Hot Weather Bring Chinese Coal Market Back to Life

The price of steam coal in China is has raised nearly $8 in this week after its price decrease for 9 months. Traditional periodical business such as coal, cement, nonferrous metal industries is gradually getting back to life. The rising coal price is stimulated by mainly two factors.

The first reason is the adjustment of domestic coal price. The new policies focus on the deduction of taxes, which lowered the production cost of coal enterprises. The imported coal has less advantage in price. Therefore, Chinese coal enjoys a larger domestic market share.

The second reason is the continuing increasing temperature in China. The southern part of China is having extreme heat for days with the highest temperature reaching 44 centigrade (111Fahrenheit). The air conditioning and other cooling systems are consuming electricity in a record breaking speed, resulting in the power plants used up their coal stock. Most of the power plant in China still relies on thermal power,thus the domestic demand is increasing.

This article come from: http://www.china-slurry-pump.com/News/Hot_Weather_Bring_Chinese_Coal_Market_Back_to_Life.html

＂Coal capital＂ or ＂Solar capital＂

Shanxi Province in China is famous for its coal resources and traditionally regarded as major coal suppliers. However, it is turning into "city of solar power" these days.

The international solar power decathlon is held in Datong, Shanxi with 20 "solar houses" made by 13 countries attracting vistors from home and abroad. It is the first time the competition is held in Asia.

Solar power is a sustainable energy source with many great characteristics like easy accessible, inexpensive and promising future. Other sustainable energies are wind, biomass and geothermal energies. Many countries are now trying to make use of these energies with fossil fuels are becoming more and more precious.

Datong is turning the city from black to green by developing sustainable engery industries and expected to become one of new energy base in 2020.

This article come from:http://www.china-slurry-pump.com/News/_Coal_capital__or__Solar_capital_.html

Barrick Gold Agrees $300m Sale of Yilgarn South Mines to Gold Fields

Canadian miner Barrick Gold, the world's largest gold producer, has sold its western Australian assets to Aussie rival Gold Fields as part of its restructuring plan.

Barrick's $300m (£192.3m, €224.8m) sale of its Yilgarn South properties comes amid the miner's new focus on lower cost assets, following an $8.7bn asset value writedown because of the falling price of gold in 2013.

The Yilgarn South assets include the Granny Smith, Lawlers and Darlot mines. The deal will help Gold Fields to change its focus from Africa to Australia where it can try lower costs.

"The agreement to divest Yilgarn South demonstrates further progress as we work to optimize the company's portfolio and maximize free cash flow in line with our disciplined approach to capital allocation," said Jamie Sokalsky, Barrick's president and chief executive.

Gold Fields will have the option to deliver up to 50% of the deal's cash value in its own common shares, Barrick said in a statement.

The deal is expected to be sealed at the beginning of October, but is subject to regulatory approval.

Recently, Switzerland-based miner Glencore, which completed its acquisition of miner Xstrata in May, booked a multibillion pound loss on the value of Xstrata assets in its first set of results since the two groups merged because of lower commodity prices.

Global Mining Crisis

The global mining industry has been facing challenges due to rising operating costs and falling commodity prices.

According to a London-based PricewaterhouseCoopers' (PwC) analysis, the mining industry is going through a confidence crisis over whether increasing operating costs can be controlled; uncertainty over the outlook for an improved return of capital which is at its lowest rate for a decade; and better commodity prices.

PwC's analysis is based on the top 40 mining companies, which reported a combined $110bn in capital spending for first four months of this year, a 21% fall year-on-year.

"The first four months of 2013 have been rougher and tougher than at any time in the past decade, with market values plunging $220bn, or 18%, for 37 of the world's top 40," PwC Australia's mining leader Jock O'Callaghan said.

 "After years of outperformance and superior returns the industry is now facing a crisis in confidence."

PanAust in Talks To Buy Glencore Copper Project-Source

Australian copper-and-gold miner PanAust Ltd. (>> PanAust Limited) is in talks to buy Glencore Xstrata PLC's (>> Glencore Xstrata PLC) majority stake in one of Asia's biggest undeveloped copper deposits, a person familiar with the matter said.

PanAust is seeking to take control of the Frieda River deposit in Papua New Guinea from Glencore, which owns 82% of a project that it previously estimated would cost US$5.6 billion to build, the person said.

The talks signal that deal-making in the resources sector globally is starting to recover amid a brighter economic outlook in China, which is the world's biggest buyer of industrial commodities like copper.

On Thursday, South African miner Gold Fields Ltd. (GFI.JO) agreed to buy three mines in Australia from Canadian peer Barrick Gold Corp.(>> Barrick Gold Corp.) for about US$300 million. Weeks earlier, Rio Tinto PLC (>> Rio Tinto plc) agreed to sell its controlling stake in the Northparkes copper-and-gold mine in Australia to a Chinese company for US$820 million.

PanAust is no stranger to operating mines in impoverished Southeast Asian nations lacking in infrastructure and skilled workers. It has two active pits in Laos that produce copper and gold, and the Brisbane-based company accounts for about 30% of that country's exports.

"The company continues to evaluate potential acquisition opportunities that complement the existing asset portfolio and corporate strategy," PanAust, which has a market value of 1.42 billion Australian dollars (US$1.28 billion), said in a half-year report Thursday.

Glencore inherited the Frieda River project through its multibillion dollar takeover of Xstrata PLC earlier this year, but has signaled a preference for owning active mines that produce commodities it can sell through its trading arm.

Highlands Pacific Ltd. (>> Highlands Pacific Limited), which controls the remaining 18% stake in Frieda River, said in July that Glencore Xstrata was in ongoing talks to sell its interest in the project. However, Highlands said it was "unaware of the likely outcome and timeframe for conclusion of this process."

It also pointed to local media reports in Papua New Guinea, which had suggested the government there may be interested in taking over the project. The Papua New Guinea government already has the right to acquire a 30% stake in the project under the terms on the original joint venture agreement.

Switzerland-based Glencore Xstrata has been conducting a review of its assets, and is due to update investors on Sept. 10. Chief Executive Ivan Glasenberg this week declined to say whether the company intended to sell any assets as a result of that review. Earlier this year, the company had agreed with Chinese regulators that it would sell the US$5.2 billion Las Bambas copper project in Peru as a condition of getting its takeover of Xstrata approved.

If Glencore fails to enter a binding agreement on the sale of Las Bambas in time, it has committed to the rapid sale of one of four other copper projects: Tampakan in the Philippines, Alumbrera or El Pachon in Argentina, or Frieda River.

Glencore Xstrata, on a website dedicated to the project, describes Frieda River as one of the largest undeveloped copper-and-gold deposits in the Asia-Pacific region.

Xstrata had estimated the project, near the border of the Sandaun and East Sepik Provinces of northwest Papua New Guinea, could produce 204,000 metric tons of copper and 305,000 troy ounces of gold annually in an operation lasting around two decades.

PanAust is targeting production of 62,000-65,000 tons of copper, 160,000-175,000 ounces of gold, and about 1 million ounces of silver in 2013 from its Phu Kham and Ban Houayxai mines in Laos. The miner this week lowered its annual profit guidance, however, as falling commodity prices dragged its first-half net profit down by a third.

Coal shoulder: BLM sells controversial coal mining lease, but no one’s buying

Today the Bureau of Land Management in Wyoming held a sale for the lease of 148 million tons of coal on public land in the Powder River Basin — and received not a single bid, a first in the state BLM’s history.
The sale was the first of two that the BLM had planned in the area over the next month, which combined would pave the way for the extraction of 316 million tons of Powder River Basin coal. Cloud Peak Energy had asked the BLM back in 2006 to open the site of today’s lease to mining, presumably to expand on its adjacent Cloud Peak mine. But today, the energy company decided it wouldn’t bid, and no one else stepped up (federal coal leases frequently see only one bidder). Here’s Cloud Peak CEO Colin Marshall in the company’s press release:

We carefully evaluated the estimated economics of this LBA [lease by application] in light of current market conditions and the uncertainty caused by the current political and regulatory environment towards coal and coal-powered generation and ultimately decided it was prudent not to bid at this time. … [W]e believe a significant portion of the BLM’s estimated mineable tons would not be recoverable by us if we were to be the winning bidder in the BLM’s competitive process. In combination with prevailing 8400 Btu market prices and projected costs of mining the remaining coal, we were unable to construct an economic bid for this tract at this time.

In other words, coal in this country is getting more difficult and costly to mine, domestic demand is falling, and Obama has directed EPA to crack down on emissions from coal-fired power plants. Even the coal industry’s hail-mary plan to stay profitable by pushing exports to Asia faces setbacks. We agree with Cloud Peak that starting up a whole new coal-mining operation is probably not prudent at this point.
The BLM’s coal-leasing process is already rife with problems: In June, an Interior Department inspector general’s report found that the BLM routinely underestimates the value of federal coal leases, failing to take into account the more lucrative Asian market. Taxpayers lose out on tens of millions as a result. But this time, even that hefty discount wasn’t enough to get Cloud Peak to bid.

St Barbara profit tumbles on weak gold price

 Gold miner St Barbara has reported a net loss after tax of A$192-million for the financial year ended June, after reporting a A$309-million impairment on its Pacific operations, which were acquired from Allied Gold Mining.

The impairment was ascribed to the sharp decline in gold prices, and the corresponding impact on future gold-price assumptions.

The net loss for the 2013 financial year compared with a net profit of A$130.2-million in the previous financial year.

Underlying net profit after tax for the full year was also down to A$29-million, compared with the A$121-million reported in 2012, while earnings before interest, tax, depreciation and amortization were A$141-million, compared with the A$182-million reported over the last financial year.

Sales revenue for the year remained on par with the 2012 results, with St Barbara reporting that some A$568.4-million had been accumulated.

At the Australian operations, St Barbara generated a total sales revenue of A$372.1-million, excluding discontinued operation, from gold sales of 239 667 oz. The ASX-listed miner noted that although production was consistent with the previous year, revenue was adversely impacted by the decline in the spot gold price during the year under review.

Meanwhile, in the period since acquisition, the Pacific operations generated some A$139.6-million in sales revenue from gold sales of 88 262 oz.

St Barbara noted that the planning for integrating the Pacific operations into the company portfolio was completed during the period, and integrating the new operations had progressed well by the end of June.

After cost cuts, miners need to do more with less, BHP says

Mining firms are wooing investors with aggressive cuts after years of profligate spending, but BHP Billiton says the greater challenge will be improving productivity, if major producers are to ride an eventual recovery.

BHP, Rio Tinto and others big and small have promised shareholders they will slash billions of dollars of spending, shedding jobs, reining in wages and cutting back on fringe costs, such as staff travel.

Rio says it tells employees in its iron ore unit to use low-cost airlines or teleconferencing - a far cry from a time when chartering flights to remote mines were the norm and tales abounded of truck drivers on six-figure annual dollar salaries.

But that was the easy bit, the chief financial officer of BHP Billiton, the world's largest miner, told Reuters.

"When you talk about costs there are two elements. One is how you tighten your belt and make the easy changes," said Graham Kerr, a BHP veteran put in charge of finance last year.

"The second is productivity," he said in an interview. "Getting more out of your existing people, your equipment and your infrastructure. Productivity will deliver more benefits over time, but takes a little more time to be done."

BHP said this week alongside its report on annual earnings that it had cut $2.7 billion of "controllable" costs - new exploration projects, for example, but not fuel for existing operations. That figure amounts to a reduction of roughly 7 percent in spending per tonne of copper equivalent production.

The saving - $2.2 billion at the operating level - helped offset an $8.9-billion hit to operating profit caused by lower prices for BHP's products.

The bulk of the saving came from cutting back on exploration and development - $1.5 billion out of the $2.7 billion - a decision Kerr is confident carries little risk for the future.

BHP has already been pulling out of regions where mining has been developed only recently, including parts of west Africa, and it has been concentrating instead on its core deposits. Exploration is now focused on copper, with no spending planned on new, greenfield projects seeking other minerals.

"We don't need more iron ore, more energy coal, more nickel," Kerr said. "We have our resources in the right location and we understand them very well."

Analysts tend to agree the large miners have enough to work on and can afford to slow the search for new deposits, cutting one area - exploration - that does not affect current production and where, arguably, they can make up lost time later.

Since smaller firms are struggling to raise cash to develop new mines, the risks of losing out on a major find are also smaller now.

"The view taken now is no one else is exploring the gaps you are pulling out of," said one London-based industry adviser who spoke on condition of anonymity. "You are not necessarily missing out on the next big opportunity."

And the big miners have enough to work on for now. "Rio has enough in their larder anyway for the next 10 years, 20 years," said analyst Paul Gait at Sanford Bernstein in London.

PRODUCTIVITY

Having cut costs, BHP's Kerr said, the challenge now is to get more out of existing assets - and this at a time when many miners are finding ore grades falling, particularly in copper.

BHP plans to spend over $16 billion in 2014 on growth, maintenance and exploration - below 2013 and less than initially planned but still a very large share of the $18.2 billion it generated in net operating cash flow in the year to June.

For some other miners, the drive for efficiency can mean organisational shifts - the simplification of Anglo American's divisional structure, for example. And for all, it has meant a focus on new technology - BHP's new chief executive has compared it to Formula One's search for constant improvement.

But for most now, it will mean improving what they get from their existing mines, to permit increased output that can offset lower prices - and make the most of any future surge in demand.

BHP, Kerr said, has improved its comparison of performance between sites and has, for example, made truck use at Goonyella, its Australian coking coal mine, 25 percent more efficient.

He also highlighted improvements at Escondida in Chile, the world's largest copper mine, which has increased volumes going through a concentrator - though BHP was also fortunate to strike higher-grade ores at the site during the financial year to June.

And in due course, BHP believes, world demand will improve.

"As some of our peers reduce capex, stop projects, stop growth, demand is going to continue to grow in China and we are well positioned to feed that demand," Kerr said.

"I see upside for us."

Junior miners to benefit from AAMIG co-op deal

Australian junior miners operating in Africa were set to benefit from a newly minted cooperation agreement between the Australia-Africa Mining Industry Group (AAMIG) and the Department of Agriculture and Food, Western Australia (DAFWA).

“This relationship will directly benefit African mining and exploration companies seeking to achieve positive and functional community engagement and development through agriculture,” said AAMIG CEO Trish O’Reilly.

“AAMIG members will now have direct access to DAFWA’s international consultancy arm, and can leverage specialist knowledge and technical services in finding solutions for issues such as biosecurity, quarantine and supply chain systems, crop diversification and productive capacity.”

She pointed out that junior mining companies were frequently hindered by a lack of internal resources and funding, and could not solve all the social and economic issues in the vicinity of their operations.

“Better results are likely to be achieved by building strategic alliances such as this one – developing more of a team Australia approach to investing in Africa,” O’Reilly said.

The DAFWA’s international consulting arm, dubbed AGWEST Food Security, has a long history of working with developing nations over 40 years, in 30 countries, including countries in Africa, O’Reilly noted.

DAFWA director-general Rob Delane said AGWEST Food Security offered a diverse range of services, drawing on the expertise of specialist agribusiness, academia and DAFWA staff.

“Highly qualified personnel with extensive experience in biosecurity and food safety systems, sustainable agriculture development, natural resource management and community development are available,” he said.

“AGWEST Food Security works in partnership with private enterprise, government agencies, international funding agencies and nongovernment organisations in Africa, as well as the Middle East and Asia.”

In recent years the consultancy has worked on African projects in Libya, Morocco, South Africa, Tunisia and Botswana.

Delane said there were synergies between the agriculture and mining sector, which could be enhanced for mutual benefit.

“Food security and safety has long been a challenge for developing nations, affecting health, education and the economy,” he said.

“AGWEST Food Security can provide the mining sector with access to specialists – on site if necessary – to work with clients to provide solutions to issues such as improving biosecurity, quarantine and supply chain systems, building community resilience to drought and natural disasters, and enhancing crop diversification and productive capacity.”

Goldman Sachs’ inside track on the U.S. oil-by-rail boom

While the role of Goldman Sachs Group Inc in global metals markets has fallen under a harsh regulatory spotlight this summer, the bank has also quietly enjoyed a privileged front-row seat to one of the most dynamic trading trends to emerge from the U.S. shale oil boom: shipping crude by rail.

Through a previously unreported minority investment in a small, privately held Texas-based firm called U.S. Development Group (USD) in 2007, Goldman Sachs has played a leading role in financing the expansion of nearly a dozen specialized terminals that can quickly load and unload massive, mile-long trains carrying crude oil and ethanol across the United States.

Dan Borgen, president and chief executive of USD, said the firm he helped found two decades ago has benefited from a regular exchange of ideas with Goldman, as well as from its financial clout.

“It’s great for someone who tends to be creative and entrepreneurial to bounce ideas off smart folks who understand the strategic nature of the business,” Borgen said in an interview. “We lean on them for advice and they are some smart people. It’s one of the reasons we accepted their investment years ago.”

To be sure, there are important distinctions between Goldman’s involvement with USD and with Metro International Trade Services, the warehousing group that is now the subject of a U.S. regulatory inquiry and lawsuits alleging it used anticompetitive practices that helped drive up the cost of aluminum. Goldman has denied the allegations.

Unlike Metro, a wholly-owned subsidiary of Goldman’s J. Aron trading operation, USD was a minority-stake investment by a different part of the bank, a Goldman spokesman said in response to queries. There is no indication that Goldman played any role in USD’s operations or ever benefited beyond its financial stake in USD. Both are balance sheet investments made with the bank’s own capital rather than investor funds.

Still, the USD stake, which has fallen from 49 percent in 2007 to less than half that now, shows that Goldman’s interests in the commodity industry run deeper than widely known, and extend beyond the Metro warehouses and its ownership of a Colombian coal mine, its two most public holdings.

In principle, its ownership stake in privately held USD could provide the bank with valuable insight as the shipping crude by rail moved from a niche play to a mainstay of the U.S. market, as booming U.S. oil production outstripped pipeline capacity in many regions.

While private sector investments have long been a common part of merchant banking, the stakes may attract additional scrutiny at a time of unprecedented public and political pressure on Wall Street investments in commodities markets, particularly ownership of infrastructure such as metals warehouses and trading of physical commodities.

Lawmakers have questioned whether commercial banks, guaranteed by the Federal Reserve, should own oil tankers or run power plants – activities that may expose them to massive financial risk in the event of a spill or meltdown.

While the bank isn’t obliged to reveal every investment it makes with its own money, lawmakers on the Senate Banking Committee have complained it is almost impossible to know how deeply involved banks are in the industry, due to the lack of disclosure.

The Federal Reserve must make a decision by September that will determine whether former investment banks like Goldman will be allowed to continue owning and operating physical commodity assets. More broadly, it is also reviewing a landmark 2003 decision that first allowed commercial banks to trade physical commodities.

Some banks, including JPMorgan Chase & Co, are opting to withdraw from physical trading, because of the regulatory pressure and several years of diminished margins.

The Goldman unit with an interest in USD, GSFS Investments I Corp, has also cut its holding in USD, although the reduction pre-dates the current debate over how deeply Fed-backed banks should be allowed into commerce. As a “merchant” investment held at arm’s length from the bank, the stake must divested by Goldman by 2017, according to Federal Reserve rules.

GSFS cut its roughly 49 percent shareholding to about 33 percent in 2011, according to Texas Franchise Tax Public Information reports. Its share has fallen further since then, according to a person familiar with the matter.

Neither Goldman nor USD’s Borgen would comment on the exact size of the current stake, nor why the bank was reducing it. USD is an employee-owned business, Borgen said. He declined to talk about the ownership structure in more detail.

BENEFITS?

U.S. Development Group has been in business for two decades, but it has only gained a high profile recently as it shifted from building up ethanol-related rail terminals to tapping into the shale crude oil boom.

Borgen said the initial deal with Goldman came about after USD had turned down other would-be investors. The company had already made its mark in the industry with a series of projects including small-scale rail projects, large-scale “storage in transit” for the petrochemicals industry and some wholesale oil-by-rail diesel fuel arbitrage.

“Because we’re not public we’re able to get out there early and put our stake in the ground before others identify the market opportunities that are there,” said Borgen. “We start things and hopefully they become industry solutions.”

At the time of Goldman’s investment in 2007, well before the surge in North Dakota crude production had begun, USD was in the midst of building ethanol terminals across the United States, including one in the New York Harbor trading hub, where prices for benchmark U.S. gasoline and heating oil are set. It sold three of those terminals to Kinder Morgan in 2010.

It later shifted to crude oil facilities, building up five such oil-by-rail terminals – which it sold to Plains All American Pipeline for $500 million in late 2012, leaving the company cash-rich and asset light.

Understanding the trading flows through such lynchpin oil facilities can provide valuable insight for oil traders, who scour the market for information that may help them predict how much oil is being shipped to different parts of the country.

Large price discounts for oil in locations poorly served by pipelines have offered traders attractive opportunities if they can figure out how to get the crude to higher-priced markets. Data on crude-by-rail shipments is particularly opaque, with government figures only available months after.

It is not clear what – if any – information about the USD investment found its way to Goldman’s J. Aron arm. A person familiar with the business said J. Aron traders had never chartered oil through the USD terminals, nor did they have direct access to information from the company. Borgen declined to comment on USD’s customers.

Borgen said he did not know if Goldman had benefited from the conversations with USD in the same way that USD had learned from Goldman’s bankers: “You’d have to ask them,” he said.

A bank spokesman declined to comment beyond saying that Goldman viewed USD as purely a financial investment.

Unlike rivals at Morgan Stanley, J. Aron traders have not been big players in the U.S. physical oil market for years.

The bank has an agreement with refiner Alon Energy USA to supply crude and sell products for several small plants in California, plus one in Texas and one in Louisiana.

Borgen said the investment by Goldman had been good for his company, allowing it to expand and draw on their expertise.

“Their investment has allowed us to grow at a more rapid pace than we otherwise would have,” Borgen said of Goldman. “We have similar cultures, and they’re some of the smartest in the business.”

Mackenzie feels the resources pinch

BHP and Rio Tinto are Australia's two mining whales, and they are swimming through similar, slightly chilly water this year as the resources bubble deflates and they focus much more tightly on costs and productivity.

Investors are taking on different risks depending on which whale they ride. Rio is the biggest punt on the iron ore price. BHP is a more evenly weighted bet on a basket of commodities, and a less risky conveyance as a result.

BHP's 31 per cent lower June year underlying net profit of $US11.8 billion missed the consensus forecast of $US12.6 billion, but chief executive Andrew Mackenzie says the group hit the mark on higher-level profit lines, including 15.9 per cent lower earnings before interest, tax, depreciation and amortisation (EBITDA) of $US28.4 billion.

Several BHP businesses made big contributions to the result, as usual. Iron ore EBITDA was down from $US15 billion to $US12.2 billion, but it was still the biggest business, contributing 42 per cent of total earnings at the EBITDA level. Oil and gas EBITDA edged down from $US9.1 billion to $US8.8 billion, 31 per cent of the total. Copper earnings eased from $US4.7 billion to $US4.6 billion, but were still 16 per cent of EBITDA. Coal is usually another big piston in BHP's engine, but this year its contribution fell from $US3.6 billion to $US1.7 billion, 6 per cent of total EBITDA.

Advertisement

Lower prices including a 17 per cent lower iron price cost BHP $US8.9 billion during the year. It saved $US2.7 billion with cost cuts and productivity gains including labour productivity gains of $US458million, however, and its broad portfolio of commodities ironed out profit volatility.

The 18 per cent lower underlying profit of $US4.23billion for the June half that Rio announced a week-and-a-half ago was by way of contrast pretty much a single-piston effort. Rio’s iron ore business posted a decline in EBITDA from $US10.1billion to $US9.6billion, but it still generated 65 per cent of the group’s revenue, and 79.5 per cent of Rio’s total EBITDA.

The aluminium business that Rio dramatically and tragically bulked up in 2007 with the $US38billion takeover of Alcan contributed 13 per cent of operating revenue but only 7.1 per cent of EBITDA. Rio’s copper division contributed 29 per cent of revenue, but only 9.3 per cent of EBITDA. Energy coal and uranium contributed 4.1 per cent of EBITDA, and Rio’s diamonds and minerals division contributed 6.5 per cent.

Rio is a more profitable iron ore miner. Its EBITDA-to-revenue ratio of 65 per cent in the June beat BHP’s iron ore EBITDA-to-revenue ratio of 60 per cent in the year to June, and it generated an outstanding annualised EBITDA yield of 71 per cent on gross assets employed: BHP’s EBITDA return on its iron ore assets was lower at 44 per cent, albeit still an object of envy in the corporate world.

The huge weight of the iron ore business inside Rio combined with better prices to produce solid numbers at group level in the June half year. Even as it carried its muscle-bound aluminium division, it managed a 28.4 per cent annualised return on operating assets, and its EBITDA-to-revenue margin was 36.1 per cent.

BHP’s overall return on assets employed in the June year was lower, at 20.5 per cent. Its overall EBITDA-to-revenue margin was better however, at 45 per cent: on balance, it is a more balanced business.

Rio’s big iron ore weighting is assisting the group this year because the iron ore price is refusing to fall.

It slipped from just under $US159 a tonne to $US113.80 a tonne between February 20 and June 26 this year, and there were predictions that it would sink well below $100 a tonne in the December half as Chinese steel mills implemented a seasonal production slowdown. Since the end of June it has rallied again and it was trading at $US139.20 a tonne on Tuesday when BHP reported.

Most iron ore observers still expect the iron ore price to weaken in the medium to long term as supply expands and recycling accelerates. If it happens, Rio will be more exposed than BHP.

Rio is increasing its copper exposure with the giant Oyu Tolgoi development in Mongolia. But it is proving to be a politically complicated process and in the meantime BHP is lining up new diversification options, with Mackenzie announcing on Tuesday that the group will invest $US2.6billion to finish digging shafts that prepare its Jansen Potash mine in Canada for a production green light – and develop the project to a point where BHP has a better chance of attracting joint venture partners to help fund a push to production.

$A firms as spot gold hits two-month high

AAP

The Australian dollar has firmed as the gold price reached its highest point in two months.

At 1700 AEST on Monday, the local unit was worth 92.04 US cents, up from Friday's 91.57 cents.

The currency held above 92 US cents for most of the local session as the spot price of gold reached $US1,380 per fine ounce for the first time since June 7, before closing at $US1,373.30.

"That had a positive impact upon the commodity-block currencies such as the Aussie," CMC Markets foreign exchange dealer Tim Waterer said.

"That was essentially the reason why the Australian dollar was able to move through the 92 US-cent level during our session today."

Minutes from the Reserve Bank of Australia's August meeting, where the cash rate was cut to a record-low of 2.5 per cent, could help the local unit on Tuesday if it signals a change from an easing to a neutral bias.

"There's potentially still scope for one more rate cut but having said that, there is a growing expectation that the current interest rate setting could be the bottom of the easing cycle," Mr Waterer said.

The Australian dollar could jump by a quarter to half a US cent if the central bank suggests there was no urgency to cut rates again, he added.

"It depends on how aggressive that tone is."

At 1700 AEST, the Australian dollar was at 89.93 Japanese yen, up from Friday's close of 89.41 yen, and at 69.07 euro cents, up from 68.69 euro cents.

Meanwhile, Australian bond futures contract prices finished weaker as investors overlooked a drop in the University of Michigan US consumer confidence reading for August.

Commonwealth Bank interest rate strategist Philip Brown said a sharper sell-off in 10-year Australian bonds showed investors believed the US Federal Reserve would begin tapering its quantitative easing from September.

At 1630 AEST, the September 10-year bond futures contract was trading at 95.970 (implying a yield of 4.030 per cent), down from 96.020 (3.980 per cent) on Friday.

The September three-year bond futures contract was at 97.170 (2.830 per cent), down from 97.200 (2.800 per cent).

Ascot welcomes new shareholder

 ASX-listed Ascot Resources has welcomed a A$1-million investment from mineral processing and infrastructure provider Sedgman.

Ascot said on Monday that the investment marked the start of a strategic relationship between the two companies to explore opportunities to grow their respective businesses in Colombia, and in South America generally.

Under the investment agreement, Sedgman would subscribe for five-million shares in Ascot, at 10c a share for the first A$500 000 placement. The second tranche of the investment would be made by way of a two-year unsecured loan note.

On completion of the note issue, Sedgman would become Ascot’s largest shareholder, having a 13.8% shareholding in the company. As a result, Sedgman would be allowed to nominate a director to the Ascot board.

“Sedgman’s investment marks the beginning of a strategic relationship between our companies and represents a significant endorsement of the company’s Titiribi coal project,” said Ascot executive chairperson Andrew Caruso.

He added that despite the recent weakness in the global resources sector and the challenging market conditions currently faced by juniors, the company’s advancement in delivering a maiden resource at Titiribi had added considerable value to shareholders.

“With capital availability in the mining sector being restricted, particularly at the junior end, Ascot’s success in securing another tranche of funding is testament to the quality of the Titiribi coal project,” said Caruso.

Family of heiress Huguette Clark ready to divide up her $300m copper wealth

Settlement negotiations are under way to divide up the $300 million estate of American heiress Huguette Clark, one of the so-called “Copper Kings” youngest daughter.

Clark's father was former US Sen. William Andrews Clark, one of the copper magnates of Montana, a banker, a builder of railroads and the founder of Las Vegas.

NBC Investigations reports the reclusive heiress specifically stated in her will that she didn't want any part of her copper fortune to go to far-flung relatives she hardly knew. However, 19 have challenged the will in court.

Clark, who died in 2011 at 104, lived a reclusive life after 1930 and her activities were virtually unknown to the public. Upon her death, she left behind a vast fortune, including the sold jewels, most of which was donated to charity. Substantial sums were also left to her long-time nurse, her goddaughter, some employees and her attorney.

RELATED: Expected heir to $300 million copper fortune found dead

According to papers seen by the New York Post, the heiress was “mumbling incoherently” and “unable to hold the pen” when she signed her $300 million fortune away to her employees.

The disclosure of those documents triggered a battle over her fortune, likely to settle before the trial scheduled to begin September 17.

The huge gold ETF outflow in just one chart

The World Gold Council's 2Q report had one big chart showing a big stampede out of ETFs.

Over 400 tonnes of gold flowed out of ETFs as the prospects for the US economy brightened, and the end of the Fed's quantitative easing program became more real.

The move out of gold was enough to dampen gold demand by 856 tonnes (US$39 billion), down 12% compared with Q2 2012.

But lower prices saw an equally big pick up by physical gold investors, especially in Asia, who snapped up gold bars and coins.

"The consumer market for gold was once again dominated by global leaders India and China, which together accounted for almost 60% of the global jewellery sector and around half of total bar and coin demand," writes the authors of the World Gold Council report.

"On a year-to-date basis, total consumer demand (for jewellery, bars and coins) in each country is almost 50% ahead of the same period in 2012.

The World Gold Council warns that gold may have difficulty maintaining this momentum going forward.

"Bar and coin demand may struggle to maintain the exceptional levels of the past quarter, however it has solid underpinnings – most notably in the Asian markets."

Creative Commons image of the Christmas tree by jciv. Chart from the Q2 2013 Gold Demand Trends report

Peru proposes rainy-day fund to hold local mining taxes, royalties

LIMA – Peru's President Ollanta Humala wants to create a rainy-day fund to house part of the millions of dollars provincial leaders receive from mining activities in their regions, the finance minister said on Thursday.

The fund would accumulate money when global mineral prices are high and distribute it to local leaders when they drop, Finance Minister Luis Miguel Castilla said.

Regional presidents and mayors are now not legally required to save payments from mining taxes and royalties payments.

The proposed fund could please mining companies that want to see more consistent development in poor provinces where they work, but it might upset local leaders who oppose some mining projects and accuse the Humala administration of meddling in their affairs.

The proposal could also pay out revenues so that more benefit.

"There are municipalities that receive a lot and others that get almost nothing," Castilla said in an interview on RPP radio.

Other mining-dependent countries like Chile use similar policies to weather periods of low prices and weak production.

Humala's proposal comes as local leaders complain they cannot finish projects because the mining royalties and payments they usually receive have dropped more than expected this year.

Some regional presidents and mayors have criticised the Humala administration for initially forecasting bigger mining proceeds and have urged the government to distribute funds.

The mining revenues come from company profits, which have shrunk as mineral prices have tumbled this year.

The highland province of Espinar in the southern Cusco region, where antimining protests turned deadly last year, has reported a 92% drop in expected funds this year.

The proposed fund would also apply to money that local governments receive from natural gas and oil projects.

"These are volatile resources," said Castilla.

But Castilla said local governments now have access to some $4-billion in unspent natural resource revenues that should help them withstand the current dip in incoming money.

According to the government and private groups, about half of all money generated by mining taxes that is transferred to provinces is not spent. That means roads, hospitals and schools are still lacking in remote towns near billion-dollar mines.

The Humala administration has tried to defuse dozens of disputes over the spoils of natural resources that have helped delay a mining investment pipeline worth more than $50-billion.

Earlier this year the Humala administration said it was revising rules to press regional governors to unlock the piles of mining receipts that are sitting idle.

Centamin Q2 earnings fall despite record production

Despite a “materially weaker” gold price environment, dual-listed Centamin’s Sukari mine was able to generate healthy cash flows during the quarter ended June 30, assisted by a third successive quarter of record production.

The company’s flagship operations delivered 93 624 oz of gold in the quarter, up 8% on the 87 016 oz produced in the first quarter of the year and 39% higher than the 67 422 oz produced in the second quarter of 2012.

“We have made good progress again in the second quarter and remain committed to delivering on our full-year production guidance of 320 000 oz, which will represent a 22% increase in production from 2012, at a cash operating cost of $700/oz,” chairpersonJosef El-Raghy said in a statement to shareholders on Wednesday.

He noted that, despite the recent gold price weakness, the Sukari mine remained relatively low cost.

The mine generated revenue of $134.3-million in the three months ended June 20, a 3% drop on the $138.2-million earned in the first quarter, owing to a 15% drop in the realised gold price, which offset the 14% increase in gold sales.

Unit cash operating cost of production for the quarter amounted to $690/oz, $134/oz higher than in the first quarter.

Centamin stated that the higher unit cost was expected, with the quarter-on-quarter increase mainly driven by exceptionally low openpit mining costs in the first quarter, as well as longer haulage distances and an increase in maintenance work during the second quarter.

Further, operating cash costs increased by 34% quarter-on-quarter to $64.9-million.

Centamin reported a 22% quarter-on-quarter fall in earnings before interest, tax, depreciation and amortisation to $63.7-million for the second quarter, owing to the increase in the unit cash costs of production, a $4.4-million decrease in inventory movement, a $1.9-million increase in corporate costs and the decrease in revenues.

Basic earnings a share for the quarter are $0.04 a share, down 28% quarter-on-quarter and 22% lower than that recorded in the second quarter of 2012.

Meanwhile, El-Raghy noted that the recent political changes in Egypt have not affected the Sukari mine’s operations, adding that the company was confident that the political tension in that country would not affect the company’s investment.

Further, the gold miner continued to make good progress with the Stage 4 Sukari process plant expansion, which started at the end of 2011.

Commissioning of the plant remained on track to start in the second half of this year and would be largely completed by the end of the year.

Centamin was in discussions with the Egyptian Mineral Resources Authority (EMRA) and other government departments to secure the required permits to increase the daily ammonium nitrate consumption and blasting accessories that are needed to increase openpit mining rates to feed the expanded plant.

The expansion would double plant throughput capacity to ten-million tons a year from 2014 to produce between 450 000 oz/y and 500 000 oz/y of gold by 2015.

COURT CASES
Centamin’s Supreme Administrative Court (SAC) appeal and its diesel fuel court case were ongoing.

The company was still awaiting the outcome of an appeal process hearing relating to an October 2012 Administrative Court judgment that determined that the exploitation lease for the Sukari mine was invalid.

Last year, several parties, including an independent member of the previous Egyptian Parliament, lodged a claim at the Administrative Court seeking nullification of the concession agreement that gave Centamin the right to operate in the country.

The court determined that although the concession agreement was valid, there was insufficient evidence to demonstrate that the 160 km² exploitation lease between Centamin subsidiary Pharoah Gold Mines and the EMRA had received approval from the relevant Minister.

The Administrative Court, therefore, declared the 160 km² exploitation lease invalid. However, it found that there was a valid lease in respect of a 3 km² area.

Centamin obtained a temporary stay of the judgment and lodged a formal appeal before the SAC.

The next hearing will be held on September 24, during which time the parties will have the opportunity to make submissions.

Operations at the mine were continuing as normal while the appeal process was ongoing.

Centamin was confident that its appeal was based on strong legal grounds and that it would, ultimately, be successful; although it did expect the appeal process to be lengthy.

It added that the EMRA and the Minister of Petroleum had lodged appeals in support of the gold miner.

The company warned, however, that, should the appellate court not “be persuaded by the merits of the case put forward by the group, the operations at Sukari could be adversely affected to the extent that the company’s operations exceeded the 3 km² referred to in the original court decision”.

Meanwhile, the company’s appeal against an Egyptian General Petroleum Corporation (EGPC) decision that companies operating in the gold mining sector in the country were not entitled to local fuel subsidies and had to pay international prices, was also still ongoing.

Centamin was, in January last year, informed by its fuel supplier Chevron that the mining company would have to pay international prices rather than subsidised local fuel prices for the diesel fuel oil used at the Sukari operation.

This added $150/oz to the mining company’s production costs.

Further, Centamin received a further demand from Chevron to repay £E403-million, or about $60-million, in fuel subsidies received by it between late 2009 and January 2012.

While the company has lodged an appeal against the EGPC decision in the Egyptian Administrative Court, and while it believes the grounds for appeal are strong, it has, since January last year, paid Chevron international fuel prices to ensure the continuation of supply to the mine.

“No decision has yet been taken by the courts regarding this matter. The group remains of the view that an instant move to international fuel prices is not a reasonable outcome and will look to recover funds advanced thus far should it win the case,” Centamin stated.

However, the company said it also recognised that there were practical difficulties in reclaiming funds from the government and has, therefore, fully provided against the prepayment of $69.5-million, as an exceptional item. Of the total, $14.2-million was provided for in the second quarter of the year.

This resulted in a net decrease of $12.5-million in the company’s profits for the quarter.

Centamin's share price on the LSE fell by as much as 5.29% on Wednesday, reaching a low of 36.7p a share, compared with Tuesday's close of 38.75p a share. Its share price rebounded somewhat to trade at 37.48p a share in the afternoon.