Can cost-cutting break Rio Tinto’s link with iron ore price? – by Clyde Russell (Reuters U.S. – December 1, 2014)

http://www.reuters.com/

LAUNCESTON, Australia – (Reuters) – Rio Tinto launched a stirring defense of its iron ore strategy last week, with the basic message that it will still make huge profits even as the price slumps to five-year lows.

Leaving aside, for the moment, that some of Rio Tinto’s price and demand assumptions for the steel-making ingredient still look heroic, the real question to be answered is can the company convince the market that it’s on the right path?

To do so, Rio Tinto will have to break the shackles of the strong correlation of its share price to that of Asian spot iron ore.

Since the 2008 recession the Australian-listed shares of the world’s second-biggest iron ore miner have moved pretty much in lockstep with the price of the steel-making ingredient, although this year the correlation has shown signs of breaking down.

Iron ore has fallen a dramatic 48 percent this year, with the close on Nov. 28 of $69.80 a tonne only marginally above the $68 reached on Nov. 26, which was the weakest since June 11, 2009. Rio Tinto’s shares ended at A$59.10 ($49.64) on Nov. 28, down just 13.3 percent for the year.

The question is whether the nexus between the share price and iron ore has broken or whether the relationship is likely to be restored, most probably by the shares losing value since the prospect of iron ore rebounding is slim given the huge supply overhang in the market.

Read more

Globe-Trotting Vale CEO Faces Wall Street as Iron Plunges – by Juan Pablo Spinetto (Bloomberg News – December 1, 2014)

http://www.bloomberg.com/

Vale SA’s chief executive officer says he travels so much that the mining company’s executive jet is among the most flown in Bombardier Inc.’s fleet this year.

“I like to visit all our operations at least once a year but normally I go more than that,” Murilo Ferreira said in an interview at the company’s Rio de Janeiro headquarters on Nov. 26. “I travel a lot, a lot, a lot,” he said in a weary tone.

Ferreira, 61, will board his Global Express XRS jet to visit investors in New York and London this week, adding to the more than 240,000 kilometers (149,000 miles) flown in the first 10 months of 2014. On the agenda? How the world’s largest iron-ore producer will adapt to a collapse in the price of the commodity that prompted analysts to have the bleakest opinions about the stock since at least 1999.

Vale is producing iron ore at a record pace and its base metals unit — which for years experienced delays, accidents and stoppages — is finally starting to contribute to profits. Yet expanding global supply at a time of slowing demand in China, the largest consumer of metals, has pushed down prices of the steelmaking raw material to the lowest in more than five years and made Vale the worst performing major mining stock.

The reaction from Vale, as with other mining companies, has been to cut costs, put lower-return expansions on hold and focus on its most profitable businesses. The company probably will announce tomorrow a $10.4 billion budget for next year excluding research and development expenses, the lowest since 2009 and 25 percent below last year’s approved capital expenditures, according to the average of nine analyst estimates compiled by Bloomberg News.

Read more

Iron ore prices could stay depressed for 10 years – by Scott Murdoch (The Australian – December 1, 2014)

http://www.theaustralian.com.au/business

A PROMINENT Chinese fund manager has grimly forecast that the global iron ore price could remain under pressure for 10 years as oversupply continues to hit the market and the Chinese residential property market slumps.

Shanghai Jianfeng vice-president Liang Ruian believes prices could slide below $US60 a tonne within the next year and could even fall to as low as $US50 a tonne, with major consequences for miners around the world.

The iron price on the weekend was $US71.32 a tonne, up $US1.34, but the commodity is down more than 50 per cent this year. The price slide has prompted miners to rethink capital expenditure plans and intensifies pressure on companies struggling to bring projects to the production stage.

Mr Liang, a well known fund manager in Shanghai, said the price of iron ore would be heavily affected by the performance of the domestic Chinese real estate ¬market.

About 30 per cent of China’s steel output is used in residential development, which is forecast to remain flat in the next few years after a surge following the global financial crisis. It is estimated China now has a nationwide inventory of housing to last up to three years.

Read more

Miners ‘Covering Their Eyes’ on China’s Commodity Cliff – by David Stringer (Bloomberg News – December 1, 2014)

http://www.businessweek.com/

After spending $1 trillion since 2002 on projects to feed China’s commodity boom, the world’s mining companies have a lot riding on their biggest customer.

While commodities may be trading at five-year lows, the heads of three top miners BHP Billiton Ltd. (BHP), Vale SA (VALE3) and Rio Tinto Group (RIO) last week all backed China, the world’s second-biggest economy, to keep buying increasing amounts of their products deep into the next decade. Not everyone agrees.

“The commodity guys are just too optimistic,” Tao Dong, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong, said in an interview, without referring to particular companies.

As China moves to a consumer-led from an investment-led economy, there may be a substantial absolute drop in commodities demand, not just slower growth, he said. “This is happening now,” Tao said. “It’s just people are covering their eyes and refusing to believe that what is happening now is not just a cyclical story, but also a structural story.”

Goldman Sachs Group Inc. this year joined other banks in calling an end to the commodities supercycle as China slows. The biggest consumer of industrial metals and iron ore and the largest oil user after the U.S. is headed for the slowest full-year expansion since 1990.

Read more

Wabush woes: Labrador mining town reels from a China slowdown – by Rachelle Younglai (Globe and Mail – November 29, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

WABUSH, LABRADOR — Ron Barron has spent 30 years working in the Wabush mine, one of three generations of Barrons who have toiled in the open pits in what western Labrador bills as the iron ore capital of Canada.

The family’s roots run deep here. Mr. Barron’s father was one of Wabush‘s first settlers, who not only got a job in the mine when it opened in the 1960s but also helped organize a union. Five of Mr. Barron’s brothers have worked in the same pits along with his son and nephew.

But now Mr. Barron’s life has been upended along with the rest of city. The Wabush mine, once the cornerstone of this community, is shutting down along with another iron ore mine called Bloom Lake in neighbouring Quebec. More than 1,000 miners will be out of work, not to mention a slew of other job losses from businesses that service the industry. It’s a crippling blow in an area with a population of about 9,000.

“Oh my god, everybody loses. All the organizations, the schools, everything loses. Everything will suffer because of it,” said Mr. Barron, who will be officially out of a job by mid-December. “We have had shutdowns and layoffs before, but this is different. The mine is closing.”

The reason for the closings is simple: The price of iron ore, a key ingredient in steel, has been in freefall, falling 60 per cent in three years. Where the resource once traded as high as $190 (U.S.) a tonne in 2011, it is now below $70.

Read more

Ukraine faces coal shortage with rebels controlling mines (Business Insider – November 29, 2014)

http://www.businessinsider.com/

Kiev (AFP) – With the rich seams of coal in eastern Ukraine under rebel control and Russia cutting off supplies, the Kiev government faces the awkward prospect of turning to its enemies for help.

As winter set in, the biggest fear in recent months was that Ukraine would run out of the natural gas that heats the country. A last minute deal with Russia averted that disaster. But now a new one is looming as coal shortages threaten to leave the country desperately short of electricity.

Ukraine gets some 40 percent of its power from coal-fired plants, and has traditionally had a surplus of coal, producing some 86 million tonnes at last count in 2012.

But the Russian-backed rebellion in the east has cut the government off from large swathes of the coal-rich mining region of Donbass. Then, without warning, Russia announced it was stopping coal supplies to Ukraine last week, claiming “force majeure” but offering no explanation.

“I don’t know for how long Russia intends to stop coal deliveries. If it stops them for a long period, our thermal stations will not be able to function at full power,” said Ukraine’s Energy Minister Yuriy Prodan.

Read more

The progressive war on science – by Margaret Wente (Globe and Mail – November 29, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

An epidemic of whooping cough has broken out in California. Not long ago, this ancient scourge had been banished by modern medicine. But now it’s back, thanks to people who believe modern medicine is dangerous.

These folks are not ignorant backwoods hicks. Many of them have advanced degrees. They live in some of the nicest neighbourhoods on Earth – places like Marin County, Napa and Malibu. But they believe that vaccines cause autism or worse. Immunization rates in some of the more fashionable California schools resemble those in the more backward parts of Africa. At the Valley Waldorf City School in Lake Balboa, for example, 88 per cent of students don’t have the standard vaccinations.

Nearly 9,000 people in California have come down with whooping cough this year, and a handful have died. Repeated pleas from public health officials have gone unheeded. “Children are the victims of our ignorance,” vaccination expert Paul Offit wrote in The Wall Street Journal. “An ignorance that, ironically, is cloaked in education, wealth and privilege.”

Yet it’s conservatives – religious, less educated, less wealthy and certainly less liberal – who are generally condemned for dogmatically refusing to embrace science. After all, they’re the knuckle-draggers who believe that evolution is just a story and that global warming is a crock.

Read more

Project could create 1,000 jobs – by Jeff Labine (Timmins Daily Press – November 29, 2014)

The Daily Press is the city of Timmins broadsheet newspaper.

TIMMINS – Things are looking good for Timmins’ new talc and magnesium mine, which could create more than a thousand jobs.

William Quesnel, president and CEO of General Magnesium Corp., told The Daily Press the demand for magnesium has doubled over the past few years. Magnesium is a light weight metal and highly sought after in the auto industry. Quesnel said the auto industry is pulling out all the stops to continue to make vehicles like SUVs with the lighter material, which is good news for the company.

“The project is really moving ahead,” he said. “Things take time to do. The thing is, people who are looking at the project to purchase our material have gone above and beyond on their due diligence. Their consultants say we will be a very low cost producer in the world. When you have low costs like that you are able to create jobs that are sustainable because you can deal with the fluctuation in metal prices.

“We have three phases we’re looking at and the jobs could be over a 1,000, which I think is a fairly strong impact for Timmins.”

The Daily Press learned from a source close to the project that the lifespan of the mine could be a hundred years. The three phases will be broken up into building a talc plant, followed by a magnesium concentrator and finally a magnesium thermal reduction plant. Quesnel said that will be the real job creator because it turns the magnesite material into a metal.

Read more

HISTORY: Timmins Pioneers preferred boozy beverages – by Karen Bachmann (Timmins Daily Press – November 29, 2014)

The Daily Press is the city of Timmins broadsheet newspaper.

Karen Bachmann is the director/curator of the Timmins Museum and a local author.

TIMMINS – Now, for something just a little different. I was going to put together another collection of little items and stories from 1940, but, being the short-attention-span kinda gal I am these days, I was sidetracked by an article entitled “Some of the Beverages Used Through the Years” by that goddess of the 1940s kitchen, Edith M. Barber.

She began her informative piece with a definition of beverages (“anything in liquid form which we drink with or between meals” – how helpful), and then proceeded with a description of a variety of rather unsavory drinks from the early Canadian colonial period.

That got me thinking about some of those early drinks, seeing as how we are approaching the holiday season, and festive beverages are once again on the itinerary. I figured, how bad could these early cocktails actually be?

Turns out the answer is, actually, quite horrid. How anyone could stomach some of these concoctions is beyond me (by the way, museum staff who are coming to my place for a glass of Christmas cheer need no longer fear that it will be an 1812 themed event).

The thinking at the time (I mean in the early days of Canada, between 1763 and the mid-19th century) dictated that fermented beverages were so much safer than water.

Read more

On pipelines, politicians are just listening to the people – by Gary Mason (Globe and Mail – November 28, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

If you listen closely, you can hear the sound of desperation in the voice of Alberta Premier Jim Prentice when he talks about the Energy East pipeline. One doesn’t have to concentrate quite as hard to detect the same anxiety in the words of Saskatchewan Premier Brad Wall.

Both were taken aback when Ontario and Quebec announced seven conditions for granting approval to the pipeline. One of those includes an assessment of the project’s upstream greenhouse gas emissions – which would appear to take into account the source of the crude moving through the pipeline. In Alberta’s case, that would be the oil sands, a high GHG emitter.

The conditions are similar to ones the B.C. government set out for pipeline projects, including a requirement to consult with First Nations. And we all know how that’s been going for pipeline companies trying to reach tidewater on the West Coast.

Despite conditional approval from the National Energy Board, most believe the Northern Gateway pipeline will never get built because of opposition to it. The courts have given First Nations new powers to fight developments that encroach on their land. Outside of aboriginal communities, public opinion regarding pipelines is at best divided – although there seems to be a growing societal angst about climate change that is palpable.

Kinder Morgan, which also wants to add a pipeline to the West Coast, is encountering that sentiment now.

Read more

Canada’s unfinished business with First Nations is an economic failure – by Diane Francis (National Post – November 29, 2014)

The National Post is Canada’s second largest national paper.

“The great themes of Canada are as follows: Keeping the Americans out, keeping the French in, and trying to get the Natives to somehow disappear.” – Will Ferguson, humorist and 2012 Giller Prize winner

Ferguson’s acerbic quote also summarizes the great unfinished business of Canada which is to reconcile the rights and create a role for the country’s 614 First Nations and their 700,000 members. The failure to have done this after centuries not only impedes national economic development, but is at the root of much of the misery and squalor on and off reserves.

The United States did not make deals, but conquered its Native Americans and, under international law, has only been required to compensate them. But here, Britain signed sovereign deals with aboriginals, catapulting them under international law to the rights and privileges of nation-states. Thus they call themselves First Nations. Australia has a similar history, but, unlike here, Canberra has fully addressed the issues.

Canada must now do the same. A recent, landmark Supreme Court of Canada ruling has fully, and radically, defined “aboriginal rights.” Justices unanimously decided that lands in the British Columbia interior, the size of Greater Vancouver, belonged to the Tsilhqot’in Nation, a band with 400 members. They now own and must manage the lands in perpetuity, rights they can relinquish only if they sign ownership over to a government.

Read more

Swiss Reject SNB Gold Initiative, SRF Projections Show – by Catherine Bosley (Bloomberg News – November 30, 2014)

http://www.businessweek.com/

Swiss voters rejected a referendum requiring their central bank to hold a portion of its assets in gold, a measure its President Thomas Jordan termed an “invitation to speculators” that could have hamstrung the economy.

The “Save Our Swiss Gold” proposal stipulating the Swiss National Bank hold at least 20 percent of its 520-billion-franc ($540 billion) balance sheet in gold and never sell any bullion was voted down by 78 percent to 22 percent, according to projections by Swiss television. Polls had forecast the initiative’s rejection. Two other initiatives on tax privileges for foreign millionaires and immigration limits also were rejected.

SNB policy makers warned repeatedly that the measure, which also required the 30 percent of central bank gold stored in Canada and the U.K. to be repatriated, would have made it harder to keep prices stable and shield the central bank’s cap on the franc of 1.20 per euro. That minimum exchange rate was set three years ago, with the SNB pledging to buy foreign currency in unlimited amounts to defend it.

“The key word is relief, but it’s not a reason to crack the champagne corks yet,” said Janwillem Acket, chief economist at Julius Baer Group Ltd. in Zurich. Due to the rejection, “the SNB has more options and fewer constraints on monetary policy,” he said.

Investors anticipating more easing by the European Central Bank helped push the franc to a 26-month high against the euro earlier this month. ECB President Mario Draghi has explicitly cited government bond-buying as a possible policy tool.

Read more

‘Deep Down Dark,’ by Héctor Tobar – by Mac McClelland (New York Times – November 20, 2014)

http://www.nytimes.com/

In 1987, a toddler who became known to the world as Baby Jessica fell into an abandoned well in a backyard in Midland, Tex., where she was stuck for 58 hours. Watching the coverage as a 7-year-old, I couldn’t get an answer from the newscasters or my parents that explained why it was taking so long for so many smart grown-ups to solve such a simple problem. Even now, I find it hard to believe that the human race can be outmatched by such a primitive adversary as a hole in the ground.

Crises of faith are the dominant theme of Héctor Tobar’s “Deep Down Dark,” the story of 33 men who were buried for 69 days in a collapsed Chilean mine in 2010. With his exclusive access to the survivors, Tobar, a Pulitzer Prize-­winning journalist, graphically recounts the quandaries that beset the men as well as their families — camped out at the mine’s entrance — the officials and rescue crews as a worldwide audience watched. There is weeping.

There is acceptance of death. There is the miners’ terror, every time the rescue drill stops, that they have been given up for dead. “The silence just destroyed us,” one man told Tobar. “Without a positive sign, your faith collapses. Because faith isn’t totally blind.” Some men find a stronger connection to God (“Omar realizes that the improbable fact of their survival also carries a hint of the divine. To be alive in this hole, against all odds, speaks to Omar of the existence of a higher power with some sort of plan for these still-living men”). Others struggle with whether to pray or to succumb to the darkness and lie down to die.

The hierarchy that gave the miners order in their workday routine is destroyed almost instantaneously. The shift supervisor buckles under the realities of the collapse and abdicates his authority.

Read more