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Wednesday, 18 September 13
IRON ORE AND ZINC ARE BEST PERFORMING MINING SECTORS IN CURRENT LOW PRICE, HIGH COST ENVIRONMENT - WOOD MACKENZIE
 With the fall in commodity prices, cash margins in the mining industry have come under pressure. Accordingly, producers and investors are placing intense focus on both operating and capital costs. Wood Mackenzie's report titled 'Who hurts most' analyses cash costs and margins across the bulk commodities as well as base and precious metals. The report reveals that the iron ore and zinc sectors will perform best on average; while copper, export metallurgical coal and gold will be most challenged. Based on this, companies may have to make important decisions to protect their overall margins.
Wood Mackenzie finds that amongst the bulk commodities, iron ore stands above the rest. Despite pulling back from 2012 levels with a 19% cash margin decline, iron ore still has a very strong average industry margin of US$49/tonne (52% of average price) in 2014, enabling continued large cash generation in this high volume business. This supports the on-going focus by the major producers like Rio Tinto, BHP Billiton and Vale, on pushing ahead with expansions at their low cost iron ore operations. It is also in stark contrast to coal and bauxite, both of which have average margins of less than 25% in 2013 - the outlook is particularly bleak for export thermal coal with an average margin of only 19% in 2014.
Mr Steve Hulton, Principal Mining Analyst for Wood Mackenzie, says, "The sectors that fare the worst, with biggest average falls in margins from 2012 to 2014 are copper, export metallurgical coal and gold. Nickel has the lowest average industry margin of only 13% of price in 2013. This rises slightly in 2014, but it is still the worst of all commodities studied. As such, the nickel industry is under severe pressure. In 2012, one-third of industry production generated negative margins after taking into account total cash and sustaining capex costs."
The zinc mining sector has a very high average margin as a percentage of the metal price due to the large contribution of by-product credits like copper, lead, silver and gold, which offset operating costs. While remaining relatively high, the average zinc margin is expected to decrease to 83% in 2014, even with a rising zinc price, due to the lower value of by-product revenue in this polymetallic sector.
For the copper and gold industries, lower prices will continue to put pressure on overall operational cash-flow. In Wood Mackenzie's analysis, average industry margins in 2014 fall to 39% for copper and 44% for gold, down from 49% and 50% respectively from 2012. In export met coal, margins in 2014 are only 25% of average price, down from 30% in 2012.
Mr Hulton explains the importance of this analysis to producers, "Operating costs in the mining industry have risen rapidly over recent years, but now that prices have dropped there is a renewed focus from mining companies on reducing costs and trying to protect margins."
"To compare overall operating margins, we examine total cash cost plus sustaining capital. For producers to accurately assess cash margins at the mine level, just examining the basic C1™ operating cost can be misleading. Total cash cost plus sustaining capital is a better full cash cost measure. This comprises the C1™ operating cash cost plus indirect cash costs such as royalties & levies, and the cash spend on capital required to sustain production." The industry standard C1™ cost is the direct cash cost of mining, processing and offsite realisation costs, including any by-product credits. It is primarily used to compare the relative underlying cost efficiency of production between mines.
Mr Hulton concludes, "Individual mining companies will be variously affected depending on their exposure to the different commodities, and where their particular mines sit on the respective industry cost/margin curves. As price takers, there are limited tunes the producers can play and one of them will be to slow down on capital spend, and prioritise the commodities that have the best returns."
*Note: The base and precious metals commodities covered in the analysis are copper, nickel, zinc and gold. The bulk commodities covered in the analysis are metallurgical export coal, thermal export coal, bauxite and iron ore.
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Sunday, 18 August 13
INDO - INDIA FREIGHT EXPECTED TO BE FIRM NEXT WEEK - VISTAAR
COALspot.com - The freight market was up this week with the BDI gaining more than 10 pct due to strong Cape Sector.
The BDI was closed at 1,102 p ...
Friday, 16 August 13
US COAL PRODUCTION SLIGHTLY UP ON WEEK
COALspot.com – United states the world’s second largest coal producer produced totaled approximately 20.10 million short tons (mmst) of ...
Thursday, 15 August 13
CAPESIZE : TRENDS SOMETIMES SHIFT WITH NO PRIOR WARNING - FEARNRESEARCH
Handy
The influence of the summer holidays across Europe was felt in the Atlantic basin this week. Very little activity and a growing list of avail ...
Wednesday, 14 August 13
ANOTHER WEEK IN THE RED FOR DRY BULK CARRIERS - INTERMODAL
Chartering (Wet: Stable- / Dry: Stable- )
Another week in the red for Dry Bulk carriers with the market losing further steam as fewer an ...
Tuesday, 13 August 13
AUSTRALIA NEWCASTLE COAL EXPORTS JUMP 30.61 PERCENT ON WEEK
COALspot.com: Power plant and semi-soft coking coal shipments from Australia's Newcastle port up 30.61 per cent week on week to 2.95 million mt for ...
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- Neyveli Lignite Corporation Ltd, - India
- TeaM Sual Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- Singapore Mercantile Exchange
- Merrill Lynch Commodities Europe
- Wood Mackenzie - Singapore
- Riau Bara Harum - Indonesia
- Straits Asia Resources Limited - Singapore
- Dalmia Cement Bharat India
- The University of Queensland
- Jaiprakash Power Ventures ltd
- Gujarat Electricity Regulatory Commission - India
- Electricity Generating Authority of Thailand
- Karbindo Abesyapradhi - Indoneisa
- Kaltim Prima Coal - Indonesia
- Central Java Power - Indonesia
- GMR Energy Limited - India
- Salva Resources Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Bharathi Cement Corporation - India
- Sical Logistics Limited - India
- VISA Power Limited - India
- Iligan Light & Power Inc, Philippines
- Altura Mining Limited, Indonesia
- Videocon Industries ltd - India
- Baramulti Group, Indonesia
- Vizag Seaport Private Limited - India
- Global Green Power PLC Corporation, Philippines
- Meralco Power Generation, Philippines
- Bhatia International Limited - India
- Gujarat Sidhee Cement - India
- Orica Australia Pty. Ltd.
- Heidelberg Cement - Germany
- Vedanta Resources Plc - India
- Tamil Nadu electricity Board
- Kartika Selabumi Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- International Coal Ventures Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Thiess Contractors Indonesia
- Aditya Birla Group - India
- Indian Oil Corporation Limited
- Semirara Mining Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- Simpson Spence & Young - Indonesia
- Ministry of Finance - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Africa Commodities Group - South Africa
- Planning Commission, India
- Antam Resourcindo - Indonesia
- Kumho Petrochemical, South Korea
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- Coastal Gujarat Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Central Electricity Authority - India
- Parliament of New Zealand
- Grasim Industreis Ltd - India
- Posco Energy - South Korea
- Maheswari Brothers Coal Limited - India
- Price Waterhouse Coopers - Russia
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- Directorate Of Revenue Intelligence - India
- Minerals Council of Australia
- TNB Fuel Sdn Bhd - Malaysia
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- South Luzon Thermal Energy Corporation
- San Jose City I Power Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Sakthi Sugars Limited - India
- Kepco SPC Power Corporation, Philippines
- Electricity Authority, New Zealand
- European Bulk Services B.V. - Netherlands
- Energy Link Ltd, New Zealand
- Medco Energi Mining Internasional
- Bank of Tokyo Mitsubishi UFJ Ltd
- Krishnapatnam Port Company Ltd. - India
- CIMB Investment Bank - Malaysia
- Intertek Mineral Services - Indonesia
- Latin American Coal - Colombia
- Ministry of Mines - Canada
- Rashtriya Ispat Nigam Limited - India
- Ministry of Transport, Egypt
- Barasentosa Lestari - Indonesia
- IHS Mccloskey Coal Group - USA
- Indian Energy Exchange, India
- Jorong Barutama Greston.PT - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- SMC Global Power, Philippines
- AsiaOL BioFuels Corp., Philippines
- Commonwealth Bank - Australia
- Bangladesh Power Developement Board
- Siam City Cement - Thailand
- PowerSource Philippines DevCo
- The State Trading Corporation of India Ltd
- Eastern Coal Council - USA
- GN Power Mariveles Coal Plant, Philippines
- India Bulls Power Limited - India
- Banpu Public Company Limited - Thailand
- Thai Mozambique Logistica
- Larsen & Toubro Limited - India
- Georgia Ports Authority, United States
- Bhoruka Overseas - Indonesia
- Agrawal Coal Company - India
- ASAPP Information Group - India
- SN Aboitiz Power Inc, Philippines
- IEA Clean Coal Centre - UK
- Sindya Power Generating Company Private Ltd
- Tata Chemicals Ltd - India
- Jindal Steel & Power Ltd - India
- McConnell Dowell - Australia
- Leighton Contractors Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Maharashtra Electricity Regulatory Commission - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kideco Jaya Agung - Indonesia
- Therma Luzon, Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- PTC India Limited - India
- Uttam Galva Steels Limited - India
- Bayan Resources Tbk. - Indonesia
- LBH Netherlands Bv - Netherlands
- Indika Energy - Indonesia
- White Energy Company Limited
- Kohat Cement Company Ltd. - Pakistan
- Binh Thuan Hamico - Vietnam
- Bukit Baiduri Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Borneo Indobara - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Mercuria Energy - Indonesia
- Renaissance Capital - South Africa
- Metalloyd Limited - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMG Consultants - Indonesia
- Interocean Group of Companies - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Cement Manufacturers Association - India
- Globalindo Alam Lestari - Indonesia
- Goldman Sachs - Singapore
- Alfred C Toepfer International GmbH - Germany
- Sarangani Energy Corporation, Philippines
- Trasteel International SA, Italy
- Toyota Tsusho Corporation, Japan
- Mintek Dendrill Indonesia
- Sree Jayajothi Cements Limited - India
- GAC Shipping (India) Pvt Ltd
- Kalimantan Lumbung Energi - Indonesia
- Ind-Barath Power Infra Limited - India
- Karaikal Port Pvt Ltd - India
- Mercator Lines Limited - India
- Indonesian Coal Mining Association
- Aboitiz Power Corporation - Philippines
- Carbofer General Trading SA - India
- GVK Power & Infra Limited - India
- Billiton Holdings Pty Ltd - Australia
- Energy Development Corp, Philippines
- Parry Sugars Refinery, India
- PNOC Exploration Corporation - Philippines
- New Zealand Coal & Carbon
- Petrochimia International Co. Ltd.- Taiwan
- Oldendorff Carriers - Singapore
- Sojitz Corporation - Japan
- Ambuja Cements Ltd - India
- Coal and Oil Company - UAE
- Global Coal Blending Company Limited - Australia
- Petron Corporation, Philippines
- Siam City Cement PLC, Thailand
- Orica Mining Services - Indonesia
- Deloitte Consulting - India
- Attock Cement Pakistan Limited
- Meenaskhi Energy Private Limited - India
- Samtan Co., Ltd - South Korea
- The Treasury - Australian Government
- Marubeni Corporation - India
- Savvy Resources Ltd - HongKong
- Chettinad Cement Corporation Ltd - India
- Standard Chartered Bank - UAE
- Mjunction Services Limited - India
- Ceylon Electricity Board - Sri Lanka
- Romanian Commodities Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Independent Power Producers Association of India
- Pendopo Energi Batubara - Indonesia
- Eastern Energy - Thailand
- Global Business Power Corporation, Philippines
- Wilmar Investment Holdings
- CNBM International Corporation - China
- Semirara Mining and Power Corporation, Philippines
- Coalindo Energy - Indonesia
- London Commodity Brokers - England
- Formosa Plastics Group - Taiwan
- Directorate General of MIneral and Coal - Indonesia
- Indogreen Group - Indonesia
- Essar Steel Hazira Ltd - India
- Bukit Makmur.PT - Indonesia
- ICICI Bank Limited - India
- Port Waratah Coal Services - Australia
- Star Paper Mills Limited - India
- Lanco Infratech Ltd - India
- Makarim & Taira - Indonesia
- Bhushan Steel Limited - India
- Manunggal Multi Energi - Indonesia
- Economic Council, Georgia
- Malabar Cements Ltd - India
- Anglo American - United Kingdom
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Holcim Trading Pte Ltd - Singapore
- Australian Coal Association
- Asmin Koalindo Tuhup - Indonesia
- Chamber of Mines of South Africa
- Edison Trading Spa - Italy
- Madhucon Powers Ltd - India
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