Mark Latham Commodity Equity Intelligence Service

Vedanta posted an unexpected profit in the third quarter as India’s biggest producer of aluminium and copper countered a slump in commodity prices by cutting costs. The shares surged the most in more than three months.

Group net income slumped to 179.1 million rupees ($2.63 million) in the three months to December 31 from 15.9 billion rupees a year earlier, the unit of London-listed Vedanta Resources said in a statement on Thursday. Analysts projected on average a loss of 1.04 billion rupees. Sales tumbled 23% to 148 billion rupees in the quarter, beating analysts’ estimates of 144.9 billion rupees.

Shares of Vedanta have slid 25% this month as the rout in commodities from base metals to crude oil and iron ore deepened amid forecasts for the Chinese economy to grow at the slowest pace in a generation. The parent company has cut costs and reduced overall expenditure by as much as 25% to counter the slump while betting on a recovery, chairman Anil Agarwal said last week.

“In the weak commodity price environment, we remain committed to optimising our operations, leveraging our high quality asset base, and pro-actively managing our balance sheet,” Vedanta’s chief operating officer Tom Albanese said in the statement.

Vedanta’s total costs fell 12% to 135.4 billion rupees in the quarter, while other income rose 35% to 5.79 billion rupees, the company said. Gross debt stood at 809.52 billion rupees at the end of December, while cash and liquid investments totaled 506 billion rupees, it said. The shares rallied 5.5% to 67.30 rupees by 3:30pm close in Mumbai, the biggest gain since October 12.

Vedanta’s inability to mine enough bauxite has forced its aluminium smelters to operate below capacity, while courts have limited the amount of iron ore it can mine. Three-month copper prices on the London Metal Exchange fell for a sixth straight quarter to cap a third annual loss in 2015. Aluminium tumbled 19% last year while an index of six metals on LME declined 24%.

http://www.mineweb.com/news-fast-news/vedanta-defies-commodity-price-collapse-to-post-surprise-profit/?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A%20MasterGold%20%28Gold%20News%29&utm_term=MasterMetals

Not only is the fourth, feeble and final dead CAT bounce in US sales officially over, with December US retail sales tumbling -10% Y/Y, after "only" a -5% decline in November and hugging the flatline for the past few months, but sales elsewhere around the globe were a complete debacle: Asia/Pacific (mostly China) was down -21%, EAME dropping -12%, and Latin America (i.e. Brazil) continuing its free fall dropping by -36%, but global retail sales just posted a massive -16% drop in the past month, tied for the worst annual decline since the financial crisis.

Putting the annual drop in context, CAT sales dropped 12% a year ago, another 9% in 2013, and -1% in 2012, or four consecutive years of declines!

But where the manufacturing depression as seen from the perspective of heavy industrial machinery operator has never been worse is shown in the chart below: CAT has now suffered a record 37 months, or over 3 years, of consecutive declining annual retail sales - something unprecedented in company history,and set to surpass the "only" 19 months of decling during the great financial crisis by a factor of two in January!

Image title

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Russia hints at OPEC talks.

Oil futures surged on Wednesday after Russia indicated there was a possibility of co-operation with OPEC, fanning hopes for a deal to reduce a global oversupply that sent prices to the lowest levels in over a dozen years last week.

A statement from Russia's energy ministry left the door open to talks with OPEC, moments after the head of Russia's pipeline monopoly said officials have decided they should talk to Saudi Arabia and other OPEC members about output cuts.

The top non-OPEC producer, Russia has in the past been unwilling to cut oil output, as it battles for market share with OPEC output leader Saudi Arabia.

"I remain sceptical, at the end of the day, about that happening as the oil producers are looking at the other guy to cut production while maintaining their own levels," Andrew Lipow of Lipow Oil Associates said.

"I think the geopolitical factors in the Middle East are playing a bigger part in the actual oil production than the statements from energy ministers who'd like to see higher prices."

Hints of a possible deal between OPEC members and rival producers had already helped oil rally 4 percent on Tuesday.

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Tesla vs Toyota hybrid. So which actually has higher mpg?

Losses From Generation To Distribution

Generation Losses

This is a table of heat rates for electricity generation. To express the efficiency of a generator or power plant as a percentage, we must divide the equivalent Btu content of a kWh of electricity (which is 3,412 Btu) by the heat rate. The average heat rate for all types of turbines, if you average them together, is about 10,134. This is a rough calculation and does not scale as dispersed.

Efficiency = [(3,412)/(10,134)]*100 = 33.7%

This means that 66.3% of the energy in the raw materials themselves are lost due to heat. Think about that! 1,000 kWh worth of fuel dumped into a generator will leave you with 337 kWh of electricity on average! Image title

Transmission and Distribution Losses

Electricity needs to make it from the generator to your home. As an electrical engineer who works for an electrical contractor, I can briefly speak to how it works.

GENERATOR -> HIGH VOLTAGE TRANSMISSION LINES -> SUBSTATION (steps down voltage for distribution -> DISTRIBUTION LINES -> HOME

The EIA estimates that approximately 6% of all electricity is lost - 2% for transmission and 4% for distribution - from the generator to your meter. This is due to the real-world inefficiencies of the infrastructure and can vary wildly from state-to-state. Older infrastructure, of course, will likely perform worse. Please note these are US figures - we have some of the most efficient electricity transmission and distribution infrastructure in the world thanks to our rigorous standards - countries like India are estimated to incur losses of up to 30% in transmission and distribution (significant amounts are from theft), so EV's will perform remarkably worse in poorer countries, further lessening their efficiency. Image title

dding It All Up

If you've made it this far, we need to calculate the real energy cost of an EV like the Tesla Model S 70, factoring in losses in generation, transmission, distribution and charging.

Generation Efficiency: 33.7%

Transmission/Distribution Efficiency: 94%

Charging Efficiency: 90%

[[(70)/(0.337)]/(0.94)]/(0.90) = 245.53 kWh

Because electricity is such an inefficient utility, it actually takes more like245.53 to charge a 70 kWh EV battery. This drops the real efficiency of a Tesla Model S 70 to 0.977 miles/kWh.

According to the EPA, one gallon of gasoline has an energy equivalent of 33.7 kWh. If a Tesla Model S 70 goes 240 miles on 245.53 kWh of electricity, then we can say a Tesla Model S 70 goes 240 miles on 7.29 gallons of gasoline. In other words, the Tesla Model S 70 gets an equivalent of 32.94 mpg. That is only 58.8% as efficient as a 2016 Toyota Prius Eco for nearly three times the price. (fueleconomy.gov estimates a 2016 Toyota Prius ECO gets a combined fuel rating of 56 mpg.) Depending on which state you live in, a Toyota Prius could get even better mileage by comparison if your transmission and distribution networks see above average losses, or if your state gets more energy from coal than natural gas, which is less efficient in the generation.

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Freeport-McMoRan pledges to cut up to $10 billion debt, questions smelter deposit

Freeport-McMoRan Inc, the U.S. mining and oil group, on Tuesday made its strongest pledge yet to reduce its massive debt, saying it wants to lop off as much as $10 billion through proceeds from a mix of asset sales and joint ventures.

Freeport also reported a lower-than-expected fourth-quarter loss, and the shares jumped as much as 12 percent.

At one point, the stock fell on concerns about securing an important Indonesia copper export permit before Thursday's deadline.

Freeport faces "serious challenges" because of weak copper and oil prices and the massive debt on its balance sheet, Chief Executive Officer Richard Adkerson said on a conference call.

"We are addressing this seriously and with a degree of urgency and we're very focused on it," he said, mentioning a debt restructuring target of $5 billion to $10 billion for the first time.

Freeport's shares have tumbled 80 percent in the past year from the double whammy of falling oil and copper prices and $20 billion in debt.

Credit default swaps showed investors pricing in slightly less risk of a Freeport default after the results. Still, the massive premium demanded to insure Freeport debt implies a better-than-85 percent chance of default within five years.

Freeport was in talks with a number of parties on joint ventures or sales involving its copper assets, any of which could be sold at the right price, he said.

The company continues to weigh alternatives for its oil and gas assets.

Freeport expects to make "significant" progress on debt reduction in the first half of 2016, Adkerson said, but declined to give a time frame for the $5 billion to $10 billion target.

Freeport, the biggest U.S.-listed copper producer, suspended its annual dividend last year and made cuts to capital spending and copper output.

Adkerson did not rule out another equity issue but said Freeport was focusing on assetsales and joint ventures.

Excluding charges of $4.1 billion, Freeport reported an adjusted net loss of $21 million, or 2 cents a share, better than analysts' estimates of a loss of 17 cents.

http://www.reuters.com/article/us-fcx-results-idUSKCN0V41MS

Freeport questions Indonesia's demand for smelter deposit

JAKARTA | BY WILDA ASMARINI AND BERNADETTE CHRISTINA MUNTHE

Indonesia's demand that Freeport McMoRan Inc pay a deposit for a new smelter to continue exporting copper concentrate is "inconsistent" with an agreement reached between the two sides in mid-2014, the firm's CEO said on Tuesday.

Indonesia's government has said the U.S. mining giant must provide a $530 milliondeposit by Thursday to prevent a possible halt in copper concentrate exports from its massive Grasberg mine in the province of Papua.

A halt in exports would deal a blow to Freeport's profits and deny the Indonesian government desperately needed revenue from one of the country's biggest taxpayers. It would also buoy global prices of the metal that have slipped 6 percent so far this year on worries over a glut.

The U.S. firm's six-month export permit for its Indonesian unit is due to expire on Thursday, said Didi Sumedi, an official at the trade ministry, correcting a statement earlier this week that said the deadline was Tuesday.

"Certain officials with the ministry of energy and mines have suggested that we should continue to pay an export duty and that we should make a sizeable escrow deposit to support the smelter development," Freeport CEO Richard Adkerson said on a call following the announcement of its Q4 financial results.

"These points are inconsistent with the arrangements that we had worked with the government in mid-2014."

Those agreements said Freeport must sell the government a greater share of the Grasberg copper and gold mine and invest in domestic processing to win an extension of its contract beyond 2021.

Adkerson said discussions with the government were ongoing, and he was confident a new export license would be issued.

Jakarta wants the $530-million deposit as a guarantee

http://www.reuters.com/article/us-indonesia-freeport-idUSKCN0V4123

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US energy leverage

If it feels as if the stock market and oil futures are moving in lockstep these days it’s because, to a large extent, they are.

As oil futures plunged in the first two weeks of the new year to 12-year lows, U.S. equities put in the worst-ever start to a new calendar year.

The Tuesday price action was no exception. Oil futures US:CLG6 CLH6, +3.07% surged overnight, lifting global equities and sending U.S. stock-index futures sharply higher. As those oil gains started to fade, stocks also lost altitude. As oil turned lower, U.S. equities soon followed suit, giving up gains to trade in negative territory.

To be a little more precise, Leo Chen, quantitative analyst at Cumberland Advisors, noted that the correlation became very tight after oil fell below $40 a barrel in December. Since then, the contemporaneous correlation between Brent futuresLCOH6, +3.70% and the S&P 500 SPX, +1.19% is “unbelievably high” at 91.39% (see chart below), Chen said, in a note. Image title

That’s pretty close to lockstep, and on par with the correlation between U.S. gross domestic product and the S&P 500, Chen wrote.

Such a close correlation isn’t the norm. In fact, over a five-year period, the correlation was negative 71.8%—meaning stocks and oil tended to move in opposite directions (see chart below), Chen said. And over the last 20 years, the correlation between the two assets, while positive, is only 25%, he said, citing Barclays data.

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Global stocks fell sharply Tuesday as Chinese markets plunged and oil prices fell back below $30 a barrel.

Investors sold equities in Europe and Asia and favored traditional havens such as the yen, gold and U.S. Treasurys after the Shanghai Composite plummeted 6.4%.

“People are scared to death about China,” said John Manley, chief equity strategist forWells Fargo Funds Management.

Compounding investors’ concerns, Brent crude oil fell 3.5% to $29.43 a barrel, weighing on energy shares, amid concerns about oversupply.

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Cities across Brazil cancel carnival celebrations because of economic woes

Rio de Janeiro's Carnival has more than just samba this year as group's pay tribute to Motown, hard rock and even Michael Jackson.

At least 48 cities in eight states across Brazil have cancelled their carnivals due to the recession, which has eroded municipalities' financial resources, media reports said.

Nearly 50 cities in the states of Goias, Minas Gerais, Paraiba, Rio de Janeiro, Rio Grande do Norte, Rondonia and Tocantins decided at the last minute to scrap their carnivals to save money needed for other programs, the G1 news Web site said.

Other cities, the majority of them in the interior of São Paulo state, cancelled carnival celebrations, considered the biggest festivals of the year, electing to use the funds in the fight against dengue, whose cases have spiked in the past year, along with chikunguña and zika cases.

All three diseases are spread by the Aedes aegypti mosquito.

Other municipalities in São Paulo are using funds initially intended for carnivals to deal with the damage caused by the recent torrential rains that hit parts of the state.

Even cities still planning to hold carnivals are scaling back the celebrations due to the severe economic downturn in Brazil.

Brazil's gross domestic product (GDP), according to analysts, will contract 2.99 percent this year after falling 3.71 percent in 2015, while the inflation rate is expected to top 10 percent.

http://latino.foxnews.com/latino/money/2016/01/25/cities-across-brazil-cancel-carnival-celebrations-because-money-woes/

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Saudi Arabia can sustain low prices for a long, long time, Saudi Aramco boss says

LONDON (ShareCast) - (ShareCast News) - Crude oil futures weakened in afternoon trading following remarks from Saudi Aramco chairman Khalid al-Fatih that his country would maintain its investment plans. Saudi Arabia, the world´s main producer of oil could sustain low prices for "a long, long time," al-Fatih told a conference in Riyadh, Bloomberg reported.

Earlier in the day, the Secretary General of the Organisation for the Petroleum Exporting Countries, Abdalla El-Badri, had called on producers from outside the group to assist in braking the glut of oil around the world.

Figures showing a 5.6% drop in Chinese diesel use in December and gasoline use at its lowest in two years were seen by some as adding to Monday´s decline in prices.

As of 18:48GMT front month Brent crude futures were off by 4.1% to $30.92 per barrel on the ICE.

Oil and Gas

Iranian oil tanker leaves sea storage fleet for China

An Iranian oil tanker sailed from Iran headed for China, becoming the second ship in days to be despatched from the country's floating storage fleet, Reuters ship tracking showed on Thursday.

The Sinopa tanker - capable of carrying a maximum of 1 million barrels of oil - left Iranian waters bound for the Chinese port of Dalian, the data showed. The sailing comes after the larger Serena, which can carry up to 2 million barrels of oil, left for South Korea around Jan. 15.

A tanker tracking source confirmed the Sinopa had left and was likely to be carrying condensate, a very light grade of crude.

Earlier this month, international oil sanctions imposed on Iran were lifted, although the pace of exports is likely to be slower than Tehran expected partly due to difficulties in securing insurance especially for foreign tankers.

http://en.chinamining.com.cn/News/2016-01-29/1454035756d75195.html

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Glencore storing crude?

Glencore Plc is said to be storing oil on ships off the coast of Singapore and Malaysia as a market structure known as contango allows traders to benefit from holding on to supplies for sale later.

The commodities trader has at least 4 very large crude carriers, each of which can hold about 2 million barrels, floating at sea off the nations’ coast in Southeast Asia, people with knowledge of the matter said, asking not to be identified because the information is confidential. When a market is in contango, prices for supplies today are lower than those in future months, allowing traders with access to stored crude to potentially lock in a profit.

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BG shareholders give Shell's $52 bln acquisition final nod

BG Group shareholders overwhelmingly approved Royal Dutch Shell's $52 billion takeover on Thursday, clearing the way for the two firms to create the world's biggest trader of liquefied natural gas (LNG).

BG will now merge with Shell on Feb. 15, nearly two decades after the company was born from British Gas and just a few months after it reached record oil and gas output thanks to new projects in Australia and Brazil.

At a meeting in London, 99.53 percent of BG shareholders voted in favour of the merger, a day after 83 percent of Shell's shareholders approved the deal first announced on April 8 last year.

Shell shareholders are putting their faith in CEO Ben van Beurden's decision to focus the Anglo-Dutch company's operations in liquefied natural gas (LNG) and deep water oil production over the coming decades as the industry undergoes one of its worse downturns in decades.

Low oil prices will remain a challenge for the combined company in the short term, however, as crude has fallen 75 percent over the past 18 months to around $30 a barrel.

While the oil price is expected to stage a gradual recovery, Shell has said the combined group needs crude to be above $60 a barrel to break even.

"I very strongly believe in what Shell is trying to do long term ... The idea that they try to specialise in their strengths being deepwater and LNG is absolutely the right thing to do," BG Chairman Andrew Gould told reporters.

The acquisition will boost Shell's oil and gas production by 20 percent and bring it closer to challenging the world's top international oil company ExxonMobil.

Combined, Shell and BG will overtake Chevron as the world's second-biggest publicly-traded oil and gas company measured by market value.

Shell has promised to find $3.5 billion from cost savings and overlaps by 2018, from various areas including its corporate, administrative and IT operations.

http://www.reuters.com/article/bg-group-ma-shell-idUSL2N15C0DP

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Oasis Petroleum raises stock to fund lowered capex for 2016

North Dakota oil producer Oasis Petroleum Inc launched a new stock offering to partly fund its 2016 capital expenditure of $385 million-$435 million, even though its budget is about 30 percent lower than last year.

Oasis said on Thursday it would offer 34 million shares, with a 30-day option for underwriters to purchase an additional 5.1 million shares.

Based on Wednesday's close of $5.32, Oasis can raise as much as $208 million from the offering, including the underwriters' option.

Oasis Petroleum shares fell as much as 15 percent in premarket trading to $4.51. The stock has more than halved in the past year.

The company said it expects to produce 46,000-50,000 barrels of oil equivalent per day (boepd) in 2016, compared with 50,477 boepd last year.

About 60 percent of Oasis's oil output has been hedged at an average price of $53.36, the company said in a statement.

http://www.reuters.com/article/oasispetroleum-capex-idUSL3N15C4W7

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Oil Spikes On Confusion Whether Saudis Propose 5% Production Cut

Headline hockey continues in the energy complex as earlier confirmation of a pending OPEC meeting possible in February has seen more color added, via Reuters, that Saudi Arabia made a proposal that OPEC members cut production by a maximum of 5%. There remains confusion however as Bloomberg reports simply that Russian energy minister has said they "may discuss it," as opposed to being a specific proposal.

- RUSSIAN ENERGY MINISTER STATES THAT SAUDI ARABIA MADE A PROPOSAL TO REDUCE OIL OUTPUT BY EACH COUNTRY BY A MAXIMUM OF 5%
- RUSSIA'S NOVAK SAYS OPEC MEETING MAY DISCUSS 5% OUTPUT CUT: RIA
- NOVAK: 5% CUT TALKS MAY INVOLVE ALL OIL PRODUCING NATIONS: RIA
- NOVAK: OPEC, PRODUCER MEETING WOULD BE MINISTER LEVEL: RIA
- IRAN WANTS TO RECOUP OIL MARKET SHARE AND IS A CHALLENGE IN ANY DEAL TO CUT OIL OUTPUT - OPEC SOURCES

Headlines about "oil production cuts" are the new "Greece is saved" trial balloon.

Following today's dizzying surge in crude oil on speculation by the Russian energy minister that the Saudis have proposed a 5% supply cut, which was subsequently trimmed to merely a statement that a "meeting may be called where a production cut could be discussed" we asked how long until the denial:

The answer: 15 minutes when the following rejection hit:

OPEC DELEGATES SAY NO PLAN YET FOR MEETING WITH RUSSIA

And now that the squeeze is over, oil can resume tumbling.

http://www.zerohedge.com/news/2016-01-28/oil-spikes-confusion-whether-saudis-propose-5-production-cut

http://www.zerohedge.com/news/2016-01-28/saudi-production-cut-story-rejected-opec-delegates-say-no-plan-meeting-russia

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Kremlin says 'nothing tangible' yet on possible coordination with OPEC

The Kremlin said on Thursday that the situation on oil markets was being actively discussed among producers, but that there was "nothing to talk about in a tangible sense" when it came to possible coordination with the OPEC group.

"It is too early to talk about the outcome of these active discussions," Dmitry Peskov, a Kremlin spokesman, said of the talks about what action, if any, oil-producing countries might take to boost low prices.

http://www.reuters.com/article/russia-oil-kremlin-idUSR4N0ZC010

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Penn West cuts 2016 capex by 90 pct, sees 30 pct lower output

Canadian oil and natural gas producer Penn West Petroleum Ltd cut its 2016 capital budget by as much as 90 percent from a year earlier, to weather a steep plunge in crude oil prices.

The company, which cut its capex to C$50 million ($35 million), said it expects to produce 60,000-64,000 barrels of oil equivalent per day this year, about 30 percent lower than its 2015 production estimate.

Penn West had cut its 2015 capital budget three times, eliminated about 35 percent of workforce in September and stopped paying dividend from October.

"Given the present state of the commodity price environment, our 2016 capital budget reflects the reality of living within our means at current price levels and managing thebusiness on a week-to-week basis," Chief Executive Dave Roberts said in a statement on Thursday.

Penn West said it continued to be in talks with potential buyers to divest non-core assets.

The Calgary-based company said proceeds from any asset sale would be used to cut debt rather than to fund capital program.

Up to Wednesday's close of 98 Canadian cents, Penn West shares had more than halved in 12 months on the Toronto Stock Exchange.

http://www.reuters.com/article/penn-west-capex-idUSL3N15C4MI

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Valero Energy's profit falls on lower refining margins

U.S. refiner Valero Energy Corp reported a 74 percent decline in quarterly profit, hurt partly by lower refining margins.

Net income attributable to Valero's stockholders fell to $298 million, or 62 cents pershare, for the fourth quarter ended Dec. 31, from $1.16 billion, or $2.22 per share, a year earlier.

Operating revenue fell 33 percent to $18.78 billion.

http://www.reuters.com/article/valero-energy-results-idUSL3N15C4R2

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Russia-Saudi-OPEC Deal> CNBC

The chances of a deal between Russia and OPEC are viewed as very slim, despite an intraday spike Thursday in crude prices on talk of a proposed production agreement.

"There's nothing new. It's another part of a stream of news that comes out of Russia and there's no indication that the Saudis have any desire to do anything," said Edward Morse, global head of commodities research at Citigroup.

News services reported that OPEC and producers from outside the cartel would meet to discuss production cuts. There was also a report that Russian Energy Minister Alexander Novak said Saudi Arabia had proposed each country cut oil production by 5 percent to support prices.

Dow Jones later quoted a senior Gulf OPEC official as saying that the Saudis did not ask Russia to cut output by 5 percent. The official also said the proposal was an old suggestion from Algeria and Venezuela.

"I really don't think that has any legs. I don't expect we will see any talks coming from these, and the other reason I think the Saudis would not really pursue this is because the real target of the Saudis is the U.S. shale producers," said Chris Weafer, senior partner at Macro-Advisory in Moscow. "Unless they are also part of an agreement, I can't see Russia or Saudi cutting their own production to help the shale industry."

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Kinder Morgan to partner with private equity on $3 billion in investment

Kinder Morgan plans to sell partial stakes in two projects representing $3 billion in investment to private equity groups, executives said Wednesday.

The deals, which would carve off parts of the planned $2 billion Elba Island liquefied natural gas facility and the $1.1 billion Palmetto refined products pipeline, are part of Kinder Morgan’s push to slash capital spending amid an oil bust that has sharply limited its access to capital.

In a presentation to analysts Wednesday, Kinder Morgan Chief Financial Officer Kimberly Dang said the company was already in talks with potential partners and was budgeting under the assumption they’d be sharing the cost of the projects.

Dang also opened the door to cooperating on other joint ventures, saying that Kinder Morgan would shop around some of the planned projects that weren’t directly linked to the company’s core network of pipelines.

“It’s not going to make sense for projects that are on our existing network,” she said. “It needs to be projects that are stand-alone… and it needs to be projects that are attractive generally to infrastructure funds, because that’s where the most firepower is today.”

Kinder Morgan’s Elba Island liquefied natural gas plant export project is a $2 billion venture that will put about 350 million cubic feet per day of export capacity on the coast of Chatham County, Georgia. Kinder Morgan expects the project to be completed by 2018 and is currently working its way through permitting.

Originally, Elba Island LNG was a 51-49 percent joint venture between majority owner Kinder Morgan and international major Royal Dutch Shell. Kinder Morgan bought Shell’s interest in July 2015, though Shell has still hung onto the 20-year contracts for 100 percent of the facility’s capacity.

The second project Kinder Morgan is shopping around is the $1.1 billion Palmetto pipeline, which would carry gasoline and other products from the northern part of South Carolina through Georgia and into Jacksonville.

Construction on the pipeline is expected to commence in spring 2016. Kinder Morgan faced regulatory hurdles late last year when Georgia denied the company the permit that would grant the power to use eminent domain to clear the route. Kinder Morgan appealed the decision, and CEO Steve Kean said Wednesday that the company may be able to finish the project without eminent domain. The company would likely wait until there’s more clarity on the permitting issue before signing on a partner, he said.

http://fuelfix.com/blog/2016/01/27/kinder-morgan-to-sell-stakes-in-pair-of-joint-ventures-totaling-3-billion/

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Repsol Books $3.2 Billion Charge as Provision for Oil Drop

Repsol Books $3.2 Billion Charge as Provision for Oil Drop

Repsol SA, Spain’s largest oil company, said it will book an impairment charge of about 2.9 billion euros ($3.2 billion) for 2015 as a provision after crude prices collapsed.

The charge will lead to a net loss of about 1.2 billion euros for the year, Madrid-based Repsol said Wednesday in a regulatory filing following a board meeting. Excluding one-time items, net income of about 1.85 billion euros for the year will surpass the higher end of the company’s estimates, driven by refining profits and a cost savings, Repsol said. Adjusted fourth-quarter net income will rise 20 percent from a year earlier to about 450 million euros.

As the global oil industry struggles with a price crash, Repsol is faced with the additional task of integrating Talisman Energy Inc., the Canadian oil producer it acquired last year, while also reducing its debt load. Oil this month reached the lowest level since 2003, driving companies globally to cut projects and write down the value of assets.

Together with the impairment, Repsol also plans to cut investments in 2016 by an additional 20 percent to 4 billion euros, according to the filing. It will also accelerate efforts to seek cost savings from the Talisman assets. The company now identifies potential synergy gains of about $400 million a year, compared with $220 million when Talisman was acquired.

While provisions are “not a complete shock, we are a little surprised that the impairments already include Talisman," Jefferies Group Plc analysts Marc Kofler and Jason Gammel said in a note to clients Wednesday. The analysts expect all the impairments to be in the exploration and production division.

For the entirety of its assets, the Spanish company intends to reach synergies and efficiency savings of about 1.1 billion euros this year, or more than 50 percent of the target set through 2018 in its business plan.

In Wednesday’s announcement, Repsol also said that its fourth-quarter refining margin will probably stand at $7.30 per barrel, compared with $5.50 per barrel a year ago. The margin is a gauge for refining profitability. The company also said production reached an estimated 697,000 barrels of oil equivalent per day in the period.

http://www.bloomberg.com/news/articles/2016-01-27/repsol-books-3-2-billion-charge-as-provision-for-oil-collapse

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Oil Surges After Russia Says Will Discuss "Possible Production Cuts With OPEC"

... one just one piece of news: moments ago both Reuters and Bloomberg cited the CEO of Russia's Transneft, who said that Russia and OPEC will discuss possible output cuts:

BREAKING: Russia's Transneft says Russia and OPEC will discuss possible output cuts -TASS

It appears that Russian oil chiefs discussed coordination w/ OPEC at meeting with Energy Minister Alexander Novak, Bashneft head Alexander Korsik, a participant, tells reporters after event. Bloomberg notes that discussions will continue, no decision yet.

Russia needs to discuss cuts, coordination with OPEC, Transneft CEO Nikolay Tokarev, another participant at meeting said cited by Bloomberg.

The response: every risk asset is now soaring, tracking the bounce in oil tick for tick. At least until Saudi Arabia issues a statement denying that it has any intention of cooperating with Russia on production cuts.

For now, however, those record WTI and Brent shorts are feeling the heat.

http://www.zerohedge.com/news/2016-01-27/stocks-storm-green-oil-surges-after-russia-says-will-discuss-production-cuts-opec

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US Oil production drops slightly from previous week

Last Week Week Before Last year

Domestic Production '000......... 9,221 9,235 9,213

http://ir.eia.gov/wpsr/overview.pdf

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Summary of Weekly Petroleum Data for the Week Ending January 22, 2016

U.S. crude oil refinery inputs averaged over 15.6 million barrels per day during the week ending January 22, 2016, 551,000 barrels per day less than the previous week’s average. Refineries operated at 87.4% of their operable capacity last week. Gasoline production decreased last week, averaging 9.4 million barrels per day. Distillate fuel production decreased last week, averaging about 4.5 million barrels per day.

U.S. crude oil imports averaged 7.6 million barrels per day last week, down by 170,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.8 million barrels per day, 7.2% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 576,000 barrels per day. Distillate fuel imports averaged 186,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 8.4 million barrels from the previous week. At 494.9 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 3.5 million barrels last week, and are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories decreased by 4.1 million barrels last week but are near the upper limit of the average range for this time of year. Propane/propylene inventories fell 6.2 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 1.0 million barrels last week.

Total products supplied over the last four-week period averaged 19.5 million barrels per day, down by 1.7% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 8.7 million barrels per day, down by 2.5% from the same period last year. Distillate fuel product supplied averaged 3.4 million barrels per day over the last four weeks, down by 14.8% from the same period last year. Jet fuel product supplied is up 4.8% compared to the same four-week period last year.

http://ir.eia.gov/wpsr/wpsrsummary.pdf

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Gasoline cargoes sail to Iran, crude exports still tough

Major oil firms and trade houses are gradually resuming energy trading with Iran but efforts remain very cautious and often face huge legal obstacles, meaning a post-sanctions return to full-scale activity will take weeks if not months.

Trading sources told Reuters major trading houses Gunvor and Vitol have each delivered several cargoes of gasoline into Iran in the past few weeks. Gunvor and Vitol declined to comment.

Meanwhile, Swiss trading house Litasco of Russian oil major Lukoil (LKOH.MM) had to cancel a booking of a tanker to transport oil from Iran to Italy in early February due to what trading sources described as ship insurance difficulties.

Trading sources on Wednesday cited preliminary fixtures being made by Glencore and Total for tankers to lift Iranian crude in February although it was still unclear if the deals had been concluded partly due to insurance issues.

"It is still very difficult despite the sanctions removal. Dollar clearing is an issue, banks' letters of credit is an issue, ship insurance is an issue. Loads of people are still very cautious," said a senior trading executive.

Leading shipping players say efforts by Iran to start exporting oil to Europe are being held up as tanker owners are still struggling to secure insurance for cargoes.

A nuclear deal between world powers and Iran earlier this month led to the removal of European sanctions on the country.

But many foreign firms remain wary of violating other sanctions that were imposed by the United States and have not been lifted. Measures still in place from Washington prohibit most business between U.S. persons, U.S. companies and Iran as well as no dollar trades.

Third-party liability insurance and pollution cover for vessels is provided by P&I clubs - marine insurers owned by shipping clients and reinsured internationally. The umbrella International Group of P&I clubs is still unable to confirm payments under re-insurance contracts.

"Gasoline exports to Iran are a bit easier as tankers are much smaller, insurance is easier and there are banks which are willing to do this as non-dollar transactions," one senior trading source familiar with the matter said.

Iran is a gasoline importer despite being the third largest producer within the OPEC group as its outdated refining industry cannot meet rising petrol needs in the country.

The country has continued to import gasoline regardless of sanctions but the biggest names stayed out of the game for the past few years.

Iran's oil exports have fallen to just over 1 million bpd, from a peak of more than 2.5 million bpd before the imposition of tougher European sanctions in 2012.

Since the sanctions' removal this month, Iran has ordered a 500,000 barrel per day (bpd) increase in oil output, of which it said some 200,000 bpd will initially go to Europe. Prior to sanctions, Europe was importing as much as 800,000 bpd.

Greece's Hellenic Petroleum (HEPr.AT) on Friday became the first European refiner to agree to restart crude imports from Tehran and pre-sanctions buyers Italy, France and Spain are expected to follow.

Oil and gas condensate held by Iran on its domestic tankers in floating storage is estimated by shipping sources to be at least 40 million barrels and the country has said it is keen to offload volumes into the market to boost revenues.

"It will take weeks if not months to return to full-scale crude exports to Europe. Tonnes of papers will need to change hands between inhouse risk officers, lawyers and banks before the picture is fully clear," said a trading executive involved in the discussions.

But ultimately oil should flow at full steam.

"It's just a matter of price. If the price is good, we'll buy it," Marco Schiavetti, director of supply and trading with Italy's Saras said of Iranian oil. "Obviously we will talk to them soon, and we will consider."

http://www.reuters.com/article/iran-trade-oil-idUSL8N15B2RO

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Spread between Henry Hub, Marcellus natural gas prices narrows as pipeline capacity grows

Natural gas spot prices around the United States are often compared to prices at the Henry Hub in Louisiana. At trading points in and around the Marcellus and Utica shale plays in Pennsylvania, West Virginia, and Ohio, natural gas prices consistently trade below the Henry Hub national benchmark price. However, the difference between these pricing points and the Henry Hub has narrowed in recent months as new pipeline projects have come online.

Most of the natural gas produced in the region is consumed in other areas of the country. With limited infrastructure to deliver natural gas to consumers, the Marcellus region can quickly become oversupplied, causing prices within the Marcellus region (especially Pennsylvania) to be discounted. In times of high demand for heating in the winter, natural gas spot prices can rise substantially in market areas such as New York and Boston. New infrastructure projects have come online to alleviate the disconnect between prices in producing and consuming areas around the country.

Although prices in the Marcellus region are still relatively low, trading under $1.50 per million British thermal units (MMBtu), the gap between Marcellus region price points and Henry Hub has narrowed. The price at Transcontinental Pipeline's (Transco) Leidy Hub in central Pennsylvania, for example, averaged 93 cents per MMBtu below the Henry Hub price from December 1 through January 15. In July 2015, this differential was much larger, averaging $1.65/MMBtu for the month.

Bentek Energy noted that the effect of these new pipeline projects was somewhat limited in November and the beginning of December because of a warm beginning to winter. As heating demand increased in late December and into January, natural gas production in the region increased as well, setting records in December and January, likely because producers had access to new takeaway capacity.

In the Marcellus and Utica plays, production has grown rapidly over the past several years, and infrastructure growth has not kept pace. This is partly because pipeline projects are costly and may take several years to bring online. As a result, there is a large backlog of wells that have been drilled but won't produce until there is available infrastructure or until the price of natural gas increases. These wells allow Marcellus production to ramp up quickly when new infrastructure comes online. According to Bentek estimates, from January 1 through January 20, natural gas production in the Northeast (which includes production from the Marcellus and Utica) was 17% higher than during the same period in 2015.

An upcoming Today in Energy article will discuss several new pipeline projects and expansions that have recently begun operation, along with several projects now under development. As these projects and other pipeline expansions come online, the difference between Marcellus region prices and the Henry Hub price should continue to narrow.

http://www.eia.gov/todayinenergy/detail.cfm?id=24712

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Hess Reports First Annual Loss Since 2002 Amid Oil Slump

Hess Corp. reported its first annual loss in 13 years as it cut spending to weather a prolonged slump in oil prices.

The oil and gas producer posted a net loss of $1.82 billion, or $6.43 a share, in the fourth quarter compared with a deficit of $8 million, or 3 cents, a year earlier, the company said in a statement Wednesday. For the full year, the loss was $3.06 billion. Excluding one-time items, the per-share loss was $1.40, beating the average estimated loss of $1.47 from analysts in a Bloomberg survey.

Hess will cut spending by 40 percent this year to $2.4 billion as it pulls back in all regions and seeks further cost reductions and efficiency gains, it said Tuesday in a statement. Oil prices have tumbled more than 70 percent from a June 2014 peak.

“Looking forward, our top priority is to continue to keep our balance sheet strong," said Chief Executive Officer John Hess in the statement. "Our 2016 capital and exploratory budget is 40 percent below our 2015 spend and we will continue to pursue further cost reductions. At the same time, we plan to continue to invest in future growth.”

The company reduced its estimate of proved oil and gas reserves to 1.086 billion barrels of oil equivalent as of Dec. 31, down from 1.431 billion a year earlier, as a result of lower crude prices and reduced drilling plans.

The company will hold a conference call with analysts and investors at 10 a.m. New York time.

http://www.bloomberg.com/news/articles/2016-01-27/hess-reports-first-annual-loss-since-2002-amid-oil-slump

Distress in the Shale Oil Patch Spurs New Type of Joint Venture

Joint ventures between oil and gas explorers in the U.S. and their foreign counterparts helped fuel the shale boom. They’re coming back in a new iteration for the bust.

The difference this time: Shale explorers are partnering with Wall Street financiers to raise money for drilling, instead of overseas rivals.

Typically, private equity firms invest in energy by buying entire companies or providing capital to startups. Last year, U.S. oil and gas companies struck a half-dozen joint venture deals with private equity firms totaling at least $1.4 billion. In December, an affiliate of Fortress Investment Group agreed to provide National Fuel Gas Co. with as much as $380 million to fund wells in Pennsylvania, while Blackstone Group LP’s credit arm closed a similar deal in July with Linn Energy LLC.

Such transactions could accelerate this year as explorers face a cash crunch amid a rout in commodity prices. They are essentially a source of off-balance sheet financing for producers with good land but less than stellar credit. The way they are structured makes such deals akin to a homeowner renting out a room to keep the lights on.

“It’s tough times in the oil patch,” said Ron Gajdica, co-head of energy acquisitions and divestitures with Citigroup Inc. in Houston. “The traditional ways of raising money are not available.”

Joint ventures with private equity firms are fairly complex but have a simple premise. The investor pays for a certain number of new wells in exchange for a temporary majority stake in each well it funds. After booking a specified return, the financier surrenders most of its ownership interest back to the explorer.

They make sense right now because low commodity prices means producers are facing budget shortfalls, and they’re losing access to other types of funding.

http://www.bloomberg.com/news/articles/2016-01-26/distress-in-the-shale-oil-patch-spurs-new-type-of-joint-venture

China Energy Giant Signals Nation's Fuel Oversupply Is Worsening

China’s biggest energy company predicted the nation’s refineries will increase output in 2016, exacerbating a fuel glut and boosting exports of the surplus to regional markets.

Net export of oil products -- which strips out imports -- will rise by 31 percent this year to 25 million metric tons, China National Petroleum Corp. said in its annual research report. The country’s refineries will increase oil processing by 5.3 percent while net crude imports will rise 7.3 percent to 357 million tons.

“China is set to ship record oil products overseas amid its slowing domestic demand,” Jean Zuo, an analyst at ICIS China, said by phone from Guangzhou. “The country will remain enthusiastic for crude imports this year amid low prices and as strategic crude stockpile facilities are due to come online.”

China exported a record amount of diesel, kerosene and gasoline last year and for the first time shipped more products abroad than it imported amid the slowest economic expansion in 25 years. Meanwhile, its crude purchases increased to a record in 2015 as the world’s second-biggest oil consumer sought to fill its strategic oil reserve and the government allowed small private processors called teapots to buy foreign supplies.

Teapot Expansion

The teapots, clustered around the eastern Chinese province of Shandong, will account for the bulk of the increase in oil processing this year as the country’s bigger state-owned processors decrease output, CNPC said in its report.

"China’s fuel glut is in its worst shape," Dai Jiaquan, director of CNPC’s oil market department, said Tuesday. "This is mainly due to weak demand and fast growth of refining projects in recent years. Now low oil prices have boosted refinery operating rates, especially for teapots, who are snatching market share rapidly from major refineries.”

The country’s oil consumption will rise 4.3 percent to 566 million tons this year, with imports satisfying 62 percent of total demand, according to CNPC.

http://www.bloomberg.com/news/articles/2016-01-26/china-energy-giant-signals-nation-s-fuel-oversupply-is-worsening

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Iraq's Oil output from central and southern fields exceeded 4.0 mln bbls day in December

Iraq's oil ministry told Reuters on Monday that the country had record output in December, with its fields in the central and southern regions producing as much as 4.13 million barrels a day. A senior Iraqi oil official said separately the country may raise output even further this year.

"There's more oil coming into the market, and there's no reason to expect oil prices to go up," said James Williams, energy economist at WTRG Economics in London, Arkansas.

"If you look at the supply-demand situation, prices have not bottomed. We're probably going to go lower again through March in the absence of an OPEC meeting."

A preliminary Reuters survey showed on Monday that commercial crude oil and gasoline inventories probably rose last week, while distillate stocks likely fell.

http://www.reuters.com/article/global-oil-idUSL3N159189

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Indian state oil refiners plan 1.2 mln bpd plant on west coast

Three Indian state-run oil refiners will jointly build a 60 million tonnes a year, or 1.2 million barrels per day (bpd), refinery on the country's west coast, the federal oil minister said on Monday, adding the investment for the first phase of the refinery could exceed 1 trillion rupees ($14.8 billion).

Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd along with another state-run company, Engineers India Ltd, will design for an 800,000 bpd capacity in the first phase of the refinery in Maharashtra state, Dharmendra Pradhan said on Twitter.

India is seen as the most important driver of energy demand growth in the world in the years to come with its oil consumption seen rising by 6 million bpd to about 10 million bpd by 2040, according to the International Energy Agency.

Reliance Industries Ltd, controlled by India's richest man Mukesh Ambani, currently operates the world's biggest single-location refinery complex, in the western Gujarat state, with a capacity to process about 1.2 million bpd of crude.

The planned refinery will produce gasoline, diesel and other products as well as feedstock for petrochemical plants, Pradhan said, adding his ministry would work with the provincial government for early identification of land and finalising project details.

The minister did not give a timeline for setting up the refinery.

http://www.reuters.com/article/indian-oil-corpn-india-refinery-idUSL3N1594P4

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Quicksilver Resources announces winning bid for sale of certain US assets

Quicksilver Resources Inc. and its U.S. subsidiaries announced today that they have successfully completed a Bankruptcy Court-approved auction for their U.S. oil and gas assets located primarily in the Barnett Shale in the Fort Worth basin of North Texas as well as assets in the Delaware basin in West Texas, which are concentrated in Pecos County, Texas and to a lesser extent Crockett and Upton Counties, Texas. The completion of the auction follows a months-long marketing process of all of Quicksilver's and its U.S. subsidiaries' U.S. assets that began in September 2015. At the auction, which was held on January 20 and 21, 2016, Quicksilver and its U.S. subsidiaries declared an all-cash bid from BlueStone Natural Resources II, LLC in the amount of $245 million the highest or otherwise best bid for the oil and gas assets, and the successful bid.

Regarding the outcome of the auction, Glenn Darden, President and CEO of Quicksilver, said, 'We believe that the marketing and sales process was thorough and resulted in a successful outcome. This sale maximizes value for the benefit of our creditors in the face of difficult market conditions.'

Quicksilver and BlueStone executed the asset purchase agreement for the sale of the oil and gas assets on January 22, 2016. Quicksilver and its U.S. subsidiaries will seek final approval for the sale from the United States Bankruptcy Court for the District of Delaware on January 27, 2016. Quicksilver and its U.S. subsidiaries intend to continue normal operations pending the consummation of the sale.

Quicksilver and its U.S. subsidiaries filed voluntary petitions under chapter 11 of title 11 of the United States Code on March 17, 2015, in the United States Bankruptcy Court for the District of Delaware. The chapter 11 cases are being jointly administered under the case number 15-10585. Quicksilver's Canadian subsidiaries were not included in the chapter 11 filing and are not subject to the requirements of the Bankruptcy Code. The assets of Quicksilver's Canadian subsidiaries are not included in this sale, and the sale process for those assets remains ongoing.

http://www.oilvoice.com/n/Quicksilver-Resources-announces-winning-bid-for-sale-of-certain-US-assets/9bfbf539e926.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29

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Exxon Sees Energy Demand Rising 25% by 2040 as Population Grows

Energy demand will climb 25 percent worldwide by 2040, an increase equivalent to all the power and fuel consumed currently in the Americas, according to Exxon Mobil Corp.

Crude oil will retain its dominant position among energy sources a quarter century from now as population growth and rising standards of living in much of the world more than offset energy-saving efficiency gains, Exxon said in its annual long-term outlook released on Monday. Demand for natural gas will grow more than any other source and will account for 40 percent of the overall increase, according to the report.

Oil demand will grow by 20 percent to 112 million barrels a day in 2040, the Irving, Texas-based explorer said. The base year was 2014 for all the figures cited in the report, which Exxon relies on for long-term business and strategic planning. Those crude supplies will come increasingly from shale, oil-sands mines and deepwater fields, Exxon said.

Venezuela will emerge as a major producer of crude from oil sands in coming decades, the company predicted. Globally, output from oil sands will more than double by 2040, according to the report.

China and India will account for half of the global increase in demand for all types of energy going forward, Exxon said. Another 30 percent of the worldwide growth will be driven by just 10 countries: Brazil, Mexico, South Africa, Nigeria, Egypt, Turkey, Saudi Arabia, Iran, Thailand and Indonesia, according to the report.

Coal use for power generation will drop to about 30 percent in 2040, from 40 percent in 2014, while natural gas will pull even with coal. Wind and solar will provide more than 10 percent of the world’s electricity, up from about 4 percent, Exxon said.

http://www.bloomberg.com/news/articles/2016-01-25/exxon-sees-energy-demand-rising-25-by-2040-as-population-grows

Ophir brings Schlumberger on board Fortuna FLNG

London-based Ophir Energy revealed on Monday it has partnered up with Schlumberger on the Fortuna FLNG project in Equatorial Guinea.

According to Ophir’s statement, a non-binding heads of terms agreement has been signed under which Schlumberger will receive a 40% economic interest in the Fortuna FLNG project.

Last week, Schlumberger joined forces with Golar LNG to develop gas reserves utilizing floating LNG technology.

A definitive deal is expected to be signed in the second quarter of 2016, prior to the final investment decision, which would see Schlumberger reimburse 50 percent receive a 40% economic interest in the Fortuna FLNG project. This would cover Ophir’s share of capital expenditures up until first sales of LNG, the statement reveals.

Ophir noted that it also expects to complete a shortlist of the gas off-take offers in the coming weeks.

Ophir’s CEO Nick Cooper said, “These are tough times for the upstream sector, but this transaction will free up our balance sheet and further increase our financial flexibility.”

The company predicts its 2016 capital expenditure to be between US$175 million and US$225 million compared to approximately US$250 million in 2015.

Additionally, the company informed that Tanzania Petroleum Development Corporation has announced the location of the LNG site at Machenga Bay.

Ophir also expects Shell to assume operatorship of the project upon completion of the Shell-BG Group deal. BG Group formed a partnership with Ophir in 2010 in blocks 1, 3 and 4, offshore Tanzania.

http://www.lngworldnews.com/ophir-brings-schlumberger-on-board-fortuna-flng/

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Beach flags impairment charge, cuts capex and output guidance

Australian oil and gas producer Beach Energy on Monday warned of an impairment charge of between A$450-million and A$650-million for the 2016 half year, on the back of lower oil prices.

The company also announced a A$60-million reduction in its planned capital expenditure for 2016, to between A$180-million and A$210-million. The company told shareholders that the reduced range reflected savings of about A$20-million achieved in the first half of 2016, and a further A$40-million in reductions and deferrals identified for the remainder of the year.

Subject to joint venture (JV) approval, the savings would be achieved through a curtailed operated drilling programme, well inventory management, deferral of the Bauer facility upgrade and noncritical projects, and a reduced capital programme within its South Australian Cooper Basin JV and the South West Queensland JV, which were operated by fellow-listed Santos.

“During these challenging times it is extremely pleasing to demonstrate Beach’s ability to live within its means and maintain financial strength,” said acting CEO Neil Gibbins. “Despite lower oil prices over the past six months, we have held our net cash position relatively constant, secured increased debt financing facilities and improved terms, and identified up to A$40-million of second half savings and deferrals in our capital programme.

” Operationally, Beach continued to perform well, Gibbins said, adding that production levels were maintained during the second quarter of 2016, giving the company grater confidence in its full-year guidance, while the recent infrastructure projects have delivered results better than expected.

Beach on Monday narrowed its full-year production expectations from the previous guidance of between 7.8-million and 8.6-million barrels of oil equivalent, to between 8-million and 8.6-million barrels of oil equivalent.

http://www.miningweekly.com/article/beach-flags-impairment-charge-cuts-capex-and-output-guidance-2016-01-25

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Possible Saudi IPO wouldn’t include oil reserves

The chairman of Saudi oil giant Saudi Aramco was quoted as saying a possible initial public offering would not include the kingdom’s oil reserves.

Chairman Khalid al-Falih made the comments to Saudi privately owned broadcaster Al-Arabiya in an interview from Davos, Switzerland. The Dubai-based broadcaster reported the comments Sunday.

Al-Falih also says the potential share flotation could take place on local or international markets.

Saudi Deputy Crown Prince Mohammed bin Salman told The Economist earlier this month that the kingdom was considering an IPO involving the Saudi Arabian Oil Co., better known as Saudi Aramco. The company is the world’s largest oil producer.

http://fuelfix.com/blog/2016/01/24/official-possible-saudi-ipo-wouldnt-include-oil-reserves/

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SGX Seeks to Break LNG's Price Link to Oil With Singapore SLInG

Singapore Exchange Ltd. wants to break the liquefied natural gas market’s reliance on oil as a pricing peg as the city-state seeks to solidify its role as Asia’s energy trading hub.

The exchange, known as SGX, plans to launch on Monday futures and swaps linked to its index of spot prices for LNG traded in Asia. Final settlement for the contracts will be determined by average weekly assessments gathered from producers, consumers and traders in the physical LNG market.

Natural gas can be supercooled and liquefied to transport it on tankers between areas difficult to link by pipeline. LNG traded in Asia -- where sellers such as Qatar and Indonesia ship fuel to buyers including Japan or China -- has traditionally been pegged to crude prices. That’s because the region lacks a benchmark similar to Henry Hub in the U.S., which the country’s burgeoning LNG exporters use in sales contracts.

For Singapore to become Asia’s LNG pricing hub, it will need greater physical supplies and expanded storage facilities in addition to swaps and futures, according to Wood Mackenzie Ltd.

“When Singapore talks about being a pricing hub, it is talking more about being a physical hub for gas where as a buyer and seller you can put gas in and take gas out,” Gavin Thompson, Wood Mackenzie’s vice president for China and Northeast Asia gas and power, said in an interview. “That price for the physical commodity is then priced into the short-term spot and long-term contracts, potentially the same way Henry Hub is priced into long-term LNG contracts.”

Divergent Supply

While both oil and LNG prices have tumbled since 2014, a forecast decrease in global crude output in the medium-term contrasts with LNG’s “tsunami” of new production, according to Adrian Lunt, an associate director of commodities at SGX. These divergent supply situations, and the growing share of LNG in global energy markets, “will likely reveal the increasingly blatant flaws” of pricing the fuel off oil, he said.

Japan’s Jera Co., a joint venture between Tokyo Electric Power Co. and Chubu Electric Power Co. that’s poised to become one of the world’s biggest LNG buyers, may use the Singapore index in its term contracts, according to the company. Korea Gas Corp. isn’t actively using the index because its not purchasing LNG on a spot basis, according to spokesman Song Kyu Cheol.

Indian Oil Corp. isn’t planning to use the swaps and futures and prefers indexing its contracts to Brent, said Debasis Sen, director of planning and business development.

http://www.bloomberg.com/news/articles/2016-01-25/sgx-seeks-to-break-lng-s-price-link-to-oil-with-singapore-sling

Germany's SMA Solar says 2016 operating profit could quadruple

Germany's largest solar power equipment maker, SMA Solar, said on Friday that its operating profit could quadruple this year due to strong demand for its inverters in markets outside Germany, notably the United States and Britain.

Its forecasts were not as strong as some analysts had estimated, however, and its shares fell sharply.

SMA said it expects its earnings before interest and tax (EBIT) to rise to between 80 million and 120 million euros ($87-131 million) this year from 30-33 million in 2015, SMA said as it held its investor day on Friday.

Analysts polled by Thomson Reuters estimate 2016 EBIT of 114 million euros.

The company also said it expected sales of between 950 million and 1.05 billion euros this year, broadly flat from last year's 1.0 billion, and below analysts' forecasts for 1.08 billion euros.

Following years of losses and cost cuts, restructuring has helped SMA emerge from a deep sector crisis that claimed many peers over the past five years. Its turnaround has been factored into its share price, which has more than quadrupled over the past year.

SMA shares fell more than 10 percent at one point on Friday. They were down 6.2 percent by 0919 GMT.

Earlier this week, the company unveiled 2015 results that beat its own targets on sales and earnings, returning the business to profitability sooner than expected.

SMA's inverters are needed to turn direct current into alternating current and feed it into the power grid. Demand has been high as countries around the world accelerate a shift towards renewables and away from fossil fuels.

http://www.reuters.com/article/sma-solar-outlook-idUSL8N15D1CJ

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£1bn biomass plant to bring 1,700 jobs to Anglesey

Work is set to start on a £1bn combined food and power plant on Anglesey, which will create more than 1,700 jobs.

The large biomass plant and eco park will be built near Holyhead after the company behind it, Orthios, bought the former Anglesey Aluminium site.

The development will see more than 500 permanent jobs and 1,200 construction jobs brought to the area before 2018.

The plant will process waste wood to create power, with heat generated used to farm prawns and grow vegetables.

It is expected to generate 299MW of electricity, which is enough to power about 300,000 homes.

Albert Owen, MP for Anglesey, said Orthios Eco Park had the potential "to be a catalyst in giving the local economy a much-needed boost".

"The company intends to liaise with businesses, training providers and schools in the area - the benefits of which will be seen in the local and regional economy as well as providing career opportunities," he said.

The plant is one of two planned for Wales - a similar facility will also be built in Port Talbot - after which the technology will be rolled out to China and developing countries.

The idea is for a biomass power plant generating electricity with spare heat being used to warm indoor ponds for king prawn farming. The UK currently imports king prawns.

Waste from the prawns can then be used as fertiliser to grow crops.

http://article.wn.com/view/2016/01/29/1bn_biomass_plant_to_bring_1700_jobs_to_Anglesey/?utm_source=twitterfeed&utm_medium=twitter

http://www.eldoradocountyweather.com/forecast/europe/europeanwind.html

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Orocobre completes major capital raise

ASX- and TSX-listed Orocobre has completed an A$85-million capital raise through a share placement to institutional and sophisticated investors. The company on Friday announced that it had placed more than 40.4-million shares, at a price of A$2.10 each

The issue price represented a 10.7% discount to the company’s five-day volume-weighted average price, prior to a trading halt on January 20. More than 25.3-million shares would be issued under the company’s current capacity, while the balance of the shares would be issued subject to shareholder approval at a general meeting scheduled for February 29.

Orocobre would use the proceeds of the placement to service financing costs related to the Olaroz project, including principal and interest payments due in March and September this year, and payments to the debt service reserve accounts.

Meanwhile, Orocobre noted that production ramp up at the Olaroz lithium facility, in Argentina, continued during the three months to December, with the operation producing 1 108 t of lithium carbonate during the quarter. This was an increase of 616 t over the previous quarter.

A production rate of 20 t/d was achieved towards the end of December, and Orocobre was confident that it could produce between 600 t and 650 t during the month of January.

Debottlenecking work would also be completed during January, allowing the plant to achieve the operating cost breakeven run rate, and enter the final stages of the production ramp up. The Olaroz project had a nameplate capacity of 17 500 t/y.

http://www.miningweekly.com/article/orocobre-completes-major-capital-raise-2016-01-22

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DuPont forecasts higher 2016 earnings, helped by cost cuts

DuPont forecast higher 2016 earnings, helped by aggressive cost-cutting to offset continued pressure from a strong dollar and weakness in its farm business.

The company forecast full year operating earnings of $2.95-$3.10 per share, including an expected benefit of 64 cents per share from its cost cutting and restructuring plan.

DuPont and Dow Chemical Co (DOW.N) are in the process of a merger that would create a company with an estimated combined market capitalization of about $130 billion as of Dec. 11, when the deal was announced. The companies plan to then break up into three separate standalone businesses.

"Our merger process is on track," DuPont Chief Executive Edward Breen said on Tuesday.

"We are meeting key milestones and have begun our planning to create three strong, highly focused, independent businesses in agriculture, material science and specialty products."

The company reported a quarterly profit of 27 cents per share, excluding items, that slightly beat analysts' average estimate of 26 cents.

However, including restructuring and other charges of $622 million, the company reported a quarterly net loss.

Net loss attributable to the company was $253 million, or 29 cents per share, in the fourth quarter ended Dec. 31, from $683 million, or 74 cents per share, a year earlier.

Net sales fell 9.4 percent to $5.3 billion.

http://www.reuters.com/article/dupont-results-idUSL3N15A3US

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Putin says government looks into export duties on mineral fertilisers

Russia's government is looking into introducing duties on exports of mineral fertilisers to make them more affordable for the country's farmers, President Vladimir Putin said on Monday.

Meeting his loyalists from the pro-Kremlin public movement, The All-Russia People's Front, Putin heard compalints from a farmer saying that massive exports of mineral fertilisers meant Russia's agricultural producers were forced to buy pricey fertilisers for hard currency.

"As for such a measure as raising export customs duties, yes, it is one of the solutions, and it is also being studied now," Putin said during a visit to the region of Stavropol in southern Russia.

"But according to the estimates by the agriculture ministry and the industry ministry, it may not lead to the desired result."

http://www.reuters.com/article/russia-fertilisers-idUSR4N154020

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Precious Metals

Something Snapped At The Comex

There had been an eerie silence at the Comex in recent weeks, where after registered gold tumbled to a record 120K ounces in early December nothing much had changed, an in fact the total amount of physical deliverable aka "registered" gold, had stayed practically unchanged at 275K ounces all throughout January.

Until today, when in the latest update from the Comex vault, we learn that a whopping 201,345 ounces of Registered gold had been de-warranted at the owner's request, and shifted into the Eligible category, reducing the total mount of Comex Registered gold by 73%, from 275K to just 74K overnight.

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This took place as a result of adjustments at vaults belonging to Scotia Mocatta (-95K ounces), HSBC (-85K ounces), and Brink's (-21K ounces).

Meanwhile, the aggregate gold open interest remained largely unchanged, at just about 40 million ounces.
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This means that the ratio which we have been carefully tracking since August 2015 when it first blew out, namely the "coverage ratio" that shows the total number of gold claims relative to the physical gold that "backs" such potential delivery requests, - or simply said physical-to-paper gold dilution - just exploded.
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As the chart below shows - which is disturbing without any further context - the 40 million ounces of gold open interest and the record low 74 thousand ounces of registered gold imply that as of Monday's close there was a whopping 542 ounces in potential paper claims to every ounces of physical gold. Call it a 0.2% dilution factor.

To be sure, skeptics have suggested that depending on how one reads the delivery contract, the Comex can simply yank from the pool of eligible gold and use it to satisfy delivery requests despite the explicit permission (or lack thereof) of the gold's owner.

Still, the reality that there are just two tons of gold to satisfy delivery requsts based on accepted protocols should in itself be troubling, ignoring the latent question why so many owners of physical gold are de-warranting their holdings.

Considering there are now less than 74,000 ounces of Registered gold at the Comex, or just over 2 tonnes, we may be about to find out how right, or wrong, the skeptics are, because at this rate the combined Registered vault gold could be depleted as soon as the next delivery request is satisfied. Or isn't.

http://www.zerohedge.com/news/2016-01-26/comex-snaps-gold-dilution-hits-record-542-oz-gold-claims-every-ounce-physical

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China Dec gold imports through Hong Kong highest since 2013

China's net gold imports for December via main conduit Hong Kong surged to the highest in more than two years, data showed on Tuesday, as investors lost faith in collapsing stock markets and a weakening currency and snapped up bullion.

Net gold imports by China, the world's top consumer, jumped to 129.266 tonnes last month from 79.003 tonnes in November, according to data emailed to Reuters by the Hong Kong Census and Statistics Department.

That was the highest monthly number since October 2013 when imports stood at 131.190 tonnes.

As China's equities slumped and its yuan currency finished 2015 with a record yearly loss, "people looked at other investment alternatives that's why there was huge demand for gold," said Brian Lan, managing director at gold dealer GoldSilver Central in Singapore.

China's gross gold imports via Hong Kong reached 152.158 tonnes in December, the highest since March 2013.

For all of 2015, China's net gold imports rose to 861.7 tonnes from 813.1 tonnes in 2014.

China's gold imports this year might approach the all-time high of 1,158.16 tonnes hit in 2013, said Lan, but are unlikely to top that.

"We expect to see a pickup in the China market especially in the first quarter. (This year) will be better than the past two years but is unlikely to beat 2013 when there was a big crash in prices," said Lan.

Spot gold ended a 12-year rally in 2013, with prices tumbling 28 percent, and the values have fallen further in the two following years to their lowest levels since 2010.

Gold touched a 12-week high on Tuesday of $1,117.60 an ounce, benefiting from safe-haven bids as stocks and oil tumbled again.

China does not provide trade data on gold, and the Hong Kong figures serve as a proxy for flows to the mainland.

The Hong Kong data might not provide a full picture of Chinese purchases as imports through Shanghai and Beijing, for which no data is available, gathered pace last year.

http://www.reuters.com/article/china-gold-imports-idUSL3N15A39H

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Harmony guides 3rd consecutive quarter of increased production

Harmony Gold Mining Company Limited (‘Harmony’ or ‘the Company’) is pleased to advise that it continued to increase its gold production for a third consecutive quarter. Underground grade was up close to 7% and overall gold production was 2% higher quarter on quarter.

Newly appointed chief executive officer, Peter Steenkamp, commented: “The production teams kept their momentum, with the majority of the operations delivering both higher kilograms and higher grades. Combined with the current higher R/kg gold prices, the past quarter has been very rewarding for Harmony.”

The company reports second quarter and half year results to the end of December on the 4th of February.

http://www.mineweb.com/news-fast-news/harmony-guides-3rd-consecutive-quarter-of-increased-production/?platform=hootsuite

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Petra Diamonds H1 revenue falls 28 percent

Diamond miner Petra Diamonds Ltd said its first-half revenue fell 28 percent as the price of diamonds continued to fall.

Revenue for the six months to Dec. 31 fell to $154 million from $214.8 million a year earlier, the company said in a statement.

The price of rough diamonds fell about 9 percent, hurt by slowing demand for the precious stone.

http://www.reuters.com/article/petra-diamonds-results-idUSL3N1592P1

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Base Metals

BHP Billiton set to fund Aston Bay's Storm copper project

The Canadian arm of mining giant BHP Billiton (BHP.AX) has signed a letter of intent to help fund exploration at Aston Bay Holdings Ltd's (BAY.V) Storm copper project, Aston Bay said on Thursday.

Under terms of the preliminary deal, BHP could earn a 75 percent interest in Storm, located in Canada's far north territory of Nunavut, if it spends a minimum of C$40 million on exploration over the next few years.

Vancouver-based Aston Bay, a small exploration company, will have no required exploration expenses for four years from the date a definitive agreement is signed. The two sides expect to finalize a deal in the second quarter, said Aston Bay.

A definitive deal would be a huge boost for Aston Bay, which like many of its small peers has seen its share price pummeled amid the rout in commodity prices. The price of copper CMCU3 continues to languish around levels not seen since the tail end of the financialcrisis in 2009.

Such earn-in agreements allow mining majors to secure stakes in promising early-stage projects for relatively limited up-front risk. They were fairly common when metal prices soared through much of the last decade, but have become rare in the last few years for both base metal and precious metal assets.

The latest move by BHP comes close on the heels of similar moves by rival Rio Tinto which recently inked similar deals involving the copper assets of two Canadian juniors.

The developments indicate the majors are beginning to be concerned about their long-term copper project pipeline as supply-demand fundamentals in the commodity remain fairly tight despite the slide in the price of copper.

In November, Avala Resources Ltd announced an earn-in agreement with Rio on its Lenovac project, located in Serbia, coming days after Rio signed a similar deal with Reservoir Minerals Inc on its Timok Magmatic Complex in Serbia.

Both assets are located near the promising Cukaru Peki deposit in Serbia, part of a joint venture Reservoir has with Freeport-McMoRan Inc. That deposit has shown promising results, leading to heightened interest in the region.

http://www.reuters.com/article/us-bhp-billiton-ltd-aston-bay-jointventu-idUSKCN0V62OX

Chinese tin producers jump on the cutback bandwagon

Chinese tin producers jump on the cutback bandwagon

China's main tin producers have joined the cutback bandwagon with an announcement they will curtail 17,000 tonnes of output this year.

As with similar announcements by Chinese producers across the base metals spectrum, there may be more to this apparent self-discipline than meets the eye.

But the cuts, if implemented, will help tighten further a market already facing structural supply issues even before the latest cross-commodities pricing rout.

Proof of that tightness comes in the form of chronically low stocks in London Metal Exchange (LME) warehouses and the resulting persistent stress in nearby time spreads.

China is the world's largest tin producer and the nine entities that have pledged to cut output account for around 80 percent of the country's output and 40 percent of global output, according to industry body ITRI.

The 17,000 tonne cutbacks would represent a 12 percent drop from 2015 production levels and are equivalent to 4-5 percent of global output.

But, as with similar coordinated cutbacks announced in other parts of the Chinese metals sector, these ones are in essence a cry for central government help.

The tin market, according to the nine producers, "is detached from fundamentals", for which read, "the current low tin price is not our fault, it's the fault of speculators".

http://www.reuters.com/article/tin-market-ahome-idUSL8N1562AO

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Lundin Mining Announces 2015 Production Results and Guidance

2015 Highlights:

Exceeded the high-end of annual production guidance for copper and nickel while meeting overall targets for zinc.
Candelaria outperformed the most recent copper production guidance due primarily to higher than expected mill throughput in Q4.
At Candelaria as previously announced, the successful exploration and mine plan optimization efforts resulted in total Mineral Reserves increasing by approximately 20% and resulted in the extension of the mine lives of all of the higher grade underground mines as well as the open pit.
Zinkgruvan achieved new annual records relating to tonnes of ore mined and milled. Annual zinc production also constituted a new record for the operation.
As at year end 2015, the Company had a net debt balance of $441 million, and did not have any amounts drawn on its $350 million revolving credit facility.

2016 Capital Expenditure and Exploration Guidance

Capital expenditures for 2016 for mines operated by the Company are expected to be $220M, which includes:

$35M in capitalized stripping at Candelaria. This has significantly decreased from prior estimates due to a deferral of 30Mt of waste being mined from Phase 10, resulting in expected cost savings of approximately $65M in 2016.
At Candelaria spending on the Los Diques tailings facility is expected to amount to $70M in 2016. The total capex budget for the project is expected to total $325M between 2016 and 2018, in-line with prior estimates.
At Eagle sustaining capital costs are expected to total $10M in 2016, which represents a decrease of 50% compared to 2015 guidance levels.
At Neves-Corvo capital costs in 2016 are expected to total approximately $55M, in-line with guidance levels provided for 2015.
At Zinkgruvan the guidance amount of $35M for 2016 includes the spending of $8M on an expansion project which is aimed at increasing the overall mill capacity by approximately 10% by the end of 2017.
Exploration expenditures in 2016 are expected to total $40M, which represents a decrease of approximately $20M from 2015 guidance levels due to the deferral or cancelation of most greenfields exploration work.

http://finance.yahoo.com/news/lundin-mining-announces-2015-production-223000730.html

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Steel, Iron Ore and Coal

Atlas Iron boosts shipments, lowers costs

Iron-ore miner Atlas Iron on Friday reported that December quarter had increased by 10% on the previous quarter, while its full cash costs for the three months fell by 9%. Atlas shipped 3.6-million tonnes of ore in the December quarter, compared with the 3.3-million tonnes in the September quarter, with full cash costs declining from A$58/t to A$54/t, including all contractor cost clawback and profit share.

A total of 3.5-million tonnes of ore was mined at Atlas’ various Western Australian assets, with more than 3.4-million tonnes of ore processed during the quarter under review. The Wodgina mine delivered 1.52-million tonnes of ore during the quarter, with the Abydos mine contributing 829 372 t, and the Mt Webber operation 1.14-million tonnes.

Atlas MD David Flanagan told shareholders that while iron-ore market has remained challenging going into January, the falling Australian dollar, low freight prices and further interim cost savings negotiated in December, would assist the company in remaining competitive during the completion of its debt restructure.

Flanagan said that the debt restructure agreement, which was struck during the December quarter, was an important step in making Atlas more sustainable, particularly in volatile iron-ore markets. Atlas in December last year miner inked agreements with more than 75% of its term loan B (TLB) lenders, and amended its existing syndicated facility agreement.

Under the two agreements, Atlas would make a pay down of the TLB loan of some $10-million and issue shares and options to the TLB lenders in exchange for the lenders retiring $132-million of debt. The TLB lenders would hold a combined 70% of the company’s shares and options on issue, immediately post the restructure. The issue of these shares and options would be subject to shareholder approval.

Furthermore, the existing syndicated facility agreement would be amended to include a covenant that cash was not to fall below A$55-million on any day during the implementation of the interim covenant. On implementation of the financial restructuring, Atlas would have reduced its term loan debt from $267-million to $135-million, extended the maturity date from December 2017 to April 2021, and reduced its cash interest expense by over 65% as a result of the lower debt balance and reduced interest rate.

http://www.miningweekly.com/article/atlas-iron-boosts-shipments-lowers-costs-2016-01-29

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Asia Ferrochrome: Japan Prices Fall To 10-Year Low Of 60-62 Cents/LB

Japan's spot high-carbon ferrochrome prices fell to a 10-year low of 60-62 cents/lb CIF Japan this week as keen spot sellers emerged amid the seasonal pre-Lunar New Year holiday lull, according to Platts' assessments.

The 60-62 cent/lb level is the lowest since March 8, 2006, when prices were assessed at 61 cents/lb CIF Japan.

A consumer in southern Japan awarded a 280 mt tender for early March delivery this week, triggering competition among spot sellers in a market devoid of buyers in the leadup to the Lunar New Year holidays.

One producer offered at 60 cents/lb CIF Japan for 10-50 mm sized lumps with minimum 60% chrome, maximum 8% carbon, maximum 2.5% silicon, maximum 0.03% phosphorous and maximum 0.05% sulfur for loading in February from Oman.

Another producer offered at 62 cents/lb CIF Japan for 10-50 mm lump for minimum 58% chrome, maximum 8-9% carbon, maximum 4% silicon, maximum 0.04% phosphorous and maximum 0.05% sulfur for loading in February from India.

There were offers at 64 cents/lb CIF Japan for similar specifications except chrome content at 56%-60%, maximum 4% silicon and maximum 0.03% phosphorous, sources said.

The tender in southern Japan was awarded at around 60 cents/lb, basis unknown. Platts has not been able to confirm the details.

A Japanese trader this week sold to a mill over 1,000 mt of 0-10 mm fines for prompt shipment at 57-60 cents/lb CIF Japan.

The material contained maximum 48-49% chrome, maximum 8% carbon, maximum 6-7% silicon, maximum 0.03% phosphorous and maximum 0.05% sulfur.

There is typically a 10 cent/lb gap between 0-10 mm fines and 10-50 mm lumps.

"You can no longer distinguish fines from lumps," the trader said.

Falling Chinese steelmaker bids for domestic ferrochrome, producers closing term deals on a China domestic price basis and thin spot demand amid the seasonal lull caused lump prices to plunge, traders said.

China's largest stainless steelmaker, Taiyuan Iron and Steel Group, bid at around Yuan 4,800/mt ex-plant for domestic high-carbon ferrochrome for January delivery, which equates to 56 cents/lb without local tax.

Some Japanese and Taiwanese steelmakers have suggested producers set term contracts on the basis of the Taiyuan monthly bid price, producer and mill sources said.

However some producers were not in the spot market as ferrochrome demand in India remained steady.

"We have sold out our production this month and we are not selling spot. We have been selling to Indian customers at 67 cents/lb FOB equivalent and I refuse to sell below 66-67 cents/lb CIF Japan," one Indian producer said.

Platts assessed 58%-60% high-carbon ferrochrome at 59-60 cents/lb CIF China Friday, down from 64-65 cents/lb CIF China a week earlier, and 48%-52% charge chrome at 59-60 cents/lb CIF China, flat week on week.

http://www.platts.com/latest-news/metals/tokyo/asia-ferrochrome-japan-prices-fall-to-10-year-27196169

Fortescue Iron Ore Shipments Climb 3.8% as Costs Decline

Fortescue Metals Group Ltd., the world’s fourth-biggest iron ore exporter, said second-quarter shipments rose 3.8 percent, beating analyst estimates, as costs fell to a record and net debt declined.

Shipments were 41.4 million metric tons in the three months ended Dec. 31, compared with 39.9 million tons a year ago, the Perth-based producer said in a statement on Thursday. This beat the median estimate of 40 million tons among three analysts surveyed by Bloomberg. Total shipments, including third-party material, were 42.1 million tons from 41.1 million tons.

Producers are racing to cut costs as iron ore is trading at less than a quarter of its 2011 peak and last month plunged to the lowest level in more than six years as the economic slowdown in China slows demand growth in the biggest user. Fortescue’s output costs were lowered for the eighth consecutive quarter, Chief Executive Officer Nev Power said in the statement, dropping to $15.80 a wet metric ton.

Fortescue “continues to make good progress on costs,” David Coates, a Sydney-based analyst at Bell Potter Securities Ltd., said by phone. “I’d certainly expect them to make progress to get their" costs to, or below, $15 a ton by the end of the fiscal year, he said.

Stock Climb

The stock closed 4.1 percent higher at A$1.52, paring losses this year to 19 percent.

Fortescue sees opportunities for further cost reductions this year including from lower shipping expenses helped by a 14 percent slump in oil prices this year. The company sees more scope to pare debt with a cash balance of $2.3 billion as at the end of last year. Net debt fell to $6.1 billion, from $6.6 billion the previous quarter.

“The U.S. debt markets have been heavily oversold predominantly on the back of the oil price and our debt has been priced down,” Power said on a media call. “If the market would price our debt at those low levels, then it’s a great opportunity for us to buy back ahead of time and do it very economically.”

Iron ore with 62 percent content delivered to Qingdao advanced 3.3 percent to $42.43 a dry ton on Wednesday after bottoming at $38.30 on Dec. 11, a record low in daily prices by Metal Bulletin Ltd.dating back to May 2009. Fortescue’s average realized price for the quarter was $40.46 a ton, the company said.

“Demand for Fortescue’s products remains strong and represents over 17 percent of imported iron ore into China,” the company said in the statement. It maintained full-year shipments guidance at 165 million tons and completed the early repayment of $750 million of debt during the quarter.

“The fact that they can service and reduce their debt in a tough iron ore market like this, I think it should give the market a lot of confidence in the stock,” Bell Potter’s Coates said.

http://www.bloomberg.com/news/articles/2016-01-27/fortescue-iron-ore-shipments-gain-3-8-as-costs-hit-record-low

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China's run-of-mine iron ore output falls 7.7% on year to 1.38 bil mt in 2015

China's run-of-mine iron ore output fell by 7.7% on year in 2015 to 1.38 billion mt, latest data released by the National Bureau of Statistics Monday showed.

The fall was less than the minimum 10% drop expected by market participants. The decline in 2015, however, was in contrast to the 3.9% year-on-year rise seen in 2014.

China's independent iron ore miners suffered most due to the low price environment and had to shut mines towards the end of last year.

"I shut my three mines one after another over November-December 2015, so for my own operations, [the output decline] is even more than 10%," a source at a 2 million mt/year iron ore mine in Liaoning province said Tuesday.

With price of 64%-Fe iron ore concentrate dropping below Yuan 300/wet mt ($46/wmt) in Liaoning, the source said it was meaningless to keep mines in operation amid stiff competition from better and more affordable Australian and Brazilian iron ore imports.

Australian and Brazilian iron ore supplies accounted for about 85% of the country's total consumption in 2015, up from around 65% a decade ago, according to official data.

China's iron ore concentrates typically have 64-66% ferrous content and are used for either sintering or pelletizing.

The steel mills, on the other hand, were not impacted much.

A North China steel mill's mining operation source said their run-of-mine iron ore output had, in fact, gone up in 2015.

"We sold all our iron ore output to our steel mills, so we have not resorted to production cuts. Most of the mines that belong to Chinese steel mills have been running more or less at full rates," he said.

China's steel mills own 70%-80% of the country's total run-of-mine iron ore production capacity, according to industry sources. As such, most of the mines will keep operating as long as they can supply their concentrates to their own downstream processes, and will be little impacted by slump in international prices, add the sources.

China's iron ore mining operations are mainly located in the provinces of Liaoning, Hebei, Anhui, Shandong, Inner Mongolia and Sichuan. Independent mines located in Anhui and Shandong were hurt the most by the price declines in 2015, market sources said.

http://en.chinamining.com.cn/News/2016-01-27/1453860926d75159.html

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Shandong to cap coal consumption in 2016

Eastern China’s Shandong province planned to further cap coal consumption of 2016, which was expected to be 10 million tonnes less than that in 2012 at some 380 million tonnes, in the hope of alleviating air pollution, Xinhua News Agency reported, citing local government authorities.

The reduction volume of coal consumption will be allocated to 17 cities of the province, mainly targeting major coal-guzzling enterprises of these cities.

By 2017, 10 million tonnes more coal consumption will be cut in the province compared to 2016.

In addition, environmental protection authorities will set up a quality standard for “San Mei”, the main culprit to blame for the heavy pollution in northern China.

In 2014, Shandong consumed a total 396 million tonnes of coal, ranking the No.1 in China, and coal consumption accounted for 80.8% of the total energy use of the province, 14 percentage points higher than the national average level.

The official data on Shandong’s coal consumption last year hasn’t been available yet.

http://en.sxcoal.com/0/140091/DataShow.html

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Rio Tinto sells Australia coal mine to Indonesia's Salim

Global miner Rio Tinto has agreed to sell one of its last remaining coal mines in Australia to a group owned by Indonesia conglomerate Salim Group, continuing an exit from coal as it battles a sharp slump in prices, it said on January 25.

Rio was selling its Mount Pleasant thermal coal assets in the Hunter Valley in New South Wales to a private company, MACH Energy Australia Pty Ltd. -- an entity owned by Salim Group, for $224 million plus royalties.

The royalties from the mine would only be paid when coal prices top $72.50/t, well above the current price of $47.37/t.

"We believe Mount Pleasant can have a very positive future under its new owners with different priorities for development and capital allocation," Rio Tinto copper and coal chief executive Jean-Sebastien Jacques said in a statement.

The sale of the Mount Pleasant mine, which has marketable reserves of 474 million tonnes, follows Rio Tinto's sale of its stake in the Bengalla joint venture last year for $606 million and leaves it with the Hunter Valley Operations and Mount Thorley Warkworth mines.

http://en.sxcoal.com/0/140090/DataShow.html

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China 2015 thermal coal imports down 38pct on year

China’s imports of thermal coal—including bituminous and sub-bituminous coals– fell 38.17% on year to 83.21 million tonnes in 2015, according to the latest data released by the General Administration of Customs.

Total value of thermal coal imports during the same period stood at $4.85 billion

Thermal coal imports in December stood at 7.43 million tonnes, falling 0.37% from a year ago but up 0.14% from November, data showed.

In addition, lignite imports in 2015 reached 48.26 million tonnes, down 24.6% from the year prior.

Lignite imports in December stood at 3.55 million tonnes, sliding 36% on year and down 6% on month.

In addition, China exported 1.33 million tonnes of thermal coal in 2015, down 49% year on year, with December exports at 39,467 tonnes, dropping 73.5% from a year ago and down 43.4% from November.

Lignite exports in 2015 plunged 61.5% on year to 3,858 tonnes, with December exports fell 48.6% on year and down 74.8% on month to 533 tonnes.

http://en.sxcoal.com/0/140042/DataShow.html

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China 2015 coking coal imports down 23.1pct on year

China’s coking coal imports slumped 23.1% on year to 47.83 million tonnes in 2015, showed the latest data from the General Administration of Customs (GAC).

The value of the imports saw a yearly plummet of 41.2% to $3.81 billion, the GAC said.

The average price of imported coking coal was $79.68/t in 2015, dropping 24% or $25.21/t from 2014’s $104.89/t.

In December last year, China imported 4.45 million tonnes of coking coal, falling 41.1% on year but 9.34% higher than the month-ago level.

The value of the December imports was $274.44 million, plunging 59.6% year on year and down 3.65% on month.

In 2015, China exported 970,000 tonnes of coking coal, a year-on-year rise of 21.5%, with December’s exports standing at 120,000 tonnes, up 33% on year and rising 20% on month, data showed.

The value of the exports in 2015 was $103.93 million, up 2.9% on year with December’s value at $11.08 million, down 3.4% from the year prior but up 86% on month.

http://en.sxcoal.com/0/140045/DataShow.html

Government policies have killed iron ore trade in India

PTI reported that alarmed by the continuous slide in the exports of iron ore, miners body FIMI has accused the government of “killing” India’s ore trade and sought immediate steps for its revival. Apprehending a sharp fall in exports of the key steel-making raw material this fiscal too, the Federation of Indian Mineral Industries has said ore units are on the verge of closure.

FIMI secretary general Mr RK Sharma said “India is the only country in the world which has killed its flourishing iron ore trade. The trends show that exports will decline hugely this fiscal. In 2014-15, exports stood at 6.12 million tonnes.”

The allegations come in the wake of India’s top 12 major ports witnessing a sharp 38 per cent decline in ore handling to only about eight million tonnes (mt) in April-December of the current fiscal, which includes domestic movement of cargo.

Mineral ore exporter bodies have already sought Prime Minister Narendra Modi’s intervention for removal of export duty on iron ore, saying it will help in higher revenues of $750 million a year. Besides, industry body GMOEA has written to PMO urging it to remove the export duty on iron ore fines with Fe content below 58 per cent and on iron ore lumps.

http://steelguru.com/mining/government-policies-have-has-killed-iron-ore-trade-in-india-fimi/444535#tag

China to cut crude steel capacity by 150 mln T: premier

China will cut crude steel production capacity by 100 to 150 million tonnes, and reduce coal capacity by "a relatively large margin", according to a statement issued on January 24 after an executive meeting of the State Council chaired by Premier Li Keqiang on January 22.

http://en.sxcoal.com/0/139963/DataShow.html

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Shandong to slash 25% coal capacity over 2016-2020

Eastern China’s Shandong province aims to pare back coal production capacity by 42.82 million tonnes per annum over 2016-2020, accounting for nearly 25% of the province’s total capacity, said one government official on January 21.

By the end of 2015, the province had a combined coal capacity of 172 million tonnes per annum. Its coal output in 2015 amounted to 145 million tonnes, a year-on-year decline of 2.14%, according to the Shandong Administration of coal mine Safety.

All capacity cut will target provincially-owned coal miners, which managed to cut cost by 68 yuan/t ($10.37/t) on year in 2015 and saved 12.5 billion yuan in total, said Fanjun, Deputy Director of the Shandong State-owned Assets Supervision and Administration Commission, at a provincial meeting on deepening state-owned enterprises reforms.

Of those miners, Yankuang Group, Shandong Energy Group, Shandong Iron and Steel Group and Shandong Gold Group last year cut staff salary by 3.9 billion yuan or 8% from a year ago.

In response to the central government’s call for overcapacity elimination, Yankuang and Shandong Energy shut 6.85-million-tonne capacity in the past year comprising 21 mines.

http://en.sxcoal.com/0/139845/DataShow.html

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