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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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Monday, 17 July 23
APPROVED AMMONIA-FUELED CONTAINERSHIP - BENEFITS AND RISKS: REED SMITH
Following the news in Offshore Energy that Korea Maritime Consultants has secured approval in principle from the American Bureau of Shipping for it ...
Friday, 14 July 23
CLEAN COAL USE KEY TO DEEP CUTS IN EMISSIONS, STABLE ELECTRICITY SUPPLY - CHINA DAILY
China must push for the clean use of coal and step up integration of the dirty fuel with carbon capture, utilization and storage to achieve sustain ...
Thursday, 13 July 23
VIETNAM'S COAL EMISSIONS PRIMED FOR SURGE AFTER IMPORTS JUMP - REUTERS
Vietnam’s thermal power emissions are primed for a steep climb this summer after the country’s imports of thermal coal soared to their ...
Monday, 26 June 23
COAL PRODUCTION AND CONSUMPTION UP IN 2022 - EUROSTAT
In 2022, EU coal production and consumption continued to increase, reaching 349 million tonnes (+5% compared with the previous year) and 454 millio ...
Wednesday, 21 June 23
QATAR STRIKES SECOND BIG LNG SUPPLY DEAL WITH CHINA - REUTERS
Qatar on Tuesday secured its second large gas supply deal with a Chinese state-controlled company in less than a year, putting Asia clearly ahead i ...
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- Renaissance Capital - South Africa
- Kalimantan Lumbung Energi - Indonesia
- Simpson Spence & Young - Indonesia
- Borneo Indobara - Indonesia
- San Jose City I Power Corp, Philippines
- Indo Tambangraya Megah - Indonesia
- Antam Resourcindo - Indonesia
- Latin American Coal - Colombia
- Bulk Trading Sa - Switzerland
- European Bulk Services B.V. - Netherlands
- PNOC Exploration Corporation - Philippines
- Rio Tinto Coal - Australia
- Makarim & Taira - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Star Paper Mills Limited - India
- Baramulti Group, Indonesia
- Parry Sugars Refinery, India
- Pendopo Energi Batubara - Indonesia
- Chamber of Mines of South Africa
- Barasentosa Lestari - Indonesia
- Kepco SPC Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Manunggal Multi Energi - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Leighton Contractors Pty Ltd - Australia
- Sical Logistics Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Anglo American - United Kingdom
- Agrawal Coal Company - India
- Directorate General of MIneral and Coal - Indonesia
- Thai Mozambique Logistica
- Meenaskhi Energy Private Limited - India
- Cement Manufacturers Association - India
- Ceylon Electricity Board - Sri Lanka
- Madhucon Powers Ltd - India
- Kartika Selabumi Mining - Indonesia
- International Coal Ventures Pvt Ltd - India
- Australian Commodity Traders Exchange
- Coastal Gujarat Power Limited - India
- Tata Chemicals Ltd - India
- Wilmar Investment Holdings
- Bhushan Steel Limited - India
- Coal and Oil Company - UAE
- Siam City Cement PLC, Thailand
- Gujarat Sidhee Cement - India
- Orica Australia Pty. Ltd.
- Aditya Birla Group - India
- Ministry of Transport, Egypt
- ASAPP Information Group - India
- Semirara Mining and Power Corporation, Philippines
- Indian Energy Exchange, India
- SMC Global Power, Philippines
- Karaikal Port Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- GVK Power & Infra Limited - India
- Aboitiz Power Corporation - Philippines
- VISA Power Limited - India
- South Luzon Thermal Energy Corporation
- Indogreen Group - Indonesia
- Energy Development Corp, Philippines
- New Zealand Coal & Carbon
- Eastern Coal Council - USA
- Jaiprakash Power Ventures ltd
- Edison Trading Spa - Italy
- Samtan Co., Ltd - South Korea
- Videocon Industries ltd - India
- Australian Coal Association
- Africa Commodities Group - South Africa
- Commonwealth Bank - Australia
- Tamil Nadu electricity Board
- The Treasury - Australian Government
- IEA Clean Coal Centre - UK
- Oldendorff Carriers - Singapore
- TeaM Sual Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Semirara Mining Corp, Philippines
- Vizag Seaport Private Limited - India
- Power Finance Corporation Ltd., India
- Heidelberg Cement - Germany
- Mintek Dendrill Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Electricity Authority, New Zealand
- MS Steel International - UAE
- PowerSource Philippines DevCo
- McConnell Dowell - Australia
- Electricity Generating Authority of Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Xindia Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Globalindo Alam Lestari - Indonesia
- Standard Chartered Bank - UAE
- Intertek Mineral Services - Indonesia
- Coalindo Energy - Indonesia
- Kumho Petrochemical, South Korea
- Maheswari Brothers Coal Limited - India
- Merrill Lynch Commodities Europe
- Marubeni Corporation - India
- Neyveli Lignite Corporation Ltd, - India
- Wood Mackenzie - Singapore
- Gujarat Mineral Development Corp Ltd - India
- ICICI Bank Limited - India
- Ministry of Finance - Indonesia
- Indika Energy - Indonesia
- PTC India Limited - India
- Planning Commission, India
- Bhatia International Limited - India
- Medco Energi Mining Internasional
- Ambuja Cements Ltd - India
- Petron Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Metalloyd Limited - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Bhoruka Overseas - Indonesia
- Lanco Infratech Ltd - India
- The State Trading Corporation of India Ltd
- White Energy Company Limited
- Bayan Resources Tbk. - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Directorate Of Revenue Intelligence - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Carbofer General Trading SA - India
- Port Waratah Coal Services - Australia
- The University of Queensland
- IHS Mccloskey Coal Group - USA
- Riau Bara Harum - Indonesia
- Mercuria Energy - Indonesia
- Indian Oil Corporation Limited
- Timah Investasi Mineral - Indoneisa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Interocean Group of Companies - India
- Cigading International Bulk Terminal - Indonesia
- Dalmia Cement Bharat India
- Eastern Energy - Thailand
- Sarangani Energy Corporation, Philippines
- Thiess Contractors Indonesia
- Binh Thuan Hamico - Vietnam
- Miang Besar Coal Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Ministry of Mines - Canada
- Larsen & Toubro Limited - India
- Central Electricity Authority - India
- Bangladesh Power Developement Board
- Sree Jayajothi Cements Limited - India
- Attock Cement Pakistan Limited
- Ind-Barath Power Infra Limited - India
- Bharathi Cement Corporation - India
- Sindya Power Generating Company Private Ltd
- Sojitz Corporation - Japan
- Jindal Steel & Power Ltd - India
- Meralco Power Generation, Philippines
- SMG Consultants - Indonesia
- GMR Energy Limited - India
- Chettinad Cement Corporation Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Grasim Industreis Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kaltim Prima Coal - Indonesia
- Posco Energy - South Korea
- PetroVietnam Power Coal Import and Supply Company
- Billiton Holdings Pty Ltd - Australia
- Iligan Light & Power Inc, Philippines
- Goldman Sachs - Singapore
- Asmin Koalindo Tuhup - Indonesia
- India Bulls Power Limited - India
- Malabar Cements Ltd - India
- Georgia Ports Authority, United States
- Vedanta Resources Plc - India
- Central Java Power - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement - Thailand
- LBH Netherlands Bv - Netherlands
- Deloitte Consulting - India
- Mercator Lines Limited - India
- Formosa Plastics Group - Taiwan
- Sakthi Sugars Limited - India
- SN Aboitiz Power Inc, Philippines
- Trasteel International SA, Italy
- Bukit Baiduri Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Singapore Mercantile Exchange
- GAC Shipping (India) Pvt Ltd
- Essar Steel Hazira Ltd - India
- Independent Power Producers Association of India
- CNBM International Corporation - China
- Altura Mining Limited, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Romanian Commodities Exchange
- Toyota Tsusho Corporation, Japan
- Therma Luzon, Inc, Philippines
- Parliament of New Zealand
- Global Coal Blending Company Limited - Australia
- Kapuas Tunggal Persada - Indonesia
- CIMB Investment Bank - Malaysia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Uttam Galva Steels Limited - India
- Bukit Makmur.PT - Indonesia
- Economic Council, Georgia
- Jorong Barutama Greston.PT - Indonesia
- London Commodity Brokers - England
- Mjunction Services Limited - India
- Straits Asia Resources Limited - Singapore
- Minerals Council of Australia
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Global Green Power PLC Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Global Business Power Corporation, Philippines
- Orica Mining Services - Indonesia
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