Mining

Freeport rejig only partly solves credibility gap

6 Oct 2015

Jim Bob Moffett’s energy group is bowing to pressure from activist Carl Icahn. It’s ditching board seats and a controversial management structure and may hive off the oil and gas unit it bought in a bad 2012 deal. Like Chesapeake, though, more fundamental changes may be needed.

Glencore $2.5 bln issue shows defiance in distress

16 Sep 2015

Suspected short-sellers and hedge funds were underweighted in the Swiss trading group’s equity raising. While the wafer-thin discount means those left out aren’t much diluted, it’s a pointed reminder that there’s plenty of room for things to get personal at owner-managed companies.

Glencore model is battered but not broken

14 Sep 2015

Ivan Glasenberg’s mining creation has been wrong-footed by commodity prices, China, and shareholder worries about debt. The pressures may undermine Glencore’s premium valuation and its penchant for doing big deals. Its mix of trading and mining, however, is logical and robust.

Glencore’s giant cash call puts squeeze on rivals

7 Sep 2015

The Swiss trader’s $10 bln debt reduction plan eases balance sheet jitters by cutting net borrowings by a third. Investors get stability at the expense of their dividend. But the move offers a grim view of commodity prices that undercuts the investment case for the whole sector.

Freeport-McMoRan leaves Carl Icahn lots of targets

28 Aug 2015

Big cuts in spending and staff sent the struggling miner’s stock soaring – just before the activist revealed an 8.5 pct stake. The pre-emptive strike won’t be enough to satisfy the feisty billionaire. High debt and low commodity prices suggest he has asset sales in his crosshairs.

Miners’ dividends are a fragile commodity

25 Aug 2015

BHP Billiton has raised its payout even as prices fall. That helps win investor support for its aggressive iron ore production strategy. Yet across the sector, funding generous payouts will become tough unless supply and demand rebalance. There is little to suggest they will.

Glencore tripped up by faith in rational markets

19 Aug 2015

The commodity trader’s earnings have disappointed as copper and coal have tumbled. Anticipating the market is getting harder because both rivals’ behaviour and Chinese demand for raw materials are even more unpredictable. Glencore is thus focusing on what it can control: cash.

Rio Tinto is winning in dirty ore wars

6 Aug 2015

The Australian miner’s earnings from iron ore more than halved in the first half, yet production is booming. Low costs give Rio and big peers ammo to drive others out of the market as metal prices crater. It’s a brutal demonstration of market forces, and geological good luck.

Molycorp unearths definition of a commodity

1 Jun 2015

The rare-elements miner missed an interest payment, which could herald a descent into bankruptcy protection. Since peaking at $6 bln in 2011, Molycorp’s market value has collapsed 99 pct. It’s a classic case of investors confusing a demand surge, tight supply and real scarcity.

Rio, BHP will show market trumps Aussie politics

19 May 2015

Prime Minister Tony Abbott might want to do something about the fiscal pain caused by slumping iron ore prices. But he won’t get far. He can’t tell the big miners to abandon their “saturate and dominate” strategy. The tactics are bang in line with Australia’s free-market ethos.

Mongols and miners bow to market reality

19 May 2015

Rio Tinto and Mongolia have ended a two-year stand-off on the giant Oyu Tolgoi mine by both giving ground. The nomad state now has a fix for plummeting investment inflows. While the miner’s hand looks stronger, falling metals prices have made civility the better part of valour.

Oil companies stare into the mining abyss

19 Mar 2015

Embattled iron ore producer Fortescue risks being frozen out of debt markets after balking at paying a high rate on a deal. Rivals that dallied at raising capital after metal prices tanked suffered worse fates. Oil servicers and drillers still have a chance to save themselves.

Alcoa risks overreach in bid for new relevance

9 Mar 2015

A $1.5 bln swoop on titanium producer RTI is the U.S. aluminum giant’s latest move away from base metals towards more profitable auto and aircraft materials. Promised synergies cover the 50 pct premium on offer, but the slide in Alcoa’s shares suggests investors are skeptical.

Cheap oil highlights multifaceted resource curse

24 Feb 2015

Commodities-dependent nations got more bad news, as BHP warned on iron ore prices. To survive, many will need to turn their economies upside down. Resources prevent long-term strategies, dull the good and bad governance gap and ultimately cloud voters’ views of who’s responsible.

Freeport-McMoRan has yet to fully settle M&A tab

15 Jan 2015

The U.S. miner’s $138 mln check to resolve a lawsuit over conflicts-riddled deals sets a precedent that gives shareholders more clout. It should turn up the heat on Chairman James Moffett, whose cross-holdings factored in the case. Better governance would enhance the big payout.

Rio Tinto can dig in against Glencore

7 Oct 2014

The miner’s shares leapt after it admitted rebuffing the commodity trading giant. Yet the timing is opportunistic, as iron ore slumps, and a $160 bln merger looks suspiciously like a takeover on the cheap. So Rio’s board can justifiably demand a big premium, or no deal. 

Glencore Rio takeover would be harder than Xstrata

7 Oct 2014

Ivan Glasenberg’s miner-trader is stalking $90 billion iron giant Rio Tinto. Though there’s some logic to a deal, Glencore will be loath to pay much of a premium, and the clash of cultures would be extreme. Rio is also in a better position to resist than rival Xstrata in 2012.

Mining short-termism will prolong iron ore misery

6 Oct 2014

The commodity’s price is slumping due to oversupply. Group discipline among producers could stop the rot. Instead, BHP Billiton plans to squeeze more out of existing facilities. Others may do the same. Unfortunately, offering shareholders jam today may mean harder times tomorrow.

AngloGold spinoff faces headwinds

10 Sep 2014

The bullion producer wants to carve out non-South African assets into a London listing. This could attract investors wary of problems in the group’s domestic business. But gold has lost its shine and miners have a reputation for wasting capex. It may be a tough investment story.

Glencore’s capital promises are those of a trader

20 Aug 2014

The $80 bln trader-miner is returning $1 bln of cash and has set out a framework for capital management, with wiggle room. That makes sense – miners need flexibility on M&A and capex. Glencore’s owner-manager ethos gives credibility to its broad commitment to shareholder returns.