Gold

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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The US dollar index has declined 6% since its peak in mid-March.

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This decline gave a boost to commodities and, of course, precious metals were not left behind. However, their upside moves look anything but impressive. Despite the weaker dollar, it seems as if precious metals are having a hard time moving away from their lows.

Gold prices rose a shy 6% since mid-May. The yellow metal is still near record lows. A bit more encouraging is the move silver is making, up 12% since mid-May. The grey metal, however, is still near record lows as well. The metal is trading at $17.71/oz and we’ll see if it can break medium-term resistance at $18.5/oz.

A bit more encouraging is the move silver is making, up 12% since mid-May. The gray metal, however, is still near record lows as well. The metal is trading at $17.71/oz and we’ll see if it can break medium-term resistance at $18.5/oz.

Platinum is up 7%. A very small movement compared to its huge decline since summer last year. The metal has a long way up to reach last year’s levels.

Palladium rose 8% after making a 1-year low in March. Palladium is clearly the best performer among precious metals but since summer of last year is also being dragged down with the rest of precious metals.

What This Means For Metal Buyers

Recent weakness in the dollar is giving a boost to precious metals. However, these price movements have been quite shy so far. It still makes sense to be long-term bullish on the dollar and bearish on precious metals.

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It is one of those delicious ironies of life that India, the world’s largest consumer of gold, has very little to show when it comes to actually mining the yellow metal.

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That’s poor form because India sits on very large resources of gold, revealed by several geological studies in the past. One such study pegged India’s primary gold resources at about 491 metric tons. Despite its 6,000-year mining history, the country mines just around a pitiful 25 mt of gold annually.

Imports Flourishing

India is one of the biggest importers of gold, despite a punitive 10% import tax. In the financial year ended March 31, gold imports had touched 900 mt, up 36% from a year ago.

Perhaps keeping all this in mind, and the fact that gold mining could mean earning some big bucks, Western Australia recently expressed interest in developing gold mines in India, as part of the bilateral cooperation in minerals and energy sectors between the two nations.

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Today in MetalCrawler; the Chinese economy continues to disappoint, gold breaks a key support level and nobody agrees about when copper prices might recover.

Chinese Economy May Be Stimulus-Proof

In many ways China doesn’t really look like an economy growing at even 7%, with exports plunging in March, power generation dropping 3.7%, the biggest fall since 2008, and a host of other indicators pointing to sluggish growth.

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Reuters Clyde Russell writes that increased economic stimulus spending by Beijing may not be able to do much to help the Chinese economy this year.

Gold Falls

Gold slid below $1,200 an ounce on Thursday as the dollar pared losses after upbeat US factory data and demand for physical metal stayed weak, though uncertainty over the timing of a Federal Reserve rate increase underpinned prices.

The dollar index, strength in which tends to weigh on gold, recovered from lows against a basket of currencies after a survey showed factory activity in the mid-Atlantic region accelerated in April.

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Investments in automotive aluminum keep popping up in MetalCrawler.

Constellium Expands Plant

Aluminum manufacturer Constellium recently said it has invested $40 million for a 210,000-square-foot expansion of its Detroit are plant to meet the increasing demand for aluminum by automotive manufacturers.

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Constellium has hired nearly 200 additional workers at the Van Buren site and will employ a total of 370 there after it hires about 20 additional workers.

Freeport Plans to Expand

Freeport McMoRan Inc. is expanding and that has it poised to become the world’s biggest copper producer at a time of slowing China growth.

The Phoenix-based company will close the gap with current world No. 1 Codelco next year after expanding mines in Peru and the US and as the Chilean state-owned company runs out of profitable ore at a mine in the Atacama Desert.

US Dollar Climbing Again

Gold eased Monday as the US dollar gained ground against other currencies, sapping foreign investors’ interest in the dollar-denominated metal.

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US Sen. Lisa Murkowski, (R-Alaska), last week, introduced the American Mineral Security Act of 2015, a bill that promises “to prevent future mineral supply shocks and boost the competitiveness of our energy, defense, electronics, medical, and manufacturing industries.”

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The AMSA would require that the director of the US Geological Survey establish a list of minerals critical to the American economy and provide a comprehensive set of policies to address issues associated with their discovery, production, use, and reuse. It also would require that the federal government establish a methodology for the designation of critical minerals, based on potential supply disruptions and the importance of their use, and require the list to be reviewed and updated at least every two years.

Critical Minerals

There are also changes in permitting, the Federal Register process and the bill would extend an executive order issued by President Obama in 2012, regarding the permitting of important infrastructure projects, to mines that produce critical minerals and critical mineral manufacturing projects. The full bill is available online at the Senate website.

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MetalCrawler crawls the web for the latest metal news so you don’t have to. We even get that hard to reach metal news from China.
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We’ve also got more on the Gold Apple Watch and Chile’s copper mining industry.

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Metalcrawler finds metal news so you don’t have to.

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MetalCrawler scours the web for the latest metal news, whether it’s Apple inventing a new gold alloy just for its devices, major acquisitions, the price of steel or whether Marvel/Disney will finally cave and accurately change the name of its trillion dollar movie franchise to Titanium Alloy Man.

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I would like to report the culprits in Indian gold’s biggest smuggling case were carried off the plane with a hernia after trying to get their carry-on bag into the overhead locker, or that the wheels dropped off the carry-on as they left the arrivals hall but the reality is the single biggest seizure of smuggled gold in India was a simple tip off.

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But what a tip off, according to the India Business Standard the Special Operation Group of the Ahmedabad City Police seized 60 kg of the yellow metal worth an estimated $2.35 million at the Sardar Patel International Airport. Six individuals were arrested including three who had flown in from Dubai on an Emirates Airlines flight and three that met them on arrival and helped load the heavy cases into a car.

The previous highest quantity of pure gold bars and coins seized was in Mumbai last year when about 16 kg of the metal was seized at the airport. The biggest seizure on the country’s border was in 2013 when about 35 kg of gold was seized at Indo-Nepal border in 2013.

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This month our base metals took a big tumble. Some industrial metal prices that faltered in January fell of a steeper cliff.

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The Copper MMI®, Raw Steels MMI® and Construction MMI® all recorded drops of more than 5% and only our Global Precious Metals MMI® and Rare Earths MMI® were able to post price increases this month as low oil prices continued to drag down other commodities.

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