Today - Tuesday, April 21, 2015
- Mongolia has extended its cooperation with a World Bank insurer, overcoming a major obstacle ahead of a $5.4B expansion project to the Oyu Tolgoi copper deposit.
- Disputes between the government and Oyu Tolgoi lead developer Rio Tinto (RIO -2.5%) have prevented the construction of an underground mine Rio says will unlock 80% of the copper wealth; Rio owns 66% of the mine indirectly through its Turquoise Hill Resources (TRQ -2%) unit.
- The announcement comes on the same day that a government-appointed Oyu Tolgoi board member unexpectedly announced his resignation, a step one analyst says could lead to "a united credible position of the Mongolian negotiations side."
- Markets make opinions, and oil's sizable bounce over the past month - 30% and counting - has the team at JPMorgan seeing "signs of stability and modest upside" for black gold.
- "The bottoming-out phase for oil prices has occurred more quickly than anticipated driven by Iraq’s production shortfall during Q1, stronger-than-expected refinery runs absorbing surplus crude supplies, and rising geopolitical tensions centered on the conflict intensifying in Yemen," says Joyce Chang, head of global research at the bank, who also sees stronger demand growth, particularly towards year-end.
- Source: Barron's
- Previously: Baker Hughes increases layoffs to 10,500 (April 21)
- Oil's about unchanged on the session at $56.30 per barrel.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, UGA, USL, DNO, UHN, OLO, SZO, TWTI, OLEM
- Barrick Gold (ABX -1.1%) is being advised on options for its Zaldivar copper mine in Chile by the boutique firm of mining rainmaker Michael Klein, in a deal potentially worth as much as $2B, Reuters reports.
- ABX reportedly already has contacted a limited group of buyers including some diversified Chinese miners and copper companies; options could include a full sale of the Zaldivar mine, but ABX would be more likely to retain a stake in the mine that produced 222M lbs. of copper in 2014 and has reserves of a further 5.56B lbs.
- Zaldivar is next to Escondida, the world's largest copper mine, which is jointly owned by Rio Tinto (RIO -1.7%) and BHP Billiton (BHP -0.9%); Zaldivar could be of interest to both companies, as well as P-E firms such as the mining arm of Warburg Pincus and Mick Davis' X2, according to the report.
- Rio Tinto (NYSE:RIO) -1.7% premarket after announcing a sharp drop in its Q1 iron ore shipments, but the miner says it will compensate for the weaker start to 2015 to meet its previously announced full-year production target of up to 350M metric tons.
- Rio reported Q1 iron ore shipments of 72.5M metric tons, down 12% Q/Q and missing some analyst forecasts of above 80M, but Rio said wet weather, the impact of a cyclone and a train derailment combined to hurt output and shipments; when compared to the same quarter a year earlier, shipments were rose 9% while production jumped 12% to 74.7M metric tons.
- Rio continues to defend its widely criticized strategy to keep increasing production, as top iron ore exec Andrew Harding argues it is operating in "a competitive, international marketplace” and that other miners would increase their output if Rio did not; Rio’s 2015 target of 350M metric tons is a sharp increase from the 303M metric tons it shipped in 2014.
- Earlier: Turquoise Hill posts Q1 Oyu Tolgoi production
Monday, April 20, 2015
- "The markets still appear to be anticipating some sort of last-minute deal or accounting tricks to rescue Greece,” says Capital Economics' Julian Jessop. However, he says, it would be a mistake to believe the country is a "special case" and that others might not follow Greece out of EMU.
- Even if Greece doesn't leave the euro, a "further escalation of the crisis" will support the yellow metal.
- Gold is lower by 0.85% today to $1,193 per ounce.
- ETFs: GLD, IAU, SGOL, UGL, DGP, GLL, UGLD, DZZ, GLDI, OUNZ, DGL, DGZ, DGLD, AGOL, TBAR, GEUR, UBG, GYEN, BAR
- Hecla Mining (NYSE:HL) and Australia's Newcrest Mining (OTCPK:NCMGF, OTCPK:NCMGY) reportedly are among the bidders for Barrick Gold's (ABX -0.3%) Australian Cowal mine, which is on the block as ABX continues to shrink its global footprint.
- Gold Fields (NYSE:GFI) and Evolution Mining (OTCPK:CAHPF) also are said to be among other companies to have made it through to a second round of bidding for Cowal.
- ABX in February started a process to sell the mine, as well as a joint venture in Papua New Guinea; Cowal could be worth as much as $700M after the open-pit mine produced 268K oz. of gold last year.
- McEwen Mining (MUX -1.2%) is initiated with a Buy rating and $1.25 price target at H.C. Wainwright, which estimates production at El Gallo 1 to reach 50.4K oz. of gold in 2015 with a decrease in costs expected throughout the year.
- Wainwright notes El Gallo has strong expansion potential as the complex includes additional deposits including the El Gallo 2 and Palmarito silver deposits as well as the Magistral gold deposit.
- While the firm believes the additional deposits have potential, it believes higher metals prices are necessary in order to advance any expansion scenarios.
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.
Visit Seeking Alpha’s new Earnings Center
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs