Frank Wu, regional head of structured commodity trade finance, Asia Pacific at Deutsche Bank, talks about China’s Belt & Road Initiative (BRI), synchronised global economic growth and what this means for the commodity finance market.
Beijing-headquartered state grains and agricultural trader COFCO has bought cargoes of soybeans from the US - but future purchases may be jeopardised by renewed trade tensions between the two nations, according to sources.
China last week gave state-controlled companies the nod to resume buying the oilseed, used in animal feed, after Beijing agreed to import more goods and services from the US, its top trading partner, in order to ease the $335 billion trade gap between the two countries.
But US President Donald Trump unexpectedly toughened his trade stance this week. He called for tariffs on $50 billion of imports from China unless it addressed the issue of theft of American intellectual property.
While it was not clear how many cargoes COFCO booked, one of the two sources briefed on the buying said COFCO and state grain stockpiler Sinograin have together bought at least 10 cargoes of US soybeans.
Debt-laden Hong Kong-headquartered commodities trader Noble Group has secured $100 million in trade finance facilities from a group of investors, winning fresh support for a $3.4 billion debt restructuring plan that is key to its survival.
Noble said a consortium of investors, which includes perpetual security holders Value Partners and Pinpoint Asset Management, will provide the three-year financing. The consortium, which owns about 5% of Noble stock, has agreed to back the restructuring.
US-headquartered oil and gas group Ring Energy has announced that the borrowing base on its $500 million senior secured credit facility has been increased from $60 million to $175 million. All other terms and conditions remain the same. There was no outstanding debt on the senior secured credit facility at March 31, 2018.
Maarten Koning, global head of structured metals and energy finance at ING, explains how the bank's Geneva commodity business is rapidly growing. He expects commodity producers to increase their capex and M&A activities, although capital models continue to hinder commodity finance deals.
Royal Dutch Shell has sold oil and gas assets in Norway and Malaysia for over $1.3 billion, bringing it closer to a target of $30 billion in disposals by year-end. The company agreed to sell its 45% interest in the Draugen Norwegian offshore field and a 12% in the Gjoa block for a total of $566 million to OKEA - a Norwegian producer backed by private equity firm Seacrest Capital.
Shell earlier announced the completion of the sale of a 15% stake in Malaysia LNG Tiga to the Sarawak State Financial Secretary for $750 million.
Russian state-run gas giant Gazprom has committed to invest $1.2 billion in exploration and production at the Vitiacua onshore field in southern Bolivia. The contract will mean the "drilling of two exploratory wells, six development wells, adding a total of eight wells, with a maximum production of 400 million cubic feet in coming years", Bolivia's state-owned oil and gas company YPFB chief executive Oscar Barriga said. The Viticua block in the Chaco oil and gas basin has potential reserves of 2.17 trillion cubic feet.
Colombia's Ecopetrol will pay off $156 million in loans - which date back to 2013 and were issued with a payment schedule that would end in 2023 - early. Ecopetrol has planned two payments, on July 6 and 25, that will fulfill its debt obligations with no penalty for a shortened repayment time line. The loans were taken out from various banks and guaranteed by the Export-Import Bank of the United States.
London-based insurance broker Miller has hired Ryanne Smith to strengthen its energy capabilities in North America. Smith specialises in onshore energy and will be focusing on North American oil and gas, midstream, power and utilities and renewable energy.
She has worked as a retailer and marketer in energy for both Marsh and Lockton in Houston; and for the Onshore Energy and Structured Credit & Political Risks teams at RKH Specialty in London.
Embattled Hong Kong-headquartered commodity trader Noble Group has won over Goldilocks Investment, a major opponent of its $3.5 billion debt-for-equity restructuring plan, ending months of accusations and lawsuits.
Existing shareholders will get 20% of a restructured company, up from 15%. Noble Group said previous critic Goldilocks Investment was a supporter of the revised deal and the two would cease fighting each other in the courts. But hours later, long-time foe Iceberg Research renewed its criticism, saying the trader has no value.
Iceberg, the group that first published critiques of Noble's accounting in 2015, said "20% of zero is still worth zero", according to a statement on Twitter. It flagged "other obstacles to the restructuring", without giving details.
Bob Angliss, deputy head of the commodities centre at Bank of China, talks about future growth plans, opportunities in the short-term transactional market, traders becoming banks and issues with uninformed regulators.
VAKT, an independent company focused on creating an industry-wide post-trade processing platform for commodities through blockchain, has announced its launch and strategic alliance with Deloitte and ThoughtWorks.
It claims the platform will focus on post-trade processing to create a single source for the trade lifecycle, eliminating reconciliation and paper-based processes.
John Jimenez, from BP, has been appointed as VAKT's interim CEO. Further senior appointments to the management team include Adam Vile as Chief Technology Officer, and Lyon Hardgrave as Vice President of Product and Business Development.
The commodity trading landscape is changing, as are the needs to insure risk by both commodity traders and producers. Katharine Morton spoke to brokers, insurers and the end users of insurance to see how the market is evolving. Is CPRI meeting end user needs and will bank regulation put the whole commodity trade insurance market under a cloud?
Oil price strength in the second quarter of 2018 has been driven by geopolitics, in particular heightened tension in Syria and in the Middle East, and subsequently the US withdrawal from the Iran nuclear deal, says Euler Hermes in a new report.
Its base case for the remainder of the year stands at USD 72/barrel (bbl). We assume 2018 GDP growth of 3.3%, and 0.5mbpd supply loss on the assumption that most of the loss from Iran will be mitigated while Venezuelan production shortfalls will not. Opec has about 2mbpd of spare capacity and there may be room for marginal growth from US production.
Its bullish scenario reaches USD 80/bbl. This assumes 2% USD appreciation, with 1.5mbpd production loss from Iran and 0.5mbpd from Venezuela.
And its bear scenario is at USD 67/bbl: we reduce our GDP growth forecast to +3% and assume a 5% USD appreciation while at the same time assuming full mitigation of all production shortfalls from Iran and Venezuela, along with a small 0.5mbpd increase from US shale production.
Energy trader Vitol has started the planned A$5 billion ($3.7 billion) float of its Australian refinery and fuel supply network Viva Energy, in what would be the country's biggest initial public offering in four years.
The sale of the unit, which supplies about a quarter of Australia’s fuel, is Vitol’s second IPO this year after the London listing of an African fuel business and is expected to raise up to A$3 billion for the energy trader and its partners, who will retain a 40% to 50% stake.
A consortium led by oil trader Vitol has entered into exclusive talks to buy stakes in Nigerian offshore fields that are held by Brazil's Petrobras and its partners, aaccording to sources. The assets are estimated to be worth up to $2.5 billion.
The buying consortium comprises Vitol, Vancouver-based Africa Oil, and Delonex Energy, an Africa-focused oil company backed by private equity fund Warburg Pincus and the International Finance Corporation.
The sale, announced last year, includes the 40% stake of Petrobras Africa held by a subsidiary of Grupo BTG Pactual SA and the 10% holding owned by Helios Investment Partners.
Resource nationalism is always present, but a recent increase in intensity fuelled by an uptick in commodity prices has got some in the growing electric vehicle (EV) market worried. In short, resource rich governments now have the balance of power in a highly competitive global market for lithium and cobalt resources, and long term supply contracts and regulation are being renegotiated with increasing frequency.
Midstream and downstream energy company Puma Energy Singapore has announced that Pierre Eladari is stepping down as CEO and will leave the company.
He joined the company - originally as part of Trafigura - in 2004. Puma Energy has yet to announce a successor.
Australian junior cobalt explorer Jervois Mining has appointed ex-Glencore nickel executive Peter Johnston to its Board of Directors. He has more than 35 years of operational and project development experience.
From 2013 to 2015, he was Head of Global Nickel Assets for Glencore International AG and sat on the Glencore executive management committee.
The move means that all Jervois Mining board members are previous executives of Glencore. Johnston joins non-executive directors Brian Kennedy and Michael Rodriguez.
BHP has approved $2.9 billion in capital expenditure for the South Flank project in the central Pilbara, Western Australia. The South Flank project expands the existing infrastructure at Mining Area C, and involves construction of an 80 Mtpa crushing and screening plant, an overland conveyor system, stockyard and train loading facilities, procurement of new mining fleet and substantial mine development and pre-strip work.
Russian aluminium producer UC Rusal has completed the first stage of development of the Dian-Dian bauxite deposit in Guinea and the commencement of ore export shipments. The company has commissioned a mine with an annual capacity of 3 million tonnes of bauxite and has built the associated infrastructure to serve the mine, in particular, roads and a railway line, for the transportation and storage of ore.
Diversified Gas & Oil has signed a letter of intent to buy gas and oil producing assets in the Appalachian Basin for $575 million to strengthen its portfolio.
The proposed acquisition includes 11,350 wells with a current net total gas production of 32.1Mboe/day, allowing the company to enhance its net daily production by 114%.
The company will fund the transaction from a new $1 billion debt facility with an initial borrowing base of $600 millio, of which $376 millio will be used for the acquisition.
TXF caught up with Mark Segall, a partner at CMS, to find out more about the revival of Ukraine's commodity finance market, changes in structured trade finance in Russia, sanctions, Asia's growth, traders becoming lenders, and how alternative lenders are now providing viable sources of funding.
Large-scale commodity trading houses are feeling the heat of escalating trade disputes - as sabre rattling between the US and China intensifies, leaving many trading houses stuck with cargoes on the water or at loading ports, with uncertain destinations.
Unipec, the trading arm of China's state-owned Sinopec, was scheduled to load eight VLCCs of US crude in June, but by the time they arrive at Chinese ports in two-months, Beijing's latest tariffs may kick in.
Traders have been entering new regions that others fear to tread, and stiff competition has pushed them into riskier trades. Trade-war risks have emerged for trading houses such as Glencore, Vitol, Trafigura, Gunvor and Koch.
Specialization has left them more exposed to individual commodities.
This can be seen in the near-collapse of Noble Group, looming consolidation for the ABCDs in agriculture - Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus - and tighter regulation such as Europe's MiFID II rules. In early May, ADM warned that trade spats could cost $30 million in losses.
New Orleans-based First Bauxite Corporation has secured a second bridge loan facility from financier Resource Capital Fund of up to $10 million as it starts full-scale construction of its Bonasika bauxite project in Guyana.
The one-year loan bears a 10% coupon and supplements a $5 million bridge loan facility the company secured from the same lender in January. Under terms of both bridge loans, an amount of more than $25 million will become immediately payable should the company secure further debt from a third-party lender, or sell a royalty or metals stream to fund project construction.
Hong Kong-headquartered Noble Group has signed a memorandum of agreement with Aeolian Spirit Shipping and Transmed Shipping for the proposed sale of a Kamsarmax dry bulk carrier vessel called Ocean Forte for $32.2 million. Noble said proceeds from the sale will form part of its assets in its restructuring plan.
Cobalt Blockchain (COBC) – expected to be the world's first blockchain-based provenance system for cobalt – has signed a letter of intent for a $10 million revolving trade finance facility with United Bank for Africa (UBA). Proceeds will be used for purchasing cobalt concentrates (1% minimum, 3-4% average cobalt) from a mining cooperative in the Democratic Republic of the Congo (DRC). The supply agreement guarantees COBC a supply of cobalt concentrate of 40,000 tonnes per annum.
Gold miner Petropavlovsk has loaned $29.75 million to IRC Ltd to help an IRC subsidiary meet a payment due under an ICBC project loan. Petropavlovsk, which owns 31% of IRC, says the bridge loan will be repaid as soon as refinancing of the ICBC facility is completed.
The $340 million ICBC loan, for which Petropavlovsk is a guarantor, was granted to IRC's unit Kimkano-Sutarsky Mining and Beneficiation Plant LLC. The payment due on June 20 is $35.2 million. Negotiations to refinance the facility are at an advanced stage with a major Russian bank.
Glencore has settled a mining royalties dispute in Democratic Republic of Congo with companies associated with US sanctioned Israeli billionaire Dan Gertler. Gertler’s Ventora Development Sasu had been seeking $695 million in unpaid and future royalties from Glencore’s subsidiary Mutanda Mining, and $2.28 billion from Glencore subsidiary Kamoto Copper Company (KCC). Ventora accused KCC of breaching an agreement by declining to make royalty payments because Gertler was under US sanctions. Glencore has resolved the situation by agreeing to pay royalties in a currency other than US dollars.
African Development Bank Board has approved a $15 million equity investment in Africa Food Security Fund (AFSF), to support enterprises in agri-business SMEs in Africa. AFSF is a second-generation fund targeting a total capitalization of $100 million. The Fund will invest in potential high-growth SMEs operating in the food and agriculture value chains across sub-Saharan Africa. The fund manager is Zebu Investment Partners.
Anthony Julien has resigned as president and CEO of Meridian Mining and is being replaced by Gilbert Clark as interim president and CEO. Clark has served as a partner with Sentient Equity Partners since 2017. Prior to that he was a director at Sentient Asset Management Canada. He has been involved in private equity investments and appraisals primarily in the mining and energy sectors and is currently a non-executive director of North American Nickel.
US-based precious metals merchant Auramet has raised its first syndicated borrowing base – a $185 million 364-day revolving credit lead arranged by ING Capital with participation from Rabobank, Macquarie, Mizuho, Brown Brothers Harriman & Co and Bank Hapoalim.
The deal includes a $50 million accordion feature and allows for additional bilateral credit of up to $75 million outside of the syndicated borrowing base. ING provides a $25 million bilateral line of credit for transactional borrowings as part of this feature.
Exxon Mobil Corp is pushing deeper into energy trading, building a global cadre of experienced traders and beefing up risk-management systems in a bid to lift profits and boost its share price.
Exxon has long lagged behind rivals BP, Chevron Corp and Royal Dutch Shell Plc, which have created trading units that occasionally generate more profit than their refining businesses.
But last year Exxon retained John Masek, a former trader at Swiss-based Glencore, the world's second largest buyer and seller of petroleum, to consult on gasoline trading. Earlier this year, it also poached four petrol market specialists from refiner Phillips 66.
This month, Exxon hired former BHP Billiton trader Nelson Lee as an international crude trader. In 2014 Lee orchestrated BHP's first-ever crude exports by maintaining the lightly refined oil met criteria for an exportable product. The deals helped usher in the end of a US prohibition on crude exports more than a year later.
The company has also added crude, products and liquefied natural gas specialists to London and Singapore offices. It recently hired Paul Butcher, a trader who has worked at BP, Glencore and Vitol, to advise on North Sea markets and accounting for trading transactions.
The Indian government has been making consistent progress in opening up formal credit lines to Indian farmers - total lending of 5.11 lakh crores in 2011-12 jumped to 8.45 lakh crores in 2014-15. But with many borrowers struggling to meet repayments, national and state governments are having to give waivers again for agricultural loans.
CITIC Metal is acquiring 19.9% of Ivanhoe Mines for C$723 million ($556 million). Ivanhoe is issuing 196,602,037 common shares to CITIC through a private placement at a price of C$3.68 per share. Ivanhoe will use the proceeds to advance its projects in Southern Africa – Kamoa-Kakula, Platreef and Kipushi – and also for working capital and general corporate purposes.
China’s Zijin Mining Group, which acquired a 9.9% stake in Ivanhoe Mines in 2015 through a wholly-owned subsidiary, will be entitled to exercise its existing anti-dilution rights through a concurrent private placement, which could result in additional proceeds of $60 million if exercised in full. (In addition, Zijin and Ivanhoe each are equal 39.6% joint-venture partners in the ongoing development of Ivanhoe’s flagship Kamoa-Kakula copper project.)
Vale has signed separate streaming agreements with Wheaton Precious Metals Corp and Cobalt 27 Capital to fund its Voisey Bay underground nickel mine expansion project (VBME) in Canada.
Vale will receive an initial cash payment of $690 million - $390 million from Wheaton and $300 million from Cobalt 27. Cobalt 27 and Wheaton will make additional payments of 18% of the cobalt Metal Bulletin price for each pound of finished cobalt until the upfront payment has been fully depleted, after which the additional payments will increase to 22% of the cobalt reference market price. The additional payments will amount to approximately 20%, on average, of the cobalt Metal Bulletin price for each pound of finished cobalt delivered to Cobalt 27 and Wheaton under the agreements.
Consequently, from 1 January 2021 onwards, Wheaton will be entitled to receive finished cobalt equivalent to 42.4% of the future cobalt production from Voisey’s Bay and Cobalt 27 will be entitled to receive finished cobalt equivalent to 32.6% of the future cobalt production from Voisey’s Bay. The streamed percentages will be halved after the delivery of approximately 54.8 million pounds of cumulative cobalt to Cobalt 27 and Wheaton. Vale has granted a completion guarantee in relation to the VBME project, to be measured by the throughput rate from the underground mine in 2025.
Congolese state-owned Gecamines is to drop legal proceedings to dissolve Kamoto Copper, a copper and cobalt joint venture with Katanga Mining, after reaching a settlement with Katanga’s parent Glencore.
The deal involves converting $5.6 billion of Kamoto’s debt to equity, thus reducing its debt burden from $9 billion-plus to $3.45 billion, and a cut in the interest rate on intercompany loans.
In addition, Katanga has also agreed to make a one-off payment to Gecamines of $150 million relating to historical commercial disputes, and $41 million to cover expenses incurred as part of an exploration programme. Gecamines will also be freed of an obligation to repay $57 million of contractor costs and to replace or provide financial compensation for mineral reserves valued at $285 million.
KazakhExport has agreed to provide 90% cover for Agricultural Credit Corporation (ACC) working capital loans to Kazakh farmers. In addition, ACC will be significantly cutting due diligence times on future lending decisions.
ING Wholesale Banking has appointed Lynn Ng as global head of commodities and food and agriculture within its industry lending business. In this newly created role, Lynn will be responsible for trade and commodity finance, structured commodities finance, metals and mining and the food and agribusiness. She joined ING in 2007.
Australia-based company advisory agency EverBlu Capital has hired Jarryd Rubinstein from Noble Group. Rubinstein spent 11 years at Noble, where he was primarily based in Hong Kong, Dubai, Nigeria, and South Africa, and headed up world origination.
He joins EverBlu as a director within the company finance group and can lead assets protection, in addition to running the commodity buying and selling desk.
Vancouver-headquartered Nautilus Minerals has entered into a loan agreement with Deep Sea Mining Finance for a secured structured credit facility of up to $34 million. The company, and its wholly-owned subsidiaries Nautilus Minerals Niugini and Nautilus Minerals Pacific Pty, entered into the loan agreement to continue the advancement of the Solwara 1 Project, in the Bismarck Sea, Papua New Guinea, while it seeks the remaining project financing of up to $350 million.
Malaysia-headquartered MISC has revealed that its ten-year long-term charter contract with Brazilian oil giant Petrobras - signed in May - was worth $645 million.
MISC's tanker unit AET Tanker Holdings was awarded the contract to own and operate four specialist DP2 Suezmax shuttle tankers for Petrobras for operations in international and Brazilian waters. The firm charter will commence in 2020.
Harmony Gold has raised ZAR1.05 billion ($82 million) via a share placement. JP Morgan Securities and UBS were joint global co-ordinators and and were joined by Nedbank and Absa as joint bookrunners. The net proceeds will be used to pay down part of the outstanding $150 million bridge loan raised for the acquisition of Moab Khotsong from AngloGold Ashanti, which concluded end of February for a total consideration of ZAR3.5 billion.
The Moab transaction includes the Great Noligwa mine, which has been incorporated into the Moab Khotsong mining complex, as well as tailings dumps containing nearly 900,000oz of gold and 22-million pounds of uranium that Harmony could retreat. As part of the purchase, Harmony has also acquired the Nufcor uranium processing plant near Randfontein.
Agribusiness Wilmar International has signed a second loan that links interest rates to its sustainability performance, this time with Oversea-Chinese Banking Corp (OCBC). The margin on the $200 million revolving credit will be pegged to sustainability targets that will be monitored annually by Sustainalytics.
Wilmar raised its first sustainability-linked loan from ING in November last year. In March 2018, commodities trader Olam also debuted in the market with a $500 million three-year sustainability-linked facility.
Corbion has completed the acquisition from Bunge of a 49.9% stake in their SB Renewable Oils joint venture – an aquaculture and animal feed operation in Brazil. Corbion now is 100% owner of the plant in Orindiuva and has assumed Bunge's share in the external debt of the joint venture, including accrued interest ($15 million) and has repaid Bunge's working capital loan ($8 million). Additionally, a five-year earn-out provision starting in 2021 has been agreed.
As the SB Renewable Oils plant is located adjacent to one of Bunge's sugar mills, long term supply agreements have been secured regarding sugar and utilities. Approval by the relevant regulatory bodies in Brazil has been obtained.
Glencore is facing a third legal challenge in the Democratic Republic of Congo. Charles Brown has resurrected a legal claim that Glencore considered dead, launching a billion-dollar bid for compensation for a 19% stake he previously held in Mutanda Mining – the world’s biggest cobalt miner.
The move comes at the same time as Glencore faces down the government over a new mining code that hiked taxes. And it raises further questions about Glencore’s ability to hold onto its Congolese assets given state-owned miner Gecamines is bidding to dissolve their Kamoto Copper joint-venture and former partner Dan Gertler is suing for billions of dollars over unpaid royalties.
Fuel retailer Phoenix Petroleum has agreed to partner with a subsidiary of state-owned China National Offshore Oil Corp (CNOOC) to explore building a receiving terminal for liquefied natural gas (LNG) in the Philippines. The country is seeking investors to build a storage and distribution facility for imported LNG as it moves to replace its Malampaya gas reserves, expected to be depleted by 2024.
Whether you’re an insurance buyer, provider or simply looking to learn more about political risk and trade credit insurance as a risk management tool, this event is a unique opportunity to network with senior decision makers and discuss the key issues impacting the private insurance industry.
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