Republic of Mining

With Glencore, Commodity Rout Beginning to Look Like a Crisis – by Bradley Olson (Bloomberg News – September 28, 2015)

September 28, 2015

http://www.bloomberg.com/news

The 15-month commodities free-fall is starting to resemble a full-blown crisis.

Investors are reacting to diminished demand from China and an end to the cheap-money era provided by the Federal Reserve. A Bloomberg index of commodity futures has fallen 50 percent since a 2011 high, and eight of the 10 worst performers in the Standard & Poor’s 500 Index this year are commodities-related businesses.

Now it all seems to be coming apart at once. Alcoa Inc., the biggest U.S. aluminum producer, said it would break itself into two companies amid a glut stemming from booming production. Royal Dutch Shell Plc announced it would abandon its drilling campaign in U.S. Arctic waters after spending $7 billion.

And the carnage culminated Monday with Glencore Plc, the commodities powerhouse that came to symbolize the era with its initial public offering in 2011 and bold acquisition of a rival in 2013, falling by as much as 31 percent in London trading.

Rio Tinto and BHP Billiton to keep dividends despite pressure, says Macquarie – by Stephen Cauchi (Australian Financial Review – September 28, 2015)

September 28, 2015

http://www.afr.com/

BHP and Rio Tinto would have to trim their dividends in coming years due to crashing commodity prices, according to research released on Monday by Macquarie, with Rio tipped to be the better performer of the two.

Both companies remain committed to progressive dividend policies, in which dividends rise in line with earnings per share. The dividends would continue, said Macquarie. But the bank nevertheless trimmed its forecasts for both companies.

For BHP, “we now only factor a flat payment of $US1.24 a share for the next three years, a payment of $US6.5 billion”.

For Rio, “we have reduced our dividend growth assumptions … with our dividend compound annual growth rate reducing from 4 per cent to 2 per cent over the next three years.”

BHP’s dividend per share in 2015, averaged over 12 months, was $1.68. Rio’s interim 2015 dividend per share was $1.44.

UPDATE 4-Copper, Glencore send Zambian kwacha into freefall – by Chris Mfula and Karin Strohecker (Reuters U.S. – September 28, 2015)

September 28, 2015

http://www.reuters.com/

LUSAKA/LONDON, Sept 28 (Reuters) – Zambia’s currency went into freefall on Monday as prices for its copper exports hit a one-month low, feeding fears that mining giant Glencore might further rein in its extensive operations there.

The kwacha was down more than 17 percent against the dollar at one point, its biggest one-day fall on record, further hampered by a rating downgrade from credit agency Moody’s that the government criticised as unsolicited.

“We have a double-whammy, meaning copper prices continue to soften, and production targets are really at risk because of the Glencore news,” said Kevin Daly, portfolio manager at Aberdeen Asset Management in London.

Glencore’s Mopani Copper Mines is the second largest employer in Zambia after the government, but fears over the mining and trading company’s ability to withstand a prolonged fall in metals prices sent its shares tumbling 25 percent on Monday.

Glencore Needs a Little Privacy – by Liam Denning (Bloomberg Business – September 28, 2015)

September 28, 2015

http://www.bloomberg.com/

Could Mick Davis save Glencore?

That might seem like an odd (or churlish) question to ask: After all, it was Glencore’s decision to buy Xstrata, the mining behemoth that Davis built, which saddled the commodity trading firm with a lot of the debt now weighing on its shares.

The latter slumped 27 percent on Monday to about 70 pence each after Investec Securities released a report speculating that depressed commodity prices could wipe out Glencore’s equity value. That report came just days after one from Goldman Sachs throwing doubt on Glencore’s investment-grade credit rating — a big deal for a trading firm. The shares sank below 100 pence for the first time since 2011’s initial public offering, when they priced at 530 pence apiece.

That 87 percent drop since the IPO makes Glencore the worst-performing major mining stock aside from Vale — which at least has the excuse of being listed in Brazil. Apart from Glencore’s balance sheet having made its stock a pinata for analysts, the crisis raises a more fundamental question: Should Glencore exist in its current form?

Alcoa to split into two as aluminum glut batters legacy business – by Nick Carey (Reuters U.S. – September 28, 2015)

September 28, 2015

http://www.reuters.com/

CHICAGO – Alcoa Inc (AA.N) said Monday it will break itself in two, separating its faster growing business manufacturing parts for planes and automobiles from its traditional aluminum smelting operations as shareholders seek higher returns amid a commodity slump.

Pressured by a 42 percent drop in its share price this year and a surge in Chinese aluminum exports, Alcoa is splitting into two publicly traded companies focusing on smelting and higher-tech products. It is joining a wave of major corporations which this year have divested business to add shareholder value.

Alcoa shares jumped 2.4 percent to $9.29 as analysts applauded its intensified focus on products for expanding businesses like aerospace and auto.

The stock surge made the 127-year-old company the biggest percentage gainer on the benchmark S&P 500 index.

The global glut of aluminum, which has depressed prices, has battered Alcoa stock, driving the company’s market value this year down to about $12 billion.

In refreshing change, gold producers pitch investors on their survival instincts – by David Milstead (Globe and Mail – September 26, 2015)

September 28, 2015

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Can a gold company be all things to all kinds of gold investors? Let’s hear what Goldcorp Inc. CEO Chuck Jeannes had to say at this week’s Denver Gold Forum.

“I think there’s a couple camps out there. One would be the group that continues to believe very much in gold, and in the near term, thinks gold is going up, and is very much focused on our leverage to the gold price,” Mr. Jeannes said in kicking off Goldcorp’s investor presentation.

“I think Goldcorp is a very good choice for that camp of investor. We’ve got growing production this year, our costs are declining, we have zero limitations on our exposure to gold price, no hedging, no streams on gold assets, so we give you that exposure.

“The biggest and second camp of investors are those who continue to believe in gold, but are concerned about what the price is going to do in the near and medium term, so you want to minimize your risk of holding shares while you wait for the gold price to recover – and you don’t know when that’s going to happen,” Mr. Jeannes continued.

“For that class of investor, I think Goldcorp is a really safe choice.

NEWS RELEASE: Horizonte consolidates Araguaia nickel project through acquisition of Glencore project

September 28, 2015

/PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL./

LONDON, Sept. 28, 2015 /CNW/ – Horizonte Minerals Plc, (AIM: HZM, TSX: HZM) (‘Horizonte’, ‘HZM’ or ‘the Company’) the nickel development company focused in Brazil, is pleased to announce that it has reached agreement to indirectly acquire through wholly owned subsidiaries in Brazil the advanced high-grade Glencore Araguaia nickel project (‘GAP’) in north central Brazil (the ‘Proposed Transaction’). GAP combined with Horizonte’s 100% owned high-grade Araguaia nickel project (‘Araguaia’ or ‘Araguaia Project’) creates one of the world’s largest nickel saprolite projects in terms of size and grade, in a premier mining jurisdiction that has a defined path to feasibility.

Highlights

The combination of GAP and Horizonte’s Araguaia Project will create one of the largest saprolite nickel projects in the world (the “Enlarged Project”).
Additional resources with potential to provide ore grading 2% nickel for the first 10 years of mine life.
Higher nickel grades are expected to improve project economics delivering a shorter capital repayment period and a lower break even nickel price.
Upfront consideration on closing of US$2M to be satisfied through issue of HZM shares.
Total acquisition cost US$8M.
Placing of new shares to raise £1.55M through existing cornerstone shareholders.

Peru mining protests prompt alarm – by James Wilson (Financial Times – September 27, 2015)

September 28, 2015

http://www.ft.com/

More than 4,000 metres above sea level in Peru’s central highlands is one of the biggest construction sites in the western hemisphere.

Some 16,000 workers are building Las Bambas, a huge copper mine. It is already 95 per cent complete and when the project owned by MMG, controlled by China Minmetals, starts producing next year it should quickly ramp up to become one of the largest in the world.

The vast mineral wealth of projects such as Las Bambas have made Peru one of the focal points for mining investment in recent years. But while the resources have not changed, the climate has.
Las Bambas may mark the end of a period of substantial mining spending in Peru that has seen one mine, Hudbay’s Constancia, reach commercial levels of production this year, as well as the imminent completion of a big expansion of Freeport-McMoRan’s Cerro Verde copper mine.

“In the past four or five years, we have seen important investments in mining projects,” says Carlos Gálvez, president of Peru’s National Society for Mining, Petroleum and Energy. “But, unfortunately, we are now dropping.”

Glencore slumps 30% as debt fears grow – by Lionel Laurent and Sudip Kar-Gupta (Reuters/Globe and Mail – September 28, 2015)

September 28, 2015

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

LONDON — Reuters – Glencore shares tumbled more than 30 per cent to an all-time low on Monday on fears that the mining and trading company was not doing enough to rein in its debt to withstand a prolonged fall in global metals prices.

About 3.5 billion pounds ($5.33-billion) in market value was wiped off the firm, which is in the middle of a drive to sell assets and raise cash to help cut its $30-billion debt pile and protect its credit rating after a crunch in prices of its main products, copper and coal.

Swiss-based and London-listed Glencore earlier this month raised $2.5-billion through a share placement, part of a wider plan to cut its net debt by a third by the end of 2016.

Glencore’s top individual shareholders, according to Thomson Reuters Eikon data, include CEO Ivan Glasenberg, with an 8.4 per cent stake, and Qatar Holding, with 8.2 per cent. Qatar is also a top shareholder of German auto maker Volkswagen , another beaten-up blue-chip.

Monday’s fall spread to the broader UK mining sector, which has also felt the pain from an emerging-markets slowdown and a crash in commodities prices. The FTSE 350 mining index sank to its lowest level since Dec. 2008.

Argentina’s presidential candidates want mining to be platform for country’s recovery – by Cecilia Jamasmie (Mining.com – September 24, 2015)

September 28, 2015

http://www.mining.com/

Only weeks before Argentina heads to the polls to choose its new leader, analysts are saying that President Cristina Fernandez’s chosen successor, Daniel Scioli, would probably be the best outcome for miners, as he has promised to maintain financial incentives designed to bolster investments, as well as oil and gas production.

But others differ. One of them is Santiago Dondo, a mining specialist at Pensar, the think tank of leading opposition candidate Mauricio Macri’s party. He told Reuters that the former mayor of Buenos Aires and ex-president of the popular Boca Juniors soccer team, may be a better choice. This, as Macri would give provincial governments a larger chunk of profits from companies operating in the country. The candidate, he added, has vowed to improve environmental inspections across the industry.

“The main challenge … is to generate trust at home, which would also give investors stability,” Dondo said. But according to the country’s mining chamber, any of the three candidates running in the upcoming October election is a good option, as they all have said they see mining as the platform for Argentina’s recovery.

“Scioli has said mining should be an engine for the economy, Macri has been consistent in his support and [opposition candidate] Sergio Massa has said the sector deserves attention,” the president of the Argentine Mining Chamber, Martin Dedeu, said earlier this year, according to País Minero (in Spanish).

Ivory Coast government makes effort to develop potential of gold – by James Wilson (Financial Times – September 27, 2015)

September 28, 2015

http://www.ft.com/

Sheltered from the tropical sun, laid out metre by metre in metal racks, the rock samples from Amara Mining’s gold project testify to a busy year of drilling.

Analysis of these drill cores will form the basis for investor interest in the UK group and its project at Yaoure, less than an hour’s drive from Yamoussoukro, Ivory Coast’s official capital.

Amara wants to join the ranks of the country’s gold producers, which include two of the largest companies in gold mining, Australia’s Newcrest Mining and Randgold Resources, listed in the UK and the US.

Endeavour Mining, a midsized Canada-listed producer with four west African mines, opened its Agbaou mine in the country last year. Endeavour has a partnership with the privately owned La Mancha group to acquire the Ity mine. A minority shareholding in Ity is held by a high-profile investor, Didier Drogba, perhaps the nation’s best-known footballer.

Notwithstanding these projects, gold mining is uncommon by the standards of the region, where Ghana and Mali have long been established producers.

Sudbury lakes centre developing educational video – by Lindsay Kelly (Northern Ontario Business – September 25, 2015)

September 28, 2015

Established in 1980, Northern Ontario Business provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North.

Sudbury’s Vale Living with Lakes Centre is developing an educational and promotional video designed to share the story of the city’s regreening success.

The story of Sudbury’s regreening, following decades of mining, has long been a shining example of environmental recovery. Now, the Vale Living with Lakes Centre is taking that message into the digital realm with a training and promotional video that will debut next fall.

An initiative led by research scientist Nadia Mykytczuk, the video features a series of vignettes that tell the Sudbury story from the start of the mining era, through the early days of the regreening efforts, and up to today’s advanced science research, and how all of it has helped researchers, miners and the greater community learn from the past.

Mykytczuk noted that the last compendium of the Sudbury story was the Green Book, which was compiled in 1995. But that format is now outdated, and many scientific gains have been made since then, requiring a new way for scientists to inform and engage their audience.

Mining losing growth obsession: BlackRock’s Evy Hambro – by Paul Garvey (The Australian – September 26, 2015)

September 28, 2015

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

The scale of BlackRock’s resources arm means the brutal retreat in mining stocks over recent years has been particularly painful.

But for Evy Hambro, whose role as the head of BlackRock’s resources unit makes him one of the mining world’s most influential voices, one piece of upside from the carnage has been a return among mining executives to the core principles and philosophies that drove the industry before boomtime exuberance crept in.

Speaking to The Weekend Australian, Mr Hambro relates a recent conversation with the chief executive of one of the world’s big mining companies.

During the boom, the executive said, the share register was invaded by “tourists” who only wanted to focus on growth, growth and growth. That singular focus over time began to creep into the company’s culture.

As a result, the company strayed from its principles, invested a lot of money in acquisitions and capex, and has been struggling with debt and regretting the move ever since.

Commodity conundrum: Opposing views on Ontario’s Ring of Fire – Business Network News (September 24, 2015)

September 25, 2015

http://www.bnn.ca/ The Ontario government plans to spend $1 billion for infrastructure in the northern Ontario mining area known as “The Ring of Fire”. BNN gets the positive and negative view on the future of mining in this area from Alan Coutts, CEO of Noront Resources, a junior miner in the region, and Patrick Ryan, …

Coal prices turn off investors – by Amanda Saunders (Sydney Morning Herald – September 25, 2015)

September 25, 2015

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

First it was tobacco, then alcohol, gambling, then asbestos. Sugar might also be on the nose for investors. But right now it is hard to find a more loathed sector than coal.

Not only are the forces of environmentalists lining up against the commodity. But there seems to be no end in sight for depressed prices.

The gas industry turned rogue on their counterparts in coal a few months ago too, attacking the industry in a bid to position itself as a cleaner source of energy.

And in a fresh kick in the guts, news broke out from the United States on Friday that Chinese President Xi Jinping was preparing to announce a cap-and-trade scheme to curb emissions as part of a climate deal with the US, ahead of climate talks in Paris in December.

China is Australia’s biggest coal customer and as China and US face off in a climate change battle, the commodity is likely to be a victim.