Mark Latham Commodity Equity Intelligence Service

Friday 28th August 2015
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    Oil and Gas


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

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

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

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

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

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

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

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

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

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

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

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

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

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    China sells dollars.

    China has cut its holdings of U.S. Treasuries this month to raise dollars needed to support the yuan in the wake of a shock devaluation two weeks ago, according to people familiar with the matter.

    Channels for such transactions include China selling directly, as well as through agents in Belgium and Switzerland, said one of the people, who declined to be identified as the information isn’t public. China has communicated with U.S. authorities about the sales, said another person. They didn’t reveal the size of the disposals. Ten-year Treasuries pared gains and two-year notes erased an earlier advance.

    The People’s Bank of China has been offloading dollars and buying yuan to stabilize the exchange rate following the Aug. 11 devaluation. The nation’s foreign-exchange reserves, the world’s largest, dropped $315 billion in the last 12 months to $3.65 trillion. The stockpile will fall by some $40 billion a month in the remainder of 2015 because of the intervention, according to the median estimate in a Bloomberg survey.

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    Bunker prices plunge to ten year low in Singapore

    Maritime 360Prices of CST380 heavy fuel oil fell to USD205 per tonne in Singapore, the world's biggest bunkering port by sales volumes.

    Bunker prices in Singapore have not been this low since 2005.

    Fuel oil traders who spoke to IHS Maritime say it remains to be seen if prices would fall below USD 200 per tonne, as oil prices show no sign of recovering.

    One trader said that "There is just too much oil in the market and OPEC shows no sign of cutting output. It is inevitable that HFO prices will continue falling. If sanctions on Iran are lifted, more oil will be available."

    Another trader said that the downward trend in Singapore's bunker prices casts doubt on whether LNG bunkering can take off there. There are no ECAs in Asia and with the shipping market still depressed, shipowners have no incentive to invest in retrofitting vessels, more so now when fuel oil is so cheap. Prices of HFO and marine diesel oil have come down by more than 50% from last year.

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    Global shipping slumps as Asia to Europe container movement’s freight rates falls

    Exim News Service reported that global shipping has slumped over the late summer as freight rates for container shipping from Asia to Europe fell by over 20% in the second week of this month, even though trade volumes should be picking up at this time of the year.

    According to them, this slump has dashed hopes of a quick recovery from the global trade recession, heightening fears that the six-year economic expansion may be on its last leg.

    The Shanghai Containerised Freight Index for routes to north European ports crashed by 23% in five trading days.

    Recent data from Container Trades Statistics shows that global volumes fell by 3.1% in June from the already depressed levels the month before. The period from June to August is normally the strongest time of the year, boosted by pre-shipments for the Christmas season.

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    From 'Ugly' to 'Dire'

    ˈʌɡli/ adjective
    1. 1. unpleasant or repulsive, especially in appearance. "she thought she was ugly and fat"
      synonyms: unattractiveill-favouredhideousplain, plain-featured, plain-looking,unlovelyunprepossessingunsightly, displeasing, disagreeable;More
    2. 2. involving or likely to involve violence or other unpleasantness. "the mood in the room turned ugly"
      synonyms: unpleasantnastyalarmingdisagreeabletensechargedserious,gravedangerousperilousthreateningmenacinghostileominous,sinister.

    ˈdʌɪə/ adjective
    1. 1. extremely serious or urgent. "misuse of drugs can have dire consequences"
      synonyms: terrible, dreadful, appalling, frightful, awful, horrible, atrocious, grim,unspeakable, distressing, harrowing, alarming, shocking, outrageous;More

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    China Daily on Tianjin: confessions of the state press!


    How did Rui Hai International obtain a permit to store toxic chemicals?

    For many residents, that is the key issue.

    The company at the heart of the police investigation is Rui Hai International, which storedchemicals at the site without, it is claimed, the knowledge of local authorities.

    With registered capital of 100 million yuan ($15.7 million), Rui Hai International was set up inDongjiang Free Trade Port Zone in 2012. The company's business facilities are made up ofwarehouses, storage terminals, storage yards, wastewater sumps and office buildings.

    The company's website showed that it received a permit by Tianjin Maritime Safety Administration to operate storage and distribution works for toxic chemicals. These included calcium carbide, sodium nitrate and potassium nitrate for use in domestic and overseas markets.

    Tianjin police has struggled to clearly identify the substances being stored at the blast site because the company's offices were destroyed. Confused documentation has also been a problem.

    In another twist, Xinhua News Agency reported that Rui Hai International had only been granted a license to handle toxic chemicals less than two months ago. This poses the question: Had the company been operating illegally since October 2014 after its temporary license had expired.

    Did the company flout government regulations?

    That is impossible to say at this stage as the investigation continues, although there havebeen accusations.

    Dong Shexuan, the deputy head of Rui Hai International, who holds 45 percent of thecompany's shares, is reported to be well connected with officers inside the Tianjin police forceand fire service. Although details are sketchy, it has been alleged in The Beijing News that hemet with officials of the Tianjin port fire brigade during a safety inspection.

    According to claims from a senior official, who declined to be named, from the Industrial and Commercial Bureau of the Tianjin Binhai New Area, Dong gave fire service officers safety appraisal files, but an independent assessment of the site was not carried out. Dong, who is now in police custody, was unavailable to comment about these allegations.

    What does appear clear is that Dong was given the green light for operating a storage facility close to a residential area. To many local residents, this appeared unusual as similar companies operating in the chemicals sector had been closed down by authorities.

    So far, the police has detained senior managers of Rui Hai International, including Dong, as well as the son of a former police officer in Tianjin, and Yu Xuewei, a former State-owned company executive. Both are shareholders in Rui Hai International.

    "Obtaining a safety risk assessment license should not be that easy," Zhu Liming, deputy head of the planning and land management bureau at Binhai New Area, said.

    "It should involve not only the local fire brigade but also safety experts who have the experience and expertise in this area. They are needed to identify all the potential safety risks and should be part of the evaluation team," Zhu added.

    Why were the warehouses located so close to residential areas?

    Again, this is a difficult question to answer. Yang Baojun, vice-president of the China Academy of Urban Planning and Design in Beijing, has called for the planning process to be overhauled.

    "Because of economic development, the fast pace of urbanization and rising land prices in higher-tier cities, local governments need to pay greater attention to the distance separating residential areas from dangerous manufacturing and energy facilities," Yang said. "These should include chemical plants, power stations and paper mills."

    Existing laws in China state that warehouses containing toxic materials must be at least 1,000 meters from major transport hubs and public buildings. But the Rui Hai International complex was only 560 meters away from a residential area and 630 meters from the railway station.

    "It is impossible to improve production technology and storehouse methods over a night,"Yang said. "But governments at different levels should be able to produce an urban plan that safeguards people's homes from potential harmful plants."

    In Germany, industrial facilities, or warehouses, that use toxic or store chemicals, are built in isolated areas to protect the general public. The Berlin government also stipulates that these facilities have detailed safety and rescue plans in place. Plants are constantly monitored and regular safety checks are carried out.

    How can disasters such as the Tianjin port explosion be averted in the future ?

    Views on this subject are mixed. He Liming, chairman of the China Federation of Logistics and Purchasing, an industry body in Beijing, has pointed to the financial costs involved.

    Moving chemical plants and warehouses outside of cities could prove difficult unless companies are heavily compensated

    "As many chemical plants are located in the cities where land prices in China's urban area shave surged, they will not easily relocate unless they are paid the full value for the land they occupy," He said.

    In addition, local governments rely on these companies to generate jobs, growth and taxes. In fact, they have become vital to domestic economies across the country.

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    BHP Billiton's credit ratings fragile in FY16, agencies warn

    BHP Billiton's investment-grade credit ratings might come under pressure in the current financial year, ratings agencies said on Wednesday, after the top global miner posted its weakest profit in a decade but still hiked dividends.

    While BHP has long sought to protect its 'A+' rating by Standard and Poor's and 'A-1' rating by Moody's, it reiterated a pledge on Tuesday to never cut its dividend through the highs and lows of commodity price cycles.

    But both ratings firms said that with commodity prices likely to remain weak in the fiscal year to June 2016, the company's debt to earnings balance may temporarily put it out of the range needed to hold on to its ratings.

    S&P said its 'A+' rating could withstand a dip in earnings ratios as long as the agency believed those metrics would recover by the following fiscal year.

    "Should the weak trading environment persist further, the recovery in credit metrics is unlikely to occur based on BHP Billiton's earnings alone," it said.

    Both agencies said even with BHP's sharp cut in capital spending and plans to pare costs beyond the $4.1 billion already slashed in the 2015 financial year, funding the dividend from cash flow would be a challenge if commodity prices worsened.

    "This would place further pressure on credit metrics and the rating," Moody's said.
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    Newly constructed Panama Canal locks cracked

    IHS Maritime 360 reported that One of the newly constructed locks in the Panama Canal has sprung a leak, raising fresh questions on the expansion project's already delayed timetable.

    A publicly posted video reveals water leaking through cracks in the Cocoli Locks on the waterway's Pacific side. Asked by IHS Maritime about the severity of the issue, the Panama Canal Authority responded that earlier in June, the filling of the new locks began, signalling the start of a deliberate and methodical phase of operational testing. This stage of testing is meant to detect and correct any imperfection.

    As part of this testing, some water-filtration issues were detected in a specific area of the new Cocoli Locks, located on the Pacific side of the waterway. The imperfection was detected in the step that divides the middle chamber of the locks from the lower chamber, known as 'Lockhead 3'.

    The Panama Canal technical team is closely involved to ensure that these tests meet all quality standards and is working with Grupo Unidos por el Canal [GUPC], the contractor for the third set of locks project, to resolve this issue.

    GUPC has the obligation to ensure the long-term performance on all aspects of the construction of the locks and to correct this issue. Moreover, GUPC's contract with the ACP dictates that the group is responsible for modifications and corrections.

    The ACP said that at this time and based on preliminary evaluations, the project's completion timeline as well as the expected date for commercial operation are not expected to change. The overall project is 93% complete. The current schedule calls for full commercial operations in 1H16.

    In general, the relationship between the ACP and GUPC has been strained over the course of the project. Work stopped for an extended period in early 2014 amidst a contentious dispute between the two parties on cost overruns. Earlier this month, during a labour dispute between GUPC and one of its worker unions, the GUPC described ACP's behaviour as ‘intransigent’ and displaying a ‘negative attitude.’

    GUPC has yet to respond to requests for comment on its plan to rectify the leak.
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    China lawmakers discuss new pollution bill, coal cap clause expected

    Chinese legislators are considering a new air pollution law that could give the state new powers to punish negligent local authorities and industrial enterprises and provide a legal mandate to impose caps on coal consumption.

    Amendments to China's 15-year old Air Pollution Law are expected to be approved this week by the National People's Congress, the country's parliament, and will make local governments directly responsible for failing to meet air quality targets.

    China's ruling Communist Party has acknowledged the damage that decades of untrammelled economic growth have done to the country's skies, rivers and soil, and it is now trying to equip its environmental inspection offices with greater powers and more resources to tackle persistent polluters and the local governments that protect them.

    "Local governments will become responsible to assess and meet standards by a certain time," said Tonny Xie, director of the Clean Air Alliance of China, which has been involved in consultations on the law.

    "Previously, there was one sentence in the law about 'making plans' to treat air pollution, rather than 'achieving plans'."

    A 31-page draft includes sections on controlling pollution from coal combustion and will provide a legal basis for the establishment of consumption caps and restrictions on low-grade imports, but legislators continue to debate the precise details.

    "We have been lobbying for the inclusion of a specific timeline for coal consumption to peak, but this won't be included," said a source with an environmental group involved in consultations.

    Coal, China's biggest source of air pollution, accounts for around two thirds of total primary energy use.

    According to a notice on Tuesday from the Ministry of Environmental Protection, legislators are still deliberating on whether to include clauses banning the direct combustion of low-grade coal as well as new fuel oil standards.

    The draft law gives the central government the ability to suspend local authority powers to approve new projects if they fail to meet pollution targets. It bans firms from temporarily switching off polluting equipment during inspections and outlaws other behaviour designed to distort emission readings.

    It also includes provisions to limit pollution from industry and automobiles, though legislators have already excised a clause allowing local governments to set their own restrictions on car use, official news agency Xinhua said.

    China's new Environmental Protection Law, which came into force at the beginning of this year, put an end to the "maximum fine" system that allowed firms to pollute with impunity once they had paid a limited penalty. It also puts them at risk of criminal punishments should they continue to break rules.

    According to the environment ministry, concentrations of hazardous breathable particles known as PM2.5 fell 17.1 percent in the first half to 58 micrograms per cubic metre, but China doesn't expect to meet the state standard of 35 micrograms until 2030.
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    Palladium Takes a Bath

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    Palladium fell by the most since 2011 on concerns that the market is heading for oversupply. Gold dropped as gains in U.S. consumer confidence damped demand for a haven.

    In South Africa, mine output of platinum and related metals, including palladium, surged 84 percent in June from a year earlier, official data showed Tuesday. The country is the world’s top palladium producer after Russia. Futures in New York plunged as much as 8.1 percent, the most since December 2011.

    While most industrial metals climbed Tuesday on easing concerns over Chinese economic growth after the nation cut interest rates, palladium failed to get a boost because of speculation that the move won’t be enough to buoy auto sales in the country. China accounts for about 22 percent of global demand for the metal used in pollution-control devices, according to Bloomberg Intelligence data. Prices are heading for a third straight monthly decline.

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    Commodity Intelligence q3: Ugly, What Next?

    Commodity Intelligence q3.pdf

    We're taking dates for meetings now.
    Please contact us for details.

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    Yurun Group pays Sausages for Steel?

    Yurun Group real estate company intends to suppliers can not deliver votes ham debt ], " Die Zeit " reported that a Shanghai steel suppliers said that from the beginning of August , Jiangsu Yurun to China 's Industrial Group Co., Ltd. will not be commercially votes cashed . More wonderful is that they even forced to use ham to offset each other's attitude is no money , enough to ham intestine . It refuses to offset the ham , you can select the property to arrive .
    It is understood, easy stuff barter global platform is a professional "barter" global barter platform, from easy stuff Group's investment operations platform is based on the concept of the establishment of modern barter, with independent intellectual property rights, the platform relies Things to actively carry out cross-border barter, barter provide enterprises information release, query, barter settlement transactions and other specialized services to help enterprises to develop multilateral barter transactions, realize barter, as repossessed assets in order to barter shares, an inventory of asseImage titlets and other functions.

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    BHP Billiton Ltd. said annual profit plunges

    The company, the world’s biggest miner by market value, on Tuesday reported a net profit of $1.91 billion for the year through June, down from $13.83 billion in the 12 months earlier.

    Underlying earnings were down 52% at $6.42 billion.

    Net profit was weighed by higher noncash charges that reduced earnings by $1.3 billion and included write downs against some oil fields.

    Underlying profit was $6.4 billion in the year ended June 30 from $13.3 billion a year earlier, Melbourne-based BHP said Tuesday in a statement. The figure excludes the contribution of a collection of assets into spinoff company South32 Ltd., which began trading in May, BHP said. BHP will increase its dividend by 2.5 percent to $1.24 a share, it said.

    Supply gluts and forecasts for the slowest growth since 1990 in China, the largest buyer of metals and energy, have sent the price of raw materials plunging and punished mining company profits. BHP today lowered its forecast for Chinese peak steel demand.

    “The key commodities to which they are exposed — oil, copper, iron ore, they are all struggling,” Gavin Wendt, Sydney- based senior resource analyst at Mine Life Pty., said before the earnings were released. “That reality is rapidly hitting home in terms of the profits results.”

    BHP rose 2 percent at the close in Sydney trading Tuesday to A$23.34, trimming its decline this year to 15 percent.

    “In the short term we expect ongoing economic reforms in China to contribute to periods of market volatility,” BHP Chief Executive Officer Andrew Mackenzie said in the statement. “While we remain confident in the long-term outlook for commodities demand as emerging economies continue to urbanize and industrialize, we have lowered our forecast of peak Chinese steel demand.”

    The largest mining companies have been wrong-footed on slower growth in China, Glencore Plc Chief Executive Officer Ivan Glasenberg said last week, with demand “getting very tricky to call.” Rio Tinto Group this month reported underlying profit fell 43 percent in the six months through June, while Fortescue Metals Group Ltd. said Monday full year net income slumped 88 percent.

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    German Electricity Falls Below 30 Euros for First Time Since ’03

    German electricity for year-ahead delivery, a benchmark European contract, fell below 30 euros ($34) a megawatt-hour for the first time since October 2003 as energy prices slump.

    The contract dropped as low as 29.99 euros on the European Energy Exchange, according to data compiled by Bloomberg. German electricity for 2017 delivery fell 2 percent to 29.35 euros a megawatt-hour in broker trading, a record low for the contract.

    Year-ahead power is set for a record fifth yearly slide as Germany relies on renewable energy rather than fossil fuels for more of its consumption. Electricity contracts also are retreating as coal and oil fall. Until now, the 30-euro level served as a psychological barrier for the German year-ahead price, according to Bruno Brunetti, New York-based senior director of electricity at Pira Energy Group.

    “Major German power generators have already hedged large amounts of power forward, so I think the pain will be felt in the longer term,” he said.

    The year-ahead contract fell 1.1 percent to 30.05 euros a megawatt-hour by 11:53 a.m. Berlin time on EEX. Coal for year-ahead delivery to northwest Europe on Friday touched the lowest price in data going back to November 2005 from Cie. Financiere Tradition SA, and Brent crude plunged 58 percent in the past year in London trading.

    Renewable energy’s share of gross German power consumption increased by 2.4 percentage points last year to 27.8 percent, the Economy and Energy Ministry said March 5. Coal, lignite and nuclear accounted for 59 percent of German generation in 2014, according to AG Energiebilanzen e.V., an association of energy lobbies and economic-research institutes.

    Some coal and nuclear plants will struggle to cover their fixed costs with power prices below 30 euros, Brunetti said.

    Germany is scheduled to shut its eight remaining nuclear reactors by 2022. EON SE’s Grafenrheinfeld plant closed on June 27, before its operating license expired, because of waning profitability amid the increase in renewable generation and a tax on nuclear fuel.

    Power prices below 30 euros in Germany in the long term “would create more incentive for remaining nuclear to retire earlier than the set dates,” Brunetti said.
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    Power producer Southern Co to buy AGL Resources for $8 bln

    Power producer Southern Co said it would buy AGL Resources Inc for about $8 billion in cash, making it the No. 2 U.S. utility by customers after Exelon Corp.

    The combined company will have generation capacity of about 46 gigawatts and will operate nearly 200,000 miles of electric lines and more than 80,000 miles of gas pipelines.

    The deal will form a company with 11 regulated electric and natural gas distribution companies serving about 9 million customers, Southern Co said.

    AGL shareholders will receive $66 for every share held, a 38 percent premium to the stock's Friday close.

    Including debt, the deal is valued at about $12 billion.

    The deal will add natural gas infrastructure assets to Southern Co's portfolio.
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    Obama "60% likely" to approve Oil exports.

    Legislation to repeal a 40-year ban on most domestic oil exports will probably become law in the first quarter of next year, according to analysts at Evercore ISI.

    A move to end the ban would probably include a condition that allows the administration of President Barack Obama to set export levels, Evercore analyst Terry Haines said in a research note Friday. While there is some congressional support to lifting the ban, some analysts said its unlikely to happen before the 2016 elections.

    “Obama and his regulators are likely to have a more positive view of an oil export ban repeal that empowered regulators generally to decide oil export levels,” Haines said in the note. “That sort of repeal also would be attractive to congressional Republicans and Democrats that would see it as a compromise alternative that overturns the ban and is a significant step on the road to full unregulated repeal.”

    Haines said repealing the ban is “60 percent likely” by the end of the first quarter. Earlier this month the U.S. allowed some crude to flow to Mexico in a swap of light oil and condensate for heavy Mexican crude. Canada is the only other nation that is exempt from the prohibition on exports.

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    China and the world

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    The Killing Zone: CDS's stress and prices.

    Here's the dozen or so 'supercap' commodity companies with CDS rates above 250bps:

    Image titleGazprom, Rosneft, Petrobras, Freeport and Teck are above 500, and effectively 'locked' out of public credit markets.

    CDS rates are in the last column on the right. The second column is the Altman Z score, which scores the balance sheet. A value below 2 is dangerous. 
    Image titleBloomberg commodity index is trading around year 2000 levels.

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    South32 maiden profit jumps, to focus on cost cuts

    South32 maiden profit jumps, to focus on cost cuts

    South32 Ltd, the mid-sized miner spun off by BHP Billiton in May, said annual underlying profit jumped 41 percent and flagged big cost cuts over the next three years to help boost returns in a weak commodity market.

    The company was cast out of BHP with a suite of unloved coal, aluminium, manganese, and silver assets mostly in Australia and South Africa but with a strong balance sheet, positioning it to weather tough conditions and snap up assets.

    "Our business is performing well despite the difficult environment," Chief Executive Graham Kerr told analysts on a conference call.

    While the profit rise stands in stark contrast to other miners' results, South32 continued to be battered by the broader market rout, with its stock sliding as much as 3.9 percent to a record low on Monday.

    Underlying pro-forma profit for the year to June rose to $575 million, but that was well below analysts' forecasts of $700 million, according to Thomson Reuters I/B/E/S.

    However, underlying earnings before interest and tax, which rose 56 percent to $1 billion, were in line with analysts' estimates.

    Profit gains were driven by $282 million in cost cuts, mostly in labour and contractor costs.

    Kerr has said the company would consider acquisitions, but said on Monday it was not attracted to any of the coal assets up for sale in Australia because those mines faced challenges in gaining permits to extend their lives.

    "We don't see any strong returns being generated," he told reporters.

    Instead, South32 is focused cutting costs by at least $350 million a year, or around 8 percent of its controllable cost base, through the 2018 financial year.

    The company expects to cut stay-in-business capital spending by 9 percent to $650 million in the year to June 2016, with plans to reduce output from most operations except Australian energy coal, Australian manganese, the Worsley alumina plant, and Cannington silver mine.

    South32 warned that power shortages in South Africa posed challenges. But Kerr said it did not face the same problems that rival Glencore Plc has at its Optimum coal arm, which is in administration, stuck with a loss-making coal supply agreement with the national power company, Eskom.

    South32 sees opportunities with Eskom as the utility is building two major new coal-fired power plants.

    "We sit on top of some large high quality resources that could fill that gap in coal supply in a tightening market," Kerr said.
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    Explosion at chemical plant in eastern China, 9 injured - state media

    Explosion at chemical plant in eastern China, 9 injured - state media

    An explosion hit a chemical plant on Saturday night in eastern China, the official Xinhua state news agency said, citing local authorities.

    No fatalities were reported, Xinhua said, citing local police, although nine people were injured and taken to hospital.

    The blast, which triggered a fire, happened around 8.50pm local time in Huantai county in Shandong province.

    The explosion occurred at a factory of Shandong's Runxing Chemical company which is a subsidiary of Runxing Group and has 200 million yuan ($31 million) in registered capital, Xinhua reported.

    The factory produced adiponitrile, a colourless liquid that releases poisonous gases when it reacts with fire, the People's Daily said, citing the state-run Beijing Times.

    Seven fire brigades consisting of a total of 150 fire fighters and 20 fire engines were sent to the scene and fire brigades that are trained to work with fires involving chemicals are being dispatched, Xinhua said.

    Windows shattered in the village where the blast occurred, state media said, and tremors reverberated within 2 kilometres (1 mile) of the site of the explosion.
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    US Manufacturing PMI Tumbles To 22 Month Low

    US Manufacturing PMI Tumbles To 22 Month Low

    Not even the seasonally-adjusted sentiment surveys can give a glimmer of hope any more. A few weeks after the July ISM manufacturing report printed at the lowest since March, moments ago the Markit mfg PMI index was released, printing at justt 52.9, below the expected 53.8, and down from last month's 53.8. This was the lowest level since October 2013 and the biggest miss in exactly 2 years, with output, new orders and employment all expand at slower rates in August; Markit adds that "Input cost inflation picks up fractionally, but remains well below the survey average."

    The report also notes that the latest rise in production volumes was the weakest since the weather-related slowdown recorded in January 2014 - perhaps someone can blame it on the record hot July. Some survey respondents cited a cyclical slowdown in new business growth, as well as heightened uncertainty regarding the demand outlook in August.

    But wait, the financial comedy TV said China can not possibly affect the US. Just chalk it up to the latest thing the economists were wrong about.
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    China: 'Unimaginably fierce resistance'


    President Xi Jinping's wide-ranging reform push, covering everything from politics to the military, has come up against "unimaginably" fierce resistance, according to a tersely worded commentary carried by state media on Thursday.

    In unusually strong language, the article said the reforms were at a critical stage and had encountered immense difficulties, affecting the interests of various groups.

    "The in-depth reform touches the basic issue of reconfiguring the lifeblood of this enormous economy and is aimed at making it healthier," the article said. "The scale of the resistance is beyond what could have been imagined."

    The commentary was attributed to "Guoping", an apparent pen name used by state media to comment on major state and Communist Party issues. It appeared in state media including the websites of CCTV and Guangming Daily.

    Observers said the commentary suggested the reforms had not achieved the desired results and were opposed by various factions.

    Xu Yaotong, a political science professor at the Chinese Academy of Governance, said the publication came amid concerns the anti-corruption campaign, which had targeted several top military officials and politicians, was waning and that other reforms had attracted opposition.

    Observers said the commentary suggested the reforms had not achieved the desired results and were opposed by various factions. Photo: AP"The tone [of the commentary] reads furious," Xu said.

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    RBA says less ATM's needed.

    The Reserve Bank has predicted a decline in the number of automated teller machines, as digital payments allow consumers to make fewer cash withdrawals and avoid pesky fees.

    Banks and other owners of ATMs say their returns from the machines are being crunched, as they spend more money on maintaining machines that are being used less. 

    ATMs were introduced widely in the 1980s and there are more than 31,000 cash machines around the country now, which the RBA says is high relative to Australia's population.

    However, the number of withdrawals has fallen by about 20 per cent since from a 2009 peak. This has occurred as more shoppers use cards, including contactless payments, where they would have previously paid in cash.

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    Oil and Gas

    Oil supply contraction in 2016?

     Supplies outside OPEC are expected to contract in 2016 for the first time since 2008, sliding by 200,000 barrels a day, according to the International Energy Agency. With consumption set to grow by 1.4 million barrels a day, OPEC and its de facto leader Saudi Arabia could seize the chance to broaden their market as competitors damaged by the price slump fall off.
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    Shell Nigeria declares force majeure on Bonny Light crude exports

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

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

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

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

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

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

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

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

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

    Nearly 10 million barrels of September-loading Nigerian crude oil cargoes are still looking for buyers, and face steep competition from other crude oil grades.
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    UK Q2 oil output surges 12.3% on year

    UK Q2 oil output surges 12.3% on year to 11.54 mil mt or 988,000 b/d, raising hopes of slowdown in long-term decline, DECC says...Platts
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    ConocoPhillips Ponders Australian “Backfills” To Sustain Darwin LNG Project

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

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

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

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

    Attached Files
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    Gazprom finds a new way to supply gas to China

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

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

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

    The situation changed after at the beginning of August the USA suddenly imposed the sanctions against the main deposit of Gazprom on the Sakhalin shelf - South-Kirinskoye one, without the gas of which none of new export projects can be realized in the foreseeable future.
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    China Oil Giants Seeking to Join Spree of Global Energy Deals

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

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

    Oil’s collapse to a six-year low has prompted a wave of acquisitions across the energy industry. Three of the last five quarters have exceeded $160 billion in deal volume, surpassing even the late 1990s, a period when many of the world’s largest energy corporations were formed, according to data compiled by Bloomberg. While China’s big three oil companies have sat out this latest round, China Petroleum & Chemical Corp. also said Thursday it’s seeking overseas assets, signaling that at least two of them are now ready to join the spree.
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    PetroChina’s first-half profit drops 63% on oil market rout

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

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

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

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

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

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

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

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

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

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    Three Chilean generators seeking LNG contracts after reserving capacity

    Three Chilean power companies will be looking to sign supply contracts for LNG in the coming months after reserving capacity in a proposed expansion of the country's largest regasification terminal, GNL Chile said Wednesday.

    AES Gener, Colbun and IC Power reserved the whole of the 3.2 million cubic meters/day on offer under an open season launched late last year, GNL Chile said in a statement. The power companies now have until December to confirm their interest in signing a definitive contract.

    GNL Chile is owned by local gas consumers ENAP, Endesa Chile and Metrogas, which each own 20% of the Quintero terminal. The balance of shares is owned by Spain's Enagas and Oman Oil Company.

    GNL Chile said that the three companies' proposals obtained the highest points under the open season qualification process contemplated. The open season aims to attract new clients to the terminal, until now controlled by the shareholders of GNL Chile, and expand the size of the natural gas market in Chile in line with the current government's pro-gas energy market.

    In the past, energy companies have blamed the lack of access to regasification capacity on competitive terms for hindering the growth of the market.

    AES Gener, controlled by AES Corp, has become Chile's largest power generator thanks to heavy investment in coal-fired capacity over the last decade. It also owns the 379-MW Nueva Renca combined cycle plant in Santiago. Colbun, linked to Chile's Matte business group, owns 1,144 MW of gas-fired installed capacity in central Chile.

    IC Power, a subsidiary of New York-listed Kenon Holdings, currently owns two diesel-fired power plants in Chile.

    "This result underlines the commitment of GNL Chile's shareholders to competition on this market and to facilitate investment in the energy sector," GNL Chile chairman Andres Alonso said.
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    Oil industry needs to find half a trillion dollars to survive

    At a time when the oil price is languishing at its lowest level in six years, producers need to find half a trillion dollars to repay debt. Some might not make it.

    The number of oil and gas company bonds with yields of 10 percent or more, a sign of distress, tripled in the past year, leaving 168 firms in North America, Europe and Asia holding this debt, data compiled by Bloomberg show. The ratio of net debt to earnings is the highest in two decades.

    If oil stays at about $40 a barrel, the shakeout could be profound, according to Kimberley Wood, a partner for oil mergers and acquisitions at Norton Rose Fulbright LLP in London.

    Debt repayments will increase for the rest of the decade, with $72 billion maturing this year, about $85 billion in 2016 and $129 billion in 2017, according to BMI Research. A total of about $550 billion in bonds and loans are due for repayment over the next five years.

    U.S. drillers account for 20 percent of the debt due in 2015, Chinese companies rank second with 12 percent and U.K. producers represent 9 percent.

    In the U.S., the number of bonds yielding greater than 10 percent has increased more than fourfold to 80 over the past year, according to data compiled by Bloomberg. Twenty-six European oil companies have bonds in that category, including Gulf Keystone Petroleum Ltd. and Enquest Plc.

    Gulf Keystone can “satisfy all its obligations to both its contractors and creditors” after authorities in Kurdistan, where the company operates, committed to making monthly payments from September, Chief Financial Officer Sami Zouari said in an e- mail.

    Some earnings metrics are already breaching the lows of the 2008 financial crisis. The profit margin for the 108-member MSCI World Energy Sector Index, which includes Exxon Mobil Corp. and Chevron Corp., is the lowest since at least 1995, the earliest for when data is available.

    Some U.S. producers gained breathing space by leveraging their low-cost assets to raise funds earlier this year and repay debt, Goldman Sachs Group Inc. wrote in a Aug. This helped companies shore up their capital and reduce debt- servicing costs.

    That may no longer be an option because energy companies have been the worst performers in the past year among 10 industry groups in the MSCI World Index.

    The biggest companies, with global portfolios that span oil fields to refineries, will probably emerge largely intact from the slump, Norton Rose’s Wood said. Smaller players, dependent on fewer assets, could have problems, she said.
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    Appalachian Producers Considering More Pennsylvania Utica wells

    Following last year’s rush to test the boundaries of the Utica Shale outside Ohio, some producers are reevaluating their prospects in the Appalachian Basin to determine how best to spend capital after consistent success from the formation in West Virginia and Southwest Pennsylvania.

    To be sure, for those with established acreage across the basin, the Marcellus Shale remains the low-risk, high-quality asset, while the Utica Shale in Southeast Ohio remains the proven economical sweetspot. But better-than-expected results from the Utica Shale in West Virginia and a series of record-breaking Utica wells in Southwest Pennsylvania now have management at some companies wondering how those blocks could fit into stretched drilling programs amid the current commodity price environment. Infrastructure would need to be built, or repurposed for voluminous dry gas Utica wells, astronomical costs, particularly in the deep, dry gas Utica of Southwest Pennsylvania, would need to come down and more data needs collecting.

    For the time being, as oil prices seesaw and natural gas prices show no signs of a rebound, some of the basin's leading producers are at the very least considering their options.

    "I think at this point, it's just too early to know how we're going to allocate those rigs to potential Utica wells in 2016 or not," Range Resources Corp. CEO Jeffrey Ventura told financial analysts during the company's second quarter earnings call in July. "I think we'll look at the economics; we'll look at the cost; we'll look at the markets and our new transportation deals and the customers that are coming online. We'll have to look at all of those things to see how that rolls out when we present our budget to the board in December."

    Range was the first company to test the Utica in Southwest Pennsylvania's Washington County. In December, the company reported an initial production (IP) rate from its Claysville Sportsman's Club #1 well of 59 MMcf/d (See Shale Daily, Dec. 15, 2014). That well has a 5,800-foot lateral. Since then, two other wells have bested the Claysville.

    EQT Corp. reported that its Utica Scotts Run well in Greene County, PA -- to the south of the Claysville -- had an IP rate of 72.9 MMcf/d (see Shale Daily, July 23). That well was drilled with a 3,221-foot lateral.

    To the east, Consol Energy Inc.'s Gaut 4IH, a step-out well in Westmoreland County, PA, IP'd at more than 60 MMcf/d on a 5,840-foot lateral. Both Consol’s and EQT's wells cost about $30 million to drill, complete and turn to sales -- more than double the cost of some Utica wells in Ohio.

    The recent success has been underscored by several other prolific dry gas wells in Southeast Ohio and Northern West Virginia over the last year, where operators have tested Utica wells between 25 MMcf/d and nearly 47 MMcf/d (see Shale Daily, Dec. 9, 2014; Sept. 25, 2014; Sept. 8, 2014; June 2, 2014; Feb. 14, 2014). Terry Engelder, a professor of geosciences at Pennsylvania State University, said those results from a tight, seven-county swath encompassing all three states have essentially proven the Utica's potential in Southwest Pennsylvania. He cautioned, though, that there is not yet enough data to determine decline rates there.

    "We have 614,000 acres in the Utica, 530,000 are 100% working interest acres that we really felt needed to be tested," said Consol Vice President of Gas Operations Craig Neal in an interview withNGI's Shale Daily. "Quite frankly, I'm glad we did; the results here have really driven us to look hard at comparing this to our Marcellus opportunities. We believe that we will get the cost down to under $15 million in the deep area and probably work our way down below that. Over in Monroe County, OH, we're already at that level on our 10,000-foot total vertical depths, and we'll be working our way down to much lower than $15 million, possibly even $12 million."

    EQT has said the same, aiming to lower Utica costs in Southwest Pennsylvania to between $12.5-14.5 million. EQT plans to drill a second Utica well in Greene County by the end of September, which would be about 13,400 feet deep and have up to a 4,500-foot lateral. Range is finishing up completions at its second Utica well in the region and plans to spud its third by the end of the year ahead of completion in 2016.

    Neal said Consol is drilling its second Utica well in the state, the CNX GH9, four miles away from the Smiths Run well. Both EQT and Consol have said it would take a "few" of these wells to ultimately lower costs in the area.

    "We think that [laterals] will get longer. We're monitoring our ability to frack at those depths. This thing is in the range of 20,000 feet," Neal said. "So, at those lengths, we are concerned about being able to stimulate it, see what the pressures would be." Neal added that the company would use ceramic proppant on the CNX GH9 as it did on the Gaut well. EQT also used ceramic proppant on its Smiths Run well.

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    US natural gas glut prompts price warning

    The hot summer weather has done little to burn off an impending US natural gas glut, prompting warnings of record-breaking inventories and lower prices for the fuel in the year to come.

    By the onset of winter, gas banked for the heating season is likely to approach or exceed 4tn cubic feet, surpassing a previous high set in 2012, analysts believe.

    The forecasts are surprising, because this summer has been warmer than the last two and the 10-year norm, according to Commodity Weather Group. Power plants have consumed 4bn cu ft per day more gas than in 2014 as they meet air conditioning needs and turn away from coal as an energy source, according to Bentek Energy.

    But robust output from shale formations has more than compensated for this demand, with states such as Ohio emerging as important suppliers.

    Bentek, an analysis and forecasting unit of commodities information service Platts, warned in a report that benchmark US gas prices could fall below USD 2.50 per million British thermal units by autumn, with regional prices around northeastern wells dropping to record lows. Nymex September gas settled at USD 2.685 per mBtu on Tuesday.

    “Not much stands in the way of US gas storage inventories reaching record high levels this fall of about 4tn cu ft,” Bentek said in the report, to be issued at an industry conference this week. “And that strong likelihood points to a winter of relatively weak gas prices, perhaps carrying deep into 2016.”

    In the US gas market, producers inject gas into underground storage reservoirs from spring to autumn, banking fuel for the winter heating season. Design capacity of these facilities, consisting of salt domes, depleted gasfields and aquifers, is 4.665tn cu ft, according to the Energy Information Administration.

    The record for stocks held at the end of injection season was 3.929tn cu ft in November 2012. Because storage capacity is ample, some analysts do not expect a fire sale in which producers unload gas they cannot store.

    Breanne Dougherty, analyst at Société Générale, wrote: “While achieving a record storage level seems likely it is less about the level and more about how that level relates to capacity”.

    However, Bentek said that some storage reservoirs, especially salt domes along the US Gulf of Mexico coast, would approach physical limits by late autumn.

    “The price implications for this are decidedly bearish,” its report said, as “significant volumes of natural gas will be dumped on to the market this October and November, especially if heating load is slow to ramp up.”

    Natural gas production across all major shale regions in Energy Information Administration Drilling Productivity Report (DPR) is projected to decrease for the first time in September.

    Production from these seven shale regions reached a high in May at 45.6 billion cubic feet per day (Bcf/d) and is expected to decline to 44.9 Bcf/d in September.

    In each region, production from new wells is not large enough to offset production declines from existing, legacy wells said the EIA.

    The Utica region in eastern Ohio is the only DPR region expected to show production increases in June, July, and August.
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    US Oil production declines slightly

                                        Last Week  Week Before  Year Ago
    Domestic Production ......9,337            9,348           8,631

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    Summary of Weekly Petroleum Data for the Week Ending August 21, 2015

    U.S. crude oil refinery inputs averaged about 16.7 million barrels per day during the week ending August 21, 2015, 117,000 barrels per day less than the previous week’s average. Refineries operated at 94.5% of their operable capacity last week. Gasoline production decreased slightly last week, averaging 9.8 million barrels per day. Distillate fuel production decreased last week, averaging 4.9 million barrels per day. 

    U.S. crude oil imports averaged 7.2 million barrels per day last week, down by 839,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.5 million barrels per day, 1.7% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 630,000 barrels per day. Distillate fuel imports averaged 123,000 barrels per day last week. 

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 5.5 million barrels from the previous week. At 450.8 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 1.7 million barrels last week, but are in the middle of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 1.4 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories rose 1.9 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 2.9 million barrels last week. 

    Total products supplied over the last four-week period averaged 20.3 million barrels per day, up by 2.4% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.6 million barrels per day, up by 5.8% from the same period last year. Distillate fuel product supplied averaged 3.7 million barrels per day over the last four weeks, down by 5.7% from the same period last year. Jet fuel product supplied is up 4.6% compared to the same four-week period last year.

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    Anadarko Finds Mozambique-Gas Buyers as State Mulls Go-Ahead

     Anadarko Petroleum Corp. has clinched almost all the supply accords it needs to bring a natural-gas project in Mozambique to fruition and is awaiting state consent to export the fuel as U.S. competition gathers pace.

    The company has obtained about 90 percent of the heads of agreement, or non-binding accords, it needs to finance an onshore liquefaction plant, country manager John Peffer said by phone from Maputo.

    Reaching an investment decision on the liquefied natural gas project “is predicated on how quickly we can get the agreements from government,” Peffer said. “They’re motivated and we’re motivated.”

    Africa’s projects to chill gas to a liquid for shipment by sea face competition from the U.S., which is moving ahead with its own export plans after shale production boomed. Mozambique passed laws in the past year to aid LNG development while PresidentFilipe Nyusi, elected in October, made senior appointments to state energy companies ahead of a possible gas bonanza.

    “Ultimately the timing for taking a final investment decision will be determined by the government’s pace agreeing the legal and contractual framework and approving necessary permits,” Peffer said. Anadarko expects to submit its development plan in the coming months.

    The oil and gas producer, based in The Woodlands, Texas, is pursuing the $15 billion Mozambique project at a time when other energy companies have deferred large developments following the collapse in crude, which is trading at less than half its price a year ago. The LNG plant would allow shipments from the largest gas discovery in a decade.
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    Trafigura replicates its oil market tactics to dominate LNG

    Trafigura is blazing a trail for trade houses, adopting highly successful tactics used in oil markets, to get an edge in the burgeoning liquefied natural gas (LNG) sector.

    Oil traders usually act as a go-between for producers and end users, investing in logistics and storage to facilitate trade, while also providing credit and shouldering risk for their customers.

    Commodity traders are now stepping up their activity in LNG, adding liquidity and carving a niche in a market previously dominated by producers and oil majors such as Qatar and BP , as new supplies create fresh trade opportunities.

    Trade houses including Vitol, Noble Group and Guvnor are also attracted to LNG through rising global supply, growing competition and increasingly scattered pockets of demand fuelling spot market trade.

    Swiss-based Trafigura, best known for its oil and metals business, is leading the pack, having become the top LNG trader in around two years after leaping into LNG markets in 2013 with a major deal to supply Mexico.

    Trafigura declined to comment on its strategy or growth outlook.

    "They're taking the classic trading model from other energy markets and applying it to LNG, using infrastructure and shipping to take advantage of opportunities, it's the typical bag of tricks used by traders," Jason Feer, head of business intelligence at Poten & Partners said.

    Earlier this year Trafigura took advantage of a glut of cheap tankers available for spot charter, agreeing a rare deal with shipping company Golar LNG to lease six vessels on a single-voyage basis.

    It has also leased storage at India's Kochi terminal and Singapore's Jurong Island import terminal, providing flexibility and security to execute trades at short notice that other players cannot easily match.

    "If somebody fails to perform for them then they've got backup and vice versa, if they're distressed, they're long a cargo, then they can always stick it into storage," a source at a rival trading house said.

    Flat forward prices may keep pushing Trafigura to maintain trading momentum in order to repay the costs of leasing tank space. In a rising market, by contrast, simply storing fuel adds to its value, helping pay down fees.

    Trade houses ability to manage risks around a buyers terms and conditions, along with managing payment, have helped them increase their market share of LNG.

    "They use their balance sheet, they're willing to go places other people aren't, they're willing to take risks that major oil companies aren't," Feer said.

    Oil major Shell is fronting a significant chunk of supply for Trafigura's various positions into Latin America and Egypt, say trade sources, showing how traders are partnering suppliers wary of exposure to potentially risky new buyers.
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    Schlumberger to buy oilfield gear maker Cameron in $14.8 bln deal

    Oilfield services company Schlumberger Ltd agreed to buy Cameron International Corp, which makes equipment used by oilfield services providers, in a deal valued at $14.8 billion to cut costs amid weak drilling activity.

    Cameron makes products, such as blowout preventers and valves, that control pressure at oil and gas drill sites. Schlumberger provides oil and gas producers with a full array of services from surveying a site to drilling and completing wells.

    The two companies had combined their subsea businesses in November 2012 to create a joint venture to drill in deeper waters.

    Besides cutting operating costs, the acquisition will also help Schlumberger streamline its supply chains and improve its manufacturing processes, Chief Executive Paal Kibsgaard said in a statement.

    The cash-and-stock offer values Cameron at $66.36 per share, a premium of 56.3 percent to Cameron's Tuesday close.

    Cameron's shares shot up to $62.50 in premarket trading on Wednesday. Schlumberger's shares fell 1.4 percent to $71.50.

    Oil prices have tumbled 60 percent since June last year, forcing oil and gas producers to cut back on exploration activity, which in turn has hurt demand for oilfield services.

    Schlumberger has slashed 20,000 jobs this year alone and lowered its capital budget in an effort to maintain margins.

    Schlumberger's rivals Halliburton Co and Baker Hughes Inc agreed in November to merge in an effort to contain costs. The deal, which will create a company with 2013 pro-forma revenue of $51.8 billion, is yet to get all required regulatory approvals.

    Schlumberger and Cameron's combined pro-forma revenue would have been $59 billion in 2014, Schlumberger said.

    Schlumberger's offer values Cameron at $12.74 billion, based on the company's diluted shares as of June 30.

    Cameron shareholders will get $14.44 in cash and 0.716 of a Schlumberger share for each share held.

    Schlumberger said it expects the deal to add to earnings by the end of the first year after closing, which is expected in the first quarter of 2016.
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    Top Asian refiner Sinopec's net profits slip 22 pct in H1

    China's Sinopec Corp , Asia's largest refiner, posted a 22 percent fall in first-half profit on a sharp decline in international crude prices that hit upstream earnings.

    The state-controlled company's net profit was 25.4 billion yuan ($3.96 billion), compared to 32.5 billion yuan a year earlier, it said in a filing with the Hong Kong bourse.

    Sinopec said last month that it expected an 11-fold jump in quarterly net profit in the second quarter compared to the first.

    The company plans to cut back operations at its refineries by around 5 percent in the fourth quarter compared with the first half of the year as fuel inventories rise and demand for diesel slows, industry sources told Reuters.

    In the first half, crude oil production fell 2.1 pct on year to 174.1 million barrels, Sinopec said in the filing.

    Sinopec reported a worse than expected fourth-quarter net loss of 5.3 billion yuan in 2014 -- its first quarterly loss since becoming a public company in 2000.

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    CNOOC first-half net profit slumps 56 pct on crude price fall

    China's top offshore oil producer CNOOC Ltd said its consolidated first-half net profit fell 56.1 percent, as a precipitous drop in crude prices offset higher production.

    The company reported a net profit of 14.73 billion yuan ($2.30 billion) for the first half, compared to the 33.6 billion profit a year earlier, according to a filing with the Hong Kong stock exchange.

    The results are unaudited.

    Net production of oil and gas for the first-half was up 13.5 percent on year to 240.1 million barrels of oil equivalent.

    CNOOC chairman, Yang Hua, said in the filing that the "severe operating environment" is expected to continue through the second half of the year, and that the company will "focus more on economic efficiency" rather than just on "production volume".
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    PIRA: Qatar ups LNG deliveries to Europe

    NYC-based PIRA Energy Group reports that Qatari LNG pushes to Europe to support Asian prices.

    Increases in European LNG buying are largely centered on Qatari firms pushing more volume into their equity-owned terminals. With more Australian LNG coming, Qatari volumes to Europe will go up unless the two Qatari firms make a stronger push for market share in Asia through lower prices, PIRA said in its report.

    In the United States, despite drilling efficiency gains, 2Q15 production was tempered by price-driven curtailments in Appalachia. As a result, overall U.S. production sustained growth but at a decidedly slower pace than in the prior quarters. Output within the PIRA Group grew, but was unimpressive compared with considerably larger 1Q15 and 4Q14 year-on-year gains.

    Weakness on the front end will continue to be an issue with seasonal gas demand in Europe, reaching its low point for the year. Over the next six months, gas demand will more than double from current levels to nearly 2-bcm/d if the weather emerges under a normal pattern. In this context, PIRA sees underlying demand growth as well, although through the second and third quarter PIRA ran through a string of downward revisions. Germany has been an exception to this slowdown in demand growth.

    Following recent LNG reforms in Mexico, floundering domestic production continues to underscore the critical need for new outside capital to stymie this downtrend. Given this reality, PIRA found the results of Mexico’s first upstream tender troubling (only 2 out of 14 blocks awarded). The Mexican government has recognized the importance of relaxing fiscal/operating terms to avoid similar results in subsequent rounds, but Mexico runs the risk of seeing deeper production losses in the years ahead unless those changes in terms prove to be effective.

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    Mexico sweetens oil auction terms again to avoid repeat of flop

    Oil companies competing in the next phase of Mexico's historic Round One auction will know the minimum level of profits demanded by the government prior to the auction, the sector regulator said on Tuesday, in a bid to raise investor interest.

    The oil regulator, known by its Spanish-language acronym CNH, also said it will offer companies the possibility to conduct additional exploration and extraction beyond reserves that have already been discovered.

    The changes are aimed at avoiding a repeat of the first phase of the auction, in which the government missed its own modest expectations, awarding just two of 14 contracts offered.

    During that auction, Mexico's finance ministry only revealed the minimum level of profits companies would have to pay the government after firms presented their bids.

    The next round will be awarded on September 30, and involves five production-sharing contracts covering nine shallow water oil fields along the southern edge of the Gulf of Mexico.

    The regulator already said in August that it would lower the corporate guarantee - money a consortium has to put up in case of an accident- for the second phase.

    Twenty companies have pre-qualified for the late September auction, either as individual operators or in consortia, including international oil majors Chevron and Royal Dutch Shell.

    Mexican billionaire Carlos Slim's Carso Oil and Gas is also among the firms that have pre-qualified to bid, partnering up with two winners from last months auction; Talos Energy and Sierra Oil and Gas.

    Mexico's oil regulator is running the five-phase Round One auction, which aims to lure billions of dollars in investment and reverse a decade-long dip in crude output.
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    Qatar raises its game to fend off next LNG giants

    Gas giant Qatar is becoming commercially sharper, using traders and tenders to grab new customers, and fighting to hold on to its share in the prized Asian market.

    Qatar is the world's top supplier of liquefied natural gas (LNG), but in the coming five years it could be surpassed by Australia, a shift which threatens its dominance in Asia -- which accounts for almost three quarters of the global market and has paid the highest prices.

    "Previously Qatar's strategy had been about retaining price, in future it's going to be about retaining market share," said Noel Tomnay, head of global gas and LNG research at Wood Mackenzie.

    "As lots of Australian LNG comes into the market, it's inevitably going to push out some Qatari volumes from Asia," Tomnay said.

    This has prompted Qatar to work more closely with trade houses who are focused on short-term deals, often in riskier markets, while also lowering its price expectations.

    "In the past Qatar did not need to be commercial. Now they are a lot more commercial, a lot sharper," said a trader at an international trade house. "They are dealing with traders more and have started participating in tenders."

    With the help of trade houses, Qatar has been supplying LNG to some of the newest importers including Egypt, Jordan and Pakistan, who are securing vast amounts via short term tenders.

    The global LNG market was based on bilateral long term deals, with contracts lasting years, but the new supply has increased uncommitted volumes, triggering more focus on 'spot' trade.

    "Qatar as a supplier can afford to provide their long term contracts and then on top of that they have flexible LNG to attack new markets. It's a strategy to adapt itself to the new world," a trader at an oil major said.

    Independent LNG consultant Andy Flower estimated Qatar's exports to Asia in the first half of the year fell by around 2.7 million tonnes compared to the same period a year ago, while exports to Eastern Mediterranean countries including Israel, Jordan and Egypt were up by 0.4 million tonnes and exports to Europe were up by around 2.5 million tonnes.

    "This suggests that they are showing increased flexibility in responding to the changes in the markets," Flower said.

    Qatar was previously able to charge a premium on the basis that they were a very reliable supplier. Its major LNG producers Qatargas and RasGas produce around 77 million tonnes per year.

    "Qatargas and RasGas are no longer averse to talking about making changes to existing contractual agreements in light of the completely changed market dynamics," a source at importer Gail India said.

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    Fourth Tanker leaves Iran floating storage since nuclear deal

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    Encana sells Haynesville gas assets for $850million

    Encana Oil and Gas is to sell its Haynesville natural gas assets in northern Louisiana, to GEP Haynesville in a $850million deal.

    Encana operates approximately 300 wells in the area. Estimated year-end 2014 proved reserves were 720 billion cubic feet equivalent (Bcfe) of natural gas.

    Its natural gas assets include approximately 112,000 net acres of leasehold, plus additional fee mineral lands.

    GEP Haynesville is a joint venture formed by GeoSouthern Haynesville and fund manager GSO Capital Partners.

    Through the transfer of current and future obligations, Encana will reduce its gathering and midstream commitments – which will be substantially complete by 2020 – by approximately $480 million on an undiscounted basis.

    Encana will transport and market GeoSouthern’s Haynesville production on a fee for service basis for the next five years. It will use the total cash consideration to reduce its net debt.

    Over 80% of 2015 capital will be invested in the company’s four most strategic assets in the Permian, Eagle Ford, Duvernay and Montney.

    Encana chief executive Doug Suttles said: “This transaction delivers significant proceeds that we’ll use to strengthen our balance sheet. In addition, it eliminates our midstream commitments in the Haynesville and captures ongoing revenue upside through a gas marketing arrangement.”
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    Gulf Marine Services Profit Higher, Expects Second Half Earnings Boost

    Gulf Marine Services PLC on Tuesday posted a solid set of results for the first half, with profit and revenue both higher and the group's fleet utilisation remaining strong, along with confidence that earnings will improve in the second half.

    The company, which provides self-propelled self-elevating support vessels to the offshore energy sector, said its pretax profit for the six months to the end of June was USD36.1 million, up from USD34.3 million a year earlier, as revenue for the group increased to USD98.2 million from USD90.7 million.

    Gulf Marine said its fleet utilisation in the half was 98%, with charter day rates in line with its guidance. The group said its fleet expansion programme is now more than half complete and is on time and on budget. The three new vessels it has commissioned most recently have been immediately deployed to new contracts.

    The company added it would pay a flat interim dividend of 0.41 pence per share.

    The group is anticipating a reduction in planned special projects in the second half of the year and, in addition to the new vessels which will be added to its fleet in the third quarter, expects an increase in total available days of more than 25% in the second half. More than 95% of its total available days for the second half have already been contracted, it said, and this should lead to a substantial rise in second half earnings.

    "Given the group's continued success in winning contracts for the new vessels, we expect to see growth in our revenue earning capacity feeding through to the bottom line and dividend prospects in 2016 and thereafter," said Chief Executive Duncan Anderson.

    "As the period of capital investment associated with the current new build programme concludes in 2016 and the group captures the earnings benefit from the enlarged fleet, the board will consider the appropriate dividend policy that balances the opportunities to invest to continue to grow the business with the potential for increased shareholder returns," Anderson added.
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    Iraqi oil minister says $9 bln in arrears paid to foreign oil companies

    Iraq's oil minister said on Tuesday his country had paid foreign oil companies $9 billion in remaining arrears for 2014 and was paying 2015 arrears in stages until the beginning of 2016.

    Adel Abdel Mehdi wrote in the local al-Adala newspaper that the ministry would study with foreign oil companies ways to reduce costs and link them to oil prices.

    Service contracts with Western oil companies are currently based on a fixed dollar fee for additional volumes produced, meaning that with the drop in oil prices over the past year, the amount of crude needed to pay the companies has roughly doubled.
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    Construction workers at Chevron LNG project vote to strike

    Construction workers on Chevron’s Gorgon LNG project in Western Australia have voted in favour of taking industrial actions over roster concerns.

    According to reports, more than 1,000 employees – who are employed by contractor Chicago Bridge and Iron – want to change the current rota from 26 days on and nine off.

    Instead, staff are calling for more ‘family-friendly’ shifts with 20 days on, with 10 off.

    The ballot for strike action has been called by the Australian Manufacturing Workers’ Union and the Construction, Forestry Mining and Energy Union.

    The secret vote resulted in94% of members supporting the move with workers able to down their tools after giving seven days notice.

    AMWU state secretary Steve McCartney said: “Workers are prepared to spend two-thirds of their time on Barrow Island. “They just want one third of their lives for their families.”

    The huge $54billion LNG project is almost complete but is currently behind schedule.
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    Boost in hydro, fall in power demand prompts Brazil LNG re-exports

    A Brazilian Ministry of Mines and Energy decision to authorize the re-export of LNG was prompted by a growing supply of hydropower and an overall reduction in electricity demand, a Brazil-based power market analyst said Monday.

    The ministry August 20 authorized state-led Petrobras to re-export volumes up to 6.6 million cu m of gas, equivalent to about 10,840 cu m of LNG.

    "Reservoir inflows in July were 50% above the historical average for the month," said the analyst, who asked not to be identified. "As a result the MME has cut back on dispatch of the most expensive thermal plants, specifically those running on diesel and fuel oil."

    Despite severe drought conditions in Brazil, a strict water-rationing policy has restored reservoir levels in Brazil's critical Southeast-Midwest region, where 70% of generation capacity is installed, to an average 37.4% in July, according to data from the National Electric System Operator. By comparison, reservoir levels during July 2014 averaged just 34.4%.

    A recent slowdown in Brazil's economic activity has also prompted a reduction in electricity demand.

    "Most of the recent decline has come from a reduction in residential electricity use," the analyst explained. "Most of the slowdown in industrial demand has already occurred."

    During the first trimester of 2015, Brazil's GDP contracted by 0.9%, data from the Brazilian Institute of Geography and Statistics shows.

    "The MME is laying the ground work for a reduction in gas demand that seem imminent," the analyst said. "All of the gas-fired thermal plants are still running at 100% dispatch, but that could change."

    The recent authorization issued by the MME allows LNG volumes to be reloaded onto ocean-going vessels and resold into the spot market from any of Brazil's three regasification terminals in Rio de Janeiro, Bahia or Ceara.

    The authorization requires Petrobras to meet its contractual obligations to supply gas to the domestic market and may be revoked by the Ministry if there is a perceived risk of supply shortage.

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    Petrofac posts net loss. Hurt by Laggan-Tormore costs

    Oilfield services provider Petrofac swung to $133 million net loss in the first half of the year, compared to a net profit of $136 million in the first half of 2014. Revenue rose to $3.2 billion, up from $2.5 billion a year ago.

    Explaining the loss, the company said it recorded incremental losses on the contract in the first half of 2015 of approximately $263 million after tax as a result of additional completion and pre-commissioning work on the Laggan-Tormore gas plant.

    “The additional costs predominantly relate to additional direct construction man-hours, along with the associated indirect, subcontractor and material costs. The rest of our portfolio remains in good shape and is performing in line with our expectations,” Petrofac said in a statement.

    As for its Offshore Projects & Operations, in the first half, Petrofac secured a number of new wins and extensions, totalling approximately $800 million, including Oranje-Nassau Energie, CNR International and Eni.

    The company said that overall activity levels within the Offshore Projects & Operations in the first half of 2015 were lower than the first half of 2014. This was primarily due to lower levels of activity on capital projects, such as the Laggan-Tormore gas plant on Shetland in the UK and the upgrade and modification of the FPF1 floating production facility (which will subsequently be deployed on the Greater Stella Area).

    As a result of the lower activity, Petrofac laid off 200 workers from its offshore branch in 1H, with final headcount at the end of the first half standing at 5,300.
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    Energy Transfer bidding for Magnum Hunter stake in pipeline unit

    Pipeline company Energy Transfer Equity LP is bidding for Magnum Hunter Resources Corp's stake in natural gas gathering unit Eureka Hunter Holdings, Bloomberg reported, citing people familiar with the matter.

    Oil and natural gas producer Magnum Hunter, which has been struggling with weak natural gas prices, said in June that it expected to raise $600 million-$700 million by selling its 45.53 percent stake in Eureka Hunter.

    Magnum Hunter began working with the Bank of Montreal to auction its stake in Eureka Hunter after Energy Transfer made an unsolicited bid for the assets earlier this year, Bloomberg reported on Monday.

    Morgan Stanley's infrastructure investing arm, Morgan Stanley Infrastructure, owns a majority stake in Eureka Hunter.

    Energy Transfer has also been pursuing bigger rival Williams Cos Inc.
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    Oil Search eyeing acquisitions in PNG

    Oil Search Ltd said on Tuesday it is looking for acquisitions in Papua New Guinea, where it holds the bulk of its assets, but Managing Director Peter Botten said deals may take some time as buyer and seller expectations remain wide apart.

    Botten said Oil Search is better positioned than many of its peers to weather a prolonged period of low oil prices as its oil and gas output in PNG remains very profitable.

    Armed with $1.6 billion in cash and debt facilities, it is looking to snap up cheap assets, but Botten said buyers' and sellers' views on the oil price outlook have yet to converge enough to seal deals.

    "On that basis, I suppose if you're a buyer, time is on your side. If you're a seller that might not be the case," he said.

    He did not comment on whether Oil Search has approached Santos Ltd over any of its its stakes in Papua New Guinea. Santos last week effectively put all its assets up for sale.

    "Clearly, our assets in PNG are where we would like to look and optimise," Botten told reporters.

    Santos owns a 13.5 percent stake in the PNG LNG project, in which Oil Search already owns a 29 percent stake, and is a partner with Oil Search in the South East Gobe oil field. It also has exploration licenses on and offshore in PNG.

    Oil Search reported a record half-year profit of $227.5 million on Tuesday, up 49 percent on a year earlier thanks to a full six-month contribution from PNG LNG.

    The PNG LNG plant is producing at a rate of 7.1 million tonnes a year, above its nameplate capacity of 6.9 mtpa.

    Oil Search is counting on PNG LNG, operated by Exxon Mobil , to go ahead with an expansion using gas from the P'nyang field. It also hopes the Total operated Papua LNG project, in which it has a 22.8 percent stake, will go ahead with gas from the Elk and Antelope fields.

    Botten said the company believes both projects would be economically viable even if oil prices remain "lower for longer" around $50 to $60 a barrel for some time, as he forecasts.

    "We certainly see they remain very attractive - more attractive than most," he said.

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    Shale oil production in Bakken, Eagle Ford grew marginally in July: Platts'

    Oil production from key shale formations in North Dakota and Texas increased slightly in July from June, according to Bentek Energy, an analytics and forecasting unit of Platts. Platts is a leading global provider of energy, petrochemicals, metals and agriculture information.

    Oil production from the Eagle Ford Basin in Texas remained relatively strong in July, up 10,000 barrels per day (b/d), ), but less than 1%, from June, the latest analysis showed. This increase followed the growth trend that has been set by the basin since January of this year when oil production showed the first (and so far only) sign of decline when it decreased 14,000 b/d month on month.

    Crude oil production in the North Dakota section of the Bakken shale formation of the Williston Basin remained flat, increasing less than 500 barrels b/d, or less than 1% in July vs June.

    The average oil production from the Eagle Ford Basin last month was 1.6 million barrels per day. On a year-over-year basis, that is up a little less than than the incremental 250,000 b/d, or about 17% higher than July 2014, according to Sami Yahya, Bentek energy analyst. The average crude oil production from the North Dakota section of the Bakken formation in July was 1.2 million b/d, or up approximately 90,000 b/d from year-ago levels.

    "It is the flight to quality and higher returns that is keeping crude production going in those two key shale basins," said Yahya. "Initial production (IP) rates have been improving, especially in the oily window of the Eagle Ford Basin. As well, producers in the Eagle Ford are currently drilling 2.5 wells per rig per month, which is higher than the national average of 1.5 wells. Drill times have been improved from an average of 15 days per well in 2014 to roughly 11 days per well in 2015."

    The Bakken shale formation follows closely behind the Eagle Ford Basin in terms of efficiency gains and internal rates of return, noted Yahya. Drill times in this basin have dropped from about 15 days per well in late 2014 to about 13 days per well during the second quarter of this year, he said.

    "Substantial cost savings protocols alongside reduced drill times have kept internal rates of return (IRR) in the Bakken shale formation among the best in the country," explained Yahya.  "Current rates of return in the Bakken shale formation are around 15%, which is comparable to the 18% found in the Eagle Ford Basin."

    Bentek analysis shows that from July 2014 to July 2015, total U.S. crude oil production has increased by about 550,000 b/d.,+eagle+ford+grew+marginally+in+july:+platts'+bentek+energy_120296.html
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    China’s LNG imports beat piped volumes in July

    China’s LNG demand continued to show signs of improvement in July with imports rising by nearly 5% from a year ago, but this was offset by an 11% fall in piped volumes from Central Asia and Myanmar.
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    Russia’s Novatek to sell 10% in Yamal to Chinese fund

    Russia’s second-biggest gas producer Novatek is close to selling a 9.9 percent stake worth an estimated $900 million in its Yamal liquefied natural gas project to a Chinese investment fund, Kommersant business daily reported on Monday.

    The deal may close in the coming weeks, the daily quoted three sources familiar with the talks as saying. It quoted one of source as saying the buyer was China’s infrastructure fund Silk Road.

    The stake sale may help Novatek to line up project financing from Chinese banks after sanctions shut access for Russian companies to Western capital markets, Kommersant said.

    Novatek was not immediately available for comment.

    China announced last year it would contribute $40 billion to set up the Silk Road fund to boost connectivity across Asia. The fund made its first acquisition in April, investing $125 million in a Chinese company developing energy projects in Pakistan.
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    Daewoo Shipbuilding & Marine Engineering cancels drillship order

    Daewoo Shipbuilding & Marine Engineering cancels drillship order

    IHS Maritime reported that South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering has cancelled a drillship order after the customer missed a payment.

    In a Korea Exchange filing, DSME said that the KRW 703.4 billion order was placed by an Americas-based customer in July 2013.

    The drillship was to be delivered in November 2015, but DSME decided to terminate the contract as the customer defaulted on a payment instalment.

    The customer was not identified but IHS Maritime's Sea-Web data indicates the customer is Vantage Drilling.

    The drillship, Cobalt Explorer, has been built and launched.

    DSME said it would try to sell the vessel and would consider legal action against its customer to seek compensation.

    The collapse in oil prices has caused drilling companies to either cancel or defer deliveries of drillships that were ordered speculatively, as oil majors cut back on exploration and production work.

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    Oil production increases in OPEC nations

    The Platts survey of OPEC nations’ oil production has revealed that Saudi Arabia pumped an additional 100 000 bpd, accounting for almost the entire increase in oil pumped last month. Angola pumped 50 000 bpd, UAE 30 000 bpd and Iran 20 000 bpd. Algeria, Libya and Nigeria collectively pumped 80 000 bpd, revealed Platts’ survey.

    Senior correspondent Margaret McQuaile said, “OPEC is now pumping at its highest level in three years, and that’s before Iran comes back at full throttle. At some point, something will have to give, but that time may be some way off.”

    Since August 2012, July’s total oil volume pumped is now the highest by OPEC. However, despite the decline in oil prices (below US$50 a barrel) coupled with additional inflow from Iran in a few months, there is no sign that OPEC’s Saudi Arabia-drive market share policy is about to change anytime soon, stated McQuaile. OPEC was earlier trying to limit production within the 30mn bpd ceiling, which came into play in January 2012. Though this is OPEC’s official output volume, there is no mechanism to enforce it.
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    GLNG to market six commissioning cargoes

    Santos-operated Gladstone LNG facility on Curtis Island, is making good progress towards start-up expected around the end of third quarter.

    The company recently fed gas into its LNG production train 1 at the facility.

    Sources told Reuters that six commissioning cargoes will be put on offer between October and December, as GLNG intends to sell cargoes to market before it long-term deliveries begin.

    According to sources, during the commissioning period, two cargoes per month are expected to be loaded with GLNG likely to send invites during next week.
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    Iran Plans ‘Any Cost’ Oil Output Rise to Defend Market Share

    Iran plans to raise oil production “at any cost” to defend the country’s market share and backs calls for an emergency OPEC meeting to help shore up crude prices.

    “We will be raising our oil production at any cost and we have no other alternative,” said Oil Minister Bijan Namdar Zanganeh, according to his ministry’s news website Shana. “If Iran’s oil production hike is not done promptly, we will be losing our market share permanently.”

    Iran had the second-biggest output in the Organization of Petroleum Exporting Countries before U.S.-led sanctions banning the purchase, transport, finance and insuring of its crude began July 2012. Oil producers such as BP Plc and Royal Dutch Shell Plc have expressed interest in developing the country’s reserves, the world’s fourth-biggest, once sanctions are removed.

    Zanganeh was speaking during the first visit by a British foreign secretary to Iran since 2003. Philip Hammond was accompanied by officials from Shell and BP as he reopened the U.K. embassy, four years after it was shut following a mob attack, marking the improvement in relations since July’s nuclear accord.

    Shell will pay $2.3 billion owed to Iran “immediately” after the restrictions are lifted, Zanganeh said. Shell has consistently said that once sanctions are lifted, it will repay the debt, a company spokesman said.

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    San Leon Energy confirms bid interest

    San Leon Energy confirms bid interest

    In a short statement, San Leon confirmed that had been bid interest in the company.

    Money on the table? Not quite. The bid hasn't evolved that far.

    Expect shares in Poland-focused oiler San Leon Energy (LON:SLE) to light up after it confirmed a weekend report it had received a bid approach.

    However the AIM junior cautioned: “There can be no certainty that an offer will be made or as to the terms on which any offer might be made.”

    A further announcement will “be made, as appropriate, in due course”, San Leon told investors.

    The stock market statement followed a brief article in the Sunday Business Post that flagged up potential interest in the business.

    San Leon’s main focus is Poland, where it has interests in six licences. It also part of consortium that is drilling offshore Morocco and it has a net profit interest in the Barryroe Licence in the waters off Ireland along with assets in France, Romania, Spain and Albania.

    In June it announced plans to raise £29mln that will fund development work.
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    US oil rigs increase by two as drillers prop up vertical units

    US oil rigs increase by two as drillers prop up vertical units

    U.S. drillers put two oil rigs back to work this week, Baker Hughes said Friday, marking the rig count’s fifth consecutive weekly gain.

    That brought the nation’s fleet of oil rigs up to 674, up by 46 from the rig count’s lowest point of the year in late June. The nation’s gas-drilling rigs stayed the same at 211. Texas’ overall rig count slipped by five.

    Three oil rigs were propped up in the Williston Basin in North Dakota, and drillers in the Haynesville in Louisiana, the Granite Wash in the Texas Panhandle and the Cana Woodford in Oklahoma increased their oil rig fleets by a combined four. But two tight oil plays, the Permian Basin in West Texas and the Eagle Ford in South Texas, together sidelined eight rigs.

    Baker Hughes’ data also shows that in recent weeks drillers have been propping up vertical-drilling rigs. Those units have climbed from their lull of 99 in early June to 130 on Friday, boosting the share of vertical rigs in the U.S. market from 11.4 percent to 14.7 percent. In that same time, active horizontal drilling rigs have increased by four.

    That suggests that the rigs being sent back to the field aren’t chasing oil that’s trapped in shale rock, but rather in conventional sandstone or carbonite reservoirs. They’re the kind of formations the industry has drilled for a century, but that lost their luster in the last decade with the advent of shale formations in Texas and North Dakota. There, operators can benefit from lower drilling costs — about a third of the cost of horizontal shale drilling — and a longer life-span for their wells. Shale wells deplete rapidly, by up to 80 percent in one year, which is unattractive when oil prices are hovering around $40 a barrel.

    Though conventional reservoirs are “not as sexy” as shale, “your costs were low and in the end it’s probably higher upside and it makes more sense when oil is $40 a barrel,” said Phillip Blower, a land manager at Whitmar Exploration Co. in Denver, during the North American Prospect Expo on Thursday.

    So why are some rigs coming back online while the price of crude drops? The increase may not last long. But some of the gains may be coming from small oil companies that hedged their production in May and June, when oil was around $60 a barrel, said Wil Harris, senior vice president at oil adviser Asset Risk Management, which helps small oil producers lock in prices for their future oil output.

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    India to Sell $1.5B of Indian Oil Shares on Monday

    India to Sell $1.5B of Indian Oil Shares on Monday

    India will sell a 10 percent stake in top state-run refiner Indian Oil Corp Ltd on Monday through a stock market auction, the government said, as part of its drive to raise funds by selling off assets.

    At the current market price of the stock, that stake would be valued at about $1.5 billion.

    The government owns 68.6 percent of IOC, whose stock hit a record high in July and has outperformed the broader market this year as the refiner benefits from cheaper global crude prices.

    It will sell about 242.8 million shares in Indian oil in Monday's auction, for which it will set a floor price on Saturday. Individual investors can buy the stock at a 5 percent discount to the final bid price, the government said in a regulatory filing.

    New Delhi is seeking to raise as much as $11 billion by selling stakes in state-run companies this fiscal year, crucial to narrowing the fiscal deficit to a planned 3.9 percent of gross domestic product in 2015/16.

    The government has missed its divestment target for the last five years in a row.

    Last month, the government raised about $260 million from the sale of a 5 percent stake in Power Finance Corp Ltd , after the auction received bids for more than twice the number of shares on offer.

    Citigroup, Deutsche Bank, Nomura and Indian investment banks JM Financial and Kotak Securities are the managers of the Indian Oil share sale.

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    Canada’s Largest Refinery Shifts from Bakken Shale Oil to Brent Crudes

    Canada’s Largest Refinery Shifts from Bakken Shale Oil to Brent Crudes

    The operator of Canada’s largest crude oil refinery, Irving Oil Ltd., said it has stopped importing Bakken Shale oil from the U.S. in favor of cheaper crudes from such producers as Saudi Arabia, reflecting a shift in crude costs affecting East Coast refiners during a global slump in oil prices.

    The closely held company’s 320,000-barrel-a-day refinery in Saint John, New Brunswick, one of the biggest by volume in North America, has reduced purchases of Bakken crude shipped by rail to zero from a high of nearly 100,000 barrels a day two years ago, Irving President Ian Whitcomb said in an interview on Thursday.

    “We’re not importing any Bakken crude right now,” he said.

    The move reflects shifting economics in the energy industry even as the price of oil—including Bakken crude—has slumped to six-year lows.

    A once-yawning gap, between the cost of oil produced in North America and overseas crudes priced at the Brent global benchmark, has narrowed since 2013. Refiners on North America’s east coast can now import crude shipped by sea for less than the cost of shipping it by rail from shale oil producers in North Dakota and elsewhere in the U.S.

    U.S. shale oil production has surged in recent years, especially from the Bakken Shale formation in North Dakota, where a lack of pipelines led to a boom in shipments of crude by rail. Shipping by rail is more expensive than by pipeline—and in many cases by ship—and fewer refiners seem willing to pay that premium.

    Refiners PBF Energy Inc. and Phillips 66 both said they increased procurement of overseas crudes at the expense of crude-by-rail in the second quarter, though they signaled it is unclear if that will continue throughout the rest of the year.

    “Our ability to source sovereign waterborne crudes was far more economic to the East Coast facilities, and that’s what we did,” PBF Energy CEO Tom Nimbley said in late July.

    Phillips 66 CEO and Chairman Greg Garland told investors last month, “We actually set [crude-by-rail] cars on the siding. We brought imported crudes in the system.”

    But, he added, “I’d say given where our expectations are for the third quarter, I’d say cars are coming off the sidings, and we’re going to import less crude.”

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    Petronas acquires 50% stake in MLNG Dua facility from Shell

    Petronas acquires 50% stake in MLNG Dua facility from Shell

    Malaysian oil and gas company Petroliam Nasional Berhad (Petronas) has acquired a 50% stake in the MLNG Dua liquefied natural gas (LNG) plant from Royal Dutch Shell.

    Financial details about the deal have not been disclosed.

    The equity, owned by Shell's unit Sarawak Shell, was operated under a Production Sharing Contract (PSC) which had been signed with the state-owned Petronas in 1993.

    The new deal has turned PETRONAS Carigali Sdn (PCSB) and its subsidiary E&P Malaysian Ventures as new PSC operators for the facility with 90% and 10% of ownership stake respectively.

    It will come into effect as the previous PSC for the plant has expired on 20 August.

    Petronas Upstream Malaysia senior vice president Mohd Anuar Taib said: "Petronas is committed to ensure that there will be no interruption to the supply and demand of gas and achieve stability in the operations of MLNG Dua."

    The takeover is in line with the Malaysian firm's strategy to develop the state of Sarawak as the gas hub in the region.

    The firm intends to retain the current staff and vendors for the facility, it said.

    Anuar Taib said: "The 39 employees released by the previous operator are the only staff that PETRONAS can legally approach for employment offer, and 37 have accepted. They will continue performing their jobs at MLNG Dua as usual."
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    Dutch storage company Vopak shares dive on outlook concerns

    Dutch storage company Vopak shares dive on outlook concerns

    Shares in Vopak, the Dutch oil and chemicals storage company, tumbled on Friday after it said it did not expect Asian markets to improve and that its core earnings were likely to be lower in the second half of the year.

    Vopak said its first-half earnings rose 17 percent thanks to good trading conditions in North America and Europe, offset by the impact of China's economic slowdown.

    But investors dumped the stock on the company's worsening outlook, sending the stock down more than 15 percent, poised for its worst trading day in nearly three decades.

    The results coincided with data showing the Chinese factory sector shrank at its fastest rate in almost 6-1/2 years. .

    Vopak, the world's largest independent storage tank operator, reiterated its April forecast for full year EBITDA, or earnings before interest, taxes, depreciation and amortisation, in excess of 763 million euros ($858 million) for 2015.

    However, that implies a decline in the second half of the year after the company reported EBITDA of 408 million euros in the first half of 2015.

    Vopak Chief Executive Eelco Hoekstra confirmed a decline in the second half was the most likely scenario.

    "If you do not expect or see signals for significant improvements for the Asian results in the second half of the year...then it's more likely of course that the second half of the year is lower than the first half," he said.

    To meet current guidance, the company would have to report EBITDA of at least 355 million in the second half -- which would represent a 13 percent fall from first half levels.

    Vopak said the impact of divestments would also be felt in the second half of the year.

    The company is in the process of divesting 15 primarily smaller terminals, which contributed around 4 percent to 2014 earnings, to focus on markets with higher demand, largely in the Middle East and Asia.

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    Alternative Energy

    W.A. says solar is the future as it prepares to dump coal

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

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

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

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

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

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

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

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

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

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

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    WTO rules against India in solar power programme dispute with US

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

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

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

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

    The WTO typically circulates decisions on disputes to the parties before they are made public.
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    UK proposes end to small-scale renewable support next year

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

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

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

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

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

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

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

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

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

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

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    Origin says big solar to dominate large-scale renewable energy market

    Origin Energy, the biggest energy retailer in the country, says that large-scale solar plants will quickly overtake wind energy, as the most cost competitive renewable energy technology, and will likely dominate the new build required to meet the reduced large-scale renewable energy target.

    Origin CEO Grant King says wind energy is not likely to fall in costs, because of the declining Australian dollar, the distance from new projects to transmissions sources, and because it is a mature technology. (And, if you believe New Zealand’s Meridian Energy, because the political opposition to wind energy will likely raise costs too).

    But large-scale solar – little of which has been built in Australia to date without additional government grants – is looking more attractive, both in terms of costs and because solar projects can be built more quickly, from planning to construction, than wind farms.

    Origin Energy produced this graph to show the transition between solar and wind costs. But it says that even these estimates of the falling cost of solar may prove conservative.

    wind vs solar costs“Wind, which has traditionally supplied renewable energy, is unlikely to come down in cost,” King told a media briefing following the company’s annual results on Thursday.

    “If anything, wind energy will go up in cost in our view because sites are becoming further removed from transmission and are costing more to connect.” The appreciation of the dollar and the fact wind was a “mature” technology, meant it was unlikely wind costs would fall, he said.

    “The big story is that solar costs continue to come down and come down quite dramatically,” King said. “We suspect that this chart in a few years will have underestimated the falling costs of utility-scale solar.”

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    EDF buys US wind energy developer

    EDF’s renewable arm has bought a wind power developer in the US.

    It now owns 100% of OwnEnergy’s assets, which includes its pipeline of future wind projects.

    The US company currently has eight wind energy projects either in the construction or operating phase. They have a total capacity of 329MW.

    Tristan Grimbert, CEO and President of EDF Renewable Energy said: “OwnEnergy’s business model taps into the entrepreneurial spirit of farmers, ranchers and other community leaders across the country with a focus on the mid-size market of off-takers. Their community partner approach will continue under the EDF Renewable Energy brand.”

    EDF has so far developed 6GW of wind, solar, biomass and storage projects in North America.
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    Samsung: E-Bike Battery Pack That Runs 100km with Single Charge

    Samsung SDI unveiled an e-bike battery pack that can run for 100 km with a single battery charge. The company will participate at the Eurobike 2015 on August 26 (Wednesday) in Friedrichshafen, Germany to showcase its various lithium-ion battery technologies for electric bicycles.

    “As the No.1 company of small scale-batteries, we will continue to build up the market for new battery application.”

    Eurobike is the world’s largest bicycle trade fair that has around 1,300 industry companies from 54 different countries attending each year. Starting from 2012, this year will mark Samsung SDI’s fourth participation.

    Samsung SDI will exhibit six types of standardized battery packs that can either be built inside or installed on the outside for immediate use. It will also display 12 types of battery packs that are currently being supplied to global manufacturing companies and the cells of various specifications. Another technology worth noticing is the addition of a Bluetooth function which will enable users to check on their smartphones for residual battery, remaining distance, and other data, while riding their bicycles.

    The 500Wh battery pack, unveiled for the first time by Samsung SDI, has achieved its slim size by incorporating high capacity cells and superior battery pack technology. It can also run for a 100km with a single charge by having maximized energy storage.

    Recent vitalization of eco-friendly e-bicycle market and higher demand for long distance products - due to the diversification of usage in leisure, commuting, and others - have prompted Samsung SDI to develop its high capacity battery packs.
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    UK AD sector breaks 500MW capacity

    The UK anaerobic digestion (AD) industry now has a capacity of more than 500MW.

    That’s according to data published by the Anaerobic Digestion and Bioresources Association (ADBA).

    AD is the process of converting waste to produce green energy.

    The new total is 514MW for 411 plants in the farming, waste and water sectors.

    ADBA’s Chief Executive, Charlotte Morton, said: “This capacity is extremely valuable because AD generates low carbon baseload or dispatchable power, helping to keep the lights on and balance the output from intermittent renewables such as wind and solar.”

    She added Energy Secretary Amber Rudd has “rightly said providing baseload is one of her department’s priorities and biogas should be seen as an important component to our energy security”.

    However she said further growth in capacity is being hindered by the government’s decisions to remove Levy Exemption Certificates in the Summer Budget – which ADBA estimates will cost the industry £11 million – and to fast-track a four-week consultation aimed at removing pre-accreditation from the Feed-in Tariff.

    Ms Morton added: “To continue to expand the industry needs viable support in the forthcoming FiT review and an RHI budget which will support new green gas.

    “AD has the potential to meet 30% of UK domestic gas demand and overall it could cut UK greenhouse gas emissions by 4% and support food security and production.”
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    Molycorp to suspend production at Mountain Pass facility in California

    Rare earths supplier Molycorp Inc , which recently filed for bankruptcy protection, said it would suspend production at its flagship Mountain Pass facility in California by Oct. 20 due to a fall in prices.

    The company, which is the only U.S. supplier of rare earths, said it will continue to supply rare earths from its other facilities in Estonia and China.

    The Greenwood, Colorado-based company filed for bankruptcy protection in June.

    Rare earths gained global attention in 2010, when China clamped down on exports. Sensing an opportunity, Molycorp started expanding its Mountain Pass rare earths mine in California. But China subsequently eased export rules, causing prices to fall.

    Rare earths are used in a range of products from smartphones to military jet engines to hybrid vehicles. China controls roughly 90 percent of the world's supply of rare earths.
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    Tech challenges, severed contracts cloud Hanergy's outlook

    Hanergy Thin Film Power Group Ltd (HTF), which is being probed by Hong Kong regulators after its stock suddenly plunged, will have to convince shareholders about its outlook after it cut ties with its parent, which last year alone bought about two-thirds of its solar panel making equipment.

    HTF, whose valuation peaked at $48.5 billion in March only to plunge by nearly half in less than one hour two months later, has already warned the unravelling of these contracts may result in a first-half net loss, which would be its first since 2009.

    The company, whose stock has been suspended since it crashed on May 20, reports first-half results on Friday. It did not give a figure for the potential loss.

    "Hanergy's recent announcements about its contract and profits are akin to rearranging the deck chairs on the Titanic," said Soren Aandahl, director at shortseller Glaucus Research.

    "Hanergy has shown little ability to attract customers who were not also named Hanergy," he told Reuters. "I would be surprised if it ever traded again."

    HTF did not respond to Reuters requests for comment about its decision to suspend ties with its parent, or to questions about its business outlook.

    HTF is controlled by Li Hejun, who at one point this year dethroned Alibaba Group Holding Ltd's Jack Ma as China's richest man. It manufactures solar panel making machines and its main customers have so far been unlisted China-based parent Hanergy Holding and its four affiliates.

    Hanergy Holding accounted for 62 percent of HTF's sales in 2014, public filings show. Last week, however, HTF said it was cancelling or suspending these contracts to address concerns by the Securities and Futures Commission about its dependence on its parent, but gave no details.

    Reuters had previously reported that HTF was resisting an SFC request to disclose the parent company accounts to the regulator as a condition to resume trading.

    Analysts say thin film solar panels are inefficient by industry standards, and that makes it difficult for HTF to find external clients. Thin film panels have an 8-9 percent conversion rate, which measures the efficiency of turning solar energy into power, while the industry average is 11-15 percent.

    "Uncertainties related to its thin film technology and market responses to the solar applications are still very high," BNP Paribas, which has a "reduce" recommendation on the stock, said in a March report, its last update on the company.

    Some of the contracts HTF has struck with external clients include a $660 million deal in February with Shandong Macrolink New Resources Technology Ltd, an unlisted company which produces thin-film solar collectors. It also agreed to sell a 3.6 percent stake to a core investor of Shandong Macrolink for $700 million, company filings show.

    Shandong Macrolink, however, told Reuters last week it had closed that deal, adding that it did not expect future cooperation with HTF due to its uncertain future.

    "HTF sold almost all its production to the parent company and if those contracts were cancelled, there is no real market for their equipment," said Hong-Kong based CLSA analyst Charles Yonts.
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    Monsanto Drops $46 Billion Bid for Syngenta

    Biotech seed giant Monsanto Co. has dropped its roughly $46 billion bid for pesticides-focused rival Syngenta AG, bringing an end to a strongly resisted takeover bid that would have reshaped the global agriculture industry.

    Monsanto said it continues to believe that such a deal would have created “tremendous value,” but it will now focus on building its core business.

    Monsanto, the world’s largest seller of seeds, proposed in late April a deal that would have created a world leader in both seed and pesticide sales. The St. Louis-based company says the new entity would be better equipped to formulate new products and bring them quickly to farm fields.

    On Aug. 18, Monsanto increased its takeover offer to a value of 470 Swiss francs a share in cash and stock, up from its original offer of 449 francs and making the deal worth about $46 billion. The proposal also increased the reverse breakup fee to $3 billion.
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    DuSolo launches strategic review following weaker-than-expected fertiliser sales

    Brazil-focused DuSolo Fertilizers will implement several sales and production strategies in an attempt to increase revenues from its Bomfim mine after demand for its product failed to meet the company's expectations. "In light of the current market conditions in Brazil and the effect it has had on the company's performance, 

    DuSolo's new board and management have undertaken a strategic review of all operations," DuSolo CEO Darren Bowden advised in a statement on Tuesday. To combat the demand dearth, DuSolo had drawn down its bridge loan facility as working capital as it started to accept forward sales contracts. 

    The Bomfim processing plant would also potentially be reconfigured to expand direct application natural fertiliser (DANF) output without installing additional hammer mills, saving the company about C$400 000. After a longer-than-expected rainy season, the TSX-V-listed company had started excavating and processing DANF product at Bomfim in June. 

    However, DANF sales had been less than estimated, owing to soft fertiliser demand in Brazil. Of the 81 100 t in signed commitments, only about 3 290 t of product had been delivered and a further 3 363 t would be delivered in the short term. All of these contracts were still in good standing, despite buyers being slow to perform as a result of soft market conditions. This was a result of weaker crop prices, the lower purchasing power of the real currency and delayed credit availability from the government to farmers and agribusinesses.

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    Monsanto sweetens offer for Syngenta, values firm at $47 bln

    U.S.-based Monsanto Co sweetened its offer to buy Switzerland's Syngenta AG , valuing the company at around $47 billion as it tries to lure the Swiss firm to the negotiating table, a person familiar with the matter said on Monday.

    Monsanto, which wants to combine its world-leading seeds business with Syngenta's own seeds and pesticides, raised its offer to 470 Swiss francs ($501.98) per share from CHF 449 per share, the person said.

    The increased offer, which sent Syngenta's shares jumping, is aimed at ending the stalemate between the two firms. Syngenta rejected a previous proposal in April and has refused to open its books to its rival.

    Monsanto's sweetened offer is primarily comprised of an increase to the cash portion of its cash and stock proposal, the person added.

    Some top investors had been pushing Syngenta to at least sit down with Monsanto and seek a better offer. Cedric Lecamp, senior investment manager at Pictet Asset Management, the 17th-biggest investor in Syngenta, told Reuters earlier this year he thought a deal could get done above 500 Swiss francs.

    A Sanford C. Bernstein survey earlier this month of nearly 100 current and former Syngenta investors found that about 92 percent were in favor of a negotiated deal, and would accept a 5 percent higher offer from Monsanto. The average acceptable offer price among the investors was 473 Swiss francs, according to the report.

    The new offer also includes an increase in the break-up fee to $3 billion from $2 billion if the transaction is blocked by regulators or falls apart for other reasons, the person said.

    The offer is not necessarily Monsanto's best and final bid, and the door could be open to negotiations if Syngenta engages, according to the person familiar with the matter.
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    John Deere says farming is still in trouble

    John Deere says farming is still in trouble

    John Deere says the agricultural industry will be in the pit for a while.

    The maker of huge machinery used in farming and construction reported third-quarter earnings results on Friday morning.

    It beat earnings forecasts, but expects that the rest of the year will be painful for the agricultural industry, of which it has a solid reading.

    For the quarter, it reported adjusted earnings of $512 million, or $1.53 per share — down 40% year-over-year. Revenues fell 20% from a year ago to $7.6 billion.

    The consensus estimate among analysts was for adjusted earnings per share of $1.44 on revenues of $7.17 billion, according to Bloomberg.

    Deere and other agricultural companies have had to grapple with grain prices that tumbled as a result of bountiful harvests. Last week, corn, wheat, and soybean futures fell sharply after the US Department of Agriculture raised its forecasts for production this year.

    During the quarter, Deere equipment net sales in the US and Canada fell 21%, and dropped 23% elsewhere.

    And for the rest of the fiscal year, the company estimates that equipment sales will drop about 21%, including a 4% currency hit.

    "John Deere's third-quarter results reflected the continuing impact of the downturn in the farm economy as well as lower demand for construction equipment," said CEO Samuel Allen in the earnings statement.

    "Lower commodity prices and falling farm incomes are continuing to pressure demand for agricultural machinery, with the declines most pronounced in higher-horsepower models," the statement said.

    In the second quarter, the company's profits fell 30% year-on-year, and the top and bottom lines surpassed analysts' forecasts.

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    Another Bubble Pops: Price Of Farmland Suffers First Annual Decline Since 1986

    Another Bubble Pops: Price Of Farmland Suffers First Annual Decline Since 1986

    One of the bigger asset bubbles in recent US history has nothing to do with stock, bonds or commodities, and unlike the real estate bust of 2007 (which has since rebounded only for the ultra-luxury segment), barely batted an eyelid during the Great Financial Crisis. Curiously, it was not until early this decade that the institutional money even noticed said bubble, something he discussed in October of 2010 when we profiled TIAA-CREF's investment in this particular asset class. We are talking of course about farmland.

    And yet, like all other bubbles - be they the result of retail euphoria or central bank rigging - this one too must come to a close, and as the WSJ reports, the first crack in the farmland bubble are appearing, after farmland values declined in parts of the Midwest for the first time in decades last year "reflecting a cooling in the market driven by two years of bumper crops and sharply lower grain prices, according to Federal Reserve reports on Thursday."


    Putting this in context, the average price of farmland in the Federal Reserve Bank of Chicago’s district, which includes Illinois, Iowa and other big farm states, fell 3% in 2014, marking the first annual decline since 1986, which makes farmlands the only asset class that had not seen a down year in nearly three decades!

     Prices for cropland during the fourth quarter remained steady compared with the previous quarter, according to the bank’s survey of agricultural lenders, though half of all respondents said they expect farmland values to decline further in the current quarter.

    Demonstrating the robustness of farms as an asset class, the price decline was sporadic and not pervasive: "in the St. Louis Fed’s district, which includes parts of Illinois, Kentucky and Arkansas, prices for “quality” farmland gained 0.8% in the fourth quarter compared with year-ago levels, despite lower crop prices and farm incomes in the region. A majority of lenders in the district expect values to cool in the current quarter compared with the first quarter of last year, reflecting reduced demand for land amid tighter profit margins for farmers."
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    Precious Metals

    Saracen's record production lifts profits

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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    Northern Star shines in 2015

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

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

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

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

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

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

    Australian gold producer Evolution Mining has more than doubled its underlying net profit for the financial year ended June, as the company’s focus on cost reduction and improved efficiencies paid off. 

    Underlying net profit for the year reached a record A$106.1-million, compared with the A$50-million reported the year before, while earnings before interest, taxes, depreciation and amoritsation increased by 28% to A$266.4-million. 

    Evolution executive chairperson Jake Klein said on a conference call on Thursday that these results were reflective of the journey Evolution had been on in the last four years. “We started this journey with assets that were perceived as high cost, with limited mine lives. 

    By acting like owners and focusing on costs and efficiency gains, we have materially improved these assets. Put simply, this year, these results show that we were able to produce more gold from these same assets at significantly lower cost, while also selling each ounce at a higher amount.” Evolution reported record gold production of 437 570 oz for the year, as well as record low group average cash costs of A$711/oz and all-in sustaining costs of A$1 036/oz, which compared with the A$1 083/oz reported last year. 

    Operating costs decreased by 9%, to A$360.5-million, with Evolution noting that this lower cost level was sustainable going forward, owing to strong cost control at all operations. The transition to an owner-miner model at the Mt Rawdon mine in July 2014 and the more recent transition of the Mt Carlton mine had been a driving force behind the reduction in operating costs. 

    Sales revenue for the full year increased by 5% to A$666-million, driven by an 11% increase in gold volumes sold to 426 562 oz. Looking ahead, Evolution was forecasting group gold production of between 730 000 oz and 810 000 oz for the 2016 financial year, as the newly acquired La Mancha assets were expected to add to production in the new year. 

    The La Mancha assets included the high-grade Frog’s Leg underground mine and the adjacent White Foil openpit mine, in Western Australia, as well as the recently completed 1.5-million-tonne-a-year Mungari carbon-in-leach processing plant. Evolution had also acquired the Cowal gold project in July, where an ore reserve estimate of 72.58-million tonnes, grading 0.93 g/t gold for 2.18-million ounces of contained gold, has been defined. 

    Further, the miner flagged a takeover offer for fellow-listed Phoenix Gold, which has assets adjacent to the La Mancha assets. “We look forward to the next exciting phase in Evolution’s growth as we now turn our focus towards the successful integration of Cowal and Mungari, while maintaining our high standards across all of our sites,” Klein said.
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    Russia's Polymetal sees stronger second half

    Russian gold and silver miner Polymetal anticipates a stronger financial performance in the second half of the year thanks to weaker local currencies and higher production, it said on Tuesday after first-half net profit fell.

    The weaker rouble, caused by lower oil prices and Western sanctions imposed on Russia over the Ukraine crisis, helped Polymetal cut dollar-denominated costs in the first half of 2015 and offset a drop in prices for precious metals.

    Polymetal owns a gold and copper mine in Kazakhstan, whose volatile tenge currency has been falling due to low oil prices and the weak rouble in its former Soviet master, Russia.

    "The rouble and tenge weakening should more than offset the decline in gold and silver prices, that is why we expect the second half of the year to be stronger than the first half," Vitaly Nesis, Polymetal chief executive, told Reuters.

    Polymetal's second-half production will be higher than in the first six months of the year thanks to seasonal factors, according to Nesis, and the company is still on track to produce 1.35 million ounces of gold equivalent for the full 2015.

    Thanks to the rouble weakening, Polymetal has reduced its full-year cash cost guidance to $525-575 per troy ounce of gold equivalent, a mix of gold and other metals, from a previously expected range of $575-625.

    Its first-half net profit fell 2 percent to $98 million and revenue was down 11 percent to $648 million due to lower gold and silver prices, said the London-listed company, which is part-owned by businessman Alexander Nesis, a brother of Chief Executive Vitaly Nesis.

    The company has recommended a first-half dividend of $0.08 per share, unchanged from the same period of 2014.

    Polymetal added that it maintained its guidance for 2015 capital expenditure at $240 million and that it had secured a four-year, $170-million loan from Russian bank VTB in August.
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    De Beers cuts diamond prices by up to 9 pct

    Aug 24 De Beers, the world's largest producer of rough diamonds by value, reduced prices for its diamonds by as much as 9 percent, Bloomberg reported, citing people familiar with the matter.

    De Beers, a unit of London-listed mining company Anglo American Plc, lowered prices after cuts to production failed to support demand, Bloomberg reported, citing three people familiar with the situation. (

    A sustained weakness in the diamond market this year has resulted in a softening of diamond prices.

    Russian diamond miner Alrosa, the world's largest miner of rough diamonds by carats produced, said in June it lowered diamond prices by 6 percent since the start of the year.

    De Beers was not immediately available for comment.
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    Base Metals

    Shanghai copper premiums jump?


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

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

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    Tiger struggles in interim period

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

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

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

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

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

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

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

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

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

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

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

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

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    Vedanta Aluminium Lanjigark smelter closure to impact 2,000 jobs

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

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

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

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

    Vedanta’s aluminium arm is one of the country’s largest producers of the metal and operates the refinery, which has a capacity of one million tonnes per annum. Vedanta Aluminium’s Lanjigarh plant provides direct employment to 2,000 people and indirect to another 8,000.
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    Chalco swings to profit in H1 on cost cuts

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Henderson mine molybdenum production will be cut by 35 percent.

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

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

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

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

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

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

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

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

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

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

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

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    Goldcorp and Teck combine El Morro and Relincho projects in Chile

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

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

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

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

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

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

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

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

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

    Thundelarra strikes high grade copper at Red Bore

    Thundelarra’s has found very high grade copper during drilling at its Red Bore Project in Western Australia’s Doolgunna region. This has extended the known mineralisation at the Gossan prospects.

    The best result includes a peak intersection of 52 metres at 2.5% copper, and also included 1.9 grams per tonne gold and 4.2g/t silver from 25 metres in TRBC096.

    Down-hole surveying has also identified the presence of deeper off-hole conductors.

    In addition, two new holes at Impaler have intersected copper-gold-silver mineralisation, providing further support for the interpreted presence of deeper primary mineralisation.

    Detailed targets are currently being prepared as the final results of the downhole surveying are received and incorporated in to the conceptual model.

    These will be tested by a program of deeper diamond drilling in the next quarter.

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    Rusal warns aluminium prices to stay weak, pays no dividend

    Russia's Rusal Plc reported a 158 percent jump in second-quarter core profit on Thursday, beating forecasts thanks to sharp cost cuts and a weaker rouble, but opted not to pay a dividend due to limits imposed by its lenders.

    The world's top aluminium producer warned that it sees aluminium prices, already down to six-year lows, remaining under pressure due to a glut of exports from China and new supply from the Middle East and India.

    "Looking to the future, we expect that (the) aluminium market is likely to remain challenging for the remainder of the year," Chairman Matthias Warnig said in a statement.

    Rusal predicted global supply would outstrip demand by 277,000 tonnes in 2015, but that was less bearish than U.S. rival Alcoa's forecast for a surplus of 760,000 tonnes this year.

    It said it doubted Chinese producers would increase exports of semi-manufactured aluminium products, like plates for window frames and beer cans, as those exports were already loss-making.

    "This may result in a potential slowdown in Chinese exports in the second half of the year," it said.

    Rusal's core profit, or adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), soared to $568 million for the three months to June from $220 million a year earlier, topping eight analysts' forecasts around $467 million.

    Recurring net profit, which is adjusted net profit plus Rusal's share of Norilsk Nickel's earnings, nearly tripled to $363 million from a year ago.

    It cut net debt to $8 billion by the end of June from $8.6 billion at the end of March.

    The market had thought Rusal would announce its first dividend since listing in 2010, after it said earlier this month that was under consideration.

    "We would like to see the dividend instated, but I don't think it's a key driver of the share price, and this should be overshadowed by the EBITDA and cash beat," CLSA analyst Andrew Driscoll said.

    Rusal's shares initially rose nearly 3 percent on Thursday but later fell 4.1 percent.

    Rio Tinto said recently that sliding London Metal Exchange prices and shrinking premiums - surcharges paid on top of LME prices for metal delivery - had driven 40 percent of the industry's smelters back into the red.

    That has led producers to consider cutting smelter capacity again, adding to cuts over the past two years. Glencore's Century Aluminum Co this week said it would idle a plant in Kentucky.

    Rusal expects to decide later this year on plans to cut 200,000 tonnes per year of capacity, which would come through maintenance of pot lines and would mostly affect output in 2016, Chief Financial Officer Alexandra Bouriko told reporters.
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    Vedanta to close down aluminium refinery unit at Lanjigarh in Odisha

    PTI reported that Vedanta on Tuesday said it will initiate steps for gradual closure of its alumina refinery at Lanjigarh in Odisha mainly due to shortage of raw material and absence of bauxite linkage within state.

    A company statement said “The company is forced to initiate the process of gradual closure of the facility.”

    It added that Vedanta is taking steps to formally communicate to the concerned state government departments about the development

    Mr Abhijit Pati, CEO Aluminium, Vedanta Limited, said in a statement "In the absence of bauxite supply from Odisha, the current market dynamic has threatened our very survival. With a heavy heart, we are bound to take some steps which are going to be painful.”

    Plant's chief operating officer Mr KK Dave said "With the current market turmoil, which is unlikely to improve soon and in the absence of access to bauxite from within the state, the Lanjgarh refinery is facing a daily loss of INR 3 crore. Hence, we are forced to initiate the process of gradual closure.”

    Vedanta ran the plant with commitment for nearly a decade despite heavy odds, he said and added its closure would impact nearly 10,000 people directly and the region at large.
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    Century Aluminium issues WARN Notice at Hawesville KY Smelter

    Image Source: Century AluminiumCentury Aluminum of Kentucky, a wholly-owned subsidiary of Century Aluminum Company, has issued a notice to employees at its Hawesville, Kentucky aluminum smelter of its intent to curtail its plant operations beginning on October 24, 2015 unless the current pricing environment substantially changes. The announcement was made pursuant to the federal Working Adjustment and Retraining Notification Act (WARN).
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    Pan Pacific mine woes dull shine of Chile copper sector

    The slow ramp up of an ambitious waste disposal system and an inexperienced workforce have been key factors curbing output at a remote Chilean mine built by Japan's top copper smelter Pan Pacific Copper to bolster its supply of concentrate.

    Those are among the main conclusions of a consultant's report commissioned by the company and seen by Reuters, which details troubles at the Caserones plant, one of only a handful in the world's top copper producer churning out high-quality concentrate.

    Output on the project has been behind schedule since it started producing in May last year in the arid mountains of northern Chile, and its problems highlight the challenges facing miners in the country as they scrabble through far-flung locations after more accessible deposits have largely been tapped out.

    Faltering Chilean output of the metal, used in everything from wiring to air conditioners, could help support international prices languishing near six-year lows.

    But the head of Pan Pacific, owned by JX Holdings and Mitsui Mining & Smelting, played down the problems contained in the report and said the mine remained on track to reach full capacity next month, even as some industry analysts said that could be tricky.

    "The Caserones concentrator is going through a severe crisis in the operation of its facilities," Canadian mining consultant Hatch said in the report, dated April but updated in May, referring to critical equipment used to process crushed ore that has not been running as expected due to the waste problems.

    The consultancy did not respond to requests for comment on the report, a summary of a so-called technical assessment conducted around March. Reuters was shown the report by somebody with direct knowledge of Caserones' operations.

    "The conclusion of the Hatch report was that there were no major problems (at Caserones)," Pan Pacific President Yoshihiro Nishiyama told Reuters.

    "The report suggested there were various reasons why the (plant's) utilisation rate has not risen, but those issues were solvable."

    Forecast to produce 150,000 tonnes of concentrate a year at full operation, Pan Pacific developed Caserones to cut its dependency on major miners for supply.

    It is also partly owned by Mitsui & Co, a trading house in the world's No.2 concentrate importing nation, making it the first major Japan-owned copper mine.

    But costs on the project have already doubled to over $4 billion since construction began in 2010.

    Hatch blamed the under-utilisation of the concentrator on issues such as problems with the mine's "bold and aggressive" tailings dam system, where waste is stored after concentrate is extracted.

    The plant's topography means it has two tailings dams - one for sand and one for mud - as the typical single, larger dam would be difficult to accommodate.

    Hatch said some sand had been deposited in the dam that would usually only be used for mud, risking spillage and potential "environmental type sanctions" from the government.

    The company said that was a temporary measure while adjustments to the operations of the sand tailings dam were finalised. Nishiyama said work would be finished this month and that there was "no environmental problem".
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    As Trafigura exits metal storage, rivals brace for boom from economic gloom

    Swiss commodities merchant Trafigura is ending a five-year foray into the lucrative base metals storage business just as warehousing firms are bracing for sheds to fill up amid concerns a China-led slowdown could stall the global economy.

    On Tuesday, its logistics and warehouse unit Impala Terminals scrapped plans for a metals warehousing joint venture in China and said it will exit its refined base metals storage business.

    The move followed a strategic review and a steady retreat over the past year from metals storage, where warehousing firms charge rent to keep metal in London Metal Exchange (LME) registered facilities.

    Impala has already cut the number of sheds in its LME arsenal to around nine from over 40 at its peak in 2013. The firm will focus on export markets for bulk commodities and on its larger, capital intensive port and terminal developments, Trafigura said.

    For most companies that rely on a booming economy for revenue, the timing would be logical. But storage companies operate in a countercyclical market and make money when they're earning rent from sheds bursting with metal.

    One executive at a global warehouse firm in the LME's network said it was "strange" for Trafigura to quit completely just as many warehousing firms are hoping for a pickup.

    "You'd think metal will soon start flowing into the LME warehouses," he said, referring to fears that China's stock market crash will crimp spending in the world's second-biggest economy, slowing global growth.

    Trafigura, however, has many reasons to call it a day, not all of them shared by its rivals. Its storage business is tiny compared with competitors such as Glencore-owned Pacorini and independent Steinweg, which account for more than half of the LME's network of over 600 facilities stretching from Singapore to Antwerp.

    The merchant has also been embroiled in a dispute over storage deals in China's Qingdao port. The issue is linked to a financing scandal that hurt confidence in the industry as a whole. Trafigura is not accused of fraud.

    One factor common to the industry is a new set of LME rules that will make it harder to capture the fat margins that lured merchants like Trafigura and Glencore and Wall Street banks like Goldman Sachs Group Inc into storage in 2010.

    Aiming to placate angry metal users and concerned regulators, the LME has embarked on a years-long effort to overhaul its storage policy, introducing new rules that speed up delivery rates, cap rent and limit wait times in hubs with big backlogs.

    The measures are aimed at curbing abuse that consumers have complained led to long wait times and inflated prices.

    Trafigura's exit may offer an opportunity for smaller rivals to pick up the slack if the economic gloom spreads and consumers rush for storage like they did during the 2008 economic crash, a source at a larger rival to Trafigura said.
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    Freeport says Indonesia copper exports dry up on payment impasse

    Freeport says Indonesia copper exports dry up on payment impasse

    Freeport-McMoran said exports of copper from its giant Indonesian mine have slowed to a trickle over the past month as it faces new rules on how buyers pay for metal, with the government showing no sign of handing it a second waiver.

    Freeport, which is one of Indonesia's biggest tax payers, won a six-month exemption from new rules introduced this year making it compulsory for exports of coal, palm oil, oil and gas and minerals to be transacted through letters of credit issued by domestic banks.

    The U.S. miner said almost all exports of copper concentrate from its Grasberg mine had been halted since the exemption expired on July 25 and it was currently in talks with both its buyers and the Indonesian government.

    "We are gradually working with our buyers to change their method of payment," Freeport Indonesia spokesman Riza Pratama told Reuters on Tuesday. "Hopefully we will get this matter resolved very soon. We are talking with the government so we can continue our exports."

    International buyers and traders often pay Freeport directly or in advance, without going through the Indonesian banking system.

    The dispute is the longest disruption to shipments since a seven-month stoppage last year when Indonesia imposed an escalating tax on metal concentrates.

    Freeport exports about 60 percent of the estimated 2 million tonnes of concentrate produced each year at Grasberg, one of the world's biggest mines, while the rest is smelted locally into metal.

    Mines Ministry Coal and Minerals Director General Bambang Gatot said any fresh exemption for Freeport would be decided by the trade ministry.

    "Every company is supposed to comply with this regulation," he said, adding that Newmont Mining Corp, Indonesia's second largest copper miner, seemed to be complying with the new rules without problems.

    Karyanto Suprih, acting director general for foreign trade at the trade ministry, told Reuters: "So far, there is no instruction to give an exemption on this LC obligation for mineral or coal exports."

    Operations at Freeport's mine in remote Papua were running normally, Albar Sabang, a senior official at a Freeport union said late last week.

    Under normal conditions, Grasberg produces about 220,000 tonnes of copper ore per day, which is converted to copper concentrate.

    Freeport's Pratama said the miner would need more space for stockpiling "very soon" but could not give a timeframe.

    Rio Tinto has a joint venture with Freeport for a 40 per cent share of Grasberg's production above specific levels until 2021, and 40 per cent of all production after 2021.

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    Kiberan Resources: ThyssenKrupp signs major Epanco off-take

    Kibaran has executed a 10+5-year off-take agreement with global industrial group ThyssenKrupp Metallurgical Products for 20,000tpa refractory grade natural flake graphite, representing half of planned output from its Epanko project in Tanzania.

    Together with a 10,000tpa pact with a major European graphite trader, Kibaran now has binding agreements for 75% of Epanko’s production.

    ThyssenKrupp is also assisting secure project funding following Epanko’s positive BFS. MD Andrew Spinks says Kibaran is continuing discussions with other sophisticated, targeted customers worldwide.
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    Antofagasta interim profit slumps on declining copper prices

    Antofagasta posted a large drop in first-half pre-tax profit as revenue fell on the back of declining copper and by-product prices and shipment delays.

    For the six months ended 30 June, pre-tax profit slid 63.8% to $297.3m as revenue dropped 31.4% to $1.79bn.

    Earnings before interest, tax, depreciation and amortisation were down 48.6% from the first half of 2014 at $561.6m. Analysts had been expecting EBITDA of around $595m.

    Earnings per share, meanwhile, came in at 8.8 cents, which is a 72% drop from the same period last year.

    Antofagasta cut its interim dividend to 3.1 cents per share from 11.7 cents a year earlier.

    The Chilean copper miner said the decline in revenue reflected a 17.8% drop in realised copper prices as well as lower by-product revenues and a 15.5% decrease in sales volumes.

    Chief executive officer Diego Hernandez said: “With our robust balance sheet and cash generative operations we are well positioned for the current low point in the copper price cycle.

    "Our position has recently been improved by the sale in June of our water division and this position of financial strength allows us to view the current trading environment both as a time that presents opportunities, as well as a time of challenge.

    "Throughout this period of lower copper prices Antofagasta has had a rigorous approach to cost control at our operations and we are on-track to make $160 million savings in 2015. Good-quality assets and tight capital discipline means we can weather the current downturn and maintain our competitive position in this challenging environment and when the copper cycle begins to recover, we will enjoy healthy margin growth.

    As far as output is concerned, Antofagasta’s first-half copper production was 303,400 tonnes, 12.9% lower than the same period last year, mainly due to lower grades as expected and lower throughput and recoveries at the Los Pelambres mine. It also reflects the impact of protests at Los Pelambres.

    Gold production was 112,500 ounces, down 11,300 ounces from last year on the back of lower production at Los Pelambres.

    Antofagasta said the average realised copper price fell to $2.54 per pound from $3.08 in the first half of 2014.

    The company reaffirmed its plan to produce 665,000 tons of copper this year, down from an earlier estimate of 695,000 tons.

    - See more at:
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    Chinese copper smelters consider deeper production cuts

    China's copper smelters are considering deeper output cuts due to low metal prices and as supply of raw material scrap and concentrates from domestic mines falls, industry sources said on Monday.

    Lower production in the world's top producer and consumer of refined copper could drive up the country's demand for imports of spot metal.

    Jiangxi Copper Company Limited -- the top integrated copper producer in China -- would cut production by about 10 percent in the next 4 months at its main Guixi smelter, said an industry official who is familiar with the company's operations. He declined to be named because he was not authorised to speak to media.

    "If the prices fall further, (they) would continue the cut," the official said.

    He added that the move would reduce refined metal production at the Guixi smelter by about 10,000 tonnes a month.

    A spokesman at Jiangxi Copper did not comment.

    The Guixi smelter produced about 85 percent of Jiangxi Copper's 1.2 million tonnes of refined metal production in 2014.

    Copper prices have hovered around six-year lows this month in China CU-1-CCNMM and the international market.

    Weak prices have prompted suppliers to cut sales of copper concentrates and scrap in the domestic market over the past two months.

    An executive at a state-owned copper smelter said producers that used scrap and concentrates from local mines faced mounting pressure to slow metal production.

    "People at smelters are talking about production cuts. They may extend the time of maintenance or slow the production. But I don't think they are going to close completely," the executive said.

    He added that smelters were still making small profits from refined metal production made from imported concentrates. Some smelters have already slowed production.

    China's refined copper production dropped 4.5 percent in July from June.

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    Anglo American sells two Chilean mines to Audley for $300 million

    Anglo American is to sell two Chilean copper mines to investment firm Audley Capital for $300 million, the company said on Monday, as it delevers its balance sheet to help combat a global slump in commodity prices.

    Orion Mine Finance Group is principal co-investor with Audley for the open-pit Mantos Blancos and Mantoverde mines. The deal includes conditional future payments which could boost the eventual price tag by $200 million, Anglo American said.

    Following a review last year Anglo American said it would divest assets that did not meet its return criteria. The investment by Audley Capital was led by John Mackenzie, a former chief executive of Anglo's copper business.

    The potential follow-up payments are contingent on the copper price and also on whether the new investors decide to extend the sulphide life of the Mantoverde mine.

    Banking sources had initially touted the mines as having a price tag of up to $1 billion. But as the copper price slid sources told Reuters that they could be worth less than $500 million, despite attracting interest from Glencore and X2, the investment vehicle led by former Xstrata CEO Mick Davis.

    "The sale of our Norte copper assets to the Audley consortium represents a good outcome for Anglo American, both in terms of the up-front value achieved, the potential upside geared to the copper price and the continued delivery of our asset disposal programme," said Mark Cutifani, chief executive of Anglo American.

    The mines are also closer to the end of their lives than the Zaldivar copper mine, in which Barrick Gold Corp sold a 50 percent stake last month for what analysts labelled as an expensive $1 billion.

    Mantos Blancos has a reserve life of 10 years and Mantoverde five.

    Amid a global commodity price slump, many miners have embarked on a series of asset sales in order to shore up balance sheets and maintain credit ratings.

    "Although the transaction is only a modest step in delevering the balance sheet, the fact that Anglo American got another transaction done is a positive sign," Morgan Stanley analysts said in a note.

    The transaction is not subject to any regulatory conditions and is expected to close in the third quarter of this year.
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    Aluminium giant sees 18% net rise amid 'malicious' charges

    China Zhongwang Holdings Ltd - Asia's largest and the world's second-largest aluminium producer - has reported a 17.9-percent rise in net profit to 1.5 billion yuan ($234.8 million) for the first half of 2015, compared with a year ago, after the company categorically rejected recent charges of inflated sales by the company.

    Aluminum extrusion accounted for 99.6 percent of the group's revenue, roughly at the same level for the corresponding period last year, the Hong Kong-listed company told the Hong Kong Stock Exchange on Thursday.

    About 86.5 percent of the company's revenue, which remained flat at 7.89 billion yuan for the first half, came from sales on the Chinese mainland.

    Some 13.5 percent of the revenue was from overseas sales, covering eight countries, including two new markets, Belgium and Holland. This contribution dropped by 31 percent year-on-year to 1.07 billion yuan, of which 770 million yuan came from the US - Zhongwang's conventionally major export destination.

    The group last week rebutted point-by-point allegations by previously-unknown research house Dupre Analytics, which said in a 51-page online report that Zhongwang Chairman Liu Zhongtian and his family have been siphoning money and products from the company to other countries.

    Calling the report "malicious" and "groundless", Liaoning province-based Zhongwang said the allegations were "factually incorrect and defy normal commercial logic".

    The company's stock was suspended on July 30 after Dupre, whose company website was set up last month, published the report.

    Before resuming trading, Zhongwang's stock price last stood at HK$3.31 - down by 33 percent from this year's peak in April. As trading in the stock resumed on Aug 13, the price dropped by up to 18 percent before paring losses to end 12-percent lower at HK$2.9.

    Lu Changqing, Zhongwang's executive director and vice-president, said the short-seller's report was "no big deal" for the company, which owns the most state-of-the-art production equipment among industry peers and enjoys a real price advantage over its international competitors.

    The attack by short-sellers comes as exports of aluminium from the mainland soar, reflecting severe overcapacity at mainland aluminium smelters.

    Lu said it's unreasonable to argue that the global glut and aluminium's bleak prospects have been exacerbated by exports of the metal from the mainland, where 90 percent of aluminium products are consumed in the domestic market.

    If there's something unreasonable, Lu pointed out, that is China, currently accounting for a staggering 56 percent of global aluminium production with growth of 18 percent in the first half of this year, still having no say in aluminum prices on the LME.

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    Boart Longyear: Departure of its chief executive and reports net loss

    Boart Longyear: Departure of its chief executive and reports net loss 

    Boart Longyear's chief executive Richard O'Brien will step down from the helm of the drilling services company.

    The news came as Boart reported a blowout in its net losses to $US152.3 million for the half year to June 30, from a $US142.8 million loss a year earlier.

    Chairman Marcus Randolph will take on the role of executive chairman, temporarily, while a search for a new chief executive begins.

    Mr O'Brien said he will step down at a date yet to be determined and will continue to provide day-to-day leadership and oversight of the company until he leaves.

    Mr O'Brien said that until his departure, he and Mr Randolph will work closely together to accelerate the company's improvement initiatives.

    "My departure does not signal a significant change in the company's priorities," Mr O'Brien said on Monday.

    He said that during 2013 and 2014, the company had worked hard to improve its cost structure and increase its balance sheet flexibility.

    The company had cut about $US1.1 billion from spending since 2012 as it responded to changing market conditions, and recapitalised.

    Mr O'Brien said the company's efforts to cut costs and improve productivity had the board's support.

    Shares in Boart Longyear were 0.2 cents lower at 8.8 cents at 1248 AEST.

    Boart Longyear said the first half of calendar 2015 continued to be a difficult period for the drilling industry and for the company because of stagnant prices for metals and other commodities, which reduced demand for drilling services.

    First half revenue fell eight per cent as a result of lower prices for drilling services and unfavourable currency movements due to the stronger US dollar.

    If the currency movements had not occurred, revenue would have fallen only one per cent.

    "Our results, while disappointing overall, do reflect the general decline in worldwide exploration spending by the mining companies that we have experienced over the last several years," Mr O'Brien said.
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    Indonesia gives tin miner PT Timah green light to resume exports

    Indonesia gives tin miner PT Timah green light to resume exports

    Indonesia's PT Timah, the country's top tin miner, has been granted government clearance to resume exports and will look to make its first shipment by early September, company and government officials said on Friday.

    State-owned PT Timah halted exports when new rules for shipments were introduced on Aug. 1, and like other tin miners in the world's top exporter, has been embroiled in government red-tape ever since.

    "It's done for the next six months," Didi Sumedi, director of export industry and mining products at the trade ministry told Reuters when asked whether Timah had received an export permit.

    No other tin companies had been granted an export permit, he said.

    Earlier this week, a senior official at Timah said some exports would likely restart by "early September" but that prices would have to rise above $17,000 a tonne for spot sales to resume.

    Timah's Corporate Secretary Agung Nugroho repeated this to Reuters on Friday, adding that the company would now look to trade 100-200 tonnes on the Indonesia Commodity & Derivatives Exchange (ICDX) on Monday.

    Indonesia is tightening its rules for tin shipments in a fresh bid to crack down on environmental damage and smuggling, and to enforce payment of royalties and taxes on shipments.

    The Indonesian unit of Freeport-McMoRan, which runs one of the biggest copper mines in the province of Papua, has also halted its exports, as it adapts to new rules on using letters of credit from domestic banks.

    Freeport is working with the Indonesian government and related parties so that exports can resume immediately, a spokesman said on Thursday.

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    Sumitomo points to Aluminium corruption in China?

    Sumitomo cuts Q4 LME aluminium price f'cast to $1,800 from $2,000

    Japanese trading firm Sumitomo Corp has cut its forecast of London Metal Exchange (LME) aluminium prices to $1,800 in the October-December quarter from its January estimate of $2,000 due to rising exports from China and a stronger U.S. dollar.

    It also lowered its estimate of Japan's aluminium premiums, the surcharge for obtaining physical metal, for the quarter to $100 per tonne from its earlier prediction of $425.

    Japan is Asia's top aluminium importer and the premiums for primary metal shipments PREM-ALUM-JP it agrees to pay each quarter over the LME cash price set the benchmark for the region.

    "We had thought a combined price of the LME cash level and the premium would not slide much below $2,000. But it has fallen much more than anticipated," Shingi Yamagiwa, manager of Sumitomo's light metals trading team, told a small group of reporters on Friday.

    Higher exports of aluminium products from China, some of which are used to remelt and used as raw material, were the biggest reason for the bigger-than-anticipated slide, he said.

    China's exports of unwrought aluminium and products fell 5.3 percent in January-July from a year ago, but still stayed high at above 2.8 million tonnes.

    A stronger dollar and cheaper average smelting cost thanks to a series of closures at high-cost smelters and increased output of new and low-cost smelters were also behind the market slump, Yamagiwa said.

    The revised forecast, however, is still above current prices which are trading near 6-year lows at around $1,550 a tonne.

    "It now looks that it will take longer for metal prices and premiums to recover. But the current level is too low," he said, adding the combined prices of the cash and the premium should eventually bounce back to $2,000-2,200 a tonne.

    Japan's aluminium premiums for July-September shipments fell nearly $300 from the previous quarter, the sharpest such decline ever, to a six-year low of $100 as swelling Chinese exports piled more pressure on an already swamped market. The premiums hit a record high of $425 per tonne for January-March period.

    The next round of quarterly pricing negotiations are set to begin later this month between Japanese buyers and global miners.

    "We expect Japan's premiums to stay nearly flat at around $100 through next year, although it may temporarily fall $10 or $20 from the level," Yamagiwa said.

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    Steel, Iron Ore and Coal

    Atlas Iron: Pilbara mines close on cost target

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

    Md David Flanagan says Atlas is on track to reach a break-even benchmark price of $US50/t. He says the mines are generating positive cash flow, which is expected to increase in August.
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    China, US seek 'clean coal' agreement as industry struggles

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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    Shenhua taps S. Korea market for coal export

    China’s coal giant Shenhua Group has been reportedly seeking export of the commodity to South Korea, encouraged by the recent devaluation of the yuan and a lack of positive signs in the domestic market.

    It was said Shenhua had dispatched a delegation to South Korea days ago to meet traders and power utilities.

    One South Korean trader said Shenhua was offering 5,800 Kcal/kg NAR coal with 0.3% sulfur from Yujialiang mine located in Shendong County, Shaanxi Province at $80/t FOB, inclusive of the export tax.

    The main target customers for Shenhua may be the South Korean power utilities, who normally bought typical high calorific coal with about 1% sulfur.

    On 6,080 Kcal/kg NAR basis, Shenhua’s price of $80/t FOB translated to about $85/t CFR South Korea basis, far above South Korean utilities’ current price expectations.

    Some South Korean utilities were bidding this variety at below $55/t CFR, while others could accept prices at $54/t FOB, traders said.

    Actually, Shenhua Group and Datong Group -- one leading Chinese power producer, reported during an industry gathering in Beijing in April their plans to raise coal exports, hoping to find new growth momentum amid slack domestic demand.

    In a sign that China has been making efforts to revitalize the coal export market, the country lowered its coal export tax from 10% to 3% in January this year.

    Domestic and import demand for coal both shrank at a faster pace since 2014, which may be the main cause for the government to make the export tax cut.

    In 2014, China’s domestic coal consumption declined for the first time on a yearly basis to 3.51 billion tonnes, down 2.9% from 2013, data showed.

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    BC Iron pledges to cut costs further as loss widens

    AAP reported that BC Iron has axed its dividend and pledged to cut its production costs further after the slide in iron ore prices saw it slump to a $158 million loss which followed a $71.8 million profit a year ago. The result was weighed down by more than $120 million in writedowns, though it still made a $43.1 million loss on an underlying basis.

    The junior miner cut its C1 cash costs from $69 to $47 per wet metric tonne during the second half of the year but not quickly enough to offset the fall in prices. On Wednesday the company said it would look to bring that down to between $42 and $45 per tonne in 2015/16.

    BC Iron has also scrapped its final dividend payment in response to the full year loss. In 2013/14 the company paid out 32 cents per share in dividends.

    Managing director Morgan Bell said the year had been challenging for the company, but it was focused on lowering costs at its Nullagine mine and other assets. He said "We are committed to continuing to drive costs down at Nullagine and building a long term future around our newly acquired assets. We also recognise the need to be pragmatic and make decisions that reflect the iron ore environment we operate in.

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    Tata Steel to mothball Wales plant as tough markets persist

    Tata Steel, Britain's largest steelmaker, said on Wednesday it will mothball a plant in south Wales as tough markets persist, forcing the company to focus on higher-value products.

    Europe's second-largest steelmaker after Arcelor Mittal said it will redeploy employees at the plant in Llanwern, Newport, which makes strip products used in autos, construction, domestic goods and packaging, although British press reports said the company will cut 250 jobs.

    The move comes only a month after Tata said it may cut up to 720 British jobs, mainly at Rotherham in northern England, in a revamp of its speciality and bar business, which has been hit by cheap imports and high energy costs.

    "In the past year, we have also been making positive improvements to our manufacturing capability," Stuart Wilkie, director of Tata Steel's Strip Products UK business, said in a statement on Wednesday.

    "But surging, and often unfairly traded, imports have combined with a strong pound to create a very challenging business environment," Wilkie added.

    Tata Steel has been forced to slash costs and jobs since 2007 when it bought Anglo Dutch producer Corus for $13 billion. It employs around 17,000 people versus some 25,000 in 2008.

    The UK steel sector has shrunk dramatically in recent years amid challenges like poor post-financial crisis demand growth, over-capacity, high labour and energy costs and more recently, rising imports and a strengthening currency.
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    Vale sells another coal mine in Australia

    Brazilian mining giant Vale has continued its disposal of non-core holdings, agreeing to sell a mothballed coal mine in Australia jointly to Glencore Plc and Bloomfield Group for an undisclosed sum.

    The mine, called Integra, has been in care and maintenance since July 2014, when Vale said low coal prices meant keeping it open was no longer sustainable. It is the second coal mine Vale has sold this month, as it pursues a strategy to divest non-core assets.

    Vale in July sold another coal mine in Australia to a local operator for A$1 amid a sector downturn that has claimed thousands of jobs and billions of dollars in losses.

    The Integra colliery neighbours separate coal assets owned by Bloomfield and Glencore. It produced about 4.5 million tonnes of coal per year from both its underground and open cut mine before it was shut.

    Prices for coking coal used in steel making have fallen from $300 a tonne in 2011 to around $85, reflecting a global supply glut and a slowdown in steel production growth in China, a key destination for Australian coal.

    Vale has been looking to get out of the Integra mine since 2012. At the time it was seen worth around $500 million, although such heady valuations may no longer apply, say analysts.

    Under the sale, Glencore will acquire Integra's underground operations while Bloomfield will acquire the open cut mine.

    "This is a logical and unique opportunity that would strengthen our ability to operate over the long term," said John Richards, managing director of Bloomfield. "The deal would breathe new life into the Integra open-cut site and will sustain local employment."

    More than 4,000 jobs have been lost at Australian coal mines alone in the past two years.

    Bloomfield intends to incorporate its part of the mine into its existing operations, while Glencore said it had no immediate plans to resume mining in the near term.

    "This acquisition provides Glencore with future optionality to realise synergies from adjoining tenements," said Ian Cribb, head of Glencore's Australian coal operations

    Vale owns 61.5 percent of Integra with the rest held by Asian manufacturers, steelmakers and power companies, including Japan's Toyota Industries Corp and JFE Holdings Inc and South Korea's Posco, who have also agreed to sell.

    The transaction is expected to close in the next few weeks, the statement said.

    Vale said the sale was in line with its strategy of owning assets able to produce large volumes at competitive costs.

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    China July coking coal imports further rise

    China’s coking coal imports posted a second straight monthly increase to 6.66 million tonnes in July – up 31.1% from June and up 31.9% on year, showed the latest data from the General Administration of Customs (GAC).

    Industry insiders attributed the increase largely to a slump of Australian coking coal prices and improved demand from domestic steel mills amid a rebound of steel prices.

    Imports from top supplier Australia surged 92.5% from the previous year and up 39.9% from the month-ago level to 3.98 million tonnes in July.

    Coking coal imports from Mongolia – China’s second largest supplier – rose 18.6% on year and up 3.4% from June to 1.32 million tonnes during the same month.

    Canada’s July exports to China stood at 1.0 million tonnes, up 32.7% on year and roaring 134.9% from June.

    Over January-July, China imported a total 28.29 million tonnes of coking coal, down 21.4% year on year.

    Top supplier Australia contributed 14.84 million tonnes or 52.5% during the same period, down 13.1% year on year.

    Mongolia and Canada exported 7.59 million and 3.22 million tonnes of coking coal during the same period, down 12.2% and 15.7% on year, separately.
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    China July thermal coal imports down 30.6pct on year

    China’s July imports of thermal coal – including bituminous and sub-bituminous coals, climbed 12.8% from the previous month but slumped 30.6% on year to 7.12 million tonnes, according to the latest data from the General Administration of Customs (GAC).

    The was the fifth consecutive yearly drop, reflecting chronic weak domestic demand amid the government’s stricter quality standards of imported materials.

    China’s thermal coal imports over January-July were 49.47 million tonnes, a 42.2% fall from the year-earlier period.

    China imported 3.99 million tonnes of Australian thermal coal in July, down 28.1% on the year but increasing 5.8% from June, while imports from Indonesia fell 21.4% on year but up 16.2% on month to 2.1 million tonnes.

    Thermal coal imports from Russia decreased 23.4% on year but climbed 22.1% on month to 0.85 million tonnes in the month.

    Meanwhile, China’s lignite imports in July fell 4.4% on the year but surged 41.4% from June to 4.95 million tonnes.

    Lignite imports over January-July were 28.7 million tonnes, down 31.2% year on year, with imports from top supplier Indonesia at 93.4% or 26.8 million tonnes, down 32.1% from a year ago.
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    Voestalpine may delay China special steel plant - CEO

    Austrian high-end steel maker Voestalpine might not stick to its plan to start building a specialised steel plant in China this year but still wants to expand there in the long term, its chief executive told Reuters in an interview.

    Voestalpine said in October it planned to start building this year a premium steel and specialised steel product plant in Yinchuan with local partner Kocel Machinery, pumping 140 million euros ($161 million) into the project.

    The plant was still an option but "we will take our time to assess how we will proceed from here", Wolfgang Eder said, adding Voestalpine might choose another location. He gave no details.

    European car makers such as Volkswagen and BMW have seen their business slow in China as demand drops.

    Voestalpine has been relatively shielded from the slump in Chinese markets and cheaper Chinese steel exports as it produces premium steel and steel products, mainly for the transport and energy sectors, which are otherwise hard to get in China.

    "Nothing has changed for us in terms of China's attractiveness in the long term," Eder said, adding it was not "unrealistic" that Voestalpine might build another 10 plants in China by 2020.

    Voestalpine is keen to expand in Asia, where it generated around 783 million euros of revenue -- or 7 percent of the group total -- in 2014/15, of which 300 million was in China alone, where it already has around two dozen sites.

    It has said it aims to nearly triple annual revenue there to around 2 billion euros by the end of 2020 and invest between 400 million and 500 million euros in the region.

    Low prices for commodities including iron ore, aluminium, coal and titanium have derailed Voestalpine's revenue target of 20 billion euros by 2020/21, Eder said. In 2014/15 Voestalpine's revenues reached 11.2 billion euros.

    Still, he confirmed a 9 percent margin target for earnings before interest and tax (EBIT) and 14 percent for earnings before interest, tax, depreciation and amortisation (EBITDA) by 2020/21, adding the latter may be hit before then.

    He also confirmed Voestalpine's EBITDA and EBIT this financial year are on track to beat last year's 1.53 billion euros and 886.3 million, respectively.
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    China steel firms slip into red as glut persists

    Most of the steel companies listed on the A-share market have seen a sharp erosion in profits during the first six months of the year, due to the glut in domestic production.

    Hongxing Co Ltd, a company whose main shareholder is Jiuquan Iron & Steel (Group) Co Ltd, was the worst-performing listed steel company as of Aug 19 with losses of 1.55 billion yuan ($242 million) in the first six months. Hongxing said the losses were mainly due to production overcapacity, a slowing economy and the significant fall in steel prices.

    Beijing Shougang Co Ltd, another major producer, has forecast losses of about 200 million yuan to 300 million yuan for the first half of the year.

    According to data provided by the National Development and Reform Commission, large and medium-sized steel companies earned revenue of about 1.5 trillion yuan in the first six months of the year, down 17.9 percent from the same period a year earlier. However, the steel-making business of these firms ran up losses of about 21.7 billion yuan during the period, up 16.8 billion yuan from the same period in 2014.

    About 43 steel companies registered losses during the period, while only three reported growth in profits. Fushun Special Steel Shares Co Ltd saw its net profit surge to 131 million yuan, an 803 percent year-on-year growth.

    Daye Special Steel Co Ltd reported net profit of 139 million yuan by the end of June this year, up 5.42 percent from the same period in 2014. According to the company, the domestic steel market is still bogged down by production overcapacity and the lack of new growth drivers. Daye attributed its profit growth to measures taken to reduce output costs.
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    Thermal coal imports at Indian 12 major ports rose 24pct

    Imports of thermal coal jumped 24% at the India’s top 12 major ports to 32.54 million tonnes during the April-July this year even as the government continues to announce its commitment to boost domestic output.

    These 12 ports had handled 26.29 million tonnes of coal during the same period of the last fiscal, according to the data released by the Indian Ports Authority.

    Thermal coal is the mainstay of India's energy programme as 70% of power generation is dependent on the dry fuel, while Coal Minister Piyush Goyal has been emphasizing the need to increase the production by state-run Coal India.

    Handling of coking coal, which is used mainly for steel-making, however remained flat at 10.56 million tonnes during the same period, compared with 10.74 million tonnes in April-July of 2013-14.

    Together, they handled 43.10 million tonnes coal during the April-July period of the current fiscal as against 37.03 million tonnes in the same period of the previous fiscal.

    India is the third-largest producer of coal, after China and the US, and has 299 billion tonnes of resources and 123 billion tonnes of proven reserves, which may last for over 100 years.

    India has 12 major ports - Kandla, Mumbai, JNPT, Marmugao, New Mangalore, Cochin, Chennai, Ennore, V O Chidambarnar, Visakhapatnam, Paradip and Kolkata (including Haldia) - which handle approximately 61% of the country's total cargo traffic.

    Thermal coal is used in power generation and with the world's largest miner Coal India, which accounts for over 80% of the domestic requirement consistently failing to meet its target as well as demand of the firms, the power plants resort to imports.

    Less production coupled with increased demand from power firms is further widening the demand-supply gap in the country, which is likely to widen to 185.5 million tonnes in 2016-17.
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    China begins construction of coastal steel project

    China has begun construction of a large 9.4 million tonne a year steel project in northern Hebei province, pushing on with plans to build newer, more efficient plants in coastal regions despite a supply glut and shrinking demand.

    The project, the second phase of the Shougang Jingtang steel complex at Caofeidian, one of China's largest ports, is one of several integrated steel projects planned by top steel mills that were approved during the commodity boom.

    The plant, which will help cut shipping costs for imported iron ore and coal, will involve a total investment of 43.55 billion yuan ($6.79 billion), the National Development and Reform Commission (NDRC) said on Tuesday.

    The project start comes as the steel sector struggles with weak demand and chronic overcapacity that has pushed prices to more than 20 year lows, plunging many small mills into the red.

    Total investment in the steel and processing sector fell 12.3 percent in the seven months to end-July from a year ago, the NDRC said.

    However, big state owned firms suffer fewer restrictions on credit than their smaller rivals, while lower shipping costs will also help them gain competitiveness.

    China aims to build three to five giant steel mills and boost the crude steel output of its top 10 steelmakers to more than 60 percent of the country's total by 2025.

    Baoshan Iron & Steel and Wuhan Iron & Steel plan about 10 million tonnes a year of new steel capacity in coastal areas in order to take advantage of their proximity to southeastern Asian buyers and ore importers.

    Baosteel will launch first phase operations at the 10-million tonne per annum Zhanjiang project in Guangdong province in September, while Wuhan has already commissined part of its project at Fangchenggang port in the southwestern region of Guangxi in June.

    China's total steel production capacity stood at 1.16 billion tonnes by the end of 2014, according to official industry ministry figures. Output last year reached 822 million tonnes.
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    Iron ore, steel futures slip in rout of risky assets as Chinese demand ebbs

    Domestic iron ore and steel futures fell sharply on Monday, hitting their downside limits as they were caught up in a broad-based selloff of risky assets that was sparked by fears that a cooling Chinese economy could spark a global slowdown.

    The spot price of iron ore, the biggest commodity produced by global miners Vale, Rio Tinto and BHP Billiton, has rebounded by more than one-quarter from a decade low of $44.10 per ton reached in July.

    But a slowing Chinese economy could put the focus back on a global glut that has pulled iron ore prices down for a third year running amid shrinking steel demand in China.

    "In a broad way, it feels like we're back where we started in 2009. Things are shaky to the extent where all the progress we've made in the past years looks to have been erased," said Howie Lee, analyst at Phillip Futures in Singapore, on the rout in risky assets.

    The latest data on China, released on Friday, showed its factory sector contracting this month at its fastest pace in more than six years.

    That number weighed further on sentiment toward the Chinese economy, said Helen Lau, analyst at Argonaut Securities in Hong Kong.
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    Goa miners to start iron ore extraction in Goa in next months

    PTI reported that Goa's mineral resources companies like Fomento Resources, V M Salgaocar Brothers and Chowgule, etc have confirmed their intent and initiated preparatory acts to begin mining-related activities after the monsoon in September-October this year

    Goa Mineral Ore Exporters Association said in a release that following Vedanta, three more mining companies have expressed their intent to resume iron ore extraction activity in the state

    GMOEA release said “The state's mineral resources companies like Fomento Resources, V M Salgaocar Brothers and Chowgule, etc have confirmed their intent and initiated preparatory acts to begin mining-related activities after the monsoon in September-October this year.”

    GMOEA secretary Glenn Kalavampara said “These activities, as in the past, would gain momentum post the Ganesh Chaturthi celebration.”

    He added “Pursuant to the judgement of Supreme Court in April 2014 and High Court in August 2014, both the Central and state governments have acted and complied with the directions of both the courts.”

    Vedanta's Sesa Goa has already announced resumption of iron ore extraction at their Codli lease, which was Asia's biggest mining site before mining was shut down in 2012.

    Goa government has renewed the mining leases of 88 mines, all which are under scanner of Accountant General of Goa for failing to obtain clearance from the Indian Bureau of Mines.

    Attached Files
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    China's top steel producer Baosteel ekes out first-half profit

    Baoshan Iron & Steel , China's biggest listed steel company, reported a modest increase in first-half profit on Monday, citing easing demand in its domestic market.

    China's steel sector is grappling with chronic overcapacity, tougher environmental measures and an economic slowdown that is hitting demand for industrial metals.

    "The steel sector has entered its usual winter mode as demand for downstream products sees slowing growth, competition intensifies and environmental requirements become more stringent," Baosteel said.

    Net profit in the six months to June 30 rose 0.65 percent year on year to 3.17 billion yuan ($495.1 million), the company said in a filing on the Shanghai stock exchange.

    Chinese crude steel output fell 4.6 percent to 65.84 million tonnes in July from a year ago, government data showed this month, as steel mills in the world's top producer faced tumbling prices and faltering demand.

    With steel prices at 20-year lows, members of the China Iron & Steel Association (CISA) -- consisting of about 100 large and medium-sized mills -- suffered aggregate losses of 21.68 billion yuan from their core steel business in the first half of the year.

    Steel prices have plummeted 25 percent since the start of the year, dampening iron ore prices .IO62-CNI=SI by 21 percent over the period.

    Producers are likely to suffer further losses in the second half of 2015, squeezed by credit restrictions and pressures to repay existing debts while demand is expected to remain subdued.

    China's Hangzhou Iron and Steel said last week that it suffered a net loss of 296.2 million yuan in the first half, compared with an 8.9 million yuan profit in the same period last year.

    Attached Files
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    China Coal Energy posts 965 mln yuan loss in H1

    China coal energy Co., Ltd., the country’s second largest coal producer, suffered a net loss of 965 million yuan ($151 million) during the first half of the year, falling within the expected range of 0.8-1.2 billion yuan, said the company on August 21.

    This was the first time China coal swung to the red in the first half since its listing in 2008, compared to a net profit of 686 million yuan in the same period last year, it said.

    The company attributed the deficit mainly to falling prices caused by weak demand against an excess of supply amid slowing Chinese economy.

    By end-June, China Coal offered its self-produced commercial coal at an average of 310 yuan/t, falling 72 yuan/t on year. Specifically, the average sales price of thermal coal slid 76 yuan/t from a year ago to 294 yuan/t, while that of coking coal dropped 96 yuan/t from the previous year to 482 yuan/t.

    China Coal produced 46.27 million tonnes of coal over January-June, down 22.1% year on year. Total commercial coal sales slid 14.6% from the preceding year to 64.12 million tonens during the same period, 72% of which or 46.42 million tonnes were self-produced, a year-on-year drop of 16%.

    On July 30, China Shenhua Energy Co., Ltd. said its net profit tumbled 45.6% on year to 11.73 billion yuan in the first half of the year.

    Attached Files
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    Low-cost Indonesian coal in high demand in India

    Financial Express reported that with Indonesian coal prices falling to USD 59 per tonne (free on board), there is a new trend in fuel consumption. A number of small traders have tied up with miners of Indonesia for high sea sales of coal to fulfil the demand coming up from unconventional corners - small sponge iron units, lime factories, smokeless fuel plants, coke oven units, tea gardens and even brick kilns.

    Mr Pritam Dutta, a Kolkata-based trader, said this time there is an opportunity for coal traders to do business in larger volumes because the demands have been coming up from very unconventional corners.

    Generally small consumers, who have no FSA or linkage with Coal India (CIL) and consumes below 4,200 tonne per annum, try to source coal from state trading corporations, who are allotted a CIL quota. CIL earmarks around 8 million tonne per annum for supplies to small consumers through nominated state agencies.

    Besides consumers try to get CIL’s e-auction coal and also purchase coal from Nagaland and Meghalaya. Petty players sometimes resort to informal means to ensure supplies to their units.

    While the informal means of getting coal, popularly known as DISCO coal, has been fully sealed, there has been no supplies from Meghalaya since rat hole mining has been absolutely banned. There are very little supplies from Nagaland, inadequate to meet the demand of small players.

    Mr Dutta said that “In such a situation, the only domestic option left for small consumers were sourcing from state- nominated agencies and procurement through e-auction. But with prices of Indonesian coal falling and government imposing zero duty on coal, Indonesian coal has become a cheaper option for small consumers.”

    He said that with big consumers already flushed with coal, miners in Indonesia are unable to strike any long-term contract. In such a scenario consignments are mainly coming for small traders, who instead of handling the bulk cargo at the ports, are making high sea purchases.

    Mr Debasish Dutta, chairman of the Federation of Freight Forwarders Association, said high sea purchase is absolutely legitimate with traders lifting coal paying a 2% CENVAT. Buyers tied up with traders, in whose name the consignment comes, make the purchase at a spot price on the high seas. Buyers generally lift the coal in small barges or vessels and directly carry to its consuming point.

    Mr Dutta said that “In the newly emerged scenario many traders both from India and Bangladesh are trying to make an entry into the new space tying up with the miners of Indonesia.”

    Attached Files
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    Rio Tinto to ship 20% more iron-ore to China in 2015

    Australian mining giant Rio Tinto expects to deliver 240-million tonnes of iron-ore to China this year, up from 200-million tonnes in 2014, the company's China MD told reporters on Friday. The miner has driven down its production costs to $16.20/t this year, $2 lower than a year ago, enabling it to cope with falling prices of the steelmaking raw material, Ren Binyan said at a press briefing. 

    The outlook for the raw material remains grim for the rest of the year as well. China's steel consumption is expected to fall further this year, after it dropped 3.4% in 2014 - the first decline since 1981. 

    Also, the top global miners aim to further bring down costs and expand production to back their battle to maintain market share in China. The efforts have enabled the big three to drive out higher-cost producers in China and elsewhere and expand their market share. 

    Australia and Brazil accounted for 84.6% of China's total imports in July, data shows. Rio is aiming to raise full-year output by 15% to 340-million tonnes from 2014, but it has reset its capital spending reduction target to $1-billion this year from $750-million earlier to cope with weak conditions. 

    Globally in iron-ore, about 120-million tonnes of unprofitable mining capacity is expected to close this year, with 80-million tonnes coming from China's higher-cost operators, the miner said earlier this month. Ren said Rio Tinto was keeping a close eye on the impact of China's currency devaluation on iron-ore demand, but said the rise in the US dollar was positive for the company.
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    China Coal Energy Jul coal output down 13.4pct on yr

    China Coal Energy Co., Ltd., the country’s second largest coal producer, produced 9.05 million tonnes in July, down 5.7% on month and down 13.4% on year – the 13th consecutive year-on-year drop, it said in a statement late August 21.

    Over January-July, China Coal produced 55.32 million tonnes of coal, down 20.8% year on year, said the company.

    Total coal sales during the same period reached 77.8 million tonnes, down 10.9% on year, with the July sales at 13.68 million tonnes, up 11.9% on year but down 0.2% from June.

    The company sold 8.51 million tonnes of self-produced coal in July, accounting for 62.2% of the total, up 4.6% year on year but down 4.6% from June. Total self-produced coal sales between January and July dropped 13.4% on year to 54.93 million tonnes.

    China Coal Energy suffered a loss of 965 million yuan ($150.8 million) in net profit during the first half of the year, the first drop since its listing in 2008, according to its half-year report released on the same day.
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    China woes slash profits at Australia iron ore miner Fortescue

    China woes slash profits at Australia iron ore miner Fortescue

    Australia's Fortescue Metals Group on Monday said annual profit dropped nearly 90 percent to $316 million, the latest iron ore miner to report sharply lower earnings on weak prices for the steel-making ingredient as China's economy slows.

    Chief executive Nev Power said the world's fourth biggest iron ore miner was operating in a "challenging environment" and would look for greater cost efficiencies and operational improvements in the year ahead.

    Shares in Fortescue, dependent on sales to Chinese steel mills for revenue, fell as much as 9.4 percent to their lowest since July 28 after the drop in profit was reported. The stock was the biggest percentage loser on the world-wide Dow Jones Titans Basic Resources Index

    Feeling the effect of weak iron ore prices, rival miner Rio Tinto saw net profit drop 82 percent in the last half-year

    Analysts also expect BHP Billiton BLT.L> to unveil a 43 percent fall in underlying attributable profit to $7.73 billion in its financial results released on Aug. 25, according to Thomson Reuters I/B/E/S.

    Fortescue, sold its ore for an average of only $52 per tonne in the half-year to June 30 versus $82 in the year earlier period.

    The benchmark spot price for high-grade ore .IO62-CNI=SI opened in January at $71.20 a tonne and finished on June 30 at $59.30, down 17 percent.

    However, Fortescue must sell its ore at a roughly 15 percent discount to the benchmark due to its lower iron content.

    Power in July called an end to expansion work at Fortescue's Australian mines, saying more than enough ore was being mined to meet global demand.

    At that time, Power criticised larger Australian miners Rio Tinto and BHP for ramping up output despite soft demand and slumping prices, despite his own company lifting shipments 33 percent in fiscal 2015 before calling a halt.

    For the full fiscal year, Fortescue's $316 million was a far cry from the $2.7 billion it reported the previous year.
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    Hebei Iron & Steel to raise up to $1.3 bln in private placement

    Hebei Iron & Steel Co Ltd , China's largest steelmaker, said it plans to raise up to 8 billion yuan ($1.25 billion) in a private placement to fund an acquisition of a sister firm that makes automotive sheets.

    The company said in a stock exchange statement on Sunday that it would issue 1.43 billion shares at 5.6 yuan a share to investors including brokerages and insurance firms. The cash raised will also be used to invest in other projects and pay off bank loans, it said.

    Hebei Iron & Steel's shares last traded on June 29 at 7 yuan a share.
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    Xinjiang Hami finds 18.6 bln T coal resources

    Xinjiang Hami finds 18.6 bln T coal resources

    A total of 18.6 billion tonnes of coal resources have been found within the depth of 1,000 meters in Hami, Xinjiang after one-year exploration work, the Ministry of Land and Resources said on August 21.

    Among that, 11.46 billion tonnes have been through detailed investigation, accounting of over 60% of the total resources.

    The exploration work was mainly carries out in southern, central and western parts of Sandaoling mining area in Hami, which was identified as another resource-rich bulk coalfield in the autonomous region.

    Predicted coal resources in Xinjiang ranks first in China at 2.19 trillion tonnes, accounting for 40.6% of the country’s total.

    Xinjiang produced 143 million tonnes of raw coal in 2014, sliding 8.18% on year and taking 3.7% of China’s total output, showed monitoring data by CCR.
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