Mark Latham Commodity Equity Intelligence Service

Thursday 24th November 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    What Exactly is Trump saying on Climate Change?

    Trump to scrap Nasa climate research in crackdown on ‘politicized science’

    Nasa’s Earth science division is set to be stripped of funding as the president-elect seeks to shift focus away from home in favor of deep space exploration.

    Bob Walker, a senior Trump campaign adviser, said there was no need for Nasa to do what he has previously described as “politically correct environmental monitoring”.

    “We see Nasa in an exploration role, in deep space research,” Walker told the Guardian. “Earth-centric science is better placed at other agencies where it is their prime mission.

    “My guess is that it would be difficult to stop all ongoing Nasa programs but future programs should definitely be placed with other agencies. I believe that climate research is necessary but it has been heavily politicized, which has undermined a lot of the work that researchers have been doing. Mr Trump’s decisions will be based upon solid science, not politicized science.”

    TRUMP: HIS OWN WORDS VERBATIM:

    TRUMP: You know the hottest day ever was in 1890-something, 98. You know, you can make lots of cases for different views. I have a totally open mind.

    My uncle was for 35 years a professor at M.I.T. He was a great engineer, scientist. He was a great guy. And he was … a long time ago, he had feelings — this was a long time ago — he had feelings on this subject. It’s a very complex subject. I’m not sure anybody is ever going to really know. I know we have, they say they have science on one side but then they also have those horrible emails that were sent between the scientists. Where was that, in Geneva or wherever five years ago? Terrible. Where they got caught, you know, so you see that and you say, what’s this all about. I absolutely have an open mind. I will tell you this: Clean air is vitally important. Clean water, crystal clean water is vitally important. Safety is vitally important.

    And you know, you mentioned a lot of the courses. I have some great, great, very successful golf courses. I’ve received so many environmental awards for the way I’ve done, you know. I’ve done a tremendous amount of work where I’ve received tremendous numbers. Sometimes I’ll say I’m actually an environmentalist and people will smile in some cases and other people that know me understand that’s true. Open mind.

    JAMES BENNET, editorial page editor: When you say an open mind, you mean you’re just not sure whether human activity causes climate change? Do you think human activity is or isn’t connected?

    TRUMP: I think right now … well, I think there is some connectivity. There is some, something. It depends on how much. It also depends on how much it’s going to cost our companies. You have to understand, our companies are noncompetitive right now.

    They’re really largely noncompetitive. About four weeks ago, I started adding a certain little sentence into a lot of my speeches, that we’ve lost 70,000 factories since W. Bush. 70,000. When I first looked at the number, I said: ‘That must be a typo. It can’t be 70, you can’t have 70,000, you wouldn’t think you have 70,000 factories here.’ And it wasn’t a typo, it’s right. We’ve lost 70,000 factories.

    We’re not a competitive nation with other nations anymore. We have to make ourselves competitive. We’re not competitive for a lot of reasons.

    That’s becoming more and more of the reason. Because a lot of these countries that we do business with, they make deals with our president, or whoever, and then they don’t adhere to the deals, you know that. And it’s much less expensive for their companies to produce products. So I’m going to be studying that very hard, and I think I have a very big voice in it. And I think my voice is listened to, especially by people that don’t believe in it. And we’ll let you know.


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    Anglo productivity up 40%


    Mining company Anglo American, which has reduced the number of assets in its portfolio from 68 in 2012 to 42 now, is producing more product from those 42 assets than it was with the 68.

    As a consequence, the product produced per person is currently 40% higher than it was four years ago.

    With that, the company has seen a 33% reduction in operating costs and is on track to deliver a $1.6-billion cost improvement and a $1-billion cash flow improvement when it reports in February.

    While continuing to adhere to its announced strategy of reducing the asset number still further to 37, Anglo currently finds itself in a position to be considerably more price assertive when dealing with offers for its mining businesses outside of diamonds, platinum and copper – the chosen three.

    It is becoming increasingly comfortable to continue operating and investing in its iron-ore, thermal coal, coking coal and other assets earmarked for disposal, until offers arise that match or better the price tags set for them – and also benefit the countries concerned.

    Anglo CEO Mark Cutifani makes the point that Anglo’s sale of Rustenburg platinum mine to South Africa’s Sibanye Goldwas right for South Africa because Sibanye is committed to investing in the asset for the long term, whereas Anglo American Platinum has other investment priorities.

    Meanwhile, it is continuing to go all out to meet all the commitments to shareholders, which could mean that it will have only 37 assets when it reports in February, as it is not deviating from its disposal strategy despite the improved commodity price climate.

    It laid the foundation for change in 2015, began experiencing the benefits of that this year buoyed by better commodity prices, and expects to be set up for the future as it goes into next year.

    http://www.miningweekly.com/article/anglo-productivity-up-40-2016-11-23
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    US Manufacturing PMI Rebounds To 13 Month Highs On Post-Election Optimism


    Following the bump in Eurozone PMIs this morning, Markit reports November US manufacturing at 53.9 (better than 53.5 expected) and its highest since Oct 2015, showing "further signs of factories and their customers moving away from destocking to inventory-building amid a more optimistic outlook."

    However, hope in the PMI survey seems to be decoupling from reality in actual production.

    Under the covers, everything looks awesome with new orders rising (highest since Oct 2015), employment spiked to one of the largest of the year, and output jumped to its highest since March 2015.

    Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

    “US manufacturers enjoyed a strong post-election bounce in November, further tilting the scales toward the Fed hiking rates in December. Many factories reported that demand from customers had picked up as uncertainty about the election result cleared. Domestic demand rose especially sharply, helping to make up for subdued export growth, linked in turn to the strong dollar.

    “The survey also found further signs of factories and their customers moving away from destocking to inventory-building amid a more optimistic outlook, accompanied by an upturn in hiring. The increase in employment was one of the largest seen so far this year.

    “Inflationary pressures remained muted, with average prices charged barely rising, despite some further upward movement in many commodity prices.

    “The buoyant post-election picture of the manufacturing economy and signs of increased optimism about the futurewill further fuel the conviction that the Fed will raise interest rates at its December 14th meeting, and may also raise the possibility that policymakers might be inclined to tighten somewhat more aggressively in 2017 than previously thought, although much of course also depends on the new government’s policy framework.”

    http://www.zerohedge.com/news/2016-11-23/us-manufacturing-pmi-rebounds-13-month-highs-post-election-optimism-decouples-produc
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    Odebrecht to sign $2 billion leniency deal in Brazil graft probe: source


    Brazilian engineering conglomerate Odebrecht SA has agreed to plea bargains and a massive leniency deal under which it would pay around 7 billion reais ($2.1 billion) in fines for its role in Brazil's biggest corruption scandal, a person familiar with the matter said.

    The deals sent shockwaves through Brazil's political establishment as they could incriminate as many as 200 lawmakers for taking graft money from Odebrecht , which prosecutors said had a department dedicated to bribery.

    If approved by the judge leading the "Operation Car Wash" probe into corruption at state-controlled oil firm Petrobras, the Odebrecht deal would be the world's largest plea and leniency agreement.

    The Salvador, Brazil-based company told Reuters it has no comment on "an eventual deal with the courts." A spokesperson for the prosecutor general's office declined to confirm any deal had been signed.

    A source close to the negotiations, however, told Reuters that more than 70 executives at Odebrecht, Latin America's largest engineering company, would sign plea bargain deals on Wednesday or Thursday.

    Under the deals, the executives would become states witnesses and provide prosecutors with details of bribes paid to executives of Petrobras and other state companies, plus kickbacks to dozens of politicians.

    A separate leniency deal for Odebrecht is almost ready and will be signed within a few days, said the source, who spoke on condition of anonymity due to the sensitivity of the matter.

    A settlement figure of 7 billion reais reported by local media was broadly accurate, the source said, without confirming the amount.

    Such a deal involving admission of guilt by the company, return of embezzled funds and payment of fines, would allow Odebrecht to bid for government contracts again by lifting a suspension imposed after the Petrobras scandal broke in 2014.

    Reuters reported this month that the deal would exceed the record 2008 agreement in which German engineering company Siemens AG paid $1.6 billion to U.S. and European authorities for paying bribes to win government contracts.

    Prosecutors are expected to take months to take plea statements and verify their details, prolonging political instability caused by a corruption scandal that contributed to the removal of leftist president Dilma Rousseff this year.

    Political turmoil in Congress could delay passage of fiscal reforms by new President Michel Temer and delay Brazil's recovery from its deepest recession since the 1930s.

    The price on Odebrecht's 7.5 percent perpetual bond jumped more than 1 cent on the dollar to 54 cents in midafternoon trading. At that price, yields slid to 14.05 percent from about 14.25 percent.

    Odebrecht has been accused by prosecutors of overcharging state-controlled oil company Petróleo Brasileiro SA and other state companies for contracts and paying bribes to politicians.

    The agreement is key to the restructuring of the company's 110 billion reais in debt.

    Since August, law firm E. Munhoz Advogados has been advising the talks with banks and investors.

    Marcelo Bahia Odebrecht, Odebrecht's former chief executive officer and the scion of the family that owns the conglomerate, has been in jail since June 2015 and was sentenced to 19 years.

    The patriarch of the family-owned business, Emilio Odebrecht, is also making a plea statement to prosecutors.

    http://www.reuters.com/article/brazil-odebrecht-corruption-idUSL1N1DO0DY

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    Oil and Gas

    North Sea Oil Glut to Get Short-Term Relief as Flows Go East


    A glut of North Sea oil that’s helped depress global prices and heap pressure on OPEC is poised for short-term relief after traders booked tankers to take as much as half of the region’s key oil flow to Asia.

    Mercuria Energy Group Ltd. and Royal Dutch Shell Plc booked Forties crude onto tankers that typically haul 2 million barrels each for loading this month, according to lists of charters and four people involved in the market. Statoil ASA provisionally booked a ship to collect North Sea oil by Dec. 5. The combined outflow could exceed 500,000 barrels a day over an 11-day period, more than half the rate of key Brent, Forties, Oseberg and Ekofisk loadings.

    “For now, it’s kind of a short-term relief,” said Olivier Jakob, managing director of Petromatrix GmbH in Zug, Switzerland, adding that there are still too many moving parts to determine when and how a global excess will be eliminated.

    The bookings come at a time when insufficient demand is causing traders to store millions of barrels of North Sea oil on tankers because there’s not enough space on land. At the same time, the Organization of Petroleum Exporting Countries is working on a plan to try to eliminate a global surplus and stem a price slump. The group meets in Vienna on Nov. 30, attempting to finalize an accord it set out eight weeks ago in Algiers to trim as much as 1.5 million barrels a day from supply.

    Contango Trading

    North Sea oil is trading in a pattern known as contango, where a physical-market surplus pushes down immediate-month future contracts below those in later periods. That gap got so wide this month that it cost investors more than $1 a barrel to extend, or roll, bullish trades when most-immediate Brent contracts expire, from less than 50 cents earlier this year. The spread narrowed to as little as 93 cents on Wednesday, the smallest since Nov. 16, ICE Futures Europe data show.

    As much as 12 million barrels of benchmark North Sea grades are now in floating storage off the U.K. coast as land sites fill up, according to ship-tracking data compiled by Bloomberg. While that puts pressure on Brent, it also makes the grade more attractive to buyers in other parts of the world.

    “Now the North Sea is priced not only to go to floating storage, but also to be exported to all regions,” said Jakob.

    The region next month is scheduled to load an average of 2.1 million barrels of crude a day, the most in 4 1/2 years, according to data compiled by Bloomberg. That oil may either be stored or exported. For the key Brent, Forties, Ekofisk and Oseberg grades, that flow is less than 1 million barrels a day.

    Mercuria is set to load the vessel Argenta at Hound Point on Nov. 25, from where it will sail to China, the fixtures show. Shell is to load the Victory I from the same location on Nov. 29. The tanker’s destination after that is still unclear but most supertankers head to Asia once they’ve loaded North Sea barrrels.

    In addition, Statoil ASA provisionally chartered the supertanker Bunga Kasturi Lima to load at the Norwegian port of Mongstad from Dec. 1-5, where it will then sail for South Korea, shipping fixtures show. If that loading proceeds, the tanker will be the first to head to Asia from Mongstad since November 2012, according to data compiled by Bloomberg.

    https://www.bloomberg.com/news/articles/2016-11-23/north-sea-oil-glut-to-get-short-term-relief-as-barrels-flow-east
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    Iran oil exports into EU increase

    Image title

    The ramp up we have seen in Saudi, Iraqi - and particularly - Iranian oil exports. The chart below highlights how Iranian oil exports have flowed back into the EU after the lifting of sanctions at the beginning of the year.

    Iranian flows have also increased into Europe as Nigerian flows have dropped off, with West African exports rising to the U.S. East Coast as Bakken production has drifted lower and as crude by rail economics have become increasingly unfavorable. The chart below also highlights the recent increase in Libyan exports as production returns. The vast majority of Libyan oil exports head to Europe:    





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    Bruised Oil Nations Seek Solace in Fastest Growing Guzzler


    As the oil market anxiously awaits OPEC’s decision next week, some of the countries hardest hit by the biggest price crash in a generation may have found a lifeline outside of the group.

    India, the world’s fastest growing crude consumer whose appetite for fossil fuels is forecast to surge in the next two decades, will likely decide next month on whether to advance $15 billion to Nigeria for future supplies. Essar Oil Ltd., operator of India’s second-biggest refinery, has struck a $13 billion deal which may lead to the plant processing more oil from Venezuela.

    With prices languishing at under $50 a barrel, about 55 percent below its 2014 peak, smaller sellers have been the most vulnerable to falling revenues. Nigeria has been pushed to the brink of its first full-year economic contraction in 25 years, while Venezuela struggles to ward off a debt default at its national oil company. Now the two crude producers are finding their own means of survival as OPEC seeks to resolve an impasse over output cuts aimed at stabilizing the market.

    “Countries like Venezuela and Nigeria, reeling under financial crisis, will challenge any OPEC decision that works against their economic interests,” said Kunal Agrawal, an analyst with Bloomberg Intelligence. “These countries want to secure long-term supply contracts with the likes of India and China.”

    India, which imports more than two-thirds of its oil from the Middle East and whose demand is forecast to double through 2040 to 10.3 million barrels a day, is seeking to diversify its purchases to guard against the geopolitical risks tied to the world’s biggest suppliers like Saudi Arabia and Iraq. Over 80 percent of India’s crude is imported, and with a burgeoning population and an economy projected to grow 7.4 percent next year, companies such as the U.K.’s BP Plc and Russia’s Rosneft PJSC are eyeing a piece of an oil retail market already worth $117 billion.

    Rosneft has indicated it intends to process crude from its share of oil fields in Venezuela at Essar’s refinery after the Russian company’s acquisition of the facility at Vadinar in western India. Nigerian oil minister Emmanuel Ibe Kachikwu said last month that the West African nation is looking to sign a pact with the Indian government for $15 billion in advance payments for its oil in December.

    Welcome Respite

    “You can’t depend on one country, but you have a basket of countries from where you take,” said Mukesh Kumar Surana, chairman of India’s state-run refiner, Hindustan Petroleum Corp. “So there will be opportunities for smaller producers.”

    Those deals are a welcome respite for Nigeria and Venezuela. Nigeria, which counts oil as its biggest foreign-exchange earner, could see its gross domestic product shrink 1.7 percent this year, according to the International Monetary Fund, its first full-year contraction since 1991. Venezuela has faced widespread shortages of food and essential products as the price of oil, which accounts for 95 percent of its foreign currency earnings, collapsed.

    The Latin American nation’s state-owned oil company, Petroleos de Venezuela SA, has struggled with its finances this year after the price it receives for its exports has plummeted 63 percent from over $100 a barrel in 2014. PDVSA, as the company is known, said last month that creditors holding $2.8 billion of bonds that come due over the next year agreed to extend maturities in a highly anticipated swap that will buy the company some time.

    http://www.bloomberg.com/news/articles/2016-11-23/bruised-oil-nations-seek-solace-in-fastest-growing-crude-guzzler
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    IEA expects oil investment to fall for third year in 2017


    Investment in new oil production is likely to fall for a third year in 2017 as a global supply glut persists, stoking volatility in crude markets, the head of the International Energy Agency (IEA) said on Thursday.

    "Our analysis shows we are entering a period of greater oil price volatility (partly) as a result of three years in a row of global oil investments in decline: in 2015, 2016 and most likely 2017," IEA director general Fatih Birol said at an energy conference in Tokyo.

    "This is the first time in the history of oil that investments are declining three years in a row," he said, adding that this would cause "difficulties" in global oil markets in a few years.

    Oil prices have risen to their highest in nearly a month, as expectations grow among traders and investors that OPEC will agree to cut production, but market watchers reckon a deal may pack less punch than Saudi Arabia and its partners want.

    The Organization of the Petroleum Exporting Countries meets next week to try to finalise to output curbs.

    U.S. shale oil producers will increase their output if oil prices hit $60 a barrel, meaning OPEC will have to walk a fine line if it curtails production to prop up prices, Birol said last week. Brent crude stood around $49 a barrel on Thursday.

    He said that level would be enough for many U.S. shale companies to restart stalled production, although it would take around nine months for the new supply to reach the market.

    http://www.reuters.com/article/iea-oil-investment-idUSL4N1DP16F
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    Norway oil companies lower 2017 spending plans-survey


    Norway's oil companies have lowered their 2017 investment plans, a Statistics Norway survey showed on Wednesday, raising the chances of a central bank interest rate cut in the coming months.

    Norway's biggest industry has curbed spending in the wake of a more than 50 percent fall in oil prices over the last two years, bringing the economy to a near standstill.

    The country's oil companies plan to invest 146.6 billion crowns ($17.21 billion) next year, the survey showed, down from 150.5 billion crowns when surveyed in August by Statistics Norway.

    "The decline is mainly due to lower estimates for exploration and shutdown and removal (of platforms). Exploration wells and removal projects originally planned for 2017 are now postponed," Statistics Norway said in a statement.

    Plans now point to a 10 percent cut versus 2016, economists at Handelsbanken said, much deeper than the approximately 4 percent cut expected by the Norwegian central bank.

    "This suggests that the offshore oil sector will continue to drag down Norway's industrial sector and economic activity next year, by maybe more than we thought," Handelsbanken Chief Economist Kari Due-Andresen said.

    The oil sector accounts for 20 percent of the Nordic country's economy.

    Due-Andresen expects the central bank to leave its key policy rate unchanged at 0.50 percent on Dec. 15 but she said the bank could cut its rate path, or outlook.

    Norges Bank has said since September that it expects the key policy rate to stay at 0.50 percent "in the period ahead".

    Kyrre Aamdal an economist at DNB Markets, agreed that the central bank would likely leave the rate untouched as it worries about overheating in the housing market.

    However, "the downside risk is high and has increased after the oil investment numbers," Aamdal said.

    http://www.reuters.com/article/norway-oil-investment-idUSL8N1DO12W
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    Global LNG buyers, sellers meet as Japan probes contract clauses


    A new Japanese regulatory probe into sales restrictions for liquefied natural gas (LNG) contracts will be at the forefront of discussion as the industry's biggest buyers and sellers gather in Tokyo this week.

    Representatives from major LNG producers Qatar, Australia and Malaysia will meet with buyers from companies including Japan's Jera Co, the world's biggest buyer of the fuel, and Taiwan's CPC Corp to find ways to address a market where demand is only about 76 percent of supply, Thomson Reuters Eikon data shows. The overhang is leading the industry to question everything from how the fuel is priced to how it is sold.

    Adding to the disruption, the Japan Fair Trade Commission is examining whether destination clauses, long-time features of LNG sales contracts that restrict buyers from selling cargoes to third parties, are anti-competitive. The investigation could force the renegotiation of billions of dollars of existing LNG contracts.

    Buyers in Japan, the world's biggest LNG importer, have long complained about destination clauses and will voice their displeasure again at the LNG producers and consumers conference on Thursday.

    "It is desirable to have no destination restrictions," Takehiro Honjo, president of Osaka Gas, Japan's second biggest city gas company, said on Friday. He added that about 20 percent of its current LNG contracts do not have the clauses.

    Japan's buyers are now overcommitted to their contractual LNG cargoes as demand is dropping. They want more leeway to resell the spare cargoes but are prevented by the clauses.

    "Japan appears to be following Europe's example, (which) led to these clauses being reviewed in a number of gas and LNG supply arrangements and supported improved flexibility," said Kerry Anne Shanks, vice president, Asia gas and LNG research, at Wood Mackenzie.

    She pointed to the example of Spain, where re-exports of cargoes totalled nearly 4 million tonnes in 2014. A cargo is typically about 110,000 tonnes.

    Producers have rebuffed the objections. But, they are having to reconsider that position because of increasing U.S. LNG exports, which do not carry the destination restrictions.

    Japan, Europe, South Korea, China and India, which together account for about 80 percent of the world's total LNG imports, have jointly called for relaxing or abolishing the destination clause, Japan's trade ministry said.

    Major sellers could be convinced to relax or remove the restrictions if buyers would make other concessions, said a source familiar with their thinking.

    "Cancelling the clause will have to result in some give elsewhere," said the source.

    But with prices down by nearly two-thirds from their 2014 high LNG-AS and more supply coming to market, gas consumers, who use the fuel for power generation and for cooking, have more power to force through changes.

    "It's a buyers market now. We are asking them (sellers) not to include destination restrictions as much as possible and we have made some progress on reaching an understanding," Tokyo Gas Executive Officer Kentaro Kimoto, who is in charge of the company gas resources department told reporters on Monday.

    http://www.reuters.com/article/lng-japan-idUSL4N1DN1WK

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    Another partner gives financing nod for Coral South FLNG


    Mozambique’s state-owned energy firm Empresa Nacional de Hidrocarbonetos (ENH) has given its approval for the financing of the development of the Coral south FLNG project.

    The approval comes less than a week after Italian oil and gas firm Eni, which is the operator of the Coral offshore gas discovery, gave its financing approval for the project.

    The Area 4, located in the deep waters of the Rovuma Basin, contains the giant Coral South gas field for which the investment decision was made by Eni’s board of director last week.

    Mozambican media have reported that the expected total investment for the project will be $8 billion, of which ENH will provide $800 million.

    ENH owns a 10 percent stake in the project. Eni operates the offshore Area 4 with a 50 percent indirect interest, owned through Eni East Africa (EEA), which holds a 70 percent stake of Area 4. The remaining 20 percent stake in EEA is owned by China’s CNPC. EEA’s partners in Area 4 are Galp, Kogas, and ENH with a 10% stake each.

    All the partners need to give their financing approvals before the Final Investment Decision (FID) is made. The FID is expected to be reached by the end of 2016.

    The FID will represent the first phase of development of 5 trillion cubic feet of gas in the Coral discovery in deep waters some 80 kilometers offshore of the Palma bay in the northern province of Cabo Delgado.

    The giant discovery, made in May 2012 and outlined in 2013, proved the existence of a high quality field of Eocenic age with excellent productivity. It is estimated to contain 15 trillion cubic feet of gas in place, wholly located in Area 4.

    Eni in October secured a major push towards the Final Investment Decision. Namely, Eni and its partners in the Area 4 concession have managed to find a major customer for the gas to be produced there – British energy major BP.

    Under the agreement, BP will buy all the LNG to be produced by Eni’s Coral South Floating LNG unit, which will be installed offshore Mozambique, over a period of 20 years. Commercial details of the agreement were not disclosed.

    http://www.offshoreenergytoday.com/another-partner-gives-financing-nod-for-coral-south-flng/
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    Canacol Energy announces new gas sales contracts, private pipeline, and 2017 and 2018 gas forecast


    Canacol Energy Ltd. is pleased to provide the following update concerning the execution of 100 million standard cubic feet of new gas sales contracts to existing and new customers located on the Caribbean coast of Colombia, and the initiation of a private pipeline venture that will deliver 40 MMscfpd of new gas production to new and existing customers located on the Caribbean coast in 2017.

    New Gas Sales Contracts

    Further to its November 10, 2016 announcement of a new transportation agreement with Promigas S.A. to ship 100 MMscfpd of new gas production, the Corporation has negotiated 4 new take or pay gas sales contracts totalling 100 MMscfpd with existing and new thermoelectric, refining, industrial, and commercial customers located in Cartagena and Baranquilla. The contracts all commence in December 2018, have a term of between 5 and 10 years, and are with large, established offtakers. The pricing of these new contracts, combined with the Corporation's current multi-year take or pay gas contracts, and the private pipeline sales as described below, results in an average contract price of approximately US$ 5.00/mcf for the anticipated 230 MMscfpd of production in December 2018.

    Private Pipeline

    A Special Purpose Vehicle ('SPV') has been formed to build a new private gas pipeline connecting the Corporation's gas facility located at Jobo to the Promigas operated pipeline at Sincelejo. The private pipeline will consist of approximately 80 kilometers of flowlines and two compression stations, and is designed to transport 40 MMscfpd of Canacol's gas to new and existing customers located in Cartagena under take or pay contracts at existing prices. Surveying and permitting for the new pipeline is underway, with first gas transportation anticipated in December 2017. The SPV is anticipated to raise approximately US$ 50 million in a combination of equity and debt, outside of Canacol, to construct and operate the pipeline.

    Corporate Gas Production Forecast 2017 and 2018

    Based upon the above mentioned new private gas pipeline, the new gas sales contracts, and the recently announced agreement whereby Promigas will add 100 MMscfpd of new transportation capacity to the existing pipeline to Cartagena and Baranquilla by December 2018, the Corporation is planning to increase current gas sales from 90 MMscpf to 130 MMscfpd in December 2017, and to 230 MMscfpd in December 2018.

    The Corporation expects to have approximately 190 MMscfpd of productive capacity from the 11 existing wells drilled in its Nelson, Palmer, Nispero, Trombon, Clarinete and Oboe gas fields combined with two remaining 2016 development wells (Clarinete 3 and Nelson 8) being drilled prior to year end 2016. In addition, the Corporation's facility located at Jobo has 190 MMscfpd of gas processing capacity.

    http://www.oilvoice.com/n/Canacol-Energy-announces-new-gas-sales-contracts-private-pipeline-and-2017-and-2018-gas-production-forecast/9a53f1f9c8c0.aspx
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    End of downturn at hand? Operators' behavior suggests so: Fuel for Thought


    The way US E&P operators are adding rigs, planning activity ramp-ups, preparing to raise capex and looking forward to renewed production growth in 2017, you'd be tempted to write finis to a harrowing two-year industry downturn.

    During third-quarter 2016 earnings calls in the last few weeks, oil operator after operator unveiled what became surprisingly repetitive near-term plans: stirring the production pot by slipping a rig or two into the field during the final months of this year, kicking up the capital budget modestly and then returning to production growth in 2017.

    'Third quarter results tell the story of good, old fashioned American ingenuity,' Robert W. Baird analyst Ethan Bellamy told S&P Global Platts. 'Costs are down, productivity is up, and capital is flowing into the most productive regions.'

    CEOs certainly displayed sunnier dispositions on conference calls than a couple of quarters ago when the specter of what then was a recent period of $30/b oil was fresh in their minds.

    But now, with a new year looming, oil executives seemed energized by their victory over a low-priced oil world after two years of squeezing costs and efficiencies from oil fields and developing precise completion designs to extract still more oil and gas per well. So they appeared willing to open the purse strings a bit next year-and if oil prices cooperated, rev up the drilling machine and production spigot in the months to come.

    But beneath their show of confidence, oil executives appeared mindful of the sobering and ongoing volatility of oil prices. Most clearly conveyed that any stepped-up activity would be done prudently until price signals indicated otherwise. Larger operators in particular said higher prices of mid-$50s/b to $60/b were needed for next-stage growth.

    Paul Horsnell, head of commodities research for Standard Chartered Bank, noted industry still is not investing according to the oil price curve. Front-month WTI closed Friday at $45.69/b, while forward prices in June and December 2017 settled at $49.49/b, and $50.60/b, respectively.

    'On average, they are maybe planning on the basis of the curve minus at least $5' per barrel, Horsnell said. 'So, not overly aggressive.'

    But even as the outlook for 2017 turns up, independent E&Ps as a group showed financial losses from July to September for the eighth straight quarter, he said.

    Despite losses, rig count growing

    While the losses were half that of three months before and only 15% of the loss in the same 2015 period, 'it was another loss on top of a lot of other losses,' he said.

    Q3 results 'show an industry that is behaving like survivors from a storm: very happy to be alive, but still facing the task of clearing up a lot of wreckage,' Horsnell added.

    While 153 oil rigs have been added in US fields during the last six months, and 19 in the last week alone, not all operators are necessarily planning production growth. Some are preparing for flat output next year. ConocoPhillips is eyeing flat to 2% growth in 2017 output while others, like Whiting Petroleum and Murphy, could hold next year's output flat with Q4 2016.

    On the other hand, several operators have forecasted double-digit output growth, notably from the Permian Basin in West Texas and New Mexico: Pioneer Natural Resources expects 13% to 17% production increase next year that includes 23% to 27% oil output growth. Concho Resources sees 20% per year total production growth for 2017-2019 and Diamondback Energy eyes more than 30% output growth.

    To meet those estimates in the Permian Basin, operators added 50 rigs in Q3 and so far in Q4 have added another 26 to a total of 229 rigs, nearly 100 more than all other major US shale plays combined.

    Although the EIA has forecasted US oil production down 110,000 b/d or 1.2% for 2017 year over year, the agency 'may be underestimating the capital efficiency being realized by US E&Ps, UBS analyst Bill Featherston said in a recent investor note. And that could potentially 'prolong the oil price recovery or lower the medium-term normalized oil price.'

    UBS' own oil production model, based on EIA data, currently calls for 2017 volumes to be down roughly 340,000 b/d year over year or 4%, and 2018 output up around 85,000 b/d or 1% year on year.

    While oilfield service and equipment providers recently cautioned they would likely soon take back some of the 15% to 30% or more in price concessions granted to oil companies early in 2015, this may not happen until late next year or possibly even 2018, Robert W. Baird analyst Dan Katzenberg said.

    http://www.oilvoice.com/n/End-of-downturn-at-hand-Operators-behavior-suggests-so-Fuel-for-Thought/90663a04aff3.aspx

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    Small increase in US oil Production


                                                          Last Week    Week Before   Last Year
    Domestic Production '000............ 8,690              8,681            9,165
    Alaska ............................................ 511                      514               528
    Lower 48 ........................................ 8,179              8,167             8,637

    http://ir.eia.gov/wpsr/overview.pdf
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    Summary of Weekly Petroleum Data for the Week Ending November 18, 2016


    U.S. crude oil refinery inputs averaged 16.4 million barrels per day during the week ending November 18, 2016, 271,000 barrels per day more than the previous week’s average. Refineries operated at 90.8% of their operable capacity last week. Gasoline production decreased last week, averaging 9.7 million barrels per day. Distillate fuel production increased last week, averaging 5.1 million barrels per day.

    U.S. crude oil imports averaged about 7.6 million barrels per day last week, down by 845,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 8.1 million barrels per day, 13.3% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 855,000 barrels per day. Distillate fuel imports averaged 136,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.3 million barrels from the previous week. At 489.0 million barrels, U.S. crude oil inventories are at the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 2.3 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 0.3 million barrels last week and are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.8 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories decreased by 0.1 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.9 million barrels per day, up by 1.6% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.2 million barrels per day, up by 0.6% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels per day over the last four weeks, up by 1.9% from the same period last year. Jet fuel product supplied is up 10.2% compared to the same four-week period last year.

    Cushing down 100,000 bbl

    http://ir.eia.gov/wpsr/wpsrsummary.pdf
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    U.S. Gulf Coast Refinery Maintenance Nears Completion


    U.S. Gulf Coast refinery utilization has nearly recovered from fall maintenance season with only two units left in restart mode following planned work as of November 21.

    The 124,500 bpd fluid catalytic cracker and associated 26,600 bpd alkylation unit remained below normal operating levels since being shut late September at Marathon's 464,000 bpd Garyville, LA, refinery. October was the heaviest month of maintenance in the Gulf Coast this year, according to Genscape.

    The largest maintenance projects this fall were at Valero's 292,000 bpd Port Arthur, TX, refinery, which completed after the restart of a hydrocracker on November 6, and Marathon's Garyville refinery, where units are restarting. Valero's plant-wide overhaul was expected for completion in late October, according to Reuters.

    A multi-unit overhaul underway at Valero’s 292,000 bpd Port Arthur, TX plant on Oct. 3. Maintenance activity was completed on Nov. 6 with the restart of a hydrocracker. Click to enlarge

    During the maintenance season, at least 11 percent of Gulf Coast FCC capacity was shut in October. Monitored FCCs that shut for planned work in October include Shell's 70,000 bpd unit in Deer Park, TX, Petrobras' 56,000 bpd Houston unit, Valero's 96,000 bpd unit in Corpus Christi, TX, and Marathon's 124,500 bpd unit in Garyville, LA.

    Marathon's Garyville FCC will be down for the longest period, shut for 56 days as of November 21. The Garyville FCC was also the only FCC monitored by Genscape that was shut in October 2015 for planned work. The 2015 work was completed in 19 days, according to Genscape.

    Fall maintenance in the U.S. Gulf Coast increased in 2016, reaching a maximum capacity offline of 11 percent on October 10. Maintenance in 2015 was uncharacteristically low with companies running units to capture relatively healthy refining margins and relatively weak crude prices. The maximum capacity offline monitored by Genscape in fall 2015 was 2.46 percent, or 226,000 bbls, on November 3, 2015. The U.S. benchmark West Texas Intermediate (WTI) price closed that day at $47/bbl. In 2014, the maximum outage was 8.22 percent, or 550,000 bbls, on November 1.

    Genscape's North American Refinery Intelligence Service combines observations obtained from infrared cameras with in-house analytical and technological expertise to provide an unrivaled view into real-time operations at U.S. and Canadian refineries. Genscape currently monitors 80 percent of overall refinery capacity in the United States, including 92 percent of East Coast refineries, 84 percent of Midcontinent refineries, and 91 percent of Gulf Coast refineries. To learn more, or request a free trial of the North American Refinery Intelligence Service, click here.

    - See more at: http://www.genscape.com/blog/us-gulf-coast-refinery-maintenance-nears-completion#sthash.HSVZtTxY.dpuf
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    Alternative Energy

    Yunnan 2016 power transmission exceeds 100 TWh


    Southwestern China's Yunnan province transmitted 100.2 TWh of electricity to eastern cities of the country from January 1 to November 22 of 2016, showed data from National Development and Reform Commission.

    Of this, electricity generated by clean energy accounted for 85%, which could reduce 68 million tonnes of greenhouse gas emissions from the burning of 27 million tonnes of coal.

    Rich in water and solar energy resources, the province is expected to see its annual power transmission exceed 100 TWh for the first time to reach 109.6 TWh by the end of the year, rising 28% yearly from 32.3 TWh in 2011.

    Yunnan's "West-to-East" power transmission capacity has nearly tripled to 25.2 GW, compared to 9.3 GW in 2011, accounting for 59% of the total capacity of "West-to-East" power transmission projects under China Southern Power Grid.

    The province's power transmission capacity is anticipated to reach 36 GW by the end of 13th Five-Year Plan (2016-2020).

    http://www.sxcoal.com/news/4549518/info/en
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    Agriculture

    Potash Corp cuts production, lays off 140 from Cory mine


    Canada’s Potash Corp. of Saskatchewan, the world’s largest producer of the fertilizer by capacity, said Wednesday it would cut jobs and production at its Cory potash mine west of Saskatoon.

    The Saskatoon, Saskatchewan-based company said approximately 100 full-time workers and 40 temporary positions are being laid off. Most of the cuts will take place in February with the remainder during the company’s 2017 third quarter.

    Production will also be halted for six weeks at Lanigan mine starting in January and for 12 weeks at Allan, beginning in February.

    Potash Corp said it plans to drop production of one type of potash at Cory, lowering the mine’s operational capability by 43% to about 800,000 metric tons of the key fertilizer ingredient. It also said the mine will continue to employ about 350 people.

    “We are making this decision to optimize production to our lowest cost operations, including Rocanville and other Saskatchewan sites,” Mark Fracchia, president of the company’s PCS Potash operations said in the statement.

    Rocanville mine, also in Saskatchewan, has a production capacity of 3 million tons.

    Potash will also curtail output for six weeks at two other operations in the province in early 2017 to help match supply with market demand. Production will be halted for six weeks at its Lanigan mine starting in January and for 12 weeks at Allan, beginning in February.

    Potash Corp, which agreed in September to merge with peer Agrium, said additional temporary layoffs will result from the curtailments, adding that specific numbers haven’t yet been determined.

    Sector struggles

    A global oversupply of the fertilizer has caused prices to tumble in the past year, leading to layoffs and mine closures across the sector.

    Prices for the fertilizer ingredient began their decline four years ago, as weak crop prices and currencies weakness pinched demand. Potash has also suffered from increased competition following the breakup in 2013 of a Russian-Belarusian marketing cartel that previously helped limit supply.

    Potash's collapse picked up speed in the past year, putting additional pressure on producers, whose profits have been hit by falling prices, largely due to weak currencies in countries such as Brazil and low grain prices.

    Crop prices have also been hurt, with corn and wheat at seven-year and 10-year lows respectively, which have reduced farmers’ willingness to maximize production with fertilizers.

    Earlier this year, BHP Billiton, revealed it might place its Canadian Jansen potash project in the back burner if prices for the fertilizer ingredient don’t pick up by the end of the decade.

    http://www.mining.com/potash-corp-cuts-production-lays-off-140-from-cory-mine/
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    Precious Metals

    $6 Billion Puke Sends Gold Plunging Below $1200 As Dollar Index, Bond Yields Spike


    As Chinese Yuan collapses to fresh lows (USD Index spikes), and bond yields surge, this morning's durable goods data sparked an extended collapse in gold, crashing them below $1200 as over $6 billion of pressure flowed through futures.

    EUR down, Stocks down, Bonds down, Gold down...Yuan just keeps crashing...Bonds are dumped as USD soars...

    Dollar index makes new high...Sending gold reeling... as 50,000 contracts are dumped. The gold liquidity moment started it (around 0825ET) but the US macro data sparked the break below $1200...Pushing Gold to its lowest since Feb...

    http://www.zerohedge.com/news/2016-11-23/6-billion-puke-sends-gold-plunging-below-1200-dollar-index-bond-yields-spike

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    Base Metals

    China construction, power, other sectors to use 29.2 mil mt copper in 2016-20


    China's construction, power, transport, home appliance and manufacturing sectors are forecast to consume a total of 29.2 million mt refined copper in the 13th Five Year Plan period (2016-20), up 14% from the 12th Five-Year Plan period (2011-15), major Chinese copper producer Tongling Nonferrous Metals Group said in a report on its website Wednesday.

    The rise is attributed to demand growth in the five sectors in the coming years, with the sectors accounting for more than 50% of mainland China's annual copper demand, according to the report.

    In accordance with China's plans for the 13th Five-Year Plan period, the country will build a high-speed rail network in 2016-20, linking Lianyungang City, Jiangsu Province, East China and Urumqi City, Xinjiang Uyghur Autonomous Region, Northwest China, plus linking Beijing City and Hong Kong, with an extra high-speed rail distance estimated to total 11,000 km in the next five years, covering more than 80% of Chinese cities, according to the China Nonferrous Metals Industry Association.

    The power industry is expected to be the biggest driver of China's copper demand in 2016-20, due to investment in clean energy, new energy vehicles, as well as building modern urbanization facilities, state-run metals consultancy Beijing Antaike told an industry seminar in March in Beijing.

    China's refined copper demand in 2016 is forecast at 9.53 million mt, up 4.2% year on year, according to Antaike.

    The Beijing agency forecast China's refined copper imports and exports in 2016 at 3.2 million mt and 220,000 mt, respectively, up 9.86% and 4.76% year on year.

    It estimated China's national refined copper output this year at 7.95 million mt, up 7.29% year on year, with the domestic refined copper surplus expected to narrow to 1.4 million mt this year, from a surplus of 1.6 million mt last year.

    http://www.platts.com/latest-news/metals/hongkong/china-construction-power-other-sectors-to-use-27715235
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    SNC-Lavalin awarded EPC contract from Codelco for sulphuric acid plant construction


    Chile-based Corporación Nacional del Cobre de Chile (Codelco), the world’s largest copper producer, has appointed TSX-listed engineering and construction group SNC-Lavalin to construct two sulphuric acid plants at the Chuquicamata copper smelter complex, located in the Antofagasta region of northern Chile.

    Codelco’s project incorporates sulphuric acid production technology by MECS, a wholly owned subsidiary of DuPont, with whom SNC-Lavalin has successfully executed projects for more than 50 years. The plants, which will produce up to 2 048 metric tonnes of market grade sulphuric acid a day, will treat off-gas from the Chuquicamata smelter.

    These new plants will replace those currently in operation at the facility and are part of Codelco's ongoing environmental compliance plans.

    Construction is expected to begin in early 2017 with SNC-Lavalin providing basic and detailed engineering services, procuring equipment, and constructing the acid plants through their Santiago and Toronto offices.

    "Following our recent contract award for the replacement of the effluent treatment plant at the Chuquicamata copper  smelter, this new contract again supports our strong position in Latin America", noted SNC-Lavalin mining and metallurgy president José J Suárez, adding that the company was proud to be part of a project that would be a key element in Codelco’s future environmental programme.

    "Codelco's environmental values are closely aligned with those of SNC-Lavalin and this adds to an already excellent working relationship," he concluded.

    http://www.miningweekly.com/article/snc-lavalin-awarded-epc-contract-from-codelco-for-sulphuric-acid-plant-construction-2016-11-23
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    Steel, Iron Ore and Coal

    Indian state ports Oct thermal coal imports down 14.5pct on yr


    India's 12 major government-owned ports imported 6.86 million tonnes of thermal coal in October, falling 14.5% year on year but increasing 10.4% from September, according to latest data released by the Indian Ports Association (IPA).

    Coking coal shipments received by the 12 ports in October were 4.13 million tonnes, dropping 6.96% from a year ago but up 11.4% from the month prior, the data showed.

    Paradip port on the east coast handled the highest volume of thermal coal in the month at 2.58 million tonnes, down 6.29% from a year ago.

    The port also handled the highest coking coal shipments at 1.17 million tonnes, surging 56.9% from 746,000 tonnes in the same month last year.

    The 12 ports are Kolkata, Paradip, Visakhapatnam, Ennore, Chennai, VO Chidambaranar (Tuticorin), Cochin, New Mangalore, Mormugao, Mumbai, Jawaharlal Nehru Port Trust (JNPT) and Kandla.

    Cochin, JNPT, Kolkata and Chennai ports did not import any coal cargoes in October.

    By end-October, India's thermal coal imports dropped 6.53% on year to 56.06 million tonnes during 2016-17 fiscal year (April-March), while its coking coal imports slid 6.17% on year to 29.04 million tonnes over the same period.

    http://www.sxcoal.com/news/4549521/info/en
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    South Korea Oct thermal coal imports drop nearly 23.8 pct on month


    South Korea imported 6.73 million tonnes of thermal coal (including bituminous and sub-bituminous coal) in October, dropping 7.68% on year and 23.76% on month, customs data showed.

    Of this, 95.1% or 6.40 million tonnes were bituminous coal, falling 4.82% from the year-ago level and down 22.22% from September.

    Indonesia remained the largest supplier of bituminous coal in October, shipping 2.50 million tonnes, increasing 4.46% on year but down 19.2% on month.

    This was followed by Australia with a shipment of 1.85 million tonnes, down 41.3% from a year ago and down 27.74% from the previous month; Russia at 1.03 million tonnes, rising 13.63% on year but down 41.98% on month.

    The country imported 335,200 tonnes of sub-bituminous coal in October, sliding 41.36% from a year prior and down 44.59% on month, all from Indonesia.

    Korea imported 931,800 tonnes of anthracite coal in October, down 8.82% compared to the same month last year but up 22.41% from September.

    http://www.sxcoal.com/news/4549520/info/en
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    Rio Tinto CEO didn't see coal price going up, but expects it to fall

    Rio Tinto CEO didn't see coal price going up, but expects it to fall

    Rio Tinto Chief Executive Jean-Sébastien Jacques on Wednesday admitted he didn't see the recent meteoric rise in coal prices coming. But he is already predicting the fall.

    Jacques, named five months ago to run the world's second-biggest mining company, said it's now clear China's mandate to rid its skies of pollution by restructuring its state-owned coal industry was behind a tripling of coal prices since January.

    "I can tell you, we have been surprised by what the Chinese government did on the coking coal market," Jacques told Rio Tinto's annual investment day seminar.

    "Let's be clear, nobody saw it. But you can say for sure that at some stage they are going to increase capacity and coal prices will go down. There's no doubt about it," he said.

    In April, China's State Administration of Work Safety introduced new coal-production caps, restricting the number of annual working days for its coal miners to 276 days from 330 previously. China also imposed import restrictions and banned imports of coal containing more than 3 percent sulfur and more than 40 percent ash.

    Jacques said the "big uncertainty" was the speed at which state-owned enterprises will continue to restructure, and also admitted to being unsure of where to next for Chinese policy on industry.

    Beijing earlier this year pledged to cut as much as 240 million tonnes of domestic steel output over the next five years, leaving Rio Tinto to scale back its hopes that production would hit 1 billion tonnes a year. Rio is one of the world's biggest importers of iron ore to China.

    Rio Tinto also got it wrong on Chinese domestic iron ore production - a key determinant on how much iron ore China will import - said Jacques.

    "If you had asked me the question six months ago, I would have said we believed they (Chinese mines) would produce 230 million tonnes," Jacques said. "Today, all the signs are they are producing 260-270 million."

    http://www.reuters.com/article/rio-tinto-strategy-coal-idUSL4N1DP24Z

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    JSW Steel to restart coking coal mining in US

    JSW Steel to restart coking coal mining in US

    JSW Steel plans to restart mining at nine coking coal mines with cumulative resources of 123 million tonnes at West Virginia in the US by March next year, following sharp rise in prices during the last few months, The Hindu reported on November 23.

    Spot coking coal prices have more than trebled from $90/t to $310/t since July, on the back of strong demand from China and predictions of worst-ever cyclone in Australia.

    These coking coal mines, which were acquired from a string of US-based companies in 2010, could not be developed due to fall in coal prices following global financial crisis and the subsequent economic slowdown.

    "It has thrown a great opportunity to restart iron ore and coking coal mines in Chile and the US, though the increase in coking coal and iron ore prices are eating into the company's margins," said Seshagiri Rao, joint managing director of JSW Steel.

    The company is closely evaluating the sudden spike in iron ore and coking coal prices to understand whether they are sustainable at the higher levels.

    Fundamentally, there is no reason for iron ore and coking coal prices to go up. Given that there is incremental iron ore supply of 56 million tonnes, the game being played in the international markets is very difficult to understand, he said. When coking coal prices were above $310/t in 2008 and 2011, the steel prices were about $900/t.

    However, steel prices today are below $500/t and coking coal prices are at $310/t and iron ore prices are at $90/t, said Rao.

    http://www.sxcoal.com/news/4549541/info/en

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    Samarco licensing moving forward despite fines, regulator says


    Samarco’s quest to obtain permits for resuming its Brazilian iron-ore operations is progressing despite environmental fines and a court order, with a mid-2017 restart still possible, the state licensing agency said.

    The venture owned by BHP Billiton and Vale, which halted work a year ago after a tailings dam collapse, is seeking a new operating license as well as additional permits to deposit waste into an unused pit called Alegria Sul rather than building a new dam. Minas Gerais state environmental regulator Semad sees merit in the Alegria Sul option, which the company says would allow it to resume at partial capacity for about two years.

    “The benefit and the environmental balance is very positive,” Anderson Silva de Aguilar, who is overseeing the licensing requests, said in an emailed response to questions. "Environmentally, it is a lot better than depositing in an area that was not prepared or would have to be prepared for this purpose."

    For now, Semad has received all the documentation requested from Samarco and is analyzing the plan to use the vacant pit while it formulates a set of guidelines for the mining complex license.

    The regulator’s decision to look at re-licensing the mine’s main complex under a single “corrective” permit rather than requiring dozens of individual licenses, will simplify the process, according to Semad’s press office.

    LEGAL CHALLENGES

    Samarco Mineracao, as the operating company is known formally, was the world’s second-largest producer of iron-orepellets before the dam collapse sent billions of gallons of sludge into the Rio Doce river valley. The incident killed as many as 19 people, contaminated waterways in two states, put thousands out of work and is threatening repayments on more than $3-billion in debt.

    As it seeks new licenses, the mine is facing other regulatory and legal challenges that threaten to increase costs. Earlier this month, Brazil’s federal environmental agency Ibama said Samarco had yet to fully contain leakage from the dam that ruptured more than a year ago, imposing a fine of 500 000 reais ($149 000) a day until it proves otherwise.

    Separately, a federal judge in Minas Gerais ruled Samarco had failed to prove it has definitively contained leaking. The judge gave the company 90 days to provide proof that the situation has been rectified, and 30 days to come up with a 1.2-billion-real guarantee.

    While Samarco will need to also prove to Semad it has contained the leaking of mining waste before it can secure licenses, the issue is not slowing the agency’s work, according to Semad’s press office.

    http://www.miningweekly.com/article/samarco-licensing-moving-forward-despite-fines-regulator-says-2016-11-23

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    Rio Tinto may cut iron ore output as it targets $5bn cash flow boost


    Rio Tinto chief executive Jean-Sébastien Jacques said the mining giant can boost cash flow by $5m over the next five years via a new "productivity drive".

    On top of its current $2bn cost-cutting target for the end of next year, Jacques told investors at an seminar in Sydney the company would prioritise "value over volume" and would drive productivity by "focusing on operational excellence to generate superior shareholder returns through the cycle".

    For 2017, based on current production forecasts, Rio will generate operating cash flow of around $10bn based on the average prices during the recent quarter.

    Jacques told investors he was prepared to cut iron ore output if it would improve cashflow, Bloomberg reported from the event, which would represent a major about-turn on the sector-wide strategy of recent years.

    The CEO also predicted the rise in coal prices from China's recent output cut could not last, other outlets noted.

    "I can tell you, we have been surprised by what the Chinese government did on the coking coal market," the France-born Londoner said. "Let's be clear, nobody saw it. But you can say for sure that at some stage they are going to increase capacity and coal prices will go down. There's no doubt about it," he said.

    Rio, which on Wednesday agreed to sell its assets at Lochaber in Scotland to SIMEC for $410m (£330m) and earlier in the month sacked two directors over a controversial payment connected to assets in Guinea, continues to expect total cash returns to shareholders over the longer term to be in a range of 40-60% of underlying earnings, Jacques assured.

    "We have placed our assets at the heart of the business to drive improved performance and ensure our resilience through the cycle.

    "We are well on track to meet our target of $2 billion of cash cost savings by the end of next year. We are also taking advantage of any opportunity to generate value from mine through to market.

    "Lifting the productivity on our $50 billion asset base creates a low risk and highly attractive return. It will deliver an additional $5 billion of free cash flow over the next five years."

    http://www.digitallook.com/news/news-and-announcements/rio-tinto-may-cut-iron-ore-output-as-it-targets-5bn-cash-flow-boost--2315752.html
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    Equatorial Resources aims to invest $1.2 billion in Congo iron project


    Africa-focused Australian mining company Equatorial Resources Ltd will aim to invest around $1.2 billion to develop its Badondo iron ore project in Republic of Congo, the company said.

    John Welborn, a non-executive director of Equatorial Resources and chief executive of its Congolese unit Congo Mining Exploration Ltd, met Prime Minister Clement Mouamba on Tuesday and submitted an application for a mining license.

    "The recent improvement in the price of iron ore makes Equatorial confident that it will find the necessary financing to develop the mine," the company said in a statement distributed late on Tuesday after the meeting.

    African mining, particularly large iron ore projects, has been hit hard by the global commodities crash.

    However, the S&P 1500 composite steel index .SPCOMSTEEL has surged since the U.S. election, bolstered by U.S. president-elect Donald Trump's perceived support for the steel industry.

    Chinese iron ore futures are also rising amid news that production at steel mills in northern Hebei province will be curbed or even shut for as long as four months in an effort to combat pollution.

    Equatorial Resources estimates annual iron ore production of 40 million tonnes at the Badondo mine and its feasibility study foresees construction beginning next year, the statement said.

    Plans for the building of new infrastructure, including construction of a rail line and port to facilitate exports, must be finalised before the project can be developed, it said.

    http://www.reuters.com/article/us-congo-iron-equatorial-idUSKBN13I0XY
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    Solomon gets green light for 3-fold expansion


    The last thing the iron ore market needs is more production, but the company behind the expansion of a major iron ore hub in Western Australia claims it has no plans to increase ore output. Yet.

    The country's Environmental Protection Authority has sanctioned a three-fold expansion of Fortescue Metals Group's Solomon Hub, which comprises the  Firetail and Kings producing mines. Together, Firetail and Kings have an annual production capacity in excess of 70Mt. The Solomon Hub made #6 on MINING.com's World Top 10 Iron Mines in 2015.

    “The company has no current plans to increase production from the Solomon Hub.”

    Fortescue CEO Andrew Forrest famously called for a cap on iron ore production when the price of the steelmaking ingredient plumbed $55 a tonne lows in 2015, and has criticized top iron miners Rio Tinto and BHP Billiton for trying to squeeze smaller players like Fortescue out by keeping production high, thus suppressing the price.

    But according to a post in today's Guardian, the company has no plans to ramp up production, even though documents from the EPA application allow it to grow output by 80 million tonnes a year.

    “Fortescue began seeking regulatory approval for sustaining production at Solomon several years ago as a procedural measure to achieve the necessary permits for ongoing mining operations,” an FMG spokesman told the newspaper. “The company has no current plans to increase production from the Solomon Hub.”

    While that seems a little hard to believe, what is more certain is that the environmental approval will turn up the volume on opposition against growing the mine. The area to be cleared for the expansion totals just over 12,000 hectares of native vegetation, which is double the footprint of the existing mine. But it gets worse for pro-mining advocates. Six hectares that would be bulldozed for mining purposes is currently habitat for two endangered species – the northern quoll and Pilbara leaf-nosed bat – along with the Pilbara olive python, which is considered vulnerable. State authorities have also raised concerns over the need for a new field of water bores, which could reduce the flows into nearby Hamersley Gorge by 12%.

    The EPA has imposed 19 conditions on the proposed expansion, including management of flora and fauna, and prevention of groundwater contamination. The proposal still needs approval from state and federal environmental ministers. If it passes, the expansion will allow mining for the next 35 years.

    http://www.mining.com/solomon-gets-green-light-3-fold-expansion/

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