Mosaic softens blow of major profit drop with $1 billion share repurchase program |
- Mosaic softens blow of major profit drop with $1 billion share repurchase program
- Gold price hones in on $1,300 on Yellen comments, Chinese demand surge
- Cliffs cutting capital expenditures by 50%, laying off 500 employees
- Fortune Minerals gets conditional environmental approval for Saskatchewan processing plant
- Russian gold output to decline after record year
- Miners avoided Quebec last year, investments plunged 34%
| Mosaic softens blow of major profit drop with $1 billion share repurchase program Posted: 11 Feb 2014 04:47 PM PST Fertilizer producer Mosaic has reported a 79% drop in profit in the last quarter of 2013, reflective of the weakened phosphate and potash market. But following a year of significant pricing pressure and lower-than-expected sales volumes, Mosaic's board of directors has decided to approve a $1 billion share repurchase program, adding to a previously disclosed agreement to repurchase 43.3 million shares in the first half of 2014. The scheme appears to have cushioned the blow of low profits: Mosaic shares were up neary 2.5% on Tuesday, trading at $47.96 apiece. Net earnings for the year were $129 million compared with $616 million a year ago. Earnings per share were 30 cents compared with $1.44 in the same period the year before. "While our results for the fourth quarter reflect the low market prices for potash and phosphates, current market conditions are improving," said CEO Jim Prokopanko in a statement. "Market dynamics are unfolding as we expected they would, with sales volumes increasing before prices; in fact, we shipped a record volume of phosphates during the quarter, and potash volumes increased significantly. Full-year profits were down more than 40%, an indication of just how battered the potash market is after the collapse of the world's biggest potash pricing cartel last summer. Mosaic isn't alone: Last month Potash Corp. of Saskatchewan reported a 46% drop in fourth-quarter profit. The price collapse forced Mosaic and other potash producers to sell their product at a significant discount to last year's levels. In the last quarter of the year, Mosaic sold its potash for an average price of $303 per tonne, down from $435 a year ago. Mosaic sees an improving potash market looking forward and expects sales volumes for the first quarter to be higher than in 2012. "Customers believe a bottom in potash prices has been reached and are now exhibiting improved confidence in their buying decisions," Prokopanko said. "In 2014, we expect record global shipments and improving producer operating rates. Our long-term constructive outlook for potash has not changed."  |
| Gold price hones in on $1,300 on Yellen comments, Chinese demand surge Posted: 11 Feb 2014 03:55 PM PST The gold price enjoyed strong gains on Tuesday, after new US Federal Reserve chair Janet Yellen voiced strong support for the central bank's economic stimulus program. On the Comex division of the New York Mercantile Exchange, gold futures for April delivery – the most active contract – last traded at $1,290.60 an ounce, up nearly $16 from yesterday's close after rising steadily throughout the trading day. Gold hit an intra-day high of $1,294.40 shortly before lunchtime and traders point out that breaching technical hurdles at $1,292 and $1,308, could trigger a series of gains. Yellen told lawmmakers she expects "a great deal of continuity" in the Fed's approach to monetary policy, but left the door open to pause the tapering of $65 billion a month asset purchases under its quantitative easing program should the economic outlook deteriorate. Yellen was one of the chief architects of the stimulus program that is tied to the US unemployment rate, and two disappointing jobs reports in December and January have strengthened the hands of the doves on the Federal Open Market Committee. The US has not been alone in printing money and together with the Bank of Japan, the European Central Bank and the Bank of England, more than $10 trillion is now sloshing around in the system. Monetary expansion, particularly since the financial crisis, has been a massive boon for the gold price. Gold was trading around $830 an ounce when previous chairman Ben Bernanke announced Q1 in November 2008. Gold and the US dollar usually moves in the opposite directions and gold's perceived status as a hedge against inflation is also burnished when central banks flood markets with money. The price of gold slid close to 28% in 2013 – the worst annual performance since 1980 – in anticipation of an end to the ultra-loose monetary policy. But the metal's perceived value as a safe have in time of turmoil and strong physical demand from Asia has seen gold gain 6% so far this year. China consumed 1,176 tonnes of gold in 2013, 41% higher than in 2012, according to data released on Monday by the China Gold Association. Despite onerous new taxes and import restrictions Indian consumption still rose 5% to 987.2 tonnes last year and the two countries together represent more than 50% of world demand. |
| Cliffs cutting capital expenditures by 50%, laying off 500 employees Posted: 11 Feb 2014 03:36 PM PST Just a couple days ahead of its 2013 financial results, Cliffs Natural Resources (NYSE:CLF) has announced that it will lay off about 500 employees and significantly reduce spending. The US-based iron ore producer will cut capital expenditures to between $375 and 425 million - a reduction of more than 50% compared with last year. The company also announced that it will idle Canada's third largest iron ore mine, Wabush, in Newfoundland and Labrador. "Sharper capital allocation must drive our decisions," CEO Gary Halverson said in a statement. "Today's announcement to reduce overall capital spending is an important first step." The Wabush decision, to be implemented by the end of the first quarter of 2014, will affect about 500 employees, both at the Wabush Scully Mine and the Pointe Noire rail and port operation in Québec, though the port will remain open. With fourth-quarter 2013 cash costs of $143 per tonne, operations costs at Wabush are "unsustainably high," Cliffs wrote. The company announced last spring that it would idle the pellet plant at Pointe Noire. "Over the past three years we have seen pricing drop and Wabush Mine's costs escalate all while we have made significant capital investments into the operation," Halverson said. "This is a regrettable but necessary decision. We simply cannot continue operating a high-cost mine while pricing and freight markets are so volatile." Idling the mine will cost about $100 million in 2014 and will result in impairment charges of about $183 million which will be reflected in Thursday's fourth-quarter results. Bloom Lake is in phase one of production and is expected to produce and sell between 5.5 and 6.5 million tonnes in 2014, which is in line with full-year 2013 results. Phase two expansion has been indefinitely suspended and the company has indicated that it would idle phase one if pricing significantly decreased for an extended period of time. The reduction in capital expenditures "is driven by a significant reduction in the Company's expansion and tailings and water management capital spending" at Bloom Lake, Cliffs wrote. The American miner – which had the dubious honour of being named the S&P 500's third worst performing stock of 2013 – was up 4.5% on the New York exchange on Tuesday, trading at $21.50 per share. Image featured on homepage: Cliffs Northshore MIne | Copyright © 2011 Cliffs Natural Resources Inc. |
| Fortune Minerals gets conditional environmental approval for Saskatchewan processing plant Posted: 11 Feb 2014 01:56 PM PST Fortune Minerals jumped nearly 18% to trade at 43 cents per share on the Toronto exchange on Tuesday after announcing that it had secured environmental approval for its metals processing plant in Saskatchewan. With the Ministry of Environment having given the green light for the $200 million metals processing facility – subject to conditions – Fortune can now apply for the required construction and operation permits. "As a condition of approval, the project will be subject to stringent ongoing monitoring and reporting from construction through operation, decommissioning and reclamation activities," the Ministry wrote. The Saskatchewan Metals Processing Plant (SMPP), located about 30km from Saskatoon and adjacent to the Canadian National Railway, will process about 65,000 tonnes of ore into gold, bismuth, cobalt and copper products per year. Fortune's planned NICO mine in the Northwest Territories will feed the Saskatchewan refinery, along with other custom processing orders. The company also sees potential in the metals recycling business through SMPP. Together, the NICO mine and the processing plant will "be an important vertically integrated and reliable Canadian source of cobalt and bismuth metals and chemicals with a highly liquid gold co-product, and copper," the company wrote in a news release on Tuesday. Fortune considers the Saskatchewan location ideal due to lower electricity costs and the mining-friendly provincial government which, according to Fortune, has passed "attractive tax legislation to encourage processing of raw materials that have been sourced from outside the province." It's estimated that the processing facility will add about 200 jobs during construction and 100 long-term positions. But some residents of a town located 2.5km away from the planned facility have said the plant would threaten the area's water supply and blow toxic dust onto nearby farmland, Global News reported in December. The Saskatchewan Environmental Society lobbied the provincial government to not grant approval saying that "there are so many unanswered questions and potential hazards associated with the project." Fortune says it has mitigated the risks of arsenic-laced waste making its way into the region's main aquifer, which sits directly below the land on which the plant will be built. The Saskatchewan government says that during the environmental assessment, which included a 60-day public review period, the proposal was found to be "both environmentally and technically sound, providing both environmental safeguards and outlining company plans to ensure Saskatchewan's air, water and natural resources are protected throughout the duration of the project and after." |
| Russian gold output to decline after record year Posted: 11 Feb 2014 11:40 AM PST After reaching record gold production in 2013, Russia will likely see a 5% drop in gold output this year as miners hit the breaks on high-cost operations. Russia's output of the yellow metal rose by 12.6% year on year in 2013, Reuters reported. Total gold production – including output from mining, scrap and smelting of other metals – was 254 tonnes; this is 14 tonnes higher than what the Russian Gold Industrialists' Union had expected. But according to the Union head who spoke with Reuters, the country's gold miners are slowing down production due to low gold prices. Following a 28% gold price drop in 2013, producers have postponed or sold off more costly projects. "The miners were mining at the highest possible cost because the gold price was going up and when it stopped going up, they had to reduce that," Peter Hambro, Petropavlovsk chairman, told Reuters last month. "So that means that they will mine less gold," One of the biggest contributors to 2014's anticipated output drop will be the delayed launch of Natalka – a mined planned by Russia's biggest gold producer, Polyus Gold (LSE:PGIL). Natalka was supposed to begin operations in the summer of 2014 but this has been delayed by one year. Russian miners Petropavlovsk (LSE:POG) and Nord Gold (LSE:NORD) announced in January that they would reduce costs and cut production. Petropavlovsk reported a 2014 output target of 625,000 ounces of gold – compared with 741,200 ounces produced in 2013. Nord Gold is forecasting between 870,000 and 920,000 ounces of gold production for the year. The company produced 924,400 ounces in 2013. |
| Miners avoided Quebec last year, investments plunged 34% Posted: 11 Feb 2014 10:45 AM PST Mining investments in Canada's province of Quebec dropped significantly more than expected in 2013, plunging about 37% from a record year in 2012, and marking the first annual drop in a decade. According to preliminary data released Tuesday by Quebec's provincial statistics agency, investments in the sector tumbled to $3.25 billion from $5.13 billion a year earlier, driven mainly by weak gold prices and softer demand in China and emerging markets. The news shouldn't come as a surprise for investors following the latest development in the east-central province. Early last year, conservation group Canadian Boreal Initiative (CBI) published a poll results that revealed Quebec was turning hostile to mining. And in December, think-tank Fraser Institute warned Quebec was quickly losing its edge as a consequence of mounting uncertainty over protected areas and environmental restrictions, as well as increased regulation and tax changes. The province that ranked first worldwide from 2007 to 2010 as a desired mining destination, barely reached the 11th place out of 96 jurisdictions last year. In 2012, it was fifth.
Gold stayed the most sought after metal, but its share in the total exploration expenditures for the province plummeted to 37% from 54% in 2011. Yet authorities are optimistic, projecting an increase of 14% to $374 million in exploration and development projects. In 2013, both dropped 47% to $328 million. Junior mining companies accounted for 65 per cent of all exploration expenditures last year. Canada's federal government is set to release results for all the other provinces in March. Image by Spacecat/via Flickr |
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