Apostrophe
28 Feb 2017
why still going down? If the market understands the current position, why is the SP still falling? 10% in a week?Grateful for any insight - thanks!
Eadwig
28 Feb 2017
Re: Goodbye Grasberg? "Shareholders are pressuring Freeport McMoRan (FCX) to stand up to the Indonesian government over changes the country wants to make in the miner's contract, with many of them believing FCX has "been too nice," CEO Richard Adkerson says.The CEO says Rio Tinto (RIO), a partner in FCX's Grasberg copper and gold mine in Indonesia, also supports the company's tougher approach.In some of his strongest language yet, Adkerson says Indonesia's new regulations are "in effect a form of expropriation of our assets, and we are resisting it aggressively."FCX remains locked in a standoff with the Indonesian government over permission to export copper concentrate produced at Grasberg, which accounts for about a third of its annual copper production and 40%-50% of the value of its worldwide assets."LKH, RE: Mongolia and Bold Bataar (my next nickname when ii bans me)I did some judo myself as a teenager, its not much of a martial art to intimidate people, especially in a place where the national sport is wrestling!
LK Hyman
22 Feb 2017
Re: Goodbye Grasberg? Eadwig,"Then you have to deal with the Mongolian government instead, of course."No worries, m8. They've got the wonderfully named Mongolian feller Bold Baatar in a high rankin' position on the RIO payroll. He can handle the Mongolian top boys as, according to what I found on the web, he's a gold medallist judo expert.On the copper front RIO have the big Resolution copper project in the USA to fill any gaps in their copper production profile. OK, it'll take a few years to bring the big sucker on stream, but it'll benefit both RIO and my BLT when it starts spitting out the red metal. I'm sure that Trumpton will approve any plans they may have to get digging right away, erm, right away.LKH on the flybridge
Eadwig
18 Feb 2017
Re: Goodbye Grasberg? A bit more info, first released Feb 9th, - I missed it at the time - its the details in between the news that are interesting though, I think. Keep in mind reported comments are a week old. - already posted on ANTO board: RIO holders take note of Bingham Canyon situation! It never rains but it pours!Goldman Sachs say Cu prices could rise further if disruptions at the world's two largest copper mines persist, as workers at the Escondida mine (BLT & RIO mostly) begin their expected strike and a new export permit at Freeport McMoRan's Grasberg mine (FCX & RIO) has yet to be granted after the prior permit expired nearly a month ago.Goldman were already bullish on Cu believing China's economy is improving after higher than expected GDP at 6.8% was reported recently. Goldman said, “The timing of these disruptions is important because they are occurring over the same period as we expect to see a strong seasonal and cyclical uptick in Chinese demand post Chinese New Year and into 2Q2017”Goldman reckon between them the two two mines were expected to produce approx 9% of global mined Cu this year. Goldman also noted potential supply risk in RIO's Bingham Canyon because current contracts expire in March 2017. I hope for RIO's sake the contract extension is already done, as they don't have much of a negotiating leg to stand on otherwise.Macquarie, which recently raised its copper price forecast by 9.3% to $5,850/metric ton (I need a conversion ap, and you don't spell metric tonne like that, silly American people), expect the Escondida strike to last a week or two, reducing global supply by as much as 45K metric tonnes. I don't know what they base the 'week or two' on, but their estimate for lost output is of interest anyway which is why I included it, even though we don't know if that is 5 [working days=1 week] or 14 days [2 working weeks of 7 day's each]. It would be easy to figure out if the bleedin mine was owned by only one, or even two, players. Its never that easy with these figures though, and I'm sure Macquarie are being deliberately vague so they can keep selling their industry reports.
Eadwig
18 Feb 2017
Re: Goodbye Grasberg? LKH,I've been checking back on speeches given by Jean-Jaques erm ... (I always want to say Burnell here, but he plays base for The Stranglers) anyway, the new(ish) RIO CEO, who was promoted to head up 'Copper and Coal' and bring those disparate divisions under one roof.As I suspected, he talked very big about Grasberg in the past, and also based a lot of justifications on RIO's future strategy on them getting a 40% share of it in 2021. So he has a lot personally invested. That's why I judge his comments to be posturing for the upcoming arguments with the Indonesian government.On the other hand, especially with their (now) one customer on strike for who knows how long, and how often in future, that Oyu Tolgoi can eventually do the business for them and more than fill the hole left by Glasberg, even taking into account the 2021 increase in ownership.Then you have to deal with the Mongolian government instead, of course. That's a bit like choosing between the devil and the deep blue sea.I dunno, if I were he I might walk away from Glasberg unless I was asked to stay with improved guarantees. The mine itself is an embarrassment and has been for years in terms of environmental damage and significant reduction in life expectancy of workers.One of the other things I noted while searching his speeches this morning was the increasing need for the industry to be able to demonstrate to the world how green and essential it is, the social contract I think he calls it in one speech (obviously I could only read so much of that kind of twaddle). The only thing Grasberg has going for it is they are mining copper which is required for sustainable and efficient ... well, all sorts of things ... and is 100% recyclable. But the mine is in an otherwise very photogenic and bio-diverse part of the world and the media love to show the bad conditions and pollution it causes etc etc. On the other hand, Oyu Tolgoi wouldn't be missed if someone accidentally detonated a few megatons of hydrogen bomb on it and the local wildlife, Camel Spiders, are about the most horrible and aggressive creatures on earth and would attack on sight any animal loving environmentalist looking to give one a hug. The media wont visit giving you a bad name because the Gobi desert just doesn't have the pull of a tropical paradise Indonesian Island (so they tell me). And its very cold as well - but a dry cold which, as a northern lad, I found was T shirt weather at -15, although the locals looked somewhat puzzled at my dress from under their yak skin coats and Siberian fox skin Davy Crockett hats.So concentrating on Mongolia and exiting Indonesia *might* be RIO's best long term strategy, but will leave a hole in their copper production for quite some time.The whole current situation does highlight a weakness in concentrating on less than a handful of Tier 1 assets for each of your revenue streams though, if you can suddenly be faced with losing half of your production more or less overnight (Escondia strike and situation in Grasberg). That's the other side of having a super-slick balance sheet, I suppose.The problems may only be short term (unless they do pull out of Grasberg, which I doubt because Oyu isn't close to filling the gap left in projections even by 2021), but a few short term problems like that can ruin your financial year when it comes to failing to meet your previous projections, and might necessitate the issuing of profit warnings approaching year end.The last thing any top company needs to be doing at the moment is issuing a profit warning - the market is VERY unforgiving right now as you have probably noticed. Once, a profit warning might see a 10% drop in share price which you could happily buy and sell a couple of weeks later for a very quick 10% gain as all returned to normal. Not any longer - look at Next and Bovis, just recently, both of whom have got away with it before, Wizz Air too and plenty in the US fr
LK Hyman
18 Feb 2017
Re: Goodbye Grasberg? Eadwig,"must check if the ARMS board still exists on ii LOL"Yup, it's still there .... an excellent read for anyone interested in how an ostensibly attractive opportunity in a far oiff country of which we know little can turn into a munter, jump off the tracks, roll down the embankment and plunge into the abyss far far below.One doesn't hear much about the boy Nat these days; I wonder what he's up to?LKH on the flybridge
Eadwig
18 Feb 2017
Goodbye Grasberg? RIO could walk away from its interest in the huge Grasberg copper mine in Indonesia amid uncertainties over the future operation of the mine, Jean-Sebastian Jacques reportedly told an analyst briefing."Everyone was taken by surprise," the CEO said, referring to Indonesia's halt of copper exports from Grasberg, which mine operator Freeport McMoRan (FCX) has warned could force it to cut production and its local workforce.A strike at Indonesia's biggest copper smelter, which is FCX's only domestic buyer of copper concentrate, has added to pressure on the partnership.Rio will decide in "coming weeks and months" whether to sell or exit its option to take an effective 40% stake in Grasberg in 2021, Jacques said.[Sounds like a bit of counter-posturing to me, it depends if they're getting a fair price for the copper they extract or not to some extent. Indonesia has been a terrible place to mine in for quite a few years now, due to government policies and interventions - Mind you, some of the mining conditions and safety standards (not) followed in the past were deplorable, so the backlash is perhaps well deserved, and has been spreading across to south-east Asia also - Eadwig]
trueblog
17 Feb 2017
Re: Intrinsic Value BumpAny thoughts guys?
Eadwig
16 Feb 2017
Re: Director takes the plunge LKH, "They should just send their hairy-arsed explorers out into the field"They all disappeared in the first round of cost-cutting pretty much, didn't they? Not just at RIO either. As for acquisitions, I agree, steer well clear (unless you have a %age as a JV and already know the conditions on the ground for a particular asset).The sector as a whole probably showed it was about the worst at M&A of all sectors since the start of this century. A result of "How do we take advantage of unprecedented growth in an industry that often takes 5 years lead time to get a new asset producing?" Answer: "Buy more production capacity at just about any cost!". Didn't work though, did it? Not just because they took on lots of debt then hit the credit crunch, but the growth began dropping away too. Also, buying whole companies to get your hands on one or two primary assets saw large parts of the rest of the purchased business being written off.Lots of lessons were no doubt taken on board, but I can't really think of when they might be applied again, unless India gets its act together in spectacularly short order. Otherwise, all the same mistakes will probably be made by a new generation by the time the Indian commodity super-cycle finally arrives - if it ever does. Certainly not guaranteed. Perhaps only a command economy can generate the new demand that China did in such short order.
LK Hyman
16 Feb 2017
Re: Director takes the plunge Games,"I suppose he's ruling out acquisitions as a use of Capital."I HOPE he's ruling out acquisitions .... RIO has a pretty sorry-assed record when it comes to acquisitions; Alcan, the Mozambique coal munter to name but two.They should just send their hairy-arsed explorers out into the field and tell 'em not to come back until they've found something worth developing. Anyhoo they have plenty of organic capex they could do, not to mention scratching around a bit further afield in the Pilbara. The place is made of iron ore innit though?LKH on the flybridge
gamesinvestor
16 Feb 2017
Director takes the plunge [link] Brown, a non-executive director at Rio Tinto, picked up 4,500 American Depositary Receipts in the miner at an individual price of US$46.27, pocketing out a total of US$208,215 in the process."""well halleluja""""CFO Chris Lynch reiterated there are only three destinations for RIO’s cash generation—capital expenditure, strengthening the balance sheet, or shareholder returns."""statement of the blxxdin obvious?I suppose the other options are that you could hand the cash to your wife's firm who supplies services to the company, or issue it as bribes to foreign firms in exchange for contracts (Rolls Royce) or just waste it? Maybe there are other ways.I suppose he's ruling out acquisitions as a use of Capital.Games - will probably hang on to this now in the hope that the mentioned 4335p is not just a fantasy figure.
Eadwig
16 Feb 2017
Re: Bloomberg: Iron Ore +5% this morning Games, "It's all total guesswork isn't it? I don't think anyone has the first clue what is going to happen with commodity pricing."Yeah, I agree. I think waters have been muddied by the change in policies in China which have caused a re-jig of the supply chain and some short-term lack of supply as adjustments are made. I cannot find any data to support actual increased global demand in base metals, although such data does lag very badly unless you are prepared to pay top dollar for analyst reports. In most cases you're lucky to find a breakdown of supply and demand up to the end of 2015 that is both in the public domain and from a source that can be trusted.I just re-read my post before reading your response, and was struck by the paragraph I've re-quoted below. It reads like someone trying to have their cake and eat it. Or, to be more blunt about it, someone admitting commodity demand is dropping but that it actually suits their particular 'brand' of that same commodity:“There’s another fundamental shift going on in China, and that’s the preference for the more efficient and less polluting end of the industry,” Lynch says, believing the switch by mills to higher quality imports will support Rio and other exporters while China’s growth becomes less reliant on commodities."Which still doesn't explain why the price of the commodity should continue to rise or even stay flat, as far as I can see and the scenario to which Lynch gave the above response.I still think GLEN may have more room to run, assuming markets keep going up generally. Extremely hard to gauge given GLEN's badly priced IPO, disastrous acquisition of Xstrata and near-death experience through being over-leveraged. They don't have exposure to iron ore, haven't been reliant for recent results on gaining top prices for their coal due to hedging policies, and copper is likely to remain higher than expected for longer due to the Escondia strike cutting supply (from BLT and RIO), just as GLEN's own supply cuts, partially made to help support the Cu price (if Ivan is to be believed), are coming back online with significant increases in supply and substantially lower costs.More minor revenue streams for GLEN have had higher prices, including oil which has remained higher for longer than expected due to OPEC cuts (or rumours thereof), Zinc prices are up about 60% over the last 12 months (off multi-year lows). Nickel didn't drop as much as other metals in the last few years, but did hit multi-year lows finally this year. It has bounced about 20% from there so far though.GLEN's Cobalt production has been added to which could turn out to be a very interesting development given its presence in all the strongest magnet types required for 'green energy' turbines as well as its requirement in the manufacture of Lithium-ion batteries. I think GLEN may now be the world's biggest single supplier of Cobalt. Whether or not that can convert into significant revenues all depends on where energy production goes in future.GLEN also announced a large deal involving the marketing of oil for a major Russian supplier, which should boost the otherwise pretty stolid, year in, year out, marketing revenues.Otherwise I'm out of mining, having sold my final tranches in RIO a while ago now, too early as it turns out (about par for the course with me and miners). I'm not sure I'll be getting involved again in future either. Commodity cycles are too steep and painful too often and very difficult to time, while taking up huge amounts of research time. I only ever got involved with GLEN because of its 'marketing' (commodity trading) division, reasoning that being the middle man is the best place to be where commodities are concerned over the full length of a commodity cycle. I'd be happy if GLEN sold off all its mining interests tomorrow and became just a pure commodity trader.Its many years now since my last smooth entry and exit with high returns from
gamesinvestor
14 Feb 2017
Re: Bloomberg: Iron Ore +5% this morning ""Several analysts believe iron ore is poised to correct sharply in H2 this year on rising supply from Australia and Brazil, but RIO CFO Chris Lynch tells Bloomberg that he thinks iron ore will defy forecasts for a dramatic price collapse as China’s economy remains strong and the country increases demand for higher quality imports."""It's all total guesswork isn't it?I don't think anyone has the first clue what is going to happen with commodity pricing.Games - like banks, which I am out of, I'm edging toward the exit door (+GLEN and BHP)
Eadwig
13 Feb 2017
Re: Bloomberg: Iron Ore +5% this morning Rhigos, "I understand reason why price gone up is because Chinese government restricted number of days their iron refineries can operate so they need higher grade ore"Ah yes, this is possibly the same restriction on working days I mentioned below - although this may be on actual refineries as a measure to cut pollution rather than on individuals. [Unbelievably difficult to get a grip on this 'new' policy and exactly how it affects workers in different sectors within China].Anyway, iron ore prices are reported to have continued to rise:Iron ore prices rose by more than 7% in China overnight to its highest level since October 2013, extending the recent increase driven in part by a pick-up in construction in the country following the annual Chinese new year holiday.Ore with 62% content in Qingdao rallied overnight to as high as $92.23/dry ton, the highest since August 2014.At the same time, growth in iron ore production has slowed, rising by just 1.1% last year to 3.26B metric tons, vs. the 6.5% compounded annual rate of growth during 2006-15, according to Thomson Reuters.Several analysts believe iron ore is poised to correct sharply in H2 this year on rising supply from Australia and Brazil, but RIO CFO Chris Lynch tells Bloomberg that he thinks iron ore will defy forecasts for a dramatic price collapse as China’s economy remains strong and the country increases demand for higher quality imports.“There’s another fundamental shift going on in China, and that’s the preference for the more efficient and less polluting end of the industry,” Lynch says, believing the switch by mills to higher quality imports will support Rio and other exporters while China’s growth becomes less reliant on commodities.The world's three top iron ore producers are RIO, BHP and VALE.
Eadwig
13 Feb 2017
Short term factors for RIO price. Rio Tinto reported a better than expected full-year 2016 profit and saying it will pay a much higher dividend than expected and buy back $500M of shares.Higher iron ore prices boosted underlying profit 12% Y/Y to $5.1B in 2016, beating the consensus analyst estimate of $4.75B.RIO says it will pay an annual dividend of US$1.70/share, down 21% from last year's $2.15/share but well above the $1.36 analyst consensus and the company's stated commitment to pay a minimum $1.10 dividend.Rio says a recovery in the price of iron ore, which accounts for most of its earnings, roughly doubled last year from the lowest in more than a decade.Copper asset valuations are still too high, and the diamond industry is “very attractive,” CEO Jean Sebastien Jacques says in a Bloomberg TV interview.Rio Tinto to give up diamond mine to Indian stateRIO says it will hand over its Bunder diamond mine to the government of India's Madhya Pradesh state, where the project is located. Rio halted work at the mine last year in a bid to cut costs and conserve cash, saying development of the mine would have cost $330M.The company has strong ties with the Indian diamond industry, employing more than 250K Indian diamond cutters and polishers for processing its diamonds.(Diamonds/Copper/Indian growth named by Sam Walsh as the 3 main drivers for RIO's medium term growth in Nov 2014 - or was it 2015?)RIO denies that its sale of its 46.6% stake in the Simandou iron ore project in Guinea to Chinalco has stalled."The two [negotiating] teams are working as we speak. The Rio team was in Beijing last week again and we'll be in China next week again," CEO Jean-Sebastien Jacques said during today's earnings conference call, while declining to say if he was confident that Rio and Chinalco would finalize the deal within the original six-month timeframe.If the deal goes ahead, Rio has said it would receive payments of $1.1B-$1.3B, based on the timing of the project's development.Escondia Strike:Latest reports as the miner's union builds a tent city outside the mine is that the strike is expected to halt production for up to 2 months. [No wonder J-S Jacques is saying Cu is still over-valued at the moment - Eadwig]. Although BHP own the largest stake in this mine, RIO also owns a very large stake (35% from memory?) and it is currently the biggest copper producing mine in the world.The wage settlement at this mine tends to set wages throughout the South American copper mining industry, especially Chile, so most majors will be affected by the outcome.
