Mark Latham Commodity Equity Intelligence Service

Friday 17th February 2017
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    These 10 companies spend most looking for gold, copper

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    A new report by SNL Metals and Mining on exploration spending by the largest mining companies, documents the shifting sands in the mining industry last year as the sector began to turn around.

    SNL, part of S&P Global, notes that larger players allocated a total of nearly $2.2 billion for non-ferrous exploration during the year. Companies with the 20 largest exploration budgets in 2016 accounted for 31% of the just under $6.9 billion worldwide exploration total.

    The top 10 companies were responsible for over $1 of every $5 spent on exploration worldwide last year with combined budgets of some $1.46 billion.

    Exploration for gold represented 56% of the total budget of the largest players – gold companies usually dominate the top 20 list. Together copper and gold account for 90% of the budgets of the top 10 companies.

    The 12 largest gold miners spending on exploration came to 37% of worldwide gold allocations. Two companies, Canada’s Agnico-Eagle and South Africa-based Gold Fields joined the top ten for the first time spending $111 million and $125 million respectively.

    Last year’s top spender AngloGold Ashanti allocated nearly half its $185 million budget to brownfield projects with the lion’s share going into Colombia.

    Larger players represented 34% of the global total spent on copper exploration. In turn two companies, Rio Tinto and Antofagasta accounted for nearly half of the spending by the top 20 companies delineating and finding copper deposits.

    SNL also notes that Rio Tinto was one of the few major mining companies whose planned exploration spending increased in 2016, up about 19% to $218 million. The Melbourne-based company was also the only large firm to spend money ($20 million) on uranium exploration.

    Despite the weakness on uranium markets, total global spending on uranium was $284 million last year, nearly as much as was spent on diamonds and surpassing exploration dollars for nickel.

    A persistent financing drought has squeezed juniors' budgeting to the point that the majors have become the biggest drivers of early-stage exploration.

    The only other diversified mining company in the top 10 – Vale – spent $51.5 million looking for copper and $41.5 million for nickel. Allocations for other minerals were mostly focused on phosphates and potash in Brazil and Peru.

    Overall diamonds accounted for 8% (with Alrosa and De Beers responsible for about 54%) and other targets, including silver, potash, phosphates and manganese made up 7% of the spending by larger players.

    Considering the stage of exploration, spending patterns in the industry changed last year notes SNL:

    Conventional wisdom holds that the major companies leave grassroots exploration to the juniors. It may therefore be surprising that the larger players contributed 34% of all greenfields allocations in 2016.

    A persistent financing drought has squeezed juniors' budgeting to the point that the majors have become the biggest drivers of early-stage exploration.

    Similarly, the larger players traditionally dominate minesite spending; however, in 2016 they accounted for only 37% of the near-mine work, as their investors demand improved returns over growth.

    It is also interesting to note that the major players were responsible for just 25% of late-stage and feasibility work.

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    US Purchasing Managers Love Trump

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    Li Kequiang Index says China economic activity rolling over.

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    The Bloomberg Intelligence Li Keqiang Index, a gauge of electricity use, rail cargo volume and bank loans the Chinese premier said he favored back in his provincial government days a decade ago, got a big boost in recent months as policy makers kept stimulus flowing to support the expansion. Now, after growth picked up in the fourth quarter, China is shifting to prudent and neutralpolicy and focusing more on reducing financial risk -- and Li’s gauge has reversed some of the gains.

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    Miner South32 swings to profit and unveils maiden interim dividend

    Rising commodity prices have carried mining group South32 into profit for the first half of the year, prompting it to announce a maiden interim dividend.

    South32, a collection of smaller assets that was spun off from FTSE 100 giant BHP Billiton in 2015, reported falling costs and a large jump in free cashflow to $626m (£501m) in the six months to December 31. The company will pay out a dividend of 3.6 US cents a share, or $192m.

    Pre-tax profits of $797m compared to a loss of $1.6bn the year before, when the fledgling company was hit by a $1.7bn impairment due to low prices. Revenue grew 6.8pc to $2.87bn.

    The mining industry was much more “buoyant”, said Graham Kerr, chief executive, in part due to policy decisions in China, the world’s largest consumer of raw materials, which launched a stimulus package for its construction industry last year. This had had a “fantastic impact” on commodity prices, particularly in metallurgical coal, which is used to make steel.

    But he vowed that South32 would ride through ups and downs in the commodities cycle. “These policies come and go. We’ll watch and see how it pans out but our focus is on what we can control.”

    South32 is buying Metropolitan Colliery, a metallurgical coal producer in Australia, for $200m, but has no other “large acquisitions” under way, Mr Kerr said, though he has expressed an interest in buying Anglo American out of its 40pc stake in a manganese ore business that both companies own.

    In the meantime, South32 will pursue expansion at its existing operations, which are spread across South Africa, Australia and Brazil, and include alumina, nickel, silver and lead mines. It is also prospecting for manganese ore, used in stainless steel, in British Columbia, Canada.

    BHP shed South32 in order to focus on its large-scale iron ore and copper mines, as well as its substantial oil and gas operations. Since the demerger South32’s shares have outperformed its former parent, up by 27.8pc compared to a 6pc fall.
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    Oil and Gas

    Oil firms as OPEC floats extended output cut; markets still bloated

    Oil prices edged up on Friday, lifted by a report that producer club OPEC could extend an output cut aimed at reining in a global fuel supply overhang.

    The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia plan to cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017, and estimates suggest compliance by OPEC is around 90 percent.

    The cuts are aimed at curbing oversupply that has dogged markets since 2014.

    To help rebalance the market, OPEC sources told Reuters that the supply reduction pact could be extended if all major producers showed "effective cooperation".

    For now, inventories remain bloated and supplies high, especially in the United States.

    Recent price movements reflect this, with Brent and WTI trading within a $5 per barrel price range this year, in what has become the longest and most range-bound period since a price slump began in mid-2014.

    "Despite the headlines, the massive inventory glut in both oil and gasoline continues to thwart any upward momentum," said Stephen Innes, senior trader at OANDA in Singapore.

    In the United States, rising output has helped push up crude and fuel stocks to record highs.

    In Asia, oil flows into the region remain as high as they were before the production cuts, data in Thomson Reuters Eikon shows, as exporters shield their big customers in a fight for market share.

    This comes amid signs of stuttering demand growth in core markets, China and India.

    In India, fuel demand growth fell in January, while in China sagging car sales and soaring gasoline and diesel exports also point to a slowdown in growth.

    That leaves Europe, where OPEC has significantly cut supplies. However, Eikon data shows rising North Sea oil exports to Asia, indicating there is no real supply shortage there either.

    Despite the ongoing glut, analysts expect oil markets to tighten in the longer term.

    "In the fourth quarter of 2018, global oil demand will most likely surpass 100 million barrels per day," AB Bernstein said on Friday in a note to clients.

    "If oil prices stay around $60 per barrel and GDP growth over 3 percent per annum, then oil demand growth will be stronger over the next 5 years, than the previous decade. What we are witnessing is a rather surprising renaissance of oil consumption," it added.
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    Iraq's February Oil Sales Accelerate Despite OPEC Effort to Cut

    Iraqi crude shipments rose 3 percent in the first half of February even after OPEC’s second-biggest producer agreed to participate in global output cuts to mop up a glut that has put pressure on oil prices.

    Exports increased to 3.93 million barrels a day in the first 15 days of the month, 122,000 barrels a day more than the average for all of January, according to port-agent reports and ship-tracking data compiled by Bloomberg. Shipments from the southern Iraqi port of Basra grew by 10 percent, while sales by the Kurdish Regional Government in the north of the country were up 13 percent, the data show.

    The Organization of Petroleum Exporting Countries is limiting output in the first half of this year to cut global crude stockpiles that are weighing on prices. The group agreed on Nov. 30 to reduce production by 1.2 million barrels a day, with 11 countries outside of OPEC pledging to reduce by about 600,000. Benchmark Brent crude has gained more than 10 percent since OPEC announced the cuts and was 5 cents higher on Thursday at $55.84 a barrel at 11:11 a.m. in London.

    Iraq pledged to decrease production by 210,000 barrels a day from the 3.91 million it pumped in October, the month that OPEC set as a baseline for its agreement.

    Rough Weather

    The February mid-month tally is a sign of how much crude the country is selling, though total shipments for the full month may not end up reflecting this trend due to the high winds and rough seas that often interrupt loadings during Iraq’s winter months. The country plans to export about 3.64 million barrels a day in all of February, according to a loading program.

    Iraq’s March oil exports may decline to a seven-month low of 3.01 million barrels a day, according to loading programs obtained by Bloomberg. Shipments typically slump in March because of weaker seasonal demand. This, together with maintenance at some of Iraq’s biggest fields, may help the producer meet its pledge under OPEC’s deal to restrict supply.

    The International Energy Agency reported this month that Iraq cut output by 110,000 barrels a day in January. OPEC, citing data from so-called secondary sources such as analysts and tanker trackers, said Iraq cut 166,000 barrels in the same month.

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    Angola crude oil exports to rise

    Angola crude oil exports to rise to 1.69 mln bpd in April from 1.54 mln in March - loading plan

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    Kuwait Boosts Oil Capacity to Open Taps Once OPEC's Cuts Expire

    Kuwait is sticking with plans to add half a million barrels a day of oil-production capacity as it prepares for the eventual expiration of the output quotas OPEC adopted to help drain a global oversupply, the head of Kuwait Oil Co. said.

    State-run KOC plans to raise the Gulf nation’s capacity from its current level of 3.15 million barrels a day, Chief Executive Officer Jamal Jaafar said in an interview in Kuwait City. The company, which is responsible for most of Kuwait’s domestic crude production, will add capacity even if the Organization of Petroleum Exporting Countries decides to extend the supply cuts beyond June, he said.

    “We will continue to increase production capacity because we have a five-year plan to reach 3.65 million barrels a day by 2021, so we can’t stop investing in that,” Jaafar said on Wednesday. “We will take advantage of the OPEC-cut deal to perform maintenance on facilities in the fields.”

    OPEC agreed in November to reverse its strategy of pumping without limits to defend its market share against increased supplies, including oil from U.S. shale deposits. The group won pledges from Russia and other producers to contribute, targeting collective cuts of 1.8 million barrels a day for six months starting in January. Benchmark Brent crude, which traded at more than $115 a barrel in June 2014, has stemmed losses since the deal was announced and was trading down 11 cents at $55.86 in London at 2:41 p.m local time.

    Service Agreements

    “KOC is producing 2.7 million barrels a day now, and we will maintain this under the deal,” Jaafar said. “At the moment we have the capacity to reach 3.15 million barrels a day, but we will stick to the OPEC agreement.”

    KOC has signed three service agreements with Royal Dutch Shell Plc and another with BP Plc to develop exploration and production projects, he said. The company plans to drill its first offshore exploration wells by year-end, including wells near Failaka Island in the Persian Gulf, Jaafar said. Kuwait is OPEC’s fifth-largest producer.

    The company plans to shut facilities and oil fields in the east and south of the country for maintenance, while northern fields will remain open because they produce a higher-quality crude that can be used for blends that are exported, he said.

    OPEC ministers will meet in May to assess the market and decide if they should extend their output cuts into the second half of the year. The group is 92 percent compliant with its pledge to reduce output by 1.2 million barrels a day, Kuwaiti Oil Minister Essam Al-Marzooq told reporters on Monday in Kuwait City. Non-OPEC producers are complying at a lower rate of more than 50 percent, Al-Marzooq said.

    Kuwait’s state company for investing in oil production outside the country has boosted output after spending $900 million on a project in Thailand and an additional $300 million on a deal in Norway, Nawaf Saud Al Sabah, CEO of Kuwait Foreign Petroleum Exploration Co., told reporters on Wednesday. Both projects are providing a “very good’ return on investment, Al Sabah said, without elaborating.

    Kuwait Foreign Petroleum Exploration plans further acquisitions, including in the Middle East, as the drop in crude prices in the last few years makes such deals more attractive, he said.

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    India reaches out to new players in quest to unlock oil, gas potential

    New Delhi approves award of 31 licenses comprising 44 oil, gas fields
    Contract areas to monetize 40 million mt of oil, 22 Bcm of gas
    Awards signal New Delhi's effort to attract new players into the sector

    India has decided to award the bulk of the operating licenses to new players following its first oil and gas fields auction in six years as New Delhi steps up efforts to boost domestic oil and gas production and reduce its dependence on crude oil imports.

    The federal cabinet Wednesday approved the award of operating licenses for 31 contract areas comprising 44 oil and gas field under a revenue-sharing model. The list includes many new private companies that are venturing into the upstream oil and gas sector for the first time.

    These contract areas would monetize 40 million mt of oil and 22 Bcm of natural gas over 15 years for the Indian government, according to an official statement.

    The approved contract areas comprise 28 onshore and 16 offshore oil and gas fields of state-owned explorers Oil and National Gas Corp. and Oil India Ltd.

    While some state-owned oil companies such as Indian Oil Corp. and OIL were on the list, it also figured private companies such as Sun Petrochemicals Pte. Ltd., Mahendra Infratech Pte. Ltd. and Ramayna Ispat Pte. Ltd., signaling New Delhi's intention to encourage the entry of more private participants in the oil and gas industry at a time when India's oil demand is growing at double-digit rates.

    According to Platts Analytics, India's oil demand growth will outpace China's for the third year in a row in 2017. Indian oil demand is expected to grow at about 7% to 4.13 million b/d and Chinese demand by about 3% to 11.5 million b/d.

    Prime Minister Narendra Modi presided over the cabinet meeting to decide the outcome of his government's first auction of oil fields.

    "Single bids were received for 14 contract areas, multiple bids were received for 17 contract areas," finance minister Arun Jaitley said after the cabinet meeting.


    The awarded fields were originally part of 67 small and marginal oil and gas fields offered in May under a revenue-sharing model where the contractor would start payments to the government as soon as production starts at a field.

    The contract areas were discovered long ago, but could not be monetized due to various hurdles such as isolated locations, small size of reserves, high development costs and other technological constraints.

    The final signing of the awarded contracts should take another two months, oil ministry officials said.

    The 67 offered fields were put into 46 contract areas and put on offer through online international competitive bidding July 15.

    A total of 134 were received for 34 contract areas in the bidding process that closed in November.

    Finally, operator licenses were awarded for 31 contact areas as three areas did not qualify in the final round of the bidding process.

    A total of 47 companies submitted bids, of which 43 were Indian.


    Oil minister Dharmendra Pradhan said in May that the award of the offered 67 fields would unlock around Rupee 700 billion ($10.47 billion) worth of oil and gas reserves.

    The fields were estimated to hold proven reserves of up to 625 million barrels of oil and gas equivalent, according to the ministry's assessment.

    In the latest auction, companies were allowed to bid for more than one exploration block.

    Global companies were also allowed to bid for fields without any mandatory domestic participation.

    Since 1999, India has conducted nine auction rounds under the New Exploration Licensing Policy, or NELP, for oil and gas blocks and four rounds for coalbed methane.

    Under NELP IX in 2012, 34 blocks were offered and received 74 bids for 33 of them. Of this, production sharing contracts have been signed for 19 blocks. The Hydrocarbon Exploration Licensing Policy, or HELP, has replaced NELP.

    India is making a concerted effort to lower its reliance on imported crudes with the government focusing on boosting domestic production, promoting renewables, and improving the refining process at a time of increasing demand.

    Highlighting the growing importance of energy security, Modi said in December that India would strive to reduce crude imports by 10% from current levels by 2022.

    For a country dependent on imports for 80% of its crude oil needs, India's oil import bill is subject to wild swings linked to international prices, which in turn has repercussions on the country's current account balance and overall economy.

    Pradhan has said that India would reduce its dependence on crude imports with the help of a five-point plan -- raising domestic oil and gas production, improving energy efficiency, promoting alternative fuels and renewables, demand substitution, and improving the refining process.
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    Intesa in talks with 14 banks to syndicate Rosneft deal loan-exec

    Italian bank Intesa Sanpaolo is talking to 14 banks to syndicate a 5.2 billion euro loan it provided to fund the purchase of a 19.5 percent stake in Russian energy giant Rosneft by Glencore and Qatar's sovereign wealth fund, the head of Intesa's operations in Russia told Reuters.

    "We aim to choose 2-3 banks to take up 2.5-3 billion euros," Antonio Fallico said on Thursday on the sidelines of a conference on Italy-Russia cooperation in Milan.

    Fallico, who is chairman of Banca Intesa Russia, said there was no rush in closing the syndication deal. He said none of the banks involved in the syndication talks were Russian.

    Asked about the funding of the stake purchase, Fallico said Intesa Sanpaolo had paid half of the overall amount.

    "The rest was paid by the buyers," he said.

    He added that Intesa had no connection with Russian bank VTB in the deal.
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    Santos reports $1.1 bln impairment

    Oil and gasmajor Santos has recorded a net loss of more than $1-billion for the full year ended December, on the back of a $1.1-billion impairment charge on its Gladstone liquefied natural gas (GLGN) asset and lower oil prices.

    Excluding impairments and other significant items, the company reported an underlying profit of $63-million, compared with the $49-million reported last year.

    “In 2016, the Santos leadership team took tough and decisive action to stabilise the business and build the foundations for future growth. We restructured the business, removed substantial cost, all while maintaining safety and delivering record production and sales volumes,” said MD and CEO Kevin Gallagher on Friday.

    “As a result, our turnaround strategy is starting to deliver. In 2016, Santos was free cash flow positive at $36.50 per barrel and generated $370-million in free cash flow over the last eight months of the year. This is pleasing progress, but there is still more to be done.”

    Production volumes for the full year was up by 7%, to 61.6-million barrels of oil equivalent, with sales volumes up 31% to 84.1-million barrels of oil equivalent, resulting in a 6% increase in revenue for the full year, at $2.6-billion.

    The record production came on the back of the start up of the GLNG train 1 in September 2015 and train 2 in May of 2016, as well as strong production from the Papua New Guinea LNG (PNG LNG) operation.

    “Our aim is to transform Santos into a low cost, reliable and high performance business that delivers sustainableshareholder value,” Gallagher said.

    “At the heart of our strategy is a portfolio simplification and focused growth across five core, long life natural gas assets; Cooper Basin, GLNG, PNG, Northern Australia and Western Australia gas. Each asset has significant upside potential.”

    Gallagher pointed out that Santos will continue to focus on exploration, development, production and the sale of natural gas, which he said had a significant role to play in securing Australia and Asia’s energy future.

    “In 2017, we will further refine our operating model to drive costs down, improve cash flow and reduce debt. We now have the strategy, assets, people and growth options to deliver on our future success and provide sustainable shareholder value.”

    For 2017, Santos was targeting a production and sales volume of between 55-million and 60-million tonnes, and between 73-million and 80-million tonnes respectively.
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    PNG LNG gets resource boost

    ExxonMobil PNG, a unit of the US-based energy giant and operator of the Papua New Guinea LNG joint venture, said Thursday it has added 2.3 trillion cubic feet (Tcf) to the existing LNG project fields’ resource base.

    The resource addition follows an independent review by Netherland Sewell Associates.

    The recertification study, which included all PNG LNG fields, found that the most likely technically recoverable resource is 11.5 Tcf, a 25 percent increase beyond the earlier 9.2 Tcf assessment.

    “The independent review highlights the exceptional quality of the PNG LNG project resources and the significant increase in resource provides the potential for additional mid or long-term sales,” said Andrew Barry, ExxonMobil PNG managing director.

    A significant contributor to the increase was the Hides field, due to completion of development drilling including previously undrilled areas of the field, completion of optimised long term depletion plans and production performance since start up in 2014, ExxonMobil PNG said.

    In 2016, PNG LNG produced 7.9 million metric tons, an increase of 14 percent from the original design specification of 6.9 million metric tons a year.

    The PNG LNG project is providing long-term supplies of liquefied natural gas to four major customers in Asia as well as spot and short-term supplies to those and other customers.

    In a separate statement, Oil Search’s Managing Director, Peter Botten said the increase in proved gas reserves at the PNG LNG project “is particularly significant for Oil Search and our coventures, as the project only contracts 1P reserves.”

    “At present, 6.6 MTPA of LNG is sold under long term contract, while the project is operating sustainably at rates above 8 MTPA. The increase in 1P reserves, which equates to 2.8 tcf on a gross basis, will provide the co-venture the potential to explore market opportunities to contract this material additional production, which is currently being sold on the spot market,” Botten said.

    Besides ExxonMobil and Oil Search, other JV participants in the PNG LNG project are Santos, National Petroleum Company of PNG, JX Nippon Oil and Gas Exploration, Mineral Resources Development Company, and Petromin PNG Holdings.
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    UK natural gas: NBP curve mixed on Rough storage announcement

    UK natural gas: NBP curve mixed on Rough storage announcement

    The NBP curve went in different directions in early Thursday trade as the market began to price in the fact that Rough storage will not inject gas during the second quarter of the year, lowering demand expectations for the period.

    The Q2 17 contract was seen trading at 44.80 pence/therm Thursday morning, lower than the previous assessment of 45.025 p/th, with the Q3 17 contract climbing to 43.70 p/th, widening the spread between the two contracts.

    Winter 17 was the contract most affected by the news, up 1.07 p/th from the Wednesday close to be dealt at 50.27 p/th.

    "I'm surprised Winter 17 hasn't been impacted more," said one UK-based gas trader, with eyes keenly focused on injection rates during the third quarter for Winter 17 storage level indications.

    Closer in, the near-term NBP was supported by a short gas system, pushing the NBP spot back up to around 50 p/th.

    National Grid figures put the UK gas system short by 10 million cu m at 11:00 am, as physical flows of 270 million cu m/d were behind demand forecasts for the day of 280 million cu m.

    Within-day and day-ahead were seen trading at 50.10 p/th and 50 p/th respectively, compared with Wednesday's day-ahead assessment of 48.70 p/th, with front-month March rising to 50.19 p/th from 49.20 p/th.

    Norwegian flows were lower due to no fewer than three unplanned outages reported by Gassco, running at 117 million cu m/d.

    Withdrawals from storage were running at a mere 3 million cu m/d Thursday morning with only the Hornsea medium-range facility sending gas into the system.

    IUK imports were nominated at 14 million cu m at 10:00 am, with BBL imports flowing at 12 million cu m/d.

    LNG regasification from South Hook was unchanged at 5 million cu m/d.

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    Marathon Oil beats estimates, doubles 2017 capital budget

    Marathon Oil Corp, a U.S. shale exploration company, on Wednesday doubled its projected capital spending for the full year, as crude prices stabilize following a two-year rout.

    The company, which reported a smaller-than-expected wider fourth-quarter loss on Wednesday, expects to spend more as it ramps up activity in Oklahoma and the Bakken Shale formation.

    Oil producers are betting big on a continued rise in crude prices by buying up acreage and raising capital spending.

    Marathon said it plans to spend about $2.2 billion this year, or roughly double the $1.1 billion it spent in 2016.

    Industry peers Exxon Mobil, Chevron Corp and Hess Corp also boosted their capital budgets for the year.

    Marathon's net loss widened to $1.37 billion, or $1.62 per share, in the fourth quarter ended Dec. 31, from $793 million, or $1.17 per share, a year earlier.

    Excluding items, the company posted a loss of 10 cents per share, lower than analysts' average estimate for a loss of 15 cents.

    Revenue fell 5.8 percent to $1.39 billion, above the Street's estimate of $1.19 billion.

    Marathon shares ended down 0.67 percent at $16.30 in regular Thursday trading on the New York Stock Exchange.

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    Cenovus Energy posts surprise profit as costs fall, output rises

    Canadian oil and gas producer Cenovus Energy Inc reported a surprise quarterly profit as production rose and costs fell.

    Oil and gas companies, battered by a two-year slump in oil prices, have sharply cut costs and are also benefiting from a sharp drop in prices for oilfield services.

    Cenovus Energy, which has laid off nearly a third of its workforce since 2014-end, said its oil sands operating costs fell 12 percent in 2016, while operating costs for its conventional oil assets fell 10 percent.

    The Calgary, Alberta-based company's total crude oil production rose about 10 percent to 219,551 barrels per day in the fourth quarter.

    The company said expansions at its Christina Lake and Foster Creek projects in northern Alberta increased its total oil sands production capacity by 26 percent to an average of 390,000 barrels per day in the quarter.

    Cenovus also said the chairman of its board, Michael Grandin, would retire after the company's annual meeting on April 26. Grandin will be succeeded by Patrick Daniel.

    The company reported net earnings of C$91 million ($69.73 million), or 11 Canadian cents per share, in the three months ended Dec. 31, compared with a loss of C$641 million, or 77 Canadian cents per share, a year earlier.

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    Encana delivers strong fourth quarter and full-year 2016 results

    Encana delivered strong performance across its business in the fourth quarter, positioning itself to create value and return to growth in 2017. Throughout 2016, Encana grew quarter-over-quarter non-GAAP cash flow, significantly lowered costs, strengthened its balance sheet and continued to deliver better wells at lower cost in each of its core assets. The company reached its planned 2017 activity level in the fourth quarter to launch itself into 2017, when it expects to deliver strong growth in crude and condensate production and increase its non-GAAP corporate margin. The company is firmly on track with its five-year plan. Fourth quarter and full-year highlights from 2016 include:

    - fourth quarter production from core assets of 237,100 barrels of oil equivalent per day (BOE/d), representing 74 percent of total production
    fourth quarter total liquids production of 108,900 barrels per day (bbls/d) including oil and plant condensate production of 86,300 bbls/d, representing almost 80 percent of total liquids production
    - fourth quarter cash from operating activities of $199 million and non-GAAP cash flow of $302 million
    - lowered full-year average drilling and completion costs by about 30 percent compared to 2015
    - drove further efficiency across the business, delivering more than $600 million of savings compared to 2015
    - reduced long-term debt by $1.1 billion from 2015 and net debt by more than 50 percent since year-end 2014
    - generated full-year cash from operating activities of $625 million and non-GAAP cash flow of $838 million
    - replaced 326 percent of full-year 2016 production on a proved plus probable reserves basis after royalties (Canadian protocols) and 175 percent of full-year 2016 production on an SEC proved reserves basis (U.S. protocols), excluding dispositions

    “We delivered on our 2016 strategic objectives and our performance through the fourth quarter created a powerful launch pad for our five-year growth plan,” said Doug Suttles, Encana President & CEO. “We drove innovation and efficiency into every part of our business to increase margins and returns and we have one of the largest premium return drilling inventories in our industry. Our high quality multi-basin portfolio and leading operational performance positions us to generate strong returns at today’s prices.”

    “We carried considerable momentum into 2017,” added Suttles. “Through innovation and our relentless focus on efficiency and supply chain management, we expect to hold total year-over-year drilling and completion costs flat despite cost inflation for some services. We expect to significantly increase crude and condensate production throughout the year and deliver strong corporate margin growth.”

    Better wells at lower cost

    Encana’s focus on operational excellence, stacked pay zones and developing its premium return well inventory has positioned the company as an operational leader in each of its core assets. In 2016, Encana had 10,000 premium return well locations and the company anticipates growing that inventory through 2017. Already in 2017, Encana has added 50 premium return well locations to its Eagle Ford inventory. Harnessing the competitive advantages of its high quality multi-basin portfolio, Encana rapidly applies technical advancements and efficiencies across its core assets to deliver better wells at lower cost.
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    B.C., First Nations sign PNW LNG benefits agreements

    The Canadian province of British Columbia reached multiple agreements with the Lax Kw’alaams Band and the Metlakatla First Nation securing economic benefits from the proposed Pacific NorthWest LNG project.

    Lax Kw’alaams Band signed LNG benefits agreement, a Coastal Fund benefits agreement and a pipeline benefits agreement, according to the statement by the province.

    Upon final investment decision by the Petronas-led Pacific US$27 billion project, a predetermined amount of funds will be released from the trust, with the remaining balance available once facility construction begins.

    A total of 1,942 hectares of Crown land will also be transferred to the Lax Kw’alaams Band as part of the benefits detailed in the agreement.

    The Coastal Fund benefits agreement defines ongoing benefits for the Lax Kw’alaams Band during export operations, including those linked to PNW LNG and any additional LNG export facilities that may be built in the Prince Rupert area.

    In addition to benefits identified under the LNG benefits agreement and Coastal Fund benefits agreement with the province, PNW LNG has executed an impact benefits agreement with both the Lax Kw’alaams First Nation and the with the Metlakatla First Nation which will serve as the foundation for long-term, mutually beneficial partnerships.

    The agreements include access to employment, training and capacity funding, financing and cultural support, participation in ongoing environmental monitoring, First Nations business opportunities in the construction and operational phases of the project and annual payments based o the production of the LNG facility.

    As well, the Lax Kw’alaams Band signed an agreement related to TransCanada’s Prince Rupert Gas Transmission line, the connecting pipeline for PNW LNG.

    The LNG benefits agreement with the Metlakatla First Nation provides financial benefits including a trust fund and capital for road improvements and infrastructure.

    The agreements provide benefits based on specific steps in the development of a coastal LNG industry. They provide initial funding to the Metlakatla First Nation for community and economic development projects, as well as social initiatives, linked to the construction and operation of Pacific NorthWest LNG

    Previous to the latest agreements, British Columbia, the Lax Kw’alaams Band, the Metlakatla First Nation and the government of Canada signed an environmental monitoring committee agreement which outlines how all parties will collaborate to facilitate environmental oversight over the lifetime of PNW LNG.

    The PNW LNG project, located in the district of Port Edward, is pending a final investment decision by Petronas and their venture partners, Sinopec, Japex, Indian Oil Corporation and PetroleumBrunei.

    Collectively, this partnership is conducting a full evaluation of the PNW LNG project before any final investment decision is made.

    The proposed facility, to be located on Lelu Island within the district of Port Edward, will comprise an initial development of two LNG trains of approximately 6 million tons per annum each, and a subsequent development of the third train of approximately 6 mtpa.
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    Alternative Energy

    Drax dividend review puts pressure on shares

    Power producer Drax said it was reviewing its dividend policy after reporting another decline in annual profits on the back of weak energy prices, sending its shares down 6 percent.

    As its core power production business struggled with low market prices, the company more than trebled revenue from providing back-up generation. It saw scope to grow this business significantly as rising renewable energy production requires stand-by plants to fill gaps in output.

    Drax said it would pay a full-year dividend of 2.5 pence per share, down from 5.7 pence in 2015, but in line with a policy of paying out half of underlying earnings.

    However, it plans talks with shareholders in coming months over a review of that payout policy.

    "To us this points to a lower dividend policy long-term than current consensus expectations," said analysts at Jefferies who rate the stock as 'underperform'.

    Drax reported a 17 percent fall in earnings before interest, tax, depreciation and amortisation (EBITDA) to 140 million pounds, just below analysts' forecast of 143 million pounds.

    The company, which is converting Europe's once most polluting coal plant to run on biomass, made 47 million pounds ($59 million) in revenue last year from contracts with National Grid which reward it for providing back-up power. This compares with 14 million made from these services in 2015.

    The contracts mean that Drax has been able to keep its remaining coal-fired power units running. It said a year ago it may have to mothball the coal units that have struggled to compete with cheaper green energy output.

    "We do expect our coal plants to continue to generate at very low levels compared to historic rates but we think they will be needed to keep the system stable and secure," Drax Chief Executive Dorothy Thompson told Reuters.

    Drax's coal generation more than halved last year to 6.9 terawatt-hours as its biomass units produced 65 percent of the company's output, up from 43 percent in 2015.

    The British government has ordered the closure of all coal plants by 2025, a policy that Drax said will lower the value of its coal units by around 30 million pounds a year.

    Drax said it needed further government incentives to convert the last three of six coal units to run on biomass. Its latest conversion, which was approved by the European Commission in December, receives a guaranteed power price of 100 pounds per megawatt-hour (MWh).

    Thompson said further conversions could happen at a "significantly lower" price as costs have come down.

    Drax is also expanding its energy supply business, having earlier this month completed the 340 million pound acquisition of business energy provider Opus Energy.
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    China to spend US$247B on land consolidation

    China will spend about 1.7 trillion yuan (247 billion U.S. dollars) to increase the quality ofarable land and to promote urbanization.

    The country will divide its land into nine zones for land consolidation over the 13th Five-year Plan period (2016-2020), according to a plan released Wednesday.

    Land consolidation refers to the rational use of land. In the case of farming, parcels of landare consolidated to provide larger holdings.

    Faster development of "high-standard cropland" will be a priority, Zhuang Shaoqin, headof the planning bureau of the Ministry of Land and Resources (MLR), told a newsconference on the blueprint.

    The target refers to large-scale, contiguous plots of land with fertile soil and modern farming facilities. This type of farmland can maintain stable and high yields and has sound ecological condition and strong capacity to resist natural disasters.

    At least 400 million mu (about 26.7 million hectares) of high-yield farmland will be added by 2020, he said. The country has created the same amount of farmland meeting those standards from 2011 to 2015.

    Higher quality arable land will see a 40-billion-kg increase in China's food production capacity, an official with the MLR said.

    Meanwhile, urban and suburban residents will be better integrated and urbanization willbe promoted with improved infrastructure and environment in city outskirts.

    Per-capita annual income of farmers will increase by 750 yuan during the period.
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    India raises 2016-17 wheat production forecast to record high 96.6 mil mt

    India's wheat production is forecast to hit a record high 96.64 million mt in current marketing season 2016-17 (April-March), the Indian government's latest estimate for major food crops showed Wednesday.

    The estimate has been raised due to "very good rainfall during monsoon 2016 and various policy initiatives taken by the government, [the result of which is] the country has witnessed record foodgrain production in the current year," India's Ministry of Agriculture said in a statement.

    The latest forecast is 790,000 mt higher than record high output in 2013-14 of 95.85 million mt and 4.37% higher than last season's production of 92.29 million mt.

    The Indian government recently released separate data showing an increase in wheat planting from the previous year, which was up 6.92% at 31.781 million hectares as of February 3 from 29.725 million hectares a year earlier.

    Forecasts of favorable weather and higher moisture levels are further boosting expecations of a higher than usual yield.

    Centrally held buffer wheat stocks stood at 13.75 million mt in January, down 42.2% year on year and the lowest in more than a decade, but still above the stocking buffer required in April at 7.46 million mt.

    Nevertheless, traders said there could be some discrepancy in official production and stocks statistics given that domestic prices remained high.

    The US Department of Agricultures recently estimated India's wheat production for 2016-17 at 87 million mt, down 3 million mt from an earlier estimate, on expectations of stock levels being lower than expected due to high domestic prices, traders said.

    The USDA last December also revised up its forecast for India's wheat imports in 2016-17 by 700,000 mt to 3.7 million mt, the highest in almost a decade, on a production deficit due to dry spells over the past two seasons and ongoing firm demand from the food sector.

    Traders surveyed by S&P Global Platts said about 1.8 million mt of Australian wheat has been sold to India since the removal of a wheat import duty on December 8 last year.

    "We are still getting some interest for April but we don't have an adequate shipping stem for that now and Indian importers are unwilling to pay a higher premium with the new crop situation still in the preliminary stage," said an Australian trader.

    Australian Standard White with 9% protein was sold at $195-$196/mt FOB Newcastle in late January and prices have since risen $3-$5/mt due to a stronger Australian dollar, higher US wheat futures, tight shipping stems for prompter months and flooding in Western Australia.

    India's wheat harvest typically begins in late March or April, depending on weather conditions.

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    Precious Metals

    Gold Fields earnings up sharply

    South Africa’s Gold Fields on Thursday announced a rise in profits and a long-awaited plan to make its South Deep mine profitable, with a production target of 500 000 ounces a year.

    Gold Fields’ last South African asset, South Deep is a mechanised mine which has presented operational challenges in an unforgiving geology 3km (2 miles) beneath the surface.

    In 2015, the company scrapped production and cost targets for the operation, with a focus on getting it to break even while finding new methods to mine the rich ore body.

    The aim now is for 500 000 ounces a year, down from previous targets of 700 000 and 650 000 ounces, and the mine generated cash of $12 million in 2016 from 290 000 ounces. Gold Fields’ global output was 2.146 million ounces.

    Chief executive Nick Holland told Reuters that new methods at South Deep meant bigger rigs could be used for multiple tasks, eliminating cumbersome steps and making the operation more efficient.

    “These are bigger drill rigs that do everything,” he said.

    Efficiency is being further enhanced by making bigger cuts in the ore body. “So for every metre advanced, you are getting more tonnes,” Holland said.

    There has also been a drive to get the critical skills needed for deep-level, mechanised mining, and Gold Fields said most of those positions had been filled.

    Growth capital of R2.280 billion will be spent on underground infrastructure at South Deep over the next six years, peaking at R582 million in 2019.

    South Africa, with the world’s deepest mines, has more than a century of experience when it comes to extracting ore far below the surface with a large, unskilled workforce.

    But mechanised mining is almost virgin territory in South Africa’s gold reefs, from which a third of the bullion ever mined in recorded history has been produced.

    Gold Fields posted normalised earnings of $191 million for the year through December 2016 compared with $45 million for the year before.

    This was in line with what the company had flagged to the market, primarily driven by an 8% increase in the gold price, lower net operating costs in local currencies as well as the impact of converting these costs at weaker exchange rates.

    A proposed final dividend of 60 cents per share gives a total for the year of 110 cents.
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    World's largest gold project bulked up again

    Shares in Seabridge Gold were off to the races on Thursday after the Toronto-based company bulked up its already massive KSM gold-copper-silver project in northern British Columbia.

    The KSM project is the world's largest undeveloped gold project based on mineral reserves and on Thursday the company announced expansion of the resource base at the main Deep Kerr deposit of the 100%-owned project.

    By vastly increasing the amount of copper mined life of mine operating costs are now a negative $179 an ounce while all-in costs fall to just $358 an ounce

    According to a statement, the new inferred resource at Deep Kerr now totals 1.92 billion tonnes grading 0.41% copper and 0.31 g/t gold (containing 19.0 million ounces of gold and 17.3 billion pounds or 7.85 million tonnes of copper) constrained by conceptual block cave shapes.

    The updated resource estimate represents an increase of 3.0 million ounces of gold and 2.1 billion pounds of copper over last year's inferred resource estimate which was incorporated into the updated National Instrument 43-101 Technical Report released September last year.

    A  preliminary economic impact study released by Seabridge in October transformed the ambitious project into a much larger operation than originally envisaged  and in the process improved both the environmental impact and economics of KSM.

    An NI 43-101 report filed in November incorporating the PEA and an updated PFS calls for mill throughput of 170,000 tonnes per day, 40,000 tonnes more than the earlier study which Seabridge says can be done without significant redesign of facilities. Initial capital costs have been increased by just less than 10% to $5.5 billion.

    In the study the bulk of the operations are moved underground and using the block-cave method Seabridge says it can reduce waste rock by a whopping 81% or 2.4 billion tonnes over the 51 year life of the mine.

    By vastly increasing the amount of copper mined life of mine operating costs are now a negative $179 an ounce while all-in costs fall to just $358 an ounce.

    Economically viable Proven and Probable Mineral Reserves at KSAM are pegged of 2.2 billion tonnes grading 0.55 grams per tonne gold, 0.21% copper and 2.6 grams per tonne silver (38.8 million ounces of gold, 10.2 billion pounds of copper and 183 million ounces of silver)

    During the first seven years of operation annual gold output would top 1 million ounces and life of mine annual production is estimated at 592,000 ounces of gold, 286,000 pounds of copper and 2.8 million ounces of silver.

    Measured and Indicated Mineral Resources at KSM are estimated at 2.9 billion tonnes grading 0.54 grams per tonne gold, 0.21% copper and 2.7 grams per tonne silver which translates into 49.8 million ounces of gold, 13.6 billion pounds of copper and 253 million ounces of silver.

    KSM received the green light from Canada's federal government at the end of 2014 . The federal and provincial environmental assessment process took nearly seven-years and KSM was only the second metal mine in five years to receive approval.

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    Zinc, lead rally bad news for silver price

    Silver futures prices moved higher again on Thursday with March delivery contracts hitting the highest level since November 11 last year.  At $18.09 an ounce, silver is up 11.4% since the start of the year and trading 32% for the better compared to the same time last year.  Silver is now also close to wiping out all its losses since the US presidential election pulled the floor from under precious metals.

    But a new study suggests the metal's good run may be coming closer to the end. In a research note, Capital Economics, says silver  may fall victim to the rally in zinc (up 94% over the past year) and lead (+45%) due to the fact that silver as a byproduct of mining these base metals is the biggest source of supply.

    Only around 30% of annual supply comes from primary silver mines while more than a third is produced at lead/zinc mines operations and a further 20% from copper mines.

    Zinc's rally from multi-year lows were on the back of major mine shutdowns with total production going offline since 2013 of more than one million tonnes.

    BHP Billiton, Glencore and Nyrstar also lowered output at base metal operations last year which coupled with disruption of production at primary silver mines translated into the first fall in annual mine supply in nearly a decade (down 2% in 2016 according to Capital Economics estimates).

    Commodities economist Simona Gambarini says on paper there could be an even bigger decline in output this year but  "there is a risk that further down the line, some of the production might come back owing to higher prices":

    Indeed, several zinc miners have already announced their intention to restart some of their idled operations over the coming months and with zinc and lead prices having climbed further since the start of the year, we think that other miners might follow suit.

    Capital Economics predicts an end-2017 price for silver of $14.50. That's a nearly 20% fall from today's price. For end-2018 the forecast is for silver trading at $17.50 per ounce.
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    Steel, Iron Ore and Coal

    Guizhou coal production capacity at 170 Mtpa by end-2016

    Southwestern China's Guizhou province had 571 coal mines by the end of 2016, with capacity of 170 million tonnes per annum (Mtpa), said the provincial Energy Administration days earlier.

    Guiyang city in the province had 19 coal mines by end-2016, with capacity of 2.73 Mtpa, while Liupanshui and Zunyi cities had 128 and 64 coal mines, with capacity of 59.03 Mtpa and 15.03 Mtpa, respectively.

    The province planned to shut 15.03 Mtpa of coal capacity by closing 120 mines in 2017, said officials of the provincial Administration of Work Safety.

    The province said in March last year it would shed coal capacity of over 70 Mtpa by shutting 510 mines in the next three to five years.

    By 2020, total coal production in the province will be controlled at 200 million tonnes or so, and the number of coal mines will reduce to 750.
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    Shaanxi Jan raw coal production down 6.31pct on year

    Shaanxi province, one of China's major coal production bases, produced 34.12 million tonnes of raw coal in January, dropping 6.31% from the year-ago level and plummeting 54.07% from December, showed the latest data from the Shaanxi Administration of Coal Mine Safety.

    Of this, coal mines owned by the central and provincial governments produced 6.76 million and 9.69 million tonnes of raw coal in January, decreasing 7.67% and falling 11.61% from the year prior, respectively.

    Coal output of the mines owned by municipal and prefecture governments stood at 17.67 million tonnes, falling 2.56% year on year.

    In January, coal sales stood at 33.27 million tonnes or 97.5% of the total coal output of the province, down 5.78% year on year and 54.9% from last December.

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    Indian government likely to divest up to 10% in Coal India

    Indian government plans to divest up to 10% in Coal India by August, a move that will help it earn about Rs 20,000 crore at today's prices and reduce its stake to 69%, the Economic Times reported on February 13.

    The government is likely to divest between 5% and 10%. It already has permission for divesting 10% in the company. At present, the government holds 79.78% in the company, a senior Coal India executive said on condition of anonymity.

    Last year, Coal India offered to buy-back 1.7% (10.89 crore shares) of its fully paid-up equity shares at Rs 335 per share totalling Rs 3,650 crore. After the buy-back, the government's holding in Coal India increased marginally to 79.78% from 79.68%

    If the government divests 10% of its shares, it is likely to help the Centre raise around Rs 20,000 crore and will allow Coal India to conform to holding norms in which a public listed company needs to have at least 25% shares listed on stock exchanges, the executive said.

    The company has been witnessing a fall in production as well as sales due to less than anticipated power demand growth. Against a near 10% growth in 2015-2016, this year the company has not been able to attain a growth of even 2% either in sales or production.

    The timing of the divestment will be crucial because the company has not been able to fulfill its targets. Revenues and profits are likely to be less than anticipated as price realisation from e-auction has been falling due to reduced demand.

    Nevertheless, Coal India share price has been falling from September last year till January, after which it started to rise on anticipation of marginal better performance as coal production picks up after the monsoons every year, said an analyst.
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    Shandong to control raw coal output within 130 mln T in 2017

    Shandong will control raw coal output in the province within 130 million tonnes in 2017, and expects production of its mines located in other provinces to exceed 120 million tonnes, said officials at a coal work meeting held on February 15.

    Last year, the province produced 128.61 million tonnes of raw coal, falling 11.31% from 2015, due to the government-led capacity cut campaign, showed data from the Shandong Administration of Coal Mine Safety.

    The washing rate of raw coal in the province is expected to be over 66% this year, and it planned to shed 3.51 Mtpa of coal capacity by closing five mines this year, according to officials.

    Coal producers in Shandong made a total profit of 5.5 billion yuan ($800.58 million) in 2016, a year-on-year surge of 233.2%.

    Last year, the province's coal industry realized operating revenue of 311.88 billion yuan, increasing 23.83% from the year-ago level.

    The province closed 66 coal mines in 2016, slashing 19.6 million tonnes per annum (Mtpa) of capacity, completing 120.6% of its annual de-capacity target. The number of coal producers in Shandong reduced to 53 last year.

    It has basically realized diversified development while depending on coal industry. In 2016, value of the province's non-coal businesses totalled 223.9 billion yuan, accounting for 69.2% of its total.
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    Rio said to seek bank pitches on $1.5bn coal mine sale

    Rio Tinto Group has asked banks to pitch for a role advising on the divestment of its last remaining coal operations in Australia, people with knowledge of the matter said.

    The London-based company has decided to pursue a sale of its Hail Creek and Kestrel mines after receiving unsolicited approaches from potential buyers, according to the people, who asked not to be identified because the details are private. The assets in Queensland state’s Bowen Basin, which mainly produce coking coal used in steelmaking, could fetch as much A$2-billion ($1.5-billion), people familiar with the matter said earlier this month.

    Rio, the world’s second-biggest miner, has been divesting coal assets since dismantling its energy division in 2015 and last month agreed to sell $2.45-billion of Australian mines to a company controlled by China’s Yanzhou Coal Mining Co. The producer is focusing on key divisions including iron ore, which generated more than 60 percent of profit last year, as well as copper and aluminum, according to Chief Executive Officer Jean-Sebastien Jacques.

    There’s no certainty the deliberations will lead to a transaction, and Rio could still decide to keep Hail Creek and Kestrel, the people said. A spokesman for Rio declined to comment.

    Rio shares rose 1.3% to A$69.27 at the close Thursday in Sydney, extending their advance over the past year to about 60%.

    Mine sales appear to be accelerating under Jacques, who took the helm in July, amid a drive to reshape the producer’s portfolio, UBS Group AG analysts including Glyn Lawcock wrote in a February 13 research note. Rio has announced $7.7-billion of assets sales since 2013, according to a filing last month.

    While Rio likes coking coal as a commodity, the producer no longer has a meaningful position in the material, Chief Financial Officer Chris Lynch was cited by UBS as telling analysts Monday in Sydney. The futures of other assets -- including Iron Ore Co. of Canada, a uranium unit and Australian alumina and aluminium operations -- are also the subject of debate, UBS cited Lynch as saying.
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    Brazil's Vale produced record 349 mln tonnes of iron ore in 2016

    Brazilian miner Vale SA said on Thursday it produced a record 349 million tonnes of iron ore in 2016, above its own guidance, helped by strong performance at mines in northern Brazil and the successful start of its new S11D mine.

    The world's largest producer of iron ore had forecast that output would be at the lower end of a range of 340-350 million tonnes.

    Vale said it produced 92.4 million tonnes in the fourth quarter, up 4.5 percent on the same period in 2015. Full-year production rose 1 percent on the previous year.

    The company said it had continued to halt or reduce higher cost tonnes from its mines in the southeastern state of Minas Gerais, offsetting them with cheaper production from northern Brazil where its costs are lower and quality higher.

    The S11D mine is Vale's largest ever iron ore project and is located in the Amazon, neighboring the company's other mines in the northern Brazilian state of Para.

    Guidance for 2017 remained at 360-380 million tonnes, Vale said, adding that by the end of 2018 it expected to reach an annual production rate of 400 million tonnes.

    Vale reported nickel production of 311,000 tonnes in 2016, 7 percent higher than in 2015 and a company record, after stronger performance at plants in Canada and New Caledonia.

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    Atlas moves ahead with Corunna Downs development

    Iron-oreminer Atlas Iron has approved the development of its Corunna Downs project, in the Pilbara, with capital costs estimated at between A$47-million and A$53-million.

    A definitive feasibility study estimated that the project had the potential to deliver four-million tonnes a year of lumps and fines direct shipping ore over an initial five- to six-year mine life.

    C1 costs for the project have been estimated at between A$37/t and A$43/t, with full cash costs forecast at between A$49/t and A$55/t.

    First ore from Corunna Downs is now expected to be shipped in the March 2018 quarter.

    The company’s lenders have agreed to amend the terms of an existing loan, enabling the project to be funded from operating cash flows.

    “This is a strong vote of confidence in Atlas by our lenders, several of whom are significant Atlas shareholders,” said Atlas MD Cliff Lawrenson.

    “Corunna Downs, together with Mount Webber, will build our production rate of approximately 12-million tonnes a year after Wodgina and Abydos cease production in the first and second half of 2017 respectively.”

    He noted that the amendments to the current loan facility will enable Atlas to capitalise on current and future opportunities provided by the stronger iron-ore price.

    The amendments to the Term Loan B facility will allow Atlas to accumulate up to a further $45-million in cash generated, and the funds will not be subject to the cash sweep through to the end of June 2018.

    After each of the March, June and September quarters of this year, Atlas will be entitled to transfer cash on hand in excess of A$80-million into a dedicated reserve account, subject to a cap of A$20-million a quarter and A$45-million in aggregate.

    Cash on hand in excess of these limits will still be paid to the lenders to reduce the loan balance.

    As consideration for the amendments, Atlas will commit to paying all of its Term Loan B interest in cash, and will issue ordinary shares valued at A$5-million, to support the Term Loan B lenders.

    The Term Loan B principal outstanding will also be increased by A$3-million, unless the facility is refinanced or repaid within 120 days of satisfying the conditions precedent.

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    Nippon Steel expects China steel prices to hold firm this year

    Nippon Steel & Sumitomo Metal, Japan's biggest steelmaker, expects steel prices in top consumer China to hold firm at least until its Communist Party congress late this year, amid solid demand that is underpinning coking coal and iron ore markets.

    Chinese futures contracts for steel reinforcing bars used in construction have already risen 17 percent in 2017, on top of a gain of more than 60 percent last year. Besides sustained demand for construction activity, Beijing is forcing steel producers to cut output as it wages its war on smog, raising worries about supply. 

    "Steel demand and prices in China have been fairly strong on the government's stimulus," Nippon Steel executive vice president Toshiharu Sakae told Reuters in an interview.

    "I expect this trend to continue for a year as Beijing will work hard to support its economy ahead of the Congress," Sakae said, referring to China's 19th Communist Party Congress that is expected to be held late in the second half of 2017.

    To pass on the resulting higher materials costs, Nippon Steel - the world's third-largest steelmaker by output in 2015 - wants to raise product prices in the financial year starting in April.

    "My guess is that coking coal prices will stay at $150-200 a tonne as China is said to be trying to cut market volatility," he said, adding that iron ore prices may move towards $90 a tonne on a free-on-board basis on hopes that China's imports grow.

    China's iron ore futures hit their highest in more than three years this week, amid solid steel demand.

    To offset rising costs, Nippon Steel has sought to increase product prices by around 20,000 yen ($174.73) per tonne this financial year, but will need more hikes next year, Sakae said.

    The high materials costs have squeezed margins and it is difficult to make the capital expenditure needed to maintain high quality and the swift delivery of products, he said.

    The company's iron ore term contracts for April-June quarter are expected to come at around $77-78 a tonne, up from $57 this quarter, Sakae said.

    Raising its product prices would help improve its performance in the upcoming 2017/18 financial year. The company has predicted its recurring profit will likely fall 35 percent in the year to March 31 due to materials price gains that have outpaced the steel price increases.

    Sakae, who has warned that worries over U.S. President Donald Trump's protectionist policies are "growing every day", said the recent friendly meeting between Trump and Japanese Prime Minister Shinzo Abe has not eased his concerns.

    "If the U.S. takes measures that affect the Japanese auto industry, it will indirectly hurt our business," he said.

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    Europe's steel industry adds Iranian imports to list of threats

    Iranian steel imports have become the latest threat to European steelmakers, their trade group said on Thursday, after imports from Iran rose by nearly eight times between 2013 and 2016.

    Steel lobby group Eurofer said on Thursday that Iranian exports to Europe had leapt to just over 1 million tonnes annually, putting the country just behind India at 1.9 million tonnes, while China shipped 5.7 million tonnes in 2016.

    "The threat from Iran is new and it's going to be one of the top three issues: China, India, Iran," Karl Tachelet, external relations and trade director at Eurofer, told Reuters.

    Iran has sought to boost its steel sector, with help from foreign partners, as it targeted economic expansion following the 2015 deal to curb Iran's nuclear programme in return for an easing of sanctions.

    But Tehran has said it is considering export duties on iron ore, as India has done, which would increase the availability of cheap raw materials for its own steelmakers.

    Eurofer, which represents an industry that has to import its iron ore, says that amounts to protectionism. Iranian officials contacted by Reuters for comment did not immediately respond.

    On Wednesday, after a two-day conference on steel in Tehran, Iran said it aims to export between 20 and 25 million tonnes annually by 2025 and to increase total output to 55 million tonnes from an estimated 16 million tonnes now.

    That compares with a global market of 1.6 billion tonnes.

    China, the world's top producer and consumer of steel, is a dominant player in Iran, where other countries have struggled with the complexity of political and logistical hurdles.

    And while cutting its own capacity, China has been building steel operations elsewhere, including on the edge of the European Union in Serbia.

    The EU is investigating alleged dumping of hot-rolled steel by producers in Serbia and Iran as well as Brazil, Russia and Ukraine.

    It has already imposed penalties on China, prompting an angry response and a WTO complaint from Beijing.

    Eurofer says EU measures against nations such as China have helped to revive an industry that was deeply in crisis in late 2015 and early 2016 when steel prices were very low.

    Prices have since recovered, but industry officials say the market remains fragile and cannot cope with capacity increases, while politicians in Europe balk at capacity reductions.

    "A European commodity steel business won't be sustainable in the long term unless the external parameters (such as anti-dumping duties or capacity reductions) change," Wolfgang Eder, CEO of Voestalpine, told Reuters on Wednesday.

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