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Day: August 19, 2014

Diversified mining giants becoming less so – by Lawrence Williams (Mineweb.com – August 19, 2014)

http://www.mineweb.com/

Confirmation that BHP Billiton is planning to demerge what it considers its non-core assets into a new company continues the trend for the world’s biggest miners to simplify their structures.

LONDON (MINEWEB) – The big post 2008 fallout in the global mining sector has been a major influence on corporate policy since. It has already seen the culling of the chief executives who had the misfortune to be in place as metal prices slumped and profits collapsed. They had previously been exhorted by their institutional shareholders to go for growth almost at any cost.

But once it became apparent that some of the huge capital programmes involved were actually having a negative impact on the bottom line, helped by the fact that the concentration on growth had led to management’s eyes being taken off controlling costs at existing operations, then institutional pressures changed and heads started to roll. CEOs became an endangered species

Now it looks as though there is something of a different tack coming into play. For the single commodity players – e.g. those in the precious metals sector there has also been a move to demerge, or just sell what are considered to be non-core assets – those that had appeared to be taking up too much management time and effort, but without complementary returns. A typical example of this has been Barrick Gold’s floating off of African Barrick which now at least seems to be turning itself around, but still probably falls short of its parent’s return requirements. Others have been divesting of so-called non-core projects piecemeal.

But while the gold miners were relatively quick to act – the big diversified miners perhaps took a little more time over their moves to do likewise.

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UPDATE 4-BHP announces spin-off plan, no share buyback for now – by Sonali Paul and Silvia Antonioli (Reuters India – August 19, 2014)

http://in.reuters.com/

MELBOURNE/LONDON, Aug 19 (Reuters) – The world’s biggest mining company, BHP Billiton , announced plans to spin off businesses worth an estimated $16 billion, most of them acquired in a 2001 merger, to focus on its most profitable activities.

But it held off on a share buyback, disappointing investors who had hoped to receive around $5 billion. BHP’s London-listed shares fell 4.5 percent on Tuesday.

Chief Executive Andrew Mackenzie said the widely expected move to simplify BHP around the “four pillars” of iron ore, copper, coal and petroleum – with potash as a potential fifth pillar – would spur cashflow growth and boost returns.

These assets generated 96 percent of the group’s underlying core profit in the 2014 financial year.

“A demerger is a logical next step for other high quality assets also in our portfolio that don’t have a scale of those in our major business,” Mackenzie said in a call with investors.

The spin-off company, dubbed NewCo for now, will bundle BHP’s aluminium, manganese, Cerro Matoso nickel in Colombia, South African energy coal, some Australian metallurgical coal assets and the Cannington silver, lead and zinc mine. It will not include Nickel West in Australia, for which a separate sale process was continuing, Mackenzie said.

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Australia rebukes mining tycoon over abusive attack on China – by Jane Wardell and Ben Blanchard (Reuters India – August 19, 2014)

http://in.reuters.com/

Aug 19 (Reuters) – Australian mining mogul and politician Clive Palmer was rebuked by the government on Tuesday for a tirade against China, in which he described its government as “bastards” who shoot their own people and want to take over the country’s resources.

Treasurer Joe Hockey said the remarks aired on Australian television on Monday were “hugely damaging”, noting that Palmer had benefited personally from doing business with China.

“Do not bring down the rest of Australia because of your biases,” he said. “They are a business partner for Australia, they’re our biggest trading partner, they buy a lot of our produce, and in doing so they help to lift the quality of life for everyday Australians.”

China is Australia’s biggest trade partner with two-way trade approaching $150 billion, representing more than 20 percent of Australia’s total trade.

Palmer, who holds the balance of power in the Australian parliament’s upper house, is currently locked in a legal battle with Chinese firm CITIC Pacific over cost blowouts and disputed royalty payments at an iron ore port in Cape Preston in Western Australia.

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Rio and BHP tighten grip on world iron ore – by John Addis (Sydney Morning Herald – August 18, 2014)

http://www.smh.com.au/

Mexican drug cartels have been diversifying into the iron ore business, smuggling ore worth about $US1 billion a year into China. But it’s the emergence of a more legitimate cartel – one run largely by Australians – that should worry China more.

Rio’s latest result shows how powerful the big three global producers have become. The company’s results for the six months to June 30, with underlying earnings rising 21 per cent to $US5.1 billion ($5.47 billion), are remarkable given that iron ore prices actually fell 20 per cent over the period.

After slashing costs, capital expenditure and debt, management hinted at higher dividends and more buybacks. If the mining boom is supposed to be over, no one told Rio Tinto.

The really interesting element to the result concerned production increases. Although lower iron ore and coal prices stripped $US1.4 billion from underlying earnings, volume increases, particularly in iron ore, offset that fall by more than $US900 million. All up, iron ore contributed more than 90 per cent of total profit.

With China slowing and the country’s government frantically shifting spending away from capital expenditure towards consumption, which dampens demand for ore, Rio Tinto and BHP are expanding output.

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Will the mine of the future be a mine at all? – by W.Scott Dunbar (Globe and Mail – 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.

The Globe and Mail has sought out columns from thought leaders in Western Canada, people whose influence is shaping debate, but whose names may not be widely recognized. Scott Dunbar is the head of the Department of Mining Engineering at the University of British Columbia.

Metals to support our way of life are extracted by mining and processing large quantities of rock. The basic extraction paradigm is “drill, blast, load, haul, dump, crush, grind, separate, process.” There are many variations, but fundamentally, the paradigm has not changed since ancient times.

Innovations have made operations in the paradigm safer, more efficient, automated and even autonomous. Rock containing very small quantities of metal can be economically mined and processed and it is tempting to think that further innovations will allow mining and processing of rock containing even smaller amounts of metal.

However, some constraints are having a significant effect on the feasibility of mining. First, economic metal deposits are very difficult to find. Some deposits exist at depths of one kilometre or more, but heat and rock-mass stability at these depths make their exploitation difficult. Also, the waste-rock dumps and tailings generated by mining and mineral processing pose significant engineering challenges, environmental concerns and financial liabilities.

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B.C. mine’s breached tailings pond one of 98 to undergo independent investigation – by Sunny Dhillon (Globe and Mail – 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.

VANCOUVER — The B.C. government has ordered independent investigations into the spill at the Mount Polley mine and at every other tailings pond in the province, saying the disaster has shaken public confidence and threatens to undermine other resource-sector projects as well.

The province – which has been criticized by First Nations near the spill for a perceived lack of industry oversight – has also signed a letter of understanding with two bands, whose leaders say they’ll push for meaningful mining reform.

The hiring of an outside panel of experts to investigate the Mount Polley spill is a shift from the province’s earlier stance that probes by the chief inspector of mines and the Conservation Officer Service would suffice. Each of the three experts on the panel has decades of engineering experience, with one having worked on the investigation into the New Orleans levee failures during Hurricane Katrina.

At a news conference Monday, Bill Bennett, B.C.’s Minister of Energy and Mines, stressed that the province must do whatever it takes to restore public confidence in mining in particular and the resource sector in general.

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NEWS RELEASE: Toronto Star finds mine well worth its salt

This article was provided by the Ontario Mining Association (OMA), an organization that was established in 1920 to represent the mining industry of the province.

The world’s largest underground salt mine has been discovered by Canada’s largest daily circulation newspaper. The Toronto Star’s edition on Saturday, August 16, 2014 featured the Sifto Salt mine in Goderich with a two-page spread starting on the front of the Weekend Life section. Sifto Salt is a member of the Ontario Mining Association.

Toronto Star reporter and restaurant critic – who better equipped to write about salt? — Amy Pataki, traveled to the shores of Lake Huron at the mouth of the Maitland River and visited the mine, which is owned by Compass Minerals. Photographer Richard Lautens accompanied her on her recent underground expedition.

The mine has been operating since 1959 and it produces 6.3 million tonnes of salt annually. Most of the output from the 600-plus employees at Sifto is rock salt used for road safety. However, the company’s nearby evaporator plant turns out about 95,000 tonnes of food grade salt annually. This high-purity product is used as table salt – yes you do shake it on your fries – salt licks for farm animals and in water softeners.

Congratulations to Sifto for this extensive article and photography display and to the Toronto Star for reminding us that we cannot live without this valuable commodity.

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Why [B.C. mines minister] Bill Bennett Needs to Resign – by Rafe Mair (TheTyee.ca – August 18, 2014)

http://thetyee.ca/ 

By well-established precedent, Bill Bennett right about now should be typing his letter of resignation to Premier Clark.

Extreme? Not at all. Here’s a bit of history that, trust me, speaks directly to the mining minister’s duty after the catastrophic breach of the tailings pond at Mount Polley mine.

Just after the the Second World War, the British agricultural minister resigned. During the war, the Royal Air Force had expropriated a lot of farmland for airfields. After the war, this land was resold by the ministry to bidders. A lot of hanky-panky and plain unfairness came with the sales and it became a scandal.

When the scandal broke, the minister, Thomas Dugdale, who knew little of the scheme and had nothing personally to do with it, promptly resigned. When asked why, he explained simply that since he took credit for when things went well in the ministry, he had to bear responsibility when they didn’t. He perhaps was too hard on himself. Many thought so, including Winston Churchill, his prime minister. He, however, felt that his ministry had failed in its duty, which required that he take the fall.

During the Falklands War, Lord Carrington, the defence minister, felt that his ministry had not properly advised the prime minister on the ramifications. The prime minister didn’t think so but Carrington did. Again, in his view, the ministry had failed to do its duty, he was the minister, and so he must go.

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