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Copper tumble risks hampering Glencore’s takeover ambitions – by Silvia Antonioli (Reuters U.S. – January 14, 2015)

 http://www.reuters.com/

LONDON, Jan 14 (Reuters) – A sudden plunge in the price of copper pulled the shares of global miner Glencore to their lowest level on record on Wednesday and risks frustrating any intention to make a fresh move on larger rival Rio Tinto.

Copper prices slid to their lowest in 5-1/2 years after a downward revision to global growth forecasts by the World Bank and shares in Glencore lost as much as 12 percent to 236.20 pence on Wednesday. Glencore, among the large diversified miners, has the largest exposure to copper.

If sustained, the steeper fall in copper prices compared with that of iron ore so far this year, might derail any potential move by Glencore to take over Australian miner Rio Tinto , which is heavily exposed to iron ore.

After Glencore’s first takeover approach was rebuffed by Rio last summer, the market was widely expecting Swiss-based Glencore to make another attempt this year. The steeper fall last year in prices of iron compared with base metals made Rio a more affordable target for Glencore.

That has been partially reversed this year. Copper has lost almost 12 percent of its value, while iron ore has lost less than 5 percent.

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SA-led titans display urge to merge – by Tina Weavind (Business Day Live – January 11, 2015)

http://www.bdlive.co.za/

HUNDREDS of billions of dollars will change hands this year if rumours of a spate of megamergers prove to be true. Some of the biggest predicted tie-ups are Glencore and Rio Tinto, SABMiller and its larger rival Anheuser-Busch InBev, and, further afield, oil giants Shell and BP.

The “GlenTinto” scenario has been around for a few years, but in October, Glencore announced it had finally made the call — and the idea had been rejected. The Swiss-based commodities conglomerate is run by South African Ivan Glasenberg, who owns 8.3% of its shares. Glencore took out a secondary listing on the JSE in 2013.

The company produces and trades about 90 products with a serious stake in agriculture and minerals. But its gaping hole is iron ore, which is Rio’s major cash cow. Glasenberg wants to fill the gap — and he is known for getting what he wants, as those who recall his relentless pursuit of Xstrata will attest.

Although he has been spurned at this point, speculation is that he has approached Rio Tinto’s biggest shareholder, Chinalco (the Aluminium Corporation of China), which has a 9.8% stake. The tie-up would create by far the biggest company in the industry, worth about $150-billion. To put that in context, consider that Anglo American’s market cap stands at about $26-billion.

One potential benefit of the deal would be the estimated cost-saving synergies of about $20-billion.

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Miners face challenge tapping copper opportunities – by James Wilson (Financial Times – January 6, 2015)

 http://www.ft.com/intl/companies/mining

The giant Chilean Escondida mine produces more copper than anywhere on earth. Some 1.2m tonnes emerge from the BHP Billiton-run facility each year. For the largest miners, Escondida also serves as a key measure for world copper output.

To meet global demand over the next decade, the industry “will have to add the equivalent of a new Escondida every 15 months”, says Jean-Sebastien Jacques, head of copper at Rio Tinto, which owns a minority stake in the mine. First Quantum, a mid-tier copper miner, says that if China, India and Brazil were to reach EU levels of copper use by 2020, it would imply nine new Escondidas.

Such predictions explain why big UK miners are talking up their growth potential in copper, even though worries over Chinese demand have driven the price of the metal to its lowest since 2010.

Both Rio and BHP believe the copper market is oversupplied now but will tighten from 2018, with growing deficits. “The copper story remains very strong,” says Mike Henry, BHP’s president for marketing.

Some of the UK’s pure-play copper miners are investing heavily in growth. Antofagasta expects to lift annual output from its Chilean mines from 700,000 tonnes last year to 900,000 tonnes by 2018. Kaz Minerals is building two mines in Kazakhstan.

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NEWS RELEASE: New court victory for the Innu against Rio Tinto (IOC): Quebec Court of Appeal authorizes $900M lawsuit

New court victory for the Innu against Rio Tinto (IOC): Quebec Court of Appeal authorizes $900M lawsuit

UASHAT MAK MANI-UTENAM, QC, Jan. 7, 2015 /CNW Telbec/ – The Innu First Nations of Uashat Mak Mani-Utenam and Matimekush-Lac John, whose traditional territory (Nitassinan) covers a large part of North-eastern Quebec and Labrador, celebrated on January 6, 2015 a new legal victory in their 900 million dollar lawsuit targeting the Iron Ore Company of Canada (majority owned as well as operated by the mining giant Rio Tinto).

Rio Tinto (IOC) was seeking to have the case dismissed before trial by arguing that the Innu should have sued the government rather than the company. On September 19, 2014, the Rio Tinto (IOC) motion to dismiss the lawsuit was rejected at first instance by the Quebec Superior Court and the Court of Appeal has now refused to hear an appeal of the judgment by Rio Tinto (IOC).

“Rio Tinto and its subsidiary IOC continue to try to ignore us, just as they always have. IOC’s president even refuses to meet with us personally. But after this judgement, Rio Tinto (IOC) will no longer be able to hide. The highest Court in Quebec has made clear that Rio Tinto’s subsidiary IOC will have to answer in Court for its violations of our constitutionally protected rights, which violations date back to the 1950s”, declared the Chief of Uashat Mak Mani-Utenam, Mike McKenzie.

Despite their 900 million dollar lawsuit and the injunction they are seeking to put an end to the “IOC megaproject”, the Innu have tried time and again to achieve an honourable outcome with Rio Tinto by way of negotiation.

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Iron Ore Extends Drop to Five-Year Low as China Economy Weakens – by Jasmine Ng (Bloomberg News – December 22, 2014)

http://www.bloomberg.com/

Iron ore sank to the lowest level since 2009 as supply exceeds demand and China, the biggest user, contends with its weakest expansion in almost a quarter century.

Ore with 62 percent content delivered to Qingdao, China, retreated 1.8 percent to $67.90 a dry metric ton, data compiled by Metal Bulletin Ltd. showed. That’s the lowest since June 3, 2009, and extends this year’s slump to 50 percent.

The steel-making raw material is headed for the biggest annual loss in at least five years as BHP Billiton Ltd. (BHP), Rio Tinto Group and Vale SA (VALE5) expanded output, betting increased production will boost revenue and force less competitive mines worldwide to close. Gripped by a property downturn and excess capacity, China is set to grow 7.4 percent this year, the slowest full-year expansion since 1990. Australia cut its price estimate for next year by 33 percent as a surplus builds.

“The falling price this year has been far deeper than anyone anticipated,” Andrew Hodge, an analyst at Wood Mackenzie Ltd. in Sydney, said before today’s prices were released. “China has had weaker than expected demand from its own residential property sector. For the big three, they have the lowest cost operations so there’s no reason to stop producing,” he said, referring to BHP, Rio and Vale.

The market needs to absorb a surplus of about 110 million tons next year, almost double the 60 million tons in 2014, Goldman Sachs Group Inc. estimated in October. The bank forecasts a price of $80 next year.

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Vale Loses Bid to Toss Rio Tinto Suit Over Guinea Mining – by Patricia Hurtado (Bloomberg News – December 17, 2014)

http://www.bloomberg.com/

Vale SA lost a bid to dismiss Rio Tinto Plc (RIO)’s suit alleging it conspired with Israeli billionaire Beny Steinmetz and his BSG Resources Ltd. to steal rights to the world’s biggest untapped iron-ore deposit by bribing officials in Guinea.

Rio Tinto accused Vale of passing confidential information it obtained during discussions the two companies had about Vale buying a stake in the Guinea property to Steinmetz and BSGR. Steinmetz, BSGR and Vale used that information to advance their own bid for the mining rights, Rio Tinto said in a complaint filed last year in federal court in New York.

U.S. District Judge Richard Berman in Manhattan today rejected Vale’s argument that the suit should have been brought in the U.K. because the two companies had agreed to take any dispute to an English court.

The judge cited “legitimate reasons” for keeping the case in the U.S., including Rio de Janeiro-based Vale’s alleged conduct in furtherance of the racketeering conspiracy, such as meetings between the company and London-based Rio Tinto that occurred in New York.

Berman also pointed to an existing federal investigation by Manhattan U.S. Attorney Preet Bharara relating to whether there was a scheme to siphon off Guinea’s mineral wealth.

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After conquering iron ore, BHP and Rio move to dominate in copper – by James Regan (Yahoo Finance/Reuters – December 14, 2014)

http://finance.yahoo.com/

SYDNEY, Dec 15 (Reuters) – Rio Tinto and BHP Billiton are amassing vast copper holdings in a push to capture a greater chunk of the $140 billion world market, apparently aiming to squeeze out high-cost producers just as they did in the global iron ore business.

Separately and in joint ventures, Rio and BHP intend to mine millions of additional tonnes of copper, despite seeing an oversupplied market for the next few years.

“For both companies, this is about wielding the greatest influence possible over the global marketplace,” said Gavin Wendt, senior resources analyst for Sydney-based consultants MineLife.

“Having said that, unlike in the highly concentrated iron ore space where the focus is squarely on one market owned in large part by Rio and BHP – China, copper is sold much more widely, leaving room for smaller producers to stay in the game,” Wendt said.

Several smaller producers contacted by Reuters declined to comment, saying it was too early to gauge the impact of the expansions. There have been no suggestions that BHP and Rio are working in concert to seize overriding control of global copper supply.

A worldwide supply surplus of 300,000 tonnes is forecast in 2015 by Australia’s Bureau of Resource and Energy Economics, equivalent to half a year’s output by South Korea.

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Mining’s ‘Cash Machine’ Promise Fades as Prices Crater – by Jesse Riseborough (Bloomberg News – December 8, 2014)

http://www.bloomberg.com/

BHP Billiton Ltd. (BHP) and Rio Tinto Group run the risk of taking on additional debt as a plunge in commodity prices threatens their ability to keep a promise of returning more cash to shareholders.

As the world’s two biggest mining companies reiterate pledges to bolster returns, a near five-year low in iron ore and coal prices raises the specter both will need to borrow to meet their dividend commitments. Along with rivals Glencore Plc (GLEN) and Vale SA (VALE5), the two companies are largely responsible for the supply glut that’s putting downward pressure on prices.

While investors demanded higher industry returns after $1 trillion was spent on acquisitions and new mines in the past decade, the prospect of companies “robbing Peter to pay Paul” doesn’t sit well with Clive Burstow, an investment manager at Baring Asset Management, which oversees $60.5 billion.

“If they start leveraging up the balance sheet just to give investors back some money, I’m not a great fan of that,” said Burstow, who has been reducing holdings of BHP and Rio this year. “That effectively means they are banking on there being higher commodity prices in the future.”

If current commodity prices prevail, BHP faces an estimated $5.4 billion shortfall to meet a forecast $6.6 billion dividend payout for the fiscal year ending June 30, according to Liberum Capital Ltd. mining analyst Richard Knights.  That means the prospect of any additional return through a buyback is “very low,” he said. Rio’s estimated dividend shortfall is $1 billion next year, Knights said.

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Mining’s ‘Cash Machine’ Promise Fades as Prices Crater – by Jesse Riseborough (Bloomberg News – December 8, 2014)

http://www.bloomberg.com/

BHP Billiton Ltd. (BHP) and Rio Tinto Group run the risk of taking on additional debt as a plunge in commodity prices threatens their ability to keep a promise of returning more cash to shareholders.

As the world’s two biggest mining companies reiterate pledges to bolster returns, a near five-year low in iron ore and coal prices raises the specter both will need to borrow to meet their dividend commitments. Along with rivals Glencore Plc (GLEN) and Vale SA (VALE5), the two companies are largely responsible for the supply glut that’s putting downward pressure on prices.

While investors demanded higher industry returns after $1 trillion was spent on acquisitions and new mines in the past decade, the prospect of companies “robbing Peter to pay Paul” doesn’t sit well with Clive Burstow, an investment manager at Baring Asset Management, which oversees $60.5 billion.

“If they start leveraging up the balance sheet just to give investors back some money, I’m not a great fan of that,” said Burstow, who has been reducing holdings of BHP and Rio this year.  “That effectively means they are banking on there being higher commodity prices in the future.”

If current commodity prices prevail, BHP faces an estimated $5.4 billion shortfall to meet a forecast $6.6 billion dividend payout for the fiscal year ending June 30, according to Liberum Capital Ltd. mining analyst Richard Knights.

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Mining and corruption: Crying foul in Guinea (The Economist – December 6, 2014)

http://www.economist.com/

Africa’s largest iron-ore mining project has been bedevilled by dust-ups and delays

“AN emblematic tragedy” is how Sir Paul Collier, an adviser to the British government, describes the situation in Guinea—referring not to the Ebola outbreak (awful though he considers that to be) but the saga of Simandou, a mining project mired in allegations of corruption, expropriation and corporate espionage.

Simandou, a mountainous area in southern Guinea (pictured), has been called the El Dorado of iron ore. It is the world’s largest known untapped deposit of the stuff, with enough ore to sustain annual production of 200m tonnes—7% of global iron-ore output—for more than a quarter of a century. Better still, the ore there has unusually high iron content. The potential project cost for the mine, and the railway and port that would be needed to get ore on to ships, is $20 billion, making it Africa’s largest ever proposed mining venture.

Guinea could do with the investment: it ranks 179th out of 187 countries in the UN’s human-development index. Wags, alas, have taken to calling Simandou “Simandon’t”. Exploration rights were first granted in the 1990s, yet the earliest anyone expects production to begin is 2019.

The saga oozes intrigue. Among its cast of characters: two of the world’s biggest mining groups, the Anglo-Australian Rio Tinto and Vale of Brazil; Beny Steinmetz, an Israeli diamond tycoon; George Soros, a billionaire philanthropist; Mark Malloch-Brown, a former deputy head of the UN; the wife of Guinea’s former leader; and, possibly, members of South Africa’s elite and security services. It is, as one lawyer involved in the case wryly puts it, “a slightly Hollywood story”.

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UPDATE 2-Rio Tinto not looking at acquisitions to raise defences against Glencore – by Silvia Antonioli (Reuters India – December 4, 2014)

http://in.reuters.com/

LONDON, Dec 4 (Reuters) – Global mining company Rio Tinto is not looking to make any major acquisition to protect itself from a potential Glencore takeover, Chief Executive Sam Walsh said at a meeting with investors on Thursday.

Since Rio Tinto rejected a tentative approach from smaller rival Glencore in July, speculation has mounted that it might rush to make an acquisition to raise its defences against another takeover attempt by the mining and trading giant.

But Rio Tinto’s boss said the focus remained on improving mining operations and delivering more cash to shareholders, rather than becoming involved in disruptive mergers and acquisitions.

“I see speculation that we are going to rush out and buy somebody. Let me reassure you that we are not looking at any major M&A. We are not looking at doing anything stupid,” Walsh said.

Glencore Chief Executive Ivan Glasenberg has criticized the strategy of rival miners BHP Billiton and Rio Tinto to flood the market with new iron supply to squeeze out smaller competitors. He says the move has backfired and led to a fall in the iron ore price, which is down 50 percent this year.

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Rio keen to blend mining and marketing – by James Wilson and Neil Hume (Financial Times – December 1, 2014)

http://www.ft.com/home/us

Pilbara Blend. Robe Valley. Yandicoogina Fines. The names may sound as if they belong on a tea caddy or in a wine cellar – but Rio Tinto investors know better. These are the labels under which the company sells Australian iron ore, the prosaic yet hugely important commodity on which its fortunes depend.

The idea of branding a commodity that is shovelled into blast furnaces to make steel may seem strange. But iron ore has many variations in mineral content and purity.

Miners such as Rio say part of their skill lies in matching ores to the right buyers. Their marketing strategies are therefore crucial to their success – more so this year, when a flood of low-cost supply from Rio and its peers helped to drive the iron ore price down by almost 50 per cent.

Now investors have another important reason to consider Rio’s marketing skills: they are central to a possible tie-up with Glencore, the rival commodities group that this year approached Rio about a potential merger.

Glencore is one of the world’s most successful and entrepreneurial trading companies, spanning commodities such as coal, copper, oil and agricultural products. Its pursuit of a combination with Rio next year may hinge on whether Ivan Glasenberg, Glencore’s chief executive, judges he can extract value from Rio’s iron ore assets – the source of almost 90 per cent of its earnings – with better marketing and trading.

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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.

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Rio Invests $350 Million in Diamond Project After Walsh Backing – by David Stringer (Blomberg News – November 26, 2014)

http://www.bloomberg.com/

Rio Tinto Group (RIO), the world’s second biggest mining company, approved a $350 million project to expand a diamond mine in northwestern Canada, weeks after Chief Executive Officer Sam Walsh flagged an investment.

Construction of the A21 kimberlite pipe at the Diavik mine, 220 kilometers (140 miles) south of the Arctic Circle, will start next year, London-based Rio Tinto said today in a statement. Rio owns 60 percent of the mine, with Dominion Diamond Corp. (DDC) holding the remainder.

The investment comes after Walsh said in an interview this month that there were “seriously good” opportunities in diamonds, a unit that had been put up for sale by former CEO Tom Albanese. Demand globally will probably rise 4 percent to 4.5 percent this year with U.S. consumption increasing as much as 6 percent, according to De Beers, the biggest producer.

“I love diamonds,” Walsh said in an interview on Nov. 10 with Bloomberg Television in Beijing, when he flagged an expansion at its Canadian diamond operation. “I think it’s a seriously good business.”

Production from the pipe is expected to start from late 2018. The expansion will ensure output at Diavik continues at existing levels, Rio Tinto said. The mine’s current production plan has output continuing until 2023, it said.

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Glencore readies for Rio Tinto round two – by Amanda Saunders (Sydney Morning Herald – November 26, 2014)

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

Glencore chief executive Ivan Glasenberg’s second attempt to force a merger with Rio Tinto will involve an attack on Sam Walsh over dwindling hopes of substantial capital returns, as he tries to win the support of Rio’s biggest shareholder, Chinese giant Chinalco, by promising to sell key assets Oyu Tolgoi and Simandou.

That’s the view of Bernstein’s London-based senior analyst Paul Gait, who predicted Glencore would make a move on Rio in September, a month before Rio confirmed the approach.

That $190 billion merger approach was rebuffed, and under British law Glencore must wait until April to make another attempt. Mr Gait expects Mr Glasenberg will waste little time. “Is he coming back? In my view, yes,” Mr Gait said from London.

Mr Gait told The Australian Financial Review Glencore’s shock announcement that it would shut down its Australian coal operations for three weeks was a strong indication Mr Glasenberg would try again for Rio. He said Mr Glasenberg would be able to point to Glencore’s willingness to pull tonnes out of an oversupplied market in a direct challenge to Rio over its expansion in iron ore.

“To me this coal announcement is clearly Ivan playing games,” Mr Gait said. “It had the language of someone trying to make his credentials on managing the market as a CEO. It’s a shot across the bows to Rio.”

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