Mark Latham Commodity Equity Intelligence Service

Wednesday 7th October 2015
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    Time to buy?

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    Fed cancels tightening until late next year.

    DALIAN, Sept. 11 (Xinhua) -- We may be half a year from its release but a government plan that will set the course for China's economic and social development in the coming five years was a hot topic at the Summer Davos forum this week.

    The five-year plan, China's 13th, is considered strategically important as it is crucial to China's goal of realizing "a moderately prosperous society in all respects by the centennial anniversary of the founding of the CPC in 2021."

    China is also aiming to double its 2010 GDP and people's income by 2020. The quality of the next five-year-plan will, to a large extent, decide whether these grand goals are achievable.

    Drafting of the plan started in April last year. It will be discussed during a key policy meeting in October and made effective during the annual session of China's top legislature in March.

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    Miners at lows?Image title
    Energy at lows?

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    IMF Cuts Global Outlook as Commodity Slump Hits Emerging Markets

    A slowdown in emerging markets driven by weak commodity prices forced the International Monetary Fund to cut its outlook for global growth this year to 3.1 percent from a July forecast of 3.3 percent. Next year the world economy will expand 3.6 percent, less than the 3.8 percent projected in July.

    “The ‘holy grail’ of robust and synchronized global expansion remains elusive,” IMF chief economist Maurice Obstfeld said in a statement Tuesday accompanying the Washington-based fund’s World Economic Outlook.

    Six years after the world emerged from a financial crisis and recession, the deteriorating picture showed a global recovery that’s uneven still from Australia to Germany. Brazil and Russia’s economies are contracting, Japan and the euro area are struggling to impress, and long-time growth engine China is decelerating. Meanwhile, the U.S. economy is nearly strong enough for central bankers to consider raising interest rates.

    The IMF advised emerging markets to be ready for the U.S. to tighten monetary policy, urged advanced economies to address “crisis legacies” and suggested nations consider the “compelling” case for public infrastructure investment at a time of very low long-term interest rates.

    Such calls for policy action will be on the agenda when global finance chiefs from the Group of 20 economies meet this week in Lima during the IMF’s annual meetings. They’ll also be addressing new risks that the IMF report says have risen, especially in emerging economies, many of which have seen their currencies depreciate sharply as the Fed prepares to lift rates andcommodities such as oil and copper slump.

    “In the near term, global growth will remain moderate and uneven, with higher downside risks than were apparent at our July update,” Obstfeld said.

    The fund left its outlook for China’s growth this year at 6.8 percent and 6.3 percent for next year. Still, the IMF said the “cross-border repercussions” of slowing Chinese growth “appear greater than previously envisaged.”

    Emerging growth expected to slow in 2015 for a fifth straight year. Russia’s economy will contract by a larger-than-expected 3.8 percent this year, before shrinking 0.6 percent in 2016, compared with the IMF’s July projection for 0.2 percent growth next year. The IMF sharply cut its outlook for Brazil, whose economy it now expects to shrink 3 percent this year and 1 percent next year.

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    Freeport: New Board Structure & Review of Its Oil & Gas Business

    Freeport-McMoRan Inc. announced today that it has reduced the size of its Board from sixteen to nine members and is undertaking a review of strategic alternatives for its oil and gas business, following constructive discussions with many of its largest shareholders.

    The reconstituted FCX Board is comprised of seven independent directors: In addition, the Company will no longer have an Office of the Chairman management structure.

    Gerald J. Ford, Lead Independent Director, said: “We have discussed as a Board our proper and most effective size and make-up, consistent with the needs of the business going forward. We have listened to and taken into account views and concerns from many of our largest shareholders. 

    FCX also announced that its Board has undertaken a strategic review of its oil and gas business (FM O&G) to evaluate alternative courses of action designed to enhance value to FCX shareholders and achieve self-funding of the oil and gas business from its cash flows and resources.

    FM O&G’s high quality asset base, substantial underutilized Deepwater Gulf of Mexico infrastructure, large inventory of low risk development opportunities and talented and experienced personnel and management team provide alternatives to generate value. The previously announced potential public offering of a minority interest in FCX’s oil and gas business remains an alternative for future consideration, the timing of which is subject to market conditions.

    Other alternatives currently under consideration include a spinoff of FCX’s oil and gas business to its shareholders, joint venture arrangements and further spending reductions. The oil and gas strategic review is being undertaken with an objective of improving FCX’s financial position and enhancing long-term value for its shareholders.

    In preparation of considering a separation of the oil and gas business, five directors have left the FCX Board and have been appointed to the FM O&G Board of Directors.

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    Banks keep faith in commodity traders as Vitol, Trafigura raise $10 bln

    Two of the world's commodity powerhouses, Vitol and Trafigura, have raised over $10 billion this week, despite rival Glencore's run-in with investors, which they say shows bankers understand the sector better than bond or equity dealers.

    As commodities prices tanked in late September, a series of research notes on Glencore unleashed a bear raid on stocks and bonds of publicly- and privately-held companies.

    But that has not stopped privately-owned Vitol, the world's largest oil trader, from closing a syndicated loan worth $8 billion this week.

    Rival Trafigura, whose founder Claude Dauphin lost his battle with cancer last week at the height of the turmoil engulfing Glencore, closed syndication on a $2.2 billion loan that was so much in demand by the banks, its size was increased from the originally-planned $1.6 billion back in July.

    "The successful loan syndication reflects the gap in understanding between banks and bond investors," Trafigura chief financial officer Christophe Salmon told Reuters.

    "Banks have better understanding of commodity trade finance business because most have been lending to the sector for 15-20 years," he said.

    Glencore was at the heart of the storm, losing as much as 30 percent of its value in a single day, as falling base metal and oil prices ignited concern about the sustainability of its business, given the size of the company's $30 billion debt pile relative to its dwindling revenues.

    Glencore's credit default swaps -- a form of insurance against a default -- are trading around 600 basis points, meaning that the market perceives Glencore's bonds to be riskier than those of Iraq, Angola or Nigeria.

    Trafigura, which is privately held, saw its bonds come under fire, which pushed the yield on its April 2018 notes to around 15 percent, from closer to 7 percent six weeks ago.

    The company believes its success in tapping the capital markets speaks for itself and the spike in its bond yields is just more proof that dealers do not understand its business the way that its bankers do.

    "Our bond prices are suffering due to the ripple effect from Glencore, which is a very different company with a majority of its revenue coming from its mining activity. There is concern in the overall commodity sector without making differentiation between producers, refiners and traders," the company said.

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    Risking backlash, India's Modi to push power price hikes

    India's prime minister is to tell states to raise electricity prices in return for access to a financial bailout package, a politically contentious move that risks a backlash from farmers and consumers long used to free or cheap power.

    Narendra Modi has made overhauling India's largely loss-making utilities, buckling under $66 billion of debts, a priority, convinced that if he can fix their finances he will recover his reputation as an economic reformer willing to take tough decisions.

    State-run electricity distributors are running out of cash and struggling to repay loans, squeezing banks' ability to spur credit growth and undermining Modi's campaign to attract more energy-hungry manufacturers to build new factories.

    Under a rescue package that could go to the cabinet for approval as early as this week, states will be told they must work with local regulators and utilities to raise tariffs that have been kept artificially low, a senior government source with direct knowledge of the plan told Reuters.

    In return for raising prices, the eight worst affected states will be allowed to absorb up to 75 percent of the debt on the distributors' books depending on their fiscal position, the source said, requesting anonymity because the plan is not yet public.

    After cabinet approval, states will need to strike agreements with distributors and the power ministry, the government source said. The source added that it will not be easy and that each deal will need to be tailored individually, with varying tariff rises and performance targets.

    In India, the price of power is a sensitive subject and generally decided by individual state regulators. New Delhi's past attempts at instigating reform, including a 2012 rescue plan under Modi's predecessor, have largely failed.

    Many Indians view free or cheap power as a right.

    Politicians appeal to key groups of voters like farmers or the poor by keeping prices low and ignoring theft, prompting scepticism about whether states will agree to any package that forces tariff hikes.

    "There are two things that states completely avoid: raising tariffs for farmers and privatisation. These are hugely political," said Debasish Mishra, a power expert at Deloitte. "The political parties know what sells and what will keep them in power."

    Recent attempts at raising tariffs have proven politically difficult. Rajasthan state, whose utilities owe $9 billion, this year postponed an attempt to hike prices after huge opposition from its powerful farming community.

    But Modi successfully overhauled the power sector as chief minister in Gujarat in the mid-2000s. He saw off opposition to metering farmers and clamping down on consumer theft, and the state now enjoys reliable power supplies that the majority pay for, with low levels of theft.

    By linking price rises to reduced debt, the government hopes to give utilities the financialspace to purchase more power and end blackouts, and to avoid future losses by ensuring they sell electricity at or above cost.
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    Even top juniors are running out of money

    The drying up of equity and debt markets coupled with new lows in cash reserves have pushed Canada’s junior mining industry to the brink says PwC’s annual report on the TSX Venture’s top 100 junior mining companies.

    According to report, now in its ninth year, juniors raised $514 million in equity financing in 2015, down 25% from last year, while debt financing fell 27% to $278 million over the same period.

    Many companies are assessing their cash burn out rate as a matter of months—yet another reason companies should start looking at new ideas for keeping afloat

    Despite attempts to reduce spending, cash reserves are dwindling to new lows as the top 100’s on-hand cash dropped on average from $10 million to $7 million. That's down nearly one third in a year and 70% below the peak in 2011.

    For explorers the fall has been dramatic and the top 100 juniors have seen cash balances declined by over 43%, but for those already operating  cash flows are just as severely strained with money in the bank dropping by more than half.

    The management consultants have a stark warning for the industry emphasizing that despite the prudent steps taken by companies the trends are clear and waiting it out is no longer a viable strategy:

    "Many of Canada’s junior miners will soon find themselves running out of cash, and those that wait too long to act may find themselves without options.

    "Many companies are assessing their cash burn out rate as a matter of months—yet another reason companies should start looking at new ideas for keeping afloat."

    According to the report overall revenue is down 28% from 2014, a drop of nearly $195 million, balanced slightly by an 18% reduction in overall net losses. Market capitalization dropped significantly from $7.9 billion to $4.8 billion as of June, 2015.

    “The challenges in the junior mining sector persist and the industry is really at a crossroads,” said Liam Fitzgerald, PwC’s Canadian Mining Leader.

    “Despite the downward trend we have seen some stories of true innovation this year – those junior miners who have moved from simply keeping the lights on to transforming their business have given us a glimpse into what could be a more optimistic future.”

    Full report  and read how Oban Mining, First Mining Finance, Premier Gold Mines, NovaCopper, Klondex, Jaguar Mining and Alloycorp defied the odds in today's market.
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    Oil and Gas

    Oil prices up sharply after reports of tanking U.S. production

    Brent oil climbed to the highest level in a month amid speculation that falling crude production will ease the global supply glut.

    U.S. crude production dropped 120,000 barrels a day in September from the prior month, according to the U.S. Energy Department’s monthly Short-Term Energy Outlook. At an industry conference in London Tuesday, Royal Dutch Shell Plc Chief Executive Officer Ben Van Beurden said the first signs of recovery in the oil market are beginning to appear, although the company is still planning for a long period of low prices.

    Oil has held near $45 a barrel for more than four weeks after plunging to a six-year low in August amid speculation a global glut will be prolonged. U.S. crude stockpiles remain about 100 million barrels above the five-year average, while OPEC continues to pump above its collective quota.

    “The drop in production is starting to register with folks,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by phone. “We have the CEO of Shell and the OPEC Secretary General talking about the market starting to recover. Low prices have already led to a 500,000-barrel cut in U.S. production.”

    U.S. crude output is down 514,000 barrels a day from a four-decade high reached in June, Energy Information Administration data show.
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    Russia, Saudi Energy Ministers Discussed Oil Demand, Production, Shale

    Russia and Saudi Arabia discussed the situation on the oil market last week and agreed to continue consultations, exchanging views on demand, production and shale oil, Russian Energy Minister Alexander Novak told reporters on Tuesday.

    Even though the oil price has halved since last year on oversupply, Russia, the world's top oil producer, has refused to cooperate with OPEC, where Saudi Arabia is the leading producer.

    Both OPEC and Russia are instead increasing production in a move to defend market share.

    Novak did say on Saturday that Russia was ready to meet with OPEC and non-OPEC producers to discuss the market and his comments have supported prices, although analysts have warned that relations may suffer over the two sides' different positions on Syrian President Bashar al-Assad's future.

    Novak, who was in Turkey last week for a G20 energy ministers meeting, said he did not see a risk that relations between Russia and Saudi Arabia would worsen and said he had discussed global oil markets with Saudi Oil Minister Ali al-Naimi.

    "We discussed the situation on the market in Istanbul, held consultations, exchanged views on demand, production, the shale oil revolution, (and) agreed to continue consultations," Novak said.

    Novak added that a meeting of the Russia-Saudi Arabia intergovernmental commission was scheduled for the end of October or the beginning of November.

    OPEC's Secretary-General Abdullah al-Badri said on Tuesday that the oil exporter group should work together with producers outside OPEC to tackle the oil surplus in the global market.

    Novak's first deputy, Alexei Texler, said last week that Russia would stick to its plans not to cooperate with OPEC.

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    Saudi Oil Minister Puts On Brave Face Amid Severe Headwinds

    As the EM world looks on helplessly while Saudi Arabia’s war with the US shale complex (and, by extension, with the Fed) serves to keep crude prices depressed putting enormous pressure on commodity currencies and accelerating emerging market outflows, the question is whether Riyadh’s SAMA piggy bank can outlast the various capital market lifelines available to America’s largely uneconomic shale drillers.

    It’s tempting to simply say “yes.” That is, with the next round of revolver raids due in days and with HY spreads blowing out amid jittery US markets, it seems unlikely that maligned US producers will be able to survive for much longer, and despite the fact that data out yesterday shows Riyadh’s FX reserves falling to a 32-month low, the Saudi war chest still amounts to nearly $700 billion,  giving the kingdom plenty of ammo. However, between maintaining subsidies, defending the riyal peg, and fighting two proxy wars, Saudi Arabia’s fiscal situation has deteriorated rapidly, forcing Riyadh to tap the bond market in an effort to help plug a hole that amounts to some 20% of GDP.

    Given the above, some have dared to suggest that in fact, the Saudis could lose this “war” just as they may be set to lose their status as regional power broker to Tehran thanks to Iran’s partnership with Moscow in the ongoing effort to shore up Assad in Syria and wrest control of Baghdad from the US.

    But don’t tell that to Saudi Arabia's Oil Minister Ali al-Naimi who says that despite all the uncertainty, the economics of oil exploration and production will prevail at the end of the day. Here’s Reuters, citing Economic Times:

    Saudi Arabia's Oil Minister Ali al-Naimi believes economic producers will prevail over higher-cost suppliers and OPEC's share of the market will rise, India's Economic Times newspaper reported on its website on Monday.

    In comments suggesting Saudi Arabia, the world's top oil exporter, is sticking to its policy of defending market share rather than supporting prices, Naimi told the paper the drop in oil prices was less of a problem than fluctuations.

    "The world needs a reliable, sustainable supply. Best way to do it is to make sure that demand and supply should be equal, so there will not be fluctuation of price. The biggest problem for everybody, producer and consumer today, is fluctuation — the ups and downs," he was quoted as saying.

    Referring to reports that the number of drilling rigs deployed by U.S. shale producers is falling, Naimi said: "Eventually, economic producers will continue to prevail," the paper reported.    

    Naimi disagreed with analysts who believe OPEC's market share would fall further, the paper reported. "On the contrary, OPEC's market share will be higher," he said.

    Maybe so, but make no mistake, this is a precarious time for the Saudis. If the US shale complex finally folds under the weight of its own debt, bad economics, and less forgiving capital markets allowing Riyadh to raise prices again having secured the future of the country's market share, and if Iran and Russia end up being content with preserving the regional balance of power and don't move to push the issue in Iraq and Yemen once they're done "saving" Syria, then the Saudis may well weather the storm.

    However, there are quite a few things that can go wrong here that would serve to destabilize the situation and if the rumours about a rebellion within the royal family are true, the slightest misstep could end up being catastrophic.
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    Big-Oil Spending Cuts Lower Costs at Top India Explorer ONGC

    The worst commodity slump in a generation has a silver lining for India’s state-run energy explorer.

    Oil & Natural Gas Corp. predicts exploration costs will drop a fifth as fees for rigs and vessels moderate after businesses including BP Plc and Royal Dutch Shell Plc curbed outlays. That could mean a saving of 49 billion rupees ($749 million) on planned exploration spending of 245 billion rupees in the year through March 2016, Bloomberg calculations based on company estimates show.

    “This is the only saving grace in the low oil-price regime,” ONGC’s Director Offshore Tapas Kumar Sengupta, who gave the estimate of a 20 percent drop in expenses, said in an interview in New Delhi. “We’ve awarded contracts for about 20 vessels and received a record 150 bids. We’ve placed orders at about half the earlier rates.”

    The biggest explorer in Asia’s third-largest economy is betting that its highest capital expenditure in at least six years will pay off once oil prices revive. In contrast, the slump in Brent crude costs in the past year has led global majors such as BP and Royal Dutch Shell to cut billions of dollars from spending budgets.

    “One’s pain is another’s gain,” said Abhishek Kumar, senior energy and modeling analyst at Interfax Energy’s Global Gas Analytics in London. “ONGC should utilize these services on its ongoing projects as much as it can and capitalize on new projects once oil prices recover. This is a strategy common among government-run companies globally.”

    ONGC shares gained as much as 3 percent to 254.85 rupees and traded at 253 rupees as of 11 a.m. in Mumbai. The stock has dropped 38 percent in the past year, compared with a 2.5 percent increase in the S&P BSE Sensex. Brent crude, a global benchmark, has declined 43 percent over the period to about $52 per barrel.

    ONGC plans 362.5 billion rupees of capital expenditure in the 12 months that began April 1, and some two-thirds of that figure is earmarked for exploration, company filings and presentations show. Net income rose 14 percent to 54.6 billion rupees in the three months ended June 30.

    Indian Prime Minister Narendra Modi has made energy security a priority for a nation that imports the bulk of its oil. Production has declined in fields accounting for almost three-quarters of ONGC’s output, adding pressure on the company to find new reserves.  

    ONGC intends to spend 11 trillion rupees by 2030 to raise output. It’s seeking about 30 drilling vessels, including five deep-water rigs, Sengupta said in the Sept. 23 interview.

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    YPF Said to Cut Oil Price in First Step to Close Gap With Brent

    Argentina’s YPF SA has cut the price paid to producers of light crude in one of the first signs of closing a gap between high domestic and lower international prices, according to officials from two companies that sell their oil to YPF refineries.

    The country’s largest refiner is paying $75 a barrel for Medanito, a light crude produced in the Neuquen basin, down from $77 earlier this year, said the officials, who asked not to be named as domestic market prices aren’t public. While the government has set caps on local prices, state-owned YPF establishes a benchmark since it has the largest refining market share.

    As part of the country’s efforts to boost energy output, maintain investments and protect jobs, President Cristina Fernandez de Kirchner’s government has set a domestic oil price about 65 percent above international levels while also allowing costs at the pump for consumers to rise steadily to finance part of the difference. YPF, which was expropriated from Spain’s Repsol SA in 2012, declined to provide the exact price paid for Medanito and a heavier grade crude known as Escalante.

    “YPF, in accordance with the current agreement, is receiving an average $69 a barrel between Medanito and Escalante,” the company said in an e-mail.

    Brent, the benchmark for most global oil contracts, rose 5.4 percent to $51.92 a barrel in London on Tuesday, the highest settlement since Aug. 31.

    YPF’s American depositary receipts rose as much as 12 percent and closed 6.9 percent higher at $17.71 in New York.

    “Any move to remove distortions in the market is a positive,"Michael Roche, a strategist at Seaport Global Holdings LLC, said by e-mail.
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    Costs hike for Martin Linge

    Total costs have increased by a further Nkr8 billion ($970.4 million) on field projects under development off Norway, with Total’s stalled Martin Linge scheme showing the biggest year-on-year hike, according to figures released in Norway’s state Budget on Wednesday.
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    Gazprom to halve TurkStream pipeline capacity - CEO

    Gazprom has almost halved the planned capacity of its TurkStream gas pipeline project to 32 billion cubic metres (bcm) per year from an original capacity of 63 bcm, Gazprom Chief Executive Officer Alexei Miller said on Tuesday.

    The TurkStream pipeline is an alternative to Russia's South Stream pipeline project to bring gas to Europe without crossing Ukraine, which was dropped last year due to objections from the European Commision.

    Russia has long sought to circumnavigate Ukraine to pipe its gas to Europe because of pricing disagreements, which have led to disruptions in supplies to the European Union. Currently around 40 percent of Russian gas goes to Europe via Ukraine.

    Miller, addressing an industry conference on Tuesday, said that Gazprom now planned to supply up to 32 bcm via TurkStream because it also plans to expand Nord Stream gas pipeline, which runs on the bed of the Baltic Sea to Germany.

    "Speaking about designed capacity ... we can talk that it will be created at volumes of up to 32 bcm," Miller said, adding that the reduction in capacity was linked to Gazprom's plans related to Nord-Stream-2.

    Gazprom had originally planned to supply Europe with a total 63 bcm by 2020 via TurkStream, with the first line of 15.75 bcm designed for Turkey and the rest flowing to Greece onwards to Europe.

    Gazprom and a number of European energy companies have agreed to build stage 3 and 4 of Nord Stream, with capacity of 55 billion cubic metres per year, which should double the existing Nord Stream-1.

    Gazprom has earlier said it would have to postpone the launch of TurkStream as Russia and Turkey did not sign an intergovernmental deal, essential for construction to start.
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    Nigeria Arrests Co-Chair of Atlantic Energy over Corruption

    Nigeria has arrested the co-chairman of local oil firm Atlantic Energy to question him over corruption and money laundering charges, an official at the Economic and Financial Crimes Commission said on Tuesday.

    The official, who asked not to be named, said prominent businessman Jide Omokore was being investigated in connection with a crackdown on corruption in the oil sector that has swept up former oil minister Diezani Alison-Madueke, who was arrested last week in London.

    Alison-Madueke was minister from 2010 until May 2015 under former president Goodluck Jonathan, who was defeated by Muhammadu Buhari at the polls in March.

    Buhari took office in May promising to root out corruption in Africa's most populous country, where few benefit from the OPEC member's enormous energy resources.

    Former central bank governor Lamido Sanusi was removed during Alison-Madueke's tenure after he raised concerns that tens of billions of dollars in oil revenues had not been remitted to state coffers by the government-run oil company NNPC between January 2012 and July 2013.

    She has denied any wrongdoing but was criticized by Sanusi for handing out contracts to Atlantic, a new company, shortly after becoming oil minister.

    The financial crimes unit has sealed one of her houses in Abuja as part of the probe, security sources have told Reuters.

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    Veresen confirms $860million dollar Canadian gas plant will go ahead

    Canadian energy firm Veresen has confirmed a new $860 million gas plant has been given the green light in British Columbia.

    The Cutbank Ridge Partnership (CRP), a partnership between Encana and Mitsubishi, has sanctioned the 400 million cubic feet per day Sunrise gas plant, to be located in the Montney region near Dawson Creek in north eastern British Columbia.

    The facility is expected to be in-service in late 2017. Veresen said it has invested approximately $130 million to date.

    Chief executive David Fitzpatrick, said: “This is the largest gas plant to be commissioned in western Canada in the last 30 years and we are excited to partner with CRP on this facility.”

    “Upon start-up of the Sunrise plant, Veresen Midstream’s footprint in the Montney will grow substantially, and we look forward to continuing to work with Encana and CRP, as well as other producers in the region, to unlock the value of this important resource play.”

    Veresen anticipates CRP will proceed to a final investment decision for the 200 mmcf/d Tower gas plant in late 2015.
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    Alternative Energy

    California's landmark renewable energy law to be signed on Wednesday

    In a milestone for reducing pollution and fossil fuel use, Gov. Jerry Brown will sign into law Wednesday a bill that requires 50 percent of California's electricity to come from renewable sources like solar and wind by 2030.

    With huge new solar farms sprouting in the desert every few months and Silicon Valley driving much of the clean energy investment, the state now receives 25 percent of its electricity from renewables. Brown's act to double that at a signing ceremony in Los Angeles, however, sets in motion a green energy transformation for California over the next 15 years on a scale larger than anything any state has ever attempted.

    "It's huge," said Kathryn Phillips, state director for Sierra Club California. "It tells banks and utilities, and the people who make solar panels and windmills, that there is going to be a market. If you are thinking, 'Should I invest in oil wells in Bakersfield or solar panels in Fresno,' the solar panels are now the better bet."

    But energy experts say that it won't be easy to reach the legislation's goals in a state with 38 million people and a $2 trillion economy.
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    Panasonic announces 22.5% module-level efficiency solar panel

    Company claims new solar module prototype sets new world record for module-level efficiency based on mass-production technology. New HIT N330 high-powered module set to debut in U.K.

    Mere days after U.S. solar company SolarCity claimed to have produced the world’s most efficient rooftop PV module – achieving 22.04% module-level efficiency – Japan’s Panasonic has raised the bar even higher with today’s announcement that it has produced a 22.5% efficient solar module based on mass-production technology.

    The electronics giant revealed that its latest commercial-sized prototype panel has been produced using solar cells based on mass-production techniques, utilizing a 72-cell, 270-watt prototype that incorporates Panasonic’s enhanced technology that can be immediately scaled into volume production.

    The panel’s 22.5% conversion efficiency was verified by Japan’s National Institute of Advanced Industrial Science and Technology (AIST), and builds upon the 25.6% efficiency record the company set in 2014 at cell level.

    “The new panel efficiency record demonstrates once again Panasonic’s proven leadership in photovoltaics and our ongoing commitment to move the needle in advanced solar technology,” said Panasonic Eco Solutions Europe senior business developer Daniel Roca.

    Panasonic will also introduce its HIT N330 solar panels to the U.K. market next week. The high powered modules are mass produced with a conversion efficiency of 19.7% module-level efficiency, and a nominal power output of 330 watts, making them – Roca added – ideal for mature solar markets going big on self-consumption.
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    Tesla's new SUV is way too expensive - Morgan Stanley

    Tesla's new Model X is great, but Morgan Stanley analysts say it's too pricey.

    After much anticipation, the electric car companyunveiled its new SUV last week, and said it already has a backlog of orders out to a year.

    In a note on Tuesday, Morgan Stanley's Adam Jonas wrote that as great as the car is, the $132,000 price tag – mentioned in media reports and quoted for early adopters – is just too expensive.

    "We had very high expectations for the technical capabilities of the vehicle and it appears Tesla has met these expectations. However, the Model X price appears to have an as much as $25k higher average transaction price (ATP) than the Model S and easily $10k to $15k higher than we had expected, based on early list pricing/specification options. Even allowing the Model X ATPs to decline over time through the introduction of lower-spec models leaves what we believe to be a higher-priced vehicle than we expected that may struggle to meet the volume expectations of the market and our forecasts."

    Jonas said the company would have to lower the Model X price to deliver more than 20,000 cars next year. They also lowered their delivery forecasts on the SUV by between 5,000 and 10,000 units from next year through 2018.
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    Prolonged Australian dry spell threatens agricultural output

    A bout of hot, dry weather in Australia over the next three months is likely to exacerbate an expected downturn in agricultural output, with wheat and milk production most affected, analysts said on Wednesday.

    Nearly all of Australia's east coast is likely to record below average rainfall until the end of the year, the Australian Bureau of Meteorology (BOM) said, while much of country faces higher than average temperatures.

    The adverse outlook comes at a critical growing time for crops and follows recent hotter than average temperatures in the country's south and southeast, which have already curbed wheat yields for some farmers.

    "Having that heat so early is putting crops under stress and it is bad for yields. There is some production risk on the (official) wheat estimates," said Phin Ziebell, agribusiness economist, National Australia Bank.

    "Looking forward, the BOM is talking about pretty much no rain for southeast Australia ... it is bad news not just for grain growers but also graziers."

    Hotter, drier weather over the next three months could mean Australia's production of wheat, canola and milk in particular miss official estimates, analysts said.

    "There is little rainfall in prospect that will restore moisture across areas where that is still relevant," said Tobin Gorey, director of agricultural strategy, Commonwealth Bank of Australia.

    Production of beef, however, could exceed forecasts as farmers are forced to slaughter animals as pasture wilts and dams run dry.

    Lower wheat production in the world's fourth-largest exporter could support prices, which hit a near two-month peak on Tuesday on concerns over unfavourable weather in the Black Sea and Australia.

    Australia's chief commodity forecaster last month raised its forecast for wheat production to in excess of 25 million tonnes.

    However, much of the country has recently recorded unseasonably warm temperatures for the Spring season.

    South Australia, a large wheat exporting state, recorded its hottest early-October day in 70 years, putting stress on wheat crops in their yield-determining phase.

    Glencore dominates bulk grain handling in South Australia, while domestic bulk grain handler GrainCorp Ltd is the dominant handler in New South Wales and Queensland states.

    Lower Australian milk production could also undermine expansion plans by the country's largest milk processor, Murray Goulburn, which recently raised A$500 million ($360 million) to boost production of dairy beverages and cheese products for export to Asia.
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    Precious Metals

    Implats moves to raise R4bn

    Mining company Impala Platinum (Implats) on Tuesday announced its placing of new shares to raise up to R4-billion through a bookbuild offering run by UBS as acting underwriter. 

    This follows Mining Weekly Online’s report last month in which Implats CEO Terence Goodlace outlined the company’s revised action plan for sustainable profitability in a “lower for longer” metal price environment. The action plan takes in cuts in working costs and capital expenditure as well as an acceleration of the repositioning of the principal operations at the Impala mine, north of Rustenburg, on the western limb of the Bushveld Complex. 

    This includes the completion of the large 16 Shaft and 20 Shaft replacement projects within the Impala lease area at a cost of R3.9-billion over the next three years. These new shafts will replace production from the older shafts as they are mined out and closed and in so doing improve infrastructure use and smelter efficiency.

    Implats stated in a Johannesburg Stock Exchange News Service announcement that the share placing should allow it to operate profitably n both the short and long term.

    The company said that the placing, through an accelerated bookbuild process to qualifying investors only, did not constitute an offer to the public to buy shares. The share price will be decided at the close of the bookbuild. 

    The share sale move is backed 49% by Coronation Fund Managers, Royal Bafokeng Holdings and the State-owned Public Investment Corporation, with Allan Gray irrevocably committing 2.6% through client recommendation.
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    Base Metals

    Noble's US metal traders leave in latest senior exits – sources

    Noble Group's senior US metals traders Scott Evans and Jeff Romanek have left the company, four sources said on Tuesday, the latest in a string of high-profile departures as the Asian commodities trader battles weak metals and oil prices.

    The departures come as Asia's biggest commodity trader seeks to shore up its balance sheet and reduce its exposure to capital-intensive operations like trading copper, and returns to its historic roots in aluminium and alumina. Both traders were hired as part of the company's recent years-long push into copper, zinc, lead and nickel. 

    Evans joined 2-1/2 years ago from Goldman Sachs and Romanek followed from the Wall Street bank in April last year. A spokesperson for Noble declined to comment on the situation. The sources requested anonymity because they are not authorised to speak to the media. 

    Mining and metals accounted for 20% of the company's $34-billion revenue in the first half of the year. Their exits reflect internal ructions as the trader pursues options, including selling core businesses, to boost market confidence after a bruising accounting dispute. The moves also underscore challenging market conditions for merchants as prices of industrial raw materials languish at six-year lows. 

    Commodity traders carrying big inventory on behalf of customers have been hit by the unprecedented plunge this year in aluminium premiums, which are paid on top of the benchmark London Metal Exchange prices. In the second quarter, Noble's metals and mining segment swung to a loss before interest and tax of $50-million after an unprecedented drop in aluminium premiums. That compared with a profit of $102-million in the same period last year. 

    The group reported net profits of $62.6-million, compared with $65.8-million a year earlier. In its earnings report, it said the copper business performed strongly due to strong customer growth and volumes amid broader copper market weakness. Overall volumes in copper grew 30% year-on-year in the first half.
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    Steel, Iron Ore and Coal

    Adani faces further delays over Australian coal mine permit

    A giant coal project under development in Australia by India's Adani Enterprises is facing further delays over environmental permitting, Australia's environment minister said on Tuesday.

    Australia had yet to receive assurances that endangered species would be protected if Adani is reissued with an environmental permit to construct its Carmichael coal mine, the minister, Greg Hunt, said.

    "The government is now waiting on the company, and I'll make a final assessment on its merits when that comes," Hunt told reporters on the sidelines of a climate investment conference.

    A court on August 5 temporarily blocked progress on the $7 billion project in the inland Galilee Basin following a claim Adani failed to take into account the welfare of the yakka skink and an ornamental snake.

    The Environment Department at the time said Hunt would reconsider his approval in six to eight weeks pending new submissions by Adani.

    Adani, which wants to ship 40 million tonnes of coal a year to India, has battled opposition from environmental groups since starting work on the project five years ago.

    The project has been repeatedly delayed by court actions by environmentalists, difficulties in obtaining finance and concern over the economics of the project, so much so that Adani recently halted engineering work.

    An Adani source close to the matter said the company remained commited to the project and was counting on the permit being reissued by late November.
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    For squeezed global steel sector, no quick fix in prospect

    The global steel industry faces an escalating crisis and any mill closures already in prospect look unlikely to be enough to restore profitability in the sector.

    Britain's second-largest steelmaker SSI UK went into liquidation last week, citing a slump in steel prices and record exports from China, which produces half the world's steel.

    Similar troubles are circling South Africa's second-largest steelmaker Evraz Highveld Steel and Vanadium, which is undergoing so-called business rescue proceedings, while Tata Steel and U.S. Steel Corp have curtailed capacity this year.

    Experts say measures taken so far are nowhere near enough.

    "The steel industry is in its worst recession in 10 years, potentially it's as bad as 1991-92," said VTB Capital's global head of commodities research Wiktor Bielski. "There's almost nobody who isn't hurting right now. Less than 50 percent of the global industry can make money at current prices."

    Consultants CRU said 700 million tonnes out of a total 2.3 billion tonnes of steelmaking capacity is "spare", with cuts of 400 to 500 million tonnes needed by 2020 to balance the market.

    Few believe such cuts will materialise, not least because an estimated 300 million tonnes of spare capacity sits in China, where trimming a sector that employs millions could spark unrest.

    "It is the rule of the market. If not China, it will be Indian, Russian or Turkish mills, the more competitive will outlive the high-cost producers in the developed economies," said a China Iron and Steel Association (CISA) officer.

    CISA expects China's steel exports will exceed 100 million tonnes this year, after surging 50 percent last year to 94 million. This flood of cheap Chinese steel has helped send global prices ST-CRU-IDX to their lowest in 11 years.

    "Global steel prices have fallen more than iron ore in the last few weeks. In southern Europe we see steel from China at around 300 euros per tonne, significantly below the cost of the most efficient (EU) producer," said Voestalpine Chief Executive Wolfgang Eder.

    Scarcely a month goes by without news of new protectionist measures, actions which many experts see as counter-productive in the long run because they reinforce overcapacity.

    "The best market is a market that is as free as possible from artificial restrictions within the rules of the World Trade Organisation," said Edwin Basson, director general of the World Steel Association.

    Yet protectionism is popular, and political and labour pressures to keep mills running are intense, not just in China, as ArcelorMittal learnt in 2012 when it faced threats of nationalisation on attempting to close blast furnaces in France.

    Attached Files
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    Kloeckner cuts Q3 outlook on weak steel prices

    German steel distributor Kloeckner & Co said on Tuesday it would not meet its third-quarter target, citing poor market conditions due to prices falling further and weak demand for steel and metal products.

    Third-quarter earnings before interest, tax, depreciation and amortization (EBITDA) excluding restructuring expenses will be around 30 million euros ($33.79 million), Kloeckner said in a statement.

    The company had earlier guided for EBITDA, excluding special items of between 45 million euros and 55 million euros. That outlook was based on the assumption of a slight recovery of prices and robust demand, Kloeckner said.

    Kloeckner shares were down 6.9 percent in after-hours trading. The shares closed 0.5 percent higher after the regular trading session.

    "Contrary to the general market expectation, steel prices continued to decline, mainly due to a further decrease in quotations for Chinese steel exports," the company said.

    "As a result, margins came under pressure and inventory write-downs became necessary."

    Kloeckner said that this situation was expected to continue in the fourth quarter and that as a result 2015 EBITDA excluding restructuring cost would remain "substantially" below last year's, though a positive cash flow is still expected.

    In 2016 EBITDA is expected to rise again, while net income should be "noticeably positive again," Kloeckner said.
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