Two dozen missing in vast mudflow of Brazil mine disaster – by Stephen Eisenhamer (Reuters U.S. – November 8, 2015)

http://www.reuters.com/

MARIANA, BRAZIL – Brazilian authorities late on Saturday were investigating a second suspected death after two dams at a major mine in the country’s southeast burst and unleashed a massive mudflow that wreaked havoc across more than 80 km (50 miles).

A dozen residents of villages downstream from the burst dams remain missing, along with 13 workers from the mine. Officials warned of a higher death toll even as they struggle to find bodies probably swept away by the torrent.

One death from the disaster was confirmed on Friday, and authorities reported the body of someone believed to be a second victim on Saturday evening. A spokesman for the state fire department said they expected to be able to determine on Sunday if the body is that of one of the missing people.

“The death toll will rise for sure,” said Duarte Júnior, mayor of Mariana. “Some people still aren’t accounted for.”

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Brazil community flooded after dam burst at BHP and Vale-owned iron ore mine – by Matt Chambers (The Australian – November 6, 2015)

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

At least 17 people are dead in Brazil following a mudslide unleashed after the collapse of a tailings dam at a mine half owned by BHP Billiton.

More than 50 people were injured, said local fire chief Adao Severino Junior, who added: “The number of missing is going to surpass 40 but that is not official.”

Television footage showed a torrent of industrial muck several hundred metres long that had swamped houses and ripped off their roofs in the southeastern state of Minas Gerais.

The structure that failed is a tailings dam, used to hold water and discarded minerals from a nearby iron-ore mine operated by Samarco Mineração, a company owned 50-50 by BHP Billiton (BHP) and Brazil’s Vale.

The village of Bento Rodrigues near the dam was practically buried in mud, the fire chief said.

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Biggest U.S. Iron Ore Producer Says Rio, BHP in ‘Imaginary World’ – by Jasmine Ng (Bloomberg News – November 4, 2015)

http://www.bloomberg.com/

The biggest iron ore producer in the U.S. says its larger rivals in Australia are hurting themselves as well as their competitors as they ramp-up production in an oversupplied market.

With iron ore slumping to less than $50 a metric ton, revenues at the biggest miners are shrinking faster than costs, according to the head of Cliffs Natural Resources Inc., who said the majors’ expectations that rivals will quit the market aren’t being fully realized.

“Prices below $50 are not comfortable to anyone, including the majors,” Chief Executive Officer Lourenco Goncalves said in a phone interview from the company’s headquarters in Cleveland, Ohio on Tuesday. “The cost-cutting is not even close to offset their loss in revenues. My entire point: the loss in revenue, totally avoidable. Self-imposed. Self-inflicted.”

BHP Billiton Ltd. spokeswoman Emily Perry said on Wednesday the company wouldn’t respond to Goncalves’s remarks, while Rio Tinto Group sent comments from Brendan Pearson, head of the Minerals Council of Australia, which represents miners.

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BHP Billiton says no relief from weak iron ore prices – by Amanda Saunders (Australian Financial Review – November 3, 2015)

http://www.afr.com/

A senior BHP Billiton executive says there is no light at the end of the tunnel for depressed iron ore prices, which will gradually deteriorate over the next few years before finding a new normal well below $US50 a tonne.

Alan Chirgwin, BHP’s vice president of marketing for iron ore, says the price will gradually fall over the next few years before finding a new normal at the highest breakeven of “a major producer in Australia or Brazil”.

That would likely be either Fortescue Metals Group or Brazil’s Vale, which are both racing to avoid the unwanted marginal producer status. Fortescue is sitting at about $US37 to $US38 on breakeven, while Vale is closer to to $US40 a tonne, and they are well behind the other two majors, Rio Tinto and BHP.

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China coal testing regime ‘significant impost’ on free trade, BHP says – by Amanda Saunders (Australian Financial Review – November 1, 2015)

http://www.afr.com/

The world’s biggest exporter of metallurgical coal, BHP Billiton, says China’s import-coal quality testing regime is a “significant impost” on free trade and some rivals are being forced to sell rejected cargoes at “distressed” prices.

Shaun Verner, BHP’s vice-president of marketing for coal, told Fairfax Media the testing was hurting sentiment and making it “much more difficult” and slower to sell tonnes into China.

BHP has not had a cargo rejected, but Mr Verner said “our understanding is that where some cargoes have been rejected, and we have heard through the market that there have been a few, they have had to be reloaded and resold as distressed cargoes in other markets.

“If you take the general market situation, and price where it is, the risk of having a cargo rejected is not something that people are willing to bear.”

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Big miners kick the empire building habit – by James Wilson (Financial Times – October 26, 2015)

http://www.ft.com/

BHP Billiton and Rio Tinto are being forced to curb their spending amid China’s economic slowdown

When the chief executive of one of the world’s biggest mining groups had to find words to describe his industry’s litany of problems, he turned to a US country song with an apt title: If You Are Going Through Hell.

“If you’re goin’ through hell keep on going,” were the lyrics recited by Freeport-McMoRan’s Richard Adkerson at a London reception this month, as his Arizona-based company battles a plummeting copper price and burdensome debts. “Don’t slow down, if you’re scared don’t show it . . . you might get out before the devil even knows you’re there.”

Forget the devil: mining investors are only too aware that the sector is a long way from paradise. The industry’s fortunes have deteriorated significantly since the end of the commodities “supercycle” — a big upward shift in demand driven by China’s post-2000 emergence as a manufacturing superpower.

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Why Miners Keep Expanding, as Prices Collapse – by Paul Kiernan and Rhiannon Hoyle (Wall Street Journal – October 22, 2015)

http://www.wsj.com/

Weaker currencies help many firms cut costs, fueling new projects and adding to a global glut

RIO DE JANEIRO—Even as iron ore prices have collapsed, Brazilian giant Vale SA is building a $16 billion iron-ore operation that it touts as “the biggest project in our history and in international mining.” How? Because its costs are collapsing as well.

From South America to Australia, plunging currencies in mineral-rich nations are helping some companies expand their mines—and contributing to a glut of production that has saturated markets and driven prices down.

The cost of producing many commodities is “dropping like a stone,” said Goldman Sachs’s head of commodities research, Jeff Currie, who describes it as a “negative feedback” loop. The dynamic helps explain why commodity busts can be so long-lived.

The hope for recovery in commodities markets rests with the prospect that producers will run out of money or tire of losses and shut their facilities, bringing supply back into balance with weakened demand.

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BHP First-Quarter Iron Ore Output Jumps 7% to Meet Estimates – by David Stringer (Bloomberg News – October 21, 2015)

http://www.bloomberg.com/

BHP Billiton Ltd., the world’s biggest mining company, said first-quarter iron ore output rose 7 percent, joining rivals Vale SA and Rio Tinto Group in reporting increased supply amid falling prices and a global glut.

Production was 61.3 million metric tons in the three months ended Sept. 30, Melbourne-based BHP said Wednesday in a statement. That compares with 57.1 million tons in the same period a year earlier and with a median of 61.9 million tons of three analysts surveyed by Bloomberg.

Benchmark iron ore prices have fallen more than 70 percent from a 2011 peak amid slowing economic growth in China and as the largest suppliers raise output to boost savings and squeeze out higher-cost rivals. BHP reported a 4 percent drop in petroleum output and flagged a 6 percent decline in the unit’s capital spending this fiscal year.

“The iron ore result is as expected and is a good result, though we’d expected petroleum to be higher,” said David Lennox, a resource analyst at Fat Prophets in Sydney.

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Glencore’s Zinc Rationale Defies History – by Liam Denning (Bloomberg News – October 15, 2015)

http://www.bloomberg.com/

“You shut up!/No, YOU shut up!” is how schoolyard scuffles kick off. Miners tweak it slightly to: “You shut down!/No, YOU shut down!”

Ivan Glasenberg, the chief executive of Glencore, has long bemoaned miners’ tendency to literally dig themselves into a hole with too much supply. As concern about Glencore’s swollen debt has hit the stock price, Glasenberg has recently taken himself at his word, ordering a temporary shutdown of some of the company’s zinc output. That caused the price of the metal to jump 10 percent last Friday.

But history suggests Glencore’s fight to raise zinc prices sustainably could be a tough one. Taking yourself out of the market in order to reduce excess supply can be a great strategy— but primarily for those rivals who keep producing and benefit from higher prices while your own reserves stay in the ground.

Sure enough, this week the marketing chief at one of said rivals, BHP Billiton, confessed himself “quite intrigued” about all the talk of cutting production, as he hadn’t seen any capacity being shut-in that was making cash.

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BHP says shutting down mines won’t help commodity prices – by James Chessell (Australian Financial Review – October 15, 2015)

http://www.afr.com/

A senior BHP Billiton executive has played down the impact of production cuts by miners such as Glencore, arguing that commodity prices will not be affected because most of the mines being shut down are unprofitable.

Asked if prices of key commodities such as copper would benefit from higher-cost “marginal” producers cutting back production, BHP marketing president Arnoud Balhuizen said it would not make a significant difference.

“I am quite intrigued by all the conversation about cutting down production because I haven’t seen any production being shut which is making cash,” Mr Balhuizen told journalists in London on Wednesday.

“So for me it is just a normal rational economic decision. If you have a cash negative operation you shut it but it doesn’t do anything for price. You should have done it anyway.”

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LMEWEEK-BHP gloomy on iron ore price, but cautiously optimistic on China – by Maytaal Angel and Eric Onstad (Reuters U.S. – October 14, 2015)

http://www.reuters.com/

LONDON, Oct 14 (Reuters) – BHP Billiton, the world’s largest miner, was downbeat on Wednesday about iron ore prices as low-cost producers continue to swamp the market and as the intensity of China’s demand for the steel making raw material ebbs.

However, there were some positive signs on the economic outlook for top commodity consumer China, BHP officials told a briefing during the LME Week industry gathering.

A global glut and falling Chinese steel demand have dragged spot iron ore prices .IO62-CNI=SI to less than $60 a tonne from a high of nearly $200 in 2011. The price is forecast to drop to $50 over the next two years, a Reuters poll showed.

“By the end of this year, there will be additional iron ore coming from Australia, from Brazil,” Arnoud Balhuizen, president of the group’s marketing unit, told a media briefing. “Our expectation is that the iron ore market cost curve will continue to flatten and continue to come under pressure.”

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BHP Billiton exec talks up Nickel West prospects – by Barry Fitzgerald (The Australian – October 9, 2015)

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

BHP Billiton has served up a surprise by talking up the prospects of its Nickel West division in the face of depressed prices for the stainless steel ingredient.

Nickel West is the price-challenged division BHP withdrew from sale last year after failing to attract reasonable offers, and it is the division that was not good enough to be included with the other non-core assets spun off by BHP into South32 earlier this year.

Because Nickel West was seen internally as doubly non-core to BHP, it was to be run for cash and would not receive new investment, raising fears that the once proud business — spawned during the Poseidon nickel boom and a cornerstone of BHP’s 2005 acquisition, WMC — would be left to wither on the vine.

But at the Australian Nickel conference in Perth, Nickel West’s new asset president, Eddy Haegel, said there was a now sense of “nervous excitement’’ in the division. He said Nickel West had embarked on a journey to reinvent itself by adopting a junior miner mindset, while remaining inside the world’s biggest mining company.

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BHP Billiton’s split may have lessons for Alcoa – by James Regan (Reuters U.S. – September 29, 2015)

http://www.reuters.com/

SYDNEY – In what could be a cautionary tale for Alcoa Inc, global miner BHP Billiton’s decision to spin off non-core businesses into a separate company is yet to pay off for shareholders.

Alcoa announced on Monday it will break itself in two, separating a faster growing plane and car parts business from traditional alumina and aluminum production as shareholders seek higher returns amid a commodity slump.

BHP used a similar rationale for ring-fencing select operations in Australia, southern Africa and South America into what became South 32 last May to concentrate on its most profitable commodities.

South32 shares fell to a record low on Tuesday of A$1.38, more than a third below its listing price. BHP stock, at A$21.61 at Australia’s Tuesday close, is the lowest in seven years.

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BHP Billiton sees strong earnings growth even in low carbon world (Reuters U.S. – September 29, 2015)

http://www.reuters.com/

MELBOURNE – BHP Billiton, the world’s largest miner, said on Tuesday it sees its earnings doubling over the next 15 years, even in a world where carbon emissions are cut to limit global warming to 2 degrees Celsius.

Under pressure from UK investors who fear fossil fuel assets could become worthless under tough climate policies, BHP released analyses of its copper, coal, oil, gas, potash, uranium and iron ore assets showing the company will hold up well under what it considers the most realistic scenarios.

Even with the 2 degrees C limit – equivalent to a rise of about 3.5 degrees Fahrenheit – that has been set for UN climate talks later this year, demand in 2030 for all of BHP’s commodities except thermal coal would be higher than in 2014.

Uranium would be the biggest winner as more nuclear power would be needed, BHP said. “In this scenario, our portfolio remains resilient, and our analysis indicates that margins remain strong and even increase in some commodities,” Chief Commercial Officer Dean Dalla Valle told reporters ahead of an investor briefing in London.

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Rio Tinto and BHP Billiton to keep dividends despite pressure, says Macquarie – by Stephen Cauchi (Australian Financial Review – September 28, 2015)

http://www.afr.com/

BHP and Rio Tinto would have to trim their dividends in coming years due to crashing commodity prices, according to research released on Monday by Macquarie, with Rio tipped to be the better performer of the two.

Both companies remain committed to progressive dividend policies, in which dividends rise in line with earnings per share. The dividends would continue, said Macquarie. But the bank nevertheless trimmed its forecasts for both companies.

For BHP, “we now only factor a flat payment of $US1.24 a share for the next three years, a payment of $US6.5 billion”.

For Rio, “we have reduced our dividend growth assumptions … with our dividend compound annual growth rate reducing from 4 per cent to 2 per cent over the next three years.”

BHP’s dividend per share in 2015, averaged over 12 months, was $1.68. Rio’s interim 2015 dividend per share was $1.44.

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