COLUMN-Who benefits from the iron ore supply glut? Nobody? – by Clyde Russell (Reuters U.S. – March 11, 2015)

http://www.reuters.com/

PERTH, March 11 (Reuters) – One question that skulks like an elephant in a room where the iron ore industry has gathered is who has benefited the most from bulging global supplies.

The Anglo-Australian pair of BHP Billiton and Rio Tinto are happy to tell you how they have successfully ramped up output at costs low enough to still rake in profits.

That was very much their message at this week’s Global Iron Ore & Steel Forecast conference in the Western Australia capital city.

The smaller miners suffering from the collapse in Asian spot iron ore prices are only too willing to speak of their battle to survive amid what they see as the destruction of the value of an industry that is Australia’s largest export earner.

The price of iron ore .IO62-CNI=SI hit its lowest on record on Tuesday, at $58 a tonne, with this year’s decline of 19 percent compounding last year’s slump of 47 percent.

Steel industry officials in China, the destination of two-thirds of the world’s seaborne iron ore, will also tell you how their industry suffers from overcapacity, poor profits and the economy’s shift to consumption-led growth.

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Indonesia attracts $1.4 bln in investment for 11 nickel smelters – by Wilda Asmarini (Reuters U.S. – March 11, 2015)

http://www.reuters.com/

JAKARTA – (Reuters) – Eleven new nickel smelters are to be built in Indonesia over the next two years at a cost of $1.4 billion, a mining ministry official said, a sign that laws requiring domestic processing of ores are having an impact after initial resistance from the industry.

Early last year, Jakarta put in place export restrictions aimed at forcing mining firms to develop smelting and processing facilities so that Indonesia could refine all of its raw ores and concentrates.

Most of the six new nickel smelters due to be finished in 2015 are located in Sulawesi, Coal and Minerals Director General Sukhyar told reporters late on Tuesday. They involve a combined investment of $920 million and will have capacity to produce 6,000 tonnes of refined nickel a year plus 66,000 tonnes of ferro nickel and 50,000 tonnes of nickel pig iron.

Another five nickel smelters set for completion in 2016 are all in Sulawesi, Indonesia’s main nickel ore region, and will cost about $468 million in total, Sukhyar added.

“We estimate that if all these nickel smelters are completed, in 2018 we will be able to process 30 million tonnes of nickel ore – 50 percent of our nickel ore exports in 2013,” he said, referring to exports before the January 2014 ban.

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Cliffs Shuns Seaborne Iron Ore as Australia Unit for Sale – by Jasmine Ng (Bloomberg News – March 11, 2015)

http://www.bloomberg.com/

(Bloomberg) — Cliffs Natural Resources Inc., the largest U.S. iron ore mining company, is quitting the seaborne trade in the commodity after the world’s biggest suppliers flooded the market with low-cost output and hurt prices.

The Cleveland-based company will focus on the U.S. market, where demand for steel is increasing, Chairman and Chief Executive Officer Lourenco Goncalves said at an industry conference in Perth, Australia, on Wednesday. The company’s operations in Western Australia are for sale, he said.

Iron ore tumbled 47 percent in 2014 and has extended losses this year as surging low-cost supply from Rio Tinto Group and BHP Billiton Ltd. outpaced demand growth, triggering a global glut. Goncalves, who took over as CEO in August after an activist investor ousted the previous management, has sold mines and rationalized other operations in the face of the slumping prices. Cliffs’ stock lost 71 percent over the past 12 months, and is at the lowest since 2004.

“Here in Australia, we have a very good operation,” said Goncalves. “The asset is for sale, even if someone comes and buys to shut it down, that’s fair game. We’d like to sell to someone that will continue to keep the mine in operation.”

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The platinum story nobody is talking about – by Patrick Cairns (Mineweb.com – March 9, 2015)

http://www.mineweb.com/

Reasons for optimism.

Most investors currently view South Africa’s platinum industry with a huge amount of scepticism. Platinum stocks on the Johannesburg Stock Exchange have been shedding value in an environment where their balance sheets are deteriorating and free cash flows are close to zero.

Impala Platinum and Anglo American Platinum have both announced that they are looking to sell non-profitable mines. Glencore also recently told its shareholders that it will be unbundling its stake in Lonmin, which suggests that there is little hope for finding a buyer.

This is all taking place at a time when the prices of platinum group metals (PGMs) have remained depressed, with even the CEO of Impala Platinum, Terence Goodlace, recently commenting that he expects above-ground stocks to keep the platinum price low for another two to two-and-a-half years. On top of this, the seemingly hostile labour environment, power shortages and regulatory uncertainty make South Africa’s platinum mining sector appear like a place few would fear to tread. However, there is another side to the story.

Consider that 35 kilometres north west of Rustenburg, there are three new platinum mines being developed on the western limb of the Bushveld Complex. In total, $3.5 billion worth of capital is going into these ventures, which are all more or less within eyesight of each other.

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BHP, Rio Tinto Say Chinese Demand for Iron Ore Not Fading – by Rhiannon Hoyle (Wall Street Journal – March 10, 2015)

http://www.wsj.com/

BHP executive says outlook for China’s resource demand remains compelling

SYDNEY—The world’s two largest mining companies say they are convinced China’s hunger for iron ore isn’t about to fade, even as the price plumbed new lows after Beijing’s official acceptance it is set for slower economic growth.

In an interview with The Wall Street Journal, BHP Billiton Ltd. ’s iron-ore president Jimmy Wilson said the outlook for China’s resource demand remained compelling, as the world’s second-largest economy expands from a larger base level.

He said demand for steelmaking ingredient iron ore from the country’s manufacturing sector had been running above BHP’s expectations in recent months and the country’s cooling property market could also be set for an uptick.

“I think we have to appreciate that China is getting bigger—they are targeting 7% [growth] and they are actually uncannily capable of delivering against those targets,” Mr. Wilson said. “We should never underestimate what is happening in China, and what continues to happen in China.”

His remarks echoed earlier comments from Rio Tinto PLC’s iron-ore chief executive Andrew Harding, who expressed optimism Beijing can maneuver the Chinese economy into a new stage of growth during a speech in Perth on Tuesday.

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Canadian Mining Company Social Star in Cambodia – by Valentin Schmid (Epoch Times – March 6, 2015)

http://www.theepochtimes.com/

Developing Cambodia’s commercial mining sector, Angkor Gold puts social responsibility first

They come and just rob the local people of their resources. Whether it’s North Dakota or Cambodia, that’s how most oil and mining companies are perceived to do business. Angkor Gold is different.

For the Canadian mining and exploration company operating in Eastern Cambodia, corporate social responsibility (CSR) comes before the first hole is drilled in the ground—and not just in the corporate presentation.

“It’s the right thing to do. To do nothing when we have some ability to help residents in a country where we are the foreigners,would be completely unacceptable. That’s the philosophy of our entire team,” says Delayne Weeks, VP of corporate social responsibility.

Other mining and oil companies only start a social program once they are sure they have an economically viable project, she says. Angkor started with their social programs from day one. They include schools for hundreds of students, a health center servicing 20,000 people, a farm, and countless smaller projects.

“We try to treat people the same way that we would like to be treated,” says Delayne Weeks.

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Column: India coal output will gain, but not to heroic forecasts – by Clyde Russell (Reuters India – March 9, 2015)

http://in.reuters.com/

NEW DELHI – (Reuters) – It’s easy to dismiss the government’s assertion that the country will be able to more than double coal production in the next five years. But that doesn’t answer the question of how close they will get.

India will produce 1.5 billion tonnes of coal by the end of this decade, Coal Secretary Anil Swarup told the Coaltrans India conference this week in New Delhi.

Swarup, the top coal bureaucrat, presented these numbers in a relaxed and confident manner, a stark contrast to previous government presentations at Coaltrans events, which have generally been cautious and fraught with defensive justifications of past disappointments.

He still has the problem that nobody believes that state-controlled behemoth Coal India (COAL.NS) will be able to double its output to 1 billion tonnes per annum within five years.

There is perhaps some more confidence that private miners will be able to ramp up their production to 500 million tonnes, but that comes with the caveat that the laborious process for mining approvals is streamlined.

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Nickel prices poised for a rebound – by Biman Mukherji (Wall Street Journal – March 9, 2015)

http://www.wsj.com/

PRICES of nickel hit their lowest levels in more than a year last week, suggesting it is just another metal suffering from weaker Chinese demand growth and a strong dollar.

But many traders and analysts think the long decline in nickel’s price is reaching an end, as China’s drive to produce more of a substitute product — nickel pig iron — shows signs of cracking. NPI is commonly used in China as a cheaper alternative to pure nickel for producing stainless steel.

China’s burgeoning output and usage of NPI has meant that the world has had plenty of spare pure nickel. That has put pressure on prices for the commodity: the benchmark three-month nickel futures contract on the London Metal Exchange is down around 30 per cent in the past year.

For more than a year, Chinese producers of nickel pig iron have countered an export ban on the nickel ore they need from their largest supplier, Indonesia, by drawing upon stockpiles of the ore they built up just before the ban was imposed in early 2014. But now China’s stockpile of nickel ore is running short: stocks in five of the country’s main ports have halved within one year, according to Commerzbank.

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‘India poised to be world’s 3rd largest economy’ (Business Standard – March 9, 2015)

http://www.business-standard.com/

As India’s investment climate seems to be improving, the moment might not be far away for the country to emerge as the world’s third economy, says Jim O’Neill who is better known for coining the acronym BRIC.

“It is probably too early to say with certainty that India will soon take its place as the world’s third largest economy, behind China and the United States. But, given that India’s investment climate seems to be improving, that moment might not be too far away,” he said in a recent commentary posted on Project Syndicate website.

“By 2017, India could surpass Italy and Brazil to become the world’s seventh largest economy; by 2020, there is a reasonable chance that it will overtake France and the United Kingdom to become the fifth largest,” O’Neill, who was recently in India, said.

Way back in 2001, O’Neill, had coined the acronym BRIC — the grouping of Brazil, Russia, India and China — while mentioning about growth prospects in large emerging markets.

O’Neill, a former chairman of Goldman Sachs Asset Management, is now a Honorary Professor of Economics at Manchester University and Chairman of the Review on Antimicrobial Resistance, among other roles.

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Platinum in Your Car Set to Shrink Shiny Stockpiles: Commodities – by Andre Janse Van Vuuren (Bloomberg News – March 5, 2015)

http://www.bloomberg.com/

(Bloomberg) — Shrinking platinum stockpiles, growing demand from carmakers and new uses being trotted out in the energy field are stoking producers’ expectations that prices of the metal are poised to rebound from a five-year low.

Production of the shiny metal, used for jewelry and in catalytic converters in cars, will fall short of consumption this year by about 500,000 ounces, according to a January estimate by Credit Suisse Group AG. That’s prompting industry leaders to debate how long it will take for buyers to use up reserves and start paying more for a less available product.

Platinum is “in its strongest position” in a decade, said Chris Griffith, chief executive officer of Johannesburg-based Anglo American Platinum Ltd., the industry’s largest producer. “The fundamentals are that demand is increasing.”

Griffith said he believes prices will begin trending upwards relatively soon. Meanwhile, Terence Goodlace, CEO of Impala Platinum Holdings Ltd., the second-biggest producer, sees increases further out, estimating it will be two to 2 1/2 years for excess supplies to be depleted, with prices starting to recover in the second half of next year.

“The above-ground stocks for us is still a very, very big thing,” Goodlace told reporters at a media round table.

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Prospector of the year – by Kip Keen (Mineweb.com – March 6, 2015)

http://www.mineweb.com/

And this year’s award for ‘Amazing Exploration Genius’ goes to…Western Australia. In an industry overweight with large, usual male egos and aggressive credit-taking, we tend to celebrate the individual.

The amazing CEO. The hardened, relentless prospector. The brilliant geologist. And each year they get their awards for driving, overseeing and being lucky in making significant discoveries.

Often, the praise is well-deserved, when they have played an instrumental role in doing one of the hardest things you can do: find a major deposit. I do it myself. I sometimes profile the person who “made” the big discovery, usually the geologist who targeted the obvious discovery drillhole. It’s exciting.

So we like to celebrate the genius – a trait shared by society at large, obsessed as it is with celebrity, of all kinds. But in focusing on the individual in mining, we overlook some very important players: namely governments that expend significant financial and cerebral resources on supporting exploration.

Indeed, maybe, given what can be their driving role in discovery, it’d be worth a class of award on its own: Best government in exploration. Really.

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Can Mick Davis build another Xstrata? – by Stephen Bartholomeusz (Business Spectator – March 6, 2015)

http://www.businessspectator.com.au/

Mick Davis’s announcement overnight that his X2 Resources has raised $US5.6 billion could be a signal that he is about to begin the much-anticipated reprising of the game-plan that created Xstrata. Or else it could be another false dawn.

X2 announced that it had successfully completed its “initial” capital raising, securing $US5.6 billion in equity capital from a small number of “word-class” investors to create a new “mid-tier diversified” mining and metals group.

It described the raising, which comprises $US4 billion in committed capital available for immediate drawn-down and $US1.6 billion in conditional equity, as “one of the largest ever first-time raises by a private vehicle”.

The uncertainty about what the raising foreshadows relates to three earlier announcements by X2. The first, in 2013, not long after the merger/takeover of Xstrata by Glencore that saw Davis ousted as chief executive, announced that Noble Group and TPG had agreed to invest $US500 million each in X2.

The second, in March last year, was an announcement that X2 had secured $US2.5 billion in committed capital and another $US1.25 billion in conditional capital from five investors, including Noble, TPG, sovereign wealth and pension fund investors.

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Polish Coal Miners Ride Solidarity Legacy to Oblivion – by Ladka Mortkowitz and BauerovaMarek Strzelecki (Bloomberg News – March 6, 2015)

http://www.bloomberg.com/

(Bloomberg) — For decades, Polish coal miners have enjoyed benefits that are the envy of their working class countrymen: An annual bonus of two months’ pay regardless of performance, company-sponsored holidays, retirement before 50, and no weekend shifts. Today, that legacy of the communist era threatens the mostly state-owned mining sector and is digging a hole in the national budget.

To understand why reform remains elusive, take a drive through Upper Silesia, the coal-rich region in southern Poland that’s home to two dozen mines. The snowy countryside, drained of color in the feeble winter light, is framed by smoking chimney stacks and elevator towers that haul coal up from the pits.

Even as European coal prices have fallen by half in recent years and producers have struggled, powerful unions have foiled government attempts to close failing operations, cut jobs, and restore the sector to profitability. In January, the Economy Ministry cautioned that without significant restructuring Kompania Weglowa SA — the European Union’s largest coal producer — risked bankruptcy.

With their historical ties to Lech Walesa’s Solidarity, Poland’s roughly 100,000 miners are clinging to their jobs. Their unions’ links to the 1980’s movement mean they can easily forge alliances across the political spectrum — and threaten any reform-minded government with widespread strikes.

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Copper faces looming supply gap – Teck Resources – by Simon Rees (MiningWeekly.com – March 5, 2015)

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

TORONTO (miningweekly.com) – The level of new copper output will be unable to plug a supply gap that could develop as early as 2017, Canadian diversified miner Teck Resources manager for market research Michael Schwartz told an audience at the Prospectors and Developers Association of Canada 2015 convention.

Teck had calculated that the average yearly rate of copper demand growth would reach 2.7% in the coming years. This equated to about 680 000 t of new supply being required each year, a level producers would be unable to match.

This supply/demand fundamental was in stark contrast with copper’s performance over the past 12 months, with Schwartz noting that Wood McKenzie had recorded a 300 000 t surplus for 2014. “Although we are showing a balanced market to a slight deficit,” he added.

The overhang had been reflected in the red metal’s price, which was currently hovering at around $2.65/lb, compared with a 52-week high of about $3.25/lb. Producers with cost-of-production rates above $2.50/lb would continue to struggle, Schwartz pointed out.

Disruption to output, which offered price support depending on its severity, would become an increasingly important issue as the industry mined lower-grade zones in remoter areas.

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Iron Ore Sinks as China Ushers in Slower Growth – by Rhiannon Hoyle (Wall street Journal – March 6, 2015)

http://www.wsj.com/

Iron ore prices crash to six-year low after China lowers its growth forecast

SYDNEY—As China’s top officials heralded a new era of slower growth, iron ore, a resource that has powered years of breakneck expansion in the world’s second-largest economy, bore the brunt of ill sentiment in commodity markets.

The steelmaking ingredient’s value crashed to a six-year low late Thursday, after China lowered its economic growth forecast, reigniting concerns about its appetite for the raw material at a time when supplies are already outpacing demand.

Some of the world’s biggest miners, including Rio Tinto PLC and BHP Billiton Ltd. , have been aggressively expanding their operations in the Pilbara iron-ore mining hub of northwest Australia, betting that China will still need more of the commodity to make steel for its skyscrapers and for industries such as auto manufacturing.

But with China’s growth already slowing, their expansion has resulted in an emerging iron ore glut.

Beijing has now further rattled the market by lowering China’s annual growth forecast to 7%–down from last year’s goal of about 7.5%, and actual growth of 7.4%. Chinese leaders are now talking of a “new normal” for the economy.

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