Mark Latham Commodity Equity Intelligence Service

Thursday 9th February 2017
Background Stories on www.commodityintelligence.com

News and Views:

Attached Files






    Macro

    Speaking in London-All Welcome!

    We are pleased to invite you to attend the third global independent research conference which will take place on March 9, 2017 at 1 Wimpole Street in London.

    As Commodity Intelligence is taking part in the commodities panel, we have been given some free tickets for buy-side firms which we would like to share with you.

    Organised by Research for Investors and supported by Euro IRP (the European association of Independent research providers) this conference aims to provide independent investment advice to the buy-side community. Independent research providers will be debating their views on a range of investment topics through panel discussions.

    You will find bellow the link to the latest brochure for your perusal and should you want to attend as our guest, please let us know and we will get Research for Investors to send you a confirmation email.

    http://www.researchforinvestors.com/images/doc/Brochure%2009012017.pdf

    We look forward to hearing from you.
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    Border Adjustment: Explained


    The House Republicans' plan to upend how the U.S. collects corporate taxes

    WHAT IS THE BORDER-ADJUSTED TAX?

    Republicans are proposing a tax concept common in other countries but novel in the U.S. The idea is "border adjustment." Under the plan, companies wouldn't be able to deduct the cost of imports from their revenue, a move that today enables them to lower their overall tax burden. At the same time, exports and other foreign sales would be made tax-free. The plan would operate like a tax on the trade deficit and raise about $1 trillion over a decade, according to independent estimates, which could help pay for lower tax rates and other provisions.

    See the graphics: http://www.wsj.com/graphics/border-tax/
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    White House eyeing executive order targeting 'conflict minerals' rule - sources


    President Donald Trump is planning to issue an executive order targeting a controversial Dodd-Frank rule that requires companies to disclose whether their productscontain "conflict minerals" from a war-torn part of Africa, according to sources familiar with the administration's thinking.

    Reuters could not learn the precise timing of when the order will be issued, or exactly what it will say.

    http://www.miningweekly.com/article/white-house-eyeing-executive-order-targeting-conflict-minerals-rule---sources-2017-02-08
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    Babcock to launch new equipment, says customers upbeat about 2017


    Engineering support services company Babcock will, during the course of this year, launch new “ground-breaking construction equipment”.

    “Babcock is renowned and respected for delivering high-production machinery that is also fuel efficient. Therefore, this year, we are adding the Volvo A60H, the largest articulated dump truck (ATD) to ever be launched commercially by Volvo, to our product range,” Babcock Equipment MD David Vaughan said at the Investing in African Mining Indaba.

    He remarked that the Volvo A60H’s higher payload represented a 40% increase on that of Volvo’s A40 model, thereby significantly lowering the cost-per-tonne ratio for hauler customers, while its stability, comfort and high hauling speeds are ensured by the matched drivetrain, automatic drive combinations, all-terrain bogie, hydro-mechanical steering and active suspension, further optimising production and minimising operating costs.

    Vaughan commented that the first Volvo A60Hs were expected to reach South Africa’s shores by March and would be launched into the Southern African market by May, together with the new Volvo EC950E, a 90 t crawler excavator that combined power and stability to handle a higher capacity in the toughest applications.

    “The A60H is ideal for hard-rock mining, coal mining, general mining and big quarry applications and the EC950E has been designed to load the massive A60H; therefore, they work hand-in-hand.”

    Vaughan pointed out that Babcock had already presold three Volvo A60H articulated haulers, as well as one Volvo EC950E excavator to Burgh Plant Hire – a long-standing customer of the company’s.

    Burgh Plant Hire CEO and owner Stanley van der Burgh said the company owns a fleet of more than 100 Volvo that are used in coal mining operations – the majority of them articulated haulers – demonstrating that he had full confidence in the new model.

    Additionally, Vaughn said Babcock would also offer Volvo’s A45G articulated hauler to South African customers during the course of this year.

    He stated that the A45G was designed for heavy hauling in extreme offroad operation. It has a 2 t larger payload than its predecessor the A40.

    Terex Trucks sub-Saharan Africa business manager Erik Lundberg noted that another first for Babcock in 2017 would be the introduction of the company’s Generation 10 TA300 and TA400 ATDs.

    He pointed out that the Generation 10 ADTs were the first new Terex Trucks products to be launched by the company, since Volvo acquired the Terex Trucks brand in June 2014, and Babcock was subsequently appointed as the official distributor in Southern Africa of these articulated haulers and rigid haulers.

    Further, Vaughan commented that demand for larger construction equipment continued as customers were continuously searching for the most cost-effective way to move material.

    “With indications of recovering commodity prices, our customers are positive about the outlook for 2017,” said Vaughan. He stated that the mining sector remained an integral market for Babcock, particularly as it had several high-profile customers operating in the coalfields of Middelburg, in Mpumalanga.

    SUPPORTING MIDDELBURG COAL OPERATORS

    Vaughan recounted that, at the beginning of last year, the company opened an ultramodern sales, parts and service dealership in Middelburg to offer responsive support and service across its entire equipment product range to customers in the region.

    “From this new flagship branch, we have been able to deliver improved service and a faster turnaround time and the response from our customers has been exceptionally positive,” he enthused.

    Opencast coal mining subcontracting company Atlantis Mining MD Mark Johnstone affirmed that Babcock’s Middelburg facility was “world-class and well-stocked with inventory lines”, therefore, it was very seldom that the company had to wait for parts. “The sales team is always willing to assist us at the drop of a hat,” he added.

    Babcock is the exclusive distributor of various international equipment brands in Southern Africa, including Volvo Construction Equipment, Terex Trucks, Tadano and Sennebogen cranes, Winget concrete handling equipment and Shandong Lingong Construction Machinery construction equipment.

    http://www.miningweekly.com/article/babcock-to-launch-new-equipment-says-customers-upbeat-about-2017-2017-02-07
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    Bitcoin Slides After China's Central Bank Holds "Closed-Door" Meeting With Exchanges


    The Chinese were bust over the Golden Week holiday... buying Bitcoin (up from 6350 to 7550 in Yuan). But now that the vacation is over, China's central bank is back to its crackdown and following reports of "closed-door" meetings with various Bitcoin exchanges, the virtual currency was sent tumbling this morning.

    As Bloomberg reports, officials from the People’s Bank of China are meeting Wednesday afternoon with representatives from a number of the nation’s trading venues, the people said, asking not to be named because the meeting is private. Money laundering is among the topics on the agenda, said one person without elaborating.

    The cryptocurrency has reacted sharply to reports in the past that China may tighten rules on the digital currency to curb capital outflows. The Wednesday pow-wow follows a regulatory inspection of exchanges including OkCoin, Huobi and BTCC in January. Bitcoin had risen by 120 percent over the past year as investors made purchases to hedge against yuan depreciation. The central bank didn’t respond to a faxed request for comment.

    “There are a lot of people shorting bitcoin now, one because of the regulatory environment, another because the price is relatively high,” said Tian Jia, a Beijing-based trader of bitcoin. “The fact that PBOC continues to look into this issue might make people think that the whole thing isn’t over, and based on past trends, whenever the central bank holds meetings with exchanges the price will drop.”

    China has taken a central role in the bitcoin market in recent years as its citizens have become leading traders and miners of the cryptocurrency. Their interest has been fueled by the hunt for alternative assets, zero exchange fees and the low cost of electricity to run the computers needed to mine the currency. But any increased scrutiny from government authorities may dampen purchases of bitcoin in China.

    The last time PBOC 'probed' the exchanges the reaction was dramatic (but as is evident, the effect was to kill volumes and control that capital outflow)

    http://www.zerohedge.com/news/2017-02-08/bitcoin-slides-after-chinas-central-bank-holds-closed-door-meeting-exchanges
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    Oil and Gas

    OPEC Ministers Say the Market Might Need More Oil Cuts


    OPEC and other major crude-producing nations may need to extend output cuts into the second half of the year to re-balance the market, oil ministers for Iran and fellow group member Qatar said.

    Global oil supplies have decreased as the Organization of Petroleum Exporting Countries and producers outside the group comply with a six-month deal to curb output that took effect on Jan. 1, Qatar’s Energy Minister Mohammed Al Sada said Wednesday at a news briefing in Doha. “It’s too early to make a judgement,” he said, adding that markets may re-balance in the third quarter.

    In principle, OPEC will have to cut output in the second half, Iran’s Oil Minister Bijan Namdar Zanganeh said, according to the Fars news agency. The issue needs further study before the group can make a decision, Zanganeh said, after meeting in Tehran with his counterpart from Venezuela, also an OPEC member.

    The organization agreed in November to impose quotas on its members for the first time in eight years, in an effort to stem a supply glut that had depressed crude prices. OPEC enlisted support from 11 other producers on Dec. 10 in an historic deal to remove as much as 1.8 million barrels of oil a day from the market. OPEC expects to decide whether to extend the cuts at its bi-annual meeting in Vienna in May.

    Benchmark Brent crude fell as much as 61 cents in London on Wednesday and was trading at $54.64 a barrel at 10:03 a.m. local time, on course for a third daily decline after industry data showed U.S. stockpiles surged.

    Most OPEC members are happy with a crude price of about $60 a barrel, Zanganeh said, according to the Tasnim news agency. OPEC’s compliance with the accord on output has been very good, and non-OPEC producers have begun cutting production and pledged to reach their targets quickly, the Oil Ministry’s Shana news service reported him as saying. Iran is the third-biggest producer in OPEC, behind Saudi Arabia and Iraq, while Qatar ranks 11th.

    A committee in charge of monitoring compliance with the deal is due to release its first report on Feb. 17, disclosing January production levels for participating countries, Qatar’s Al Sada said. The five-member committee, chaired by Kuwait, will use as many as six sources of data to measure output, he said.

    Last month, Saudi Arabia’s Energy and Industry Minister Khalid Al-Falih said an extension of the agreement probably wouldn’t be necessary, given high levels of compliance and expectations of strong demand. Nonetheless, “all players have indicated their willingness to extend, if necessary,” he said on Jan. 16 in Abu Dhabi.

    The oil market would be re-balanced when global inventories, currently near record highs, approached their five-year average level, Al Sada said. The third quarter of this year would be a “good estimate” for when this is likely to happen, he said.

    Investment in the oil industry has tumbled during the past three years, and a failure to reverse this trend could hurt future supply and cause a shortage three years from now, Al Sada said. Current oil demand is healthy and will increase by 1.1 million to 1.2 million barrels a day in 2017, he said.

    https://www.bloomberg.com/news/articles/2017-02-08/opec-ministers-don-t-rule-out-renewing-oil-cut-to-balance-market

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    Iran Reports 15 Billion Barrel Oil Find


    Iran has struck new crude oil reserves totaling 15 billion barrels of which 2 billion barrels are recoverable, according to the managing director of the National Iranian Oil Company Ali Kardor. Along with the crude, there were 1.8 trillion cu m of natural gas in the new deposits, details of whose location were not divulged. Half of this was recoverable, Kardor also said, as quoted by local media.

    The exploitation of these newly found reserves would require massive investments and modern technology, which Iran does not have at the moment. The discoveries are likely to lead to more tenders targeting international oil companies, which have the technology to tap them.

    This could turn tricky if the U.S. decides to impose more sanctions against Tehran, after last week the Trump administration slammed the country with fresh sanctions against individuals and entities linked to the special forces of Iran’s army, the Revolutionary Guards. The sanctions followed non-nuclear ballistic missile testing in Iran and were seen by senior U.S. defense officials as the first move in a campaign aimed at deterring Iran from expanding its military capabilities.

    http://tehrantelegram.com/story-z18222099
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    Trafigura to bring UK’s Teeside LNG facility back to life


    Trafigura, one of the world’s largest commodities trading firms, plans to reopen the UK’s Teeside LNG import facility which was closed in 2015.

    The trading house is investing about $30 million in the LNG import terminal and aims to start operations at the facility in the middle of next year, a Trafigura spokeswoman confirmed to LNG World News on Wednesday.

    The facility will be supplied with natural gas by floating storage and regasification units (FSRUs).

    Trafigura said it has already taken a long-term lease from PD Ports on the LNG terminal site.

    However, the project is subject to obtaining necessary permits from the authorities.

    The Teesside terminal located near Middlesbrough was placed in service in February 2007 by U.S.-based floating LNG player Excelerate Energy. It was the world’s first dockside floating regasification facility, according to Excelerate.

    The terminal was decommissioned in 2015 as only a small number of cargoes were imported via the facility and it was not commercially viable to continue to operate it.

    https://www.lngworldnews.com/trafigura-to-bring-uks-teeside-lng-facility-back-to-life/
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    Japan spot LNG contract price hits two-year high in January


    Prices for liquefied natural gas (LNG) spot cargoes for Japan, the world's top buyer, rose to a two-year high in January, official data showed on Thursday.

    The average price of spot LNG bought last month was $8.40 per million British thermal units, up from $8 in the previous month and the highest since January 2015, according to monthly data from the Ministry of Economy, Trade and Industry (METI).

    Spot gas prices in Asia LNG-AS had fallen to $7.75 per million British thermal units (mmBtu) by the end of January from $9.75 earlier in the month, as oversupplied Japanese utilities sought to offload cargoes and as key European gas benchmarks softened.

    METI surveys spot LNG cargoes bought by Japanese utilities and other importers, but excludes cargo-by-cargo deals linked to benchmarks such as the U.S. natural gas Henry Hub index.

    It only publishes a price if there is a minimum of two eligible cargoes reported by buyers.

    http://www.reuters.com/article/lng-japan-spot-idUSL4N1FU1Q8
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    Norway's Grane crude oil at five-month high on demand for heavy grades


    Norwegian crude Grane has hit a five-month high versus the Dated Brent benchmark, lifted by buoyant trading levels on competing heavy crudes such as Angola's Dalia, sources said.

    Grane was assessed 25 cents/b higher at Dated Brent minus $1.25/b Tuesday, its highest since early September, S&P Global Platts data showed.

    The volume of Dalia clearing to the East had increased local demand for heavier North Sea crudes like Grane, according to traders, adding the six March-loading Dalia cargoes have been sold to end-users.

    "Look at Dalia which is a competitor and has been trading at very high levels," one trader said.

    "The heavy crudes have cleared in WAF and Middle East allocations to Europe have gotten smaller. Margins are favoring heavier cuts, so Grane is looking good. Margins are OK but supply has been lower from other regions."

    Dalia has seen its value soar during the March trading cycle. On Tuesday, Platts assessed Dalia at a discount of 75 cents/b FOB to the 30-60 day Dated Brent strip, its highest since August 2, 2013.

    "Angola and the heavy grades have moved even further up [over the course of March trading]. it Is crazy," said one West Africa crude trader.

    Dalia, along with other heavy Angolan crudes Hungo and Pazflor, have hit their highest levels versus Dated Brent in a number of years on buying from Asia as a result of a narrow Brent/Dubai EFS, lower freight rates, and tighter supply of heavy barrels globally.

    OPEC production cuts which began in January have reduced the supply of heavy sour crude because most of the group's members produce this quality, which is high in sulfur and yields a good amount of fuel oil and vacuum gasoil. Due to the shortfall of heavy crude in the Middle East, China has been leaning more on such crudes from Angola, including Dalia.

    "Eastern buyers are attempting to buy more of the heavier grades because currently with light sweet grades you are able to find lots of alternatives, while for heavy grades it is not as easy," said a second trader active in the Angolan crude market.

    While Grane is still classified as a heavy crude, the addition of the Ivar Aasen field in December had been expected to result in a lighter Grane Blend, with an API gravity of 28.4 degrees, according to a 'simulated' assay from Statoil, compared with 19 degrees for the original Grane crude.

    According to Ivar Aasen's field operator BP, the field will eventually reach peak output of 65,000 b/d.

    http://www.platts.com/latest-news/oil/london/norways-grane-crude-oil-at-five-month-high-on-26657776
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    NWE butyl acetate prices hit all-time high on Oxea, BASF force majeures

    NWE butyl acetate prices hit all-time high on Oxea, BASF force majeures

    Northwest European butyl acetate prices have surged to an all-time high on the back of two out of three producers now under force-majeure, according to sources and S&P Global Platts data.

    Spot prices rose Eur500 ($535), the single biggest week-on-week increase since Platts records began in 1994, to Eur1,500/mt FD NWE Tuesday.

    The previous highs for butac were in May 2011 at Eur1,440/mt and April 1995 at Eur1,308/mt, but both times prices rose in moderate increments.

    The finally balanced butac market was shaken by Oxea declaring force majeure last week.

    Markets were already tight because of BASF's force majeure from October, which the company confirmed as still in place.

    The two force majeures left Ineos as the sole significant producer.

    "Ineos is now the last man standing so it can basically charge whatever it wants," a source said.

    Following the Oxea force majeure, there were reports that prices even broke above Eur2,000/mt but then fell back as the market calmed down.

    Oxea is the largest producer of butac in Europe with a capacity of 100,000 mt/year at its Marl, Germany, plant.

    BASF is close behind with a capacity of 90,000 mt/year in Ludwigshafen, Germany plant.

    Ineos is the smallest of the three with an annual capacity of 60,000 mt in Antwerp, Belgium.

    http://www.platts.com/latest-news/petrochemicals/london/nwe-butyl-acetate-prices-hit-all-time-high-on-26657775
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    Summary of Weekly Petroleum Data for the Week Ending February 3, 2017

    Summary of Weekly Petroleum Data for the Week Ending February 3, 2017

    U.S. crude oil refinery inputs averaged 15.9 million barrels per day during the week ending February 3, 2017, 54,000 barrels per day less than the previous week’s average. Refineries operated at 87.7% of their operable capacity last week. Gasoline production increased last week, averaging 9.8 million barrels per day. Distillate fuel production increased last week, averaging 4.8 million barrels per day.

    U.S. crude oil imports averaged about 9.4 million barrels per day last week, up by 1.1 million barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.5 million barrels per day, 10.0% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 811,000 barrels per day. Distillate fuel imports averaged 209,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 13.8 million barrels from the previous week. At 508.6 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 0.9 million barrels last week, but are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories remained unchanged last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 6.9 million barrels last week but are in the middle of the average range. Total commercial petroleum inventories increased by 1.4 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.9 million barrels per day, up by 0.3% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 8.3 million barrels per day, down by 6.0% from the same period last year. Distillate fuel product supplied averaged about 3.9 million barrels per day over the last four weeks, up by 7.6% from the same period last year. Jet fuel product supplied is up 6.4% compared to the same four-week period last year.

    Cushing up 1.2 mln bbl

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

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    US oil production on the rise


                                                         Last Week  Week Before   Last Year

    Domestic Production '000.......... 8,978           8,915           9,186
    Alaska ............................................... 518              528             513
    Lower 48 ..................................... 8,460           8,387           8,673

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

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    Suncor Energy reports fourth quarter 2016 results


    “Suncor generated $2.4 billion in cash in the fourth quarter thanks to strong contributions from all of our assets and our focus on cost management,” said Steve Williams, president and chief executive officer. “Reliable performance throughout the year has helped us overcome challenging crude pricing and the major production outage associated with the Fort McMurray forest fires, resulting in annual cash flow significantly exceeding our annual sustaining capital and dividend commitments.”

    Funds from operations (previously referred to as cash flow from operations) of $2.365 billion ($1.42 per common share), driven by higher benchmark crude pricing, increased production at Oil Sands and Exploration and Production (E&P), lower operating costs at Oil Sands operations and E&P, as well as solid Refining and Marketing (R&M) earnings. Cash flow provided by operating activities, which includes changes in non-cash working capital, was $2.791 billion ($1.68 per common share).
    Operating earnings of $636 million ($0.38 per common share) and net earnings of $531 million ($0.32 per common share), including an R&M first-in, first-out (FIFO) gain of $114 million.
    Suncor achieved a new quarterly crude production record of 738,500 barrels of oil equivalent per day (boe/d), which included 187,000 barrels of oil per day (bbls/d) of Syncrude production, reflecting additional Syncrude working interests acquired in 2016 and significantly improved Syncrude reliability.
    Oil Sands operations cash operating costs per barrel decreased to $24.95 for the fourth quarter of 2016 from $28.00 in the prior year quarter. During the same periods, Syncrude cash operating costs per barrel decreased to $32.55 from $40.15.
    Suncor successfully reached agreements to sell its Petro-Canada lubricants business and its interest in the Cedar Point wind facility. Both transactions closed in the first quarter of 2017, with cash received of $1.4 billion. This brought total anticipated divestment proceeds to $2.0 billion since the start of 2016, significantly exceeding the company’s target of $1.0 to $1.5 billion.
    Subsequent to the end of the quarter, Suncor’s Board of Directors approved an increase to the company’s dividend to $0.32 per common share, an increase of 10%, demonstrating the company’s commitment and ability to generate cash flow and return cash to shareholders, even in a low commodity price environment.

    Financial Results

    Suncor recorded fourth quarter 2016 operating earnings of $636 million ($0.38 per common share), compared to an operating loss of $26 million ($0.02 per common share) in the prior year quarter. The increase in operating earnings is primarily attributed to improved benchmark crude pricing, an R&M FIFO gain and higher Syncrude operating earnings, which were a result of the acquisition of additional working interests in 2016 and significantly improved Syncrude upgrader reliability. Lower operating costs at both Oil Sands operations and E&P also contributed to the improvement.

    Funds from operations (previously referred to as cash flow from operations) was $2.365 billion ($1.42 per common share) compared to $1.294 billion ($0.90 per common share) in the fourth quarter of 2015, with the improvement being attributed to the same factors noted above in operating earnings.

    Net earnings were $531 million ($0.32 per common share) in the fourth quarter of 2016, compared with a net loss of $2.007 billion ($1.38 per common share) in the prior year quarter. In addition to the operating earnings factors noted above, net earnings for the fourth quarter of 2016 included an unrealized after-tax foreign exchange loss of $222 million on the revaluation of U.S. dollar denominated debt, a non-cash after-tax mark to market gain of $188 million on interest rate derivatives for future debt issuance and $71 million of after-tax derecognition charges. The net loss in the prior year quarter included $1.599 billion of non-cash impairment charges and an unrealized after-tax foreign exchange loss of $382 million on the revaluation of U.S. dollar denominated debt.

    Operating Results

    Suncor’s total upstream production achieved a new quarterly record of 738,500 boe/d in the fourth quarter of 2016, compared with 582,900 boe/d in the prior year quarter. The increase was primarily due to the additional 41.74% ownership interest in Syncrude acquired during 2016, combined with significantly improved Syncrude upgrader reliability. Higher E&P production in the fourth quarter of 2016 was offset by slightly lower production at Oil Sands operations, when compared to the prior year period.

    http://boereport.com/2017/02/08/suncor-energy-reports-fourth-quarter-2016-results/
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    U.S. to sell 10 mln barrels of SPR oil in Feb -Energy Dept


    The U.S. Energy Department said on Wednesday it will sell 10 million barrels of oil from the government's emergency crude reserve in late February.

    The sale from the Strategic Petroleum Reserve (SPR) was required by a law passed last year as a way to help increase funding for medical research. The law mandated sales of 25 million barrels from the SPR over three years, starting with the sale of 10 million barrels this year.

    The reserve, a series of heavily guarded underground salt caverns along the coast in Texas and Louisiana, currently holds about 690 million barrels of mostly sour oil, a type containing high sulfur that many U.S. refineries can process.

    It will be the second sale of oil from the emergency stash this year. Last month, Shell bought 6.2 million barrels from the reserve and Phillips 66 bought 200,000 barrels.

    The federal government held that sale to fund a modernization of the SPR. More sales are expected be held in coming years to fund up to $2 billion for the revamp.

    http://www.reuters.com/article/usa-crude-reserves-idUSL1N1FT1XF

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    Without a quorum, US FERC cancels monthly open agenda meetings

    Without a quorum, US FERC cancels monthly open agenda meetings

    The US Federal Energy Regulatory Commission has canceled its regular monthly open meetings until further notice because it lacks a quorum, the remaining sitting commissioners -- acting Chairman Cheryl LaFleur and Commissioner Colette Honorable -- announced Wednesday.

    The next agenda meeting, at which the commissioners typically consider, discuss and vote on a full slate of official orders, was scheduled to occur February 16.

    FERC, for the first time in its history, finds itself without the minimum three commissioners needed to do the bulk of its major caseload. Norman Bay, who served as FERC chairman for nearly two years, abruptly left the commission, effective February 3, after President Donald Trump designated LaFleur acting chairman.

    The five-member commission normally has a majority of sitting commissioners, including the chairman, who are members of the president's party. The three open seats are expected to be filled by Republicans, as both LaFleur and Honorable are Democrats. But vetting prospective commissioners and moving them through the Senate nomination and confirmation procedures can take months.

    Until the US Senate confirms the replacements, the commission will be unable to act on significant orders, petitions, rules and policy pronouncements. Some routine business can continue under authority delegated to office directors.

    In the last few days before Bay left, the commission rushed out dozens of orders, including one clarifying the delegated authority that can be used by senior commission staff to process certain types of filings and orders.

    Numerous names have been floated regarding who Trump may nominate to bring the commission to full mast: Neil Chatterjee, long-time energy adviser to Senate Majority Leader Mitch McConnell; Crowell & Moring partner Richard Lehfeldt; Greenberg Traurig attorney and shareholder Kenneth Minesinger; Bracewell managing partner Mark Lewis; American Transmission Company General Counsel Bill Marsan; Montana Public Service Commission Vice Chairman Travis Kavulla and Janet Sena, senior vice president and director of policy and external affairs at North American Electric Reliability Corporation.

    Unless otherwise announced, FERC will continue to hold previously scheduled meetings and events, including the joint meeting between FERC and the Nuclear Regulatory Commission February 23 and the upcoming Hydropower Regulatory Efficiency Act of 2013 workshop March 30.

    FERC also will continue to schedule future meetings, technical conferences and workshops as appropriate, the Wednesday announcement said.

    http://www.platts.com/latest-news/natural-gas/washington/without-a-quorum-us-ferc-cancels-monthly-open-21837682
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    Alternative Energy

    EU softens proposal on extension of Chinese solar duties


    The European Commission has proposed extending import duties on solar panels from China by 18 months, a shorter period than initially planned, and with a gradual phase-out, Commission Vice President Frans Timmermans said on Wednesday.

    Anti-dumping and anti-subsidy duties have been in place on Chinese solar panels and cells since 2013 and are currently under review as to whether they should be maintained. A majority of EU countries last month opposed a proposed two-year extension.

    Timmermans told a news conference that it was a sensitive issue. The Commission's proposal, revealed by Reuters on Tuesday, will be put to the EU's 28 member states later this month.

    "The phase-out is also meant to make sure that producers of solar panels in the European Union have the time to adapt to the new situation. The precise conditions are something that will be up for debate, also with member states now," Timmermans told a news conference.

    The Commission faces a delicate balancing act between the interests of EU manufacturers and those benefiting from cheap imports, while also being concerned about the response from Beijing, seen as a possible ally in fights against protectionism and climate change.

    The EU and China came close to a trade war in 2013 over EU allegations of dumping by Chinese solar panel exporters.

    To avoid that, both sides agreed to allow limited tariff-free imports of panels at a minimum price of 0.56 euros per watt, anti-dumping duties of up to 64.9 percent for those outside the agreement and anti-subsidy duties capped at 11.5 percent.

    The case is due to be settled by March 3.

    http://www.reuters.com/article/us-eu-china-trade-idUSKBN15N18X
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    China issues first five-year plan for geothermal energy


    China has issued 13th Five-Year Plan for Geothermal Energy, the first such plan in the country, in a bid to boost clean energy development and improve the environment.

    Over 2016-20, China will add geothermal power installed capacity by 500 MW, which could drive investment worth 40 billion yuan ($5.8 billion). During the same period, China will also add geothermal heating (cooling) area by 1.1 billion square meters.

    By 2020, the country aims for geothermal power installed capacity of 530 MW and geothermal heating (cooling) area of 1.6 billion square meters.

    http://www.sxcoal.com/news/4552031/info/en
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    Clean Energy signs three LNG fueling deals


    Clean Energy Clean Energy Fuels, one of the largest providers of natural gas fuel for transportation in North America, signed three LNG fueling contracts in Washington and California.

    The company signed the first of three agreements with Castan, a drayage truck operator based out of Edgewood, Washington which operates in the ports of Seattle and Tacoma.

    Castan, that expects to have its full fleet running on liquefied natural gas by the end of 2017, will fuel at Clean Energy’s LNG station in Fife.

    The signed two more deals in California, one with the city of Bakersfield under which it will deliver the chilled fuel to the city’s two LNG stations which are operated and maintained by Clean Energy. The city is anticipated to use approximately 760,000 gallons per year.

    The second deal in California has been signed with Burrtec Waste Industries, a private solid-waste company.

    Under the contract, Clean Energy will deliver approximately 190,000 gallons of LNG to Burrtec’s facility in Palm Desert each year.

    http://www.lngworldnews.com/clean-energy-signs-three-lng-fueling-deals/
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    Agriculture

    Russia's Phosagro launches secondary share offering


    Russian fertiliser producer Phosagro said on Wednesday it planned to sell up to 5 percent of its share capital as investors' appetite for Russian assets recovers.

    The company offered shares at 2,500-2,600 roubles ($42.19-$43.88) each in the secondary share placement, a financial source and a source close to the placement told Reuters.

    "The books have been signed in this range (2,500-2,600 roubles per share)," one source said.

    That price guidance, a discount to the closing price of 2,700 roubles per share, was later confirmed by the bookrunner, which said the books were covered throughout the range.

    Phosagro is one of the world's largest producers of phosphate rock, an essential agricultural nutrient. It also sells compound fertiliser, a blend of processed phosphates, nitrogen, potash and often sulphur.

    Phosagro has benefited from Russia's rouble devaluation giving it lower costs and higher export revenues and expects at least stable revenues, core earnings and profits in 2017.

    At the company's current share price, a 5 percent stake is valued at around 17.5 billion roubles ($296 million).

    Phosagro, which gave no price guidance, said it will not receive any proceeds from the sale.

    The shares being sold are held by a trust, the economic beneficiaries of which are Deputy Chairman of the board of directors Andrey Guryev and members of his family.

    The final number of shares to be sold and the price will be decided after the bookbuilding.

    The company said it would offer for sale 6,475,000 ordinary shares.

    The Russian Direct Investment Fund (RDIF) said it has formed a consortium comprising leading investors to participate in the offer.

    "The RDIF-led consortium will include six leading sovereign wealth funds from Asia and the Middle East, as well as other investors," RDIF said.

    A source, familiar with the offering details, said RDIF was eyeing up to $200 million worth of Phosagro shares. The source also said the fund has offered $14.84 per Phosagro share, which is a three percent discount to the closing price.

    http://www.reuters.com/article/russia-phosagro-offering-idUSL5N1FT68X

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    Base Metals

    Southern Copper wants to shoot the lights out


    Southern Copper Corp the world's fifth largest copper producer in terms of output, has plans to increase copper production by two-thirds in just six years thanks to a raft of projects coming on stream towards the latter part of the decade.

    Last year the company, controlled by diversified resource and infrastructure giant Grupo Mexico, produced 906,000 tonnes of the red metal but according to company CFO Raul Jacob that could grow to 1.5 million tonnes on the back of a more than $5.6 billion capital spending program.

    Southern Copper, worth some $30 billion on the NYSE after a 20% jump in the share price year to date, has already spent some $1 billion expanding its flagship Buenavista copper-molybdenum-zinc-silver mine in Mexico and most of the outlay will occur before the end of the decade.

    Projects include the massive El Arco property in Baja California which has the potential to become a 190kt copper and 105kt gold mine, and two other projects in the country called El Pilar and Pilares.  In Peru, the $1.2 billion Toquepala concentrator expansion will add 100kt per year by mid-2018 while additional Cuajone expansions is planned for after 2020.

    The brownfield 120kt Tia Maria project which has run into fierce community opposition requires $1.4 billion in capex while the Los Chancas projects in Peru is a $1.8 billion undertaking that could produce 100kt per year. The company is also spending more than $1 billion on a copper smelter and refinery in Mexico.

    Southern Copper claims the world's largest copper reserves pegged at just over 70 million tonnes (Chilean state-owned Codelco is second at 57 million tonnes and US-based Freeport McMoRan a distant third). Cash costs for the company are a mouth-watering $1.49 a pound copper and less than $1 taking into account byproducts. Copper was last trading at $2.65 a pound in New York.

    http://www.mining.com/southern-coppers-super-aggressive-expansion-plans/
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    Protests in Peru block roads to MMG's Las Bambas copper mine


    Protests in a remote highland region of Peru have blocked roads used by MMG Ltd to transport copper concentrates from its mega mine Las Bambas, a representative of the ombudsman's office said on Wednesday.

    Residents of the town of Challhuahuacho took to the streets on Monday to demand that the government of President Pedro Pablo Kuczynski build a hospital and a sewage system, said Artemio Solano with the ombudsman's office in the region of Apurimac.

    Protest leaders want Kuczynski to travel to the town, at an altitude of more than 12,000 feet (3,658 meters)in Peru's southern Andes, to negotiate a solution, said Solano.

    Kuczynski's office and a representative for Las Bambas' did not immediately respond to requests for comment.

    Protests in the region last year suspended shipments of copper from the mine and nearly halted its operations. One protester was killed in clashes with police who tried to restore transportation on a road used by the mine.

    Challhuahuacho's population has grown rapidly in the past decade as the open-pit mine was built, fueling calls for new public work projects to support newcomers in one of Peru's poorest regions.

    Peru is the world's second biggest copper producer but is rife with conflicts over mining in far-flung regions where basic services such as running water and paved roads are scant.

    Las Bambas produced some 300,000 tonnes of copper in the first 11 months of 2016, according to the energy and mines ministry.

    http://www.reuters.com/article/peru-copper-mmg-idUSL1N1FT28F

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    First Quantum Minerals asks court to dismiss Zambia's $1.4bn claim


    First Quantum Minerals has asked a Zambian court to dismiss a $1.4-billion claim by a state-owned firm, which accused the Canadian company of irregular transactions with its local subsidiary.

    The claim by Zambia Consolidated Copper Mines Investment Holdings (ZCCM-IH), which holds minority stakes in most of the country's copper mines, includes $228-million in interest on $2.3 billion of loans that it said First Quantum wrongly borrowed from the Kansanshi Copper Mine, as well as 20% of the principal amount, or $570-million.

    First Quantum said in court papers seen on Wednesday in the Lusaka high court that the action taken by ZCCM-IH was started without the approval of the state firm's board, which was dissolved when the action commenced.

    ZCCM-IH, in which the Zambian government has a 77% stake, said in papers filed in the Lusaka High Court on Oct. 28, 2016 that First Quantum used the money as cheap financing for its other operations.

    First Quantum says the loans were at a fair market rate.

    http://www.miningweekly.com/article/first-quantum-minerals-asks-court-to-dismiss-zambias-14bn-claim-2017-02-08

    Canada's First Quantum Minerals plans to invest over $1 billion in a new smelter and modernisation of a copper mine in Zambia, a senior Zambian official said on Wednesday, but the company said the investment was "very conditional".

    Zambia's high commissioner (ambassador) to South Africa Emmanuel Mwamba told Reuters by telephone that First Quantum Minerals Chief Executive Officer Phillip Pascal had announced the investment on Wednesday when he met Zambian officials attending a mining conference in Cape Town.

    First Quantum planned to invest $700 million in a new smelter whose location the company did not specify and $350 million would be invested in modernising its Kansanshi copper mine, Mwamba said.

    "These are fresh investments which should help boost Zambia's economic growth," Mwamba said.

    First Quantum owns 80 percent of the operator of Kansanshi, Africa's largest copper mine in northwestern Zambia.

    Clive Newall, First Quantum's president, told Reuters in Canada that the possible new investment was "very conditional".

    "Our intentions are at some point to invest a lot of money," Newall told Reuters by telephone, without confirming the $1 billion figure.

    "But there are a number of conditions that need to happen before we do that, some of which are our own, you know balance sheet issues," he said. "Some are practical: We are building a very major project in Panama, which is taking up a lot of our energy."

    "We need demonstrable fiscal stability in Zambia over a period of time before we do it," he said, summarising what he said First Quantum had told the Zambian officials.

    Zambia proposed measures in November to curb its budget deficit at a time when slumping commodity prices have seen the country face mine closures, rising unemployment, power shortages and soaring food prices.

    First Quantum had invested $5.7 billion in Zambia as of 2015 with $2.6 billion going into the Kansanshi Mine, $1 billion in the Kansanshi smelter and $2.1 billion in the Trident Project, which includes the Sentinel and Enterprise mines.

    First Quantum has asked a Zambian court to dismiss a $1.4 billion claim by a state-owned firm, which accused the Canadian company of irregular transactions with its local subsidiary, according to court papers.

    http://www.reuters.com/article/zambia-firstquantum-idUSL5N1FT5EX
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    S Korea aluminium premiums rise $3/mt on restocking, US, contango


    Platts South Korean aluminium spot premium weekly assessment rose $3/mt week on week to $100-$105/mt plus LME cash, CIF Busan Wednesday from $97-$102/mt a week earlier.

    Market participants noted that premiums in South Korea have surpassed Japan as buyers are having to compensate for having slashed term contract purchase volumes.

    Strong bullish momentum in the US was pushing up global premiums and South Korean traders and consumers are having to raise their bids in order to secure tons.

    The LME's contango curve also put upward pressure on premiums, as stockholders were more prone to sitting on their tons in anticipation of higher returns.

    Bid, ask levels appeared to be wide in South Korea. A South Korean trader reported bidding for 1,000-2,000 mt of March units at premiums of $95-$100/mt CIF Busan for metal of Australian, Indian or any duty-free origin.

    Another trader said his bid ceiling was $100/mt for shipments into the North Asia. Suppliers were generally holding out for higher.

    Mainstream sellers guidance appeared to center on $105-$110/mt CIF Busan. There were mutterings that Indian ingots may be available at competitive rates, possibly as low as $90/mt CIF Busan, but this could not be confirmed.

    A producer put $100-$105/mt CIF Busan as a reasonable valuation for March shipments from Australia, India and other duty free origins.

    The range appeared to be validated by a notable number of regional and western traders.

    Two traders felt strongly that sellers could reasonably expect to achieve $110/mt CIF Busan.

    A third trader said $110/mt could easily be reached for shipments to Incheon, but that Busan was closer to $100-$105/mt.

    DOMESTIC WAREHOUSE PREMIUMS $115-$125/MT

    Warehouse tons in Korean warehouses appeared to center on $115-$125/mt FCA Busan, depending on terms and optionalities.

    Western traders may generally be able to offer lower ex-warehouse premiums, but the terms and optionalities would typically be more restricted, including currency options.

    Following a warning by warehousing firm Access World on January 27 of forged warehouse receipts in their name circulating in the metals market, participants have said they were not aware of many fraudulent cases that have been detected in South Korea.

    Platts surveyed market participants earlier on how they would convert FCA Busan values to CIF, and a number indicated that CIF values would typically be about $12/mt below FCA. Others have cited price differentials ranging from $5-$15/mt or none at all.

    The conversion differences appear to stem from varying credit terms, trucking cost arrangements, discharge rates at ports, terminal handling charges, bulk and containerised freight rates and in certain cases currency upcharges as well.

    The conversion differences may also be related to whether the metal is stored in a LME-registered or non-LME registered warehouse, a trader said.

    Platts South Korean aluminium spot assessment reflects the premium or discount to the LME cash price for P1020A ingots CIF Busan basis, for P1020 of any origin, with a typical trade volume of 200-2,000 mt for loading in the next 30 days, duty unpaid.

    The specifications are P1020A ingots to meet minimum LME specification, 99.7% Al min, max 0.1% Si, 0.2% Fe, 0.03% zinc, 0.04% gallium and 0.03% vanadium.

    The assessment is normalised to reflect metal with a maximum iron content of 0.14%, reflecting dominant trading patterns in South Korea.

    http://www.platts.com/latest-news/metals/sydney/s-korea-aluminum-premiums-rise-3mt-on-restocking-27765419
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    Arconic challenges Elliott's revised analysis in proxy fight


    Arconic Inc raised questions on Tuesday about the analysis behind Elliott Management's proxy campaign, further escalating the battle between the specialty metals maker and its largest shareholder.

    Arconic said in a press release that Elliott has posted five different versions of the presentation it originally disclosed on January 31, the day it launched its proxy fight against the company by nominating five directors for its board.

    The presentation, titled "New Leadership Is Needed At Arconic," is part of the largest proxy fight of the year so far. It pits Arconic, a $10-billion maker of high-end aluminium and titanium alloys, against the world's largest activist investor, with more than $30-billion in assets.

    Arconic separated from aluminium producer Alcoa Corp last November, in a move led by Klaus Kleinfeld, Alcoa's CEO since 2008 who became Arconic's chief executive after the split.

    Arconic cited several changes that Elliott has made to the presentation.

    For instance, the company said, the hedge fund significantly cut the magnitude of its projected share price appreciation from potential cost savings in the company’s global rolled products business.

    The original slide No 8 says global rolled products could save up to $750-million, which would translate into a $13.50 per share margin improvement for that business line.

    An updated version of the presentation, posted on Elliott's Arconic campaign website revises the figure down to $245-million, or $4.41 per share. Elliott lowered the figure to reflect the midpoint of the industry average and a top performer in the sector.

    The updated presentation was filed to the SEC on Monday.

    The revision "calls into question Elliott’s grasp of Arconic’s business and industry," the company said in a statement.

    Elliott responded that the only changes Arconic’s shareholders care about are the company's own downward revisions that led it to miss 2016 earnings guidance for its business units.

    "We have been completely transparent about our work, including updates which show that the upside to Arconic’s stock is significant even under a highly conservative set of assumptions," an Elliott spokesperson said in an emailed statement.

    http://www.miningweekly.com/article/arconic-challenges-elliotts-revised-analysis-in-proxy-fight-2017-02-08
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    Steel, Iron Ore and Coal

    Peabody expects U.S. coal consumption to rebound in 2017


    Peabody Energy Corp projects demand for seaborne thermal coal to rise modestly by 25 million to 35 million tonnes from 2016 through 2021, Reuters reported on February 2.

    In U.S., coal demand rebounded in second half of 2016 as natural gas prices rose sharply from lowest levels in approximately 15 years.

    For a longer term, Peabody forecasts U.S. coal consumption will decline 5 million to 15 million tonnes between 2016 and 2021.

    By 2021, Peabody Energy Corp expects coal to supply an estimated 29% of U.S. electricity generation, down from 33% in 2015.

    About 180 GW of power generation capacity are expected by Peabody to be added in China, 64 GW added in India, 72 GW added in other Asian countries.

    "Peabody expects longer-term metallurgical coal pricing to retreat to more stable levels, driven by Chinese policies restricting supply," said the company.

    In seaborne metallurgical coal, demand is forecast to increase 30 million to 35 million tonnes, or 10% - 15% during the same period, according to Peabody.

    http://www.sxcoal.com/news/4552042/info/en
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    Baoshen Railway Jan coal transport at 14.91 mln T


    Baoshen Railway Co., Ltd, a controlling subsidiary of Shenhua Group, transported 14.91 million tonnes of coal in January, 590,000 tonnes more than the delivery goal for the month, according to Shenhua Group website.

    Of this, 14.32 million tonnes was contributed by Bazhun line, which starts from Ordos city and links to Datong-Zhunger railway, and south and north lines of Baotou-Shenmu railway that connects Baotou city in Inner Mongolia with Shenmu county in Shaanxi province. The transport volume was 640,000 tonnes more than the monthly target set by Shenhua Group.

    Ganquan rail line, stretching from Ganqimaodu Border Crossing to Wanshuiquan station of Baotou-Shenmu line, realized coal delivery of 688,000 tonnes in January, surging 288.7% from the same period last year.

    Tahan rail line, starting from Hanjiacun station of Baotou-Shenmu railway to Ordos city, delivered 465,000 tonnes of coal in the month, increasing 305.4% year on year.

    In January, Shenshuo Railway transported 21.1 million tonnes of coal, 326,000 tonnes more than planned. Its profit stood at 270 million yuan in the month, up 25% from a year earlier.

    The 266-km line, which starts from Daliuta in Shaanxi province and ends in Shuozhou in neighboring Shanxi province, mainly delivers coal from Shenfu and Dongsheng coalfield owned by Shenhua Group.

    http://www.sxcoal.com/news/4552034/info/en
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    Billion-dollar Alberta coal company goes bankrupt


    A coal company in west-central Alberta that in 2011 sold for $1-billion is bankrupt, killing hopes that its mine might re-open in the first quarter.

    The Calgary Herald reported that Grande Cache Coal sent a letter to the town bearing the same name, warning that the company is heading into receivership, thus allowing it to restructure. The letter also said the metallurgical coal mine would re-open in July. According to the newspaper, Grande Cache Coal was forced into bankruptcy last week after the mining company's owner, Chinese coal producer Up Energy Development Group Ltd., defaulted on debt payments in 2016, having owed hundreds of millions of dollars.

    About 220 employees lost their jobs in 2015 when the mine shut down, a victim of low met-coal prices. But it looked like the mine was going to enjoy a phoenix-like rise, when in November 2016 Grande Cache Coal and Up Energy said that surface-mine operations were expected to restart in Q1 2017. The restart – no doubt prompted by rocketing coal prices – would however depend on "shareholders' approval and the negotiation of key contracts," Grande Cache Coal said at the time. Steelmaking coal prices reached a multi-year high of $308.80 per tonne in November, but have since been in freefall. They settled at $167.80 on Friday, which is still better than 2016, when coking coal averaged $143 a tonne.

    The bankruptcy is devastating for the small town of 4,000 northwest of Edmonton, where Grande Cache Coal is the main employer; a  year before it closed, the mine had a payroll of 500.

    It's an unfortunate end to what looked like a bright future for Grande Cache Coal, which in 2011 was purchased for a whopping $1-billion by two Asian companies: Winsway, a Hong Kong-listed public company which imports coking coal for the Chinese steel industry, and Marubeni, a large Japanese trading house.The company was later purchased by Up Energy. At the time, coal prices had not yet been crushed by oversupply, waning demand and increasing regulatory burdens which threw the market into disarray. Most of the coal mined by Grande Cache was exported to Asia, where it was used for making steel.

    According to the Herald a court-appointed receiver will put its Alberta mining assets up for sale, which include leases covering over 29,000 hectares, with an estimated 346 million tonnes of coal resources in the Smoky River Coalfield of west-central Alberta.

    http://www.mining.com/billion-dollar-alberta-coal-company-goes-bankrupt/
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    Australia probes coal spill near Great Barrier Reef


    Coal has washed up in waters dangerously close to Australia's Great Barrier Reef, environmental authorities said on Wednesday, following an investigation into complaints of black dust on nearby beaches.

    Ship-loading facilities at the port of Hay Point, which ships tens of millions of tonnes of coal annually to export markets worldwide, are at the center of the investigation by authorities in the northeastern state of Queensland.

    But it was too early to say if the Hay Point port was the source of the coal and fine dust that washed up on the nearby beaches of East Point and Louisa Creek, the state's environment minister, Steven Miles, told reporters.

    "The impact on marine life and the reef is likely to be quite localized," Miles added. "Provided the source can be identified and we can ensure it is not continuing to spill, it is likely to be possible to clean up."

    Hay Point is the largest of several coal ports located near the Great Barrier Reef Marine Park and a flashpoint for environmentalists concerned over runoff contamination of the reef, a World Heritage site.

    "This is another example of why coal and the Great Barrier Reef don’t mix," said Sam Regester, campaigns director for the activist group GetUp! "We know more ships and more coal equals more accidents."

    In December, Australia earmarked expenditure of A$1.3 billion ($992 million) over the next five years to improve the water quality of the reef, to keep it off the United Nation's "in danger" list.

    Activists say the money is insufficient and want to see more concrete action to protect the reef.

    More than two million people visit the reef each year, generating more than A$2 billion ($1.53 billion) in tourism dollars, an Australian government report showed in 2016.

    http://www.reuters.com/article/us-australia-environment-reef-idUSKBN15N0X6
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    Guangdong cuts coal consumption share to optimise energy mix


    Guangdong province in southern China cut coal consumption share of its total energy use to less than 42% in 2016, as part of efforts to optimize energy mix and prevent air pollution, according to the provincial Development and Reform Commission.

    Meanwhile, its non-fossil fuel consumption's share increased to over 21% last year, greatly reducing pollutant emissions brought by fossil fuel burns, said the commission.

    In 2015, Guangdong reported a coal burn reduction of 12.27 million tonnes compared with 2012, completing the target in advance set by Chinese authorities.

    The province will continue to optimise energy structure, and further boost clean energy consumption, including nuclear, solar, wind power and natural gas, in order to realise sustainable and healthy development.

    http://www.sxcoal.com/news/4552056/info/en

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    Iron Ore to plummet...

    Iron Ore Will Plummet Into $40s, Says ‘Very Bearish’ Liberum 

    Iron ore will probably collapse below $50 a metric ton in the second half as global supply exceeds demand,
    according to Liberum Capital Ltd., which highlighted prospects for additional output coupled with lackluster growth in
    consumption and record port stockpiles in China. Prices will be back in the $40s as an extra 90 million tons
    of seaborne ore will hit the market in 2017, analyst Richard Knights said in an interview. The increase comes at a time when
    holdings at ports in China are already at an all-time high, while steel consumption in the top user could be flat, he said.
    “There’s a perception that demand is better than it actually is,” Knights said by phone from London on Tuesday. “The
    market -- despite that apparent pickup in demand in the fourth quarter -- is in significant oversupply, as evidenced by the
    amount of iron ore inventory. And supply is not decelerating,  it’s accelerating this year.”

    Iron ore took many investors by surprise in 2016 by surging more than 80 percent as stimulus in China supported steel output
    and consumption, even as low-cost mine supply expanded. Plenty of analysts have now flagged the potential for a selloff this
    year, with Citigroup Inc. seeing a sharp correction and top forecaster RBC Capital Markets describing prices as unsustainable. With supply set to increase, Knights said that he’s “very bearish.”

    ‘Every Incentive’

    “Particularly with prices where they are, there’s every incentive in the world to bring iron ore supply on,” said
    Knights, adding that there’s scope for the port stockpiles to expand further, before they slump. “It’s just as simple as
    supply exceeding demand, which obviously isn’t reflected in the price.”

    Ore with 62 percent content in Qingdao rose 0.3 percent to $83.53 a dry ton on Wednesday, according to Metal Bulletin Ltd.
    The commodity hit a two-year high of $83.65 on Jan. 16, and it’s up about 6 percent this year after rising in January to post a
    fourth monthly gain. On Thursday, futures fell in Singapore and Dalian, signaling lower Metal Bulletin prices.
    The resurgence has boosted miners, including Rio Tinto Group, which this week reported its first profit gain since 2013, BHP Billiton Ltd. and Fortescue Metals Group Ltd. Brazil’s Vale SA has seen its stock surge 25 percent this year as prices
    gain and it jacks up output from the giant new S11D mine. The record bout of restocking in China has driven iron ore
    prices to “irrational” levels that are soon to correct, Gordon Johnson, an analyst at Axiom Capital Management Inc., wrote in a
    note received Wednesday. Looking at days of inventory at Chinese mills and stockpiles at ports, both have never been this high,
    he said.

    ‘Forcefully Lower’

    “Should steel capacity in China come offline as inventory is being destocked, we feel this would push iron ore prices
    forcefully lower,” Johnson said. Axiom sees iron ore at $57 in 2017 and $45 next year.
    Not everyone is bearish. Prices may average $73 this year, according to JPMorgan Chase & Co., which sees them at $71 in the
    third quarter and $66 in the final three months. Last month, Singapore Exchange Ltd., which operates derivatives contracts
    that help to set global prices, said a survey of industry participants showed most expected rates to hold firm or gain.
    Inventories at China’s ports climbed to 123.5 million tons last week, according to Shanghai Steelhome Information
    Technology Co. The stockpiles are at about 75 percent of the ports’ holding capacity and are still growing fairly quickly,
    according to Knights. A further 20 million tons would bring them to about 90 percent of capacity, which could see a $20 to $30
    drop in prices, he added.

    “What will happen is the price will fall and also there will be an incentive for people to start drawing on those port
    stocks,” Knights said. “I’d expect that traders who hold that inventory would just start cutting the price to try and get rid
    of it, unless we’re bailed out by very, very strong demand in the first and second quarter, which is possible, but it’s not my
    base case.”

    Attached Files
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    Rio Tinto denies Guinea iron-ore sale has stalled after investigation


    Rio Tinto shrugged off concerns on Wednesday that its sale of Guinea's Simandou project to Chinalco had stalled after an investigation into payments to a consultant who helped it win rights to the huge iron-ore deposit.

    Rio signed a preliminary deal in late October to sell its stake in Simandou, the world's largest untapped iron-ore reserves.

    But the following month, the world's second-largest miner axed two of its top ten executives amid a probe over $10.5 million in payments to a consultant providing advisory services on the Simandou project.

    Rio has alerted US, British and Australian regulators about the payments, but there is no suggestion that the officials or consultant acted illegally.

    China, the world's largest iron-ore consumer, provides an obvious market for Simandou, but industry sources have questioned whether China would ever develop the project.

    "Why do you say stalled?," Rio Tinto CE Jean-Sebastien Jacques said during a results conference call in response to a question.

    "The two (negotiating) teams are working as we speak. The Rio team was in Beijing last week again and we'll be in China next week again."

    Jacques declined to say if he was confident that Rio and Chinalco would finalise the deal within the original six-month timeframe.

    "We are progressing, it's a complicated process, it takes some time. We're just moving as quickly as we can," he said.

    If the deal to sell its 46.6 percent stake in Simandou to Chinalco went ahead, Rio Tinto would receive payments of between $1.1-billion and $1.3-billion based on the timing of the project's development, it said in October.

    Rio pleased investors on Wednesday when it beat full-year profit forecasts and announced a bigger-than-expected annual dividend, but it also warned that the investigation "could ultimately expose the group to material financial cost".

    "At this point in time it's early days," Jacques said.

    "We don't know if there will be any provision... but it was important due to disclosure requirements to put out that there could be something."

    http://www.miningweekly.com/article/rio-tinto-denies-guinea-iron-ore-sale-has-stalled-after-investigation-2017-02-08
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