Mark Latham Commodity Equity Intelligence Service

Monday 24th August 2015
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    The Killing Zone: CDS's stress and prices.

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

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

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

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    China: 'Unimaginably fierce resistance'


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

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

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

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

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

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

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

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    US Manufacturing PMI Tumbles To 22 Month Low

    US Manufacturing PMI Tumbles To 22 Month Low

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

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

    But wait, the financial comedy TV said China can not possibly affect the US. Just chalk it up to the latest thing the economists were wrong about.
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    Explosion at chemical plant in eastern China, 9 injured - state media

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

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

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

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

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

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

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

    Windows shattered in the village where the blast occurred, state media said, and tremors reverberated within 2 kilometres (1 mile) of the site of the explosion.
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    South32 maiden profit jumps, to focus on cost cuts

    South32 maiden profit jumps, to focus on cost cuts

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

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

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

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

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

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

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

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

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

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

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

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

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

    "We sit on top of some large high quality resources that could fill that gap in coal supply in a tightening market," Kerr said.
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    RBA says less ATM's needed.

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

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

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

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

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    Oil and Gas

    Iran Plans ‘Any Cost’ Oil Output Rise to Defend Market Share

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

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

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

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

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

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    GLNG to market six commissioning cargoes

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

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

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

    According to sources, during the commissioning period, two cargoes per month are expected to be loaded with GLNG likely to send invites during next week.
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    India to Sell $1.5B of Indian Oil Shares on Monday

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

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

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

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

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

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

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

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

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

    - See more at:
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    Dutch storage company Vopak shares dive on outlook concerns

    Dutch storage company Vopak shares dive on outlook concerns

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

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

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

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

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

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

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

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

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

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

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

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    Petronas acquires 50% stake in MLNG Dua facility from Shell

    Petronas acquires 50% stake in MLNG Dua facility from Shell

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

    Financial details about the deal have not been disclosed.

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

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

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

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

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

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

    Anuar Taib said: "The 39 employees released by the previous operator are the only staff that PETRONAS can legally approach for employment offer, and 37 have accepted. They will continue performing their jobs at MLNG Dua as usual."
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    San Leon Energy confirms bid interest

    San Leon Energy confirms bid interest

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

    John Deere says farming is still in trouble

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

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

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

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

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

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

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

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

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

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

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

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    Base Metals

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    If the currency movements had not occurred, revenue would have fallen only one per cent.

    "Our results, while disappointing overall, do reflect the general decline in worldwide exploration spending by the mining companies that we have experienced over the last several years," Mr O'Brien said.
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    Anglo American sells two Chilean mines to Audley for $300 million

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

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

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

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

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

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

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

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

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

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

    The transaction is not subject to any regulatory conditions and is expected to close in the third quarter of this year.
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    Indonesia gives tin miner PT Timah green light to resume exports

    Indonesia gives tin miner PT Timah green light to resume exports

    Indonesia's PT Timah, the country's top tin miner, has been granted government clearance to resume exports and will look to make its first shipment by early September, company and government officials said on Friday.

    State-owned PT Timah halted exports when new rules for shipments were introduced on Aug. 1, and like other tin miners in the world's top exporter, has been embroiled in government red-tape ever since.

    "It's done for the next six months," Didi Sumedi, director of export industry and mining products at the trade ministry told Reuters when asked whether Timah had received an export permit.

    No other tin companies had been granted an export permit, he said.

    Earlier this week, a senior official at Timah said some exports would likely restart by "early September" but that prices would have to rise above $17,000 a tonne for spot sales to resume.

    Timah's Corporate Secretary Agung Nugroho repeated this to Reuters on Friday, adding that the company would now look to trade 100-200 tonnes on the Indonesia Commodity & Derivatives Exchange (ICDX) on Monday.

    Indonesia is tightening its rules for tin shipments in a fresh bid to crack down on environmental damage and smuggling, and to enforce payment of royalties and taxes on shipments.

    The Indonesian unit of Freeport-McMoRan, which runs one of the biggest copper mines in the province of Papua, has also halted its exports, as it adapts to new rules on using letters of credit from domestic banks.

    Freeport is working with the Indonesian government and related parties so that exports can resume immediately, a spokesman said on Thursday.

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    Sumitomo points to Aluminium corruption in China?

    Sumitomo cuts Q4 LME aluminium price f'cast to $1,800 from $2,000

    Japanese trading firm Sumitomo Corp has cut its forecast of London Metal Exchange (LME) aluminium prices to $1,800 in the October-December quarter from its January estimate of $2,000 due to rising exports from China and a stronger U.S. dollar.

    It also lowered its estimate of Japan's aluminium premiums, the surcharge for obtaining physical metal, for the quarter to $100 per tonne from its earlier prediction of $425.

    Japan is Asia's top aluminium importer and the premiums for primary metal shipments PREM-ALUM-JP it agrees to pay each quarter over the LME cash price set the benchmark for the region.

    "We had thought a combined price of the LME cash level and the premium would not slide much below $2,000. But it has fallen much more than anticipated," Shingi Yamagiwa, manager of Sumitomo's light metals trading team, told a small group of reporters on Friday.

    Higher exports of aluminium products from China, some of which are used to remelt and used as raw material, were the biggest reason for the bigger-than-anticipated slide, he said.

    China's exports of unwrought aluminium and products fell 5.3 percent in January-July from a year ago, but still stayed high at above 2.8 million tonnes.

    A stronger dollar and cheaper average smelting cost thanks to a series of closures at high-cost smelters and increased output of new and low-cost smelters were also behind the market slump, Yamagiwa said.

    The revised forecast, however, is still above current prices which are trading near 6-year lows at around $1,550 a tonne.

    "It now looks that it will take longer for metal prices and premiums to recover. But the current level is too low," he said, adding the combined prices of the cash and the premium should eventually bounce back to $2,000-2,200 a tonne.

    Japan's aluminium premiums for July-September shipments fell nearly $300 from the previous quarter, the sharpest such decline ever, to a six-year low of $100 as swelling Chinese exports piled more pressure on an already swamped market. The premiums hit a record high of $425 per tonne for January-March period.

    The next round of quarterly pricing negotiations are set to begin later this month between Japanese buyers and global miners.

    "We expect Japan's premiums to stay nearly flat at around $100 through next year, although it may temporarily fall $10 or $20 from the level," Yamagiwa said.

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    Aluminium giant sees 18% net rise amid 'malicious' charges

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

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

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

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

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

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

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

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

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

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

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

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

    Attached Files
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    Steel, Iron Ore and Coal

    China Coal Energy Jul coal output down 13.4pct on yr

    China Coal Energy Co., Ltd., the country’s second largest coal producer, produced 9.05 million tonnes in July, down 5.7% on month and down 13.4% on year – the 13th consecutive year-on-year drop, it said in a statement late August 21.

    Over January-July, China Coal produced 55.32 million tonnes of coal, down 20.8% year on year, said the company.

    Total coal sales during the same period reached 77.8 million tonnes, down 10.9% on year, with the July sales at 13.68 million tonnes, up 11.9% on year but down 0.2% from June.

    The company sold 8.51 million tonnes of self-produced coal in July, accounting for 62.2% of the total, up 4.6% year on year but down 4.6% from June. Total self-produced coal sales between January and July dropped 13.4% on year to 54.93 million tonnes.

    China Coal Energy suffered a loss of 965 million yuan ($150.8 million) in net profit during the first half of the year, the first drop since its listing in 2008, according to its half-year report released on the same day.
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    Xinjiang Hami finds 18.6 bln T coal resources

    Xinjiang Hami finds 18.6 bln T coal resources

    A total of 18.6 billion tonnes of coal resources have been found within the depth of 1,000 meters in Hami, Xinjiang after one-year exploration work, the Ministry of Land and Resources said on August 21.

    Among that, 11.46 billion tonnes have been through detailed investigation, accounting of over 60% of the total resources.

    The exploration work was mainly carries out in southern, central and western parts of Sandaoling mining area in Hami, which was identified as another resource-rich bulk coalfield in the autonomous region.

    Predicted coal resources in Xinjiang ranks first in China at 2.19 trillion tonnes, accounting for 40.6% of the country’s total.

    Xinjiang produced 143 million tonnes of raw coal in 2014, sliding 8.18% on year and taking 3.7% of China’s total output, showed monitoring data by CCR.
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    Rio Tinto to ship 20% more iron-ore to China in 2015

    Australian mining giant Rio Tinto expects to deliver 240-million tonnes of iron-ore to China this year, up from 200-million tonnes in 2014, the company's China MD told reporters on Friday. The miner has driven down its production costs to $16.20/t this year, $2 lower than a year ago, enabling it to cope with falling prices of the steelmaking raw material, Ren Binyan said at a press briefing. 

    The outlook for the raw material remains grim for the rest of the year as well. China's steel consumption is expected to fall further this year, after it dropped 3.4% in 2014 - the first decline since 1981. 

    Also, the top global miners aim to further bring down costs and expand production to back their battle to maintain market share in China. The efforts have enabled the big three to drive out higher-cost producers in China and elsewhere and expand their market share. 

    Australia and Brazil accounted for 84.6% of China's total imports in July, data shows. Rio is aiming to raise full-year output by 15% to 340-million tonnes from 2014, but it has reset its capital spending reduction target to $1-billion this year from $750-million earlier to cope with weak conditions. 

    Globally in iron-ore, about 120-million tonnes of unprofitable mining capacity is expected to close this year, with 80-million tonnes coming from China's higher-cost operators, the miner said earlier this month. Ren said Rio Tinto was keeping a close eye on the impact of China's currency devaluation on iron-ore demand, but said the rise in the US dollar was positive for the company.
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    China woes slash profits at Australia iron ore miner Fortescue

    China woes slash profits at Australia iron ore miner Fortescue

    Australia's Fortescue Metals Group on Monday said annual profit dropped nearly 90 percent to $316 million, the latest iron ore miner to report sharply lower earnings on weak prices for the steel-making ingredient as China's economy slows.

    Chief executive Nev Power said the world's fourth biggest iron ore miner was operating in a "challenging environment" and would look for greater cost efficiencies and operational improvements in the year ahead.

    Shares in Fortescue, dependent on sales to Chinese steel mills for revenue, fell as much as 9.4 percent to their lowest since July 28 after the drop in profit was reported. The stock was the biggest percentage loser on the world-wide Dow Jones Titans Basic Resources Index

    Feeling the effect of weak iron ore prices, rival miner Rio Tinto saw net profit drop 82 percent in the last half-year

    Analysts also expect BHP Billiton BLT.L> to unveil a 43 percent fall in underlying attributable profit to $7.73 billion in its financial results released on Aug. 25, according to Thomson Reuters I/B/E/S.

    Fortescue, sold its ore for an average of only $52 per tonne in the half-year to June 30 versus $82 in the year earlier period.

    The benchmark spot price for high-grade ore .IO62-CNI=SI opened in January at $71.20 a tonne and finished on June 30 at $59.30, down 17 percent.

    However, Fortescue must sell its ore at a roughly 15 percent discount to the benchmark due to its lower iron content.

    Power in July called an end to expansion work at Fortescue's Australian mines, saying more than enough ore was being mined to meet global demand.

    At that time, Power criticised larger Australian miners Rio Tinto and BHP for ramping up output despite soft demand and slumping prices, despite his own company lifting shipments 33 percent in fiscal 2015 before calling a halt.

    For the full fiscal year, Fortescue's $316 million was a far cry from the $2.7 billion it reported the previous year.
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    Hebei Iron & Steel to raise up to $1.3 bln in private placement

    Hebei Iron & Steel Co Ltd , China's largest steelmaker, said it plans to raise up to 8 billion yuan ($1.25 billion) in a private placement to fund an acquisition of a sister firm that makes automotive sheets.

    The company said in a stock exchange statement on Sunday that it would issue 1.43 billion shares at 5.6 yuan a share to investors including brokerages and insurance firms. The cash raised will also be used to invest in other projects and pay off bank loans, it said.

    Hebei Iron & Steel's shares last traded on June 29 at 7 yuan a share.
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