AngloGold lowers full-year output guidance

JSE-listed AngloGold Ashanti on Monday said that, despite a strong second-quarter performance, the group has lowered its production guidance for 2013.

The group now expected to produce between four-million and 4.1-million ounces of gold during the year, a decline from the forecast 4.1-million to 4.4-million ounces tabled earlier this year.

“In line with its commitment to move decisively to remove marginal ounces from its production profile and to optimise free cashflow generation, AngloGold Ashanti is revising its current mine plans,” the company stated.

During the second quarter of 2013, AngloGold produced 935 000 oz of gold at a total cash cost of between $900/oz and $920/oz.

“It’s been a strong performance in a challenging environment from our operators and from the teams developing our two new, high-quality projects,” CEO Srinivasan Venkatakrishnan said.

However, the group would continue to curb costs owing to lower and more volatile gold prices and capital expenditure would be focused on AngloGold’s highest quality assets, while curtailing spending or suspending operations at projects that may yield lower returns.

The group also aimed to bring two new mines – the Tropicana joint venture (JV) in Australia and the Kibali JV in the Democratic Republic of Congo – into production by year-end to boost future output.

“Together, these two projects are proceeding to plan and are expected to add, in 2014, attributable production of approximately 550 000 oz to 600 000 oz at a combined average total cash cost of less than our current average,” he commented.

Miners unsure about Rudd’s carbon tax announcement

The Australian resources sector seemed ambivalent to the announcement that the Kevin Rudd-led government would fast-track the move to a floating carbon price, saying it gave little comfort that fundamental flaws eroding the competitiveness of the country’s industry would be fixed.

Over the weekend, Rudd announced that his newly instated government would axe the fixed carbon tax and accelerate an emissions trading scheme, saying it would take the cost-of-living pressures off Australians, while still protecting the environment.

The fixed-price carbon tax, which the government approved under Julia Gillard’s watch in 2011, puts a price on emissions of A$24.15/t and would have moved to a floating price in July 2015.

Details of the new scheme are yet to be released.

Queensland Resources Council CEO Michael Roche said that the industry body could not pass definitive judgement on the new carbon pricing plans in the absence of answers to some questions of detail.

He noted that some of the issues that needed clarification included: the adoption of the European carbon price, whether the new coal pricing would continue to apply to fugitive emissions from coal mines and whether Australian firms would be locked into trading at least 50% of their carbon emissions locally.

“If the federal government’s answers to each of these questions is no, then clearly the intent is no more than a political fix in the shadow of an election, not the fundamental re-think that is so badly needed to ensure Australia’s trade-exposed industries can be internationally competitive,” said Roche.

He added that the Rudd government had the opportunity to lift a discriminatory burden on the Australian coal industry at a time when coal producers were facing the most difficult market conditions in more than a decade.

The Association of Mining and Exploration Companies also noted that the changes to the carbon tax were not enough to address the sector’s concerns.

CEO Simon Bennison has called on the government to fully rescind the Clean Energy Future plan, saying, also, that the part removal of the diesel fuel credit arrangement should be reinstated to pre-carbon-tax levels as soon as possible.

“This will go a long way to recovering some of the lost competitiveness that has occurred over the past few years, as a direct consequence of this and other public policy announcements targeting the Australian mineral exploration and mining sector. These announcements have also dented much needed investor and banking confidence in the industry.”

Bennison pointed out that diesel was a major business input, as it is a primary source of energy for mining and exploration companies, representing between 4% and 7% on typical mining projects. The cost was, however, more pronounced for smaller miners and mineral exploration companies, which, in many cases, have no other option than to use diesel fuel for their essential energy requirements.

Opposition leader Tony Abbott, who continues to call for the complete scrapping of a carbon tax, described the plans to move forward the planned changes to the carbon tax by one year as a “con”. 

“Mr Rudd can change the name but whether it is fixed or floating, it is still a carbon tax.”

NUM case struck off the roll

JOHANNESBURG – An application by the National Union of Mineworkers (NUM) to stop platinum miner Lonmin from derecognising it was struck off the roll by the Labour Court in Johannesburg on Monday.

“The matter is struck off the roll for lack of urgency. The applicant is ordered to pay the costs,” Judge Rob la Grange said.

“NUM did not need to wait until it saw the notices before raising the alarm about the situation. In any event, it could have pressed for notices as soon as it was advised orally of the membership situation at the beginning of April this year,” he said.

The NUM wanted the court to stop Lonmin from de-recognising it, claiming it had detected irregularities in the transfer of its members to the Association of Mineworkers and Construction Union (AMCU).

The NUM also wanted the court to reverse the membership of those who had joined AMCU.

NUM spokesman Lesiba Seshoka said the ruling was a minor setback.

“We are meeting at the Commission for Conciliation, Mediation and Arbitration on Wednesday. We knew from last week that the court has no jurisdiction.”

He said the NUM would speak to its lawyers about what would happen to the offices it occupied at Lonmin’s Marikana operations near Rustenburg, North West.

The NUM had until July 16 to recruit more members and retain its majority union status, or vacate the offices.

What Newcrest Mining’s latest news means for investors

In its ongoing battle to keep ahead of plunging gold prices, Newcrest Mining (ASX: NCM) is again cutting jobs to attack rising costs and dropping margins. Reports have stated that a yet-to-be-confirmed number of fly-in-fly-out workers and contractors are to be cut from the company’s Telfer mine in Western Australia.

The mine employs up to 1,800 people, which Newcrest wants to reduce over the next 6-12 months in efforts to increase the margin on each ounce of gold it sells. The job cuts are on top of 150 job losses in March this year, mostly from the company’s Brisbane and Melbourne offices, as well as 150 jobs cut from its Lihir mine in Papua New Guinea.

The Lihir cuts represent 5 to 7% of the mine’s workforce and is part of Newcrest’s revised 2014 budget to cut both overheads and capital expenditure.

It’s not the first time Newcrest has cut jobs at the Telfer mine. In 2008, the companyreduced the mine’s workforce by around 400 from 1,300 in response to a review of high costs around the time of the global financial crisis. At that point, Newcrest shares were trading for around $17, compared to today’s price of $11.10.

Job cuts are not isolated to Newcrest however. BHP Billiton (ASX: BHP) has started talks with contract mining staff at its Pilbara iron ore mine, which has also been hammered by slumping prices this year, while Rio Tinto (ASX: RIO) has also announced numerous job reductions over the last three months to try and stay ahead of falling commodity prices.

Foolish takeaway

The latest cuts will put increasing pressure on the mining services industry and those directly affected by the cuts, but for investors it is a signal that Newcrest is serious about running the rule over every inch of its operations. Going forward this will result in a leaner and meaner operation which will benefit it if, or when, there is a rise in the price of gold.

Avoiding gold stocks? How about high-yielding ASX shares? Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

Mega Uranium, Cameco may form Kintyre Rocks JV

Toronto-listed Mega Uranium has entered into a nonbinding farm-in and joint venture (JV) term sheet with fellow uranium miner Cameco Australia, covering certain granted tenements and tenement applications in Mega’s Kintyre Rocks project, in the east Pilbara region of Western Australia.

The project, which is owned by Boxcut Mining, a wholly owned subsidiary of Mega, immediately surrounds the lease containing the Kintyre uranium deposit, which is jointly owned by Cameco and Mitsubishi Development.

Mega and Cameco would now work towards negotiating and entering into a formal binding farm-in and JV agreement in respect of the project.

“Establishing a JV with Cameco represents a great opportunity for Mega to advance the exploration and development of the project with a world-class agreement partner that has significant uranium exploration expertise,” Mega said in a statement.

Subject to the negotiation of a definitive agreement, Cameco would earn an initial 51% interest in the project through the sole provision of A$2-million in exploration funding.

Once Cameco had earned this interest, Boxcut and Cameco would form a JV for the purpose of maintaining, exploring, developing and mining the project.

Cameco would be the operator of the project during the Stage 1 farm-in period, and would act as the manager of the JV.

The company could elect to earn an additional 19% interest in the project through the funding of a further A$2–million in exploration funding within four years.

Goldman targets single stocks such as First Quantum in mining sector

Goldman Sachs said it was focusing on single-stock buying opportunities in the mining sector as it does not see any strong catalyst for a sector-wide turnaround at a time when commodity prices are languishing.

Goldman Sachs said its negative outlook on the mining sector was reinforced by expectations of a weaker Chinese economy and lower iron ore and copper prices.

According to a Reuters poll, China’s economy likely grew 7.5 percent between April and June from a year ago, slowing from the previous three months as weak demand dented factory output and investment growth.

Iron ore prices are down nearly 16 percent this year as sluggish economic activity curbs Chinese demand.

Goldman counted global mining majors such as Rio Tinto Plc and Anglo American Plc among its top “sell”-rated stocks, citing negative earnings momentum and the dependency of their free cash flow on iron ore.

“We see upside potential to nickel, aluminium and zinc prices but these do not impact our large-cap coverage sufficiently to get overly positive,” Goldman said.

Asset sales and cost cuts would not be enough to compensate for the weak underlying performance of large-cap mining stocks, the brokerage said.

“While the sector has underperformed it is not particularly cheap…and those that look cheap on near-term earnings estimates are facing big declines in 2015,” the brokerage said in a note dated July 9.
Instead Goldman said it favoured mining companies that focused on funded growth and strong free cash flows.

Goldman Sachs upgraded Canada’s First Quantum Minerals Ltd to “buy” from “neutral”, attributing the upgrade to its industry-leading growth, an attractive project portfolio and an improving cost position.

The brokerage also upgraded London-listed Vedanta Resources Plc to “buy” from “neutral”, saying the company offered near-term earnings growth helped by its aluminium, copper, zinc, and energy businesses.

Rio Tinto’s London listed shares were down 1.22 percent at 2703 pence at 0906 GMT on Wednesday, while Anglo American shares were down 1.5 percent at 1262 pence.

Cutifani to cough up for fine wine on gold wager – Bristow

Anglo American Plc Chief Executive Officer Mark Cutifani will need to splash out on fine wine in October when he loses a bet that the Kibali mine won’t produce gold this year, Randgold Resources Ltd. CEO Mark Bristow said.

“It’s still on track and it’s still within budget,” he said yesterday. “I’m in no doubt that Mr. Cutifani is going to have to cough up for a very expensive South African red wine.”

The two made their wager on when output would begin at the Democratic Republic of Congo mine two years ago at an investor conference in Miami when Cutifani was the head of AngloGold Ashanti Ltd., like Randgold a 45 percent owner of Kibali.

Cutifani offered to buy South African wine if it produced gold this year and an Australian vintage if output began in 2014. Bristow is South African and Cutifani from Australia.

Either way, the outcome of the bet won’t compensate for the 35 percent slump in gold prices to $1,255 from their peak of $1,921 in 2011 that’s squeezing companies’ profits. The industry needs major restructuring and must refocus on higher-grade ore that can be mined in quantity to reduce costs, Bristow said.

Kibali will help raise Randgold’s annual production to more than 1.2 million ounces by 2014 from about 800,000 in 2012, according to Bristow’s Johannesburg presentation yesterday. The mine will produce at least 30,000 ounces this year, 550,000 in 2014 and average about 600,000 ounces in its first eight years.

Randgold’s preferred exploration areas are West and Central Africa and Russia, with South American risks making it hard to run profitable mines even with deposits that are attractive, Bristow said. “South America carries much more risk than Africa,” he said. “Colombia makes Mali look like a walk in the park. We don’t have to arrive there in armored vehicles.”

Randgold is open to investing in Russia even with the potential for government interference, Bristow said.

“If you’re not in Russia in the gold industry in the next 10 years, you’re going to be behind the curve,” he said. “We look over the fence at Russia all the time.”

Emily Blyth, a spokeswoman for Anglo American, declined to comment on behalf of Cutifani. 

Newmont to sell Canadian oil sands stake for $578m

Newmont Mining Corp., the biggest U.S. gold producer, has agreed to sell its stake in Canadian Oil Sands Ltd. for about C$608 million ($578 million.)

Newmont owns about 6.5 percent of Calgary-based Canadian Oil Sands and will sell its stake to a banking syndicate that will then offer the shares to various buyers, Omar Jabara, a spokesman for Greenwood Village, Colorado-based Newmont, said in an e-mail today.

“Our investment in Canadian Oil Sands has returned a lot of value for Newmont and its shareholders and this stake sale also will help streamline and rationalize our portfolio of assets,” he said.

Newmont is among gold companies that spent $195 billion on acquisitions in a decade-long bull market, which are now selling assets as the precious metal’s price tumbles. Whitecap Resources Inc., a Canadian oil and natural gas producer, said on June 27 it agreed to buy energy assets from Barrick Gold Corp., the world’s biggest gold producer.

Gold declined 26 percent in 2013, sliding into a bear market in April while equities and the dollar rose. Gold rallied for 12 years through 2012 as the U.S. Federal Reserve cut borrowing costs to a record to bolster the economy.

 

 

Ralated Article: Aecon partnership with Matawa First Nations for Ring of Fire mine projects

Aecon Group has signed a Memorandum of Understanding with Kiikenomaga Kikenjigewen Employment & Training Services (KKETS), A Division of Matawa First Nations. The agreement is the beginning of a strategic partnership between Aecon and KKETS; starting with a joint commitment to expand training and development programs for First Nations in northern and remote areas surrounding Ontario’s Ring of Fire mining development. Aecon and KKETS will work collaboratively to develop Remote Training Centres to provide local access to community-based education, trades and apprenticeship training, operated by First Nations in a socially and culturally relevant environment.

The Remote Training Centres take advantage of state of the art computerized technology systems and high-speed satellite broadband internet to connect communities. The Ring of Fire projects were covered in detail in IM, January 2013, pp12-18.

“Our relationship with the Matawa First Nations and KKETS is an important component of Aecon’s strategic approach to community engagement and skilled labour development,” says Teri McKibbon, Aecon’s President and Chief Operating Officer.  “Education and training is a priority for Aecon. Programs such as the Remote Training Centres are an innovative response to the future demand for labour in remote areas, and will make positive contributions to surrounding communities.”

“In the past, First Nations did not have the same participation in the labour market, but through the process of developing and maintaining relationships with key employers, potential employment opportunities have been recognized,” stated Morris Wapoose, KKETS’ Program Manager. “We want to thank Aecon for stepping forward and we look forward to building this positive relationship.”

Matawa First Nation Management (MFNM) is a non-profit corporation and Tribal Council that provides advisory services to its nine member First Nations of Eabametoong First Nation, Neskantaga First Nation, Marten Falls First Nation, Nibinamik First Nation, Webequie First Nations, Constance Lake First Nation, Aroland First Nation, Long Lake # 58 First Nation, and Ginoogaming First Nation. KKETS is the Aboriginal Skills and Employment Training Strategy Provider for Matawa First Nations and is committed to delivering programs that meet the needs of employers and trainees for all Matawa First Nations.

Aecon Group is a Canadian leader in construction and infrastructure development providing integrated turnkey services to private and public sector clients. Aecon is pleased to be consistently recognised as one of the Best Employers in Canada.

Vancouver City Council Says No to Coal

The Province reported that Tuesday night Vancouver’s city council voted to ban the storage, handling and trans-shipment of coal at the city’s marine terminals and berths. The move is being described as symbolic due to the fact that no coal facilities currently exist in Vancouver and because the city does not have any power over Port Metro Vancouver, North America’s second-largest coal exporter.

 

As quoted in the market news:

The Vision Vancouver-dominated council voted 9-2 for the zoning and development bylaw amendment that a staff report said was in line with the Greenest City 2020 Plan, which aims to curb greenhouse gas emissions and set the air quality target to “breathe the cleanest air of any major city in the world.”

No coal facilities exist within Vancouver’s jurisdiction, but staff said the motion to ban any future shipments of coal was partly prompted by industry inquiring about the possibility of shipping coal out of private lands on the city’s northeastern waterfront.

 

 

 

 

The Ralated Article: Saskatoon potash producer signs agreement with China

Gensource Potash Corp (CVE:GSP), a Saskatchewan potash producer, has signed an agreement with China to develop potash projects in the province, Global News reports.

“Our goal is to deliver Saskatchewan potash under long term supply contracts to markets where we have solid long term relationships,” Mike Ferguson, Gensource CEO told Global News. “China is a vital market player going forward.”

Details of the agreement have not yet been released.

In June Gensource and Canada Potash Corp (CPC) executed a binding term sheet in which the companies agreed to combine their resources to develop potash properties in Saskatchewan. As part of the agreement, CPC consented to introduce Gensource to its contacts in China.

Saskatchewan contains almost two-thirds of the world’s recoverable potash but the province has been trying to attract foreign investors to tap these resources.

Saskatoon Mayor Don Atchinson traveled to China in April to try and promote the city as an investment opportunity. Potash is the only commodity mined in Saskatoon but the province is a world leader in potash and uranium sectors and holds about 55% of the global potash resources.

Shell’s Alberta oil sands one step closer to expansion

Royal Dutch Shell’s (NYSE:RDS.A) planned expansion of its Jackpine oil-sands project in Alberta is looking more likely after a panel of federal and provincial regulators conditionally approved the move.

The group says it supports the project despite indications that the expansion would have “significant” adverse effects on the environment. The economic benefits outweigh these considerations, the committee’s report summary indicates.

“The Panel considers these effects to be justified and that the Project is in the public interest,” the summary reads.

The regulators’ 400-page report includes 88 recommendations to federal and provincial governments and 22 conditions for Shell.

Throughout the review process the committee studied the project’s environmental impacts and found that expansion would disturb wetlands, old-growth forests, traditional plant potential areas, wetland-reliant species at risk, migratory birds and biodiversity. Aboriginal traditional land use would also be affected.

The report noted that the energy giant did not propose or support the use of conservation offsets in its application. Therefore the panel advises that the Alberta government mandate the use of these conservation initiatives.

In 2011 Shell Canada launched its own environmental project, purchasing a 1,820 acres of boreal forest for biodiversity conservation.

Included in the conditions is a requirement that the oil company have no fluid tailings at the end of the mine’s life.

The regulatory body has been assessing Shell’s proposal since 2011 and will submit its report to federal and provincial governments for further review.

The application, which has been under review since late 2007, would increase bitumen production by 15,900 cubic meters per day at the mine site located 70km north of Fort McMurray. Current daily production of the crude is about 31,800 cubic meters.