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A recent study by SNL Metals & Mining reported that delays in the US mine permitting process diminish the value of minerals and mining projects – underscoring a need for a streamlined permitting process.

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The study, “Permitting, Economic Value and Mining in the United States,” commissioned by the National Mining Association, found that duplicative permitting processes can delay mining projects a decade or longer and those processes, both federal and state, are hindering US mining industry’s ability to meet a rising demand for minerals.

SNLstudyimage

It can take three to five times as long to receive a mining permit in the US than in Canada or Australia. Source: NMA/Minerals Make Life.

Some mining projects lost as much as half of their value while awaiting state or federal approval. Three domestic mines in Arizona, Alaska and Minnesota served as case studies for the research. In one example, SNL found that after eight years of delay the value of Arizona’s Rosemont mine dropped by $3 billion. Alaska’s Kensington mine suffered 20 years of mining delays, while the capital cost of building the mine increased by 49%.

Where Have Exploration Dollars Gone?

“Why aren’t we attracting the exploration dollars we should be? Back in the mid-’90s we attracted about 20% of the worldwide exploration budget for mining. Now, it’s only about 7% and I do think it’s this delay on the return on investment that makes a big difference,” said Katie Sweeney, senior vice president, legal affairs, and general counsel at the NMA. “Are you going to put your money in Australia where you can get a permit in a couple of years or here where it’s 7 to 10? The process is definitely broken.”

The study details a veritable alphabet soup of permitting processes in all three states as well as the federal process. It quantifies incremental, production and additional risk. There is a comparison with the processes in Australia and nearby Canada in the report as well, one that’s not favorable to the US as both clock in with an average permit time of two years compared to seven or more for US projects.

The timeline for the government to respond is more clearly outlined in those countries, the permitting agency leading the process is identified from the outset and responsibility for preparing a well-structured environmental review is given to the mining company, not the government. In the US not only is a primary permitting agency not defined, but several groups with competing interests could be lining up for review.

New Legislation

There are bills pending in both the US House and Senate to streamline federal processes.

“On the House side we should see the bill move through. It’s passed the lower chamber the last two congresses so I would anticipate it will get through this congress as well,” Caswell said. “On the Senate side we think there is more opportunity than in previous congresses. Senator Lisa Murkowski (R. Alaska) is a champion of this bill and with her in position as Chairman of the Energy and Resources Committee, she has more opportunity to promote moving this bill forward. When she held the last hearing on this bill there seemed to be wide support among the committee members present. We are hopeful of making progress in the Senate this time.”

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MetalMiner™ invades “Hotlanta!” Yes, you heard right: Join us Sept. 1-2 at the Georgia International Convention Center for Steel Summit 2015. The SMU Steel Summit Conference is composed of manufacturing companies, fabricators, service centers, steel mills, trading companies, wholesalers and other industry providers. We strongly encourage you to attend for the impressive list of speakers, […]

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PriceWaterhouseCoopers‘ Mine 2015 Report was good news for India, but cast a troubling picture of the overall global mining industry.

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Dry-fuel miner Coal India Ltd. (CIL) moved up from the 8th to the 6th slot on the list of the largest mining companies in the world in terms of market capital.

A second state-owned company, which was also the country’s top iron ore miner, National Mineral Development Corporation (NMDC), also improved its ranking by coming in 21st, up three spots over the previous year.

What is Mine 2015?

Mine 2015 analyzed the financial performance of the world’s top 40 mining companies by market capitalization. The report said market values continue to fall, overall, in spite of improvements reported in the financial results of all top 40 companies.

Depending on which way you read it, in 2014, a collective $156 billion was eroded (about 16%) of the top 40 companies’ combined market value, but then again, that was only half of the 2013 slide. The collective market capitalization came in at $791 billion in 2014, which was the range miners held a decade ago.

The report said the world’s largest miners had reduced spending but stepped up production. The industry was also helped by lower input costs and currency devaluation. PwC did note, however, that weak commodity prices due to low demand hammered down revenues.

The Iron Ore Drag

The report said the downturn was largely driven by iron ore miners, particularly diversified companies with large exposure to shifts in commodity prices.

Last year, iron ore was the hardest hit, with prices dropping by half because of a supply glut and a negative short-term demand outlook, the report said.

On the coal front, coal miners in the BRICS countries (Brazil, Russia, India, China, South Africa) saw their values increase 19% over the period, regaining almost half of the value they lost in 2013.

In Asia, more industry consolidation was expected between key resource players from India and China in order to stem production overcapacity, the report said.

Chinese Production Still Surging

The coal companies of China made significant gains in the ranking of the top 40 mining companies, with three appearing in the this year’s top twenty.

China Shenhua Energy Co. Ltd (Shenhua) topped the list, becoming the third most valuable mining company (based on market capitalization) after BHP Billiton and Rio Tinto Group. Shenhua moved up from fifth in 2013’s rankings.

Another company, China Coal Energy Co. climbed to 14th rank from 23rd in 2013, with a 30% increase in valuation, while Inner Mongolia Yitai Coal Co. jumped to 18th from 25th. Yanzhou Coal Mining Co. came in at 26th – up from 34th in 2013. Yanzhou also recorded a more than 30% increase in value over 2014.

US Miners Can’t Keep Pace

On the other hand, not many US coal-mining companies charted in Mine 2015. Consol Energy found itself at number 28. No other companies charted despite noted concern from US manufacturing execs about local resource supply.

Of the 40 companies, 15 miners saw their share values appreciate, while 25 witnessed a decline.

The average return on capital employed was largely below the minimum hurdle investment rate of 15 to 20% set by the companies themselves. Only 6 of the 40 passed the 15% benchmark: CIL (coal), OAO Norilsk Nickel (nickel), NMDC (iron ore), Randgold (gold), Shandong Gold (gold), and Newcrest (gold), according to the report.

Copper Still Stagnating

On the copper front, Mine 2015 noted that global copper production had gone up by only 2.8% last year, which was way below the 8.1% of 2013. PwC noted that the world’s largest copper producer, Chile, had faced problems increasing its production due to falling grades.

PwC’s general outlook for the global metals and mining market though remains dreary due to the continuance of a slower rate of economic growth, particularly in emerging markets, especially due to the cooling off of China’s growth rate.

In 2014, iron ore, coal and copper prices had fallen by 50%, 26% and 11%, respectively, according to the report.

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President Obama and congressional republicans won a battle for trade authority in congress and a major rare earths restructured and sought bankruptcy protection.

Trade Promotion Authority Passes Senate

The US Senate voted Wednesday to give President Barack Obama “fast track” authority to negotiate trade deals—one of the final steps in a long political battle that pitted the White House against House Democrats in a battle over trade authority for the president. Fast track means deals such as the Trans-Pacific Partnership, which will be debated later this year, must be given an up or down vote by the Senate.

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The bill—which passed 60-38 in the Senate—will be sent to the president’s desk. Separate bills to provide assistance to American workers displaced by trade deals, known as Trade Adjustment Assistance, and to provide tougher anti-dumping enforcement protections from US Customs and Border Protection, particularly for the steel industry, are expected to follow and possibly be signed by the president simultaneously.

Molycorp Files for Chapter 11

Molycorp, Inc. filed for chapter 11 bankruptcy protection today.

The only US miner and producer of rare-earth elements—15 elements used in magnets, batteries, catalytic converters and other high-tech products—said it had secured an agreement with creditors to restructure its $1.7 billion in debt. The deal also provides $225 million in new financing to continue operations.

Molycorp and 20 subsidiaries filed chapter 11 petitions in the U.S. Bankruptcy Court in Wilmington, Del. The company said it expects to exit chapter 11 before the end of 2015. The restructuring support agreement is with creditors that hold over 70% of the aggregate principal amount of the company’s 10% senior secured notes.

The Company’s operations outside of North America, with the exception of non-operating companies in Luxembourg and Barbados, are excluded from the filings. Molycorp Rare Metals (Oklahoma), LLC, with operations in Quapaw, Oklahoma, also is excluded from the filings as it is not 100% owned by the Company.

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Usually, Iron ore and coking coal move in lock step. The two raw materials for steel production are driven by the same demand factor, – at least for seaborne trade consumption – by the Chinese, Japanese and Korean steel industries.

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Often production comes from the same or similar multinational suppliers – Rio Tinto Group, BHP Billiton, Glencore PLC.

China’s domestic producers, like its iron ore mines and steel producers are state owned. Both raw materials have experienced massive investment surges this decade as high prices encouraged producers to boost production and both have suffered aggressive price falls as supply has hit a weakening demand market.

The Iron Ore Mini-Rally

Recently, though, prices have diverged. Iron ore as we wrote last week, has gone through something of a mini-rally driven in part by dwindling Chinese port stocks prompting the impression supply is more limited than originally thought and by announcements of mine closures among smaller producers in places such as Iran and Mozambique.

As Iron ore falls reversed and the price rose 30% since the start of April, coking coal could only look on from the sidelines, continuing its fall from over $300 per metric ton four years ago to below $90 now. The latest quarterly metallurgical coal prices have been concluded at the lowest level in more than a decade as quarterly contract prices follow spot prices downward.

Coking Coal: What Are We? Chopped Liver?

Unfortunately for coking or metallurgical coal, even the token supplier rationalization we have seen in iron ore has not been mirrored for coal. Chinese producers, many state owned have actually increased production last year and, according to the Financial Times, China has become a net exporter of coking coal and its derivatives. China’s coking coal imports fell 24.2% in the first four months of 2015 over the same period last year, no doubt aiding the statistics as marginal suppliers were squeezed out the market.

North American Supply Displaced

Australia still supplies some 50% of imports but Mongolia is becoming increasingly important at the expense of Canadian and Russian supplies. To the extent that the US can no longer competitively supply China. Canadian material may also be displaced as prices in North America will be correspondingly depressed further in the second half of the year as suppliers chase the local market.

The most recent statistics from China quoted by Reuters suggest domestic coking coal may finally be plateauing. May’s number was down 4.2% compared to a year ago and that suggests even domestic suppliers are struggling. There is little on the horizon to offer coal suppliers much optimism but steel mills and steel consumers will welcome the reduction in raw material costs for the rest of this year.

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Steel production fell worldwide last month as Russia’s top oil producer, Rosneft, expanded exploration to Venezuela and ArcelorMittal USA has lost nearly $300 million since it was created via a merger in 2006.

WSA: Steel Production Fell Last Month

Global crude steel production fell 2.1% in May from the same month a year ago, as output declined in most major producer regions including China, figures from the World Steel Association (Worldsteel) showed on Monday.

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Global crude steel output fell to 139 million metric tons in the month while output in China, which produces half the world’s steel, fell 1.7% to 70 million mt.

Russia’s Rosneft Signs Exploration Deal With Venezuela

Venezuelan state oil company PDVSA said this week it has signed investment agreements with top Russian oil producer Rosneft, including a plan to create a joint venture to produce natural gas in the South American country.The venture would include the fields of Mejillones, Patao and Rio Caribe – all part of the large offshore Mariscal Sucre gas project.

ArcelorMittal USA Lost $1.5 Billion

ArcelorMittal – forged through an international merger of steel companies in 2006 – has pumped a huge amount of money into its US operations, but hasn’t seen a profit from it, ArcelorMital USA Flat Carbon President and CEO Andrew Harshaw told the Times of Northwest Indiana.

“Our USA business is not getting a return on its investment,” he wrote in a blog post. “Since 2010, the company has invested an average $1.5 billion per year into our USA facilities in both capital investment and the long-term maintenance of our assets. During those same five years, our USA business lost nearly $1.5 billion dollars, an average loss of $293.8 million per year.”

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At the Metalminer Week-In-Review, we promise to report accurate prices every day through our Indx. But what if that’s not enough? What about the add-ons, over-and-aboves and shipping charges? Buying steel? We’ve got bar fuel surcharges for eight US regions. Eight!

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We’ve been covering that pesky Midwest aluminum premium like Richard Sherman on a wideout, too. Want to know about anti-dumping and countervailing duties. You’ve come to the right place! All of these non-price inputs made our homepage this week as the gulf between the price and what you actually pay reared its head again this week.

Who Polices the Midwest Premium?

With falling London Metal Exchange aluminum prices and much-reduced physical delivery premiums even the combined, all-in price of aluminum is below cost for many smelters these days.

Pile of aluminium bricks waiting for transport to the factory

I’m aluminum, get me out of this warehouse!

That’s enough reason for smelters such as Alcoa, Inc., to question the involvement of the Commodities Futures Trading Commission in discussions with the LME on how best to reform their warehouse network and cut down the one-year-plus wait to get ingots out of the operations in Detroit (Metro International) and Vlissingen, Netherlands (Pacorini).

Higher premiums benefit producers such as Alcoa and UC Rusal, after all. Is it any wonder that producers want the CFTC to butt out? Yet, the CFTC still wants to butt in.

Don’t Let Your Profitability Drown in the VAT!

Meanwhile, over in China, rampant speculation is going on over how Beijing will replace its current business tax system with a new system of value-added taxes. A VAT taxes the difference between the sale price charged to a customer, minus the cost of materials and other taxable inputs.

container-ship-night-MMslider

Better pay the VAT or this is going to be a short trip!

The best estimates we have seen show that the new VAT will considerably increase what US buyers pay for metals from China and likely from nearby markets trying to compete with Chinese steel. China’s VAT is just one of many ways that imports could become more expensive later this year as…

Tariffs On Foreign Steel Could Increase This Fall

Coiledsteel_585

At least export me for as much as it cost to produce me. I feel I deserve at least that much.

We already know some Chinese producers are exporting steel and other metals at below their production cost. So, the anti-dumping action against coated/anti-corrosion steel filed by six US producers last week against China and four other nations has a really good chance of turning into anti-dumping duties this Fall when the Commerce Department makes a ruling on the petition.

We’d say it’s kind of a slam dunk, but even slam dunks can be hilariously missed. The tariffs the US producers are asking for are in a range that would significantly increase the overall cost of steel from the five nations.

That was the wild week in non-prices. Next week we hope to write more about, you know, actual prices.

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Molycorp missed another payment this week and the House passed fast-track trade approval which now moves on to the debate in the Senate.

Molycorp Restructuring

Molycorp Inc., the Greenwood Village Colo.-based miner of rare earth elements is skipping its second loan payment in two weeks.

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Molycorp officials on Monday said they would take advantage of a 30-day grace period on a $3.36 million semi-annual interest payment related to 3.25% senior unsecured convertible notes that are due in 2016. The move, company officials say, will not trigger any cross-defaults on its other loans.

The company will use the grace period to continue evaluating debt restructuring options, the company said in a US Securities and Exchange Commission filing.

Fast-Track Trade Bill Advances

The House on Thursday took the first step toward reviving the White House’s trade agenda by passing legislation granting President Obama fast-track authority.

The bill now goes to the Senate, where the White House and GOP leaders are seeking to strike a deal with pro-trade Democrats.

The House vote was 218-208, with 28 Democrats voting for it. This is the second time in a week the House has voted to approve a fast-track bill. On Friday, the House voted 219-211 in favor of fast-track, which would make it easier for Obama to complete a sweeping trans-Pacific trade deal.

In last week’s vote, though, the House GOP paired the fast-track bill with a measure known as Trade Adjustment Assistance (TAA) that gives aid to workers displaced by trade. Both measures needed to be approved in separate votes for the entire package to move forward.

House Democrats have historically favored TAA, but they voted against it on Friday to kill fast-track, which is deeply opposed by unions and other liberal groups. The White House still wants both measures to reach Obama’s desk, but is now advancing a different strategy that would move the two bills separately.

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Indian steel, aluminum and copper companies are pinning their hopes on India’s defense sector to help increase sales.

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The government’s “Make in India” campaign, a broad sweep enveloping the entire manufacturing sector, and, as a result, the metals and mining sectors, is expected to boost local raw materials used in defense applications.

The government raised the threshold for foreign direct investment in defense to 49% and has done away with licensing requirements for most items. Several Indian companies such as Tata Steel, Reliance Industries, Mahindra, Larsen & Toubro and others have started identifying areas of defense production their products fit in. They have also started scouting around for foreign partnerships and technology transfers.

International Joint-Venture Partners

One such international player that has in the past shown active interest in this sector is Germany’s ThyssenKrupp AG. The company is reportedly pursuing two interests in the defense field – naval weapons, specifically submarines, and aerospace.

In a recent interview with the Business Standard, Michael Thiemann, CEO of the company’s India region revealed that ThyssenKrupp India Pvt. Ltd was looking to expand its business in not only these segments but was also interested in investing in “smart” cities.

Thiemann said his company was already in discussion with public sector and private shipyards on the submarine front. The CEO let on that his company was open to tying up with private Indian companies such as Larsen and Toubro Ltd. for defense projects.

Project 75

“Project 75,” a plan for the construction of six submarines for the Indian Navy has been in the pipeline for several years now, but with the Make In India campaign it has caught a second wind.

Going by media reports here, the Indian government is likely to shortlist shipyards for the project in about two months. Thiemann said Thyssenkrupp has the technology and expertise and is willing to collaborate with Indian companies, by offering design, engineering and implementation know how.

Thyssenkrupp’s Edge

ThyssenKrupp already makes mining equipment and cement in India. But specifically, where the defense sector is concerned, ThyssenKrupp, say analysts, may have an edge because one of its group companies, ThyssenKrupp Marine Systems (TKMS) has been a partnering with the Indian Navy for more than two decades. Some of the Indian Navy’s previous submarines were made in India under a technology-transfer agreement in which TKMS was involved.

ThyssenKrupp has already invested in a service center at Bengaluru in South India for material processing of aluminum and titanium used in the manufacture of aircraft. The current revenue size of India’s aerospace business is nothing to write home about, but it is expected to grow because of the decisions made by the government.

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Sources told Reuters that steelmakers in China were selling their products below cost and President Obama hosted a picnic at the White House with members of Congress ahead of a key trade vote.

Confirming What We Already Knew

Some Chinese steelmakers are selling their products abroad at a loss, traders and a producer told Reuters, as a group of global industry bodies urged governments to take action over rising shipments from China.

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Chinese mills had sold steel overseas at a loss of up to 200 CNY ($32) a metric ton and cut the export price of hot-rolled coil by 5% to $340-$350 per mt, free-on-board basis, this week compared to last week, traders and a producer in Hebei, China’s top steel-producing province told the news service.

These mills were also selling at a loss to the domestic market, the sources said.

“The domestic market is too weak to consume high output and our prices are competitive, so some mills are still keen to step up exports, hoping to ease high inventories and maintain market share,” said a senior official at a privately owned mill in Hebei.

Preesident Has Picnic With Lawmakers Ahead of Trade Re-Vote

President Obama hosted members of Congress yesterday for the congressional picnic amid a fierce trade debate on Capitol Hill.

This year’s gathering took place before the House was expected to hold a vote today to revive the president’s stalled trade agenda, and less than one week after Democrats killed a key part of the legislative package.

House Minority Leader Nancy Pelosi (D-Calif.) was in attendance at the picnic. The president has not spoken with her personally since she led the Democratic revolt against the trade bills.

The event is seen as an opportunity for the president to get face time with lawmakers in a low-pressure setting. That could prove to be important for Obama with the House set for a re-vote on fast-track trade authority and a measure to provide aid to US workers displaced by international trade.

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