Mark Latham Commodity Equity Intelligence Service

Wednesday 16th November 2016
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    Dr Copper and Copper,

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    Codelco cuts China 2017 copper premium to lowest since 2009

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    Australia's EMR Capital raises $860 mln for mining deals

    Australian private equity firm EMR Capital has raised $860 million for its second fund, as it looks for more investments in copper, gold, potash and coking coal, the firm said on Wednesday.

    EMR Capital, founded by ex-OZ Minerals boss Owen Hegarty, said the fund mainly attracted North American investors and was oversubscribed, as was the company's first fund, which raised $450 million last year.

    "We are actually looking at quite a few things at the moment," said Chief Executive Jason Chang said, adding that EMR was seeing more assets available now than two years ago.

    EMR is keen to snap up copper assets given strong demand for the metal in China and India. It has looked at Glencore Plc's Cobar copper mine in Australia, among others, Chang said.

    "And we love Australia. Anything in copper in Australia we'd like to look at. So we're looking at a range of different things," he said.

    "That's one of the reasons for the rapid establishment of Fund II, because I think investors agree with us that there's a universe of interesting opportunities that we're seeing across all four commodities."

    He said the firm would also be interested in looking at Wesfarmer's Curragh coking coal mine in Australia "if it's high quality coking coal". Wesfarmers said on Wednesday that it could put its Curragh and Bengalla coal mines on the block.

    He said the recent spike in coking coal and other commodity prices was making vendors hold back on asset sales, but EMR Capital had a 10- to 12-year timeframe for its fund, so would be patient on acquiring assets.

    "We have some runway and we are very confident we can deploy (our fund) in the right timeframe," Chang said.

    The firm sees now as a good time for private funds to invest in copper, gold, coking coal and potash as capital for publicly listed companies had dried up with the earlier collapse in commodity prices, Chang told Reuters in an interview last week.

    Its first fund has invested in six assets, including the Martabe gold mine in Indonesia, a coking coal mine in Britain, a copper mine in Australia and Chile, and potash projects in Spain and the United States.
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    Russian minister held over $2m ‘bribe’

    Russian Minister of Economic Development Alexei Ulyukayev has been formally charged after being caught “red-handed” in sting over alleged bribery, according to the country’s Investigative Committee.

    The long-serving politician has also been placed under house arrest as a “preventive measure” following his detention in an early-morning raid on Tuesday in connection with the alleged receipt of $2 million in relation to Rosneft’s purchase of a controlling stake in oil producer Bashneft.

    After earlier on Tuesday revealing details of the alleged bribe and of the action taken against Ulyukayev, the Committee swiftly followed this up with a statement, issued in Russian, praising unidentified Rosneft representatives for their “timely” statement to lay enforcement authorities about the minister’s alleged “illegal actions”, alleged to have taken place on Monday.

    "Thanks to the timely treatment of representatives of Rosneft to law enforcement authorities with a statement about the [alleged] illegal actions … Ulyukayev was arrested red-handed."

    Russian Investigative Committee
    The Committee has charged him with allegedly receiving a bribe of $2 million in return for giving a “positive opinion” in his capacity as minister to the recent purchase by state-owned Rosneft of a holding just over 50% in Bashneft.

    “In this case the defendant expressed threats, using his authority and create further obstacles to the activities of the company,” the Committee said.

    “Thanks to the timely treatment of representatives of Rosneft to law enforcement authorities with a statement about the [alleged] illegal actions … Ulyukayev was arrested red-handed,” the later statement read.

    Ulyukayev, who has held the ministerial post since 2013, was a critic of the state seizing further control over assets. However, having initially been against the proposed acquisition by Rosneft of Bashneft, he then suddenly turned to being for the deal.
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    Oil and Gas

    Hedge funds turn bearish on oil at record rate

    Hedge funds turned bearish towards oil prices at the fastest rate on record in the first week of November amid growing doubts about whether OPEC will reach a successful deal to curb its growing production.

    Hedge funds and other money managers cut their net long position in Brent and West Texas Intermediate (WTI) futures and options by 149 million barrels in the week ending Nov. 8

    The weekly reduction in net long positions was the largest on record, according to an analysis of data published by regulators and exchanges.

    The sell-off in crude prices, which has been under way for three weeks, was initially led by the liquidation of stale long positions, but the most recent week saw the emergence of a heavy wave of fresh short-selling.

    Hedge funds increased their short positions across the three main crude contracts by 135 million barrels in the seven days to Nov. 8, while long positions were cut by 13 million barrels.
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    Niger Delta Avengers Claim Attack on Nembe Creek Lines

    Niger Delta Avengers Claim Attack on Nembe Creek Lines - Trunk Line has supply capacity of 300,000 barrel per day to Bonny export terminal.

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    Iranian Floating Storage Tankers Exit Persian Gulf

    During the week ending November 11, three vessels, used for floating storage in Iran, left the Persian Gulf for destinations in India and South Korea, according to Genscape. Floating storage is often used to leverage a rising oil price.

    However, Iran’s decision to start exporting from floating storage may indicate the country’s wish to take advantage of oil prices at current levels. As crude output continues to rise in parts of the world, the move may signify the country is preparing for backwardation in the oil price, where prompt prices are higher than those for future delivery.

    - See more at:
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    USGC distillate exports to Europe at 1.14 million mt in Nov to date

    About 1.14 million mt of distillates have left the US Gulf Coast for arrival in Europe and North Africa in November, according to an estimate based on Platts trade flow software cFlow.

    S&P Global Platts calculates cargo volumes based on the size of each ship and standard diesel export sizes from the US to Europe.

    In October, a total of 1.16 million mt had been tracked loading from the USGC for discharge into European and North African ports.

    This month, the 1.14 million mt are split into 28 clips, 19 of which are currently heading towards Northwest Europe including 10 towards the Amsterdam-Rotterdam-Antwerp hub.

    Of the remaining nine vessels, four -- potentially carrying high sulfur gasoil -- are expected to discharge into Algeria, Egypt and Libya. In October, no USGC cargoes were seen going into North Africa, and in September, only two were spotted discharging into Libya's Zawiyah and Tunisia's La Skhirra ports, according to cFlow.

    While a trickle of cargoes continues to make its way to Europe, the US-Europe arbitrage for middle distillates has been shut for weeks and remains unworkable this week, according to traders.

    "We're not seeing any US [product], but it was the same last month, so there's no real change on that front," a source said.

    Medium Range tanker rates on the USGC to UK Continent trip, basis 38,000 mt, fell to be assessed at Worldscale 80 ($14.16/mt) Monday, according to S&P Global Platts data, after peaking at w135 ($23.90/mt) November 1, the highest rate recorded on that route this year.

    With limited resupplies from the US and reduced flows from the East of Suez of late, the European diesel market was heard to be balanced to tight. But market participants pointed at higher Baltic exports this month and said the market may soften before the year-end, when stock holders typically try to minimize their inventories and as Eastern refineries come out of maintenance and resume exports.

    "I think the market is quite balanced. Destocking may happen and cargoes traded at a fair price," a trader said.

    Another source said: "Obviously we're seeing more volume from Primorsk but I think on top of that we're seeing more material exported from other ports -- Klaipeda, Ventspils from what I hear -- so I think the supply increase is significant from Baltic [ports]."
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    Who Will be the Next Secretary of Energy?

    Harold Hamm is the legendary CEO of Continental Resources. Hamm is, along with George Mitchell, Aubrey McClendon, and a few others, one of the original pioneers who figured out how to combine fracking with horizontal drilling to access previously-trapped oil in shale deposits.

    Hamm’s claim to fame is drilling in the mighty Bakken oil fields of North Dakota. Harold Hamm is, by all accounts, one of the biggest frackers in the world.

    Hamm addressed the Republican National Convention in July, and tongues immediately began flapping that Hamm was in line to become Trump’s Secretary of Energy if and should he win .

    We eagerly stoked those flames. We think Hamm would be a tremendous Energy Secretary. Apparently those rumors are growing stronger. Although Hamm has publicly said he’s not interested, he’s one of three names under serious consideration for the post. And if we were laying money on a bet, we’d pick Hamm…
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    Exxon in negotiations with Chad over record $74 billion fine: Bloomberg

    An airplane comes in for a landing above an Exxon sign at a gas station in the Chicago suburb of Norridge, Illinois, U.S., October 27, 2016.  Young

    Exxon Mobil Corp is negotiating with Chad over a record $74 billion fine the U.S. oil company was told to pay by a court in the central African nation over unpaid royalties, Bloomberg reported on Tuesday.

    Exxon has appealed the Oct. 5 court ruling, but the appeals court hearing has been delayed because of the talks.

    The court decision fined a consortium led by Exxon over 44 trillion CFA francs ($73.44 billion) - nearly four times BP's Deepwater Horizon settlement and roughly seven times Chad's annual gross domestic product.

    The consortium, which includes Malaysian state oil firm Petronas PETRA.UL and Chadian oil company SNT, were found to owe the country nearly 484 billion CFA francs ($808 million) in royalties, according to the court judgment.

    It did not explain why the penalty amounted to more than 90 times that amount.

    The unpaid royalties stem from a dispute over fees, sources in the Chadian finance ministry have told Reuters. The finance ministry, they said, is seeking a 2 percent royalty fee from the consortium, a rate the defendants have said is higher than the agreed level.

    Exxon did not immediately respond to a request for comment, while Petronas and SNT could not immediately be reached.
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    US shale oil production declines continue to slow

    US shale oil production declines over the past year and a half are forecast to slow to 20,000 b/d in December, down from a 30,000 b/ddrop in November, US Energy Information Administration data showed Monday.

    December's shale oil output is estimated to be at 4.498 million b/d, compared to 4.518 million b/d in November, the EIA said in its monthly Drilling Productivity Report.

    This compares to a decrease of 118,000 b/d to 4.949 million b/d over the same time period a year ago. Production peaked at 5.618 million b/d in March 2015, according to the EIA.

    But crude oil production in two of the four the main producing shales areas covered by the report, the Permian in West Texas and New Mexico, and Colorado's Niobrara are forecast to increase production, while Texas' Eagle Ford, and the Bakken Shale of North Dakota and Montana are expected to see production fall.

    The Permian is expected to increase production 27,000 b/d to 2.065 million b/d in December, while the Niobrara is forecast to raise output by 2,000 b/d to 404,000 b/d.

    The increases in those two regions would be offset by drops of 33,000 b/d to 978,000 b/d and 14,000 b/d to 918,000 b/d in the Eagle Ford and Bakken Shales, respectively.

    Greater output in the Permian has been expected by analysts due to the dramatic run up in rigs over the last six months.

    The Permian had 218 rigs operating as of last week, which is up by 86 from when the rig count bottomed out there in April this year, according to Baker Hughes.


    Efficiency gains have been a mainstay of the shale boom in the US, with producers able to squeeze out more oil per well and that does not look to slow down in December, the EIA data shows.

    The biggest increase in new-well oil production per rig is forecast for the Niobrara, which should increase by 35 b/d to 1,177 b/d.

    This is likely behind the forecast for greater production as the shale's rig count has remained fairly steady this year bouncing slightly above and below the 16 rig active last week.

    Despite productivity gains in the Eagle Ford and Bakken, they were not enough to offset the overall decline in production in those shales.

    Eagle Ford's new-well oil production per rig is forecast to grow by 27 b/d to 1,307 b/d, while in the Bakken it is predicted to increase 22 b/d to 949 b/d, according to the EIA.

    Permian productivity is expected to increase 7 b/d to 611 b/d in December.

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    A $900 Billion Oil Treasure Lies Beneath West Texas Desert - U.S. Geological Survey

    In a troubled oil world, the Permian Basin is the gift that keeps on giving.

    One portion of the giant field, known as the Wolfcamp formation, was found to hold 20 billion barrels of oil trapped in four layers of shale beneath the desert in West Texas, the U.S. Geological Survey said in a report on Tuesday. That’s almost three times larger than North Dakota’s Bakken play and the single largest U.S. unconventional crude accumulation ever assessed. At current prices, that oil is worth almost $900 billion.

    The estimate lends credence to Pioneer Natural Resources Co. Chief Executive Officer Scott Sheffield’s assertion that the Permian’s shale endowment could hold as much as 75 billion barrels, making it second only to Saudi Arabia’s Ghawar field. Pioneer has been increasing its production targets all year as drilling in the Wolfcamp produced bigger gushers than the Irving, Texas-based company’s engineers and geologists forecast.

    “The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” Walter Guidroz, coordinator for the geological survey’s energy resources program, said in the statement.

    For a look at one explorer’s Wolfcamp bonanza, click here

    Oil explorers have been flocking to the Permian Basin in West Texas and New Mexico to tap deposits so rich that they generate profits despite the 2 1/2-year slump in crude prices. A race to grab land in the Permian has been the main driver of a surge of deals in the energy patch and the industry’s main source of good news.

    Although the Permian has been gushing crude since the 1920s, its multiple layers of oil-soaked shale remained largely untapped until the last several years, when intensive drilling and fracturing techniques perfected in other U.S. Shale regions were adopted. The Wolfcamp, which is as much as a mile (1.6 kilometers) thick in some places, has been one of the primary targets of shale drillers.

    ConocoPhillips, the world’s largest independent oil producer by market value, increased its estimate for the size of its Wolfcamp holdings on Nov. 10 to 1.8 billion barrels from 1 billion last year. A day earlier, Concho Resources Inc. CEO Timothy Leach told investors and analysts on a conference call that two recent wells it drilled in the Wolfcamp were pumping an average of 2,000 barrels a day each.

    Diamondback Energy Inc. disclosed last week that it has been drilling 10,000-foot sideways wells in the Wolfcamp. Production from the wells has been as high as 85 percent crude, according to the Midland, Texas-based explorer.

    For Apache Corp., a slice of the Wolfcamp and another Permian layer known as the Bone Spring are major components of the 3 billion-barrel Alpine High discovery that the company announced in September. Chief Executive Officer John Christmann called Alpine High “a world class resource” during a Sept. 7 presentation at a Barclays Plc conference in New York.

    The Wolfcamp shale also holds 16 trillion cubic feet of natural gas and 1.6 billion barrels of gas liquids, the geological survey said in a statement on Tuesday.

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    Oil drilling in Permian matches rest of U.S.

    U.S. oil drilling activity is concentrating in West Texas’ Permian Basin. The Permian, which stretches into southeastern New Mexico, now holds nearly as many active oil rigs as the rest of the country combined, including those offshore, the U.S. Department of Energy reported this week.

    The rig count has been rising since this summer, the report shows. But the Permian began seeing rigs increase earlier than the U.S. as a whole, and is adding rigs more quickly. Of the roughly 450 total U.S. rigs, the Permian now accounts for about 220.

    Moreover, the Permian is the only region expected to increase production for the third consecutive month, the report said.

    Permian production has now crested 2 million barrels of oil per day. South Texas’ Eagle Ford oilfield and North Dakota’s Bakken have both fallen to less than 1 million barrels per day.
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    Bakken Update: Bakken Oil Production Per Well Increasing 27.3%

    Mega-Frac style wells continue to show impressive production results, with an increase of 27.3% from 2013 to 2015.

    Enhanced well designs are still in its infancy, and should continue to accelerate from a production standpoint.

    From 2014 to 2015, the number of completions decreased by 30% but oil production decreased just 16% and natural gas 1.5%.

    These improvements have been seen in all US plays and we will cover the Eagle Ford in our next submission.

    Trump is bullish the US oil industry and we expect protectionist policies will accelerate oil production growth in all US plays.

    Oil and gas has been through significant changes since the price of oil dropped from north of $100/bbl. Prices have stabilized, but volatility is expected. In the short term, prices could pull back to $40, and take the US Oil ETF (NYSEARCA:USO) with it. Longer term we think the price is moving higher. Whether the price of oil stays around $50/bbl. in 2017, or heads to $70/bbl., it is important to know the difference in operator economics. Every operator is unique with respect to costs and production, but the main identifier to success is geology.

    Geology is better understood when isolated by location. Pulling production and cost over several counties is not helpful when looking at one company. Significant changes in production can be seen from one section to the next, so it is important to know the specifics of each prospect to get an idea of value. Each prospect should be examined specifically, as this provides insight to operator viability.

    Each play has a different break-even price, but operators do not drill to break-even. Like any business, operators need to turn a decent profit. Since unconventional production produces a large amount of resource in a short period of time, an operator will not drill wells for oil prices next year. Conventional operators understood wells would produce for decades at a steady rate with low decline. Low prices do not limit these types of wells, as an operator may think prices will be higher next year.
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    Mid-sized Canadian oil and gas producers expanding spending plans for 2017

    Several mid-sized oil and gas producers operating in a range of plays have spiked their capital spending plans for next year by as much as 70 per cent.

    The beefed-up budgets signal the widely held view that 2016 marked the bottom of the oil rout, though companies remain prepared for fluctuating prices, said Jeremy McCrea, analyst with Raymond James.

    “Most companies are under the impression that oil prices will be higher than (they were in) 2016; as a result the budgets we’re seeing are reflective of that higher expected cash flow,” McCrea said.

    “With that said, though, most companies admit that prices do continue to seem extremely volatile and are still emphasizing caution with these budgets.”

    Calgary-based Whitecap Resources Inc. said Monday it would spend about $300 million on capital projects next year, an increase of 71 per cent from its 2016 capital budget of $175 million.

    The company expects to drill 187 oil wells in Western Canada, boosting annual production from the equivalent of 45,700 barrels of oil per day to 57,000 — a 25 per cent jump.

    Whitecap said in a release that it believes oil prices will remain volatile next year and has based its spending plans on West Texas Intermediate trading at US$40 to $60 per barrel.

    The mid-sized producer said it remains flexible to either reduce spending if prices weaken or accelerate capital in the second half of the year if there is a “meaningful and sustained” increase in prices.

    WTI for December delivery dipped nine cents to US$43.32 per barrel on Monday. The price of oil has fallen sharply since mid-2014, when it was over US$100 a barrel, dropping below US$30 at the start of this year.

    Other mid-sized producers are exercising similar caution.

    “(Companies) are remaining cautious with the commodity (prices) and trying to come up with prudent budgets that, even if prices deteriorate here, they won’t have to revise those budgets downward again,” McCrea said.

    Over the next three years, Whitecap plans to spend an estimated $1.2 billion, including $420 million in 2018 and $470 million a year later.

    Thomas Matthews, an analyst at AltaCorp Capital Inc., said in a note that Whitecap’s three-year spending and production growth plan is sustainable at forecast oil prices.

    If prices continue to rise, the company “will be in an enviable position to enhance shareholder returns via an acquisition, dividend bump or additional capex (capital spending) increases,” Matthews wrote.

    Painted Pony Petroleum Ltd., a Calgary-based natural gas producer, said late Sunday it plans to spend $319 million on capital projects next year, a nearly 50 per cent spike over its estimated budget for 2016.

    The company said its partner AltaGas Ltd. has fast-tracked a planned expansion of a natural gas processing facility in northeastern British Columbia, now expected to be operational in October 2017, ahead of earlier plans to build it in 2018.

    With the accelerated construction schedule for the Townsend facility, Painted Pony expects to produce the equivalent of 408 million cubic feet of natural gas per day in late 2017, a 19 per cent jump over previous expectations. It also represents a 70 per cent spike over forecast volumes for late 2016.

    Calgary’s ARC Resources reported last week it will spend $665 million next year, largely on oil and gas drilling in northern and central Alberta, and in northeastern B.C. The spending envelope represents a nearly 50 per cent jump from its $450-million budget for 2016.

    ARC Resources has targeted annual production at the equivalent of 128,000 to 133,000 barrels of oil per day in 2017.

    Enerplus Corp. on Monday announced a preliminary capital budget of $400 million, a dramatic increase from its $215-million envelope for 2016. Most of next year’s spending is expected to flow in North Dakota, where the Calgary-based company will run a second drilling rig in January.

    The oil and gas producer plans to reveal more details about its 2017 spending plan in the coming weeks.

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    Army Corps Decides Not to Make a Decision on Dakota Access Pipeline

    Army informed the Standing Rock Sioux Tribe, Energy Transfer Partners, and Dakota Access, LLC, that it has completed the review that it launched on September 9, 2016,” a press release from the Corps of Engineers states today. “The Army has determined that additional discussion and analysis are warranted in light of the history of the Great Sioux Nation’s dispossessions of lands, the importance of Lake Oahe to the Tribe, our government-to-government relationship, and the statute governing easements through government property.”

    You can read the full letter from the Corps to Energy Transfer Partners, the company trying to build the much-protested Dakota Access Pipeline, below.

    We knew some sort of a decision on the Dakota Access Pipeline was imminent. I guess what we’ve learned now is that the decision was to make no decision at all.

    It’s worth keeping in mind at this junction that the Corps had previously indicated that this easement should be issued. It wasn’t until the Obama administration intervened earlier this year that the easement was delayed.

    So this is pretty blatant political obstruction. Especially when you consider how thoroughly the tribes were consulted during the regulatory process around the pipeline. “The record shows that the corps held 389 meetings with 55 tribes. Corps officials met many times with leaders of the Standing Rock Sioux tribe, which initiated the lawsuit and the protests,” Shawn McCoy wrote in a column over the weekend.

    “The corps alerted the tribe to the pipeline permit application in the fall of 2014 and repeatedly requested comments from and meetings with tribal leaders, only to be rebuffed over and over. Tribal leaders ignored requests for comment and canceled meetings multiple times,” he continues.

    Anyway, these political delays seem like a moot point now. There are just weeks left of the Obama administration, at which point President-elect Donald Trump takes over, at which point approval of this easement seems like a near certainty.

    In the mean time North Dakota officials will continue to grapple with a protest movement that is often unlawful, and often violent, who have disrupted the life and peaceful of people in the region most of whom have nothing at all to do with the pipeline.

    Here’s the letter:
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    Alternative Energy

    Yunnan power capacity exceeds 80 GW; clean energy at 84pct

    Southwestern China's Yunnan province saw its installed power generation capacity connecting to the grid reach 80.37 GW by November 1, increasing by nearly 10 times from 8.88 GW by end-2006, showed data from Yunnan Power Grid Corp.

    Of this, clean energy capacity accounted for 84%, including 59.01 GW hydropower, 6.82 GW wind power and 1.92 GW solar power. Thermal power capacity stood at 12.62 GW.

    With rich water resources, Yunnan has made great progress in developing hydropower, with capacity surged compared with less than 5 GW in 2006.

    The province's hydropower capacity surpassed thermal capacity for the first time in 2009, signaling a successful transformation of energy mix from dirty fossil fuels to the cleaner hydropower.

    To make full use of clean energy, the Yunnan Power Grid plans to invest 20.1 billion yuan ($2.93 billion) during the 13th Five-Year Plan period to optimize and improve power transmission to end users outside the province.

    It is anticipated that Yunnan will have a power transmission capacity of 31.20 GW by 2020.

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    US energy department aims to slash costs of solar to just 2c/kWh

    How important is clever federal government policy in pushing down the costs of developing and installing renewable energy?

    In Australia, we have gone to lengths to prove it is not the only thing that matters – sheer demand and clever technology mean it gets there in the end, at least in household solar. But in the US, we have just been offered a pretty compelling reminder of how good federal policy can be a game-changer, a job creator and economic win-win.

    In an announcement that might be a last ditch effort to shore up America’s solar industry before a potentially destructive Donald Trump takes the reins in January, the Obama administration’s US Department of Energy’s has made a new commitment for its SunShot Initiative to cut the cost of solar-generated electricity by another 50 per cent between 2020 and 2030.

    The goal is to slash the cost of energy over the next decade, to bring down the average cost of utility scale solar in the US to US3c/kWh, and the cost in the sunniest areas to just US2c/kWh. That will beat any fossil fuel technology by a wide margin it makes you wonder how a president Trump could ever “save” the coal industry as he has promised.

    The SunShot Initiative was launched in 2011 “with the goal of making solar electricity cost-competitive with traditional energy sources without subsidies by 2020.” But what’s really worth noting is that in just five years the Initiative has achieved more than 90 per cent of that goal to cut the cost of utility-scale solar electricity in the US to $US0.06c/kWh.

    Today, in America, the cost of utility-scale solar averages at $US0.07/kWh. The program has also aced more than 70 per cent of its commercial and residential PV cost targets – also in just five years.

    The SunShot 2030 targets aim to double down; halving utility-scale costs again to $US0.03/kWh; and aiming for $US0.04c/kWh for commercial solar, and $US0.05c/kWh for residential.

    And as the DoE points out, these are just the targets for areas with an average climate and without subsidies. In the country’s sunnier regions, they’re looking to push prices as low as $US0.02c/kWh for utility-scale solar.

    At these prices, the DoE points to recent modelling that suggests the US could more than double the projected amount of nationwide electricity demand that could be met by solar in 2030 and beyond.

    And there’s no reason to suggest they can’t smash these new targets – Congress willing – like they did first time around.

    To support the effort, up to $25 million is being made available to improve PV module and system design, including hardware and software solutions that facilitate the rapid installation and interconnection of PV systems.

    Another $30 million will be made available for projects that accelerate the commercialisation of products and solutions that can help to drive down the cost of solar energy. And $10 million will be put aside for projects focused on improving solar irradiance and power forecasts used by utilities.

    The DoE said it was now accepting applications for the three funding opportunities under the SunShot Initiative’s PV Research and Development Program, Technology to Market Program, and Systems Integration Program.

    But will SunShot be safe under a Donald Trump administration? There has been some speculation about this since last week’s election result. But there is a level of confidence that the property tycoon’s capitalist leanings and “make America great” mantra will see SunShot for what it is: a policy success story.

    “The focus of the Sunshot initiative is to help the American solar industry and companies to reduce their costs to make them more competitive,” said Christopher Mansour, vice president of federal affairs for America’s Solar Energy Industries Association (SEIA), in an interview with PV Magazine last week.

    “That’s a kind of a pro-Capitalist thing that the federal government get involved in.”

    While Trump doesn’t put solar in the same basket with wind (hates it), one of his main quibbles with PV is that it’s “too expensive” – a complaint he shares with some of Australia’s leading Conservative politicians.

    But Mansour is confident this misconception can be cleared up.

    “Part of our job has been is to talk with people on (Trump’s) campaign and his transition, to really point out that this is information that he has which may be a little bit out of date. That costs have come down tremendously, and we anticipate that they are going to continue to come down. We are competitive, and we are getting more competitive by the day,” Mansour told PV Magazine.

    “I think that once we have an opportunity to talk with his people and talk with his incoming team a little bit more, and show him that this is a giant job creator for the United States.

    “We are going to go from having 209,000 Americans working in solar from the end of 2019 to 400,000 by the end of 2020. These are good-paying jobs that are attractive to a lot of American workers. I am very confident they will see the advantages of current policy, and where it is helping the solar industry grow.”
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    GE forges ahead with world’s first wind + hydro + storage project

    Trump or no Trump, the global clean energy train has left the station. A case in point is a new wind, hydropower, and energy storage collaboration between US-based GE and Germany’s Max Bögl Wind AG. The project is on track to connect its four wind turbines to the grid next year, with the hydropower component coming online in 2018.

    The project represents an innovative combo of two different forms of renewable energy with an energy storage bonus thrown in.

    Wind turbines and real estate

    GE dropped a bit of a clue regarding one aspect of the project a couple of years ago, when it introduced its “space frame” turbine tower.

    The company invited me to take a sneak peek of its prototype in California on behalf of CleanTechnica, and one thing I learned is that GE was beginning to think of wind turbine towers in terms of their footprint.

    Our guide on the tour pointed out that the hollow design of the turbine tower provides the potential for piggybacking other uses inside the frame. 

    That’s a lot of useful space, right? The polyvinyl cladding allows daylight to filter through, so you could imagine indoor farming among many other options.

    Wind power and energy storage

    GE’s new project takes the piggyback idea to a whole new level.

    The project is located at the Gaildorf wind farm. It includes four wind turbines with a combined capacity of 13.6 megawatts. The base of each turbine will double as a water storage reservoir, for a total of 1.6 million gallons (to be clear, these are not GE space frame towers — for obvious reasons, they are fully enclosed).

    These storage units will interact with a nearby lake with a 9 million gallon capacity, and a 16 megawatt hydropower plant. In effect, the turbines will act as giant batteries and provide an opportunity for the hydroplant to operate economically:

    During times of peak demand and high electricity prices, the hydro plant will be in production mode. During times of low electricity demand and lower prices, the hydro plant will be in pump mode, pumping and storing water–and hence energy–in the upper reservoir for later use.

    To ice the renewable energy cake, the added storage raises the height of each turbine tower by 40 meters.

    The end result is a “record-breaking” height of 246.5 meters, making these turbines the tallest in the world.

    GE will contribute its new 3.4-137 (3.4 megawatts, 137 meter rotor diameter) wind turbines to the project. That includes the company’s Digital Wind Farm platform with Predix* software to maximize efficiency.

    For those of you new to the wind energy topic, stronger, more consistent winds are located at higher altitudes. So, the taller the wind turbine, the better.

    When the wind is blowing strong, excess energy from the turbines will go directly to the grid. During lulls, the hydropower plant will draw additional water from the turbine towers as needed.

    Onward And Upwards For Pumped Storage

    Compared to other forms of energy storage, conventional pumped hydro has a limited opportunity for global application. Geography is the main limiting factor because two reservoirs are required, and one must be located higher up than the other.

    The innovative approach offered by the GE – Bögl collaboration expands those opportunities to more sites, where an in-ground upper reservoir is otherwise unfeasible.

    According to GE, Bögl is already anticipating that it will engage in one or two similar projects in Germany annually after the Gaildorf project goes online.

    As for GE, the company’s GE Renewable Energy arm has been front and center in the clean energy revolution, especially in the area of wind turbine technology.

    The company positioned its wind turbine business to take full advantage of the federal Production Tax Credit for wind, and now it has been expanding into the wind transmission sector.

    GE recently got back into the high voltage converter business after a 20-year hiatus, just in time to hook up with the proposed 720-mile Plains & Eastern wind transmission line. The company will provide three converter stations for the project, which also has the support of the Energy Department.

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    Base Metals

    Chilean mining costs highest in the world, despite saving measures

    Mining costs in Chile, the world’s No. 1 copper producer, were among the highest in the world last year even though most companies spent 2015 cutting expenses and placing projects in the back burner, a new study released Monday shows.

    Data from the Mining Council, which groups the largest copper, gold and silver miners operating in Chile, reveal that production costs in the country last year were 5.4% higher than its global peers’ average.

    Production costs in Chile, the world’s No. 1 copper producer, were 5.4% higher last year when compared to its global peers’ average.

    Mine level cash costs in the country that is responsible for nearly 6 million tonnes of global annual copper production of 21 million tonnes fell last year to an average of $1.3 per pound, local paper El Mercurio reports. In the rest of the world, the average was between 82 cents to $1.05 per pound.

    The news comes as a bit of shock for the industry, as the costs of mining copper in Chile last year maintained the downward trend they had been following since 2013, reaching $2.16 per pound, which is about 3.5% less than the $2.24 they hit in 2014.

    But the South American nation has also been hit by high energy costs, which threatens the competitiveness of the country's copper industry and poses a major challenge for new developments.

    Electricity costs in Latin America’s wealthiest economy have climbed 11% per year since 2000, making it one of the most expensive places in the world to secure energy for mining projects.

    And while the nation has the world's richest reserves of copper, grades are falling at its massive but aging copper mines, making it difficult to maintain output and putting pressure on costs.

    Better times ahead

    The future is suddenly looking brighter, with many analysts forecasting a spike in copper prices as the market begins to enter a supply deficit expected to kick off in 2021.

    Copper market is poised to enter a "substantial" supply deficit from 2021 onwards, pushing prices of the industrial metal higher.

    "In the near term, mining companies are not investing in additional capacity and copper demand is growing at a pace of around 2 percent a year," the head of Chile's national mining association Sonami, Diego Hernández, said Monday.

    Speaking at the Copper 2016 industry conference in Kobe, Japan, Hernández said that supply growth will likely begin to drop from around 2019 and the market will face a “substantial deficit” in the next decade, coinciding with a demand recovery.

    He noted that such demand and, therefore, copper price increase will be driven population growth and urbanization in China and other emerging countries, and less fossil fuel use amid climate change, Reuters reports.

    Copper briefly surpassed $6,000 a tonne last week and headed for the biggest weekly rally ever as the metal became the target of Chinese speculators and bets that US President-elect Donald Trump will pour money into infrastructure.

    Goldman Sachs analysts cautioned in a report Monday that such rally is coming "too much too fast," because the impact of Trump's infrastructure plan (he promised a "$1 trillion over a 10-year period" in his victory speech) on global demand was tiny compared to that of China.

    Overall, US copper and steel demand shifts would represent just a 0.4% increase in total demand, with all else constant, the analysts noted.
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    Lundin Mining to sell stake in Tenke mine owner for $1.14 billion

    A view of processing facilities at Tenke Fungurume, a copper and cobalt mine 110 km (68 miles) northwest of Lubumbashi in Congo's copper-producing south, owned by miner Freeport McMoRan, Lundin Mining and state mining company Gecamines, January 29, 2013. REUTERS/Jonny Hogg

    Canada's Lundin Mining Corp (LUN.TO) said it would sell its indirect stake in TF Holdings Ltd to an affiliate of Chinese private-equity firm BHR Partners for about $1.14 billion in cash.

    Bermuda-based TF Holdings owns an 80 percent interest in Tenke Fungurume Mining SA. Lundin owns an indirect 30 percent stake in TF Holdings, resulting in an effective 24 percent interest in Tenke.

    The Canadian miner said it could also get up to $51.4 million based on the average prices of copper and cobalt during a 24-month period beginning Jan. 1, 2018.

    Freeport McMoRan (FCX.N) holds a 56 percent stake in the Tenke Fungurume copper and cobalt mine, through its 70 percent stake in TF Holdings. Congo's state miner Gecamines owns the remaining 20 percent.

    Lundin, which primarily produces copper, nickel and zinc, said in connection with the deal, it will waive its rights to acquire Tenke mine operator Freeport's stake in TF Holdings.

    In May, Freeport agreed to sell its majority stake in the Tenke mine to China Molybdenum Co (603993.SS) for $2.65 billion to reduce debt.

    Lundin had no option but to either allow the China Moly deal to proceed, supplant the offer, or sell its stake.

    Lundin's agreement to sell its stake comes on the deadline it was given to exercise its right to first offer, after which Freeport said the sale to China Moly would go through.

    Tenke Fungurume, in the southern Congolese copper belt, is one of the world's largest copper deposits.

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    Congo awards payments from Glencore mine to Kabila’s friend

    The Democratic Republic of Congo’s State-owned copper producer signed over millions of dollars in future payments to an offshore company owned by billionaire Dan Gertler, according to advocacygroup Global Witness.

    Congo’s Gecamines, which holds a 25% stake in the Kamoto project of Katanga Mining , instructed the Glencore unit in January 2015 to transfer the state mining group’s royalties to Africa Horizons Investment , Global Witness said Tuesday by e-mail. Africa Horizons is a unit of Gertler’s Fleurette Group.

    “The contract we have seen provides no reason for Gecaminesgiving away these royalties,” Pete Jones, a campaigner at the London-based advocacy group, said in the statement. “Neither Gecamines nor Gertler’s representatives have told us whether Gecamines received any payment in return.”

    Africa Horizons bought the royalty stream from Gecamines, Fleurette said by e-mail, while declining to elaborate on the particulars of the deal, citing a confidentiality agreement.

    Gecamines said it couldn’t comment in response to e-mailed questions.


    Glencore was contented with the arrangement to pay Gecamines’s royalties to Africa Horizons, the company said by e-mail. It took “reasonable measures in accordance with its procedures to satisfy itself that the sale was authorised by Gecamines and that there was an underlying basis for the sale.”

    Gecamines has faced criticism in the past five years from the International Monetary Fund and advocacy groups including Global Witness for selling assets in non-transparent procedures. In April, it sold its 25% share of Eurasian Resources Group’s Metalkol tailings project without disclosing the transaction, as required by law.

    The Congo expelled two researchers with Global Witnessfrom the country in July.

    A close friend of President Joseph Kabila, Gertler has operated in Congo for almost 20 years. He originally traded in rough diamonds before buying stakes in copper, cobalt, gold and oil projects.


    The Kamoto copper project was the country’s third-biggest producer in 2014, shipping 158 026 metric tons and paying more than $63-million in royalties to Gecamines, according to declarations made to the Extractive Industries Transparency Initiative.

    The potential royalties for Gecamines over the lifespan of the mine, which could produce until at least 2030, could have been as much as $880-million, Global Witness said. Fleurette said this figure was inflated and that the contract only provides for Africa Horizons to receive the royalty stream until “early 2019.”

    “Independent international financial institutions advised both sides, and the transaction was priced in accordance with the valuations provided to the parties,” according to Fleurette’s e-mailed statement.

    Glencore suspended operations at the mine in Sept. 2015 to invest in modernizing processing facilities and production will restart in 2018. The shutdown means Africa Horizons doesn’t expect to receive any further payments from the royalty agreement before the end of the contract in 2019, Fleurette said, and declined to explain the reasons behind the arrangement, the total value of the contract or what Gecamines had received in return.


    In 2013, Fleurette was in advanced negotiations to acquire Gecamines’ stake in the Kamoto project before the deal was blocked by the government, which criticized the state-owned miner for not informing the Ministry of Mines or Ministry of Portfolio of its intentions and questioned the reasons for the proposed sale.

    Earlier in 2013, Fleurette loaned Gecamines $196-million to acquire the untapped Deziwa and Ecaille C miningconcessions, which it now plans to develop in a joint venture with China Nonferrous Metal Mining Group. Information regarding the loan only became public in April 2014.

    Fleurette said it stood to suffer a “huge loss” on the royalty transaction due to the suspension of production at Kamoto and declined to confirm whether the deal was intended as repayment for the Deziwa loan.

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    Prominent Hill life extended to at least 2028

    Copper and gold miner Oz Minerals has released a new mine plan for its Prominent Hill operation, in South Australia, which will see the mine operate through to at least 2028.

    The company told shareholders on Tuesday that underground production at Prominent Hill would increase from a rate of between 2-million and 2.2-million tonnes a year, to between 3.5-million and 4-million tonnes a year by 2019, with mining costs projected to be in the bottom-half of the cost curve.

    The increase would see the Prominent Hill processing plant continue to operate at the current capacity of up to ten-million tonnes a year until mid-2023, by processing stockpiles and underground ore, prior to running full time at a milling capacity of between 3.5-million and 4-million tonnes to 2028.

    Oz Minerals CEO Andrew Cole said that the projected capital costs to de-rate the plant to the lower 4-million-tonne-a-year capacity was expected to be some A$5-million.

    Cole said that the new mine plan provided a definitive statement about the strong future of the Prominent Hill operation.

    “This is a long-life asset that will continue to deliver revenue as proposed new projects come on stream. The mine life extension to at least 2028 directly benefits local communities and shareholders. It will boost the region’s economic development and refutes any perception that Prominent Hill faces a short-term future.”

    Cole said that given Oz Minerals was continuing resource to reserve conversion drilling, there was also the potential for further extensions to the timeline.

    “While the openpit will ramp down, the ore stockpiles we continue to build and the growth in our underground mining operations will see Prominent Hill remain one of Australia’s largest sources of copper.”

    Meanwhile, Oz Minerals reported a 40% increase in the underground ore reserves at Prominent Hill, driven by ongoing drill programmes, mine planning initiatives, and a reduction in the cut-off grade.

    The project is estimated to host a total copper mineral resource of 148-million tonnes and 25-million tonnes of goldresource, while copper and gold reserves are estimated at a combined 75-million tonnes.
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    Steel, Iron Ore and Coal

    Russian Jan-Oct coal output, exports rise

    Coal-rich Russia produced 314.56 million tonnes of coal over January-October this year, a year-on-year rise of 4.45%, showed data from the Energy Ministry of Russian Federation.

    The country's coal output in October dropped by 4.38% on year to 33.19 million tonnes, the second fall compared with the same month last year. But the volume was up 4.40% from September's 31.79 million tonnes.

    During the first ten months of the year, the Asian country exported 135.77 million tonnes of coal, increasing 7.81% compared to the corresponding period a year ago.

    Its coal exports stood at 14.68 million tonnes in October, rising 10.84% from the year-ago level and up 5.64% from 13.90 million tonnes in September.

    Coal output and exports of Russia in 2015 totaled 371.67 million and 151.42 million tonnes, respectively.

    The country planned to increase coal production in 2016 by 10 million tonnes, while the increase of coal exports will also be around 10 million tonnes, said Deputy Energy Minister Anatoly Yanovsky in June.
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    Vietnam Oct coal imports surge 46pct on year

    Vietnam imported 1.17 million tonnes of coal in October, increasing 46.4% on year and up 42.3% on month, showed customs data released on November 14.

    Australia was the largest exporter to Vietnam with 498,272 tonnes in October, up from zero a year ago. Russia followed with exports of 262,177 tonnes to Vietnam, up 102.1% on year. The third biggest supplier was Indonesia, exporting 232,007 tonnes, down 24.4% from a year ago.

    Vietnam's total coal imports soared 131.4% on year to 11.68 million tonnes over January-October.

    Of that, Vietnam imported 3.73 million tonnes from Australia, up over four times from the previous year. Followed was Russia with 3.34 million tonnes, up 3.8 times from a year earlier. Indonesia exported 2.24 million tonnes of coal to Vietnam, up 45.3% from a year ago.

    Vietnam's coal exports fell 16.3% on year to 96,397 tonnes in October, adding up to 827,525 tonnes over January-October, down 46.2% from the year before.
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    Rio gives Christmas gift to itself and the iron ore market

    There are two ways of looking at Rio Tinto's decision to close one of its major iron ore mines over the Christmas period: to take the company's explanation of operational reasons at face value or to see the move as part of a wider strategy.

    Rio told its employees at the Hope Downs 4 mine in Western Australia that it would close the operation for two weeks at the end of the year.

    The 440 workers affected can either take leave, bring forward leave or apply for shifts at Rio's other mines in the remote region of Western Australia, the Australian Financial Review (AFR) reported.

    The reason for the closure was that the mine will have achieved its annual production target early, with the email expressing congratulations "on a fantastic effort throughout 2016 as we safely deliver our planned production at the right cost", the AFR said.

    The face value explanation of Rio's move is quite simple: the mine has achieved its goals and extra output isn't needed at the current time.

    There is also the likelihood that Rio's rail and port capacity wouldn't be able to handle the extra tonnes mined should Hope Downs 4 continue operating as usual over the festive season.

    The face value explanation is certainly plausible, however, it also pays to consider the wider dynamics at work in the iron ore market in order to put Rio's decision into context.

    Iron ore has enjoyed a stellar year, with the spot price almost doubling so far in 2016, notwithstanding a sharp drop on Tuesday as profit-taking finally hit the market.

    Iron ore futures in China, which buys about two-thirds of seaborne supplies, have also rallied hard this year, jumping 161 percent since the end of last year to Tuesday's close of 617 yuan ($90) a tonne.
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    US sheet steel market surprised by third wave of price hikes

    The US sheet steel market was abuzz because of multiple mill price increases on sheet products as well as zinc coating extras, but with the announcements so fresh, buyers on Tuesday could not be sure if the third round of price hikes would be successful.

    Nucor and AK Steel increased sheet prices $40/st on Tuesday, independently following a similar increase by ArcelorMittal USA establishing minimum base pricing of $560/st on hot-rolled coil and $780/st on cold-rolled coil and hot-dip galvanized sheet substrate. USS Steel also increased its quotes, according to market sources.

    A mill source said the other two price increases probably pulled forward demand.

    Two service centers and an end-user agreed that they placed extra orders when they perceived the market bottomed and probably would not have to place any substantial spot orders for the rest of the year.

    The mill source admitted that the price increases were supply driven and meant to recoup increased costs, but that they were not justified by bolstered demand. Even the mill source was surprised by the third round of price hikes.

    "We thought maybe a third round would be after Thanksgiving. This is almost like a back-to-back announcement," he said.

    In the week of November 7, mills announced $30-$40/st price increases.

    The price increases are justified by higher met coal and iron ore prices, another mill source said.

    "With the low level of imports expected in the near term, and low service center inventory, there isn't a lot stopping mills from continuing to increase price unless automotive slows more than expected or mills rush to bring capacity online," he said.

    One service center source said he was surprised that CRC and galvanized sheet have maintained about a $200/st spread over HRC.

    "You would think that gap between HR and coated would have started coming down because automotive seems to be really softening," he said.

    An end-user said even though mills have been aggressive in pushing these price increases, they were still proactively calling customers, trying to get them to commit to larger volume orders.

    Another service center said mini-mills have been able to be a little more choosy with their sales for December and are not competing as aggressively on price as they were before.

    The mini-mills have been pretty firm about the prices last week, the source said, and the price increases Tuesday will help to cement even higher prices.

    With little buy-side interest on Tuesday, S&P Global Platts maintained its daily HRC and CRC assessments at $500-$520/st and $700-$720/st, respectively.

    Both assessments are normalized to an ex-works Midwest (Indiana) basis.
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    Nippon Steel to pass extra coking coal cost on to customers

    Nippon Steel & Sumitomo Metal Corp, the biggest steelmaker in Japan, expects coking coal prices to stay at $250-$300/t for the next three months after nearly quadrupling this year, Reuters reported on November 15.

    The price of the key steelmaking material has surged as China, the world's biggest coking coal producer, has cut supply to curb overcapacity and pollution.

    Premium hard coking coal prices in Australia, which dominates global exports, rose to $307.2/t last week, up from about $85/t at the beginning of June.

    "Unless China softens its cap on coking coal output or U.S. coal export starts to surge, coking coal prices are likely to remain high," said Toshiharu Sakae, executive vice president of Nippon Steel.

    "We plan to slash our expenses by 60 billion yen ($557.78 million) or more this financial year (to March 31), but this high coal price is too much for us to absorb by our efforts to cut costs," Sakae said.

    Nippon Steel is determined to pass on about 80% of the extra coal cost in price hikes to customers, which will be supported by improving demand.

    With automakers and construction firms as key customers, the firm could be forced to lower profit targets if it failed to implement price hikes.

    Early this month, Nippon Steel posted a plunge in profit for the six months to September, hit by lower steel prices and less competitive exports amid a higher yen. But it surprised investors that it stuck to its annual profit target while the higher material costs have led others to cut theirs.

    The firm's full-year outlook first issued in July is based on an assumption that the coking coal price will stay flat at $200/t over January-March next year, the price agreed between it and Peabody Energy last month as the October-December coal benchmark.
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