Mark Latham Commodity Equity Intelligence Service

Tuesday 18th August 2015
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    Yesterdays daily was the most read ever in our history.

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    This is the Bloomberg commodity index, which is breaking to new lows.
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    Empire Fed Collapses To Six Year Lows

    Empire Fed Collapses To Six Year Lows 

    Having 'stabilized' in recent months, The Empire Fed Manufacturing Survey just collapsed to -14.92 (from 3.86) missing expectations of 4.50 by the biggest margin since 2010. Across the board it was a bloodbath with New Orders crashing, inventories plunging and employment lower (with both workweek and number of employees falling). The headline data would have been worse were it not for the concurrent spike in 'hope' - highest since April.

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    China home prices rise for third month in July

    China home prices rise for third month in July

    Chinese home prices rose for a third consecutive month in July, fuelled by a pick-up in sales and market sentiment, a rare counterpoint to a growing list of grim indicators in the world's second-largest economy.

    Average new home prices rose 0.3 percent in July versus June, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS) on Tuesday, slightly slower than June's 0.4 percent rise.

    Even a modest recovery in a sector that accounts for around 15 percent of GDP is a welcome boost for an economy heading for its weakest growth in 25 years.

    Property sales bottomed out during the first half of 2015 after declining for more than a year, propped up by a barrage of government support measures since last September, including a series of interest rate cuts and lower downpayment requirements.

    Exports have tumbled, investment growth has hit repeated lows, and the stock market crashed 30 percent in a matter of weeks, keeping policymakers busy with an unprecedented array of support measures, including a currency devaluation and repeated attempts to increase lending.

    Some of those measures, along with gains made on stocks in a 150 percent run-up in the year before the crash, have helped buyers like Lilian Liu, a 33-year-old worker in the tourist industry, who purchased a second home in the eastern city of Hangzhou last month.

    "It's the policy that makes it possible to buy my second apartment. Without lower down-payments, I couldn't make the decision this time," she said.

    While policy measures and increased lending helped fuel a wave of pent-up home buying in recent months, a huge overhang of unsold houses in smaller cities keeps the sector under pressure.

    China's overall real estate investment growth continued to slow in the first seven months of 2015, but property sales and housing investment improved.

    Compared with a year ago, home prices still fell 3.7 percent in July, easing from the previous month's 4.9 percent drop, Reuters calculated from NBS data showed.

    China Vanke, the country's largest property developer, said on Monday that the housing market was slowly emerging from a year-long slump, but it would take time to see a full recovery.

    "The number of land acquisitions has decreased, and inventory is slowly being digested. It'll take time, but it's confirmed that a recovery is ongoing," said Vanke President Yu Liang.

    The NBS data showed home prices across China rose month-on-month in 31 of the 70 major cities monitored, up from 27 in June.

    Prices in first-tier cities such as Beijing, Shanghai and Shenzhen have been leading the recovery.
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    China tries senior power industry executive on graft charges

    China tries senior power industry executive on graft charges

    The former chief executive and chairman of China Resources Power Holdings Co. Ltd. is being tried on allegations of graft, Chinese authorities said on Monday.

    Wang Yujun was put on trial on Aug. 12 in Zhenjiang, a city in the eastern province of Jiangsu, the country's procuratorate said in a statement on its website (

    Wang is accused of seeking profit for others, illegally accepting other people's assets, and embezzling public money using his various official roles.

    The statement did not say when a verdict would be issued.

    China Resources Power Holdings is one of the listed units of state-owned China Resources Holdings, a conglomerate of energy, land and consumer businesses in mainland China and Hong Kong.

    An investigation into the conglomerate has ensnared at least seven senior executives, including the chairman Song Lin.

    Chinese President Xi Jinping has pursued an extensive campaign against corruption since taking power more than two years ago.

    Xi, like others before him, warned that the problem was so severe it could affect the party's ability to maintain its grip on power.
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    Oil and Gas

    Has Saudi policy failed?

    With the latest analysis from theInternational Energy Agency showing that oil production capacity continues to rise despite the sharp fall in prices, is Saudi Arabia ready to admit that its strategy of over-production designed to force other producers out of the market has failed?

    This year is proving to be a bad one for Saudi.

    • At the heart of the problem is Saudi’s arch rival Iran. President Barack Obama pointedly overrode Saudi concerns over the nuclear negotiations with Iran and reached a deal that is already transforming the regional balance of power. Western politicians and investors – led, of course, by the oil majors – are flooding into Tehran even before the deal is completed. Iranian oil production and exports may not rise that much immediately but over a year or two a million barrels a day could be added, undermining an already weak market.
    • The concern about Iran’s rehabilitation and growing regional influence has led the Saudis to intervene in Yemen against the Iranian backed Houthi forces. The ill-conceived and badly executed air campaign has achieved little beyond demonstrating the limitations of the Saudi military. After four months, the result is a humanitarian disaster that leaves Houthi forces in control of much of the north of Yemen on the edge of Saudi Arabia’s southern border.
    • Meanwhile, the Saudi’s attempted assertion of power in the international oil market has backfired. The US shale industry has not followed the script by obediently cutting back in production as prices have fallen, as an excellent article from the Oil and Gas Journal confirms. On the contrary, producers have used the pressure of low prices to cut costs and US shale production this year will be higher than in 2014. Around the world other oil producers, including the Russians, have responded to the price fall by increasing output to raise revenue. The oil price is back to $50 a barrel. With stocks already high and demand flat because of the Chinese downturn, prices could fall further.

    The fact that the resilience of the shale industry is so strong seems to have come as a surprise, which just shows how out of touch the Saudi rulers have become. The king is 79, the oil minister Ali al-Naimi is 80. Both perhaps thought that the world oil market still operates as it did in the 1980s. It doesn’t, and a pragmatic regime in Riyadh would accept that Saudis interests lie in a stable oil price perhaps at $70 to $80 a barrel for the next five years. To get to that will require a serious cut in production of perhaps 2mbd. A few others such as Kuwait and Abu Dhabi could make smaller contributions. Opec discipline is never perfect, and will certainly be challenged as Iran and Iraq raise production over the next few years but even partial discipline is better than the alternative.

    These are not easy choices. On balance, I think a change of policy is more likely than not. Over the years caution rather than assertion has served the kingdom pretty well. A change of policy would probably mean a change of leadership and almost certainly the departure of the deputy crown prince.
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    Germany Proves Russia’s Most Loyal Gas Customer as Price Plunges

    Germany Proves Russia’s Most Loyal Gas Customer as Price Plunges

    Russia boosted natural gas supplies to Germany by almost 50 percent in the second quarter as prices plunged, while the world’s largest natural gas exporter struggled with weaker demand from its former Soviet allies.

    Gazprom PJSC’s deliveries to Germany jumped to 11.7 billion cubic meters compared with 7.8 billion a year earlier, the highest quarterly level since at least 2010, according to data on the Moscow-based exporter’s website. Gazprom’s average gas price at the German border fell 36 percent this year as crude plunged.

    The European Union, which gets about 30 percent of its gas from Russia, may be Gazprom’s only growing market this year, the government in Moscow said last month. Gazprom has boosted fuel sales to the 28-nation bloc since the end of May as Brent crude slumped 21 percent. Most of the company’s gas contracts are linked to the price of oil.

    “Germany has been a loyal customer for Russia for years,” said Alexander Kornilov, an oil and gas analyst at Alfa Bank in Moscow. “Such relationships stay in place, though volumes depend on a price -- business is business.”

    Gazprom’s price to Germany fell to $6.68 per million British thermal units in July, the lowest level since December 2009, according to the International Monetary Fund. Germany is importing almost all of its gas from Russia now, energy broker Marex Spectron Group Ltd. said in a July 29 note.

    Germany was the only nation among Gazprom’s key clients that increased Russian gas purchases in the first half. The company’s total shipments of the fuel fell 10 percent to 222.8 billion cubic meters through June, mainly because of lower sales in Italy, Turkey, Central Europe, Ukraine and Russia, Gazprom said in its earnings report under Russian accounting standards on Friday.

    Gazprom cut its 2015 output forecast for at least the third time this year, reducing its outlook to 444.6 billion cubic meters, according to the report. That’s only 0.1 percent higher than last year’s record-low output. Russia’s Economy Ministry predicted last month the gas company would cut output to 414 billion cubic meters for 2015.

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    Petrobras board approves sale of 25 pct of fuel unit, two oppose

    Petrobras board approves sale of 25 pct of fuel unit, two oppose

    The board of directors of Brazil's state-controlled oil company Petroleo Brasileiro SA approved the sale of at least 25 percent of its fuel unit BR Distribuidora, according to board minutes published in a securities filing late Monday.

    Reuters previously reported that Petrobras would seek to sell at least a quarter of the unit, which controls Brazil's largest service-station network. A sale is expected as early as the end of this year.

    Petrobras, as the company is known, wants to sell $15.1 billion of assets by the end of 2016 to help reduce its $132 billion of debt, the largest of any oil company.

    A majority of the board on Aug. 8 approved the plan to seek approval from Brazil's securities regulator CVM for the sale, which could expand beyond 25 percent with additional "Green Shoe" and "Hot Shoe" sales, the statement said.

    There were two votes on the ten-member board against the plan, including that of board chairman Murilo Ferreira.

    Ferreira opposed the sale on the grounds that additional decisions needed to be made, including hiring professionals with experience in retail sales and the approval of a business plan for BR Distribuidora, before any sale can be approved, the statement said.

    Board member Deyvid Bacelar opposed the motion on the grounds that market conditions were not right for a sale and that BR Distribuidora could provide improved returns to Petrobras if the board improved its management or sought out partnerships instead of selling stock to the public.

    Bacelar represents union workers at Petrobras.

    BR Distribuidora was recently valued at around $10 billion by UBS Securities analysts.

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    Russia’s Rosneft registers to take part in Brazil licensing round

    Russia’s Rosneft registers to take part in Brazil licensing round

    Russian energy company Rosneft said on Monday it had registered to take part in the 13th licensing round organised by Brazilian national energy agency Agencia Nacional do Petroleo, Gas Natural e Biocombustiveis.

    Rosneft said that 10 oil basins and blocks, located onshore and offshore, would be put up for sale at the licensing round.
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    Santos refutes equity raising reports, updates GLNG

    Santos refutes equity raising reports, updates GLNG

    Australia’s Santos, operator of the GLNG project, has denied media reports it was planning to launch an equity raising.

    The company’s shares dropped 9 percent on Friday, amid concerns it would need to raise cash as oil and gas prices show no sign of recovery.

    “Santos retains ample liquidity, with over $2 billion in cash and undrawn debt facilities currently available,” the company said in a statement.

    The company said it continues to take positive steps to strengthen its operating position in the lower oil price environment. First half capital expenditure was more than 50% below 2014 levels

    “First half capital expenditure was more than 50% below 2014 levels and unit production costs for the first half were 11% lower,” Santos said.

    “The underlying performance of the business remains strong. Production was up 13% in the first half and continued growth is expected over the next few years, coinciding with the ramp up of GLNG,” it added.

    GLNG project

    According to Santos, the GLNG project being developed on Curtis Island off Gladstone has made significant progress and remains on track for first LNG around the end of the third quarter.

    All upstream facilities are fully operational and good progress is being made on commissioning the LNG plant on Curtis Island, the company said.

    The LNG project involves gas field development in the Surat and Bowen Basins, a 420-kilometre gas transmission pipeline, and the construction of a 7.8 mtpa LNG plant on Curtis Island.
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    Schlumberger in business unit sale

    Schlumberger in business unit sale

    Oilfield services behemoth Schlumberger is selling its management consultancy wing to global giant Accenture.

    Schlumberger Business Consultancy (SBC) is going to the buyer for an undisclosed sum, Accenture said on Monday.

    It is understood that most or all of current SBC employees will move over to Accenture, which is looking to boost its offering to oil & gas clients.

    Accenture Strategy chief executive Mark Knickrehm said: “Our technology-driven business strategies and digital knowledge complement the core consulting strengths of the professionals who will join us through this acquisition.”

    Accenture Resources chief executive Jean-Marc Ollagnier added: “The upstream oil and gas sector is undergoing a fundamental transformation, partly driven by oil price volatility, but also by increased regulation and technology advances.

    “Energy companies are also under pressure to improve internal performance in delivering large capital projects, reduce production costs and extend into new areas, including renewables.

    “This acquisition will enhance our capabilities in helping clients navigate these challenges with a combination of business, digital and technology knowhow that differentiates us in this global market.”

    SBC was founded in 2004 and has more than 250 consultants working from nine global offices. Schlumberger’s website says the wing is “the world’s leading management consultancy in the upstream oil and gas industry, and a leading player in the energy sector more generally”.
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    Funds For Fracking Finally Dry Up: One Last Hail Mary Pass Remains

    Funds For Fracking Finally Dry Up: One Last Hail Mary Pass Remains

    Is Saudi Arabia on the verge of winning the war on US Shale firms? It appears the spigot of malinvestment-subsidizing liquidity that kept numerous zombie energy firms alive has been shut off almost entirely. As oil prices return to cycle lows, so credit risk has spiked to record highs and issuance of life-giving bonds has collapsed. This has opened up opportunities for deep-pocketed private equity firms to push for restructuring or buy assets as many oil companies need cash to replenish banks' slimmed-down lending facilities, service their bonds and finance drilling of new wells to keep pumping oil and sustain cash flow.

    As public market demand for this sector has collapsed...

    Through out much of the crude market rout that started in mid-2014 oil firms could rely on generous capital markets investors betting on a quick recovery in prices, which made any asset sales look unattractive. But since crude prices began tanking again in early July after a partial three-month recovery, oil firms have finally started to feel the squeeze.

    A torrent of $44 billion in high-yield debt and share sales in the first half of this year has slowed to a trickle with oil now at just above $42 a barrel, 30 percent below its June levels and 60 percent down from June 2014, CLc1 and a more pessimistic view taking hold that global oversupply could keep oil cheap for years.

    The number of high-yield bond and share issues has tumbled more than two-thirds from levels seen in May,Thomson Reuters data show.

    That opens up opportunities for deep-pocketed private equity firms to push for restructuring or buy assets as many oil companies need cash to replenish banks' slimmed-down lending facilities, service their bonds and finance drilling of new wells to keep pumping oil and sustain cash flow.

    “The capital markets showed up in force in the first quarter much to everyone's surprise," said Carl Tricoli, managing partner at Denham Capital, a private equity fund in Houston.

    "It didn't solve people's problems, so now when you roll to 2016 ...there will be an opportunity for private equity-backed companies with plenty of capital in place to go out and start buying."

    On Monday, shale producer Magnum Hunter Resources Corp. (MHR.N) said it would get an unnamed private equity fund to pay for up to $430 million of drilling work in Ohio in return for rights to the land.

    Dealmakers say potential sellers of oilfield assets are now discussing bids they would have rejected a few months ago while the changed outlook for oil allows buyers to adjust bids down.

    But hope is fading as Bill Conway, co-CEO of The Carlyle Group, a giant in alternative funding, struck a cautious tone...

     "I would say, this is a good time to be careful when it comes to investing in energy."

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    Goldboro LNG granted import and export approval

    Goldboro LNG granted import and export approval

    Pieridae Energy said that it has been issued long-term licenses by the National Energy Board of Canada to import natural gas from the USA and to export LNG from Canada.

    The licenses issued with terms and conditions were granted in response to an application by Pieridae submitted on October 24, 2014 to the NEB.

    The natural gas imported from the USA and natural gas supplied from Canadian sources will be processed at the proposed Goldboro LNG facility to be located in Goldboro, Nova Scotia and exported from Canada’s LNG for delivery to Europe and other countries, the company said in a statement.

    The term of the export license is for 20 years starting from the date of first export with a maximum annual export capacity of 16.675 billion cubic meters. The import license is also for a 20-year term starting from the date of first import and has a maximum annual import volume of 11.845 billion cubic meters.

    In May 2015, Pieridae Energy (USA), a corporation affiliated with Pieridae, received authorization from the Department of Energy of the USA to export natural gas to Canada for end use in Canada and for further export to countries with which the USA has free trade agreements for trade in natural gas.

    Pieridae has a 20-year sales agreement with European-based E.ON Global Commodities to deliver approximately five million metric tons per annum of LNG produced from the proposed Goldboro LNG facility.

    Pieridae plans to make a final investment decision on the Goldboro LNG project in 2016.
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    Canada crude woes..Trican hints at bankruptcy.

    Enbridge mid-month apportionment adds to Canada crude woes

    Canadian pipeline operator Enbridge Inc is rationing space for mid-month on its line 4/67 ex Kerrobert for August, according to a notice to shippers on Monday that was seen by Reuters.

    Line 4/67, which is a part of its mainline system, would be apportioned by an additional 5 percent for August, the notice said. The company said on July that line 4/67 nominations were at 29 percent apportionment for August.

    The mid-month apportionment piles fresh misery on Canadian crude producers, who are already struggling with outright heavy crude prices at their lowest level in at least a decade.

    Extra rationing of pipeline space means producers cannot ship all their nominated volumes and will likely lead to a buildup of crude in Alberta, putting further pressure on Canadian differentials.

    "This additional apportionment is a result of numerous unplanned outages, power curtailments, and lower-than-expected rates on the western heavy system in late July and early August," the company said in a note to shippers on Monday.

    Enbridge restarted two key Canadian crude lines last week after they were shut following a crude oil release in Missouri on Aug 11.

    The discount on Western Canada Select (WCS) heavy blend crude for September delivery last week hit its widest level this year following the pipeline disruptions last week and an ongoing disruption at BP Plc's Whiting, Indiana, refinery, which is one of the biggest consumers of Canadian crude.

    September WCS was last trading at $19.35 per barrel below the West Texas Intermediate benchmark, putting the outright price of heavy Canadian crude at $22.52 a barrel.

    The collapse of oil prices walloped Trican Well Service Ltd. in the first quarter as customers slashed capital spending, prompting the fracking company to cut 2,000 jobs and cancel dividends.

    Trican, which has operations in Canada, the United States and elsewhere, warned it’s at risk of breaching conditions of its sizable debt, which could threaten its ability to keep operating. It is seeking relief from its lenders. The shares tumbled 14.5 per cent Wednesday.

    Like the rest of the drilling and well-completion business, demand for Trican’s services plummeted in the quarter – normally the busiest of the year – as producers whittled down drilling plans. Trican suffered a $19-million operating loss even after opting to park more than a third of its equipment.

    “It’s a very, very difficult time for the frackers, and Trican’s leverage is exacerbating the situation for them,” AltaCorp Capital Inc. analyst Dana Benner said. “Other service companies have cut their dividend … so Trican is not unique in this respect. But if you look at its ratios, the leverage is very high for the company. I think the market is looking at the leverage, the fact that they were not able to obtain covenant relief from their lenders yet.”

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    Alternative Energy

    Utilities Muscle in to Rooftop Solar Market

    Utilities Muscle in to Rooftop Solar Market

    In the past five years, rooftop solar has revealed the limitations of the archaic electric utility business model, as customers have found generating their own power more cost effective than taking 100% of their energy from the incumbent monopoly. For years, utilities have fought back by trying to make competition less cost effective, at a substantial cost to their image (and ratepayer’s own money).

    It was only a matter of time until electric monopolies realized that co-opting would be less costly than confronting, and several utility companies are now planning to own solar on their customers’ roofs. Southern Company CEO Tom Fanning put it bluntly, “If distributed generation is eroding your growth, own distributed generation!”

    The big question is: Will utility-owned rooftop solar add to or replace customer ownership of solar?  And secondarily, is this a good deal for utility customers?

    Tucson Electric Power, based in the sunniest part of the U.S., received regulatory approval for a residential solar program in 2014. The 600 arrays they’ve proposed will average 6 kilowatts.  The cost of TEP’s program is estimated at $10 million for a cumulative capacity of up to 3.5 megawatts of solar capacity. The utility says it will be between $2.85 and $3.50 per Watt.

    Customers pay a one-time $250 application fee and a monthly fee equivalent to their average utility bill payment over the past 12 months. Customers receive the electricity from the solar array as bill credits, with the system sized to their annual average use. Thus, the only savings for customers will be if utility rates rise (they have by 2.8% per year since 2008).

    ILSR’s analysis suggests that it will take customers about 5 years to pay back the program application fee, and that the net benefit to the customer over 25 years will be about $6,800.

    Arizona Public Service has also planned a residential solar offering. It’s program will provide 1,500 customers a $30 monthly credit over 20 years, with no upfront fee. The program is anticipated to cost $28.5 million for 10 megawatts of solar, for an average installed cost of $2.85 per Watt.

    ILSR’s calculation of net benefit suggests that customers will gain about $5,600 over 25 years from the APS program (adjusted for the time value of money and inflation), with no payback period because the customer has no upfront costs.

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    SunEdison, Goldman Sachs funds form $1 bln investment vehicle

    SunEdison, Goldman Sachs funds form $1 bln investment vehicle

    U.S. solar company SunEdison Inc said it would form a $1 billion warehouse investment vehicle along with funds managed by Goldman Sachs Group Inc to fund construction and buy operating assets.

    West Street Infrastructure Partners III and its affiliates, managed by Goldman Sachs, will provide $300 million equity for the investment vehicle, WSIP Warehouse, SunEdison said.

    A syndicate of banks including Morgan Stanley, Bank of America Corp and Deutsche Bank AG will provide commitments of $700 million debt. Of this, $500 million will be a five-year term loan and $200 million a four-year revolving credit facility.

    SunEdison will have the option to expand the facility by up to $1 billion.

    "The WSIP Warehouse expands our capacity beyond our existing $1.5 billion First Reserve Warehouse and the $500 million dollar TerraForm Private Warehouse," SunEdison Chief Financial Officer Brian Wuebbels said on Monday.

    TerraForm Power Inc, a unit of SunEdison, will have an exclusive call right over the warehoused assets, the company said.

    SunEdison agreed in July to buy Vivint Solar Inc, the second-biggest U.S. solar panel installer, in a deal valued at about $2.2 billion to speed up its expansion in the booming residential solar market.
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    Precious Metals

    AngloGold harvesting short-life mines

    AngloGold harvesting short-life mines 

    AngloGold Ashanti is harvesting short-life gold mines for cash and will do so with more mines if the gold price falls below $1 000/oz, CEO Srinivasan (Venkat) Venkatakrishnan said on Monday. Already being harvested after a falling gold price put an end to disposal negotiations are the Sadiola and Yatela gold mines in Mali, in which AngloGold has stakes of 41% and 40%. 

    If the gold price falls below $1 000/oz, more will follow. “We’ll look to harvesting them for cash until the crisis improves,” Venkat told the presentation attended by Mining Weekly. CFO Christine Ramon reported that currency effects more than compensated for the drop in the gold price and inflationary pressures in the three months to June 30. 

    Weaker national currencies against the dollar contributed to the reduction in operating costs in South Africa, Australia, Brazil and Argentina. Ramon said that AngloGold's net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio of 1.44 was positioning the company well to withstand gold price volatility as well as production disruptions, within reason. 

    In the second quarter 84% of AngloGold’s Ebitda was generated by its international operations, which contextualises the low potential impact of a production disruption in the South African region through strike action. “I’m hoping that we don’t end up with a strike scenario because we’ve just seen the damage that has been done to the platinum industry on the back of a strike. “In the event that our workers want to go on strike, I’m just pointing out the diversified nature of our operations and their ability to withstand a strike,” Venkat commented.

    International operational head Ron Largent reported that AngloGold’s international operations accounted for some 70% of the company’s overall production. “We’ve continued to improve margins even with the reduced gold price,” Largent reported. AngloGold’s South African operations produced 18% less gold at 261 000 oz, on mainly safety stoppages at both the West Wits and Vaal River regions. “It’s like having an accident on a motorway. There are two approaches you can take. You can shut the entire motorway down or you can ring-fence the area where there is a problem and address that particular problem. “What you are hearing the industry say is identify the area where there is a problem and let’s deal with it rather than taking one approach across the entire industry. 

    Presenting cash-generative financial results for the three months to June 30 despite the falling gold price and decreased production, AngloGold reported cutting total cash costs to $718/oz, lowering net debt to $3.076-billion, lifting liquidity by selling its US Cripple Creek & Victor (CC&V) gold mine for $820-million and producing 6% less gold production on the cessation of underground mining at Obuasi in Ghana and the sale of the Navachab gold mine in Namibia.

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    Base Metals

    Nevada Copper’s Pumpkin Hollow clears last regulatory hurdle

    Nevada Copper’s Pumpkin Hollow clears last regulatory hurdle 

    TSX-listed Nevada Copper is now fully permitted to start construction and operate its $1.04-billion Pumpkin Hollow openpit and underground copper project, located in the province. The Vancouver-based project developer on Monday said that the appeal period for the outstanding revised reclamation permit expired on August 9. No appeals were filed, rendering this final permit effective as of August 14. 

    "Achievement of a fully permitted project is an enormous achievement and, for Pumpkin Hollow, is the culmination of years of effort by many people. "Pumpkin Hollow has a long life and low operating cost, confirmed by our recently-completed integrated feasibility study with additional upside as demonstrated by recent drilling results,” president and CEO Giulio Bonifacio commented. 

    The Pumpkin Hollow copper project had proven and probable mineral reserves, including openpit and underground, of 572-million tons of ore grading 0.47% copper equivalent, containing 5.05-billion pounds of copper, 761 000 oz of gold and 27.6-million ounces of silver. 

    The feasibility study on the project had confirmed the technical and financial viability of building and operating a 70 000 t/d copper mining and processing operation comprising a single large concentrator, with mill feed from openpit and underground operations. 

    The project development proposed a 63 500 t/d openpit mine and 6 500 t/d underground mine feeding a single 70 000 t/d concentrator, generating substantial yearly cash flow over the life of mine. The project had a net present value, at a 5% discount rate, of $1.1-billion, an after-tax internal rate of return of 15.6%, with 4.7-year payback. 

    “What makes Pumpkin Hollow truly unique, however, is that it is now a fully permitted copper project located in Nevada – one of the best mining jurisdictions in the world. This makes Pumpkin Hollow an attractive and scarce copper asset,” Bonifacio said. Nevada Copper said that it continued to advance financing options and expected these developments to further enhance financing opportunities.

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    Steel, Iron Ore and Coal

    Indonesia's Aug HBA thermal coal price hit new low

    Indonesia's Aug HBA thermal coal price hit new low

    Indonesia's August thermal coal reference price, also known as Harga Batubara Acuan (HBA), was set at $59.14/t FOB, the lowest ever recorded since its inception in January 2009, said the Ministry of Energy and Mineral Resources.

    The August HBA price represents a drop of 0.03% from July, when it was set at $59.16/t -- an all-time low before the latest fall.

    The HBA is a monthly average price based 25% on the Platts Kalimantan 5,900 kcal/kg gross as received assessment; 25% on Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR); 25% on the Newcastle Export Index -- formerly the Barlow-Jonker index (6,322 kcal/kg GAR) of Energy Publishing -- and 25% on the globalCOAL Newcastle (6,000 kcal/kg NAR) index.

    It is based on 6,322 kcal/kg GAR coal, with 8% total moisture content, 15% ash and 0.8% sulfur.

    The HBA for thermal coal is the basis for determining the prices of 73 Indonesian coal products and for calculating the royalties Indonesian producers have to pay for each metric ton of coal they sell locally or overseas.

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    Canada's Brookfield buying Australia freight firm Asciano for $6.6 bln

    Canada's Brookfield buying Australia freight firm Asciano for $6.6 bln

    Canada's Brookfield Asset Management is buying Australian port and rail freight firm Asciano for $6.6 billion to form a global logistics player, scooping up an asset that has been made cheaper by a slump in coal prices.

    The deal, the largest purchase of an Australian firm by an overseas entity since 2011 and the biggest acquisition by a Canadian firm in that country, underscores the huge international appetite for Australian infrastructure.

    It also casts a vote of confidence in the long-term future of the Australian coal industry, which is expected to defy global pressure on high polluting energy sources and grow exports in the years ahead. Coal exports are a key generator of earnings for haulage companies like Asciano.

    After slumping to 8-year lows, the coal price CO-FOBNWC-AU will probably stop falling soon and a lower Australian dollar means coal producers "are probably in better condition today than they were a year ago", Brookfield's infrastructure chief executive, Sam Pollock, told journalists in Sydney.

    Record low interest rates and a shrinking currency have added to the M&A appeal of the Australian logistics sector which is already struggling with lower valuations because of a downturn in commodity prices.

    Asciano's former parent company, Toll Holdings, agreed to a A$6.5 billion takeover by Japan Post Holdings earlier this year, while larger rail freight provider Aurizon Holdings has been seen as a potential takeover target.

    Adding to Asciano's appeal, the Sydney-listed company also on Tuesday beat analyst expectations with a 19 percent jump in underlying net profit for the year to end-June due to the benefits of a A$3 billion overhaul aimed at automating its equipment.

    Asciano's shares have traded below Brookfield's offer price since it first disclosed the Canadian company's approach on July 1. On Tuesday, the shares rose nearly 8 percent to an intra-day peak of A$8.75, their highest since 2008, but still below the offer price of A$9.15.

    "You've got currency risk and the risk of where those Brookfield shares will trade," said Morningstar analyst Ross MacMillan, noting that the cash and scrip offer is expected to close in December. The two companies and analysts did not see any significant regulatory hurdles for the deal.
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    Patriot Coal Reaches Deal to Sell Remaining Mines

    Patriot Coal Reaches Deal to Sell Remaining Mines

    Patriot Coal Corp. hopes to unload more than $400 million in debt in a newly announced deal to sell its remaining West Virginia mines.

    Patriot said Monday that an affiliate of the Virginia Conservation Legacy Fund, an environmentally focused nonprofit, is in line to acquire two Patriot mining complexes in West Virginia as well as mining permits.

    As part of the deal, which Patriot hopes to subject to higher bids through a court-overseen auction process, VCLF would take responsibility for more than $400 million in liabilities—workers’ compensation, black lung and environmental—tied to the assets.

    VCLF Chief Executive Tom Clarke said mining operations would continue at Patriot’s Federal complex in northern West Virginia, where the organization will seek to reduce carbon emissions.

    The deal covers most of the assets that would remain if Patriot closes a previously announced sale of most of its mines to Blackhawk Mining LLC.

    “With VCLF and Blackhawk, Patriot has now entered into agreements to sell effectively the entirety of the Company, and we will move expeditiously to close both transactions so that we can successfully emerge from bankruptcy within the coming months,” Patriot President and Chief Executive Bob Bennett said Monday in a statement.

    Mr. Bennett added that both deals are expected to result in job offers for a “substantial majority” of Patriot’s current workforce.

    Patriot sought chapter 11 protection in May, less than two years after emerging from its prior court restructuring.

    Blackhawk is offering to issue up to $653.3 million in debt to fund its purchase of the bulk of Patriot’s mining assets, subject to competing bids at a Sept. 9 auction.

    Patriot is due in bankruptcy court Tuesday to ask the judge to let its creditors begin voting on its debt-payment plan, at the heart of which are the Blackhawk, and now the VCLF, sales.

    Creditors and other important stakeholders have asserted objections to a preliminary version of the plan, which they say is short on such crucial details as how much they will be paid. Others are concerned about the fate of the company’s environmental and employee obligations.

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    Supply-demand mismatch continues to dampen steel prices

    Supply-demand mismatch continues to dampen steel prices
    Steel prices in China continued to spiral downward in July as market supply far exceeded demand, latest data from the China Iron and Steel Association (CISA) revealed on Monday.

    The CISA China steel price index came in at 62.73 by the end of July, down 5.94 percent from a month earlier. The index marked a drop of 31.56 percent from a year ago, as no significant improvement in the supply-demand mismatch was seen, according to the association.

    It attributed the weak demand to the prolonged downward pressure on the broader economy, which posted a 7-percent growth in the first half of the year.

    As the government's pro-growth policies such as increased infrastructure spending gradually filter through, the CISA expects improving steel demand in the latter half of the year. But a substantial rebound in prices is unlikely due to high output and a severe export outlook, it added.

    Earlier statistics showed China's crude steel output totalled 476 million tonnes in the first seven months of 2015, down 1.8 percent year on year, while apparent consumption went down 5.2 percent to 420 million tonnes.

    The Chinese government has been at pains to digest production gluts from an investment boom spawned by generous subsidies in the past few years that saw producers in "favored" sectors, including steel, expand rapidly with little regard to real market demand.

    To gradually solve the problem, the government has banned new projects in steel, cement, electrolytic aluminum, flat glass and shipbuilding before 2017.

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