19 / 01 / 12 Goldman Cuts Copper, Nickel Forecasts on Supply Prospects Goldman Sachs Group Inc. lowered forecasts for copper, nickel and zinc prices on prospects..
more
28 / 08 / 11 China steps up iron ore drive in Africa A bold push by China into iron ore projects in Africa and elsewhere will increase its acce..
more
11 / 08 / 11 Nickel prices rebound on China imports, LME inventory Nickel prices recuperated slightly after a sharp fall in the previous month. This rise in ..
more
20 / 07 / 11 Copper gains on dollar & China-demand hopes Copper hit its highest since mid-April on Tuesday as a weaker dollar and hopes Chinese dem..
more
|
 |
26 / 01 / 12 in
Vale Set to Bypass China Ore-Ship Ban With Transfer Vessel
Vale SA, the world's largest iron- ore producer, is set to take delivery of a ship that will help the company bypass the exclusion from Chinese ports of its biggest vessels hauling the commodity.
The Ore Fabrica, a raw-materials carrier that's been converted to a so-called transshipment vessel, will be delivered tomorrow, according to Redhill, England-based IHS Fairplay. The ship will be the largest global floating transfer station, Robert Willmington, a spokesman for the provider of shipping data, said by e-mail.
China is excluding Vale's five largest ships, the world's biggest carriers of dry-bulk commodities, because they lack port-entry permits, Jose Carlos Martins, head of iron ore and strategy, said in December. The Rio de Janeiro-based company planned to transfer ore to smaller ships from the so-called valemax vessels for delivery elsewhere, he said.
Vale is spending more than $8 billion to operate a fleet of 35 valemaxes in an effort to gain more control of freight costs to its fastest-growing market in Asia. Chinese shipowners opposed the vessels' introduction on concern it would worsen a capacity glut and plunging rates. China is the biggest global user of iron ore, a steelmaking ingredient.
Subic Bay
The transshipment operations would be based at Subic Bay in the Philippines, Martins said. The Ore Fabrica is destined for the port along with the ore carriers Vale Brasil and Vale China, ship-tracking data compiled by Bloomberg show. The vessels are scheduled to arrive on Feb. 2, Feb. 12 and Feb. 22, respectively, according to the data.
The Ore Fabrica's conversion started in August, according to a note on the website of Jiangsu Xinrong Shipyard Co. That was six weeks after Vale Brasil, Vale's first valemax, diverted to Italy on its maiden voyage from the original destination of Dalian in China.
The conversion was the second for the Ore Fabrica, which was previously altered by Vale to an ore carrier from a tanker, IHS Fairplay data show.
The three Chinese ports that Vale has said can accommodate the valemaxes have so far failed to handle any of the ships. The vessels, each able to carry 400,000 metric tons of iron ore, are about twice the size of the capesize ships generally used to haul cargoes to Asia from Brazil, the second-largest global exporter of the commodity after Australia.
The ships' exclusion from Chinese ports is a “technical issue” and has no connection to political influence, Vale's Martins said last month.
19 / 01 / 12 in
Goldman Cuts Copper, Nickel Forecasts on Supply Prospects
Goldman Sachs Group Inc. lowered forecasts for copper, nickel and zinc prices on prospects for increased supply of the metals.
The 12-month estimate for copper was cut to $9,000 a metric ton, the bank said in a report dated today. It projected prices of $18,600 a ton for nickel and $2,200 a ton for zinc. The forecasts in December were $9,500 a ton for copper, $21,000 a ton for nickel and $2,400 a ton for zinc. Its recommendation to buy gold in October has gained $266.80 an ounce and the copper recommendation in December is up $734 a ton.
Goldman’s new forecasts signal gains for copper, zinc, nickel and aluminum after the London Metal Exchange’s index of six industrial metals fell 22 percent last year, the biggest drop since 2008. Mined copper output growth will accelerate to 4 percent this year from 0.4 percent last year while demand for refined metal will climb 3 percent this year compared with 2.8 percent last year and 10 percent in 2010, Goldman said.
“Current prices generally present value to consumers,” Max Layton, a London-based analyst at the bank, said in the report. “We are most bullish on copper, moderately bullish on aluminum and zinc, and bearish on nickel” over six to 12 months.
Goldman Recommendations
Copper, oil and gold may lead a 15 percent rally in raw materials this year as economic growth in the U.S. and China offsets the impact of a European recession, Goldman said in a report last week. Goldman’s commodity recommendations to buy gold, brent oil, copper, zinc and U.K. natural gas since April 2011 have been profitable except for natural gas. It closed copper and zinc recommendations in December at losses and recommended investors buy them again at lower prices.
In three months, copper will be at $8,000 in three months, aluminum at $2,300, zinc at $2,050 a ton and nickel at $18,600 a ton, Goldman said. On that basis, aluminum and zinc will be higher over the period and copper and nickel lower.
Copper for delivery in three months rose 0.7 percent to $8,056.25 a ton by 11:22 a.m. on the LME. Aluminum was at $2,150 a ton, zinc was at $1,960 a ton and nickel was at $19,460 a ton.
Goldman lowered forecasts for this year’s average prices of all four metals , citing an “unexpected deterioration in demand” in 2011’s final quarter. Copper will average $8,567 a ton, against the October forecast of $9,200 a ton, and the projection for aluminum was cut to $2,321 a ton from $2,500 a ton, the report showed.
Zinc is set to average $2,104 a ton, down from $2,305 a ton previously, according to Goldman Sachs. The bank reduced its estimate for nickel to $18,650 a ton from $20,000 a ton.
Copper demand will exceed supply by 202,000 tons this year, compared with a shortage of 198,000 tons last year, according to the report.
05 / 01 / 12 in
Iron ore price negotiations - 40% cut reported
It is reported that Rio Tinto Limited and BHP Billiton Limited have reportedly agreed to a temporary 40% cut to iron ore prices.
The China Iron and Steel Association said that reduced prices would be in place until a formal benchmark deal was done.
The current benchmark price of about USD 92 per tonne for iron ore fines and USD 129 for iron ore lump was negotiated when prices were at historic highs, but ends for many contracts this week.
Mr Tom Price analyst of Merrill Lynch "We think it is possible that a temporary price deal has been done between the iron ore majors and China's steel mills."
Spokesmen at both BHP Billiton and Rio Tinto refused to comment on the price negotiations while they were ongoing.
Steelmakers typically continue paying last year's prices until the new benchmark rate is settled but have reportedly asked that a lower temporary rate be established. The iron ore price is traditionally negotiated between steel makers and the three largest iron ore producers Brazil's Vale, Rio Tinto and BHP Billiton.
(Sourced from thewest.com)
22 / 12 / 11 in
Iron Ore-Spot price rises as China boosts restocking
Spot iron ore prices extended gains on Wednesday as more steel mills in China returned to the market to replenish stockpiles ahead of the new year, but a sombre outlook for steel demand may limit the upside.
Spot prices have begun stabilising this week, with offers of 61.5 percent Pilbara fines being offered at $134-136 per tonne on Wednesday, including cost and freight, compared with $132-134 from the previous day, Chinese consultancy Umetal said.
"More steel mills are making bookings before prices rise further, driving up spot prices, but we are not sure how long this recovery will sustain," said an iron ore trader in Beijing.
Chinese steel mills, producing nearly half of the world's steel output, turned out lower daily steel output in early December, falling by 0.69 percent to 1.674 million tonnes from the preceding 10 days, industry data showed.
Lower output and sluggish demand for steel during the winter have forced mills and traders to remain cautious, and their reluctance to make sizable bookings could limit the upside.
"What I only expect is there will be a new wave of price hikes in January, but I can't say for sure how much prices will be able to rise as the macroeconomic situation hasn't changed fundamentally," said a second iron ore trader in Shenzhen city.
Iron ore index with 62 percent Fe grade .IO62-CNI=SI rebounded to $132 per tonne on Tuesday, up 0.53 percent from Monday.
The most active rebar futures on the Shanghai Futures Exchange rose to a three-week high of 4,204 yuan ($660) per tonne on Wednesday, before ending for the monring up 0.26 percent at 4,185 yuan per tonne from the previous close.
27 / 11 / 11 in
No Year-End Party in Iron Ore
Weak demand and high inventories in China have curbed enthusiasm for this key steel ingredient. Look for prices to stay around $140 to $150 per ton.
'Tis the season for strong demand in the iron-ore market, but this year the party is likely to be mellow.
Iron-ore prices usually strengthen toward the end of the calendar year, as steel mills in China stock up on the steel-making ingredient ahead of the Lunar New Year holiday. Many businesses shut operations during the holiday, and historically mills have sped up production ahead of it.
Between Sept. 30 and Nov. 30 last year, the spot price of iron ore rose 19%. But this year, the price is down 18% from Sept. 30 and demand from the Chinese mills is muted. A recent rout in iron-ore prices and tight Chinese credit conditions mean that many steel mills have either already stocked up on iron ore at reduced prices or are scaling back their buying amid concern that the limited lending will continue to threaten construction projects.
"Chinese mills were looking for price reductions, so when prices were down around $120 a ton to $125 a ton, buying picked up," says Rob Montefusco, an industrial commodities broker at Sucden Financial. "Now that stocks have been topped up, we aren't seeing that same push to buy. The global slowdown and Chinese tightening have certainly taken their toll."
Iron-ore prices hit a low of $116.90 a metric ton on Oct. 28, according to information provider The Steel Index, as deterioration in demand for steel put the price of iron ore under pressure.
Prices soon picked up again, however, as lower prices sparked capacity shutdowns at some Chinese iron-ore mines, and steel mills took the opportunity to stock up on the raw material.
The rally peaked Nov. 17, when iron ore reached $147.60 a ton. Since then, prices have leveled, settling at $140.40 a ton Friday.
"Iron ore has temporarily stabilized at $140 to $150 a ton, which means that the market is content with it being at that level for the time being," said Denny Sabah, research analyst at commodity-trading firm Ronly.
And there isn't anything on the horizon that could let iron ore resume its usual end-of-the-year price rally.
HSBC's preliminary China Manufacturing Purchasing Managers Index fell to 48 in November, from October's reading of 51. The November PMI, the lowest since March 2009, indicated a contraction in manufacturing in the world's top consumer of iron ore and steel.
In the past year, the Chinese government has embarked on a series of inflation-busting measures, including raising interest rates and squeezing credit available to property developers.
"We believe that credit tightness will continue to be a problem in 2012," Standard Chartered said in a recent research note. "Property developers could still push back projects in the next 12 months."
Standard Chartered forecasts Chinese steel-demand growth at 6% in 2012, down from 8% in 2011.
For iron ore, the implications are clear: Lower steel demand means less appetite for its vital ingredient.
"Demand for iron ore isn't going to rise significantly in the near term, as the current economic environment in China deters steel makers [from buying] aggressively," said a purchasing manager at a Chinese steel mill.
FRANCESCA FREEMAN covers precious and base metals for Dow Jones Newswires in London. Yue Li in Shanghai contributed to this column.
15 / 11 / 11 in
Nickel Surplus May Jump to Most in Four Years on Slow Demand
A global nickel surplus may soar in 2012 to the highest in four years as Europe's debt crisis and a sluggish U.S. economy cuts demand, said Japan's top producer.
Supply will likely exceed demand by 54,000 metric tons in 2012, the biggest surplus since 2008, said Toru Higo, Sumitomo Metal Mining Co.'s general manager of nickel sales and raw materials. Demand outstripped supply by 63,000 tons last year, the first deficit since 2006, before moving to a surplus of 11,000 tons this year, Higo said.
Prices of the metal, used for corrosion resistance in stainless steel, have fallen 25 percent this year, making it the worst performing base metal on the London Metal Exchange. The global surplus will increase to 70,000 tons in 2012 from 30,000 tons in 2011, according to the International Nickel Study Group. Barclays Capital expects a surplus next year, analyst Gayle Berry said on Nov. 11.
"Demand growth may slow following Europe's debt crisis and a slowing U.S. economy," Higo said in an interview on Nov. 11. This year's surplus forecast was revised down from an earlier estimate of 20,000 tons in July because of delays and maintenance at major producers this year.
Output from Sherritt International Corp.'s Ambatovy mine in Madagascar, Vale SA's Goro mine in New Caledonia and Onca Puma mine in Brazil as well as its Copper Cliff furnace in Canada, may increase next year, he said.
Perfect Substitute
World stainless-steel output may increase to 34.6 million tons in 2012 from 32.8 million tons in 2011, Higo said. Output by China, the world's biggest producer, is expected to rise to 14.4 million tons from 13 million tons, as the country will keep driving global consumption growth next year, he said.
"Production costs will largely determine nickel's price range for the foreseeable future," Barclays' Berry said. "Relative nickel pig iron and refined nickel price levels will determine the composition of Chinese nickel needs now that nickel pig iron is a perfect substitute for refined nickel in a number of applications." Pig iron is a substitute made from low-grade ore from Indonesia and the Philippines.
China's output may grow to 405,000 tons in 2012, including pig iron, from 385,000 tons in 2011, while demand will likely rise to 700,000 tons from 640,000 tons, he said.
Nickel will average $23,099 a ton in 2011 and $18,125 in 2012, Michael Widmer, head of metals research at Bank of America Merrill Lynch in London, said in a weekly note on Oct. 28.
Toyota, Canon
Three-month delivery metal gained 2.1 percent to $18,460 a ton on the LME at 3:06 p.m. in Tokyo. The metal reached $29,425 a ton in February, the highest level since April 2008. LME stockpiles totaled 84,180 tons as of Nov. 14 after touching 83,160 tons on Nov. 9, the lowest level since January 2009.
In Japan, Asia's second-largest consumer, the yen's strength and Thailand's worst floods in almost 70 years may curb demand from the auto and electronics parts industries, Higo said.
Demand may gain 14 percent to 151,100 tons next year, while output will likely rise 11.8 percent to 171,000 tons after this year's earthquake and tsunami curbed production, Higo said. Exports are expected to climb 23 percent to 82,500 tons, he said.
Japan's exporters, including Toyota Motor Co., Hitachi Ltd. and Canon Inc., built up factories in Thailand in the past three decades to cut labor costs and stem the erosion of profit caused by the yen's appreciation against the dollar. The yen traded at 77.13 per dollar today after touching 75.36 on Oct. 31.
15 / 11 / 11 in
Iron Ore-Upward momentum intact on tight supply, demand
Limited supplies and sustained buying interest from top consumer China lifted spot iron ore prices for an 11th straight day and the market stayed well bid on Tuesday, suggesting the upward momentum may not lose steam soon.
Firmer Chinese steel futures this month helped iron ore rebound from a more than 30 percent slide in October, encouraging steel mills to replenish run-down inventories of the raw material.
Iron ore with 62 percent iron content rose 0.4 percent to $138.30 a tonne on Monday, the highest since Oct. 24, according to the Steel Index.
Iron ore has gained 18.3 percent over the past 11 trading sessions. "We're getting regular inquiries from China for cargo, from steel mills and traders and there isn't a lot available out there," said an iron ore trader in Shanghai who sells mostly Indian material to Chinese buyers.
Iron ore supply in the spot market has thinned with fewer tenders from Australia and Brazil, the world's two biggest iron ore exporters, while shipments from third-ranked India remain disrupted by logistical problems and the government's crackdown on illegal mining, traders said.
"Some of the sellers also feel that the market is rising and a lot of people are going to ask them for cargo so they want to hold off for a bit to get better prices," said the Shanghai trader, adding that prices may go up another $5-$10 from current levels.
Some buyers are bidding $148 a tonne, cost and freight for Indian high-grade 63.5/63 iron ore fines, said Dhruv Goel, managing director at Steel Mint in India's eastern Orissa state.
That is well above the offer price on Tuesday of $142-$145 a tonne of the Indian material in China, according to Chinese consultancy Umetal. Offers for Australian and Brazilian ore rose a further $1-$3 a tonne, Umetal said.
Despite rising prices, many Indian exporters, whose costs are inflated by export tariffs and high railway freight rates, are unwilling to sell at current levels, traders said.
Including freight, the cost of producing 63.5/63 grade in India is about $145-$150 a tonne, the Shanghai trader said. "It doesn't make sense to export at a loss. The mine owners can sell it to the domestic market where the return is better," he said.
Signs of easing credit conditions in China, particularly towards small and medium sized enterprises, may be helping steel prices recover some ground with product inventories at Chinese mills back to near recent lows on a days-of-supply basis, Commonwealth Bank of Australia said in a note.
"Declining inventories might reflect a combination of some production cuts, much lower pricing, better access to credit for SMEs and robust underlying demand," the bank said.
"To the extent underlying steel demand remains robust and credit conditions continue to ease in a 'targeted' fashion, we see China's commodity demand and prices as reasonably well supported."
The most-active May rebar contract on the Shanghai Futures Exchange eased 0.8 percent to close at 4,157 yuan a tonne on Tuesday, after two sessions of gains. Despite the loss, rebar is up 0.6 percent so far in November after three months of decline.
02 / 11 / 11 in
India calls for total ban of chrome ore export
Early in October, India's steel ministry, concerned over the depleting reserves of chrome ore, called for a complete ban of its export. The ministry warned that the country may soon run out of the costly steel making input if it failed to plug exports. The article said that India had roughly 50 million tonnes of charge chrome grade ore but the country's reserves are said to have depleted to 38 million tonnes.
Mr PK Misra steel secretary of India told Indian Express newspaper said that "Despite this low reserve base, we are exporting nearly 500,000 tonnes of chrome ore a month. So, we are categorically in favor of a ban on chrome ore exports and have conveyed our opinion to the concerned departments."
India's announcement came months after South Africa, the world's largest exporter of chrome, said it wanted to ban chrome exports to China. India is the world's third largest chrome exporter. Along with Kazakhstan, the world’s second largest producer, the three countries account for around 80% of the world’s production of chromite ore, which is used to make stainless steel to pigments to finish metals to plating.
The Indian government, which had until now enforced several restrictions against exporting chrome ore, is now calling for a total ban for the first time.
Mr Mark Beveridge, a market research analyst at Paris based International Chromium Development Association, said that "Speculation about export bans, particularly in India, is pretty common. That being so, I don't think there is anything to say on this until we get confirmation that either country is actually going to do something."
The National Union of Mineworkers in South Africa in September called for urgent restrictions on chrome exports, especially to China. The union said China was stockpiling chrome, mainly sourced from South Africa, to dictate future market prices, adding that of the 8 million tonnes of chrome ore imported by China in 2010, about 3.1 million tonnes were sourced from South Africa.
Mr Beveridge said that "South Africa's authorities are thought to be considering the implications that a chrome ore export ban would have. It is by no means clear at this stage that they will actually recommend any restrictions or duties on chrome ore exports. Indian authorities are also reported to be considering an extension to the ban they already have on exporting certain types of chrome ore. But, as with South Africa, they have not actually said they will be making any changes."
Experts say it is hard to gauge what kind of impact a chromium ban would have on the markets as the metal is not traded on major metal exchanges. Trades are included in bulk-steel trades in an over the counter deal or the price of the metal can also be negotiated between parties.
Some chrome producers themselves have also called for a ban of the metal to China from South Africa. Stuart Elliot, the chief executive officer of Merafe Resources, a South African chrome miner, said in a recent interview that the rising level of South African chrome exports to China was of huge concern, adding that exporting South African chrome ore cheaply to China improved the competitive position of the Asian country’s ferrochrome industry to the detriment of South African producers.
Whether these bans lead to shortage and price increases is still to be seen. But with global stainless steel production at an all time high of 35 million tonnes in 2011, demand for chrome ore is expected to rise, according to an article in the Wall Street Journal. The article added that supply conditions may drive up prices of ferrochrome and chrome ore in 2012 as China is expected to see chrome ore shortage after Zimbabwe banned export of the metal to China. The outcome of India and South Africa's move could tip the scale either way.
24 / 10 / 11 in
Iron ore and copper reflect China's wave of selling
Iron ore fell to its lowest level of the year and copper plunged more than 6 per cent as Chinese investors led a wave of selling across industrial commodities markets amid concerns of a global economic slowdown.
The sharp falls came as the eurozone debt crisis entered a crucial week of negotiations. At the same time, however, investors are concerned by the possibility of a hard landing in China, which accounts for more than 40 per cent of demand for many industrial metals.
Those fears have been exacerbated by the sharp drop in spot iron ore prices. Benchmark Australian iron ore – with a 62 per cent iron content – delivered to China, which had been relatively stable amid the commodities sell-off over the past few months, fell to $145 a tonne, down 20 per cent from an early September peak of $183.
Duncan Hobbs, analyst at Macquarie, said the fall in the iron ore spot price was “reinforcing perceptions of a slowdown of the Chinese economy” and was affecting sentiment of other industrial metals in spite of bullish supply and demand fundamentals, especially in copper. China this week reported GDP growth of 9.1 per cent in the third quarter – the lowest in two years.
Analysts said large steel mills in China were reporting declining orders and that aggregate steel output should probably be reduced in the short term.
Negative sentiment in China also weighed on industrial metals. Copper for delivery in three months at the London Metal Exchange, the bellwether of the base metals markets, fell as much as 6.5 per cent to a low of $6,710 a tonne. That was slightly more than a 14-month low of $6,635 touched this month, and the lowest close since July last year.
Prices of copper and steel on the Shanghai Futures Exchange – seen as the clearest indicator of sentiment in China – have fallen even more sharply than global market prices in recent days. SHFE rebar – a form of steel bar used in construction – for delivery in three months has tumbled 20 per cent since September’s start, and on Thursday fell to within reach of a two-year low.
Nicholas Snowdon, base metals analyst at Barclays Capital in New York, noted that Chinese companies and investors, who were ready buyers of metals only a few weeks ago, had turned sellers: “There has been growing pessimism over the possibility of a hard landing in China. It’s clear there have been some production cuts in the Chinese steel sector. It’s something a lot of hedge funds have pointed to as a sign of weakness in China.”
Marius Kloppers, chief executive of BHP Billiton, the world’s largest mining company, told investors that the group had seen customers “behave conservatively in the light of global uncertainty”. He added that companies were keeping a close watch on inventory levels, in light of “the potential need to tailor their plans if the global economic uncertainty continues”.
13 / 10 / 11 in
Best Mining Deal Seen With Sundance China-Africa Ties: Real M&A
No mining takeover in the world is offering arbitragers a bigger potential windfall than Australia’s Sundance Resources Ltd.
Sundance, owner of the $4.7 billion Mbalam iron ore project in Africa, agreed to sell itself to Sichuan Hanlong Group after the Chinese conglomerate boosted its offer last week. While the agreement was struck at the biggest premium for a metals or mining company in five years, Sundance has given up most of its share gain since Hanlong’s proposal was first announced in July.
By betting the acquisition will succeed, traders now stand to reap a 31 percent profit, according to data compiled by Bloomberg. While Sundance has retreated on speculation that the deal may face delays as both Sundance and Hanlong seek approvals from Australia, Cameroon and the Republic of Congo, CLSA Asia- Pacific Markets says the Chinese government’s economic ties with the two African nations will help bolster support for the A$1.36 billion ($1.4 billion) takeover.
“The deal will be completed,” said Michael Evans, Sydney- based analyst at CLSA. The negotiations between the companies and the governments involved are “more advanced than the market or the share price is suggesting,” he said.
Paul Armstrong, a spokesman for Perth, Australia-based Sundance, and Ilse Schache, a spokeswoman for Hanlong in Sydney, both declined to comment on the drop in Sundance’s share price.
Hanlong, located in Chengdu in China’s southwestern province of Sichuan, has investments in highway and power projects and said last year it will spend as much as $5 billion on resource assets to feed China’s demand for commodities.
Acquisition Detail
The company acquired 16 percent of Sundance in March from Talbot Group after millionaire mining magnate Ken Talbot was among the Sundance board members killed in a plane crash in the Congolese jungle in June 2010.
After becoming Sundance’s largest shareholder, Hanlong made an unsolicited bid of A$1.2 billion, or 50 cents a share in cash, in July. Hanlong then increased its proposal to 57 cents a share, 43 percent higher than Sundance’s price of 40 cents prior to the initial offer and a 68 percent premium to its 20-day average, data compiled by Bloomberg show.
While Sundance climbed as high as 54 cents, the stock ended at 44 cents yesterday after declining almost 20 percent since July. The gap is now the widest for any mining takeover in percentage terms and second-largest of any billion-dollar acquisition in the world, the data show.
Buying Sundance will give Hanlong control of the Mbalam rail, port and mine project straddling Cameroon and Congo.
510-Kilometer Railroad
Sundance said in April that it intended to build a 510- kilometer (320-mile) heavy-haulage railroad through Cameroon and a deep water port for bulk iron ore carriers and aimed to start shipping iron ore by 2014. Once completed, the mine will produce 35 million metric tons a year, data compiled by Bloomberg show.
Before Hanlong can start work and begin building out the rail and port capacity, the companies must obtain a mining permit from Congo, while Cameroon needs to adopt laws covering taxation and royalty payments that will provide an investment framework for the project, according to CLSA’s Evans.
Concern the deal will unravel because of the regulatory approval process may be misplaced. The company has already received drafts of the mining concession and terms of the mining permit from both governments, said Evans, who cited an investor call on Oct. 5 with Sundance Chairman George Jones and Chief Executive Officer Giulio Casello.
Loans and Timber
Having a Chinese buyer for the mining project in western Africa may also help expedite the approvals because Cameroon has received “substantial” interest-free loans from China, while the world’s fastest-growing major economy is also the biggest purchaser of Congolese timber, Evans said.
“It’s a Chinese buyer, it’s an underdeveloped western African asset with large capital requirements,” said Chris Weston, a dealer at IG Markets in Melbourne. “If you looked long and hard at the situation, and you really thought the deal was going to go through, there’s great upside.”
Roddy Barclay, an analyst on the Africa desk at Control Risks in London, said the re-election of Paul Biya, who has ruled for almost three decades as president of Cameroon, will also bolster confidence that the government’s policies for the mining industry won’t be undermined by political upheaval.
“The likely re-election of Biya will signal a continuation of the status quo with regards to the government’s interactions with businesses,” he said. “There is unlikely to be a radical shift in government policy toward the mining sector in the immediate term.”
The results of the Oct. 9 elections aren’t known yet.
Welcome Mat
While an investigation in Australia of Hanlong employees suspected of insider trading in relation to Sundance may delay the Foreign Investment Review Board’s ruling on the takeover, Michael McCarthy, chief market strategist at CMC Markets Asia Pacific Pty, said the deal will likely to be approved because Sundance’s mine isn’t a strategic asset to Australia.
Hanlong said in an e-mailed statement that the company wasn’t under investigation over the insider trading allegations and that it is cooperating with all the relevant government and regulatory bodies. Peter Arden, an analyst with Ord Minnett Ltd. in Melbourne, didn’t consider the investigation a “serious impediment” to the success of the acquisition.
“I don’t see these resources as being considered strategic,” CMC Markets’ McCarthy said. “There’s a much higher level of eagerness to welcome Chinese groups in Africa than possibly what we’ve seen in Australia so far.”
|
