No excuse for Glencore Xstrata writedown – by Paul Murphy (Financial Times – August 23, 2013)

http://www.ft.com/home/us

Argument claiming ‘accounting construct’ fails to convince

When large companies announce big asset impairment charges after a controversial takeover, as Glencore Xstrata did this week, two things happen.

First, the financial press bang the multibillion-dollar figure into a headline or two; then, almost immediately, ranks of investment banking analysts step up to explain, in condescending tones, that this is just an accounting exercise and really doesn’t matter since no cash was involved.

If the acquisition under debate involved the predator paying solely or largely in shares, as Glencore did in acquiring Xstrata, then those ignorant newspaper headlines are treated with complete disdain.

Step forward, then, Dominic O’Kane of JPMorgan Cazenove in London. As he told his clients on Wednesday: “$10.1bn of impairments/significant expenses, including a total of $8.8bn on XTA, were seized on by the press and sections of the market as evidence of the latest and perhaps most egregious example of capital misallocation in a sector with a poor recent track record. We would argue this misrepresents the true situation.”

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Environmental review wraps up for New Prosperity mine (Canadian Press/CBC News Business (August 23, 2013)

http://www.cbc.ca/news/business/

Open pit gold and and copper mine to be located 125 kilometres southwest of Williams Lake

It’s the tenth largest undeveloped gold-copper deposit in the world — at least nine-million wedding rings’ worth — and for half a century since its discovery, the deposit has remained buried among the pristine lakes and mountains of British Columbia’s wild Chilcotin region.

Opponents of a billion-dollar plan to develop the site want it to stay that way. The company behind the proposal that has already been rejected once says it has a new plan that will save a lake of cultural significance to First Nations — contrary to the original plan — and put millions of dollars into provincial coffers.

Public hearings on the New Prosperity mine proposal wrap up today following five weeks of hearings in nearby communities, and the proponent and opponents remain deeply divided.

“What it is we propose to do is not unusual. It’s an engineering exercise, not a science experiment,” John McManus, senior vice-president of operations for Taseko told the panel on the opening day of the latest set of hearings.

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In aftermath of cartel break-up, potash prices slide – by Brent Jang (Globe and Mail – August 23, 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.

VANCOUVER – Spot prices for Canada’s potash exports may have eased, an indication of a softer market following the breakup of a Russian-Belarusian industry oligopoly last month.

Prices for spot shipments of the crop nutrient from Port Metro Vancouver recently slipped $20 (U.S.) to less than $400 a tonne, while there are preliminary signs of market softness elsewhere, including slightly discounted potash prices on rail shipments to China, Patricia Mohr, vice-president and commodity market specialist at Bank of Nova Scotia, said in an interview Thursday.

Russia’s OAO Uralkali announced on July 30 it was abandoning Belarusian Potash Co., a joint venture with rival Belaruskali of Belarus and one of the two largest marketing groups for potash, a mineral used on farms to boost crop yields. Analysts have warned that increased competition following the breakup would lower potash prices by late 2013.

“We can’t be too precise about forecasts because there are a variety of different kinds of prices to different buyers, and some of them are spot and some of them are contract,” Ms. Mohr said. However, she added that the stage has been set for lower potash prices over the next six months, perhaps trading around $350 a tonne in early 2014.

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Indonesia Allows More Metal Ore Shipments Before 2014 Export Ban – by Eko Listiyorini and Widya Utami (Bloomberg News – August 23, 2013)

http://www.businessweek.com/

Indonesia said that it will allow more shipments of unprocessed mineral ores for the rest of this year by dropping quotas before an export ban comes into force as planned in 2014. A 20 percent tax on exports will be retained.

“This is a temporary policy, until the 2014” ban on unprocessed ores is in place, Finance Minister Chatib Basri said in Jakarta today. “We see that the restriction or quota has caused a drop in exports revenue.”

Southeast Asia’s biggest economy unveiled a policy package today after a record current-account deficit and worse-than-estimated economic growth and inflation data prompted investors to sell stocks and drove the rupiah to its weakest level since 2009. The country is the largest exporter of refined tin and thermal coal.

“Commodity prices remain weak, the mining sector’s profitability is declining rapidly, and government receipts through royalties and taxes would have suffered if the government had not taken any measures,” said Xavier Jean, a Singapore-based director of corporate ratings at Standard & Poor’s. “This is not coming as a surprise.”

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Mosaic Deal Hopes Fade as BHP Bets on Own Potash Mine: Real M&A – by Tara Lachapelle and Elisabeth Behrmann (Bloomberg News – August 22, 2013)

http://www.businessweek.com/

Mosaic Co. (MOS:US)’s takeover prospects are diminishing after BHP Billiton Ltd. (BHP) renewed a commitment to building its own potash mine.

BHP this week said it plans to see the Jansen potash project through to production as it invests $2.6 billion and seeks partners, damping speculation that the world’s biggest mining company may still consider a purchase of fertilizer maker Mosaic. Mosaic’s enterprise value has fallen to $14.8 billion, about the same as the estimated cost of constructing Jansen, its first potash mine.

Buying Mosaic would have been a logical alternative to building Jansen, which may not begin producing fertilizer until 2020, Sanford C. Bernstein & Co. said. Mosaic became a cheaper target this month as it dropped to its lowest price relative to book value on concern that the breakup of a Russian-led export venture will flood the market with supply and suppress potash prices. Even as hurdles to a sale of Mosaic were lifted this year, potential buyers are scarce, especially as BHP’s new project promises even more supply to come.

“The additional spending shows BHP wants to go ahead with Jansen,” Paul McTaggart, a Sydney-based analyst at Credit Suisse Group AG, said in a phone interview. “There’s now no turning back.”

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Resource Nationalism Speech – by Gold Fields CEO Nick Holland (Johannesburg – August 15, 2013)

http://www.goldfields.co.za/

This speech was give by Gold Fields CEO Nick Holland at the Gordon Institute of Business Science in Johannesburg on
15 August 2013.

Thank you and good evening, it is certainly good to be here and I’m glad that we’ve mentioned the fact that it’s the eve of the anniversary of the Marikana tragedy. I guess some of the things I’m going to talk about tonight are probably going to be appropriate in the context of that terrible tragedy of over a year ago.

A lot of debate has been raised on resource nationalism. It has been rated the number one risk in various surveys. I guess what is interesting is maybe that risk has been somewhat overshadowed of late by the decline in metal prices across the mining industry, which in of itself I think presents another challenge.So the reason that we’ve decided to look at this topic is to spark some debate. And I think there are going to be a lot of different views on resource  nationalism. What is it really? Is it good? Is it bad? And the other thing I just want to highlight is this is not a South Africa centric presentation.

Many of the problems that we’re currently experiencing in the South African mining industry are not unique to South Africa. The same issues present themselves around the world.

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Resource nationalism can mean growth and prosperity – by Nick Holland (South Africa Business Day – August 16, 2013)

http://www.bdlive.co.za/

Nick Holland is the CEO or Gold Fields.

AT A time when the global mining industry is besieged by falling commodity prices, soaring input costs and investor apathy, resource nationalism strikes fear into the hearts of many mining executives and investors. At Gold Fields we have a different view.

We are strongly in favour of a more equitable distribution of the benefits of the mining economy, provided that we — governments and the mining industry — are aligned on which economic pie it is we are sharing. Is it the ever-shrinking mining earnings pie that has become the norm in most countries, or is it the growing mining economy pie so elusive to most countries?

A debate of this sensitivity requires well-defined parameters. We view resource nationalism as “government actions to extract the maximum developmental impact and value from a country’s natural resources for its people”. We believe this is the right, if not the duty, of every government.

Most developing countries with a natural resource endowment, including South Africa, have a legacy of poverty and inequality. To address this, and to see more sustainable growth, we need to maximise the socioeconomic benefits from the extraction of natural resources without shrinking the mining pie.

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Mining slowdown begins to hurt as Bay Street sheds jobs, firms – by Boyd Erman and Jacqueline Nelson (Globe and Mail – August 23, 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.

A sustained downturn in Canadian capital markets claims its first big foreign victim Friday, as Stifel Financial Corp. shuts down its Toronto and Calgary operations and lets go of 60 people.

Businesses such as stock underwriting and trading have plunged, eating away at profits for investment dealers in Canada – particularly smaller ones – and forcing some firms to close or merge.

The problem is that deep weakness in the commodity and resource sectors and volatile markets have sharply curtailed deal volumes and new public offerings for investment dealers. The S&P/TSX materials index has fallen 22 per cent in the past year and the energy index was flat, even as U.S. markets have soared to record highs. That poor showing has curtailed investors’ interest in junior mining and oil and gas stocks, meaning that fewer resource companies are able to raise money.

Eleven investment dealers merged, closed their doors, or announced plans to do so in the first half of 2013, the Investment Industry Association of Canada said. Ten firms closed in 2012.

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INTERVIEW-Rio keeps focus on exploration while cutting costs – Clara Ferreira-Marques (Reuters India – August 23, 2013)

http://in.reuters.com/

LONDON, Aug 23 (Reuters) – Big miners such as Rio Tinto can slash exploration spending and still make valuable finds but they must resist the temptation to stop searching entirely or they will pay later, the company’s head of exploration said.

The secret of successful exploration on a budget, according to Rio’s Stephen McIntosh, is prioritisation and planning. “If something is not making it, we will get out quickly or divest that opportunity, so we can reinvest into something that will be of value to Rio Tinto,” McIntosh said.

Total withdrawal from exploration – attractive as it has no impact on current production – could hit earnings in decades to come especially at a time when smaller explorers and miners cannot raise cash to fill the gap left by big players.

“If you stop your most fundamental greenfield exploration, for the majors you won’t miss it for a very long time. But you will wake up one day, want to the go to the cupboard of future options and find it a little bit bare,” McIntosh said in a telephone interview from Singapore. Cutting exploration, has proved an easy win for miners under pressure, as prices and demand cool, to reduce costs that ballooned during the boom years.

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Barrick Gold Corp. to sell three mines in Australia for $300 million (Canadian Press/Toronto Star – August 23, 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.

Barrick Gold Corp. has agreed to sell off three high-cost mines in Western Australia to South Africa-based miner Gold Fields Ltd. — a move analysts say will free Barrick up to focus on more profitable operations.

Barrick said it will receive about $300 million from the sale, which is subject to customary closing conditions, including approval by Australia’s Foreign Investment Review Board.

The company said the three mines that comprise the Yilgarn South assets produced a total of 452,000 ounces of gold in 2012 and a further 196,000 ounces in the first half of this year.

Kerry Smith, an analyst at Haywood Securities, said selling the higher-cost mines will reduce Barrick’s operating expenses and have only a minimal impact on the company’s production volumes. “By eliminating those three mines out of their portfolio, it frees their management up to spend more time on other assets that actually make more cash,” Smith said.

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Arctic tour: Stephen Harper acknowledges social issues in Canada’s North – by Tonda MacCharles (Toronto Star – August 23, 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.

Prime Minister Stephen Harper shifted his political message in the North Thursday after he met Nunavut Premier Eve Aariak and faced media questions about the immense social challenges here.

RANKIN INLET, NUNAVUT—On a day he intended to highlight more money for mining development, Prime Minister Stephen Harper shifted his political message in the North after he met Nunavut Premier Eve Aariak and faced media questions about the immense social challenges here.

Those had largely gone unmentioned by the prime minister during his eighth annual Arctic tour. Instead it has focused on resource development and Arctic sovereignty. Thursday was also supposed to boost the prime minister’s credentials as a supporter of basic science.

In Rankin Inlet, on the northwest coast of Hudson’s Bay, Harper, who is frequently criticized for failing to back scientific research and accused of muzzling scientists, threw his weight behind a major geological research project and brought geologists along to tell everyone about it.

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Beyond bitumen: Can Fort McMurray build a future that’s bigger than the oil sands? – by Mashoka Maimona (National Post – August 23, 2013)

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

The matron of northern Alberta’s oil sands country — Fort McMurray — envisions a future beyond energy for a community built on bitumen.

Melissa Blake, the mayor of Wood Buffalo, the regional municipality made up of Fort McMurray and nine rural communities, is well aware her town — sitting on the largest deposit outside OPEC — has become synonymous with the oil sands.

“I can acknowledge that just about any other job that’s supported in Fort McMurray is one that is here to support those who work for the [oil] industry. But I also see the opportunity of being able to offer more cultural amenities, more social amenities, more retail and commercial opportunities — really allowing people who have creative energy to be successors in their own right,” Ms. Blake said in a phone interview from Fort McMurray. “If we turn our backs on those opportunities, we won’t be able to welcome a different era in the future.”

Fort McMurray is bursting at the seams: its population has doubled in the past 15 years to nearly 80,000, and the number is expected to surpass 200,000 by 2030.

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A pipeline that’s good for Canada is good for Ontario, too – by Jesse Kline (National Post – August 23, 2013)

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

British Columbia’s Liberal Premier, Christy Clark, has not been shy about her province’s desire to get its “fair share” out of the proposed Northern Gateway pipeline, which would transport oil sands crude to the West Coast. Not only does Ms. Clark want to receive royalties from oil originating in Alberta, she also wants the federal government to pick up the cost, should anything go wrong.

Unfortunately, this strain of thought seems to have spread beyond B.C.’s borders, passing from one Liberal mind to another.

Last year, the former Liberal premier of Ontario, Dalton McGuinty, weighed into the debate by arguing that the high Canadian dollar that results from energy exports is bad for Ontario’s manufacturing sector. “If I had my preferences as to whether we had a rapidly growing oil and gas sector in the West or a lower dollar, I’ll tell you where I stand: with the lower dollar,” he said.

Mr. McGuinty eventually changed his mind, perhaps having realized that since Ontario manufactures much of the machinery used to develop Alberta’s oil resources, holding up the construction of new pipelines would be counterproductive. But now that he is out of office and his successors are facing the very real prospect of Alberta oil flowing through their backyard, the Ontario Liberals appear to be adopting strategies developed by their West Coast cousins.

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Michael Den Tandt: Days into Harper’s trip, the real problems of the North begin to emerge – by Michael Den Tandt (National Post – August 23, 2013)

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

RANKIN INLET, Nunavut — After days of singing the praises of Arctic sovereignty, resource extraction and development, Prime Minister Stephen Harper came face to face here with the stark challenge of catalyzing a 21st Century gold rush in a society afflicted by grinding poverty and social dysfunction. It is a daunting task, with no assured outcomes. What is clear, now, is that the Conservatives intend to try.

Thursday morning the PM appeared before a small crowd to deliver the day’s pre-packaged news — a $100-milion investment in geo-mapping, intended to lay bare the underground riches of the North. The goal is to send geologists fanning out across the Arctic Archipelago, first by air and then on the ground, to create a map that will guide mining firms in their own future explorations.

While he spoke, children played outside on a dirt field, as beat-up pickup trucks and four-wheelers raced along gravel roads, among the modular buildings that make up this hamlet of 2,358. Rankin Inlet, high on the northwest shore of Hudson’s Bay, is one of three regional centres in Nunavut, alongside Cambridge Bay and the capital of Iqaluit.

Though clearly better off than communities further north, Rankin has a developing-world feel — right down to the choking dust and chaotic traffic. Respiratory ailments, one resident told me, are rife, particularly among the elderly.

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NEWS RELEASE: Geo-mapping key to opening up mineral opportunities in Canada’s North – Mining industry commends the federal government on GEM funding announcement

OTTAWA, Aug. 22, 2013 /CNW/ – The Government of Canada’s decision to renew the Geo-mapping for Energy and Minerals (GEM) program is a positive and welcome investment that will help facilitate exploration activities in Canada’s North.

Building on a previous allocation of $100 million over five years from Federal Budget 2008, the government’s renewed commitment of $100 million over seven years will carry this important work forward to the benefit of the mineral industry, northerners and all Canadians.

“Mineral exploration is like looking for a needle in a haystack,” said Pierre Gratton, President and CEO of the Mining Association of Canada (MAC). “This continued investment in surveying will help the industry better determine where mineral deposits are located, and ultimately, where the next generation of Canadian mines can be developed.”

Geoscience is a fundamental building block of a minerals economy. For companies conducting exploration, it makes sense to spend their high-risk dollars in areas where good geological data is available in order to heighten the chances of finding a deposit. By developing a broader body of reliable geological information, Canada is enhancing its attractiveness as a destination for mineral exploration investment.

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