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Day: July 4, 2014

Can mining companies survive US$90/t iron ore prices? – by Dorothy Kosich (Mineweb.com – July 4, 2014)

http://www.mineweb.com/

If iron ore prices continue at near-record lows, mining companies with substantial debt or expensive operations may “bear the brunt of the impact”, S&P warns.

RENO (MINEWEB) – If iron ore prices “stagnate” at US$90 per ton through 2015, some miners’ key credit metrics might worsen significantly, based on scenario analysis on 10 major iron ore producers, Standard & Poor’s Ratings Services observed this week.

“In particular, miners with large iron ore exposure, but are unable to cut costs and are saddled with debt, will face a severe deterioration in earnings and credit metrics,” warned S&P Credit Analysts May Zhong, Diego H. Ocampo, Andrey Nikolaev, Amanda Buckland, Elad Jelasko, and Xavier Jean.

“Whether this deterioration triggers a downgrade depends critically on a mining company’s financial flexibility. If a miner can defer its capital expenditure and conserve cash, its credit quality should be able to withstand sliding iron ore prices,” said the analysts. “In addition, diversified mining companies are well placed, as they can rely on commodities with more resilient prices, such as oil.”

“Another important factor is the movement of mining companies’ local currencies, which could affect their costs and revenues,” S&P observed.

“We observed that major players – Australia’s BHP Billiton Ltd. and Rio Tinto, PLC, and Brazil’s Vale S.A, – can accommodate declining earnings should iron ore prices stay at US$90 per ton through to the end of 2015,” said the credit ratings agency.

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REPORT: THE RARE EARTH ELEMENTS INDUSTRY IN CANADA ─ SUMMARY OF EVIDENCE – by Standing Committee on Natural Resources (June 2014)

Standing Committee on Natural Resources – JUNE 2014 – 41st PARLIAMENT, SECOND SESSION (Government of Canada report)

INTRODUCTION

In November 2013, the House of Commons Standing Committee on Natural Resources (hereafter “the Committee”) commenced a study on the rare earth elements (REE) industry in Canada. The purpose of this study was to gain a better understanding of the challenges and opportunities related to the development of REE in Canada and around the world. This document summarizes witness testimony presented to the Committee during the course of four meetings.

It is organized according to the following topics: background information on REE and their applications; REE global market, including the role of China in rare earths supply; opportunities and challenges of developing rare earth resources in Canada with a brief overview of current exploration activity; and, ongoing initiatives that support Canada’s REE industry.

PART I — BACKGROUND

A. What Are Rare Earth Elements?

Rare earth elements (REE)1 are a group of 17 metals (including scandium and yttrium), which exhibit similar properties and occur in many of the same mineral deposits. According to Christine Villemure, Director General at Natural Resources Canada, contrary to what the term “rare earths” may suggest, REE are relatively abundant in the earth’s crust.2 However, REE seldom occur in concentrations that are economically exploitable; instead, they are found together with other elements and as a result, are difficult to separate for extraction.3

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Kyrgyzstan’s Centerra Gold shares vulnerable to possible seizure after key court ruling – by Peter Koven (National Post – July 4, 2014)

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

TORONTO – The government of Kyrgyzstan has lobbed many nationalization threats at Centerra Gold Inc. over the past 17 years. But a court ruling has turned the tables and made a large chunk of the government’s own Centerra shares vulnerable to potential seizure.

The strange turn of events is tied to Canadian junior miner Stans Energy Corp., which is also active in Kyrgyzstan. In 2012, a parliamentary committee revoked Stans’ licence for a rare earths project under highly suspicious circumstances, and the company launched legal action to protect its rights.

Those efforts culminated in a key ruling this week, as an arbitration court in Moscow ordered Kyrgyzstan to pay US$118.2-million to Toronto-based Stans.

It is highly unlikely that Kyrgyzstan will respect the ruling and pay out any cash. That leaves Stans the option of securing verdicts against one or more of the state’s foreign assets. And a logical one to go after would be Kyrgyzstan’s 32.7% stake in Centerra, currently worth almost $500-million.

David Vinokurov, vice-president of corporate development at Stans, declined to comment on whether the company would target Centerra, also based in Toronto, shares for payment. But he acknowledged that it would be a logical place to look.

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Excerpt from Potash: An Inside Account of Saskatchewan’s Pink Gold – by John Burton

To order a copy of Potash: An Inside Account of Saskatchewan’s Pink Gold, click here: http://www.uofrpress.ca/publications/Potash

John Burton grew up on a farm in Saskatchewan, studied at the University of Saskatchewan and the London School of Economics, was elected to Parliament, and played a major role in Saskatchewan’s 1975 decision to acquire potash-producing facilities. He was a member of the Board of Directors of the Crown-owned Potash Corporation of Saskatchewan from 1975 to 1982.

CHAPTER 2: Beginnings and Development

Tommy Douglas, political leader of the CCF (Co-operative Commonwealth Federation), led the party to a massive election win on June 15, 1944. He had a strong complement of competent and dedicated people to choose from in selecting a Cabinet for his government. One of those people was Joe Phelps, a dynamic, aggressive, action-oriented man. He was a fiery speaker known for his excitability, verbosity, and temper. Douglas appointed him minister of natural resources but with some misgivings. His mandate was to diversify the economy, and Phelps produced results with a wide variety of initiatives, some of which got the government into trouble. He and his officials constantly looked for new opportunities.

One official picked up a report supposed to be kept hush-hush that some stuff called “potash” had been found near Radville by one of the companies drilling for oil in 1942. The informant had to emphasize that the “stuff” was much more important than any of several salts found on the surface.

This information was of interest since there was no knowledge of the find until then. Other indications of potash came to light subsequently, and by 1946–47, potash was identified as a resource with significant potential for Saskatchewan. The province had endured more than a half century of struggles and problems during its early development phase, with many harsh times that often tempered the dreams of its pioneers. Thus, the prospect of new opportunities was greeted eagerly and created new hope for the struggling province.

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Iron failings [Labrador Trough] – Editorial (St. John’s Telegram – July 04, 2014)

http://www.thetelegram.com/

The Labrador Trough may have seen a feeding frenzy in its day, but the herd seems to be thinning. Lured by cheaper iron from competitive sources, customers have been moving on to greener pastures.

The latest victim: Labrador Iron Mines, which announced Wednesday it’s suspending operations on both sides of the Labrador-Quebec border.

Over the past financial year, the company lost $105.2 million, compared to a net loss of $129.7 million a year ago. It said 2014 will be a “development year” as it concentrates its efforts on its Houston Mine, located near Schefferville in northern Quebec. That project is slated to begin production in April 2015.

In February, Cliffs Natural Resources announced it was idling its operations in Wabush indefinitely, leaving 400 employees out of work. But optimism still springs eternal among government and industry officials.

Two days after the February closure, Premier Tom Marshall was in Wabush announcing that Newfoundland and Labrador Hydro had been instructed to forge ahead with a third line to supply power from Churchill Falls to Labrador West.

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Davis sees IPO for X2 at future point – by David McKay (Miningmx.com – July 2, 2014)

http://www.miningmx.com/

[miningmx.com] – WHEN NEWS FILTERED through last year that Mick Davis was planning to establish his own firm, the natural assumption was that he was joining the ranks of other former mining executives in private equity.

Davis’s former banker, for instance, Ian Hannam has established an investment firm of his own aimed at capitalising on opportunities in Zimbabwe. There are a bunch of others.

Then in April, Ivan Glasenberg and Mark Cutifani, the CEO of Anglo American, told Reuters at the FT Commodities conference that private equity and mining was like mixing oil and water.

Private equity gears up assets with steady cash flows which are used to repay interest. Then the asset is sold for a higher value after a six to seven year investment period.

“The problem with the commodities space, if you have a high gearing (debt), is that you are not running Boots pharmaceutical where you have a pretty constant earnings base,” said Glasenberg. “In mining you just don’t know your earning base.” Davis, however, said X2 Resources differs from private equity.

“X2 Resources’ proposition is that of building another diversified mining company.

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What Mick [Davis] wants – by David McKay (Miningmx.com – June 30, 2014)

http://www.miningmx.com/

[miningmx.com] – ONE OF THE best quotes about Mick Davis, the founder CEO of Xstrata, comes from former JP Morgan banker Ian Hannam who assisted with a number of transactions for Davis.

He said: “There are four people who claim they brought Billiton to London: [Brian] Gilbertson, myself, Adrian Coates [a well-known banker in London, then at HSBC] and Davis. The answer is – it was Davis. He saw the opportunity and managed to persuade Gilbertson that it would create a platform to build a new company to rival Rio [Tinto]”.

Since the listing of Billiton in 1997, Davis has been the primum mobile of some of the highest profile mining deals in London, including Billiton’s merger with BHP, a string of transactions during the decade or so during which Xstrata was built into the fourth largest diversified miner, Xstrata’s ultimately frustrated ‘merger of equals’ with Anglo American, and finally, the marriage of Xstrata to Glencore in 2013, the largest transaction in the City that year.

The Glencore-Xstrata combination was also described in terms of ‘a merger of equals’ when first unveiled in 2012. The fact that the final arrangement ended with the departure of Davis, and nearly all of his senior management team, suggests that in global mining finance, mergers are illusory, created to save the actors from over-paying for those acted upon.

That’s why it’s so tempting to style Davis’s swift return to the UK’s corporate scene as head of X2 Resources as an act of ‘unfinished business’, although, Davis was off stage so briefly, it’s hard to describe X2 Resources as a return so much as a continuum.

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Rio Tinto looks to catch up in potash – by Emiko Terazono (Financial Time – July 3, 2014)

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

Miner’s Canadian joint venture is latest in oversupplied market

Dark clouds are gathering over the potash industry again. Last week, Rio Tinto and its partner, Russian fertiliser group Acron, said they would push ahead with the development of the Albany project in Saskatoon, Canada.

In its first disclosure of the size of the asset, north Atlantic Potash, the 50-50 joint venture between Rio and Acron, said the project area contained 1.4bn tonnes of assumed potash resources, a key fertiliser ingredient, of which 329m are estimated to be recoverable.

The announcement does not bode well for an already oversupplied sector where several other major developments, the biggest being BHP Billiton’s Jansen mine with its 5.3bn tonnes of measured resources and 1.3bn tonnes of inferred potash, are also on the drawing board.

Rio, which invested in the joint venture in 2011, has not disclosed how much it has spent on the project, but it sees it as a “tier one” exploration asset.

According to last week’s announcement, the next steps for Rio and Acron are a continuation of the environmental assessment and the pre-feasibility study.

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Glencore slams Australian report that it paid zero tax in three years – by Henry Lazenby (MiningWeekly.com – July 3, 2014)

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

TORONTO (miningweekly.com) – Global diversified mining giant and commodity trader Glencore has condemned a recent report by Australian media company Fairfax Media, claiming that through aggressive tax structuring, Glencore had paid zero tax over the past three years, despite earning income of A$15-billion.

Business and technology news website Business Insider had published an internal email to staff by Glencore’s coal CE, Peter Freyberg, in which he dispelled the media speculation surrounding its tax payments, saying that the firm had paid A$400-million in corporate income tax since 2011.

He also said Glencore had paid A$8-billion in royalties and taxes, including A$2-billion related to corporate income tax, in Australia since 2007.

“As you will be acutely aware, for much of this period the resource industries in which we participate have faced significant challenges including low commodity prices, high input costs and a robust Australian dollar.

“Profitability is significantly lower than during the preceding four years – the reality is that a significant proportion of Australia’s coal mines are currently operating at a loss and although we run an efficient business, we are not immune to the market conditions.

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Major Partner Won’t Expand Stake In Mine Near Ely – by CBC Minnesota (July 3, 2014)

 http://minnesota.cbslocal.com/

MINNEAPOLIS (AP) — A major partner gave up the right Thursday to take a bigger stake in the proposed Twin Metals copper-nickel mine near Ely in northeastern Minnesota, which has been a target of criticism from environmentalists who fear it will harm the nearby Boundary Waters Canoe Area Wilderness.

Chilean-based mining company Antofagasta PLC said it has terminated its option to buy another 25 percent of Twin Metals Minnesota LLC. The announcement said Toronto-based Duluth Metals Ltd. is now assuming control of the joint venture.

Duluth Metals owns 60 percent of Twin Metals Minnesota. Antofagasta, which could have upped its stake to 65 percent, said it’s now “evaluating its options” for what to do with its 40 percent interest in the joint venture and its 10 percent direct ownership stake in Duluth Metals.

“By doing this today Antofagasta has signaled they intend to walk away from the project,” said Aaron Klemz, spokesman for the Friends of the Boundary Waters Wilderness. An Antofagasta spokesman denied that.

“No they’re not walking away,” spokesman Robin Wrench said by phone. He said Antofagasta still likes the project for the long-term, it’s just not exercising its right to buy a larger stake. The move means Antofagasta is only responsible for 40 percent of the project’s future funding, not 65 percent, he said.

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“You can’t breathe in air with 7000 micrograms of sulfur dioxide.” [Norilsk Nickel – Kola Peninsula] – by Amelia Jaycen (Barents Observer – July 03, 2014)

http://barentsobserver.com/en

BarentsObserver.com is an open internet news service, which offers daily updated news from and about the Barents Region and the Arctic. The site is run by the Norwegian Barents Secretariat in Kirkenes, Norway.

Putin presses Norilsk Nickel to move to a functioning, upgraded plant, dismantle the obsolete polluter in Nikel.

Russia’s Ministry of Natural Resources and Ecology on Tuesday told representatives of “MMC” Norilsk Nickel of the planned decommissioning some of Nikel plant rundown facilities by 2016 and reorganization of metallurgical production at the Monchegorsk plant, which must be upgraded and modernized, the ministry said in a press release yesterday. Monchegorsk is owned by the same company and located some two-hour drive south of Murmansk on the Kola Peninsula.

The program involves modernization and renovation of all stages of processing and consolidation of smelting and refining capacity to a more modern venue including technological upgrading and expansion of refinery at Monchegorsk during 2016-2017. Capital investments in the program total more than 50 billion rubles, the release says.

The decision was made in the course of inter-ministerial consultations, and the updated reconfiguration of Monchegorsk is to be accompanied by a special Russian-Norwegian working group. The parties scheduled a technical workshop for September 2014 in Moscow to plan the next steps.

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UPDATE 2-India’s Sesa sees 6-fold jump in iron ore output, Goa mining set to resume – by Krishna N Das (Reuters India – July 3, 2014)

http://in.reuters.com/

NEW DELHI, July 3 (Reuters) – India’s Sesa Sterlite Ltd expects its iron ore output to surge six fold this fiscal year as it resumes production in Goa in September after a 19-month mining ban in the state, an executive of the country’s top private iron ore miner said.

A pick up in production as mines in India’s biggest iron ore-exporting state restart could hurt global prices of the steelmaking raw material .IO62-CNI=SI that have already lost almost 30 percent this year in an amply supplied world market.

Sesa Sterlite’s total iron ore output from India, where it operates in Goa and neighbouring Karnataka, is expected to reach 9.29 million tonnes in the year to March 2015 from about 1.5 million a year ago, Aniruddha Joshi, a vice president at the firm, told Reuters in an interview on Thursday.

Most of the output will be exported as Indian steelmakers are not keen on buying the low-grade ore from Goa at global benchmark prices, Joshi said. The country is currently the world’s tenth largest exporter of iron ore.

“It’ll suffice to say that only China can use Goan ore,” Joshi said. “Because it’s hematite coarse fines which can be mixed with very fine concentrates that are only produced in China in high quantities.”

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Randgold CEO Bristow Hunts One Last Big African Discovery – by Kevin Crowley (Bloomberg News – July 3, 2014)

 http://www.bloomberg.com/

Mark Bristow, the chief executive officer of Randgold Resources Ltd. (RRS), said he’s hunting one last major discovery to cap his career before retiring.

The 55-year-old South African has overseen Randgold’s development from a junior mining-exploration company into a gold producer with assets across sub-Saharan Africa including Mali, the Democratic Republic of Congo and Senegal. The next big find could be in Ivory Coast, he told reporters.

“I’d like to find one more asset, for me it would be a perfect finish to my career,” he said in Johannesburg yesterday. “We pour the gold and I’m out of here. I don’t want to hang around. I don’t want to be the chairman or anything like that. I’ve got other things to do.”

Bristow, a geologist by training, led the discoveries of three gold mines in Mali holding 20 million ounces in deposits, over the course of his 30-year career at Randgold. The stock’s return has averaged the equivalent of 27 percent annually in the past decade, compared with the 0.4 percent gain by Barrick Gold Corp. (ABX), the largest producer, and the 2.7 percent decline by Newmont Mining Corp. (NEM), the second biggest, according to data compiled by Bloomberg.

With the Kibali mine in Congo that went online at the end of 2013, Randgold can produce gold profitably across its operations even if the price of bullion falls to $1,000 an ounce, 32 percent lower than the current spot price, for the next five years, Bristow said. The challenge is the five years beyond that.

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The Supreme Court’s BC land-title decision? It’s more important than you think – by Bob Rae (Globe and Mail – July 4, 2014)

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.

Bob Rae was Premier of Ontario 1990-1995, a federal Member of Parliament 2008-2013 and leader of the federal Liberal Party 2011-2013.

Some of the reactions to the Supreme Court’s decision in the Tsilhqot’in First Nation case, which requires pipeline projects and similar developments to seek aboriginal approval, are so over the top they cannot go without comment.

Nearly forty years ago a case from the Nisga’a community known as Calder made a similar long journey through the courts, and it was there that the Supreme Court (long before the Charter) held that the arguments from both Ottawa and British Columbia that no aboriginal title or claims survived the arrival of European settlement was wrong.

The invasion and occupation of the Americas had been seen by imperial powers as a conquest of empty land, whose borders and boundaries were decided by any number of treaties and agreements signed in Europe. In the sixteenth century there was even a theological argument in the Valladolid debate about whether aboriginals were human. The doctrine of “terra nullius” was often invoked to assert the legal fiction that these lands belonged to “no one” before they were “discovered” by white people from Europe.

The Calder decision rightly blew those doctrines out of the water, and urged governments, First Nations, and other aboriginal peoples to sort out their relationships on the basis of equality and respect.

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Remembering Bre-X: Suicide and the gold ‘find of the century’ – by Douglas Goold (Globe and Mail – June 24, 2014)

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.

With its wood carvings, objets d’art and pool surrounded by palm trees, it was hard to imagine a more luxurious hotel than the Shangri-La in Jakarta. When I knocked on the door of Suite 1234, a gruff John Felderhof greeted me. It was Feb. 28, 1997, and I was on assignment for The Globe and Mail. What neither of us knew was that this would be the last interview the controversial vice-president of exploration for Bre-X Minerals Ltd. would give before the whole Bre-X fable unravelled.

Bre-X had grown from a Calgary-based penny gold stock to a $6-billion company based on its claim to have discovered one of the world’s largest gold finds in the jungles of Busang, Borneo. The story was so compelling and well-known that I was frequently stopped in the street by people who recognized me eagerly asking whether I thought the estimates would continue to grow.

It was hard to imagine they could. On a conference call a few weeks earlier, Felderhof had famously suggested the find could be as much as 200 million ounces, with a value of $70-billion (U.S.), then the equivalent to the GDP of the Philippines. Regulators were looking into the claim.

Felderhof was born in Holland but grew up in Nova Scotia, and was an old-fashioned explorer with a major discovery to his credit. But the Bre-X phenomenon was increasingly looking too good to be true.

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