BiField Business Resources

12 / 12 / 09 in

We can't afford to ignore our coal resources

AS world leaders gather in Copenhagen for the climate change summit, the UK delegation should remember this: Britain is facing an energy crisis of untold proportions.

Alistair Buchanan, Ofgem's chief executive has warned that consumers
face energy cost rises of at least 14 per cent by 2016 with price spikes as high as 60 per cent.

Speaking on the BBC news recently, he declined to rule out energy blackouts that could see the lights go out and against this background we witness further protests at Radcliffe-on-Soar power station in Nottinghamshire.

Britain's energy security is in serious danger as a result of the policies followed first by the Tories and then by New Labour.

In recent years, the Government has conducted two energy reviews and still the crisis escalates and appears to be finally coming to a head in the year that has seen the 25th anniversary of the miners' strike that resulted in the decimation of our deep-mine coal industry.

It was, or should have been, obvious to energy policy makers that by 2020 our gas reserves would be at the fag-end and our oil reserves gone.

Yet nothing has been done to reduce our over-reliance on foreign
imports of gas, oil and coal.

We are now a net importer of energy. We import more gas than we produce and in 2008 we imported 44 million tonnes of coal at a cost £2bn, half of which came from Russia. Gas and coal represent 82 per cent of our energy requirements and for those who think coal is a fuel of the past we burn 60 million tonnes of coal a year but produce only 16 million tonnes ourselves, half from opencast and half from deep-mine production.

According to the Coal Authority, both the National Coal Board, in the late '70s, and later in 1990, British Coal, assessed Britain's
recoverable coal resources at 45 billion tonnes – 300 years worth at present consumption rates. In that time, we have only mined just over one billion tonnes.

Our operating reserves at existing mines in 1990 amounted to four billion tonnes, with a further two billion identified at what were then described as new mines. In other words, a possible 100 years of
reserves at present consumption rates.

The abandonment of these precious coal reserves have left us at the
mercy of unstable foreign importers of coal and gas. The spurious arguments used against exploiting our coal reserves are based on environmental concerns surrounding CO2 emissions.

Certain environmentalist lobbies, supported by other vested interests, have managed to convince many people that coal is a dangerous fuel that will damage the planet – evidenced by the campaigns waged against the power stations at Kingsnorth in Kent, Drax in Yorkshire and now Ratcliffe-on-Soar in Nottinghamshire.

If all our coal-fired power stations were closed, it would not effect the billions of tonnes of CO2 being pumped into the atmosphere by China and America alone.

Clean coal technology is an absolute must and here's why. In 2004, China emitted 4,707 million tonnes of carbon dioxide while America emitted 5,293 million tonnes. These amounts are projected to reach 11,239 and 7,950 million tonnes respectively by 2030 according to the International Energy Agency.

The only solution is to develop clean coal technology to tackle what is a worldwide problem and, since developing nations like China and India will burn their coal reserves and America will seek to reduce its over-reliance on imported oil by burning its coal, those who argue for the development of clean coal technology are the true environmentalists trying to save the planet for future generations.

A new up-to-date in-depth assessment of Britain's mineable coal
reserves is urgently needed with the aim of using our coal as a major strategic energy resource.

Such a strategy cannot be left to the short-term thinking of the market with its limited ability to provide the necessary investment.

We have allowed the crisis to develop over many years and the Government has a duty to ensure Britain's energy security at a price that the poorest in our society can afford.
22 / 06 / 09 in

Anglo stresses early-stage nature of Xstrata 'proposal'

The board of diversified mining group Anglo American confirmed on Sunday that it had indeed received a "preliminary proposal" from its smaller Swiss-based rival, Xstrata.

However, the London-domiciled company stressed in a statement, which it indicated had been issued in response to media speculation, that the "situation is at a very preliminary stage".

It added that the proposal "may or may not lead to a transaction".

In response to the Anglo statement, Xstrata confirmed that it had recently sent a "written proposal" to the Anglo board, in which it suggested that "a merger of equals" be considered.

Xstrata argued that it viewed the case for such a transaction as "highly compelling", highlighting, in particular, “substantial operational synergies”, and the potential for enhanced shareholder returns from the “optimisation and reprioritisation of the combined company’s organic growth pipelines”.

However, it too offered "no assurance that any transaction will be forthcoming".
14 / 04 / 09 in

China economy shows signs of recovery

China's economy is showing signs of a nascent recovery, but even officials who want to boost public confidence warn a rebound faces risks from the global crisis and is not yet certain.

Imports of oil, iron ore and other raw materials rose in March, reflecting the impact of Beijing's multibillion-dollar stimulus spending on industry. Home and auto sales are up, suggesting consumers might be more willing to spend.

A rebound for China, the world's third-largest economy, could help other countries by boosting demand for their exports, though analysts say China alone cannot propel the global economy out of its worst slump since the 1930s.

"I think they've turned the corner," said economist David Cohen of Action Economics in Singapore. "There is a sense that we are getting back on track with growth."

But Cohen and others caution it is still early and China could face trouble if trade weakens more than expected or consumer spending, housing sales and other private-sector areas fail to achieve a sustained rebound.

"Things probably will get a little bit worse before they get better," said economist James McCormack of Fitch Ratings.

Observers hope for a clearer picture when the government releases first-quarter economic growth figures Thursday.

The economy showed "better than expected positive changes in the first quarter" because of stimulus spending and some areas "are in a process of gradual recovery," Premier Wen Jiabao said over the weekend. But he warned against complacency.

"As the (global) crisis has not touched its bottom, we can hardly say that the Chinese economy alone has got out of the crisis," Wen said, according to state media.

Forecasts of Chinese growth this year range from 8 percent — the official target — to as low as 5 percent. That would be a drop from 2007's stunning 13 percent growth but still the fastest for any major country at a time when the U.S. economy, the world's largest, is mired in recession.

The 4 trillion yuan ($586 billion) stimulus aims to pump money into the economy mostly through higher spending on building highways and other public works. But its goal is to boost public confidence and encourage China's own thrifty consumers to spend more.

So far, the biggest impact has been to boost employment and revenues at state-owned construction companies and suppliers of cement and other building materials.

But some consumer areas are improving, possibly because of easier credit and other incentives. March auto sales rose to a monthly high of 1.1 million as buyers were lured by sales tax cuts and rebates. Home sales rose 23.1 percent in the first three months of the year from the same period of 2008, the government reported Monday.

Beijing wants such domestic consumption to reduce reliance on exports, which fell 17.1 percent in March from a year earlier.

The World Bank said last week China could start to recover this year, helping the rest of Asia to stabilize and possibly rebound. China is the top trading partner for many of its neighbors, which supply its factories with components and raw materials.

China is well-positioned to ride out the slump, economists say. Its state-owned banks avoided the turmoil that battered Western institutions. Government debt is low compared with other countries, giving Beijing room to borrow for its stimulus.

Eager to shore up public confidence and encourage consumers to spend, the government has been highlighting strong growth in bank lending as state companies borrow money for stimulus projects. Lending in March surged to a monthly high of 1.9 trillion yuan ($277 billion).

"We believe China's stimulus-led domestic recovery is well under way," said UBS economist Tao Wang in a report last week.

Wang said lending is growing so fast that Beijing's next move should be "taming credit growth" to reduce the risk of wasteful investment and bad debt that might imperil banks.

Also in March, iron ore imports rose 46.2 percent from the same month last year, while imports of coal were up 37.4 percent, according to customs data. Oil imports were down from a year earlier but up 33 percent compared with February.

But trade is still lackluster. The collapse in demand for Chinese exports wiped out at least 20 million jobs as factories closed. Communist leaders worry that more job losses could fuel unrest.

If global consumer demand fails to rebound until next year, "that would suggest there are more difficulties ahead for China and probably worse economic news to come," said Fitch's McCormack. "That suggests to us some of the numbers that are recovering now may have another leg down later in the year."
02 / 01 / 09 in

China turns screws on iron ore giants

JUST days into the new year the signs from China for our battered big miners are ominous.

According to reports out of Shanghai, the Chinese Government is seeking tighter control over iron ore imports to help drive down prices for the steel-making ingredient.

That's bad news for the world's biggest iron ore producers - Rio Tinto, BHP Billiton and Brazil's Vale - as it will give Chinese steel giant Baosteel much greater muscle in the current round of iron ore price talks.

Substantially reduced iron ore prices will put even more pressure on BHP and Rio, as they grapple with dramatic price falls across all major commodities.

Rio is especially vulnerable as it struggles with $US38.9 billion ($A55.3 billion) in debts in the face of the global financial crisis.

Annual iron ore contract price negotiations are shrouded in mystery but are believed to have kicked off in the weeks before Christmas.

Beijing reportedly wants closer monitoring of where iron ore shipments end up after their arrival in China's ports.

And it is looking at clamping down on the practice among import agents of making profits by stockpiling iron ore as a punt on future higher prices.

The new regulatory regime could hurt BHP and Rio as it will potentially reduce shipments of iron ore - Australia's second-biggest commodity export after coking coal - into China.

Iron ore demand has already softened dramatically in recent months as the global economic slowdown pulls in steel-intensive industries such as construction activity and car-makers. Global construction of crude steel experienced one of its biggest reversals in November, tumbling nearly 20 per cent to just 59 million tonnes when compared with the same month of the previous year.

In another bad omen China's first batch of coking coal imports for 2009 are nearly half the levels they were a year ago. China's Ministry of Commerce has decided on an initial quota of 5.78 million tonnes - down from 9.62 million tonnes at the start of last year.

That suggests Australia's biggest trading partner is shifting to greater use of domestically produced coking coal rather than imported product as economic times get tougher.

And it could not come at a worse time for coal producers already starting to suffer after a sharp drop in prices for the energy source.

Queensland's Macarthur Coal last month slashed its profit guidance, suspended dividends and laid off workers after chairman Keith de Lacy warned shareholders that it was impossible to predict when coal prices would improve.
10 / 12 / 08 in

Vale Halts Output at 2 Brazil Iron-Ore Pellet Plants

Cia. Vale do Rio Doce, the world number one iron-ore producer, halted output at two iron-ore pellet plants in Brazil’s port of Tubarao as an “unprecedented contraction” in demand forces it to step up production cuts.

The two facilities, which supply raw materials for the steel industry, can produce 7.3 million metric tons a year, Rio de Janeiro-based Vale said today in a statement. Vale said it has now idled 29.3 million tons of annual pellet capacity, including production in a joint venture with BHP Billiton Ltd.

Vale is paring output to match similar declines by steelmakers as a slowing global economy hurts demand. The company’s iron-ore and pellet sales may plunge 40 percent this quarter because of slumping Chinese steelmaking, said Gilberto Cardoso, an analyst at Banif Securities in Rio de Janeiro.

“This reflects the dismal state of the market,” Cardoso said in an interview. “Pellets are the first product that buyers cut as they’re more expensive than other iron-ore products and more difficult to keep in stock.” The company may now have cut 50 percent of its capacity in Brazil, he said.

Vale also shut down on Nov. 5 two other pellet plants at Tubarao, located in the southeastern Brazil state of Espirito Santo. The four Tubarao plants, along with two suspended facilities run by the Samarco Mineracao joint venture with BHP Billiton Ltd., have annual capacity of 29.3 million tons. The venture won’t resume operations until mid-January, Vale said.

“In light of the severe global recession and the uncertainties about the future, Vale will continue to manage its production in line with its assessment of market conditions prevailing in the short term,” the company said.

Chinese Steelmakers

Chinese steelmakers will be seeking an 82 percent price cut for iron ore next year after steel prices plunged to 1994 levels, Shan Shanghua, secretary of the China Iron and Steel Association, told Bloomberg News today in an interview.

Earlier this year, Vale gained price increases of between 65 percent and 71 percent for iron-ore fines in annual contract negotiations with its global customers, while the price of its pellets jumped 87 percent to a record. Iron ore has rallied for six straight years.

“The Chinese statement today is a formal position to kick off the 2009 iron-ore price negotiations,” Cardoso said. “China has 65 million tons of iron ore in stock and economic projections for first-half 2009 are dismal.”

A Rio de Janeiro-based Vale press spokesperson said by telephone the company had no comment on the report from China.

Vale gained 2.21 reais, or 10 percent, to 23.71 reais in Sao Paulo trading today. The shares have declined 53 percent this year, compared with a decline of 40 percent in the Bovespa share index.
04 / 12 / 08 in

Vale Fires 1,300, Sends 5,500 on Leave Amid Export Crisis

Cia. Vale do Rio Doce, the world number one iron-ore producer, fired 1,300 employees and will send 5,500 more on paid leave because of the “serious crisis” in the metals and mining industry.

An additional 1,200 employees are being retrained for new jobs, a press official for the Rio de Janeiro-based company said today in a telephone interview. Before the cuts, Vale had 62,000 employees worldwide, said the official, who declined to give her name.

“The mining sector is going through a serious crisis due to the reduction in orders from steelmakers,” the spokeswoman said. “Vale is working to avoid dismissals or to dismiss as few as possible. We’re making an effort to preserve our employees who are specialized and trained.”

Steelmakers including U.S. Steel Corp., the largest U.S.- based producer by 2007 sales, are cutting output as demand falls. Pittsburgh-based U.S. Steel said yesterday it will pare output at three plants and temporarily lay off 3,500 workers. Iron-ore is a key raw material used in steelmaking.

Staggered Leave

Under Vale’s system of paid leave, groups of employees will take leave on a staggered basis between this week and the end of February, the official said. The changes mostly affect employees in the company’s iron-ore operations, she said.

Of the 5,500 taking paid leave, 80 percent are from the Brazilian state of Minas Gerais, where Vale’s so-called southern system iron-ore mines are located, the spokeswoman said. Of the 1,300 dismissed, 20 percent were from Minas Gerais, she said.

Vale fell 3 centavos, or 0.13 percent, to 22.46 reais in Sao Paulo trading today. The stock has plunged 56 percent this year, compared with a 45 percent fall for Brazil’s benchmark Bovespa index.

Vale said Oct. 31 that it was cutting 30 million metric tons a year of iron-ore output, around 10 percent of capacity, mainly from high-cost mines with lower-quality reserves in the southern system because of the slowing global economy.

The company also said in October it would temporarily shut manganese and ferroalloys operations in Brazil and ferroalloys plants in France and Norway. Nickel output was cut in Indonesia and China, and Vale slashed primary aluminum production by 60 percent in Brazil.

“The Vale layoffs are a natural process,” Jayme Alves, a mining analyst with Sao Paulo-based broker Spinelli SA, said in a telephone interview. “Steel distributors and carmakers have high stocks of steel and falling prices are encouraging steel- production cuts.”

Iron-ore stockpiles are also high in China and at some steelmakers, Alves said. BHP Billiton Plc, the world’s biggest mining company, said it will cut iron-ore output about 5 percent worldwide, and rival Rio Tinto Group announced a 10 percent reduction in its global output.

Bargaining Power

Daniel Gorayeb, an analyst with Sao Paulo-based Accerta Investment Consultancy, said the job losses don’t necessarily signal new production cuts. Reducing output will help preserve the company’s bargaining power in the annual iron-ore pricing negotiations that are now beginning, the analyst said.

“Vale has to show the market it’s not going to produce in excess,” Gorayeb said. The cuts “show caution, that it’s managing the situation and has the ability to adapt to it. With the cuts it maintains its cash-generation power and this ends up positive for all the employees,” he said in an interview.
03 / 11 / 08 in

Fall in Chinese steel demand sees price of iron ore buckle

Chinese steel production has been dropping along with the steel price for weeks.

But the situation in Tangshan, China's steel capital, shocked even a seasoned steel market analyst recently: "The statistical data sound depressing, but what we observe on the ground is more devastating," says Bonnie Liu of Macquarie Bank.

"Nearly all independent rollers have suspended production since the beginning of October, and most integrated steel mills are running at 30 to 50% of their normal capacity, with large layoffs taking place," she says.

Against a background of collapsing steel production, dramatically falling prices and rapidly softening demand from the Chinese car, appliance and construction industries, it is small wonder that analysts, traders and executives are predicting the toughest annual iron ore pricing negotiations for many years.

The talks for the annual benchmark agreements started informally last week with an industry conference in the Chinese port city of Qingdao, where representatives of the Chinese steel industry made several aggressive comments in favour of a price cut.

"It's clear where iron ore prices will be going," Liang Shuhe, deputy director of foreign trade at China's Ministry of Commerce, said at the Qingdao conference. "Iron ore demand may drop next year with falling demand for steel."

Sales of iron ore are highly dependent on Chinese economic growth as the country consumes almost half the world's seaborne traded ore. But the problems extend beyond its frontiers as steelmakers in Europe and the US are also cutting production sharply.

Ferrexpo, a small iron ore producer based in Ukraine, this week said that its regional customers were deferring contracts for November and December into next year because a significant reduction in both steel demand and output.

"The deterioration in the demand outlook has been marked and is exacerbated by customer de-stocking of iron ore," said Simon Wandke, Ferrexpo's head of marketing. Other executives agree that steelmakers from China to Germany are running down their stocks amid an uncertain outlook.

Steel Business Briefing, the consultancy in Shanghai, says it is unusually difficult to predict the outcome of the annual round of iron ore price negotiations because of the chaotic situation of the global economy.

"No one knows what will happen," says Tina Wang of Steel Business Briefing, a former iron ore trader. "Things are much more unpredictable than usual." Contract prices could fall by 10 or 20 per cent - or even more, she says.

"People are waiting for steel prices to bottom out, and that hasn't happened yet," she says, noting that spot iron ore prices in China have fallen to under $70 a tonne from a record $200 a tonne earlier this year. "A month ago, no one could have predicted that spot prices would fall so far," she adds.

Chinese steel production is forecast to be flat this year, rather than rising 5-10% as expected, the head of a steel industry group said recently. Shan Shanghua, Secretary General of the China Iron and Steel Association, said he expected China to produce about 500m tonnes of steel this year, up 10m tonnes from last year, and short of forecasts for an increase to 520m-550m tonnes.

Other analysts and bankers agree that current market conditions favour buyers over sellers. The consensus among traders, bankers and analysts is for a price cut of 10 to 20 per cent for the contracts starting in April 2009 as today's Chinese ore spot prices of less than $70 a tonne is well below the estimated cost of $90 a tonne in the annual contracts.

Steelmakers executives talk about larger cuts - 30% is often mentioned - while mining executives, who are likely to delay the negotiations until well into next year hoping that the market will have recovered by then, say prices could settle each side of a 10% cut to a 10% increase.

Du Wei, analyst at Umetal, a Chinese steel consultancy, says that Chinese steel makers are determined to pursue a price cut in this year's negotiations.

"Falling demand for steel and the reversal of the gap between the spot price and long-term contract price will enhance the bargaining position of Chinese companies," he says.

The timing of the price settlement will be critical. Miners hope that ore demand will recover early next year just as Chinese domestic supply tightens.

They believe today's low prices will force Chinese mines to cut capital spending or close production altogether. Up to a third of China's domestic iron ore production is lossmaking when spot prices drop below $100 a tonne, according to some industry estimates.

Some ore producers have been so concerned about the prospect of low prices that they have recently bought protection in the iron ore swap market, bankers say. But consumers and speculators remain on the sidelines of the swap market.

Nevertheless, current ore prices could soon lure some consumers into the swap market as spot prices at $70 are seen as a blip rather than trend, bankers say. Adam Knight, co-head of global commodities at Credit Suisse, says: "Today's low prices offer an opportunity for consumers to hedge some of their medium-term needs at attractive prices."

For iron ore consumers in Tangshan, such hedging seems unlikely: after all, it will only add to their costs at a time when production has collapsed.

Source: Financial Times
10 / 08 / 07 in

Chromex Mining to acquire 271 hectare chrome project on Bushveld complex, South Africa

Acquisition of 15 million tonne chrome project located on the Western Limb of the Bushveld complex in South Africa

· Acquisition to more than double Chromex's resources from 9 million tonnes to approximately 24 million tonnes chromite and reduce operational risk through development of two mines

· Mining Right in place will facilitate the fast-track development of project and reduce timeline to production

Chromex Mining plc, the AIM listed dedicated chrome company operating in Southern Africa, has entered into a binding Heads of Agreement with Mkhombi Stellite (Pty) Ltd ("Mkhombi") whereby Mkhombi will vend 100% of its chrome assets into Chromex's South African subsidiary Chromex Mining (Pty) Ltd for a total consideration of ZAR34m (approximately GBP2.4m). This comprises ZAR14m (approximately GBP1m) cash with the balance of ZAR20m (approximately GBP1.4m) in new Chromex shares at a price of 25p per share.

Mkhombi is the controlling (51%) and managing shareholder of Ilitha Mining (Pty) Ltd ("Ilitha") which is the 100% owner of the Stellite chrome project located on the Western Limb of the Bushveld complex in South Africa. A New Order Mining Right has been granted to Ilitha, encompassing the entire 271 hectare Stellite property. The project has an estimated 15 million tonnes of chrome resources comprising four seams, namely the LG6, MG1, MG2 and MG4. All four seams outcrop on the property and it is anticipated that approximately 3 million tonnes will be open cast. The project has been extensively drilled and has had approximately 170,000 tonnes of chromite mined and sold both to the domestic and international chrome markets.

The Mining Right will facilitate the fast track development of the Stellite opencast resources, which will significantly reduce the Company's timeline to production. The proposed transaction will more than double the Company's controlled resources from 9 million tonnes to approximately 24 million tonnes and reduce the Company's operational risk through the development of two mines instead of a single standalone operation. . In terms of the agreement Chromex has secured the current management team to ensure continuity in the development of this asset.

The transaction is conditional on a successful due diligence, consent from the South African Department of Minerals and Energy ("DME") related to the change of control in Ilitha and the waiver of pre-emptive rights by the remaining minority Ilitha shareholders.

Nigel Wyatt, CEO of Chromex, said, "This transaction is in line with our strategy of increasing our chrome resources particularly with acquisitions that have the potential for near term development, to facilitate the rapid growth of the Company within the current buoyant ferrochrome market."

Ayanda Ngubane, a spokesperson for Mkhombi said, "The combination of Mkhombi and Chromex's chrome assets will provide the critical mass necessary to underpin the long term viability of the projects through the commodity circle."
13 / 11 / 06 in

African business and reporting - Digging deep on disclosure

The new GRI guidelines for non-financial disclosure will help make sustainability reports more relevant, say two leading South African mining companies. Hundreds of companies, African-based ones included, have for years struggled with how to report on their non-financial performance.

Since 1997 the Global Reporting Initiative and its guidelines have aimed to provide a framework for companies to report on their social and environmental impacts. But in trying to capture the complexity of corporate non-financial performance, the GRI guidelines have asked companies to report on an often bewildering array of indicators. Read the rest of this entry
08 / 11 / 06 in

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BUSINESS CENTER

We can't afford to ignore our coal resources

Anglo stresses early-stage nature of Xstrata 'proposal'

China economy shows signs of recovery

China turns screws on iron ore giants

Vale Halts Output at 2 Brazil Iron-Ore Pellet Plants

Vale Fires 1,300, Sends 5,500 on Leave Amid Export Crisis

Fall in Chinese steel demand sees price of iron ore buckle

Chromex Mining to acquire 271 hectare chrome project on Bushveld complex, South Africa

African business and reporting - Digging deep on disclosure

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