28. Juli 2011 10:26 - Minenarbeiter streiken in Chile.
2.300 Arbeiter fordern bessere Umsatzbeteiligung - Streik könnte Minenbetreiber täglich mehr als
21 Millionen Euro kosten
Santiago de Chile - Die weltgrößte Kupfermine Escondida in Chile hat wegen eines seit knapp einer
Woche andauernden Streiks ihre Lieferungen bis auf weiteres eingestellt. Wegen der "Bedingungen
in der Mine" könne Escondida die vertraglich vereinbarten Liefermengen für Kupferkonzentrat nicht
mehr einhalten, hieß es nach Angaben der örtlichen Medien vom Mittwoch in einer an die Kunden
verschickten Mitteilung. Das Unternehmen teilte nicht mit, wie lange der Lieferstopp anhalten werde.
Die 2.300 Arbeiter der Escondia-Mine fordern unter anderem eine bessere Umsatzbeteiligung. Der
Streik könnte den Minenbetreiber Schätzungen zufolge täglich umgerechnet mehr als 21 Mio. Euro
Chile ist mit einem Volumen von jährlich 5,6 Tonnen der weltweit größte Produzent von Kupfer,
dessen Preise in den vergangenen Jahren in die Höhe geschnellt sind. Erst Anfang des Monats
waren die Arbeiter beim weltgrößten Kupferlieferanten Codelco in Chile in den Ausstand getreten.
Sie protestierten gegen Pläne des konservativen chilenischen Staatschefs Sebastian Pinera, das
Unternehmen umzubauen und zahlreiche Stellen abzubauen. (APA)[/quote]gemäß § 34 WpHG dürfen die Autoren zu jederzeit Short- oder Long-Positionen in der/den behandelte(n) Aktie(n) halten. Bitte beachten Sie immer den Risikohinweis unter folgendem Link: Haftungsausschluß und Disclaimer
Colombia Attracting Oil Billionaires May Spur Auction of Gold, Coal Rights
By Heather Walsh - Sep 5, 2011 7:45 PM GMT+0200
Colombia may auction rights to tap its coal and gold deposits after attracting investors such as billionaire Eike Batista to develop the nation’s oil industry.
The South American nation is seeking to spur exploration and production and also boost copper, platinum and coltan reserves to raise government income, Mines and Energy Minister Carlos Rodado said in an interview in the city of Medellin.
It’s “very, very possible in the future you’ll see auction rounds in the case of Colombian minerals like you saw with hydrocarbons,” Rodado said. The strategy may be the best way to “increase the value” of such reserves, he said.
President Juan Manuel Santos is counting on international investment in new oil wells and mines to spur exports amid rising demand for commodities. Batista’s OGX Petroleo & Gas Participacoes SA and Carlos Slim’s Grupo Carso SAB are among companies seeking to tap oil reserves after Colombia improved security and opened new swathes of the country to exploration.
The country may hold reserves of coltan, used in mobile telephones, in its eastern provinces, Rodado said Sept. 2. Identifying such areas is a first step toward auctions that will help bring more mining companies to Colombia, he said.
Colombia also has untapped reserves of thermal coal, used by power companies, and metallurgical coal that requires new infrastructure such as railroads to export, Rodado said.
Colombia wants to make the most of its reserves after coal rose 33 percent in Europe in 12 months. Copper rallied 16 percent in the same period and gold surged to a record.
Coal production this year probably will meet or surpass 80 million tons even after storms hindered output, he said. The country holds 45 percent of Latin America’s reserves and produced about 74.4 million tons last year.
Mining companies across Colombia will have to brace for more rains as seasonal storms begin next month after hampering production earlier this year, Claudia Jimenez, executive director of Bogota-based Large Scale Mining, an industry group that represents companies, said Aug. 31. In June, coal exports tumbled 16 percent to 5.85 million metric tons from a year earlier.
In northern Colombia, Drummond Co., Batista’s MPX Energia SA (MPXE3), Glencore International AG and BHP Billiton Plc are among companies seeking to expand coal production after prices rose. BHP, Anglo American Plc (AAL) and Xstrata Plc (XTA) decided last month to invest $1.3 billion to expand their Cerrejon mine.
Auctions of oil blocks in Colombia, South America’s third- largest supplier of crude, helped increase production by 21 percent to 953,000 barrels per day last month from a year earlier. Oil blocks auctioned in 2010 will spur more than $1 billion in exploration spending over three years, according to government estimates.
In Colombia, gold mining’s becoming more dangerous than cocaine
Bloomberg News Oct 12, 2011 – 12:07 PM ET | Last Updated: Oct 12, 2011 1:13 PM ET
By Heather Walsh
Colombia, the world’s largest cocaine producer, said illegal gold mining is becoming the “next major threat” to security as government efforts to crack down on drug crops prompt rebels to seek new revenue sources.
Unlike cocaine, gold can easily be sold into the economy and be used to finance terrorist groups, Mines and Energy Minister Mauricio Cardenas said in an interview.
“It’s something that has been growing fast, and in some ways it’s Colombia’s next major threat from the point of view of illegal groups,” Cardenas, 49, said Oct. 10 at his office in Bogota. “We have to combat this very effectively, very fast. We cannot let this problem grow.”
Colombian gold deposits, which enriched Spanish conquistadors more than four centuries ago, have attracted investment from billionaire Eike Batista and AngloGold Ashanti Ltd. Guerrilla and paramilitary groups, whose suppression has been the cornerstone of government efforts to boost security and lure investments, have also been drawn to mining for the precious metal as gold trades near record levels.
Gold’s rally has made illegal mining “a lot more profitable,” threatening to bring “reinvigorated strength” to terrorist groups, according to Cardenas. Futures for delivery in December fell 0.6% to close at US$1,661 an ounce Tuesday on the Comex in New York. Gold has surged 23% in the past year.
“A stronger guerrilla would recruit better, make it easier to extort people and companies, and attack infrastructure and the military,” Alfredo Rangel, a former member of Colombia’s Security Council, said by phone. “All of which would have a terrible effect on security and investment expectations and be very negative for economic growth.”
Improved security has helped President Juan Manuel Santos to draw international investment in mines, oil fields and coal projects. Foreign direct investment may rise to a record US$12 billion this year, according to the finance ministry, more than quadruple levels a decade ago.
Batista’s AUX Canada Acquisition Inc. purchased control of Ventana Gold Corp. this year to gain gold deposits in Colombia, while AngloGold Ashanti, the gold producer whose largest shareholder is billionaire John Paulson, is developing the La Colosa gold mine.
Guerrilla groups and organized crime gangs are also tapping the deposits as a way to expand beyond drug trafficking, fund weapons purchases and manpower, Vice President Angelino Garzon said in an interview last month. He estimates a “high” amount of output from illegal gold mining.
“It’s a diversification of revenue,” Garzon said.
The government has increased arrests and seizures of equipment at illegal mines this year, Cardenas said. Colombia is studying additional steps to combat the operations, such as tracking raw materials used to extract gold.
Guerrilla and paramilitary groups thrived on drug revenue in the 1990s, fueling violence that led investors to shun the Andean nation. Since then, cocaine output in Colombia, still the world’s largest producer of the drug processed from coca leaves, has plunged amid government eradication and anti-trafficking efforts, according to United Nations figures.
Colombian production shrank to 350 metric tons in 2010 from 410 tons in 2009, the UN said. Declining output means Peru may be on track to become the world’s top supplier of cocaine, the International Narcotics Control Board said in March.
Eradicating coca production over the past decade has weakened the Revolutionary Armed Forces of Colombia, or FARC, Latin America’s oldest guerrilla group, as well as the smaller ELN and paramilitary groups that purchase weapons and secure manpower with drug money, kidnappings and extortion.
As cocaine production fell, gold output climbed to a record 53.6 metric tonnes last year, according to Colombian government figures. Output has more than tripled from 15.5 tonnes in 2007. The government doesn’t have an estimate on how much gold is mined illegally because, like coca cultivation, it often takes place in isolated areas with few roadways and steep terrain, Cardenas said.
Guerrillas already long present in some mining areas are now bringing in heavy equipment and consolidating to increase output in provinces in central and southwestern Colombia, Rangel said.
Unlike drugs, “illegal gold mining is easy to legalize once you have a gram of gold in your hands, because then you can sell it anywhere,” Cardenas said. “It’s something you have to control” at the mine site.
Bloomberg.comgemäß § 34 WpHG dürfen die Autoren zu jederzeit Short- oder Long-Positionen in der/den behandelte(n) Aktie(n) halten. Bitte beachten Sie immer den Risikohinweis unter folgendem Link: Haftungsausschluß und Disclaimer
* Draft would ban minerals investment, imports
* Eritrea denies it supports Somali Islamists
* Opposition in Security Council could dilute resolution
By Patrick Worsnip
UNITED NATIONS, Oct 18 (Reuters) - Mining companies would
be banned from investing in Eritrea's potentially booming
minerals sector under a draft U.N. resolution that Security
Council members are due to start negotiating on Tuesday.
The council is weighing the investment ban, as well as an
import ban on Eritrean minerals and other measures to add to
existing sanctions against the Horn of Africa state in
retaliation for Eritrea's alleged support of Islamist rebels in
Somalia. Eritrea denies supporting the rebels.
But diplomats said some of the toughest provisions in the
proposed resolution, which has been drafted by Gabon, faced
opposition from some members of the 15-nation council, meaning
the final text could be watered down.
Proposals by an East African bloc to toughen sanctions on
Eritrea have been stalled for three months as the search went
on for an African state sitting on the Security Council to
The Inter Governmental Authority on Development, or IGAD,
which groups seven East African states, called in July for more
sanctions to hit the Eritrean mining sector and remittances.
Eritrea has blamed its rival Ethiopia, from which it split
away in 1993, for the drive. In a letter this month to the
council it urged the body to "reject Ethiopia's current hostile
campaign" and immediately lift all sanctions against it.
The new draft, a copy of which was obtained by Reuters,
says that "all states shall prohibit investment by their
nationals, persons subject to their jurisdiction and firms
incorporated in their territory or subject to their
jurisdiction in the extractive industries and mining sectors in
It also says all states shall prohibit the import of gold
and other raw materials from Eritrea.
The draft also seeks to block payment of a 2 percent
"diaspora tax" on their incomes that Eritreans working abroad
are expected to pay to their local Eritrean embassy.
Eritrea is seen as being on the brink of a minerals boom
that could revive its struggling economy. Remittances that it
receives from its large diaspora in the West and Middle East
are its biggest source of foreign exchange.
The country's most advanced mining project, Bisha, believed
to contain gold, copper and zinc, is run by Canada's Nevsun
Resources Ltd <NSU.TO>. Earlier this year, Eritrea granted
Australia's Chalice Gold Mines <CHN.AX> two new exploration
licenses in a nearby location.
The fresh sanctions drive follows a report by a U.N.
monitoring group in July that found Eritrea continues to
provide political, financial, training and logistical support
to al Shabaab and other armed groups in Somalia.
Eritrea has denied repeatedly that it funds and arms the
Islamist al Shabaab but the accusation prompted the Security
Council in 2009 to impose an arms embargo, asset freeze and
travel ban on leaders and firms in Eritrea.
The new resolution would add more individuals and
organizations to those already under sanctions.
But council diplomats suggested it could be toned down.
"Council members are generally well-disposed towards a
strengthening of the Eritrea sanctions regime but several
cannot accept the most substantive elements of the draft,
particularly those that amount to sweeping economic sanctions,"
one diplomat said.
"However, the key point is to target the regime and its
destabilizing activities in the region and it should be
possible to find consensus on measures that achieve that."
The diplomat did not identify the countries that were
objecting but China and Russia typically are cautious about
(Editing by Bill Trott)
((email@example.com ; +1 212 355 6053; Reuters
Messaging: firstname.lastname@example.org ))
Keywords: ERITREA UN/gemäß § 34 WpHG dürfen die Autoren zu jederzeit Short- oder Long-Positionen in der/den behandelte(n) Aktie(n) halten. Bitte beachten Sie immer den Risikohinweis unter folgendem Link: Haftungsausschluß und Disclaimer
Eine neue Resolution der UNO könnte den Bergbau in Eritrea vor große Probleme stellen. Davon wären auch ausländische Investoren betroffen.
Der Sicherheitsrat der UNO diskutiert in dieser Woche, ob es neue Sanktionen gegen Eritrea geben soll. Geplant ist unter anderem ein Importverbot für Gold und andere Rohstoffe aus Eritrea. Auch sollen ausländische Investitionen in den Bergbausektor des Landes untersagt werden. Das würde das vorläufige Aus für die Branche bedeuten. Dem ostafrikanischen Land wird vorgeworfen, die islamischen Rebellen in Somalia zu unterstützen. Eritrea bestreitet dies jedoch und vermutet dahinter eine Intrige des Nachbarstaats Äthiopien.
Sollten die Sanktionen umgesetzt werden, wäre eine Reihe von ausländischen Unternehmen direkt davon betroffen. So arbeitet Nevsun Resources (WKN: 901340) aus Kanada auf dem Bergbauprojekt von Bisha, um dort Gold, Kupfer und Zink zu fördern. Chalice Gold Mines (WKN: A0JDKP) aus Australien hat gerade zwei Explorationslizenzen erhalten.
Beobachter gehen jedoch davon aus, dass die Sanktionen letztlich abgemildert werden. Ob die wirtschaftlichen Einschränkungen tatsächlich in dieser Form durchgesetzt werden, wie einigen afrikanische Staaten dies fordern, wird angezweifelt. Traditionell sind vor allem Russland und China in diesen Angelegenheiten sehr zurückhaltend. Beide Staaten haben ein Vetorecht im Sicherheitsrat und können Sanktionen zu Fall bringen.gemäß § 34 WpHG dürfen die Autoren zu jederzeit Short- oder Long-Positionen in der/den behandelte(n) Aktie(n) halten. Bitte beachten Sie immer den Risikohinweis unter folgendem Link: Haftungsausschluß und Disclaimer
Antofagasta/Barrick in dispute with Pakistan province over Reko Diq gold/copper project
Antofagasta/Barrick JV has filed a notice of dispute with Pakistan's Baluchistan province after the
region refused to meet its executives to resolve issues over the mining lease being sought for big
Reko Diq copper-gold project..
Tanzania's mining sector down in 2011 - need to address production constraints
Mining growth in Tanzania slumped in two consecutive quarters this year due to uncertainty over
government policies, a prolonged power crisis and infrastructure constraints, a senior mining official
said on Thursday..
China's 2020 nuclear targets may be cut after Fukushima
Industry officials predict China's nuclear capacity targets for 2020 could be adjusted in the wake
of the moratorium imposed on new project approvals following the Fukushima disaster in Japan..gemäß § 34 WpHG dürfen die Autoren zu jederzeit Short- oder Long-Positionen in der/den behandelte(n) Aktie(n) halten. Bitte beachten Sie immer den Risikohinweis unter folgendem Link: Haftungsausschluß und Disclaimer
Key political risks for mining investment in Mongolia
For those looking to invest in Mongolia, the article takes a look at some of the key political risks to watch out for as political uncertainty ahead of parliamentary elections in June 2012 has investors worried.
Author: By David Stanway (Reuters)
Posted: Tuesday , 01 Nov 2011
ULAN BATOR (Reuters) -
Mongolia sits on vast quantities of untapped mineral wealth, the exploitation of which is likely to turn it into one of the world's fastest growing economies over the next decade.
But political uncertainty ahead of parliamentary elections in June 2012 has worried investors, with Mongolia's shaky coalition government under pressure to renegotiate a landmark 2009 investment agreement for the Oyu Tolgoi copper deposit.
The priority for Mongolia is the development of its tiny economy, and foreign investors want to know if the government can create a stable legal environment while handling the pressures exerted by impatient citizens as well as its two giant neighbours, Russia and China.
Following is a summary of key political risks to watch:
The government has now formally given up on its idea of renegotiating the contract for the Oyu Tolgoi copper-gold mine, after earlier saying it wanted to look again at a 2009 deal with Ivanhoe Mines, now 49 percent owned by Rio Tinto.
Foreign investors were worried that renegotiating a deal two years after it was first signed would undermine confidence, but Mongolia is under pressure to boost revenues and meet ambitious social pledges made at the last elections in 2008. Some politicians have called for the prime minister to resign over his handling of the Oyu Tolgoi contract.
The controversy over Oyu Tolgoi's ownership has spilled over into another giant mine, the Tavan Tolgoi or "Five Hills" coal deposit.
Mongolia hopes to complete an investment agreement for the project before the end of 2011 as it races to launch a much-anticipated initial public offering next year, and meet the promises it made to voters.
But an initial proposal to hand development rights in the project to China's Shenhua, Peabody of the United States and a Russian-Mongolian consortium was rejected, and the government is trying to devise another deal that will include Japanese and South Korean partners.
The confusion drew attention not just to the geopolitical pressures facing Mongolia, but also to its opaque approval procedures.
The government is under pressure to pass several new laws before the end of the year, including the budget, an election law, judicial reforms, and the investment agreement for Tavan Tolgoi. Many are worried that there will not be enough time to do everything.
What to watch:
-- Progress of new laws through parliament.
-- Whether the government can produce an investment agreement for Tavan Tolgoi that will satisfy foreign partners and keep the public happy, and whether it can do it in time . In October, a senior official said Mongolia could add "one or two" banks to its list of advisers for the initial public offering. BNP Paribas , Deutsche Bank (DBKGn.DE: Quote), Goldman Sachs and Macquarie have already been shortlisted, according to some bankers.
-- Whether foreign investors will be deterred by Mongolia's less than transparent approval procedures.
THE RESOURCE "CURSE"
Mongolia's dependence on mining has alarmed environmentalists and opposition politicians, and the country is already showing classic symptoms of "Dutch disease", including soaring inflation and high interest rates.
The government is trying to put in place structures that will protect it against fluctuating commodity prices, and is keen to use the proceeds from mining to pay for infrastructure, health and education programmes and develop other sectors.
It is under pressure to spread the wealth, and has already extracted "pre-payments" from foreign firms involved in both the Tavan Tolgoi and Oyu Tolgoi projects in order to give money to the public.
What to watch:
-- How Mongolia uses the proceeds from its mining projects. It has set up education and fiscal stabilisation funds, but it has also promised direct dividends for Mongolian citizens.
-- How it deals with rapid economic change as well as inflation as foreign investment transforms the country's mainly rural economy. Overall investment in Oyu Tolgoi alone will double the country's entire GDP in 2009.
GETTING ON WITH THE NEIGHBOURS
Many of Mongolia's 2.7 million citizens are concerned about growing Chinese and Russian influence, and their fears were not allayed by the plan to hand the majority of Tavan Tolgoi's western block to Chinese and Russian interests.
China already dominates Mongolia's economy, buying 90 percent of the country's exports in the first half of 2011, mostly at discount. But if Mongolia is going to stand a chance of easing its long-term dependence, it needs cash -- and that will only come from trade with its southern neighbour.
Mongolia's growing dependence on Russia and China for fuel, power and transportation also poses a major risk to its mining sector. Russia has been known to turn off supply taps, and China is not averse to closing crucial railway links.
Mongolia also depends on Russia's railway network to fulfil plans to deliver coal to Japan and South Korea.
What to watch:
-- Will efforts to ease dependence on China merely increase Russia's hold, and vice versa? Is the Chinese market for coal and other minerals its only option in the short term?
-- How will the government handle growing nationalist sentiment, and fears about the role of foreign firms and workers.
For a feature on the wrangling over the Tavan Tolgoi project, click here:
To read a multimedia special report on the Oyu Tolgoi copper and gold deposit, click here: r.reuters.com/nas97p</A1 > (Editing by Daniel Magnowski)
China to impose rare earths invoice system to curb illegal sales and regulate prices
Mandatory production limits of rare earths have been broken each year due to lack of strict enforcement within China, thus a new invoice system is set to curb overproduction and force speculators to exit the market.
Author: Shivom Seth
Posted: Tuesday , 01 Nov 2011
MUMBAI - -
In a bid to further curb the rampant illegal production of rare earths, China is all set to introduce specialised invoices for designated rare earths producers this month. Though rumours to that effect have been surfacing all through last month, traders say a decision in this regard has been taken to cushion the fall in rare earth prices and to curb over production.
Traders in China have been caught off guard by a sudden dip in rare earth prices, with the prices of certain minerals plunging over 30% as compared to last month. (see More rare earth companies in China suspending production as prices slide) This has led to many dealers who had accumulated inventories at high prices being thrown off balance. Moreover, prices of rare earths sold without invoices have fallen even further,'' said an analyst tracking the sector.
For example, lanthanum cerium was being sold for $ 34,488 per tonne with invoice, and $ 23,515 per ton without invoice. In Baotou, Inner Mongolia, one dealer who had purchased several thousand tonnes of rare earth carbonate at a price of $ 14,109 per tonne, was said to be desperately seeking buyers. Several rare earth producers are reportedly holding on to their inventories rather than selling them at the current low prices.
Analysts also pointed to the fact that China had set this year's rare earth exploration target at 93,800 tonnes - 80,400 tonnes of light rare earth and 13,400 tonnes of ion-absorbed rare earth, according to a Ministry of Land and Resources' circular. However, that target has already been broken, said an official at China Minmetals Rare Earth Co Ltd.
Some downstream rare earth separating companies have also reportedly stopped buying raw ore because miners cannot offer invoices for over explored minerals.
Mandatory production limits have been broken each year due to lack of strict enforcement, analysts said, and ensuring an invoice system is all set to change that.
China's annual rare earth output exceeded 100,000 tonnes for five consecutive years from 2005 - the planned production quota was 80,000 tonnes per year on average over the same period. Data from the Chinese Society of Rare Earths shows that China produced about 130,000 tonnes of rare earth last year, while the government's target was only 89,200 tonnes.
Analysts also pointed out that the invoice system is set to trigger panic selling by small companies, though output at some small firms in Baotou City has reduced by nearly two-third so far.
They add that the invoices confirm China's efforts to control production and sell-off of the valuable rare earth minerals. Two years ago, China had slashed export quotas even as it closed some of its rare earth processors due to environmental concerns. Analysts add that the invoice system would be an effective measure to regulate the rare earths market and would be in tune with the country's stricter policies to control the valuable minerals.
"Regional Politics" is one of the several regular sections that make up The IKN Weekly. As more than one reader of the Weekly took time out yesterday to write in and say "hey, good Regional Politics section this week" I thought I'd share it here (though a different respected reader took time to write and tell me why I was wrong about Argentina). The only changes are the deletion of specific stock names.
Mining & industrial plant leasers SKC on the state of the local industry
Here’s an example of the background stuff I tend to read here and there. This one is chosen because 1) it’s pretty typical of the general sentiment 2) it’s not directly mining but it makes clear that the mining industry in LatAm is a big growth driver and 3) the international growth aspect of the firm in question is interesting. SKC is a plant/machinery leasing company based in Chile, with a decent reputation and client base in the Central and South regions, but let’s not get too heavy on the preamble, here’s the report from Chile’s Diario Financiero (7) translated by your author and dated October 25th
“There’s non-stop activity and we haven’t seen any let-up in investments”, says Alvaro Santa Cruz, CEO of Sigdo Koppers Comercial (SKC) regarding whether the international economic situation has affected companies with which he has a relationship, mainly in the mining and industrial sectors.
The executive says that, “Independent of the feelings of worry about what could happen in Europe and the rest of the world, we firmly believe that the mining sector will continue growing.”
So much so that he believes that in the next 12 months there will be an increase of between 10% and 12% in the volume of activity, this without adding new projects that may emerge. “Today the banks are a little more demanding (regarding credit facilities) but there is no credit crisis. There are still lines of credit available.”
Copiapó and Calama
The company is beefing up its presence in the North (of Chile) due to the growth in the mining sector. Santa Cruz commented that due to this SKC was opening a 4500 m2 branch in Copiapó that entailed an investment of $3.5m Also, next year they expect to begin the construction of a branch in Calama which will be an investment and surface area similar to that of Copiapó. The idea is that the mining sector will continue to increase its importance to the company.
The commercial subsidiary of the SK group is also raising its international profile. In Peru for example, as well as Lima, Arequipa and Chiclayo the company is going to open in Trujillo. “We’re going to open a couple of premises more focused on the mining sector”, he said. They are also growing in Brazil, having been in business in Curitiba for one year. In Brazil the company is mostly connected to the industrial sector. “We’re looking at Colombia. We’ve done some studies, but it’s a project that we’ll look at in 2012”, Santa Cruz added, saying that the mining sector in Colombia still had a lot of work to do to bring it up to speed.
Correa at Quimsacocha
Last Tuesday President Rafael Correa of Ecuador made a site visit to the IAMGold Quimsacocha project (8). The visit was political in nature of course, as he took time to point out to the media in tow that the project wouldn’t affect the nearby lakes and ensuing downstream water supply (the word ‘Quimsacocha” in Quechua means “two lakes”), that the rigged consultancy amongst locals that we reported on a couple of weeks ago was indeed rigged and “illegal” (rigged it certainly was, ‘illegal’ is debatable) that mining will be a big growth sector in Ecuador and all the other statements we’ve seen and heard before. The sanitized version of the visit is that above, but there were also incidents reported including the arrest of a 57 year old man who threw stones at the Presidential motorcade (apparently there was a rain of stones at one point, but only one capture), a strong police presence to keep protesters out of Correa’s face and a large crowd who booed and drowned out Correa as he tried to make a speech from the steps of the local municipal building.
In effect, the visit was a microcosm of the country’s attitude towards mining with the national government making the right kind of noises and the locals vehemently opposed to seeing a large mine set up in their vicinity. This split in opinion isn’t going away and won’t go away even if the now (in)famous negotiations on contracts with the big five mining projects (including Quimsacocha of course) are ever decided upon and get signed. The other negative that needs to be clearly underscored here is that Correa has been making the same mining-friendly noises for at least three years, but the progress made by his government on bringing large-scale formal mining to the country has been precisely and exactly zero.
The call on Ecuador remains AVOID, written in capitals bold-typed and underlined. If the country ever gets its act together then we can re-examine that call but even if the current negotiations with ther big mining companies reach a conclusion (so much for “signed in October”, no?) we’d still be a long way away from seeing a mining project get through the on-ground protests and oppositions it would be certain to attract and start producing metal (be it copper, gold or whatever).
A final point. After last week’s note which, like today, covered Ecuador in the ‘Regional Politics’ section and mentioned XXXXXX along the way I had two mails from subscribers wanting to know whether I was warming up again to the idea of buying XXXXX. The answer to those mails which gets repeated here is that no, I’m not considering XXXXX as a buy in the short-term or even medium-term. What we’d need from XXXXX to make it attractive is its own deal with the government on tax and royalty burdens, signed sealed and delivered, before it could seriously be considered a buying opportunity again. That kind of timesecale is likely counted in years, not days or weeks or even months. My thoughts regarding XXXXX last week didn’t make that time distinction and as such (and by the looks of the couple of mails received) may have caused confusion, so here today I want to shine the light clearly. I got out of XXXXX at a loss, it sunk much lower in the weeks after that sale and even though I note that the stock put in a bit of a low volume rebound last week I have no interest whatsoever in buying back. I made the mistake of hanging in too long on XXXXX and thinking Ecuador would be able to turn around its political risk profile in the time I held the stock, which was a failure in judgment but hardly likely to be the last one I ever make. However, in the words of Seneca the Younger, “Errare humanum est, perseverare autem diabolicum”.
Minas Conga, Peru
The gold mining project known as Minas Conga in Cajamarca, owned by the Yanacocha consortium (the operator NEM and partner BVN, with the IFC as minority holder), has been making headlines in the last couple of weeks due to a protest by locals against the project. The Congas project has been a contentious one for years (not just this year) but received its enviro permits late in 2010 and then got the formal green light from both boards of directors and the project is now supposed to be in construction (if it weren’t for the protests). Yanacocha SA (the main mine is close to Conga) wants to invest U$4.8Bn at Conga to bring the new deposit online by 2015 as the main Yanacocha pit is starting to deplete, while locals oppose the project because they say it will drain the local water supply to nothing and ruin the agricultural land around the region (9). In the last couple of weeks things have come to a head with road blocks and marches that were mostly pacific but a couple of violent flashpoints were reported as well.
So far so normal for Cajamarca. This region hosts some of the biggest gold mining operations in Peru (GFI Cerro Corona is another) but can also be a pretty fractioned and politically difficult region in which to operate. Political risk is a not a blanket “good” or “bad”, but varies from area to area, even village to village, depending on the attitude and culture of the local community groupings. In the case of Conga, those against the project have been organizing their protests for at least three years but now the Humala government with its Consulta Previa (pre-consulting) law is in power, the locals have found a legitimate platform and traction for their cause at the very same time as construction activity is beginning to ramp up at the site....hence the uptick in protests, the roadblocks, etc.
What happens from here is interesting from a test-case point of view, as (along with the Tacna protests against Southern Peru’s expansion plans and Anglo at Quellaveco mentioned a couple of weeks ago on these pages), it will be one of the first serious tests the government policy. That kicks off next week with a round-table meeting due to start between miners and locals (10) that the government (via the Mining Ministry) will sit in on, rather than lead. This return to negotiations between the two sides may well lead to an eventual government-led negotiation period, because both sides seem rather intransigent up to now (in typical fashion the mining company maintains it has complied to the letter of the law and in typical fashion the local communities are looking for a monetary compensation for the arrival of the mining company, said to be around the 200 million soles (U$74m) mark). Both sides accuse each other of the flipside of their demands, both claim blackmail and skulduggery, and from the outside looking in it seems the whole process is sorely in need of arbitration.
A personal call on this would be that in the best of cases, the government starts its formal arbitration process and after a few weeks Yanacocha concedes some ground and agrees on some level of financial compensation for the affected population, who then sign guarantees of support for the project and the whole thing goes ahead. That’s a best case of course and right now I’d give it a 50/50 chance of happening that smoothly. But Minas Conga is definitely a test case that a lot of major mining companies will be closely following, as it will give plenty of clues as to whether the new government policies will be effective. We’ll also be watching this space carefully in what’s left of 2011.
Argentina and repatriation
This one has made plenty of headlines and has been fodder for plenty of analysis notes, too (including of course the Flash update from last Wednesday afternoon which you can find in Appendix 1 underneath) so before noting a bit of fine-print, let’s cut to the chase with some what-you-need-to-know bullet points:
The new repatriation rule really is no biggie for mining companies (producer or explorer, large or small) in Argentina and does not stop any company from remitting profits back home
It’s not really about mining and much more about the crackdown in the exchange trade in dollars in Argentina. We note today the news reports (11) about how the market for dollars will be restricted by the Argentina tax office (AFIP) temporarily. No dollars from internet or phone banks none from cash machines and if you want dollars tomorrow and go to a bank teller window, you also have to justify your purchase and explain why you want dollars. It’s all about capital flight from Argentina and all about how the Central Bank (BCRA) has had to intervene by selling dollars to the market in order to prop up its currency.
It is ultimately an inflation fighting exercise by run by the Argentine government, as tighter controls on dollars = less capital flight = more power for the BCRA to intervene and prop up the currency = a stronger (or better put “less weak”) Peso = more buying power per banknote = prices don’t rise as quickly as they might. Whether or not this will work as a policy is beyond the scope of this publication about junior mining companies in LatAm, the fact is that they’re trying it.
Other regional countries apply the same rules as the new Argentina Executive Decree (a good example being Brazil, which imposes the same kind of small transaction tax on money movements as Argentina and is a near carbon copy of what companies will go through in Argentina in the future) with nary a word spoken against them.
This move may presage further tightening on transactions in foreign currency for companies (in our case the miners) because you can never say never, but anyone who shouts, states or even implies that those tightening measures are bound to happen doesn’t have the first clue on the subject.
Further restrictions on foreign currency transactions in Argentina are unlikely in the short to medium term, i.e. the attention span that the market is using and will continue to apply in the future.
This issue, badly understood by the prophet of doom English language media and analysis brigade, has thrown up a good buying opportunity in many Argentina exposed stocks, including of course our own covered stock XXXXXXXXXXXX, which has a great buy/add price on offer right now (I’ve personally taken advantage of that).
Now for a bit more and some background is needed here. Firstly, it’s interesting to note how the demonization of the Cristina government quickly moved from the original call from Northern press and its anal yst community of “Mining money can’t leave Argentina!! Sell!!”. When that was clearly pointed out as false, the anal yst talk went to “It’s the first move in a tightening that will lead to...” and you can add the rest yourself. The fact is that it might lead to a situation further down the line that puts more restrictions on the remittance of revenues (mining and other) out of Argentina, but for one thing that’s unlikely because even a heterodox economic model such as Argentina’s isn’t going to commit financial suicide and for another, even if the eventual policy hardens to such extremes it’s not going to happen for plenty time yet.
Second up: What we saw last week was a pretty classic example of how the Kirchnerites (or K people, or Frente Para la Victoria sub-section of the Peronist movement, or whatever else you’d like to call them) operate their political powers. The normal way the Kirchnerites (led by Cristina herself of course) move is to:
1) Move by surprise and hit the market or opponents over the head with a large piece of 2x4 introducing a new rule or law or decree when nobody was expecting it.
2) Wait for the critics and push back from their extreme and unannounced move.
3) Negotiate to a more moderate position that leaves its opposition satisfied that it has gained some relief, while holding on to all the policies it wanted to install in the first place.
Last week and this week is part 1) and we’ll now go through the yelps and cries and accusations of how Argentina is a Chávez-modelled authoritarian police state while part 2) gets into gear. Give it a couple of weeks and part 3) of the K plan will come to the fore, things will settle down and it’ will be business as usual. And if you don’t believe me, don’t buy XXXXXX or any other Argentina exposed mining stock for that matter. I won’t hold it against you.
The fact remains that the new regulations as stand are of minor importance to the mining community in Argentina and that we’re not going to see remittance restrictions placed on revenues from mining companies operating in Argentina in the foreseeable future (by which I mean that even if restrictions are applied, it will be long, long after the time when the market has forgotten all about this issue-du-jour and has bought back all the stock it sold in its panic). Or in the simplest of terms, this is a buying opportunity. You don’t have to hold the stock you buy for years on end and you don’t have to like the CFK government’s policy or way of doing things. You don’t have to go and live in Argentina, either. You don’t even have to visit the place if you have a strong ideological complaint with the direction it (or any other LatAm country for that matter) goes about its business. You just need to know that this is a buying opportunity...for a bunch of juniors we follow...it’s business...it’s nothing personal. For further reading, this article (12) is recommended, written as it is by an Argentine mining journalist. He got it right the day after everyone in the English language was either still getting it wrong or just adapting their original, erroneous prophet-of-doom calls and making them even worse.
China looks at Chihuahua
Stories about how China is looking to the Latam region as a prime destination for its investment cash nowadays have a bear defecates in tree-covered location ring about them, but all the same it’s good to track down some micro-regional action have an idea about some specific places that may eventually attract Sino-dollars. For example Chihuahua in North Mexico, as this short report (13) makes clear:
Mexico City, Mexico, Oct 25 (UPI): Chinese business executives have announced their interest in investing in the Northern State of Chihuahua, bordering with The USA.
The Chinese met with the regions’ governor, César Duarte, to whom they stated their interest in bringing investment to this northern region of Mexico.
“For us it is of great importance to know of your interest in making investments in Chihuahua”, said Duarte.
He added that, “We are set on converting ourselves into a viable bridge for Asia products, specifically those of China, to The USA.”
The investors told the governor of their desire to put resources towards different types of projects that include the sectors of mining, rural development and water.
Stormy weather is expected in Australia's Federal Parliament building over the next few days as Julia Gillard's government tries to push through its mining resource rent tax.
Author: Ross Louthean
Posted: Wednesday , 02 Nov 2011
There should be some stormy sessions in Australia's Federal Parliament in Canberra in the next few days as debate goes on about the Gillard Government's introduced legislation that proposes a minerals resource rent tax (MRRT) on iron ore, magnetite and coal mining.
The battle lines are not quite drawn, with the independents, who have sided with the Labor Government to allow it to govern, demanding that a large part of the money raised go into research into ways to curb coal seam gas mining in rural eastern Australia.
The Tony Abbot-led Liberal-National Party opposition has said it will oppose the mining tax as being damaging to the nation and to resource financing but there was speculation one Liberal member from Western Australia may support the tax.
The Greens, which have the balance of power in the Senate, are wanting the tax to be increased and to take in all forms of mining, so that billions can be thrown into alternative and green energy - a quest for which it has the support of academics.
The MRRT Bill was introduced in Parliament today by Assistant Treasurer Bill Shorten because Treasurer Wayne Swan had lost his voice, and the legislation seeks a 30% tax to apply to "extraordinary profits of coal and iron ore miners from July 1, next year.
The Gillard minority government claims it will use revenue from the tax to fund a billion-dollar tax break for small business, a cut to the corporate tax rate, an increase in compulsory superannuation contributions and improve regional infrastructure.
While the first move to hit mining with a super tax hit the rocks and sunk Kevin Rudd as Prime Minister, the re-arranged and modified tax with new Prime Minister Julia Gillard - put together exclusively with the big three miners (BHP Billiton, Rio Tinto and Xstrata) - appeared to mollify some voters but not the financial world.
Despite the fact that the MRRT was cobbled together to create no great impact on the big three miners, it does, however, hit emerging competitors between the eyes as they have to finance their mining infrastructure.
One of the mining associations angered by the perceived collusion between the Gillard Government and the three majors, the Association of Mining & Exploration Companies (AMEC) said today that the new legislation was discriminatory and anti-competitive.
AMEC chief executive Simon Bennison said: "Despite consistent requests made by AMEC, the Federal Government still chooses to ignore the significant effect the MRRT will have on small emerging Australian miners, and our many concerns and recommendations have gone unheard.
"AMEC continues to oppose the MRRT as it is ill conceived, discriminatory, punitive, complex and a short term tax grab that does not look at the effect of the proposed mining tax on Australia's international competitiveness and sovereign risk.
"However, some of our concerns can be addressed by, at the very least, increasing the profit threshold to $A500 million which would represent a production level of about 10 million tonnes per annum.
Bennison said his association supports a recent discussion paper released by BDO Accountants suggesting establishment of a ‘benchmark rate' and a deferred payment arrangement for small emerging miners.
"AMEC also supports the exclusion of magnetite concentrate from the MRRT legislation, in order to recognise the extensive beneficiation process of low value magnetite."
Bennison said many AMEC members are already experiencing problems raising capital for projects in Australia and are looking to transfer their work to overseas jurisdictions that are also resource rich.
A new lobby group, Eureka 2011, was announced today in Perth and claims it will pressure the Gillard Government to put the proposed MRRT on hold until it can be "subjected to a more coherent planning and review process."
Chairman of the group, Peter Ellery, said the "Stop the Mining Tax" campaign had been set up to bring a grass roots voice to the arguments against the MRRT currently being put forward by mining industry groups.
"It's very easy for the Government to dismiss the arguments of the mining industry itself as being rooted in self interest," said Ellery, who is a mining sector veteran working as a corporate adviser and former business journalist and industry group manager.
"However, many Australians with no direct connection to mining believe this is the worst possible time to be putting a brake on the performance of the main driver of our economy, and it's those people whose views we will be putting to Government," he said.
"It's a bad tax, cobbled together in haste and secrecy, which will be damaging to the mining sector, very difficult to administer and unlikely to meet Treasury's optimistic revenue predictions."
A problem for Eureka 2011 and most mining lobby groups is that on the ascension of Julia Gillard the "them and us" push developed on claims all miners were making huge profits, being paid too much and sending most of the profits overseas.
That argument appears to have had some credence in the lesser mining States of New South Wales and Victoria.
"In the process it will hamper the growth of emerging iron ore and coal miners, drive investment capital offshore and throw a dark shadow over Australia's sovereign risk reputation," he said.
"Our international competitors for the supply of iron ore to China are on the record as saying they will cut prices to erode Australia's market share, yet here's our own government proposing a new tax that will further weaken our competitive position.
"The Gillard government's approach to this tax flies in the face of economic logic.
Mr Ellery said the manner of the development of the proposed MRRT should also give Australians cause for concern.
"Within the last week ministers have referred to the consultative process that is supposedly taking place between Government and the mining sector. It is universally accepted that there has been no consultation whatsoever, unless you accept that three multinational companies - BHP, Rio Tinto and Xstrata - are truly representative of Australia's mining industry.
"There are literally hundreds of Australian-owned mining companies who would say the Prime Minister's claims are, at best, at variance with reality," said Mr Ellery.
Indonesian Gov't. persists in contract re-negotiations despite Grasberg woes
As FCX officials continue to grapple with the Grasberg strike and demands to re-negotiate the operation's contract of work, its Tenke Fungurume operation will undergo another expansion.
Author: Dorothy Kosich
Posted: Wednesday , 02 Nov 2011
RENO, NV -
As Freeport-McMoRan Copper & Gold sought "a mutually acceptable resolution" to its ongoing strike at the Grasberg operation, Indonesia's new Energy and Mineral Resources Minister Jero Wacik said he hoped PT Freeport Indonesia would be willing to re-negotiate its contract with the Central Government.
On October 18, Indonesian President Susilo Bambang Yudhoyono reshuffled his cabinet and subsequently asked his ministers to immediately begin talks with foreign companies whose mining, oil or gas work contracts would be renegotiated.
Contracts of work that were made decades of years ago, and are now considered unfair to the Indonesian nation should be re-negotiated, Yudhoyono said.
Indonesia state news agency Antara reported a number of companies, including PT Freeport Indonesia, have refused to re-negotiate their contracts with the Indonesian government.
In an interview with Reuters on Oct. 19, Freeport CEO Richard Adkerson said, "Our contract is eminently fair by international standards." He noted that the company paid $2 billion in royalties and taxes to the Indonesian government last year.
Nevertheless, Jero Wacik said re-negotiating mining contracts, especially those viewed as generating too little revenue for the state as well as contracts signed 30 years ago, should be viewed as a normal part of doing business. Freeport first signed Grasberg's Contract of Work 40 years ago.
However, Adkerson has insisted PT-FI pays more in taxes in Indonesia than if Grasberg were located in any other country.
Among the companies Antara identified as being willing to renegotiate their contracts are Newmont Nusa Tenggara and PT Vale Indonesia (formerly Inco).
Meanwhile, Freeport-McMoRan said PT Freeport Indonesia is operating the Grasberg open pit mine and the DOZ underground mine at reduced rates using non-striking employees and contractors. "Since Oct. 22, 2011, mining operations have been temporarily suspended pending repairs to concentrate pipelines damaged as a result of civil unrest which has occurred during the course of the strike," FCX said in a press release Tuesday.
The company has tried to repair damaged pipelines, "but has not been able to gain full access to the affected areas of the pipelines because of road blockages by striking workers."
PT-FI is working with local authorities to restore access to the road and pipelines in order to complete pipeline repairs and restart milling operations at Grasberg.
TENKE FUNGURUME EXPANSION
In an unrelated development, Lundin Mining announced Tuesday that Freeport-McMoRan has advised Lundin that the FCX board has approved the undertaking of the second phase of the expansion at Tenke Fungurume mining operations in the Democratic Republic of the Congo.
The expansion, which targets the addition of 150 million pounds (68,000 tonnes) of annual copper cathode production, is expected to increase overall copper production by 50% to 195,000 tonnes of copper cathode and 15,000 tonnes of cobalt in hydroxide.
The cost of $850 million expansion will be split 70/30 between FCX and Lundin. "However, subject to metal prices being strong, it is anticipated that the capital cost for the Phase 2 expansion will be funded out of surplus cash from Tenke Fungurume operations," Lundin said.
Colombia environment ministry to analyze Angostura and La Colosa projects
BN Americas reported that Colombia's environment and sustainable development ministry will
analyze Vancouver based Eco Oro Minerals, Angostura project as well as South African miner AngloGold Ashanti's La Colosa..
Griechenland will Öl-Förderung ausbauen
06.11.2011, 19:11 Uhr
Bei den Öl-Firmen in Griechenland ist von der Krise wenig zu merken: Um von den hohen Marktpreisen zu profitieren, will das griechische Unternehmen Energean nach neuen Quellen im Land suchen. Das Potenzial ist groß.
von Martin Murphy
AthenMathios Rigas ist ganz oben angekommen. Seine Firma Energean Oil & Gas hat ihren Sitz im Atrina Center, einem von Sonne und Seewind gezeichneten Glasturm im Athener Stadtteil Marousi. In der Gegend haben große Konzerne wie der frühere Telefonmonopolist OTE ihre Zentralen. Auf sie schaut Rigas herab, wenn er aus dem Fenster im obersten Stockwerk des Hochhauses schaut. „Kein Platz in Athen ist höher als dieser hier“, sagt der Vorstandschef.
Im hochverschuldeten Griechenland ist die Wirtschaft zum Erliegen gekommen. Banken geben keine Kredite, Investitionen werden auf einen fernen Tag verschoben, an dem es Griechenland besser geht.
Rigas will dies nicht akzeptieren. Er will investieren. Der Erdölförderer Energean gehört in Griechenland zu den Aktivposten der Wirtschaft. Einer, der im europäischen Energiegefüge eine wichtige Rolle spielen will.
„Griechenland ist reich an Bodenschätzen“, sagt Rigas. Erschlossen sind die Vorkommen aber kaum. Zwar wurde früher Erdöl in dem Land gefördert, die Produktion war in den vergangenen Jahren aber weitgehend zum Erliegen gekommen. Dies änderte sich erst mit der Gründung von Energean im Jahr 2007, wie der Manager ausführt.
Die Gesellschaft übernahm die siechende Firma Kavala Oil und investierte frisches Kapital, um die Fördergebiete im Golf von Kavala nahe der Grenze zur Türkei aufzurüsten. „In den vergangenen fünf Jahren haben wir 200 Millionen Dollar dafür aufgewendet“, sagt Rigas dem Handelsblatt.
Aber nicht nur hier ging der frühere Investment-Banker in die Offensive, seine Firma expandierte über die Grenzen hinweg. Energean betreibt inzwischen Förderanlagen in Ägypten, geplant ist der Einstieg in weiteren Ländern Nordafrikas.
Schwerpunkt bleibt der Heimatmarkt. Anders als die Nachbarländer Türkei oder Albanien ließ Griechenland seine Vorkommen brachliegen, auch weil der früher niedrige Ölpreis die Produktion unrentabel gemacht hatte. Jetzt, mit einem dauerhaft höheren Niveau bieten die Gewässer rund um das Land große Chancen. „Griechenland ist im Mittelmeer das Land, das seine Vorkommen am wenigsten erschlossen hat“, sagt Rigas.
Die Hoheitsgewässer reichen von der albanischen Grenze bis nach Kreta
Nach offiziellen Angaben liegen die Ölreserven bei zehn Millionen Barrel (159 Liter). Tatsächlich sollten die Vorkommen erheblich größer sein. Schätzungen reichen bis zu 26 Milliarden Barrel, von denen aber nur ein Teil erschließbar ist.
Diesen Schatz will das finanziell klamme Land nun heben. In den Hoheitsgewässern, die sich von der albanischen Grenze bis hinunter zur Insel Kreta ziehen, sollen Unternehmen nach Öl suchen dürfen. Energean werde dabei sein, sagt Rigas.
Die jährliche Produktion von derzeit einer Million Barrel soll damit deutlich erhöht werden. Aber auch ohne neue Vorkommen wird sich die Ausbeute wegen der Investitionen in neue Förderanlagen mehr als verdoppeln, wie er sagt.
Energean will nicht nur Öl fördern, das Unternehmen sucht seinen Platz auch im internationalen Gashandel. Griechenland ist ein Transferland für den Energieträger aus Zentralasien und dem Nahen Osten. Geplante Pipelines wie South Stream und Nabucco sollen über griechischen Boden verlaufen oder nahe an dem Land vorbeigeführt werden. Um daraus Kapital zu schlagen, will Rigas zusammen mit dem italienischen Energiekonzern Edison einen Gasspeicher bauen.
„Ideal geeignet ist dafür ein ausgeschöpftes Gasfeld im Golf von Kavala“, sagt Rigas. Das Gebiet sei bereits an das nationale Gasnetz angeschlossen. Die Investitionen beziffert er auf 400 Millionen Dollar. „Das Geld liegt bereit, aber wir können nicht loslegen.“ Die Regierung gebe ohne Angabe von Gründen keine Genehmigung.
Dabei wäre der Speicher im Interesse aller Griechen, könnte mit diesem das Land doch 50 Tage lang mit Gas versorgt werden. Derzeit gibt es keine Speicher, bei Engpässen werden die Preisaufschläge direkt an die Kunden weitergegeben.
Rigas hat noch ein weiteres Ziel fest im Blick: den Gang an die Börse. Die fertigen Pläne dafür hatte er wegen der Krise zurückstellen müssen. Vorerst, wie der Grieche sagt.
Fitch Ratings has upgraded the Issuer Default Ratings (IDRs) and Country Ceiling for Peru as follows:
--Foreign currency IDR from 'BBB-' to 'BBB';
--Local currency IDR from 'BBB' to 'BBB+';
--Foreign currency short-term IDR from 'F3' to 'F2';
--Country ceiling from 'BBB' to 'BBB+'.
The Rating Outlook is revised to Stable from Positive.
The upgrade reflects Fitch's view that reduced uncertainty regarding macroeconomic policy continuity and changes to the fiscal contribution of the mining sector under President Ollanta Humala will continue to support the strength of the sovereign's external and fiscal accounts as well as Peru's robust macroeconomic performance.
Fitch considers that Peru's strengthened resilience to external and confidence shocks is underpinned by the sovereign's robust net external creditor position (49% of CXR), rising international reserves and moderate external indebtedness, which partly balance high commodity dependence and still significant financial dollarization, two of Peru's key credit weaknesses.
'The maintenance of a credible monetary policy as well as a conservative fiscal stance under the Humala administration are likely to provide Peru with policy flexibility to respond to external shocks without jeopardizing macroeconomic or financial stability, and the sustainability of public finances,' said Erich Arispe, Director in Fitch's Peru's Sovereign Group.
The track record and credibility of Peru's central bank is likely to support growth momentum with relatively low inflation. Fitch estimates growth could average 6.4% in 2011, thus increasing its five-year average performance to 6.8%, more than double the median for the 'BBB' category (sovereigns rated 'BBB+', 'BBB' and 'BBB-'). Although inflationary pressures have increased, price stability still compares favorably with regional and investment-grade peers.
'The swift and successful completion of negotiations regarding the increased fiscal contribution of the mining sector between private companies and the government has reduced regulatory uncertainty and bodes well for the continuation of Peru's positive investment and growth cycle,' added Arispe.
According to Fitch estimates, Peru will likely record a general government surplus of at least 1.1% of GDP in 2011. More importantly, Fitch expects that increased social spending under the Humala administration will be done in the context of fiscal prudence, thereby supporting positive debt dynamics. General government debt is forecasted to decline to 22% in 2011, substantially lower than the 40% 'BBB' median.
Fitch notes that FX-denominated debt, as a percentage of total government debt, remains higher than peers, which exposes debt dynamics to exchange rate risks. This credit weakness is partly balanced by the sovereign's manageable amortization profile, high level of international reserves and debt prepayment record.
Significant and sustained strengthening of the sovereign's external and fiscal balance sheets, improvements in the government's debt composition and financial dollarization would be positive for Peru's creditworthiness. Over the medium term, progress on social indicators as well as deepening of political institutions would further increase the durability of the current economic model and benefit Peru's creditworthiness. Conversely, policy choices that result in increased macroeconomic volatility, reduced growth prospects, and sustained deterioration in public and external credit metrics in the context of adverse term of trade would be viewed negatively.
Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Sovereign Rating Methodology' (Aug. 13, 2010).
Australia's new mining tax has companies at odds over who will shoulder the biggest burden, as small miners fear their larger counterparts will use other loopholes to avoid liability and leave them to foot the bill.
Author: By James Regan (Reuters)
Posted: Friday , 11 Nov 2011
SYDNEY (Reuters) -
A new tax in Australia on mining profits is pitting smaller mining companies against the likes of global giants BHP Billiton, Rio Tinto and Xstrata over who will shoulder the biggest burden.
The sector, which provides jobs to more than a quarter of a million Australians, has long complained the tax on coal and iron ore mining will drive investment away from Australia.
But now, small miners say they fear larger counterparts will use deductions and other loopholes to avoid liability for the 30 percent tax and they will be left footing the bill.
Reassurances from Prime Minister Julia Gillard's Labor party that the "big end of town" will pay its share have done little to allay their concern.
A national advertising campaign launched this week by the Association of Mining and Exploration Companies (AMEC), representing small miners, aims to highlight the unfair and anti-competitive nature of the proposed tax, says the association's chief executive, Simon Bennison.
The tax is being closely watched by other resource nations and the government says it will ensure Australians get a fairer return from the biggest mining boom in a century, being fed by near insatiable Asian demand.
The battle with smaller miners follows Gillard's victory this week in passing through parliament a far-reaching carbon tax on Australia's 500 worst polluters, which includes most of the mining industry.
The carbon tax is initially set at A$23 per tonne of carbon emitted, or double the price of European Union carbon credits.
MINING MAGNATE UNLIKELY SUPPORTER
An unlikely leading advocate for the small miners is one of Australia's wealthiest individuals, Andrew "Twiggy" Forrest, who made a fortune in mining iron ore and readily admits his company, Fortescue Metals Group, is unlikely to pay much, if any of the tax.
"Being ill conceived, poorly negotiated by government and finalised in a shroud of secrecy and exclusiveness with the world's biggest mining companies, this tax is unfair and a penalty on smaller mining companies," Forrest said.
"Mining is the backbone of the Australian economy, which this tax will hurt," Forrest said.
The Minerals Resource Rent Tax is expected to pass through Australia's lower parliament this month and take effect on July 1, 2012, taxing iron ore and coal mining companies making more than A$50 million in annual profits at a rate of 30 percent.
Gillard, who held closed-door talks with BHP Billiton, Rio Tinto and Xstrata before issuing final details of how the tax will work, plans to pay for more social programmes with the A$7.7 billion in revenue she hopes will be raised in the first two years.
Australian treasurer Wayne Swan has said big miners, including BHP, Rio and Xstrata, will shoulder up to 90 percent of the tax burden in any given year.
Forrest has slammed the claim as "pathetic."
MINING INDUSTRY SPLIT
But the mining industry itself is split and the head of the Minerals Council of Australia, the nation's largest industry lobby group, said he believed the figure was correct, also putting him at odds with Forrest.
"We have no basis to contest treasury's calculations that 90 per cent of the revenue from this tax will be paid by the bigger miners," the council's chief executive, Mitch Hooke, said.
The government has so far resisted pressure to publish details of how the revenue will be raised.
AMEC's Bennison said advertising will target influential members of parliament who may be sitting on the fence to consider pushing for last-minute tax break for its members.
The Gillard administration is still not assured of the numbers to pass the bill through the lower house, where it needs support from three independents and a Green to pass laws.
A key independent, Andrew Wilkie, has said he would push for changes to protect smaller mining companies.
A decision by parliament's upper house to send the bill to a Senate Economics Committee was welcomed by Bennison. But he said that alone would not ensure junior mining companies were not discriminated against.
A 40 percent tax proposal supported by former prime minister Kevin Rudd was dumped last year after mining companies ran a multi-million-dollar campaign against it.
Pakistan says no to Antofagasta/Barrick mining lease application
Government officials in Pakistan's remote Baluchistan province have rejected a mining lease
application from Chilean copper producer Antofagasta and Canada's Barrick Gold, raising
questions over the future of their Reko Diq copper-gold project..
Lifting of ban on uranium exports to India has huge implications for Australia
According to legal firm, Minter Ellison, the change will present new opportunities for uranium mine developers as well as existing producers such as BHP Billiton
Author: Ross Louthean
Posted: Thursday , 17 Nov 2011
With American President Barack Obama flying out of Australia today after a whirlwind 27 hour visit, Australian Prime Minister Julia Gillard must now put some hard lobbying into her plan to overturn a ban on supplying uranium to India.
This US President's visit was a sequel to a meeting of Pacific Nations, Australia and the US in Hawaii that led to wonderful talk about new relationships, and prompted Gillard on her return to Australia to say she wanted the ban on supplying uranium to India lifted.
The Australian Labor Party (ALP) ban, not necessarily supported by the Liberal Party opposition, relates to India not having signed any nuclear non-proliferation treaty
That has sparked anger from the left wing of Federal ALP and sent the Green Party feral, given its stance on wanting all uranium mining banned and even coal mining in Australia - a big vertebrae in the country's economic backbone - shut down.
Political commentators are saying Gillard is trying to show she is not anti-mining (a hard case after introducing a carbon tax and planning a super tax on iron ore, magnetite and coal mining) and also distancing herself from the obvious perception of groveling to the Greens, so as to stay in power. The carbon tax was an about-face on electoral promises but demanded by the Greens, and that party also wants heavier taxes on mining.
Today the big Australian legal firm Minter Ellison commented on what may happen with lifting the ban on supplying uranium to India. Its Energy and Resources partner Andrew Thompson said lifting the ban could see interest from Indian and other foreign private and State-owned enterprises (SOEs) looking for uranium exploration and development opportunities in Australia.
Thompson said The Australian Government recently refined the Foreign Investment Review Board (FIRB) policy for foreign SOEs investing in uranium exploration and development into a two staged approvals process.
"This reversal comes as welcome news to Australian mining companies that are currently restricted by the policy. It will see an increase in uranium export markets, as well as opportunities for foreign direct investment and increased capital for Australian uranium projects.
"Australian uranium explorers and producers would benefit from India's increasing use of nuclear energy, which is expected to grow from 3% to 40% of total domestic electricity consumption by 2050."
ALP policy currently bans the export of uranium to nation-states that are not signatories to the Nuclear Non-Proliferation Treaty (NPT), including India, North-Korea, Taiwan, Israel and Pakistan, as a means to prevent the proliferation of nuclear weapons.
Minter Ellison said the proposed ALP policy change outlined by Gillard and led by Federal Minister for Resources and Energy, Martin Ferguson, is expected to be successfully passed at the ALP National Conference that begins on December 2 in Sydney.
Andrew Thompson said this change will present new opportunities for uranium mine developers as well as existing producers such as BHP Billiton, which has recently received Federal Government approval for its A$30 billion expansion of the copper-uranium reserves at South Australia's Olympic Dam mine.
Uranium exploration and mining are currently permitted only in South Australia, Northern Territory and Western Australia, while exploration (but not mining) is permitted in Queensland through the policy of the reigning ALP State Government.
LIMA, Nov. 26 (UPI) -- Opponents of a proposed gold mine in northern Peru say it would destroy four lakes and threaten the area's water supply.
Gregorio Santos, the president of the Cajamarca region, asked President Ollanta Humala to meet with opponents about the mine's potential social and environmental impacts, the Los Angeles Times reported. Locals worry the mine "could destroy the entire ecosystem," Santos said.
On Thursday, about 10,000 residents marched in protest against the project, and Santos said last week Humala's support for the mine indicated he faced pressure from "transnational capitalism."
Protesters have blocked roads, and some Cajamarca-area schools and businesses closed to protest the proposed mine.
It would be operated by Colorado company Newmont Mining, which also runs the Yanacocha open-pit gold mine 20 miles to the north.
The company has proposed investing $4 billion in the proposed mine, which could yield 580,000 to 680,000 ounces of gold per year and bring in royalties and taxes to the government that could total $800 million, the Times said.
The mine would also produce copper.
Opponents say the project would threaten the four lakes in the high Andes that may be connected to the aquifer that produces drinking water in the area.
The Times said protests have become more violent in recent days and protesters reportedly entered the Yanacocha mine site Thursday and destroyed a warehouse.
Humala said Peru needs the proposed mine and the profits and jobs it would bring. Mining has played a significant role in Peru's economic growth.
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