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Mon Dec 19, 2016 | 7:53am EST
Vale agrees $2.5 billion sale of fertilizer business to Mosaic
Vale SA agreed to sell part of its fertilizer business to Mosaic Co for $2.5 billion, in a move aimed at helping the world’s largest iron ore producer cut debt and focus on core mining activities.
Vale will receive $1.25 billion in cash and $1.25 billion in newly issued shares of U.S.-based Mosaic, a roughly 11 percent stake in the firm, the Rio de Janeiro-based company said in a Monday securities filing.
After the deal closes by late 2017, Vale will have the right to pick two members of Mosaic’s board, the filing said.
On June 17, Reuters was first to report on the Mosaic’s talks with Vale to reach a deal to buy the latter’s fertilizer unit.
According to the filing, Vale will retain control of its nitrogen and phosphate fertilizer assets in the city of Cubatão, in southeast Brazil but expects to sell them in 2017. Sources with knowledge of the deal told Reuters in October that Vale was also in talks with Norway’s Yara International ASA to sell some of its fertilizer assets.
Mosaic will acquire the rest of Vale’s phosphate assets in Brazil, Vale’s stake in Peru’s Bayóvar mine and Canada’s Kronau potash project. Mosaic has yet to decide whether to include the Rio Colorado potash project in Argentina in the acquisition.
Mosaic may pay an additional $260 million depending on future earnings of the fertilizer unit, the filing said. Vale will not be allowed to sell Mosaic shares for two years.
Analysts at Banco BTG Pactual estimate Mosaic is paying 8.6 times the fertilizer division’s earnings before interest, taxes, depreciation and amortization, a gauge of operational profit.
“This is an attractive multiple for Vale”, the analysts said in a client note.
Vale shares edged up slightly in choppy early trading.
Vale, the world’s largest iron ore miner, is disposing of assets to help meet a $10 billion debt-reduction target by next year. The plan was devised by Chief Executive Murilo Ferreira to help protect the mining company against lower iron ore and nickel prices, after losing a record $12.1 billion last year.
Vale said it will use the funds raised with the sale to cut debt, while continuing its divestment program.
Preferred shares in Vale have advanced 140 percent so far this year to 24.33 reais, surpassing a 35 percent rally in Brazil’s benchmark Bovespa stock index.
(Reporting by Bruno Federowski, Tatiana Bautzer and Roberto Samora; Editing by Guillermo Parra-Bernal and W Simon)
- 13 Dec 2016
- Calgary Herald
- CLAUDIA CATTANEO
- Financial Post
With Trump’s blessing, likely KXL revival near
The Keystone pipeline, you’re going to have a decision fairly quickly … And you’ll see that.
Much like the rejection of Keystone XL by U.S. President Barack Obama was about climate change symbolism, president-elect Donald Trump is going out of his way to make the revival of the Alberta-to-Texas pipeline project symbolic of his back-to-business and energy security priorities.
He spoke about the proposed oilsands pipeline during his election campaign, right after his election and again while putting together his transition team, which could include none-other than KXL supporter Rex Tillerson, the former CEO of Exxon Mobil Corp., as his secretary of state.
In his latest plug for KXL, in an interview Sunday with Fox News, Trump suggested — unprompted — he’d move quickly on Keystone XL after taking office, after being pressed on whether his fossil fuel-friendly administration would remain in the Paris climate agreement.
“The Keystone pipeline, you’re going to have a decision fairly quickly,” Trump said. “And you’ll see that.”
Dennis McConaghy, the former TransCanada Corp. senior executive who just completed a book, Dysfunction, about the KXL saga under Obama, said it’s no surprise Trump is enthusiastic about the 800,000 barrels-a-day pipeline linking Alberta’s oilsands to refineries in the U.S. Gulf.
“This is going to be $10 billion of infrastructure investment that the federal government doesn’t have to pay for,” said McConaghy.
In his book, McConaghy writes that Obama’s KXL’s rejection was “a triumph of symbolism over substance and reasonable expectation of due process” that occurred after becoming “a highly politicized emblem for the American environmental movement.”
Calgary-based TransCanada, the proponent of KXL, is saying little publicly about a revival of KXL while the transition in Washington is underway.
The energy company had to take a $3 billion writedown following Obama’s rejection after a sevenyear review and followed up with a challenge against the U.S. government under the North American Free Trade Agreement to recoup US$15 billion in damages.
But behind the scenes, TransCanada’s legal and commercial teams are likely working overtime to assess whether KXL still has shipper support and on what terms it could go ahead, McConaghy said.
McConaghy, who retired from TransCanada in mid-2014, said the company is likely looking at what a revival could look like from a regulatory and legal perspective, while waiting to see who is appointed by Trump to oversee the project.
The company’s legal team would want to ensure a revived KXL is insulated from litigation, he said.
“Don’t underestimate, when this thing moves forward toward approval, the U.S. environmental movement will do everything it can to legally challenge that,” McConaghy said. “You can count on that.”
TransCanada would also have to resolve outstanding litigation in Nebraska. The fight against KXL started in the state, where landowners were concerned about its impact on the Ogallala aquifer.
A further hurdle is that the company would have to re-assemble the team responsible for KXL, which was likely re-assigned after its rejection, McConaghy said.
If Tillerson gets the top job at the State Department, which was responsible for KXL’s review, it would be a bonus for the pipeline.
Tillerson is said to be the frontrunner for the job, although blowback due to his ties with Russia could scuttle that.
TransCanada did not reveal which companies made commitments to ship on KXL, but in his book McConaghy said many were U.S.-controlled.
Exxon Mobil’s Canadian affiliate, Imperial Oil Ltd., is one of the top developers of oilsands leases in Alberta, which would make Tillerson very familiar with the oilsands and the KXL debacle. In 2008, Tillerson called the oilsands “a tremendous resource opportunity to meet our energy needs.” Indeed, if Tillerson gets the secretary of state appointment, Canada’s oil and gas sector would find itself with more support in Washington than in either Edmonton or Ottawa, where governments are more concerned about reducing oilsands impacts.
KXL opponents have expressed outrage that Trump might bring KXL back from the dead. But having launched other oilsands battlefronts following the KXL defeat — in the West against Kinder Morgan’s now-approved TransMountain expansion; in the East against TransCanada’s Energy East; on the coasts against oil tankers — they are the ones looking like they are under siege.
Why Canada’s resource wealth should fuel the new economy
SCOTT VAUGHAN AND ROBERT SMITH
Special to The Globe and Mail
Published Wednesday, Dec. 07, 2016 5:00AM EST
Last updated Wednesday, Dec. 07, 2016 6:24AM EST
Scott Vaughan is president of the International Institute for Sustainable Development. Robert Smith is a Senior Associate with the Institute and Principal of Midsummer Analytics.
The federal government’s decision to approve two pipelines last week raises a number of issues, but there is one we haven’t really heard in the debate so far: How should revenues earned from resource extraction be used? For us, this is a central question and one that touches directly on Canada’s well-being.
We believe a greater portion of resource revenues needs to be re-invested in creating the new economy Canada will need going forward. There are several ways we could do this, all of them well-tested.
Canada could start by following Norway’s lead and using a portion of resource revenues to create national or provincial wealth funds. Such funds could then be used to invest in the innovative Canadian companies that will create the jobs of the future. Norway’s wealth fund is worth about $860-billion (U.S.). That money will come in handy when its North Sea resources are depleted.
If wealth funds aren’t seen as desirable, governments could use increased resource revenues to give them the fiscal room to provide incentives for companies to expand in new areas, or to fund universities to improve education and undertake new research.
One way or another, the country needs to think hard about how it manages resource revenues in the future. Pumping oil out of the ground is like taking money out of the national savings account. It’s fine so long as the account is flush. But if we don’t keep an eye on the bottom line, we might find we’re in for a surprise one day. And the reality is that governments aren’t keeping as close an eye on the bottom line as they should. We know this from new research released last week.
In one of the first reports of its type ever, the International Institute for Sustainable Development took a close look at Canada’s “comprehensive wealth.” The findings offer a sobering assessment of how well we’re managing our wealth.
Put simply, comprehensive wealth is the value of all the assets Canadians rely on to make the economy work. This includes obvious things such as factories and roads. But it also includes our natural resources and ecosystems, our skilled and educated work force and the value of the trust and co-operation that are the foundations of our economy and society. Taken together, this portfolio of assets is what allows Canadians to enjoy their high level of well-being. If the value of the portfolio is allowed to decline, well-being will inevitably follow suit. Just like spending an inheritance faster than it grows will eventually end the party.
Our findings suggest Canada is not managing its comprehensive wealth portfolio as well as it should. Looking at the data from 1980 to 2013, long enough so that the normal swings of the economy wouldn’t obscure the trends, we found that comprehensive wealth has barely grown. Real per capita comprehensive wealth grew by less than 0.2 per cent a year over the period. Human capital, the biggest component of wealth, didn’t grow at all. Natural capital declined by a startling 25 per cent. Produced capital was the bright spot, growing by about 73 per cent, though most of this was in housing and oil and gas infrastructure.
At the same time, real per capita consumption has been growing quickly. This is a circle that’s hard to square. The country can’t go on consuming at a rapidly growing rate with the other side of the ledger looking as shaky as it does. Especially when the future holds so much risk. Climate change, oil prices, new sources of fossil fuels and renewable energy, the push toward a low-carbon economy, growing protectionism. All of these are reason for long-term concern.
Canada will be best poised to take on these risks with a solid comprehensive wealth balance sheet in hand. Right now, we think the country’s account is out of balance. Investing more of our resource revenues to help build up our human, natural and produced capital would be a move in the right direction. Of course, that’s not all that needs to be done to bolster the balance sheet. But given that the government has decided to approve pipelines, now seems to us like the right time to be talking about it.
Manufacturing Sales Jump in September
Released on November 16, 2016
Saskatchewan’s manufacturing sales took a leap in September from a year ago, increasing by 8.2 per cent, the highest rate among the provinces and more than five times the national average. On a month-over-month basis, manufacturing sales were up 1.0 per cent, the third best among the provinces. Manufacturing sales in September were $1.24 billion.
“Manufacturing is one of the mainstays of the Saskatchewan economy and the impressive year-over-year growth is good news,” Economy Minister Jeremy Harrison said. “Our provincial manufacturers are innovative, competitive-minded and are meeting the needs of global markets with made-in-Saskatchewan solutions.”
On a year-over-year, seasonally-unadjusted basis, sectors that saw significant growth included food manufacturing, which increased by 34.3 per cent, machinery manufacturing which was up by 16.8 per cent and wood products which increased by 31 per cent.
About 26,200 people work in Saskatchewan’s manufacturing sector, which posted total sales of $14.1 billion in 2015.
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- 9 Nov 2016
- Saskatoon StarPhoenix
- ALEX MACPHERSON
Colonsay miners ‘enthusiastic’ about getting back to work
Mosaic Co. to resume production at site following shut down in July
They’re enthusiastic about being back, there’s no two ways about that.
Blaine Bracke spent more than three months struggling to scrape together enough money to cover his bills after he was temporarily laid off from his job at Mosaic Co.’s Colonsay potash mine in July.
The 50-year-old potash industry veteran landed a retail job three weeks ago, but it pays less than half his wage at the mine — so he was happy to learn last week that he could resume his 60-kilometre commute to Colonsay on Dec. 5.
“It’s going to be a whole different atmosphere at the mine, (but) I’m more than willing to give it a chance and do my job, same as I did before,” Bracke said Tuesday.
He is one of about 330 unionized miners who lost their jobs on July 13 when Mosaic decided to “idle” the mine amid what a company spokeswoman called “really challenging” market conditions.
Oversupply has caused potash prices to crumble from about US$900 in 2008 to less than US$200 today. Companies have responded by slashing production and cutting costs, while the government halted its planned potash royalty review.
The economic impact of weak potash, uranium and oil prices has been felt across the province. Over the last 12 months, Saskatchewan shed about 10,000 full-time jobs, Statistics Canada reported last week.
Mosaic Colonsay employees were told in July that work would resume in early January. That timeline is still in place as overseas buyers work through stockpiles, the Plymouth, Minn.-based company’s president and CEO said last week.
“We’re believing that it will probably be necessary for us to be starting up Colonsay in the early new year,” Joc O’Rourke said on a conference call. Production will resume in January, a company spokeswoman confirmed on Tuesday.
United Steelworkers (USW) local 7656 president Barry Moore said that while some employees were more successful than others at finding work over the last four months, most are excited about returning to the mine.
“They’re enthusiastic about being back, there’s no two ways about that,” Moore said, adding only about 10 of the roughly 330 laid-off workers have confirmed that they won’t return to the mine.
At the same time, many of the returning staff are wary of the “unpredictability” inherent in the potash industry, Moore said. Bracke, who said he plans to keep his second job as a form of insurance against another shutdown, is one of them.
“I’m not going through the unemployment situation again,” Bracke said.
When the Colonsay miners return to work, they will do so with a new contract. After voting down a proposed deal one week before the layoffs, USW local 7656 approved a contract in a Sept. 28 vote that at least one miner said was unfair.
Union officials and miners have said previously that the company’s timing felt suspect, and alleged that Mosaic was using the layoffs as a negotiation tactic — a charge the company vigorously disputes.
Industry analysts have suggested Mosaic won’t need the Colonsay mine to meet its production commitments until the end of 2017, but the company said last week it expects a “more stable operating environment” next year.
- 15 Oct 2016
- C. FRASER
Carbon pricing report echoes Wall’s warning
A yet-to-be-released federal report would seem to indicate some industries could face hardships when carbon pricing is brought in.
It notes that carbon pricing leads to reductions in greenhouse gases, but “it would also represent an increase in the costs facing some producers and consumers.”
The federal government has yet to release a working group report it put together in partnership with the provinces, but one section of the report, reviewed by the LeaderPost, says carbon pricing “works by making carbon-intensive goods more expensive and carbon-intensive firms less competitive.”
That report studies carbon pricing mechanisms and the impact they could have on the economy and environment.
For this reason, the report continues, “many of the competitive and equity impacts across sectors are a necessary product of a functioning carbon pricing system. As the market adjusts to the reality of carbon pricing, the overall makeup of the economy will change.
“This will create a period of transition where some firms will need to change production processes and some individuals may need to change employment.”
Saskatchewan Premier Brad Wall has been the fiercest critic of the federal government’s plan to put a price on carbon emissions.
Announced last week, that plan will see the feds set the price of carbon at $10 per tonne in 2018 before climbing to $50 per tonne by 2022.
Wall pegs the cost of that plan at $2.5 billion to the province’s economy — $1,250 for each family.
Doubt has been cast on those numbers, since the levy will see the dollars collected from it stay in the province.
Another section of the report outlines how increasing carbon prices to levels beyond those of Canada’s trading partners could create competition concerns.
“When their competitiveness is affected, Canadian firms may face pressure to reduce domestic production, or shift production/ investment to a country that has not yet priced carbon at a comparable level (although firms consider many factors when making investment decisions),” says the report, echoing a concern from Wall that energy and agriculture operations in Saskatchewan could move south of the border.
To combat such concerns, the report suggests tax exemptions as a potential solution for those industries dealing with competition concerns, but goes on to say that, “while this mitigates the impact of the carbon tax, the price signal to reduce emissions is effectively removed or weakened for those sectors.”
The federal government did not respond to repeated requests for further comment on the report.
Wall maintains the added cost of doing business from the carbon levy will cause hardship for Saskatchewan’s agriculture and energy companies as they struggle to compete with other markets, particularly those south of the border.
The report is wrought with qualifiers on how carbon pricing can or cannot work, but seems to reach a general consensus that it will.
While significant assessment was made on how carbon pricing will affect Indigenous communities and the north, there was little else in terms of specific regional impacts.
In meeting with reporters last week, Wall charged the feds have no economic assessment for the carbon plan.
“It’s not there. The bottom line is, they haven’t done it,” Wall told reporters last week.
A spokesperson for ReginaWascana MP and Liberal cabinet minister Ralph Goodale said, “The existing legislation in Saskatchewan has not been fleshed out with regulations, so it’s difficult to assess its full impact. But the Government of Canada is fully ready to work with Saskatchewan to develop a workable plan — building on the efforts Saskatchewan has already made. We look forward to further discussions.”
While Wall remains fiercely against carbon pricing — calling the federal plan a “betrayal” — those he claims to be protecting have been less forthcoming.
Tim McMillan, a former cabinet minister in Wall’s government and now the president and CEO of the Canadian Association of Petroleum Producers (CAPP) says that when it comes to carbon pricing, “there are still a lot of questions that need to be answered” and that “the details will matter a great deal.”
SRC’s Post-CHOPS Well Test Centre evaluates new technologies to capture huge left-behind heavy oil resources
SRC’s Post-CHOPS Well Test Centre evaluates new technologies to capture huge left-behind heavy oil resources
This article is brought to you by: SRC
Sept. 1, 2016, 7:33 a.m.
Gaining access to the estimated 30 billion barrels of heavy oil held in Saskatchewan reservoirs has been an ongoing research project for more than 60 years.
Early technologies allowed developers to tap around three per cent of the massive resource. The arrival of progressive cavity pumping led to cold heavy oil production with sand (CHOPS), which provided access to seven per cent of the resource.
But CHOPs is now running its course, leaving the Saskatchewan Research Council (SRC) to work with collaborators to figure out how to leverage the thousands of wells nearing the end of their productive life to pump out more of the initial heavy oil endowment. Increasing recovery to 20 per cent would add three billion barrels of reserves, worth $100 billion at today’s prices.
“The infrastructure is there; the wells are there. There has been lots of investment,” says Muhammad Imran, manager of EOR Field Development with SRC’s Energy Division.
Muhammad Imran, manager, EOR Field Development, SRC Energy Division
SRC recently launched its Post-CHOPS Well Test Centre to test, monitor and validate new technologies that could work in these end-of-life wells. In the CHOPS process when the reservoir’s gas drive is depleted, it leaves behind a network of wormholes or open channels in the formation. The challenge is how to use the network of wormholes to design enhanced oil recovery (EOR) processes, and this is the focus of industry and SRC.
Imran says they are currently working with technology developers on a number of promising candidates to tap the remaining oil from CHOPS reservoirs. SRC has leveraged its 3D modelling capabilities to advance its understanding of fluid mobility in post-CHOPS wells.
SRC has conducted a proof-of-concept numerical simulation study to evaluate recovery capability of alkali metal silicide when injected into the depleted CHOPS reservoirs with a network of wormholes. This EOR method has the potential to provide thermal, chemical and gas-drive benefits in one treatment.
“Alkali metal silicide is very reactive with water, so when you inject it into the reservoir, it reacts with reservoir water and generates a lot of hydrogen and huge amounts of energy,” he explains. “It re-pressurizes the reservoir and produced heat reduces oil viscosity. One of the reaction products acts as a surfactant that has the ability of altering the interfacial tension and wettability, allowing enhancement in oil recovery.”
SRC is also involved in conducting proof-of-concept studies to test potential post-CHOPS EOR processes where steam and flue gases are co-injected into depleted CHOPS reservoirs. One example of such a process is the steam combustion vaporizer process.
The successful application of post-CHOPS will likely not come from one single technology, but from a mix of a few technologies, says Imran.
SRC is also heavily involved in testing and validating thermal EOR processes, especially hybrid thermal where solvents or surfactants are added with steam to control steam to oil ratios,” Imran explains. “We have a complete model to screen surfactants and a defined series of tests to give a complete picture of how a surfactant will behave with steam and whether it will work in reservoir conditions. We also have a comprehensive process and a suite of equipment to determine surfactant performance in the vapour phase before further testing on core flood or large 3D physical model equipment. If it shows good performance, then we do corefloods and 3D physical model experiments and then numerical simulations that gives us a tuned reservoir model. That model is the starting point for field scale simulation as it provides the opportunity to evaluate the process technically and economically.”
Another interesting thermal EOR technology working its way through SRC’s proof-of-concept process is in situ steam reflux (ISR).
“With the use of heaters in the wells, the in situ water near to the wellbore is vaporized into steam, which rises up the formation to create a steam chamber. The condensed steam falls back on the heater and is recycled back into steam. Because of in-situ recycling, this process needs little fresh water injection and thus cuts down on the steam to oil ratios,” says Imran. SRC has done number of large-scale physical model experiments to prove the concept of the ISR process.