Asia Mining – “Battle for Minerals” – USA

THIS POST WAS ORIGINALLY PUBLISHED FEBRUARY 13, 2009


In my recent post I focused on China, as a major player, but there are certainly other ones in the area, the United States being, of course very prominent. Let us look at Vietnam and latest news reveal a good performer.
 US public company (listed at NYSE Euronext ) ATI Petroleum (ATIP) seems to be vigorously operating in Vietnam.
One of the noteworthy project is the plan to build 2 nuclear power plants in Vietnam with total capacity of 4,000MW.  The project has been approved by the Congress and a feasibility study had to be submitted to the government in September 2008.  ATIP is also developing its uranium project in Niger – which was discussed with Vietnamese officials in August. Furthermore, ATIP’s President in September 2008 delivered a report at the special session in Hanoi, where he emphasized that new technologies can provide for dramatic reduction of construction period of nuclear plants “from 10 years to 5 years at the cost of about $35 per megawatt-hour, far less than using coal at a cost $40.8/MWh or gas  at a cost of $41.4/MWh”.
ATIP, a subsidiary of American Technologies Incorporated Group has a long-time presence in Vietnam and is engaged in oil and gas exploration on offshore blocks in the northern Gulf of Tonkin since 2000.  Initially ATIP signed a production sharing contract (PSC) for Blocks 102 and 106, covering 14,000 sq. km. (3.5 million acres) off the coast of Hai Phong, Vietnam. Since that time extensive exploratory actuvutes were conducted in some blocks: Yen-Tu, Ha Long, Thai Binh, and Ham Rong, that resulting in the discovery of three new oil and gas fields. As the result it is estimated that there is a high probability of high commercial rate production.
Expanding operations in Vietnam, at the beginning of 2009 increased activities are underway at the development of an ilmenite/titanium reserve deposit with estimated at over 5.5 million metric tons. The area is about 586 hectares and is currently producing Ilmenite, Rutile, Zircon and Monazite in commercial quantities. Presently the company's production capabilities allow for the separating and processing of 4,000 m/t of ore per month. Ilmenite is currently processed by ATI Petroleum on site to a high TiO2concentration of approximately 62%. If this can be processed to produce synthetic rutile with a 94-95% TiO2concentration, it will greatly increase the value of the mineral. At present, ATI Petroleum is able to sell its ilmenite for approximately $120 per metric ton. Synthetic rutile is typically worth four to five times this amount.
It seems that ATIP is now in discussions with Tor Minerals, a worldwide producer of specialty mineral products (that already has its plant in Malaysia) to install Vietnam's first synthetic rutile processing facility. Last week the sample of its titanium dioxide (TiO2) ilmenite sand was delivered to Tor Minerals processing plant in Malaysia to determine the feasibility of converting the ilmenite to synthetic rutile.
  So, new spots on the Asian mineral map are being visible as the time goes on…
UPDATE
As if the US businessmen are reading my blog….. he-he
“It’s time to look at the Vietnamese market, says US executive” – this is the Voice of Vietnam brings to us. A delegation from 15 businesses and academics from the USA Pittsburgh region arrived to Vietnam and are looking “to explore this dynamic Asian market”.  The report also cites Roger Cranville, vice president for global marketing of the Pittsburgh Regional Alliance: “market entry timing is critical, and as part of its long-term opportunity Asian strategy…”

ASIA MINING: Chinese Offensive

THIS POST WAS ORIGINALLY PUBLISHED FEBRUARY 24, 2009


The commentary in yesterday’s People’s Daily says: “China has grown to be a new heavyweight player and stepped into the limelight on the world stage… If the Cold War was 'a tug of war' between East and West, and a showcase of hard power, what we have today, for the first time in history, is a global, multicivilizational and multipolar competition, and a display of smart power”. And true to these words, we see a real display of smart power.
Looking at the world mineral resources market, it is obvious that China has become a dominant ingredient in its structure. About one third of total consumption of majority of metals goes to China. "With the global financial crisis, most companies are becoming cautious of investing in the sector, but with domestic demand increasing in the long term, we are under great pressure this year," Wang Min, vice-minister of land and resources, told a national geological survey conference in Beijing.
There are different options to relieve the country from this pressure. China Daily today reports vast internal potential of the country:  “From 1999 to 2007, a total of 3,795 exploration programs were carried out, with 7.56 billion yuan ($1.1 billion) invested and about 184 companies and bureaus of land and resources involved…” There are more than 1,200 potential mining sites including 20 medium and large ones. And one way is to increase foreign participation in mineral survey and exploitation, as well as attract foreign investors. While the first two things are quite feasible and would be welcomed by international companies, I think, that the investment side might take quite a while.
Thus, the other way is open and is used on full scale – M&A on international scale. This is well reflected in current press reports; I have been posting some references here too. The latest news come from Australia, that in fact my soon turn into some second-grade supplier of resources to China. That is another “beefing up of mining efforts”: after yesterday’s deal with Valin Iron and Steel Group that takes the stake in Fortescue Metals Group Ltd, the latter agreed to increase its supply to up to 4 million tons a year to Valin subsidiary Xiangtan Steel from 2010 onwards, up from 1 million tons a year now – four times higher.
It is interesting to note that financial transactions around Fortescue are far from over – there are reports that several deals are upcoming that include among the others -  sovereign wealth fund China Investment Corporation (CIC) is going to invest more in the company. And there is an Indian trace here too: Valin Iron and Steel Group owns a 33.9% stake of Hunan Valin Steel Company, in which ArcelorMittal also has a 33% equity interest.
This is without a doubt “global, multicivilizational and multipolar competition, and a display of smart power”

ASIA MINING: Islamic Finance – a New Solution in a Global Crisis?

THIS POST WAS ORIGINALLY PUBLISHED FEBRUARY 26, 2009

Islamic Finance was born about 40 years ago, and has seen unprecedented growth in recent years; the pace of this growth is accelerating. There is a very common notion that Islamic Finance is a financial system that is essentially interest free, and that is the end of it. This is not entirely accurate as, although the basis of Islamic Finance denounces usury, termed as riba (which is the lending of money at exorbitant rates), there is more to it than just this. The concept is more accurately that money has no intrinsic value – it is only a measure of value, and since money has no value itself, there should be no charge for its use. Therefore, Islamic Finance is said to be asset based as opposed to currency based whereby an investment is structured on exchange or ownership of assets, and money is simply the payment mechanism to effect the transaction.
 Speaking plain language Islamic Finance specializes in financial products that comply with Islamic law. That means no collecting interest, no short selling and no contracts that are considered exceedingly risky. It also rules out some of the activity that got Western finance in trouble — subprime mortgages, credit default swaps and the like. Islamic Finance operations aren’t prohibited from making a profit -  banks that comply with Islamic law, or Sharia, earn money from fees that are part of the cost of the loan, some paid up front and some over time. 
Some numbers that are produced from “A Guide to Islamic Finance In Or From The DIFC”
    The total size of the Islamic Banking industry is currently estimated to be between USD 800 billion to USD 1trillion, and is estimated to have a global potential of USD 4 trillion.
    Growth rate is 15%-20% per annum
    Within the next 8-10 years, the Islamic banking industry is estimated to capture half of the savings of the world’s 1.6 billion Muslims.
    Assets under management in Islamic Funds are estimated to be between USD 50 billion to USD 70 billion.
 So, what about mining? Of course, as any other sector mining is in the focus of Islamic Finance.
Last year one of the key events was the decision of BlackRock Global Resources & Mining Fund to accept the principles of Shariah financing. The Dubai Multi Commodities Centre (DMCC) joined Barclays Capital and Shariah Capital  were introduced as the seed investor the BlackRock Global Resources & Mining Fund on the Shariah governed Al Safi Trust platform. BlackRock, Inc., with over $1.26 trillion assets under management, will manage the BlackRock Global Resources & Mining Fund on Al Safi. That means that the following funds shall be here: Gold, Energy, Natural Resources, Global Resources & Mining Fund. Special emphasis is made on small cap companies with capitalizations from $25 million to $2 billion.
A few days ago it was reported that AIM-listed Islamic Investment Bank acquired a 26% stake in Diamondcorp. And today Finance Asia publishes “Challenges and opportunities for Islamic finance” an interview with Humayan Dar, chief executive officer of BMB Islamic UK, that is worth reading. And just yesterday Bernama reported that Deloitte has set up an Islamic finance centre of excellence in Malaysia to provide consultation on Islamic finance for the Asia Pacific region.
So, I think, that Islamic Finance in this rapidly and drastically changing world might be a very good option for mining firms looking for cash.
 Here are some links for those interested to learn more on the subject:

•      A Basic Guide to Contemporary Islamic Banking and Finance. Mahmoud Amin El-Gamal, Rice University, June 2000
•     Quo Vadis Islamic Finance?
•     What is Islamic Finance?
•     A Guide to Islamic Finance In Or From The DIFC

Political Risks and Mining

THIS POST WAS ORIGINALLY PUBLISHED JANUARY 29, 2009


Aon Risk Services produced the 16th Annual Political Risk Map – and here we are this is how the credit crunch influences mining and natural resources companies. There was some discussion on it too.
I took the liberty to produce a  part of the map with SE Asia – everyone can download it at the provided link

Earthstone matrix: Indonesian iron ore is bound for China

THIS POST WAS ORIGINALLY PUBLISHED JANUARY 26, 2009


The ASIA Miner - First quarter January-March, 2009 pp. 51-52

IT was in the rainy season exactly a year ago when a group of entrepreneurs convened at a hotel in the centre of Jakarta, Indonesia. Pankaj Shah, a non-resident Indian businessman, has been the driving force of the impressive endeavour that resulted from this meeting and who has managed to assemble an international team with one goal - to start international business with a focus on opportunities in South East Asia.
It was decided that the team’s first focal point would be Indonesia and its mines and minerals. Starting business from scratch in a completely new environment is, indeed, a challenging task. However, a year has passed and one can say that the operational matrix that emerged during 2008 was a success, and currently Earthstone Holdings is going through its expansion and fast growth phase. Telling the story of the company’s rise to prominence is Earthstone Holdings’ business development director Pooja Sharma, who answered questions from The ASIA Miner.
Ms Pooja can you please explain what is Earthstone?
Basically, we are an international holding that has interests in mines and minerals, energy, roads, airports, ports, rail networks and other allied infrastructure. This means that we are not narrow-focused to a specific industry but rather an opportunity-driven enterprise. The current multi-polar world is witnessing a lot of changes and a prominent one among them is the emergence of new fast developing nations. Thus, one of the keystones of our corporate strategy is to help these developing nations by way of investing in projects of national significance.
The majority of countries in South East Asia have abundant natural resources but poor infrastructure and a lack of advanced technology to develop mining. We decided to start with one of the most promising countries in the region, Indonesia, and we feel that our efforts will benefit its development.
What is the key area in the company’s Indonesian operations at this time?
It is the Nalo Baru iron ore development in Sumatra. This project has a total mining area of 438 hectares and quite recently John T Boyd made an assessment that the total iron ore reserves are about 164 million tonnes of high grade 64+ iron. Last summer PT Earthstone Resources executed an MOU with the GJR Group, India’s leading mining and steel conglomerate, under which we formed a joint venture to develop the project.
Working as a team, we managed to convert this greenfield site into an operational mine that is delivering its first commercial shipment in the first quarter 2009. Initial production and logistics capacity will be 3 million tonnes per annum, which will be increased to 10 million tonnes in the short term.
One of the great advantages of our union with GJR is that the group will shift its current exports to China from Indian mines to Indonesian ones. We are expecting to sign long term contracts with Chinese, Korean and Japanese buyers. In summary, we are opening a wide road for Indonesian iron ore exports to Asian countries and primarily to China. As far as I know, there are not too many, if any, Asian companies that are currently selling iron ore to China.
Is Nalo Baru the only project that you have?
As I mentioned earlier, we are an opportunity-driven organization so we embarked on what we called the ‘Aceh Initiative’ because we see an untapped opportunity in this Indonesian province. We are running an extensive research and exploration program in the province and, at this stage when we count Nalo Baru and Aceh opportunities, we say that Earthstone has a cumulative reserve base of almost 500 million tonnes of high grade 63.5%+ iron ore. Of course, we could not bypass the opportunities presented by coal exploration. Last August we teamed with Integrated Coal Mining Company Limited, which is a special arm of CESC Limited, a flagship company of the RPG Group, one of India’s primary diversified industrial conglomerates. Under the signed MOU both companies are working to identify thermal coal mining opportunities in Indonesia and are doing preliminary surveys, surface mapping and drilling. We are working on a number of projects with the one at Meaulaboh in Aceh being the biggest. This is described in detail at our web-site.
Are you planning to expand operations worldwide?
In 2007 we were granted by the Government of the Republic of Niger four Exploration Permits for uranium and associated elements with estimated reserves of 100 million pounds and 2008 has seen the start of our Niger operations. We are actively looking for opportunities in some other countries: Vietnam, Laos, Cambodia and Myanmar. Another detail worth mentioning is that Earthstone is investigating opportunities in alternative energy projects and we have established a stipend for experts that are working on algae biofuel. Maybe in the future we will be involved in the first project of that kind in South East Asia.