Showing posts with label Australia. Show all posts
Showing posts with label Australia. Show all posts

Tuesday, December 18, 2012

Platinum Australia and Jubilee mull merger

Embattled platinum miner Platinum Australia was in merger discussions with fellow South African miner Jubilee Platinum regarding a possible merger.

Under the proposed merger, Jubilee would acquire all the ordinary shares on issue in Platinum Australia in a share exchange.

The parties have now executed a heads of agreement outlining the key elements of the proposed transaction, which would be used to guide the preparation of binding transaction documents, which were in the process of being negotiated.

In a joint statement, Jubilee and Platinum Australia said that the merged entity, which had the potential to create a top 5 platinum producer in the world, would be seeking a financing package for project finance, working capital and for the partial settlement of Platinum Australia’s debts.

The financing package was currently being negotiated.

Under the proposed transaction, the Smokey Hills mine, which was fully capitalized and ready for production, would be reopened to provide the combined group with significant platinum group metal product.

It was expected that the mine would be brought into production during the second half of 2013.

Furthermore, Jubilee recently concluded an agreement with Platinum Australia for the toll processing of Dilokong chrome mine platinum-bearing tailings using the concentrator at the Smokey Hills operation. The agreement accelerated the processing of Dilokong tailings by some 14 months, to start during the first half of 2013.

The two companies said on Monday that the combined group would have access to the ConRoast process for its future concentrate production, and with the exception of the Tjate platinum projects, the other projects in the combined group were near-term, with relatively low capital requirements.

“We believe that Jubilee’s diverse platinum portfolio and cash flow potential, together with our Smokey Hills mine and development projects, will result in a balanced group well able to take the benefits of the anticipated improvement in the fortunes of the platinum industry,” said Platinum Australia director John Lewins.

Jubilee’s CEO Leon Coetzer added that the proposed transaction would materially enhance Jubilee’s mine-to-metals strategy, and added that the company was looking forward to developing the respective assets in best interest of shareholders.

It was believed that the development of Platinum Australia’s openpit Rooderand project would complement the Smokey Hills mine, and a mining right application was submitted for the project late in 2012, with a definitive feasibility study due for completion shortly.

The group would also look to develop Platinum Australia’s openpit Kalahari platinum project, on which a mining right application would likely be submitted in the first half of 2013.

Edited by: Creamer Media Reporter

Tuesday, December 4, 2012

India's Adani to begin coal mining in Australia by 2016

India's Adani Group announced the company has completed its exploration in Australia and says they will beging mining by 2016.

The company's Carmichael mine is located in the Galilee basin in Queensland, Australia.

The company is positive that miningwill begin in 2015-2016 and will reach its peak at approximately 60 million tonnes a year by 2022.

The Carmichael mine is estimated to hold approximately 10 billion tons of coal and could be the larges coal deposit in the world.

The company said in a press release "Our partnership with Australia and Queensland has been one of exceptional trust, transparency and understanding. Having seen the speed, and with the support received to undertake and complete the largest and most ambitious mining exploration programme in record time, I am now certain that Queensland has been the right choice. Australian industry and the Indian corporates like the Adani Group have some distinctive synergies, which will prove to be of mutual benefit to all in the long run,"

Wednesday, November 28, 2012

Oil and gas drive Australia resources spend to record A$268bn

Investment in the Australian resources sector has reached an all-time high of A$268.4-billion, with liquefied natural gas (LNG), gas and petroleum project accounting for the bulk of the record investment.

LNG, oil and gas investments amount to A$195-billion, the Bureau of Resources and Energy Economics (BREE) stated in its ‘Resources and Energy Major Projects—October 2012’ report.

Federal Resources and Energy Minister Martin Ferguson welcomed the strong project pipeline, which was up 3% from the previous release in April 2012.

“To put Australia's investment in oil and gas in perspective, the total committed expenditure on these projects is comparable to the cost of the Apollo Moon Program in today's prices,” Ferguson said.

The report stated that 87 projects were in the committed category, of which 51 were minerals projects, 18 gas and petroleum projects and 18 infrastructure projects. A further 277 projects were in the planning stages.

BREE executive director and chief economist Professor Quentin Grafton said 11 mega projects, costing more than A$5-billion each, accounted for A$201-billion, or 76%, of the total committed investment in resources and energy major projects. Most of these mega investments were LNG projects located in the Pilbara region of Western Australia and Gladstone, in Queensland.

In the six months to October 2012, ten projects worth A$13.2-billion were committed to after receiving a positive final investment decision, the largest of these was for an additional LNG train at the Australia Pacific LNG plant at Gladstone.

Ferguson said that the report showed that Australia had a “solid” pipeline of potential investment in resources and energy, despite weaker commodity prices.

“In the face of lower commodity prices, the delivery of this pipeline of projects is contingent on keeping production costs down, providing access to skilled labour and increasing our productivity and efficiency.”

Grafton also noted that any substantial net increase to the dollar value of committed projects would require either cost increases to larger, existing projects and/or a new final investment decision on a large project within the coming year

Ferguson noted that the Australian government was working with the resources industry to ensure that Australia remained competitive, and continued to attract investment in one of its most valuable sectors.

Edited by: Mariaan Webb

Monday, November 5, 2012

Australia court to hear mine tax challenge in 2013

Australia's High Court agreed on Monday to hear a challenge against a tax on mining profits in early 2013, as the government stood by its revenue forecasts for the tax despite a drop in commodities prices due to slower growth in China.

Mining magnate Andrew Forrest and his Fortescue Metals Group are leading the High Court challenge against the 30% minerals resource rent tax (MRRT), which started on July 1 this year in the face of industry and political opposition.

Australia's third-largest iron ore miner believes the tax is unconstitutional as only state governments can impose royalties. The government has said it will strongly defend the tax, and was careful to ensure the tax was on mining profits and not On production.

In a directions hearing, High Court Chief Justice Robert French referred the issue to the court's full bench, with hearings expected to start in March, 2013.

The tax on iron ore and coal profits was designed by the government and global miners BHP Billiton, Rio Tinto and Xstrata after a brutal political campaign and warnings it would cripple Australia's resources sector.

In its mid-year budget update in October, the government forecast the tax would bring in A$2-billion ($2.07 billion) in the current financial year, down from the A$3-billion May budget forecast, and raise A$9.1-billion over four years.

But media reports said global miners reported no liability for the tax in its first three months, while private forecasters Deloitte Access Economics on Monday said the tax would fall well short of Treasury's revenue estimates due to lower world commodity prices and a strong Australian dollar.

"That mix means the MRRT will have a dog of a year -- when China sneezes, the MRRT was always going to get pneumonia," Deloitte Access economist Chris Richardson said.

He said any drop in mining tax revenue would threaten the government's target of delivering a A$1.1-billion budget surplus for the financial year to June 30, 2013.

Trade Minister Craig Emerson defended the Treasury forecasts and said the government would still deliver a surplus budget.

"We take note of the forecast provided by officials and we stand by those forecasts: we stand by the MYEFO, the Mid-year Economic and Fiscal Outlook. We're on track for a surplus and they're the figures that we stand by," Emerson said on Monday.

Source: Reuters

Monday, October 22, 2012

Australian gold exports to China surge over 900%, iron ore sinks 5%

By Marc Howe

Australian sales of gold to China have surged a staggering 905.4% on the back of the Middle Kingdom's efforts to short up its foreign currency reserves.

The Australian reports that the stunning year-on-year gain in gold sales to China for the period of January to August in 2012 has left the precious metal Australia's second most valuable tangible export to the emerging Asian giant at AUD$4.2 billion in total, replacing stalwart commodities export coal.

The total value of coal exports for the same period also enjoyed impressive gains, up 79.9% year-on-year, yet clocked in at third place amongst Australia's tangible exports to China at AUD$3.9 billion.

Fresh data from the Australian Bureau of Statistics also indicates that iron ore and concentrates remains far and away the country's most valuable physical export to the Middle Kingdom, worth AUD$26.9 billion for the period from January to August of 2012.

This amount represent a 5.4% fall, however, compared to the same period in 2011, due to ailing demand from China which has driven spot prices lower.

Analysts believe the surge in sales of gold are the result of efforts by Chinese banks to raise their low level of foreign currency reserves of gold.

Gold demand amongst retail purchasers in China has also risen, with middle-class urbanites esteeming the precious metal a safe and profitable investment as real interest rates languish, PRC stocks remain weak, and a bursting of the property bubble looms on the horizon.


Wednesday, September 19, 2012

China displays continued appetite for Australian minerals with Western Desert bid

China's Meijin Energy Group has launched a USD$457 million bid for Australia's Western Desert Resources (ASX:WDR).

"This offer from a major Chinese corporation represents excellent value for shareholders" said Western Desert chairman Rick Allert in a statement.

The bid of AUD$1.08 per share at a 26% premium to Western's last closing price demonstrates that the Asian economic giant still retains considerable appetite for minerals despite recent signs to the contrary.

The Australian branch chief for China's biggest bank announced earlier this week that it would be winding down lending to Australia's resource sector in anticipation of troubled times for miners.

Speculation has also been rife in the Australian media of late that the peak period for the resources sector has passed, triggered by resource minister Martin Ferguson's impromptu announcement of the end of the mining boom in an ABC interview at the end of August.

Western Desert is a diversified miner with interests encompassing iron ore, gold, base metals and uranium. It has 321.1 million outstanding shares and is due to issue a further 19.6 million share as part of a rights offer, which alongside 61.5 million in unlisted options brings total outstanding shares to 402.23 million.

Shenzhen-listed Meijin Energy is based in the inland Chinese coal cradle of Shanxi province, and engages in coal mining, coke production and steel making.

Meijin has already made inroads into the Australia resource industry with a 4.2 billion tonne coal project in Queensland's Galilee basin.

Monday, August 20, 2012

Brazil to regain iron ore top spot from Australia in 2017 says Vale

Brazil will overtake Australia and regain its position as the world's top iron ore exporter in 2017 after a giant new Amazon mine owned by Vale SA starts operations, Vale's investor relations chief said on Tuesday.

The reversal will be sealed by the addition of new mines in Brazil, including Vale's 90 million-tonne-a-year Serra Sul mine at its Carajas complex in Brazil's northern Amazonian state of Para, investor relations director Roberto Castello Branco told investors in Rio de Janeiro.

Serra Sul is expected to start operations in 2016.

While Rio de Janeiro-based Vale remains the world's largest producer of iron ore, Australia, led by BHP Billiton Ltd and Rio Tinto Ltd, used its proximity to China, the largest consumer of iron ore, to overtake Brazil in 2008 in the 1-billion-tonne-a-year seaborne market.

Vale, the world's second biggest mining company, and other Brazilian iron ore producers such as MMX Mineracao e Metalicos SA, Cia Siderurgica Nacional and Ferrous do Brasil have struggled to expand iron ore production as quickly as Australian rivals.

Half of the 400 million tonnes of world iron ore exports expected to be added by 2015 will come from Australia and only 30 percent from Brazil, according to Ferrous, which plans to increase output sixfold to 17 million tonnes by 2017.

Brazil, which once had about half the seaborne market, now has about a third and Australia about half.

Ferrous does not see Brazil regaining its top spot from Australia. In 2015, Brazil is expected to export about 444 million tonnes or a third of the seaborne market, according to Ferrous and Barclays. Other Ferrous estimates put the total at 370 million tonnes.

In 2015 Australia is expected to export 693 million tonnes or half of the world total. The addition of 90 million tonnes from Serra Sul would still leave Brazil in second place.

Brazil's environmental laws are some of the world's toughest and its bureaucracy is slow. Getting clearance for new mining, rail, port and other infrastructure projects can take as much as two years longer in Brazil than in Australia, Jaime Nicolato, chief executive of Ferrous do Brazil, said in July.

Vale, which is partially controlled by the employee pension fund of Banco do Brasil SA, a government-controlled bank, is reluctant to criticize Brazilian bureaucracy or environmental laws. Castello Branco said the company needs to improve its own planning systems.

"We don't like to blame others for our failure to secure an environmental license (to open a mine)," Castello Branco said, referring to the notoriously slow Brazilian bureaucracy. "We have highly competent teams that are proactive and eager."

Source: Reuters

Tuesday, June 26, 2012

Australia gold output declines for third consecutive quarter

Gold production in Australia declined by 5% quarter-on-quarter and by 4% year-on-year in the first three months of 2012, mining consultant Surbiton Associates reported over the weekend.

Australia produced 62 t of the precious metal in the first quarter.

Surbiton said in its quarterly review that this was the third consecutive quarter that gold production had declined, with lower output attributed to a number of factors, including the effects of wet weather.

“The March quarter often has lower gold production and this year was no exception,” said Surbiton director Dr Sandra Close.

“As well as the usual ups and downs, wet weather caused access problems in several mines, particularly in New South Wales and the Northern Territory, so there was greater reliance on treating lower-grade stockpiles, which reduced gold output.”

Also, the March quarter was one day shorter than the December quarter and Close said that this alone accounted for about two-thirds of a ton of gold output.

“Several of Australia’s largest operations, including Boddington, Cadia Hill and the Super Pit had lower output in the March quarter. Although, on the positive side, there are a number of new or redeveloped operations coming on stream,” she added.

At Newmont Mining’s Boddington mine, gold production fell by 43 000 oz, or well over a ton of gold, owing to lower grades being mined and fewer tons of ore being processed.

Ground slippage problems and heavy rain affected gold output at Newcrest Mining’s Cadia Hill operation in New South Wales, where production fell by 27 000 oz compared with the previous quarter.

The Super Pit, operation, which is 50% held by both Newmont Mining and Barrick Gold, regained its place as the largest Australian producer for the quarter, even though its output was down 16 000 oz owing to mill maintenance, which reduced the amount of ore processed.

“Some new or recycled operations have already commenced production in 2012, such as Ramelius Resources at Mount Magnet, while others will join the list of producers by the end of the year. Among these are a number of copper/gold producers including Osborne, DeGrussa and Kanmantoo,” Close said.

In Queensland, Ivanhoe Australia produced the first copper/gold concentrates from its reopened Osborne mine, near Cloncurry. Sandfire Resources shipped the first high-grade copper ore from its new DeGrussa copper/gold mine in Western Australia, while Hillgrove Resources’ Kanmantoo mine in South Australia, which was commissioned late last year, continued to ramp up production.

“In the near-term, output from these new copper/gold operations is offset by the closure of the openpit at Xstrata’s Ernest Henry operation in Queensland, which has been one of Australia’s largest gold by-product producers,” Close said.

“However, Ernest Henry is currently being redeveloped as an underground mine.”

She noted that by far the most significant new operation was Newcrest’s Cadia East gold/copper mine, near Orange, in New South Wales, which was slated to come into production around the end of this year.

“The Cadia East underground mine will replace the worked out Cadia Hill openpit and when it reaches full production around 2016, it will produce about 700 000 oz to 800 000 oz of gold and 100 000 t of copper annually,” Close said.

“It will be one of the largest underground mines in the world and by far the largest in Australia.”

Close added that there was also a string of medium to small gold operations that should begin production later this year. These include Regis Resources’ Garden Well operation in Western Australia, which should produce over 200 000 oz/y of gold and Millennium Minerals’ Nullagine plant, scheduled to produce about 100 000 oz of gold yearly.

“Each is not large but taken together they amount to a steady supply of new projects that replace those that are worked out and closed.”

Despite the decline in output, Close noted that there was still considerable focus on the gold price.

“Despite its volatility in US dollar terms since the start of the year, it has been much less variable in Australian dollar terms, due to exchange rate variations,” she said.

The US dollar gold price rose early in the year to peak at near $1 800/oz in late February and has now fallen to below $1 600/oz. By comparison, since the start of the year, the Australian dollar price has fluctuated in a narrower range, averaging around A$1 600/oz over the period. Over the same period the Australian dollar has varied some 10c against the US currency.

“Irrespective of the vagaries of the gold price and exchange rate variations, uncertainty remains on world markets,” Close said.

“While the European financial crisis is the current concern, many of the other factors affecting global financial, economic and political uncertainty remain and these problems are not going to be solved quickly.”

Friday, June 1, 2012

Vale declares force majeure at Australian coal operation

Brazilian mining giant Vale (NYSE: VALE) has declared force majeure at Carborough Downs, one of its metallurgical coal operations in Bowen Basin, Queensland, Australia, effective May 31, and said it would restart operations as quickly as possible, the company said in a statement.

The force majeure was declared due to the detection of abnormal levels of carbon monoxide in the mine, according to the company.

A subsequent directive from the Queensland state inspectorate for mines on May 29 was conducted to orderly withdraw personnel from the mine.

There were no employees affected and no environmental damage.

Vale estimates that roughly 7,700t of run-of-mine coal output has been impacted since withdrawal of personnel took place on May 29, the statement said.

Vale's Carborough Downs produced 325,000t of metallurgical coal in 1Q12.

This is the second time Vale declares Force Maejure in less than two months. On May 10, the company declared force majeure at its New Caledonia nickel mine.

Vale is the world's largest iron ore producer and exporter. It has operating coal assets and exploration projects in Australia and Mozambique, in addition to minority interests in two JVs in China.

Tuesday, May 29, 2012

$6.4 billion Alpha Coal Project given go-ahead

The Newman Government has given the green light to what will be one of Australia’s biggest mines, the $6.4 billion Alpha Coal Project in Queensland’s Galilee Basin.

Queensland’s Coordinator-General has provided conditional approval for the mine – the first in the untapped coal rich Galilee Basin.

Minister for State Development, Infrastructure and Planning Jeff Seeney welcomed the decision and said the project would produce significant economic benefits for the state and nation.

“There’ll be an estimated $11 billion boost to the economy during the mine’s three year construction phase. 80 per cent of that will be retained in Queensland,” Mr Seeney said.

“Once operational, Queensland’s economy should see an economic boost of $1 billion per year from this mine alone.

“Australia can expect an $80 billion dollar rise in exports over the life of the mine.”

Mr Seeney said the Coordinator-General had approved the mine with strict conditions and the move was a major step towards opening up the Galilee Basin’s coal deposits.

“The proposal is for a 30 million tonnes per year open-cut coal mine and a 495km railway line from the mine to the Port of Abbot Point near Bowen,” he said.

The project is expected to generate up to 3600 construction jobs and 990 operational jobs.

The mine site is 130km south-west of Clermont and about 360km south-west of Mackay. The expected life of the mine is 30 years, with sufficient resources to potentially extend the project life beyond that time.

Despite the Coordinator-General completing Queensland’s assessment, the Federal Minister for Environment is yet to complete his assessment under Commonwealth environmental legislation.

“The Coordinator-General has thoroughly assessed Hancock Coal’s Environmental Impact Statement and associated materials, including 60 public submissions, and its Supplementary Environmental Impact Statement (SEIS),” Mr Seeney said.

Coordinator-General Barry Broe said his 393 page report contains 128 conditions.

“Conditions and recommendations in my report will ensure that impacts are well mitigated and managed through environmental management plans, environmental licences, development permits and a social impact management plan,” Mr Broe said.

The mine plan comprises six separate open-cut pits, with a total strike length of 24 km in a north-south direction.

Hancock Coal anticipates the construction period to occur between 2013 and 2016, subject to relevant approvals being granted for the project.

Wednesday, May 23, 2012

Australia, Latin America should strengthen links – Carr

Australia’s Foreign Affairs Minister Bob Carr has called for a closer business relationship between Australia and Latin America, saying that more could be done to build on the strong foundation that mining had left.

Speaking at the Latin America Down Under conference, in Sydney, Carr noted that while both continents were sharing their expertise and experience in the mining sector, there was still room to build on the personal, government and business links.

“There is much more that we can do together, on the international financial system, in multilateral efforts, in trade and in security. And for the global environment,” Carr told delegates.

The Minister noted that the presence of Australian miners in Latin American countries had grown over the last two decades, with more than 80 Australian mining and exploration companies now active in the region.

In the mining equipment, technology and services sector, there were only three or four companies in Latin America some 15 years ago. Today, there were over 80 companies in Chile alone, and dozens of others across the region, said Carr.

“Mining makes up about 8% of our gross domestic product, and more than half of our export revenue,” said Carr.

“Last year, our mining exports were worth A$176-billion, and are forecast to break the A$200-billion-a-year mark in the near future. Our miners are a great domestic industry but, unsurprisingly, given their international markets, they have led the way in developing projects overseas.”

Carr also called for a greater working relationship on environmental reform and standards, saying that climate change and the health of the oceans were two of the most difficult global challenges faced in this century.

“But we need an environmental awareness to permeate through every level of what we do.

“Latin America and Australia are both regions with strong environmental importance – just look at our extraordinary biodiversity. We both have rich resource endowments, which we have to extract in a way that does not damage our local environments or alienate local communities.”

Carr noted that when done properly, mining could be a catalyst for sustainable socioeconomic development.

“Transparency is critical, as is sound financial and environmental management. We strongly support developing economies endowed with resources adopting sound mining practices.”

Carr told delegates that through the Department of Resources, Energy and Tourism, and an aid programme, Australia would be running sustainable mining workshops in Mexico and Peru later in 2012.

“This will be an area on which we can continue to collaborate in coming decades, a place in which we can learn from each other,” he said.

Sunday, May 20, 2012

BHP's Australia coal miners returning to picket line

Workers at global miner BHP Billiton's Bowen Basin mines will strike for seven full days starting late next week after voting to reject a new employment contract proposed by BHP for the second time, the workers' union said Friday.

The action comes as BHP, the world's biggest diversified mining company, scales back capital spending across business units due to slowing global commodities demand.

The workers at BHP Billiton-Mitsubishi Alliance's (BMA) coal mines in the Bowen Basin of Queensland state have been staging rolling work stoppages for almost a year as they battle with the global miner over work schedules.

A BHP spokeswoman said further industrial action was "unnecessary and would be harmful for all concerned".

"We are focused on finalising an agreement and will resume discussions to complete the agreement as soon as possible," the spokeswoman said.

BHP had already declared force majeure on shipments from the mines as it struggles to meet supply contracts. Force majeure is a legal manoeuvre releasing companies of immediate supply obligations due to circumstances beyond their control.

In total, the mines under the partnership have an output capacity of more than 58 million tonnes a year, representing about a fifth of annual global trade in metallurgical coal.

Stephen Smyth, district president of the Construction, Forestry, Mining and Energy Union, said the workers were determined to continue to press for their terms.

"This result proves BHP is still radically out of touch with its workforce, an overwhelming majority of whom is still not prepared to give up crucial conditions around safety, rosters, housing and equality for contractors," Smyth said.

BHP, in its March quarter production report, blamed a 14 percent drop in metallurgical coal production on work stoppages and other industrial action by roughly a third of its workforce, compounded by heavy rains that hurt operations.

Prices of metallurgical coal, used in steel making, have weakened in recent months to around $200 a tonne, but they are still more than twice as high as estimated production costs of around $80 per tonne at the mines, according to analysts.

BHP Chairman Jacques Nasser said on Wednesday he expects commodity markets to cool further and that investors had lost confidence in the longer-term health of the global economy, in the most cautious comments yet by a major mining company.

He also said BHP had put the brakes on a plan announced by Chief Executive Marius Kloppers in 2011 to spend $80 billion over five years to expand its iron ore, coal, energy and base metals divisions.

Source: Reuters

Vale Loses to Australia as Mine Laws Curb Market Share

By Juan Pablo Spinetto

Vale SA (VALE5), the world’s largest iron-ore producer, is poised to lose market share to Australian rivals Rio Tinto Group (RIO) and BHP Billiton Ltd (BHP) as Brazil imposes stricter environmental rules on new mining projects and labor costs soar.

Brazil’s share of the seaborne iron-ore market may sink to 27 percent by 2016, down from 31 percent now, as the country boosts capacity by 188 million tons, according to data compiled by Bloomberg. Australia will probably add about 502 million tons, taking its market share to 50 percent from 41 percent.

Vale, based in Rio de Janeiro, delayed the $8 billion Carajas Serra Sul expansion and at least three other projects in Brazil last year amid environmental permit issues, higher costs and labor shortages. The company also cut its 2015 iron ore output estimate by 10 percent to 469 million metric tons and is weighing asset sales as it focuses on metals production.

“We are becoming less competitive,” Jose Fernando Coura, president of the Brazilian Mining Institute, said by telephone from Brasilia. Getting approval for a new project is “a Calvary because you need to go through 350,000 institutions,” he said.

BHP, based in Melbourne, said April 18 that fiscal third-quarter iron-ore output surged 14 percent as it expands mines and ports in Australia. London-based Rio Tinto’s production gained 9 percent to 45.6 million tons, while Vale’s dropped 2.2 percent to 70 million after bad weather hurt operations.

Miners are boosting output to meet Chinese demand as the country’s growth stokes demand for steel in automobiles, appliances and construction. Chinese steel production reached a record in March amid the ramp up of new plants.


Australian Ore

Australian iron ore output may climb to 940 million tons by 2016, compared with an expected 519 million tons for its South American rival, according to Bloomberg data.

Vale rose 2.6 percent to 35.70 reais in Sao Paulo on May 18. The stock has fallen about 18 percent in the past twelve months, more than the 13 percent decline of the Brazilian benchmark Bovespa Index. (IBOV) BHP, the world’s biggest mining company, lost 29 percent in Sydney during the same period while Rio Tinto fell 32 percent.

China’s steel demand will remain positive until at least 2025 and production will rise to about 1.1 billion tons by 2025 from about 700 million tons currently, BHP said in March. The company is more than doubling its iron ore capacity by 2020 and this year got initial approval to expand its export harbor in Western Australia, where most of the country’s ore is mined.


Australia Investment

“The investing environment in Australia is a little bit friendlier than in Brazil from a political, environmental and permitting standpoint,” said Andrew Cosgrove, a Bloomberg Industries analyst in Princeton, New Jersey. “Brazil may not be seen as the source of new supply in the future that a lot of people are expecting.”

Brazil, which counts iron ore as its key export product, shipped 330.8 million metric tons last year, 107 million less than Australia. The gap between the two has widened since 2008, the year the country overtook Brazil as the largest exporter.

Australian exports will grow 12 percent this year to reach 493 million metric tons, the country’s Bureau of Resources and Energy Economics said in a March 21 report. Brazilian exports will gain 6.4 percent in 2012, it said.

Vale’s Carajas Serra Sul project, which is expected to increase capacity by 90 million metric tons, is two years behind schedule, the company said Nov. 28. Vale is expecting to get a preliminary environmental license for the project by June.


‘Licenses to Maintain’

“We obtained licenses to maintain,” Vale Chief Financial Officer Tito Martins told reporters May 18. “The difficulty that arose is getting licenses to expand.” Vale’s permit to operate its N5 Sul pit, granted in January, was the first license the company obtained in the Carajas region, where the company has its biggest mine, in 10 years, Martins said.

Vale isn’t the only company grappling with project delays and challenges in obtaining licenses in Brazil. Anglo American Plc (AAL), based in London, was ordered by the authorities to stop construction at its Minas Rio project, the company’s biggest, six times. The reasons for the stoppages included protecting the area’s artistic and cultural heritage.

“This is a painful process, but we go through it,” Paulo Castellari, the head of Anglo’s iron-ore unit in the Latin American country, said of the Brazilian permitting processes in an April 5 interview from Rio de Janeiro.

The company last month also had a license to install a power line at the project suspended by a Minas Gerais state court. Anglo failed to fulfil some of the conditions to obtain the permit, prosecutor Francisco Francisco Chaves Generoso told the court in a civil lawsuit.


Higher Costs

In December, Anglo raised its cost projection for at least the fourth time to as much as $5.8 billion, more than double the figure planned when the company agreed to buy the assets. The company has followed all legal requirements for environmental licensing on the project, which remains on track to begin shipments in the second half of next year, according to London-based spokesman James Wyatt-Tilby.

Mining projects in Brazil may become less profitable because of planned legislation. The government is drafting new rules to increase royalties on the extraction of iron-ore and other minerals.

Vale last year stopped publishing a long-term iron-ore output forecast after cutting its 2015 estimate. Rio Tinto, the world’s second-largest iron-ore exporter, has embarked on a plan to boost output capacity by more than 50 percent in Western Australia, reaching 283 million metrics tons in 2013, with a plan for a further increase to 353 million tons by the first half of 2015, it said in February.

Still, Vale’s low production costs and the high quality of its iron ore may prevent it from losing the lead in the market, according to Alan Glezer, an equity analyst at Banco Bradesco BBI SA.

“The company has the lowest production costs and has an iron ore of high quality, so they have a privileged position as the market expands,” he said by telephone from Sao Paulo.

Wednesday, May 16, 2012

AREVA and Mitsubishi co-operate on Australian uranium exploration

AREVA and Mitsubishi Corporation, through their respective subsidiaries Afmeco Mining and Exploration Pty Ltd (AFMEX) and Mitsubishi Development Pty Ltd (MDP), have decided to work together in a uranium exploration program in Australia.

Exploration will be conducted for several years across tens of thousands of square kilometers of Australia where little or no previous exploration has yet been undertaken.

Under the terms of the agreement entered into between both companies, MDP will cover 100% of AFMEX’s exploration expenditure for several years up to a predetermined amount. Once the threshold is reached and if MDP confirms its interest, MDP will have the option to acquire 49% of the greenfield* uranium exploration permits held by AFMEX in Australia and enter into a joint venture owned 51% by AFMEX and 49% by MDP. The operations of the new joint venture will be managed by AFMEX.

Olivier Wantz, AREVA Senior Executive Vice President in charge of mining activities stated: “By joining forces through this partnership, AREVA and Mitsubishi Corporation are gaining the means to develop Australia’s very substantial uranium potential. We believe that exploitable low production cost deposits will be discovered there over the long term, hence our mutual commitment to financing such a large-scale exploration effort.”

Australia produced nearly 6,200 tons (about 16.1 million pounds) of uranium in 2011. It is the world’s number three uranium producer behind Kazakhstan and Canada, and its uranium reserves are among the largest in the world. AREVA recently stepped up its exploration efforts in Australia, where it has discovered several deposits since commencing exploration activities there in the 1970s.

Thursday, March 22, 2012

Australia’s mining boom to generate $225 billion in exports by 2017

Australia’s resources and energy commodity export earnings will continue to grow over the medium term to reach a record $225 billion in 2016-17, said today the Bureau of Resources and Energy Economics (BREE).

In the Resources and Energy Quarterly—March quarter 2012 report, released today, the entity says that despite the softening in commodities prices, earnings from exports will keep rising, as Australia ships larger volumes of minerals and energy products to overseas buyers.

“The growth in resources and energy export earnings over the next five years is forecast to be underpinned by increases in export earnings for most commodities, including LNG, iron ore and thermal coal,” said Professor Grafton, BREE’s Executive Director and Chief Economist, on releasing the report.

A large proportion of increases in export earnings are expected to come from LNG, with eight projects (including the almost complete Pluto project) under construction. Export volumes are forecast to increase from 20 million tonnes in 2011–12 to over 60 million tonnes in 2016–17, while export earnings for LNG are also forecast to treble over the same period to $30 billion.

“The growth in Australia’s LNG industry over the next five years is underpinned by over $175 billion worth of investment to expand capacity in Western Australia, Queensland and the Northern Territory,” said Professor Grafton.

Between 2011–12 and 2016–17 export volumes are forecast to increase for iron ore (62 per cent), metallurgical coal (47 per cent), thermal coal (65 per cent), copper ores and concentrates (77 per cent) and alumina (29 per cent).

“The increase in Australia’s export volumes for most commodities reflects commitments by the industry to increase production and expand infrastructure capacity over the medium term,” added Professor Grafton.

Friday, March 16, 2012

Kobe Steel to invest $298 million in Southdown iron ore project in Australia

TOKYO – Kobe Steel, Ltd. announces that it reached agreement with trading firm Sojitz Corporation to take a 33% equity share in Sojitz Resources & Technology Pty Ltd, currently a 100% owned subsidiary of Sojitz Corporation.

Sojitz Resources & Technology and Grange Resources Limited are conducting a Definitive Feasibility Study for Australia’s Southdown Project. Sojitz Resources & Technology has a 30% stake in the project. By acquiring shares in Sojitz Resources & Technology, Kobe Steel will indirectly hold a 9.9% interest in Southdown.

The Southdown Project is a new iron ore project, which will produce magnetite pellet feed. This is pulverized magnetic iron ore, highly suitable for processing into pellets. The Southdown magnetite deposit is located approximately 90 kilometers northeast of the Port of Albany on the south coast of Western Australia. The project proposes to produce 10 million metric tons per year of premium magnetite pellet feed with about 69% iron content. First shipment is expected in 2015. The total cost of the project is estimated to reach approximately 250 billion yen.

In addition to acquiring shares in Sojitz Resources & Technology, Kobe Steel agreed with Sojitz Corporation to offtake 1.5 million metric tons per year of the magnetite pellet feed produced from the Southdown magnetite deposit. This will contribute to stable operation and cost reductions at the Pellet Plant at Kobe Steel’s Kakogawa Works.

In the future, high-grade iron ore will decrease and iron ore prices are forecast to remain high. By participating in this project, Kobe Steel will be able to further increase its iron ore interests. This will help Kobe Steel secure necessary resources and increase the competitiveness of its steel business.


Profile of the Southdown Project

Equity share:Grange Resources 70%, Sojitz Resources & Technology 30%
Location:Southern Western Australia (90 km northeast of the Port of Albany)
Product:Magnetite pellet feed
Production volume:10 million metric tons/year
Development plan:Production to begin in 2015
Shipping port:Port of Albany


Profile of Sojitz Resources and Technology

Name:Sojitz Resources & Technology Pty Ltd (Name to change after Kobe takes equity)
Equity share:Sojitz Corporation 100%
(After Kobe’s equity participation: Sojitz 67%, Kobe Steel 33%)
Location:Perth, Western Australia
Managing Director:Miki Akai
Business:Holds 30% equity share in the Southdown Project


Profile of Grange Resources

Name:Grange Resources Limited
Equity share:Listed on the Australian Securities Exchange
Location:Perth, Western Australia
Managing Director:Russell Clark

Friday, March 2, 2012

Resource rents will render South African mining uncompetitive – Solomon

JOHANNESBURG  – The imposition of resource rents in South Africa would render the South African mining industry uncompetitive, mining industry executive Michael Solomon said on Friday.

Solomon was commenting, at a mining law seminar hosted by law firm Bell Dewar, on the State intervention mining study (SIMS) of the ruling African National Congress (ANC), which in rejecting the nationalisation of mines, proposed that South Africa introduce a mineral rent, in which mining companies and the government would share post-profit upside on a 50:50 basis.

Defining resource rent as the surplus between the revenue and the directly productive costs, Solomon a real financial model to prove that South African was currently as competitive as any, but the moment a minerals rent was introduced, the model showed that South Africa was rendered completely uncompetitive.

He took an actual polymetallic deposit in South Africa and theoretically placed it in countries including the US, Canada, Australia, Chile and Brazil to determine the impact on the South African mining industry of a rents imposition.

“While each of the regimes have different components that go into their tax and royalty regimes, one way or another they balance out at the end of the day and the only one that is not is South Africa if you add the resource rent,” said Solomon, who has 30 years experience as a mining engineer and who is currently group executive mining for J&J Group.

“It sounds like a good idea to be able to share in mining’s upside, but it really messes up our competitiveness and we will see less and less investment coming to South Africa if it is introduced,” Solomon warned.

The former Wesizwe Platinum CEO said that the ANC’s 600-page SIMS document contained many positives in terms of constructive State participation, but the resource rents would be debilitating.

Much rent would arise from mines that had low costs and very little rent would arise from mines with high costs.

The rents would follow social licence costs, fiscal flows, which averaged 23%, and “reasonable” investor returns, which might range from 5% in Canada and 10% in Australia and to 25% in the Democratic Republic of Congo.

Lower commodity prices would squeeze rents, which would in turn result in decisions to mine higher grades and sterilise lower grade ore.

As South Africa already had a mature industry and was mining at greater depth, productive capacity would be reduced, which would lower labour absorption capacity.

While SIMS and the ANC Youth League saw State intervention as creating more jobs, it would thus actually work in reverse.

As inefficiencies in the system were increased and cut-off grades rose, mines would close sooner, curtailing jobs still further not only in mining, but also in the secondary and tertiary sectors of the economy, which in South Africa’s case were well developed.

In the exploitation of the polymetallic deposit chosen as an example, rent absorbed a third of the project’s 39% internal rate of return (IRR).

The SIMS document advocates that rent be shared 50:50 over-and-above a 22% IRR, with the difference between 22% IRR and 39% IRR split equally between government and the mining company.

In the example, the project’s net present value (NPV) of R1.1-billion net present was reduced to R675-million, knocking R435-million off the IRR, which was taken down seven points from 39% to 32%.

“The government may argue that the mining company is still doing well by getting an IRR of 32%, but we are not in isolation from the rest of the global minerals economy.

“There seems to be a perception that investors are falling over one another to get to the South African mineral sector, but they are not.

“What is happening is that investors are falling over themselves to get in to Latin America, the rest of Africa, Indonesia and Malaysia and we’ve got Australia and Canada to compete with,” Solomon said.

Moreover, the weighted average cost of capital (WACC) defined the NPV and the cost of capital defined the profitability.

The two most important factors within the WACC were the risk-free rate, which in South Africa was 7.78%, Australia 4.09%, US 1.97%, Spain 4.88%, Canada 2%, Brazil 8.5%, Chile 2.5% and Indonesia 5.75%.

The other component was the country risk premium and the long bond reflected the state of the political economy, which was high for unstable countries and low for stable ones.

Then there was also the discretionary risk premium that investors themselves put into the WACC.

South Africa’s risk premium was 6.3%, Australia’s 5.8%, US’s 5.5%, Spain’s 5.9%, Canada’s 5.9%, Brazil’s 7.7%, Chile’s 5.7% and Italy’s 4.5%.

Putting the South African project used as an example in Australia gave Australia a R550-million NPV advantage over South Africa – 40% versus 32% – making it a no-brainer to opt for Australia as a better investment destination.

He guessed that if the major mining companies opted to leave South Africa, other investors would take their place, but he questioned whether they would be of the same quality.

If they were of a lower quality, as was likely, it was likely that the frustration of near-mine communities would be exacerbated.

South African mining companies had gone through decades of mining companies getting its act together in terms of social licence and environment and it was unlikely that the new foreign companies would have the same level of empathy with the philanthropic aspects of mining.

“Unless you have a reasonable investor return, you will not have an industry,” Solomon believed.

“Mining creates money. Every time a miner mines something, it creates real money and real value,” said John Meyer of London mining analyst company Fairfax in a note on Friday.

Meyer added that the economic value of mining was substantial and created a multiplier impact on economies that went for downstream processing.

Smelting and refining captured value while manufacturing was the key to maximising value from national resources.

Tuesday, February 21, 2012

Rio Tinto invests US$518 million in autonomous trains for Pilbara iron ore rail network in Western Australia

 Rio Tinto will run the world’s first automated long-distance heavy-haul rail network, with a US$518 million investment (Rio Tinto share US$478 million) in driverless trains.
The first driverless train will be launched in 2014, with the AutoHaulTM automated train programme scheduled for completion a year later.

AutoHaulTM is being pioneered as part of the automation component of Rio Tinto’s Mine of the FutureTM initiative that also includes driverless trucks and autonomous drills. On its 1,500-kilometre rail network, Rio Tinto currently runs 41 trains from mines to ports, comprising 148 locomotives and 9,400 iron ore cars.

Automating train operations allows Rio Tinto to expand Pilbara production capacity without needing to make a substantial investment in additional trains.

It will also drive productivity improvements, with greater flexibility in train scheduling and the removal of driver changeover times creating extra capacity in the rail network. Other benefits include more efficient fuel use, resulting in lower energy costs and a reduction of carbon dioxide emissions for each tonne of iron ore produced.

Rio Tinto chief executive Australia and Iron Ore Sam Walsh said “Rio Tinto is leading the way in large-scale use of automation, with plans to deploy 150 driverless trucks and our plans for AutoHaulTM. Expanding Pilbara iron ore production is a high-return and low-risk investment for Rio Tinto that will enhance shareholder value. Automation will help us meet our expansion targets in a safe, more efficient and cost-effective way.

“Automation also helps us address the significant skills shortage facing the industry, providing a valuable opportunity to improve productivity. However, as we expand our business we will see an overall increase in job numbers and this will provide new opportunities in the rail division and elsewhere. As always, we will engage directly with those affected as we gradually make the transition to automation over the next three years.”

AutoHaulTM and the overall expansion of rail operations are subject to a number of State Government and other approvals..

About Mine of the FutureTM
Launched in 2008, Rio Tinto’s Mine of the FutureTM programme introduces next-generation technologies for mining operations that aim to reduce costs, increase efficiency and improve health, safety and environmental performance.

About Rio Tinto
Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and New York Stock Exchange listed company, and Rio Tinto Limited, which is listed on the Australian Securities Exchange.
Rio Tinto’s business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds, thermal and metallurgical coal, uranium, gold, industrial minerals (borax, titanium dioxide and salt) and iron ore. Activities span the world and are strongly represented in Australia and North America with significant businesses in Asia, Europe, Africa and South America.