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Day: April 1, 2015

Vale sets aside $185m to finance expansion – by Tama Salim (Jakarta Post – April 1 2015)

http://www.thejakartapost.com/

Publicly listed nickel mine operator PT Vale Indonesia (INCO) will allocate up to US$185 million in capital expenditures (capex) this year to finance expansion projects, including the construction of new refining facilities. The company’s chief financial officer, Febriany Eddy, said on Tuesday the allocated sum was significantly higher than last year’s capital spending realization of $76.8 million.

She said that Vale would be gearing up for the second phase of its ore processing and refining facility in Sorowako, South Sulawesi, as well as operations in Bahodopi, Central Sulawesi. “Phase 1 is currently being concluded, so we’re starting to plan out the next phase while we await the licenses for expansion,” Febriany told reporters in South Jakarta, on Tuesday.

“If everything goes according to plan, we can realize all our capital spending and put our projects into motion.” Vale’s capital expenditure for 2014 was 51 percent lower than the $163 million target, because of delays in the issuance of required permits and the decision to further assess the rebuilding of an electric furnace.

On the other hand, stakeholder returns in 2014 were high as the firm reached a dividend payout ratio of 58 percent, equal to $50.2 million. Febriany argued that the high payout rate was in line with Vale’s previous actions, citing average dividend payments of more than 50 percent in the last five years.

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Deutsche Bank cuts [BHP Billiton] South32 valuation – by Amanda Saunders (Sydney Morning Herald – April 2, 2015)

http://www.smh.com.au/

South32, the company being created in the demerger of BHP Billiton, will be in a “perfect position” to pursue acquisitions of up to $US3 billion ($3.9 billion) in Australian coal, and offshore in base metals and manganese – but its stock is likely to trade at just about $2 a share, well short of market expectations, according to Deutsche Bank.

Deutsche mining analyst Paul Young cut his valuation of South32 from $US13 billion to $US11.2 billion after reviewing the more than 1500 pages of shareholder documents on the spin-off released by BHP last month. His valuation for the spin-off falls to $US7 billion when based on current spot prices for commodities.

While the new company’s growth and savings opportunities will be limited, parent BHP with its strong balance sheet has put it “in the perfect position to pursue [value enhancing] acquisitions up to $US3 billion”, Mr Young said.

Also playing in its favour is the fact that the largest miners are selling non-core assets following the fall in commodities prices, and have all but ruled out acquisitions.

South32 is expected to first eye greenfield mining assets, rather than entire companies, according to the analyst report. High up on its list would be Anglo American’s 40 per cent stake, valued at $US1.4 billion, in the maganese group Samancor.

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[South Africa] Mining charter ‘silent’ on crucial ownership issue – by Liesl Peyper (Miningmx – April 1, 2015)

http://www.miningmx.com/

[miningmx.com] – SOUTH Africa mines minister, Ngoako Ramatlhodi, made the best of a very bad situation when he said yesterday he would allow the High Court to rule on the ‘once-empowered, always-empowered’ principle in the Mining Charter.

“It was a good PR exercise on behalf of the Department of Mineral Resources (DMR),” said Nicola Jackson and Eric van den Bergh, both partners at law firm Fasken Martineau’s global mining group.

“His announcement sends the right message to current (and future) industry stakeholders that the DMR values the participation of the industry players, and that it’s cognisant of the ramifications of the ‘once-empowered, always-empowered’ principle not being applied.”

Jackson and Van den Berg said that despite the practical issues that lie ahead, it was a good call for Ramatlhodi to look to the courts for clarification on the ‘once-empowered, always-empowered’ matter. “Any other route would only exacerbate the trust issues between government and the sector.”

However, whether Ramatlhodi and his legal team would successfully argue against the contentious principle in court remains to be seen. “It’s difficult [to predict the outcome], because the charter is a very nefarious, nebulous document,” said Chris Stevens, a director at Werksmans Attorneys.

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At midday: TSX drops as Teck, resource shares decline – by Solarina Ho (Reuters/Globe and Mail – March 31, 2015)

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.

Canada’s main stock index dropped on Tuesday on a decline in miner Teck Resources Ltd and other resource stocks, but the fall was cushioned by modest gains in industrials and heavily weighted financials.

Vancouver-based Teck was the most influential decliner, retreating 8.6 per cent to $17.78. The stock had surged on Monday after Bloomberg News reported that Teck and Chile’s Antofagasta Plc were in early-stage merger discussions. The two companies subsequently denied the report.

The index’s materials sector, home to mining issues, was off 0.45 per cent, pressured in part by weak commodity prices. Gold was headed for its third quarter of price drops, while nickel prices extended recent hefty losses, hitting the lowest price in nearly six years on record supply and weak demand.

“The commodities sectors are still challenged. You still don’t have any robust rallies in any of the real commodities and those sectors have been beaten up for so long that people are weary,” said Paul Hand, managing director at RBC Capital Markets. The Toronto Stock Exchange’s S&P/TSX composite index was off 24.71 points, or 0.17 per cent, at 14,883.68. Seven of the index’s 10 main groups fell.

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Mining stocks hit as iron ore price slump continues – by Sarah-Jane Tasker and Matt Chambers (The Australian – April 1, 2015)

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

Australia’s iron ore miners continue to feel the pain of the brutal slump in the price of the commodity, with falls on the local market in early trading.

As the price of iron ore sits on the cusp of falling below $US50 a tonne, Fortescue Metals Group lost almost 2 per cent of its value after the market opened to sit at $1.92, while Atlas Iron’s stock was off 3.85 per cent at 12.5c.

BHP Billiton, the world’s largest miner, was 1.7 per cent lower this morning at $30.50, while its main rival, Rio Tinto, was off 1.28 per cent at $56.60.

Overnight, Chinese iron ore prices monitored by The Steel Index fell $US1.90, or 3.6 per cent, to $US51 a tonne, representing a record low since the index starting monitoring prices.

When current freight prices of about $US4.50 a tonne are removed, it is the lowest price Australian iron ore has been sold at since March 2006, when prices were still negotiated annually. The price could face a fresh round of negative news today, with China’s official manufacturing index data due.

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U.S. Steel to idle some production at Minntac, affecting hundreds of workers – by John Myers (Duluth News Tribune – March 31, 2015)

http://www.duluthnewstribune.com/

The string of bad economic news on the Iron Range compounded Tuesday when U.S. Steel announced that it will dramatically slow production at its Minntac taconite facility in Mountain Iron starting June 1.

Local union officials said the move will put 700 Steelworkers off the job, nearly half of the nearly 1,500 people who work at Minnesota’s largest taconite mine and processing plant.

The Pittsburgh-based steel giant said the move was forced by an oversupply of iron ore due to continued low demand for its American-made steel — a problem made critical in recent weeks by the ongoing flood of foreign steel made with cheap foreign iron ore.

“Global influences in the market, including a high level of imports, unfairly traded products and reduced steel prices, continue to have an impact,” the company said in a brief statement Tuesday.

State Rep. Jason Metsa, DFL-Virginia, said he’s been told that three of the plant’s five production lines will be shut down in an effort to reduce a backlog of 3.2 million tons of taconite. Union officials said they had not yet been told which employees will be laid off.

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NEWS RELEASE: Minister Rickford: Canada’s Plan for Responsible Resource Development Supports British Columbia’s Energy and Mineral Potential

VANCOUVER, March 31, 2015 /CNW/ – The Honourable Greg Rickford, Canada’s Minister of Natural Resources, today delivered keynote remarks hosted by the Vancouver Board of Trade, where he highlighted how Canada’s plan for Responsible Resource Development is supporting jobs, protecting the environment and enhancing First Nations engagement.

Minister Rickford reinforced Prime Minister Stephen Harper’s recent announcement accelerating the capital cost allowance on equipment used for liquefied natural gas (LNG) development from eight percent to 30 percent. Our government is supporting the Province of British Columbia’s efforts to advance LNG development, thereby creating Canadian jobs and generating revenue to support critical social programs.

The Minister also highlighted the Harper Government’s recent decision extending the Mineral Exploration Tax Credit. During a challenging global economy, this incentive helps keep investment in the mining industry flowing. Since 2006, it has assisted junior mining companies in raising over $5.5 billion.

Minister Rickford also emphasized the Harper Government’s announcement earlier this month expanding the definition of Canadian Exploration Expenses for tax purposes to include costs of environmental studies and community consultations that are required to obtain a permit for grassroots exploration. Companies can deduct these costs, making it easier for them to raise capital, create jobs and contribute to the economy.

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Feds provide funding to save Algoma passenger train – by Staff (Northern Ontario Business – April 1, 2015)

Established in 1980, Northern Ontario Business provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North.

The federal government will provide $5.3 million over three years so the Algoma Central Rail (ACR) passenger service between Sault Ste. Marie and Hearst can continue.

The announcement was made on April 1. CN, the current operator of the train, said it would cease offering the service as of April 1, after Transport Canada announced last year it would no longer provide the subsidy to keep it going.

According to a government news release, the City of Sault Ste. Marie will receive federal support for three years for the continued operation of the passenger rail service.

This would allow Railmark, the proposed operator, to demonstrate its ability to deliver on its business plan. A review will be carried out at the three-year mark to determine if additional funding is warranted.

“The Harper government is pleased to provide funding over the next three years to maintain operation of the passenger rail service between Sault Ste. Marie and Hearst,” Sault MP Bryan Hayes said in the release.

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Mercury in Mining a Toxic ‘Time Bomb’ for Indonesia – by Harry Pearl (Jakarta Globe – March 31, 2015)

http://thejakartaglobe.beritasatu.com/

Cisitu, Banten. Inside a dusty, cupboard-sized workshop in the remote mountains of western Java, Ateng spells out the toxic mix he uses to produce gold.

“I used 300 grams of mercury, in five ball mills, for two sacks of ore,” the 25-year-old says, flicking a blowtorch alight and taking aim at the amalgam of gold ore and mercury in front of him.

It’s a familiar calculation for Ateng, and one that in some form or another has been utilized for centuries — using mercury, a highly toxic liquid metal, to extract gold from ore. But here in Cisitu, a gold mining village deep in Gunung Halimun National Park, medical experts and environmental campaigners believe it could be the cause of a rash of illnesses among residents.

Rice fields and fishponds have been poisoned, environmental testing has found, and some residents are showing signs of severe mercury intoxication.

What’s more worrying to campaigners like Yuyun Ismawati, a Goldman Prize-winning environmental engineer and senior adviser at BaliFokus, is that a similar situation is being played out at hundreds of mining hot spots across Indonesia.

“You cannot see it now, but the cost of inaction could be huge,” says Ismawati, an Indonesian now based in the United Kingdom.

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India seeks potash bargain after Belarus-China deal – by Rajendra Jadhav (Reuters U.S. – April 1, 2015)

http://www.reuters.com/

MUMBAI- (Reuters) – Belarus’ deal to sell potash to China at a lower-than-expected price has prompted India to seek a similar bargain ahead of the signing of new contracts this month, a move that could hit spot rates already under pressure due to stiff competition.

Belarusian Potash Company (BPC) last month agreed to raise the price of potash exports to China, the biggest consumer and which sets the benchmark, by $10 to $315 per tonne, undercutting Russian and North American rivals who were negotiating for a hike of $25-$30.

India, which imports all its potash needs, bought the crop nutrient at $322 per tonne on a cost and freight basis last year, the lowest level in seven years. It is seeking to keep the price at the same level this year.

India usually pays slightly more than China due to additional freight and as it buys in small consignments.

“The Chinese deal has highlighted the oversupply in the market,” said P.S. Gahlaut, managing director of state-run Indian Potash Ltd, the country’s biggest importer. “As far as India is concerned we cannot afford a price rise.”

Officials from Russia’s Uralkali, the world’s largest producer, are expected in India in the third week of April and any supply agreement around last year’s price will put pressure on spot prices that collapsed after Uralkali broke away from a joint trading venture with BPC in 2013.

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Russian Miners With Billions of Dollars Weigh Dividend Increase – by Yuliya Fedorinova (Bloomberg News – March 31, 2015)

http://www.bloomberg.com/

(Bloomberg) — Russian metals exporters that are piling up cash after the ruble collapse are sharing the wealth with investors as the economy tilts into recession and global demand slows.

The weaker ruble has benefited Russia’s resource companies, which have costs in the national currency and revenues in dollars or euros. OAO Novolipetsk Steel, OAO GMK Norilsk Nickel and four other of Russia’s largest metals and mining companies together held $8.3 billion in cash and equivalents at the end of December, according to data compiled by Bloomberg. They had about $5.7 billion a year earlier.

Companies are using the windfall to reward shareholders, switching focus from debt repayments or investments. Prices for major materials have softened as China’s economic growth slowed last year to the weakest since 1990. Russia is sliding into its first recession in six years, as U.S. and European sanctions add to slowing consumer demand and a slump in oil prices.

“It makes no sense to start large investments now, and it’s better to pay excessive cash to the owners,” Kirill Chuyko, head of equity research at BCS Financial Group, said by phone on March 31. “The cost of capital for Russian companies increased, which also makes companies rethink their dividend policies.”

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South Africa seeks court decision on mining black ownership rule – by Zandi Shabalala (Reuters U.K. – March 31, 2015)

http://uk.reuters.com/

PRETORIA – (Reuters) – South Africa’s mines ministry and the industry have agreed to ask the courts to help them resolve a dispute over a black ownership target of 26 percent for mining companies, the two sides said on Tuesday.

Mines minister Ngoako Ramatlhodi said there was “no consensus” on the issue as he gave details from an assessment of how the industry has complied with the targets set out for it in a state charter aimed at redressing the imbalances of white apartheid rule which ended two decades ago.

The main sticking point is the industry contention that once a company is 26 percent black-owned, it has effectively complied, even if some of the black shareholders then sell out. The government says companies must retain the 26 percent ratio as an absolute minimum.

Failure to meet the targets can result in mining permits or rights being revoked in an industry which is an increasingly hard sell to foreign investors in the face of often violent labour unrest, depressed prices and soaring wage and power costs.

South Africa’s Chamber of Mines said it had agreed with the ministry to approach the courts on the ownership target issue “in order to break the impasse, and to avert any confusion that may be damaging to investor perceptions”.

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Sudbury smelter charges no surprise — union – by Carol Mulligan (Sudbury Star – April 1, 2015)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

A committee of representatives from Vale Ltd. and United Steelworkers Local 6500 is working to ensure the 58 recommendations from a joint investigation into the death last year of a millwright are implemented and that history doesn’t repeat.

Mike Bond, chair of health and safety for USW Local 6500, said some progress has been made to resolve issues at the Copper Cliff Smelter Complex, where Paul Rochette, 36, was killed April 6, 2014, while working on an ore crusher.

Monday, the Ministry of Labour announced it had laid 17 charges under the Occupational Health and Safety Act in relation to Rochette’s death. Nine were laid against Vale Canada Ltd. and eight were laid against two supervisors, and a third supervisor who was classified as a worker at the time.

The charges against Vale relate to ensuring work was done properly, that workers were educated and trained, and that safeguards were put in place to keep pieces of machines in place.

Bond said no one who knew anything about the situation at the smelter complex last year was surprised so many charges were laid.

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Illegal mining in Latin America: Minecraft (The Economist – September 16, 2014)

http://www.economist.com/

BONANZA, a tropical town in north-eastern Nicaragua, has attracted gold miners since 1880. Still true to its name, it yields over a thousand kilos of the metal every year. But it is a dangerous place. Last month heavy rain triggered a landslide, trapping 29 miners inside. Seven still remained unaccounted for by the time rescue workers abandoned the search.

The miners who died in Bonanza were informal workers, working on the basis that they sold any gold they found to Hemco, a Colombian-owned company which formally operates the concession. Informal mining is not necessarily illegal, but whether operating on the fringes of, or far outside, the law, workers run great risks. Twelve wildcat miners died in Colombia in May after a landslide at an illegal gold mine. In July eight died in Honduras.

Gold is not the only commodity to lure unlicensed prospectors but it has a particular appeal. Its price more than doubled between 2008 and 2011 (it has since come down again). In Madre de Dios, a jungle region in south-east Peru where 97% of local gold production in 2011 came from illegal mining, miners can earn $75 a day, up to five times the amount they might expect as a farm labourer. In Colombia nine out of ten gold mines are unlicensed. Low start-up costs mean miners can work in very small groups—although organised criminal groups also operate illegal mines at much bigger scale. Mercury, which is typically used to separate gold from ore, is cheap and readily available.

It is not only those underground who face danger. In Colombia, armed groups have muscled their way into the mining business, using violence to settle their disputes.

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