Mark Latham Commodity Equity Intelligence Service

Tuesday 27th October 2015
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    Argentine assets gain after strong Macri election showing

    Conservative opposition candidate Mauricio Macri's surprisingly strong showing in presidential elections set up a second vote next month.

    With almost 97 percent of polling stations declared, the pro-business mayor of Buenos Aires had won 34.4 percent of the vote, enough to prevent the candidate of Argentina's ruling party, Daniel Scioli, from claiming an outright victory.

    To win the Nov. 22 run-off, Scioli, who is backed by outgoing leftist President Cristina Fernandez and had a clear lead in opinion polls last week, will need to court supporters of third-placed candidate Sergio Massa, a moderate lawmaker.

    "Macri will have momentum now and Massa is now the kingmaker," Dehn said. "If Sciolo wants his votes he needs to become more moderate."

    The outcome of the election will shape how the South American country tackles its economic woes, including high inflation, a central bank running precariously low on dollars and a sovereign debt default.

    Scioli is running on a platform of "gradual change" and has promised to maintain popular welfare programs while Macri advocates moving quickly to open up the economy.

    Macri is seen by international investors as the candidate most likely to negotiate with a group of "holdout" hedge funds whose suit over bonds defaulted on by Argentina in 2002 caused a new and ongoing default last year.

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    Duke Energy to buy Piedmont Natural Gas in $4.9billion deal

    Duke Energy will buy Piedmont Natural Gas in a $4.9billion deal as it looks to expand its natural gas distribution business.

    The company offered $60 in cash for each Piedmont share representing a premium of around 42%.

    Duke and Piedmont are also among the partners in the $5 billion 550-mile Atlantic Coast pipeline, which moves gas from Pennsylvania’s Marcellus shale field to North Carolina and Virginia.
    AGL resources also has a 5 percent stake in the pipeline.

    Duke sells power to 7.3 million customers in North and South Carolina, Florida, Indiana, Ohio and Kentucky at rates set by state regulators.

    The company also provides regulated natgas services to about 500,000 customers in Ohio and Kentucky.

    Piedmont has about one million customers in North and South Carolina and Tennessee.

    Duke will also assume about $1.8 billion of Piedmont’s net debt, giving the deal an enterprise value of $6.7 billion.

    One Piedmont director will join Duke’s board after the deal closes, expected by the end of 2016, and a Piedmont executive will lead Duke’s natural gas operations, the company said.
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    Oil and Gas

    Crude oil down on product glut worry

    Crude prices edged lower on Monday on worries that the oversupply in oil products could swell from unseasonably warm weather and the waning maintenance cycle for U.S. refineries.

    Influential Wall Street trading house Goldman Sachs warned of downside risk for oil prices through spring 2016 as U.S. and European storage utilization for distillates, which include diesel, neared historic highs.

    Traders told Reuters that as refined oil product storage tanks fill up, unwanted diesel and jet fuel cargoes were backing up outside Europe's ports and taking longer, slower routes around the southern tip of Africa.

    "There's talk in the market about ULSD (ultra low sulfur diesel) storage potentially reaching 'tank tops', and that's weighing on crude," said Dave Thompson of Washington-based broker Powerhouse.

    Goldman it would take 50 fewer heating degree days (HDDs) than normal in Europe for storage there to hit tank tops.

    HDDs are measured by the difference between the average temperature outside and the 70 degrees Fahrenheit (21 degrees Celsius) level, which is deemed to be neutral indoors for heating. The lower the reading, the less energy products such as heating oil and natural gas are expected to be required for heating.

    "While our distillate balances suggest that stocks will fall short of capacity, the margins of error are small and the risks high, leaving risks to current crude oil prices and timespreads as skewed to the downside through next spring," analysts at Goldman Sachs wrote.

    Investments in oil are likely to decline further in 2016 after sliding this year by more than a fifth, Fatih Birol, executive director of the International Energy Agency (IEA), said.

    "If it comes true, this will be the first time in two decades we will see oil investments declining for two consecutive years and may be an indication for future oil markets," Birol said at Singapore International Energy Week.
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    BG chief: LNG demand to rise up to 6% through 2020

    Global demand for liquefied natural gas is likely to grow strongly over the long term, according to the head of U.K.-based gas and oil company BG Group (BG.LN), despite the recent slump in prices in regions such as Asia.

    "There should be no doubt LNG will have an increasingly influential role in the changing landscape of global energy supply," said Helge Lund, BG chief executive at an energy conference in Singapore, on Tuesday.

    Liquefied natural gas prices have been dealt a severe blow this year as demand in key importing countries such as China has moderated. Robust supply growth and competitive coal pricing have also put gas prices under pressure.

    The benchmark U.S. natural-gas price tumbled to its biggest one-day percentage drop overnight since February 2014 on expectations of a deepening supply glut.
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    Oil cargoes bought for state reserve stranded at China port - sources

    About 4 million barrels of crude oil bought by a Chinese state trader for the country's strategic reserves have been stranded in two tankers off an eastern port for nearly two months due to a lack of storage, two trade sources said.

    The delays will cost millions of dollars and indicate how China is struggling to import record amounts of crude if storage and port capacity at Qingdao, its largest oil import terminal, are unable to keep pace.

    Ocean Lily and Plata Glory, two very large crude carriers (VLCCs) carrying oil for Sinochem Corp, arrived at Huangdao, Qingdao's main oil terminal, in early September, and both were still at anchor this week, waiting to unload, according to Reuters' shipping data, and trade and port sources.

    "They are both for SPR (strategic petroleum reserve), but no tank space is available to take that oil in," said a senior trader familiar with Sinochem's oil trading.

    China's crude oil imports rose nearly 9 percent in the first nine months of the year over a year earlier to 6.65 million bpd, driven partly by reserve building.

    China said late last year the first phase of the government's emergency stockpile is storing about 90 million barrels of crude oil, with the construction of a second phase due by 2020, partly through private investment.

    Huangdao is the site of one of China's first SPR tanks, with space for 20 million barrels of oil and also has plans for a second phase of similar size.

    A recent move to increase competition for oil imports by granting quotas to independent refineries has added to congestion at Huangdao, where operations were already hampered following a pipeline accident two years ago.

    "Storage and berths were not ready for such a quick market opening," the trader said.

    Huangdao has experienced cargo congestion since a pipeline explosion that killed 66 people two years ago, with tighter security checks and repairs to old and damaged pipelines slowing tanker unloading.

    Congestion has worsened following a scramble by a raft of new crude buyers to bring in oil, trading sources have said.

    Since July, China has granted a total of nearly 1 million barrels per day (bpd) of crude import quotas to a dozen independent refineries in an effort to boost competition and private investment.

    The pace of the reform has been much quicker than the market expected, with the newly approved quotas making up more than 10 percent of China's current total imports.

    Broker reports show that Sinochem owns Ocean Lily, while Plata Glory was fixed on a six-month charter at around $37,750 a day in April, with an option to extend for another six months, putting the cost of keeping the two vessels idle at several million dollars.

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    A Santos takeover could reignite the domestic gas sector

    The Santos takeover approach is unique. While clearly Santos shareholders’ interests are paramount, the national interest also becomes important because the Santos bid is a first step in overcoming looming chronic gas shortages and much higher prices ahead for Sydney and later Melbourne.

    On the national interest front, the most exciting aspect of the proposed Santos takeover is that some of the longest term oil and gas investors in the world -- the ruling families of Brunei and the United Arab Emirates -- are prepared to invest vast sums to solve Australia’s dreadful gas morass.

    Of course, they expect to win longer term, but Australia has never needed substantial investment in our gas industry more than we do now. Most of the existing players are cash-strapped.

    Australia’s biggest and most prosperous gas company, Woodside, looked hard at Santos and the domestic gas crisis and decided there were better returns bidding for Oil Search in PNG.

    The mismanagement of the three Queensland coal gas ventures -- the consortiums headed by Santos, British Gas and Origin -- created our domestic gas crisis because collectively they contracted to export more gas than they had available in Queensland.

    The shortfall was met by gas from the Cooper Basin, which was earmarked for Sydney. Already, steps are being put in place to pipe gas out of the Bass Strait to meet Sydney’s shortfalls, which threatens Melbourne’s supply.

    In fairness to Santos and the other Curtis Island gas players, the environmentalists have blocked exploitation of coal gas reserves in other areas to meet the shortfalls.

    Nevertheless, what’s required is much bigger investment in the Cooper Basin and in Queensland to develop the gas needed to satisfy the Curtis Island LNG export contracts and our eastern states’ domestic demand.

    Debt-racked Santos simply does not have the money to do this because the slump in world gas and oil prices has hit its envisaged LNG cash flows. Indeed, so bad is the current debt position at Santos that the board, which made the fundamental mistakes that got the company into this mess, are looking to break the Santos network up, which may make it even harder for Australia to solve the problem.

    Although the crisis has been there for all to see, for over a year Santos is only now getting around to preparing a plan. The proposed asset sales and other moves, when they are announced, will need to be compared to a takeover bid.

    If the asset sales involve essential parts of the gas supply network, then Santos shareholders may need to agree to large payments in the future to create an attractive asset for infrastructure investors.

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    Tokyo Gas says Japan LNG demand to dive under 80 mil T in 5 yrs

    Japanese liquefied natural gas (LNG) demand will dive by 17 percent or 15 million tonnes in five years to below 80 million tonnes a year as more nuclear reactors are restarted, said a top executive of Tokyo Gas on Monday.

    "Last fiscal year, the imported volume of LNG was 89 million tonnes. By 2020, that demand could be reduced," said Shigeru Muraki, executive advisor of Japan's top gas utility on the sidelines of the Singapore International Energy Week.

    He said 15 to 20 nuclear reactors could restart in about five years. Other estimates have put the number of nuclear restarts in the next few years as low as seven.

    All of Japan's nuclear reactors were shut following the March 2011 tsunami disaster, with the country restarting only two as of August and October.

    Still, Tokyo Gas is looking to add 2 million to 3 million tonnes of LNG a year to its current annual offtake of 13 million tonnes as the company expects demand from its own customer base to increase, Muraki said.

    Muraki also said Tokyo Gas will continue to use long-term contracts for its basic supply, but he expects traditional sellers to provide more flexibility to buyers, including not limiting contract cargoes to a single destination.

    "I don't think traditional sellers will continue to stick to the traditional way of doing contracts. For instance, in the U.S., our LNG contract is based on long term supply but has flexibility in the destination," he said.

    "We don't need to offtake everything to our terminals."

    With LNG markets more than amply supplied over the next several years, buyers have a chance to get sellers to offer better contractual terms, Muraki said.

    Tokyo Gas is also not giving up hopes of investing in a natural gas pipeline linking Russia to Japan despite U.S. sanctions against Russia, or of offtaking LNG from Mozambique despite a lack of infrastructure in East Africa, Muraki said.

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    Santos Gets $1.1 Billion Offer for Australian Gas Fields

    Santos Ltd., which last week rejected a $5.2 billion takeover offer, has received a binding bid from Quadrant Energy Pty for Australian oil and gas fields the companies jointly own, people with knowledge of the matter said.

    Santos is considering the offer of about A$1.5 billion ($1.1 billion) for its stakes in the fields in Western Australia state as part of a broader review of its assets, according to the people. Japanese trading house Marubeni Corp. is separately in talks to buy 3.6 percent of Exxon Mobil Corp.’s Papua New Guinea liquefied natural gas plant from Santos for more than A$1 billion, the people said, asking not to be identified as the details are private.

    The Australian energy producer is speaking to a number of parties about different sets of assets, according to the people. Santos hasn’t made a final decision on which parts of its portfolio to sell or whether it needs to raise equity in addition to the divestments, the people said.

    Santos said in August it’s considering strategic options and that Chief Executive Officer David Knox will step down as the rout in commodity prices triggered concerns that the company has too much debt. The company last week rejected a A$6.88-per-share takeover offer from Scepter Partners, an investment firm backed by Asian and Middle Eastern royalty, saying it was too low and “opportunistic.”

    Santos’s Western Australian assets, located in the Carnarvon Basin, accounted for 24 percent of its production last year, according to the company’s website. It owns 45 percent of the Reindeer, John Brookes and Spar gas fields there, while Quadrant owns the rest and is the operator. Santos also owns 37.5 percent of the Fletcher Finucane oil field in the region and is the operator.

    Perth-based Quadrant Energy was formed after a group led by Macquarie Group Ltd. and Brookfield Asset Management Inc. agreed in April to buy Apache Corp.’s Australian assets for $2.1 billion. Macquarie has since sold part of its holding to other investors including Wesfarmers Ltd. and Western Australia businesswoman Angela Bennett’s family investment firm.

    Separately, both Santos and Quadrant are seeking buyers for the Stag oil field off the Western Australian coast, people familiar with the matter said in September. Santos owns 66.7 percent of the field, while Quadrant owns the rest and is the operator.
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    BP’s downstream boosts offset by upstream losses

    BP’s downstream boosts offset by upstream losses

    Oil major BP’s cost profit in the third quarter of the year has more than halved since the same period in 2014.

    The company, which announced its third quarter results today, said it had made a profit of $0.8billion, compared with $3.9billion this time last year.

    BP reported underlying replacement cost profit of $1.8 billion for the quarter, compared with $1.3 billion for the previous quarter and $3.0 billion for the third quarter of 2014. Compared with a year earlier, the result primarily showed the impact of sharply lower oil and gas prices but also the benefits of a continuing strong downstream environment and performance and steadily lower cash costs throughout the Group.

    The lower results, BP said, were primarily due to the effect of lower oil and gas prices.

    In its downstream business the operator continued to see a strong performance which saw an increase in profit from $1.5billion last year to $2.3billion.

    Strong refining operation and fuels marketing and cost benefit simplification was said to have boosted the area of the business.

    Income from other sources including Rosneft for the quarter have also increased from $110million in the third quarter last year to $383million.

    BP said the company has almost completed its current divestment programme which is expected to approach $10billion by the end of 2015.

    A further $3-5billion in divestments are expected next year, before returning back to a rate if around $2-3billion a year thereafter.

    The company’s chief executive Bob Dudley is set to brief investors today on the oil major’s results.

    He said staff were working hard to rebalance their books at $50 oil.

    Dudley said: “Last year, we acted decisively to reset BP for a sustained period of lower oil prices and the results are coming through well. We are now in action to rebalance our financial framework in this new price environment.

    “And I am confident that BP’s strong and well-balanced portfolio of businesses and projects gives us the ability to grow value into the future. All of this underpins our strong priority of sustaining our dividend and then growing free cash flow and shareholder distributions over the long term.

    “BP has successfully adapted to changing circumstances many times in its history and, in a hard time for the entire industry, I believe we will once again successfully take on today’s challenges. We are already in action, with a quality portfolio and clear plans for the future, underpinned by enduring principles. I am confident BP will continue to deliver value into the years and decades ahead.”

    BP’s operating cash flow for the third quarter was $5.2billion, bringing the total for the first nine months of the year to $13.3billion.

    Organic capital expenditure over the nine month period was $13.2billion.

    Net debt was $25.6billion, representing a gearing level of 20%, including 1% arising from the agreements in principle, BP said, to settle with the US government and Gulf states over the 2010 Deepwater Horizon oil spill.

    In July the company said it had reached, in principle, an agreement to settle all outstanding federal and state claims arising from the incident.

    It included payments of up to $18.7billion over a period of 18 years.

    A hearing is set for March 2016 to consider final approval.

    BP said it also entered into an agreement with five Gulf states and has accepted releases received from the vast majority of local government entities and payments required under those releases were made during the third quarter.

    A charge of $426million for the incident was also taken in the third quarter, bringing the total pre-tax charge to $55billion.

    During the quarter BP was awarded five new blocks in the UK North Sea.

    In October it was announced that, subject to government approval, BP was also awarded three shallow water blocks in the Mediterranean Sea off Egypt.

    The Woodside-operated Western Flank A project offshore Western Australia, the latest phase of the North West Shelf development, began production in October.

    Capital expenditure from now until 2017 is expected to be between $17-19billion.

    Last year, expectations for capital expenditure were $24-26billion while they were estimated at just under $20billion in the second quarter of this year.

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    Mitsui to acquire stake in Petrobras’ natural gas distribution unit for $489m

    Japan-based Mitsui has signed an agreement with Petróleo Brasileiro (Petrobras) for partial acquisition of shares in the latter's natural gas distribution unit Petrobras Gás (Gaspetro) for about R$1.9bn ($489m).

    Through Mitsui Gas, Mitsui is set to acquire 49% of shares in Gaspetro which has equity stakes in local gas distribution companies (LDCs) in 19 Brazilian states.

    Mitsui Gas with equity interests in LDCs in seven states was acquired by Mitsui in 2006 and since then the companies worked to improve the gas distribution infrastructure in Brazil.

    According to the company, the acquisition of Gaspetro shares will increase the number of states served by gas companies in which Mitsui Gas has an equity interest to 19.

    The gas distribution business in the country comprises regional monopolies based on the concessions that are granted by state governments.

    Distribution companies develop the gas distribution infrastructure in their service areas in each state including gas pipeline networks, as part of concession agreements signed with the governments.

    Gas purchased from Petrobras would be supplied by the companies to power stations and general industrial and commercial users, as well as residential consumers.

    Gaspetro's portfolio covers several regions, including central, northeastern, and southern Brazil.

    Mitsui acquired an equity interest in Companhia in December 2014 and is currently engaged in gas distribution operations in eight Brazilian states.
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    Natural Gas plumbs the depths.

    Image titleThe latest weather report showed mild weather across a wide section of the U.S. in the next two weeks, triggering a 9.8 percent plunge in the front-month natural gas contract. The futures ended the session at $2.06 MMBtu, a level last seen in 2012.

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    Oil flows east, leaving an Oklahoma pipeline unusually empty

    A pipeline to America’s largest crude-oil hub is about to find itself in an unfamiliar position: not full.

    One of the main pipelines that carries crude to Cushing, Oklahoma, will run at less than capacity in December for the first time in nearly two and a half years. The drop in supply coincides with the opening of a pipeline to Quebec, giving shippers the option of diverting some oil from the middle of the U.S.

    “There will be less light sweet crude available to make its way to Cushing,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “There’s going to be some significant rebalancing of where oil flows in North America.”

    Shippers on Enbridge Inc.’s Spearhead pipeline only asked to transport about 155,000 barrels of crude a day in December, below the system’s capacity to move about 193,000 to Cushing from Flanagan, Illinois. It’s the first time shippers haven’t filled the line since August 2013. Some months shippers request 10 times more space than is available.

    The drop in Spearhead interest comes as Enbridge plans to start another pipeline carrying 300,000 barrels of crude a day from the Midwest to Montreal by the end of 2015. Suncor Energy Inc. and Valero Energy Corp. have said they plan to use the line to supply refineries in Quebec with crude from Western Canada and the U.S. Midwest.

    Crude in eastern Canada competes with the global benchmark, Brent, which is priced a few dollars higher than West Texas Intermediate in Cushing.

    Enbridge next month will also start filling its Southern Access pipeline, which carries crude within Illinois from Flanagan to Patoka, according to a U.S. regulatory filing. The company expects to put the 168-mile-long spur in service in December.
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    Crestwood to Launch Open Season for Delta Crude Pipeline Later This Week

    Crestwood Midstream's DELTA pipeline project will launch a non-binding open season later this week, seeking commitments for crude and condensate flows starting at the company's proposed Orla terminal in the Delaware Basin, Senior Vice President Brian Freed said Monday at Hart Energy's Midstream Texas conference.

    The pipeline would carry 200,000 b/d of crude and condensate from the gathering facility in Orla, Texas, to takeaway pipelines as far away as Midland and McCamey, Texas. Depending on the pipeline connections the company can secure, the crude and condensate could then make its way to export and refining markets near Houston or Corpus Christi, Texas.

    The Orla terminal will be able to stabilize 75,000 b/d of condensate, and the DELTA pipeline will be batched, which means condensate processed at the terminal could make its way to coastal export markets without losing its export-eligible status by mixing with unprocessed crude.

    The Orla terminal will have 200,000 barrels of crude and condensate storage capacity and a truck facility capable of handing 64,000 b/d, along with access to the company's RIGS gathering system.

    The company is able to work on the project despite the downturn in oil prices because it is located in an active part of Texas' Delaware Basin, Freed said.

    "The devil is in the details, and you've got to look at things on a localized basis," he said. "Sub $60/b works in some areas and doesn't in others."

    Even beyond that, Christopher Keene, the CEO of Rangeland Energy II, which is also building midstream infrastructure in the Permian Basin said he does not think the market is going to remain low forever.

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    McClendon Seeks Help from Investment Banks

    We always thought Aubrey McClendon could sell snow to Eskimos–as the now-politically incorrect but old saying goes. Aubrey can charm money out of your grandmother. At last check more than a year ago he’d raised $8.7 billion of OPM–other people’s money–for use in his aggressive drilling ventures

    . We’re pretty sure that number exceeded $10B at some point over the past year.

    But then this year we began to hear whispers that Aubrey wasn’t paying his bills. And then Bloomberg published a hit-piece saying Aubrey had sold his investors a bill of goods . Indeed it appears the bloom is off the money-raising rose for Aubrey. According to inside sources, Aubrey has hired investment banks (plural) to help him find more money to keep going…
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    Alternative Energy

    EDF aims to double its renewable capacity to 50GW by 2030.

    CEO of the company Jean-Bernard Levy said he wants the firm to become “a champion” in low carbon energy production with nuclear and renewable power.

    The company, which is developing a nuclear power station atHinkley Point in the UK, claims it invests around $2 billion (£1.3bn) per year in green projects worldwide.

    EDF is also working “strongly” towards energy efficiency services.

    Mr Levy added: “There is a huge opportunity in energy efficiency services outside France.”

    China announced it will invest £6 billion in EDF’s nuclear project in the UK.
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    Inox Wind net profit jumps 63pct in Q2 2015

    Energy solutions provider Inox Wind reported a 63.4 per cent rise in consolidated net profit at INR 89.13 crore for the September quarter.

    Inox Wind said that the company’s consolidated net profit in the year—ago period was INR 54.52 crore. Its income from operations during the quarter increased to INR 1,008.22 crore from INR 543.13 crore a year ago.

    The group is engaged in the business of manufacturing wind turbine generators (WTG) and also provides related erection, procurement, and commissioning services, operations and maintenance and common infrastructure facility for WTGs and development of projects for wind farms.

    Inox Wind has manufacturing plants near Ahmedabad, Gujarat and at Una, Himachal Pradesh.
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    POSCO may build Magnis Resources' Tanzanian graphite project

    South Korea's POSCO may build and help arrange financing for a graphite project in Tanzania being developed by Magnis Resources , as the Australian explorer races to start producing from the east African site by 2017.

    Demand for graphite is expected to soar as it is a major ingredient in lithium-ion batteries for hybrid vehicles and wind and solar energy storage, with appetite for greener transport and energy booming.

    Magnis said on Tuesday it had signed a memorandum of understanding that could see POSCO Engineering & Construction arrange debt from lenders it has ties with for the $210 million Nachu project, as well as coming up with a fixed-price bid by mid-2016 to build the mine and processing plant.

    "The quality of the graphite at Nachu is the best in the world and with the huge demand in the battery market, we are excited to be involved with Magnis," POSCO E&C mining plantbusiness group director Peter Lim said in a statement put out by Magnis.

    Electric car maker Tesla Motors Inc is looking for graphite supply for a factory it is building in Nevada which it says will make more lithium ion batteries annually by 2020 than were produced globally in 2013.

    Magnis is in talks to line up debt and construction proposals from a range of sources in order to get the most competitive offers and the quickest development plan, said its chairman, Frank Poullas.

    The plan with POSCO E&C is similar to one that Magnis lined up with state-owned China National Nonmetallic Minerals Industrial Corp (SINOMA) for $150 million in potential project finance and construction services.

    SINOMA is one of two Chinese companies that have agreed to buy a total 180,000 tonnes a year, or about 70 percent, of the planned output from Nachu. Supply agreements like those are key to lining up financing.

    "The remaining offtake that we plan to sign will be with western groups, just to spread that risk," Poullas told Reuters.

    "What we've seen with a lot of parties looking, when it comes to financing, is they want western offtakes."

    Poullas declined to comment on whether Magnis was in talks to supply Tesla.
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    Precious Metals

    Gold demand rises in Q3 on surge in coin, bar buying - GFMS

    Surging demand for coins and bars and a rise in buying by central banks pushed physical gold demand up 7 percent in the third quarter, an industry report showed on Tuesday, though the market remained in a surplus of 51 tonnes.

    Demand for gold coins and bars jumped by 26 percent year-on-year in the last quarter, GFMS analysts at Thomson Reuters reported in the Q3 update of their Gold Survey 2015.

    Retail investment surged in top consumers India, China and Germany, with buying rising 30 percent, 26 percent and 19 percent respectively. Those three markets alone accounted for an additional 26 tonnes of retail buying.

    "A sharp price correction in July, which saw the gold price plunge to a near six-year low at the start of the quarter, was the major driver behind Q3 growth," GFMS said.

    Central bank purchases picked up speed in the third quarter after a quiet start to the year, rising 13 percent to 132 tonnes. Russia is expected to be this year's biggest reported official-sector gold buyer.

    Central banks are expected to become net buyers of gold for a sixth consecutive year in 2015, the report said.

    Nonetheless, the group's price view for this year remains cautious due to continued uncertainty over the timing of a rise in interest rates by the Federal Reserve, low inflation expectations, and weak investor sentiment.

    "We expect gold to average $1,100 an ounce in Q4 2015, down by $75 an ounce from our previous forecast, which brings an annual average of $1,159 in 2015," it said.

    "Gold is set to remain under pressure until there is more clarity on the timing and the scale of U.S. rates normalisation."

    Gold prices held near $1,165 an ounce on Monday.

    Jewellery fabrication, the biggest individual segment of demand, fell 1 percent in the third quarter to 510 tonnes. European jewellery consumption fell 23 percent on the back of plunging demand from Russia and Turkey.

    Chinese jewellery demand edged up half a percent year-on-year, GFMS said, while Indian jewellery demand rose 5 percent.

    India regained its position as the world's biggest gold consumer from China in the first three quarters of the year, GFMS said, with overall consumption of 642 tonnes. Chinese consumption stood at 579 tonnes.

    "We still expect China's total gold demand to record a second consecutive annual decline in 2015," GFMS said, though it added that it expected consumption to be stronger in the second half of the year than the first, and for Chinese demand to grow modestly next year.

    On the supply side of the market, mine output was broadly flat year-on-year in the last quarter, while scrap supply rose 3 percent on strong gains in India and Turkey.
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    Base Metals

    Iranian copper output to increase by 17 pc

    IRNA reported that Managing Director of National Iranian Copper Industries Company Mr Ahmad Moradalizadeh said on Sunday that Iran will produce some 250,000 tonnes of copper this year which shows 17 percent increase compared to figures from last year.

    He predicted that Iran's output of copper and concentrated copper will reach 400,000 tonne and 1.5 million tonnes respectively by the end of Iranian calendar year 1398 (March 2020) respectively.
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    Steel, Iron Ore and Coal

    China Jan-Sep thermal coal imports down 39pct on yr

    China’s imports of thermal coal—including bituminous and sub-bituminous coals, plunged 38.91% year on year to 63.6 million tonnes over January-September this year, according to the latest data released by the General Administration of Customs.

    Of this, thermal coal imports from Australia fell 25.78% on year to 33.89 million tonnes during the same period; those from Indonesia decreased 41.38% on year to 20.93 million tonnes.

    Imports from Russia stood at 7.47 million tonnes during the same period, falling 33.96% from a year ago.

    Lignite imports over January-September were 37.33 million tonnes, down 26.07% from the year prior, with imports from top supplier Indonesia at 35.14 million tonnes, down 20.96% year on year.

    China’s thermal coal imports in September amounted to 6.93 million tonnes, falling 25.91% from a year ago and down 3.72% from August.

    That was the 7th straight yearly drop as well as the first decline after the 4th consecutive monthly rise, mainly due to the subdued demand from downstream sectors amid cooler weather and continuous falling prices at domestic market.
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    China Sep coal transport down 17.7pct on year

    China’s rail coal transport fell 17.7% on year and down 4.9% on month to 154.4 million tonnes in September, posting the 13th consecutive year-on-year decline, showed the latest data from the China Coal Transport and Distribution Association.

    Over January-September, China transported a total 1.5 billion tonnes of coal through railways, down 12.5% from a year ago, data showed.

    Of this, 1.03 billion tonnes or 68.7% of the total was railed to power plants, down 12.3% year on year, with September haulage sliding 14.1% on year and down 5.7% from August to 106.93 million tonnes.

    Coal-dedicated Daqin line transported 31.21 million tonnes of coal in September, a decline of 17.15% from the previous year and down 7.19% from August. Over January-September, Daqin accomplished a coal transport volume of 305.04 million tonnes, a decline of 10.17% from the year prior.
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    Eminent Australians press world leaders to ban new coal mines

    Prominent Australians, including a former central bank governor, scientists and doctors, are urging world leaders to impose a moratorium on new coal mines when they meet in Paris for a climate summit next month.

    The letter echoed a recent call by the president of Kiribati, one of a number of low-lying Pacific island nations that are under threat from rising sea levels as a result of global warming.

    "A global moratorium on new coal mines and coal minne expansions could make Paris COP21 truly historic," said the full-page letter in the Sydney Morning Herald newspaper on Tuesday. It was signed by former Reserve Bank of Australia governor Bernie Fraser, Nobel Prize winner Peter Doherty, Wallabies rugby player David Pocock, religious leaders, and environmental advocates, among others

    Australia, the world's largest coal exporter, has pledged to cut its greenhouse gas emissions by 26-28 percent from 2005 levels by 2030, a target criticised by green groups as not enough to limit global warming to 2 degrees Centigrade.

    The target was set under former prime minister Tony Abbott, who said coal is good for humanity. He has since been replaced by Malcolm Turnbull, who has said he would attend the Paris talks, in contrast to Abbott.

    The 61 eminent Australians said plans for Australia to double its coal exports are incompatible with efforts to curb climate change.

    They highlighted a mine planned by India's Adani Enterprises in the untapped Galilee Basin in northern Australia, which would export more than 2 billion tonnes of coal over its life, among a range of projects on the drawing board.

    "These coal export plans will have severe negative impacts on the health and wellbeing of citizens all over the world," they said.
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    Shanxi Sep coke output down 11.4pct on yr

    Coke output from China’s top producer Shanxi province reached 6.53 million tonnes in September, down 11.4% on year but up 0.13% on month, showed data from the National Bureau of Statistics (NBS) on October 27.

    The coke output of Shanxi between January and September stood at 60.9 million tonnes, a year-on-year decline of 6.3%.

    Shanxi’s coke market maintained a continuous downward trend in September, as most producers cut output amid the Beijing military parade in early-September.

    At present, most coking plants of the province kept their operation rate stable at 40-80%, and some even began to slightly increase production. Inventories were kept in a proper volume.

    Northern Hebei province ranked the second, producing 3.95 million tonnes of coke in September, falling 13.94% and down 13.41% from August. Total output over January-September stood at 42.27 million tonnes, down 1.72% on year.

    Eastern Shandong’s followed with output in the same month at 3.65 million tonnes, falling 4.7% on year and down 0.63% from August. Total output in the first three quarters was 32.71 million tonnes, down 3.6% on year.
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    Climate change campaigners occupy opencast coal mine in Northumberland

    Protesters say they have shut down an opencast coal mine on land belonging to Conservative peer and climate sceptic Viscount Ridley.

    Campaigners calling themselves “Matt Ridley’s Conscience” have occupied one of the diggers at Shotton surface mine, in Cramlington, Northumberland on Viscount Ridley’s Blagdon Estate.

    The group, a mix of local campaigners and protesters from across the UK, have also formed a protest blocking the road, locking their arms into red arm tubes as part of a protest calling for an end to coal mining to protect the climate.

    Around 20 to 25 protesters are at the site, with banners that read “end coal“ and “keep it in the ground”.

    The mine, operated by Banks Mining, has around six million tonnes of coal to be recovered and supports 150 jobs, according to the company which has also submitted a planning application for a new opencast coal mine near Druridge Bay.

    But the campaigners say the vast majority of coal has to stay in the ground in order to prevent dangerous climate change, and are calling for an immediate end to opencast mining and for the
    Government to phase out the use of coal-fired power stations by 2023.

    The protest comes ahead of crucial UN talks in Paris in December which aim to agree a new global deal on tackling climate change.

    One of the activists, Ellen Gibson, said: “Gone are the days when mining benefited millions – now opencast mining lines the pockets of millions like climate sceptic Lord Ridley, whilst destroying the landscape and cooking the planet.

    “We need to keep 80% of all known fossil fuels in the ground if we’re to prevent catastrophic climate change, and coal is the dirtiest fuel of all.

    “The Government needs to end opencast mining and shut the UK’s last power station by 2023 at the latest.”

    Northumberland resident Rakesh Prashara, who is also at the protest, said: “Mining for more coal is holding us back, instead we need to be investing in the renewable energy that would provide new skills and jobs to the young people of our region.”
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