It was supposed to be one of the best trades of 2013 – buy mining stocks to get leveraged upside to the global economic turnaround. But as we approach the end of the first quarter, only one half of that equation is working. The world economy is recovering strongly but the big miners are being well and truly left behind – Australian Financial Review.
Yep, the miners as a ‘leveraged play on global growth” is not going exactly to plan: Read more
John Kemp at Thomson Reuters has pointed us in the direction of colleague Clara Ferreira-Marques’ piece on the likely repercussions of Rio Tinto’s $14bn revaluation of aluminium and coal assets last week. As she notes, it’s almost certain that Rio Tinto’s hit will now set the stage for a wave of writedowns across the industry. Read more
BHP Billiton is taking a step back from its planned $20bn expansion of its Olympic Dam copper and uranium mine — as many had suspected it might.
The company wrote down $346m on its investment so far in the South Australian project. That, combined with writedowns on its North American shale gas assets, led to a 21 per cent decline in its full-year profit after tax. Read more
Here’s a bold call: the developed world’s fastest growing (that’s Australia for those of you at the back of the class) will fall in to recession next year as the China-driven mining investment boom ends.
Given the recent declines in Chinese steel prices and spot iron ore price, Deutsche Bank economist Adam Boyton reckons Australia’s terms of trade (the price of exportable goods divided by price of importable goods) could be 15 per cent lower year-on-year by the fourth quarter. Read more
As low cost producers, with arguably the best resources in the world, it’s little wonder that BHP Billiton and Rio Tinto are shipping as much iron ore as they possible can from their mines in the desolate Pilbara region of Western Australia. Assuming a $7/tonne freight rate, Lex estimates, the landed iron ore price in China would have to fall to $37/t before Rio lost out.
So even with the iron price at a near three-year low of $112 , Rio and to a lesser extent BHP are making a killing and will continue to do so as higher cost producers (mainly Chinese) fall by the way side. Read more
It can’t be much fun being an Australian in London at the moment. (Trailing the Brits is one thing, but lagging the Kiwis in the medal table must really hurt.)
But at least our antipodean visitors can afford to indulge in a little retail therapy at Westfield Stratford City (the Australian dollar is trading close to a record high against the British pound) or, if they are really embarrassed, hop on the Eurostar to Paris (where the dollar hit a record high against the eurothingy just last week). Read more
An interesting column from Clyde Russell at Reuters (H/T John Kemp) pointing out the key problems facing miners today. They can’t get sufficient returns on capital invested, so should they even bother trying?
From Russell: Read more
A BHP executive’s comments about Chinese steel demand growth flattening have gone viral, with lots of market reports pointing to Ian Ashby’s words to explain European markets closing lower yesterday and falling Asian stocks today.
From the Australian Financial Review: Read more
BHP Billiton, the world’s biggest mining company, sees no reason to change its strategy in light of Glencore’s proposed merger with Xstrata, the FT reports. “People have asked me does this deal make a difference to you, and I would say it doesn’t make difference to our strategy, it doesn’t make a difference to our philosophy,” Marius Kloppers, BHP’s chief executive, said on Wednesday after the release of interim results. His comments came after BHP reported a 6 per cent rise in half-year underlying earnings before interest and tax to $15.7bn, a result that was slightly ahead of analyst forecasts. Record production from BHP’s iron ore mines in Western Australia and a gain in bulk commodity and petrol prices were behind the rise. Read more
BHP Billiton has put its diamonds business up for sale at a time when expectations of rising long-term demand for the precious stones are unleashing tectonic changes in the world’s diamond industry, the FT reports. The world’s biggest mining company by market value said on Tuesday it would review options for the Ekati mine in northern Canada, the only diamond mine in its portfolio. This could to lead to a sale of its diamonds business over the next two months. “Potential transactions arising from the review will be subject to detailed analysis before a final decision is made,” BHP said. It expects to complete the process by the end of January 2012. Potential buyers include Rio Tinto and Anglo American. Anglo is positioned to become the world’s biggest diamond miner by production, after it bought a controlling stake in De Beers for $5.1bn this month. Diavik, Rio’s diamond mine in Canada, is close to the Ekati mine in the semi-arctic diamond fields north of Yellowknife, Northwest Territory. Former and present employees of both Rio and BHP have said privately that the companies have for years studied proposals to combine the assets. Read more
BHP Billiton, the world’s biggest mining company, named Graham Kerr as chief financial officer to succeed Alex Vanselow, reports Bloomberg. Mr Kerr, 40, joined BHP in 1994 and was most recently president of diamonds and specialty products. The company said Mr Vanselow, a Brazilian national who has been chief financial officer since 2006, is leaving from February 2012 to pursue personal business interests. He told reporters he was interested in becoming chief executive of another publicly listed company. Read more
Remember when Vale and BHP, two of the world’s biggest iron ore miners, changed their pricing contract methods with China and Japan?
The move from annual to quarterly contracts came amid resurging Chinese demand for iron ore, which put the miners in a powerful position. Read more
– By Neil Collins –
Dear Lloyds: nobody wants to buy your bank Read more
It was only a couple of months ago that Vale was talking up iron ore prices out to 2015 and beyond, and analysts were saying the discount being applied to company shares on expectations of a glut were too steep.
Moreover, Marius Kloppers and Tom Albanese were both cautioning that building up the planned new capacity that might take longer than expected. Read more
BHP Billiton, the world’s largest mining company, reported an 86 per cent rise in its annual net profit on Wednesday and said it expects commodities demand to remain strong despite China’s efforts to cool its economy, the WSJ reports. The Melbourne-based company blamed global imbalances and high levels of sovereign debt in the US and Europe for continuing to create uncertainty. The company called on policy makers to make a coordinated response that “has the potential to engender confidence and ease the volatility” in markets. They added that fixed-asset investment in China, which has been the engine of global growth since the financial crisis, has yet to fully reflect Beijing’s moves to tighten monetary policy and rein in excessive lending, it added. “Despite these near-term challenges, we remain positive on the longer-term outlook for the global economy,” BHP said in a statement. Overall, BHP’s net profit rose to $23.65bn in the fiscal year ended June 30, bolstered by strong iron prices, compared with a net profit of $12.72bn a year earlier. Full-year revenue rose 36 per cent to $71.74 bn. Read more
Nothing has been harder hit in the current market swoon (in London at least) than the mining sector.
Even by the standards of the recent financial crisis, Thursday’s sell-off in stock markets was sizeable, the FT says. The growing nervousness over the debt crisis in Europe, the risk of a “double-dip” recession in America and a view among investors that policymakers, including the Japanese government and European Central Bank, had failed to shore up confidence accelerated this week’s sell-off. The worst hit stocks were those of the world’s big natural resources groups, including miners, oil companies and traders. Despite the prices of many commodities remaining near recent highs, their shares prices tumbled, sending valuations to the lowest levels of the year. Even gold started selling off like any other risky asset on Thursday, reports the WSJ. In Sydney on Friday, resources stocks continued to be pounded with BHP Billiton off 4.1 per cent and Fortescue Metals Group down 6 per cent. Read more
BHP Billiton has declared force majeure on exports from the world’s biggest copper mine, the FT reports, as a mineworkers’ strike entered its eighth day. The strike at BHP’s Escondida mine in Chile, which supplied 7 per cent of the world’s copper last year, comes in a month of widespread mining strikes from Indonesia to South Africa. Early on Friday in Singapore, three-month copper LME futures rose to their highest level since April, Reuters says. Read more
Workers at the world’s biggest source of copper, BHP Billiton’s Escondida mine in Chile, began striking late on Thursday, Bloomberg reports. The strike is planned to last 24 hours, leading to about 3,000 tonnes of lost copper production. Strikes are also planned in seven of BHP’s central Queensland coal mines in Australia, beginning next week, the news agency says. The industrial action in the flood-ravaged state is expected to drive coal prices higher. Read more
BHP Billiton said iron ore production rose for an 11th consecutive year, in a market update that underlines confidence the mining giant will next month report a near doubling in financial full-year net profits to $23bn, the FT reports. Shares in the Anglo-Australian listed miner rose nearly 2 per cent to A$43.44 by the Sydney close on Wednesday after BHP said that in addition to iron ore it had set annual production records for the period ended June in manganese ore, parts of its nickel unit and in natural gas. BHP’s natural gas division was boosted by a maiden contribution from the $4.7bn acquisition earlier this year of Arkansas-based shale gas assets from Chesapeake Energy of the US. The miner last week placed another large bet on the US shale gas industry when it announced an agreed $12.1bn for Houston-based developer Petrohawk. The miner’s annual production of iron ore rose 8 per cent to 134m tonnes, while growth of 7 per cent in the four quarter compared with the third came in spite of a disruption caused by a train derailment. Read more
BHP Billiton has made another big bet on energy in the US, announcing an agreement to buy Petrohawk, an independent oil and gas company, for $12.1bn in cash, the FT reports. In its biggest acquisition to date, the Anglo-Australian mining group said on Thursday it had agreed to pay $38.75 a share for Petrohawk, which operates in three leading areas of shale gas and oil production in the US. The deal values Petrohawk at $15.1bn including net debt. NYT DealBook says should the tender offer succeed, it may also help BHP move past its spotty history of deal-making. Last year, the Canadian government effectively blocked the company’s $38.6bn bid for the Potash Corporation. BHP has also failed to both buy its main rival, Rio Tinto, and form a joint venture with that mining company. Read more
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1Bernanke weighs in on robot wars; brings Keynes for backup
2Secret liquidity and Scottish independence
3Spain's awful unemployment
4S&P 2,100, by Goldman Sachs
5Pump up, debase
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10In which the FTSE puts the crisis behind it
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