Friday, August 29, 2014
- Indonesia's government says it hopes Newmont Mining's (NYSE:NEM) local unit can resume exporting in September, following a new round of contract negotiations it says will begin next week.
- The country's chief economics minister says the government would use the successful recent negotiation Freeport McMoRan as a rough model for talks with NEM.
- Earlier this week, NEM withdrew an international arbitration case filed against the government relating to new export taxes.
3:57 PM| Comment!
- More negative sell side coverage is out for Cliffs Natural Resources (CLF -0.6%), as BofA reiterates its Underperform rating and $11 price target, apparently seeing the same challenges albeit with a little tweaking after meeting with CEO Lourenco Goncalves.
- BofA says the new CEO told its analysts that CLF has hired banks to pursue a sale of Australia iron ore mining, U.S. coal mining and other operations but not core infrastructure, a departure from initial plans floated by Casablanca Capital, and is visiting U.S. and Canada ops to focus on cost cutting and decide whether to continue expansion plans in Canada or shut down entirely.
- Axiom Capital thinks iron ore prices - and iron ore stocks - are heading for a big fall, and says it would initiate a short position in CLF at current share price levels.
- Iron ore prices are falling for a 10th straight day and have dropped 8.4% this month to five-year lows on concerns that global supplies are topping demand just as China’s recovery shows signs of faltering.
- Iron ore demand seems to be cooling in China, Commerzbank analysts say, adding that the usual seasonal uptick in Chinese demand likely will fail to materialize this year.
- Supply in the seaborne market also remains plentiful, where output is expected to exceed demand by 72M tons in 2014 and 175M tons in 2015, and prices will average $106/ton this year and $80 next year, Goldman Sachs estimates.
- Global miners are mostly lower following big losses yesterday: SID -2.6%, VALE -1.6%, CLF -1%, RIO -0.2%, BHP +0.2%.
- Morgan Stanley (NYSE:MS) is filing plans to build, own and operate one of the first U.S. compressed natural gas export facilities and submitted its application to the Department of Energy in May.
- The move is the first sign that the bank is returning to the physical commodity markets even as it sells its global oil business.
- Morgan Stanley, along with Goldman, are the only two Wall Street banks that are allowed to own and operate infrastructure of raw materials due to their "grandfather" status for any commodities activities they engaged in before 1997.
Thursday, August 28, 2014
- Uranium prices jumped the most in at least two and a half years after Cameco (NYSE:CCJ) moved to temporarily shut its McArthur River mine amid a labor dispute.
- McArthur River has the capacity to produce 18M lbs/year of uranium, or ~10% of global demand, according to Bank of Montreal analysts, and was the world’s largest uranium mine by production last year.
- Uranium prices are still only about half their levels just before the March 2011 earthquake and tsunami that led to the meltdown of three Japanese reactors and the suspension of the country’s nuclear power plants.
- ETFs: URA, NLR, NUCL
- Last night's fire at BP's 405K bbl/day Whiting refinery, the largest plant in the Chicago area, nearly doubled the premium for gasoline today on speculation that supplies will shrink.
- Spot gasoline in the Chicago region was $0.12/gal. above October futures on the Nymex, up from a $0.725 premium yesterday, while ultra low sulfur diesel rose by $0.275 to a $0.03 discount to Nymex futures and jet fuel jumped $0.65 to a $0.14 premium.
- The extent of the damage at BP's 105K bbl/day hydrotreater is not immediately clear, analysts are saying.
- ETF: UGA
- Concerns about falling iron ore prices are sending global miners and steel companies sharply lower: CLF -5.8%, SID -5.7%, VALE -4.4%, RIO -3.9%, X -3.9%, BHP -2.5%, ANR -2.5%, MT -2.4%.
- There’s too much supply of iron ore and prices will continue to fall further, deepening a slump that has hurt profits at the biggest miners, according to the head of Austria’s largest steelmaker.
- Iron ore prices fell to their lowest level in five years today to $87.30/ton, the lowest since 2009; Voestalpine CEO Wolfgang Eder sees prices at $90-$100/ton for the rest of 2014 before settling at $80-$90 in the medium term.
- Uralkali (OTC:URALL) sees North American demand for potash rising to ~10M metric tons in 2014, matching the record level of 2010, as farmers boost production of crops.
- Consumption will be sustained at least through this fall as farmers replenish declining nutrient levels in the soil after crop production that reached an all-time high this year, Uralkali says; the region’s H1 demand was ~6M tons, up 30% Y/Y.
- Uralkali, competing with Potash Corp. (NYSE:POT), Agrium (NYSE:AGU) and Mosaic (NYSE:MOS), sells ~5% of its output in the U.S.
- Syngenta (SYT -0.3%) is open to a deal, whether as an acquirer or as a target, perhaps with Dow Chemical (DOW -1.4%) or DuPont (DD +0.2%), Bloomberg speculates.
- SYT and Monsanto (MON -0.5%) held preliminary talks with advisers earlier this year about a combination that never came to fruition, which shows SYT’s willingness to make a deal, analysts say.
- One option discussed is a takeover of Dow’s agricultural business, which Dow is open to divesting; SYT also could merge with DuPont and then spin off the U.S. company’s non-agricultural businesses.
- Dow may be a better candidate to use a SYT acquisition to relocate overseas for tax advantages, analysts suggest, but with the Obama administration looking at ways to discourage tax-inversion acquisitions, DuPont’s well-known brands and sales to the U.S. military may spark greater political pushback.
Wednesday, August 27, 2014
- Commodity trader and miner Glencore (OTCPK:GLCNF, OTCPK:GLNCY) and Chinese nickel producer Jinchuan Group are the front runners to buy BHP Billiton's (NYSE:BHP) Australian Nickel West division, Reuters reports.
- Estimates of Nickel West's value vary greatly, with some analysts and industry sources saying it's worth up to a $1B while others tag negative figures to the asset that they say is burning cash.
- Nickel West was not included in BHP's de-merger plans announced last week, but CEO Andrew Mackenzie said shortly thereafter that the company was in talks to sell all or part of the unit.
- DuPont (NYSE:DD) agrees to pay $1.28M to settle alleged violations tied to hazardous chemical leaks at the Belle chemical plant in West Virginia during 2006-10 that left one DuPont worker dead, the U.S. Justice Department and EPA announce.
- DuPont also agrees to implement new procedures to improve its response to alarms over hazardous releases, which are expected to cost $2.28M; the company already has spent ~$6.83M to comply with a 2010 order from the EPA over Clean Air Act violations.
- Newmont Mining (NYSE:NEM) has withdrawn its arbitration claim against Indonesia's government, which Sterne Agee analyst Michael Dudas should pave the way for a ramp-up for copper production and exports from Batu Hijau and help to remove an overhang for NEM shares.
- NEM’s shares underestimate where gold prices may trade, the firm believes; as longer-term plans emerge supportive to margins and returns, NEM’s valuation should regain support based on its assets, commitment to cash flow, and margin and balance sheet strength.
- The firm considers Buy-rated NEM its favorite large-cap North American gold equity.
- The U.S. will not go ahead with planned import duties on specialized steel from Japan, Germany and Poland after the U.S. International Trade Commission found the imports were not harming local industry.
- The U.S.-based public affairs lobby of the Japanese steel industry welcomes the decision, which came after a complaint lodged by AK Steel (AKS -2.9%) and others.
- The decision affects companies including Nippon Steel & Sumitomo Metal (OTC:NISTF) and Germany's ThyssenKrupp (OTC:TYEKY, OTCPK:TYEKF), which had been named in the dispute.
- Also: X -1.1%, STLD -0.4%, WOR -0.6%.
- ETF: SLX
- Dow Chemical (DOW +1.2%) reportedly has started a process to sell two of its specialty chemicals subsidiaries that could fetch nearly a combined $2B, part of its effort to divest several billion dollars in non-core assets by 2015.
- Dow is said to have hired investment bankers including Morgan Stanley to sell its Angus Chemical and AgroFresh subsidiaries.
- The two units are in addition to the epoxy business and some chlorine and derivatives assets Dow previously said it has earmarked for sale.
- Fuel distributor Cosen (CZZ +4.6%) is sharply higher following news that the U.S. government may tax imports of Mexican sugar at fees as high as 17%.
- U.S. sugar prices are up 18% since March, ending yesterday at a nearly two-year high of 26.35 cents/pound.
- CZZ is active in the production and sale of ethanol and other products derived from sugarcane.
- Methanex (MEOH -1.7%) says Trinidad's National Gas Co. has advised it to expect higher gas curtailments in the country during H2 than in H1, due to maintenance and tie-in activities “and the ongoing mismatch between upstream commitments to supply NGC and downstream demand from NGC’s customers."
- MEOH is operator of two plants in Trinidad, holding respective 100% and 63% interests for a combined proportional share of capacity of ~2M metric tons.
- Fortuna Silver Mines (NYSE:FSM) reports estimated measured and indicated resources for its San Jose mine in Mexico rose 42% in contained silver oz. and 29% in contained gold oz. from the July 4, 2013 resource estimate.
- H1 production totaled nearly 2.1M oz. silver and ~15.5K oz. gold, 10% and 8% above budget, respectively; production guidance for 2014 is for the processing of 683K metric tons of ore averaging 203 g/t of silver and 1.56 g/t of gold, resulting in output of 4M oz. of silver and 30.4K oz. of gold.
Tuesday, August 26, 2014
- Barrick Gold (NYSE:ABX) is eliminating its corporate development team, including the head of the development team, with more cuts in the works as it looks to further cut costs, Reuters reports.
- ABX moved to lay off up to a third of the staff at its corporate headquarters in Toronto and other offices just over a year ago.
- Brazil coffee production could end up down 18% Y/Y when the harvest ends next month. A severe drought in the nation has destroyed a large swath of crops.
- The shortfall in the nation is included in a forecast from Citigroup that calls for a global coffee deficit which could last until 2016 and pressure prices.
- Related stocks: GMCR, SBUX, JVA, SJM, KRFT, DNKN
- Related ETFs: JO