Tag Archives: copper

John Rubino: Huge Miner Bankruptcies Possible Soon; Great News For Gold And Silver, Bad News For Streaming Companies?

By John Rubino, Jan 13, 2016

The commodities bust may be about to claim some brand-name victims:

Freeport-McMoRan Inc: The Hits Just Keep Coming

Freeport-McMoRan (NYSE:FCX) is off to a brutal start in 2016 with its stock price down nearly 40% in just over a week. The company is being battered by a barrage of negative news items, with the latest being another analyst downgrade. The rough start, which follows a very tough 2015, has a lot of investors wondering if the company will make it through the year in one piece.

The weakness in the copper price has been the biggest weight on Freeport-McMoRan’s stock this year. Its price recently hit a six-year low due to growing concerns of a worsening slowdown in China, which is the world’s biggest copper market. With copper falling below $2 per pound it calls into question Freeport-McMoRan’s ability to generate sufficient cash flow to both manage its debt and fund its capex plan. It’s a plan that is based on a $2 copper price in 2016 and $45 per barrel for oil. Presently, copper is a few pennies below that level, while oil has plunged into the low $30s.

Those price weaknesses not only will weigh on the company’s cash flow, but are weighing on the value of oil and copper assets. That’s making it even less attractive for Freeport-McMoRan to pursue asset sales to pay down its large debt load. In fact, asset values have fallen so steeply that one Jefferies analyst is concerned that “window of opportunity for Freeport-McMoRan to repair its balance sheet may have closed.” That’s after the company has yet to find a funding solution for its oil and gas business after searching for alternatives for more than a year.

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Glencore Debt Swaps Jump to Six-Year High as Copper Price Slides

(Bloomberg) – The cost of insuring Glencore Plc’s debt against default rose to a more than six-year high as the price of raw materials such as copper continued to tumble.

The trader and miner’s credit default swaps increased to as much as 946 basis points, the highest since April 2009 on a closing basis, according to data from S&P Capital IQ’s CMA.

Slumping commodity prices have battered Glencore, prompting it to scrap a dividend payment, sell new shares and outline asset sales as it seeks to curb debt to maintain its investment-grade rating. Copper dropped to a six-year low amid a rout in metals as muted Chinese inflation increased concern that demand from the world’s largest buyer of raw materials will slow.

“CDS levels are driven by commodity prices and in the case of Glencore, especially copper,” said Max Mihm, a Frankfurt-based portfolio manager at Union Investment, which holds Glencore bonds among assets totaling about $271 billion. “If prices fall further and stay low Glencore will need to do more to protect its IG ratings.”

A lot of big, diversified miners produce silver and gold as byproducts, so if, say, a copper mine closes because of that metal’s recent price collapse, that also takes precious metals out of the production stream and other things being equal raises their price. So far so good for gold bugs.

But fans of gold and silver streaming companies, including this writer, are watching the carnage in copper and oil with mixed emotions. Many of the miners now teetering on the edge of insolvency have cut deals in which they promise to sell their byproduct gold and silver to streaming companies in return for big up-front payments. That money may now be at risk.

Franco Nevada, the biggest streaming company, recently paid Canadian miner Teck Resources $610 million for a future share of the silver produced by the latter’s Peruvian mine. The number two streaming company, Silver Wheaton, has paid Glencore and Vale over $1 billion for portions of the gold and silver produced by some of their mines.

What happens if some of these miners subsequently go bankrupt? That’s not clear, but it can’t be good for the streaming companies whose cash will be tied up (at best) and might simply disappear.

Meanwhile, the never-ending precious metals bear market is producing a steady drumbeat of smaller gold and silver mining failures, some of which are streaming company partners. Most recently, Rubicon Gold fell to effectively zero after announcing that oops, its reserves were only one-tenth of what it had previously promised. Streaming company Royal Gold is on the hook for $75 million to this one.

Looking on the bright side, the streaming companies are highly diversified, with dozens of deals spread around the world. So the failure of any one — even a big one — probably isn’t an existential threat. It is, however, a near-term problem for buyers of these stocks. But also possibly a long-term opportunity if the streaming companies get swept down in the general carnage.

This article is written by John Rubino of Dollarcollapse.com and with his kind permission, Gecko Research has been privileged to publish his work on our website. To find out more about Dollarcollapse.com, please visit:

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Harmless commodity crash accelerates as dollar soars

By Ambrose Evans-Pritchard, Nov 23, 2015

copper mineThe bottomless pit of copper.

‘Dr Copper should be struck off the list. He is telling us a lot about over-supply in China, but little about the world economy,’ says Capital Economics.

Copper prices have crashed to their lowest level since the Lehman Brothers crisis and industrial metals have slumped across the board as a flood of supply overwhelms the market.

The violent sell-off came as the US dollar surged to a 12-year high on expectations of an interest rate rise by the US Federal Reserve next month. The closely-watched dollar index rose to within a whisker of 100, and has itself become a key force pushing down commodities on the derivatives markets.

Copper prices fell below $4,500 a tonne on the London Metal Exchange for the first time since May 2009, hit by rising inventories in China and warnings from brokers in Shanghai. Prices have fallen 32pc this year, and 55pc from their peak in 2011 when China’s housing boom was on fire.

Known to traders as Dr Copper, the metal is tracked as a barometer of health for the world economy but has increasingly become a rogue indicator. China consumes 45pc of the world’s supply, distorting the picture. Beijing is deliberately winding down its “old economy” of heavy industry and break-neck construction, switching to a new growth model that is less commodity-intensive.

“Dr Copper should be struck off the list,” said Julian Jessop, from Capital Economics. “He is telling us a lot about China and the massive over-supply of copper on the market, but he is not telling us anything much about the economy in the US, Europe or the rest of the world.”

The CPB index in the Netherlands shows that global trade began to recover four months ago after contracting earlier in the year, and the JP Morgan global PMI index for manufacturing has risen since then to 51.3 – well above the boom-bust line.

The trigger for the latest plunge in copper prices was a decision last week by the Chilean group Codelco to slash its premium for Chinese customers by 26pc, effectively launchng a price war for global market share. “We’re trying to lower costs. We’re not cutting production,” said the group’s chief executive, Nelson Pizarro.

Glencore has already said it will suspend output in Zambia and the Congo for two years until new equipment is installed, and others are doing likewise. But Codelco is the key player.

Kevin Norrish, at Barclays Capital, said Codelco is in effect copying Saudi Arabia’s tactics in the oil market: using its position as the copper industry’s low-cost giant with a 10pc global share to flush out the weakest rivals.

The price war comes as the expected revival of Chinese metal demand disappoints yet again. Warehouse stocks in Shanghai have risen to their highest in five years, though LME inventories have been falling since September.

Views are starkly divided over the outlook for copper, as it is for the whole nexus of commodities. Goldman Sachs says the demise of China’s “old economy” will lead to a near permanent glut through to the end of the decade.

Natasha Kaneva, from JP Morgan, said it would take another one to two years to touch the bottom of the mining cycle, predicting further price falls of 12pc-28pc. “We remain bearish on all the base metals,” she said.

But the International Copper Study Group is sticking to its guns, insisting that there will be a global copper shortage of 130,000 tonnes next year.

What is clear is that the commodity rout has taken on a life of its own, with financial flows and speculators reinforcing the crash. Nickel, lead, zinc and aluminium have all plunged over recent weeks, tracking the parallel drama in oil and gas. Even soybeans and wheat have fallen by roughly 40pc since May.

Commodity crashes are a dangerous warning signal if global demand is falling. But they are benign if caused by excess supply, acting as a shot of stimulus for most of the world, or a “positive supply shock”, as it is known.

Peter Praet, the European Central Bank’s chief economist, said the jury is out on this point, warning that a “significant part” of the latest slump appears to come from weak demand and therefore needs watching carefully.

Yet the current circumstances are nothing like mid-2008 before the Lehman crisis, when most commodities were reaching fresh highs even though the money supply was already buckling in the US, Britain and the eurozone. Some economists argue that it was the oil shock of June and July 2008 that ultimately caused the financial crisis three months later.

This time the picture is inverted, with global real M1 money growing at the fastest pace in 30 years, potentially setting off a strong economic recovery.

Harvard economist Carmen Reinhart said commodity busts typically run for seven years as it takes time to clear the tidal wave of supply from over-investment during the boom. If the historical pattern holds, we are only half-way through. “This commodity-price roller-coaster ride is probably not over yet,” she said.

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NEWS: Kaizen Discovery to Participate in Upcoming Investor Conferences in Lima and San Francisco

Oct 15, 2015

Kaizen Discovery (TSX VENTURE:KZD) announced today its participation in two forthcoming investor conferences in Lima, Peru and San Francisco, California.

  • November 4 and 5: Mining & Investment Latin America Summit at The Westin, Lima. President and Chief Executive Officer, B. Matthew Hornor, will provide an overview of Kaizen’s corporate and project developments on November 4, 3:00 p.m. (PET), during a panel session titled “Junior Mining Roadshow: Who has the next big project in Latin America?”. The company also will be hosting conference attendees at its information booth.
  • November 23 and 24: The 2015 Silver Summit and Resource Expo at The Park Central Hotel, San Francisco. Mr. Hornor will participate in the “My Generation” panel moderated by Marin Katusa on November 23, 9:00 a.m. to 9:30 a.m. (PST). Attendees also are invited to meet members of Kaizen’s management team and view information on Kaizen’s exploration projects at booth #204.

About Kaizen Discovery

Kaizen is a Canadian mineral exploration and development company. Kaizen has a collaboration agreement with ITOCHU Corporation of Japan and has access to HPX TechCo’s proprietary, geophysical, Typhoon technology under a dedicated services agreement. Kaizen’s long-term growth strategy is to work with Japanese entities to identify, explore and develop high-quality mineral projects that have the potential to produce and deliver minerals to Japan’s industrial sector.

More information on Kaizen is available at www.kaizendiscovery.com.

Full release

NEWS: AM Gold Shareholders Approve Sale of Pinaya Copper-Gold Project in Peru to Kaizen Discovery

Sep 8, 2015

Kaizen Discovery Inc. (TSX VENTURE:KZD) is pleased to announce that AM Gold Inc. shareholders passed a special resolution to approve the previously announced sale to Kaizen of Canper Exploraciones S.A.C., a Peruvian subsidiary of AM Gold whose material asset is the Pinaya Copper-Gold Project.

The special resolution was approved by 99.9% of the votes cast by AM Gold shareholders.

The closing of the transaction with AM Gold is subject to certain other closing conditions, including (i) approval of the transaction by the TSX Venture Exchange in respect of both Kaizen and AM Gold; (ii) delivery of a title opinion for the Pinaya Project acceptable to Kaizen, and (iii) no material adverse effect upon closing for Kaizen, AM Gold or Canper.

The Pinaya Project covers 192 square kilometres and includes more than 25 kilometres of strike length within the emerging Andahuaylas-Yauri Porphyry Belt in southeastern Peru. This belt hosts numerous productive and world-class porphyry and skarn systems, including Las Bambas, Tintaya, Constancia and Haquira.

More information on the planned transaction with AM Gold and the Pinaya Project is available in Kaizen’s July 6, 2015 news release available at www.kaizendiscovery.com.

Full release

Kaizen Discovery CEO Matthew Hornor: Opportunity in a Bear Market

Copper Investing News, Aug 4, 2015

Kaizen Discovery CEO Matthew Hornor on what the company has been up to in 2015, and why he sees opportunity in the current bear market.

The Investing News Network was able to speak with Matthew Hornor, CEO of Kaizen Discovery (TSXV:KZD), at the recent Sprott-Stansberry Vancouver Natural Resource Symposium.

As this 2014 piece from Global Mining Observer explains, Kaizen was born when private surveying specialist HPX TechCo, controlled by Robert Friedland, took on the TSX listing of Concordia Resource in 2013. Several members of the management team at Friedland’s Ivanhoe Mines (TSX:IVN), including Hornor and esteemed explorer Dr. David Broughton, stepped up to head Kaizen, and the company has been making big moves in the junior mining space ever since.

In recent months, Kaizen has been putting out drill results from its Aspen Grove project in British Columbia and advancing permitting at its Coppermine project in Nunavut. It has also announced a transaction to acquire the Pinaya copper-gold project in Peru.

Certainly, Kaizen has been keeping busy despite a tough market. And while the copper price hasn’t been favorable, Hornor sees opportunity in the current bear market. “As the base metal markets and the commodity markets continue to go the way they’re going, that only provides more opportunities for Kaizen to get involved and pick up interesting assets at lower costs,” he said. “We’re in this for the long term.”

Hornor also spoke about Kaizen’s strategic partnership with Japanese trading house ITOCHU, what investors can expect next from the company this year and what it takes for junior mining companies to achieve exploration success. Echoing what others in the space have said, Hornor chalked up the success of Ivanhoe and Kaizen to having the right people in place.

“Robert Friedland has had a lot of success in his life, but it’s not by dumb luck,” he said. “There’s been many opportunities and projects that have come across our tables — we’re looking at thousands and thousand of them — and really having the right team in place who knows what to look for, and what they’re looking at, is key.”

Watch the video above for more of what Hornor had to say. Interestingly, the CEO also discussed why he left his position as a senior associate at an international law firm in Japan to join Ivanhoe and Kaizen.

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