Mark Latham Commodity Equity Intelligence Service

Wednesday 14th October 2015
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    Iran lawmakers vote to implement nuclear deal

    Iran’s parliament voted Tuesday to support implementing a landmark nuclear deal struck with world powers despite hard-line attempts to derail the bill, suggesting the historic accord will be carried out.

    The bill will be reviewed by Iran’s 12-member Guardian Council, a group of senior clerics who could return it to lawmakers for further discussion. However, Iran’s Supreme Leader Ayatollah Ali Khamenei, who has the final say on key policies, has said it is up to the 290-seat parliament to approve or reject the deal.

    Signaling the nuclear deal’s likely success, a spokesman for moderate President Hassan Rouhani’s administration welcomed the parliament’s vote and called it a “historic decision.”

    “Members of parliament made a well-considered decision today showing they have a good understanding of the country’s situation,” Mohammad Bagher Nobakht said. “We hope to see acceleration in progress and development of the country from now on.”

    The European Union’s foreign policy chief Federica Mogherini, who helped facilitate the nuclear talks, also praised the vote as “good news” in a message on Twitter.

    In the parliamentary session carried live by state radio, 161 lawmakers voted for implementing the nuclear deal, while 59 voted against it and 13 abstained. Another 17 did not vote at all, while 40 lawmakers did not attend the session.

    A preliminary parliamentary vote Sunday saw 139 lawmakers out of the 253 present support the outline of the bill. But despite getting more support Tuesday, hard-liners still tried to disrupt the parliament’s session, shouting that Khamenei himself did not support the bill while trying to raise numerous proposals on its details.

    “This decision has no link to the leader!” shouted Mahdi Kouchakzadeh, a hard-line lawmaker who rushed toward the front of parliament to yell at speaker Ali Larijani. “It is a decision by Larijani and we oppose it!”

    The semi-official Fars news agency reported that Ali Aghar Zarei, another hard-line lawmaker, broke down weeping after the vote. Foreign Minister Mohammad Javad Zarif, who led Iran’s nuclear negotiation team, left the session when it grew tense, the state-run IRNA news agency said.
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    China Property Market: post golden week sales disappoint.

    September is traditionally regarded as a peak season for real estate sales on the mainland. But Evergrande Real Estate reported a 35.4 per cent month-on-month decline in sales to 1.42 million square metres, down from the 2.2 million square metres it sold in August.

    China Vanke reported that its contracted sales in September amounted to 1.84 million square metres in gross floor area terms, up just 7.3 per cent from August’s 1.72 million square metres.

    “This is because developers reaped strong sales in the second quarter,” Hong said.

    The number of new homes sold in Shenzhen between September 1 and September 29 fell 32 per cent month on month to 3,849, according to official data. In Beijing, home sales in September fell 30 per cent month on month, according to Beijing-based property agent Yahao.

    Carlby Xie, director of research at Colliers China, said that due to limited supply, the outlook for housing markets in first-tier cities remained positive, but he was concerned about the situation in smaller cities which still had high levels of inventory.

    Some analysts expect better in the next two months.

    “We believe satisfactory sales in October and November, on the back of more launches by developers and more favourable policies from the government, will be the next positive catalysts for the China property sector,” Barclays property analyst Alvin Wong said in a report released on Thursday.

    SouFun’s 100-city price index rose 0.28 per cent month on month in September.

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    China Sept PPI down 5.9pct on year

    China's Producer Price Index (PPI), which measures inflation at wholesale level, dropped 5.9% year on year and down 0.4% month on month in September, the National Bureau of Statistics (NBS) said on October 14.

    It was the 43rd straight year-on-year decline, due to subduing demand from downstream sectors.

    Factory prices of production materials declined 6.8% year on year and down 0.6% from August, the NBS said.

    The price of coal mining and washing industry fell 15.4% on year and down 1 % on month, while the price of oil and natural gas mining industry decreased 40.6% on year and down 7.3% on month, it said.

    Besides, prices of ferrous metal industry dropped 19.9% from the previous year and down 1.1% from August, data showed.

    Over January-September, PPI dropped 5% on average from the previous year, and factory prices of production materials decreased 5.9% on year.

    Of this, the average price of coal mining and washing industry fell 14.1% on year; while the price of oil and natural gas mining industry decreased 37.2% on year; price of ferrous metal industry dropped 21% from the previous year, data showed.

    The data came along with the release of the Consumer Price Index (CPI), which rose 1.6% the year prior and up 0.1% from the month before in September.

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    MH17 shot down by a Russian made missile

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    Toyota improves Prius fuel efficiency in bid to boost sales

    Toyota Motor Corp said on Tuesday its new Prius hybrid would be a fifth more fuel efficient than its predecessor, an upgrade the automaker hopes will boost flagging sales of the environmentally friendly model amid a slump in gasoline prices.

    The new Prius, which will be released in Japan in December before being launched overseas, has a listed mileage of roughly 40 km per litre (94 mpg), an improvement from the current version's 32.6 km per litre, the company said.

    The launch, however, comes as petrol prices in the biggest market for the Prius - the United States - are at their lowest in about a decade, pushing consumers to trade in hybrids and electric vehicles in favor of sports utility vehicles.

    "When you look at it globally, they haven't taken off as much, but we are looking to increase their profile as an environmentally sound option," Chief Engineer Koji Toyoshima told reporters, referring to the model.

    According to the latest available figures, August Prius sales in the United States fell 24 percent from the same month a year earlier to 17,757 cars. Last year, U.S. Prius sales totaled 207,372 vehicles.

    The Prius may get a boost from the emissions scandal engulfing competitor Volkswagen's, diesel cars from drivers seeking alternate, fuel-efficient models, analysts say.

    "The timing for Toyota in terms of the VW diesel scandal is probably good at least in terms of consumers who are concerned either from the pollution standpoint, or if the favourable tax treatment in euro for diesel goes away," CLSA senior research analyst Christopher Richter said.

    Toyota dominates the gasoline-hybrid car market, manufacturing 8 million of the more than 9 million gasoline-fuelled vehicles on the road globally. Roughly 4 million of those are Priuses.

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    Oil and Gas

    Iran boosts oil trade via UAE ahead of sanctions relief

    Iran has boosted exports of fuel oil through U.S.-ally the United Arab Emirates and also almost doubled its imports of gasoline, despite Western sanctions, trading sources said.

    The U.S. State Department recently cabled a message to embassies around the world to reiterate that sanctions on Iran are still in place, diplomatic and government sources told Reuters on Friday.

    Yet behind the scenes Iran and its eager potential trading partners are quietly getting ready for life after sanctions, following the landmark July agreement with the West over Tehran's nuclear policy.

    The resumption of some direct shipments of refined oil products from Iran's Bandar Mahshahr to the UAE's Fujairah port contrasts with the more intricate and furtive means Tehran had employed using ship-to-ship transfers and trading firms in the UAE acting as middlemen for buyers to sidestep sanctions.

    The trading sources said Iranian fuel oil shipments are still being presented with documents declaring it of Iraqi origin at the ship refuelling hub of Fujairah. Fuel oil is used to power ships and also for electricity generation.

    State-owned National Iranian Oil Co.(NIOC) has now started to offer much more fuel and at much more attractive discounts, the trading sources said.

    It is also using its own ships to sail directly to Fujairah, saving buyers costly freight charges, as it becomes more proactive in anticipation of lifting sanctions next year, the sources said.

    "Now because they think the sanctions are over, they are shipping more, I have seen around 6 to 7 shipments (of fuel oil) coming through Fujairah with fake documents, the volumes are bigger now," said one source.

    "Sometimes they use their own ships. They need to put these cargoes out even before sanctions are lifted. People are ready to buy it if they can offer $2-3 discounts on the price."

    The trading sources estimated Iranian fuel oil exports at around 350,000-500,000 tonnes per month in September and October.

    "Internally they use more natural gas for power utilities, therefore export of fuel oil is at that high level," said another trading source.

    A third trading source said the fuel oil shipments from Iran are being pumped into Fujairah Oil Tanker Terminal 2 but since they are then shipped from there to Asia, port regulations are less strict than if the cargoes were to remain in the UAE.

    Traders have also started to ship more gasoline to Iran with volumes at around 10-12 cargoes a month, or 300,000 to 360,000 tonnes, in September and October, up from 6-8 cargoes before, the first source said.

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    Saudi offers of extra oil in Asia fail to lure interest in cutthroat market

    Saudi Arabia failed to attract offers for additional oil cargoes for loading in October, industry sources said, in a sign that the market remains over supplied despite recent production cuts.

    The offers were made to some customers in Asia ahead of maintenance at a major Saudi refinery, two sources close to the matter said, as the world's biggest crude exporter seeks to maintain its market share in Asia.

    Yet in a sign of the ongoing price war between producers and the surplus supplies, potential buyers who received the offers said they were too prompt in delivery, adding that cheaper alternatives such as Iraq's Basra crude were also available.

    "Even if the November OSPs (Official Selling Prices) are attractive, we do not have room to take more," one of the potential buyers said, declining to be named due to company policy.

    Refinery maintenance across Asia in the third quarter has also curbed the appetite for more crude in the region.

    Saudi crude production in the first nine months of 2015 hit 10.21 million bpd, up from 9.69 million bpd in 2014, Reuters data showed.

    "Saudi Arabia's strategy of targeting market share amongst key Asian consumers remains at play," said Virendra Chauhan, an analyst at consultancy Energy Aspects.

    "It's a buyers' market at the moment so Saudi will be looking to place its barrels aggressively or risk losing out," he added.

    Despite this strategy, Saudi may trim output further in October as domestic demand drops following the peak consumption summer months and because of maintenance at PetroRabigh's 400,000 bpd refinery. The Yasref refinery has also cut operating rates to 75 percent, down from full capacity in July.

    "We see 10-10.1 million bpd as the new norm for Saudi production given that more crude will be consumed domestically with the two new refineries ramping up to capacity," Chauhan said.

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    Oil Slide Means `Almost Everything' for Sale as Deals Accelerate

    More than $200 billion worth of oil and natural gas assets are for sale globally as companies come under renewed financial pressure from the prolonged commodity price rout, according to IHS Inc.

    There are about 400 buying opportunities as of September, IHS Chief Upstream Strategist Bob Fryklund said in an interview. Deals will accelerate later this year and into 2016 as companies sell assets to meet debt requirements, he said. West Texas Intermediate crude has averaged about $51 a barrel this year, more than 40 percent below the five-year mean.

    Low prices have slashed profits and as of the second quarter aboutone-sixth of North American major independent crude and gas producers faced debt payments that are more than 20 percent of their revenue. Companies have announced $181.1 billion of oil and gas acquisitions this year, the most in more than a decade, compared with $167.1 billion the same period in 2014, data compiled by Bloomberg show.

    “Basically almost everything is for sale,” Fryklund said Oct. 8 in Tokyo. “Low cycles are when a lot of these companies can rebalance their portfolios. In theory, this is when you upgrade your existing portfolio.”

    Companies with strong balance sheets are seeking buying opportunities, said Fryklund, citing Perth, Australia-based Woodside Petroleum Ltd.’s $8 billion offer for explorer Oil Search Ltd. and Suncor Energy Ltd.’s $3.3 billion bid for Canadian Oil Sands Ltd. Both targets rejected initial offers.

    As of August, one out of every eight junk-rated oil companies was in danger of defaulting, according to Moody’s Corp. WTI plunged below $40 a barrel in August, to the lowest price in six years. The grade added 0.3 percent to $46.81 a barrel on the New York Mercantile Exchange at 11:36 a.m. in Tokyo.

    Next year the U.S. benchmark may trade around $55, said Fryklund. It will take several years for supply and demand to rebalance and prices may rise to about $70 a barrel by 2018, he said.

    “These down cycles are really great for defining the winners for the next cycles,” said Fryklund. “The ones that have cash right now, the ones that have good financials are seeing lots of opportunities.”

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    Russia's Putin says does not want energy sector investments to stop

    Russia will not pressurise the energy sector, which is currently working effectively, President Vladimir Putin told an investment conference on Tuesday.

    Recent changes in taxes levied on the energy sector, approved for the next year, do not mean that Russia wants to investments to stop, Putin added.
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    Venezuela says eight non-OPEC nations invited to Vienna meeting

    Venezuelan Oil Minister Eulogio del Pino said on Tuesday that eight non-OPEC countries have been invited to an Oct. 21 oil meeting: Azerbaijan, Brazil, Colombia, Kazakhstan, Norway, Mexico, Oman and Russia.

    The technical meeting of oil experts from the Organization of Petroleum Exporting Countries and non-OPEC countries will be held in Vienna, he told Reuters.

    "The confirmations are coming in gradually and I'm personally calling ministers to ensure that the delegation is of the adequate level of authority," del Pino said.

    Venezuela will unveil a bold new oil strategy this month. The OPEC country's long-time oil minister and current United Nations ambassador, Rafael Ramirez, told Reuters in an interview the proposal would reapply the old mechanism of progressive production cuts to control prices, with a "first floor" of $70 per barrel and a later target of $100 per barrel.

    Price hawk Venezuela has been pushing to stem a tumble in oil prices, but faces an uphill battle to convince its richer Gulf counterparts and non-OPEC nations. The meeting's date was already known but the location and full list of invitees was not revealed until Tuesday.

    President Nicolas Maduro said on Tuesday night the most important part of Venezuela's proposal was a suggested meeting of OPEC heads of state and non-OPEC producers.

    "I think we're going to achieve it," he said in an hours-long televised broadcast. "Sometimes processes are slow, but we've already achieved the Oct. 21 experts' meeting."

    Venezuela's proposal will be discussed at the meeting this month, Kuwait's oil minister said on Tuesday.

    "There is no decision. It will be discussed, and (based on) the outcome, we will decide whether to agree or disagree," Ali al-Omair told reporters.

    Russia, the world's top oil producer, has refused to cooperate with OPEC, in which Saudi Arabia is the leading producer.

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    The EU Diesel problem

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    Is it really too much to ask that we live in a continent where it is safe to breathe?

    Currently, because testing procedures specified under EU rules are harmfully inadequate, nine out of ten diesel vehicles exceed the permitted pollution levels. The fight is now underway at EU level to ensure that pollutants emitted in the lab under new test procedures accurately reflect emissions from the car in real driving conditions. 

    The cost of air pollution is immense in human terms: we're talking about 400,000 premature deaths in Europe every year. It is also a huge financial drain, since air pollution in the European Union costs around 766 billion euros every year.

    Forty million EU citizens are also exposed to levels of a certain size of particulate matter, 'PM10', which are above the legal European limits. PM10 is a deadly form of air pollution which diesel cars emit.

    But, to add insult to injury, clean air for everyone will be even harder to achieve given recent revelations that the German car manufacturer Volkswagen has cheated on the pollution tests for 11 million of its diesel vehicles. This constitutes an unprecedented health scandal.

    The "dieselgate" scandal shows unequivocally that EU emission limits to curb polluting emissions from vehicles are not just not being respected, but that manufacturers are committing fraud, with criminal intent, through the use of so-called 'defeat devices' which trick the test procedure into thinking that the car has much lower emissions of nitrogen oxides than it will have on the road. Nitrogen oxides react in the atmosphere to form nitrogen dioxide, which is toxic to human health. Beyond the case of Volkswagen, the scandal is also likely to concern other manufacturers.

    Having maintained the myth of "clean diesel", car-makers are now trying to avoid a Europe-wide inquiry. As Green MEPs for the South West and South East of England, and London, we call on the EU institutions not give into industry lobbying, the result of which would be the protection of private interests at the expense of citizens' health.

    We refuse to accept that the people we represent continue to be poisoned in order to swell the profits of car manufacturers. We therefore call for full transparency and for the law to be upheld.

    We believe that the European Commission must immediately launch an inquiry into all vehicles, both petrol and diesel, on the European market to discover the extent to which defeat devices are being used to cheat emission tests for NOx but also for other pollutants, including CO2.

    ~Petition in 4 languages now filed on EU website. 134000 signatures so far in 6 days. 


    This varies from case to case:

    • If the petition concerns a specific case requiring individual attention, the Commission may contact the appropriate authorities or intervene through the permanent representation of the Member State concerned, as this course of action is likely to settle the matter. In certain cases, the Committee on Petitions asks the President of the European Parliament to contact the national authorities in question.
    • If the petition relates to a matter of general interest, for example if the Commission finds that EU law has been breached, it can open infringement proceedings. This may result in a Court of Justice ruling to which the petitioner can then refer.
    • The petition may result in political action being taken by Parliament or the Commission.

    In all cases, the petitioner will receive a response detailing the results of the action taken.

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    Moroccan shale giving up gas

     Irish energy company Circle Oil, which focuses on North African basins, said it had remarkable success with the early results from shale basins in Morocco.

    Circle Oil said preliminary drilling results from its Sebou concessions in Morocco yielded about 8 million cubic feet of natural gas per day. Chief Executive Mitch Flegg said in a statement the results came in better than expected.

    "The flow rates achieved during the well test are at the upper end of our range of expectations and the well will now be tied in to our existing infrastructure and put into production as soon as possible," he said. "This gas will be sold at fixed rates which are not subject to oil price fluctuations."

    Morocco is one of the West African countries that have drawn interest from international energy companies eager to tap into unexploited reserves. Onshore, the country holds an estimated 20 trillion cubic feet of recoverable shale oil and natural gas reserves.

    Rival company Gulfsands Petroleum in early 2015 said natural gas was flowing at a rate of 10 million cubic feet per day at a test well in northern Morocco.

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    Latest: US shale firms see smaller-than-expected cuts to credit lines

     U.S. shale oil and gas producers have seen smaller-than-expected cuts to their credit lines, a sign that banks could be relaxing their lending standards to help companies avoid technical defaults.

    Companies that hold nearly a third of the energy industry's $100 billion or so in reserve-based loans - borrowed against their oil and gas reserves - have reported a 1.4 percent net drop in credit lines.

    Of the 31 companies that have disclosed information on loan resets so far, banks have cut credit lines of 10 firms by just over $1.15 billion and raised them for six companies by about $725 million.

    Shale companies are also pushing lenders to package credit lines in their favor.

    For example, while lenders last week cut Oasis Petroleum's credit line, the company is seeking relief by inserting a provision that will allow it to borrow as much as possible under the current facility.

    "It's a good example of how bonds and some covenant packages have progressively grown looser over the years," said Anthony Canale, who heads high-yield research at Covenant Review, a research firm focused on debt covenants.

    Meanwhile, companies such as Halcon Resources Corp and Midstates Petroleum Co are trying to swap their unsecured debt for new secured loans.

    "We are seeing more exotic financing transactions ... notably the swapping of unsecured notes for second-lien and third-lien secured indebtedness," said Jimmy Vallee, a partner at law firm Paul Hastings LLP.

    The relatively few lending cuts also underscore the steps taken by energy companies to keep their credit lines secure.

    The decision by many of these firms to snap up hedges in June during a brief price rally has made lending to them far less risky, while a sale of non-core assets and deep cuts to costs have reassured lenders.

    Also, after nearly a decade of uninterrupted growth, the energy sector may be short of workout bankers - who deal with troubled loans and negotiate with borrowers - helping energy companies hold on to their loans longer, said Robert Gray, a partner at law firm Mayer Brown LLP.

    "They all left, so it's partially a management issue."

    Several companies have been able to hold their oil and gas reserves steady because they are mostly completing existing wells rather than drilling new ones.
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    North Dakota oil well backlog nears 1,000 amid price slide

    The number of North Dakota oil wells that have been drilled but not fracked rose to an all-time high in August of almost 1,000, as producers delayed bringing them online as long as possible in hopes that crude prices would rebound.

    It was the latest sign yet that the state's oil industry, the second-largest in the United States, has sharply curtailed spending amid the more than 50 percent drop in oil prices since 2014.

    North Dakota now has 993 drilled-but-uncompleted wells, or DUCs, according to data released on Tuesday by the state's Department of Mineral Resources, which reports with a two-month lag.

    "That reflects an attitude of leaving the oil in the ground and voluntarily reducing production," Lynn Helms, the DMR's director, said on a conference call with reporters.

    Helms said he expects the number to eclipse 1,000 before the end of the year. The increase in DUCs is in part why output in the state is edging down as production from existing wells naturally declines. Only 51 new wells entered service in August, lifting the total well count to 13,016.

    Producers have one year to drill, frack and start producing oil from a well. If that window passes, the DMR warns producers they have six months to plug the well or start producing oil. It then moves to confiscate the well if nothing has been done by the end of that six-month window.

    Most of the delayed wells have one-year windows that expire in December, Helms said.

    Helms said last month that he was open to granting extensions on the one-year timeline, though he would need approval from the North Dakota Industrial Commission to do so.

    The commission, which comprises the state's governor, attorney general and agriculture commissioner, will next meet on Oct. 22, at which time Helms said he will ask permission for a blanket policy allowing for extensions.

    Extensions for each of the 993 wells must be applied for and reviewed individually, and mineral and land owners have the right to object to any extensions. EOG Resources Inc and Exxon Mobil's have the largest number of DUCs, according to state data.

    The state's oil production fell slightly in August for the second month in a row, largely because of low crude prices .

    North Dakota produced 1,186,444 barrels of oil per day (bpd) in the month, compared with 1,206,996 bpd in July, according to the DMR.

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    Antero 3Q15 Operational Update: Production Up 33%, Gets $3.99/Mcf

    Today Antero Resources became the first major Marcellus/Utica driller to issue their third quarter 2015 update. The company reports a 39% increase in production over the same quarter last year, and a 1% increase from 2Q15.

    They must have some sharp financial types at Antero because the average price they received for their natural gas was $3.99 per thousand cubic feet (Mcf) in 3Q15, which is $1.22 higher than gas sold for in the NYMEX futures market. What that means is that they’re really good at hedging and using complicated financial instruments called derivatives in order to get a higher price for their gas than many others get. Good for them!

    However, not part of the update released today are Antero’s income statement and balance sheet–which will show the true financial condition of the company. They’re holding that back until the quarterly analyst phone call on Oct. 28.

    We also spotted a new 10-year agreement for LNG to Chubu Electric via the Freeport (TX) LNG terminal…

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    Polish energy company PKN expands via north American deals

    Poland's top refiner, the state-controlled PKN Orlen, said on Tuesday it has launched takeover bids for Canada's Kicking Horse Energy and Nasdaq-listed FX Energy, worth a total of over $300 million.

    PKN currently buys most of its oil from neighbouring Russia and these deals would expand its own exploration and production activities.

    It already runs one such upstream business in Canada after it bought TriOil Resources in 2013 and has said it wants to seize potential takeovers opportunities as low oil prices force rivals to sell assets.

    According to PKN, valued at 27.7 billion zlotys ($7.5 billion) on the Warsaw bourse, the takeovers will raise its deposit base by 38 million barrels of oil equivalent (boe), or 76 percent, to 88 million boe.

    "In line with our strategy in the upstream segment we're aiming at achieving a production potential of 6 million boe a year in 2017," PKN Chief executive Jacek Krawiec said in a statement.

    PKN has offered Kicking Horse's shareholders 4.75 Canadian dollars for each share in an all-cash deal, valuing the firm's equity at 293 million Canadian dollars ($225 million), and putting the enterprise value at C$ 356 million.

    It also offered FX Energy shareholders $1.15 in cash for each common share and $25 for each preffered share, valuing the firm's equity at $83 million. PKN said it it will annouce a tender offer for FX Energy by Oct. 23.

    Kicking Horse, an oil and gas explorer, produces around 4,000 boe a day from its Alberta-based unit. Its market value on Canada's TSX Venture Exchange stands at C$199 million.

    Besides U.S. producing assets in Montana and Nevada, FX Energy has concessions around Poland, partly co-owned with Poland's state-controlled gas group PGNiG. Its curret market value equals $59 million.

    PKN, which runs a refining and gas-station business in Poland, Lithuania, the Czech Republic and Germany, has not yet produced oil at home. It has been trying to build a foothold in shale gas but its efforts have so far come to naught.

    The group plans to delist both takeover targets and finalise the deals in the first quarter of 2016. According to PKN, they do not alter its dividend policy.
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    Alternative Energy

    PTC India sign MoU with Solar Energy Corpn

    Business Line reported that PTC India Ltd has signed a MoU with Solar Energy Corporation of India for the sale and purchase of power generated from 3,000 MW of solar projects.

    The power from these projects will be sold onward on a long term basis for 25 years from the commercial operation date of each project to the state electricity distribution utilities.

    PTC India Ltd statement said that "Under the said arrangement, SECI will facilitate development of 3,000 MW of solar projects at various locations on behalf of central public sector units or any other government/private agency. PTC will purchase solar power offered by SECI/project developers for onward sale to state utilities at tariffs to be determined by SECI through reverse auction process or any other competitive route."
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    Statoil Readies Investment in Scottish Floating Wind Farm

    Statoil ASA, Norway’s biggest oil company, is looking to make an investment decision to go ahead with its Hywind floating windpower farm offshore Scotland within the six next weeks, the first such commitment since creating a separate renewable-energy unit.

    “Offshore wind has a strong potential” along the coast of the U.K., Stephen Bull, senior vice president for wind power projects, said in an interview Tuesday at Statoil’s office outside of Oslo. “It’s a natural place to try and develop and build our business.”

    The Hywind park, which will consist of five 6 megawatt floating turbines, is a pilot project designed to demonstrate the technology on a commercial scale, according to Statoil. Bull declined to provide a spending estimate. Construction is planned to start as early as next year with final commissioning in 2017, according the company.

    Statoil is committing to the project after Chief Executive OfficerEldar Saetre, who succeeded Helge Lund at the top of the Norwegian state-controlled company a year ago, named Irene Rummelhoff to head its newly created New Energy Solutions unit.

    While the company aims to take advantage of its offshore expertise in expanding into offshore-wind and other renewable-energy projects, they will need to compete with oil and gas ventures to demonstrate profitability, Bull said.

    “To kick off and develop a renewables business, you can’t do this on the hope that we will make money one day,” he said. “We need to have positive rates of return. We need to show that this can be profitable.”

    Statoil’s only commercial wind project in production is the Sheringham Shoal farm offshore eastern England. It also made an investment decision on the nearby Dudgeon project last year and is a partner on two Dogger Bank projects, which were approved by the U.K. earlier this year.
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    CEFC’s Yates says solar-to-hydrogen fuel cheaper than petrol in regions

    Clean Energy Finance Corporation chief executive Oliver Yates says he is a big fan of hydrogen energy, and believes that right now solar-to-hydrogen fuels in regional Australia would be cheaper at the pump than petrol. All that is missing are the hydrogen fuel cell cars and a refuelling network.

    But Yates would like to fix that. “I’m a self-proclaimed hydrogen junkie,” he quipped in a speech to 6th World Hydrogen Technologies Conference in Sydney this week. That was opposed to the overall Australian economy, which he said was a “carbon junkie” and needed to drop its habit of heavy emissions.

    Yates has a vision of having hydrogen fuels follow the NBN network around Australia. This, he says, would provide power for the telecoms towers, and also provide a network of fuelling stations that could be used by commercial and heavy vehicles – utes, trucks, buses and even tractors – and at the distances required in regional Australia.

    “There is an ability for hydrogen to be a piggy back technology – with one investment, Australia can solve two problems. Can we think that far ahead?”

    Yates said that an array of solar panels, with an electrolysed to transform the electricity into hydrogen (just add water and bottle the left over pure oxygen) might be able to deliver fuel at around $1.25 a litre. In areas such as Mt Isa, where fuel had to be trucked vast distances, petrol prices were above $1.40. In other areas, even more.

    Yates said that potentially in some remote areas, it would be possible to cut out the costly transportation of fuels. “We have got significant solar resources, and significant wind resources,” Yates said.

    “We like the hydrogen space; it is versatile, transportable and flexible and economic in regional Australia right now. It is a very exiting market.”

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    Rare earth major cuts production

    China Northern Rare Earth (Group) High-tech Co Ltd said on Tuesday that it was effecting a 10percent reduction in its rare earth output target, as prices have fallen sharply due to oversupplyand illegal mining.

    The company, China's largest rare earth miner, said its reduced rare earth output for this yearwould be 2,596 metric tons. The move, the company said, will "help stabilize the market and propup prices of rare earth products".

    An informed source told China Daily that the company was asked by the government to cut itsoutput target in September, after prices fell more than expected, and many rare earth mining firmsslipped into the red.

    "The other five major rare earth miners will also roll out measures to cut their output targets forthis year," the source said. "We hope this will bring normalcy to the industry and relieve thepressures caused by a glut in the market."

    Operating revenue of the company rose 35 percent to 3.2 billion yuan ($502 million) for the firsthalf of this year, but its profit was only 260 million yuan, up a mere 2 percent for the same period.

    The average prices of neodymium iron boron permanent magnets made out of rare earths andused in strategic industries such as smartphones, military and airplane equipment, haveplummeted since 2011.

    Prices fell to their lowest this year, as China decided to drop export quotas in January, andannounced cancellation of rare earth export tariffs in April, in a bid to curtail smuggling.

    Meanwhile, the sharp drop in prices has boosted overseas sales of rare earths, as foreign buyersare going on a shopping spree, taking advantage of low prices.

    China, the world's largest rare earth supplier, exported 3,658 tons of rare earths in July, thehighest level in four years, double the amount from a year earlier. However, the average priceshave witnessed a drop of about 30 percent.

    During the first three quarters of this year, about 23,400 tons of rare earths were exported tocountries like the United States and Japan, data from the General Administration of Customsshowed.

    Chen Zhanheng, deputy secretary-general of the Association of China Rare Earth Industry, saidthat the curbs on production are expected to push up prices in the short term. However,technology will be the key to solving the problems faced by the rare earth industry in the longterm.

    "Companies will have to shift to downstream business to absorb the excess production," Chensaid.

    The Ministry of Industry and Information Technology announced the first batch of rare earth production quotas in 2015. This includes a quotas of 52,500 tons for rare earth mining and another 50,050 tons of rare earths smelting and separating production quotas.
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    Denison, Fission cancel merger as investor support falls short

    Canadian uranium companies Denison Mines Corp and Fission Uranium Corp said on Tuesday they have terminated their C$483 million ($371.71 million) merger agreement due to opposition from Fission's shareholders.

    While a majority of the Fission shares voted were in favor of the purchase by Denison, the required two-thirds approval was not obtained, the companies said in a statement.

    "A lot of people who own our stock tend to be the type who want a home run, not a single," Fission Chief Executive Dev Randhawa said in an interview. "They feel combining it with another company dilutes the story."

    Cantor Fitzgerald analyst Rob Chang said some Fission shareholders did not support the combination because it lacked operational synergies. They viewed Denison's assets as lower quality than Fission's Patterson Lake South project in northern Saskatchewan, he added.

    Randhawa said he does not expect a revised offer from Denison.

    Fission's shares jumped 5.8 percent, or 4 Canadian cents, to 73 cents in Toronto, while Denison's stock gained 1.5 percent, or 1 Canadian cent, to 68 cents.

    Fission will continue drilling at Patterson Lake, viewed by some as the best undeveloped uranium deposit in the world, and resume its search for a strategic investor, Randhawa said.

    At the deadline for submission of proxies on Friday, Denison's shareholders strongly supported the arrangement.

    Both companies have canceled the shareholders' meetings scheduled for Wednesday.

    Up to Friday's close, Denison Mines' shares had declined 9.4 percent since the announcement of the deal, while Fission Uranium's stock had lost nearly a third of its value.

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    Base Metals

    LME Week delegates mildly optimistic

    LME Week delegates mildly optimistic 

    The mood at the metals world's number one annual gathering – LME Week – appears to be one of cautious optimism.

    A survey of 400 metals and mining investors polled by Macquarie at the London summit returned a moderately bullish view of the next 12 months for base metals.

    Platts quotes Macquarie's head of commodity research Colin Hamilton as saying "despite the ongoing and conspicuous issues for fundamentals across base metals markets, the overall mood was not as bearish as we might have expected":

    "While concern over Chinese economic growth and metals demand was clear, the consensus for growth, albeit slower, persisted," he added.

    Zinc was the top pick among the delegates with the consensus view that the metal would be trading at $2,000 a tonne in a year's time, up by double digits from today's ruling price.

    Glencore may also ride to the rescue of nickel with speculation rife that the Swiss mining and trading giant is on the brink of announcing supply cuts

    Glencore said last week it would slash its zinc output by over a third or 500,000 tonnes, most of it in Australia, after the price of the industrial metal fell to a five-year low leading to a 10% jump in the price on Friday.

    Copper was also expected to strengthen adding $500 to todays's price around $5,300 over the next year, while tin should continue its good run holding onto its gains around $15,000 a tonne.

    Aluminum was considered the worst bet with predictions of a fall to $1,450 a tonne by this time next year.

    Last year's favourite, nickel also found no love with forecasts of further losses to $9,650 a tonne compared to today's LME ask of $10,460 a tonne.

    But here Glencore may also ride to the rescue with speculation rife that the Swiss mining and trading giant is on the brink of announcing cuts at its operations in Canada, Australia, New Caledonia and elsewhere. Glencore is the world's fifth largest producers of the steelmaking raw material.

    During the boom years copper was the top pick among summit attendees for five years in a row before switching to lead and tin in 2013.

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    Indonesia wants more royalties from Freeport for longer contract

    Freeport-McMoRan Inc should significantly increase the amount it pays in royalty payments to the Indonesian government if it wants to extend a contract to operate one of the world's biggest copper mines, a cabinet minister said on Tuesday.

    The U.S. firm last week said it received assurances from Indonesian mining minister Sudirman Said that Freeport's contract for its giant Grasberg copper and gold mine would be extended beyond 2021.

    But comments this week from Said's boss, chief natural resources minister Rizal Ramli, have raised questions as to whether contract renegotiations between Freeport and the Indonesian government will be that straightrandiforward.

    Ramli, who oversees mining and energy, sharply criticized Freeport's history in Indonesia, telling parliament that the government had not shared enough in the company's profits over the past few decades.

    "It is time to rewrite our history," Ramli said. "(Freeport) has to pay 6-7 percent royalty."

    "If Indonesia's government shows its persistence and it won't easily be lobbied by Freeport, I think that Freeport will give up in the negotiation process and follow what we want."

    Freeport agreed in July 2014 to start paying 4 percent in royalties on copper sales, up from 1.5-3.5 percent previously.

    Freeport spokesman Riza Pratama said a royalty payment increase was one of the issues being discussed with the government.

    "(The mines ministry) and Freeport are working hard to finalize the contract extension," Pratama said.

    Freeport, the biggest listed U.S. copper producer and one of Indonesia's largest taxpayers, has been trying for years to obtain a contract extension but the government says legally it cannot start talks until 2019.

    An Indonesian government official said on Friday it planned to amend rules on mining contracts by the end of this year, allowing Freeport to apply for an extension immediately.

    Freeport plans to invest $18 billion to transition the Grasberg complex from an open pit to underground mining in late 2017. The company currently produces about 220,000 tonnes of copper ore per day, which is then converted to copper concentrate.

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    Nickel pig iron producer in Indonesia to triple capacity by May

     A unit of China steel producer Tsingshan Group is set to triple its capacity to produce nickel pig iron in Indonesia as soon as May, an executive said, as the Southeast Asian nation pushes to win more profit from its mineral wealth.

    Chinese stainless steel mills often feed nickel pig iron into furnaces to strengthen their product as a cheaper alternative to refined nickel.

    That means increased Indonesian nickel pig iron output could help pour cold water on remaining hopes for international nickel prices to climb off six-year lows.

    "By May next year, we'll have an installed capacity of 900,000 tonnes of nickel pig iron," Tsingshan Bintangdelapan Group CEO Alexander Barus said in an interview late last week.

    The expansion of its facility on the island of Sulawesi will make the company the country's top producer of the nickel iron feed. The plant has been operating at 60-70 percent of its current capacity of 300,000 tonnes, said Barus.

    The firm is developing three smelters at the site, which once completed will have a combined annual output capacity of 1.2 million tonnes of nickel pig iron, containing 120,000 tonnes of nickel. The group expects all three smelters to be completed by June 2017. Other stakeholders include Hanwa Co Ltd of Japan.

    Output from the plant has already driven the Southeast Asian nation to become the top supplier of the feed to China's vast stainless steel sector in the wake of a ban on exporting mineral ores that kicked in at the start of last year.

    Growing smelting capacity is a rare piece of good news for President Joko Widodo who has been struggling with faltering economic growth and political infighting since taking power last year, as his government has prioritised a drive to win bigger returns from Indonesia's mineral resources.

    While the ban was intended to boost Indonesia's profits from its mineral wealth, miners and analysts had doubted the viability of developing downstream mineral processing facilities.

    Barus said the timetable for expanding the project had not been changed due to the low nickel prices, which this week stood around $10,400 per tonne. He expects price to recover to $12,000-13,000 in the next six months as the global economy revives.

    "We are producing at a loss now, but this is the way you arrive at an area where in the future you are going to be competitive," he said.

    "For the time being we are sticking to our schedule."

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    Steel, Iron Ore and Coal

    Shanxi Coking Coal cuts Oct prices 20-50 yuan/t

    Shanxi Coking Coal Group Co. Ltd, China’s largest metallurgical coal producer, has cut its offer price by 20-50 yuan/t ($3.15-$7.90/t) for some products to several strategic customers, effective from October 1.

    Most end users in northern China had received news and confirmation of the price drop, sources said on October 12.

    The miner cut 30 yuan/t for primary coking coal from its flagship Tunlan mine -- with 20-23% VM, less than 10% ash, less than 1% sulfur, and above 75 G-value -- for Taiyuan Iron & Steel Group.

    It also cut prices to similar extent for other coking coals with sulfur levels between 1-2% from mines of Jiexiu, Xinliu and Xinyu.

    However a price cut of 50 yuan/t was applied to Shaqu coal with less than 0.8% sulfur, 20-23% VM, and above 85 G-value.

    Meanwhile, a drop of 30 yuan/t was applied to fat coal from Wangjiahui mine and 20 yuan/t to Zhaocheng mine.

    For 1/3 coking coal, there was a 40-50 yuan/t cut made for Zhujiadian Kelan coals with below 2% sulfur, 31-35% VM, 9-10% ash and 85 G-value.

    Guandi PCI with 13-16% VM, below 10% ash and below 1.1% sulfur fell 30 yuan/t.

    The group also cut 30 yuan/t on Xiaonan and Wangjiahui coal and 20 yuan/t on Zhaocheng coal for Anhui Iron & Steel Group, sources said.
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    China Sep coal exports up 67%.

    China’s coal imports, including lignite, thermal and metallurgical coal, fell 16.02% on year to 17.77 million tonnes in September -- the 15th consecutive year-on-year drop, but up 1.6% on month, showed data from the General Administration of Customs (GAC) on October 13.

    The decrease was mainly because buyers preferred domestic coals due to large coal miners’ price cut and discounts under sales pressure.

    The value of September imports stood at $977.6 million, falling 35.65% on year and down 0.32% on month. That translates to an average price of $55.01/t, $16.78 lower than the year prior and down $1.06/t from August.

    The GAC didn’t give a breakdown of the September imports, which could be available late this month.

    Over January-September, the country imported a total 156.36 million tonnes of coal, down 29.83% from a year ago, the GAC said.

    Total value of imports during the same period amounted to $9.63 billion, plunging 44.5% year on year.

    Meanwhile, China exported 730,000 tonnes of coal in September, soaring 65.91% on year and up 37.74% on month.

    The value of the September exports was $63.64 million, increasing 28.01% from a year ago and up 43.3% from August. That translates to an average price of $87.18/t, falling $25.82 on year but up $3.39/t on month.

    Over January-September, China exported a total 4.02 million tonnes of coal, a year-on-year decline of 7.89%, with total value falling 27% on year to $394.6 million.

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    Rio Tinto to pay millions in royalties to mining magnate Rinehart

    Rio Tinto Plc will have to pay more than A$200 million ($144 million) in royalties and court fees after losing an Australian legal battle with iron ore magnate Gina Rinehart.

    The High Court on Wednesday ruled in favour of Rinehart, one of Asia's richest women, and heirs to her father's business partner in their pursuit of royalties from two Rio mines in the Pilbara, Western Australia.

    The royalties were part of a deal made when Rinehart's father, Lang Hancock, and his partner Peter Wright sold the Channar and Eastern Range mines to Rio Tinto in 1970.

    Rio had argued through its subsidiary Mount Bruce Mining Pty Ltd that it was not liable to pay the royalties to Rinehart's Hancock Prospecting Pty Ltd and Wright Prospecting Pty Ltd because the mines were not continually in their possession over the period.

    Lower courts had ruled the payout should be voided due to a lapse in Rio's control of the Channar Mine in the 1970s.

    Wright and Hancock's lawyer Allan Myers told the court during hearings that they were claiming A$200 million in lost royalties.

    Rio was also ordered by the High Court to pay the costs of the court case, which has been running for several years.
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    China Sept steel products exports hit new high

    China saw its steel products exports hit record high to 11.25 million tonnes in September, rising 32% year on year and up 15.6% from August, showed the customs data on October 13.

    The increase was mainly attributed to the steel producers’ application to customs in advance before the National Day holidays.

    The value of September steel exports stood at $5.68 billion, dropping 9.8% on year but up 10.4% on month. That translated to an average export price of $504.7/t in September, dropping 4.5% from August and down 31.7% year on year.

    Over January-September, the exports of China’s steel products stood at 83.11 million tonnes, a year-on-year decline of 27.2%.

    Total exports value during the same period stood at $48.66 billion, down 4.8% from a year ago.

    China’s steel price continued to drop in September. By end-September, the price of rebar fell 103.1 yuan/t on month to 2,052.4 yuan/t.

    Impacted by the slowing decline of steel price and intensified international anti-dumping acts, the export of steel products may fall slightly but remain at a high level in October.

    The new export order sub-index under the Purchasing Managers Index (PMI) for China’s steel industry dropped 13.8 from August to 40.7 in September, hitting a five-month low, data showed from the China Federation of Logistics and Purchasing (CFLP).

    Meanwhile, China imported 1.01 million tonnes of steel products in September, dropping 25.7% on year and down 1% on month. The value of imports stood at $1.08 billion, dropping 2.8% from August and down 35.5% from a year ago.

    Over January-September, the imported steel products amounted to 9.73 million tonnes, down 11.6% on year. The value totaled $11.2 billion, a decline of 18.7% year on year.

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