Mark Latham Commodity Equity Intelligence Service

Wednesday 27th May 2015
Background Stories on www.commodityintelligence.com

News and Views:

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    Oil and Gas

    There is a disconnect between crude oil futures and the physical markets



    “Like pushing a rock up a hill”

    That’s how some trader’s view the current disconnect between the physical market for crude oil and the futures market with speculators pushing futures prices higher while the physical market remains moribund.

    Before continuing, it’s important to make the distinction between the physical market for crude and the crude futures market.

    Physical (also known as cash) market prices are determined by the supply and demand for physical crude. Here traders buy oil from the producer and sell it to the refiner, for immediate delivery. Physical buyers and sellers have a direct pulse on the market and may feel immediately when it is well supplied, or not.

    Futures prices, on the other hand, are determined by the supply and demand for crude futures positions. Futures markets provide a means for trading the probability of where crude prices will be at certain points in the future; this allows physical market participants a means by which they can hedge their position and so reduce risk.

    The physical crude market tends to show weakness (i.e. too much crude swashing about) when the premium for the best crude grades weakens against the benchmark Brent. One of the most favoured grades in Europe is Azeri Light due to its high quality.

    Over the past couple of months physical crude traders have noted the weak premiums for Azeri Light versus Brent as other cargoes, particularly from West Africa compete to supply crude into an already oversupplied Atlantic Basin market.

    This apparent disconnect between the futures and the physical market appears eerily similar to mid-2014, just prior to crude prices collapsing. So is the current weakness in the physical crude market a precursor to an imminent weakening in crude futures prices?

    Don’t bet on it - at least not based solely on what the physical market is doing.

    While the physical fundamentals of supply and demand prevail eventually, the physical market may not always be able to anchor futures prices for days, months or even years.

    If commodity futures prices rise too much, perhaps as a result of speculative interest, as there is now, physical supplies will start to be delivered against short positions (a manufacturer looking to hedge its inventory of raw materials might have this kind of position).

    In practice, there is never enough physical material readily available to deliver against all the short positions, so rising futures prices can only be offset by buying back crude futures contracts rather than making physical delivery. It takes time to divert and accumulate sufficient physical crude supplies to meet a rise in futures prices driven by speculative rather than fundamental factors.

    To get an idea of the extent to which this process is occurring take a to look at the net contract short position for commercial hedgers from the US CFTC weekly Commitments of Traders report. Back in mid-2014 the net short position amongst commercial hedgers (actual producers and users of crude) rose to around 500,000, a record level. This position has since fallen to just over 300,000, but it is still high on an historical basis.

    As we know from the months leading up to the oil market crash that began in the middle of 2014, oil futures prices can divorce themselves from the physical fundamentals for a long time.

    The price of crude, as with any other commodity is only worth what someone is prepared to pay for it. The market’s perception of scarcity in mid-2015 is such that participants in crude futures markets are now willing to pay less than half what they were paying just one year ago.

    While theory suggests crude futures markets are anchored to the physical market as contracts expire, in reality the link is a lot more tenuous. As with the myth of Sisyphus the rock will eventually start to roll back. Timing when that will take place, and the catalyst involved, is a whole different matter.

    Read more: http://uk.businessinsider.com/there-is-a-disconnect-between-crude-oil-futures-and-the-physical-market-2015-5?r=US#ixzz3bFuHlxNj

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    China's CNPC makes first tight oil find over 100 million tonnes

    Chinese state-owned energy giant China National Petroleum Corp (CNPC) has discovered more than 100 million tonnes of tight oil geological reserves in its Changqing field, a company-run newspaper said on Tuesday.

    The discovery, located in the western province of Shaanxi, is the first Chinese tight oil find to surpass 100 million tonnes, the China Petroleum Daily said.

    Technically recoverable reserves may be considerably lower. Tight oil production capacity in the Ordos basin, where Changqing is located, is more than 1 million tonnes, the paper said.

    CNPC is Asia's largest oil producer and the parent of PetroChina Co Ltd..

    In the first quarter of 2015, Changqing produced 6 million tonnes of crude oil, or 487,600 barrels per day, according to the official Xinhua News Agency's China Oil, Gas & Petrochemicals (OGP) newsletter.

    http://www.reuters.com/article/2015/05/26/us-china-oil-discovery-idUSKBN0OB0YK20150526
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    Ecopetrol foresees $6 bln/yr investment budgets through 2020

    Colombia's Ecopetrol SA expects its annual investment budgets to be around $6 billion through 2020, it said in a strategic plan published on Tuesday, down from recent years as it pursues a structural savings target of $1 billion a year.

    The plan is the first since Juan Carlos Echeverry took over as CEO in early April. It foresees production of 870,000 barrels per day by 2020, up from 722,000 barrels currently, and for the company to add 1.7 billion barrels of proven reserves by the same year.

    Ecopetrol plans to invest around $4 billion per year in production and boost reserves by increasing the amount of oil that can be recovered from existing fields through technologies including injection of liquids and gases.

    The exploration budget, which was slashed to $600 million this year, is expected to be between $1 billion and $1.5 billion per year until 2020, the company's e-mailed presentation said.

    Ecopetrol is by far the Andean country's biggest oil company and oil sector representatives say spending on exploration is increasingly urgent as reserves fall to less than seven years' worth at the country's current million-barrels-per-day output.

    The company said it is budgeting for an accumulated $2.5 billion in spending on transport and logistics between now and the end of the decade.

    Ecopetrol's target of saving a total of $6 billion through 2020 is part of an efficiency drive that will seek savings across the company's operations. It also aims to cut net debt over the period but did not give a target figure.

    http://www.reuters.com/article/2015/05/26/ecopetrol-strategy-idUSL1N0YH0XS20150526
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    Noble’s dispute in Israel could resolve with resignation of antitrust commissioner

    The anti-trust regulator who raised questions about Noble Energy’s control over the country’s oil and gas resources plans to step down, a move that could potentially resolve the dispute that has stalled Noble’s investment there.

    Israel’s Antitrust Commissioner David Gilo announced that he would resign in August because the government was pressing forward with a deal that undercut competition to develop the country’s newly discovered energy reserves, according to reports in Reuters.

    An inter-ministerial alliance recently agreed to a deal that would allow Noble to continue its plans to operate the Tamar basin and sell its gas by divesting of some assets there, and jointly market gas from the Leviathan basin, according to reports in The Jerusalem Post. But the country’s antitrust commissioner has disagreed with the proposal.

    Noble Energy said in a statement that it remains actively engaged in dialogue with the government to resolve antitrust concerns, but until a final agreement is reached, the Houston-based oil company will not move forward with developing the Leviathan and expanding the Tamar.

    “A stable and attractive investment climate is necessary for continued exploration and development, investment in infrastructure and the entry of new companies into the oil and natural gas sector,” spokeswoman Paula Beasley said in a statement Saturday. “We are working cooperatively with the government in their efforts to develop an appropriate and workable solution.”

    Keith Elliott, who oversees Noble’s Eastern Mediterranean operations, recently spoke with the Houston Chronicle about the ongoing negotiations and the future of the company’s investment in the Mediterranean.

    “We’ve been in Israel for a long time,” he said. “We’ve been through ups and downs. We’ve been through the emergence of the regulatory environment there from the day when there was nothing offshore. And we’ve been through period of conflict and our commitment has been there. We are comfortable working with Israel. We just need to have these things resolved so we can move forward.”
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    LPG turns ugly in Houston.


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    MGL: US LPG prices are crashing to new lows here. 

    LPG is one of those also-ran commodities, we use it for lighter fuel, portable stoves, and the Indians use most of all for cooking.

    Its produced in quantity by wet gas wells, and by Oil shale wells. Eagle Ford producers typically have up to 20% of volume in LPG, for example. 

    US demand is pretty constant, growing somewhat as chemical plants gradually debottleneck. So it must be supply thats increasing.

    That must mean either Natural Gas supply or Oil, or both supply in the US is increasing. That means the market is way, way, wrong in assuming a supply contraction this year.




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    Texas oil patches brace for more rains, possible floods

    Texas oilfields could see strong rains and thunderstorms later this week, though they were spared the heaviest flooding that struck central and eastern Texas over the Memorial Day weekend, the National Weather Service said on Tuesday.

    There were reports of flooded roads in parts of the Permian Basin of west Texas and swollen creeks in the Eagle Ford shale area of south Texas, the two largest onshore oil producing regions in the United States.

    But there were no reports of extensive damage or prolonged road closures in the oilfields, regional meteorologists said.

    The rest of Texas, including areas around Austin, Dallas, and Houston, saw significant damage and some deaths.

    The National Weather Service said the likelihood of rain and storms would rise through the remainder of this week.

    "Chances of thunderstorms will increase Wednesday and Thursday," said Alec Lyster, senior meteorologist for the National Weather Service in Midland. "Storms either of those days is definitely a possiblity."

    Meteorologists said that latest bout of rain could mark an end to a prolonged drought that has affected Texas.

    http://www.reuters.com/article/2015/05/26/usa-storms-oil-idUSL1N0YH16U20150526
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    Crescent Point to acquire Legacy for shares, debt worth C$1.53 bln

    Crescent Point Energy Inc, Canada's No.4 independent oil and gas producer, said on Tuesday it has agreed to acquire Legacy Oil + Gas Inc for shares and debt worth C$1.53 billion ($1.23 billion), adding oil production in its core regions in Western Canada and North Dakota.

    Crescent Point is offering 0.095 of its own shares for each Legacy share. Based on Crescent Point's closing price on Monday of C$30.00, the offer is worth C$2.85 per Legacy share.

    Crescent Point said its offer was a 36 percent premium to Legacy's price prior to April 17, when the company was targeted by activist shareholders determined to place representatives on Legacy's board.

    Legacy shares last traded at C$2.92 before being halted on the Toronto Stock Exchange.

    Crescent Point said the acquisition, which has been approved by Legacy's board, would add 22,000 barrels of oil equivalent per day to its production. Nearly 70 percent of that production is in the company's core areas in Saskatchewan, Manitoba and North Dakota.

    "Legacy's combination of high-growth resource play assets and high-quality, low-decline conventional assets are a tremendous fit with Crescent Point and are expected to enhance our long-term dividend plus growth strategy," Scott Saxberg, Crescent Point's chief executive, said in a statement.

    Crescent Point said it is offering a total 18.97 million shares and will assume Legacy's C$967 million in debt.

    To pay for its acquisition, Crescent Point will sell 21.06 million shares to a group of underwriters led by BMO Capital Markets and Scotiabank to raise gross proceeds of about C$600 million, though the company can issue a further 3.16 million shares if demand warrants.

    Crescent Point said the acquisition will boost its production and cash flow while adding about 102.7 million barrels of established reserves.

    The acquisition will raise Crescent Point's expected average production this year by nearly 7 percent to 162,500 boepd.

    http://www.reuters.com/article/2015/05/26/legacy-oil-gas-ma-crescent-point-idUSL1N0YH2FQ20150526
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    Low oil and gas prices spur Vanguard’s two big acquisitions

    Low oil and gas prices contributed to Vanguard Natural Resource’s decision to make two significant acquisitions in less than 40 days, the Houston company’ chief financial officer said Tuesday morning.

    Vanguard last Friday that it is buying up Eagle Rock Energy Partners. That came after its deal to buy LRR Energy LP on April 20. LRR — an affiliate of Lime Rock Resources. Both are onshore, exploration and production master limited partnerships based in Houston. MLPs are tax-advantaged corporate structures.

    “One larger, more diverse company was better equipped in the current commodities price environment,” Vanguard Executive Vice President and CFO Richard Robert said in a conference call on Tuesday, noting that Vanguard received consent from LRR to proceed with both deals simultaneously.

    Robert argued the expanded Vanguard will be “well positioned when the commodity price recovers.” The two deals are both expected to close in the third quarter. Vanguard is postponing its June 4 annual meeting for a to-be-determined date so unitholders can also vote to approve the Eagle Rock deal. Robert said Vanguard is unlikely to pursue any other deals until after the two purchases close. But he noted that “there’s still some good deals out there.”

    Vanguard is paying $474 million to acquire Eagle Rock, not counting $140 million in assumed debt. Vanguard, likewise, is dishing out more than $250 million for LRR, but that does not include another $288 million in assumed net debt.

    Robert said the deals strengthen Vanguard’s asset base while also boosting its liquidity and flexibility to reduce its debts moving forward.

    The Eagle Rock deal, in particular, boosts Vanguard’s growing presence and assets in the Mid-Continent region, including the Anadarko and Arkoma basins and more. Robert said Vanguard is “very fortunate to be adding another prolific basin that is in the beginning stages of production.”

    He said Eagle Rock unitholders will own 22 percent of the combined entity while LRR unitholders will hold 12 percent. The merged Vanguard will have big presences in the Mid-Continent region, as well as the Permian Basin, the Gulf Coast and up into Colorado, Wyoming, Montana and North Dakota.

    http://fuelfix.com/blog/2015/05/26/low-oil-and-gas-prices-spur-vanguards-two-big-acquisitions/
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    Alternative Energy

    Wind and Solar Account for 100 Percent of New US Generating Capacity in April

    In what is becoming a frequent occurrence, if not predictable pattern, renewable energy sources once again dominate in the latest federal monthly update on new electrical generating capacity brought into service in the United States.

    According to the recently-released "Energy Infrastructure Update" report from the Federal Energy Regulatory Commission's (FERC) Office of Energy Projects, wind and solar accounted for all new generating capacity placed in-service in April. For the month, two "units" of wind (the 300-megawatt (MW) Hereford-2 Wind Farm Project in Deaf Smith County, TX and the 211-MW Mesquite Creek Wind Project in Dawson County, TX) came on line in addition to six new units — totaling 50 MW — of solar.

    Further, wind, solar, geothermal, and hydropower combined have provided over 84 percent (84.1 percent) of the 1,900 MW of new U.S. electrical generating capacity placed into service during the first third of 2015. This includes 1,170 MW of wind (61.5 percent), 362 MW of solar (19.1 percent), 45 MW of geothermal steam  (2.4 percent), and 21 MW of hydropower (1.1 percent). The balance (302 MW) was provided by five units of natural gas.

    The total contribution of geothermal, hydropower, solar, and wind for the first four months of 2015 (1,598 MW) is similar to that for the same period in 2014 (1,611 MW, in addition to 116 MW of biomass).  However, for the same period in 2014, natural gas added 1,518 MW of new capacity while coal and nuclear again provided none and oil just 1 MW.  Renewable energy sources accounted for half of all new generating capacity added in 2014.

    Renewable energy sources now account for 17.05 percent of total installed operating generating capacity in the U.S.: water - 8.55 percent, wind - 5.74 percent, biomass - 1.38 percent, solar - 1.05 percent, and geothermal steam - 0.33 percent (for comparison, renewables were 13.71 percent of capacity in December 2010 — the first month for which FERC issued an "Energy Infrastructure Update").

    Renewable energy capacity is now greater than that of nuclear (9.14 percent) and oil (3.92 percent) combined. In fact, the installed capacity of wind power alone has now surpassed that of oil. In addition, total installed operating generating capacity from solar has now reached and surpassed the one-percent threshold — a ten-fold increase since December 2010.

    Note that generating capacity is not the same as actual generation. Electrical production per MW of available capacity (i.e., capacity factor) for renewables is often lower than that for fossil fuels and nuclear power. According to the most recent data (i.e., as of February 2015) provided by the U.S. Energy Information Administration, actual net electrical generation from renewable energy sources now totals 13.4 percent of total U.S. electrical production; however, this figure almost certainly understates renewables' actual contribution significantly because neither EIA nor FERC fully accounts for all electricity generated by distributed renewable energy sources (e.g., rooftop solar).

    http://www.renewableenergyworld.com/articles/2015/05/wind-and-solar-account-for-100-percent-of-new-us-generating-capacity-in-april.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+RenewableEnergyNewsRssFeed+%28Renewable+Energy+News+RSS+Feed%29
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    Solar Fastest Growing US Electricity Source

     Move over shale. The sun is now the fastest growing source of U.S. electricity.

    Solar power capacity in the U.S. has jumped 20-fold since 2008 as companies including Apple Inc. use it to reduce their carbon footprint. Rooftop panels are sprouting on homes from suburban New York to Phoenix, driven by suppliers such as SolarCity Corp. and NRG Energy Inc.

    Giant farms of photovoltaic panels, including Warren
    Buffett’s Topaz array in California, are changing power flows in the electrical grid, challenging hydro and conventional generators and creating negative prices on sunny days. The surge comes after shale drilling opened new supplies of natural gas, contributing to the 47 percent drop in oil since June.

    “Solar is the new shale,” Michael Blaha, principal
    analyst of North American power at Wood Mackenzie Ltd. in Houston, said April 8. “Shale has lowered cost and enabled lower natural gas prices. Solar will lower costs for electricity.”

    Solar capacity surged 30 percent in 2014 to more than 20 gigawatts and will more than double by the end of 2016, according to the Washington-based Solar Energy Industries Association. That’s enough to power 7.6 million U.S. homes, up from 360,000 in 2009. The biggest gains will be in California, Arizona, Texas, Georgia, New York and New Jersey.

                             Rate Review

    Even with the rapid growth, solar still accounts for less
    than 1 percent of total U.S. power production, behind coal, natural gas, oil, nuclear and hydroelectric, according to the government’s Energy Information Administration. Because output suffers on cloudy or hazy days, grid operators have to keep conventional plants on standby. 

    Negative Prices

    On April 23, spot wholesale prices at Southern California’s SP15 hub, which includes Los Angeles and San Diego, averaged minus $60.94 a megawatt-hour for the 10 hours from 8 a.m., with solar accounting for as much as 23 percent of power generation in the hour ended at noon. The negative price meant that the seller, wanting to keep its generator running, paid the buyer to take the power.

    "I was here before we broke ground and seeing it then and now amazes me at how quickly we were able to build the project and coexist with the environment and generate 550 megawatts of green power,” Gary Hood, project manager for Topaz, about 250 miles southeast of San Francisco, said as he showed a visitor around.

    Berkshire is already producing power at Solar Star, which will be fully operational in the third quarter. Apple said in February it is investing $850 million in a plant that First Solar Inc. is building nearby.

    “We will see renewables increasingly make up part of the resources stack just because it makes economic sense,” Jonathan Mir, head of North American power and energy at Lazard Freres & Co. LLC in New York, said by phone May 13.

    “Appreciating that there are important qualitative
    differences between non-renewables and renewables, I don’t think people can simply say with a straight face any more that renewables are more expensive,” he said.

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    UK's Haven Power to provide Thames Water with renewable energy

    Britain's Haven Power has signed a 520 million pound ($800 million) deal with Thames Water to supply the water utility with renewable electricity over five years, Haven's parent company Drax Group Plc said on Tuesday.

    The deal carries an option for two further five-year renewals which could increase the overall value of the contract to more than 1.5 billion pounds over 15 years, it said.

    Haven Power supplies electricity to businesses and sources its power from Drax's power plant in Yorkshire, which is converting from coal to biomass.

    Two of the six units at Drax's 4-gigawatt plant have been converted to biomass and the firm plans to convert another this year.

    Thames Water already sources around 20 percent of its electricity from renewables such as solar, wind, hydro and biogas but the deal will enable it to meet all of its electricity needs from renewables.

    http://www.reuters.com/article/2015/05/26/havenpower-thames-wtr-idUSL5N0YH19Z20150526
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    Vestas wins 83 MW order in Poland

    Vestas is to supply and install 25 V126-3.3MW wind turbine machines to a wind farm in Poland.

    The 83 MW wind turbine order, which includes a 15-year service agreement, is for the Korytnica North project in Poland, which was developed by Geo Renewables.

    Commissioning is set for the fourth quarter of 2015.

    Vestas Northern Europe president Klaus Steen Mortensen said,“With the delivery of the first V126-3.3 MW turbines to the Korytnica North project Vestas is now taking a significant step in reducing the cost of energy for wind in Poland.”

    http://www.powerengineeringint.com/articles/2015/05/vestas-wins-83-mw-order-in-poland.html?hootPostID=cf9212585d257186016417a60ec68566
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    New renewable energy model combines solar, bio-gas and H2

    To provide 24x7 uninterrupted power from renewable energy sources, experts from the UK and IITs are now working together to create a new model which combines the best of solar power, biomass energy and hydrogen.

    The first-of-its-kind UK-India experimental Bio-CPV project on development and integration of biomass and concentrating photovoltaic (CPV) system will soon light up a remote tribal hamlet in Shantiniketan, 180 km away from here.

    "The problem with dependence on solar power is that sunlight is not available 24x7 and 365 days a year. Therefore we are integrating it with biomass so that the power supply remains continuously available," project leader Prof Shibani Chaudhuri said.

    She said that this was the first time that the three sources of green energy would be integrated together in India.

    The installation work is expected to begin in October, this year and the entire model would be ready by 2016.

    Chaudhuri, who teaches environment at Visva-Bharati University in Shantiniketan, said the idea was to use solar power during the day and match it with biomass generation from local sources of organic material during the night.

    Hydrogen would also be used for emergency use. The UK-India research project is jointly funded by Research Councils UK (RCUK) and India's department of science and technology.

    From the UK, experts from the University of Leeds, University of Exeter, and University of Nottingham are sharing their inputs with scientists from Visva-Bharati, IIT Madras and IIT Bombay.

    Pearsonpally, a tribal village of Shantiniketan, has been selected as the site for installation of the integrated energy system.

    http://timesofindia.indiatimes.com/home/environment/the-good-earth/New-renewable-energy-model-combines-solar-bio-gas-and-H2/articleshow/47439372.cms
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    Duke Energy to convert shut down coal power plant to energy storage system

    Power Engineering reported that Duke Energy is teaming with LG Chem and Greensmith to convert a shut down coal-fired power plant into an energy storage system.

    The 2 MW battery storage project will be located at the site of the decommissioned W.C Beckjord coal-fired plant in Ohio and is expected to be operational by late 2015. LG Chem will supply the integrated operating system using advanced lithium-ion batteries. Greensmith will provide intelligent storage control and analytics software, and system integration services. Parker Hannefin will provide a 2 MW power conversion inverter.

    Duke Energy operates a 36 MW battery-based energy storage and power management system at the Notrees Windpower Project in Texas in partnership with the US Department of Energy.

    http://steelguru.com/power/duke-energy-to-convert-shut-down-coal-power-plant-to-energy-storage-system/425071#tag
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    Uranium

    China eyes low cost uranium miners

    China is looking for companies with large uranium deposits and low costs to meet domestic demand.

    Wang Ying, head of China National Nuclear (CNNC), has said the country is seeking miners that have least 30,000 tonnes of uranium resource, cash production no higher than US$25 a pound and total production costs of no more than US$45 a pound, Financial Post reports.

    Based on that criteria, deposits that could get immediate attention from Chinese investors are Rio Tinto's Roughrider, Cameco's Millennium, Fission Uranium's Patterson Lake South and UEX's Shea Creek. Other project that could attract interest in the long term, adds the report, is Denison Mines' Wheeler River project.

    Nuclear power firms in China are turning to the domestic market to raise capital for express expansion, after the government pledged to rely more on renewable energy for power generation.

    China is the country with the world’s largest nuclear growth. It has 22 operating reactors on the mainland with a total installed capacity of 20.3 gigawatts as of 2014, and other 24 reactors are under construction, data from the China Nuclear Energy Association shows.

    China aims to more than double its capacity to at least 58 gigawatts by 2020 and around 150 gigawatts by 2030.

    http://www.mining.com/china-eyes-canadian-uranium-miners-report/
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    Precious Metals

    China to launch $16bn gold investment fund

    The fund is part of a scheme known as the ‘Silk Road’ initiative, which aims to resurrect the ancient path as a modern transit, trade, and economic corridor to run from Shanghai to Berlin.

    China is setting up a new gold fund, expected to raise about $16 billion for investment into activities and business related to the precious metal, which may help to boost trade across Asia.

    The creation of such fund, state-owned CCTV reported, is part of a scheme known as the ‘Silk Road’ initiative, will be run by a new company to be established by gold producers and financial institutions.

    The fund may also include an exchange-traded fund for gold and investments in miners of the precious metal

    Two top local gold producers, Shandong Gold Group, the parent of Shandong Gold Mining, and Shaanxi Gold Group will own 35% and 25% of the new financing source respectively. The fund may also include an exchange-traded fund for gold and investments in miners of the precious metal, according to the report.

    China is the largest gold producer and consumer of the precious metal, and plays a key role in determining the overall direction of the gold market. According to the World Gold Council’s latest market analysis, jewellery demand in China dropped 10% in the first three months of the year, as slowing economic growth hit consumer sentiment in the world’s second-largest economy.

    The “Silk Road” project, also known as the “One Belt, One Road” plan, was officially launched in March by President Xi Jinping, with the goal of help the country’ economy double over the next decade.

    The ambitious vision is to resurrect the ancient Silk Road as a modern transit, trade, and economic corridor that runs from Shanghai to Berlin. The 'Road' will traverse China, Mongolia, Russia, Belarus, Poland, and Germany, extending more than 8,000 miles, creating an economic zone that extends over one third the circumference of the earth.

    Xi Jinping has said that the creation of the new “Silk Road” would result in around $2.5 trillion of additional trade for all those involved over the next 10 years. However, the plan – which includes investment in transport and energy infrastructure – comes amid growing concern over China’s slowing economic growth and decline appetite for commodities and gold.

    http://www.mining.com/china-to-launch-16bn-gold-investment-fund/?utm_source=twitterfeed&utm_medium=twitter
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    Russia boosting gold holdings as defence against 'political risks' - c.bank

    Russia is increasing its gold holdings because gold is a reserve asset that is free from legal and political risks, a senior central banker said on Tuesday.

    The comments by Dmitry Tulin, who manages monetary policy at the central bank, reflect Russian fears that the country's overseas assets could be frozen as part of a possible toughening of Western sanctions over the Ukraine crisis.

    "As you know we are increasing our gold holdings, although this comes with market risks," Tulin told lawmakers in the lower house of parliament.

    "The price of it (gold) swings, but on the other hand it is a 100 percent guarantee from legal and political risks."

    According to central bank data, Russia's gold reserves rose to 40.1 million troy ounces as of May 1 compared with 39.8 million ounces a month earlier.

    Russia increased its gold holdings for many months in a row last year, as shown by central bank and International Monetary Fund figures.

    Western sanctions imposed because of Russia's actions in Ukraine have not targeted government assets abroad, but Russia has been reducing its holdings of assets such as U.S. Treasury bills, fueling speculation that it regards them as vulnerable.

    Russia also faces over $50 billion in claims from former shareholders of oil company Yukos, who have vowed to target Russian state assets in the West.

    In 2008, central bank accounts in France were frozen at the request of Swiss firm Noga, which sought to seize Russian state assets abroad in an attempt to recover debts arising from an oil-for-goods deal. The central bank later argued in court it was independent from the government, and the accounts were unfrozen.
    http://www.reuters.com/article/2015/05/26/russia-cenbank-gold-idUSL5N0YH38V20150526
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    Barrick to sell 50 pct in Papua New Guinea unit to China's Zijin

    Canadian miner Barrick Gold Corp said it would sell 50 percent stake in its unit that manages the Porgera gold mine in Papua New Guinea to China's Zijin Mining Group Co Ltd for $298 million in cash.

    The deal, a part of Barrick's plan to reduce net debt by at least $3 billion by the end of the year, comes a day after the world's largest bullion producer sold its Cowal mine to Evolution Mining for $550 million.

    The unit, Barrick Niugini, owns 95 percent in the Porgera mine and the Papua New Guinea government owns the rest.

    Zijin and Barrick will jointly control Barrick Niugini after the sale, which is expected to be completed in the third quarter, the Canadian miner said on Tuesday.

    Barrick said it expected its share of gold production from the Porgera mine to rise to 500,000-550,000 ounces this year from 493,000 ounces in 2014.

    http://www.reuters.com/article/2015/05/26/barrick-gold-jointventure-zijin-idUSL3N0YH3FV20150526
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    Base Metals

    China's Zijin to buy stake in Ivanhoe's DRC copper project

    Chinese mining company Zijin Mining Group has agreed to buy almost half of the Kamoa copper project in the Democratic Republic of Congo (DRC) from Ivanhoe Mines for $412 million, the companies said on Tuesday.

    Under the deal, Zijin will buy through its subsidiary, Gold Mountains International Mining Company Limited, a 49.5 percent stake in Ivanhoe Mines' subsidiary Kamoa Holding Limited, which currently owns 95 percent in the DRC copper project.

    The mining sector has been hit in the last three years by a steep decline in metals prices but copper is seen by analysts as one of the commodities with the brightest prospects given some supply constraints.

    http://www.reuters.com/article/2015/05/26/ivanhoe-mines-ma-zijin-idUSL5N0YH22N20150526
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    Steel, Iron Ore and Coal

    China's coal production falls 6.1 pct

    Coal production in China, the world's largest producer and consumer of the mineral, declined 6.1 percent in the first four months this year as the impact of the government's clean air and renewable energy policies began to weigh on the industry.

    Production totaled 1.15 billion tonnes between January and April, with the pace of decline accelerating from a 3.5-percent fall registered in the first three months of the year, according to data released Tuesday by the National Development and Reform Commission (NDRC).

    Coal imports also fell during the period, plunging by 37.7 percent from one year earlier to 69 million tonnes, the NDRC said in a report on its website.

    Coal consumption accounts for about 66 percent of China's primary energy consumption, 35 percentage points higher than the world average. The country aims to bring its share of non-fossil energy to 15 percent by 2020 and 20 percent by 2030.

    China's coal output fell in 2014 for the first time this century as a result of slowing economic growth, government efforts to reduce air pollution and increased investment in renewable energy. Analysts expect production to further decline this year.

    http://en.chinamining.com.cn/News/2015-05-27/1432691170d72340.html
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    Yunnan Jan-Apr coal output slumps 49pct

    Southwestern China’s Yunnan province produced 13.18 million tonnes of coal over January-April, slumping 49% from the year before, data from the National Development and Reform Commission (NDRC) showed on May 26.

    Total commercial coal sales during the same period also plunged 49.2% on year to 15.82 million tonnes, including coals sold out of the province at 1.59 million tonnes, down 65.4% on year, the NDRC data showed.

    Total rail coal transport in the first four months was 630,000 tonnes, down 52.8% on year, data showed.

    By end-April, coal enterprises across the province held 1.05 million tonnes of coal, down 51.8% from a year ago but up 18.0% from March.

    http://en.sxcoal.com/0/119423/DataShow.html
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    US Clean Power Plan Will Double Coal Plant Closures

    A new government analysis of President Barack Obama’s signature effort to fight climate change affirms what critics suspected: the proposal could further weaken an already battered coal industry.

    Electricity generation from the carbon-intensive fossil fuel would fall by 90 gigawatts, more than twice the decline government analysts had predicted as recently as April, according to a report released Friday by the Energy Information Administration. There were about 292 gigawatts of coal-fired generation capacity in 2014, according to EIA.

    Most of the coal-plant closures would occur by 2020, when the Environmental Protection Agency’s proposal to cut carbon dioxide emissions would kick in. Consumers may also take a hit as electricity prices would increase as much as 7 percent on average by 2025, partly because of the costs of building new power plants.

    “In short, EIA confirms EPA’s rule is all pain, no gain — a symbolic gesture that continues the administration’s policy path for destroying high wage jobs for generations,” said Hal Quinn, chief executive officer of the National Mining Association, a lobbying group that represents companies including Peabody Energy Corp.

    Coal, which has served as the backbone of U.S. electricity generation for decades, is in a steep downturn amid competition from lower-cost natural gas and pressure to meet tougher emissions standards.

    The Obama administration’s proposal, released in June, is not final. Supporters, including Senator Maria Cantwell, a Washington Democrat, said the EIA projected the plan would cut carbon emissions from all U.S. power plants 25 percent below 2005 levels by 2020.

    http://www.renewableenergyworld.com/articles/2015/05/us-clean-power-plan-will-double-coal-plant-closures.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+RenewableEnergyNewsRssFeed+%28Renewable+Energy+News+RSS+Feed%29
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    Rescue in the works for indebted Sinosteel

    CaixinCaixin reported that China's economic slowdown and slumping iron ore prices have intensified what's now a 2 year old financial crisis at one of the country's biggest resource trading companies, Sinosteel Corporation.

    Sources from banks recently said that new, unnamed investors are poised to rescue Sinosteel as part of a broad restructuring plan. The plan was expected to be announced by the end of June.

    The proposed restructuring could include a debt relief plan that caps painful negotiations between state owned Sinosteel and its state owned creditors. The talks began in January, shortly after the State Council got the ball rolling by ordering the China Banking Regulatory Commission to arrange meetings between Sinosteel executives and bankers.

    The order by the cabinet was designed to end a financial impasse that's cast a cloud over Sinosteel's future. At the end of last year, the company and its 72 subsidiaries had fallen behind in repaying about CNY 75 billion borrowed in recent years from some 80 domestic and foreign banks. The debt crunch began in 2013, the most recent year for which the firm released financial results.

    Sinosteel said that the company supplies state owned steel mills with iron ore, coke and other raw materials from domestic and overseas mines. The company is also engaged in logistics and the rare earths business. It employs more than 46,000 people. About a decade ago it became China's first major state owned company to expand overseas, investing in mines in Australia, South Africa and Zimbabwe.

    At least part of the company's debt problem has been traced to a 2008 decision to buy the Australian iron ore mining company Midwest Corporation for 9 billion. That investment has proven costly in the face of the recent ore price decline.

    http://steelguru.com/steel/rescue-in-the-works-for-indebted-sinosteel/425077#tag
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