RPT-INSIGHT-Barrick Gold’s Peter Munk seeks to regain his Midas touch – by Euan Rocha (Reuters U.S. – August 22, 2013)

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Aug 21 (Reuters) – Peter Munk has long driven the agenda for Barrick Gold Corp, the company he formed in 1983 and built into the world’s largest gold producer, but recent missteps have raised questions about the leadership of a man once seen as a visionary in the industry.

Munk, who owns a stake of less than a quarter of a percent in the company, still steers Barrick’s strategy from his position as chairman, and he is now attempting to shore up the miner’s position. But some investors, seizing on what they view as misguided decisions and problems at several mines, are questioning both the company’s direction, and Munk’s role.

In the last two years, gold miners across the globe have been stung by falling bullion prices and a surge in costs. Barrick has fared worse than its rivals, outlining about $13 billion in writedowns this year alone.

Its share price is down nearly 65 percent in two years, outpacing a 50 percent drop in the NYSE Arca Gold Bugs Index , and a 26 percent drop in the price of spot gold.

While environmental woes at its Pascua-Lama gold-mining project, high in the Andes, have been the biggest drag on Barrick’s share price, investors have taken the most issue with its disappointing push into copper and with a proposal to give Munk’s heir apparent, co-chairman John Thornton, an unusually large, $11.9 million signing bonus.

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FEATURE-North Nigeria’s poor beat path to nascent mining boom – by Tim Cocks (Reuters India – August 22, 2013)

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BAGEGA, Nigeria, Aug 22 (Reuters) – Like almost everything else in Nigeria’s economy, mining of metals and other solid minerals fell by the wayside when the West African nation discovered oil.

In the two decades to 1954, foreign companies produced around 360,000 ounces of gold in total, according to government statistics – tiny by today’s standards, but not insignificant for a country approaching independence with high hopes.

By 1964 – post-independence and less than a decade after oil was found in the creeks of the southern Niger Delta – gold production had largely ground to a halt.

Now much of the digging up of Nigeria’s minerals is done by artisanal miners in the largely Muslim north, bereft of the high-tech machinery that makes it safe and brings economies of scale.

“The sector was left in the hands … of untrained and ill-equipped artisans … making negligible contributions to GDP,” was how a government policy brief summed it up last year.

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After cost cuts, miners need to do more with less, BHP says – by Clara Ferreira-Marques (Reuters U.S. – August 21, 2013)

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LONDON – Aug 21 (Reuters) – Mining firms are wooing investors with aggressive cuts after years of profligate spending, but BHP Billiton says the greater challenge will be improving productivity, if major producers are to ride an eventual recovery.

BHP, Rio Tinto and others big and small have promised shareholders they will slash billions of dollars of spending, shedding jobs, reining in wages and cutting back on fringe costs, such as staff travel.

Rio says it tells employees in its iron ore unit to use low-cost airlines or teleconferencing – a far cry from a time when chartering flights to remote mines were the norm and tales abounded of truck drivers on six-figure annual dollar salaries.

But that was the easy bit, the chief financial officer of BHP Billiton, the world’s largest miner, told Reuters. “When you talk about costs there are two elements. One is how you tighten your belt and make the easy changes,” said Graham Kerr, a BHP veteran put in charge of finance last year.

“The second is productivity,” he said in an interview. “Getting more out of your existing people, your equipment and your infrastructure. Productivity will deliver more benefits over time, but takes a little more time to be done.”

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Uranium miners face new hurdles as Fukushima disaster worsens – by James Regan (Reuters U.S. – August 21, 2013)

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SYDNEY – (Reuters) – Revelations of more toxic leaks from Japan’s Fukushima Daiichi nuclear power plant will raise second-thoughts about Japan’s nuclear future, but won’t halt the long-term global expansion of the industry, the head of a uranium mining company said.

“It reinvigorates the heightened state of nervousness, it surely will make the Japanese government and nuclear regulatory authorities more cautious and conservative in the decisions about the restart,” said Vanessa Guthrie, managing director of Australia’s Toro Energy Ltd (TOE.AX), which expects to start mining uranium in Australia in 2016.

Japan is set to raise the severity rating of the leak to level 3, or “serious incident”, on an international scale for radiological releases, underlining a deepening sense of crisis at the site.

The price of uranium, used mainly as fuel for nuclear reactors, plunged after the March 2011 meltdown at the Fukushima plant 240 km (150 miles) from Tokyo and has struggled to recover ever since. August uranium futures stood at $35.15 per pound on Wednesday compared with $68 per pound before the earthquake and tsunami that triggered the disaster.

However, Guthrie said contract prices between uranium miners and buyers standing at around $58-$59 a pound more accurately reflect the supply and demand balance than the spot price.

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Miners at ’30-year lows’ could bounce as rates rise – by Jenny Cosgrave (CNCB.com – August 20, 2013)

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Mining stocks slipped on Tuesday, as weak earnings from BHP Billiton and Glencore Xstrata sent the sector lower. Analysts said miners were now the cheapest they have been in 30 years, relative to the market, and were set to bounce back when interest rates begin rising.

The majority of global miners are in correction territory year-to-date, due to the slowdown in the Chinese economy and the slump in commodity prices. However, this “severe de-rating” has not hit earnings to the same extent as share prices, making mining stocks a compelling buy, according to Henry Dixon, fund manager at Matterley Asset Management.

“Miners had a torrid time in the first half. Mining has been the worst performing sector this year, leaving it as cheap relative to the market as we can find,” said Dixon, who was confident mining stocks would be the first to benefit from the climb in bond yields that will follow the Federal Reserve’s tapering off of its stimulus program.

Dixon said he had increased his exposure to mining stocks in recent weeks. “Obviously a lot has been made of the move we have seen in bond yields, and with history in mind, and rising bond yields, it is actually the mining sector that stands tall as one of the best under this environment, with the key being a little bit more growth in the system,” he said.

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COLUMN-Diversified miners’ short-term challenges at odds with long-term views – by Clyde Russell (Reuters U.S. – August 21, 2013)

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Clyde Russell is a Reuters market analyst. The views expressed are his own.

LAUNCESTON, Australia, Aug 21 (Reuters) – The world’s top diversified mining companies are starting to resemble choir boys singing the same hymn about cutting projects and costs.

The recent financial results of BHP Billiton, Rio Tinto, Glencore Xstrata and Anglo American were remarkably similar, as were the accompanying comments by their chief executives.

All reported lower earnings, but not dramatically so, which may be a bit of a surprise given weaker commodity prices in the first half of 2013 and widespread concern of worse conditions to come.

And all four also repeated the mantra of cost cutting and slashing capital expenditure, while at the same time trying to give equity investors more of what they want in the form of dividends and higher share prices.

The question is whether this unanimity is the right path or whether the diversified miners are going too far in a bid to boost share prices.

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Miners Buying Hugo Boss Perfume as Chile’s Copper Booms – by Matt Craze & Javiera Quiroga (Bloomberg News – August 20, 2013)

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Since starting work at the Esperanza copper mine in northern Chile two years ago, Erick Moreno has tripled his salary and is preparing to buy his first home. The pay, he says, is so good that he’d never take a job elsewhere.

“I am going to die in this industry, I don’t see myself anywhere else,” Moreno said by phone from Antofagasta, a city on the edge of the mineral-rich Atacama desert. “When you start working in a mine, everything changes and in a very little period of time.”

While Moreno, 27, completed his engineering course at Antofagasta University, he says many fellow students dropped out to start work at the mines without graduating. Most of them already own their homes and drive sports cars, while many older miners have five or more houses, some far from the mines that litter the northern desert, he said.

Spending by high-earning miners is spreading through the economy, fueling a consumer boom and driving unemployment to its lowest since 1973. The nation, squeezed between the Andes Mountains and the Pacific Ocean, has become the wealthiest in Latin America, according to the International Monetary Fund, with gross domestic product per capita rising to about $16,300 this year from $4,780 ten years ago. World Bank President Jim Yong Kim last month congratulated the country on earning “high-income” status.

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Another gold CEO bites the dust – this time at African Barrick – by Lawrence Williams (Mineweb.com – August 21, 2013)

http://www.mineweb.com/

African Barrick Gold’s CEO Greg Hawkins has resigned and has been replaced by Bradley Gordon, formerly with Intrepid Mines, to try and improve the fortunes of the African gold miner.

LONDON (MINEWEB) – African Barrick Gold (ABG), which has seldom seemed able to meet its operating objectives since its spin-off from parent Barrick Gold and listing on the London Stock Exchange three years ago, has announced the resignation of its Chief Executive Officer, Greg Hawkins ‘to pursue other opportunities’, and his replacement by Australian Bradley Gordon who takes over with immediate effect. Gordon resigned from his previous position as CEO of Intrepid Mines last month – presumably with the ABG appointment already settled.

Thus, Hawkins is the latest gold mining company CEO to be ousted, in this case to see if new blood can revitalise the ailing African gold miner. African Barrick stock has lost 73% of its value since its launch in 2010 and, although part of this fall is attributable to the plunging gold price and so outside management control, Hawkins is seemingly carrying the can for the company’s continual underperformance.

ABG operates three mines in Tanzania and is that country’s largest gold miner. The flagship mine is the Bulyanhulu underground operation and the others are Buzwagi (open pit) and North Mara, also an open pit operation. A fourth mine, Tulawaka, was closed down earlier this year as it was uneconomic.

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Amplats to cut 7,000 South African jobs, union ‘shocked’ – by Sherilee Lakmidas and Ed Stoddard (Reuters U.S. – August 19, 2013)

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JOHANNESBURG – (Reuters) – Anglo American Platinum (Amplats) said it planned almost 7,000 job cuts at its South African operations including thousands of compulsory lay-offs, drawing an angry response from a labor union and raising the risk of renewed unrest at its mines.

Amplats (AMSJ.J), the world’s top platinum producer and a unit of Anglo American (AAL.L), had aimed for 14,000 job cuts after posting its first loss last year, but lowered the target after a backlash from the government and the unions, which organized a series of strikes.

After months of consultations with government officials and worker representatives, the company said 6,000 mining jobs would go and that “approximately 900 corporate and overhead employees will also be affected”.

The addition of white-collar job cuts might alleviate some criticism of the lay-off plan, since not only blue-collar workers would be affected. But at least one union saw the decision by Amplats as a betrayal, saying the company had committed only last week to avoiding forced lay-offs.

“We are shocked. Our agreement with Amplats was to cut 3,000 jobs and those jobs would not be forced retrenchments but voluntary severance packages.

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UPDATE 2-Glencore seeks fresh start with $7.7 bln hit to Xstrata mines – by Clara Ferreira-Marques (Reuters India – August 20, 2013)

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LONDON, Aug 20 (Reuters) – Glencore Xstrata took a $7.7 billion hit on Xstrata’s mining assets on Tuesday, drastically reducing the value of early-stage projects after falling prices dragged down first-half profit.

The mining industry has been pummelled by billions of dollars in writedowns since the start of the year, with cooling prices and demand prospects denting the value of mining projects.

Glencore had been expected to follow suit once it completed the acquisition of Xstrata, and in its first post-takeover results on Tuesday it announced the figure alongside a 9 percent drop in core profit.

In absorbing the impact of a drop in commodity prices during the time it took to close the marathon takeover, Glencore wiped out all the goodwill value it had provisionally allocated to Xstrata’s mines at the time of the merger.

“We just had to value the business with a blank sheet of paper,” Chief Financial Officer Steven Kalmin said.

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BHP delays $14 billion Canada potash push as profit drops – by Sonali Paul (Reuters U.K. – August 20, 2013)

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MELBOURNE – (Reuters) – BHP Billiton’s new chief has put his stamp on the top global miner, mapping out a cautious approach to expanding into the potash market, which it sees as its next big growth business beyond 2020.

CEO Andrew Mackenzie outlined the low-risk course as he handed down his first results, reporting a 15 percent drop in half-year profit before one-offs, which missed forecasts largely due to Australian mining tax adjustments and other non-operational items.

BHP and Glencore Xstrata wrapped up the results season for the world’s big five miners, with BHP holding up slightly better than its peers as it stepped up output of iron ore, copper, coal and oil and slashed $2.7 billion in costs in the face of sliding commodity prices.

Major miners have come under pressure to rein in spending, sell off underperforming assets and tackle debt after years of rampant spending on new mines and acquisitions as commodity prices soared. Reflecting the austerity drive, BHP said it plans to invest $2.6 billion over the next four years digging shafts at the Jansen potash project, delaying production at least until 2020 from its original 2015 target, while inviting offers for stakes in the mine.

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Glencore expected to writedown billions – by Reuters/Star Staff (Sudbury Star – August 20, 2013)

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Glencore Xstrata is expected to write down the value of assets inherited from Xstrata by as much as $7 billion when it reports first-half earnings on Tuesday — the first full set of results since the takeover that created the mining giant in May.

Glencore’s management, no strangers to Xstrata given the trader’s 34% stake in the miner, have been reviewing Xstrata’s assets as owners over the past three months and they had been expected to book a hit alongside maiden results.

Analysts and an industry source said the group writedown, mostly on the value of former Xstrata assets, would likely amount to $5 billion to $7 billion.

Nickel assets — including Xstrata’s $5 billion Koniambo operation in New Caledonia — are likely to take the brunt of the pain as nickel prices languish at less than a third of their 2007 highs and supply continues to exceed demand.

Glencore’s local operations, now officially known as the Sudbury Integrated Nickel Operations, include Fraser Mine and Nickel Rim South Mine, Strathcona Mill and the Sudbury smelter. Nickel and copper are its main products.

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BHP reveals corruption probes by U.S., Australian authorities – by Dorothy Kosich (Mineweb.com – August 19, 2013)

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A slow-moving investigation of BHP Billiton’s business practices, which began in 2009, is heating up.

RENO (MINEWEB) – U.S. and Australian authorities are cooperating on an investigation into “possible corruption” within Australian über miner BHP Billiton, stepping up a probe that began four years ago concerning BHP’s Olympic sponsorship, hospitality and gifts given to top Chinese officials, and now reportedly involves the company’s attempts to secure a bauxite project in Cambodia.

The allegations are being investigated by the U.S. Department of Justice and the Australian Federal Police as well as the U.S. Securities and Exchange Commission.

In a statement released on Friday by BHP Billiton, the company disclosed it had commenced an internal investigation when it received a request for information in August 2009 from the SEC. “As a result, the Group commence an internal investigation and disclosed to relevant authorities including the U.S. Department of Justice (DOJ) evidence that it uncovered regarding possible violations of applicable anti-corruption laws involving interactions with foreign government officials,” the company said.

“As has been publicly reported, the Australian Federal Police has indicated that it has commenced an investigation,” the company confirmed.

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Gold Bears Retreat as Prices Reach Two-Month High: Commodities – by Tony C. Dreibus (Bloomberg News – August 19, 2013)

http://www.bloomberg.com/ 

Speculators cut bullish and bearish bets on gold simultaneously for the first time in two months as prices advanced to the highest since mid-June on signs of strengthening physical demand.

The net-bullish position rose 18 percent to 56,604 futures and options by Aug. 13, as the 17 percent contraction in short bets exceeded the 3 percent drop in long wagers, U.S. Commodity Futures Trading Commission data show. Net-long holdings across 18 U.S.-traded commodities expanded 23 percent as the position in silver more than doubled and investors turned positive on copper for the first time since February.

Gold tumbled a record 23 percent last quarter as some investors lost faith in the metal as a store of value. The rout spurred losses for billionaire John Paulson, who joined George Soros in selling bullion holdings in three months ended June 30, government filings showed last week. Lower prices spurred demand in India and China, the top buyers, driving global coin and bar purchases to record in the second quarter and jewelry purchases to the highest since 2008, the World Gold Council said Aug. 15.

“People became more interested in holding gold as the price dropped,’ said Tom Stringfellow, the president of San Antonio-based Frost Investment Advisors LLC, which manages about $9 billion.

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COLUMN-Mongolia, Rio Tinto playing high stakes on copper mine – by Clyde Russell (Reuters U.S. – August 19, 2013)

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Aug 19 (Reuters) – Is Rio Tinto’s dispute with the Mongolian government over the expansion of the Oyu Tolgoi copper and gold mine the signal that the nation’s commodity boom is over, or is it just a hiccup?

Certainly, Mongolia’s reputation as a desirable investment destination and one of the few remaining countries ripe for developing natural resources has taken a battering recently.

Rio Tinto, the world’s second-largest mining company, said on Aug. 14 that it will cut 1,700 jobs at Oyu Tolgoi after a $5 billion expansion of the project was put on hold last month.

The dispute is over how the expansion gets financed, and the Mongolian parliament has been recalled from its summer recess for an emergency session to try and deal with the matter.

But the real issue is how long it will take for Mongolia to get significant amounts of money from the mine, which is slated to boost the economy by 35 percent by 2020. 

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