Archive for July, 2014

Cashing in on pork chops: Chinese supplier Wan Long to become billionaire on share sale

Thursday, July 31st, 2014

 CHOP CHOP & HURRY UP SAYS Wan Long

pork chop meat image www.foodpassions (2)

Meaty business: Wan Long’s stake in the business is valued at more than $US1 billion.

Wan Long, who runs the world’s biggest pork supplier, will become a billionaire when his company WH Group completes an initial public offering in Hong Kong.

WH Group is set to raise at least $US2.05 billion ($2.2 billion), based on data in its share sale prospectus. The company received enough orders for its sale of 2.57 billion shares at HK$6.20 each, people with knowledge of the matter said.

Wan owns 9.1 per cent of the Luohe, China-based meat packer through two holding companies, Sure Pass and Rise Grand. The stake is valued at more than $US1 billion, according to the prospectus.

Born in 1940, Wan joined WH Group’s predecessor Luohe Cold Storage in 1968, a decade after the state-owned company was founded in central China’s Henan province. He became the head of the factory in 1984.

The company is raising money to repay part of a $US4 billion loan that funded its purchase of Smithfield Foods, the biggest Chinese acquisition of a US firm so far. WH Group revived the share sale this month, after scrapping plans to raise as much as $US5.3 billion in April.

Fund managers placed orders for at least double the amount of stock available to them, according to sources who asked not to be identified. Individual investors subscribed for more than 55 times the number of shares in that portion, which accounted for 5 per cent of the offering, the people said.

The share sale would value WH Group at $US11.4 billion, about 11.5 times its estimated 2014 profit. Benny Liu, a Hong Kong-based external spokesman for WH Group, declined to comment.

BOC International Holdings and Morgan Stanley have been arranging the offering.

Henry Sapiecha

Titano-magnetite New Zealand may approve underwater mine

Saturday, July 26th, 2014

New Zealand may approve underwater iron sands mine

new-zealand-may-approve-first-underwater-mine-image www.www-globalcommodities.com

New Zealand will announce Wednesday the fate of Trans Tasman Resources (TTR) $70 million underwater iron sand project, which could become the world’s first commercial metals operation on the ocean floor, off the country’s west coast.

Backed by Australian, American and New Zealand investors, the mine will suck in iron-rich seafloor sands, to later extract the desired titano-magnetite for export to Asian steel mills, with about 90% of the sand being returned to the bottom of the sea.

According to Reuters, if South Taranaki Bight project is approved it will encourage others looking to mine copper, cobalt, manganese and other metals deeper on the ocean floor, but concerned about barriers to dig in Neptune’s kingdom.

TTR aims to raise as much as US$550 million in debt and equity to fund the project, expected to begin production by 2016.

ttl-project-map nz image www.www-globalcommodities.com

Kiwis Against Seabed Mining (KASM) led opposition to the initiative, claiming there was too much scientific uncertainty about environmental impacts of the proposal, as well potential effects on surf breaks and other coastal formations.

TTR argues the iron sands are mainly inhabited by sandworms, which typically re-establish themselves after disturbance over a period of years.

“Our view, supported by our science experts, is that between five and 10 years you will get almost full recovery of the area that’s been mined … because the organisms and environment are already quite adapted and recover quickly,” TTR Chief Executive Tim Crossley told Reuters.

Trans Tasman Resources already has a mining licence, but is awaiting a marine consent from New Zealand’s Environmental Protection Agency (EPA).

Trans Tasman Resources already has a mining licence, but is awaiting a marine consent from New Zealand’s Environmental Protection Agency (EPA).

Nautilus Minerals (TSX:NUS), the first company that began exploring the ocean floor for polymetallic massive sulphide deposits, reached an agreement with Papua New Guinea in April. The deal will allow Nautilus’ Solwara 1 gold, copper and silver underwater project, located in the Bismarck Sea, north of Papua New Guinea, to finally move towards production.

The Canadian company, which is also in talks with New Zealand, expects to begin production at Solwara in 2017.

The push to explore the ocean for mining minerals is gaining momentum as ore deposits on land are on the decline, and demand for hard-to-find rare-earth elements needed for portable electronics and batteries for hybrid vehicles continues to grow.

Henry Sapiecha

**** LATEST NEWS RELEASE ON UNDERWATER MINING IN NEW ZEALAND****

Authorities in New Zealand have poured cold water on Trans Tasman Resources (TTR) $70 million ocean floor iron mine project by rejecting what could have become the country’s first operation of its kind.

In its decision the country’s Environmental Protection Agency (EPA) said the major for the refusal was the vagueness around the scope and significance of the potential adverse environmental effects, and those on existing interests.

The company had applied for a permit to mine 66 square kilometres, located between 22 and 36 kilometres offshore in the South Taranaki Blight.

Up to 50 million tonnes of sand per year would have bee processed on ships to remove iron ore, with about 45 million tonnes of waste sand returned to the seabed.

The committee said it wasn’t satisfied that negative effects could be avoided, remedied or mitigated. It also said it was concerned by the “lack of clarity” about the project’s wider economic benefits, outside of royalties and taxes

The committee said it wasn’t satisfied that negative effects could be avoided, remedied or mitigated. It also said it was concerned by the “lack of clarity” about the project’s wider economic benefits, outside of royalties and taxes. The company now has 15 days to appeal with the High Court.

TTR had estimated it would extract about $446 million worth of iron each year, providing employment opportunities and raising the level of New Zealand’s exports by $147 million per year.

Considering next steps

In an e-mailed statement, Trans-Tasman Resources chief executive Tim Crossley said his firm was extremely disappointed with the decision.

“We have put a significant amount of time and effort into developing this project including consulting with iwi and local communities and undertaking detailed scientific research to assess environmental impacts of the project,” he said.

The company, which has already spent more than $50 million on the project, will take the next few days to consider next steps.

The push to explore the ocean for mining minerals is gaining momentum as ore deposits on land are on the decline, and demand for hard-to-find rare-earth elements needed for portable electronics and batteries for hybrid vehicles continues to grow.

Besides New Zealand and Papua New Guinea, where Canadian Nautilus Minerals (TSX:NUS) is developing its Solwara 1 gold, copper and silver project, other countries in the Pacific are also looking at underwater mining. Fiji, Solomon Islands, Tonga and Vanuatu, have all issued exploration licenses. Cook Islands, in the South Pacific, also plans to put seabed exploration permits up for bids later this year.

Henry Sapiecha

This Aussie town lets people pay for a hotel room with gold

Saturday, July 26th, 2014

kalgoolie lets-people-pay-for-a-hotel-room-with-gold image www.www-globalcommodities.com

A hotel in the Wild West mining town of Kalgoorlie, in West Australia, is now allowing travellers to settle bills for accommodation with gold nuggets, bars, rings and “anything” as long as it’s the shiny yellow metal.

The idea, reports ABC, came up in light of the upcoming Diggers and Dealers mining conference, to take place in Kalgoorlie from August 4 to 6, but the resort manager Nicholas Parkinson-Bates said he plans to let people pay with gold all year round.

Everyone here knows the value of gold – it’s sort of a way of life in Kalgoorlie

Everyone here knows the value of gold – it’s sort of a way of life in Kalgoorlie,” he was quoted as saying.

According to the manager of the Rydges Resort and Spa, located 600km east of Perth, trading in gold was standard practice in Kalgoorlie-Boulder in the late 1800s and there are still a few businesses that accept the precious metal as payment.

“People buy cars in gold here (…) I’ve also heard of some other types of businesses even doctors and stuff who have been accepting gold,” Parkinson-Bates told AAP.

Transactions will be carried out through a local buyer with connections to Perth Mint.

Parkinson-Bates noted he would still take a credit card to hold for any extras the guests may spend.

So far no one has paid the hotel in gold yet.

Henry Sapiecha

Congo mines no longer controlled by warlords and militia

Thursday, July 10th, 2014

Children as young as 11, used to work at Congo’s illegal mines image www.worldwidediamonds.info

Latest research by the ENOUGH Project, an anti-genocide campaign group, shows that Congolese warlords have lost their grip on most of the country’s mines, almost putting an end to a long-era of major abuses in the African country and surrounding areas.

According to the report, an US law that came into force last week demanding companies to disclose whether their products contain so-called “conflict minerals,” and efforts by technology firms, have helped limit exports from Africa for consumer electronics.

Tin, tantalum and tungsten, used to make computers, smart phones, and tablets, used to generate $185m a year for armed groups. Now, about two-thirds of mines formerly controlled by warlords “are part of peaceful supply chains,” says ENOUGH Project.

Tin, tantalum and tungsten, used to make computers, smart phones, and tablets, used to generate $185m a year for armed groups. Now, about two-thirds of mines formerly controlled by warlords “are part of peaceful supply chains,” says ENOUGH Project.

“Our research found that electronics companies are expanding their responsible minerals sourcing from Congo, and Congolese miners are now able to earn 40% more from those mines,” says senior policy analyst, Sasha Lezhnev.

Artisanal mining of gold, however, is believed to continue funding army commanders, it adds.

The ENOUGH Project’s report said the results exposed in the study were the result of five months of field research.

Henry Sapiecha

INFOGRAPHIC: Exploring the US mining industry

Wednesday, July 9th, 2014

Highlights of the US mining industry: America has the world’s largest coal reserve and it is the second largest producer of gold and copper.

mining-industry-infographic-www.www-globalcommodities.com

Henry Sapiecha

MINING COSTS IN CHILE HAVE GONE UP 350% OVER THE LAST DECADE

Wednesday, July 9th, 2014

ET_graphelectricity-90x60

Once the darling of mining investors venturing in Latin America, world’s top copper producer Chile is becoming one of the most expensive countries to explore and mine.

While less costly than Mexico, the cost of producing a pound of copper went —according to data from the country’s copper commission—from US$0.63 per pound in 2004, which was half of Africa and well below the world average at the time, to US$2.50 last year.  It means it now costs about 3.5 times more (350%) to produce a pound of the red metal in Chile, compared to a decade ago, and the figure is also higher than global average of $2.38 per pound registered last year.

The same study shows that only two mining jurisdictions last year were more expensive than Chile: Europe and Asia.

The same study shows that only two mining jurisdictions last year were more expensive than Chile: Europe and Asia.

Between 2004 and 2013, production costs in Chile — measured in dollars per year— went up by 295%, representing an annual average of 30%. Measured in dollar value for 2012, cost jumped by 186%. In comparison, global average production cost increase went up by 267%.

The problem of rising costs is not limited to Chile; it is a trend affecting the mining industry worldwide.

Energy-starved

However, the South American country is also struggling with high cost of energy, which threatens the competitiveness of the country’s copper industry and poses a major challenge for new developments.

Electricity costs in Latin America’s wealthiest economy have climbed 11% per year since 2000, making it one of the most expensive places in the world to secure energy for mining projects.

And while the nation has the world’s richest reserves of copper, grades are falling at its massive but aging copper mines, making it difficult to maintain output and putting pressure on costs.

High wages don’t help the situation. Chilean mine workers produce less than half of their North American counterparts, while getting paid more, told Bloomberg in April Peter Beaven, BHP Billiton (ASX:BHP) base metals head in the country.

Chilean mines’ production costs could come down, however, if miners scale back planned expansions because of falling copper prices and energy suppliers are forced to offer more competitive prices.

Henry Sapiecha

Chile’s Codelco production to be over 300 tons of silver in the coming year

Wednesday, July 9th, 2014

Silver production at Chile’s Codelco, the world’s largest copper miner, went up by over 38% in the first five months of 2014, compared to the same period last year, as a result of the company’s increasing efforts to become one of the globe’s top ten silver producers.

The company expects to produce between 300 to 600 tons of the precious metal this year, as its massive and new Ministro Hales mine ramps up production

chiles-codelco-Ministro Hales copper-silver mine image www.www-globalcommodities.com

According to figures provided by the state-owned firm to Portal Minero (in Spanish), inferred silver production to date has reached 144 tons, 40 more than last year. The company expects to produce between 300 to 600 tons of the precious metal this year, as its massive and new Ministro Hales mine ramps up production.

Located on the outskirts of Calama, in northern Chile, the nearly $3 billion mine will generate about a third of the country’s silver production. It will also add 180,000 tonnes to global copper supply, helping to counteract declining ore grades in Codelco’s other mines.

Last year Chile’s total silver output reached almost 1,220 tons, a 5% of the world’s total.

Henry Sapiecha

Montana-based Sunlight Mine offloaded by Barrick Gold

Friday, July 4th, 2014

montana-based-sunlight-mine image www.www-globalcommodities.com

Barrick Gold (TSX, NYSE:ABX), the world’s largest producer of the precious metal, is reportedly ready to offload its aging Golden Sunlight mine in southwestern Montana, US, as part of a now two-year-long move to shed non-core assets and pay back debts.

According to The Wall Street Journal, the gold giant has hired Canadian Imperial Bank of Commerce (CIBC) to help sell the mine, which it acquired after taking over Placer Dome in 2006.

The open-pit mine, located in Jefferson County, is one of Barrick’s smallest properties, producing 92,000 ounces of gold in 2013

The open-pit mine, located in Jefferson County, is one of Barrick’s smallest properties, producing 92,000 ounces of gold in 2013, according to the company’s website.

In January, the Toronto-based company sold its interest in the Kanowna operation in western Australia to Northern Start Resources for $75 million cash. The transaction followed the sale of its Plutonic mine also to Northern Star for $25 million in December.

Barrick’s earning per share plummeted in the most recent quarter, in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years.

Being the most debt-heavy company in the gold sector has meant for Barrick to be among those that have lost the most due to volatile bullion prices.

“The company has never been known for managing its cash or resources well or, for that matter, being investor friendly,” writes Steve McDonald, bond strategist for The Oxford Club.

“It has a history of being too aggressive in its growth efforts and having too many underperforming assets that are too spread out,” he adds.

Barrick’s shares were down -0.55% to $18.24 Thursday in pre-market trade.

Henry Sapiecha

AFRICAN IRON ORE DEAL SIGNED & THIS WILL BE A GAME CHANGER

Friday, July 4th, 2014

chalco-selling-stake-in-simandou-iron-ore-project-for-2-billion-image  www.www-globalcommodities.com

A deal between the Guinea government and Rio Tinto (LON:RIO) regarding the Simandou iron ore development was inked on Monday.

The deal with Anglo-Australian giant and its partner – China’s Chalco together with the World Bank – sets out conditions for the associated infrastructure for the ambitious $20 billion project.

A sticking point in the negotiations was the route and funding of a railway to get the Simandou area ore to port.

Monday’s agreement calls for a new 700km railway across the country to Conakry, Guinea’s capital in the north, at a conservatively estimated cost of $7 billion, Reuters reports:

It would also need a deep-water port at Morebaya costing a further $4-billion, and support infrastructures estimated to cost a minimum of $2.5-billion, documents seen by Reuters showed on Monday. The port and railway would eventually be expanded to handle up to 100-million tonnes of minerals a year.

Because of the economic benefit to the impoverished West African nation Guinea this route was chosen in stead of a much shorter and cheaper railway to the deep Buchanan port in neighbouring Liberia to the south. The developers will operate the infrastructure for thirty years whereafter ownership reverts to Guinea.

Rio Tinto CEO Sam Walsh said in a speech recently that “the infrastructure that brings Guinea’s natural resource wealth to global markets can do so much more for the country,” pointing out that once Simandou is fully operational, it will contribute an estimated $7.6bn to the Guinean economy each year, dwarfing the amount of aid payments the country receives.

Guinea is home to some of the richest and easily exploitable iron ore fields outside of Australia’s Pilbara region and top producer Vale’s Brazilian home base.

Initially scheduled for next year, even with the new deal in place initial exports is doubtful for this decade. Monday’s deal committed the partners to producing a feasibility study within little over a year, another more than two-half-years for financing and production within a decade.

guinea-railway-africa-liberia-conakry-simandou-buchanan image www.www-globalcommodities.com

Simandou would by itself be the world’s fifth-largest producer

Rio acquired the rights for the vast mountain deposit hosting some of the world’s highest-grade ore more than 15 years ago.

Rio Tinto is developing the southern part of Simandou and has already spent more than $3 billion building open pits, but the scale and scope of the development had been placed in doubt by the fall in the price of iron ore and a looming supply glut.

At full production Simandou would export up to 95 million tonnes per year – that’s a third of Rio’s total capacity at the moment – and would catapult Rio past Vale as world number one.

Simandou would by itself be the world’s fifth-largest producer behind Australia’s Fortescue Metals and BHP Billiton.

The northern part of the Simandou concession was held by BSG Resources and Brazilian giant Vale (NYSE:VALE), but the Guinea government withdrew the mining permit in April, accusing BSGR of obtaining its rights through corruption in 2008.

Rio Tinto has filed its own lawsuit against both Vale and BSGR for what it qualifies as a “steal” of its previously-owned concessions.

Fellow Anglo-Australian miner BHP Billiton has decided to pull out of the country and is in the process of selling its stake in a nearby iron ore project called Nimba.

Henry Sapiecha

IRON ORE PRICES TAKE ANOTHER HIT..DOWN-DOWN-DOWN.

Friday, July 4th, 2014

 

Shares in producers dumped after as China’s crackdown on shadow banking system snares metal-backed trade loans

Benchmark iron ore fell more than 2% on Thursday to fresh lows last seen September 7, 2012.

iron-ore-truck-image www.www-globalcommodities.com

According to data from the The Steel Index, the import price of 62% iron ore fines at China’s Tianjin port was pegged at $91.50 per tonne, down $2 on the day.

China is responsible for two-thirds of the 1.2 billion tonne seaborne trade and the fresh declines in the price of the steelmaking raw material has been blamed on data out on Thursday showing credit growth in in the world’s second largest economy slowing.

While official bank lending increased, the flushing out of riskier debt in the economy led to an overall decline.

Beijing is clamping down on unofficial financing activities happening outside state-owned banks, the so-called shadow banking system. The use of commodities – particularly copper and iron – as collateral in trade financing agreements makes up a large portion of the unofficial banking sector.

Estimates vary wildly but the portion of iron ore and copper stockpiles at the country’s ports tied up in these deals could be as high as 60%.

Last week’s revelation that authorities are probing whether traders at the port of Qingdao pledged the same copper, iron ore and aluminum inventories as collateral for loans multiple times to different banks could mean and end to practice alltogether.

After a strong first quarter iron ore imports fell back to 77.4 million tonnes in May, down 7.2% from April; a sign that these deals may be unwinding at a more rapid rate than previously thought.

With soft underlying demand, record high stockpiles of more than 100 million tonnes and ample supply of seaborne ore already hurting prices, the dumping of finance-related inventories onto the market is destined to bring further weakness.

The dumping of finance-related inventories onto the market is destined to bring further weakness

Morgan Stanley on Thursday cuts its iron ore price estimate for this year and the investment bank foresees a further drop in 2015. Morgan Stanley forecasts iron ore to average $105 tonne for the whole of 2014 versus a year to date average of $113 a tonne. Back in May, the bank still pegged $118 for this year.

For 2015, when an increase in seaborne supply will more than make up for domestic Chinese production cuts the bank sees iron ore averaging $90 a tonne, a more than one-fifth cut to earlier estimates.

Iron ore is down more than 30% year to date and first declined to double digits mid-May. Attempts at a comeback since then have fallen short.

Apart from that quick gap down in 2012 when the steelmaking raw material spent two weeks below $100 a tonne ore hasn’t traded in double digits at all since 2009 during the financial crisis.

Share prices for the Big 3 – number one producer Brazil’s Vale (NYSE:VALE) and Australian giants Rio Tinto (LON:RIO), BHP Billiton (LON:BHP) – all declined sharply on Thursday, taking huge chunks out of their combined market value of close to $300 billion.

ADRs of Vale lost 3.8% in New York and the Rio de Janeiro-based company is now down 19% in 2014 despite a huge boost from its nickel operations – it’s the world’s number two producer – thanks to a soaring price for the metal used in steel alloys.

Number two Rio Tinto, which thanks to aggressive expansion in its home base of the Pilbara in Northwest Australia have been rapidly closing the output gap with Vale, dropped 3.2% in New York bringing its losses year to date to 9%. Among the diversified giants, Rio is most exposed to iron ore which last year accounted for nearly all its profits.

The world’s number one miner with a market value of $170 billion BHP, which has also been adding to its iron ore business this year even as it sell off assets in other divisions, gave up 1.2% in New York.

In a recent earnings announcement BHP said every $1 decline in the price of iron ore translates into a $120 million hit to the bottom line and the Melbourne-based firm portfolio of assets are not that heavily skewed to iron ore as its peers.

It was another bad day for North American operator Cliffs Natural Resources

Number four producer behind BHP, Sydney-listed Fortescue Metals Group (ASX:FMG), fell 4.6% in Sydney, but is down 27% this year given that all its ore is shipped to China. From zero production seven years ago is targeting output of annualized 155 million tonnes in 2014.

It was another bad day for North American operator Cliffs Natural Resources (NYSE:CLF) which brought the counter’s losses for the past month to 21%. The Cleveland based firm is idling mines and cutting expenditures amid an ugly boardroom battle.

Anglo American’s ADRs (OTCMKTS:AAUKY) trading in New York declined 3.2%. Apart from a hit from iron ore and copper, shares in the London-based company fell after an end to the strike in South Africa saw platinum group metal prices tank.

Henry Sapiecha

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