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Posts Tagged ‘Mitsubishi’
Mining Week 15/’12: Coal in Mongolia, no coal in Australia.
April 9, 2012
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Top Stories of the Week:
- Chalco bids for Mongolian coal miner
- Chalco (holding company = Chinalco) made a tentative $930mln offer for 57.4% ownership of SouthGobi Resources, a Canadian listed company, currently owned by Ivanhoe resources.
- Sources: Financial Times; Wall Street Journal
- Coal production issues in Australia
- BMA, the coal JV between Mitsubishi and BHP Billiton in Queensland, declared force majeure after a week long strike in some of its mines. The labor conflict has been going on for almost a year, with workers campaigning for better contract rights for contracted workers and to retain the union’s power in recruiting decisions.
- Sources: Financial Times
- Alcoa again cuts production
- Alcoa, the largest aluminium producer in North America, announced it would cut alumina production by 2% to support prices.
- At the start of the year Alcoa cut aluminum production, at that time by 12% and mainly in the USA. The 2% alumina cut is said to be aligned with this 12% ‘final product’ cut.
- Sources: Wall Street Journal; Financial Times; Alcoa press release
Trends & Implications:
- The potential Chalco – SouthGobi deal appears to be engineered by or via Rio Tinto. Chinalco owns a significant stake of Rio Tinto, which became the majority shareholder of Ivanhoe recently with the key objective of quickly developing the Oyu Tolgoi gold-copper mine (also in Mongolia).
- Despite a general demand boom which has not passed aluminum many major aluminum producers are posting losses. Profit margins over the past 10 years average below 10%. The key reason for this situation is an overcapacity resulting in oversupply and high inventory levels. Aluminium is currently one of the very few mined natural resources that could be seen as a ‘demand-driven’ market rather than a ‘supply-driven’ market for price setting. However, as more and more producers cut investment, the demand growth fundamentals should invert this situation in the next couple of years.
Alcoa's long term demand outlook as presented end of 2011
©2012 | Wilfred Visser | thebusinessofmining.com
Categories: Mining Week
alumina, aluminium, BHP Billiton, BMA, business, Chalco, Chinalco, coal, copper, Ivanhoe, mining, mining business, Mitsubishi, Rio Tinto, SouthGobi
Mining Week 52/’11: Chinese investment welcome in Australia
December 31, 2011
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Top Stories of the Week:
- Australia solicits Chinese infrastructure investment
- The government of Western Australia is trying to speed up the development of port and rail facilities of the Mid West region’s Oakajee port by stripping the Mitsubishi/Murchison combination of exclusive development rights and inviting Chinese parties to step in. 8 of the 14 projects in development in the region have Chinese investors.
- Sources: Wall Street Journal; Government statement; Murchison Metals statement
- Yanzhou teams up with Gloucester coal
- Yanzhou’s Australian coal company Yancoal will merge with Gloucester coal, 64.5% owned by Singapore-based Noble group. As a result Yancoal obtains a listing on the Australian stock exchange, a condition put on the 2009 acquisition of Felix Resources
- Sources: Wall Street Journal; Financial Times; Wall Street Journal blog on synergies
- Anglo and Codelco fight for Minas Sur stake
- Anglo American launched a range of claims in Chilean court trying to prevent Codelco from being awarded the right to buy a full 49% of the Minas Sur assets. The scope of the option for Codelco to buy 49% has been unclear since Anglo sold a 24.5% stake to Mitsubishi. In response to Anglo’s claims Codelco restated its intention to acquire 49% of the full project.
- Sources: Financial Times 1; Financial Times 2; Anglo American press release
Trends & Implications:
- As expected Chinese investments have proven to be a key driver of M&A activity in the mining industry in 2011. It is noteworthy that many Chinese firms are using a foreign based subsidiary or team up with a Western firm to do foreign investments. This structure holds 2 main benefits for the Chinese investors: they obtain an experienced western staff with knowledge of the way of doing business in the target countries; and they are viewed much more favorably by regulators when trying to execute deals.
- The fight of Anglo American and Codelco over Minas Sur appears to become a long term court fight. The longer this court fight stretches, the more inclined Anglo American will be to find a compromising deal, as the uncertainty about the ownership structure will delay all investment decisions for the company in the mining region.
©2011 | Wilfred Visser | thebusinessofmining.com
Categories: Mining Week
Anglo American, Australia, business, China, coal, Codelco, copper, Gloucester, iron ore, legal, Mid West, Minas Sur, mining, mining business, Mitsubishi, Murchison, Oakajee, synergy, Western Australia, Yancoal, Yanzhou
Chilean Copper-Mine Strike Continues
July 28, 2011
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“Escondida, the world’s largest copper mine, declined the Chilean government’s offer of mediation in its labor conflict, Valor Futuro reported Tuesday, citing a company document. The sole union at the mine, representing 2,375 workers, went on strike late Thursday to protest what it says are unmet labor-contract terms.
‘We’ve received an invitation from the government to talk, and in this context we’ve given them our reasons for declining to participate at a negotiations table with union leaders while the illegal strike continues,’ reads the Escondida document as reported by Valor Futuro.”
Source: Wall Street Journal, July 26 2011
Observations:
- Escondida (translated: ‘hidden’) is majority owned and operated by BHP Billiton. Unions demand higher bonuses, unmet housing benefits, the elimination of shifts lasting more than 12 hours, and protection for sick workers.
- Daily lost output could add up to 3,000 tons. The company plays tough by refusing to continue negotiations as long as the strikes continue.
Implications:
- The wave of new labor contracts reached for various copper mines in Chile through collective bargaining has gone relatively smooth so far. Leaders of Codelco have expressed fear that the conflict at Escondida could spread to other companies.
- High commodity prices and increased resource nationalism have led to a surge in mine operation strikes in the last months: BHP’s Australian coal operations, South African coal mines, and Escondida being the most well-known. Companies try to maximize output and make record profits while prices are high, and in turn workers demand a larger part of this profit then originally agreed upon.
©2011 | Wilfred Visser | thebusinessofmining.com
Categories: Corporate Social Responsibility, Market change
BHP Billiton, bonus, business, Chile, Codelco, copper, Escondida, mining, mining business, Mitsubishi, profit, Rio Tinto, strike
BHP faces more industrial action at coal mines
June 27, 2011
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“BHP Billiton Ltd. is facing a third round of industrial action in Australia this week at its coking coal mines, further disrupting output from the world’s largest exporter of the steelmaking material.
Workers at seven mining sites owned by BHP Billiton Mitsubishi Alliance in Queensland state’s Bowen Basin won’t do any “non-rostered” overtime on June 30 and July 1, Stephen Smyth, a division president at the Construction, Forestry, Mining and Energy Union in Queensland, said by telephone today.
Coal mine workers began their second round of strikes on June 24 and they’ll finish on June 29, said Smyth. BHP has been notified about the latest plan and further strikes are possible next week, he said.”
Source: Bloomberg, June 27 2011
Observations:
- Over 3,000 workers at the BMA coal mines are campaigning for better contract rights for contracted workers and to retain the union’s power in recruiting decisions.
- BMA is using a contract workforce to minimize loss of production caused by the strikes. Lost production could be up to 130Kt per day, or just over an average ship of export capacity.
Implications:
- Negotiations are progressing slowly, and will continue to do so as long as production continues. If the unionized staff manages to convince the contract workers (roughly 50% of personnel) to lay down the work the pressure on BMA management would increase.
- Various other miners in similar situations have shut down operations, fired the staff, and rehired the loyal staff members on own terms. BHP certainly will try to prevent this situation, as it would hurt the company’s reputation as a top employer.
©2011 | Wilfred Visser | thebusinessofmining.com
Categories: Market change
BHP Billiton, BMA, business, coal, coal mines, coking coal, mining, mining business, Mitsubishi, negotiation, Queensland, strike, union
Top Miner’s M&A History
Gold Miner’s M&A History
