Brazilian supergroup Vale, the world's No 2 miner by value, and most indebted miner, today announced that it would be selling ten year notes, and additional 6.875% guaranteed notes due 2039. Market reports indicated that Vale would immediately seek to raise USD 1bn in the shorter end notes, and around USD 500m in notes due 2039. USD m 1H10 1H09 2009 2008 2007 2006 Free cash flow Operating cash flow 5,082 3,231 7,136 17,114 11,012 7,232 Capital expenditure -4,053 -3,696 -8,096 -8,972 -6,651 -4,431 Free cash flow 1,029 -465 -960 8,142 4,361 2,801 Cash on hand 6,235 11,192 11,040 12,639 1,046 4,448 Debt -23,959 -19,493 -22,880 -18,245 -19,024 -22,556 Net debt -17,724 -8,301 -11,840 -5,606 -17,978 -18,108 Dividends 0 0 -2,724 -2,850 -1,875 -1,300 NET DEBT, selected mining names Market value Value to USD bn End-2008 End-2009 30-Jun-10 USD bn debt ratio -3.3 179.8 1.8% -12.2 124.5 9.8% -7.9 48.2 16.3% -10.3 50.4 20.5% -1.7 36.6 4.8% -8.3 11.1 74.8% -17.7 145.8 12.2% -3.1 -3.2 45.1 7.1% -2.8 -2.4 44.3 5.3% Total/average -98.2 -81.6 -67.0 685.6 11.9%
Vale said that it plans to use the net proceeds from the offering for general corporate purposes, a euphemism for the strong need to shore up its internal cash flows. While other miners have worked fastidiously at paying down debt after heavy mineral price corrections sent panic waves through the global sector in 2008, Vale has battled to generate strong free cash flows.
Vale's capital expenditure is running pretty much at the same level as BHP Billiton, the world's biggest diversified resources stock, and generator of copious amounts of free cash flow.
As the world's biggest individual player in seaborne iron ore, Vale can pack a punch when iron ore prices are good and great; in 2008, Vale delivered USD 17.1bn in operating cash flow (compared to Rio Tinto's USD 14.9bn, and BHP Billiton's 17.8bn). The 20 or so months since 2008 have seen Vale's operating cash flows fall sharply back, but at least the trend line has been rising since early 2009.
Vale
In sharp contrast to BHP Billiton and Rio Tinto, Vale's balance sheet generally has been increasingly stretched in the past few years by its very heavy capital expenditure programme, plus acquistions, mainly in fertiliser, over the past year and more.
Vale remains stung by its seriously overpriced 2007 acquisition of Inco, a nickel group, for USD 18.9bn in cash. Vale raised USD 12.2bn in fresh equity during 2008, diluting shareholders. That only helped stem the slide in Vale's net debt (including cash) from USD 5.6bn at the end of 2008, to USD 17.7bn on 30 June 2010.
Questions can be raised over Vale's ability to deliver new mine builds on time and on budget. Onça Puma, a nickel mine in the Brazilian state of Pará, was announced in July 2006. Investment was put at USD 1.4bn, with start up towards the end of 2008. The latest numbers are for USD 2.7bn and start up towards the end of this year.
Vale has not yet even given the full green light for the build of Serra Sul, its proposed new giant iron ore mine in Brazil. There are equally pressing, and relatively new, demands from Simandou, in Guinea. Serra Sul was announced in 2007, with a budget of USD 10.1bn, with start up for the first half of 2012. The latest numbers are for USD 11.3bn and start up towards the end of 2013, subject to approval by the board of directors.
Going forward, Vale's premium valuation rating, relative to Rio Tinto, in particular, may be tested.
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vale opened the flow of debt
Diposting oleh jim | 02.21 | Company, finance/investment, market, News | 0 komentar »Review of the 100 most in-demand gold stocks
Diposting oleh jim | 00.02 | Company, Gold, market, News, stock | 0 komentar »Why are some Tier 1 gold stocks relatively underperforming their global peers in the stock price tables: These and other questions may well be pondered by specialist investors in listed gold stocks as the dollar bullion gold price flirts with making fresh all-time records. Stock From From Value price high* low* USD bn CAD 2.32 0.0% 132.0% 1.038 CAD 2.51 0.0% 73.1% 0.833 AUD 0.50 0.0% 132.6% 0.345 CAD 2.14 0.0% 234.4% 0.252 CAD 1.05 0.0% 218.2% 0.081 CAD 0.82 0.0% 368.6% 0.057 CAD 10.29 -0.1% 169.4% 0.758 CAD 9.46 -0.1% 279.9% 2.443 CAD 26.90 -0.2% 179.6% 1.469 CAD 5.95 -0.3% 138.0% 0.580 CAD 5.43 -0.4% 179.9% 1.001 USD 16.05 -0.4% 145.2% 0.793 CAD 8.01 -0.5% 310.8% 0.553 AUD 4.48 -0.7% 74.3% 9.700 USD 1.45 -0.7% 126.6% 0.050 USD 122.70 -0.7% 26.8% 52.246 CAD 7.81 -0.8% 288.6% 1.033 AUD 0.65 -0.8% 86.1% 0.230 CAD 10.51 -0.8% 191.9% 1.826 COP 6,580 -0.9% 73.7% 0.953 CAD 5.68 -1.2% 140.7% 0.379 CAD 0.40 -1.2% 166.7% 0.042 AUD 0.39 -1.3% 85.7% 0.696 AUD 3.85 -1.3% 288.9% 0.803 CAD 1.38 -1.4% 133.9% 0.164 AUD 1.03 -1.4% 390.5% 0.405 AUD 0.66 -1.5% 65.0% 1.782 CAD 4.58 -1.5% 84.7% 0.232 USD 4.92 -1.6% 90.0% 1.210 AUD 3.02 -1.6% 184.9% 1.163 AUD 2.87 -1.7% 55.1% 0.229 CAD 7.22 -1.8% 1436.2% 0.623 CAD 8.68 -1.8% 200.3% 0.694 CAD 1.95 -2.0% 137.8% 0.216 USD 62.07 -2.1% 49.7% 30.085 AUD 38.80 -2.4% 30.5% 17.148 USD 28.10 -2.4% 29.1% 0.546 CAD 6.63 -2.5% 127.8% 0.577 CAD 17.62 -2.6% 106.6% 1.944 AUD 10.67 -2.8% 52.2% 0.983 CAD 15.77 -2.8% 126.9% 3.533 CNY 45.30 -2.9% 59.5% 9.486 AUD 5.95 -2.9% 230.6% 0.715 CAD 0.33 -2.9% 450.0% 0.033 AUD 0.32 -3.0% 300.0% 0.028 USD 2.87 -3.0% 348.4% 0.130 CAD 2.86 -3.1% 84.5% 2.804 USD 41.35 -3.1% 44.6% 11.367 CAD 3.65 -3.2% 973.5% 0.201 AUD 3.34 -3.2% 125.7% 0.888 CAD 1.69 -3.4% 92.0% 0.039 AUD 0.14 -3.6% 101.5% 0.091 CAD 1.05 -3.7% 195.8% 0.800 HKD 20.85 -3.7% 63.7% 1.173 AUD 0.52 -3.7% 96.2% 0.234 AUD 0.13 -3.7% 170.8% 0.028 CAD 6.72 -3.7% 99.4% 2.508 CAD 30.72 -3.8% 180.3% 7.517 USD 19.29 -3.8% 94.7% 10.554 GBP 10.95 -3.9% 69.2% 12.113 USD 13.30 -4.0% 70.5% 5.312 AUD 2.11 -4.1% 374.2% 0.343 CAD 31.39 -4.1% 207.1% 2.468 USD 45.75 -4.7% 36.0% 45.095 CAD 2.80 -4.8% 4566.7% 0.424 CAD 5.23 -4.9% 302.3% 0.377 USD 5.17 -5.0% 155.9% 0.602 AUD 0.75 -5.1% 107.2% 0.200 CNY 36.29 -5.1% 47.0% 7.600 CAD 1.87 -5.1% 175.0% 0.555 AUD 1.86 -5.1% 58.2% 0.277 USD 48.90 -5.2% 25.8% 0.534 CAD 4.45 -5.3% 27.1% 0.489 CAD 1.70 -5.6% 900.0% 0.214 AUD 1.35 -5.6% 202.4% 0.511 CAD 1.15 -5.7% 76.9% 0.025 CAD 6.99 -5.8% 83.5% 1.064 GBP 0.20 -5.8% 68.8% 0.211 CAD 0.24 -6.0% 193.8% 0.056 AUD 2.35 -6.4% 217.6% 0.384 USD 44.39 -6.6% 30.1% 16.104 CAD 0.28 -6.7% 330.8% 0.030 USD 92.56 -7.1% 45.6% 8.409 AUD 1.10 -7.2% 204.2% 0.248 CAD 5.06 -7.3% 77.5% 0.149 GBP 0.16 -7.4% 152.0% 0.039 CAD 0.44 -7.4% 83.3% 0.120 CAD 0.50 -7.4% 1011.1% 0.023 AUD 0.19 -7.5% 105.6% 0.231 CAD 0.97 -7.6% 98.0% 0.063 CAD 7.75 -7.8% 105.6% 0.891 ZAR 107.25 -7.9% 29.1% 10.391 CAD 5.70 -8.1% 129.8% 0.213 AUD 0.88 -8.3% 10.0% 0.126 CAD 31.52 -8.4% 24.2% 3.427 USD 19.21 -8.5% 57.6% 7.143 CAD 1.25 -8.8% 220.5% 0.429 CAD 1.76 -8.8% 53.0% 0.054 Averages/total -3.1% 124.0% 316.137 Weighted averages -3.5% 52.8% * 12-month ** Mainly silver Source: market data; tables compiled by Barry Sergeant
What is clear is that the favoured Tier I gold counter, Newmont, continues to hold sway over the global gold subsector group. This is a position Newmont has held for much of this year. It is followed in the Tier I sector, in terms of stock price performance, by Newcrest (busy with a merger with fellow Australia-based global Tier I name Lihir), Barrick (the world's No 1 gold stock by value and production), and two South Africa based names, AngloGold Ashanti, and Gold Fields.
On the other hand global No.2 gold stock by value, Goldcorp, and former high flyer Agnico-Eagle along with Kinross, are still currently underperforming.
Looking at gold and gold-related stocks, the biggest, in terms of market value, stands as US-quoted SPDR Gold Shares ETF, the world's biggest gold bullion exchange traded fund. This has a current market value of USD 52.3bn, compared to Barrick's USD 45.1bn. The ETF holds physical bullion on behalf of investors, and does not operate as a mining company, thus removing the many risks that may or may not be associated with digging the stuff out of the ground. The ETF does not accrue, or pay, any form of income, unlike a gold stock, which may pay dividends and/or interest on debt instruments.
Looking at the most in-demand Tier II stocks, Red Back makes a strong appearance, under offer as it is from Tier I gold stock Kinross, which, from a pricing viewpoint, ranks as the bottom performing in its peer group, with the exception of China's Zijin.
Goldcorp this week announced a take out bid for Andean; investors may perceive, as is also the apparent case with Kinross, that the bids are overpriced. Such a notion has done but little, however, to dampen appetite for Newcrest. The three bids mentioned involve differing components of paper (fresh equity) and cash. These do not appear correlated, as such, with relative stock price performance.
The majority of Tier II gold stocks are well in demand; the only real exception is Yamana, possibly a delayed reaction to the firm's somewhat unconventional style of reporting its production and costs.
Looking at gold stocks with a market value of at least USD 20m, it is apparent that a good number of smaller names are in plentiful demand; mention can be made of Romarco, Integra Mining, Timmins Gold, Grayd Resource, Radius Gold, and Guyana Goldfields.
A good number of gold stocks active in Africa are also in strong demand, not least Great Basin, Semafo, Nevsun, Adamus Resources, Oromin, Golden Star, and Perseus Mining. No doubt a number of investors and speculators are taking bets on the "next" Red Back.
100 most-wanted gold & related equities
With a minimum market value of USD 20m
source
The impact of slow economic recovery for the gold price
Diposting oleh jim | 22.55 | Gold, market, News | 0 komentar »The' better-than-expected' poor employment figures of last week were generally taken as a sign that the recovery is there, but L-shaped with a slightly rising bias. The new stimuli from government will be positive and hitting where they should. Tax breaks on new equipment and infrastructural development tastes the same as digging holes and filling them in did in the 1930's. We have to wait and see if the economy will respond. We sincerely hope it will. But do investors even in the U.S. believe that a recovery will see a fall in the gold price? We think not!
THE FUTURE OF THE DOLLAR
We ask the question, will a recovery help the U.S. Dollar? One of the factors that U.S. investors have looked at in the past, but has broken down this year is the belief that if the Dollar falls gold will rise and vice versa. Cast your mind back to the pre-credit crunch time and what did we see?
The U.S. Trade Deficit was a regular +$60 billion a month because imports were cheaper than locally made goods and consumers bought imports. Consequently the Dollar drifted over time, lower. With U.S. consumers more thrifty than then and buying cheap imports in place of local products, we expect the same to be true in a slow recovery. In fact, the Trade deficit has already been rising faster than expected for this very reason. As Asia adds to its expertise as time goes by the quality of their goods, but not necessarily the price, will rise and claim more market share than ever before. So in even a slow recovery, expect a rising Trade deficit. This is Dollar negative.
What should be of great concern to all is the internationalization of the Yuan. Once this internationalization of the Yuan has gained traction we will see the use of the U.S. Dollar in international trade decline and fairly rapidly. The unused Dollars will have nowhere to go except home. On the world's foreign exchanges the result will be a decline in the Dollar's exchange rate. Unless there is a structural change in the import demand within the U.S., the U.S. will contribute to the Dollar's fall still. The only quick way out for the U.S. is Protectionism, which will help stop this decline. However, this will bring a far greater level of instability and uncertainty in foreign exchanges than we see now. This would be extremely gold positive.
THE POSITIVE IMPACT OF A RECOVERY ON GOLD
The overall impact of a recession or even worse, is that the quantity of money shrinks, even in the investment world. Yes, in that scene gold is sought out as a preserver of wealth, but perhaps not in as great a volume as in an uncertain, unstable, recovering economy.
The shock of the last three years on the developed world could not have been greater as the U.S. economy and its position in the global economy reached it zenith, then buckled. In the years since then there has been a considerable metamorphosis in investment thinking. The rosy future has gone. The fact that any day could bring some more bad news, more uncertainty and more instability, is firm in all of our minds. Consequently, prudence is taking as greater place as muted optimism in the investment world and investment strategies are adjusted accordingly.
As part of that new prudence gold investments have found a solid place in successful portfolios. The strategy is to act as a counter to poor performing other investments. As this attitude to gold continues to grow, more and more investment managers are getting to know the value of gold even if they don't want it in their portfolios. More and more of those managers are turning from disliking gold, to liking it. This does not necessarily mean that there is a steady drift by developed world investment managers into gold, but it does mean that each time there is another shock to the monetary system and investment world the speed and investment volumes with which investment managers turn to gold, increases. So battered are we in the last three years by bad news that we are extremely sensitized to it and react quickly.
The benefits of even a slow recovery over a recession, as far as it concerns gold, is that greater volumes of investment funds will be available for investment in gold and gold related products.
BUT A VERY SLOW RECOVERY
A rapid recovery would have fanned a positive attitude to investments and could well have deflected U.S. investment managers from investing in gold. Even as the recovery struggles to take hold, current doubts about the recovery keeps fear and uncertainty in place. The failure of the recovery to gain pace after so much has been injected into the economy so far, has fanned uncertainty and increased cautionary investing policies. It is going to take far more than simply unemployment figures that were not as bad as expected, to convince investors that a recovery has really taken hold. If the current efforts of the Obama Administration fail, it will be nigh on impossible to convince the investing public that all is well in downtown, U.S.A.
Such a mood is internationally infectious and will spread globally. Should that happen gold will accelerate its move to centre stage, in the investing world.
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Rio and Japanese mills agreed to cut ore price 13%
Diposting oleh jim | 20.16 | Company, market, Steel | 0 komentar »Anglo-Australian mining giant Rio Tinto has agreed to a 13 percent cut in fourth quarter iron ore prices with Japan's Kobe Steel Ltd, probably setting a trend the industry will follow.
The deal, expected by the market, could fuel a restocking cycle if other players follow, leading to stronger prices for most of 2011, offsetting the savings of nearly $3 billion in the fourth quarter Chinese buyers might see as a result.
"We have agreed to a 13 percent cut in the price of iron ore for October-December from July-September," Gary Tsuchida, spokesman for Japan's fourth-largest steelmaker, said on Wednesday, although he would not comment on the actual price.
However, a spokesman from another Japanese steelmaker, Sumitomo Metal Industries, said the company had agreed with Rio Tinto on a price of around $127 a tonne, down 16 percent from around $147.00 a tonne paid for the third quarter.
Larger firms Nippon Steel and JFE Steel both declined to comment.
"The deal looks like an average of the June, July and August spot price, and in line with expectations," said Ben Westmore, economist at National Australia Bank.
"On the demand side there it looks like they have steadied. There have been persistent stories about destocking by Chinese mills, part of the broad cycle and nothing to be panicked about."
The destocking cycle would turn around in the fourth quarter, resulting in rising prices in the first nine months of next year and a net rise for 2010 of the order of 7 percent, he added.
Chinese steel production remained brisk in August, but could slow in September after several provinces ordered mills to limit production.
China produced 1.7 million tonnes of crude steel per day in August, data from the China Iron & Steel Association showed, higher than July's daily average of 1.66 million tonnes as a 15 percent rally in prices of products like rebar encouraged output.
CISA data also suggested crude steel production slowed in the last 11 days of August after output in several provinces was affected by reduced electricity supply. But few in the market expect those cutbacks to endure.
CISA fought a bitter rearguard action against the launch of of a more flexible pricing system, instead preferring annual prices, which critics described as a "free put" option for Chinese buyers.
At the height of the economic crisis, spot prices plunged below the annual contract and Chinese mills were quick to defer or default on those higher priced annual tonnages to buy cut price spot material -- a move that dealt a finishing blow to the decades-old system.
Shan Shanghua, the secretary general of CISA, was not available while another senior official, the deputy head, declined to comment on the Rio Tinto price news.
If other miners agree to the same price as Rio and Chinese imports continue at the pace seen in the year so far, China will see its iron ore bill cut by $2.9 billion for the last three months of the year against the third quarter.
Based on Japan's imports of 77.9 million tonnes of iron ore between January and July, the nation's mills could save $626 million in the final three months of the year.
Glyn Lawcock, head of Australian Resources, UBS Securities Australia told Reuters the industry's move to quarterly pricing appeared to be working well, with customers sticking to agreed prices.
Prices would have to fall considerably further to result in output cuts by miners, he added.
"When (iron ore) get down to around $110 a tonne -- if it falls that far -- that provides a bit of a floor because the domestic guys (in China) are starting to get close to a break-even cost position."
"But while we stay above $100 a tonne -- most people in the market use basis $60 a tonne long term -- so, above $100 they are still making a lot of cash."
source
Iron ore prices are poised to decline further this year following a 14% drop so far in the third quarter from the second quarter.
Prices are averaging $143 a tonne for the third quarter, vs. $167 a tonne in the second quarter, according to Metal Bulletin prices.
Last week, global mining giant Rio Tinto(RTP) told Australia Associated Press that iron ore prices are set to decline 13.3% during the fourth quarter. The company's iron ore division chief executive Sam Walsh foresees prices dipping to $127 a tonne, based on the average index price during the previous quarter.
The Steel Index, which tracks 62%-grade iron ore arriving at China's Tianjin port, expects prices to plunge by around 12% during the fourth quarter. Assuming the current average of $143, the prices could hover around the $125-a-tonne mark.
In a recent development, China Minmetals Corp. told Bloomberg that the China Iron & Steel Association is negotiating with iron ore producers to fix a monthly price for the raw material. However, the move from quarterly pricing to monthly pricing increases the prospect of Chinese steelmakers defaulting on contracts, Minmetals' Vice President Feng Guiquan was reported saying.
This year, Rio, BHP Billiton(BHP), and Vale SA(VALE), which together account for about 70% of global iron ore production, fixed iron ore prices on a quarterly basis instead of the annual pricing mechanism followed earlier.
The steel industry will benefit from lower iron ore prices as it reduces the cost of production. China's steel manufacturers stand to gain from the drop, as the country is the largest steelmaker and top consumer.
Sluggish demand forced nearly 40% of Chinese steelmakers to suspend production due to a 17% drop in steel prices and as the government attempted to cool the overheated property market. Looking forward to 2010, MEPS, an independent supplier of steel market information, forecasts China's steel production to grow 10% year over year to 627 million tonnes from 567.8 million tonnes.
China's iron ore imports for the first seven months ending July 2010 stood at 360 million tonnes, up 1.5% year over year. The country's iron ore imports could reach 650 million tonnes during 2010, according to Wu Wenzhang, an analyst from steelhome.cn.
The likely surge in iron ore imports is attributed to lower prices and reduced stockpiles. However, China's steel production has declined 8% from May to July this year. Production fell to a five-month low of 51.7 million tonnes in July, down 3.9% month on month but up 2.2% year over year.
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