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Day: May 8, 2013

Poor Decisions Are Sending This Company [Cliffs Natural Resources] Downhill – by Mike Thiessen – (Motley Fool – May 8, 2013)

http://beta.fool.com/

Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Once a darling of fund managers and retail investors alike, Cleveland-based Cliffs Natural Resources (NYSE: CLF) has suffered an epic share-price collapse as well as a number of strategic setbacks. Buffeted by low market prices for its core iron ore and coal products and slackening demand from emerging-market customers in China and elsewhere, the company has had to implement several painful cost-control measures to shore up its finances.

Even worse, its much-touted acquisition of the Bloom Lake mine complex in Quebec has thus far provided disappointing results. Cliffs has delayed a key expansion at the mine and has given only vague guidance about when these activities might resume. Given the high hopes that the company expressed for Bloom Lake as recently as June of 2011, this comes as a serious setback. Shareholders have punished the firm by pushing its price-to-book ratio below 0.6. If Cliffs cannot turn around its fortunes soon, more drastic steps may need to be taken.

Financial Comparison with the Competition

As a major producer of basic raw materials like iron ore pellets, coking coal and lump ore, Cliffs competes with some of the largest and most recognizable names in the mining industry. These include London-based Rio Tinto (NYSE: RIO) and Melbourne-based BHP Billiton (NYSE: BHP).

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PQ presents ‘North for All’ plan – by Kevin Dougherty (Montreal Gazette – May 8, 2013)

http://www.montrealgazette.com/index.html

First Nations feel blindsided by plan

MONTREAL — The Plan Nord was launched by Jean Charest as the “project of a generation,” with the short-term hope of generating votes for his Quebec Liberals.

Two years later, in a fly-in, fly-out news conference in Chibougamau, the Parti Québécois government has launched its Nord pour tous (North for All) plan. Despite similarities, Premier Pauline Marois insists her government’s plan is not at all the same as the Plan Nord.

In fact, the PQ has scaled down the size of public investments in the north and Marois avoided any mention of Charest’s 25-year target of $80 billion in investments.

Marois stressed that unlike the Liberal Plan Nord, her North for All vision is focused on protecting the environment and takes into account the concerns of native and non-native people living in the north. But environmentalists and aboriginal leaders expressed disappointment, and said they felt blindsided by the government.

Ghislain Picard, Assembly of First Nations chief for Quebec and Labrador, said he received a “maladroit” email invitation last Friday to the Chibougamau news conference.

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Quebec’s mining operators need a boost from the province, not a hand reaching into their pockets – by Peter Hadekel (Montreal Gazette – May 7, 2013)

http://www.montrealgazette.com/index.html

MONTREAL — Most observers are describing Quebec’s new regime on mining royalties as a retreat from the election promises made last year by the Parti Québécois.

But while the damage isn’t as bad as first feared, the new policy adds up to a missed opportunity. At a time when mining investment is slowing down because of tumbling metal prices and weak interest from the financial community, mining operators need a boost from the Quebec government, not a hand reaching into their pockets.

Industry officials are disappointed that the new policy fails to take stock of the uncertain economic context facing the mining business.

“The cost of doing business is constantly increasing and adding another layer of taxation is certainly not the best policy,” said Michel Rathier, a consultant at KPMG Secor.

During the election campaign, the PQ promised to double the royalties on mining operations, arguing that companies were getting too sweet a deal compared with other jurisdictions around the world.

The party proposed a five-per-cent royalty on the value of production from each mine, whether it made or lost money, and a 30-per-cent “supertax” on profits above eight per cent.

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Rio Tinto to press on with iron ore expansion plans – by James Regan and Sonali Paul (Reuters India – May 7, 2013)

http://in.reuters.com/

SYDNEY/MELBOURNE, May 7 (Reuters) – Rio Tinto, the world’s No.2 iron ore miner, is set to press on with plans to boost production at its Australian mines by a quarter by 2015, shrugging off pressure to slow spending and conserve cash as the commodity boom cools.

In spite of forecasts of a looming global supply glut, shareholders expect Chief Executive Sam Walsh to tell the firm’s annual general meeting in Sydney on Thursday that it’s full speed ahead with a 70 million tonnes-per-year increase that will take output to 360 million tonnes annually by 2015.

The plan means that a major additional chunk of iron ore production will enter the world market in the next few years and will add to concerns about increased supply that could weigh on a recovery in prices.

“They should continue to expand what is a high margin, high returning project, one of the best returning mining projects in the world, because growth now will mean yield in the future,” said Ben Lyons, who helps manage A$400 million ($409.42 million)at ATI Asset Management, which holds Rio shares.

Rio Tinto’s board is not expected to make a final decision on the expansion plans, estimated to cost up to $5 billion, until later this year.

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PQ piles taxes on Quebec miners – by Marilyn Scales (Canadian Mining Journal – May 7, 2013)

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.

As promised in the last provincial election, the Partie Québécoise has slapped new taxes on Quebec’s mining industry. Beginning in 2014 producers will pay either a royalty or a graduated tax on the company’s profit margin whichever is higher.

The royalty is set at 1% of the first $80-million-worth of production, and at 4% on amounts greater than that. It will apply to any mine regardless of profitability.

The graduated tax starts at 16% and rises to a top rate of 28%. This option claws back profits made at a given operation.

The new taxes are less than promised by the PQ during the election. They were scaled back from the $388-million target due to the recent softening of commodity prices. Nonetheless, the measures are expected to add between $73 million and $200 million to the provincial pocketbook each year.

The Quebec Mining Exploration Association (AEMQ) expressed disappointment at the new taxes. “The Quebec mining sector is already suffering from severe a financial crisis, and in the last few years, we have had to deal with significant mining taxes.

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NEWS RELEASE: SOT+ case study kicks off at Vale – advancing mine plan optimization

Sudbury, ON, May 6, 2013 – MIRARCO continues to be a leader in adding value to underground selective mining operations through the use of the Schedule Optimization Tool (SOT). Building upon this commercial software, the SOT+ project dives deeper to enhance the capabilities of the existing tool. In partnership with mining companies Vale and Newmont, commercialization partners CAE Mining and Deswik, and project managed by the Centre for Excellence in Mining Innovation (CEMI), the first SOT+ case study is now underway, optimizing the economic value of a Vale mining operation in the Sudbury area.

The SOT software optimizes the net present value (NPV) of medium to long-term underground mine schedules for both development and production. As a result, it decreases financial risk, saves time and manpower, and facilitates the evaluation of alternative designs and strategic options along with a wide range of analyses.

The SOT+ project aims to advance the functionality of the software for selective mining and to expand the software to handle bulk mining methods. There are five research themes, each of which will be anchored by a three year case study. The research themes are: ore blending, ventilation constraints, geotechnical constraints, schedule optimization for bulk mining methods (block caving and/or surface mining), and advanced valuation.

The research team includes partners from MIRARCO, Laurentian University, Curtin University, and Chasm Consulting/Ventsim. A mine planning specialist is seconded to the mining company sponsor for each case study.

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Canada’s largest ore skips made in New Liskeard – by Liz Cowan (Northern Ontario Business – May 7, 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.

It was a first for Canada and a first for Wabi Iron and Steel Corp. in New Liskeard. In March, the company delivered the first of three 50-tonne ore skips for Agrium’s Vanscoy Mine in Saskatchewan. The remainder of the 68-feet long skips were shipped in April.

“It’s a first for the company and we are confident they are the biggest in Canada for now. We know our competitors have received contracts of the same size but these are the first to be done,” said Peter Tuomi, director of sales.

The Vanscoy Mine expansion project is a potash mine and mill upgrade managed by SNC-Lavalin and PCL Construction in a joint venture partnership. When complete, the Vanscoy Mine will have a capacity of more than three million tonnes per year.

The company got involved in 2010 when it submitted a proposal along with other potential contenders.

“Everyone knew the expansion plans for Saskatchewan and we prepared ourselves and started making trips out there,” he said. “Then we were asked to submit a concept design to Agrium and then a formal tender process began and we submitted and got the order.

“It was a longer process than what we have been through before since they are big pieces of equipment.”

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Quebec announces plans for northern development, assigns $868m – by Henry Lazenby (MiningWeekly.com – May 7, 2013)

http://www.miningweekly.com/

TORONTO (miningweekly.com) – Quebec Premier Pauline Marois and provincial Natural Resources Minister Martine Ouellet, on Tuesday outlined the province’s incumbent political party, Parti Québécois’ economic vision for developing the vast north, committing $868-million over the next five years to develop the region.

Marois, during a visit to the mining town of Chibougamau, said the bulk of the money would be spent on infrastructure, through creating the Nordic Development Fund.

“We want to develop the north responsibly to maximise the benefits for local communities and for all Quebecers,” Marois said.

Marois added government was proposing developing a new framework for funding related to infrastructure projects in the north, which would put forward practical and innovative solutions to ensure the wellbeing and the beneficial development of communities in the area, while simultaneously ensuring the harmonious and respectful development of the environment.

Investors were mostly in the dark about the government’s plans for Quebec’s north since Marois’s party defeated Jean Charest’s Liberals toward the end of last year. Marois had indicated she wanted to replace Charest’s Plan Nord project with her own vision for the territory but detail had been scarce until today.

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Mining exploration sinks to new low – by Jeff Candy (Mineweb.com – May 8, 2013)

http://www.mineweb.com/

According to IntierraRMG, mining exploration fell once more in March, extending a 17-month decline in exploration activity.

GRONINGEN (MINEWEB) – The mining industry’s search for new ounces fell to a new low in March, extending a 17-month decline in exploration activity. This is according to IntierraRMG’s latest State of the Market report.

According to the group’s online database, there were drilling reports from a total of only 355 prospects (it adds that this figure includes reports from more than one drilling prospect per project). This, it says is compared to “440 in February, 662 in January and (a restated) 367 in December 2012”.

“Gold-exploration has been particularly weak, with activity reported from just 172 prospects in March, compared with 199 in February, 350 in January and 382 in March 2012. Last month’s gold activity is still better, however, than the nadir of 157 prospects reported in December,” the group writes.

While the number of drills turning at gold prospects fell in absolute terms during the quarter, the search for the yellow metal continues to dominate the overall figures. During the quarter 651 gold projects reported drilling activity, IntierraRMG says, as compared to only 192 copper projects, 154 silver projects, 63 zinc projects and 42 lead projects.

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A Quebec mining plan that pleases no one – by Sophie Cousineau (Globe and Mail – May 8, 2013)

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.

MONTREAL — Premier Pauline Marois is going to great lengths to put the Parti Québécois’s imprint on the development of Quebec’s North.

Ms. Marois and three of her ministers travelled all the way to Chibougamau on Tuesday to meet the press in the small mining and forestry town that sits north of the 49th parallel, in what used to be Plan Nord territory.

But now it’s out with Plan Nord, Jean Charest’s signature economic project, and in with the “Nord pour tous” – North for everybody – as the PQ’s program is now called.

In a blind taste test, however, you would be hard pressed to tell the two plans apart. The government now says it will invest $868-million in infrastructure and social housing over the next five years, almost exactly what the Liberals had allocated to the roads and parks in the North. The only change is that private developers will have to assume a bigger share of the risk when they are the sole users of roads and railways – a flaw the PQ rightly corrected.

In essence, the Quebec government is barely rebranding a program so tainted in bright Liberal red that Ms. Marois’s eyes would hurt just looking at it. But there are some striking differences between the then and the now.

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Australia cuts benchmark interest rate [Mining in Australia] – by Tavia Grant (Globe and Mail – May 8, 2013)

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.

An overvalued currency, lower commodity prices and cooling investment in the mining sector. These things are not just happening in Canada, they’re also dealing a blow to Australia, which surprised markets by cutting its key interest rate in an effort to bolster its economy.

The Reserve Bank of Australia cut its benchmark rate to a record low of 2.75 per cent Tuesday, citing rising unemployment, “below trend” economic growth and resource-sector investment that’s poised to cool. And it didn’t mince words about the Australian dollar, which it suggests is too strong. As its natural resource sector slows, the central bank is aiming to give a lift to consumer spending and factories.

Canada’s economy is often compared with Australia’s. Both countries are heavily reliant on commodity exports, have triple-A credit ratings and strong currencies. They have similar levels of wealth, as measured by GDP per capita, and relatively small populations spread over a huge land mass.

But though Australia’s rate cut will be closely watched by Canada’s incoming central bank governor, Stephen Poloz, that doesn’t mean this country’s monetary policy will follow suit.

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‘No such thing as ethical oil,’ Al Gore tells Toronto audience – by Ivan Semeniuk (Globe and Mail – May 8, 2013)

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.

Declaring that “American democracy has been hacked,” former U.S. vice-president Al Gore told a Toronto audience that his countrymen needed to wake up to the special interests that have a grip on the levers of power in the U.S. Congress and are able to block legislation on a range of policy issues including his signature cause, global climate change.

Mr. Gore added that he felt action on climate change was possible, indeed inevitable, once it was viewed by enough people as a matter of personal values. “When these kind of issues settle into a choice between right and wrong, then the moral clarity that eventually develops makes it possible to move quickly.”

In a public interview with The Globe and Mail’s editor-in-chief, John Stackhouse, Mr. Gore also spoke of his wish that U.S. president Barack Obama would cancel the Keystone XL pipeline intended to transport heavy crude from the Alberta oil sands to U.S. refineries. In part because oil-sands crude requires more energy to extract than conventional sources, and so produces more greenhouse gases per barrel, he suggested that the full social and environmental cost of developing the oil sands made it a more expensive proposition than a faster move by the U.S. to renewable sources.

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Resources Minister takes bitumen battle to Europe – by Shawn McCarthy (Globe and Mail – May 8, 2013)

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.

OTTAWA — Environmentalists are warning the European Union’s proposed fuel-quality directive could curtail imports of oil-sands-derived diesel from the U.S. Gulf Coast and drive down the price of Canadian crude.

It’s a warning that Natural Resources Minister Joe Oliver is clearly taking seriously as he visits European capitals to argue that the proposed fuel standard unfairly discriminates against Canada and underestimates emissions of crude now imported into Europe from countries such as Nigeria and Russia.

The standard assesses penalties for high-carbon fuels. Mr. Oliver wants the EU to revamp the existing proposal to reduce the difference in how it would treat oil sands producers versus other sources of oil.

While Ottawa’s objections were once based on fear of a negative precedent that could migrate to this side of the Atlantic, it is now clear the proposal could have tangible impacts on the North American crude market. Canadian producers and U.S. refiners increasingly see Europe as an attractive export destination – both for crude from Canada if a west-to-east pipeline gets built, and for petroleum products made from Alberta bitumen refined in the U.S. Gulf Coast.

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NEWS RELEASE: OMA member earns national safety honours — again

This article was provided by the Ontario Mining Association (OMA), an organization that was established in 1920 to represent the mining industry of the province.

Xstrata Copper Kidd Operations was presented with the John T. Ryan National Safety Trophy for metal mines for the 11th time. Other national winners were the Potash Corporation New Brunswick Division for select mines and Prairie Mines & Royalty Genesee Mine in Alberta in the coal category and both have been to this podium many times previously. The three winners of the John T. Ryan National Safety Trophies for 2012 have built up safety cultures at their operations which have lasted through decades of time and generations of workers.

“Winning this award again attests to our record of continually improving safety performance over many years,” said Tom Semadeni, General Manager for Xstrata Copper Kidd Operations. “It also speaks to our on-going commitment to achieving Zero Harm so that all of our employees and contractors can continue contributing to the well-being of their families and our community.”

This marks the eleventh occasion that Xstrata Copper Kidd Operations has captured this national award. Previous years as the country’s safest metal mine were 1991, 1985, 1984, 1982, 1981, 1980, 1978, 1977, 1976 and 1975. Kidd is also an 18-time winner of the Ontario regional trophy. Genesee Mine also is an 11 time winner in the coal category. Previous years it has earned the national coal trophy include 2009, 2007, 2005, 2003, 2002, 1999, 1998, 1997, 1996 and 1995.

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Canada’s precarious dependence on the commodity price super-cycle – by Alex Carrick (Journal of Commerce – May 7, 2013)

http://www.journalofcommerce.com/

Chief Economist, CanaData

Mid-April was not a good time for Canada’s raw materials sector. In the course of just a couple of days, an already weakening price of gold surrendered all restraint and plunged the most in three decades.

Falling from its most recent high of $1,900 per ounce to a low of $1,350 per ounce, gold has exhibited a “bear” market. The usual definitions of “bull” and “bear” markets are asset value swings of at least +20% and -20% respectively.

From its previous peak to most current trough, the price of gold fell by nearly 30%. It has since recovered slightly.
Three primary reasons are cited for the floor-dropping air pocket.

First, inflation is still nowhere to be found. Canada’s latest year-over-year increase in the Consumer Price Index (CPI) was only +1.0%. In the U.S., April’s inflation rate was a slow +1.5%.

Gold is usually seen as a hedge against rapid price run-ups. Central banks around the world have been keeping interest rates low while rapidly expanding the money supply. The Federal Reserve in the U.S. has been buying $85 billion per month in bonds and the Bank of Japan is about to embark on a similar 7.5 trillion-yen per month ($75 billion U.S.) bond-purchase spree.

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