WSJ: Newmont, Barrick merger talks break down |
- WSJ: Newmont, Barrick merger talks break down
- Sliding Chinese currency takes blame for gold price weakness
- One more reason iron ore price won't stray too far from $120
- Keystone XL decision delayed again
- We have to talk about Fanya Metal Exchange
- VIDEO: A really big game of Jenga played with Cat machines
| WSJ: Newmont, Barrick merger talks break down Posted: 18 Apr 2014 03:32 PM PDT According to a report by the Wall Street Journal, the world's top two gold miners in terms of production had been in talks to merge this week, but no deal could be made. According to "people familiar with the matter" the talks broke down in the past few days and it wasn't the first time that the Canadian and US miners have discussed a deal. Toronto-based Barrick (TSE:ABX NYSE:ABX) which produces some 7 million ounces of gold per year is worth $21 billion on the TSX, down 20% compared to a year ago and nowhere near its $54 billion market value in 2011. Newmont Mining Corp (NYSE:NEM) with a market value of just under $12 billion has fared even worse shedding 30% in value compare to this time last year. The Denver-based company is a 5 million ounce a year producer. Gold is up some 8% in 2014, but more than $600 an ounce below all-time highs reached September 2011.  |
| Sliding Chinese currency takes blame for gold price weakness Posted: 18 Apr 2014 03:03 PM PDT The price of gold ended the holiday-shortened week below the psychologically and technically important $1,300 level, losing almost 2% since Monday. The sell-off was blamed on an easing of tensions between Russia and the West over Ukraine after marathon diplomatic talks on Thursday. The gold price was also hurt by renewed profit-taking ahead of the Good Friday long weekend when many markets in the West are closed for trading. Investors continued to pull money out of the SPDR Gold Trust (NYSEARCA:GLD), the world's largest physically-backed gold ETF accounting for some 40% of total holdings in the industry. A new report suggests there may be other reasons for the recent weakness in the yellow metal: The slide in the value of the Chinese currency, the yuan, to levels against the US dollar last seen in February. Copper being used in China as collateral for loans and to bypass the country's capital control regulations has long been a staple of the industry. With the tight credit conditions inside the country, the practice has spread to iron ore and gold. Some estimates put the the portion of copper stockpiles used in finance deals as high as 80%, while 40% of iron ore inventories could be tied up for trade credit. This week a report by the World Gold Council said Chinese firms could have locked up as much as 1,000 tonnes of gold in financing deals. DailyFX explains the dynamic of how this could push down the gold price: "The highest USD/CNY fixing rates in months may have forced the unwinding of some extremely overleveraged positions. Although the systems of financing are often complex as we saw with copper, gold has been used for some even more complex and lucrative structures surrounding the skirting of capital controls. "In regards to the depreciating Yuan, political pressure continues to build with Treasury officials warning the Chinese not to weaken the Yuan for their economic benefit. Meanwhile, the daily reference rates out of the PBoC continue to move higher toward the ominous 6.25 mark. That is said to be the level where a large concentration of leveraged financial vehicles may experience some serious stresses." Another indication that there may be lots of gold on offer in China is the disappearance of premiums paid on the Shanghai Gold Exchange. From premiums that topped out at $37 when gold was trading around $1,200 last year, traders are now offering gold at a discount or a couple of dollars above to the quoted London spot price. Driven in part by a weakening yuan discounts on gold in China widened to as much as $9 an ounce below when the price were headed towards $1,400 in March. |
| One more reason iron ore price won't stray too far from $120 Posted: 18 Apr 2014 02:15 PM PDT The benchmark price of iron ore tracked higher again this week and is up more than 10% from lows suffered early March. According to data from the The Steel Index, the import price of 62% iron ore fines at China's Tianjin port changed hands for $116.50 per tonne as imports from top consumer China is expected to continue at a record breaking pace. Chinese steel mills and iron ore traders made the most of soft prices for the commodity in March, ramping up imports 21% to just under 74 million tonnes in March. First quarter imports are 19% higher than last year and at 222 million tonnes imply an annualized tally of almost 890 million tonnes, compared to 2013's 820 million tonnes. China has for years been trying to lessen its dependence on foreign ore, artificially boosting domestic production of iron ore by restricting small blast furnaces' access to high-quality imports. Domestic output has grown at an almost as fast a rate as imports to reach some 1.4 billion tonnes last year. But the bulk of the fines requires a process called sintering before being fed into blast furnaces which adds to the environmental impact and costs. At the same time domestic supply drives up costs for the country's steelmakers because the ore is of such a low quality – falling from above 30% to a only 21.5% iron content today. As a result China's steelmakers have been substituting domestic supply with so-called "lump" ore from Australian, South African and South American producers that lower costs and cut pollution by reducing the need for sintering. Premiums for high-quality lump and pellets over fines have reached as much as $17–$18 a tonne and $42 a tonne respectively this year according to Metal Bulletin. South China Morning Post reports another piece of Beijing's strategy – a new plan to consolidate the domestic industry under six to eight large miners producing around 30 million tonnes a year – also does not stand much of a chance of success: "The only way for the new integrated miners to compete against top miners is if they can slash their costs, but I do not expect this can happen," said a senior official at a medium-sized Chinese miner with an annual output of 2 million to 3 million tonnes. "Chinese resources require deeper and deeper digging, and grades are falling, meaning both mining and beneficiation [crushing and separating ore] costs are increasing." Market watchers have been calling down the price of iron ore to single digits for a long time, but last year the raw material was one of the best performing commodities defying weakness in everything from gold to copper to potash. Despite the March drop to near 18-month lows, the climb back to around $120 a tonne has been steady. $120 a tonne has long been considered a price floor for iron ore as many of China's hundreds of small scale miners quickly become unprofitable at these levels. That compares to the estimated $45 – $55 a tonne (FOB) costs of Australian, Brazilian and South African miners. Even if the Chinese industry consolidation happens as planned, competing with these input costs is just too big an ask, meaning that a firm price floor for iron ore should remain in place. Even if that is below $120. Image by bluecloudspatial |
| Keystone XL decision delayed again Posted: 18 Apr 2014 12:58 PM PDT The Keystone XL pipeline project will continue to languish in regulatory limbo with the US administration announcing another delay in the controversial approval process on Friday. The Canadian government had asked for an immediate decision on the $5 billion pipeline, so that construction could begin this summer, but 8 federal agencies said more time is needed to review the project which has been complicated by a court dispute in Nebraska. "Agencies need additional time based on the uncertainty created by the on-going litigation in the Nebraska Supreme Court which could ultimately affect the pipeline route in that state," according to the announcement from the State Department. The legal action is only expected to run its course by the end of this year at the earliest. The proposed project would transport crude from the Canadian oil sands in Alberta to refineries on the US Gulf Coast and should counteract some of the pricing pressures bitumen producers are under. Supporters have said it would be a boon for job creation and domestic energy production, but opponents have warned that oil extraction from the tar sands —among the most carbon-intensive methods of energy production— would likely increase should the project be approved. |
| We have to talk about Fanya Metal Exchange Posted: 18 Apr 2014 12:13 PM PDT Bismuth is a lead substitute and pearlescent pigment widely used in the cosmetics industry (hence the picture of a fashion model). Explorers and miners hardly ever give bismuth a second thought. And fewer still bother to indicate Bi reserves in reports (with one notable exception and for good reason). It's relatively abundant (11 parts per million in earth's crust compared to gold's 0.0013) but usually in negligible concentrations. Only one mine in Bolivia and one in China mines bismuth ore. Pretty boring topic then, much like rare earths were a decade ago. When the rest of the world handed the industry to China on a platter. We all know what happened then:
Fast forward to 2014 and the REE party's over. Perhaps the antimony, germanium, gallium, wolfram, indium, silicon, cobalt and bismuth party is just starting. They are used in many of the same high-tech industries that need REEs and now that REEs are becoming more abundant the likes of antimony and bismuth would top the list of at risk minerals. The Fanya Metal Exchange in Kunming, China trades all of these rare metals. From total obscurity a couple of years ago Fanya is now the dominant player. It has stockpiled 3 times global indium production and is doing the same for bismuth. After going nowhere for a very long time, bismuth prices are up 20% over the last year and and all the action in the industry has shifted from mines to Chinese broker-dealers. Fanya is not quite Wall Street, but the exchange has now opened in the Shanghai Free Trade Zone. If silver – which it also trades – can be cornered by two brothers who knows how far the Fanya's ambitions reach. Fanya makes no bones about its ultimate goal as a state-sanctioned operator. In its mission statement it talks of China's "unique advantage in rare metals" and goes on to say that "from the perspective of the world economy, the protection and utilization of rare metal has been related to a nation's strategy, safety and development." Granted, a shortage of bird shot, Bi subgallate, Moodstruck Minerals Blusher and Pepto-Bismol does not rank as high as control systems for jet fighters (that can't fly without samarium according to Frank Underwood) or absorbers in nuclear reactor control rods. We could probably get by without cheap, readily available and in-volume bismuth. But why should we?
 Image of bismuth germanate scintillator crystals by Savannah River National Laboratory. |
| VIDEO: A really big game of Jenga played with Cat machines Posted: 18 Apr 2014 10:33 AM PDT
 To show off Caterpillar machines, the company pitted excavators, telehandlers and other machines in a giant Jenga-like game of blocks. The object of the game is for heavy equipment operators to remove and then reposition a stack of 27 blocks one at a time without toppling the structure. Machine operators can only use machines and attachments. The video has over 785,000 views. Companies are using elaborate stunts to show off their wares. Last summer a hamster drove a Volvo dump truck out of a quarry to show off the vehicle's enhanced steering system.
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