Mount Polley fallout puts damper on Canadian mining – by Derrick Penner (Vancouver Sun – August 27, 2014)

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Signs continue to mount that the modest rebound that Canada’s mining sector had been experiencing has been knocked off the rails by the blowout of the tailings dam at Imperial Metals’s Mount Polley Mine and the Supreme Court of Canada’s Tsilhqot’in decision on land title.

Shares of Canadian mining companies had been doing well in the weeks before the court decision on July 29, and then the mine disaster on Aug. 4, as investors anticipated better demand for metals for a booming global auto sector. But declines have been steady in recent days.

“People are being discouraged about investing in mining in general,” said Raymond Goldie, a senior mining analyst with the brokerage firm Salman Partners, referring to the recent developments.

He added that Energy and Mines Minister Bill Bennett’s establishing an independent review panel to investigate the Mount Polley dam failure, and then ordering the operators of all 98 tailings ponds licensed under his ministry to conduct independent safety inspections, is the latest fallout from Mount Polley that is clouding investor sentiments.

“That is going to dissuade companies from investing in British Columbia,” Goldie said. “(And) along with the Tsilhqot’in decision of last month, it increases the uncertainty about investing in (the province).”

He added that the Canadian Nuclear Safety Commission’s followup move to demand Canada’s uranium miners do their own safety checks to ensure that tailings facilities are in compliance with requirements compounded investor concerns.

Goldie noted that shares in Cameco Corp., Canada’s biggest uranium miner, dropped five per cent on the news.

“When you see Cameco shares down five per cent due to an independent review of tailings dams, yes we are seeing (the impact of the Mount Polley incident),” he added.

Accounting and consulting firm EY, in its second-quarter Canadian Mining Eye report, found that the shares of companies that it follows for the index had gained nine per cent in value during the quarter. That was not quite as good as the first quarter, which saw the index climb 13 per cent, but enough to outperform the S&P/TSX Composite Index.

“Overall, we anticipate the third quarter to continue to show positive trends with mixed expectations on metal prices,” Mining Eye authors Jay Patel and Bruce Sprague wrote.

However, the report captured company performance to the end of June 30, and was released Aug. 12, still in the middle of the storm of events following both the court challenge and the Mount Polley dam failure.

The Toronto Stock Exchange metals and mining sub-index, which tracks nine key companies, offers a proxy for sentiments around mining since then. Since its peak at 954.68 points on July 30, the sub-index has declined seven per cent to 888.7 points.

Up to the peak, the sub-index had enjoyed a 35-per-cent rise from a 52-week low of 703.86 points that it reached last Dec. 12.

Global commodity markets, however, will remain unfazed by the disruption of Mount Polley and sentiments in Canadian mining, according to Patricia Mohr, vice-president of industry and commodity research for Scotiabank.

Mohr said the event might lead to delays in capital spending within B.C., but outside Canada “I think the impact is actually minimal.”

She added that global copper markets have seen positive signs in the last couple of months. The commodity price bottomed out at the end of June, rallied in July and while it has dropped a bit in August remains “quite lucrative.”

“Quite often in the late summer, you get into the summer doldrums (in copper trading),” Mohr said. “This year, that doesn’t seem to be happening, which is telling me something. I think we’re going to get a cyclical recovery now.”

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