Mark Latham Commodity Equity Intelligence Service

Thursday 21st January 2016
Background Stories on www.commodityintelligence.com

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    Macro

    Last year was hottest on record globally -U.S. science agencies


    Last year's global average temperature was the hottest ever by the widest margin on record, two U.S. government agencies said on Wednesday, adding to pressure for deep greenhouse gas emissions cuts scientists say are needed to arrest warming that is disrupting the global climate.

    Data from U.S. space agency NASA and the National Oceanic and Atmospheric Administration showed that in 2015, the average temperature across global land and ocean surfaces was 1.62 degrees Fahrenheit (0.90 Celsius) above the 20th century average, surpassing 2014's previous record by 0.29 F (0.16 C).

    This was the fourth time a global temperature record has been set this century, the agencies said in a summary of their annual report.

    "2015 was remarkable even in the context of the larger, long-term warming trend," said Gavin Schmidt, director of NASA's Goddard Institute for Space Studies.

    The sharp increase in 2015 was driven in part by El Niño, a natural weather cycle in the Pacific that warms the ocean surface every two to seven years. But scientists say human activities - notably burning fossil fuels - were the main driver behind the rise.

    "We would not have seen the record warming without the long-term trend," Schmidt said.

    The latest El Niño started in late 2015 and will last until spring 2016. It is among the strongest ever recorded but Schmidt and others say the weather phenomenon played just a supporting role in the earth's temperature rise.

    The 2015 data underscores the urgency of cutting greenhouse gas emissions if the world is to hold temperature increases to well below 2 degrees C, the target agreed to by more than 190 countries at climate talks in Paris last December.

    Schmidt said the fact that the world is now halfway to the U.N. goal has led many scientists to argue that even that target is too high and more stringent goals are needed.

    http://www.reuters.com/article/climatechange-temperature-record-urgent-idUSL2N1540VQ

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    China says to invest 800 billion yuan on rail infrastructure this year


    China Railway Corp. (CRC), the operator of country's railroads, has planned to invest 800 billion yuan on infrastructure in 2016, up from 823 billion yuan in 2015 and 809 million yuan in 2014, its general manager Sheng Guangzu,said at a press conference on January 17.

    While spending in 2015 was the second most in the nation's history, the CRC data showed it lost over 9.4 billion yuan in the first three quarters last eyar, nearly three times more than the losses in the corresponding period of 2014.

    The company this year aims to increase passenger traffic by 10% from 2015 and freight transport by 2%, Sheng said.

    Some 2.5 billion people traveled by rail in China in 2015, the third straight year of 10% growth. However, the amount of rail freight fell by about 10% from last year, the largest decline the country has ever seen, Sheng said. He blamed the slump on fewer shipments of bulk commodities such as coal and steel.

    To boost the freight industry, the CRC plans to take more orders for shipping merchandise such as consumer goods, speed up freight trains and develop high-speed units for cargo transport, Sheng said.

    To resolve the problem of mounting debts, it will also try to diversify its sources of income, he said. The company has announced plans to sell ad space on tickets, and Sheng said it may build commercial districts around stations.

    China says to invest 800 billion yuan on rail infrastructure this yr

    http://en.sxcoal.com/0/139698/DataShow.html

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    South32 slashes debt to weather coal, metals slump


    South32 Ltd has cut net debt by about 70 percent since the end of June to $115 million, it said on Thursday, shoring up the miner of coal and metals against shrinking earnings from weaker output and plunging prices for most of its commodities.

    South32, spun off last year by BHP Billiton , has already cut or suspended output at its high cost South African manganese ore mines, and some smelters and said it would do more to help it ride out the tough market.

    "Further decisive action will be taken as we seek to maximise short-term cash flow, while preserving longer-term value," Chief Executive Graham Kerr said in a statement.

    South32 cut its forecast output of Australian coal by 7 percent to 8.3 million tonnes for the year to June 2016 after running into geological challenges at two mines.

    However, it reaffirmed full-year output guidance for its other products, including alumina, South African coal, nickel, silver, lead and zinc, while it continues a review of its South African manganese operation.

    Except for zinc, all production is expected to be lower than last year.

    Zinc output in the December quarter rose 31 percent from a year earlier to 22,200 tonnes, well ahead of a Goldman Sachs' forecast of 18,794 tonnes, boosted by a sharpimprovement in the amount of ore recovered per tonne of rock.

    South32's shares, down 58 percent since they listed last May, rose 1.1 percent on Thursday after the production report, roughly in line with the broader market.

    http://www.reuters.com/article/south32-output-idUSL3N1545OW
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    Oil and Gas

    New Study Shows China's Oil Demand Slowing Down by Almost 60%


    Today, ESAI Energy released a new study, 'Balancing Act: China's Oil Demand and Energy Mix to 2030' that takes an in-depth look at China's oil demand trends to 2030, projecting energy mix and demand for thirteen oil and alternative fuel products The study shows in detail that the pace of oil demand from 2015 to 2030 will slow by almost 60% versus the 2000-2015 period.

    The study examines China's efforts to balance the delicate relationship between coal, natural gas and oil and handle the dramatic changes in its oil products market. Beyond demand, the study looks at refining developments and estimates China's net trade position for each petroleum product. China will become an even larger supplier of gasoline to the world and will eventually export fuel oil while continuing to absorb significant quantities of LPG.

    As the Chinese stock market continues to keep the global oil and financial markets on tender hooks, ESAI Energy's sector analysis of oil demand provides a road map for the future of the second largest oil consumer and largest oil importer in the world.

    'Understanding China puts any player at an advantage in an increasingly competitive energy market,' says ESAI Energy's Megan Wu, 'especially in the current low oil price environment where almost every supplier is looking at China for market share.'

    http://www.oilvoice.com/n/New-Study-Shows-Chinas-Oil-Demand-Slowing-Down-by-Almost-60/027edb953819.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29
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    Oil's Plunge Drags Gazprom's Gas Price in Europe Down by 37%


    Russia’s natural gas prices in Europe will probably slump 37 percent this quarter to levels not seen since 2005 because of the rout in oil.

    The first-quarter price may drop to about $180 per 1,000 cubic meters compared with $284 a year ago, Gazprom PJSCchairman Viktor Zubkov said Wednesday at a conference in Vienna. Gazprom meets about 30 percent of the European Union’s gas demand.

    Russia is still committed to oil-linked pricing in its long-term supply accords even as crude hovers near its lowest since 2003. The company in October forecast that its gas prices in Europe may drop to the lowest level in 11 years in 2016. That estimate was based on an average price of $50 a barrel set in the nation’s budget. So far this year, Brent crude has averaged $32 a barrel.

    “It’s extremely dangerous to be guided by here-and-now profits in such a forward-looking industry as gas -- that may undermine” the market, Zubkov said.

    The government in Moscow is now considering changes to the budget, possibly
    using $40, according to the Finance Ministry. Gazprom gas prices in Europe may
    then average $177 a thousand cubic meters in 2016, the country’s Economy Ministry said. That estimate would mean that the European price would be the lowest in 12 years, with export revenue shrinking by more than a quarter in dollar terms to about $28 billion, Bloomberg calculations based on company data show.

    GAZPROM SALES OUTSIDE EX-USSR

    While gas supplies to Europe will depend on the market, the company so far sees volumes stable at about 160 billion cubic meters this year, Zubkov said. Gazprom sees increasing demand for imported fuel in the region given the drop in production in the European Union, Gazprom export arm’s head Elena Burmistrova said at the same event.

    “Europe will need a great deal of natural gas in the coming decades, and there will be room enough for all in the gas market,” Burmistrova said.

    http://www.bloomberg.com/news/articles/2016-01-20/oil-s-plunge-drags-gazprom-s-gas-price-in-europe-down-by-37-
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    Gazprom warns Europe: We need clear rules to prevent gas crisis


    Kremlin-controlled energy giant Gazprom warned the European Union on Wednesday of a wide-scale gas market crisis and underinvestment amid falling commodity prices unless Brussels revises its "contradictory" energy policies.

    Gazprom supplies Europe with a third of its gas needs. Its exports to the European Union and Turkey last year rose by 8 percent to 159.4 billion cubic metres as consumers took advantage of falling gas prices, which are pegged to those of oil with a six- to nine months lag.

    Gazprom's chairman Viktor Zubkov told a conference in Vienna on Wednesday that Russian gas prices in Europe will likely fall by more than a third in the first quarter to $180 per 1,000 cubic metres and that exports this year will remain broadly the same.

    However, he painted a gloomy picture for years ahead as oil prices have plummeted to 12-year lows and suppliers are facing financial constraints.

    "There are actually only quite a few countries that can continue their investment when prices are as low as they are now. In the future, when there won't be enough investments for 2017-18 there might be huge problems on the gas markets," he told the conference.

    Russian gas supplies to Europe have become increasingly politicised after Moscow's relations with the West dramatically worsened in 2014 following Russia's annexation of Ukraine's Crimea peninsula and introduction of sanctions by the EU and United States.

    The EU had introduced new sets of regulations, known as Third Energy Package in 2009, which angered Gazprom and forced it to sell stakes in some assets in Europe.

    The regulations, entered into force in the EU in 2009, also set a huge obstacles to Gazprom's plans to build the South Stream undersea gas pipeline to Bulgaria - a project eventually scrapped by President Vladimir Putin in 2014.

    Zubkov, a close ally of Putin, told the conference that Russia "needs to understand the role the EU gives to Russian gas in its energy mix".

    "We need to know clear rules of the game on the market because investments... will depend on this," he said.

    "The situation is rather difficult now and it could be a great risk for security of supply. We need balanced cooperation with our partners," Zubkov said, reassuring that Russia will always be a reliable energy supplier.

    "We call upon our European partners to keep up a long term balance of the interests of all participants of the market. We don't know how long the prices will be as low as they are now."

    Last year, Gazprom agreed with a number of European companies to expand the Nord Stream pipeline which should double the existing capacity of the route and help Russia to avoid Ukraine as a transit country for some of its gas flows to Europe.

    http://www.reuters.com/article/russia-gazprom-europe-idUSL8N1541Q9

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    In Private Davos Meeting, Oil Chiefs Push Plan to Reduce Costs


    The world’s largest oil companies, grappling with lowest crude prices in 12 years, met behind closed doors at Davos in a push to cut costs by standardizing some of the equipment used in exploration and production, according to two people who attended.

    The meeting, attended by the heads of Saudi Aramco, BP Plc, Statoil ASA and Repsol SpA, as well as senior executives from Royal Dutch Shell Plc, Total SA and Chevron Corp., is the latest sign the industry is moving away from the bespoke kit designed on a project-by-project basis that seemed affordable during the decade-long boom in prices.

    As have prices have tumbled, reaching a 12-year low below $28 a barrel in New York on Wednesday, companies have taken an ax to spending. Investments in oil and gas fields worldwide probably dropped to $572 billion last year, 20 percent lower than the $715 billion spent in 2014, the International Energy Agency, said in November. Spending is likely to drop by a similar amount this year, Fatih Birol, executive director at the Paris-based agency said at the time.

    The biggest oil companies believe they can reach a technical consensus with their suppliers so everyone in the industry uses the same kind of kit in some areas, including giant valves and submerged oil well equipment, the people said, asking not to be identified because the meeting was private.

    Shell declined to comment. Saudi Aramco, BP, Repsol and Total didn’t immediately respond to requests for comment.

    CEO Eldar Saetre participated at the Community Project Working Dinner for the Oil & Gas Industry in Davos yesterday, along with executives of more than 50 companies, Statoil spokesman Baard Glad Pedersen said by phone. He declined to provide details of what was discussed over dinner.

    The share prices of oil-services companies that supply the industry have fared even worse than producers in the slump as projects are canceled and spending pared back. The Schlumberger Ltd., the world’s largest oil-services provider, has fallen 22 percent over the last year, while Exxon Mobil Corp. is down 16 percent over the same period.

    http://www.bloomberg.com/news/articles/2016-01-20/in-private-davos-meeting-oil-chiefs-push-plan-to-reduce-costs

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    Genel forecasts lower revenue


    Genel Energy, one of the main oil producers in Iraqi Kurdistan, forecast lower revenue and production for this year, hurt by weak oil prices, sending its shares down to a record low on Wednesday.

    The company forecast revenue of $200 million-$275 million for 2016, assuming Brent oil price at $45 per barrel. Genel reported revenue of $342 million for 2015.

    Genel also forecast this year's production at 60,000-70,000 barrels per day (bpd). The higher end of the range was 17.5 percent lower than the 84,900 bpd that it produced on average for 2015.

    Oil producers across the globe are trying to deal with the financial fallout of a sharpdecline in crude prices.

    Crude futures slumped again in Asian trade on Wednesday, with U.S. oil dropping more than 3 percent towards $27 a barrel and its lowest since 2003, on worries about global oversupply.

    However, the company said it was well-positioned to weather the downturn in oil prices as its production cost was $2 per barrel and due to recent efforts at cutting capital expenditure and overhead expenses.

    The London-listed company, which was owed $409 million by the Kurdistan Regional Government (KRG) for oil exported from the region as of October, said it received almost $100 million in four consecutive payments.

    http://www.reuters.com/article/genel-energy-results-idUSL3N1542NA
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    Venezuela requests emergency OPEC meeting on oil price


    Venezuela has requested that OPEC hold an emergency meeting to discuss steps to prop up oil prices, which have fallen to their lowest since 2003, two OPEC sources said on Wednesday.

    But four other delegates from countries in the Organization of the Petroleum Exporting Countries said such a meeting was unlikely to happen. OPEC's Gulf members including Saudi Arabia have opposed earlier calls for emergency meetings.

    "Venezuela has requested an extraordinary meeting," said an OPEC delegate from a Middle East member-country. Another OPEC source confirmed that such a request had been made.

    The next scheduled OPEC meeting is not until June.

    OPEC's statutes say support from a simple majority of the 13 members can trigger an extraordinary meeting. But delegates say that in practice, none will occur without support from Saudi Arabia and other top producers.

    The last extraordinary meeting to discuss a price slump, in 2008, resulted in OPEC making its largest-ever production cut, paving the way for prices to double within a year.

    http://www.reuters.com/article/opec-venezuela-idUSL8N154326
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    Petrobras says in talks to sell Argentine assets


    Brazil's state-run oil company Petroleo Brasiliero SA is in talks to sell its Argentine assets, it said on Wednesday in a filing, but added there was no assurance that a deal would be signed.

    http://www.reuters.com/article/petrobras-argentina-divestiture-idUSE6N0Z901S
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    Woodside Sees Up to $1.2 Billion in Writedowns Amid Oil Rout


    Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, expects writedowns of as much as $1.2 billion for 2015 after the slide in energy prices.

    The charges will be finalized when it reports earnings next month, Perth-based Woodside said Thursday in its fourth-quarter production report. Sales in the quarter fell 37 percent to $1.11 billion from $1.76 billion a year earlier.

    Woodside is among energy companies coping with worsening market conditions and oil prices that have fallen to the lowest levels since 2003. With a relatively strong balance sheet and new projects across the industry in doubt, Woodside may seek acquisitions after abandoning its pursuit of Oil Search Ltd. last month, according to Morgans Financial Ltd.

    “Given that they walked away from their approach for Oil Search, perhaps they are in the hunt for additional acquisitions to fill that growth profile,” Adrian Prendergast, an analyst at Morgans in Melbourne, said by phone. “They certainly have the firepower.”

    The Australian producer is weathering oil’s slump better than competitors, its shares sinking 22 percent in Sydney trading over the past year compared with a 33 percent slide in the MSCI AC Asia Pacific Energy Index and a 60 percent tumble for rival Santos Ltd.

    http://www.bloomberg.com/news/articles/2016-01-20/woodside-sees-up-to-1-2-billion-in-writedowns-after-oil-rout
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    China's CNPC Boosts Overseas Oil, Gas Production to Record High


    China National Petroleum Corp., the country’s biggest oil and gas producer, boosted overseas output in countries from Central Asia to Africa to a record amid tumbling oil prices and currency fluctuations.

    CNPC raised its equity oil and natural gas production in countries including Iraq by 10.5 percent to record 72.02 million metric tons last year, it said in its online newsletter on Thursday. That’s nearly 1.45 million barrels a day. Equity output refers to the company’s share of production split between project partners.

    “In 2015, the overseas operation was challenged by low oil prices, geopolitical instability and worsening security in some countries, as well as big currency fluctuations,” CNPC said in the statement. “The company has been coping with the difficult time through cutting costs.”

    Oil collapse below $30 a barrel has forced global producers from Royal Dutch Shell Plc to CNPC’s state-run rival China National Offshore Oil Corp. to cut spending. CNPC last year cut investments in its Kazakhstan operations by 50 percent and lowered spending in Latin America by more than 60 percent, it said.

    CNPC added 98.86 million tons of overseas recoverable oil and gas reserves last year, 29 percent above its target, in countries including Kazakhstan, Sudan and offshore Brazil. Total overseas output at projects it operates climbed 8.5 percent to 138 million tons, a figure that includes oil and gas owned by project partners.

    http://www.bloomberg.com/news/articles/2016-01-21/china-s-cnpc-boosts-overseas-oil-gas-production-to-record-high

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    U.S. refiners brace for possible glitches amid first winter test


    U.S. refineries along the East Coast and the Midwest are facing their first major test of the winter season since last year's blistering cold set off a string of outages, sending gasoline and diesel prices soaring.

    Freezing temperatures have descended upon the U.S. Northeast and Midwest ahead of a potentially historic storm that threatens to dump as much as 24 inches (61 cm) of snow in parts of the I-95 highway corridor running between Boston and Washington this weekend, according to the National Weather Service.

    Temperatures are also expected to remain below 20 degrees Fahrenheit (-7 degrees Celsius), about 10 to 15 degrees below normal.

    Marathon Petroleum's refinery in Catlettsburg, Kentucky emerged over the long weekend as the first victim of this year's freezing temperatures, shutting down several key units after pipes froze in single-digit temperatures. Workers were struggling to restart the units on Tuesday.

    Although most refineries, particularly those in northern climes, are designed to operate throughout the winter, increasingly extreme weather conditions in recent years have tested their resilience. Last February more than a third of the East Coast's capacity was abruptly shut down due to glitches.

    "At 30 degrees and 10 inches of snow, we're ok. At 15 degrees, and 10 inches of snow, there could be problems," said one East Coast refinery worker.

    Operators are expected to call in additional workers later this week or at the weekend if the storm hits to help apply steam to pipes and gauges to prevent freezing, according to industry sources at the region's refineries.

    Some have already applied the lessons learned last year.

    At Delta Airlines' refinery outside of Philadelphia, among the hardest hit by the cold last year, workers spent a good portion of the last year identifying and eliminating idle sections of piping within the plant, known as "dead legs," a source familiar with the plant's operations said on Tuesday.

    Those segments, which can explode or snap as the residual product in the line expands and contracts, were partly responsible for glitches that shut down much of the plant for nearly two weeks last year, the source said. Its supply of water used for coolant had also frozen.

    "It was a big priority," the source said.

    Monroe Energy, the subsidiary of Delta that runs the plant, did not respond to requests for comment.

    MARGIN BOOST?

    Additional refinery glitches could offer some relief to traders who have voiced fears that a rapidly growing surplus of diesel fuel - swollen by the lack of demand for heating fuel during the warmest fourth quarter on record - coupled with an emerging excess of gasoline could trigger a renewed slump in oil prices.

    Gasoline demand, along with healthy margins, have been the one bright spot in the collapse in oil prices. The RBOB crack LRBc1-LCOc1, an indicator of profit margins for refining crude into gasoline, settled at $15.70 per barrel Tuesday, nearly double the $8.65 per barrel a year ago.

    Gasoline inventories on the East Coast have risen the past four weeks to 62.9 million barrels, while distillate stocks are at the highest levels in the region for this time of year since 2007, according to the U.S. Energy Information Administration.

    "We have plenty of product, so a disruption may not be a bad thing," John Auers, a vice president at Turner Mason, said. "Also, the cold weather is a welcoming thing from a distillate demand standpoint."

    Last winter, freezing temperatures caused a spate of refinery problems, particularly on the East Coast.

    During four weeks of February, when plants would normally have been running flat out due to robust profit margins and intense winter demand, output dropped 40 percent to 773,000 bpd REFCR-1-EIA, one of the lowest weekly rates ever recorded, according to Energy Information Administration data. It rebounded in March as they recovered.

    For the moment, U.S. plants are still running at breakneck rates. The U.S. refinery utilization rate last week was 91.2 percent, among the highest levels ever for this time of year, EIA data shows.

    At Phillips 66's 238,000-bpd Bayway refinery in Linden, New Jersey, the largest in the region, they're also bracing for the cold weather and potential storm. Last year it suffered delays in restarting a crude unit after planned work. Severe cold froze lines that fed the system.

    http://www.reuters.com/article/refinery-operations-winter-idUSL2N1532FX
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    Pioneer says something interesting.

    Wells with EURs averaging >1.3 MMBOE with an estimated cost of $8.0 MM generate IRRs >30% at current strip prices1
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    Kinder Morgan swings to loss on $1.15 billion charge


    U.S. pipeline company Kinder Morgan Inc swung to a fourth-quarter loss after a $1.15 billion writedown on natural gas assets, and said weak commodity and stock markets could bring more trouble.

    "Let me give you this warning, if commodity and equity prices continue to fall, then we may have impairments in future quarters," Chief Financial Officer Kimberly Allen Dang told analysts on a quarterly earnings call on Wednesday.

    Kinder Morgan, the largest energy infrastructure company in North America, cut its 2016 capital budget to $3.3 billion from its previous estimate of $4.2 billion, based on West Texas Intermediate crude oil trading at $38 per barrel.

    Kinder Morgan, which also disclosed a $285 million writedown mainly in its carbon dioxide segment, said it does not expect to access the capital markets to fund growth projects in 2016.

    The Houston-based company, once resilient in the face of falling oil prices, last month cut its dividend, by 75 percent, for the first time since going public to maintain cash.

    President and Chief Executive Steven Kean said the company shaved its capital budget largely by dropping acquisitions, which he did not identify, cutting costs and lowering carbon dioxide spending.

    The company also delayed completion of $5.4 billion Trans Mountain Pipeline expansion by a year, to the third quarter of 2019, as it awaited regulatory approval. The capacity expansion, to 890,000 bpd from 300,000 bpd, has met fierce environmental and aboriginal opposition.

    One shareholder on the conference call raised concerns about continued capital spending. "Now there's the fear that the dividend isn't even secure," he said.

    "I'm the largest shareholder," Chairman Rich Kinder responded, noting that the company would use cash flow as it saw best given volatile market conditions. "I want to see all kinds of value derived by the common shareholders of this company."

    Kinder Morgan posted a net loss of $637 million in the quarter ended Dec. 31, compared with a profit of $126 million a year earlier.

    Excluding items, profit fell to $491 million from $664 million. Revenue dropped 8 percent to $3.63 billion.

    http://www.reuters.com/article/us-kinder-morgan-de-results-idUSKCN0UY2R0
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    Range Resources Ethane Heading to Marcus Hook Beginning February


    Range Resources’ ethane will start to flow through a “fully operational” Mariner East 1 pipeline to the Marcus Hook refinery in February, according to an announcement by Range.

    Mariner East 1 has been up and running for some time, but has not, until now, flowed ethane. Yesterday’s announcement states the ethane will be loaded onto ships.

    Range doesn’t say where the ethane on those ships will go, but we already know that part of the story. The ethane (at least some of it) is headed for Norway, Scotland and possibly Panama.

    Fantastic news that the Mariner East 1 pipeline is about to be fully, 100% ethane operational, after a very long battle to complete it…

    http://marcellusdrilling.com/2016/01/range-resources-ethane-heading-to-marcus-hook-beginning-february/?utm_source=dlvr.it&utm_medium=twitter
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    Alternative Energy

    India energy minister says solar power now cheaper than coal


    The latest auction of solar energy capacity in India has achieved a new record low price of 4.34 rupees/kWh, prompting the country’s energy minister Piyush Goyal to say that solar tariffs are now cheaper than coal-fired generation.

    The results of a reverse auction tender of 420MW of solar capacity conducted by the Rajasthan government revealed this week that Finnish group Fortum Energy bid the lowest price of 4.34 rupees/kWh for a 70MW solar PV plant.

    It is the lowest price obtained so far in India, which aims to install more than 100GW of solar by 2022, and was hailed by Goyal as a sign that solar power is now cheaper than coal power.

    http://reneweconomy.com.au/2016/india-energy-minister-says-solar-power-now-cheaper-coal-29756

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    Precious Metals

    Eldorado Gold wins appeal over Greek mining ban


    Greece's top administrative court has annulled the government's decision last year to revoke Eldorado Gold's mining licence, according to court documents published on Wednesday.

    The Canadian mining company had appealed to Greece's top court to overturn the ban on its plans to develop gold mines in a forested area of northern Greece, in a case widely seen as a test of the leftist government's approach to foreign investment.

    The majority of the court's judges ruled in favour of Eldorado in November, but a final ruling was pending.

    Eldorado has put in about $700 million since 2012 and planned to invest another $1 billion to develop two mines at Skouries and Olympias sites in Halkidiki.

    But Greece's government revoked its permit in August, saying the tests for a so-called flash-melting method the company planned to use to ensure there would be no environmental damage did not take place on the spot, but rather outside Greece.

    Tensions between the two sides came to a head last week, when Eldorado said Greece had been delaying the necessary permits and announced it would suspend construction at the Skouries project, putting more than 600 jobs at risk.

    It warned it would do the same at its Olympias mine, risking another 500 jobs in northern Greece, if it didn't secure necessary permits by the end of March.

    Greece's energy minister has asked the firm to reverse its decision and safeguard jobs as a condition for the two parties to continue talks.

    http://www.reuters.com/article/greece-eldorado-gold-court-idUSL8N15442O
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    Canada Revenue Agency goes after Silver Wheaton again


    Canada Revenue Agency is set to begin a fresh audit of Silver Wheaton’s international transactions for the period between 2011 and 2013, the Vancouver-based miner said Wednesday.

    Earlier in July 2015, the CRA sought to tax the company's streaming income earned by its foreign units and said its taxable income should be increased by about C$715 million ($488.66 million) for the years 2005 to 2010.

    If the announced reassessment happens, said the silver streaming company, it will further increase its estimated taxes payable in Canada by about $310 million for this period.

    “We believe that we have complied with Canadian tax law and feel that the court process, rather than the CRA appeals process, will provide the most expeditious avenue for the resolution of this matter," Randy Smallwood, President and CEO of Silver Wheaton said in a statement.

    The tax dispute is unlikely to be resolved before 2017, Phil Russo, an analyst at Raymond James Financial Inc. in Toronto, said Wednesday in an e-mailed note.

    “We suspect the stock will come under further downside pressure on this news. Longer term investors who can tolerate the taxation dispute should consider current levels given the fundamentals, while overshadowed today, remain strong,” Russo wrote.

    http://www.mining.com/canada-revenue-agency-goes-after-silver-wheaton-again/

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    Steel, Iron Ore and Coal

    BHP Billiton on track to meet 40 mln T coking coal target


    UK-Australian resources firm BHP Billiton is on track to meet its 40 million tonnes coking coal production guidance for the 2015-16 fiscal year that ends June 30, despite a 6% fall in output in October-December from a year earlier, Argus reported on January 20.

    BHP Billiton's coking coal production was 10.49 million tonnes in October-December, in line with the 10.45 million tonnes produced during July-September. The company needs to produce 19.07 million tonnes in January-June in order to meet its annual target of 40 million tonnes.

    Production in the latest quarter was supported by record output at the Blackwater, Daunia, Caval Ridge and South Walker Creek mines in the Bowen basin region of Queensland in Australia. But this was offset by a four-week suspension of operations at Broadmeadow after the longwall got stuck underground, and the completion of longwall mining at the Crinum mine.

    About 80% of BHP Billiton's hard coking coal production comes from its 50:50 BHP Mitsubishi Alliance (BMA) joint venture with Japanese trading firm Mitsubishi. BMA is the world's largest supplier of seaborne coking coal.

    BHP Billiton's share of production from the venture rose to 8.21 million tonnes in October-December from 8.09 million tonnes in July-September. All of BMA's mines are in the Bowen basin.

    Most of the remainder of BHP Billiton's hard coking coal production comes from its 80% stake in the BHP Billiton Mitsui Coal (BMC) joint venture with Japanese trading company Mitsui, which holds the remaining 20%. BHP Billiton's share of production from this venture fell to 2.19 million tonnes in October-December from 2.34 million tonnes in the previous quarter.

    Hard coking coal sales were 7.64 million tonnes in October-December, up from 7.02 million tonnes during July-September, while semi-soft coking coal sales fell to 2.7 million tonnes from 3.25 million tonnes over the period, based on a breakdown of sales by product from the combined BMA and BMC mines.

    Output from the 1 Mtpa Haju coking coal mine in Kalimantan, Indonesia started in the July-September quarter. The mine produced 15,000 tonnes in the period, rising to 87,000 tonnes in October-December.

    http://en.sxcoal.com/0/139699/DataShow.html
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    Shanxi to ban mining of high-sulphur or high-ash coal seams


    Shanxi province, a major coal production base in northern China, will ban the mining of coal seams with high sulfur or high ash, to further improve commercial coal quality and thus reduce dust pollution, said the provincial Coal Industry Bureau in a notice released on January 15.

    Coal seams for mining must meet the quality standards as below: the sulfur content of coal should be less than 1.5% for lignite and below 3% for other coal varieties, while the ash content should be below 30% for lignite and 40% for other varieties.

    Coal mines in the province should make sure the raw coal washing ratio exceeds 70%, which means that at least 70% of raw coal will be washed for use.

    All newly-built coal mines should have corresponding coal selecting and washing facilities.

    The existing coal mines are required to accelerate building and upgrading of washing facilities and raise raw coal washing ratio, in order to ensure quality and alleviate pollution.

    Facilities for dust prevention and reduction should be available in coal storage yards and transfer sites of coal enterprises.

    Open-cast mines adopt special measures of dust prevention and reduction at working sites.

    http://en.sxcoal.com/0/139700/DataShow.html

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    China to allocate $4.6 bln to shut 4,300 coal mines -Xinhua


    China will allocate 30 billion yuan ($4.56 billion) in funds over the next three years to support the closure of small and inefficient coal mines and redeploy around 1 million workers, state media reported on Thursday.

    The Chinese government is determined to reduce the share of coal in its overall energy mix as part of efforts to cut smog and greenhouse gas emissions, but it also looking to secure a soft landing for a sector that employs around 6 million people.

    Total raw coal output fell 3.5 percent to 3.68 billion tonnes last year, according to officialdata, the second annual decline in a row. Prices fell by about a third during the year, causing heavy losses in the industry.

    The Economic Information Daily, a newspaper run by official news agency Xinhua, said that the National Development and Reform Commission, China's state planning agency, is currently soliciting opinions from the industry ahead of the release of a plan to tackle chronic overcapacity in the coal sector.

    It said China will aim to close 4,300 mines and cut annual production capacity by 700 million tonnes over the next three years.

    The central government will also ban new mine approvals for the next three years, but the move is unlikely to make much of a dent in a production capacity surplus said to amount to more than 2 billion tonnes a year, over half the country's total output.

    Citing the China National Coal Association, the report said China still had around 11,000 coal mines in operation by the end of 2015, with a total capacity of 5.7 billion tonnes.

    Analysts at Shenwan Hongyuan Securities estimate that the funds required to tackle overcapacity in the coal and steel sectors could reach 200 billion yuan, 70 percent of which would be needed for coal.

    According to the National Energy Administration, coal consumption amounted to 64.4 percent of China's total energy mix in 2015, down 1.7 percentage points compared to the previous year. China aims to cut the rate to 62.6 percent this year.

    http://www.reuters.com/article/china-coal-closures-idUSL3N1551R4
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    Mt Gibson boosts cash reserves


    Junior miner Mount Gibson Iron has managed to increase its cash reserves even as falling prices continued to put the future of its mines under a cloud.

    The Perth-based miner yesterday said it had increased its iron ore sales and lifted its cash reserves by $15 million to $345m in a difficult environment during the December quarter.

    The cash balance compares to Mount Gibson’s current market capitalisation of about $196m.

    Despite the result, Mount Gibson chief executive Jim Beyer admitted the company was struggling to generate cash in the current iron ore price environment.

    “I think it’s very marginal,” Mr Beyer told analysts during a conference call yesterday.

    “We continue at Koolan Island to get some benefits of the mining that was done back in the September quarter but there’s no doubt it’s a pretty challenging period for us at the moment.”

    Mount Gibson’s all-in December quarter cash costs averaged $47 a tonne compared with $52 a tonne in the preceding quarter. The benchmark iron ore price is about $US42 a tonne, although Mount Gibson sells its ore at a discount to that price.

    Mr Beyer estimated it would cost about $30m to close Koolan Island in the Kimberley and almost $8m to close Extension Hill in the Mid-West.

    The company is continuing to review its activities amid a weak outlook for iron ore prices.

    “We continue to evaluate potential new resource acquisition opportunities outside of iron ore,” Mr Beyer said.

    Mount Gibson has cut staff and implemented new rosters to reduce costs over recent months.

    Westoz executive director Philip Rees described the quarterly result as “solid”, with the increase in cash the main highlight.

    “This is a very relevant outcome given Mount Gibson’s current market capitalisation of $196m is pricing in significant cash erosion,” he said.

    http://www.theaustralian.com.au/business/mining-energy/mt-gibson-boosts-cash-reserves/news-story/f4cf201a7f541bddf34282d6ef487fa0

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