And the $64,000 question, How much are the traders and their chavista friends making off these deals?
* Half of PDVSA's 2009-2011 shipments from 3rd countries
* Agreement aimed to eliminate reliance on intermediaries - supposedly...
RPT-PDVSA turns to traders to sustain Ecuador oil deal | Reuters
Mon Jun 25, 2012 9:00am EDT
By Marianna Parraga and Daniel Wallis
CARACAS, June 24 (Reuters) - Venezuelan state oil giant PDVSA has had to buy dozens of extra fuel cargoes from countries as far away as Estonia and Saudi Arabia to keep up its side of a 2008 oil supply deal with leftist ally Ecuador, according to traders and sales documents.
In an examination of shipping data that highlights the practical risks of political trade deals, Reuters found that half the fuel Venezuela sent to Ecuador, which cannot process its own heavy crude, came from third countries, often via trading companies including Glencore.
What was meant to be an example of cooperation between ideologically aligned states, with Venezuelan President Hugo Chavez importing Ecuadorean crude in return for refined fuel, has instead become another sign of problems in PDVSA's refining network and a profitable niche for foreign traders.
It is also the latest indication of difficulties for PDVSA, one of the world's biggest oil companies and the cash cow of Chavez's "21st century" socialism. In an election year in Venezuela, PDVSA's finances are under growing pressure as Chavez digs deep into its coffers to fund welfare programs.
The shipments to Ecuador were corroborated by some traders involved in the deals - and show that the system appeared to stumble after its first year.
So Venezuela turned to third countries and traders, often derided by Ecuadorean President Rafael Correa as speculators, for many of the supplies. Sources said Venezuela paid the transport costs for bringing cargoes from countries that also included Britain, France, the Netherlands and Colombia.
"PDVSA has made deals but then doesn't have the agreed products, whether due to problems with refining, production or quality," said one trader involved in the transactions who asked for anonymity.
The bottlenecks in PDVSA's refineries - from accidents to outages and unplanned stops for maintenance - are well-known.
But the dynamics of the Ecuador deal underscore a less familiar truth: as Chavez inks ever-growing numbers of pacts with political allies, PDVSA has found itself in the improbable role of middleman. PDVSA officials did not immediately respond to a detailed request for comment.
Trading companies Glencore, Trafigura and PRSI Trading were hired by PDVSA to buy fuel for Ecuador on the open market, the details of the transactions showed.
Between 2009 and 2011, 53 percent of Venezuela's shipments to Ecuador were sourced from third countries, with traders accounting for 39 percent, according to a database of the shipments compiled by Reuters and Armando.info, a Caracas-based network of investigative journalists.
'ELIMINATE THIRD PARTIES'
The remaining 47 percent came from Venezuela and its overseas storage and refining facilities, according to the study. In total, shipments valued at $947 million were put in the hands of intermediaries during that 2009-11 period.
It was not clear how much traders made on the deals.
The agreement signed with much fanfare by Chavez and Correa four years ago s ays state oil company Petroecuador would supply Venezuela with Ecuadorean crude for processing by PDVSA refineries, and would receive fuel in return from Venezuela.
That way, the accord said, it will "eliminate intermediaries from direct participation in the buy-sell process."
Nevertheless, the Venezuelan government says it always planned for there to be scope in the agreement to vary where the crude was sent, and where the products for Ecuador were sourced.
"What we are doing is a triangulation," Venezuelan Energy Minister Rafael Ramirez said when asked by Reuters about the agreement, referring to the practice of receiving Ecuadorean crude then sourcing refined products from abroad.
"We receive their oil and we determine its value carefully. It is sold, and we get the products they need, of the quality they need, and it is sold to them."
The Ecuador deal is one of a host of oil deals that Chavez has signed with political allies - including China, Cuba and more than a dozen other nations in Central America and the Caribbean - many of which have been criticized by Venezuela's opposition before the Oct. 7 presidential election.
The opposition says Chavez rewards allies with crude on easy terms, including nations with questionable rights records such as Syria, Iran and Belarus. His government routinely dismisses such criticism as "counterrevolutionary" lies.
Chavez's government has also funded literacy programs, schools and health clinics in several leftist Latin American nations, winning him political influence in recent years and prompting some leaders to turn their backs on Washington and strengthen relations with China and Russia instead.
The oil agreements are a major factor putting pressure on PDVSA's increasingly constrained cash flow: in some cases, customers pay for shipments in exchange for goods and services.
The company also has to contend with falling global prices, and heavy local subsidies that mean Venezuelans enjoy the cheapest gasoline in the world.
RECORD REVENUE
To be sure, PDVSA still has a lot of financial clout. Its net profit jumped 42 percent to $4.5 billion last year on record revenue of almost $125 billion.
And it is still able to make huge contributions to Chavez's government - they doubled last year to nearly $50 billion - that help pay for his signature social programs, a central element of Chavez's re-election bid.
Companies including U.S. majors Chevron and Exxon Mobil Corp, Brazil's Petrobras and Petrochina also delivered cargoes to Ecuador on PDVSA's behalf under the deal, according to the bills for the shipments.
Individual traders confirmed the trend and various transactions involving their companies.
They said Venezuela's state oil company does the same thing to cover shortfalls in supply deals with other countries. Data on those agreements was not immediately available.
"PDVSA buys in the same way to supply Argentina, Uruguay and Bolivia," a trader told Reuters.
It would not be the first time Chavez's administration has worked with Western traders: Trafigura helped it beat a months-long, opposition-led strike that all but halted operations by PDVSA's own tankers during 2002 and 2003.
Part of the problem is that Ecuador produces heavy crude, like the majority of Venezuela's oil, meaning there is competition for access to Venezuelan refineries that process it.
That was cited by Venezuela's government in 2007 as one of the main reasons why the two nations had not signed a similar agreement earlier. But Ramirez later said it had been decided that PDVSA's U.S. refining subsidiary Citgo would handle some of the cargoes from Ecuador, with the rest going to Venezuela.
Sourcing fuel cargoes going the other way has proved expensive. For example, in June 2009 Trafigura chartered the Bright Express tanker to ship 263,500 barrels of catalytic naphtha, used for making gasoline, to Ecuador from Yanbu in Saudi Arabia. Maritimes sources say that journey alone will have cost PDVSA some $1.2 million.
"Trafigura was carrying a lot from Venezuela to Africa that year, so certainly it suited it to do the return journey bringing (products) from Yanbu," said a maritime source involved in PDVSA's shipping logistics.
"These are business opportunities that traders can't ignore."
REFINERY REVAMP
Asked by Reuters about the agreement, Petroecuador's general manager, Marco Calvopina, said it had always been expected that PDVSA might procure Ecuador's fuel from third countries.
"They handle big volumes of oil products. They can always find them on better terms than Petroecuador," Calvopina said.
"We have always compared the prices Venezuela offers us against the market ... sometimes we take them when it's convenient for the state, and on other occasions we have not."
Petroecuador has complained to PDVSA about the delayed arrival of some cargoes, and at times about the quality of the fuel delivered, the study of the shipping records showed.
Ecuador, OPEC's smallest member, currently pumps around 500,000 bpd of crude, just about a sixth as much as Venezuela.
As part of a big plan to revamp its fuel production and become an exporter within three years, Ecuador is investing $750 million to boost efficiency at its largest refinery, the 110,000 bpd Esmeraldas facility, and will invest an additional $600 million to enable it to make higher-quality products.
It says it also plans to spend $800 million overhauling its smaller Shushufindi refinery in the Amazon region.
At the center of the efforts is another project that also involves Venezuela: the construction of the 300,000 bpd, $12.5 billion Pacifico refinery, a PDVSA-Petroecuador joint venture slated to begin production in 2015. Ecuador says it is in talks with China about financing for it.
In April, Ramirez hailed Ecuador for "strengthening its capacity" to distance itself from market intermediaries who had undervalued its crude. A month later, Ecuador's foreign minister, Ricardo Patino, was in Caracas for talks with officials.
He said the two nations' collaboration should inspire similar pacts worldwide. "We are an example that can be turned into a form of global exchange," Patino said.
RPT-PDVSA turns to traders to sustain Ecuador oil deal | Reuters
June 25, 2012
#Guatemala introduces sweeping #mining law reforms - Mineweb.com
Guatemala introduces sweeping mining law reforms
Guatemala's Union of Extractive Industries says it will not support sweeping reforms to the nation's Mining Act, which include permanent royalty increases and the creation of a state mining company.
Author: Dorothy Kosich
Posted: Monday , 25 Jun 2012
RENO (MINEWEB) -
The Ministry of Energy and Mines (MEM) has introduced amendments to 30 articles of the country's Mining Act, one of which would require 147 companies with operating licenses to pay new royalty rates.
The amendments would also replace a voluntary agreement signed earlier this year between the mining industry and Guatemala's President Otto Perez Molina which increased the royalty rate on gross revenue by 400%. Gold and silver companies now voluntarily pay 4%, while base metals pay 3% and industrial minerals remained at 1%.
As a result the state is expected to reap royalties between Q600 million (US$76.38mn) to Q700 million (US$89.11mn) this year, up Q500 million (US$63.65mn) more than previously paid by Guatemala's mining industry.
The legislation also proposed the creation of a state mining company to possibly encourage government participation in Guatemala's mining and oil projects.
The MEM amendments would also establish a mining fund to distribute incomes from royalties including 35% to the community where the mine is located and 20% for the remaining communities in the department in which the mines operate. Guatemala's Ministry of Social Development will get 20% of the royalties, the fund for national disaster emergencies 20%, and MEM and the Ministry of the Environmental and Natural Resources would receive 3% and 2%, respectively.
The legislation would also create a national system of mining information, as well as regulations for the reclamation of abandoned mines in Guatemala.
The MEM also proposes a crackdown on illegal mining in the country including the disposal of materials and chemicals in rivers.
A Mining Council, chaired by the Ministry of Energy and Mines, would be convened to develop a vision plan for mining both at the local and national levels. Council members would include the Ministry of the Environment and Natural Resources, the Ministry of Planning and Programming for the Presidency, a representative of the mining sector association, the Union of Extractive Industries (Gremiex), and a representative of the National Association of Municipalities.
However, Gremiex issued a statement, stating that the organization does not support the reform submitted by MEM because mining companies have not had a chance to review the contents of the legislation.
Gremiex said they were surprised that the MEM submitted reform measures to the Mining Act without reaching a consensus with mining and exploration companies.
Among the mining and exploration companies doing business in Guatemala are Goldcorp's Marlin operation and Radius Gold's El Tambor gold mine.
Read the article online here: Guatemala introduces sweeping mining law reforms - POLITICAL ECONOMY - Mineweb.com
Guatemala's Union of Extractive Industries says it will not support sweeping reforms to the nation's Mining Act, which include permanent royalty increases and the creation of a state mining company.
Author: Dorothy Kosich
Posted: Monday , 25 Jun 2012
RENO (MINEWEB) -
The Ministry of Energy and Mines (MEM) has introduced amendments to 30 articles of the country's Mining Act, one of which would require 147 companies with operating licenses to pay new royalty rates.
The amendments would also replace a voluntary agreement signed earlier this year between the mining industry and Guatemala's President Otto Perez Molina which increased the royalty rate on gross revenue by 400%. Gold and silver companies now voluntarily pay 4%, while base metals pay 3% and industrial minerals remained at 1%.
As a result the state is expected to reap royalties between Q600 million (US$76.38mn) to Q700 million (US$89.11mn) this year, up Q500 million (US$63.65mn) more than previously paid by Guatemala's mining industry.
The legislation also proposed the creation of a state mining company to possibly encourage government participation in Guatemala's mining and oil projects.
The MEM amendments would also establish a mining fund to distribute incomes from royalties including 35% to the community where the mine is located and 20% for the remaining communities in the department in which the mines operate. Guatemala's Ministry of Social Development will get 20% of the royalties, the fund for national disaster emergencies 20%, and MEM and the Ministry of the Environmental and Natural Resources would receive 3% and 2%, respectively.
The legislation would also create a national system of mining information, as well as regulations for the reclamation of abandoned mines in Guatemala.
The MEM also proposes a crackdown on illegal mining in the country including the disposal of materials and chemicals in rivers.
A Mining Council, chaired by the Ministry of Energy and Mines, would be convened to develop a vision plan for mining both at the local and national levels. Council members would include the Ministry of the Environment and Natural Resources, the Ministry of Planning and Programming for the Presidency, a representative of the mining sector association, the Union of Extractive Industries (Gremiex), and a representative of the National Association of Municipalities.
However, Gremiex issued a statement, stating that the organization does not support the reform submitted by MEM because mining companies have not had a chance to review the contents of the legislation.
Gremiex said they were surprised that the MEM submitted reform measures to the Mining Act without reaching a consensus with mining and exploration companies.
Among the mining and exploration companies doing business in Guatemala are Goldcorp's Marlin operation and Radius Gold's El Tambor gold mine.
Read the article online here: Guatemala introduces sweeping mining law reforms - POLITICAL ECONOMY - Mineweb.com
June 22, 2012
#Gold companies where management has `skin in the game` outperform others - U.S. Global - JUNIOR #MINING - Mineweb.com
Tags:
mining stocks
No mystery here...
Gold companies where management has 'skin in the game' outperform others - U.S. Global
New research by U.S. Global Investors shows that companies that have high levels of insider ownership have significantly outperformed their peers where this is not the case.
Author: Geoff Candy
Posted: Friday , 22 Jun 2012
GRONINGEN (Mineweb) -
Gold companies that have a high level of insider ownership have significantly outperformed peers with less insider ownership says U.S Global Investors.
Speaking to Mineweb.com's Newsmaker podcast, U.S Global portfolio manager, Brian Hicks explained, after attending a number of conferences over the spring and hearing many discussions about the difference in performance between bullion and gold stocks, a few anomalies caught his attention.
While a number of stocks are clearly very cheap on a relative basis, he said, there was a dislocation "in that you're really not seeing insiders buying their own shares and yet they're asking us to buy their shares and trying to convince us that this is a great time to invest because of the disparity between bullion and the mine shares."
Hicks compared the share price performance of 32 silver and gold producers to the percentage of "insider ownership" of these stocks and found that, "the companies that were in the top half of insider ownership clearly outperformed, in a very meaningful way, companies that were in the bottom half of insider ownership."
"Just to quantify that," he added, "this is over a three year time period that ended on June 13 and the entire universe of stocks had a median return of 10.2%. The top half in terms of insider ownership returned about 14.6% whereas the bottom half only returned 7.8%."
U.S. Global Investors CEO, Frank Holmes says that this qualitative measure fits well into the firm's existing framework of assessing stocks that focuses on relative valuations.
He explains, "We line them all up and compare who has the best or worst production per share, who has the best of growth of reserves per share and who has the best growth cashflow per share. And then the mosaic would include, is this event going to be positive or negative in the next 12 months, will it change momentum and then we make decisions to overweight or underweight those companies."
Intuitively such a finding makes sense, given that managers with more skin in the game are likely to work harder to ensure profitability, as Hicks explains, " clearly if you have a stake in the position or in the company, you're going to be more diligent, you're going to be more thoughtful in running that business and it looks as though performance is enhanced."
Notwithstanding these findings, with the advent of the gold ETF, management teams have become even more important at gold mining companies because investors now need a reason to choose the stocks over investment in the actual metal.
Holmes agrees adding that the gold ETF has created a "transparency of their performance on a relative basis.
"One of the things we noted in some research by CIBC was the cost now of looking for producing and shipping an ounce of gold worldwide is over $1500/oz, taxes have risen dramatically and the cost of ongoing production has gone up dramatically, so management is going to be very, very key in making very prudent decisions that are not dilutive to the shareholders that they can show this attractiveness on reserves and production per share growth."
See the article online here: Gold companies where management has `skin in the game` outperform others - U.S. Global - JUNIOR MINING - Mineweb.com Mineweb
Gold companies where management has 'skin in the game' outperform others - U.S. Global
New research by U.S. Global Investors shows that companies that have high levels of insider ownership have significantly outperformed their peers where this is not the case.
Author: Geoff Candy
Posted: Friday , 22 Jun 2012
GRONINGEN (Mineweb) -
Gold companies that have a high level of insider ownership have significantly outperformed peers with less insider ownership says U.S Global Investors.
Speaking to Mineweb.com's Newsmaker podcast, U.S Global portfolio manager, Brian Hicks explained, after attending a number of conferences over the spring and hearing many discussions about the difference in performance between bullion and gold stocks, a few anomalies caught his attention.
While a number of stocks are clearly very cheap on a relative basis, he said, there was a dislocation "in that you're really not seeing insiders buying their own shares and yet they're asking us to buy their shares and trying to convince us that this is a great time to invest because of the disparity between bullion and the mine shares."
Hicks compared the share price performance of 32 silver and gold producers to the percentage of "insider ownership" of these stocks and found that, "the companies that were in the top half of insider ownership clearly outperformed, in a very meaningful way, companies that were in the bottom half of insider ownership."
"Just to quantify that," he added, "this is over a three year time period that ended on June 13 and the entire universe of stocks had a median return of 10.2%. The top half in terms of insider ownership returned about 14.6% whereas the bottom half only returned 7.8%."
U.S. Global Investors CEO, Frank Holmes says that this qualitative measure fits well into the firm's existing framework of assessing stocks that focuses on relative valuations.
He explains, "We line them all up and compare who has the best or worst production per share, who has the best of growth of reserves per share and who has the best growth cashflow per share. And then the mosaic would include, is this event going to be positive or negative in the next 12 months, will it change momentum and then we make decisions to overweight or underweight those companies."
Intuitively such a finding makes sense, given that managers with more skin in the game are likely to work harder to ensure profitability, as Hicks explains, " clearly if you have a stake in the position or in the company, you're going to be more diligent, you're going to be more thoughtful in running that business and it looks as though performance is enhanced."
Notwithstanding these findings, with the advent of the gold ETF, management teams have become even more important at gold mining companies because investors now need a reason to choose the stocks over investment in the actual metal.
Holmes agrees adding that the gold ETF has created a "transparency of their performance on a relative basis.
"One of the things we noted in some research by CIBC was the cost now of looking for producing and shipping an ounce of gold worldwide is over $1500/oz, taxes have risen dramatically and the cost of ongoing production has gone up dramatically, so management is going to be very, very key in making very prudent decisions that are not dilutive to the shareholders that they can show this attractiveness on reserves and production per share growth."
See the article online here: Gold companies where management has `skin in the game` outperform others - U.S. Global - JUNIOR MINING - Mineweb.com Mineweb
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