Friday 9th December 2016

Resource Clips


Posts tagged ‘Barrick Gold Corp (ABX)’

Visual Capitalist: How precious metals streaming works

September 12th, 2016

by Jeff Desjardins | posted with permission of Visual Capitalist | September 12, 2016

Miners seeking new capital have always had a variety of options: They could issue new shares, take out a loan, enter into joint-venture agreements or divest non-core assets.

However, in the last decade, a new option has emerged called “precious metals streaming”—in which streaming companies essentially offer capital up front to mining companies in exchange for metal later. If properly executed, the result is a win for both parties that can ultimately provide value to investors.

Precious metals streaming

This infographic from Silver Wheaton TSX:SLW explains the precious metals streaming model and the arbitrage opportunity that creates value for both the streamer and the miner seeking to acquire capital:

How precious metals streaming works

 

The aforementioned arbitrage opportunity in precious metals streaming is key.

For a traditional base metal miner, the majority of forecasted mine revenue may come from a metal like copper or nickel. However, along with those “target” metals, smaller amounts of gold and silver may be produced from the deposit as well.

Investors would still value those byproduct precious metals in a base metal miner’s portfolio, but the metals may be typically valued at an even higher multiple in a precious metal streamer’s portfolio. This allows the base metal miner to transfer these future “streams” to the streamer in exchange for up-front capital, which can be a win-win scenario for both parties.

Streaming benefits

In other words, miners use streaming to acquire non-dilutive financing and to extract value from non-core assets. This allows them to deploy capital on purposes more central to their strategy. Major miners such as Teck Resources TSX:TCK.A and TCK.B, Barrick Gold TSX:ABX, Vale NYSE:VALE and Glencore all sold streams in 2015.

Meanwhile, streaming companies have been very successful since this model was first pioneered 12 years ago. They are getting gold and silver at a discount, and this has created significant value for investors over the last decade. Today there are many valuable streaming companies out there, including the major ones such as Silver Wheaton, Royal Gold and Franco-Nevada TSX:FNV.

Posted with permission of Visual Capitalist.

May 28th, 2015

Home battery systems like Tesla’s are already popular in Germany Equities Canada
Yukon Premier Darrell Pasloski: Our goal is to be the number one mining location Streetwise Reports
Barrick teams with Zijin Mining at Porgera mine Stockhouse
Australian government rules out iron ore inquiry NAI 500
Strict specifications: UK frac sand potential Industrial Minerals
China’s silk road economic project will include gold GoldSeek
Great deposits of the world—Hishikari, Japan Geology for Investors

May 27th, 2015

Home battery systems like Tesla’s are already popular in Germany Equities Canada
Yukon Premier Darrell Pasloski: Our goal is to be the number one mining location Streetwise Reports
Barrick teams with Zijin Mining at Porgera mine Stockhouse
Australian government rules out iron ore inquiry NAI 500
Strict specifications: UK frac sand potential Industrial Minerals
China’s silk road economic project will include gold GoldSeek
Great deposits of the world—Hishikari, Japan Geology for Investors

May 26th, 2015

Yukon Premier Darrell Pasloski: Our goal is to be the number one mining location Streetwise Reports
Barrick teams with Zijin Mining at Porgera mine Stockhouse
Australian government rules out iron ore inquiry NAI 500
Strict specifications: UK frac sand potential Industrial Minerals
China’s silk road economic project will include gold GoldSeek
Plenty of competitors for Tesla in home energy storage market Equities Canada
Great deposits of the world—Hishikari, Japan Geology for Investors

East dominated M&A in 2013, expect overall uptick this year—PwC report

February 26th, 2014

by Ana Komnenic | February 26, 2014 | Reprinted by permission of MINING.com

East dominated M&A in 2013, expect overall uptick this year—PwC report

 

The bad news first: 2013 was the worst year for mergers and acquisitions in recent history, with the volume of deals dropping 33% to the lowest level since 2005.

Now for the good news: According to PricewaterhouseCoopers’ latest Global Mining Deals report, the mining industry can expect an uptick in M&A throughout 2014.

Though these deals will be “smarter, more conservative,” 2014 will be characterized by joint ventures, mid-tier buyers and more mergers or sales from juniors, PwC predicts. The gold price drop will also make buying gold assets more appealing—especially in Canada.

“You aren’t going to see the big dollars in riskier jurisdictions,” PwC wrote, quoting Brett Mattison of Gold Fields NYE:GFI.

As evidence of a strong start to the year, PwC points to Goldcorp’s TSX:G hostile takeover bid for Osisko TSX:OSK—though Osisko has called the offer “opportunistic” and some say Goldcorp is trying to take advantage of a weak gold market.

“The turnaround won’t mirror the surge in movement we saw back in 2011, but expect deal making to resurface in most parts of the world this year as both an opportunity and in some cases a necessity for companies across the sector,” PwC global mining leader John Gravelle said in a statement.

“Companies have been cleaning up their balance sheets and putting off decisions, waiting for the right time to act—that timing is near.”

Overall, PwC expects deal activity to increase this year—reaping “long-term gain” from “short-term pain.”

While it’s well known that M&A dropped off in a big way last year, PwC revealed something new in its latest report: The Eastern world dominated M&A activity last year. In fact, “the East accounted for nearly half of the deals by value in 2013, or about 45%, while the West represented about 36%,” PwC wrote.

East dominated M&A in 2013, expect overall uptick this year—PwC report

“Looking ahead, many Western-based majors are still going to wait for commodity prices to stabilize, concentrating on cash costs, rationalizing their assets and trying to divest assets as a way to pay down debt and fund existing operations,” Gravelle said.

The rich and powerful from Russia and Kazakhstan in particular bought up assets while major mining companies such as Rio Tinto NYE:RIO and Barrick TSX:ABX were selling.

The biggest deal of 2013 was in Russia, where Gavril Yushvaev and Zelimkhan Mutsoev purchased nearly half of Polyus Gold from billionaire Mikhail Prokhorov.

Reprinted by permission of MINING.com

Faceoff: Cliffs and major shareholder in public debate over company’s future

February 12th, 2014

by Ana Komnenic | February 12, 2014 | Reprinted by permission of MINING.com

Cliffs Natural Resources NYE:CLF, America’s biggest iron ore producer, announced February 11 that 500 Canadians would lose their jobs as a result of the company’s decision to idle its iron ore mine in Newfoundland and Labrador.

Now the miner’s negotiations with one of its major shareholders has turned ugly. In a statement issued February 12, activist investment firm Casablanca Capital, which owns 5.2% of Cliffs, called the shutdown a “knee-jerk” reaction to its earlier call for change, referring to a letter Casablanca wrote to Cliffs last month.

Casablanca also said it was backing Lourenco Goncalves, former CEO of Metals USA, to step in as Cliffs’ CEO—a position that’s currently open. Goncalves has personally invested approximately $1 million in Cliffs shares.

The New York-based investment firm has also delivered a letter to the company declaring its intention to nominate a majority of directors for election to Cliffs’ board at the 2014 annual meeting of shareholders.

The company is disappointed that Casablanca seems intent on waging a public campaign rather than continuing its private engagement with our chairman and management to address our doubts and concerns.—Cliffs Natural Resources

“In spite of its public statements, Cliffs hasn’t engaged us in any meaningful dialogue on the issues we’ve raised or provided a timetable for doing so,” Donald Drapkin, chairman of Casablanca said in a statement.

This is the second time in less than two weeks that Casablanca has lashed out at Cliffs.

Late last month the firm published a lengthy public letter calling on Cliffs to spin off its international assets and to immediately double dividend payments.

With iron ore prices suffering due to weak Chinese demand and an oversupplied market, Casablanca believes the U.S.-based miner needs to separate its domestic operations from its international ones.

Casablanca’s decision to try and reshuffle Cliffs’ board of directors comes as a surprise considering that in its January letter the investment company wrote that it recognized that the current “management team and many board members were not responsible” for the decisions that led Cliffs to being the S&P’s third-worst performing stock of 2013.

Cliffs reacted to the February 12 statements with a much sterner tone than in January.

“Casablanca’s overall proposal fails to provide a sustainable, long-term value-enhancing alternative,” Cliffs wrote.

“The company is disappointed that Casablanca seems intent on waging a public campaign rather than continuing its private engagement with our chairman and management to address our doubts and concerns.”

Cliffs also stood firm on its intention to appoint as CEO the company’s current chief operating officer, Gary Halverson. He previously headed Barrick Gold’s TSX:ABX U.S. operations and stood in as interim COO.

“The choice of Mr. Halverson as incoming CEO follows an exhaustive search by the board … Following a comprehensive search, the board determined that Mr. Halverson was the right leader given his deep international and large-scale mining industry leadership experience,” Cliffs wrote.

Reprinted by permission of MINING.com

December 10th, 2013

How to judge your financial adviser Goldseek
“You’ve endured the pain, now please stay around for the gain” Industrial Minerals
Peter Munk’s successor says Barrick Gold may seek Chinese partner Stockhouse
Thomas Drolet: Why uranium and coal rank high for energy return on energy invested Streetwise Reports
The outlook for potash might be better than you think VantageWire
Inflation versus deflation and the growing currency war Equedia

December 9th, 2013

“You’ve endured the pain, now please stay around for the gain” Industrial Minerals
Eric Coffin: My big fat Chinese plenum Goldseek
Peter Munk’s successor says Barrick Gold may seek Chinese partner Stockhouse
Thomas Drolet: Why uranium and coal rank high for energy return on energy invested Streetwise Reports
The outlook for potash might be better than you think VantageWire
Inflation versus deflation and the growing currency war Equedia

December 6th, 2013

Eric Coffin: My big fat Chinese plenum Goldseek
Peter Munk’s successor says Barrick Gold may seek Chinese partner Stockhouse
Thomas Drolet: Why uranium and coal rank high for energy return on energy invested Streetwise Reports
The outlook for potash might be better than you think VantageWire
Redrawing trade patterns for graphite and fluorspar Industrial Minerals
Inflation versus deflation and the growing currency war Equedia

New Barrick chief uses the h-word

December 5th, 2013

by Frik Els | December 5, 2013 | Reprinted by permission of MINING.com

Gold producers reduced their hedging for the first time in three quarters, according to the latest data about forward-selling in the gold mining industry from metals research firm GFMS.

The outstanding producer hedge book now stands at 3.6 million ounces, or 112 tonnes, nowhere near the levels seen before gold began its 12-year upward climb.

Locking in prices and steady cash flow made sense for gold miners when gold was around the $300 level with little prospect of any substantial move higher.

New Barrick chief uses the h-word

Hedging as an analytical intellectual exercise.

But as gold’s bull run gained momentum gold miners lost out on billions of dollars under contracts signed for future delivery well below the ruling price—and often below cost.

Now with the rally in precious metals losing steam, market watchers believe hedging may be making a comeback.

And the world’s number one producer of the yellow metal no longer thinks hedging is a dirty word.

John Thornton, the ex-Goldman Sachs banker who next year takes over the helm at Barrick Gold TSX:ABX, said the idea of dusting off the hedge book should not be automatically ruled out:

“I don’t know why you wouldn’t look at it, if for nothing else as a kind of analytical intellectual exercise,” Thornton told WSJ.com. “And try to then make a judgment. I don’t understand people in the industry who would say you should never do that.”

Toronto-based Barrick, like its peers in the industry, spent billions unwinding its hedge book in 2009, but ended up still saving money on the deal as gold’s rise still had a good two years to go.

Barrick, set to produce more than seven million ounces in 2013, has embarked on an aggressive cost-cutting program and in October said it has reduced its 2013 guidance for all-in cash costs by a full $100 per ounce and that 75% of this year’s production will be mined at a cost of less than $800 an ounce.

That compares to an industry average of $1,200 to $1,300.

GFMS analyst William Tankard told Reuters that Barrick is well placed to take advantage of hedging thanks to its relatively low operating costs, but Tankard doesn’t envisage a large-scale return to forward selling:

“Interest rates remain exceptionally lean, and gold liquidity is not great. There aren’t many central banks looking to lend over long tenures at the moment,” he said. “Coupled with that, options hedging will not be especially cheap right now. So it is a tough decision.”

Gold is coming off a 12-year bull run and has shed close to 27% so far this year. After a drop to $1,226 on December 5 the metal is within shouting distance of a three-year low.

The price of gold peaked at an all-time high of $1,921 an ounce in September 2011.

Reprinted by permission of MINING.com