Thursday, March 26, 2015
- Timmins Gold (NYSEMKT:TGD) calls off a private placement worth up to $10M that had been announced on Feb. 17; the offering was priced at C$1.25/share, but shares currently are trading below C$1.
- Also today, Orbite Aluminae (OTCQX:EORBF) called off an offering of debentures and warrants that was expected to raise as much as C$15.5M.
- Six gold companies raised nearly $800M in the span of two days in January, but raising capital has been a challenge ever since; the one major offering that was announced in March - Silver Wheaton’s (NYSE:SLW) $800M bought-deal - was priced too high and led to big losses for the underwriters, and has put a chill in the mining financing market.
- Rio Tinto (RIO -1.2%) CEO Sam Walsh rejects as “hare brained” a request by a rival miner for the industry to stop the slide in iron ore prices by collectively capping output.
- Mining execs say any attempt to agree a cap on production would leave companies exposed to lawsuits and fines for anti-competitive pricing in multiple jurisdictions, as well as complaints and potential litigation from customers.
- The arguments show the extent to which miners have been hurt by the drop in prices, although the largest producers such as BHP, Vale (NYSE:VALE) and Rio, continue to insist they can withstand the slump.
- Andrew Forrest, CEO of Fortescue Metals (OTCPK:FSUMF) - the world's no. 4 iron ore supplier which earlier this month pulled out of a proposed debt refinancing because of unfavorable market conditions - suggested this week that a production cap by the big iron ore miners would help prices.
- Southern Copper (SCCO -0.5%) is initiated with a Hold rating and a $32 price target at Brean Capital, which believes SCCO's significantly richer valuation than peers is justified by a deep bench of opportunities and strong balance sheet from which to pursue them.
- As SCCO pursues its aggressive expansion program, the firm projects the majority of the company's capex budget - currently $4.3B through 2017 - will be funded by cash from operations, with only a modest temporary increase in leverage in 2015.
- On the whole, Brean believes SCCO is one of the better positioned names to not only weather the cyclical downturn in commodity pricing, but also to expand and execute growth opportunities ahead of and during a market recovery.
- Alcoa (NYSE:AA) has been approved for a $259M loan from the $25B U.S. Energy Department program that helped fund flops like Fisker and Solyndra as well as successes such as Tesla, which is resuming lending after a four-year hiatus.
- The Alcoa loan will help the company upgrade a plant in Tennessee that supplied the metal for the new all-aluminum body Ford F-150 pickup truck unveiled last year.
- Franco-Nevada (FNV +2.4%) opens higher after reporting Q4 earnings that slightly missed analyst expectations along with a 23% Y/Y increase in revenues.
- FNV also raised its dividend 5% to $0.21/share.
- Q4 production rose 33% Y/Y to a quarterly record 92.7K gold equiv. oz.
- For FY 2015, FNV expects attributable royalty and stream production to total 335K-355K gold equiv. oz. from its mineral assets and revenue of $20M-$30M from its oil and gas assets; of the 335K-355K gold equiv. oz., 210K-220K are expected from FNV's various stream agreements.
- FNV said it expects to fund $300M-$350M in 2015 in connection with its precious metals stream agreement on Cobre Panama.
- FNV also issued a five-year outlook, which analysts said was lower than expected.
- Saudi airstrikes are targeting the military assets of Yemen's Houthi militants after (Saudi-backed) president Abed Rabbo Mansour Hadi fled the country yesterday.
- Iran chimes in, its foreign minister saying the Saudi actions will further destabilize the region.
- Gold (NYSEARCA:GLD) is up 1.1% on the session to $1,210 per ounce, and has now erased what previously were sizable losses for March.
- ETFs: GLD, IAU, SGOL, UGL, DGP, GLL, UGLD, DZZ, GLDI, OUNZ, DGL, DGZ, DGLD, AGOL, TBAR, UBG, BAR, GYEN, GEUR, BARS
Wednesday, March 25, 2015
- Vale (NYSE:VALE) is looking to raise cash but may find it easier to dispose of giant ships and part of its stake in a rail logistics business before selling mining assets, Reuters reports, citing four sources with knowledge of the situation.
- With several cash-raising options discussed earlier now looking more problematic as the risk associated with both Brazil and mining-related investments continues to mount, selling a group of Valemax ore carriers and disposing of all or part of a 43.8% stake in rail freight firm MRS Logística are said to have become the best options for Vale.
- Vale has to fill a $1.4B cash flow shortage this year, according to analyst estimates.
- U.S. Steel's (X +1.4%) announcement that it will idle an Illinois plant and lay off more than 2,000 workers is providing a sector-wide boost, as AK Steel (AKS +3.2%) and Steel Dynamics (STLD +1.3%) also enjoy strong gains.
- With hot-rolled coil prices yet to find a bottom and currently at $471/ton, Citi analysts say it makes sense that U.S. Steel would continue to take actions to rationalize production and streamline operations to mitigate costs.
- Perhaps even more important, firing 2K-plus employees likely will be used as further evidence of damage to the U.S. steelmaking industry from high imports flows that were primarily responding to elevated U.S. price premiums, boosting the case for higher tariffs, Citi says.
- “The planet is destabilizing and everybody knows it - the el-Mandeb chokepoint is the entire story," says Richard Hastings from Global Hunter Securities.
- Western-backed President Abed Rabbo Mansour Hadi has reportedly fled the Yemen port of Aden by boat as militants were closing in.
- WTI crude is higher by 3.5% to $49.19 per barrel.
- USO +3.9%
- ETFs: USO, OIL, UCO, SCO, BNO, UGA, DTO, DBO, UWTI, USL, DWTI, UHN, DNO, SZO, OLO, TWTI, OLEM
- Eastman Chemical (EMN -0.4%) says it will close its Workington acetate tow manufacturing site in the U.K., resulting in costs and restructuring charges totaling ~$100M, primarily in H1 2015.
- EMN says Workington has 24K metric tons of acetate tow manufacturing capacity, and expects savings from the closure of $20M in annual operating costs and another $20M total of infrastructure capital expenditures planned for the next five years.
- EMN will continue to manufacture acetate tow at its facilities in Kingsport, Tenn., and Ulsan, Korea.
- IAMGOLD (IAG -2.6%) says three of its directors, including founder and current Chairman Bill Pugliese, will retire and not stand for re-election at its annual meeting scheduled for May 11.
- Pugliese founded IAG in 1990, has been its Chairman since 1993 and served as CEO until 2003; he participated directly in the evolution of the company, including the development of the Sadiola concession in Mali.
- IAG says it will keep the size of the board at seven after the retirements, instead of the current 10.
- Orange juice futures are 21% higher in a three-day rally tied to concerns over crops in Florida.
- The steep rise follow a 3-month period of falling OJ prices.
- Leading brands Tropicana (NYSE:PEP) and Minute Maid (NYSE:KO) have some pricing pressure on them already with OJ demand in decline across the U.S.
- Retail analysts think the popularity of smoothies and the unpopularity of sit-down breakfasts with younger generations have cut into sales.
- Orange Juice futures chart
- U.S. Steel (NYSE:X) +1.2% premarket on news it will consolidate its North American flat-rolled operations and temporarily idle its Granite City Works operations in Granite City, Ill., impacting the employment of more than 2,000 employees.
- The company says the move is the result of challenging market conditions including reduced steel prices, unfair trade, imports and fluctuating oil prices.
- Turquoise Hill Resources (NYSE:TRQ) +5.5% premarket after reporting in-line Q4 earnings, a big revenue increase and a strong production outlook.
- Mongolia's Oyu Tolgoi, TRQ's principal mineral resource property, produced 589K oz. of gold in concentrates and 148.4K metric tons of copper in 2014, compared to 157K oz. of gold in concentrates and 76.7K metric tons of copper in 2013.
- Based on the current mine schedule, TRQ expects Oyu Tolgoi to produce 600K-700K oz. of gold in concentrates and 175K-195K metric tons of copper during 2015, and expects production from the high-grade core of the southwest zone to resume in mid-2015.
- Rio Tinto (NYSE:RIO), which owns 51% of TRQ, +1.8% premarket.
Tuesday, March 24, 2015
- Police in Peru clashed today with opponents of Southern Copper's (NYSE:SCCO) $1.4B proposed Tia Maria mine in protests that threaten to further delay the project.
- Protesters called for the government to end the project because they say it will pollute agricultural valleys; the local police chief says 600-700 protesters, mostly women, took part in today's march in the second day of protests.
- SCCO has said it expects to receive a building permit by the end of this month following the government's key approval of its environmental plan last year; the company hopes the project will produce 120K metric tons/year of copper.
- Robert Perri, Paragon Shipping's (NASDAQ:PRGN) CFO since 2013 and its financial officer for the prior 3 years, is leaving the company to "pursue a different career path more in line with my past experience." CEO Michael Bodourglou will serve as interim CFO until a replacement is found.
- The drybulk shipper also announces its Q4 report will arrive after the March 31 close. The CC will take place the following morning at 9AM ET.
- Investors largely take in stride Freeport McMoRan's (FCX -0.7%) 84% dividend cut, apparently agreeing with analysts at Jefferies who say the cut was “sensible” because it saves the company $1.1B/year of cash.
- FCX "is not entirely out of the woods yet as macro risks clearly remain, but this dividend reduction is a step in the right direction and could indicate a bottom in Freeport shares," says the firm's Christopher LaFemina.
- The dividend was so high that investors probably knew that paying out $1.25/year might be hard to continue, but an 84% cut - particularly with the recent bounce in copper prices - is a message that FCX is "worried about more than just the next few earnings reports," 24/7's Jon Ogg writes.
- Dividend cuts are rare in the energy and materials sector, points out S&P's Howard Silverblatt, who wonders what Exxon Mobil (XOM -0.9%) will do next month when it reports earnings; after increasing its dividend for 32 straight years, Silverblatt says the more pertinent question is not if, but by how much.
- Investors rushed into gold ETFs early this year, adding $3.4B to the funds, but have pulled $1.8B out in the last three weeks, according to Markit Research, naturally noting the prospect of Fed rate hikes and a surging dollar.
- Sector giant, the GLD - with $28.3B in AUM - has accounted for $1B of the outflows this month.
- Over the past 12 months, outflows have totaled $3.5B, or 5.7% of the $63B managed by gold ETFs.
- Source: Barron's
- ETFs: GLD, IAU, SGOL, UGL, DGP, GLL, UGLD, DZZ, GLDI, OUNZ, DGL, DGZ, DGLD, AGOL, TBAR, UBG, BAR, GYEN, GEUR, BARS
- Teck Resources (TCK -2.1%) should buy HudBay Minerals (HBM +0.3%), National Bank of Canada analyst Shane Nagle says, believing that HBM would give TCK greater exposure to copper and zinc, and would get some copper growth opportunities which it currently lacks because it has not approved its QB2 and Relincho projects.
- "The pro forma company would have an improved growth profile, stronger balance sheet, free cash flow generation and more compelling valuation," the analyst says.
- TCK could raise part of the funds needed for a deal by selling a 20% silver stream from its Trail facility in British Columbia, Nagle suggests.
- Yamana Gold (AUY +2.6%) is upgraded to Buy from Hold with a $6 price target, raised from $5, at TD Securities, which says AUY's spinoff of three non-core Brazilian mines into Brio Gold will eliminate further cash drain and allow management to concentrate on more important projects.
- The firm expects AUY to focus on further debt reduction, anticipating net debt to EBITDA will dip to a "more comfortable" 1.7x by the end of 2016, compared with a current pro forma ratio of 2.1x.
- Despite weak gold prices, AUY became free cash flow positive in Q4, which TD expects will continue in 2015 with the company's focus returning to its key low-cost mines and significantly lower capex, adding that net debt should fall to ~$1.18B and its net debt to EBITDA ratio to 1x.
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