Friday, April 17, 2015
- Celanese (NYSE:CE) hit a new 52-week high today and closed with a 15.5% gain after reporting Q1 earnings that routed analyst estimates and raising its FY 2015 EPS guidance to $5.60-$5.90 from an earlier outlook for $5.00-$5.50 and above the $5.21 consensus estimate.
- CEO Mark Rohr said CE began 2015 with "significant headwinds at the macro level," including an uncertain macroeconomic environment and volatile currency markets as well as the company's methanol transition and tow inventory de-stocking, but CE's strong Q1 commercial performance "gives us confidence that we can overcome these headwinds."
- UBS raised its price target on CE to $69 from $65 following the Q1 results, citing the increased guidance and cost savings initiatives, while UBS reiterated its Buy rating on the shares.
- CE also says it is considering expanding its south Texas chemical plant to produce methanol; the $800M project, to be built under a JV with Japan's Mitsui, would have the capacity to produce 1.3M tons/year of methanol.
- Thompson Creek Metals (TC -5.2%) reports Q1 concentrate production for its Mount Milligan mine in British Columbia totaled 30.3K dry tons, with 15.4M lbs. of payable copper and 46.1K oz. of payable gold which were respective 8% and 18% Y/Y increases.
- TC says recent improvements at Mount Milligan should allow it to increase secondary crushing for the rest of 2015, and achieve throughput of ~60K tons/day by year's end.
- TC also says Q1 molybdenum sales from the Thompson Creek Mine and 75%-owned Endako Mine totaled 4.3M lbs.
- Royal Gold (NASDAQ:RGLD) says its subsidiary received 26.2K oz. of gold in Q1 from Mount Milligan as part of its purchase and sale agreement with TC.
- Three of the world's largest pension funds - Ontario Teachers’ Pension Plan, British Columbia Investment Management, and the Netherlands’ PGGM Vermogensbeheer - say they will vote against the re-election of Barrick Gold’s (ABX +1.8%) board, citing poor corporate performance and excessive compensation.
- The pension funds' stand is a slap against ABX Executive Chairman John Thornton, whose $13M pay package for 2014 has been widely criticized by investors.
- None of the three pension funds are among ABX’s biggest investors, and some other shareholders have expressed support for the board, but complaints from the funds may act as a rallying call for protesters.
- Peruvian Pres. Humala is throwing his weight behind Southern Copper's (SCCO -0.2%) stalled $1.4B Tia Maria copper project, sending delegations of cabinet ministers to persuade reluctant local residents of the benefits of the mine.
- Recent protests against Tia Maria echo other fights between anti-mining groups, farmers and mining companies over the last few years over who gets to use precious water supplies in some of Peru's extremely dry areas.
- Peru’s Energy and Mines Ministry issued a statement this week saying SCCO has guaranteed it will not touch water to be used for farming, and that dust from the mining process will be controlled.
- SCCO expects mining at Tia Maria will start in the middle of 2017, once a construction license is granted.
- Syngenta (SYT -3.8%) reports Q1 sales of $4.02B, down 14% from $4.68B in the same period a year ago and below analyst consensus of $4.43B, as the strength of the dollar and a severe winter in the U.S. weakened demand for its crop protection products.
- A prolonged winter delayed the start of the planting season in the U.S., pushing sales in North America down 17%, while sales in Europe, Africa and the Middle East dropped 13% and Latin America sales tumbled 17%.
- SYT expects its North America business to recover in Q2 and maintains its full-year sales targets.
- General Moly (GMO +53.7%) surges higher after announcing a strategic partnership with AMER International Group to become a major shareholder, which will help its ability to secure full project financing for its Mt. Hope Project.
- China-based AMER says it will work with GMO to procure and support a $700M senior secured term loan from a major Chinese bank or banks for development of Mt. Hope, and says it will guarantee the bank loan.
- GMO estimates Mt. Hope molybdenum production will total 16.5M lbs./year for the first five years.
Thursday, April 16, 2015
- Turquoise Hill Resources (TRQ -1.7%) is lower after TD Securities downgrades shares to Hold from Speculative Buy on valuation, even as the firm raises its stock price target to C$5 from C$4.50.
- TD says it continues to expect TRQ to reach a resolution over Oyu Tolgoi with Mongolia's government sometime in H2 2015 and the resumption of underground development in 2016; in the meantime, it expects TRQ to generate solid free cash flow in 2015, supported by strong production and low cash costs at Oyu Tolgoi.
- U.S. crude oil rose for the sixth straight session to finish at another new high for the year, settling $0.32 higher at $56.71/bbl on news that an Al Qaeda-related tribal group took control of a major southern oil terminal in Yemen after military forces protecting it withdrew from the site.
- The terminal is one of the major hubs for the Hadramout region, exporting an average of 120K-140K bbl/day of crude from fields in the area.
- Crude posted its gains despite a report from OPEC that Saudi Arabia boosted crude output by 658K bbl/day in March to an average of 10.29M bbl/day - roughly half the daily production from the Bakken formation in North Dakota.
- OPEC also predicted output from U.S. oil fields would stall out and eventually fall later this year as producers park hundreds of drilling rigs, expecting U.S. liquids production to decline by ~600K bbl/day from around the middle of the year to Q4.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, TWTI, OLEM
- B2Gold (BTG +2.9%) reports its Q1 consolidated gold production rose 20% Y/Y to nearly 116K oz. with gold revenue totaling $139M, both quarterly records for the company.
- BTG says its new Otjikoto mine in Namibia successfully transitioned into production, contributing 18.8K oz. of pre-commercial production and $23M of pre-commercial sales; the Otjikoto mill expansion from 2.5M metric tons/year to 3M/year remains on schedule, expecting to increase gold production starting in September.
- BTG says it is on track to meet its 2015 guidance of 500K-540K oz. of gold production at all-in sustaining costs of $950-$1,025/oz.
- North American Palladium (PAL -46.1%) is halted after the NYSE determines it is no longer suitable for listing on NYSE MKT due to the "abnormally low" trading price of its common stock.
- Just yesterday, PAL announced a recapitalization plan that included a $25M interim credit facility and said it planned a strategic review process to solicit interest in a sale of the company.
- Thousands of workers at Eldorado Gold's (EGO +0.9%) Skouries gold mine in Greece protest against the new government's decision to revoke the company's license to develop the mine.
- EGO has spent ~$400M in the project since 2012 and would invest another $700M by 2017 to build a processing plant and develop two mines in the area, but Prime Minister Tsipras' leftist government, which took power in January, revoked the company's license, saying it wanted to examine whether it was in line with town planning and environment regulations.
- Some 2,000 people are currently employed by the project and EGO would hire another 1,000 by 2020, in a country struggling with record high joblessness.
- The iron ore industry is “facing an existential challenge,” Goldman Sachs says as it lowers its iron ore forecast and now sees the price falling to average $52/metric ton this year, $44 in 2016, and $40 in 2017 and 2018.
- First-tier producers will remain profitable although their margins will be squeezed, but as much as half of tier 2 production capacity is at risk, the firm says; tier 1 consists of BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO) and Vale (NYSE:VALE).
- That's not a vote of confidence in the big miners who show no signs of slowing production amid weakening demand, which has sent iron ore prices below $50 this month.
- Goldman cuts Rio and Fortescue Metals (OTCPK:FSUMF) to Sell, and Rio will need to utilize its balance sheet to pay dividends, while shares are expensive at 20x 2016 estimated earnings relative to history, the firm says; BHP is downgraded but only to Neutral, as it is the least exposed to iron ore among the big miners.
- Several others - including J.P. Morgan, UBS and Citigroup - cut their iron ore price estimates earlier this month.
Wednesday, April 15, 2015
- Southern Copper's (NYSE:SCCO) says Peru's government has approved its planned $1.2B expansion of its Toquepala mine, putting it on track to double the operation's concentrating capacity.
- SCCO says the expansion will boost the capacity of the mine's copper concentrator to 120K metric tons/day from the current 60K.
- SCCO also says it expects the government to issue a construction permit for its stalled $1.4B Tia Maria project in coming months, despite ongoing protests.
- Rubicon Minerals (RBY +10.4%) says the development and construction of its Phoenix Gold Project in Red Lake, Ontario, is on schedule for projected initial production in mid-2015.
- RBY says the mill commissioning process has started ahead of schedule and is expected to continue throughout Q2.
- RBY says it has completed 85% of the original underground development planned prior to the start of projected initial production.
- May crude oil futures rose 6% today to $56.25/bbl, the highest settlement of the year, enjoying a boost from a higher global oil demand forecast from the International Energy Agency and another rise in U.S. crude supplies.
- The weekly inventory report showed a lower-than-expected 1.294M-barrel build in inventories, enough to send U.S. crude oil inventories to 483.7M barrels for their highest level at this time of year in at least 80 years.
- The narrative that oil prices may have found a bottom is beginning to pick up, which is helping drive buying interest in energy stocks; among today's gainers are XOM +1.9%, CVX +1.6%, COP +1.6%, BP +1.4%, RDS.A +2.9%, HES +4.5%, SLB +2.9%, HAL +3.9%.
- ETFs: USO, OIL, XLE, UCO, UWTI, VDE, ERX, OIH, SCO, XOP, BNO, DBO, DWTI, ERY, DIG, DTO, DUG, USL, XES, IYE, IEO, IEZ, DNO, FENY, PXE, PXI, PXJ, OLO, SZO, RYE, FXN, TWTI, OLEM, DDG
- The Canadian unit of Bunge (BG +0.3%) and Saudi Agricultural and Livestock Investment Co. say they have formed a joint venture to acquire a 50.1% stake in the Canadian Wheat Board for C$250M.
- The Canadian Wheat Board operates seven grain elevators in western Canada and port terminals in Thunder Bay, Ont., and Trois-Rivières, Que., and is building four other grain-handling facilities.
- BG’s export terminal in Quebec City and four elevators in Quebec also will be part of the transaction.
- Australia’s Treasurer Joe Hockey plans to discuss iron ore demand with his Chinese counterpart after rising output from Rio Tinto (NYSE:RIO) and BHP Billiton (NYSE:BHP) helped drive the metal’s price below $50/metric ton this month.
- "When you have an iron ore price that has dropped as dramatically as it has in the last 12-18 months, we’ve got to build shock absorbers into our system to cope with it,” Hockey says.
- China, which buys about two-thirds of all iron ore transported by sea, grew last year at the weakest pace since 1990 and likely will slow further in 2015, and the country’s consumption of iron ore probably will remain weak as steel demand contracts.
- RIO plans output of 330M tons this year from 295M in 2014, while BHP targets 225M tons this year from 204M; Vale (NYSE:VALE), the world's leading iron ore producer, expects to produce 340M tons this year.
- North American Palladium (PAL -47.3%) says it has arranged a $25M interim credit facility with Brookfield Capital Partners to help reduce debt and enhance liquidity.
- PAL says it has obtained covenant relief from senior secured lenders until Aug. 15; although PAL produced ~45.6K payable oz. of palladium in Q1, covenant relief was required due to the decline in palladium prices and weakening of the Canadian dollar, as well as lower production volumes in March combined with higher expenses, which hurt minimum shareholders' equity and leverage ratio covenants.
- PAL also says it plans a strategic review process to solicit interest in a sale of the company.
- Barrick Gold (NYSE:ABX) says it welcomes the decision by Zambia's government to set its mining royalties at 9% for both open-pit and underground mines, but that it will review the details before reconsidering plans to shutter its Lumwana copper mine.
- Zambia's January decision to increase royalties for open pit mines to 20% from 6% and those for underground mines to 8% from 6% had rattled unions, miners and investors, forcing the government to review the plan; companies such as Glencore (OTCPK:GLCNF, OTCPK:GLNCY) and First Quantum Minerals (OTCPK:FQVLF) stopped expansion plans worth $1.5B.
- The new 9% rate still would be considered on the high end compared to other mining jurisdictions, but it might make more mines viable.
Tuesday, April 14, 2015
- The merger of equals between Alamos Gold (NYSE:AGI) and AuRico Gold (NYSE:AUQ) makes no sense for AGI shareholders, as the deal "effectively rescues" AUQ from its balance sheet troubles and provides AGI no premium in exchange, says TD Securities analyst Steven Green.
- The deal's enterprise value of $392 for AGI vs. AUQ's EV of a bit more than $1B means the merger undervalues AGI, Green says in downgrading AGI to Hold from Buy and cuts his stock price target to $9 from $11.
- The deal effectively puts both miners into M&A play, Green says, speculating that Agnico Eagle Mines (NYSE:AEM), Kinross Gold (NYSE:KGC) and Iamgold (NYSE:IAG) could be interested in AGI.
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