Mark Latham Commodity Equity Intelligence Service

Monday 26th October 2015
Background Stories on

News and Views:

Attached Files


    BHP seen approaching an M&A ‘sweet spot’ in hunt for deals

    BHP Billiton Ltd. is snapping up oil-exploration prospects from the U.S. to Australia and flagged this week that it’s seeking to make more similar investments. There’s speculation it’ll also target deals for operating wells and mines.

    BHP confirmed Wednesday it secured about 13,000 square kilometers (5,000 square miles) for petroleum exploration off the Western Australia coast and had been awarded leases in the Gulf of Mexico. The Gulf purchase came after it made high bids worth about $16.3 million in an August sale, according to the Bureau of Ocean Management. It signed a farm-in and operating agreement in July to take a controlling interest in an Australian exploration block with Cnooc Ltd., China’s biggest offshore oil and gas explorer.

    The company is pursuing high-quality oil plays in the deepwater Gulf, the Caribbean and Beagle sub-basin in Western Australia, it said in a 

    BHP was among companies that entered the final round of bidding to buy a stake in Barrick Gold Corp.’s Zaldivar copper mine in Chile, people familiar with the matter said in June. Antofagasta Plc in July agreed to buy a 50% interest in the asset for about $1 billion.

    As distressed competitors are forced to sell quality assets, dealmaking may be the logical next step for BHP as it manages the commodities rout, Lennox said. “In terms of the sequence of this low commodity price cycle, they’ve done all the right things,” he said. “When you’ve got through all of that and have a balance sheet in relatively good shape, then what’s left? Mergers and acquisitions.”

    Attached Files
    Back to Top

    China cuts interest rates to spur growth

    China has cut interest rates for a sixth time in a year to spur slowing growth  in the world's second-largest economy.

    The central bank on Friday also increased the amount of money available for lending by reducing the amount banks are required to hold in reserve.

    The bank said the benchmark rate on one-year loans will fall by 0.25 percentage points to 4.35 per cent effective Saturday.

    The benchmark rate for one-year bank deposits will be reduced by the same margin to 1.5 per cent.

    Economic growth in the latest quarter declined to a six-year low of 6.9 per cent, according to official data.

    Back to Top

    Oil and Gas

    Russia offers gas, oil swap deals to Iran

    Russian Energy Minister Alexander Novak said on Friday Kremlin-controlled gas producer Gazprom has offered gas supplies to Iran under a swap arrangement, and similar oil deals were also under consideration.

    Moscow has boosted efforts to foster political and economic ties with Tehran and increased its activity after a decision in July to lift international sanctions on Iran in principle. The ending of sanctions, related to Iran's nuclear programme and including restrictions on oil exports, have yet to take effect.

    Novak said Iran normally supplies gas to its northern regions from the south of the country and the proposed swap deals would help to cut its transportation costs.

    "We could supply gas through to Iran's north and receive gas from the south (of Iran) via swap deals in the form of liquefied natural gas or pipeline gas," Novak told Russian state-run TV Rossiya-24.

    "Similar swaps could be done with oil. This is a reduction of transportation costs. Our colleagues have given a positive response to the idea," he added.

    Iran is keen to recover oil market share it lost as a result of the international sanctions.
    Back to Top

    Gazprom Said to See Its Lowest Europe Gas Price in 11 Years

    Gazprom PJSC, the world’s biggest natural gas exporter, is planning for the lowest price for its fuel in its main European market for more than a decade.

    The state-run exporter is drafting its budget for 2016 with preliminary estimates for gas prices outside the former Soviet Union of about $200 per 1,000 cubic meters ($5.45 a million British thermal units), said two people with direct knowledge of the matter who asked not to be identified because the information is private. That compares with the company’s estimate of an average price for the region, which covers Turkey and Europe outside the Baltic States, in 2015 of about $238 per 1,000 cubic meters and $349 last year.

    The company’s press office declined to comment on estimates.

    Gazprom, which supplies about a third of Europe’s gas and relies on exports of the fuel for 40 percent of its annual revenue of more than $100 billion, is facing declining prices abroad as most of its contracts are linked to oil with a time lag of six to nine months. Brent crude has lost 16 percent this year after a 48 percent drop in 2014. The company is also facing increased competition as the U.S. prepares to export its first liquefied natural gas from the Gulf Coast.

    “Gazprom’s forecasts look reasonable,” Alexei Kokin, an energy analyst at UralSib Financial Corp. in Moscow, said by phone Friday. Russia has the capacity to maintain its market share in Europe given lower prices next year even amid the predicted glut in LNG, he said.

    The Moscow-based company is set to this year note its lowest revenue outside the former USSR in a decade in dollar terms. Sales in rubles may rise to a record, reflecting a 2.2 percent weakening of the Russian currency against the dollar this year, following a 46 percent drop last year.

    Exports to the region are expected to stay stable at about 160 billion cubic meters (5.6 trillion cubic feet) in 2016 with revenue in rubles declining but still near the average of the past few years, according to one of the people.

    Attached Files
    Back to Top

    Pre-salt breakeven at $48

    By Francisco Marcelino

    Brazil’s pre-salt oil reserves are viable even with oil prices at $48 per barrel, as Petroleo Brasileiro
    SA has gained scale, Solange Guedes, the head of exploration and production of the state-owned company, told O Estado de S.Paulo.

    Petrobras, as the oil producer is known, has reduced its per-barrel production costs by 11 percent in the past year, Guedes said in an interview conducted via e-mail on Oct. 23 and published Sunday by the Sao Paulo-based newspaper. The company’s well construction costs dropped by about half in the past five
    years, O Estado said, citing Guedes.

    Guedes also said that Petrobras is renegotiating contracts with suppliers to reduce operating costs, according to O Estado.

    Attached Files
    Back to Top

    Cheniere: We won't compete with Russia

    U.S.-based Cheniere Energy doesn't believe it will become Europe's leading liquefied natural gas (LNG) player despite bullish export plans.

    The company, headquartered in Houston, is at the forefront of what is being called a U.S. energy renaissance with plans to churn out its first batch of LNG for overseas shipments in the next few months.

    Export production volumes at its Sabine Pass export terminal are expected at 27 million metric tons per year (mmtpy), a number set to rise to 60 mmtpy by 2025. That's sparked market talk of whether Cheniere could overcome Russia to become Europe's leading supplier once it begins exporting to the region. Gazprom, Russian state-owned company, currently supplies more than 30 percent of Europe's gas.

    But CEO Charif Souki remains cautious, for now.

    "Russian gas will still be the dominant player in Europe," he said at the Singapore International Energy Week conference on Monday.

    "Cheniere's entry into Europe won't dent [LNG] prices there…I don't see us as price makers."

    But European nations are already courting Cheniere in an attempt to wean themselves off Russian supply. Earlier this month, Lithuania's Energy Minister Rokas Masiulis announced it was in talks with the U.S. firm regarding potential imports.

    "We would love to have U.S. cargo in our region to have competition with Gazprom. But of course negotiations will depend on price terms," Masiulis told Reuters.

    Cheniere's shipments are likely to start in January, with natural gas supplies due to arrive at its LNG plant later this year, Souki said on Monday.
    Back to Top

    Govt rejects Cairn appeal to renew Rajasthan block deal

    Image Source: Economic TimesEconomic Times reported that the government has rejected the Cairn India's plea to renew the contract for the prolific Rajasthan block with the existing terms and conditions and has asked for the investment plan for the renewal period to assess the extent to which the state's share of profit can be raised.

    Cairn India, controlled by billionaire Mr Anil Agarwal, is seeking to extend the contract to operate the oil and gas block in Barmer, Rajasthan, by 10 years after the 20-year agreement runs out in 2020.

    Cairn owns 70% in the joint venture that manages the Barmer block, responsible for nearly one-fourth of India's local oil production, with state-run Oil and Natural gas Corp (ONGC) owning the balance.

    The company has been lobbying the government for about two years for an early extension, arguing a clarity on this would make it easier for them to plan future investments. It has also argued against any suggestion of alteration to the terms of the contract.

    A senior government official said that "Legally, we can change the terms of the contract if we choose to extend it. We will take a call on the new terms of the contract only after the company shows us their investment plan and output projection for the block."

    Attached Files
    Back to Top

    Galp Energia beats forecast with 49 pct rise in third-quarter profit

    Portugal's Galp Energia posted a stronger-than-expected 49 percent rise in adjusted quarterly net profit on Monday, boosted by higher refining margins and a steep increase in oil output in Brazil.

    Galp said that after pumping a record 45,700 barrels of oil equivalent per day in the third quarter, production has increased further lately to surpasss the 50 kboepd milestone as the giant Lula/Iracema oilfield off Brazil was pumping more crude than initially expected.

    The third Lula/Iracema oil platform off Brazil's coast should reach a plateau during this quarter, ahead of schedule, the company said. Another platform at Lula/Iracema was ramping up production after an early start in July, while two more platforms were on track to be deployed in the first quarter of next year, it said.

    Galp reported a net profit of 180 million euros ($199 mln) in the July-September period. Earnings before interest, taxes, depreciation and amortization (EBITDA) rose about 9 percent to 411 million euros. The results are adjusted to reflect changes in the company's stocks of crude.

    Analysts polled by Reuters had forecast, on average, an adjusted net profit of 153 million euros and EBITDA of 415 million euros.

    Galp's refining margin rose to $6.7 per barrel from $4.7 a year ago, following global trends amid a fall in crude prices. Galp's sales were also helped by recovering demand for fuel in Portugal and Spain.

    The company said earlier this month that oil output rose by nearly 44 percent in the third quarter.
    Back to Top

    Petronet pays hefty demurrage as PSUs refuse costly gas import

    Petronet LNG Ltd, India’s biggest liquefied natural gas importer, is shelling out INR 400 crore every quarter in demurrage charges for ships idling because of its PSU buyers refusing to buy expensive imported gas.

    The company is taking only 68 per cent of the volumes it agreed to in 25-year contracts with RasGas of Qatar after a slump in global energy prices led to gas being available in spot or current market a roughly half that rate.

    Senior officials said that state-owned GAIL India Ltd, Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL) have committed to buy all of the 7.5 million tonne a year of LNG Petronet is to import from Qatar. But with slump in global prices, they have opted to buy gas from spot market rather than use the long—term LNG.

    The reduced offtake by the buyers forced Petronet to cut its purchase from RasGas. This resulted in idling of three cryogenic ships it had chartered hired for ferrying gas in its liquid form at sub—zero temperatures from Qatar to its import terminal at Dahej in Gujarat.

    An official said that “The cut in volumes has meant that on an average one out of the three ships is idling.”

    But as per charter hire conditions, Petronet continues to pay the day rates.

    Official said that “The demurrage charges come to about INR 400 crore per quarter.”

    While LNG in the spot market is available at USD 7-8 per million British thermal unit, the price of gas under the long-term contract with RasGas is close to USD 13 per mmBtu.

    Pricing of LNG under the long-term deal is linked to the previous 12-month Japan Crude Cocktail (JCC), including caps and floors based on average JCC prices of the past 60 months.

    Petronet had hired two LNG tankers of 138,000 cubic meters capacity and one tanker of 155,000 cubic meters capacity from a consortium of shipowners led by Mitsui OSK Lines Ltd of Japan for transportation of 7.5 million tonne per annum of LNG from Qatar to Dahej.

    The time-charter agreement is valid till April 30, 2028.

    The two 138,000 cubic meters ships were hired at a dayrate of USD 68,900 while the bigger one charges USD 72,880 a day.

    Attached Files
    Back to Top

    Brazilian panel approves report clearing Petrobras of wrongdoing

     A final report approved by a Brazilian congressional panel investigating corruption at state-run oil company Petrobras has blamed suppliers and rogue employees for the graft, rather than politicians or the company.

    The committee's final report did not criticize any politicians, including those closely associated with Petrobras, such as President Dilma Rousseff, who was chairwoman of the company's board when much of the corruption happened.

    It also spared Eduardo Cunha, the speaker of the lower house who is under investigation by police and prosecutors for alleged corruption.

    Rousseff, who is facing a possible impeachment battle, has not been charged or accused by police or prosecutors of any criminal wrongdoing.

    The report, which followed eight months of investigation and was approved by a vote of 17 to 9 with one abstention, also denied "institutional corruption" existed at Petroleo Brasileiro SA, as the company is formally known.

    Five amendments attempting to alter the text were rejected.

    The report has been criticized for failing to censure any politicians or two previous Petrobras chief executives.

    Approval of the report comes the week after Brazil's government said Swiss authorities froze $2.4 million in accounts held by Cunha.

    Federal prosecutors are investigating Cunha over allegations made during plea bargains that he received a $5 million bribe as part of the Petrobras corruption scheme.

    Cunha, who is a member of Brazil's Democratic Movement Party, part of the ruling Workers' Party-led coalition, previously told the committee he had no Swiss bank accounts.

    The committee's official rapporteur, Luiz Sergio Nóbrega de Oliveira, a member of the Workers' Party, said his panel received no proof Cunha had bank accounts abroad.

    The final report criticizes police and prosecutors handling of the Lava Jato or "Car Wash" probe into contract fixing, bribery and political kickbacks at Petrobras.

    The report also criticizes the use of "an excess" of plea-bargains in exchange for reduced sentences to win confessions from key players in the case. The report says there was no proof that money was diverted from Petrobras projects to politicians.

    Brazil's plea-bargain law requires that cooperating witnesses provide evidence as well as testimony in order to receive reduced sentences.
    Back to Top

    U.S. oil drillers slow pace of rig cuts -Baker Hughes

    U.S. energy firms reduced oil rigs for an eighth week in a row this week but slowed the rate of those cuts to just one rig, data showed on Friday, a sign some drillers may soon return to the well pad with hopes of rising crude prices in the future.

    The total rig count for the week ended Oct. 23 fell to 594, the least since July 2010. Over the past eight weeks, drillers cut a total of 81 rigs, oil services company Baker Hughes Inc said in its closely followed report.

    The reduction this week was the lowest since drillers started cutting rigs at the start of September after adding 47 rigs over the summer. Drillers decided to add the rigs over the summer during the spring when crude prices averaged $60 a barrel in May and June.

    U.S. oil futures this week however have lost over 5 percent to average $45 a barrel, sliding for a second straight week, on continuing oversupply concerns even as China's latest interest rate cut raised hopes for stronger demand from the world's top energy consumer.

    The total count this week is less than half the 1,595 oil rigs in the same week a year ago. Since hitting an all-time high of 1,609 in October 2014, weekly rig count reductions have averaged 19.

    With natural gas rigs up one to 193 this week, the total oil and gas rig count held at a 13-year low, according to Baker Hughes.

    The rig count is one of several indicators traders look at in trying to figure out whether production will rise or fall over the next several months. Other factors include how fast energy firms complete previously drilled but unfinished wells and rising well efficiency and productivity.

    Despite the overall decline in oil rigs, drillers added rigs in two of the four major U.S. shale oil basins this week. They added three in the Niobrara in Colorado and Wyoming and one in the Eagle Ford in South Texas, but removed three in the Permian in West Texas and eastern New Mexico. There were no changes in the Bakken in North Dakota and Montana.

    On a weekly basis, the amount of U.S. oil pulled out of the ground has remained about 9.1 million bpd since the start of September, according to EIA's weekly field production report, well below the 9.6 million-barrel per day peak seen in April.
    Back to Top

    Cabot reports Q3 loss

    Cabot Oil & Gas Corp. on Friday reported a third-quarter loss of $15.5 million, after reporting a profit in the same period a year earlier.

    On a per-share basis, the Houston-based company said it had a loss of 4 cents. Losses, adjusted for one-time gains and costs, came to 1 cent per share.

    The results did not meet Wall Street expectations. The average estimate of 17 analysts surveyed by Zacks Investment Research was breakeven on a per-share basis.

    The independent oil and gas company posted revenue of $305.3 million in the period, which also missed Street forecasts. Ten analysts surveyed by Zacks expected $354.4 million.

    Equivalent production in the third quarter of 2015 was 142.1 billion cubic feet equivalent (Bcfe), consisting of 133.0 billion cubic feet (Bcf) of natural gas and 1.5 million barrels (Mmbbls) of liquids (crude oil/condensate/natural gas liquids). These figures represent increases of 7 percent, 5 percent, and 57 percent, respectively, compared to the third quarter of 2014.

    Cash flow from operations in the third quarter of 2015 was $146.4 million, compared to $358.3 million in the third quarter of 2014. Discretionary cash flow in the third quarter of 2015 was $150.4 million, compared to $296.0 million in the third quarter of 2014. Net loss in the third quarter of 2015 was $15.5 million, or $0.04 per share, compared to net income of $100.8 million, or $0.24 per share, in the third quarter of 2014. Excluding the effect of selected items including a $17.6 million after-tax non-cash mark-to-market loss on natural gas derivatives, net loss was $2.2 million, or $0.01 per share, in the third quarter of 2015, compared to net income of $85.0 million, or $0.20 per share, in the third quarter of 2014.

    EBITDAX in the third quarter of 2015 was $167.6 million, compared to $325.9 million in the third quarter of 2014. Significant reductions in realized prices for both natural gas and oil were the primary drivers for the lower results in the quarter, partially offset by higher equivalent production and lower overall operating expenses. See the supplemental tables at the end of this press release for a reconciliation of non-GAAP measures including discretionary cash flow, net income excluding selected items, EBITDAX and net debt to adjusted capitalization ratio.

    Natural gas price realizations, including the effect of hedges, were $2.02 per thousand cubic feet (Mcf) in the third quarter of 2015, down 34 percent compared to the third quarter of 2014. Excluding the impact of hedges, natural gas price realizations for the quarter were $1.68 per Mcf, representing a $1.09 discount to NYMEX settlement prices. Oil price realizations were $43.71 per barrel (Bbl), down 54 percent compared to the third quarter of 2014.

    Total per unit costs (including financing) decreased to $2.35 per thousand cubic feet equivalent (Mcfe) in the third quarter of 2015, an improvement of 7 percent from $2.53 per Mcfe in the third quarter of 2014.
    Back to Top

    China's Yantai Xinchao to buy U.S. oilfields for $1.3 bln

    China's Yantai Xinchao Industry Co Ltd has agreed to spend about 8.3 billion yuan ($1.31 billion) to buy oilfields in the U.S. state of Texas, the company said in a corporate filing late on Saturday.

    The oilfields, in Howard and Borden counties, will be bought from Tall City Exploration LLC and Plymouth Petroleum LLC, Xinchao said in the filing to the Shanghai Stock Exchange.

    The transaction has aready been approved by the U.S. Treasury's Committee on Foreign Investment, it added.
    Back to Top

    Alternative Energy

    Spain Approves Solar Taxes!

    Until recently, Spain had a very general self-consumption policy framework that applied to both grid-connected and off-grid systems. This month though, Spain's Council of Ministers approved a new self-consumption law that has set the country's solar advocates up in arms with the government.

    The main problem with the new law, say solar advocates, is that it taxes self-consumption PV installations even for the electricity they produce for their own use and don’t feed into the grid. Spain's PV sector calls the new law a 'sun tax.’

    According to Spain’s Photovoltaic Union (UNEF), the new law requires self-consumption PV system owners to pay the same grid fees that all electricity consumers in Spain pay, plus a so-called 'sun tax'. Specifically, said UNEF, a self-consumption PV owner "will pay a 'sun tax' for the whole power [capacity] installed (the power that you contracted to your electricity company, plus the power from your PV installation) and also another [second] 'sun tax' for the electricity that you generate and self-consume from your own PV installation (this applies to installations larger than 10 kW)."

    Installations smaller than 10 kW and all installations in the Canary Islands and the cities of Ceuta and Melilla (these are Spanish territories in Africa) will be exempted from the second 'solar tax.' Furthermore, installations with co-generation will be exempted of the second 'sun tax' until 2020 and the Balearic islands of Mallorca and Minorca will pay a reduced price. Off-grid installations will obviously not pay any grid tax whatsoever.

    The new law also prohibits PV systems up to 100 kW from selling electricity. Instead, their owners are required to donate the extra electricity to the grid for free. Systems over 100 kW must register in order to sell electricity in the spot market for the excess power they generate. Limitations do not end at this point though. Thus, for PV systems up to 100 kW the owner of the installation must be the owner of the contract with the electricity company, while community ownership is prohibited altogether for all sizes of self-consumption systems.

    Finally, the law is retroactive meaning that all existing self-consumption PV installations need to comply with the new regulations otherwise face an astronomically high penalty fee up to €60 million. This sanction, UNEF notes, is double the fine set for radioactive leaks from nuclear plants.

    The Islands' Paradox

    Regarding Spain's non-mainland territories, the new law makes even less sense, argues UNEF, since the cost of electricity supply is particularly high (about €184 per MWh in the Canaries and €139 per MWh in the Balearics), adding €1.8 billion to the Spanish consumers' total electricity bill. On the contrary, UNEF adds, self-consumption systems have costs below €100 per MWh and are an ideal solution for island territories where self-supply generation, at the point of consumption, is more economical than power transmission from the peninsula.

    Attached Files
    Back to Top


    Monsanto clears USDA regulatory hurdle for new GMO corn

    The U.S. Department of Agriculture on Friday signed off on a new genetically modified type of corn developed by Monsanto Co after a review concluded it posed no significant threat to agricultural crops, other plants or the environment.

    The USDA's Animal and Plant Health Inspection Service (APHIS) announced it would deregulate Monsanto's MON 87411 maize, which was developed to protect plants against corn rootworms that can damage roots and drag down grain yields and be tolerant to the herbicide glyphosate.

    The so-called trait would be inserted into a line of corn seeds' genetic code and could be "stacked" with other traits.
    Back to Top

    Precious Metals

    India's gold monetisation scheme may be ready in weeks - Modi

    A programme to attract gold owned by households into a bank deposit scheme to monetise the precious metal could be ready in weeks, Prime Minister Narendra Modi said on Sunday, a step aimed at cutting expensive imports.

    The scheme would allow people to put their gold into banks in return for interest payments in an attempt to mobilise thousands of tonnes of the metal sitting idle in Indian households.

    Indians prize gold as gifts and as a way of storing wealth. The country consumes nearly 1,000 tonnes of gold every year, most of it imported, and gold is the second-biggest expense on the import bill after oil.

    In his monthly radio address, Modi said the programme should be ready before Dhanteras next month, a festival when it is considered an auspicious period to buy gold.

    "Please, don't let your gold be dead money," Modi said. "Gold is very important for the country. Gold can become an economic strength for us."

    Huge gold imports were blamed for pushing the country's current account deficit to a record $190 billion in 2013, prompting the government to hike its duty on imports to 10 percent, an all-time high.

    Attached Files
    Back to Top

    Base Metals

    Chile's Cochilco cuts 2015 copper forecast to 5.68m tonnes

    State copper consultancy Cochilco revised down its forecast for Chile's 2015 copper production for the fourth time this year on Friday, estimating that the top copper exporter will produce 5.68-million tonnes of the red metal. As recently as July, Cochilco had said that Chile would produce 5.88-million tonnes of copper, and in January it had estimated that output would likely come to six-million tonnes. 

    But low prices on weak demand in key buyer China have led mining companies to delay new projects and lay off workers, while a slew of natural disasters and labour disputes has also hurt production. 

    Cochilco also revised down its copper price forecast to $2.53/lb in 2015, and $2.50/lb in 2016. It had projected the 2015 price at $2.77/lb in July. The weak market has led some miners to signal that they would seek to cut production. Chile's large Collahuasi mine, owned by Anglo American and Glencore, said in September it would cut production by 30 000 t. 

    Meanwhile, state-owned copper miner Codelco has said it would likely not get back any of its profits from the government this year, and is expected to announce more delays to new projects.
    Back to Top

    MMG’s gigantic Las Bambas mine in Peru to open next year despite protests

    The mine, located at 4,000 metres in the south of the South American country, is set to deliver 400,000 tonnes of copper per year during the first five years of production placing it within the top three copper mines globally.

    MMG’s Las Bambas copper mine in Peru, one of the world's biggest mines of the red metal, is on track to begin production in the first quarter of 2016, despite weak prices and relentless protests against the project that left four dead and 16 seriously injured last month.

    Melbourne-based and Hong Kong-listed MMG, which acquired the $7.4 billion copper-silver-molybdenum mine from Glencore (LON:GLEN) in August 2014, said it has already completed the installation of conveyor belts, while all four electric shovels and 38 trucks are operational.

    A shipment of 600 concentrate transport containers were dispatched from China and 80 rail wagons are ready for shipping, MMG said, adding that it expects to spend a total $1.9-2.4 billion this year at the project.

    "While we have some challenges ahead yet, the Las Bambas team is to be congratulated for their commitment to deliver this flagship project on schedule and within budget," MMG CEO Andrew Michelmore said in a statement.

    Las Bambas is set to deliver 400,000 tonnes of copper per year during the first five years of production placing it within the top three copper mines globally.

    The mine, located at 4,000 metres in the south of the South American country, will also produce significant amounts of silver, gold and molybdenum over its 20-year mine life. Las Bambas boasts 6.9 million tonnes of copper reserves and a 10.5 million tonne resource.

    Attached Files
    Back to Top

    OZ Minerals lifts copper guidance

    OZ Minerals has lifted its full-year copper output guidance as a record run of production buoys the miner's fortunes.

    In the quarter, OZ Minerals produced 33,518 tonnes of copper, a 28 per cent increase on the previous corresponding period and a slight improvement on the 32,991 tonnes produced in the second quarter.

    Year-to-date copper production stands at 97,669 and OZ Minerals now expects full-year production to come in between 126,000 and 131,000 tonnes. Previously it had expected output between 110,000 and 120,000 tonnes.

    “Prominent Hill is having a very strong year,” managing director Andrew Cole said.

    “The last three quarters have been the strongest in five years and we are now confident that we will exceed our original production guidance target.”

    Gold production in the quarter totalled 23,817 ounces, a modest decline on the 24,790 ounces produced in the second quarter.

    Cash costs fell to US74.3c per pound, down from US75.3c per pound in the second quarter.

    OZ Minerals also reduced it full-year cost guidance reduced to US70c to US80c per pound of payable copper, from US80c to US95c per pound previously.
    Back to Top

    China's Zhongwang evading aluminium import duties -U.S. group

    U.S. aluminium extruders have accused Zhongwang Group, the world's second largest producer of aluminium extrusions, of evading U.S. import duties, firing the first salvo in a dispute over China's ballooning exports.

    In a petition filed with the U.S. Commerce Department late on Thursday, the U.S. Aluminium Extruders Council (AEC) alleged China Zhongwang Holdings Ltd is shipping extruded aluminium products, including pallets and 5050 alloy extrusions, into the United States without paying duties.

    " Zhongwang has been engaged in a concerted effort to avoid U.S. duties and maximize its ability to continue to flood the global market with unfairly traded Chinese aluminium," the complaint said.

    Extrusion is the process of shaping aluminium, by forcing it to flow through an opening in a die.

    The complaint asked the government to clarify that pallets and 5050 alloys are subject to the antidumping and counterveiling duties introduced in 2011. That ruling marked a major victory for U.S. extruders that argued Chinese exports were unfairly subsidized.

    The AEC's complaint said Zhongwang's shipments of both materials into the United States have increased substantially since the duties were put in place.

    The Commerce Department has 45 days to initiate an investigation.

    The filing is the first formal move to curb China's aluminium exports, which U.S. producers say have grown steadily over the past year.

    U.S. producers like Alcoa Inc say this has hurt prices and margins, helping push London Metal Exchange prices to six-year lows.

    The Aluminium Association, which represents aluminium producers and fabricators, has called on U.S. regulators to probe mislabelling of China's exports of semifabricated aluminium products to avoid paying duties.

    The AEC's case is separate from any action the Aluminum Association might take, but highlights deepening worries about the impact of China's surplus inventory on the global market.

    The allegations come months after short-seller Dupre Analytics alleged Zhongwang inflated sales by sending shipments to companies it controls offshore, which the company dismissed as "groundless or untrue."

    At the time, the AEC called on several governments to investigate the claims.

    Zhongwang's sales to the United States fell 86 percent, to $62.5 million, in 2011 after the duties were imposed. But revenue bounced back in 2012 and continued rising to $302.9 million in 2014, which the complaint attributed to pallet shipments.

    "Zhongwang appears to have created these "pallets" sepcifically for the purpose of circumventing the orders," the complaint read.
    Back to Top

    Steel, Iron Ore and Coal

    China could cut on-grid power tariffs before end of year - state media

    China may cut on-grid wholesale prices of thermal electricity for the second time this year, state media said on Friday, a move which could reinforce the downward trend in coal prices and hit struggling coal mines.

    More than 70 percent of coal mines have suffered losses in the first half of the year.

    The country's State Council has proposed cutting benchmark on-grid prices, perhaps by an average of 0.03 yuan per kilowatt hour, from November at the earliest, the state-run Economic Information Daily said.

    The move would come after a sustained collapse in coal prices, brought about by a huge supply glut of the fossil fuel, with benchmark Qinhuangdao thermal coal SH-QHA-TRMCOAL last quoted at around 380 yuan per tonne, down 27 percent so far this year.

    On-grid tariffs are the rates power generators charge grid companies and prices vary from province to province. Thermal power, including coal, accounts for almost 70 percent of China's power generation.

    A cut would affect electricity companies, reducing their profits by 126 billion yuan ($19.85 billion), but would have limited impact on the falling coal prices, the newspaper quoted an analyst as saying.

    A price change in April cut on-grid prices for coal power by 0.02 yuan.
    Back to Top

    Iron ore price drops to 3-month low

    The price of iron ore dropped for the ninth session in a row on Friday after a rate cut and economic stimulus measures announced by top consumer China did little to lift the bearish outlook for the commodity.

    On Friday the benchmark 62% Fe import price including freight and insurance at the Chinese port of Tianjin slid 1% to $50.90 a tonne, the lowest in three months and down 8% in two weeks according to data provided by The SteelIndex. In July, the steelmaking raw material on a spot price basis, fell to a record low of $44.10.

    The People’s Bank of China cut benchmark interest rates by 25 basis points to 4.35% and in an effort to stimulate lending lowered banks' required reserve ratio for the sixth time on Friday.

    The attempts to re-ignite infrastructure spending is coming too late for China's steel industry which forges almost as much as the rest of the wold combined and accounts for more than 70% of the world's seaborne iron ore trade.

    More astonishing is the fact that the Rio de Janeiro-based company was able to reduce cash costs to just $12.70 per tonne

    Crude steel output in the country continued to shrink in September, down 3% to 66m tonnes, as mills struggle to remain profitable amid a saturated domestic market. Year to crude steel output totalled 609m tonnes, a 2.1% decline. The World Steel Organization, last week forecast that steel demand in China is expected to decrease by -3.5% in 2015 and -2.0% in 2016, after hitting a demand peak in 2013.

    While moderating demand in China can take the blame for the recent weakness, a  surge in supply will likely push prices down further towards the end of the year and next.
    Back to Top

    Australia's Bluescope wins tax break to keep steel plant open, buys out US site from Cargill

    Australia's biggest steelmaker, Bluescope Steel, on Monday said it would keep its flagship Port Kembla steelworks open after persuading the government to defer A$60 million ($43 million) in payroll tax.

    While trimming operations in Australia, Bluescope also said it had agreed to buy out joint venture partner Cargill's 50-percent share of the North Star mill in the United States for $720 million giving it full ownership of the Ohio site.

    Bluescope, which has already cut labour costs by $60 million by eliminating 500 job cuts, or 10 percent of its Australian workforce, and freezing wages, said the tax agreement with the New South Wales state government was crucial to keeping the Port Kembla plant open.

    The changes drove Bluescope shares 12 percent higher in early trading to A$4.55, outpacing more modest gains in the broader market

    Low steel prices and weaker demand in Asian export markets due to overcapacity have forced Australian steel companies to cut costs to survive.

    Earlier this month, Arrium Ltd announced it would cut A$100 million a year in costs at its Whyalla steelworks in neighbouring South Australia state. Those cuts were in addition to an overall reduction target of A$60 million announced in August.

    Before that Arrium reduced output from it iron ore business by a third to 9 million tonnes to stem losses on higher cost production.

    In acquiring Cargill's stake in North Star, Bluescope exercised its right of last refusal, matching an offer from an unnamed third party, the company said.

    "It is centrally located within a large scrap pool, operates close to its core markets, has low conversion costs and benefits from a highly motivated and focused workforce," it said.

    Owing to the changes, Bluescope upgraded its first half earnings outlook by about A$50 million, saying earnings before interest and tax would be about 40 percent above the previous six months.
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    Company Incorporated in England and Wales, Partnership number OC334951 Registered address: Highfield, Ockham Lane, Cobham KT11 1LW.

    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority.

    The material is based on information that we consider reliable, but we do not guarantee that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have 'long' or 'short' positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.

    © 2018 - Commodity Intelligence LLP