August 18, 2014 – Republic of Mining

COLUMN-BHP Billiton demerger shows how good a deal Billiton got – by Clyde Russell (Reuters U.K. – August 18, 2014)

August 18, 2014

http://uk.reuters.com/

Clyde Russell is a Reuters columnist. The views expressed are his own.

LAUNCESTON, Australia, Aug 18 (Reuters) – BHP Billiton’s plan to demerge its unwanted aluminium, nickel and manganese assets underscores just what a fantastic deal shareholders in the old Billiton got when the two joined in 2001.

When Australia-based BHP joined forces with the London-listed, but largely South African, Billiton, a diversified natural resources giant was created.

At the time it was largely viewed as a deal that favoured Billiton shareholders. BHP shareholders got about 58 percent of the merged entity, while Billiton’s got 42 percent, meaning that BHP paid about a 20 percent premium to Billiton shareholders, according to a March 19, 2001 report in the Wall Street Journal.

With the Aug. 15 news that BHP Billiton’s board favours a demerger, the 2001 deal comes full circle. While it’s unlikely to be an exact match, the bulk of assets proposed for the new spin-off company will be those that Billiton brought into the 2001 merger.

Billiton’s main assets in the 2001 merger were the Hillside and Bayside aluminium smelters in Richards Bay on South Africa’s east coast, the Mozal smelter in neighbouring Mozambique, and energy coal mines in South Africa.

In focus: Pascua Lama remains in legal limbo – by Fermín Koop (Buenos Aires Herald – August 18, 2014)

August 18, 2014

http://www.buenosairesherald.com/

Barrick says project has slowed due to the company’s debts, lower gold prices

With more than US$5 million spent so far in what has long been described as one of the first bi-national mining projects in the world, Barrick Gold continues with its foot firmly on the brakes in Pascua Lama hoping to resolve its legal limbo in Chile as soon as possible while it seeks out new investors to join the project.

Even as Barrick likes to tout the potential benefit of the project for both Chile and Argentina, environmental groups continue to call for the cancellation of the mine’s environmental permits due to the potential risks the project could have on the area’s rivers and glaciers, which they say have already been affected.

“The project has not been abandoned, we temporarily decreased the pace of construction. It was impossible to keep working at a quick pace considering the company registered a US$10.37 billion loss last year and the price of gold dropped a lot,” a Barrick official in Buenos Aires told the Herald. “Plus, the legal issues in Chile led to the suspension of the construction there.”

Located in the Andes Mountains on the border between Argentina and Chile, Pascua Lama is an open pit mining project of gold, silver, copper and other minerals. It contains estimated deposits of 18 million ounces of gold and 676 million ounces of silver, with 75 percent of the deposits in Chile and 25 percent in Argentina.

Mount Polley inquiry must be independent – by Stephen Hume (Vancouver Sun – August 18, 2014)

August 18, 2014

http://www.vancouversun.com/index.html

Dam collapse: Government was involved in inspecting structure, so a true arms’-length investigation essential

The engineering firm that designed the Mount Polley tailings pond containment system that collapsed on Aug. 4 also designed a tailings dam that failed catastrophically in South America on Aug. 19, 1995.

Knight Piésold designed the tailings containment facility for the Canadian-owned Omai gold mine in Guyana. Before the accident, it had handed off operational responsibility to the mining company, which then hired another engineering consultant, the Canadian firm Golder Associates.

The Omai tailings dam collapse spilled an estimated 2.9 million cubic metres of toxic waste into the Essequibo River, the country’s biggest and most important watershed. (Some estimates run higher.) Guyana’s President Cheddi Jagan, whose government held a five per cent share of the mining venture — it was the poor country’s largest private sector employer — and had been championing its economic benefits, called it “the country’s worst environmental disaster.”

A subsequent inquiry found no criminal liability and a civil class action suit was later dismissed. It’s worth noting, perhaps, that by comparison the Mount Polley tailings dam failure, which B.C.’s Mines Minister Bill Bennett has equated with a simple natural landslide, spilled 14.5 million cubic metres — about five times as much contaminated waste as at Omai — into the Fraser River system, B.C’s biggest and most economically important watershed.

UPDATE 1-Rio Tinto to review stake in closed Papua New Guinea copper mine – by Sonali Paul (Reuters India – August 18, 2014)

August 18, 2014

http://in.reuters.com/

MELBOURNE, Aug 18 (Reuters) – Rio Tinto is set to decide on its stake in a long-dormant copper mine in Papua New Guinea’s Bougainville after the passage of a new mining law on the island, with the company possibly pulling out of the project after a quarter of a century.

The interim mining law converts Bougainville Copper Ltd’s mining lease into an exploration lease. That can be converted to a mining lease if approved by the autonomous province’s government, which now controls resources on the island.

“In light of recent developments in Papua New Guinea, including the new mining legislation passed earlier this month by the Autonomous Bougainville Government (ABG), Rio Tinto has decided now is an appropriate time to review all options for its 53.83 per cent stake in Bougainville Copper Limited (BCL),” the company said on Monday.

Rio Tinto declined to comment on what was the most likely outcome of its review or how soon a decision would be made. Selling its stake would be an option.

A secessionist rebellion on Bougainville in 1989 stopped mining at BCL’s Panguna mine. The mine produced some 3 million tonnes of copper and 9.3 million ounces of gold over 17 years.

Salt at the source: A day in a Lake Huron mine – by Amy Pataki (Toronto Star – August 16, 2014)

August 18, 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.

We visited the world’s largest salt mine, following the mineral from the tunnels under Lake Huron to our dinner tables and driveways.

GODERICH—Here’s a funny thing about road salt: In its rawest form, it is as slippery as ice. They know this down in the world’s largest operating salt mine, a four-hour drive from Toronto in the pretty town of Goderich.

The mine is 533 metres beneath the surface of the Earth, almost as deep as the CN Tower is high, and tunnels 7 kilometres underneath Lake Huron. It’s owned by Sifto Canada. Visitors are rare.

It’s a strangely beautiful environment, a crystal catacomb of glittering walls and surprisingly sweet air. Salt is everywhere, as thick pillars holding up the 20-metre ceiling and as floating particles that coat the skin and lips.
Salt is also thick underfoot. The exposed seam is rink slick. Miners lay down crushed salt for traction.

“We are standing on product,” says operations manager Mark Rowe. “It should be in a bag, and we’ll get there.”

Bagged or bulk, salt makes our winter roads safe and our summer barbecues tasty. The Goderich mine and its sister evaporation plant (where brine is turned into solid sodium chloride) meet age-old needs with modern technology. Here’s how the grains travel from the ground to your shaker or driveway.

China faces buyer’s remorse in Canada’s oil patch – by Jeffrey Jones (Globe and Mail – August 18, 2014)

August 18, 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.

CALGARY — Chinese companies have shelled out more than $30-billion in Canada’s energy industry, but many of those investments have been hit with operational problems, delays and weak returns, leading to growing impatience in some quarters in China.

PetroChina Co. Ltd., Sinopec, CNOOC Ltd., China Investment Corp. and other state-owned enterprises made a raft of big bets on oil sands projects, shale developments and domestic companies since 2005 and many have yet to pay off.

There is “absolutely” some buyer’s remorse stemming from many of China’s big-ticket acquisitions, said Samir Kayande, vice-president of energy research at ITG Investment Research, who has done intensive studies of some of the deals.

Some problems were the result of purchases made during a rush on assets across the industry, when competition from both domestic and foreign buyers was brisk, Mr. Kayande said. Eventually, assets in the best geological regions are likely to pay off, and those further from the earliest developments will lag in performance, he said.

Officials with the Chinese companies, and Canadians familiar with their thinking, say it is far too early to deem the buying spree, in a notoriously difficult industry, a bust.

When coal was king: Drumheller’s Atlas coal mine takes visitors back in time – by Karan Smith (Canadian Geolgraphic Travel – Summer 2014)

August 18, 2014

http://travelclub.canadiangeographic.ca/

TWO. ONE.” CLICK. We all turn off our headlamps. And it’s dark in here. Really dark. I reach for my daughter’s hand. Above our heads is 12 metres of earth; ahead of us, the mouth of the mine. We’re walking up the angled ramp of the underground gantry in the Atlas coal mine. Alongside us is the wide rubberized canvas belt that once carried the chunks of coal shovelled out of the mine, in East Coulee, Alta., to homes across Canada.

As we click our lights back on, our guide, Chelsea Saltys, an area local and engineering student, tells the story of a young miner named Eric Houghton, who slipped one rainy day on the wet links between the coal cars. He fell underneath the moving train and was severely hurt: broken hip and leg, punctured lung, crushed ribs. After a shot of morphine and a cigarette, he made it to the hospital, then spent months in traction. When he got out of the hospital, he got a job at the Banff Springs Hotel as a night watchman. Physiotherapy was climbing the stairs at the grand resort. But the black gold called him back and he returned for his old job. “It goes to show you what these men were made of,” says Saltys.

THERE’S A KIND OF DESOLATE BEAUTY that comes with abandoned towns. Driving along the hoodoo-lined highway to the Atlas coal mine, the eight-storey wooden tipple, once used to load coal into railway cars, stands out as a landmark. It’s the last wooden tipple in Canada and a national historic site.

(You might have seen it on last summer’s Amazing Race Canada, where contestants competed to load a two-tonne coal car.) On the site, rusting trucks from the 1940s are permanently parked. A narrow gauge track runs in front, evidence of the railway’s role here.

Mr. Harper, Tear down this wall! – by Stephen Stewart (Mining Markets – August 15, 2014)

August 18, 2014

http://www.miningmarkets.ca/

Stephen Stewart is a managing partner of the natural resource private equity firm Minvest Partners in Toronto.

Canada’s mining sector needs clear, consistent rules to thrive

Mining has been an integral part of Canada’s social fabric for well over a century and accordingly we have cultivated an abundance of talented geologists, engineers, technicians and financiers who give us a tremendous competitive advantage. Yet many of these professionals sit by idly, frustrated with what amounts to an inability to broaden Canada’s mineral wealth, while other nations position their natural resources to prosper in a globalized economy. Our abundance of oil remains thwarted from transport to any one of our three oceans, and world class orebodies lay dormant as disorder surrounds their required infrastructure.

While Canada’s natural resource industry needs to look inwards in order to analyze and exit its current depressed state, the rulemakers — ie. the federal and provincial governments, as well as any number of regulatory bodies — need to work towards a regulatory system that is meant to safeguard without injuring those it seeks to protect.

Understanding risk is fundamental to investment in natural resource projects so the investor, when making capital allocation decisions, can quantify the risks versus rewards. When projects operate within a congested and opaque regulatory environment, investors balk and follow the path of least resistance away from the unknown. The groundswell of politicized agendas, which layers on increased regulation, have created uncertainty, which delays the advancement of countless resource projects and their related infrastructure.

UPDATE 5-BHP Billiton set to spin off unwanted assets – by Sonali Paul and Silvia Antonioli (Reuters U.K. – August 15, 2014)

August 18, 2014

http://uk.reuters.com/

MELBOURNE/LONDON, Aug 15 (Reuters) – Diversified mining company BHP Billiton declared its preference for a demerger of its aluminium, manganese and nickel assets on Friday, setting the stage for the formation of a separate business that could be worth at least $12 billion.

BHP said its board was considering a spin-off at meetings ahead of its annual results announcement next week. An Australian newspaper said those plans were well advanced and would include the Nickel West business that the world’s biggest miner has been trying to sell.

“A demerger of a selection of assets is our preferred option,” the company, which has a market capitalisation of $185 billion, said in a statement to the Australian stock exchange. BHP has long aimed to sell or spin off its manganese, aluminium and nickel assets, which contribute little to its earnings. Simplifying the company would “generate stronger growth in cash flow and a superior return on investment”, it said on Friday.

Some of the largest shareholders in BHP welcomed the announcement. “It’s good to see BHP taking the lead in the sector on this. It reassures you as a shareholder. It makes me more willing to have it as a significant bet within my fund,” said Christopher Moore, portfolio manager of Fidelity Global Industrials Fund.

Oilsands mogul Murray Edwards to help fund Mount Polley mine spill cleanup – by Christopher Donville and Andy Hoffman, (Bloomberg News – August 15, 2014)

August 18, 2014

http://www.vancouversun.com/index.html

Oilsands mogul Murray Edwards is backing a $100 million bond sale by Imperial Metals Corp. that will help fund the cleanup of a B.C. mine-waste spill, the worst accident of its kind in Canada in 20 years.

Edwards, Imperial’s largest shareholder, agreed to buy $40 million of the 6 percent, 6-year senior unsecured convertible debentures via Edco Capital Corp., a company he controls.

The Fairholme Partnership LP will buy another $40 million. If the issuance fails to raise the full amount sought, Edco will buy non-convertible notes bearing interest at 12 percent to make up the shortfall, Imperial said yesterday in a statement.

Murray, 54, who holds a 36 percent stake in Imperial, has business interests that span energy, engineering and a stake in a National Hockey League team. Buying the bonds isn’t the first time that he’s helped fund development of the Mount Polley copper and gold mine, the scene of last week’s accident, said David Davidson, an analyst at Paradigm Capital Inc.

“Once he invests in something, he supports it through thick and thin,” Davidson, who’s based in Toronto and whose rating on Imperial is under review following the spill, said today in an interview. “Not only is he committed to Mount Polley, but he’s committed at a really tough time.”

Building roads to resources a priority, says NWT premier – by Trish Saywell (Northern Miner – August 13, 2014)

August 18, 2014

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry.

Mining is the largest industrial sector in the Northwest Territories (NWT), and building transportation and other important infrastructure is the key to unlocking its potential, NWT Premier Bob McLeod said at a symposium in Toronto on Aug. 6.

“We have long understood that stranded resources represent significant lost opportunity for economic development,” McLeod said in prepared remarks at the infrastructure summit of Canada’s premiers hosted by Ontario Premier Kathleen Wynne. “Without dependable, all-weather connections, the huge base metal and mineral potential in the Northwest Territories will remain locked in place.”

On the sidelines of the conference the premier told The Northern Miner that he expects seven new mines will be built in the NWT between now and 2020, but emphasized infrastructure must be built to help support development in the north.

In addition to diamonds and base and precious metals, the Northwest Territories has conventional and non-conventional oil and gas potential in the Mackenzie Valley and Beaufort Delta, he noted.

McLeod believes that one of the most important steps his government must take is to build a $2-billion highway system through the Mackenzie Valley linking the rest of Canada to Tuktoyaktuk, a small community on the Arctic Ocean.

Talk will not solve mining’s problems – by Business Day Live Editorial (August 14, 2014)

August 18, 2014

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

A DAY after Deputy President Cyril Ramaphosa endured searing cross-examination at the Marikana commission of inquiry, government and mining stakeholders convened in Midrand to discuss some of the very issues he was being made to answer for.

The state of South Africa’s mining industry has been debated ad nauseam in the past few years, in particular after the Marikana massacre in 2012. What has been lacking is a clear plan to not only resolve the issues causing so much conflict, but also to put the industry in a position to meet historically high expectations from across the spectrum.

When the mining lekgotla was first convened two years ago, hopes were high that it would result in concrete steps being taken to pull the sector back from the brink. Since then it has seen more conflict, which includes the longest protected strike in the history of the country, in platinum mines.

The sector has also not won any new friends through its contribution to transformation and broader social development. In turn, the matters that have dogged the industry’s competitiveness for years continue to be an obstacle to further growth.

Rising input costs, including for electricity and labour, look far from abating, while policy uncertainty continues in mineral resources law amendments that appear to remain unattended in the president’s in-tray.