Oil
Yet another FPSO in Brazil's Pre-Salt 24 May 2017
Shell, Petrobras and other partners in Lula South pre-salt oil field, announced today that production started at the floating, production, storage, and offloading facility (FPSO) named P-66, located in Brazil's southeast deepwater Santos Basin.
P-66 can process up to 150kbpd of oil and 6Mcmpd of gas, at 2,150m water depth. The unit is the first in a series of standardized vessels to begin production in the BM-S-11 block over the next three years, and the tenth FPSO in operation across Shell’s working interest in the pre-salt areas.
Shell has a 25% stake in the BM-S-11 consortium, Petrobras is the operator with a 65% share, and Galp holds the remaining 10% interest.
Coal
Boggabri: Idemitsu to Replace Contractor at Boggabri in December 24 May 2017
Idemitsu Kosan, the owner of the 6.9Mtpa Boggabri mine in the Gunnedah Basin, has announced that it will be replacing the mining contractor at the mine in December. Downer is the currently contractor, employing 450 workers for the site, but when its contract ends at the end of the November, control will be passed onto BGC Group. How many of workers will move to BGC is currently uncertain, however, it is likely that all workers engaged in coal activities, will be retained. However, Idemitsu is transitioning the site to an owner-operator model, so it will take over the mine’s management positions. Boggabri has historically had higher mining costs than other mines in the Gunnedah Basin, operated by Whitehaven Coal. The company has seen a return to strong profitability in 2016 after reporting thin margins in recent years. AME expects the cash costs will fall under the new contract.
Other Indonesia (CL): Indonesia’s ITM Reports Lower Sales in Q1 2017 24 May 2017
Indonesian thermal coal producer, Indo Tambangraya Megah (ITM) has reported significantly lower sales in the March Quarter of 2017 as heavy rainfalls during the period impacted production. Sales and production for the quarter were both at 5.4Mt, down 22% and 13% year on year, respectively. ITM is targeting 25.5Mt of production for 2017, down slightly from the 25.6Mt produced in 2016. Its coal sales target is 27Mt for the year, 77% of which has already been contracted. Of the contracted volume, 44% is contracted on a fixed-price basis and around 29% on an index-price basis. During the quarter, the average selling price rose 42% year on year, while the cash cost rose 22% to US$51.6/t. ITM operates six coal mines in Kalimantan producing thermal coal ranging from 4,400Kcal/kg to 6,300Kcal/kg.
Other China (CL): Shandong Energy to Close its Beizao Coal Mine 24 May 2017
Shandong Energy Longkou Mining Group (Shandong) has announced that it will be closing its Beizao coal mine, which is located off the coast of Longkou city. The closure is part of the province’s capacity reduction plans as the mine is classed as sub-standard in terms of efficiency. The mine is the only underwater mine in China and as such, the mining costs were three times higher than the average cost of land-based mining. The mine employs 1,580 workers, who will be relocated to other mines. The mine has produced up to 8Mt of ROM coal and has 1.29bt of proven resources, with current activities occurring 350m below sea-level. The mine is unlikely to ever be restarted due to its high costs and inefficient practices. It takes workers well over 20 minutes of travel underground just to reach the coal face.
Steel
Other - India: India Overtakes Japan To Become Second Largest Stainless Steel Producer 24 May 2017
The International Stainless Steel Forum has released their annual “Stainless Steel In Figures”. Global Stainless steel production in 2016 reached 45.8Mt and India has overtaken Japan to become the world’s second largest stainless steel producer with 3.3Mt and 3.1Mt of stainless steel produced respectively. China is still by far the world’s largest stainless steel producer with 24.9Mt of produced in 2016, representing 54% of global production. AME expects further growth in the Indian stainless steel industry, driven by government initiatives such as “Make In India” which aims to make India self-sufficient in steel production by 2030.
Other - Vietnam: Nam Kim Steel JSC Commissions New Compact Cold Rolling Mill 24 May 2017
Vietnamese steelmaker Nam Kim Steel Joint Stock Company has commenced operations on a new 435kt Compact Cold Mill supplied by SMS group. The new mill will complement an existing single stand cold rolling mill which has been in operation since 2015. The new mill will produce cold strip with final gauge ranging from 2.0 to 0.2mm. Nam Kim Steel specialises in the production of both hot and cold rolled steel products which are used to supply various industries such as construction and manufacturing. There is great incentive for Vietnam’s steel producers to invest and increase capacity due to a rapidly growing domestic market and policies put forth by the government aimed at growing the local steel industry.
Copper
Chuquicamata: Codelco Optimises Chuquicamata Pit as nears Transition to Underground Mining 24 May 2017
Chile’s Codelco is implementing an optimisation project in the final stage of the Chuquicamata open pit that involves a three degree increase in pit wall slopes. This will save extracting 13Mt of waste that would otherwise have been removed and permits access to an additional 14Mt of sulphide ore grading 0.83% copper. The project has been included in Chuquicamata’s 2017 development plan. In 2016, Chuquicamata produced 302kt of copper. Codelco is investing US$4.0bn to transform the century-old open-pit mine into an underground operation, which is expected to commission in 2019 and produce 367ktpa of copper when fully ramped up. As at the end of 2016, the underground development was 41% complete after spending US$461m during the year.
Zinc
Other China Zinc: Chinese Refined Zinc Production Falls in April 24 May 2017
According to data released by the National Bureau of Statistics, China’s refined zinc production fell in April. Refined production for the month totaled 474kt, a decline of 5.6% year on year. AME believes the decline in production is the result of extended maintenance periods at a number of smelters. Major smelters, Shaanxi Non-ferrous’ 360ktpa Shaanxi Hanzhong and Huludao’s 390ktpa Huludao smelter both saw reduced production during the month. The decline in Chinese refined production saw Chinese refined zinc imports lift to 47kt in April, an increase of 85% on March 2017. Refined imports in April were the highest since March 2016. AME forecasts China will produce 6.25Mt of refined zinc in 2017, a marginal decline of 0.4% on 2016.
Gold
Hope Bay: Commercial Production Declared at TMAC Resources' Hope Bay, Canada 24 May 2017
TMAC Resources has declared commercial production at its underground Hope Bay project in the Nunavut province of Canada. First gold was poured in February 2017 from a processing plant at the Doris North deposit. 2017 pre-production and expansion capital is expected to be US$49m, up 40% from the original forecast primarily due to the delay in completion and ramping up of the processing plant. At the end of 2016 TMAC had incurred US$316m in development expenditures excluding environmental bonding letters of credit. The project is slated to mill an average grade of 7.7g/t to produce 160kozpa of gold doré over 20 years for an all-in sustaining cost (AISC) of US$785/oz. Hope Bay is expected to produce 100-120koz in 2017 at an AISC of US$749/oz to rank in the lower half of AME's cost curve.
Economics
US - Economics: President Trump Proposes Selling Half of US Strategic Oil Reserve in Budget 24 May 2017
The US plans to reduce its national debt by selling off half of its strategic oil reserves and its entire strategic gasoline reserves. The sale would raise US$500m in the 2018 financial year and as much as much US$16.6bn over the coming decade. Currently, the US Strategic Petroleum Reserve is 687.7Mbbls of oil. The IEA requires countries to have enough reserves to cover 90 days of imports. The US has been below this level for most of the past decade. However, the rise of shale production has seen the reserve increase to over 110 days of cover. The White House budget plan calls for selling 270Mbbl. The plan also aims to close the Northeast Gasoline Supply Reserve. It holds 1Mbbl of gasoline, all of which would be sold in the 2018 financial year under the White House proposal.