Wednesday, November 25, 2015
- Tongue River Railroad Co. -- a joint project by BNSF Railway, Arch Coal (ACI +2.9%) and a limited liability financing company -- has indefinitely suspended plans for a $400M railroad to haul coal from a proposed mine owned by Arch Coal.
- The Otter Creek Mine on the Wyoming-Montana border has run into concerns including delayed permits and a softening coal market overall. The TRRC had hoped to begin production at the mine by January 2017, but "with mine permitting delays and near-term market weakness, that timeline now appears unachievable."
- The company hasn't withdrawn its application, though, and BNSF's Matt Jones says TRRC could renew it once Montana issues a mine permit and lawsuits are resolved.
- Before the report, Arch Coal shares had jumped 15.7% after hours, following on a strong 2.9% gain today.
- Endeavour Silver (NYSE:EXK) has struck a deal with Cowen to sell up to $16.5M worth of shares via at-the-market distributions. Cowen will receive a discount equal to 3% of the gross sales price of sold shares.
- Net proceeds and existing cash will be used to "expedite the Company's brownfields exploration drilling programs at existing operations in order to extend their mine lives, to advance the exploration and development of the Company's Terronera Project with further drilling, engineering and related studies, and to add to working capital."
- The Canadian silver miner had $22.8M in cash at the end of September, and $22M in credit facility debt.
- Scorpio (NYSE:SALT) is selling two Capesize dry bulk vessels and four newbuilding Capesize dry bulk vessels under construction for $227M.
- Two of the vessels were delivered to Scorpio this year. One is expected to be delivered in Q4, and three in Q1 2016.
- SALT +2.4% after hours to $0.89. The dry bulk shipper had $274M in cash at the end of September, and $328M in bank loans, and $74M in senior notes.
- The U.S. oil rig count falls by 9 to 555. One year ago it was 1,851.
- The total rig count of 744 is lower by 13 from last week and by 1,173 from a year ago.
- The news seemed to be enough to help crude to a modestly higher close at $42.93 per barrel.
- Previously: Crude inventories higher by 1M to 488.2M barrels (Nov. 25)
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, UGA, USL, DNO, UHN, OLO, SZO, OLEM
- Citing high toxicity levels for non-target plants, the EPA has revoked the registration of Dow Chemical's (DOW -2.6%) Enlist Duo herbicide.
- Enlist Duo, which targets severe weed resistance (hinders crop production), was approved last month with a series of restrictions. Dow says it's working with the EPA to provide additional assurances for the product.
Tuesday, November 24, 2015
- Some analysts continue to see tough times ahead for U.S. Steel (NYSE:X), but BB&T analyst Garrett Nelson awards Buy ratings to Nucor (NYSE:NUE) and Steel Dynamics (NASDAQ:STLD), believing NUE is “worth every bit of its premium valuation, and then some," while STLD is "attractively valued and positioned for future growth."
- NUE and STLD are "high-margin, FCF-generating, ROIC-advantaged" recycling companies, and among the metals and mining industry’s greatest success stories of the past few decades, Nelson says, adding that YTD declines in the stocks have created attractive entry points.
- Nelson says the biggest headwind faced by NUE and STLD is just general investor sentiment toward steel and metals and mining equities.
- Black gold had its best session in a few weeks today, but has given up some of that ground after hours following API data reportedly showing a 2.6M barrel gain in inventories for the week ended Nov. 20.
- Analysts had expected a decline of 200K barrels.
- Crude is trading at $42.62 per barrel after climbing above $43 earlier today.
- USO -0.5% after hours
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, UGA, USL, DNO, UHN, OLO, SZO, OLEM
- AK Steel (NYSE:AKS) appoints Jaime Vasquez as its new CFO and VP of finance, effective Jan. 1, replacing Roger Newport, who already was named the company's new CEO.
- Vasquez was Director of Finance upon joining AKS in 2014, after earning 30 years of finance, investor relations and sales management experience.
- Potash Corp. (POT +1.5%) is preparing a new takeover approach for K+S (OTCQX:KPLUY), which likely would come next spring, Reuters reports, citing German investor newsletter Platow Brief.
- POT on Oct. 5 withdrew its €7.9B takeover proposal for K+S, citing the decline in global commodity markets and a lack of engagement by K+S management.
- Also: AGU +1.7%, MOS +1.8%, IPI -1%.
- Alcoa (AA -0.1%) says Roy Harvey will become the CEO of its traditional aluminum smelting and refining operations, which the company plans to separate from its faster growing plane and car parts business.
- Harvey has been president of the company's global primary products business, where he managed operations of aluminum smelters, alumina refineries and bauxite mines.
- Current Alcoa CFO William Oplinger will continue in the same role at the smelting and refining business, and Ken Giacobbe, who currently is the finance chief of the company's engineered products and solutions business, will be CFO of the plane and car parts business.
- Alcoa already had said its current CEO Klaus Kleinfeld would lead its plane and car parts business; the separation of the two businesses is expected to be completed in H2 2016.
- Australian miners BHP Billiton (BHP +0.5%) and Rio Tinto‘s (RIO +0.5%) dividend policies are not sustainable at current levels, Goldman Sachs says, as reported by Barron's.
- Goldman considers 20% of the miners' EBITDA - their 40-year long-term average - to be sustainable, but BHP and Rio currently are running at twice as much as the long-term average.
- The firm estimates BHP and Rio will generate a respective $15B-$18B and $11B-$17B in EBITDA; using its 20% EBITDA sustainable level, the miners could afford to pay out only $0.62 and $1.41 in annual dividends, 50% and 65% of the current level.
- Alcoa (AA +0.3%) is backing off its plan to close smelting operations in upstate New York after Gov. Cuomo's administration agreed to a series of incentives, saving ~600 jobs.
- Under the terms of the agreement, the Massena West smelter will remain open for at least three and a half years, and the state will offer up to $30M in electricity savings and $38M for upgrades and improvements at the facility.
- Alcoa says the plant will keep operating at full capacity of 130K metric tons/year.
- Three weeks ago, the company announced plans to curtail the New York plant along with two smelters in Washington state which produce substantially more primary aluminum than Massena.
- Schnitzer Steel (SCHN +9.9%) soars after Morgan Stanley upgrades shares to Equal Weight from Underweight with a $21 price target, raised from $14, believing the worst is over for the company given that the stock has underperformed its peers by ~50% over the last five years.
- The firm expresses optimism about SCHN's mid-cycle margins and free cash flow yield, but says it "cannot get more constructive on the name as long as the global steel market remains grossly oversupplied."
- Kinross Gold (KGC +6.8%) is higher after RBC Capital upgrades shares to Sector Perform from Underperform with a $2.50 price target, raised from $2.25, seeing KGC's $610M acquisition of assets in Nevada - a 50% stake in Round Mountain it does not already own and a 100% stake in Bald Mountain - as a strategic win.
- RBC says the deal reduces KGC's geopolitical risk, as estimated Americas gold production for 2016 climbs to 59% from 53%, and the deal is accretive on various metrics including net asset value and cash flow per share.
- The firm says the Nevada lands "have significant exploration upside and the potential to extend the current mine lives significantly," adding that KGC paid a premium given the work already done at both projects and their mine lives.
- The price of iron ore has dropped to its lowest level in at least seven years, Financial Times reports, but share prices of the world's top iron ore suppliers are higher in early U.S. trading: BHP +1%, RIO +0.4%, VALE +0.2%.
- The price of iron ore for China delivery hit $43.4/metric ton, a record low going back to 2008, amid slowing demand for steel in China and oversupply from the big miners.
- Through October, China's YTD steel output fell 2.2% Y/Y to 675M metric tons, while October output was down 3.1% Y/Y at 66M metric tons.
- Commodities specialist Andy Xie predicts iron ore prices will fall below $40 before year-end, and could sink as low as $30 for much of next year.
- U.S. Steel (NYSE:X) -3.8% premarket after BofA Merrill Lynch cuts its stock price target to $3 from $7 and says it has concerns about the company's liquidity.
- The firm also cuts its estimated 2016 hot rolled coil forecast to an average $455/short ton from $475.
- Yesterday the company announced the idling of operations at its Granite City, Ill., plant.
- Also, AK Steel (NYSE:AKS) -4.3% premarket.
- The 2.2B cf torrent of mud and debris unleashed by the dam burst at Samarco's iron ore mine in southeastern Brazil has reached the Atlantic Ocean.
- The mud flowed downstream into the Doce River, where it devastated wildlife and compromised the drinking water source for hundreds of thousands of people; Brazil's Environment Minister predicts it may take up to 30 years to get rid of the toxic sludge from the Doce basin.
- Eleven bodies have been found since the dam burst on Nov. 5, but only seven of them have been identified; 12 people are still missing.
- At BHP’s annual meeting in Perth on Friday, protesters called on the company to do more to help with clean-up efforts, and Vale's (NYSE:VALE) headquarters in Rio de Janeiro has seen regular protests, but the government also has come in for strong criticism for the laxity of the dams’ inspection regime and Brazil’s weak environmental legislation.
- Crude took a heavy dip Monday morning on concerns about a strong dollar and worries OPEC would ramp up output at its next meeting.
- Prices then shot up after Saudi Arabia pledged to work towards stabilizing the market, but then fell back and closed the session lower. What will happen today?
- Crude futures +0.7% to $42.06/bbl.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, OLEM
Monday, November 23, 2015
- Barrick Gold (NYSE:ABX) lowers its 2015 production forecast because of a mechanical problem at its jointly owned Pueblo Viejo mine in the Dominican Republic that will reduce output until mid-January 2016.
- ABX says it now expects to produce 6M-6.15M oz. of gold this year, down from its previous estimate of 6.1M-6.3M oz.
- ABX owns 60% of Pueblo Viejo, while Goldcorp (NYSE:GG) owns the remaining 40%.
- U.S. Steel (NYSE:X) says it will temporarily idle its Granite City Works steelmaking and finishing operations in Granite City, Ill., affecting ~2K employees at the plant who had received WARN notices in early October.
- The company says it will continue steelmaking operations in Indiana, Michigan and Pennsylvania as well some finishing operations in Alabama.
- SunCoke Energy (SXC, SXCP) says it expects U.S. Steel to honor its contract to supply coke to blast furnace operations through 2025.
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