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Mongolia restarts bidding for giant coal project as economy flags (Reuters India – December 3, 2014)

http://in.reuters.com/

Dec 3 (Reuters) – Mongolia has relaunched an international tender to develop its giant Tavan Tolgoi coal project as it tries to boost a flagging economy hit by falling commodity prices and a decline in foreign investment.

The latest attempt has drawn interest from Hong-Kong listed Mongolia Mining Corp (MMC), U.S.-based Peabody Energy Corp and Japan’s Itochu Corp, despite weak global coal prices.

Tavan Tolgoi holds around 7.5 billion tonnes of coking coal, but Mongolia’s cash-strapped government has struggled to finance its development, and little progress has been made since an international bidding process collapsed in 2011.

The Mongolian Mining Corp (MMC) said on Monday that it has formed a consortium with “certain independent parties” to submit a bid for the project, located around 300 kilometres (186 miles) from the Chinese border.

Interested firms had to notify the Mongolian government of their intention to bid for the block before a Dec. 1 deadline, with a shortlist expected to be released by Dec. 15, MMC said.

The firm declined to give further details of its bid, when contacted by Reuters. Erdenes Tavan Tolgoi, the state-owned entity in charge of the project, did not immediately respond to requests for comment.

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Vale Says Base Metals Unit May Be Worth Up to $35 Billion – by Juan Pablo Spinetto (Bloomberg News – December 2, 2014)

http://www.bloomberg.com/

Vale SA (VALE5), the world’s largest nickel producer, said it may raise cash selling a minority stake in its metals-producing unit worth as much as $35 billion as it faces lower commodity prices.

Chief Financial Officer Luciano Siani said the base metals unit, the company’s largest business after iron ore, may be worth between $30 billion and $35 billion. Vale will only consider selling the stake if the company can get a “fair price,” Chief Executive Officer Murilo Ferreira told investors during a presentation in New York.

“An IPO could be considered,” Siani said in an interview with Betty Liu on Bloomberg Television today. “We want to be ready sooner rather than later to take the opportunity when it presents itself very clearly if that’s the case.”

Vale, whose shares have dropped 43 percent this year, is seeking to move beyond a series of setbacks including strikes in Canada, plant faults in Brazil and an acid spill in New Caledonia. While its earnings outlook was boosted by nickel’s first-half rally, prices have plunged 18 percent from a Sept. 8 peak as Vale increased production.

Nickel output will climb to 303,000 metric tons next year while copper is forecast to rise to 449,000 tons, The Rio de Janeiro-based company said in its annual budget release today.

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The 2015 Metals Outlook Series: Nickel – by Cole Latimer (Australian Mining – December 1, 2014)

http://www.miningaustralia.com.au/home

The story of nickel is finally one of stability.

Since 2005 the me­tal has been wracked by skyrocketing highs and sharp declines that have caused massive job losses and uncertainty that has seen an exodus from the sector by many of the larger players.

Much of this was due to a fall in stainless steel demand, working inversely to the growing demand for construction steel. IBISWorld put it succinctly: “Nickel prices, having reached unprecedented highs prior to the global financial crisis, plummeted as global economic growth slumped in subsequent years.”

And while the future is slated to be better, a swift and strong recovery is not forecast. Earlier this year the metal reached a two year high in May, but since that time has reversed its gains, falling 27 per cent.

Much of this spike was based on Indonesia’s implementation of a ban on unrefined nickel being exported, with prices surging 56 per cent at the time, however the fall came quickly due to the likelihood of current global supply more than meeting the hole left by the Indonesian ban.

BHP’s attempts to sell off its Nickel West assets exemplified the confused nature of the sector. While the miner saw the assets as valuable enough to retain during its greater demerger earlier this year, it did not see them as vital enough to keep within its mix.

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Gold miners in trouble – Hambro/Raw – by Lawrence Williams (Mineweb.com – December 2, 2014)

http://www.mineweb.com/

A fairly downbeat presentation on gold mining stocks from Blackrock executives at Mines & Money London.

LONDON (MINEWEB) – A gloomy morning in London was not uplifted for gold mining stock investors by a decidedly downbeat update on the sector from Blackrock’s Evy Hambro and Catherine Raw. They were speaking to a packed hall on the first main day of this year’s Mines & Money event.

Perhaps the only positive comment on the sector from those running what is probably the world’s biggest gold mining investment fund, Blackrock Gold & General, was that after many years of underperforming the gold price, the stock index beta is now once again following gold more closely – perhaps small comfort to those who have seen gold stock investment decimated over the past two to three years, with the gold price itself at the lowest level for around five years.

One has to add though that the previous speaker, Peter Boockvar of the US’s Lindsey Group, was more positive on current prospects for the gold price pointing to the continuing scale of central bank money printing, despite the US Fed’s withdrawal; the Fed’s worries about dollar strength impacting the US economy; the symbolism of the Swiss gold referendum, despite the ultimate low vote, the loosening of import restrictions by the Indian government and with his comment that demand for physical gold is off the charts. He predicted that the gold price has bottomed – but warned that he also said that a year ago too!

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Obama’s conflict minerals law has destroyed everything, say Congo miners – by Sudarsan Raghavan (The Guardian/Washington Post – December 2, 2014)

http://www.theguardian.com/uk

US legislation aimed at damaging Congolese militias has inadvertently propelled millions deeper into poverty

When his father could no longer make enough money from the tin mine, when he could no longer pay for school, Bienfait Kabesha ran off and joined a militia. It offered the promise of loot and food, and soon he was firing an old rifle on the frontlines of Africa’s deadliest conflict. He was 14.

But what makes Kabesha different from countless other child soldiers is this: his path to war involved not just the wrenchingpoverty and violence of eastern Congo but also an obscure measure passed by US lawmakers. Villagers call it Loi Obama – Obama’s law.

The legislation compels US companies to audit their supply chains to ensure they are not using “conflict minerals” – particularly gold, coltan, tin and tungsten from artisanal mines controlled by Congo’s murderous militias. It was championed by influential activists and lawmakers, both Republicans and Democrats, and tucked into the massive Wall Street reform law known as the Dodd-Frank Act.

The law’s supporters said it would weaken the militias by cutting off their mining profits. But the legislation, signed by President Obama four years ago, set off a chain of events that has propelled millions of miners and their families deeper into poverty, according to interviews with miners, community leaders, activists and Congolese and western officials, as well as recent visits to four large mining areas.

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Rio keen to blend mining and marketing – by James Wilson and Neil Hume (Financial Times – December 1, 2014)

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

Pilbara Blend. Robe Valley. Yandicoogina Fines. The names may sound as if they belong on a tea caddy or in a wine cellar – but Rio Tinto investors know better. These are the labels under which the company sells Australian iron ore, the prosaic yet hugely important commodity on which its fortunes depend.

The idea of branding a commodity that is shovelled into blast furnaces to make steel may seem strange. But iron ore has many variations in mineral content and purity.

Miners such as Rio say part of their skill lies in matching ores to the right buyers. Their marketing strategies are therefore crucial to their success – more so this year, when a flood of low-cost supply from Rio and its peers helped to drive the iron ore price down by almost 50 per cent.

Now investors have another important reason to consider Rio’s marketing skills: they are central to a possible tie-up with Glencore, the rival commodities group that this year approached Rio about a potential merger.

Glencore is one of the world’s most successful and entrepreneurial trading companies, spanning commodities such as coal, copper, oil and agricultural products. Its pursuit of a combination with Rio next year may hinge on whether Ivan Glasenberg, Glencore’s chief executive, judges he can extract value from Rio’s iron ore assets – the source of almost 90 per cent of its earnings – with better marketing and trading.

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Can cost-cutting break Rio Tinto’s link with iron ore price? – by Clyde Russell (Reuters U.S. – December 1, 2014)

http://www.reuters.com/

LAUNCESTON, Australia – (Reuters) – Rio Tinto launched a stirring defense of its iron ore strategy last week, with the basic message that it will still make huge profits even as the price slumps to five-year lows.

Leaving aside, for the moment, that some of Rio Tinto’s price and demand assumptions for the steel-making ingredient still look heroic, the real question to be answered is can the company convince the market that it’s on the right path?

To do so, Rio Tinto will have to break the shackles of the strong correlation of its share price to that of Asian spot iron ore.

Since the 2008 recession the Australian-listed shares of the world’s second-biggest iron ore miner have moved pretty much in lockstep with the price of the steel-making ingredient, although this year the correlation has shown signs of breaking down.

Iron ore has fallen a dramatic 48 percent this year, with the close on Nov. 28 of $69.80 a tonne only marginally above the $68 reached on Nov. 26, which was the weakest since June 11, 2009. Rio Tinto’s shares ended at A$59.10 ($49.64) on Nov. 28, down just 13.3 percent for the year.

The question is whether the nexus between the share price and iron ore has broken or whether the relationship is likely to be restored, most probably by the shares losing value since the prospect of iron ore rebounding is slim given the huge supply overhang in the market.

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Globe-Trotting Vale CEO Faces Wall Street as Iron Plunges – by Juan Pablo Spinetto (Bloomberg News – December 1, 2014)

http://www.bloomberg.com/

Vale SA’s chief executive officer says he travels so much that the mining company’s executive jet is among the most flown in Bombardier Inc.’s fleet this year.

“I like to visit all our operations at least once a year but normally I go more than that,” Murilo Ferreira said in an interview at the company’s Rio de Janeiro headquarters on Nov. 26. “I travel a lot, a lot, a lot,” he said in a weary tone.

Ferreira, 61, will board his Global Express XRS jet to visit investors in New York and London this week, adding to the more than 240,000 kilometers (149,000 miles) flown in the first 10 months of 2014. On the agenda? How the world’s largest iron-ore producer will adapt to a collapse in the price of the commodity that prompted analysts to have the bleakest opinions about the stock since at least 1999.

Vale is producing iron ore at a record pace and its base metals unit — which for years experienced delays, accidents and stoppages — is finally starting to contribute to profits. Yet expanding global supply at a time of slowing demand in China, the largest consumer of metals, has pushed down prices of the steelmaking raw material to the lowest in more than five years and made Vale the worst performing major mining stock.

The reaction from Vale, as with other mining companies, has been to cut costs, put lower-return expansions on hold and focus on its most profitable businesses. The company probably will announce tomorrow a $10.4 billion budget for next year excluding research and development expenses, the lowest since 2009 and 25 percent below last year’s approved capital expenditures, according to the average of nine analyst estimates compiled by Bloomberg News.

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Iron ore prices could stay depressed for 10 years – by Scott Murdoch (The Australian – December 1, 2014)

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

A PROMINENT Chinese fund manager has grimly forecast that the global iron ore price could remain under pressure for 10 years as oversupply continues to hit the market and the Chinese residential property market slumps.

Shanghai Jianfeng vice-president Liang Ruian believes prices could slide below $US60 a tonne within the next year and could even fall to as low as $US50 a tonne, with major consequences for miners around the world.

The iron price on the weekend was $US71.32 a tonne, up $US1.34, but the commodity is down more than 50 per cent this year. The price slide has prompted miners to rethink capital expenditure plans and intensifies pressure on companies struggling to bring projects to the production stage.

Mr Liang, a well known fund manager in Shanghai, said the price of iron ore would be heavily affected by the performance of the domestic Chinese real estate ¬market.

About 30 per cent of China’s steel output is used in residential development, which is forecast to remain flat in the next few years after a surge following the global financial crisis. It is estimated China now has a nationwide inventory of housing to last up to three years.

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Miners ‘Covering Their Eyes’ on China’s Commodity Cliff – by David Stringer (Bloomberg News – December 1, 2014)

http://www.businessweek.com/

After spending $1 trillion since 2002 on projects to feed China’s commodity boom, the world’s mining companies have a lot riding on their biggest customer.

While commodities may be trading at five-year lows, the heads of three top miners BHP Billiton Ltd. (BHP), Vale SA (VALE3) and Rio Tinto Group (RIO) last week all backed China, the world’s second-biggest economy, to keep buying increasing amounts of their products deep into the next decade. Not everyone agrees.

“The commodity guys are just too optimistic,” Tao Dong, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong, said in an interview, without referring to particular companies.

As China moves to a consumer-led from an investment-led economy, there may be a substantial absolute drop in commodities demand, not just slower growth, he said. “This is happening now,” Tao said. “It’s just people are covering their eyes and refusing to believe that what is happening now is not just a cyclical story, but also a structural story.”

Goldman Sachs Group Inc. this year joined other banks in calling an end to the commodities supercycle as China slows. The biggest consumer of industrial metals and iron ore and the largest oil user after the U.S. is headed for the slowest full-year expansion since 1990.

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Ukraine faces coal shortage with rebels controlling mines (Business Insider – November 29, 2014)

http://www.businessinsider.com/

Kiev (AFP) – With the rich seams of coal in eastern Ukraine under rebel control and Russia cutting off supplies, the Kiev government faces the awkward prospect of turning to its enemies for help.

As winter set in, the biggest fear in recent months was that Ukraine would run out of the natural gas that heats the country. A last minute deal with Russia averted that disaster. But now a new one is looming as coal shortages threaten to leave the country desperately short of electricity.

Ukraine gets some 40 percent of its power from coal-fired plants, and has traditionally had a surplus of coal, producing some 86 million tonnes at last count in 2012.

But the Russian-backed rebellion in the east has cut the government off from large swathes of the coal-rich mining region of Donbass. Then, without warning, Russia announced it was stopping coal supplies to Ukraine last week, claiming “force majeure” but offering no explanation.

“I don’t know for how long Russia intends to stop coal deliveries. If it stops them for a long period, our thermal stations will not be able to function at full power,” said Ukraine’s Energy Minister Yuriy Prodan.

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Swiss Reject SNB Gold Initiative, SRF Projections Show – by Catherine Bosley (Bloomberg News – November 30, 2014)

http://www.businessweek.com/

Swiss voters rejected a referendum requiring their central bank to hold a portion of its assets in gold, a measure its President Thomas Jordan termed an “invitation to speculators” that could have hamstrung the economy.

The “Save Our Swiss Gold” proposal stipulating the Swiss National Bank hold at least 20 percent of its 520-billion-franc ($540 billion) balance sheet in gold and never sell any bullion was voted down by 78 percent to 22 percent, according to projections by Swiss television. Polls had forecast the initiative’s rejection. Two other initiatives on tax privileges for foreign millionaires and immigration limits also were rejected.

SNB policy makers warned repeatedly that the measure, which also required the 30 percent of central bank gold stored in Canada and the U.K. to be repatriated, would have made it harder to keep prices stable and shield the central bank’s cap on the franc of 1.20 per euro. That minimum exchange rate was set three years ago, with the SNB pledging to buy foreign currency in unlimited amounts to defend it.

“The key word is relief, but it’s not a reason to crack the champagne corks yet,” said Janwillem Acket, chief economist at Julius Baer Group Ltd. in Zurich. Due to the rejection, “the SNB has more options and fewer constraints on monetary policy,” he said.

Investors anticipating more easing by the European Central Bank helped push the franc to a 26-month high against the euro earlier this month. ECB President Mario Draghi has explicitly cited government bond-buying as a possible policy tool.

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‘Deep Down Dark,’ by Héctor Tobar – by Mac McClelland (New York Times – November 20, 2014)

http://www.nytimes.com/

In 1987, a toddler who became known to the world as Baby Jessica fell into an abandoned well in a backyard in Midland, Tex., where she was stuck for 58 hours. Watching the coverage as a 7-year-old, I couldn’t get an answer from the newscasters or my parents that explained why it was taking so long for so many smart grown-ups to solve such a simple problem. Even now, I find it hard to believe that the human race can be outmatched by such a primitive adversary as a hole in the ground.

Crises of faith are the dominant theme of Héctor Tobar’s “Deep Down Dark,” the story of 33 men who were buried for 69 days in a collapsed Chilean mine in 2010. With his exclusive access to the survivors, Tobar, a Pulitzer Prize-­winning journalist, graphically recounts the quandaries that beset the men as well as their families — camped out at the mine’s entrance — the officials and rescue crews as a worldwide audience watched. There is weeping.

There is acceptance of death. There is the miners’ terror, every time the rescue drill stops, that they have been given up for dead. “The silence just destroyed us,” one man told Tobar. “Without a positive sign, your faith collapses. Because faith isn’t totally blind.” Some men find a stronger connection to God (“Omar realizes that the improbable fact of their survival also carries a hint of the divine. To be alive in this hole, against all odds, speaks to Omar of the existence of a higher power with some sort of plan for these still-living men”). Others struggle with whether to pray or to succumb to the darkness and lie down to die.

The hierarchy that gave the miners order in their workday routine is destroyed almost instantaneously. The shift supervisor buckles under the realities of the collapse and abdicates his authority.

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HISTORY: Workers at biblical copper mines ate quite well – by By Megan Gannon (Fox News.com – November 28, 2014)

http://www.foxnews.com/

LiveScience – Metalworkers who did skilled labor at biblical-era copper mines in modern-day Israel were rewarded for their efforts with well-rounded meals, new research suggests.

The metalworkers’ diet included good cuts of sheep and goat, as well as pistachios, grapes and fish brought to the middle of the desert from the Mediterranean, according to an analysis of ancient leftovers at “Slaves’ Hill,” a mining camp in Israel’s Timna Valley.

The findings imply that “Slaves’ Hill” might be a misnomer; the people who manned the furnaces probably weren’t slaves, but rather, they held a higher status because of their craft, archaeologists say. [The Holy Land: 7 Amazing Archaeological Finds]

Not-exactly ‘Slaves’ Hill’

“Somebody took care that these people were eating well,” said Erez Ben-Yosef, an archaeologist from Tel Aviv University.

Since 2012, Ben-Yosef has been leading an archaeological expedition in the heart of Timna Valley, the second biggest source of copper in the southern Levant region. (The biggest is Faynan, farther north in Jordan.) People have taken advantage of the copper deposits at Timna for millennia. There are dozens of smelting sites and thousands of primitive mining pits clearly visible in the region today. And the area is still used for copper production; the Mexican mining giant AHMSA has a stake in the region.

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COLUMN-Sliding investment, cost-cutting shows commodity boom-bust lives – by Clyde Russell (Reuters U.S. – November 28, 2014)

http://www.reuters.com/

LAUNCESTON, Australia, Nov 27 (Reuters) – Anybody who still has lingering doubts that the commodity cycle has turned bearish need only delve into two reports released this week on Australia’s resources sector.

The half-yearly report from the Bureau of Resources and Energy Economics (BREE), the government’s forecaster, showed only three projects, worth a total A$597 million ($507 million), reached a positive final investment decision (FID) in the six months to October.

This is not only the lowest number, but the lowest value for more than a decade, and is conclusive proof that investment in projects is waning under the burden of low prices and more muted demand forecasts as growth in top buyer China slows.

The other report released this week came from consultants PwC, with their annual review of mid-tier Australian miners showing companies are now trying to maximise productivity by boosting output while cutting costs.

The problem is so far these efforts aren’t bearing fruit, as prices fall faster than the companies can make improvements. “In fact, the worst may be yet to come, at least for iron ore and coal miners,” PwC said in the Nov. 25 release.

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