Mark Latham Commodity Equity Intelligence Service

Thursday 30th April 2015
Background Stories on www.commodityintelligence.com

News and Views:






Macro

China power consumption to grow 3-5 pct in 2015, CEC

China’s power consumption is forecast to reach 5,690-5,800 TWh in 2015, up 3-5% from the previous year, with consumption in the first half of the year estimated at 2,680 TWh, up about 2% from a year ago, China Electricity Council (CEC) said in a report on April 29.

The A month ago, the CEC forecast China’s power consumption in 2015 would be 5,740-5,800 TWh, up 4-5% year on year.

The forecast, revised down from CEC’s previous forecast of 4-5% growth to 5,740-5,800 TWh in early March, was based on multiple factors, including the downturn in industrial production, economic restructuring, warmer weather, on-grid power tariff cut and decrease in Q1 power consumption.

Total newly installed power generating capacity is expected to reach 100 GW this year, consisting over 53 GW of capacity from non-fossil fuels. And overall installed power generating capacity will amount to 1,460 GW by end of the year, rising 7.5% or so year on year, 35% or 510 GW of capacity would be based on non-fossil fuels.

Utilization rate of power generating units is forecast to be 4,130 hours on average in 2015, but the utilization of thermal units may fall below 4,600 hours to hit a new low, mainly due to weak demand and rising share of cleaner energy sources.

The CEC said power supply would be surplus in northeastern and northwestern provinces, and remain generally balanced in other parts of the nation. But some parts of northern China may see sporadic tightness, while south China-based Hainan province may see supply far short of demand, it noted.

http://en.sxcoal.com/0/117457/DataShow.html
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China Lesso

Image title

This is China Lesso Group. They make plastic pipe.

8x eps, 5.5x ev/ebitda. 2.5% yield.

Beijing is planning to spend $5.7tn on water remediation. This sounds to us like much plastic pipe.Image title

Here are plastic pipe prices, which are modestly rising, but input costs will be nicely flat to down because of Oil!Image title
The company is not very informative, but has consistently made money. We do know that the plastic pipe industry in China has been horrible, with massive excess capacity.

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Oil and Gas

Global Tertiary Demand

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Thai retail gasoline volumes.
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Total R&M operating numbers (volumes)
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US stocks of crude.




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PIRA: new volumes to overshoot new LNG supply deals

PIRA Energy Group reports that sizable volumes of new production capacity will be coming online in the next 12 months, but the ramp up on contracts tied to this capacity will lag behind by a considerable margin.

In addition, expiring contracts on existing LNG projects offer additional supply to the trading mix, most notably from Indonesia, PIRA said in its report.

The year-on-year U.S. storage surplus is well on its way to inflate an additional ~100 BCF by end-month. The implications of such a massive year-on-year increase will carry forward given that weekly stock builds ahead increasingly must fall below last year’s record pace. Certainly, these issues will make May Bidweek (concluding next Monday) all the more interesting as a test of whether last month’s price action that dragged the prompt month decidedly lower will be repeated.

In Europe, the approach to storage management and the acquisition of supply are quite different from normal at the beginning of the 2015 injection season. The normal rules and assumption will not apply because of the sizable decrease in oil-indexed prices in the coming months, which are causing all kinds of unique optimization plays.

PIRA foresees Mexican energy policy reforms, coupled with low oil prices, increasing the nation’s dependence on U.S. gas exports. Reforms to stimulate foreign investments were aimed to revitalize domestic oil and gas resource development, as well as upgrade critical infrastructure, but the collapse of oil prices has undercut resource investments and depleted already capital-short PEMEX. By comparison, reforms targeting private infrastructure investments are gaining strong traction, signaling more positive momentum for gas demand, especially gas-fired power generation. Stronger gas demand and stiffer domestic gas production headwinds should boost the call on U.S. exports from 2.0 BCF/D in 2014 to 5.6 BCF/D by 2020.

http://www.lngworldnews.com/pira-new-volumes-to-overshoot-new-lng-supply-deals/
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Europe’s biggest oil refiner joins those predicting end of boom

The surge in European refining margins, which jumped by the most in 4 years last quarter, cannot be sustained because the region still has surplus processing capacity, Total SA said Tuesday. The French oil producer joins refiners including Gunvor Group and Eni SpA who predicted this month that the favorable market won’t last.

Strong gasoline demand and a high level of maintenance at refineries in the U.S. increased margins, Total said. Eni, whose first-quarter refining margins jumped sixfold, said Wednesday that lower demand, overcapacity, and increasing competitive pressure from imports will be “headwinds” for companies in the region.

“European refiners are benefiting from a double whammy of lower crude oil prices and strong demand,” Hamza Khan, an Amsterdam-based senior commodity strategist at ING Bank NV, said by e-mail on April 28. “They will see a tough operating environment in the long run as new capacity comes online in the Middle East, the U.S. increases product exports and the price of crude recovers.”

http://fuelfix.com/blog/2015/04/29/europes-biggest-oil-refiner-joins-those-predicting-end-of-boom/
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China cuts subsidy for shale gas development for 2016-2020

China will offer smaller subsidies from next year to develop its potentially huge resources of shale gas, the Finance Ministry said on Wednesday, a sign that the industry has managed to cut the cost of production.

China has set a target of producing 30 billion cubic metres (bcm) shale gas by 2020, about 17 percent of current demand, but less than half an earlier goal, due to its complex geology, water scarcity and high drilling cost.

The Ministry said subsidies for shale gas development would be cut to 0.3 yuan per cubic metre from 2016 to 2018. That compares with a grant of 0.4 yuan from 2012 to 2015.

The subsidy will be further cut to 0.2 yuan per cubic meter in the 2019-2020 period, the ministry said on its website (www.mof.gov.cn).

Sinopec Corp, China's second-largest state energy firm and by far the leader in shale gas development, was unfazed by the lower subsidies.

"Shale gas is a strategic development area for the company and such a strategy wouldn't be affected by lower oil prices or subsidies," said company spokesman Lu Dapeng.

Better technology and a greater scale of development have helped the company cut the gas production cost, he added.

Sinopec, which discovered China's largest commercial shale gas field of Fuling in the southwest, has said it used new drilling technologies and made all the production equipment and tools at home, which has reined in development costs.

With the current subsidy of 0.40 yuan per cubic metre, Sinopec has said its internal rate of return for producing gas at Fuling was 11 to 13 percent.

http://af.reuters.com/article/commoditiesNews/idAFL4N0XQ31120150429
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China's natural gas output up 6.8% in Q1

China's natural gas output rose 6.8% year on year and hit 35.2 billion cubic meters (cu m) in the first three months of 2015, said the National Development and Reform Commission.

From Jan to Mar, the country's natural gas imports amounted to 16 billion cu m, up 16.5% from the previous year.

According to the statistics, China's imports of LNG gas decrease of 2.9% year on year to 6.8 billion cu m in the first quarter, while its imports of pipeline gas surged 36.8% to 9.3 billion cu m in the period.

In the first quarter of this year, China's natural gas consumption amounted to 50.2 billion cu m, up 4.8% from the year before.

http://en.chinamining.com.cn/News/2015-04-30/1430355516d72045.html
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Refining cushions Shell profits after oil price slide

Refining and trading cushioned a drop in Royal Dutch Shell's first quarter profits, which fell less than expected after the collapse in oil prices decimated earnings from oil and gas output.

Shell joined rival oil majors BP and Total which this week reported stronger than expectedprofits thanks to refining, a division the firms have struggled to rationalise in recent years but which proved valuable in the recent oil price downturn.

"Our results reflect the strength of our integrated business activities, against a backdrop of lower oil prices," Shell Chief Executive Officer Ben van Beurden said.

Shell however lowered its 2015 planned capital investment to $33 billion (21 billion pounds) from an earlier guidance of $35 billion.

Shell reported a 56 percent drop in first quarter net income at $3.2 billion, beating analysts' expectations of $2.4 billion profits.

It maintained a dividend of 47 cents per share and said it would use its planned $70 billion acquisition of smaller British rival BG Group to further optimise its asset base.

Shell's 6 percent investment cut was lower than its rivals in the sector which reduced 2015 upstream spending by 10 to 15 percent. Van Beurden in January warned against over reacting to the recent oil price fall.

“At last Shell is giving granularity for its 2015 capex guidance compared to its previous vague guidance. There is a relief that Shell is reacting to the lower prices,” Raymond James analyst Bertrand Hodee said.

Profits from refining and trading, also known as downstream, rose to $2.65 billion in the first quarter of 2015 from $1.575 billion a year earlier, offsetting a sharp drop in oil and gas production earnings to $675 million from $5.7 billion.

http://uk.reuters.com/article/2015/04/30/uk-shell-results-idUKKBN0NL0EE20150430
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Statoil Adjusted Profit Beats Estimates Amid Trading Gains

Statoil ASA adjusted profit beat estimates in the first quarter on trading and refining as it wrote down the value of mainly U.S. unconventional assets by $6.1 billion amid plunging crude prices.

Adjusted net income fell to 7 billion kroner ($928 million) from 15.8 billion kroner a year earlier, the Stavanger-based company said on Thursday. That compared with an estimate of 4.2 billion kroner in a survey of analysts. It took “significant accounting charges” after asset impairments of 46.1 billion kroner, mainly related to U.S. onshore unconventional assets.

Statoil, Norway’s largest oil producer in February announced it was deepening cost cuts from 2016 and also lowered capital spending plans to preserve its ability to pay dividends. The cuts have sent ripples through Norway, which relies on oil for about 20 percent of its economy, as producers and service companies have jettisoned thousands of jobs.

The company maintained plans for capital spending of about $18 billion and sees costs cuts of about $1.7 billion from 2016. It will pay a 1.8 kroner dividend for the quarter.

Statoil’s production rose to 2.056 million barrels of oil equivalent a day in the first quarter from 1.978 million barrels a year earlier. The average liquids price declined 40 percent.

The company reported adjusted earnings of 6.9 billion kroner for its market and trading unit, amid higher refinery margins and “strong” trading results.

Of the impairment losses 30.4 billion kroner, including goodwill of 4.2 billion kroner, relate to unconventional onshore assets in North America and 14.6 billion kroner on conventional upstream assets.

http://www.bloomberg.com/news/articles/2015-04-30/statoil-adjusted-profit-beats-estimates-on-marketing-trading
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Weir expects fall in oil and gas orders to continue falling

Weir Plc said orders from its oil and gas business fell 23 percent in the first quarter, a smaller drop than was expected by the market, sending its shares up as much as 5 percent.

The Scottish industrial engineering firm, which expects the decline in orders to continue in the second quarter, said it would cut costs at its oil and gas segment by another 10 million pounds ($15.35 million).

Companies serving the oil and gas industry have been feeling the pinch as exploration and production majors slash spending in response to the steep fall in crude prices.

Weir, which makes valves and pumps for the energy and mining industries, plans to cut another 125 jobs, mostly in its North American oil and gas business, and consolidate its service centres in the region, Andrew Neilson, Director of Strategy and Corporate Affairs told Reuters.

"We're getting to the point that it might start to impede our ability to respond to market recovery, if we cut it much more," Chief Executive Keith Cochrane said on a call with analysts, when asked if the company could withstand more job cuts.

After the latest round of cuts, Weir will have reduced its North American oil and gas headcount by about 27 percent. It first began taking cost-saving measures in November.

http://www.reuters.com/article/2015/04/29/weir-group-results-idUSL4N0XQ2DM20150429
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US oil inventories are still at an 80-year high

The latest data from the Energy Information Administration showed that commercial crude inventories rose by 1.9 million barrels in the week ended April 24.

The consensus forecast was for a build of 3.3 million barrels.

That brought the total to 490.9 million barrels, keeping inventories at the highest level for this time of year in at least 80 years.

Last week, oil inventories rose by 5.3 million barrels from the previous period, more than the consensus forecast of 3.2 million barrels.

Read more: http://uk.businessinsider.com/eia-weekly-crude-oil-inventories-april-29-2015-4?r=US#ixzz3Yi4Fktn3

For the first time since November 2014, Cushing saw an inventory decline (-514k) last week.





http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/04-overflow/20150424_oil2.jpg


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Hess Reports First-Quarter Loss on Lower Crude Prices

Hess Corp., which sold refineries and gasoline stations to focus on oil production, cut capital spending and reported a first-quarter net loss after crude prices plummeted.

Hess will cut 2015 capital spending 6.4 percent to $4.4 billion, the New York-based company said Wednesday in a statement. The loss was $389 million, or $1.37 a share, compared with profit of $386 million, or $1.20, a year ago.

The loss came even as the company pumped more oil and natural gas to make up for prices that fell by more than half from last year, the company said. Oil and gas production increased to 361,000 barrels of oil equivalent a day from 318,000 barrels a year ago.

Lower oil prices reduced adjusted net income by about $700 million. West Texas Intermediate, the U.S. benchmark crude, fell 0.4 percent to $56.86 a barrel at 8:01 a.m. in New York. Oil is down 47 percent since its June high.

The loss was 98 cents a share excluding some items, narrower than the $1.06 a share average estimate of 20 analysts compiled by Bloomberg.

http://www.bloomberg.com/news/articles/2015-04-29/hess-reports-first-quarter-loss-from-lower-crude-oil-prices
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Suncor turns to loss on low oil price, foreign exchange loss

Suncor Energy Inc, Canada's largest oil and gas company, reported a loss on Wednesday as oil prices tumbled by half and a foreign exchange loss outweighed higher production.

The company's net loss was C$341 million, or 24 Canadian cents per share, compared with a profit of C$1.49 billion, or C$1.01 per share, in the first quarter of 2014.

Operating earnings, which exclude one-time items like the C$940 million ($781.8 million) foreign exchange loss on the value of the company's U.S.-dollar denominated debt, fell sharply to C$175 million, or 12 Canadian cents per share, from C$1.793 billion, or C$1.22 per share, in the year-ago period.

The adjusted result lagged the average analyst estimate of 14 Canadian cents per share, according to Thomson Reuters I/B/E/S.

Suncor, like its peers, has already slashed jobs and spending to cope with the sharp decline in the oil price over the past year. The company, the dominant producer in Canada's oil sands, said efforts remain on track to cut C$1 billion from its 2015 capital budget while still moving ahead with key growth projects.

Output from Suncor's northern Alberta operations rose 13 percent to 440,400 barrels per day, mainly due to less maintenance activity in the quarter.

Cash costs for its oil sands operations fell to C$28.40 per barrel from C$35.60 in the year-prior quarter, due to the higher production, lower natural gas prices and the company's cost cutting initiatives.

Overall, Suncor produced a total 602,400 barrels of oil equivalent per day (boepd), up 10.5 percent from 545,300 boepd in the fourth quarter of 2014.

The company's cash flow, an indicator of its ability to pay for new projects, fell 49 percent to C$1.48 billion and it said earlier this month that it expected second-quarter production of 598,000 boepd.

http://www.reuters.com/article/2015/04/30/suncor-energy-results-idUSL1N0XR04Q20150430
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Whiting Petroleum Swings to a Loss on Oil Price Drop

Whiting Petroleum Corp. reported it swung to a loss in the first quarter, as tumbling oil prices weighed on results even as production remained strong.

The per-share loss beat expectations, though revenue fell below analyst forecasts. Shares fell less than 1% in recent after-hours trading.

Denver-based Whiting, one of the largest producers in the prolific Bakken Shale formation in North Dakota, has been suffering from the sharp decline in oil prices.

Last December, it closed a $3.8 billion deal to buy rival Kodiak Oil & Gas Corp. The deal saddled the company with more than $2 billion of additional debt, and Whiting now has a so-called enterprise value, which includes debt, of more than $11 billion, according to S&P Capital IQ.

In March, The Wall Street Journal had reported that Whiting is seeking a buyer after plummeting crude prices took a bite out of the oil-and-gas producer’s results and its shares tumbled. However, a stock sale in late March signaled that any larger takeover was unlikely soon.

Chief Executive James Volker said production remained strong though the company was reducing its rig count and well cost. First-quarter production generated 166,930 barrels a day, up 3% pro forma on a sequential basis.

Overall, the company posted a loss of $106 million, or 63 cents a share, compared with a year-earlier profit of $109 million, or 92 cents a share.

Excluding special items, the company’s per-share loss was 23 cents, compared with a year-earlier profit of $1.06 a share.

Revenue dropped 29% to $529 million.

http://www.wsj.com/articles/whiting-petroleum-swings-to-a-loss-on-oil-price-drop-1430338952
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Valero Energy reports on record first quarter

Valero Energy Corporation reported net income from continuing operations attributable to Valero stockholders of US$964 million, or US$1.87 per share, in the first quarter of 2015 compared to US$829 million, or US$1.54 per share, in the first quarter of 2014. The results were a record first quarter for the company.

“Our team’s solid performance and favourable margins helped us deliver impressive results during a heavy planned maintenance period in the first quarter,” said Joe Gorder, Valero Chairman, President and Chief Executive Officer. “Valero’s financial position is strong, and we are clearly executing our strategy, which includes investing to optimise our operations, growing VLP and returning cash to stockholders.”

The refining segment reported first quarter 2015 operating income of US$1.6 billion versus US$1.3 billion in the first quarter of 2014. The US$361 million increase in operating income primarily resulted from the US$1.49 increase in throughput margin per barrel from US$10.90 in the first quarter of 2014 to US$12.39 in the first quarter of 2015. The increase in throughput margin per barrel was mainly driven by stronger gasoline and secondary product margins per barrel relative to Brent crude oil and lower natural gas costs. These positive drivers were partially offset by lower discounts per barrel for most sweet and sour crude oils relative to Brent crude oil.

http://www.energyglobal.com/downstream/refining/29042015/Valero-Energy-reports-on-record-first-quarter-684/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+EnergyGlobal+%28Energy+Global%29
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Range Resources sees fall in NatGas surplus

In the presentation below, they reiterate the high decline rates on shale oil production of 80% (which seems very consistent with CLRs & WLL stats) in the first 12 months. Thus, if rigs fall, even with some uplift in well productivity of 20-30%, production should fall. They argued on the call that unlike in 2008/09 laterals are much longer indicating limited productivity gains vs. that time, hence why the theory that rig drops don’t lead to production cuts is false this time. In addition, we are much further along on horizontal wells vs. vertical wells too. This concurs with our research and thus why 2H both oil and gas production will plateau and, in the case of oil, fall.



GasProductionResponse



http://oilprice.com/Energy/Natural-Gas/Range-Resources-Expects-Natural-Gas-Glut-To-Even-Out-By-Year-End.html
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Noble Corp's profit beats as contract drilling margins rise

Noble Corp Plc reported a better-than-expected quarterly profit as higher margins from contract drilling services helped offset losses from retirement of rigs due to a slump in oil prices.

The company said on Wednesday that margins in its contract drilling business rose to 59 percent in the first quarter from 50 percent in the prior quarter.

Shares of Noble, which gets about 97 percent of its operating revenue from contract drilling services, rose about 1.5 percent in extended trading.

Noble's average daily revenue rose 2.8 percent from the prior quarter to $340,000, while fleet utilization rose to 86 percent from 82 percent.

The company, however, said it expected its capital spending to fall to about $585 million in 2015 from $1.9 billion in 2014.

Net income attributable to Noble fell to $178.4 million, or 72 cents per share, in the quarter ended March 31 from $256.3 million, or 99 cents per share, a year earlier.

Net income from continuing operations rose to 72 cents from 60 cents a year earlier. In August, Noble completed the spin-off of Paragon Offshore Plc, which owns drilling assets that were previously part of Noble.

Operating revenue rose about 1 percent to $804.3 million.

Analysts on average had expected earnings of 51 cents per share and revenue of $777.4 million, according to Thomson Reuters I/B/E/S.

http://www.reuters.com/article/2015/04/29/noble-corp-results-idUSL4N0XQ62A20150429
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Precious Metals

Yamana Gold pledges to fix executive pay plan after investors vote 'no'

Yamana Gold Inc will change its executive pay plan to better reflect performance, the mid-tier miner told shareholders on Wednesday after they voted against the plan, a day after industry leader Barrick Gold Corp made the same promise to its unhappy investors.

More than 50 percent of Yamana shareholders who voted rejected the plan, according to early returns, Chief Executive Peter Marrone said after Yamana's annual meeting in Toronto.

"We regret this result, although we have clearly understood the message," Marrone told shareholders, adding that he had made a personal decision to waive 450,000 performance share units that he was awarded last June.

Although say-on-pay shareholder votes are not mandatory in Canada, and companies are not required to take action on the outcomes, they are considered important barometers of investor attitudes.

Influential advisory firm Glass Lewis recommended against Yamana's plan, citing excessive compensation and one-off awards, with a "significant disconnect between pay and performance".

The CPP Investment Board, Canada's largest pension fund manager, voted against the Yamana plan, but supported the reelection of the company's directors. All 10 Yamana directors were reelected on Wednesday.

Marrone was paid $8.5 million in 2014, Yamana said, comprised of $5.7 million in compensation and a $2.7 million cash award tied to the Osisko acquisition.

In 2013, Marrone was paid $10.3 million and in 2012 he got $12.1 million.

Yamana will also consider ways to increase share ownership by executives, Marrone said.

Shareholders at the meeting also asked the company to consider holding fewer board meetings, to better detail board compensation and to forgo further dilutive share issues for acquisitions.

http://www.reuters.com/article/2015/04/29/yamana-gold-compensation-idUSL1N0XQ2WR20150429
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Base Metals

Antofagasta cuts copper output forecast over rain, protests in Chile

Disruptions at two of Chile-focused Antofagasta’s mines during the first quarter of the year has forced the copper company to scale back its production guidance for 2015.

The miner said Wednesday it lost about 8,000 metric tons of copper output due to a 10-day protest over water supplies at its flagship Los Pelambres mine in early March. Later that month, it was also forced to suspend operations at its Centinela, Michilla and Antucoya operations due to torrential downpours in northern Chile's Atacama desert, one of the world's driest places.

The company now expects to mine 15,000 tonnes less than its original forecast of 710,000 tonnes, but maintained its annual net cash cost forecast of around $1.40 per pound.

As a result, the company now expects to mine 15,000 tonnes less than its original forecast of 710,000 tonnes, but maintained its annual net cash cost forecast of around $1.40 per pound.

"Normal operations" have now resumed, said the London-listed miner, including at Los Pelambres mine,which produces more than 400,000 tonnes of copper a year, following anagreement reached with the local community. Antofagasta added it expected to recover some of the lost output through the rest of the year.

The miner, which plans to spend close to $1.3 billion in capital projects this year after $1.6bn of capex in 2014, is in the middle of a sequence brownfield expansions at its Chilean operations.

Construction at the $1.9 billion Antucoya project, said Antofagasta, is on track to be completed in the second quarter of 2015 and in full production by the start of 2016.

http://www.mining.com/antofagasta-cuts-copper-output-forecast-over-rain-protests-in-chile/?utm_source=twitterfeed&utm_medium=twitter
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Lundin Mining reports solid First Quarter Results

Lundin Mining Corporation today reported net earnings of $83.3 million or net earnings attributable to Lundin shareholders (after deducting non-controlling interests) of $71.8 million ($0.10 per share) for the quarter ended March 31, 2015. Cash flows of $224.0 million were generated from operations in the quarter, not including the Company's attributable cash flows from Tenke Fungurume.

Earnings for the three month period included a full quarter of operating and financial results from Candelaria, which was acquired in the fourth quarter of 2014 and Eagle, which was commissioned in the same period. Candelaria and Eagle generated operating earnings of $163.7 million and $56.1 million, respectively, in the current quarter.

Paul Conibear, President and CEO commented, "Our focus on delivering operational and cost efficiencies has resulted in very strong quarterly performance across the Company, and marks an excellent start to the year. During the first quarter, we achieved record copper and nickel production as well as record levels of operating cash flow, which reflects the positive contributions now being attained from our recent acquisitions."

"Eagle performed at or above full design capacities for the entire quarter. Our focus now remains on the efficient transition of Candelaria into Lundin Mining and optimization of its production profile and continuing to deliver robust production, cash flow and earnings from our other operations to further contribute to our healthy balance sheet."

http://finance.yahoo.com/news/lundin-mining-first-quarter-results-213000059.html
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Steel, Iron Ore and Coal

Vale, China in talks to build 50 giant bulk carriers — report

Iron ore giant Vale the world’s No. 1 producer of the steel-making material, is said to be negotiating the manufacture of 50 giant bulk carriers with Chinese shipbuilders.

The Rio de Janeiro-based miner aims to increase its fleet of mega ships, the world's biggest bulk ore carriers, to transport iron ore from Brazil to China.

According to Wall Street Journal, the Rio de Janeiro-based miner aims to increase its fleet of mega ships, the world's biggest bulk ore carriers, to transport iron ore from Brazil to China.

The newspaper added that China Cosco Holdings, ship financier Shandong Shipping Corp., ICBC International Leasing Ltd. and China Merchants Energy Shipping are all involved in the ongoing negotiations.

Vale's carriers were barred from China from Jan. 2012 to Sept. last year, due to rules preventing ships of more than 250,000 dwt in capacity from docking at mainland ports.

In February, Beijing finally amended rules around vessels allowed to berth at its harbours, paving the way for the entry of Vale's giant ships, known as Valemaxes, which can carry up to 400,000 deadweight tons.

Vale's inability to dock its iron ore carriers at Chinese ports had stymied its efforts to reduce freight costs and to compete with Australian based-rivals like BHP Billiton (ASX:BHP) and Rio Tinto (LON:RIO), which are closer to China.

If the shipbuilding deal rumour were confirmed, the order would be the largest in history for this kind of massive ore carriers.

http://www.mining.com/vale-china-in-talks-to-build-50-giant-bulk-carriers-report/?utm_source=twitterfeed&utm_medium=twitter
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Goa iron-ore mining resumption delayed again

With the monsoon season ahead and the disincentives of low international prices, iron-ore mining operations in the western Indian coastal province of Goa are not expected to resume before October or November, at the earliest.

According to an official in the Goa Mineral Exporters’ Association (GMEA), if mining operations were to restart, production would have to be reduced within the next month or so with the onset of the monsoon rains. Simultaneously, miners were not keen to resume operations as the cost of mining had increased to meet stricter mandatory environmental norms and these costs would not be covered by the current low international prices, he said.

According to Goa miners, export offers for benchmark high-grade iron-ore would need to move up by at least $15/t to $20/t from current levels, to ensure miners of sufficient margins from outward shipments. A GMEA official said that even though current export offers for high grade iron-ore had bounced back to levels of $60/t cost and freight to China after falling to a recent low of $50/t, during April, the government increase in royalty payments and mandatory contributions towards the District Mineral Fund had increased the cost of production which would not be covered by current prices.

 In April 2014, the Indian Supreme Court lifted an 18-month ban on iron-ore mining in the province, but resumption of mining operations was made subject to a yearly production ceiling of 20-million tonnes a year and stricter environmental guidelines. Since then the Goa government had 72 mining leases which had been cancelled in the wake of the court orders.

But as a silver lining, miners were looking towards a hike in the yearly production ceiling imposed by the apex court. A committee appointed by the Supreme Court to monitor and oversee resumption of mining in the province was expected to submit another report before the court, and indications available from the industry suggested that the committee could recommend an increase in the yearly production ceiling of another 15-million tonnes a year in addition to the already imposed 20-million tonnes a year limit, enabling miners to produce an aggregate 35-million tonnes a year.

http://www.miningweekly.com/article/goa-iron-ore-mining-resumption-delayed-again-2015-04-29
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Iron ore price rally turns into dead cat bounce

A two week hot streak that saw iron ore enter a new bull market came to an abrupt halt on Wednesday with the steelmaking raw material suffering its worse one day drop in a month.

The 62% Fe import price including freight and insurance at the Chinese port of Tianjin fell $2.30 or 3.9% to $56.90 a tonne on Wednesday after failing to break the psychologically important $60 a tonne level according to data provided by The SteelIndex.

After a rally that began on April 16 the iron ore price added 26.7% since hitting record lows at the beginning of April of $46.70 a tonne. A more than 20% appreciation from a low is considered a bull market. Iron ore hit an all-time high of $191 a tonne in February 2011.

Many industry players view the recent rally in iron ore prices as being overdone as the fundamentals still remain off balance

The advance in the Metal Bulletin's benchmark 62%-index at the ports of Qingdao-Rizhao-Lianyungang in China also reversed on Wednesday  with the price pulling back to $57.13 a tonne after falling just 12c short of $60.

Recent strength came on the back of a period of restocking by Chinese steelmakers where the beleaguered industry enjoyed a rise in rebar prices which also fizzled out on Wednesday.

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