Today - Thursday, October 8, 2015
- Franco-Nevada's (FNV +0.5%) latest streaming deal with Teck Resources (TCK +8.2%) is praised by TD Securities' Greg Barnes even as the market seems to have given FNV little credit, with the analyst noting that the Antamina mine is a top-tier asset and FNV's business model allows it to grow in the current environment of low metal prices.
- Barnes is fine with the anticipated modest 4.2% internal rate of return on the deal, believing that royalty companies are being valued at a much lower discount rate than the base metal mining companies from which they acquire assets.
- TCK had not even reported the silver produced at Antamina since it is relatively immaterial to its core business, Barnes says, "leaving one to wonder if the market put any value on it at all."
- While most energy analysts have been cutting their expectations for crude oil as market consensus grows for a “lower for longer" outlook, energy consulting firm PIRA Energy Group has grown more positive on oil prices in the past two weeks.
- "The next $20 move in prices is up, not down," Gary Ross, PIRA's head of global oil, said at its annual seminar today in New York, while calling for prices to rise to $75/bbl in 2017.
- Ross, a longtime bull, had startled some attendees at last year's PIRA seminar when he called for prices to fall, but now he points out that oil held up well when the equity market was testing its lows in late September.
- Global demand is up strongly this year, and PIRA expects it to continue, forecasting consumption growing 1.7M bbl/day, or nearly 2%, next year, while seeing non-OPEC production falling by 500K bbl/day.
- Earlier: Goldman on oil: Sell the rip
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, OLEM
- Mining companies operating in Zambia ask the government to set mineral royalties for both underground and open pit operations at 6% to mitigate the negative impact of falling copper prices on the industry.
- The government of Africa's second leading copper producer already cut mineral royalties for underground mines to 6% from 9% and those of open cast mines to 9% from 20% following an outcry by mining firms.
- Glencore's (OTCPK:GLCNF, OTCPK:GLNCY) Zambian unit has said it plans to lay off more than 3.8K workers due to lower metal prices and high production costs; other foreign mining companies operating in Zambia include First Quantum Minerals (OTCPK:FQVLF), Barrick Gold (NYSE:ABX) and Vedanta Resources (OTCPK:VDNRF).
- Iamgold (IAG -3.5%) says it is reducing the workforce at its Rosebel mining operations in Suriname by 10% to cut costs amid low gold prices.
- Rosebel, which employed more than 2K people directly and through contractors at the end of 2014, produced nearly one-third of IAG’s gold in 2014.
- IAG says the cuts are necessary for the long-term viability of the mine, which is owned 95% by IAG and 5% by the Suriname government.
- The sharp rally in oil comes alongside a general rally in risk assets over the past week combining with what's still significant short positioning in crude, says Goldman.
- The data, however, do not suggest a change in bearish oil fundamentals, with the numbers pointing to an oversupplied market despite a decline in U.S. production.
- The team notes this rally looks an awful lot like the one which occurred in late August - a risk-on move combining with massive shorts. The outcome - a quick reversal - should be the same.
- What of the Fed's dovish shift as a catalyst for higher prices? This is actually a bearish development, says Goldman, as the Fed attitude reflects weaker business activity- and thus softening oil demand - in both the US and emerging market economies.
- Oil is higher by 1% today to $48.30 per barrel.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, UGA, USL, DNO, UHN, OLO, SZO, OLEM
- Freeport McMoRan (NYSE:FCX) says Indonesia's government has assured the company's local unit that it will approve the extension of operations beyond 2021 and is working on economic stimulus measures including revisions to mining regulations.
- Separately, a government official says FCX must propose its divestment share price to the government by Oct. 14; the company must divest more of its Indonesian unit as part of its investment agreement with the government.
- Apollo Global Management (NYSE:APO) is exploring the feasibility of making an offer for Chemours (NYSE:CC), the former DuPont (NYSE:DD) chemical manufacturing unit, and using it as a platform for consolidating other titanium dioxide makers, Bloomberg reports.
- APO is said to have held preliminary talks with bankers about a buyout of Chemours and then approaching other companies, including Tronox (NYSE:TROX), about a tie-up to generate scale and cost efficiencies.
- Among potential obstacles to a deal are a tax bill for DuPont if Chemours is taken private too soon after the July spinoff, and the ~$4B in debt resulting from a payment made to DuPont prior to the split.
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