August 25, 2015 – Republic of Mining

Can You Read China? Top Mining CEOs Disagree on Biggest Customer – by Thomas Biesheuvel (Bloomberg News – August 25, 2015)

August 25, 2015

http://www.bloomberg.com/

What on earth is going on in China?

Two of the biggest mining companies feeding the country’s appetite for raw materials can’t even agree on whether there’s an answer to the question.

Andrew Mackenzie, head of BHP Billiton Ltd., is bullish on his ability to comprehend a country that consumes more commodities than any other — and whose economic woes have shaken markets around the globe this week.

“We don’t find China impossible to read,” Mackenzie, chief executive officer of the world’s biggest mining company, said Tuesday.“We’ve been at this game for decades.”

His certainty conflicts with billionaire mining rival Ivan Glasenberg’s admission last week that he couldn’t read the world’s second-largest economy right now and neither could anyone else.

The 21 commodities that say China isn’t the problem – by Clyde Russell (Reuters U.S. – August 25, 2015)

August 25, 2015

http://www.reuters.com/

LAUNCESTON, AUSTRALIA – Aug 25, 2015 – One of the reasons advanced for the plunge in commodity prices is concern over the outlook for Chinese demand for raw materials as growth slows in the world’s second-largest economy.

But these are fears not necessarily in evidence, as can be seen by trawling through the detailed customs data for July.

There were at least 21 commodities that showed increases in imports greater than 20 percent in July this year, compared to the same month in 2014.

While it’s true that many of these commodities are minor, there are some fairly major ones showing strong growth as well, led by crude oil, which saw imports jump 29.3 percent in July from the same month a year earlier.

Among the notable increases were a massive 236,594 percent jump in ethanol imports in July, with that single month accounting for more than half of total imports of the fuel so far this year.

Western Nunavut gold project heads into technical review (Nunatsiaq News – August 25, 2015)

August 25, 2015

http://www.nunatsiaqonline.ca/

Nunavut regulators seek comment on TMAC’s revamped project

The price of gold is down, but TMAC Resources Inc. continues to move ahead with its Hope Bay-Doris North gold mine project in western Nunavut, about 125 kilometres south of Cambridge Bay, with a view to getting its mill in operation by the end of 2016.

By then the price of gold — now languishing at US $1,164 per ounce — may rise again to US $1,250 per ounce which TMAC said, in its pre-feasibility study, is required for the mine to make money.

Meanwhile, the Nunavut Impact Review Board and the Nunavut Water Board have opened the project for technical review and asked for comments on TMAC’s new plans for the gold-rich Doris North deposit.

The project, originally reviewed and approved, when it was still owned by Newmont Mining Corp., involved the development of an underground mine at Doris North.

BHP Billiton posts worst profit in 11 years, maintains dividend – by Peter Ker (Sydney Morning Herald – August 25, 2015)

August 25, 2015

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

Analysts say BHP Billiton is offering shareholders “the dividend yield of a lifetime”, after it grew dividends by 2 per cent during a year that its profits slumped by 52 per cent to their lowest level in more than a decade.

The $US0.62 dividend announced by BHP on Tuesday confirmed the miner’s pledge to maintain a “progressive” dividend despite the deliberate shrinking of the company through the spin-out of South32 earlier this year.

The pay out came as the resources giant posted a $US6.4 billion underlying profit, which was well below the $US7.5 billion that analysts had expected.

BHP has not posted a profit this low since the earliest days of the mining boom in 2004. The statutory profit was 86 per cent lower at $US1.9 billion. But despite the result, BHP’s London shares have surged by more than 8 per cent in early trading.

The company’s earnings were always going to struggle amid a broader collapse in commodity prices during the 2015 financial year.

Dollar Rallies as Global Stocks Advance While China Cuts Rates – by Eshe Nelson (Bloomberg News – August 25, 2015)

August 25, 2015

http://www.bloomberg.com/

The dollar climbed for the first time in five days against the yen as stock markets rallied following Monday’s $2.7 trillion global equity wipeout and China cut interest rates.

The U.S. currency’s biggest gains came against the Swiss franc and euro, as well as the yen — all currencies that investors consider to be havens in times of market turmoil. The yen weakened after a Japan Ministry of Finance official said its rally to a seven-month high as China’s economy slows had been “abrupt.”

“The better tone in markets, and a rebound from yesterday’s collapse, is helping lift dollar-yen,” said Keng Goh, a foreign-exchange strategist at Royal Bank of Canada in London. If equity markets stay calm, expectations for the Federal Reserve to raise interest rates will build again, further supporting the U.S. currency, he said.

The dollar jumped 1.5 percent to 120.13 yen as of 7:10 a.m. in New York, after slumping to 116.18 on Monday, the weakest since Jan. 16. It climbed 1 percent to $1.1498 per euro. Europe’s single currency gained 5.4 percent in the previous four days, the most since March 2009.

Metals feel China pain as rout spreads to other commodities – by Rachelle Younglai (Globe and Mail – August 25, 2015)

August 25, 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.

Copper, aluminum, nickel and other commodities plunged to new lows on fears that China’s faltering economy will exacerbate a market awash in metal.

The latest event to spook investors was the steep decline in Chinese stocks earlier on Monday. Copper and aluminum hit six-year lows. Nickel plunged 10 per cent. Zinc and lead dropped to five-year lows. Gold, usually a safe haven in times of turmoil, barely rose.

“All bad news is bad news and good news is no news. That’s the environment we are in,” said Jessica Fung, commodity strategist with BMO Nesbitt Burns. Once the engine behind the bull market in commodities, China’s slowdown is wreaking havoc across the mining complex.

There is less and less confidence that the world’s second-largest economy will reach its 7.5-per-cent growth rate target. Recent data showed a decline in China’s manufacturing sector, a top consumer of metals such as aluminum and steel.

Global commodity slump could hit parts of Canada hard – by Ian Bickis (Canadian Press/Toronto Star – August 25, 2015)

August 25, 2015

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Petro-provinces like Alberta, Saskatchewan and Newfoundland will be especially hard hit as oil prices keep sliding amid fears about China’s economy.

Global commodity prices are tanking and they’re bringing Canadian markets down with them, though experts say certain provinces are going to feel the pinch more than others.

“It’ll feel like a recession, depending on where you live in the country,” said John Stephenson, chief executive of Toronto hedge fund Stephenson & Co. Capital Management.

He said everything from oil to metals to lean hog prices are dropping as weaker growth globally weighs on demand — a downward trend that took its toll on the world’s stock markets Monday.

“Virtually everything is down in price — and significantly down, not just a little bit,” said Stephenson.

Madagascar faces uphill struggle to revive bruised mining sector – by Drazen Jorgic and Lovasoa Rabary (Reuters U.S. – August 25, 2015)

August 25, 2015

http://www.reuters.com/

ANTANANARIVO, Aug 25 (Reuters) – When foreign mining firms and Western donors were pulling funds out of Madagascar following a coup in 2009, Austral Resources chief executive Scott Reid did the opposite and poured money in to the Indian Ocean island.

Yet far from being rewarded, the company’s $3.5 million investment in drilling and exploration of a high-grade mine has turned sour. Austral’s permit to extract zircon, used in ceramics, has expired and the project is far from production.

Sliding global commodities prices have hindered the Australian firm but to Reid the main frustration has been bureaucracy and government failure to renew its permit which languishes in the mining ministry with about 4,000 others.

With woeful air links hobbling tourism and power outages holding back its textiles industry, the former French colony’s economic recovery after years of political turmoil hinges on the revival of its mining sector.

But without permits, most miners are unable to raise cash on stock markets or get loans to keep their projects alive.

China’s fever, everyone’s disease – by Doug Saunders (Globe and Mail – August 25, 2015)

August 25, 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.

What happened on Monday upended the conventional logic of the world economy. Suddenly, the way China finances its enterprises – previously considered a rather opaque mystery but one that was best left to China’s self-contained economy – became the whole world’s business.

A sudden loss in confidence in Beijing’s ability to rescue its collapsing stock market and restore confidence in its currency became, overnight, a worldwide event. It wasn’t just that Western stock markets plummeted as a result of a Chinese policy decision; worse, it triggered a truly global crash: throughout Monday, markets cratered in India, Saudi Arabia, Vietnam, Poland, the Philippines, Brazil, not to mention New York, London and Toronto. It may not have been the biggest or longest-lasting downturn, but it was a truly worldwide one, born in Beijing.

The stock markets are not an all-consuming force in China. Traded equities represent only a slice of finance in a Chinese economy still largely dependent on bank finance and wealth funds; the Shanghai and Shenzhen exchanges don’t have much relationship to the actual Chinese economy. Chinese stocks are largely closed to foreign traders. And, significantly, the pensions and retirement savings of Chinese are not invested in stocks – in fact, a move to allow pension funds to buy shares this weekend was one of the events that triggered the sell-off.

Emerging Markets Hit Hard as Global Rout Continues – by Raymond Zhong, Andrey Ostroukh and Patrick McGroarty (Wall Street Journal – August 24, 2015)

August 25, 2015

http://www.wsj.com/

Growing anxieties about China cause investors to pull money from developing markets

New Delhi, Moscow, Johannesburg – Bad news from China has sparked a firestorm in the developing countries that feed its vast industrial machine, leaving a swath of economies with few good ways to escape a crunch.

In Indonesia, coal once bound for China is piled up in port. In South Africa, mines that fed China’s voracious demand for metals are firing workers. In financial markets, investors have responded by pulling out.

On Monday, the currencies of Russia, Indonesia, South Africa, Brazil and other commodity exporters tumbled to multiyear lows against the U.S. dollar. Stock indexes collapsed.

The Russian ruble hit a seven-month low Monday, and by the end of the main trading session in Moscow it slid to its weakest-ever closing level of 70.9 to the dollar. A year ago, a dollar bought only around 36 rubles.