Rio chief quits after $14bn writedown
By Neil Hume
January 17, 2013 -- Updated 1110 GMT (1910 HKT)
Albanese will be replaced by Sam Walsh, the head of Rio Tinto's iron ore division -- its biggest and most profitable business.
STORY HIGHLIGHTS
Rio said that the value of its aluminium assets would be written down by $10bn-$12bn
Tom Albanese will be replaced by Sam Walsh, the head of Rio Tinto's iron ore division
Nomura analysts said the writedowns and forced management change would be taken negatively
(Financial Times) -- Tom Albanese, the chief executive of Rio Tinto, has stepped down after the resources company booked $14 billion of impairment charges, most of them related to the disastrous acquisition of Alcan, its aluminium business.
Rio said on Thursday that the value of its aluminium assets would be written down by $10 billion-$12 billion and that it would also take a $3bn charge against its recently acquired Mozambique coal assets. The company also expects to report a number of smaller asset writedowns totalling around $500 million.
Albanese will be replaced by Sam Walsh, the head of Rio Tinto's iron ore division -- its biggest and most profitable business.
Rio paid $44 billion, including debt, to buy Canada-based Alcan in June 2007, shortly before the worst of the global financial crisis hit in 2008. The deal saddled Rio with large debts and led to a $15.2 billion rights issue.
"The further deterioration in aluminium market conditions in 2012, together with strong currencies in certain regions and high energy and raw material costs, has had a negative impact on the current market values in the aluminium industry," Rio said in a statement.
Jan du Plessis, Rio chairman, said the writedowns -- the second for the Alcan business in less than a year -- were "disappointing" and "unacceptable". Rio wrote down the value of Alcan by almost $9 billion last February, a decision that led to Albanese waiving his annual bonus.
"The Rio Tinto board fully acknowledges that a writedown of this scale in relation to the relatively recent Mozambique acquisition is unacceptable," said du Plessis. "We are also deeply disappointed to have to take a further substantial writedown in our aluminium businesses, albeit in an industry that continues to experience significant adverse changes globally."
Analysts at Nomura said the scale of writedowns and the forced management change would be taken negatively even though Mr Walsh was well known to investors.
"He is seen as a pretty straight shooter, but perhaps his credentials in strategically managing such a diverse business may be questioned by the market," they said.
But they added: "We do not think you will see any major change in strategy from the group with the new appointment. We certainly think they'll be steering well clear of any acquisitions, possible upside being increased capital returns for shareholders."
Shares in Rio were down 2.9 per cent at £33.57 in early London trading.
Rio Tinto paid $4bn for Africa-focused coal miner Riversdale Mining, which had coking coal assets in Mozambique, eventually taking control of the business in early 2011. Rio on Thursday said Doug Ritchie, the executive who led the acquisition and integration of those assets, had also stepped down by mutual consent of the board.
The company said the $3 billion writedown reflected infrastructure issues -- the government in Mozambique had rejected a plan to send coal down the Zambezi river -- and lower than expected recoverable coking coal volumes.
Rio said that both Albanese and Mr Ritchie would remain with the business until July. During that time both would receive base pay, benefits and pension contributions but would not be entitled to a lump-sum payment or annual performance of share awards for 2013.
Rio has yet to appoint a replacement for Mr Walsh. Analysts believe Greg Lilleyman, the head of Rio's iron ore operations in the Pilbara region of Western Australia, would be a logical successor.
The company is also searching for a replacement for Guy Elliott, its long-serving chief financial officer who last year announced he would step down by the end of this year.
================
Rio Tinto CEO pays price of calamitous acquisitions
Thu, Jan 17 18:57 PM EST
((Writedown:
A writedown is an accounting treatment that recognizes the reduced value of an impaired asset. The value of an asset may change due to fundamental changes in technology or markets. One example is when one company purchases another and pays more than the net fair value of its assets and liabilities. The excess purchase price is recorded on the buying company's accounts as goodwill. If it becomes apparent that the purchased company no longer has the value recorded in the goodwill account (it can't be resold at the same price), the value in the goodwill asset account is "written down". Rupert Murdoch's News Corp bought Wall Street Journal publisher Dow Jones at a 60 percent premium in 2007, which News Corp later had to write down by $2.8 billion because of declining ad revenues.[1]
A writedown is sometimes considered synonymous with a write-off.[2] The distinction is that while a write-off is generally completely removed from the balance sheet, a writedown leaves the asset with a lower value.[3] As an example, one of the consequences of the 2007 subprime crisis at financial institutions was a revaluation under mark to market rules:
"Washington Mutual will write down by $150 million the value of $17 billion in loans...":[4]
Read more: http://www.answers.com/topic/write-off-legal-term#ixzz2IIxTnTp4))
By Clara Ferreira-Marques
LONDON (Reuters) - Rio Tinto sacked chief executive Tom Albanese on Thursday and revealed a $14 billion writedown almost entirely on the value of his two most significant acquisitions, the Alcan aluminium group and Mozambican coal.
An engineer who became the miner's first American boss, Albanese will be replaced by Australian Sam Walsh who heads Rio's operations in iron ore, where it is the world's second largest producer.
Doug Ritchie, the heavyweight former energy boss who led the acquisition of Mozambique-focused miner Riversdale, was also shown the door after almost three decades with the company.
New Jersey-born, Alaska-trained Albanese had until now survived the consequences of his disastrous $38 billion acquisition of Alcan in 2007, a bruising top-of-the-market deal when Rio was under pressure from rivals to bulk up or be bought.
The deal, just two months after Albanese took the reins, turned bad as markets crumbled and aluminium prices slumped, battering Rio's balance sheet, nearly forcing it into the arms of Chinese state-owned Chinalco and triggering a $15 billion rights issue. Rio has since suffered years of losses in aluminium, with Alcan adding to problems at its original business, and has taken some $29 billion in impairments.
Walsh was already in charge of the division that accounts for nearly 80 percent of profits and his appointment hints at a back-to-basics strategy as shareholders demand better cash controls throughout the mining sector.
Walsh was welcomed by investors and analysts on Thursday as a safe pair of hands, but many also questioned whether a 63-year-old veteran would be a long-term solution, raising concerns over management at a group that also announced the departure of its chief financial officer last July.
"It's another black mark in terms of (Albanese's) M&A record and I suppose, given the magnitude of this writedown ... I'm not surprised that he's stepping down with this, nor am I surprised that Doug Ritchie is," analyst Jeff Largey at Macquarie said.
Rio had planned to shrink the aluminium arm, cutting back one of the world's largest producers of the metal by hiving off most of its Australian and New Zealand assets. But industry sources say it has not been mobbed by buyers.
Further damaging his reputation as a dealmaker, Albanese spearheaded a $4.2 billion deal in 2011 to buy Mozambique-focused coal miner Riversdale, fighting off other suitors.
There, like many others in the region, Rio has struggled with the challenge of getting from pit to port, after a plan to transport coal by barge along the Zambezi river failed to get the green light. It has also been forced to cut estimates of how much coal it will be able to recover.
Rail and port bottlenecks are the main headache for miners eager to cash in on Mozambique's coal rush, but it could take a decade for many of the current infrastructure projects to come to fruition on a scale to meet industry demands.
"ALWAYS A BAD DEAL"
"(Alcan) was always a bad deal, and Albanese was lucky not to carry the can for it back in 2008," one of Rio Tinto's 10 largest investors said. "Mozambique is more of a surprise, but the industry's record on acquisitions is appalling, and Rio is not alone in destroying shareholder value."
Anglo American is facing potential writedowns linked to its Minas Rio iron ore acquisition in Brazil, a project set to cost more than three times initial estimates. BHP Billiton, meanwhile, failed to clinch three ambitious bids under its current boss - including two tilts at Rio - but then splashed out $17 billion on two shale gas takeovers in the United States just before gas prices slumped.
BHP CEO Marius Kloppers forfeited his bonus last year after BHP took a $2.8 billion charge on the value of its shale assets.
Much like Anglo, which appointed a mining engineer as chief executive earlier this month, Rio will be led by a veteran operations man who will be under pressure to boost returns to shareholders and scale back on deals.
Walsh joined Rio Tinto in 1991 after 20 years in the auto industry working for General Motors and Nissan Australia. He rose up Rio's management ranks before being appointed to head its biggest division, iron ore, in 2004.
Walsh has a more relaxed presence than Albanese, who rarely veered from the script. Albanese has long been a lover of the great outdoors who walked across remote Alaska snowfields staking mining claims after college. These days he is more often found on Britain's canals in his own narrow boat.
SURPRISE HIT
News of Albanese's departure and the writedown, almost as large as the group's underlying profit in 2011, took the market by surprise, knocking Rio shares in early trade. At 1340 GMT the stock was 1.5 percent lower, having been down as much as 4.5 percent earlier in the day.
"I wasn't expecting the $14 billion writedown," said Tim Schroeders, a portfolio manager at Pengana Capital, which owns Rio Tinto shares. He said the departures pointed to a company under pressure to do a better job of managing its purse strings.
"I think it's clearly a case (that) the board's laid down the law in terms of stricter accountability than we had pre-(crisis)," he said.
Rio said the writedowns include a charge of around $3 billion relating to the Mozambique business - virtually its entire original price tag - as well as reductions in the carrying values of Rio's aluminium assets in the range of $10 billion to $11 billion.
Since Rio bought Alcan in 2007, aluminium prices have fallen by a quarter but costs have soared, squeezing margins.
The group also expects to report a number of smaller asset writedowns in the order of $500 million. The final figures will be included in Rio Tinto's full-year results on February 14, along with details of more cost cuts.
"It is non-cash, it doesn't impact valuation, it doesn't impact the earnings near term," said a London analyst who declined to be named. "For me, it's clearly negative, but it's not the end of the world," said the analyst, adding that the flagship Oyu Tolgoi copper and gold mine in Mongolia was still going to plan.
Analysts at Sanford Bernstein said the writedowns amounted to 4 percent of their estimate of the company's value.
Neither Albanese nor Ritchie, who will leave in July, will take lump-sum payments, and both will forfeit bonuses on departure, including outstanding share entitlements earned in previous years.
Albanese is not the only chief executive on the way out of a major mining company. BHP has said it is seeking a replacement for Kloppers and Anglo American replaced chief executive Cynthia Carroll earlier this month.
(Additional reporting by Sonali Paul in Melbourne, Jim Regan in Sydney, Agnieszka Flak in Johannesburg, Sinead Cruise and Sarah Young in London and Brenton Cordeiro in Bangalore; Editing by Will Waterman and David Stamp)
===============
Showing posts with label Rio Tinto. Show all posts
Showing posts with label Rio Tinto. Show all posts
Thursday, January 17, 2013
Monday, September 12, 2011
The blacklisting of Rio Tinto
Too many invest in companies - such as Australia's Rio Tinto - without any consideration of the ethics of doing so.
NAJ Taylor Last Modified: 12 Sep 2011 12:24
Papuans protest against Freeport and Rio Tinto's Grasberg mine outside of Freeport's office in Jakarta [EPA]
[This is the first of four pieces examining Rio Tinto and mining in Indonesia's West Papua province]
Investing in conflict-affected and high-risk areas is a growing concern for responsible businesses and investors. Often times companies based in developed countries operate in lesser-developed, foreign markets, where governance standards are lax, corruption is high and business practices are poor.
These pieces focus on one specific Anglo-Australian company that operates in West Papua, one of the poorest provinces of Indonesia. The risks for the company include the potential to contribute to environmental and social damage in a foreign market. The risks for investors include financing a company that does not get its risk management right. This is the story of how the Norwegian Pension Fund blacklisted Rio Tinto.
An ancient copper mine located near Huelva in southernmost Spain changed hands in 1873. A group of opportunistic Anglo-German investors, equipped with modern techniques that favored mining aboveground, acquired it from the Spanish government. The mine's copper had stained the surrounding water to such an extent that the indigenes named the river Rio Tinto - literally meaning "red river".
The mine at Rio Tinto had supplied the Phoenicians, ancient Greeks, Carthaginians, and the Roman Empire. Its copper had paid for Carthage's numerous wars on Rome and had been held by both Scipio and Hannibal. We can only assume that these investors, aware of such indelible marks on the environment and history, missed the irony, because they named their company Rio Tinto.
However, the red river has since flowed a long way from home. The company has expanded its operations through Australia, North and South America, Asia, Europe, and southern Africa - across coal, aluminum, copper, diamonds, uranium, gold, industrial minerals, and iron ore. Rio Tinto is now so large that its dual listing on the Australian and London stock exchanges commands a value of over $100bn.
What's left behind near the Spanish town of Huelva is a 58-mile-long river flowing through one of the world's largest deposits of pyrite, or fool's gold. Because of the mine, the river has a pH reading similar to that of automobile battery acid and contains virtually no oxygen in its lower depths. In the late 1980s, temporary flooding dissolved a power substation, a mandibular crusher, and several hundred yards of transport belts.
More recently, NASA astrobiologists used the conditions of the river to replicate the conditions of Mars. "If you remove the green," one of them remarked, "it looks like Mars". The thinking goes that if something could live in such an acidic river, then there is likely to be life on Mars too.
Every Australian - through public monies invested by elected governments, or their choice of superannuation fund, insurer, and bank - is funding this red river now too. Rio Tinto is so large and so profitable that, for the average Australian, investment in it is very near unavoidable.
Blacklisted
On September 9, 2008, amid the turmoil of the global financial crisis, the Norwegian government announced that it had liquidated its entire $1bn investment in Rio Tinto for "grossly unethical conduct". Operating the second largest fund in the world, the Norwegians' decision focused solely on the Grasberg mine in West Papua on New Guinea, which it believed posed the "unacceptable risk" of contributing to "severe environmental damage" if it were to continue funding the Anglo-Australian mining giant.
Rio Tinto had been blacklisted.
The following day, Rio Tinto's official statement relayed that the company was "surprised and disappointed", given both its recognised leadership in environmental sustainability and its noncontrolling interest in the Grasberg mine. As with most claims of sustainability, the truth is otherwise.
Rio Tinto should not have been surprised by the Norwegian stance on Grasberg. Records show that there had been months - in fact, years - of dialogue with the Norwegians about Grasberg's inadequate environmental and social performance. Rio Tinto had faced a litany of signposts indicating that multinational and Indonesian involvement in West Papua was not meeting various standards, laws, and norms: Institutions such as the World Bank, the Australian Council for Overseas Aid, the International Finance Corporation, the Overseas Private Investment Commission, the United Nations Committee against Torture, the US State Department, and the Indonesian Environment Ministry, as well as many US and European politicians, independent environmental assessments, international media, Papuan leaders, civil society groups, and shareholders had brought the problems to Rio Tinto's attention.
That an institutional investor should act on environmental, social, and corporate governance considerations is a newly evolving development within the global investment industry, and one in which many Australian institutional investors and service providers have been quick to claim leadership. However, the blacklisting of Rio Tinto by the Norwegian government was uniquely public, transparent, and forward-thinking. Yet this wholesale dumping of one of Australia's blue-chip stocks received only syndicated coverage in the local media.
Behind the headlines of the global financial crisis is a deeper, more systemic fault line that rewards rampant capitalism. Too many invest in and operate mines such as Grasberg without any consideration of the ethics of so doing.
Part 2 to follow next week.
This is an extract of a chapter from the book, Evolutions in Sustainable Investing: Strategies, Funds and Thought Leadership, to be published by Wiley in December 2011.
Follow NAJ Taylor on Twitter: @najtaylordotcom
The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.
BHP today announced that its iron ore division head, Ian Ashby, would be leaving on 1 July 2012 after more than 25 years with the company. Rio Tinto said separately that it has become a member of the new China Beijing Metals Exchange, an electronic trading platform that will provide participating members with an additional iron ore trading channel in the China market.
NAJ Taylor Last Modified: 12 Sep 2011 12:24
Papuans protest against Freeport and Rio Tinto's Grasberg mine outside of Freeport's office in Jakarta [EPA]
[This is the first of four pieces examining Rio Tinto and mining in Indonesia's West Papua province]
Investing in conflict-affected and high-risk areas is a growing concern for responsible businesses and investors. Often times companies based in developed countries operate in lesser-developed, foreign markets, where governance standards are lax, corruption is high and business practices are poor.
These pieces focus on one specific Anglo-Australian company that operates in West Papua, one of the poorest provinces of Indonesia. The risks for the company include the potential to contribute to environmental and social damage in a foreign market. The risks for investors include financing a company that does not get its risk management right. This is the story of how the Norwegian Pension Fund blacklisted Rio Tinto.
An ancient copper mine located near Huelva in southernmost Spain changed hands in 1873. A group of opportunistic Anglo-German investors, equipped with modern techniques that favored mining aboveground, acquired it from the Spanish government. The mine's copper had stained the surrounding water to such an extent that the indigenes named the river Rio Tinto - literally meaning "red river".
The mine at Rio Tinto had supplied the Phoenicians, ancient Greeks, Carthaginians, and the Roman Empire. Its copper had paid for Carthage's numerous wars on Rome and had been held by both Scipio and Hannibal. We can only assume that these investors, aware of such indelible marks on the environment and history, missed the irony, because they named their company Rio Tinto.
However, the red river has since flowed a long way from home. The company has expanded its operations through Australia, North and South America, Asia, Europe, and southern Africa - across coal, aluminum, copper, diamonds, uranium, gold, industrial minerals, and iron ore. Rio Tinto is now so large that its dual listing on the Australian and London stock exchanges commands a value of over $100bn.
What's left behind near the Spanish town of Huelva is a 58-mile-long river flowing through one of the world's largest deposits of pyrite, or fool's gold. Because of the mine, the river has a pH reading similar to that of automobile battery acid and contains virtually no oxygen in its lower depths. In the late 1980s, temporary flooding dissolved a power substation, a mandibular crusher, and several hundred yards of transport belts.
More recently, NASA astrobiologists used the conditions of the river to replicate the conditions of Mars. "If you remove the green," one of them remarked, "it looks like Mars". The thinking goes that if something could live in such an acidic river, then there is likely to be life on Mars too.
Every Australian - through public monies invested by elected governments, or their choice of superannuation fund, insurer, and bank - is funding this red river now too. Rio Tinto is so large and so profitable that, for the average Australian, investment in it is very near unavoidable.
Blacklisted
On September 9, 2008, amid the turmoil of the global financial crisis, the Norwegian government announced that it had liquidated its entire $1bn investment in Rio Tinto for "grossly unethical conduct". Operating the second largest fund in the world, the Norwegians' decision focused solely on the Grasberg mine in West Papua on New Guinea, which it believed posed the "unacceptable risk" of contributing to "severe environmental damage" if it were to continue funding the Anglo-Australian mining giant.
Rio Tinto had been blacklisted.
The following day, Rio Tinto's official statement relayed that the company was "surprised and disappointed", given both its recognised leadership in environmental sustainability and its noncontrolling interest in the Grasberg mine. As with most claims of sustainability, the truth is otherwise.
Rio Tinto should not have been surprised by the Norwegian stance on Grasberg. Records show that there had been months - in fact, years - of dialogue with the Norwegians about Grasberg's inadequate environmental and social performance. Rio Tinto had faced a litany of signposts indicating that multinational and Indonesian involvement in West Papua was not meeting various standards, laws, and norms: Institutions such as the World Bank, the Australian Council for Overseas Aid, the International Finance Corporation, the Overseas Private Investment Commission, the United Nations Committee against Torture, the US State Department, and the Indonesian Environment Ministry, as well as many US and European politicians, independent environmental assessments, international media, Papuan leaders, civil society groups, and shareholders had brought the problems to Rio Tinto's attention.
That an institutional investor should act on environmental, social, and corporate governance considerations is a newly evolving development within the global investment industry, and one in which many Australian institutional investors and service providers have been quick to claim leadership. However, the blacklisting of Rio Tinto by the Norwegian government was uniquely public, transparent, and forward-thinking. Yet this wholesale dumping of one of Australia's blue-chip stocks received only syndicated coverage in the local media.
Behind the headlines of the global financial crisis is a deeper, more systemic fault line that rewards rampant capitalism. Too many invest in and operate mines such as Grasberg without any consideration of the ethics of so doing.
Part 2 to follow next week.
This is an extract of a chapter from the book, Evolutions in Sustainable Investing: Strategies, Funds and Thought Leadership, to be published by Wiley in December 2011.
Follow NAJ Taylor on Twitter: @najtaylordotcom
The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.
BHP today announced that its iron ore division head, Ian Ashby, would be leaving on 1 July 2012 after more than 25 years with the company. Rio Tinto said separately that it has become a member of the new China Beijing Metals Exchange, an electronic trading platform that will provide participating members with an additional iron ore trading channel in the China market.
Monday, January 10, 2011
Force Majeure: RPT-WRAPUP 2-Flash floods hit Australia's third biggest city
10 Jan 2011
Source: reuters // Reuters
* Residents sandbag homes in major city
* Floods to cut economic growth - analyst
* PM says floods will not prevent return to surplus in 2012-13
* Floods have hit coal industry, threaten tourism (Adds details on towns affected, coal industry)
By Michael Perry
SYDNEY, Jan 10 (Reuters) - Residents in Australia's third largest city, Brisbane, sandbagged their homes against rising waters on Monday as torrential rain worsened floods that have paralysed the coal industry in the northeast and now threaten tourism.
Prime Minister Julia Gillard said the cost of the floods would not delay a return to budget surplus in 2012-13, but J.P. Morgan predicted the disaster would crimp growth this year and could delay another increase in interest rates.
The worst floods in 50 years have at times covered an area the size of France and Germany combined in Queensland state. Six people have been killed while dozens of towns have been isolated or partially submerged. More monsoon rains are expected all week.
"People need to think about how to get out and if you don't need to travel, stay off the roads," said Police Chief Superintendent Alistair Dawson, referring to some of the smaller towns near Brisbane, Queensland's state capital.
Toowoomba, a major rural city west of Brisbane, was hit by a two-metre-deep wall of mud-filled floodwater which swept two people to their deaths and left others clinging to the tops of vehicles carried along streets by the torrent, police said.
In Brisbane, a city of 2 million, people in low-lying areas were given sandbags and warned the worst of the flooding might not occur until Tuesday or Wednesday.
Police urged motorists to stay off the roads in the state's heavily populated southeast, home to the Sunshine and Gold Coast tourist strips, Australia's premier tourism destinations.
Queensland Tourism said rains and flooding would hurt the industry, but it was too early to quantify the impact.
Australia's A$32 billion tourism sector was already in trouble due to the strength of the local dollar driving off overseas visitors and enticing Australians to go abroad.
The floods have caused an estimated A$6 billion ($6 billion)in damage and economists say they will cut economic growth in 2011 and heighten inflation as food prices rise and reconstruction begins in the nation's second largest state.
Queensland's $20 billion coking coal export industry has been brought to a virtual standstill.
"With more rain falling it could be months before the floodwaters clear and the extent of the damage to essential infrastructure is known," said J.P. Morgan chief economist Stephen Walters.
J.P. Morgan on Monday cut its GDP growth forecast for 2011 to 3.3 percent from 3.7 percent and raised its inflation forecast to 3.8 percent from 3.2 percent. That pushed out to May from February the likely timing for the central bank's next interest rate hike.
"Even inflation-conscious RBA (Reserve Bank of Australia) officials won't hike with Queensland under water," said Walters.
TOTAL DAMAGE BILL UNKNOWN
Gillard announced more aid on Monday, but said the floods would not derail an expected 2012-13 return to a budget surplus, with economic expansion now well into the 20th year and annual growth at 2.7 percent in December.
"I can't at this stage tell people what the total cost of recovering from these floods is going to be, because I can't predict the draw-down on infrastructure money until we see what's under the floodwaters," she said.
In Queensland's north, floodwaters containing toxic farm pesticides were flowing into the Pacific Ocean, threatening Australia's Great Barrier Reef, marine park officials and wildlife experts said.
"Toxic pollution from flooded farms and towns along the Queensland coast will have a disastrous impact on the Great Barrier Reef's corals and will likely have a significant impact on dugongs, turtles and other marine life," said World Wildlife Fund spokesman Nick Heath.
The flood threat was expected to be extended to towns in neighbouring New South Wales state.
A major concern now was the ground, so waterlogged that heavy rains were unable to be absorbed. Full rivers, creeks and man-made watercourses were bursting their banks.
About 116,000 mega litres of water -- equivalent to more than 100,000 Olympic swimming pools -- were being released daily from one Queensland dam, officials said.
COAL INDUSTRY HIT HARD
Floods have also paralysed operations that produce 35 percent of Australia's estimated 259 million tonnes of exportable coal. Australia contributes two-thirds of global coking-coal exports, needed to make steel.
Coal seam gas drilling in the Surat Basin, a major source of gas for an estimated $200 billion in proposed liquefied natural gas projects to be built this decade, has been halted by flooding.
Global miners Anglo American , Rio Tinto , Xstrata and BHP Billiton , have been hit by the floods, and all have made force majeure declarations, which release firms from delivery commitments.
Flooding has begun to recede in the main Bowen Basin coal region, but many mines remain flooded and will take weeks to drain and resume full production. While some rail links between mines and the ports have resumed, others remain under water.
Coal stocks were running low at the key coal port of Dalrymple Bay, but it was receiving enough to keep loading ships, while the port of Gladstone said it could be days to weeks before it starts getting coal supplies back to normal. (Additional reporting by Rob Taylor in Canberra; Writing by Michael Perry and Rob Taylor; Editing by Dean Yates)
====
REFILE-WRAPUP 5-Australia floods inundate Brisbane, 67 missing12 Jan 2011
Source: reuters // Reuters
* Thousands evacuated, power cut, residents stockpile food
* Floods peak expected to last 3-4 days
* RBA member says 1 pct GDP impact possible
* Australian dollar hits fresh four-week low
* Brisbane port closed, coal industry at standstill (Refiles to put correct day in lead) (Revises missing and dead, adds latest on flooding and fresh quotes)
By Ed Davies
BRISBANE, Australia, Jan 12 (Reuters) - Massive floods shut down the centre of Australia's third-largest city, sent thousands fleeing from their homes and sparked panic buying of food on Wednesday as rescuers searched desperately for nearly 70 people missing in floodwaters.
The biggest floods in a century have so far killed 16 people since starting their march across the northern mining state of Queensland last month, crippling the coking coal industry, destroying infrastructure, putting a brake on the economy and sending the local currency to four-week lows.
The flood surge is expected to peak in Brisbane, a riverine city of two million people, before sunrise on Thursday and last for days. However, the peak will arrive within the next few hours in Ipswich, a satellite town to the west.
"The water is rising and swallowing up the city. It's really heartbreaking," said Ipswich Mayor Paul Pisasale.
Brisbane residents on Wednesday pushed food-laden shopping carts through drowned streets, others waded in shoulder-high water to rescue possessions, while boats and pontoons were ripped from moorings in the Brisbane River and smashed into bridges as the muddy brown tide gathered strength.
At flooded intersections people paddled surfboards through floodwaters, balancing their possessions on the deck of the boards, while boats ferried evacuees to dry ground.
"I am feeling a sense of horror and awe at the power of the river. Sadly in coming hours we will see bits of people's homes float down the river," Brisbane Mayor Campbell Newman said, warning the torrent could take three to four days to subside.
Rescue crews took advantage of some rare sunshine to look for 67 people still missing from tsunami-like flash floods that tore through townships west of the city this week.
The worsening floods are forcing economists to raise estimates of the economic impact, with one central bank board member on Wednesday saying the disaster could cut 1 percent off growth -- equal to almost $13 billion, double the previous highest estimate. [ID:nSDYBCE7YF]
The Australian dollar sank to a fresh four-week low of $0.9803 on the comments from Warwick McKibbin, an academic and a member of the central bank's policymaking board.
Treasurer Wayne Swan in November forecast GDP growth of 3.25 percent in fiscal 2010-11, up from a 3.0 percent projection, but said spending would be cut to ensure a surplus of A$3.1 billion or 0.2 percent of GDP in 2012/13.
Food prices are surging around the country as the floods ruin Queensland crops and distribution networks. Prices for tomatoes have leapt about 200 percent in two weeks, while beef is up 11 percent and wheat has risen 4 percent in four months.
BRISBANE A DESERTED CITY
In Brisbane, thousands of homes and businesses were deserted as swirling floodwaters rose in and around the city, forcing residents to flee with few possessions to higher ground and to evacuation centres crowded with more than 3,500 people.
Some of the scenes in the city were surreal, with early-morning joggers trying to carry on as normal, even though parts of their routes were underwater. Others were distraught.
"This is my whole life, everything is gone. I never thought it would get this bad," said Kim Hung, manager of the Salt 'n' Pepper catering business, as two friends floated a coffee machine toward higher ground.
Raw sewage began spilling into the river and creeks, prompting authorities to warn of a heightened disease risk as damaged water treatment works polluted the floodwaters.
Bligh said she expected about 19,700 homes to be flooded at the river's peak, affecting up to 45,000 people. The military is running relief flights with helicopters and C-130 transports.
Dams built to protect Brisbane and outlying towns were spilling floodwaters into swollen rivers. The Port of Brisbane was closed, shutting down Australia's third-busiest container port and a 5-million-tonnes-a-year coal-loading facility.
Australia is the world's biggest exporter of coking coal, which is used in steel manufacturing and accounts for more than half of global exports, and is also the second-biggest exporter of thermal coal used for power generation.
Power company Energex shut power to some low-lying areas of Brisbane, including parts of the financial district, for fear that live power lines could electrify floodwaters. Some 78,000 homes in the southeast of Queensland were without electricity.
'TERRIFYING, CHAOS'
Queensland Premier Bligh advised people not to leave their homes if they are safe and to conserve water in case fresh supplies were interrupted. "As crazy as it sounds, now is not a time to be wasting water," she said.
Prime Minister Julia Gillard arrived in Brisbane to inspect the devastation and said she was deeply concerned about the impact on jobs and livelihoods.
"I have been shocked. I think we've all been shocked by the images of that wall of water just wreaking such devastation. The dimensions of it are truly mind-boggling," Gillard said.
The floods have been blamed on a La Nina weather pattern in the Pacific, with Australia recording its third-wettest year on record in 2010, with two wet-season months to go. Weather officials are also forecasting an above-average cyclone season.
As the Queensland floods and rains move south, major rivers in New South Wales state have begun flooding or threatening to break their banks, forcing rural evacuations. In southeast Victoria state, heavy rain caused flash flooding and landslides, prompting fears a lake near Horsham could break its banks. However, underlining the country's summer of extremes, authorities in Western Australia battled huge bushfires. (Additional reporting by Rob Taylor in CANBERRA and Balazs Koranyi, Wayne Cole and Amy Pyett in SYDNEY)
(Writing by Rob Taylor; Editing by John Chalmers)
=====
ReadAustralia floods inundate Brisbane, over 90 missing
11 Jan 2011
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11 Jan 2011
2Green Cars to Watch for at 2011 Detroit Auto Show
06 Jan 2011
3Australia floods inundate Brisbane, 67 missing |
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4Barclays boss says banks should stop saying sorry
11 Jan 2011
5Discussed8Straw in row over Pakistani men sex abuse comments
4U.S. congresswoman battles for life after shooting
3Autism-vaccine researcher a ”fraud” – medical journal
Watched Oil moves closer to $100
Tue, Jan 11 2011 Nintendo : 4 mln 3DS in 1st month
Mon, Jan 10 2011 Fate of Fiat plant stirs tension
Tue, Jan 11 2011Scientists see climate change link to Australian floods
By David Fogarty, Climate Change Correspondent, Asia
SINGAPORE | Wed Jan 12, 2011 8:01am GMT
SINGAPORE (Reuters) - Climate change has likely intensified the monsoon rains that have triggered record floods in Australia's Queensland state, scientists said on Wednesday, with several months of heavy rain and storms still to come.
But while scientists say a warmer world is predicted to lead to more intense droughts and floods, it wasn't yet possible to say if climate change would trigger stronger La Nina and El Nino weather patterns that can cause weather chaos across the globe.
"I think people will end up concluding that at least some of the intensity of the monsoon in Queensland can be attributed to climate change," said Matthew England of the Climate Change Research Center at the University of New South Wales in Sydney.
"The waters off Australia are the warmest ever measured and those waters provide moisture to the atmosphere for the Queensland and northern Australia monsoon," he told Reuters.
The Queensland floods have killed 16 people since the downpour started last month, inundating towns, crippling coal mining and are now swamping the state's main city of Brisbane.
The rains have been blamed on one of the strongest La Nina patterns ever recorded. La Nina is a cooling of ocean temperatures in the east and central Pacific, which usually leads to more rain over much of Australia, Indonesia and other parts of Southeast Asia. This is because the phenomena leads to stronger easterly winds in the tropics that pile up warm water in the western Pacific and around Australia. Indonesia said on Wednesday it expected prolonged rains until June.
WEATHER SWITCH
The Pacific has historically switched between La Nina phases and El Ninos, which have the opposite impact by triggering droughts in Australia and Southeast Asia.
"We've always had El Ninos and we've had natural variability but the background which is now operating is different," said David Jones, head of climate monitoring and prediction at the Australia Bureau of Meteorology in Melbourne.
"The first thing we can say with La Nina and El Nino is it is now happening in a hotter world," he told Reuters, adding that meant more evaporation from land and oceans, more moisture in the atmosphere and stronger weather patterns.
"So the El Nino droughts would be expected to be exacerbated and also La Nina floods because rainfall would be exacerbated," he said, though adding it would be some years before any climate change impact on both phenomena might become clear.
He said the current La Nina was different because of the warmest ocean temperatures on record around Australia and record humidity in eastern Australia over the past 12 months.
Prominent U.S. climate scientist Kevin Trenberth said the floods and the intense La Nina were a combination of factors.
He pointed to high ocean temperatures in the Indian Ocean near Indonesia early last year as well as the rapid onset of La Nina after the last El Nino ended in May.
====
BREAKINGVIEWS-Miners may shoulder some cost of Australian floods12 Jan 2011
Source: reuters // Reuters
-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --
By John Foley
HONG KONG, Jan 12 (Reuters Breakingviews) - It will be some weeks before the cost of Queensland's devastating floods becomes clear. But when it does, it is likely that the hit -- which could reach $13 billion by some early estimates -- is likely to fall partly, if indirectly, on Australia's miners.
Miners have already felt the brunt of the disaster. Coking coal producers in Queensland, a state which accounts for almost 60 percent of global exports, have been brought to a virtual halt. Pits accounting for two-thirds of the state's annual output have declared force majeure on some or all of their production, according to Reuters analysis.
The pain will mostly be temporary. Prices of metallurgical coal are set to spike following the floods, with Citi now estimating a 33 percent hike on year-end levels. For Queensland's miners, that should provide part compensation for lost revenues, and that might explain why BHP Billiton and Rio Tinto shares had largely recouped earlier market losses by Jan. 12.
But the economy at large will still shoulder costs, though the actual fix-up bill is hard to even guess. Central banker Warren McKibbin suggested the bill could equal one percent of GDP -- or $13 billion. A JPMorgan analysis puts the total at around half that amount.
A sum of that order would dent Australia's finances, despite the fact they are getting stronger. True, the central government runs a persistent deficit. But new Prime Minister Julia Gillard has promised to reduce it by 2013. And after a promising start -- the deficit was set to fall from 4.5 percent to 2.8 percent of GDP this year, according to HSBC estimates before the floods -- Gillard will find it hard to let that target slide.
That's where the miners come in. Politicians are still mulling plans for a super-tax on producers' boom-time profits. Back in July, miners seemed to have the upper hand: their lobbying saw Gillard temper the measures considerably, cutting the estimated tax take by some $1.5 billion a year. With the floods adding extra strain on the budget, those concessions may be clawed back.
===
Wild weather could push miners to reassess contracts, risks
08 Feb 2011
Source: reuters // Reuters
By James Regan and David Fogarty
SYDNEY/SINGAPORE, Feb 8 (Reuters) - A surge in weather-related disasters in Australia could push global mining firms to overhaul supply contracts and rethink how bad weather will affect their operations and customers worldwide.
Miners needed to better assess the threats from floods, storms and droughts and include weather data and risks in mine management and commodity contracts, said Robert Milbourne, a mining and resources lawyer for global law firm Norton Rose.
"Contracts must now more accurately address the consequences of weather variability and non-delivery due to weather," Milbourne, a former senior counsel for Brazilian miner Vale , told Reuters.
"Traditionally, severe weather disruptions would be deemed beyond the reasonable expectation of either party. If severe weather events gradually become more foreseeable due to meteorological forecasting capacity, then that forecasting (and planning) capacity will need to be reflected in transactions," he said.
A series of floods, drought and cyclones has badly disrupted mining in Australia, particularly in Queensland, where coking coal miners have been hit by severe floods twice in three years.
The latest floods along Australia's east coast, which began late last year, have led to 16 coal mines in Queensland state covering total annual capacity of 94.3 million tonnes declaring full or partial force majeure.
FORCE MAJEURE
Force majeure is a legal let-out that enables miners to break or suspend sales contracts without penalty.
Australia is a leading coking coal producer and Queensland produces 90 percent of the nation's coking coal from miners including Anglo American , Rio Tinto and BHP .
Eastern Australia's devastating floods would hit production at BHP's coal mining operations for at least six more months, the world's biggest miner said after output in Queensland fell by nearly a third in the last quarter.
Flood damage to mines and transport infrastructure will cost the Queensland government A$2.9 million a day in lost coal royalties for the rest of the financial year, which runs until June 30, a study by the Queensland Resources Council showed.
Droughts and cyclones can also be extremely disruptive, with iron ore mines in the northwest of Western Australia state vulnerable to powerful cyclones.
"The sequence and intensity of flooding and cyclones (in Queensland) has actually been down since the 1980s, so historically speaking they have had a pretty good run," said Queensland Resources Council spokesman Jim Devine.
while iron ore major
PRICING IN RISK
Climate scientists say a warmer world will cause greater extremes of weather and some scientists have pointed to climate change as factors in some weather disasters in Australia.
Reinsurers Munich Re say weather related disasters have tripled in Australia over the past 30 years.
Predictions of what were seen as extreme one-in-100 year events were becoming more frequent, he said.
(Editing by Clarence Fernandez)
Source: reuters // Reuters
* Residents sandbag homes in major city
* Floods to cut economic growth - analyst
* PM says floods will not prevent return to surplus in 2012-13
* Floods have hit coal industry, threaten tourism (Adds details on towns affected, coal industry)
By Michael Perry
SYDNEY, Jan 10 (Reuters) - Residents in Australia's third largest city, Brisbane, sandbagged their homes against rising waters on Monday as torrential rain worsened floods that have paralysed the coal industry in the northeast and now threaten tourism.
Prime Minister Julia Gillard said the cost of the floods would not delay a return to budget surplus in 2012-13, but J.P. Morgan predicted the disaster would crimp growth this year and could delay another increase in interest rates.
The worst floods in 50 years have at times covered an area the size of France and Germany combined in Queensland state. Six people have been killed while dozens of towns have been isolated or partially submerged. More monsoon rains are expected all week.
"People need to think about how to get out and if you don't need to travel, stay off the roads," said Police Chief Superintendent Alistair Dawson, referring to some of the smaller towns near Brisbane, Queensland's state capital.
Toowoomba, a major rural city west of Brisbane, was hit by a two-metre-deep wall of mud-filled floodwater which swept two people to their deaths and left others clinging to the tops of vehicles carried along streets by the torrent, police said.
In Brisbane, a city of 2 million, people in low-lying areas were given sandbags and warned the worst of the flooding might not occur until Tuesday or Wednesday.
Police urged motorists to stay off the roads in the state's heavily populated southeast, home to the Sunshine and Gold Coast tourist strips, Australia's premier tourism destinations.
Queensland Tourism said rains and flooding would hurt the industry, but it was too early to quantify the impact.
Australia's A$32 billion tourism sector was already in trouble due to the strength of the local dollar driving off overseas visitors and enticing Australians to go abroad.
The floods have caused an estimated A$6 billion ($6 billion)in damage and economists say they will cut economic growth in 2011 and heighten inflation as food prices rise and reconstruction begins in the nation's second largest state.
Queensland's $20 billion coking coal export industry has been brought to a virtual standstill.
"With more rain falling it could be months before the floodwaters clear and the extent of the damage to essential infrastructure is known," said J.P. Morgan chief economist Stephen Walters.
J.P. Morgan on Monday cut its GDP growth forecast for 2011 to 3.3 percent from 3.7 percent and raised its inflation forecast to 3.8 percent from 3.2 percent. That pushed out to May from February the likely timing for the central bank's next interest rate hike.
"Even inflation-conscious RBA (Reserve Bank of Australia) officials won't hike with Queensland under water," said Walters.
TOTAL DAMAGE BILL UNKNOWN
Gillard announced more aid on Monday, but said the floods would not derail an expected 2012-13 return to a budget surplus, with economic expansion now well into the 20th year and annual growth at 2.7 percent in December.
"I can't at this stage tell people what the total cost of recovering from these floods is going to be, because I can't predict the draw-down on infrastructure money until we see what's under the floodwaters," she said.
In Queensland's north, floodwaters containing toxic farm pesticides were flowing into the Pacific Ocean, threatening Australia's Great Barrier Reef, marine park officials and wildlife experts said.
"Toxic pollution from flooded farms and towns along the Queensland coast will have a disastrous impact on the Great Barrier Reef's corals and will likely have a significant impact on dugongs, turtles and other marine life," said World Wildlife Fund spokesman Nick Heath.
The flood threat was expected to be extended to towns in neighbouring New South Wales state.
A major concern now was the ground, so waterlogged that heavy rains were unable to be absorbed. Full rivers, creeks and man-made watercourses were bursting their banks.
About 116,000 mega litres of water -- equivalent to more than 100,000 Olympic swimming pools -- were being released daily from one Queensland dam, officials said.
COAL INDUSTRY HIT HARD
Floods have also paralysed operations that produce 35 percent of Australia's estimated 259 million tonnes of exportable coal. Australia contributes two-thirds of global coking-coal exports, needed to make steel.
Coal seam gas drilling in the Surat Basin, a major source of gas for an estimated $200 billion in proposed liquefied natural gas projects to be built this decade, has been halted by flooding.
Global miners Anglo American , Rio Tinto , Xstrata and BHP Billiton , have been hit by the floods, and all have made force majeure declarations, which release firms from delivery commitments.
Flooding has begun to recede in the main Bowen Basin coal region, but many mines remain flooded and will take weeks to drain and resume full production. While some rail links between mines and the ports have resumed, others remain under water.
Coal stocks were running low at the key coal port of Dalrymple Bay, but it was receiving enough to keep loading ships, while the port of Gladstone said it could be days to weeks before it starts getting coal supplies back to normal. (Additional reporting by Rob Taylor in Canberra; Writing by Michael Perry and Rob Taylor; Editing by Dean Yates)
====
REFILE-WRAPUP 5-Australia floods inundate Brisbane, 67 missing12 Jan 2011
Source: reuters // Reuters
* Thousands evacuated, power cut, residents stockpile food
* Floods peak expected to last 3-4 days
* RBA member says 1 pct GDP impact possible
* Australian dollar hits fresh four-week low
* Brisbane port closed, coal industry at standstill (Refiles to put correct day in lead) (Revises missing and dead, adds latest on flooding and fresh quotes)
By Ed Davies
BRISBANE, Australia, Jan 12 (Reuters) - Massive floods shut down the centre of Australia's third-largest city, sent thousands fleeing from their homes and sparked panic buying of food on Wednesday as rescuers searched desperately for nearly 70 people missing in floodwaters.
The biggest floods in a century have so far killed 16 people since starting their march across the northern mining state of Queensland last month, crippling the coking coal industry, destroying infrastructure, putting a brake on the economy and sending the local currency to four-week lows.
The flood surge is expected to peak in Brisbane, a riverine city of two million people, before sunrise on Thursday and last for days. However, the peak will arrive within the next few hours in Ipswich, a satellite town to the west.
"The water is rising and swallowing up the city. It's really heartbreaking," said Ipswich Mayor Paul Pisasale.
Brisbane residents on Wednesday pushed food-laden shopping carts through drowned streets, others waded in shoulder-high water to rescue possessions, while boats and pontoons were ripped from moorings in the Brisbane River and smashed into bridges as the muddy brown tide gathered strength.
At flooded intersections people paddled surfboards through floodwaters, balancing their possessions on the deck of the boards, while boats ferried evacuees to dry ground.
"I am feeling a sense of horror and awe at the power of the river. Sadly in coming hours we will see bits of people's homes float down the river," Brisbane Mayor Campbell Newman said, warning the torrent could take three to four days to subside.
Rescue crews took advantage of some rare sunshine to look for 67 people still missing from tsunami-like flash floods that tore through townships west of the city this week.
"We can take no comfort from that blue sky," Queensland state Premier Anna Bligh told reporters, predicting almost 20,000 homes could be flooded at the river's peak in what she called Queensland's worst natural disaster.
"The water and the rain have already done their damage. This is a deeply serious natural disaster."
The worsening floods are forcing economists to raise estimates of the economic impact, with one central bank board member on Wednesday saying the disaster could cut 1 percent off growth -- equal to almost $13 billion, double the previous highest estimate. [ID:nSDYBCE7YF]
The Australian dollar sank to a fresh four-week low of $0.9803 on the comments from Warwick McKibbin, an academic and a member of the central bank's policymaking board.
Treasurer Wayne Swan in November forecast GDP growth of 3.25 percent in fiscal 2010-11, up from a 3.0 percent projection, but said spending would be cut to ensure a surplus of A$3.1 billion or 0.2 percent of GDP in 2012/13.
Food prices are surging around the country as the floods ruin Queensland crops and distribution networks. Prices for tomatoes have leapt about 200 percent in two weeks, while beef is up 11 percent and wheat has risen 4 percent in four months.
BRISBANE A DESERTED CITY
In Brisbane, thousands of homes and businesses were deserted as swirling floodwaters rose in and around the city, forcing residents to flee with few possessions to higher ground and to evacuation centres crowded with more than 3,500 people.
Some of the scenes in the city were surreal, with early-morning joggers trying to carry on as normal, even though parts of their routes were underwater. Others were distraught.
"This is my whole life, everything is gone. I never thought it would get this bad," said Kim Hung, manager of the Salt 'n' Pepper catering business, as two friends floated a coffee machine toward higher ground.
Raw sewage began spilling into the river and creeks, prompting authorities to warn of a heightened disease risk as damaged water treatment works polluted the floodwaters.
Bligh said she expected about 19,700 homes to be flooded at the river's peak, affecting up to 45,000 people. The military is running relief flights with helicopters and C-130 transports.
Dams built to protect Brisbane and outlying towns were spilling floodwaters into swollen rivers. The Port of Brisbane was closed, shutting down Australia's third-busiest container port and a 5-million-tonnes-a-year coal-loading facility.
Australia is the world's biggest exporter of coking coal, which is used in steel manufacturing and accounts for more than half of global exports, and is also the second-biggest exporter of thermal coal used for power generation.
Power company Energex shut power to some low-lying areas of Brisbane, including parts of the financial district, for fear that live power lines could electrify floodwaters. Some 78,000 homes in the southeast of Queensland were without electricity.
'TERRIFYING, CHAOS'
Queensland Premier Bligh advised people not to leave their homes if they are safe and to conserve water in case fresh supplies were interrupted. "As crazy as it sounds, now is not a time to be wasting water," she said.
Prime Minister Julia Gillard arrived in Brisbane to inspect the devastation and said she was deeply concerned about the impact on jobs and livelihoods.
"I have been shocked. I think we've all been shocked by the images of that wall of water just wreaking such devastation. The dimensions of it are truly mind-boggling," Gillard said.
The floods have been blamed on a La Nina weather pattern in the Pacific, with Australia recording its third-wettest year on record in 2010, with two wet-season months to go. Weather officials are also forecasting an above-average cyclone season.
As the Queensland floods and rains move south, major rivers in New South Wales state have begun flooding or threatening to break their banks, forcing rural evacuations. In southeast Victoria state, heavy rain caused flash flooding and landslides, prompting fears a lake near Horsham could break its banks. However, underlining the country's summer of extremes, authorities in Western Australia battled huge bushfires. (Additional reporting by Rob Taylor in CANBERRA and Balazs Koranyi, Wayne Cole and Amy Pyett in SYDNEY)
(Writing by Rob Taylor; Editing by John Chalmers)
=====
ReadAustralia floods inundate Brisbane, over 90 missing
11 Jan 2011
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2Green Cars to Watch for at 2011 Detroit Auto Show
06 Jan 2011
3Australia floods inundate Brisbane, 67 missing |
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4Barclays boss says banks should stop saying sorry
11 Jan 2011
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4U.S. congresswoman battles for life after shooting
3Autism-vaccine researcher a ”fraud” – medical journal
Watched Oil moves closer to $100
Tue, Jan 11 2011 Nintendo : 4 mln 3DS in 1st month
Mon, Jan 10 2011 Fate of Fiat plant stirs tension
Tue, Jan 11 2011Scientists see climate change link to Australian floods
By David Fogarty, Climate Change Correspondent, Asia
SINGAPORE | Wed Jan 12, 2011 8:01am GMT
SINGAPORE (Reuters) - Climate change has likely intensified the monsoon rains that have triggered record floods in Australia's Queensland state, scientists said on Wednesday, with several months of heavy rain and storms still to come.
But while scientists say a warmer world is predicted to lead to more intense droughts and floods, it wasn't yet possible to say if climate change would trigger stronger La Nina and El Nino weather patterns that can cause weather chaos across the globe.
"I think people will end up concluding that at least some of the intensity of the monsoon in Queensland can be attributed to climate change," said Matthew England of the Climate Change Research Center at the University of New South Wales in Sydney.
"The waters off Australia are the warmest ever measured and those waters provide moisture to the atmosphere for the Queensland and northern Australia monsoon," he told Reuters.
The Queensland floods have killed 16 people since the downpour started last month, inundating towns, crippling coal mining and are now swamping the state's main city of Brisbane.
The rains have been blamed on one of the strongest La Nina patterns ever recorded. La Nina is a cooling of ocean temperatures in the east and central Pacific, which usually leads to more rain over much of Australia, Indonesia and other parts of Southeast Asia. This is because the phenomena leads to stronger easterly winds in the tropics that pile up warm water in the western Pacific and around Australia. Indonesia said on Wednesday it expected prolonged rains until June.
WEATHER SWITCH
The Pacific has historically switched between La Nina phases and El Ninos, which have the opposite impact by triggering droughts in Australia and Southeast Asia.
"We've always had El Ninos and we've had natural variability but the background which is now operating is different," said David Jones, head of climate monitoring and prediction at the Australia Bureau of Meteorology in Melbourne.
"The first thing we can say with La Nina and El Nino is it is now happening in a hotter world," he told Reuters, adding that meant more evaporation from land and oceans, more moisture in the atmosphere and stronger weather patterns.
"So the El Nino droughts would be expected to be exacerbated and also La Nina floods because rainfall would be exacerbated," he said, though adding it would be some years before any climate change impact on both phenomena might become clear.
He said the current La Nina was different because of the warmest ocean temperatures on record around Australia and record humidity in eastern Australia over the past 12 months.
Prominent U.S. climate scientist Kevin Trenberth said the floods and the intense La Nina were a combination of factors.
He pointed to high ocean temperatures in the Indian Ocean near Indonesia early last year as well as the rapid onset of La Nina after the last El Nino ended in May.
====
BREAKINGVIEWS-Miners may shoulder some cost of Australian floods12 Jan 2011
Source: reuters // Reuters
-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --
By John Foley
HONG KONG, Jan 12 (Reuters Breakingviews) - It will be some weeks before the cost of Queensland's devastating floods becomes clear. But when it does, it is likely that the hit -- which could reach $13 billion by some early estimates -- is likely to fall partly, if indirectly, on Australia's miners.
Miners have already felt the brunt of the disaster. Coking coal producers in Queensland, a state which accounts for almost 60 percent of global exports, have been brought to a virtual halt. Pits accounting for two-thirds of the state's annual output have declared force majeure on some or all of their production, according to Reuters analysis.
The pain will mostly be temporary. Prices of metallurgical coal are set to spike following the floods, with Citi now estimating a 33 percent hike on year-end levels. For Queensland's miners, that should provide part compensation for lost revenues, and that might explain why BHP Billiton
But the economy at large will still shoulder costs, though the actual fix-up bill is hard to even guess. Central banker Warren McKibbin suggested the bill could equal one percent of GDP -- or $13 billion. A JPMorgan analysis puts the total at around half that amount.
A sum of that order would dent Australia's finances, despite the fact they are getting stronger. True, the central government runs a persistent deficit. But new Prime Minister Julia Gillard has promised to reduce it by 2013. And after a promising start -- the deficit was set to fall from 4.5 percent to 2.8 percent of GDP this year, according to HSBC estimates before the floods -- Gillard will find it hard to let that target slide.
That's where the miners come in. Politicians are still mulling plans for a super-tax on producers' boom-time profits. Back in July, miners seemed to have the upper hand: their lobbying saw Gillard temper the measures considerably, cutting the estimated tax take by some $1.5 billion a year. With the floods adding extra strain on the budget, those concessions may be clawed back.
===
Wild weather could push miners to reassess contracts, risks
08 Feb 2011
Source: reuters // Reuters
By James Regan and David Fogarty
SYDNEY/SINGAPORE, Feb 8 (Reuters) - A surge in weather-related disasters in Australia could push global mining firms to overhaul supply contracts and rethink how bad weather will affect their operations and customers worldwide.
Miners needed to better assess the threats from floods, storms and droughts and include weather data and risks in mine management and commodity contracts, said Robert Milbourne, a mining and resources lawyer for global law firm Norton Rose.
"Contracts must now more accurately address the consequences of weather variability and non-delivery due to weather," Milbourne, a former senior counsel for Brazilian miner Vale , told Reuters.
"Traditionally, severe weather disruptions would be deemed beyond the reasonable expectation of either party. If severe weather events gradually become more foreseeable due to meteorological forecasting capacity, then that forecasting (and planning) capacity will need to be reflected in transactions," he said.
A series of floods, drought and cyclones has badly disrupted mining in Australia, particularly in Queensland, where coking coal miners have been hit by severe floods twice in three years.
The latest floods along Australia's east coast, which began late last year, have led to 16 coal mines in Queensland state covering total annual capacity of 94.3 million tonnes declaring full or partial force majeure.
FORCE MAJEURE
Force majeure is a legal let-out that enables miners to break or suspend sales contracts without penalty.
Australia is a leading coking coal producer and Queensland produces 90 percent of the nation's coking coal from miners including Anglo American , Rio Tinto and BHP .
Eastern Australia's devastating floods would hit production at BHP's coal mining operations for at least six more months, the world's biggest miner said after output in Queensland fell by nearly a third in the last quarter.
Flood damage to mines and transport infrastructure will cost the Queensland government A$2.9 million a day in lost coal royalties for the rest of the financial year, which runs until June 30, a study by the Queensland Resources Council showed.
Droughts and cyclones can also be extremely disruptive, with iron ore mines in the northwest of Western Australia state vulnerable to powerful cyclones.
"The sequence and intensity of flooding and cyclones (in Queensland) has actually been down since the 1980s, so historically speaking they have had a pretty good run," said Queensland Resources Council spokesman Jim Devine.
But mining firms would not want to elaborate on risk management.,
"That is something that would be very commercially sensitive and not something mining companies would contemplate discussing in earshot of each other," he said.
BHP Billiton declined to comment on the likelihood of changes to its risk assessment strategy. When asked about risks from more intense cyclones in Western Australia
while iron ore major
Fortescue Metals Group said:
"Risk mitigation is already included in the planning, design and construction of Fortescue's operations and infrastructure due to weather events commonly experienced in the Pilbara," in a reference to a major iron ore region in the state. But it had not quantified the costs of risk mitigation, it added.
PRICING IN RISK
Milbourne said weather risk needed to be a much more central component of contract negotiations and such risks could also begin to be priced into the value of mine assets, such as the cost of operating mines in disaster-prone areas.
"I think commodity contracts such as coking coal will now have to expressly look much more seriously at force majeure and delay as fundamental commercial terms," said Milbourne, who is based in Queensland's capital Brisbane.
Climate scientists say a warmer world will cause greater extremes of weather and some scientists have pointed to climate change as factors in some weather disasters in Australia.
Reinsurers Munich Re say weather related disasters have tripled in Australia over the past 30 years.
"We're at the mercy of the environment and many stakeholders haven't fully analyzed that variability before," Milbourne said, adding he believed there was going to be a premium on getting accurate meteorological data.
Martijn Wilder, head of Baker & McKenzie's global environmental markets practice, agreed.
"We haven't seen a dedicated focus on making sure that force majeure events in contracts reflect what are catastrophic climate events," he told Reuters from Sydney.
Predictions of what were seen as extreme one-in-100 year events were becoming more frequent, he said.
"Insurance companies like IAG and Swiss Re have continuously made this point and yet a lot of neither industry nor government have taken real steps to mitigate against such events."he said.
But he thought the floods and last week's powerful Cyclone Yasi that struck northern Queensland might bring change.
"The rawness of the cost of such events and the ever-growing loss of infrastructure, livelihood and life, means there is a greater chance than ever that companies will really start to look at this,"
Superannuation funds also needed to take climate catastrophes into greater account when investing, he added.
"It's also an issue for those who invest in companies. If you're an investor in a mining company in an area that is susceptible to cyclones, should you start thinking about how this affects that company?"
(Editing by Clarence Fernandez)
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