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Day: July 30, 2014

Getting it right in the ring may take decades – by Rick Millette (Sudbury Star – July 30, 2014)

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Rick Millette is from the Northern Policy Institute.

Like the children who anticipate the big day coming, Northern Ontarians are finding it painfully difficult to stop themselves from diving under the tree and ripping open the prize that awaits. But wait they must.

“We can and we will create a much better, a much stronger, Ontario and Canada through the Ring of Fire,” says Northern Development and Mines Minister Michael Gravelle. “and we will do it right.”

The federal minister responsible for the Ring of Fire, Greg Rickford, said much the same when telling Canadian Press that “this is a legacy resource project and we want to get it right for the multi generations of Northern Ontarians that can benefit from this.”

It’s hard to argue with the rationale of taking the time and “getting it right.” However, there’s another determining factor at play. That factor is the reality of how mining projects usually unfold from discovery to development.

About 150 kilometers to the east of the Ring of Fire, there is the DeBeers Victor diamond mine. Access is only possible by winter road or aircraft. DeBeers had to build an ore processing mill, on-site accommodations and operational buildings, as well as a 90-kilometer hydro line and an airstrip to start up. Before that, there were time-eaters like environmental studies, agreements with First Nation Communities, training plans and hiring. Not to be forgotten is the actual digging to get at the diamonds, via a large open pit operation.

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Platinum future: Provide dignity, prevent strikes – by Greg Nicolson (Daily Maverick South Africa – July 30, 2014)

http://www.dailymaverick.co.za/

The platinum strikes may seem a distant memory to those not working in the industry. While the companies figure out how they’re going to cover the losses and the high increases, work is underway to address some of the underlying causes of the unrest, such as housing. Little has been done, but this could be the year that changes it all.

Thumeka Maswanoqana stood to tell her story of Wonderkop, Marikana.

“There are no proper structures or buildings. There is no water, no electricity,” the Sikala Sonke Women’s Organisation member told the Marikana Commission. “People use pit toilets. It is very difficult. When it’s raining – as we’re in shacks – when it’s raining the workers will stand on top of their beds … These workers work under difficult circumstances, but they are staying in very unbearable places.

“Their lives was supposed to be easy [but] even the people who died during the strike asking for more pay don’t have houses,” said Maswanoqana, speaking in April at Wits University. “We are living under difficult circumstances. Right now during this strike the poverty in Marikana is very bad.”

After this year’s five-month strike at Anglo American Platinum (Amplats), Lonmin, and Impala Platinum (Implats), it was clear discontent among mineworkers went beyond just wage issues.

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Teck still on solid ground, despite coal price slump – by Nelson Bennett (Business Vancouver – July 29, 2014)

http://www.biv.com/

BC’s largest mining company remains on solid financial ground, despite its profits dropping 63% in the first half of 2014 and a commitment to spend $850 million this year on a new oilsands project in Alberta.

In a second-half earnings call, Teck Resources Ltd. (TSX:TCK.B) reported its profits dropped from $197 million in the second quarter of 2013 to $72 million in this year’s second quarter.

That decline was due largely to a global glut of metallurgical (“met”) coal, which accounts for about half of Teck’s business. The company’s gross profits were down from $871 million in Q2 2013 to $633 million to date.

But unlike American coal miner Walter Energy Inc. (TSX:WLT), Teck has not had to resort to closing any of its B.C. mines, although it has officially mothballed the long-planned restart of the Quintette mine in Tumbler Ridge.

Teck estimates it could take several months to whittle down the current oversupply of steelmaking coal. Teck’s coal sales in Q2 were up by 500,000 tonnes, but prices were down 23% to US$122 per tonne. The company expects to ship 26 million to 27 million tonnes of coal in 2014, and has contracts to sell at US$120 per tonne for the higher-grade coal.

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High costs hurting mine investment, says Gina Rinehart – by Clive Mathieson (The Australian – July 29, 2014)

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

MINING magnate Gina Rinehart says the high cost of doing business in Australia is driving some multinational companies to pursue overseas projects that have the potential to further damage the country’s export revenue.

Mrs Rinehart, the chairwoman of ­the privately owned Hancock Prospecting and the nation’s richest person, lamented the decision by some companies to invest in lower-cost offshore projects that could drive down commodity ­prices and undercut Australian projects. “Sadly, too many multinational companies, even Australian companies, are focusing and preferring to invest in overseas countries with lower costs,” she told The Australian.

“For instance, Rio Tinto, which has been in Australia for decades, and made most of its revenue from Australia, is now arranging multi-billions of dollars of investment for a major resource project with substantial infrastructure in ­Guinea in Africa.

“When that’s operating, it will bring billions of tonnes of ore on to the market to compete against Australia, and push down commodity prices. Too few seem to recognise the impact this will have when we are competing with lower-cost countries and how it will hurt Australia for decades.”

Mrs Rinehart said Rio Tinto, Hancock’s partner in the giant Hope Downs iron ore project in Western Australia, should not be singled out, saying the nation must do more “to lower its costs and compete for investment”.

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Ontario First Nations Prepared To Lay Down Their Lives To Protect Lands: Chiefs – by Maria Babbage (The Canadian Press/Huffington Post – July 29, 2014)

http://www.huffingtonpost.ca/

TORONTO – Aboriginal people in Ontario are prepared to lay down their lives to protect their traditional lands from any unwanted development, a group of First Nations chiefs said Tuesday.

Five aboriginal chiefs served notice on the Ontario and federal governments, developers and the public that they’ll assert their treaty rights over their traditional territory and ancestral lands.

That includes the rights to natural resources — such as fish, trees, mines and water— deriving benefit from those resources and the conditions under which other groups may access or use them, which must be consistent with their traditional laws, said Ontario Regional Chief Stan Beardy.

“All those seeking to access or use First Nations lands and resources have, at a minimum, a duty to engage, enquire and consult with First Nations with the standards of free, prior and informed consent,” he said.

“We will take appropriate steps to enforce these assertions.”  Tuesday’s declaration follows a Supreme Court of Canada ruling in late June which awarded 1,700 square kilometres of territory to British Columbia’s Tsilhqot’in First Nation, providing long-awaited clarification on how to prove aboriginal title.

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The creeping hyperbole of Iron Range mining politics – by Aaron Brown (Minneapolis StarTribune – July 29, 2014)

http://www.startribune.com/

Last week I was called into town to do another “Iron Range political pundit” interview with Northland’s NewsCenter’s Nick Minock. The story was about something presumptive Minnesota GOP U.S. Senate nominee Mike McFadden had said about nonferrous mining projects in Northern Minnesota. McFadden had suggested that projects like PolyMet and Twin Metals, which have been mired in environmental review, have the potential to have the same economic impact the Bakken oil fields had on western North Dakota. I was asked, is that true?

In short, no. In long form, hell no. The sheer amount of money and people working to extract oil in the Dakotas will not come close to being matched by Northern Minnesota’s PolyMet or Twin Metals, even if these projects are permitted, financed and open to rousing success — none of which is assured for reasons outside the control of a solitary U.S. Senator. It was a piece of political hyperbole, one which McFadden all but copped to later.

I’ve written before that the controversial “mining issue” will flare up throughout Election 2014, with particular flourish in the MN-8 Congressional race, the U.S. Senate race and governor’s race. Each of these races have indeed featured the same dynamic: Republicans who support new mining arguing that Democrats who support new mining don’t support new mining enough. I’ll call this the Mesabi Daily News Rule, which states: Any deference to the concerns of project opponents, even if patronizing and entirely rhetorical, is equivalent to outright opposition.

The MDN rule essentially allows this GOP gambit, which is based on the notion that Iron Range voters who support mining and distrust the Twin Cities in a general sort of way will flock to Republican candidates.

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Water scarcity and rising energy costs threaten mining industry – by James Wilson (Financial Times – July 27, 2014)

http://www.ft.com/intl/companies/mining

Access to water has become one of the most significant business risks for miners, says a report that also highlights the threat to the sector from rising energy costs in some resource-rich areas.

EY, the consultancy, said affordable water and energy should now be viewed as one of the 10 biggest problems for miners. The threat was particularly acute in South America and Africa, it said. These continents are significant in the global supply of many metals, particularly copper.

Spending by mining companies on water infrastructure amounted to almost $12bn last year, compared with $3.4bn in 2009, EY said. BHP Billiton and Rio Tinto, the two largest in the world by market capitalisation, are investing $3bn to build a desalination plant at Escondida, the Chilean copper mine that is the world’s largest by output.

The report underscores how water resources are becoming an increasingly important concern across business. Peter Brabeck, chairman of Nestlé, told the Financial Times in a recent interview that water scarcity presented a more urgent challenge than climate change.

EY said large companies such as Rio, BHP and Anglo American had the expertise and financial strength to build complex water procurement systems for large projects and were therefore “likely to emerge as the partners of choice in water-scarce countries seeking to exploit their natural resources”.

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Quebec lawyers optimistic about revived Plan Nord – by Julius Melnitzer (National Post – July 30, 2014)

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

Quebec’s mining lawyers are cautiously optimistic about the impact of the Liberal government’s revival of the Plan Nord mining project.

“What lies ahead for Quebec’s mining industry is better than what the future looked like during the last two years when there was no clear signal from the PQ that the mining industry was welcome here, ” said Jean-Philippe Buteau in Norton Rose Fulbright Canada LLP’s Quebec City office. “That’s not to say we’re just a few weeks or months from being back to the good old days, but now there’s a majority government that has both hands on the steering wheel.”

Indeed, the stars seem to be lining up. On July 8, Stornoway Diamond Corp. closed a $946-million comprehensive funding package for the construction of the company’s Renard Diamond Project in north-central Quebec.

“The government assisted Stornoway in building the access road to the project and was instrumental in obtaining financing,” said Michel Brunet in Dentons Canada LLP’s Montreal office. Significant support from the new Liberal government, then, was instrumental in the deal’s culmination.

“Stornoway is a great signal that Quebec will stand beside the mining companies if their business plan makes good sense and they are willing to play by the rules,” Mr. Buteau said.

About one month earlier, Agnico Eagle Mines Ltd. and Yamana Gold Inc. completed their acquisition of Osisko Mining Corp. The new owners will take over operation of the Canadian Malarctic gold mine located in the Abitibi-Témiscamingue region about 550 kilometres northwest of Montreal.

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The Brics bank is a glimpse of the future – by David Pilling (Financial Times – July 30, 2014)

 

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

If the postwar order is being upended, the right response is ‘hear, hear’

Thirteen years ago, Brics was a marketing ploy dreamt up by Jim O’Neill, then chief economist at Goldman Sachs. Now it is a bank. Next thing you know, it will have its own line of designer handbags.

This month in Fortaleza, the five Brics nations – Brazil, Russia, India, China and South Africa – agreed to establish a development bank. They also set up a $100bn swap line, known formally as a contingent reserve arrangement, a deal that gives each country’s central bank access to emergency supplies of foreign currency. To borrow a phrase from Anton Siluanov, Russia’s finance minister, the five countries are attempting to conjure a mini-World Bank and a mini- International Monetary Fund.

The Brics’ plan is good for the world, although you would not know it from the sniffy reaction in the west. There have been two default positions. One is to scoff at the very idea of five such disparate nations organising anything coherent or staying the course. The other is to worry that the world order reflected in the two US-led institutions set up at the Bretton Woods conference of 1944 is about to crumble.

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UPDATE 3-Rio Tinto pulls plug on ill-fated Mozambique coal venture – by Silvia Antonioli and Jim Regan (Reuters India – July 30, 2014)

http://in.reuters.com/

LONDON, July 30 (Reuters) – Rio Tinto has agreed to sell coal assets it bought through a $4 billion acquisition of Riversdale in 2011 for just $50 million to an Indian joint venture, ending its ill-fated venture in Mozambique’s coal sector.

The sale of Rio Tinto Coal Mozambique to International Coal Ventures Private Limited (ICVL), includes the Benga coal mine and other projects in Tete province, assets that had a value of $71 million as of March 31 in Rio’s books.

In 2013, Rio Tinto sacked its chief executive and other executives directly involved in the acquisition of Riversdale and wrote off about $3.5 billion of the purchase price, partly owing to a failure to secure a permit to move coal by barge down Mozambique’s Zambezi River.

Rio Tinto is only retaining one of the assets it got from the Riversdale acquisition: the Zululand Anthracite Colliery, a small coal mine in South Africa.

“It has clearly been a horrible experience for Rio Tinto,” said Liberum analyst Richard Knights, saying that the sale price was lower than he expected and implied a further writedown.

“The assets clearly weren’t as good as they thought but in order for them to be written down that aggressively they must have seen very little scope in the foreseeable future for the profitable export of coal from Mozambique.”

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A year after brutal losses, Canada’s gold miners expected to see return to stable ground – by Peter Koven (National Post – July 30, 2014)

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

One year ago, the gold mining sector reported its most appalling quarterly earnings ever. A steep decline in the price of gold caught the industry off-guard in the spring of 2013, prompting some miners to report record writedowns and net losses in the second quarter. Barrick Gold Corp. led the way with an absurd quarterly loss of US$8.56-billion, the second biggest in Canadian history.

The senior gold miners are now set to report their latest Q2 results over the next two days. But thanks in part to the measures they took a year ago, their earnings should be a lot less noisy and a lot less troubled.

“I’m not looking for any big dislocations in this quarter,” Mackie Research Capital Barry Allan said. “Not a lot of ‘Oh my God, where did that come from?’”

When gold plunged 26% in April and May of 2013, the whole industry shifted focus. Instead of chasing production growth (as they had for many years while prices were rising), miners turned their attention to cost reductions and capital spending cuts.

At the time, the cost reduction announcements were overshadowed by some of the more ridiculous writedowns. But those moves are bearing fruit today.

The senior gold miners reported significant year-over-year reductions in all-in sustaining costs in the first quarter of 2014.

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An embargo on Russia’s Norilsk Nickel would hurt West -French rival – by Gus Trompiz (Reuters India – July 30, 2014)

http://in.reuters.com/

PARIS, July 30 (Reuters) – An embargo against Norilsk Nickel as part of Western sanctions against Russia would hurt nickel users in Europe and the United States rather than Norilsk itself, the head of French mining group Eramet said.

Norilsk, the world’s largest producer of the stainless steel ingredient, has not been targeted so far by western measures aimed at punishing Russia for its support of pro-Moscow rebels in neighbouring Ukraine.

“Nobody expects sanctions against Russia and Norilsk would affect Norilsk’s production since it would sell to China if it couldn’t sell elsewhere,” Eramet Chief Executive Patrick Buffet said during a presentation of Eramet’s first-half results on Wednesday.

“It’s unlikely an embargo by Europe would materialise, because it would be shooting itself in the foot, since Norilsk could ship its production to Asia, creating a shortage in Europe and oversupply in Asia. The consequence would be a jump in physical premiums in Europe and a discount in Asia,” he added.

The most likely scenario for western restrictions against Norilsk would be a U.S.-only embargo, which would push up nickel premiums there but not hit the world market, Buffet added. Nickel prices have already rallied this year after a ban by Indonesia on nickel ore exports curbed supply to China.

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Aboriginal court decisions shouldn’t be dealbreakers – by Drew Hasselback (National Post – July 30, 2014)

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

You’ve heard varying degrees of panic over the Supreme Court of Canada’s rulings in Tsilhqot’in and Grassy Narrows.

These are clearly important aboriginal rights decisions, and each will have a profound impact on Canada’s natural resource industry. Yet I’m not sure either case justifies any fear.

The cases clarify some technical aspects of aboriginal law. And, well, that’s it. They’re not legal blocades that will halt all development in this country.

Litigation is a zero-sum game. If a case makes it all the way to judgment, you have a winner and you have a loser. Now, what is it that the winner gets? A bill from the lawyers, and a bunch of legal rights that too often require a fresh round of litigation — i.e., even more legal bills — to enforce. Just because you can win a legal case doesn’t mean you instantly get what you really want.

A lot of commentary around Tsilhqot’in and the Grassy Narrows decisions treats them like winner-takes-all victories. But that’s not how it works. If you win some rights in native litigation, you still have to speak with the other side about how you will use those rights. Indeed, a lot of lawyers who practice aboriginal law actually spend their time negotiating so-called impact and benefit agreements. These are business deals that ensures a local First Nations participates in the profits from a project on or near their lands.

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Timmins’s Kidd Operations earn reclamation award – by Ron Grech (Timmins Daily Press – July 30, 2014)

The Daily Press is the city of Timmins broadsheet newspaper.

TIMMINS – As David Yaschyshyn leads the way towards the former jarosite pond site, a cool mild breeze carries a waft of clover from the field up ahead.

Yaschyshyn, the environmental manager at Kidd Operations (Glencore), points to the ground, noting the fresh moose tracks along the trail.

“Since the jarosite pond has been reclaimed and re-vegetated, we have seen hundreds of geese. We’ve seen bears and their cubs and even moose wandering across. So it really has been returned to nature. It’s now an open meadow ecosystem.”

Yaschyshyn isn’t exaggerating. The 50-hectare area that was once a dumping pond for a liquid byproduct of the zinc refinery process is now covered waist-high in wildflowers and native grasses.

The jarosite (iron sulphate mud) pond was built in 1971 and was used as part of the smelting process from 1972 until the refinery at the metallurgical site closed in 2010.

After that there was no use for the storage pond, so it was dewatered, dried, covered with layers of stones, gravel and dirt, before being sealed with a specially designed 60-millimetre thick plastic liner.

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Mining deals defy the doubters – by Peter Koven (National Post – July 30, 2014)

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

Mining M&A activity has defied the doubters and returned to prominence in 2014, with several big deals being struck and more in the pipeline.

After an extremely slow 2013, the expectations for mergers and acquisitions activity were muted going into this year. Metal prices remained low, junior and intermediate companies did not want to sell while their stock prices were depressed, and many seniors were still trying to recover from bad acquisitions in the last cycle. They were effectively in the investor “penalty box.”

Regardless, the takeovers have come. There have been 41 Canadian mining deals so far this year worth a total of $7.1-billion, according to Financial Post Data. By comparison, there were just $9.3-billion of deals in all of 2013.

Most notably, there has been an impressive number of large and medium-sized takeovers, including those of Osisko Mining Corp. ($3.7-billion), Augusta Resource Corp. ($555-million), Lumina Copper Corp. ($470-million), and Sulliden Gold Corp. Ltd. ($300-million). And of course, Barrick Gold Corp. and Newmont Mining Corp. were negotiating a potential US$13-billion tie-up until talks collapsed in April.

The pace and size of deals is still far below peak years like 2010, when there were 191 transactions worth almost $40-billion. But the action is very encouraging in a sector that needs more consolidation.

Kevin Thomson, a partner at Davies Ward Phillips & Vineberg LLP who works on many mining deals, said the hostile bid for Osisko back in January was the catalyst that got people looking at M&A again.

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