Mark Latham Commodity Equity Intelligence Service

Friday 28th August 2015
Background Stories on www.commodityintelligence.com

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    Macro

    Strong field makes it to first base in $12 bln Australian energy sale

    A half dozen groups of companies from four continents placed indicative bids by a Thursday deadline for an electricity transmitter in Australia's most populous state, a source told Reuters, a milestone in a record $12 billion privatisation sale.

    The high number of bidders suggests appetite for Australian infrastructure with regulated and predictable revenue has been unaffected, perhaps even helped, by roiling global equity and commodities markets which have sent company profits and shares plummeting.

    New South Wales government-owned TransGrid, which runs 12,000 km (7,500 miles) of transmission lines from one side of the state of 7.5 million people to another, meanwhile has its earnings secured by a national energy regulator which approves its fees five years in advance.

    "A strong field of parties have lodged indicative bids for the long-term lease of TransGrid," NSW Treasurer Gladys Berejiklian said in an email statement without saying how many parties bid and without identifying any bidders.

    TransGrid is one of three assets expected to fetch a total A$17 billion in the sale.

    A source with direct knowledge of the process told Reuters that five consortia bid and that the status of a sixth, including another electricity company, Ausnet Services Ltd , Singapore Power and government-owned State Grid Corp of China was uncertain.

    An Ausnet spokesman confirmed the company had previously lodged a formal expression of interest but declined comment further.

    Other bidders included Australia's IFM Investors, an investment fund owned by 30 pension funds, with Queensland state-owned investment fund QIC, the source said.

    Another consortium to bid was Australia's Hastings Funds Management, Australian electricity firm Spark Infrastructure , sovereign fund Abu Dhabi Investment Authority and Kuwait's Wren House Infrastructure, with Canadian pension fund investor Caisse de depot et placement du Quebec, the source said.

    A fourth bidder was Canadian pension fund investor Borealis, the Canada Pension Plan Investment Board and AustralianSuper Pty Ltd, the source said.

    Infrastructure fund Global Infrastructure Partners and China Southern Power Grid Co Ltd joined up for a bid and Hong Kong's Cheung Kong Infrastructure Holdings Ltd bid solo, the source added.

    State treasurer Berejiklian did not say when she would make a shortlist of preferred bidders, but said the government "will now move to shortlist qualified parties for the lodgement of binding bids which will be due in the coming months".

    http://www.reuters.com/article/2015/08/27/australia-privatisation-idUSL4N1122WO20150827
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    Oil and Gas

    Oil: Shorts run for cover.

    Oil headed for its biggest weekly advance since April after rising the most in more than six years as U.S. economic growth beat forecasts.

    Futures climbed as much as 2.1 percent in New York, extending a 10 percent rally on Thursday. U.S. gross domestic product increased at a 3.7 percent annualized rate in the second quarter, exceeding all projections in a Bloomberg survey of economists. The nation’s crude stockpiles declined last week, paring a surplus, government data showed Wednesday.

    Oil is poised for its first weekly gain in nine weeks, sustaining a rebound above $40 a barrel as concerns eased over a slowdown in the U.S. and China. Prices fell Monday to the lowest close since February 2009 and are still down almost 20 percent this year on signs a global supply glut will persist.

    “The volatility in the market will continue,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “Any rallies are going to be quite extreme and probably short. There is adequate global oil supplies and we still have more than 450 million in U.S. stockpiles.”

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    Oil supply contraction in 2016?

     Supplies outside OPEC are expected to contract in 2016 for the first time since 2008, sliding by 200,000 barrels a day, according to the International Energy Agency. With consumption set to grow by 1.4 million barrels a day, OPEC and its de facto leader Saudi Arabia could seize the chance to broaden their market as competitors damaged by the price slump fall off.
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    UK Q2 oil output surges 12.3% on year

    UK Q2 oil output surges 12.3% on year to 11.54 mil mt or 988,000 b/d, raising hopes of slowdown in long-term decline, DECC says...Platts
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    Shell Nigeria declares force majeure on Bonny Light crude exports

    Shell's Nigerian unit, Shell Petroleum Development Company (SPDC), declared force majeure on Bonny Light crude oil exports on Thursday after shutting down two key pipelines in the country due to a leak and theft.

    The Trans Niger Pipeline and the Nembe Creek Trunkline are two of the biggest onshore pipelines in Nigeria, and carry Bonny Light crude oil to vessels for export worldwide.

    Planned exports of 162,000 barrels per day (bpd) of Bonny Light in September accounted for just over 8 percent of Nigeria's total planned exports of nearly 2 million bpd.

    A leak was reported on the Trans Niger Pipeline at Oloma in Rivers State, which has the capacity to carry around 180,000 barrels a day of crude oil. SPDC closed the Nembe Creek Trunkline to remove crude theft points, it said in a statement.

    Shell, whose SPDC subsidiary operates the pipeline with Nigeria's state oil company NNPC, did not give a timeline for restarting either line, and did not elaborate on the scale of the leak. Traders said the force majeure was unlikely to last long, depending on the size of the leak.

    Theft is rampant in Nigeria's oil industry, and Shell has been forced several times over the past year to close its pipelines to remove theft points or clean up oil spills.

    The pipeline closures do not always lead to a force majeure declaration, and even when they do, it does not preclude some export cargoes from loading.

    Shell has also come under increasing pressure to pay damages for oil spills. Earlier this year, it agreed to pay 55 million pounds ($85 mln) to the Bodo community for a spill in the Niger Delta.

    The issue could relieve a problem for Shell on the physical oil market, as traders said it was still holding the bulk of the export cargoes, but it could also alleviate the general oversupply of crude oil in the Atlantic Basin.

    Nearly 10 million barrels of September-loading Nigerian crude oil cargoes are still looking for buyers, and face steep competition from other crude oil grades.

    http://www.reuters.com/article/2015/08/27/nigeria-shell-bonnylight-idUSL1N1121LL20150827
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    PetroChina’s first-half profit drops 63% on oil market rout

    PetroChina Co., the nation’s biggest oil and gas producer, posted a 63% decline in first-half profit as oil prices slumped, lagging analyst estimates.

    Net income dropped to 25.4 billion yuan ($4 billion), or 0.14 yuan a share, in the six months ended June 30, from 68.1 billion yuan, or 0.37 yuan, a year earlier, the Beijing-based company said Thursday in a statement to the Hong Kong stock exchange.

    The average of three analysts estimates compiled by Bloomberg was a profit of 30.3 billion yuan.

    PetroChina is suffering amid the collapse in oil prices as it depends on exploration andproduction for most of its revenue. Crude has tumbled as producers sustain output to protect market share, worsening a global oversupply. Brent, the benchmark for about half the world’s crude, averaged about $59/bbl in the first half of the year, down 45% from the same period in 2014.

    The explorer produced 2.6% more oil in the first half from the year earlier period. Sales dropped 24% to 878 billion yuan, according to the statement. Capital expenditure dropped 33% to 61.7 billion yuan. PetroChina produced 736 MMboe in the first half, up 2.9% from a year earlier. The company’s average realized crude price fell 45% to 2,478 yuan per ton, while average natural gas prices rose 0.4%.

    http://www.worldoil.com/news/2015/8/27/petrochina-s-first-half-profit-drops-63-on-oil-market-rout
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    China Oil Giants Seeking to Join Spree of Global Energy Deals

    PetroChina Co., the country biggest oil and gas producer, signaled it’s looking to join a wave of global energy deals as crude’s collapse makes it the right time to buy and sell assets.

    “Low crude prices are a good opportunity for acquisitions,” Wang Dongjin, the company’s president, said at a briefing on Thursday after it reported a 63 percent slump in profits during the first half of the year. “Timing is really important now. We have been tracking some assets for a while and are waiting for the time to come.”

    Oil’s collapse to a six-year low has prompted a wave of acquisitions across the energy industry. Three of the last five quarters have exceeded $160 billion in deal volume, surpassing even the late 1990s, a period when many of the world’s largest energy corporations were formed, according to data compiled by Bloomberg. While China’s big three oil companies have sat out this latest round, China Petroleum & Chemical Corp. also said Thursday it’s seeking overseas assets, signaling that at least two of them are now ready to join the spree.

    http://www.bloomberg.com/news/articles/2015-08-27/petrochina-s-first-half-profit-drops-63-on-crude-market-rout
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    Gazprom finds a new way to supply gas to China

    Gazprom hasn't been able to come to an agreement with China on gas supplies along the western route and on the eve of the Putin's visit to China offers the Chinese a new way of the supply - through a gas pipeline from Sakhalin. Russia is extremely interested in such project, as the key for the region South Kirinskoye field suddenly came under US sanctions, which severely restricted the possibility of its development. But the question is whether Beijing is ready to seriously spoil relations with Washington for Moscow.

    Yesterday, head of Gazprom Alexei Miller announced that the company could sign a memorandum with Chinese CNPC on pipeline gas deliveries from the Russian Far East 'in the near future'. According to him, the companies 'included the project in the draft program of joint actions of the strategic partnership'. Mr. Miller made a statement in Beijing by results of the regular talks with CNPC on gas supplies along the western route (via Altai, the project is now called Power of Siberia-2). The contract is very important for Gazprom, as it will allow the company to use the production capacities in Western Siberia, which are now partly idle. But in this regard the parties are unlikely to achieve considerable success - the press release of Gazprom says only that 'the negotiations are on track'. According to the Kommersant's interlocutors familiar with the situation, there are still fundamental differences at the price, volume and time of the deliveries.

    The idea for the supply of pipeline gas to China from the Far East appeared not for the first time. Alexei Miller said this in October 2014, explained that the project could become a substitute for the construction of an LNG plant in Vladivostok. There are good prerequisites to implement the new supply route: proven reserves of gas on the Sakhalin shelf (within the Kirinskoye block of Sakhalin-3), as well as the already built gas pipeline of Sakhalin - Khabarovsk - Vladivostok (after Khabarovsk, it is almost along the border with China), the capacity of which can be increased by adding additional compressor stations. But until now it seemed that Gazprom chose a different path of the development of the Sakhalin's assets: in June, the monopoly signed a memorandum with Shell that gas from the Sakhalin-3 project would be used to expand the capacity of the LNG plant that already operates on the island.

    The situation changed after at the beginning of August the USA suddenly imposed the sanctions against the main deposit of Gazprom on the Sakhalin shelf - South-Kirinskoye one, without the gas of which none of new export projects can be realized in the foreseeable future.

    http://www.oilvoice.com/n/Gazprom-finds-a-new-way-to-supply-gas-to-China/078ff12ae841.aspx
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    ConocoPhillips Ponders Australian “Backfills” To Sustain Darwin LNG Project

    ConocoPhillips aims to develop the Poseidon and Caldita-Barossa gas fields in the Timor Sea to supply Darwin LNG with gas after current sources finish

    ConocoPhillips (NYSE:COP) plans developing offshore gas off northern Australia in mid 2018. The expansion will aid its Darwin Liquefied Natural Gas (LNG) project, once current supplies run out, which may potentially cost the company $21 billion. However, Conoco realizes that executing such a plan will not be possible without a sharp decrease in current expenditures.

    The Vice President for the oil major’s exploration and development in Australia; Frank Krieger has stated that development will either take place in the gas fields of Caldita-Barossa in the Timor Sea or Brown Basin’s Poseidon fields. Mr. Krieger's term has made it clear that any future development will not expand Darwin LNG, but rather a “backfill.”

    The gas from the northern Australian fields will be used to help sustain operations in the Darwin LNG project once current sources in the Bayu-Undan field are exhausted. The life span of its current field, also located in the Timor Sea, is expected to expire in 2022 or 2023.
     
    The Darwin project produces 3.7 million tonnes of LNG a year and has the approval to increase production capacity at the site to 10 million tonnes. However, taking the oil price slump into consideration, coupled with the escalation of costs after the construction of the first plant, Mr. Krieger remains doubtful of future expansion plans.

    http://www.businessfinancenews.com/23702-conocophillips-ponders-australian-backfills-to-sustain-darwin-lng-project/

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    Alternative Energy

    UK proposes end to small-scale renewable support next year

    The British government on Thursday proposed ending feed-in tariffs for new small-scale renewables installations next year, or cutting the remaining budget available, if a support scheme is found to be unaffordable following a consultation.

    Britain's Conservative government has been reining in spending on renewable power subsidies since it took power in May.

    It will scrap new subsidies for onshore wind farms from April next year and has already announced plans to close support for small-scale solar projects, change the way renewable projects qualify for payments and modify subsidies for biomass plants.

    Figures published by the Department of Energy and Climate Change show the cost of renewables subsidies could reach 9.1 billion pounds ($14 billion) a year by the 2020/21 tax year compared with a proposed budget of 7.6 billion.

    The so-called Feed-in-Tariff (FiT) scheme was introduced in 2010 to encourage the deployment of renewable energy.

    Under the scheme, households or businesses which install low-carbon energy sources such as solar panels or small wind turbines are paid for the electricity they generate and unused energy can be sold to electricity suppliers.

    In a consultation report the government said it was setting out proposals for a fundamental review of FiTs, aimed at controlling the scheme's costs more effectively.

    "If, following the consultation, we consider that the scheme is unaffordable ... we propose ending generation tariffs for new applicants from January 2016 or, alternatively, further reducing the size of the scheme's remaining budget available for the cap," the report said.

    It proposed that the FIT scheme is limited to a maximum overall budget of between 75 million pounds and 100 million from January 2016 to 2018/19.

    Depending on the views of stakeholders to the consultation, changes could take effect as soon as January 2016, the government said.

    http://www.reuters.com/article/2015/08/27/britain-renewables-idUSL5N1122VG20150827

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    WTO rules against India in solar power programme dispute with US

    Image Source: ReutersReuters reported that the World Trade Organization has ruled against India in a dispute with the United States over its solar power program.

    An unnamed official from the commerce ministry said that the country planned to appeal the decision, made after the United States complained about domestic content requirements in a program aimed at easing chronic energy shortages in India, Asia's third-largest economy.

    India has said that it expects peak power demand to double over the next five years from around 140,000 megawatts today. To help meet that demand, India wants 100,000 MW of new capacity from solar panels, with at least 8,000 MW from locally made cells.

    The WTO dispute settlement panel, in a confidential report to New Delhi and Washington, found India violated global trade rules by imposing local content requirements for solar cells and solar modules and also struck down incentive policies such as subsidies provided for domestic solar companies to manufacture cells and solar modules.

    The WTO typically circulates decisions on disputes to the parties before they are made public.

    http://steelguru.com/power/wto-rules-against-india-in-solar-power-programme-dispute-with-us/433083#tag
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    W.A. says solar is the future as it prepares to dump coal

    The West Australian government appears to have overcome years of institutionalised resistance and recognized that the state’s energy future will be built around solar energy.

    In a landmark speech this week, Energy Minister and state treasurer Mike Nahan said solar PV would meet the daytime electricity needs of WA within the next decade. Nahan noted that solar was cheap, and democratic, and was likely to account for all new generation capacity, and it would displace the state’s ageing coal generators.

    “We expect that the bulk of generating capacity during sunlight hours in the [Perth] metro area in about 10 years time will be provided by rooftop solar,” said Nahan in a speech to an energy conference in Perth.

    “That’s the reality. So it is going to provide the bulk of additional capacity going forward.

    Solar will also displace a lot of the existing [coal-based] capacity. It’s low-priced, it’s democratically determined and it’s something we’re committed to facilitating.”

    This is an extraordinary admission for someone, who as the former head of the right-wing think tank, the Institute of Public Affairs, had constantly ridiculed the prospects of renewable energy and solar in particular.

    But as the IPA and other conservative commentators continue to ignore the plunging cost of solar, and continue their stranglehold on the views of the Federal Coalition, Nahan has moved on.

    Nahan’s comments are also in stark contrast to the findings a review commissioned by his own government last year, which bizarrely did not even consider solar as a future technology and even contemplated importing coal from Indonesia to solve future energy needs.

    But Nahan has been presented with the reality of a state, which as RenewEconomy has mentioned on several previous occasions, is something of a basket case.

    The centralised, fossil fuel system has relied on massive government subsidies that now equate to more than $600 million a year, or more than $500 per household.

    http://reneweconomy.com.au/2015/w-a-says-solar-is-the-future-as-it-prepares-to-dump-coal-63324

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    Precious Metals

    Northern Star shines in 2015

    Gold miner Northern Star Resources has reported massive surges in revenue and profit for the financial year ended June, following the acquisition of a number of gold projects in Western Australia over the past year. Underlying net profit for the full year increased by 198% year-on-year to A$108.9-milion, while underlying earnings before interest, taxes, depreciation and amortisation was up 220% to A$333.1-million. 

    The acquisition of the Jundee, Plutonic, Kundana and Kanowna Bell mines resulted in a 176% increase in total gold sold during the 2015 financial year, which increased to 580 784 oz, from the 210 055 oz sold the year before. As a result, revenue for the full year was up 185%, from the A$296.9-million reported in 2014, to A$845.6-million. 

    “Our acquisitions have delivered exceptional results at the profit, production and return on equity levels,” said Northern Star MD Bill Beament. “They are now also generating strong exploration results, with substantial growth in resources and reserves, which will underpin increases in mine lives.” Beament noted that, while Northern Star had completed three major acquisitions over the past 18 months, repaid all of the debt used to fund these acquisitions, and invested A$50-million in exploration, the company also adopted a prudent and cautious approach to capital management, keeping and building upon its cash balance. 

    “This reflects our philosophy of increasing the dividend payout to a level that is both meaningful and sustainable, while maintaining a balance sheet that can withstand the increased level of volatility we are currently seeing in commodity markets and also provide the firepower to make opportunistic acquisitions without creating financial duress.”

     The A$50-million spend on exploration had paid strong dividends, with Northern Star increasing its measured and indicated resources by some 42% to 4.4-million ounces. In light of this success, Beament said on Thursday that Northern Star would invest a further A$74-million in both exploration and expanding capital to potentially bring a further 1.5-million ounces into future mine plans. This investment was expected to see Northern Star’s production profile increase from the current 2016 estimates of between 535 000 oz and 570 000 oz.

     “Northern Star now has total flexibility and a host of options. We can implement prudent capital allocation, while retaining our status as a growth stock on the back of exploration and development, as well as the potential for further strategic acquisitions,” Beament said.

    http://www.miningweekly.com/article/northern-star-shines-in-2015-2015-08-27
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    Saracen's record production lifts profits

    Record gold production pushed miner Saracen Mineral Holdings’ net profit after tax up 86% and revenue by 18% in the 2015 financial year. Gold production rose 25% year-on-year to 167 531 oz, generating revenues of A$249.9-million. Net profit after tax increased from A$6-million in 2014 to A$11.1-million in the year under review. 

    Saracen also reported a 58% increase in earnings before interest, taxes, depreciation and amortisation, from A$42.1-million in 2014, to A$66.5-million. The higher gold production also resulted in an increase in operating costs, from A$150.9-million to A$162.7-million, while all-in sustaining costs declined by 25% to A$1 139/oz. 

    MD Raleigh Finlayson said the strong financial and operating results for 2015 provided a robust foundation for Saracen’s plans to join the ranks of midtier gold producers. “The strong cash generation of our Western Australian gold operations during the year has enabled us to repay all of our debt, while, at the same time, funding mine development and a significant exploration campaign.” 

    He added that the continued strong performance from the Carosue Dam operations would generate significant cash flows in 2016, allowing the Thunderbox development to be funded through internal sources. Saracen was expecting to produce between 150 000 oz an 160 000 oz, at an all-in sustaining cost of between A$1 025/oz and A$1 075/oz in the 2016 financial year. 

    With the development of the Thunderbox asset, gold production would double to a targeted rate of 300 000 oz/y within the next two years, while all-in sustaining costs would reach A$1 075/oz.

    http://www.miningweekly.com/article/saracens-record-production-lifts-profits-2015-08-28
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    Lonmin sees full-year cash costs below guidance

    South Africa-focused platinum producer Lonmin Plc said on Thursday it expected full-year underlying cash costs to stay below its guidance, indicating that its deep cost-cutting measures were beginning to bear fruit.

    The London-listed company remains at risk from platinum prices falling to lows not seen since the 2008 financial crash, while power and labour costs in South Africa have risen sharply.

    Lonmin said its unaudited cash costs were at 10,499 rand ($806) per PGM ounce at the end of July on a year-to-date basis and are expected to remain below its guidance of full-year costs of 10,800 rand per ounce.

    Shares rose to trade up almost 6 percent before falling back. They were up 2.3 percent at 0915 GMT.

    "Some good progress from Lonmin, but risks remain with the company sitting at the upper middle of the cost curve meaning it will still have its work cut out to keep its head above water through the current cycle of low prices, in our view, plus a fairly ugly balance sheet in need of repair," Numis analysts said in a note.

    Lonmin in May posted an interim pretax loss of $118 million, down from a $278 million loss a year earlier, when it was battered by industrial action.

    The company was hit harder than other producers by the platinum mining strike in 2014, South Africa's longest and costliest, as unlike its peers, virtually all its operations are concentrated in the strike-affected Rustenburg area.

    To try to turn around its fortunes, the miner announced a plan in July to close or mothball several mine shafts, putting 6,000 jobs at risk. But it faces pressure from the government and labour unions to maintain jobs. 

    Lonmin said on Thursday 1,400 employees had so far left the company through voluntary redundancies.

    The government was in talks with mining companies and unions over planned job cuts as President Jacob Zuma's government frets over high unemployment ahead of key local elections next year.

    The parties have committed to a broad plan to stem job losses, including boosting platinum by promoting the metal as a central bank reserve asset, according to a draft agreement seen by Reuters on Wednesday.

    Other firms planning job cuts include Glencore, Kumba Iron Ore and Sibanye Gold.

    Lonmin on Thursday said it expected to eliminate more than 100,000 ounces of high-cost production over the next two years. It added that production would be reduced by 100,000 ounces per year by the end of 2017.

    http://www.reuters.com/article/2015/08/27/lonmin-results-idUSL4N1122MM20150827

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    Base Metals

    Freeport-McMoran cuts, and Icahn stake.

    Freeport-McMoran Inc said on Thursday it will slash its mining capital budget by 25 percent next year and cut 10 percent of its U.S. mine staff, as the diversified miner and energy producer attempts to weather an ongoing slump in copper prices.

    Shares of Freeport-McMoran, which will suspend operations and lower production at some U.S. mines, surged 22 percent to $9.67 after the announcement.

    This marks the latest in a string of cuts from the Arizona-based company, which earlier this month reduced the 2016 and 2017 oil and gas capital budgets by 31 percent to $2 billion per year.

    Freeport now plans to spend $2 billion on mining in 2016, for a total capital budget of $4 billion. Last month it cut total spending to $4.7 billion from $5.6 billion forecast in July.

    "This is a step in the right direction to stop the bleeding; however, current copper and oil prices restrict the company's ability to materially de-lever," Cowen and Co analyst Anthony Rizzuto wrote in a note to clients.

    "We believe there is room for additional spending cuts and/or production curtailments, especially in North America and Indonesia."

    To diversify from its copper, gold and molybdenum mining, Freeport acquired two oil and natural gas producers in 2013. Those deals bulked up its debt, which was $20.9 billion at June 30.

    If the cuts and plans to raise up to $1 billion through an equity issue and the IPO of a minority stake in its energy business are not enough, asset sales could be next, Jefferies analyst Christopher LaFemina said in a note.

    Freeport's stake in the Cerro Verde copper mine in Peru could fetch $4 billion, the El Abra deposit in Chile $1.1 billion, and the Morenci mining complex in Arizona $1.6 billion, he wrote.

    With seven copper mines in North America, Freeport will suspend operations at its Miami mine in Arizona, halve production at Tyrone in New Mexico and "adjust" rates at other U.S. sites, while reducing its workforce by 1,000.

    Henderson mine molybdenum production will be cut by 35 percent.

    Cash production costs to produce a pound of copper are now estimated at $1.15, down from $1.25 previously.

    Seen as a proxy for industrial activity, copper prices sank to six-year lows this week amid ongoing worries over China's economy.

    Freeport lowered its copper sales estimates for 2016 and 2017 by about 150 million pounds. It previously forecast 2016 sales of 5.4 billion pounds.

    http://www.reuters.com/article/2015/08/27/fcx-outlook-idUSL4N1124GO20150827

    Activist investor Carl Icahn disclosed an 8.5 percent stake in Freeport-McMoran Inc, taking aim at the company's spending and capital structure, as well as executive compensation.

    Shares of the diversified miner and energy producer had surged earlier on Thursday after it announced plans to slash its mining capital budget by 25 percent next year and cut 10 percent of its U.S. mine staff.

    But the stock climbed further after the billionaire investor disclosed the stake in a filing with the U.S. Securities and Exchange Commission, and said that he plans to speak with Freeport and may seek board representation.

    Icahn's holding is valued at $897 million based on Freeport's closing stock price of $10.19. The stock rose to $12.18 in extended trade.

    Freeport is undervalued, Icahn said in the filing, and he intends to address "executive compensation practices and capital structure as well as curtailment of the issuer's high-cost production operations."

    In a statement, Freeport said it "welcomes constructive input toward our common goal of enhancing shareholder value."

    Icahn, known for taking on such companies as Apple and Hertz Inc., also disclosed an 8.2 percent stake in Cheniere Energy earlier this month. Just over two weeks later, Cheniere named two of Icahn's managing directors to the company's board.

    U.S. companies targeted by activists has more than doubled since 2012, with at least 250 campaigns this year, according to Activist Insight, an industry data and media firm. Activists typically push companies to use cash piles to buy back shares, hive off divisions, or be put up for sale to boost shareholder value.


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    Shanghai copper premiums jump?

     

    Copper premiums in Shanghai jumped this week on supply tightness in the market, as some traders continue to stockpile material to push up premiums further.


    Some market participants remain unwilling to sell amid slumped copper prices, while buying interest is stable due to the favourable arbitrage between London and Shanghai. Metal Bulletin sister publication Copper Price Briefing assessed London Metal Exchange (LME) premiums at $110-130 per tonne on an in-warehouse Shanghai basis on Wednesday August 26, $25 higher than a week ago.




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    Goldcorp and Teck combine El Morro and Relincho projects in Chile

    Goldcorp INC. today announced an agreement to combine their respective El Morro and Relincho projects, located approximately 40 kilometres apart in the Huasco Province in the Atacama region of Chile , into a single project.

    Teck and Goldcorp will contribute their respective project interests into a 50/50 joint venture. The combined project will have the interim name of Project Corridor.

    "Combining these two neighbouring assets is a common sense approach that allows us to consolidate infrastructure to reduce costs, reduce the environmental footprint and provide greater returns over either standalone project," said Don Lindsay , President and CEO of Teck. "Through Project Corridor, we will work to establish meaningful relationships with the community, Indigenous Peoples and other stakeholders that will help guide the project's development and create greater value for all parties."

    "The combination of El Morro and Relincho is consistent with our focus on maximizing value from our asset portfolio," said Chuck Jeannes , President and CEO of Goldcorp. "We now have an improved development approach that we expect to significantly decrease initial capital requirements and increase financial returns, while ensuring the project is developed in partnership with our neighbours, creating lasting benefits for residents in the region and our shareholders."

    Based on the results of a Preliminary Economic Assessment ("PEA"), Project Corridor contemplates a conveyor to transport ore from the El Morro site to a single line mill at the Relincho site. We expect that this approach will provide a number of key benefits, including:

    Reduced environmental footprint
    Lower cost, improved capital efficiency
    Optimized mine plan
    Enhanced community benefits
    Community engagement

    In combination with community consultation, a Pre-Feasibility Study is expected to commence in early 2016 and be completed in 12 – 18 months. Assuming a positive Pre-Feasibility Study, a Feasibility Study would be initiated thereafter.

    Goldcorp's El Morro project contained proven and probable reserves of 8.9 million ounces of gold and 6.5 billion pounds of copper as at December 31, 2014 . Teck's Relincho project contained proven and probable reserves of 10.1 billion pounds of copper and 464 million pounds of molybdenum as at December 31, 2014 . 

    Goldcorp also announced earlier today that it has reached an agreement to acquire New Gold's 30% interest in the El Morro project for $90 million in cash upon closing, along with a 4% gold stream on future gold production from the El Morro property. Closing of the transactions contemplated by this news release is subject to customary conditions and is expected to occur in the fourth quarter of 2015.

    http://finance.yahoo.com/news/goldcorp-teck-combine-el-morro-120000380.html
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    Tiger struggles in interim period

    Copper cathode producer Tiger Resources has swung to a loss in the interim period ended June, despite a 111% increase in revenues. Tiger on Friday reported a net loss after tax of A$5.6-million for the six months under review, compared with a net profit after tax of A$10.3-million in the previous corresponding period. 

    The company said the 154% decrease in profits resulted from a noncash depreciation and amortisation expense relating to its Kipoi solvent extraction and electrowinning (SX-EW) plant, which started commercial production in July 2014, and higher finance costs resulting from interests and fees on additional secured debt facilities. 

    Meanwhile, Tiger reported a 135% increase in sales volumes for the six months under review, to 14 598 t, comprising 13 286 t of copper cathode and 1 312 t of copper in concentrate from residual stockpiles. This was compared with the 6 213 t of copper in concentrate sold in the previous corresponding period. Tiger noted that the increased sales volumes were partly offset by a decrease in the realised copper price. 

    During the period under review, sales revenue increased by 111% to A$82.9-million, compared with the A$39.2-million reported in the previous corresponding period. For the full 2015, Tiger was targeting copper cathode production in excess of 25 000 t. 

    A recent debottlenecking study of the Kipoi SX-EW plant revealed that copper production could be increased to as much as 32 500 t/y at a capital investment of $25-million.

    http://www.miningweekly.com/article/tiger-struggles-in-interim-2015-08-28
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    Australian officials threaten to close giant Glencore zinc mine

    Glencore Plc's McArthur River zinc mine in Australia could be ordered to close unless it improves its environmental record and increases a financial bond covering rehabilitation of the site, according to government officials. 

    Residents near the zinc mine, one of the world's biggest, have complained of smoke coming from a waste rock dump, traces of lead in fish, and a contamination incident last year which resulted in cattle in the area having to be destroyed. 

    Adam Giles, the chief minister of the Northern Territory where the mine is located, said his government had been talking to Glencore for months about the need to come up with a plan to control increased levels of reactive waste rock, a chemical which turns into sulphuric acid when it meets water. "We have been working with the mine itself to increase its level and standards of environmental protection at the site," Giles told Australian Broadcasting Corp. "We have been adamant that unless Glencore fixes its environmental procedures and practices we will close the mine." 

    Miners in the Northern Territory are required to lodge a bond to cover 100 percent of the final remediation cost at every stage of the mine's life. Glencore's chief operating officer for zinc in Australia, Greg Ashe, said the mine was engaged in a process with the government around the bond and was committed to finding a balanced solution that meets the expectations of the government, the mine and the community. 

    "McArthur River and Glencore have been very frank with the government and the community about the environmental and operating challenges we've been facing," Ashe told a mining conference in the Northern Territory city of Darwin. "The McArthur River Mine will continue to operate so long as we are able to extract and process the ore safely, so long as we're able to maintain our social license to operate and so long as we're economic." 

    A spokesman for Northern Territory Minister for Mines and Energy David Tollner said Glencore had been issued with an Oct. 1 deadline to lodge an amended bond. "We want to see significant changes, including increasing the environmental bond," said Tollner. 

    The concerns come two years after Glencore was granted approval to lift the rate of mining from 2.5-million tonnes of ore annually to 5-million tonnes and the yearly yield of zinc and lead bulk concentrate from 360 000 dry metric tonnes to 800 000 dry metric tonnes. It also extended the mine's scheduled closure date by nine years to 2036.

    http://www.miningweekly.com/article/australian-officials-threaten-to-close-giant-glencore-zinc-mine-2015-08-28

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    Chalco swings to profit in H1 on cost cuts

    Image Source: forbesimgReuters reported that Aluminum Corp of China Ltd on Thursday posted a first-half net profit of CNY 27.6 million (USD 4.31 million), helped by lower production costs and rising sale prices of alumina products.

    Chalco swung to a net profit in the first quarter of this year after having posted a record loss in 2014 that was partly due to huge writedowns. The first-half profit compared with a net loss of 4.12 billion yuan in the six months through June 2014.

    The company, China's top integrated aluminium group, sells its product mainly in the domestic market.

    Low prices have prompted high-cost smelters in China to idle total more than 1.8 million tonnes of capacity so far this year. Smelters may close more capacity in the coming few months as metal prices trough at 6 1/2 year-lows.

    http://steelguru.com/metal/chalco-swings-to-profit-in-h1-on-cost-cuts/433148#tag
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    Vedanta Aluminium Lanjigark smelter closure to impact 2,000 jobs

    Image Source: The HinduPTI reported that Vedanta Aluminium on Thursday said it has started the closure process of one of its production streams, which will lead to the Lanjigarh facility’s output declining by half and impacting up to 2,000 jobs. The mining conglomerate said that the collapse in aluminium prices and lack of bauxite availability from Odisha had forced it to opt for a gradual closure of its Lanjigarh facility in the State.

    Vedanta Aluminium CEO Mr Abhijit Pati said “It is a gradual closure. With no visibility in terms of bauxite linkage, volatility in global metal prices and sharp fall in aluminium rates, we are pained to take this decision for the Lanjigarh facility.”

    He said “The company has started the process of partial closure and is closing one of the two streams, which will lead to a drop in the plant’s production capacity by about half. This closure will take about two months and if such a situation persists then we will be forced to shut down the second stream as well, but I’m hoping that something can happen in the meanwhile.”

    On impact of the shutdown on jobs, Mr Pati said it “will impact about 2,000 jobs, both direct and indirect.”

    Vedanta’s aluminium arm is one of the country’s largest producers of the metal and operates the refinery, which has a capacity of one million tonnes per annum. Vedanta Aluminium’s Lanjigarh plant provides direct employment to 2,000 people and indirect to another 8,000.

    http://steelguru.com/metal/vedanta-aluminium-lanjigark-smelter-closure-to-impact-2-000-jobs/433146#tag
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    Steel, Iron Ore and Coal

    China, US seek 'clean coal' agreement as industry struggles

    U.S. and China officials signed an agreement on August 25 to advance "clean coal" technologies that purport to reduce the fuel's contribution to climate change — and could offer a potential lifeline for an industry that's seen its fortunes fade.

    The agreement between the U.S. Department of Energy and China's National Energy Administration would allow the two nations to share their results as they refine technologies to capture the greenhouse gases produced from burning coal, said Christopher Smith, the Energy Department's assistant secretary for fossil energy.

    The clean-coal technologies are expensive, and efforts to develop them for commercial use have struggled to gain traction in the U.S. Some critics describe clean coal as an impossibility and say money being spent on it should instead go toward renewable energy.

    China leads the world in coal use. It produces and consumes about 4 billion tonnes annually, four times as much as in the U.S.

    “Coal will continue to play a role in China's developing economy”, said Shi Yubo, vice administrator of China's energy agency, "but we need to pay special attention to developing clean coal technology."

    Shi said China was seeking to develop more demonstration projects that capture carbon to prevent it from escaping into the atmosphere. He acknowledged that efforts to put the greenhouse gas to beneficial use "are still far behind."

    Meanwhile, the U.S. coal industry has suffered a beating in recent months, with major mining companies going bankrupt.

    The Interior Department is proposing hikes on coal royalties and possibly leases payments for publicly owned reserves of the fuel in areas. Also, cheap natural gas is squeezing out demand for coal, and Obama has made reductions in carbon dioxide emissions from coal-fired power plants a key component of his climate policy.

    "It's positive if those projects (to capture carbon) get built here. It's positive if those get built in China and India and Europe and around the world", said Smith.

    Almost one-third of energy-related carbon dioxide emissions in the U.S. come from burning coal, equivalent to 1.6 billion tonnes of the gas in 2014.

    By comparison, two clean coal projects closest to completion — the Petro Nova project in Texas and the Kemper project in Mississippi — would capture less than 5 million tonnes of carbon dioxide annually.

    http://en.sxcoal.com/0/130517/DataShow.html
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    Atlas Iron: Pilbara mines close on cost target

    Atlas says the new contractor collaboration model and cost-cutting programs at its West Australian iron ore mines are delivering the results it expected, with full cash costs for the month of July falling to $A55/wmt CFR – against average realised prices of $57/wmt.

    Md David Flanagan says Atlas is on track to reach a break-even benchmark price of $US50/t. He says the mines are generating positive cash flow, which is expected to increase in August.

    http://www.miningbusiness.net/content/atlas-iron-pilbara-mines-close-costs-target
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    Steel scrap generation to surge in China

    Image Source: theaustralianThe Australian reported that over the past decade, China has accumulated more steel than any other economy in the world. And because steel can be endlessly recycled, the country’s steelmakers are likely to turn increasingly to scrap instead of the iron ore mined by the likes of BHP Billiton, Rio Tinto and Anglo American.

    China accumulated so much steel so rapidly that the total amount of steel in the economy and available for recycling now stands far beyond the level that would be typical for an economy its size, at around five tonnes per capita, according to analysis by Morningstar.

    China’s scrap production currently amounts to around 10 per cent of its total steel output, compared with two-thirds for the US. Analysts expect its scrap production to start taking off toward the start of next decade.

    And in the next decade, as the country’s consumers and businesses start recycling their first generation of containers, cars and appliances, the steel glut will be compounded.

    http://steelguru.com/steel/steel-scrap-generation-to-surge-in-china/433152#tag

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