Gold price rally fizzles as ETF selling continues |
- Gold price rally fizzles as ETF selling continues
- Colossus tries to stay afloat with creditor protection
- Neil Young puts oil sands debate front and centre
- Primrose oil sands summertime leak not yet over
- Iron ore, coking coal prices are breaking bad
- Nickel price: Indonesia ban not enough to lift oversupplied market
| Gold price rally fizzles as ETF selling continues Posted: 14 Jan 2014 04:44 PM PST The gold price let go of the psychologically important $1,250 level on Tuesday, giving up $5.70 an ounce to settle at $1,245.40 on the day. Gold received a boost on Friday after a surprisingly weak US jobs report that showed labour participation rates at levels last seen in 1978. The jobs shocker was interpreted as forcing the Federal Reserve to keep interest rates near zero for longer than anticipated, hurting the dollar and boosting gold in return. But on Tuesday two noted Fed hawks poured cold water on any backpedaling on the taper process that kicked off in December with a $10 billion reduction in monthly bond buying. Charles Plosser, president of the Philadelphia Federal Reserve, said asset purchases running at $75 billion a month, should be wound down sooner than the end of the year, while Dallas President Richard Fisher said he wanted the taper to be double the size it was, that is $20 billion. A negative in the market remains continued outflows from gold-backed exchange traded funds. Holdings of the world's largest gold ETF – SPDR Gold Shares (NYSEARCA:GLD) – dropped more than 3 tonnes on Tuesday and outflows for the year total 8.7 tonnes. At 789.6 tonnes GLD holdings are at the lowest level since January 2009 after a whopping 552 tonnes left the fund last year. The Wall Street Journal reports that the strength seen in 2014 could be because certain investors are buying gold "simply to track two of the world's most closely followed commodity indexes, the Dow Jones UBS Commodity Index and the S&P GSCI:" Both indexes are carrying out an annual adjustment to their commodity holdings to reflect changes in production and liquidity, or ease of trading. This year, the DJ-UBS index will raise its gold allocation to 11.53% from 10.82%, while the S&P GSCI will trim its gold allocation to 2.80% from 2.81% last year. Funds that follow either index will need to buy gold to match the new weights, as gold's declines eroded the value of both allocations. The paper quotes Bart Melek, head of commodity strategy at TD Securities, as saying index rebalancing "will lead to additional purchases of the equivalent of 1.97 million ounces of gold, or about 2.2% of the annual output of gold mines." The price of of gold ended 2013 down 28% at a shade over $1,200 an ounce, bringing a 12-year bull run that took it from around $270 an ounce at the end of 2000 to a record high above $1,900 in September 2011 to a decisive end.  |
| Colossus tries to stay afloat with creditor protection Posted: 14 Jan 2014 04:28 PM PST Cash-starved and in debt, Colossus Minerals is hoping to stay afloat with creditor protection after it failed to make an interest payment due at the end of 2013. With creditor protection and court-supervision, the company will pursue a sale process and restructuring through a debt-for-equity swap. Colossus announced in a news release Tuesday. Debtor-in-posession financing will fund the company thorugh this six-week process. Under the agreement, note holders would control 51.% of shares, streaming company Sandstorm Gold 38.8%, and lenders under a bridge loan 8%. Existing shareholders would hold approximately 1.7%. Meanwhile, the Toronto Stock Exchange has been reviewing Colossus for delisting. The company came close to securing facing through Arias Resource Capital Fund late last year but the deal fell through. According to the Financial Post, the miner needs an additional $70 million to bring the mine into production. Colossus, for a long time considered a very promising junior, is developing the Serra Pelada mine in Brazil. Construction was well under way when the project was put on care and maintenance at the beginning of this year. After two resignations in December, the company has been left with just two members on its Board of Directors. In order to conserve what little cash it has left, Colossus announced earlier this month that it would lay off about 400 workers at the project and "significantly" reduce the number of employees at its Toronto office. In an interview with the Gold Report last month, James West of The Midas Letter called the Serra Pelada mine "one of the highest-grade platinum/palladium/gold deposits ever discovered." "Even if gold went down to $800/oz, this is a project that would still be very economically viable," West said. But Colossus has taken a beating over the past year. In January 2013 the company was trading at about $5 per share. Now it's down to less than five cents. A trading halt was imposed on Tuesday. |
| Neil Young puts oil sands debate front and centre Posted: 14 Jan 2014 02:02 PM PST Rockstar Neil Young has brought a heated debate to a boil. The Canadian musician is doing a benefit tour across the country to support First Nations communities in their fight against oil sands development. When it comes to environmental issues, Young says the Canadian government is "completely out of control." The rockstar – a vocal oil sands opponent for some time now - visited oil sands sites and says it's "one of the ugliest things [he's] ever seen," the Toronto Sun reported. Young's condemnation of the multi-billion dollar industry has roused the Federal government, with the Prime Minister's Office coming out in defence of the oil sands. "Even the lifestyle of a rock star relies, to some degree, on the resources developed by thousands of hard-working Canadians every day," Jason MacDonald from the PMO's office said in a statement, as reported by the Huffington Post. "Our government recognizes the importance of developing resources responsibly and sustainably and we will continue to ensure that Canada's environmental laws and regulations are rigorous." Young fired back saying that in fact, no, "rockstars don't need oil." "My car's generator runs on biomass, one of several future fuels Canada should be developing for the Post Fossil Fuel Age," Young wrote, as reported by Global News. "This age of renewable fuels could save our grandchildren from the ravages of Climate related disasters spawned by the Fossil Fuel Age; but we have to get started." The back-and-forth sparked a war of words on the Twittersphere. |
| Primrose oil sands summertime leak not yet over Posted: 14 Jan 2014 12:24 PM PST An oil sands leak which started in the summer of 2013 at the Primrose oil sands field in Alberta is not over, according to a report by Reuters. Steve Laut, president of Canadian Natural Resources (TSX:CNQ) – the company behind the operation – told the news agency that there is still a "low rate of seepage," about "one cubic metre squared per day." Laut said the leak will be stopped shortly and that it won't have an impact on production. The Alberta government has served Canadian Natural Resources (CNRL) with two environmental protection orders related to the Primrose leak. The orders stipulate that the company must drain the affected water body, clean up the sites and determine the cause of the leaks. In November the President of CNRL told the Canadian Press that the bitumen leak was "totally solvable" and that cleanup was about 80% complete. The Alberta Environmental Regulator and CNRL don't agree on what might be causing the spills. The environmental watchdog says it could be "geological weakness." CNRL says that several legacy wells could be to blame. Earlier this month the regulator investigated another leak from a CNRL well. The agency said 27,000 litres of crude bitumen were released underground on January 3 at the Primprose field, Global News reported. The leak was stopped and an agency spokesman told reporters that a failed well casing was to blame. |
| Iron ore, coking coal prices are breaking bad Posted: 14 Jan 2014 12:11 PM PST Iron ore sinks below $130 for the first time in 148 trading days and coking coal breaks long-held industry rule of thumb and dips below the iron ore price.
 The price of iron ore slumped to a 6-month low on Tuesday, breaking below the $130 level for the first time since July. The benchmark CFR import price of 62% iron ore fines at China's Tianjin port fell more than 1% to $129.50 a tonne on Tuesday, a level last seen July 16 and down 3.5% since the start of the year according to data supplied by The Steel Index (TSI). Compared to previous years – 2011 and 2012 saw $60 a tonne crashes over not much more than a month of trading – the iron ore market was uncommonly stable last year, particularly in the second half with the steelmaking ingredient trading between $130 and $140 a tonne for 148 days straight. TSI's Tianjin price index is used as the basis for many physical term contracts and also as the settlement for swaps, options and futures listed on the Singapore Exchange (SGX) and other exchanges. While still a relatively small part of the iron ore trade volumes of iron ore derivatives have soared in recent years. SGX, which dominates the market, enjoyed a doubling of swaps volumes cleared in 2013 to nearly 230 million tonnes, while options volumes and open interest grew exponentially. Futures, newly launched on SGX in April 2013, saw monthly volumes increase by more than 25 times to 2.2 million tonnes in December. The forward price indicators from Singapore aren't great either. In a research note The Steel Index points out that the forward curve for iron ore on SGX dipped under $130 a tonne for the January contract for the first time last week and currently trends downwards along the curve to under $120 a tonne by May this year. After a 10% jump to a record 820 million tonnes last year, China now consumes almost three-quarters of the global seaborne iron ore trade which for 2013 is estimated at just over 1.1 billion tonnes. The country manufactures almost as much steel as the rest of the world combined with its blast furnaces pumping out steel at a record-setting rate of 2.1 million tonnes per day, a 9.4% increase over 2012. But dumping that much product onto the market comes at a price and China's Iron and Steel Association reports average profitably among large domestic mills to be under 0.5%. A slowdown in Chinese steel production this year appears inevitable amid overproduction, a crackdown by authorities on the industry over environmental concerns and weaker domestic demand. Clouding the outlook further is a rise in Chinese iron ore stockpiles to 88.6 million tonnes in December, up a whopping 21% from a year ago, and an expected 22% jump in exports from Australia and strong production growth in Brazil after two stagnant years. The other crucial ingredient in the steelmaking process, coking coal is also under pressure. TSI's prices for premium hard coking coal (FOB Australian east coast exports) has trended downwards since reaching $151.10 a tonne in the middle of September last year, dipping as low as $130.30 a tonne this week, before a tick upwards on Tuesday. After hitting a high of $172 a tonne in February 2013, premium met coal prices have been lower than the benchmark iron ore index for four of the last six trading days against "a long-held rule of thumb that coking coal prices are higher than those of iron ore," says TSI. |
| Nickel price: Indonesia ban not enough to lift oversupplied market Posted: 14 Jan 2014 10:36 AM PST Indonesia rocked the mining world on Sunday putting into effect an outright ban on nickel and bauxite ore exports. The Asian nation is the world's premier thermal coal and refined tin exporter and is also a gold and copper powerhouse, but as the number two miner and largest exporter of nickel the ban is a potential game changer in the market for the steelmaking raw material. Indonesia accounts for over a fifth of global supply at an estimated 400,000 tonnes of contained metal. The impact will be felt most heavily in China which relies on Indonesian laterite nickel ore and accounts for 50% of global demand. Chinese nickel pig iron producers imported more than 30 million tonnes of nickel ore in anticipation of the ban and stockpiles inside the country may be enough to cover as much as 6-months supply. Global warehouse levels which have also risen sharply over the past two years – hitting a record 260,000 tonnes last week according to LME data – have also kept prices subdued. Ample available metal and ore combined with a 20% rise in worlwide mining output since 2011 just as the market was moving into surplus, help to explain why nickel prices have reacted in a fairly subdued manner. Three-month nickel on the LME is trading at $14,250 a tonne, it's highest levels this year, but a far cry from 2013's high of $18,700 struck in February and near levels last seen in 2009. Independent research house, Capital Economics in a note out on Tuesday says in the short-term, Indonesia's ban "should support global nickel prices, but the market impact will be "We have raised our end-2014 price forecast to a still-low $15,500 per tonne, compared with $14,200 per tonne today, to reflect the impact of the ban on supply."
Global output is forecast to rise for the first time to over 2m tonnes in 2015. That's up from 1.4m tonnes in 2007. A number of large new nickel laterite projects are being ramped up to full capacity outside Indonesia including VNC New Caledonia (60,000 mt/year), Ambatovy Madagascar (60,000 mt/year), Koniambo New Caledonia (60,000 mt/year) and Onca Puma Brazil (57,000 mt/year). While not all these project will be brought up to nameplate capacity and producers like Talvivaara in Finland are scaling back operations, given the tough market conditions, large producers are eager to produce at full tilt to drive down overall costs. For smaller producers that poses a significant threat and some estimates put the portion of loss-making nickel operations around the world at 30% of the total. |
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