Today - Thursday, December 5, 2013
6:17 PMAlexco Resources +2.4% AH on Keno Hill economic assessment
- Alexco Resources (AXU) +2.4% AH after releasing a preliminary economic assessment for expanded silver production from the eastern part of its Keno Hill Silver District in Yukon.
- AXU projects average annual delivery of 3.1M oz. of payable silver, 6.8M lbs. of lead, 6.6M lbs. of zinc and 1,050 oz. of gold from ~150K metric tons/year of consolidated mine and mill production.
- AXU's forecast 38% internal rate of return includes its silver purchase agreement with Silver Wheaton (SLW); initial capital requirements are ~$25M.
3:35 PMBarrick's Thornton opens the door to hedging
- Barrick Gold (ABX -1.6%) has signaled a potentially titanic shift in the gold mining industry: a second look at hedging.
- John Thornton, set to become sole chairman of ABX, says “I don’t know why you wouldn’t look at it, if for nothing else as a kind of analytical intellectual exercise... I don’t understand people in the industry who would say you should never do that."
- Analysts say the large gold producers aren’t going to start hedging big chunks of their output, since no one wants to be seen selling at the bottom, and many investors still want their mining investments to track the price of the metal - but when the top man at the top gold producer says hedging isn’t a dirty word, that alone may open the door.
- Gold ETFs: GLD, IAU, PHYS, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, DGZ, AGOL, GLDI, DGLD, TBAR, UBG.
- Gold miner ETFs: GDX, GDXJ, NUGT, DUST, GLDX, GGGG, RING, PSAU, JNUG, JDST.
12:52 PMVale considers selling stakes in coal, fertilizer businesses
- Vale (VALE +1.7%) says it might sell stakes in its global fertilizer and coal businesses to strategic partners to lighten project costs but isn't targeting the segments for divestments as it still considers them part of its long-term core.
- The two segments account for a small portion of Vale's revenue - a combined 7.9% in Q3 - and have weighed on cash flow.
- Vale says it is considering selling a 15%-25% stake in its coal division, although it plans to invest ~$2.8B in the business next year.
- Vale's efforts to become a major player in fertilizers took a hit this year when it suspended a $6B potash project in Argentina; it has just $52M set aside for investing in new fertilizer projects next year.
10:49 AMGeneral Moly offers upbeat outlook for Mt. Hope project
- General Moly (GMO +7.9%) forecasts operating costs for its Mt. Hope projec; GMO expects direct operating costs over the first full five years of operation to average $6.28/lb. and costs applicable to sales to average $7/lb., including anticipated royalty payments calculated at $15/lb. of molybdenum, which the company regards as a sustainable long-term price.
- Economics for GMO's 80% ownership in Mt. Hope anticipates an after-tax net present value, discounted at 8%, of $707M and an internal rate of return of 17.6%.
Wednesday, December 4, 2013
6:56 PMInvestors continue to pour assets into depreciating gold miner ETFs
- Go figure: The Market Vectors Gold Miners ETF (GDX) has now slid ~55% YTD to a five-year low, yet the fund has nearly doubled in size to $6.8B, as investors have added ~$2.5B despite the dismal performance.
- With stocks at record highs, miners may look relatively cheap vs. other sectors, and funds like GDX and GDXJ appeal to many institutional investors who turn to miner equities as their favorite proxy for gold; indeed, the SPDR Gold Trust has lost $23B-plus YTD in assets under management.
- But demand for gold miner funds isn’t always tied to value investors or long-term buy-and-hold types: Direxion Daily Gold Miners Bull 3X Shares (NUGT) has attracted net asset inflows of more than $1.3B despite a difficult year for returns, while the bearish counterpart fund (DUST) has seen YTD net outflows despite gains of ~200%.
- Also: GLDX, GGGG, RING, PSAU, JNUG, JDST.
6:39 PMBarrick's Thornton has no plans to sell Pascua Lama, African Barrick
- Barrick Gold (ABX) confirms Peter Munk will step down from its board at the 2014 annual meeting, expected around April, and co-chairman John Thornton will become sole chairman at that time.
- Thornton tells WSJ that ABX will focus on establishing long-term relationships with Chinese partners but has no current plans to sell its Pascua Lama project or its majority stake in African Barrick Gold (ABGLF, ABGLY), two sources of trouble for the miner in recent years.
- Thornton also says ABX would consider increasing its exposure to copper and silver over time, depending on the price of those metals, dampening rumors that the company wants to sell out of its copper projects.
5:11 PMNewmont Mining selling Nevada site for $83M| Comment!
3:59 PMAg sector strong as RBC starts Mosaic, Agrium at Outperform
- Fertilizer equities are higher following new coverage from RBC Capital, which prefers Mosaic (MOS +3.2%) and Agrium (AGU +2.4%) in the sector.
- MOS and AGU are rated Outperform thanks to to a recent trend toward "improving demand in the potash and phosphate markets" and an expectation for "substantial" returns to holders over the next few years; MOS' solid position in the phosphate market could better position it if others are interested in its potash assets.
- Potash (POT +1.3%), CF Industries (CF +10.7%) and Intrepid Potash (IPI +2.4%) are each started with Hold ratings.
- Also impacting the ag names is news that CF is working with investment banks about creating an MLP.
- ETFs: MOO, CROP, PAGG, VEGI.
3:52 PMPotash sees possible early 2014 bounce in its market
- A bounce in potash markets is possible next year, assuming China steps back into the market and Russia and Belarus paper over differences that have disrupted the market, Potash Corp. (POT +1.4%) says at the Citi basic materials conference.
- A supply contract in Q1 2014 between China and Canpotex - the export arm of Potash, Mosaic (MOS +3.3%) and Agrium (AGU +2.5%) - would set a price floor, then Indian buyers might lock in prices with Canpotex, followed by deals in other markets, setting up a chance for a "nice bounce" in H1 of next year, POT CFO Wayne Brownlee says.
- POT says its decision to cut its workforce by ~18% will lead to cost reductions across the board; it anticipates a one-time cash charge in Q4 of ~$70M.
2:59 PMTurquoise Hill founder to participate in rights issue
- Turquoise Hill (TRQ -24.1%) founder Robert Friedland says he plans to participate fully in the company's $2.4B rights issue; the mining tycoon owns a 10% stake in TRQ, which means he would have to pay ~$240M if he takes up his share of the rights issue.
- More than 1B shares are expected to be issued, resulting in a doubling of TRQ's shares outstanding; the rights will stop trading on Jan. 7.
- Also, Friedland, the executive chairman of Ivanhoe Mines (IVAN), says he remains interested in pursuing a secondary listing for that company.
12:55 PMPrecious metals reverse to turn sharply higher
- Threatening to sink below $1,200 ounce after the strong ADP jobs report this morning, gold has staged a big reversal to $1,247. Below $19 earlier, silver has also come along for the ride, now at $19.72.
- GLD +2.1%, SLV +3.4%.
- The taper may be coming, but the SF Fed's John Williams is talking about raising the bar even further before the FOMC would consider hiking rates.
- The gold miners (GDX +3.7%) are the best performing sector in the market today.
- PM ETFs: GLD, SLV, IAU, AGQ, PHYS, SIVR, PPLT, PALL, ZSL, USLV, SGOL, UGL, DGP, GLL, DZZ, UGLD, DBS, DGL, DSLV, GLTR, DGZ, PTM, AGOL, DBP, GLDI, DGLD, WITE, SLVO, PGM, TBAR, USV, JJP, UBG, RGRP, LPLT, BLNG, IPLT
- Miner ETFs: GDX, GDXJ, NUGT, SIL, DUST, GLDX, SLVP, GGGG, RING, SILJ, PSAU, JNUG, JDST
12:05 PMTurquoise Hill -27% as trading begins on rights issue
- Turquoise Hill (TRQ -26.7%) shares are sharply lower as the rights issued under the miner's recent $2.4B rights issue began trading on a when-issued basis today in Toronto.
- More than 1B shares are expected to be issued under the rights offering, resulting in a doubling of TRQ's shares outstanding.
- TRQ will use the proceeds to repay Rio Tinto (RIO +2%)for a $600M bridge loan and $1.8B in interim funding, and to use any remaining funds for the continued financing of the Oyu Tolgoi copper-gold project; TRQ has stumbled in its negotiations with the Mongolian government over financing for the mine.
11:34 AMThompson Creek -2.3% after TD points out solvency issue
- Thompson Creek Metals (TC -2.3%) appears to be running out of cash, TD Securities warns, pointing to TC's highly leveraged balance sheet and its unsustainable molybdenum operations at current metal prices.
- TC's long-term solvency is a "major issue" whatever the outcome of the Mt. Milligan ramp-up, the firm says; with a bad ramp-up and even lower metal prices, TC could be pressured to refinance next year.
- The firm maintains its Reduce rating and $0.50 price target.
11:15 AMCF Industries jumps after saying it's considering MLP
- CF Industries (CF +9.5%) is today's top gainer on the S&P 500 after saying it is in talks with financial advisers to evaluate an MLP and “MLP-like structures along with other financial options,” according to a presentation at Citi's basic materials conference.
- RBC starts coverage of CF at Sector Perform with a $235 price target, believing modestly lower nitrogen prices will lead to lower although still strong margins.
9:47 AMBarrick Gold set to unveil key management appointments
- Barrick Gold (ABX +1.3%) reportedly will announce the appointment of well-known Canadian investor Ned Goodman to its board today, and will hire Jim Gowans, a former De Beers Canada CEO, as its COO.
- Founder and long-time chairman Peter Munk also is expected to hand over the role of chairman to his heir apparent, current co-chairman John Thornton.
- The appointment of new directors will be closely watched by investors, some of whom worry that Munk may try to retain influence through boardroom appointments; representatives from some of Canada's biggest pension funds reportedly held a conference call yesterday to discuss potential reactions to today's announcements.
8:26 AMMechel gets covenant holidays on $1.8B in loans| Comment!
Tuesday, December 3, 2013
6:15 PMPotash's problem: poor fertilizer demand, too much supply
- The layoffs and production cuts announced by Potash (POT) illustrate the key problem in the fertilizer sector: There has been no potash demand growth for six years while supply has been growing.
- The job cuts have nothing to do with Uralkali's move to produce at full capacity, POT CEO Bill Doyle says; it's about demand weakness across all nutrients that began well before the chaos caused by Uralkali.
- The two most important emerging markets for fertilizer are China and India, and demand is far lower than anticipated in both.
- Barclays views the planned cuts as "a good and needed move" in response to the ills plaguing the industry.
- Other fertilizer producers: MOS, AGU, IPI, CF, SQM.
- ETFs: MOO, CROP, PAGG, VEGI.
3:46 PMMountain Province Diamonds says permit OKd for Gahcho Kue mine
- De Beers Canada and Mountain Province Diamonds (MDM +8.9%) say the Mackenzie Valley Land and Water Board approved a pioneer land use permit for the Gahcho Kue diamond mine, which will allow land-based site works to begin in preparation for deliveries planned for the 2014 winter road season.
- Gahcho Kue is expected to mine ~31M metric tons of ore containing ~49M carats.
2:24 PMMolycorp turns green as CEO sees positive cash flow by late 2014/early 2015| 10 Comments
2:15 PMAK Steel praises favorable ITC ruling in steel trade case
- The U.S. International Trade Commission ruled in favor of AK Steel (AKS +2.7%) yesterday in an anti-dumping and countervailing trade petition against allegedly cut-priced imports of non-oriented electrical steel from six countries.
- AKS praises the ruling which said the trading practices were causing injury; the preliminary injury determination means that cases against the foreign producers will proceed.
- Earlier, BofA upgraded shares to Neutral from Underperform after adjusting estimated 2013 underfunded legacy liabilities for a better equity return and higher discount rate.