Mark Latham Commodity Equity Intelligence Service

Thursday 11th June 2015
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News and Views:


Guangdong's quarterly carbon auction undersubscribed

The latest auction on China's largest carbon market in Guangdong province sold little more than 10 percent of the permits on offer on Wednesday, with companies able to buy allowances more cheaply on the secondary market due to an economic downturn.

The local carbon bourse, the China Emissions Exchange, said it sold 315,000 permits at a minimum bidding price of 40 yuan in its last quarterly auction of the compliance year, during which companies must buy permits to cover their carbon emissions.

Some 3 million permits were on sale, a large share of the 7 million supplied during this compliance year, which is due to end next Saturday.

Only two local companies participated in the auction, according to the exchange, with the impending deadline doing little to raise the appetite for more than 200 companies covered by the Guangdong market.

"It is an expected result -- the available permits trading on the market are much cheaper," said a market player who did not want to be named because he is not authorised to speak to media.

The closing price on the secondary market stands at just 17.7 yuan, down from a high of 71 yuan last June.

Daily trading volumes have mostly been low in Guangdong, with the economic downturn leading to a surplus of permits.

However, trading picked up this week, with 266,000 permits changing hands in the last three days -- 20 times last week's volumes.

Huaneng Power International Corporation a state-owned power supplier covered by the Guangdong carbon market, signed a swap contract to change 10 percent of its permits issued in Guangdong for eligible offset credits offered by Anglo-Dutch energy company Shell in China on Wednesday, according to the traders involved in the deal.

A total of 900,000 offset credits have been traded so far in Guangdong.
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Brace for ore rivals: BHP chief

BHP Billiton chief executive ­Andrew Mackenzie has warned Australian miners to expect a surge of competition from rival countries selling to China, as the Asian giant strengthens business and diplomatic ties with a number of mineral-producing nations.

In Beijing, Mr Mackenzie told The Australian China’s growing relationship with Latin America, especially Brazil, could be a risk to Australia’s export levels in future.

Mr Mackenzie said Australian producers needed to ensure their Chinese customers were con­fident that security of supply would not be affected over the next few years.

Mr Mackenzie chaired a high-level meeting with Premier Li Keqiang and 14 top global chief executives at the Great Hall of the People on Tuesday to examine China’s economic transformation. The Chinese government has put in place an official target for the economy to grow by 7 per cent this year.

Mr Li recently returned from a lengthy trip to Brazil, where the two countries signed trade deals worth $US50 billion ($64bn), ­primarily in improving export ­infrastructure.

“I think the risk has always been there, but one of the things is that when we think about how the world is evolving ... the Brazil, Russia, India and China (BRICs) countries are becoming more ­interesting,” Mr Mackenzie said.

“There are strengthening ties between the countries where they want to have a lot more independence. We have to recognise the growing sphere of influence the BRICs have, and they are becoming a little bit less dependent on doing things the Western way.”
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Oil and Gas

Indonesia 30-day fuel reserves plan to cost up to $24 bln -official

Indonesia's plan to develop 30 days' worth of fuel and oil emergency reserves is expected to cost up to $24 billion, and would be in addition to plans to boost operational reserves, an energy ministry official said on Wednesday.

The government hopes funding for the emergency reserve facilities would come from the private sector, but it may also come from state-owned firms, Oil and Gas Director General Wiratmaja Puja also told reporters.

He estimated that 45 million barrels of crude and fuel would be needed for the emergency reserves, assuming demand of 1.5 million barrels per day.

"The function of this storage buffer is for emergencies, like when there was a tsunami in Aceh, or wars. This requires a lot of fuel, so when there's an emergency we're ready for at least a month," Wiratmaja said.

The government hopes to begin designing the facilities next year, he said. The estimated investment cost of $17 billion-$24 billion would cover construction costs as well as the fuel and crude to fill new oil storage tanks, he said.

Regulations for the emergency reserves plan are currently being drafted and are expected to be released this year.

Indonesia also plans to develop operational fuel reserves to cover 30 days, up from around 22 days at present, Wiratmaja said, and has asked state oil and gas firm Pertamina and other companies to assist.

Last month Pertamina announced plans to build a fuel depot in Jakarta as part of this programme.

The government is also considering hiring storage from other firms and utilising facilities that oil and gas contractors are no longer using, he said.
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Islamic State expands near Libya’s largest oil terminal

Islamic State strengthened its hold in central Libya, taking territory near Libya’s largest oil terminal and repelling efforts by militias to halt its advance.

The jihadist group had been tightening its grip on Sirte over recent months. It claimed on Tuesday to have finally succeeded in taking Muammar Qaddafi’s hometown, after overrunning a nearby power station.

Islamic State already controls the desert town of Naufaliya, about 30 miles from Libya’s largest export terminal of Es Sider and neighboring Ras Lanuf, the third-largest. Controlling Sirte helps cement those positions on the west side of the so-called Sirte Basin, which is home to about 70 percent of the country’s crude reserves.

“It’s becoming clear that they’re getting more structure and their control of this region is getting more serious,” said Riccardo Fabiani, senior North Africa analyst at the London-based Eurasia Group.
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BP's annual statistical review

BP Plc released its yearly Statistical Review of World Energy on Wednesday. Used for decades as an industry benchmark, this year's edition laid bare the seismic shifts taking place in global energy markets.

1) The rise and rise of U.S. oil production

The rise in U.S. crude output has simply been explosive. America added 1.6 million barrels a day in 2014, taking production past its previous peak in 1970. It also made the U.S. the world's largest crude producer, knocking Saudi Arabia off its perch.

While there are signs shale production will fall back slightly this year because of the slump in oil prices it's marginal compared with the longer-term trend. Energy independence is getting closer: U.S. energy production met almost 90 percent of consumption last year, the most since the Reagan administration.

2) China's energy slowdown

China -- the motor of global energy demand since the turn of the century -- is trying to change course. A slowing economy and shift away from heavy industry meant 2014 saw energy consumption grow just 2.6 percent, less than half its recent average and the smallest increase since the Asian crisis of 1998. The country's energy intensity -- the amount of fuel it needs to consume to generate each dollar of GDP -- is getting closer to U.S. and European levels.

If, and BP says it's quite a big if, China keeps a lid on new steel mills and cement factories, it'll have a big impact on global demand in the years ahead.

3) The global solar boom

Renewable energy is now a force to be reckoned with. Last year non-fossil fuels, including nuclear, accounted for more of the increase in global energy consumption than oil, gas and coal combined. Particularly notable are record installations of solar panels.

The combination of slower energy demand growth and more renewable power meant global emissions expanded just 0.5 percent in 2014, the slowest pace since the financial crisis. increasing just 0.5 percent.
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China's May crude runs up 7.4 percent y/y - stats bureau

China's crude througput grew 7.4 percent in May from the same month a year ago to 43.92 million tonnes, data from the National Statistical Bureau showed on Thursday.

Crude oil output rose 2 percent on year last month to 18.14 million tonnes.
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Why EIA, IEA, and BP Oil Forecasts are Too High

When forecasting how much oil will be available in future years, a standard approach seems to be the following:

Figure out how much GDP growth the researcher hopes to have in the future.
'Work backward' to see how much oil is needed, based on how much oil was used for a given level of GDP in the past. Adjust this amount for hoped-for efficiency gains and transfers to other fuel uses.
Verify that there is actually enough oil available to support this level of growth in oil consumption.

In fact, this seems to be the approach used by most forecasting agencies, including EIA, IEA and BP. It seems to me that this approach has a fundamental flaw. It doesn't consider the possibility of continued low oil prices and the impact that these low oil prices are likely to have on future oil production. Hoped-for future GDP growth may not be possible if oil prices, as well as other commodity prices, remain low.

It is easy to get the idea that we have a great deal of oil resources in the ground. For example, if we start with BP Statistical Review of World Energy, we see that reported oil reserves at the end of 2013 were 1,687.9 billion barrels. This corresponds to 53.3 years of oil production at 2013 production levels.

If we look at the United States Geological Services 2012 report for one big grouping-undiscovered conventional oil resources for the world excluding the United States, we get a 'mean' estimate of 565 billion barrels. This corresponds to another 17.8 years of production at the 2013 level of oil production. Combining these two estimates gets us to a total of 71.1 years of future production. Furthermore, we haven't even begun to consider oil that may be available by fracking that is not considered in current reserves. We also haven't considered oil that might be available from very heavy oil deposits that is not in current reserves. These would theoretically add additional large amounts.

Given these large amounts of theoretically available oil, it is not surprising that forecasters use the approach they do. There appears to be no need to cut back forecasts to reflect inadequate future oil supply, as long as we can really extract oil that seems to be available.

There is clearly a huge amount of oil available with current technology, if high cost is no problem. Without cost constraints, fracking can be used in many more areas of the world than it is used today. If more water is needed for fracking than is available, and price is no object, we can desalinate seawater, or pump water uphill for hundreds of miles.

If high cost is no problem, we can extract very heavy oil in many deposits around the world using energy intensive heating approaches similar to those used in the Canadian oil sands. We can also create gasoline using a coal-to-liquids approach. Here again, we may need to work around water shortages using very high cost methods.

The amount of available future oil is likely to be much lower if real-world price constraints are considered. There are at least two reasons why oil prices can't rise indefinitely:

Any time oil prices rise, economies that use a high proportion of oil in their energy mix experience financial problems. For example, countries that get a lot of their revenue from tourism seem to be vulnerable to high oil prices, because high oil prices raise the cost of airline travel. Also, if any oil is used for making electricity, its high cost makes it expensive to manufacture goods for export.
When oil prices rise, workers find that the cost of food tends to rise, as does the cost of commuting. To offset these rising expenses, workers cut back on discretionary spending, such as going to restaurants, going on long-distance vacations, and buying more expensive homes. These spending cutbacks adversely affect the economy.

The combination of these two effects tends to lead to recession, and recession tends to bring commodity prices in general down. The result is oil prices that cannot rise indefinitely. The oil extraction limit becomes a price limit related to recessionary impacts.

The cost of oil is currently in the $60 per barrel range. It is not even clear that oil prices can rise back to the $100 per barrel level without causing recession in many counties. In fact, the demand for many things is low, including labor and capital. Why should the price of oil rise, if the overall economy is not generating enough demand for goods of all kinds, including oil?
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Lukoil First-Quarter Profit Slides 60% Following Crude Drop

OAO Lukoil, Russia’s largest non-state oil producer, said first-quarter profit dropped 60 percent after crude prices slumped.

Net income fell to $690 million from $1.73 billion a year earlier, the Moscow-based company said Wednesday in a statement. That missed the $1.04 billion average estimate of seven analysts surveyed by Bloomberg.

Oil companies have been hurt by tumbling prices for output amid a global supply glut. Brent, the benchmark for more than half the world’s crude, has slumped 40 percent in the past year after the Organization of Petroleum Exporting Countries chose to maintain production to defend market share.

Oil’s partial recovery since January helped Lukoil post a profit after reporting a loss in the fourth quarter of 2014. Results were also buoyed by a weaker ruble, which reduced costs, and spending cuts. Russian peers OAO Gazprom Neft and OAO Novatek also returned to profit in the first quarter following losses in the fourth.

Lukoil signed an agreement on the sale of 50 percent of Caspian Investment Resources Ltd. to China Petrochemical Corp., or Sinopec, for $1.07 billion. The agreement will halt arbitration, which the Russian company began in London this February, Lukoil said in the statement.

Lukoil’s oil and natural-gas output rose 7 percent from a year earlier to 2.37 million barrels a day, it said. The company pumped 2.03 million barrels of oil and liquids a day as it ramped up an Iraqi project.

Refining throughput in Russia fell 12 percent due to a decrease in margins as a result of tax legislation.

First-quarter capital spending fell 25 percent to $2.43 billion from a year earlier, it said.
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Pemex unveils biggest oil find in years, sees 200,000 bpd boost

Mexican state oil company Pemex said on Wednesday it had made one of its biggest discoveries in years, unveiling new shallow water oil fields in the southern Gulf of Mexico that could produce 200,000 barrels per day (bpd) by mid-2018.

The total proven, probable and possible reserves of the fields could be as high as 350 million barrels of crude-oil equivalent, Pemex's Chief Executive Officer Emilio Lozoya told an oil conference in Guadalajara.

The new fields off the coast of Tabasco and Campeche states comprise three of light crude and one of heavy crude, and could start coming onstream in 16 months, Pemex said.

The fields would take around three years to reach their full 200,000 bpd capacity, Jose Antonio Escalera, director of exploration for Pemex, told Mexican radio.

Pemex described the finds as its biggest exploration success in the last five years after the discoveries in Tsimin-Xux and Ayatsil, also in the southern Gulf.

Located near the super giant Cantarell oil field found in the 1970s and Pemex's most productive current field Ku Maloob Zaap, the finds could boost revenue for the government, which relies on Pemex income to provide about a third of the federal budget.

CEO Lozoya said the discoveries could also make the company reconsider its production forecasts.

The new hydrocarbon finds were also expected to generate production of 170 million cubic feet of gas per day.

Output at Pemex has fallen from a peak of 3.4 million bpd in 2004 to less than 2.4 million bpd currently.

Mexico will auction 14 oil and gas exploration and production blocks not far from the new fields this summer, and Energy Minister Pedro Joaquin Coldwell said at the Guadalajara event that the finds would make the tenders more attractive.
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Weir expects full-year results to be weighted toward H2

Weir Group Plc said it expects its full-year results to be more weighted towards the second half, as a drop in orders at its oil and gas division and weak trading at upstream businesses hurt second-quarter performance.

The Scottish company, which makes valves and pumps for the energy and mining industries, has been hit by a slowdown in North American oilfield activity as crude oil prices remain depressed and explorers and producers slash capital spending.

The company said its oil and gas order input was 34 percent lower in the first five months of 2015 than in the prior year period.

Weir, whose North American operations accounted for about a third of its 2014 revenue, said it had temporarily suspended operations for a week at its Fort Worth, Texas facility to cut costs.

"The overall tone of the update suggests a possibly tougher Q2 than management had thought... Some improvement is expected in H2, but the statement will likely create some small downside risk to consensus EPS," UBS analysts wrote in a note.

Weir Group told Reuters in April that it planned to cut another 125 jobs, mostly in its North American oil and gas business. The company first began taking cost-saving measures in November.
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Summary of Weekly Petroleum Data for the Week Ending June 5, 2015

U.S. crude oil refinery inputs averaged 16.6 million barrels per day during the week ending June 5, 2015, 169,000 barrels per day more than the previous week’s average. Refineries operated at 94.6% of their operable capacity last week. Gasoline production increased last week, averaging 10.0 million barrels per day. Distillate fuel production increased last week, averaging 5.1 million barrels per day.

U.S. crude oil imports averaged over 6.6 million barrels per day last week, down by 750,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.0 million barrels per day, 2.3% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 666,000 barrels per day. Distillate fuel imports averaged 181,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 6.8 million barrels from the previous week. At 470.6 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 decreased by 2.9 million barrels last week, but are in the upper half of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 0.9 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories rose 1.7 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories decreased by 0.6 million barrels last week.

Total products supplied over the last four-week period averaged over 19.7 million barrels per day, up by 5.1% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.4 million barrels per day, up by 3.8% from the same period last year. Distillate fuel product supplied averaged over 3.9 million barrels per day over the last four weeks, down by 1.7% from the same period last year. Jet fuel product supplied is up 8.7% compared to the same four-week period last year.
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U.S. Petroleum Balance Sheet, Week Ending 6/5/2015

Production rose once again (up 0.25%) to new record highs at 9.61mm bbl/day.
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Apache Corp. CEO Isn’t Afraid of OPEC or Low Oil Prices

Apache Corp. CEO John Christmann didn’t just get a new job when he took charge of one of the world’s biggest shale producers in the dark days of the oil market crash in January, he signed on to a corporate makeover.

In the past six months Christmann has focused on transforming Apache from a high-flying global explorer into a ruthlessly efficient production machine rooted deeply in West Texas shale fields. Under his watch, Apache has set the pace for an industry intent on moving beyond basic cost-cutting to reset priorities on regions and projects that can thrive with $50-a-barrel oil.

Christmann has now accomplished what none of his other major peers have yet managed: he’s making more cash from operations than he’s spending. That compares to the two years preceding the 2014 oil market crash, when Apache was among a group of 18 producers on the Standard & Poors 500 Index spending a total of $36 billion more than the cash they generated.

Christmann and his peers have used the downturn as a catalyst to turn shale drilling from a money-losing technology into the future of global oil, said Les Csorba, partner at executive search firm Heidrick & Struggles.

“This new generation of leaders was really anticipating the downturn, even before prices began falling, focusing on standardization and driving efficiency,” said Csorba, who helped Apache select Christmann and placed other energy CEOs in the past two years. “They’re engineers who are very focused on returns, more than on production growth.”

Apache moved faster than anyone, reducing its operating drilling rigs initially by 70 percent and finally by 87 percent, to 12 from 91, a cut equivalent to some producers’ entire rig fleet.

By February, Christmann had cut spending so severely its planned 2014 production increase fell to zero from a previous 18 percent -- a daring move in an industry investors value mainly for growth prospects.

With his emphasis on profits, Christmann was returning Apache to its roots. The company was among the top-performing oil and natural gas producers from 2001 to 2010, nearly tripling in value as it focused on turning tired-out oilfields into cash engines.

As the shale boom was taking off in the U.S., Apache began pursuing developments from Argentina to Australia, sinking billions into projects that wouldn’t show returns for years. The company’s market value fell 21 percent from 2010 to mid-2014, while peers such as EOG more than doubled in value during the same period, according to data compiled by Bloomberg.

Under Christmann’s guidance, Apache’s service costs have fallen 40 percent in some regions, contributing to free cash flow that is expected to reach up to $1 billion in 2015, according to the average of analyst estimates compiled by Bloomberg. Apache sold off all but two of its major overseas operations, in Egypt and the North Sea, and Christmann is refocusing the company on North America.

The 3.3 million gross drilling acres the company controls in the Permian Basin of West Texas are now the “heart and soul” of Apache, he said.

EOG can now make the same profit with oil at $65 a barrel that it could with $95-a-barrel crude two years ago.

The overall decline in costs may outpace early industry hopes of realizing 25 percent reductions, according to analysis by Bloomberg Intelligence. After six months of oil prices hovering between $50 and $60, producers in the top three drilling regions of the Permian Basin have dropped the so-called breakeven price -- which includes a 10-percent profit -- to about $42 a barrel, a decline of 19 percent from last year, according to Bloomberg New Energy Finance.
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Gulfport Energy to buy more Utica acreage in Ohio

Gulfport Energy Corp., Oklahoma City, has agreed to acquire 35,326 net acres in the Utica shale in Ohio from American Energy-Utica LLC, a subsidiary of American Energy Partners LP.

The purchase price for 6,198 net undeveloped acres in Belmont and Jefferson counties is about $68.2 million, subject to adjustment. The acreage is near or adjacent to acreage in Gulfport’s pending acquisition of Paloma Partners III LLC (OGJ Online, Apr. 16, 2015).

In a second agreement with AEU for about $319 million, Gulfport will acquire 27,228 net acres in Monroe County, including 14.6 MMcfd of net production, 11.3 net drilled but uncompleted wells, a fully constructed four-well pad location, and an 11-mile gas gathering system.

Gulfport also has agreed to acquire from AEU an additional 1,900 net acres in Monroe County for $19.4 million if completed within 30 days of the closing of the other Monroe agreement.

The pending Paloma acquisition includes 24,000 net acres. Gulfport said its holdings of Utica shale leasehold are expected to total 243,000 net acres.
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Alternative Energy

First Solar, SunPower: 8point3 Energy Partners IPO Expected to Price at $19-$21/Share

First Solar gained after announcing its 8point3 Energy Partners LP IPO is expected to price at $19-$21 per share. SunPower shares also advanced. A related press release is below.

8point3 Energy Partners LP, a limited partnership formed by First Solar, Inc and SunPower Corporatio to own and operate a portfolio of selected solar energy generation assets, announced today that it has commenced an initial public offering of Class A shares representing limited partner interests in 8point3 Energy Partners. 8point3 Energy Partners is offering 20,000,000 shares to the public. In addition, the underwriters have a 30-day option to purchase up to an additional 3,000,000 shares from 8point3 Energy Partners at the IPO price, less the underwriting discount. The IPO price is currently expected to be between $19.00 and $21.00 per share. The shares are expected to be listed on the NASDAQ Global Market under the symbol "CAFD."

8point3 Energy Partners intends to use all of the net proceeds of the IPO to purchase the common units of 8point3 Operating Company, LLC ("8point3 Operating Company"), the entity that holds 8point3 Energy Partners' project assets. 8point3 Operating Company intends to use the proceeds from the sale of its common units (i) to make a cash distribution to each of First Solar and SunPower and (ii) for general corporate purposes, including to fund future acquisition opportunities.
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Hybrid device combines solar and wind energy

Production facility in Maheshwaram to roll out the products in large numbers soon. The devices are designed to work in both on-grid and off-grid environments.

In an enterprise which could bring hybrid renewable energy to Indian rooftops, WindStream Technologies, a U.S.-based renewable energy technologies manufacturer, has launched its trademark product – SolarMill, at its newly inaugurated facility in Maheshwaram mandal of Ranga Reddy district on Wednesday.

The prototype of the portable device consists of three vertical axis wind turbines fixed beneath one or more photovoltaic panels, to produce 2.5KW of renewable energy. The turbines need a minimum wind speed of two metres per second for generation.

Based on the climatic conditions, wind speeds and local needs, the devices may be integrated seamlessly, representatives of the company said. A solar and wind analysis will be done before arriving at the combination of solar and wind components.

The devices are designed to work in both on-grid and off-grid environments, hence, are suitable for mini or micro grids in remote locations, Venkat Kumar Tangirala, president of WindStream Technologies India & South Asia said.

A 50,000-sq ft production facility in Maheshwaram will soon begin to roll out the products in large numbers. Thousand units are likely to come out next week, Dan Bates, president and CEO of the company, informed.

Besides claiming that this is the first fully integrated hybrid renewable energy device, the company also cites lowest cost per installed watt (35 sq ft for one kilowatt), flexibility between battery and inverter, and easy plug-in facility to attach two devices as its USPs.
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Areva's chairman says EDF must make better offer for nuclear reactor unit

Utility Electricite de France must improve its offer for nuclear engineering group Areva's reactor unit and relations between the two firms need to improve in order to reach a swift agreement, Areva's chairman said on Wednesday.

Last week, the French government approved EDF's plan to take a majority stake in Areva's nuclear reactor business and gave the two state-owned firms a month to do a deal.

Relations between the two state-owned firms have been strained for years over EDF's desire to take control of Areva's reactor design and lead France's nuclear export drive, and the state put new management in place at both firms to end the strife.

Varin was appointed as Areva's new chairman in January and was also made a board member of EDF to smooth relations with EDF's new chief executive, Jean-Bernard Levy.

But in unusually blunt comments on Wednesday Varin said relations between the two firms would have to improve "radically" for them to reach a deal within a month as the government wants.

Varin did not say how much EDF had offered for the reactor unit and did not confirm media reports of a 2 billion-euro ($2.3 billion) bid, well below the 2.7 billion euros which the unit is valued at in Areva's accounts.

He did say, however, that EDF would have to agree to share responsibility for the long-troubled Olkiluoto 3 EPR reactor project in Finland. Main contractor Areva and its Finnish customer Teollisuuden Voima (TVO) are suing one another for billions of euros in damages over construction problems and soaring costs.

"We need to find an equitable sharing of the risk of the Finland project, which is a sword of Damocles that has weighed on the group for a long time and which can compromise any future scenario," Varin said.

Varin added that current discussions with China were mostly technical - about two EPR reactors being built in Taishan and a project to build two EPR reactors in Hinkley Point, Britain - but the possibility of Chinese investment in Areva could not be ruled out.

"We cannot exclude that the Chinese option is one of the options for the recapitalisation either for (reactor unit) Areva NP or the group," Varin said.

He declined to comment on how much new capital Areva needs to rebuild its balance sheet after four years of losses. Analysts and industry sources have estimated the requirement to be 5 to 7 billion euros between now and the end of 2017.

Meanwhile the planned takeover of Areva's reactor arm would not be finalised before the second half of 2016, Varin said, because the European Union will have to give anti-trust clearance.
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Base Metals

Gigantic copper mine reaches milestone

Gigantic copper mine reaches milestone

The giant Las Bambas project high in the Peruvian Andes took another step closer to completion on Wednesday with the signing of a $490 million transportation deal.

The contract between operators MMG and Perurail is expected to commence on January 1 2016 for an initial period of 15 years to carry concentrate to the port of Matarani 295km away.

Las Bambas is set to deliver 400,000 tonnes of copper per year during the first five years of production placing it within the top three copper mines globally.

The mine located at 4,000 metres in the south of the South American country will also produce significant amounts of silver, gold and molybdenum over its 20-year mine life. Las Bambas boasts 6.9 million tonnes of copper reserves and a 10.5 million tonne resource.

Melbourne-based and Hong Kong-listed MMG says the project was 90% complete at the end of March and pre-stripping commenced at Fuerobamba, one of the four deposits that make up the complex, already in January.

Las Bambas is majority owned by China's Minmetals with two other Chinese concerns holding the remaining 37% in the venture.

Minmetals acquired Las Bambas from Glencore in April last year in a controversial $6 billion deal tied to the Swiss giant's merger with Xstrata.
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Ivanhoe Mines update on Kamoa Copper Project in DRC

Image Source: Ivanhoe MinesMr Robert Friedland, Executive Chairman of Ivanhoe Mines and Mr Lars-Eric Johansson, Chief Executive Officer, said that positive discussions are continuing with the government of the Democratic Republic of Congo about Ivanhoe's recent announcement of an agreement with China-based Zijin Mining Group to strategically co-develop Ivanhoe's Kamoa copper discovery in the DRC's southern province of Katanga.
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Tiger mulls Kipoi debottlenecking after hitting output high

Copper miner Tiger Resources has reported record production during May, some 12 months after the Stage 2 solvent-extraction and electro-winning (SXEW) plant was introduced at its Kipoi project, in the Democratic Republic of Congo. 

The plant was commissioned in May 2014 and reached its nameplate capacity of 25 000 t/y of copper cathode in August of the same year. During May this year, the plant returned a record output of 2 306 t of copper cathode. 

Tiger told shareholders on Thursday that with a full year of operations under its belt at the SXEW plant, the company has identified areas where the plant could be debottlenecked to increase production and reduce operating costs. 

The initiatives, which include minimising material rehandling by using an overland conveyor, the addition of extra electro-winning cells, and bringing forward the heavy mineral sands fines delivery through the addition of a small modular tank leach, would be assessed with a view of being rolled out over the next 12 months.
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Steel, Iron Ore and Coal

BC Iron set to pay off debts

The share price of iron-ore miner BC Iron jumped by 8% on Thursday after the company announced that it complete the repayment of a $130-million bank facility with the ANZ and Commonwealth Bank 18 months ahead of schedule. 

The miner announced to shareholders that it would repay the remaining $30.8-million outstanding on the secured term loan by the end of June this year. 

The original $130-million facility was entered into in 2012 to partially fund the acquisition of an additional 25% interest in the Nullagine joint venture from partner Fortescue Metals. 

Since then, the company has moved to repay the facility ahead of schedule, taking advantage of the higher iron-ore price environment. 

MD Morgan Ball said that the repayment of the debt facility would de-risk and simplify BC Iron’s balance sheet, providing a solid platform for the company to consider any future opportunities that could arise.

“Prudent cash management and ongoing cost reduction success has allowed this repayment to be made comfortably from existing cash reserves. We continue to focus on productivity and cash management at each of our projects to ensure BC Iron is in the strongest possible position,” Ball said. 

Following the repayment of the facility, BC Iron’s only remaining debt would be a $5-million interest-free and security free facility with offtake partner Henghou Industries, which was due at the end of December this year.
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China May steel products exports up 7.7pct on mth

China exported 9.2 million tonnes of steel products in May, increasing 14% year on year and up 7.73% from April, the second consecutive monthly increase, showed data from the General Administration of Customs (GAC) on June 8.

Over January-May, total steel products exports reached 43.52 million tonnes, up 28.2% from the previous year, the GAC data showed.

More Chinese producers turned to international market to ease sales pressure amid a supply glut and low prices in the domestic market.

The value of May exports was $5.338 billion, down 16.24% on year but up 1.89% on month; total value over January-May was $27.42 billion, up 1.8% on year, said the GAC.

That translated to an average export price of $580.22/t in May, down 26.53% on year and down 6.42% on month.

During May 25-31, the price of domestic steel products dropped 0.7% from the previous week, with rebar prices down 1%, showed data from the Ministry of Commerce.

However, steel mills continued to expand output despite high stocks and oversupplied market. Daily crude steel output of key Chinese steel producers increased 1.59% from ten days ago to 1.806 million tonnes over May 10-20, said the China Iron and Steel Association (CISA).

China’s total daily output during the same period was estimated at 2.285 million tonnes, up 0.7% from ten days ago.

As of May 20, total stocks in key steel mills stood at 16.57 million tonnes, up 4.62% from ten days ago.

The CISA predicted further price decline, as demand may further shrunk during the slack consumption season in summer; steel mills may cut output from late-May amid low profit.
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China key steel mills daily output down 2.2pct in late-May

Daily crude steel output of key Chinese steel producers fell 2.21% from ten days ago to 1.766 million tonnes over May 20-31, showed data from the China Iron and Steel Association (CISA).

China’s total daily output during the same period was estimated at 2.228 million tonnes, down 2.49% from ten days ago.

The decline was mainly due to persisting weak demand from downstream sectors amid a supply glut in domestic market.

As of May 31, total stocks in key steel mills stood at 15.83 million tonnes, down 4.45% from ten days ago.

During May 25-31, the price of domestic steel products dropped 0.7% from the previous week, with rebar prices down 1%, showed data from the Ministry of Commerce.
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