Mark Latham Commodity Equity Intelligence Service

Tuesday 29th September 2015
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    Glencore: A crisis of confidence.

    Now that after long last the market has turned its attention not only to Glencore's mining operations, which as we have repeated said are a secondary aspect to the company's business model, the key being its trading operations which transact in billions of commodities every single day, and the stocks just plunged to fresh intraday lows down a historic 30%, here is a quick pointer at what traders should be looking at next: the company's own disclosure on counterparty risk from its most recent annual report.

    But before we get into it, here is a reminder of Glencore's most recent disclosed financial situation: $30Bn net debt on $6.5bn in EBITDA. EBITDA, which as a reminder, drops by $1.2BN for every 10% drop in copper pricesaccording to the company itself.

    All the detail:

    Perhaps the punchline: $19 billion in derivative liabilities. As a reminder, every collateral netting chain (this is for the very confused "gross is not net" punditry out there) is only as strong as the weakest counterparty. Should GLEN fail, those gross liabilities become net.
    Image titleImage titleThe company has lost more than 70% of its value this year as commodity prices have slumped, making it the worst performer in the FTSE 100 index and the JSE.

    Glencore’s drive to sell assets to cut heavy debts failed to soothe fears over slumping metals prices.

    Traders cited a bearish Investec note that raised doubts over Glencore’s valuation if spot metal prices did not improve. The note pointed to high debt levels at the company.

    Glencore earlier this month sold $2.5bn of new shares to pay down debt to help protect its credit rating amid a rout in commodities prices.

    Glencore sold the stock at 125 pence a share, a 2.4% discount to the closing price on Tuesday, 15 September. Glasenberg paid about $210m to buy shares in the sale in order to maintain his 8.4% stake, honouring a commitment that he and other senior managers representing 22% of the company wouldn’t dilute their holdings.

    Glasenberg was responding to investor concern that a debt- laden balance sheet can’t withstand the slump in commodity prices. The share sale is part of a wider $10bn debt-reduction programme on 13 September, which saw the company scrap dividends and plan asset sales to cut its $30bn of borrowings.

    “The challenging environment for mining companies leads us to the question of how much value will be left for equity holders if commodity prices do not improve,” Investec said in a note to investors Monday.

    The bank said that if major commodity prices remain at current levels, almost all Glencore’s equity value would evaporate in the absence of substantial restructuring.
    “It’s a pure fear trade,” said 
    Tom Voorhees, a corporate bond-trader atBrean Capital LLC in New York. Investment-grade credit investors “have less tolerance for loss,” which is exacerbating selling and price declines, he said.

    Image titleInvestec put out this chart.

    Credit ratings: In light of the Group’s extensive funding activities, maintaining strong Baa/BBB investment grade ratings is a financialpriority/target. The Group’s credit ratings are currently Baa2 (stable) from Moody’s and BBB (stable) from S&P.
    Value at riskOne of the tools used by Glencore to monitor and limit its primary market risk exposure, namely commodity price riskrelated to its physical marketing activities, is the use of a value at risk (VaR) computation. VaR is a risk measurementtechnique which estimates the potential loss that could occur on risk positions as a result of movements in risk factorsover a specified time horizon, given a specific level of confidence. The VaR methodology is a statistically defined,probability based approach that takes into account market volatilities, as well as risk diversification by recognisingoffsetting positions and correlations between commodities and markets. In this way, risks can be measured consistentlyacross all markets and commodities and risk measures can be aggregated to derive a single risk value. Glencore has seta consolidated VaR limit (1 day 95%) of $100 million representing less than 0.2% of equity, which was not exceededduring the period.Glencore uses a VaR approach based on Monte Carlo simulations and is either a one day or one week time horizoncomputed at a 95% confidence level with a weighted data history.Average market risk VaR (1 day 95%) during the first half of 2015 was $41 million, representing less than 0.1% of equity.Average equivalent VaR during the first half of 2014 was $30 million.
    Image titleWe understand this is at CSFB (Zurich)

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    CDS's over 200: Killing Zone.

    Image title
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    Read the entire complaint filed by Gates Foundation against Petrobras


    1. This action is to recover damages for losses Plaintiffs have suffered on certain securities issued by Petrobras and purchased by Plaintiffs between January 2, 2009 and September 24, 2015, inclusive (the "Relevant Period").

    2. This case arises from a pervasive bribery and money laundering scheme carried out by Petrobras and willfully ignored by PwC. Senior Petrobras executives have admitted to the conspiracy and described it in detail, Switzerland and Monaco have frozen over $400 million in secret bank accounts held by Petrobras executives and other co-conspirators, and Petrobras and PwC have now admitted that Petrobras’ financial statements overstated the value of Petrobras’ Case 1:15-cv-07568 Document 1 Filed 09/24/15 Page 1 of 103 2 assets and profitability by at least $17 billion, a figure which is likely understated and will only continue to grow.

    3. The depth and breadth of the fraud within Petrobras is astounding. By Petrobras’s own admission, the kickback scheme infected over $80 billion of its contracts, representing approximately one-third of its total assets. Equally breathtaking is that the fraud went on for years under PwC’s watch, who repeatedly endorsed the integrity of Petrobras’ internal controls and financial reports. This is not a case of rogue actors. This is a case of institutional corruption, criminal conspiracy, and a massive fraud on the investing public.

    Lots, Lots more:
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    China's Xi says to prioritize energy cooperation with Iran

    Iranian President Hassan Rouhani and Chinese President Xi Jinping greet children during the welcome ceremony at the Xijiao State Guesthouse in Shanghai

    China and Iran have close diplomatic, economic, trade and energy ties, and China has been active in pushing both the United States and Iran to reach agreement on the nuclear issue.

    Under the multilateral deal, agreed in July, sanctions imposed by the United States, European Union and United Nations will be lifted in return for Iran agreeing to long-term curbs on a nuclear program that the West has suspected was aimed at creating a nuclear bomb.

    Meeting in New York on the sidelines of the United Nations, Xi told Rouhani that once the nuclear agreement was put in force "Iran will have ever more opportunity for foreign cooperation, and Sino-Iran ties will face a new development opportunity", China's Foreign Ministry said on Tuesday.

    China wants increased cooperation in the fields of railways, roads, iron and steel, auto manufacturing, electricity and high-technology, Xi said.

    "(We) must prioritize energy and financial cooperation," he added, without elaborating.

    China is the biggest customer of Iranian oil.

    Last week, a senior Chinese envoy offered Iran help with upgrading its manufacturing technology to boost its economy.

    China had long railed against unilateral sanctions imposed on Iran by the United States and Europe, though it has supported U.N. ones, and had denounced threats of force.
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    China to prosecute former senior judge for corruption - watchdog

    China will prosecute a former senior judge from its highest court on suspicion of corruption after accusing him of crimes including illegally accepting public funds, Beijing's anti-graft watchdog said on Tuesday.

    Xi Xiaoming, the former vice president of the Supreme People's Court, came under investigation in July for "serious violations of discipline and laws", the terminology China usually uses for corruption.

    He is one of the most senior judicial officials to be ousted by President Xi Jinping's anti-corruption campaign since the downfall of Zhou Yongkang, the former domestic security chief whose brief included law enforcement and courts.

    Xi Xiaoming had been a member of the ruling Chinese Communist Party for 40 years but has been accused of abusing his position to help his relatives obtain benefits for their business activities, the party's Central Commission for Discipline Inspection said in statements on its website.

    Other charges include illegally accepting public funds, breaching confidentiality rules, and leaking secrets related to judicial work.

    His case has been transferred to legal authorities, the watchdog said, meaning that he will face prosecution. He has also been expelled from the party.

    It was not possible to reach Xi Xiaoming for comment and it was not clear if he has a lawyer.

    China's leaders have pledged to continue combating graft, seen as crucial to the party's survival, and have vowed to go after "tigers" in senior positions as well as lowly "flies".

    Zhou was sentenced to life in jail in June after he was found guilty at a secret trial of bribery, leaking state secrets and abuse of power, in China's most sensational graft scandal in 70 years.

    Xi Xiaoming, 61, was the number four official in the Supreme People's Court, where he specialized in economic law cases.

    A native of eastern Jiangsu province, he rose from working as a policeman in the northern city of Shenyang in the 1970s to the highest echelon of China's judiciary, where he was also a member of the court's leading Party members' group.

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    Oil and Gas

    The Saudi Royal Letter demanding change, and $70bn withdrawn.


    A senior Saudi prince has launched an unprecedented call for change in the country’s leadership, as it faces its biggest challenge in years in the form of war, plummeting oil prices and criticism of its management of Mecca, scene of last week’s hajj tragedy.

    The prince, one of the grandsons of the state’s founder, Abdulaziz Ibn Saud, has told the Guardian that there is disquiet among the royal family – and among the wider public – at the leadership of King Salman, who acceded the throne in January.

    The prince, who is not named for security reasons, wrote two letters earlier this month calling for the king to be removed.

    “The king is not in a stable condition and in reality the son of the king [Mohammed bin Salman] is ruling the kingdom,” the prince said. “So four or possibly five of my uncles will meet soon to discuss the letters. They are making a plan with a lot of nephews and that will open the door. A lot of the second generation is very anxious.”

    “The public are also pushing this very hard, all kinds of people, tribal leaders,” the prince added. “They say you have to do this or the country will go to disaster.”Image title

    Saudi Arabia has withdrawn as much as $70 billion from global asset managers as low oil prices continue to put financial pressure on OPEC’s largest producer, according to financial services market intelligence company Insight Discovery. Saudi Arabia is likely to post a deficit of 19.5% of GDP this year amid low oil prices due to a global glut,according to information from the International Monetary Fund.

    Critical Section of this letter:

    'And how we like the massive bleeding of state funds, including more than double spending
    In the past years?

    The first Scottna is the one who allowed the accumulation of risk, and we have to move aggressively on this move have on the level of
    Decision-making and finding a real solution impotent King Salman to the problem that exploits and his young teenager. We will not stop
    The financial bleeding and adolescence political and military risks, but a mechanism to change the decision even if need be to change the King

    Then we have to recall that our people has become a high degree of awareness has available to him the tools that can be pursued
    Where the situation, it is folly and audacity to behave as if in the judgment was absent ignorant people unable to follow up
    Juvenile Affairs. Therefore we do not want to fool citizens have a responsibility to disregard them, and do not want to bear
    The responsibility of political and media act without evoke developments and means of communication and information as well as activities
    Opponents who monitor the efficiency of what we are trying to hide or mislead people about him.'

    Named Saudi princes who have 'great competence':
    /continues for several pages, and is signed:

    Your son Savior
    One of the descendants of the founder King Abdul Aziz bin Abdul Rahman Al-Faisal Al-Saud

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    Morgan Stanley Has Given Up on Energy Stocks

    Toward the beginning of 2015, with crude oil prices in free fall, Morgan Stanley's equity strategy team made a bold call, upgrading the energy sector to overweight.

    But there's been no reprieve for those stocks this year, with the S&P 500 energy sector index losing nearly one-quarter of its value year-to-date:

    Now, in a display of candor that's rare on Wall Street, chief U.S. equity strategist Adam Parker is waving the white flag.

    "We made a really bad call by going overweight energy at the beginning of this year," he wrote.

    Morgan Stanley downgraded the sector to market weight, indicating the supply glut in oil may not improve for another year, at a minimum, and that investors will likely find a better entry point in six to nine months.

    In rationalizing the downgrade, Parker adapted a phrase often attributed to John Maynard Kenyes: "When the facts change, I change my mind. What do you do, sir?"

    There's been new information "… since the original upgrade and our judgment is, why hold a losing bet when we have new information?" wrote Parker, noting that the full effects of the shale revolution are now being crystallized. "Companies can make the same margins at $60 oil today as they could at $90 oil a couple of years ago."

    The strategist recounted how his dream scenario in energy turned into a nightmare:

    Our original thesis when we went overweight the energy sector at the beginning of the year was that they were cyclical stocks that were down a lot, you had to be anticipatory and the valuation was compelling. We thought the falling rig count would be a catalyst to spark a dream of higher oil. Well, we now think rig counts aren’t the way to think about it. It is production, and production isn’t down really at all in the US. While the sector rallied in February and March in anticipation of achievable estimates in April, the sector has lagged massively since because of stronger than expected supply. The valuation argument only works with a dream of a much higher oil price in the future, and that dream has been a bit of a nightmare.

    A scary thought for the remaining oil bulls: Parker posits that oil is perhaps much more like natural gas than is currently acknowledged, implying that meaningful upside from current levels might not be on the horizon. The futures curve for West Texas Intermediate is sending a similar signal, with contracts through 2023 priced below $60 per barrel.

    But in the same breath as he lowered his rating of the sector, Parker expressed concern that he's making this call at exactly the wrong moment.

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    Platts: October spot LNG prices to Asia drop

    Prices of spot liquefied natural gas for October delivery to Asia averaged $7.538 per million British thermal units, according to latest Platts Japan/Korea Marker data for month-ahead delivery.

    The figure reflects the daily JKM assessed between August 17 and September 15, expressed as a monthly average.

    The marker, which fell 5.9% month over month, started the assessment period at $7.95/MMBtu, but weakened over the course of the month to be assessed at $7.00/MMBtu on September 15, as supply concerns from the previous month eased following multiple sell tenders from projects in the Asia Pacific region.

    Although the market was moving into the traditional peak winter season, demand among northeast Asian buyers remained weak owing to high inventories in tank and moderate temperatures. Demand among portfolio sellers and traders, who had previously provided some support to prices, was also lackluster, as most short positions had now been covered. Arbitrage opportunities between the two basins had also narrowed on tighter spreads between the Platts JKM and U.K. onshore National Balancing Point gas prices.

    “High inventories continued to result in weak demand from South Korea, Japan, and Taiwan,” saidStephanie Wilson, managing editor of Asia LNG at Platts. “In Japan, Kyushu Electric was unable to take delivery of a cargo due to high inventories, while in Taiwan, CPC, the only North Asian buyer to have shown sustained demand for additional LNG in 2015, was recently heard to be looking to defer contractual volumes due to high stocks.

    Furthermore, Chinese downstream demand is also weak, with state-owned LNG buyer CNOOC issuing a supply tender, the first sell tender from a traditional northeast Asian LNG consumer, said Wilson.“Demand is looking uncharacteristically soft leading up to winter,” Wilson said.

    On the supply side, there were numerous sell tenders from the majority of Asia Pacific projects, as sellers found it difficult to market extra volumes. Tenders from Australia, Indonesia, Papua New Guinea, and Russia were issued during the month.

    This is the eighth consecutive month that Platts JKM prices have been range bound between $7-8/MMBtu since declining from the $9-10/MMBtu level seen over January and February delivery.

    Meanwhile, the price of possible competing fuel thermal coal also decreased 21.1% year over year, while fuel oil was also down 60.0% from the same month in 2014.

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    Russia Reconsiders Tax Proposals to Ease Oil Producer Fears

    Russia will weigh lowering oil-export duties at a slower rate than planned instead of raising an extraction tax as the government seeks to plug its budget deficit without hurting the prospects for the country’s biggest crude producers.

    “The government is considering the variant where the export duty is reduced more slowly,” Natalya Timakova, a spokeswoman for Prime Minister Dmitry Medvedev, told reporters on Monday at his residence outside Moscow. Medvedev decided that Russia won’t make changes to an oil-extraction tax, she said.

    Finance Ministry plans to raise more than 600 billion rubles ($9.1 billion) of additional tax revenue next year prompted concerns that a higher extraction levy would curb Russian oil production. The collapse in crude prices sees Russia facing its widest budget gap this year since 2010, forcing the government to choose between deeper austerity, tax increases and a freeze on pension-fund contributions as the nation experiences its first recession in six years.

    The government had originally planned to lower the export duty on oil to 36 percent next year from 42 percent, Economy MinisterAlexei Ulyukayev told reporters. Each percentage point decrease is worth about 37 billion rubles to Russian producers, he said, citing the companies’ accounting.

    “In essence, the proposal is not to do this decrease in full,” according to Ulyukayev, who said Russia is also considering other sources of budget revenue, including export duties on natural gas and central bank earnings. “We have sources that aren’t linked to actions in energy, including, for example, central bank profits.”
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    With cash from Russian sales, Gunvor readies European expansion

    Gunvor is close to buying its third refinery in Europe, reinvesting money from asset sales in Russia, in a major turnaround for the Swiss trading house since its deep links with Moscow nearly brought it to a collapse only 18 months ago.

    Industry and banking sources told Reuters on Monday Gunvor had entered into exclusive talks with Kuwait Petroleum Corp (KPC) to buy its Dutch refinery in Rotterdam adding to its refining portfolio in Germany and Belgium.

    The quick overhaul at Gunvor, led by Chief Executive Torbjorn Tornqvist, has surprised many rivals and market watchers many of whom had predicted tough times for the company after its co-founder, Russian businessman Gennady Timchenko, was put on a U.S. sanctions list.

    In March 2014, the United States slapped sanctions on Timchenko and other allies of President Vladimir Putin following Russia's annexation of Crimea. The U.S. Treasury said it believed Putin had investments in Gunvor and may have access to its funds although it never elaborated.

    The move plunged Gunvor into brief turmoil even though it said Timchenko had sold out his 50 percent stake in the firm a day before sanctions were imposed.

    "It was a question of the firm's survival," one insider said, as some banks and peer trading houses had briefly stopped dealing with the firm.

    Tornqvist, a Swedish oil trader who started his career at BP , said at the time it was the most challenging moment in Gunvor's history.

    The situation improved after U.S. officials said they did not want sanctions on Timchenko to affect Gunvor. Most counterparties quickly resumed dealings with Gunvor which trades oil, refined products, gas and metals across 100 countries.
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    Halliburton, Baker Hughes plan more divestitures for deal approval

    Oil services provider Halliburton Co and Baker Hughes Inc will sell additionalbusinesses in connection with Halliburton's pending acquisition of its smaller rival, the companies said in a joint statement.

    Halliburton's proposed acquisition of Baker Hughes ran into regulatory hurdles with the U.S. antitrust enforcers who believe the $35 billion merger will lead to higher prices and less innovation.

    Halliburton said in April that it would sell three of its drilling businesses and on Monday said it had received proposals from multiple interested parties for each business.

    Halliburton also said it would additionally divest its expandable liner hangers business, while Baker Hughes will divest three businesses.

    Baker Hughes will divest its core completions business, its sand control business in the Gulf of Mexico and its offshore cementing businesses in Australia, Brazil, the Gulf of Mexico, Norway and the United Kingdom.

    The companies also said they have agreed with the U.S. Department of Justice to further extend by three weeks the earliest closing date of the department's review.

    Now, the review will, at the earliest, close on the later of Dec. 15 - from the current date of Nov. 25 - or 30 days after the date on which the two companies fully comply with the DOJ's second request.
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    So far, less pain than feared as U.S. shale firms renew loans

    A number of U.S. shale oil and gas companies are securing unchanged or even increased credit allotments during their semi-annual loan reviews, defying expectations that banks would slash small firms' credit lines in response to low crude prices.

    According to a Reuters review of disclosures made by 19 independent U.S. shale oil and gas companies since Aug. 1, at least 11 have said their borrowing bases have been or will be maintained or increased. In contrast, just five talked about cuts.

    It is too early to tell if the whole sector will emerge equally largely unscathed from the reviews. Many more companies from a batch of about 60 U.S. independents typically tracked by investment banks will probably make disclosures after the usual loan reset deadline of Oct. 1.

    But outcomes so far suggest an expected pullback by banks may be far less severe than many in the industry have feared.

    "I've seen some companies maintaining borrowing bases and some companies even increasing borrowing bases, though other companies are cutting," one energy lawyer in Houston said. "It really is on a case-by-case basis."

    The Office of the Comptroller of the Currency has voiced concern about banks' exposure to oil's nearly 60 percent slide given crude prices serve to determine the value of borrowers' assets.

    A survey of a broad range of 182 energy industry professionals this month by the law firm Haynes & Boone showed they expected borrowing bases linked to valuations of oil and gas reserves to fall on average by 39 percent.

    However, a quarterly survey of 40 energy lenders by the advisory firm Macquarie Tristone showed the average oil price they use to size their loans has edged down only about 5 percent in the last six months, suggesting just a modest pullback in lending.

    Bankers also expect crude prices to recover from six-year lows in the months ahead. They see the U.S. benchmark price averaging at $48 per barrel this year and $54 next year and climbing above $61 in 2018 from around $45 now.

    A combination of bank lending and private equity financing has allowed many U.S. companies to keep producing crude and adding to a global glut even after funding in public capital markets began drying out in June.

    "Many firms were able to hedge in June, so that allowed them to be better positioned coming into redeterminations," said an energy banker in Dallas. "Price decks have largely been maintained ... and most banks are fairly optimistic."

    Banks, anticipating an oil market recovery, have also trimmed their price estimates used to size loans, so-called price decks, much less than the drop in crude would suggest.

    Finally, by driving down costs companies have helped keep chunks of their reserves, used as collateral for credit, economically recoverable.

    Some, such as Gulfport Energy Corp, which operates in Ohio and Louisiana, have also acquired new oil fields during the downturn. Back in February, Gulfport reported its proved reserves had tripled from the previous year and earlier this month the company said The Bank of Nova Scotia had increased its borrowing base to $700 million from $575 million.

    Others, such Gastar Exploration Ltd., which operates in Oklahoma, West Virginia and East Texas, credited their hedging for keeping lending bases steady.

    Even with cuts, many firms appear to have some financial leeway. Bank of America Merrill Lynch Global Research said this month only a fifth of the 59 oil companies it tracks have used more than half of their borrowing bases.

    Private equity funds are also there to plug financing gaps, albeit at a steeper cost than typical loan rates of around 8.5 percent.

    "There's a very robust private capital market," said J.P. Hanson, managing director at New York-based investment bank Houlihan Lokey. "For at least a few companies that need a lifeline, there is capital available."
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    Freeport-McMoRan Announces Positive Drilling Results at the Horn Mountain Deep Project

    Freeport-McMoRan Inc. announced today positive drilling results from the Freeport-McMoRan Oil & Gas 100-percent-owned Horn Mountain Deep well in the Deepwater Gulf of Mexico . Initial production from this well, which will be tied back to existing facilities, is expected in first half 2017. This well, combined with two follow on development wells at Horn Mountain Deep, may be capable of producing an aggregate of 30,000 barrels of oil equivalents per day (BOE/d).

    During September 2015, the Horn Mountain Deep well was drilled to a total depth of approximately 16,925 feet. Logging while drilling logs indicated that the well encountered a total of approximately 142 net feet of Middle Miocene oil pay with excellent reservoir characteristics. In addition, these results indicate the presence of sand sections deeper than known pay sections in the field. The 100-percent-owned Horn Mountain production facilities in FM O&G’s Mississippi Canyon area are capable of processing 75 MBbls of oil per day. The positive results at Horn Mountain Deep and our geophysical data support the existence of prolific Middle Miocene reservoir potential for several additional opportunities in the area, including the 100-percent-owned Sugar, Rose, Fiesta, Platinum and Peach prospects. FM O&G controls rights to over 55,000 acres associated with these prospects.

    Since commencing development activities in 2014 at its three 100-percent-owned production platforms in the Deepwater GOM, FM O&G has drilled 12 wells, all with positive results. Three of these wells have been brought on production, and FM O&G plans to complete and place the remaining additional wells on production in late 2015, 2016 and 2017.

    The success at Horn Mountain Deep follows the positive drilling results announced in July 2015 from three wells drilled in the Horn Mountain area, including the Quebec/Victory (QV), Kilo/Oscar (KO) and Horn Mountain Updip tieback prospects. In aggregate, these wells may be capable of producing over 27,000 BOE/d, with initial production expected in mid-year 2016.
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    Sanchez Energy Enhances Liquidity With $345 Million Midstream Asset Sale

    Sanchez Energy Corporation today announced that it has executed an agreement with Sanchez Production Partners LP pursuant to which the Company will divest, and SPP will acquire and operate, certain pipeline, gathering and compression assets located on the Western part of its Catarina asset in the Eagle Ford Shale in South Texas, for cash consideration of approximately $345 million, subject to normal and customary closing and post-closing adjustments. The transaction is expected to close in October 2015.

    Proceeds from the Western Catarina Midstream Divestiture further enhance Sanchez Energy's strong liquidity position, which is expected to enable the Company to pursue growth opportunities through opportunistic asset acquisitions, the acceleration of cost-efficient drilling and completion activities, and the strategic leasing of additional acreage in its core areas of operations. Sanchez Energy previously reported that it maintained liquidity of $572 million as of June 30, 2015, which included $300 million in available capacity on the Company's undrawn bank credit facility. As a result of the sale of midstream assets, pro forma liquidity will increase to approximately $918 million, inclusive of cash on hand and the $300 million elected commitment under its undrawn revolving credit facility.
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    Icahn raises stake in Cheniere Energy to 11.43 pct

    Activist investor Carl Icahn raised his stake in liquefied natural gas company Cheniere Energy Inc to 11.43 percent, according to a regulatory filing on Monday.

    Icahn raised his stake to 9.6 percent on Sept. 14.

    The biggest investor in the company as of Sept. 14, Icahn now owns 27 million shares of the Houston-based company. 

    Cheniere appointed Icahn Enterprises directors Jonathan Christodoro and Samuel Merksamer to its board last month, weeks after Icahn disclosed his stake in the company.

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    Herbicide scrutiny mounts as resistant weeds spread in U.S.

    Concerns about the world's most popular herbicide continue to mount, as U.S. agricultural experts note spreading weed resistance to glyphosate.

    As the key ingredient in Monsanto Co's Roundup herbicide products as well as about 700 other products, glyphosate is widely used on farms as well as residential lawns.

    But the chemical has come under increasing scrutiny in recent years in part because scientists and environmentalists have warned that weed resistance to glyphosate has become a significant problem that impacts crop production.

    In the latest account of glyphosate-resistant weeds, U.S. weed scientist Dallas Peterson said this week that resistance is increasing rapidly in the key farming state of Kansas. The trend is a worrisome sign as weed resistance spreads from the southern U.S. into the Midwest and Plains farming states, he said.

    Peterson, who is both a weed scientist at Kansas State University (KSU) and president of the Weed Science Society of America, said Kansas soybean farmers in particular are experiencing weed problems, particularly with a type known as Palmer amaranth. Wet weather along with the weed resistance contributed to the problem, he said.

    "It's really kind of exploded," he said.

    Farmers in other Midwestern states, including Missouri, Nebraska, and Illinois have reported mounting problems with weed resistance as well.

    Weeds can choke off nutrients to crops hurting production, and raise costs for farmers who often use added chemicals or other means to combat the troublesome weeds.

    Weed resistance across U.S. farmland is becoming such a significant problem that a briefing on the matter is being planned for Dec. 4 in a meeting room of the U.S. House of Representatives agriculture committee.

    The U.S. Department of Agriculture said that reliance on glyphosate by many farmers is the primary factor for the problem. Fourteen glyphosate-resistance weed species have so far been documented in U.S. crop production areas, according to USDA.

    The use of glyphosate by farmers surged after Monsanto introduced glyphosate-tolerant "Roundup Ready" soybeans and other crops in the mid-1990s.

    Monsanto and DowAgroSciences, a unit of Dow Chemical , are bringing new herbicides to market, combining glyphosate with dicamba from Monsanto, and glyphosate with 2,4-D from Dow.

    Peterson warned, however, that tests at KSU showed that these combinations still had trouble controlling Palmer amaranth weeds.

    Both companies said research shows their new herbicide combinations are highly effective, but they also advise farmers to use multiple strategies to fight the troublesome weeds.

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    Precious Metals

    Swiss watchdog opens bank probe into precious metal collusion

    The Swiss competition watchdog has launched an investigation into possible collusion in the precious metals market by several major banks, it said on Monday, the latest in a string of probes into gold, silver, platinum and palladium pricing.

    Global precious metals trading has been under regulatory scrutiny since December 2013, when German banking regulator Bafin demanded documents from Deutsche Bank under an inquiry into suspected manipulation of gold and silver benchmarks by banks.

    Even though the market has moved to reform the process of deciding on its price benchmarks, accusations of manipulation have refused to go away.

    Gold prices have also shed some 9 percent in the last two years as investors lose faith in its status as a store of value.

    Switzerland's WEKO said its investigation, the result of a preliminary probe, was looking at whether UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui conspired to set bid/ask spreads.

    "It (WEKO) has indications that possible prohibited competitive agreements in the trading of precious metals were agreed among the banks mentioned," WEKO said in a statement.

    A WEKO spokesman said the investigation would likely conclude in either 2016 or 2017, adding that the banks were suspected of violating Swiss corporate rules.

    The banks face financial penalties if WEKO finds them guilty of wrongdoing, the spokesman said, though he declined to comment on the size of any possible fine.

    WEKO could add more banks to its investigation if it finds cause for suspicion, the spokesman said.

    The move comes a month after press reports that the European Union's competition regulator was investigating anticompetitive behaviour in precious metals spot trading, and follows news of a U.S. probe by the Department of Justice (DoJ) and the Commodity Futures Trading Commission earlier this year.

    U.S. authorities are investigating at least 10 major banks for possible rigging of precious metals markets, according to reports. HSBC and Barclays said earlier this year that they were cooperating with the investigation.

    Aside from regulatory probes, a number of lawsuits have also been filed in U.S. courts alleging a conspiracy to manipulate precious metals prices.

    Commenting on the WEKO probe, a Julius Baer spokesman said the bank was cooperating with authorities.

    In a statement, Deutsche Bank said it was cooperating with requests for information from "certain regulatory authorities" over precious metal benchmarks but declined to comment further.

    Representatives for UBS, Barclays, Morgan Stanley and HSBC declined to comment. Mitsui was not immediately available for comment.
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    More rough diamond price cutting needed –

    A further reduction in the price of rough diamonds is needed, according to the World Federation of Diamond Bourses (WFDB). Last month Anglo American-controlled De Beers cut the prices of its rough by up to 10% and this month State-controlled Alrosa of Russia followed suit, against the background of diamond manufacturers laying it on the line that they simply could not be expected to pay high prices for rough at a time of falling polished prices. 

    Now WFDB said it expected to see the trend repeated at other diamond sales and tenders. “I believe we need to see a further reduction in rough prices,” said WFDB president Ernie Blom in a media release sent to Mining Weekly Online. Blom singled out the Indian manufacturing sector in particular for carrying out a much-needed downscaling of polished production and also drew optimism from this month’s “solid and stable” Hong Kong Gems and Jewellery Fair, which he said served as a useful barometer of diamond industry sentiment owing to the global nature of its exhibitors, buyers and visitors. 

    The decision of many diamantaires to hold off on manufacturing would also help put a firm floor under prices. "We had a situation where there were simply too many polished goods on offer. Now that some major players have cut production, there will be lower levels of polished inventories and possibly shortages in some items,” said Blom, who believed a rise in business transactions would result. He forecast lower levels of polished inventories and possibly shortages in some items as a result of the cutbacks of polished diamonds at a time when the work of World Diamond Mark to raise consumer demand was bearing fruit. 

    While the collective efforts were a cause for greater optimism, the situation in the diamond business remained “far from easy”, which was why a further reduction in rough prices was expected. Last week alluvial diamond miner Rockwell Diamonds reported that it had averaged a 24%-lower $1 791/ct for rough diamonds on 28%-lower total diamonds sales over 12 months and miner Trans Hex reported 21%-lower dollar prices and 9% lower rand prices than those fetched in the 12 months to March 31.

    Attached Files
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    Base Metals

    Alcoa to Split Into Two Companies

    Struggling Aluminium maker Alcoa Inc. said Monday that it would split into two publicly traded companies next year, joining the recent wave of companies looking to spur growth by breaking up.

    Alcoa said its upstream company, which will keep the Alcoa name, will include its bauxite-mining, alumina-refining and aluminium-production businesses. The company would have had revenues of $13.2 billion in the year ended June 30.

    The other company, which Alcoa is calling its value-add company, will include its global rolled products, engineered products and solutions, and transportation-and-construction businesses. The company would have had $14.5 billion in revenue in the year ended June 30.

    Alcoa said a big chunk of the company’s revenue will come from the aerospace industry, through its strength in areas such as jet engine and industrial gas turbine airfoils and aerospace fasteners.

    Chief Executive Klaus Kleinfield will lead the value-add company as chairman and CEO, and he will also chair the upstream company initially.

    The move comes as Alcoa has struggled with the price for raw aluminium remaining under pressure as China floods the global markets with steel, aluminium and other industrial metals.

    The deal is expected to close in the second half of next year.

    Alcoa shareholders will own all outstanding shares of both companies. Alcoa said it expects the deal to qualify as a tax-free transaction for shareholders.
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    First Q4 Japanese aluminium premium settlement at $90/mt, down from Q3

    The fourth-quarter aluminium contract premiums have settled at $90/mt plus London Metal Exchange cash CIF Japan among some Japanese buyers and producers, down from $90-100/mt for Q3, buyer and producer sources said Monday.

    The negotiations are continuing, among buyers seeking $80-90/mt premiums and sellers $90-95/mt, negotiators said.

    Four deals were reported done to date at $90/mt plus LME cash CIF Japan for over 500 mt/month of P1020/P1020A ingot for loading in October-December, payment cash over documents.

    Three global producers offered $110/mt plus LME cash CIF Japan, up from Q3, attributing the increase to demand recovery in Southeast Asia and the stable Japanese demand.

    Japanese buyers had counter-bid at $80-$90/mt plus LME cash CIF Japan, saying that main port stocks of 500,000 mt was discouraging fresh import demand.

    "There was resistance from producers who wanted the premiums back up to three-digit level [from Q3's $90-100/mt], but they came down to $90/ we are grateful they are listening," said one consumer, indicating that talks were drawing to a close.
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    Steel, Iron Ore and Coal

    Baosteel starts production at new mill in Zhanjiang

    Baoshan Iron & Steel Co (Baosteel) started production at its new project in China's southern port city of Zhanjiang even as steel prices plunge amid sluggish demand in the country, which  is facing its slowest pace of economic growth in 25 years.

    The No. 1 blast furnace of the project, designed to have an annual capacity of 4.1 million tonnes of melted iron, was ignited on Friday, China's biggest publicly traded steelmaker said in  a filing to the Shanghai Stock Exchange yesterday.

    The project will be fully operational a year later with an expected annual crude steel production of 8.75 million tonnes, Baosteel said.

    It usually takes three to six months of trial production before a new steel mill begins commercial operation.

    Chinese mills face declining domestic demand for the first time in a generation amid a property slump, which crushed prices in the nation that produces more than half of world output.

    Baosteel last month said that it expected a 50 percent to 60 percent drop in net income for the first nine months of the year, citing foreign exchange losses related to debt restructuring  after a surprise yuan devaluation.
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    Kobe Steel cuts profit target by 58%

    Kobe Steel Ltd has more than halved its full-year profit target after China’s slowing economy hurt sales at its construction machinery unit and a power outage at its Kakogawa steelworks pushed up costs.

    The steelmaker now forecasts net income at 25 billion yen ($207 million) for the year to March 2016, 58 percent lower than its July forecast of 60 billion yen

    Kobe Steel had a profit of 86.5 billion yen in the year to March 2015.

    Kobe Steel, Japan’s third biggest producer of the metal, cut its full-year sales forecast by 2.6 percent to 1.9 trillion yen and its operating profit target by 24 percent to 95 billion yen, according to its statement. The Kakogawa plant in west Japan is one of two, and profits there will be hit by higher safety costs after July’s power outage and reduced output, it said.
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