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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, 24 June 24
PHILIPPINES COAL SUPPLY ENOUGH UNTIL 2030 - PHILSTAR GLOBAL
The country’s existing coal-fired power plants are sufficient to ensure enough base load capacity in the next six years, Energy Secretary Rap ...
Friday, 14 June 24
NEXTDECADE, SAUDI ARAMCO SIGN 20-YEAR LNG SUPPLY DEAL - REUTERS
U.S. liquefied natural gas (LNG) provider NextDecade has signed a non-binding agreement with Saudi Aramco 2222.SE to supply 1.2 million tonnes per ...
Friday, 14 June 24
NEWBUILDING PRICES CLIMB 3% TO HIGHEST LEVEL IN 16 YEARS - NIELS RASMUSSEN
“Since the start of the year, newbuilding prices have risen 3% to their highest level since 2008. Compared to their most recent low in late 2 ...
Friday, 14 June 24
INDIA TARGETS HIGHER DOMESTIC COAL PRODUCTION, REDUCED IMPORTS: GOVT - REUTERS
India wants to reduce coal imports and increase domestic production, federal coal minister G. Kishan Reddy said on Thursday.
The cou ...
Thursday, 13 June 24
US LNG TO ASIA FOR POWER GENERATION EXPECTED TO CUT EMISSIONS VERSUS COAL - RYSTAD ENERGY
The value-chain emissions of liquified natural gas (LNG) are lower on average than for coal-fired power generation, even when the fuel is shipp ...
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- Semirara Mining and Power Corporation, Philippines
- Eastern Energy - Thailand
- Global Green Power PLC Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Economic Council, Georgia
- Orica Mining Services - Indonesia
- Commonwealth Bank - Australia
- Heidelberg Cement - Germany
- Latin American Coal - Colombia
- Sarangani Energy Corporation, Philippines
- GMR Energy Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Videocon Industries ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Orica Australia Pty. Ltd.
- Kohat Cement Company Ltd. - Pakistan
- Cement Manufacturers Association - India
- Siam City Cement PLC, Thailand
- PTC India Limited - India
- Price Waterhouse Coopers - Russia
- Bharathi Cement Corporation - India
- Essar Steel Hazira Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Eastern Coal Council - USA
- Uttam Galva Steels Limited - India
- Cigading International Bulk Terminal - Indonesia
- ICICI Bank Limited - India
- Holcim Trading Pte Ltd - Singapore
- Aditya Birla Group - India
- CNBM International Corporation - China
- Gujarat Mineral Development Corp Ltd - India
- ASAPP Information Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Mines - Canada
- Sojitz Corporation - Japan
- Kideco Jaya Agung - Indonesia
- Tamil Nadu electricity Board
- Miang Besar Coal Terminal - Indonesia
- San Jose City I Power Corp, Philippines
- Global Business Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Electricity Generating Authority of Thailand
- Salva Resources Pvt Ltd - India
- Malabar Cements Ltd - India
- Globalindo Alam Lestari - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Georgia Ports Authority, United States
- Billiton Holdings Pty Ltd - Australia
- Savvy Resources Ltd - HongKong
- Lanco Infratech Ltd - India
- Standard Chartered Bank - UAE
- Central Java Power - Indonesia
- Manunggal Multi Energi - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Global Coal Blending Company Limited - Australia
- Barasentosa Lestari - Indonesia
- LBH Netherlands Bv - Netherlands
- GVK Power & Infra Limited - India
- Ministry of Transport, Egypt
- Indian Oil Corporation Limited
- Indogreen Group - Indonesia
- Maheswari Brothers Coal Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Anglo American - United Kingdom
- OPG Power Generation Pvt Ltd - India
- Vedanta Resources Plc - India
- Directorate Of Revenue Intelligence - India
- White Energy Company Limited
- SMC Global Power, Philippines
- Goldman Sachs - Singapore
- Bhoruka Overseas - Indonesia
- Formosa Plastics Group - Taiwan
- Sical Logistics Limited - India
- Mjunction Services Limited - India
- Indian Energy Exchange, India
- Antam Resourcindo - Indonesia
- Bhatia International Limited - India
- Kepco SPC Power Corporation, Philippines
- Thai Mozambique Logistica
- Dalmia Cement Bharat India
- Meralco Power Generation, Philippines
- Tata Chemicals Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Australian Coal Association
- India Bulls Power Limited - India
- Planning Commission, India
- Wood Mackenzie - Singapore
- Timah Investasi Mineral - Indoneisa
- Simpson Spence & Young - Indonesia
- Central Electricity Authority - India
- Singapore Mercantile Exchange
- Gujarat Electricity Regulatory Commission - India
- South Luzon Thermal Energy Corporation
- Siam City Cement - Thailand
- Asmin Koalindo Tuhup - Indonesia
- McConnell Dowell - Australia
- Grasim Industreis Ltd - India
- Australian Commodity Traders Exchange
- Vizag Seaport Private Limited - India
- Gujarat Sidhee Cement - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Indonesian Coal Mining Association
- Jorong Barutama Greston.PT - Indonesia
- Energy Link Ltd, New Zealand
- Jindal Steel & Power Ltd - India
- Interocean Group of Companies - India
- Oldendorff Carriers - Singapore
- Indika Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Borneo Indobara - Indonesia
- Bukit Makmur.PT - Indonesia
- Straits Asia Resources Limited - Singapore
- Intertek Mineral Services - Indonesia
- Madhucon Powers Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Petrochimia International Co. Ltd.- Taiwan
- Marubeni Corporation - India
- Indo Tambangraya Megah - Indonesia
- Leighton Contractors Pty Ltd - Australia
- GAC Shipping (India) Pvt Ltd
- Sakthi Sugars Limited - India
- Riau Bara Harum - Indonesia
- Electricity Authority, New Zealand
- Bukit Baiduri Energy - Indonesia
- Chamber of Mines of South Africa
- Posco Energy - South Korea
- VISA Power Limited - India
- Independent Power Producers Association of India
- Coalindo Energy - Indonesia
- Bhushan Steel Limited - India
- IHS Mccloskey Coal Group - USA
- Kaltim Prima Coal - Indonesia
- The University of Queensland
- Karaikal Port Pvt Ltd - India
- Altura Mining Limited, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Development Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Larsen & Toubro Limited - India
- Bangladesh Power Developement Board
- Samtan Co., Ltd - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Medco Energi Mining Internasional
- The State Trading Corporation of India Ltd
- Parliament of New Zealand
- Sindya Power Generating Company Private Ltd
- Mercuria Energy - Indonesia
- Renaissance Capital - South Africa
- Petron Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Chettinad Cement Corporation Ltd - India
- Star Paper Mills Limited - India
- PNOC Exploration Corporation - Philippines
- AsiaOL BioFuels Corp., Philippines
- Kartika Selabumi Mining - Indonesia
- Binh Thuan Hamico - Vietnam
- Pipit Mutiara Jaya. PT, Indonesia
- London Commodity Brokers - England
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Carbofer General Trading SA - India
- Mintek Dendrill Indonesia
- Mercator Lines Limited - India
- Semirara Mining Corp, Philippines
- Deloitte Consulting - India
- Rio Tinto Coal - Australia
- Wilmar Investment Holdings
- TeaM Sual Corporation - Philippines
- CIMB Investment Bank - Malaysia
- Attock Cement Pakistan Limited
- Coastal Gujarat Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Minerals Council of Australia
- Ministry of Finance - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Ambuja Cements Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Port Waratah Coal Services - Australia
- Edison Trading Spa - Italy
- Xindia Steels Limited - India
- Ind-Barath Power Infra Limited - India
- New Zealand Coal & Carbon
- Makarim & Taira - Indonesia
- Pendopo Energi Batubara - Indonesia
- Kobexindo Tractors - Indoneisa
- Sree Jayajothi Cements Limited - India
- Iligan Light & Power Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Power Finance Corporation Ltd., India
- Thiess Contractors Indonesia
- Romanian Commodities Exchange
- Coal and Oil Company - UAE
- Toyota Tsusho Corporation, Japan
- PetroVietnam Power Coal Import and Supply Company
- Jaiprakash Power Ventures ltd
- Bulk Trading Sa - Switzerland
- SMG Consultants - Indonesia
- Africa Commodities Group - South Africa
- Baramulti Group, Indonesia
- Parry Sugars Refinery, India
- Agrawal Coal Company - India
- Trasteel International SA, Italy
- Bahari Cakrawala Sebuku - Indonesia
- SN Aboitiz Power Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Therma Luzon, Inc, Philippines
- IEA Clean Coal Centre - UK
- MS Steel International - UAE
- Metalloyd Limited - United Kingdom
- The Treasury - Australian Government
- PowerSource Philippines DevCo
- International Coal Ventures Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Merrill Lynch Commodities Europe
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