Thursday, May 26, 2022
Wednesday, May 25, 2022
Katanga copper mine in the DRC. (Image courtesy of Glencore.)
In February, Glencore announced it had set aside $1.5 billion cover the costs of settlements in the US, UK and Brazil, and the company confirmed it would appear in court in the US Tuesday in connection with “proposed resolutions” to probes into its activities.
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In the US, the miner pled guilty to violating the Foreign Corrupt Practices Act, agreeing to pay $700 million to resolve the bribery investigation and more than $485 million to settle market manipulation charges.
“Glencore today is not the company it was when the unacceptable practices behind this misconduct occurred,” chairman Kalidas Madhavpeddi said in the statement.
The firm has further agreed to pay more than $39.5 million under a resolution signed with the Brazilian Federal Prosecutor’s Office (MPF) in connection with its bribery investigation.
The Swiss company disclosed in 2018 that the US DOJ had requested documents related to the group’s business in the Democratic Republic of Congo (DRC), Nigeria and Venezuela as part of a probe into possible corruption and money laundering.
Brazil also launched an investigation into Glencore and trading groups Vitol and Trafigura over alleged bribery of employees at state-run oil company Petrobras.
A year later, the UK’s SFO confirmed it was investigating suspicions of bribery by both the company and its staff.
Switzerland’s Attorney General followed suit, saying the probe was the result of a wide-ranging investigation by law enforcement agencies opened in early 2020.
Glencore, which is also subject to investigations from Swiss and Dutch authorities, has said the timing of those probes remains uncertain but would expect any possible resolution to avoid duplicate penalties for the same conduct.
Tuesday, May 24, 2022
(The opinions expressed here are those of the author, Clyde Russell, a columnist for Reuters.)
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Domestic iron ore futures on the Dalian Commodity Exchange were also stronger, rising a more modest 3.4% to end at 827 yuan ($123.62) a tonne on May 20.
China lowered the five-year loan prime rate by 15 basis points to 4.45% in the monthly fixing on May 20, the biggest reduction since the interest rate mechanism was revamped in 2019 and more than the five or 10 basis points tipped by most in a Reuters poll.
The move was viewed by analysts as an attempt to boost the property and construction sectors, which account for about 25% of the economy and have been struggling in recent months amid Beijing’s strict zero-covid policy, which has led to extended lockdowns in several cities including the major financial hub of Shanghai.
Chinese Premier Li Keqiang said last week that Beijing will step up policy adjustments to return the world’s second-biggest economy to what he termed normal growth.
The market interpretation of Li’s comments was that more stimulus measures are likely, with hopes that manufacturing will also receive a boost.
Coupled with signs that Shanghai is starting to emerge from its strict lockdown, the view is that China’s economy is set to rebound in the second half of the year.
All of these measures bode well for iron ore demand and steel output, and there are other factors that suggest iron ore has room to rally further.
The first is that supply from top exporters Australia and Brazil appears to be at levels below potential.
Top shipper Australia is on track to export about 72.45 million tonnes in May, according to commodity analysts Kpler, which is slightly down from 73.48 million in April.
It’s a similar story for number two exporter Brazil, with May exports likely to be slightly weaker than the previous month, coming in at 24.82 million tonnes, down a touch from April’s 25.42 million.
There are still concerns about iron ore shipments from Ukraine, which used to supply about 44 million tonnes a year to the seaborne market, mainly to European buyers.
Ukraine was the fourth-largest iron ore exporter, but Kpler data shows shipments plunging to zero from March onwards, after 2.32 million tonnes were exported in February.
Another smaller iron ore exporter, India, also looks set to see its shipments plummet, with Argus reporting on Monday that the government has imposed a 50% tax on exports of all grades.
This would effectively render India’s exports uncompetitive and they are likely to drop to zero. The South Asian nation shipped out 3.14 million tonnes in April, according to Kpler.
Another factor is China’s port inventories of iron ore, which have been sliding in recent weeks, even though they are still at levels above where they were at the same time in 2021 and 2020.
Inventories stood at 137.25 million tonnes in the week to May 20, down from a 2022 peak of 160.95 million on Feb. 18, but still above the 128.35 million from the same weeks in 2021 and the 110 million in 2020.
In some ways it’s not the absolute level of inventories that are key, it’s the pace at which they are declining, and the 15% slump since the February high indicates a fairly rapid drawing on available stockpiles and the potential for restocking demand.
There are also signs that China is ramping up its steel output after the winding back of winter pollution curbs and the lifting of some covid-19 restrictions.
April output rose 5.1% from the prior month to 92.78 million tonnes, although this was also still 5.2% below the level of April 2021.
This shows there is still scope to ramp up steel production further, and this is also a quick way to boost the economy, because even if the steel produced isn’t needed immediately, it’s easy to stockpile for future use.
Overall, the picture that is emerging is that the long-anticipated China stimulus measures are starting to come through, covid-19 is potentially being beaten back and the government is wanting a return to solid growth in the second half of the year. All positive for iron ore.
(Editing by Muralikumar Anantharaman)
Monday, May 23, 2022
Uranium miners are racing to revive projects mothballed after the Fukushima disaster more than a decade ago, spurred by renewed demand for nuclear energy and a leap in yellowcake prices after Russia’s invasion of Ukraine.
Spot prices for uranium have doubled from lows of $28 per pound last year to $64 in April, sparking the rush on projects set aside after a 2011 earthquake and tsunami crippled Japan’s Fukushima nuclear power plant.
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“Things are moving very quickly in our industry, and we’re seeing countries and companies turn to nuclear with an appetite that I’m not sure I’ve ever seen in my four decades in this business,” Tim Gitzel, CEO of Canada’s Cameco, which mothballed four of its mines after Fukushima, said on a May 5 earnings call.
Uranium prices began to rise in mid-2021 as several countries seeking to limit climate change said they aimed to move back to nuclear power as a source of carbon-free energy.
A quest for secure energy supplies has added to the potential demand.
Unrest in January in Kazakhstan, which produces 45% of primary global uranium output, had already driven prices further when Moscow’s Feb. 24 invasion of Ukraine spurred a 50% rally.
Russia accounts for 35% of global supply of enriched uranium.
Prices have retreated since a peak in April, but John Ciampaglia, CEO of Sprott Asset Management, which runs the Sprott Physical Uranium Trust, told Reuters Moscow’s invasion had “shifted the energy markets dramatically”.
“Now the theme is about energy security, energy independence and trying to move away from Russian origin energy supply chains,” he said.
There are about 440 nuclear power plants around the world that require approximately 180 million pounds of uranium every year, according to the World Nuclear Association.
Uranium mines produce about 130 million pounds, a deficit that mining executives predict will widen even if idled capacity by major producers such as Cameco and Kazakhstan’s Kazatomprom comes back online.
The supply gap used to be filled by stockpiled material, much of which came from Russia.
Now, miners are dusting off feasibility studies for mothballed mines and reviving projects.
In Australia, uranium producers – including Paladin Energy Ltd which aims to restart its Langer Heinrich uranium mine in Namibia, idled over a decade ago – have raised close to A$400 million ($282.08 million) in share sales over the last six months to fund exploration and resuscitate mines on three continents.
“With all of the additional demand that’s coming from the new nuclear (plants), the thesis is that over a five or 10-year period, that additional demand will just dwarf those volumes coming back to market,” said Regal Funds Management analyst James Hood.
China plans to build 150 new reactors between 2020 and 2035 and Japan also aims to boost nuclear capacity as does South Korea.
In Europe, Britain has committed to build one new nuclear plant every year while France plans to build 14 new reactors and the European Union has proposed counting nuclear plants as a green investment.
Easier said than done?
Delivering the new reactors, however, will be a challenge as repeated delays and cost-overruns could be exacerbated by the supply chain problems following the pandemic and the additional disruption of the Ukraine war, making demand for uranium hard to predict.
Many environmental campaigners, especially in the West, also remain opposed to nuclear energy because of the waste it generates even though atomic power is emissions-free.
Advocates of nuclear energy say small modular reactors are a solution to the difficulty of bringing on new capacity.
Keith Bowes, managing director of Lotus Resources, which owns the idled Kayelekera uranium mine in Malawi, says modular reactors will be a major source of growth from 2028 onwards.
Others say the traditional obstacle of high cost is less of a problem given the sharpened focus on security of supply.
“No longer is price the determinant, it’s now security of supply,” Duncan Craib, managing director at Boss Resources told the Macquarie Australia conference on May 9.
Boss will make a final investment decision soon on developing the Honeymoon uranium mine in South Australia, aiming for first production 18 months after any go-ahead.
Sprott’s Ciampaglia said uranium could hit $100 per pound in the long run. Prices peaked around $140 per pound in 2007.
This year’s rally has taken them to levels last seen in 2011 in part as a result of Sprott’s activity in the market with its uranium funds growing from near zero last year to about $4 billion now.
Ciampaglia said Sprott’s buying is in response to investor demand: “The Trust provides investors with a vehicle to express their view on physical uranium.”
Smaller uranium developers also want to get involved, but will need prices of at least $60 a pound to ensure the economic viability of projects, industry watchers said.
Even then there would be risks. The restart of idled capacity from uranium giants could disproportionately hit smaller players while community opposition in some areas remains.
“No mine development or restart of an idled mine is easy or without challenges,” said Guy Keller, manager of Tribeca Investment Partners’ Nuclear Energy Opportunities Fund.
($1 = 1.4180 Australian dollars)
(By Praveen Menon and Sonali Paul; Editing by Barbara Lewis)
NioCorp Developments’ (TSX: NB) Elk Creek project in southeastern Nebraska can now be considered the second-largest indicated-or-better rare earth resource in the US, second only to MP Materials’ Mountain Pass rare earth deposit.
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“According to the 2022 feasibility study, the Elk Creek project contains an estimated 632.9 kilotonnes of contained total rare earth oxides in the indicated mineral resource category. According to US Geological Survey data, this places the Elk Creek mineral resource behind MP Materials’ Mountain Pass deposit in the US but ahead of all other current rare earth projects in terms of contained TREO from a NI 43-101 rare earth resource of indicated or higher classification,” NioCorp said in a media statement.
The company pointed out that the 2022 feasibility study also showed that, in addition to relatively high grades of niobium, scandium, and titanium, the Elk Creek mineral resource contains various amounts of all REEs.
“There is potential for NioCorp’s REEs to be mined, crushed, and placed into solution as part of the process NioCorp plans to use to produce its primary niobium, scandium, and titanium products once project financing is secured,” the release states. “Depending upon the outcome of metallurgical testing on REE recovery rates from Elk Creek ore, now being conducted at a demonstration plant in Quebec, and whether necessary project financing is secured, NioCorp could produce separated rare earths as a byproduct, placing it at a competitive advantage vis-à-vis other rare earth projects.”
Given these results, the Colorado-based firm plans to commission a new technical report on the Elk Creek project in accordance with NI 43-101.
What the study showed
Using a ≥$180/tonne NSR cut-off that was calculated using solely the contained niobium, scandium, and titanium in the mineral resource, the 2022 feasibility study showed that the Elk Creek Indicated Mineral Resource includes:
- 632.9 kt of TREO, including these individual rare earth oxides:
- 26.9 kt of praseodymium
- 98.9 kt of neodymium
- 2.3 kt of terbium
- 9.1 kt of dysprosium
- 970.3 kt of niobium oxide
- 11,337 tonnes of scandium oxide
- 4,221 kt of titanium oxide
In order to update the project’s mineral resource to include REE data, NioCorp and its consultants were required to complete additional assays of historical drill core to fill data gaps in the existing resource database and re-model the mineral resource. The mine plan and mineral reserve were also updated, independent of the REE data collection and REE by-product mineral resource.
Friday, May 20, 2022
Gautam Adani and Mukesh Ambani are profiting from a surge in global commodity prices triggered by Russia’s invasion of Ukraine, burnishing their fossil-fuel credentials even as Asia’s richest men publicly push their pivots toward greener energy.
With coal prices skyrocketing to a record, Adani’s conglomerate is expanding a controversial mine in Australia to meet demand. Ambani’s Reliance Industries Ltd. is snapping up distressed crude-oil cargoes at discounts to feed its refining complex, the biggest in the world. Reliance even deferred a scheduled maintenance of the facility to help churn out more diesel and gasoline, whose margins have shot up to touch a three-year high.
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Though Adani, 59, and Ambani, 65, have unveiled a combined $142 billion in green investments over the next few decades in a pivot away from coal and oil — the bedrock of their empires — they are also finding it hard to kick the fossil-fuel habit as the conflict stokes demand. Global coal demand is expected to rise to a record level in 2022 and stay there through 2024, according to the International Energy Agency.
The war has created a tailwind for fossil fuel-based firms in India, said Chakri Lokapriya, managing director and chief investment officer at TCG Advisory Services Pvt. in Mumbai.
“The collateral damage is that fossil fuels will continue to play a vital role the next 20 years or more,” he said, adding that it was sufficient time to reap benefits from carbon-based investments.
Representatives for Adani Group and Reliance Industries didn’t respond to an email requesting comments.
Bullishness in coal prices helped flagship firm Adani Enterprises Ltd. clock a 30% jump in profit for the three months ended March — the highest in six quarters — while surging prices of petroleum products aided Reliance, which posted one of its biggest quarterly profits ever.
Shares of both Reliance and Adani Enterprises had soared 19% and 42% respectively between Feb. 24, when the invasion began, and end of April, before a global stock rout wiped out some of those gains. Adani has added about $25 billion to his wealth since the war started, taking his net worth to almost $106 billion, according to the Bloomberg Billionaires Index. Ambani’s fortune swelled by almost $8 billion to $92.4 billion.
It isn’t just these two Indian billionaires benefiting from the commodities surge. Others include US oil and gas tycoons Harold Hamm, Richard Kinder and Michael S. Smith, and Indonesia’s Low Tuck Kwong, the boss of coal mining company PT Bayan Resources, who have all seen their wealth increase this year.
Almost 60% of Reliance’s revenue comes from oil-refining and petrochemicals, the mainstay business founded by Ambani’s late father. Since inheriting it in 2002, Ambani has been reducing the conglomerate’s dependence on oil-refining by diversifying into retail, telecommunications and technology.
India has bought millions of barrels of Urals crude in the spot market since the end of February, according to data compiled by Bloomberg. While flows of Russian oil into India aren’t sanctioned, the South Asian country has repeatedly said that those shipments are minuscule compared to Europe’s purchases and represent a tiny fraction of the country’s total consumption. They also provide some relief at a time when inflationary pressures are increasing. India’s consumer prices rose the most in eight years in April.
“We have minimized feedstock cost by sourcing arbitrage barrels,” Reliance’s Joint Chief Financial Officer V. Srikanth told reporters on May 6, without providing details. “Overall demand drivers are very promising,” he said referring to the strong comeback in demand for fossil fuels.
Refiners in India exported 3.37 million tons of diesel in March, the highest since April 2020, when overseas sales were a record 3.4 million tons as local demand plummeted during the Covid-19 lockdown, according to data on Petroleum Planning and Analysis Cell’s website. Gasoline exports reached a five-year high of 1.6 million tonnes.
For first-generation entrepreneur Adani, coal is central to his empire. He has invested more than $3 billion in coal mines in India, Australia and Indonesia. His Carmichael mine in Queensland, which has been a target of environmental activists including Greta Thunberg for years, started shipping the fuel only this year.
In a May 4 earnings call, Adani Enterprises said it plans to raise the annual capacity of the Carmichael mine to 15 million tons in the year through March 2023, about 50% more than what its board approved for the first phase of the project. It plans to export as many as seven capesize cargoes a month, director Vinay Prakash said on the call.
The “geopolitical situation” is expected to keep coal prices strong for now, but how long this lasts is “anyone’s guess,” Prakash told investors.
(By Rajesh Kumar Singh and Debjit Chakraborty, with assistance from P R Sanjai, Pei Yi Mak, Rakteem Katakey and Alexander Sazonov)
Thursday, May 19, 2022
Electric vehicles (EVs) overtook smartphones and other high-tech devices for the first time last year as the main driver of cobalt demand, with the sector consuming 59,000 tonnes of the battery metal, or 34% of the total globally.
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Not surprisingly, prices for cobalt, nickel, lithium and copper have skyrocketed. Cobalt has nearly tripled in price since the start of 2021. Nickel turned so wild in March the London Metal Exchange (LME) had to suspend trading.
Battery-makers have responded by using more lithium-iron-posphate chemistry, which doesn’t use either cobalt or nickel, but that tightens up the lithium market itself with spot prices doubling since the start of the year.
Benchmark Mineral Intelligence estimates the global lithium industry needs as much as $42 billion of investment by the end of the decade in order to meet demand
MINING.COM’s EV Metal Index, which tracks the value of battery metals in newly registered passenger EVs (including full battery, plug-in and conventional hybrids) around the world, totalled $1.5 billion in December, an increase of 192% over the same month of 2020.
“Securing access to raw materials is crucial if the world is to achieve the sustainable and just transition to a greener future,” David Brocas, head Cobalt Trader at Glencore and chairman of the Cobalt Institute’s executive committee, said. “Cobalt’s role in batteries and recycling makes it one of the critical materials of a climate-neutral future.”
Production in hands of very few
The metal, a by-product of copper and nickel mining, makes up only 0.001% of the earth’s crust. Its appeal to EV makers comes from the fact that it provides batteries with energy density that increases the range of their vehicles and boosts their life.
Supply comes mainly from the Democratic Republic of Congo, where production is dominated by miner and commodities trader Glencore (LON: GLEN) as well as Chinese companies.
The institute expects cobalt demand to keep growing to about 320,000 tonnes annually over the next five years, almost double the total consumed in 2021, with EVs driving 70% of this growth.
It also sees supply picking up this year and next, leading to a more balanced market. From 2024, cobalt availability will wind down again, growing 8% a year, compared to more than 12% of demand growth, which will leading to significant deficits.
Some manufacturers, such as Tesla (NASDAQ: TSLA) and Volkswagen have even announced intentions of becoming “actively involved in raw materials business”.
Wednesday, May 18, 2022
B.C.’s clean LNG touted as important decarbonization tool, and economic tool in reconciliation with First Nations
The first Canada Gas and LNG conference to take place in person in three years kicked off today at the Vancouver Convention Centre with a low-key demonstration from environmentalists and a recap of LNG projects underway or proposed in Canada, including two in which First Nations would be owners or major partners.
The projects range from a small operator – Cryopeak – that supplies liquefied natural gas (LNG) to mines and remote communities, to a new project in Newfoundland, LNG NL, that proposes to source natural gas from the Jeanne d’Arc Basin near the Hibernia oil fields, and pipeline it to Grassy Point Newfoundland for liquefaction and export it to Europe.
The project could also see a second pipeline built to return CO2 captured at Grassy Point back to the Jeanne d’Arc Basin for deep sea sequestration.
The Canadian LNG industry has taken a back seat to the U.S., which has dramatically eclipsed Canada as a major LNG producer. But there was some sense Tuesday at the three-day conference that the Canadian natural gas and LNG sectors could be having a moment, thanks to an energy crisis in Europe, exacerbated by war, which has underscored the importance of natural gas in energy security and the energy transition.
Anyone looking at gasoline prices today may be suddenly thinking about energy and energy security, said Bryan Cox, president of the Canadian LNG Alliance.
“We’re starting to feel that, and we’re starting to think about energy in a whole different way,” Cox said.
In a press release, Stand, Dogwood and the Wilderness Committee accused Bruce Ralston, minister of Energy, Mines and Low Carbon Innovation, of “peddling myths about clean LNG.”
“In reality, pumping more super-polluting methane gas out of the ground will prevent B.C. from meeting its climate targets and condemn all of us to more deadly extreme weather,” Dogwood campaigner Alexandra Woodsworth said in a press release.
But independent studies, including from St. Xavier University, have confirmed that the natural gas produced in Northeast B.C. has some of the lowest GHG intensities anywhere, partly due to low methane leakage, and a number of LNG projects in B.C. propose to use electric drive, which would make it, again, some of the lowest intensity LNG produced anywhere.
“Right now, today, people are building new coal-fired power plants in Asia,” said Jason Klein, the new CEO of LNG Canada, which is building a $17-billion plant in Kitimat.
“This industry has the opportunity to displace that coal with natural gas…and we have some of the cleanest LNG in the world. LNG Canada, when it’s in operation, will be the lowest GHG intensity of any currently operating LNG plants. It’s 35% lower greenhouse gas intensity of any facility operating today, and 60% lower than the global weighted average.”
The Intergovernmental Panel on Climate Change says switching from coal power to natural gas could reduce GHGs emission by 50%, provided fugitive methane emissions are managed. This has proven true in the U.S., which has achieved some of the most dramatic decreases in GHGs from the power sector in the western world, thanks largely to fuel switching from coal to gas.
“With our CleanBC Roadmap to 2030, we continue to demonstrate we are one of, if not the most, responsible natural gas producing jurisdiction in the world,” said Ralston. “We are bringing forward stronger targets to reduce methane emissions from the oil and gas sector by 75% by 2030, and nearly eliminate all industrial methane emissions by 2035.”
B.C.’s natural gas and LNG not only would be some of the cleanest in the world, it also could be the springboard for the next generation of even cleaner fuel – hydrogen. Hydrogen can be produced from natural gas, and some of the pipeline infrastructure and export terminals could eventually be used to transport hydrogen.
“Hydrogen alone has the potential to reduce the province’s emissions by 30% of the 2050 Clean BC target,” Ralston said.
The biggest LNG project in B.C. that’s under construction is the $18-billion LNG Canada project. Next in line is the smaller $1.6-billion Woodfibre LNG project in Squamish, which just recently got the notice to proceed.
FortisBC is working on an expansion of its Tilbury LNG plant, and two First Nations are partnered with oil and gas industry players on two new projects – the Haisla’s Cedar LNG and the Nisga’a-backed Ksi Lisims LNG project.
“Were going to be the largest First Nations investment in Canadian history,” Haisla Chief Crystal Smith said of the $3-billion Cedar LNG project, which is currently in an environmental review process.
Paul Sullivan, senior vice president of Global LNG for Worley, said a 40-year-old natural gas and LNG business model in Europe has been “shredded” overnight by Russia’s invasion of Ukraine. He said European leaders are now deeply concerned about the cost of energy, and now asking themselves if they can afford to dispense with coal.
He said Canada is blessed with a “massive amount of natural resources, including natural gas.” The question for Canada is whether it is willing to share those resources with countries trying to secure supplies of low carbon energy.
The first LNG facility built in B.C. has been around for quite some time – the FortisBC Tilbury Island plant, which originally produced LNG as a backup for pipeline gas. It has expanded its production capacity to start supplying LNG as a transportation fuel for both trucking and the marine sector. Some LNG produced there has been shipped to Asia in ISO containers.
Because it is largely powered with clean BC Hydro power, the LNG it produces is 30% less carbon intensive than LNG produced elsewhere in the world, said FortisBC CEO Roger Dall’Antonia.
“That’s a massive advantage, when you think about a premium low-carbon LNG product, Canada’s leading the way on that front,” he said.
FortisBC plans to expand its Tilbury plant, with an additional storage tank, additional liquefaction and a new marine terminal for marine LNG bunkering.
FortisBC has also been investing in renewable natural gas (RNG), which when blended with natural gas lowers its emissions intensity even more. Dall’Antonia said Tilbury LNG could reduce GHGs from shipping in B.C. by 27%, compared to other marine fuels.
In addition to providing a possible new source of low carbon energy to Asia and Europe, the nascent LNG sector in B.C. is also proving an important economic tool in reconciliation with First Nations.
Despite what some news headlines might suggest, the fact is a number of LNG projects are wholeheartedly supported by First Nations. Sixteen along the Coastal GasLink pipeline corridor have signed option agreements to take up to a 10% equity stake in the pipeline, and the Haisla First Nation has leveraged its partnerships with the LNG Canada and Coastal GasLink to proposed their own LNG project – Cedar LNG.
The Nisga’a First Nation are also partnered up with Alberta oil and gas producers on the Ksi Lisims LNG project.
Tuesday, May 17, 2022
Monday, May 16, 2022
Lloyd Blankfein, the former chief executive officer at Goldman Sachs,
speaks at the annual DealBook conference in New York, Nov. 1, 2018. The
U.S. Justice Department revealed that a former Goldman partner pleaded
guilty to bribery charges, clouding Blankfein’s final weeks as chairman.
The risk of the U.S. falling into a recession is “very, very high,” Goldman Sachs Chairman Lloyd Blankfein warned Sunday, saying citizens and corporations alike must prepare for the worst.
Blankfein, the investment bank’s former chief executive and current senior chairman, issued the grim warning on the CBS program “Face the Nation.” It comes as inflation is tracking at 8.3 percent over this time last year, economic growth fell into negative numbers for the first quarter of the year, and the national debt has topped $30 trillion.
“If I were running a big company, I would be very prepared for it,” Blankfein said. “If I was a consumer, I’d be prepared for it.”
The Federal Reserve raised its benchmark interest rate by a half-point earlier this month, in a strong, but expected move to slow surging inflation amid the negative economic growth. The central bank is expected to continue raising the rate through the end of the year after holding it at or near zero for several years. It normally raises or lowers the rate in quarter-point increments, and the half-point increase, which followed a quarter-point boost in March, was the biggest jump since May, 2000. The current federal funds target rate is between .75% and 1%.
A recession is defined as two straight quarters of negative economic growth. A recession coupled with surging inflation is dubbed “stagflation” by economists.
Blankfein said a recession is “not baked in the cake” and claimed the Federal Reserve has been “responding well” to the threat.
Blankfein’s warning came as Goldman’s economists cut their forecasts for U.S. economic growth this year and next. It now expects GDP to expand 2.4% this year, down from 2.6%. It cut its 2023 estimate to 1.6% from 2.2%.
Last month, a top economist warned that the entire globe is already in the early stages of a “very significant” recession.
“It’s going to be a global recession pulling down [the] Euro zone in particular,” Piper Sandler Chief Global Economist Nancy Lazar told Fox Business anchor Maria Bartiromo, noting that “it looks like China GDP in the second quarter could also be negative.”
The doom and gloom comes as Americans grapple with surging gasoline, food, and housing prices, as well as a shortage of baby formula. U.S. consumer sentiment plunged in early May to the lowest level since 2011.
“Joe Biden inherited a robust economy from President Trump and has managed to fully squander it — leading Americans into stagflation,” the Republican National Committee tweeted earlier this month.
Last week, the Senate voted 80-19 to confirm Federal Reserve Chairto a second term, despite the roaring inflation, which he last year dismissed as “transitory.”
After raising the Fed rate earlier this month, Powell told reporters he believes the Fed can lower inflation without triggering a recession.
“We have a good chance to have a soft or softish landing,” he said. “The economy is strong and is well-positioned to handle tighter monetary policy.”
The community of Fuerabamba in the Andean region of Peru was resettled eight years ago to make way for a giant Chinese-owned copper mine, in a $1.2 billion scheme billed as a model solution to protests dogging the South American nation’s mining sector.
Now the community wants the land back.
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An attempt in late April by the mine’s Chinese owner MMG Ltd to remove the camp led to clashes in which dozens of people were injured and failed to end the protest. Copper production – worth $3 billion a year – remains suspended, with no restart in sight.
The Fuerabamba members were evicted but the Huancuire community remained in place – and the two groups have formed an alliance to bargain with the government and the mine.
Las Bamas acknowledges that 20% of its obligations under the resettlement agreement are outstanding, including the purchase of new lands for the community.
While Fuerabamba’s leaders had initially called just for Las Bambas just to fulfill its commitments, tensions have flared since the failed eviction.
“We’re going to keep fighting until Las Bambas shuts down and gets out of here for good,” Edison Vargas, the president of the Fuerabamba community, told Reuters. “It’s war.”
The protest is the most severe crisis Las Bambas has faced since opening in 2016, calling into question the future of one of the largest investments ever made in Peru, the world’s No. 2 copper producer, industry experts say.
The mine, which still has over a decade of planned production remaining, has faced road blockades in recent years by communities further away that have hit its production. But the invasion marks a major escalation as well as the potential unraveling of Peru’s most expensive community resettlement scheme, amid a resurgence in South America of protests against mining projects.
Some 1,600 members of the Fuerabamba community were relocated by Las Bambas in 2014 to a purpose-built village with tidy rows of three-floor homes near the mine. The community approved the move, which came with $300 million in cash payouts, according to the company.
A Reuters reporter who visited Las Bambas in late April saw community members, including women and children, rebuilding adobe houses there and grazing cattle against the mine’s open pit backdrop. Residents of Fuerabamba and Huancuire said they would not abandon demands for the return of what they called their ancestral lands.
They face long odds, according to former government officials and advisors. Both communities received substantial payments from Las Bambas in exchange for the land they now want back.
Executives at Las Bambas – which is 62.5%-owned by MMG, the Melbourne-based unit of state-owned China Minmetals Corp – say the protests are illegal and have called on authorities to enforce the rule of law. The company declined requests for comment for this story.
On Tuesday, as the stoppage entered a third week, Peru’s government failed to broker a deal in talks at Las Bambas with the communities, as the two sides traded accusations of violence.
Edgardo Orderique, chief executive for operations at Las Bambas, said Fuerabamba and Huancuire members had destroyed tens of millions of dollars of equipment and injured 27 security personnel during the clashes late last month. Vargas said a Fuerabamba member had lost an eye in the violence.
The protest underscores the depth of the challenge facing Las Bambas as it proceeds with plans to increase annual copper output from 300,000 to 400,000 tonnes amid a spike in global copper prices.
“This protest is the most serious that Las Bambas has faced since it began operating in Peru,” said Ivan Merino, a former mining minister under Peru’s embattled President Pedro Castillo, whose government has been torn between its pledge to uphold the rights of rural communities – the bedrock of its support – and the need to revive the economy.
“The State does not have the control to resolve the conflict,” said Merino.
Peru’s mining ministry did not respond to multiple requests for comment.
The face of progress
In the main square of New Fuerabamba, the town that Las Bambas built, a plaque says the settlement is the durable “face of progress and hope”.
Close to a dozen residents, however, said the abrupt transition from rural living to town life had caused trauma and mental health issues. Reuters was not independently able to confirm this.
The residents cited simple problems like the new brick houses – which have electricity and indoor plumbing – do not keep out the cold of the chill Andean nights as well as their former adobe homes.
Residents have also complained that basics like water, food and fuel – which the rural community was previously able to glean from the land – must now be paid for. Many of them no longer plant crops or tend livestock because the replacement plots provided by Las Bambas are too far away.
“The problem is that sustainable development has not been achieved,” said Paola Bustamante, a director at Videnza, a consultancy, who previously served as Peru’s top official in charge of social conflicts at Las Bambas.
“What has been done is they were given some money and that’s it.”
As part of the resettlement agreement, Las Bambas gave one job per family at the company for the life of the mine. The company also said in a 2021 presentation that health and education levels have also sharply improved, particularly in young children.
Three residents told Reuters that some members of the community had already spent their payouts. The resettlement plan, which MMG inherited when it bought the mine from Glencore Plc in 2014, gave Fuerabamba’s people cash settlements the mine says averaged $500,000 per family.
Residents say the payout was closer to $100,000.
Either way that’s a huge sum in a country where the legal annual minimum wage is $3,300.
“For us, it seemed like a lot of money, endless money,” Dominga Vargas, a lifelong resident of Fuerabamba, told Reuters from the tent camp at Las Bambas before the eviction. “But now it has all run out and we don’t have anything left.”
“How could we not regret selling,” she added.
Government ignored ‘critical situation’
The government gave MMG permission to expand the mine in March. Fuerabamba chief Vargas said Castillo’s administration turned a deaf ear to his warnings of a brewing crisis and a request for mediation before the occupation took place.
In a March 28 letter seen by Reuters, Vargas warned the mining ministry of a “critical situation” at Las Bambas. He told Tuesday’s meeting that he also went to the capital Lima to ask the government to intervene in the dispute, without success.
On the day of the attempted eviction, April 27, the government declared a state of emergency in the area, suspending the civil rights to assembly and protest.
The government said in a statement following the eviction attempt that it had supported dialogue between the parties from the beginning.
Under Peruvian civil law, property owners can attempt to evict trespassers by force during the first 15 days after they have settled in the property. If that time period lapses, then they need to go through a lengthier legal process.
In the wake of the clashes, Vargas wrote to Las Bambas management saying that further attempts to restart mining operations would be considered a “provocation” by his community and could trigger more violence, according to a separate April 29 letter seen by Reuters.
“Las Bambas won’t restart, not a single gram of copper will leave from here,” he told the meeting on Tuesday.
The Huancuire community, which also sold land to Las Bambas a decade ago for $33 million that is now key to the expansion project, is demanding more benefits from the minerals under the ground.
Pablo O’Brien, a former adviser to several Peruvian governments including Castillo’s, said the communities were pushing their luck making new demands given the large previous payouts.
“This situation is really just open extortion,” he said. “They cannot complain that they have not benefited financially.”
Community leaders denied the protests were a shakedown.
“As an indigenous community, we need to make ourselves heard because the government has issued this permit without consulting us,” said Romualdo Ochoa, the President of Huancuire.
Under Peruvian law, citizens don’t own mineral wealth underground and the land was already formally sold, Ochoa acknowledged. But he said indigenous communities have special rights because of their long ancestry in the territory: “What’s under our soil still belongs to us.”
(By Marcelo Rochabrun and Marco Aquino; Editing by Adam Jourdan and Daniel Flynn)
Major copper producers from BHP Group to Freeport-McMoRan Inc. will likely avoid drastic changes in the way they do business in Chile as writers of a new constitution wrapped up deliberations on mining proposals.
In a vote on the Constitutional Convention floor on Saturday, a plan to replace the nation’s investor-friendly concession model with a system of temporary and revocable permits fell short of the two-thirds threshold needed to be included in a document that will be put to a referendum on Sept. 4.
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“On the one hand, it excludes the risks that were initially foreseen, but on the other hand, it leaves everything subject to simple laws and, therefore, to circumstantial political majorities,” said Juan Carlos Guajardo, who heads consulting firm Plusmining. “But without a doubt, compared to how this story began, we are in a much better situation.”
In other measures that may affect resource projects, the draft charter will include an expansion of environmental governance, including a reshaping of water rules to focus on availability and greater protection of supplies on indigenous lands.
In Saturday’s vote, members approved a ban on all mining activity in glaciers, but rejected similar proposals for salt flats, wetlands, permafrost areas and the ocean floor. Chile is the second-largest producer of lithium thanks to mineral-laced brines in its northern desert.
A state guarantee of “equitable and non-discriminatory” access to energy was also approved on Saturday.
The proposals were presented by a committee stacked with young ecological activists and left-wingers, elected in the wake of protests that began in October 2019 over inequality. The full convention floor has a more diverse mix of members.
(By James Attwood)
Friday, May 13, 2022
Tesla is open to buying a mining company if producing its own supply of electric vehicle (EV) metals would speed up worldwide adoption of clean energy technologies, Chief Executive Officer Elon Musk said on Tuesday.
Concern is mounting across the EV industry that there may not be enough supply of lithium, nickel, copper and other metals to match demand later this decade, fueling questions about whether Tesla would consider jumping into the mining sector.
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While the auto giant has EV metals contracts with suppliers across the globe, its goal to produce 20 million vehicles annually by 2030 – what Musk called an “aspiration, not a promise” – will require vastly more supplies of metals. Tesla produced just under 1 million EVs last year.
Other automakers and executives including Carlos Tavares, the CEO of Tesla rival Stellantis NV, have warned the auto industry faces a metals supply shortage.
Tesla has no experience with the time-intensive and laborious task of building and operating a mine, so industry analysts have advised the automaker to focus on buying an existing operator.
Many in the mining industry have noted that buying an existing metals producer would cost far less than the $43 billion Musk offered to personally buy social media network Twitter earlier this year.
Tesla has nickel supply deals with Vale SA and Talon Metals.
(By Ernest Scheyder, Eva Matthews and Bernard Orr)
Image courtesy of Kurtis Garbutt, Flickr Commons.
Gold climbed higher on Wednesday after hotter-than-expected US inflation fueled expectations that the Federal Reserve will maintain a path of aggressive interest-rate hikes.
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According to Labor Department data released Wednesday, the core consumer price index, which excludes food and energy, increased 0.6% from a month earlier and 6.2% from April 2021, exceeding the median forecasts of economists.
The broader CPI rose 0.3% from the prior month and 8.3% on an annual basis, a slight cooling but still among the highest readings in decades.
Treasury yields spiked following the print, while the US dollar initially rallied before giving up its gains.
“The market saw the print and went ‘SELL, SELL, SELL.’ But gold has since bounced back with the thinking that the data is higher than expected, but not horrifying,” Tai Wong, an independent metals trader in New York, told Reuters.
“The Fed won’t get more hawkish with this report, but definitely won’t ease off either,” Wong added.
“After investors digested the latest inflation report, the overall takeaway is that it still won’t change Fed policy over the short-term and considering how bad gold has been beaten up over the past few weeks, prices appear to be finding some support here,” Ed Moya, senior market analyst at Oanda, wrote in a Bloomberg note.
Bullion has been under pressure as the Fed tightened monetary policy to fight accelerating consumer-price gains. That helped push bond yields higher and has propelled a gauge of the US currency up around 6% since the end of March, weighing on gold.
(With files from Bloomberg and Reuters)
Prices are surging in some corners of the rough-diamond market, as sanctions on one of the world’s two giant miners ripple through the supply chain. In the past, the industry could turn to behemoth De Beers to crank out extra gems when supply ran tight — but not this time.
The price of a small rough diamond, the type that would end up clustered around the solitaire stone in a ring, has jumped about 20% since the start of March, according to people familiar with the matter. The reason: Diamond cutters, polishers and traders are struggling to source stones after the US levied sanctions on De Beers’s Russian rival, Alrosa PJSC, which accounts for about a third of global production.
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Those days are now long gone. The company only carries working inventory stocks and its mines are running at full tilt. There is little chance of material increases in supply before 2024, when an expansion at its flagship South African mine will be completed.
“It’s very difficult to see us bringing on any new production,” Chief Executive Officer Bruce Cleaver said in an interview in Cape Town. “Thirty percent of supply being removed isn’t sustainable.”
De Beers also produces relatively few of the type of diamonds Alrosa specializes in: the small and cheap gems that surround a larger center-point stone or are used in lower-end jewelry sold in places like Walmart or Costco.
For many in the sector, that means growing shortages unless Alrosa and its trade buyers can find a work around.
Alrosa canceled its last sale in April and is unlikely to sell any large volumes again this month, the people said. It’s uncertain when the company will be able to sell normally again, they said, even as the company, banks and buyers look for solutions.
Alrosa’s press service declined to comment. A US Treasury license that allowed for winding down of deals with the company expired on May 7.
The fallout from Russia’s invasion of Ukraine has divided the global trade. As western governments levy sanctions on Russia and companies pull away from the country, many in India’s diamond industry still want to keep buying, according to people familiar with the matter. And while big-name US jewelers Tiffany & Co. and Signet Jewelers Ltd. have said they will stop buying new diamonds mined in Russia, retailers in places like China, India and the Middle East have not followed suit.
That dynamic is spurring concern that diamonds from Russia will be passed off as other origins.
Very few diamonds remain in one party’s custody through the entire supply chain. Most are cut, polished, manufactured and then set in jewelry by different companies and often traded in between each step. Diamonds are routinely mixed into parcels of similar sizes and qualities throughout this process, making origin tracking almost impossible in many cases.
De Beers, which sells to around 60 handpicked customers, is already looking to beef up its standards. It’s considering increasing both the paper and physical audits it already carries out on its customers to make sure supply remains segregated.
“They have to show us that our production is not being mixed,” Cleaver said.
(By Thomas Biesheuvel)
Thursday, May 12, 2022
FILE - Interior Secretary Deb Haaland speaks during a Tribal Nations
Summit during Native American Heritage Month, in the South Court
Auditorium on the White House campus, on Nov. 15, 2021, in Washington.
The Biden administration says it is canceling three oil and gas lease
sales scheduled in the Gulf of Mexico and off the coast of Alaska. That
will remove millions of acres from possible drilling as U.S. gas prices
reach record highs.(AP Photo/Evan Vucci, File)
The Biden administration says it is canceling three oil and gas lease sales scheduled in the Gulf of Mexico and off the coast of Alaska, removing millions of acres from possible drilling as U.S. gas prices reach record highs.
The Interior Department announced the decision Wednesday night, citing a lack of industry interest in drilling off the Alaska coast and “conflicting court rulings” that have complicated drilling efforts in the Gulf of Mexico, where the bulk of U.S. offshore drilling takes place.
The decision likely means the Biden administration will not hold a lease sale for offshore drilling this year and comes as Interior appears set to let a mandatory five-year plan for offshore drilling expire next month.
“Unfortunately, this is becoming a pattern — the administration talks about the need for more supply and acts to restrict it,’’ said Frank Macchiarola, senior vice president of the American Petroleum Institute, the top lobbying group for the oil and gas industry.
“As geopolitical volatility and global energy prices continue to rise, we again urge the administration to end the uncertainty and immediately act on a new five-year program for federal offshore leasing,’’ he said.
The lease cancellations come as gas prices have surged to a record $4.40 a gallon amid the war in Ukraine and other disruptions that have pushed prices $1.40 a gallon higher than a year ago. Consumer prices jumped 8.3% last month from a year ago, the government said Wednesday.
A federal appeals court in New Orleans, meanwhile, is considering a challenge to a moratorium on new federal leasing that Biden imposed soon after taking office in January 2021. Biden said the administration needed to consider the effect of new drilling on climate change and conduct proper environmental reviews.
Louisiana and 12 other states challenged Biden’s order, saying laws passed in response to the 1970s oil crisis require lease sales on federal lands and waters.
The Biden administration failed to “grapple with prior analyses” of the planned sales to give a valid reason for postponing or canceling them, Louisiana Deputy Solicitor General Joseph Scott St. John told a 5th U.S. Circuit Court of Appeals panel this week.
The three-judge panel did not indicate when they will rule.
Environmental groups hailed the latest lease cancellation, saying the administration needs to do more to curb greenhouse gas emissions from fossil fuels that are driving climate change.
“To save imperiled marine life and protect coastal communities and our climate from pollution, we need to end new leasing and phase out existing drilling,” said Kristen Monsell, oceans legal director at the Center for Biological Diversity, an environmental group.
Republicans denounced the decision as harmful to consumers and U.S. national security.
The Interior Department’s decision “approaches levels of irresponsibility and reckless stupidity never seen before,’’ said Rep. Garret Graves, R-La. “We are paying record prices for gasoline and to heat and cool our homes. Rather than using American energy sources to help solve the problem and lower prices, the Biden administration continues to carry out policies that only benefit Russia, China, Iran, Saudi Arabia, Venezuela and other apparent allies of this White House.’’
The state challenge to Biden’s leasing order has not yet gone to trial, but a federal judge blocked the order in a preliminary injunction last year, writing that since federal law does not state the president can suspend oil lease sales, only Congress can do so.
After U.S. District Judge Terry Doughty ruled for the states, the Interior Department held an offshore lease sale last fall, which a federal judge in Washington, D.C. later blocked.
The administration has appealed Doughty’s ruling, but has scheduled onshore lease sales next month in eight mostly Western states. However, the administration scaled back the amount of land offered for drilling and raised royalty rates by 50%.
Biden has come under pressure to increase U.S. crude production as fuel prices spike because of the coronavirus pandemic and the war in Ukraine. The United States and other nations have banned imports of Russian oil, driving up prices worldwide.
Biden also faces pressure from Democrats and environmental groups urging him to do more to combat climate change, even as his legislative proposals on climate and clean energy remain stalled in a sharply divided Congress.
Interior cannot conduct new offshore oil and gas lease sales until it has completed a required five-year plan. The current plan expires June 30, and administration officials have not said when or if a replacement will be released.
Interior Secretary Deb Haaland said last month that the oil and gas industry is “set” with the amount of drilling permits at its disposal. She defended Biden administration actions to scale down federal leasing, saying that industry has about 9,000 permits that have been approved but are not being used.
“The industry is free to use these permits in a way they see fit. They just haven’t acted on those,” Haaland told a House committee last week.
Oil companies have been reluctant to ramp up production, saying there are not enough workers, scant money for new drilling investments and wariness that today’s high prices won’t last.
Democrats accuse the industry of “price gouging” and have vowed to bring legislation cracking down on price manipulation to votes in the House and Senate.
Associated Press writer Janet McConnaughey in New Orleans contributed to this report.
Apple has lost its crown as the world’s most valuable company to oil giant Saudi Aramco, as soaring commodity prices swell profits at energy companies and technology stocks continue to slide.
In a sign that the old economy is reasserting itself over the new this year, Saudi Aramco eclipsed Apple on Wednesday night amid the ongoing rout on Wall Street.
Apple, which had become the world’s first 3 trillion dollar company in early January, saw its shares sink another 5% on Wednesday, knocking its value down to $2.37tn (£1.94tn) – an 18% drop this year.
This pulled the iPhone maker’s valuation below Aramco, whose market capitalisation has climbed by a quarter this year to hit $2.43tn, stoked by the surge in oil prices since the Ukraine war began.
Aramco’s rise comes a decade after the watershed moment in 2011 when Apple surpassed another energy giant, ExxonMobil, to become the world’s most valuable listed company. Since then, Apple, Microsoft, Google’s owner Alphabet and Amazon have dominated stock markets, hitting and then surpassing $1tn valuations and pushing oil giants out of the top ranks. Only Saudi Aramco has regularly featured among the most valuable.
Neil Wilson of Markets.com said there was “something symbolic in tech being overtaken by oil”, adding that “this steamroller of a bear market” was pushing stocks down.
The two companies have traded the top spot before. Aramco became the world’s biggest listed company when it floated on Saudi Arabia’s Tadawul stock exchange in December 2019, and would have been bigger than Exxon if it had been a public company a decade ago. Apple surged back to overtake Aramco in July 2020 as the pandemic boosted demand for technology products and services.
This latest changing of the guard highlights how the impact of Russia’s invasion of Ukraine, soaring inflation and the current Covid-19 lockdowns in China are all creating economic turmoil.
“Apple posted better than expected results in the quarter ended March 2022,” explained Parth Vala, analyst at GlobalData. “However, amid the increasing supply chain constraints on account of the rapidly changing global geopolitical scenarios, silicon shortages and intense lockdowns in China, the company anticipates that the June quarter could take a revenue hit between the range of $4bn and $8bn.”
In contrast, Aramco is seeing bumper revenues and earnings, having doubled its profits last year. In its first-quarter earnings due on Sunday, it is expected to report that net income almost doubled to about $38bn in the January-March period.
“The Russia-Ukraine conflict has sent the global energy prices soaring, which resulted in the energy companies booking substantial top-line and bottom-line growth,” Vala added.
Aramco has a particularly low cost of production, as much of its oil is in easy-to-tap fields onshore or in shallow waters. That boosts profitability at the firm, which is still 95% owned by the Saudi government.
James Meyer, chief investment officer at Tower Bridge Advisors, has pointed out that Apple and Aramco aren’t comparable in terms of businesses or fundamentals, although the latter has clearly benefited from the tightening commodity market. “They’re the beneficiaries of inflation and tight supply,” Meyer said.
The Ukraine invasion drove oil to 13-year highs of about $130 a barrel. Although prices have eased, Brent crude is still trading at $105 a barrel today, up from $77 at the start of year.
The surge in energy and food prices this year will leave consumers with less money to spend on non-essential items such as technology products. Higher interest rates have also hits the value of “growth stocks” such as technology companies, which promise higher returns in the future.
More than $1tn has been wiped off the valuation of major US tech stocks in the last week, after America’s central bank reasserted its determination to cool inflation from its 40-year high.
The Nasdaq Composite Index has tumbled by 27% this year, and 20% since the start of April, while Vanguard’s Energy Index Fund has surged 34% during 2022.
The former darlings of the Covid lockdown period have seen their valuations crumble, with Netflix down 72% this year, and Peloton off 65%.
It’s a similar story in the UK, where online grocery firm Ocado’s shares have more than halved this year. Having been worth more than Tesco, the UK’s largest supermarket chain, in September 2020, Ocado’s value has now dropped below second-largest grocer Sainsbury’s.