Fitch Givs Teck Resources A BBB- Rating

Teck Outlook Is Stable

The credit rating company, Fitch, has assigned a BBB- to Canadian miner and shipper, Teck Resources.

A BBB- rating is in the ‘lower medium’ rating, the 10th of Fitch’s 20 rating ranks.

Fitch says in its report that Teck’s ratings output is stable, reflecting Teck's leading positions in zinc, in the seaborne hard metallurgical coal market, and its solid core position in copper. Q4 2009 operating profits before depreciation and pricing adjustments were 39% coal, 39% copper and 22% zinc.

Adjusting the balance sheet for the sale of Teck’s one-third interest in the Wanata Dam hydroelectric facility in British Columbia, debt at Dec. 31, 2009 would be C$6.7 billion or 1.9 times 2009 operating EBITDA of C$3.4 billion. Pro forma for the transaction, Teck's cash balance would have been C$1.3 billion and scheduled debt maturities would have been C$453 million in 2010, C$432 million in 2011 and C$494 million in 2012.

Fitch expects free cash flow (operating cash flow less capital expenditures less dividends) in 2010 to be less than the C$2.7 billion generated in 2009, despite stronger earnings, on higher capital spending (C$1 billion guidance in 2010 versus C$590 million spent in 2009). Free cash generation should be at least C$ 1.1 billion in 2010 and funds from operations (FFO) adjusted leverage should decline from the actual level of 2.1 times at Dec. 31, 2009 given the focus on debt repayment coupled with stronger earnings. Teck repaid nearly C$5 billion in debt in 2009. Fitch does not expect FFO adjusted leverage to exceed 2.5x on average over the next 24 months.
Liquidity is strong with cash on hand of C$1.3 billion, internally generated cash flow and roughly C$1 billion available under credit facilities.

The report points out that Teck does have several development opportunities and therefore capital spending is expected to remain high if the outlook for commodities prices remains favorable. The company has sufficient flexibility to curtail production and delay capital spending.

Fitch points out that Teck is facing headwinds from an appeal to Red Dog's National Pollutant Discharge Elimination System Permit (the NPDES Permit). Red Dog in Alaska accounts for the bulk of zinc production and generated C$473 million in operating profit before depreciation in 2009. Until the U.S. EPA issues the notice, Teck will not know whether and to what extent access to Aqqaluk, the next deposit to be mined at Red Dog, will be affected by the appeal. The current operating plan calls for continuing to mine the Main Deposit under existing permits until mid 2011. However, in order to maintain efficient production rates, Main Deposit ore will eventually need to be supplemented with ore from Aqqaluk. If permit delays extend beyond May 2010, the transition plan will be affected and production at Red Dog would likely be curtailed in October 2010. Production would not be expected to resume until the appeal is resolved and the mine can be restarted, which could take up 18 months unless the appeal is withdrawn. Fitch does not believe a temporary curtailment of Red Dog would affect the rating.

The Stable Outlook reflects Fitch's view that Teck will continue to focus on debt reduction and resume dividends at a modest level in the second half of 2010.
A negative rating action could follow from a leveraged acquisition or other recapitalizing event. A positive rating action could follow further sustainable reduction in financial leverage.

Teck owns, or has interests in, 13 mines in Canada, the U.S., Chile and Peru, as well as one metallurgical complex in Canada.

Patriot Sells Coal To Asian Steel Mills

US coal miner, Patriot Coal Corp, is to sell 1.5 million tons of metallurgical coal to Asia, the company announced on Monday.

The deal was done through Pennsylvania coal trader, Xcoal.

Under the terms of the deal "steel mills in the Pacific Rim" will take coal from Patriot's Panther and Winchester mines to be delivered between April 2010 and the early part of 2011.

"This transaction opens up new markets for our products," said Patriot Chief Executive Richard Whiting, predicting additional opportunities for Patriot to sell met coal to Asia.

"With this sale, we now expect our 2010 met coal shipments will be more than 7 million tons. This represents more than a 30 percent increase in total met shipments over 2009 levels," he said.

Gindalbie, Anshan Sign Co-operation Deal

Australian iron ore miner, Gindalbie Metals and its Chinese shareholder Anshan Iron and Steel Group (Ansteel), have taken their co-operation a stage further with a deal to develop metallurgical coal, manganese, chromite and nickel projects, and pellet plants and steel mills in Australia.

Gindalbie and Ansteel currently co-operate on an iron ore project at Karara in Western Australia.

"The assets to be targeted will primarily be in the carbon steel materials sector ... as well as downstream processing opportunities such as pellet plants and steel mills," Gindalbie said in a statement on Wednesday.

The statement added: "Ansteel will contribute its extensive experience as a global iron ore and steel company and access to capital to potential joint development opportunities which can provide it with long-term sources of supply of raw materials from Australia. Gindalbie will contribute its geological and resource project expertise, contacts and knowledge base within the Australian resource sector to actively identify, explore and develop quality resource projects."
Gindalbie managing director, Garret Dixon, said the two partners had already identified several opportunities and will be stepping up their search in the months ahead.

Last year Ansteel and the West Australian government agreed to undertake a feasibility study to construct the state’s first steel mill at the Oakajee industrial estate near Geraldton, which is centred on a new deep water export port. Land clearing for the project is well advanced and exports are slated to commence in 2011.

Ansteel is Gindalbie's largest shareholder with a 36.2 per cent stake.

Anglo-American Profits Fall 53 Per Cent

Profits at mining giant Anglo American Plc fell 53% in 2009 as metals prices fell sharply as a result of the global economic downturn. The company also blamed falling demand, especially for its metallurgical coal and thermal coal.

The London-based firm reported full-year net profit of $2.42 billion, or $2.02 per share, compared with $5.22 billion, or $4.34 a share, in 2008.

Group revenue fell 25% to $24.6 billion from $32.9 billion.

Wesfarmers Sees Sales Increase From Curragh Coal Mine

Australian conglomerate Wesfarmers Ltd says sales from its Curragh coal mine in Queensland are expected to rise to between 8 and 8.5 million tonnes a year, from current levels of 6.5-7 mtpa after signing a new long-term contract with Thiess Pty Ltd for increased overburden removal.

"The Thiess contract will result in the Curragh North mining area utilising an ultra-class fleet with Curragh and Thiess to be operating some of the largest earth moving equipment in Australia from mid 2011," Wesfarmers said in a statement.

The company said that the agreement, together with the Curragh mine's expansion, will enable the company to take advantage of the expected increase in seaborne metallurgical coal demand.

Clines Raises Funds To Complete New Elk Mine Rehabilitation

Canadian coal miner Cline Mining has raised C$6.9 million to complete the rehabilitation of its New Elk thermal coal and metallurgical coal project in Colorado. C$3.9 million has come in the shape of a loan from Mitsui Matsushima International Pty of Tokyo with the rest coming from a private placement of shares and warrants.

The New Elk coking coal mine is situated near the town of Trinidad in Colorado. It has a coal resource of 315 million tons of coal and will directly employ 450 employees. The mine rehabilitation program is presently in due for completion in July 2010 with the first saleable production of coking coal expected in the fourth quarter of 2010. The mine will reach an annual capacity of 1.3 million tons in 2011, proceeding continuously to the production and sale of 3.0 million tons of coal annually, slated for world export markets.

The Mine has large in-place compliant coal resources and Cline expect further significant production in the future.

Lower Coal Prices Hit Grande Cache Profits

Profits at Canadian coal miner Grand Cache Coal Corp were hit by lower coal prices in the third quarter ended 31 December 2009.

Average prices for the Alberta-based miner of metallurgical coal were C$134 per tonne, against C$254 per tonne in the same period last year although the cost sales fell to C$106 a tonne against C$128 a tonne last year.

Revenues were down 32 per cent to C$62.4 million while profits for the quarter fell 88 percent to C$4.3 million compared with C$36.8 million a year ago. The year-to-date profit figure was $18.7 million, compared to $87.2 million last year.

The company expect to sell between 1.6 million and 1.8 million tonnes of metallurgical coal in 2010.

Ennore Coke Close To Acquiring Australian Coke Mine

The Financial Express has reported that Ennore Coke Limited is close to acquiring the Broughton coking coal mines in Australia, becoming the country's second met coke company after Gujarat NRE to have overseas coking coal assets.

Mr Ganesan Natarajan president & CEO of Ennore Coke said that the company is asked a price of USD 12 million for taking over 90% stake in Australia's Broughton coal mines having estimated reserves of 30 million tonne.

He added that "Although at one point of time we thought that the valuation would further drop to around USD 7 to USD 8 million, finally it has been valued at USD 15 million."

The process of stake acquisition is expected to be completed by July next year. Rio Tinto, the global mining giant, which was also in the race, finally backed out and paved Ennore's way for acquisition, he added.

Mr Natarajan said that the Haldia unit, which is currently expanding its capacity from 150,000 tonnes per annum to 300,000 tonnes per annum at an investment of INR 80 crore, would also require an additional 200,000 tonnes of coking coal above its present 600,000 tonnes requirement.

Source: Steel Guru/Financial Express

Pinnacle Calls Back 100 Coal Miners

Cliffs Natural Resources Inc. announced Friday that its wholly owned subsidiary, Pinnacle Mining Co., LLC, is calling back about 100 employees back to work at its Pinnacle and Green Ridge No. 1 mines. Employees are expected to return to work early in August.

The callback was prompted by a modest improvement in current orders and in the market expectations going forward. Both mines had been idled.

The Pinnacle and Green Ridge No. 1 mines are located near Pineville and produce metallurgical coal for the steel industry. Metallurgical coal demand has been reduced as the steel industry has cut back production in the face of the global economic slowdown.

In April, Cleveland-based Cliffs announced it was indefinitely idling the Green Ridge No. 1 mine, reducing operations at the Pinnacle preparation plant and halting production at the Pinnacle mine for approximately two months. The moves resulted in the layoffs of about 290 employees.

Cliffs Natural Resources is an international mining and natural resources company. It is the largest producer of iron ore pellets in North America, a major supplier of direct-shipping lump and fines iron ore out of Australia and a significant producer of metallurgical coal.

The North American business unit is composed of six iron ore mines owned or managed in Michigan, Minnesota and Eastern Canada, and two coking coal mining complexes located in West Virginia and Alabama. The Asia Pacific business unit is composed of two iron ore mining complexes in Western Australia and a 45 percent economic interest in a coking and thermal coal mine in Queensland, Australia. The South American business unit includes a 30 percent interest in the Amapá Project, an iron ore project in the state of Amapá in Brazil.

Source: Beckley Register-Herald

US Coal Exports "Unlikely To Pick Up"

U.S. export coal volumes are unlikely to pick up in the near future because of continued low steel output in Europe, which uses metallurgical coal, the top executive of No. 4 U.S. railroad Norfolk Southern Corp said on Wednesday.
"We see no near-term improvement for coal," Chief Executive Wick Moorman told Reuters in a telephone interview.

Moorman added that although it is "very difficult" to raise prices in the current U.S. recession, the railroad intended to continue to price its business to "what we believe the value of our business is."

Source: Reuters

Gladstone Coal Exports Down 32 Percent

Coal exports from Australia’s Gladstone Port, the world’s fourth-largest coal export terminal, declined 32 percent in the first half of this month amid waning demand from steelmakers in Asia.

Shipments in the first two weeks of January totalled about 1.7 million metric tons, Leo Zussino, Gladstone Port Corp. chief executive officer, said yesterday . That compares with exports of about 2.5 million tons in the last two weeks of December, he said.

“We’ve had in January a significant softening of exports of metallurgical coal,” Zussino said. “There is a great deal of uncertainty and that’s to some extent being created by the commencement of price negotiations for metallurgical coal.”

The port shipped 54 million tons of coal last fiscal year but Mr Zussino said it may miss its 2009 fiscal year budget of 62 million tons by as much as 4 million tons on rail constraints and a demand slump.

Source: Bloomberg

JFE Looks For Iron Ore Prices To Fall To 2007 Levels

Mr Hajime Bada, the president of the world's third-largest steelmaker, JFE Steel, Hajime Bada, says the Japanese company wants prices of iron ore and coking coal in the fiscal year of 2009 to fall to at least fiscal 2007 levels due to the precipitous world decline in steel demand. According to reporters at a reception for the Japan Iron and Steel Federation “the fiscal 2007 levels, that's the minimum for us.”

Iron-ore prices have nearly tripled this business year, ending March 31, amid tight supply, but demand for steel has fallen sharply since late last year due to the downturn in the global economy. In a new report, the Fitch Ratings credit-rating agency says that “contract prices for iron ore and metallurgical coal are expected to be 20%−40% lower than the $77/metric ton contract price settled by Companhia Vale do Rio Doce (Vale of Brazil) or the $94/metric tons contract price settled by Rio Tinto (of Australia) last year.”

Major steelmakers in China and Japan (the users of 53% of seaborne iron ore and coking coal) and their suppliers typically set the fiscal-year prices that are charged to smaller steel firms throughout Asia and India. These prices aren’t the same but do set the trends for North American and European import prices of iron ore and metallurgical coal.

Source: Purchasing.com