Thursday, July 30, 2015
- Barrick Gold (NYSE:ABX) agrees to sell a 50% interest in its Zaldivar copper mine in Chile to Antofagasta (OTC:ANFGF) for ~$1B.
- ABX has been trying to sell the mine as it looks to pay down at least $3B of debt by the end of this year.
- The Zaldivar mine produced 222M lbs. of copper in 2014, while proven and probable copper reserves as of December 2014 were 5.56B lbs.
- The June Prices Index for agricultural production, down 1.9% from the May index & 7.1% below the June 2014 index.
- The crop production index decreased 2.2% M/M to 88, while the livestock index decreased 0.8% to 121.
- Food grains -5.1% M/M and -17% Y/Y.
- Feed grains -1.6% M/M and -20% Y/Y.
- Oilseeds unchanged M/M and -31% Y/Y.
- Fruits and nuts +0.8% M/M and -2.2% Y/Y.
- Other crop unchanged M/M and -15% Y/Y.
- Related ETFs: DBA, RJA, DAG, JJA, AGA, AGF, FUD, USAG, UAG, DIRT, TAGS, ADZ
- Bunge (BG -4.8%) shares are sharply lower after the agricultural commodities trader posts Q2 earnings far below expectations, citing weak oilseed processing margins in Canada and Europe and an unexpectedly steep drop in demand for its food products in Brazil.
- Q2 earnings in the agribusiness segment, which buys, sells, stores and transports crops and processed products, plunged 57% Y/Y, while profit in the food and ingredients segment sank 68% as edible oils margins and volumes contracted amid rising unemployment, inflation and currency devaluation in Brazil.
- Bumper crop harvests in the U.S. and the Black Sea region, which would boost BG's asset utilization, and strong soy processing margins in China could lift H2 returns, CEO Soren Schroder said in this morning's earnings call; full-year EBITDA in agribusiness is expected to top $1B from $464M as of June 30.
- Vale (VALE -3.2%) moves into the black for the first time in a year, overcoming a slump in iron ore prices to report a Q2 net profit of $1.68B, a 17.3% Y/Y increase and more than 4x the average forecast of $408M.
- A major factor behind the improved result was a reduction in cash costs, with Vale lowering its cost of iron ore production to $15.8/metric ton from $18.3/metric ton in Q1; total Q2 expenses were $4.93B vs. $6B in the year-ago quarter.
- Vale says its realized price on ore sales rose to $50.6/metric ton from $46 in Q1.
- Vale's Q2 debt service costs totaled $215M, down from $983M a year ago.
- However, Q2 net revenue dropped 29.7% Y/Y to $6.96B, and EBITDA fell 46.1% to $2.2B.
- In this morning's earnings conference call, Vale said last week's collapse of a coal stacker at its port in Mozambique will not affect its coal production forecast for next year.
- Separately, Vale says it agrees to sell a 36.4% stake in its MBR unit to an investment fund for 4B reais ($1.19B); the company also concludes a previously announced sale of four Valemax ships to China Merchants Energy Shipping Co. for $448M.
- AK Steel (AKS +2.6%) is upgraded to Overweight from Neutral with a $5 price target at J.P. Morgan, which believes fundamentals for domestic integrated steel makers have bottomed.
- Steel prices likely have recently hit bottom, and falling imports coupled with stable demand should push steel prices higher throughout the end of the year, the firm says, adding that AK’s Q2 results instead of its Q3 should represent a low for the current cycle.
- While the macro environment remains negative due to the strong dollar, a weaker Chinese economy and weak oil prices, lower imports should push steel prices, and AK’s earnings and stock price higher in the near term, the firm says.
- JPM expects hot-rolled prices to increase to the low $500/ton area by year-end as the import situation sees some improvement and demand remains stable; trade cases should help to reduce imports into the U.S., which in any case is no longer as attractive of a destination for exports given current prices.
- Goldcorp (GG -2.1%) opens lower after saying it will cut its dividend by 60% even though it has a strong balance sheet compared to many of its peers, while reporting slightly better than expected Q2 earnings as well as improved production and cost forecasts.
- GG says its move to cut the cut the monthly payout to US$0.02/share from $0.05 will save nearly $300M/year.
- Q2 gold sales totaled 903K oz. on production of 908K oz., vs. sales of 639.5K oz. on production of 648.7K oz. in the year-ago quarter; the quarterly record was driven by higher grades at Penasquito in Mexico and an ongoing ramp-up at Cerro Negro in Argentina, but the average realized price dropped to $1,189/oz. from $1,296/oz.
- Q2 all-in sustaining costs were $846/oz. of gold compared to $852/oz. in the year-ago quarter.
- GG says it sees 2015 production at the high end of its forecast of 3.3M-3.6M oz., with all-in sustaining costs at $850-$900/oz., down from an earlier estimate of $875-$950/oz.
- In addition to the dividend cut, GG has taken a couple of other measures in recent weeks to improve its liquidity: It sold its take in Tahoe Resources for nearly $1B, and expanded a credit facility by $1B.
- Potash Corp. (NYSE:POT) +0.9% premarket after slightly missing Q2 earnings expectations and reporting in-line revenues.
- POT lowered the top end of its full-year EPS forecast to $1.95 from $2.05 while keeping the low end of guidance unchanged at $1.75, vs. the analyst consensus estimate of $1.89, but the company issues an upbeat outlook, saying “While we have faced some near-term market headwinds, we are encouraged by the strength of global potash demand, especially in offshore markets."
- POT says Q2 potash production remained flat at 2.5M metric tons, while the average realized potash price rose 4% Y/Y to $273/metric ton; potash gross margin jumped 5.6% to $417M, but costs increased as the company sourced less potash from its lower-cost mines.
- The biggest Q2 weakness was the nitrogen business, where production fell 2% Y/Y and POT’s realized selling price was $334/metric ton, down from $393 in the year-ago quarter; the company says results were hurt rising supply in key producing regions.
- POT sees another solid year for potash demand, with total global shipments reaching 60M metric tons in 2015, would be just below 2014's record of 61M.
- POT says little about its proposal to acquire K+S, only reiterating that it wants to have “constructive” discussions with K+S management.
- U.S. Steel (NYSE:X) +1.8% premarket after J.P. Morgan upgrades shares to Overweight from Neutral with a $28 price target, up from $26, with the firm saying it had expected the company's results to bottom in Q3 but now appears to have bottomed in Q2 based on solid cost reduction efforts.
- The firm sees prices for hot-rolled coil increasing to the low $500/ton area by the end of 2015, with the imports scenario improving and demand remaining stable.
- JPM expects X to benefit from $375M incremental cost improvements in H2 and reach the low end of its 2015 adjusted EBITDA guidance of $700M-$900M, provided market conditions continue improving at the current pace.
- Air Products & Chemicals (NYSE:APD) +5.3% premarket after easily beating FQ3 earnings estimates and raising its full-year earnings guidance.
- APD now sees FY 2015 EPS of $6.50-$6.60 from its previous outlook of $6.35-6.55, and for FQ4 the company forecasts EPS of $1.75-$1.85 vs. $1.77 analyst consensus estimate.
- For the current quarter, APD's adjusted EPS of $1.65 beat its own profit projection for a range of $1.55-$1.60, although the range was below analyst expectations when it was issued.
- FQ3 sales in the Americas fell 16% Y/Y to $898M as lower energy prices strained some of the company's customer; sales in the Europe, Middle East and Africa totaled $455M, a 15% Y/Y decline driven mostly by unfavorable currency impacts.
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