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Blackwater USA – Daily Brief

Migration

  • The WSJ says that the U.S.-Guatemala immigration deal is likely to lead to a greater share of migrants entering the U.S. being single, often male adults—since most asylum seekers from the countries affected tend to be families who will now be deterred by the idea of being sent to Guatemala.
  • Mexico said that the number of migrants transiting through Mexico to the U.S. border has dropped 40% since May, which makes it look like it’s fulfilled its end of the deal to avoid U.S. tariffs.

DRC

  • A second person died after contracting Ebola in Goma, raising fears that the virus could spread through the city and across the border into Rwanda.

Venezuela

  • Talks between the opposition and Pres. Maduro’s government will resume this week—but the opposition rep who made the announcement didn’t say when or where.

Afghanistan

  • An attack on a bus on the Kandahar-Herat highway killed at least 32 civilians. The Taliban denied responsibility—as it often does for especially brutal attacks on civilians—but was likely responsible.
  • The UN mission in Afghanistan released 1H 2019 civilian casualty figures that showed that the ANSF and NATO troops in the country killed more civilians than the Taliban did (though overall casualty counts were down).

Brexit

  • It looks like investors aren’t too confident in Boris Johnson’s ability to negotiate a responsible Brexit: the GBP has fallen from around $1.30/GBP to $1.22/GBP since his election just over a week ago.

China

  • Two Xinjiang officials with central government support says that most Uighurs who were detained in re-education camps in Xinjiang have now been released, and are now “transitioning from internment to societywide control”—and with vocational training, now!
  • While Huawei 1H sales are up almost a quarter, Apple’s iPhone sales declined for the third consecutive quarter.

North Korea

  • DPRK tested yet more weapons, firing two short-range ballistic missiles toward South Korea. That’s their second test in a week.

Strategic Minerals

  • Glencore said it was preparing a turnaround plan for its copper unit that it will announce this week. A Financial Times article about Glencore’s struggles in DRC is pasted below.

Glencore to announce turnround plan for African copper unit (FT)

Mining company has been grappling with string of issues in DR Congo

Glencore boss Ivan Glasenberg said he would reveal a detailed turnround plan for its ailing African copper arm next week as he took a swipe at the performance of the business.

The news came as the Swiss-based group said its powerful “marketing”, or trading arm would suffer a hit to earnings because of a collapse in cobalt prices.

Glencore has been grappling with a string of issues in the Democratic Republic of Congo, where it operates two copper mines, and in Zambia, where it owns another asset.

Dozens of illegal miners died last month at its largest copper and cobalt mine in the DRC after a pit wall collapsed, while the company has closed two “uneconomic” shafts at its Mopani Copper Mines business in Zambia as it works on new ones.

Mr Glasenberg said its African copper business “did not meet expected operational performance” as production fell 3 per cent to 187,800 tonnes in the six months to June.

“Our African copper assets retain significant potential and will play a key role in the transition to a low-carbon economy. We have developed detailed turnround plans and I look forward to taking you through these plans along with our financial performance on August 7,” he said.

Last year responsibility for Glencore’s mining, or industrial assets, was handed to Peter Freyberg, the former head of its coal division, in a move that highlighted a broader shift at the company from its roots as a swashbuckling trader to a more prosaic miner.

Investors are hoping that Mr Freyberg can bring some of the technical rigour and process from the coal business to Glencore’s African copper arm. He will deliver the turnround plan alongside Mr Glasenberg.

Although African copper is a small part of Glencore’s overall business, it receives a lot of attention from analysts and investors. The company has invested heavily in the DRC and Zambia and reckons it will be one of the best placed miners to benefit from the shift to cleaner forms of energy.

Demand for copper is expected to outstrip supply over the next decade because of the growth of renewable power, while cobalt is needed in the battery packs of electric vehicles.

Many of the problems Glencore has faced have been at Katanga Mining, its main subsidiary in the DRC.

Last year Katanga, which is listed in Toronto, was fined by Canadian regulators for issuing misleading financial statements. It has also been forced to a build a new system to remove uranium from its cobalt supplies.

Katanga is due to release the results of a comprehensive business review next week and downgrades are likely to follow, according to analysts. Katanga had been expected produce 285,000 tonnes of copper this year and 26,000 of cobalt, estimates it is unlikely to hit. The company said overnight that Mr Freyberg had joined its board and also announced a six month delay in commissioning a cobalt project.

In Wednesday’s trading update, Glencore said its trading arm been forced to take a mark-to-market loss of $350m on about 10,000 tonnes of cobalt inventory it owns but has yet to sell. It said the loss would be non-cash as the position had been funded in 2018.

“The cobalt price drop continues to wreak havoc on the marketing books,” said Tyler Broda, an analyst at RBC Capital Markets. “But this is largely owing to timing.”

Excluding this cobalt loss, Glencore said its marketing arm was set to report earnings before interest and tax of $1.3bn in the first six months of the year, which on an annualised basis is within the $2.2bn-$3.2bn guidance range set by the company.

Shares in Glencore fell 1.2 per cent to 269.5p on Wednesday and are down around 6 per cent this year.