Mining

Iron ore rally is triumph of hope over reality

8 Mar 2016

Prices for the steel-making commodity may have rebounded. Imports into China increased last month and a new railway building spree could boost demand. But miners still can’t accurately forecast demand and haven’t learned their lesson on supply. 

BHP admits dividend pledges and mining don’t mix

23 Feb 2016

The world’s largest miner slashed its interim dividend 74 pct and followed rival Rio in scrapping a “progressive” policy. About time. Promising payouts will only ever go up is daft in such a cyclical sector. Consistency matters less than safeguarding the balance sheet.

Unusual truce holds water in Aussie ports fracas

23 Feb 2016

Rival bidders Brookfield and Qube are mulling a joint $6.5 bln breakup of Asciano, the rail and container-terminals operator. It’s rare for M&A adversaries to make peace. But an armistice would sidestep competition and funding problems while ensuring no-one is left empty-handed.

Brazilian dam deal sped by mutual self-interest

17 Feb 2016

Dilma Rousseff is close to extracting $5 bln from Samarco Mineração for November’s busted river barrier that killed 17. The embattled Brazilian president needs a victory of sorts. Mine owners BHP and Vale can’t afford to have iron ore stuck in the ground. Tough times focus minds.

Rio Tinto maims but doesn’t kill a sacred cow

11 Feb 2016

The miner has scrapped its cherished progressive dividend policy as it warned of a tougher year ahead for global miners. It’s a smart move that gives Rio room to manoeuvre should prices dip again. But it isn’t changing its strategy of pumping out more iron ore into a downturn.

Sweeter Cairn bid is Vedanta’s least bad option

25 Jan 2016

Anil Agarwal’s Vedanta Resources is edging towards loan covenant limits. Bondholders are losing faith in the mining tycoon’s ability to tap buried cash and repay $8 bln of debt. The stress may force Agarwal to sweeten a deal to merge subsidiaries and simplify the group structure.

Chancellor: Best cure for low oil is low prices

21 Jan 2016

Having invested heavily, both mining and energy firms are struggling with oversupply and weak prices. New mining production from BHP and others will continue to weigh on commodities for years. But oil investment cuts set the stage for the next bull market in the black stuff.

BHP Billiton plays catch-up with $7 bln shale hit

15 Jan 2016

Plunging energy prices forced the miner to write down its U.S. oil and gas assets again. The non-cash charge is large but just brings BHP’s balance sheet closer to the outside world’s estimation. A bigger step would be to follow the market’s lead once more and slash the dividend.

Managerial competence makes the difference in 2016

5 Jan 2016

Markets are getting choppier. Capital is becoming more expensive in the world’s largest economy. Globalization is taking big knocks. Economic growth is middling. Good managers will distinguish winners from losers as much as valuable assets do from lousy liabilities.

Ivan Glasenberg may be mining’s last man standing

31 Dec 2015

The Glencore chief outlasted his peers when the commodity boom turned in 2013. The sector may be due another shakeout in 2016 if prices keep falling. But Glasenberg’s big stake in Glencore and his newfound dash of humility mean his copper plating should last another year.  

Freeport chairman exit eases credibility problem

28 Dec 2015

James “Jim Bob” Moffett is leaving the $9 bln mining group he helped found amid pressure from activist investor Carl Icahn. It’s a needed step to restore confidence after faux pas including an ill-timed, cozy-looking 2012 oil deal. His replacement, though, has his work cut out.

Cash calls leave issuers with unfinished business

11 Dec 2015

Lonmin and Standard Chartered’s shares have both slipped further than theory might suggest since issuing a combined $5.5 billion of new stock. That’s logical at miner Lonmin, which now has a big stock overhang. For lender StanChart, it looks like a vote of diminished confidence.

Glencore deserves credit for lessons learned

10 Dec 2015

The Swiss miner and commodities trader will cut debt even faster than it vowed in September. Planning for copper prices below current levels is wise. Chief Executive Ivan Glasenberg can’t control China’s demand for metals, but at least his balance sheet now reflects reality.

Anglo American is facing a crisis of confidence

8 Dec 2015

Collapsing commodity prices led the coal, copper and diamonds miner to suspend its dividend on Dec. 8. It’s also slashing jobs and investment. Big London-listed miners including Anglo American have lost 47 percent of their market value this year. Yet things could still get worse.

Rio Tinto capex cuts won’t stop race to the bottom

8 Dec 2015

The Anglo-Australian miner is cutting spending by $1.5 billion to save cash amid the rout in commodities. But it’s not the same as slashing production – which is what’s needed to bring metals prices back up. The current strategy should make shareholders nervous.

BHP’s Brazil disaster points to dividend cut

30 Nov 2015

The Anglo-Australian miner needs to conserve cash to pay for the Samarco dam disaster in Brazil. Forecast earnings already fall short of the $6.5 billion it paid shareholders last year. BHP would be wise to get ahead of the curve and scrap its commitment to progressive payouts.

VW’s dieselgate may be Lonmin cash call decider

19 Nov 2015

The South African platinum miner wants to raise $407 mln to fund restructuring. The 46-for-one rights issue means investors that fail to subscribe will be diluted almost out of sight. Much of the investment decision rests on demand for catalytic converters as VW cleans itself up. 

Lonmin buys time but platinum is bigger problem

9 Nov 2015

A $407 mln rights issue at an eye-popping 94 pct discount will allow the South African miner to postpone a day of reckoning with its creditors. Lonmin has bought itself a reprieve, but this won’t fix the platinum price, or help it avoid another strike at its Marikana mines.

Brazil dam disaster tests BHP’s mega-mining model

6 Nov 2015

Investors ditched BHP Billiton shares after a jointly owned dam failed in Brazil. While mining is much safer than it used to be, such catastrophes are an inherent risk. A big balance sheet and diverse income streams mean it can absorb the financial consequences better than most.

Glencore getting smaller but maybe not wiser

13 Oct 2015

The embattled commodities trader is hacking back production in a bid to reduce its debts. The latest cut could be a fifth of its copper production. Companies with strong, single-minded leaders often choose to shrink rather than change after crisis hits. That leaves them at the mercy of markets.