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Rio’s Oyu Tolgoi woes deepen – by Matt Chambers (The Australian – April 22, 2014)

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

MONGOLIA has stepped up criticism of Rio Tinto over continuing delays to expansion of the pair’s $US11.5 billion ($12.3bn) Oyu Tolgoi copper and gold mine, revealing a big divide still stands in the way of the profitable second stage of the giant mine.

In a letter to Rio chief Sam Walsh leaked to the Mongolian press at the weekend, Prime Minister Norov Altankhuyag chided Rio over behind-the-scenes moves to declare it was seeking an end-of-year extension to project financing for the $US5.1bn underground expansion of Oyu Tolgoi.

Lenders’ commitments for a $US3.6bn financing package for the stalled expansion expired last month because Rio and the government could not agree on Mongolia’s take from the project, access to water, and a $US2bn cost blowout on the first-stage ­expansion.

The disagreement threatens to derail the underground expansion of the project, which is where most of the value is set to be ­realised. The March 27 letter from Mr Altankhuyag, who has declared Mongolia is ready to wrap up the funding, shows the government is unhappy with Rio’s public statements on the project.

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BHP Needs Rebound, Not Spinoffs, Amid Metal Slump: Real M&A – by Angus Whitley and Elisabeth Behrmann (Bloomberg News – April 17, 2014)

http://www.businessweek.com/

A spinoff of BHP Billiton Ltd.’s (BHP) least-loved assets may do little for shareholders of the world’s largest mining company.  BHP, which is wringing out costs after a decade-long mining boom ended, said this month it’s studying “structural options” to help narrow its focus to four commodities including iron ore. With mines aging and new oil and gas fields becoming harder to find, BHP’s return on invested capital has sunk to the lowest since 2003, according to data compiled by Bloomberg.

Separating the nickel, manganese and aluminum assets from BHP probably wouldn’t boost profit at either the new or old entity, said Sanford C. Bernstein Ltd. Profit margins for the unfavored business have evaporated at the bottom of the commodity cycle and CLSA Asia-Pacific Markets said a spun-off company may be valued at $7.5 billion, just 4 percent of Melbourne-based BHP’s market value.

“There’s a long history of the larger companies succumbing to the cyclical pressures,” John Robertson, director at EIM Capital Managers Pty in Melbourne, said by phone. “If you’re going to float off a large chunk of assets that currently have a low return on capital, unless somebody’s got a magic wand, it’s really not going to do much.”

In 2011, as China devoured everything from iron ore to copper to feed economic expansion, BHP’s return on invested capital was 35 percent, Bloomberg data show. The figure slumped to 10 percent two years later because of slower Chinese growth and costs that were still aligned with a resources boom.

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Ludlow massacre spurred New Deal labor reforms – (Associated Press/Washington Post – April 18, 2014)

http://www.washingtonpost.com/

DENVER — A century ago this Sunday, 11 children and two women died in a fire that followed a shootout between the Colorado National Guard and striking coal miners at a tent camp in southern Colorado.

What became known as the Ludlow Massacre quickly evolved into a national rallying cry for labor unions and eventually helped lead to New Deal labor reforms. But over the years, the tragedy has been largely forgotten, even among many in Colorado.

To mark the centennial, a Greek Orthodox Easter service will be held Sunday on the prairie where the women and children died on April 20, 1914. They had hidden in a dugout beneath the tent colony when the fire roared through the camp. The miners came from many countries; mining rules were posted in 27 languages. But most had joined fellow Greek strikers in celebrating Orthodox Easter the day before.

The United Mine Workers of America plans a May memorial at the site about three hours south of Denver with descendants of labor activist Mother Jones, who was jailed twice for refusing to stay away from the strike zone. The deaths at Ludlow came during a strike launched in September 1913 by miners whose living conditions were largely controlled by Colorado Fuel & Iron, owned by John D. Rockefeller Jr.

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Harold Hamm: The Billionaire Oilman Fueling America’s Recovery – by Christopher Helman (Forbes Magazine – April 16, 2014)

 http://www.forbes.com/

This story appears in the May 5, 2014 issue of Forbes.

Harold Hamm has transformed the U.S. oil industry like no one since John D. Rockefeller, while helping to keep domestic prices low — and making himself a $17 billion fortune. The great domestic energy boom, he says, is just beginning.

Two Scotches in, with seats on the floor of Oklahoma City’s Chesapeake Energy CHK +0.96% Arena, Harold Hamm is feeling good. And why not? His hometown Thunder is spending the evening whupping the Philadelphia 76ers. Earlier Hamm announced big bonuses for Continental Resources CLR +1.99% employees, courtesy of record oil production. And a judge’s ruling, revealed that morning, in Hamm’s divorce case suggested the energy tycoon would keep the Continental shares he already owned when he married soon-to-be-ex Sue Ann Hamm 26 years ago. With that chunk of stock, encompassing about $16 billion out of his $16.9 billion fortune, Hamm owns 70% of Continental.

As every wildcatter knows, such is life in the oil patch when you’re on a hot streak. And Hamm’s on perhaps the most epic one in domestic energy history, perhaps save for John D. Rockefeller’s. No one, aside from kings, dictators and post-Soviet kleptocrats, personally owns more black gold–Continental has proved reserves of 1 billion barrels, mostly locked underneath North Dakota. Hamm took the company public in 2007–and shares are up 600% since, as the revolution in horizontal drilling has given America a cheap energy booster shot, fueling factories, keeping a lid on gas prices and adding millions of jobs.

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Why the Great Wash U Sit-in Against Peabody Coal Matters: Which Side Are You on? – by Jeff Biggers (Huffington Post – April 16, 2014)

http://www.huffingtonpost.ca/

Entering its second week, the inspiring Washington University sit-in against Peabody Energy has already gone beyond its goals to cut school ties with the St. Louis-based coal giant, and forced the rest of the nation to ask themselves an urgent question in an age of climate change and reckless strip mining ruin: Which side are you on?

Will other schools, alumni groups — and investors in Peabody Energy — follow the lead of the Washington U. students?

Case in point: Tonight in my native Saline County in southern Illinois, the county commissioners genuflected to short-term Peabody coal dollars over the “negative impact on about a dozen homeowners who live near the site of the proposed mine,” according to one cynical commissioner, and voted to allow the company to close off Rocky Branch road for a proposed strip mine expansion, despite the lack of EPA permits, and documented evidence of flooding, blasting and emergency access problems.

Facing financial ruin, grave heath problems and displacement, the Rocky Branch residents will fight on, thanks to the Wash U. students, and continue to tell the truth: We all live in the coalfields now, in this age of climate change, and it is no longer acceptable to allow anyone to be collateral damage to a disastrous energy policy.

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COLUMN-China economic data shows trend to less-intensive commodity use – by Clyde Russell (Reuters U.K. – April 16, 2014)

http://uk.reuters.com/

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

LAUNCESTON, Australia, April 16 (Reuters) – China’s economic growth data contains a short-term positive and longer-term negative for commodity demand in the world’s largest user of raw materials.

The positive is that gross domestic product (GDP) growth of 1.4 percent in the first quarter is soft enough to justify the mini-stimulus spending on infrastructure planned by the authorities.

While many in the market will focus on the year-on-year GDP growth of 7.4 percent being ahead of the market consensus for 7.3 percent, the more important figure is the quarterly outcome. If annualised, this would come in at 5.8 percent, well below the government’s target for 7.5 percent growth.

Even a mini-stimulus that boosts spending on rail and other infrastructure would be positive for demand for major commodities, such as iron ore, copper, crude oil and coal. There are, of course, risks to the short-term outlook in the form of a crackdown on using commodities as collateral for financing deals.

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3 Reasons Why Palladium Prices Should Continue To Surge – by Royston Wild (Forbes Magazine – April 15, 2014)

http://www.forbes.com/

A confluence of factors have propelled palladium to multi-year peaks in the past few days. Recent highs above $800 per ounce representing the highest level since March 2011, and for some a march towards 2001′s all-time high of $1,090 is considered a very real possibility.

I am amongst those who reckon that palladium is poised to enjoy further solid price appreciation, and here I outline the three major factors which should continue to drive the metal skywards.

Russian shipments on the wane

The escalating political crisis in Ukraine has been a significant driver of palladium’s ascent in recent weeks, with Russia’s alleged involvement in the conflict prompting the US and the European Union to discuss imposing heavy economic sanctions on the country.

Norilsk Nickel is the world’s largest producer of the precious metal, and last year the company produced 2.58 million ounces of the material, or about 40% of total global supply. So the possibility of trade restrictions being placed on Russia could be catastrophic for metal supplies.

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UPDATE 2-BHP and Australian rivals raise iron ore targets as competition grows – by James Regan (Reuters India – April 16, 2014)

http://in.reuters.com/

SYDNEY, April 16 (Reuters) – Australian miners are racing ahead with plans to expand iron ore production to capture more of the Chinese market for the steelmaking ingredient, amid strong competition from the world’s biggest supplier Vale of Brazil.

Efforts to beat already ambitious output targets comes as a crackdown in China on using commodities as collateral to raise cash risks unleashing iron ore sales from tens of millions of tonnes sitting in Chinese port warehouses, pressuring prices.

Fortescue Metals Group Ltd, which is raising production 57 percent this year, says its needs iron ore prices to stay between $110-$120 a tonne for the next 12-18 months in order to pay off a targeted $2.5 billion in debt.

The Australian Bureau of Resources and Energy Economics forecast an average price of $110 a tonne this year but only $103 a tonne in 2015. By 2016, Citigroup sees the price falling to $80.

Iron ore was quoted at $117.10 .IO62-CNI=SI on Wednesday. BHP, the world’s biggest diversified mining company, on Wednesday lifted full-year iron ore production guidance by 5 million tonnes to 217 million as it pushes ahead with new mine work in Australia.

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Vale Lands $2.8 Billion Brazil Funding for Iron Expansions (1) – by James Attwood (Bloomberg News – April 15, 2014)

http://www.bloomberg.com/

Vale SA (VALE5) secured 6.2 billion reais ($2.8 billion) of funding from Brazil’s state development bank for expansions at Carajas, the world’s largest iron-ore complex.

The BNDES loan will help finance Rio de Janeiro-based Vale’s railway network and a new mining and processing unit in Para state with annual capacity of 90 million metric tons, the bank said in a statement distributed by e-mail today.

Chief Executive Officer Murilo Ferreira is seeking to recover ground in the seaborne iron-ore market that it lost to Australian rivals BHP Billiton (BHP) Ltd. and Rio Tinto Group since 2007. Serra Sul, part of Carajas in northern Brazil, is the industry’s most expensive project ever at almost $20 billion.

The expansion and related distribution network will generate about 30,000 jobs at the peak of construction and is scheduled to start operating in 2016, BNDES said. It will be the first major iron-ore venture to fully replace in-mine trucks with conveyor belts, according to the miner.

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UPDATE 2-Bad weather cuts Rio Tinto’s iron ore shipments – by James Regan (Reuters India – April 15, 2014)

http://in.reuters.com/

SYDNEY, April 15 (Reuters) – Rio Tinto’s iron ore shipments fell 8 percent in the first-quarter from the previous quarter due to weather-related disruptions in Australia and Canada, but the miner said it was on track to meet its full-year target.

Production still jumped 16 percent on the same quarter a year ago as the world’s No. 2 iron ore producer behind Brazil’s Vale ramps up production at its Australian mines to meet growing demand from China.

“It appears they were hit a litle harder than we expected by the weather, though we don’t see any issues in meeting their full-year target,” said RBC Capital Markets analyst Chris Drew.

Iron ore has replaced other industrial and precious commodities such as coal, gold and silver as the mineral with the most profit potential, delivering bumper earnings for giant low-cost miners such as Rio and BHP Billiton.

Iron ore prices .IO62-CN=SOI have recovered 12 percent since a steep dip in March on weaker Chinese steel prices. At the current price of $117 a tonne, Rio Tinto enjoys a profit margin of over $60 a tonne.

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Copper miners look past present pain to future gain – by Xan Rice (Financial Times – April 14, 2014)

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

Santiago – These are tough times in the copper world. Prices have fallen nearly 10 per cent in 2014, testing four-year lows. Meanwhile, the long-awaited global surplus of refined metal is mounting. So why is the gloom lifting among miners?

“Short-term pain, long-term gain?” – the title of one of the main presentations at the annual copper conference in Chile – offered a hint: better days surely lie ahead.

Several key reasons to be positive emerged from Cesco week in Santiago. First, the plunge in prices is no disaster. Some small, high-cost producers may be struggling, but the industry’s healthy margins mean larger miners and producers remain comfortable.

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COLUMN-BHP’s “unloved” assets may be better long-term bet – by Clyde Russell (Reuters U.K. – April 14, 2014)

http://uk.reuters.com/

LAUNCESTON, Australia, April 14 (Reuters) – “Unloved” was a word that popped up several times in relation to BHP Billiton’s mooted plans to spin-off its non-core aluminium, nickel and manganese businesses.

It’s worth looking at the language used to describe and frame corporate plans as this is more often revealing that the bland statements companies tend to issue.

BHP Billiton didn’t use the word “unloved” itself, that was the description applied by news outlets, among them Reuters, the Sydney Morning Herald and the Wall Street Journal.

What BHP Chief Executive Andrew Mackenzie did say was the world’s largest mining company was looking at a range of options in the “next phase of simplification,” but would only pursue those that enhanced shareholder value.

BHP has identified four key pillars of its business – iron ore, copper, coal and petroleum – with potash a potential fifth. This leaves the so-called unloved assets as aluminium, alumina, bauxite, nickel and manganese.

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Anglo seeks buyer for Rustenburg operations – by Staff Writer (Business Day Live – April 14, 2014)

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

ANGLO American is seeking a buyer for its Rustenburg platinum mines as the group looks elsewhere to extract the metal, CEO Mark Cutifani said on Friday. In a BusinessDay TV interview with editor Peter Bruce, Mr Cutifani said the skills within Anglo could be better deployed elsewhere than the deep-level, labour-intensive and technically complex mines that make up Rustenburg.

The mines under consideration are operated by Anglo American Platinum (Amplats), an 80% held Anglo subsidiary. Mr Cutifani has indicated before that Rustenburg was no longer a core asset, but this was the first time he has been explicit about wanting another party to own the mines.

His comments have a deeper resonance as a strike at the mines enters a third month. “The Rustenburg resource is not what it used to be,” Mr Cutifani said. “I don’t think that’s where our best skills set sits.

“That’s why I’ve been quite vocal saying we should consider taking a step back from Rustenburg. We should be focusing on the more mechanised operations, which is what I think we do much better, and allow someone who has a better skills set in those types of mines to run those kinds of assets,” he said.

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Coal sector muscles up to green activists – by Sarah-Jane Tasker (The Australian – April 14, 2014)

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

AUSTRALIA’S coal industry is hitting back at its vocal opponents and returning fire with the tools used by anti-coal activists as it steps up its campaign to gain support for the struggling sector.

The industry, which has ­increasingly become a target by activists determined to close coalmines, has taken the unusual step to publicly muscle up in its fight with the green movement and launch an active campaign.

The Minerals Council of Australia, backed by the world’s largest coalminers, such as BHP Billiton, Rio Tinto and Glencore, will today launch a website — Australians for coal — to give a voice to the sector.

Brendan Pearson, chief executive of the Minerals Council, said the website was an ­opportunity for the silent majority to have a say and not let what he says are the small number of noisy extremists get free air.

“A small number of fringe ­activist groups are doing their level best to undermine the sector,” he said.

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Montana Moment: Miners win eight-hour workdays – by Kristen Inbody (Great Falls Tribune – April 12, 2014)

http://www.greatfallstribune.com/

The moment: Butte miners win eight-hour workday in 1901.

The story: Children grew up in Butte attuned to the sounds that signaled death and disaster in the mines, sounds that could leave them fatherless, as accidents killed a miner every other day in Butte in the 1890s.

One woman lost three husbands in a row to the mines, with children from each to support on her own, wrote Janet Finn in her “Mining Childhood.” Another former child of Butte recalled a widow with 20 children who became a midwife, rustled railroad ties, had a cow, baked bread and took in washing, which her children delivered.

Mines were opportunities and peril, bread on the table and a stake in a new land for 8,000 miners pulling 210 million pounds of copper a year from five square miles. Against a rising swell of populism, Butte unions lobbied for better pay and safer conditions. Unions helped members when they were sick, paid for funerals and gave workers a voice. A campaign for a balanced day of eight hours of work, eight hours of leisure and eight hours of sleep became a rallying cry for workers around the industrialized world. A 12- to 14-hour workday was the norm.

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