Stopping the helium fire sale

A quick sell down of the US Government’s stockpiles of helium in the 90s crowded out the private sector and left the US with dangerously low levels of a key industrial material.

Early this month the U.S. Senate Committee on Energy & Natural Resources started considering changes to the way the government manages helium.

Helium is not only being used in party balloons, but it is also a key component in medical devices, industrial welding and high tech manufacturing. And don’t forget scientific research to launch all those weather balloons.

The National Helium Reserve, the world’s only underground helium storage facility, is a depleted gas field located 19km northwest of Amarillo, Texas. Unrefined or crude helium sales from the reserve supply roughly half of all domestic helium needs and one third of global helium demand each year.

The reserve is close to gas fields in southwest Kansas, Oklahoma and the Texas panhandle that contain high amounts of helium, which is separated from natural gas as a byproduct. Helium is collected, piped and injected underground.

Back in 1925 when airships were considered leading flight technology, the reserve was established by the US government as a strategic supply of gas. Later in the 1950s, the helium reserve became important to the US space program.

By the mid-90s a billion cubic metres of gas had been collected but the reserve was also deeply in debt. Congress passed the Helium Privatization Act of 1996 directing the government to start liquidating the reserve to payoff a US$1.4 billion debt.

The committee believes that the current sales structure distorts the private helium market and is creating uncertainty for commercial, Federal, medical and scientific users of helium.

“The proposed legislation would remove this market distortion for the benefit of industry, private, and Federal users. Additionally, the debt will be paid off prior to the mandated final sell off date, which may result in the expiration of the funding mechanism that provides the operating expenses for the reserve. According to the BLM, this may occur as early as mid-year 2013,” said the committee in a statement.

Proposed legislation would extend authorization of the reserve beyond 2015 when the operation was set to expire. The Bureau of Land Management would set helium prices at fair market value. Selling at market rates will also hopefully spur the development of private sources of helium.

via Stopping the helium fire sale |

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 |