Archives for April 2012

Iron ore billionaire plans to rebuild the Titanic and run against Deputy Prime Minister

Clive Palmer, who made his fortune through securing access to 160 billion tonnes of iron ore reserves in the Pilbara Ranges, plans to rebuild the Titanic and contest the seat held by Wayne Swan, the Deputy Prime Minister of Australia.

Palmer, who is 58 and has an estimated net worth between $3 to $6 billion, made both announcements on Monday in Brisbane.

Palmer says he plans to run as candidate in Australia’s conservative party, Queensland’s Liberal National Party (LNP).

Palmer is not a fan of the recently passed coal tax.

If chosen to represent the Brisbane seat of Lilley, he will try to unseat Swan who has held the seat since 1998.

“I believe we should be getting bigger and stronger, creating more wealth for our people, so that we have more money to distribute to the things that need to be done in this country,” said Palmer during his announcement.

“[Swan] believes in a redistribution of wealth and making the economy smaller.”

Swan said he looked forward to contesting the seat against Palmer.

“Mr Palmer will use his very considerable resources, and has used his very considerable resources to capture the Liberal Party of Queensland, and he now intends to use them if he’s pre-selected, in contest between myself and Mr Palmer,” said Swan.

“I relish the prospect of that contest. I care deeply about ideas and what sort of country we want to be, what sort of country we want to hand to our children and grandchildren.”

Palmer’s other big announcement was plans to build the Titanic II, a near replica of the ill-fated ship that sunk this month 100 years ago.

The Titanic II would differ from the original in being equipped with modern engine and a modern hull design.

When built the Chinese navy has been invited to accompany the ship when it runs its maiden voyage from England to New York.

via Iron ore billionaire plans to rebuild the Titanic and run against Deputy Prime Minister |

Vale makes most bullish iron ore comments yet. $180 a tonne anyone?

The Financial Times reports Brazil’s Vale expects prices for the steelmaking ingredient to remain strong in 2012, “climbing as high as $180 a tonne” as economic growth in China “re-accelerates”.

“There is a new level of prices for iron ore globally,” Tito Martins, chief financial officer told the paper, “arguing that when prices drop below about $120 a tonne, higher-cost Chinese producers cease to be competitive.”

FT argues that “iron ore prices are, in effect, dictated by the highest cost producers who shut down output when prices tumble.”

Friday’s comments in a conference call with analyst follow that of the CEO of the number one iron ore exporter earlier this month. Murilo Ferreira told reporters at company HQ in Rio de Janeiro: “Those who have been betting against Chinese growth since the 1990s will be wrong again. China is just getting going.”

These are strong words from a company that has seen iron ore imports by China, its biggest customer, slump more than 9% last month. Vale alone controls more than a quarter of the 1 billion tonne seaborne iron ore trade and China represents 60% of global demand.

But Vale is definitely putting its money where its mouth is – the company plans to invest more than $50 billion to expand production of iron ore to a staggering 400 million tonnes per year.

The import price of 62% iron ore fines at China’s Tianjin port was $145.40 at tonne on Friday, levels it has been stuck at for most of 2012. Before staging a mini-crash in October last year, iron ore traded at over $180 a tonne, an-all time high.

The price of 62% iron ore never strayed from $10 – $14 a tonne for more than 20 years (1991 was a banner year – miners got all of $15.03 for their haul). The state of affairs was due to secretive negotiations and annual contracts.

Then at the end of 2004 all hell (for Chinese steelmakers that is) broke loose. The Big 3 – Vale, BHP Billiton and Rio Tinto – decided enough is enough and put up the price 72%, marking the start of a supercycle and the beginning of the end of the old pricing system.

via Vale makes most bullish iron ore comments yet. $180 a tonne anyone? |

We need to talk about how rare earth prices are imploding

We need to talk about how rare earth prices are imploding

Platts reports Thursday China will start forcing rare earth producers out of business if they don’t qualify for new value-added tax permits being allocated from May 1.

Officially it’s China’s latest bid to curb resource plundering, dangerous artisanal mining and widespread pollution.

China produces over 95% of the world’s REEs used in a variety of industries including green technology, defense systems and consumer electronics.

Platts quotes one Chinese industry source as saying: “We believe it is a start that China will undertake to regulate the country’s rare earth production, however there is a long way to go.”

Cleaning up the notoriously dirty rare earth business in China is laudable, but the latest regulations are probably aimed more at trying to stop chronic overproduction of REEs in Sichuan and Inner Mongolia, which have recently led to an implosion in export prices.

Official output quotas in place since 2007 are readily exceeded by 40% – 50% each year. While prices have been moderating since the record levels of Q3 2011, in 2012 prices for many rare earths are close to collapsing.

Abundant, less valuable REEs such as lanthanum have experienced the sharpest reversals.

Lanthanum oxide – used in ceramics and fuel catalysts – for example rose from a price of just $8.71/kg in 2008 to $117/kg in the third quarter last. At the start of 2012 it had pulled back to $66/kg.

Now it has halved again – on Monday a kilogram of lanthanum could be picked up for $26. That’s a 77% collapse in less than nine months. And consider that inside China that same kilogram costs half $13.15.

When export prices of lanthanum were at record highs of $117/kg domestic Chinese prices were less than $20. That differential has gone from almost 10 times to less than double.

This price behavior can be seen across the board.

Cerium oxide used to polish TV screens and lenses is now also trading at $26 from all-time highs of $118 in the September quarter last year and just under $60 in Q4. The price for cerium oxide was $4.56 in 2008.

Heavy and scarcer REEs have generally held up better, but many have experienced price declines of 50% or more.

Neodymium oxide used in windmills have seen a dramatic slump – from $338/kg in Q3 2011 to $120/kg as at 23 April.

A hybrid vehicle ingredient, dysprosium rocketed from a price of $118.49/kg in 2008 to $921.20/kg in the third quarter of 2011 and $2,262/kg by September last year.

Dysprosium, also used in conjunction with vanadium and other elements in making laser materials, has now given up more than $1,000 per kilogram and went for $1,170 this week. The price is also now much more in line with domestic Chinese prices of $729/kg.

The reversal in europium oxide – the priciest REE which is used in medical imaging and the nuclear and defence industries – has been most startling.

The price of europium increased almost 10-fold from $492 in 2009 to average $4,900 in the third quarter of 2011. Three months later it dropped $1,100 in price and is now worth $2,420 a kilogram. Chinese domestic europium is another $1,000 cheaper at $1,315/kg.

While producers of flat screen TVs, hospital scanners, jet fighter electronics and sophisticated laser systems must be rejoicing rare earth mining heavyweights like Molycorp and juniors like Quest and Avalon cannot be too thrilled by events.

via We need to talk about how rare earth prices are imploding |

Near-record for mining M&A in 2011 to be followed this year by an “African Renaissance”

Near-record for mining M&A in 2011 to be followed this year by an “African Renaissance” – PwC

by Cecilia Jamasmie | March 5, 2012

If 2011 was a near-record year for mining mergers and acquisitions (M&A), with over 2,600 deals worth $149 billion announced in the global mining sector, 2012 will be remembered as the year of the “African Renaissance,” concludes the latest PricewaterhouseCoopers’ report released this morning.

Despite a weak macro backdrop and falling commodity prices, 2011 M&A deals volumes in mining were close to historic highs and values were 33% higher than 2010, says PwC’s Global Mining 2011 Deals Review & 2012 Outlook: On the road again.

Canada led the way in mining deals making, with 30% of all 2011 global mining acquisitions involving a Canadian buyer, a greater stake than any other one country.

In terms of sectors, gold generated much of the M&A activity, driven in large part by record cash flows spurred on by the high price of bullion, and the desire for big producers to seek new supplies.

“Buyers were plentiful, bidding wars ensued and valuations were high, all of which are unexpected in an environment of resource price erosion,” says John Nyholt, Canadian Mining Deals Leader, PwC.


Mining companies didn’t tend to look to far when it came to deals. PwC reveals that geographic clustering remains prevalent in the sector.

“With the exception of a small number of outliers, the developed and growth worlds are biased towards transacting within their own regions. Very little ‘cross-pollination’ occurred between the two worlds,” says Nyholt.

Regarding Western-led deals, 72% involved acquisitions of projects in another developed world region. Sixty-one per cent of Canadian-led acquisitions involved projects in Canada. The report also indicates that the trend of Western miners’ bias to “playing it safe” may be a barrier to long-term growth, given that roughly three quarters of known reserves lie in countries outside the developed markets.

“Numbers don’t lie. Developed nations have to ask themselves– What is the long-term cost of not doing more business in these markets?,” adds Nyholt.

In 2011, key growth market buyers represented 24% of acquisitions, nearly 50% higher than the total deal value at the 2006 market peak.

“While these markets aren’t yet dominant, with each passing year, growth market miners increasingly become forces to be reckoned with,” says Mr. Nyholt.

To effectively approach a growth market and reduce the risk of a deal cancellation, PwC recommends Western entities, especially boards and shareholders, “reconsidering the manners in which the balances of risk and reward are weighed.”

African Renaissance

According to the report, the global mining industry will continue to see high M&A volumes and values. One particular region emerges this year, according to PwC’s forecast, as the one that will attract most deals: Africa.

The company predicts that an increasingly friendly investor climate will prompt an “African Renaissance,” characterized by increased investment into Africa’s mining sector.

PwC’s vision matches the survey’s results published on Friday by The Economist Intelligence Unit, which said that two-thirds of institutional investors interested in frontier markets see Africa as holding the greatest opportunity.

“With demand for new projects, rising production costs and declining developed world reserves, miners will seek out targets to build scale and achieve cost efficiencies,” says Nyholt.

The “top five” resources (gold, copper, coal, iron ore and silver) are expected to be busy, says the report. However, it’s not likely that M&A valuations in the gold sector will be bid up to bridge the gap between the price of gold and the price of gold equities.

via Near-record for mining M&A in 2011 to be followed this year by an “African Renaissance” – PwC |

Broadcast live today: How James Cameron’s company will mine asteroids

Broadcast live today: How James Cameron’s company will mine asteroids |