Showing posts with label BHP Billitons. Show all posts
Showing posts with label BHP Billitons. Show all posts

Wednesday, November 7, 2012

Copper mine Escondida's output surges 72.4% in Q3

Output from Chile's Escondida, the world's largest copper mine, surged 72.4% in the third quarter compared with the same period of 2011, to 253 800 t, according to state copper commission, Cochilco.

The strong performance was helped by better ore grades and a low base of comparison from the year-ago quarter.

Escondida, which is 57.5% owned by global miner BHP Billiton and extracts about 7% of the world's copper, produced 787 000 t between January and September, up 31.6% from the same period of last year.

The mine's copper output plummeted 24.6% in 2011 to 819 261 t, its lowest level in nearly a decade, on sinking ore grades and a two-week strike.

Escondida Ore Access project set out to boost ore grades and a low base of comparison with the strike-hit third quarter of 2011 are seen having buoyed output in the July to September period of this year.

BHP and Rio Tinto, which owns 30% of the mine, have approved plans for a $4.5-billion expansion of Escondida to boost output.

A new 152 000 t/d concentrator plant and new mineral handling system will boost production to more than 1.3-million tons a year by June 2015.

Several mega deposits in Chile, the world's No 1 copper producer, are struggling this year, most notably world No 3 copper mine Collahuasi, amid stubbornly dwindling ore grades and operational trouble.

But the Andean country's copper output has picked up in recent months on improved ore grades and increased output at operations that started up in 2011.

Edited by: Creamer Media Reporter

Thursday, November 1, 2012

BHP affirms confident China outlook after exec's comments

A senior executive of top miner BHP Billiton said China's economy could easily grow up to 7.5% a year in the decade ahead, prompting the company to quickly say the remark did not represent a downgrade of its official view.

A BHP spokeswoman said the comments by Group Executive Alberto Calderon were not intended to suggest BHP had changed its outlook on China. The company was sticking to a forecast given two weeks ago for average growth of 7 to 8 percent over the next decade, she said.

"The main message was we're still confident in growth in China and growth around 7% is still expected," the spokeswoman, Eleanor Nichols, said.

An economic slowdown in China, BHP's biggest customer, has driven down prices for iron ore and coal, forcing miners to axe jobs, scale back operations and shelve expansion projects.

Calderon told an economics conference in Melbourne that it would not take much effort for the world's no.2 economy to achieve 6% to 7.5% growth over the next decade.

"I believe that China doesn't have to do anything different than what it has done in the past to keep growing at high growth rates -- 6%, 7%, 7.5% on average during the next 10 years," he said.

BHP's outlook is more bullish than that of top global iron ore producer Vale, which sees annual economic expansion of 6% to 7% on average for the rest of this decade.

Many economists see China's economy growing at a lower trajectory in the years ahead after it expanded at a blistering pace of over 10% a year on average during the past decade.

"China's official target of 7.5%, which is more in line with what we see, would be consistent with commodity prices holding up at reasonable levels," said AMP's chief economist Shane Oliver.

BHP has long flagged that it expects China's rate of steel demand growth to slow, forecasting annual steel demand at 1 billion tonnes in about a decade, up from 700-million tons a year now.

Iron ore prices slid to a three-year low of $87 a ton in September as demand in China fell. They have since recovered to $119, but analysts say the rebound has been driven mainly by restocking in China rather than a real pick-up in demand.

Even at $120 a ton, down from record highs of around $200, BHP makes a massive profit on iron-ore as its production costs are closer to $40 a ton.

"I still think $120 is a spectacular price. I'd like $180 but I try to be not too greedy," Calderon said.

Edited by: Reuters

Thursday, September 13, 2012

BHP silent on report of 24% cut in coking coal prices to Japan

Top global coking coal exporter BHP Billiton declined on Thursday to comment on a report that it has agreed to a 24% cut in coking coal prices to Japanese steelmakers for October to December.

The reported 24% cut matches the steep fall in spot coking coal prices, which have slumped to around $165 a tonne for the key steel-making fuel, amid an unexpected slowdown in demand from China and weaker steel output around the region.

Japan's Nikkei reported on Wednesday that Japanese steelmakers and BHP had agreed to set prices at $170 a ton for the December quarter, which the newspaper said was the lowest level since the quarterly pricing system was adopted two years ago.

BHP said it never comments on what it called price speculation.

Source: Reuters

Thursday, August 30, 2012

Iron-ore hits lowest in nearly 3 years; miners' shares tumble

Iron-ore prices fell to their lowest levels since 2009 on Thursday, dragging down shares in miners including top producers of the steelmaking ingredient, Rio Tinto and BHP Billiton , as a slowdown in top consumer China threatened to further sap demand.

Benchmark iron ore with 62% iron content slid nearly 2% to $88.70/t on Thursday, the lowest since October 2009, according to data provider Steel Index. Iron ore pricing moved from decades old once-a-year benchmark system to daily assessments in 2010, although recorded spot prices fell as low as $59 in early 2009.

The iron ore price has dropped by a third, or almost $50/t, since July, as Chinese steel producers shun cargoes and the appetite of the world's largest consumer cools.

Prices could fall up to 30% more, with no sign consumption will rebound anytime soon, analysts and traders said.

"It's possible for prices to fall to as low as $65 to $70 in the spot market, before a recovery back to the $80 to $90 range," said Fairfax I.S. analyst John Meyer, adding that the price slide could continue for the next one to two months.

"It's a little early to look for significant restocking in China. I think they're still shaking the tree."

Iron ore is a leading economic indicator as it highlights demand in key industrial sectors such as construction and carmaking.

Many traders are currently trying to liquidate their iron ore cargoes with little success, a further sign that a rebound is not on the cards in the short term.

"Not only is a recovery in the near term unlikely, there is also no sign that the fall will stop," a UK-based iron ore trader said.

"Looking at the cost curve these prices make no sense but there are no signs at all of an improvement in demand. The further traders wait the more they lose and waiting for a recovery is a big risk to take."

A second trader said he was getting "no interest whatsoever" for an iron ore cargo he was offering.

A movement of the iron ore swaps forward curve on Thursday also indicated the market has lost faith in a price recovery in the near term.

Swaps tied to iron ore deliveries for the firt quarter next year traded above swaps for the last quarter this year, showing players think a rebound is unlikely until 2013.

CHINA SLOWDOWN PUTS ON BRAKES

Iron ore has been the biggest revenue earner for top miners Vale, Rio Tinto and BHP Billiton and producers have for years banked on China's industrialisation efforts to sustain its appetite for the material.

But the slowdown in the Chinese economy put the brakes on a rally that lifted spot rates to near $200 last year, more than triple the level since 2008.

Prices have been falling rapidly since early July.

Shares of Rio Tinto in Australia fell 3.8% to close at A$48.63, their lowest since July 2009, while rival BHP lost 2.4%, the steepest single-day drop in a month. In London, BHP shares were down 2.9% in afternoon business, while Rio was trading close to 2012 lows, down 2%.

Mid-tier miners were under even more pressure as the margin between costs and prices narrows. Shares in Ukrainian producer Ferrexpo fell as much as 10%, as analysts quoted fears of a fall in the premiums for pellets and high freight costs.

Analysts at Liberum said Australian producer Fortescue Metals Group , with cash costs around $50 per tonne, in reality had much higher costs once royalties, corporate overheads and freight are included. All in, costs would be $79/t, not far from realised prices, the analysts said.

Shares in emerging west African producers African Minerals and London Mining were also hit by the margin fears, down 4.8% and 5.4% respectively, underperforming a 2.4% drop in the sector .

"The speed in the fall of the iron ore price is alarming. I don't think many people expected it to be sub $100 and to see it go below $90 is eye-opening to say the least," analyst Asa Bridle at Seymour Pierce said.

"For a long time there was uncertainty over whether a lot of the planned production would come on, and perhaps that is still the case, but for those that have made it to production, the timing is cruel to say the least."

STRUGGLING

The iron-ore market will remain under pressure until the steel sector recovers and this will not be a quick process, analysts said.

"With sluggish manufacturing activity in Europe and a construction market that's struggling to pick up in China, demand for steel has dropped sharply with no quick fix in sight," said Metal Bulletin research steel analyst Kashaan Kamal.

Chinese steelmakers said the sector, nourished by a decade of breakneck growth, needs to brace itself for weak demand and razor-thin margins over the next three to five years that will force inefficient mills to shut.

The most active rebar contract for January delivery on the Shanghai Futures Exchange slipped 0.2% to close at 3,437 yuan a ton, stretching its losing streak to a 14th day running.

Rebar, or reinforcing steel bar which is used in construction, hit a record low of 3,327 yuan on Wednesday. Down almost 9% so far in August, it is on track to extend its monthly loss to a fifth straight month.

Fading steel demand in China will see producers incurring bigger losses this month following a loss of 1.9-billion yuan ($299 million) in July.

Baoshan Iron and Steel Co, China's biggest listed steelmaker, said global demand for iron ore could drop in the second half of 2012 compared with the first six months, while 50-million tons of additional supply will come on stream, weighing further on prices .

Iron ore lost almost a quarter of its value this month as most Chinese buyers opted to keep their iron ore inventories low and bought smaller lots from port stockpiles instead of ordering fresh cargoes.

"We're lucky we don't have so much cargo. Many traders are struggling to unload their material into the market," said an iron ore trader in Shanghai.

Price offers for cargoes from Australia, Brazil and India fell by another $2/t to $4/t on Thursday, traders said.

Source: Reuters

Wednesday, August 22, 2012

BHP profit falls 35% on weak commodity markets, cost pressures

Mining giant BHP Billiton on Wednesday reported a 15% decline in underlying earnings before interest and tax for the financial year ended June, as well as a 21% decline in attributable profit.

Underlying earnings for the 12 months reached $27.2-billion, compared with the $31.9-billion, while profit from operations reached $23.7-billion, compared with the $31.8-billion in the previous financial year. Exceptional items totalling $1.7-billion contributed to a 35% decline in attributable profit to $15.4-billion.

The miner said the decline in profits was attributable to weakness in the commodity markets, as well as industry-wide cost pressures.

“The group has been quick to respond to the change in the operating environment and has acted decisively by closing energy intensive silicomanganese alloy production capacity in South Africa and by temporarily closing capacity at Temco, in Australia.”

In addition, BHP noted that metallurgical coal production at Norwich Park, also in Australia, was suspended following a review of the mine’s profitability. The viability of other high-cost operations was also being assessed and additional measures were being implemented that would substantially reduce operating costs and non-essential expenditure across the business.

Meanwhile, the attributable profit for the 12 months to June was also impacted by a number of exceptional items, including a $1.8-billion impairment from the Fayetteville dry gas assets, a $355-million impairment from the Nickel West operations, in Australia, and a $342-million charge for the suspension of early closure of operations and the change in status of specific projects, including the Olympic Dam project.

Other exceptional items included the settlement of insurance claims at Queensland Coal, while a $637-million non-cash income tax credit was recognised following the passing of Australia’s mineral resource rent tax and petroleum resource rent tax in March this year.

During the financial year, BHP reported annual record production records at ten of its operations, with revenue for the group increasing by 0.7% to $72.2-billion during the 12 months to June.

Looking ahead, the miner noted the while concerns around the stability of the Eurozone and the decline in economic activity that accompanied the slow-down of Chinese growth had led to significant market volatility in the 2012 financial year, the company remained positive on the long-term view.

“Our positive longer-term view is unchanged as urbanization and industrialisation across the developing world is expected to remain the primary driver of global economic growth. While the rate of expansion within China has adjusted to a more sustainable level as its economy has matured, economic growth in this decade is expected to rise substantially in absolute terms, given the higher starting base,” the miner said.

As far as commodity prices were concerned, the mining major said that it expected volatility to persist as temporary weakness in the manufacturing and construction sectors were expected to weigh on market sentiment.

However, in the medium term, the miner expected supportive economic policy and a broad growth bias, particularly in China, to lead to measured improvements in the external environment, beginning in the first half of the 2013 financial year.

“For specific commodities, the industry will find it difficult to develop new supply quickly enough to satisfy the expected increase in demand. This is particularly the case for industries where barriers to entry are high or where the global resource endowment is in decline.

“We believe that our strategy of being a low-cost, upstream, diversified natural resource company will provide more opportunities to create long-term shareholder value as commodity demand patterns evolve with economic development.”

Edited by: Creamer Media Reporter

Tuesday, June 26, 2012

Rio Tinto exec sees moderation in iron-ore prices

Rio Tinto expects a moderation in iron-ore prices going forward as additional supply comes on stream, and sees no going back to annual pricing, a senior company executive said on Tuesday.

"The demand outlook is strong but supply is responding as well," Alan Davies, president of international operations for Rio Tinto told Reuters in an interview on the sidelines of a Metal Bulletin iron ore conference.

"Iron-ore prices are high from historic standards now but as supply comes on we would expect a moderation in the price in the medium term."

In response to recent comments by the CEO of steelmaker Posco and by that of competing iron-ore miner Vale about a possible return to annual iron-ore pricing, Davies said he did not see that happening.

"I don't see a turnaround," he said. "I'd personally be surprised if it went back to a longer term pricing regime because our customers wanted a shorter term prices regime and that's exactly what we have got."

The big three iron-ore miners: Vale, Rio Tinto and BHP Billiton started to price iron ore on a quarterly, monthly and spot market system after the 2008/9 financial crisis, when many steelmakers, especially in China, defaulted on annual contracts to take advantage of falling spot market prices.

Rio Tinto is currently selling iron ore to Korean, Japanese and Taiwanese buyers on a quarterly-lagged mechanism.

Its sales to China, which represent about 60% of the company's sale, are made on a mix of spot, monthly and quarterly prices.

Rio, the world's second-largest miner of iron ore after Brazil's Vale is continuing to invest heavily in iron ore, which it sees as one of the most profitable commodity in its portfolio as prices remain historically high although lower than a peak of almost $200 per ton hit in 2011.

Rio said last week it will spend $3.7-billion to increase iron-ore output in Australia by a further 25% to 353-million tons a year tonnes by 2015.

"Iron ore is a great commodity we are heavily investing in it, the margins are good and we expect margins to be good because we only invest in lowest cost projects," Davies said.

He added iron ore production cost at its main projects, in the Pilbara, Australia, and in Simandou, Guinea, would be cheap compared with other projects.

"We expect there will be 700-million tons of supply opportunity for producers to actually meet demand over the next seven to eight years and we expect to bring on about 25% to 28% of that."

Edited by: Reuters

Wednesday, June 13, 2012

BHP's huge Olympic Dam copper/uranium/gold project expansion decision closer?

Yet another purchase of exploration licenses close to its big Olympic Dam copper/gold/uranium mine suggests that BHP is increasingly confident of its huge expansion plans for the operation

News that BHP Billiton has bought more exploration licenses in the vicinity of its big Olympic Dam copper/gold/uranium mine from junior explorer, Tasman Resources, is perhaps yet another indicator that the company's enormous expansion plans for the operation in South Australia are that much closer to a go ahead. A decision whether to do so or not - in full or in part - is expected by the end of this year

Tasman released a statement yesterday saying that it has agreed to sell five exploration licenses and one license application to BHP for A$3 million. (The Australian dollar is just about on a par currently with its U.S. counterpart.) This joins other recent BHP acquisitions around Olympic Dam from juniors Minotaur Exploration and Archer Exploration, both announced in April this year. Altogether BHP has paid around A$21 million for these groups of exploration licenses in the area.

Tasman notes in its release regarding the exploration tenements sold to BHP that although they contain several targets, they are believed to be deep, relatively high risk and as such, more suited to companies with far larger exploration budgets. Tasman also concluded that the $3 million from the sale of the tenements fairly represents their current value. Significantly, they do not include the company's Vulcan IOCGU (iron ore, copper gold uranium) discovery located approximately 30km north of Olympic Dam, which is the subject of a Farm-in/Joint Venture Agreement with another mining major, Rio Tinto's, exploration arm.

BHP's Olympic Dam deposit has to rank, perhaps with Freeport's Grasberg, as the world's most significant mineral deposit and the company's existing operation there as one of the world's super-mines. Indeed the potential as expressed by BHP is absolutely enormous and BHP has already put forward its huge development plan to add an open pit mine and substantially expand the underground operations which would make the combined operation the world's biggest mine of any type. However the costs of undertaking this development are enormous - some estimates put it at some A$30 billion including associated infrastructure - a sum even the world's biggest mining company views with a certain amount of caution, particularly in the light of current global economic uncertainties..

Overall estimates, as noted by South Australia's government department responsible for resources and energy, suggest that Olympic Dam's existing resource comprises over 9 billion tonnes of ore grading 0.86% copper, 0.27 kg/tonne uranium oxide, 0.32 g/tonne gold and 1.48 g/tonne silver. (Within this resource there are 163 million tonnes of ore grading 1.10 g/tonne gold.) This makes it the world's largest known uranium resource, the fourth largest resource of both copper and possibly of gold too, and a major silver resource - yet currently the operation primarily concentrates on copper and gold with uranium production less important in its earnings.

BHP says that the proposed Olympic Dam Expansion is centred on the creation of a new open-pit mine that would operate simultaneously with the existing underground mine. The proposed expansion would be built progressively in around five stages and lift ore production. The existing smelter at Olympic Dam would be expanded and new concentrator and hydrometallurgical plants would be built to process the additional ore and generate additional concentrate. The project schedule will ultimately depend on the timing and nature of government approvals and the final investment decision of the BHP Billiton Board. For a detailed presentation on the Olympic Dam expansion plans click here.

Overall the expansion programme envisaged would ultimately raise ore production around six fold. Current annual copper production has averaged about 180,000 tonnes, with 4,000 tonnes of uranium oxide, 80,000 ounces of gold and 800,000 ounces of silver.

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

Latin American mining investment boom continues unabated

Over the past decade, mining investment in Latin America has more than doubled, even after experiencing a sharp drop in 2009. According to a report by the Metals Economic Group, Latin America is now the primary destination for mining exploration investment in the world, with 25% of total investment going to Chile, Peru, Brazil, Colombia, Mexico and Argentina.

In 2003, hardly 10% of global mining investment was headed towards Latin America, but today big announcements abound.

London-based Hochschild Mining, which operates throughout Latin America, recently said it will invest another LIMA$425 million in two silver projects near its Arcata and Pallanca mines in southern Peru over the next two years.

Unveiled earlier this week at the International Gold Symposium in Lima by Hochschild’s executive chairman, Eduardo Hochschild, this is the latest mining investment announced for Peru, and for Latin American mining in general, which continues to experience an investment boom.

Other recent announcements have included a combined $1.3 billion investment into Colombia’s coal mining industry by the Drummond Company Inc., Cerrejon Mineria Responsable and Glencore International’s Prodeco Coal; as well as South African miner Gold Fields’ increased investment for its Peruvian Chucapaca project to $1.2 billion, from an earlier US$750 million.

Over the next five to 10 years, more than $425 billion in investments have already been announced, again, with a focus on Chile, Peru and Colombia, from such companies as BHP Billiton, Xstrata and Rio Tinto, among others.

Wednesday, May 2, 2012

BHP moves to ease worries over mega project spend

LONDON - Miner BHP Billiton moved to reassure investors fretting over its spending on "mega projects", promising discipline and potential noncore asset sales in one of the sector's clearest efforts to address market worries over the cost of growth.

BHP, the world's largest miner, has said it will "live within its means", but went further on Wednesday to soothe concerns, as investors across the sector fret over the prospects of flattening demand for some commodities while the sector's organic growth pipeline totals some $180-billion.

Alberto Calderon, BHP's chief executive of aluminium, nickel and corporate development, said in a presentation the company had "substantial flexibility" to sequence investments - stagger their progress - and would match spending to cash flows.

Laying out BHP's plan, he said projects would be "be approved in a sequence that maximises value, reduces risk and balances short- and long-term returns".

Calderon said BHP was committed to a progressive dividend, but gave little hope to investors expecting more discipline on major projects could mean a fresh share buyback.

LARGE-SCALE FOCUS

Calderon did, however, signal the miner could sell off more non-core operations, a stance mirrored across the sector as the major players focus on simple, large-scale operations.

"Businesses must earn their right to remain in the portfolio," Calderon said in the presentation.

BHP has said it could sell its Canadian diamond mine, EKATI, and is selling its stake in Richards Bay Minerals, a South African titanium minerals producer, to Rio Tinto.

BHP's four major organic growth projects - the Olympic Dam expansion and the Outer Harbour iron ore project in Australia, US shale gas growth and the Jansen potash project in Canada - will require more than $120-billion of capex over the next 15 years but only increase returns from 2023, according to Deutsche Bank estimates.

Three of these - Olympic Dam, Outer Harbour and Jansen -- are expected to be taken to the board for approval in 2012.

Analysts at Liberum in London said the presentation marked the "first clear attempt by a major mining house to address investor concerns over capital allocation".

"We feel one of the major reasons for the sector underperformance thus far in 2011 has been fears over capital discipline, as free cash flow yields across the sector remain sub-5% at a time of extremely healthy margins in copper, coal and iron-ore," Liberum said.

"BHP's tacit admission that it is listening to shareholders should prove very positive for the shares and the broader sector."

Wednesday, April 18, 2012

Rio Tinto, Harry Winston on track for 24% boost to Diavik diamond production

Harry Winston outlined stronger quarterly diamond production at the Diavik mine in the Northwest Territories as Rio Tinto continues to review ownership options

HALIFAX, NS - Harry Winston Diamond (TSX: HW, NYSE: HWD) and its mining partner Rio Tinto look to be on track to churn out 8.3 million carats in 2012 at their co-owned Diavik diamond mine - or about 24 percent more than in 2011 - according to the latest Diavik production figures.
In the first quarter 2012, Harry Winston, which owns 40 percent of the Diavik mine, said the mine's production grew 19 percent over the same quarter a year ago to 1.6 million carats, owing largely to a boost in recovered carats from reprocessed ore. The reprocessed ore accounted for 0.08 million carats of the quarterly diamond output.

The higher quarterly production put the diamond partners on pace with Diavik guidance for 2012: 8.3 million carats as compared to 6.7 million carats in 2011.
During the quarter diamond grades improved to 3 carats per tonne from 2.8 carats a tonne a year ago and edged the partners closer to grades as defined in proven and probable reserves. At last count Rio Tinto and Harry Winston said Diavik held 19 million tonnes @ 3.1 carat per tonne for 59 million carats in proven and probable reserves.

Meanwhile, based on the latest production figures published by Harry Winston on Tuesday morning, Diavik diamond prices held more or less steady.
Still up in the air is the question of what will become of Rio Tinto's majority interest in the Diavik operation. Rio Tinto, which owns 60 percent of the Diavik mine, said earlier this year it was considering what to do with its diamond assets, which includes diamond mines in Australia and Zimbabwe.

These, it has been reported by the Sunday Times and in these pages, might be combined with BHP Billiton's diamond assets - also under review - to form one of the world's largest diamond producers.

Monday, April 16, 2012

KKR plans to create diamond giant

LONDON - Private equity firm Kohlberg Kravis Roberts & Co. wants to buy the diamond mining operations of BHP Billiton Ltd. 1.89% and Rio Tinto PLC -2.26% and merge them to create a challenger to the two diamond industry leaders De Beers and Alrosa, reports The Sunday Times.

KKR is said to be leading the bidding for BHP's Ekati diamond mine in Canada for around $750 million, the paper says without citing sources.

The private equity firm plans to combine Ekati with Rio Tinto's $2 billion diamond mining business which is also up for sale, the paper says. The combined businesses would control around 15% of world diamond supply, it says.

With 4 mega-projects sucking up $120 billion, BHP vows to ‘live within its means’

Reuters reports BHP has recently informed shareholders it will be “living within its means,” after shareholders raised concerns regarding its four largest projects – Olympic Dam, the Outer Harbour iron ore infrastructure project in Australia, expansion of its US shale gas operations and Jansen potash in Saskatchewan, Canada:

The four “mega projects” will require more than $120 billion of capex over the next 15 years but only increase returns from 2023, according to Deutsche Bank estimates.

“You have got to be certain that the quality of the assets you have are really good and that they are going to earn good long-term returns over 20, 30 years. You have to have the capability and the confidence to keep investing through all cycles, all the way through,” said James Laing, deputy head of UK and European Equities at Aberdeen Asset Managers, a top 10 investor in Rio and BHP.

Some institutions have already reduced their exposure to BHP, the world’s number one miner with a stock market valuation of roughly $175 billion. At the end of March, BlackRock’s World Mining Fund, reduced its position in BHP to around 6.5% from double digits before.

While the price tag for the Outer Harbour expansion to add 100 million tonnes per annum of capacity at the terminal is above $40 billion, of the four projects Olympic Dam is by far the most ambitious.

BHP has already received approval for a mammoth $30 billion expansion of the existing uranium, copper, silver and gold mine in South Australia.

The planned open pit mine adjacent to the current Olympic Dam underground operation would be the world’s biggest.

An idea of the olympian effort required to construct the mine and the size of the undertaking is clear from the fact that trucks will haul overburden 24/7 for five to six years just to reach the ore body.

The combined operations would mine 72 Mt ore per year and would produce 750,000 tonnes refined copper, 19,000 tonnes uranium oxide, 800,000 gold ounces and 2.9 Moz of silver per year.

While Olympic Dam, located in its own backyard, suits BHP’s expertise, analysts have long voiced concerns about the miner’s US energy industry operations after last year’s $12 billion Petrohawk deal – its most ambitious foray into the controversial business of shale gas extraction to date.

They cite the company’s poor track record with acquisitions (the ultimately unsuccessful $40 billion bid for Canada’s PotashCorp and the botched attempt to tie-up with Rio Tinto on iron ore), its relatively limited experience in the fracking business and environmental concerns. BHP is also involved in deepwater conventional oil in the Gulf of Mexico.

The last of the four mega-projects, the greenfield Jansen project, was BHP’s response to the federal government of Canada’s blocking of the Potashcorp deal.

The company has already spent $1.2 billion to bring the project to the feasibility stage and has undertaken some construction.

It will be presented to the board later this year, but given strong fundamentals in potash, should sail through the approval process. Production could start as early as 2015. The life of the mine is predicted to be a staggering 70 years.

Thursday, March 22, 2012

BHP keeps investing in iron-ore despite Chinese slowdown

PERTH – Mining giant BHP Billiton said on Tuesday that it had no intention of scaling back its iron-ore expansion plans, despite a slow-down in China’s growth rates.

BHP president for iron-ore, Ian Ashby, told reporters on the sidelines of the Global Iron and Steel Conference, in Perth, that there was a significant gap in the Chinese capital stock, compared to other economies, such as the US.

“The best statistic I have is that of the US economy, which has a capital stock of 20 t of steel per population. China is currently at 3 t. This is the amount of steel needed to support individuals,” Ashby said.

Ashby predicted that China’s steel capacity was likely to increase from the current 700-million tons to between 1-billion and 1.1-billion tons by 2025, to support the changing demand of its economy.

“China is moving to a more mature economy focused on consumers, and for us, that relates to the steel being used more in equipment and machinery that supports that transition,” Ashby said.

BHP predicted that some 170-million people in China were expected to urbanise in the next decade.

“Urbanisation drives construction build, people are more productive and generate higher gross domestic product, and are slowly moving up the income and quality of the living curve, meaning higher consumer spending.”

However, Ashby noted that looking beyond 2025, Chinese steel demand would likely soften, with the steel industry intensity per capital reaching its expected peak while steel scrap availability would increase.

“This will impact and soften global demand,” Ashby told delegates at the conference.

During the last decade, BHP has invested some $10-billion in expanding its Western Australian and Brazilian iron-ore assets, with a further $10-billion in planned committed capital to grow its capacity to 220-million tons in the Pilbara, and to 30-million tons of pellet capacity in Brazil.

Ashby said that Australia and Brazil would continue to dominate the seaborne iron-ore export sector for the foreseeable future, as these countries offered established port and rail infrastructure, large resource bases and political stability.

“We don’t expect a new supply basin like the Pilbara to emerge in the short term,” Ashby said.

He added that new projects, in less established districts like West Africa, were often faced with a lack of infrastructure and political instability, making the development of these projects more difficult.

Edited by: Mariaan Webb

Billions hacked off mining majors after BHP’s China comments

Mining’s top companies were all marked down significantly on Tuesday after BHP Billiton said that China’s steel growth rates “will flatten, and they have flattened.”

“The big infrastructure build clearly will come to some end,” Ian Ashby, the Australia-based company’s chief of iron ore, told reporters today in Perth according to Bloomberg.

China’s ferocious demand for iron ore has been a central feature of the global mining industry over the past decade and the driving force behind the spectacular profit growth at mining’s big three.

BHP, Vale and Rio Tinto control nearly 70% of the 1 billion tonne annual iron ore seaborne trade and even though the price of iron ore has come down by more than a fifth from record highs of $180/tonne touched in September last year, it’s still a very profitable commodity.

Benchmark iron ore import prices at China’s Tianjin port was last quoted at $144/tonne by Steel Index, a level it has spent most of 2012 at, recovering from a $116/tonne low set in November.

Ashby did temper his comments by saying that he thought prices will hold up over the medium term and that only in 2025 will it “soften markedly.”

Word from the world’s number one miner, nevertheless gave an excuse to investors to take chunks out of the majors and by midday in New York, BHP Billiton’s ADRs were down 3.7%.

Valuations of Rio Tinto and Brazil’s Vale, both of which are more exposed to iron ore than BHP, were also slashed with Rio losing 3.7% and Vale shedding an even 3%. Combined, the globe’s biggest listed mining companies are worth some $330 billion.

$52 billion Anglo-American was hammered down 4% by lunchtime in New York, while Swiss-based met coal giant Xstrata curbed losses to 2.3% on the LSE.

Canada’s Teck Resources gave up 3% in Toronto, Fortescue’s ADRs bled 2.7% and further down the scale losses were even more pronounced with $23 billion Kumba Iron Ore’s ADRs giving up 3.9% and US number one coal producer Peabody losing 5.7%.

China dominates the global trade in just about every commodity including iron ore (representing almost half of world trade), copper (38%), coal (47%), nickel (36%), lead (44%) and zinc (41%).

Earlier this month China forecast that it will grow by 7.5% this year. China recorded GDP growth of 9.2% in 2011 and annual growth has averaged 10.4% since 2001, peaking in 2007 at 13%. The last time expected growth was pegged at below 8% was 2004.

Sunday, March 4, 2012

Rio Tinto sees tight coking coal, copper markets in 2012

The miner expects the markets for coking coal and copper to be tight thus year but remains bearish on aluminium, with smelters facing a margin squeeze as costs rise and aluminium prices remain weak.

MELBOURNE (Reuters) - Rio Tinto, the world's third-largest miner, said it sees coking coal and copper markets remaining tight, while margins were being squeezed in aluminium.

"Demand for commodities in 2012 will be supported by a through-the-year improvement in global growth, although we cannot rule out periods of volatility similar to those in 2011," Rio Tinto's chief economist, Vivek Tulpule, said in slides prepared for a presentation in Sydney.

He maintained Rio Tinto's outlook that economic growth in China would remain above 8 percent in 2012.

As a result, the market for coal used in steel making "remains tightly balanced", the slides said, with countries outside China helping to pump up demand in 2012 and 2013.

The "copper market remains tight despite supply growth", the slide presentation said, with the company anticipating rising costs and supply disruptions to continue, following strikes last year.

Rio Tinto, which is looking to sell most of its Australia and New Zealand aluminium business, remains bearish on the aluminium market, with smelters facing a margin squeeze as costs rise and aluminium prices remain weak.

"But the global bauxite market is growing rapidly" with Chinese imports of bauxite from Indonesia taking off.

Rio Tinto earlier this week reiterated it expects the global iron ore market to remain in deficit even after massive expansions by top iron ore miner Vale, Rio Tinto and BHP Billiton, as smaller miners' projects were running into delays.

Iron ore prices seen as falling in the short term

Moody's sees record results from iron ore miners in 2011 unlikely to be maintained as prices expected to weaken - except perhaps for the big three: Vale, Rio Tinto and BHP.

JOHANNESBURG - The dust has hardly settled on the celebrations of record iron ore results for 2011 and analysts are expecting prices to weaken.

With capacity increases expected to bring more than 450Mtpa, or 260Mtpa on a 62% Fe equivalent basis, on line in the next two years, iron ore prices are in for some pressure says leading research firm Moody's Investors Service.

In a South African context, Kumba Iron Ore has just brought its Kolomela mine on line five months ahead of schedule. The mine is expected to produce 9mtpa from 2013 to add to the existing production of 40mtpa from the Sishen and Thabazimbi mines.

Kumba's headline earnings for the year ended 31 December 2011 were a record R17.0 billion (US$2.3 billion), 19% more than the R14.3 billion achieved in 2010. This was achieved mainly as a result of a weighted average increase of 26% in export iron ore prices and a 3% increase in sales volumes.

African Rainbow Minerals (ARM) is also ahead of schedule with its ramp up its Khumani iron ore expansion project from 10mtpa to 16mtpa. The iron ore division reported a 79% increase in headline earnings to R3.1bn for the six months ended 31 December 2011.

Logistics plays an important role with industry players and Transnet having embarked on a joint feasibility study to expand the current Saldanha export channel to beyond 60mtpa. The study is expected to be completed by March 2012 said ARM.

But the additional capacity is not the only threat to iron ore prices over the medium term. Moody's added that the uncertainty around a Chinese slowdown in growth coupled with a weakening outlook for steel and a simultaneous growth in Chinese scrap steel supply could push prices below the US$120/t barrier.

China's consumption of total iron ore production has grown from around 44% in 2006 to 54% in 2011 on the back of continued industrialisation and urbanisation accompanied by a tightening of supply and resultant strong price increases said Moody's. The prices have undoubtedly cooled in the last six months but could trend lower if the analysts' forecasts come to fruition.

The exception to the rule are expected to be the big three (Vale, BHP Billiton and Rio Tinto) said Moody's.

"We would expect the iron ore divisions of the major producers to remain highly profitable over the medium term given the scale, efficiency and low cash costs of production"

The casualties are expected to be the higher cost producers whose margins could be squeezed.

All is not negative though with the analysts remaining confident in the long term fundamentals supported by ongoing growth, urbanisation and the continued curbing of exports by India.

Other positive factors mentioned are renewed growth and mining projects being notoriously slower on ramp up than guidance given, especially given the logistical and political challenges facing some of the more remote prospects

Source: Mineweb

BHP to suspend TEMCO ops

BHP Billiton has announced its intention to temporarily suspend production at TEMCO, its manganese alloy production facility located in George Town, Tasmania, by early to mid March 2012.

BHP Billiton manganese president, Tom Schutte, said: “TEMCO is a processing business that competes globally with similar facilities in other parts of the world. Recently, there has been further erosion of its international competitiveness due to the strong Australian dollar and steady increases in input costs, including in reductants and electricity.

"At the same time, manganese alloy markets in Europe and North America have been weak and global prices remain low.

“While measures have been taken to make the operation as cost effective as possible, these have not been sufficient to counter shifts in the market, increased costs of production, or operating losses,” he said.

BHP Billiton manganese Australia president, Bryan Quinn, said the company will review the long term future of the operation over a three month period, which will include extensive stakeholder consultation and review of all options.

TEMCO is part of the manganese joint venture between BHP Billiton (60%) and Anglo American (40%) and produces approximately 65kt of SiMn and 240kt of High Carbon Ferro Manganese.

BHP Billiton is the manager and operator of the facility.

Saturday, March 3, 2012

BHP Billiton to move trading to Singapore-sources

BHP Billiton, one of the world's biggest mining houses, is moving its marketing and trading hub from The Hague to Singapore, industry sources said.

"We currently have a consultation process underway about the closure of the Hague Office," a BHP Billiton spokesman said, but declined to comment further.

"All the traders and staff in The Hague will be moved to Singapore but quite a few people don't want to or can't relocate," one industry source said.

The mining major is the latest commodity firm to relocate the centre of its trading or sales to Singapore because of its proximity to growing Asian markets and tax advantages, industry sources said.

BHPB has offices already in Basel, Antwerp and large marketing and trading teams in Singapore handling energy coal, coking coal, iron ore and non-ferrous metals.

Several years ago the company moved some of their operations including freight to Basel in Switzerland.

Edited by: Reuters