CEMENT GIANTS CLASH OVER MERGER TERMS

Global construction materials giants Lafarge and Holcim are in talks to renegotiate the terms of a proposed merger that was slated to create the world’s largest cement company.

Almost a year after the merger was first announced, Swiss company Holcim has rejected the terms the two parties initially agreed upon.

According to a statement issued by the company, the Holcim board of directors “has concluded that the combination agreement can no longer be pursued in its present form, and has proposed to enter into negotiations in good faith around the exchange ratio and governance issues”.

The merger initially involved a one-for-one share exchange ratio. However, multiple media sources indicated that Holcim’s shareholders no longer felt this was adequate, given France-based Lafarge’s weak performance for the year ended 31 December, 2014.

It was said that the considerable divergence between the two companies’ valuations was partly due to the Swiss National Bank’s decision to remove an exchange cap in mid-January that caused the value of the Swiss franc to soar to record highs.

Reports indicated that Lafarge’s 2014 financial results had also caused Holcim’s board to question Lafarge CEO Bruno Lafont’s ability to lead the combined LafargeHolcim entity as per the original merger agreement.

Lafarge responded with its own media release, which stated that it was “willing to explore the possibility of a revision of the parity, in line with recent market conditions, but it will not accept any other modification of the terms of the existing agreements”.

Despite this, a Reuters report cited sources familiar with the matter as saying the two parties were discussing new leadership for the new company, which would position Lafont in a “lesser role”.

Quarry approached both Holcim and Lafarge for comment on the matter but neither had responded by the time of publication.

Update – 21 March 2015
After hastily convened talks, The Wall Street Journal and Reuters have reported that the two companies have agreed to new terms, which will see Lafont appointed as co-chairman of LafargeHolcim. Holcim’s current chairman Wolfgang Reitzle will be the other co-chairman.

GEMCO sees ore spill during cyclone, EPA says

GEMCO-sees-ore-spill-during-cyclone-EPA-says-660143-l_300BHP Billiton’s GEMCO operation has reportedly suffered four uncontrolled manganese spills following Cyclone Lam, the Northern Territory EPA says.

The miner reported four manganese ore discharges at the site due to heavy rains caused by Cyclone Lam, the ABC reports.

The cyclone hit the Northern Territory Coast as a category four, late last month, passing over GEMCO, the Ranger uranium mine, and Rio Tinto’s Gove alumina site.

According to the EPA the rains hit the stockpile, washing out a retaining wall, which allowed the manganese to discharge into the sea.

“The discharge occurred during a period [of] very high rainfall during a cyclone,” NT EPA head Bill Freeland said.

“The circumstances of that we are still investigating.”

He went on to say that discharge poses no environmental concern.

“This thing gave way during heavy rainfall repeatedly, the things that came out were manganese concentrate, which is manganese dioxide. It’s pretty insoluble and sank to the bottom,” he said.

This is not the first time the mine has suffered an accidental spill.

The miner accidentally dumped two tonnes of manganese iron ore into the sea at its port facility in 2010.

At the time, NT Resources Minister Kon Vatskalis stated: “To their credit GEMCO immediately reacted and they put a container under the conveyor belt and also dredged the area where the manganese was dumped into the sea.”

However he did voice disappointment the incident was not reported for nearly a week.

Regarding the most recent spill, Freeland said investigations are ongoing.

“You’ve got be careful about what you do. You can’t just say ‘you’ve been negligent or terrible or anything like that’,” he said.

“You’ve got to really investigate and find out what happened.”

Freeland went on to applaud GEMCO’s quick reporting of the incident.

Under their existing licensing arrangements, they have to notify us of any untoward thing, any incident, anything contrary to the license … and that’s what happened,” Dr Freeland said.

“They’re dutiful people and they provided the information we looked for.”

GEMCO is not set to remain a BHP company for much longer, having been flagged to be spun out in the upcoming demerger, and placed in the new entity South32.

BHP has been contacted for further comment.

REWARD PROGRAM EXTENDED FOR EXCAVATOR, LOADER CUSTOMERS

QN-34-HitachiAn equipment supplier program that provides additional benefits with all purchases of wheel loaders and excavators has been extended.
The ChoicePlus program is being offered by Hitachi Construction Machinery Australia (HCA), the exclusive Australian distributor of Hitachi, Bell and John Deere equipment.

Under the program, any customer that purchases selected excavators or wheel loaders from the Hitachi and John Deere range will be allowed to choose a reward – each worth thousands of dollars.

The reward options include 12 months of free servicing, a free four-year powertrain warranty, reduced finance of 3.99 per cent for up to five years, and a trip to Hitachi’s factory in Japan, among others.

The program was originally launched in September 2014 and was due to close on 31 December, 2014, but has now been extended until 31 March, 2015.

HCA’s sales director for construction, forestry and mining Gilberto Pauleta said the ChoicePlus program was about delivering value beyond the productivity and efficiency gains offered by the two suppliers’ excavators and wheel loaders.

“Hitachi and John Deere are well known as premium brands,” he said. “We’re focused on delivering excellent value and return on investment. I think contractors who take a look at what they get when they choose Hitachi or John Deere will be pleasantly surprised by the quality of the product and the price.”

Pauleta said HCA was excited to extend the popular program, adding each reward had “real value”, especially because customers could choose an option that best suited them.

“The free service offer is worth between $4000 and $12,000, depending on the size of the machine,” he said. “Our standard powertrain warranty is 36 months, so the ChoicePlus option is a significant step up for those customers interested in the extra peace of mind that comes from an extended warranty. As for the exclusive factory trip, we think that this will be a real eye opener for those who have not previously been to our factories.”

ChoicePlus is available across the Hitachi excavator range, from the eight-tonne ZX85 to the 82-tonne ZX870, the Hitachi wheel loader range from the 1.1m3 bucket ZW100 to the 3.7m3 ZW250, and the John Deere wheel loader range from the 3.6m3 724K to the 5.5m3 844K, while stocks last.

“While the greatest reward for choosing Hitachi or John Deere machinery is having an advanced, productive, reliable machine with a strong support network around Australia, ChoicePlus is a great way to make your investment go even further, so it’s an ideal time for contractors to think about upgrading or expanding their fleet,” Pauleta added.

Rio Tinto reveals plans to ‘simplify’ company

Rio Tinto plans to condense its assets into four product groups as part of a major restructure in an effort to rein in costs.

The corporate restructure will see its various assets now operate under: Aluminium, Copper and Coal, Diamonds and Minerals, and Iron Ore.

As part of the changes, Rio’s coal and copper operations will be combined, while uranium will be added to the Diamonds and Minerals group.

One of the consequences of the restructuring is the exit of Energy chief executive Harry Kenyon-Slaney will leave the business.

The Aluminium and Iron Ore product groups remain unchanged.

In announcing the changes, Rio said a number of key corporate functions will also be “reshaped” to further reduce costs and improve effectiveness.

Rio Tinto CEO Sam Walsh said the restructure is part of a business transformation aimed at reducing costs and simplifying the company.

“Our coal and uranium assets remain a part of our world-class portfolio. We will work hard to ensure there is a smooth transition for our colleagues in the Energy product group and continue to maximise efficiencies in our coal and uranium operations,” Walsh said.

“I would like to thank Harry for the important contribution he has made during almost 25 years with the Group, including as a colleague on the Executive Committee for the past five years. Harry has my best wishes for the future and my full appreciation for the significant role he has played in his time at Rio Tinto.”

The move comes after an Australian Mining exclusive last week which flagged the company was set to engage a heavy cost cutting campaign, involving renegotiation of service contracts, reduction of scheduled maintenance task times, and changes to staff pay .

An internal document leaked to Australian Mining showed Rio Tinto iron ore chief executive Andrew Harding had outlined a series of cost cutting requirements, including an immediate hiring freeze, which he said must be performed to maintain business success.

The move by Rio to simplify its business comes after BHP Billiton undertook a similar simplification process last year.

BHP chief executive Andrew Mackenzie said simplifying the company’s product portfolio was a “priority” before announcing that a portfolio focused on major iron ore, copper, coal and petroleum assets would be part of its four pillar company.

This has led to the proposed demerger of BHP’s non-core assets of aluminium, manganese, nickel and silver into company South32.

Chatree gold mine to remain closed

Chatree_300Kingsgate Consolidated has been forced to keep its Chatree gold mine in Thailand closed.

The mine was suspended from operating in mid-January after orders from the country’s environmental watchdog.

Kingsgate was ordered to close the mine after sampling found high levels of arsenic and manganese in the blood of people living near the operation.

The mine, 280km north of Bangkok, was to close for 30 days while the government conducted testing.

However, a further 45 days has been served while Kingsgate responds to additional information from the Thai authorities.

“As a result, considerable uncertainty still remains with respect to the structure and timing of any restart,” the company said.

Kingsgate chairman Ross Smyth-Kirk has previously said the company was shocked at the decision to close Chatree because it does not use either arsenic or manganese at the site.

“We are shocked and amazed at the temporary suspension order at the Chatree Mining Complex, situated in central Thailand which is internationally recognised as one of the safest gold mines in the world,” Smyth-Kirk said in a statement.

“It is important to note that arsenic and manganese are not used or stored at the Chatree Mining operation now or at any time in its history.

“We are calling for a speedy resolution as there are 1100 jobs at the mine which are in jeopardy. Loss of these jobs would have adverse flow on effects to the local communities.”

Shares in Kingsgate have been suspended since the mine was shut.

Largest coal mine in Russia opens

Largest-coal-mine-in-Russia-opens-659681-l_300A new 167 year life coal mine has opened in Russia.

The new Arshanovsky open cut mine, in south eastern Siberia, has set a goal of two billion tonnes of coal extracted over its mine life, at a rate of around 10 million tonnes per annum, according to the Siberian Times.

One of Australia’s largest coal mines, Adani’s Carmichael mine, has an operational life of only 60 years.

The Russian mine will be located in the Khakassia region of Siberia, with plans to construct additional rail infrastructure to support the operation.

The opening comes as Russia also announces the construction of two new coal ports in Siberia, which gives the nation more access to Chinese, Japanese, and Korean coal markets.

Rio Tinto iron ore to cut costs across all sites

Rio Tinto’s iron ore business is set to engage in a heavy cost cutting campaign, involving renegotiation of service contracts, reduction of scheduled maintenance task times, and changes to staff pay which will “reflect market conditions”.

An internal document leaked to Australian Mining this week showed Rio Tinto iron ore chief executive Andrew Harding had outlined a series of cost cutting requirements, including an immediate hiring freeze, which he said must be performed to maintain business success.

The document was distributed by email to members of management, and was read aloud to workers on all Rio Tinto iron ore sites in Western Australia.

The areas said to require urgent attention include:

Cost-outs and capital reductions that are significantly below the existing plan;
The renegotiation of significant service and supply contracts;
Reflecting market conditions for employees and labour related costs;
The extension of an immediate hiring freeze and review of organisational structures;
Revamping of the way we schedule maintenance – by intervals and task times;
A significant reduction in warehouse and stockpile inventories.
Harding stressed that “the whole business will be called to contribute to this work, with a degree of urgency”.

The document also said that all site superintendents will be subject to quarterly reviews, which would help to identify “pinch points” in the business.

“These will cover safety, cost and productivity performance, as well as commitments for the forthcoming quarter,” Harding said.

“I do not intend that any of these actions, and the extra efforts required on safety, will compromise our objective of continuing to be the best iron ore company in the world.

“Indeed, I expect that they will actually ensure that we can continue to be ‘the best’.”

Harding said the agenda was a large one, but “not unmanageable”.

Australian Mining contacted Rio Tinto to discuss the details of these adjustments, however a spokesperson for Rio Tinto said no further details could be disclosed at this point, and made the following statement:

“We remain focused on maintaining our market competitiveness in very challenging industry conditions. For some time now our people have been pursuing cost and productivity improvements. We are constantly examining all parts of our business in order to remain strong and globally competitive.”

Recent rumours among staff on Rio Tinto sites around Western Australia suggest plans to cut the Australian iron ore workforce by 10 to 15 per cent, however Rio Tinto said these claims were incorrect.

Rio Tinto will release their Quarterly Report on Thursday evening, February 12.

Arrium sells Newcastle manufacturing business

Arrium is selling its Wire Ropes business in Newcastle to a Danish firm for $90 million.

The business supplies drag line and shovel ropes to miners and has been operating for more than 90 years.

Arrium’s CEO Andrew Roberts said while Wire Ropes is a quality outfit, it lies outside the company’s strategic focus for future growth in mining consumables.

“Our growth in mining consumables is centred on the global mineral processing industry, including capturing at least our share of the expected strong growth in grinding media demand,” Roberts said.

“Today’s announcement is consistent with our focus on recuding debt, and builds on our good progress with asset divestments.”

Arrium’s asset divestment proceeds for FY2015 will increase to at least $150 million following the completion of the sale in March.

New owner Bekeart is expected to offer all of Wire Rope’s 100 workers ongoing employment.

Last month, Arrium announced it will be recording an asset impairment charge of $1.3 billion.

The writedown relates to Arrium’s iron ore mining and steel businesses and includes an impairment of $1.7 billion in the company primarily related to the impact of low iron ore prices and the mothballing of Southern Iron mine, and $130 million in steel and recycling.

The company is targeting a $200 million reduction in its capital expenditure as well as a redesign of its mining business in order to deal with the mining downturn.

Sandvik to close Wollongong operations

wollongong_300Sandvik has announced it will close its Wollongong operations and reduce its Kalgoorlie site in the wake of continuing mining uncertainty.

As a result of the shutdown Sandvik will now focus on field service in the Illawarra, while its Kalgoorlie site will now operate as a field service division, warehouse, and rock drill rebuild facility.

“Sandvik Mining in Australia continues to operate under very challenging market conditions, with the continued reduction in commodity prices and subsequent decline in the mining business,” Rowan Melrose, country manager for Sandvik Australia, stated.

“As a result Sandvik Mining has undertaken a further review of the business and adjusted our Australian operations accordingly.”

As a result of these changes 63 roles will be made redundant in the company.

“Unfortunately, these redundancies are necessary as a result of the continuing decline in market conditions,” Melrose said.

“Sandvik is not alone in having to make these difficult decisions, with other suppliers of equipment and services, along with mining companies, announcing employment reductions and facing the same situation.”

The company added that all workers affected will be offered career transitioning services and access to Sandvik’s employee assistance program.

Sandvik will now carry out its customer pre-delivers and machine rebuilds and repairs for the Illawarra and Kalgoorlie regions from Heatherbrae and Perth respectively.

Nullagine Joint Venture

The Nullagine Joint Venture (NJV) is an unincorporated 75:25 joint venture between BC Iron and Fortescue Metals Group (Fortescue), which is located approximately 150km north of Newman in the Pilbara region of Western Australia.

The NJV is a producing iron ore mine with the capacity to export up to 6Mtpa of product. BC Iron is the operator and manager of the joint venture and Fortescue facilitates the export of iron ore via both its rail and port infrastructure, and the provision of marketing services.

Nullagine Joint Venture location
Nullagine-Joint-Venture-locationIron mineralisation occurs in channel iron deposits, which present as flat-top hills or ‘mesas’. The NJV contains an extensive number of mesas, shown in orange above. The current NJV mine plan includes 12 mesas across four mining areas; Outcamp (1-5), Warrigal (1-4), Bonnie East (1) and Coongan (1 and 2).

Ore is mined using surface miners and then processed via a simple dry crushing and screening method to produce Bonnie Fines, a direct shipping ore (DSO) fines product. The Bonnie Fines product is transported approximately 60km from the NJV mine site to Fortescue’s Christmas Creek rail loadout facility via a private bitumen haul road, utilising 400 tonne payload Powertrans Pit Hauler rigs. At Christmas Creek, Bonnie Fines is loaded onto trains and transported approximately 300km to Fortescue’s Herb Elliot Port at Port Hedland, where it is loaded onto capesize vessels and exported to customers overseas.

Bonnie Fines has an iron grade of 56-57% Fe, but has a loss on ignition of approximately 12% which produces a high calcined iron grade after sintering. It also has low impurities, particularly phosphorus and silica. These properties make it a highly-sought after sinter feed.

During FY2014, the NJV exported 5.79M wmt1 (BC Iron share 4.30M wmt) at free-on-board (FOB) C1 cash operating costs of $52 per wmt. As at 30 June 2014, the NJV has a remaining mine life of 5-6 years at an average waste to ore ratio of 1.3:1.

BC Iron is assessing mine life extensions at the NJV via the beneficiation of low grade material (50-55% Fe) into a saleable product. The initial phase of this work has been completed, which culminated in BC Iron reporting an Ore Reserve estimate for beneficiated shipping ore (“BSO”) of 3.9Mt at 54.2% Fe (after yield adjustment). This estimate only consider low grade at existing stockpiles and within the current DSO pit designs. Further work is required to evaluate regional mesas which are not in the current mine plan.

BC Iron leans on contractors for cost savings

BC Iron is looking to renegotiate the terms of several of its workforce contracts in order to save money amid the weak price of iron ore.

BC made the announcement as part of its December quarter results.

At Iron Valley, the agreement with Mineral Resources Limited is being varied to ensure the company can implement initiatives aimed at securing the project’s long-term viability.

Meanwhile, the Nullagine mine is also going out to tender in the hope of securing cost savings.

“The next round of material savings will come in our retendering of existing contracts,” CEO Morgan Bell said.

“We’re expecting a reduction in the overall cost of mining and potentially haulage.”

Nullagine mine, a joint venture with FMG, cut jobs in December in order to deal with the falling price of iron ore.

The price of the commodity hit fresh five-year lows last week of $USS63 a tonne.

BC Iron managed to save $2-3 per wet metric tonne during the quarter, with the company revising its full-year cash cost guidance down to $47-51/wmt.

Nullagine mine ramped up production to its 6 million tonnes per annum run-rate in the December quarter following an operational slow-down in the September quarter.

The mine shipped 1.38wmt of Bonnie Fines for an average price of $60 per tonne.

The new Iron Valley mine shipped a total of 0.79M dmt in the quarter.

BC Iron’s cash balance was $110.1 million as at 31 December 2014.

Ball said the miner would continue to focus on operational performance, productivity and costs in order to make it through the iron ore slump.

“In a really tough in environment we’re all doing a really good job and keeping on punching,” Ball said.

Last year, company announced three non-executive directors resigned with the remaining directors taking a 10 per cent pay cut.