Standard Bank expanding physical iron ore and swaps trade

Wednesday, 24 Aug 2011

Reuters reported that Standard Bank started to trade iron ore swaps this year, chiefly as an add on to its expanding physical iron ore business and this derivatives activity is attracting ever more customer interest.

Mr Jim Coupland global head of base metals and bulk commodities, told Reuters in an interview that “We see the key being the physical flow and the derivatives being an add on to manage price risk. We started to trade iron ore swaps this year mainly to manage our prices risk, but from a customers' point of view it has also become more interesting.”

He added “We have already concluded some long term iron ore off takes in Sweden, Latin America and Australia and we are actively trading material in China as well.”

Iron ore swaps allow producers, consumers and financial market participants to hedge or bet on prices in the future. A number of investment banks have started to trade iron ore swaps in the last few months. Some, including Citi and Goldman Sachs are also looking at physical iron ore trading, attracted by large market volumes that mean potentially high returns.

Standard Bank also started trading physical steel products such as billet and scrap last year and is active in steel derivatives such as rebar on the Shanghai Futures Exchange and billet in the London Metal Exchange.

Standard Bank physical steel and iron ore traders are based in Shanghai, Hong Kong, Singapore and London while the bulk of the risk management team is based in Singapore.

(Sourced Thomson Reuters)

Banks grant Sentula flexible R740m debt facility

JOHANNESBURG (miningweekly.com) – JSE-listed coal-mining services company Sentula has secured a R740-million debt facility involving a reduced funding rate, a six-month capital moratorium and a four-year repayment profile.
By flexibly refinancing Sentula’s existing senior debt, Standard Bank, Hong Kong & Shanghai Banking’s Johannesburg branch and Sanlam Capital have afforded Sentula the liquidity it requires.
Sentula now has R120-million in refurbishment funding for its existing fleet and idle equipment through a six-month capital moratorium.
The refinancing structure creates more cash-flow headroom, Sentula CEO Robin Berry comments.
Standard Bank has been mandated to advise and arrange the refinancing, which provides Sentula with an immediate R140-million for new capital equipment.
The structure also allows for further new capital equipment drawdown over four years, as long as the total debt level does not exceed R800-million.
“The R800-million peak debt level is conservative and appropriate in current trading conditions," adds Berry, while remaining cognisant of the consequences of over-gearing given Sentula's peak debt level of R1,9-billion in its 2008 financial year.