February Newsletter – 26.02.18



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  • The Mining Industry Is Awash With Cash
  • Canada the world’s top mining destination, despite Saskatchewan fall
  • Apple in Talks to Buy Cobalt Directly From Miners
  • For coal miners, it’s time to exit or get rich: Russell
  • Inflation’s Back and Commodities Will Benefit, JPMorgan Says
  • Glencore M&A Firepower Undimmed After $2.9 Billion Dividend
  • Russia’s Central Bank Gold Hoard Is Now Bigger Than China’s
  • Gold, silver miner Hochschild eyes move into copper and zinc
  • Australia’s Top Gold Miner Boosts Bets on Ecuador’s Riches


The Mining Industry Is Awash With Cash
By Thomas Biesheuvel, Bloomberg

  • Rio pledges record payout and even Glencore pays hefty reward
  • Companies put era of big spending, risky deals behind them

The mining industry is awash with cash, and so far it’s got two main uses — pay down debt and reward investors.

Three of the big four London-listed miners have released earnings this month, and it’s clear the companies are doing what shareholders have demanded of them. Glencore Plc, which traditionally favoured stuffing its war chest over rewarding shareholders, surprised the market with a $2.9 billion payout Wednesday.

Rio Tinto Group promised $5.2 billion in dividends with an additional $1 billion stock buyback, and BHP Billiton Ltd., whose financial year ends in June, also made a generous interim payment.


Canada the world’s top mining destination, despite Saskatchewan fall
Cecilia Jamasmie

Canada is the world’s most attractive region for mining investment, based on the combined rankings of all its provinces and territories, the latest annual global survey of mining executives released Thursday by the Fraser Institute shows.

While the Maple Leaf country overtook Australia as regional destination number one, many of its provinces and territories did not fair well this year in the policy think-tank’s annual survey.

While Canada overtook Australia as regional destination number one, many of its provinces and territories did not fair well this year in the Fraser Institute’s Annual Survey of Mining Executives.

Saskatchewan, which together with Manitoba topped last year ranking, fell down to second place in the ranking, leaving old-time favourite Finland leading the list of most attractive jurisdictions, with Nevada in third place.

Manitoba simply disappeared from the top ten, while British Columbia and Alberta continue to receive low marks from investors for regulatory uncertainty and concerns about disputed land claims.

Quebec ranked second in Canada (6th overall), followed by Ontario (7th), which improved its rank from 18th last year.

“Capital is fluid and one province’s loss can be another province’s gain because mining investors will flock to jurisdictions that have attractive policies,” says Kenneth Green, senior director of the Fraser Institute’s energy and natural resource studies.



Apple in Talks to Buy Cobalt Directly From Miners
By Jack Farchy  and Mark Gurman, Bloomberg

  • iPhone maker is one of the largest end users of the metal
  • Cobalt is a key ingredient in mobile phone batteries

Apple Inc. is in talks to buy long-term supplies of cobalt directly from miners for the first time, according to people familiar with the matter, seeking to ensure it will have enough of the key battery ingredient amid industry fears of a shortage driven by the electric vehicle boom.

The iPhone maker is one of the world’s largest end users of cobalt for the batteries in its gadgets, but until now it has left the business of buying the metal to the companies that make its batteries.

The talks show that the tech giant is keen to ensure that cobalt supplies for its iPhone and iPad batteries are sufficient, with the rapid growth in battery demand for electric vehicles threatening to create a shortage of the raw material. About a quarter of global cobalt production is used in smartphones.


For coal miners, it’s time to exit or get rich: Russell
Reuters Staff

By Clyde Russell

LAUNCESTON, Australia, Feb 26 – It seems coal miners are adopting one of two disparate strategies, either exit the business in a highly visible way to buff up your climate credentials, or sit tight, keep as quiet as possible and rake in the cash.

An example of the public exit from the business is South32 , the Perth-based miner spun out of BHP Billiton which is in the process of selling out of its thermal coal assets in South Africa.

Mike Fraser, South32’s president and chief operating office for South Africa, told Reuters earlier this month that the company was aiming to sell its coal assets because it “did not believe in the commodity.”

It would also be better if the coal mines were majority-owned by black investors, Fraser said.

This is a reasonable recognition that it’s increasingly hard for companies without black investors to do business in South Africa, given its laws and rules aimed at promoting the economic interests of the majority population following centuries of discrimination under first colonial and then white-minority rule.

South32 joins Anglo American in getting out of South African coal, with the London-listed miner selling the last of its domestic coal assets to a majority black-owned company in January.

Anglo American will continue to export coal from South Africa, but it will no longer be a participant in supplying the domestic market, which is dominated by the state power utility Eskom.



Inflation’s Back and Commodities Will Benefit, JPMorgan Says
Bloomberg News

  • Raw materials rallied in January to highest level since 2015
  • Metals show ‘best performance’ when inflation quickens to 2%

Inflation’s back and raw materials stand to benefit, according to JPMorgan Chase & Co., which has raised price forecasts for metals.

“Inflation has come and it should be good for commodities,” the bank said in a report received on Wednesday. Among signs of the shift, JPMorgan cited stronger U.S. wage numbers as well as recent core consumer price inflation.


Glencore M&A Firepower Undimmed After $2.9 Billion Dividend
By Thomas Wilson, Bloomberg

  • Glencore wants to grow its agriculture business, CEO says
  • Standstill agreement with Bunge has ended: Glasenberg

Glencore Plc surprised investors with a bigger dividend on the back of surging profit and commodity prices, but is still stockpiling cash as dry powder for future deals.

“We’re generating $10 billion of free cash flow on current commodity prices,” said Chief Executive Officer Ivan Glasenberg. “There is room if and when we want to do any acquisitions.”

Glencore nearly tripled its dividend payout to $2.9 billion and reported full-year results largely in line with expectations. The results leave Glasenberg well positioned to continue doing what he knows best — deals. While competitors such as Rio Tinto Group shied away from dealmaking last year, Glencore announced acquisitions worth more than $4 billion in copper, oil, zinc and coal.

The stock added 3.9 percent to 399.3 pence as of 9:42 a.m. in London, the biggest intraday gain since August. In the past year, it’s up 22 percent.

Russia’s Central Bank Gold Hoard Is Now Bigger Than China’s
By Eddie Van Der Walt

  • Bank of Russia has bought gold every month since March 2015
  • U.S. still largest owner of metal, followed by Germany

Russia has overtaken China as the fifth-biggest sovereign holder of gold, allowing it to diversify its foreign currency holdings amid a deepening rift with the U.S.

The Bank of Russia in January increased its holdings by almost 20 metric tons to 1,857 tons, topping the People’s Bank of China’s reported 1,843 tons. While Russia has increased its holdings every month since March 2015, China last reported buying gold in October 2016.



Gold, silver miner Hochschild eyes move into copper and zinc

Feb 21 (Reuters) – Gold and silver miner Hochschild Mining Plc, which has been scouting for early-stage mining projects, is interested in moving into other metals including copper and zinc, the company’s chief executive said on Wednesday.

Miners around the world have been looking to take advantage of demand for minerals used in car batteries and new electric vehicles, forecast to soar in coming years as governments crack down on pollution and fossil fuel engines.

“There are other metals that could be interesting to us. Copper is one of them. Zinc is another one,” Chief Executive Officer Ignacio Bustamante told Reuters, adding that the company might also go for other minerals linked to electronics and batteries.


Australia’s Top Gold Miner Boosts Bets on Ecuador’s Riches
By David Stringer, Bloomberg

  • Newcrest to invest $250 million to take stake in Lundin Gold
  • Metals producers racing to uncover gold and copper in nation

Australia’s largest gold producer, Newcrest Mining Ltd., will invest $250 million for a stake in Lundin Gold Inc. to boost its presence in Ecuador, which is attracting a slate of mining giants hunting for major untapped metals deposits.

Newcrest will take 27.1 percent of Vancouver-based Lundin Gold, which expects to bring the Fruta del Norte gold and silver mine in southeastern Ecuador into production by the end of next year. The companies will explore eight other concessions to the north and south of the project under the deal, and Newcrest can earn up to a 50 percent interest in that joint venture by spending $20 million over five years, the Melbourne-based producer said in a statement Monday.

The world’s biggest miner BHP Billiton Ltd. and billionaire Gina Rinehart’s Hancock Prospecting Pty are among firms that have raced into Ecuador seeking major copper and gold deposits. Latin America saw the largest rise in exploration spending in 2017, according to S&P Global Market Intelligence.