By-Monthly Report of the MALAYSIAN CHAMBER OF

For Members Only March — April 2011

MALAYSIAN MALAYSIAN MINERALS & METALS MINERALS & METALS

BULLETINBULLETIN

Gold Market ReviewGold Market Review

Gold News HighlightsGold News Highlights ► Silver State Launches Dinar, Dirham Coins ► Pacific Mine to Reopen As Gold Fever

Grips Region ► Raub was the El Dorado of Malaya ► Physical Gold Still Very Much in Demand:

Jewellers ► Gold Roars Past US$1,500 ► Cops: Gold Price Hike may Attract Nega-

tive Attention ► Gold Soars to Record in Sixth Straight Ses-

sion ► Gold Mining Affected by Rocky Issues ► Golden Offer for Al Rajhi Customers ► Gold Strikes Record as Dollar Wilts

Aluminium News HighlightsAluminium News Highlights ► Press Metal Picks Samalaju for Expansion ► Joint Agreement on RM5bil Aluminium

Smelting Plant ► Chinalco, GIIG to Build Aluminium Smelter

Near Bintulu

Steel News HighlightsSteel News Highlights ► Demand Boost Seen for Korean, Taiwan-

ese Steel ► JFE Steel may Trim Output ► Posco Q1 Profit Misses Forecast on Higher

Costs ► Vale may Cut Stake in Steel Mill JV with

Korean Firms

Iron Ore News HighlightsIron Ore News Highlights ► Mining Giants Eye China’s Western Re-

gions for Future Growth ► Rio and Guinea in Iron-ore Deal

Coal News HighlightsCoal News Highlights ► Malaysia Smelting to Sell Asiatic Stake ► Rio in Talks to Buy Shares in Riversdale ► High Coal Price Hampers TNB ► Coal Prices at 4-month High

Other Minerals/Metals News High-Other Minerals/Metals News High-lightslights ► Malaysian Steel Firms Seek Safeguards ► Taking a Risk for Rare Earths ► Lynas Must Meet M’sian AELB Standards ► OMH Plans Sarawak Smelter ► Rare Earths Exports to Reach RM8bil ► Rio Tinto Eyeing Quality Mining Assets ► China to Raise Tax on Rare Earths in April ► BHP Spending US$9.5b to Boost Mining

Ops ► Lynas of Australia Sheds Some Light on

Controversial Project ► China’s Minmetals Offers US$6.5b for

Equinox ► Press Metal, Partners Sign Deal with Sara-

wak Energy ► Record Profits Seen for Rio, BHP ► Wild Weather Slams Rio Tinto Coal, Iron

Ore Output ► Glencore Said to be Worth Up to US$69b ► Minmetals Withdraws Offer for Equinox ► New Rare Earth Plant Deal is a No-go,

INSIDE THIS IS-INSIDE THIS IS-

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MARKET REVIEWMARKET REVIEW

MARCH Gold opened the first trading day of March on the London Bullion Market at US$1,420.75 per oz, higher than its clos-ing price in February at US$1,411.00 per oz. Gold was traded during the March trading month between a price range of US$1,400.50 per oz to US$1,447.00 per oz. The average price for the month was US$1,424.02 per oz. The gold market during the month was very much influ-enced by the strength of the US dollar. Gold prices were in a somewhat flat mo-mentum during the first and second trad-ing weeks. During the third trading week, prices softened to their lowest level for the month at US$1,400.50 per oz on 15 March. Thereafter, supported by a weaker dollar and soaring oil prices, gold prices rebounded to US$1,447.00 per oz on 24 March, their highest level for the month, before sliding slightly as the fourth trading week ended with the precious metal's tra-

ditional inverse relationship with the dollar remained intact. During the final trading week, gold prices rebounded but were short lived as prices softened again to close the trading month of March at US$1,439.00 per oz.

APRIL

Gold opened the trading month of April at US$1,418.00 per oz, which was also the month’s lowest price level. The precious metal was traded within a price range of US$1,418.00 per oz to US$1,535.50 per oz during the month while its average price was US$1,473.81 per oz. Gold prices during the month were on an upward momentum due to the ongoing Eurozone sovereign debt crisis, political instability in the Middle East and North Africa, rising global inflation and worries over the fiscal stability of the United States. Gold closed the trading month of April at US$1,535.50 per oz, which was also its highest price level for the month. Table 1 below shows the major gold mar-

kets' price per-formance during the months of

London After-noon

NY Comex

MARCH

Low 1400.50 1387.80

High 1447.00 1441.20

Average 1424.02 1422.55

APRIL

Low 1418.00 1419.90

High 1535.50 1506.80

Average 1473.81 1470.32

Table 1: GOLD MARKET OVERVIEW (US$/OZ)

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MARCH & APRIL 2011 GOLD PRICES

MARCH & APRIL 2011 GOLD PRICES

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Gold News HighlightsGold News Highlights Silver State Lauches Dinar, Dirham CoinsSilver State Lauches Dinar, Dirham Coins Perak yesterday launched the gold dinar and silver dirham coins for investment and saving transactions. The coins were officially launched by Perak Menteri Besar Datuk Seri Dr Zambry Abd Kadir. Kelantan was the first state in the country to launch dinar and dir-ham on Aug 12 last year as an alternative currency. Zambry stressed the coins were not launched as a currency but for diversify-ing investment, a hedge against inflation, as an option to be used as marriage dowry, as corporate gifts and medals for achieve-ments."Global inflation is on the rise and gold has shown to be a good hedge against it... price of gold rises during times of economic distress and turmoil." A gramme of gold was RM30 in 2000 but now it is hovering at RM130. Silver price has been quadrupling in the past 12 months and the appreciation is 12.5 per cent more than gold. "Our gold dinar and silver dirham are 99.99 per cent pure, " he said in his launch address. Also present was GoldNet International Sdn Bhd executive chairman Datuk Rais Hussin Mohamed Ariff. The coins are minted by Mariwasa Kraftangan in Kuala Kangsar. The task of launching the coins was given to GoldNet International Sdn Bhd, jointly-owned by Gold Net (M) Sdn Bhd and Perak e-Organisation Sdn Bhd (a Perak State Eco-nomic Development Corporation subsidiary). (Source: New Straits Times, 1 March 2011) Pacific Mine to Reopen As Gold Fever Pacific Mine to Reopen As Gold Fever Grips Grips RegionRegion An Australian miner is due to restart a gold mine in the Solomon Islands this week, sig-nalling that the commodities boom has finally caught up with one of the world’s most re-mote regions in the South Pacific islands. The miner, Allied Gold, is not alone. Papua New Guinea might resume mining of one of the world’s richest copper deposits by 2012, two decades after villagers attacked and sabotaged operations there. From Papua

New Guinea to New Caledonia, mines have often created conflicts between poor villagers and their governments over the distribution of wealth, leaving the South Pacific with little to show for its mining riches. Australia-listed Allied Gold said yesterday that it would begin pouring its first gold bars at its Goldridge mine near the Solomon Is-lands’ capital of Honiara later this week after spending A$150mil on development. “We see opportunities in the South Pacific which I believe has been underexplored over the years,” Allied Gold executive chairman Mark Caruso told Reuters in an interview in the Solomons. Gold is about US$3 away from last week’s record high of around US$1,440 an ounce, a level that has encouraged more digging in far-flung locations with little history of mining. “If you look at the uncertain eco-nomic situation in the United States and what’s going on in other parts of the world, it’s all supportive for gold,” Caruso said, referring to gold’s reputation as a safe-haven asset. “Unemployment in the United States remains painfully high and the Middle East is undergo-ing dramatic changes.” Allied Gold, which has a market capitalisation of about A$675mil, is also listed in Toronto and on London’s AIM exchange. It aims to produce 120,000 ounces a year from its Goldridge mine, which had been abandoned a decade ago after tensions flared between rival bands of islanders. (Source: The Star, 8 March 2011) Raub was the El Dorado of MalayaRaub was the El Dorado of Malaya One of the first things Yee Chong Man likes to tell visitors to Kampung Bukit Koman, Raub, is that the place was once served by no less than four pork stalls when he was a little boy in the 1950s, when gold mining was the backbone of all economic activities in town. To him, the number of stalls at the time was a fairly good indication of the place's sizeable population and its level of affluence. Comparatively, when the town's gold mine ceased operations in 1961, the number dwin-dled to just one. "The butcher slaughtered just one pig for sale each day and even so,

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he couldn't finish selling it," said the retired 66-year-old. Today, there are only about 300-odd families in the village, most of them descendants of miners of old. As is the norm in rural spots without an anchor economic activity, many of the residents are either still schooling or re-tired – with the young and able having mi-grated to urban areas in search of better-paying jobs. This was a far cry from the bus-tling Bukit Koman of old, once regarded as the biggest and most important gold-mining area in the Raub district. The abundance of the exquisite mineral in Raub was once such that Peninsular Malaysia was named the Golden Chersonese, or the Golden Penin-sula. There were even tales that one of King Solomon's mines was located here. During the time when the northern Malay rulers ac-knowledged the suzerainty of the Siam king, Raub was the place they sent their emissar-ies to get the bunga emas, or golden flowers, to be delivered as tribute to Siam. Raub is named after a Malay word meaning "scoop", suggesting that at one time, gold had lain in such abundance here that it could liter-ally be scooped up by the handfuls from the land surface. It is said that gold mining in the area dates back over 800 years ago -- when Mon Khmer Cambodians came to Raub on elephants to obtain gold to adorn their majes-tic temples in Angkor Wat. For the longest time, mining was done very primitively and with heavy reliance on dulang washers who panned for gold in the river beds. It was only from 1889 that it evolved from simple panning to open-cast mining with the coming of the Raub Australian Gold Mining Syndicate, later known as the Raub Australian Gold Mining Company Ltd. The initial stages of explora-tion and mining were spearheaded by the company's manager, William Bibby, and cen-tred around the Raub Hole, the main gold-digging site which was open-cut by the Khmers. It was abandoned later, leaving be-hind a large pond in a dense forest. Interestingly, Bibby, regarded by some as the "founding father" of Raub, had not thought that highly of the place initially. In one ac-count reported in the Straits Times, he had said that if not for the men he had brought

with him there, he would have turned tail the next morning and headed home. "I had never been more disappointed in a place in all my life... there was nothing but jungle and swamp, swamp and jungle. The colour of gold was nowhere to be seen," he had said. Bibby, however, managed to turn things around when he stumbled across rich gold-bearing seams some way from the Raub Hole. The discovery got him to build a new mining plant at Bukit Koman in 1894, an en-terprise which soon transformed the swampy belukar into a prosperous township. About a year later, the nearby Bukit Jalis and Bukit Malacca sections were also opened up. Gold mining became such a huge enterprise here that Malaya's first power station was brought on-line in Raub on July 4, 1900, when the gold mining company built a small hydroelectric power station on the nearby Sempan River. In comparison, the Straits Settlements only got its first electrical supply some four years later. It is said that just be-fore World War 2, the population on the gold mining company's lands, including families, neared 3,500. They even had their own police force. As the town thrived, so did colonial life, cricket games and all. But the money- and merry-making came to a halt when Japanese troops invaded Malaya in 1941 and the min-ers had to abandon Bukit Koman. To keep the wealth away from the hands of the invad-ing army, they sabotaged the mine's machin-ery as they fled. However the Japanese were not deterred. According to published accounts, they caught the mine's manager and tortured him for infor-mation on the location of the richest seams of gold. Refusing to comply, he was eventually executed. The Australians eventually re-turned in March 1946 after the Japanese re-treated but it was only after much effort and money spent that they were able to resume mining. However, all operations came to a grinding halt not long after, in about 1961, when the gold price dipped to some $30 per ounce. After the Australians left, a smattering of local small-time miners kept the industry going, although the level of mining activities never reached the scale of yesteryear. An estimated one million ounces of gold was

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mined here from 1889 till the mid-1990s. Many thought the gold deposits in the area had been fairly depleted and as such, built the town over many old, abandoned mining shafts. Those who had worked in the Bukit Koman mines told the New Straits Times back in 1988 that the depth of some of the underground shafts reached more than 300 metres. Although it is hard to tell now, it was said that the shafts and tunnels zig-zagged all the way to Raub itself and that the townsfolk could feel the vibration of the earth under their feet whenever drilling and blasting took place. Pelayar Ingupasu, 56, was proud to recount that his grandfather had worked as a "bomber" in the mine after the Japanese left. The retired tractor driver now works at an es-tate neighbouring the Bukit Koman mine, which has been revived recently by – surpris-ingly – the Raub Australian Gold Mining Sdn Bhd. However, unlike its namesake, this is a Malaysian company wholly-owned by Penin-sular Gold Limited, which is listed on the Lon-don Stock Exchange. "I don't remember much of my grandfather now but it feels good to see the return of the Bukit Koman gold heritage, to see the town getting to be as busy as it was during my grandfather's time," said Pelayar. Indeed, it seems that the district is set to see more in-teresting times ahead as the advent of new technology, coupled with the fantastic price of gold these days, have once again made Raub and its mines the focus of great com-mercial interest. "I had feared that Bukit Ko-man was becoming a dying town. But now, with the reopening of the Bukit Koman mines, young people are slowly coming back and many others will have a reason to stay put," said Yee, a father of four and grandfather of three. "It is good because all my children and grandchildren will have a reason to remain here, instead of leaving us oldies behind. By the way, I heard that even Secret Recipe is coming to town to open up a branch here!" (Source: New Straits Times, 13 March 2011) Physical Gold Still Very Much in Demand: Physical Gold Still Very Much in Demand: JewellersJewellers Local jewellers are seeing a growing demand

for physical gold bars and coins, but the de-mand has softened somewhat with the ad-vent of gold investment accounts from finan-cial institutions. “Yes, (the introduction of) gold investment accounts has affected de-mand for physical gold…but there remains a niche market of customers who prefer to hold their gold in the physical form rather than on paper,” DeGem Bhd executive director Paul Choong told SunBiz in an interview. “In fact, of late, we have seen a growing number of people buying gold bars as prices of gold have been rising. We have started selling gold bars since last month. They come in 20gm, 50gm, 100gm, 500gm and 1kg,” he said, adding that gold bars in denominations of 20gm and 50gm have already sold out. The company plans to make selling gold bars a big part of its business. “We have set up a division to do this, but we haven’t done any advertisement in a big way yet. We hope to generate about RM10-15 million in revenue each year,” said Choong. For the financial year ended Dec 31, 2010, DeGem recorded revenue of RM185.3 million, which was slightly lower than the revenue of RM189.4 million achieved in 2009. Poh Kong Holdings Bhd executive chairman and group managing director Datuk Eddie Choon said the company started offering 1kg gold bars and 10gm wafers since two to three years ago. “We have seen good response for these products and it is on an upward trend as people see it as another form of invest-ment. But a lot of people still prefer to buy gold jewellery compared with gold bars be-cause jewellery such as necklaces can be worn,” he said. Choon said the majority of those who buy gold jewellery are middle-aged. “Young people also buy gold jewellery, but they prefer white gold and small dia-monds. They also prefer more trendy de-signs and that’s why we offer Tranz, a range of trendy gold jewellery targeted at younger customers,” he added. (Source: The Sun, 21 March 2011) Gold Roars Past US$1,500Gold Roars Past US$1,500 The price of gold topped US$1,500 (US$1 =

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RM3.02) for the first time yesterday as a weaker dollar plus fears over high inflation and debt attracted investors into the tradi-tional safe-haven precious metal. Gold reached US$1,505.65 an ounce at 0945 GMT on the London Bullion Market. It later traded at US$1,503.60. Silver meanwhile hit a fresh 31-year high of US$44.79 an ounce. "Gold remains comfortably underpinned with short-term inflation pressures and economic woes triggering some fresh safe-haven inflows," said Andrey Kryuchenkov, commodities ana-lyst at Russian financial group VTB Capital. The metal is seen as a safe store of value in troubled economic and political times. The dollar meanwhile fell against the euro, with the US unit troubled by concerns over Washington's ability to tackle its high debt in the world's biggest economy. Gold began its run towards US$1,500 on Monday after rat-ings agency Standard & Poor's revised its outlook on US sovereign debt to "negative" from "stable". S&P's move challenged Wash-ington's gold-star "AAA"-rated standard as it warned that politicians seemed unable to agree a plan to reduce a huge budget deficit, which is running at around 10 per cent of gross domestic product. The downgrade had also sent global share prices tumbling on Monday, coming amid growing concerns over global inflation, with China, India and the eu-rozone struggling to control prices. Metals consultancy GFMS last week forecast that gold price would soar past US$1,600 this year, driven primarily by fears over high infla-tion. Kryuchenkov said that gold "shot up af-ter S&P downgraded the US sovereign debt outlook to negative. The move came on top of existing economic woes over resurfacing debt troubles in the eurozone." "Gold has been acting as a currency in its own right, and that is why we are up at US$1,500," said Simon Weeks, head of precious metals at the Bank of Nova Scotia. "There is an awful lot of bad news in the price. The S&P comment the other day has given us the final kicker to get up here." Gold has risen 6 per cent since the start of the year, breaking a series of record highs along the way. It topped US$1,000 for the first time in March 2008. "Gold will re-main well bid as long as the ongoing debt and

inflation worries persist," Ian O'Sullivan, Spread Co trading group analyst said. (Source: New Straits Times, 21 April 2011) Cops: Gold Price Hike may Attract Nega-Cops: Gold Price Hike may Attract Nega-tive tive AttentionAttention The rise of gold price to an all-time high of US$1,500 (RM4,530) per ounce has not only stirred the interest of investors but also the police who are taking measures to ensure the precious metal stays with its owners. Federal police Criminal Investigations Department (CID) director Commissioner Datuk Seri Mohd Bakri Zinin said police are aware that a steep price rise in such commodities can lead to criminals targeting those who own it. He said when the price of copper went up years ago, thieves stripped power cables, telecom-munication wires and water supply meter units at public places. “This is no different. We are looking at the situation from this aspect and are aware of the possible targets of criminals. We are tak-ing proactive measures to prevent or mini-mise these possibilities. Knowing the situa-tion and to avoid any untoward incidents, we advise those who use gold jewellery to be cautious. Use it at the right place and time and store it in a safe place. Do not allow op-portunity which criminals may take advantage of.” he told theSun. He said goldsmith shops should also consider beefing up security at their premises and install close-circuit cam-eras if they had yet to do so. In Penang, checks at several goldsmiths on Campbell Street and Jalan Masjid Kapitan Keling indi-cate that it was business as usual. Penang Goldsmith and Jewellers Association president Lo Fook Kheong said customers are still changing their gold for cash or other jewellery, but there was no influx of consum-ers trading in their gold. “Purchasing gold is the best form of investment. It is easier to get cash for gold compared with selling items such as cars or houses.” Lo, who is also chairman of Lai Wah Goldsmith and Lai Yuen Company, predicted that the price of gold will increase. “In 2008, one gramme of 24 carat

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gold was about RM109, and it has been in-creasing. This year, it is about RM172,” he said. “I believe the price of gold will continue to go up.” (Source: The Sun, 22 April 2011) Gold Soars to Record in Sixth Straight Gold Soars to Record in Sixth Straight SessionSession Spot gold surged to a lifetime high on Friday in thin holiday trade, hitting a record for a sixth consecutive session on a weak dollar and factors ranging from geopolitical uncer-tainty to inflation concerns. Silver also raced to its loftiest in 31 years, notching the mile-stone for a seventh straight day and outstrip-ping gold's weekly gains by a huge margin. The ongoing eurozone sovereign debt crisis, unrest in the Middle East and North Africa, rising global inflation, and most recently wor-ries over the fiscal stability of the United States have fueled the record-breaking rally in these precious metals. Spot gold rose to a record of US$1,512.50 an ounce, before easing to US$1,507.69 by 0853 GMT, on track for a weekly gain of 1.5% - its sixth consecutive week of gains. Spot silver hit US$46.69 an ounce, its highest since 1980, on course for a weekly rise of 8.4%, its biggest weekly increase in two months. Silver has gained 51% so far this year, and gold 6%. This compares with a cor-responding 1% rise in the London Metal Ex-change price of copper, the bellwether of the industrial metals complex. Supporting pre-cious metals, the dollar was languishing near a three-year low against a basket of curren-cies, and could take a run at the all-time low hit in 2008, pressured by record low interest rates and the crushing weight of the US budget deficit. So long as the overall environment stays sup-portive and the dollar remains weak, gold is expected to retain its strength. Price of bullion is seen to rise to US$1,700 an ounce by 2015, analysts polled said. However, a cor-rection might be on the horizon after the re-cent rapid ascent, traders and analysts said.

"Gold is likely to consolidate around the US$1,500-level next week," said Li Ning, an analyst at Shanghai CIFCO Futures. "The angle of the recent rally is very sharp, and we are bound to see some correction in the near term." Spot gold has rallied more than US$50, or 4%, in the past eight sessions. (Source: The Star, 23 April 2011) Gold Mining Affected by Rocky IssuesGold Mining Affected by Rocky Issues Gold mining may not be a new activity in Ma-laysia but it is sad to see minimal efforts be-ing taken to develop the lucrative business on a larger scale. This is particularly when the country is endowed with huge gold deposits stretching from the major Eastern Gold Belt stretching from Kelantan, Terengganu, Pa-hang right down to Johor as well as in Sabah all waiting to be fully explored. What more with gold prices trail blazing since 2011 and currently showing no sign of losing steam. Gold spot price yesterday hit another new record to trade at US$1,517.40 an ounce on weaker US dollar as well as continuing ten-sion in the Middle East and North Africa. Many traders and research houses have even predicted that the precious metal might hit US$1,600 an ounce before year-end. As reflected by the surging prices, gold remains a safe haven investment among investors to guard against inflation and geopolitical tur-moil. Given such encouraging developments on the global front for gold, one may wonder whether there will be enough incentives for state governments to issue more exploration licences and mining leases for gold to attract mining investors. The safest answers could be a small “yes” on the part of some mineral-rich state govern-ments but a big “no” from potential major gold miners. Pahang, for example, has the largest gold mine in Malaysia at Penjom, Kuala Lipis which contributed almost 95% to total domes-tic gold production. There are also five gold mines in Jeli, Kelantan as well as six gold mines in Raub and Kuala Lipis still being ex-cavated for commercial mining. The latest

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finding for the precious metal is in Mersing, Johor and Lubuk Mandi in Terengganu. De-spite some state governments gradually issu-ing exploration licences and mining leases in mineral-rich states, there are several impedi-ments among gold miners. Some quarters maintained that it would not be economical to undertake gold mining activities in Malaysia. The Eastern Gold Belt, for example, may be rich with gold deposits but it is mostly in “hard rock” formation. In other words, huge capital investment would be needed to undertake prospecting, exploration and mining. Apart from that, potential miners would also have to deal with other major costs issues. These include high “tribute” request (payment be-tween the owner of the mining lease and the mining operator) which could reach up to 10%, standard royalty of about 5% paid to the state on the minerals to be produced, corpo-rate tax for the rehabilitation fund and the cor-porate responsibility (CR) work. Therefore, it is suffice to say that only major mining groups are capable of undertaking such high risks. On the other hand, mid and small-scale min-ers might have to take a back seat even though gold mining prospects in Malaysia certainly look promising and lucrative. (Source: The Star, 26 April 2011) Golden Offer for Al Rajhi CustomersGolden Offer for Al Rajhi Customers Al Rajhi Bank (Malaysia) plans to capitalise on the recent gold rush by offering its first gold product in Malaysia. Gold has been on the uptrend since breaking the US$1,500 (RM4,485)-an-ounce mark last week. Pre-cious metals consultancy firm GFMS has pro-jected that gold will reach US$1,600 (RM4,784) an ounce by the end of the year on concerns of high inflation. Yesterday, the world's largest Islamic bank started offering its affluent customers, which have a total credit balance of RM250,000 and above, an opportunity to invest in physical gold through its Al Rajhi Gold-i programme. Al Rajhi's flagship Affluent Branch is in Bang-sar. The product will only be available in all other branches by the third quarter of 2011. The programme offers Swiss gold wafers and

bars at 999.9 purity, that range from five grams to one kilogramme. "We realise that demand in real physical gold is rising over the years. Our target customer segment consists primarily of retail individuals with deep and growing interest to diversify their existing as-set allocations to include physical gold bars or wafers as an alternative investment," said Al Rajhi Bank (Malaysia) director of retail banking Sabry Ghouse. Globally, 70 per cent of gold is traded for jewellery, while only 20 per cent is by individual investors. However, according to the 2010 World Gold Council, the global demand for physical gold bar or coins has increased significantly as individual investors, primarily from India and China, prefer physical gold to create and pre-serve their wealth in the long term. Asian countries in emerging markets recorded the strongest surge in demand in 2010. On an-othor note, Al Rajhi plans to open five more branches this year, two in the next couple of months, in Kota Kinabalu and Ipoh. The Kota Kinabalu branch will complete the bank's as-piration of covering the whole of Malaysia. Al Rajhi currently has 20 branches around the country. It will also launch another unit trust fund soon. (Source: New Straits Times, 28 April 2011) Gold Strikes Record as Dollar WiltsGold Strikes Record as Dollar Wilts Gold hit record highs yesterday as the dollar's three-year low against a basket of major cur-rencies attracted non-US investors, after the United States signalled it would retain accom-modative monetary policy. Spot gold as-cended to a lifetime high of US$1,534.30 an ounce, breaking records for the second straight session. It traded at US$1,530.54 an ounce at 1116 GMT, up from US$1,526.40 late in New York on Wednesday. US gold futures also hit an all-time high at US$1,535.1 an ounce. The dollar index, a measure of the green-back's strength against a basket of major cur-rencies, dipped to a three-year low after the US Federal Reserve signalled no rush to re-verse low interest rates in order to support economic recovery. The weakening dollar

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has been a key driver behind gold's rally in recent weeks, alongside concerns over the ongoing crisis in the Middle East and North Africa region, sovereign debt problems in euro zone and rising inflation worldwide. Meanwhile, buyers snatched up gold in the physical market in Asia, undeterred by record-high prices, as they expected bullion to con-tinue to break records in a macro environ-ment favourable to precious metals. In India, the world’s largest gold consumer, traders stepped up purchases ahead of key gold-buying festivals and during the ongoing wed-ding season. “Buying is good even at current price levels,” said Haresh Acharya, head of bullion desk at Parker Agrochem. “We don’t know by how much the prices could rise.” (Source: New Straits Times, 29 April 2011)

Aluminium News HighlightsAluminium News Highlights Press Metal Picks Samalaju for ExpansionPress Metal Picks Samalaju for Expansion Press Metal Bhd (PMB) has picked Samalaju Industrial Park in Bintulu, Sarawak as location for its second phase expansion of its alumin-ium smelting operation. In a filing to Bursa Malaysia yesterday, the company said the expansion plan is to meet the growing de-mand of aluminium raw material in Asia. PMB, via its 80 per cent unit Press Metal Sa-rawak Sdn Bhd, has developed its Phase-1 aluminium smelting project in Mukah. The project will be funded by both internal funds and borrowings. (Source: New Straits Times, 6 April 2011) Joint Agreement on RM5bil Aluminium Joint Agreement on RM5bil Aluminium Smelting PlantSmelting Plant Gulf International Investment Group Holdings Sdn Bhd, headed by local tycoon Tan Sri Syed Mokhtar Al-Bukhary and UAE-based business leader Mohamed Ali Rashed Alab-bar, has entered into a joint-venture (JV) agreement with Aluminium Corp of China to develop a US$1.6bil (RM5bil) aluminium smelting plant in Sarawak. The JV com-

pany, Smelter Asia Sdn Bhd, will develop, own and operate the private aluminium smelt-ing plant with an annual capacity of 370,000 tonnes. The smelter will be located in Samalaju Industrial Park, 60km from Bintulu and some 180km from the Bakun hydroelec-tric dam. The park has been earmarked by the state government for heavy industries un-der the Sarawak Corridor of Renewable En-ergy master plan. Smelter Asia also executed the principal terms of the power purchase agreement (PPA) with Syarikat Sesco Bhd, the wholly-owned subsidiary of Sarawak Energy Bhd, for over 600MW of power supply to the proposed aluminium smelting plant. Smelter Asia and Sesco will jointly conclude the PPA by mid-year. “The global demand for aluminium is projected to grow by an average 4% over the next five years, with Asia driving the demand. Our strategic collaboration will bring the best in class technology to create a modern alu-minium plant that will contribute to the socio-economic growth of Sarawak state,” Syed Mokhtar said in a media statement yesterday. Meanwhile, Alabbar said the plant would not only benefit the country but also support the Asean region's development thrust by provid-ing aluminium, which is critical in driving the massive infrastructure projects that are being planned. “This signing of joint-venture agree-ment marks a significant milestone in the course of project development. I believe Smelter Asia would become an indispensable driving force that dramatically stimulates Sa-rawak's economic growth,” Aluminium Corp deputy general manager Zhang Chengzhong said. The agreement follows the execution of the heads of agreement for the JV in Febru-ary. (Source: The Star, 29 April 2011) Chinalco, GIIG to Build Aluminium Smelter Near Bintulu GULF International Investment Group Hold-ings Sdn Bhd (GIIG) has entered into a joint venture agreement with Aluminium Corpora-tion of China (Chinalco) to build a US$1.6 bil-lion (US$1 = RM2.97) aluminium smelting

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plant in Sarawak. GIIG is headed jointly by Malaysian tycoon, Tan Sri Syed Mokhtar Al Bukhary and UAE-based businessman Mo-hamed Alabbar. The signing in Kuala Lum-pur was witnessed by visiting Chinese Prime Minister Wen Jiabao and Prime Minister Da-tuk Seri Najib Razak. The joint-venture, called Smelter Asia Sdn Bhd, will develop, own and operate the private aluminium smelt-ing plant with an annual capacity of 370,000 tonnes. The smelter will be located in Samalaju Industrial Park, about 60km from Bintulu and some 180km from the Bakun hy-droelectric dam. Samalaju Industrial Park is earmarked by the Sarawak state government for heavy indus-tries under the Sarawak Corridor of Renew-able Energy (SCORE) master plan. Smelter Asia has also signed the principal terms of the power purchase agreement (PPA) with Syarikat SESCO Berhad, the wholly owned subsidiary of Sarawak Energy Berhad, for over 600MW of power supply to the proposed aluminium smelting plant. "The worldwide demand for aluminium is projected to grow by an average of four per cent over the next five years, with Asia driving the demand," Syed Mokhtar said in a press statement. The modern aluminium plant is expected to contribute to Sarawak's the socio-economic growth, by creating new jobs and supporting industries. "Smelter Asia is a powerful exam-ple of global collaborations to create a dy-namic socio-economic growth engine for Ma-laysia. The plant will not only benefit the country but also support the Asean region's development thrust by providing aluminium, which is critical in driving the massive infra-structure projects that are being planned," Mohamed Alabbar added. Zhang Cheng-zhong, Chinalco's deputy general manager said the Chinese group has been working closely with GIIG for the development of Smelter Asia Project over the past years. (Source: New Straits Times, 30 April 2011)

Steel News HighlightsSteel News Highlights

Demand Boost Seen for Korean, Taiwan-Demand Boost Seen for Korean, Taiwan-ese Steel ese Steel South Korean and Taiwanese steel mills such as Posco and China Steel Corp could see a temporary surge in demand as their Japa-nese counterparts halt production at their plants after last Friday's earthquake and tsu-nami, OSK Research Sdn Bhd said, adding that an escalation in steel prices is likely, es-pecially for flat products. The research firm sees South Korean and Taiwanese mills as major beneficiaries given that they are fo-cused on premium flat steel products and are among only a few producers in this region that produce quality products matching that of the Japanese mills. "Other mills from China, the Commonwealth of Independent States (CIS) and Southeast Asia (SEA) may only substitute the supply since commercial grade products are not the main focus of Japanese mills. And while the flat products of some Chi-nese mills have attained quality of automaker standard, they are already heavily committed to their local customers," OSK said in a report yesterday. It said given that Japan is a major supplier in SEA and the Far East, the potential shutoff may lead to curtailment of supply. "The latest statistics from the Japan Iron and Steel Fed-eration showed that Japan exported 43.4 mil-lion tonnes of steel in 2010, with flat and spe-cialised steel representing the bulk of the total export tonnage of 57% and 18% respectively. The void left will be leveraged by mills from Asia-Pacific that would be more than eager to divert volumes to this region to make the best of the situation," it said. Still, the supply dis-ruption is likely to be only a blip as OSK ex-pects the steel production halt in Japan to be temporary. “As other mills step in and fill the gap, we think they would be motivated by higher prices, and thus see an escalation in steel prices,” it added. Meanwhile, the production halt by Japanese mills may result in a shortfall in demand of iron ore, scrap metal and coke, leading to a price drop in the spot market. The research firm has a neutral call on Malaysia’s steel mills as most of them are involved in long steel products, while for those which produce flat steel, their product quality may not match

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Japanese standards, and hence are unlikely to be able to capitalise on the sudden short-age of flat steel exports from Japan. How-ever, it believes most of the mills in Malaysia may benefit from a potentially shortlived es-calation in steel prices. (Source: The Sun, 15 March 2011) JFE Steel may Trim OutputJFE Steel may Trim Output JFE Steel Corp, the world's fifth-biggest steel-maker, is facing rising inventories due to weak demand from domestic manufacturers following last month's devastating earthquake and tsunami and may need to cut production ahead, the company's president said yester-day. Eiji Hayashida, also chairman of Ja-pan's Iron and Steel Federation, told a news conference for the industry body that the im-pact of the quake on the output of steelmak-ers might have been smaller than expected in March, but that shutdowns of car and parts plants might take a heavy toll on steelmakers' production after May. The 9.0 earthquake and tsunami on March 11 has forced Toyota Motor Corp and many car-makers to operate at 50% of their target plans as the quake disrupted their parts supply chains and triggered power outages and an ongoing nuclear crisis. “JFE will decide in early May whether it needs to cut output after seeing carmakers' production levels,” Haya-shida said. He said Japan's crude steel out-put in March might have been reduced by less than 1 million tonnes from February's 8.93 million tonnes, smaller than expected by many industry watchers. (Source: The Star, 20 April 2011) Posco Q1 Profit Misses Forecast on Posco Q1 Profit Misses Forecast on Higher CostsHigher Costs Posco, the world’s No 3 steelmaker, reported a 36% fall in quarterly operating profit, miss-ing forecasts, hit by high raw materials costs and low demand. The global steel sector, seen as a barometer of the broader econ-omy’s health, is facing a margin squeeze as China continues to churn out record steel de-

spite rising interest rates, while raw material costs remain high partly due to persistent rains in Australia delaying production recov-ery. The devastating earthquake in Japan is also dimming overall demand prospects from key consumers such as carmakers, shipbuilders and consumer electronics goods makers as they struggle to normalise production amid rolling power blackouts. Japan’s JFE Hold-ings, the world’s No 5 steelmaker, reported a 67% fall in quarterly profit on Thursday after the March 11 earthquake curtailed shipments, and provided no guidance for the current fi-nancial year. South Korea’s Posco, which trails Arcelor-Mittal and Baosteel, said its January-March operating profit was 921 bil-lion won (US$852mil), below the consensus forecast of 1.1 trillion won by Thomson Reuters I/B/E/S. The profit compared with 1.44 trillion won a year ago and 519 billion won in the previous quarter, Posco said. Posco raised domestic steel prices by 16%-18% this week in its first increase since July last year because of the surge in costs of raw materials such as iron ore and coking coal. Prices of spot iron ore have surged more than 30% since July. Shares in Posco, which counts billionaire investor Warren Buffett’s investment vehicle Berkshire Hathaway Inc as its major shareholder, have little changed so far this year, underperforming the broader market, which renewed life-time highs this week, and lagging its home rival Hyundai Steel’s 18% jump. Prior to the result, Posco shares closed up 0.5% in a flat market. (Source: The Star, 23 April 2011) Vale may Cut Stake in Steel Mill JV with Vale may Cut Stake in Steel Mill JV with Korean FirmsKorean Firms Vale, the world’s largest iron ore producer, is in talks to reduce its stake in a joint venture with two South Korean firms to build an inte-grated steel mill in Brazil, a source with direct knowledge of the matter said yesterday. Lo-cal media reported that Vale’s stake may fall from 50% to 30% in the second phase of con-struction of the plant, while POSCO and Dongkuk Steel may increase their stakes to

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35% each. POSCO, the world’s No 3 steelmaker, and smaller Dongkuk Steel agreed to hold an ini-tial 20% and 30% stake in the project, re-spectively. “POSCO and Dongkuk are in talks to increase their stakes in the joint ven-ture with Vale in the second phase of con-struction,” an industry source told Reuters, declining to elaborate further. “But nothing has been decided yet as the second phase will start after the first phase is completed in 2014,” he said, declining to be named due to the sensitivity of the issue. Last November, Vale signed a preliminary deal to take a 50% stake in the first phase of the steel mill with annual production capacity of three million tonnes. The project is ex-pected to require US$4 billion (RM11.97 bil-lion) in investments in its first phase. The plant, which will be located in Brazil’s Ceara state, will add another three million tonnes of capacity in the second phase of construction. (Source: The Sun, 26 April 2011)

Iron Ore News HighlightsIron Ore News Highlights Mining Giants Eye China’s Western Re-Mining Giants Eye China’s Western Re-gions for Future Growthgions for Future Growth The world's biggest iron ore producers are looking to China's undeveloped western re-gions for future growth as steel output on the country's thriving eastern coast nears its peak. Speaking at a Metal Bulletin confer-ence in Beijing, mining executives said the industrialisation and urbanisation of western regions like Xinjiang will need soaring vol-umes of steel and keep Chinese demand for imported ore at high levels. "Global iron ore demand for the foreseeable future is strongly driven by China," said Sam Walsh, iron ore director with Rio Tinto. "Steel use in high-intensity export-dominated cities like Shanghai, Tianjin and Beijing is al-ready at the high levels of developed markets like South Korea, but what is truly remarkable is what is yet to come - inland provinces are

just beginning to climb the steel intensity curve," Walsh said. Government efforts to redress the west-east income gap through intensive infrastructure construction will drive demand, he said, adding that per capita steel consumption in western and central regions was still not even half that of coastal regions. Luiz Meriz, China president of Brazil's Vale, the world's top iron ore producer, said on Tuesday that rumours of a slowdown in Chi-nese iron ore demand over the next few years were greatly exaggerated. "Steel inten-sity (the amount produced per unit of GDP) varies per region and it is still very low in western China, though it might have peaked in east coastal regions," he said. He said steel output in the east could peak by 2015, but growth in central and western regions would continue, adding that China's current 46 per cent urbanisation rate was expected to grow 1 per cent every year until it hits 70 per cent. Annual seaborne iron ore trade has more than doubled in the last 10 years to around 1 billion tonnes, driven primarily by demand from China's steel industry. The surge has prompted global mining giants to expand capacity, with Vale aiming to raise output to 522 million tonnes by 2015, up from 311 million tonnes last year and Rio planning an increase of more than 100 million tonnes by investing big in its Pilbara property and its Simandou project in Guinea. Official figures show that China imported 618.6 million ton-nes of iron ore in 2010, down 1.43 per cent from the 2009 record, and the industry pre-dicts a 6 per cent increase in imports this year. However, steel industry consultants MEPS said in a research report this week that Chinese demand is being underestimated to the tune of 118 million tonnes over the next t w o y e a r s . (Source: New Straits Times, 25 March 2011) Rio and Guinea in IronRio and Guinea in Iron--ore Dealore Deal Rio Tinto Plc said it would pay the Guinea government US$700mil under a mining set-tlement in a bid to start iron ore shipments by mid 2015. The Simandou project in the west African nation would require more than

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US$10bil of investment, Sam Walsh, chief executive officer of Rio’s iron-ore unit, said in a statement on Friday. The terms of the agreement won’t be affected by current or future mining reviews by the Guinea govern-ment, according to the statement. Rio, the world’s second-largest mining com-pany by sales, has said the project would de-mand tens of thousands of workers and would create 4,000 full-time jobs when pro-duction starts. The settlement between the London-based company and Guinea comes after President Alpha Conde ordered a draft-ing policy giving the country at least a one-third stake in mining projects. The agreement “gives us the certainty we need to allow us to invest and move forward quickly,” Walsh said in statement. The Guinea government had the right to as much as 35% of the project, Rio said. Rio has been involved in a dispute with Guinea since 2008, when the Government ordered it to hand over part of the Simandou venture, a stake later acquired by rival Vale SA of Brazil. Rio said last month it had al-ready spent US$700mil on the project. Rio runs the Simandou project through the com-pany’s Simfer SA subsidiary. Rio has agreed to sell a 44.65% stake in Simfer to Aluminium Corp of China Ltd, or Chinalco, as the state-owned company is known. (Source: The Star, 25 April 2011)

Coal News HighlightsCoal News Highlights Malaysia Smelting to Sell Asiatic StakeMalaysia Smelting to Sell Asiatic Stake Malaysia Smelting Corp Bhd (MSC) has agreed to sell its 60 per cent stake in Asiatic Coal Pte Ltd for US$1.89 million (RM5.78 mil-lion) to Taurus Capital Ltd, which owns the remaining 40 per cent stake in Asiatic Coal. The disposal will be done in two parts, MSC said in a filing to Bursa Malaysia yesterday. The first involves MSC disposing of a 30 per cent stake in Asiatic Coal, while the second part involves Australia Oriental Minerals NL, a 76.91 unit of MSC, disposing of another 30

per cent stake. The disposal will allow MSC to be focus on its core business, it added. (Source: New Straits Times, 18 March 2011) Rio in Talks to Buy Shares in RiversdaleRio in Talks to Buy Shares in Riversdale Rio Tinto Group, seeking to buy Riversdale Mining Ltd for A$3.9bil, is in talks to buy shares in the coal company from Cia Siderur-gica Nacional SA, two people with knowledge of the matter say. They declined to be identi-fied because the discussions are private. CSN, as the Brazilian steelmaker is known, owns 19.9% of Sydney-based Riversdale, a c c o r d i n g t o d a t a c o m p i l e d by Bloomberg. Tata Steel Ltd owns 27%, the data shows. It wasn't clear how many shares Rio would buy from CSN. Rio confirmed it's in talks with a major shareholder after Rivers-dale halted its shares from trading yesterday in Sydney, citing notification by the London-based company of discussions. Gaining control of Riversdale's projects in Mozambique would boost Rio's reserves of steelmaking coal as prices double. “If neither of these companies are sellers to Rio, I think Rio is likely to stay there with a minority inter-est of 40%,” Peter Rudd, mining and re-sources research manager at Armytage Pri-vate Ltd, told Susan Li on Bloomberg Televi-sion's “First Up” programme. “Maybe subse-quently there's a share issue and they'd be able to take up their entitlement and maybe underwrite a shortfall and therefore increase their involvement. That's very speculative.” Rio said on March 10 it would raise its offer to A$16.50 a share from A$16 should more than half of Riversdale's holders accept. The deadline for the sweetened bid was Monday, with the bid overall set to expire on April 6. Rio now owns 41% of its target, according to a filing yesterday. Rio rose 0.2% to A$82.01 at 12.10pm in Sydney trading. Riversdale closed on Monday at A$16.10. Tata and CSN have increased their stakes in Riversdale since the offer opened. Coal producers are being targeted as prices gain, forcing companies to spend more on acquisitions to secure reserves in nations

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from Australia to Mozambique as consump-tion in China and the developing world drives up valuations. A record US$30bil in deals may be completed in the coal industry this year as acquirers pay an average 33% pre-mium, the highest in at least a decade and double the historical average, according to Bloomberg data. Rio “genuinely believes that an outcome of those discussions is likely to emerge during the course of this morning,” according to a letter from Rio's laywers Minter Ellison, lodged yesterday with the Australian stock exchange by Riversdale. Tata's managing director H.M. Nerurkar said on Feb 21 his company wanted to retain its stake in Riversdale. Tata also owns 35% of Riversdale's Benga coal project. Update: Rio Tinto cuts 50% condition on Riversdale bid. Meanwhile, Reuters reported Rio had low-ered the acceptance condition on its A$3.9bil offer for Riversdale yesterday after entering into talks with CSN. Rio's offer of A$16.50 a share was now conditional on securing a minimum 47% of Riversdale shares by April 6, compared with 50%, the bidder said. If it failed to reach the new threshold, Rio would pay Riversdale shareholders only A$16 a share. (Source: The Star, 30 March 2011) High Coal Price Hampers TNBHigh Coal Price Hampers TNB High coal prices have been working against Tenaga Nasional Bhd, and this has clearly been seen in its decreasing share price. Un-certainties in TNB’s tariff mechanism has also seen foreign shareholding gradually decrease from a two-year peak of 12.7% in September 2010 to 10.4% in January 2011. With coal making up some 50% of TNB's fuel cost, even a small increase in the market price of coal greatly affects its bottomline. As it is, the supply of coal has already been tight. This problem was exacerbated with the flooding in Queensland, Australia. Australia is the world's largest supplier of coal, and thus, the floods caused coal prices to spike as fears of tight supply escalated. To make matters worst, the earthquake and tsu-nami tragedy hit Japan, and caused panic

when its nuclear power plant threatened to emit radiation. There are now expectations for the Japanese to reduce its nuclear de-pendency and renew its purchases of coal for its thermal plants. This has caused coal to resume its upward trend. Coal prices have risen by 8% from last month to US$130 per tonne currently - 53% above the US$85 per tonne incorporated into TNB's current tariff structure. Currently, most of TNB's coal supply is pur-chased under term contracts with prices be-ing negotiated annually based on current rates. “A US$10 increase in coal prices will set TNB's net profit back by RM350mil to RM400mil. That's very significant,” said a power analyst. AmResearch analyst Alex Goh maintains his financial year (FY) 2011 and FY12 coal cost assumption of US$100 per tonne, pending the developments in TNB's tariff review, scheduled bi-annually in July-August this year. Based on current coal prices and the current US dollar to ringgit ex-change rate, the AmResearch analyst is esti-mating that TNB's FY11 to FY13 net profits could drop by 25% to 26%. “We estimate that coal handling costs constitute about 0.6% of TNB's operating expenses given that coal makes up 50% of TNB's fuel cost; fuel costs, in turn, account for around 21% of op-erating expenses and coal handling costs are around 5% of coal cost,” said an analyst from CIMB Research. Meanwhile, TNB's three-year coal transporta-tion contract with Maybulk will expire in mid-2011 and the rate is likely to be revised down significantly from the current high rate of US$60,000 to US$90,000 per day. Thus, TNB will benefit from lower handling and freight rates for its coal. “However, we be-lieve that this will be more than offset by the increase in coal price arising from extra de-mand from Japan for fossil fuels to compen-sate for the loss of nuclear power generation capacity. The national utility company has only managed to lock in 18% of the 18.1 mil-lion tonnes of coal that it expects to procure in FY11,” said the CIMB analyst. ECM Libra research head Bernard Ching notes that power demand has been rising steadily from a low base in 2009. Power de-

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mand has increased 8.9% from 83,353 GWh in 2009 to 90,771 GWh in 2010. “Going for-ward, power demand growth will be driven by a potential rebound in Malaysia's Industrial Production Index (IPI), which in turn is driven by a steady recovery in the developed econo-mies as well as successful implementation of projects under the government's Economic Transformation Programme,” he said. Ching added that since the industrial sector ac-counted for the biggest source (44.3% or 40,186GWh) of electricity demand in 2010, any rebound in industrial production would in turn boost industrial electricity production, which would in turn positively impact overall power demand. Although the recent rise in coal prices will dampen the near term prospects of TNB, this will support its argument for a tariff hike which is likely to be implemented after the general election, according to Ching. “Near term share price weakness presents an opportu-nity for accumulation as valuation is unde-manding with financial year ending Aug 2011 price earnings at 12 times. The expectations of a tariff hike is premised on the Govern-ment's move to reduce subsidies to keep its budget deficit in check. With the general election speculated to happen this year, it would appear that hopes for a tariff hike is diminishing. A tariff hike may help the Gov-ernment reduce subsidy expenses but it can also lead to inflationary concerns. TNB is now paying a subsidised gas price of RM10.70 per million British thermal units (mmbtu), which is lower than the market price of about RM12 per mmbtu. Last week, TNB acquired 22.1% of port operator Integrax for RM106.5mil. TNB has been looking into ways to reduce fuel costs amid the coal price surge. This was done via a share sale agree-ment with two substantial shareholders of In-tegrax. Halim Rasip Holdings Sdn Bhd and Rozia Hanis collectively agreed to sell 66.5 million Integrax shares to TNB. (Source: The Star, 30 March 2011)

Coal Prices at 4Coal Prices at 4--month Highmonth High Expectations that China would boost its coal imports over the summer months rose when its domestic thermal coal prices climbed fur-ther to scale a four-month high and port stocks dropped again to a five-month low this week. Coal with a heating value of 5,500 kcal/kg rose for the third week up to 785795 yuan (US$121.83) a tonne yesterday, while 6,000 kcal/kg NAR coal steadied at 845 yuan, according to industry data website SXCOAL. (www.sxcoal.com). On other price monitors such as the BohaiRim price index, the price of 5,500 kcal/kg NAR coal has risen 1.9% from a week ago to hit 799 yuan this week, a sign that the price advantage for imports could be even wider. Stocks at top coal port Qinhuangdao posted its seventh straight week of declines, with stocks falling another 7% to 5.96 million ton-nes, bringing total declines since the start of the month to 19.6%. (Source: The Star, 22 April 2011)

Other Minerals/Metals News Other Minerals/Metals News HighlightsHighlights Malaysian Steel Firms Seek SafeguardsMalaysian Steel Firms Seek Safeguards Malaysian steel players are feeling the heat from their rivals in China and are seeking the government's help for safeguard measures. But local companies must make a case for this together with their peers in ASEAN, said the International Trade and Industry Minister Datuk Seri Mustapa Mohamed in a dialogue with the Malaysia Iron and Steel Industry Federation in Kuala Lumpur yesterday. Un-der the China-ASEAN free trade agreement, which came into effect from early 2010, steel firms have to compete against rivals in China.

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Meanwhile, aluminium industry players la-mented that the Chinese producers are en-joying lower material costs by 10 to 15 per cent compared with Malaysian firms, which buy the metals based on the London Metal Exchange prices. "We have also advised the aluminium producers to talk with their ASEAN colleagues and come with a strong case be-fore it is brought to the Chinese authorities as a joint submission," he said at a media brief-ing yesterday. According to the aluminium industry, many countries including India and the European Union, have implemented duties against the import of Chinese aluminium products. The steel players are also urging the government to follow the stand taken by Vietnam and In-donesia to ban the export of scrap metal, say-ing it is a local resource needed by domestic users. On the industry's outlook, the federa-tion said the steel industry will continue to grow at a rate of 5 to 7.5 per cent this year. Although it is not specifically identified as a National Key Economic Area (NKEA), iron and steel products will become raw materials supporting the 19 projects and developments for the 10 NKEAs. They are keen to see the construction of the RM36 billion Mass Rapid Transit project, construction of hotels and re-sorts for tourism development and invest-ments in the gas and energy sector. But they have to use scrap metal in their operations and have to contend with slightly higher scrap metal prices. Scrap metal prices have risen following the uptrend in iron ore and coking coal prices to about US$500 (RM1,520) per tonne from around US$400 (RM1,216) per tonne in De-cember. The dialogue with metal industry players is the second held with industries in Malaysia to address non-tax issues. The metal industry comprises iron and steel and non-ferrous metal (tin, aluminium, copper, zinc and lead) sub sectors. (Source: New Straits Times, 2 March 2011) Taking a Risk for Rare Earths Taking a Risk for Rare Earths A colossal construction project here could

help determine whether the world can break China’s chokehold on the strategic metals crucial to products as diverse as Apple’s iPhone, Toyota’s Prius and Boeing’s smart bombs. As many as 2,500 construction work-ers will soon be racing to finish the world’s largest refinery for so-called rare earth metals — the first rare earth ore processing plant to be built outside China in nearly three dec-ades. For Malaysia and the world’s most ad-vanced technology companies, the plant is a gamble that the processing can be done safely enough to make the local environ-mental risks worth the promised global re-wards. Once little known outside chemistry circles, rare earth metals have become increasingly vital to high-tech manufacturing. But as Ma-laysia learned the hard way a few decades ago, refining rare earth ore usually leaves thousands of tons of low-level radioactive waste behind. So the world has largely left the dirty work to Chinese refineries — proc-essing factories that are barely regulated and in some cases illegally operated, and have created vast toxic waste sites. But other countries’ wariness has meant that China now mines and refines at least 95% of the global supply of rare earths. And Beijing has aroused international alarm by wielding that virtual monopoly as a global trade weapon. Last September, for example, China imposed a two-month embargo on rare earth ship-ments to Japan during a territorial dispute, and for a short time even blocked some ship-ments to the United States and Europe. Bei-jing’s behavior, which has also included low-ering the export limit on its rare earths, has helped propel world prices of the material to record highs — and sent industrial countries scrambling for alternatives. Even now, though, countries with their own rare earth ore deposits are not always eager to play host to the refineries that process them. An American company, Molycorp, plans to re-open an abandoned mine near Death Valley in California. But Molycorp must completely rebuild the adjacent refinery to address envi-ronmental concerns. All of this helps explain why a giant Australian mining company, Lynas, is hurrying to finish a US$230mil rare-earth refinery here, on the

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northern outskirts of Malaysia’s industrial port of Kuantan. The plant will refine slightly radio-active ore from the Mount Weld mine deep in the Australian desert, 4,020km away. The ore will be trucked to the Australian port of Fre-mantle and transported by container ship from there. Within two years, Lynas says, the refinery will be able to meet nearly a third of the world’s demand for rare earth materials — not counting China, which has its own abundant supplies. Nicholas Curtis, Lynas’s executive chairman, said it would cost four times as much to build and operate such a refinery in Australia, which has much higher labor and construc-tion costs. Australia is also home to an envi-ronmentally minded and politically powerful Green party. Despite the potential hazards, the Malaysian government was eager for in-vestment by Lynas, even offering a 12-year tax holiday. If rare earth prices stay at current lofty levels, the refinery will generate US$1.7bil a year in exports starting late next year, equal to nearly 1% of the entire Malay-sian economy. Raja Dato Abdul Aziz bin Raja Adnan, the director-general of the Malaysian Atomic En-ergy Licensing Board, said his country ap-proved the Lynas project only after an inter agency review indicated the imported ore and subsequent waste would have low enough levels of radioactivity to be manageable and safe. Malaysia had reason to be cautious: Its last rare earth refinery, operated by Japan’s Mitsubishi Chemical, is now one of Asia’s largest radioactive waste cleanup sites. “We have learned we shouldn’t give anybody a free hand,” Raja Adnan said. Despite such assurances, critics are not con-vinced that the low-level radioactive materials at the Lynas project will be safe. “The word ‘low’ here is just a matter of perception — it’s a carcinogen,” said Dr. Jayabalan A. Tham-byappa, a general practitioner physician and toxicologist. He has treated leukemia victims whose illnesses he and others have attributed to the old Mitsubishi Chemical refinery. That plant, on the other side of the peninsula, closed in 1992 after years of sometimes vio-lent demonstrations by citizens protesting its polluting effects. Now, in an engineering effort

that has largely escaped the outside world’s notice, Mitsubishi is engaged in a US$100mil cleanup. Rare earths, a group of 17 elements, are not radioactive themselves. But virtually every rare earth ore deposit around the world con-tains, in varying concentrations, a slightly ra-dioactive element called thorium. Radiation concerns — along with low-cost Chinese competition — eventually forced the closing of all rare earth refineries in Japan. It was during this phase-out that Mitsubishi moved its refining operation to Malaysia, where old tin mines had left behind thousands of tons of semiprocessed slag that was rich in rare earth ore. It also had extremely high levels of radioactive thorium. The new Lynas refinery, with nearly two dozen interconnected buildings and 50 acres of floor space, will house the latest in pollu-tion control equipment and radiation sensors. A signature feature will be 4.8ha of interim storage pools that will be lined with dense plastic and sit atop nearly impermeable clay, to hold the slightly radioactive byproducts un-til they can be carted away. But carted to where? That is still an open question. Build-ing the lined storage pools was one of the promises Lynas had made to win permission to put the refinery here, in an area already environmentally damaged by the chemical plants that line the narrow, muddy Balok River. Lynas’ Curtis insists the new factory will be much cleaner and far safer than the old Mitsubishi plant, which “never should have been built,” he said recently, as he led a tour of the sprawling Lynas refinery construc-tion site here. One big difference, he said, was that the ore being imported from Austra-lia is much less radioactive. It will have only 3 to 5% of the thorium per tonne found in the tin mine tailings that Mitsubishi had processed. And he said the Lynas factory would also process 10 times as much ore with only twice as many employees — about 450 in all — thanks to automation that will keep workers away from potentially harmful materials. But the long-term storage of the Lynas plant’s radioactive thorium waste is still unresolved. After using sulfuric acid to dissolve the rare

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earths out of the concentrated ore, Lynas plans to mix the radioactive part of the waste with lime. The aim is to dilute it to a thorium concentration of less than 0.05 percent — the maximum permitted under international stan-dards to allow the material to be disposed with few restrictions. Lynas wants to turn this mixture into large concrete shapes known as tetrapods that are used to build artificial reefs for fish and as sea walls to prevent beach erosion. Local residents seem to be of two minds about the sprawling plant being built near the river. The river empties into the ocean several miles away, next to an impoverished fishing village, where on a recent evening a small group of fisherman sat at the end of a wooden dock. Muhamad Ishmail, 56, said that pollution from the chemical factories that started opening upstream in the 1990s had forced local fishing — a river industry for gen-erations — to move primarily out to sea. Al-though one of his five children works in the nearby industrial district, Ishmail said he did not want Lynas or anyone else to open any more factories. “This river used to be clean, and you could catch fish right here,” he said. But Muhamad Anuar, 30, said his community needed the reliable paychecks that Lynas might offer. “I have two kids, and I don’t want them to be fishermen,” he said. “It’s a hard job.” (Source: The Star, 10 March 2011) Lynas Must Meet M’sian AELB StandardsLynas Must Meet M’sian AELB Standards Australia's Lynas Corp has to meet strict standards set by the Malaysian Atomic En-ergy Licencing Board (AELB) to secure a li-cence to operate its rare earth ore processing plant that is under construction in Gebeng in Kuantan. To get the licence, Lynas has sub-mitted an application for pre-operations. “It is still incomplete but they are beginning to pro-vide documents,'' said AELB director general Raja Datuk Abdul Aziz Raja Adnan. The li-cence will only be issued after and “inter-agency assessment is done.'' But before it begins operations, a pre-operating licence will be issued for Lynas to show proof of its claims that its raw materials are “safe, non-toxic and are non-hazardous.''

“The board will have to verify and decide but of utmost (concern) to us is the safety and security of the workers, the community and the environment. If they (Lynas) do not meet the conditions set by the government, then there is little we can do to help,'' Raja Aziz told StarBizWeek yesterday. The Gebeng plant was thrust into the limelight after a New York Times report said the “long term storage of thorium waste was still unresolved. The ore to be imported for processing in Malaysia will have 3% to 5% of the thorium per tonne found in the tin mine tailings that Mitsubishi had processed.'' This raised alarm bells and the critics are unconvinced - to them, the risks of radioactive pollution is very real be-cause refining rare earth minerals usually leaves thousands of tonnes of low level radio-active waste behind. The stringent rules and layers of monitoring imposed by Malaysia is vital as it cannot af-ford a second tragedy after the contamination caused by the Mitsubishi Chemicals plant near Ipoh. The plant - Bukit Merah Asian Rare Earth - was shut down after a protest in 1992 and now the cleanup is complete. Raja Aziz said the site had been handed over to the local authorities. Lynas promises that it will set a “precedent for leadership in environ-ment performance.” “We are dedicated to zero harm and care and well-being of our people and the communities in which we op-erate is at our core. We have agreed to place funds with the Malaysian government to en-sure safe management of any remaining resi-due as required by the AELB,'' Lynas vice president of corporate and business develop-ment Dr Mattew James said in an email. He added that the raw materials from Mount Weld has naturally low levels of thorium and according to Nuclear Malaysia, it is 50 times lower than the different raw materials used at Bukit Merah. How dangerous is this waste? “This is not radioactive waste. It is under the category of industrial waste which contains normal radio-active elements and they are just the same as your granite walls in your house and the water in the ground. We are very careful as a precedent has been set in Perak,'' Raja said. Lynas, based in Sydney, is investing

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US$230mil to build the world's biggest rare earth ore processing plant in Gebeng. This plant will provide materials critical for the manufacture of high tech goods. This is the first such facility to be built out of China for decades. The aim of the plant is to reduce China's monopoly on the global supply of 17 rare earth metals essential for making prod-ucts like flatscreen TVs, mobile phones, hy-brid cars and even weaponry. The raw mate-rial for processing will have to come from Western Australia. Lynas got MIDA's approval to set up the plant here three years ago and it will enjoy a 12-year tax holiday. The report said about 2,500 workers are rushing to complete the construc-tion so that operations can begin this year. Asked how Lynas will clean up the waste from the plant, Raja Aziz said: “We have been monitoring and taking environmental samples (from the onset). “We will make sure there is subsequent monitoring of the opera-tions if (their application) is approved as it must not have an impact on the environment. That is our guarantee. We are not promoters but concerned for the public. We monitor the situation all the time and its impact on the workers, the public and the environment. If there is an impact, we have provisions to sus-pend the licence (if it is approved),'' Raja said. He said even before the construction began, the Environmental Impact Assessment (EIA) and Radiological Impact Assessment reports had been undertaken. “It is a performance-based EIA, not prescriptive. This means we, and some other government agencies, have to monitor and measure the levels of radioac-tivity (all the time). “There were no concerns in the EIA as (Lynas) is convinced that the radioactive levels will be below the (permissible) levels, but we will have to check it for ourselves,'' Raja Aziz said. (Source: The Star, 12 March 2011) OMH Plans Sarawak SmelterOMH Plans Sarawak Smelter OM Holdings Ltd (OMH) plans to set up a manganese and ferro silicon alloy smelter under the Sarawak Corridor of Renewable Energy (SCORE) initiative. The company,

which is listed on the Australian Securities Exchange (ASX), said as part of expanding its South East Asian smelting strategy, it was now assessing the commercial development, finance, construction and operation of the proposed smelter facility. “The smelter facility is expected to have the capability to produce 300,000 tonnes of manganese ferro alloys and 300,000 tonnes of ferro silicon alloys (a year) for consumption by the growing Asian steel industry,” OMH said in an announce-ment to the ASX. OMH said its preliminary feasibility study on the smelter project was due for completion by the middle of this year while the bankable feasibility study was ex-pected to be ready in the third quarter. Its wholly-owned subsidiary, OM Materials (Sarawak) Sdn Bhd, has executed an exclu-sive memorandum of understanding (MoU) with Syarikat Sesco Bhd (SSB) for the supply of electricity to the proposed smelter. SSB, a wholly-owned subsidiary of Sarawak Energy Bhd (SEB), is licensed to generate, transmit and distribute electricity in Sarawak. It is in the process of acquiring power from Bakun hydroelectric dam to be supplied to energy-intensive industries to be set up in Samalaju Industrial Park, Bintulu within SCORE. The 2,400MW Bakun dam, which is developed by Sarawak Hidro Sdn Bhd, is expected to produce its first 300MW in three to four months' time. Sarawak Hidro managing direc-tor Zulkifle Osman told StarBiz earlier this week that wet testing of the first of the eight turbines would be carried out next month when the water level at the dam reservoir reached 195 metres. The current level is 185 metres. He said negotiations on sales of Ba-kun power to SEB was progressing well, and that Sarawak Hidro and SEB were now nearer to reaching an agreement on tariff rates. OMH said under the key terms of the MoU, both parties would enter into exclusive nego-tiations regarding a long term power pur-chase agreement (PPA) for 500MW of power capacity to be utilised by the proposed smelter. “Both OMH and SSB have entered into an indicative term sheet which outlines the negotiation process as well as the princi-pal terms and conditions to be addressed in the PPA. Both parties are targeting to finalise

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and sign the PPA by the third quarter. The PPA would be subject to certain conditions precedent being satisfied by both parties, in-cluding various approvals, compliance and regulatory requirements,” added OMH. OMH is the second foreign company to invest in a manganese smelter in SCORE. Accord-ing to Sarawak Chief Minister Tan Sri Abdul Taib Mahmud, Asia Minerals Ltd would invest in a manganese smelter with an annual ca-pacity of 400,000 tonnes. OMH has roots in metal trading, including the sourcing and dis-tribution of manganese ore products, and subsequently in processing ores into ferro-manganese intermediate products. It now op-erates commercial mining operations, leading to a fully integrated operations covering Aus-tralia, China and Singapore. (Source: The Star, 18 March 2011) Rare Earths Exports to Reach RM8bilRare Earths Exports to Reach RM8bil Processed rare earths exports from a Malay-sian plant owned by Australia's Lynas Corp could hit RM8bil a year from 2013 based on current prices, a top company official said, as buyers chase supplies outside China. The forecast is more than nine-fold increase from earlier projections of RM880mil in 2009 and would be the equivalent of about 1% of Ma-laysia's gross domestic product, Lynas ex-ecutive vice-president of strategy and corpo-rate communication Matthew James said. The Lynas Advanced Materials Plant in Pa-hang is slated to begin production in Septem-ber 2011, making it a key global supplier, af-ter top rare earth producer China last year imposed export quotas to retain resources. “Lynas is a key part of that supply response,” James told Reuters yesterday. “Malaysia will become the go to destination for value-added exports. Companies requiring rare earths would eventually locate on the east coast of Malaysia. Lynas is acting as a seed for future investments,” he added. (Source: The Star, 19 March 2011)

Rio Tinto Eyeing Quality Mining AssetsRio Tinto Eyeing Quality Mining Assets Rio Tinto Group, the world’s second-largest mining company, is looking to buy “quality assets” while maintaining a selective ap-proach to takeovers, according to chief ex-ecutive officer Tom Albanese. “We will limit mergers and acquisitions to small and inter-mediate size, which we would define as sin-gle billion category,” Albanese said yesterday at a conference in Hong Kong. “First-tier as-sets are still few and far between. We are going somewhat cautious and circumspect.” Albanese returned to takeovers this year, raising his offer for coal producer Riversdale Mining Ltd to A$3.9bil (US$3.9bil), after his purchase of Alcan Inc in 2007 left the London-based company with US$40bil in debt. A lack of new projects is forcing miners to ex-pand through acquisitions. “We want to look at high quality projects,” Albanese said. “Most of the stuff that I’m seeing pitched in the investment universe now are resources that were discovered 10, 20 years, even 30 years ago. They were dogs then and they are coming to light because the economy is a little better.” Rio’s shares were unchanged in Sydney trading at 1:28pm Sydney time. They’ve dropped 5.8% this year. (Source: The Star, 24 March 2011) China to Raise Tax on Rare Earths in April China to Raise Tax on Rare Earths in April China will increase a tax on rare earths from April 1, according to a local media report yes-terday. The report, carried on the website of State Administration of Taxation, said the re-source tax would be raised to between 30 to 60 yuan a tonne, depending on type, a sub-stantial increase from the current level of 0.5-3 yuan a tonne. China, the world’s dominant producer of rare earths, has restricted ex-ports, forcing international prices up dramati-cally since July last year. (Source: New Straits Times, 25 March 2011) BHP Spending US$9.5b to Boost Mining BHP Spending US$9.5b to Boost Mining OpsOps

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BHP Billiton has approved US$9.5 billion (US$1 = RM3.03) of capital investment to ex-pand its Australian iron ore and coal mining operations, showing that planned mining and carbon taxes are not crimping its growth plans. The world's biggest miner has decided to expand its own operations and infrastruc-ture rather than chase ambitious takeovers after three failed deals as it scrambles to meet rising demand from Asia. The investments announced for its Pilbara iron ore project, plus its Bowen Basin and Hunter Valley coal projects, mark the first de-tails BHP has given of a planned US$80 bil-lion in investments over five years. "This is putting meat on the bones with regard to tim-ing, actual tonnes and the amount of capex," said Constellation Capital Management port-folio manager Peter Chilton. "Rio has done the same, trying to get more out of their exist-ing assets. It's not like making a big acquisi-tion, these are all things they have control over and manage already," he said. Other major capital projects include expand-ing the Olympic Dam copper and uranium mine. BHP has previously announced plans to spend around US$20 billion on that. Ana-lysts estimate the massive Jansen potash project in Canada, still in the feasibility stage, could cost up to US$13 billion to build. Ana-lysts have noted BHP's average annual spend over the next five years was not much bigger than rival Rio Tinto's plans for 2011 and 2012. BHP said the investment would develop port capacity and reduce bottlenecks so that port and rail systems could operate at full capacity, as mine production continued to grow. The announcements came just a day after Australian mining companies won a con-cession over a plan to tax their profits at 30 per cent, with the government agreeing to repay current royalties the miners pay to state governments. BHP ferrous and coal chief Marcus Randolph said the concession had been expected, and the profits tax on iron ore and coal mines had long been factored into the miner's plans. "We reached a framework agreement with the government quite a while back and our as-sumption was that agreement was going to

be respected. So we continue to operate and invest on that premise," Randolph told a me-dia briefing. Randolph said BHP had also factored a planned carbon tax into its analysis for several years, and such a tax would not make a big difference to these projects as they were not major users of energy. The top global miner said it would invest US$6.6 billion in a total investment of US$7.4 billion to continue production growth in its western Australian iron ore operations, to in-crease annual capacity to above 220 million tonnes. Strong demand from Asian steel-makers has sent prices of coking coal surg-ing. Contracts for coking coal in Asia for deliv-ery in the second quarter of 2011 are ex-pected to settle at around US$330 per tonne, up from US$225 per tonne in the first quarter. (Source: New Straits Times, 28 March 2011) Lynas of Australia Sheds Some Light on Lynas of Australia Sheds Some Light on Controversial ProjectControversial Project Australia-listed Lynas Corp Ltd had received approvals to build a rare earth refinery in Aus-tralia and China but had picked Malaysia as the “preferred location” given its “proximity to market, access to high quality chemicals, utili-ties and engineering skills' coupled with its transparent regulatory framework,” said the company. Lynas said it had initially obtained all approvals for this project in Australia but several factors in the country made it not fa-vourable such as water shortage, difficulty of finding a suitable location that met with all its required infrastructure needs, lack of indus-trial land and port capacity, short supply of engineering and construction skills and the relatively high costs. The company said this in response to queries sent by StarBiz. China which produces 97% of the world's rare earth supply, according to Lynas, had previ-ously approved its plan to set up the process-ing plant in the country but the Chinese gov-ernment had later imposed export limits on all final products as well as export taxes. “The Chinese government now controls and re-stricts export of all rare earth materials and also applies import and export taxes of up to 25% specifically for rare earths. Lynas was

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unwilling to invest in China and then have the export of final products controlled by the Chi-nese government,” Lynas said. In recent weeks, protests over Lynas' project in Kuantan have gained strong momentum; the project has drawn much flak on the back of concerns over its potential health and envi-ronmental risk from the radioactive waste. “By all international standards, the Lynas raw ma-terial is classified as safe, non-toxic and non-hazardous,” it reiterated. According to Lynas, the project's operating expenditure is esti-mated at RM350mil a year while it expects to rake in export revenue of RM880mil a year. It said the project would create over 350 skilled and semi-skilled job opportunities. In an attempt to clear the air, the supplier of rare earths said it had initially proposed to set up its RM1.3bil plant in Kemaman, Tereng-ganu as per the advice of Malaysian Invest-ment Development Authority (Mida) in 2006 and had designed the plant for that specific location, having obtained all relevant approv-als from AELB, DOE and the Kemaman mu-nicipal council. However, while waiting for the Terengganu government to allocate the land, Lynas said Mida had asked the com-pany to consider relocating the plant to Ge-beng, Pahang, which is where it is currently being built. Kuantan, the company elabo-rated, is well-equipped with multi-port facili-ties, available industrial land, plentiful water supplies, natural gas pipelines and stable electricity supply and it also has diverse chemical, high quality chemical supplies which the company can purchase from local companies. “At no time did the Terengganu government reject approval for the Lynas plant. Lynas feels an obligation to respond to recent public statements made about the Ly-nas Advanced Material Plant in Malaysia-statements we believe are factually incorrect, statements which are taken out of context, and statements which are misleading to the public,” it continued. The Lynas plant will process raw material sourced from its mine and concentration plant in Mount Weld, Western Australia which will be transported to the facility in Pahang. “This is very different to the raw material processed at the Asian Rare Earth Plant in Bukit Merah

which used tin mining tailings as its raw mate-rial. This contained high levels of thorium, which was the source of high levels of radia-tion, and ultimately this plant's closure. Un-der current regulations, the raw material proc-essed at Bukit Merah could not be processed in Australia, Malaysia or China today,” it said, adding that by contrast, the Lynas raw mate-rial contained naturally low levels of thorium 50 times lower than the tin tailings used by Asian Rare Earth. (Source: The Star, 31 March 2011) China’s Minmetals Offers US$6.5b for China’s Minmetals Offers US$6.5b for EquinoxEquinox Minmetals Resources, China's biggest metals trading firm, yesterday offered US$6.5bil to buy Equinox Minerals, chasing the target company's copper assets in Zambia and Saudi Arabia. China, which accounts for 40% of the world's demand for copper, is on a min-ing acquisition spree as prices for the red metal hover near record highs. Minmetals, which owns mining operations in Australia and Asia, said it would offer C$7 per share for Equinox, a 23% premium to Equinox's close in Toronto last Friday of C$5.71. It would be China's fourth-biggest outbound M&A deal, according to Thomson Reuters data. Equi-nox's Australian shares surged 29% to a re-cord A$7.35, topping the value of the Minmet-als' offer on expectations a rival bid may emerge. “It's game on now,” said Ausbil Dexia chief executive Paul Xiradis, a share-holder in Equinox. “They'll be looking to de-fend their turf and it may entice another party to come in as well, looking for quality assets such as those held by Equinox.” Minmetals' shares rose 2.4% to HK$6.72. Chief executive Andrew Michelmore told Reuters the Equinox offer was Minmetals' best price, adding he was not considering in-creasing it. “It fits into a strategy of building a leading international diversified base metals upstream business,” he later told a media conference in Hong Kong. “It certainly fits in with the strategy in terms of growing the base metal size, particularly in terms of copper,” said Michelmore, adding Minmetals would be the world's 14th largest copper producer after

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the deal, from its current rank of 30th. The offer is conditional on Equinox dropping its C$4.7bil bid for Canada's Lundin Mining, which has been the subject of a separate takeover tussle between Equinox and Inmet Mining. Investors said it was possible rival bidders could emerge for Sydney and To-ronto-listed Equinox, but said they might be deterred by Minmetals' financing power. While Minmetals has a market value of just US$2.5bil, the metals trading firm said its bid was being funded with credit from Chinese banks and equity investments by Chinese institutions. “Ultimately no one wants to get into a bidding war with Chinese-related par-ties, given that Chinese companies are per-ceived to have a lower cost of capital relative to western companies,” said Tim Schroeders, a portfolio manager at Pengana Capital. China, and to a lesser degree India, have been scouring the globe to secure resources to fuel their fast-growing economies. Chinese banks have loaned African nations billions of dollars and committed to fund major infra-structure projects as part of a drive to secure access to everything from copper to iron ore and food. Surging global demand for copper plus the high cost and long lead time to bring new re-sources to production has fuelled expecta-tions of more takeover activity and a pro-longed bull run in the metal. London Metal Exchange copper touched a record high of US$10,190 a tonne in February, and yester-day stood at US$9,350. It has risen some 120% in the past two years. Investors said Minmetal's offer premium was reasonable but not necessarily high enough, as Equinox's shares had declined in recent weeks on con-cerns about the Lundin deal. “I would de-scribe it as a realistic offer but not a knockout bid,” said James Bruce, portfolio manager at Perpetual, which recently sold its Equinox shares. “It's a cleverly timed bid by Minmet-als. We thought Equinox were paying too much for Lundin and were taking on too much debt in that deal.” This will be Minmetals' second major acquisi-tion after it bought Minerals and Metals Group (MMG) for US$1.85bil from state-owned par-ent China Minmetals NonFerrous Metals Group late last year. It is already planning a

new share issue of US$1bil to part-fund the MMG deal. Equinox said in a statement its board planned to meet to consider the Minmetals bid. It has not yet made a recom-mendation to shareholders to accept or reject the bid. A source familiar with Equinox said the Minmetals approach caught the company by surprise. Equinox executives are currently in Canada marketing the Lundin offer, which Lundin's board has urged shareholders to re-ject. The deal marks the latest in a string of Australian mining takeovers involving Michel-more, who has been criticised by some dis-gruntled investors for his track record on mergers and acquisitions. He was at the helm of WMC Ltd in 2005 when it was sold to BHP Billiton for US$6bil, a sale seen as too cheap after nickel prices rocketed shortly af-ter the deal was completed. (Source: The Star, 5 April 2011) Press Metal, Partners Sign Deal with Sara-Press Metal, Partners Sign Deal with Sara-wak Energywak Energy Press Metal Bhd and three foreign compa-nies, which together plan to invest some RM9.5bil in energy-intensive industries in Samalaju Industrial Park, Bintulu, have signed separate power purchase agreement (PPA) term sheet with Sarawak Energy Bhd (SEB). SEB's chief executive officer Torstein Dale Sjotveit said Press Metal and the three companies OM Materials, Asia Minerals Ltd and Tokuyama Corp would require a long-term supply of 1,300MW to power their plants. The electricity will be supplied by the 2,400MW Bakun hydroelectric dam, which is expected to produce its first 300MW in three months. He said Press Metal, which owns and operates an aluminium smelter in Mukah, would invest RM5bil in a new smelter project in Samalaju. Press Metal, which also has operations in China, Singapore and Dubai, sold 20% of its stakes in Press Metal Sara-wak to Japan's Sumitomo Corp about six months ago. “OM Materials, a Singapore company listed on Australian Stock Ex-change, and has operations in China, Austra-lia and Africa, will invest US$300mil (RM903mil) in a manganese and ferro-silicon

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smelting plant. Asia Minerals Ltd, a Hong Kong company with current operations in Mongolia, China, South Africa and Brazil, will also set up a manganese smelting plant with an investment of US$200mil (RM602mil),” added Torstein at the PPA term sheet agree-ment signing ceremony witnessed by Sara-wak Chief Minister Tan Sri Abdul Taib Mah-mud here yesterday. He said Tokuyama Corp would invest RM3bil in a polycrystalline silicon factory, which is now under construc-tion. The proposed plants of the four companies, which are the first batch of investors in Samalaju in Sarawak Corridor of Renewable Energy (Score), are expected to start com-mercial production next year and in 2013. Torstein said SEB would finalise the PPA with the four companies. He said SEB was con-cluding the PPA term sheet with another three Score investors, which planned to in-vest close to RM3bil. He did not name these investors. The seven investors are expected to create about 30,000 jobs when their plants are fully operational. “SEB, together with the State Planning Unit, is also in various levels of discussions with up to 20 other potential Score customers,” he added. Torstein said the signing of the PPA term sheet signified the positive development to-wards the success of Score, one of the five regional economic corridors in Malaysia. “Score holds the most compelling compara-tive advantage for Sarawak in that the state has abundant energy resources, predomi-nantly the hydro power, an area which SEB has been tasked to develop.” He said it was a big challenge for SEB to develop up to 7,000MW by 2020 as being planned by the authorities. About 75% of the 7,000MW would be from hydro dams. SEB is now construct-ing the 944MW Murun dam, upstream of Ba-kun dam. (Source: The Star, 13 April 2011) Record Profits Seen for Rio, BHPRecord Profits Seen for Rio, BHP Rio Tinto Group and BHP Billiton Ltd will re-port record profits this year as Australia ships more iron ore than ever and still fails to meet

Chinese demand that has increased seven-fold in a decade. The biggest ore-exporting nation will send 425 million tonnes overseas, 5.5% more than in 2010, according to the Australian Bureau of Agricultural and Re-source Economics and Sciences, the Govern-ment’s commodities forecaster. Global seaborne supply of the raw material for steel will fall about 15 million tonnes short of de-mand, compared with an 11 million-tonne sur-plus last year, according to Macquarie Group Ltd. The Sydney-based bank is forecasting a 12% jump in prices this year, on top of 2010’s 84% advance, showing why analysts estimate that Rio and BHP will report gains in profit of as much as 74%. Demand will also strengthen as Japan, the world’s second-biggest ore im-porter, rebuilds after its worst-ever earth-quake. That still won’t be enough to make shipping rates in the spot market profitable. “Chinese appetite for iron ore isn’t showing any signs of abating,” said Chris Hall, who helps manage US$4bil of assets at Argo In-vestments Ltd in Adelaide, including shares of BHP. “Add to that all the steel Japan will need to help rebuild after the earthquake and it’s looking like Australia’s iron-ore exporters are in for a good year.” Record profit for mining companies won’t necessarily mean profitable rates for the ship-ping firms hauling the material. Rates for capesizes, carriers three times the size of the Statue of Liberty, slumped 62% this year be-cause of a glut of vessels, according to the London-based Baltic Exchange, which pub-lishes daily rates for more than 50 maritime routes. Forward freight agreements, traded by brokers and used to hedge or bet on future transport costs, are pricing in a fourth-quarter rate of US$14,586 a day. While that’s 92% more than now, it’s still less than the US$25,000 a day owners of capesizes valued at US$60mil need to cover expenses such as crew and financing, according to HSBC Ship-ping Services Ltd in London. Rates are volatile, rising or falling 10% or more in all except two of the last 30 months. The capesizes fleet of 1,082 vessels will ex-pand 17% this year, compared with a 7% gain in demand to ship iron ore, the biggest

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cargo, according to Clarkson Plc, the world’s largest shipbroker. About 90% of global trade moves by sea, according to the Round Table of International Shipping Associations. “With the amount of new ships on order, it will not really be enough to make a massive differ-ence,” said Peter Norfolk, an analyst at Freight Investor Services Ltd, a broker of shipping derivatives in London. “It will help, but I wouldn’t expect it to lead to a significant increase in rates later in the year.” Investors are already concerned that demand for commodities may weaken as China seeks to restrain growth. The People’s Bank of China raised interest rates for a fourth time in six months on April 5, before a report forecast to show consumer prices climbed 5.2% last month from a year before, the fastest pace since 2008. China’s growth of 9.5% this year, compared with 10.3% in 2010, will still be three times bigger than the US and five times that of the eurozone, according to the median estimates in Bloomberg surveys of as many as 89 economists. The anticipated surge in iron-ore exports to Japan may be delayed because the country first has to repair the ports and roads damaged by the earthquake and 2 tsunami on March 11. (Source: The Star, 13 April 2011) Wild Weather Slams Rio Tinto Coal, Iron Wild Weather Slams Rio Tinto Coal, Iron Ore OutputOre Output Global mining giant Rio Tinto yesterday said Australia's wild weather had seen first-quarter iron ore output shrink three per cent from a year earlier and steelmaking coal slump 12 per cent. The Anglo-Australian firm said pro-duction had dropped sharply as Australia's north was hit by record flooding and tropical cyclones hammered the vast continent's east and west coasts. "Our Australian coal, iron ore, uranium and alumina operations were affected by the extreme weather in the first quarter, but most are recovering and are benefiting from continued strong prices," chief executive Tom Albanese said. Global iron ore fell three per cent from the first quarter of 2010 to 42 million tonnes - a 16 per cent plunge on the previous record-

breaking quarter as cyclones and flooding struck the mineral-rich Pilbara region. "The impact of three tropical cyclones and addi-tional tropical low depression systems caused out-loading operations to be suspended sev-eral times during the quarter, with the resul-tant loss of approximately nine shipping days," Rio said in its first-quarter operations report. "Severe monsoonal rains" in coal min-ing Queensland state saw coking, or steel-making, coal output slip 12 per cent on year to 1.6 million tonnes, which was 29 per cent lower than the fourth quarter of 2010. Ther-mal coal, burned to produce electricity, held at a consistent level of 4 million tonnes, with other Australian mines making up the short-fall. Rio had to declare force majeure at all four of its Queensland coal mines after heavy flooding swept the state, swamping tens of thousands of homes and killing more than 30 people. One of the mines remains closed. Albanese said Rio had successfully taken control of Mozambique-focused coal miner Riversdale and "plan to accelerate the devel-opment of these significant tier one coking coal assets." It had also expanded iron ore capacity in the Pilbara by five million tonnes in the quarter to 225 million tonnes per an-num. Rio is targeting 333 mtpa by the second half of 2015. Rio flagged annual iron ore pro-duction of 191 million tonnes, 9.3 million ton-nes for steelmaking coal and 18.2 million ton-nes for thermal coal. Analysts said Rio's numbers were disappointing, but broadly in line with expectations after weather-related disruption. "We are all aware of the weather issues and no one was really expecting pro-duction to be in line with the fourth quarter," analyst Richard Knights at Liberum in London said. Rio Tinto forecast its iron ore produc-tion for 2011 to total 191 million tonnes, roughly in line with market expectations. (Source: New Straits Times, 14 April 2011) Glencore Said to be Worth Up to US$69bGlencore Said to be Worth Up to US$69b Glencore is already worth as much as US$69 billion (US$1 = RM3.02), with its earnings set to double in two years, according to research from two banks underwriting the commodity trader's potentially record-breaking listing.

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Glencore's banks are distributing research to potential investors to help convince them to back the previously insular trader as it seeks to raise as much as US$12.1 billion. Re-search from Barclays Capital and Credit Suisse - not distributed to the media but seen by Reuters - also forecasts rapid growth in key measures of profitability, such as earn-ings before interest, tax, depreciation and amortisation (Ebitda). Barclays says Glen-core's equity is now worth US$52.5 billion to US$69.2 billion, while Credit Suisse values the Swiss firm, led by former coal trader Ivan Glasenberg, at US$53 billion to US$68.6 bil-lion. Pre-flotation research typically excludes funds raised by selling new shares, in this case up to US$8.8 billion. If that is the situa-tion here, it would mean the banks think that Glencore could ultimately be worth as much as US$78 billion after a listing - even more than the top of the US$45 to US$73 billion range implied by Glencore's own figures. The banks declined to comment. Valuation is a challenge for a complex business that is part trader, part miner, and part investor - a 34.5-per cent stake in Xstrata plc is Glencore's big-gest listed holding. Glencore is aiming to sell a 15 to 20 per cent stake worth US$9 to US$11 billion, including US$2.2 billion of existing shares and the op-tion to sell an extra 10 per cent. Barclays says earnings will hit US$8.86 billion in 2012 - or more than double last year, when net profit was US$3.8 billion. Glencore's Ebitda will also far surpass 2007's record US$7.7 billion by 2012, the duo forecast. In the next two years, Barclays says it will more than double to hit US$12.9 billion, while Credit Suisse predicts it will touch US$11.76 billion. The rise far outstrips analysts' average fore-cast of a 48 per cent rise at Xstrata. The banks use a range of measures to value Glencore, including "sum of the parts" valua-tions and price-to-earnings and enterprise value to Ebitda ratios. On an EV/Ebitda basis, Glencore should fetch a premium to European miners, be-cause of a lower tax base and less volatile earnings thanks to its marketing business, Barclays says. It says a long-mooted merger

with Xstrata would make "a very attractive company" but the financing of such a deal "remains unclear" and would require signifi-cant debt or equity funding. Glencore chief executive Ivan Glasenberg said in a newspa-per interview last Saturday that bringing Glen-core and Xstrata together would add value but is not on the agenda at the moment. (Source: New Straits Times, 18 April 2011) Minmetals Withdraws Offer for EquinoxMinmetals Withdraws Offer for Equinox Minmetals Resources Ltd, controlled by China’s largest metals trader, withdrew its offer to buy Equinox Minerals Ltd after Barrick Gold Corp trumped it with a C$7.32bil (US$7.68bil) cash bid. “The price offered by Barrick is above our most optimistic assess-ment of value,” Andrew Michelmore, chief ex-ecutive officer of Hong Kong-based Minmet-als, said in a statement yesterday. “Competing with Barrick at these prices would, in our view, be value destructive.” The withdrawal clears the path for Toronto-based Barrick to take control of the Lumwana mine in Zambia and Saudi Arabia’s biggest copper deposit, in the world’s most expensive copper mining takeover. Minmetals plunged in Hong Kong trading on concern it missed an opportunity to shore up copper reserves as China’s demand grows. “Minmetals had wanted to diversify its non-ferrous metal busi-nesses by adding copper assets,” said Helen Lau, a Hong Kong-based analyst with UOB Kay Hian Ltd. “To become a world-class min-ing company, it has to do a lot of acquisi-tions.” Minmetals dropped 7.9% to HK$5.26 at 2:28pm in Hong Kong yesterday, after falling as much as 13%. The company, controlled by state-owned China Minmetals Group, will concentrate on other opportunities and devel-oping its own assets that include the world’s second-biggest zinc mine and projects in Australia, Laos and Canada. The Equinox offer by Minmetals was already China’s larg-est ever proposed takeover of a mining com-pany, and the 32% premium over the 20-day trading average would have been the most a Chinese company has paid for a mining deal

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greater than US$500mil, according to data compiled by Bloomberg. “China will continue to be very prudent buyers of assets,” Chris Weston, an institutional dealer at IG Markets in Melbourne, said by mobile phone yester-day. “They will be prepared to pay up for the right company at the right time. They may have looked at Barrick and said: “They want it more. We don’t want to get into a huge bid-ding war.”

The offer from Barrick, the world’s biggest gold company, values Perth, Australia-based Equinox at 13.5 times earnings before inter-est, taxes, depreciation and amortisation, a record level for a copper takeover, according to data compiled by Bloomberg. It is priced at C$8.15 a share, 16% more than Minmetals’ offer and 17% more than Equinox’s average share price over the past 20 trading days. The bid values Equinox’s equity at 28 times net income, the highest for an acquisition in the industry and topping the 24 times multiple that underpinned Minmetals’ abandoned pro-posal. “Equinox is expensive, but nothing is cheap now,” said UOB’s Lau. “Minmetals may have to wait until resource prices fall, but it’s unlikely to happen anytime soon.” (Source: The Star, 27 April 2011) New Rare Earth Plant Deal is a NoNew Rare Earth Plant Deal is a No--go, go, says Peraksays Perak The Perak government will not allow another rare earth plant to be built in the state, execu-tive councillor Datuk Hamidah Osman said. “For any exploration work to be carried out, an application must be submitted to the state government through the mineral committee chaired by the Mentri Besar. “The procedure is required for all mining projects,” added Hamidah, who heads the state Industry and Investment committee. She was responding to an MoU signed between a Hong Kong company and state-owned Perbadanan Ke-majuan Negeri Perak (PSDC) to explore and mine rare earth in the state. In a filing to the Hong Kong Stock Exchange dated April 18, CVM Minerals Ltd said it had entered into an understanding with PSDC, which report-edly agreed to carry out the project on a joint-venture basis in Bukit Merah. The Hong Kong company, through its local subsidiary CVM Metal Recycle Sdn Bhd, has applied to the state’s land and mineral office for a licence to explore an area covering 250ha. Bukit Merah was the site of Malay-sia’s rare earth plant 20 years ago, which is still undergoing a massive RM300mil clean-up of alleged radioactive waste. Hamidah said the Perak government has absolutely no interest to give the green light for such a sen-

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sitive project to take off. “The issue was blown out of proportion as the MoU clearly stated that both parties would only enter into a joint-venture should there be approval from the authorities. There is none and I do not foresee there will be any forthcoming,” she told The Star at her office here yesterday. Hamidah said the matter was done without the state government’s knowledge and it has advised PSDC chief executive officer Datuk Samsudin Hashim to refer to the government before entering into any future agreements. Meanwhile, Samsudin said the MoU had no binding effect and would expire in six months. (Source: The Star, 29 April 2011)

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