Potash: Come back Vlad, all is forgiven |
- Potash: Come back Vlad, all is forgiven
- Africa silver miner surges after first pour
- Zinc, nickel prices to move 'dramatically' higher next year says Scotiabank
- CHART: Copper price could follow iron ore over a cliff
- Gold up on Ukraine tensions, but gains pared
- Less than 2% of Peru’s total mining concessions are active
| Potash: Come back Vlad, all is forgiven Posted: 28 Aug 2014 03:00 PM PDT In July last year Uralkali CEO Vladislav Baumgertner blasted the global potash market wide open sending stock prices in the sector tumbling and projects back to the drawing board. Baumgertner's breakup of the Belarus-Russia potash bloc – which cost him his job and some jail time – was supposed to move potash from a clubby system of tightly controlled global supply and set prices to an open market where volume and cost-based pricing is key. Baumgertner, who is still under house arrest and the subject of a criminal investigation, forecast at the time the price of potash would fall 25% to below $300 a tonne in short order. Fast forward 12 months and while Belaruskali and Uralkali may still patch things up, it seems Baumgertner's big move is playing out more or less as predicted. According to the latest commodity price index from Canada's Scotiabank global shipments of the soil nutrient rebounded significantly this year. Better still, after the swift drop on the Baumgertner bomb, prices are also creeping back up. According to Scotiabank economist Patricia Mohr buyers have been making the most of lower prices and global potash deliveries could be on the high side of expectations, surging 7% to 58 million tonnes. Shipments have been boosted by strong sales in North America, record fertilizer application in Brazil — linked to higher soybean plantings and robust coffee prices — and a modest pick-up in demand from palm oil growers in Malaysia and Indonesia. Granular potash — preferred in Brazil — is in short supply, as is all grades of SOP (potassium sulphate, non-chlorine potash fertilizer). Brazilian potash imports surged by 26% to a record 4.6 million tonnes during the first half of the year, though Mohr believes aggressive pricing by Uralkali probably contributed to this strong demand. The net result according to the report is that producer inventories across North America fell 18% below the five-year average in June. The rest of the year is looking even better. China will exercise a large amount of optional tonnage from Canada in the second half and Canpotex, the North American marketing and distribution arm of the big three producers, and top producer Potash Corp (TSE:POT) have announced that they are sold out this quarter. Granular prices in Brazil may increase from the current $355 – $360 to $380 CFR, given strong seasonal demand in the third quarter. However notes the report, broad-based price increases may await negotiation of a new contract price with China for early 2015 — widely expected to be a 10% hike on today's $305 CFR China price — setting a new higher floor. Potash is currently priced well below phosphate fertilizers, which are strengthening. Sulphur prices, used to make DAP fertilizers, have been on a tear, rising to $155 at the Vancouver port in July. That's up 18% compared to the previous month. Uralkali expects global potash shipments to climb to 60 million tonnes in 2015, though this may be optimistic given softer crop prices and weaker farm economics, concludes the report.  |
| Africa silver miner surges after first pour Posted: 28 Aug 2014 02:39 PM PDT Shares in Maya Gold & Silver Inc (CVE:MYA) jumped on Thursday after the Quebec-based company announced the first silver pour at its Zgounder silver mine in Morocco. Zgounder Millenium Silver Mining, the 85% owned joint venture with l'Office National des Hydrocarbures et des Mines of the Kingdom of Morocco (15%) produced 234.5 kilos of silver from 20 ingots grading between 90-97% Ag at the site where silver mining dates back to ancient times. Maya, worth $43 million on the Toronto Venture Exchange, is up nearly 50% this year. Zgounder has measured and indicated resources of 6 million silver @ 343 g/t Ag, according to Maya's May 2014 pre-feasibility study. Under care and maintenance since 1990, Maya has been refurbishing Zgounder, one of only a handful of primary silver mines on the African continent, since September last year. Capex to bring the mine back to production is pegged at only $4 million. From 1982 to 1990, previous operators of the underground mine extracted 500,000 tonnes of silver ore grading 330g/t Ag using a cut off grade of 125 g/t Ag. |
| Zinc, nickel prices to move 'dramatically' higher next year says Scotiabank Posted: 28 Aug 2014 12:57 PM PDT
Patricia Mohr is Scotiabank's Vice President of Economics and Commodity Market Specialist who, in 2012, won the Metal Bulletin Apex award for the top gold and overall precious metals price forecasts when she was 99.63% accurate in her call on the price of the yellow metal that year. Yesterday, she published a succinct report noting that a cyclical recovery in base metals was underway and that zinc and nickel were setting up for dramatic price returns in 2015. A Cyclical Recovery in Zinc & Nickel Is UnderwayBase metals in July was led by zinc which rose to US$1.05 per pound today from US$0.96 per pound a month ago. She notes: "Commodity funds & investors have bid up zinc prices, anticipating tightening supplies over the next three- four years — with mine supplies not keeping pace with demand growth. In our view, zinc prices will climb to US$1.25 in 2015 and a very lucrative US$1.60-1.70 in 2016 (benefitting Teck, Lundin & Hudbay Minerals in Canada)."  "Global supply and demand conditions for 'refined' zinc are in 'deficit' in 2014 (that is, world consumption of slab zinc exceeds production), pulling down LME & Shanghai Futures Exchange stocks by 20.8% since late 2013," Ms. Mohr noted. "Chinese imports of 'refined' zinc have jumped by 39.3% through July, given solid underlying demand growth—up about 7% in 2014, boosted by strong auto production (+9.4% YTD), the rising content of galvanized steel in cars to prevent rust (Chinese consumers are demanding higher-quality motor vehicles) and low operating rates at Chinese smelters (74%) due to weak treatment charges & poor profitability." Zinc concentrate is currently oversupplied but is expected to come under serious constraint in the coming years as mines deplete their reserves and exploration efforts over the past decade haven't been able to replace the pace of extraction. Market Conditions to Get Tight in 2016MMG Limited's Century zinc mine in Australia is currently in what the company calls a 'transition period' which means the mine will no longer produce zinc as of 2015. In 2014, the mine is expected to produce up to 480,000 tonnes of zinc concentrate, making it the third largest zinc mine in the world. The Lisheen mine (owned by The Vedanta Group, India's largest mining company) is set to close in 2016 and currently produces 132,000 tonnes of zinc concentrate annually. Recent closure of a pair of Canadian zinc mines in 2013 also puts a strain on supply. Glencore's (then Xstrata Zinc's) Brunswick mine which produced 190,000 tonnes per year as well as their Perseverance mine which produced roughly 125,000 tonnes of zinc per year both closed their operations last year. Ms. Mohr notes: "Overall mine output should ramp up — Glencore's McArthur River in Australia, Boliden's Garpenberg in Sweden, reactivation of Teck's Pend Oreille mine — after almost no gain in 2014. However, recent prices have not been high enough to 'incent' sufficient new mine development (at least US$1.13 is required and much more, say US$1.60, late decade) to meet world demand. Market conditions will become genuinely tight in 2016." Nickel's Nice Too"A recovery in nickel prices is also underway," the senior Scotiabank economists says. "LME nickel has spurted from US$6.31 per pound in December 2013 to US$8.64 in July and should climb to US$10.75 in 2015 and US$12 in 2016."
She highlights the January 2014 export ban on unprocessed nickel ore from Indonesia to hold which puts a strain on as much as 28% of the world supply. "The world supply & demand balance will shift into a marked 'deficit' in 2015, as China depletes its inventory of Indonesian ore for 'Nickel Pig Iron' production (used in stainless steel). Chinese users have already rushed to step-up purchases of Ferro- Nickel (FeNi) and nickel-containing ore from the Philippines, though Filipino mines with ore grading more than 1.5% nickel have now all been suspended due to environmental breaches." Ms. Mohr expects prices to remain high until the back half of 2016 when new processing plants become available in Indonesia. According to her, there have been 16 new plants proposed with most being backed by China. On the nickel side, there are very few companies with significant exposure. Sherritt International (S:TSX) is one them. Lundin Mining (LUN:TSX) is probably the best way to gain exposure to zinc and nickel combined as they are significant producers of both, especially with their Eagle nickel mine expected to ramp-up to full production in 2015. Eagle is expected to produce 23,000 tonnes of nickel annually starting next year. By Travis McPherson |
| CHART: Copper price could follow iron ore over a cliff Posted: 28 Aug 2014 11:54 AM PDT Iron ore is down 34% this year over China fears, soft demand and surging supply. The copper market is equally exposed, but has so far defied fundamentals.  Glencore employee Anibal Contreras clears slag at the Altonorte metallurgical facility, north Chile. Source: Glencore The price of copper has been swinging wildly since hitting a near four-year low in March. This week is no exception and the red metal is down 3% in since Tuesday erasing most of the gains from a surge in the price last week. In midday New York trade on Thursday, December copper fell more than 1.5% to a low of $3.1425 a pound without any fresh news that can be blamed fro the sharp pullback. Weak economic news out of China, consumer of 45% of the globe's copper, is the number one factor for the weakness in the price. Manufacturing activity in the world's second largest economy slowed sharply in August and is nearing contractionary levels, a reading of the country's services industry dropped to nine-year lows in July while bank lending is at financial crisis levels. Probably most worrying is weakness in China's property sector – construction accounts for 60% of copper demand. Latest monthly data show home sales declining by almost a fifth, the sharpest downturn since December 2008. At the same time unsold inventories of real estate in China have risen by more than 25% this year. The outlook is bleaker still and some economists are predicting a property bust after years of overbuilding that will make the US subprime mortgage crisis seem puny. Outside China the demand picture is not that bright either. Accelerating growth in the US, the world's second largest consumer of the metal has been offset by continuing soft demand from two other major importing countries Germany and Japan. While demand factors are putting the copper price under pressure, supply is adding to concerns for the rest of this year and 2015.
Mine production is ramping up again and is forecast to grow 5% this year and more than 7% in 2015, notably in Peru which has a number of large mines becoming operational or expanding capacity. Freeport McMoran (NYSE:FCX), Indonesia's largest copper concentrate producer, is resuming exports for the first time this year while Newmont Mining (NYSE:NEM) could also soon restart shipments from the country following a dispute over concentrate duties. While still up sharply year on year China's imports of refined copper fell to to 340,000 tonnes in July, the third straight month of declines. For the rest of the year imports are expected to decline sharply as some 450,000 tonnes of additional refined output in China come on stream. One positive factor for the copper market this year is the fall in global inventories. Global refined warehouse stocks are at their lowest level since early 2012, while exchange inventory is at the lowest level since 2008. However, since the Qingdao scandal where several companies pledged the same copper and iron ore held at the port as collateral for loans to different banks, the spectre of vast quantities of "off-balance sheet" copper hitting the market has muted the impact the drawdowns would otherwise have had. The price of copper could well follow the trend in the iron ore price where a combination of slowing demand, swelling supply and similar exposure to China have seen the price collapse by more than a third this year. This chart by Capital Economics illustrates why the independent research house argues that "if the relationship between copper and iron ore prices is to be restored, it is likely to take the form of a renewed fall in copper prices:"  Source: Capital Economics |
| Gold up on Ukraine tensions, but gains pared Posted: 28 Aug 2014 10:56 AM PDT
 The price of gold rose for the third straight day Thursday as mounting tensions in Ukraine and declines in equities worldwide reinforced safe-haven demand for the precious metal. Spot gold changed hands at $1,289.80 an ounce around 1:00 p.m. EST, up from Wednesday's close of $1,282.70. Gold futures for December delivery traded at $1,290.80 per ounce in the afternoon on New York's Comex, up $7.40, or 0.58%, from $1,283.40 seen Wednesday. Ukraine said Thursday it would do everything possible to defend itself from what it called an invasion involving Russian troops seizing a town and several villages near the shared border, The Wall Street Journal reported. The news sent global stocks lower and pushed gold to $1,297.60 an ounce, the highest level since August 20, the newspaper said. Investors tend to buy gold as a kind of insurance in times of political or financial turmoil. Advance pushed back But the gains were pared by U.S. economic data showing stronger second-quarter growth than first thought and the related possibility of higher borrowing costs in the country, Reuters reported. When interest rates rise, investors generally move from gold, which pays no interest, to assets that do. "The market woke up on geopolitical headlines around Ukraine but we gave up some gains because of very strong U.S. economic data," VTB Capital analyst Andrey Kryuchenkov was quoted by the news agency as saying. In addition, improving U.S. jobs data boosted the dollar, which increased downward pressure on the yellow metal. The dollar usually moves inversely to gold, which is traded in dollars and gets pricier for buyers using other currencies. |
| Less than 2% of Peru’s total mining concessions are active Posted: 28 Aug 2014 10:29 AM PDT
About 1,000 of the 55,000 active mining concessions in Peru, or a 1.8%, are currently in full swing, a study published this week by the country's Ministry of Energy and Mines (MEM) reveals. While the South American nation has 1.7 million tonnes of copper reserves and 74 million ounces of gold waiting to be extracted, only a few companies are actually going ahead with their planned exploration and extraction activities. The situation, however, won't go on for long. According to Latin Pacific Business News (in Spanish), the country's concessions department's director Luis Barranzuela said around 15,000 titles have passed the seven-year mark granted by the government. After that period, title-holders are required to either have begun operations or reached an annual minimum production (AMP) rate per hectare or risk penalties and even losing all privileges over the land. "Producing mines we don't have many, around 500 to 1,000," Barranzuela said. "And that figure includes those run by global mining companies," he added. According to official data provided by the MEM, there were 940 concessions to June this year, with 461 already producing at 479 still in the exploration phase. Most of them (63.4%) mine for copper, while 13% of them go for gold and 12% for iron ore. Peru plans to double its current copper production of 1.4 million tonnes by 2016 and so recover the second position among the world's largest production of the industrial metal. |
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Mentha oil prices ended with gains supported by improving demand from consuming industries in the spot market.