Citigroup: 'Don't be tempted' to buy gold mining stocks |
- Citigroup: 'Don't be tempted' to buy gold mining stocks
- Fight to oust Cliffs board just got real ugly
- EPA's new carbon regulations could cut coal emissions by 20%
- 30 years after Hunt bros, scramble to take over London silver fix
- Why You Should Pump Slurries with a Peristaltic Pump
- Weir abandons $6.1bn bid to buy rival Metso
| Citigroup: 'Don't be tempted' to buy gold mining stocks Posted: 29 May 2014 04:00 PM PDT The gold price extended the week's losses on Thursday sliding to a near 4-month low as negative sentiment sweeps the market. On the Comex division of the New York Mercantile Exchange, gold futures for August delivery touched $1,251 an ounce during regular trading, the lowest since end January. Gold is still modestly up in 2014 but has retraced 68% of its year to date rally, down $123 from highs reached mid-March as the rally on the back of safe haven demand loses steam and lower prices fail to entice bargain hunters. Investment blog Barron's quotes on Thursday from Citigroup's so-called Global Gold Book which paints a grim picture of prospects for the industry and that the "poor fundamentals [is] difficult to ignore: Understandably, many shareholders are toiling with the idea of buying into gold equities given the past 12-month's decline in share prices. We continue our theme of "don't be tempted". Clearly there will be rallies in market valuations as sentiment about gold or operating currencies change, but we believe these will be short term in nature and are difficult to time. Long-term shareholder value is driven by a company / industry's ability to deliver EVA. The odds remain strongly against gold companies on this front. "Cuts to capex and exploration costs, and high grading, are helping margins near term. However, it is a double edged sword. The reason is that gold companies have to spend an increasing amount of capex just to fight a falling production trend and prevent a blow-out in unit costs. "It is because of this that we caution that a slow-down in capex will invariably result in a fall in production (over time), which in turn will lead to a faster rise in unit costs. Whether or not they cut capex, we see both scenarios as bad for cash flow delivery and shareholder returns, longer term. Increasing head grades in order to boost near-term results (a practice that has become common over the past year) should also have detrimental effects longer term. There seems to be no easy way out." While Citigroup makes no bones about its bearishness on the sector, the bank nevertheless rates Vancouver's Goldcorp (TSE:G) and top producer Barrick Gold (TSE:ABX) as buys and is neutral on Newmont Mining (NYSE:NEM). Citigroup cautions investors to stay away from Gold Fields (NYSE:GFI), Harmony Gold (NYSE:HMY) and Sibanye Gold (NYSE:SBGL).  |
| Fight to oust Cliffs board just got real ugly Posted: 29 May 2014 01:34 PM PDT Cliffs Natural Resources (NYSE:CLF), the US' biggest iron ore producer, announced this week that it is reducing capital spending by an additional $100 million on top of the $460 million in cuts already announced. This led to speculation that Cleveland-based firm could breach certain debt covenants should the weakness in the price of the steelmaking raw material persist. Cliffs stock was up on Thursday, but investors in the company are nursing a 37% slide in the market value of the company and an exit from the S&P500 index as it tries to cope with a downturn in the market by idling mines in Canada and the US and laying off workers. Activist investment firm Casablanca Capital launched a bid in January to oust the current Cliffs board and on Wednesday issued another statement calling for drastic changes at the company. Casablanca, a top shareholder with more than 5% of equity in the miner, called the value destruction at the company "alarming" adding that despite the losses "a majority of the current Cliffs directors, including its chairman, James Kirsch, remain in their seats." "Rather than recognizing and addressing the need for fundamental change, the Board, which in the aggregate holds less than 1% of Cliffs' shares, is digging in to protect its own interests at the expense of shareholders." New York-based Casablanca said a proxy statement for the upcoming AGM "quietly filed late last Friday afternoon into a holiday weekend" an "affront" to shareholders: "Cliffs stated that the election of a majority slate of new directors proposed by Casablanca could trigger a change of control under the indenture governing Cliffs' senior notes, potentially compelling it to repurchase the notes. This mandatory repurchase — or "Proxy Put" — would have a serious negative impact on Cliffs. We consider this an explicit threat to shareholders: vote for the incumbent Board or destroy the Company." Calling it a breach of the directors' fiduciary duties and citing previous court cases backing its assertion, Casablanca goes on to say it "intends to protect shareholder interests by all available means, including litigation." When Casablanca first launched its appeal for change, Cliffs elevated Gary Halverson, chief operating officer who joined Cliffs only in November last year, to the top position. Halverson previously headed Barrick Gold Corp's US operations. Casablanca is backing Lourenco Goncalves, former CEO of Metals USA, to lead Cliffs and doesn't have kind words for Halverson or Kirsch: "The record of shareholder value destruction on Mr. Kirsch's watch is not limited to his time at Cliffs. Shareholders of Ferro Corp suffered a loss of 86% of its value during his tenure as Chief Executive Officer from 2005 to 2012 (Ferro's share price recovered most of its losses soon after Mr. Kirsch's departure). "While Mr. Halverson is relatively new to Cliffs and cannot be blamed for all of its past missteps, he also cannot, in our view, be counted on to drive the dramatic change that is desperately needed. Casablanca is backing Lourenco Goncalves, former CEO of Metals USA, to lead the company. Goncalves has personally invested some $1.5 million in Cliffs shares, while "not surprisingly, Mr. Kirsch has never invested even one dollar of his own money in Cliffs." Apart from iron ore mines in Michigan and Minnesota and eastern Canada, Cliffs also owns an iron ore complex in Western Australia and operates five coking coal mines in the US. After the market close on Thursday, Cliffs released a response to the Casablanca letter to shareholders saying despite Casablanca's relatively small holding in Cliffs', Casablanca "are continuing their effort to seek full control of the Board without providing a credible and clear path to increase long-term shareholder value or paying a control premium": "With regard to Casablanca's "Proxy Put" accusation, in no way is Cliffs threatening its shareholders. On the contrary, it is Casablanca's actions that have put shareholders' interests at risk. The change of control provision within the senior note indenture that is in question has been publicly disclosed since Cliffs first issued public debt in March of 2010 and is standard for most companies with publicly issued debt. " Cliffs also said it has made several offers to Casablanca in an effort to reach a settlement in good faith, but that Casablanca "seems intent on pursuing a costly and time consuming proxy contest": "Cliffs will continue to pursue a resolution, avoiding a costly and distracting proxy contest, to the benefit of all shareholders and stands ready to engage with Casablanca." |
| EPA's new carbon regulations could cut coal emissions by 20% Posted: 29 May 2014 12:13 PM PDT  The upcoming rules will be a key test to see whether the president and his Environmental Protection Agency (EPA) are able to curb greenhouse gas emissions without hurting the country's economy. US President Barack Obama is reportedly planning to announce fresh carbon emissions cuts next week, which will allow states to use cap-and-trade regulations to force the coal industry pay for the pollution it generates. The highly anticipated plan, reports the New York Times, will be the first imposed limits on power plant emissions in the history of the US. It is expected to cut coal plant emanations by up to 20%. They will also be the most aggressive part of Obama's climate change policy, and a key test to see whether the president and his Environmental Protection Agency (EPA) are able to help curbing greenhouse gas emissions without hurting the country's economy. The EPA, reports The Wall Street Journal, is expected to finalize the directive by mid-2015 and present a plan to implement the rule by end of the year. Some states, such as California, already have cap-and-trade schemes. There is also an ongoing regional plan in the Northeast and Mid-Atlantic States of the country. However, the upcoming announcement will open up the strategy to all states. According to Los Angeles Times, the 3,000-page rule is more than likely to trigger lawsuits and claims of job losses. It will also prompt Obama critics too claim he has stepped up his dubbed "war on coal." Experts believe that West Virginia will be the hardest hit by the new measures. The state, one of the US's three poorest by household income, sits at the heart of coal country. Official figures also show the state gets 95% of its power from the fossil fuel. According to environmental group Sierra Club, 165 of the US's 600 coal plants are already set to be closed in the next few years as they cannot comply with toxic metal regulations or beat natural gas, which burns more cleanly. |
| 30 years after Hunt bros, scramble to take over London silver fix Posted: 29 May 2014 11:45 AM PDT Amid investigations of manipulation and price-fixing, Deutsche Bank, became the first to resign from both the London Gold Fixing and Silver Fixing panels earlier this month May. The lawsuits piling up and the ongoing probe by the UK financial regulator – and the first of what could be a slew of fines – meant that the German banking giant could not find any buyers for the seats. Talks on how to overhaul the London Gold fix which has been used as a benchmark for the global physical trade in the precious metal for the past 95 years is still under discussion. But the body responsible for administering the silver benchmark are ceasing operations on August 14 and the industry under the direction of the London Bullion Market Association (LBMA) is now scrambling to find a new price discovery and benchmarking. Reuters reports there is no shortage of parties interested in taking over the silver spot pricing mechanism, including the news and financial date provider itself. An attempt by the Hunt Brothers to corner the market sapped all liquidity The London Metal Exchange, acquired last year by a Hong Kong-based exchange operator, is considered a frontrunner to take over the fix which is supposed to go from being an obscure process conducted via conference call between a handful of banks twice a day to a "robust transaction-based electronic system" to set the daily spot price. The LME at the moment runs a limited clearing service for over the counter silver forward rates and it's not the first time the storied mostly base metals exchange which traces its roots back to the early 19th century, had plans to muscle in on silver: "The LME operated a 10,000 ounce silver contract in the 1970s, which was suspended the following decade after an attempt by the Hunt Brothers to corner the market sapped all liquidity from the market, a trading source said. "It considered re-launching a silver contract in the 1990s, but struggled against falling demand for the metal from the photography sector and a lack of industry support, the source added. Silver futures in New York were last trading at $19.01 an ounce, little changed from 2014 opening levels. The contract hit a high of just over $48 an ounce in April 2011, still below the Hunt-induced spike to $48.70 in 1979, when the price increased 8-fold over less than a year. The Hunt saga ended on Silver Thursday in March 1980 when the price halved during a single trading session and the brothers could not cover a margin call. |
| Why You Should Pump Slurries with a Peristaltic Pump Posted: 29 May 2014 09:58 AM PDT
• LESS WATER Hose pumps can circulate slurry SGs of 1.6 to 1.8 or up to 80% solid content. The traditional centrifugal pump loses efficiency when the slurry SG reaches 1.3 or 30% solids. With this limitation, slurry pumps have significant process water demands : on a plant processing 75 tonnes of ore per hour, and at 65% solids, every time a hose pump replaces a process slurry pump, it saves over 1,100 Million litres of water annually because of the slurry pump's inefficiency : on the same duty, the hose pump requires less than 25% of the process water of a slurry pump. • LESS POWER On the same 75 ore tonnes per hour plant, on thickener underflow duty at full flow, a VF125 hose pump absorbs around 35 kW whereas a slurry pump needs over 70kW : a saving of over 50%. This directly translates into reduced electrical requirements. Power rationing is a concern for many established mines, on new developments the infrastructure costs to import power can be considerable and can even cause significant delays and generate considerable non-mining environmental opposition. There is also a significant economic case – in the above example, the hose pump reduced annual operating power demand by over 210 MWh. • LESS SPACE Pulp density is critical to optimum plant performance, an increased solid content can reduce the number of post thickening filter stages, saving on the initial capital cost and reducing the footprint of mineral processing operation. • LESS POLLUTION Many mineral recovery processes use Cyanide based leaching techniques especially where Gold is a key mineral. Cyanide has many adverse environmental consequences including polluting the land surrounding the plant, contaminating aquifers and decimating life in water courses. The traditional dosing solution, progressing cavity pumps have integral seals requiring regular replacement and representing a clear leakage risk. Peristaltic pumps are seal-less and consequently, have a much lower contamination risk. • LESS DAMAGE • LESS CHEMICAL A peristaltic pump's gentle low shear pumping action maintains particle size minimising the use of flocculent and other process reagents. Conventional high shear technologies such as progressive cavity or screw pump significantly increase reagent usage increasing operating costs and raising post processing costs due to flotation reagent carryover. Similarly, residual reagent can increase the waste remediation cost or increase the environmental damage from tailings dams or their resultant groundwater pollution. • LESS MAINTENANCE COSTS Slurries are often acidic and or highly abrasive. Consequentially, conventional slurry pumps use impellers made from increasingly expensive and non standard materials with service lives that are measured in days. • LESS DOWNTIME In contrast, on a peristaltic pump, only the rubber hose is in contact with the pumped liquid and as the ultimate rubber lined pump, service life is measured in months, reducing pump downtime and as the hose can easily be changed in situ, maintenance hours are similarly reduced. • LESS SPECIAL PARTS To pump highly acidic slurries, hoses are made from several standard elastomers, each proven in the mining environment to withstand process chemicals and avoiding the use of expensive exotic metal impellers. Visit http://www.verderflex.com/ for more information. |
| Weir abandons $6.1bn bid to buy rival Metso Posted: 29 May 2014 09:37 AM PDT  Metso's HQs in Finland. Scottish engineering company Weir Group (LON:WEIR) has dropped its pursuit of rival Metso after the Finnish firm rejected a sweetened multibillion-dollar bid on the grounds that it was "significantly" undervalued and appeared "opportunistic." The improved offer, which value Metso at $6.13 billion, was Weir's second and last attempt to forge an equity tie-up at a 34% premium compared with where Metso shares were trading March 26, one day before Weir made an initial approach. Metso's board, which firmly rejected Weir's first approach in April saying it would prefer to remain independent, rebuffed the new bid as too low. "The board of Metso did not engage with Weir and on 27 May 2014 rejected the proposal, based on its belief that the market does not fully value the prospects of Metso and that the proposal significantly undervalues Metso," Weir said on Wednesday. Weir said it believed the proposal was compelling but was not prepared to stretch itself further financially, adding it "did not intend to pursue this opportunity further at this time". The failed marriage of the companies, which make equipment for the energy and mining, was an attempt by the Scottish firm to boost its activities in rock-crushing, area in which Metso is a world leader. The botched merger would have created a new company potentially valued at more than $15 billion, based on current market value for the individual firms. |
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