Minmetals to buy Peruvian copper mine
May-08-2014 By : agxadmin
A group backed by China Minmetals Corp will buy Glencore Xstrata’s key Peruvian copper mine for USD5.85 billion, in one of China’s largest overseas mining acquisitions. China would gain control of one of the world’s largest copper projects being built while allowing Glencore to cut debt. Glencore last year agreed to sell the Las Bambas project in return for its takeover of Xstrata to be approved by China’s authorities. “The acquisition of Las Bambas is an important milestone for outbound Chinese investment in the global resources industry,” Minmetals President Zhou Zhongshu said, adding that it will improve the company’s mining portfolio and produce synergies with existing businesses. Melbourne-based MMG, the overseas unit of state-owned Minmetals, holds a 62.5% stake in the consortium buying Las Bambas while Guoxin International Investment Corp has 22.5% and CITIC Metal Co owns 15%. Las Bambas could produce over 2 million tons of copper concentrate in its first five years of operation, MMG said. The deal could propel MMG ahead of Jiangxi Copper Co as the biggest listed copper miner by volume in Asia, Barclays said. The transaction, set to close by the autumn, is subject to regulatory approvals in China and Peru and a vote by MMG shareholders. The acquisition increases MMG’s copper resources by 2.7 times to 10.5 million tons and turns the firm into Asia’s largest miner of the metal and into the big league of the top 15 copper mining companies. Barclays’ analysts estimated the acquisition could result in an up to 300% increase in potential profit for MMG from 2016.
Beijing becomes third import point for gold
By : agxadmin
China has begun allowing gold imports through Beijing as a third import point after Shenzhen and Shanghai. The People’s Bank of China (PBOC) was believed to be adding to its gold reserves, the World Gold Council (WGC) said, as it looked to diversify from U.S. Treasuries. The central bank rarely reveals the numbers. Gold has traditionally been imported from Hong Kong into Shenzhen, where nearly 70% of China’s gold jewelry business is located. Shanghai was opened up as a second port last year. Only banks are allowed to import gold into China. China imported nearly 1,160 tons of gold from Hong Kong last year, more than twice 2012’s figure, as the drop in prices caused a spurt in demand. An analysis of trade figures from data provider Global Trade Information Services showed China imported at least a further 194 tons last year from centers other than Hong Kong, likely into Shanghai. China also produced about 428 tons domestically last year. The People’s Bank of China (PBOC) last disclosed its gold reserves in 2009, when it announced its holdings had risen to 1,054 tons from 600 tons in 2003. Some estimate the size of the PBOC’s gold reserves at 3,000 to 5,000 tons. The United States is the biggest holder, with more than 8,000 tons. Even a 1,000-ton increase from last-announced levels could prompt a jump in gold prices, which would make the PBOC very cautious about the timing of any announcement.
Overcapacity brings losses in steel sector
By : agxadmin
Crude steel output increased 2.37% year-on-year in the first three months of this year to 202.7 million metric tons, the China Iron and Steel Association (CISA) said. That translates to a daily output of 2.25 million tons and an annualized 822 million tons for 2014. Severe overcapacity brought a CNY2.33 billion loss for major domestic steel companies in the period, compared with a CNY3.3 billion profit in the year-ago period, said Zhang Changfu, Vice Chairman of CISA. He cited high iron ore costs, rising spending on carbon emissions and falling prices for the result and said industry profitability is expected to improve, but still struggle, in the second quarter. The domestic price of unit steel products dropped 10.14%, or CNY368 a ton in the January-March period. The average price of export steel products was USD794 a ton, down USD63 year-on-year. Weak demand and increased output produced high steel inventories, which by end-March stood at 19.41 million tons, up 43.65% from the start of the year. Li Xinchuang, Director of the China Metallurgical Industry Planning and Research Institute, told China Daily that under those circumstances, no new steel capacity should be added for any reason. Still, fixed steel-sector investment during the first quarter was CNY89.3 billion, of which CNY71.6 billion came from the private sector. Some large companies, including Baosteel Group Corp and Tangshan Iron and Steel Group Co, plan to raise their non-steel business to 50% of their portfolio to survive.
Iron ore financing under investigation
By : agxadmin
The China Banking Regulatory Commission (CBRC) has urged local authorities and banks to step up an investigation into iron ore financing deals in a bid to minimize default risks. Trade sources said Chinese banks started to tighten loan requirements for steel mills and trading firms seeking credit for iron ore imports, due to concerns over their inability to repay loans, particularly as growth in demand for metals has slowed. Iron ore inventories at main ports have hit record levels of more than 100 million tons since mid-February, putting banks on alert that any big collapse in prices might cause default risks. China’s total iron ore port inventory reached 112.63 million metric tons on April 25, up 66% compared with the same period last year, according to data from the Shanghai-based industrial information provider Mysteel. A reasonable port inventory is about 65 million tons, which means a large number of ore traders have been stockpiling the material, waiting for prices to rise. Up to 36.07 million tons of it belong to traders who are facing possible tightening of credit regulations, according to Mysteel. It has been reported that the CBRC may raise credit collateral requirements from the current 15% to 30% in May. Yu Chen, Iron Ore Analyst with Mysteel, said that if that is the case, traders will be pushed to sell iron ore to increase their cash flow, which will lead to a round of price cuts. With high inventory and weak demand, the imported iron ore price declined 5.52%, or USD7.47 a ton, to USD127.95 a ton in the first quarter. Yu said that with the CBRC’s new collateral requirements, the price of iron ore likely will fall below USD100 a ton in the near future.
Gold bar demand dives
By : agxadmin
China’s gold consumption in the first quarter of 2014 eased significantly from last year mainly because of reduced demand for gift-related gold bars, experts said. In the January-March period, gold consumption was 322.99 metric tons, rising 2.45 tons or 0.76% year-on-year. Gold jewelry purchases jumped 30.2% to 232.53 tons, while gold bar consumption slumped 43.56% to 67.95 tons, the China Gold Association (CGA) said. The drop in gold bar demand was a result of China’s austerity campaign, according to Albert Cheng, Far East Managing Director of the World Gold Council (WGC). “On the whole, China’s gold consumption in the first quarter maintained growth, which is very satisfactory, as 2013 was an unusual year for the gold markets in China and the world. China’s gold demand rose very strongly last year, and demand this year will noticeably slow down,” Cheng said. He added that China’s demand for gold will maintain a growth rate of 20% to 25% in the next four years. In 2013, China became the world’s largest gold producer, consumer and importer. Gold consumption surged 41.36%, while gold production went up 6.23% year-on-year, according to the Association. A report from the WGC said on April 15 that following the record level of Chinese demand in 2013, this year would likely see consolidation and succeeding years would see steady growth. The private sector demand for gold in China is set to increase from the current level of 1,132 tons per year to at least 1,350 tons by 2017, the report said. China however has little influence on the gold price. “The gold price will remain weak in the near future, while China’s gold industry will be confronted by great challenges. Domestic enterprises must join hands to combat difficulties, including maintaining healthy competition, advancing technology for innovation and further reducing costs,” said Song Xin, President of the China Gold Association. Last week, the Association, together with the CPM and Jingyi Gold Co, launched the Chinese version of the CPM Gold Yearbook 2014. In the first quarter of this year, China’s gold production reached 96.50 tons, an increase of 7.33% from a year earlier, the China Daily reports.
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