metals to sell at reduced prices.

Developmental pricing would be lower than the already-agreed-to “mine gate price”, essentially an export parity price less transport, which was a hard-won concession on the part of mining companies during discussions on the drafting of the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill in 2013.

Government intends to use developmental pricing to enforce the beneficiation of the country’s still extensive mineral resource endowment, a mechanism it believes will stimulate the South African economy by diversifying sectors, enhancing the quantity and quality of exports, and creating decent employment.

Local View: A single mining job pays a lifetime of dividends – by Kirk D. Haldorson (Duluth News Tribune – April 2, 2015)

April 7, 2015

http://www.duluthnewstribune.com/

I grew up one of six children here in northern Minnesota, and my father was employed with Reserve Mining in Silver Bay. Growing up in a mining town, I never really thought of mining as anything but a normal, regular industry; and quite possibly I took for granted that it would always be there.

We grew up fishing, camping and swimming in the Boundary Waters Canoe Area Wilderness. We grew up planting trees for the U.S. Forest Service to help fund our college. We would plant as many as 200,000 trees a year and spend endless days enjoying the beautiful forests.

Saying all this, I never would support something such as PolyMet Mining if I thought it would harm our environment. I can honestly say there is no one who loves nature and the wilderness more than me. I feel blessed to see some of the trees I planted so many years ago now being harvested for this generation.

We need to either grow it or mine it if northern Minnesota is going to provide for future generations. My parents raised six children, and all six went on to some sort of higher education — all because of one mining job.

All six children went on to get married, and all six children and their spouses currently live, work and pay state income taxes to Minnesota — all due to one mining job.

India’s $18 Billion Mistake? – by Dhiraj Nayyar (Bloomberg News – April 1, 2015)

April 7, 2015

http://www.bloombergview.com/

A decade ago, Korean steelmaker Posco’s proposed $12 billion investment in the eastern Indian state of Odisha (then still known as Orissa) was hailed as the country’s biggest-ever foreign investment commitment, as well as a vote of confidence in India as a potential manufacturing power. Ten years later, Posco’s reported pullout is a PR debacle and a blow to Prime Minister Narendra Modi’s hopes to convince companies to “make in India.”

Worse, it’s the government’s success rather than its policy failures that appear to have driven out the steelmaker. On the heels of a lucrative auction of telecom spectrum, which garnered bids totaling a record $18 billion last week, the government is set to sell off iron ore and the rights to limestone mines by auction as well. Under the old regime, the state would have allocated these kinds of resources to industry at a nominal price. Now that the government is looking to maximize profits by putting them up for bids instead, Posco has apparently decided that the additional costs make the Odisha project unappealing.

The political logic of auctions is obvious. Under the previous Congress-led government, the opaque process of allocating resources to private companies quickly led to accusations of cronyism and corruption. Anger over the 2G spectrum scandal of 2008 and the coal scandal of 2009 played a huge role in Modi’s landslide victory last year.

Unfortunately, criticism has focused on the idea that the government gave away India’s resources too cheaply.

Vale sets aside $185m to finance expansion – by Tama Salim (Jakarta Post – April 1 2015)

April 1, 2015

http://www.thejakartapost.com/

Publicly listed nickel mine operator PT Vale Indonesia (INCO) will allocate up to US$185 million in capital expenditures (capex) this year to finance expansion projects, including the construction of new refining facilities. The company’s chief financial officer, Febriany Eddy, said on Tuesday the allocated sum was significantly higher than last year’s capital spending realization of $76.8 million.

She said that Vale would be gearing up for the second phase of its ore processing and refining facility in Sorowako, South Sulawesi, as well as operations in Bahodopi, Central Sulawesi. “Phase 1 is currently being concluded, so we’re starting to plan out the next phase while we await the licenses for expansion,” Febriany told reporters in South Jakarta, on Tuesday.

“If everything goes according to plan, we can realize all our capital spending and put our projects into motion.” Vale’s capital expenditure for 2014 was 51 percent lower than the $163 million target, because of delays in the issuance of required permits and the decision to further assess the rebuilding of an electric furnace.

On the other hand, stakeholder returns in 2014 were high as the firm reached a dividend payout ratio of 58 percent, equal to $50.2 million. Febriany argued that the high payout rate was in line with Vale’s previous actions, citing average dividend payments of more than 50 percent in the last five years.

Deutsche Bank cuts [BHP Billiton] South32 valuation – by Amanda Saunders (Sydney Morning Herald – April 2, 2015)

April 1, 2015

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

South32, the company being created in the demerger of BHP Billiton, will be in a “perfect position” to pursue acquisitions of up to $US3 billion ($3.9 billion) in Australian coal, and offshore in base metals and manganese – but its stock is likely to trade at just about $2 a share, well short of market expectations, according to Deutsche Bank.

Deutsche mining analyst Paul Young cut his valuation of South32 from $US13 billion to $US11.2 billion after reviewing the more than 1500 pages of shareholder documents on the spin-off released by BHP last month. His valuation for the spin-off falls to $US7 billion when based on current spot prices for commodities.

While the new company’s growth and savings opportunities will be limited, parent BHP with its strong balance sheet has put it “in the perfect position to pursue [value enhancing] acquisitions up to $US3 billion”, Mr Young said.

Also playing in its favour is the fact that the largest miners are selling non-core assets following the fall in commodities prices, and have all but ruled out acquisitions.

South32 is expected to first eye greenfield mining assets, rather than entire companies, according to the analyst report. High up on its list would be Anglo American’s 40 per cent stake, valued at $US1.4 billion, in the maganese group Samancor.

[South Africa] Mining charter ‘silent’ on crucial ownership issue – by Liesl Peyper (Miningmx – April 1, 2015)

April 1, 2015

http://www.miningmx.com/

[miningmx.com] – SOUTH Africa mines minister, Ngoako Ramatlhodi, made the best of a very bad situation when he said yesterday he would allow the High Court to rule on the ‘once-empowered, always-empowered’ principle in the Mining Charter.

“It was a good PR exercise on behalf of the Department of Mineral Resources (DMR),” said Nicola Jackson and Eric van den Bergh, both partners at law firm Fasken Martineau’s global mining group.

“His announcement sends the right message to current (and future) industry stakeholders that the DMR values the participation of the industry players, and that it’s cognisant of the ramifications of the ‘once-empowered, always-empowered’ principle not being applied.”

Jackson and Van den Berg said that despite the practical issues that lie ahead, it was a good call for Ramatlhodi to look to the courts for clarification on the ‘once-empowered, always-empowered’ matter. “Any other route would only exacerbate the trust issues between government and the sector.”

However, whether Ramatlhodi and his legal team would successfully argue against the contentious principle in court remains to be seen. “It’s difficult [to predict the outcome], because the charter is a very nefarious, nebulous document,” said Chris Stevens, a director at Werksmans Attorneys.

Mining stocks hit as iron ore price slump continues – by Sarah-Jane Tasker and Matt Chambers (The Australian – April 1, 2015)

April 1, 2015

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

Australia’s iron ore miners continue to feel the pain of the brutal slump in the price of the commodity, with falls on the local market in early trading.

As the price of iron ore sits on the cusp of falling below $US50 a tonne, Fortescue Metals Group lost almost 2 per cent of its value after the market opened to sit at $1.92, while Atlas Iron’s stock was off 3.85 per cent at 12.5c.

BHP Billiton, the world’s largest miner, was 1.7 per cent lower this morning at $30.50, while its main rival, Rio Tinto, was off 1.28 per cent at $56.60.

Overnight, Chinese iron ore prices monitored by The Steel Index fell $US1.90, or 3.6 per cent, to $US51 a tonne, representing a record low since the index starting monitoring prices.

When current freight prices of about $US4.50 a tonne are removed, it is the lowest price Australian iron ore has been sold at since March 2006, when prices were still negotiated annually. The price could face a fresh round of negative news today, with China’s official manufacturing index data due.