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Canadian nickel giant Falconbridge Ltd has a growing appetite for expansion and is poised for growth through acquisition and exploration, the company's new chief executive officer said in an interview.
"The appetite of this company is much higher than what it used to be," Oyvind Hushovd told Reuters on Wednesday. "Falconbridge is in very good shape financially today, which means that we have the ability to grow."
Hushovd, 46, replaced Frank Pickard as chief executive this month after Pickard died suddenly at the age of 63 during a business trip in Chile this September.
Hushovd, originally from Norway, has worked for Falconbridge for more than 22 years.
He spent the past year and a half working closely with Pickard in the position of executive vice-president and was chairman of the steering committee that put together a strategic plan to carry Falconbridge into the next century.
"I don't see a need to revolutionize Falconbridge," he said. "The backbone of Falconbridge is nickel, and copper is another leg of Falconbridge. It will probably be like that in the future."
However, Hushovd is not content simply to sit back and let the long-term strategic plan unfold.
The plan calls for Falconbridge to double its annual nickel production to 200,000 tonnes and triple its copper production to about 500,000 tonnes a year, within 15 years.
To do that, Falconbridge needs to find growth opportunities, especially since the company lost a bid to take over the huge Voisey's Bay nickel, copper and cobalt deposit in remote Labrador, said Hushovd.
Ongoing work in New Caledonia, Ivory Coast and Zambia should complement plans to start producing nickel by the end of next year at the Raglan project in Quebec and plans to produce copper by 1998 at the Collahuasi joint venture project in Chile, Hushovd said.
In Zambia, Falconbridge joined a consortium in November to develop the Konkola Deep copper mine, in which Falconbridge is partners with South Africa's Gencor Ltd and Anglo American Corp of South Africa Ltd.
In New Caledonia in the South Pacific, Falconbridge is poised to gain access to nickel reserves to supply a nickel plant planned in the north of the country. The board of France's Eramet on Thursday said it had agreed to reallocate its mining reserves in New Caledonia, which would give Falconbridge access to Eramet's Koniambo field.
Hushovd does not intend not stop there.
"Falconbridge has always been very strong in exploration," he said. "We felt we lacked the business development infrastructure."
So last summer, the company set up a business development group, to search out growth opportunities either through exploration or acquisition.
While Hushovd would not hint at specific acquisition targets, he stressed, "I want properties that are not only profitable today but are also profitable in the future."
In any future acquisitions, Falconbridge can probably count on support from its powerful majority shareholder, Noranda Inc, which owns 46 percent.
"We have a big owner, which means that hopefully we can pursue things that might be tough to pursue on our own," Hushovd said. "We can have a bigger appetite than the company on its own would have."
Hushovd said he had no immediate plans to boost the company's share price, which peaked at C$32.75 in May but is currently trading around C$29.15.
He noted that the stock normally reflects the nickel price, which has failed to meet expectations in 1996.
"I think we all had very high hopes for nickel this year, and the market did not turn out the way that we had forecasted," he said.
As for next year, "I feel it's difficult to give a prediction at the present time. Fundamentally I do believe we're going to see better prices in 97 than we did in 96," Hushovd said.
((Reuters Toronto Bureau 416 941-8100))
| 12 |
Everything old is new again in the ageing gold zone near Timmins in northern Ontario.
Exploration has exploded in the area, which has been mined since the early 1900s.
While most Canadian exploration companies are off making inroads in South America and Asia, a handful of innovative and optimistic junior companies are staying behind, hoping to strike gold on their home turf.
Established producers in the area, 438 miles (700 km) north of Toronto, are expanding and sinking millions of dollars into new exploration.
"We've had lots of speculative money coming in. It's got a lot of people interested," said Lorne Luhta, geologist for the Ontario Ministry of Northern Development and Mines. What better place to look but around Timmins, where there's been a history of gold."
Junior explorer Band-Ore Resources Inc. has attracted the most attention, after hitting mineralisation last February just outside the traditional mining camp.
"We kind of went against the trend," said Bruce Durham, vice president of Band-Ore. As everyone else was going off to Chile and Mexico and Africa and Asia, we sat here in Timmins and put together a large land position."
Band-Ore's find inspired other exploration companies to set up in the area and a couple of them have drilled some "interesting" holes, said mining analyst Barry Allan with Gordon Capital.
Major companies with established mines in the area have also been exploring and expanding.
Royal Oak Mines Inc. said this autumn it discovered more gold on its Timmins and nearby Matachewan holdings and decided to expand production. It is now reshaping operations to put Timmins at the centre of its production.
Echo Bay Mines Ltd. is considering an open pit mine at nearby Night Hawk Lake and Kinross Gold Corp. has been steadily increasing its reserves at its Hoyle Pond Mine and it has set up a separate exploration company to search out more prospects in the area.
Gold giant Placer Dome Inc. is turning its old underground deposit into a huge, low-cost, low-grade open-pit.
"One of the things that's rejuvenating the area is Placer Dome looking at their operation as a large, low-grade open pit as opposed to an underground operation," said Band-Ore's Durham.
A new emphasis on large, low-grade deposits has changed the way Placer Dome approaches mining in the area, confirmed Paul Burchell, senior geologist for Placer Dome in Timmins. "Our ideas have changed, and certainly the economics have changed for us."
The major producers have created an intricate infrastructure in the Timmins area that makes it attractive for exploration companies, said Durham. "We've got roads, workforce, cheap power and reliable workers. It can really help to keep the cost down."
But new technology has been the biggest boost for exploration in Timmins. Most of the old discoveries in the area were found where mineralised rock lies near the ground surface, said Burchell.
The areas being explored are covered with a thick layer of sand, gravel and clay. "It acts as a very effective mask. The gold has no signature," said Burchell.
With new exploration equipment, junior mining companies -- their pockets lined with the riches of the ongoing boom in exploration stocks -- can find fresh drilling targets.
But exploration in the area is expensive. And it takes more than money and persistence drilling to hit gold.
Band-Ore disregarded the traditional beliefs about geology in the area and explored in new directions.
"We kind of went contrary to that, reinterpreted some geophysical data and some of the old work done in the area, and came up with some new ideas," said Durham.
"It's one of those ideas that paid off."
| 12 |
Weak metals prices will undermine third-quarter earnings for many North American metals producers, analysts surveyed by Reuters said.
"In most cases, we'll see they're going to be down, either year over year or quarter over quarter," said Manford Mallory, analyst for Research Capital. "Metal prices are down a long way and volumes in some cases are down too. The conditions are not as good as they were a year ago."
Copper is in the doldrums after having fallen sharply since mid-June, while nickel and aluminum have slid steadily.
Gold has been anemic, hovering around US$380 an ounce.
"It's not going to be a buoyant trend," Mallory said. "Most of them are going to be reporting profits, but there will be a few losses as well."
Earnings in the mining sector were disappointing in the first quarter and dropped off in the second quarter when the copper scandal at Japan's Sumitomo Corp sent base metals downward.
The third quarter will be even worse, said base metals analyst David Davidson with Wood Gundy. He estimated earnings would be 10 to 15 percent lower than in the second quarter.
"The more leverage you have to copper, the bigger the loss," he said in a phone interview.
Phelps Dodge Corp led the way on Thursday when it reported third-quarter net income of US$80.2 million or US$1.22 a share, compared to US$211.8 million or US$3.03 a share a year earlier.
Most large gold companies hedge part of their production, curbing their exposure to the low gold prices of the third quarter this year, said Davidson.
"But those who haven't much in the way of hedging are certainly suffering in the market," said Mallory.
Investors should keep their eyes on Inco Ltd, said Davidson, who predicted "the earnings are not going to be great."
"You're going to have the impact of diluted earnings with the Diamond Fields Resources purchase," he said. Inco, the western world's largest nickel producer, completed the C$4.3 billion takeover of Diamond Fields Resources Ltd in August.
The takeover, along with a 10-day lockout at its Thompson, Manitoba facility and a smelter out of commission in Indonesia, will hurt earnings.
| 12 |
The world's gold producers will likely pay dearly for the steep fall in the bullion price and the deep uncertainty overhanging the gold market.
If the bullion price weakness continues or worsens, gold miners face lower profits, money-losing operations, closed mines, slashed exploration budgets and plunging share prices.
Analysts predict smaller companies will be increasingly vulnerable to takeovers as industry conditions get rougher.
"Earnings are going to be terrible," said gold analyst Michael Fowler at Levesque Beaubien Geoffrion in Toronto. "There have already been some mines that have shut and there could be a few more. And consolidation is likely to continue."
Gold, which was fixed at $358.55 an ounce in London on Friday, has lost more than $13 since the start of the new year, and few analysts believe the decline is finished.
The low price has already taken its toll on Canadian gold stocks, knocking the Toronto Stock Exchange's heavily weighted gold index down more than nine percent since Dec. 30.
At least two companies have announced shutdowns of marginal mines recently. Toronto-based TVX Gold Inc. said earlier this week it would close its Casa Berardi gold mine in Quebec. In December, Vancouver-based Placer Dome Inc. said it would sell two small mines in Quebec and stop work at its high-cost Paymaster mine in Northern Ontario.
"That can certainly happen again," said Jim Taylor, mining analyst with Yorkton Securities in London. "The high-cost producers are certainly vulnerable."
The effect will begin to show in fourth-quarter earnings, and earnings in the first quarter of 1997 will certainly reflect the low bullion price, according to analysts.
If Merrill Lynch's predictions of an average 1997 gold price of between $370 and $375 an ounce hold true, it could spell earnings trouble for many producers.
Merrill Lynch analyst David Christensen predicted that U.S. gold firm Homestake Mining Co.'s earnings for the year would drop to about 13 cents a share if gold averaged $370. Homestake would earn 22 cents a share at a gold price of $385.
Companies that do not hedge their gold sales -- such as Homestake, Echo Bay Mines Ltd., Battle Mountain Gold Co. and Agnico Eagle Mines Ltd. -- were especially vulnerable, Christensen said. Other analysts mentioned Royal Oak Mines Inc. and Pegasus Gold Inc. as prime victims of a lower price.
"A surprisingly large number of these companies are marginal -- companies that you wouldn't traditionally think of being marginal producers," he said.
Companies that rely on the spot price of gold "are fully exposed to a decline in the gold price," Christensen noted. "They're all either spot sellers or don't have significant forward selling. They'll all be negatively affected in terms of earnings and cash flow."
One exception was U.S.-based Newmont Mining Corp., which would likely see earnings rise in 1997 because of projects ready to start this year, he added. His projection did not take into account the potential acquisition of Santa Fe Pacific Gold Corp..
Even companies with solid hedging programs, such as Canada-based Barrick Gold Corp., will likely find their share prices hit along with the gold price.
"This is a sentiment swing," said gold analyst Manford Mallory with Research Capital in Toronto. Investors do not usually differentiate between hedgers and non-hedgers when the gold price starts to drop, he added.
Although some analysts believe a few more marginal projects could bite the dust if the gold price stays low, most say the production effects of lower gold prices will become apparent in decisions to delay development.
"Most of these companies will continue to produce as long as they are cash flow positive as opposed to earnings positive," said Christensen.
But as earnings start to drop, one of the first casualties will likely be exploration budgets. While some 1997 exploration commitments have been made, high-cost companies could find themselves slashing any flexible plans in order to cut their losses.
Exploration companies will become more vulnerable to takeover moves from larger companies with strong cash flow, analysts said. As the low price of gold discourages investors, junior companies will find it more difficult to raise money for exploration programs.
"The capital is drying up," said analyst Daniel McConvey of Lehman Brothers in New York.
The smaller companies may well see their share prices drop, making it cheaper for companies laden with cash to swallow them.
Toronto-based Kinross Gold Corp. a mid-tier producer, said it plans to take advantage of the sector weakness to expand.
"I would classify us as a predator," Kinross spokesman Gord McReary said in an interview. "We think we're in a very privileged position. We're in the kind of strange situation where maybe some of the bad news for the sector can be good news for us," he said.
Gold equities in Australia may also be knocked down by lower gold prices, said analyst Taylor. But since many Australian companies hedge their sales, earnings will not be hurt as much as among some companies in North America.
In South Africa, however, analysts expect first-quarter earnings to be trampled by low gold prices.
In Mexico, mining giants Industrias Penoles and Grupo Mexico will probably not alter their expansion plans for polymetallic mines with high gold contents but will see slightly differing bottom-line impacts.
| 12 |
Canada's Bre-X Minerals Ltd could face a multi-billion-dollar lawsuit over the ownership of its spectacular Busang gold deposit in Indonesia.
The young Calgary-based company said Friday that one of its Indonesian partners, PT Krueng Gasui, threatened it and 19 others with legal action in Canadian courts, claiming damages of US$1.9 billion.
"I find it curious that PT Krueng Gasui has chosen to threaten a lawsuit in Canada relating to matters that allegedly occurred in Indonesia," Bre-X chief executive David Walsh said in a statement. "However, we will sit down with them and listen to what they have to say."
Krueng Gasui owns an undisputed 10 percent of one section of the Busang discovery. It claims it owns up to 40 percent of the entire deposit, but Bre-X says the Indonesian company does not have the documentation to back up its claims.
Bre-X, which closed down C$1 at 20.90 in heavy trading on the Toronto Stock Exchange, said Friday it had received a letter from its Indonesian partner demanding a meeting before November 22 to resolve the dispute. If Bre-X refuses or does not make an attempt to settle the argument, Krueng Gasui will sue, the letter said.
Bre-X said it has asked its lawyers to arrange a meeting.
"In my opinion, this (threat of a lawsuit) appears to be a last minute act of desperation," said gold analyst Chad Williams of Research Capital Corp.
"My question is, why have they waited so long? And why did they choose to do this in Canada?"
The dispute between Bre-X and Krueng Gasui, who is backed by Australia's Golden Valley Mines NL, became public at the beginning of October.
The argument prompted the Indonesian government to delay issuing vital contracts of work until the two parties worked out their difficulties. Without the contracts, Bre-X cannot proceed with work on Busang and has had to stall its search for a major gold producer to operate or buy the discovery, analysts say.
"The key is how the Indonesian government will react" to the lawsuit, said Williams.
The threat of a lawsuit gives Bre-X a strong incentive to settle with Krueng Gasui and Indonesian businessman Jusuf Merukh, who controls Krueng Gasui, said gold analyst Catherine Gignac of Deacon Capital.
While most analysts said it was too early to tell whether the Indonesian case would stand up in Canadian court, they said the threat of a lawsuit will definitely force Bre-X to treat the claims more seriously.
"It reinforces the uncertainty with respect to Bre-X," said gold analyst John Ing of Maison Placements. "My sense is this thing is not going away. This is more of a manoeuvring than an actual threat, but it does not look like this will end any time soon."
Krueng Gasui said in its letter that it will also sue the other Indonesian partners of Bre-X, some Bre-X officers and Canada's Minorca Resources Inc., which has a small stake in the discovery.
Minorca president Roland Horst said his company has no reason to be involved.
Exploration at Busang has outlined 47 million ounces of gold so far, and some analysts predict there could be up to 100 million ounces.
| 12 |
No final deal was in sight Wednesday for Bre-X Minerals Ltd. and Barrick Gold Corp., which are in the midst of forging a deal on one of the world's biggest gold deposits -- Indonesia's Busang.
As a Wednesday deadline slid by, Bre-X and Barrick said they were still trying to hammer out several issues, leaving the market to speculate about the status of negotiations.
A few issues remain to be solved, and Bre-X will have more news on the negotiations "shortly," Chief Executive David Walsh said in an interview from New York.
He said the main issues that stand in the way of a full agreement with Barrick are "regulatory" but maintained he was prevented by a confidentiality agreement to give details.
"We need certain additional comfort in any agreement that would satisfy the regulatory authorities and our shareholders," he said.
The Indonesian government directed Bre-X to form a joint venture with Barrick by Dec. 4, with Barrick getting 75 percent of Bre-X's stake in the rich gold discovery and Bre-X keeping 25 percent. The companies were invited to consider giving the Indonesian government 10 percent of the rich find.
As the clocked ticked, Bre-X issued a statement saying no new deadline had been set by the Indonesian Mines Ministry. It said it expected the Ministry of Mines to clarify its stand on the outstanding issues "in due course."
The direction of negotiations is in the hands of the Indonesian government, Walsh said.
"We are waiting on the answers we get from the Minister of Mines," he said.
Sources close to the talks said Indonesian mining officials had left Jakarta and would not be back until Dec. 9.
"I think both sides are probably worried about the so-called deadline, which has come and gone," said gold analyst John Ing with Maison Placements Canada Inc. "It's back in the lap of the Indonesians."
In Jakarta, a senior Indonesian mines official said the government of President Suharto would explore other possibilities to develop Busang if the two companies fail to clinch a deal.
"If they cannot reach an agreement, the government will take the necessary and appropriate action ... to expedite the development of Busang's resouces," Umar Said, secretary-general of the Mines Department, told a news conference in Jakarta.
"What the action will be ... I have to get back to the government. This is not my playground," he added.
Meanwhile, investors pushed up Bre-X's stock C$1.30 to close at C$20.10 ($14.84) in heavy trading in Toronto Wednesday, while Barrick rose C$1.45 to C$39.30 ($29.01).
"People think there's an agreement that will come out sooner rather than later," said gold analyst Catherine Gignac of Deacon Capital in Toronto.
But she noted that the uncertainty surrounding the negotiations was preventing Bre-X's stock from rising to meet the level of rumoured offers of about C$25 ($18.50) a share from Barrick.
"We're actually hearing that (the deal) is done and they're just dotting the i's and crossing the t's," Gignac said. "Everything has been set. We just don't know the details."
But a source close to the negotiations said he understood that the two companies did not have a deal and were trying to get a deadline extension from the Indonesian government.
The latest deadline is the second the two companies missed. They let a deadline at the end of November slip by too, sources said.
Possible stumbling blocks in the talks include price, how to pay for the deal and a series of threatened lawsuits over Bre-X's claims, analysts said.
Waiting to pounce on the deposit if the Indonesian government does open the door to outside bidding is another North American gold giant -- Placer Dome Inc., which seemed to be positioning itself in case the Barrick, Bre-X talks fail.
"I don't think today's deadline had any great significance," Placer spokesman Hugh Leggatt said in Vancouver, British Columbia. He added that the company still hoped to be allowed to form a partnership with Bre-X to develop Busang.
"We're not discouraged. It's going to be a long process," he said.
Newmont Mining Corp. and Teck Corp. also expressed an interest in Busang, which is located deep in the jungle in East Kalimantan on the island of Borneo.
| 12 |
A chill swept through the Canadian village of Nain this month when a small plane carrying two mineral explorers disappeared in a snow squall.
Prospectors passing through the town near the huge Voisey's Bay nickel deposit, believed to be one of the largest in the world, spoke quietly about the missing men from Vancouver-based Castle Rock Exploration Corp., speculating about what happened, imagining themselves in their position.
"I fly a lot over this area, and you just never know," said Capt. Luc Plourde at the military base in Goose Bay, Labrador. "It's a rugged terrain. You can't imagine what it's like to survive out there."
Two hundred exploration companies are active in Labrador, staking more than 250,000 claims in the past two years and investing about C$85 million ($62.9 million U.S.) so far this year. About 184,000 diamond drill holes have been plunged into the dome-shaped hills that dot the sparse landscape, and only one site, Voisey's Bay, has revealed anything significant.
The nickel, copper and cobalt deposits at Voisey's Bay are among the biggest base metals discoveries ever. The world-class finds boosted stock in Vancouver-based Diamond Fields Resources Inc. from pennies to more than C$42 ($31) before the company was taken over by Toronto-based nickel giant Inco Ltd.
Exploration companies and investors from all over Canada want their own Cinderella story. The discomforts at most camps are tempered by hot running water, radio, videos, laundry facilities and good, hearty food, but stories of people being blown off cliffs, tents torn by the wind, and bad exploration luck persist.
"The feeling is another Voisey's Bay will be found, but at great depth," said geologist Kevin Brewer, who heads an exploration management service and works with several companies in the area.
The Voisey's Bay deposit was discovered in late 1993 by a pair of explorers who initially set out to look for diamonds. As the story goes, they spotted a rusty outcrop of mineralised rock, tested it and hit the jackpot.
No one else has been that lucky, noted Brewer.
"When you fly over the country, you see hundreds of really large rusty zones," he said in an interview in St John's, Newfoundland. "You see similar brilliant rusty hills, oxidised rocks that look tremendous. But there's nothing in them."
Many of the mining companies are giving up, but a few have made long-term financial commitments to continue drilling.
"It's really hard for a junior mining company now," observed Brewer. "You have to have more than a really good showing on the surface. People want drill results."
But David Barbour, in charge of exploration for Vancouver-based NDT Ventures Ltd., is still optimistic.
"There's lots of mineralisation kicking around out there," he said in an interview in the warm and spacious kitchen tent at one of NDT's snowy sites near Nain.
"The biggest setback to actually finding something is there's not much known about the geology of the area. There's so much land that hasn't been touched," said Wayne Jenkins, a Nain-based expediter for exploration companies.
The millions of dollars and influx of people in this forgotten patch of Canada have changed the isolated region permanently.
Residents of Nain and Goose Bay, about 250 miles (400 km) away, have started investing in junior mining stocks. Housing starts and new businesses in Goose Bay are booming.
In Nain, rents have soared. Expansion of the village is impossible because of a border of huge cliffs and hills as well as a shortage of municipal money for water, sewerage and electricity. What little space is available can command thousands of dollars a month in rent.
Helicopters and aircraft fly into Nain in a constant stream. Some new businesses have appeared along Nain's pot-holed, muddy streets.
The noise and activity have offended many of the Inuit, or Eskimos, who live in Nain. "There is the mindset that when you come to Labrador, you can do anything you want," said William Barbour, president of the Labrador Inuit Association, which acts as a regional government.
The Inuit have been trying to negotiate a land claim with the provincial government for 19 years, but mining companies seem to get permission to lay claims as a matter of course, he complained.
"It seems like the mining companies come first, not the community," added Fran Williams, who heads a local aboriginal radio station.
The Labrador Inuit Association has started issuing report cards to exploration companies as a reminder that they are under close scrutiny.
| 12 |
The world potash market is churning, and Canada's huge Potash Corp of Saskatchewan Inc is in the middle of the upheaval.
Since Potash Corp, the world's biggest potash producer, said last week it had entered into talks to buy a controlling stake in a major European potash firm, its stock has zigzagged as the market comes to terms with a quickly changing picture of the potash world.
"You're getting into an interesting part of the fertilizer world, and I don't know what will happen," said James Searls, a potash analyst for the U.S. Geological Survey in Virginia.
"It's going to be really curious."
Potash Corp wants to acquire a 51 percent interest in Kali und Salz AG from German chemical conglomerate BASF AG. If it succeeds, Potash Corp would control 25 percent of Germany's four-million-tonne-per-year potash market.
The deal would boost the Saskatchewan company's share of world production capacity to about 50 percent from 35 percent, analysts have said.
But there is another player waiting in the wings, promising to make Potash Corp's consolidation plans more intriguing.
Asia Pacific Resources Ltd of Vancouver has made an important potash discovery in Thailand. The company says exploration so far has shown at least one mine is economical.
"We believe we've got the potential for than one," Asia Pacific president Gerry Wright said in an interview. "It may be two, it may be three or whatever."
Wright believes the property will be producing about two million tonnes of potash by the turn of the century and between four and six million tonnes by 2005 -- a sizable chunk of the world's current production of about 40 million tonnes last year.
While Asia Pacific plans to take develop the mines itself, it has signed confidentiality agreements with eight companies in the hopes of finding a partner, said Wright.
Potash Corp is not among them, he said.
He hopes three of the eight will sign non-binding agreements with Asia Pacific by October and one will emerge as a partner by the first quarter of 1997.
The attraction of Asia Pacific's find is its location, said analyst Sam Kanes with ScotiaMcLeod in Toronto.
"These mines appear to have twice the margin per tonne that Saskatchewan Potash gets, because it's so close to the market that imports all of it," Kanes said.
China and the Pacific Rim are growing potash consumers, he said, and the Thai deposits are convenient.
But Wright has no plans to take on Potash Corp for its market share.
"We have no interest in getting into a tussel with existing suppliers to that region," he said.
The growing market will be big enough for everyone, he said.
But market growth depends on healthy economic growth in Asia, said Michel Prud'homme, senior minerals analyst for federal department Natural Resources Canada.
In 1995, the type of potash produced by Potash Corp had a surplus supply capacity of about 7.5 million tonnes, he said.
"Any new major project would be jeopardizing current supply arrangements."
The recent developments have the stock market in a tizzy. Potash Corp shares soared on news of its negotiations in Germany, but it has been a volatile ride for the stock since then.
The stock dropped off Wednesday after a U.S. brokerage downgraded it from a buy to an outperform. But it was up C$2.50 to C$104 on Thursday, due to hedge buying by fertilizer distributors trying to sidestep an expected potash price increase, analysts said.
"It will remain volatile until this deal with Germany is settled and until APQ is settled," said Kanes.
Asia Pacific lost C$0.10, falling to C$10.15, but the stock has been climbing steadily on news from Thailand.
-- Reuters Toronto Bureau 416 941-8100
| 12 |
Investors were on edge on Wednesday, anxiously awaiting the outcome of talks between Canada's Bre-X Minerals Ltd. and Barrick Gold Corp. aimed at forging a deal on Indonesia's huge Busang gold deposit.
As a Dec. 4 deadline slid by, Bre-X and Barrick said they were still trying to work out several issues, leaving the market to speculate about the status of negotiations.
"Several points remain outstanding," Barrick spokesman Vince Borg said. "An overall deal has not been reached."
The Indonesian government directed Bre-X to form a joint venture with Barrick by Dec. 4, with Barrick getting 75 percent of Bre-X's stake in the rich gold discovery and Bre-X keeping 25 percent. The companies were asked to consider giving the Indonesian government 10 percent in the rich find.
As the clocked ticked, Bre-X issued a statement saying no new deadline had been set by the Indonesian Mines Ministry.
In Jakarta, a senior Indonesian mines official said the government of President Suharto would explore other possibilities to develop Busang if the two companies fail to clinch a deal.
"If they cannot reach an agreement, the government will take the necessary and appropriate action ... to expedite the development of Busang's resouces," Umar Said, secretary-general of the Mines Department, told a news conference in Jakarta.
"What the action will be ... I have to get back to the government. This is not my playground," he added.
Meanwhile, investors pushed up Bre-X's stock by C$1.40 to C$20.10 ($14.90) in heavy trading in Toronto Wednesday, while Barrick rose C$1.10 to C$38.95 ($28.85).
"People think there's an agreement that will come out sooner rather than later," said gold analyst Catherine Gignac of Deacon Capital in Toronto.
But she noted that the uncertainty surrounding the negotiations was preventing Bre-X's stock from rising to meet the level of rumoured offers of C$25 ($18.50) a share from Barrick.
"We're actually hearing that (the deal) is done and they're just dotting the i's and crossing the t's," Gignac said. "Everything has been set. We just don't know the details."
But a source close to the negotiations said he understood that the two companies did not have a deal and were trying to get a deadline extension from the Indonesian government.
The latest deadline, if passed, would be the second the two companies missed. They let a deadline at the end of November slip by too, sources said.
Possible stumbling blocks in the talks include price, how to pay for the deal and a series of threatened lawsuits over Bre-X's claims, analysts said.
Waiting to pounce on the deposit if the Indonesian government does open the door to outside bidding is another North American gold giant -- Placer Dome Inc., which seemed to be positioning itself in case the Barrick, Bre-X talks fail.
"I don't think today's deadline had any great significance," Placer spokesman Hugh Leggatt said in Vancouver, British Columbia. He added that the company still hoped to be allowed to partner with Bre-X to develop Busang.
"We're not discouraged. It's going to be a long process," he said.
Newmont Mining Corp. and Teck Corp. also expressed an interest in Busang, which is located deep in the jungle in East Kalimantan on the island of Borneo.
| 12 |
Before the huge nickel, copper and cobalt deposits at Voisey's Bay were discovered two years ago, the mainly aboriginal population of Nain did not know much about mining.
But as hundreds of prospectors flooded their snug coastal village in the northern Canadian province of Labrador, the inhabitants figured they had better learn fast.
"It fell on us like a ton of bricks in 1994," said William Barbour, president of the Labrador Inuit Association, which represents the Inuit -- or Eskimos -- who populate the frozen territory, which is on the Canadian mainland but is part of the Atlantic province of Newfoundland.
"There was panic. We felt completely ignored. So we educated ourselves in terms of the mining industry," Barbour told Reuters.
Now, even people with little education can keep up a steady conversation about massive sulphides and tailing ponds.
But that does not mean everybody sees things the same way as Inco Ltd, the Toronto-based nickel giant that owns the deposit. The tight-knit community of 1,200 is split over whether mining will help their remote town.
Adam Igloliorte, a 32-year-old Inuit from Nain, sees development as a chance for a good job. He has worked his way up to general labourer from janitor at the Voisey's Bay site.
Steady work and decent pay are hard to come by in the poor and troubled northern coast of Labrador, especially if, like Igloliorte, you only have six years of schooling.
"I got suspended (from school) and never went back," he said. Now he wants to upgrade his skills to land a permanent job with Inco once it takes over management of operations in January. "That would be excellent."
Igloliorte has improved his standard of living, is able to support his girlfriend and his one-year-old son and buy spare parts for his snowmobile.
He said he trusts Inco to be responsible as it develops the huge metals deposit that sits hidden underneath the moss which caribou graze on.
COMMUNITY FEARS OF WHAT MINING WILL BRING
Others are not as optimistic. They fear mining in the area will bring disease and drugs, destroy their aboriginal culture, eradicate their language, corrupt their daughters and upset the delicate balance of the vital ecosystem.
"Everybody sees some economic benefit. All the talk has been jobs," said Fran Williams, the director of an aboriginal radio station and local activist. "But there's still no focus on what the impact is on culture and tradition."
The effects are already starting to show in Nain, a town accessible only by plane, boat or snowmobile.
The community has struggled since the 1970s, when fish, the main resource, became scarce. Residents have experimented with a fish plant, commercialised caribou hunting and a nearby quarry, but so far nothing has overcome the dependence on government assistance or solved the alcohol and drug abuse, violence and suicide that so often stem from isolation and hardship in the region.
Williams feels mining and exploration are pulling her community further from a solution. Young men have been leaving to work in exploration camps, while women and the older generation stay behind to care for the huge number of children.
The men are too busy to hunt for the winter's supply of caribou, forcing their families to shop for the tasteless, outdated and costly canned food at the Nain grocery store.
"It's already having an impact on women," said Williams. "They are the ones with the least to gain and the most to lose. This activity will be a big disruption of family life."
The older people complain about the constant drone of airplanes and helicopters overhead.
Many of those earning large salaries at Voisey's Bay and other exploration camps have not learned how to handle the money. "We're not wage earners," said Williams. "We get it, we spend it."
While social services and courses may resolve some of the problems, the long-term effects of mining could be devastating.
"Drug abuse is already on the rise," said Williams, adding that she expects an increase in unwanted pregnancies, sexually transmitted diseases and violence as strangers bring their bad habits to town.
"It's incredible how all of Labrador has all of a sudden become dots of mining claims," she said. "You no longer feel like you're an inhabitant of your own land."
One 25-year-old from Nain who has worked at the Voisey's Bay site for about two years, is in an ideal position to gain from the development.
The man, who preferred not to be named, said he was kicked out of school, fathered two children when he was in his teens and has a criminal record for a string of alcohol-related assaults.
He was glad to get a position at Voisey's Bay after years of drifting between odd jobs. But he has no plans to make a career of it.
He does not trust Inco to treat him properly or respect the land, he said. And he resents the tight controls of managers, who ban liquor and keep close tabs on the workers.
He said he has seen an influx of drugs on the site, and he has become part of a chain of people who smuggle alcohol into Voisey's Bay for the workers.
Nain's transition to a mining town from a troubled, dependent community is bound to be bumpy, noted John Igloliorte, an elected elder and Adam's father. But he feels the results will be positive for his people.
"In the community, a lot of young people had nothing to do," he said in his native Inuktitut. "They were doing mischief, break and enters. That seems to have stopped a bit now that they have jobs."
Igloliorte and the other elders were opposed to exploration and development when it started, but most have changed their minds as they become better informed, he said.
"The companies are doing a good job. They're looking after the land and the environment," he said. "If they keep doing that, everything will be all right."
| 12 |
Canada's gold giant Placer Dome Inc said it is poised to become a more powerful player in the Asia-Pacific region with its late Wednesday US$600 million takeover bid for Highlands Gold Ltd and the rest of its subsidiary, Placer Pacific Ltd.
A takeover of Papua New Guinea's Highlands would make Placer the main company involved in the rich Porgera gold deposit in that country, Placer Dome spokesman Hugh Leggatt said in an interview from Vancouver.
"We think exploration at Porgera will be very prospective in the future," he said.
"It simplifies our structure and we believe it gives us more bang for the buck in terms of future exploration."
Highlands owns 25 percent of the Porgera joint venture. Placer Pacific also owns 25 percent of the gold deposit and is the mine's manager. The takeovers would give Placer Dome a 50 percent stake.
If the takeovers are successful, Placer Dome's yearly gold production would be boosted by 430,000 ounces to more than three million ounces a year by 1998, Leggatt said.
Reserves would go up by four million ounces to a total of 30 million ounces, he said.
"It clearly consolidates Placer's position in Porgera," said gold analyst David Christensen of Merrill Lynch in San Francisco.
"It's a very high quality operation with low production costs."
But Highlands' initial reaction to the takeover bid was to advise shareholders not to sell their shares.
"At the moment, the advice would be not to sell," Highlands company secretary Phillip West told Reuters in Sydney. "But the directors are considering the offer and are expected to make a statement later today," he said.
Placer has offered A$0.75 (corrects from A$0.25) a share for Highlands and has offered one Placer Dome share for every 15 Placer Pacific shares.
"We think it's a very fair bid. We have no intention of changing it," said Leggatt.
Placer already owns 75 percent of Placer Pacific and 33 percent of Highlands Gold.
It said its bid for Highlands represents a 36 percent premium to the price of Highlands shares on November 26, and its bid for Placer Pacific has a premium of almost 50 percent.
"This is about growth for Placer Dome shareholders and a golden opportunity for the shareholders of Highlands Gold and minority shareholders of Placer Pacific," John Willson, Placer's chief executive, said in a statement.
"We have great confidence in the Asia Pacific region. Placer Dome is consolidating its presence to compete more effectively."
| 12 |
Inco Ltd's huge nickel, copper and cobalt property at Voisey's Bay in remote Labrador keeps getting bigger, with 11 drill rigs working around the clock to define three enormous deposits that promise to upset the world's metals markets.
"There are a couple hundred million tonnes for sure, close to proven," said Greg Soper, a drill manager for Archean Resources, which has an exploration contract until the end of the year at the Northern site on a sub-Arctic land mass that is closer to Greenland than to much of the rest of Canada.
"This here is a world class deposit. Every week we're hitting stuff," said Soper, waving his arm to point at the vast stretch of bog and thin forest surrounding the round, rocky hill where metals were discovered two years ago.
Inco's most recent calculations, compiled in an internal report at the end of August, showed 138 million tonnes of resource (corrects from "proven or probable reserves") spread out over three different deposits at the Voisey's Bay property. Resources are potential reserves.
On average, the deposits graded 2.09 percent nickel, 1.24 percent copper and 0.99 percent cobalt, the report said.
At the Ovoid deposit, found close to the surface of a bog close to the Labrador Sea, drilling has outlined 37.5 million tonnes. Exploration is finished at the Ovoid and Inco now plans to mine the area through an open pit mine.
The Eastern Deeps, which lies under a series of hills covered with sparse trees and lush moss, has not yet been defined.
Recent calculations showed 75.5 million tonnes of ore, but the deposit was open in all directions.
To the west of the Ovoid, in the Western Extension, drills are uncovering another rich deposit. The mineralization was uncovered last April, after Diamond Fields Resources Inc, the owner of Voisey's Bay, accepted Inco's C$4.3 billion takeover offer.
So far, drilling has defined 24.7 million tonnes, but the deposit is growing steadily.
Both the Eastern Deeps and the Western Extension need extremely deep holes to strike significant metal, and each major hole takes about three weeks to drill, said Soper.
More than 340 holes have been completed so far, with a total drilling meterage of more than 135,000 metres, Inco said in its recent mine and mill project description.
"Over half of our holes are good. They're mineralized," said 25-year-old geologist Mary Vaughan as she examined a new box of core samples just brought in from the Eastern Deeps.
"It just blows you away. It's an explorationist's dream."
Archean Resources plans to keep drilling at a breakneck pace until its contract ends in December.
Inco has not said whether it will extend Archean's contract, but the Toronto-based company has promised to spend C$20 million over the next four years on exploration.
Only five percent of the property has been explored so far, but small exploration companies that have claims surrounding Inco's 495-square-kilometre site have not found anything significant.
New resource calculations are expected within the next month, Rick Gill, spokesman for Inco subsidiary Voisey's Bay Nickel Co told Reuters in St. John's, Newfoundland.
Mining at Voisey's Bay is expected to last at least 20 years, with a concentrator on site handling 15,000 tonnes of ore a day. Mining will likely continue all year round, despite high winds, extremely cold temperatures and thick ice that locks in the site for a few months every winter.
"The information that we have at this time suggests it will be possible to operate year 'round with ice breaker support," said Gill.
-- Reuters Toronto Bureau 416-941-8100
| 12 |
Falling gold prices have recently drained much of the life from the Toronto Stock Exchange's key gold index and analysts say the bloodletting may not be over.
"Gold stocks are still reflecting a $380 gold price, but look at the price now," said gold analyst Mike Jalonen at brokerage Midland Walwyn in Toronto. "It's awful."
"I think people are writing the obituary for the Toronto gold index," said Vahid Fathi, a mining analyst at Everen Securities in Chicago. "They've been slaughtered."
The Comex February gold price has slid steadily since Dec. 30 to $355.70 an ounce on Wednesday from $370.90. Gold was up slightly in London on Thursday at $356.60.
Gold prices have slumped to three-year lows on a strong U.S. dollar, booming financial markets, low inflation, rising mine production and rumors of central bank selling.
Most analysts said the yellow metal was headed further south, but there was no consensus on the extent of the decline or when prices might recover.
The heavily weighted gold index in Toronto, Canada's biggest stock market, has dropped with the price of the metal, losing more than nine percent since Dec. 30.
Canada's biggest gold companies, Barrick Gold Corp. and Placer Dome Inc. have followed suit.
Barrick, the world's third largest gold producer, closed at C$35.55 on Wednesday, down from C$39.50 on Dec. 30. The stock rose slightly on Thursday to C$35.75. In New York, Barrick has fallen to 26-3/8 from 28-7/8 on Dec. 30.
Vancouver-based Placer Dome fell to a 52-week low of C$27.05 on Wednesday from C$30.90 on Dec. 30. It was up C$0.30 to C$27.35 on Thursday. In New York, Placer fell to 20-1/4 on Thursday from 22-5/8 on Dec. 30.
U.S. gold producers have also been hit. Newmont Mining Corp. was trading at 40 on Thursday on the New York Stock Exchange, versus 45-1/4 on Dec. 30. Homestake Mining Co. was at 13 5/8 on Thursday in New York, down from 14-1/4 on Dec. 30.
Traditionally, Toronto gold stocks move up in tandem with the gold price, but do not react as strongly to a price decline.
Discoveries, takeover rumors and news from exploration companies that share the Toronto gold index with major producers generally temper the index's reaction to price slumps.
That is not the case now.
"At this point in time, the market is not even paying attention to special situations," said Fathi.
On Wednesday, almost every stock in the Toronto gold index fell except for diamond companies.
Midland Walwyn's Jalonen predicted Toronto golds would lose a further five percent before they stabilized.
Diversified producers such as Vancouver-based Teck Corp. were not as vulnerable as pure gold producers to steep drops in the gold price, Jalonen noted.
| 12 |
Bre-X Minerals Ltd's hold on the huge Busang gold deposit in Indonesia remained unclear Thursday after a string of statements from the company defending its rights to the find.
Calgary, Alberta-based Bre-X issued three news releases in as many hours early on Thursday about its grasp on Busang, worth at least $21 billion at today's gold prices and one of the world's biggest gold deposits.
Bre-X said its exploration permits and applications for contracts of work on Busang remained in good standing.
"Obviously significant progress is being made on all fronts toward the development of the Busang deposit," Bre-X Chief Executive David Walsh said in a statement issued from Jakarta.
Bre-X said its officials had met with Umar Said, Indonesia's secretary general of the Ministry of Mines, to clarify its status with Busang.
The company said Umar apologised for comments relating to the cancellation of permits and contract of work applications for Busang.
"The exploration permits and CoW applications for Busang II and Busang III remain in good standing," Bre-X said. Busang II contains most of the gold found so far on the property.
But earlier on Thursday, Umar repeated his comments to Reuters in Jakarta casting Bre-X's status in doubt.
Indonesian mining officials told Reuters in Jakarta that they had stopped processing Bre-X's applications for vital contracts of work on the gold find. Instead, Bre-X and Toronto-based Barrick Gold Corp. must jointly submit new applications for the permits.
"The government has stopped processing the previous application for contracts of work by Bre-X because of various problems," Umar said. "Therefore, the previous application by Bre-X that has been delayed must be stopped and must be said to have been cancelled."
While mining officials were explaining their position in Jakarta, Bre-X was issuing optimistic statements.
Bre-X said it appeared that the development of Busang was "possibly open to negotiation" and that draft documents showed it had exclusive operating rights to Busang.
The Indonesian government encouraged Bre-X in November to form a joint venture with Barrick, with Barrick getting 75 percent of the joint venture, Bre-X keeping 25 percent and the two companies granting the Indonesian government a 10 percent stake.
But Bre-X said on Thursday that "the government of Indonesia appears to be seriously reconsidering its earlier decision that would have compelled Bre-X into a partnership with Barrick."
Bre-X cited a published report that suggested Indonesian President Suharto was ready to intervene in the process.
Bre-X and Barrick said last week they reached agreement on some points to form a joint venture for Busang, but outstanding issues remained and no overall agreement had been settled.
But Bre-X was still hopeful on Thursday that the negotiations for Busang could be opened up to an auction process.
"We have believed from the outset that the best interests of the Indonesian people and their economy would best be served by a truly open negotiation process for the development of this extraordinary natural resource," Walsh said in a letter to Indonesia's Minister of Mines.
Bre-X shares were still halted on the Toronto Stock Exchange. The company requested a halt on Wednesday so it could clarify statements from Jakarta. The stock closed Tuesday at C$20.50.
| 12 |
The world's gold producers will likely pay dearly for the steep fall in the bullion price and the deep uncertainty overhanging the gold market.
If the bullion price weakness continues or worsens, gold miners face lower profits, money-losing operations, closed mines, slashed exploration budgets and plunging share prices.
Analysts predict smaller companies will be increasingly vulnerable to takeovers as industry conditions get rougher.
"Earnings are going to be terrible," said gold analyst Michael Fowler at Levesque Beaubien Geoffrion in Toronto. "There have already been some mines that have shut and there could be a few more. And consolidation is likely to continue."
Gold, which was fixed at $358.55 an ounce in London on Friday, has lost more than $13 since the start of the new year, and few analysts believe the decline is finished.
The low price has already taken its toll on Canadian gold stocks, knocking the Toronto Stock Exchange's heavily weighted gold index down more than nine percent since Dec. 30.
At least two companies have announced shutdowns of marginal mines recently. Toronto-based TVX Gold Inc. said earlier this week it would close its Casa Berardi gold mine in Quebec. In December, Vancouver-based Placer Dome Inc. said it would sell two small mines in Quebec and stop work at its high-cost Paymaster mine in Northern Ontario.
"That can certainly happen again," said Jim Taylor, mining analyst with Yorkton Securities in London. "The high-cost producers are certainly vulnerable."
The effect will begin to show in fourth-quarter earnings, and earnings in the first quarter of 1997 will certainly reflect the low bullion price, according to analysts.
If Merrill Lynch's predictions of an average 1997 gold price of between $370 and $375 an ounce hold true, it could spell earnings trouble for many producers.
Merrill Lynch analyst David Christensen predicted that U.S. gold firm Homestake Mining Co.'s earnings for the year would drop to about 13 cents a share if gold averaged $370. Homestake would earn 22 cents a share at a gold price of $385.
Companies that do not hedge their gold sales -- such as Homestake, Echo Bay Mines Ltd., Battle Mountain Gold Co. and Agnico Eagle Mines Ltd. -- were especially vulnerable, Christensen said. Other analysts mentioned Royal Oak Mines Inc. and Pegasus Gold Inc. as prime victims of a lower price.
"A surprisingly large number of these companies are marginal -- companies that you wouldn't traditionally think of being marginal producers," he said.
Companies that rely on the spot price of gold "are fully exposed to a decline in the gold price," Christensen noted. "They're all either spot sellers or don't have significant forward selling. They'll all be negatively affected in terms of earnings and cash flow."
One exception was U.S.-based Newmont Mining Corp., which would likely see earnings rise in 1997 because of projects ready to start this year, he added. His projection did not take into account the potential acquisition of Santa Fe Pacific Gold Corp..
Even companies with solid hedging programs, such as Canada-based Barrick Gold Corp., will likely find their share prices hit along with the gold price.
"This is a sentiment swing," said gold analyst Manford Mallory with Research Capital in Toronto. Investors do not usually differentiate between hedgers and non-hedgers when the gold price starts to drop, he added.
Although some analysts believe a few more marginal projects could bite the dust if the gold price stays low, most say the production effects of lower gold prices will become apparent in decisions to delay development.
"Most of these companies will continue to produce as long as they are cash flow positive as opposed to earnings positive," said Christensen.
But as earnings start to drop, one of the first casualties will likely be exploration budgets. While some 1997 exploration commitments have been made, high-cost companies could find themselves slashing any flexible plans in order to cut their losses.
Exploration companies will become more vulnerable to takeover moves from larger companies with strong cash flow, analysts said. As the low price of gold discourages investors, junior companies will find it more difficult to raise money for exploration programs.
"The capital is drying up," said analyst Daniel McConvey of Lehman Brothers in New York.
The smaller companies may well see their share prices drop, making it cheaper for companies laden with cash to swallow them.
Toronto-based Kinross Gold Corp. a mid-tier producer, said it plans to take advantage of the sector weakness to expand.
"I would classify us as a predator," Kinross spokesman Gord McReary said in an interview. "We think we're in a very privileged position. We're in the kind of strange situation where maybe some of the bad news for the sector can be good news for us," he said.
Gold equities in Australia may also be knocked down by lower gold prices, said analyst Taylor. But since many Australian companies hedge their sales, earnings will not be hurt as much as among some companies in North America.
In South Africa, however, analysts expect first-quarter earnings to be trampled by low gold prices.
In Mexico, mining giants Industrias Penoles and Grupo Mexico will probably not alter their expansion plans for polymetallic mines with high gold contents but will see slightly differing bottom-line impacts.
| 12 |
Bre-X Minerals Ltd. has been silent since it said last month that it formed a partnership with the son of the Indonesian ruler Suharto, a move that has worried shareholders and prompted regulators to seek more information.
Despite a whirl of rumours and persistent questions that have sent the Canadian mining company's shares on a roller-coaster ride, Bre-X has maintained a dogged silence.
The Calgary-based company that controls one of the world's biggest gold prospects in Indonesia has not talked to the press for weeks. Company officials will take calls only from a handful of favoured analysts, according to market sources.
"I haven't had any calls returned," said gold analyst Rick Cohen with Goepel Shields in Vancouver. "There seems to be a certain number of people they talk to. Everybody's a bit in the dark."
Bre-X on Oct. 28 announced its alliance with Suharto's son, Sigit Harjojudanto, whose business influence is pervasive in Indonesia.
Since then, instead of directly addressing questions about its business in Indonesia -- many of which are playing havoc with the stock price -- Bre-X has opted instead to leak to the market carefully selected press material.
On Sunday, for example, the company faxed the media, analysts and shareholders a copy of a story from the Far Eastern Economic Review detailing its links with Sigit.
The article referred to Sigit's possible ties with the Indonesian army, stated that one of Bre-X's Indonesian partners has been bought out and asserted that gold giant Barrick Gold Corp. tried to push Bre-X into a bad deal.
Despite questions about the article, Bre-X refused to respond and still has not said whether it endorses the story or puts any faith in the statements.
"I've certainly suggested a few times that they talk to the media and clear things up," said Neil Winchester, manager of surveillance for the Toronto Stock Exchange. "It would be advantageous to the marketplace."
Rumours have shrouded Bre-X since the Indonesian government said last month it would not issue essential contracts for work on the project until Bre-X cleared up an ownership dispute with some of its Indonesian partners.
The dispute has put a cloud over Bre-X's search to find a major mining partner to help it develop the rich Busang gold deposit in East Kalimantan, but the alliance with Suharto's son was expected to help the company clear up its problems.
"They're optimistic that they can get everything within a couple of weeks," said gold analyst Michael Fowler of Levesque Beaubien Geoffrion, who said he spoke with Bre-X on Tuesday.
But he said Bre-X would not comment on the article it distributed. "They just sent it out for general interest purposes."
Still, statements in the article and other gossip were taking its toll on shares linked to Bre-X and other exploration companies in Asia have complained the uncertainty has hurt their stocks.
Minorca Resources Inc., a Canadian mining company that has an interest in the Busang deposit through an alliance with Bre-X's Indonesian partner, PT Askatindo Karya Mineral, has found itself on the defensive.
Talk about Askatindo being bought out is unfounded, Minorca President Roland Horst said in an interview. "They have no intention to sell out," he said.
Minorca's chairman is in Indonesia this week meeting with Askatindo officials and verified the company's intentions, Horst said.
Horst said he had a slew of unanswered questions about Bre-X's arrangements with Suharto's son too. "To be frank, the relationship between Minorca and Bre-X is relatively cool."
| 12 |
The Indonesian gold bug is nibbling away at Inco Ltd, the world's biggest nickel company.
The company whose name has become synonymous with nickel is turning its sights to gold, copper and zinc exploration in Indonesia, Africa, Canada's Far North, Turkey and Brazil.
"Our target exploration area is Indonesia," Bob Horn, Inco's vice-president of exploration, said in a recent interview.
"We've reassessed what we're doing, we've refocused on our work," he said.
"When we got rid of TVX, it was sold at a substantial profit...It was not a strategic move to get out of gold. It was a strategic move to get out of that particular company," Horn said.
"There's nothing wrong with gold. If it makes money, we'll be there."
Inco does not have any plans to go head-to-head with the world's huge gold producers, however.
"They always pay too much, but if we come across a situation where we find gold, we'll go for it, like we have in Indonesia," Horn said.
The company has budgeted US$24.8 million for field exploration in 1997, slightly less than the US$25 million in 1996. But three recent alliances mean up to an extra US$15 million will be devoted to exploration through the junior partners, Horn said.
In addition to its alliance with Colony Pacific, Inco also has an arrangement with Carlin Resources Corp to explore in Africa, and a third deal in the works.
The company has just about all the nickel it needs with continued exploration in Canada at the huge and expanding Voisey's Bay deposit in remote Labrador as well as growing mines in Thomson, Manitoba and Sudbury, Ontario.
Instead, Inco hopes to grow through an exploration focus on copper, zinc and gold, Horn said.
In 1995, Inco did not produce any zinc, but it produced 240 million pounds of copper, 3.775 million pounds of cobalt, 60,000 troy ounces of gold and 403 million pounds of nickel.
"We already market copper, so it's no big deal to us," said Horn. "And the technology for zinc is pretty well the same. We don't have to develop any new expertise to get into zinc."
But gold?
Inco got rid of most of its gold in 1993, when it sold its controlling interest in TVX Gold Inc. Gold production since then has been minimal.
Inco kept many of its gold experts on staff, however, and Horn said the company has all the expertise it needs to mine gold.
Analysts said Inco is wise to use its solid status and its 28-year history in Indonesia to explore the vast mineral potential there.
Inco, which has a huge nickel operation in Indonesia, has several exploration projects there and recently struck deals with Highlands Gold Ltd and Canadian explorer Colony Pacific Explorations Ltd to step up its search for gold and copper.
Alliances with smaller companies will be key to Inco's exploration in the future, Horn said.
| 12 |
Canada's Bre-X Minerals Ltd and Barrick Gold Corp are still trying to forge a joint venture to mine the spectacular Busang gold discovery in Indonesia, despite a cloud of uncertainty over the rights to the deposit Bre-X's chief executive David Walsh said.
Progress in the negotiations with Barrick is slow, Walsh told Reuters in a telephone interview on Thursday.
"We're moving ahead, albeit at a snail's pace," he said, adding that legal issues stood in the way of a full agreement. "We're trying to get them to appreciate our views and the legal stance that we've taken," he said.
Last month, the Indonesian government advised Bre-X to form a joint venture with Toronto-based gold giant Barrick to operate Busang. The government requested a deal by December 4, but the two companies announced after the deadline that several issues were still outstanding.
Since then, the Indonesian government has raised doubts about Bre-X's grip on Busang, which is estimated to contain at least 57 million ounces of gold, worth around $21 billion at today's prices.
"The government has stopped processing the previous application for contracts of work by Bre-X because of various problems," Umar Said, Indonesia's secretary-general of mines, told Reuters in Jakarta on Thursday. "Therefore the previous application by Bre-X that has been delayed must be stopped and must be said to have been canceled."
He said Bre-X and Barrick must jointly submit new applications for contracts of work on the deposit.
Without contracts of work granted by the Indonesian government, Bre-X cannot proceed to exploit the find
But Walsh defended his company, saying its permits and applications for the gold property were "in good standing."
He said two Bre-X officials met with Umar in Jakarta on Thursday and were assured everything was in line.
"The telephone call that I got from Rolie (Francisco), he was quited pleased with the meeting. He said we're making very good progress in our relationship (with the mines ministry)," Walsh said.
Bre-X spokesman Steve McAnulty tried to explain the apparent contradiction in Umar's statements. "What the government wants to do in essence is that if an agreement with Barrick is made, the existing applications will be replaced with new applications," he told Reuters
Bre-X earlier said Umar had apologized for the misunderstanding, saying his comments were "erroneously reported in a December 11 Reuters newswire article."
Peter Thomas, the Reuters company spokesman in London, said Reuters was confident the quotations in its December 11 story from Jakarta were accurate.
Despite the barrage of news releases from Bre-X on Thursday, Barrick was still seeking clarity on the situation from the Indonesian government.
"We're still seeking clarification and we want to hear directly from the government of Indonesia," Barrick spokesman Vince Borg said in Toronto. "We're not saying anything until we talk directly to the government of Indonesia."
Bre-X, too, is waiting for the Indonesian government to make a move.
Walsh said he still had high hopes that Indonesian President Suharto would open up an auction for Bre-X, allowing other major mining companies to bid on the Busang project.
He said Bre-X had not made a formal request for an auction, but "we understand that the president is reviewing the situation."
An auction would be advantageous for Bre-X shareholders and for Indonesia, he said.
"We're not soliciting offers. We are getting other phone calls," Walsh said. "I am talking to to principals of other companies."
He said he had spoken to executives at Placer Dome Inc, Newmont Mining Corp and Teck Corp.
In Vancouver, Placer Dome spokesman Hugh Leggatt said any suggestion of an open auction on Busang was encouraging. His company has made a formal request for an open bidding process.
But gold mining analyst Bill Belovay with CIBC Wood Gundy said Barrick's competitors may be trying to make a deal with Bre-X more expensive for Barrick.
"They're playing games," he said. "One has got to read between the lines."
He said Busang was so fraught with uncertainty that he has a hard time understanding why the major gold producers would be interested. "One doesn't even know what percentage (Barrick) will end up with. One doesn't even know how to keep Suharto happy," he said. "To me it's a whole big nightmare."
Investors were thoroughly confused by Thursday's developments, analysts said.
"We're getting so much information, headline after headline," said one analyst. "It's causing anxiety for everyone."
Bre-X, which has halted all day Wednesday, closed down C$0.85 at 19.80 in rapid trading on Thursday of more than 8.6 million shares. Barrick, which lost C$2.75 on Wednesday, regained C$1 on Thursday to C$39.50 in trading of more than two million shares.
| 12 |
Canadian nickel giant Falconbridge Ltd has a growing appetite for expansion and is poised for growth through acquisition and exploration, the company's new chief executive officer said in an interview.
"The appetite of this company is much higher than what it used to be," Oyvind Hushovd told Reuters on Wednesday. "Falconbridge is in very good shape financially today, which means that we have the ability to grow."
Hushovd, 46, replaced Frank Pickard as chief executive this month after Pickard died suddenly at the age of 63 during a business trip in Chile this September.
Hushovd, originally from Norway, has worked for Falconbridge for more than 22 years.
He spent the past year and a half working closely with Pickard in the position of executive vice-president and was chairman of the steering committee that put together a strategic plan to carry Falconbridge into the next century.
"I don't see a need to revolutionize Falconbridge," he said. "The backbone of Falconbridge is nickel, and copper is another leg of Falconbridge. It will probably be like that in the future."
However, Hushovd is not content simply to sit back and let the long-term strategic plan unfold.
The plan calls for Falconbridge to double its annual nickel production to 200,000 tonnes and triple its copper production to about 500,000 tonnes a year, within 15 years.
To do that, Falconbridge needs to find growth opportunities, especially since the company lost a bid to take over the huge Voisey's Bay nickel, copper and cobalt deposit in remote Labrador, said Hushovd.
Ongoing work in New Caledonia, Ivory Coast and Zambia should complement plans to start producing nickel by the end of next year at the Raglan project in Quebec and plans to produce copper by 1998 at the Collahuasi joint venture project in Chile, Hushovd said.
In Zambia, Falconbridge joined a consortium in November to develop the Konkola Deep copper mine, in which Falconbridge is partners with South Africa's Gencor Ltd and Anglo American Corp of South Africa Ltd.
In New Caledonia in the South Pacific, Falconbridge is poised to gain access to nickel reserves to supply a nickel plant planned in the north of the country. The board of France's Eramet on Thursday said it had agreed to reallocate its mining reserves in New Caledonia, which would give Falconbridge access to Eramet's Koniambo field.
Hushovd does not intend not stop there.
"Falconbridge has always been very strong in exploration," he said. "We felt we lacked the business development infrastructure."
So last summer, the company set up a business development group, to search out growth opportunities either through exploration or acquisition.
While Hushovd would not hint at specific acquisition targets, he stressed, "I want properties that are not only profitable today but are also profitable in the future."
In any future acquisitions, Falconbridge can probably count on support from its powerful majority shareholder, Noranda Inc, which owns 46 percent.
"We have a big owner, which means that hopefully we can pursue things that might be tough to pursue on our own," Hushovd said. "We can have a bigger appetite than the company on its own would have."
Hushovd said he had no immediate plans to boost the company's share price, which peaked at C$32.75 in May but is currently trading around C$29.15.
He noted that the stock normally reflects the nickel price, which has failed to meet expectations in 1996.
"I think we all had very high hopes for nickel this year, and the market did not turn out the way that we had forecasted," he said.
As for next year, "I feel it's difficult to give a prediction at the present time. Fundamentally I do believe we're going to see better prices in 97 than we did in 96," Hushovd said. ((Reuters Toronto Bureau 416 941-8100))
| 12 |
Some of the world's most influential gold producers are upping the ante as a December 4 deadline edges closer for Canada's Bre-X Minerals Ltd to make a deal with gold giant Barrick Gold Corp.
At stake is the rich Busang gold deposit in Indonesia. New estimates released on Tuesday suggest the discovery contains more than 57 million ounces of gold that can be mined at the low cost of US$96 an ounce.
The Indonesian government has virtually mandated that Bre-X must carve up its find, with Barrick getting 75 percent of Bre-X's stake and Bre-X 25 percent.
And the government of President Suharto has also made it plain it would "appreciate" a stake of 10 percent in Busang.
But now, some major figures in the gold mining world are protesting that the deal ordered by Indonesia is unprecedented and unfair. They are pressuring Jakarta to allow rival bids.
"I think it's Bre-X's natural right to have a say who their partner will be," John Willson, chief executive officer of Vancouver-based Placer Dome Inc, told Reuters in an interview on Tuesday.
Placer Dome, Canada's second biggest gold company and one of the world's largest, wants to bid on Busang, and Willson said Newmont Mining Corp and Teck Corp have also been at the negotiating table for months.
The three heavyweight mining companies were abruptly shut out of the process last month when Indonesia forced Bre-X into Barrick's arms.
Analysts have suggested Barrick used its business connections with Suharto's eldest daughter, as well as political connections through Barrick advisers former U.S. President George Bush and former Canadian Prime Minister Brian Mulroney, to sway the Indonesian government.
"We were clearly disappointed -- that's a nice way of putting it -- that all of a sudden the thing went away from us," Willson said in an interview. "Something has been going on that is not kosher in the West."
Willson said he believes the Indonesian government can be persuaded to consider other offers for Busang. Otherwise, the country would face international condemnation and risk losing foreign investment, said Willson.
"This is indeed unusual," he said. "The message to the whole market is we risk our money big time to find gold, and if we really find the jackpot, somebody's going to come along and tell us what to do with it.
"It would put a great big red flag on Indonesia," he added.
Placer, Newmont and Teck must now await word from Indonesian government on whether they will be allowed back into the bidding process.
Indonesia's consulate in Toronto declined to comment on the matter on Tuesday. Newmont Mining also would not comment.
Teck's chief financial officer, John Taylor, said the company would consider bidding for Busang if Indonesia opens the door to an auction process, but would likely seek a partner in any bid.
"That's a pretty big bite," said Taylor.
Willson, however, noted Placer Dome could comfortably afford to take on Busang alone, despite a recent US$600 million bid for a larger stake in Papua New Guinea's Porgera gold deposit.
He would not say what price Placer was willing to offer, but "it's clearly worth considerably more that what's being contemplated," he said after looking at the new resource calculations for Busang.
The resource calculations are in line with analysts' expectations, said mining analyst Bruno Kaiser with CIBC-Wood Gundy in Toronto, who noted that most analysts believe Busang holds a lot more gold than has already been outlined.
Kaiser said he was not concerned about the December 4 deadline ticking past without news from Jakarta.
"My take on it is that the Indonesian government imposed this December 4 deadline primarily as a means to facilitate bids and get the process moving," he said. "You get everyone who is interested and serious stepping up."
But analyst Catherine Gignac with Deacon Capital in Toronto expressed doubts about the Indonesian government soliciting more suitors for Bre-X. "Why should the Indonesian government provide the market with a bidding process just because we want them to?" she said.
North America's gold miners are not alone in seeking a piece of Busang. Bre-X's Indonesian partner Jusuf Merukh has claimed up to 40 percent of the deposit. And the former Australian owners of the property say they also have rights to part of the riches.
Barrick closed at C$37.85, down C$1.70, on the Toronto Stock Exchange on Tuesday. Bre-X was halted at C$18.70, up 0.95, when trading was halted for the new resource calculation. Placer Dome lost 0.45 to close at 30.60.
| 12 |
The rights to Bre-X Minerals Ltd.'s huge Busang gold discovery in Indonesia appeared to be up in the air Monday despite an Indonesian government statement declaring Canada's Barrick Gold Corp. the winner.
"We still don't have a deal. There are a number of points that are still being negotiated," Bre-X spokesman Steve McAnulty said in a phone interview. "Negotiations are still ongoing."
"I can explain to you that we don't have a signed agreement," Barrick spokesman Vince Borg said.
The Indonesian government told Reuters in Jakarta Monday that the two companies had agreed to split the deposit, with Barrick getting 75 percent and Bre-X keeping 25 percent.
"They have reported they can both accept the government suggestion," of a 75-25 split, said Umar Said, secretary-general of the Mines and Energy Ministry.
"They are also ready to provide a 10 percent stake to the government," he said. "It is good."
Last month, Indonesia asked Bre-X to form a joint venture with Barrick and announce a deal by Dec. 4. When the deadline passed, the two companies said they had reached agreement on some issues but that others were still outstanding.
"We are negotiating toward an end," McAnulty said Monday.
He said legal issues stood in the way of an agreement.
"The whole thing is totally confusing," said gold analyst Michael Fowler of brokerage Levesque Beaubien Geoffrion in Toronto.
"I think these guys are close, but there are probably a few things in the way."
The companies are wrangling over the Busang gold find, which holds at least 57 million ounces of low-cost gold on the island of Borneo.
Neither company would provide details about the terms of a deal, when the terms would be announced, whether shareholders would be able to vote on the agreement or who would be given essential contracts of work granting mining rights to the property.
Bre-X was still hoping the Indonesian government would drop its request for a deal with Barrick and let Bre-X find a partner through an open bidding process, McAnulty said.
"We're getting signals from the consulate, from the embassy, from Mr. Said," he said. "We certainly hope the government allows the process to proceed as originally planned. It would be to the best interest of Bre-X shareholders."
Vancouver, British Columbia-based gold firm Placer Dome Inc. has complained about being shut out of the process despite months of negotiations.
Placer Dome has said it wanted a chance to put forward a bid, but its status was in limbo as it awaited word from the Indonesian government.
Newmont Mining Corp., which had previously shown interest in Busang, said Monday it was preoccupied with a takeover bid for Santa Fe Pacific Gold Corp.
Bre-X closed down C10 cents (8 cents) to C$20.05 ($14.80), topping the list of most active stocks on the Toronto Stock Exchange. Barrick fell C15 cents (11.7 cents) to C$40.05 ($29.67) in Toronto and by 12.5 cents to $29.375 on the New York Stock Exchange.
| 12 |
Inco Ltd's huge Voisey's Bay nickel deposit will help turn the company into a 750-million pound a year low-cost nickel producer by the year 2001, company executives said on Monday.
The new discovery will propel the company's growth by 86 percent over 1995 when Inco produced 403 million pounds of nickel, Inco chairman and chief executive Mike Sopko said in a speech to media and analysts.
"We want to remain the world's leading nickel producer in a growing nickel market," he said.
Costs will decline by 23 percent because of Voisey's Bay, from $1.30 a pound in 1995 to 0.89, said chief financial officer Tony Munday.
But capital costs for Voisey's Bay will be higher than initially thought, said Stuart Gendron, president of Voisey's Bay Nickel Co, a unit of Inco.
The company now expects to spend US$1.4 billion on facilities until the year 2000, up from earlier estimates of US$1.1 billion, he said. The company expects to finish a feasibility study by the end of this year, he added.
Inco took over Diamond Fields Resources Inc last summer for US$3.3 billion and won control of the giant Voisey's Bay resource. The company expects to be producing 270 million pounds of nickel a year from the property by 2001.
In the near term, Inco said its production should grow in 1997 to 430 million pounds, up from 415 million in 1996. By 1998, nickel production should reach 450 million pounds, the company said.
While world nickel supply and demand were in balance in 1996, nickel demand should slightly outpace supply in 1997, said Peter Salathiel, vice-president of marketing.
"I would argue that in the near term, 97-98, the supply-demand fundamentals for nickel look very good," he said.
He said it was mystery to him why nickel prices have been trending down recently, but he pointed to a glut in the stainless steel market.
"The stainless steel industry is going through kind of a crisis right at the moment," he said.
He said he did not expect any increase in Russian production of nickel in the next three to four years.
But Salathiel, who will retire at the end of the year, would not predict a nickel price for next year.
"The one thing I've learned is it's impossible to predict nickel prices," he said.
Inco plans to spend US$68.6 million on exploration next year, up from an expectedUS$55.1 million this year, said Bob Horn, vice-president of exploration.
((Heather Scoffield, Reuters Toronto Bureau 416 941-8104))
| 12 |
Canadian mining company Bre-X Minerals Ltd has been in hiding since it announced 17 days ago that it has formed a partnership with the son of Indonesian ruler Suharto, prompting a flurry of comment on its ethics. (Corrects description of Suharto.)
Despite a constant whirl of rumors and persistent questions that have sent the company's shares on a roller coaster ride, Bre-X is maintaining a dogged silence.
The Calgary-based company that controls one of the world's biggest gold prospects in Indonesia has not talked to the financial press for weeks. Company officials will take calls only from a handful of favoured analysts, according to market sources.
"I haven't had any calls returned," said gold analyst Rick Cohen with Goepel Shields in Vancouver. "There seems to be a certain number of people they talk to. Everybody's a bit in the dark."
Bre-X sent out a news release on October 28 about its alliance Suharto's son, Sigit Harjojudanto, whose business influence is pervasive in Indonesia.
Since then, instead of directly addressing material questions about its business in Indonesia -- many of which are playing havoc with its stock price -- Bre-X has opted instead to leak to the market carefully selected press material.
On Sunday, for example, the company faxed the media, analysts and shareholders a copy of a story from the Far Eastern Economic Review detailing its links with Sigit.
The article referred to Sigit's possible ties with the Indonesian army, stated flatly that one of Bre-X's Indonesian partners has been bought out and asserted that Canadian gold giant Barrick Gold Corp had tried to push Bre-X into a bad deal.
Despite questions about the article, Bre-X refused to respond and still has not said whether it endorses the story or puts any faith in the statements contained in the story.
"I've certainly suggested a few times that they talk to the media and clear things up," said Neil Winchester, manager of surveillance at the Toronto Stock Exchange.
"It would be advantageous to the marketplace," he added.
Rumors have surrounded Bre-X since the Indonesian government said last month it would not issue essential contracts of work until Bre-X cleared up an ownership dispute with some of its Indonesian partners.
The dispute has placed a cloud over Bre-X's search to find a major mining partner to help it develop the rich Busang gold deposit in East Kalimantan, but the alliance with Suharto's son was expected to help the company clear up its problems.
"They're optimistic that they can get everything (the permits) within a couple of weeks," said gold analyst Michael Fowler of Levesque Beaubien Geoffrion, who said he spoke with Bre-X on Tuesday.
But he said Bre-X would not comment on the article it distributed. "They just sent it out for general interest purposes," he added.
Still, the rumors in the article and other rampant gossip are taking a toll on shares linked to Bre-X. Other exploration companies in Asia have complained the uncertainty has spilled over and hurt their stocks.
Minorca Resources Inc, a Canadian junior mining company that has an interest in the Busang deposit through an alliance with Bre-X's Indonesian partner, PT Askatindo Karya Mineral, has found itself on the defensive.
Talk about Askatindo being bought out is unfounded, Minorca president Roland Horst said in an interview. "They have no intention to sell out," he said.
Minorca's chairman is in Indonesia this week meeting with Askatindo officials and verified the company's intentions.
"There were discussions, but they were rebuffed," said Horst.
He added that he also had a slew of unanswered questions about Bre-X's arrangements with Suharto's son.
"To be frank, the relationship between Minorca and Bre-X is relatively cool."
--Reuters Toronto Bureau 416 941-8100
| 12 |
North America's major gold companies are waging an expensive battle to win the coveted title of world's biggest gold producer.
"We want more of the action," said Hugh Leggatt, spokesman for Vancouver-based gold firm Placer Dome Inc.. "We want to be positioned in the industry as a bigger player."
Placer Dome has made a $600 million bid for Highlands Gold Ltd. of Papua New Guinea and the 25 percent of Placer Pacific Ltd. it does not already own.
The company also plans to raise $300 million through a preferred share issue and sell off some small Canadian mine properties.
Placer also has its eye on Bre-X Minerals Ltd., a Calgary, Alberta-based exploration company that discovered what could become one of the world's largest gold mines, the Busang deposit in Indonesia.
But Bre-X is also crucial to Barrick Gold Corp.'s plan to become the world's biggest gold company.
Toronto-based Barrick is already the the world's most profitable gold company and North America's biggest, but it wants to surpass Anglo American Corp. of South Africa Ltd. and Gold Fields of South Africa Ltd. to be the world's largest.
Barrick, through skilful navigation of Indonesian politics, appears to have Bre-X within its grasp. Jakarta has asked the two companies to form a joint venture to develop the 57 million ounce Busang deposit, with Barrick controlling 75 percent.
Denver-based Newmont Mining Corp. was interested in Bre-X, but when Barrick appeared to gain the upper hand, Newmont turned its sights to Santa Fe Pacific Gold Corp., a mid-tier gold company.
Although Newmont seems to have lost out on its stock swap offer for Santa Fe to a $2.3 billion competing bid from Homestake Mining Co., analysts said Newmont was still hunting for other takeover targets.
"This is a very capital-intensive industry and it's becoming a global industry," Newmont spokesman Doug Hock said in an interview.
"In order to compete, you have to have large resources to do that. What you see is the larger players becoming bigger in order to compete."
Homestake is poised to become North America's second-biggest gold company after Barrick if its takeover of Santa Fe succeeds.
Major gold companies are under pressure from their shareholders to keep gold reserves growing, analysts said.
"If one company gets big, they have a lot of clout in the marketplace to acquire properties or resources," said gold analyst Michael Fowler of brokerage Levesque Beaubien Geoffrion.
With gold bullion prices in a steep decline, the share prices of many mid-tier companies have been hit, making takeovers cheaper, Fowler said.
But he said the current leaders of the gold world, the South Africans, were not caught up in the recent consolidation.
"It looks as though they're losing out to the North Americans," said Fowler. "They're behind the eight-ball really."
North American gold producers were geared to react aggressively and quickly, but the South African producers concentrated more on paying dividends, he said. "They don't move very fast."
Analysts said this round of deal-making was far from over as major gold companies fought it out to satisfy their shareholders' thirst for growth.
Analysts said possible future takeover targets included large mid-tier producers such as Dayton Mining Corp., Battle Mountain Gold Co., Cambior Inc. and Echo Bay Mines Ltd..
| 12 |
Poor metal prices hurt earnings at Canadian base metal miners in the third quarter, with profits down at Inco Ltd., Falconbridge Ltd. and Cominco Ltd.
Nickel giant Inco said on Monday its third-quarter profit fell to $29 million, or 19 cents a share, from $44 million or 33 cents a share a year earlier. The earnings per share for the 1996 third quarter were worse due partly to shares issued in the takeover of Diamond Fields Resources Inc.
Inco's rival, Falconbridge, earned $30.1 million ($22.3 million) or C17 cents (13 cents) a share excluding extraordinary gains, a steep drop from last year's C$84.5 million ($62.7 million) or C47 cents (35 cents) a share.
Vancouver-based Cominco, which produces zinc, nickel, copper and other metals, said earnings were C$5.2 million ($3.86 million) or C6 cents (4 cents) a share, down sharply from C$22 million ($16.4 million) or C25 cents (19 cents) a share last year.
All three cited copper as the main culprit.
The average price for copper on the London Metal Exchange in the third quarter was 90 cents a pound, vs. $1.37 at the same time last year, Cominco said.
The copper price plummeted in June after a copper scandal at Japanese metals giant Sumitomo Corp. The red metal has just begun to regain some of its strength.
All three companies also pointed to lower nickel prices as a major source of weakness in the third quarter.
The average nickel price for the quarter fell to $3.26 a pound from $3.92 at the same time last year, Cominco said.
Analysts said investors were now taking advantage of the lower stock prices to buy more shares.
Inco rose C$1.15 to C$41.90 in Toronto and by $1 to $31.125 in New York in late afternoon trading on Monday. Falconbridge rose 75 cents to C$29 ($21.48) and Cominco gained C45 cents to C$30.65 ($22.70) on the Toronto Stock Exchange.
Copper and nickel have strengthened recently, putting a shine on the fourth quarter, said mining analyst Tony Hayes at the Credifinance brokerage.
"I'm astounded that copper has not already risen. It will go very rapidly when it does move."
| 12 |
Canada's Bre-X Minerals Ltd., moved on Monday to resolve a dispute over its huge Busang gold discovery in Indonesia, forging an alliance with a company controlled by the eldest son of Indonesia's President Suharto.
"This is an important first step to the resolution of Bre-X's problems," said gold analyst John Ing of Maison Placements Canada.
The stock jumped C$3.50 to C$24.30 on the Toronto Stock Exchange, topping actives on more than 6.4 million shares. On Nasdaq, Bre-X rose $2.625 to $18.25.
Bre-X said it will pay $40 million for a deal with PT Panutan Duta, part of the Panutan group run by Sigit Harjojudanto, Suharto's eldest son.
Analysts said the alliance with Panutan Duta, part of the Panutan group involved in energy, mining and telecommunications, should help Bre-X clear up a widely publicised dispute over the ownership of its glittering Busang gold discovery.
Bre-X stock has taken a beating in recent weeks because of the dispute.
One of Bre-X's Indonesian partners, Jusuf Merukh, is seeking a 40 percent stake in Busang, which has estimated gold reserves of 47 million ounces.
The Indonesian government has said it will delay issuing the crucial contracts of work to Bre-X until the dispute is resolved. Without the contracts, Bre-X cannot advance its work on the Busang deposit.
The dispute has also clouded Bre-X's quest to find a major mining partner to develop and operate Busang.
Panutan will receive a 10 percent interest in the richest parts of the Busang gold deposit on the island of Kalimantan, Bre-X said.
In return, Panutan will act as a consultant for Bre-X in Indonesia and help the Calgary, Alberta-based company deal with administrative and technical matters. The deal is conditional on Bre-X's receiving essential permits from the Indonesian government.
"Having an arrangement with this fellow is a bonus," said Ing, the analyst. "The key in Indonesia is who you know."
"They seemed to have teamed up with a partner with high standing," said mining analyst Michael Fowler of brokerage Levesque Beaubien Geoffrion.
"This should clear up most of the (ownership) claims that are out there."
Merukh told Reuters in Jakarta on Monday that he was optimistic a deal would be reached in November.
But Bre-X's hold on the Busang discovery is shrinking as it works out its problems, said Ing.
He said Bre-X will probably have to give away another slice of the deposit to Merukh and his Australian supporters, Golden Valley Mines NL.
"Slowly and salami-like, Bre-X is getting cut back," said Ing.
Officials at Bre-X did not return phone calls to discuss details of the alliance.
| 12 |
Canadian gold giant Barrick Gold Corp is the most likely contender to partner junior mining company Bre-X Minerals Ltd in developing its huge Indonesian gold deposit, analysts polled by Reuters said.
"We really only have one potential front runner: Barrick," said gold analyst Barry Allan with Gordon Capital.
Barrick has demonstrated its interest in Indonesian gold by investing more than US$10 million in exploration and amassing a large land position in Indonesia, analysts said.
And Barrick's association with a construction company run by the daughter of Indonesia's President Suharto suggests Barrick is carefully setting up its network to control a piece or all of the Busang, Bre-X's 47-million-ounce discovery in the middle of the jungles of Borneo.
"They're trying to position themselves the best they can," said one analyst who did not want to be named.
Analysts who have been closely watching developments around Busang,said Barrick stands the best chance of bidding successfully for a stake in the property because Barrick's own high-priced stock, relative to the value of its assets, will look attractive to Bre-X shareholders.
"In order to pay the sort of multiples Bre-X is trading at, you have to have a high gold multiple in order to land the company or the property at these prices," said Rick Cohen at Goepel Shields in Vancouver.
Bre-X shareholders will likely look for a combination of cash and shares so they can keep a stake in the fortunes of Busang, analysts said.
Bre-X is looking for a heavyweight mining company to buy all or part of the Busang discovery and act as operator of what is expected to become one of the world's biggest gold mines. But the search has been dogged by a dispute with Bre-X's Indonesian partners over ownership.
The spat has caused the Indonesian government to delay granting Bre-X essential contracts of work needed to develop Busang. Without the contracts, analysts said a bid for Bre-X would be unlikely.
Bre-X has refused to speak to the media since it forged an alliance with Indonesian President Suharto's son last week. But some analysts said Bre-X told them recently the dispute should be cleared up this month.
While Barrick is at the top of the list of companies who could afford to buy into Bre-X, Vancouver-based Placer Dome Inc also has the resources and the attractive stock price to make a bid, analyst Cohen pointed out.
"The size of this deposit and the potential involved here sort of limits it to those two," he said.
Others said the Bre-X play was not Placer Dome's style.
"Definitely Placer has the capability to do it. I just don't think they have the stomach for it," said Allan.
Newmont Gold Co, RTZ Corp PLC, Minorco SA and Freeport-McMoRan Copper and Gold Inc could also be in the running for Bre-X. However, their chances are not as good as Barrick's, analysts said, noting that Newmont, Freeport and RTZ already have large exposure in Indonesia.
While the Luxemburg-based Minorco, controlled by Anglo American Corp of South Africa ANGL.J., has recently raised US$400 million, the company's stock lacks the high multiple that would make it attractive to Bre-X shareholders.
Minorco could run into political problems if it were to make a bid for Bre-X, said one South African analyst who follows Minorco closely.
"The South Africans might not want to get into a situation that's so blatantly political," he said. "It might backfire on them."
If Barrick does eventually succeed in controlling the Busang deposit, it would go a long way to fulfilling Barrick chief executive Peter Munk's dream of building the world's largest gold company to supplant Anglo American, analysts said.
"It fits very nicely with Munk's strategy," said one analyst. "Munk is not driven by money. He wants to have a legacy. He wants to be able to say he started with nothing and ended with the largest gold company in the world.
| 12 |
North America's largest gold producer, Toronto-based Barrick Gold Corp, reported lower third-quarter earnings on Tuesday due to an after-tax charge and higher operating costs.
"I think their quarter clearly underscores that Barrick has made the transition from a growth company to one that's trying to maintain its existing base," said mining analyst Barry Allan of Gordon Capital.
Barrick's net income for the quarter fell to US$21 million, or US$0.06 a share, from US$67.7 million, or US$0.19 cents a share, in the same period a year earlier.
Earnings were slightly below analysts' expectations.
Barrick pointed to higher cash costs, which rose to US$203 an ounce from US$194 an ounce a year earlier.
The company also took a US$38 million hit to bail out of its Cerro Corona exploration project in Peru.
And Barrick hiked its exploration budget more than 50 percent, to US$46.4 million for the first nine months of the year, compared to US$30.9 million previously.
Investors seemed to shrug that off. Barrick's shares rose C$0.50 to C$36.15 in heavy trading on the Toronto Stock Exchange. In New York, the stock rose 3/8 to US$26 7/8.
The market seemed positive to Barrick's plans to develop its Pascua mine in Chile and its new Pierina property in Peru, analysts said.
Barrick bought the Pierina deposit last summer through its US$800 million takeover of Arequipa Resources Ltd, based on a minimum of 4.5 million ounces of gold. According to the company, recent drilling on the property suggests the number was conservative.
Barrick said production at Pierina should begin in late 1999 at a rate of 500,000 ounces of gold a year. Costs should be below US$100 an ounce thanks to a substantial silver credit and high grade gold.
Capital costs should be about US$200 million, the company said. It has eight drills on the property working to define the deposit.
"They are proceeding very aggressively on Pierina," analyst Allan said. However, he cautioned that it was risky to make such claims while drilling was still underway and a feasibility study is still a long way off.
At Pascua in Chile, recent exploration suggests the deposit may extend across the nearby border into Argentina, Barrick said. Production is expected to begin in 1999, totaling 400,000 ounces a year at an operating cost of US$240 per ounce. Capital costs are expected of about US$475 million.
-- Reuters Toronto Bureau 416 941-8100
| 12 |
Bre-X Minerals Ltd. and Barrick Gold Corp. are trying to forge an alliance to mine the huge Busang gold deposit in Indonesia despite a cloud of uncertainty over the rights to the find, Bre-X's chief executive said Thursday.
But the negotiations with Barrick are progressing slowly, Bre-X Chief Executive Officer David Walsh told Reuters.
"We're moving ahead, albeit at a snail's pace," he said, adding that legal issues stood in the way of a full agreement. "We're trying to get them to appreciate our views and the legal stance that we've taken."
Last month the Indonesian government advised Bre-X to form a joint venture with Toronto-based Barrick to operate Busang. The government, which also requested a 10 percent stake, set a Dec. 4 deadline, but the two companies announced after that date that several issues remained outstanding.
Since then, the Indonesian government has raised doubts about Bre-X's grip on Busang, estimated to contain at least 57 million ounces of gold, worth about $21 billion at today's prices.
"The government has stopped processing the previous application for contracts of work by Bre-X because of various problems," Umar Said, Indonesia's secretary-general of mines, told Reuters in Jakarta on Thursday. "Therefore the previous application by Bre-X that has been delayed must be stopped and must be said to have been cancelled."
He said Bre-X and Barrick must jointly submit new applications for work on the deposit. Without contracts of work granted by the Indonesian government, Bre-X cannot proceed to exploit the find.
Walsh defended his company, saying its permits and applications for the gold property were "in good standing."
He said two Bre-X officials met with Umar in Jakarta Thursday and were assured everything was in line. "The telephone call that I got from Rolie (Francisco), he was quite pleased with the meeting. He said we're making very good progress in our relationship (with the mines ministry)," Walsh said.
Bre-X spokesman Steve McAnulty, explaining the apparent contradiction, said: "What the government wants to do in essence is that if an agreement with Barrick is made, the existing applications will be replaced with new applications."
Bre-X earlier said that Umar had apologised for the misunderstanding, saying his comments were "erroneously reported in a Dec. 11 Reuters newswire article." But Peter Thomas, a Reuter spokesman in London, said the international news and information company was confident the quotations in its Dec. 11 story from Jakarta were accurate.
Umar's comments to Reuters Thursday were essentially repeating what he said on Wednesday.
Despite a barrage of statements from Bre-X on Thursday, Barrick was still seeking clarification on the situation from the Indonesian government.
"We're still seeking clarification and we want to hear directly from the government of Indonesia," Barrick spokesman Vince Borg said in Toronto. "We're not saying anything until we talk directly to the government of Indonesia."
Bre-X, too, is waiting for the Indonesian government to make a move.
Walsh said he still had high hopes that Indonesian President Suharto would open up an auction for Busang, allowing other mining companies to bid on the project. He said Bre-X had not made a formal request for an auction, but added: "We understand that the president is reviewing the situation."
An auction would be advantageous for Bre-X shareholders and for Indonesia, he said. "We're not soliciting offers. We are getting other phone calls," Walsh said. "I am talking to principals of other companies."
He said he had spoken to executives at Placer Dome Inc., Newmont Mining Corp. and Teck Corp.
In Vancouver, Placer Dome spokesman Hugh Leggatt said any suggestion of an open auction on Busang was encouraging. His company has made a formal request for an open bidding process.
But gold mining analyst Bill Belovay of CIBC Wood Gundy said Barrick's competitors may be trying to make a deal with Bre-X more expensive for Barrick. "They're playing games," he said. "One has got to read between the lines."
Belovay said Busang was so fraught with uncertainty that he has a hard time understanding why the major gold producers would be interested. "One doesn't even know what percentage (Barrick) will end up with. One doesn't even know how to keep Suharto happy," he said. "To me it's a whole big nightmare."
Investors were confused by Thursday's developments, analysts said.
Bre-X, whose stock was halted all day on Wednesday, fell 85 cents to C$19.80 in heavy trading of more than 8.6 million shares. Barrick, which lost C$2.75 on Wednesday, regained C$1 to C$39.50 in trading of more than 2 million shares.
| 12 |
Confusion whirled around Canada's Bre-X Minerals Ltd on Wednesday after Indonesia's mines minister said the government canceled parliamentary approval for Bre-X's application for essential contracts of work for the huge Busang gold deposit.
Bre-X asked that its stock be halted on the Toronto Stock Exchange on Wednesday morning so company officials could explain the news to the public, said Neil Winchester, head of surveillance at the Toronto exchange.
Trading in Bre-X was also halted on Nasdaq.
Bre-X had not yet released a statement late in Wednesday's trading session, leaving investors and analysts trying to assess the impact of the minister's statements on Bre-X's future.
"Does Bre-X lose everything? We have no idea," said gold analyst Catherine Gignac. "It's very unclear. We have to sit tight and wait for news out of Jakarta. There are many options open to the government right now."
Earlier on Wednesday, Indonesian Mines and Energy Minister Ida Bagus Sudjana spoke to reporters about Bre-X's application for vital contracts of work for Busang.
"We cancel it. The Bre-X contract of work will be processed from the beginning," he said.
The secretary-general of the ministry, Umar Said, told a parliamentary commission hearing that the government was checking into representations Bre-X had made to North American regulatory authorities.
"I don't have an answer on what it means," said Vince Borg, a spokesman for Toronto-based Barrick Gold Corp .
Barrick has been negotiating with Bre-X to form a joint venture to operate Busang after the Indonesian government asked the two companies to work out a deal.
The move has irked Bre-X shareholders and other major gold companies wanting to bid on the 57 million-ounce deposit, but there were rumors on Wednesday that the Indonesian government may be considering an open bidding process.
"We need to clarify what this means," said Borg. "We are seeking to asctertain from both Bre-X and the Indonesian Mines Ministry what impact the parliamentary committee will have on our negotations."
Barrick, the world's third biggest gold producer, fell C$2.35 ($1.70) to C$38.90 ($28.55) on the Toronto Stock Exchange on Wednesday and by 1-7/8 to 28-3/8 on the New York Stock Exchange.
A deal to control Busang would take Barrick a long way to achieving its goal of becoming the world's biggest gold producer.
Bre-X has a contract of work for the Busang I area of the property on the island of Borneo. But Busang I contains only an estimated 2.6 million ounces of gold, with the bulk of the precious metal in two adjoining lots, Busang II and Busang III, for which it needs contracts of work to explore and develop.
The permits were held up this autumn because of an ownership dispute between Bre-X and one of its Indonesian partners over the Busang property.
| 12 |
Everything old is new again in the aging gold zone near Timmins in Northern Ontario.
Exploration has exploded in the area, which has been mined since the early 1900s.
While most Canadian exploration companies are off making inroads in South America and Asia, a handful of innovative and optimistic junior companies are staying behind, hoping to strike gold on their home turf.
| 12 |
The fate of one of the world's most glittering gold finds landed back in the hands of the Indonesian government on Monday after two Canadian mining concerns said they finally agreed on a plan of joint development.
Canadian gold giant Barrick Gold Corp. and Bre-X Minerals Ltd. ended weeks of speculation on whether they could work together when they submitted a proposal to develop the huge Busang deposit, which contains at least 57 million ounces of gold.
"We've made a submission...which says we can work together if the government can satisfy requests by both parties on a couple of items," Bre-X chief executive officer David Walsh said in a phone interview from New York.
"Within the document, there were certain concerns that we've asked the government to give us guidance on," said Walsh. "They are concerns from both parties."
He would not say what the concerns were, but he said price was not an issue.
The Indonesian government told the two companies in November to form a joint venture, with Barrick gaining 75 percent and Bre-X keeping 25 percent. The two companies were also asked to give the government a 10 percent cut.
The joint submission "is in accord with the government parameters," said Barrick spokesman Vince Borg. Neither company would say what the terms or structure of the proposed deal were or whether Bre-X shareholders would have a chance to vote on it.
They said a government response was expected in due course.
The government has twice extended a deadline for the two companies, with the latest extension being the end of December.
"This to me looks like they're doing what (Indonesian president) Suharto asked," said gold analyst Rick Cohen with Goepel Shields in Vancouver.
"There wasn't much else Bre-X could have done at this point."
The government's statements have angered Bre-X shareholders and hurt the company's once high-flying stock on Canadian stock exchanges.
One group of shareholders has hired high profile Texas lawyers to make sure shareholders get a fair deal.
"Talk of lawsuits is premature. We've got to see an offer first," said Greg Chorny, a retired lawyer who lives near Toronto and is spearheading the initiative. "We'll see what they have on the table, judge it and react appropriately."
Until Monday, Bre-X had been optimistic that the Indonesian government would endorse an open bidding process for Busang. Mining giants Placer Dome Inc., Newmont Mining Corp. and Teck Corp. have expressed interest.
But the statements from Barrick and Bre-X on Monday suggested there was little hope of an auction process, analysts said.
"We still remain hopeful," Placer Dome spokesman Hugh Leggatt said. "It's not over till it's over."
Investors appeared to be dumping Bre-X shares on Monday and picking up Barrick shares to participate in Busang, analysts said.
Barrick stock was up C$1.35 to C$40.15 while Bre-X fell C$1 to C$20 by late afternoon trading on the Toronto Stock Exchange.
| 12 |
The U.S. Environmental Protection Agency lost a bid on Tuesday to freeze shares in Inco Ltd. worth $152 million belonging to international mining financier Robert Friedland.
The EPA had said that Friedland should be held responsible for environmental problems at a former gold mine in Summitville, Colorado. It requested an injunction on the shares until it could sue Friedland for $152 million in costs to clean up the Summitville site.
But an Ontario Court judge Tuesday shot down the EPA's arguments and scolded the agency for the "nondisclosure and misrepresentations" that he said riddled its case.
"The evidence has led me to the conclusion that the liability of Robert Friedland is anything but clear," Justice Robert Sharpe of Ontario Court's general division said as he read his decision.
He ordered that the Inco shares be held by Friedland's lawyers until Friday afternoon to give the United States a chance to apply for an appeal.
Lawyers for the United States would not say if they would appeal.
"This is the most devastating judgment they've ever had," Friedland lawyer Alan Lenczner said in an interview. "This is just unprofessional."
Friedland gained the Inco stock as part of Inco's takeover last August of Diamond Fields Resources, a company run by Friedland, which controlled the huge Voisey's Bay nickel deposit in remote Labrador.
In the 1980s, Friedland founded and ran Galactic Resources Ltd., the company that controlled the Summitville mine and the firm the EPA said was responsible for the pollution.
The EPA wanted Friedland's assets frozen since it said it had a strong case against Friedland in Colorado.
But the Ontario judge said the EPA's case was far from strong. The EPA failed to show that Friedland was directly responsible for any pollution in Summitville, he said.
"In my view there are serious shortcomings in the case of the United States," he said.
More important, the United States did not present the court with the full and fair information required for an injunction, making it hard for the judges who granted the injunction to make a fair decision, the judge said.
"This is a serious departure from the fundamental integrity of the judicial process," he said.
A previous ruling from Sharpe ordered the United States to disclose all documents related to the case, not just the ones the agency had presented voluntarily.
Those documents showed the EPA had doubts about its ability to win the case against Friedland, the judge said.
"The extent of nondisclosure of the United States in this case is serious and fundamental."
Galactic mined gold at the Summitville mine in the 1980s, using open-pit heap leaching methods where ore is placed on top of rubber pads and then sprayed with a cyanide mixture. Cyanide leaked through the pads, threatening the area's rivers.
| 12 |
Canada's Bre-X Minerals Ltd could face a multi-billion-dollar lawsuit over the ownership of its spectacular Busang gold deposit in Indonesia.
The young Calgary-based company said Friday that one of its Indonesian partners, PT Krueng Gasui, threatened it and 19 others with legal action in Canadian courts, claiming damages of US$1.9 billion.
"I find it curious that PT Krueng Gasui has chosen to threaten a lawsuit in Canada relating to matters that allegedly occurred in Indonesia," Bre-X chief executive David Walsh said in a statement.
"However, we will sit down with them and listen to what they have to say."
Krueng Gasui owns an undisputed 10 percent of one section of the Busang discovery. It claims it owns up to 40 percent of the entire deposit, but Bre-X says the Indonesian company does not have the documentation to back up its claims.
Bre-X, which closed down C$1 at 20.90 in heavy trading on the Toronto Stock Exchange, said Friday it had received a letter from its Indonesian partner demanding a meeting before November 22 to resolve the dispute.
If Bre-X refuses or does not make an attempt to settle the argument, Krueng Gasui will sue, the letter said.
Bre-X said it has asked its lawyers to arrange a meeting.
"In my opinion, this (threat of a lawsuit) appears to be a last minute act of desperation," said gold analyst Chad Williams of Research Capital Corp.
"My question is, why have they waited so long? And why did they choose to do this in Canada?"
The dispute between Bre-X and Krueng Gasui, who is backed by Australia's Golden Valley Mines NL, became public at the beginning of October.
The argument prompted the Indonesian government to delay issuing vital contracts of work until the two parties worked out their difficulties.
Without the contracts, Bre-X cannot proceed with work on Busang and has had to stall its search for a major gold producer to operate or buy the discovery, analysts say.
"The key is how the Indonesian government will react" to the lawsuit, said Williams.
The threat of a lawsuit gives Bre-X a strong incentive to settle with Krueng Gasui and Indonesian businessman Jusuf Merukh, who controls Krueng Gasui, said gold analyst Catherine Gignac of Deacon Capital.
While most analysts said it was too early to tell whether the Indonesian case would stand up in Canadian court, they said the threat of a lawsuit will definitely force Bre-X to treat the claims more seriously.
"It reinforces the uncertainty with respect to Bre-X," said gold analyst John Ing of Maison Placements.
"My sense is this thing is not going away. This is more of a manoeuvring than an actual threat, but it does not look like this will end any time soon."
Krueng Gasui said in its letter that it will also sue the other Indonesian partners of Bre-X, some Bre-X officers and Canada's Minorca Resources Inc, which has a small stake in the discovery.
Minorca president Roland Horst said his company has no reason to be involved.
Exploration at Busang has outlined 47 million ounces of gold so far, and some analysts predict there could be up to 100 million ounces.
| 12 |
Barrick Gold Corp. completed its C$1 billion takeover of the promising smaller exploration company Arequipa Resources Ltd. Tuesday, solidifying its position as the world's third biggest gold producer.
"We are pleased that Arequipa shareholders have chosen so overwhelmingly to accept this offer," Barrick Chairman Peter Munk said in a statement. "We now have the opportunity to realize the potential of Arequipa's excellent assets."
A total of 93 percent of Arequipa shareholders accepted Barrick's C$30 ($21.94) a share bid overnight, and Barrick said it plans to exercise its right to buy the remaining shares.
Barrick said it will have to spend at least C$512 million ($374 million) and issue about 13.4 million shares to complete the takeover, giving the deal a total value of C$1.02 billion ($745 million) based on the closing price for Barrick stock Tuesday.
The acquisition gives Barrick, North America's largest gold mining company, ownership of Arequipa's prize possession, the Pierina gold deposit in Peru.
While exploration on the property is in its early stages, some experts have speculated the deposit has potential reserves of up to 12 million ounces of high-quality gold.
Barrick originally offered Arequipa shareholders C$27 a share July 11 to take over the Vancouver-based company. Analysts initially saw the offer as generous since exploration at Pierina was preliminary.
But Arequipa recently released a fresh batch of drill results from the property, attracting interest from other potential bidders.
On Aug. 16, Barrick raised its offer to C$30 a share to pre-empt a takeover battle.
More drill results were expected soon.
Hours after Barrick officials got the news that the takeover offer had succeeded, two top executives in charge of exploration left to take a closer look at their new treasure.
"They're on their way to Lima right now, to start work on Pierina," said company spokesman Vincent Borg. "What's next is to get a handle on the ore body."
Drilling on the property will continue at an accelerated pace, he said. Barrick also plans to send in additional drill rigs and prepare for engineering work leading up to an eventual feasibility study.
"Things will start kicking in," Borg said.
Analysts were also on their way to Vancouver to scrutinize data collected by Arequipa that Barrick has not yet seen.
Funding the takeover will not be a problem, Borg added. "We've got a very strong balance sheet. We've got no long-term debt."
But the company will have to pay interest on its line of credit and bump up its exploration budget to uncover the metal at Pierina, cutting into earnings, one analyst said.
The Arequipa acquisition was a very "aggressive" move for Barrick and signals the start of a bold, new expansion strategy for the gold giant, mining experts said.
"I don't think they'll stop here. I think they'll continue on the acquisition track," one said.
Barrick would not say if it had its eye on another property. But the company has said in the past it plans to make more than one acquisition.
| 12 |
North America's largest gold producer, Barrick Gold Corp., is negotiating with Canada's Bre-X Minerals Ltd. to gain control of Bre-X's huge Busang gold discovery in Indonesia, the companies said Tuesday.
Acquiring a stake in Busang would set Barrick well on its way to becoming the world's biggest gold producer, industry analysts said. It is currently ranked third.
Barrick has become increasingly aggressive in moving toward its goal, analysts said. Last summer, it acquired Arequipa Resources Ltd. including its promising Pierina gold property in Peru, for about $800 million.
The companies were negotiating under the guidance of the Indonesian government, which asked Bre-X to form a joint venture with Barrick, Bre-X said.
Calgary, Alberta-based Bre-X discovered Busang, one of the world's biggest gold deposits, in 1994.
Official estimates of Busang have outlined 47 million ounces of gold so far, but industry analysts have said that number could rise to 100 million ounces.
"This is a result of Barrick working very hard behind the scenes to circumvent Bre-X's sale process," one analyst said. Bre-X has been seeking a partnership with a major gold producer to operate Busang.
To satisfy Indonesia, Bre-X would keep 25 percent of its stake and 75 percent would go to Toronto-based Barrick.
Bre-X said the Indonesian government "would appreciate it if the parties could consider a 10 percent participation being given to the Indonesian government."
The Indonesian government wants Barrick and Bre-X to reach a deal by Dec. 4, or else the government "will take steps to prevent a delay in the development" of Busang, Bre-X said.
Development of Busang has been held up by disputes between Bre-X and its Indonesian partners over ownership of the discovery. Bre-X, which controls 90 percent of Busang, said it asked Indonesia's Mines Ministry if other deals would be acceptable, but had not yet received an answer.
A deal between the two companies was not a sure thing, Barrick spokesman Vince Borg said.
With the Indonesian government guiding the Busang negotiations, Bre-X's powers to negotiate a favourable deal appear to be curbed, analysts said.
"There have been some constraints imposed on Bre-X," said analyst Chad Williams at Research Capital Corp. in Montreal. "That's going to negatively impact on how much Bre-X can receive for its interest."
Barrick has an international reputation at stake and will have to be seen as treating Bre-X fairly, analysts said.
"Given the possible questions that may be raised over how Barrick obtained this special status, it will be essential that they are viewed as treating Bre-X shareholders fairly in any negotiations going forward," said one analyst who asked not to be identified.
Barrick shares soared on the news, gaining C$2.45 ($1.82) to C$39 ($29.05) on the Toronto Stock Exchange. They rose $1.75 to $28.875 on the New York Stock Exchange.
Bre-X shares fell in Toronto before the news and held steady at C$20.35 ($15.16), down C$2.20 ($1.64) afterward. The stock has been volatile lately, clouded by the ownership dispute over Busang.
In 1995, Barrick -- already North America's largest gold miner -- produced 3.1 million ounces of gold and had gold reserves totalling 43.3 million ounces.
| 12 |
North America's largest gold producer, Toronto-based Barrick Gold Corp, reported lower third-quarter earnings on Tuesday due to an after-tax charge and higher operating costs.
Barrick's net income for the quarter fell to $21 million, or 6 cents a share, from $67.7 million, or 19 cents a share, in the same period a year earlier.
Earnings were slightly below analysts' expectations.
"I think their quarter clearly underscores that Barrick has made the transition from a growth company to one that's trying to maintain its existing base," said mining analyst Barry Allan of Gordon Capital.
Barrick pointed to higher cash costs, which rose to $203 an ounce from $194 an ounce a year earlier.
The company also took a $38 million hit to bail out of its Cerro Corona exploration project in Peru.
Barrick hiked its exploration budget more than 50 percent, to $46.4 million for the first nine months of the year, compared with $30.9 million previously.
Investors seemed to shrug that off. Barrick's shares rose C50 cents to C$36.15 in heavy trading on the Toronto Stock Exchange. In New York, the stock rose 37.5 cents to $26.875.
The market seemed positive to Barrick's plans to develop its Pascua mine in Chile and its new Pierina property in Peru, analysts said.
Barrick bought the Pierina deposit last summer through its $800 million takeover of Arequipa Resources Ltd, based on a minimum of 4.5 million ounces of gold. According to the company, recent drilling on the property suggests the number was conservative.
Barrick said production at Pierina should begin in late 1999 at a rate of 500,000 ounces of gold a year. Costs should be below $100 an ounce thanks to a substantial silver credit and high grade gold.
Capital costs should be about $200 million, the company said. It has eight drills on the property working to define the deposit.
"They are proceeding very aggressively on Pierina," Allan said. However, he cautioned that it was risky to make such claims while drilling was still underway and a feasibility study is still a long way off.
At Pascua in Chile, recent exploration suggests the deposit may extend across the nearby border into Argentina, Barrick said. Production is expected to begin in 1999, totalling 400,000 ounces a year at an operating cost of $240 per ounce. Capital costs are expected of about $475 million.
| 12 |
Gold giant Barrick Gold Corp. is negotiating with Canada's Bre-X Minerals Ltd. to gain control of Bre-X's huge Busang gold discovery in Indonesia, the two companies said on Tuesday.
The companies were negotiating under the "guidance" of the Indonesian government, which asked Bre-X to form a joint venture with Barrick, Bre-X said.
Calgary, Alberta-based Bre-X discovered Busang, one of the world's biggest gold deposits, in 1994.
Official estimates of Busang have outlined 47 million ounces of gold so far, but analysts have said that number could rise to 100 million ounces.
"This is a result of Barrick working very hard behind the scenes to circumvent Bre-X's sale process," one analyst said of the news. Bre-X has been seeking a partnership with a major gold producer to operate Busang.
To satisfy Indonesia, Bre-X would keep 25 percent of its stake and 75 percent would go to Toronto-based Barrick, the world's third largest gold producer.
Bre-X said that the Indonesian government "would appreciate it if the parties could consider a 10 percent participation being given to the Indonesian government."
The Indonesian government wants Barrick and Bre-X to reach a deal by December 4 or else the government "will take steps to prevent a delay in the development" of Busang, Bre-X said.
Development of Busang has been held up by disputes between Bre-X and its Indonesian partners over ownership of the discovery.
Bre-X, which controls 90 percent of Busang, said it asked Indonesia's Mines Ministry if other deals would be acceptable, but had not yet received an answer.
A deal between the two companies was not a sure thing, Barrick spokesman Vince Borg said in an interview.
He said he had no details about how much money or stock would change hands or when a deal would be reached.
With the Indonesian government guiding the Busang negotiations, Bre-X's powers to negotiate a favorable deal were curbed, analysts said.
"There have been some constraints imposed on Bre-X," said mining analyst Chad Williams at Research Capital Corp. in Montreal. "That's going to negatively impact on how much Bre-X can receive for its interest."
But Barrick has an international reputation at stake and will have to be seen to treat Bre-X fairly, analysts said.
"Given the possible questions that may be raised over how Barrick obtained this special status, it will be essential that they are viewed as treating Bre-X shareholders fairly in any negotiations going forward," said an analyst who did not wish to be identified.
Barrick shares soared on the news, gaining C$2.30 to C$38.85 by mid-afternoon on the Toronto Stock Exchange. They rose 2-1/4 to 29-3/8 on the New York Stock Exchange.
Bre-X shares fell in Toronto before the news and held steady in active trading at C$20.10, down C$2.45, after the market digested the news.
Its stock has been volatile lately, clouded by the ownership dispute over Busang.
Busang would set Barrick well on its way to achieving its dream of becoming the world's biggest gold company.
In 1995, the company -- already North America's largest -- produced 3.1 million ounces of gold and had gold reserves totaling 43.3 million ounces.
It has become increasingly aggressive in moving towards its goal, analysts said.
Last summer, Barrick acquired Arequipa Resources Ltd. and its promising Pierina gold property in Peru for about $800 million.
-- Reuters Toronto Bureau 416-941-8100
| 12 |
Major mining companies may have second thoughts about teaming up with Bre-X Minerals Ltd in its huge Indonesian gold discovery because of Bre-X's new strategic alliance, analysts said.
Bre-X announced this week an alliance with PT Panutan Duta, an Indonesian company controlled by Sigit Harjojudanto, the son of President Suharto.
Part of the deal forms a support services company to be owned 60 percent by the Bre-X group and 40 percent by Panutan.
"There will be certain companies that look at this and shake their heads," said mining analyst Doug Leishman of Yorkton Securities.
The support services company will provide utilities, petroleum products and limestone for the Busang gold discovery on the island of Kalimantan, Bre-X said.
The new company could have control over major parts of operating and capital costs, said Leishman.
"If these things aren't done at normal world market prices, it could add on unwarranted capital and operating costs," he said in a telephone interview from Vancouver.
Any major mining company considering a bid for Bre-X would have to take into account the potential extra costs and the loss of control over supplies that the new alliance brings, he said.
Bre-X is in the middle of a search for a major mining company to act as its partner to help develop the Busang discovery.
"Certain major companies will not like this. It ties them to a supplier, and no one likes that," Leishman said.
Canadian gold giants Barrick Gold Corp and Placer Dome Inc, both said they needed more details about the supply company before they could judge whether it would be a factor in bidding for Busang.
"Does this change things? Unless you know the details of the agreements, you don't know if this changes things or not," Barrick spokesman Vince Borg said in an interview. "It could and it could not."
Bre-X would not return repeated telephone calls this week to ask for details of the Panutan agreement.
Analyst Catherine Gignac at Deacon Capital Corp said the agreement is vital to Bre-X's progress.
"I think it's something they should have done two years ago," she said in an interview. "You need a local company that's on side. You need local connections."
Bre-X stock shot up C$3.50 to C$24.30 on Monday after the alliance was announced, but has slid back to C$22.40 since then as investors began to realize that the Panutan deal does not solve all Bre-X's problems, analysts said.
Bre-X has been plagued by a dispute over the ownership of Busang. One of its Indonesian partners is claiming up to 40 percent of the discovery and has said he will not back down despite Bre-X's alliance with Suharto's son.
The Indonesian government has vowed not to issue essential contracts of work until Bre-X sorts out its problems. The alliance with Panutan is also contingent on Bre-X receiving the permits.
--Reuters Toronto Bureau 416 941-8100
| 12 |
Canada's Barrick Gold Corp seems poised to supplant two South African mining giants to become the world's biggest gold producer through an unprecedented deal which will give it a majority share in Indonesia's rich Busang gold discovery.
Barrick, whose high-profile board of directors includes a former U.S. President George Bush, on Wednesday confirmed weeks of rumors it was negotiating with Bre-X Minerals Ltd for a stake in the Busang deposit, which contains at least 47 million ounces of gold, possibly more.
The unusual negotiations were requested by the Indonesian government, which has urged Bre-X to hand over 75 percent of its Busang stake to Barrick and form a joint venture.
"If this thing comes off, it makes Barrick the leading gold producer in the world," said Fred Ketchen, vice-president of Toronto brokerage ScotiaMcLeod.
"It indicates the advantages to major companies in having such high profile people on their board as George Bush and (former Canadian prime minister) Brian Mulroney."
Exploration at the Busang property is still in its early days, but already the potential promises to catapault Barrick's production above that of the world's two leading gold companies, Anglo American Corp of South Africa Ltd and Gold Fields of South Africa Ltd.
Barrick started with basically no gold production in 1983 and grew through acquisition and exploration to produce about 3.1 million ounces a year.
Barrick's flamboyant chairman Peter Munk, a fabulously wealthy risk taker well connected in both business and politics, has made no secret of his ambition to make his company number one.
While neither Barrick nor Bre-X would comment on how Barrick managed to persuade the Indonesian government to virtually mandate a deal with Bre-X, pieces of an intriguing jigsaw are beginning to fit together.
Bre-X bought the Busang properties in 1993 and made the huge gold find in 1995. The discovery propelled the company's stock from pennies to over C$200 before a stock split.
After Bre-X announced it would search for a heavyweight mining partner in Busang, the Cinderella story turned sour.
One of Bre-X's Indonesian partners claimed rights to up to 40 percent of the deposit and threatened to sue. The Indonesian government then delayed granting Bre-X its vital mining permits because of the ensuing disputes. "It's quite clear that Bre-X did not follow protocol in its ownership issues," said an analyst who asked not to be named.
So Bre-X set up a strategic alliance with the eldest son of Indonesia's President Suharto, hoping the alliance would help sort out its problems. At the same time, Barrick was worked behind the scenes to gain the upper hand, sources said.
"Peter Munk is a pretty smart guy," said Ketchen. "No grass grows under his feet."
Barrick developed a relationship with Suharto's eldest daughter, hiring her construction company for future mining work. It developed ties with the Indonesian government, probably using Bush and Mulroney's influence, sources said.
"They (Barrick) really did the end run. There was lots of arm twisting," said an executive at a rival mining company.
Spokesmen for both Bush and Mulroney declined comment.
With the Indonesian government almost forcing Bre-X into Barrick's arms, Bre-X has lost much of its bargaining power. "The government is God here. It holds most of the cards," said Michael Fowler with brokerage Levesque Beaubien Geoffiron.
Jakarta has given the companies until December 4 to come up with an arrangement. If they do not, the Indonesian government could take matters into its own hands.
But on Wednesday Bre-X investors seemed confident that Bre-X would win a reasonable deal. They pushed the stock up C$0.65 to 21.00 in heavy trading. Barrick rose 0.75 to 39.65.
"At the end of the day, I believe Barrick will be fair," said Fowler. Barrick has an international reputation to uphold and could face lawsuits from Bre-X shareholders if it tries to undermine Bre-X. Barrick may buy part of Busang and act as operator, rather than bidding for Bre-X, analysts said.
"None of the parties involved here will walk away completely unscathed," said analyst David Christensen with Merrill Lynch in San Francisco.
With all the intrigue and rumor clouding the Busang developments, investors will always wonder if they've heard the whole story, he said.
| 12 |
North America's major gold companies are waging an expensive battle to win the coveted title of world's biggest gold producer.
"We want more of the action," said Hugh Leggatt, spokesman for Vancouver-based gold firm Placer Dome Inc..
"We want to be positioned in the industry as a bigger player."
Placer Dome has made a $600 million bid for Highlands Gold Ltd. of Papua New Guinea and the 25 percent of Placer Pacific Ltd. it does not already own.
The company also plans to raise $300 million through a preferred share issue and sell off some small Canadian mine properties.
Placer also has its eye on Bre-X Minerals Ltd., a Calgary, Alberta-based exploration company that discovered what could become one of the world's largest gold mines, the Busang deposit in Indonesia.
But Bre-X is also crucial to Barrick Gold Corp.'s plan to become the world's biggest gold company.
Toronto-based Barrick is already the the world's most profitable gold company and North America's biggest, but it wants to surpass Anglo American Corp. of South Africa Ltd. and Gold Fields of South Africa Ltd. to be the world's largest.
Barrick, through skillful navigation of Indonesian politics, appears to have Bre-X within its grasp.
Jakarta has asked the two companies to form a joint venture to develop the 57 million ounce Busang deposit, with Barrick controlling 75 percent.
Denver-based Newmont Mining Corp. was interested in Bre-X, but when Barrick appeared to gain the upper hand, Newmont turned its sights to Santa Fe Pacific Gold Corp., a mid-tier gold company.
Although Newmont seems to have lost out on its stock swap offer for Santa Fe to a $2.3 billion competing bid from Homestake Mining Co., analysts said Newmont was still hunting for other takeover targets.
"This is a very capital-intensive industry and it's becoming a global industry," Newmont spokesman Doug Hock said in an interview.
"In order to compete, you have to have large resources to do that. What you see is the larger players becoming bigger in order to compete."
Homestake is poised to become North America's second-biggest gold company after Barrick if its takeover of Santa Fe succeeds. Major gold companies are under pressure from their shareholders to keep gold reserves growing, analysts said.
"If one company gets big, they have a lot of clout in the marketplace to acquire properties or resources," said gold analyst Michael Fowler of brokerage Levesque Beaubien Geoffrion. With gold bullion prices in a steep decline, the share prices of many mid-tier companies have been hit, making takeovers cheaper, Fowler said.
But he said the current leaders of the gold world, the South Africans, were not caught up in the recent consolidation. "It looks as though they're losing out to the North Americans," said Fowler.
"They're behind the eight-ball really."
North American gold producers were geared to react aggressively and quickly, but the South African producers concentrated more on paying dividends, he said. "They don't move very fast."
Analysts said this round of deal-making was far from over as major gold companies fought it out to satisfy their shareholders' thirst for growth.
Analysts said possible future takeover targets included large mid-tier producers such as Dayton Mining Corp., Battle Mountain Gold Co., Cambior Inc. and Echo Bay Mines Ltd..
-- Sydney Newsroom 61-2 373-1800
| 12 |
Three Canadian mining companies are caught up in a quarrel over what do with the Petaquilla copper-gold project in Panama.
Adrian Resources Ltd, a Vancouver-based exploration company, Teck Corp, a big Vancouver-based miner, and troubled Toronto-based Inmet Mining Corp are partners in the deposit.
Adrian, which controls 52 percent of the find, says that a feasibility study on the property done by Teck was "incomplete and not in compliance with existing arrangements."
Teck had an option to acquire up to 26 percent of the development by funding a feasibility study and eventually operating and arranging to fund the mine.
But Adrian said Teck has not filled the first requirement to move forward with its option.
"They had a job to do and they didn't complete it," Doug Turnbull, a consulting geologist for Adrian, said in an interview on Tuesday.
"Our stand right now is, they do not have their option until they complete their obligations," Turnbull said.
But Teck says there was nothing wrong with its feasibility study.
"The study was a comprehensive assessment of the project, but...the economics would make a production commitment difficult under present metal price conditions," Teck's senior vice president of mining operations, Michael Lipkewich, said in a statement.
Teck hopes to resolve its difficulties with Adrian and work with the junior company and Inmet to continue exploration on the property in search of higher grade ore, Teck's vice-president of corporate affairs, George Stevens, said in an interview.
The ore at Petaquilla so far is low grade, he said.
"The capital costs are higher than we had both anticipated a couple of years ago," he added.
He said Teck's agreement with Adrian allows Teck to defer a production decision twice before Adrian "can make us walk."
"Their problem is they came out with a very optimistic scoping study," Stevens said. He said Adrian had not revised its projections.
According to Adrian, the study said the property had a geological resource of 3.74 billion tonnes of ore, including 31.8 billion pounds of copper and 9.8 million ounces of gold. The study said the proven reserves came to 1.46 billion tonnes of ore containing 13.74 billion pounds of copper and 3.17 million ounces of gold.
Teck's numbers were considerably lower but the company had not done sufficient infill drilling, Adrian's Turnbull said.
The spat has knocked Adrian's stock down from C$3.85 on Friday to C$2.07 by Tuesday on the Toronto Stock Exchange.
Caught in the middle of the dispute is Inmet, which has just written off a series of mining interests and is struggling to regain investor confidence. Inmet controls 48 percent of Petaquilla.
"Under the current metal price conditions, we agree with Teck," Inmet's chief financial officer Richard Ross said in an interview.
But he said the company did not have anything to add to the dispute.
((Reuters Toronto Bureau (416) 941-8100))
| 12 |
Production at the huge nickel deposit at Voisey's Bay in remote Labrador is still years away, but already it risks falling behind schedule because of environmental concerns and pressure from aboriginal groups.
Inco Ltd, the Toronto-based nickel giant that won control over the spectacular nickel, copper and cobalt property after a bidding war last spring, planned to start open pit production by 1998 and full-scale underground mining by 2000.
| 12 |
Shareholders are troubled about negotiations between Barrick Gold Corp and Bre-X Minerals Ltd over the huge Busang gold deposit in Indonesia.
Some Bre-X shareholders are concerned they may be pushed into a bad deal; while some Barrick shareholders are worried they could emerge from any deal with a poor reputation.
"Shareholders are very vocal at this point," gold analyst Michael Fowler of brokerage Levesque Beaubien Geoffrion said Friday. "And you've got some influential shareholders here."
Many big institutions hold both stocks, he noted.
"I think it's the responsibility of Barrick to be responsible here, given that Bre-X has a gun to its head."
Earlier this week, Calgary-based Bre-X said the Indonesian government had told it to negotiate with gold giant Barrick Gold to carve up Bre-X's stake in Busang.
Jakarta wants Barrick to control 75 percent and Bre-X to control 25 percent, while both are to consider giving a 10 percent stake to the Indonesian government, Bre-X said.
"It's got to be a fair deal. Barrick can't screw Bre-X shareholders or there will be hell to pay," said Fowler.
If Barrick makes what is seen as a fair deal with Bre-X, shareholders may be prepared to ignore the fact that Bre-X is negotiating with a gun to its head, oberved a portfolio manager at one Canadian institution that has significant holdings in both companies.
"Everybody can sort of hold their nose and say, this thing smells, but it doesn't smell too badly," said the source, who asked not to be indentified.
However, if Barrick takes advantage of its favorable position and does not treat Bre-X fairly, "then it smells very, very bad," the portfolio manager said.
"The constraint on Barrick is that they have to go back to the capital markets from time to time doing other deals. "It's a question of sawing off somewhere where it smells but doesn't smell too bad," he told Reuters.
Retail shareholders are expressing their worries too.
One Bre-X shareholder, Gregory Chorny, who said he and his family owned about one percent of Bre-X's issued shares, circulated a letter to other shareholders on Friday, urging them to register their concerns by faxing a form letter to Barrick and Bre-X.
"I wish to register my concern with these developments and put both Bre-X and Barrick on notice that any transaction struck between them must fully represent full and fair value to Bre-X shareholders," the letter reads.
"I and other like-minded Bre-X shareholders plan to watch developments closely and are prepared to take appropriate action to ensure the rights of Bre-X shareholders are fully respected."
The letter demands access to any internal or external resource calculations so that shareholders can better judge the fair value of any deal between the two companies.
"We've had 4 1/2 months of drills working on that site and no published results. How can anyone possibly comment on the value?" Chorny told Reuters.
While Chorny acknowledged it is too early to judge the success of campaign, he said he had consulted with "several dozens" of concerned Bre-X shareholders.
A fax machine at Bre-X was reportedly spewing out letters from shareholders at full tilt. Barrick spokesman Vince Borg said his company's fax machines were no busier than usual.
| 12 |
Consolidated Eurocan Ventures Ltd , a small Canadian mining exploration company, was poised to gain control of one of the world's largest unexplored copper-cobalt discoveries on Friday.
The Zaire government agreed to a deal with the Vancouver-based company backed by Geneva-based Swedish financier Adolf Lundin, spokesmen from both sides told Reuters in Zaire. The deal gives Gecamines, Zaire's state-owned mining company, a 45 percent stake in the huge Tenke Fungurume deposit. Eurocan will have a 55 percent stake, sources said.
A spokeswoman for Eurocan in Vancouver said she expected official confirmation by Monday morning.
Eurocan has said it expected to win the property for US$250 million and a commitment to develop the property.
"It's a very satisfactory deal for Eurocan, if they've got it," said Andrew Milligan, president of Cornucopia Resources Ltd, a Vancouver-based company that had also had its eye on Tenke Fungurume.
"It's one of the best projects anywhere in the world."
Cornucopia had formed a tentative consortium last spring with metals giants Inco Ltd and Phelps Dodge Corp, hoping to submit a proposal for the project.
But Eurocan's pact freezes Cornucopia out of the running.
The deal gives a hint of some stability in Zaire's business world, said Ken MacLeod, president and chief executive of International Panorama Resource Corp, another Vancouver-based company exploring in Zaire.
"It gives a signal that the government is working and it's in business," he said in an interview. "From an investment perspective, it's a powerful message.
"It means when Gecamines gets involved in an agreement, the government backs them up."
But some analysts were concerned about the high risks involved in doing business in Zaire, a country plagued by political uncertainty and overrun by crowds of refugees from neighboring Rwanda.
"Zaire is a basketcase," said mining analyst Tony Hayes at brokerage Credifinance in Toronto.
The amount of money Eurocan will have to invest and pay for the project is "ridiculous" for the return and the risk the company can expect, he said.
Milligan estimated it would cost about US$300 million for initial development of Tenke Fungurume and up to US$3 billion in total capital costs.
The project was previously explored by a consortium led by Anglo American Corp of South Africa Ltd, which invested almost US$300 million in the project in the 1970s but walked away because of political risk.
-- Heather Scoffield, Reuters Toronto Bureau 416 941-8104
| 12 |
Investors with "exploration fever" have latched onto Black Swan Gold Mines Ltd, hoping drill results expected this week will line their pockets with paper profits.
"There certainly are rumors that the results they've got from their Brazilian exploration are going to be positive," said Fred Ketchen, senior vice-president at ScotiaMcLeod.
"It's all part of the current phenomenon -- exploration fever."
Black Swan was the most active stock on the Toronto Stock Exchange on Tuesday after heavy trading on Monday and last Friday. The stock was down C$0.05 to C$1.45 on volume of 2.6 million shares Tuesday.
But the flurry of speculative interest in the stock is not linked to anything concrete, company spokesman Richard Simpson said from the company's headquarters in Vancouver.
Drilling results from Black Swan's 50 percent-owned gold project in Brazil likely will released until later this week, he said, adding that the results are very preliminary.
"I know there'll be gold in the hole," said Simpson. "As to what grade it will be, whether it will be above or below the expectations of the market, I simply don't know. They're always looking for pretty jazzy stuff."
The rumor in the market is that the results will be good, and investors, especially institutional investors under pressure to show robust returns, are placing their bets, analysts said.
Mutual funds that burnished their performances on high returns from investments in such high-flying explorations stocks as Bre-X Resources Ltd and Diamond Fields Resources are quick to pile into junior mining shares with any hint of potential.
Although many previously Hot junior mining stocks cooled off quickly in June and July, investors seem to have forgotten their earlier rough ride, said Barry Cooper, a mining analyst at Wood Gundy.
"The 'once burned twice shy' saying doesn't work in junior gold stocks," he noted.
The attraction with Black Swan is a limited downside, since the stock has been trading around the C$1.50 mark, added ScotiaMcLeod's Ketchen.
"Whereas the upside potential, if they come up with something, can be rather impressive."
Black Swan shares its Cata Preta gold project in the Brazilian State of Minas Gerais with Sul America Mineracao Ltda, a Brazilian company.
Black Swan is in the midst of negotiating a takeover of its partner to gain a 100 percent interest in the Cata Preta and acquire Sul America's other Brazilian properties.
The drill results expected this week are from hole 23, the first of a 30-hole series expected to be completed by the end of the year.
Black Swan plans to drill a total of 150 holes to determine how much gold lies beneath a surface deposit already explored.
-- Reuters Toronto Bureau 416 941-8100
| 12 |
No final deal was in sight Wednesday for Bre-X Minerals Ltd. and Barrick Gold Corp., which are in the midst of forging a deal on one of the world's biggest gold deposits -- Indonesia's Busang.
As a Wednesday deadline slid by, Bre-X and Barrick said they were still trying to hammer out several issues, leaving the market to speculate about the status of negotiations.
"Several points remain outstanding," said Barrick spokesman Vince Borg. "An overall deal has not been reached."
The Indonesian government directed Bre-X to form a joint venture with Barrick by Dec. 4, with Barrick getting 75 percent of Bre-X's stake in the rich gold discovery and Bre-X keeping 25 percent. The companies were invited to consider giving the Indonesian government 10 percent of the rich find.
As the clocked ticked, Bre-X issued a statement saying no new deadline had been set by the Indonesian Mines Ministry. It said it expected the Ministry of Mines to clarify its stand on the outstanding issues "in due course."
Sources close to the talks said Indonesian mining officials had left Jakarta and would not be back until Dec. 9.
"I think both sides are probably worried about the so-called deadline, which has come and gone," said gold analyst John Ing with Maison Placements Canada Inc. "It's back in the lap of the Indonesians."
In Jakarta, a senior Indonesian mines official said the government of President Suharto would explore other possibilities to develop Busang if the two companies fail to clinch a deal.
"If they cannot reach an agreement, the government will take the necessary and appropriate action ... to expedite the development of Busang's resouces," Umar Said, secretary-general of the Mines Department, told a news conference in Jakarta.
"What the action will be ... I have to get back to the government. This is not my playground," he added.
Meanwhile, investors pushed up Bre-X's stock C$1.30 to close at C$20.10 ($14.84) in heavy trading in Toronto Wednesday, while Barrick rose C$1.45 to C$39.30 ($29.01).
"People think there's an agreement that will come out sooner rather than later," said gold analyst Catherine Gignac of Deacon Capital in Toronto.
But she noted that the uncertainty surrounding the negotiations was preventing Bre-X's stock from rising to meet the level of rumoured offers of about C$25 ($18.50) a share from Barrick.
"We're actually hearing that (the deal) is done and they're just dotting the i's and crossing the t's," Gignac said. "Everything has been set. We just don't know the details."
But a source close to the negotiations said he understood that the two companies did not have a deal and were trying to get a deadline extension from the Indonesian government.
The latest deadline is the second the two companies missed. They let a deadline at the end of November slip by too, sources said.
Possible stumbling blocks in the talks include price, how to pay for the deal and a series of threatened lawsuits over Bre-X's claims, analysts said.
Waiting to pounce on the deposit if the Indonesian government does open the door to outside bidding is another North American gold giant -- Placer Dome Inc., which seemed to be positioning itself in case the Barrick, Bre-X talks fail.
"I don't think today's deadline had any great significance," Placer spokesman Hugh Leggatt said in Vancouver, British Columbia. He added that the company still hoped to be allowed to form a partnership with Bre-X to develop Busang.
"We're not discouraged. It's going to be a long process," he said.
Newmont Mining Corp. and Teck Corp. also expressed an interest in Busang, which is located deep in the jungle in East Kalimantan on the island of Borneo.
| 12 |
Canada's Trade Minister Art Eggleton is in good health and will leave Tuesday night for an international conference in Manila, despite being taken to hospital earlier Tuesday after he collapsed at a meeting here.
"The last thing I heard was he's still going to Manila," Eggleton's spokeswoman Elaine McArdle told Reuters by telephone from in Ottawa. "His health is great. It doesn't appear that anything is broken."
Speakers had just finished addressing a luncheon audience of businessmen and trade officials at Toronto's Westin Harbour Castle Hotel when Eggleton, 53, tripped as he got up to leave the head table.
"There was a gap in the floorboards and he went right through them," McArdle said.
Other dignitaries helped Eggleton, pale and shaky, to a chair where he waited with his head resting on a table until ambulance attendants arrived. The attendants strapped on an oxygen mask and carried Eggleton out on a stretcher.
Witnesses said he twisted his ankle as he fell and landed on his knee.
Eggleton had been expected to speak at the luncheon with Chilean President Eduardo Frei. Canada and Chile signed a free trade pact in Ottawa on Monday.
Eggleton plans to leave for Manila on Tuesday night for the Asia Pacific Economic Co-operation (APEC) annual meeting and leaders summit.
He is scheduled to accompany Canadian Prime Minister Jean Chretien to China and Japan after the APEC conference.
| 12 |
Some of the world's most influential gold producers are upping the ante as Wednesday's deadline edges closer for Canada's Bre-X Minerals Ltd. to make a deal with gold giant Barrick Gold Corp.
At stake is the rich Busang gold deposit in Indonesia. New estimates released Tuesday suggest the discovery contains more than 57 million ounces of gold that can be mined at the low cost of $96 an ounce.
The Indonesian government has virtually mandated that Bre-X must carve up its find, with Barrick getting 75 percent of Bre-X's stake and Bre-X 25 percent.
And the government of President Suharto has also made it plain it would "appreciate" a stake of 10 percent in Busang.
But now, some major figures in the gold mining world are protesting that the deal ordered by Indonesia is unprecedented and unfair. They are pressuring Jakarta to allow rival bids.
"I think it's Bre-X's natural right to have a say who their partner will be," John Willson, chief executive officer of Vancouver-based Placer Dome Inc., said.
Placer Dome, Canada's second biggest gold company and one of the world's largest, wants to bid on Busang, and Willson said Newmont Mining Corp. and Teck Corp. have also been at the negotiating table for months.
The three heavyweight mining companies were abruptly shut out of the process last month when Indonesia forced Bre-X into Barrick's arms.
Analysts have speculated that Barrick used its business connections with Suharto's eldest daughter, as well as connections through former U.S. President George Bush and former Canadian Prime Minister Brian Mulroney, Barrick advisers, to sway the Indonesian government.
"We were clearly disappointed -- that's a nice way of putting it -- that all of a sudden the thing went away from us," Willson said. "Something has been going on that is not kosher in the West."
Willson said he thought the Indonesian government could be persuaded to consider other offers for Busang. Otherwise, the country would face international condemnation and risk losing foreign investment, he said.
"This is indeed unusual. The message to the whole market is we risk our money big time to find gold, and if we really find the jackpot, somebody's going to come along and tell us what to do with it.
"It would put a great big red flag on Indonesia."
Placer, Newmont and Teck must now await word from Jakarta on whether they will be allowed back into the bidding process.
Indonesia's consulate in Toronto declined to comment on the matter Tuesday. Newmont Mining also would not comment.
Teck's chief financial officer, John Taylor, said the company would consider bidding for Busang if Indonesia opened the door to an auction process, but would likely seek a partner in any bid.
"That's a pretty big bite," Taylor said.
Willson, however, noted Placer Dome could comfortably afford to take on Busang alone, despite a recent $600 million bid for a larger stake in Papua New Guinea's Porgera gold deposit.
He would not say what price Placer was willing to offer, but "it's clearly worth considerably more that what's being contemplated," he said after looking at the new resource calculations for Busang.
The resource calculations are in line with analysts' expectations, said mining analyst Bruno Kaiser with CIBC-Wood Gundy in Toronto, who noted that most analysts believe Busang holds a lot more gold than has already been outlined.
Kaiser said he was not concerned about the Dec. 4 deadline ticking past without news from Jakarta.
"My take on it is that the Indonesian government imposed this Dec. 4 deadline primarily as a means to facilitate bids and get the process moving," he said. "You get everyone who is interested and serious stepping up."
But analyst Catherine Gignac with Deacon Capital in Toronto expressed doubts about the Indonesian government soliciting more suitors for Bre-X. "Why should the Indonesian government provide the market with a bidding process just because we want them to?" she said.
North America's gold miners are not alone in seeking a piece of Busang. Bre-X's Indonesian partner Jusuf Merukh has claimed up to 40 percent of the deposit. And the former Australian owners of the property say they also have rights to part of the riches.
| 12 |
Royal Oak Mines Inc is reshaping its operations to concentrate on its low-cost gold deposits in the Timmins area and British Columbia, the company president said Wednesday.
"We have refocused our strategy to bring on very low-cost production," Peggy Witte said in an analysts' conference call. "It's very clear that's where Royal Oak's future lies."
The Kirkland, Washington-based gold producer said Wednesday it will close down its mine in Hope Brook, Newfoundland, and write down the reserves at its Colomac mine in the Northwest Territories.
Royal Oak expects to take C$37.4 million in charges because of the Hope Brook and Colomac decisions. After tax, the charges will amount to a decrease in net income of about C$27 million or C$0.19 a share in the fourth quarter of 1996.
The company plans to move most of the mining and mill assets from Hope Brook to its Matachewan project in northern Ontario.
"It's a very positive story for us being able to redeploy those assets, and we did not want to spread our senior management too thin," Witte said, explaining the decision.
Hope Brook will shut down in the third quarter of 1997, while Matachewan is expected to start production in the second half of 1998, Royal Oak said.
The company recently increased its gold reserves at its Timmins and Matachewan properties, decided to expand its Pamour Mill and is putting together a feasibility study for an expanded open pit in the area.
The northern Ontario mines, along with production expected in 1998 from the Kemess copper and gold mine in British Columbia, will boost production and decrease costs significantly for Royal Oak, said chief financial officer Jim Wood.
The company expects to produce 375,000 ounces at a cash costs of US$325 an ounce in 1997. In 1998, production will rise to 500,000 ounces at a cost of US$250 or US$260 an ounce. By 1999, the company expects up to 750,000 ounces at about US$240 an ounce, and in 2000, production should be almost one million ounces with costs in the low US$200s, Wood said.
"Although we have closed out Hope Brook cash costs are somewhat disappointing at Colomac, the future of the company, with the Pamour expansion, looks very bright for us in terms of production and our average cash costs," he said.
The company reported third quarter profits of C$10.2 million or C$0.07 a share, up from C$6.2 million or C$0.05 a share a year earlier.
Gold production rose 13 percent in the quarter to 104,012 ounces from 92,159 ounces during the third quarter last year.
The increase came from the Pamour mine in Northern Ontario, which produced higher grade ore.
Revenue was 48 percent higher in the third quarter, mainly because of a successful hedging program. The company realized a gold price of US$543 per ounce, compared to US$418 an ounce at the same time last year.
Royal Oak expects to produce about 400,000 ounces of gold in 1996 at a cash cost of US$335 an ounce. The lower production level and increase in cash cost from previous estimates are a result of lower grade ore at Colomac.
-- Reuters Toronto Bureau 416 941-8100
| 12 |
Exporters have united to oppose an Ivorian government plan to make them liable for income tax owed and frequently unpaid by upcountry buyers, exporters said on Tuesday.
Tax laws approved by parliament in February allowed for deductions equivalent to about 7.5 percent of commission paid by exporters to agents buying cocoa on their behalf in the 1996/97 season, they told Reuters.
"Because we hold export licences does not mean we are qualified to act as tax collectors. We are in discussions with the government," GEPEX exporters' forum president, Rene Ekra, told Reuters on Tuesday.
One exporter said the dispute had contributed to export delays at the start of the 1996/97 marketing season but a decision was expected by the end of the week. "Banks are ready to finance but we still do not have an export rate to work on and now we are into November," he said.
Exporters say the plan means a deduction of about 2.5 CFA per kilo from buyers' commissions. Buyers are currently paid a 1995/96 commission rate of about 32 CFA per kilo of collected cocoa, but Ivory Coast opened its 1996/97 cocoa marketing year October 24 without setting new reference rates for exporters and buyers along the farmgate-to-shipment marketing chain.
Exporters say if the law is applied, tax collection costs should be given by the government to exporters.
"We would also have to find ways of getting buyers to pay up and cover the tax collection costs if it goes through," one told Reuters.
Donors say the plan is part of a clampdown on tax evasion by up-country buyers.
"Buyers must pay their income tax and the government has found it difficult to get them to pay. The idea is to get exporters to pay it up front," said a bank official.
Exporters say the tax plan is poorly defined as well as misdirected.
"We cannot pay such amounts in advance," said one. "For every thousand tonnes exporters would have to pay the govenment 2.5 million CFA (francs)."
Some up-country buyers said they would avoid the tax by setting up as GVCs, tax-exempt buyers' cooperatives currently under government review for lack of accounting transparency.
"It would be easy to hire someone to set up on that basis," said one trader, but cooperatives say laws under consideration could make such a move more difficult.
"Buyers might set up as GVCs but it will be harder in future. Accounting standards might be tightened later this year and licensing could be stricter," a UNECACI farm cooperative leader said.
Exporters say the law might not be implemented. "It is possible. GVCs crop up and disappear overnight. There is talk of tightening up GVC management but no sign of it yet." said one.
The government has had problems identifying traitants because of the sporadic nature of their work and their locations, said one international banker. "Exporters usually know whom the buyers are as well as where they are," he added.
--Abidjan Newsroom + 225 21 90 90
| 32 |
Unilever subsidiary Blohorn will overhaul palmoil plantations and nine factories recently bought from Ivory Coast, a senior Blohorn official said.
"The strategic issue for us was to win vertical control of raw supplies as there was a danger of others exporting for overseas revenue," group vice-president Martin Rushworth told Reuters in an interview.
The supplies from the plantations and factories, in which Blohorn now holds a 34 percent stake, total 190,000 tonnes of annual oil production, he added.
Ageing plantations on 36,000 hectares would be overhauled as some trees were nearing the end of their 28-year productive life and needed replacing at a rate of 4-6 percent a year.
"In some plantations trees have an average age of 22 years so there will have to be extensive replanting," Rushworth said.
Nine crop processing factories would also be refurbished over two years.
Palmoil prices (CIF Europe) averaged around $380 a tonne in 1993, $680 in 1994, $650 in 1995 and $540 in 1996, he said.
"Export prices are now around $560 a tonne but we think they will stabilise at around $540 a tonne in 1997," said Rushworth.
Blohorn's tender for leading stakes in the two state-owned Palmindustrie blocks were accepted by Ivory Coast and signed on November 28 and December 27.
Blohorn linked up with competitor SIFCA to complete the purchase along with the Belgian firm SOCFIN SA for its technical expertise in plantation management.
"Output will be used for domestic production of cooking oil and soaps with only consumer goods and refined oil for export," he said. Sites would sell palmoil to Blohorn at going-rate transfer prices and operate largely as separate entities.
Other Palmindustrie capacity of 40,000 tonnes was taken by the Belgian firm SIPEF with Ivorian SAFIPAR taking the remaining 35,000 tonnes.
Blohorn, whose main oil-based domestic brands are Dinor cooking oil and Savon de Marseille, bought three sites sold as two large blocks. Shareholders paid a total 64.5 billion CFA and took on 24 billion CFA in staggered government debt.
Palmoil processors are also seen as potential cocoa grinders but Rushworth said Blohorn would only do so from June to August to help with overheads during slack periods.
Ivory Coast's donor-sponsored privatisation programme saw 26 companies sold between 1991 and 1995 and another 10 in 1996.
Blohorn's main 34 percent shareholding is followed by Ivory Coast (30 percent), SIFCA (17 percent), village farmers (11 percent), SOCFIN (5 percent) and employees (3 percent).
-- Abidjan newsroom +225 21 90 90
| 32 |
Ivorian 1996/97 cocoa arrivals picked up in early January, pushing the total to 640,000-650,000 tonnes by January 13, analysts and exporters said.
This was still down on the 730,000 tonnes recorded by January 13 last year.
The 1996/97 figure includes 50,000 tonnes of arrivals in the first three weeks in October as the season opened three weeks late.
"The problem now is that there is too much cocoa in the port," said one exporter with offices in Abidjan and San Pedro.
"Some exporters in San Pedro are slowing down (buying) because there is no storage space left."
Sources close to the Caisse de Stabilisation marketing board gave an even higher arrivals total -- 707,000 tonnes by December 27, excluding the pre-season 50,000 tonnes. Exporters said the estimate was too high.
One exporter put arrivals lower, with 185,000 tonnes at San Pedro and 450,000 taken to Abidjan.
Other exporters put total arrivals at 555,000 tonnes by the end of December after 450,000 for mid-December.
"Cocoa is coming in at about 60,000 tonnes (a week) so there's a lot of cocoa about," said another exporter. "Quality is still quite good with bean sizes averaging 95-97 (beans per 100 grams)," he added.
Humidity levels were around 9-10 percent due to a lack of harmattan drying winds usually seen at this time of year, he said. Exportable quality is 7-8 percent.
Up country buyers noted, however, that humidity levels had already fallen from 11 percent noted in December.
"Bean sizes are around 95-97 per 100 grams but humidity is already down to 9-10 percent because of the sun," said one Gagnoa buyer, adding that the harmattan had arrived there.
National weather data showed no rains at eight out of 10 monitoring stations in the first 10 days of January. Rain at the other two was negligible.
Up-country buyers said bush tracks had now dried out after late-December problems and collection rates were normal.
"There is still a bit of cocoa out there and we expect February will be a bit better than usual," said Husseini Khaled, a buyer working around Gagnoa. "As for the mid-crop question, we don't know yet," he added.
Buyers said they were paying at least the minimum recommended farmgate price of 315 CFA a kilo despite poor world prices and initially poor exporter offtake.
Exporters had originally said they would begin marketing a large coffee crop earlier then usual. "Some people turned attention back to cocoa as coffee quality turned out to be terrible," said one exporter.
San Pedro exporters said they expected strong arrivals to continue at least into early February. Other exporters said they expected a late-January tail-off.
Shipping forwarders said warehouses were filling up but did not give precise warehouse figures. One source said at least 350,000 tonnes of cocoa had been exported since October 1.
"People talk of between 100,000 and 300,000 sitting as stock," said the port source. "A middle figure would be a good working assumption," he added.
The industry's focus is now turning to final estimates for the mid-crop, which so far has been put at anything between 70,000 and 200,000 tonnes.
Pod counters were expected to complete up-country tours in January before firming up estimates.
-- Abidjan newsroom +225 21 90 90
| 32 |
The Inter-African Coffee Organization (IACO) will focus on low world prices at its 1996/97 coffee season annual meeting in Abidjan on November 17-19, IACO's chief economist said on Friday.
"In spite of a world export programme the indicative robusta price is only at 73 cents per pound. This is too low," chief economist Donald Kaberuka told Reuters on Friday.
"We do not aim to set a target price but today's composite price for robusta and arabica, 99.29 cents, is also low," he said. "Any recommendations will be sent to the Association of Coffee Producing Countries (ACPC)."
Last May the ACPC, which represents 80 percent of world production, agreed to limit green coffee exports from its 14 members to 53.5 million 60-kg bags in the year to June 1997 after 48.9 million in 95/96.
Africa's total 1996/97 export allocation under the ACPC plan is 12,840,000 bags, or 24 percent of total ACPC target.
The 25-member group of African IACO exporters were very concerned by persistent low prices on the world markets despite a producer plan to limit exports, Kaberuka said in an interview.
"The market could be in balance this year as there is only a small production surplus. We are perplexed by the low prices and want the plan to have an impact," he added.
Kaberuka, who is in charge of ACPC target management for IACO, said IACO provisions allowed a review of the export plan after six months, meaning December.
IACO's 25 members would study the situation and then decide if action was needed. Full agenda details are not yet available.
IACO last met in Gabon in November 1995 to review volatile world markets, coffee rehabilitation plans and financing deals for exporters.
This time last year the world export plan aimed to stabilise market prices at 135 cents/lb for robusta and 165 cents for arabica. Prices then were 114 and 128 cents respectively.
The current export targets were set at the May ACPC review of the export plan, now in its second year (July 96-June 97). In 1995/96 the ACPC set total world exports at 60.4 million bags, including non-ACPC producers. --Abidjan Newsroom + 225 21 21 90
| 32 |
Shipments of cocoa from Ivory Coast's main port of Abidjan are matching arrivals, leaving intact a standing stock of about 90,000 tonnes reported at the end of October, shipping sources said on Tuesday.
"The majority of transporters are shipping cocoa but some are still cautious as freight rates have not been agreed," one port source told Reuters. "Total stocks have not really changed since last week," he added.
Port sources said arrivals seemed to be picking up with increasing numbers of trucks arriving.
Shipping companies and exporters last week said delays in issuing freight rates and export licences had blocked some cocoa at Abidjan. Exporters now expect 1996/97 export licences to be issued this week.
"The Caistab (marketing board) told me licences would be out this week" said one exporter. "Some exporters have decided to wait for their licences and bank finances before buying anything but some are going ahead."
Shipping companies say they would continue shipping at the 1995/96 reference freight rates agreed with the Caistab last November.
Shipments at the start of the 1995/96 cocoa marketing season were delayed from early October to mid-November when shipping companies refused to cut their freight rates by 25 percent as requested by the Caistab. A cut of seven percent was evenutally agreed.
"So far we have avoided a repeat. Shipments have carried on so far but we will just wait see what happens," said one port source.
Rates for this year are widely expected to remain unchanged.
Shipping companies have been asked by government agencies to submit detailed information on freight rates and projected volumes for next year but say prices are confidential business information.
Caistab spokesmen were not immediately available for comment and no date has been set for fixing the reference freight rates for the 1996/97 cocoa season.
--Abidjan newsroom +225 21 90 90
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A prolonged dry spell In Ivory Coast has stretched into the small rainy season, but its impact on mid-crop cocoa pod setting and main crop growth may not be clearer until later this year, crop and weather analysts said on Wednesday.
"The weather is very, very strange. We have a mixture of harmattan (hot, dry) conditions in some places but light rains nearby," said one crop analyst. "Pod setting and progression could be affected. It just depends on rains before December as the front passes," he added.
Weather analysts said the front that usually heads southwards in September, giving Ivory coast a light rainy season between September and December, had finally moved south over the weekend. But rains were still far below average.
"It is now over Dimbokro (seventh northern parallel) but rains are well over a month late. So far we have not had a small rainy season," said one weather analyst.
Weather data showed less than 50 percent of average October rains fell in Ivory Coast. Data for early November were not available to build a clear picture of the overall rainfall pattern in early November, said analysts.
"Flowering and soil moisture vary greatly between regions but cherelle (early pod) setting should be clearer later in November," said a crop analyst who recently toured Ivorian farms.
Up-country buyers around Daloa told Reuters intermittent rains had started in the centre-west cocoa region but more rain was needed for late main and early mid-crop development.
Ivory Coast opened its 1996/97 cocoa marketing season late on October 24 after rain deluges in July and August. Bean moisture was no longer a problem, they said.
"Now there is a nice mixture of rain and sun but we need more rain up to the end of the year to avoid small mid-crop bean sizes," said one buyer. Beans sizes of over 110 per 100 grammes are not considered to be of export quality.
Crop analysts said soil moisture levels were low in some areas and could affect pod sizes if sunny weather continued. One crop analyst told Reuters he had only seen rain on two out of his 10 days of treking around the whole cocoa belt.
Official weather data showed average or above rains in Man and Gagnoa, but rain deficits elsewhere, particularly south of Gagnoa, around Sassandra, Abidjan and Adiake.
Sunny conditions had prevailed in the south as monsoon air was at higher altitudes south of Gagnoa than usual, said the weather analyst.
"The sun is burning off low clouds," he said.
Elsewhere, one crop analyst said the danger in Ghana of blackpod, a fungus hitting cocoa pods in prolonged cool and damp spells, had gone after regional attacks in September. Rains there had been heavier than in Ivory Coast.
--Abidjan Newsroom +225 21 90 90
| 32 |
Foreign Minister Saleh Kebzabo defended Chad's new policy of summarily executing alleged criminals, saying it was justified because the country's courts systematically freed wrongdoers.
Human rights groups say scores of Chadians have already been executed by security forces, including 11 people shot in public on New Year's eve.
"The policy has worked. We no longer see the levels of violence before it was introduced," Kebzabo told Reuters in an interview in the capital N'Djamena on Saturday.
His comments were the most senior official confirmation of a decree issued by President Idriss Deby. An order to police commands in the country to forget the courts when dealing with criminals caught in the act was leaked to reporters last week.
"It came to force around the beginning of November," Kebzabo said. "If you want to know how effective it has been, ask a white woman in the market. Before they couldn't even go there without being attacked for their jewellery."
Deby justified the policy, saying the courts were corrupt and systematically freed criminals.
Insecurity is a major problem in Chad, which was gripped by civil war or conflict with Libya for more than two decades until 1990. The vast but largely desert country also borders the volatile states of Sudan and Central African Republic, with whom it is seeking a common strategy against cross-border banditry.
Kebzabo, a former journalist and close political associate Deby, dismissed critics who say the shoot-at-sight policy is a gross human rights violation.
"While the situation continued there was no question of human rights for those attacked," said Kebzabo, who heads the National Union for Development and Renewal party.
He said there were no official figures for those executed so far, but he did not directly dispute the Chad Human Rights League's reports of scores killed.
"Some people, if they heard 10 people had been killed, they would say 100. There are no figures. But when the League makes a statement it is usually pretty true," said Kebzabo, himself a former activist who had brushes with authorities before joining the government.
In one crackdown, nine people accused of theft and banditry were executed at Fianga in the southwestern region of Mayo-Kebbi on Christmas Eve, campaign group Chad Non-Violence said in a report submitted to the Human Rights League on Friday.
"Nine people were arrested on December 22 and kept at the Fianga gendarmerie. On December 24 they were tied up and executed in a public market in the presence of administrative, political and military authorities," said the report signed by Chad Non-Violence president Lazare Serge Tikri.
"Also in Fianga, 11 others were arrested and received the same treatment on December 31," it added.
A League spokesman said it was not unusual for reports to reach N'Djamena two weeks late because of poor communications.
A December 26 League report listed some of the people killed since November, including a pregnant woman, streetchildren and suspected thieves.
"A docker accused of breaking into an empty container was executed in the market. The shooting caused one pregnant woman at the scene to miscarry under emotional shock," it said.
"It is quite open but the total numbers killed are not," an aid worker said. "We are called out to scenes of executions and we talk with relatives of those killed."
Many ordinary Chadians interviewed about the shoot-to-kill policy said they initially supported it because of rampant crime but that they now feared it could get out of hand.
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Ivory Coast's 1996/97 coffee is likely to be well up on last season but rising volumes are bringing quality problems, regional buyers and exporters' agents said.
They expect coffee marketing, sluggish for the time of year, to pick up in February.
"There's a lot of coffee about but quality is poor," said one buyer based in the Man region. "We could see well over 230,000 tonnes but exporters have bought little so far and made large quality adjustments."
Port forwarding agents said they had noted no major quality problems with coffee received for export. One quality inspector suggested that as little as 150,000 tonnes could be shipped out this season.
Ivory Coast opened its 1996/97 coffee season late on November 14 amid plummeting prices, and forecast output at 230,000 tonnes against 180,000 last year.
Farmgate prices were cut by 200 CFA to 500 CFA a kilo.
"Farmers have been waiting for a price rise hoping it will be a sellers' market," said one buyer. "Little care has been taken over sorting as farmers have less time, but exporters want better quality than last year."
Farmers face a higher than normal January cocoa harvest as well.
"This season will be twice a long as usual," said one buyer north of San Pedro, commenting on the slow start.
"We should be busy into April," said a buyer around Soubre.
Buyers expected to be at their busiest in February and March with port forwarders slating peak arrivals in April and May.
Large amounts of coffee could be seen along roadsides around buyers' stores this week with stocks said to be rising.
Buyers in most regions pointed to high percentages of black beans, fragments and bean husks.
"Humidity is around 16 percent," said one buyer in San Pedro, against a 13 percent export standard. "Exporters are rejecting around 10 percent even after sorting," he added.
One buyer in Sassandra in the south said some farmers were delivering sacks with 50 percent of problem beans.
Quality is widely seen as better in more productive northern areas around Man, where weather had been more favourable.
"Farmers are only now getting the message about quality but we have been buying since November," said the manager of a new buying unit in Man opened by a processor.
The unit was advertising 30 CFA above guideline prices for top grades but paid 477 CFA for lower grades. Margins of up to two percent for quality variation applied within each grade.
About one thousand tonnes had been bought by the end of January. Around 420 tonnes had left for Abidjan, with the rest, including 299 tonnes of low grade stocks, in Man warehouses.
Other buyers in the Man area, which is expected to produce 30 percent (corrects from 80 percent) of Ivory Coast's coffee, said they could not match the prices paid by processors.
"They can buy directly and save on transport and lower middleman charges," said one. Farmers had got into the habit of not sorting coffee in the past two years, he added.
Banks have been reluctant to fund exporters' buying operations out of concern that the Caistab would not pay up price support to its clients.
Buyers said some large exporters had not bought any crop.
A French coffee scientist based in Man said coffee bush flowering was good in many areas but dry Harmattan conditions could kill new fruits if rain did not fall.
-- Abidjan newsroom + 225 21 90 90
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African robusta producers will meet discuss to export limit quotas on February 26-27 after a January world agreement in Rio de Janeiro to shore up prices, Ivory Coast's Commodities Minister told Reuters on Friday.
Gauze, who is also chairman of the Interafrican Coffee Organisation, gave no venue details but said African robusta exporters would afterwards seek to meet other producers.
"There will be a meeting to decide how to divide export limits between African producers," said Gauze. "The meeting will be for two days, on February 26 and February 27," he added.
"We will then call on other producers for a meeting," he said without giving agenda details.
Gauze on February 5 called off talks in Bali with Asian robusta producers.
The world Association of Coffee Producing Countries (ACPC) decided on January 23 to cut robusta exports by one million bags (60 kg) after low prices seen in late 1996.
The limitation was expected to be shared between African and Asian producers.
"The talks have been postponed," Gauze said after returning to Ivory Coast to attend cocoa sector reform with International Cocoa Organisation and donor officials.
Indonesian officials told Reuters export cut sharing between Africa and Asia had not been discussed as the Bali meeting.
Gauze said African producers would discuss how to divide Africa's export limitation share, which he said was 850,000 bags, between exporting countries.
IACO chief economist this week delined to comment on African sharing arrangements saying the decision was an internal IACO matter.
Indonesia has decided to reduce its exports by 150,000 bags in the January to June 1997 period covered by the volutary export restraint.
ACPC members are concerned that rising production from non-ACPC member such as Vietnam will undermine their own export restraint policy.
Indonesia's ACPC representative Paian Nainggolan said informal discussions had taken place after Gauze cancelled his trip. No ACPC export cut sharing cut talks took place, he said.
Ivory Coast, Africa's largest exporter, expects to produce 230,000 tonnes in 1996/97 but local quality inspectors say quality problems mean not all of it will be exportable.
--Abidjan newsroom +225 21 90 90
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As Chad's odyssey to oil production from 2001 enters financing and tender stages, senior officials are asking for guarantees that benefits will trickle down to the impoverished population.
"I am afraid about the oil because the experience of other African countries shows that it is always mismanaged," Chad's Foreign Minister Saleh Kebzabo told Reuters in an interview.
"It will change people's mentality for the worse. No preparations have yet been made at political and management levels and there has been no public debate," he said.
After decades of civil strife or conflict with neighbouring Libya, Chad held its first multiparty legislative elections on January 5, marking a symbolic transition to peace.
Other political party leaders, who like Kebzabo, contested the elections, voiced similar concerns.
"We must have laws to ensure all interests are served, with Chad at the centre," said Lol Mahamet Choua, who draws support near the smaller Sedigi oilfield on the shores of Lake Chad.
Exxon's unit Esso Exploration and Production Chad Inc., a 40 percent-share consortium member with Shell's Chad unit (40 percent) and Elf (20 percent) in November sealed a deal with Chad on finance and legal terms for Chad's main field 350 miles (560 km) south of N'Djamena.
Doba, due on stream in 2001, is forecast to yield 900 million barrels, or 200,000-250,000 bpd over 15-20 years, at a cost of $3 billion, according to Exxon, Houston. Cheaper electricity is expected from power stations using Sedigi crude.
"There are some milestones needing to be resolved but something could happen next month," Exxon spokesman Ed Burwell told Reuters last week as Chad's finance minister left for discussions in Washington and officals held talks on a pipeline through Cameroon.
Chad's Gross National Product per capita income at $237 in 1995 is one of Africa's lowest. It is dependent on cotton, livestock and gum arabic revenue and badly needs foreign currency after 30 years of war since independence from France in 1960 and devaluation of the regional CFA franc in 1994.
Investors hope Moslem President Idriss Deby, once dubbed "Cowboy of the Sands" for lightning jeep-based warfare against Libya, can both welcome oilmen to his country -- twice the size of Texas -- and heal North-South, Moslem-Christian strife.
The consortium is nearing the end of exploration and engineering studies, despite logistics problems in the sprawling Sahel state with only 300 km (170 miles) of paved roads.
Doba's geological profile is such that horizontal flow and recovery of oil is small, meaning costly vertical well-drilling.
Most financial aspects of Doba remain unclear. "Chadians are told nothing at all about what is going on," Assistant Government Secretary Saleh Makki told Reuters. "Royalties are a closely guarded secret, but if there is no transparency people will find other ways to express themselves."
Production slipped back from 1998 to 2001, partly due to rebel activities in southern areas led by Moise Kette. The group wants an autonomous Chrisitan region in the south where Chad's cotton, and soon oil, wealth is concentrated.
Chad buys oil from southern neighbours Nigeria and Cameroon.
"Oil has not made people's lives much better in those countries, despite United Nations figures. Our oil money should not also disappear abroad," former National Assembly leader and ex-prime minister Jean Bawayou Alingue told Reuters.
Compared with Chad's per capita income of $237, that for oil-producer Cameroon is $813 and Gabon -- with Elf dominating offshore oil production -- $4,400. Chad has appealed for food aid for 1997.
"There will be enough money in government coffers for them to do some smart things," said Louis Adande, vice-president at the Abidjan unit of Citibank, reviewing finance options for the consortium. "But Chad is obviously still looking for stability and has an interest in promoting it."
A private Swiss firm, Cotecna, hired to manage Chad's treasury funds, recently ended a two-year contract. Opposition parties fear political use of future revenues.
The half-desert central African state of 6.5 million has held talks with the World Bank over partial funding of a 30-inch (76 cm), 650 kilometre (404 mile), pipeline with four pumping stations to take landlocked Chad's oil to French-built refineries, and marine terminals, at Kribi port in Cameroon.
An airport for supply planes is planned for Doba along with roads to N'Djamena and 300 long-term jobs are expected.
| 32 |
Delegates to Ivory Coast's cocoa Consultative Committee focused on bean quality and marketing on Thursday, the mid-point of their review of industry reforms.
"I would prefer to get down to talking about cocoa quality and continuity of supply," Cacao Barry managing director Alain Leblond said before the second day of the talks, which end on Friday.
Ivory Coast's Consultative Committee, a tripartite group of Ivorian, industry and donor officials, was set up in 1996 to monitor cocoa sector reforms since 1990.
After opening the talks on Wednesday, International Cocoa Organization Chief Executive Edouard Kouame said changes must benefit farmers and other local players.
"At the same time the legitimate interests of others in the sector must be safeguarded," he added, referring to foreign traders, cocoa butter manufacturers, and chocolate and confectionary industries.
An electronic export contract auction set up in May 1996 to increase market transparency is widely seen as encouraging overbidding and concentrating export contracts in a few hands.
Local exporters, allocated 85 percent of contracts, and foreign traders, allocated 15 percent, have complained they cannot win export contracts at favourable prices.
"The question needs to be asked how some people can bid as much as they have (been bidding)," Cocoa Association of London Chief Executive Philip Sigley told Reuters.
Industry concerns have been voiced about quality since the state marketing monopoly was ended.
"Quality has to do with liberalisation and the auction system," Netherlands Cocoa Association Managing Director Louis Bensdorp told Reuters. "The lack of quality checks is the major problem. That and the second thing, the education of farmers."
Industry watchers are wondering whether strong arrivals so far in 1996/97 means that output will rival the 1995/96 (Oct-Sept) record of 1.2 million tonnes.
"There is a very good crop coming in which suggests that last year was not a fluke of nature," said Bensdorp.
Commodities Minister Guy-Alain Gauze declined to confirm whether buoyant cocoa arrivals would mean an adjustment of the Caistab state marketing board's 1996/97 production forecast of 950,000 tonnes. Industry forecasts are increasingly putting total output at more than one million tonnes.
Industry delegates said mid-crop forecasts for April to September had not yet been finalised.
"It is still too early to talk about the mid-crop but it tends to be bigger and bigger," said Bensdorp.
Ivory Coast wants to process 50 percent of its output by 2000 to shore up world prices and add value the cocoa sector's output.
At least two cocoa processors have expressed interest in building factories in Ivory Coast.
-- Abidjan newsroom +225 21 90 90
| 32 |
Rains ended abruptly throughout most of Ivory Coast in the second 10 days of December, allowing crops to dry after the extended rain, upcountry buyers and weather analysts say.
Weather data showed average rain down to 8mm from about 45 mm at the start of December, with little or no rain falling at six of eight stations monitored in the 10 days to December 20.
A total of 65 mm fell compared to 400 mm at nine stations in the first 10 days of the month. Only the northern Daloa area, with 21.8 mm, and the far southwest around Tabou, with 42.5 mm, received noticeable amounts.
Around 250 mm fell in San Pedro and Tabou alone in early December during a late, small rainy season usually seen in October and November.
"The inter-tropical weather front has still not brought down Harmattan (drier conditions usually seen in early December and on through January after rains)," said one weather analyst.
Farmers visited by Reuters over Christmas had begun drying beans but some exporters in Abidjan were rejecting moist beans, some of which had sat uncollected in villages before mud tracks solidified.
Heavy rains fell in early December, leading to deterioration of bushtracks and raising cocoa bean humidity levels to up to 11 percent, compared to exportable levels of about eight percent.
One crop analyst said before the latest figures that mid-crop (April-September) prospects would be boosted by another 20mm rain by January. Sporadic rains have fallen upcountry since December 20 but month-end rainfall figures were not immediately available.
Midcrop flowers are expected to give cherelles (small cocoa pods) as insect activity gets underway after rains end. Crop analysts will be looking for clear indications of prospects in early January.
Crop analysts see the rains as beneficial for pods still on trees as a preceding small dry season had also been late and wetting would cushion the effects of coming dry Harmattan winds.
The data, from Ivory Coast's national weather station, shows rainfall for the second 10 days of December in the following key growing areas -
Dalao 21.8mm, Gagnoa 0 mm, San Pedro 0.7 mm, Tabou 42.5 mm and Man 0 mm, Dimbokro 0 mm, Yamoussoukro 0 mm, Adiake 0 mm.
No data was available for Abidjan and Sassandra but sporadic rains have been seen by Reuters in south coast areas, including Abidjan, since Dec 20. --Abidjan Newsroom + 225 21 90 90
| 32 |
Bulk cocoa shipments from West Africa will more than double to 325,000 tonnes in 1996/97, solidifying a cost-cutting trend sparked by recent trial shipments, exporters and shippers said.
"West African shipments will reach at least 325,000 tonnes this year (1996/97)," said one trader, with most going to large Amsterdam-based buyers. "And that is only a start." he added.
Bulk shipments include beans stuffed directly into containers or poured loose into ship's holds, replacing traditional stacks of 60 kg jute bags.
Ivory Coast would ship about 270,000 tonnes in bulk this year. The world's largest producer blazed the trail by shipping 120,000 tonnes in 1995/96 as bagged cocoa lost favour with large buyers, said the source.
Of this year's total, about 260,000 tonnes would be shipped for two Amsterdam-based clients out of an expected crop of 900,000 to one million tonnes, said the trader.
Less than half, about 120,000 tonnes, would be shipped loose on holds against the same tonnage for all forms of bulk shipments in 1995/96. The remainder would be leave in twenty-foot bag-lined containers packed with drying agents.
Additional shipments of about 5,000 tonnes for trials to Germany, and less for Mediterranean ports would take the total of both bulk methods to around 270,000 tonnes.
Ghana is also expected to build on small shipments with 25,000 tonnes possibly leaving in December. Volumes from Nigeria and Cameroun are widely expected to rise.
Little was shipped in bulk from other West African ports last year but shipping companies say that will change.
Dutch transporters Spliethoffe completed three successful trials from Ivory Coast in 1995/96 totalling about 10,000 tonnes followed by another 110,000 tonnes for processors Gerkens and Cacao De Zaan.
The loading and shipment methods developed then has prompted an expected 100 percent plus jump in overall regional tonnages for 1996/97, say shippers.
Shipping lines Nedlloyd, Compagnie Maritime Belge (CMB) and Delmas (SDV) are already taking bulk cargos from forwarders SAGA and Delmas, and Ivorian exporters/forwarders Jean-Abile Gal and SIFCA.
"Each have loading systems (total of 8) in Abidjan and San Pedro (Ivory Coast's second port) but only direct users have reception facilities," a West Africa region shipping manager said. "Not everyone has a 4,000 tonnes a day capacity plant with storage facilities," he added, referring to large processors in Amsterdam.
"In future, about 25 percent of all cocoa will leave in bulk," said one shipping manager, depending on the size of the reference crop
The manager of another shipper handling large volumes put the figure at 40 percent by 2000 for Ivory Coast.
"The economics are simple. What used to be shipped in four containers is now shipped in three," he said, or 100 tonees per six 20 foot containers.
Shipping companies had gained a 25 percent freight space saving and exporters would expect rebates in return, he said.
A typical charter on FIOS (free in and out, stowed) rates would be 55 dollars, with another 25 dollars in handling to be added depending on terms, said one shipping line.
The marginal cost of loading a container was about 3,750 CFA a tonne with 55,000 CFA for positioning a container, but labour and time savings more than compensated. Conveyor belts, silos and tip-up containers are all used for loading.
Plans to build a new bulk reception warehouse in Amsterdam unveiled by Dutch Cocoa Association (NCV) president Louis Bensdorp on Friday would encourage bulk cocoa advocates, said local exporters.
-- Abidjan newsroom + 225 21 90 90
| 32 |
Chad held much-delayed multi-party parliamentary elections on Sunday but there was little enthusiasm in the sprawling and volatile African nation for its fourth round of voting in less than a year.
Some polling stations in the capital opened late as voting materials were not ready for the scheduled 7 a.m. (0600 GMT) start. Few queues formed in the shimmering heat of the day and those that did were small.
Some opposition candidates denounced incidents of fraud but the 30 or so international observers reserved judgment and there were no immediate reports of electoral unrest in the majority Moslem nation with a lively southern Christian minority.
President Idriss Deby, the former northern guerrilla leader who seized power in a French-backed coup in 1990, paid tribute to Chad's democratic progress after voting in the capital.
"We have made a non-negligible step in the democratic process set up in 1990," he told reporters.
Others took a different view. "Turnout will be low because people know the fraud apparatus is still in place and nothing much will change," said former national assembly leader Jean Bawoyeu Alingue, a defeated presidential hopeful.
More than 650 candidates from 49 parties contested the 125 seats in the national assembly, which will convene on March 31 to end the former French colony's transition to democracy.
Chad has known coups, civil war or conflict with northern neighbour Libya for much of its life from independence in 1960.
After repeated electoral delays, Deby won a multi-party presidential election in July after a run-off against southern rival and fellow general Wadal Abdelkader Kamougue.
Almost 68 percent of voters took part in the first round of that poll, which followed a March constitutional referendum. Voter interest tailed off in the second round.
A total of 3.5 million people were eligible to vote on Sunday in the nation on the fringes of the Sahara Desert. An estimated 300,000 nomads started voting on Thursday.
Deby's Patriotic Salvation Movement, leading member of the 27-party Republican Front coalition, started favourite to win or to be able to cobble together a working majority after the poll.
The opposition, which called a boycott of the presidential runoff alleging first-round fraud, has a 17-party coalition.
Election issues tended to be local or ethnic but diplomats said that all parties were looking for a fair distribution of any wealth from oil, which is expected to come on stream by the year 2000. Chad has about 100 ethnic groups.
"Oil is really what is at stake. Christian and Moslem differences have calmed," one diplomat said.
"It does not take much to make people feel better off," Alingue said. "We don't want to see the money vanish abroad."
Polls were to close at 6 p.m. (1700 GMT). Election officials expected provisional results within 10 days and final results by January 25, once the appeal court had checked them. Any run-offs will be held on February 23.
| 32 |
Demands for commodity auction rule changes to stop overbidding for cocoa export contracts will dominate talks in Abidjan next week on progress with Ivorian agriculture reforms, donor and industry delegates say.
"We are now ready to revisit the issue and the possibility of amending rules," a World Bank official told Reuters.
Ivory Coast's Consultative Committee, set up in October to review progress on a World Bank Agricultural Sector Adjustment Credit (ASAC) timetable, meets in Abidjan on February 5-7.
A clear agenda was expected to emerge after intitial meetings between the Ivorian government, industry and international trade officials.
Exporters want immediate changes to the auction, which is aimed at ensuring price competition and market transparency.
"Exporters have to pay too much, sell at a loss and get into (contract) positions they don't really want," one told Reuters.
The World Bank sponsored the auction as part of a $150 million ASAC loan dating back to 1994 on condition that rules and penalties were applied.
"The problem is that the Caistab (Caisse de Stabilisation marketing board) has not given us sales data since September," said one bank official.
Contract allocation was previously handled by the Caistab as a state commodity marketing monopoly.
Donors in September agreed to two modifications but said initial overbidding and concentration of export rights in a few hands had waned since the system was put in place in May 1996.
"We cannot wait until next year (Oct-Sept 1997/98) for changes," one exporter told Reuters. "Two thirds of each year is sold forward so new rules would not bite until 1999."
"Support for the system is disappearing, especially for physicals traders," another said. "There's a lot of forward buying for 1997/98 to ensure smooth debloquage."
Ivorian ministry officials along with International Cocoa Organization, World Bank, International Monetary Fund, European Union, industry and trading representatives will attend talks.
"The market has certainly fallen below the price of some people's contracts," said one exporter. Auction rules were partly the problem but recent low world demand and price could also mean some would hold on to stocks for a March premium.
Warehouses at Ivorian ports are full to normally operating capacity estimated to be at least 380,000 tonnes.
There is also discord over auction penalty rules.
"Penalties are not being applied so the system is really not working," one European-based buyer told Reuters.
Exporters say penalties are unclear. "The rules are too blurred and are being applied when they shouldn't," said one.
Export contracts are auctioned in two daily sessions but exporters are banned for five sessions if they fail to put up a bank guarantee of 25 CFA per kilo within three days of bid confirmation by the Caistab.
"We are still in disageement with the Caistab about the levels of interest rates," said one exporter. Before the reforms, the Caistab put up guarantees on behalf of exporters.
The World Bank in late 1996 agreed to a proposal for an 85-15 percent split between sales to local exporters and by the Caistab directly to international traders.
"If international traders' bids do not at least match the best local exporters' bid they should not be allowed to buy," said one exporter.
The World Bank has not agreed to parts of a GEPEX exporters' forum proposition to spread contracts more widely, between five highest bidders in each session.
"We have agreed the principal of differentiated prices and the 85-15 rule but not the five bidders proposal," said a World Bank official.
The World Bank wants bidders held to the price they bid, rather than winning contracts but at the second highest bid price -- a rule which it says encourages overbidding.
($1=551 CFA francs)
-- Abidjan newsroom + 225 21 90 90
| 32 |
Sporadic rain showers up to the end of November have continued to water Ivory Coast's cocoa belt but mid-crop campaign prospects are not yet clear, say weather and crop analysts.
A weather front expected to bring hot dry weather southwards over the whole of Ivory Coast had backtracked to the country's northern border with light rains taking hold in dried out areas.
"It has moved up to Korhogo (10th northern parallel) from Dimbokro (8th)," said one weather analyst. Rains usually fall in a sweep 200 km to the south of the front's position, he added.
Crop analysts said the front's retreat meant no dramatic changes in cocoa pod development but they welcomed continuing rains.
"We are now seeing the first fruits for the mid-crop ," said one crop analyst. "December weather will now determine the full potential. It is too early too draw conclusions," he addded.
Weather data show variable rains for the last 10 days of November with 650 percent of normal levels falling around Bondoukou in the north-east, put down to local effects, compared to 53 percent for San Pedro and Tabou in the southwest.
An average of 30mm fell at ten weather stations monitored in the last ten days of November with heavy showers concentrated around Abidjan and Yamassoukro. In the preceeding ten days the average was 42mm, also boosted by heavy showers in Abidjan.
Overall November rains in three successive ten day periods rose from 104mm to 423mm before dropping to 295 mm in the last third of the month.
Light rains fell in Daloa and Man, after none in the first ten days of November. More southern cocoa belt areas received 53 percent of end-November average rains around San Pedro, and 62 percent around Gagnoa. Rains around Abidjan and Yamassoukro were 200 percent above average.
"November rains moved into surplus in the south towards the end of the month but we are still in deficit in the north," said a weather analyst.
Crop analysts said the latest weather picture was highly variable and mid-crop development would depend on December's pattern. Rains last year continued into December, they said.
"This year, dry weather up to early November slowed down mid-crop development but we could still be heading towards a reasonable crop," said the crop analyst.
"It is too early to draw conclusions as last year's weather picture was different," he said. "We had twice the normal rains for December but then a strong mid-crop."
One crop analyst said on November 20 a long dry spell pushing into the year's short rainy season could slightly affect young cocoa fruits. The degree would depend on an extension rains seen since early November which would cushion the drying effect of Harmattan conditions, he said then.
Up-country buyers welcomed rains after dry weather in September and October but said drying problems had increased harvested cocoa humidity levels to up to 10 percent.
"Drying has slowed deliveries a bit, but overall quality is still good," said one.
Abidjan newsroom +225 21 90 90
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Cocoa producers broadly agree on output management and have struck a compromise to unite against use of non-cocoa fats in chocolate in the European Union while accepting the change in other markets, Ivory Coast's commodities minister said on Monday.
"Europeans are rich consumers who can afford to carry on buying pure chocolate," Gauze, outgoing head of the Cocoa Producers Alliance (CPA) ministerial council, said on the sidelines of a two-day council meeting in Gabon.
But Gauze added that world cocoa demand could rise by allowing use of vegetable fats in some countries.
"Residual markets needs dynamising," he said after palm-oil and cocoa producer Malaysia dropped its blanket acceptance of non-cocoa fat use as part of the compromise.
"Malaysia has moderated its position," he said. "It has adopted the same line as the CPA."
The ministers, who wrap up their meeting on Tuesday, were reviewing a 1993 International Cocoa Agreement and plans to cut member output by 90,000 tonnes by the year 2000.
Gauze, current chairman of the International Cocoa Organisation Council, predicted that members would resolve differences over CPA output projections for the next three years by Tuesday.
"The differences are slight," he said after objections from Brazil, Ghana and Malaysia during preliminary talks among experts last week.
He said Malaysia had put forward a 1996/97 output proposal of 120,000 tonnes against a 130,000 tonne CPA projection. Malaysia's 1997/98 projection was 140,000 tonnes compared to the CPA's 137,000 tonne forecast.
Gauze said Ghanaian and CPA projections for Ghana's 1996/97 output differed by only 20,000 tonnes.
"I do not want to leave here with any outstanding differences," Gauze said, adding that member output agreements were likely to be available late on Tuesday.
Gauze said efforts would continue to persuade the largest non-CPA producer Indonesia to join and to persuade Mexico to reconsider a decision to quit the alliance. Colombia would also be asked to join, he said.
Ivory Coast, the world's top producer, has spearheaded opposition to European Union plans to allow use of up to five percent of non-cocoa fats in chocolate throughout the EU next year. It says this would cut demand for cocoa by 200,000 tonnes and harm cocoa-producing economies.
A Dutch study in September put the drop in demand at just 33,000 tonnes.
Ministers from producing nations agreed in September at an ICCO meeting to cut output by 15,000 tonnes in 1996/97 and by 30,000 tonnes and 45,000 tonnes respectively in the two following seasons to balance world supply and demand and boost cocoa prices.
-- Abidjan newsroom +225 21 90 90
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Port arrivals of 1996/97 Ivorian cocoa ranged between 745-755,000 tonnes by January 27 compared to 800,000 tonnes in 1995/96 as exporters cut up-country buying for lack of storage space, industry sources and exporters say.
"There's cocoa all over the place," said one Abidjan exporter. "I have trucks waiting to unload but no space or pallets until I ship 5,000 tonnes next week," he added.
Crop analysts returning from upcountry reported heavy pod loads in southwestern Ivorian hybrid plantations. Upcountry store managers told Reuters their stocks would rise into February.
All eyes are focused on weather data as favourable showers before April could swell mid crop cocoa volumes.
"The trees need about 10 mm a week between now and then," said one plantation owner, giving a rough mid-crop forecast of 150,000-175,000 tonnes. "That of course depends on rain."
Others put the figure at over 100,000 tonnes, with one local crop forecaster more bullish at 200,000 tonnes. Ivory Coast notched up a record 1.2 million tonnes crop in 1995/96 after an unexpectedly strong 200,000 tonne mid-crop. The government has forecast 950,000 tonnes for 1996/97.
This season's arrivals were expected to be more strung out than last season's.
One crop analyst said,"When arrivals figures pick up again and reflect what is out there arrivals could be closer to a million before the mid crop starts."
His estimate was higher than most others.
Exporters in Ivory Coast's two main ports are battling to find warehouse space with many cutting purchasing until shipments leave.
A late February surge is expected at San Pedro.
"Everything will be off the trees by the end of February so a wave of cocoa will leave Ivory Coast against March contracts," said the Abidjan exporter. "San Pedro has been very busy."
Port forwarders and inspectors reported improving bean quality with grain sizes below 100 beans per 100 grammes. Bean humidity levels had dropped to 6-8 percent from 8-10 percent in December and early January.
Export standard is 105 beans and under per 100 grammes and eight percent and under for humidity.
San Pedro exporter Jean-Abile Gal (JAG) has reported two drying plant fires.
Full warehouses were surrounded by drying beans and lines of palleted cocoa fresh from trucks.
A JAG cocoa and coffee plantation manager said a dryer might be sent down from his Gagnoa area site to speed up conditioning.
San Pedro processor SACO has full warehouses and more cocoa under awnings at the front of its plant.
"January is definitely busier than last year but I don't have the figures immediately to hand," said one exporter. Warehouse space at San Pedro is set to rise from 1998 with forwarders SAGA building a 12,000 tonne capacity shed and an Ivorian maritime firm, SIVOM, planning another, smaller unit.
Bulk shipments loading improvements are also set to improve evacuation of cocoa from the port with forwarder SAGA planning to raise loading rates from 40 to 100 tonnes an hour.
One bulk ship, Pantelis K, left Ivory Coast last week with 7,000 tonnes.
Industry sources said upcountry buyers were transporting cocoa to port in 40 tonne loads on trucks designed for 23 tonnes.
Tilting and bent trailers, some being repaired along roadsides, were making their way to port through numerous police and army checkpoints.
-- Abidjan newsroom + 225 21 90 90
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Ivory Coast and other African coffee nations will hold talks with Vietnam on Tuesday on robusta output ahead of an emergency meeting of coffee producers in Rio de Janeiro on January 23, InterAfrican Coffee Organisation (IACO) officials said on Monday.
"The Vietnam meeting is a seminar to convince Vietnamese at the highest level to join the ACPC," IACO Secretary General Aregu Worku told Reuters, referring to the Association of Coffee Producing Countries (ACPC).
"There will also be a fact-finding mission with tours to plantations to see developments in Vietnamese production and techniques," he said by telephone.
Ivorian Commodities Minister Guy-Alain Gauze, also IACO's chairman, has already left Abidjan for Vietnam where the Asia International Coffee Conference '97, organised by IBC Singapore, is being held in Ho Chi Minh City from January 14 to 18.
Gauze was accompanied by IACO's chief economist Donald Kaberuka, Worku said. Ivory Coast's new Caistab marketing board coffee department director Avi Adroh will also attend.
Gauze in November blamed non-ACPC member exporters, including Vietnam, for instability in the world robusta price. He called for an urgent ACPC review.
"The real talks will take place in Rio de Janeiro (at the January 23 meeting) when proposals made by the African group will be discussed," said Worku.
African producers would renew demands for an additional 2.5 million bags export quota cut for the first six months of 1997.
"That is the area we have been talking about," said Worku, adding that Ivory Coast had stuck to its ACPC quota while non-members had increased production.
"Indonesia has insisted on Vietnam joining and we will have to come up with something in Rio to be able to stick with our strategy after June," said Worku.
Gauze and Kaberuka were expected to arrive in Ho Chi Minh City on Monday night or Tuesday morning for the Vietnam talks, an IACO secretary said.
-- Abidjan newsroom + 225 21 90 90
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Cocoa arrivals in Ivory Coast at the start of the 1996/97 season are slower than normal with exporters awaiting financing and warehouses filling up at the main port, Abidjan, exporters and shipping sources say.
"There is a problem of finding space in the port," the head of the exporters' trade body, GEPEX, Rene Ekra, told Reuters.
He and others say delays in issuing export licences and freight rates had blocked shipments of cocoa. Large consignments of cotton were also taking up port space, they added.
Exporters were also unable to secure bank finance without export licences and contracts.
"Some are financing buying operations themselves but up-country buyers are keeping busy," said a San Pedro exporter.
Ivory Coast opened its 1996/97 cocoa marketing season on October 24 with its farmgate price unchanged at 320 CFA per bagged kilo and the cocoa export tax down 10 CFA to 150, but has yet to set reference exporter rates and buyer commissions as well as freight rates.
"Arrivals are lower than normal but we should get back into a rhythm in the next couple of weeks," said the San Pedro exporter.
"We are hoping all rates will be out within a fortnight," said GEPEX President Ekra. He said 31 exporters were given licences last year but 1996/97 applicants were still waiting for government approval.
About 600 buyers were expected to be approved, he added.
Yves-Marie Koissy, new head of the Caistab cocoa marketing agency which grants licences and sets reference exporter and buyers' commission rates is expected to return from the United States in early November.
Precise arrival figures remain unclear. Market estimates range from 8,000 to 9,000 for San Pedro in the week to October 25 and over 7,000 tonnes for Abidjan.
"It is too early to get a clear picture of quantities. Wait until mid-November," said one exporter. "Last year, arrivals were 180,000 tonnes in November. I think it will be less this year but 950,000 tonnes for the whole year cannot be discounted," he added. "Bean sizes and quality are very good, around 95 per 100 grammes."
Early arrivals were also greater at San Pedro.
"Liberalisation of transport means it is cheaper to go to the nearest port. If San Pedro exported 30 percent of cocoa last year, it could well be 35 to 40 percent this year (1996/97)," said the San Pedro exporter.
Buyers around Daloa and Gagnoa said rains were regular with good sunshine. "There are plenty of flowers. But we need regular showers between now and December for a good April and March crop," said Daloa-based buyer Makkram Haddad.
Up-country buyers around Gagnoa and Daloa said some stocks were still held up-country because heavy rains in July, August and in some areas, September had made bush tracks impassable.
"We are buying 20 new three-tonne covered trucks to get through to farmers who cannot move their stocks," said Gagnoa buyer Hussaini "Some tracks have been repaired but there is a lot of damage and 15-tonne trucks are too big."
Buyers say they usually replace their trucks every two years. One truck importer told Reuters sales were rising.
Sunny weather south of Gagnoa in the past couple of weeks had dried many areas, Khaled and others said. Intermittent rain has continued north of Gagnoa.
Up-country sources said stocks of cocoa being held by buyers in centre-west and south-west areas around Soubre, Daloa, Duekoue and Guilgo would be taken to port when the full scale of marketing costs was known.
-- Abidjan Newsroom, + 225 21 90 90
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French chocolate manufacturer Cantalou will sign a deal by 1998 on building a cocoa processing plant in Ivory Coast, a Cantalou official said on Monday.
"There will be a signature by the end of this year," public relations manager Catherine Poirier told Reuters by telephone.
Cantalou said investment plans had not been finalised despite recent reports that the Perpignan-based manufacturer of "Cemoi" brands was going ahead with plans.
But Poirier added that plans were solid and very likely to be confirmed in coming months.
Speculation about new market entrants had already risen following a decision by Cargill to open an office in Abidjan in late 1996 to explore processing and other options.
Cargill's new Ivory Coast-based representative has already begun negotiations on setting up a processing plant with decisions expected from March, industry sources close to the discussions told Reuters recently.
Talk of new entrants to Ivory Coast's expanding local processing industry intensified in December after an official visit to Ivory Coast by Cantalou representatives in late 1996. Officials from Cantalou, which has European turnover of 2.9 billion French francs and owns 15 other plants, discussed setting up a 160 million French franc cocoa processing plant.
Cantalou's plans for a 60,000 tonne per year capacity processing plant resurfaced last week in the French business daily La Tribune Defosses but Poirier, quoted in the report, told Reuters plans had still not been finalised.
Other aspiring processors are also still in discussion stages.
Ivorian exporter SICC in December outlined to Reuters its own plans for processing up to 50,000 tonnes a year of cocoa. Plans for a $2 million investment were expected to be finalised in early 1997 after talks with potential partners.
SICC, which also has shipping plans, expects to handle a total of 200,000 tonnes of cocoa exports in 1996/97 for clients including Cargill's Netherlands processing subsidiary Gherkens.
Other firms are also said to be in discussions about starting processing. More are waiting on the sidelines.
"We badly want to get into processing," a manager for British development firm Commonwealth Development Corp told Reuters last week.
Cocoa processing in Ivory Coast is dominated by Abidjan-based processor UNICAO and rival Callebaut-Barry. Factory bean processing capacity stands at 180,000 tonnes but Ivory Coast aims to add more value to exports by raising this to 50 percent of annual output - which varies widely each year.
Local industry sources had expected Cargill or Dutch group Cacao De Zaan to buy into UNICAO in December. But minority 30 percent shareholder U.S-based W.R. Grace then sold its stake in UNICAO's parent, SIFCA, to rival Archer Daniels Midland (ADM).
A UNICAO spokesman said plans to add 21,500 tonnes of processing capacity to take production potential to 86,000 tonnes by late 1997 were unchanged by the deal.
"They (ADM) have still not visited companies with a shareholding (in UNICAO)," UNICAO factory production director Kanga N'Ze told Reuters on Monday. "There has been no contact."
UNICAO's only main rival Callebaut-Barry has three plants grinding up to 80,000 tonnes of beans a year.
Ivory Coast posted a record 1.2 million tonne crop in 1995/96 but has forecast closer to a million tonnes for 1996/97. It expects cheaper energy from offshore gas to encourage investment in cocoa processing but critics have said investors are more interested in winning short-term government incentives gains than long-term commitment.
-- Abidjan newsroom + 225 21 90 90
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Ivorian 1996/97 cocoa arrivals stood at 330,000 to 350,000 tonnes by early December, analysts and exporters said.
The December 7 figures were down from an estimated 410,000 tonnes by December 3 last year, but some analysts said a further 50,000 tonnes should be added to this year's figures for comparative purposes as the season had opened three weeks late.
"The gap from last year will widen in December but February and March look good," one exporter said. "Arrivals are down from about 60,000 last week to probably 35-40,000 tonnes by the end of this week."
Ivory Coast opened its 1996/97 marketing season (October-September) three weeks later than usual on October 24 and initially expected a total crop of around 950,000 tonnes.
About 285,000 tonnes had arrived from October 24 to the end of November 1996.
The sources said that 100,000 tonnes had been taken by Ivory Coast's second port, San Pedro, so far this season. Ivory Coast's two main ports usually take less cocoa over the Christmas and New Year holiday periods.
Some cocoa is likely to be delayed by drying problems. Weather analysts point to rain in early December, normally a dry month.
But cocoa inspectors say quality is good, with humidity levels of 8-10 percent and widely ranging bean sizes averaging 90 per 100 grammes -- well within the export standard of 105 per 100 grammes.
"Some people are also concentrating on buying coffee," said one exporter. A large and slightly earlier 1996/97 coffee crop was diverting attention from cocoa, exporters said.
Last year's cocoa crop rose to a December peak before dropping off in January, with arrivals in 1995/96 reaching 668,000 tonnes by the end of December before the season ended with a record 1.2 million tonnes.
An unexpectedly strong mid-crop (April-September) boosted 1995/96 output, so analysts are now scouting cocoa plantations to calculate the prospects for this season as flowering begins.
A different 1996/97 cocoa crop profile is expected.
"The curve is flatter but more sustained than last year. February and March arrivals will push figures up again," said one analyst. Mid-crop forecasts are expected between now and January.
Port stock levels are unknown, but one set of figures showed exports since October 1 totalling 220,000 tonnes. Port sources said large shipments of up to 50,000 tonnes had since left but updated figures were not available.
Large stores of cocoa could be seen around Abidjan and San Pedro ports early this week.
"There is plenty of cocoa around and stocks now just depend on when and if contracts are going to be met," said one port source. "People either have cocoa but no contracts or they simply have not shipped yet."
Some companies said tallying arrivals had been more difficult since personnel changes in the Caistab cocoa marketing agency made by its new managing director, Yves-Marie Koissy.
"Information is thinner on the ground," said one exporter.
Exporters said continuing arguments with the Caistab over some of its official cocoa and coffee marketing and reference shipping freight rates, as well as its new electronic cocoa contract auctioning system, could also have slowed activity.
"The GEPEX (exporters' trade body) is still in discussions (with the Caistab)," said one exporter.
-- Abidjan newsroom +225 21 90 90
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Ivory Coast opened three days of cocoa sector reform talks on Wednesday aimed at fine-tuning donor-sponsored liberalisation policies, with bean quality high on the agenda.
"Liberalisation is about reducing the role of the state. We need less state but a better state," said Philippe Mian, president of Ivory Coast's Consultative Committee, which is hosting the talks which end on Friday.
Dutch Cocoa Association president Louis Bensdorp told Reuters two issues would dominate the talks.
"The main issues are the quality of the cocoa and the assurance of contracts," he said before going into talks.
Ivory Coast's Consultative Committee, grouping Ivorian officials, loan donors and international cocoa industry bodies, was set up in October under the terms of a World Bank Agricultural Sector Adjustment Credit (ASAC).
Ivory Coast has liberalised internal and some external cocoa marketing functions since 1990 but there have been industry concerns over cocoa quality and the functioning of a new commodities auction system in place since May 1996.
Other agenda items include an overall review of reforms, cocoa quality issues, local processing of cocoa and policy revision recommendations.
Ivory Coast's commodities minister, Guy-Alain Gauze, said reform revisions would help Ivory Coast's competitiveness.
"A problem remains with importers about quality," Gauze told reporters before going into the private talks.
"The proposals forming part of the sector reforms deal with quality and security of supplies for European and American importers," he added, referring to complaints by exporters that some firms were overbidding on the auction system to win contracts.
Revisions to the auction system would be discussed but were not officially on the agenda, Mian told Reuters.
"Nothing is perfect and the auction system could well have weak points which could be corrected and for which proposals could be made," he said during a midday break in talks.
Further cuts in the role of the Caistab marketing board would also be discussed, he added.
Dutch Cocoa Association president Bensdorp said industry would argue for changes to the auction system and seek better quality controls.
"What we do not like is the 85 to 15 percent rule as there is too little chance for foreign companies to buy cocoa directly," he added.
Under auction rules 85 percent of Ivorian cocoa export rights are auctioned to local exporters, with the remaining 15 percent reserved by the Caistab for direct sale to traders abroad.
"The problem is that, of the 15 percent, 10 percent is sold to Phibro so only five percent is available for the rest of international trade," he added.
U.S.-based trader Phibro has a long-standing cocoa contract with the Caisab which is due to expire this year.
Bensdorp also referred to concerns over cocoa quality.
"Usually we see a deterioration of quality after the main months, in fact about now. The main problem is a lack of proper quality checks," he said.
World Bank, International Monetary Fund, European Union, International Cocoa Organization, France's development agency and Ivorian officials will issue their findings on Friday. -- Abidjan newsroom +225 21 90 90
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Ivory Coast's 1996/97 coffee season has begun amid slow buying and reports of variable quality, industry sources said.
"SIFCA (the largest Ivorian buyer) has started buying, so we are likely to see others follow," said one large exporter. "You could say that marks the real start of the season."
Buying had been limited in December although up-country agents had been active with larger than usual volumes.
Output is put at 230,000-250,000 tonnes for 1996/97, against 180,000 in 1995/96.
The season was officially opened on November 14, rather than early October, as the Caistab marketing agency struggled to set a recommended price closer to falling world market levels.
"It will be a very large crop," said one local analyst. "The coffee is now mainly off the trees and being sat on by farmers at village level."
Buyers reported variable quality and humidity up to 15 percent in some areas, against export limits of 13 percent. "Quality is particularly good around (northwestern) Man but elsewhere you will find opinion dependent on who you talk to," said one.
One source put arrivals by January 10 at San Pedro port at 3,337 tonnes, but figures for Abidjan were less clear.
Bank sources said in December they were reluctant to put money into coffee because of fears borrowers would not receive transfer payments from Caistab and would default on loans.
"That remains the case," said one exporter. "Banks are certainly reticent, so purchasing is still low." Continuing low world market prices added to the uncertainty, others said.
Bush tracks had dried out and some farmers were profiting from January sun to dry produce that was still damp because of the failure of harmattan desert winds to arrive in some areas in late December.
"Some farmers are also being paid below offical, recommended (500 CFA) a kilo prices," said one buying source.
Prices ranging between 300 and 500 CFA per kilo were being offered, depending on area and quality, the source said. But others said they were offering up to 540 for top quality grades.
One industry analyst said 44 exporters were licensed, against 32 last year, so some would struggle to balance accounts amid more acute internal price competition.
Attention is also turning to a report on further coffee sector liberalisation expected to be with donor market reform sponsors by the end of January.
Private British consultant Landell Mills and Co will submit its report amid donor calls for an end to cross-subsidies to the coffee sector from cocoa profits from the beginning of 1997/98.
"The price support is running at around 100 CFA a kilo based on current world prices," said one source.
The focus is also turning to Association of Coffee Producing Countries (ACPC) talks on January 23 which will focus on pushing up world prices through voluntary export restraints.
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Ivory Coast's 1996/97 cocoa crop is likely to top one million tonnes after good January harvests and abundant flowering for the mid-crop (April-Sept), crop analysts and buyers say.
"The total crop will be at least one million tonnes," said one crop analyst returning from an upcountry tour of cocoa farms. "The flowers and cherelles (early pods) are there and with a little more rain we could see well over a million."
One source estimated arrivals by January 27 at over 750,000 tonnes. Industry estimates of arrivals up to January 20 from October 1, were in the 710,000 to 720,000-tonne range. This compares with around 800,000 in the previous season.
Attention is now focused on rainfall figures and pod survival rates in coming weeks for a firmer indication of midcrop tonnage.
Ivory Coast posted a record 1.2 million tonnes crop in 1995/96 after an unexpectedly strong 200,000 tonne mid-crop and has forecast 950,000 tonnes for 1996/97.
Crop analysts said pod loads were heaviest in younger hybrid tree farms in southwestern areas where rainfall had also been more favourable for late main crop and mid-crop development.
"Canopies are in reasonable shape and there are plenty of one to four inch cherelles and pods," said one analyst.
Farms north of San Pedro seen by Reuters still bore noticeable late main crop pod loads but older trees, around Daloa and Gagnoa, generally had few flowers and pods.
Upcountry buyers' stores were surrounded by large amounts of drying January cocoa, with more arriving from village farms.
"Cocoa is coming out fast. Farmers have no incentive to stock so we are seeing fresh crop," said one store owner in Meadji. "Exporters are not buying but we expect things to get (cocoa) moving again in February and March." Stocks would rise in some areas for a short period, he added.
"January has been better than last year," said one buyer at in Issia. "Our November estimates were too low." He and others agreed that February and March harvests would be down on 1995/96.
Buyers around Gagnoa and Daloa said most main crop pods had been harvested by mid-January but large amounts of cocoa still up-country would not be seen at ports until mid-February.
Harmattan wind conditions had returned to cocoa areas a week ago making drying of cocoa easier, but farmers said they expected rains to return after a brief wave of showers in mid-January.
A new manager at Ivory Coast's largest plantation near Gagnoa said care of trees would be more determinant for pod and flower survival rates away from hybrid areas.
"Farmers have not kept up maintenance and canopy trimming around here and the results are clear," he said.
He pointed to plantation trees at one side of a bush track with late main crop pods, and plenty of cherelles and flowers.
On the other side of the track, more densely planted and villagers' untrimmed trees on similar soil were largely bare.
Exporters' agents and buyers say cocoa purchasing has dropped off now that Ivory Coast's warehouses are full.
Shipments remain low on weak overseas demand.
"There are no shipments so exporters have cut purchasing," said one exporter. "At San Pedro, arrivals are coming in at 10,000 tonnes a week compared to 30,000 in December."
Exporters said port stocks estimated at upwards of 380,000 tonnes would shrink in February and especially March when they expect export contract deadlines to boost shipment levels.
Cocoa humidity levels of 6-8 percent were being recorded upcountry. Buyers said they would mix new arrivals with 8-10 percent cocoa stored in San Pedro stores waiting for an upswing in demand. Only 15 exporters out of 44 were actively purchasing, one said.
Shipping forwarders at San Pedro said empty warehouse space would rise from February. "Contracts will pick up next month but March will be a boom (for shipments)."
-- Abidjan newsroom + 225 21 90 90
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One of Ivory Coast's largest cocoa and coffee exporters, SIFCA, will appoint a liquidator for its loss making up-country buying subsidiary, SOGEPAG, but exporters and buyers say port arrivals will not be affected.
"Our cost calculations were wrong and farmers never really caught on to our new ideas," Pierre-Dominique Blind, spokesman for SIFCA, owners of the SOGEPAG buying subsidiary, told Reuters in an interview. "We lost too much money and could not go on refinancing debts."
"Purchase volumes were too small and farmers' debts became a vicious circle," said Blind, managing director of UCEPAG, a holding company set up by SIFCA to run SOGEPAG.
SOGEPAG's warehouses could be empty for the rest of the season after a liquidator is named this week, and SIFCA would probably take back assets it wanted, he added.
Liquidation is expected to take at least three months.
Minority 33 percent shareholder DAFCI, an Ivorian exporter, was not immediately available for comment.
UCEPAG figures show cocoa purchases of 46,000 tonnes of cocoa and 9,741 tonnes of coffee in 1995/96, but other exporters said the figure was underestimated. In 1994/95 the amounts were shown as 43,000 and 9,000 tonnes.
SOGEPAG was set up in 1991 and guaranteed farmers fixed farmgate prices when world prices dipped. It paid official reference prices while other buyers paid less, said Blind.
"Our operation was based on protection against prices going down, but prices went up after 1991," he said. "The aim was to take 20 percent of the market in three years but our sales only rose by about seven percent a year."
The total Ivorian cocoa crop in 1995/96 was about 1.2 million tonnes.
Up-country buyers said SOGEPAG had not understood buying strategy upcountry. It paid cash but sometimes three days late.
"Our strategy was wrong. Farmers preferred immediate cash in hand, even if less than our prices," said Blind. "We gave prefinancing and logistical support to farmers on good terms and then they would sell to someone else."
SOGEPAG built up the number of its sites to 17 from four at its inception.
Other exporters said SOGEPAG's closure would have no effect on the market. "SIFCA and DAFCI will probably take control of the key assets and others will step in to buy whatever is sold," said one.
"We will buy some of their trucks," said one buyer. "No cocoa will be left in the bush."
SOGEPAG has 120 vehicles, mainly collection trucks and tractors it used to hire to farmers and GVCs -- farmers' cooperatives which aim to sell directly to exporters.
SIFCA's parent SIFCOM is a main distributor of Nissan vehicles.
Blind said SOGEPAG was owed 160 million CFA francs for vehicle hire at one point but only 60 million had been repaid. "Farmers saw us as a cash cow," he said. "Variable cost inflation after depreciation of the CFA also got out of hand."
He said many modern trucks on the market were too sophisticated and expensive for farmers.
Some industry analysts said farmers had made money out of SOGEPAG but did not see why a decision had been taken to close operations at this point.
"It is a pity for the farmers. The World Bank had just approved funding for us to give them more training," said Blind. "Now they will be paid less than reference prices and many GVCs have poor little logistical expertise."
Ivory Coast, the world's largest cocoa producer, opened its 1996/97 cocoa marketing season on October 24, setting farmgate cocoa prices unchanged at 320 CFA per bagged kg but delaying an announcement on guideline buyers and exporters rates.
($1=512 CFA francs)
-- Abidjan newsroom +225 21 90 90
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Voters in Chad, who showed little apparent enthusiasm for Sunday's election to end their much-delayed transition to democracy, face a long wait before they know the shape of their new national assembly.
"Provisional results are set for January 15 and final results for January 25 after approval by the court of appeal," the president of the Independent National Electoral Committee, Pascal Yaodamnadji, told Reuters.
Runoffs are scheduled for February 23.
Polling for the 125-seat assembly, which began last Thursday for nomads in the sprawling and volatile African country with a Moslem majority and lively southern Christian minority, passed off calmly with no reports of major incidents.
A total of 658 candidates from 49 parties stood for the assembly, which will convene on March 31 to end the former French colony's transition to democracy.
Chad has known coups, civil war or conflict with northern neighbour Libya for much of its life from independence in 1960.
President Idriss Deby, a former northern guerrilla leader, seized power in the arid nation in a 1990 French-backed coup.
After repeated electoral delays, he won a multi-party presidential election in July after a runoff against southern rival and fellow general Wadal Abdelkader Kamougue.
Almost 68 percent of voters took part in the first round of that poll, which followed a March constitutional referendum. Voter interest tailed off in the second round, which many opposition parties urged their supporters to boycott.
About 3.5 million of Chad's 6.4 million people were eligible to vote on Sunday but there was little enthusiasm for the poll in the capital, which accounts for 10 percent of all voters and where turnout appeared well down on previous polls.
Some opposition candidates denounced instances of fraud.
Former national assembly leader Jean Bawoyeu Alingue, a defeated presidential contender, cited three types of fraud.
"Electoral cards were copied, pre-stuffed envelopes were taken into booths by voters and nomads have been allowed to vote in an uncontrolled manner," he told Reuters.
The 30 or so international observers, many of whom were yet to return from monitoring polling in the provinces, were expected to report their findings on Wednesday.
British European Parliament member Michael McGowan praised the organisation of polling in the capital. "On the whole the elections seemed to me to be well-organised and thorough."
Deby's Patriotic Salvation Movement heads the 27-party Republican Front coalition. The opposition, which alleged fraud in the presidential poll, has a rival 17-party coalition.
Election issues tended to be local or ethnic but diplomats said all parties sought fair distribution of any wealth from oil, expected to come on stream by the year 2000.
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Port dues at Ivory Coast's main port of Abidjan will rise by up to 6.4 percent from January 1 to fund expansion projects, a government statement said.
Rates would increase by 6.3 percent for ships, 6.4 percent for container gantry cranes, 5.8 percent for containers and 2.5 percent for cargo and other items, it said.
The charges, which caught shipping companies off guard, were agreed by Abidjan Port Authority in September but awaited government blessing. "The cabinet has approved the new rates," the statement said.
Shipping companies said the costs would probably have little impact but were awaiting more details from Port Authority.
"We have not done our calculations yet but if this is just a port charge rather than a direct handling charge it will passed straight on to the consumer," said one container line manager.
Others said growing competition on West Africa-European routes would mean some companies might choose to absorb some costs to attract business.
"Competition determines what costs are passed on," said another shipping manager. More ships had been deployed in the West Africa region recently as freight rates were higher than on Far Eastern routes.
"Port costs are a hell of a lot higher than in the Far East but freight rate earnings are also better," said the manager. "We will wait for clearer details."
International donors have been pushing for efficiency measures rather than investment in infrastructure as a way to boost cargo handling capacity. In December 1995 the government urged port operators to meet efficiency targets to attract private sector development loans from the World Bank.
"Things have definitely improved. Container throughput time at the port for imports was 17 days," said a container shipping manager. "Now it is only 11 and the target was set at seven."
The efficiency drive began last December but shippers say export cargo efficiency targets have been less successful. A target of three days was set for export container throughput.
"For exports we are talking about rapid documentation for transit cargo. Bureaucracy there has not changed much," said another line manager. This is mainly cotton from the Sahel.
Measures include shortening times for declaring ships' manifests to customs, under the threat of port fines, and avoiding duplication of paperwork.
Gantry cranes, plagued by downtime, were expected to be in use 90 percent of the time and handle 16 containers an hour.
Local shipping agents said they were also concerned by talk of a bunker surcharge. Large customs fines for non declaration of ships' bunkers have been levied over the past year.
"It's a problem. But the port needs money and still competes well with others in the area," said one. "Other ports in the area have applied all kinds of add-on charges."
Projects put on hold after devaluation of the CFA franc in 1994 included new gantry cranes, renovating a fruit terminal, building a fish wharf, dredging and a new container park.
Increasing quantities of Ivory Coast's principal cocoa and coffee exports are being shipped in containers. --Abidjan newsroom +225 21 90 90
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Ivory Coast must boost quality controls, improve farmer training and market different grades of cocoa separately, to retain its quality image, Netherlands Cocoa Association (NCV) head Louis Bensdorp said on Friday.
"Ivory Coast produces extremely good cocoa but somewhere along the line the bad 10 percent is bringing down the quality of the rest," NCV Managing Director Bensdorp told Reuters in an interview.
"Quality is the name of the game but it is easily lost."
Amsterdam, Europe's cocoa processing hub, imports cocoa mainly from Ivory Coast and increasingly in bulk form.
Bensdorp was speaking as Ivorian Consultative Committee cocoa sector reform talks continued. Cocoa quality and teething problems with a new export contract auction system have topped the agenda.
"There is a total lack of quality control," Bensdorp said, outlining three corrective measures he put before International Cocoa Organization, industry, donor and Ivorian government committee delegates.
He cited an urgent need for quality checks at all stages of the marketing chain and an increased role for farmers' cooperatives in training and quality checks.
"The third quality issue is what I call government interference," said Bensdorp. "The government has in the past said the mid-crop (April-Sept) would be kept off the market. In practice that means it is kept in upcountry stores."
Poor storage meant a risk of middlemen mixing deteriorated cocoa and smaller beans usually seen in midcrops with the larger main crop (Oct-Mar) beans preferred by industry for its higher fat content.
"About 15 to 17 percent of chocolate is cocoa butter so it is very important for the shelf life of products," Bensdorp said, adding that long storage and poor quality bean pushed free fatty acid levels above the European legal food standard of 1.75 percent.
"There is no specific trade condition on free fatty acids so we as an industry are thinking about what to do with existing cocoa bean contracts (to change that)," he said.
"That does not necessarily mean a free fatty acid clause but we need better checks on quality than we have today," he added.
"Good cocoa should be separated from bad cocoa and sold separately. There is a market for everything."
Ivory Coast has in the past announced it would withold mid-crop cocoa and process it at home to add value to its cocoa exports.
"Usually it is mixed in with main crop cocoa," said Bensdorp. He said poor quality at the end of the 1995/96 season had partly been due to a flow of cocoa from farmers in the southwest who were using a new hybrid tree but who lack the expertise of farmers in the less productive but long-standing eastern plantations.
Bensdorp said buyers of bulk cocoa, increasingly favoured by some processors over cocoa in jute bags, had put in place their own origin port quality checks. Most of these buyers were Dutch.
Consultative Committee president Philippe Mian, technical advisor to Ivorian Prime Minister Daniel Kablan Ducan, told Reuters more checks from village level downwards were needed.
"The only administrative control is at the port of loading," he said. "We are now preoccupied with quality and there have been discussions with who should be responsible for contracts, the industry or the state."
Other delegates feared that cocoa in Ivory Coast's full-to-capacity warehouses could deteriorate if not shipped by March.
Stocks have risen as exporters who bid too high for export contracts wait for better prices.
"I do not see the auction as the cause of quality problem but the rules have been discussed," said Bensdorp.
Ivory Coast's Caistab marketing board has pulled back from a monopoly internal and external marketing role and closed upcountry buying centres and quality checkpoints.
Export contracts are now allocated by auction as part of a donor-sponsored market liberalisation policy.
--Abidjan newsroom +225 21 90 90
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After years of war-induced poverty, gum arabic is offering drought-stricken Chad's rural poor a lifeline to the production plants of the world's food and beverage giants.
The name gum arabic may mean little to most people but the sticky acacia tree sap balls are a valued commodity in companies as diverse as Coca Cola Co, drug manufacturer Hoechst and bubble gum factories around the globe.
For impoverished sub-Saharan states producing the bulk of world demand, gum arabic simply means export currency.
"Gum arabic is one of nature's best emulsifiers but the industry has suffered from low prices in recent years," a senior U.N. Food and Agriculture Organisation (FAO) official said.
"But with synthetic food-substitutes losing favour prices could move up again as quality is improved," FAO's programme director Mahamat Ali Hassam told Reuters in the capital N'Djamena.
Soft drinks makers now consume 30 percent of world output but it is also used in sweets such as pastilles and chewing gum. The food industry uses it as a stabiliser and a preservative.
Chad, neighbour of the world's largest gum arabic producer, Sudan, is planning a quality blitz to win markets after years of falling yields and bloody turf disputes between foraging nomads and commercial farmers.
"About 70-80 percent of world output (about 35,000 tonnes) is African with Sudan producing 25,000 to 30,000 tonnes," said FAO Chad director Pierre Gence. "But Chad has the potential to match Sudan's output."
The FAO and the French aid agency Caisse Francaise de Developpement (CFD) are both working on projects to propel Chad's output to 30,000 tonnes from around 3,000 tonnes today.
Some experts say Chad has the capacity to produce 160,000 tonnes a year but that world demand would have to increase dramatically to accomodate that.
Gum arabic has a history dating back to ancient times. Arab traders brought it north from Africa in caravans to Middle Ages Europe and the Middle East along with gold, ivory and slaves.
It is also highly prized as a soluble food fibre because, unlike other strong vegetable emulsifiers with thickening and gelling qualities, it can be used in foods and beverages without altering texture.
It is used in everything from indelible ink for Chad's Koranic schools to textile dyes, glues, pastilles, perfumes and pharmaceutical products.
Despite traces of arsenic it is also nutritious, with 90 percent sugar and 2.5 percent each of fat and protein in addition to copper, calcium, sodium and magnesium.
Hungry nomads pluck gum arabic as they pass with grazing goats and cattle.
But state land rights for Chad's 25,000 producers are poorly defined. "People get killed over this," said one French worker.
"Our studies aim to entirely review and reform the whole sector so everyone's interests are respected and output can grow," said a spokesman for the French CFD development agency.
Trees take five years to mature yielding about 150 grams in each of two main harvests between November and March.
"Some super-trees yield eight kg per harvest so we are trying to find out their genetic code and plant more," said the FAO's Mahamat Ali.
Gum arabic is dried from squash-ball sized yellow blobs of sap into quartz-like chunks and split into top grade Kitir followed by Tarlah grades before it enters a highly secretive marketing chain in 2.5 kg Corlo lots.
Marketing data is kept secret.
Commercial planting has not got underway but existing trees have suffered from 20 years of drought. Rains of 300-500 mm are needed whereas some areas are only forecast to get little over 100 mm in 1997. Chad has already appealed for food aid.
Chad's four-year "Gum Arabic Project" to 1999 seeks to improve knowledge of the sector and its practices -- from commercial tree bleeding, tooling, drying, sorting, stocking, transporting to dealing along the murky marketing chain.
The FAO's two-year $285,000 project up to 1997 on inventory assessment, mapping, training and standards completes the picture of sectoral reform.
Neighbouring countries are also planning more output, from Senegal, Burkina Faso, and across the arid Sahel desert fringe to strife-torn Central African Republic.
Nigeria is already second only to Sudan in terms of production. India is the main producer outside Africa.
| 32 |
Light rains in Ivory Coast after a dry start to January will help mid-crop (April-Sept) cocoa crop development, particularly if they extend into February, a crop analyst said on Thursday.
"We have seen around average rain levels for January so far but a little more now and in February would help," another local crop analyst told Reuters.
Distribution of rains was patchy.
Most fell in central and northern cocoa and coffee areas, particularly around Man, Daloa, Yamoussoukro and Gagnoa, the data showed. Little fell in coastal areas around San Pedro and Abidjan.
"The front (associated with rain) is now over central areas," said one weather analyst. "Central areas have seen a surplus for the period but southern areas are in deficit," he added.
One crop analyst told Reuters rains seemed to have reached most cocoa and coffee areas.
"There seem to have been good light showers in most cocoa areas," said the crop analyst after returning from an up-country tour. "There is no dust on most bush tracks."
Dry harmattan conditions from the Sahara had now retreated northwards after failing to reach southern Ivory Coast as usually expected in late-December or early January.
Exporters and crop inspectors said cocoa humidity levels remained around 8-10 percent against exportable quality of eight percent, despite drying efforts
Coffee farmers have also had drying problems but export activity remained low after shipments put by port sources at 10,492 tonnes for October to December, exporters said.
Quality inspectors said a better picture of coffee humidity and quality after rains would emerge as arrivals picked up.
The data, from Ivory Coast's national weather station, showed the following rainfall for the second 10 days of January in key growing areas plus the commercial capital Abidjan:
Dalao 47.5 mm, Gagnoa 7.8 mm, San Pedro 0.1 mm, Tabou 6.2 mm and Man 0 mm, Dimbokro 4.6 mm, Yamoussoukro 44.8 mm, Aidjan 6 mm, Sassandra n/a, Adiake n/a, Korhogo 0 mm.
No data were available for Adiake and Sassandra.
-- Matthew Bunce Abidjan Newsroom +225 21 90 90
| 32 |
Ivory Coast might cut cocoa freight slightly for 1996/97 but a decision on rates is not likely to hold up shipments as it did last October, exporters and shipping lines said.
Shipments should start when export licences and finances are in place, they added.
"We have already written last year's (1995/96) rates into our costs for next year's (1996/97) accounts. Any change will be small," one major shipping line manager told Reuters.
"The government might choose to cut a bit as (shipping) costs have gone down since liberalisation," said a large fleet manager. He added, "You never can tell. I don't think they will cut, but certainly not much more than one and a half percent."
But there was uncertainty over how to fill in official forms, due to be in by October 15, requesting data on import and export cargo this year and rates to be applied in 1996/97.
"We have to get this done quickly and there still has not been a meeting (of trade body FEDERMAR) to decide how to fill in the forms and what to argue with the Caistab," said one shipping line marketing manager.
"We don't know if they want separate freight rates or the conference guide rate," he said. Shipping managers were trying to arrange a meeting, he added.
Cocoa shipments in 1995 were blocked from early October to mid-November when shipping lines rejected a 25 percent cut in cocoa and coffee freight rates to Europe set by Ivory Coast's Caistab marketing board. A rate of seven percent was eventually agreed.
Fob rates of 415,836 CFA per tonne for cocoa and 856,732 CFA for coffee were set for 1995/96.
"We have heard from the Caistab that rates should not change between this season and last season. But it is still open, there may be a change of one and a half percent in either direction," said another shipping manager.
The exporters' forum GEPEX foresees at most a small rate change. "I think after last year's problems it will be difficult to make much of a change to the rates," said one exporter.
A transport ministry official said 1996/97 rates would be stable. "It will be difficult to rock the boat again after last year. Liberalisation does not mean rates should be forced down artificially." The decision rested with the Caistab, he added.
The seven percent cut in the 1995/96 rate to northern Europe and an unchanged price for shipments to Mediterranean, British and French ports was agreed in November last year.
Freight rates were cut by 12 percent in 1992/93 but were left unchanged in 1993/94 and 1994/95.
Another government transport official said he was sceptical about the benefits of shipping liberalisation, which is part of wider donor-sponsored reforms aimed at increasing commodity market efficiency and transparency.
"All prices are set behind close doors. The Caisse pays to exporters the price set in the bareme but exporters are pocketing money by getting lower freight rates and rebates from shipping lines," he said.
An announcement of other 1996/97 marketing rates, including farmgate prices is expected this week, but some industry sources think the season might not get going until October 21 or 23.
Cocoa farmer prices are broadly expected to rise only in line with inflation, if at all, from 320 per kilo of bagged cocoa in 1995/96.
Coffee producer prices are expected to fall to 500-600 CFA per kilo, from 700 CFA in 1995/96, in line with lower world prices.
Export taxes are expected to remain stable for cocoa at 160 CFA per tonne.
"The coffee tax (150 CFA) is likely to be slashed," said an international banker, pointing to earlier World Bank advice to that effect.
- Abidjan newsroom +225 219090
| 32 |
Ivorian 1996/97 cocoa arrivals stood at around 390,000-410,000 tonnes by mid-December, after a slow start to the month, analysts and exporters say.
Exporters blamed a combination of crop profile and demand factors for the dip in December -- usually the strongest month.
The figures to December 16 were down from an estimated 540,000 tonnes by that date last year, but some analysts said a further 50,000 tonnes should be added to this year's total for comparative purposes as the season had opened three weeks late.
An averaged figure plus the 50,000 tonnes would put arrivals since October 1 at 450,000. Various sources put arrivals at San Pedro since October 1 at 130,000-140,000 tonnes with the rest going to the main port of Abidjan.
"Arrivals were slower than usual for December but in the past week arrivals have overtaken last year's (weekly) rate," said one exporter. "People are completing December contracts but January will be strong," he added.
Subsequent arrivals up to December 22 were said by exporters to be around 50,000 tonnes per week. They expected the deficit in arrivals compared to last year to grow in December before narrowing sharply in January, when arrivals pick up again.
Difficulty in obtaining export contracts from the Caistab marketing board and problems with bean drying after rains upcountry had accentuated the usual Christmas period drop-off.
Rains had damaged bushtracks, delaying collection and raising humidity and moisture to above acceptable levels in some areas.
"We are refusing some cocoa. There is a lot more coming down now the sun is out," said one Abidjan-based exporter.
Drying problems and poor fermentation had raised bean humidity to 11 percent in some areas, extending both normal and machine drying times.
"Humidity levels are slipping back down from anything up to 11 percent," said one San Pedro-based buyer, and the guideline farmgate price of 315 CFA per kilo had on the whole been paid to growers.
Upcountry buyers visited by Reuters over Christmas had taken the chance to dry out large quantities of fresh through to greyish moist beans as a wet early December gave way to usual dry sunny weather ahead of the holiday.
"It's patchy, but sunny days are here again," said one buyer. "Whatever was cut off in village stores or too wet can now be properly dried out," he added.
San Pedro received over 15,000 in the week from December 16, exporters there said.
Reports of smuggling to Guinea continue to surface but one Western diplomat recently returning by road from Conakry said road conditions were appalling and few covered trucks had been seen.
Large shipments in the past weeks are expected to cut into port stocks.
"Port area stocks are unclear but there are a lot of bulk shipments," said one exporter.
-- Abidjan Newsroom +225 21 90 90
| 32 |
Chad's cotton monopoly Cotontchad is forecasting rises in output and processing capacity in the 1996/97 November-October season, thanks in part to higher world prices.
At the same time, it is looking to new markets in China and Russia to boost sales of what is currently the nation's main source of foreign exchange.
But company administrative director Mahamet Tahi Kherallah says that despite the optimistic outlook, the industry remains hostage to external factors beyond its control.
"The future depends on the problems of world cotton price fluctuation, rain levels, and the exchange rate for sales in dollars," he told Reuters in an interview.
Africa's fifth largest cotton producer, majority state-owned Cotontchad limited the impact on production of a 1996 drought.
"The threat of drought has been overcome by enlarging the area under cultivation," Kherallah said. "Rains in (southern Chad) cotton areas were largely sufficient. We needed four months of good rain between May and September."
Rain in other areas was up to 50 percent below average.
Cotontchad sees its seed cotton purchases rising to a record 204,600 tonnes in 1996/97 from 157,476 tonnes in 1995/96. It projects the area under cultivation rising to 264,557 hectares from 209,750 in 1995/96.
Africa produces no more than five percent of world cotton.
Chad's National Office for Rural Development (ONDR) in November raised Grade 1 cotton farmgate prices for 1996/97 by 30 CFA francs a kg to 170 CFA to pass on world market price increases to farmers and encourage production.
The rise followed a 20 CFA increase in 1995/96, a move that had already encouraged farmers to plant cotton and use insecticides and fertilisers.
Total seed cotton processing capacity at Cotontchad's eight southern factories, which handle all the annual crop, has been increased to cope with the projected production increase.
In 1995/96 they produced 61,808 tonnes of fibre. In 1996/97, officials expect them to produce 83,991 tonnes.
"We recently added capacity to an existing factory at Pala, which is now our most modern facility," Kherallah said. "Quantities and quality are particularly good around Pala."
Processing capacity has also been boosted to 40,000 tonnes of seed cotton a year at Moundou and Kelo, with plans to do the same at Koumra over the next two to three years, he added.
Exports could be boosted, with China and Russia showing interest. Traditional markets for Grade 1 cotton are Portugal, Germany, Japan and France -- plus Nigeria for Grade 2.
With world average per capita consumption expected by some experts to rise to 7.24 kg in 1997 from 7.12 kg in 1995, Cotontchad says demand for its produce is already increasing.
"Our cotton is sold throughout the world but we are getting a lot of interest in people setting up business with us," Paris-based Marketing Director Ibrahim Malloum told Reuters.
Cotontchad hopes oil revenue, expected from 2000, will be used to improve dirt bush tracks. Road construction is under way in southern cotton belt areas but some tracks are closed to large trucks by law during two to four months of rains.
Cotton thrives in Chad's wetter southern areas. It was not farmed commercially until French colonisers gave Coton Fran, later Cotontchad, a monopoly on cotton purchasing and ginning.
Cotontchad is owned by Chad (75 percent), the CFDT French textile development board (17 percent), banks (six percent) and the CFD French Development Board (two percent).
An estimated two million of Chad's 6.4 million people depend directly on cotton, but textile manufacturing is still a minor industry.
The country's one textile plant, the partly French-owned Cotex factory at Sahr, took only 500 tonnes from Cotontchad in 1995/96, Kherallah said. The plant has a 1,000-tonne capacity.
($1=530 CFA francs)
-- Abidjan newsroom +225 21 90 90
| 32 |
Delayed export financing is slowing Ivory Coast cocoa arrivals but shipments for existing contracts will continue ahead of an imminent government decision on licences and marketing rates, exporters and shipping sources said on Friday.
"The central bank has stopped backing private lenders," said one exporter. "Buying activity has slowed down in the past two days."
No immediate figures on latest arrivals were available on Friday.
At least one major bank has stopped financing, and exporters expect others to follow suit unless rates are published soon.
"Exporters with licences from 1995/96 and enough money are carrying on buying and shipping. November contracts are fewer than December but still have to be met," said one exporter.
Ivory Coast opened its 1996/97 cocoa marketing season on October 24 but delayed an announcemement on guideline buyer and exporter marketing rates. "They have never been so late," said an exporter.
Almost no cocoa trucking activity was visible at Abidjan on Friday. But large consignments of cocoa can be seen in warehouses and total port stocks are now estimated by shippers to be over 100,000 tonnes.
One banker financing some large exporters said many of their clients had no cocoa in port and the owner of the stocks was not clear. A large shipment to Amsterdam from Ivory Coast is expected within two weeks.
"Port stocks will probably slip before cocoa arrivals pick up after licensing," said one exporter. "Activity will probably pick up after November 15 when licence finances have been sorted out."
Exporters are expecting total arrivals for November of between 150,000 and 180,000 tonnes, rising to a December peak before a slow January tail-off. Exporters' total year crop estimates pivot around 900,000 tonnes.
Shipping companies expected licences to be out by Friday but are now waiting for an announcement next week. "Many companies we deal with were saying licences would be out by the weekend but we have heard nothing about rates," said one source.
Licences are usually announced by the Ministry of Agriculture but no date has been set.
Caistab sources said this week a list of approved cocoa exporters had been drawn up by Wednesday but still had to be signed by the Minister of Commerce. The list had been expected by exporters on Wednesday.
Caistab president Yves-Marie Koissy is still in the U.S, but could return next week, said Caistab sources.
Exporters have rejected Caistab requests to them to argue for a cut in freight rates. They have also rejected a government plan to make exporters responsible for collecting buyers' unpaid income taxes.
"The Caistab is also trying to get exporters to pull down freight rates but they (exporters) are refusing to approach shipping lines," said another port source.
"Exporters want the rates set the same, so their rebate from the Caistab is not cut," the source added.
Pod counters recently up country said large quantities of cocoa were seen along roadsides and moving through warehouses.
"November arrivals will be strong as soon as the uncertainty is over," said one.
--Abidjan Newsroom +225 21 90 90
| 32 |
African coffee producers will meet before the end of February to discuss implementation of world export cuts set in Brazil on January 23, Ivory Coast's commodities minister Guy-Alain Gauze told a news conference on Thursday.
"A meeting will be held by the end of February," said Gauze who is also chairman of the Interafrican Coffee Organisation (IACO) producer group.
African and Asian states agreed at the end of emergency talks of the Association of Coffee producing Countries (ACPC) in Rio de Janeiro on Janaury 23 to cut robusta exports by one million 60-kg bags between January and June 1997.
A meeting in Bali on February 6 on sharing out the export cuts between the two regions would follow 10 days of informal discussions since January 23, an ICO spokesman told Reuters.
"We are satisfied by the results at Rio and the idea now is to put together control and verification mechanisms to ensure measures succeed," said OIC chief economist Donald Kaberuka.
Gauze did not specify the basis on which export curbs would be distributed between Asian and African regions, or between individual countries.
Arabica producers at the Rio talks also agreed to cut their output by a total of 300,000 (18,000 tonnes).
African producers had complained that previous export restraints had been ineffective in shoring up sagging coffee prices in late 1996, calling on non-member producers to join the ACPC.
((--Abidjan newsroom + 225 21 90 90))
| 32 |
Ivory Coast-based firms and new investors aim to boost local cocoa processing in 1996/97 but will not reach the country's 50 percent of production target by 2000, industry sources and analysts say.
"The 50 percent is usually understood to mean about 400,000 tonnes (beans) but we're still way off that," said a spokesman for Abidjan-based processor UNICAO, one of Ivory Coast's top processors with rival Callebaut-Barry.
The country can already process around 180,000 tonnes but the industry sources said other potential investors might lift the total by at least another 110,000 tonnes to nearer 300,000 tonnes from 1997 if plans are completed.
Ivorian exporter SICC told Reuters its first processing project is likely to take shape in early 1997. The firm handles a total of 200,000 tonnes of cocoa in 1996/97 for clients including Cargill's Netherlands processing subsidiary Gerkens.
"We cannot think of handling that much without going into processing. We want to start in 1997 and are now at the decision stages with our partners," Deputy-Director Guillaume Adome told Reuters in an interview.
He said plans partly hinge on government incentives.
"A minimum of 50,000 tonnes (of beans could be processed) at Abidjan or San Pedro depending on space availability," said Guillaume, adding that Ivory Coast's second port San Pedro offered better tax advantages.
"It (the plant) would cost about $2 million and we will do it, one way or another," he said.
At least four other exporters and foreign traders are said to be interested in processing in Ivory Coast.
French group CEMOI restated in December its interest in processing up to 60,000 tonnes a year in Ivory Coast but has not detailed plans.
"We thought Cargill or (Cacao) De Zaan would buy into UNICAO," said one exporter. Others said they were waiting to see whether Cargill or its subsidiary Gerkens would boost its presence in Ivory Coast after its supplying trader Phibro's cocoa purchase contract with Ivory Coast's Caistab marketing body ended in late 1997.
UNICAO says its own 1997 processing expansion plans will go ahead despite the December sale of a 30 percent holding of its parent, largest Ivorian exporter SIFCA, to Arthur Daniels Midland by rival W.R. Grace.
A third 21,500 tonne capacity production line would be ready by October with production under way around January 1998.
"Capacity (bean grinding) will then be 86,000 three lines," said UNICAO's deputy director Kanga N'Ze, producing 50 percent cocoa butter and cake and 50 percent liquor. Capacity in 1995 was 43,000 tonnes.
UNICAO's only main rival Callebaut-Barry has three plants operated by its subsidiaries SACO and Chocodi, grinding up to 80,000 tonnes of beans a year.
Analysts, who see 30 percent as a more realistic processing target, say the aim of adding value to exports might be hi-jacked by short-termism.
"It takes a year to build a plant from scratch but is everyone committed for the long-term?" said N'Ze. "Running, especially energy costs, are still high so why would a European firm move?"
Ivory Coast produced a record 1.2 million tonnes in 1995/96 but has forecast closer to a million tonnes for 1996/97.
Commodities Minister Guy-Alain Gauze said earlier this year fiscal reforms, a new investment code, various incentives and the prospect of cheaper energy from offshore gas should encourage investment in cocoa.
| 32 |
Cocoa buyers in central Ivory Coast say their purchases are down by 30 percent from this time last year and expect the country's total 1996/97 cocoa output to be under 850,000 tonnes.
"The estimates have been too high. The crop will be about 800-850,000 tonnes for the whole year," said one buyer. Most other buyers in the area visited by Reuters agreed.
"We have had two strong years but now we are going back to normal levels," said one buyer with nine purchasing centres. "Our business is running at 65 percent of last year."
The state of cocoa farms between the main central towns of Gagnoa and Daloa seen by Reuters varied widely with cocoa pod deterioration strongest in the north around Daloa.
Ivory Coast exporters said this week cocoa arrivals were down 25 percent on this time last year.
Exporters and buyers in southwest Ivory Coast expect arrivals of the 1996/97 crop to be no more than 900,000 tonnes.
Private forecasters last summer projected a main crop alone of 850-900,000 tonnes. The 1996/97 season opened on October 24.
Prime Minister Daniel Kablan Duncan said recently he expected his country's total cocoa crop to shrink to 950,000 tonnes in 1996/97 from a record 1.2 million tonnes last year.
Buyers in Daloa told Reuters production from older trees in their area would pull down average Ivorian cocoa production figures boosted by higher yields from young hybrids around Soubre and San Pedro in the southwest.
They said bean sizes varied widely from farm to farm and between trees, with a range of 90-100 per 100 grammes and 9-10 percent humidity.
Beans totalling no more than 105 per 100 grammes are considered exportable.
"The trees here are older and have not recovered from giving a massive mid-crop last year," said the biggest cocoa buyer in Daloa. "Overall quality is good but the beans are smaller and mid crop beans might be too small for export."
Several buyers said they would close their stores in June.
"Crop forecasts have been too high while pod survival has been poor. There is little on trees for the rest of the year," said the main Gagnoa buyer.
Pods had wilted on trees because of sparse rains since September and insects had thrived in the dry conditions as farmers could not afford treatments early in the harvesting season, said one plantation owner.
Six farms visited by Reuters between Daloa and Gagnoa showed plenty of wilted, deformed or undersized pods with insect damage and occasional "black pod" fungal disease.
Mature but discarded November and December-harvest pods lay in heaps on some farms with mid-crop flowering rare.
However, the situation south of Gagnoa was markedly different with little disease, insect damage or pod wilting.
"If farmers could afford to spray (treatments) other plantations would be in much better shape," said one farmer.
Several farms had good pod sizes and age distribution with flowering concentrated on some trees.
"Rains south of Gagnoa have been more spread out so the situation is better there," said the manager of one well-kept plantation.
He said Harmattan season sun mixed with some cloud cover and daily showers would help flowering for mid-crop pods.
Buyers said most cocoa had now been brought out of the bush with few village stores remaining full. Transportation to port would not be delayed much by road conditions, they said.
The up-country buying operations of recently liquidated SOGEPAG, a subsidiary of large Ivorian exporter SIFCA, have been taken over by Daloa-based private buyer Enza Diaby -- an associate of SIFCA.
Larger SOGEPAG stores have stopped receiving cocoa but smaller centres were operating. The firm offered cooperative-like terms and logisitical help to farmers.
"Diaby is running the small stores. He has enough trucks for collecting cocoa," said other buyers.
One farmer said long-term output around Gagnoa was set to decline as trees aged and government agencies encouraged farmers to plant rubber and diversify agricultural production.
-- Abidjan bureau +225 21 90 90
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Ivory Coast's coffee industry faces more Caistab market reforms and fresh uncertainties over its returns in 1997, exporters and analysts said.
"The Caistab has a battle on its hands to keep farmers interested while meeting obligations to liberalise the sector to meet (World Bank) loan conditions," said one analyst. "There could be a lot of changes in store and not all of them welcome."
Ivory Coast slashed its reference farmgate price to 500 CFA per kilo from 700 CFA and opened its 1996/97 marketing season late on November 14.
Prices were set high in 1995/96 to encourage rehabilitation of plantations, but world prices slid to levels well below prices guaranteed by the Caistab.
The World Bank fears a repeat in the coming year. It wants a rapid end to cross-subsidies to the coffee sector from cocoa earnings and is waiting for new Caistab chief Yves-Marie Koissy to unveil plans early in 1997.
One export bank risk manager doubted whether all subsidies to the coffee sector would be paid this year.
Some exporters project coffee output to exceed the 230,000 tonnes forecast by Caistab, which could mean higher-than-budgeted subsidies.
"We are not funding (exporters) until we are sure the Caistab will keep its word," the risk manager said. "It (Caistab) has funds but export margins are already non-existent."
Industry opinion is split on what action the World Bank should take when British consultant Landell Mills (LMC) presents its ideas for market liberalisation in January.
Ivory Coast no longer guarantees a set coffee price to farmers, using instead to a guideline minimum price.
"Internal prices have been liberalised but it is still not clear if you would be jailed for paying below that level. The law is not clear," said a buyer. "What is clear is the government exerts a quasi-monopoly on external marketing by its allocation of export contracts and export licences."
"We have nothing to fear if quality checks are kept in place along with some back-seat stabilisation functions," said one.
Thin up-country buying this month has seen merchants paying farmers less than the reference price. Farmers were being paid only 300 to 340 CFA per kilo, one crop analyst said.
One large coffee processor operating in Ivory Coast said it was now paying 40 CFA above the reference price for premium quality coffee, even though other buyers paid less.
"We are for a completely free market with quality checks," said a manager.
Exporters said they were generally satisfied with trading via a new electronic auction system introduced in May to make dealings more transparent. Cocoa traders using a similar system have complained about contract sizes and excessive bidding to win contracts.
Exporters expect no changes to the 1996/97 list of coffee marketing prices issued by Caistab in November.
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Europe's cocoa industry will shortly issue a draft contract document for increasingly popular loose-bean bulk cocoa shipment techniques, according to the head of the Dutch cocoa industry.
"We will put forward very shortly Netherlands Cocoa Association ideas on a bulk contract," Association Managing Director Louis Bensdorp told Reuters on the sidelines of a cocoa conference in Ivory Coast which began on Wednesday.
"We are in discussions with the AFCC (the French cocoa and coffee industry body) and the Cocoa Association of London," said Bensdorp. "It (bulk) requires changes in the contract conditions. We are thinking about how to write a new bulk cocoa contract for mega-bulk." he added. The contract would be on cost, insurance and freight (CIF) terms.
Mega-bulk, an industry term for the recent trend of loading cocoa ships with loose beans rather than 60 kilo jute bag-loads, gained favour after trial shipments from the Ivory Coast in 1996.
Another bulk technique involves pouring beans into containers packed with drying agents to prevent water condensation damage as ships steam from tropical origin to consumer country climates.
"It has revolutionised the industry," Bensdorp told Reuters. "We will receive 250,000 tonnes to 300,000 tonnes of cocoa at Amsterdam this year but next year we expect 350,000," he added. Amsterdam is Europe's cocoa processing hub.
Labour and time savings, as well as better quality, favoured the growth of bulk techniques.
"There is a struggle to keep costs down and bulk means everything is cheaper," said Bensdorp. Quality was better because of tighter origin port quality checks than for bagged cargo and selection of quality ships, he added.
One problem was that bulk ships could not get close enough to some Amsterdam receivers unloading facilities, meaning costly road transport by container trucks.
"I think containers are an intermediate step," said Bensdorp. "In future it will be done by transhipment to barges," he told Reuters at cocoa sector reform talks ending on Friday.
Bensdorp said large Amsterdam-based industry processors, including Cargill subsidiary Gherkens and Dutch processor Cacao de Zaan, still dominated demand for bulk.
"Soon you will see more bulk going into Hamburg and Hull " said Bensdorp. British trader E D and F Man has a new processing plant in Hull.
Bulk cocoa is not tenderable on London's LIFFE terminal market.
"It is useless to set up a separate exchange in Amsterdam so we have to find a way of doing it through LIFFE," said Bensdorp.
Cocoa exporters and receivers in Ivory Coast have put in place bulk loading facilities at both Abidjan, and the second Ivorian port, San Pedro port.
Ivory Coast's largest cargo forwarder, SAGA, told Reuters it plans raise bulk loading rates from 40 tonnes an hour to 100 tonnes to match rising demand for the technique.
Local exporters and European industry officials expect Ivory Coast to ship 270,000 tonnes in bulk in the 1996/97 (Oct-Sept) season, mainly to Amsterdam. West African shipments could reach well over 300,000 tonnes.
Ivory Coast exported aboput 120,000 tonnes of bulk cocoa in its record 1.2 million tonne output 1995/96 season.
-- Abidjan newsroom + 225 21 90 90
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Shipments of cocoa from Ivory Coast's two main ports are estimated to have risen to around 120,000 tonnes by end-November but official figures would not be ready until later this month, shippers and exporters said.
"About 120-130,000 tonnes sounds right," said one. Others agreed and said Abidjan and San Pedro port stocks had risen over the past week.
Official statistics for October and November are not yet available but about 100,000 tonnes had been exported by the same date in 1995/96. Shipments then had been delayed in a shipping freight rate dispute, making year-on comparisons difficult.
Under 10,000 tonnes were exported in October 1996 and volumes for this year are expected to be small as the marketing season opened over two weeks later than usual on October 24.
Exporters said arrivals in 1996/97 had reached 285,000 tonnes by end-November. Some put the figure at closer to 300,000.
"That would leave stocks of around 150,000 tonnes, which sounds a bit high," said one. But large shipments in early December would have already cut into that volume, he added.
Shippers looking ahead expected arrivals to slacken from mid-December to end-January before a steady flow until the end of March.
"There's also plenty of coffee to deal with this year. Cocoa should take off again in February and March," said one exporter. "There's not much demand and plenty of stocks in Europe."
Cocoa crop analysts said an extension of light rains well into December would greatly improve mid-crop prospects. Drying could slow arrivals but only marginally. Shipments would rise again from February.
"The trees are flushing now and large pods have been taken off. That gives trees more reserves for flowering," said one.
Peak 1996/97 harvesting is expected in late December and early January, boosting early February arrivals for shipments to meet benchmark March contracts.
Harvested cocoa usually takes about 21-27 days to reach ports for shipment, after fermenting, drying, sorting, bagging and transport.
"The year will certainly be drawn out until March," he said.
Mid-crop volumes from March onwards still unpredictable but will be favoured by continuing light rains.
Some shipping freight rate elements were still under discussion this week but those set on October 24 in the 1996/87 Caistab marketing agency price list were largely accepted. No delays to shipments were expected, said exporters.
Some exporters said they had negotiated cheaper rates for some destinations than last year, especially for U.S.-bound cargo, as premiums on space had dropped with arrivals volumes down.
-- Abidjan newsroom + 225 21 90 90 REUTER MPB
| 32 |
An Ivory Coast liberalisation study focusing on quality, competition and less bureaucracy will be ready as planned by January 31, according to sources close to reforms.
"Four options have to be reviewed," said one source. "Price stability while making each year self-financing (with no carryovers between years) will be looked at," the source added.
The donor-sponsored study by private British firm Landell Mills Consultants (LMC) would also seek to avoid pitfalls seen in countries such as Cameroon where unfettered liberalisation led to coffee quality problems and loss of premium.
Ivory Coast embarked on a series of coffee and cocoa sector reforms in 1995 as conditions for a three-tranche $150 million World Bank Agricultural Sector Adjustment Loan.
Although the guideline farmgate coffee price was cut by 200 CFA a kilo to 500 CFA when the 1996/97 season opened in November, exporters point to continuing low world prices and the need for further support for the sector out of cocoa revenues.
"We are in favour of complete liberalisation but with good quality controls kept in place," said one industry buyer. "The Caistab's role should be limited to a hands-off marketing role giving quality assurance and statistical information."
Coffee exporters expect support for coffee to run at around 100 CFA a kilo, as world prices remain low, until recommended prices are reset or entirely scrapped for 1997/98.
The Caisse de Stabilisation (Caistab) marketing board sets a guide price for farmers whereas once it dictated prices. Donors have already demanded further streamlining of its operations and increased transparency about a shadowy set of costs referred to in accounts as "Delta" costs.
Delta expenditures for 1996/97, which will partly determine stabilisation fund levels for coffee, are due to be set from January when the Caistab gives details of coffee forward sales.
"The problem is that the Caistab has not released any (forward sales) data since October," said one source. "That puts everyone in a very difficult position."
The Delta cost for both coffee and cocoa is budgeted to be largely unchanged in 1996/97 from 53 CFA a kilo in 1995/96.
The Caistab, whose new managing director Yves-Marie Koissy was appointed in September but did not formally take over until October, declined immediate comment on the planned report.
The Caistab employs over 900 people but with its role reduced it is expected to cut staff levels after overruning many budgeted running cost items in 1995/96.
"The real number of employees in unclear," said on source.
The report will also look at how the Caistab can cut marketing margins through competition to below levels in competitor countries.
"Some exporters who were expected to be off the list in 1996/97 for debts were let back in through the window this year," said one source.
Advice for further competition in transportation, quality control and coffee bean hulling is also under review.
Forward sales policy amid volatile world market prices and an increasingly spot-driven world market are also expected to be considered in the LMC report.
Ivory Coast aims to encourage plantation rehabilitation and boost output to closer to 300,000 tonnes a year from a forecast 230,000 tonnes in 1996/97.
The Caistab phased out purchasing centres from 1995/96 to speed up the flow of produce to Ivory Coast's main ports.
It has also ended its monopoly over the import and distribution of collection sacks for coffee upcountry, but provides protection to local manufacturers against cheap imports from Asia.
($1= 542 CFA francs)
-- Abidjan newsroom +225 21 90 90
| 32 |
Ivory Coast will only market its midcrop cocoa (April-Sept) if world price levels are right, Ivory Coast Commodities Minister Guy-Alain Gauze said on Friday after a three-day cocoa sector review.
"We will market the midcrop if prices are right," he told Reuters at the end of a Consultative Committee cocoa review with International Cocoa Organisation, industry, donor and Ivorian officials.
Cocoa stocks around Ivorian ports in January filled warehouses to a capacity estimated by trade sources to be close to 400,000 tonnes.
Cocoa futures in London LIFFE terminal market trading slumped to 18-month lows on February 6. May contracts were trading at 871 stg but by Friday's close had edged up to 886 stg after an afternoon high of 893 stg.
Traders noted slowing origin selling activity.
Ivory Coast's midcrop is usually of poorer quality than main crop cocoa, tempting some buyers to mix it in with main crop cocoa to get a better price. Industry buyers say this undermines quality.
The meeting of Ivory Coast's cocoa Consultative Committee reviewed sector reforms ranging from quality, export contract auction rules, security of supply for buyers and farmgate prices paid to farmers.
Industry delegates said they wanted better quality controls put in place after market liberalisation, separate marketing of good and bad grades of cocoa and rules to prevent overbidding at auctioning of export contracts.
Ivory Coast aims by the year 2000 to process 50 percent of an annual cocoa output at home and wants to stabilise its production at 900,000 tonnes.
Midcrop forecasts for 1996/97 are still not clear as flower survival rates after dry weather have not been assessed.
Pod counters said initial prospects seemed good after early pod setting on hybrid trees in south-west Ivorian plantations around San Pedro.
Ivory Coast produced an unexpectedly large 200,000 tonne midcrop in a record 1995/96 season of 1.2 million tonnes.
"It would be unwise for the government to interfere in a crop of this size," said one industry delegate. "The government has said in the past it would withold midcrop and has then used it."
-- Abidjan newsroom +225 21 90 90 (c) Reuters Limited 1997
| 32 |
Cocoa arrivals at Ivory Coast's ports this season could be 25 percent below last season's record 1.2 million tonne because of erratic weather and insect damage starting in July, buyers and exporters around San Pedro say.
They predict cumulative arrivals to the end of November of around 250,000 tonnes and of up to 300,000 for December.
"Mid-December to February will dip because of the rains in July," said one exporter in the southwestern port. "Harvests will now be later and more prolonged, but not over 900,000 tonnes."
Buyers said heavy July and August rains hurt flowers for December and January pods. Sunshine after August had helped the outlook for March while lighter rains, which started in early November, would boost flowering for mid-crop pods.
Widespread wilting of smaller pods was noted this week on on southwestern farms east and north of San Pedro last visited in September. Insect damage and "black pod" fungus had also been noticeable.
The Ivory Coast has slated 950,000 tonnes for its total 1996/97 output after private forecaster estimates of 850-900,000 for the main crop alone. The 1995/96 season hit a 1.2 million tonnes record after a higher than expected mid-crop of 200,000 tonnes.
But one San Pedro exporter said, "There will be no more than 900,000 tonnes for the whole year. It could have been better but pod deterioration, insects and maybe even the trees' natural cycle have had an effect."
Local buyers and other exporters in the southwest agree, some putting the output at even less, but they say mid-crop predictions are unreliable.
Few flowers and pods were seen on coastal farms and little cocoa was drying along roadsides. Tree pods and village stores were more plentiful in productive Meadji and Soubre areas.
Exporters and buyers in the southwest now matching cocoa arrivals data with last season's say volumes are down, with humidity higher at 8-10 percent and smaller bean sizes of between 93 and 100 per 100 grammes, against 85-90 last year.
"There is less cocoa than last year. It takes twice as long to fill a truck driving around the bush and it needs a lot of drying," said a buyer in Sassandra. Buyers elsewhere agreed.
Cumulative arrivals to end-November could be 250,000 tonnes, the sources said. One put registered cumulative arrivals at 213,000 to November 24, with 85,000 arriving in the week up to then. November arrivals last year topped 300,000.
Buyers and exporters foresee arrivals of around 250,000- 300,000 for December against about 400,000 in 1995/96.
A San Pedro exporters' agent said he had taken in 22,800 tonnes of cocoa this season with 10,000 still in stores and room for 25,000 more. Many San Pedro warehouses were full this time last year.
Another said their cumulative year-on arrivals were down 15 percent at November 24 and expected the gap to widen in December.
San Pedro's largest port handler expects up to 30 percent less volume this year and said arrivals to November 17 totalled 70,000 tonnes. The port expects to handle a third of this year's crop.
Cocoa quality is good but some mouldy, moist and deteriorated beans were being mixed in the rush to supply exporters.
"Some buyers can charge higher prices as export contracts have been sold up to March and have to be met," said one. Mould levels were around four percent, he added.
Some buyers have supplied farmers with insecticides and say dry Harmattan weather moving southwards will help drying. One 15-tonne capacity dryer was out of action after a fire at a San Pedro plant on Saturday.
Exporters said they now accept the 1996/97 list of marketing prices set by the government this month after a late start to the season. But they said the Caistab marketing board had not altered its auctioning system to prevent overbidding.
Smaller exporters say some people have been laid off until March as they cannot match prices bid over opening calls.
"About 750,000 tonnes have been sold to highest bidders but the Caistab has not sold the 15 percent it retains. Maybe they are waiting for higher world prices," one exporter said.
A San Pedro factory said it aimed to process 25-30,000 tonnes of cocoa this year.
-- Abidjan newsroom +225 21 90 90
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Ivory Coast's 1996/97 coffee crop is set to return to the 250-300,000-tonne levels seen before farmers neglected their trees in the early 1990s, exporters and up-country buyers say.
Coffee output in 1995/96 was around 180,000 tonnes and experts see the increase as part of a new good-moderate-weak cycle that tends to dominate the sector.
"It is a very good crop although there are some quality problems," one San Pedro exporter told Reuters.
"I think the crop will be at least 250,000 tonnes," said a large buyer visited in the coffee-rich areas around Man and Vavoua. "Exporters are not yet buying and the world price is still very low."
Prime Minister Daniel Kablan Duncan last week said the crop would exceed 200,000 tonnes after a 32 billion CFA franc rehabilitation plan, favourable weather and better maintenance.
The government set a higher 1995/96 price to encourage production, but reference farmgate coffee prices were set lower this year to lessen government subsidisation of the sector.
Ivory Coast slashed its 1996/97 farmgate price to 500 CFA from 700 CFA for unhulled green coffee cherries, with lower prices for hulled cherries.
Most buyers and exporters visited by Reuters in a tour this week have not yet seen a full 1996/97 marketing list detailing their commissions, but they said they would have to accept rates shown in a copy obtained by Reuters.
"Buyers will lose out on commission," said one. Exporters said operations would go ahead in spite of some objections.
The new marketing season opened on November 14, delayed from early October.
Coffee marketing would get underway from mid-December as usual after cocoa harvests tail off, San Pedro exporters said.
"Most coffee is now held in village stores and the weather means drying and sorting will take more time," said one buyer.
Good yields meant some farmers had stripped ripe and unripe beans and mixed them together, they said.
Large amounts of coffee, both green and ripe red cherries, were this week seen by Reuters drying, some mixed together, along roadsides and in bush clearings, particularly in the north. Green cherries are bought at discounted prices.
Well-managed plantations visited were harvesting once a month but many trees around villages showed signs of unselective stripping, buyers said.
"Farmers take less care when quantities rise so we will have to consider the price," said a Daloa buyer. "Exporters have not put in orders yet so we are not buying."
One Abidjan-based exporter who went up-country this week also said quality was down. "It is pretty bad in some places but the quantities are excellent," he said.
One crop analyst recently forecast 1996/97 production at 230,000 tonnes but most buyers and exporters said the figure was too low. Some up-country buyers said output could even be higher than 250,000 tonnes.
One expected 300,000 tonnes this year but most estimates put 1996/97 yields at one-third higher than the previous season, matching expected percentage drops in cocoa output.
A mild dry season favouring flowering and the natural production cycle of coffee trees had lifted the crop from a relatively poor 180,000 tonnes range in 1995/96, said Jean Toullec, a plantation manager in Gagnoa.
"I think 250,000 tonnes is possible as farms are being well maintained," he said. "We are seeing 600 kg of coffee per hectare each harvest instead of 450."
-- Abdidjan newsroom +225 21 90 90
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Revisions to Ivory Coast's coffee and cocoa auction system have been finalised in line with donor loan conditions and need only government blessing to come into effect, donor sources and exporters say.
"It could be done in 12 hours if the government wanted it," one exporter told Reuters on Tuesday.
Talks with the World Bank and the Caistab cocoa and coffee marketing board to boost transparency and prevent overbidding were concluded in September, he said.
"There will be a weighted allocation among the highest bidders in proportion to the size of each bid," said a banker close to the reforms.
The Caistab launched an electronic screen auction system to replace telephone dealing six months late in May to meet World Bank loan conditions, but it has been under review since July after complaints.
Bankers said the final touches needed ministerial approval before $45 million of a three-tier $150 million World Bank loan to Ivory Coast could be disbursed in mid-October.
"There will be changes in management rules when Yves-Marie Koissy (the new Caistab president) arrives but the management will have to be approved by the government rather than the Caistab," one told Reuters.
The exporter confirmed that the Caistab would award export contracts for the price and quantity bid by the five highest bidders, but bids would be downscaled pro-rata if they outstripped total sales slated for that session.
One source close to the market said the system had been flawed. "If you knew the quantity on sale at a particular time you place a high bid for the right amount and walk away with the lot. Apart from that it was a matter of speculation with the best information to hand or who you knew," said another.
Smaller exporters, cooperatives and unions say exporters with less financial clout in international markets were pushed aside by overbidding.
Caistab staff said Koissy, appointed in September but yet to finish his contract with the International Monetary Fund in Washington, was due in Ivory Coast on October 9-10.
This raised expectations that the 1996/97 cocoa marketing season would open as announced on October 15 despite some doubts in the market. Koissy would then leave again to return at the end of the month.
Exporters had complained that two European-backed firms had priced others out of the market earlier this year to win contracts under a rule that rewarded the highest bidders.
Under the existing system the Caistab offers to sell an undisclosed quantity of produce in two daily sessions.
The highest bidder in terms of price gets the quantity he requests at the second highest bid price provided there is enough produce on offer. Anything left over goes to the next highest biddder at his price and subsequent buyers thereafter.
Donor sources say $60 million of the $150 million loan have been granted already as the auction system was in place even though about 600,000 tonnes of the 1996/97 had been sold forward by telephone before the auction opening in May.
"We expect next year's crop to be entirely sold through the auction. This year the only condition was for it to be operational," a source close to the negotiations said.
He said a third, $45 million, part of the loan would be given in 1997 depending on the auction's success. London trader ED & F Man in a September report put the total forward sale of 1996/97 crop by the end of August at 590,000 tonnes, 65,000 up on the previous year.
"I would say the figure, which is not really known, is closer to 500,000," said the source close to the negotiations. "Next year all the cocoa should be sold on the system."
($1=515 CFA francs)
--Abidjan Newsroom +225 21 90 90
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Revised rules for Ivory Coast's electronic cocoa and coffee auction system have been agreed to stop overbidding, a source close to discussions on the issue said.
Changes agreed between marketing board Caistab, exporters and the World Bank were expected to be put in place but no date had been set.
"Bidders will be held to the price they offer rather than the second highest bid price now applied," said the source.
"There are two main changes we have agreed which should now be applied quickly," he told Reuters, pointing to a date in late December or early 1997.
The second rule change would allow exporters to buy 15 percent of contracts previously reserved for Caistab direct sales to traders abroad if prices were right, said the source.
Existing rules mean the Caistab's 15 percent is withdrawn and submitted for later auction even when exporters are prepared to pay more than outsiders.
The rules were originally designed to ensure lots could be held back in the hope of higher offers later.
"Direct sales only act as a safety valve when traders bid more than exporters," said one observer. "The changes on that point will favour the exporters as more will remain on offer."
Contracts would also be awarded to the five highest bidders rather than one and scaled down pro rata if total demand outstripped supply. Bids are made without knowing what quantities are on offer for a particular session.
The donor-backed auction was launched on May 2 as part of a $150 million World Bank loan deal, but Commodities Minister Guy-Alain Gauze said at the time it could lead to distortion of contract prices.
"There is a double speculation here because the futures
market is a type of speculation and the same goes for the auctioning system," he said.
Up to 115,000 tonnes of cocoa is estimated by exporters and industry analysts to have been sold forward for 1996/97, plus another 100,000 tonnes for 1997/98, since the new screen-based system replaced telephone trading.
About 660,OOO tonnes of 1996/97 cocoa was sold before the auction opened.
Exporters told Reuters average quantities now offered at each auction session were too small.
Others said exporters had bought cocoa on the spot market but lacked Caistab contracts for shipping to clients abroad.
About 2,500 tonnes are auctioned daily, or about 20,000 tonnes in each of 50 trading weeks after allowing for about 15-20 percent destined for local production, one said.
"We would prefer two weekly sessions of 10,000 tonnes to make sure we can secure whole contracts in one go," he said. "Coffee contracts are smaller so the same problem doeen't arise there."
"Support for the system is disappearing, especially for physicals traders. Most of this year's crop is sold so we are really talking about contracts for next year," said one exporter.
The exporters' GEPEX trade body was still in talks with the Caistab this week after claims that a few firms had won too many contracts by bidding unrealistically high prices.
Exporters have said they lack the financial clout of foreign operators and face higher costs.
"It (the auction) is completely unworkable," said one exporter.
The Caistab has estimated a total of 950,000 tonnes of cocoa and 230,000 tonnes of coffee for the 1996/97 season.
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Ivory Coast 1996/97 cocoa marketing season began on Thursday with the farm-gate price unchanged, the export tax lower, but confusion over freight rates.
Agriculture Minister Lambert Kouassi Konan told a news conference late on Wednesday that the farm-gate price would remain at 320 CFA francs per bagged kilo.
Kouassi Konan, whose comments were broadcast on Ivorian state television on Thursday, said the Droit Unique de Sortie (DUS) export tax would be cut from 160 CFA francs to 150.
"To maintain the price, the government itself had to agree to a sacrifice of about 10 billion CFA francs, through the lowering of the Driot Unique de Sorti for cocoa," he said.
"If we had not made this cut we would have had to touch the price. The head of state insisted that the price of 320 CFA be maintained for our producers."
Exporters had been expecting no significant price change.
Shipowners spoke of disagreements with officials over an indicative freight rate for 1996/97.
The Office Ivoirien de Chargeurs had requested detailed information on proposed freight rates on shipments for 1996/97, they said.
"We cannot give that kind of information now that markets have been liberalised. This is a part of our business strategy," one said.
"Normally (the Ivorian shipping industry forum) FEDERMAR would organise a meeting to discuss matters but we have been waiting."
Kouassi Konan said the government had approved on Wednesday without amendment a decision taken by the Caisse de Stabilisation marketing board on the campaign.
Noting that the 1995/96 campaign was ending on Wednesday, he added, "As a result, remaining stocks must be declared to the Caistab."
The opening of the season had been delayed by about three weeks. The government had given no explanation but some exporters linked the delay to the appointment only last month of new Caistab head Yves-Marie Koissy.
Koissy, who previously worked for the International Monetary Fund in Washington, has formally taken over but is not expected back in Ivory Coast until mid-November.
The 1995/96 season produced a record of around 1.2 million tonnes but a dispute over shipping rates blocked exports from early October to mid-November.
Export financers say bank liquidity was good with interest rates down on last year after Ivory Coast repaid some external debt.
"When exporters present their licences and backing contracts we can go ahead. Export licensing should be no problem," said an international banker.
Commodities Minister Guy-Alain Gauze, speaking on the sidelines of a two-day ministerial review in Gabon of the 1993 International Cocoa Agreement, said on Monday that Ivory Coast's 1996/97 cocoa production would be between 900,000 and 950,000 tonnes.
--Abidjan newsroom +225 21 90 90
(c) Reuters Limited 1996 (c) Reuters Limited 1996
| 32 |
Chad holds much-delayed parliamentary elections on Sunday with voters hoping that democratic reforms and oil development will bring a lasting end to sometimes bloody ethnic rivalry.
An estimated 300,000 nomads in the sprawling arid nation on the edge of the Sahara Desert started voting on Thursday, three days before the rest of the 3.5 million voters throughout the Moslem north and centre and largely Christian south.
A total of 658 candidates from 49 parties will be vying for the 125 seats in a new national assembly which will convene on March 31 when the former French colony's democratic transition finally draws to an end.
"Oil is really what is at stake. Christian and Moslem differences have calmed although Islamic fundamentalism is rising," one diplomat told Reuters.
Polls open from 7 a.m. (0600 GMT) to 6 p.m. (1700 GMT).
French troops, stationed in Chad under a defence pact, will help fly voting materials and the 30 international observers to far-flung polling stations.
President Idriss Deby, the former northern guerrilla leader who seized power in a French-backed coup in 1990, won a long-delayed presidential election in July against southern rival and fellow general Wadal Abdelkader Kamougue.
Deby's Patriotic Salvation Movement, leading member of the 27-party Republican Front coalition, starts favourite to win Sunday's election or to be able to cobble together a working majority after the poll.
Election officials expect vote counting to end by Wednesday, provisional results a week later and final results by January 25, once the appeal court has checked them. Any run-offs will be held on February 23.
Many opposition parties disputed the first-round results of the presidential poll and urged their supporters to boycott the runoff but polling passed off peacefully. The opposition are grouped in a 17-party coalition.
The capital was calm on Saturday following a peaceful campaign, which ended on December 31.
Election issues tended to be local or ethnic but diplomats said that all parties were looking for a fair distribution of any wealth from oil, which is expected to come on stream by the year 2000. Chad has about 100 ethnic groups.
"People still largely vote on local grounds and Deby is not president of all Chadians," former national assembly leader, Jean Alingue, another defeated presidential hopeful, told Reuters.
"Turnout will be low because people know the fraud apparatus is still in place and nothing much will change," he predicted.
Chad has known coups, civil war or conflict with northern neighbour Libya for much of its life from independence in 1960.
It had a 57-member interim legislature under a 1993 transitional charter. Elections were repeatedly delayed, the parliamentary poll at least twice in 1996. Election officials cited organisational delays.
| 32 |
Security forces in Chad have summarily executed scores of people since a November official decree sanctioned instant justice for criminals caught in the act, local human rights officials said on Friday.
A pregnant woman, streetchildren and supected thieves are among victims of public executions reported, but human rights groups fear scores of other killings were carried out secretly.
"The policy has been carried out since November. It is quite open but the total numbers killed are not," a charity worker who gave her name only as Marie-Odile told Reuters.
"We are called out to scenes of executions and we talk with relatives of those killed," she said.
Officials confirmed the shoot-at-sight decree, but refused to go on the record. Instead they cited a public statement by President Idriss Deby whose office issued the order to paramilitary gendamrie commanders nationwide.
"N'Djamena is being held hostage by real organised gangs which, when they are apprehended by the law, are systematically freed again by the justice system. After they are freed they continue to give law enforcers problems," Deby told a news conference after meeting rights groups on November 23.
Insecurity is a major problem in Chad, which has been gripped by internal conflict or war with Libya for more than two decades until 1990.
"Crime is a huge problem. The whole place is run by the army and bandits and roads outside N'Djamena are subject to roadblocks by robbers," a Western resident said.
The vast but largely desert country also borders the volatile states of Sudan and Central African Republic, with whom it is seeking a common strategy against cross border banditry.
A transport worker at a dock on Lake Chad was among victims of the shoot-to-kill order listed by the human rights groups.
"A docker accused of breaking into an empty container was executed in the market. The shooting caused one pregnant woman at the scene to miscarry under emotional shock," the Chadian Human Rights League (LTDH) said in a December 26 report.
A Paris-based human rights group, in its account of the executions, said a pregnant woman suspected of stealing grain in a market was shot dead on the spot by gendarmes on November 16. A boy was put in a bag and shot dead on the banks of the Chari river in similar circumstances two days earlier.
Three suspected livestock thieves were shot in public on December 26, the International Federation of Human Rights Leagues told Paris daily Liberation.
A copy of the November 14 order to security forces seen by Reuters in N'Djamena read in part:
"We remind you once again that robbers must not be the object of normal procedures (of arrest). If one is caught in the act, you must immediately proceed with his physical elimination.
"Non-application of this order will result in very severe punishment including possible loss of rank and sacking from the force."
LTDH workers say two gendarmerie officers who leaked the order were taken into custody and had not been seen since. The two, named as Job Mbaibougue and Abel Djimong were arrested on November 23 and taken to Faya Largeau prison, they said.
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