Mark Latham Commodity Equity Intelligence Service

Friday 5th June 2015
Background Stories on www.commodityintelligence.com

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    Oil and Gas

    Prepare for $40 oil by year-end, ex-OPEC research head says

    Brent crude will be lower by the end of the year as production is set to increase from Iraq and Iran, shale oil output stabilizes while demand slows, according to OPEC’s former head of research.

    Brent will trade between $40 and $50 in the fourth quarter, Hasan Qabazard, who was research head from 2006 to 2013, said in an interview in Vienna. That compares with Wednesday’s close of $63.80 and the lower end of the range is below the price at which the benchmark bottomed in January.

    The end of the U.S. driving season will mean slower demand, Qabazard said. “The fourth quarter is going to be a real test,” Qabazard, who’s now CEO of Kuwait Catalysts Co., said on the sidelines of an OPEC seminar on prospects for the oil industry. The meeting was attended by chief executives from Exxon Mobil Corp. to BP Plc and Royal Dutch Shell Plc and oil ministers from Saudi Arabia to Kuwait and United Arab Emirates.

    “There is a serious oversupply in the market,” Iran’s Oil Minister Bijan Namdar Zanganeh told reporters in Vienna on Thursday.

    Zanganeh said he’s delivering a letter at the meeting alerting OPEC to make room for a rise in the country’s output. Shell CEO Ben Van Beurden and BP CEO Bob Dudley said they are interested in investing in Iran if sanctions related to its nuclear energy program are removed.

    Prices are attractive for non-OPEC producers to keep drilling, Qabazard said. U.S. shale oil output is now steady at about 4 MMbpd, and will grow to 5 MMbpd by 2018, he said.

    http://www.worldoil.com/news/2015/6/04/prepare-for-40-oil-by-year-end-ex-opec-research-head-says
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    Bloated oil market fed more crude from unwinding sea storage plays

    Physical oil is coming under pressure as trade houses unwind a profitable storage play after several months that saw them holding millions of barrels on tankers at sea.

    A drop in the volume of crude stored for speculative profit is putting more supply into an already saturated market, elbowing out new loadings leading to a build-up of unsold West African, North Sea and Mediterranean oil.

    "When the contango started, it created a demand," said Tamas Varga of PVM oil brokerage. Now "they are creating additional supply".

    "The structure of the market should weaken significantly," Varga added. "There is just lots of oil around in the U.S. and globally."

    At its peak earlier this year as much as 50 million barrels of oil was estimated to have been earmarked for storage on tankers. The oil market has since rallied - flattening that discount, also known as a contango, leading trade houses to cash in on profits.

    Shipping sources and shipping data estimated that volumes earmarked for contango-led floating storage had dropped to as few as 10 tankers, known as very large crude carriers, each capable of carrying a maximum of 2 million barrels, meaning at most 20 million barrels.

    "We're getting to the point where it makes sense to sell," Richard Mallinson, analyst with Energy Aspects.

    In the past week alone as much as 5 million barrels of floating storage has been sold, shipping data showed.

    Trade sources said trading firms such as Trafigura and Vitol as well as Shell had all sold cargoes held in floating storage.

    "If you want to recreate the contango trade, you need a steep drop ... in the oil price to make it viable given where tanker rates are today," said Arctic Securities analyst Erik Nikolai Stavseth.

    Nevertheless, for holders of millions of barrels of West African crude and also North Sea oil in the Atlantic, the sell-off in floating storage could mean a longer wait to offload cargoes as they compete. "Everyone is trying to sell," one oil trader said.

    http://www.reuters.com/article/2015/06/04/oil-tankers-storage-idUSL5N0YP3ZC20150604
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    Tight oil is here to stay, Conoco CEO tells OPEC

    The U.S. tight-oil boom is here to stay despite low crude prices as technological breakthroughs will allow steep reductions in costs, the head of U.S. firm ConocoPhillips told a seminar organised by oil-producing group OPEC.

    "Innovations have already led to a U.S. energy renaissance. Tight-oil reservoirs can remain viable today, breakeven costs are already down by 15 to 30 percent," Ryan Lance, chairman and CEO of Conoco, said on Thursday.

    The North American shale oil industry "will survive at $100 and it will survive at $50 or $60 Brent pricing too," Lance told an audience packed with OPEC officials, including Saudi Arabia's influential oil minister Ali al-Naimi.

    Lance said cost reductions had been partly achieved due to cuts in service costs.

    "We're in the second inning of a nine-inning game. We're still trying to figure out how to get the optimum amount of flow through the reservoir. There are more (gains) to come."

    "So the message - unconventional production is here to stay," Lance said.

    U.S. oil production growth has slowed in recent months and the number of rigs drilling for crude shrank dramatically.

    "If prices stabilise and start to improve a little bit, I think you will see rigs start to improve and come back as we go into 2016 and 2017 and create more supply into the system," Lance said.

    http://www.reuters.com/article/2015/06/04/opec-meeting-conoco-idUSL5N0YQ1DV20150604
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    Will Saudi boost oil capacity? Naimi's retort: Show me 10 pct return

    When it comes to whether Saudi Arabia will invest billions of dollars to increase its ability to pump more oil, boosting the world's only large stand-by reserve, minister Ali al-Naimi has a quick answer: show me the return.

    Naimi, speaking informally to reporters in Vienna on Thursday, was asked whether the kingdom needs to lift its capacity now that it is pumping crude at its fastest rate in over three decades to meet a resurgence in demand.

    The country last embarked on a $100 billion push to raise its capacity a decade ago amid a price boom fuelled by China's growth. It can now pump as much as 12.5 million barrels per day (bpd), scarcely 2 million bpd above current output.

    With casual banter, Naimi responded: "Is there demand for Saudi crude? Can you guarantee it? If I go and put a dollar, will you guarantee that I would get 10 percent on that dollar?"

    He added: "I don't want 16 percent, just 10 - can you guarantee that?"

    While his comment sheds little light on the kingdom's internal discussions about possible future investments, the question is more relevant than ever as the world's spare reserve shrinks to its smallest in seven years just as unprecedented regional political tensions are raising new risks.

    Some analysts warn that the recent price crash - which has reignited demand and slammed the brakes on much global investment - may be sowing the seeds of another supply squeeze as early as next year.

    It may also reflect the financial considerations being made by the world's biggest oil exporter as it navigates a new market order, one it created last year by saying the kingdom would no longer cut its own production to shore up prices - although it will continue to meet new demand from its customers.

    Saudi officials have consistently brushed aside questions of new upstream investment. After finishing the kingdom's programme to add nearly 4 million bpd of capacity in 2009, Saudi officials and oil company executives have talked on and off about the possibility of targeting another boost to 15 million bpd by 2020, but those plans were shelved several years ago as demand growth cooled and new supplies emerged.

    Not that the kingdom has been idle. It launched a $35 billion five-year exploration and production investment plan in 2012 meant to sustain its current capacity.

    While the number of U.S. oil rigs has fallen by more than half since last year due to low prices, those drilling in the Middle East have risen to near the highest in records going back to 1975, according to Baker Hughes data.

    More than 400 rigs are operating in the region, a more than 10 percent rise from 2013, with just over half of those in Saudi Arabia.

    Much of Saudi Arabia's international influence has derived from a role often described as the oil equivalent of a major central bank, since it holds nearly all of the world's spare capacity - an emergency reserve that this year has dwindled to its lowest since 2008 as the kingdom steps up output to cover shortfalls in places such as Iran and Libya.

    "There's not a lot of spare capacity left in the world," said Dr. Gary Ross, executive chairman of New York-based PIRA Energy Group. "The last time they pursued this kind of philosophy in 1985 they had 10 million bpd of spare capacity. "

    http://www.reuters.com/article/2015/06/04/opec-meeting-saudi-capacity-idUSL1N0YQ0AH20150604
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    Global Demand Growth for Natural Gas Shrinks: IEA

    The International Energy Agency (IEA) on Thursday morning released its “Medium-Term Gas Market Report” covering the next five years. The agency forecasts demand growth of 2.0%, down from growth of 2.3% in last year’s forecast. Lower prices will drive demand growth, but demand from Asia is expected to decrease and that more than offsets the impact on growth due to low prices.

    The belief that Asia will take whatever quantity of gas at whatever price is no longer a given. The experience of the past two years has opened the gas industry’s eyes to a harsh reality: in a world of very cheap coal and falling costs for renewables, it was difficult for gas to compete.

    Because Asian natural gas prices are indexed to oil prices, last year’s sharp drop in the price of crude has also substantially dropped the price of natural gas. In the short term, demand for natural gas will increase because of the lower pricing, but some Asian countries (India comes to mind) plan to expand coal-fired power generation because coal is even cheaper than natural gas.

    Due to their capital-intensive nature and long lead times, liquefied natural gas (LNG) projects are soft targets for investment reductions and several of them are likely to be delayed or even cancelled. If current low prices persist, LNG markets could start tightening substantially by 2020, with demand gradually absorbing the large supply upswing expected over the next three years.

    LNG projects in Australia and the United States are forecast to supply 90% of the 40% jump in natural gas supplies on the market in 2020. Chevron Corp. (NYSE: CVX) is expected to begin first deliveries later this year from its massive Gorgon LNG project in Australia. The company is also the operator of another Australian LNG project, Wheatstone, that is still being developed.

    Read more: Global Demand Growth for Natural Gas Shrinks: IEA - Chevron Corp (NYSE:CVX) - 24/7 Wall St. http://247wallst.com/energy-economy/2015/06/04/global-demand-growth-for-natural-gas-shrinks-iea/#ixzz3c6RVzi9o
    Follow us: @247wallst on Twitter | 247wallst on Facebook

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    Lukoil may cut price to close Kazakh deal with Sinopec

    Russia's second largest oil company Lukoil is in talks with China's Sinopec over a stalled sale of assets in Kazakhstan, and is ready to cut its price by up to 10 percent, industry sources said on Thursday.

    Lukoil signed a sale and purchase agreement last year for the sale to Sinopec of a 50 percent stake in Caspian Investment Resources Ltd, a company with various stakes in four hydrocarbon-production projects in Kazakhstan. However Sinopec has failed to complete it, according to Lukoil.

    In February, Lukoil said it had commenced arbitration proceedings in London against Sinopec over the uncompleted $1.2 billion deal, although Lukoil CEO Vagit Alekperov has expressed hope for an out-of-court settlement.

    "The discount would be less than 10 percent of the initial price," a source close to Lukoil told Reuters.

    The deal was initially announced when the price of oil stood at above $100 per barrel. Since then it has halved.

    "It's hard to agree on such projects when the prices on the market are so low," another source said.

    Caspian Investment Resources' fields are located mainly in the western part of Kazakhstan which supplies oil to Europe via Russia.

    Lukoil's share of production through the venture was around 30,000 barrels per day in 2013. Output from various small fields that the venture controls will soon peak or has done so already.

    http://www.reuters.com/article/2015/06/04/russia-lukoil-sinopec-corp-idUSL5N0YQ3IY20150604
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    Fracking has not led to widespread risk to drinking water supplies: EPA

    Fracking has not led to widespread, systematic pollution of drinking water, the Environmental Protection Agency (EPA) will say on Thursday in a long-awaited study, sources who have seen the assessment said.

    The study, five years in the making, found some drinking water vulnerabilities to hydraulic fracturing, such as where supplies were scarce, but overall saw little impact from the drilling technique.

    In its review of data sources "available to the agency," the EPA found specific instances where fracking affected water sources but found that they were small relative to the overall number of fracking sites around the United States.

    “EPA’s draft assessment will give state regulators, tribes and local communities and industry around the country a critical resource to identify how best to protect public health and their drinking water resources,” Dr. Thomas Burke, EPA’s science advisor and deputy assistant administrator of EPA’s Office of Research and Development, said in a statement seen by industry sources.

    http://uk.reuters.com/article/2015/06/04/us-usa-water-fracking-idUKKBN0OK1X220150604
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    CNRL, Cenovus wait to resume oil production lost to wildfires

    Production at two of Canada's major oil sands operations remained suspended on Thursday as wildfires continue to rage in northern Alberta.

    Cenovus Energy Inc's 135,000 barrel per day Foster Creek oil sands project and Canadian Natural Resources Ltd's 80,000 bpd Primrose site have been shut for a week after staff were evacuated when a wildfire threatened the two sites.

    The Burnt Lake Fire in northeastern Alberta has consumed more than 33,000 hectares (127 square miles) of forest and remains out of control even as 300 firefighters struggle to contain the blaze.

    The fire shut in about 10 percent of total production from the oil sands, the largest source of U.S. oil imports, and pushed the differential between Canada's Western Canada Select crude and the U.S. standard, West Texas Intermediate, to the narrowest in more than five years.

    While the fire remains a threat and fire hazard in the region remains listed as very high, officials have allowed both companies to return some staff to their sites to prepare for normal operations.

    Canadian Natural, the country's largest independent oil producer, has already resumed some production. The Kirby South project had suspended about 18,000 bpd of production after a third-party pipeline shutdown. That site began ramping up on Wednesday.

    The company said on Thursday it has begun a staged start-up at the larger Primrose project, but cannot yet say when it will reach full capacity.

    Cenovus has also returned some staff to Foster Creek, co-owned with ConocoPhillips. Cenovus said the restart is going well and it expects production to resume soon, though it has yet to announce a target.

    Though the two companies had combined production losses of more than one million barrels of oil, neither has issued a warning that the project shutdowns will impact their second-quarter earnings or revised the production promises made to investors.

    http://www.reuters.com/article/2015/06/04/canada-oil-sands-fires-idUSL1N0YQ27120150604
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    Magnitude redefines microseismic fracture monitoring and refracturing efficiency

    Magnitude, a Baker Hughes company, announced the commercial release of two new offerings, the IntelliFrac™ VSP-Enhanced monitoring service and the IntelliFrac Recomplete service, as part of the company’s line of IntelliFrac advanced microseismic services.

    The new IntelliFrac VSP-Enhanced microseismic monitoring service integrates vertical seismic profiling (VSP) and time-lapse quantitative VSP analysis with traditional microseismic measurements to facilitate improved fracture designs, help optimize real-time fracture applications, and deliver more accurate and far-reaching fracture mapping than is possible by just using microseismic measurements alone. Combining the accurate event locations and magnitudes gathered through this service with patent-pending SWAT (Shear Wave Attenuation Tomography) analysis also makes it possible to best ascertain the effectiveness of hydraulic fracturing treatments via changes in fracture density.

    The IntelliFrac Recomplete service combines microseismic depletion zone mapping with advanced Baker Hughes completion and pressure pumping technology to design and execute effective, efficient refracturing treatments that target and isolate non-depleted regions along the wellbore. Using this service, operators can avoid restimulating areas of the reservoir that have little hydrocarbons left to offer, reducing restimulation costs while still optimizing the potential recovery from their refracturing operations.

    http://www.scandoil.com/moxie-bm2/news/magnitude-redefines-microseismic-fracture-monitori.shtml
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    Alternative Energy

    Germany's record wind turbine growth boosts output

    Germany's wind power output in January-May rose 34% year on year and the country is on track for a third successive record year for new turbine installations, with the first wave of offshore wind farms finally coming online, a Platts analysis of the latest available data show.

    Wind turbines in Germany generated 32.5 TWh of electricity in January-May, up more than 8 TWh from a year earlier, grid operator data compiled by Platts Powervision show.

    On average, wind generated 7.5 GW each hour in the first five months of 2015, the data shows.

    The main reason for the rise is record growth in Germany's wind-power industry with Germany on track to install over 14 GW of new wind turbines between 2013 and 2015, averaging over 12 MW a day.

    That compares with 13 GW added in the seven previous years between 2006 and 2012, or averaging just 5 MW/day, data from Platts Powervision show.

    The offshore grid link bottlenecks now easing, the first wave of some 3 GW of German offshore wind farms is on track to be online by the end of 2015.

    Offshore wind power capacity registered for direct marketing was 2.225 GW in May, a fourfold increase from a year earlier, according to the latest data from the TSOs.

    Total onshore capacity was 38.116 GW as of end 2014 after a record 4.75 GW of new onshore wind capacity was installed last year.

    For 2015, wind lobby group BWE still expects another significant increase of 3.5-4.0 GW, it said earlier this year.

    The boom in additional wind capacity from 2013 to 2015 is in stark contrast to a sharp slowdown in new solar capacity, which boomed between 2010 and 2012 adding some 22 GW in those three years alone, Platts Powervision data show.

    German day-ahead prices in April averaged Eur25.30/MWh, the lowest monthly average in more than 12 years as the seasonal drop in demand combined with strong supply from renewables as well as conventional sources.

    http://www.platts.com/latest-news/electric-power/london/analysis-germanys-record-wind-turbine-growth-26109874
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    Qingdao to build provincial largest wind field

    Forty-six wind power project in Shangdong were approved recently by China's National Energy Board as part of the 12th Five-Year Plan (2011-2015) for renewable energy. Datang Group, with an installed capacity of 250,000 kilowatts, is the largest project, the Qingdao Daily reported.

    Qingdao, at the southern tip of the Shandong Peninsula, has a temperate monsoon climate. Its wind force of 3 or above in spring, autumn and winter is suitable for wind energy generation, explained a meteorologist from Qingdao¡¯s observatory.

    The coastal West Coast New Area, in particular, is one of the windiest areas in Shandong, due to its low mountains and hills. Its annual average wind speed in flat areas hit 2 meters/second.

    West Coast New Area has introduced State-owned enterprises since 2011. At present, there are five wind power projects and three development enterprises. The total installed capacity has reached 218,000 kilowatt.

    In 2014, the total electricity generation in West Coast New Area hit 330 million kilowatt-hours, and 110,000 tons of standard coal and 1.03 million tons of water were saved. The discharge of carbon dioxide was reduced by 210,000 tons.

    Datang's 250,000-kilowatt project, with 2 billion yuan ($322.6 million) of investment, will settle in the New Area's hilly land in the west.

    Upon completion, it is expected to generate 500 million kilowatt-hours of electricity per year, equal to 160,000 tons of standard coal. It will save 1.54 million tons of water, reduce carbon dioxide emissions by 320,000 tons and sulfur dioxide by 1,521 tons.

    "We will introduce related enterprises and professionals to the New Area, relying on the project," said Yang Yong, a manager of Datang, adding that it will also boost other advanced manufacturing industries.

    http://en.chinamining.com.cn/News/2015-06-05/1433484431d72454.html
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    The small windpower market expected to grow at 19.5% pa

    The small wind power market, in terms of types, has been segmented into horizontal axis wind turbine and vertical axis wind turbine.

    Small wind turbines have a power rating of 100 KW or less. These small wind turbines find applications in the micro-generation of energy, mainly to cater to the demands of small-scale commercial customers, residential customers, telecommunication providers, farms, and small industrial facilities.

    The global small wind power market was valued at $776.8 million in 2014 and is projected to grow at a CAGR of 19.5% from 2014 to 2019, to reach a market size of $1,895.0 million. The growth of this market is mainly attributed to the rise in demand for renewable sources for energy generation. Among the applications, the off-grid application segment accounted for the largest market share of about 66% of the global small wind power market in 2014.

    The major companies operating in the global small wind power market are Northern Power Systems Inc. (U.S.), Bergey Wind Power Co. (U.S.), Kingspan Group Plc. (Netherlands), and Xzeres Wind Corp. (U.K.).

     http://www.micromarketmonitor.com/market-report/small-wind-reports-2279680873.html
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    Uranium

    Looming 15% uranium market supply gap could spur price revival – Cameco

    An emerging 15% supply gap could signal a prolonged upturn in the uranium price through to 2024, Canadian uranium major Cameco said on Thursday. A decline in secondary sources of yellowcake was forcing the market to increasingly rely on primary suppliers, which, when coupled with unprecedented growth in the nuclear reactor industry, foretold improved market conditions over the medium and long term, investor relations director Rachelle Girard told the Cantor Fitzgerald Annual Global Uranium Conference, in New York. 

    Cameco expected the market to expand at 4% a year to about 230-million pounds of uranium oxide a year by 2024, a far cry from today’s output of about 140-million pounds, excluding projects under development.

    Worldwide, about 63 new nuclear reactors were under construction, but the world’s insatiable need for electricity could see a further 81 more nuclear reactors come on line in the future. 

    The global uranium market had been stumped by Japan's March 2011 Fukushima Daiichi nuclear disaster, which prompted all nuclear reactors to be shut down in Japan. The natural-disaster induced crisis had created significant global uranium market backlash and public opinions about the safety of using nuclear-derived power took a beating. This had eroded demand and caused a global supply glut, as the Japanese nuclear fleet remained largely offline. 

    Girard said Japanese reactor restarts could kickstart uranium demand growth and start clearing the excess market supply. However, the low-price environment was keeping investment low in new uranium development projects, which could see the primary uranium producers finding it difficult to keep up with demand, once the market started to rebound. 

    “The world needs four more Cigar Lakes to keep up with future demand,” Girard stressed. China would account for 57 new nuclear reactors by 2024, while Indian nuclear-sector growth was poised to take off with 16 new reactors expected to be built by then. 

    Cameco’s recent C$350-million deal to supply more than seven-million pounds of uranium concentrate to India had opened the door to a significant previously inaccessible market, Girard noted. Other developing regions such as the Middle East, Southern Africa and South America were also expected to increasingly draw on the demand side. 

    And when the inevitable global market improvement had started gaining sustained traction, Cameco would be waiting in the wings, able to quickly ramp-up output to about 30% of the global output by 2024. “Cameco has the pounds in the ground when the market calls for it,” Girard said. 

    Cameco expected Cigar Lake to ramp up to its full production rate of 18-million pounds by 2018. 

    http://www.miningweekly.com/article/looming-15-uranium-market-supply-gap-could-spur-price-revival-cameco-2015-06-04
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    Precious Metals

    For risk-wary gold miners, small is beautiful

    Bigger isn't better for the world's gold miners, who are increasingly making "bite-sized" developments that carry less risk of budget disasters and fewer of the political and environmental disputes that have derailed mega-mines in recent years.

    Newmont Mining is a prime example of how companies are responding to bleak industry conditions by building mines on a smaller scale than in the past, with the price of gold down almost 40 percent from its peak in 2011 and banks avoiding the sector.

    The cautious approach will likely persist even if conditions improve, with miners increasingly teaming up on big, complex projects to share costs, expertise and risk, senior mining executives and industry watchers said.

    "If there's going to be something go wrong, you'd rather it go wrong after you've spent $1 billion than $3 billion or $4 billion," said Goldcorp Inc Chief Executive Chuck Jeannes. Goldcorp, the world's most valuable gold miner by market capitalization, owns stakes in a number of joint-ventured assets such as the Alumbrera gold mine in Argentina and the Pueblo Viejo gold mine in the Dominican Republic.

    Barrick Gold, the world's largest bullion producer, could be the poster child for problem-plagued mega-mines.

    Newmont Mining, the world's No. 2 gold producer, decided to start small with its recently-announced Long Canyon project in Nevada.

    The first phase is a $250 million to $350 million development funded with cash flows and available cash, using existing staff. Payback is projected in just over four years.

    Rather than building all the infrastructure for future phases up front, this approach makes each successive phase carry and provide its own return-on-investment, said Newmont CEO Gary Goldberg.

    Yamana Gold is building Cerro Moro in Argentina for $265 million over two and a half years. It will be Yamana's smallest operation on a throughput basis, or the volume of ore processed each day. "It's a sweet spot in terms of manageable capital expenditures over an extended period of time," said CEO Peter Marrone.

    But miners have learned from the past five years, said Joseph Foster, portfolio manager at Van Eck, Barrick's biggest shareholder. "I don't think we'll see the capital cost blowouts and the margin squeezes going forward that we have in the past," Foster said. "They've learned a very hard lesson and I don't think they'll forget it."

    http://www.reuters.com/article/2015/06/05/mining-gold-idUSL1N0YK20T20150605
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    End of an era as largest gold ETF drops out of top 10

    Once the largest fund of its kind in the world, top physical gold-backed exchange traded fund – SPDR Gold Shares (NYSEARCA: GLD) – has dropped out of the top ten.

    According to ETF.com GLD suffered outflows of $902 million or 3% of its total assets under management during May.

    That compares to total inflows in US-listed ETFs – dominated by US and international equity funds – in May of more than $12 billion and the year to date total if $84 billion.

    GLD still dwarfs other physically-backed exchange traded gold products holding 44.5% of the global total at 709.9 tonnes or 22.8m ounces worth $26.8 billion.

    http://www.mining.com/end-of-an-era-as-gld-falls-out-of-top-10-etfs/?utm_source=twitterfeed&utm_medium=twitter
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    Weaker rouble pushes Russia's Alrosa Q1 profit to 22.2 bln rbls

    Russian diamond mining company Alrosa said on Thursday its net profit rose to 22.2 billion roubles ($409 million) in the first quarter of 2015, up almost fourfold year-on-year due to a weaker rouble.

    Alrosa, the world's top producer by output in carats, and other Russian exporters have benefited from the depreciation of the rouble, weakened by Western sanctions and lower oil prices, as their costs fell in dollar-terms, supporting margins.

    "First quarter results were mainly driven by a favourable foreign exchange market environment," chief executive Andrey Zharkov said in a statement.

    The company also said it achieved higher prices for its gem-quality rough diamonds due to a better product mix, which helped to compensate for weaker market demand.

    "The diamond market in the first quarter was less active compared with (the same period last year) due to a lower demand for rough diamonds from Indian cutters and polishers," Zharkov said.

    Earnings before interest, taxation, depreciation and amortisation (EBITDA) rose to 42.9 billon roubles, up 65 percent compared to the previous year, the company said. Revenue increased 31 percent to 74.6 billion roubles.

    Alrosa recorded a 16.8 billion rouble loss last year, as the tumbling value of the rouble prompted a revaluation of the dollar-denominated part of its debt.

    But the miner has said it expects net income of 100 billion roubles in 2015 and to increase sales by one percent, taking advantage of rising production and using offtake from its stock. ($1 = 54.3005 roubles)

    http://www.reuters.com/article/2015/06/04/russia-alrosa-profit-idUSL5N0YQ0HH20150604
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    Base Metals

    First Quantum closes C$1.44bn equity financing

    First Quantum Minerals has completed the previously-announced overnight-marketed public offering of common shares at C$16.25 per common share.

    Including the common shares issued on the exercise of the over-allotment option, First Quantum issued 88,461,450 common shares for aggregate gross proceeds of C$1,437,498,563. The underwriting syndicate was led by RBC Capital Markets and Goldman Sachs Canada Inc, and included Barclays, BNP PARIBAS, Deutsche Bank Securities, Jefferies International Limited and Nomura.

    First Quantum intends to initially use the largest portion of the net proceeds of the offering to reduce net debt and thereby reduce its interest expense, for further capital investment in respect of the company's existing production facilities and development projects, and in respect of strategic initiatives to further enhance its growth pipeline.

    http://www.iii.co.uk/stockmarketwire/246568/first-quantum-closes-c144bn-equity-financing
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    Zinc likely to struggle in the short term

    Zinc prices are likely to struggle in the short term, weighed down by a more plentiful supply situation than forecast.

    Analysts and industry sources said that more inventories are due to move into LME warehouses while two mine operations will produce more than expected despite well flagged closures.

    Zinc is one of the best performing metals on the London Metal Exchange and has been a favourite of investors in recent years due to the prospect of shortages developing because of the shutdowns of major mines.

    Benchmark LME zinc surged by a fifth during the six weeks to May 5, when it hit an eight month peak of USD 2,404.50 per tonne but has since given up about half of those gains.

    Some analysts are concerned about more flows of inventories into LME warehouses after 36,400 tonnes arrived in Malaysian depots on May 19, the biggest one day inflow in over a year.

    Ms Vivienne Lloyd analyst at Macquarie in London said that “We expect to see some more material being warranted and we can only assume that will restrain any further bullish sentiment for zinc for now. Warrants are ownership documents for metal placed in LME certified warehouses.

    She said that “Sizable amounts of metal are in non-LME warehouses in Asia and the United States, which may be shifted into LME facilities. Lloyd expects inflows in both June and July mainly due to LME market dynamics, which included a strong backwardation in May, where nearby prices are higher than forward ones.

    http://steelguru.com/metal/zinc-likely-to-struggle-in-the-short-term/426022#tag
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    Alcoa supplying aerospace aluminum for Samsung Galaxy 6 phones

    Metals company Alcoa Inc said on Thursday it is supplying aerospace-grade aluminum to Samsung Electronics Co Ltd for its Galaxy S6 and S6 edge models, enabling the smartphone maker to produce more durable and sleeker phones.

    Phones made with 6013 Alcoa Power Plate, which is 70 percent stronger than standard aluminum are available now globally, Alcoa said.

    This latest announcement fits New York-based Alcoa's strategy of moving away from costly traditional smelting and refining toward more value-added businesses such as automotive and aerospace.

    "Alcoa's Power Plate is the perfect fit to create the phones that our customers want: thinner, lighter, and stronger," DJ Koh, executive vice president of Samsung's mobile communication business said in a statement put out by Alcoa.

    Part of aluminum's strength comes from heat treatment. The plates are a few millimeters thick and are produced in South Korea.

    Sales of Samsung's flagship Galaxy S6 smartphones reached 6 million units at the end of April, less than a month after their launch, researcher Counterpoint said on Tuesday.

    Counterpoint said it expected sales for the new Samsung flagship phones to reach 50 million by the end of the year, which could make it the world's top-selling smartphone ahead of the iPhone 6 series from rival Apple Inc O>.

    While the flat-screen S6 sold more in April, the researcher said sales of the curved-screen S6 edge would have been higher had it not been for supply constraints.

    Samsung has said supply problems for the edge model will be resolved within the current quarter.

    http://www.reuters.com/article/2015/06/04/samsung-alcoa-galaxy-idUSL1N0YP1R120150604
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    Steel, Iron Ore and Coal

    Joy Global's profit plunges as miners cut spending

    Mining equipment maker Joy Global Inc reported a quarterly profit that nearly halved as customers cut spending due to weak prices.

    The company, which gets about 60 percent of its revenue from coal miners, also said it now expects earnings and sales for 2015 to be at the low end of its previous forecast.

    "The further step down in our key commodity end markets, in particular with U.S. coal and global copper, has resulted in reduced production forecasts and further deferred maintenance on our installed base of equipment with our customers," CEO Ted Doheny said in a statement.

    Joy Global had forecast earnings of $2.50-$3.00 per share on revenue of $3.3 billion-$3.6 billion for the year.

    Analysts on average were expecting earnings of $2.57 per share and revenue of $3.38 billion.

    Coal miners have been hurt by weak demand for thermal coal as U.S. utilities have switched to cheap and abundantly available natural gas.

    Sluggish demand from Europe and Asia, especially China, has also weighed on metallurgical or steel-making coal.

    Revenue fell 13 percent to $810 million in the second quarter ended May 1.

    But U.S sales rose 7.3 percent after falling for the last nine quarters. U.S. is the company's largest market and accounted for 31 percent of overall sales in 2014.

    Overall bookings fell 29 percent in the quarter.

    Net income fell to $38.7 million, or 40 cents per share, from $74 million, or 73 cents per share, a year earlier.

    Excluding pension settlement and restructuring charges, Joy Global earned 59 cents per share.

    The year-earlier quarter included restructuring charges of $3.1 million.

    Analysts had expected quarterly earnings of 56 cents on revenue of $810 million, according to Thomson Reuters I/B/E/S.

    Up to Wednesday's close of $38.93, the company's stock had fallen about 16 percent this year.

    http://www.reuters.com/article/2015/06/04/joy-global-results-idUSL3N0YQ3FK20150604

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    POSCO to sell stake in construction unit to Saudi fund - Officials

    Company officials said that POSCO will sign a deal to sell a 38 percent stake in POSCO Engineering and Construction (E&C) to a Saudi sovereign fund this month.

    POSCO E&C held a board of directors meeting Monday and decided to issue new shares worth 400 billion won and sell them to the Public Investment Fund (PIF) of Saudi Arabia.

    Previously, POSCO Group, the company's largest shareholder, said during a recent board of directors meeting that it would sell a 25% stake in POSCO E&C, which is worth about KRW 800 billion.

    When the deal is finalized, the Saudi sovereign fund will be the second largest shareholder of POSCO E&C, after POSCO Group which currently holds an 89.5 percent stake in the construction company.

    POSCO plans to sign an agreement with PIF by mid-June.

    http://steelguru.com/infra/posco-to-sell-stake-in-construction-unit-to-saudi-fund-officials/425993#tag
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    Molybdenum oxide at 11-year low, threatens to break $7.50/lb

    Molybdenum oxide prices hit the lowest point seen in 11 years on Thursday, June 4, as buyers continued to stay away from the market despite lower offers.

    Platts' daily molybdenum oxide was at $7.50-$7.55/lb from $7.50-$7.60/lb giving a mean of $7.525/lb, the lowest level seen since 26 February 2004, when Platts' weekly dealer oxide mean was at $7.35/lb.

    "I can't sell at $7.50/lb, but I don't think any sales have been done lower," one European trader source said. Others agreed that despite market talk of $7.40/lb and $7.45/lb being concluded, there was evidence of sales.

    http://www.platts.com/latest-news/metals/london/molybdenum-oxide-at-11-year-low-threatens-to-27477473
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