July 16, 2013 – Republic of Mining

KPMG Commodity Insights Bulletin Chromite – July 2013

July 16, 2013

http://www.kpmg.com/ca/en/

Commodity outlook

Chrome ore witnessed challenging market conditions in 2012, especially during 2H12. There was a fall in ferrochrome prices
due to renewed concerns over European debt, general global economic weakness, weaker stainless steel demand and lack of producer discipline in South Africa.

Ferrochrome prices showed a modest increase of 2.5 cents to 112.5 cents/lb during 1Q13. Spot prices in Europe and China have also recently started rising on increased demand, restocking, higher nickel prices and some anticipation of producer cutbacks in South Africa as they enter another round of power buyback deals with Eskom (South African Power Utility).

Ferrochrome prices are expected to rise modestly during 2Q13 to 120 cents/lb as the Eskom buy-back deals start, and then remain unchanged throughout the remainder of the year. As per consensus price estimates, the yearly average prices for chrome ore and ferrochrome are expected to increase to US$219/t and 120 cents/lb, respectively, during 2013.

The prices are expected to further increase in 2014 and then remain steady till 2016. South African producers are expected to remain under cost pressure as the South African Rand appreciates. With Eskom buy-back agreements coming into implementation and the prevailing labor situation, South Africa is expected to witness only a modest production growth during 2013.

Troubles at Northland Resources deter Nordic mining investment – by Silvia Antonioli and Simon Johnson (Reuters India – July 16, 2013)

July 16, 2013

http://in.reuters.com/

LONDON/STOCKHOLM, July 16 (Reuters) – A financial crunch at iron ore miner Northland Resources demonstrates the impact of metal price falls on small-scale mine exploration in the Nordic region and is scaring away already rattled investors.

The sector had been flourishing since the mid-2000s, drawing in foreign and domestic companies and investment, until the price falls of the last two years in iron, base metals such as nickel, and more recently in gold. The reversal in fortunes was driven home when the Swedish unit of Norway-listed Northland Resources, one of the region’s best-known new iron ore miners, filed for bankruptcy protection in February.

In January it revealed a $425 million funding shortfall, about four times its then market capitalisation, to cover higher than expected capital and operating costs for its Swedish mine. Small Nordic miners and explorers found their efforts to raise funds suddenly got much harder, threatening to cause serious delays or even halt some projects completely.

“It doesn’t help at all. It certainly affects local confidence, adding to the lack of confidence worldwide across the industry in terms of return of capital,” Michael Hudson, the CEO and President of Mawson Resources, a Canadian firm operating in Sweden and Finland, said of Northland’s difficulties.

Rio Tinto Posts Record Iron-Ore Output – by Robb M. Stewart (Wall Street Journal – July 16, 2013)

July 16, 2013

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

The Miner Says It Is Maintaining Guidance Despite an Equipment Breakdown, Wet Weather

MELBOURNE, Australia—Rio Tinto RIO.LN +2.73% PLC achieved record output of iron ore in the first half of the year despite an equipment breakdown and unseasonably wet weather.

Helping its outlook further, the world’s second-largest producer of iron ore after Brazil’s Vale SA VALE5.BR +1.02% said it is recovering from a landslide at a major copper mine in the U.S. faster than anticipated.

Rio Tinto held to its output guidance for the year and said the expansion of operations in the remote Pilbara region of Western Australia to 290 million metric tons a year is on track to start this quarter.

However, the boost to its bottom line from higher volumes will be muted by a volatile price for iron ore, which accounts for around 80% of Rio Tinto’s earnings. The average spot price for the steelmaking commodity fell 2.8% in the first six months of this year compared with a year earlier.

Mining company expected to finish exploratory drilling this week – by The Associated Press (Green Bay Press Gazette – July 15, 2013)

July 16, 2013

http://www.greenbaypressgazette.com/

MADISON — A company looking to dig a huge iron mine just south of Lake Superior is set to finish exploratory drilling, setting up a lull that could dampen tensions with protesters, at least for a while.

Wisconsin Department of Natural Resources officials say Gogebic Taconite workers should finish drilling their eighth and final test hole in the Penokee Hills within three or four days. The test boring is designed to help the company determine if mining in the area is economically feasible as well as what minerals lay within potential waste rock and the pollution risk they might pose, said Ann Coakley, director of the DNR’s waste and materials management bureau.

Gogebic Taconite officials next want to remove larger rock samples from five sites in the area, an effort known as bulk sampling. The company would haul those samples to a test plant, where they would be processed into final taconite pellets to give the company an idea of total processing time, Coakley said.

The DNR hasn’t granted a permit for that operation yet, though. Agency officials asked the company two weeks ago for more details on the plan, including what kind of explosives would be used, air emission estimates, a site wetland inventory and anti-erosion and anti-pollution measures. Coakley said the company had not responded to the request as of Monday morning.

UPDATE 4-Chilean court suspends Barrick’s Pascua-Lama mine project – by Erik Lopez (Reuters U.S. – July 15, 2013)

July 16, 2013

http://www.reuters.com/

SANTIAGO, July 15 (Reuters) – A Chilean appeals court on Monday suspended Barrick Gold Corp’s controversial Pascua-Lama gold mine until the company builds infrastructure to prevent water pollution, and ordered the mine’s environmental permit be reviewed.

In April, the Copiapo Court of Appeals temporarily and preventively froze construction of the $8.5 billion project, which straddles the Chile-Argentine border high in the Andes, while it examined claims by indigenous communities that it has damaged pristine glaciers and harmed water supplies.

On Monday, a three-judge panel of the appeals court, in a unanimous decision, ordered a freeze on construction of the
project until all measures required in the government’s environmental license for adequate water management, “as well as
urgent and transitory measures required by the environmental regulator,” are adopted.

Chile’s environmental regulator had already suspended Pascua-Lama, citing major environmental violations, and asked
Barrick, the world’s top gold miner, to build water management canals and drainage systems. “Barrick is committed to operating at the highest environmental standards at all of its operations around the world, including at Pascua-Lama, and is working diligently to meet all regulatory requirements at the project,” the Toronto-based company said in a statement on Monday.

Aglukkaq takes environment post as Ottawa seeks to win over First Nations, U.S. on resource projects – by Shawn McCarthy (Globe and Mail – July 16, 2013)

July 16, 2013

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.

OTTAWA — Prime Minister Stephen Harper has moved his cabinet’s lone aboriginal minister into the sensitive portfolio of Environment as the government works to win crucial First Nations’ support for new pipelines and other resource-development projects.

In the shuffle announced on Monday, Mr. Harper demoted former broadcaster Peter Kent to the back benches and appointed health minister Leona Aglukkaq to the critical post, where one of her first jobs will be to finalize long-promised federal regulations covering greenhouse-gas emissions in the oil and gas sector.

The Conservative government is under great pressure to show it is serious about battling climate change and protecting the environment, even as it aggressively pursues energy and mining development.

Natural Resources Minister Joe Oliver, who has been the government’s point man on its so-called responsible resource development approach, remains in the post he has held since entering Parliament two years ago.

Innovation’s vastly cheaper than green subsidies – by BJØRN LOMBORG (Globe and Mail – July 16, 2013)

July 16, 2013

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.

Bjørn Lomborg is author of The Skeptical Environmentalist and Cool It, and director of the Copenhagen Consensus Center.

The U.S. Energy Information Administration recently published a report that estimates global shale gas resources. These findings may have a significant impact on energy policy in the future: Shale gas increases global resources of natural gas by a whopping 47 per cent. And this may be the tip of the iceberg. For example, at the end of June, the British Geological Survey released shale gas estimates for just one field in mid-England that increased the global estimate by more than 18 per cent.

Canada’s shale gas resources – the world’s fifth highest in terms of technically recoverable gas, estimated at 573 trillion cubic feet – are nothing to balk at. The economic benefits from fracking are manifold: Whereas natural gas prices in the European Union have doubled since the year 2000, U.S. prices have declined about 75 per cent in the past few years. This has saved U.S. consumers $125-billion a year. So the shale gas revolution promises to be great news for the Canadian economy, but – perhaps surprisingly, it is also good news for our climate.

China’s next bet is on natural gas – by Peter Tertzakian (Globe and Mail – July 16, 2013)

July 16, 2013

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.

They say, “What happens in Vegas, stays in Vegas,” but not so in China. Affairs in the Middle Kingdom have huge global influence – at least the mundane affairs of economic activity, primary energy use and environmental impact (in that order of causation). After a dozen boom years, the impact of small changes in China’s gargantuan condition triggers repercussion around the world, not the least for major oil and gas exporters like Canada.

Here’s what’s going on: China’s economy is decelerating, which implies caution (but not alarm) for oil markets; but its energy diet is becoming leaner, which rings a positive tone for future natural gas use. A Chinese transition to more natural gas, much more than the International Energy Agency (IEA) is forecasting, reinforces the importance of Canada’s West Coast liquefied natural gas (LNG) prospects.

China’s annual GDP growth has cooled off from its historically supercharged 10 per cent or more, down to an annualized 7.5 per cent for the second quarter of this year. Other metrics suggest loss of economic momentum; its exports are down 3.1 per cent year-over-year; domestic wages are increasing; manufacturing is weakening; and credit is crunching.

Uncertainty concerning disputed land claims compounds challenges for Manitoba’s miners – by Alana Wilson (Mining Facts.org – July 10, 2013)

July 16, 2013

MiningFacts.org is a digital resource for Canadian mining information produced by the Fraser Institute, a conservative-leaning think tank.

Manitoba faces ‘potentially deal-breaking uncertainty’ over treaty land claims in its mineral exploration sector according to an article by Martin Cash in the Winnipeg Free Press. This is compounding problems for the mineral exploration sector at a time when metal prices are low, investors are already avoiding the sector, and equipment is subject to an additional 1% sales tax.

According to the article, Mega Precious Metals –an exploration company working to develop a gold property called Monument Bay—have received an eviction notice from the nearby Red Sucker Lake First Nation. A temporary court injunction has since been issued which “authorizes the arrest of anyone obstructing, trespassing or creating a nuisance or ‘engaging in any act which interferes with the operations of the Monument Bay project’.”

The band has referred to the property in a news release as “a mineral-exploration company operating illegally in Red Sucker Lake First Nation traditional territory”. Yet Mega Precious Metals has been working with the band for years and in 2010 signed a memorandum of understanding (MOU) with them.

Special report: In tax case, Mongolia is the mouse that roared – By Anthony Deutsch and Terrence Edwards (Reuters India – July 16, 2013)

July 16, 2013

http://in.reuters.com/

AMSTERDAM/ULAN BATOR – (Reuters) – Turquoise Hill Netherlands is a little-known Amsterdam-based company with three employees, no office, and not even its own mailbox. To the government of Mongolia, though, the company represents billions in taxes that it will never see.

Turquoise Hill was created in 2009, five years after Mongolia and the Netherlands signed a tax treaty to avoid double taxation and boost investment in Mongolia. But in 2011, Mongolia decided to cancel the pact, arguing that it would cost the country income from one of the most lucrative gold and copper mines in the world.

The move was rare – tax experts say only a handful of such deals between countries have ever been cancelled – and it highlights a big contradiction.

The Netherlands, which has more than 90 such treaties globally, spent roughly 13 million euros ($17 million) on three aid programs to Mongolia in 2009 and 2010. Globally its aid budget is about $5.5 billion – the fifth most-generous rate among rich nations at 0.71 percent of Gross National Income, according to the OECD.

UPDATE 3-POSCO drops $5.3 bln Indian steel mill, keeps main project alive – by Hyunjoo Jin (Reuters India – July 16, 2013)

July 16, 2013

http://in.reuters.com/

SEOUL, July 16 (Reuters) – South Korea’s POSCO said on Tuesday it will pull out of a $5.3 billion steel mill development in India’s Karnataka state, but will proceed with another $12 billion project billed as the country’s largest foreign direct investment.

POSCO said in a regulatory filing that it had agreed to cancel the project with the government of southern Karnataka state because of delays in receiving iron ore mining rights and opposition from residents which had held back land acquisition.

The move could provide fresh impetus to POSCO’s main steel project in the eastern state of Odisha. Already eight years in the making, it has recently gained momentum with the clearing of legal obstacles to the granting of an iron ore exploration licence.

“We will proceed with a steel mill project in Odisha, which is making progress. The latest move will make us more focused on the project,” POSCO spokeswoman Kim Ji-young said. POSCO, the world’s fifth-biggest steelmaker, had pursued three steel mills in India as a way of hedging its bets on the slow-moving Odisha project.

In 2010, POSCO signed a preliminary agreement with the Karnataka state government to construct a mill capable of producing 6 million tonnes of steel a year. A year earlier it signed a separate steel mill deal with state-run Steel Authority of India Ltd (SAIL).

Bye, bye BRIC: A new global investment shift takes hold – by Joanna Slater (Globe and Mail – July 13, 2013)

July 16, 2013

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.

NEW YORK — When the thirteen members of the investment team at Ballentine Partners LLC sit down each quarter to review their holdings, it is a loud and boisterous affair. Last month, their discussion turned to emerging markets.

The Massachusetts-based firm, which manages $4-billion (U.S.) for ultra-wealthy families, faced a decision: Pare its bullish bet on such countries or stick with it, even as stock prices fell.

The debate circled around the potential dangers for these markets and for China in particular. One agitated analyst pounded the table and called the country’s credit-fuelled expansion a “shell game.”

In the end, the firm’s staff decided to scale back on emerging-markets stocks. “It’s going to be a bumpy time,” said Greg Peterson, Ballentine’s head of investment research. So they decided to act out of caution, he said, to see “how all the issues resolve right now.”

Across the world, many investors are coming to a similar conclusion, watchful and uneasy about the future path of developing economies. In recent weeks, some have fled those markets, sparking marked declines in stocks, bonds and currencies.

[Ring of Fire] Influence moves northwest with cabinet shuffle – by Darren MacDonald (Sudbury Northern Life – July 15, 2013)

July 16, 2013

http://www.northernlife.ca/

The appointment of Kenora MP Greg Rickford as minister responsible for FedNor and the Ring of Fire is another sign of the importance upper levels of government place on developing the major chromite discovery.

And Dick Destefano, executive director of the Sudbury Area Mining Supply and Services Association, says it’s a sign of the growing political influence of northwestern Ontario.

Rickford replaces Parry Sound-Muskoka MP Tony Clement in a major cabinet shuffle that was unveiled Monday by Prime Minister Stephen Harper on his twitter account. In all, Harper added eight new faces to his cabinet of 39 ministers, the largest federal cabinet since Brian Mulroney’s government in the 1980s and early 1990s.

Rickford’s appointment comes months after Liberal Premier Kathleen Wynne named Thunder Bay MPP Michael Gravelle as minister of Northern Development and Mines, replacing longtime Sudbury MPP Rick Bartolucci, who is retiring.

Both appointments reflect new realities in Northern Ontario, Destefano said. “The focus is not on northeastern Ontario at all, it’s on northwestern Ontario and the Ring of Fire and it’s potential value,” he said. “From a political point of view, it’s seen as the area where the next major development is going to take place in Ontario.”

Rickford Ready for Ring of Fire – by James Murray (Netnewsledger.com – July 15, 2013)

July 16, 2013

http://www.netnewsledger.com/

OTTAWA – Greg Rickford says that his Blackberry has been “radio active today”. The new Minister of State for Science and Technology has been busy all day since being sworn in this morning in his new position in the Conservative Government. In an interview with NetNewsLedger, Rickford comments that the process has been exciting, however for the past week since he was informed is was a little cloak and dagger to keep out of the public eye and maintain the secrecy of cabinet building for Prime Minister Harper.

Ring of Fire Responsibilities in Rickford’s Camp

While Tony Clement remains the Senior Minister for Northern Ontario, Rickford confirms that he has responsibility for the Ring of Fire. Rickford’s experience in Northern Ontario where he has been working in the medical field as well as Parliamentary Secretary for the Minister of Aboriginal Affairs should serve him well there.

Rickford is now not only responsible for Science and Technology, a portfolio that reportedly has had the Prime Minister looking to gather greater scope, but in addition is the Minister responsible for FedNor.

“In following Minister Tony Clement, I realize I have some big shoes to fill, and I am looking forward to the challenge, but also with working closer with Minister Clement,” stated Rickford.

Rickford [Ring of Fire/FedNor] appointment draws praise – by Carl Clutchey (Thunder Bay Chronicle-Journal – July 16, 2013)

July 16, 2013

Thunder Bay Chronicle-Journal is the daily newspaper of Northwestern Ontario.

Friends and foes alike of the federal Conservatives are hoping that a re-focused FedNor agency under Tory MP Greg Rickford will be a boon for some large-scale Northwestern Ontario economic development projects like the Ring of Fire. Rickford, 46, who is from Kenora, was put in charge of FedNor Monday in a cabinet shuffle that also made him Science and Technology minister.

A Northerner hasn’t headed the FedNor file since 2005, when former Liberal MP Joe Comuzzi was the agency’s minister.
“I’m just ecstatic about it,” said Thunder Bay Mayor Keith Hobbs. “A lot can get accomplished in two years (before the next federal election).”

“I know (Rickford) was champing at the bit to get into cabinet, and I think he’s going to be a great guy for the job,” added Hobbs, who is a personal friend of Rickford. Though Rickford represents the riding of Kenora, “I’ve always considered him an MP for Thunder Bay,” said Hobbs.

NDP MP John Rafferty (Thunder Bay-Rainy River) said it’s a good thing to have a Northerner in charge of an agency (FedNor) that is devoted to Northern projects. According to Rafferty, FedNor was neglected under Industry Minister Tony Clement “who did not consider FedNor as one of his top priorities.”