Mark Latham Commodity Equity Intelligence Service

Tuesday 21st July 2015
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    End Game

    The prices of raw materials from oil and gold to copper, cotton and sugar tumbled, underscoring an increasing aversion to commodity investments as the Federal Reserve prepares to raise interest rates for the first time in nearly a decade.

    U.S. oil prices dipped below $50 a barrel on Monday during intraday trading for the first time since April, while gold slid 2.2% to its lowest level in five years.

    The drops extend a retreat from the commodity sector that has picked up speed in recent months. Hedge funds and other investors are holding more bearish than bullish wagers on gold for the first time on record going back to 2006, according to data released Friday by the Commodity Futures Trading Commission. Investors cut their bullish bets on oil to the lowest level since March.

    Investors pulled roughly $1.1 billion from commodities-sector funds during the second quarter of 2015, according to fund-data provider EPFR Global.

    Driving the selloff are expectations that the Fed will raise borrowing costs in coming months, a move that investors expect to further boost the dollar and pressure the prices of commodities, which generally are priced in the U.S. currency. A rising dollar makes raw materials less affordable to overseas investors, while higher interest rates tend to draw money into yield-bearing assets and away from commodities, which pay their holders nothing and often carry storage costs.




    Commodity prices fell close to the lowest level since 2002 on Monday, under pressure from a rout in precious metals, lower oil prices and weakness in most agricultural and soft commodities.

    The excess return Bloomberg Commodity index, which tracks a basket of 22 materials, was on course for its lowest close in 13 years as strengthening dollar weighed on well-supplied markets for energy, metals and grains.


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    Across commodities, there are increasing signs that the more than decade-long “commodity supercycle” has ended.

    Producers have responded to several years of elevated prices by bringing on new supplies, which have more than met growth in demand from emerging markets.

    Gold dropped below $1,100 an ounce for the first time in five years; US WTI crude oil futures fell within a few cents of $50 a barrel, less than half its level of July last year; and copper in London slipped back towards a six-year low near $5,400 a tonne.




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    Seeing as gold is collapsing we had better watch velocity

    Fed Lifts Capital Requirements for Banks



    As originally proposed, the size of the surcharge would have been determined based on a measure of each bank’s systemic importance relative to other global banks. This made individual surcharges somewhat unpredictable; they would depend not just on a bank’s own actions but those of others, too. So, a bank seeking to reduce its surcharge by shrinking could be stymied if other banks took the same tack.

    That wasn’t what the Fed wanted. Discussing the new rules, Chairwoman Janet Yellensaid the goal was to force banks either to shrink or to hold substantially more capital.

    The revised rule uses a fixed measure of systemic importance. That should make the surcharge more predictable.


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    China’s energy guzzlers H1 power use down 1.5pct on yr

    Power consumption of China’s four energy-intensive industries dipped 1.5% on year to 819.1 TWh over January-June this year, accounting for 30.8% of the nation’s total power consumption, the China Electricity Council (CEC) said on July 21.

    http://en.sxcoal.com/0/127153/DataShow.html
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    Power producer Talen Energy to acquire Mach Gen for $1.18 bln

    U.S. power company Talen Energy Corp said on Monday it would acquire rival Mach Gen LLC for $1.18 billion to expand in the wholesale power market.

    Mach Gen owns more than 2,500 megawatts of natural gas-fired generating capacity.

    http://www.reuters.com/article/2015/07/20/mach-gen-ma-talen-energy-idUSL3N1003BT20150720
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    Oil and Gas

    Hedge funds turn unusually bearish on oil

    Hedge funds and other money managers have rarely been so bearish about the outlook for oil prices, according to the latest positioning data from the U.S. Commodity Futures Trading Commission.

    Hedge funds boosted short positions in futures and options linked to the price of U.S. crude to 138 million barrels by July 14, from 84 million four weeks earlier. Over the same period, they cut long positions from 340 million to 292 million barrels.

    The hedge fund community has an inherent long-bias, but the ratio of long to short positions, at just over 2:1, down from 4:1 a month ago, is among the lowest in the last six years (link.reuters.com/naw25w).

    The number of hedge funds with reported short positions was equal to the number of longs last week, which is highly unusual.

    The liquidation of long positions and establishment of fresh shorts help explain the downward pressure on U.S. crude prices over the last month.

    The market has not been this bearish about the outlook for oil prices since March, when investors were worried about rising inventories and the possibility storage space at oil refineries and tank farms would run out.

    In March the number of short positions was much higher, at around 200 million barrels, but so was the number of long positions, at around 380 million barrels.

    Prices subsequently rose more than $16 per barrel, about 36 percent, as the short positions were unwound over the next two months.

    There is some potential for hedge funds to add to their current short positions and reduce their long exposure further, putting extra downward pressure on crude prices in the next few weeks.

    But hedge funds are already running unusually short, and at least some of those positions need to be bought back, which could moderate selling pressure and push prices higher again.

    http://www.reuters.com/article/2015/07/20/oil-hedgefunds-kemp-idUSL5N1001DS20150720
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    Iran seeks to regain market share regardless of oil price

    Iran will emphasize regaining oil sales it lost due to sanctions over helping to prop up prices once curbs that choked off the nation’s crude exports are lifted.

    The Persian Gulf producer plans to restore output to the level it achieved before the economic curbs crippled production and exports, Oil Minister Bijan Namdar Zanganeh said Monday in Tehran. Iran wants to pump almost 4 MMbopd within seven months once sanctions are removed and 4.7 MMbopd as soon as possible after that, he said.

    Such an increase may cause oil prices to fall, Zanganeh told reporters after meeting with Germany’s Vice Chancellor Sigmar Gabriel. “But that doesn’t mean we won’t enter our oil into the market.”

    Iran had the second-biggest output in OPEC before the European Union banned purchases of its crude in July 2012. The country is now fourth-largest in the Organization of Petroleum Exporting Countries, with output in June averaging 2.85 MMbopd compared with 3.6 MMbopd at the end of 2011, according to estimates compiled by Bloomberg.

    Under the nuclear agreement Iran and six world powers reached in Vienna last week, the U.S. agreed to end efforts to limit Iran’s oil sales. The EU said it would end the bloc’s embargo on imports once Iran complies with obligations to scale back its nuclear program.

    Countries that sold more oil and took market share from sanctions-bound Iran will have to adjust as the country restores its output and exports to historical levels, Zanganeh said, without identifying such nations.

    http://www.worldoil.com/news/2015/7/20/iran-seeks-to-regain-market-share-regardless-of-oil-price
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    Halliburton profit beats estimates as costs cuts pay off

    Halliburton Co, the world's No.2 oilfield services provider, reported a better-than-expected quarterly profit as costs cuts helped offset the impact of a steep drop in drilling activity.

    The company also said it was "fully committed" to completing its takeover of smaller rival Baker Hughes Inc, after the U.S. Department of Justice extended its review of the deal.

    Halliburton's shares rose 3 percent to $41.25 in premarket trading on Monday.

    The Halliburton-Baker Hughes deal is facing stiff regulatory scrutiny because the companies have overlapping businesses in the United States, Asia and Europe.

    Halliburton has put up three drilling businesses for sale to alleviate regulatory concerns and said on Monday it was "pleased with the prices and level of interest" it had received.

    The company was confident of achieving cost synergies of nearly $2 billion from the deal regardless of market conditions or cost cuts moves made by either company to date, Chief Executive Dave Lesar said in a statement.

    The company and its peers have been cutting costs and laying off thousands of workers in response to lower drilling activity globally due to the slump in crude oil prices.

    Halliburton's revenue from North America slumped 38.5 percent in the second quarter ended June 30. Revenue from outside the region fell only 12 percent. North America accounts for 45 percent of the company's revenue.

    Total revenue slumped 26.5 percent to $5.92 billion, but beat analysts' average estimate of $5.78 billion.

    Halliburton's net profit slumped 93 percent to $53 million, or 6 cents per share. Excluding charges related to the pending Baker Hughes deal and other items, adjusted profit was 44 cents.

    According to Thomson Reuters I/B/E/S, the company earned 38 cents per share, excluding depreciation cessation on assets held for sale, deal-related costs, impairments and other charges. That was higher than analysts' average estimate of 29 cents.

    Through Friday's close of $39.99, Halliburton's shares have fallen about 44 percent in the last 12 months, compared with a 38 percent fall in the Dow Jones U.S. oil equipment and services companies index.

    http://www.reuters.com/article/2015/07/20/halliburton-results-idUSL3N1003B920150720

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    How much oil does Texas produce? The EIA has a better way to count

    The U.S. Energy Information Administration is trying to make its oil production estimates faster and more accurate. That will mean going around Texas’ top industry regulator and straight to the producers to get the numbers.

    Recent price swings in crude oil markets have necessitated the shift, said Gary Long, an EIA petroleum engineer, as production has swung faster during the downturn than it did at any point during the long buildup of the shale oil boom.

    “We were basically just using a ruler and adding 50,000 (barrels) a day, and that worked pretty well for a while,” he said. “But after the downtown and the talk of the (production) rollover… we thought ‘Our methodology isn’t going to see that.'”

    The Lone Star State produces the most oil in the U.S. The EIA’s most recent April figures put its total bounty at about 3.71 million barrels of crude per day. But that figure uses the methodology that the EIA is moving away from, and it isn’t perfect.

    The projection starts with data from the Texas Railroad Commission, a state agency which receives reports from producers about how much oil each lease they own has produced. The Texas Railroad Commission figures are messy. Often, the forms aren’t complete or contain errors, and the Railroad Commission will file the problem reports in a pending file that doesn’t get counted.

    That can leave a lot barrels out of the figure. For example, the Texas Railroad Commission reported a preliminary March production of 2.30 million barrels per day, while the EIA gives 3.78 million barrels per day in the same period.

    Over about six months or so, Railroad Commissions figures are adjusted upwards as the paperwork is gradually moved out of the pending file. Eventually, the number ends up within a few percent of the EIA estimate, Long said.

    The Texas Railroad Commission declined to be interviewed on the subject, but a spokeswoman for the group noted it updates its figures as late or corrected reports come in.

    To compensate for the Railroad Commission’s data lag, the EIA looks at how months-old Railroad Commission data has been revised and applies that historic adjustment to the best available data it can get for the present month. The process works well when the past data is similar to present data, but can miss the mark when things move fast enough to create a disconnect between the past and present.

    And moving quickly is what the oil markets have been doing recently. The number of active rigs is down by 60 percent from an October 2014 high, and prices have fallen by about half since last year. Recently, another correction has driven crude down $10 per barrel and ended a fleeting period of stability at $60 per barrel.

    Accordingly, the EIA has been experimenting with going straight to producers to get its production data. The process would resemble how the group arrives at its natural gas data, Long said.

    The top 80 percent or so of producers by the amount of crude they pump would report to the EIA how much they produced across the state. That data would then form the backbone of a production estimate by the EIA, whose analysts would estimate the rest.

    “We actually started surveying operators or producers,” Long said, saying that the next monthly estimate may be made using the new methodology if all goes well. “That data has started coming in. We’re looking at it, we’re evaluating it.”

    http://fuelfix.com/blog/2015/07/20/how-much-oil-does-texas-really-produce-the-eia-now-says-it-has-a-better-way-to-count/#26983101=0
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    Halliburton secures $500 mln to fund drilling in old wells

    Halliburton Co said it had tapped BlackRock Inc for $500 million to help fund drilling in existing shale wells, the first such move by a major oilfield services provider at a time when oil producers are shying away from drilling new wells.

    Market leader Schlumberger NV and Baker Hughes have touted refracking, the practice of fracking existing wells, as means for oil producers to save money. Drilling normally accounts for about 40 percent of the cost of a new well.

    "Though a relatively small market today, we see significant runway for refrac in the future," Halliburton President Jeffrey Miller said on a post-earnings call on Monday.

    Oil and gas companies have said refracking is still too unpredictable, but some such as Devon Energy Corp and Chesapeake Energy Corp are using the technology to revive output from existing wells.

    The funding could help Halliburton speed up adoption of refracking, Edward Jones analyst Rob Desai said.

    "I think people are wondering why Halliburton themselves weren't providing some of that financing." Desai said Halliburton tapped the capital market to help it conserve capital given the Baker Hughes deal and the effect of the oil price slump on its own business.

    Halliburton's revenue from North America slumped 38.5 percent in the second quarter ended June 30. Revenue from outside the region fell 12 percent.

    The company said it expects an "uptick" in activity, including refracking, later this year and a "meaningful recovery" only in 2016.

    http://www.reuters.com/article/2015/07/20/halliburton-results-idUSL3N1003B920150720
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    Consol Energy Warns It Will Report a Second-Quarter Loss

    Consol Energy Inc. on Monday warned it would report a loss for its second quarter, largely due to lower energy prices.

    In addition, Consol—one of the country’s biggest natural-gas producers—said it would record a “significant” write-down on its conventional shallow oil and gas assets on account of continued depressed NYMEX forward prices.

    The Pennsylvania company didn’t indicate how wide of a loss it expects to post. According to Thomson Reuters, analysts have expected the company to swing to a profit in the June quarter and report $10.4 million, or 10 cents a share.

    In April, Consol projected second-quarter gas production of about 71 billion cubic feet and coal production of 7.1 million tons to 7.73 million tons. The company said Monday that it still expects to hit those targets.

    Like many other energy companies grappling with sharply lower energy prices, Consol has this year trimmed its capital budget and it is in the midst of a restructuring program designed to help it scale back its exposure to coal. The company recently sold a stake in a new master limited partnership, CNX Coal Resources.

    Shares in the company, down 43% over the past three months, were inactive premarket. Consol is slated to report second-quarter results next week.

    http://www.wsj.com/articles/consol-energy-warns-it-will-report-a-second-quarter-loss-1437391873
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    CONSOL Energy/Noble Energy Rumours Continue to Swirl

    Following up on our CONSOL Energy/Noble Energy rumor from last Friday, MDN now has a second source that delivers a bit more information about the rumor–refining it for us. We told you on Friday that a persistent rumor among those working for or with CONSOL Energy is that Noble Energy is lining up to buy the gas division, CNX . A new source tells MDN that a complete buyout of CNX is not necessarily in the cards–but that Noble Energy is “taking over” the joint venture acreage the two currently hold in a 50/50 deal in the Marcellus/Utica…

    http://marcellusdrilling.com/2015/07/consol-energynoble-energy-rumors-continue-to-swirl/?utm_source=dlvr.it&utm_medium=twitter
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    Oil Explorers Pull Back From Shallow U.S. Gulf in Shift to Shale

    Explorers Mostly Quit Shallow U.S. Gulf in Shift to Inland Shale

    The number of permits for new wells in seas less than 500 feet (152 meters) deep plunged 74 percent to nine during the first six months of this year from a year earlier, according to the U.S. Bureau of Safety and Environmental Enforcement.

    Shallow-water drilling has largely targeted gas in recent decades because most of the crude in fields close to shore had already been discovered and harvested. The glut of gas from shale fields in Texas, Louisiana, Oklahoma and Pennsylvania that crushed prices for the fuel made offshore gas production less attractive.

    “A lot of the players operating on the continental shelf are financially distressed or significantly cutting back on capital spending,” J.B. Lowe, an analyst at Cowen and Company in New York, said in an interview on Monday. “There’s not the same amount of cash flow coming in to justify drilling some of these prospects when there’s better stuff to be had elsewhere.”

    In the years following the April 2010 blowout at the Macondo well that sank the Deepwater Horizon rig, shallow-water permitting for the first half of the year peaked in 2013, when regulators were greenlighting new exploration projects at a rate of one every five days.

    It’s a different story in the deep waters of the Gulf, where exploration is proceeding apace with 2014, undaunted by the rout in crude prices. During the first six months of this year, 31 permits were approved for new wells, unchanged from a year earlier, according to the BSEE.

    Brent crude averaged $59.35 during the period, down 45 percent from a year earlier, according to data compiled by Bloomberg. Deep-water exploratory permitting for the first half of the year since the Deepwater Horizon disaster topped out at 67 in 2012.

    The BSEE defines anything beyond 500 feet as deep water. That differs from much of the industry, which regards 1,000 feet as the cutoff point.

    http://www.bloomberg.com/news/articles/2015-07-20/four-signs-of-pain-in-commodities
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    Nova Scotia natural gas facility gets US export approval

    CTV News reported that a proposed liquefied natural gas facility in Cape Breton has received export approval from the U.S. Department of Energy.

    Bear Head LNG Corporation said that the approval would authorize it to bring up to 12.5 billion cubic metres per year of US natural gas to Canada and to export up to 8 million tonnes of liquefied natural gas per year to free trade countries.

    The company said that it is now waiting for the same authorization from Canada's National Energy Board.

    Environmental approval was granted by Nova Scotia's Environment Department in May.

    The company must address 32 terms and conditions to control greenhouse-gas emissions and to reduce impacts on wildlife, water and wetlands at the site near Port Hawkesbury.

    Construction of the facility is expected to begin next year, with operations to start in 2019.

    http://steelguru.com/gas-oil/nova-scotia-natural-gas-facility-gets-us-export-approval/429986#tag
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    Alternative Energy

    Germany sees big rise in offshore wind capacity

    Germany added more than three times the amount of offshore wind capacity in the first six months of this year than in the same period of 2014 and the country looks set to reach half of its 2020 offshore target of 6,500 megawatts (MW) later this year.

    After regulatory hurdles and questions over onshore connections were cleared, investors have warmed to the technology, helping Germany in its ambitious plan to use more renewable power.

    Data from engineering association VDMA showed that some 1,765 MW of new offshore capacity were installed in the first six months of 2015, compared with 492 MW in January-June 2014.

    Current permissions and construction activity mean capacity additions for the whole of 2015 are likely to reach 2,250 MW, which would take overall installed capacity to 3,300 MW.

    "The expansion is going ahead with further projects," said Joerg Buddenberg, chairman of VDMA's offshore wind committee.

    "Units with a capacity of 704 MW are under construction at nine projects and final investment decisions (FID) have been taken at five further projects," he added.

    But VDMA said investors needed clarity about future network connections in order to look beyond 2020, because offshore projects need long lead times and limited access to onshore connections would hamper their ability to compete.

    "Should the access to networks become a bottleneck again, then cuts to production costs, which is the aim of introducing more competition, would be unnecessarily hindered," said Joerg Kuhbier, chairman of the non-profit Offshore-Windenergie Foundation.

    Renewable legislation planned by the government for 2016 is due to change the fixed-price schemes of the past to auction-based models, bringing green energy gradually into the wholesale power market, away from a costly era of subsidies.

    These subsidies have allowed operators to overcome initial problems and costs of the new technology and exploit the advantages of big turbines and steady winds far out at sea.

    Some 89 percent of Germany's total operating 668 turbines are located in the North Sea and the rest in the shallower and less windy Baltic Sea.

    http://www.reuters.com/article/2015/07/20/germany-renewables-wind-idUSL5N10013L20150720
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    Dubai Electricity & Water Closes Solar-Park Phase Two Financing

    Dubai Electricity and Water Authority arranged financing for a 200 megawatt solar plant that will form part of a planned $3.3 billion solar park, the government-owned utility said.

    The photovoltaic plant is the second phase of a project to produce more than 3,000 megawatts of electricity when completed in 2030, DEWA said Monday in an e-mailed statement. Dubai, the largest sheikhdom in the United Arab Emirates after Abu Dhabi, plans to boost solar production to 7 percent of the national total by 2020 and then to 15 percent by 2030, it said.

    “DEWA will continue to execute these ground-breaking projects in renewable energy and contribute to the growing energy needs of Dubai,” Chief Executive Officer Saeed Mohammed Al Tayer said in the statement, which gave no details about the financing. Officials at DEWA’s media office didn’t answer five phone calls seeking additional information.

    Dubai is developing solar power as it seeks to reduce reliance on natural gas as its main source of energy for local use. Saudi Arabia and Abu Dhabi are also developing renewable energy as oil producers in the Persian Gulf try to curb the burning of costlier fossil fuels to produce power for their growing populations. DEWA tripled its target for solar energy by 2030 to 15 percent from 5 percent of total power capacity, al-Tayer said in a Jan. 21 interview.

    The company will own 51 percent of the new facility, with the remainder shared between Saudi Arabia-based ACWA Power International and TSK, a builder with headquarters in Spain. The plant is to be operational in April 2017.

    http://www.bloomberg.com/news/articles/2015-07-20/dubai-electricity-water-closes-solar-park-phase-two-financing
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    SunEdison, unit to buy Vivint Solar for about $2.2 bln

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

    Demand for Vivint's residential solar systems has soared as the company that went public last october allows homeowners to lease its systems rather than buying them outright. A decline in equipment costs has also helped.

    The distributed generation business, or power produced for local consumption, is expected to contribute about 28 percent of SunEdison's 2016 revenue, post acquisition, from an estimated 18 percent in 2015, S&P Capital IQ analyst Angelo Zino said.

    Installers command higher margins from the residential solar market than more aggresively priced utility-scale projects.

    Vivint, controlled by Blackstone Group LP, operates in seven states, including California and New York.

    SunEdison will give Vivint stockholders $9.89 in cash, $3.31 in stock and $3.30 in notes for every share held. The offer works out to $16.50 per share - a 51.7 percent premium to Vivint's Friday close.

    Vivint shares jumped as much as 46.4 percent to $15.93 on the New York Stock Exchange on Monday. SunEdison shares were up 2.9 percent at $32.48, after touching a near-seven-year high of $33.44.

    SunEdison also said its unit TerraForm Power Inc would eventually buy Vivint's rooftop solar portfolio of 523 megawatts, expected to be installed this year, for $922 million.

    The offer works out to four times Vivint's retained value of $560 million as of March 31, said Raymond James analyst Pavel Molchanov.

    Retained value, a metric commonly used by solar firms, is the value of income from future electricity sales minus costs.

    http://www.reuters.com/article/2015/07/20/vivint-solar-ma-sunedisn-idUSL3N1003EQ20150720
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    Class Action Lawsuit Against Yingli Green Energy Holding Co. Ltd.

    Goldberg Law PC announces that a class action lawsuit has been filed in the United States District Court for the Central District of California against Yingli Green Energy Holding Co. Ltd., for alleged violations of the federal securities laws. Investors who purchased shares between March 18, 2014 and May 15, 2015.

    The class in this case has not yet been certified, and until certification occurs, you are not represented by an attorney. If you choose to take no action, you can remain an absent class member.

    Yingli is a supplier of vertically integrated photovoltaic (PV) modules based in the People’s Republic of China. According to the complaint, the Company made false and/or misleading statements and failed to disclose: (1) that the Company was inappropriately recognizing revenue; (2) that the Company had no reasonable prospects to collect on certain accounts receivable based on historical customer conduct; (3) that the Company was no longer able to borrow from commercial banks to fund its operations; (4) that Yingli’s inability to raise additional capital or borrow funds from commercial banks threatened the Company’s ability to continue as a going concern; and, (5) that, as a result of the foregoing, Defendants’ statements about Yingli’s business, operations, and prospects were false and misleading and/or lacked a reasonable basis. When the truth emerged, the stock dropped harming investors.


    Read more at http://www.stockhouse.com/news/press-releases/2015/07/20/important-shareholder-reminder-goldberg-law-pc-announces-securities-class#LmmpoUuyC7ID5EWz.99
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    Agriculture

    ICL sees progress in tax talks, could renew Israel investments

    Potash producer Israel Chemicals (ICL) said on Monday it would resume investments worth more than 5 billion shekels ($1.3 billion) in Israel if the government scraps a planned rise in taxes on natural resources.

    The company, which has exclusive rights to mine minerals at the Dead Sea, last year halted or put under review nearly $2 billion in domestic projects because of the proposed tax hikes.

    The tax increase was proposed by former Finance Minister Yair Lapid, but his party is no longer part of the governing coalition following a March election, raising the chance the new Likud-led government might soften or even drop the proposal.

    Parliament, the Knesset, is expected to decide on the tax rate by the end of this year.

    Tel Aviv-based ICL, the world's sixth-biggest potash producer and the only big mining company operating in Israel, said on Monday it was making progress in talks with the government on the issue. If taxes are not raised it would plan to invest $1.5 billion in domestic projects over the next four years, including those put on hold last year, it said.

    Most of its projects are in the Negev desert in southern Israel.

    "ICL hopes that this dialogue will help create new and proper arrangements for all the issues, allowing it to invest again in Israel, after such investments were halted in ... 2014," it said in a statement.

    "Within this framework, ICL has presented an investment plan worth over 5 billion (shekels) for projects in the eastern Negev."

    The tax proposal recommended a progressive tax of 25 percent after miners reach an annual return on investment of 14 percent, rising to 42 percent for returns over 20 percent. Israel's government currently takes in about 23 percent in taxation from mining companies but that would ultimately rise to between 46 and 55 percent under the proposal.

    http://www.reuters.com/article/2015/07/20/icl-taxation-idUSL5N1001X020150720
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    Precious Metals

    Large 5 tonne trade dumps Gold

    In Shanghai, close to 5 tonnes of gold was sold on the SGE in a two-minute window just prior to 9:30am, in a market where the normal volume traded is 25 tonnes in an entire day. The August 15 Comex gold contract also saw 7,600 contracts traded in the same two-minute window, though intraday trading data showed an unusual spike in Comex volume just before Shanghai, suggesting Comex gold lead the selloff, but SGE clearly exacerbated it.

    Thianpiriya says the technical outlook is very bearish now for gold, saying “further downside risks remain” and that “other indicators also suggest the likelihood of an immediate rebound is low.”

    Gold fell 1% on Friday after the People's Bank of China revealed lower than expected gold reserves. All the signs coming out of the world's biggest gold consumer right now are cautious.

    “We would be sellers of rallies, and wary of buying dips,” Thianpiriya says.

    Here’s a chart of the crazy move in the gold price.



    Read more: http://uk.businessinsider.com/gold-price-flash-crash-caused-by-five-tonnes-of-chinese-bullion-2015-7?r=US&IR=T#ixzz3gSDyK6fZ

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    Evolution achieves record FY output, lower costs

    Australian gold miner Evolution Mining has reported record gold production for the three months to June 30, as well as for the full-year, as both the Edna May and Mt Carlton operations delivered strongly. Gold production for the June quarter reached 113 821 oz, which was up from the 103 305 oz delivered in the previous quarter, while full-year gold production was up by 2.3% year-on-year to 437 570 oz. 

    The Edna May operation, in Western Australia, delivered an outstanding result during the full year, producing 89 766 oz, up 23% on the previous financial year and well above the forecast production. Edna May produced 22 283 oz of gold in the three months to June. 

    The Mt Cartlon project, in Queensland, also delivered strong results for the full year, producing 77 658 oz of gold, which was also above the guidance of between 65 000 oz and 72 500 oz. The mine produced 20 845 oz of gold in the June quarter. The Mt Rawdon and Cracow mines, both in Queensland, performed within guidance. Mt Rawdon produced 102 162 oz of gold for the full-year and Cracow 9 064 oz. For the quarter ended June, Cracow delivered 27 868 oz of gold, while Mt Rawdon produced 27 242 oz of gold. 

    Evolution on Tuesday said a focus on cost and productivity improvements continued during the 2015 financial year, which resulted in record low costs across the group. Average C1 cash costs of A$711/oz for the year was 9% below that of 2014. The average was also below the bottom-end of the guidance of between A$750/oz and A$820/oz. 

    All-in sustaining costs for the full year improved by 4% on 2014, reaching A$1 036/oz, and was also below the bottom-end of the guidance of between A$1 050 and A$1 130/oz. 

    Evolution noted that using the average Australian/US dollar exchange rate for the June quarter, the company’s costs continued to decline relative to its global peers during 2015. 

    Meanwhile, for the quarter under review, the company’s operations delivered a record cash contribution of A$41.4-million, after all sustaining and major project capital expenditure. A total of A$43.2-million was spent during the quarter, with some A$77-million spent in the full year on sustaining costs and a further A$91.2-million on capital expenditure.

    http://www.miningweekly.com/article/evolution-achieves-record-fy-output-lower-costs-2015-07-21
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    Base Metals

    Indonesia tin smelters face credit squeeze over shipment failures

    Indonesian tin smelters are finding it harder to get credit from banks and trading houses after a Singapore-based firm failed to deliver some shipments, in a further blow to an industry reeling from a slump in prices.

    More than a third of Indonesia's smelters have already shut over the past year and tougher credit conditions could hasten mergers or closures in the world's top exporter of refined tin.

    "It's not easy to get more money like it used to be," said Agung Nugroho, corporate secretary at PT Timah, Indonesia's biggest tin miner.

    "Now in order to get credit from the banks, besides a good name and letter of guarantee, we have to show them all of the assets," he said, adding tight credit could force consolidation or mergers between smaller smelters.

    A trader at a global trading house confirmed it had cut advances to firms in Singapore and Indonesia to finance tin purchases due to concerns over deliveries not being made.

    "We only try to get material from companies that can ship without needing money in advance," said the trader, who declined to be identified due to the sensitivity of the issue.

    A banker at an Asian-based Western lender also said the firm was more cautious about lending due to low tin prices and concerns about deliveries to its customers after Singapore-based Uni Bros Metal Pte Ltd (UBM) had failed to deliver some cargoes.

    Asked about the issue, UBM did not directly refer to the missed shipments but said in an email that there had been an "unprecedented" fall in tin prices.

    Traders noted that steep falls in tin prices can lead to a cash crunch for trading firms that haven't sufficiently hedged against price swings.

    UBM, a mid-size trader in the tin industry, acted as a middle man, sourcing tin from Indonesian smelters for end-users or major trading houses.

    UBM failed to deliver contracted tin shipments to at least two customers in the first quarter of 2015, according to a Taiwanese smelter and a metals trader with direct knowledge of the matter. Reuters could not confirm the reasons for the non-deliveries.

    UBM's failure to make the deliveries has led at least three mid-size trade houses - significant players in the small tin market - to stop advancing funds by prepaying for tin shipments from Indonesia, three sources familiar with the matter said.

    Prepayments are relied on by many smaller Indonesian smelters for operating capital. Smaller smelters account for more than a quarter of Indonesia's tin exports, traders estimate.

    http://www.reuters.com/article/2015/07/20/singapore-tin-idUSL5N0Y61SZ20150720
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    Finished products help Norsk Hydro offset aluminium price fall

    Norsk Hydro, one of the world's largest aluminium producers, beat second-quarter profit forecasts as demand for finished products such as components, strips and foils offset the impact of falling metal prices.

    The Norwegian company cut forecasts for global primary aluminium demand growth excluding China for the second quarter running, and said there was more excess aluminium in global markets than it had previously estimated.

    But it said better performances from its rolled products and Sapa business, a joint venture with Norway's Orkla, were helping it to cope, sending its shares more than 4 percent higher in early Tuesday trading.

    "It was very important for the share that there was a beat in this report as the share has traded along with negative earnings revisions for the last 4-5 months," Nordea Markets analysts said, referring to recent cuts in analysts' profit forecasts as aluminium prices have fallen.

    The three-month price of aluminium -- used in the aerospace, construction and automotive sectors -- was around $1,700 per tonne on Tuesday, down from around $2,000 in May as exports from China and Russia saturate the market.

    Norsk Hydro shares are down around 24 percent over the last three months. At 0750 GMT, they were up 1.6 percent at 32.63 crowns, one of the biggest rises among European blue-chips.

    The company reported a jump in second-quarter underlying operating profit to 2.67 billion Norwegian crowns ($324 million) from 544 million in the year-ago period, above forecasts for 2.34 billion in a Reuters poll of analysts..

    It trimmed its 2015 global forecast for primary aluminium demand growth to 2-3 percent from 3 percent excluding China, and to 5 percent from 6 percent when China is included.

    The firm, one of Norway's largest industrial companies with operations from Brazil to Qatar, said global markets would be oversupplied by between 0.5 and 1 million tonnes of aluminium this year, up from a previous estimate of 0.5 million tonnes, as Chinese production exceeds a deficit in the rest of the world.

    U.S. peer Alcoa said earlier this month it expected supply to outpace global demand by 760,000 tonnes this year, some 400,000 tonnes higher than its previous forecast, as China had not cut output as much as expected..

    http://www.reuters.com/article/2015/07/21/norsk-hydro-results-idUSL5N1010CR20150721

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    Steel, Iron Ore and Coal

    Steel downtrend further dampens Chinese met coal market

    China’s metallurgical coal market has further deteriorated over the past week, as steelmakers steered clear of purchases as they grapple with a persisting downtrend in steel markets.

    Moreover, persisting losses and the government’s intensified environmental protection campaign are leading to more furnaces maintenance and output cut in steel mills.


    Sources said only one or two out of the 12 steel mills in Bazhou region of Hebei province were in operation. Some small steelmakers in Hebei also started to cut production, impacted by the Anti-Japanese War military parade in early September.

    Many steel mills sources in Tangshan confirmed that they have received notifications from the local government to suspend or cut production for nine months, in preparation for the World Horticultural Exposition to be held in the city in 2016.

    One Changzhi-based large miner took the lead to cut the free-on-rail prices of his lean coal and PCI by 10-20 yuan/t, and started to pay some fees related to rail transport, resulting in a total 30-40 yuan/t drop.

    Prices of imported coking coal also posted apparent drop amid weak domestic demand. The price of premium low-vol hard coking coal was assessed at $92.5/t CFR China on July 15, falling $2.75/t on week.

    Many coking plants expected coking coal prices to drop; some of them in Linfen of Shanxi and Hebei province have cut coking coal purchase prices this month. One Hebei-based coke producer cut purchase price of Shanxi high-sulphur primary coking coal by around 20 yuan/t, with the delivered price of this material with 1.3% sulphur at 590 yuan/t.

    On the other hand, some steelmakers hoped recent furnace maintenances across China could help balance the seasonal drop-off in demand over the next two months.

    http://en.sxcoal.com/0/127103/DataShow.html

    Attached Files
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    China coal miners have 140 GW power capacity by end-2014

    Installed power generation capacity from coal-fired plants partly or fully owned by China’s coal producers hit 140 GW by the end of 2014, taking 17% of the country’s total coal-fired power capacity, said Wang Xianzheng, director of China National Coal Association, at an industry meeting earlier this month.

    The government has been urging coal miners to engage more in power or integrated coal-power business, to better use their coal resources to improve profitability.

    With a combined power capacity of 65 GW, coal giant Shenhua Group, parent of China Shenhua Energy, realized profit of over 20 billion yuan ($3.27) in the first half, thanks to its coal-power integration, said Ling Wen, the general manager of the group.

    Datong coal mine Group, the biggest Shanxi-based coal producer, gained 900 million yuan of profit last year from its power business, with power output hitting 36.45 TWh. It has an installed power capacity of 14 GW.

    And also, power producers are encouraged to tap the upstream coal industry to lower cost and help advance structural adjustment and transitioning of the coal sector.

    China’s top five power producing companies hold a combined coal production capacity of 320 million tonnes per annum, with output at 260 million tonnes each year or 20% of their coal consumption.

    http://en.sxcoal.com/0/127105/DataShow.html
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