Tuesday, May 26, 2015
- Analysts and big investors voice support for Barrick Gold's (NYSE:ABX) first step to long-promised partnerships with China as well as progress in reaching an ambitious debt-cutting goal.
- ABX announced a strategic partnership and the sale of a stake in its Porgera mine in Papua New Guinea to China's Zijin Mining, and the $550M sale of its Cowal mine in Australia brings recent asset sale proceeds plus cash close to $1B, a third of the way to ABX's debt-reduction target of at least $3B this year.
- "They’ve set out a plan and we're seeing them execute on it. The biggest nut to crack is the debt burden, and they are whittling away at it." says Joseph Foster, portfolio manager at Van Eck, ABX's biggest shareholder.
- But Credit Suisse keeps ABX with a Neutral rating even as it likes the miner's progress toward $3B in net debt reduction, as ABX's higher financial leverage vs. peers offers more upside if gold prices increase but more downside if prices decline.
- ABX fell 4.7% during regular trading, in line with other gold stocks, as bullion slid.
- Energy and natural resources stocks are among today's weakest performers as a sharp increase in the dollar destabilized commodity markets.
- Nymex crude oil futures fell 2.8% to its lowest level in a week at $58.03/bbl, while Comex gold fell 1.4% to a two-week low $1,186.90/oz., as upbeat U.S. data on new home sales and consumer confidence helped lift the dollar.
- Adding to oil price weakness was commentary from Goldman Sachs expecting the global oil market to be oversupplied by 1.9M bbl/day this quarter, saying "the market now depends on how U.S. producers will respond to the recent rally and whether low-cost producers can sustainably deliver higher production."
- ETFs: GDX, USO, NUGT, OIL, XLE, GGN, DUST, UCO, SIL, UWTI, VDE, ERX, OIH, SCO, XOP, BNO, DBO, UGL, DWTI, ERY, GLDX, DGP, DIG, GLL, DTO, UGLD, DZZ, DUG, BGR, USL, XES, IYE, GLDI, SGDM, IEO, BCX, ASA, SLVP, IEZ, DGL, DNO, DGZ, RING, FENY, PXE, DGLD, PXI, HAP, FIF, PXJ, IRV, PSAU, OLO, SZO, NDP, MXI, RYE, GNR, FXN, TGLDX, GUNR, TBAR, GEUR, UBG, GYEN, BAR, TWTI, OLEM, DDG
- Steel Dynamics (STLD -1.4%) says it is idling its Minnesota ironmaking operations in Chisholm and Hoyt Lakes for at least two years, citing the continued decline in pig iron pricing which has resulted in the cost of iron nugget production being meaningfully higher than product selling values.
- The shutdown, which is effective immediately, will affect ~200 workers.
- Peru's government over the weekend instituted a 60-day state of emergency in a region roiled by deadly protests against Southern Copper's (SCCO -1.5%) stalled $1.4B Tia Maria project.
- The state of emergency in nine districts in the southern region of Arequipa suspends civil liberties, allowing police and troops to enforce curfews and order an end to two months of protests that led SCCO to place the project on hold last week.
- The announcement followed the death of a fourth person in clashes between protesters and police as Tia Maria opponents pushed to cancel the proposed 120K metric tons/year copper mine.
- Rio Tinto (RIO -0.9%) will seek to raise as much as $6B of external funding to develop the Oyu Tolgoi underground mine in Mongolia, to be raised through third-party project financing, product off-take arrangements and other forms of funds, according to a development plan published by Turquoise Hill Resources (TRQ -0.2%), which owns 66% of the mine.
- Rio's goal is to raise more than $4B in third-party project financing and will target 15-20 banks, copper business head Jean-Sebastien Jacques has said.
- Rio and the Mongolian government last week ended a two-year dispute that stalled construction of the underground mine; estimated underground development capital is $4.7B, sustaining capital is $1.5B and the value-added tax and duties on capital is $600M, the agreement shows.
- Fortescue Metals (OTCPK:FSUMF, OTCQX:FSUGY) jumps as much as 15% in Australian trading following a report in the Australian Financial Review that Chinese companies including Baosteel, China’s largest publicly traded steel producer, and conglomerate Citic are seeking to invest in the company.
- Fortescue already has close ties with Baosteel, which purchases ore from the Australian company and is a minority investor in Fortescue’s Iron Bridge magnetite project under development in Western Australia.
- Fortescue, the largest pure-play miner of iron ore in the world, has been struggling to remain profitable amid the sharp fall in iron ore prices and its continuing massive debt burden.
- Barrick Gold (NYSE:ABX) announces a strategic partnership to help forge closer ties with China, agreeing to sell a 50% stake in its unit that manages the Porgera gold mine in Papua New Guinea to Zijin Mining (OTCPK:ZIJMF) for $298M in cash.
- The unit, Barrick Niugini, owns 95% of Porgera and Papua New Guinea owns the rest; the mine is expected to produce 500K-550K oz. of gold this year.
- Separately, Zijin also says it is buying a 49.5% stake in Ivanhoe Mines' (OTCPK:IVPAF) Kamoa copper project in the Democratic Republic of Congo for $412M.
- ABX -1% premarket.
Sunday, May 24, 2015
- Barrick Gold (NYSE:ABX) says it is selling its Cowal mine in Australia to Evolution Mining (OTCPK:CAHPF) for $550M.
- ABX had said in February it wanted to sell Cowal, along with its Porgera mine in Papua New Guinea, to help reduce net debt by at least $3B by year-end.
- Evolution, which landed Cowal for well below the $650M it had been expected to fetch, considers the acquisition transformational for the company.
Friday, May 22, 2015
- Monsanto's (NYSE:MON) efforts to try to take over Syngenta (NYSE:SYT) could spark a selloff or de-emphasis of its glyphosate product line that last year brought in ~$5B, or a third of total MON's revenues, industry sources tell Reuters.
- The key ingredient in MON's popular Roundup herbicide is glyphosate, the world's most widely used weed-killing agent, but its heavy use has led to high levels of weed resistance, and rivals have been developing alternative herbicide options.
- A move away from glyphosate would make sense for MON, a Piper Jaffray analyst says, since "as resistance continues to grow with glyphosate, the value of that product is likely going to decline."
- Executive VP for global strategy Kerry Preete told investors earlier this week that in addition to selling off SYT's seeds and traits business to make the acquisition work, MON is open to selling "certain overlapping crop protection chemical assets that exist."
- The U.S. oil rig count fell for the 24th consecutive week in the latest survey from Baker Hughes (NYSE:BHI), but the decline was just one, to 659 active rigs.
- For all U.S. rigs, including natural gas, the week’s drop was three to 885, and down 52% from last year’s 1861.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, TWTI, OLEM
- ArcelorMittal (MT -1.6%) says it will explore the possibility of building an auto-grade steel mill with state-run Steel Authority of India, as the two companies sign a memorandum of understanding and plan to form a joint venture for the project.
- The companies say the planned collaboration will address rising demand in India, which is projected to become the world’s fourth-largest automobile manufacturing nation by 2020.
- Gold Fields (NYSE:GFI) is among final bidders competing to acquire the Cowal gold mine in Australia's New South Wales state from Barrick Gold (NYSE:ABX), according to a Bloomberg report.
- GFI and China’s Zijin Mining (OTCPK:ZIJMF) are said to be competing with local suitors Evolution Mining and Independence Group, which have submitted binding bids.
- Analysts say the Cowal mine, which produced 268K oz. of gold last year, may be worth at least $400M, and that ABX could raise as much as $1.1B from divesting both the Cowal and Porgera mines.
Thursday, May 21, 2015
- Archer Daniels Midland (ADM +0.9%) says it is expanding grain export capacity at its Puerto San Martin port in Argentina to help boost shipments from the country.
- The expansion, to be completed by early 2016, will include a new berth for unloading barges and additional grain storage, and will increase the terminal's capacity to ~2.5M metric tons from ~2M.
- The investment comes after several recent strategic deals by ADM aimed at reaching its goals of doubling its grain origination over the next decade.
- U.S. crude oil posted its biggest rally in a month, with the July Nymex contract surging 3% to $60.72/bbl after yesterday's EIA storage report revealed a third consecutive weekly draw and U.S. oil output fell to below 9.3M bbl/day, its lowest level since early February.
- Increased fighting in Iraq raised worries about the security of Middle East crude shipments, and a retreat in the dollar today also took some pressure off prices.
- Still, some analysts caution that stocks of crude oil and oil products are higher than last year, meaning that shortages should not occur and prices could face yet another leg down.
- S&P's energy sector (+0.9%) is today's top performer thanks to the rally.
- Commodity ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, TWTI, OLEM
- Energy company ETFs: XLE, VDE, ERX, OIH, XOP, ERY, DIG, DUG, BGR, XES, IYE, IEO, IEZ, FENY, PXE, PXI, FIF, PXJ, NDP, RYE, FXN, DDG
- Potash Corp. (POT +1.5%) CEO Jochen Tilk says he views the company's stakes in fertilizer companies Sinofert Holdings and Arab Potash as "strategic," but continues to review whether to keep its shares in Israel Chemical (ICL +0.2%) and SQM (SQM +0.1%).
- Tilk, speaking at a BMO investor conference in New York, says if POT could not build on its SQM and ICL minority stakes, it will consider whether it should keep them.
- ICL CEO Stefan Borgas responds that if POT wants to increase its stake, it should speak directly with Israel's government, adding that many investors have approached ICL about interest in POT's stake.
- First Quantum Minerals (OTCPK:FQVLF -4.6%) lays out plans for C$600M in new spending over the next 18 months to speed up project development, as it raises as much as C$1.44B in a public offering.
- First Quantum is earmarking C$300M-C$400M for expansion of the Kansanshi copper mine in Zambia, C$150M to advance permitting for the Haquira project in Peru, plus some money for the Taca Taca deposit in Argentina; the C$600M comes on top of C$1.4B budgeted for projects such as Cobre Panama.
- "It's better to build at the bottom of the cycle than at the top, but also to try and get as much of that pipeline into production to coincide with the inevitable rise in the copper price in the next two or three years," company president Clive Newall tells analysts.
- China's commitment to invest in Brazil's iron ore sector puts the big Australian exporters on notice, as Vale (VALE +1.6%) is forecast to increase production from current levels of 330M metric tons of iron ore to 450M by 2018 - greater than the combined output of BHP Billiton (BHP +1.2%) and Rio Tinto (RIO +0.9%).
- China's new A$5B revolving line of credit for Vale means the company now can fund a $16B expansion of its iron ore mines; the deal also saw Chinese invest in several of Vale's giant iron ore carriers, ships that can carry vastly more resources and reduce transport costs by ~25%.
- Vale last year accounted for 18% of the supply to the Chinese market vs. nearly 60% by Australian producers.
- Anglo American's (OTCPK:AAUKF, OTCPK:AAUKY) diamond producing De Beers unit says it will seek to sell its Kimberley Mines in South Africa in the coming months as it focuses on much larger mines across southern Africa.
- De Beers says it wants a potential buyer who is willing to invest in the operations and extend the mine's operating life beyond 2018.
- Kimberley Mines, South Africa's second-largest diamond operation, is a mature mine that produces diamonds largely from tailings; it recovered 722K diamond carats last year and has a mining right that extends to 2040.
- Chile's government has removed BHP Billiton's (BHP +0.7%) $4B Spence copper expansion project from its 10-year development timeline, saying it expects the miner will miss its targeted deadline of first production by 2020.
- BHP has conducted a pre-feasibility study to deliver copper from the ore body that lies beneath its existing Spence mine by 2020 as part of a plan to extend the life of the facility by up to 50 years, but Chile's copper commission says it expects the timeline to slip, with the massive Escondida mine remaining the priority.
- In 2012, the commission predicted the development of $105B of resource projects in Chile in the following decade, but the slump in global commodity prices has prompted it to revisit its 10-year horizon and downgrade the pipeline of projects to $75B by 2025.
- Cliffs Natural Resources (NYSE:CLF) says it is seeking court protection from creditors of its Wabush iron ore mine and related assets in eastern Canada, after it sought similar protection earlier this year for its Bloom Lake mine and other Canadian iron ore assets.
- CLF says in an SEC filing that a "more comprehensive restructuring and sale process" will result if it was able to include the Wabush group under the same creditor protection and allow a more "streamlined exit" from eastern Canada.
- CLF idled its Wabush operations in Newfoundland and Labrador in Q1 2014 as it sought to cut costs.
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