Tuesday, March 31, 2009

Mongolian Copper-Gold Project Set To Be Finalised

An investment agreement for the long-delayed Oyu Tolgoi copper-gold mine project in Mongolia will likely be finalised this month when the matter is discussed in that nation's parliament.

The project, spearheaded by Canada's Ivanhoe Mines and Rio Tinto, has been on hold for the past four years due to partisan parliamentary bickering, but the current mining-friendly Government hopes the mine -- the largest resource of its type in the world -- can move to the development stage as soon as possible.

The delay in finalising the investment agreement had resulted in lost opportunities, Mongolian Deputy Prime Minister M. Enkbold said yesterday.

"We, both our people and the parliament, understand what is the cost of the delay," he told Dow Jones Newswires.

Mongolia in 2006 said it would seek a stake of up to 50percent in strategic mining projects such as Oyu Tolgoi, and that it would impose a windfall tax on company profits from copper and gold production.

There have recently been indications that the Government will be flexible on the 50percent rule for Oyu Tolgoi and that it might remove the windfall tax for the project.

Oyu Tolgoi is expected to produce an average of 440,000 metric tons of copper and 320,000 troy ounces of gold a year over the life of the project.

Rio Tinto holds a minority stake in Ivanhoe Mines, the project's owner. Rio made an initial $US303 million investment in the project in 2006 and has an option to increase its investment to $US2.3 billion ($3.4 billion) for a 46.65 per cent stake.

The Mongolian Government was also exploring various options towards privatising the Tavan Tolgoi coal mine -- a huge thermal and coking coal project in the Gobi Desert -- with a broad range of potential investors, including companies from China, South Korea, Japan and the US, Mr Enkbold said.

Source: The Australian

Raspadskaya Sales Back To Pre-Slump Levels

Russian coking coal producer Raspadskaya's sales have recovered to close to what they were before the third quarter 2008 demand drop, a company official said on Tuesday.

Sales have reached 70 pct of that level with exports accounting for 30-35 pct of production, said Deputy General Director for Strategic Planning Alexander Andreev.

"Our strategy is to focus on raising coking coal sales to Russian coke and chemical plants. We're aiming to raise exports to 40 pct of production by 2011 and to diversify our customer base," Andreev told the Coaltrans conference.

"We release our results on April 15 and many people will be interested to see who we've signed new contracts with. In February, for example, we started shipping to the Ukraine," he said.

November 2008 was the toughest month for coal producers but the situation is beginning to improve as a result of discussions held late last year and in January between the government and coal producers, but the wider economic crisis will be quite a lengthy one, Andreev said.

"Late last year after various meetings in Kemerovo and Moscow the government finally listened to the requests of the coal industry and new rail tariffs were set. Tariffs rose 20 pct but we can live with them," he said.

Government support was also needed to ensure smooth transport of coking coal to Ukraine, he added. Last year over 1 million tonnes could not be shipped due to disputes over rail cars.

Producers have taken action to cut costs in response to the slump in prices and demand, Andreev said. Larger coking coal producers revised their budgets following the slump in steel and coal prices and adopted anti-crisis cost-cutting measures.

Coal producers will need to find new export markets for their production, principally in Asia.

Raspadskaya has had to adapt too to much shorter term contracts of only one to two quarters rather than long-term deals and to show flexibility and negotiate with steel clients in Russia unable to take the full contracted coal volumes, Andreev said.

"Many Russian coal companies were supplying under 4-5 year long-term contracts. When the November crisis came not a single company went to court to sue steel companies for non-fulfilment of contracts because they didn't take as much coal as they ordered. They sat and negotiated instead," he said.

Russian coal suppliers will need to balance sales into the domestic market and to growing export markets, he said.

South Korea, India and China will see a large number of infrastructure projects going ahead despite the global slowdown -- presenting an opportunity for Russian sellers to expand their customer base.

To do this coal companies must work with the government to ensure there are more Russian ports equipped to handle coking in addition to thermal coal exports to Asia, Andreev said.

Source: Reuters

Australia Agrees To Hunan's Stake In Fortescue

China’s Hunan Valin Iron & Steel Group’s A$1.3 billion ($893 million) investment in Fortescue Metals Group Ltd. was approved by Australia with conditions to avoid conflicts of interest over prices, sales and marketing.

The investment, a 17.6 percent stake acquired through new stock and from shareholder Harbinger Capital Partners, is subject to “formal and strict undertakings,” Treasurer Wayne Swan said today in an e-mailed statement.

Chinese investments face increasing attention in Australia as the biggest metals consumer speeds up takeovers amid a global recession. China Minmetals Group today made a revised bid for OZ Minerals Ltd. after an initial offer was rejected because of security concerns. Swan has yet to approve Aluminum Corp. of China’s proposed $19.5 billion investment in Rio Tinto Group.

“It shows the door isn’t shut to Chinese investment in Australia but all deals are being closely scrutinized,” Alex Passmore, head of metals and mining research at Patersons Securities Ltd. in Perth, said today by phone. “Just because this deal has been approved doesn’t mean the other two in front of the regulators will go ahead.” “

Fortescue, Australia’s third-biggest iron ore exporter, rose 2.4 percent to A$2.55 at the 4:10 p.m. Sydney time close on the Australian stock exchange. State-owned Valin is China’s ninth-largest steelmaker.

The conditions apply to Valin board nominations and cover potential conflicts of interest with sales and marketing, Treasurer Swan said. They require the company to report to Australia’s Foreign Investment Review on its compliance, he said.

“These undertakings ensure consistency with Australia’s national interest principles for investments by foreign government entities,” Swan said. “They ensure the appropriate separation of Fortescue’s commercial operations and customer interests, and support the market-based development of Australia’s resources.”

The requirements aren’t a “special arrangement” and are in line with Australian laws and the normal practices of such deals, Valin Group said in a faxed statement today. “We have complied with the commitment as we submit the application to the FIRB.”

Fortescue last month agreed to increase sales to a unit of Valin and will boost shipments from 2010. It’s seeking to boost exports from its iron ore mine in Western Australia and is facing a A$731 million funding shortfall for the expansion, Macquarie Group Ltd. analysts said in a Feb. 24 report. China is the world’s biggest buyer of iron ore.

“I have no intention of seeking any more direct equity investment,” Fortescue Chief Executive Officer Andrew Forrest said on a conference call after the announcement. “I will continue to grow Fortescue within the Chinese economic system. If there’s a requirement for any further capital then we’ll let you know about the need for Chinese participation.”

Fortescue may seek funding from China’s debt markets and capital providers, Forrest said. The company is talking to “organizations which lead the Hubei steel industry,” he said, without giving details.

Fortescue on March 24 said investment talks are still continuing with China Investment Corp., or CIC, the $200 billion sovereign wealth fund.

China may spend more than $500 billion on overseas resources investments over the next eight years to secure supplies, Eric Lilford, head of Australia mining for Deloitte Touche Tohmatsu, said March 23.

Fortescue started shipping to Chinese customers from its A$2.8 billion Pilbara iron ore project in May. It wants to expand production of the steelmaking ingredient from its mines in Western Australia that supply Chinese steel mills.

The company sold shares in December to pay bills. An expansion to boost capacity at its Cloud Break mine to 80 million metric tons from 55 million tons may cost A$2.5 billion, JPMorgan & Chase Co. said in a Jan. 30 report.

“It’s a positive for the company as its funding requirements over the next half are now met after looking fairly precarious,” Paterson’s Passmore said.

Source: Bloomberg

Datang: No Agreement On Coal Prices

Electricity provider Datang International Power has not signed any major contracts with China's coal miners for this year, its Chairman Zhai Ruoyu said on Tuesday.
China's big five power generators -- Huaneng, Datang, Guodian, Huadian and China Power Investment Corporation --- have been embroiled in a dispute with China's big coal miners about 2009 prices.

China's power companies want the country's coal miners to cut 50 yuan per tonne from last year's term prices, but coal miners want to raise the price by 80 yuan per tonne, Zhai told reporters at a media briefing.

Chinese coal mining giant China Shenhua Energy Co said on Monday that it had agreed long-term contracts with some Chinese power producers.

Source: Reuters

China National Coal To Invest Billions In Xinjiang

China National Coal Group Corp said it plans to invest more than 100 billion yuan ($14.6 billion) in China's far northwestern Xinjiang region over the next five years.
China Coal will invest in coal mining, coal-fired power generation, coal chemical plants and the development of coal-bed methane. The total annual production value is expected to exceed 30 billion yuan, the company said in a statement on its website (www.chinacoal.com), without giving further details.

China Coal Energy Co, the listed arm of China's No.2 coal miner, has said it was suspending a 17 billion yuan project in Heilongjiang, which would have produced 10 million tonnes of coal a year.

The remote Xinjiang region holds about 40 percent of China's coal reserves, or about 2.2 trillion tonnes. It produced 60 million tonnes of raw coal in 2008, according to official data from the region's statistics bureau (www.xjtj.gov.cn), and has attracted investment from large coal groups including China's top coal miner Shenhua.

Source: Reuters

Vietnamese Steel Sales Hit By Downturn

The economic slowdown has hurt Vietnamese steel sales, but the industry is much more anxious about stiff competition from Chinese and Southeast Asian steel exporters.

Pham Chi Cuong, chairman of the Vietnam Steel Association, told Thanh Nien that sluggish activity in the construction industry has hit steel consumption, which has fallen 20 percent year-on-year this month to 250,000 tons.

Cuong expects the situation to improve in the next two months when many infrastructure and housing projects are launched thanks to the government’s economic stimulus package.

He is most worried about the invasion of cheap imported steel products.

The global recession has hurt demand for steel from manufacturers and builders, prompting mills in China, the biggest producer, and Southeast Asia to cut prices and push exports.

According to VSA, about 60,000 tons of steel products have been imported from China this year.

“These products were registered with customs as alloy steel, although they are not, to benefit from a zero tariff policy,” Cuong says. “As a result, Chinese steel products are sold at VND1 million per ton less than domestic products.”

Cuong said his association has recently asked the Ministry of Industry and Trade and the General Department of Vietnam Customs to follow up on this matter and stop foreign exporters from evading tax.

In a recent case, according to VSA members, the Thanh Long Steel Company in the northern province of Hung Yen claimed 29,000 tons of steel imported from China in January and February were alloy steel.

However, a testing center of the Directorate for Standards, Metrology and Quality found that the steel products that Thanh Long imported were in fact carbon steel with only a small amount of boron added, 0.005 percent. Boron is added to steel products to increase hardness.

Carbon steel imports are currently subject to a tax rate of 12 percent. Thanh Long Steel Company would have to pay as much as VND17 billion (US$960,000) in taxes if its steel imports had been reported to customs as carbon steel.

VSA Deputy Chairman Nguyen Tien Nghi said several other Southeast Asian countries had also reported similar instances of boron being added to carbon steel to avoid tariffs.

The China Iron and Steel Association has asked Vietnam to provide a name list of Chinese exporters of such products so that it can intervene, Nghi added.

ASEAN exporters

VSA said the imports from ASEAN reached 47,000 tons in the first two months this year. The large imports have pushed domestic firms’ market share down to 20 percent from 28-30 percent earlier.

Steel exports within the 10-member Association of Southeast Asian Nations, or ASEAN, are exempt from tariffs. The grouping’s members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Dao Dinh Dong, head of the market division at the Vietnam Steel Corporation, said sales of the corporation in March dropped 35 percent from a year ago.

Dong said many steel makers in Vietnam are facing harsh competition from imports from other ASEAN members. His company had had to slash prices four times in just one month.

Domestic steel producers, with a capacity of around 4.5 million tons, had 300,000 tons of billet in stock, Cuong said last week.

The Ministry of Finance has decided to increase the import tax on steel billet from 5 percent to 8 percent and the tax on finished steel from 12 percent to 15 percent to help local steel firms liquidate their growing stockpiles.

The new rates take effect April 1. But they will not affect the zero tariff policy among ASEAN nations.

Source: Thanh Nien

Hwange Colliery Production Down 17 Percent

Hwange Colliery Company Limited coal production last year fell 17 percent from 2,071,526 tonnes to 1,722,801 tonnes.

HCCL, the country’s largest coal miner attributed the decline to frequent breakdowns and the loss of critical skilled staff.

The company said that the demand for coke and coal products in the market was firm in the first three-quarters of the year but decreased significantly in the fourth quarter as the global economic crisis began to unfold.

It said that by the end of the year, most of the local and export customers in the mining, ferrochrome and manufacturing industries had scaled down their operations and some even closed.

"The demand in the export markets was also low in the last quarter of the year.

"The decline in the commodity price on the international markets led to the decrease in the prices of coal and coke," said the colliery.

The production tonnage was lower than the previous year because of the envisaged recapitalisation of the business was not achieved. The sources of coal for the period under review were JKL and Chaba opencast, and three main underground mine.

Since there was no major equipment purchases during the year, the existing aged plant and equipment had frequent breakdowns that constrained the company’s operations.

Hwange coking coal and Hwange industrial coal sales amounted 494 990 tonnes and were slightly below the tonnage of 541 357 tonnes achieved in the prior year.

A total of 147 228 tonnes of coal fine were sold during the year locally and to export market. The company added that deliveries of coal to Zimbabwe Power company ‘s Hwange Power station amounted to 1 073 602 tonnes compared to 1 315 799 tonnes delivered for the same period last year.

There were no coke oven gas supplies during the year because of the major breakdown on the gas pipe.

Coke sales including breeze, accounted for 154 529 tonnes of which 70 percent was exported. A tonnage of 213 370 tonnes was sold the previous year.

On its general outlook, the company said that procurement of mining equipment and refurbishment of major machinery will be priority during 2009 and this is expected to restore.

Source: The Herald, Zimbabwe

Monday, March 30, 2009

Ukrainian Coal Production Up In February

Coal production in Ukraine grew by 2.06% - or 120,000 tons - in February compared to January 2009, to 5.945 million tons, according to a report by the Ukrainian Coal Ministry.

The production of coking coal rose by 10.18% or 195,000 tons, to 2.11 million tons, whereas that of steam coal fell by 1.89% or 74,000 tons, to 3.835 million tons. In January-February 2009, coal output totaled 11.77 million tons or 107.1% of the target.

Source: NRCU, Ukrainian Radio

WISCO Takes Stake In Canadian Iron Ore Miner

Consolidated Thompson Iron Mines Ltd said on Monday that Chinese steel maker Wuhan Iron and Steel Corp (WISCO) has agreed to make a $240 million in the Canadian mining company in return for a 19.9 percent stake in the company.

Numerous Chinese companies have been acquiring stakes in foreign mining companies, in a bid to secure access to metals needed to fuel the country's rapid internal growth.

Chinese metals group Chinalco has just arranged a $21 billion loan to finance a major investment in Rio Tinto, while China's Minmetals has made a $1.7 billion bid for Australian miner OZ Minerals Ltd.

The letter of agreement between Consolidated Thompson and WISCO provides for WISCO to make a total investment in Consolidated Thompson of $240 million and in return Consolidated Thompson will issue 29.7 million of its common shares to WISCO.

This will represent 19.9 percent of Consolidated Thompson's outstanding shares post the transaction.

In addition, WISCO will receive not less than a 25 percent interest in a newly incorporated company that is to be established to operate the Bloom Lake mine, and will commit to purchase a similar percentage of iron ore production over the life of the mine.

Furthermore, WISCO will also be entitled to other long-term off take rights at fair market value from both the initial production and future expansion of the Bloom Lake project, as well as from Consolidated Thompson's Lamelee and Peppler Lake projects.

"This partnership will also strengthen Consolidated Thompson's potential to expand from the current mine plan of 8 million tons per year to 16 million tons of annual production of iron ore," said Consolidated Thompson's Chief Executive Richard Quesnel, in a statement.

Source: Reuters

NMDC, COSATU Arm To Sign African Mineral Scouting JV

Indian state-owned mining giant NMDC would soon join hands with South Africa's Kopanao Ke Metla Investment Company for acquiring coal, iron ore
and manganese properties in African nations.

"(The) NMDC board has approved the tie-up with Kopanao. We have apprised them of our decision and are waiting for a reply," NMDC Chairman and Managing Director Rana Som told reporters.

Kopanao Ke Metla Investment Company is the investment arm of South Africa's biggest trade union federation -- the Congress of South African Trade Unions, which facilitates foreign investments in African countries.

After an initial business working agreement with the African entity, NMDC is looking at floating a joint venture company with it to look for mineral properties.

Asked about the time-frame by which the two agreements are likely to be signed, Som said it would depend on the response from the African company. Sources, however, said the business working deal is likely to be signed in just over a week's time.

NMDC has already received a couple of proposals from South African companies to form joint ventures for taking up iron ore mining.

Early this year, the Indian miner had announced applying brakes on acquisition of overseas mining assets due to the global economic slowdown, but has been considering proposals in Africa, Armenia, Australia and Brazil.

Source: Economic Times

Minmetals Still In Discussions Over Oz Minerals

China's Minmetals was still in discussions with Australia's foreign investment regulators about buying debt-laden Oz Minerals, a spokesman said Monday, after a crucial part of the deal was vetoed by the government.

Treasurer Wayne Swan delivered a blow to China Minmetals Nonferrous Metals Co.'s proposed 2.6 billion Australian dollars ($1.7 billion) acquisition of the world's second-largest zinc producer when he said the state-owned company would not be allowed to buy Oz Minerals' Prominent Hill mine in the Woomera Prohibited Area, a military weapons testing range.

Fairfax Media newspapers reported Monday that Minmetals handed Oz Minerals a revised plan to buy most of the company but not the Prominent Hill gold and copper mine.

Oz Minerals, which sought the original Minmetals deal as a financial lifeline, did not respond to requests for comment Monday.

Minmetals spokesman in Australia, Ian Smith, also declined to comment on a revised plan but said Monday the company had been talking to the Foreign Investment Review Board and "that remains the case."

"Any offer put forward would be subject to FIRB considerations," Smith said.

Oz Minerals is Australia's third-largest mining company and the world's second-largest producer of zinc. It also produces copper, gold, lead and silver.

Source: Forbes/Associated Press

China Shenhua Agrees Contracts With Utilities

Chinese coal mining giant China Shenhua Energy Co has agreed long-term contracts with some Chinese power producers, its President Ling Wen said on Monday.

Shenhua and China's other big coal miners have been struggling since the start of the year to agree 2009 prices with the big five power generators -- Huaneng, Datang, Guodian, Huadian and China Power Investment Corporation.

Asked about the progress of the talks at a media briefing, Ling said the firm had signed some agreements with the country's power plants for domestic long-term contract sales, but declined to disclose the price. He did not name the power firms.

"The contracts so far that have been signed are very satisfactory from our point of view," Ling said. "Whether it is from a quantity or price point of view, we are confident that our sales target will be met."

He did not elaborate, nor did he say whether the 2009 price negotiation was effectively over.

Some industry sources cautioned that a price settlement between Chinese suppliers and domestic utilities could also mark an end to China's recent binge on overseas coal, which could threaten Asian spot coal prices.

"This will change market dynamics. Chinese utilities have been buying a lot of coal from Indonesian and Australian producers and that has offered some support to Asian prices," said a Sydney-based trader.

"And once they've reached a local supply agreement, they won't need to ship from overseas anymore. A lot of producers will have trouble finding a market for their cargoes."

Source: Reuters

Terramin Gets Financing For Algerian Mine

Terramin Australia Ltd said on Monday it had begun financing for a proposed zinc and lead mine in Algeria, securing A$46 million ($32 million) from investors in China and Europe.

Terramin has agreed to a five-year lead and zinc concentrate supply pact with commodities trader Transamine for material from the mine, Talma Hamza, which could potentially yield a quarter of a million tones of metal annually, Terramin Managing Director Kevin Moriarty said.

The miner has also agreed to sell equity to one of China's largest resources firms, China Non-Ferrous Metals Industry, and give it a seat on Terramin's board in exchange for funds.

The sale must be approved by Australia's foreign investment regulators, who are also reviewing a proposed $19.5 billion investment by China Aluminum Co in Rio Tinto Ltd/Plc amid some opposition in Australia to Chinese investment in domestic companies.

On Friday the Australian government blocked the sale of a copper mine to China's Minmetals, citing security concerns given its location near an Australian military installation.

Terramin recently commissioned its Angas mine in Australia, forecast to yield 45,700 tonnes of zinc and 16,500 tonnes of lead concentrate this year.

A final study into the feasibility of the Algerian project will be finished this year, enabling Terramin to seek major funding from smelting firms and additional Chinese investors to underwrite capital costs estimated at under $290 million, Moriarty said.

It was likely to be next year before Terramin seeks most of the funding, hopefully allowing time for metals markets ravaged by the commodities bust to recover, according to Moriarty.

The supply agreement with Transamine covers 100,000 tonnes of zinc and 40,000 tonnes lead concentrates annually, starting once the mine is running in 2011, Moriarty said.

"Both Transamine and NFC are promising to bring in financing via smelters and directly from China," Moriarty said. "The A$46 million buys us time."

Zinc and lead markets have been hit hard by the slump in commodities. Zinc MZN3 is down 44 percent, while lead MPB3 is off 55 percent in the last year.

Transamine will seek to use its offtake rights to access funds from smelting firms to supplement bank finance once development of the mine commences, Moriarty said.

The mine is being designed to initially produce 250,000 tonnes of lead and zinc concentrate containing about 50 percent metal, eventually climbing to 400,000-500,000 tonnes, he said.

Under the terms of the agreement with NFC, Terramin will issue 15.5 million ordinary shares at A$0.65 each to raise A$10.075 million, making the Shanghai-listed firm Terramin's largest shareholder.

Terramin is also entitled to issue $10 million in unlisted, unsecured convertible redeemable notes to Transamine.

Following a decision to mine, Terramin can issue a further $7.5 million of unlisted, unsecured convertible redeemable notes and issue fully paid ordinary shares, Moriarty said.

Shanxi Plans To Trim Cut Production

China's top coal-producing province, Shanxi, plans to produce 650 million tonnes of raw coal in 2009, down 2 percent from the previous year, the official Xinhua News Agency said.

Shanxi produced 660 million tonnes of coal in 2008, the Shanxi Province Coal Industry Administration said on its website (www.sxcoal.gov.cn).

Shanxi's coal output has maintained double-digit rates of annual growth over the past few years, as China's appetite for electricity surged with the booming economy.

The Shanxi Province Coal Industry Administration has decided to control overheated investment in coal mining, according to the Xinhua report.

The province also plans to cut the number of coal mines to 1,000 from 2,500 over the next two years. Thousands of small mines in China, most of them dangerous and inefficient, are blamed for China's poor mine safety record.

Source: Reuters

Platinum Group Looks To Venture Into Manganese, Chromite

Platinum Group Metals Corporation is looking at venturing into manganese and chromite given the dampened demand and prices of nickel.

Mr John H Cabarrus SVP of Platinum Group said that "We are seriously considering multi alloy production like ferromanganese or ferrochrome just to be able to utilize our plant and equipment. We are conducting a lot of research and development and looking at costs and revenues we can generate as a result of converting to ferrochrome or ferromanganese."

He said that however, it has to apply for an environmental compliance certificate from the Environment department for its new venture. The Platinum Group will submit its application next month.

Platinum Group has shelved its nickel processing plants in Iligan City in Lanao del Norte and in the town of Manticao in Misamis Oriental. A total of 139 and 129 workers were retrenched from the Iligan and Manticao plants, respectively. Seventeen employees were left in Iligan and six in Manticao. It invested USD 20.59 million and USD 9.948 million to develop the Manticao and Iligan processing plants, respectively.

Berong Nickel Corporation ceased its Palawan operations last month amid dampened demand and rock-bottom prices of nickel, cutting 600 jobs and retaining less than 50 employees. But despite the drop in demand, the Platinum Group wants to sell 350,000 to 500,000 wet tonnes of nickel ore, extracted from its 4,376 hectare mine in Surigao del Norte to Chinese traders this year.

Source: Business World

Sunday, March 29, 2009

Minmetals Makes Revised Offer For Oz

Sydney Morning Herals - China Minmetals put a proposal to OZ Minerals last night (Saturday) to acquire the bulk of the company, excluding the Prominent Hill copper-gold mine, in a move that could help save the miner from administration.

The Herald understands an offer was given to OZ after a weekend of frantic work by advisers from both sides who hoped to agree on a restructured deal after the Department of Defence's decision on Friday to bar the state-owned Chinese company from buying Prominent Hill.

"We would respond to any proposal we receive as soon as we evaluated it," OZ's executive manager of business support, Bruce Loveday, said last night.

OZ could resume trading as early as today if it agrees to the revised proposal from Minmetals, although it is understood no strict deadline had been set under which OZ needed to reply to the proposal lodged last night.

OZ has $1.3 billion of debt due to be repaid to its banking syndicate tomorrow, which has left it on the brink of administration. That means it is not in a particularly strong bargaining position over any offer from Minmetals.

The Prominent Hill copper-gold mine is OZ's most valuable asset. The Federal Government has allowed Minmetals to proceed with a bid for the remainder of the company.

A Deutsche Bank analyst, Paul Young, said he thought the banking syndicate would be willing to grant a 30-day extension on OZ's debt if the company could strike a revised deal with Minmetals by tomorrow.

He said OZ could be worth 50c a share, compared with the previous Minmetals offer of 82.5c a share, if Prominent Hill was excluded from the mix.

"If Minmetals decide to not revise their offer, then we see no alternative for OZ than administration," Mr Young said, adding he valued OZ at 33c a share under a liquidation scenario.

It could take months for OZ's banking syndicate to recover their funds if the company enters voluntary administration or receivership.

OZ and Minmetals spent the weekend working as fast as possible to come up with a new deal, which would include assets such as the Century zinc mine in Queensland, the Sepon copper-gold operation in Laos and the Rosebery zinc mine in Tasmania.

"There are a lot of issues to be sorted through," Mr Loveday said. "Tuesday is an interesting day for two reasons. That is when the trading halt is over and it is the bank day. It would be great to resolve it before then, but it is about doing the right deal, not just any deal."

OZ is unable to solicit offers for Prominent Hill under its existing deal with Minmetals, but it is open to considering approaches from potential acquirers such as BHP Billiton and Canadian miner Barrick Gold. BHP owns the Olympic Dam mine located about 150 kilometres from Prominent Hill and has already purchased copper concentrate from the OZ mine.

Mr Young said Prominent Hill could fetch $941 million, but that figure would include $600 million of associated project debt. The mine is not expected to be cash-flow positive until the June quarter.

Zambia To Abolish Mining Windfall Tax

Zambia's parliament has agreed to abolish a controversial 25 percent windfall tax to reduce pressure on foreign mining firms hit by the global financial crisis, Mines Minister Maxwell Mwale said on Saturday. Mwale said parliament agreed on Friday to repeal the tax, introduced in April 2008 and which triggered protests by mining companies.

"Basically what it means is that one tax regime they did not like because it was eating into their profitability is scrapped and they should have no complaints," Mwale said.

"We were aware as the government of (constraints) created by higher taxes at the mines. Zambia will now be perceived as a friendly country in terms of tax regime and it will attract more investments."

In his budget speech to parliament in January, Finance Minister Situmbeko Musokotwane proposed scrapping the tax, to cushion the country's key copper mining industry from weak metals prices stemming from the global crisis.

On Saturday, officials said parliament also approved a proposal to cut a duty on heavy fuel oils to 15 percent from 30 percent and removing customs duty on copper powder, copper flakes and copper blisters.

But the government will keep a 15 percent variable windfall tax, which the mines had also wanted removed.

The southern African country depends on copper and cobalt for more than 63 percent of government revenues.

Foreign mining firms have complained of higher taxes, high electricity tariffs and fuel prices and falling global metals prices as hindrances to their operations.

Source: Reuters

Saturday, March 28, 2009

Maghreb Minerals Seeking Partner For Tunisian Project

Maghreb Minerals PLC has announced that the scoping study on the Bou Jabeur - Gite Est deposit in Tunisia concludes that the project is uneconomic at current lead and zinc prices, but an increase in resources may change that, so it is seeking a partner to progress the project, primarily to fund the additional drilling programme required.

It noted that in the current economic circumstances this process could take some significant time.

In the meantime Maghreb will concentrate on its prospective fluorspar permits and on fluorspar opportunities in general, it said.

The economic appraisal part of the scoping study indicates breakeven for the project with an increase in the current prices of lead and zinc of somewhat less than 20 percent This will also be favourably affected by increasing the resources to allow for a mining rate of greater than 1,500 tonnes per day.

Source: Proactive Investors

China's Silicon Metal Exports Hit New Low

According to customs statistics China exported 14,106 tonnes of silicon metal in February down by 7.8% MoM from 15,297 tonnes in January and sliding 65.6% YoY from 40,933 tonnes in the review period. It is also another record low since the financial crisis began.

Exports in the first two months totalled 29,404 tonnes with whole value of USD 58,553,374.

According to 2008's data, silicon shipped to Japan were around 20,000 tonnes every month, However, only 3,383 tonnes were delivered this February falling 15.0% MoM and 67.5% YoY.

Hammered by the fiscal crisis, only 943 tonnes of silicon went to South Korea plunging 51.9% MoM and 73.0% YoY. Meanwhile, exports to German slipped from 1827 tonnes to 1184 tonnes while tonnages to the US declined to zero from 227 tonnes a month ago. However, silicon export to Hong Kong rose to 3335 tonnes from 2807 tonnes in January, tonnage to India rose to 1201 tonnes from 875 tonnes and to Taiwan grew to 756 tonnes from 224 tonnes.

Source: Steel Guru

Indian Steel Firms Ready For Price War

India's steel companies are likely to enter into a pricing war as input costs have come down significantly and demand could peter out after the elections.

"There remains a big question mark over the steel demand post elections, and if things don't go right, a price war will be inevitable.
The market could see a 10%, or $50 per tonne, drop in prices in the next two months," said an analyst with a domestic brokerage who did not want to be named.

Steel firms are also readying for the challenge. A senior official from a private steelmaker said, "We know that demand post-elections might drop and we might have to lower prices. However, we can't comment on the extent of the price roll-back." He added that the lower cost of production will definitely give companies some space to reduce prices.

Domestic steel prices (HR coil) are down to around Rs 28,000 per tonne from highs of around Rs 45,000 a tonne in June 2008. This has hit the profits of companies in the third quarter.

JSW Steel, for instance, reported a loss of Rs127 crore in the third quarter while its income rose marginally to Rs 2,826.74 crore. Tata Steel reported a 44% drop in its net profit to Rs 732 crore and Steel Authority of India's profits dropped 56% in the quarter to December 2008. The drop in production costs will provide some relief for steel firms. Most of them are expecting to renew coking coal and iron ore contracts at 60% and 40% lower rates, respectively.

"Pig iron prices have come down from recent highs of Rs 24,000 per tonne to Rs 16,000 per tonne now. Also, BHP Billiton has signed coking coal contracts with Nippon Steel of Japan at around $120 per tonne, a 60% fall from rates six months back. This will be a benchmark for the global industry and cost of production will be lower substantially," said an analyst.

An official from a Mumbai-based steel company said falling international prices of steel was a concern. "If prices in the international market fall, we will have to reduce to be in tandem with them." He felt the government should increase import duty to 15% to protect the domestic industry. "Such a measure will help us if the international prices fall too much. Otherwise, people will just import steel, forcing us to match the international prices."

Source: DNAIndia

Friday, March 27, 2009

Dhamra Port, Tata Set To Sign Cargo Deal

With a little more than a year to go before the scheduled commissioning of Dhamra port, the promoter, Dhamra Port Company Ltd (DPCL), a joint venture of Tata Steel and Larsen & Toubro, is mulling signing cargo agreements with prospective users of the port. The first such agreement is to be signed shortly with Tata Steel, Mr S.K. Mohapatra, CEO of DPCL, told Business Line here on Friday.

“We will initiate negotiations in this regard with other prospective users of our port in due course, only after we’ve firmed up our arrangement with Tata Steel,” Mr Mohapatra said, pointing out that a few months ago, several private as well as public sector steel plants inquired about the facilities to be offered by the new port.

However, some of them, insisting on signing of the cargo agreements at that time, were nowhere to be seen now, presumably because of the present downturn of the economy and the consequent crisis facing the steel industry, he said.

Mr Mohapatra, however, declined to comment on the kind of cargo support he would expect from Tata Steel, except saying that initially the volume would not be large.

“With the proposed Kalinganagar and Jharkhand projects of Tata Steel yet to make much headway, we’ve to depend on the Jamshedpur plant, which already some sort of arrangements with Paradip port and Haldia dock of Kolkata port,” he observed.

At present, Tata Steel imports annually about 0.7 million tonnes (mt) of coking coal through Haldia and about 1 mt through Paradip.

Mr Mohapatra allayed the fear that Haldia and Paradip would stand to lose substantially with the commissioning of Dhamra port.

“Tata Steel’s Hooghly Metcoke at Haldia will continue to import coking coal through the dock; also, it will be too much to presume that the steel plants proposed to be set up near Paradip will opt for Dhamra port in preference to Paradip port,” he observed.

In the long run, however, as the CEO of DPCL felt, it would make sense for the users of Kolkata port to explore the possibility of using Dhamra port as the transshipment point for handling dry bulk cargoes in view of the problems thrown up by the limited navigability of the Hooghly river.

For a large number of industries in West Bengal, Jharkhand, Bihar and parts of Orissa, Dhamra port would be the obvious choice because of its proximity to deep sea as well as hinterland (both as the source of raw materials and destinations of imports).

To start with, Dhamra port will have two berths totalling 25 mt of capacity a year – one for handling coking coal imports and the other for iron ore exports. “The capacity of our coking coal berth will almost be equal to the present level of total coking coal imports through all east coast ports,” he added.

Source: The Hindu Business Line

Visa Steel Expecting 50% Sales Rise

India's Visa Steel, part of the Visa group, is expecting an increase of over 50% in its sales turnover in the last quarter of this fiscal from its ferrochrome, pig iron and LAM coke, and sponge iron production.

By the end of this fiscal, the company plans to finish the second phase of expansion at its sponge iron (DRI) facility in Orissa and the proposed 50 mw power plant. The capacity at the DRI plant currently stands at 1.5 lakh tonne and another 1.5 lakh tonne will be added in the second phase.

Vishal Agarwal, managing director, Visa Steel, told DNA Money, "Sales have revived and are expected to increase this quarter but it's definitely a tough quarter. Prices of steel have stabilised to some extent and a lot of de-stocking has taken place at the customer end." The depreciation of rupee against the dollar and decline in steel prices have attributed to a flat average realisation for the last three months, he said.

"The value per tonne of steel has come down but volumes are growing over the last couple of months and this should be reflected in our fourth quarter sales revenues. On a ballpark basis, the fourth quarter sales could be estimated at around Rs 250 crore. Sponge iron production and volume have been added in the last quarter. We should be doing a ferrochrome production of 7,000 tonnes this quarter," Agarwal said.

Prices of ferrochrome, which were volatile over the last few months, have been hovering around Rs 35,000-45,000 a tonne.

The company said it will complete the second phase of the capacity addition at the DRI unit by fiscal-end. And once the second phase of the power plant, which currently has a capacity of 25 mw, is on stream, Visa Steel would partly sell the power to the Orissa grid."We've suffered a foreign exchange loss of Rs 24.75 crore in the third quarter while importing coal. From next year onwards, we should have no foreign exchange losses," Agarwal said.

Source: DNA India

Vale Launches $1.3 Billion Mozambique Coal Project

Brazilian mining giant Vale on Friday launched the construction of a $1.3 billion coal project in northern Mozambique, with a capacity to produce 11 million tonnes of coal per year.

The plant will be located in Moatize in the Tete province, and the coal produced would be exported to Brazil, Asia, the Middle East and Europe, the company said in a statement.

The project is expected to produce 8.5 million tonnes of metallurgical coal and 2.5 million tonnes of thermal coal, the company said.

"This is our first big project in Africa ... from here we will go to other countries, the Democratic Republic of Congo, Zambia and Namibia for copper and nickel," Vale Chief Executive Roger Agnelli said.

South Africa holds most of Africa's coal reserves, but experts say Mozambique is expected to become the second-ranked coal producer in the continent with the development of the Moatize project by Vale, formerly known as CVRD, the world's largest iron ore producer.

The Moatize mine, which suffered extensive damage during Mozambique's civil war in the 1970s and 1980s, is believed to hold about 2.4 million tonnes of coal reserves, making it one of the largest untapped deposits in the southern hemisphere.

Mozambique, one of Africa's poorest countries and still largely dependent on agriculture, has become popular with foreign companies and investors interested in staking a claim to Africa's vast mineral and energy resources.

Mozambique's President Armando Guebuza used the launch of the project to appeal to other investors, saying Vale's involvement showed that Mozambique was a secure investment destination, even in the context of the global financial crisis.

"Vale takes to the world a message that, despite the crisis, Mozambique is a country for the future and a country to establish longstanding and sustainable partnerships," he said.

Source: Reuters

Indian Iron Ore Prices Steady - Enquiries From China Still Low

India's benchmark iron ore prices were quoted steady from last week, but exporters said the pressure was on as enquiries from China remained low.

An official at the Federation of Indian Mineral Industries (FIMI) quoted the benchmark rate for ores with 63.5 percent iron at $48-$50 per tonne, FOB, same as last week, but two other exporters said prices had fallen $2-$3 over the past week.

One large east India-based exporter said he sold 63.5 percent iron ore for $67 including freight and another consignment of 64.5 percent iron ore for $70.

India's iron ore exports have slumped since the end of February, after a brief pick-up towards the end of last year when Chinese purchases briefly surged. The diminishing interest from China, India's biggest iron ore client, is rooted in the Asian giant's steel industry that has slowed down since the economic crisis hit the world last year.

China consumes most of India's 100 million tonnes of annual exports from total production of about 200 million tonnes. Exporters were not hopeful of any major recovery in prices in the near future with annual contract negotiations coming up, when large players fix deals for the full year at prices that are taken by the industry as a benchmark.

With Chinese importers in wait-and-see mode as they hope to push annual prices as much as 40 percent lower, gains appeared unlikely. "We are seeing volumes are low. They have been coming down," said Glen Kalvampara, secretary of Goa Mineral Ore Exporters' Association based in the western Indian town of Goa.

Exports from India in April-January fell to 78.46 million tonnes against 79.67 million tonnes a year ago and exporters expect the fical year ending next Tuesady to show a decline in shipments. Last year India exported 104 million tonnes of ore.

Source: Reuters

Iron Ore Selling At 40% Discount

Iron ore miners have struck deals with Chinese steel mills to temporarily sell shipments at 40% discount to last year's term rates, aiming to secure volume even as the miners' biggest customer continues to demand a slash in prices.

The arrangement lets mills pay 60% of last year's contract price from Jan. 1, and settle the difference with the 2009-2010 term rate only after the benchmark price is set later this year, China Iron and Steel Association Secretary-General Shan Shanghua told Dow Jones Newswires late Thursday.

The move effectively dials benchmark ore prices back to 2007 levels.

"But the talks are not yet done," Shan said. "There will still be repayment of any outstanding amount when the rate is finalized and it doesn't mean they have accepted Jan. 1 as the contract's official start date."

The arrangement is a hint of what miners might be able to accept for a final term price, given its correlation to the spot market, analysts said. While Shan declined to elaborate on how far the world's top three miners - Companhia Vale do Rio Doce (RIO), Rio Tinto Plc (RTP) and BHP Billiton Ltd. (BHP) - have each implemented it, or on the progress of the price talks, most analysts said the move is now widespread, and in some cases have been in place as early as Jan. 1.

"From what I know, almost everyone involved has begun to do this," said Hu Kai, a steel analyst with metals consultancy and trading firm Umetal.com. "In the past, all benchmark rates have been crafted from spot rates," Hu said. "Now they're already using 2007 prices. I think it's very likely the price will eventually be a 40% cut from last year."

Zou Jian, an association director, told Dow Jones on Friday he knew Vale was implementing the arrangement.

The Chinese have consistently demanded the 2009-2010 term price be cut 30%-50% from last year's rate. Miners are holding out for an economic turnaround to press for negotiating advantage. But two of the miners have already signaled they would accept a price cut.

Shan's acknowledgment of the term discounts comes as ore suppliers increasingly turn to the spot market to gain sales in a souring steel market.

"Since December, a lot of compromises on the contract system have been put in place," said Henry Liu of Macquarie Research. "All three miners have been involved. Ultimately, its to their advantage to encourage the spot basis in order to gain sales."

With spot rates now running about 30% below 2008-2009 contract prices, including cost, freight and insurance, miners are scouring for volume.

Liu had observed in mid-March that even as Vale was stating it would continue to sell ore at benchmark prices, the miner was also bundling freight costs into ore sales to win market share.

Signs had surfaced earlier this month that miners were already moving to circumvent the contract system under economic duress.

Wuhan Iron and Steel Corp. Chairman Deng Qilin said at the sidelines of China's Congress that his mill now imports ore from BHP, Rio "and others" at spot prices, adding that mills had postponed contract shipments because prices were too high.
BHP had agreed to backdate this year's contract to Jan. 1 as a start date, instead of April 1, Maanshan Iron and Steel Co. Chairman Gu Jianguo told reporters earlier this month. The move which effectively lops three months off last year's lucrative terms. Rio and Vale had insisted on April 1, Gu said. But others said Vale was not as resolute on this point as purported.

"We hear that many Brazilian contracts with China have been converted into calendar-year contracts, from fiscal-year contracts beginning on 1 April, and 'provisional pricing' is being applied to January-March deals at a significant discount to current fiscal-year benchmarks," Macquarie said earlier in March.

Miners now hope an uptick in China's stimulus-led infrastructure spending would restore the sellers' advantage, or at least save them from a deep final cut.
"Certainly we need to recognize the fundamentals of the market and the market would show that there does need to be a downward adjustment," Sam Walsh, head of Rio's iron ore division, said this week. But "current spot prices don't verify a 50% reduction (in contract prices)," he said.

Vale has already offered the Chinese a 10% price cut, but was rejected because the cut was deemed too low, Zou Jian, a CISA director, told Dow Jones Newswires late last month.

Source: Dow Jones

China To Raise Steel Export Rebates

China will raise export rebates for textiles, steel, petrochemical and electronics starting on April 1st.

According to a report in the Xinhua newspaper, which didn’t provide further details, rebates will also be increased to help exporters of non-ferrous metals, and information-technology products.

The China Iron & Stel Associayion suggested in a report to the relevant govenrment departments that all steel exports should enjoy an export rebate. The export rebate rate for such high value added products as cold rolled coil, galvanized coil, alloyed steel should be raised to 13% from 5%. CISA disclosed that the real rebate rate change may be a little different with those suggested though they have been trying to get more increase. Further, hot rolled steel coil would not enjoy export rebate. The final result will be announced soon by Ministry of Finance of China.

Customs statistics show that steel export tonnage for February was 1.56 million tonne down by 49.8%YoY and 18.3%MoM. The total export volume for January and February is 3.47 million tonnes, a drop 52.1% YoY from the period of last year. There are few new contracts in 2009 since 60% of them were signed in late 2008. Export tonnage is likely to see an 80% slump in 2009.

Market analysts believe that the rebate rate increase may help, but what really accounts for the fall is poor overseas demand. Export prices for Chinese steel products are not as competitive in the world market as those by South Korea, Turkey, South East Asia and CIS countries which are much lower. It is regarded as an effort by Beijing to support the Chinese steel industry in the current world recession. China has also lowered export the rebate rate or levied an export tax to cool exports in the past few years.

Source: Steel Guru

Steel Output Down In Russia

A report on the Russian website, Rusmet, reports that steel output in Russia in February fell by 29.8 % to 4.3 million tonnes in February 2009 YoY.

Steel output and finished products output in February 2009 decreased by 71.7% YoY. Production of cast iron and ferroalloys in February 2009 made 3.2 million tonnes - 26.7% less than in February 2008. Ferrous metals finished products output in February was3.8 million tonnes, 26.6% less than in February 2008.

Flat steel production in February 2009 decreased by 23.9% YoY compared to February 2008 to 1.6 million tonnes. However, this figure is 29.2% more than in January 2009. CR steel in February 2009 made 400,000 tonnes, 35.7 % less than in February 2008 but 36.7 % more than in January 2009. HR steel in February 2009 made 1.2 million tonnes which is by 18.2 % less than in February 2008 but by 26.6 % more than in January 2009.

Source: Steel Guru/Rusmet

Shagang To Import 1 Million Tonnes Of Coking Coal This Year

According to statistics of the Zhangjiagang Entry-Exit Inspection & Quarantine Bureau, Jiangsu Shagang Group has imported four batches of coking coke in March with a gross weight of 190,000 tonnes valued at USD 28.72 million. It is the first time the mill has imported coking coal in three years.

Shagang's move comes as overseas resources have become cheaper than domestically-produced coal. It is expected that the mill will bring in more than 1 million tonnes of coking coal this year,

At present the domestic price for coking coal stands at CNY 1400 per tonne while the imported price is at USD 150 per tonne, a difference of CNY 380 per tonne.

Source: Steel Guru

Giralia Report Maiden Ore Resource For Anthiby

Giralia Resources has reported an initial Inferred Mineral Resource for the Company’s 100% owned Anthiby Well iron ore project, located around 100 kilometres west of Paraburdoo in the Pilbara Region of Western Australia.

Highlights:

- Initial iron ore Mineral Resource at Giralia’s 100% owned Anthiby Well project subject to a production royalty:
- 63.5 million tonnes @ 50.5%Fe (55.8% CaFe), including
- 37.6 million tonnes @ 53.6%Fe (59.1% CaFe)
- This maiden estimate for the Anthiby Well channel iron deposit (“CID”) is based on an 87 hole first pass drilling program completed in December 2008.
- The resource is near surface; within ~40 metres of natural land surface.
- Drilling results include 32 metres @ 55.1%Fe incl. 24 metres @ 56.0%, 22 metres @ 56.3%Fe, and 18 metres @ 56.2%Fe.

Giralia’s Anthiby Well iron ore project is a new discovery of channel iron (CID) mineralisation confirmed by an 87 hole drilling program completed in December 2008. The Mineral Resource comprises mesas of pisolitic iron ore mineralisation. The mineralisation commences at or very near the natural land surface, to a maximum depth of approximately 40 metres. Better drilling intersections include; 32 metres @ 55.1%Fe including 24 metres @ 56.0%, 22 metres @ 56.3%Fe, and 18 metres @ 56.2%Fe.

Several Robe Pisolite mesas have been identified in the area as targets for channel iron mineralisation, and potential also exists for extensions around and between between mesas. Results from the western mesas in particular are encouraging, with thick zones of CID mineralisation intersected.

The Company plans further drilling to test for resource extensions particularly around and to the west of the Western Mesas, and to conduct beneficiation testwork to establish whether the lower grade CID and SCID mineralisation is amenable to low cost upgrading using screening.

Source: Proactive Investors, Australia

Trading In Oz Minerals Halted

Trading in shares of Australian zinc miner Oz Minerals Ltd, which is facing a March 31 deadline to pay off A$1.3 billion ($905 million) in debts, was halted on Friday pending an announcment by the company.

The company did not give further details.

One of its lenders expects the firm's banks to roll over its debts to end-April, as the world's No.2 zinc miner waits for the government to approve a Chinese takeover

China's state-owned Minmetals has made a $1.7 billion rescue bid for OZ Minerals.

Source: Reuters

Kagara Restarts Copper, Zinc Processing After Rains

Australia's Kagara Ltd has restarted copper and zinc ore processing at its Mt Garnet polymetallic plant in eastern Australia following a spate of heavy rains in the region, the company said on Friday.

Processing of higher grade ore through the plant will help recoup some copper production lost earlier this month due to the rains, it said.

The copper goes to India's Sterlite Industries (India) Ltd . Korea Zinc Co Ltd buys all of Kagara's zinc.

Source: Reuters

Thursday, March 26, 2009

India's Ferroalloy Production Set To Fall 25 Per Cent

India's production and exports of ferro alloys, the major ingredients of raw materials for steel making, are likely to decline by 25 per cent this year on poor demand from global consumer industries, according to experts.

The country produced about 2.36 million tonnes of ferro alloys last financial year, which is estimated to decline to 1.90 million tonnes this year.

The year 2008-09 has brought a mixed bag of fortune for the ferro alloy producers. While their order books were full in the first half of the financial year, the next six months, especially since November, saw orders plunging to "nil" on the back of a near-halt in shipments to the US, Europe, Korea and Japan -- the four destinations where India exports almost 80-85 per cent of its ferro alloy output. The halt was triggered by the global economic meltdown.

Surprisingly, the demand resumed slightly in February, which indicates the revival in steel and stainless steel productions and thereby, in global economy.

During the four months’ slackening period — between November and February —, nearly 30 per cent of ferro alloys producers in India halved their capacity from the normal production level of 70 per cent to 35 per cent. The period also saw about 20 per cent of the existing 150 furnaces shutting down their shops.

But, the slump-hit manufacturers are slowly resuming their operations, said T S Sundaresan, Secretary General of Indian Ferro Alloy Producers’ Association (IFAPA).

Source: Business Standard

Iron Ore Price Discounts Forecast

Cia. Vale do Rio Doce, BHP Billiton Ltd. and Rio Tinto Group, the three largest iron ore producers, may engage in a discount competition in China because of an oversupply, Mysteel Research Institute said.

Iron ore sales to Europe and Japan by the three companies may drop by more than 100 million metric tons this year, forcing them to sell more to China should they not slash production, analyst Xu Xiangchun said in Beijing at a conference today.

Benchmark contract prices for the steelmaking material may drop for two years, undermined by “whopping oversupply,” Citigroup Inc. said March 24. Steelmakers in Europe and Japan are slashing output and cutting jobs as the global recession curbs demand from carmakers and builders.

“Cutting prices will be the only way for miners to sell their additional supplies to China,” Xu said. “Miners will eventually have to sell at lower prices on the spot market.”

Cash prices of iron ore imported by China, the world’s biggest buyer, fell for a second week last week. Prices had dropped to 600 yuan ($88) a metric ton.

The three iron ore producers, which account for about three-quarters of the traded material, will have to compete with Indian and Chinese products, Xu said. Iron ore miners and steelmakers are now in talks to set annual benchmark contract prices for the year starting April 1.

Steel prices in China have dropped 13 percent since February after production had jumped on expectations of revived demand spurred by the government’s 4 trillion yuan ($585 billion) stimulus plan. Beijing-based Shougang Corp. this month called for steelmakers to cut output by 20 percent.

“Chinese steelmakers, whether big or small ones, are very reluctant to cut production,” said Xu. Prices may recover only when daily production drops below 1.25 million metric tons, he said.

China’s crude steel production was 40.4 million tons in February, equivalent to 1.33 million tons of daily output, according to figures from the National Bureau of Statistics.

Source: Bloomberg

CAMEC Restarts DRC Cobalt Exploration

Central African Mining and Exploration Co PLC has recommenced cobalt operations at Mukondo Mountain in the Katanga Province of the Democratic Republic of Congo due to the recent strengthening of demand in the market.

In order to preserve cash, CAMEC suspended operations at Mukondo Mountain in November 2008, as the global economic downturn resulted in the collapse of the cobalt price.

However, with a significant number of cobalt producers having suspended operations, inventories drawn down and demand beginning to show signs of recovery, the company feels it is appropriate to recommence operations, it said in a statement.

Source: Proactive Investors

China Finds Large Tungsten Ore Deposit

A large deposit of tungsten ore with a proven reserve of 96,200 tonnes has been verified in east China's Anhui Province, local geologists said on Thursday.

The finding, in Qimen County, is an important one for the country as only 144,000 tonnes of tungsten ore was found between 2001 and 2007, said Hao Changrong, head of No.332 Geology Team that prospects ore in the south of Anhui Province.

China's tungsten reserve are mainly in the provinces of Hunan, Jiangxi and Henan, which jointly account for 61.37 percent of the total national reserve.

The deposit in Qimen indicates that more ore could be found in the southern parts of Anhui, Jiangxi's neighbour, Hao said.

China, along with Russia, Canada and the United States, is one of the world's major tungsten producers holding 40.5 percent of the world's proved reserves.

Source: Xinhua Net

Polish Copper Miner Resisting Dividend Payout

A report by Reuters suggests that Polish copper miner KGHM will move forward with its investment plan even though the country's treasury ministry is pushing for a dividend payout opposed by the management, the company's chief executive said on Thursday.

"We are moving forward with our investment plan and we are not waiting for the dividend payout," Miroslaw Krutin told reporters in the southwestern Polish city of Lubin, where KGHM is based.

"Right now other factors influence our investments rather than dividend, that is copper price or the dollar," he said.

Treasury Minister Aleksander Grad said earlier this week he would push for a dividend payout at state-controlled KGHM in spite of management pleas to leave the entire 2008 net profit of 2.92 billion zloty ($870 million) in the company.

Grad added the amount was yet to be decided.

Last month, KGHM earmarked 9 billion zlotys for investments to boost copper production and seek deposits abroad. The miner, one of Europe's top copper producers, plans to seek acquisition targets during an upcoming CESCO copper conference in Chile.

"One of the goals of this visit will be to examine companies from the point of view of acquisitions," Jaroslaw Romanowski, head of KGHM's trade and hedging, said. "We hope we'll use the time to talk on eventual takeovers."

Last year, KGHM shareholders, led by the treasury, pushed through a 1.8 billion zlotys dividend, nearly two-thirds more than the management's proposal.

It was among the top state-owned dividend payers, together with Poland's top bank PKO BP PKOB.WA.

Analysts fear a high dividend payout may curb KGHM's investments, as the miner does not expect profit on core business this year because of lower copper prices MCU3.

Source: Reuters

China May Cut Ferroalloy Export Tax

China is likely to cut the 20 percent export tax on ferro-chrome and ferro-manganese in the second half of this year to help domestic producers, Liu Guoqing, acting chairman of China's Ferro-alloys Association, said on Wednesday.

"The Chinese government is likely to do it in the second half. This goes hand in hand with efforts to help domestic production," he told reporters on the sidelines of a ferro-alloys conference in Hong Kong.

Liu did not say what the new tax rates might be but said the tax cut was likely to target products that use less energy and require higher technology.

China is the world's largest producer of ferro-alloys.

Source: Reuters

China's Coking Coal Demand Could See Double-Digit Fall

China's demand for coke may fall to 280 million to 290 million tonnes this year, a drop of about 9 to 12.5 percent from last year's 320 million tonnes, according to China Coking Industry Association estimates cited by official media on Thursday.
The association attributed the decline to a possible drop in domestic production of crude steel, which has been hit by the slowing economy, and an expected sharp fall in exports both of coke itself and of coke contained in steel exports, the official China Securities Journal reported.

The report added that domestic coking coal prices face relatively heavy downward pressure due to sluggish steel prices. In a separate article, the paper also said the Dalian Commodity Exchange, one of China's three main futures exchanges, had drafted contract specifications for coke futures and their launch was expected to come quickly following China's recent approval of the launch of steel futures. The article gave no concrete timetable for a coal futures launch, however.

China, the world's largest steel-making nation, is the world's largest coke consumer, accounting for about half of global consumption.

Source: Steel Guru

DB Sees End To Iron Ore Benchmark System

Deutsche Bank has predicted that the annual iron price benchmark contract system may be scrapped as producers seek individual arrangements.

Mr Peter O’Connor, an analyst at Deutsche Bank, said that “The stress on the benchmark system has never been greater. There’s been a 50% increase in spot sales from Australian producers in the past 6 months as buyers renege on contracts.”

Cia Vale do Rio Doce said last month that it wouldn’t seek to be the price setter this year. Vale has traditionally been the first iron ore supplier to set its benchmark price with steelmakers, establishing the basis for settlements by other miners in the international market.

In mid-2008 after a surge in demand, Australian producers BHP Billiton Limited and Rio Tinto Group achieved price increases of 85% or higher for their ore, exceeding the 65 to 71% gained by Vale earlier in the year.

BHP is also participating in off-exchange trading for iron ore offered by Credit Suisse Group and Deutsche Bank. The banks’ trading platforms handle swaps with initial maturities as far out as December 2009 that are settled in cash each month against an iron-ore index published by Metal Bulletin.

Source: Steel Guru

BHP To Review Yabulu Refinery

BHP Billiton Ltd. is undertaking a review of the Yabulu refinery in Queensland, the Australian newspaper said, citing a report by Dow Jones Newswires.

The world’s largest miner said the refinery is back to normal operations after a cut in processing due to the closure of the Ravensthorpe mine in January, the Australian reported.

Yabulu is no longer processing mixed nickel cobalt hydroxide from Ravensthorpe and is reverting to processing ore only, BHP said, according to the report.

Wednesday, March 25, 2009

Demand Down For Indian Iron Ore

Traders in the Chinese iron ore market say that demand for Indian iron ore has reduced over the past three weeks.

At present, 63.5% Indian fine ore price in China's major ports was 66-67 dollars per dry ton (CFR), almost the same as that of the first two weeks in March. However, because domestic buyers are holding a watch-and-see attitude towards the market, there have been few transactions.

Prices have fallen almost 20pc, compared with 85 dollars per dry ton CFR last month.

Generally speaking, if the price was stable, the volume of transactions would gradually increase, but this month that situation has not been the case, and a major northern iron ore trader said on 20 March "Some buyers thought that the Indan ore prices had touched bottom last week, so they ordered some ore, but this week someone would not think so, and they held watch-and-see attitudes to the market."

Because of previous rumours that the number of Chinese steel mills will be further reduced, traders even think there will be no transactions in the coming months. Another Shanghai trader said, "I am worried that the situation of a slumping market would continue for quite a long time."

Source: Alibaba News Channel

ENRC Profits Double

Miner Eurasian Natural Resources Corp. said on Wednesday that its 2008 net profit rose to $2.64 billion from $798 million as revenue grew 66% to $6.82 billion.

The Kazakhstan group said underlying earnings before interest, taxes, depreciation and amortisation rose 117% to $4.2 billion. Eurasian said sales in the first quarter of 2009 have been better than expected, but it is not yet clear whether this is sustainable and that any sustainable recovery before 2010 seems unlikely. It will therefore maintain production cutbacks of 35% in ferroalloys and 40% in iron ore at least through the first half of 2009.

The company expects second-quarter ferrochrome prices to settle between 70 and 90 U.S. cents a pound. The first-quarter contract for the metal, used in steelmaking, settled at $0.79/lb.

The group also announced that its CEO Johannes Sittard has extended his contract and will remain with the group up to Sept. 30, 2010, while Chief Financial Officer Miguel Perry has given notice that he will step down on June 30.

Source: Marketwatch

Japanese Copper Production Cuts To Remain

Japanese copper smelters will likely extend curbs on copper production into the next financial year as there is no sign of a recovery in the autos sector or other key customers, Japan's mining and smelter industry group said on Wednesday.

Japan's smelters have cut production by about 10 percent since the start of the year, as manufacturers including automakers slash output in the face of tumbling demand.

From next week, Japanese copper smelters are due to start announcing production plans for the first half of the new financial year that starts in April.

Pan Pacific Copper Co Ltd., the copper smelting unit of Nippon Mining & Metals Co Ltd, has already said it would continue to cut copper output by 10 percent for the new financial year.

Industry sources have said it may take several more months at least for domestic demand to pick up.

Japan Mining Industry Association Chairman Nobuyoshi Soma told reporters that the industry was watching closely the fortunes of the automobile industry, a major consumer of copper and other metals.

"I think the most important thing is for us to see a recovery in the automobile industry," he said.

Demand for automobiles, however, is expected to remain in a slump, suggesting that consumption for the industrial metal is unlikely to recover soon either.

The Japan Automobile Manufacturers Association (JAMA) on Tuesday forecast the lowest domestic vehicle sales in 32 years for the coming financial year.

One of the few bright news for the Japanese industry has been an increase in exports of refined copper to China, the world's top consumer of the metal, with hopes pinned on Beijing's 4 trillion yuan stimulus package aimed at aiding economic recovery.

Japan's exports of refined copper in January rose 74.7 percent from a year earlier to 59,602 tonnes, with China accounting for over 80 percent of the purchase, official data shows.

Industry sources, however, have expressed doubts about the strength of Chinese buying and whether it stemmed from real demand.

They note that a lot of the purchase has been done by China's State Reserves Bureau, which has taken advantage of the decline in price to step up buying of copper to build up the nation's reserves.

Export data for February will be available on Monday.

The price of copper MCU3 has recovered to about $4,000 per tonne on the London Metal Exchange, but it is still less than half its all-time peak over $8,900 hit in July 2008.

Source: Reuters

Territory Inks Supply Deal With Chinese Mills

Australia’s Territory Resources has signed contracts with three Chinese steel mills for the supply of iron ore.

In the coming three years, Territory will supply totally 2 million tonnes a year to the three steel producers in China.

The company said that "Territory remains on track to complete the ramp up of production at Frances Creek to an annualized rate of 2 million tonne per annum during 2009, with a number of operational enhancements completed at the mine over the past 12 months."

Iron Ore Price Talks Not Likely To Conclude By 1 April

Negotiations on the annual benchmark prices for iron ore imports are not likely to conclude before April 1, when a new annual agreement usually comes into effect, according to analysts.

Ma Tao, analyst, Bohai Securities said talks between miners and Chinese steelmakers might drag on for a longer time than last year as negotiations are more complicated this year. Last year the agreement was inked in June with steel makers accepting a record increase of 96.5 percent.

"Neither side is in a hurry. Suppliers are waiting for demand to recover in the second quarter, while the Chinese side is seeking lower prices," he said.

As the world's largest iron ore consumer China expects to have a bigger say in its negotiations with the three major suppliers, Rio Tinto, BHP and Vale, amid the global economic downturn.

Baosteel, which is leading the negotiations, is asking for an over 40 percent cut in iron ore prices this year, which will be the first drop in seven years. Some analysts have even forecast a decline of up to 50 percent.

However, suppliers are in no mood to accept such a price even though they admit that iron ore prices are "certain to fall" this year due to declining industrial activities. Sam Walsh, head of Rio's iron ore division, was quoted by Reuters yesterday as saying that forecasts for a price cut of as much as 50 percent were too steep given a brightening demand outlook and indications from the spot ore market.

Rio, the world's second largest iron ore producer, is reportedly postponing the negotiations with Chinese mills claiming "markets are volatile and it's difficult to see what a steady state means at the moment".

The miners on the other hand are waiting for China's recent 4-trillion-yuan stimulus package to show its impact on steel production and iron ore demand, said Xu Xiangchun, chief information officer, Mysteel.com.

"A postponement of the pricing may benefit steel makers as a recovery is not expected in the short term," he said.

Xu said steel prices have been falling globally since last month as demand from Japanese and European steel makers have shrunk.

He added that the Chinese steel industry is also adjusting its negotiation strategy. The China Iron and Steel Association recently said that Chinese mills, led by Baosteel Group Corp, would direct sales to iron ore producers that agree to the price cuts.

Source: China Daily

Tuesday, March 24, 2009

Kim Jong-Il Visits More Iron Ore Mines

Kim Jong Il, leader of the Democratic People's Republic of Korea (DPRK), has visited iron ore mines in the Chaeryong District in the southwestern province of Hwanghae-namdo for "guidance on the spot".

The Korean Central News Agency reported on Tuesday that the Leader of the Country during the visit praised the wineworkers for supplying metallurgical enterprises of the country with the raw material.

Kim Jong Il urged senior officials of the enterprise to devote special attention to the working and living conditions of the miners. As a result of the inspection tour, he is reported to have determined priority tasks for the enterprise and expressed confidence that the miners at Chaeryong mines would efficiently accomplish their honorary mission of front-rankers of Socialist economic development.

The present tour by Kim Jong Il is regarded here as yet another illustration of the DPRK leadership's increased attention to the problems of the metallurgical industry.

In mid-March, local media had reported the Leader's visit to a large integrated metallurgical mill in the neighbouring province of Hwanghae-pukto. At that time the DPRK Leader had called on the workers to boost the production of ore and coal for the needs of the enterprise and ensure an uninterrupted supply of raw materials to the production complex.

Foreign observers also note an increase in the overall number of inspection tours by Kim Jong Il about the country in recent months. This year, the Leader of the Republic appeared in public more than 40 times -- approximately three times as many as in the corresponding period of last year.

Source: Itar-Tass

Ferrexpo Doubles Profits

Ferrexpo, the Swiss-headquartered, U.K.-listed, Ukraine iron ore pellet maker, said its annual profits climbed to $292 million from $124 million, with revenue up 60% to $1.12 billion, as the average pellet price rose 72%.

It said it has been trading profitably since the economic downturn and is paying a dividend of 3.3 cents a share, in either dollars or sterling, and said the outlook for the iron ore market remains uncertain in the short term.

It maintained positive margins during the first two months of 2009.

Source: Marketwatch

Foreign Interest In Alrosa Iron Ore Assets

According to Mr Sergei Vybornov president of Russian diamond miner Alrosa, Foreign companies are expressing an interest in the Alrosa Investment Group's iron ore assets.

Mr Vybornov told reporters that "They include a global player, which was unable to pull off a merger last year and a Chinese steel producer.”

Earlier reports said that Alrosa was looking for a strategic investor for these fields but planned to keep control of them.

Alrosa acquired four iron ore deposits Tayezhnoye, Desovskoye, Tarynnakh and Gorkitskoye in Yakutia in the spring of last year. It could cost RUR 180 billion to build a metallurgical complex at the fields.

BHP Billiton tried but failed to complete a merger with Rio Tinto Group last year. Chinese companies are not known for their interest in Yakutia, but South Korea's LG International has stated a firm interest mainly in coal projects in southern Yakutia and is also looking at iron ore and uranium projects.

Mr Vybornov said that Alrosa had found a buyer for its two hydrocarbons fields in Yakutia and that the sale could go through by the end of the year. Alrosa owns CJSC Irelyakhneft and a controlling stake in OJSC Sakhaneftegaz, where a court appointed a supervisor at the end of last year. Vybornov has said that Alrosa expected to earn USD 600 million to USD 700 million from the sale of these assets.

He said that Alrosa might divest its stake in KIT Finance by the end of this year and sell it to Russian Railways.

Alrosa Investment Group owns 45% of KIT Finance Holding Company, which owns more than 96% of the KIT Finance bank and which plans to consolidate 100%. RZD already owns 45% of the holding company.

Source: Steel Guru/Interfax

China's Largest Lead Mine Discovered In Yunnan Province

Following years of exploration efforts, China's largest lead-zinc mine was recently discovered in Lanping Bai and Pumi Autonomous County of Nujiang Lisu Autonomous Prefecture in Yunnan Province.

Its lead and zinc metal reserves are over 15 million tons with a potential value expected to surpass 200 billion yuan. Based on the current extraction speed, it can be mined for 100 years.

The lead-zinc mine is located 18 kilometers northwest of the county seat of Lanping Bai and Pumi Autonomous County, with a confirmed reserve of 15.4761 million tons of lead and zinc metal, and a combined grade of lead and zinc reaching 9.44 percent.

Lead-zinc mines mainly adopt surface mining techniques therefore the extraction cost is low. Currently in Lanping, the surface mining capacity of oxidized ore is 1,500 to 2,000 tons a day, and that of sulphide ore is around 2,000 tons a day.

Source: People's Daily

Monday, March 23, 2009

Gujarat NRE To Expand Illawarra Operations

India is to become an unlikely jobs saviour for the Illawarra, with its resilience amid the global financial crisis set to deliver 100 new mining positions.

Just weeks after the CFMEU predicted tens of thousands of mining jobs nationally were at risk due to the crisis, Gujarat NRE Minerals Limited chairman Arun Jagatramka has explained how the Indian company is set to buck trends and expand its Illawarra operations.

In an interview with the Illawarra Mercury, Mr Jagatramka said the 400-strong workforce would increase at least 25 per cent.

"I think I am signing at least four to five employment contracts every week or at least every fortnight," he said.

"I would say by 2010 I can easily see the number of people employed with us crossing 500."

India has little coking coal and relies on companies like Gujarat NRE, which exports raw coal from its Wongawilli and No1 collieries in Wollongong, to provide the crucial steel-making commodity.

It is a boom time for construction in the developing country, unlike elsewhere in the world.

"India's steel consumption is a very low level of 50kg per capita, as compared to 300kg per capita in China or 500kg-odd in Australia or 800kg in Japan," Mr Jagatramka said.

"So from that perspective we would expect India's ... steel production to go up by at least five times by 2020 as compared to what it is today."

Gujarat NRE plans to increase its Illawarra annual coal exports seven-fold over the next five years, to 7 million tonnes.

It will spend $500 million developing its two mines, including through the fruitful but environmentally controversial longwall method.

"Longwall mining does result in some subsidence on the surface but what we are planning is putting up longwalls beneath the Bulli longwalls where mining has already been done ... so from the surface perspective you can't expect any more subsidence," Mr Jagatramka said.

He said the expansion of Port Kembla and the unclogging of other ports was crucial to future overseas business investment.

At Port Kembla, figures from the Port Kembla Coal Terminal show the true impact of the downturn on Illawarra mining, mainly due to falling demand in developed countries.

Exports of metallurgical coal found in the Illawarra, fell more than 10 per cent in the final quarter of 2008.

The coal terminal has now revised shipment predictions for the 2008-09 financial year from 14.6 million tonnes to 12.2 million tonnes.

Illawarra Coal, which employs 1000 full-time workers and 1000 contractors, says it is working to minimise mining job losses. In January, its parent company, BHP Billiton, announced 3300 job cuts nationally but said none of those would be in the Illawarra.

An Illawarra Coal spokeswoman said "while demand for coking coal has slowed in response to the global financial crisis, Illawarra Coal redesigned its production outputs earlier in the year to address this".

Meantime, the Illawarra Mercury understands the Illawarra Coke Company is in negotiation witha Japanese company and hopes to make an announcement on a new supply deal next week.

Illawarra Coke's 49 permanent employees took holidays last month and coke production was suspended after major European customer ArcelorMittal defaulted on a large order, and the price it was receiving for coke sales fell.

Source: Illawarra Mercury

Vietnam Halts Steel Projects That Cannot Source Iron Ore

The Vietnamese government has annnounced that only steel projects that can ensure their iron ore supply or make high-grade steel will be considered for licensing. The announcement was made by the country's Deputy Prime Minister Hoang Trung Hai.

He ordered the Ministry of Natural Resources and Environment to verify if licensed steel plants have guaranteed supplies of ore before recommending action against those that do not, a statement posted on the government’s website on Friday said.

Provincial administrations are required to scrutinize ongoing steel projects.

Hai’s orders follow a Vietnam Steel Association recommendation last month that licenses should not be issued to projects that are not envisioned in a development strategy since supply is expected to be three times demand by 2020.

A development strategy drafted for the steel industry in 2007 projected demand to increase to 20 million tons a year by 2020 and capacity to 18 million tons.

But a recent study by the Ministry of Industry and Trade found capacity may skyrocket to 60 million tons.

Source: Thanh Nien Daily

Hebei Looks To Buy Baosteel's Stake In JV

Chinese steel maker Hebei Iron & Steel Group (HBIS) is negotiating with Baosteel Group to buy its 50% stake in Hansteel Hanbao Iron and Steel, Xinhua China Metals said on Monday.

Hansteel Hanbao Iron is a 50/50 joint venture between Baosteel and Handan Iron & Steel Co Ltd (Hansteel), established in 2007.

Baosteel is likely to withdraw from the joint venture as its partner Hansteel is now integrated into HBIS, the latter's vice chairman Liu Rujun said.

Source: Xinhua

Antam Puts Aside $37mn For Coal Mines

Indonesian state-owned miner, PT Aneka Tambang Tbk, has allocated $37 million for acquiring coal mines, the company said on Monday.

Antam said last year it planned to acquire coal mines as it expects coal consumption to rise significantly when it completes a new power plant near its nickel mine in Pomalaa, on Sulawesi island.

"We prepared about $37 million for acquiring coal mines from internal cash. But we don't know yet how much we will actually spend," Bimo Satryo, Antam's corporate secretary said.

"We have not made any deals yet. We are still looking for coal mines," he said.

Antam has said it was conducting due diligence on two coal-mining firms in East Kalimantan as possible acquisitions.

The firm consumes about 200,000 tonnes of coal a year to power its ferro-nickel smelters, but annual consumption may rise to 2 million tonnes once the new power plant is completed.

The $350 million coal-fired power plant, due to be built as a joint venture with an independent power producer, will have a 150-megawatt capacity. It is aimed at reducing ferronickel production costs.

Antam has selected a consortium of PT Nava Bharat and coal miner PT Indika Energy Tbk as potential partners in the development of the power plant.

Construction is due to start at the end of 2010 with commercial operations starting in 2013, the firm said.

But the firm said it could initially sell coal, before its power plant is up and running.

Antam, 65 percent-owned by the Indonesian government, is involved in the exploration and production of nickel ore, bauxite and iron sands, smelting of ferro-nickel, as well as the exploration, production and refining of gold and silver.

Source: Reuters

Atlas Makes Completes Third Toldeo Copper Shipment

Atlas Consolidated Mining and Development Corp. said on Monday it has completed its third shipment of copper concentrates to Nandong, China from its mine in Toledo City, Cebu.

The listed firm told the stock exchange that it shipped a total of 5,501.9 wet metric tons of copper concentrates, with a preliminary grade estimate of 28.56 percent copper, 2.54 grams per ton gold and 26.51 gm/ton silver. The delivery was made via MV Siti Halimah.

According to Atlas, the shipment was part of the initial 60,000 metric tons of copper concentrates committed by subsidiary Carmen Copper Corp., which operates the Toledo mine, pursuant to an offtake agreement with MRI Trading AG. Roughly half of volume was hedged at an average price of $7,612.50 per metric ton of contained copper.

Carmen finished the initial phase of the rehabilitation of the Cebu copper mine and commenced ore processing in September 2008. The company is likely to ramp up its milling capacity to 35,000 tons per day by the third quarter of this year.

The second phase of the copper mine rehab, which would increase its output to 42,000 tons of copper ore per day, is expected to be finished by the first quarter of 2010, Atlas said.

Source: ABS-CBN News

Geovic Delays Cameroon Cobalt Project

Geovic Mining Corp. will slash costs, reduce in scale and delay by at least a year its cobalt-nickel-manganese project in Cameroon as a result of the financial crisis, a company official told Reuters on Friday.

The firm's Nkamouna project, a key element in Cameroon's drive to attract $10 billion in investment into its nascent mining sector, is dependent on financing from U.S. banks which are increasingly reluctant to lend money.

"Everything has been delayed by the financial crisis," said Eduouard Edmond Bateky, deputy managing director of Geovic Cameroon, Geovic's 60 percent owned subsidiary.

"The problem is that the main financial sponsors are U.S. banks. We will now have to have something more simple, with less added value here," Bateky told Reuters.

Bateky estimated that investment in the project would be scaled back to $250-300 million, down from an original cost of $400 million that was reduced to $370 million.

"Provided everything clears, we are looking at one year's delay ... The project is still profitable. The economies are still robust but not as profitable as it was supposed to be."

A second feasibility study is needed for the project and the firm will cut in-country processing, he said.


Construction was due to begin this year with mining starting in 2010. Geovic expects to produce 4,200 tonnes of cobalt and 2,100 tonnes of nickel annually for at least 21 years from the deposits which it estimates at 52 million tonnes of ore.

This would make Geovic the one of the world's biggest producers of cobalt, a hard and durable metal used in aircraft engines and increasingly in batteries for hybrid cars.

The project originally intended a chemical treatment plant in Cameroon but Geovic is revising its plans, with the new feasibility study due to be completed by July or August.

Although the Nkamouna site in eastern Cameroon is also rich in nickel and manganese, Bateky said it was cobalt-driven.

Prices of high-tech metal cobalt have crashed to around $15 per lb from last year's highs of over $50 per lb, and the outlook for demand is bleak.

The project is profitable at $8 per lb but "at $12 we still have some room", Bateky said.

Cameroon, long a major oil producer in the Gulf of Guinea, has seen its oil revenues fall in recent years. Current production levels are around 90,000 barrels per day.

The Nkamouna project is central to Cameroon's IMF-backed plans to boost non-oil revenues in a country that analysts say is not realising its vast economic potential.

Last year Cameroon said that it hoped to attract some $10 billion in mining investments in the coming years, but the Nkamouna project has joined a list of other mining developments curbed by the financial crisis.

Source: Reuters

Russian Coal Output Down 20.8% In February

Russia's Federal State Statistics Service - Rosstat - said Russian coal production fell 20.8% to 22.1 million tonnes in February 2009 compared to February 2008.

Bituminous coal production fell 17.4% to 16.1 million tonnes in February, with open cast mines producing 8.9 million tonnes of this, down 19.7%, and deep mines producing 7.2 million tonnes, down 14.5%. Lignite coal production fell 28.6% to 6 million tonnes. Coking coal production fell 29.9% to 3.8 million tonnes.

Coal production also fell compared to the previous month - by 6.5% with open cast mines reducing output by 1% and deep mines by 7.6%.

Lignite coal production fell 12.5% in February compared to January, while coking coal output declined 15.9%.

Coal production fell 19.3% over the first two months of the year compared to the same period of 2008. Bituminous coal production fell 16.6% with open mine output declining 20.5% and deep mine production falling 11.4%. Lignite coal production fell 5.6% in the two months and coking coal output plunged 37.8%.

Soource: Interfax

China's Copper, Lead And Zinc Imports Surge To New Highs

China's imports of refined copper set a new record in February, almost doubling the import volume in the same month last year to reach 270,948 metric tons.

"We're seeing the effects of the domestic price premium over international prices favouring imports, and also the effects of the State Reserve Bureau's buying," said Wang Zhouyi of Shanghai's Cifco Futures. "Those are the two biggest reasons."

Higher domestic prices compared to global ones were also driving spectacular increases in imports of refined lead, zinc and soybeans in February.
Last month, importers were making CNY1,000/ton in arbitrage profit on refined copper, analysts said.

The State Reserve Bureau, China's national stockpiling agency for strategic resources, has bought 300,000 tons of refined copper, market participants say.
Some analysts say it could stockpile up to 900,000 tons for the year, depending on how its own target prices match copper prices in the market.

February's import volume overtook December's record of 211,000 tons, far exceeding the average import volume of around 200,000 tons last year. But with demand from car and real estate industries still low, analysts say copper's volume might end up delaying a longer term recovery.

"With end-user demand still weak, we fear that the country's copper stocks are going up, and our fear is that it is going to put pressure on prices," said Wang Lixin, an analyst with Beijing's Umetal.com consultancy.

The copper arbitrage gap has narrowed in March, lessening the attractiveness of trade play.

"We probably would not see as large an import volume in March," Wang Zhouyi said. "It'll be fairly large, but not as large."

Refined lead import volumes also rose strongly on year to 20,944 tons, more than seven times the 2,824 tons imported in February 2008.

The domestic price premium in recent weeks to London Metal Exchange prices reached $446 a ton.

Zinc imports were up 743% to 77,205 tons, driven by a $371/ton arbitrage gap in favour of imports.

Import volumes for iron ore stood at 46.82 million tons, up 23% on year, mostly in line with figures already released by the customs department earlier this month.
The rise in iron ore imports follows the trend in place since late last year, as mills have been restocking in anticipation of new projects. However, with steel prices foundering, iron ore import volumes are expected to ease.

Copper concentrate imports rose just 0.2% on year to 444,832 tons.

Nickel imports fell 3% on year to 12,690 tons. Aluminum imports were down 0.5% on year to 12,651 tons.

Soybean imports rose 61% on year to 3.3 million tons, driven by relatively cheaper international prices as government stockpiling kept domestic prices high.

Source: Dow Jones

China's Special Ferroalloys Market Remains Sluggish

China's special ferroalloy market remains weak despite the fact that March is usually the traditional peak season for the steel market. Industry analysts forecast that the sluggish performance will continue in the short term and the price will fall further though at a slower rate than at present.

The price for FerroMoybdenum price fell to CNY 110,000 to 112,000 per tonne with some transactions price falls at below CNY 110,000 per tonne. Steelmakers' purchase prices are CNY 105,000 to 107,000 per tonne, down CNY 3,000 to 5,000 per tonne from the previous level.

The Prices for Vanadium-series alloys have also fallen. 50 FeV is now offered at CNY 103,000 to 108,000 per tonne with a spot price of CNY 102,000 to 107,000 per tonne down CNY 2,000 per tonne. Ferrotungsten (FeW) has slipped to CNY 118,000 to 120,000 per tonne with the lowest transaction price hitting CNY 105,000 per tonne a fall of CNY 3,000-5,000 within a week.

Traders and analysts believe the weak market attributed to the following factors:

1. Due to a fluctuating steel market, demand remains insufficient. Stock of V-contained high strength third-grade rebar has reached 250,000 tonnes in Shanghai. Stainless steel, which consumes large amounts of ferroalloys, has also witnessed a stagnant operation for a long time. The stainless steel price lost another CNY 500 to 600 per tonne this week. Besides, the high quality and special steel markets appear bleak owing to waning demand from downstream manufacturing industries. Steelmakers are mainly consuming their inventory at the moment and keep a cautious attitude towards special ferroalloy purchasing. Some plan to buy FeMn in mid- and late-March. Some end-users still hold a fence-sitting attitude and are not enthusiastic in purchasing.

2. Traders are not active in sales. As the whole ferroalloy market is weak, traders aren't confident in the future market and mainly hold a wait-and-see attitude. Some traders have been clearing out stocks in order to accelerate capital reflow.

3. Gloomy international markets are also affecting the domestic market. The steel sector has been severely impacted by the global financial crisis and steelmakers have all reduced their steel output, leading to a shrinking demand for ferroalloys. 75% FeW price has slid to USD 27 to USD 28 per kilogram from USD 29.5 to USD 31 per kilogram within one week. Vanadium pentoxide is quoted at USD 6 per pound to 6.5 per pound; FeV at USD 22.5 to USD 23.5 per kilogram, down by USD 1 per kilogram. A sluggish international ferroalloy market has changed China's ferroalloy imports and exports. Jan exports hit 89,800 tons while imports registered 100,700 tons. China exported only 6 tonnes of FeMn in January collapsing from the 1,068 tons last January. FeMo exports started to shrink last November. Figures recorded 99.5 tonnes in November 229.6 tonnes in December and almost zero in January.

Insiders point out that given waning domestic demand, interrupted exports and increasing imports, the domestic market faces growing pressure. The special ferroalloy market can barely shake off its stagnant performance in the near future, but there is limited space for further price falls as many ferroalloy producers have cut their output. Many FeW producers have halted operations. Domestic W concentrate miners have suspended production as the market price comes near to the cost line and imported resources flood in. Some ferroalloy producers keep a wait-and-see attitude after the news that preferential electricity prices have been removed and electricity prices will rise further.

As a result, less ferroalloy products will enter the home market. If the domestic steel market revives in late March or in April steelmakers will release steel capacity, resulting in a swelling demand for special ferroalloys.

Source: Steel Guru