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Chinese copper demand could catch short-sellers by surprise – by Eric Onstad (Reuters U.S. – August 5, 2013)

http://www.reuters.com/

LONDON, Aug 5 (Reuters) – Gloom over weaker economic growth in China has led some investors to miss signs of robust underlying copper demand, which may wrong-foot those betting on a further slide in prices.

Benchmark prices in copper, viewed by many investors as a proxy for global economic health, hit the lowest levels in nearly three years at $6,602 a tonne in late June.

The price on the London Metal Exchange (LME) slid 21 percent from a peak this year in February, mainly due to worries about China, which accounts for 40 percent of copper demand. It has since rebounded modestly to trade just under $7,000 a tonne.

Despite China’s weak factory data and a credit crunch, spending on the power grid and other areas has meant copper consumption is fairly buoyant in the world’s biggest metals consuming nation.

China’s apparent copper demand, after adjusting for changes in stocks, surged over 20 percent in the second quarter, Barclays analyst Gayle Berry said.

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Zimbabwe to Seize Mines While Compensating Banks – by Franz Wild (Bloomberg News – August 6, 2013)

http://www.bloomberg.com/

President Robert Mugabe’s government plans to seize control of foreign-owned mines without paying for them as part of a program to accumulate $7 billion of assets following his July 31 election victory, a minister said.

The government will compensate bank owners as it takes control of their companies, Saviour Kasukuwere, the minister in charge of the program to compel foreign companies to cede 51 percent of their assets to black investors or the government, said in an interview in Harare, the capital, today. His comments echo a suggestion made by Mugabe earlier this year.

“When it comes to natural resources, Zimbabwe will not pay for her resources,” Kasukuwere said. “If they don’t want to follow the law that’s their problem.” Non-compliant mine owners risk losing their licenses, he said.

Anglo American Platinum Ltd. (AMS), Impala Platinum Holdings Ltd. (IMP), Barclays Plc (BARC) and Standard Chartered Plc (STAN) are among companies that operate in the country. Other industries may have to yield smaller stakes to black owners, Kasukuwere said. Metals and minerals, including platinum and gold, accounted for 71 percent, or $719.9 million, in exports in the first four months of this year, the state-controlled Herald newspaper said, citing the finance ministry.

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Despite gloom, prices for commodities China consumes are up – by Clyde Russell (Reuters India – August 6, 2013)

http://in.reuters.com/

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

LAUNCESTON, Australia, Aug 6 (Reuters) – It’s not hard to find bearish commentary on the outlook for China’s commodity demand, but every so often a little bit of information contrarian to the prevailing market views comes along.

Such a snippet is the latest China Commodity Index compiled by ANZ Banking Group, which shows the weighted average price for a basket of commodities imported by China rose to a three-month high last week.

The index gained 0.6 percent in the week ended Aug. 2, with only industrial metals detracting from the increase. It’s 0.4 percent higher than three months ago, but 2.7 percent below the level a year earlier.

Although it doesn’t have a long history, the ANZ index is useful as it tracks 22 major commodities and is weighted to reflect China’s consumption. The idea that prices of commodities most commonly used in the world’s largest consumer are at a three-month high appears at odds with other recent evidence that economic growth is stalling.

The rise in the official Purchasing Managers’ Index to 50.3 in July from 50.1 in June has been about the only significant recent Chinese economic data that has surprised on the upside.

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The Price Of Gold Is Dropping Like A Brick – by Mark Williams (WBUR Boston NPR – August 6, 2013)

http://www.wbur.org/

Watch out for that shiny pendulum because it’s swinging back fast. Investors are chasing stocks and real estate and fleeing gold. The two former asset classes have experienced solid returns since 2012 while gold has suffered double-digit declines.

Large cracks in the “go-long-gold” strategy are evident. Economic weaknesses in Europe remain but no financial Armageddon has emerged. Keynesian economics remain the drug of choice, Japan being the latest user, yet inflation is non-existent. The strength of the dollar and the increased willingness of the Fed to taper quantitative easing undermine higher gold prices. Investor support is crumbling and gold bugs, those believing it is a stable investment, should be nervous.

Since the historic highs of 2011, gold has dropped by over 30 percent. In 2013 alone, investors have begun to give back several years of gains. Recent paper losses for hedge funder John Paulson have topped $1 billion. In just the last six months, gold has dropped by 22 percent, the worst fall since modern trading commenced in early 1970s. Gold is locked in a bear strangle and prices have plenty of room to fall still further.

It has taken over a decade but the bubble has finally been pricked. The pin that popped this most recent asset swelling is not complicated.

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Falling profits for Vale – by Reuters and Star Staff (August 6, 2013)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Battered by falling iron ore and nickel prices, Vale on Wednesday is expected to report a 30% drop in second-quarter profit to $1.85 billion US from a year earlier, analysts are predicting. If so, it would be Vale’s eighth consecutive quarterly profit fall, according to the average preliminary estimates of seven analysts surveyed by Reuters.

Most of the decline is due to a 12% drop in average iron ore prices and a 38% decline in nickel prices, more than offset-t ing increases in volumes shipped by the world’s No. 1 iron ore miner and No. 2 nickel producer.

Its shares have been the worst performer among the world’s big five mining companies, down 27% this year, despite a rally from nearly four-year lows in July. Of the big five, Rio Tinto, Brazil’s Vale, Glencore Xstrata and Anglo American are expected to report sharp drops in profit.

They have been slammed by weaker copper, iron ore and coal prices as they struggle to sell off assets. Anglo — the first of the diversified majors to publish results — said last week underlying operating profit fell in the six months to $3.3 billion, ahead of a consensus estimate of $3.12 billion.

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Miners won’t get a leg-up from state – by Malavika Santhebennur (Mining Australia – August 5, 2013)

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

Gold and nickel miners will not get a lifeline from West Australian premier Colin Barnett, who said he will not be handing out royalty assistance to those affected by falling commodity prices.

Barnett argued modifying royalties due to price variation was not a good idea, saying the cyclical nature of the mining industry is a well known fact. “I know this is a tough time and some of the high-cost producers struggle. [But] at the end of the day the state government owns the minerals and companies pay the equivalent of 10 per cent of the value of the mineral. I think that’s a pretty good price.”

Miners, small and large, have had to cut the fat from their companies as commodity prices fall. They have been curtailing capital expenditure, cutting jobs and slashing operational costs.

BHP recently slashed 100 jobs across its six Nickel West operations in WA in May. The company said many operational roles will feel the brunt. The company also flagged in July it will move service contracts in-house in the Pilbara as it looks to cut contractors to cut costs.

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Indonesia’s consumer and natural resources boom falters – by Ben Bland (Financial Post – August 2, 2013)

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

Jakarta – Mitra Adiperkasa, the retail group that operates Burger King, Zara and a host of other international food and fashion brands in Indonesia, has ridden the wave of middle-class consumption that transformed Southeast Asia’s biggest economy into one of the world’s hottest emerging markets.

But the group is scaling back its expansion plans and capital expenditure next year, for the first time since 2009, as Indonesian companies contend with problems including rising inflation and slowing Chinese growth.

“The main challenge for us is rising costs,” says Fetty Kwartati, head of investor relations at Mitra Adiperkasa, with salary and rental expenses increasing more quickly than sales. The company plans to open 60,000-70,000 square metres of new space next year, down from 90,000 square metres this year. Rising consumer spending has been one of the two pillars of Indonesia’s exuberant growth in recent years, alongside burgeoning natural resource exports.

But the latter has been badly affected by the slowdown in China, a major buyer of Indonesia’s coal, palm oil and rubber.

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A Shuffle of Aluminum, but to Banks, Pure Gold – by David Kocieniewski (New York Times – July 20, 2013)

http://www.nytimes.com/

MOUNT CLEMENS, Mich. — Hundreds of millions of times a day, thirsty Americans open a can of soda, beer or juice. And every time they do it, they pay a fraction of a penny more because of a shrewd maneuver by Goldman Sachs and other financial players that ultimately costs consumers billions of dollars.

The story of how this works begins in 27 industrial warehouses in the Detroit area where a Goldman subsidiary stores customers’ aluminum. Each day, a fleet of trucks shuffles 1,500-pound bars of the metal among the warehouses. Two or three times a day, sometimes more, the drivers make the same circuits. They load in one warehouse. They unload in another. And then they do it again.

This industrial dance has been choreographed by Goldman to exploit pricing regulations set up by an overseas commodities exchange, an investigation by The New York Times has found. The back-and-forth lengthens the storage time. And that adds many millions a year to the coffers of Goldman, which owns the warehouses and charges rent to store the metal. It also increases prices paid by manufacturers and consumers across the country.

Tyler Clay, a forklift driver who worked at the Goldman warehouses until early this year, called the process “a merry-go-round of metal.”

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Nickel producers fend off output cuts as losses mount – by Melanie Burton and James Regan (Reuters U.S. – August 2, 2013)

http://www.reuters.com/

SINGAPORE/SYDNEY Aug 2 (Reuters) – Nickel miners are clinging to plans to maintain production, despite a growing supply glut and prices around four-year lows, raising the risk of more writedowns and losses being unveiled in the current financial reporting season.

France’s Eramet this week reported a first-half operating loss and warned the second half would be worse due to weak nickel prices, while other top producers such as Vale SA , Glencore Xstrata and BHP Billiton report in the next few weeks.

Between a quarter to a half of the nickel sector could be running at a loss, according to industry estimates, hit by weak demand from China, the world’s top producer and consumer of stainless steel. Nickel is a key component of stainless steel.

Nonetheless, few miners have yet made deep cuts in output and the trend is set to put more pressure on depressed prices.

“It’s a staring contest, no one wants to be the first to take the pain,” said Robin Bhar, an analyst at Societe Generale in London.

Three month nickel on the London Metal Exchange hit $13,205 a tonne on July 9, the lowest since May 2009 and down from nearly $19,000 in February. Nickel is the worst performer on the exchange so far this year, down nearly 20 percent.

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Tanzania: Kabanga Nickel Project – Light At the End of Long Tunnel – by Meddy Mulisa (All Africa.com – August 2, 2013)

http://allafrica.com/

Bukoba — THE much-awaited Kabanga Nickel Project will soon start its operations, bringing fresh hopes to many in terms of labour and employment, according to President Jakaya Kikwete during his recent tour of Kagera Region.

Kabanga Nickel is an active mine exploration project 130 kms south west of Lake Victoria in Ngara District, Kagera Region. The project is a joint venture between Barrick Gold and Xstrata Nickel.

The Minister for Energy and Minerals, Prof Sospeter Muhongo said the government would buy shares which would later be sold to wananchi. He also appealed to Tanzanians to grab the opportunity for their wellbeing. He said a total of 80 megawatts would be produced at Rusumo Falls to generate power at Kabanga Nickel.

“This is a joint project between three countries -Tanzania, Burundi and Rwanda with each country taking 27 megawatts. Kabanga’s 58 million tonne nickel resource is regarded as one of the best undeveloped greenfield nickel sulphide deposits in the world. Since 2005, there has been continued progress made in the development of the Kabanga Nickel Project with a significant investment to date of over US$205 million in drilling and evaluation studies.

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Norilsk sees Indonesia ore ban supporting nickel price – by Fergus Jensen (Reuters U.S. – August 1, 2013)

http://www.reuters.com/

JAKARTA – Aug 1 (Reuters) – Nickel prices could recover next year, when Indonesia brings in a planned ban on unprocessed ore exports, said executives from Russia’s Norilsk Nickel, the world’s largest producer of the metal.

Indonesia is the world’s top exporter of nickel laterite ore, which is mostly shipped to China to be used as a cheap substitute for nickel in stainless steel.

A strictly enforced ban on exports of ore would support demand for refined nickel, said Pavel Fedorov, deputy chief executive of Norilsk Nickel, who met government and industry officials in Jakarta to assess how the policy would be implemented.

“We received high-level assurances that there is a game plan in place that would ensure restriction on export of ore would be in place by January and would be subject to very strict rules and regulations,” added Fedorov, who did not name the Indonesian officials he met.

Uncertainty over the policy was hindering investment and disrupting the nickel market, much of which believed the 2014 ban would be delayed “or somehow fudged”, he added.

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Finding Chuqui’s lost ore – Lowell on tackling world-class mystery – by Kip Keen (Mineweb.com – August 1, 2013)

http://www.mineweb.com/

The massive Chuquicamata copper deposit has long been theorized to be missing ore, possibly faulted off to the south. Now exploration legend David Lowell is looking.

HALIFAX, NS (MINEWEB) – David Lowell, the famed octogenarian explorer credited with finding the Escondida copper deposit, among others, is now taking a crack at one of the world’s greatest exploration mysteries: finding lost – or believed to be lost – Chuquicamata copper ore. Forgive the superlative. For the known Chuquicamata copper-molybdenum deposit and mine in Chile, now owned by Codelco, is ranked by many as the greatest – or certainly one of the greatest – copper ore bodies in the world.

Chuquicamata, Chuqui for short, is big and, for its size, very high grade. A mid-2000s estimate tallied 2 billion tonnes @ 1.54 percent copper as having been mined. These days, a grade a third that is considered pretty normal – good even – for a large porphyry deposit like this. So Chuqui is abnormal. And many billion tonnes of ore remain at the known Chuqui deposit. As the massive Chuqui open pit wanes, Codelco aims to continue mining in a giant block cave mine it estimates will cost about $4.2 billion to build. The pit is reaching its limits, about 900 metres deep, and four kilometres long and three kilometres wide.

The Chuqui mystery is this: a fault, called the West Fault, cuts through the Chuqui ore body and appears to have moved a chunk – how much is not clear – of Chuqui ore elsewhere, where or exactly how far is uncertain.

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COLUMN-More mines open, making rare earths less rare – by John Kemp (Reuters India – August 1, 2013)

http://in.reuters.com/

Aug 1 (Reuters) – The United States has resumed mining rare earths after more than a decade, ending its total reliance on imports, mostly from China, for raw minerals Washington says are critical for the economy and national security.

Responding to a quadrupling of prices between 2005 and 2011 and growing anxiety about supplies from China, Molycorp’s Project Phoenix has sought to resurrect domestic production.

In 2009, the company started processing stockpiled concentrate. Last year it resumed mining at Mountain Pass in California’s Mojave Desert, which it had suspended in 2002.

Molycorp plans to raise output to 19,050 metric tonnes of rare earth oxide per year by the middle of this year, enough to satisfy more than 10 percent of worldwide demand. The resumption of domestic production comes after a period when shortages stoked tensions between the United States, the European Union and Japan and their main supplier, China.

In March 2012, the three consumers complained to the World Trade Organization (WTO) about China’s export restrictions on rare earths, tungsten and molybdenum, which they claimed were intended to reserve scarce elements for its manufacturers, discriminating against users in their own countries.

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COLUMN-China’s moves to cut metal capacity just getting started – by Clyde Russell (Reuters U.S. – August 1, 2013)

http://www.reuters.com/

Aug 1 (Reuters) – China’s plans to force more than 1,900 companies to cut excess capacity in bloated industries including aluminium, steel and copper have met with an underwhelming response from the market.

Certainly, the moves to make China’s heavy industries more efficient will have little immediate market impact, but what analysts and investors may be shrugging off a little too lightly is that once trends and processes start, they tend to gather momentum.

The edict to close some capacity by September will do very little to end surpluses in aluminium and steel production in China, as they will impact less than 1 percent of capacity.

In aluminium, about 260,000 tonnes of annual capacity may be shut, a fraction of the existing capacity of about 27 million tonnes, which is already about 28 percent higher than demand of about 21 million tonnes.

For steel, the ruling may result in about 7 million tonnes of annual output being idled, but the China steel association says there is 300 million tonnes of surplus capacity. In copper, some 654,000 tonnes of production may be closed, which is insignificant when compared with the existing idle capacity of more than 7 million tonnes.

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Analysis: Poland to get dirtier as it leans towards lignite coal – by Agnieszka Barteczko and Henning Gloystein (Reuters India – July 31, 2013)

http://in.reuters.com/

WARSAW/LONDON – (Reuters) – Poland, one of the heaviest polluters in Europe, will become even dirtier now that its shale gas ambitions have faded and it turns to cheap domestic lignite coal to secure its energy supply.

Poland already relies on coal to produce more than 90 percent of its electricity and is home to the European installation that emits the most carbon dioxide – utility PGE’s lignite power plant in Belchatow.

Its choice of fuel now could determine its energy and environmental situation for decades to come, given that Poland needs to build new power stations to replace ageing plants and cope with future demand as its power system operates close to capacity.

The government and utilities, encouraged by firm popular support, are looking to domestic lignite reserves as a cheap way to fuel that new capacity and reduce imports of Russian gas.

“Looking at Poland’s limited reserves of gas and oil, lignite coal has to be perceived as the stabilizing factor for Poland’s energy safety,” Poland’s economy ministry said in an email, adding Poland’s lignite reserves will last for 200 to 300 years.

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