December 12, 2012 – Republic of Mining

Canadian underwater miner gets sinking feeling in Papua New Guinea – by James Regan (Reuters.com – December 12, 2012)

December 12, 2012

http://www.reuters.com/

SYDNEY, Dec 12 (Reuters) – A dispute between Papua New Guinea and Canada’s Nautilus Minerals threatens to sink plans to mine gold and other metals for the first time from the ocean floor.

It could also work against efforts by the South Pacific country to restore faith in its vast resources potential and entice more foreign companies to follow the likes of Exxon Mobil , Newcrest Mining and Barrick Gold and invest billions of dollars in resource projects.

The groundbreaking undersea venture hopes to use robots operating a mile (1,600 metres) deep to mine the sea floor near hydrothermal vents that deposit copper, gold and other minerals.

Hungry for foreign investment, Papua New Guinea (PNG), a nation of 7 million spread over an equatorial archipelago the size of California, had agreed in 2011 to pay 30 percent of the costs to build the Solwara 1 project in the Bismark Sea, which Nautilus said amounts to $80 million so far.

But in June, the government’s investment arm, Petromin, said it was terminating the agreement. Without the funds, Nautilus says it cannot afford to proceed and the matter is now in arbitration in Australia under The United Nations Commission on International Trade Law (UNCITRAL).

Chinese workers headed to Greenland – by Marilyn Scales (Canadian Mining Journal – December 11, 2012)

May 4, 2015December 12, 2012

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

If something happens twice, does that the beginning of a trend? The “something” is governments allowing foreign workers to fill jobs at mining projects. With the blessing of Canada’s federal government, HD Mining is importing “temporary” Chinese workers for its Murray River coal project in British Columbia. Greenland has passed legislation that will allow the employment of Chinese workers in Greenland at the Isua iron ore project belonging to London Mining plc.

In Canada, the idea of Chinese workers arriving to fill jobs at a coal mine was first floated a few years ago. Then the plan fell below the radar until The Globe and Mail newspaper revived the story a week ago when it was learned that speaking Mandarin is a requirement for working at the Murray River project.

In Greenland, the new legislation paves the way for companies to employ foreign workers at lower wages than they would pay natives of Greenland. All political parties voted for the law, with the exception of the largest opposition party which abstained.

The situations in Canada and Greenland vary on one notable point: Canada has a skilled mining workforce, Greenland does not.

By virtue of our world class mineral industry, Canada has a knowledgeable, inventive and hardworking pool of labour from which to choose.

Flow-through donations may be safety net for junior explorers – by Lisa Davis (Canadian Mining Journal – December 11, 2012)

December 12, 2012

The Canadian Mining Journal is Canada’s first mining publication.

The author, Lisa Davis, LL.B, ICD.D, specializes in the areas of corporate and securities law with two of Canada’s leading national law firms, most recently with Heenan Blaikie LLP, and was general counsel for a national specialized investment fund business. She currently heads up the legal and operations team for Toronto-based PearTree Financial Services Ltd. Visit www.peartreefinserv.com for more information.

It’s no secret that tight equity markets are hurting junior mining and other resource exploration firms in Canada as they struggle to find the vein of capital to keep their operations running and their valuations from leeching away.

Yet, curiously, at a time when resource capital is harder than ever to access, a highly beneficial tool to expand the universe of capital sources — flow through donation financing (FTDF) — sits untouched by the vast majority of junior miners who are largely unaware of the existence of FTDF programs and how they work.

First, a few words to alleviate some of the mystery: Leveraging the tax benefits associated with exploration sector flow through share investing is a relatively new tax shelter gifting arrangement under which individuals wishing to give to a registered Canadian charity can do so at a significantly reduced after-tax cost relative to simply making a cash donation.

The North should prepare itself for a prime-time TV gold rush – by John Doyle (Globe and Mail – December 12, 2012)

December 12, 2012

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.

My prediction for 2013 is the victory of the proletariat.

Okay, all righty, maybe that’s not going to happen. So let’s stick with possible trends for 2013. Here’s a trend that is not entirely unrelated to the victory of the proletariat – the North.

News arrived recently that Discovery, the fabulously successful U.S. cable channel, has ordered up its first scripted project, and that drama project is called Klondike, based on Canadian writer Charlotte Gray’s book Gold Diggers: Striking It Rich in the Klondike.

Among those involved is Ridley Scott, the English director and producer responsible for the movies Alien, Blade Runner and Black Hawk Down, among other titles. In a press release Scott says, “Klondike was the last great gold rush; one which triggered a flood of prospectors ill-equipped, emotionally or otherwise, for the extreme and gruelling conditions of the remote Yukon wilderness.”

Indeed. But what matters, too, is that the decision to make Klondike follows on the ratings success of Discovery’s reality series Gold Rush (seen on Discovery Canada, Tuesdays, 9 p.m., Saturdays, 11 p.m.). Now into its third season, the series follows the key workers at four mining companies as they dig for gold in Alaska.

B.C. mine’s offshore hiring plan sparks conflict – by Pav Jordan and Wendy Stueck (Globe and Mail – December 12, 2012)

December 12, 2012

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.

TORONTO and VANCOUVER — When 60 Chinese workers arrive for work later this week at a British Columbia coal mine, they will be getting a lot more than they bargained for.

Hired by HD Mining International to work the Murray River coal project in Tumbler Ridge, B.C., the miners will walk squarely into a mushrooming debate about the use of temporary foreign workers in an industry running a massive labour deficit as Canada’s work force ages and new mines come on stream.

The workers will join 17 already here. All of them are skilled in the longwall coal mining method, and come to Canada directly from the coal operations of Huiyong Holding, one of two Chinese companies that own HD Mining. The other is Canadian Dehua International Mines Group Inc.

Local unions want Ottawa to reverse a decision to allow HD to hire up to 201 workers from China under the Temporary Foreign Worker Program. They say HD did not make sufficient efforts to hire locally before going abroad, that the company made Mandarin a requirement and advertised wages below the industry norm. Some question whether HD pushed the limits of the program in hiring so many workers for one operation, potentially creating the first Canadian mine that is not operated in either French or English. They also question whether advertised wages were truly competitive.

Mining lawyers bullish on next year – by Drew Hasselback (National Post – December 12, 2012)

December 12, 2012

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

Mining lawyers are fairly bullish on 2013. They’re expecting at least two trends. First, mergers and acquisitions will gather steam as cash-rich mid-tier mining companies will target increasingly cash-poor juniors. Second, weakness in traditional public debt and equity markets will fuel alternative financings, such as joint ventures, streaming or royalty deals.

Khaled Abdel-Barr, a partner with Lawson Lundell LLP in Vancouver, sees favourable market conditions for acquisitions. “I’m generally quite bullish on an uptick in M&A in the Canadian mining space.”

Commodity prices have softened, and this has weakened valuations for smaller companies. This, in turn, makes it difficult for those small companies to finance projects by raising equity through public offerings. Majors and intermediates, meanwhile, have been quietly building up cash. They’re waiting in the weeds to bid on the struggling juniors that have the best projects.

Shea Small, a partner in the Toronto office of McCarthy Tétrault LLP, says that when commodity prices were high, smaller companies were able to access capital markets to finance marginal projects. Conditions have changed — and the smaller companies are now exposed, he says. “When those high commodity prices came down, it became clearer who was swimming without a bathing suit.”

Mining costs may be abating but labour worries persist (National Post – December 12, 2012)

December 12, 2012

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

It might be minimal, but miners appear to finally be feeling some cost relief.

Despite operating in a relatively healthy commodity-price environment, the past couple of years have been mostly miserable for mining executives, as soaring costs have crimped their margins and frustrated investors. Major projects have been called off or deferred because of low projected returns, and CEOs who couldn’t turn things around got fired. By mid-2012, it was clear that investors had lost all patience with under-performing companies.

Even so, the miners are feeling a bit more optimistic as 2013 approaches. While there are few firm numbers to back it up, anecdotal evidence suggests that cost inflation in the mining sector is beginning to slow down and come under control.

As projects got delayed over the past year and companies slashed their capital spending budgets, the incredibly tight markets for inputs such as equipment and consumables began to ease, experts said. They should soften even more over the next two or three years as the pipeline of projects gets thinner due to the deferrals. Many of the largest projects in the world are on hold, including the absolute biggest: BHP Billiton Ltd.’s US$28-billion Olympic Dam expansion in Australia.

Oil pipelines remain a hard sell, industry working to ‘get the message out’ – by Claudia Cattaneo (National Post – December 12, 2012)

December 12, 2012

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

TORONTO — Compare oil production growth from Canada’s oil sands plus nearby tight-oil fields, versus pipeline infrastructure needed to transport it to consumers, and you see why Canada’s energy sector is sweating bullets.

If supplies continue to rise as expected, pipeline capacity will run out around 2015/2016, when combined production from the oil sands and the Bakken tight-oil field surpasses four million barrels a day. When production hits six million barrels a day in a decade, capacity would run out again even if all proposed pipeline plans are approved and built.

It’s a pipeline capacity cliff that’s unprecedented for Canadian oil producers and all eyes are on whether major regulatory decisions in 2013 give the go-ahead to new pipeline projects — or force a rethinking of oil production growth plans.

“On the oil side of things, we have been in and out of that situation … month to month when there are maintenance outages, but never looking forward have we had the delays … like we have seen on Keystone and some of the other regulatory processes,” Greg Stringham, vice-president for oil sands and markets at the Canadian Association of Petroleum Producers, said on the sidelines of the group’s annual investment symposium Tuesday.

Harper’s foreign ownership policy is incomprehensible – by David Olive (Toronto Star – December 12, 2012)

December 12, 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.

Once again I’m dumbfounded that Stephen Harper’s university major was economics. His new policy on foreign ownership, unveiled with fanfare late last week, is as clear as the goo extracted from the dinosaur remains at Fort McMurray.

Harper last Friday rebuked the majority Canadian public opposition to a proposed Chinese government takeover of Calgary oil producer Nexen Inc. with his approval of that $15.1-billion deal, and of a $5.2-billion Malaysian government state grab for Alberta oil and gas assets. In doing so, the PM unveiled a ballyhooed “get tough” stance on future foreign state designs on the Alberta tar sands.

This embarrassment of a policy (the more fawning typists in the financial press have labelled it the “Harper Doctrine”) is rent with loopholes, is incomprehensible, and lacks the clarity to be applied consistently. Harper has conceded as much in allowing that foreign government takeovers in the oilpatch will henceforth be blocked, other than those arising from “exceptional circumstances.”

Gosh sakes, every takeover is “exceptional.” Acquisitions are a blend of price haggling, political stability, interest rates, strategic fit, industrial cycles, CEO egos, and countless arcane factors.

Nexen deal proves Harper is China’s plaything – by Heather Mallick (Toronto Star – December 12, 2012)

December 12, 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.

Just this once, OK?

That sums up Prime Minister Stephen Harper’s terrified assent to China’s $15-billion CNOCC takeover of Calgary-based petroleum producer Nexen. From now on, he promises, he’ll only say yes under “exceptional” circumstances.

Harper had offered himself up to NDP Leader Thomas Mulcair on a platter, and Mulcair set the platter on fire during question period. It was fun to watch but that’s little comfort. Nexen’s an awful deal for Canadians.

But Harper couldn’t say no to China because he wants quick money for a tarsands industry that’s starting to look weak and because he’s an ideologue who thinks all business deals are good ones. Are the markets happy? Gosh, yes. Are Canadians of all political stripes pleased by increased foreign ownership of Alberta’s precious innards? Irrelevant.

Harper’s a bully at home, a wimp overseas. He happily torments environmentalists, refugee claimants, women, unions, public servants, you know, the locals. He ignores Parliament or prorogues it, and treats the Investment Canada Act — which states that foreign investment must benefit Canada — as a joke.

It took a while, but Harper got it right on SOEs – by Jeffrey Simpson (Globe and Mail – December 12, 2012)

December 12, 2012

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.

Prime Minister Stephen Harper’s decision – and it was his decision – about how to treat takeovers by state-owned companies will reverberate around the world.

Other countries – either the ones with state-owned enterprises (SOEs) or the ones with resources these SOEs wish to buy – won’t slavishly follow Mr. Harper’s lead. But some will take note of how an advanced industrial country handled this growing fact (or challenge) of world economics, as will countries with SOEs. The Canadian precedent – red-circling some industries against SOEs while toughening purchasing criteria in other industrial sectors – will be studied, if not copied.

The Canadian precedent is based on a fundamental premise: that SOEs don’t necessarily act the way shareholder-owned companies do. SOEs, such as those in China, contest that premise. They argue that, whatever the company’s controlling structure, SOEs act on market imperatives alone, up to and including listing their shares on stock markets.

It’s not easy generalizing about SOEs. It’s one thing to have an SOE from autocratic China, where the Communist Party and the military own big chunks of the economy, including interests in SOEs, and, say, Statoil of Norway, a profoundly democratic country that has wisely (unlike Alberta) husbanded its resource revenues in enterprises such as Statoil to make money for future generations.

Protests in Texas just a taste of pipeline battles to come – by Nathan Vanderklippe (Globe and Mail – December 12, 2012)

December 12, 2012

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.

CALGARY — For more than 70 days now, protesters have holed up in trees in Texas, trying to block construction of the southern leg of TransCanada Corp.’s Keystone XL pipeline. They have barricaded themselves inside long stretches of welded pipe, facing police mace in a bid to slow construction. They have locked themselves to equipment, and formed human chains. They have staged hunger strikes from jail cells.

“There’s a lot of resistance and animosity toward the project,” said Ron Seifert, who comes from Montana and is now a spokesman for Tar Sands Blockade, a group created earlier this year to co-ordinate civil disobedience. More than 40 people have been arrested. Tar Sands Blockade said half were Texan; TransCanada says all but one were out-of-state.

What’s happening deep in the U.S. South, however, is likely a precursor of what it is to come for other controversial pipelines. Texas is not a place that is generally opposed to oil. Yet protesters have converged on the state in hopes of interfering with construction of a project that has stoked an angry debate about the future of energy development.

If such conflict can happen in Texas, there is a strong likelihood it will happen again, and in greater force, in Nebraska – the state where opposition delayed a presidential permit for the Keystone XL pipeline – in British Columbia and other areas of North America where new pipelines are planned.

BMO bullish on Sudbury, Canadian economies – by Laura Stricker (Sudbury Star – December 11, 2012)

December 12, 2012

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

In the next 12 months, Canada will see changes in the housing market, commodity prices and a focus on the big story – household debt — the managing director and deputy chief economist of BMO Capital Markets says.

But Douglas Porter has other concerns. “By this point, Dec. 11, I thought we’d have a lot more clarity on at least one critical issue for the Canadian economy. I thought we’d have more information on the NHL lockout,” he joked.

On Tuesday, Porter spoke to about 100 people at the Greater Sudbury Chamber of Commerce luncheon about “Outlook 2013: looking beyond the cliff,” what the Bank of Montreal sees for the world’s major markets over the next 12 months.

Overall, Porter said, the outlook is positive. “If I were to speak to you just a little more than 12 months ago, the markets were actually in a fairly sour mood and we were worried about a downturn. But over the last year, the markets have swung much more to the optimistic end of the spectrum.”

The biggest risk for the global economy, he said, is still the European debt crisis. While great strides have been made on that front, there is still the possibility of a downturn.