Mostly because they already lost all their money in TC :-D
Come on, that was funny, wasn't it?
Gotta keep a sense of humor.
Yes, good post.
How quickly do they spin up the moly circuit vs. flushing it ?
Sure, price moves up, the incentive is there to turn those lines on quickly. That's always the risk.
If the copper mine, however, itself, is down (or throttled back), that takes longer to restart, and it effects the restart of the back-end by-product operation, naturally.
But by-product guys (who are smart) will want to cut back to "drain the swamp".
Mentally deficient clowns like SCCO , however, continue to plow ahead and increase moly supply, and then wonder why the price is under pressure.
Your point about new copper mines (whose deposits have some moly) is a very, valid point. Indeed.
The moly circuit is quite expensive to set up, and the costs are higher for the operation as a whole. If moly were to become functionally obsolete (because some scientist develops something "cooler, cheaper".......), then moly becomes a liability regarding development of a copper deposit, actually. I don't see that happening, though. However, low moly prices do effect the thinking on whether to build a line or even operate it at any level of capacity, if one is built. Toromocho is "case & point" on that front.
Yes, another good point. By-product moly quality is generally low.
It costs too much to process a high-grade moly conc. at most copper-moly mines since the overall moly grade is low, and these miners usually go with the bare minimum, regarding recovery of it.
That means a 40% "dog" concentrate is produced.
Few copper mines produce a quality moly conc. product.
Concentrate from primary mines is clearly superior.
Problem is, the demand is slack, and quality issues are not prevalent, at present, as there is enough quality conc. floating around to address this issue, again, at present.
SCCO only averaged $5.05/lb (in Q2) for their by-product moly concentrate.
Illustrates how much of a discount roasters exact on lower-quality stuff.
Sentiment: Strong Buy
I mean good news is it has costs and at a certain point people stop those moly circuits. Bad news is how many mines have them set up, so if prices recover how quickly do they spin that circuit back up? Other good news though is that new mines or ones that were looking at adding Moly circuits probably won't even consider it for a long, long time after seeing how it has worked out for mines in this stretch. No way a CEO wants to talk about CapEx for a Moly circuit at a Cu mine anytime in the near future. I've been shocked that the quality of Mb product hasn't already become a huge issue, I had thought smelters needed quality Mb to mix with the stuff coming from by-product operations, but this doesn't appear to have caused any problems for the steel industry yet.
There's probably a scenario whereby TC would be money ahead to redeem at least some of 12.5% coupon bonds due 05/01/19 in order to save the maximum amount of interest. Of course if Cu, Au, and Mo prices don't increase in the years ahead, creditors holding the 9.75% coupon could get MM in 2018 following a default unless refinancing or an equity insertion or both occurred prior to prevent a default.
Here's what's crazy. And why things could snap FAST... Tc has enough cash on hand to pay the highest coupon bond of 2019 in full and still have some $90m cash in the bank. That's crazy. Saving another $23m per yr to boot. That's crazy.
All three TC bond issues decrease slightly over the past week. The 9.75% coupon due 12/01/17 decreased $1.75 to $95.87. The 7.375% coupon due 06/01/18 decreased $1.01 to $61.47. The 12.5% coupon due 05/01/2019 decreased $0.70 to $65.54.
small o. and it's on;y 3 shares per box. but in 2016 you'll be able to buy 3 boxes per share. Bought some FCX today, guess why.
If expectations are real regarding the grade curve, and I believe they are, 2017 is a troubling year for copper output. It will be down sharply, even with ramp-ups from projects completed in 2014-2016 kicking in growth.
2016, on paper, we have some net growth (about 3.7%). This assumes anyone whose down a % of output in 2014-2015 for any reason other than grade decline.....won't be down (at all) in 2016.
This further assumes anybody who shut down or suspended in 2015 for whatever reason (inability to operate, unprofitable, etc.) magically reopens at full output next year, Jan 1st.
So this 3.7% growth number is pretty optimistic at this point, and the bias is downward on where it goes.
Hopefully there won't be this constant drumbeat of "CHINA (could be) COLLAPSING"........."could", "maybe", "perhaps", getting tired of the baseless (and rampant) speculation about China.
If they are hosed, so is the US (since China is still an export-driven, manufacturing-based economy), and the US is a merely an over-regulated, social-media driven, pizza, chicken-wings, retirement home / bed pan-based economy.
I like their odds, frankly, better than ours.
Sentiment: Strong Buy
China is slower than last year, but certain media elements are having fun pumping the "COLLAPSING CHINA" spin. It's certainly taking on the flavor of American schadenfreude, and those usually pumping this stuff, have a vested interest in promulgating such. Follow the money. If I were a hedge fund short copper, I'd be calling every journalist I could find to pump the story.
Saw an interview recently of some Brit economist whose firm recently developed a metric to track real economy growth, based on recent comments from Li Keqiang about Chinese economic releases.
This firm tracks electricity consumption, rail volumes, and bank credit growth, because that's what Li Keqiang (China's primier). These guys said China is growing at 3.3 to 3.8%, vs. the official 7% numbers.
I suspect the rail numbers are lower as bulk traffic is down for domestic iron ore, as the domestic Chinese iron ore industry produces a low-grade product that many of the new Chinese steel mills don't want anymore. They all want the good Aussie stuff (which is higher grade, and cheaper anyway !!!) which comes in on ships to ports where all the Chinese steel companies have been building these new plants for the last decade. Same goes for met and some thermal coal.
So that explains some softness in the rail freight numbers being down about 10% YOY.
Electric production / consumption numbers are softer vs. last year but still up. Some of this might be explained from economic softness, or just changes in who the big users are (as well as efficiency). Electricity in China isn't cheap.
Bank credit expansion was still healthy.
So an economy as large as China's is bound to slow down a bit, but it's not collapsing.
Gov't won't let that happen, and they have a lot of firepower to forestall such.
The US gets soft, the Fed has nothing in the chamber to fire at it.
The US would love economic growth of 3.3 to 3.8% if that's what China is really only doing.
Sentiment: Strong Buy
That is why they are rich. Pamela Anderson born on Vancouver Island. I am sure Do would have liked to run into her 30yrs ago at the Bengal. Those lights on the Empress would have shined even brighter. If you like Kipling might I suggest "God's of the Copybook Headings"
I know you have been providing lots of info regarding 2015 mine disruptions and their impact on total production for the year. I am wondering what 2016 might look like. Most parties agree that beginning in 2017, mine output will decline (of course, I guess this depends on the world economy between now and then).
But, I believe 2016 was suppose to be another year, like 2015, of increased production based on ramp ups by such mines as SG, MHM, Oyu Tolgoi, & Caserones. Some of this added output will now be negated by the closures you mentioned. I know there are many unknowns at this point - copper prices, Zambia power situation, status of Chinese mines, whether FCX shuts down N. Amer mines to name just a few.
If we assume output in 2015 ends up being 300-500kT below 2014, how might 2016 shape up taking reasonable guesses at some of these unknowns (One might assume a 15% decline in Zambia, that FCX shuts down their marginal mines in NA, that 1/2 the Chinese mines start mining again in '16). Then, we have a starting point against which to factor in disruptions as they occur over the course of the year.
I'm trying to see if 2016 looks like another year where production might be up some 500kT taking into account assumed gains from the ramp ups and grade declines from older mines. Or, due to closures and extended ramp ups, the 2017 deficit may have moved up by one year.
FCX isn't making money on by-product moly from their NA copper operations or from Cerro Verde. It's essentially a push.
People think moly by-product is magically free. These people believe in unicorns.
Since moly by-product is concentrated on a separate circuit, there are incremental costs.
Also, copper-moly deposits require extra 'cleaning process' steps to scrub as much moly as humanly possible from copper concentrate. Copper smelters detest moly impurities in copper concentrate, and penalize heavily for it, since it has a high melt point. It fouls up the works, so violators get hit hard. Hence, mines expect to pay more to concentrate a clean copper conc. from a copper-moly deposit vs. a deposit that is only copper.
Thus, no free lunch...
Early in the FCX CC for Q2, FCX mentioned they were looking at slowing their moly output down on the by-product side. I scratched my head when they said that, but that was before I had chance to review their #'s fully.
Two days later, the market kicked their face in, and they came out with a press release they would 'rationalize copper assets' (ostensibly) "...to preserve the resources of these operations....". They were vague but hinted (however subtly) that NA copper ops were the target.
I know in the past, Cypress Amax and Phelps Dodge always targeted Morenci and/or Baghdad and usually always Sierrita for reduction of output or suspensions, in addition to reducing output at their SX-EW ops. FCX won't touch Morenci, but Sierrita slow down is quite possible. The grades at Sierrita are lower than Bagdad. (For the record, Mt. Milligan has better grade than Sierrita. which only has trace gold). The operation has to be running at a loss, given it's old, deep, has 2.5x employees that MM has per ton run, lower grades, zip gold. So that's what I figure they do. Suspending Sierrita completely (or just reducing output) and suspending their moly ops there, will take over 20mm lbs. of moly by-product off the market.
Sentiment: Strong Buy