Today - Friday, October 28, 2016
- European Union antitrust regulator says it has opened an in-depth investigation into plans by ChemChina to acquire Syngenta (SYT +0.8%), setting a March 15 deadline to complete its review.
- The European Commission says the merger could harm competition as the two companies, particularly through ChemChina’s Adama unit, have “strong overlapping portfolios” of crop protection products, such as herbicides and insecticides.
- "This deal would lead to the combination of a leading crop protection company with one of its main generic competitors. Therefore we need to carefully assess whether the proposed merger would lead to higher prices or a reduced choice for farmers," says EU Competition Commissioner Margrethe Vestager.
- The move was expected after SYT said earlier this week that regulatory approval of the acquisition likely would be delayed into 2017.
- The yellow metal hasn't seen any love this fall, but it's added about $12 per ounce in the hour or so since news hit that the FBI is going to dig back in to the Clinton email story.
- GLD +1.15%
- ETFs: GLD, IAU, PHYS, SGOL, UGL, DGP, GTU, UGLD, GLL, DZZ, GLDI, OUNZ, DGL, DGZ, DGLD, GYEN, GEUR, UBG, QGLDX
- Vale (VALE +0.1%) cut spending by 51% on maintenance of waste dumps and tailings dams in the first nine months of 2016 from the year-ago period to $86.7M, even after last year's Samarco dam failure that killed 19 people and triggered tens of billions of dollars in lawsuits.
- The move follows similarly large cuts in 2014 and 2015 when Vale enacted aggressive belt-tightening measures in a bid to shore up cash reserves and pay down debt amid the commodity downturn.
- Brazilian prosecutors say Samarco cut by 29% the budget for its division responsible for dam management between 2012 and 2015, a period in which mine output and tailings rose.
- Southern Copper (SCCO -0.3%) edges lower after reporting Q3 earnings of $0.26/share, missing analyst consensus by $0.04, on $1.4B in revenues, 23% higher than the year-ago quarter and in line with estimates.
- Q3 copper mine production rose 25% Y/Y to nearly 225K tons, mainly the result of a 73% surge in production at the Buenavista mine in Sonora, Mexico.
- SCCO, with mining operations in Mexico and Peru, says it expects to produce a total of ~905K tons in FY 2016.
- Huntsman (HUN +4.6%) is higher in early trading after beginning the process to create a new, publicly traded specialty chemical business next year, filing an initial Form 10 registration with the SEC for the previously announced spinoff.
- HUN expects the new pigments, additives and textile effects company will begin trading on the NYSE sometime during H1 2017.
- The new company will focus on titanium dioxide, or TiO2, which is used as a pigment for various items including food coloring, paints, coatings and sunscreen, but the business is more cyclical than HUN’s other divisions.
- “TiO2 prices are improving and with additional increases expected in the future, the timing of our spinoff should be well positioned,” says HUN President and CEO Peter Huntsman.
- HUN posted a Q3 earnings beat on 10% Y/Y lower revenues of $2.36B.
- Rio Tinto (NYSE:RIO) announces a tentative agreement to sell its stake in the Simandou project in Guinea to Chinalco for $1.1B-$1.3B, based on the timing of the development of the project.
- Rio has a 46.6% stake in the world's biggest untapped iron ore reserves, while China's Chinalco owns 41.3% and the Guinea government has 7.5%.
- Rio, which has been frustrated over drumming up financing for the project despite its vast potential, says it hopes to seal a final deal within six months.
- TOT +0.4% premarket.
- Crude futures are largely unchanged at almost $50 a barrel ahead of an OPEC technical meeting which starts in Vienna today.
- But oil prices are set for their biggest weekly loss since mid-September on concerns that member nations won't be able to agree on an output deal.
- Venezuela's Oil Minister Eulogio del Pino announced earlier this week that 12 non-OPEC states have also been invited to the gathering.
- ETFs: USO, OIL, UWTI, UCO, DWTI, SCO, BNO, DBO, DTO, USL, DNO, OLO, SZO, OLEM, OILK, OILX
Thursday, October 27, 2016
- Democratic Republic of Congo's mines minister says the government supports China Molybdenum's bid to buy Freeport McMoRan's (NYSE:FCX) majority stake in the Tenke copper project despite objections from state miner Gecamines.
- But the minister also cautions that the $2.65B deal for FCX's 56% stake, agreed to in May, must respect the rights of Gecamines, which holds a 20% stake in Tenke, one of the world's largest copper mines.
- Lundin Mining (OTCPK:LUNMF), which owns the remaining 24%, has until Nov. 15 to exercise its right of first offer, after which FCXsays the sale to China Moly will go through; Gecamines says it has a right to pre-empt the sale to China Moly, a claim FCX rejects.
- Century Aluminum (NASDAQ:CENX) -12.9% AH after reporting a sizable Q3 loss when a break-even result was expected, on a 26% Y/Y drop in revenue and a 21% decline in shipments.
- CENX says Q3 shipments of primary aluminum totaled 182,429 metric tons vs. 231,040 metric tons shipped in the year-ago quarter of 2015, primarily due to curtailment actions taken in H2 2015.
- CENX says the commodity price has firmed, demand remains generally good, and supply - excluding in China - remains constrained; however, value-added product premiums, especially in the U.S., are under pressure due to the "significant and growing level of imports caused by the excess production in China."
- Black gold one week ago had topped $52 per barrel, but had backed off to as low $49 yesterday. Up 1.1% on today's session, oil currently sits at $49.72.
- Making for a nice excuse to buy was a story saying OPEC energy ministers told Russia they are willing to cut peak output by as much as 4%.
- USO +1.15%
- ETFs: USO, OIL, UWTI, UCO, DWTI, SCO, BNO, DBO, DTO, UGA, USL, DNO, OLO, UHN, SZO, OLEM, OILK, OILX
- Praxair (PX -1.7%) is lower despite reporting generally in-line Q3 results, as it offers downbeat Q4 guidance amid soft manufacturing activity in the U.S. and elsewhere.
- PX now sees Q4 EPS of $1.36-$1.43, vs. $1.46 analyst consensus estimate, and forecasts FY 2016 EPS of $5.44-$5.51, compared with previous guidance for $5.45-$5.60.
- CEO Steve Angel noted "strong demand in more resilient food, beverage and healthcare markets, but persistent weakness from industrial sectors like manufacturing and upstream energy."
- Vale (VALE +0.8%) is set to go ahead with the sale of its fertilizer business after its board of directors gave its approval, Reuters reports, citing the Valor Economico newspaper.
- Most of the fertilizer assets will be sold to Mosaic (MOS -1%), while its plants in Cubatão, São Paulo likely will go to Yara International (OTCPK:YARIY +1.3%), according to the report.
- Reuters reported earlier this month that Vale was negotiating the sale with MOS and Yara for at least $3.6B.
- Vale's board reportedly also approved the sale of its Carborough Downs coal mine, the company's last operating mine in Australia.
- Cliffs Natural Resources (CLF -16.9%) plunges after the reported a surprise Q3 loss and lower than expected EBITDA, driven by weaker than expected U.S. iron ore sales volumes and higher costs.
- CLF says its Q3 U.S. iron ore production volume fell to 3.86M metric tons from 4.1M in the year-ago quarter, but sales margins rose to $12.57/metric ton from $8.70; Asia-Pacific iron ore production was essentially flat at 2.97M metric tons vs. 2.93M a year ago, and sales margins jumped to $6.75/metric ton from $2.20.
- CLF reiterates its U.S. full-year sales projection of ~18M metric tons, at cash production costs of $50-$55/metric ton; in Asia-Pacific, CLF expects sales volume of 11.5M metric tons at cash production costs of $25-$30/metric ton.
- Vale (VALE -0.5%) shares push to a new 52-week high before dipping into the red after the world's top iron ore producer beat Q3 earnings estimates on lower costs, stronger prices and record production.
- Vale says strong cash generation led to a 61% Y/Y improvement in EBITDA to $3.02B in Q3, while net debt ended the period at $25.96B, up from the prior-year quarter but down $1.5B from this year's Q2; the company has said it aims to cut net debt to $15B by mid-2017, primarily through asset sales.
- "The more recent emphasis on 'value over volume' certainly appears to be bearing fruit in terms of Vale's cost position," says Bernstein analyst Paul Gait.
- During today's earnings conference call, CEO Murilo Ferreira hints that a rift may be emerging with BHP Billiton (BHP -1.6%) about how to re-start the Samarco mine, saying it would need to use infrastructure from Vale's neighboring mines if it wants to secure a long-term future.
- Potash Corp. (POT +0.3%) opens slightly higher after reporting better than expected Q3 earnings and revenues but well below last year's levels, as the slump in fertilizer nutrient prices outweighed improved volumes.
- The beat was due to lower than expected taxes, and investors may be disappointed with results given that potash spot prices recently have increased, Citi analyst P.J. Juvekar says.
- POT says Q3 potash sales volumes hit a record and spot prices rose ~15% from lows earlier in the year, but potash prices were still ~40% lower Y/Y, offsetting record potash sales volumes of 2.5M metric tons, a 16% Y/Y gain; prices for nitrogen and phosphate also were much lower than a year ago.
- POT lowers the top end of earnings guidance for FY 2016, now seeing EPS of $0.40-$0.45 from prior $0.40-$0.55 and $0.51 analyst consensus estimate.
- On its planned merger with Agrium (AGU +0.2%), POT says support from shareholders to date "has been very encouraging."
- Dow Chemical (NYSE:DOW) +1.2% premarket as Q3 earnings marked the company's 12th straight quarter of beating analyst estimates.
- Dow's Q3 sales rose 3.7% Y/Y to $12.48B, also topping analyst expectations, as agriculture sales climbed 5.8% to $1.24B on volume and pricing; YTD sales in the segment are 6.7% lower than in 2015.
- Q3 sales in plastics, Dow's largest segment, rose 0.8% to $4.7B, while performance materials and chemicals sales fell to $2.38B, a 25% drop primarily reflected in the divestiture of its chlorine products business.
- Dow's operating margin expanded by 25 bps to 20% on an EBITDA basis.
- CEO Andrew Liveris offers a rosy outlook on Dow's business environment, seeing "steady growth in North America and Europe continuing."
- Dow and DuPont said earlier in the week that their planned merger, originally scheduled to be completed by year-end, would now likely close in Q1 2017.
Wednesday, October 26, 2016
- Newmont Mining (NYSE:NEM) -1.8% AH after reporting lower than expected adjusted Q3 earnings, although profit more than doubled Y/Y as it benefited from higher prices and higher gold production.
- NEM says Q3 gold production rose 3.4% Y/Y to 1.25M oz., while the average realized gold price rose 20% to $1,329/oz.; all-in sustaining costs jumped to $925/oz. from $879, hurt by "inventory adjustments" at its Yanacocha mine in Peru and Ahafo mine in Ghana.
- NEM raises the lower end of its 2016 gold output forecast, and now expects to produce 4.8M-5M oz. this year vs. a previous outlook of 4.7M-5M oz.
- Expects the sale of its stake in the Batu Hijau copper and gold mine in Indonesia to close in Q4.
- NEM also revises its gold price-linked dividend policy to take advantage of rising prices; under the new policy, NEM says it will pay at least $0.10/share at gold prices below $1,150/oz., beginning Q1 2017.
- Finally, NEM says Nancy Buese, most recently the CFO at MPLX, will become the company's new CFO effective Oct. 31, replacing Laurie Brlas, who is retiring.
- Barrick Gold (NYSE:ABX) +1% AH after Q3 earnings and revenues come in ahead of expectations while increasing production and cutting costs.
- ABX says Q3 gold production fell 17% Y/Y to 1.38M oz., while the average realized gold price rose to $1,333/oz. from $1,125/oz. a year earlier; all-in sustaining cash costs in the latest quarter were $704/oz., down from $771 a year ago.
- ABX raises its gold production guidance for FY 2016 to 5.25M-5.55M oz., up from 5M-5.5M oz.
- For FY 2016, ABX now expects production of 5.25 million ounces to 5.55 million ounces of gold, at all-in sustaining costs of $740-$775/oz., down from $750-$790.
- ABX also says it remains on track to reduce its debt by at least $2B this year after ending Q3 with $2.65B in cash and $8.54B in debt.
- A decision last week by the Quebec Superior Court could set a precedent in First Nations resource claims by allowing an aboriginal group to continue its $900M lawsuit against Rio Tinto’s (NYSE:RIO) Iron Ore Co. of Canada for damages across provincial boundaries, Financial Post reports.
- The court dismissed motions by Iron Ore Co., a railway company and the government of Newfoundland and Labrador to remove portions of the lawsuit relating to operations outside Quebec, saying the claims are in a different jurisdiction.
- The Quebec Innu community is suing IOC for damages stretching back to the company’s founding in 1949 throughout areas historically occupied by the group, claiming the company displaced people from their land, destroyed the environment and did not provide financial compensation.
- The case is believed to be the first time a Canadian court has made a decision over provincial jurisdiction in a natural resources dispute involving First Nations.
- AK Steel (NYSE:AKS) -7.2% AH after announcing a 65M-share public offering, with an underwriters option to purchase up to an additional 9.75M common shares.
- AKS says it plans to use the proceeds to repay outstanding borrowings under its $1.5B asset-based revolving credit facility and for general corporate purposes.
- Shares have gained 6% since announcing Q3 earnings before Tuesday's open.
- Randgold Resources (GOLD -2.2%) agrees to pay Mali's government 15B CFA francs ($25M) to help to resolve a tax dispute that resulted in the company's Bamako offices and bank accounts being closed by authorities earlier this month.
- CEO Mark Bristow says GOLD agreed to the payment on the understanding that both parties will soon sit down to fully resolve the company's tax issues.
- The company's dispute with the government relates to tax assessments during 2011-13; Mali's finance minister said this week that GOLD owes 42B CFA, which the company disputes.
- Russia's Mechel (MTL -1.8%) expects to sign a final debt restructuring deal in early 2017, its CFO tells Reuters, concluding more than two years of negotiations on a burden that has threatened its survival.
- CFO Sergei Rezontov says MTL would soon agree terms with Russian bank VTB to reschedule debt repayments for 2020-22, after previously agreed to start repayments next year, and will conclude restructuring talks on $1.5B of credit owed to international lending syndicates.
- Before reaching restructuring agreements on most of its debt earlier this year, MTL was facing a bankruptcy which would have amounted to Russia's biggest ever corporate collapse.
- AK Steel (AKS +5.3%) charges out of the gate after BofA Merrill Lynch upgrades shares to Buy from Underperform with an $8 price target, doubled from $4, following yesterday's sizeable Q3 earnings beat.
- BofA's Timna Tanners thinks U.S. steel prices could spike, as her research shows domestic scrap steel prices might rise $30-$40/ton next month due to stronger demand; combined with the company's focus on more premium products, the analyst raises her 2017 EPS estimate for AKS to $0.90 from a prior $0.55.
- BofA also upgrades Steel Dynamics (STLD +2.5%) to Buy from Neutral after reporting its own strong Q3 results a week ago.
7:57 AM| 7:57 AM | 3 Comments
Tuesday, October 25, 2016
- Citing a bullish outlook on silver prices, Canaccord Genuity initiates coverage of two silver producers with Buy ratings: Coeur Mining (NYSE:CDE) among the $1B-plus market cap producers on its recent exploration success at Palmarejo and low cost structure at Wharf, and Fortuna Silver (NYSE:FSM) among the smaller cap names due to its execution and cost controls.
- Meanwhile, the firm rates Pan American Silver (NASDAQ:PAAS), Hecla Mining (NYSE:HL) and Endeavour Silver (NYSE:EXK) at Hold.
- Canaccord says investors who missed the first leg up in silver commodity prices and silver producer equities now have a second chance following the recent pullback.
- The firm projects at least 5% upside in silver prices over the next 12-18 months as zinc and lead mine closures impact supply, and says increasing demand from the photovoltaics industry and inflationary pressures from higher oil prices also should boost silver prices.
- ETFs: AGQ, SIL, USLV, ZSL, DSLV, SLVP, DBS, USV
- Freeport McMoRan (FCX +3.1%) racks up solid gains even after Q3 earnings fall short of estimates, but the result nevertheless breaks a streak of seven straight quarterly losses.
- FCX says it sold 1.2B lbs. of copper and 317K oz. of gold during Q3, up from 1B lbs. and 294K oz., respectively, in the year-ago period.
- For the full year, FCX now expects to sell ~4.8B lbs. of copper, 1.26M oz. of gold, and 73M lbs. of molybdenum, down from its earlier estimate of 5B lbs. of copper, 1.7M oz. of gold, and 76M lbs. of molybdenum.
- FCX says it has shed $1.38B in assets YTD with $5.24B in additional sales pending; in today's earnings conference call, CEO Richard Adkerson says he does not expect any more mining asset sales this year but may sell more oil and gas assets.
- Barrick Gold's (ABX +3.2%) Veladero gold mine in Argentina has attracted strong interest from China's Zijin Mining (OTCPK:ZIJMF) and Shandong Gold Mining, which have held separate talks with ABX to buy a 50% stake in the mine, which could fetch more than $1B, Reuters reports.
- The high quality of the mine, production capacity and the prospect for geographical diversification have appealed to the Chinese suitors, according to the report.
- Veladero, one of ABX's five core mines, is expected to produce 580K-640K oz. of gold this year.
- U.S. steelmakers are higher after AK Steel (AKS +6.2%) and Schnitzer Steel (SCHN +2.3%) both reported stronger quarterly earnings, as the companies benefited from cost-cutting measures.
- AKS reported better than expected Q3 earnings as total operating expenses fell 19% Y/Y; revenues fell 15% Y/Y to $1.45B as shipments fell 24%, partly related to a decision to focus less on less profitable commoditized products, but the selling price per ton rose 11% to $1,016, due to a better product mix and a more favorable selling environment.
- SCHN posted above consensus FQ4 earnings and revenues as overhead costs declined 20% Y/Y; ferrous sales volumes of 914K tons and nonferrous sales volumes of 153M lbs. were 2% and 13% lower Y/Y, respectively.
- Also: X +2%, STLD +0.8%, WOR -0.1%, RS -0.6%, NUE -0.7%.
- Anglo American (OTCPK:AAUKF, OTCPK:AAUKY) reports broadly higher Q3 production results across all divisions, except for copper.
- Anglo says Q3 production of diamonds, its largest underlying earnings driver in H1, rose 4% to 6.3M carats compared to a year ago, when its majority owned De Beers diamond unit cut output in response to weak market conditions.
- Q3 production of iron ore output, Anglo's second largest underlying earnings driver in H1, jumped 14% Y/Y to 16.3M tons following the restructuring of the Sishen mine in South Africa and the ramp up of its Minas Rios mine in Brazil.
- Q3 copper production fell 9% to 139,800 metric tons due to problems at its Los Bronces mine in Chile, which was affected by heavy snowfall and a strike.
- Q3 platinum production rose 1% to 619K oz.; nickel production soared 66% to 11.3K metric tons following the successful completion of the Barro Alto furnace rebuilds in 2015.
- Anglo maintains its full-year output guidance across its platinum, copper and nickel divisions, and expects iron ore production from its Kolomela mine to slightly exceed its full-year guidance of 12M metric tons.
- ThyssenKrupp (OTCPK:TYEKF -4.4%) is in advanced talks with Ternium (TX +3.5%) to sell its large steel plant in Brazil, a step that would finish unwinding the German company’s unsuccessful investment push in the Americas, WSJ reports.
- A major potential stumbling block is TX's desire to pay less than the plant’s ~€2B ($2.17B) current book value, but any deal below that value would hit ThyssenKrupp’s equity cushion, which analysts say is already thin, according to the report.
- Thyssenkrupp says it is seeking to sell Companhia Siderúrgica do Atlântico, which has an annual production capacity of 5M tons, and that it is a normal course of business to hold talks with potential buyers.
- ChemChina is ready to offer more concessions to win European Union antitrust approval for its proposed takeover of Syngenta (SYT +1.2%), Reuters reports.
- ChemChina submitted a proposal to the European Commission in September, including a plan to divest ~$20M worth of assets from its agrichemical subsidiary Adama Agricultural Solutions, but the plan was deemed inadequate by the commission, according to the report.
- SYT slid more than 9% yesterday after the companies missed an EU deadline to address potential antitrust concerns, raising worries about the likelihood of a longer investigation from the EU's competition watchdog; SYT says regulators in EU and elsewhere have requested additional information, and it now expects the regulatory process to extend into Q1 2017.
- Dow Chemical (DOW -0.2%) CEO Andrew Liveris says the merger with DuPont (DD -0.6%) may be delayed until February from a planned closing late this year.
- Agriculture is the greatest concern of European regulators, Liveris tells Bloomberg: “One of the strongest lobbies in the world out there is the farm lobby, and in Europe, the agricultural sector is very, very critical to them, somewhat protected."
- The European Commission recently delayed its decision deadline until Feb. 6 as it sought additional information about the merger, but Liveris says the value created by the deal is "worth a few months of delay."
- The CEO does not say whether the companies planned to sell assets to help win approval, although reports have indicated that Dow is seeking a buyer for its copolymers business and DuPont is planning to sell a herbicides business to ease regulators’ concerns.
- In its Q3 earnings report, DuPont CEO Ed Breen said he expects the merger to close sometime during Q1 2017.
- "Samarco continues to explore options to restructure its debt," according to a statement the from iron ore mining joint venture owned by Vale (NYSE:VALE) and BHP Billiton (NYSE:BHP).
- The company just missed its second bond payment for October, but has 30 days to remedy the situation, as it deals with the fallout from suspending its operations following last year's dam disaster.
Monday, October 24, 2016
- Gold Standard Ventures (GSV -5.1%) is lower after announcing a private placement of up to 7.88M common shares at C$3.17 each for total proceeds of up to ~ C$25M.
- As a part of the private placement, Goldcorp (GG -1.4%) is purchasing more than 4.7M shares at the offering price; GG anticipates owning ~10.6% of GSV shares at closing for the placement.
- GSV expects to use the proceeds to acquire certain royalty interests on its flagship Pinion-Railroad gold project in Nevada, purchase nearby land claims, continue exploration on the project and for general working capital purposes.
- Analysis from Canaccord Genuity suggests the gold price may have bottomed, thus the firm upgrades Goldcorp (GG -2%), Centerra Gold (OTCPK:CAGDF +0.8%), Detour Gold (OTCPK:DRGDF -1.5%) and Fortuna Silver Mines (FSM -0.4%) to Buy from Hold.
- With the recent pullback in commodity prices, "a window of opportunity appears to have presented itself, and we believe investors should consider increasing weights" in select precious metals stocks, the firm says.
- Canaccord cites rising market volatility related to the upcoming U.S. election, the recent pullback in extreme non-commercial long gold positions on the Comex, declining selling pressure among hedge funds, and real interest rates remaining near zero whether or not the Fed raises rates in December.
- The firm cites other names that could benefit, as underperforming portfolio managers look to increase their leverage to gold, including Kinross Gold (KGC -5.7%), Iamgold (IAG -2.2%) and B2Gold (BTG -3.9%) among senior producers, Endeavour Mining (OTCQX:EDVMF -1.6%) and Alamos Gold (AGI -3%) among mid- and small-cap producers, and Tahoe Resources (TAHO -1.1%) in the silver space.
- Gold Fields (NYSE:GFI) -1.4% premarket after reporting a 3.6% Y/Y decline in Q3 attributable gold production to 537K oz., although the total was 2% higher than in Q2.
- However, GFI maintains guidance for FY 2016 attributable equivalent gold production at 2.1M-2.15M oz., with all-in sustaining costs of $1,000-$1,010/oz., even as Q3 AISC rose 8% Y/Y to $1,026/oz.
- GFI says the gold price it received jumped 20% Y/Y during the quarter to $1,329/oz.
- GFI says it also reduced its net debt by 11% Q/Q to $1.029B, thanks to increased cash flow.
- Separately, GFI unveils plans to spend $1.4B to extend the life of its Ghana-based Damang mine from 2017 to 2024, enhancing its presence in one of the company's key operating regions
- Syngenta (NYSE:SYT) -7.1% premarket after the European Union says ChemChina failed to submit proposed remedies to resolve potential antitrust concerns related to their planned merger by last Friday's deadline.
- Companies involved in EU probes of complex deals sometimes decide not to offer commitments at an early stage if they know a deal is likely to get deeper scrutiny by regulators, but the move raises concerns about how quickly the deal would gain regulatory approval.
- EU regulators now have until Oct. 28 to decide whether to approve the deal without conditions or open an extended "phase two" investigation that could add at least another four months before regulators make a final decision.
Friday, October 21, 2016
- MGP Ingredients (MGPI -10.8%) plunges as much as 16% following reports that the company's plant in Atchison, Kan., had suffered a chemical spill that prompted area residents to take shelter.
- Authorities have not released details about what kind of chemical leaked, but at local reports say at least one of the chemicals is airborne chlorine powder.
- The leak apparently was caused when a delivery to the plant was placed in the wrong tank and caused a reaction.
- Mali's government has allowed the offices of companies controlled by Randgold Resources (GOLD -0.5%) in the capital Bamako to reopen, an economy ministry official says, after it shut them two weeks ago over a tax dispute.
- The government shut down the offices amid allegations that the companies owed 46.9B CFA francs ($80M) in unpaid taxes.
- The official says discussions to resolve the dispute will begin on Monday.
- Crude oil is higher as Russia reiterates its commitment to joining a production freeze; WTI +0.6% at $50.93/bbl, Brent +0.8% at $51.80.
- Even as Russia plans to produce 548M metric tons, or 11M bbl/day, of oil next year, a post-Soviet record, Energy Minister Novak says the government still wants global producers to curb production amid weak prices, and he plans to make proposals to his Saudi Arabian counterpart at a meeting this weekend.
- "The near term fundamentals in the oil market have turned positive. Demand is stabilizing, OPEC production has peaked (and will fall if cuts are implemented), and global inventory declines imply that the market is more balanced than many believe," Bernstein analyst Neil Beveridge says.
- ETFs: USO, OIL, UWTI, UCO, DWTI, SCO, BNO, DBO, DTO, USL, DNO, OLO, SZO, OLEM
Thursday, October 20, 2016
- Morgan Stanley (NYSE:MS) stands to collect $120M if Bayer (OTCPK:BAYRY) closes its $57B takeover deal for Monsanto (NYSE:MON), which would be the second-largest deal fee for a single bank on record.
- The big payout is a bright spot in an otherwise down year for M&A activity, as global deal volume YTD currently stands at ~$2.6T, 24% lower than the same period in 2015.
- The payments were disclosed in a MON proxy filing, which also showed the company held takeover talks with three other groups - identified by Financial Times as BASF (OTCQX:BASFY), Koch Industries and China's Sinochem - before agreeing to the pending deal with Bayer.
- Investor advisory company Glass Lewis recommends that Agrium (NYSE:AGU) and Potash Corp. (NYSE:POT) shareholders support a proposed merger, saying it would create a bigger, more diversified company.
- Last week, ISS also recommended support for the merger from investors in each company.
- AGU and POT are each holding their own shareholder meetings on Nov. 3 to vote deal, which requires two-thirds approval by shareholders of each company; POT shareholders would own 52% of the new company.
- Turquoise Hill Resources (TRQ +0.3%) says its Oyu Tolgoi mine in Mongolia set an all-time quarterly record of 25M metric tons of mined material in Q3, including stripping for Phase 4 of the project, which is the next area of high-grade ore.
- TRQ says Q3 copper production fell 9.9% from Q2 as a result of lower recovery from Phase 6 ore, while gold production declined, as expected, by 47% from Q2 due to lower grades from the completion of mining Phase 2.
- TRQ says it continues to expect Oyu Tolgoi to produce 175K-195K metric tons of copper in concentrates and 255K-285K oz. of gold in concentrates for 2016.
- Brazilian federal prosecutors file homicide charges against 21 people in connection with last year's catastrophic Samarco tailings dam collapse that killed 19 people.
- The people charged include current and former officials of Vale (VALE +3.1%) and BHP Billiton (BHP +0.1%) and their Samarco joint venture, among them former Samarco CEO Ricardo Vescovi, Vale’s current iron ore director Peter Poppinga, and five Vale and BHP officials who sat on Samarco’s board in recent years.
- In addition to the criminal case, Brazilian federal prosecutors in May filed a civil lawsuit against Vale, BHP and Samarco seeking 155B reais ($49B) in damages.
- Three steel companies - Steel Dynamics , Reliance Steel and Nucor - have reported earnings since yesterday’s close, with three sharply different results.
- Steel Dynamics (STLD +2.7%) is higher after reporting Q3 earnings that more than doubled as revenues rose 7.7% Y/Y to $2.1B, and gross profit margin improved to 19.4% from 11.7% a year ago, driven by a market rebound and a drop in Chinese imports.
- Reliance Steel (RS -6%) is sinking after Q3 results missed analyst estimates and guided Q4 EPS below consensus, now seeing EPS of $0.65-$0.75 vs. $0.99 analyst consensus estimate, and expecting Q4 tons sold to fall 5%-7% Q/Q and average selling prices to drop by 1%-3% Q/Q.
- Nucor (NUE +0.2%) has recovered from earlier losses to edge into the green after Q3 results missed expectations and warning that Q4 earnings likely will decrease "notably" from Q3 because of lower margins in the steel mills segment, partly due to typical Q4 seasonality.
- U.S. Steel (X +4.9%), which reports earnings on Nov. 2, and AK Steel (AKS +4.3%), which reports on Oct. 25, are higher.
- BHP Billiton's (BHP -1.5%) nickel business, which had faced closure after failing to attract a buyer, now is spending $2M/month on improvements and making headway to extend operations through the next decade, the president of BHP's Nickel West mining and processing unit says.
- "There are signs that this year could finally be the turning point for nickel," the exec says, as nickel prices have climbed 17% and global demand rose 6.1% over the eight months through August, led by an 8% gain in China and strong gains in India and China.
- The BHP Nickel West boss also hints at a potential return to the development of the promising but as-yet unexploited Yakabindie mine, stalled for years because of its $1.1B price tag; the mine is believed to hold 350K metric tons of nickel, ~20% of annual world demand.
- Fortescue Metals (OTCQX:FSUMF) says FQ1 iron ore shipments rose 5% Y/Y to 43.8M metric tons, beating analyst estimates.
- Cash costs fell to a lower than predicted $13.55/ton in the quarter from $16.90/ton in the same period a year ago, driven by productivity and efficiency initiatives.
- Higher prices for coking coal is squeezing margins for steel mills, causing additional orders for the cheaper, lower grade iron ore such as the type Fortescue mines, CEO Nev Power says.
- BHP Billiton (NYSE:BHP) Chairman Jac Nasser says he will not seek re-election as its chairman at next year’s annual shareholder meeting.
- Nasser says he had planned to announce his retirement last year but stayed because of the Samarco tailings dam disaster.
- A global search will begin to find a replacement for Nasser, who before becoming BHP's chairman in 2010 had climbed to the top at Ford, where he became known as "Jac the Knife’’ for his cost-cutting prowess.
- BHP -0.7% premarket.
- Vale (NYSE:VALE) cuts its forecast for 2017 iron ore production to 360M-380M metric tons, below its original forecast for 380M-400M metric tons, as it continues to phase out higher-cost production.
- The world's top producer of the steel-making raw material already said in July it would not meet the original target but had not provided a new range.
- Vale says it produced 92.1M tons of iron ore during Q3, up 1.5% Y/Y and 6.1% Q/Q; the Carajás mining complex hit a new production record of 38.7M metric tons of iron ore in the quarter.
- The company maintains its production estimate for 2016, saying it would be at the lower end of a range of 340M-350M metric tons.
- Vale's Q3 nickel production totaled 76K metric tons, up 6.1% Y/Y but down 3.3% Q/Q due to scheduled maintenance work at plants in New Caledonia and Canada.
- Shares +0.8% premarket.
- Glencore (OTCPK:GLCNF) has agreed to sell its Australian coal haulage business GRail to Genesee & Wyoming (NYSE:GWR) for A$1.14B ($874M).
- The deal takes Glencore's asset sales to $4.7B in 2016 and puts the mining and trading giant on course to reduce its net debt to $16.5-17.5B by the end of the year.
- For its part, Genesee & Wyoming plans to sell 49% of GRail to funds managed by Macquarie Infrastructure & Real Assets (OTC:MCQEF).
- Still, the purchase will double the size of Genesee & Wyoming's Australian operations and is expected to boost its EBITDA by A$100M in 2017.
Wednesday, October 19, 2016
- Rio Tinto (NYSE:RIO) cuts its full-year guidance for iron ore shipments from its main Pilbara operations in Western Australia by as much as 5M metric tons, after port and rail maintenance affected shipments in the September quarter.
- Rio reports Q3 shipments from Western Australia totaled 80.9M metric tons, 2% lower than Q2 and a 5% decline from the same period a year ago, causing it to revise its 2016 shipping expectations to 325M-330M metric tons, compared to a previous target of 330M; analysts had expected a slight improvement in Q3 production to ~85M metric tons.
- The company maintains its forecast for 2017 shipments of 330M-340M tons.
- RIO -0.4% AH.
- BASF (OTCQX:BASFY) says it will gradually restart production at key petrochemical sites at its Ludwigshafen headquarters after this week's deadly fire and explosion had forced it to close them.
- BASF says the two Ludwigshafen steam crackers will gradually resume output over the next few days because alternative supply lines will circumvent the disaster area, and downstream sites dependent upon supply from the steam crackers also would resume operations.
- BASF says 24 sites including the steam crackers currently are shut or working at reduced loads as a result of the accident, which was considered the worst in the German chemical industry in more than 20 years.
- U.S. crude oil settled at 15-month highs, climbing 2.6% to $51.60/bbl, after the government reported a large and unexpected draw, compared to expectations for a build, in domestic inventories.
- In its sixth drop out of the past seven weeks, crude stocks fell 5.2M barrels in the week ended Oct. 14, vs. analyst expectations for a build of 2.7M barrels.
- Also supporting oil today was evidence of declining production in China and optimism that OPEC would secure an output cut at its meeting next month.
- The S&P energy sector is 1.6% higher, by far the biggest mover on the day, helping the broader S&P 500 to a modest 0.3% gain.
- ETFs: USO, OIL, XLE, UWTI, UCO, VDE, ERX, DWTI, OIH, SCO, XOP, BNO, DBO, ERY, DIG, DTO, USL, DUG, BGR, XES, IYE, IEO, FENY, IEZ, DNO, PXE, FIF, OLO, PXJ, RYE, SZO, NDP, GUSH, DRIP, DDG, FXN, OLEM, CRAK
- DuPont (DD +0.4%) is initiated with a Buy rating and $78 price target at Nomura, which expects strong earnings potential from the proposed combination with Dow Chemical (DOW +0.6%).
- Nomura expects the DuPont-Dow merger to generate above-trend growth in earnings and free cash flow for the next three years, which it considers "exceptional in a macro environment where growth is scarce."
- DuPont management’s integration plan through 2019, which centers on aggressive cost cuts and assets spinoffs and sales, makes the shares especially compelling, the firm says, estimating the moves should result in equity value compounding at 16% annually during 2017-19.
- Iamgold (IAG +4.6%) is upgraded to Buy from Hold with an $8 price target, raised from $7.50, at Canaccord Genuity, which says a recent tour of the company's operations showed productivity improvements and major cost savings in most areas.
- The firm says IAG is ahead of schedule in completing the secondary crusher at the Rosebel gold mine in Suriname, with additional crushing supply apparently ready to come online in November.
- Canaccord also notes that IAG shares have dropped ~35% since peaking in August and now trade at a 17% discount to peers on a price/NAV basis.
- The Democratic Republic of Congo has turned to international arbitration in a bid to force Freeport McMoRan (NYSE:FCX) and Lundin Mining (OTCPK:LUNMF) to restructure terms of any exit from one of the country’s biggest mines.
- State-owned mining company Gecamines has filed a complaint with the International Court of Arbitration in Paris, demanding that any change to the indirect ownership of the Tenke Fungurume mine be blocked unless authorized by the state miner.
- FCX plans to sell 56% of the copper and cobalt mine to China Molybdenum for $2.65B, and partner Lundin has a right of first offer on the sale; Gecamines, which owns 20% of the mine, objects to the sale because it was not informed in advance and that its rights to either pre-empt or participate in the deal had been overlooked.
- Speaking at the "Oil & Money" conference in London, Saudi Arabia oil minister Khalid Al-Falih says many non-OPEC countries (Russia?) may join in the cartel's deal to limit output. The countries, he says, are willing to not just freeze, but implement healthy cuts.
- Also in attendance at the conference, Exxon CEO Rex Tillerson says any worry of a future supply shortage is overblown, thanks to the game-changer of U.S. shale.
- Texas Tea is higher by 1.3% this morning to $50.95 per barrel. USO +1.05% premarket
- ETFs: USO, OIL, UWTI, UCO, DWTI, SCO, BNO, DBO, DTO, UGA, USL, DNO, OLO, UHN, SZO, OLEM, OILK, OILX
Tuesday, October 18, 2016
- BHP Billiton (NYSE:BHP) reports iron ore production fell 6% Y/Y to 57.6M metric tons in the three months ended Sept. 30, compared with 61.3M metric tons a year earlier, which included output from the halted Samarco joint venture.
- BHP's copper division is off to a slow start to the new fiscal year due to the recent state-wide power outage in South Australia, delivering 355K metric tons of copper vs. an expected 410K; Olympic Dam's production fell 26% Y/Y to 41K metric tons, leaving it well behind the pace required to hit its targeted 200K metric tons this financial year.
- BHP says it remains on track to meet its FY 2017 production guidance for iron ore of 265M-275M metric tons vs. 257M metric tons a year ago, although guidance for Olympic Dam is under review.
- Problems at the Cerro Colorado copper mine in Chile also is is expected to reduce production in the December quarter.
- Glencore (OTCPK:GLCNF, OTCPK:GLNCY) says it has raised the size of a bond buyback tender to $1.49B from $1.25B, as it tries to capitalize on favorable conditions to reduce its debt burden.
- Industry sources say Glencore's move will reduce the amount of debt maturing each year.
- Big miners are in a stronger position after racking up high levels of debt last year because of the commodity price crash, but likely will remain cautious and use the bond market only to strengthen their balance sheets and eventually increase dividends rather than embark on aggressive expansion plans.
- BHP Billiton (BHP +2.2%) is higher after Jefferies analysts say the company's energy business should enjoy a boost from rising oil prices and its mining assets are "underappreciated."
- A Fed rate hike could depress commodity prices in the short term, but the firm foresees a recovery in Q1 2017 from seasonal factors and a dividend increase next year.
- BHP boasts some of the highest quality assets in the global mining industry, Jefferies says, and unlike most other miners, "BHP has significant organic growth optionality as a result of the quality and scale of its resources. We estimate that there is at least $18B of potential value from long-term growth within the BHP portfolio."
- SPX Flow’s (FLOW -4.1%) Q3 preliminary earnings miss is “clearly unfavorable” and points to the most downward risk for estimates for peers Flowserve (FLS -0.2%) and Colfax (CFX -0.2%), according to analysts at William Blair.
- FLOW yesterday issued downside Q3 guidance, seeing EPS of $0.30-$0.35 vs. $0.47 analyst consensus estimate, on revenues of $467M vs. $497M consensus; prior guidance was for EPS of $0.40-$0.50 and revenue of $490M-$510M.
- Q3 orders and backlog declined sequentially by 6% and 2%, respectively, primarily reflecting lower levels of original equipment orders in energy markets and lower orders for systems in food and beverage markets, which FLOW says has caused it to reassess Q4 expectations.
- Hecla Mining (HL +4.2%) moves higher after reporting preliminary 67% Y/Y increase in Q3 silver production to more than 4.31M oz. and a 20% Y/Y rise in gold production to 52.1K oz.
- HL says the strong performance from its mines prompts it to increase its 2016 silver production estimate to 16.25M oz., highest in the company's history, from its earlier outlook for 15.75M oz.
- HL says its cash and related holdings totaled $192M at the end of Q3, $33M more than at the end of Q2, and includes $16M of insurance proceeds for the Troy Mine reclamation.
- BHP Billiton (BHP +2.2%) is rejecting claims of tax evasion in Australia by pointing to $58B in taxes and royalties paid in the country over the past decade.
- Last week, former Australian Treasurer Wayne Swan accused BHP of funneling sales through its Singapore marketing hub to help lower its tax bill by "well over" A$1B.
- “There is now no question that BHP has been gaming the system," Swan says, to which CEO Jac Nasser responds, "If we were avoiding tax, clearly we're no good at it."
- Nasser says BHP’s average tax rate over the last decade including royalties is 40%, and that the company paid $85B in taxes and royalties globally over the period.
- Forecasts are calling for much of the South and Southwest to see above-normal temps through the end of October. While natural gas inventories as of Oct. 7 were 5.4% above the five-year average, the Texas heat means if production levels don't rebound, we could go into the winter with a deficit compared to last year, says Tradition Energy's Gene McGillian.
- Temps in the northeast this week are also likely to challenge upside records, but whether there's an en masse turning back on of A/Cs remains to be seen.
- Natural gas is higher by 1.6% to $3.2970. UNG +1.1%
- ETFs: UNG, UGAZ, DGAZ, BOIL, GAZ, KOLD, UNL, DCNG
9:10 AM| 9:10 AM
- Yamana Gold (NYSE:AUY) +2.7% premarket after saying it plans to spin off its Brio Gold subsidiary as a stand-alone public company to its shareholders.
- AUY says a spinoff will allow it to "better focus on its portfolio of six, soon to be seven, producing mines in top mining jurisdictions and on its organic growth pipeline."
- Last November, AUY tried to reduce its stake in Brio through a private share placement but later suspended the plan, citing poor market conditions; this time, AUY shareholders will receive purchase rights in Brio as a dividend in-kind, which they can use to buy shares in the unit.
- BASF (OTCQX:BASFY) faces a prolonged shutdown of production units at its chemical plant complex and headquarters in Ludwigshafen, Germany, where yesterday's explosion and fire killed two employees and injured dozens.
- BASF says two steam crackers at the plant remain halted and another 20 facilities are either stopped or only partially working.
- Analysts say some production units could be down for months as investigations by the company and government agencies take place, possibly tightening European ethylene markets in 2017, which could benefit Dow Chemical (NYSE:DOW) and LyondellBasell Industries (NYSE:LYB).
- Baader Bank analyst Markus Mayer says the closing of the two steam crackers mostly will impact BASF's basic chemicals division, which makes up ~21% of sales and 30% of EBITDA; he analyst estimates that 6% of annual earnings could be directly impacted by the fire, with as much as 3% of EBITDA at risk because the shutdown may last more than a quarter.
Monday, October 17, 2016
- CF Industries' (NYSE:CF) credit rating is downgraded to junk status, cut to BB+ from BBB- with a negative outlook, by S&P, just days after Moody's also lowered its rating for the company.
- S&P expects ongoing depressed pricing in the nitrogen fertilizer sector will weaken CF's credit metrics, adding that it does not anticipate any meaningful pricing recovery in 2017.
- Global nitrogen capacity is seen continuing to climb, keeping pressure on prices into 2017, and a slump in grain futures has added to weakness in fertilizer prices.
- Newmont Mining (NEM +2.5%) is upgraded to Overweight from Equal Weight at Barclays, despite fears of a Fed rate hike that have driven gold prices lower.
- The firm says it remains comfortable with its forecast for $1,350/oz. gold over 2017 as investors move past their immediate focus on the U.S. election and the next Fed move to consider what it sees as a continued high-risk, low growth global economy.
- Barclays thus believes NEM shares look increasingly attractive ahead of potentially favorable company-specific events; over the next several months, it looks for NEM to complete the sale of Batu Hijau, recalibrate and increase its dividend payout, and affirm development of its promising expansions in Ghana.
- The firm also likes OceanaGold (OTCPK:OCANF +2.4%), which has been hit by political risks in the Philippines, and thinks the miner will reaffirm its operations in the country and begin the ramp up of its key Haile project, its first in the U.S.
- Freeport McMoRan (FCX -1.1%) is resumed with an Underperform rating and $8 price target at BofA Merrill Lynch, which says balance sheet improvements are now priced in, and a sluggish copper outlook and risks related to Indonesia operations poise a real risk.
- BofA's global commodity team sees copper as the weakest in the base metals complex against a backdrop of sluggish global growth and large mines ramping up.
- After asset sales, FCX’s Americas and Indonesia mines become even more critical, and Indonesia challenges return to the forefront, specifically affected by export restrictions that could start in 2017 and an unclear future once FCX’s license expires in 2021.
- Deutsche Bank is more optimistic, retaining a Buy rating and $12.50 price target on valuation and expected corporate cost savings now that FCX has largely exited oil and gas following the $742M sale of its onshore California assets (Briefing.com).
- Teck Resources (TCK +3.8%) jumps to a 52-week high after RBC Capital upgrades shares to Outperform from Sector Perform and raises its price target to $30 from $23, and Credit Suisse upgrades the stock to Outperform from Neutral.
- Although coking coal prices are not likely to maintain all their recent gains, RBC believes TCK will benefit from a significant increase in realized coal prices in Q4 and 2017, with zinc prices also providing additional upside potential.
- “While production should rebound as the disruptions are resolved, we expect supply to remain constrained and for the price to maintain a significant portion of recent gains,” the firm says.
- RBC’s coking coal price forecasts climb to $165/metric ton from $100 for 2017, to $150 from $95 for 2018, and to $120 from $100 for 2019-20; the firm estimates roughly half of TCK’s 2016 revenue comes from coal, and every $20 increase in coking coal prices will boost EPS by $0.67.
- Several people have been injured and some are missing after explosions at two German chemical plants owned by BASF (OTCQX:BASFY -0.7%), which forced the company to shut down some production facilities.
- BASF says there was an explosion and a fire broke during work on pipelines in the north harbor area of its Ludwigshafen site, which is the world's largest chemical complex, covering an area of 10 sq. km and employing 39K workers.
- BASF also is investigating the cause of an explosion at its Lampertheim facility, which makes additives for plastics.
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