July 29, 2014 – Republic of Mining

The end of Cliffs in the Ring of Fire? – by Ian Ross (Northern Ontario Business – July 29, 2014)

July 29, 2014

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. Ian Ross is the editor of Northern Ontario Business ianross@nob.on.ca.

A New York hedge fund proclaims it’s won a bitter proxy fight with Cliffs Natural Resources to achieve majority control of the Ohio iron ore and coal miner’s board of directors. Casablanca Capital said it was successful in convincing Cliffs’ shareholders to elect all six of its nominees at the miner’s annual general meeting in Cleveland, July 29.

The final results are subject to independent inspection over the next three days. If Casablanca is right, it means Cliffs’ hold on its Ring of Fire chromite properties in the James Bay region is tenuous at best.

Casablanca, which acquired 5.2 per cent of Cliffs’ shares, wants to break off Cliffs’ international assets, including its Ring of Fire properties, from its core U.S. iron and coal divisions.

“We are grateful to our fellow Cliffs shareholders for their careful consideration of the issues and gratified that they have sent a resounding message of support for our efforts to drive meaningful change at Cliffs, bring true accountability to the company’s leadership, and restore shareholder value,” said Casablanca fund chairman Donald Drapkin in a statement.

UPDATE 2-Hedge fund triumphs in proxy battle with U.S.-based miner Cliffs – by Kim Palmer (Reuters U.K. – July 29, 2014)

July 29, 2014

http://uk.reuters.com/

(Rewrites throughout with details from meeting, analyst view, background)

(Reuters) – Casablanca Capital triumphed on Tuesday in its proxy battle with miner Cliffs Natural Resources Inc, preliminary estimates show, putting the hedge fund in a position to replace Cliffs’ chief executive and sell off underperforming assets.

Shareholders of Cleveland-based Cliffs voted onto the miner’s board all six nominees put forward by Casablanca, the New York-based fund said, citing estimates from its proxy solicitor. That means they will make up a majority of the 11-person board.

Cliffs CEO Gary Halverson said at the company’s well-attended annual meeting in Cleveland that because of the contested nature of the elections, the results would be announced in the next three business days.

Shares in Cliffs, a producer of iron ore and metallurgical coal, jumped as much as 10.4 percent to $18.33 on the New York Stock Exchange. The vote outcome “is a culmination of years of frustration on behalf of shareholders,” said Garrett Nelson, a mining research analyst at BB&T Capital Markets.

Casablanca began a proxy fight in March against Cliffs, of which it owns 5.2 percent, accusing the miner of destroying shareholder value through an ill-conceived expansion strategy.

NEWS RELEASE: CLIFFS NATURAL RESOURCES INC. ISSUES STATEMENT

July 29, 2014

CLEVELAND – July 29, 2014 – Cliffs Natural Resources Inc. (NYSE: CLF) today made the following statement following the Company’s Annual General Meeting:

“We look forward to receiving the final results of today’s vote, and the Board and management team remain deeply committed to continuing to create long-term value for all of our shareholders. We appreciate the support of the Cliffs shareholders who supported the Company’s slate and the hard work everyday by Cliffs’ more than 6,000 employees.”

The Company will await the preliminary report of the Inspector of Election, IVS Associates, Inc., before releasing any further statements about the vote. The Inspector has indicated that it expects to issue a preliminary tabulation of the vote results within approximately three business days, which Cliffs will publicly announce. Final results of the election will also be announced once they are certified by the Inspector of Election following the customary review and challenge period.

About Cliffs Natural Resources Inc.

Cliffs Natural Resources Inc. is an international mining and natural resources company. The Company is a major global iron ore producer and a significant producer of high-and low-volatile metallurgical coal. Cliffs’ strategy is to continually achieve greater scale and diversification in the mining industry through a focus on serving the world’s largest and fastest growing steel markets. Driven by the core values of social, environmental and capital stewardship, Cliffs associates across the globe endeavor to provide all stakeholders operating and financial transparency.

Changes afoot for aboriginal treaty talks and resource development – by Bill Curry and Kathryn Blaze Carlson (Globe and Mail – July 29, 2014)

July 29, 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.

OTTAWA — The Conservative government is launching more flexible options for aboriginal treaty talks after setbacks to its ambitious resource development plans.

The announcement signals Ottawa’s desire to give its stagnant British Columbia treaty process a boost by negotiating smaller, incremental treaties where possible and signing deals with aboriginal groups outside the formal treaty process.

It is also promising to improve its nation-wide approach to aboriginal consultation, which has been at the heart of a string of court defeats for the federal government as it attempts to speed up resource projects like mining and new pipelines, particularly in Western Canada.

Aboriginal Affairs Minister Bernard Valcourt made the announcement on Monday in Vancouver via a news release and was not available to answer questions.

The plans are in response to recommendations in a November, 2013, report from Douglas Eyford, who was appointed last year by Prime Minister Stephen Harper as Canada’s special federal representative on West Coast energy infrastructure.

Coal comfort: faster to start mine in Indonesia than here – by Andrew Fraser (The Australian – July 30, 2014)

July 29, 2014

http://www.theaustralian.com.au/

PETER Lynch can tell you exactly the difference between setting up a mine in Indonesia and Australia — the former takes four years; the latter somewhere between seven and 10. And the cost of producing coal from Indonesia is about two-thirds that from Australia.

Mr Lynch is in a position to know. A veteran mining figure who worked for MIM and other companies, he was the first to realise the potential of the Galilee Basin in central Queensland in 2006. He pegged out 13 exploration permits covering 250sq km. In 2010, Clive Palmer made him an offer he couldn’t refuse, paying $130 million for Waratah Coal and control of the project.

Now chief executive of mining company Cokal, Mr Lynch saw potential in Indonesia, and in early 2011 started digging exploratory holes in a remote part of Central Kalimantan. Three years later, he has all his key approvals in place and is finalising his financial backing, with the aim of starting production in September next year — a bit over four years from when he first eyed the area. By contrast, the earliest date for coal to come out of the Galilee Basin is 2017, despite the approvals process starting several years earlier.

Mr Lynch’s tale illustrates the concerns the Business Council of Australia and Hancock Prospecting chairman Gina Rinehart have raised this week about Australia losing its competitive edge because of high labour costs and red tape.

On Monday, Environment Minister Greg Hunt approved Adani’s proposed Carmichael mine in the Galilee Basin, but the Indian company still needs to get approval for the construction of a proposed railway line to Abbot Point.

PRESS RELEASE: Casablanca Receives Overwhelming Shareholder Support for Change at Cliffs Natural Resources

July 29, 2014

July 29, 2014, 12:31 p.m. EDT

All Six Nominees on Casablanca’s Majority Slate Elected to Cliffs Board of Directors According to Preliminary Voting Results

NEW YORK, Jul 29, 2014 (BUSINESS WIRE) — Casablanca Capital LP, (“Casablanca”) the beneficial owner of approximately 5.2% of Cliffs Natural Resources (“Cliffs”) shares, announced today that all six of Casablanca’s nominees have been elected to the Cliffs Board of Directors according to preliminary estimates by its proxy solicitor of the voting results at today’s Annual Meeting of Shareholders.

Donald Drapkin, Chairman of Casablanca, said, “We are grateful to our fellow Cliffs shareholders for their careful consideration of the issues and gratified that they have sent a resounding message of support for our efforts to drive meaningful change at Cliffs, bring true accountability to the Company’s leadership, and restore shareholder value.”

Lourenco Goncalves, one of the Casablanca nominees who was elected, said on behalf of all the newly-elected Casablanca nominees, “The conclusion of this proxy contest marks not an end but a beginning. We look forward to working collaboratively with the continuing members of Cliffs’ Board and the Company’s hardworking, dedicated and talented employees to set Cliffs on a course to improve performance and restore shareholder value. Cliffs has tremendous inherent value and we are confident there is much we can and will do to refocus Cliffs and steer it in a new strategic direction.”

In addition to Goncalves, the other Casablanca nominees newly-elected to the Board are Robert P. Fisher, Jr., Joseph Rutkowski, James Sawyer, Gabriel Stoliar, and Douglas Taylor.

NEWS RELEASE: Letter to the Shareholders of KWG Resources Inc.

July 29, 2014

July 29, 2014 12:12 ET

TORONTO, ONTARIO–(Marketwired – July 29, 2014) – KWG Resources Inc. (TSX VENTURE:KWG)(FRANKFURT:KW6)

Today the shareholders of Cliffs Natural Resources Inc (“Cliffs”) will elect at least four directors who are nominated by Casablanca Capital LP. We expect that this will usher in some change in how Cliffs will in future go about realizing on the value of its assets. This is therefore an opportune time to provide you with a status report on your company’s initiatives. In the past these initiatives have often, of necessity, been in response to the actions of Cliffs and of the government of Ontario.

Minerals are governed by provincial law in Canada. Like most other jurisdictions in the world, Ontario makes it a condition of a mineral lease that further processing of what is mined must be completed in Canada. When it was announced that Ontario was negotiating terms to finance the construction of a road for Cliffs to ship chromite ore from the Ring of Fire, we reminded the Ministry of Northern Development and Mines that the use of KWG’s claims for this purpose would need to comply with this “further processing in Canada” requirement of the law. The question of whether Cliffs may be granted an easement under the Public Lands Act over the KWG claims is still before the Courts.

No matter how that question is ultimately decided, it will not alter the law’s intent that our claims may be used to exploit minerals only if their further processing is completed in Canada. Letter To The Shareholders Of Kwg Resources Inc

In this regard, we are encouraged by the results of the ongoing testing of the direct reduction process that we acquired (the “New Production Method”) and are making application to patent.

Scotiabank named in silver price-fixing lawsuit – by Madhavi Acharya-Tom Yew (Toronto Star – July 29, 2014)

July 29, 2014

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.

Bank of Nova Scotia, Deutsche Bank and HSBC named in suit.

A U.S. investor has accused the Bank of Nova Scotia, Deutsche Bank and HSBC of engaging in an ongoing conspiracy to fix the price of silver.

Investor J. Scott Nicholson alleges that thousands of small investors around the world have been put at a disadvantage by the secretive way in which prices for the physical metal, as well as futures contracts, are set by the financial institutions.

The three firms have knowingly engaged in “an unlawful combination, agreement, and conspiracy” to “intentionally manipulate” the price of physical silver and silver derivatives, including futures contracts, according to the lawsuit.

“We intend to vigorously defend ourselves against this suit,” a spokesperson for Toronto-based Bank of Nova Scotia said in an email.

None of the allegations have been tested in court. The lawsuit, filed in the Southern District of New York on Friday, seeks to establish a class action that could have thousands of members, the court filing states.

Cliffs fights for its life against hedge fund – by John Myers (Duluth News Tribune – July 28, 2014)

July 29, 2014

http://www.duluthnewstribune.com/

The view from Cliffs Natural Resources’ Minnesota operations looks pretty good.

One of the state’s largest players in the taconite iron ore business, the company’s Northshore Mining, United Taconite and Hibbing Taconite plants are running near capacity with solid domestic markets and long-term contracts with U.S. steelmakers.

The company has more than 1,850 employees on the Iron Range with a payroll of $251 million.

There even was good news from Michigan’s Upper Peninsula this year when Cliffs announced its Empire taconite operations wouldn’t close after all, with a new contract for its ore keeping it running into 2017.

Even after weathering a cold spring and slow start to the shipping season, the company expects to produce about 22 million tons of taconite in the U.S. this year, up from 21 million tons last year. Northshore Mining is back to near full capacity after a temporary slowdown in 2013.

But on a global scale the view is less rosy. The Cleveland-based mining company is fighting for its life, with the decisive battle set for Tuesday. That’s when Cliffs will hold its annual shareholder meeting and election of corporate officers, and it’s when New York-based hedge fund Casablanca Capital will make its play to take over Cliffs.

Casablanca in January announced that it wanted to take control of Cliffs, saying the company was overextended overseas and was spending too much money on new projects.

Insight – Gold, diamonds feed C. African religious violence – by Daniel Flynn (Reuters India – July 29, 2014)

July 29, 2014

http://in.reuters.com/

NDASSIMA Central African Republic – (Reuters) – Three young rebels, their AK47s propped against wooden stools in the afternoon heat, guard the entrance to the giant Ndassima goldmine carved deep into a forested hilltop in Central African Republic.

Sat in a thatched shack at the edge of a muddy shantytown, the gunmen keep the peace – for a price – among hundreds of illegal miners who swarm over the steep sides of the glittering open pit, scratching out a living.

The mine, owned by Canada’s Axmin (AXM.V), was overrun by the mainly Muslim Seleka rebels more than year ago. It now forms part of an illicit economy driving sectarian conflict in one of Africa’s most unstable countries, despite the presence of thousands of French and African peacekeepers.

Seleka fighters – many from neighbouring Chad and Sudan – swept south to topple President Francois Bozize in March last year. Months of killing and looting provoked vicious reprisals by Christian militia, known as “anti-balaka”, that pushed the rebels back, splitting the landlocked country of 4.5 million people into a Muslim north and the Christian south.

“We control the mine. If there is a problem there, we intervene,” said Seleka’s local commander Colonel Oumar Garba, sipping tea outside a villa in Axmin’s abandoned compound. “People don’t want the French peacekeepers here because they know they’ll chase them away from the mine.”

Investors unclear on Barrick’s future direction amid CEO shakeup – by Rachelle Younglai (Globe and Mail – July 29, 2014)

July 29, 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.

On the eve of the first full meeting of Barrick Gold Corp.’s new board, investors are in the dark about the gold giant’s strategy.

Barrick’s new chairman John Thornton said he wants the miner, the world’s biggest gold producer, to be the “leading gold company” and a “leader” in copper. But what that means is unknown.

“I don’t think they have been clear, and I don’t think they have made up their minds yet,” said Michael Sprung, president of Sprung Investment Management, which has held Barrick shares for about five years.

The miner’s game plan has come under scrutiny after Mr. Thornton got rid of the company’s chief executive role. Instead, the company will have two co-presidents and the company’s chief financial officer will work closely with Mr. Thornton to develop strategy, he said. Barrick CEO Jamie Sokalsky will be leaving in September, just two years into his tenure.

The management shakeup will lead to further changes at Barrick, which is already in flux after a turbulent year. Directors who had served on the board with former chairman and founder Peter Munk since the beginning faced pressure to leave, and merger talks with Colorado-based gold company Newmont Mining Corp. blew up, with each side blaming the other for the collapse.

Goldman Sees Nickel Rising With Palladium to Beat Soy – by Glenys Sim (Bloomberg News – July 29, 2014)

July 29, 2014

http://www.bloomberg.com/

Nickel and palladium are set to outperform iron ore and soybeans as supply outlooks for commodities diverge amid a tentative acceleration in global economic growth, according to Goldman Sachs Group Inc.

The bank kept its 12-month recommendation for commodities at neutral, analysts including Jeffrey Currie wrote in a report dated yesterday. They expect the total return for the Standard & Poor’s GSCI Enhanced Commodity Index to be 0.1 percent in 12 months helped by positive roll yields.

Citigroup Inc. said last month that interest is returning to the asset class as Societe Generale SA called commodities a “really mixed bag” across the sectors. Raw materials are already trading independently, with a ban on ore exports from Indonesia spurring a rally in nickel, while expectations for a deepening global glut have sent iron ore into a bear market.

“While cyclical recovery tends to see rising commodity demand, prices will likely largely be determined by more structural supply factors,” the Goldman Sachs analysts wrote. “Accordingly, not all boats are expected rise with the tide created by continued improvement in global macroeconomic data.”

Commodities as measured by the enhanced index added 2.4 percent this year as global equities increased 5.6 percent and the Bloomberg U.S. Treasury Bond Index rose 3.5 percent.

U.K. opens more than half of country to drilling, goes ‘all out for shale’ – by Eric Reguly (Globe and Mail – July 29, 2014)

July 29, 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.

David Cameron’s long and risky campaign to unleash a shale gas revolution in Britain finally met with success on Monday, when government ministers opened up more than half the country to drilling.

The prime minister and his top deputies had been promoting shale gas for years, declaring that his government is “going all out for shale” as a way to reverse the country’s dependency on imported fuels, create jobs and bring down, or a least slow the relentless increase, of energy prices.

Lately, the crisis in Ukraine added a geo-political boost to their effort. Russia is the top supplier of gas to Europe and much of that gas travels through Ukrainian pipelines.

But the drilling approval has come with severe restrictions that deprived Mr. Cameron of total victory. Drilling in national parks and “areas of outstanding natural beauty” will only be allowed in “exceptional circumstances,” government guidelines dictated. Those circumstances were not immediately clear.

A spokeswoman for the department of communities and local government, publisher of the new drilling guidelines, said “defining exceptional circumstances is not an easy thing to do. It all depends on local communities and local conditions.”

Shrinking mining professional ranks may impact investors – HSBC – by Dorothy Kosich (Mineweb.com – July 29, 2014)

July 29, 2014

http://www.mineweb.com/

The dwindling ranks of geosciences professionals has impaired mining companies’ ability to quickly respond to surges in precious metals prices.

RENO (MINEWEB) – “A well-established feature of the precious metals market is the apparent inability for producers to raise production levels when demand and prices rise,” said HSBC analysts James Steel and Howard Wen.

“The paucity of trained professionals’ expertise helps explain—along with other factors—the weak supply response by producers to the surge in precious metals prices in 200-2012,” observed HSBC. “This is important to investors because it arguably contributed to the height and longevity of the precious metals rally; it also implies that future rallies are unlikely to be cut short by a rapid increase in mine output.”

An important component in our relatively positive long-term outlook for precious metals generally is the fact that demand exceeds supply in all four metals,” said the analysts, who suggest that lack of professional skilled and technical labor may be a key factor in the ability of mining companies to meet demand.

“If precious metals rallies are not be reversed by rapid increases in mine output, in part due to shortages of professional expertise, then prices may have to rise sufficiently to mobilize aboveground stocks, or deter demand,” they advised.

Obama Seeks Closer Africa Ties as China Is First Choice – by Mike Cohen and David J. Lynch (Bloomberg News – July 29, 2014)

July 29, 2014

http://www.bloomberg.com/

When Uganda sought bids last month for an $8 billion contract to expand the East African nation’s rail network, it only invited Chinese companies to apply.

That condition, agreed to by the Ugandan and Chinese governments, illustrates the hurdles President Barack Obama must overcome as the U.S. tries to challenge China’s status as Africa’s No. 1 investor and trading partner. China’s trade with the continent exceeded $200 billion last year, more than double that of the U.S, which it overtook five years ago.

Obama will step up his efforts to forge closer ties with Africa when he hosts more than 40 of the continent’s leaders at a summit in Washington next week. While the World Bank projects African growth of 4.7 percent this year, the U.S. is looking beyond securing deals and access to a consumer market of 1 billion people to promoting democratic principles and countering Islamist-inspired security threats from Nigeria to Kenya.

“China has got a massive head start,” Daniel Silke, director of Cape Town-based Political Futures Consultancy, said in a July 23 phone interview. “From both a diplomatic and economic point of view, China has made all the running over the last few years so there is quite a catch-up for the U.S.”

China has held five conferences with ministers and leaders across Africa since 2000 as it fosters ties with a continent that provides both resources and a market for manufactured goods.