International Media Resource Articles – Page 779

BHP to Pursue Potash Venture on Strong Return Expectation – by Nichola Saminather (Bloomberg News – August 25, 2013)

August 26, 2013

http://www.businessweek.com/

BHP Billiton Ltd. (BHP), the world’s biggest miner, will proceed with its plans for a Canadian potash project that has been called “misguided” by its biggest shareholder, driven by the prospect of strong investor returns.

“We are continuing on this investment because we strongly believe, and we’ve talked a lot about it with the board, this is going to offer very high returns for shareholders in the decades to come,” Chief Executive Officer Andrew Mackenzie said in an interview yesterday on the Australian Broadcasting Corp.’s ‘Inside Business’ program, according to an e-mailed transcript. “We have the best undeveloped green field mine on offer to the world and what we are doing, we will be prepared to respond very quickly to the market when it’s needed.”

Russia’s OAO Uralkali, the largest potash producer, in July quit a marketing venture with Belarus’s state producer that controlled about 43 percent of global exports and kept limits on production, and signaled prices may fall by as much as a quarter. BHP said Aug. 20 that its projections for the project assume a shift away from the current market dynamic.

Melbourne-based BHP last week said it’s seeking partners for the Jansen project after approving spending of $2.6 billion. The company has been approached and has approached possible purchasers of a stake in the project, Mackenzie said then. Jansen may cost $16 billion to build, Citigroup Inc. said last month.

In bustling Houston, it’s a case of ‘Build, baby, build!’ – by Anna Driver and Ilaina Jonas (4 Traders.com – August 25, 2013)

August 26, 2013

http://www.4-traders.com/

With Texas one of the few bright spots in the U.S. economy, the skyline of swaggering Houston is where the action is as builders and global oil companies, from Phillips 66 to Exxon Mobil Corp, look past previous busts and spend billions on gleaming new buildings.

The U.S. shale oil and gas revolution – which has already changed industries from railroads to pipelines and refineries – is helping drive the voracious appetite for office space needed for the expanding workforce in the world’s energy capital.

Demand is so hot that Houston is one of the few places where banks – including Wells Fargo & Co, which is seen as one of the more conservative big banks – will loan money for a new building without demanding developers first have a tenant.

“Houston is booming and bar none the strongest market in the United States of America,” said Joseph Sitt, chief executive of Thor Equities, which has two projects underway in Houston.

There are some 56 office buildings totaling at least 11 million square feet under construction in and around Houston, according to real estate services firm CBRE Group Inc. That is equivalent to 190 football fields.

Australia’s mining boom rolls on for Chinese entrepreneur in the outback – by James Regan (Reuters U.S. – August 25, 2013)

August 26, 2013

http://www.reuters.com/

SYDNEY – (Reuters) – Former Chinese commodities trader Jerry Ren, who is quietly building a mining empire in the Australian outback, scoffs at talk the resources boom is over. For him its just moved north.

As some mining firms clock up billions of dollars in losses, Ren has secured millions of acres of exploration rights in Australia’s most remote regions that could soon make him a billionaire, helped by his connections in the world’s biggest consumer of minerals China.

Ren, now an Australian resident, has already been dubbed the “$900-million-dollar-man” for his estimated net worth. “There’s still plenty of money and opportunity in Australia if you know where to look,” says Ren, the son of a steel mill engineer who grew up in the shadow of the Great Leap Forward, Mao Zedong’s disastrous attempt to modernize China’s economy.

Ren’s privately held Australian Oil & Gas company holds a 75 percent stake in exploration rights covering 70 million acres, 25 percent of Australia’s Northern Territory, or an area larger than Afghanistan.

Under-exploited by heavy hitters like BHP Billiton (BHP.AX) and Rio Tinto (RIO.AX) as Australia’s last boom took shape further south in established iron ore and coal fields, Ren has had a near-free run to stake his claims in the Territory.

Mining Industry Lukewarm on Changes[Indonesia] – by Tito Summa Siahaan (Jakarta Post – August 24, 2013)

August 26, 2013

http://www.thejakartapost.com/

The mining industry has welcomed government plans to stimulate investment in the sector but flagged as concerns the preservation of a 20 percent tax on mining exports and a lack of policy detail.

As part of a package of policies announced after a cabinet meeting on Friday, companies in natural resources, including nickel, bauxite and copper, will be eligible for tax holidays and allowances.

The government also plans to relax its mineral export quotas, which determines the proportion of resources that are not quarantined for domestic consumption.

Agus Suhartono, the vice chairman of the mineral entrepreneurs association Apemindo, said the government’s policies demonstrated priorities in conflict with the industry’s.

“Mining companies don’t have a problem with the quota,” said Agus, adding that the industry had increased output volumes despite the quota system. Indonesia Mining Association executive chairman Tony Wenas agreed, citing the growth in the nation’s nickel exports, which stood at 40 million tons for the first half of this year, up from 26 million tons in the same period in 2012.

The Great Potash Power Play – by Gabe Collins (The Diplomat – August 23, 2013)

August 26, 2013

http://thediplomat.com/

Potash is perhaps the world’s most strategic fertilizer. Mineable deposits are concentrated in a handful of countries, it cannot be synthesized, and crop yields suffer badly without it.

Russia-based Uralkali, the world’s largest potash producer, turned the global potash market on its head when it announced in late July 2013 it would market potash independently and stop selling through the Belarus Potash Company (“BPC”) marketing structure it previously used to coordinate exports and production.

Prior to Uralkali’s move, two major global marketers—BPC and Canada’s Canpotex—controlled around 70% of potash volume traded worldwide, which helped constrain supply and keep prices high.

Uralkali aims to boost its market share in China, where it is estimated that each 10 kilos of pork consumed requires 1 kilo of potash to produce, since Chinese pigs are increasingly fed with potash-hungry corn and soybeans. Similarly, every 44kg of rice eaten in China is thought to require 1 kg of potash to grow, with application intensity likely to rise in the year to come as China runs short of arable land and seeks to produce more grain from a static land area. Uralkali exported approximately 2 million tons of potash to China in 2012—primarily by rail—and now wants to increase this to 2.5 million tons per year, approximately 22% of China’s forecast 2013 potash demand.

INTERVIEW-Rio keeps focus on exploration while cutting costs – by Clara Ferreira-Marques (Reuters U.K. – August 23, 2013)

August 26, 2013

http://uk.reuters.com/

LONDON, Aug 23 (Reuters) – Big miners such as Rio Tinto can slash exploration spending and still make valuable finds but they must resist the temptation to stop searching entirely or they will pay later, the company’s head of exploration said.

The secret of successful exploration on a budget, according to Rio’s Stephen McIntosh, is prioritisation and planning.

“If something is not making it, we will get out quickly or divest that opportunity, so we can reinvest into something that will be of value to Rio Tinto,” McIntosh said.

Total withdrawal from exploration – attractive as it has no impact on current production – could hit earnings in decades to come especially at a time when smaller explorers and miners cannot raise cash to fill the gap left by big players.

Mining in Space – The Next Frontier? – by Chaitanya Giri (The Diplomat – July 16, 2013)

August 26, 2013

http://thediplomat.com/

Off-Earth mining is no longer science fiction. Pacific Rim countries lead the way.

Given the rising global demand for rare-earth elements (REE) and the necessity to synthesize exotic materials for numerous high-tech applications, extra-terrestrial mining is likely to become the next race in space.

REE are used in state-of-the-art electronics, nuclear technologies, lasers, super-magnets and green-energy technology. China, the world’s largest producer of REE, restricted its abundant supplies globally in 2009, citing the need to protect the environment. In fact, it was the mismanagement of reserves and increasing domestic high-tech production that compelled Beijing to cut REE exports from its Bayan Obo mining district.

In response to Beijing’s move, REE consumers and electronic manufacturers like Japan, the U.S and South Korea accelerated terrestrial exploration of reserves to maintain their industrial supplies.

In 2011, Japan succeeded in discovering REE in ocean-bed deposits in its Pacific Exclusive Economic Zone. Apart from exploration, the Japanese trading firm Sumitomo Corporation created a joint venture – Summit Atom Rare Earth Company – with Kazakhstan’s state-run nuclear agency KazAtomProm, to extract REEs from the abundant uranium tailings in Kazakhstan.

No excuse for Glencore Xstrata writedown – by Paul Murphy (Financial Times – August 23, 2013)

August 23, 2013

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

Argument claiming ‘accounting construct’ fails to convince

When large companies announce big asset impairment charges after a controversial takeover, as Glencore Xstrata did this week, two things happen.

First, the financial press bang the multibillion-dollar figure into a headline or two; then, almost immediately, ranks of investment banking analysts step up to explain, in condescending tones, that this is just an accounting exercise and really doesn’t matter since no cash was involved.

If the acquisition under debate involved the predator paying solely or largely in shares, as Glencore did in acquiring Xstrata, then those ignorant newspaper headlines are treated with complete disdain.

Step forward, then, Dominic O’Kane of JPMorgan Cazenove in London. As he told his clients on Wednesday: “$10.1bn of impairments/significant expenses, including a total of $8.8bn on XTA, were seized on by the press and sections of the market as evidence of the latest and perhaps most egregious example of capital misallocation in a sector with a poor recent track record. We would argue this misrepresents the true situation.”

Indonesia Allows More Metal Ore Shipments Before 2014 Export Ban – by Eko Listiyorini and Widya Utami (Bloomberg News – August 23, 2013)

August 23, 2013

http://www.businessweek.com/

Indonesia said that it will allow more shipments of unprocessed mineral ores for the rest of this year by dropping quotas before an export ban comes into force as planned in 2014. A 20 percent tax on exports will be retained.

“This is a temporary policy, until the 2014” ban on unprocessed ores is in place, Finance Minister Chatib Basri said in Jakarta today. “We see that the restriction or quota has caused a drop in exports revenue.”

Southeast Asia’s biggest economy unveiled a policy package today after a record current-account deficit and worse-than-estimated economic growth and inflation data prompted investors to sell stocks and drove the rupiah to its weakest level since 2009. The country is the largest exporter of refined tin and thermal coal.

“Commodity prices remain weak, the mining sector’s profitability is declining rapidly, and government receipts through royalties and taxes would have suffered if the government had not taken any measures,” said Xavier Jean, a Singapore-based director of corporate ratings at Standard & Poor’s. “This is not coming as a surprise.”

Mosaic Deal Hopes Fade as BHP Bets on Own Potash Mine: Real M&A – by Tara Lachapelle and Elisabeth Behrmann (Bloomberg News – August 22, 2013)

August 23, 2013

http://www.businessweek.com/

Mosaic Co. (MOS:US)’s takeover prospects are diminishing after BHP Billiton Ltd. (BHP) renewed a commitment to building its own potash mine.

BHP this week said it plans to see the Jansen potash project through to production as it invests $2.6 billion and seeks partners, damping speculation that the world’s biggest mining company may still consider a purchase of fertilizer maker Mosaic. Mosaic’s enterprise value has fallen to $14.8 billion, about the same as the estimated cost of constructing Jansen, its first potash mine.

Buying Mosaic would have been a logical alternative to building Jansen, which may not begin producing fertilizer until 2020, Sanford C. Bernstein & Co. said. Mosaic became a cheaper target this month as it dropped to its lowest price relative to book value on concern that the breakup of a Russian-led export venture will flood the market with supply and suppress potash prices. Even as hurdles to a sale of Mosaic were lifted this year, potential buyers are scarce, especially as BHP’s new project promises even more supply to come.

“The additional spending shows BHP wants to go ahead with Jansen,” Paul McTaggart, a Sydney-based analyst at Credit Suisse Group AG, said in a phone interview. “There’s now no turning back.”

Resource nationalism can mean growth and prosperity – by Nick Holland (South Africa Business Day – August 16, 2013)

August 23, 2013

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

Nick Holland is the CEO or Gold Fields.

AT A time when the global mining industry is besieged by falling commodity prices, soaring input costs and investor apathy, resource nationalism strikes fear into the hearts of many mining executives and investors. At Gold Fields we have a different view.

We are strongly in favour of a more equitable distribution of the benefits of the mining economy, provided that we — governments and the mining industry — are aligned on which economic pie it is we are sharing. Is it the ever-shrinking mining earnings pie that has become the norm in most countries, or is it the growing mining economy pie so elusive to most countries?

A debate of this sensitivity requires well-defined parameters. We view resource nationalism as “government actions to extract the maximum developmental impact and value from a country’s natural resources for its people”. We believe this is the right, if not the duty, of every government.

Most developing countries with a natural resource endowment, including South Africa, have a legacy of poverty and inequality. To address this, and to see more sustainable growth, we need to maximise the socioeconomic benefits from the extraction of natural resources without shrinking the mining pie.

INTERVIEW-Rio keeps focus on exploration while cutting costs – Clara Ferreira-Marques (Reuters India – August 23, 2013)

August 23, 2013

http://in.reuters.com/

The secret of successful exploration on a budget, according to Rio’s Stephen McIntosh, is prioritisation and planning. “If something is not making it, we will get out quickly or divest that opportunity, so we can reinvest into something that will be of value to Rio Tinto,” McIntosh said.

“If you stop your most fundamental greenfield exploration, for the majors you won’t miss it for a very long time. But you will wake up one day, want to the go to the cupboard of future options and find it a little bit bare,” McIntosh said in a telephone interview from Singapore. Cutting exploration, has proved an easy win for miners under pressure, as prices and demand cool, to reduce costs that ballooned during the boom years.

Barrick Gold sells mines to Gold Fields as part of restructuring – by James Wilson and Andrew England (Financial Times – August 22, 2013)

August 22, 2013

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

London/Johannesburg – Barrick Gold has started its promised restructuring by selling a trio of Australian gold mines to industry rival Gold Fields.

The $300m sale will help the Canadian miner’s stretched balance sheet and will switch Gold Fields’ main production focus away from western Africa to Australia, where it will bundle assets with its existing mines to try to lower costs.

Barrick, the world’s largest gold miner by volume, flagged the possible sale of the Yilgarn South mines earlier this month, when it posted an $8.6bn quarterly loss. The loss was linked to writedowns to asset values because of the fall in the price of gold this year.

The three mines at Yilgarn South produce 452,000 ounces of gold annually, equivalent to about a quarter of Gold Fields’ annual output. Barrick said the sale would not change its plan to produce between 7m and 7.4m ounces this year.

Nick Holland, Gold Fields’ chief executive, said there was “considerable opportunity for cost synergies” between the Lawlers mine, one of the Yilgarn South group, and its adjacent Agnew mine.

South Africa all but off BHP Billiton’s radar screen – by Martin Creamer (MiningWeekly.com – August 21, 2013)

August 22, 2013

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

JOHANNESBURG (miningweekly.com) – South Africa has all but fallen off the radar screen of BHP Billiton, the world’s biggest mining company, which on Tuesday reported an 8.7% fall in revenue to $65.9-billion for the year ended June.

The name of the country did not cross the lips of new CEO Andrew Mackenzie and one got the impression that this region’s aluminium, thermal coal and manganese interests are hanging on by a thin thread in a company dominated by iron-ore, oil, copper and coking coal.

When BHP and Gencor/Billiton of South Africa merged at the start of the new millennium, the South African assets helped to lift the chin of a then downcast BHP.

The performance of then standalone BHP, which in merged form has paid out more in dividends than the rest of the mining world put together, was so mediocre that the Economist of London scoffed that the letters BHP really stood for Broken Hearted People, and not Broken Hill Proprietary.

But the powers that be are clearly in no mood to return the favour; instead they are directing any tender, loving care they still have towards potash risk at Jansen in Canada, which is still a cost centre.

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

August 22, 2013

http://www.reuters.com/

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.