The unwelcome renaissance: [Coal] Europe’s dirty secret (The Economist – January 5, 2013)

http://www.economist.com/

Europe’s energy policy delivers the worst of all possible worlds

BERLIN – WHILE coal production and use plummet in America, in Europe “we have some kind of golden age of coal,” says Anne-Sophie Corbeau of the International Energy Agency. The amount of electricity generated from coal is rising at annualised rates of as much as 50% in some European countries. Since coal is by the far the most polluting source of electricity, with more greenhouse gas produced per kilowatt hour than any other fossil fuel, this is making a mockery of European environmental aspirations. How did it happen?

The story starts, again, with American shale gas. As American utilities shifted into gas, American coal miners had to look for new markets. They were doing so at a time when slowing Chinese demand was pushing down world coal prices, which fell by a third between August 2011 and August 2012 and is below $100 a tonne. These prices make European utilities willing buyers. European purchases of American coal rose by a third in the first six months of 2012.

Compared with the rock-bottom price of gas in America, coal is not all that cheap. But it is a bargain compared with the price of gas in Europe. Although gas can be carted around in liquid form, that is expensive and the infrastructure required is still patchy; for the most part, gas is shifted through pipelines, and tends to be used close to where it originates.

So whereas coal has world-market prices, gas has regional prices, often linked in one way or another to the oil price. Many European gas contracts were negotiated years ago with the Russian gas giant, Gazprom, and despite a wave of renegotiations European gas prices have stayed high.

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The mixed fortunes of a fuel: Coal in the rich world (The Economist – January 5, 2013)

http://www.economist.com/

Why is the world’s most harmful fossil fuel being burned less in America and more in Europe? The first of two stories looks at America’s cheap gas and new rules

WASHINGTON, DC – IN A high-tech world, dirty black lumps of coal might seem like an anachronism. Yet coal is far from a thing of the past. However whizzy your iPad, your wall-mounted television or your electric car, the chances are that it is powered by the stuff. Coal-fired power stations provide two-fifths of the world’s electricity, and there are ever more of them. In the doubling of the world’s electricity production over the past decade, two-thirds of the increase came from coal. At these rates, coal will vie with oil as the world’s largest source of primary energy within five years. As recently as 2001, it was not much more than half as important as oil (see chart).

The main factor has been the unslakable thirst for energy in China, which in 2011 overtook America as the world’s biggest electricity producer. In 2001, according to the International Energy Agency, a club of rich nations, Chinese coal demand was about 600m tonnes of oil equivalent (25 exajoules). By 2011 China’s coal demand had tripled—a rise from two-thirds of the energy America gets from oil to twice that amount. China’s domestic coal industry produces more primary energy than Middle Eastern oil does.

Other developing economies are just as keen on coal, if not yet on such a grand scale. In India, producing 650 terawatt hours of electricity in 2010 took 311m tonnes of oil equivalent, and the power sector’s coal demand is growing at around 6% a year. The IEA reckons India could surpass America as the world’s second-largest coal consumer by 2017.

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Copper Fox announces positive feasibility study for sizeable BC deposit – by Henry Lazenby (MiningWeekly.com – January 7, 2013)

http://www.miningweekly.com/page/americas-home

TORONTO (miningweekly.com) – TSX-V-listed copper junior Copper Fox Metals in December announced the positive results of a feasibility study on the Schaft Creek project, in north-western British Columbia (BC), providing for a substantial, economically feasible project with significant expansion potential.

The study, which built on four years of metallurgical and geotechnical work, provides for an openpit mining operation that would process 130 000 t/d over a 21-year mine life, producing and estimated 4.88-billion pounds of copper, 4.21-million ounces of gold, 25.1-million ounces of silver and 214.92-million pounds of molybdenum.

The current project, with its nominal 130 000 t/d milling capacity, represents a 30% increase from that previously proposed in the preliminary feasibility study prepared in September 2008, with a 20% increase in the estimated capital expenditure.

The study placed a price tag of $3.25-billion on the project, including contingencies totalling $374-million and sustaining capital expenditure is expected to total $1.24-billion over the proposed mine life, including $200-million for the BC Hydro tariff.

The project’s base case pretax net present value was calculated using long-term metal prices and exchange rates and an 8% discount rate, as required by Teck Resources, which has an earn-back option on Schaft Creek, at C$513-million and the internal rate of return is 10.13%, with a payback period of 6.5 years.

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Top 10 Mining value creators achieve ‘stunning’ returns – BCG – by Dorothy Kosich (Mineweb.com – January 7, 2013)

http://www.mineweb.com/

The challenges of persistent market uncertainties, increasingly complex industry economics, and growing social and policy risks are being overcome by several global mining companies, says a new report.

RENO (MINEWEB) – Excellent capital stewardship, robust organic growth and a strong credible outlook for value creation helped the global mining industry average total shareholder returns (TSR) of 18% between 2001 and 2011, while the S&P 500 eked out an average 3% during the same period.

“Even more remarkable was the decade-long annual average TSR of the industry’s top ten: a stunning 39%,” says a new report by the Boston Consulting Group issued Monday. “Furthermore, unlike their industry peers, the top ten mining companies continued to earn high TSRs during the second half of the decade, the period encompassing the global financial crisis.”

The Boston Consulting Group calculates TSR as a product of multiple factors including the combination of revenue growth and change in margins as an indicator of a company’s improvement in fundamental value. It then uses the change in the company’s valuation multiple to determine the impact of investors’ expectations on TSR. Finally, the model also tracks the distribution of free cash flow to investors and debt holdings in the form of dividends, share buy backs, or repayments of debt in order to determine the contribution of free-cash-flow payouts to a company’s TSR.

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The energy sector will secure Canada’s future – by Daniel Lang (National Post – January 7, 2013)

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

Senator Daniel Lang represents Yukon and serves on the Energy, Environment and National Resources Committee and on the Standing Committee on National Security and Defence.

The National Post’s editorial board recently highlighted the need to explore new avenues for getting Canadian oil to market. I agree. In the Senate, we have been considering a recent report on Canada’s energy sector — Now or Never, Canada Must Act Urgently to Seize its Place in the New Energy World Order. It is important that all Canadians understand how vital our energy reserves are to the economy, and the challenges that lie ahead for us.

The energy sector plays a vital role in keeping Canada strong, free and prosperous. It employs over half-a-million Canadians and contributed a staggering $94-billion to our country’s exports in 2010. It also contributed $35-billion in taxes and royalties in 2008 to various levels of government. With oil production set to double by 2030, these contributions to our tax base and our living standards will prove crucial to all Canadians. I stress all Canadians. Even provinces without abundant oil resources will share in the wealth through transfer payments.

The energy sector is the largest private-sector employer in Canada. Young Canadians need to be introduced to the opportunities in the energy sector as they plan their careers. Moreover, these opportunities must also be accessible to all Canadians, including aboriginal youth, 400,000 of whom will be eligible for the workplace between 2012 and 2020.

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Cutifani Said to Be Leading Candidate for Anglo CEO Post – by Matthew Campbell & Firat Kayakiran (Bloomberg.com – January 5, 2013)

http://www.bloomberg.com/

AngloGold Ashanti Ltd. (ANG) Chief Executive Officer Mark Cutifani is the leading contender to replace Cynthia Carroll at the helm of mining company Anglo American Plc (AAL), according to people familiar with the situation.

Cutifani has emerged at the top of a list of candidates that has included former BHP Billiton Ltd. (BHP) CEO Chip Goodyear and Chris Griffith, the head of Anglo American’s platinum unit, said the people, who asked not to identified because the matter is private. The decision isn’t yet final on a replacement for Carroll, who said in October she would resign as CEO of the London-based miner after a $14 billion drop in market value.

Carroll’s successor may be announced within two weeks, the people said. The new CEO will face the challenge of increasing growth at Anglo American, which has struggled with cost overruns at projects, including the Minas-Rio iron ore mine in Brazil, and sparred with Chilean state mining company Codelco.

“Mark is a pretty energetic guy,” said Caesar Bryan, a portfolio manager at Gabelli & Co. in Rye, New York, which owns Anglo American and AngloGold shares. “He’s someone that’s very focused on return on invested capital and he seems to have an open mind to doing things differently.”

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A map of the future [Northwestern Ontario/Ring of Fire] – economically speaking – by David Robinson (Northern Ontario Business – January 2013)

Established in 1980, Northern Ontario Business  provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North. Dr. David Robinson is an economist at Laurentian University in Sudbury, Canada.  drobinson@laurentian.ca

As minister of northern development and mines, Rick Bartolucci has published the most important development map of Northern Ontario. It isn’t a map of what he is doing, or even what he plans to do-this map shows what others have stopped doing. But with a bit of imagination the map also shows Northern Ontario’s future.

Strange to say, the map didn’t get into the Northern Growth Plan. Maybe the team that wrote the plan didn’t realize what they had. After all, why do we care where all the abandoned mines in Northern Ontario happen to be? It’s just one of the many neat maps available on the Ministry Northern Development and of Mines website.

It is the unsurprising information in this map that matters. The map shows that there are a lot of abandoned mines. We all knew that, although we probably didn’t know just how many. The map shows that mines tend to be found close to railroad lines and major highways. That isn’t very surprising either. The third, not very surprising but important fact, is there are only four abandoned mines in the northwest quarter of the province.

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Ring of Fire – Miles before we dig (Part 2 of 2) – by Stan Sudol (Sudbury Star – January 7, 2013)

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

The Ministry of Northern Development and Mines estimates the value of the current known chromite deposits at US$50 billion over its 30-year lifespan. Noront Resources is developing a nickel/copper mine with a current 11-year lifespan.

The mineral deposit is “open at depth,” which means that even though official TSX regulations will not allow you to estimate the potential size of the orebody, most feel that mine will be in production for much longer.

The Ring of Fire mining camp will become bigger than the nickel mines of Voisey’s Bay, Nfld., and Raglan, Que. combined. It’s bigger than diamond deposits in the Northwest Territory or the uranium mining district in northern Saskatchewan.

We have just begun to explore this geologically rich mining region that will probably equal, if not exceed, the legendary trillion-dollar Sudbury basin. These developments, and potentially many more to follow, will significantly alleviate impoverished living conditions in the adjacent Aboriginal communities, as well as provide enormous economic benefits for the entire province.

But how are the First Nations going to build their capacity and take full advantage of these extraordinary job opportunities — and, most importantly, give their consent to sustainable development of their traditional territories — when many, if not most, of them are living in deplorable conditions?

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