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Rio and BHP tighten grip on world iron ore – by John Addis (Sydney Morning Herald – August 18, 2014)

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

Mexican drug cartels have been diversifying into the iron ore business, smuggling ore worth about $US1 billion a year into China. But it’s the emergence of a more legitimate cartel – one run largely by Australians – that should worry China more.

Rio’s latest result shows how powerful the big three global producers have become. The company’s results for the six months to June 30, with underlying earnings rising 21 per cent to $US5.1 billion ($5.47 billion), are remarkable given that iron ore prices actually fell 20 per cent over the period.

After slashing costs, capital expenditure and debt, management hinted at higher dividends and more buybacks. If the mining boom is supposed to be over, no one told Rio Tinto.

The really interesting element to the result concerned production increases. Although lower iron ore and coal prices stripped $US1.4 billion from underlying earnings, volume increases, particularly in iron ore, offset that fall by more than $US900 million. All up, iron ore contributed more than 90 per cent of total profit.

With China slowing and the country’s government frantically shifting spending away from capital expenditure towards consumption, which dampens demand for ore, Rio Tinto and BHP are expanding output.

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COLUMN-BHP Billiton demerger shows how good a deal Billiton got – by Clyde Russell (Reuters U.K. – August 18, 2014)

http://uk.reuters.com/

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

LAUNCESTON, Australia, Aug 18 (Reuters) – BHP Billiton’s plan to demerge its unwanted aluminium, nickel and manganese assets underscores just what a fantastic deal shareholders in the old Billiton got when the two joined in 2001.

When Australia-based BHP joined forces with the London-listed, but largely South African, Billiton, a diversified natural resources giant was created.

At the time it was largely viewed as a deal that favoured Billiton shareholders. BHP shareholders got about 58 percent of the merged entity, while Billiton’s got 42 percent, meaning that BHP paid about a 20 percent premium to Billiton shareholders, according to a March 19, 2001 report in the Wall Street Journal.

With the Aug. 15 news that BHP Billiton’s board favours a demerger, the 2001 deal comes full circle. While it’s unlikely to be an exact match, the bulk of assets proposed for the new spin-off company will be those that Billiton brought into the 2001 merger.

Billiton’s main assets in the 2001 merger were the Hillside and Bayside aluminium smelters in Richards Bay on South Africa’s east coast, the Mozal smelter in neighbouring Mozambique, and energy coal mines in South Africa.

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UPDATE 1-Rio Tinto to review stake in closed Papua New Guinea copper mine – by Sonali Paul (Reuters India – August 18, 2014)

http://in.reuters.com/

MELBOURNE, Aug 18 (Reuters) – Rio Tinto is set to decide on its stake in a long-dormant copper mine in Papua New Guinea’s Bougainville after the passage of a new mining law on the island, with the company possibly pulling out of the project after a quarter of a century.

The interim mining law converts Bougainville Copper Ltd’s mining lease into an exploration lease. That can be converted to a mining lease if approved by the autonomous province’s government, which now controls resources on the island.

“In light of recent developments in Papua New Guinea, including the new mining legislation passed earlier this month by the Autonomous Bougainville Government (ABG), Rio Tinto has decided now is an appropriate time to review all options for its 53.83 per cent stake in Bougainville Copper Limited (BCL),” the company said on Monday.

Rio Tinto declined to comment on what was the most likely outcome of its review or how soon a decision would be made. Selling its stake would be an option.

A secessionist rebellion on Bougainville in 1989 stopped mining at BCL’s Panguna mine. The mine produced some 3 million tonnes of copper and 9.3 million ounces of gold over 17 years.

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UPDATE 5-BHP Billiton set to spin off unwanted assets – by Sonali Paul and Silvia Antonioli (Reuters U.K. – August 15, 2014)

http://uk.reuters.com/

MELBOURNE/LONDON, Aug 15 (Reuters) – Diversified mining company BHP Billiton declared its preference for a demerger of its aluminium, manganese and nickel assets on Friday, setting the stage for the formation of a separate business that could be worth at least $12 billion.

BHP said its board was considering a spin-off at meetings ahead of its annual results announcement next week. An Australian newspaper said those plans were well advanced and would include the Nickel West business that the world’s biggest miner has been trying to sell.

“A demerger of a selection of assets is our preferred option,” the company, which has a market capitalisation of $185 billion, said in a statement to the Australian stock exchange. BHP has long aimed to sell or spin off its manganese, aluminium and nickel assets, which contribute little to its earnings. Simplifying the company would “generate stronger growth in cash flow and a superior return on investment”, it said on Friday.

Some of the largest shareholders in BHP welcomed the announcement. “It’s good to see BHP taking the lead in the sector on this. It reassures you as a shareholder. It makes me more willing to have it as a significant bet within my fund,” said Christopher Moore, portfolio manager of Fidelity Global Industrials Fund.

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Talk will not solve mining’s problems – by Business Day Live Editorial (August 14, 2014)

http://www.bdlive.co.za/

A DAY after Deputy President Cyril Ramaphosa endured searing cross-examination at the Marikana commission of inquiry, government and mining stakeholders convened in Midrand to discuss some of the very issues he was being made to answer for.

The state of South Africa’s mining industry has been debated ad nauseam in the past few years, in particular after the Marikana massacre in 2012. What has been lacking is a clear plan to not only resolve the issues causing so much conflict, but also to put the industry in a position to meet historically high expectations from across the spectrum.

When the mining lekgotla was first convened two years ago, hopes were high that it would result in concrete steps being taken to pull the sector back from the brink. Since then it has seen more conflict, which includes the longest protected strike in the history of the country, in platinum mines.

The sector has also not won any new friends through its contribution to transformation and broader social development. In turn, the matters that have dogged the industry’s competitiveness for years continue to be an obstacle to further growth.

Rising input costs, including for electricity and labour, look far from abating, while policy uncertainty continues in mineral resources law amendments that appear to remain unattended in the president’s in-tray.

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COLUMN-Is China’s economy like Clouseau’s inflatable parrot? – by Clyde Russell (Reuters U.K. – August 14, 2014)

http://uk.reuters.com/

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

LAUNCESTON, Australia, Aug 14 (Reuters) – Why does the Chinese economy remind me of Chief Inspector Jacques Clouseau?

One of the many memorable scenes featuring the late Peter Sellers as the bumbling French detective comes in the Revenge of the Pink Panther, when he disguises himself as a peg-legged Swedish sailor, complete with an inflatable rubber parrot on his shoulder. [here ]

Problem is the parrot leaks, requiring Clouseau to flap his arm to operate a pump to re-inflate the bird, which eventually pops off as too much air is put in.

The connection to the Chinese economy is that once again a set of softer-than-expected economic numbers has the market anticipating that the authorities will act to boost activity. Like Clouseau’s parrot, every time the economy loses some air, the expectation is that it will be pumped up again and it will return to health.

The release of economic data that failed to meet expectations on Wednesday is the latest case in point. Credit figures showed that the amount of money flowing into the Chinese economy fell to a six-year low in July, while growth in investment, retail sales and bank lending was short of the market consensus.

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U.S. Mining Winning The Costs Race – by Tim Treadgold (Forbes Magazine – August 13, 2014)

http://www.forbes.com/

Mining booms are nearly always driven by rising commodity prices but what’s happening in the U.S. today indicates that falling costs are the driving force behind a revitalized interest in all forms of resources, from oil and gas to gold.

Activist investors, sometimes criticized for being too aggressive, have spotted the value gap developing between international mining and oil operations and those in the country winning the low-cost race, the U.S.

Cliffs Natural Resources CLF -3.04% and Apache APA -0.67% Corporation have been targeted by activist funds demanding the sale of high-cost, low-profit, assets in Australia, with Cliffs under pressure to sell an iron ore mine in Western Australia, and Apache planning to sell a 13% stake in a big Australian liquefied natural gas project being developed by Chevron CVX -0.5% Corporation.

Both U.S.-based companies will probably re-invest the capital generated in U.S. projects in much the same way some industrial companies are shifting their international operations back to the U.S. because it has become the global go-to destination, in some cases surpassing the long-term low-cost leaders, China and Germany.

Gold Cheapest To Mine In The Americas

In the commodity world, the value-gap is best illustrated by that universal material gold, with the cost profile of one company demonstrating why the U.S. is a preferred destination for new mine developments.

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Appeals court OKs permits for U.P. mine – by John Flesher (Detroit News – August 13, 2014)

http://www.detroitnews.com/

Associated Press – Traverse City — The Michigan Court of Appeals on Wednesday upheld a decision by state regulators to allow construction of a nickel and copper mine in the Upper Peninsula backwoods, the latest development in a 12-year legal and political struggle.

A three-judge panel ruled unanimously that the Department of Environmental Quality was within the law to approve mining and groundwater discharge permits for the Eagle Mine in Marquette County. Kennecott Minerals Co. began the project but its present owner is Lundin Mining Corp., a Canadian company.

Environmental groups, a Native American tribe and a private hunting and fishing club have fought to prevent the mine from being built since Kennecott conducted exploratory drilling in 2002, saying it poses numerous ecological risks. The department issued the permits five years later, a decision upheld by an administrative law judge and a circuit court before the appeals court took the case.

“Today’s ruling validates the MDEQ’s thorough and extensive permitting review process, which ensures responsible development with strong environmental protections,” said Dan Blondeau, spokesman for the mining company.

A spokesman for the National Wildlife Federation, one of the groups that challenged the permits, said no decision had been made about whether to appeal to the Michigan Supreme Court.

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Australian state approves $2 bln rail line for Adani coal project – by Sonali Paul (Reuters India – August 14, 2014)

http://in.reuters.com/

MELBOURNE – Aug 14 (Reuters) – India’s Adani Mining has won state approval to build a rail line for its $15 billion Carmichael coal project in Australia, it said on Thursday, bringing it a step closer towards making a final decision on whether to go ahead with the massive scheme.

The state of Queensland approved the A$2.2 billion ($2 billion) North Galilee Basin Rail project, a 300 kilometre (186 mile) railway to connect the Carmichael mine and potentially other mines in the untapped Galilee Basin to the east coast port of Abbot Point.

Despite analysts’ views that Adani’s project would be unprofitable at current coal prices, the company said it remained committed to pushing ahead with it to supply coal to power stations in India.

“Adani looks forward to continuing to work with our project partners and all levels of government to see this through,” Adani Mining, the Australian arm of Adani Enterprises, said in a statement.

Adani recently signed an agreement with POSCO Engineering & Construction Co Ltd to build the rail line. Costs and other details of the contract are due to be set by the end of this year.

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Regulate Canadian, Not American Metals Mine, Murkowski Says – by Alan Neuhauser (U.S. News and World Report – August 14, 2014)

 http://www.usnews.com/

The Alaska senator seeks greater environmental enforcement at a Canadian metals mine, but opposes regs at a similar mine in Alaska.

Sen. Lisa Murkowski, R-Alaska, has called for greater oversight of a Canadian metals mine – even as she lambastes federal regulation of a similar proposed mining project in Alaska.

“It’s an irony, because the risks associated with Pebble Mine are precisely those that we have seen unfolding before our eyes over the past week in British Columbia,” says Joel Reynolds, western director and senior attorney with the Natural Resources Defense Council. “That is to say, a major containment dam failure resulting in significant off-site contamination in salmon habitats.”

Last week, a dam containing the wastewater pond for Canada’s open-pit Mount Polley mine ruptured, sending millions of gallons of potentially contaminated water spilling into a river along the Alaska border (Canadian officials lifted a ban on drinking tap water Tuesday). Later that week, Murkowski dashed off a letter to Secretary of State John Kerry, urging him to impress upon Canadian leaders “the potential impacts that large-scale mining in Canada could hold” for the state’s fishing and tourism industries, as well as its indigenous population.

“The tailings pond breach at Mount Polley on August 4 has renewed the specter of environmental impacts from large-scale hardrock [sic] mineral developments in Canada that are located near transboundary rivers,” Murkowski wrote.

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Following B.C. disaster, Alaskans seek tougher review of Canadian mines – by Pat Forgey (Alaska Dispatch News – August 13, 2014)

http://www.adn.com/

JUNEAU — Following a massive mine waste spill in Canada, Alaska state and Canadian federal officials are being asked to do more to protect parts of Alaska downstream of several Canadian mines.

“That water belongs to us, too,” said Rob Sanderson, a Central Council of Tlingit and Haida Indians of Alaska vice-president and co-chair of the United Tribal Transboundary Mining Workshop.

He’s most concerned about the Kerr-Sulphurets-Mitchell mine in Canada east of Ketchikan, which he said is seven times the size of the Mount Polley Mine in interior British Columbia. The breach of the latter mine’s tailings dam contaminated the watershed of Canada’s important Fraser River.

“If that ain’t an eye opener down at Mount Polley, I don’t know what is,” Sanderson said of the KSM mine risks. “Could you imagine if they had a disaster like that at KSM if it was in full production, or even half production, it would be a disaster beyond words,” he said.

But state officials are defending provincial and federal regulators in Canada, and saying their environmental protection measures are as strong as those in Alaska or the United States.

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Lekgotla to reflect on bruised [South African] mining sector – by David McKay (Miningmx.com – August 12, 2014)

http://www.miningmx.com/

[miningmx.com] – CALL it bad luck, but Gold Fields may find itself in the naughty corner again as South Africa’s mining industry, its union, and government worthies gather again at the Mining Lekgotla – the talk-shop its participants insist isn’t a talk-shop.

Last year, the gold producer was the by-word for executive excess following revelations its CEO, Nick Holland, had been paid R45m in salaries and long-dated share awards.

For the current year, it’s the group’s shortcomings in implementing social and labour plans. This follows a Business Day article this week which cited a letter from the mineral resources department (DMR) threatening to suspend South Deep – Gold Fields most precious asset in terms of gold production and resources – unless it improved practices such as mentorship.

How employers treat employees will be seized with vigour at the lekgotla especially as Cyril Ramaphosa, South Africa’s deputy president and former non-executive director of Lonmin, acknowledged on August 12 that the platinum firm’s living-out allowance policy had “unintended consequences” leading up to the Marikana atrocity in August, 2012.

Gold Fields might therefore be subject to some tut-tutting, but they’ll also be questions about the looming mining charter deadline and who qualifies and who doesn’t for a medal, and just how empowerment obligations will be finally met by the industry.

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COLUMN-Australian coal miners running out of costs to cut – by Clyde Russell (Reuters India – August 13, 2014)

http://in.reuters.com/

Aug 13 (Reuters) – Coal miners in Australia have spent the past two years desperately cutting costs in a bid to survive falling prices, but this strategy is running out of steam.

While coal miners have been successful in lowering costs, they still haven’t managed to do it anywhere near as fast as prices have declined, and now the scope for further costs reductions is limited.

It’s likely that mining costs will start to rise again in the next year or two as the current round of cost-cutting has led to under-investment and a focus on extracting the easiest, or cheapest, to mine coal.

While coal miners are by nature a tough bunch, the prevailing sentiment at this week’s Coaltrans Australia conference in Brisbane was that prices need to increase soon or more mines will have to be shut, or placed on care and maintenance.

Data from consultants CRU illustrates the problem for coal miners in Australia, which is the world’s largest exporter of coking coal used in steel-making, and number two in thermal coal used in power plants.

This shows that mining costs have fallen, but only marginally, with site costs in New South Wales state dropping from around $65 a tonne in 2012 to $63 a tonne this year, while those in the other major producing state, Queensland, fell from about $61 to $60.

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SA sitting pretty on potential platinum powerhouse – by Ross Harvey (Business Day Live – August 11, 2014)

http://www.bdlive.co.za/

AT THIS week’s mining lekgotla, the future of the currently suppressed platinum industry is likely to be a key agenda item. Whether fuel cell technology takes off is a critical determinant of what this future might look like.

In its latest set of facts and figures, the Chamber of Mines states that “despite the significant role and contribution of the platinum mining sector to the South African economy, the industry is currently in a challenging position”.

It cites the combined effect of slowing global demand, market surpluses and associated declining prices, increasing production costs and the effect of continued labour relations strife as specific challenges.

The chamber also highlights weakness of demand for catalytic converters in Europe. Combined with some substitution of platinum by palladium — a challenge because of palladium’s much lower price — this suppressed demand suggests a break-even marginal return to platinum of $1,600/oz.

In South Africa, about “59% of the industry is either marginal or loss-making” as it is difficult to keep marginal production costs below $1,600/oz. The platinum price is at present around $1,460/oz, with a 200-day moving average of roughly $1,430. As a result, some investment analysts have gone so far as to say that there are no more profits to be made in platinum.

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Metal production expands 17.11% – by Czeriza Valencia (The Philippine Star – August 13, 2014)

http://www.philstar.com/

MANILA, Philippines – Philippine metallic production rose by 17.11 percent in terms of value in the first quarter of the year on increased revenues from gold production, the Mines and Geosciences Bureau (MGB) said yesterday.

The aggregate value of metal production for the first three months of the year is placed at P21.98 billion, up by P3.21 billion from P18.77 billion recorded in the same period last year.

Gold production accounted for 38.56 percent of the total production value during the period with aggregate earnings of P8.48 billion, up 17 percent from P7.27 billion in the comparative period.

Higher gold production during the first quarter was due to “substantial” increase in production in the following projects: Didipio gold project of Oceana Gold Philippines Inc. in Nueva Vizcaya, Toledo copper project of Carmen Copper Corporation in Cebu, and Padcal copper-gold project of Philex Mining Corporation in Benguet.

Revenues from direct shipping nickel ore and nickel sulfides comprised 34.80 percent of the total metal production value for the period at P7.65 billion.

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