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Fed expected to keep interest rates steady as Yellen era ends

WASHINGTON (Reuters) – The Federal Reserve is expected to leave interest rates unchanged on Wednesday while signaling a gradual tightening of monetary policy later this year as the U.S. economy continues to expand and job gains remain solid.

Investors will focus on the U.S. central bank’s gauge of inflation, which remains stubbornly below its 2 percent target, the risks it sees to its economic outlook, and any assessment of the impact of the Trump administration’s tax overhaul on growth.

The Fed is due to release a statement at the end of its latest two-day policy meeting at 2 p.m. EST. The policy meeting is Fed Chair Janet Yellen’s last as head of the central bank.

The economy has added about 10 million jobs and unemployment has fallen to a 17-year low of 4.1 percent during Yellen’s four-year tenure while interest rates have slowly risen from the near-zero levels put in place to fight the 2007-2009 recession.

Incoming Fed chief Jerome Powell has worked closely with Yellen and embraces her view that keeping rates on a slow upward path will allow unemployment to fall further, coaxing workers back into the labor force and fostering stronger wage growth.

With the outset of the Powell era only days away, analysts do not expect a dramatic shift from the Fed on Wednesday.

“Why change the current message on policy and possibly sway market opinion one way or the other, just before Powell takes over?” said Lou Brien, an analyst for Chicago trading firm DRW. “I don’t think Powell will shift the direction of policy in March, but it is only fair to give him a clean slate just in case.”

The Fed raised rates three times last year and currently projects another three hikes in 2018. But that forecast, which has been largely accepted on Wall Street, will hinge on a continued pickup in inflation.

Even a small upgrade in the central bank’s description of inflation or its view of the balance of risks to the economic outlook could suggest a slightly faster pace of rate hikes than currently anticipated.

The economy grew 2.3 percent last year.

Several Fed policymakers have said that President Donald Trump’s restructuring of the U.S. tax code, including an estimated $1.5 trillion in corporate and individual tax cuts, could spur growth this year.

U.S. stocks have risen sharply since the tax package passed Congress late last year on expectations of a rise in corporate profits.

Reporting by Ann Saphir; Editing by Paul Simao

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Blackstone bets big on Wall St. information business with Thomson Reuters deal

LONDON/NEW YORK (Reuters) – U.S. private equity firm Blackstone Group LP catapulted itself into the major leagues of Wall Street’s financial information industry on Tuesday with the acquisition of a majority stake in the Financial and Risk business of Thomson Reuters Corp.

The $20 billion deal is Blackstone’s biggest bet since the financial crisis and pits co-founder Stephen Schwarzman against fellow billionaire and former New York Mayor Michael Bloomberg. Bloomberg’s eponymous terminals are the market leader in providing traders, bankers and investors with news, data and analytics.

Blackstone will acquire a 55 percent stake in a newly hived off FR business, a statement from both companies said. Thomson Reuters will retain a 45 percent holding and will receive approximately $17 billion, including about $3 billion in cash and $14 billion of debt and preferred equity issued by the new business, the companies said.

The  deal will give Thomson Reuters, controlled by Canada’s Thomson family, a formidable ally as it seeks to reinvigorate a business facing challenges from a shrinking and budget-conscious customer base. 

Blackstone has a track record of cutting costs and, as one of the world’s biggest investors, it has business relationships with most of the major banks on Wall Street that are clients for Thomson Reuters’ flagship desktop product Eikon.

The Canada Pension Plan Investment Board and Singapore’s GIC will invest alongside Blackstone. The amount they will provide was not revealed. The Canada Pension Plan Investment Board declined to comment. A spokeswoman for GIC declined to comment.

Talks on a possible deal began in earnest last summer, two sources familiar with the negotiations said.

The partnership will be managed by a 10-person board composed of five representatives from Blackstone and four from Thomson Reuters. The President and CEO of the new partnership will serve as a non-voting member of the board following the closing of the transaction. The companies did not say who that person would be.

Thomson Reuters has relied heavily on cost cutting in recent years as its core customers, including banks, brokerages and investment houses, retrench in the face of weak trading conditions, tougher regulations and the rise of passive investing.

U.S.-listed shares of Thomson Reuters were up 2.2 percent at $47.52 in extended trading, after rising 7.1 percent in the regular session, while shares of Blackstone were down 0.2 percent after the bell.


As talks between the two sides intensified, the biggest sticking point had been what the partnership would mean for Reuters News, the international news agency, which supplies the Eikon terminal with headlines, stories and analysis, said the two sources, who spoke on condition of anonymity.

One issue centered around the Thomson Reuters Trust Principles, which commits Reuters to preserving its “independence, integrity, and freedom from bias” in supplying news. 

In an interview, Kim Williams, chairman of the Thomson Reuters Founders Share Company, said “we are satisfied that the nature of the contract ensures that appropriate quality of editorial is sustained.”

In its statement, Thomson Reuters and the Thomson Reuters Founders Share Co, which has overseen Reuters’ editorial independence since the company was first publicly listed in the 1980s, cited “consequential modifications” to what it described as the Trust Principles “arrangements.” The changes were not spelled out.

Until now, the principles have applied not just to Reuters News but to all Thomson Reuters business units.

Thomson Reuters Chief Executive Jim Smith said in an interview that the partnership with Blackstone required clarifying where the Trust Principles apply.

Under the deal with Blackstone, “The Trust Principles apply any place where we use the Reuters brand or a third party uses the Reuters brand in a product,” Smith said.

Reuters News will remain part of Thomson Reuters, along with its Legal and Tax and Accounting divisions. The new FR company will make minimum annual payments of $325 million to Reuters over 30 years to secure access to its news service, equating to almost $10 billion. The payments will be adjusted for inflation, company executives said.

Thomson Reuters Chief Financial Officer Stephane Bello told an investor call that the payment represented what FR used to allocate to Reuters News, plus “a tiny bit more”.

After the deal, Reuters News will have about $625 million in revenues, including the annual payment from FR and about $300 million in revenues from its media business, slightly higher than its cost base, Bello said.

Williams said that an advantage of the deal was that Reuters will move “from being a cost center inside Thomson Reuters to being a full operating business unit with its own profit and loss accounts.”

Thomson Reuters expects the transaction to close in the second half of 2018. The company said on Tuesday it expected 2017 results, which it will release next month, to meet or exceed guidance, with revenues expected to rise by 1 percent.


  • Factbox: A chronology of Thomson Reuters Corp
  • Factbox – Thomson Reuters: the history and purpose of the ‘Trust Principles’

The proceeds of $17 billion that Thomson Reuters will glean from the deal match the amount that Thomson Corp, controlled by the Thomson family, paid for London-based Reuters in 2008. That deal created the Thomson Reuters Group.

The company plans to use $9 billion to $10 billion to buy back shares, and use the rest to pay down debt, invest in its Legal and Tax Accounting units and make selective acquisitions.

Woodbridge, the Thomson family’s investment company, will take part in the share repurchase, maintaining its ownership in Thomson Reuters in the 50 to 60 percent range. Woodbridge, which currently owns 64 pct of Thomson Reuters, could not immediately be reached to comment on the deal.

Over the past six years, the family has been making divestments, reducing the number of products within the FR segment by about 70 percent since 2012, while shrinking the division’s workforce by 25 percent, according to Morningstar Equity Research. Thomson Reuters Chief Executive Smith told an investor call that there was room for more cost cuts in the new FR business.

Thomson Reuters has also sought to sell non-core assets, such as its intellectual property and science business, which it sold to private equity firms Onex Corp and Baring Private Equity Asia for $3.55 billion in 2016.

Reporting by Pamela Barbaglia, Jessica Toonkel and Greg Roumeliotis; Writing by Carmel Crimmins; editing by Grant McCool

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The delusion game

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Titan’s zinc Empire underway

Titan bought the former St Lawrence zinc mine, once owned by Hudbay Minerals, from Star Mountain Resources in December 2016.

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Trump vows to protect U.S. intellectual property, without naming China

WASHINGTON (Reuters) – U.S. President Donald Trump vowed on Tuesday to protect American intellectual property, but made little mention of China, which his administration has accused of trade abuses, in his first State of the Union speech to Congress.

Trump had been expected to deliver strong warnings to countries about unfair trade practices, including stealing intellectual property and providing state aid to their industries.

Instead, his comments on trade during the speech were restricted to several sentences that omitted China in which he repeated that “fair and reciprocal” trade was necessary.

“We will work to fix bad trade deals and negotiate new ones,” Trump said, adding: “We will protect American workers and American intellectual property, through strong enforcement of our trade rules.”

Trump has threatened to walk away from trade agreements like the North American Free Trade Agreement with Canada and Mexico, and the U.S-South Korean Free Trade Agreement, unless they bolster U.S. manufacturing and American jobs.

Last week, he imposed tariffs on imported washing machines and solar panels in his first major trade actions since withdrawing the United States from the Trans Pacific Partnership trade agreement within weeks of taking office last year.

Trump is considering broad tariffs or quotas on steel and aluminum following investigations by the U.S. Department of Commerce into whether rising steel and aluminum imports represent a threat to national security.

In his speech, Trump briefly referred to China as among “rivals” that challenge U.S. interests, values and the economy, prompting China’s Foreign Ministry to say that the United States should “abandon its Cold War mentality and outdated zero-sum game ideas.”

“China and the United States have broad and important joint interests,” ministry spokeswoman Hua Chunying told a news briefing in Beijing on Wednesday when asked about Trump’s remarks, adding that those interests were bigger than the two countries’ differences.

The Alliance for American Manufacturing, a group representing steel and other basic industries, welcomed Trump’s remarks on trade in his speech but called for actions to combat Chinese imports.

“This speech won’t change China’s behavior and defend American jobs. Only action will,” said AAM President Scott Paul, “It’s time for the president’s policies and actions to match his talk.”

Reporting by Lesley Wroughton; Additional reporting by Michael Martina in Beijing; Editing by Peter Cooney and Nick Macfie

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Endeavour looks to raise almost US$330 million

The company has launched a private placement of convertible senior notes, at a minimum of $200,000 for a total of $300 million, and has granted the initial purchasers a 30-day option to purchase additional notes totalling up to $30 million, which if exercised could take net proceeds to $325.9 million.

The notes will mature in February 2023 and may be redeemed for shares, cash or a combination.

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Endeavour has also applied for the notes to list on the International Stock Exchange (formerly the Channel Islands Securities Exchange) or another exchange by April 30.

The company’s net debt increased from $26 million in 2016 to $221 million in 2017, mainly due to the drawdown of $160 million on its Revolving Credit Facility (RCF) for the construction of the Houndé mine in Burkina Faso which poured first gold ahead of schedule and below budget in October. 

In its full-year results released this month, Endeavour said it was well positioned to fund growth as its available sources of financing and liquidity totalled $322 million – $122 million cash and $200 million undrawn on the RCF, as well as strong cash flow generation, including the remaining proceeds from its Nzema sale. 

The gold producer achieved guidance in 2017, producing 663,000 ounces, and expects this to increase in 2018 to 670,000-720,000oz at an all-in sustaining cost of $840-$890/oz.

Endeavour shares, which have ranged between C$19.77-$28.81 over the past year, closed down 13.15% yesterday to $21.80.


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Vale looks to first-ever cobalt stream: report

Vale has hired Canada’s Bank of Montreal (BMO) to raise around US$500 million from bidders for cobalt that would be produced at its Voisey’s Bay nickel mine in eastern Canada, four sources told Reuters.

The financing in return for future cobalt production could help fund Vale’s underground development at Voisey’s Bay, which has twice been put on hold, to extend the operation’s mine life as the openpit is due to finish in 2021.

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It would also tie into the company’s plans to diversify away from iron ore.

CEO Fabio Schvartsman told an event in Sao Paulo this week the company wanted to reduce its proportion of iron ore earnings from 90% to 70% within two years, Reuters reported.

The cobalt streaming plans follow diversified miner Glencore (LN:GLEN) last month teaming up with the Ontario Teachers’ Pension Plan to form a joint venture, BaseCore Metals, focused on base metals streams and royalties.

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Osisko Metals hopeful of growing zinc trend

Among the highlights, one drill hole intersected 11.4m grading 7.74% zinc, 2.42% lead, 0.48% copper, 79.34g/t silver and 0.24g/t gold, in a previously unrecognised massive sulphide extension of the deposit.

The company said the results were of “particular importance”.

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Widely-spaced historical intercepts were not previously interpreted as one continuous zone but the results suggested the thicker massive sulphide trend extended over a lateral strike length of 420m, with the potential to extend the deposit boundary further, the company said.

It is aiming to develop two mining camps, consolidating 63,000ha in New Brunswick’s Bathurst Mining Camp and aiming to complete its Pine Point acquisition this quarter, to feed into a central concentrator.

Osisko Mining (CN:OSK) and Osisko Gold Royalties (CN:OR) are major shareholders of the company, which formed in June last year when the former Bowmore Exploration started acquired holdings in New Brunswick.

Osisko Metals shares closed down almost 5% to C78c, well below a 52-week peak reached in August of $1.74.

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