Today - Monday, March 30, 2015
- The Canpotex North American potash consortium says it has finalized 2015 supply contracts with all of its major customers in China.
- Canpotex says shipments to China will reach at least 1.8M metric tons, up from 1.6M in 2014, and may be as much as 2.5M metric tons, depending on supply, demand and logistics; the group does not release price terms but says the contracts are at "current competitive levels."
- Belarusian Potash said earlier this month it signed a contract with China to sell potash for $315/ton including shipping costs, which was $10 more than last year’s price.
- Canpotex represents Potash Corp. (POT +1.5%), Mosaic (MOS +2.6%) and Agrium (AGU +1.5%).
- Yara International (OTCPK:YARIY, OTCPK:YRAIF) hires Svein Tore Holsether, the head of Swedish aluminum products company Sapa, as its new CEO.
- The Norwegian fertilizer maker company originally had hired Norsk Hydro CEO Svein Richard Brandtzaeg for the job, but he withdrew before taking up the post when Yara began merger talks with CF Industries last September; during the talks, Yara fired its then-CEO Joergen Ole Hasslestad and promoted Torgeir Kvidal to acting CEO.
- Kvidal now will return to his former position of CFO.
- A report on Tuesday from the USDA is expected to show a 3% Y/Y rise in planted soybean acreage this spring vs. a 2% decrease for corn - the move coming as farmers deal with a 50% decline in corn prices since 2012.
- "Economics rule," says one farmer, noting he can break even or make a small profit on beans, but would likely lose money on corn.
- Not exactly in a bull market itself, but still at relatively lofty levels, soybeans could face some price pressure from the switch, and big speculators of late have boosted bets on a slide in bean prices. “We’ve got record large soybean stockpiles and the crops in both hemispheres this year were just enormous,” says an analyst. “It’s a perfect storm that’s starting to brew in the beans.”
- Source: WSJ
- ETFs: CORN, JJG, SOYB, GRU
- Rio Tinto (RIO +0.4%) CEO Sam Walsh says the company's earlier proposal to Mongolia's government to restart the long-delayed Oyu Tolgoi copper mine was its "best and final offer."
- Rio submitted the proposals to resolve outstanding issues such as a $127M tax claim that already has been cut to $30M as well as the approval of a $4B project financing package to pay for construction of phase two, which will extend the mine underground.
- Walsh also says financing for the second phase of the project will have to be renegotiated, especially in light of volatile copper prices; he does not state a specific timeframe for when phase two could begin operations, saying Rio would first have to finalize negotiations with the government and also remobilize its workforce.
- Rio's Turquoise Hill Resources (NYSE:TRQ) owns 66% of the $6.5B Oyu Tolgoi, with the Mongolian government holding the rest.
- Alcoa (NYSE:AA) +1.2% premarket after announcing it will curtail all remaining smelting capacity at its Sao Luis facility in Brazil as it continues to optimize its commodity business.
- As a result, AA says it will take a restructuring related charge of $10M-$15M, or $0.01/share, in its Q1.
- AA says the curtailment is in line with its earlier announcement to evaluate 500K metric tons of smelting capacity and 2.8M metric tons of refining capacity for possible curtailment, closure or sale.
- Once the Sao Luis facility is curtailed, AA will have ~740K metric tons, or 21%, of its smelting capacity offline.
Sunday, March 29, 2015
- Barrick Gold (NYSE:ABX) Chairman John Thornton received almost $13M in total compensation last year, up from $9.5M in 2013, raising more questions of executive pay at the world's largest gold miner.
- In yet another challenging year, Barrick's shares dropped around 35% last year, amid continued weakness in bullion prices and major write downs on the value of its assets.
- Thornton's compensation was also greater than the $7.3M and $4.5M awarded respectively to the company's joint chief executive officers, Jim Gowans and Kelvin Dushnisky.
Friday, March 27, 2015
- Vale (NYSE:VALE) should consider selling as much as a 20% stake in its crown jewels - the Northern System operations, which includes Carajas, the world's largest iron ore mine - to "regain control of its destiny" amid the huge drop in iron ore prices, says Deutsche Bank analyst Wilfredo Ortiz.
- Vale's balance sheet is "precarious," Ortiz says in estimating the miner's funding gap could climb to $10B under a distressed pricing scenario for iron ore of $45/ton through the end of 2017.
- The analyst estimates selling a 15%-20% stake in Carajas could fetch $8B-$10B, which would be enough to cover most of the outstanding capital investment for the mine's expansion and would shore up Vale's balance sheet "to weather pretty much any storm in the iron ore market."
- It's just a matter of time before U.S. steel companies such as Nucor (NYSE:NUE), U.S. Steel (NYSE:X) and Steel Dynamics (NASDAQ:STLD) seek tariffs on imports, Credit Suisse analysts say.
- Recent plant closures by U.S. Steel and this week’s State of Steel meetings in D.C. "look like a convenient prelude to the filing of a steel trade case," the firm says, adding that one of the first steps is the demonstration of injury.
- Steel businesses which are most vulnerable to imports will be those most active in trade cases, Credit Suisse says; U.S. Steel is a high fixed-cost business, for which pricing losses translate almost directly into earnings loss.
- For investors, the firm prefers X for “the longer term potential of its asset base under a revised operating regime,” and worries about NUE due to its valuation premium relative to STLD.
- Conflicting statements about whether Southern Copper (NYSE:SCCO) is canceling development of its $1.4B Tia Maria copper mine in Peru leave investors confused about the project's future.
- Not long after a report quoted SCCO's head of institutional relations as saying the project would be canceled due to lack of support from regional authorities and continued local opposition, CEO Oscar Gonzalez said the company would "continue with its efforts to move forward with the Tia Maria project and we hope to have the support of the people and the government."
- Grupo Mexico (OTCPK:GMBXF), which owns a controlling stake in the Peruvian company, also said its subsidiary was not cancelling the project.
- In a dig at Third Point's Daniel Loeb, Dow Chemical (DOW +3.2%) CEO Andrew Liveris says his company's decisive move to shift out of the commodity chemicals business shows how “Dow continues to behave as our own best activist.”
- Dow's deal to sell its chlor-alkali business to Olin (OLN +18.2%) in exchange for $2B and a 50.5% stake in the smaller company will create the world’s largest chlorine producer with 5.7B tons/year of production and $1B in EBITDA.
- Citigroup’s P.J. Juvekar offers three reasons why the deal is good for shareholders: The chlor-alkali divestiture at 8x EBITDA is a great multiple for a commodity business, the Reverse Morris Trust deal makes it tax-free and a split-off will allow Dow to buy back its own shares efficiently - a similar move by PPG Industries was viewed very positively two years ago, and Dow will sell ethylene to OLN for 20 years and will receive an upfront payment of ~$400M.
- Dow may still get rid of its agricultural chemicals business, which does not have a lot in common with the rest of the business; with $7.3B in sales and almost $1B in EBITDA last year, the unit could be worth $10B.
- Juvekar says Axiall (AXLL +5%) also could benefit from the deal, seeing consolidation in the U.S. chlor-alkali industry as a positive, and OLN says it will look to optimize its expanded chlor-alkali asset base.
- Pick your excuse: A slowing in the decline of the U.S. drilling rig count, the crisis in Yemen not having a whole lot of impact, or the chance of a weekend U.S./Iran nuclear deal which would include the lifting of oil sanctions.
- WTI crude oil (NYSEARCA:USO) is lower by 5.4% to $48.64 per barrel, erasing most of a gain this week which had it above $52 not much more than 24 hours ago.
- ETFs: USO, OIL, UCO, SCO, BNO, UGA, DTO, DBO, UWTI, USL, DWTI, UHN, DNO, SZO, OLO, TWTI, OLEM
- Barrick Gold (ABX +1.4%) says it will continue to operate its Lumwana copper mine in Zambia while awaiting changes to the country's mineral royalty tax.
- ABX had said it would suspend operations and make major staff cuts after Zambia hiked mineral royalties for open pit mines to 20% from 6% raised the royalty tax rate on underground mines to 8% from 6%.
- Zambia's President Lungu this week directed the finance and mining ministers to change royalties on mining firms by April 8, saying the government could consider temporarily reverting to the 2014 tax regime while a new rate is negotiated.
- Barrick Gold's (ABX +0.3%) says it has closed its Zaldivar copper mine in Chile for safety reasons after heavy rains swept across the country's northern desert region this week, increasing to eight the number of copper miners that have been affected by the bad weather.
- No. 1 copper miner Codelco already had suspended mining operations at its Chuquicamata, Ministro Hales, Radomiro Tomic, Gabriela Mistral, and Salvador deposits due to the state of roads and mine access following the rains.
- Other mines affected by the rains include Antofagasta's (OTC:ANFGF) Michilla mine and Centinela copper complex, Anglo American's (OTCPK:AAUKF, OTCPK:AAUKY) Mantoverde and Lundin Mining's (OTCPK:LNDNF) Candelaria.
- Peru produces a third of the world's copper.
- Southern Copper (SCCO -3.9%) has canceled its $1.4B Tia Maria project amid protests in Peru, the company's head of institutional relations in the country reportedly tells a local radio station.
- Tia Maria has been stalled for the last three years after local residents protested that the mine would hurt water supplies.
- The project was expected to produce 120K metric tons/year of copper over two decades.
- Pretium Resources (NYSE:PVG) says its proposed Brucejack underground gold and silver mine has earned an environmental assessment certificate from British Columbia's mining regulator, but with 15 conditions related to construction, operation and decommissioning.
- Among other stipulations, B.C. says construction of the mine can begin only when regulators are sure that discharges from water treatment plants will not harm the Unuk River.
- PVG has estimated the mine will cost C$450M and take two years to build, and should produce up to 2,700 metric tons/day of ore.
- Israel Chemicals (NYSE:ICL) agrees to acquire Canada's Allana Potash (OTCPK:ALLRF) for C$137M (US$109M), a deal ICL hopes will accelerate development of a potash mine in Ethiopia.
- ICL already owns 16.36% of shares in Allana and would pay C$0.50/share for the portion it does not own.
- Allana's Danakhil project in Ethiopia could yield up to 1M metric tons/year of muriate of potash for 25 years.
- Hecla Mining (NYSE:HL) agrees to acquire Revett Mining (NYSEMKT:RVM) in an all-stock deal valued at $20M.
- HL says it plans to continue to advance permitting of the Rock Creek project in Montana, one of North America's largest undeveloped silver and copper deposits; RVM has reported inferred resources of 229M oz. of silver and 2B lbs. of copper at Rock Creek.
- Dow Chemical (NYSE:DOW) says it will split off a major part of its chlorine business and merge it with Olin Corp. (NYSE:OLN) in a deal valued at $5B.
- The new entity, which will include Dow’s U.S. Gulf Coast chlor-alkali and vinyl, global chlorinated organics and epoxy businesses, is expected to have revenue of nearly $7B.
- The move comes as Dow faces criticism of its structure from the Third Point hedge fund, which has pressured Dow to break apart its petrochemicals business from its specialty chemicals segment.
- DOW +6.1%, OLN +4.8% premarket.
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.
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