Mark Latham Commodity Equity Intelligence Service

Thursday 7th January 2016
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    Anger grows in Saudi Arabia's Shi'ite areas after executions

    Since Saturday's execution of four Shi'ite Muslims in Saudi Arabia, hundreds or thousands of the minority sect have marched nightly in protest, and their anger could herald wider unrest.

    The execution of one of them, dissident cleric Nimr al-Nimr, caused an international crisis as Shi'ite Iran and its allies responded angrily, but it also caused upset in his home district of Qatif, where many saw his death as unjustified.

    "People are angry. And they are surprised, because there were positive signals in the past months that the executions would not take place. People listen to his speeches and there's no direct proof he was being violent," a Qatif community leader said by phone.

    The protests in Qatif, an almost entirely Shi'ite district of about a million people in the oil-producing Eastern Province, have been mostly peaceful, though a fatal shooting and gun attacks on armoured security vehicles have also taken place.

    Qatif is located near major oil facilities and many of its residents work for the state energy company, Saudi Aramco. Past incidents of unrest have not led to attacks on the oil industry, but a bus used by Aramco to transport employees was torched after a protest on Tuesday night.

    Footage of marchers shouting "down with the Al Saud" and other anti-government slogans, corroborated by witnesses contacted by Reuters, is circulating on social media along with video clips showing shots fired at armoured cars.

    "I did not hear shooting last night, but I heard it a lot on the two nights before," a resident of Nimr's home village, al-Awamiya, told Reuters by phone. Like others Reuters spoke to in Qatif, he asked that his name be withheld.

    Saudi Arabia only permits foreign news media, including Reuters, to visit Qatif if accompanied by government officials, which it says is to ensure journalists' safety.

    The security forces believe they can quash any mass protests in Qatif, like those that began during the 2011 Arab Spring when Nimr became a figurehead, or the 1979 uprising inspired by Iran's revolution, analysts say.

    Qatif is almost entirely populated by Shi'ites and can be physically isolated by the government. Checkpoints stand at its main street entrances.

    "The security forces are very confident. The Shi'ite population is confined in certain places. They are a small minority compared to a big majority. They think they have the capability to control them," said Mustafa Alani, a security analyst with close ties to the Interior Ministry.

    Shi'ites have long complained they face entrenched discrimination in a country where the semi-official Wahhabi Sunni school regards their sect's beliefs as heretical. They say they face abuse from Wahhabi clerics, rarely get permits for places of worship and seldom get senior public sector jobs.

    Those basic complaints have over the years been aggravated by what Qatif residents call a heavy security hand against their community, accusing the authorities of unfair detentions and punishments, shooting unarmed protesters and torturing suspects.

    Reuters has met several Saudi Shi'ites detained after the 2011 protests who said they were repeatedly beaten and deprived of sleep to extract confessions of rioting.

    A series of Islamic State attacks in Saudi Arabia since November 2014 has mainly targeted the kingdom's Shi'ites as part of an apparent strategy to leverage the sectarian divide as a way of building support among conservative Sunnis.

    Such divisions are easier to aggravate because of the wider struggle between the kingdom and Iran, with many Saudis, and their government, seeing Tehran as using ties with Shi'ites across the Middle East to seek dominance and persecute Sunnis.

    "The Iranians and their allies have been pushing and promoting terrorism and recruiting people, inciting and providing weapons and explosives to people, and Nimr al-Nimr was one of them," Saudi Foreign Minister Adel al-Jubeir told Reuters in an interview this week.

    During and after the 2011 protests, eight policemen and seven civilians were killed in attacks by Shi'ites that were connected to Iran and carried out by people linked to Nimr, Riyadh says.

    Iran denies all those charges and Nimr's family say he advocated peaceful change, took no part in violence and had no links to Tehran.

    The police said Nimr was arrested when he fired on them with an assault rifle, injuring two, while trying to prevent the capture of another suspect, the act which most swayed judges to pass the death sentence on him, Alani said.

    Nimr and the three other Shi'tes were executed on Saturday along with 43 Sunni al Qaeda convicts.
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    Private capital won't touch mining

    According to a new report by private capital tracker Preqin, fundraising for natural resources investment reached record levels in 2015, with 62 funds raising a total of $63bn. That was up 14% compared to 2014 and edged past 2013’s banner year when more than 111 funds were active in the market.

    Investors, perhaps anticipating that valuations are close to bottoming, threw money at closed-end fund managers and limited partners who were able to rake in 113% of what was targeted for the year. 2015 was the third consecutive year target sizes were exceeded.

    Only 0.6% of private capital raised in 2015 for natural resource investment is for mining projects–one wind farm fund attracted more than the entire sector

    Despite plummeting crude oil and natural gas prices, according to Preqin energy-focused funds were once again the main driver of growth in 2015, accounting for more than $9 out of every $10 raised during the year. The bulk of the cash will be invested in North America.

    Mining and metals made up a paltry 0.6% of funds raised (more money were raised for timberland) with just two funds closing on $400 million in 2015. Nearly ten times the amount of money went into investment in agriculture and farmland in 2015.

    Image titleSource: Preqin

    This year 10 metals and mining focused private closed-end funds are hoping to raise $3.6bn, compared to 38 funds in the market targeting $7.7bn for agriculture and farmland investment, mostly outside North America.

    Water has now become enough of a focus for private capital that Preqin, which has tracked the industry since 2003, is breaking out the numbers, identifying six funds in the market which want to attract at least $4bn.

    The vast majority of funds are once again raising money for energy investments in 2016, but with oil prices reaching fresh 11-year lows in January it will be interesting to see how close the funds active in the sector come to the more than $114bn targeted.

    It’s also telling that one of the largest energy-focused funds in the market this year is the Green Investment Bank which is targeting over $1.5bn to build offshore wind farms. In October, the UK-based bank announced it’s more than 80% there with $1.2bn already in the kitty.

    Image titlePrivate capital encompasses a range of investment vehicles and strategies including traditional private equity such as buyout, venture capital and turnaround funds, private debt including distressed debt and direct lending, and private real estate, infrastructure and natural resources funds. A total of $550bn were raised by 1,061 funds across all strategies and sectors in 2015 according to Preqin data.

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    You can buy Anglo American - lock, stock and two smoking barrels for $5.7bn

    Anglo American and Glencore led a slump in mining stocks to the lowest in more than a decade as commodity prices tumbled on concern that China’s market turmoil will cut demand for raw materials.

    The 80-member Bloomberg World Mining Index dropped as much as 3.8% on Thursday, with Anglo sliding as much as 11% to a record low and Glencore down as much as 7.9% in London. The Bloomberg Commodities Index dropped to its lowest level since 1999 as industrial metals and oil sank.

    Investors are shunning metals amid more bad news on the economy in China, the world’s biggest consumer. Chinese stock exchanges halted trading on Thursday for the second time this week after China’s central bank lowered the currency’s daily reference rate by the most since August. Equities have tumbled around the world as the weakening of the yuan fuels fears about the strength of the global economy.

    The sharp weakening of the yuan “raises a lot of concerns about how the Chinese economy is tracking and what the central bank there is thinking,” Angus Nicholson, market analyst at IG Markets, said by phone from Melbourne. “The People’s Bank and the big institutions there should have a much better insight than us, and the real concern is that things are worse than what is showing up in the data we see.”

    The Bloomberg World Mining Index fell to the lowest since June 2004.
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    Li Keqiang urges less overcapacity, more innovation

    China must put "unyielding effort" into eliminating excess industrial capacity to make way for new growth engines, especially mass entrepreneurship and innovation, Premier Li Keqiang has said.

    Li made the remarks during the first inspection tour of 2016 on Monday and Tuesday in north China's Shanxi Province, which is known for large coal reserves and output.

    After visiting Taiyuan Iron and Steel Group, a world-leading stainless steel producer, Li said the steel sector is suffering badly from excessive production and flagging demand.

    "China should put unyielding effort into restructuring by eliminating outdated capacity and forbidding the construction of new capacity," he said.

    Companies should take pains in enhancing technology, quality and management to expand the country's effective supply with more quality products, Li said.

    In a coal mine of Xishan Coal Electricity Group, Li took a tramcar more than 300 meters underground to talk with miners and check the company's safety conditions.

    "The coal mining sector is facing hardship it has rarely seen in the face of a serious glut and plunging prices," he said.

    Mines should take the initiative in reducing output while helping laid-off workers find new jobs, according to the premier.

    Li also visited a technology park in Taiyuan with more than 200 high-tech companies.

    "China has huge market potential and bright prospects; growth impetus from innovation will create new jobs," Li said.

    He vowed more government support for entrepreneurs.

    The premier then went to a shantytown that will be renovated into apartment buildings this year, urging local governments to lessen people's wait times before moving into the new buildings.

    He also urged companies to innovate and take risks, after visiting a museum on ancient Shanxi merchants who played a dominant role in finance and trade during the Ming and Qing dynasties.

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    Turbulence in China Punishes Oil to Copper as Gold Haven Emerges

    China’s market turmoil is kicking commodities when they’re down.

    The central bank on Thursday cut the yuan’s daily reference rate by the most since August, guiding the currency lower amid tepid growth. While that may help stimulate the flagging export sector, it’ll make everything from oil to copper and corn costlier to import into the world’s biggest user of energy, metals and grains. Additionally, more overseas shipments of surplus raw materials such as steel and diesel will add to oversupplied global markets.

    Commodities are coming off their worst annual performance since the 2008 global financial crisis, and the latest move by Chinese authorities heightens concerns that the slowdown in Asia’s biggest economy is deeper than anticipated. Weaker demand in the nation have dragged returns from raw materials to the lowest since 1999, after a decade of soaring consumption fueled a so-called supercycle and a boom in prices.

    “From China’s perspective, crude and other commodities will get more expensive when the yuan weakens,” Hong Sung Ki, an analyst at Samsung Futures Inc. in Seoul, said by phone. “Being the biggest commodities importer, depreciation of the yuan is a bearish factor in the demand and supply picture as China will cut purchases, which will push down prices.”

    The Bloomberg Commodity Index dropped as much as 0.6 percent to 76.1579 by 2:26 p.m. in Singapore, the lowest intraday level since March 1999 for the measure of returns from 22 raw materials.

    Market Turmoil

    The slump extended to equities, with energy and resources shares tumbling the most on the MSCI Asia Pacific Index. China Coal Energy Co. plunged 8.2 percent in Hong Kong, while Australian explorer Origin Energy Ltd. and miner South32 Ltd. slid more than 7 percent in Sydney. BHP Billiton Ltd. traded 4.8 percent lower.

    China’s mainland shares were routed, forcing the world’s second-largest stock market to shut early for the second day this week. An unexpected yuan devaluation in August had also roiled global markets on concern the move would fuel a currency war and exacerbate deflationary pressures in the developed world.

    West Texas Intermediate oil futures in New York dropped as much as 3.7 percent to $32.71 a barrel, extending losses from the lowest close in seven years. Brent crude in London lost 3.8 percent to $32.94 a barrel.

    Copper on the London Metal Exchange dropped 1.2 percent to $4,565 a metric ton, while nickel slumped 2 percent and zinc declined 2.2 percent. Corn futures in Chicago slipped 0.4 percent as wheat and soybeans fell 0.2 percent.

    Investor Panic

    Investors are being driven “more by emotion and panic” rather than market fundamentals, according to David Mann, the chief economist for Asia at Standard Chartered Plc in Singapore.

    “The main conclusion that people are drawing from this depreciation is that they suspect it’s a last-ditch attempt to support the economy,” Mann said by phone. “That all other options to boost growth are used, and that it must be because things are even worse.”

    Amid the turmoil, gold’s status as a haven drew investors to the metal. Spot bullion climbed 0.5 percent to $1,099.23 an ounce, according to Bloomberg generic pricing. It has climbed 3.6 percent this year in the longest run of daily gains since October.

    The rout in equity markets is spilling into commodities, said Dominic Schnider, the head of commodities and Asia-Pacific foreign exchange at UBS Group AG’s wealth-management unit in Hong Kong.

    Chinese investors have “been living with a strengthening currency for a long, long period of time and now you see weakness and it becomes more clear that the economy will slow, the currency will be weak and a lot of capital likes to leave,” he said. “That leaves the currency vulnerable and a lot of asset classes vulnerable.”
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    Oil and Gas

    Halliburton Faces Long EU Probe on Missing Early Offer Slot

    Halliburton Co. passed on a chance to offer early concessions to European Union regulators, meaning it will likely face a protracted antitrust review of its plan to buy oil services rival Baker Hughes Inc. for $26 billion.

    Halliburton had until midnight Tuesday to propose remedies to the European Commission in Brussels but passed up the opportunity, according to the regulator’s press office. The EU will probably open an in-depth investigation into competition concerns by Jan. 12, the regulator’s cut-off for an early ruling.

    The commission’s review will add to the intense scrutiny of the merger from regulators across the world. The U.S. Justice Department told the world’s No. 2 and No. 3 oil service companies that officials aren’t satisfied with Halliburton’s proposals for eradicating competition concerns related to the deal. The companies countered that their package of asset sales is “more than sufficient” to address competition worries.

    Extending the probe would push the EU’s final deadline for a decision into May, beyond the companies’ self-imposed April 30 date to close the deal. While the commission seldom waits until the last minute, the timing puts pressure on Halliburton to build a package of commitments that convinces the EU authority to give its blessing.

    Halliburton and Baker Hughes didn’t immediately respond to calls and e-mails seeking comment outside of U.S. business hours.

    In-depth probes are standard for deals that would significantly cut the number of players in a market or where there are overlapping activities, especially in complex industries.

    Halliburton announced an agreement to buy Baker Hughes in November 2014 to compete with industry leader Schlumberger Ltd. by achieving scale and building a better technology portfolio in a market where the ability to innovate is increasingly critical for success. At that time, Halliburton said it planned to divest assets that generate as much as $7.5 billion in annual revenue to win antitrust approval.
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    Petrobras ends rig contract with Ensco over bribe charges

    Rig contractor Ensco Plc said Brazilian oil producer Petrobras has ended a contract for a drillship over allegations of corruption.

    Petroleo Brasileiro SA, or Petrobras, chartered the DS-5 in 2008, when it was owned by Pride International, a company Ensco bought in 2011.

    Petrobras said in a notice on Monday that Pride had knowledge that the rig's shipbuilder made "improper payments" to a marketing consultant who then shared the money with former employees of Petrobras, Ensco said. (

    Ensco said it has found no evidence that Pride, the company or any current or former employees were aware of or involved in any wrongdoing.

    The rig contractor said it planned to assert its legal rights under the contract.

    Ensco's other rigs leased to Petrobras will continue to work under their contracts, the driller said.

    London-based Ensco said it has not been contacted by other Brazil government authorities regarding alleged wrongdoing.
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    World's Cheapest Crude Hits Record Low as Oil Slump Deepens

    A deepening oil market slump is adding fresh pain for producers of the world’s cheapest crude, raising the prospect that more production will be curtailed.

    Spot prices for the Western Canadian Select grade fell to $19.81 a barrel on Wednesday, the lowest since tracking began in 2008, according to data compiled by Bloomberg. The benchmark, made up of heavy conventional production and bitumen blended with synthetic crude and condensate, fell with global grades after U.S. gasoline inventories surged the most in 22 years and crude supplies at the American storage hub in Oklahoma climbed to a record.

    The low prices may push more of the highest-cost output offline. Producers including Baytex Energy Corp. and Canadian Natural Resources Ltd. have shut in more than 35,000 barrels a day of heavy oil and bitumen production, according to company presentations and a report on the Alberta government website.

    Current prices are “below shut-in levels,” said Tim Pickering, founder and chief investment officer of Auspice Capital Advisors Ltd. in Calgary. There’s no incentive to ship Canadian crude to the U.S. Gulf Coast and producers may start annual maintenance sooner than planned, he said. “We’re the last barrel produced and we’re the first barrel shut in.”

    Maya crude, a heavy grade from Mexico, sank to $25.55 a barrel Wednesday, the lowest since 2004. West Texas Intermediate, the U.S. benchmark, tumbled to the lowest close in seven years, at $33.97. Brent, the European gauge, dropped to its lowest settlement since 2004 at $34.23.

    Canadian producers are getting some cushion from the country’s currency, which has seen its value shrink along with crude. Most of Canada’s oil is exported and producers are paid in U.S. dollars, while many of their expenses for labor and equipment are paid in cheaper Canadian dollars. Western Canadian Select was worth C$28.14 on Wednesday, above the December 2008 low of C$27.03.

    Still, the pain is being felt across Alberta, Canada’s largest oil-producing province. Energy companies are shelving new oil-sands projects and have cut more than 40,000 jobs nationwide, the industry’s main lobby group estimates. Capital spending for the 25 largest producers is poised to fall for a second straight year, dropping another 16 percent in 2016, data compiled by Bloomberg show.

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    LOOP crude storage auction sees sustained high prices, high demand

    January's auction for crude storage space at the Louisiana Offshore Oil Port saw sustained high prices for a second month in a row, after prices jumped in December's auction due to increased demand for offshore storage, according to the host of the auction.

    With LOOP storing sour crude and the Mars outright assessment in contango for the next three months, according to Platts data, there is an incentive for sour crude storage in the short term, and as a result, bidding for LOOP storage space is becoming increasingly competitive, according to one source.

    The front-month/third-month Mars spread closed at minus $1.85/b Tuesday, compared with minus 80 cents/b September 1, when the cost of LOOP crude storage was around 14 cents/b.

    As LOOP caverns fill up and the number of players increases, the level of competition could intensify in the coming months.

    NEO Markets hosted the latest monthly auction of LOOP Capacity Allocation Contracts, comprising physical forward agreements and block futures contracts, Tuesday.

    The auction offered 500,000 barrels more of physical oil storage capacity than the previous month's auction, with 7.2 million barrels of February, March, the second-quarter 2016 strip, third-quarter 2016 strip and fourth-quarter 2016 strip storage space up for auction.

    Auction activity included 3,500 block futures trading between 25 cents/b and 36 cents/b per month, compared with the 3,400 block futures that changed hands during December's auction between 21 cents/b and 31 cents/b per month.

    In contrast, the November auction saw 3,300 block futures trade between 13 cents/b and 14 cents/b per month.

    The auction also offered 3,700 physical forward agreements, which traded between 21 cents/b and 35 cents/b per month, compared with the 3,300 physical forward agreements that traded in December's auction between 20 cents/b and 36 cents/b per month.

    In November's auction, 3,800 physical forward agreements traded between 12 cents/b and 15 cents/b per month.

    CME's exchange-traded storage futures contract, launched in March 2015 with a May 2015 contract, is based on crude storage capacity at the LOOP Clovelly Hub in Louisiana.

    The contract allows the buyer the right, but not the obligation to store crude for a calendar month at the LOOP storage facility.

    Total open interest of 14,800 contracts on Tuesday was at an all-time high, according to exchange data.

    Once the auction is done for the time period, a secondary market for the LOOP storage contract trades as a differential to the Neo Markets auction result.

    "Today's auction results show continued demand for crude oil storage along the US Gulf Coast as well as expanded market participation and acceptance of a freely traded contract for crude oil storage," J. Robert Collins, co-CEO of NEO Markets, said in a statement.

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    Consol Energy slashes oil and gas capex by 41 pct

    Coal and gas producer Consol Energy Inc cut its 2016 capital expenditure budget for its oil and gas division by 41 percent due to weak commodity prices.

    The company said it now plans to spend $205-$325 million on oil and gas drilling, down from its previous estimate of $400-$500 million.

    Pennsylvania-based Consol shifted its focus to natural gas from coal as coal prices began to weaken, giving it a slight advantage. However, oil and gas prices have also plummeted, forcing the company to tighten its purse strings.

    Consol also cut its 2016 sales forecast for its coal division to 27-32 million tons from 30.6-33.4 million tons, and said it expects coal prices to fall further due to an "unusually warm winter weather".

    Separately, CNX Coal Resources LP, which was spun off from Consol and mines coal used in power generation, cut its sales forecast for the year to 4.4-5.2 million tons from 5.0-5.4 million tons.

    Consol said it expects low natural gas prices to impact coal consumption.
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    Summary of Weekly Petroleum Data for the Week Ending January 1, 2016

    U.S. crude oil refinery inputs averaged over 16.6 million barrels per day during the week ending January 1, 2016, 65,000 barrels per day less than the previous week’s average. Refineries operated at 92.5% of their operable capacity last week. Gasoline production decreased last week, averaging about 8.8 million barrels per day. Distillate fuel production increased last week, averaging 5.0 million barrels per day.

    U.S. crude oil imports averaged over 7.5 million barrels per day last week, down by 382,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.8 million barrels per day, 5.9% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 602,000 barrels per day. Distillate fuel imports averaged 164,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 5.1 million barrels from the previous week. At 482.3 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 10.6 million barrels last week, and are in the upper half of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 6.3 million barrels last week and are near the upper limit of the average range for this time of year. Propane/propylene inventories fell 1.4 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 7.3 million barrels last week.

    Total products supplied over the last four-week period averaged 19.7 million barrels per day, down by 2.5% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.0 million barrels per day, down by 3.6% from the same period last year. Distillate fuel product supplied averaged over 3.5 million barrels per day over the last four weeks, down by 9.3% from the same period last year. Jet fuel product supplied is down 0.9% compared to the same four-week period last year.


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    US oil production up on previous week and year

                                              Latest Week   Week Ago    Year Ago

    Domestic Production '000...... 9,219           9,202           9,132
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    Alternative Energy

    German Solar Power Costs Drop 5.8 Percent in Government Auction

    Germany’s third test auction for solar capacity produced a bid 5.8 percent lower than in the previous round, underpinning government hopes that clean energy will become competitive more quickly when developers must compete for contracts.

    German energy regulator Bnetza awarded 200 MW of utility-scale power at 8 euro cents a kWh (8.6 U.S. cents) for the auction opened in December, it said Wednesday. That’s a drop from 8.49 euro cents that was the lowest offer in the second sale last year. Bidding rules determine that the highest winning price for any one bloc sets the price for the remaining winners. The next auction for 125 MW is due in April.

    The government is rolling out auctions for solar and wind power from 2017 to replace feed-in-tariffs, which guaranteed a specific price for electricity for all developers that qualified. Germany’s biggest clean-energy lobbies are concerned that planned auctioned capacity will be too little, hampering growth.

    Using the lever of auctions, the federal administration seeks greater control over clean energy expansion than it had since feed-in-tariffs kicked off in 2000. Clean power comprised 33 percent of all power consumed last year, up from 27 percent in 2014.
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    Lynas beats production expectations

    Rare earths miner Lynas Corporation on Wednesday revealed that neodymium/praseodymium (NdPr) production for the six months to December had exceeded production targets. NdPr production for the six months reached 1 860 t.

    As a result of Lynas exceeding its first NdPr production target, the interest rate under an existing Japan Australia Rare Earths (JARE) senior loan facility has been reduced from 7% a year to 6.5% a year, effective from January 1. In August last year,

    Lynas refinanced its long-term debt with JARE and the Mt Kellett-led bondholder group. Under the terms of the restructuring agreement, Lynas had been given a two-year extension of its principal debt maturity date, from 2016 to 2018. Principal repayments due prior to the maturity of the JARE facility had also been adjusted downwards from $206-million to $2-million in 2016.

    A further $20-million was due in 2017, with the remainder of the loan payable in 2018. A A$60-million liquidity buffer had also been created. The JARE senior loan facility agreement specified NdPr production targets for each six month period from July 2015 until December 2017.
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    Cameco aims for bigger uranium output from new mine

    Cameco Corp , the world's second-largest uranium producer, said on Wednesday it expects its newest mine at Cigar Lake, Saskatchewan to produce 16 million packaged pounds of uranium concentrate in 2016, subject to regulatory approval.

    Reaching the higher output target depends on regulators approving an increase in the annual production limit at the McClean Lake mill, which processes Cigar Lake ore and is owned by France's Areva SA, Cameco said in a statement.

    Cameco owns just over half of the Cigar Lake mine, with Areva holding a more than a one-third stake. Cameco said it would report last year's output at Cigar Lake next month.

    It had aimed for production of 6 million to 8 million pounds from the mine in 2015, but said in October that it exceeded the target.
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    El Nino Is So Last Year, Here Comes La Nina to Wreak More Havoc

    As the effects of the most severe El Nino in almost 20 years still reverberate around the world, preparations are already under way for La Nina.

    Indonesia is set to distribute water pumps to farmers and assessing its rice stockpiles in anticipation of the weather event materializing in October, Agriculture Minister Amran Sulaiman told reporters in Jakarta on Wednesday. La Nina, sometimes thought of as El Nino’s opposite, typically brings more rainfall to the region, threatening crops with flooding and delaying harvests. Australia says El Nino has peaked and there’s a chance of its counterpart occurring in the second half of the year.

    El Nino has hampered cocoa crops in Ivory Coast, curbed the monsoon in India and forced the Philippines to import more rice. Indonesia deployed planes last year for artificial rain to help alleviate drought conditions that restricted palm oil output and exacerbated forest fires that engulfed the region in haze. Based on the 26 El Nino events since 1900, about 50 percent have been followed by a neutral year with 40 percent by La Nina, Australia’s weather bureau said Tuesday.

    “We’ll anticipate early, like we did on drought,” Sulaiman said.

    Palm oil output may stagnate or fall about 3 percent this year, according to Bayu Krisnamurthi, the head of the government-appointed Indonesia Estate Crop Fund for Palmoil.

    El Nino is a warming in the equatorial Pacific Ocean, while La Nina is a cooling of the waters. Each can impact agricultural markets as farmers contend with too much or too little rain. A large part of the agricultural U.S. tends to dry out during La Nina events, while parts of Australia can be wetter than normal.

    The previous La Nina began in 2010 and endured into 2012. Conditions typically last between 9 months and 12 months, while some episodes may persist for as long as two years, according to the National Oceanic and Atmospheric Administration. Both La Nina and El Nino tend to peak during the Northern Hemisphere winter.

    What does the BBC think?
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    Monsanto's profit falls on lower seed prices, strong dollar

    Monsanto Co, the world's largest seed company, reported a quarterly loss, compared with a profit a year earlier, hurt by lower corn prices and a strong dollar.

    Net loss attributable to the company was $253 million, or 56 cents per share, in the first quarter ended Nov. 30, compared with a profit of $243 million, or 50 cents per share, a year earlier.

    Total net sales of the company, which is known for its genetically engineered corn, soybeans and the Roundup herbicide, fell 22.7 percent to $2.22 billion.

    Monsanto Co, the world's largest seed company, said it expects 2016 earnings to be in the lower half of its previous forecast but reported a smaller-than-expected quarterly loss as soybean sales rose in Brazil.

    The company now expects full-year adjusted earnings to be in the lower half of the $5.10 to $5.60 range, partly due to weak currency in Argentina.

    Monsanto has come under renewed pressure to pursue a merger with Swiss agrochemical maker Syngenta after the ongoing merger between DuPont and Dow Chemical Co paved the way for an industry shake-up.

    Monsanto, which is known for its genetically engineered corn, soybeans and the Roundup herbicide, abandoned a $45 billion bid for Syngenta in August.

    Monsanto to slash 1,000 more jobs, total planned cuts at 3,600

    Net loss attributable to the company was $253 million, or 56 cents per share, in the first quarter ended Nov. 30, compared with a profit of $243 million, or 50 cents per share, a year earlier.

    On an adjusted basis, Monsanto reported a loss of 11 cents per share.

    Analysts on average had expected a loss of 23 cents, according to Thomson Reuters I/B/E/S.

    Total net sales of the company fell 22.7 percent to $2.22 billion.

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    Widely used pesticide can harm bees in some cases -EPA

    An insecticide widely used on cotton plants and citrus groves can harm bees that come into contact with those crops under certain conditions, the U.S. Environmental Protection Agency said on Wednesday.

    The agency said a preliminary risk assessment of imidacloprid, a neonicotinoid insecticide chemically similar to nicotine, found that chemical residues of more than 25 parts per billion would likely harm bees and their hives and result in the bees producing less honey.

    The EPA, which collaborated with California's Department of Pesticide Regulation, said data showed imidacloprid residues in pollen and nectar above that threshold level in citrus and cotton crops.

    But residues found on corn and leafy vegetables were below at-risk levels, the agency said. Some crops needed more testing.

    The federal agency is expected to finalize a broader assessment of risks the chemical may pose to pollinators by the end of the year.

    Debate over neonicotinoids, also known as neonics, has intensified as concern grows over the health of pollinators crucial to the production of many foods.

    A two-year moratorium on imidacloprid and two other neonics took effect in Europe last year. The EPA proposed a rule last year to create temporary pesticide-free zones when crops are in bloom and farmers are using commercial pollinators such as bees.

    On Wednesday, the Center for Food Safety and a coalition of farmers and agriculture groups filed a lawsuit against the EPA, accusing it of failed oversight over millions of pounds of neonic-coated seeds sold and planted.

    The case was filed in U.S. District Court for the Northern District of California. The EPA could not be reached for comment.

    Pesticide critics called on the EPA on Wednesday to suspend the sale and use of imidacloprid and other neonicotinoid pesticides.

    "They're not taking into account the realistic exposures in the field, they're not looking at the impact of these pesticides on bees or wild pollinators over time," said Lisa Archer, food and technology program director at Friends of the Earth.

    Bayer CropScience, Syngenta AG and other firms that produce or sell neonic products have said mite infestations and other factors are to blame for bee deaths.

    Bayer Cropscience said in a statement it was reviewing the EPA's preliminary findings, but added they appeared to "overestimate the potential for harmful exposures in certain crops, such as citrus and cotton, while ignoring the important benefits these products provide and management practices to protect bees."
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    Base Metals

    Imperial Metals suspends copper mining at British Columbia mine

    Canada's Imperial Metals Corp said it suspended mining at a copper mine in British Columbia due to declining prices, affecting 100 employees.

    Imperial, which has 260 employees in the Huckleberry mine, said it would retain the remaining employees to mill stockpiled ore.

    The company has a 50 percent stake in the Huckleberry mine, while Mitsubishi Materials Corp, Dowa Mining Co Ltd, Furukawa Co Ltd and others own the rest.

    Imperial, which has been reviewing options for the mine, was expecting 2015 copper production of about 22 million pounds from its stake in the mine.
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    Steel, Iron Ore and Coal

    Shenshuo rail line 2015 coal transport down at 217 mln T

    Shenshuo rail line, which starts from Daliuta in Shaanxi province and ends in Shuozhou in neighboring Shanxi province, hauled 217.3 million tonnes of coal in 2015, down 15% year on year, said its operator Shenhua Group on January 5.

    This is the fourth consecutive year for its coal transport to stay above 200 million tonnes, after reaching 207 million tonnes in 2012.

    The railway realized a total profit of 2.29 billion yuan ($349.3 million) in 2015, data showed.

    The 266-km line, the second largest coal dedicated railway after Daqin line transporting coal from western production areas to eastern consumption areas, mainly delivers products from Shenfu and Dongsheng coal fields owned by Shenhua Group.

    Meanwhile, the 2015 coal transport volume of Baoshen rail line (Shenmu-Baotou) under Shenhua Group exceeded 150 million tonnes by December 25, compared with its 2014 transport at over 180 million tonnes.

    China’s coal railway transport volume in 2015 has seen a marked fall due to the slackness of coal market and low transport demand, with the total volume over January-November at 1.82 billion tonnes, down 13.5% year on year, showed data released by National Development and Reform Commission.

    During the same period, the coal transport volume of Daqin line is 364 million tonnes, falling 11.6% year on year, and the volume of Houyue line is 150 million tonnes, down 12.1% year on year.

    Attached Files
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    Shanxi Jan-Nov coking coal output down 6.3pct on year

    Shanxi, China’s largest coking coal production base, produced a total 473.3 million tonnes of coking coal over January-November this year, a drop of 6.3% year on year, showed the latest data from China Coal Resource.

    Output in November stood at 42.81 million tonnes, decreasing 0.3% on month, the third consecutive monthly decline, data showed.

    The effective supply of washed coking coal slid 3.2% on year to 181.5 million tonnes during the same period, with November supply at 16.39 million tonnes, down 0.7% on month.

    The drop in output was mainly due to miners’ production cut to reduce losses as prices of the steelmaking material fell below the break-even points, in addition to safety concerns.

    Coking coal market in the province continued to decline in November. Major producers lowered prices by 20 yuan/t for coking coal delivered by truck, and by 10-60 yuan/t for coal transported by railway.

    One leading Changzhi-based producer offered a 20 yuan/t discount for meager-lean coal, one coking coal variety used mainly for blending purpose, for buyers with shipment above 80,000 tonnes in November.

    More coal mines closed operation in the month, driven by falling prices, high stocks and tight credit. Washing plants also withdrew from the market, with many running below 10% capacity.

    The output of coking coal in Shanxi may further decline in December, as miners halt production for better safety record in the last month of 2015.

    Coking coal prices may stabilize in January, as supply further shrinks. Market sources said large miners may take 15-30 days holiday for Spring Festival, in a move to underpin prices amid weak demand and supply glut.

    Attached Files
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    Iron ore exports from biggest port climb as Rinehart Mine starts

    Iron ore cargoes from Australia’s Port Hedland climbed last month to cap a record year as billionaire Gina Rinehart’s Roy Hill project began overseas sales, joining miners shipping greater volumes into a global market that’s facing oversupply and sinking prices.

    Total shipments were 37.55 million metric tons from 37.33 million tons in November and 37.12 million tons a year ago, according to data from the Pilbara Ports Authority on Wednesday. Exports to China were 32.17 million tons from 31.73 million the previous month and 30.63 million a year earlier.

    Iron ore plunged in 2015 to post a third annual loss as rising low-cost supplies from Australia and Brazil, the top exporters, combined with contracting demand in China to spur a glut. Rinehart’s project shipped its inaugural cargoes through Port Hedland last month, and managers plan to ramp up output over 2016. The Hedland facility, the world’s largest bulk-export terminal, also handles cargoes for BHP Billiton and Fortescue Metals Group.

    Ore with 62% content delivered to Qingdao fell 2.8% to $43.11 a dry ton on Tuesday, according to data compiled by Metal Bulletin. The raw material, which sank 39% in 2015, bottomed at $38.30 on December 11, a record in daily price data dating back to May 2009.

    The increased cargoes through Port Hedland, a gateway for miners exploiting deposits in the ore-rich Pilbara, coincide with a jump in shipments from Brazil, which surged to 39.5 million tons in December from 28 million tons in November, according to government data.

    About 145 million tons of new supply will be added to the global market this year and in 2017, according to Fitch Ratings , which has forecast that prices are unlikely to recover. Rinehart’s project plans to expand annual capacity to 55 million tons, with most output under long-term contract.

    Cargoes from Australia will probably climb to 868 million tons this year from 767 million tons in 2015, Australia’s Department of Industry, Innovation & Science said last month as it cut its price outlook for 2016. The forecast increase in exports shows that miners in Australia will build market share in China, according to the government.
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