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Nov. 10, 2015, 2:57 PM
- Rio Tinto (RIO +1.4%) is upgraded to Overweight while BHP Billiton (BHP -0.4%) is downgraded to Equal Weight at Barclays, which says Rio has a relatively attractive balance sheet in a struggling industry.
- But Barclays downgrades its overall mining sector view to Neutral, adding that it would have reverted to our Negative call of 2013-14 if not for the recent pickup in some Chinese data; looking forward, the firm fins it "hard to see what might pull the sector out of its tailspin."
- The firm sticks with its Overweight rating for Glencore (OTCPK:GLCNF, OTCPK:GLNCY), and rates Anglo American (OTCPK:AAUKF, AAUKY]]) and Vale (NYSE:VALE) at Underweight.
Nov. 10, 2015, 11:57 AM
- Shares of BHP Billiton (BHP -0.7%) and Vale (VALE -1.1%) continue to drop but less rapidly than in recent days, slowing the slide which began Thursday with news of the dam failure at the Samarco iron ore mine in Brazil and prompted a four-day 10% drop in BHP and a 12% decline for Vale.
- Morgan Stanley implies that the worst may be over for BHP, as the firm says the market has effectively priced in a permanent closure of the Samarco mine as well as a large remediation cost; Samarco provides ~3.5% of revenue to BHP and is valued at $2.8B by Morgan Stanley.
- The firm thinks the damage to Vale may be bigge, jeopardizing as much as 9% of Vale’s total iron ore output from this month through Q2 2016.
Nov. 10, 2015, 8:59 AM
- Brazil's deadly mining disaster sparks rising skepticism about the future of the joint venture between BHP Billiton (NYSE:BHP) and Vale (NYSE:VALE), especially among Samarco’s creditors, Bloomberg reports.
- Investors are concerned a temporary suspension of Samarco’s license to operate in the area may become permanent, dealing a potentially fatal blow to the company; the company's $2.2B of notes now trade at $0.56 on the dollar.
- Samarco, which has operated for almost four decades and employees ~3K people, was one of Brazil’s 10 top exporters last year.
Nov. 10, 2015, 2:47 AM
- Investors continued to dump shares in BHP Billiton (NYSE:BHP) and Vale (NYSE:VALE) on Monday after last week's deadly dam breach at its jointly owned iron-ore mine in Brazil.
- The cost to the companies, including for cleanup and rebuilding, could top $1B, said Deutsche Bank's Paul Young, who estimates the mine could be closed until about 2019.
- Iron ore output will also be cut from two nearby mines - Vale's Fabrica Nova and Timbopeba - by 3M tonnes in 2015 and by 9M tonnes in 2016.
- Previously: BHP shares hit seven-year low following Brazil dam disaster (Nov. 09 2015)
Nov. 9, 2015, 10:56 AM
- Iron ore prices likely will hold near $50/metric ton by year-end rather than tumble to $40, as prices may be helped by the Brazilian supply disruption at the BHP Billiton (BHP -2.3%) venture with Vale (VALE -1.8%), Citigroup says.
- The loss of 25M-30M tons/year of supply from the Samarco JV will coincide with cuts in Chinese production, lifting prices of pellets and lumps, but prices may resume their decline to below $40 when sizable cuts to China’s steel output occur next year after the Lunar New Year, Citi says in a new report.
- Samarco, which accounts for more than 20% of global pellet exports, produced 25M tons last year, mostly pellets, Citi estimates.
- Also: RIO +0.3%, CLF +1.6%.
Nov. 9, 2015, 8:18 AM
- BHP Billiton (NYSE:BHP) -5.6% on the Australian stock exchange to its lowest since the global financial crisis in 2008 after saying it might cut its iron ore output in the wake of the Brazilian dam disaster which has left up to two people dead and dozens still missing.
- BHP says the Samarco company it owns together with Brazil's Vale (NYSE:VALE) is responsible for the "entirety" of operations at the mine where a deadly dam break last week unleashed several million cubic feet of water and mineral waste.
- The cost to the companies, including for cleanup and rebuilding, could top US$1B, says Deutsche Bank's Paul Young, who estimates the mine could be closed until about 2019.
- BHP says CEO Andrew Mackenzie and the head of its iron ore business, Jimmy Wilson, are going to Brazil to assist Samarco, Vale and local authorities.
Nov. 6, 2015, 11:59 AM
- Vale (VALE -6.6%) says it expects its flagship S11D iron ore project to be completed on time and as much as $2.6B below budget, falling to ~$14.4B from a December forecast of $16B-$17B.
- Vale says the savings come partly because 90% of future costs for the project are denominated in the Brazilian real, which has lost ~35% vs. the dollar over the past year.
- S11D is on track for completion by the end of next year and could bring Vale's overall iron ore production costs down to $10/ton, depending on currency fluctuations, the company says.
Nov. 6, 2015, 8:29 AM
- BHP Billiton (NYSE:BHP) -5.3% premarket and -5.7% in London as investors worried about the damage to a Brazilian iron ore operation it jointly owns caused by a major dam burst.
- At least 17 people reportedly have died, with more than 30 injured and dozens missing, after a tailings dam at an iron ore mine in the Minas Gerais region of Brazil burst and devastated a nearby rural village with mudslides.
- Samarco Mineração, the JV between BHP and Vale (NYSE:VALE), says it has not established what had caused the dam to burst; Vale -3.2% premarket.
- The incident is shaping up as the most deadly incident in BHP's long history in mining and a "devastating stain" on the company's international reputation.
Nov. 5, 2015, 4:53 PM
- An iron ore tailings dam owned by a joint venture between BHP Billiton (NYSE:BHP) and Vale (NYSE:VALE) burst in southeast Brazil today, flooding a valley and devastating a rural community, Bloomberg reports.
- A local hospital confirms one death, while a mining workers union claims at least 15 fatalities
- The extent of damage is sure to place a spotlight on an operation that produced 25M metric tons of iron ore pellets last year; an extended stoppage would help reduce a global iron ore glut that has pushed down prices by 32% YTD.
Oct. 29, 2015, 10:39 AM
- Iron ore prices tumble below $50/metric ton, sinking to their lowest levels since July, as concerns resurface about demand from the world’s No. 1 steelmaker, China.
- China's steel demand is weakening at "unprecedented speed" and nationwide output may eventually slump 20%, according to a recent outlook by Boasteel chairman Xu Lejiang.
- According to WSJ, traders and analysts believe fears are intensifying again on the supply side as well, as Australia-based miners such as Rio Tinto (RIO -1.7%) and BHP Billiton (BHP -2.6%) continue to pump out record amounts of iron ore.
- A surge in low-cost supply likely will further push prices lower towards the end of the year and next, Goldman's Katie Hudson tells the Australian Financial Review, saying "the major producers are adding incremental volume at around $US20 a ton, that gives you a sense of where the vulnerability is."
- Last week, top producer Vale (VALE -2.1%) announced record Q3 shipments of 88M metric tons despite idling 13M metric tons worth of high cost operations, and the miner said it had reduced cash costs to an industry-leading $12.70/metric ton.
Oct. 23, 2015, 11:45 AM
- Iron ore shows signs of buckling again, as prices slump to their lowest level in three months as the top producers announce supply increases, Bloomberg reports.
- Rio Tinto (RIO +1.3%), BHP Billiton (BHP +1.3%) and Vale (VALE +0.8%), the three largest suppliers, all announced increases in quarterly production this month, and today China’s central bank cut benchmark rates and banks’ reserve requirements as data showed crude steel output contracted.
- BHP said this week its iron ore output jumped 7% to 61.3M in Q3, Vale said it produced a record 88.2M tons in the quarter, and Rio earlier had reported Q3 output rose 12%.
- Ore delivered to Qingdao fell 1.1% to $51.62/dry ton, losing 4% this week and falling to the lowest since July 24, having dropped for five of the past six weeks.
Oct. 22, 2015, 11:45 AM
- Vale (VALE +4.4%) is jumping despite reporting a $2.12B Q3 loss, 47% wider than a year ago, on revenue that fell 28% Y/Y to $6.5B largely due to lower prices for iron ore and other commodities.
- Vale also was hurt by the Brazilian real, which weakened by 28% vs. the dollar over the quarter and increased the local value of Vale's foreign currency debts, but CFO Luciano Siani says Vale's total debt in dollars actually decreased over the period.
- The weaker real also sent Vale's costs, particularly in iron ore, sharply lower, reducing Q3 cash costs to $12.70/metric ton, which the company says is the lowest in the industry; including expenses such as freight and royalties, Vale says it delivered iron ore to China, its main market, at $34.20/ton during Q3 vs. $58.50 a year earlier.
- Vale says it expects steel demand to recover globally next year, thanks to demand from developed economies and China.
- Vale also says its new S11D iron ore project in the Amazon, currently the industry's largest project, is 75% finished, and an expansion of the related railway and port is 50% complete; S11D could enable Vale's average production costs to fall to $10/metric ton, says iron ore head Peter Poppinga.
Oct. 22, 2015, 8:06 AM
- Vale (NYSE:VALE): Q3 EPS of -$0.41 may not be comparable to consensus of -$0.02.
- Revenue of $6.51B (-28.1% Y/Y) misses by $530M.
Oct. 20, 2015, 11:58 AM
- Vale (VALE -2.7%) is upgraded to Neutral from Sell with a $5.30 price target at UBS, which says commodity prices are normalizing following the previous supercycle China had fueled, as reported by Barron's.
- UBS analyst Andreas Bokkenheuser argues somewhat unconventionally that company profit margins drive commodity prices, not the other way around, thus "Vale’s future profitability should reflect a balanced iron ore market at mid-cycle margins.”
- Earlier: Vale Q3 iron ore production rises to new record (Oct. 19)
Oct. 19, 2015, 10:58 AM
- Vale (VALE -3.5%) reports record iron ore production of 88.2M metric tons during Q3, up 2.9% from 85.7M tons a year ago, as the world's major iron ore producers continue to raise output into an already oversupplied market.
- The result beat the 87.9M metric ton analyst consensus, while production of 71.6K metric tons of nickel and 99.3K tons of copper missed forecasts.
- Despite the new record, Vale says it suspended higher-cost mining operations accounting for ~13M metric tons of annual production, which will be largely replaced by ore coming onstream from new lower-cost mines.
- "Vale presented decent production figures for its all-important iron ore business... [but] life after China may prove more painful, and we fear the bottom is yet to come," Banco BTG Pactual analysts say.
Oct. 16, 2015, 5:41 PM
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