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Re-focusing

Now Asia Resource Minerals plc (formerly Bumi plc) has cut ties with Indonesia’s Bakrie family and promised to return US$400 million to shareholders, it is casting its eye back over its Berau thermal coal operations in Indonesia.

Its March quarter numbers came in ahead of both JP Morgan and Barclays’ expectations, with coal production reaching 6.1Mt (5.3Mt a year earlier) in the first three months of the year and the cost of sales falling to US$38/t (US$39.4/t in the previous year). At the same time, the average selling price dropped to US$58.4/t though, down from US$60.4/t in the March quarter of 2013, as the market continued to be in surplus.

“We believe Berau’s cost of sales should continue to trend down in 2014 with further benefits from lower contractor rates [and]…  productivity gains,” JP Morgan said.  “In addition, we note the company has renegotiated the marketing margin it pays on its sales from 3.5% to 3% which should result in annual cost savings of [around] US$7 million, and that exploration spend should decline from US$11 million to US$4 million in 2014.”

Nick von Schirnding, CEO of Asia Resource Minerals, said: “Continued focus on cost and efficiency remains our priority in the continued weak coal price environment and our asset optimisation programme is beginning to make a meaningful impact.”

The company’s production guidance for 2014 was stated as 25.75Mt, up 10% from the 23.5Mt produced in 2013; however Barclays noted a potential hurdle to hitting this target. “There is a caveat here which is that currently the entire Indonesian coal industry has received a limit on coal exports, keeping it flat in 2014 vs 2013.” Such a cap wasn’t all bad news though, according to the bank. “If this is upheld we would expect a decent commodity price reaction.”

Article source: http://www.mining-journal.com/australia-asia/re-focusing

Padbury shelves $6 billion Oakajee project

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Article source: http://www.mining-journal.com/australia-asia/padbury-shelves-$6-billion-oakajee-project

BNP Paribas faces uncertainty over U.S. fine: CFO


PARIS (Reuters) – BNP Paribas (BNPP.PA), France’s biggest bank, warned it might be hit with a U.S. fine “far in excess” of the $1.1 billion it set aside last year to cover litigation costs linked to a potential breach of U.S. sanctions on countries including Iran.

The warning is a fresh sign of mounting legal woes for the global banking industry, which has been hit with investigations for a string of alleged misdeeds, including fixing benchmark interest rates and manipulating foreign-exchange markets.

“There is uncertainty with respect to the amount and the nature of penalties the U.S. will impose,” BNP Chief Financial Officer Lars Machenil told Reuters Insider television.

“It’s not impossible that the fine is far in excess of the ($1.1 billion) provision.”

When asked if the fine could reach $2 billion or $3 billion, BNP’s Machenil said: “There is nothing more to say.”

Past U.S. settlements have ensnared rivals such as Standard Chartered (STAN.L) – which agreed in 2012 to pay $327 million to resolve allegations that it violated U.S. sanctions against Iran, Sudan, Burma and Libya – and JPMorgan Chase (JPM.N), which agreed to pay $13 billion in 2013 over mortgage-related charges.

BNP otherwise reported a better-than-expected 5.2 percent rise in first-quarter net income on Wednesday, with the effects of its full takeover of Belgian subsidiary Fortis last year helping to counterbalance writedowns on assets exposed to the Ukraine crisis and rising loan losses in Italy.

The bank has a robust capital base relative to peers with a core Tier 1 ratio of 10.6 percent at end-March.

BNP considers it has “excess capital” but will not use this to buy back shares at their current valuation, Machenil said.

“Today we are (trading) somewhere around book value…I don’t think (buying back shares) is on the table,” he said. “You’re going to do share buybacks when your share price is substantially below book value.”

(Reporting by Lionel Laurent and Matthias Blamont; Editing by James Regan)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/h8h5uzcMTJs/story01.htm

Alstom to review GE offer for energy business


PARIS (Reuters) – France’s Alstom said on Wednesday it would review a binding offer from General Electric for its energy business by the end of May and left the door open for a competing bid from Germany’s Siemens.

GE said its offer for Alstom’s thermal power, renewable power and grid businesses totaled $16.9 billion, including enterprise value of $13.5 billion and $3.4 billion of net cash.

“Alstom would use the sale proceeds to strengthen its transport business and give it the means of an ambitious development, pay down its debt and return cash to its shareholders,” Alstom said in a statement.

Alstom said its board had also reviewed a declaration of interest from Siemens about an alternative deal, and that the German company would have access to information needed to make a binding offer.

Siemens said separately that it had decided to make an offer provided it was given access to Alstom’s data room, as well as “permission to interview the management during a period of four weeks, to enable Siemens to carry out a suitable due diligence”.

The leaders of both companies discussed their competing proposals on Monday with French President Francois Hollande who has said the government will place a priority on preserving jobs at one of the country’s key industrial firms.

GE said on Wednesday that the takeover would boost its earnings immediately, predicting an additional 8-10 cents of earnings per share by 2016, with approximately 75 percent of operating earnings coming from GE Industrial.

The U.S. group predicted that the integration would lead to efficiencies in supply chain, service infrastructure, commercial reach, and new product development to generate more than $1.2 billion in annual cost savings by year five.

Alstom said its board recognized “unanimously the strategic and industrial merits of this offer” and had decided to set up a committee of independent directors to review the proposed transaction before the end of May, taking into consideration all stakeholders interests including the French State.

($1 = 0.7237 Euros)

(Reporting by James Regan; Editing by Tim Hepher)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/wMexZgwNRTs/story01.htm

Some U.S. companies starting to feel pain from Ukraine crisis


NEW YORK (Reuters) – Turmoil in Ukraine and a series of Western sanctions on Russia are starting to hurt some U.S. corporations doing business in the region, with the latest round of U.S. penalties threatening to complicate matters further.

The companies have expressed concern about the weak Russian economy, the ruble’s decline and the potential for the crisis to worsen. There are also worries about a possible backlash in Russia against Western products.

U.S. Treasury Secretary Jack Lew said on Tuesday that international sanctions on Russia were putting pressure on Russia’s economy, and more actions could be taken if Moscow did not step back from the Ukraine crisis.

Companies began feeling the pain in the first quarter, “but it seems to be worse and more uncertain and spreading in the second quarter, which will obviously impact future earnings reports,” said Clement Miller, investment strategist at Wilmington Trust Investment Advisors.

McDonald’s Corp (MCD.N) , which imports about half of its food used in its Russian restaurants, said the weaker ruble hurt restaurant margins in Russia by 2 percentage points, dragging down the company’s overall margins in Europe.

“So if you assume the ruble is going to stay at this depressed level the rest of the year, that is something we are going to be battling with for the rest of the year in our European margins,” McDonald’s Chief Financial Officer Pete Bensen said on the company’s first-quarter conference call.

McDonald’s, which operates more than 400 restaurants in Russia, was the first international fast-food chain to tap the Russian market when it opened in Moscow’s Pushkin Square before the collapse of the Soviet Union. McDonald’s sees Russia as one of its top seven major markets outside the United States and Canada, according to its 2013 annual report.

Ford (F.N) also pointed to pressure on margins “because even though we are working hard to localize more and more parts we still have a substantial portion of the vehicles that we produce there that have imported components,” Chief Financial Officer Bob Shanks said in an interview.

Shanks, who also cited lower sales volume in Russia due to the country’s overall weakened economy, said the geopolitical issues in Russia “so far haven’t had much of an effect. But we’ll have to wait and see what comes down the road.”

Ford Sollers, a joint venture between Ford and Russian carmaker Sollers (SVAV.MM), announced earlier this month that it was cutting 700 staff in its plant near St Petersburg due to Russia’s deteriorating economy and weaker ruble.

FALLOUT FROM WEAK ROUBLE

The worst East-West crisis since the Cold War ended in 1991 is damaging Russia’s faltering economy. Surveys have suggested business confidence in the country is now the lowest since 2008, capital outflows have surged and the ruble is down about 8 percent against the dollar this year.

The weakening ruble has made it more costly for foreign companies with Russian operations to use the currency to import necessary goods or commodities.

Even companies that have yet to see significant harm to sales or profits from the tensions warn that the path ahead is uncertain, especially if escalating tensions lead to broader instability in eastern Europe and beyond.

“We are hoping for a peaceful resolution, but business confidence around the world could dampen, and trade and world GDP could slow should the situation deteriorate,” Caterpillar Inc (CAT.N) Chief Executive Doug Oberhelman said in a statement with the company’s quarterly results.

Caterpillar, which celebrated 100 years in Russia in 2013, says Russia and the Commonwealth of Independent States are “among the most dynamic developing territories for Caterpillar.”

CONSUMER BACKLASH?

The United States on Monday announced a new round of sanctions aimed at business leaders and companies close to Russian President Vladimir Putin, while the European Union followed up on Tuesday by naming 15 Russians and Ukrainians to its blacklist, moving to freeze assets and deny visas.

In response, Putin warned that he could reconsider the participation of Western companies in Russia’s economy, including energy projects, if sanctions continued.

While it was not clear what, if any, retaliatory steps the Russian leader might take, some experts warned of a backlash from Russian consumers. They speculated the sanctions could potentially leading to shunning of U.S. brands.

“I suspect there will be an adverse impact on U.S. companies operating in the market,” said Constantin Gurdgiev, an adjunct professor of finance at Trinity College Dublin. “Unfortunately, the bitter aftertaste of the sanctions is going to stay in popular minds for a long time.”

The deputy speaker of the Russian parliament, Vladimir Zhirinovsky, known for his anti-Western rhetoric, has already demanded that McDonald’s pull out of Russia.

Credit card company Visa Inc (V.N), which has 100 million cards in Russia, stopped providing services to two Russian banks after U.S. sanctions in March. The company said the sanctions were hurting its transaction volumes in Russia and that it expected them to have some impact on its results.

Chemicals maker DuPont (DD.N) said its position in Ukraine, while only a small percent of its sales, represents an important part of its growth plan. Ukraine seed sales fell below DuPont’s expectations in the quarter, the company said.

“Given our uncertain political situation there and the tightened credit markets, we are seeing seed-buying decisions being reduced or deferred,” DuPont Executive Vice President James Borel said on a conference call with analysts.

To be sure, some U.S. companies with a substantial presence in Russia have avoided any serious problems so far.

PepsiCo Inc (PEP.N), which has nine of the top 50 packaged food and soft drink brands in Russia, posted a 10 percent increase in first-quarter revenue in the country. PepsiCo CEO Indra Nooyi characterized the business climate in Russia as “very friendly,” adding that “we have great relationships with the government.”

Some companies are even seeing a silver lining in the crisis. Raytheon Co (RTN.N) Chief Executive Thomas Kennedy said tensions between Russia and Ukraine have boosted demand for the weapons maker’s products in eastern Europe.

(Additional reporting by Ben Klayman in Detroit, James B. Kelleher in Chicago, Aman Shah in Bangalore, Phil Wahba and Ernest Scheyder in New York and Andrea Shalal in Washington, editing by Ross Colvin)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/QXosGmSesf4/story01.htm

Fed expected to take further step toward ending bond buying


WASHINGTON (Reuters) – The Federal Reserve is expected to cut its bond-buying program by a further $10 billion on Wednesday as signs mount that the U.S. economy is starting to pull away from its winter slowdown.

Janet Yellen’s second policy-setting session as Fed chair should confirm the central bank’s plan to wind down its purchases of Treasuries and mortgage-backed securities by year-end – a sign of its confidence the economy is gaining traction.

The reduction likely to be announced at the end of the Fed’s two-day meeting would bring the total monthly purchases down to $45 billion, split between $25 billion of Treasuries and $20 billion of mortgage-backed securities.

But analysts expect little more out of the session as the Fed enters what may be a sort of holding pattern as it transitions from an era of crisis response to one of more normal monetary policy.

The meeting “will probably be a quiet one,” with the reduction in purchases “a foregone conclusion,” and no fresh economic forecasts from the members of the Fed’s policy-making committee, said Goldman Sachs senior economist Kris Dawsey.

A statement outlining the policy decision and the Fed’s view of the economy will be issued at 2 p.m. EDT.

Little or no change is expected in the Fed’s guidance on its key overnight interest rate, which it has kept near zero since the depths of the financial crisis in December 2008.

The Fed changed its guidance in March when it dropped language that said the target rate would not be increased until the unemployment rate fell to at least 6.5 percent.

Unemployment has been steadily approaching that threshold, and now stands at 6.7 percent. But with little sign of inflation, Yellen has said she feels there is still ample “slack” in the economy and a need to keep rates low to continue to support economic growth.

During an April 16 speech in New York, she said the United States may still be more than two years away from what the Fed now regards as the “longer-run normal unemployment rate” of between 5.2 percent and 5.6 percent.

“Thus far in the recovery and to this day, there is little question that the economy has remained far from maximum employment,” she said.

The last Fed statement said rates would likely remain near zero “for a considerable time after the asset purchase program ends.”

Investors have construed that to mean a rate increase is not likely until the middle of next year. That, however, will depend on the performance of an economy that is expanding, but not generating much upward pressure on wages and prices.

With inflation well below the central bank’s 2 percent objective, “We continue to see the Fed erring on the side of caution and moving on the policy rate later rather than sooner,” Millan Mulraine, deputy chief economist at TD Securities in New York, wrote in a preview of the Fed meeting.

“Indeed, the elevated level of economic slack, both in the labor market and other sectors of the economy, will ensure that wage pressures stay weak and pricing power among firms remains contained,” Mulraine said.

Data on gross domestic product for the first quarter will be released on Wednesday morning. Analysts expect a poor headline result, largely because of an unusually snowy winter that depressed economic activity.

But the underlying trend is much stronger, said Ben Herzon, senior economist with consulting firm Macroeconomic Advisers.

Both the harsh winter and a slowdown in the accumulation of business inventories will produce an annualized GDP growth reading of about 1 percent for the first quarter, he said. But recent data has already shown the economy is bouncing back.

“The economy is continuing to progress,” Herzon said. “Not blockbuster, but decent … The pace of GDP growth is sufficient to keep the unemployment rate moving down.”

(Reporting by Howard Schneider; Editing by Ken Wills)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ZHAv6-N-fyc/story01.htm

Cold weather seen temporarily slowing U.S. economy


WASHINGTON (Reuters) – U.S. economic growth likely braked sharply in the first quarter due partly to an unusually cold and disruptive winter, but activity already appears to be bouncing back.

Gross domestic product probably grew at a 1.2 percent annual rate, according to a Reuters survey of economists, pulling back from the fourth quarter’s 2.6 percent pace.

An abrupt slowdown in export growth and a less rapid pace of restocking by businesses are expected to have added to the drag from the weather.

U.S. financial markets and Federal Reserve officials are likely to brush aside the slowdown in growth, given the temporary factors at play, and focus on recent data suggesting strength at the tail end of the quarter.

“We have effectively written off first-quarter growth performance in part due to the adverse weather conditions,” said

Millan Mulraine, deputy chief economist at TD Securities in New York. “With underlying momentum remaining favorable we continue to anticipate a meaningful rebound in the second quarter.”

The Commerce Department will release its first snapshot of first-quarter GDP at 8:30 a.m. EDT on Wednesday, just hours before the Fed wraps up a two-day policy meeting.

Fed officials, who have already dismissed the first quarter as being compromised by the weather, are expected to announce a further reduction in the amount of money they are pumping into the economy through monthly bond purchases.

“They will shrug off the report and continue to stress that the outlook is bright and that economy is poised to accelerate going forward,” said Thomas Costerg, a U.S. economist at Standard Chartered Bank in New York.

FEWER ORDERS AT FACTORIES

Severe weather may have chopped off as much as 1.4 percentage points from GDP growth. After aggressively restocking in the second half of 2013, businesses have been accumulating inventory at a moderate pace.

That has resulted in manufacturers receiving fewer orders.

Trade also likely undercut growth, partly because of the weather, which left goods piling up at ports.

Together, inventories and trade are forecast to slice off at least one percentage point from GDP growth.

The economy’s fundamentals, however, likely remained solid. A measure of domestic demand that strips out exports and inventories is expected to have accelerated from the fourth quarter’s tepid 1.6 percent pace.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, probably slowed from the fourth-quarter’s brisk 3.3 percent pace as freezing temperatures reduced foot traffic to shopping malls.

But demand for heating likely tempered the deceleration. Economists said the weather also likely undercut business spending on equipment, but investment in nonresidential structures, such as gas drilling, probably rebounded.

Investment in home building is expected to have contracted for a second straight quarter, in part because of the weather. But a rise in mortgage rates over the past year has also hurt.

A second quarter of contraction in spending on home building would suggest a housing recession, which could raise some eyebrows at the U.S. central bank. A bounce back is, however, expected in the April-June period.

“It’s a surprise that housing is actually a drag on GDP, but I don’t think you will see another contraction,” said Costerg.

(Reporting by Lucia Mutikani; Editing by Meredith Mazzilli)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/MQmjExWAVSA/story01.htm

Asian shares struggle; yen firms as BOJ holds pat


TOKYO (Reuters) – Asian shares turned lower on Wednesday, while a stronger yen weighed on Tokyo stocks after the Bank of Japan held policy steady as expected.

Investors stayed cautious before the outcome of the Federal Reserve’s policy meeting later in the session as well as key U.S. jobs data on Friday, and against a backdrop of continuing tension in Ukraine.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.3 percent, erasing early gains but still on track for a monthly rise of over 1 percent.

Hong Kong’s Hang Seng index slumped 1.2 percent as investors locked in gains from a late-afternoon surge on Tuesday that sent it up more than 1 percent in the final hour before the close.

Japan’s Nikkei stock average also erased early gains and shed 0.1 percent, after the BOJ board decided unanimously to keep monetary policy steady as expected.

The BOJ will release its latest economic projections later on Wednesday. Central bank policymakers will likely keep their inflation forecast for fiscal 2015 roughly unchanged from the current 1.9 percent, and estimate fiscal 2016 inflation close to 2 percent, sources have told Reuters.

Upbeat projections could bolster a growing market consensus that the BOJ will stand pat until around July or even longer to monitor how Japan’s economy has weathered this month’s hike to the national sales tax.

“The BOJ will stress that companies are smoothly passing on the costs of the sales tax hike to consumers, and that this is because of strong demand,” said Masaaki Kanno, chief Japan economist at JPMorgan Securities.

FED MEETING

Later on Wednesday, Fed officials are expected to decide unanimously at the conclusion of their two-day meeting to continue tapering the central bank’s massive bond-buying stimulus. Investors will focus on what their statement implies about the monetary policy outlook.

“For the most part we expect the statement to remain virtually unchanged. Having just shifted to qualitative guidance in March, the central bank is not planning to make any significant alterations in the near future,” said Kathy Lien, managing director of FX strategy at BK Asset Management.

“Expectations for steady taper explain the dollar’s muted reaction to positive and negative data,” she said in a note to clients.

Just ahead of the Fed meeting, gross domestic product figures are expected to show the U.S. economy grew at a 1.2 percent annual rate in the first quarter, according to a Reuters survey of economists, as winter weather, weak exports and a slower pace of restocking by businesses took their toll.

Market participants continued to track developments in Ukraine, where hundreds of pro-Moscow separatists stormed government buildings in a provincial capitals on Tuesday and fired on police holed up in a regional headquarters.

The dollar shed about 0.3 percent against the yen to 102.37 yen, moving away from a three-week high of 102.79 yen hit on Tuesday.

Against a basket of currencies, the dollar edged down to 79.800.

EURO INFLATION

The euro remained under pressure after weaker-than-expected German inflation data raised speculation of more easing in Europe.

Against the greenback, the euro inched down to $1.3806 after losing 0.3 percent on Tuesday. Against its Japanese counterpart, the euro dropped 0.3 percent to 141.33 yen, after shedding 0.2 percent the previous day.

Preliminary German data showed annual inflation was a softer-than-expected 1.1 percent in April. European policymakers are concerned about the risk of deflation, with euro zone prices rising around 0.5 percent, well below the European Central Bank’s medium-term target of just below 2 percent.

The latest price report due later on Wednesday is expected to show euro zone inflation picking up to a still-low 0.8 percent in April.

In commodities trading, spot gold slipped 0.2 percent to $1,293.86 an ounce. U.S. crude slipped 0.8 percent to $100.49 per barrel.

(Additional reporting by Leika Kihara in Tokyo and Natalie Thomas in Hong Kong; Editing by Chris Gallagher)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/OCqjNhwSLjs/story01.htm

Exelon to buy Pepco Holdings for more than $5.4 billion: Bloomberg


(Reuters) – Nuclear power company Exelon Corp (EXC.N) agreed to buy utility company Pepco Holdings Inc (POM.N) for more than $5.4 billion in cash, Bloomberg reported, citing people familiar with the transaction.

Pepco, with a market capitalization of about $5.71 billion, operates utilities in Delaware, Maryland and New Jersey and serves about 2 million customers.

The deal is expected to be announced as early as Wednesday morning, according to the report. (r.reuters.com/wav88v)

Exelon and Pepco were not immediately available for comment outside regular U.S. business hours.

Chicago-based Exelon struck a deal three years ago to buy rival Constellation Energy Group for $7.9 billion, in a bid to become the largest generator of competitively priced electricity in the United States. (r.reuters.com/bev88v)

(Reporting by Arnab Sen in Bangalore; Editing by Gopakumar Warrier)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/rk8yR2QNYEo/story01.htm