Mark Latham Commodity Equity Intelligence Service

Monday 27th July 2015
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    CRB breaks to new low.

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    A Summary of China H1 power projects under construction

    China had a total of 172.66 GW of power projects of various energy sources under construction by May 31, the China Electricity Council (CEC) said earlier this month.

    Coal-fired power projects continued to take the largest share, hitting 62.64% at 105.16 GW, according to the CEC data.

    The scale of construction for new coal-fired plants is expected to stay high in the future, as China further eliminates ageing coal-fired power generating units, said the CEC.

    Nuclear plants under construction accounted for 20.99% or 36.24 GW, up from 18.99% a year earlier; followed were wind power projects at 11.03% or 19.05 GW, up from 6.03% from the same period last year.

    The strong momentum in nuclear and wind power projects suggests that the country is seeking new energy sources as it shifts away from highly-polluting coal plants in order to optimize energy structure and improve air quality.

    http://en.sxcoal.com/127424/NewsShow.html
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    Sabic Net Beats Estimates as It Battles Volatile Oil Prices

    Profit at Saudi Basic Industries Corp. declined less than analyst estimates as the Middle East’s biggest petrochemicals company seeks ways to weather swings in oil prices.

    Sabic’s second-quarter net income dropped 4.5 percent to 6.17 billion riyals ($1.65 billion) from 6.46 billion riyals a year earlier, the Riyadh-based company said in a statement to the Saudi bourse. The company’s profit is 25 percent higher than the 4.95 billion riyal mean estimate of nine analysts compiled by Bloomberg. It will pay a dividend of 2.5 riyals a share for the first half.

    “Given the volatility in oil prices, we are looking at ways to optimize our feedstock production,” acting Chief Executive Officer Yousef Al Benyan said in a news conference in Riyadh.

    Profit declined due to lower-than-average sales prices even after Sabic reduced its cost of production, the company said in the statement. Saudi Arabia is OPEC’s biggest oil producer, and the Arab nation is home to 16 percent of the world’s proven oil reserves. Brent crude, a pricing benchmark for about half the world’s oil, declined 49 percent in the last 12 months. The company’s second-quarter sales fell 13 percent to 42 billion riyals.

    Sabic, which won’t be directly involved in Saudi Arabia’s shale production and has no plans to invest in Iran, is considering opportunities in U.S. shale gas production, Al Benyan said. It signed a shale gas production deal to export the product from the U.S. to the U.K. and other countries, he said.

    Sabic’s outlook on China’s economy is positive, he said. China was Saudi Arabia’s biggest trading partner last year, according to data compiled by Bloomberg. The company’s shares rose 2 percent to 100.25 riyals as of 11:42 a.m. in Riyadh, bringing its increase this year to 20 percent. That compares with a 12 percent gain in the same period for the 170-member Tadawul All Share Index.

    http://www.bloomberg.com/news/articles/2015-07-26/sabic-second-quarter-profit-drops-4-5-percent-beats-estimates
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    Oil and Gas

    VLCC rates rising to records

    A key benchmark route, Middle East Gulf (MEG) to Japan, rose to $93,038 per day which represents an increase of 17.7% compared to spot rates just a week earlier. It is also noteworthy that West African (WAF) routes have seen a massive jump as well moving up 14.9% to $92,081 per day to the USG (United States Gulf). Strong demand out of Asia, particularly India and China, has also sent the WAF to Far East route to new five year highs as well.
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    Crude Oil Plunge Boosts Reliance Profit to Highest Since 2007

    Reliance Industries Ltd., operator of the world’s biggest oil-refinery complex, reported its highest quarterly profit in seven and a half years as lower crude costs boosted earnings from fuel sales.

    First-quarter net income rose 12 percent to 63.2 billion rupees ($987 million), or 19.5 rupees a share, in the three months ended June 30 from 56.5 billion rupees, or 17.5 rupees, a year earlie. That beat the 62.5 billion-rupee median of 16 analyst estimates compiled by Bloomberg. Sales fell 32 percent to 658.2 billion rupees as the value of products sold overseas almost halved to $5.1 billion.

    Reliance, among a handful of global refiners with the ability to process low-grade crude into high-value products and switch between fuels depending on market prices, is gaining from crude’s 42 percent slump in the quarter from a year ago. The company, controlled by billionaire Mukesh Ambani, is investing $12 billion to boost its petrochemicals capacity and build facilities to import ethane from the U.S., securing low-cost feedstock for polymer resins such as those used to make clothing and containers.

    “The company has top class assets,” D.K. Aggarwal, chairman of Mumbai-based brokerage SMC Investments & Advisors Ltd., said before the earnings. “With crude oil expected to remain on the lower side, Reliance should continue to show good numbers.”

    During the quarter, $10.40 was earned for every barrel of crude turned into fuels, compared with $8.70 a year earlier and $10.10 in the three months ended March 31, Reliance said in the statement.

    Raw material costs fell 40 percent to 489.8 billion rupees, reflecting lower crude prices in the period.

    The start of downstream expansions in the next 18 months will lift Reliance’s earnings before interest, taxes, depreciation and amortization by 75 percent over the next three years, Vikash Kumar Jain, an analyst at CLSA Asia-Pacific Markets, said .

    Upstream shale ventures in the U.S. were affected by declining prices, Reliance said in the statement. Henry Hub gas prices averaged $2.72 per million British thermal unit, 44 percent less than a year earlier. While the market outlook is curtailing near-term growth, the business holds long-term promise, Reliance said.

    Natural gas output from KG-D6 declined 13 percent to 37 billion cubic feet in the quarter from a year earlier, Reliance said. Oil production from the block declined 16 percent to 440,000 barrels and condensate output dropped 6 percent to 80,000 barrels.

    Reliance, which also runs stores selling fruits and clothes, has spent 1 trillion rupees to build a telecommunications network that will start by December this year, Ambani told shareholders in June. First-quarter revenue from the retail business grew 18 percent on year to 47 billion rupees. As on June 30, Reliance Retail operated 2,747 stores across 210 cities in India.

    http://www.bloomberg.com/news/articles/2015-07-24/reliance-profit-rises-as-oil-price-plunge-boosts-fuel-margins
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    Galp Energia beats profit expectations

    Portugal's Galp Energia posted an adjusted quarterly net profit nearly triple year-ago levels, beating expectations, and lifted its pretax earnings estimates for the year by almost 20 percent.

    The improvement was due to a recovery in refining margins and a steep increase in oil output in Brazil, where Galp expects a new offshore oil production platform on the Iracema North field to start pumping crude in the coming days, one quarter ahead of schedule.

    Two other floating production and storage platforms were on track to start producing at the giant Lula/Iracema field in the first half of next year, Galp said in a presentation.

    Galp, which said earlier this month that oil output in the second quarter rose by 65 percent, raised its forecast for 2015 earnings before interest, taxes, depreciation and amortization (EBITDA) to between 1.3 billion euros ($1.44 billion) and 1.5 billion euros from 1.1 billion to 1.3 billion.

    It expects an average working interest daily output of 43,000 barrels of oil equivalent in 2015, practically in line with that achieved in the second quarter.

    Galp had a net profit of 189 million euros in the April-June period, up from 68 million euros a year earlier. Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 64 percent to 446 million euros. The results are adjusted to reflect changes in the company's stocks of crude.

    Analysts polled by Reuters had forecast, on average, an adjusted net profit of 150 million euros and EBITDA of 433 million euros. Galp shares rose 1.4 percent in early trading, outperforming the broader market in Lisbon, off 0.3 percent.

    Galp's refining margin in the quarter soared to $7.3 per barrel from minus $0.2 a year earlier and from $5.9 in the first quarter of 2015, also exceeding the market's benchmark margin of $5.2, the company said.

    http://www.upstreamonline.com/incoming/1406912/galp-sees-boost-in-quarterly-profit?utm_source=twitterfeed&utm_medium=twitter

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    China’s LNG imports in June rise

    China imported 1.72 million metric tons of LNG during the month of June, a 28.4% gain year on year, according to General Administration of Customs data.

    In comparison to the month of May, imports of LNG into China jumped 50% on what was the lowest level since 2012. In May, the country imported 1.12 million metric tons of liquefied natural gas.

    Platts reported that the majority of LNG imports came from Australia, while China also received cargoes from Equatorial Guinea LNG, Papua New Guinea LNG and Malaysia.

    Natural gas imports via a pipeline dropped 13.7% in June compared to the same month in 2014 while, together with LNG imports, China’s total natural gas imports increased 2.7% year on year, totalling 3.5 million metric tons.

    http://www.lngworldnews.com/chinas-lng-imports-in-june-rise/
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    Aggreko issues profit warning due to oil and gas slowdown

    British temporary power firm Aggreko said on Friday that its pretax profit for this year would be between 8 and 15 percent lower than market forecasts, due to a slowdown in oil and gas and less favourable contract terms.

    Aggreko said its North American business had been hit by a lower oil price and declining activity there meant less equipment was being hired in both shale basins and the Gulf of Mexico.

    Elsewhere, the company said security challenges in Yemen meant it could not operate all of its generators and equipment, while in Bangladesh the terms of a contract extension now being finalised would not be as favourable as it had hoped.

    It said it now expected full-year pretax profit of between 250 million pounds ($387.73 million) and 270 million pounds at current exchange rates, for the year ending in December.

    A Thomson Reuters poll of 17 analysts has forecast a pretax profit of 293 million pounds.

    The company also said it had been affected by adverse exchange rate movements in recent months without giving details.

    Shares in the company, whose equipment powers major events and covers electricity shortfalls, plunged 15 percent to a five-year low, making the stock the top loser on Britain's mid-cap index.

    In March the company had said its profit this year would be unchanged from last year at 289 million pounds.

    "We have been cautious on the high valuation against an increasing risk profile for some time, the market will now need to realign this," said Investec analyst Andrew Gibb, who has a "sell" rating on the stock.

    Aggreko has in recent years benefited from expanding its business into emerging economies, some of which are now being affected by increasing geopolitical uncertainty or falling commodity prices.

    Equipment companies globally are being affected by the oil and gas slowdown. U.S. giant Caterpillar Inc said on Thursday that the good times were over and it would prune operations and cut costs to adapt.

    http://www.reuters.com/article/2015/07/24/aggreko-outlook-idUSL5N10414I20150724
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    Shale Breakevens


    Image titleConsensus in November 2014. Average ~$60


    Image titleReality today. Average <$50

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    US rig count jumps 19 units to 876

    The US drilling rig count jumped 19 units to reach 876 during the week ended July 24, according to data from Baker Hughes Inc.

    The gains came primarily from rigs drilling on land. Land rigs were up 17 units to 841. Those drilling in inland waters also increased, up 2 units to reach 4 rigs working.

    During the week, rigs targeting oil jumped 21 units to 659. Gas-directed rigs, meanwhile, were down 2 units to 216. Rigs considered unclassified were unchanged at 1 rig working.

    Rigs engaged in horizontal drilling increased 12 units to 662. Directional drilling rigs lost 1 unit to 83.

    Rigs drilling offshore and in the Gulf of Mexico were both unchanged this week, both maintaining counts of 31.

    Canada’s rig count continued its upward climb, increasing 8 units to an even 200. Its count has now risen in 9 of the last 11 weeks. This week’s gain was spurred by a rebound in gas-directed rigs, which were up 8 units to 102. Oil-directed rigs, meanwhile, were unchanged at 98 rigs working. Canada’s overall count is still down 195 year-over-year.

    Among the major oil- and gas-producing states, Texas was up 8 units to 374. Louisiana jumped 7 rigs to 76. Oklahoma, at 107 rigs working, was up 2. Four states were up 1 unit each: North Dakota, 69; New Mexico, 51; Pennsylvania, 44; and Ohio, 20. Eight states remain unchanged from last week: Colorado, 39; Wyoming, 21; West Virginia, 18; Alaska, 11; California, 11; Kansas, 11; Utah, 7; and Arkansas, 4.

    http://www.ogj.com/articles/2015/07/bhi-us-rig-count-jumps-19-units-to-876.html
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    Cabot Oil & Gas Corporation Announces Second Quarter

    Cabot Oil & Gas Corporation COG, -1.11%today reported its financial and operating results for the second quarter of 2015. "Despite our strategic decision to curtail Marcellus volumes in the second quarter due to the adverse price environment, Cabot still generated production growth and reduced unit costs year-over-year," said Dan O. Dinges, Chairman, President and Chief Executive Officer. "Our top-tier Marcellus asset affords us the ability to reduce our gross production volumes by approximately 500 million cubic feet (Mmcf) per day and still report positive normalized results."

    Equivalent production in the second quarter of 2015 was 138.0 billion cubic feet equivalent (Bcfe), consisting of 128.4 billion cubic feet (Bcf) of natural gas and 1.6 million barrels (Mmbbls) of liquids (crude oil/condensate/natural gas liquids). These figures represent increases of 8 percent, 5 percent, and 68 percent, respectively, compared to the second quarter of 2014.

    Cash flow from operations in the second quarter of 2015 was $171.2 million, compared to $329.6 million in the second quarter of 2014. Discretionary cash flow in the second quarter of 2015 was $183.2 million, compared to $332.3 million in the second quarter of 2014. Net loss in the second quarter of 2015 was $27.5 million, or $0.07 per share, compared to net income of $118.4 million, or $0.28 per share, in the second quarter of 2014. Excluding the effect of selected items including a $36.5 million after-tax non-cash mark-to-market loss on natural gas derivatives, net income was $14.6 million, or $0.03 per share, in the second quarter of 2015, compared to $115.3 million, or $0.28 per share, in the second quarter of 2014. EBITDAX in the second quarter of 2015 was $203.9 million, compared to $367.1 million in the second quarter of 2014. Significant reductions in realized prices for both natural gas and oil were the primary drivers for the lower results in the quarter, partially offset by higher equivalent production. See the supplemental tables at the end of this press release for a reconciliation of non-GAAP measures including discretionary cash flow, net income excluding selected items, EBITDAX and net debt to adjusted capitalization ratio.

    Natural gas price realizations, including the effect of hedges, were $2.15 per thousand cubic feet (Mcf) in the second quarter of 2015, down 38 percent compared to the second quarter of 2014. Excluding the impact of hedges, natural gas price realizations for the quarter were $1.75 per Mcf, representing an $0.89 discount to NYMEX settlement prices. Oil price realizations were $56.10 per barrel (Bbl), down 43 percent compared to the second quarter of 2014.

    Total per unit costs (including financing) decreased to $2.52 per thousand cubic feet equivalent (Mcfe) in the second quarter of 2015, an improvement of 3 percent from $2.59 per Mcfe in the second quarter of 2014. "Our cash unit costs in the Marcellus during the second quarter were approximately $0.85 per Mcf, while our Eagle Ford cash unit costs were approximately $15.00 per Bbl," expressed Dinges. "With the expectation of prolonged weakness in commodity prices, we continue to focus on reducing costs and maximizing operating efficiencies throughout the organization."

    Cabot drilled or participated in a total of 37 net wells during the second quarter of 2015 and incurred a total of $228.2 million in capital expenditures associated with activity during the second quarter. "For a majority of the second quarter the Company's total rig count stood at four, with the expectation of holding this level flat through the remainder of the year and into the first part of 2016," commented Dinges. "We do not believe that accelerating activity and allocating incremental capital in this commodity price environment is the appropriate investment decision, especially in light of a more favorable outlook for Cabot's realized natural gas prices upon in-service of Constitution Pipeline in the second half of 2016."

    http://world.einnews.com/article/277595991/7RMk6uAACDoS9NPv

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    Encana braces for job cuts; swings to heavy quarterly loss on charge

    Encana Corp. is expected to announce staff cuts on Friday following sharply weaker financial results as the company copes with the extended skid in oil prices.

    Early Friday, the company posted a loss attributable to shareholders of $1.61-billion (U.S.) or $1.91 per share for the quarter ended June 30. That compared with a profit of $271-million or 37 cents per share a year ago. Revenue fell to $830-million from $1.59-billion.

    The loss for the quarter included an after-tax $1.33-billion impairment charge as well as a $187-million after-tax hit related to an unrealized hedging loss.

    On an operating basis, Encana says it lost $167-million or 20 cents per share for the quarter compared with an operating profit of $171 million or 23 cents per share a year ago.

    Like the bulk of its rivals, Encana has scaled back drilling, especially in Canada, and that division is taking the brunt of the terminations, a source close to the company said.

    The cuts affect “a little over 200” staff, according to an internal memo from Encana chief executive Doug Suttles, issued late on Thursday.

    The layoffs represent the first sizable cut since the company introduced a new, more focused North America-wide strategy under Mr. Suttles in late 2013, a few months after he was hired. He was brought in to cure several ills at the company, including an overabundance of assets around the continent and heavy reliance on natural gas markets. At the time, 20 per cent of staff, nearly 1,000 workers, were let go.

    Encana’s latest reductions add to thousands of job losses in the Canadian oil patch since the collapse in oil prices late last year.

    Encana spokesman Jay Averill declined to discuss job reductions ahead of the release of financial results, but pointed to a statement issued to media in late June.

    “We’re aligning our organization with the well-documented and dramatic portfolio transformation we’ve delivered over the past year and a half. We expect some staff reductions, but not at the scale of what we undertook in 2013. Consistent with strategy we continue to build a company that can thrive through the commodity cycle,” the statement

    http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/encana-braces-for-job-cuts-weaker-earnings/article25653388/
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    Plummeting natgas prices slash revenue of Marcellus shale producers

    The head of Pennsylvania's largest shale gas producer concluded his quarterly earnings call Friday with a dark view of the situation confronting drillers in the Marcellus.

    “I have been in this business over 30 years. I've seen a lot of cycles, and this is one of those draconian, down markets,” Dan O. Dinges, CEO of Houston-based Cabot Oil & Gas Corp., said after spending an hour answering analysts' questions, and talking about low natural gas prices and the promise of more pipelines.

    Cabot swung to a $27 million loss for the quarter from a $118 million profit the year before despite a modest increase in production.

    Expect to hear similar news from Appalachia's other shale producers as they discuss financial results in the next weeks, based on the prices they have been getting for their gas — less than $2 per million British thermal units — and early word from a few companies.

    “The realized price they're getting, that's just ugly,” S&P Capital IQ energy analyst Stewart Glickman said after Downtown-based EQT Corp. released its earnings last week. Pennsylvania's fifth-largest shale gas producer eked out a $5.5 million profit in the quarter — down 95 percent from the year before — but only because of increased revenue from its midstream pipeline operations.

    “It's a rough market to be in if you're trying to sell natural gas these days,” Glickman said, noting a 40 to 50 percent drop in the prices companies are reporting.

    Cecil-based Consol Energy Inc. warned investors it would report an operational loss Tuesday, when fellow producers Range Resources and Southwestern Energy will share results from the quarter. Other Top 10 Marcellus producers including Chevron, Anadarko and Chesapeake report later in the week and into the first week of August.

    Analysts expect losses at Consol, Anadarko and Chesapeake, and profits of less than 5 cents per share at Southwestern and Range, according to Bloomberg's consensus of estimates.

    Continued low prices combined with high debt at many companies will become a problem for them soon, said Kent Moors, editor of Oil & Energy Investor.

    “They need to be able to hedge their prices forward,” he said about the practice of locking in good prices now for later delivery.

    “We just don't see that opportunity today,” Dinges said.

    Read more: http://triblive.com/business/headlines/8748211-74/gas-prices-companies#ixzz3h4kX4njs
    Follow us: @triblive on Twitter | triblive on Facebook

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    Utica 20x bigger than original survey.

    University researchers and government agencies are pumping up the Utica shale play.

    It turns out that the natural-gas heavy underground formation that's led to millions of dollars in investment in eastern Ohio probably holds more gas than initially estimated.

    "(The Utica) is much larger than original estimates, and its size and potential recoverable resources are comparable to the Marcellus play, the largest shale oil and gas play in the U.S. and the second-largest

    The Utica, which is also increasingly being drilled in West Virginia and Pennsylvania, could have recoverable volumes of 782 trillion cubic feet of natural gas and almost 2 billion barrels of oil. That's about 20 times more than the U.S. Geological Survey's estimate just three years ago of 38 trillion cubic feet of gas. It also projected 940 million barrels of oil then.

    The Utica Shale Play Book Study comes from two years of research sponsored in part by a consortium of drillers in the area, including Chevron Corp. (NYSE: CVX), EnerVest Ltd. and Range Resources (NYSE:RRC).


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    Alternative Energy

    China unveils new energy micro-power grid guidelines

    China will develop a renewable energy micro-power grid, to further promote the sustainable development of energy resources, according to the National Energy Administration on Wednesday.

    Micro-power, the opposite of large power stations, refers to electricity sources that are small, mass producible, quick to deploy, cost competitive and rapidly scalable.

    The micro-power grid is an innovative approach to energy saving and emission reduction, according to guidelines released by the National Energy Administration.

    The guidelines listed specific requirements on the technological and operational management of micro power.

    New energy micro-power grid should make use of a mix of various renewable sources such as wind, solar, natural gas and geothermal sources.

    The guidelines acknowledged recent developments in research on technology and application of new energy micro-power grid, adding that this gave them the ability to build test projects.

    Micro-power operation releases little carbon, and allows all kinds of groups including individuals to generate power, which could encourage competition in power generating industry.

    http://en.chinamining.com.cn/Policies/2015-07-24/1437719972d73049.html
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    Uranium

    Guangdong nuclear power capacity to reach 14 GW by 2017

    Southern China’s economic hub Guangdong province aimed to realize nuclear power installed capacity totaling 14 GW by 2017, according to a document released by the provincial Development and Reform Commission on July 15.

    In 2015, Guangdong plans to finish construction of unit 2# of Jiangyang nuclear plant and advance the preliminary work of the first phase project of Lufeng nuclear plant

    It targets to add 1.08 GW of new installed capacity this year, and complete investment up to 18 billion yuan ($2.94 billion), according to the document.

    Newly added installed capacity would reach 2.83 GW in 2016, as the province would complete unit 3# of Jiangyang plant (1.08 GW) and unit 1# of Taishan plant (1.75 GW) during the year, with investment of 21 billion yuan.

    While in 2017, another 2.83 GW of newly-added capacity would be installed, namely, the unit 4# of Jiangyang plant (1.08 GW) and unit 2# of Taishan plant (1.75 GW), with total investment at 17 billion yuan.

    Guangdong, China’s leading nuclear power generation province, has completed Jiangyang unit 1# and Daya Bay nuclear power base, with total installed capacity at 7.2 GW.

    In addition, Guangdong vowed to increase onshore and offshore wind power installed capacity to 4.2 GW and 0.3 GW by 2017, respectively, and total solar power installed capacity at 2.2 GW, according to the document.
     
    http://en.sxcoal.com/0/127310/DataShow.html
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    Precious Metals

    Gold Bears come out to play

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    Platinum industry shrinks as Lonmin becomes first to cut output

    The platinum industry is seeing the first big mine closings in two years, and it may be just the beginning.

    Lonmin, the third-biggest miner of the precious metal, said Friday that it will reduce annual output by 100,000 ounces over the next two years and eliminate as many as 6,000 jobs. Other producers will have to do the same to bring a turnaround in prices, which sank to a six-year low last week, according to Wayne McCurrie, who helps manage $8 billion at Momentum Holdings in Pretoria, South Africa.

    “The others will do exactly the same as Lonmin did,” McCurrie said. “They’ve got to cut out the unprofitable production that’s not making money. If everyone caps production, the excess will eventually disappear.”

    Platinum has been in a bear market for two years, and South African producers, the world’s biggest, are losing money on three out of every four ounces they mine. Prices have plunged 19% this year on a glut of metal from stockpiles and recycled material.

    http://www.mineweb.com/news/platinum-group-metals/platinum-industry-shrinks-as-lonmin-becomes-first-to-cut-output/
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    De Beers has weak first half, looks forward to H2

    Diamond mining giant De Beers on Friday said that, despite a challenging first half, it still achieved a solid operating performance. However, its underlying earnings before interest and taxes (Ebit) decreased by 25% to $576-million for the six months ended June, compared with $765-million in the first half of the prior year. 

    This was primarily owing to softer rough diamond demand, resulting in weaker revenue, which was partly offset by lower operating costs and favourable exchange rates. Unit costs declined by almost 10% in comparison to 2014, with the effects of inflation being more than offset by foreign exchange benefits and cost control. Total sales decreased by 21% to $3-billion, with rough diamond sales decreasing by 21% to $2.7-billion

    Lower rough diamond revenue reflected a 27% reduction in consolidated sales volumes to 13.3-million carats, while average realised diamond prices increased by 7% to $206/ct, owing to the sale of a stronger product mix, despite a 4% lower average rough price index for the period. CEO Philippe Mellier said the “okay” performance saw the company trim down on production, tightening its overheads, working on its costs and trying to reduce the impact on profit. 

    De Beers had used operational flexibility at some mines to make marginal adjustments to production plans. The diamond miner saw a continuation of the market weakness of late 2014 during the first six months of 2015, resulting in a 25% underlying Ebit decrease. 

    In response to these market conditions, the business had revised production guidance for 2015 to 29-million to 31-million carats, while continuing to focus on its operational metrics. It also reduced its unit costs by 10% in dollar terms in the six months under review. 

    Mellier, meanwhile, gave an update on De Beers’ expectations for the various regions during the second half of the year. “In the US, by far the biggest market in the world, with more than 40%, we are cautiously optimistic. “The first quarter was weak, mainly owing to climatic conditions on the [US’s] East coast – it was really cold. The second quarter and the third quarter look like [they might be] pretty good quarters and we anticipate a pretty good selling season,” he said, adding that the company would have a strong marketing campaign at its Forevermark brand. In this regard, 

    De Beers opened a $10-million facility in Surat, in India, which would provide greater grading and inscription capacity, while its investment in microjet technology developer Synova would enable its customers to access better technology to increase efficiency. 

    http://www.miningweekly.com/article/de-beers-has-weak-first-half-looks-forward-to-h2-2015-07-24

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    Base Metals

    Freeport: Indonesian copper mine uncertainty rattles market

    Shares of diversified miner and energy producer Freeport-McMoRan sank for a second session on Friday, as uncertainty around Indonesian mining contracts added to worries about spending plans, high debt and falling commodity prices.

    The Phoenix, Arizona-based company has assured analysts it fully expects the Indonesian government to issue a six-month export renewal on Saturday, when the current permit expires.

    According to the Indonesian government, however, the firm still needs to show its commitment to building a second copper smelting facility by setting aside an estimated $80 million into an escrow account.

    "They haven't completed the terms," Coal and Minerals director general Bambang Gatot told reporters late on Friday, adding that his next meeting with executives is on Monday. It was not immediately clear if Freeport's exports would be stopped.

    "It depends what happens in the field," Gatot said. "The port may still allow them."

    Questions also remain surrounding its longer-term contract.

    Freeport, whose chairman is currently in Indonesia for talks with the government, is also negotiating terms of a contract or license that could extend to 2041.

    Contract certainty is crucial, Freeport said, because it will spend $15 billion on an underground expansion at its massive Grasberg copper and gold mine, and must commit to a new smelter, estimated at $2 billion-$2.5 billion.

    "Right now, more than 75 percent of our reserves are going to be produced after 2021,"
    Freeport Chief Executive Richard Adkerson said on a conference call Thursday.

    A current contract of work expires in 2021, but by law in Indonesia they cannot extend this contract until 2019 at the soonest.

    Freeport is looking to raise funds as it eyes a $1.2 billion to $1.6 billion investment to boost energy production.

    Analysts worry there may be a weak appetite for a planned initial public offering of up to 20 percent of Freeport's oil and gas business this autumn.

    http://www.reuters.com/article/2015/07/25/fcx-stocks-idUSL1N10502T20150725

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    Chile copper union vows to intensify strike after miner shot dead

    A Chilean mining contract worker was shot dead by police on Friday during a protest against state-owned copper company Codelco, prompting union leaders to say a four-day strike would intensify.

    Contract workers with the Confederation of Copper Workers, or CTC, have blocked roads at Codelco projects around the country demanding the right to negotiate a benefits package similar to that offered to direct Codelco employees.

    The CTC did not elaborate on how it would escalate the labor dispute, which has already forced the suspension of operations at Codelco's Salvador mine. Last year the mine produced 54,000 tonnes, or just under 1 percent of the company's total copper output.

    "The conflict obviously will keep going and, in fact, it will intensify. We're not going to let the death of our colleague be in vain," CTC President Manuel Ahumada said by telephone.

    A union representing Codelco's direct employees called on the copper company to draw up a proposal to improve the conditions of contract miners, but stopped short of calling on its members to join the strike.

    The CTC said contractor Nelson Quichillao had been shot while protesting near Codelco's Salvador mine in northern Chile.

    Codelco reported that four other mines targeted by striking workers continued normal operations.

    On Thursday the company said the halt at Salvador was costing it about $500,000 daily and that equipment had been damaged by striking workers.

    Codelco said this week that increasing benefits for contract workers was "not compatible" with current market conditions. The price of copper is at multiyear lows, dragged down by worries over demand in key buyer China.

    http://www.reuters.com/article/2015/07/24/chile-mine-protests-idUSL1N10417Q20150724
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    Steel, Iron Ore and Coal

    Hebei's Tangshan city tightens environmental regulation, coke and steel targeted

    Hebei-based Tangshan city, which produces nearly half of the province’s steel output, has launched a new round of environmental protection campaign this month, with coke and steel producers being the main targets.

    The campaign aims to accelerate process of desulfuration, denitration and dedusting in industries including coke, steel and cement, the municipal government said in an environment protection action plan.

    The city of Tangshan vows to speed up closure and relocation work of coke plants and steel mills in the surrounding areas, containing Xinxing Coke Plant, Zhenannan Coke Plant, Beigang Steel Mill, etc.

    In 2015, Tangshan aims to reduce 2 million tonnes of coal consumption and eliminate 1,463 sets of coal-fired boilers, the municipal government said in a statement.

    The city also targets to use 0.7 million tonnes of clean coal this year, and push poor-quality coal out of the local market, the statement said.

    By end-July, 104 blast furnaces at 28 steel mills should lower the concentration of particulate matters emission to within 15mg/m³, it said.

    Dust-removing, desulphurization and denitration facilities upgrading will be conducted on converters, sintering machines and heating furnaces before the end of October, affecting operation of over 160 steel companies

    The clearer and stricter requirements on environmental protection may forebode further slide in capacity utilization rates at steel mills in Tangshan, which stay at an average of 80%.

    Lots of local steel mills have already conducted large-scale furnace maintenance and some even closed operation in response to slack demand and widening losses.

    http://en.sxcoal.com/127271/NewsShow.html
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    Shenhua hit by declining Chinese coal demand in H1 2015

    Coal sales at China’s largest coal mining company, Shenhua, dropped by almost a quarter in 1H15.

    The company said that “For the first half of 2015, the coal sales of the company decreased by 24.2% y/y, primarily due to the y/y decrease in domestic coal consumption resulting from certain factors, such as the demand from downstream sectors, climate and heightened press fore environmental protection.”

    Coal sales dropped from 234.6 million t in 1H14 to 177.8 million t in the first six months of this year – a drop of 24.2% - with coal production down from 155 million t to 139.4 million t.

    http://steelguru.com/coal/shenhua-hit-by-declining-chinese-coal-demand-in-h1-2015/430350#tag
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    Guangdong Jun coal imports down 15.9pct on yr

    Southern China’s economic hub Guangdong province imported 4.17 million tonnes of coal in June, dropping 15.9% year on year but up 30.7% from May -- the tenth consecutive year-on-year drop, according to the latest Chinese customs data.

    Total value of the June imports was $248.15 million, which translates to an average price of $59.51/t, up $5.92/t on month but down $3.8/t on year.

    The rise in the average price of imported coal was mainly due to a jump in the imported tonnage and price of coking coal.

    Customs data showed that Guangdong province imported 0.7 million tonnes of coking coal in June, quintupling the month-ago level and up 7.7% on year. The import price averaged $97.41/t, up $7.7/t from May’s $89.71/t.

    Imports of thermal coal, mainly used for power generation, stood at 3.45 million tonnes in June, up 13.1% month on month and down 23.7% year on year. The average price was calculated at $52.0/t, up $0.2/t on month.

    Of this total, lignite imports accounted for around 40% or 1.38 million tonnes, down 23.8% from May and down 48.9% year on year. About 1.33 million tonnes or 96.4% of the total lignite imports were from Indonesia.

    In the first half of the year, the province imported a total 21.96 million tonnes of coal, down 31.5% year on year, data showed.

    Total thermal coal imports during the same period reached 19.76 million tonnes, down 28.5% on year, with lignite imports at 10.51 million tonnes, down 24.5%; while coking coal imports was 2.14 million tonnes, surging 59.7%.

    http://en.sxcoal.com/0/127425/DataShow.html
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    ArcelorMittal South Africa steps up push for steel tariff protection

    Africa’s biggest steelmaker, ArcelorMittal South Africa, could shut one its mills if the government does not impose anti-dumping duties on cheap Chinese imports, it said after flagging a dramatically wider half-year loss.

    Shares in the world’s largest producers of steel are trading around their lowest levels in more than a decade amid a global supply glut and the company has said that South Africa’s high labour costs, poor rail infrastructure and slowing economy have forced it to consider cutting back operations and jobs.

    “This company has made losses for five or six years. I don’t have an open chequebook,” Chief Executive Paul O’Flaherty said.

    He confirmed that steel baron Lakshmi Mittal was in South Africa in June, where he briefed President Jacob Zuma’s government on the challenges facing the industry and asked for intervention to counter cheap Chinese imports.

    ArcelorMittal South Africa had applied for tariff protection of between 10 percent and 15 percent and O’Flaherty said the government appeared “sympathetic” to the company’s request.

    The steelmaker said it could be forced to shut its Vereeniging mill on the outskirts of Johannesburg, which employs 1,200 workers.

    “The announcement of a potential closure of Vereeniging is not putting a gun to anybody’s head. It is not a statement. It’s a reality of business,” O’Flaherty said. “When you have got bleeding, you must stop the bleed.”

    In a trading statement released earlier, the company warned of an up to fourteenfold increase to its half-year loss, citing tough trading conditions and higher finance costs. The headline loss for the six months to June 30 is expected to be between 25 cents and 30 cents per share, it said, against a loss of 2 cents per share a year earlier.

    ArcelorMittal rival Evraz Highveld Steel and Vanadium has applied for protection from creditors and plans to reduce its 2,200 workforce by about a half.

    http://www.miningne.ws/2015/07/24/arcelormittal-south-africa-steps-up-push-for-steel-tariff-protection/
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