Mark Latham Commodity Equity Intelligence Service

Friday 26th June 2015
Background Stories on

News and Views:

Attached Files


    Nature Rebounds!

    Image titleProductivity is the enemy of  price.
    Image titleWe moved from an era of consumption to an era of efficiency.
    Image titleFarmed acres peaked globally some years ago.

    Image titlePaper is plummetting in its sensitivity to Gdp.

    Image titleThe US, the ultimate consumer, passed its peak in most commodity consumption years ago. 

    Image titleEven water usage has not tracked population, and this is a real favourite alt investment.
    Image titleLook at pollution output. Either falling or stagnant.

    Image titleEven the global population is stabilising.

    Image titleBest yet, the earth is greener than it was 20 years. Even the Sahara is contracting.

    Attached Files
    Back to Top

    Personal Spending Surges Most Since August 2009 As Savings Rate Tumbles

    After 6 straight months of decline in annual spending growth, May saw YoY spending pop 3.6% (the most since Dec 2014).

    After an unchanged April, May expectations for spending were a 0.7% jump but the data blew that away, printing a 0.9% MoM jump - the biggest since August 2009 and biggest beat since Jan 2013.

    Personal Income only grew at 0.5% (still the highest MoM jump since March 2014) driving the savings rate down to 5.1% - the lowest since December. Before Steve Liesman and his buddies get too excited - spending was driven mainly by a 4.72% surge in spending on Energy goods & services - not exactly what the discretionary buying consumer-oriented society that is required to keep the dream alive was looking for.

    Finally we note non-durable spending topped durables and this exuberant GDP-boosting spendfest (un-save-fest)provides more ammo for an earlier Fed rate hike.
    Back to Top

    Oil-rich Alberta lifts levy on carbon output, ups target for cuts

    Oil-rich Alberta will raise the cost of greenhouse-gas emissions for large industrial plants and boost targets for emission cuts as its new government took action on Thursday to strengthen the Canadian province's environmental reputation.

    Alberta is the largest source of U.S. oil imports, but its oil sands are Canada's fastest-growing source of carbon emissions and the province has faced harsh international criticism for what has been perceived as lax oversight of the oil sands industry.

    Environmental groups have used Alberta's record of rising emissions in their efforts to block TransCanada Corp's controversial Keystone XL pipeline as well as other projects.

    The left-leaning New Democratic Party government said it will boost the cost of excess carbon output to C$20 ($16.26) per tonne at the start of 2016 from the current C$15, and will raise it to C$30 per tonne for 2017. Its target for carbon-emissions cuts will climb to 15 percent of normal emissions in 2016 from 12 percent, rising to 20 percent in 2017.

    Environment Minister Shannon Phillips said the new targets will burnish Alberta's reputation.

    "If we get it right, our environmental policy will make us world leaders on this issue instead of giving us a black eye around the world," Phillips told a news conference.

    The Canadian Association of Petroleum Producers (CAPP) said oil sands producers will meet the new targets. But he said they worry that combined with recent tax increases, costs are rising even before the government launches a promised review of oil royalties.

    "The revised rules ... and Alberta's recently announced corporate tax increase have the potential to add almost C$800 million to industry costs over the next two years," CAPP said in a statement.

    The new rules extend Alberta's current climate-change regime, which was set to expire at month's end, spurring the government to prolong it to the end of 2017.

    Phillips appointed an expert panel to draft new rules on greenhouse gas reductions to take effect after 2017. The panel is expected to release a preliminary proposal ahead of a key United Nations climate change conference in Paris in December.

    The new measures were welcomed by environmental groups, which have demanded tougher rules from the province.

    "Today's news sends an important signal both inside and outside Alberta, and is a solid set of first steps," Dan Woynillowicz, director of policy for Clean Energy Canada, said in a statement.
    Back to Top

    Oil and Gas

    Bp bids for Penn Virginia?

    BP has offered US$8 a share for Penn Virginia, which drills for oil in Texas and elsewhere in the US, and has a market capitalisation of about US$319.2mln, according to people familiar with the matter.

    Penn is understood to have rejected the offer because it believes the terms offered undervalue the company, and is holding out for at least US$10 a share.

    It is believed rivals to BP such as Exxon Mobil Corp and Chevron may also be interested in buying the company.

    Penn’s share price has fallen to about US$4.50 a share from just below US$17 a share in June last year as oil prices have plummeted.

    In 2010, Penn decided to shift its investment and production focus from natural gas towards higher margin oil.

    It sold natural gas assets in south Texas in January 2014 and further assets in Mississippi in July last year to focus on the Eagle Ford Shale in south Texas.

    The Eagle Ford Shale is one of the biggest onshore unconventional finds in the US, but billionaire Penn shareholder George Soros, who is thought to own about 8% of the group, has reportedly urged it to find a buyer or a partner that could exploit its reserves more efficiently.

    Penn is understood to have appointed Bank of America Corp to help it in its search for potential buyers.

    An oil analyst in London speaking on condition of anonymity pointed out that BP has been rationalising its business in the US following the Gulf of Mexico rig blowout in 2010, but the analyst said: “It’s a good time to buy cheap assets for majors trying to replace reserves and production.”

    The analyst added: “Consolidation in the US has to happen and there are players with deep pockets who would take out some smaller US independent explorers and producers who may not be able to fund their production themselves.”

    A spokesman for BP said: “We would not normally comment on market rumour and speculation.”

    Penn increased production in the Eagle Ford Shale by 23% to 21,390 barrels of oil equivalent per day (boepd) in the first quarter of 2015 against 17,459 boepd in the three months to the end of December last year. In October last year, it owned about 104,300 net acres in the Eagle Ford Shale and said it planned to further increase its acreage position near its existing holdings. It said its lease position gave it more than 1,600 drilling locations or the equivalent of about 12 years of drilling sites.

    Back to Top

    Iran Seen Struggling by WoodMac to Restore Lost Oil After Deal

    Iran will probably struggle to restore lost crude production if it secures a deal to ease sanctions because the condition of halted fields will have deteriorated and more investment will be needed, according to Wood Mackenzie Ltd.

    The country would be able to increase crude output by 120,000 barrels a day by the end of the year if it reaches an agreement on its nuclear program, according to a report by the Edinburgh-based consultant and Verisk Maplecroft. The report forecasts a further daily increase of 260,000 barrels by the end of 2016 and 220,000 barrels the following year.

    Iran and world powers are working towards an agreement that would ease sanctions on the OPEC member’s oil sales in return for curtailing its nuclear activity. A “deal leading to the unwinding of sanctions is likely,” Wood Mackenzie estimates. Restrictions imposed on Iran’s oil trade in 2012 have curbed its shipments by about 50 percent.

    “We have taken a conservative view of the pace of ramp-up of production should sanctions be removed,” Lindsay Grant, an analyst at Wood Mackenzie, said in an interview in London. “This is because of the uncertainty around the ability of the fields to produce at pre shut-in levels and whether or not there has been any reservoir or facility degradation.”

    With sufficient investment by international oil companies, Iran could raise production to 4.4 million barrels a day by 2025, according to the report. The country will need to offer “competitive” terms to prospective investors because other producer nations are currently seeking investment, it said.
    Back to Top

    Lukoil CEO sees 2015 EBITDA rising by $2 bln

    Lukoil, Russia's No.2 oil producer, expects its earnings before interest, taxes, depreciation and amortisation (EBITDA) to increase by $2 billion this year, Chief Executive Vagit Alekperov told the company's annual general meeting on Thursday.

    Lukoil's EBITDA fell to $15.6 billion last year from $16.7 billion in 2013.

    Russia's second biggest oil producer, Lukoil, expects its oil output in Russia to decline by around 2 million tonnes, Ravil Maganov, the company's deputy president on exploration and production, said on Thursday.

    The company had planned to produce 86 million tonnes (1.73 million barrels per day) of oil this year, on a par with 2014 results.
    Back to Top

    Israel's security cabinet approves gas deal with Noble, Delek

    Israel's security cabinet approves gas deal with Noble, Delek

     Israel's security cabinet voted on Thursday in favour of a plan that would allow a U.S.-Israeli energy group to keep control of most of the country's natural gas deposits but would also put some others up for sale.

    The decision is set to end months of uncertainty and will likely to be welcomed by Texas-based Noble Energy and Israeli conglomerate Delek Group. Their control of two sizeable gas fields was put in doubt late last year after they were branded a monopoly.

    Details of the agreement have yet to be made public, but industry sources have said Noble and Delek will be allowed to keep control of Leviathan, the world's largest offshore gas discovery of the past decade.

    "We are establishing a significantly more competitive market and putting in place mechanisms that will prevent price gouging," Eugene Kandel, a top economic advisor to Prime Minister Benjamin Netanyahu who led negotiations with Noble and Delek, said on Army Radio.

    The 10-member cabinet for security and diplomatic affairs was an unusual forum to handle a primarily economic issue, but it allowed Netanyahu greater control. After voting in favour of the proposal unanimously, the government is widely expected to approve it.

    "It is of decisive importance to move quickly to develop and expand the natural gas fields that have been discovered off Israel's shores out of concern for state security and the foreign relations of the State of Israel," a cabinet statement said after the meeting ended.

    The deal gives Delek subsidiaries Avner Oil and Delek Drilling six years to sell their individual 15.625 percent stakes in another large field, Tamar, while Noble will have to lower its stake in that project to 25 percent from 36 percent, industry sources said.

    Delek and Noble will also be forced to sell their stakes in two smaller fields, Tanin and Karish, in up to 18 months.

    Tamar, with reserves of about 10 trillion cubic feet (tcf), began production in 2013 for the domestic market. Leviathan, which holds an estimated 22 tcf, is primarily earmarked for exports and is expected take three years to bring online. Tanin and Karish have a combined 3 tcf.

    Israel's energy sector was blindsided in December when the anti-trust regulator deemed Noble and Delek a monopoly and could be forced to sell off their assets.

    Noble in response halted investments in Israel, the companies threatened legal action and a number of long-term, multi-billion dollar export deals to Egypt and Jordan were thrown into jeopardy.

    Netanyahu quickly cobbled together a government committee to find a compromise and his intention to speed up development of the fields rather than demand a more sweeping divestment led to the resignation of the anti-trust regulator.
    Back to Top

    Rice Energy Exec: 90% of Utica Gas Will Come from 3-4 Counties

    An update on what Rice Energy is up to, from none other than Rice’s vice president in charge of exploration, Derek Rice. Derek said at yesterday’s Hart Energy DUG East conference in Pittsburgh that his company is, this week, finishing up work on a Utica Shale well in Greene County, PA. Derek admitted there’s differing opinions within the company about whether or not they should be drilling Utica wells in PA. 

    He says the rock is great, they’re convinced of that. The “problem” is that it costs a heck of a lot more to drill a deep Utica well than it does a Marcellus well. If Rice can squeeze more costs out of drilling a Utica well, it will be profitable. 

    He also said something very interesting about the geography of the Utica–that he believes 90% of the gas that will come out of the Utica play will come from just three or four counties…
    Back to Top

    Magnum Hunter looking to divest stake in pipeline unit

    Oil and natural gas producer Magnum Hunter Resources Corp said it expected to raise $600-$700 million by selling its 45.53 percent stake in its natural gas gathering subsidiary, Eureka Hunter Holdings.

    A deal will allow Magnum Hunter to restructure its balance sheet and shore up liquidity, the company said. (

    Magnum Hunter said in May it expected to raise about $50 million by selling a part of its interest in Eureka Hunter.

    The company, focused on natural gas production in the Marcellus and Utica Shales, has been struggling to cope with weak prices for the fuel.

    Magnum Hunter said in January it cut all capital spending as commodity prices were expected to remain low this year.

    Magnum Hunter had $13.7 million in cash and cash equivalents and total debt of $951 million as of March 31, according to Thomson Reuters data.

    Morgan Stanley Infrastructure, the U.S. bank's infrastructure investing arm, owns a majority stake in Eureka Hunter.

    Eureka Hunter owns Eureka Hunter Pipeline LLC, which operates natural gas pipelines in southeastern Ohio and northern West Virginia

    Eureka Hunter also owns TransTex Hunter LLC, which provides natural gas treating and processing service solutions.
    Back to Top

    Oklahoma drilling regulator calls spike in quakes a "game changer"

    A spike in earthquakes across Oklahoma is forcing the state's energy regulator to urgently consider tougher restrictions on drilling activity, a spokesman said, calling it a "game changer."

    From June 17 to 24, there have been 35 earthquakes of magnitude 3.0 or greater in the state, according to the Oklahoma Geological Survey. Particularly worrying for regulators, some of the recent quakes occurred in the Oklahoma City metropolitan area, where there are no high-volume wastewater injection wells.

    The spike in quakes comes roughly two months after new rules governing the disposal of briny wastewater from drilling took full effect. Drillers were ordered by the Oklahoma Corporation Commission (OCC), which regulates the oil and gas industry, to stop disposing wastewater below the state's deepest rock formation, believed to be one of the main causes of the quakes, and to reduce the depth of wells that already go that deep.

    "We have to approach it anew," said Matt Skinner, a spokesman for the OCC. "There's been a huge increase. That's a game-changer," he said, referring to the recent jump in tremors.

    Oklahoma has been grappling with a rise in seismic activity since 2009, amid an expansion of drilling activity that has doubled the state's oil output in the last seven years.

    The energy boom has created jobs and contributed to state coffers, but many residents are deeply uneasy about the tremors. Oklahoma has become ground zero in the oil industry's struggle to break the connection between production and earthquakes.

    It was not immediately clear why there was a spike in quakes in the last eight days. Prior to this period, quakes of magnitude 3.0 or greater typically hit Oklahoma once or twice a day, according to data from the U.S. Geological Survey (USGS). Prior to 2009, there were only one or two such quakes in the state in a year.

    Scientists attribute the general rise in tremors to soaring amounts of salty wastewater being injected underground. Injected liquid volumes have doubled from about 80 million barrels per month in 1997 to about 160 million barrels per month in 2013, according to a study by Stanford researchers published this month.

    The drilling boom is due in part to the expanded use of hydraulic fracturing, or "fracking," to access oil and gas in tight shale formations, although the salty wastewater being injected into Oklahoma's disposal wells is found naturally in formations along with the oil and gas, and are not fracking fluids.

    Other oil and gas states have also experienced increased seismic activity related to expanded water injection. Arkansas responded with a moratorium on disposal wells in the most sensitive areas, a plan favored by some Oklahoma activists and at least one state legislator.

    But most of Oklahoma's elected officials have been reluctant to shackle an industry that directly generated more than 7 percent of state revenues last year in the form of production taxes from companies like Devon Energy Corp, SandRidge Energy Inc, and Chesapeake Energy Corp.
    Back to Top

    Alternative Energy

    New record for UK green power

    A record 22.3% of UK electricity was generated by renewables such as wind, biomass and solar in the first three months of this year, figures show.

    The share of power coming from renewables was 2.6 percentage points up on the first quarter of last year and slightly higher than in the previous three months, the data from the Department of Energy and Climate Change revealed.

    The total amount of electricity generated by renewables increased by 15% for the first three months of the year, compared to the same period last year, with biomass power plants almost doubling their output.

    Electricity from solar panels was up 60% on the first quarter last year, due to more installations, while wind generation increased by 5.3%, with more turbines installed – particularly offshore – offsetting slightly lower wind speeds than in January to March 2014.

    Overall, low-carbon power accounted for more than two-fifths (41.4%) of total electricity generation in the first three months of 2015, with nuclear up from 17.6% of the mix in the beginning of 2014 to 19% this year.

    Coal-fired generation fell from 37% in January to March 2014 to less than a third (31.3%) for the first three months of this year, while gas was up from 23.2% to a quarter (25%) in 2015.
    Back to Top

    GE signs first deal after Australia passes clean-energy target

    General Electric Co. agreed to help develop a A$450 million ($348 million) wind farm in Australia, spurred by parliament’s approval of a new renewable energy target.

    GE will supply turbines to the 240-megawatt Ararat wind farm in the state of Victoria that’s being developed with partners including Renewable Energy Systems Ltd., according to a statement from the companies. The development is expected to become the nation’s third-largest wind farm.

    The legislation passed earlier this week to revise the target ends a period of uncertainty that crippled spending in the clean-energy industry. That should pave the way for more than A$14 billion in new investment in large wind and solar projects, Bloomberg New Energy Finance estimates.

    “With certainty comes investment,” Geoff Culbert, GE’s local chief executive officer, said in the statement announcing the first contract to be signed since the policy resolution.

    The Victorian wind farm has a power-purchase agreement with the government of the Australian Capital Territory covering about 40 percent of the energy. Partners Group AG, RES, OPTrust and GE will finance the development, while Downer EDI Ltd. will help build the project, according to the statement.
    Back to Top

    Solar energy company Sunrun files for IPO

    U.S. solar energy company Sunrun Inc on Thursday filed with U.S. regulators for an initial public offering of its common stock.

    Credit Suisse, Goldman Sachs & Co and Morgan Stanley were among the underwriters for the IPO, the company told the U.S Securities and Exchange Commission in a preliminary prospectus. 

    Sunrun, which installs and maintains solar panels for homes, has about 79,000 customers across 13 states, as of March 31.

    Another clean energy company SolarCity Corp, backed by Tesla Motors Inc founder Elon Musk, has seen its shares rise more than seven-fold since their debut in 2012.

    The residential solar market in the United States has grown dramatically in recent years, largely due to cheap prices for panels, particularly those made in China.

    President Barack Obama's fiscal 2016 budget proposes a boost in funding for clean energy by 7 percent and a new $4 billion fund to encourage U.S. states to make faster and deeper cuts to emissions from power plants. 

    Sunrun's filing, which included a nominal fundraising target of about $100 million, did not reveal how many shares the company planned to sell or their expected price.

    Sunrun, which intends to list its common stock on the Nasdaq under the symbol "RUN," listed venture capital firms Foundation Capital, Accel Partners and Sequoia Capital among its major shareholders.

    The net proceeds from the offering will be used for general corporate purposes, including working capital and capital expenditures, Sunrun said.

    The company's net loss more than doubled to about $162.6 million in 2014 from 2013, while total revenue almost quadrupled to $198.6 million.

    The amount of money a company says it plans to raise in its first IPO filings is used to calculate registration fees. The final size of the IPO could be different.
    Back to Top

    Swansea Bay tidal lagoon power price questioned

    The value for money of a proposed £1bn Swansea Bay tidal lagoon energy project has been questioned in Parliament.

    UKIP MP Douglas Carswell asked whether it was right for the UK government to promise to pay three times the market rate for power generated by the scheme.

    Energy Minister Andrea Leadsom said the price had yet to be agreed, but ministers were keen to promote "new ideas and new technologies".

    She said securing a diverse set of energy sources was "vital".

    The UK government gave the go-ahead to the project earlier in June.

    However, the policy of guaranteeing minimum prices to encourage the development of renewable energy sources has been controversial.

    Speaking during energy questions in the Commons on Thursday, Mr Carswell asked whether guaranteeing a price for energy was a good use of public money or good for competitiveness.

    "The tidal lagoon project in Swansea certainly will generate renewable energy," he said.

    "However, it will mean the government guaranteeing a payment for that energy three times the current market price."

    In response, Ms Leadsom said: "A diverse set of energy sources is vital, not just for our energy security, but also for our decarbonisation and for keeping the costs down to consumers."
    Back to Top


    Germany's K+S confirms takeover proposal from Potash Corp

    German potash producer K+S said on Thursday it has received a takeover proposal from larger Canadian fertilizer producer Potash Corp of Saskatchewan Inc, potentially marking the start of a new takeover saga in the industry.

    K+S said it was assessing its options. Two sources close to the matter however, said K+S will likely reject the 7 billion euro ($7.8 billion) takeover offer as being too low. The sources said the offer values K+S at just over 40 euros a share.

    One of the sources said that the offer is "opportunistic" as it does not reflect the value of the Legacy potash project that K+S is building in Canada. K+S has spent 2 billion euros on that mine that is now 75 percent completed.

    Saskatoon, Saskatchewan-based Potash Corp confirmed that it has made a "friendly proposal to K+S," adding that "there is no certainty that any offer will ultimately be made."

    This is Potash Corp's second tilt at K+S. A bid to acquire a majority stake in 1997 was blocked by the German competition watchdog. In 2010, Potash Corp itself was the target of a $39 billion hostile bid from mining giant BHP Billiton, but that deal too was foiled after the Canadian government blocked it.

    Since then, the once tight global potash market has turned. Potash Corp, long the swing producer, has seen that role eroded in recent years as the potash market has become over-supplied. Miners have built capacity, and competition among sellers has heated up since the 2013 breakup of Belarussian Potash Company, one of the world's biggest potash trading partnerships.

    UBS analyst Brian MacArthur, in a note to clients, said it is hard to evaluate a deal without details, but added he thinks that a "deal might make strategic sense for Potash Corp given potential operating, logistics, and marketing synergies."

    The German company's shares were up 13.3 percent at 32.45 euros in after-hours trading in Frankfurt. The shares had closed 1.5 percent higher at 29.05 euros in the regular trading session before the report came out.

    Shares in Potash Corp, which is mulling selling its shares in Chile's SQM and Israel Chemicals, ended up nearly 5 percent in New York at $31.89.

    Potash Corp, which is finishing a big expansion program that should free up cash flow, is currently operating well below full capacity because of weak potash prices.
    Back to Top

    Gene-modified wheat at centre of row fails to repel aphids

    A genetically engineered wheat that gives off a special smell designed to repel aphids has flopped in field-scale tests, underscoring the difficulty of harnessing the controversial technology.

    Scientists said the result was disappointing but they aim to amend the process to do better in future, believing that genetic modification (GM) offers a way to develop resilient crops that don't need to be sprayed with pesticides.

    Critics, however, fear such GM plants risk contaminating the environment and could jeopardise the food chain.

    The work at Britain's Rothamsted Research institute in southern England was the first test of a crop engineered to release an anti-insect pheromone, or smell, and it provoked protests from anti-GM activists who threatened -- but failed -- to rip up the plants.

    While the crop survived human attack, however, it fared less well against the aphids.

    Results from the five-year project published in the journal Scientific Reports on Thursday showed the GM wheat did not repel aphid pests in the field as hoped, despite initial success in laboratory tests.

    Aphids damage wheat by sucking sugar out of plants and spreading viruses, prompting extensive spraying with insecticides made by companies like Bayer and Syngenta.

    The Rothamsted team added genes to make the wheat produce the pheromone (E)-beta-farnesene, which is found naturally in other plants, including peppermint, and acts as an alarm call telling aphids to disperse.

    It is not clear why the GM crop failed to work as expected but scientists said the aphids may have simply become attuned to the constant alarm signal, in the same way that people get used a car alarm that never stops ringing.

    One idea now being pursued is to make the plants produce "puffs" of pheromone when aphids arrive, said Rothamsted's John Pickett, who still sees a future for pheromone-based repellents.

    "We see this as heralding a process of controlling insects without necessarily using a spray-on toxicant insecticide," he told reporters. "It's the beginning of an alternative approach."
    Back to Top

    Base Metals

    Zambia tells Vedanta unit to delay processing Chilean copper

    Zambia has asked Vedanta Resources' Konkola Copper Mines (KCM) to delay the processing of copper concentrate it imported from Chile until it puts in place safety measures to avoid pollution, Zambia's deputy minister of mines said on Thursday.

    KCM said on June 3 it had imported its first semi-processed copper from Chile to ensure its Nchanga smelter operates at full capacity. 

    Deputy minister Richard Musukwa said the government had asked KCM not to start processing the Chilean copper concentrates because they had high levels of arsenic, a toxic substance.

    Musukwa told parliament the level of arsenic in copper concentrates mined in Zambia was 1 percent but the material imported from Chile had a level of around 4 percent.

    "When we noticed that these concentrates from Chile had 4 percent arsenic, we instructed KCM not to proceed with the processing until appropriate safety measures are taken," he said.

    KCM bought 5,000 tonnes of copper concentrates from Chilean state-run firm Codelco and will smelt the semi-processed material at the Nchanga smelter, which has an annual production capacity of 311,000 tonnes. [IDn:L5N0YP0RG]

    Musukwa said KCM resorted to imports of copper concentrates because its Nchanga smelter was operating at only about half its capacity.

    KCM has been blending its concentrates with those from other local mines and the Democratic Republic of Congo but these have not been enough to reach the Nchanga smelter's capacity.

    Copper production in Zambia, Africa's second-largest producer of the metal, dropped to 708,000 tonnes in 2014 from 760,000 tonnes in 2013.
    Back to Top

    Teck suspends Quebrada Blanca cathode production after ground movement

    Canada's Teck Resources Ltd said it will suspend copper cathode production at its Quebrada Blanca operations in northern Chile after unexpected ground movement was observed near its plant on Thursday. 

    The duration of the production interruption and impact on production are unknown, the base metals miner said. Teck said its preliminary investigation into the cause of the movement is expected to take at least one week. 

    Mine operations not affected by the plant are continuing, said the company.
    Back to Top

    Altona Mining : Sign Landmark Agreement with Sichuan Railway Invest.

    Altona Mining Ltd has announced a deal with construction group Sichuan Railway Investment Group which will see the Chinese state-owned enterprise contribute US$214 million in cash to fund the Cloncurry Copper Project in to production. 

    Under the newly signed framework agreement, Altona and SRIG will - subject to approvals and confirmatory due diligence - form a joint venture over the Cloncurry Copper Project, with SRIG contributing US$214 million to earn its 60% ownership. Altona will hold the remaining 40% and has to contribute only US$38 million, which the company can immediately fund through its cash balance of $47 million, the result of selling its Finnish Outokumpu operations for US$95 million in July 2014. 

    Altona's core asset is the Cloncurry Copper Project near Mt Isa in Queensland and is one of Australia's largest undeveloped copper projects with a resource containing 1.52 million tonnes of copper and 0.38 million ounces of gold. The first development envisaged is the 7 million tonnes per annum Little Eva open pit copper-gold mine and concentrator. Little Eva’s proposed annual production is 38,800 tonnes of copper and 17,000 ounces of gold for a minimum of 11 years.
    Back to Top

    Guinea signs infrastructure sharing agreements with two bauxite miners

    Guinea and its state miner have signed infrastructure sharing agreements with two of the country's leading mining companies in an effort to accelerate development of large-scale bauxite projects, a government official and one of the companies said.

    The accords, hammered out during negotiations in Paris, detail how key infrastructure, including a railway and port in the northwestern Boké region, will be shared.

    They involve state-owned Compagnie des Bauxites de Guinée (CBG), a local unit of Russia's Rusal, known as COBAD, and GAC, owned by Emirates Global Aluminium (EGA).

    CBG is both the concessionaire and a user of the infrastructure which is managed by the state mining infrastructure agency, ANAIM.

    "The multi-user railway contract between ANAIM, CBG, GAC and COBAD defines the common user rules for the Boké railway," Saadou Nimaga, legal adviser at Guinea's mines ministry, told Reuters.

    Rusal, the world's largest aluminium producer, launched the Dian-Dian bauxite project last year. Bauxite is used to produce alumina, which is used for aluminium production.

    Dian-Dian is the world's largest bauxite deposit with reserves of 564 million tonnes, according to Rusal.

    The company plans to invest $220 million in the first stage of the project, which foresees the construction of a mine with an annual capacity of 3 million tonnes by 2016 with the potential for an increase of up to 6 million tonnes.

    "We are happy that we have come to a mutual understanding with our partners and signed a multilateral agreement to use the existing railway infrastructure of the Boké province together," Rusal's Chief Executive Vladislav Soloviev said in a statement.

    In addition to the railway agreement, Emirates Global Aluminium's GAC signed accords related to the use of the port of Kamsar and the conception, financing and construction of a new ore terminal there, Nimaga said.

    The GAC project's first phase, including construction of the mine at Sangaredi in the Boké region, is expected to cost Emirate's Global Aluminium around $1 billion.
    Back to Top

    Steel, Iron Ore and Coal

    Japan to stop inefficient coal-fired power plants being built

    Japan plans to stop power firms building coal-fuelled plants that are inefficient and dirty as it manages the competing demands of cutting greenhouse gas emissions while stepping up use of the fuel after the Fukushima disaster, officials said.

    The government has come under fierce criticism from environmentalists and more subtle pressure from allies over its support for coal, the use of which has surged to record levels after the shutdown of reactors.

    The government aims to have coal account for 26 percent of the electricity mix by 2030. After Fukushima it went up to nearly a third, against 24 percent before the meltdowns.

    "The energy mix is based on the assumption that the average fuel-efficiency of coal-fired plants across the country will be equivalent to the level of ultra-super-critical plants, the most efficient," said an official at the Ministry of Economy, Trade and Industry (METI).

    "To make it happen, we must tighten up the regulations," he said, declining to be named as an official announcement has not been made.

    Ultra-super-critical plants get the most energy from coal, although more efficient technologies are emerging.

    The government is opening up the $65 billion retail electricity market to full competition from next April. That has added to a surge in investment in coal, seen as one of the cheapest fuels, with plans to build about 40 more coal stations in the next decade.

    Japan's coal-fired plants have total capacity of around 46 gigawatts. About half of them are old and relatively inefficient, according to the ministry.

    "We want to ensure highly efficient technology is put in place in all new coal-fired plants including small ones, which tend to be less efficient than large ones," the official said.

    Japan also plans to adopt more advanced technologies such as integrated gasification combined cycle, which can cut emissions by 20 percent, and bring them into commercial operation by 2020, said METI's deputy director, Yuichi Takagi.

    "This is in line with our energy mix and climate goals," Takagi said. Japan aims to cut CO2 emissions by 26 percent from 2013 levels by 2030.

    The environment ministry recently pushed back on the growing use of coal to generate power by submitting a rare objection to plans for a new 1.2 gigawatt coal-fired plant.
    Back to Top

    Blackhawk Mining enters purchase agreement with Patriot Coal

    State Journal reported that Lexington, Kentucky's Blackhawk Mining LLC has entered a definitive agreement to purchase certain mining assets from Patriot Coal Corp.

    Patriot first announced its intent to sell the majority of its assets to Blackhawk on June 2, shortly after filing for bankruptcy with the U.S. Bankruptcy Court for the Eastern District of Virginia in May.

    The Court approved bidding procedures for the sale of Patriot assets June 23, and named Blackhawk as the stalking horse bidder for the previously identified assets.

    “A number of” Patriot's active operations and reserve areas at its Panther, Rocklick, Wells, Kanawha Eagle, Paint Creek and Midland Trail mining complexes, all located in southern West Virginia, are included in the purchase agreement.

    Under the agreement, Blackhawk would issue to Patriot's secured lenders new debt securities plus Class B Units providing an ownership stake in Blackhawk.

    Mr Nick Glancy, Blackhawk president, said that “After weeks of robust discussion with Patriot and its stakeholders, we are pleased to complete this next step of the process. We are excited about the opportunity to combine Blackhawk's diversified portfolio of operations with Patriot's position as a leading supplier of premium metallurgical coals. We will continue to work diligently to complete the transaction by late September or early October.”
    Back to Top

    Australian Q3 semi-soft coal settled at $74/t

    Mining companies Glencore and Rio Tinto have settled the Australian semi-soft coking coal contract price with Nippon Steel & Sumitomo Metal Corporation at $74/t FOB for July-September loading, $7 lower than in Q2 2015, according to market sources on June 24.

    The transaction is likely to be adhered to by other steelmakers in the Asia-Pacific region.

    The 9% quarter-on-quarter price decline is smaller than the 15% drop seen for Q3 premium hard coking coal, which was set at $93/t FOB Australia last week.

    For the third quarter, semi-soft accounts for 80% of the premium hard coking coal price, up from 74% in Q2.

    The long-term contract settlement is also a few dollars above spot clearing prices into China, which were assessed on June 23 at $79.25/t CFR China, equating to a Panamax netback calculation of $70.55/t FOB Australia.

    One market source indicated that it was surprising to see semi-soft prices reaching lower than the alleged PCI settlements of $72/t and $73/t FOB since historically it has been the opposite.

    The source said that this quarterly price structure was mirroring that of the spot market where semi-soft has outpaced PCI.
    Back to Top

    Bill to strengthen trade enforcement for US steel industry headed to the president's desk

    On Thursday, the US House of Representatives passed legislation that includes the Leveling the Playing Field Act, a bill introduced by US Senators Rob Portman (R-Ohio) and Sherrod Brown (D-Ohio) that will give US companies – like the steel industry – new tools to fight against unfair trade practices. Now the bill is headed to President Obama’s desk to become law.
    Back to Top

    Indonesian steel industry demands levies on imports

    The Jakarta Post reported that Indonesian iron and steel processing companies have called on the government to provide comprehensive protection for the entire domestic steel industry as the existing and planned regulations protect only the upstream sector. Indonesian Iron and Steel Industry Association (IISIA) executive director Mr Hidayat Triseputro said that the government’s recent plan to increase steel import duties under the Most Favored Nations (MFN) clause is seen as lacking protection for the downstream industry

    He said “We are proposing that the government harmonizes its protection simultaneously from the upstream to the downstream steel industry, because the downstream side is hampered by unfair trading and massive imports.”

    According to his business group’s review, Indonesia should follow the example of iron and steel associations in other countries and regions, such as the US, Europe, Turkey and South America, which have issued petitions against China’s alleged unfair trade policy.

    He said “At the ASEAN level, there is an understanding that we need to issue a petition that there is unfair trade conducted by our partner in a free-trade agreement [FTA]. The process will take a quite long time, so we need to improve our own regulations.”

    The MFN steel tariff policy is expected to be imposed in the second half of this year in an effort to respond to the influx of imported steel, leading to a decline in local steel production of between 30 and 40 percent.

    The MFN steel tariffs are expected to run alongside the implementation of a steel import duty hike, which was announced in May, to between 15 percent and 40 percent, up from between 0 percent and 5 percent at present.
    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