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Russian Miners With Billions of Dollars Weigh Dividend Increase – by Yuliya Fedorinova (Bloomberg News – March 31, 2015)

http://www.bloomberg.com/

(Bloomberg) — Russian metals exporters that are piling up cash after the ruble collapse are sharing the wealth with investors as the economy tilts into recession and global demand slows.

The weaker ruble has benefited Russia’s resource companies, which have costs in the national currency and revenues in dollars or euros. OAO Novolipetsk Steel, OAO GMK Norilsk Nickel and four other of Russia’s largest metals and mining companies together held $8.3 billion in cash and equivalents at the end of December, according to data compiled by Bloomberg. They had about $5.7 billion a year earlier.

Companies are using the windfall to reward shareholders, switching focus from debt repayments or investments. Prices for major materials have softened as China’s economic growth slowed last year to the weakest since 1990. Russia is sliding into its first recession in six years, as U.S. and European sanctions add to slowing consumer demand and a slump in oil prices.

“It makes no sense to start large investments now, and it’s better to pay excessive cash to the owners,” Kirill Chuyko, head of equity research at BCS Financial Group, said by phone on March 31. “The cost of capital for Russian companies increased, which also makes companies rethink their dividend policies.”

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South Africa seeks court decision on mining black ownership rule – by Zandi Shabalala (Reuters U.K. – March 31, 2015)

http://uk.reuters.com/

PRETORIA – (Reuters) – South Africa’s mines ministry and the industry have agreed to ask the courts to help them resolve a dispute over a black ownership target of 26 percent for mining companies, the two sides said on Tuesday.

Mines minister Ngoako Ramatlhodi said there was “no consensus” on the issue as he gave details from an assessment of how the industry has complied with the targets set out for it in a state charter aimed at redressing the imbalances of white apartheid rule which ended two decades ago.

The main sticking point is the industry contention that once a company is 26 percent black-owned, it has effectively complied, even if some of the black shareholders then sell out. The government says companies must retain the 26 percent ratio as an absolute minimum.

Failure to meet the targets can result in mining permits or rights being revoked in an industry which is an increasingly hard sell to foreign investors in the face of often violent labour unrest, depressed prices and soaring wage and power costs.

South Africa’s Chamber of Mines said it had agreed with the ministry to approach the courts on the ownership target issue “in order to break the impasse, and to avert any confusion that may be damaging to investor perceptions”.

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Illegal mining in Latin America: Minecraft (The Economist – September 16, 2014)

http://www.economist.com/

BONANZA, a tropical town in north-eastern Nicaragua, has attracted gold miners since 1880. Still true to its name, it yields over a thousand kilos of the metal every year. But it is a dangerous place. Last month heavy rain triggered a landslide, trapping 29 miners inside. Seven still remained unaccounted for by the time rescue workers abandoned the search.

The miners who died in Bonanza were informal workers, working on the basis that they sold any gold they found to Hemco, a Colombian-owned company which formally operates the concession. Informal mining is not necessarily illegal, but whether operating on the fringes of, or far outside, the law, workers run great risks. Twelve wildcat miners died in Colombia in May after a landslide at an illegal gold mine. In July eight died in Honduras.

Gold is not the only commodity to lure unlicensed prospectors but it has a particular appeal. Its price more than doubled between 2008 and 2011 (it has since come down again). In Madre de Dios, a jungle region in south-east Peru where 97% of local gold production in 2011 came from illegal mining, miners can earn $75 a day, up to five times the amount they might expect as a farm labourer. In Colombia nine out of ten gold mines are unlicensed. Low start-up costs mean miners can work in very small groups—although organised criminal groups also operate illegal mines at much bigger scale. Mercury, which is typically used to separate gold from ore, is cheap and readily available.

It is not only those underground who face danger. In Colombia, armed groups have muscled their way into the mining business, using violence to settle their disputes.

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Tax breakthrough at Rio Tinto’s Mongolia copper mine -source – by Terrence Edwards (Reuters U.S. – March 31, 2015)

http://www.reuters.com/

ULAN BATOR – (Reuters) – Rio Tinto and Mongolia have made a breakthrough in a tax dispute that has been among issues stalling development of the $6.5 billion Oyu Tolgoi copper mine, according to an official familiar with the government’s position.

Disputes over costs and taxes have delayed an expansion of the mine that would extend its life beyond an estimated 15 years.

“Misunderstandings and issues surrounding the tax climates have been resolved,” the official told Reuters, without specifying the terms of an agreement or what other issues needed to be resolved for the next underground phase of the project to go ahead.

“The parties are working towards agreeing on the commercial terms of the underground project,” added the official, who asked not to be named because no announcement had been made yet. A Rio Tinto spokesman and a spokesman for Mongolia’s mining ministry declined to comment.

A spokesman for Rio’s Turquoise Hill Resources, which owns 66 percent of the mine, also declined to comment and pointed to a statement last week that said Oyu Tolgoi was appealing a ruling by Mongolia’s Tax Dispute Resolution Council to the country’s Administrative Appellate Court.

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India: At the coalface – by James Crabtree (Financial Times – March 31, 2015)

http://www.ft.com/home/us

Failure to boost energy supplies will hurt Modi’s goal of turning India into a manufacturing force

A large, colourfully painted sign hangs above the entrance to the depths of Jhanjra, the largest underground mine in West Bengal’s Raniganj coal belt. The left side shows Indian mining as it once was, with roughly drawn cartoon figures wielding basic shovels and carrying woven baskets of coal, balanced on their heads. The right paints a more modern scene, featuring large yellow mining machines, operated by skilled technicians.

Take the cage-like lift down hundreds of metres into the darkness below, and walk for nearly an hour through narrow tunnels in stifling heat, and that second image suddenly becomes real as a cutting vehicle with fierce rotating metal teeth, known as a continuous miner and built by US manufacturer Caterpillar, rips tonnes of black rock from the coal face.

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Appalachia Miners Wiped Out by Coal Glut That They Can’t Reverse – by Mario Parker (Bloomberg News – March 30, 2015)

http://www.bloomberg.com/

(Bloomberg) — Douglas Blackburn has been crawling in and out of the coal mines of Central Appalachia since he was a boy accompanying his father and grandfather some 50 years ago.

The only time that Blackburn, now a coal industry consultant, remembers things being this bad was in the 1990s. Back then, he estimates, almost 40 percent of the region’s mines went bankrupt.

“It’s a similar situation,” said Blackburn, who owns Blackacre LLC, a Richmond, Virginia-based consulting firm. Now, like then, the principal problem is sinking coal prices. They’ve dropped 33 percent over the past four years to levels that have made most mining companies across the Appalachia mountain region unprofitable.

To make matters worse, there’s little chance of a quick rebound in prices. That’s because idling a mine to cut output and stem losses isn’t an option for many companies. The cost of doing so — even on a temporary basis — has become so prohibitive that it can put a miner out of business fast, Blackburn and other industry analysts say.

So companies keep pulling coal out of the ground, opting to take a small, steady loss rather than one big writedown, in the hope that prices will bounce back.

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De Beers toughens rules for diamond customers – by James Wilson and Avantika Chilkoti (Financial Times – March 29, 2015)

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

De Beers is making the biggest reforms in more than a decade to the way it sells most of its diamonds, amid concerns over the financial stability and transparency of some of its best customers.

The diamond group, which sells $6bn of unpolished diamonds annually and is the world’s largest supplier by value, is introducing tougher rules for companies wanting to join its coveted group of customers known as “sightholders”.

Under the new rules, expected to be announced this week, sightholders will have to present their accounts according to international standards. De Beers will also insist customers hold a specified proportion of equity in their businesses, making them less reliant on bank borrowing.

De Beers sells about 90 per cent of its mined output to sightholders, which play a vital role in the diamond trade, cutting and polishing rough stones and channelling them into global jewellery markets.

Only about 80 companies — most from traditional diamond trading and polishing centres such as Antwerp, Israel or India — are approved by De Beers to become sightholders and take part in regular sales, or “sights”, each year where they buy rough stones.

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Former Xstrata CEO under pressure to make new mining deals – by Silvia Antonioli and Freya Berry (Reuters India – March 31, 2015)

http://in.reuters.com/

LONDON, March 31 (Reuters) – More than a year after he launched his private fund, former Xstrata boss Mick Davis is coming under pressure to build a new mining empire with the $6 billion in capital he has raised.

The renowned dealmaker set up X2 Resources 18 months ago after Glencore’s $46 billion takeover of Xstrata, when he was passed over for the top job in favour of his Glencore counterpart, Ivan Glasenberg.

Davis has since approached most large mining companies looking to buy a variety of assets, banking and industry sources said, but nobody has agreed to sell given a feeling that current prices are at rock bottom and may turn up again before long.

“Mick’s team has been looking at so many assets closely. But nobody wanted to sell to them. Vale didn’t want to sell, Rio didn’t want to sell, BHP didn’t want to sell,” said an industry source close to Davis. With his portfolio still empty, some sources expressed concern that some investors’ patience with Davis may run thin.

A banking source said: “Not all those investors are stuck on mining. So they say: if we can’t spend on this, we’ll go buy a bank or a supermarket.”

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ENEMY OF MINE ENEMY: Mining companies and lobbyists are waging the real war on coal – by Jake Flanagin (Quartz – March 30, 2015)

http://qz.com/

It is indisputably better to be a coal miner today, in 2015, than in 1969—the year in which Congress passed the Federal Coal Mine Health and Safety Act.

Generally known in simpler terms as “the Coal Act,” the law precipitated the establishment of a number of crucial regulatory bodies, including the Mining Safety and Health Administration (MSHA)—a sort of Occupational Safety and Health Administration (OSHA), tailor-made for underground and surface-mining operations.

The act itself, in addition to creating this regulatory framework, laid down a set of nationwide health and safety standards for US miners, who, prior to, suffered some of the highest work-related mortality rates in the country.

The passage of the Coal Act, in conjunction with the establishment of MSHA, is generally credited with the precipitous decline in prevalence of coal worker’s pneumoconiosis (CWP, or “black lung”) between 1970 and 1995. This is an important distinction, because while life for the average coal miner today may be measurably better than it was 1969, it is not necessarily so when compared to industry-wide conditions in 1995.

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Southern Copper Cancels Peru Project Over “Anti-Mining Terrorism” (Latin American Herald Tribune – March 30, 2015)

http://www.laht.com/index.asp

LIMA – Southern Copper Corp. has decided to cancel its Tia Maria copper project in southern Peru because of “anti-mining terrorism” in the area.

“After evaluating the complete politicization of the (Tambo) Valley and the lack of decisiveness by the relevant authorities … I’m here to announce the cancelation of the Tia Maria project and the total withdrawal of our investment from the Arequipa region,” Southern Copper’s spokesman in Peru, Julio Morriberon, told RPP Noticias radio.

The announcement will be made official by top management via the “relevant procedures before the relevant agencies,” he said. “We’ve done our best as a company and as people to carry out a project that was going to bring great benefits for Tambo and for Peru,” Morriberon said.

Southern Copper, a unit of Mexico City-based Grupo Mexico, had been planning to invest some $1.2 billion in the construction of Tia Maria, which has an estimated mine life of 18 years and had been projected to produce 120,000 metric tons of copper cathodes annually from the start of operations in 2016.

The project had been halted for two years after peasant protests in 2011 in the small town of Islay left three dead and 44 wounded, and as a result the Peruvian government did not award construction permits until the beginning of this year.

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Coal Producers: Obama Royalty Reform May Shut Us Down – by Mark Drajem (Bloomberg News – March 25, 2015)

http://www.bloomberg.com/

(Bloomberg) — The Obama administration has proposed to change how it collects royalties on coal mined from federal land, a move that environmentalists hope, and the industry worries, will cut use of the fuel linked to climate change.

The Interior Department says the accounting change is needed to update rules adopted almost three decades ago, and streamline the program for companies such as Peabody Energy Corp. and Arch Coal Inc. And more changes are on the way.

“It’s time for an honest and open conversation about modernizing the federal coal program,” Interior Secretary Sally Jewell said in a speech last week to the Center for Strategic and International Studies in Washington. “How do we manage the program in a way that is consistent with our climate-change objectives?”

For industry, the broad effort is seen through the prism of their ongoing complaints that President Barack Obama is waging a “War on Coal.” Sales of federally owned coal from the Powder River Basin in Wyoming and Montana — the biggest source — topped 350 million tons last year, generating company revenues of almost $5 billion, government data showed.

The Interior Department wants to assess the royalty when mining companies sell the coal to an unaffiliated buyer, not when sales are made to related intermediaries.

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Lusaka paying for its indecision – by Victor Kgomoeswana (Independent Online – March 29 2015)

http://www.iol.co.za/news

While Zambia see-saws over its mining tax regime, the DRC has overtaken it as a copper source, writes Victor Kgomoeswana.

Johannesburg – The African week went by pretty quickly for me, especially with the Monetary Policy Committee (MPC) of the SA Reserve Bank leaving interest rates unchanged. I need to pay off those debts, while the current rates last.

This MPC meeting happened while African finance ministers and a number of central bank governors met in Addis Ababa, continuing on that long road towards the alignment of Africa’s fiscal and monetary policy landscape.

Back in South Africa, Eskom gave us another grim reminder of the power crisis hovering above and leaving most people whispering in the dark, even as unions are calling for the axing of the chairman of the power utility.

Egypt also had to ration its electricity supply due to a fuel shortage. How’s that for Cape to Cairo? Our cricket team bowed out of the semi-finals, setting up their opponents for a final clash with Australia – although I would plead with my fellow South Africans to stop using the C-word this time around.

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 Teck, Antofagasta Said to Explore Copper Mining Merger – by Matthew Campbell and Dinesh Nair (Bloomberg News – March 30, 2015)

http://www.bloomberg.com/

(Bloomberg) — Teck Resources Ltd. and Antofagasta Plc are exploring a merger that would create one of the world’s largest copper producers, people with knowledge of the matter said.

The companies have held early-stage talks, and any agreement hinges on the approval of the families that control both miners, the people said, asking not to be identified discussing private information. There’s no guarantee they will reach a deal, which would be primarily stock based, the people said.

Teck shares in Toronto rose as much as 15 percent Monday, the most since April 2009 and were trading at C$20.03 ($15.78) as of 3:13 p.m. local time.

A combination of Teck, based in Vancouver, and London-based Antofagasta would be the first major mining transaction since an across-the-board slump in commodity prices hammered the industry. Both companies have extensive copper operations in Chile which could be combined by a merger, potentially reducing costs. Representatives for both companies declined to comment.

With a market value of about C$11.3 billion, Teck is Canada’s third-largest mining group after Goldcorp Inc. and Barrick Gold Corp.

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The Iron Ore Bust into a Housing Boom – by Greg Canavan (Daily Reckoning Australia – March 30, 2015)

http://www.dailyreckoning.com.au/

Irony is thick on the ground this morning as we head into a shortened Easter trading week. Just as Sydney property prices go absolutely bonkers, the iron price crashes.

Of course, revenue from the great iron ore boom helped to fuel the housing bonfire, along with regular petrol douses from RBA boss Glenn Stevens. But now, with iron ore crashing, property prices continue to detach from reality. It’s a cheap money driven boom if there ever was one.

In case you missed it, the benchmark iron ore price finished trading on Friday down US$2.22 to US$53.14, a new low. It was another dose of irony that probably knocked the price lower.

Last week, Fortescue Metals [ASX:FMG] Chairman and major stakeholder Andrew Forrest implicitly called on iron ore miners to form a cartel to control the price (and save his company from a slow death). Rio Tinto [ASX:RIO] boss Sam Walsh replied with scorn, which the market interpreted to mean that Rio will continue to dig up as much red dirt as it can. Hence the price crack on Friday.

The comments from Forrest indicate just how much damage the iron ore bear market is having on marginal cost producers. Aussie juniors won’t survive this price rout. It’s just a matter of time before they fold.

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Mining for tourists? A dubious economic savior in Appalachia – (Chattanooga Times Free Press – March 29, 2015)

http://www.timesfreepress.com/

Associated Press – SECO, Ky. (AP) – Mines built this company town. Could vines – the wine grapes growing on a former strip mine in the hills above – help to draw visitors here?

Jack and Sandra Looney sure hope so. Their Highland Winery – housed in the lovingly restored, mustard-yellow “company store” – pays tribute to coal-mining’s history here, as do their signature wines: Blood, Sweat and Tears.

“The Coal Miner’s Blood sells more than any of them,” Jack Looney says of the sweet red. He and his wife have converted the store’s second and third floors into a bed and breakfast. They’ve also bought and restored a couple dozen of the old coal company houses as rentals, and rooms fill up during their annual spring Miner’s Memorial Festival.

Seco, like so many Central Appalachian communities, owes its existence to coal – its very name an acronym for South East Coal Company. But as mining wanes, officials across the region are looking for something to replace the traditional jobs and revenues.

In some of the poorest, most remote counties, about the only alternative people can come up with is tourism – eco-, adventure, or, as with the Looneys, historical and cultural.

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