July 26, 2012 – Republic of Mining

Tax changes maytake away Canada’s edge – by Drew Hasselback (National Post – July 25, 2012)

July 26, 2012

The National Post is Canada’s second largest national paper.

International companies using Canada as a base of operations – and this would include a stack of global mining companies – need to pay close attention to tax amendments announced in the last federal budget that might erode the benefits of doing business in Canada.

Finance Minister Jim Flaherty’s March 29 budget plan rolls out several changes that are supposed to close tax loopholes, among them a “targeted measure” to curtail the use of something called “foreign affiliate dumping transactions.”

The proposals have caught the attention of mining lawyers and other Canadian legal and tax advisors who work with multinational companies that have decided to manage their foreign assets out of Canada.

A joint committee on taxation made up of members of the Canadian Bar Association and the Canadian Institute of Chartered Accountants has filed a submission with the federal Department of Finance to point out some of their concerns with the proposals.

China slowing down? Don’t worry about it – by Drew Hasselback (National Post – July 25, 2012)

July 26, 2012

The National Post is Canada’s second largest national paper.

Earlier this month we saw some figures that suggest China’s rapid economic growth is starting to slow. China’s second-quarter GDP rose by 7.6%, slower than the 8.1% reported in the first quarter.

The slowdown in headline GDP might shock those who are banking on China’s future prosperity to sustain commodity prices. But Canadian lawyers doing business in that part of the world are less worried about it.

For one thing, Canadian lawyers have learned not to focus too narrowly on China, but rather to target the business opportunities available through Asia. “Your focus is on China because of the GDP numbers, but this is Asia, and the Koreans are still very involved in this,” says Jay Kellerman, a mining lawyer with Stikeman Elliott LLP in Toronto.

For another, Canadian lawyers have come to understand that business flows to and from China can be choppy. Much of Canada’s resource business is built on the foundation laid by the oomph Chinese demand has built into commodity prices. News of a slowing Chinese economy might set off alarm bells for an already nervous resource industry — but this doesn’t necessarily translate into concerns over deal flow.

China’s Canadian Energy Play – Wall Street Journal Editorial – July 26, 2012

July 26, 2012

http://online.wsj.com/home-page

Alberta’s oil sands will be developed, no matter what U.S. greens say

President Obama may not want to exploit the energy buried in Canada’s Alberta oil sands, but China sure does. Think of Monday’s $15.1 billion offer by China’s state-owned Cnooc to buy Canadian energy giant Nexen as a post-Keystone XL Pipeline bid to replace the U.S. as Canada’s biggest energy investor and market.

Nexen offers Cnooc a sweeping North American energy footprint, with assets from heavy oil and shale gas in Alberta to offshore leases in the Gulf of Mexico. Part of the bet is also on Canadian politics, which could block the investment on nationalist grounds but which so far hasn’t been captured by the anticarbon fevers that dominate Washington.

Canada seems to understand that its resources are a gift that can raise national prosperity. And as extraction technology has improved, Canada’s proven oil reserves have climbed to at least 180 billion barrels, putting it behind only Saudi Arabia and Venezuela.

Unlike the U.S., Ottawa cedes most energy decisions to the provinces, which have encouraged production. A decade ago Alberta reduced to 1% the royalty that companies must pay until they have earned back their capital costs; then the rate reverts to 25%. The incentive kick-started the oil sands investment boom.

Nexen deal: The only standard is reciprocity – by Roger Martin (Globe and Mail – July 26, 2012)

July 26, 2012

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Roger Martin is dean of the University of Toronto’s Rotman School of Management.

The CNOOC takeover bid for Nexen demonstrates once again that while a given government policy tool may have a bright, sunny face, it often simultaneously casts a dark, problematic shadow.

The Canadian policy tool that will be used to determine whether this takeover will be permitted is “net benefit.” This means that after all the capital-market formalities are taken care of – which should be pretty straightforward due to the 61-per-cent premium being offered – the government will declare whether the takeover produces net benefit for Canada.

Thus far, the net benefit tool has been all happiness and light for Ottawa. The handy thing is that the government can make up any conclusion it wants under the as-you-like-it construct of net benefit. The prima facie evidence for making stuff up is the BHP Billiton bid for PotashCorp, where the government determined that the bid didn’t provide net benefit to Canada and disallowed the takeover. I suspect the government felt pretty chuffed about the power of the net benefit tool.

Nexen deal: Canada must remain open for business – by Jim Prentice

July 26, 2012

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Jim Prentice is senior executive vice-president and vice-chair of CIBC, and a former industry minister.

A few months ago, The Economist magazine opined that the defining battle of the 21st century would not be between capitalism and socialism, but between different versions of capitalism – market capitalism on the one hand and state-owned enterprises (SOEs) on the other.

If that is so, the battleground has now shifted to Canada’s oil sands. To be clear, I do not have a horse in this race. I personally favoured a Canadian outcome for Nexen. Its assets lay in the shop window for months, arguably years, but no Canadian energy company emerged to buy them.

Instead, CNOOC, one of the world’s largest SOEs, has stepped forward with a blockbuster offer. This transaction represents the largest outbound Chinese deal to date and has been carefully insulated to provide commitments for Canadian investment, Canadian jobs, a Canadian hemispheric headquarters and a Canadian domiciled public listing.

B.C. calls on Alberta, Ottawa to join pipeline talks – by Jane Taber (Globe and Mail – July 26, 2012)

July 26, 2012

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

LUNENBURG, N.S – British Columbia Premier Christy Clark opened another front in her demand for a “fair share” of benefits from the proposed Northern Gateway pipeline, calling on the Harper government to sit down at the negotiating table along with Alberta.

Ms. Clark laid out the new terms as Canada’s premiers met with aboriginal leaders in the historic fishing town of Lunenburg ahead of the annual Council of the Federation meetings, which begins Thursday in Halifax. “My basic request is for Alberta and Canada to come to the table and sit down and figure out how we can resolve this,” she told reporters after the meeting.

But the province’s push for a greater slice of oil-sands prosperity comes as the sector’s prospects dim. Suncor Energy Inc. is backing away from its plans to produce a million barrels of oil a day by 2020, amid growing concerns from investors about the profit outlook for the oil sands. The Calgary-based giant’s hesitation stands in contrast to a bold play by China’s state-controlled CNOOC, which this week proposed a $15-billion takeover of oil and gas producer Nexen Inc.

Vale accepts [Ontario labour board] decision – by Carol Mulligan (Sudbury Star – July 26, 2012)

July 26, 2012

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Vale Ltd. officials still believe they had reason to discipline Creighton miner Mike Courchesne for his behaviour on a United Steelworkers picket line in August 2009. But the mining company says it will accept the decision of an arbitrator and give Courchesne his job back.

The company issued a statement Wednesday after arbitrator Wes Rayner ruled Tuesday that while Courchesne exhibited some bad behaviour, it didn’t warrant his dismissal.

“Although we stand by our view that Mr. Courchesne’s conduct warranted discipline — something the arbitrator concluded as well — we will follow through on the decision as directed,” Vale said Wednesday.

United Steelworkers Local 6500 president Rick Bertrand would like Vale to reinstate five more members fired during the year-long strike whose cases are also in arbitration.

Planning for the Boom [Northwestern Ontario] – by Livio Di Matteo (Northern Economist 2.0 – July 25, 2012)

July 26, 2012

An economics and policy blog from a Northern Ontario Perspective. http://northerneconomist.blogspot.ca/

The talk of booms and rumours of booms continues in Northwestern Ontario and with good reason given the ramping up of mining activity. Along with several mines currently in production, there are a number of planned projects. Cliffs Chromite Project in the Ring of Fire is about to undergo an environmental assessment. Thunder Bay is currently the host to some 26 exploration companies with projects expected to produce gold over the next 3-5 years at Greenstone (Hard Rock), Atikokan (Hammond Reef), Pickle Lake (PC Gold Inc.) as well as several other places. As well, Stillwater is planning to develop a copper project near Marathon.

All this activity is generating exploration and supply work but the mining boom is not here yet. Nonetheless, area governments are beginning “to plan” for the development that is underway and yet to come. Atikokan apparently has commissioned a community readiness study that among other things argues that six major projects in the area will lead to substantial construction activity, home building and potentially a doubling of the population. Thunder Bay is apparently also undertaking a Mining Readiness Strategy that will attempt to capitalize on the mining development.

A boom with population growth would be a welcome development in Northwestern Ontario. This would be a much different region if Thunder Bay had 150,000 people and Nipigon and Atikokan were communities of 20,000 people each.

National native chief Shawn Atleo wants resources partnership with Canadian provincial premiers – by Heather Scoffield (Canadian Press/Toronto Star – July 25, 2012)

July 26, 2012

The Toronto Star, has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

OTTAWA — National chief Shawn Atleo wants the premiers to recognize First Nations as full and equal partners in developing natural resources, but he says such recognition should not have to wait for politicians to agree on a national energy plan.

The head of the Assembly of First Nations and other aboriginal leaders are meeting today with premiers in Lunenburg, N.S., in advance of the annual Council of the Federation summit on inter-provincial relations.

The premiers, like Atleo, are consumed with devising better ways to develop natural resources so that more people can benefit, and so that the environment does not pay too steep a price.

But details of what a national energy strategy would look like are vague, and buy-in from all the provinces is uncertain — especially now that Alberta and British Columbia are sparring openly over the Northern Gateway pipeline.