The most valuable mining brands

Australian miner BHP has unseated Glencore as the most valuable brand in mining, according to research from Brand Finance.

BHP “struck gold” with its major 2017 re-branding exercise, a report on the research explained, with the company’s brand value rising by 29 per cent to $US5.1 billion, pushing it well above Glencore ($US3.7 billion) on the Brand Finance Mining, Iron & Steel 25 league table.

In May 2017, BHP launched the “Think Big” campaign, which involved rebranding from BHP Billiton to BHP. The rebranding not only increased BHP’s brand value in Brand Finance’s latest research, but also bolstered its Brand Strength Index (BSI) score from 73.2 to 74.3.

The brand value is equal to a net economic benefit that a brand owner would achieve by licensing the brand, whereas brand strength is used to determine what proportion of a business’s revenue is contributed by the brand, according to Brand Finance.

Glencore’s brand value dropped by 11 per cent in 2017 due to the significant fall in brand strength, from 62.9 to 55.3, caused in part by its association with the Paradise Papers released during November.

Rio Tinto improved two spots to fourth on the league table, behind South Korea’s Posco, with a 25.4 per cent increase in brand value to $US3.1 billion. Brand Finance said Rio enjoyed strong brand value growth alongside higher iron ore prices driven by a lift in demand in China.

Brand Finance chief executive David Haigh said after the 2014 metal price crisis, caused by a drop in demand for raw materials in China, the industry was once again being shaped by the Chinese market.

“The country’s demand for higher-quality iron ore imports is benefiting the industry’s largest brands such as BHP and Rio Tinto,” Haigh said.

“Challenger brands will need to define their competitive advantage to capture a greater proportion of the ever-growing Chinese market.”

The world’s most valuable mining, iron and steel brands (source: Brand Finance):

2018 Rank Brand name Country of HQ Brand Valuation (USD, billions) 2017 Rank Movement
1 BHP Australia 5.1 2
2 Glencore Switzerland 3.7 1
3 Posco South Korea 3.6 3 =
4 Rio Tinto United Kingdom 3.1 6
5 ArcelorMittal Luxembourg 2.9 4
6 China Shenhua China 2.8 9
7 Nippon Steel Japan 2.3 8
8 Vale Brazil 2.1 7
9 Thyssenkrupp Germany 2.0 5
10 Baowu Steel China 2.0 14

Gupta secures SA iron ore approvals, could create EV hub

Two new iron ore mine leases have been granted in South Australia, in a boost to the local Whyalla steelworks. Sanjeev Gupta, the British industrialist and head of SIMEC Mining, has gained approval for two mines, Iron Sultan and Iron Warrior, which between them will support 56 permanent workers and 130 contractors.

Iron Sultan will create hematite iron ore suitable for use in the creation of magnetite at the Whyalla Plant that will help to lower steel costs for Gupta-owned GFG Alliance, while Iron Warrior is expected to export up to 1.5 million tonnes (Mt) of iron ore per annum.

Construction on both mines is expected to begin in early March. According to South Australia’s Mineral Resources Minister Tom Koutsantonis, the approvals demonstrated “the commitment of the new owner to develop its South Australian iron ore assets and create a more sustainable steelmaking business”.

The leases are the latest signs of GFG Alliance’s aggressive Australian expansion; earlier this month, SIMEC acquired the Tahoor mine in New South Wales from Glencore, and in September last yearcompleted the purchase of Arrium Group of Companies from KordaMentha Restructuring as part of GFG’s plans for vertical integration.

Perhaps most notable is Gupta’s recent interest in the Holden car plant in Elizabeth, SA, which closed down in October last year; the GFG head is a noted proponent of electric vehicle technology. Together, with GFG’s other recent purchases, the purchase of the plant could lead to the creation of a South Australian EV production hub.

“We are incredibly excited and supportive of the GFG Alliance’s bid and subsequent plans to ensure the continuation of our very proud history of automotive excellence and innovation in South Australia,” said Koutsantonis in a letter last week regarding Gupta’s potential purchase of the former GM Motors plant.

“We believe that the GFG Alliance’s plans would put South Australia at the forefront of the inevitable transition of the Australian market to electric vehicles and ask that all due consideration be given to their bid and the potentially significant benefits to the automotive industry and broader community in South Australia.”

Whyalla tense as Arrium future remains uncertain

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The uncertain future of the Whyalla’s main employer, the Arrium steelworks, continues to trouble the city, with a significant capital injection needed to make the plant competitive again.

The ABC’s 7.30 reported last night that, according to unnamed business leaders, retail spending was down as much as 50 per cent.

Thousands of workers are uncertain if the plant will remain open. One steelworks employee, Steve Smith, told 7.30 that employees were told that if they did not accept a 10 per cent pay cut, the site would be shut by Christmas.

Mark Mentha of KordaMentha, the administrators of the Arrium group since April, said a $300 million investment was required to make the steelworks competitive internationally.

“A new bidder will have ideas and initiatives that they’ll be able to take to the marketplace,” said Mentha.

“I’m sure if a government can see that and can see that we can be competitive on a global stage, then I’m sure the support will follow.”

NXT leader, South Australian senator Nick Xenophon, mentioned the need for an urgent capital injection of $250 million at the site, as well as changes to procurement and anti-dupming laws.

Arrium, which collapsed owing over $4 billion, in in the process of being sold off in two parts: Moly-Cop (covering its profitable mining consumables business) and the remained (Arrium Australia, including the steelworks).

The steelworks was loss-making at the time of administration, and would be the least appealing asset for any buyer of Arrium Australia.

KordaMentha expects the restructure and sale to be complete by the year’s end.

Read more at http://www.ferret.com.au/articles/news/whyalla-tense-as-arrium-future-remains-uncertain-n2525874#VQJMMvdmuewD1veH.99

Tenova to help develop Ferrobamba Aymaraes iron ore plants in Peru

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Ferrobamba has signed a cooperation agreement with Tenova to develop its iron ore mine in the Aymaraes region of Peru. The company has chosen Tenova HYL Micro Module technology in order to oversee the technological design and provide the equipment to develop and build a 500,000 t/y pelletisation plant and a 250,000 t/y DRI high carbon DRI plant. ‘‘The Tenova HYL Micro Module will allow our company to add significant value to our iron ore deposit in Aymaraes, producing high carbon DRI with the proven ZR (zero reformer) technology used since 2010 in the Emirate steel,”stated Alfonso Navarro, CEO of Ferrobamba.

He continues: “Micro Module uses the same ZR technology applied in Nucor’s Louisiana plant, but is one 10th of the size and allows junior mining companies like ours to enter the DRI production market with a limited capital investment” stated Alfonso Navarro, CEO of Ferrobamba. “Our company will be in a position to produce a premium quality DRI that is not currently available in the region”. In fact, Ferrobamba’s Aymares Project is potentially one of the highest quality, lowest cost iron ore projects in the Americas with a significant resource upside potential of 3,400 Mt of iron ore. Iron ores will be first crushed and pelletised and then processed to direct reduction (DR) grade pellets. These pellets are fed into a Tenova HYL ZR Micro Module DRI plant where they are reduced to metallic iron. The DRI produced is the highest quality available with high carbon content (around 4%) and can easily substitute pig iron or high quality scrap for use in the electric steel making operation, to produce high grade steel.

“The Micro Module DR Plant is a proven technology that allow for High Carbon DRI production with a simple and compact design providing several benefits, such as low maintenance costs, minimum manpower requirements, more affordable CAPEX, and low OPEX. Moreover, the Micro Module, as any other ENERGIRON DR Plant, complies with the strictest environmental regulations. It has been permitted twice already in the US, as well in other regions of the world” confirmed Angelo Manenti, VP of North America Business development for Tenova.

SA state budget released: major focus on resource sector

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The South Australian Chamber of Mines and Energy (SACOME) has welcomed the South Australian state budget’s major priority on the resources sector.

Treasurer and mines minister Tom Koutsantonis reiterated the importance of the resources sector in SA as the 2014/15 figures showed the minerals and petroleum sector contributed $6.38 billion to the state.

SACOME chief executive Jason Kuchel said, “It is important to remember the value of our resources sector and what it does for not only our cities, but the regional hubs of our state. Regional towns near mining operations rely on those projects to stimulate life into their economies.”

SACOME welcomed the government’s decision to pay the co-produced levy on water to the state’s Arid Lands Board without seeking remuneration of the contribution from the resources sector.

“Our position is that this levy should be abolished all together, as it is water that would not ordinarily be used by other industries or private users, and no other jurisdiction globally charges for co-produced water,” Kuchel said.

Before the budget announcement, $50 million had also been promised to Whyalla Steelworks over two years for technologies or upgrades.

“These steps are critical for the regional economy and employment in the town. Thousands of people will, and already are, affected by this, so it is good to see the state government being proactive,” Kuchel added.

The budget allocated $3.6 million to collaborate with the community and develop an informed response to the Final Report of the Nuclear Fuel Cycle Royal Commission.

A further $500,000 was given for a detailed assessment of the increased electricity connections between South Australia and the National Electricity Market (NEM) which Kuchel said was “critical to ensuring security and reliability of supply to businesses in SA”.

SACOME was also provided $400,000 over two years for the employment of an industry connections manager – to enable a closer relationship between industry and service providers; sponsorship of the South Australian Mines Emergency Response Competition; a safety summit to be conducted in 2016/17; and for the ongoing creation of an annual innovation summit to take place on September 23, 2016.

Other initiatives provided by the state budget include extending the tax rebate on small business payroll for four more years; the implementation of a Magnetite Strategy which aims to identify initiatives to increase the economic benefits of SA’s magnetite deposits; and amendments to be considered for the Petroleum and Geothermal Energy Act.

In other states, the NSW budget saw a drop in coal royalties’ contribution, due to weak coal prices and slow growth in exports; this came after the QLD budget committed not to increase royalties yet neglected supporting initiatives for exploration.

Arrium sale expected to be complete by year’s end

Image: Reuters

Image: Reuters

Steel and iron ore business Arrium will be on the market in late-July and most of the restructure and sale is expected to be completed by the end of the year, says the company’s administrators.

AAP and others report that administrators KordaMentha have presented a proposal to state and federal governments for co-investment in Arrium’s loss-making Whyalla steelworks.

SA premier Jay Weatherill said any co-investment strategy to return the mill to viability could amount to hundreds of millions of dollars, reports The Advertiser. It should not be used to pump the company up for sale, he said.

Assistance would be discussed with the federal government and opposition in the coming days.

“But given that both parties are now in caretaker mode, it will require a bipartisan response and we expect to have our position finalised soon,” ABC’sPM reports him as saying.

Upgrades at the Whyalla site are badly needed, said the administrator.

“The mill has been under-invested in for some period of time,” Mark Metha of KordaMentha told the ABC.

“The capex [capital expenditure] and maintenance on the plant has probably been about 40 per cent of depreciation so it’s been in decline for a long period of time. I think most people understand that.”

Baillieu Hoist chief economist Darryl Gobbett said the company was likely to be carved up and sold, and it was vital the steelmaking component stay Australian-owned.

“Strategically we need this capability, but we need to bring Arrium’s offerings up the value chain and that will require public sector money,” he told The Advertiser.

The Arrium group of companies went into voluntary administration in April. Its debts total more than $4 billion.

Keeping Whyalla open essential to Arrium survival, says administrator

r390_54_1013_842_w1200_h678_fmaxA first meeting of Arrium’s creditors is being held today, with the iron and steel business’s administrator saying the future hinges on the Whyalla’s steelworks.

Mark Mentha of insolvency firm KordaMentha said most of the company, which owes around $4 billion, is in good shape, but was exposed to the survival of Whyalla. Arrium, which entered voluntary administration this month, has said it was undertaking studies on the effects of mothballing the loss-making plant.

Turning the steel factory around was vital to both Arrium and the community, Mentha told the ABC.

It’s the front end of the business where we dig the ore out of the ground and feed that into the mill starts the whole steel process,” he told AM.

In Whyalla, in particular, many of the businesses in that town are in some way connected to the steel works. So it’s a business that is very much interwoven into the fabric of that community and the state of South Australia.

The creditors meeting is being held in Sydney and streamed to workers in SA.

Meanwhile, the Australian Workers Union has called on the federal government to consider co-investment in the steel facility, with modernising to supply the upcoming offshore patrol vessels a “golden opportunity” for Arrium.

In the case that Australian steelmaking operations, like the Whyalla steelworks, would require an upgrade to manufacture the grade of steel required, the Government should look to enter into a co-investment arrangement,” AWU national secretary Scott McDine told The Advertiser.

Arrium enters voluntary administration

arrium1-300x270Steel and iron ore business Arrium announced this morning that it has appointed Grant Thornton as administrators.

“After considering the available alternatives, in the current circumstances it has become clear to the board of Arrium that it has, unfortunately, been left with no option than to place the relevant companies into voluntary administration in order to protect the interests of stakeholders,” it said in a statement to the ASX.

The ABC reports that Arrium owes its bankers $2.8 billion, trade creditors $1 billion and employees $500 million in entitlements.

Arrium, which split from BHP Billiton in 2000 as OneSteel, employs 7,000 in Australia, and over 1,000 at its Whyalla steelworks.

The fate of the steelworks has been in question for some time. Arrium announced in February that it was considering putting the plant and the company’s iron ore operations in care and maintenance.

Speculation about the company’s future intensified earlier this week when Arrium’s lending syndicate rejected a recapitalisation plan from vulture fund GSO Capital. This would’ve seen lenders lose 50 cents in the dollar.

It borrowed heavily to expand, buying up iron ore mines near the ore market’s peak

The management has been blamed for the company’s situation, including by industry minister Christopher Pyne.

“If there is anybody that needs to look at themselves, it’s the Arrium management, not the banks,” Business Spectator reports him as saying.

“Arrium has a $2bn debt. That is a problem for Arrium, incurred by Arrium management. It is no fault of the workers of Whyalla and it’s no fault of the state or commonwealth governments.”

Expert: impact of Whyalla Arrium closure would be worse than Holden shutdown

1455666281558_1The closure of Arrium’s loss-making Whyalla steelworks would have a greater impact on its community than the closure of Holden’s Elizabeth factory next year would, according to Professor John Spoehr.

The academic from Flinders University’s Business School told the ABC that the federal and state governments should formulate an assistance package for the company. 1,100 are employed at the steelworks and a tenth of the workforce in Whyalla – population 22,000 – work at Arrium.

“It’s important that we explore every possible option for keeping the plant in operation in the years to come,” Professor Spoehr told the ABC.

An estimated 4,000 jobs would be at risk due to the factory’s mothballing, which is being examined by the company. Studies on this are due to finish in April, as announced when the company released its half-year profit results last month. A steelworks shutdown would see many in the community relocate.

“It would have a devastating impact on the local economy, because it’s such a significant employer, and in some ways it would have a more detrimental impact than the closure of Holden is going to have in Adelaide, because it represents a much larger proportion of total employers in the area,” said Professor Spoehr.