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China Agreed to Loan Guinea $20 Billion in Exchanged of Aluminium Ore

China agreed to loan Guinea $20 billion over almost 20 years in exchange for concessions on bauxite, an ore of aluminium which the West African country has in abundance, the mines minister said.

The projects guaranteed by the loan included China Power Investment Corp’s (CPI) planned alumina refinery and Aluminium Corp of China’s (Chalco) bauxite mine and another bauxite project by China Henan International Cooperation Group, all of them in the northwestern town of Boffa.

 

According to the Mines Minister Abdoulaye Magassouba, that those are the three projects targeted as priorities for the first phase. The revenues of the projects will serve as reimbursement for the loans.

The minister said the money would be spent on badly needed infrastructure Guinea is one of the world’s least developed countries a roads for minerals formula that China often uses to gain access to Africa’s resources.

Projects earmarked included roads in the capital Guinea and highways upcountry, a project for extending the port of Conakry, an electric transmission line and the building of a university, Magassouba said.

Chalco said last month it plans to invest $500 million in the project in Boffa, about 200 kilometres from the capital Conakry, which was abandoned by BHP Billiton in 2013. The $6 billion CPI alumina project has been on the cards since at least 2012.

Guinea, Africa’s leading bauxite producer, holds some of the world’s richest bauxite and iron ore deposits, including the Simandou iron ore deposit, in its remote east, which is mired in legal disputes but has nevertheless attracted intense interest from China. 

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Platinum Price Plummet 10% Compared Last Year Amid Oversupply of the Commodity

The price of platinum took a breather from its recent rally but managed to stay above the $1,000 an ounce level and in positive territory for the year. Platinum, down 10% compared to this time last year, is under performing the precious metals complex and specifically palladium which is sporting 2017 gains of more than 37% and looks set to top its sister metal for the first time since 2001.

A new report by the World Platinum Investment Council (WPIC) shows the platinum market moved back into surplus during the second quarter as a rise in refined supply and a drop in automotive and industrial demand erased the previous quarter’s 305,000-ounce deficit.

 

WPIC is still predicting a small platinum market deficit for the whole of 2017, but the industry body expects the market to be broadly in balance compared to earlier predictions of a 120,000-ounce deficit this year.

Following a 2016 deficit of 270,000 ounces, 2017 would be the sixth consecutive year that global platinum consumption has outstripped supply primarily as the result of declining mining output and low prices discouraging recycling.

Overall supply is expected to contract further in 2017, due to closures of uneconomic mining at current market prices, with total platinum supply expected to decrease by 2% year-on-year to 7,795 koz. Secondary supply is forecast to slip by 3% when compared to 2016, with a reduction in jewellery recycling outweighing increased autocatalyst recycling.

On the demand side of the equation, conditions remain lacklustre. Nevertheless, it is encouraging to observe the continued resilience of platinum demand from the automotive sector, which is counter to many negative commentaries on the sector. The full-year forecast for the segment is 3,360 koz, down just 2% on 2016 (3,435 koz) and very close to overall automotive demand in 2015 and 2014, despite a further reduction in diesel market share in Western Europe.

 

A bright spot for the platinum market is continuing strength in investment demand. Global investment demand came in at 90,000 ounces during Q2 with bars and coins and exchange-traded funds seeing gains, while exchange stocks remain unchanged. 

This marks the sixth consecutive quarter of positive investment demand according to WPIC and indicates that overall investment growth in 2017 is likely to be greater than expected.

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Gold Price Jumps Higher as Hedge Fund Bulls Soar

Gold price jumps higher hitting levels last seen a year ago as safe haven buyers seek refuge amid escalating tensions on the Korean peninsula and weakness on equity markets see investors rotate back into gold.

Gold for delivery in December, contract on the Comex market in New York gained nearly $20 an ounce hitting a high of $1,349.70 in afternoon trade before settling at $1,344.50. Year to date gold is up 17%.

Volumes were some of the highest recorded for the Comex with futures contracts equivalent to more than 56m ounces or some 1,750 tonnes exchanging hands. That’s more than 85% above average daily volumes during August which was already a record trading month. 

The all time high for trading volumes on the exchange was set on the day after Donald Trump was elected president when nearly 90m ounces swopped owners.

 

The North Korean hydrogen bomb test over the weekend that resulted in a break between the great powers involved in the standoff sparked the latest rally in the metal.

President Trump’s warnings that the US will stop trading with any country that does business with the rogue nation drew scorn from Beijing. Yesterday US Ambassador to the United Nations Nikki Haley said Kim Jong Un  was “begging for war” which prompted Moscow on Tuesday to warn of a “global catastrophe” if  "military hysteria" is not replaced with diplomacy.

 

Managed money investors such as hedge funds which abandoned the gold market for equities and other yield-producing investments in what became known as the Trump trade even before the latest geopolitical escalation, have been returning to the precious metal market in droves.

Hedge funds added to their exposure to the yellow metal for the sixth straight week according to trader positioning data supplied by the government. Net longs bets that gold will be more expensive in the future – rose 18% to the equivalent of 23.2m ounces, the highest since September.

A trading note from Saxo Bank points out that the ratio between longs and short positions has jumped from 1 to almost 19 in the past few weeks. That’s the highest ratio since December 2012.

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Rio Tinto Opened its 16th Iron Ore Mine in Western Australia

Rio Tinto formally opened its 16th iron ore mine in the Pilbara region of Western Australia. The Silvergrass mine is due to be commissioned during the final quarter and the $338 million brownfield development is set to produce 10m tonnes of low-sulphurous ore a year.

The company said that Silvergrass was a great example of its value over volume approach, as the mine would provide low cost, high grade material to maintain the quality of the miner’s brandname Pilbara Blend.

 

Silvergrass is located adjacent to Rio’s Nammuldi mine and ore would be moved to the Namuldi plant by a 9-km conveyer system currently under construction. The initial phase, with a five million tonne per annum capacity, began production in the fourth quarter of 2015. 

Final capacity could be in excess of 20m tonnes per year, but most of Silvergrass output would replace depleting resources elsewhere.

 

Rio is also moving ahead with its $2.2 billion Koodaideri iron ore project in Western Australia, 110km west-north-west of Newman. The project would begin construction in 2019 and enter production two years later.

Rio Tinto said it shipped its five billionth tonne of iron ore last year after 50 years of operations in the Pilbara and has invested some $20 billion in Western Australia over the past decade.

Last month, the Melbourne-based giant cut back guidance for iron ore output in 2017 by up to 10m tonnes to around 330m tonnes. Iron ore accounts for just less than half Rio’s earnings.

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OZ Minerals to Build a Copper Mine in Australia

OZ Minerals said on Thursday it would begin construction of its Carrapateena copper mine in Australia, the country’s largest undeveloped copper project, which it estimated would cost $916 million.

Copper is seen as one of the strongest growth commodities given its broad use in everything from plumbing and construction to appliances and electronics.

The world’s biggest mining companies, led by BHP Billiton and Rio Tinto, are actively looking to increase their exposure to copper.

OZ Minerals said Carrapateena, located about 160 kms from the Indian Ocean in South Australia state, would start producing in the fourth quarter of 2019, and yield an average of 65,000 tonnes of copper and 67,000 ounces of gold a year over 20 years.

“Carrapateena will be a robust, cash generating asset with expansion potential that sets OZ Minerals up for further growth,” OZ Minerals Chairman Rebecca McGrath said in a statement.

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Nickel Prices Surged to an Eight Month High

Nickel prices surged to an eight-month high overnight on expectations of strong demand from China, supply concerns and declining stockpiles.

Zinc touched its highest since August 2007, though new trading restrictions in China dampened gains, and aluminium rose to near three-year highs on speculation of Chinese capacity cuts.

 

Price gains across most industrial metals, however, slowed after rallies driven by a surge of speculative investment. “The buying is tiring,” said a trader in London.

Three-month nickel on the London Metal Exchange closed up 2.2 per cent at $US11,660 a tonne after touching $US11,690, the highest since December 7. The stainless steel ingredient has been supported by rising stainless output in China and concerns over supplies from top ore exporter the Philippines.

Benchmark aluminium closed 1.1 per cent higher at $US2097 a tonne, close to a three-year high of $US2112 reached last Thursday on expectations of capacity cuts in China.

Euro zone factories recorded their best month of growth in six-and-a-half years in August, while Japanese manufacturing expanded at the fastest pace in three months. Benchmark copper finished 0.2 per cent lower at $US6565, lead ended down 1.6 per cent at $US2377 and tin closed up 0.9 per cent up at $US20,525.

Output recovered at Escondida in Chile, the world’s largest copper mine, while Freeport McMoRan Inc looked set to agree with Indonesia on continuing to operate its giant copper mine in Papua.

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Gold Edge Up as Focus Shifts to Central Banker Meeting

Gold prices edged up, supported by jitters over political uncertainty in the United States ahead of a major central banking conference this week. Spot gold was up 0.44 percent to $1,289.90 an ounce, after shedding 0.5 percent in the previous session. U.S. gold futures settled at $1,294.70 per ounce.

The precious metal kind of hanging in before this Jackson Hole meeting. It is in a wait-and-see mode but we should have a better idea of direction by the end of this week. There can be an argument made for a bearish view on gold as this stage. If the dollar were to come back due to short covering and given the rally in U.S. stocks, the dollar denominated and safe haven metal could fall out of favour.

 

Markets are turning their focus to a meeting of central bankers in Jackson Hole, Wyoming, later in the week where Federal Reserve Chair Janet Yellen and European Central Bank chief Mario Draghi are set to deliver speeches on the outlook for monetary policy and interest rates.

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. Most of the people are now looking for hints from the Jackson Hole meeting between the central bankers.

 

The most important thing is economic fundamentals, central banks are going to have tightening measures in monetary policies to have normalization. So there is not much higher upward momentum for prices.

The dollar inched lower after U.S. President Donald Trump raised the prospect of a government shutdown as he tries to force through his plans to build the wall along the border with Mexico. Gold usually fairs well in times of geopolitical uncertainty, while stocks and the dollar generally retreat.

 

Among other precious metals, silver rose 0.38 percent to $17.03 an ounce, while platinum fell 0.13 percent to $973.25. Palladium declined 0.03 percent to $932.25.

 

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Iron Ore Price Boost, Up 47% in Two Months

The Northern China import price of 62% Fe content ore jumped again on Tuesday as the country’s steelmakers stoke production ahead of mandated cuts going into winter. According to data supplied by The Steel Index the steelmaking raw material advanced 4% to exchange hands for $78.10 per dry metric tonne, the highest since April 7.

The iron ore price is now trading up a whopping 47% from its 2017 lows struck just two months ago as Chinese anti-pollution crackdown on its heavy industries force the country’s steelmakers to chase high quality imports and avoid domestic producers which contend with Fe content in the 20%-range.

 

Iron ore’s latest rally comes after another furious day of trading on ferrous derivates markets in China ahead of new curbs on trading going into force tomorrow to dampen speculative activity.

In Shanghai rebar futures the world’s most traded steel contract gained  3.6% near 4½-year highs. Dalian coking coal futures rose 3.6% while iron ore contracts closed 6.6% higher, bringing gains over the past three sessions to 11%.

China’s steel production last month rose more than 10% compared to last year to a record 74m tonnes as traders worry about a steel supply crunch going into the new year. Beijing wants to cut output by as much as 50% during winter months to fight smog, particularly in its capital city and surrounding areas.

In Hebei province, China’s key producing region, steelmakers said they will comply with stringent new emissions regulations by the September 1 deadline. Some 120 million tonnes of low quality steel capacity were shuttered during the first six month of the year.

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Gold Surged after Federal Reserve Hinted on Slow Interest Rate Increase

Gold rose for a second day after Federal Reserve officials hinted that U.S. interest rates could rise more slowly than expected. The minutes of the Fed’s July 25-26 policy meeting showed some policymakers wished to halt further rate increases until it is clear the trend of soft inflation is transitory.

Gold is sensitive to rising interest rates because they push up bond yields, raising the opportunity cost of holding non-yielding bullion, and tend to strengthen the dollar, in which gold is priced.


Spot gold rose 0.30 percent at $1,286.51 an ounce after rising 0.9 percent Wednesday. Gold futures in the U.S for December delivery settled up $9.50 at $1,292.40 an ounce.

Demand for gold as a safe haven also resurfaced after South Korea warned North Korea against “crossing a red line” and the United States said it would go ahead with joint military drills despite pressure from China.

Gold is likely to breach USD 1,300/oz as the market prices in a less hawkish Fed, particularly in a risk-off environment. Gold would struggle to rise above $1,295 after failing three times this year.

The precious metal has been supported by physical buying, with holdings in the largest gold backed exchange traded fund, New York’s SPDR Gold Trust, 275,663 ounces, or 1.1 percent, higher on Wednesday than Friday’s levels.

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Copper Price Jumped as Hedge Funds Place Billions in Bet

Copper futures trading on the Comex market in New York raced ahead as global supply disruptions come back into view and large-scale speculators place huge bets on rising prices. In massive volumes of than 3 billion pounds of copper for delivery in September jumped to a high of 2.9795 a pound ($6,569 per tonne), up more than 3%.

Copper’s 2017 year to date gains in percentage terms now top 18% and the red metal has recovered 54% in value after falling to six-year lows below $2.00 a pound in January last year.

 

On the copper derivatives market hedge funds built long positions bets on higher prices in future to a new record high last week according to the CFTC’s weekly Commitment of Traders data. So called managed money investors’ net longs now total over 112,000 lots, the equivalent of 2.8 billion pounds or nearly 1.3m tonnes worth around $8.3 billion at today’s prices.

It shatters the previous peaks achieved mid-2014 when the copper price was above $3.20 a pound and represents the equivalent of $11.8 billion swing from 2016 second quarter net short position (bets that copper can be bought back cheaper in future) of 1.2 billion tonnes.

 

On the London Metal Exchange, hedge funds have also increased their bullish bets in recent weeks and according to LME data released yesterday net longs total over 74,000 lots. LME contracts are for 25 tonnes which translates into more than 1.8m tonnes worth some $12.2 billion on Wednesday.

After a relatively uneventful supply environment in 2016, several outages at some of the world’s biggest mines including a 43-day strike at BHP’s Escondida mine in Chile which ended in March and ongoing strike action at Freeport McMoRan’s Grasberg operations in Indonesia have underpinned prices.

Freeport said flash floods at Grasberg destroyed roads, bridges and water lines and one worker remains unaccounted for. The impact on operations have not been quantified but a spokesperson for the Indonesian unit said the main processing mill at the extensive complex may also be affected.

Freeport’s temporary exporting licence is coming up for renewal in October, a bargaining chip used by Jakarta as it negotiates with the Phoenix-based company about divesting a majority stake in its Indonesian subsidiary.

 

Zambia, Africa’s top copper producer, this week reduced power supply to mines operated by Glencore and First Quantum Minerals in the country over a pricing dispute. While Glencor’s Mopani was taken off line, the impact on FQM appears minimal at this stage the power cuts coincided with a maintenance shutdown at Kansanshi and power supply had been redirected to the Canadian miner’s Sentinel mine.

Last month Chile’s Antofagasta narrowly avoided labour strikes which would have been the first in the London-listed company’s history at its Zaldivar and Centinela mines in the South American nation. Together the two mines produce more than 280,000 tonnes of copper per year.

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High Grade Rare Earths Confirmed at Burundi Mine in East Africa

Rainbow Rare Earths has made significant progress to date on its Gakara rare earths project in Burundi, including the release of some high-grade drill results. Laboratory testing recently undertaken in respect of its ‘main vein’ at Gasagwe has returned an average Total Rare Earth Oxide (“TREO”) grade of 62.17%.

Gasagwe is the area within the Company’s 39km2 mining licence which is expected to provide ore for the first two years of production, which is targeted to commence in Q4 2017. The grade compares extremely favorably to the average grade of 57% contained within mineralised veins across the Company’s Gakara Rare Earths Project in Burundi (“Gakara”) as disclosed in the Competent Person’s Report compiled by MSA contained in Rainbow’s IPO Prospectus published in January 2017.

 

The IPO raised $8 million and about $6 million has been invested into the project so far. The company expects first production in the final quarter of this year, starting with 3,900 tonnes of concentrate during the first two years and ramping up to 5,000 tpa thereafter.

The Gakara project was mined on a small scale from the 1930s to the 1970s, according to CEO Martin Eales. Rainbow received its first exploration license in 2011 and in 2015 was granted a 25-year license from the Burundi government, which holds a 10% share in the project. The company has also secured a 10-year offtake agreement with metals trader thyssenkrupp Raw Materials.

Total in-situ are earth oxides are estimated to be in the range of 47 to 67%, which would make it one of the highest-grade rare earth projects in the world. According to a project page Rainbow Rare Earths is targetting 20,000 to 80,000 tonnes of “vein material with upside potential” and has identified 408 veins to date on its 135 square kilometres of licenses. The veins contain bastnaesite and monazite minerals.

The $2.5 million project, including processing plant and truck fleet, would process the run-of-mine ore at Kabezi, about 20 kilometres away. The concentrate would be exported either from Mombasa or Dar es Salaam.

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Iron Ore Price Surge to a New High

The Northern China iron ore import price of 62% Fe content ore jumped 1.6% to exchange hands for $76.10 per dry metric tonne according to data supplied by The Steel Index. It’s the highest price since early April and the steel-making raw material is now trading 43.6% up from its 2017 lows struck in June.

Iron ore’s latest rally comes after Shanghai rebar futures the world’s most traded steel contract jumped to the highest level since March 2013 on Thursday reaching $601 a tonne on Thursday.

 

Chinese traders are worried about a steel supply crunch as Beijing steps ups efforts to crack down on polluting plants. The country wants to cut output by as much as 50% during winter months.

In Hebei province, China’s key producing region, steelmakers have until September 1 to comply with stringent new emissions regulations or would be shut down. Some 120 million tonnes of low-quality steel capacity were shuttered during the first six month of the year.

Beijing’s policies to clean up and consolidate the domestic steel industry is  playing into the hands of iron ore exporting countries with low grade furnaces – particularly those that use scrap – being forced out of business. Authorities are also clamping down on pollution from sintering plants, a necessary extra step when using low grade ore to make steel.

A worry for the industry has been high stockpiles in China and inventories at the country’s ports remain near all-time highs dipping to 139.2 million tonnes last week compared to the record set June 23 at 141.5 million tonnes according to Steelhome data. 

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Gold Rally for the First Time in 2 Months

Gold is on its way to top $US1300 an ounce for the first time this year as investors shift into bullion to protect their wealth amid the heightening war of words between US President Donald Trump and North Korea.

The spot price of gold rose 0.6 per cent to a two-month high of $US1285.53 an ounce overnight and is currently fetching $US1286. The metal has risen 6 per cent from its early July low and is now 12 per cent higher year to date.

 

Overnight, US hedge fund manager Ray Dalio recommended, in a post on his Linkedin page, to shift assets into gold because “prospective risks are now rising and do not appear appropriately priced in” because of a backward look at risk, high corporate leveraging and because past risks have been low.

“When it comes to assessing political matters (especially global geopolitics like the North Korea matter), we are very humble,” Dalio wrote. “We know that we don’t have a unique insight that we’d choose to bet on.

"Most importantly, we aim to stay liquid, stay diversified, and not be overly exposed to any particular economic outcomes,” he added. “We like to hedge our bets, though we are never completely hedged. We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit, so if you don’t have 5-10 per cent of your assets in gold as a hedge, we’d suggest that you relook at this.

Separately Capital Economics’ Simona Gambarini overnight said the recent rise in geopolitical risk could lift the price of gold "beyond $US1350 an ounce”, which would be the first time it has topped that level since the UK Brexit referendum in mid 2016.

 

Any “surge” in the price of gold however would be seen by Gambarini as temporary. “We remain of the view that theglobal macroeconomic backdrop is not supportive of higher prices. And if the situation calms down, we would not be surprised to see the gold price retreat from its current level as investors’ focus returns to Fed tightening.”

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First Quantum Plans to Suspend its Nickle Mine Operation in Australia

First Quantum Mineral plans to suspend operations at its Ravensthorpe nickel mine in Western Australia at the beginning of next month due to persistently weak nickel prices, sending its shares lower.

The mine will be placed on care and maintenance, which is expected to take effect in early October.

 

According to the mining company, its decision is disappointing blaming continuing depressed nickel market conditions, over some years. Shares in First Quantum, which also produces copper, ended down 4.6% at $13.41 on the Toronto Stock Exchange.

Nickel prices, weighed down by a supply glut, are off by nearly two-thirds since early 2011, the year Ravensthorpe resumed operations after it had been shut down by its previous owner BHP Billiton Ltd in 2009, when nickel prices also dropped.

Vancouver-based First Quantum said the latest shutdown would cost an estimated $10 million. Subsequent annual maintenance is expected to cost around $5 million.

The permitting process for the Shoemaker Levy orebody at Ravensthorpe would continue along with regular reviews of market conditions for a potential restart of the mine. First Quantum bought Ravensthorpe from BHP in 2010 for $340 million.

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Hedge funds Becoming Bullish on Oil Prices as Investors Seen Signs of Re-Balancing

Hedge funds and other money managers are becoming bullish again about oil prices as investors conclude the market is showing clear signs of re-balancing. They raised their combined net long position across the five major futures and options contracts linked to petroleum prices by 135 million barrels in the week.

The combined weekly increase in net long positions across Brent, WTI, U.S. gasoline and U.S. heating oil was the largest since Dec. 6, immediately after OPEC announced it was cutting production.

 

For the first time in months, the increase in the net long position was driven primarily by the creation of new long positions rather than covering of old short ones. Hedge funds raised their combined long position across the five major contracts by 95 million barrels to 951 million barrels, the highest level since April 18.

Fund managers cut their combined short position across the five contracts by 40 million barrels to 239 million barrels, which was the lowest level mid-April. The same pattern of new long building and continued short covering was apparent across all the individual crude and fuel contracts.

Hedge funds raised their combined net long position in ICE Brent and NYMEX and ICE WTI by 99 million barrels to 649 million barrels. Long positions were raised by 70 million barrels while short positions were trimmed by 30 million, according to regulatory and exchange data.

Fund managers have boosted their net long position by more than 290 million barrels since the end of June to the highest level for more than three months. The fund now holds almost 4.5 long futures and options positions in Brent and WTI for every short position, up from a recent low of 1.95 at the end of June.

 

Fund managers have also built up a large net long position in U.S. gasoline, a smaller one in U.S. heating oil, and a record net long position in European gasoil.

The petroleum markets have seen an enormous shift from extreme pessimism at the end of June to fairly hearty bullishness at the start of August. The sentiment shift has helped lift benchmark Brent futures prices by almost $7 per barrel or 15 percent over the last six weeks.

 

There are some sound fundamental reasons for optimism, with signs oil stocks drawing faster than normal for the time of year and shale drilling leveling off in response to lower oil prices since the first quarter. And Saudi Arabia has pledged to cut its exports sharply in August to accelerate the draw down in global oil inventories and market rebalancing.

The net long position in the five major crude and fuels contracts, at 712 million barrels, is still much lower than in April, when it peaked at 850 million barrels, or February, when it hit a record 1,025 million barrels. But with so many short futures and options positions now covered, and many new longs established, it may prove tough to sustain the recent upward momentum in crude and product prices.

 

Crude prices are now almost back to the level at which shale producers could be tempted to start adding rigs again and hedging their output for next year by selling the calendar strip for 2018.

Hedge funds and banks have already been burned twice this year, bidding up prices, only to see shale firms sell into the resulting rally, add more drilling rigs and production, and send prices tumbling.

 

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Lucara to Consider a Partnership in Selling the 2nd Worlds Largest Diamond

Lucara Diamond, the company who unearthed the world’s second largest diamond has failed to sell it, is considering a partnership to sell the giant stone if a buyers is not found within the next six to eight weeks.

William Lamb the CEO of the company said the Vancouver-based miner has “one or two” options for an outright sale, but such bids have failed to materialize, starting with the first attempt at a sale last summer at a Sotheby’s auction.

 

Bidding for the now historic 1,109-carat “Lesedi La Rona,” which means “our light” in the Tswana language spoken in Botswana, stalled at around $61 million short of the expected $70 million.

The amount for a single buyer to pay is indeed daunting.

“Everybody on the call will most fully would know one or two wealthy people who, on the weekend, could go out and buy a Lamborghini at $250,000,“ Lamb said. "What the company is asking for, for the stone, is for a company to go out and spend the equivalent of 280 Lamborghinis.”

Lucara would probably have to cut the tennis-ball-sized diamond in order for it to sell. Discovered at Lucara’s Karowe mine in Botswana in November 2015, the only diamond larger is the 3,106.5-carat Cullinan, which was cut into 105 diamonds, including several British Crown Jewels.

The CEO recently said that another challenge to fetch what Lesedi La Rona is worth, is the fact that the polishing itself is risky.

The unsold diamond weighs heavily on the company’s shares, which are down more than 30% from late 2016.

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Global Steel Price Boosts Value of Western Australian Listed Companies

The global steel price increase has boosted the value of Western Australianbased listed companies, with the 2017 financial year closing at $152.6 billion, a 13.5% increase from the previous year.

The financial gains were driven by the increased global steel price, caused by both Chinese and US Government infrastructure development commitments that supported bulk commodity markets.

 

Despite some periodic turbulence, commodity markets showed strong growth across the board, with a more optimistic outlook from last year. The performance this year are more closely represents a re-balance of pricing as markets come to terms with uncertainty and volatility representing a new normal.

The demand for mining services often acts as a lead-indicator for the overall health of the energy and resources sector. This signals optimism for increased mining investment and activity over the coming year.

This year it is encouraging to see a number of top movers and shakers being service providers to the extractive industries. Strategic consolidations, capability diversification and the continued drive for innovation and technology-led solutions all played a role in advancing the market capitalization of the highest movers, underpinned by general commodity price recovery.

The Index also found that coal delivered the strongest result in the 2017 financial year, as government policy and poor weather impacted supply of both coking and thermal coal.

 

The top three movers in the WA Index top 20 in terms of market capitalisation growth were Monadelphous Group with an increased its market capitalisation by 88% from $699m to $1,313m followed by South32 surged by 71% from $8,199m to $14,002m and Fortescue Metals Group has increased 49% from $10,898m to $16,233m.

The WA Index also found that Coking coal finished the year 61.1% higher than June 2016 at $145.00 per tonne, despite volatility in the year and thermal coal finished the year 42.1% higher at $80.95 per tonne.

However, uranium struggled, with prices finishing 25.6% lower than the start of the year at $20.10/lb. The fall in price follows significant withdrawals from nuclear power generation in America and Europe, despite supply cuts initially increasing the price.

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World's Largest Physically Backed Gold Fund Dropped as Investors Dumped Bullion

SPDR Gold Trust holdings drop more than 7% in July, as investors dumped bullion for other assets like equities and led it to its biggest monthly decline since April 2013. Holdings in the exchange traded fund (ETF) dropped about 55 tonnes in July, leaving volumes at 791.88 tonnes of bullion worth about $32 billion.

Other factors hitting gold-backed ETFs include the rate hike by the U.S. Federal Reserve in June and the European Central Bank potentially tightening monetary policy later in the year. Gold prices are currently hovering near seven week highs, but non-yielding bullion may come under pressure if the Fed raises interest rates later in the year.

Wall Street's Dow Jones Industrial Average on Tuesday broke the 22,000 barrier for the first time in its 121 year history. The index has outperformed gold this year with an 11.4% gain compared to gold's roughly 10% rise.

Analyst are still positive on global growth this year and next year. Hence, there should not be too much support from safe-haven buying for gold until the end of 2018. While most of the outflows in July were concentrated in SPDR, overall holdings in gold ETFs, including COMEX Gold Trust, fell about 4% last month.

 

These kinds of outflows are quite surprising to see in an environment where gold has been benefiting from a weaker U.S. dollar and improved market sentiments.

However, any renewal of concerns about global financial markets or geopolitical stability could restore gold's appeal. The last few years show that sentiment among investors can change quickly. Gold ETFs posted massive inflows in H1-2016 as a result of financial market turmoil and political risks.

 

 

 

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Shale Producers Are Hedging Again

After OPEC and its allies agreed to cut production late last year, U.S. producers hedged in droves, turning the oil market’s structure upside down as they sold later contracts to lock in their output. Banks including Societe Generale SA said that this activity had stopped when prices entered a bear market in June. Now, producers are at it once again, adding to the specter of a rising supply outlook in the market. 

Demand for put options that producers use to lock in prices has jumped over the last two weeks. An indicator known as the skew that compares put option and call option prices has shot up for December 2018 Brent and WTI contracts, indicating that producers are guaranteeing sales for next year. 

 

There was also a 32% increase in the number of West Texas Intermediate contracts for June 2018 last month, PVM Oil Associates analyst Stephen Brennock wrote in an emailed report Wednesday. 

The improving price backdrop has provided U.S. producers with a timely opportunity to lock in selling prices for future production that will help safeguard the U.S. shale boom. As a result, WTI is unlikely to venture too far north from the $50 a barrel level. 

Demand for the contracts that producers use to guarantee price levels soared after 2018 West Texas Intermediate crude returned to $50 a barrel. At the same time a raft of trades were reported to U.S. regulators last week that showed some producers hedging at levels as low as $45 a barrel. 

Several large trades were reported to U.S. regulators last week that were also typical of producer hedging. Among those, one saw 4 million barrels of supply locked in at $45 a barrel.

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Rio Tinto Unearth the Largest Red Diamond in Australia's Argyle Mine

Rio Tinto’s Argyle mine, located in the remote East Kimberley region of Western Australia, produces enough gems to allow the company to host annual showcases of its rarest diamonds.

This year, the first exhibition took place at a Chelsea skyscraper in New York in front of a selected group of collectors and connoisseurs.

 

The Argyle Everglow, a 2.11 carat polished radiant cut diamond that was assessed by the Gemological Institute of America as a notable diamond with a grade of Fancy Red VS2.

According to a press release, in the 33-year history of the Argyle Pink Diamonds Tender -as the show is called- there have been less than 20 carats of Fancy Red certified diamonds sold.

The price of the Everglow, however, was not disclosed. Still, The New York Times reports that the record auction price for a fancy red diamond is $5 million, paid three years ago in Hong Kong.

In total, there were 58 diamonds in the 2017 Tender weighing a total of 49.39 carats. Among them, there were four Fancy Red diamonds, four Purplish Red diamonds, two Violet diamonds, and one Blue diamond.

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Newmont Mining Shares Increases 7.7% in Quarterly Profit

Newmont Mining Corp handily beat quarterly profit estimates as production improved, more than offsetting the impact of lower realized gold prices, lifting the miner's shares as much as 7.7 percent to a five-month high.

The company also raised the lower end of its full-year production forecast on better yield from its mines in North America and Africa.

 

Chief Executive Gary Goldberg said during the earnings call that the improved margins at its newest mines are helping to offset more mature assets and continue to fund the high margin projects to sustain future production.

Newmont, which kicks off earnings for major gold miners, now hopes to produce 5 million to 5.4 million ounces of gold this year, up from its previous forecast of 4.9 million to 5.4 million ounces.

Newmont's all in sustaining costs, a key benchmark, fell to $884 per ounce in the second quarter ended June 30 from $913 per ounce in the same period last year.

The company expects to complete expansions at its Northwest Exodus project in Nevada and Tanami project in Australia next year, Goldberg said. They have been expanding its operations since the start of the year as gold miners initiate new exploration projects after five years of lull marked by a drop in gold prices.

 

A couple of months ago, Newmont invested $109 million for a 19.9 percent stake in Buritica gold project in Colombia, owned by Continental Gold Inc. Gold production grew 13.3 percent to 1.4 million ounces in the reported quarter. 

Newmont sold the precious metal at $1,250 per ounce on an average in the quarter, lower than $1,257 per ounce a year earlier. The company's adjusted net income rose to $248 million, or 46 cents per share, from $155 million, or 30 cents a share, a year earlier.

 

 

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Oil Extends Gains as Saudi Pledges to Curb Export

Oil prices extended gains on Tuesday after Saudi Arabia pledged to curb exports from next month and OPEC called on several members to boost compliance with production cuts to help rein in global oversupply and tackle flagging prices.

Gains were also supported by a warning from Halliburton's executive chairman that the growth in North American rig count was showing signs of plateauing, clouding a boom in U.S. shale oil production.

 

London Brent crude for September delivery was up 30 cents, or 0.6 percent, at $48.90 a barrel by 0206 GMT after settling up 1.1 percent on Monday.

U.S. West Texas Intermediate (WTI) crude futures were up 31 cents, or 0.7 percent, at $46.65.

 

In a ministerial meeting in St. Petersburg on Monday, Saudi Energy Minister Khalid al-Falih said the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC partners were committed to extending their existing deal to cut output by 1.8 million barrels per day (bpd) beyond March 2018 if necessary.

The Saudi minister added that his country would limit crude oil exports at 6.6 million barrels per day in August, almost 1 million bpd below levels a year ago.

OPEC also agreed that Nigeria would join the deal by capping or even cutting its output from 1.8 million bpd, once it stabilizes at that level from 1.7 million bpd recently. Nigeria had been exempt from the output cuts.

Russian Energy Minister Alexander Novak said that an additional 200,000 barrels per day of oil could be removed from the market if compliance with a global deal to cut output was 100 percent. The compliance was 98 percent in June, the group said.

 

These meetings were aimed at saving face and diverting the market's attention away from Iraq's poor compliance, shale's resilience, and Libya's and Nigeria's markedly higher output," Britain's Barclays bank said.

U.S. commercial crude oil inventories likely fell by 3 million barrels last week, a preliminary poll showed on Monday ahead of the data by the Industry group the American Petroleum Institute later in the day.

 

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BHP to Commence Production of it's $2.5bn Copper Mine Expansion

BHP can go ahead with a $2.5 billion expansion of its Spence copper mine, in Chile’s Atacama desert, after the country’s environmental regulator (SEA) unanimously approved the project this week.

A decision on the plan, the second largest mining investment that was under evaluation in the country, won’t be taken until August.

 

Spence’s expansion contemplates the construction of a concentrator plant to increase production and extend the life of the deposit about 20 years. 

It also includes an $800 million separate investment in a desalination plant at Mejillones port, located about 60 km north of Antofagasta city.

It’s estimated that the Spence project will generate about 4,100 temporary jobs and 220 permanent positions, and would add about 200,000 tonnes of copper a year to the company's output in its first decade.

BHP, already the world's second-biggest listed copper miner, decided last year to raise its annual exploration spending by 29%, allocating nearly all its $900 million budget to finding new copper and oil deposits. The mining giant is committed to make of those two commodities the pillars of its future growth.

 

Analysts believe the red metal is well placed to benefit from the increasing development of battery-powered vehicles, as they use more copper than regular cars.

If and when electric cars are massively adopted, experts say it will require a considerable increase in copper supply, which can’t be met by simply expanding existing mines. The gap will have to be filled by new projects, which only can go ahead when metals prices get considerably higher than today’s $6,035 per tonne.

 

 

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Gold Price Increase As USD Weakens

Gold prices jumped Friday, boosted by increasing weakness in the dollar.

Futures for August delivery climbed 0.75 percent to $1,254.90 per ounce. The gains lifted the precious metal above its 50-day moving average a key technical indicator for the first time since June 15 on an intraday basis.

 

The metal was also on track for its biggest weekly gain since May.
Gold futures since late April with 50-day, 200-day moving average


Gold is range bound between $1,200 and $1,300 and right now we’re in the middle of that range, said Michael Shaoul, chairman and CEO of Marketfield Asset Management

 

I think gold can get to $1,300 and run out of gas, but if it breaks above, then things get interesting.


Gold miner stocks followed the metal higher, with the VanEck Vectors Gold Miners exchange-traded fund (GDX) advancing 0.4 percent.

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Oil Price Surge Above $46 as Demand Increases

Oil prices surge above $46 a barrel as optimism that demand will help shrink supplies outweighed an increase in U.S. rigs drilling for crude.

Futures were little changed in New York, after rising 5.2% last week. Stockpiles will drop at a faster pace worldwide this half of the year as demand rises and OPEC members comply better with an output-cut agreement.

 

While oil advanced last week, prices in New York are still below $50 a barrel on concerns expanded global supplies will offset output curbs by the Organization of Petroleum Exporting Countries and its allies as part of a deal to help re-balance the market.

The group’s output climbed last month to the highest this year as members exempt from the deal Nigeria and Libya pumped more and others slipped in delivering their pledged curbs.

West Texas Intermediate for August delivery was at $46.66 a barrel on the New York Mercantile Exchange, up 12 cents, at 11:37 a.m. in Seoul. Total volume traded was about 47% above the 100-day average. Prices gained $2.31 to $46.54 a barrel last week.

Brent for September settlement added 15 cents, or 0.3%, to $49.06 a barrel on the London-based ICE Futures Europe exchange. Prices climbed 4.7% last week. The global benchmark crude traded at a premium of $2.18 to WTI.

 

The number of active oil rigs in the U.S. rose to 765. It’s the second week of renewed growth after drillers snapped a 23-week stretch of advances at the end of June.

Shale explorers have been the driving force behind a surge in U.S. production, more than doubling the rig count from a low of 316 in May 2016.

 

 

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Uranium Price Forecast to Rise by 40% by the End of 2018

Uranium was the glaring exception amid a broad-based rally in metals and minerals in 2016. The price of U3O8 fell 41% in 2016 with the industry tracker UxC's broker average price hitting 12-year lows below $18 per pound in November.

After top supplier Kazakhstan announced in the second week of January that it's cutting output by 5.2 million pounds, equal to 3% of global production, the price rallied, hitting $26.75 a pound by mid-February.

 

But Japanese utility TEPCO’s declaration of force majeure on a key uranium delivery contract from Cameco Corp., the world's top listed uranium producer, dampened enthusiasm.

And news in April that the US dept of Energy is making cuts to the amount of uranium that it disperses into the market (as much as 1.1m pounds per year less) did little to buoy sentiment, not to mention bad news surrounding nuclear power including the first new reactor to be built in the UK in a generation and risks to the US industry.

Last week Russian state nuclear corporation Rosatom suspended its Mkuju River uranium project in Tanzania for at least three years due to depressed uranium market.

Spot uranium rose to $20.75 this week but remains technically in a bear market, trading down more than 20% from its February peak. Despite the current negativity analysts surveyed in July predict a steady increase in the price from today's levels rising by 40% by the end of next year and over $40 a pound in 2020.

 

 

 

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Australia to Buy Back $262 million of Shenhua's Mining Licence in NSW

Australia will buy back half of a coal exploration licence from China Shenhua Energy as pressure from farmers and environmentalists opposed to mining on prime agricultural land.

The NSW state government had agreed to pay $262 million to buy back 51.4% of Shenhua's exploration licence on the Liverpool Plains 400 kms northwest of Sydney.

 

The exploration licence for Shenhua's $1 billion Watermark mine, granted in 2008, sparked a public backlash and split Australia's conservative ruling coalition into pro-mining and pro-farming camps.

Development has been delayed by assessments and modifications in response to concerns raised by farmers, and mining has not yet begun. Shenhua was disappointed by the government's move and would have mined the area responsibly but added the buyback was an acceptable financial outcome.

Anti-mining activists vowed to continue campaigning for a complete ban on mining in the region, including a coal mine proposed by Korea Electric Power Corp (Kepco).

Kepco is facing renewed resistance from farmers after the state's planning department endorsed its project, saying the impact on water supplies was outweighed by the economic benefits a mine would bring.

 

Last year, New South Wales agreed to buy back BHP Billiton's licence for the Caroona coal mine on the Liverpool Plains for A$220 million, ending a decade-long fight by farmers to shut down the project.

 

 

 

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Gold Imports in India Spike Ahead New Sales Tax

Gold imports in India surged more than tripled from a year ago as retail demand jumped ahead of the new sales tax that prompted jewellers and bullion dealers to replenish stocks.

June gold imports climbed to an estimated 75 tonnes from 22.7 tonnes a year ago. For the first half of the year, imports rose to 514 tonnes, up 161% from a year ago.

 

The rush of buying by retail consumers will likely lead to lower July imports. That would put pressure on global gold prices that are already trading near their lowest level since mid March.

Demand was higher than normal in June as some consumers advanced buying to avoid paying higher tax. As part of a new nationwide sales tax regime, the goods and services tax on gold jumped to 3% from 1.2 percent previously.

Gold premiums in India jumped to $10 an ounce in the last week of June, the highest level in 7-½ months.

Imports would be significantly less in July compared to June. Right now demand is very weak due to monsoon. India’s gold imports in July could be less than 35 tonnes.

In July, gold demand usually remains weak in India due to fewer weddings and as farmers are busy sowing crops. Two-thirds of India’s gold demand comes from rural areas, where jewelry is a traditional store of wealth.

 

 

 

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Former Mining Traders will Launch a New Online Platform called Open Mineral

A team of former traders from Glencore will launch a new online trading platform called Open Mineral it will help connect miners with customers such as smelters and sign deals without the need of brokers.

The online marketplace will let miners put up tenders for their concentrate directly to end users. The platform will focus first on goldsilvercopperzinc and lead which represent a combined market worth about $50 billion.

 

Open Mineral will also provide trade services such as transportation, surveying, assaying and insurance. The company is now accepting registrations and the marketplace will go live in August.

Smelters and miners could potentially boost returns by millions of dollars by dealing directly in the concentrate market which is inefficient and opaque. 

Since annual concentrate deals for the year are already set, the new online tool will target spot and 2018 contracts, which are due to be negotiated before the end of the year.

Open Mineral is not the first attempt to take the trading of metals from the physical to the online world. Last month, the former chief executive officer of the London Metals Exchange launched an alternative electronic trading platform for metals.

 

 

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CEFC will Invest $20 Million on Lithium Mine to Support Power Stability in Australia

Clean Energy Finance Corporation will invest on a lithium mine to support  power stability in Australia as the market increasingly dependent on variable wind and solar power.

The government will make a $20 million investment as part of a $132 million secured bond issued by an offshoot of Pilbara Minerals, an ASX listed company that hopes to extract lithium and supply the market for lithium ion battery storage products for electricity and electric vehicles.

 

The lithium concentrate supplies to be produced by this project will help build Australia’s capacity to supply much needed resources for the clean energy technologies that are set to play a vital role in increasing the use of renewable in our future energy mix.

The move comes as the government looks to prove it is being technology neutral in its efforts to beef up power supply in tackling over whether that should include subsidies for coal fired power.

The proceeds of the bond issue together with $80 million raised in a share sale will underpin the $234 million required for the project's first stage of development. Construction is expected to start in early 2018.

The government also awarded a $2 million grant to Australian researchers developing ultra thin, screen printed batteries for use in both large scale energy storage and in cheap, portable devices.

 

 

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BHP $20 Billion Investment Mistake in Shale

BHP entered the shale business at the height of the fracking boom in 2011 and invested billions more developing the operations. The fall in oil prices since then has led to pre-tax writedowns of about $13 billion on the business. 

Activist shareholder and hedge fund Elliott Management, holding 4.1% of BHP's London-listed shares, has been trying to gain support from other shareholders to persuade BHP to sell the shale oil and gas business.

BHP Chairman Jac Nasser said that BHP's $20 billion investment in U.S. shale oil and gas six years ago was, in hindsight, a mistake. 

New York based Elliott has directed a barrage of criticism at the global miner since releasing a list of changes in April it wants the company to implement.

Its list includes an exit from shale, removal of BHP's dual London and Australian stock listings and greater emphasis on shareholder returns. Nasser would not comment on Elliott's proposal. But he defended BHP's performance, saying the company's shareholder returns were up 486% since BHP merged with Billiton Plc in 2001.

 

According to BHP Chief Executive Andrew Mackenzie that the company was considering divesting some shale acreage and believed that the assets were well placed for the future.

Australian wealth management group Escala and fund Tribeca Investment Partners have also campaigned for a revamp at BHP, calling for board changes and reviews of the energy operations.

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Commodities Weekly Outlook

Gold prices rose to one-week highs on Friday, boosted by the weaker dollar which fell amid persistent fears over prospects for further U.S. interest rate hikes this year.

Gold for August delivery closed up 0.71% at $1,258.31 on the Comex division of the New York Mercantile Exchange, after rising as high as $1,260.00 earlier.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.37% at 96.98 late Friday, posting its largest one day decline in three weeks.

Gold and the dollar typically move in opposite directions, which means if the dollar goes down, gold futures, which are denominated in the U.S. currency, will rise.

The precious metal is also highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar.

 

Silver gained 1.13%% to $16.69 a troy ounce late Friday. While copper rose 1% to $2.624 a pound, platinum added 0.9% to $929.25 and palladium fell 3.1% to $853.23 an ounce.

Investors will be closely watching remarks this week by Fed Chair Janet Yellen on Tuesday for fresh indications on the timing of further rate hikes and signals on plans to trim the Fed’s balance sheet.

Market watchers will also be awaiting Friday’s euro zone inflation data and speeches by central bank heads at the ECB’s forum on central banking.

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Rio Tinto declined Glencore’s Bid to Buy its Thermal Coal Asset

Rio Tinto has rejected a bid from FTSE 100 rival Glencore to buy its coal mines in Australia, opting to stick with its initial buyer, Chinese-backed Yancoal.

The Anglo Australian group said that Yancoal was the preferred bidder because unlike Glencore it had already achieved regulatory clearances for the deal, meaning it could complete sooner.

Rio said it had received “additional information and confirmations” about how Yancoal would fund the acquisition, amid speculation that the company had yet to raise financing. Australia-listed Yancoal is majority owned by China’s Yanzhou, which is in turn owned by state-backed entities.  

 

Yancoal has revised its payment terms so that it will now make one single payment for the Coal & Allied business in New South Wales instead of a number of deferred payments, Rio said. They also revealed it had financial backing from Yankuang Group, its parent company's biggest shareholder, although this has yet to be approved by Yancoal's independent directors.

A bidding war broke out over the coal mines earlier this month when Glencore revealed it had tabled a $2.55bn offer for the assets, $100m more than the initial bid by Yancoal, which was announced in January.

 

Rio is backing out of coal mining to focus on iron ore and steel while China is looking to shore up its energy supply. Although the country is trying to cut back pollution from coal-fired plants, the commodity is expected to remain in long-term demand across Asia for the next two decades prompting Glencore’s interest in gatecrashing the deal.

In its offer earlier this month, Switzerland-based Glencore pointed out it already had mines adjacent to Rio’s operations in the Hunter Valley, offering potential savings if the two businesses were combined. It also has regulatory approval from Japan, which imports the bulk of the area’s coal.

 

Yancoal’s offer was the most attractive because it removes the deferred payment structure, can meet the timeline we have set for the transaction and has given us certainty regarding the outstanding regulatory approvals required.

Because Rio Tinto is 10pc owned by Chinalco, which is also backed by the Chinese government, the sale will count as a related party transaction. As such the deal must go before a vote by Rio Tinto shareholders in the UK and Australia next week.  

 

 

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Hedge funds Reducing Positions on Crude oil as Production Grows

Hedge funds and other money managers cut their combined net long position in the three major futures and options contracts linked to Brent and WTI by 51 million barrels.

According to data published by regulators and exchanges, fund managers cut their net long position for the second week running by a cumulative total of 91 million barrels.

 

Hedge funds have discounted the fact oil prices are already under than $50 per barrel and reassurances from OPEC ministers that global oil stocks will draw in the second half of the year.

Instead they have focused on the continued rise in the number of rigs drilling for oil in the United States and signs gasoline and diesel demand may not be growing fast enough to absorb the record fuel being produced by U.S. refineries.

The global oil stocks will draw down in the third quarter of 2017 as a result of OPEC’s output cuts. But global stocks are expected to rise again through 2018 as OPEC compliance deteriorates and supply from non-OPEC sources increases.

Bearish sentiment among oil traders has triggered a wave of short selling, with hedge funds adding 45 million barrels of extra short positions in crude.

 

There are signs hedge funds may have embarked on the eighth cycle of short selling in WTI since the start of 2015, though it is still too early to tell.

The only supportive factor for oil prices in the short term is that so many short positions have been established and there are relatively few long positions left to liquidate.

Conditions are in place for an eventual short-covering rally but the rebound may not come until there are clear signs global stocks are falling.

 

 

 

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Gold Moves Higher after Fed Raises Interest Rate

Gold broke a six-session losing streak, August gold slid to $1,272.70 after settling up $1,275.90 an ounce as consumer data was soft, retail sales and CPI posted declines of 0.3% and 0.1%, respectively. 

The Federal Reserve announces its benchmark rate, which is expected to increase by 25 basis points to 1.25 percent. The Fed is widely expected to raise interest rates by a quarter point to 1.25%, but there's still plenty of anticipation, as analysts will be focusing on the language in the rate statement and as well as the Fed's economic projections. 

The Fed rate statement will be cautious in tone, and dovish regarding additional rate hikes. A dovish message could pour cold water on a rate hike in September and boost gold prices. 

Earlier in the year, three rate hikes in 2017 seemed almost a given, but currently, the odds of a September move are just 28%. There are two key items which could affect gold prices. First, the Fed Economic Projections will detail forecasts of inflation, growth and unemployment, and most importantly, the rate hike path. 

 

With the US economy performing better in the second quarter, there's a strong likelihood that the Fed will not moderate its rate hike projections,which is good news for the dollar. 

Secondly, the markets will be looking for details regarding its plan to lower the $4.2 trillion balance sheet. If the Fed outlines a plan to reduce its holding in H2, the dollar could respond positively. 

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Oil Prices Plunged Below $46 As Stockpile Surge

Crude Oil prices plunged below $46 per barrel and is poised to test target support near an upward sloping trend line that comes in near $44. Resistance is seen near the 10 day moving average at 48.56.  

Additional resistance is seen near the 200 day moving average at 49.59. Prices continue to form a topping pattern, which include a modified head and shoulder reversal pattern and a break of the neckline level at $44 could lead to a test of the August 2016 lows at 39.60.

Momentum has turned negative as the MACD index generated a crossover sell signal. This occurs as the spread crosses below the 9 day exponential moving average of the spread. 

The index moved from positive to negative territory confirming the sell signal. The MACD histogram is printing in the red with a downward sloping trajectory which foreshadows lower prices.

 

U.S. stockpiles puts up another obstacle for OPEC and other petroleum exporting countries, which have cut back their output in order to shrink global inventories by about 300 million barrels to the five-year average.

The imports of oil rose by 356,000 barrels a day, while exports dropped by 746,000 barrels a day.

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Gold Investing Sentiment Jumped to a New High

GOLD investing sentiment jumped to a new 2017 high in May but only with those existing precious metals investors. The balance of private investors buying gold over those who chose to sell rose at its fastest pace in more than two years. 

Despite gold's strong rally so far in June, equities and other risk assets remain the focus for most private investors. Buying gold as investment insurance is a long way from a crowded trade right now. The number of private individuals coming to the precious metals market for the first time stayed weak, slipping for the second month to its lowest level since gold investing prices bottomed at 6-year lows in December 2015.

This 'bear market' lack of new interest comes after the strongest run of gold investing demand in 5 years. It also contrasts with the underlying trend in gold prices. 

Retreating from April's geopolitical spike, last month's daily average gold price slipped 1.6% against the US Dollar and gold dropped 4.6% and 3.8% versus the Euro and Pound respectively. These discounts saw the number of investors starting or adding to their gold holdings rise over 28% from April, reaching its largest size since December 2016. 

The number of sellers meantime fell by one-third. It pushes gold investor a unique measure of sentiment based on actual trading, up to its highest level since December, reaching 55.3 from April's level of 52.1 and rising at its fastest pace since February 2015. 

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Osisko Shares Bounce after Acquiring Orion Mine’s Assets for $1.13 Billion

Osisko Gold shares bounce more than 10 percent after they decided to acquire a precious metals portfolio from Orion Mine Finance Group for $1.13 billion. The acquisition will result in Osisko holding a total of 131 royalties and streams, including 16 revenue-generating assets.

The company was trading up 9.7% to $15.80 in Toronto and almost 9.9% higher in New York to $11.72 on the news of the acquisition.

Osisko, created in June 2014 following the acquisition of Osisko Mining by Agnico Eagle Mines and Yamana Gold, said it will pay Orion $675-million in cash and the remaining $450-million in company shares for the assets.

The transaction gives the Canadian company a 9.6% diamond stream on the Renard diamond mine and a 4% gold and silver stream on the Brucejack gold and silver mine, in addition to a 100% silver stream on the Mantos Blancos copper mine in Chile.

Osisko’s flagship, Canada’s largest producing gold mine will continue to be the 5% net smelter return royalty on the Malartic mine.

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Production of Coal India Declines for the Second Month

Coal India Ltd.  production decline for the second month. Output fell 4.3 percent from a year earlier to 40.74 million metric tons, the lowest in three years for the month of May. 

Kolkata-based Coal India will focus on liquidating stockpiles for a few months. The company will be counting on higher demand from power plants, its biggest customers, to start growing.

Production will remain under pressure for some time because of subdued demand and high inventory. A recovery is possible if power plants start restocking after the monsoons.

Inventories at Coal India rose 19 percent during the year ended March 31 to 68.6 million metric tons. The company is targeting to bring it below 40 million tons.

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CRUDE Stalling at $50 Below, GOLD Push Higher while SILVER Break 50% Fibonacci Retracement

Crude oil has collapsed after the bounce following the short-squeeze move towards $52. Support is given at a distance 43.76. The technical structure suggests further strengthening.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. Strong support lies at 24.82 while resistance can now be found at 55.24 

 

Gold is pushing higher within uptrend channel. Hourly support is located at 1246. Stronger support is given at 1195. Expected to show further upside pressures.

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 is necessary ton confirm it, A major support can be found at 1045.

 

Silver increases. Strong support is given at 15.63. Closest support is given at 16.20. Key resistance is given at a distance at 19.00. Expected to push towards 61.8% Fibonacci retracement around 17.75.

In the long-term, the death cross indicates that further downsides are very likely. Resistance is located at 25.11. Strong support can be found at 11.75.

 

 

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WA Proposed an Iron Ore Levy to be Paid Advance

WA proposed an Iron Ore Levy to be paid in advance under the potential plan that would see the two biggest miners in the country to pay out an iron ore levy early in a one-off lump sum.

Instead of increasing the miners’ rental payments levied on iron ore, currently fixed at 25 Australian cents a ton, the companies would be asked to pay them out in advance.

 

The opposition National Party last week said in parliament that such a plan could raise as much as A$4 billion for the state.

Western Australia’s Labor administration, which ousted a Liberal National coalition in March, faces a daunting task in turning around its economy. The government has previously said that erasing a debt mountain of more than A$30 billion will take decades.

 

The plan would involve a lengthy process of negotiations. It would require agreement from both the state and the companies, and the federal government would also have to agree to the payment being exempt from the goods and services tax distribution system.

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Crude Oil Plummeted Sharply

 

Crude oil prices plummeted to below $50 a barrel after an extension to a global output agreement disappointed investors looking for more.

The Organization of Petroleum Exporting Countries (OPEC) reportedly have agreed on a nine-month extension to a production cut agreement, which was set to expire at the end of June.

 

Stocks in Tokyo and Sydney opened lower, with energy producers dropping the most. Oil held losses after falling the most in three weeks as OPEC stuck to the most predictable outcome in its plans to limit production.

Commodity currencies maintained losses against the dollar. The S&P 500 Index reached a fresh record on Thursday while the U.S. currency strengthened as retailer results boosted confidence in the American consumers’ ability to buoy economic growth.

 

Global equities are on course for the best week since April, trading at a record high after six weeks of gains, as investors bet global economic growth can withstand higher U.S. interest rates as soon as next month.

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