Nickel Gains Most in Week on Signs Producers Are Cutting Output

Nickel climbed, leading increases in industrial metals, amid signs the slump in prices is forcing some producers to curtail production.

Global nickel output is likely to fall as some producers hit a “pain threshold” on lower prices, Dan Lougher, chief executive officer of Western Areas Ltd., said in an interview on Tuesday. Standard Chartered Plc estimates as much as 65 percent of nickel production is unprofitable at current prices. Metals also rallied as China planned a bond program for construction stimulus, which may improve prospects for raw-material demand.

“I still expect a lift in nickel prices from this level going forward,” Casper Burgering, an analyst at ABN Amro Bank NV in Amsterdam, said by phone. “The second half should be better.”


Nickel for delivery in three months advanced 1.3 percent to $10,885 a metric ton by 12:31 p.m. on the London Metal Exchange after rising as much as 1.9 percent, the most since July 28. It’s down 28 percent in 2015 and is this year’s worst performer among the main industrial metals on the LME.

Copper rose for the first day in four after sliding to a six-year low on Monday. The metal is close to a bear market after falling 19 percent from a peak on May 5. Zinc climbed as much as 1.6 percent after orders to remove the metal from warehouses tracked by the LME surged 54 percent.
Bond Stimulus

China is planning at least 1 trillion yuan ($161 billion) in bonds, and potentially a multiple of that, to fund construction projects to address the struggling economy, according to people familiar with the matter. The bond program is taking shape amid fresh signs that growth is running at less than an official target of about 7 percent for this year.

“Prices have lifted for all base metals this morning quite steeply,” Burgering said. “It could be that the market is hoping for some economic stimulus.”

Metals have declined to the lowest since 2009 amid the commodity rout. Oil is in a bear market, while platinum sank 1.7 percent on Tuesday to a six-year low and palladium dropped to an October 2012 low. On the LME, tin and lead increased Tuesday, while aluminum was little changed.

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Chinese Nickel Imports Jump to 6-Year High as Shortage Looms

Chinese Nickel Imports Jump to 6-Year High as Shortage Looms

China imported the most refined nickel in six years in a further sign that the world’s biggest consumer is drawing on global supply. Futures rose 2.4 percent in London.

Inbound shipments of the metal used to produce stainless steel surged 67 percent to 38,545 tons in June from the previous month, the highest since July 2009, and were more than three times the level a year earlier, Chinese customs data show.

Goldman Sachs Group Inc. and Citigroup Inc. are bullish on prices amid prospects for rising Chinese demand. Macquarie Group Ltd. sees a global shortage which may cut inventories further from a record. Stockpiles in London Metal Exchange sheds have already fallen to the lowest in almost two months. Some imports may have been for delivery against the first nickel contract to expire on the Shanghai bourse, said Celia Wang from Tianjin Zhongwei Group’s investment department.


“Huge imports arrived in China from LME warehouses as traders seek profits by delivering against the first settlement of a Shanghai nickel futures contract,” said Wang, the general manager. “Refined nickel imports are expected to remain at a high level into July.”

The Shanghai Futures Exchange started nickel trading in March and the July contract was the first expiry. The bourse is accepting metal from Moscow-based OAO GMK Norilsk Nickel, the top supplier, for settlement to ease concern about shortages.
Goldman, Citigroup

Prices climbed 2.4 percent to $11,980 a ton in London on Tuesday, the highest level since July 6, before trading at $11,875. Goldman expects rates to increase to $14,000 as the market heads toward a deficit next year, analysts including Yubin Fu wrote in a report dated July 6. Citigroup predicts a 2015 average price of $13,960 and maintains a bullish outlook.

Imports of ferronickel rose more than threefold on year to 62,511 tons, another sign China is seeking foreign supply.

An Indonesian ban on exports of nickel ore at the start of 2014 spurred China to stockpile the material and boost supplies from the Philippines, the only other major source. Inventories of nickel ore in China are now at their lowest since September 2011, according to data from Beijing Custeel E-Commerce Co.

China imported more than 100,000 tons of refined nickel in the first half for the first time since 2009 when buyers took advantage of a slump in demand after the financial crisis.

Grigor Says Talga and MRL are ‘Catalysts for Disruption in the Graphene Sector’

He says MRL is a new player in the graphene space with the ability to use the same single step, low cost graphene recovery technology

First he singled out Talga, now Warwick Grigor says he has found the other key player in the low cost graphene space.

The Sydney-based resources analyst who runs Far East Capital made headlines in Australian newspapers earlier this year when he proclaimed that he was putting his money where his mouth was and investing a large chunk of his own cash into Talga Resources (ASX:TLG) because of its single-step graphene process.

Now he has picked out another Australian company, MRL Corporation (ASX:MRF) and – again – invested his own money. He says there is room for both in an investor’s portfolio as they are operating in different fields. Talga is looking at a European hub (it is building a pilot plant in Germany and plans to supply European companies from its Swedish project) while MRL (whose deposit is in Sri Lanka) is looking to Asia and Australia as its markets.

As I have said before, Grigor is one of the most experienced Australian analysts of mining companies and, also this year, issued a detailed paper on graphene.

He says MRL is a new player in the graphene space with the ability to use the same single step, low cost graphene recovery technology that Talga “has been holding close to its chest”. His client note is advising taking up shares in MRL because of the differences in valuation: Talga’s market capitalization is A$54 million while that of MRL is A$12.2 million.

There are other differences: Talga’s orebody is much larger and wider, offering long life and technically simple mining conditions. MRL’s orebodies are narrow vein and underground with less amenability to drilling out to prove the size of the resource, but this is offset by the lower costs of working in Sri Lanka.

Another difference is the grade, says Grigor. Talga’s is around 25% whereas MRL’s is over 90%. According to his figure, Talga will need about A$30 million to get into production, MRL less than A$10 million.

He says at this junction Talga is knocking on the door of becoming an institutional-grade stock but has to kick a few more goals to get there, the obvious one being the successful commissioning of the pilot plant. “I don’t think there is much risk here, but the box still needs to be ticked,” write Grigor. By contrast, at A$10 million, MRL is still a private client stock at present; it is difficult to deploy sizeable sums of money into a company with such small capitalization.

Grigor’s second point, arguing that Talga needs to beef up its management team with respect to commercial operations, seems to have been satisfied. Last week Talga signed a non-binding term sheet with Haydale Graphite Industries, based in Britain, which would see the two companies collaborate on the development of finished graphene composite and ink products. [As Roger Bade, at London brokers Whitman Howard noted, “although there is no certainty that this collaboration will come to anything, it could give credibility that both companies – although going along separate routes – are amongst the best graphene plays out there”.]

Grigor draws comfort from the fact that his two picks are essentially non-competitive because of their separate regional focus.

“As each of these companies make progress, sentiment will rub off on other players in the sector as the graphene story becomes more credible,” he says. “Both companies will offer the lowest cost, purest forms of graphene available, so they will both be catalysts for disruption in the graphene sector.”

Pacfico Minerals Surges on Copper Hits

Core from Coppermine Creek

Three holes drilled at the Coppermine Creek prospect intersected significant intervals of disseminated chalcopyrite and bands of semi-massive chalcopyrite.

One of the holes returned veins and disseminated chalcopyrite from 38-67m, with the interval from 67-73m corresponding to the Gordons Fault and containing bands of semi-massive chalcopyrite, as well as chalcopyrite fracture fill and disseminations.

The company said the chalcopyrite was associated with only minor pyrite and returned values of more than 25% using a hand-held XRF over widths of up to 30cm.

Assays are expected within a fortnight.

Airborne electromagnetics indicate a 3km by 1km alteration and mineralisation system extending away from the Gordons Fault to the southwest, with further drilling planned to test it.

Pacifico has also started drilling the Bing Bong prospect with the assistance of a NT government grant.

Borroloola West was one of the projects Sandfire floated on in 2004 but the company farmed it out to Pacifico in 2013.

Pacifico expects to earn 51% of the project by the end of the year by spending $A1.5 million under the first phase of the agreement.

The company can earn an additional 19% by spending a further $2.5 million and can get to 80% by sole-funding a bankable feasibility study or spending another $3 million.

Shares in Pacifico jumped 130% to 3.2c, while Sandfire shares gained 1.4% to $5.71

China's Revenge Serves Body Blows to BHP and Rio

China's revenge serves body blows to BHP and Rio

It's taken six years, but China is slowly turning the tables on the heavyweight iron ore miners.

In 2009, iron ore giants BHP Billiton and Rio Tinto decided they wanted to take advantage of China's soaring demand for iron ore, which was pushing prices ever higher. So they ditched the 40-year old system of setting annual contract prices in favour of using spot pricing for the majority of their iron ore shipped to China from 2010.

Needless to say, China's steel mills weren't very happy about that. BHP's previous CEO Marius Kloppers is widely acknowledged as the man most responsible for bringing about the change. With BHP and Rio filling a huge amount of China's demand, the steelmakers had little choice but to acquiesce. 

The changes, and China's thirst for iron ore, saw the iron ore price soar as high as US$191 per tonne in February 2011, from around US$60 per tonne in 2008. Rio Tinto produced record underlying earnings of US$15.5 billion in the 2011 financial year, with iron ore contributing US$12.9 billion. BHP, for its part, saw net profit rise 74 per cent to US$21.7 billion as revenues rose 36 per cent.

China may also still be sore over aluminium giant Chinalco's aborted US$19.5 billion investment in Rio Tinto back in 2010, which was aimed at gaining resource security. At the time, reports suggest Chinese officials feared that China was too vulnerable to both Rio and BHP, even separately. Rio's board canned the deal, and announced that it was instead forming an iron ore joint venture with BHP. That deal never went ahead – much to the relief of China.

The giant (re)awakens

But China has never forgotten, and appears unlikely to forgive. Now the sleeping giant has awakened, and looks set to turn the tables on Rio and BHP.

Firstly, China needed to loosen its dependence on the two Australian iron ore miners, so it has turned to Brazil's Vale. For many years Vale was snubbed by the Chinese. The iron ore giant had built a number of very large ore carriers to ship ore to China, but they have been banned from docking at Chinese ports since 2012.

Now, China hasn't just removed the restrictions but Vale has also sold 4 of the ore carriers to two of China's biggest shipping companies. Each carrier can transport up to 400,000 tonnes of iron ore, and could reduce Vale's production costs by as much as 25 per cent, according to some estimates. That would bring Vale's landed costs around the same as BHP and Rio's.

Vale also has a 25-year shipping agreement with China Cosco to transport iron ore from Brazil to China. China has gone another step further too, loaning Vale US$4 billion to help fund a US$16.5 billion project, known as S11D.

S11D is expected to produce 90 million tonnes of very high quality iron ore each year, taking Vale's production to 450 million tonnes of iron ore within the next few years.

In two moves, China has decreased its dependence on BHP and Rio, loosening their control over the iron ore market, and thanks to the increase supply of iron ore, achieved lower prices.

One last dance? 

Fairfax Media reports today that Chinese-linked companies have applied to the Foreign Investment Review Board seeking permission for an investment with Australia's self-styled 'new force in iron ore' Fortescue Metals Group.

Fortescue, with its US$7.7 billion in net debt, could strengthen its balance sheet with a capital injection, either to pay down debt in return for an equity stake, or refinance existing debt at lower rates. The miner recently issued US$2.3 billion in senior secured notes, but is paying a whopping 9.75 pe cent interest rate, at a time when interest rates around the world are at record low levels.

Fortescue could struggle to repay its debt load if iron ore prices continue to trade at or under US$60 per tonne, with some estimates putting the miner's breakeven price around US$70 per tonne. The company may well be amenable to a deal with the Chinese, particularly after the recent kerfuffle over the iron ore inquiry that was going ahead, but was cancelled.

Andrew Forrest Makes Surprise Investment in Atlas Iron (AGO)

Andrew Forrest Makes Surprise Investment in Atlas Iron (AGO)

Mining billionaire Andrew Forrest has emerged as a new investor in rival Atlas Iron, despite continuing to serve as the chairman and major shareholder in Fortescue Metals Group.

Speaking after Atlas announced a strategy to restart mining through lower contracting fees and an equity raising of up to $180 million, the miner's chairman David Flanagan revealed that Mr Forrest had promised to participate in the raising.

"I am just so pleased to be able to announce that Andrew Forrest was the first person to put his hand up and say he was going to invest personally in that raising," he said.

"It is through one of his holding companies, whichever it will be ... we are not going to be sort of a subsidiary of Andrew Forrest Holdings, but it is meaningful in the extent of what we are doing going forward and that is all I can say.

"Thanks again to Andrew for backing Atlas."

Mr Forrest does not currently own shares in Atlas according to Bloomberg records, and the move continues a recent string of investments made by Mr Forrest in small miners.

Mr Forrest last week invested in small Victorian gold producer A1 Consolidated via his private company Minderoo Resources, and also has exposure to uranium play Vimy Resources and nickel junior Poseidon.

Mr Forrest declared earlier this year that he was setting up a new company designed to buy assets during the commodity price downturn, and some believe that company is Minderoo Resources.

Upon launching that new company in March, Mr Forrest vowed it would not compete with Fortescue's current or future strategies.

"A process has been put in place to ensure that if any possibility of doubt regarding conflicting interest arises, the matter will be resolved independently and quickly. I have written to the FMG board asking them to approve this process, and they have returned with their full support for our venture and its governance procedures," said Mr Forrest in March. 

When asked about Mr Forrest's investment in Atlas on Sunday, Fortescue chief financial officer Steve Pearce said he had "nothing to add".

"It is not a Fortescue investment," he said.

Mr Flanagan has announced his support for a federal government inquiry into iron ore, which Prime Minister Tony Abbott announced on Friday after listening to the thoughts of Mr Forrest.

BC Iron chairman Tony Kiernan and Cliffs Natural Resources chief executive Lourenco Goncalves also threw their support behind the inquiry on Sunday, along with Queensland University associate professor of regulator economics, Flavio Menezes. 



See more at: http://commoditiesaustralia.blogspot.com.au/2015/05/andrew-forrest-makes-surprise.html#sthash.gGGW2FcY.dpuf

Anzac Circulating Commemorative 50c Coin New Zealand

The Anzac commemorative coin is New Zealand’s first circulating coloured coin, and was minted by the Royal Canadian Mint

Anzac Circulating Commemorative 50c Coin New Zealand

One million Anzac coins have been minted and will be released to coincide with the 100th anniversary of the landing of Anzac troops at Gallipoli. This number represents the size of the New Zealand population in 1914, of which 10 percent served in the First World War. The coin was coloured using a revolutionary high-speed pad printing solution, developed by the Royal Canadian Mint and technology partner TECA.

Capable of producing circulation coins with vibrant, photo-quality images, in multiple varieties and blends of colour, and with superior wear resistance, this unique technology is exclusive to the Royal Canadian Mint. 

The high-resolution design of the coin was made possible by an integrated system incorporating specially developed inks, robotics for speed and precision control, as well as advanced vision inspection for quality assurance. 

The significance of the Anzac coin

The Anzac coin honours the spirit of Anzac that was formed 100 years ago, and continues to live on today.

The Anzac coin was launched in February 2015, by His Excellency Lieutenant General The Right Honourable Sir Jerry Mateparae, GNZM, QSO, Governor-General of New Zealand.

It is the first time in New Zealand's history that a coloured circulating coin has been produced. The coin will be in circulation as legal tender and available for collectors.

The Anzac coin design features a New Zealand and Australian soldier standing back to back with their heads bowed in remembrance. The mangopare (hammerhead shark) pattern symbolises strength and determination, and the silver fern reflects New Zealand’s national identity.

Availability and Distribution

One million Anzac coins have been minted to coincide with the 100th anniversary of Gallipoli. This number represents the size of the New Zealand population in 1914, of which 10 percent served in the First World War.

The Anzac coin was released into circulation as legal tender on 23 March 2015. It is being sold at its 50 cent face value.

New Zealand Post Group is coordinating the release and distribution of Anzac coins. Coins can be purchased at PostShop or Kiwibank branches, or via NZ Post’s website.

Groups representing former and current armed forces, including Returned Services Association members and Defence Force personnel, were given the opportunity to pre-order limited numbers of coins before they were released publicly.

For more information about the Anzac coin and other comemmorative coins available as part of New Zealand Post’s five-year Anzac commemorative stamp and coin programme, see www.nzpost.co.nz.

The Reserve Bank of New Zealand does not have Anzac coins available for distribution.

How the Coin is Made

The Anzac commemorative coin is New Zealand’s first circulating coloured coin, and it was minted by the Royal Canadian Mint.

The Anzac circulating coin has the same specifications as the existing 50 cent coin and testing has shown it will be accepted in coin and vending machines.

The coin was coloured using a revolutionary high-speed pad printing solution, developed by the Royal Canadian Mint and technology partner TECA. Capable of producing circulation coins with vibrant, photo-quality images, in multiple varieties and blends of colour, and with superior wear resistance, this unique technology is exclusive to the Royal Canadian Mint.

The high-resolution design of the coin was made possible by an integrated system incorporating specially developed inks, robotics for speed and precision control, as well as advanced vision inspection for quality assurance.

Coin Specifications:

Alloy: Plated steel 

Diameter: 24.75mm 

Weight: 5.00g 

Design: The Anzac coin design features a New Zealand and Australian soldier standing back to back with their heads bowed in remembrance. The mangopare (hammerhead shark) pattern symbolises strength and determination, and the silver fern reflects New Zealand’s national identity. 

Edge thickness: 1.70mm Edge treatment: Unmilled

The Reserve Bank of New Zealand has prepared an Anzac Coin Fact Sheet explaining how the coin is made and detailing its specifications.

Atlas Iron Maintains Production at Two Out of Three Mines

Atlas Iron Maintains Production at Two Out of Three Mines

Iron ore miner Atlas has reversed its decision to mothball all of its operations, temporarily at least.

Three weeks ago the miner announced production would cease by the end of April at all three of its sites in the Pilbara region of Western Australia.

At the time Atlas said the decision had been forced by falling iron ore prices, despite considerable cost cutting.

But today Atlas advised the ASX mining will continue throughout May at two of the three sites.

Production will continue at the Abydos site and be resumed shortly at Wodgina, though mining and processing will remain suspended at Mt Webber.

The announcement is expected to give a reprieve to around 400 of the 600 workers affected by the original decision.

"The decision to continue operating at these projects ... is the result of a substantial reduction in forecast cash costs for May," Atlas said in its statement to the ASX on the decision.

"The cost reductions were achieved with the support of Atlas' key service providers."

Iron ore prices have recovered from under $US50 a tonne when the suspension was announced to as high as $US59.20 a tonne earlier this week.

The price has since backtracked a little to $US56.20 a tonne.

"Atlas expects to be cash flow-positive in May," today's ASX statement said.

"This is based on target all-in cash costs plus interest and sustaining capital expense."

But Atlas shares remain suspended and the company has given no indication of its intentions beyond this month.
Hopefully they continue, workers get a reprieve: CFMEU

CFMEU mining and resources division secretary Gary Wood said any reprieve for the workers was helpful in an industry where jobs were becoming rare.

"Obviously it's a positive in the shorter term and one can only hope there's an increase in [the iron ore] price to make it a sustainable operation," he said.

"It is a positive and hopefully they can continue and the workers do get that reprieve because there's no opportunities out there in the field at this time.

"I think they would have been running as efficiently as they can so it all comes back down to the price of ore."

Regional Development Australia (RDA) Pilbara chief Diane Pentz said she remained concerned about the number of people who had been retrenched.

She said the mining company's announcement was a "bright light" that was welcomed by the RDA Pilbara and by people in the community.

"I'm sure that it's a relief to a lot of people who are employed within this resource industry and I think it also starts to signal that there is some confidence around the recovery of the iron ore price," Ms Pentz said.

Iron Ore Revival Puts Local Miners Back in the Black

Iron Ore Revival Puts Local Miners Back in the Black

At least least four Australian miners are cash-generative at current iron ore prices, thanks to a 23 per cent rise in the bulk commodity price over the past three weeks.

Another 5 per cent rally in the iron ore price late on Friday night capped a rare good week for the local industry, and pushed the benchmark price to $US57.81.

While BHP Billiton and Rio Tinto have easily remained profitable during the recent slump in iron ore prices, it is likely that few other local iron ore exporters were generating cash when the price hit $US47.08 on April 2.

But a weekly gain of 13 per cent means the iron ore price is now at six-week highs, and is believed to be above the "break-even" price for the world's fourth biggest producer, Fortescue Metals Group.

The estimation of break-even prices is fraught given the constantly changing factors involved, but Fortescue is believed to need iron ore prices to be about $US50 per tonne to cover its cost of production, royalties, maintenance spending and its debt obligations.

Fortescue mines at two locations in the Pilbara, with its newer Solomon hub the cheaper operation, while the company's original Chichester precinct is estimated by Deutsche to lose money at benchmark iron ore prices below $US50 per tonne.

The miner has already outlined plans to reduce its costs even further in the 2016 financial year, with a dramatic reduction in the amount of waste ore moved at the Chichester precinct set to drag break-even costs below $US45 per tonne.

The plan, in concert with last week's debt refinancing which pushed the company's next debt repayment back to 2019, should help Fortescue survive the lowest point for iron ore prices, which analysts at Deutsche and Credit Suisse expect to come in between the 2015 and 2017 calendar years.

But Deutsche analyst Paul Young recently opined that Fortescue's revised working plan in the Chichesters is not sustainable longer term, and is likely to be a viable approach for less than two years.

"The change in mine plan at the Chichesters is likely net present value destructive as it will likely shorten mine life and impact product quality," he said in a recent note.

The junior miner that relies on Fortescue to rail, ship and market its product to customers, BC Iron, is also likely to be profitable at the recently improved iron ore price.

According to BC's improved performance during the month of March, UBS believes the miner can be generating cash so long as the benchmark iron ore price is $US55 per tonne or higher.

Those close to break-even around these prices are believed to include Mt Gibson Iron, whose cost position has ironically improved since a wall failure at its Koolan Island mine, and US miner Cliffs Natural Resources, whose Koolyanobbing operation exports through the South Coast of WA.

US miner Cliffs Natural Resources will update investors on Wednesday morning Australian time when it publishes its March quarter results.

Gina Rinehart's Roy Hill project is not expected to start exporting until August or September, and is believed to have a break-even price between $US41 and $US51 per tonne.

Those needing a further improvement in prices include Arrium Limited and Atlas Iron, which ceased operating its mines just over two weeks ago.

While last week's improvement in iron ore prices has injected some hope into the local sector, the rising commodity price has come with some trade-offs.

The Australian dollar, which hurts local miners when it is high, has risen 3 per cent to US78.15¢ over the past two weeks.

Oil prices also appear to have found their bottom, prompting a slight rise in prices for some "bunker fuels", which are consumed by ships that carry commodities like iron ore.

Local miners will be hoping those factors don't continue rising and blunt the impact of improved iron ore prices.

Rio Tinto Goes Full Ore Ahead

Rio Tinto has revealed it shipped 72.5 million tonnes of iron ore from its Pilbara mines during the three months to March

CYCLONE season and a train derailment have slowed Rio Tinto’s iron ore business but the mining titan’s expansion plans remain firmly in place.

The Anglo-Australian miner has revealed it shipped 72.5 million tonnes of iron ore from its Pilbara mines during the three months to March.

The result, revealed in a production update on Tuesday, was 12 per cent lower than the previous quarter but 9 per cent higher than the same period a year earlier.

Rio produced 74.7 million tonnes of iron ore for the March quarter with the difference going into stockpiles.

Production was down 6 per cent on the previous quarter but up 12 per cent year-on-year.

The result missed market expectations but analysts were unfazed as Rio maintained its full-year production forecast at a record 350 million tonnes and said it would draw down on inventories to maximise cash flow throughout the year.

Rio said its operations had been impacted by tropical ­cyclone Olwyn, which battered the West Australian coast last month, and a train derailment that temporarily blocked ­access to Dampier port.

Smaller competitors such as Fortescue have been deeply critical of Rio and rival BHP Billiton for continuing to bring on new supply as the price of the key steelmaking ingredient tumbles.

Chief executive Sam Walsh said Rio’s push to milk as many low-cost tonnes from its iron ore business as possible was in the best interests of shareholders over the long term.

“By making best use of our high-quality assets, low cost base, and operating and commercial capability our aim is to protect our margins in the face of declining prices and maximise returns for shareholders throughout the cycle,” he said.

The price of iron ore rose 1.3 per cent to $US51.57 a tonne early on Tuesday after hitting a decade low of $US47.08 a tonne in early April.

Rio produced 144,000 tonnes of copper during the March quarter — a 9 per cent drop on the same time a year earlier due to mining lower grades.

Rio shares closed up 1.5 per cent on Tuesday at $55.50

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Atlas Iron Suspends Itself From Share Trade Amid Plunging Prices

Atlas Iron is stumbling in the face of the slumping ore price, suspending itself from the local share market as it tries to map out a future.

Iron ore slumped over the weekend to a fresh low of $US46.70 a tonne on a key Chinese spot market.
Atlas said it has been surprised by the "extent and the pace of the decline in the iron ore price" which it says has fallen 24 per cent since it released its half-year accounts in February.

"The voluntary suspension is requested pending the outcome of an extensive review of the company's operations, financial outlook, asset sale opportunities and capital structure," the company said in a statement to shareholders.

The company said it has already commenced discussions with a number of its stakeholders in relation to various initiatives it is undertaking to reduce costs and preserve value.
Bulk transporter McAleese Group is one of those stakeholders, it has a major iron ore haulage contract with Atlas worth around $250 million and not due to expire until 2017.

McAleese has issued a statement to shareholders saying it will continue to work with Atlas as a priority to "achieve sustainable solutions for both parties."

Atlas shares, which last traded at 12 cents, will remain suspended until the company makes an announcement at the end of the review, which should be in the next fortnight.

The share price has lost 88 per cent in the last 12 months.

Financial advisory and asset management firm Lazard is assisting Atlas with the review.

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South32 – Major in the Making - BHP Billiton

I am becoming more known these days for my gripes than my enthusiasms. A long held complaint (extant at least 7 years) has been at the denuding of the middle ranks of miners. If one looks at the mining market from a Darwinian perspective (and that is particularly apt in these days of survival of the fittest) the pyramid of life (and we use that word under advisement in the mining space) is extremely out of kilter. We have a handful of majors and vast plethora of juniors and a mid-tier that is severely underpopulated. 

This is not a natural situation. If one wonders why mining M&A is in such a torpor one not look much further than the lack of mid-tier companies for majors to munch upon. Just as a T-Rex would not have bothered chasing a squirrel (if they had even existed conterminously) thus mining majors cannot be bothered snuffling in the undergrowth of Vancouver or Perth to look for transactions that are canapés rather than main courses.

However, if we look at majors we have two ways in which they are created. One is by an existing historic major (BHP, Anglo-American, RTZ, Freeport-McMoran) devouring other smaller majors of mid-tier companies or by mid-tier companies bulking up through mergers with like-sized entities to catapult themselves into the top tier. 

Good examples of this are Barrick which went over decades, through a series of mergers from being nothing special to being a major (and still nothing special). Goldcorp, through its acquisitions of Glamis Gold and Wheaton River, is a better example of 1+1+1 equaling more than the sum of the parts. The mid-tier during the last decade and a half was not “restocked with names” because of the failure of Darwinian forces in the mining space.

Having bemoaned however the lack of the md-tier we might also bemoan the lack of majors. There has been a massive concentration in this group which has resulted in a situation where, back in the 1950s, one could have pointed to a score of diversified majors (many US-based) to a much depleted band these days. 

The survivors have gone beyond the categorization as majors and now are more accurately described as behemoths. There was a spooky moment late last year when the threatened takeover of RTZ by Glencore threatened to even reduce the ranks of the behemoths. Fortunately this proved to be just an attack of wind by Ivan Glasenberg.

Breaking up the Brontosaurs

There has been a spate of proposals in recent times to break up some of the biggest miners. BHP are spinning out South32, Vale are supposedly setting free the nickel (and other base metal) assets in a New INCO and Anglogold Ashanti went through gyrations last year first claiming it would spin out non-African assets and then doing an about-face. Chatter about RTZ disposing of diamonds or uranium interests, through demergers, surfaces from time to time.

Son of BHP

The Vale proposal is, I suspect, waiting to see how South32 goes (and also for a turn in the nickel price) while the Anglogold breakup is off the table (for now). However the South32 deal is very much alive and kicking, with a mid-May launch date.

BHP-Billiton is of course a behemoth with a heavy weighting towards iron ore, coal and oil & gas, but a plethora of other activities. Some bright spark has clearly persuaded the management that it should get rid of lesser activities (like being the largest manganese operations in the world and owning the largest silver mine) and instead focusing upon its three core commodities which all have a weak outlook at the moment. Perish the thought it might be the same type of investment bankers that thought Time Warner AOL might be a good combo! So this looks like a “taking candy from babies” opportunity for canny investors. Big dumb corporation throws baby out with bathwater and the opportunity is to try and catch the baby mid-air.

The spinout has been named South32 in a rather tenuous reference to the latitude upon which most of the major assets lie. Not really accurate, but in the annals of recent corporate namings it is one of the less obscure creations of the “branding arts”. The new entity will have operations in Australia, Brazil, Southern Africa and Colombia. The main assets will be:

GEMCO: largest Manganese ore producer
Cannington: largest silver producing mine (with lead and zinc)
Worsley Alumina: one of the largest alumina refineries
Hillside (aluminium smelter in South Africa), Mozal Aluminium (in Mozambique), Illawarra Metallurgical Coal, Cerro Matoso (nickel mine in Colombia), Alumar Refinery (aluminium in Brazil) and South Africa Energy Coal
Non-operated JV interests in Brazil (mainly a bauxite mine, refinery and smelter)

This makes for a very diversified company, by commodity and customer, with US$8.3bn of revenue in FY2014. The new company will be headquartered in Perth and will have listings on the ASX, JSE and LSE.

The new entity will be one of the major players in Manganese and aluminium; however as the chart below shows most of the revenue streams are rather well-balanced.

Interestingly the company is way less dependent upon China as a customer than many other majors.

Some have speculated that South32 might turn around and ditch the South African coal assets (to Mick Davis’sX2?). I would not shed a tear on that one. The opportunity then would come in bulking up the nickel part of the business, but more excitingly adding to the lead/zinc component to capitalize upon the Cannington position.

I am becoming more known these days for my gripes than my enthusiasms. A long held complaint (extant at least 7 years) has been at the denuding of the middle ranks of miners. If one looks at the mining market from a Darwinian perspective (and that is particularly apt in these days of survival of the fittest) the pyramid of life (and we use that word under advisement in the mining space) is extremely out of kilter. We have a handful of majors and vast plethora of juniors and a mid-tier that is severely underpopulated. 

This is not a natural situation. If one wonders why mining M&A is in such a torpor one not look much further than the lack of mid-tier companies for majors to munch upon. Just as a T-Rex would not have bothered chasing a squirrel (if they had even existed conterminously) thus mining majors cannot be bothered snuffling in the undergrowth of Vancouver or Perth to look for transactions that are canapés rather than main courses.

However, if we look at majors we have two ways in which they are created. One is by an existing historic major (BHP, Anglo-American, RTZ, Freeport-McMoran) devouring other smaller majors of mid-tier companies or by mid-tier companies bulking up through mergers with like-sized entities to catapult themselves into the top tier. 

Good examples of this are Barrick which went over decades, through a series of mergers from being nothing special to being a major (and still nothing special). Goldcorp, through its acquisitions of Glamis Gold and Wheaton River, is a better example of 1+1+1 equaling more than the sum of the parts. The mid-tier during the last decade and a half was not “restocked with names” because of the failure of Darwinian forces in the mining space.

Having bemoaned however the lack of the md-tier we might also bemoan the lack of majors. There has been a massive concentration in this group which has resulted in a situation where, back in the 1950s, one could have pointed to a score of diversified majors (many US-based) to a much depleted band these days. The survivors have gone beyond the categorization as majors and now are more accurately described as behemoths. There was a spooky moment late last year when the threatened takeover of RTZ by Glencore threatened to even reduce the ranks of the behemoths. Fortunately this proved to be just an attack of wind by Ivan Glasenberg.

Back in the early 1980s the first stock I ever bought was a very tiny amount of BHP (as it then was) and made a good turn on it. The price was embarrassingly low compared to where the stock stands now but the early 1980s were a grim period for most miners. The first time I have even been tempted to buy BHP since then is now… and strangely it’s so I can sell it… after having stripped out the South32 spin-out as a “keeper”.

Approval for the Demerger is being sought at shareholder meetings to be held in Perth and London on the 6th of May 2015. Under the spin-out proposal eligible shareholders would retain their existing shareholding in BHP Billiton and also receive a new share in South32 for every BHP Billiton share held (at the applicable record date which I understand to be mid-May). After that date South32 will be able to be kept and the BHP Billiton ditched with alacrity.

Perversely this opportunity (probably much to the chagrin of BHP’s execs) reminds me of Morticia Addams chopping the heads off roses to keep the thorny stem.

In the minds of the big strategists in the corporate suite of BHP, the “big metals” are the ones to keep. I would rather grasp the thorny stem any day….