CNOOC’s state control is a paper tiger 24 Jul 2012 The bidder for Canada’s Nexen is the smallest and most Western looking of China’s three oil majors. Moreover, lines of power between China’s oil producers and politicians run both ways. CNOOC may have a gusher of governance anomalies, but foreign regulators have little to fear.
Mining investors at a critical juncture 13 Jul 2012 Commodity bulls are pinning hopes on more aggressive Chinese stimulus. There’s good reason to expect it. But Beijing may struggle to revive the building boom that has fed the super-cycle. If so, it’s hard to see a reversal of the mining sector’s recent underperformance.
Global warming adds to food inflation risk 13 Jul 2012 Corn prices spike after the hottest U.S. six months ever. Russian wheat is also afflicted. Does global warming threaten a food price shock? For now, the risk is mitigated by a big commodity price retreat from 2011’s speculative bubble. But in the long term, the threat is serious.
Qatar evolves into active not activist investor 3 Jul 2012 The Gulf state has sent a message with its Glencore-Xstrata intervention: it won’t shy from demanding value when shareholders are put on the spot. But for all the noise, Qatar probably isn’t ready to become a genuine activist targeting underperforming companies in need of a kick.
Xstrata pay compromise saves face but little else 27 Jun 2012 Mick Davis’s tweaked “retention” package may be enough of a sop to put pay on the back burner as the miner tries to save its Glencore merger. But it makes a muddle of incentives. Tying awards to previously unseen cost-cutting potential poses dangers. It’s still a poor scheme.
Glencore-Xstrata deal looks hard to rescue 27 Jun 2012 Qatar’s call for much sweeter merger terms is a big obstacle. Xstrata’s 10 pct shareholder can’t easily retreat from its public demand. And Glencore can’t justify a sizeable raise to its own investors. If the Qataris hold firm, the deal may have to be parked for another day.
Xstrata price fears no reason to vote for "Glenstrata" 21 Jun 2012 The miner’s shares could fall sharply if investors vote no on the Glencore merger. But that’s a red herring. Technical factors would be a big driver. A combined Glenstrata would also be vulnerable to a correction. And for a standalone Xstrata, life would go on.
Xstrata shareholders should say no 18 Jun 2012 The $45 mln three-year retention package to keep CEO Mick Davis at a merged Glencore-Xstrata is an insurance policy against the damage the company would suffer if he quit. But the premium is excessive. Investors should take a stand, even if that means losing the deal.
HK exchange makes risky $2.2 bln LME bet 15 Jun 2012 The exchange is paying an alarming 58 times last year’s earnings for the London Metals Exchange - even factoring in its new fee structure. There are no cost synergies, so all depends on whether mainland Chinese buyers will be allowed to play more on foreign commodity markets.
Oil plunge offers crude contrarians a foothold 14 Jun 2012 The price of Brent has fallen by nearly a quarter in two months. It could fall further still in the event of ’Eurogeddon’. But with investors at their most bearish on commodities since 2009 and Iran tensions festering in the background, contrarians must be tempted.
Indonesia rediscovers the Faustian bargain of FDI 11 Jun 2012 The central bank is fighting to defend the currency from foreign dismay over shifting policies. Record foreign direct investment is a vote of confidence, but does not confer carte blanche. Big inflows actually make Indonesia more, not less, susceptible to foreign mood swings.
Japan’s $3.6 bln Gavilon buy goes with the grain 29 May 2012 Marubeni’s swoop on U.S. agricultural specialist Gavilon can be put down to a strong yen and commodity traders’ quest for scale. As long as China’s appetite for commodities keeps growing, so will M&A among its suppliers.
Indian oil producers may be due a windfall 28 May 2012 Delhi presently subsidises refiners, and forces state-owned oil companies to bear part of the cost. Growing deficits mean that can’t continue. A logical move is for the government to let the price of diesel rise, which could mean a boost for the likes of Oil and Natural Gas Corp.
Debt markets may be good compromise for Dreyfus 18 May 2012 The commodities giant needs to invest to maintain its position in a consolidating and increasingly capital-intensive industry. Tapping debt markets and listing a Brazilian unit will give extra firepower without diluting family control. But the pressure to go further won’t abate.
Tempting mining valuations aren’t hard to resist 16 May 2012 The big miners were flirting with decade-low valuations even before the sector took an outsize hit in the recent sell-off. But that won’t necessarily lure bargain hunters. With margins already fat, Chinese demand weakening and costs rising, there’s no compelling equity story.
Jewellers needed to ease gold bugs’ pain 11 May 2012 The price of the yellow metal has hit a four-month low despite the recent flare-up in the euro zone. Physical buyers may eventually stop the slide, but without a clear signal from the Fed that it is prepared to open the money spigot again, the lacklustre performance could continue.
Resource industry needs better schmoozers 9 May 2012 Recent asset grabs show rich world companies need a better way to deal with resource nationalism. Grabby governments aren’t going away, but companies can minimise their risks. Recruiting more political talent to the top management teams would be a good way to start.
Qatar plays merger-maker at Glencore-Xstrata 12 Apr 2012 The Gulf state has been a successful arbitrageur in the past. Its 5 pct stake in Xstrata is under water following the recent equity market sell-off. But Qatar could provide extra leverage to help the miner extract a sweeter offer from suitor Glencore.
China’s grip on rare earths market looks fragile 12 Apr 2012 High rare earth prices won’t last forever. Beijing’s drive to shut dirty smelters may support prices near term. But miners elsewhere will be better placed as Chinese producers are held to higher standards. As new mines come online, greater competition should bring prices down.
Diamonds are simply too small for Rio and BHP 27 Mar 2012 While Anglo America has just dropped $5.1 bln bulking up in diamonds, Rio Tinto and BHP Billiton are running for the exits. The industry is just too small for the biggest miners, despite solid fundamentals. That clears the way for niche players or even private-equity firms.