China Armco Arm Signs Strategic Partnership With Broker

Deal Will Give Access to Supply Contracts

Armco & Metawise (H.K.), Ltd, a subsidiary of US-based metal importer, China Armco Metals, Inc. has established a strategic partnership with Asian commodity broker, TCG Commodity Management.

TCG will source a number of high demand minerals as part of the Company's recent strategy to seek longer term supply contracts for distribution in China and has agreed to provide A&M preferential access to supplies of Manganese, Pig Iron and Iron Ore from Brazil, and Coal from Colombia.

Mr. Kexuan Yao, CEO and Chairman of China Armco Metals, Inc. said, "There is currently a supply-demand imbalance in China, with many core industrial minerals and metals. While this is largely attributable to China's strong growth, there are a number of other factors that contribute to this problem including market inefficiencies, differences in business culture and communication challenges. We believe these factors are very prominent in South America where a vast supply of these materials can be sourced into China. This is why we are convinced this partnership opens the door to a very large opportunity for us. First, TCG is unique because it has deep experience in Asia, with a management team that has been financing trades in the Asia region for decades, coupled with an established infrastructure in Brazil. TCG has a wealth of business relationships in Brazil in marketing, banking, and legal and has facilitated billions of dollars worth of international commodities transactions in numerous countries. We know of no other company with this particular balance. Second, TCG has direct access to mines and can enable us to obtain product without having to build our own origination system in South America."

Van Carter, Chairman and CEO of TCG Commodity Management, LLC, said "This business is dependent upon four factors. First is the ability to bridge the differences in business culture, communication and regulation that exist between China and Brazil. Second is the ability within Brazil, to establish deep personal and professional relationships to secure access to mineral products. Third is the ability to secure favourable pricing and delivery terms, which is a direct function of our access to capital. Through our relationship with A&M, we now have direct access to end-users in China, which is the fourth essential element of a successful business. This is a win-win for both companies."

London Mining Snaps Up Colombian Coal Business

London Mining Buys International Coal Company

Iron ore firm London Mining has bought the remaining 80 percent stake in the Colombian coking coal business, International Coal Co (ICC) that it did not own in a deal that could cost it as much as $14 million in cash and 9.8 million shares.

The company is to pay $5.5 million in cash and 3.5 million shares immediately but says it might have to pay an additional $8.5 million in cash and up to 6.3 million shares depending on the performance of the Colombian business.

London Mining says it expects capital expenditure of $40 million over the next 18 months and is targetting 250 kilotonnes per annum (KTPA) of coking coal within 18 to 24 months and up to 400 KTPA of coke. The first coke production will be within 12 months.

Shares in London Mining rose in early trading but fell back to 265p, a fall of 0.75p by 1030 BST (0930 GMT).

India To Import Colombian Coal

India’s biggest coal importer, Adani Enterprises Ltd., has agreed to buy thermal coal from Colombia for the first time. A company official said that surging electricity demand meant the company had to diversify its purchases.

The first cargo of fuel – expected to be at least 110,000 deadweight tons – is expected to land at either Mundra or Dahej ports on India’s west coast.

Although neither the source of the coal nor the quantity have been indentified it is known that Cerrejon, the Colombian company that runs the world’s largest open-cast coal mine, has been touting for sales in India after describing prices there as “much better” than those in Europe.

BHP Billiton Ltd., Anglo American Plc and Xstrata Plc each own a third of Cerrejon, which will produce 31 million to 32 million metric tons of coal in 2010. Last year, the mine cut production because of weak demand in Europe and the U.S. Colombian coal accounts for about 10 per cent of global coal trade.

India imported 60 million tons of coal in 2009 – almost double the 2008 figures – and that figure is exported to hit 200 million tons by 2012, according to Macquarie Group. Imports in February were a little more than 6 million tons, up by more than 20 per cent of a year earlier.

Glencore Buys Back Prodeco Coal Operation

Mining firm Xstrata has confirmed reports from earlier in the week that Glencore International will exercise its option to buy back its Prodeco coal operations in Colombia.

Under the option agreement, Glencore will pay Xstrata $2.25 billion in cash upon completion of the sale.

The Prodeco business comprises the Calenturitas and La Jagua open pit thermal coal operations, export port facilities and a 39.8% share in a railway in Colombia.

Glencore sold the mines to Xstrata in 2009 as its share of Xstrata’s rights issue.

Glencore Looking To Buy Back Prodeco Coal Mines

Commodity trader Glencore is expected to buy back its Prodeco coal mines in Colombia from Xstrata for about $2.5 billion. Glencore was forced to give up the operations last year for $2 billion when it was short of cash, but it got an option to buy them back that expires later today.

The repurchase price is higher than the amount Glencore sold the mines for, reflecting the deal Glencore reached with Xstrata, however analysts noted the value of the mines could be higher still because of a rise in the price of thermal coal used in power stations.

Analysts expect a decision to be announced on Friday.

Glencore may seek a partner to help buy back Prodeco and was last month was reported to be holding talks with four possible parties. Brazilian miner, Vale, US coal miner, Alpha Natural Resources, Singapore sovereign wealth fund GIC and US private equity fund, First Reserve Corp. were all touted as possible partners.
The Prodeco operations include two opencast mines, port facilities and part ownership of a railway in Colombia.

Glencore agreed to sell the mines last year to pay for its share of a $5.9 billion rights issue by Xstrata as it did not have enough cash at the time. Glencore is Xstrata’s largest shareholder with a 35 per cent stake. The two parties struck an option for Glencore to buy back the mines for a price of $2.25 billion plus capital spent on the mines by Xstrata plus earnings from the business during the option period.

Vitol Takes Capacity At Colombia Coal Mine

Global energy trader Vitol has signed a four-year deal to take 1 million tonnes of export capacity at Colombia's 3 million tonnes a year Carbonsan port in Santa Marta, sources familiar with the deal said on Monday.

Vitol has been seeking coal mining and logistical assets in key exporting countries for the past several years.

Colombia is the world's fifth-largest coal exporter and ships around 61 million tonnes of thermal coal a year to Europe, the United States. and increasingly to Asia.

Colombian coal producer Coalcorp Mining Inc (CCJ.TO) is still for sale despite agreeing to sell its La Francia mine to a to a Goldman Sachs Group (GS.N) subsidiary in a deal worth $200 million [ID:nSGE6060ED], the sources said.

The Goldman sale may not be concluded and other potential buyers are still circling, including Vitol and traders Glencore, the sources said.

"If I was Goldman, I wouldn't be happy about buying a mine on the assumption that there's port access and now there isn't any," a Colombian industry source said.

"The Vitol deal is a take-or-pay contract and it'd be difficult to fill that capacity without coal from Goldman," the source said.

Coalcorp's mine assets would be difficult to run profitably without deep experience of Colombian coal industry and strong logistics, they said.

The La Francia mine will be difficult to develop because it its reserves are a few kilometres from a town and the coal quality is below original expectations, they added.

Coal from the Caypa mine is high-quality but the production is small and needs to be blended with other coals.

The company said in a statement on its website on Jan. 21 there would be a special shareholders' meeting on Feb. 11 to discuss the Goldman deal and subject it to a vote.

Coalcorp exports via Carbosan in Santa Marta. If the Goldman deal is concluded, Goldman will have to negotiate use of the Santa Marta port with Vitol, the sources said.

As part of the deal, Coalcorp will supply about 2.4 million tonnes a year of thermal coal to Goldman.

Goldman is one of the banks which have become significant players in physical coal trading. The majority of Constellation Energy Group's (CEG.N) physical coal traders joined Goldman when Constellation sold its London-based commodity business to Goldman last year.

Source: Reuters

Richards Bay Coal Prices Fall For Second Week Running

Prices for coal shipped from South Africa’s Richards Bay, site of the world’s largest export terminal for the fuel, fell for a second consecutive week on weaker demand and sufficient stockpiles in Europe.

Export prices at the port, Europe’s biggest single source for coal burned for power, dropped $1.30, or 2.1 percent, to an average of $61.50 a metric ton in the week ended April 24, according to McCloskey Group Ltd. Prices have fallen 45 percent over the past 12 months as demand for power slumped after manufacturers cut output to grapple with the global recession. The world economy will shrink 1.3 percent this year, according to the International Monetary Fund.

“There’s lots of stocks in Europe and not many buyers around,” John Howland, an analyst at McCloskey Group Ltd., said today by telephone. The “coal of choice” at the moment in Europe is Colombian, he said. That may ease demand for South African imports.

Colombian coal supplies may increase after a strike ended this month at Fenoco, a rail company 40 percent-owned by Xstrata Plc. That, plus the end of weather disruption in Australia, will help push prices down to an average $55 a ton in the second and third quarters, Jim Lennon, a Macquarie Group Ltd. analyst in London, wrote in a report dated today. “The market is generally well-supplied,” he said.

The port of Rotterdam, Europe’s biggest, imported 7.7 million tons of coal in the first quarter of this year, up 24 percent from the same period of 2008, the port said in an e-mail on April 9. That may indicate a buildup of stocks.

Power station coal prices at Australia’s Newcastle port, a benchmark for Asia, were almost unchanged in the week to April 24, falling one cent to $63.11 a metric ton, according to the globalCOAL NEWC Index.

Source: Bloomberg

Vale Acquires Colombian Coal Assets

Brazilian mining giant Vale said on Wednesday it had completed the acquisition of coal assets in Colombia for $305.8 million.

The assets include El Hatillo coal mine, the Cerro Largo coal deposit, a minority stake in the Fenoco consortium that operates a railroad linking coal mines to a port, and the concession of the Rio Cordoba-SPRC port on Colombia's Caribbean coast.

All assets were bought from Cementos Argos S.A., Vale said in a statement.

Vale, which still gets most of its revenue from iron ore, is seeking to build a coal asset platform in Colombia, the world's third-biggest exporter of high-quality thermal coal.

Vale already has coal operations in Australia and is involved in two joint ventures in China that own a coal mine and a coke plant. The Brazilian company is also developing a large coal project in Mozambique.

Source: Reuters

Colombia Aiming To Double Coal Output By 2019

Colombia expects to double its annual coal output by 2019 to 145 million tonnes, but must overcome the challenges of the economic crisis and delays in improving its infrastructure, the government said on Thursday.

Mines and Energy Minister Hernan Martinez said the country's mining sector contribution to the economy should grow 6.7 percent a year after comparing the domestic industry with the region's mining leaders such as Chile and Peru.

"Despite the current world financial crisis and the prices of coal, Colombia is still among the best not only in terms of low costs but also because of its quality," the minister told a coal conference organized by McCloskey Group.

Colombia is among the top six producers of thermal coal, which is sold mostly to U.S. and European markets. But its road network, ports and cargo rail system are underdeveloped and in some cases insufficient to meet demands of expansion projects proposed by major exporters working in the Andean country.

Colombia's main producers are U.S. firm Drummond and Carbones del Cerrejon, run by BHP Billiton (BHP.AX) (BLT.L), Xstrata (XTA.L) and Anglo American (AAL.L).

Martinez said plans for improving infrastructure include the construction or rebuilding 5,000 kilometers of roadway with an investment of $560 million. Caribbean port work and the construction and improvement of 1,300 kilometers of railway lines for cargo are also planned.

Colombia has proven reserves of 7,000 million tonnes of coal, but could reach as much as 17,000 million tonnes. Most of the reserves are located in the northeast of the country in Cesar, Guajira, Santander and Norte de Santander departments.

Global coal prices reached record levels in 2008, but along with other commodities, prices have fallen as demand eases amid the financial crisis battering economies across the world.

Some analysts expect world demand for thermal coal to rebound next year. The Australian Bureau of Agricultural and Resource Economics forecasts world trade to rise 3.3 percent to 723 million tonnes with supply expected to remain constrained.

Source: Reuters

Xstrata Pays $2 Billion For Colombian Coal Assets

Xstrata is to pay $2bn in cash for the Prodeco coal assets in Colombia from Glencore, its largest shareholder, as a result of a rights issue announced today.

The London-listed mining group is to raise $5.8bn (£4.1bn) as it looks to reduce its debt burden in the wake of a slump in ferrochrome prices. Chinese mills cut the price they pay for the alloy by 55pc. Xstrata operates the world's largest ferrochrome producer jointly with South Africa's Merafe.

The company will offer about 1.96 billion shares at 210 pence each. Net debt will fall to about $12.6 billion after the offer, down from $16.3 billion as of Dec. 31.

Glencore is to take up its 34 percent share of the stock, which will be at a discount of about 40 percent to the so-called theoretical ex-rights price based on yesterday’s close.

Global commodity companies are under growing pressure as the credit crisis has limited the availability of new funds and the creeping global recession has cut demand for metals, with production of products from white goods to cars falling sharply.

Mining rival Rio Tinto yesterday confirmed that it "did not rule out the potential to issue equity as one of the options it has available".

The company, which is reported to be looking at a rights issue of as much as $7bn, has almost $40bn of debts following its $38bn acquisition of Canadian aluminium producer Alcan in July 2007.

Analysts have been predicting that Xstrata would need to raise new capital for at least a month, arguing the company could have to renegotiate the terms of its bank loans if metal prices do not recover.

Xstrata has expanded rapidly in recent years, racking up more than $14bn of debts as of June last year after spending $17bn on Falconbridge, the Canadian copper, nickel and zinc miner, and £515m acquiring South African platinum miner Eland.

The mining company - which has seen its market value slump from £43bn in May last year to just £6.1bn at yesterday's close - also acquired a 25pc stake in platinum producer Lonmin.

Source: Daily Telegraph, London; Bloomberg