Mark Latham Commodity Equity Intelligence Service

Wednesday 24th June 2015
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    Brazil graft probe could ensnare Eletrobras, foreign firms -prosecutor

    Brazil's biggest corruption investigation could spread to its biggest electric utility, Eletrobras, and more than a dozen foreign companies, a lead prosecutor said on Tuesday, in a sign of further turbulence for the country's business and political establishment.

    Carlos Fernando dos Santos Lima said a scheme similar to one set up as state-run oil firm Petrobras may have operated at Eletrobras, specifically on major projects like nuclear reactor Angra 3 and the $13 billion Belo Monte hydroelectric dam in the Amazon.

    In a wide-ranging interview, the Cornell University educated prosecutor said "there are many charges still to come," in a probe he said was likely to continue for at least another two years.

    The groundbreaking inquiry has already ensnared dozens of senior executives, battered the popularity of President Dilma Rousseff and rattled the fragile Brazilian economy.

    The 16-month old investigation has also turned up evidence of corruption by more than a dozen foreign firms, including South Korea's Samsung Heavy Industries Co Ltd, Swedish builder Skanska AB, Danish oil and shipping group Maersk and British engineer Rolls-Royce Holdings, Lima said.

    By investigating another state-controlled company and including so many foreign Petrobras suppliers, the prosecutors have significantly extended the scope of an investigation that claimed one of its biggest scalps yet with the arrest of the chief executive at Brazil's biggest construction and engineering conglomerate Odebrecht SA.

    Lima has said he has no doubt that Odebrecht and rival construction company Andrade Gutierrez led a "cartel" that overcharged Petrobras for work and passed on the excess to executives and politicians.

    Odebrecht denies participating in a cartel and has called the arrests illegal. Prosecutors must present charges within 30 days of arrest.
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    Chinese shipyards' new orders slump 77.4pct YoY - CANSI

    China Association of the National Shipbuilding Industry said that Chinese shipyards' new orders slumped 77.4% YoY to 7.86 million dwt in the first five months of 2015.

    The orderbook of Chinese shipbuilders fell 8.2% YoY to 138.18 million dwt at the end of May, down 7.5% from the level at the end of 2014.

    The plunge in new orders came after Chinese shipbuilders ended 2014 with a 14.2% YoY fall in awarded orders, as buyers cut back on spending on new ships since late 2014.

    The completed tonnage at the Chinese yards grew 18.9% YoY to 15.48 million dwt during the same period.

    For exports, the new orders also fell 79.8% YoY to 6.65 million dwt, accounting for 84.6% of overall new orders placed at Chinese shipyards.

    A total of 88 companies in the Chinese shipbuilding and relevant industries surveyed by CANSI posted YoY rise in operating revenues of 4.4% to CNY 102.0 billion, with gross profits up 17% to CNY 2.06 billion.

    The industrial output values of these companies increased 5.5% YoY to CNY 163 billion, with those for shipbuilders and marine equipment makers up 9.2% and 9.6%, respectively. However, the industrial output values for ship repairers were down 8.3% YoY.
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    Container Shipping Rates from China to US, Europe Collapse

    “Sluggish westbound volumes have brought about the worst spot market rate collapse that this trade has experienced.” That’s how Drewry Maritime Research summarized it in a report a couple of weeks ago. Since then, the collapse of the rates for shipping containers from China to the West has gotten worse with clockwork relentlessness.

    In mid-April, there had already been a lot of handwringing. The Shanghai Containerized Freight Index (SCFI) tracks spot rates of shipping containers from Shanghai to 15 major destinations around the world. At the time, rates from Shanghai to Rotterdam had plunged to $399 per twenty-foot container equivalent unit (TEU), down 67% from a year earlier, the lowest rate ever, and half of what was considered the break-even rate for these routes.

    It seemed that there would have to be some kind of uptick – that efforts by carriers to impose higher rates would stick. But nothing worked. So a week ago, there was a lot of handwringing because rates to Rotterdam had dropped to $243 per TEU, which wouldn’t even cover the cost of fuel of about $300 per TEU.

    But now, in the week ended June 19, the spot rates from Shanghai to Rotterdam plunged another 15.6% to $205, a previously unimaginable low.

    And it’s not just to Northern Europe.

    On the routes from Shanghai to the US West Coast, carriers also tried to implement rate increases effective April 1. But after an ephemeral uptick of $300 to $1,932 per forty-foot container equivalent unit (FEU), spot rates re-swooned. By the beginning of May, the index had dropped to $1,783, about back where they had been a year earlier.

    But look what has happened since. Last week the index plunged 5.4% to $1,268 per FEU, down 29% from the battered rates at the beginning of May.

    Spot rates to the US East Coast are also getting beat up: down 3.3% last week. Of the 15 destinations in the index, rates dropped for 11, remained flat for Taiwan and Hong Kong, and rose for Korea and East Japan.

    The overall SCFIdropped 4.3% for the week to its lowest level ever: 556.72. It’s now 44% below where it was during the Financial Crisis, on October 16, 2009, when it was set at 1,000, and down about 50% from February. This is what the terrible plunge looks like:
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    No let-up seen in Santiago's driest June in 50 years

    The Chilean capital of Santiago has experienced the driest June in half a century, leading to headache-inducing levels of pollution and Andean ski slopes bereft of snow, with no rain clouds on the horizon, meteorologists say.

    There has been zero precipitation in the month to date in Santiago - the first time that has happened in fifty years.

    The unusually dry conditions in the midst of the Southern Hemisphere winter have exacerbated the city's already-high pollution levels, leading the government to declare an "emergency" on Monday, banning many vehicles and forcing some businesses to close.

    Santiago sits in a topographical bowl, making it susceptible to pollution caused by factories, cars, fires and wood-burning stoves, particularly in winter. Normally rain clears the air at regular intervals, but the arid June has left city-dwellers gasping for breath.

    No relief from the arid conditions is expected in the week ahead.

    "We can say that no rain is expected for the next seven days," Janette Calderon, a meteorologist with the country's official meteorological office said on Tuesday.

    The dry month compounds a drought that has been going on for some eight years, weighing on industries from mining to wine producers.

    Just under 12 millimeters of rain has fallen since the start of the year, compared to an average for the first six months of the year of over 100 millimeters, said Calderon.

    That makes the first half of 2015 the driest half year since records began in 1966.

    Andean ski resorts near the city, popular with tourists and locals alike, would normally be opening in the next few weeks, but are practically bone dry.

    On Monday, the emergency meant subways were crowded as drivers left cars at home and businesses running stoves such as bakers were forced to shut.

    Miner Anglo American PLC said it did not operate a molybdenum drier for its Los Bronces plant on Monday due to the shutdown, but that the halt would not impact production.

    The government downgraded its pollution alert on Tuesday, which eases some of the restrictions on cars and businesses.
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    Oil and Gas

    Saudi Arabia Pumps Oil Flat Out in Citi, Goldman’s New Oil Order

    Not content with the blow it’s dealt to U.S. oil drillers, Saudi Arabia is set to escalate the battle for market share by raising production to maximum levels.

    The world’s largest oil exporter has already increased output to a 30-year high of 10.3 million barrels a day in a bid to check growth from nations including the U.S., Canada and Brazil. It will add even more to the global glut, according to Goldman Sachs Group Inc. Citigroup Inc. predicts the kingdom will push toward its maximum daily capacity, which the bank estimates at about 11 million barrels, in the second half of 2015.

    Saudi Arabia steered the Organization of Petroleum Exporting Countries in November to protect its market share in the face of swelling U.S. crude output, rather than cut supplies to shore up prices as it did in the past. Having abandoned the role of swing supplier -- adjusting production in line with demand -- the kingdom will maximize sales to increase pressure on producers outside the group, the banks said.

    “If you are Saudi Arabia and you’re looking at the new oil order we live in, you would go to full capacity,” Jeff Currie, head of commodities research at Goldman Sachs in New York, said by e-mail on June 15. “The world has come around to the realization that the U.S. shale barrel is the swing barrel.”

    Estimates vary on how high Saudi production might go. Oil Minister Ali Al-Naimi reiterated in St. Petersburg Thursday that his country has about 1.5 million to 2 million barrels of daily reserve capacity and is ready to increase output if demand rises. The IEA, a Paris-based adviser to industrialized nations, assesses the full capacity at 12.3 million. Saudi Arabia’s decision not to push beyond 10 million during the 2011 crisis in Libya suggests the maximum is closer to 11 million, said Seth Kleinman, head of energy strategy at Citigroup.

    “The clear implication of Saudi Arabia’s new oil policy of pressuring high-cost producers is for them to increase production and exports,” Kleinman wrote in an e-mail on June 15. “With an increasingly compelling picture of lower oil prices over the next 10 to 20 years, it makes sense for Saudi to use it all and use it now.”
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    Russia Pips Saudi Arabia in Race to Grab China Oil Market Share

    Russia surpassed Saudi Arabia to become China’s top crude supplier as the fight for market share in the world’s second-largest oil consumer intensifies.

    China imported a record 3.92 million metric tons from its northern neighbor in May, according to data emailed by the Beijing-based General Administration of Customs on Tuesday. That’s equivalent to 927,000 barrels a day, a 20 percent increase from the previous month. Saudi sales slumped 42 percent from April to 3.05 million tons.

    China is becoming a key market for global oil exporters as surging output from shale fields from Texas to North Dakota allows the U.S., the biggest crude consumer, to rely less on overseas supplies. The Asian nation will account for more than 11 percent of world demand this year, the Paris-based International Energy Agency predicted this month.

    “This is a clear sign of how spoilt Asia is for choice these days, with Middle Eastern crude now having to compete with oil from other regions,” Amrita Sen, the chief oil-market analyst at Energy Aspects Ltd., a London-based consultant, said in an e-mail. “Russia is increasingly looking east and the various deals made between Rosneft and China are likely to see more Russian crude head to China permanently.”

    Russia is China’s top crude supplier for the first time since October 2005 as it seeks new markets for its crude amid western sanctions over its dispute with Ukraine. OAO Rosneft in 2013 agreed to supply 365 million tons over 25 years to China National Petroleum Corp. under a $270 billion deal. The same year, the company agreed an $85 billion, 10-year deal with China Petrochemical Corp.

    Russia isn’t the only crude shipper to overtake Saudi Arabia last month. Angola sold 3.26 million tons to China, 14 percent more from April, rising two places to take second spot. The Middle East country lost its top rank for the first time in 13 months.

    “Following Russia’s recent acceptance of the renminbi as payments for oil, we expect more record high oil imports ahead to China,” Gordon Kwan, the Hong Kong-based head of regional oil and gas research at Nomura Holdings Inc., said in an e-mail, referring to the Chinese currency. “If Saudi Arabia wants to recapture its number one ranking, it needs to accept the renminbi for oil payments instead of just the dollar.”

    In April, Saudi Arabia had expanded its share of China’s oil market as it shipped 5.26 million tons of crude to the Asian nation, the highest level since July 2013.

    The Middle East producer raised official prices for its main crude grades sold to Asia the past four months, after record discounts for March cargoes. Arab Light and Arab Medium were set at 10-month highs for July, according to a statement from state-run Saudi Arabian Oil Co.
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    Indonesia selling 79 LNG cargoes

    Indonesia’s industrial customers have been unable to consume the liquefied natural gas produced at Tangguh and Bontang LNG plants creating a surplus of cargoes that are being placed on offer.

    SKK Migas’ spokesman Zudaldi Rafdi told Platts, that 79 cargoes to be loaded in 2015 and 2016 are being offered from Indonesia’s LNG plants. Both facilities can not cut on production as it would cause issues in the long-term production and customers for which the LNG is allocated are failing to consume the volumes due to economy-driven slump in consumption.

    Rafdi said the cargoes will be offered on the spot market or existing buyers.

    According to him, Tangguh LNG plant will have 23 excess cargoes, six in 2015 and 17 in 2016, while the Bontang LNG plant will produce 56 excess cargoes in the same two-year period. The plant is set to put out 13 excess cargoes in 2015 and 43 cargoes of liquefied natural gas in 2016.
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    Petrofac's order backlog rises to $20.5 bln

    Oilfield services provider Petrofac Ltd said strong performance at its engineering and construction division had helped increase its order backlog to $20.5 billion at the end of May.

    Petrofac shares rose as much as 11 percent to 965.5 pence on the London Stock Exchange on Tuesday morning.

    The company, however, said it expected pretax costs at its Laggan-Tormore project to increase by about 30 million pounds ($47.35 million) as it began additional completion and pre-commissioning works.

    The company has incurred about 140 million pounds in costs on the project so far this year.

    Petrofac has been taking heavy losses on the Shetland Islands project, buckling under the North Sea's hostile environment and the high cost of doing business in the region.

    The company had said in April it expected a pretax loss of about 130 million pounds in 2015, in addition to the $230 million it recognised in February.

    Laggan-Tormore, a high-quality oil and gas asset 80 percent owned by French oil major Total, is expected to yield about 93,000 barrels of oil equivalent per day at its peak.

    Order backlog at Petrofac's Engineering, Construction, Operations and Maintenance (ECOM) division, which accounted for nearly 80 percent of its revenue last year, grew 12 percent from the end of December.

    JP Morgan Cazenove analyst Daniel Butcher said Petrofac's ECOM backlog, which was $17.4 billion at the end of May, had the potential to increase to $20 billion for the first half.

    Chief Executive Ayman Asfari said the company stood to secure several contracts in the second half of the year as clients were investing in large projects in its core markets.

    The company said it expected its net profit for the year to be weighted towards the second half as several projects were near completion.
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    APPEA: gas reservation raises LNG costs in WA

    The Western Australian government must avoid imposing additional cost and complexity on liquefied natural gas projects, the Australian Petroleum Production & Exploration Association said on Tuesday.

    The Government today confirmed that the State’s domestic gas reservation policy would be applied to a floating LNG project for the first time.

    APPEA Western Region Chief Operating Officer Stedman Ellis said the decision to force projects to reserve gas for the state’s domestic market amounted to a de facto tax.

    “In what is now a new investment climate, the Government should be looking to reduce the cost and regulatory burden on LNG projects if it wants to attract investment,” Ellis said.

    “Instead, it continues to do the very opposite by imposing a gas reservation policy that simultaneously acts as a tax on gas production and a subsidy on gas consumption,” he added.

    According to Ellis, the reality is the policy is not needed to deliver energy security because, as the Independent Market Operator advised last year, WA’s domestic gas market is already well supplied into the future.

    The Economic Regulation Authority has also warned that the policy would have negative economic consequences for the State, he said.

    “The Government needs to accept that its reservation policy simply adds to the capital cost of projects that are already facing growing global competition,” Ellis concluded.
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    E.ON puts North Sea, Algeria assets on the block

    German utility E.ON wants to sell its North Sea and Algerian oil and gas assets, hoping to raise around $2 billion as it restructures, several banking sources said.

    The move adds to the rising number of North Sea assets on the market as a result of lower oil prices, but with few deals being concluded.

    E.ON has given several prospective buyers access to data on its international exploration and production assets ahead of the official launch of the sale mandate which is expected in the coming weeks, bankers and industry sources said.

    Bank of America Merril Lynch is arranging the sale process, which will be held through an auction, according to the sources.

    "E.ON has opened up data rooms for its North Sea and Algerian assets," one source said.

    The assets are estimated to fetch around $2 billion, though oil price valuations between buyers and sellers have varied significantly in recent months following the drop in crude prices over the past year.

    As a whole, E.ON's E&P unit made 1.1 billion euros ($1.23 billion) in earnings before interest, tax, depreciation and amortization (EBITDA) last year, about 13 percent of the utility's total.

    Most of it comes from the group's North Sea assets, which had a combined output of 22.3 million barrels of oil equivalent (boe) in 2014.

    In Norway, E.ON has a 30 percent stake in the Njord field, a 28.1 percent stake in the Skarv field and a 17.5 percent stake in the Hyme field, according to its website.

    In the British North Sea, it operates the Huntington, Babbage, Johnston, Hunter and Rita fields and also holds interests in several producing fields.

    In Algeria, E.ON holds a 49 percent of the exploration licence for the Rhourde Yacoub area in the Berkine basin, according to its website.
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    Shell’s Arctic drilling plans may hit permitting snag

    Shell’s plans to bore two wells in the Arctic Ocean this summer may be jeopardized by an obscure permitting requirement that effectively bars drilling operations close to each other in waters off Alaska.

    The restriction highlighted by environmentalists opposed to Shell’s Arctic drilling campaign could be a major stumbling block for the company, which has spent $7 billion and seven years pursuing oil in the region.

    The restriction is embedded in the rules for obtaining a “letter of authorization” allowing companies to disturb walruses, seals and other animals in the region — among the last permits Shell needs to launch activities in the Chukchi Sea next month. Under a 2013 Fish and Wildlife Service regulation, those authorizations are precluded for drilling activities happening within 15 miles of each other.

    The two wells Shell wants to drill this summer are about 9 miles apart.

    A coalition of environmental groups insisted Tuesday that the requirement should block Shell’s planned Arctic drilling and force the Obama administration to rescind earlier approvals.

    Any letters of authorization issued to Shell “would violate an explicit condition of the governing regulations, the organizations said in a letter to Interior Secretary Sally Jewell. And they noted that Interior Department regulators did not consider a one-well drilling program when they evaluated the environmental impacts of Shell’s broad exploratory plan for the Chukchi Sea before approving it earlier this year.

    The groups, including the Natural Resources Defense Council, Oceana and the Sierra Club, suggested that if the Obama administration allowed Shell to drill even one of its planned wells in the Chukchi Sea — much less two simultaneously — it would not be “lawful or “defensible,” because of the limited scope of that earlier environmental analysis.

    Shell has asked federal regulators for permission to drill two wells into its Burger prospect about 70 miles off the coast of Alaska this summer, with more possibly next year. It has lined up two drilling rigs for the job, including one now en route to Dutch Harbor, Alaska to wait for final approvals.

    Only four of those needed approvals are left: Two well-specific drilling permits from the Interior Department’s Bureau of Safety and Environmental Enforcement and the two letters of authorization from the Interior Department’s Fish and Wildlife Service.

    Shell appeared to be aware of the Fish and Wildlife Service’s prohibition on contemporaneous drilling activities as far back as February 2013, when it sent a letter to the agency objecting to the then-proposed rule.
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    LNG Disaster. Stock market still in denial.

    From Credit Suisse:

    ■ The Sinopec issue is clearly polarising people: The reaction of investors to yesterday’s note is interesting. It evoked strong, and polar, views. Some see it as churlish to question any risks, given APLNG’s total protection under 100% Take or Pay. Others point to iron ore and see a high probability of default. We probably agree with neither school. There’s a grey area in between, with varying degrees of pain to Origin, to test. Whilst it may come at no financial pain to them (aside from any un-contracted volumes spot), we believe that lifting destination restriction would be the first step into the grey.
    ■ Origin has already waived binding APLNG terms: We continue to believe commercial logic may need a compromise to be reached. Let’s not forgot that in February 2011 Origin agreed to ‘defer’ (triggers unlikely to be met) the 2x $500m FID payments from Conoco to Origin. The rationale was ‘to better align economic interests’. It may have been needed, but it was a clear deviation from a binding legal agreement. Sound remotely familiar?

    Exactly right. Firms will bury the truth in volumes of Orwellian legalese but the bottom line will be that under pressure from a collapsing spot market these contracts will break just as they did in the iron ore market.

    Only this time we’ll be on the receiving end.

    Attached Files
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    Alternative Energy

    Renewables to beat fossil fuels with $3.7trillion solar boom

    Renewable energy will draw almost two-thirds of the spending on new power plants over the next 25 years, dwarfing spending on fossil fuels, as plunging costs make solar the first choice for consumers and the poorest nations.

    Solar power will draw $3.7 trillion in investment through 2040, with a total of $8 trillion going toward clean energy. That’s almost double the $4.1 trillion that will be spent on coal, natural gas and nuclear plants, according to a forecast from Bloomberg New Energy Finance.

    The figures show the traditional dominance of coal and natural gas suppliers will slip in the coming years as cheaper renewables mean developing nations can tap less-polluting sources to meet their swelling energy needs. The forecast from New Energy Finance also indicates that coal will remain an important fuel, suggesting policy makers must take further steps to control greenhouse gases.

    “We will see tremendous progress toward a decarbonized power system,” Michael Liebreich, founder of New Energy Finance, said Tuesday in a statement as the research group released its findings in London. Despite this, emissions will continue to rise “for another decade-and-a-half unless radical policy action is taken.”

    Greenhouse gas emissions will increase until 2029. That’s almost a decade past the date the International Energy Agency has set as target that would lead to capping the global increase in temperatures at 2 degrees Celsius (3.6 degrees Fahrenheit) by 2100.

    Developing nations will account for 79 percent of 8.9 terawatts of new power capacity added worldwide, according to New Energy Finance, with solar reaping the biggest gains.

    Most of the solar projects in these regions will be large- scale power plants, with about 1.5 terawatts installed by 2040, compared with about 800 gigawatts of small-scale and rooftop systems.

    That pattern will be reversed in developed countries, with 271 gigawatts of large solar farms compared to almost 900 gigawatts of smaller power systems, according to New Energy Finance.

    Worldwide, rooftop and small-scale solar plants will jump nearly 17-fold from 104 gigawatts last year to nearly 1.8 terawatts in 2040.

    With prices for solar panels expected to plunge 47 percent, the industry is going to flourish because of basic economics instead of government subsidies, said Jenny Chase, chief solar analyst at New Energy Finance.

    ‘Solar is Cheap’

    Because sunshine is free, the cost advantage over fossil fuels will continue to increase. “Solar is cheap and it’s only going to get cheaper,” she said in an interview.
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    New Aus. renewable energy target to unlock $10b worth of deals, GE says

    Australia's new renewable energy target will unlock more than $10 billion of investment, General Electric said.

    The new target of producing 33,000 gigawatt hours of electricity from large-scale renewable energy projects by 2020 will "create thousands of new jobs and grow the order book of hundreds" of companies, GE's Australia chief, Geoff Culbert, said in an e-mailed statement Wednesday.

    The legislation passed late Tuesday eases industry disquiet after investment in renewable energy projects stalled amid lawmaker disagreement over what the new level should be. The windfarm industry has been the biggest beneficiary of the RET, with more than 1600 turbines from more than 60 projects now dotting rural Australian landscapes.

    The original 41,000 gigawatt-hour goal, introduced in 2009 to reduce reliance on fossil fuels by boosting renewable energy to 20 per cent of the electricity market by 2020, had become unfeasible to Tony Abbott's government. Shrinking power demand as the energy-intensive manufacturing industry contracted and efficiency improvements had seen the share surge toward 26 per cent.

    Mr Abbott, who's labeled windfarms as ugly and noisy, has led his government to axe a price on carbon emissions and is yet to announce a post-2020 target to reduce greenhouse gases. Last week, the coalition announced plans to appoint a commissioner to crack down on windfarms.

    While industry will welcome the RET agreement, it still needs clarity on the nation's emissions reduction targets, said the Energy Supply Association's chief executive, Matthew Warren.
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    Solar Thermal Desalination Now Underway in Water-hungry California

    The controversial Carlsbad desalination project’s latest projected cost is now $1 billion. It will suck in 100 million gallons of San Diego’s seawater a day and force it through a series of filters to produce 50 million gallons of water a day using high-pressure reverse osmosis.

    A modest solar thermal desalination alternative now quietly undergoing permitting inland would produce 5 million gallons of water, about one tenth of that of Carlsbad, but at a much lower cost of just $30 million, using a solar distillation process.

    A 5 ft-wide roll of silver-coated aluminium Reflectech slides into each unit making up SkyFuel's 20 ft wide parabolic trough used on the solar collector field creating steam for the WaterFX solar still.

    WaterFX will use a 24-MW trough-type solar thermal field supplied by NREL-collaborator SkyFuel to create direct steam from the sun to run multi-effect distillation, desalinating enough agricultural water for reuse to keep 2,000 acres of farmland irrigated each year.

    WaterFX Chairman Aaron Mandell, who previously founded Oasys Water, a Massachusetts provider of desalination and water-treatment technologies, said he focused on reusing agricultural drainage water because agriculture is California's biggest water user. Selenium and other natural agricultural salts build up in soil, eventually making farming impossible.

    "The agricultural sector uses about 80 percent of all the water in California," Mandell explained. "If only 20 percent of the water is being used for municipalities, and you reduce that water consumption by 50 percent, you've only made a 10 percent impact overall. Reducing agricultural use has a much bigger impact."

    Last year WaterFX completed a six-month demonstration project that convinced the Panoche Water District to go ahead with the commercial plant. "The water district has been monitoring the pilot project and they're very happy with the results," Mandell said.
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    Australia’s Paladin Energy gets historic ok to run uranium mine in Canada

    Canada’s federal government has provided a measure of relief to the country’s depressed uranium mining sector by granting an exemption to foreign ownership restrictions on producing mines.

    Late on Monday, Federal Natural Resources Minister Greg Rickford said Australia’s Paladin Energy will be allowed to have majority ownership of its proposed Michelin uranium mine in Newfoundland and Labrador.

    Under federal rules, a Canadian company must have at least 51% stake in any uranium project, unless a partner cannot be found.

    Paladin was able to show there were no Canadian partners interested in leading the development of the proposed project

    The government said Paladin was able to show there were no Canadian partners interested in leading the development of the proposed project, located approximately 140 kilometres northeast of Happy Valley-Goose Bay.

    “This is an historic decision that could have implications for all uranium companies and projects in Canada,” Raymond James analyst David Sadowski said in an e-mailed note.

    The decision to grant Paladin majority ownership of Michelin will be welcome by other provinces, especially by the Saskatchewan’s government, David Talbot, an analyst at Dundee Securities,told The Globe and Mail. This, despite that province has no stake in the asset, financially or geographically.

    “Saskatchewan supports [this kind of ownership exception] for its own jurisdiction, and that’s positive for potentially getting Rio Tinto or BHP to go after some of those smaller companies,” Talbot added.
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    Base Metals

    Chile's Collahuasi workers say won't back down in mining dispute

    Workers at Chile's massive Collahuasi copper mine on Tuesday said they would not back down in a conflict with employers and urged miners elsewhere to stage a national strike.

    The principal union at the Collahuasi mine, owned jointly by Glencore Plc and Anglo American Plc, described the firing of 31 striking workers eight days ago as "disproportionate," and vowed to continue agitating until an agreement was reached.

    The company said the 24-hour strike on June 15, which workers used to demand better working conditions, was an illegal breach of the collective labor contract that is valid until 2017.

    "We are keeping our stance of using dialogue to resolve differences with workers...we are not going to accept illegal mechanisms of applying pressure," it said in a statement on Tuesday.

    Among the union's demands are improved transport and more generous lunch schedules, roughly in line with concessions supervisors reached with employers in recent negotiations.

    "We will not quit, and we will continue to mobilize until a final agreement is reached," the union said in a statement.

    The union urged "miners that are staff and contractors, at private and state-ownedcompanies, to mobilize and move towards a national mining strike."

    The union has received the support of the Mining Federation, a union umbrella organization in the top copper exporter.

    The Collahuasi mine, located in northern Chile, employs over 2,500 workers. Last year, the mine produced 470,400 tonnes of copper, or 8 percent of Chile's total output.
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    BC issues permit for new gold, copper mine south of Dease Lake

    Image Source: VancouverThe Vancouver Sun reported that BC has issued permit for new gold, copper mine south of Dease Lake. The Red Chris copper-gold mine in northwestern B.C. is one of the few mine projects to progress to construction in recent years. The provincial government has issued a permit for another gold and copper mine to open south of Dease Lake in the Northern Interior of B.C.

    Red Chris Gold and Copper Mine, located on 660 hectares on the Todagin Plateau between Ealue and Kluea Lakes will employ 350 workers

    The Ministry of Energy and Mines says the permit makes the Red Chris mine the sixth new mine to open in BC since 2011.

    In April, the Tahltan Central Council members voted to accept a co-management agreement with Imperial Metals and Red Chris Mine. The agreement gives the Tahltan oversight of environmental issues surrounding the mine, according to the government.

    The province says the tailings storage facility at Red Chris Mine has undergone three independent reviews to assess seepage and design considerations.

    Copper and gold from the mine will be transported to the Port of Stewart where it will be shipped to overseas markets.

    The province did not provide a date for when it will open, but said Friday it will be operational soon.
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    Steel, Iron Ore and Coal

    Caofeidian coal stocks slump on low prices

    Coal stocks at Caofeidian, one of northern China’s main coal transfer ports, have dropped greatly since mid-April this year, mainly due to reduced supplies amid low prices and weak demand.

    On June 23, Caofeidian port had 3.4 million tonnes of coal in stock, down 3.4% from a week ago and plummeting 59.9% from this year’s highest level of 8.45 million tonnes on February 28. The lowest was recorded a day ago at 3.39 million tonnes.

    Data showed that daily coal railings to Caofeidian port averaged 76,875 tonnes in the month ended June 23, down 36.3% on month; while the outbound shipment was 108,750 tonnes each day, falling 47.0% on month.

    The decline was largely to decreased coal supply of Inner Mongolia, which is the main coal supplier to the port, as producers suffered a loss due to rather low prices, multiple sources told China Coal Resource.

    Meanwhile, the port is facing increased competition from Qinhuangdao port, which has cancelled coal blending fee (1 yuan/t) since May 1, luring small and medium miners who previously sent coal to Caofeidian port.

    Coal shipment at Caofeidian port dropped as demand shrank amid falling coal prices and sluggish industrial activities.

    In 2014, total coal outbound shipment at Caofeidian stood at 75.73 million tonnes, down 3.6% year on year, data showed. That accounted for 11.5% of the total coal shipment at north China ports.

    Caofeidian port has been expanding its coal handling capacity vigorously over the past few years. It planned to build 16 coal loading berths, each with handing capacity of 50,000-100,000 tonnes, through two phrases of construction. Total handing capacity of the port is expected to reach 200 million tonnes per annum upon completion by May 2018.
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    Adani halts work on Australia's Carmichael coal mine project - Guardian

    India's Adani Mining has asked its four engineering contractors working on the Carmichael project to halt work around the mine, the Guardian Australia reported, citing people familiar with the matter.

    Halting work at this stage of the project made no sense even as a savings measure, and raises speculation that the Indian company might scrap the project altogether, Guardian Australia said. (

    Adani has signed up buyers for about 70 percent of the 40 million tonnes coal the Carmichael project is due to produce in its first phase, with production expected to begin in late 2017.

    Guardian Australia said it is understood that about 40 engineers working for one of Adani's contractors, WorleyParsons, were among those pulled off the project.

    Tim Buckley, a director of energy finance studies, Australasia, at the Institute for Energy Economics and Financial Analysis, which opposes new coal developments said halting work at this stage "just crucifies the project", the newspaper reported.

    SMEC, one of the contractors hired by Adani, declined to comment.

    Adani and its other contractors Aecon, Aurecon and WorleyParsons could not be reached for comment outside regular business hours.

    Adani's ambitions in Australia have been uncertain following a surprise election result in Australia's coal-rich Queensland state, leading to a policy reversal, and heightened pressure to protect the Great Barrier Reef.
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    China's imported iron ore prices fall

    Prices of imported iron ore at 33 major Chinese ports fell last week due to weak demand, a report showed on Tuesday.For the week ending June 22, the price index for imported iron ore of 62-percent purity dropped four points from the previous week to 61. The index for iron ore of 58-percent purity fell four points to 55, according to the Xinhua-China Iron Ore Index.

    Inventories of imported iron ore stood at 78.83 million tonnes, down 1.41 million tonnes, or 1.56 percent, from the previous period (June 9 to 15).

    The report said the slide in steel prices will continue to weigh on prices of imported iron ore.

    China produced less steel in the first quarter of 2015 as demand shrank amid a slowing economy and government moves to overhaul the saturated sector, official data showed.

    The index tracks changes in the domestic iron ore market on the basis of surveys of major sea ports, iron ore traders, steel makers and customs statistics.
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    China ore sales buoy Atlas Iron

    Atlas Iron is confident of operating through another iron ore price rout after locking in forward sales above its break-even costs.

    Chief executive David Flanagan says the company will still be comfortable if the iron ore price falls back to 10 year lows of $US46 a tonne.

    "Today we're selling ore and we're making money so all of the cargoes right through to June, July, August that we've sold - we're making cash on all of them," Mr Flanagan told reporters on the sidelines of a mining conference in Perth on Wednesday.

    Mr Flanagan said the struggling junior iron ore miner had locked in some cargoes of iron ore to China as far forward as December at $US57 per tonne, comfortably above the company's break-even price of $US50 per tonne.

    "If the iron ore price goes to $US46 a tonne and it stays there for two months it won't affect the cash flow in our business because we will have pre-sold iron ore for at least the next three months."

    Mr Flanagan predicts the iron ore price, which is trading around $US60 a tonne, will move between $US50 to $US70 per tonne over the next two years, despite analysts' predictions that it could drop as low as $US38 per tonne in the months ahead.

    The company has $340 million of debt with US bond holders which is due in December 2017, with interest costs of between $2.5 million to $2.8 million per month.

    Shareholders will vote on a $180 million capital raising at Atlas' annual general meeting in Perth on Thursday before Mr Flanagan embarks on an international roadshow to Hong Kong, Singapore, London, Edinburgh, Australia and New Zealand during July.

    The company plans to restructure its debt after the capital raising and has recently been in talks with its four lenders.

    Mr Flanagan said if the $180 million capital raising was successful, the business could potential raise another $270 million if options are taken up by some of the company's 34,000 shareholders.
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    Chinese steel mills cut their export prices further this week

    If the latest numbers are to be belived, Chinese steel mills have stepped up their assault on overseas market with cheaper export offers this week by cutting plate prices further by USD 25, after dropping their prices substantially in Week 25 which resulted in severe price correction in European domestic steel market.

    While their aggresivness seems to be a result of securing volumes, it is causing serious trouble to steel mills in most countries and we need to wait to see the bottom.
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