May 21, 2013 – Republic of Mining

An adapt-or-die moment for junior miners – by By: Alisha Hiyate (Mining Markets Magazine – May 21, 2013)

May 21, 2013May 21, 2013

http://www.miningmarkets.ca/

Survival in indifferent market will depend on tapping alternative financing options

Newsletter writer and mining analyst John Kaiser sounds a little dejected as he describes the utterly bleak state of the mining industry today. “The phones are completely dead, nobody cares,” says the editor of Kaiser Research Online. “Companies can’t raise money, it’s like a complete dying sector.”

Kaiser made a now-famous prediction last year that around 500 juniors were bound for “extinction” because of an inability to raise capital, low share prices and negative sentiment on commodities.

As of mid-May, that number has grown: Of the roughly 1,800 publicly listed TSX and TSXV companies involved in mining or exploration and listed in the KRO database, 694 had less than $200,000 in working capital — basically the amount needed annually to maintain a listing. Kaiser adds that about 70% of all the companies in the KRO database are trading at below 20¢.

“It’s starting to feel like 1999, and we still had several more years to go after that,” Kaiser says of the last prolonged downturn in the industry. “That’s when the dot-com stuff was taking off and I remember subscribers mocking me for still talking about resource stocks, they were history — technology was the place to be.”

Afghan archaeology site faces rocky future – Jennifer Glasse (Aljazeera.com – May 20, 2013)

May 21, 2013

http://www.aljazeera.com/

Ancient ruins of Mes Aynak threatened by planned Chinese mining project.

Mes Aynak, Afghanistan – Ruins dot each hilltop in mountainous Mes Aynak, an hour’s drive south of the capital Kabul. Buddhist monasteries stood here for hundreds of years, and Afghan workers under the supervision of archaeologists are racing to uncover remnants of the past.

The four-square-kilometre site contains the remains of 2,000-year-old villages, but archaeologists say they believe the area has likely been inhabited for 5,000 years. Green-tinged rocks are everywhere: in the ancient walls, jutting out of the ground. That’s because this is one of the most copper-rich spots in the world.

It’s also why archaeologists have a sense of urgency to uncover Mes Aynak. The mining rights to the area have been sold to a Chinese company in a $3bn deal, Afghanistan’s largest commercial contract.

The prospect of mining threatens the ancient site.

The fall of HKMEx and what it means for Hong Kong’s commodities dreams – by Lydia Guo (Financial Post – May 20, 2013)

May 21, 2013

http://blogs.ft.com/beyond-brics/#axzz2Tw94az00

The sudden blow-up of the Hong Kong Mercantile Exchange (HKMEx) not only represents the collapse of a commercial proposition. It is also a warning call to Hong Kong’s ambition to develop itself as a commodities trading centre.

After three years in preparation and exactly two years of operation, HKMEx said on May 18 its trading revenues were insufficient to support its operating expenses and it would surrender its authorisation to provide automated trading services to the regulator, the Hong Kong Securities and Futures Commission, with immediate effect. Since all HKMEx’s trading is by ATS, it is effectively shut down.

The SFC confirmed that it had withdrawn HKMEx’s ATS authorisation.

HKMEx offers only two products, a gold futures contract and a silver futures contract, both denominated in US dollars. It began operating on May 18, 2011; until the end of April this year, trading volume for the two products added up to less than 2.4m contracts. HKMEx does not reveal it revenues but, since it charges a fee of 50 US cents a contract (and assuming it charges only sellers), its total revenues for the past two years were probably about $1.2m.

Not much. But things got worse this year: trading volume dropped more than 70 per cent in the first four months, from 455,527 to 135,699 contracts, or an average of about 34,000 contracts a month.

NEWS RELEASE: Gold exploration drops 55%

May 21, 2013

Date: 20th May 2013 Release time: Immediate

Slumping metals prices, and falling equity valuations, reflect serious uncertainty about the world economy. The recent quarter ended with the Governor of the Bank of Japan announcing a huge monetary stimulus, Europe bailing out the banking system in Cyprus, disappointing employment figures in the USA and worrying signs of a slowdown in the crucial Chinese economy. This depressing scenario has had a knock-on effect over the minerals exploration sector.

Exploration activity has been trending down since the end of October 2011, and according to the latest ‘State of the Market’ report from IntierraRMG, there were drilling reports from only 355 prospects in March. Gold exploration has been particularly weak, with activity reported from just 172 prospects in March, compared with 382 in March 2012.

The figures for the next few months are unlikely to be better following the precious-metals price collapse in mid-April and a significant drop in recent exploration funding. If the exploration sector is looking for some comfort, it might come in the knowledge that the past six months of falling metals prices comes off historically high levels.

The price of gold, for example, had risen seven-fold since 2001 to an all-time high in 2011 of over US$1,900/oz. Indeed, the last time the UK saw gold at over £1,000/oz, in real terms, was in 1489 when the Royal Mint issued sovereign coins valuing an ounce of gold at £2.

Wanted: Miners in Brazil for Anglo American – by John W. Miller (The Wall Street Journal – May 19, 2013)

May 21, 2013

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

In Remote Town, Company Must Train a Workforce Before Digging for Ore

CONCEICAO DO MATO DENTRO, Brazil—One key to controlling the wage inflation that bedevils mining companies is finding a captive labor force that’s willing to be trained, such as the one in this remote town, where cows outnumber residents almost two to one.

Nineteen-year-old Augusto Alonso Silva is eager to earn $600 a month as an industrial mechanic at an Anglo American AAL.LN +3.70% PLC iron-ore mine here. The pay is about half what mining wages are elsewhere in Brazil, but Mr. Silva says it is twice as much as he dreamed of earning as a soldier. “Now I have a different dream,” says the 19-year-old, during a break in a basic engineering class.

While rising labor costs have become almost routine for global mining firms—a drill operator in Australia can earn $200,000 a year and a truck driver in Chile $70,000—locals here have been willing to take lower-level jobs such as operating a conveyor belt or maintaining machines for less than $10,000 a year.

Instead of money, the big issue has been lack of skills. The illiteracy rate in this town of 17,000 is close to 18% for people 15 and over.

“There are lots of people in this area who were simply unemployable” when Anglo American arrived in 2007, says Pedro Borrego, the company’s Brazil director of human resources.

NUM seeks up to 60% wage hike from SA gold producers – by Idéle Esterhuizen (MiningWeekly.com – May 20, 2013)

May 21, 2013

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

JOHANNESBURG (miningweekly.com) – South Africa’s Chamber of Mines (CoM) on Monday confirmed the reciept of proposals by the the National Union of Mineworkers (NUM) regarding the revision of wages and conditions of employment of gold mining companies represented by the Chamber.

Newswire Reuters reported that NUM indicated that it would seek an entry-level minimum monthly wage of R7 000 for surface workers and R8 000 for underground workers in the gold mining industry.

The demand equates to a 49% increase for surface workers, who currently earn an entry-level wage of R4 700 and a 60% hike on the R5 000 underground worker wage.

CoM spokesperson Charmane Russell told Mining Weekly Online that the current minimums was for basic salaries, excluding benefits and allowances. Reuters also reported that NUM would seek a 15% wage hike for “all other wage categories”.

The CoM is representing AngloGold Ashanti, Gold Fields, Harmony, Sibanye Gold, Village Main Reef, Pan African Resources and Rand Uranium in the gold mining industry wage negotiations, which Russell said would get under way in early to mid-June.

Australian mining tycoon poised to become world’s wealthiest woman – by Emma Rowley, and Jonathan Pearlman (The Telegraph – May 19, 2013)

May 21, 2013

http://www.telegraph.co.uk/

One of the richest people in the world is getting just that little bit richer.

Even before last week, Gina Rinehart was worth about $17bn (£11.2bn), according to the Forbes rich list, making the mining magnate Australia’s wealthiest person by a comfortable stretch.

That figure is about to swell a little more, however, after resource giant Rio Tinto was ordered to pay royalties expected to total about A$200m (£123m) to Mrs Rinehart and another mining family, following a dispute about a decades-old iron ore agreement.
After all, if there is one thing the tycoon has shown she knows how to do, it is how to make money from iron ore, used to make steel gobbled up by growing economies.

The 59-year-old inherited her business interests from her father, Lang Hancock, a mining pioneer in outback Western Australia, but has insisted she was left with debts and no “inherited money” when he died in 1992.

What is indisputable is that under her leadership Hancock Prospecting, of which she is chairman, has reaped billions from the country’s China-fuelled mining boom, directly driving her own personal wealth.

It is possible that she will become the world’s richest women, a title currently thought to be held by Liliane Bettencourt, the L’Oreal heiress worth $30bn – though calculations vary, and some sources have in the past already handed Rinehart that title.

COLUMN-Commodity companies’ cost-cutting stampede yet to work – by Clyde Russell (Reuters U.K. – May 20, 2013)

May 21, 2013

Clyde Russellis a Reuters market analyst. The views expressed are his own.

http://uk.reuters.com/

LAUNCESTON, Australia, May 20 (Reuters) – If you ever needed an example of the corporate herd mentality, then look no further than the stampede of cost-cutting among commodity producers started by BHP Billiton.

Since the Anglo-Australian miner moved last August to scrap or delay projects and slash operating costs, mining and energy companies have been rushing to do the same.

In the past few months, no less than $15 billion of cuts in capital and operating expenditures have been announced, and this is likely just a small percentage of reductions still to come.

What started as concern among investors in BHP Billiton and its fellow Anglo-Australian miner Rio Tinto over excessive capex amid slowing demand growth for commodities from top consumer China has spread across the world.

In recent weeks several Canadian miners have announced cuts to capex, and newly-merged Glencore Xstrata has promised aggressive cost-cutting, with some investors confident it will exceed its target of $500 million in reductions.

UPDATE 2-Gloom hits services firms as Australia’s mining boom peaks – by Sonali Paul (Reuters India – Mary 21, 2013)

May 21, 2013

http://in.reuters.com/

MELBOURNE, May 21 (Reuters) – A spate of profit warnings from Australian mining services firms suggests the country’s “once-in-a-century” resources spending boom may have peaked sooner than companies, economists and policymakers had expected.

Australia has been bracing for a slowdown in its massive pipeline of investment for resource projects – liquefied natural gas, iron ore and coal in particular – as developments come on stream and as signs of a slowdown in demand from top commodities consumer China weigh on prices.

“The extent of the slowdown and just how fast the turnaround has been is a surprise,” said Savanth Sebastian, an economist at Commsec, noting the potential for more projects to be pushed back or mothballed. “It seems to have taken place in a very narrow window.”

With miners from BHP Billiton Ltd down shelving projects and slashing costs that grew out of control during the boom, they have turned the screws on contractors, in some cases dumping firms that are unwilling to cut prices. “They got carried away using too many contractors to get that extra tonne, almost like a credit-card mentality,” Tony Maher, mining division president of the Construction, Forestry, Mining and Energy Union, told Reuters.

Freeport Death Toll Reaches 28 as Indonesia Reviews Mines – by Madelene Pearson & Yoga Rusmana (Bloomberg News – May 21, 2013)

May 21, 2013

http://www.bloomberg.com/

The death toll from a collapsed tunnel at Freeport-McMoRan Copper & Gold Inc.’s (FCX) Grasberg complex reached 28 as Indonesia said it would review all mining operations following one of its worst mining accidents.

The rescue team recovered the remaining bodies that were buried at the accident site of the world’s second-largest copper mine, Thamrin Sihite, director general of coal and minerals at the Energy and Mineral Resources Ministry, told reporters today in Jakarta. Operations at the mine in Mimika, Papua province, about 3,120 kilometers (1,940 miles) east of Jakarta, will remain suspended until after an investigation is concluded, the government said.

President Susilo Bambang Yudhoyono ordered related ministries to review safety at all mines in Indonesia, Sihite said earlier. Phoenix, Arizona-based Freeport, which got 20 percent of its operating income from Indonesia last year, was still shipping material produced from the mine as of May 17, its local unit said last week.

Ten workers have been rescued from the site, Freeport said today. The “Freeport accident is one of the worst mining accidents in Indonesia,” Sihite told reporters in Jakarta today. “I don’t want this to happen again.”

James Passin, the American Who Bought Mongolia – by Brett Forrest (Bloomberg Business Week – May 16, 2013)

May 21, 2013

http://www.businessweek.com/

The Mongolian Stock Exchange occupies a single room inside a gray building that once housed a children’s movie theater, just off Sükhbaatar Square in the capital city of Ulaanbaatar. On any given day, it’s quieter than the nearby National Library, as 20 or so traders in cubicles click away softly on their laptops.

This muted bourse hardly seems a place to make a fortune, but James Passin, who needs no prompting to declare that he’s “super bullish on Mongolia,” swears it is. Passin, who’s just flown across 12 time zones from New York City, has as much reason to promote Mongolia’s potential as any foreign investor in the country. His future is riding on it.

Passin, 41, has at least $130 million in three funds that he oversees for his employer, Firebird Management, a Manhattan firm that specializes in emerging markets. Passin controls four companies listed on the Mongolian Stock Exchange—in coal, fluorite, and real estate—as well as an undisclosed number of private enterprises. His placements make Firebird one of Mongolia’s largest and most diversified foreign private equity funds.

Until a few months ago, many other international investors shared Passin’s enthusiasm for the Mongolian market. The country, with a 17.3 percent growth rate in 2011, had the fastest-growing economy in the world. A sparsely populated nation of 3.2 million run by communists until 1990, Mongolia has discovered a bounty of natural resources.

Ghana hopes to shield economy from African oil curse – by Matthew Mpoke Bigg and Kwasi Kpodo (Reuters India – Mary 21, 2013)

May 21, 2013

http://in.reuters.com/

ACCRA, May 21 (Reuters) – Oil brought riches to Nigeria but also ravaged its economy and fuelled corruption and conflict. Now nearby Ghana has begun production and wants to take the wealth but dodge the oil curse.

Ghana is used to resource riches: it is already the world’s number two cocoa producer and Africa’s second-largest gold miner. But there are signs it is struggling to manage the new oil money and some people are disappointed.

A budget deficit last year which soared to 12 percent of gross domestic product (GDP), nearly twice the targeted level, raised fears among economists of fiscal laxity, a classic symptom of the resource curse that often feeds corruption.

Investors are also watching the strengthening cedi currency . An inflation-adjusted rise due to an influx of petro-dollars can signal “Dutch disease”, where the competitiveness of farming and manufacturing is eroded, as in Holland in the 1960s.

“The government seems to be very much wary of the dangers of Dutch Disease,” central bank governor Henry Kofi Wampah said. “Oil will continue to attract attention but not at the expense of cocoa or gold.”

B.C. election sets stage for battle over jobs vs. eco-justice – by Gillian Steward (Toronto Star – May 21, 2013)

May 21, 2013

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.

CALGARY—Politics in British Columbia has always been volatile and unpredictable, as last week’s election again proved. But it also was instructive in another way.

It was the first major election campaign in Canada to feature both the economy and the environment as key issues. That is surely a sign of the times. And even though Premier Christy Clark and her intense focus on the economy garnered the most seats for the Liberals, the popular vote tells another story.

The Liberals raked in 44 per cent of the popular vote but the combined vote of Adrian Dix’s NDP (39) and the Green party (8) totals 47 per cent. B.C. voters rendered a split decision when trying to decide whether they favour protecting the environment or protecting their province’s prosperity.

So the question remains: how will British Columbians reconcile these two competing interests? And how will that affect the rest of the Canada? Of most interest to Albertans is whether or not two proposed pipelines crucial to the Alberta economy will proceed through B.C. and under what conditions. During the election campaign, those pipelines came to symbolize the choice between economic growth and environmental protection.

New political battle lines emerge in Arctic – by Stephen Bede Scharper (Toronto Star – May 20, 2013)

May 21, 2013

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.

Disputes over Arctic development are not ultimately a ‘clash of civilizations’ but a clash of world views.

In the summer of 2010, while I was visiting an ecological research station near Tobermory, Ont., the British Petroleum (BP) Deepwater Horizon oil rig was gushing out of control approximately 1,500 miles due south in the Gulf of Mexico.

Gazing across the turquoise waters of Georgian Bay, I wondered how I would feel if a collapsed oil rig were fouling this clear, remarkably beautiful expanse of the Great Lakes. I winced internally imagining the waters and arresting vistas that had become so meaningful to me becoming blackened by such a tragedy.

Perhaps such thoughts also crossed the minds of native groups in the Arctic last week as they called for a moratorium on oil extraction in their homelands, which are now rapidly opening up to mining and development owing to a warming North.

In a statement released in Kiruna, Sweden, May 13 shortly before a meeting of the eight-nation Arctic Council, 42 aboriginal signatories from Scandinavia, Russia, Canada and the U.S. called for a halt to offshore oil drilling and a hold placed on northern energy projects until local native groups have consented to such interventions.

ONTC talks spur hope – by Benjamin Aubé (Timmins Daily Press – May 20, 2013)

May 21, 2013

The Daily Press is the city of Timmins broadsheet newspaper.

TIMMINS – The fate of the Ontario Northland Transportation Commission hasn’t been sealed just yet.

At the second of what is expected to be a string of many advisory committee meetings on the ONTC, MPP Michael Gravelle (Liberal-Thunder Bay–Superior North) reiterated his stance that the province is opening itself up to options other than divestment.

Kapuskasing Mayor Al Spacek, who is president of the Federation of Northern Ontario Municipalities, said the outcome of last week’s meeting in Toronto was “very positive.”

“It’s important to note that his statement was – and he clarified that again – that divestment wasn’t the only option,” said Spacek about Gravelle’s comments. “It doesn’t mean divestment is off the table.

“But certainly, the previous position of the government was, ‘It’s divestment, period.’ Now, since they’ve adopted this other view, we found that as a very positive sign. Based on our meeting … we’re going to start to make some good progress.”

Spacek added that the meeting consisted of “a lot of frank and candid discussion. At this meeting, we did sign our non-disclosure agreements, so we were able to discuss some of the normally confidential aspects of the operation.”