Category Archives: potash

BHP explores $2 billion stake sale in Canada potash mine

AUGUST 25, 2017

REUTERS

BHP explores $2 billion stake sale in Canada potash mine: sources

John Tilak and Greg Roumeliotis

 BHP Jansen shaft

TORONTO/NEW YORK (Reuters) – Anglo-Australian mining giant BHP Billiton Ltd is considering selling a 25 percent interest in its Canadian potash mine project, a stake that could be worth close to $2 billion, people familiar with the matter told Reuters.

The move comes as activist investor Elliott Management Corp has been pushing the company for changes. BHP is working with an investment bank for the potential stake sale in its partly built Jansen, Saskatchewan potash project, the sources said this week.

For BHP, the move will help share the risk of developing the mine and reduce its exposure to the project, said the sources, who asked not to be identified because the deliberations are confidential.

BHP laid out options for the Jansen project in an investor presentation dated Aug. 22, saying it could wait, find a partner, divest or optimize it. BHP spokeswoman Bronwyn Wilkinson said it was too early in the process for the company to have determined the size of a potential stake sale.

“If you bring in a partner, you can share the capital and risk and, depending on who the partner is, help secure an off-take (supply agreement) or offer expertise,” Wilkinson said.

BHP, which will keep control of the mine, is not tied to the 25 percent, and the final stake sold could depend on offers, the people said. BHP’s 4-million tonne mine would cost about $8.5 billion to build, with more than half of that still uncommitted.

The company does not need the cash either, so it is not in a hurry, the people said. The company’s underlying profit surged to $6.7 billion in the recent fiscal year.

BHP’s U.S.-listed shares jumped, rising as much as 4.5 percent to hit a two-year high of $43.60. They were up 2.3 percent at $42.68 in afternoon trading in New York.

The potash mine has become the latest front in the battle between BHP, the world’s top miner, and Elliott, a hedge fund that has challenged some of the world’s biggest companies.

Elliott’s demands include getting BHP to spin off its U.S. oil and gas assets, doing away with its dual-listing structure, and improving shareholder returns. BHP earlier this week said it would exit the U.S. shale oil and gas business.

In July, BHP potash analyst Paul Burnside made a case for potash, arguing that a counter-cyclical investment would help position the company for rising demand for the commodity over the next few decades.

Elliott attacked BHP’s plans to enter the potash fertilizer market, which is facing over-supply and sluggish prices. Analysts are cautious about the sector.

Global prices of potash, a crucial crop nutrient that helps corn and other crops withstand stress, are low due to a slump in farm prices and rapid expansion of mining capacity by producers.

The company said this week it would not seek board approval in 2018 as expected for capital to finish building Jansen due to uncertainty in the potash market. Some analysts interpreted the comments as delaying the project. Production could start in the mid-2020s, BHP said.

The potash asset is expected to attract interest from global players, including Indian and Chinese firms, the people said.

Since India relies entirely on imports for potash, Indian fertilizer companies looking to sidestep price volatility could look to take advantage of attractive valuations.

Indian Potash Ltd, IFFCO, Deepak Fertilisers and Petrochemicals Corp, Rashtriya Chemicals and Fertilizers Ltd, Coromandel International Ltd are some of the top potash players in India.

Last month, Reuters reported that Indian agrochemicals producer UPL Ltd is exploring a bid of more than $4 billion for the agrochemicals business of Platform Specialty Products Corp, in a sign that Indian agriculture firms were actively scouting for North American assets.

Shale may be gone but BHP won’t ditch potash

Shale may be gone but BHP won’t ditch potash

Frik Els

Mining.com

Aug 23, 2017

 

BHP Jansen at sunset

The sun is not setting on Jansen. Image: BHP

On the face of it BHP caved into demands from activist investor Elliott Advisors when it suddenly announced this week that it’s actively seeking to exit oil and gas.

When it comes to potash however, the Melbourne-based company (Elliott also wants BHP to ditch its Australian listing, but that’s a fight – or should that be stoush – for another day) appears to be digging in its heels.

If you were looking for management missteps BHP’s petroleum business was always an easy target. No-one spending top dollar on tight oil in 2011 when crude was in triple digits doesn’t look foolish today. And despite similarities mining and oil doesn’t appear to mix – just ask Freeport.

“Given that we do think some time in the 2020s we are going to see a requirement for some form of new greenfield production […] the same way as we think that’s not so true for copper”

But Elliott did not mince words about BHP’s potash plans either.

The fund called the Jansen project in Saskatchewan just another example of the company’s “dubious strategy of ‘Thinking Big’ — a concept that has been disastrous for BHP shareholders”. Just to make sure the message sank in, Elliott said bringing Jansen into production would be “a severe strategic misstep”.

With a final bill north of $12 billion BHP is certainly thinking big with Jansen, regarding it as a business that could one day rival its Western Australia iron ore division. While attention has been focused on the announcement that the project won’t come before the board before 2019, BHP remains essentially on the same development path for Jansen.

The company is spending $500m to finish Jansen’s two shafts. And as CFO Peter Beaven helpfully explained to a banking analyst if you don’t finish the work the shafts will collapse “which doesn’t make any sense at all.”

Andrew Mackenzie also pointed out that once the shafts are completed by the end of 2019, Jansen would be “totally de-risked” and engineers would have “dealt with all the difficult parts”. That would make it easier to sell or in Mackenzie’s corporate parlance “crystallize value”. Then according to Mackenzie: “We will only be three years away from first potash.” Production in 2023 has been the plan all along.

In its outlook, BHP said overcapacity in the potash industry would “likely get worse before it gets better” and greenfield projects are slated to enter the market “through 2021”. But new supply is also entering the market amid record demand for the crop nutrient – Chinese imports are likely up more than 30% this year.

BHP admits potash demand is volatile, but its forecast trend demand growth of 2m tonnes per year through the 2020s does not seem overly optimistic.

Perhaps most telling of the extent of support Jansen enjoys within the company is Mackenzie hinting that potash may be BHP’s best (if not only) growth opportunity: “Given that we do think some time in the 2020s we are going to see a requirement in [the potash] market for some form of new greenfield production […] the same way as we think that’s not so true for copper.”  Well in the same way it’s not so true for iron ore or coal either.

There is no shortage of detractors – just read MINING.com’s comment section whenever Jansen is mentioned. But one bullish (and seasoned reader) predicted the fate of the shale assets and Jansen this way more than a month ago.

I remember when the “smart” money types were denigrating Escondida. The development of greenfields has always been BHP’s best route to success – not acquisitions like shale operator PetroHawk.

 

 

 

 

BHP’s New Chairman Heralds Era of Tougher Focus on Spending

BHP’s New Chairman Heralds Era of Tougher Focus on Spending

By  David Stringer

August 22, 2017, 6:02 PM CST August 23, 2017, 2:43 AM CST

Bloomberg

BHP Billiton Ltd.’s moves to ditch its U.S. shale assets and halt a rush into the potash market signal an era of more disciplined spending under the top miner’s incoming chairman.

Montreal-born Kenneth MacKenzie, 53, who takes up the post next month, is viewed by investors and analysts as more likely to focus on investment returns, after influencing BHP’s decisions to exit shale and delay proceeding on the $4.7 billion first phase of the Jansen project in Canada.

“They are talking more now about prioritizing projects based on return on capital,” according to Craig Evans, a Sydney-based portfolio manager at Tribeca Investments Partners Pty., a BHP shareholder and one of the miner’s more vocal critics in recent months. “I’d like to think this is the emergence of a bit more rigor on capex — and that’s coming from the new chairman.”

MacKenzie, appointed to BHP’s board last September and credited for doubling the market value of Australia’s largest packaging company, Amcor Ltd., in a decade-long spell as chief executive officer that ended in 2015, has met in recent weeks with more than 100 investors on a global tour that’s taken in Australia, the U.S. and the U.K.

A willingness to listen to shareholders was again apparent in board changes announced Wednesday. Grant King, the ex-Origin Energy Ltd. CEO appointed as a director in March, decided not to stand for election later this year “owing to concerns expressed by some investors,” according to a BHP statement. Fellow director Malcolm Brinded also opted to step down from October.

The producer’s strategy shift shows “an emergence of the rhetoric we’re going to see from Ken, in terms of where things are going to need to sit on the priority scale to have capital allocated to them,” Tribeca’s Evans said in an interview Tuesday. Melbourne-based BHP declined to comment.

BHP’s shares added 0.2 percent to A$26.04 in Sydney on Wednesday. Its bonds also climbed, with the 750 million euros of hybrid notes rising almost 1 cent on the euro to 119 cents, the highest since they were sold in 2015, according to data compiled by Bloomberg. The company’s 3 percent bonds due in May 2024 climbed almost 1 cent to 116 cents, the biggest gain in more than a year.

BHP’s CEO Andrew Mackenzie set out plans to improve returns and capital allocation in a speech in May 2016 and insisted Tuesday in an interview with Bloomberg Television that the decisions on shale and potash had been under consideration for several years, and weren’t a response to investor activism.

Paul Singer’s Elliott Management Corp., which began a public campaign in April urging BHP to overhaul its portfolio and boost payouts, last week backed MacKenzie as a chairman likely to heed shareholders’ calls for improvements. Elliott didn’t respond to a request for comment.

While BHP forecasts capital expenditure will rise about a third to $6.9 billion in the 12 months through June 2018, it has pledged to hold project spending to less than $8 billion annually through 2020, a fraction of the $23 billion total it deployed at its peak in 2013.

Show Caution

The producer should toughen its spending criteria and only develop projects that will deliver returns above 15 percent, Sydney-based Deutsche Bank AG analyst Paul Young said in a report last week. Aside from mothballing Jansen, BHP should also show caution on a potential $5 billion expansion of the Olympic Dam copper mine in Australia, according to Young.

BHP wants to improve the company’s average return on capital employed to about 20 percent by fiscal 2022 from 10 percent in the year ended in June, Chief Financial Officer Peter Beaven said Tuesday in a presentation. “There is still much more to be done, and this is where we’re focusing our efforts,” he told analysts on a conference call.

 BHP capital returns Aug 2017

MacKenzie’s appointment to replace Jacques Nasser, who has led the miner’s board since 2010, shows “a radical shift in strategy,” Sanford C. Bernstein Ltd.’s London-based analyst Paul Gait wrote in a note last month.

“It’s difficult not to see that in some of these changes,” Gait said by phone on Tuesday. “A focus on returns, on better capital allocation and tighter investment criteria are going to play a huge role on his watch.”

“That’s what he is known for — his reputation is predicated on maximizing returns on capital, and holding management teams to account,” said Gait.

Wesfarmers Ltd.’s outgoing finance director Terry Bowen and ex-BP Plc executive John Mogford will be appointed to BHP’s board from October, the producer said in its statement Wednesday. Bowen’s tenure at Wesfarmers has been noted for “a focus on improved cashflow and cost efficiency,” BHP said.

Ex-Royal Dutch Shell Plc exploration chief Brinded, a BHP director since 2014, chose to stand down as a result of “ongoing legal proceedings in Italy relating to his prior employment,” BHP said. Shell and Eni SpA are the subject of scrutiny over the acquisition of an offshore oil field in the Gulf of Guinea.

 

 

 

BHP to quit U.S. shale business as annual profit surges

AUGUST 21, 2017 / 4:37 PM

REUTERS

BHP to quit U.S. shale business as annual profit surges

James Regan

BHP Andrew Mackenzie

SYDNEY (Reuters) – BHP Billiton, the world’s largest miner, reported a surge in underlying full-year profit on Tuesday and said it would exit its underperforming U.S. shale oil and gas business, pleasing disgruntled shareholders who called for a sale.

The Anglo-Australian mining giant, which is under pressure from U.S. hedge fund Elliott Management to rethink its investment in oil and boost shareholder returns, was buoyed by a recovery in industrial commodities markets.

It generated more cash than even in some years of the mining boom, slashed net debt by nearly $10 billion to $16.3 billion and tripled its final dividend to $0.43 a share.

Underlying profit of $6.7 billion was below expectations for $7.4 billion, according to Thomson Reuters I/B/E/S, but the market focused on the lower debt and the company’s determination to exit U.S. shale, pushing its London-listed shares up 2.4 percent by 1354 GMT.

“Net debt looks very impressive … so the cash looks like it was applied to deleveraging versus extra dividends,” Shaw and Partners analyst Peter O’Connor said.

BHP joined other miners that have boosted payouts in the current earnings season to reward shareholders following a resurgence in commodity prices. Rio Tinto and iron ore miner Fortescue Metals both paid record dividends, while Anglo American reinstated its dividend.

Facing calls from some shareholders to dispose of the shale business it acquired at the height of the oil boom, the miner said it was working on an exit over the next two years.

Chief Executive Andrew Mackenzie said the preference would be a small number of trade sales. Other options could include a demerger or asset swaps.

“We certainly have plenty of people interested in taking a look,” Mackenzie said on a media call. “Our determination to exit means that we have other ways to exit that do not necessarily depend on … a competitive set of willing buyers.”

Fund managers including Elliott and Tribeca have been agitating for shale’s divestment, along with higher shareholder returns and the elimination of dual-structured Australia and London stock listings.

Tribeca welcomed BHP’s comments that shale was no longer core to the company.

“That was our approach. We didn’t see it fitting strategically in BHP. We think they can realize value ahead of market expectations for the U.S. onshore business,” Tribeca analyst James Eginton said..

Elliott, which last week raised its stake in the miner’s London-listed arm to 5 percent, declined to comment.

COMMODITY SURGE

BHP’s underlying profit surged from $1.2 billion a year ago as it benefited from a 32 percent rise in iron ore pricing in fiscal 2017, owing to greater demand from Chinese steelmakers, which buy the bulk of its ore.

Prices for copper, oil, coal, nickel and other commodities were also up, with only liquefied natural gas weaker.

“Strong momentum will be carried into the 2018 financial year, with volume growth of 7 percent and further productivity gains expected,” Mackenzie said.

He reiterated BHP’s commitment to its conventional petroleum business that includes operations in the Gulf of Mexico, saying there were opportunities to make money over the next couple of decades.

In response to disappointment from some analysts at the size of the dividend, Chief Financial Officer Peter Beaven said BHP’s bias was towards further strengthening the balance sheet, but any further accumulation of cash, once a target of cutting debt to $10 billion-$15 billion was met, would go to shareholders.

Capital expenditure would be no more than $8 billion per year, he said.

At the bottom line, BHP swung to an attributable profit of $5.89 billion from a record loss of $6.39 billion a year ago.

In fiscal 2016, the bottom line was hit by $7.7 billion in write-downs, with Mackenzie vowing they would not be repeated in 2017.

Elliott’s other criticisms have focused on BHP’s development of its Jansen potash mine in Canada.

“It’s no different from any other asset. It needs to pass through our capital allocation framework. In other words, the risk return needs to be sufficiently attractive,” CFO Beaven said. “Until it passes that, it won’t go forward.”

Reporting by James Regan,; Additional reporting by Barbara Lewis in London, Sonali Paul in Melbourne and Anusha Ravindranath in Bengaluru; Editing by Richard Pullin and David Evans

 

 

 

BHP Delays Saskatchewan Mine After Activist Push

BHP Delays Saskatchewan Mine After Activist Push

By  David Stringer Perry Williams Haidi Lun

August 21, 2017, 4:11 PM CST August 22, 2017, 5:51 AM CST

BHP Andrew Mackenzie

BHP Billiton Ltd. is in talks with potential buyers of its U.S. shale assets, acquired in a contentious $20 billion deals spree in 2011, and will delay a move into potash after months of public skirmishes with activist investors led by Paul Singer’s Elliott Management Corp.

The reversal by the world’s top miner comes after new Chairman Ken MacKenzie, who officially starts his job next month, met more than 100 investors in recent weeks in Australia, the U.S. and the U.K. amid demands from some shareholders for a change in strategy. BHP’s stock in London rose to its highest in six months on Tuesday.

“We’re talking to many parties and we’re hopeful” of completing a small number of trade sales to divest the onshore oil and gas division, Chief Executive Officer Andrew Mackenzie told Bloomberg Television Tuesday in an interview, adding that the moves on shale and potash aren’t the result of shareholder pressure. “We have been moving in this direction for some time” on shale, he said.

Missteps on strategy by BHP’s leadership, including in the shale unit, have destroyed about $40 billion in value, according to New York-based Elliott, which launched a campaign to seek a range of changes in April. BHP’s 2011 shale deals had been too costly and poorly timed, while the eighth-largest producer in U.S. shale didn’t deliver expected returns, CEO Mackenzie said on an analyst call.

Elliott last month joined skeptics including Sanford C. Bernstein Ltd. and Argo Investments Ltd. in raising concerns that the $13 billion Jansen project in Canada could risk depressing already low potash prices.

BHP likely concluded the shale and Jansen assets were “not going to generate the returns that is going to make the grade,” said Macquarie Wealth Management Division Director Martin Lakos. “It’s most likely the Elliott activity has accelerated the shale sales process.”

Deutsche Bank AG last week called on BHP to mothball the operation, citing potential low returns. It’ll likely be two to three years before the potash market is in a position that would allow BHP to reconsider advancing the project, Mackenzie said.

BHP shares rose as much as 3.7 percent to 1,416 pence, the highest since Feb. 21, and were up 3.1 percent by 12:40 p.m. in London trading.

Discussions among BHP shareholders have been dominated by concerns over shale and potash, according to Craig Evans, a portfolio manager at Tribeca Investments Partners Pty, which holds the producer’s shares. Tribeca and other investors have also pressed the case with BHP directly, he said.

“Elliott put the first balls in motion on this in calling them to task,” Evans said. “It’s no coincidence that we’re talking about those issues now.”

Investors including AMP Capital, Schroders Plc, Escala Partners and Sydney-based Tribeca have added to criticism of BHP or offered support for some of Elliott’s proposals in recent weeks. Elliott didn’t immediately respond to a request for comment on the miner’s latest decisions.

BHP will also study a potential demerger or initial public offering of the shale unit, the Melbourne-based producer said Tuesday in a presentation. “We are keeping the other options there so we can proceed with a reasonable amount of pace. For now, we think a trade sale would work best,” Mackenzie said in the interview.

The U.S. onshore assets were free-cash flow positive in fiscal 2017, BHP said in a statement Tuesday, as it reported full-year earnings jumped five-fold on higher commodity prices. A sale of the shale unit could fetch about $8 billion to $10 billion, and may attract buyers including Anadarko Petroleum Corp., Macquarie Group Ltd. said in a July 24 note. Anadarko didn’t immediately respond to an emailed request for comment.

BHP are going to get better value than they would have two years ago after the surge in crude oil prices from last year’s 12-year low, David Lennox, an analyst at Fat Prophets, said on Bloomberg TV. The company has “probably picked an opportune time because we’ve seen the oil price come up from a bottom,” he said.

— With assistance by Ryan Collins, and Alex Nussbaum

 

 

 

Jansen mine won’t be approved in 2018: BHP Billiton

Jansen mine won’t be approved in 2018: BHP Billiton

Saskatoon / 650 CKOM

August 22, 2017 06:38 am

BHP Andrew Mackenzie

BHP Billiton released their 2017 financial results Tuesday morning, which included a progress update on the Jansen mine, located about 90 minutes from Saskatoon.

“We are considering multiple options to maximize the value of the Jansen project, including further improvements to capital efficiency, further optimization of design and diluting our interest by bringing in a partner,” the report said.

It adds a board approval vote will only be sought if it “passes our strict capital allocation framework tests.”

While shafts at the project have been safely excavated and lined through to the Blairmore aquifer, the company said it’s now anticipating a “later market window,” which could delay the start of production.

“What we’ve said is the potash market is uncertain and we’re going to take our time to investigate all options to really enhance the returns of the project and make it as investable as possible,” said Giles Hellyer, the president of BHP Potash in Canada.

“We’re looking now to time Jansen just a little bit later than anticipated.”

Hellyer said the company has already invested close to $2.6 billion in the project.

“That is the money we’ve been using to create the infrastructure and put shafts into the ground,” he said, adding about 70 per cent of the work is now complete.

Business News Network analyst Jon Erlichman said Tuesday’s announcement has a lot to do with the pressure BHP has been feeling from investors.

“The wording from the company is very careful. It leaves the door open for them to continue ahead, if they can find the right balance between investors and what the company hoped to do,” Erlichman said.

“Clearly there’s going to be a strong demand for potash going forward, but is that the kind of demand that translates into bottom line results tomorrow. If you have impatient investors and can’t say yes to that, then that puts pressure on you to think about where your company is going.”

The BHP Billiton potash mine is expected to employ between 400 to 600 workers once in operation.

McKenzie had said in May the project could be producing four million tonnes of potash during first production in 2023.

— With files from 650 CKOM’s Chris Carr.

 

 

 

Activist shareholders push against Jansen potash project

Funds to Go for BHP’s Jugular If Miner Doesn’t Deliver Goods

By  David Stringer

August 20, 2017, 1:00 PM CST August 20, 2017, 9:46 PM CST

  • Market to weigh returns, strategy as company reports Tuesday
  • Challenges remain on board renewal, potash spending: Tribeca

 

BHP Billiton Ltd.’s truce with activist investors led by billionaire Paul Singer won’t last long if the world’s biggest mining company doesn’t pump up returns and deliver on strategic reform in the wake of its expected bumper profit report this week.

 

The naming in June of BHP’s youngest director Ken MacKenzie, 53, as chairman from next month has helped soothe disgruntled shareholders including Singer’s Elliott Management Corp., while continued demand growth in China for iron ore to coal is boosting prices, swelling earnings’ forecasts and raising expectations for higher payouts.

“They’ve got the most breathing space they’ve had in a long time,” Peter O’Connor, a Sydney-based analyst with Shaw and Partners Ltd., said by phone. “But if they mess up, the activists are going to be back on their jugular.”

After raising its stake in BHP’s London-traded shares to 5 percent, Elliott on Wednesday expressed confidence MacKenzie will heed investors’ calls to exit U.S. shale and tighten the producer’s approach on capital allocation. The increased holding, which under U.K. law allows the fund to call a company meeting, means it can “monitor BHP’s progress and hold it accountable for delivering results,” the fund said.

BHP is forecast to almost triple dividend payments as it reports an expected profit rebound Tuesday, following Rio Tinto Group and Fortescue Metals Group Ltd. in boosting returns. Perth-based Fortescue on Monday boosted dividend payments and said it may raise returns further this year amid higher prices.

Elliott, which manages more than $33 billion of assets, is regarded as one of the world’s most prolific activist investors, and is currently tussling with Warren Buffett’s Berkshire Hathaway Inc. over the firm’s offer for Texas’s largest power distributor. The fund has also shown it can be an enduring critic — battling Argentina for 15 years over its debt default.

BHP rebound forecast Aug 2017

MacKenzie met investors globally in recent weeks to listen to concerns over the company’s performance that gathered pace after Elliott launched its campaign in April. Elliott and BHP declined to confirm whether he held talks with Singer’s New York-based fund.

Elliott argues BHP’s leadership has destroyed about $40 billion in value and wants it to enhance returns, refresh the board, simplify its corporate structure and overhaul its oil and gas unit. The company on Thursday approved a $2.5 billion copper mine expansion in Chile and the new chairman will lead deliberations on pending investments in growth projects from potash to oil.

“He’s taken views on board on his listening tour and he’s been well received,” said Andy Forster, senior investment officer at Argo Investments Ltd., which manages more than A$5 billion ($4 billion) and holds BHP’s Sydney-listed shares. “It’s amazing how quickly things can turn around. With a higher iron ore price, the mining company balance sheets are in a much better position.” Argo was represented in a meeting with MacKenzie, he said.

BHP’s underlying earnings in fiscal 2017 are forecast to jump sixfold to $7.3 billion, according to the average of 18 analysts’ forecasts surveyed by Bloomberg, after plunging last year to a 15-year low. The full-year dividend will rise to 88 cents a share, from 30 cents, according to the forecasts. BHP’s consensus estimated payout of about 60 percent of earnings, above its 50 percent minimum threshold, compares with Rio Tinto’s first-half, total returns of 75 percent, according to Macquarie Group Ltd.

To read a preview of BHP’s full-year earnings, click here

The producer could use the profit bonanza to announce a modest buy-back alongside a higher dividend and additional debt repayments, according to UBS Group AG. While BHP may be tempted to follow Rio in boosting returns, it’s unlikely to do so before MacKenzie’s arrival in his post next month, Credit Suisse Group AG said in a note Wednesday.

BHP advanced 1 percent to A$25.63 at 1:43 p.m. in Sydney trading Monday.

BHP activist threats Aug 2017

Shareholders are looking to MacKenzie to begin to outline plans for improvements when he makes a first scheduled public address at an annual meeting in London in October, according to Tribeca Investments Partners Pty. BHP continues to need to carry out a wider overhaul of its board and should defer plans to enter the potash market, according to the fund, which also met with the incoming chairman.

“We’re pretty bullish on the company, but bullish because of the prospect of change,” said Craig Evans, a Sydney-based portfolio manager at Tribeca, which in May called on BHP to sell the shale assets and overhaul its leadership. “One of the things that worries us is what their intentions are with potash — we are not of the belief that they should be throwing money at it right now.”

The most important market news of the day.

The $12.8 billion Jansen potash project in Canada should be mothballed, according to a Deutsche Bank AG note Thursday. The company also should think twice about approving a $5 billion expansion of its Olympic Dam mine in Australia, Deutsche analysts including Sydney-based Paul Young wrote. The bank endorses BHP’s strategy on conventional oil — though not shale — and the longer-dated Resolution and Antamina copper projects in the U.S. and Peru.

“We want to see where the company is headed under the new leadership,” Tribeca’s Evans said. “They have an opportunity now to do a bit of self-help.”

 

 

 

Technology set to unleash mining innovation – Anglo’s O’Neill

Technology set to unleash mining innovation – Anglo’s O’Neill

16th August 2017 BY: MARTIN CREAMER
CREAMER MEDIA EDITOR

Tony O'Neill Anglo mining

JOHANNESBURG (miningweekly.com) – In the next ten years, technology is set to unleash a wave of mining innovation, with the sweet spot centred on changing the thinking around orebodies and processing plants rather than much-spoken-about automation.

“Our focus has changed from hunting technologies to hunting value,” Anglo American technical director Tony O’Neill told Creamer Media’s Mining Weekly Online in an exclusive interview.

Three-dimensional metal printing, nonexplosive breakage of rock and microwave preconditioning of rock, as well as medical imaging equipment, are finding rapid application in mineral mining and processing.

The word in the industry is that mining companies that embrace the new era will be successful and the ones that do not will ultimately not survive. Anticipated are mines with footprints that can more readily coexist alongside a community in much the same way as farming.

The good news is that pathways are already starting to develop that change the current mining and processing paradigm.

Technologies are being reconfigured to make mining and processing far more precise, which offers massive potential reward.

Currently, much larger volumes of waste are brought to surface, compared with the scenario more than a century ago. This is because, outside of safety improvements, old methods are still being used today. For instance, in 1900, to obtain 40 kg of copper, 2 t of material had to be mined using 3 m3 of water and 10 kWh of energy, compared with currently having to mine 16 times more material, using 16 times more energy and drawing on double the volume of water.

“It’s risen at such a rate that it’s becoming unsustainable,” O’Neill commented to Mining Weekly Online.

While mining was, in the past, content to be a research and development laggard, other industries were not – and they shot ahead on the technological front, proving up technology that is now available off the shelf for mining to implement.

A successful pilot plant is already pointing the way for the more widespread introduction of coarse-particle recovery, which brings considerably larger-sized particles to surface and slashes water use.

Moreover, with the maturing of robotics technology, research is also being conducted into the introduction of swarm robotic mining, involving the use of small robots that will bring ultra-precision to a hugely wasteful industry.

As more precise mining methods gather momentum, those 40 kg of copper used to illustrate mining’s deteriorating position may one day be mined without any waste at all.

Coarse-particle recovery and advanced fragmentation (using smart blasting technologies) are good examples of putting existing technologies into new configurations to deliver value right now.

None of the technologies used is unproven, but what Anglo has managed to do is configure them in a way that adds immense value, with minimal additional capital investment.

While technology will have to be honed specifically for mining at some stage, a surfeit of technologies is ready for instant application.

“It’s more about a mindset change than having to make massive investments,” Anglo American technology development head Donovan Waller added to Mining Weekly Online.

Much of the improvement is being driven by data science and the modern world’s ability to analyse increasing volumes of data to a very high degree.

Virtually all the technologies needed have come of age; one of the biggest being the stabilisation of information technology, in which other industries have tended to advance much faster than the mining industry. These other industries include consumer electronics, manufacturing, automotive engineering and the pharmaceutical sector.

COARSE-PARTICLE RECOVERY

The coarse-particle recovery process captures coarse particles that are not recoverable using conventional flotation.

By needing to grind to only 500 micron instead of 170 micron, capacity is increased. Less energy is required in the crushing and grinding and water is more easily extracted from the larger particles and then recycled, significantly reducing the need for fresh water. The extraction of interstitial water results in a dry product, which can be dry-stacked, ultimately eliminating the need for tailings dams.

In copper, coarse-particle flotation has the potential to change the cost curve of the industry by allowing for 30% to 40% more throughput at a recovery loss of 2% to 3%, a 20% energy saving and 30% to 40% less water.

This is already a significant achievement for Anglo American in copper, and the company is hopeful of migrating it to other commodities, including platinum in South Africa, where testwork is still at an early stage.

If, for example, platinum ore can be pre-sorted in advance and be presented at a grade of 10 g/t instead of 4 g/t, output can be increased by two-and-a-half times from the exact same capital invested.

SWARM ROBOTIC MINING

Swarm robotic mining descales mining to make it much more precise, mimicking the actions of a swarm of locusts devouring a field or an army of ants working independently to execute tasks.

The technology envisages highly selective mining of ore types linked to real-time algorithms across a broad spectrum that includes constraints in energy, prices and associated issues.

As many people as possible are taken out of harm’s way in a remotely controlled environment.

Small operational teams will communicate with each other, without the need for a big-brother view from the surface that controls each of those small operational elements independently in self-learning operations.

WATERLESS MINES

Currently, the industry spends a lot of time adding water to its processes and even more time trying to get the water out afterwards.

A pathway has been developed to end up with a waterless mine through the adoption of a closed loop, using only a fixed amount of water that is then recycled time and again. Anglo already recycles or re-uses more than 60% of its water requirements.

Ultimately, the aim is to arrive at potentially chemical means that allow for the liberation of particles without having to add water to them, to arrive at a waterless process.

SUN, WIND, GRAVITY AND SMALL, GREEN NUCLEAR

In terms of energy, the focus is on using renewables for energy self-sufficiency.

The solutions will be a combination of sun and wind. As the sun does not shine at night and the wind does not always blow, other energy forms, including gravity, will take advantage of the mining sector having depth as one of those solutions.

Ultimately, nuclear may be incorporated should it become “greener”, smaller and more modular, as is expected.

MODULAR CONCEPT

Instead of spending billions to build one big plant, small modular plants will be built and scaled up quickly, with the lifespan of the modules being influenced by the next step up in technology.

Mines will move away from using the same technology for long periods of time and outlaying large capital expenditure on plants that last for 50 years and more.

Smaller, modular, cheaper units will allow for technology upgrades every five years, providing scalability as well as the opportunity to ramp up on new technology that has arisen.

Although mining is not an industry that has been used to technological change, there is no reason why it should not, from now on, accelerate advancing technology quickly, as other industries do.

“Our FutureSmart Mining programme is about far more than technologies alone. It is end-to-end innovation, in its broadest sense, addressing all aspects of sustainability for the business – safety, health, the environment, the needs of our communities and host governments, and the reliable delivery of our products to customers. Those that innovate and are agile will thrive in this industry. That is mining’s new future.” O’Neill concluded.

 

 

 

Miners Built on Wildcat Culture Now Looking For Partners

Miners Built on Wildcat Culture Now Want to Share the Risk

By  Thomas Biesheuvel

August 10, 2017, 5:00 PM CST August 11, 2017, 2:07 AM CST

https://www.bloomberg.com/news/articles/2017-08-10/mining-companies-built-on-wildcat-culture-now-want-to-share-risk

  • Chastened by metals slump, new projects idle awaiting partners
  • Industry made by swashbuckling gamblers ‘has lost its nerve’

Swashbuckling gamblers abound in the mining business, where billions are spent searching for mother lodes in some of the most inhospitable places on the planet. But a prolonged slump in metals and big losses on earlier solo projects are turning top producers into risk-avoiding wallflowers.

“The mining industry has lost its nerve,” said Mark Bristow, chief executive officer of Randgold Resource Ltd., a London-listed producer of gold in Africa. “The new fad in town is joint ventures. It’s very strange if you’re a major miner. They should be comfortable in their ability.”

At a time when prices are recovering — helping to make new projects viable again — metals producers including Anglo American PlcBHP Billiton Ltd. and Rio Tinto Groupare seeking partners to share the investment risk rather than going it alone as they have in the past. While the more-cautious approach is a consequence of the near-death experience of the 2015 commodity crash, it could limit the payoff for shareholders during a metals rally.

Mining spending Aug 2017

The shift to more conservative financing comes as the industry confronts a core dilemma: the richest mines in the safest or most-accessible places have mostly been found and built. That means companies are increasingly looking to develop ore bodies that are of lesser quality and may be in higher-risk countries.

“They have to spend more to mine less,” said Rob Crayford, a fund manager at CQS Asset Management Ltd.’s New City Investment Managers in London. “A lot of the projects out there aren’t that great.”

Expansion Partners

Still, while prices remain well below their post-recession peaks, they’re up enough in the past year or so for companies to consider dusting off expansion plans they shelved during the glut. The London Metal Exchange index of six base metals, including copper and aluminum, has rallied almost 50 percent from a low in January 2016. Gold is heading for the biggest annual gain since 2010, and iron ore has almost doubled from the all-time lows reached in 2015.

S&P Global Market Intelligence estimates that exploration drilling for metals has risen for five straight quarters, off to its fastest start to a year since 2009, and there are signs the pace is accelerating.

Anglo American, a London-based producer that has been mining metal for more than a century, says its No. 1 new project is the giant Quellaveco copper deposit in Peru. But the company wants a partner before development starts, and says it will seek joint ventures for all future new mines, known as greenfield developments.

Melbourne-based BHP, the world’s largest mining company, is set to commit to the $13 billion Jansen potash mine in Canada after years of study, but says it wants to bring in a partner to help share the risk. London-based Rio Tinto also is seeking partners for future developments, while Glencore Plc says it won’t build any new mines at all.

“I’m not excited about greenfield,” said Chief Executive Officer Ivan Glasenberg, noting that over-development in years past created the oversupply and low prices that led to huge losses for the industry. “Unless something changes in the world, I don’t see Glencore doing greenfield for awhile.”

Acquisitions are more likely, Glasenberg said, because it doesn’t make sense to “bring new tons into the market which cannibalizes your existing production.”

The industry is still smarting from the self-inflicted wounds. Anglo’s giant Minas Rio iron-ore mine in Brazil cost $14 billion to buy and build, but it became an expensive mistake as prices plunged by more than half. Barrick Gold Corp., the largest bullion producer, spent $8.5 billion on the Pascua Lama project high in the Andes that has been stalled since 2013. The company recently signed a deal with China’s Handong Gold Group that may lead to a joint venture on the project.

It’s not just new mines that are making the industry more cautious. Some companies made investment mistakes that compounded the losses when prices fell. BHP has said its $20 billion spending on shale deposits was a mistake, while Glencore took a $7.7 billion writedown on its Xstrata Plc takeover. Rio Tinto bought coal assets in Mozambique for $3.1 billion that it later sold for $50 million.

To be sure, joint ventures aren’t a new idea. The giant Escondida copper mine in Chile is operated by BHP but also owned by Rio Tinto and Japanese companies including Mitsubishi Corp. But the push to share more of the risk is a marked contrast to the expansion during the previous bull market.

Still, the more swashbuckling method of going solo on projects may be the most beneficial for shareholders, according to Randgold’s Bristow, whose company built all of its three mines from scratch, including a joint venture with Johannesburg-based AngloGold Ashanti Ltd.

“Greenfield is absolutely where you should put all your money,” Bristow said. “But a lot of these companies are still dealing with their over-exuberant growth during the super cycle.”

 

Mining industry can now predict opposition to projects before it’s too late

Mining industry can now predict opposition to projects before it’s too late

Cecilia Jamasmie

August 7, 2017

Mining.com

It’s sounds too good to be true, but a new company is proving miners they can foresee opposition or any other form of social conflict related to their projects, before they even attempt going through a licencing process.

Chalkstone, a UK-based company founded by Donald Bray, a political anthropologist and academic at the University of Cambridge, bases its success in a very unique method, applying what’s known as “granular social intelligence.”

“We take a systemic approach and mix methodologies, combining big data and quantitative analysis with ethnography, qualitative interviews and focus groups, all of which help us dig deep into particular issues and accurately define the social stance of a target group,” Bray explains on the phone from his home in Paris.

“We are not interested if the community is, in any way, being taken advantage of” — Donald Bray.

Before going further, he’s quick to note that the goal of his company is not just to help mining companies get what they want, but to assist them in building mutual trust with the groups living in the areas in which they operate.

“We are not interested if the community is, in any way, being taken advantage of,” he says. “Our due diligence runs in a number of different directions.”

The expert, with more than 15 years of experience working across the globe, particularly in conflict zones, is not saying mining companies are the “bad guys” in the story.

“It’s not that firms don’t care about CSR [corporate social responsibility] or don’t want to invest in it. The problem is that most tools currently available don’t really help them grasp the human aspect of their projects,” he says.

Donald Bray
Donald Bray, Chalkstone founder.

 

Half of all risks faced by extractives companies are non-technical ones, which in turn account for nearly 75% of all projects delays. “For a mid to large sized mining company, the costs of these delays (socio-political and community risks) can add up to some $20 million a week,” says Bray. “This is huge and it deserves far more attention than mere box-ticking or forms of corporate philanthropy.”

Chalkstone already has a known success story under its belt. After an intensive study on a ruby mine and a copper deposit in Afghanistan, applying counter-insurgency tactics used by deployed troops, Bray was hired in 2015 by Gemfields (LON:GEM), the world’s largest emerald and ruby miner. At the time, the precious gems firm had committed to building an emerald mine in Colombia.

Part of Chalkstone’s work to help Gemfields enter the market was the creation of a communications platform based in text messaging, which allowed the mining company and local communities to talk freely to one another.

Named by the community as “Suna Verde” (meaning “Green Pathway” in the Muisca aboriginal language), the system kept locals updated on everything from job-training initiatives to when the “health brigade” (a team of doctors and nurses that travel around the countryside) would be in each village. Soon, says Bray, Suna Verde was rivalling the radio as the region’s main source of news and other information.

“The experience showed us that communities want jobs, roads, hospitals and clinics, schools, and any other benefit offered by mining companies, but they want to be actively involved in their decisions. They don’t want to be just beneficiaries of someone else’s goodwill,” says Bray. “This is one of the most important lessons I’ve learned and which is transferrable to almost any community in the world.”

During the first months of work for Gemfields in Colombia, Chalkstone warned the company there was opposition brewing for another international mining firm in the region. Only four months later, that miner was hit by protests and even armed attacks.

“When you invite thousands of voices into a conversation, you need to be prepared for dissenting opinions (…) By listening to all of them, you’re able to get in front of the risks. That’s what happened in Colombia… we were able to see things that you wouldn’t normally see and we told Gemfields about it.”

While Gemfields decided in May to leave Colombia and Sri Lanka to focus on its African projects, the fact the company didn’t face hostility from community members is a testament to Chalkstone’s work, says Bray.

The company, currently involved in mining and oil and gas projects in East Africa, as well as a new venture in Colombia, believes its novel approach could also be useful to investors.

“Given that nearly 66% of shareholder value in a junior miner is linked directly to socio-political and community risks, according to some calculations, investing in understanding the social environment in which a miner will operate shouldn’t be an afterthought or something people turn their minds to only when times get tough,” Bray warns. “Trust is valuable,” he concludes.

These are a few examples of conflicts an approach such as Chalkstone’s could have prevented:

    • The Tsilhqot’in National Government and Taseko Mines (TSX:TKO) are scheduled to face off in a Canadian court Monday, marking the latest stage in a long-running battle over a proposed open-pit mine the company wants to build near Fish Lake, also known as Teztan Biny.
    • Latin America-focused Tahoe Resources (TSX:THO)(NYSE:TAHO ) saw its shares collapse in July after Guatemala revoked the mining licence for its flagship Escobal mine, due to a long-running dispute with local groups.
    • Also in July, Canada’s Gabriel Resources (TSX:GBU) decided to sue Romania for $4.4 billion in alleged losses over its long-stalled Rosia Montana gold and silver project, which the government of that country refused to approve following relentless protests.
    • A few days before, Canada’s Gran Colombia Gold (TSX:GCM) decided to take the Colombian government to court for forcing the company to halt operations at its Marmato project until further consultation with locals has been conducted.

 

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