October 23, 2014 – Republic of Mining

Iron ore giants win first round in global battle but knockout unlikely – by Clyde Russell (Reuters U.S. – October 23, 2014)

October 23, 2014

http://www.reuters.com/

LAUNCESTON, Australia – Oct 23 (Reuters) – There is now no doubt that the big three global iron ore miners are producing record amounts in their bid to dominate the industry. The question remains, what will happen if they succeed?

Anglo-Australian giants Rio Tinto and BHP Billiton both reported record output in their latest quarterly reports, and affirmed they were on track to boost production even further.

Top producer, Brazil’s Vale is also increasing output, with Brazilian trade figures showing iron ore exports rose 16.7 percent in September from August to 33 million tonnes.

These figures show that the output side of the plan to dominate global seaborne iron ore trade is going quite well for the big three.

In the case of BHP and Rio Tinto, they are well-placed to continue to put pressure on competitors based in their home turf of Western Australia state, as well as those in other parts of the world.

With the lowest cash costs, in the region between $20 to $30 a tonne, and plans to strip out even more costs, they can survive and prosper even if iron ore prices remain weak.

BCL’s Norilsk deal the first step in its hunt for nickel – by Allan Seccombe (Business Day Live – October 23, 2014)

October 23, 2014

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

BOTSWANA’S state-owned BCL, a nickel mining and smelting company, is embarking on a strategy to secure extra sources of metal, and its first step is the $337m purchase of Norilsk Nickel’s African assets.

The transaction, which secures a 50% stake in African Rainbow Minerals’ Nkomati mine in SA and 85% of Tati in Botswana, will be funded out of cash and debt, said BCL’s divisional manager of corporate strategy, Mack William.

BCL has a 1-million-tonne capacity at is smelter and it is currently using about 65%. Taking the Nkomati concentrate will lift the plant to full capacity, Mr William said in an interview.

The Botswana firm used to treat Nkomati’s concentrate, but a few years ago it diverted its concentrate to another smelter, he said.

BCL is undertaking a study at its metallurgical complex to grow capacity at the smelter and better utilise its concentrator, which has capacity for 3-million tonnes of ore a year. “It will position the smelter as the ultimate destination for all nickel concentrate in Southern Africa,” Mr William said.

UPDATE 2-African Barrick tightens full-year costs target – by Roshni Menon (Reuters India – October 23, 2014)

October 23, 2014

http://in.reuters.com/

Oct 23 (Reuters) – African Barrick Gold Plc tightened its costs target for the full year as it increased output while also cutting jobs to beat the sharp drop in gold prices.

The miner reported a fall in overall expenses for an eighth successive quarter after it cut more than 500 jobs at its flagship Bulyanhulu mine in Tanzania in the third quarter ended Sept. 30.

African Barrick’s stock was among the top percentage gainers on the FTSE-250 Midcap Index on Thursday, rising as much as 4.8 percent in early trading.

To beat shrinking gold prices, African Barrick has been accelerating production at Bulyanhulu, the largest of its three operating mines in Tanzania, by increasing its use of technology.

Many gold and silver miners were forced to shelve new projects and slash costs last year after prices of precious metals fell to their lowest in a decade. Gold fell 28 percent and silver plunged 36 percent in 2013. “By the end of next year we expect Bulyanhulu to produce 350,000 ounces at $900 per ounce,” Chief Executive Bradley Gordon told Reuters.

BHP Billiton to pursue demerger with no share listing in Canada – by Barry Critchley (National Post – October 22, 2014)

October 23, 2014

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

For the second time in four years, BHP Billiton Ltd., the world’s largest mining company — which holds its annual meeting in London Thursday — has announced plans that don’t include a Canadian share listing.

In the summer of 2010, BHP Billiton – the result of the 2001 merger between BHP and Billiton – launched a hostile bid for Potash Corporation of Saskatchewan Inc. It offered US$130 cash a share — a potential US$40-billion transaction.

At the time, BHP Billiton noted it had business interests in Canada dating back almost 40 years.

The most significant interest was EKATI, a diamond mine in which it had invested about US$5-billion since production began in 1998. BHP, which sold the EKATI mine in 2012, had also acquired exploration rights in potash, notably the Jansen mine.

But, perhaps as a reflection of the takeover consideration, BHP Billiton, which at the time had a market cap of US$188-billion, made no plans to list its shares on the TSX. However, late in the game when opposition to its takeover was mounting, it offered a secondary listing on the TSX to complement listings Australia, London, Johannesburg and New York. But its TSX-listing plans were shelved when the takeover was withdrawn after Ottawa nixed the deal after applying the net benefit test.

All Female E-Mail at BHP Shows Mine Shift From Boys’ Club – by David Stringer (Bloomberg News – October 22, 2014)

October 23, 2014

http://www.bloomberg.com/

The e-mail Jacqui McGill received from one of her teams at a BHP Billiton Ltd. (BHP) coal mine in northern Australia contained great news: output delays were down 75 percent in a year.

That wasn’t the only reason she let out a whoop of excitement. “I did my little yeehaw, because every single person on the e-mail was a woman in a production role,” said McGill, asset president for two of the world’s biggest mining company’s operations in Queensland’s Bowen Basin.

“That’s the first time that’s happened in my career,” McGill, an industry veteran of more than 20 years, said of the July e-mail. “I have plenty of men in my business in senior roles, but I thought, that’s critical mass.”

Mining remains the most male-dominated business, with men holding more than 90 percent of executive positions. That’s starting to change, as retiring employees help open the $1 trillion industry’s door to female successors.

“It lags behind, it’s historically been male,” U.S. Labor Secretary Tom Perez said Sept. 10 in an interview in Melbourne. “They are missing out on great talent. They are missing out on recruiting some of the best and the brightest.”

Define ‘consultation’ and ‘social licence’ – by Jeffrey Simpson (Globe and Mail – October 22, 2014)

October 23, 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.

What does it mean to be “consulted?” Does it mean to give an opinion and to be heard? To have your views prevail? To exercise a veto? We don’t know, and as a result of this, much confusion surrounds public decisions, especially for projects that require this amorphous idea of “consultation” or “social licence” to proceed.

Who defines “social licence?” Interest groups such as NGOs or businesses? Courts? Public opinion, but as measured by what? Polls? Write-in campaigns? Social media comments? Street demonstrations? Elections?

The confusion about “consultation” and “social licence” deepens when it comes to Canada’s First Nations. Courtesy of court rulings and depending on their title or land claim or treaty, aboriginals have to be “consulted,” their interests “accommodated,” and, if title is demonstrated, give their assent – except in the face of a “pressing and substantial” public interest.

What might that be, the “public interest?” Take the Northern Gateway pipeline to pump Alberta bitumen oil through northwestern British Columbia to Asia-Pacific markets.

The three-person National Energy Board panel that exhaustively studied the pipeline proposal – and supported it, with 209 conditions – declared that “the public interest is the interest of all Canadians.”

Yukon mining project partners with China (CBC News North – October 22, 2014)

October 23, 2014

http://www.cbc.ca/news/canada/north

Collaboration with Beijing institute could ‘reduce costs by 40%’ says Canadian CEO

A mining project in Yukon is hiring Chinese engineers. Copper North Mining is planning for work in the Carmacks area. The company has announced a firm in Beijing will help design a process to help it recover copper, gold and silver.

The project is at the feasibility study stage but Chinese workers will help design the mine and ship equipment to Canada.

Harlan Meade is President and CEO of Copper North Mining. He says this approach could reduce costs by as much as 40 per cent.

“What (Copper North Mining) is doing is getting them to do the detailed design engineering. We oversee it here in Canada then we get the procured equipment in China. We have it delivered and then our Canadian engineering firm, JDS Energy and Mining Inc, does the construction management, mining, earth works, and the other parts of the project.”

Meade says Chinese engineers would provide “about half” of the work at the feasibility stage with Canadian engineers hired to do the rest.

The project would see also savings as it would obtain its equipment directly from Chinese suppliers.

Copper hopes ‘bright despite volatility’ – by Neil Hume and James Wilson (Financial Times – October 22, 2014)

October 23, 2014

http://www.ft.com/intl/markets/commodities

Copper is set for a period of price volatility as the market digests new supply but long-term prospects remain bright due to grade declines and extended lead times for new projects, according to global miner Rio Tinto.

Sentiment toward the red metal, used extensively in construction and electrical applications, has turned increasingly bearish over the past year as new projects have come on stream and concerns about slowing growth in China have intensified.

China accounts for about 40 per cent of global consumption of the commodity. These factors have pushed the benchmark copper price down 9.2 per cent this year to $6,691 a tonne.

However, some traders believe the price will recover. They say rising supply may not lead to a surplus in the refined copper market next year because of a raw material bottleneck.

Jean-Sébastien Jacques, head of copper at Rio Tinto, one of the world’s biggest mining companies, said a “wave” of new supply was set hit the market between now and 2016 as investments made over the past decade stared to bear fruit.

Taseko seeks to sue Ottawa for damages over B.C. mine rejection – by Peter Koven (National Post – October 22, 2014)

October 23, 2014

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

Taseko Mines Ltd. claims the federal government acted unlawfully in pushing its British Columbia copper project off the rails. Its solution: Try to sue the government for damages and to find out precisely what happened.

On Wednesday, Taseko will appear in a federal court in Vancouver to argue that its two judicial review applications to Ottawa should be combined into one civil lawsuit seeking damages. The move, which appears to be unprecedented, is being fiercely opposed by the government.

“We haven’t found another instance where a company in precisely this position sues the federal government,” said lawyer John Hunter of Hunter Litigation Chambers, which is representing Taseko.

Taseko claims it was the only logical course of action. The Vancouver-based miner says it has evidence of actual malfeasance by federal officials, including secret meetings with opponents of the $1.5-billion New Prosperity project that could have swung Ottawa’s decision.

The project has been controversial for many years. Taseko’s first Prosperity mine proposal was approved by the British Columbia government in 2010, but rejected by Ottawa later that year. It cited environmental concerns over Taseko’s plan to drain the nearby Fish Lake.

B.C. remains ‘high-cost environment’ despite lower LNG tax rates, industry group says – by Geoffrey Morgan and Yadullah Hussain (National Post – October 22, 2014)

October 23, 2014

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

CALGARY/TORONTO – The B.C. government slashed its tax rate proposal for its nascent liquefied natural gas industry in a bid to entice proponents to the West Coast, but some industry players still believe the province has not gone far enough to roll out the welcome mat.

Mike de Jong, B.C.’s finance minister, said he is confident the new rules introduced Tuesday are fair and balanced, but the province is not taking anything for granted. “These proponents have to make decisions worth billions of dollars, and there is still a lot of work to be done,” he said in an interview.

The new Liquefied Natural Gas Income Tax Act would tax an LNG project at a rate of 1.5% when production begins, rising to 3.5% after capital costs are recovered. That rate will rise to 5% after January 1, 2037 — when the government expects the LNG industry will be well established within the province.

“We believe this overall framework strikes the right balance between a competitive and economic environment and a fair return to British Columbians,” Mr. de Jong said in statement announcing the tax.

In February, B.C. floated the idea of a two-tiered tax system for proposed LNG projects, which super-cool natural gas into its liquid state for export off the coast. In addition to adding a third tier, the province Tuesday reduced the rate at which it would tax a project’s net income.

NEWS RELEASE: Government of Quebec Forms a Partnership with Champion Iron and Adriana Resources to Advance Labrador Trough Rail Feasibility

October 23, 2014

MONTREAL, QUEBEC and TORONTO, ONTARIO–(Marketwired – Oct. 21, 2014) – The board of Champion Iron Limited (ASX:CIA)(TSX:CIA)(“Champion” or the “Company”) is pleased to advise that the Government of Québec and Lac Otelnuk Mining Ltd., a joint venture between Adriana Resources (“Adriana”) and WISCO International Resources Development & Investment Limited, have formed a partnership with Champion, “La Société ferroviaire du Nord québécois, société en commandite (“SFNQ”).

The SFNQ was formed recently, following the tabling by the Québec government of its 2014-2015 budget in June, as a partnership of government and industry and assigned the responsibility of managing the implementation of the Feasibility Study for a new Labrador Trough rail line.

The Québec government has set aside a maximum of C$20 million from its Plan Nord Fund to contribute to the study. For its part, Champion’s contribution of sunk costs is valued up to C$6 million. Among other major economic and wide-reaching social benefits, the new rail infrastructure when developed will enhance the Québec-based mining industry’s ability to service world markets with competitive long-term tariffs.
Champion’s subsidiary Champion Iron Mines Limited is a founding partner of the SFNQ, which is open to all miners in the region.

Champion’s Chairman and CEO Michael O’Keeffe said, “The SFNQ partnership includes the Government of Québec and fellow mining group Lac Otelnuk Mining Ltd, with an open invitation to others from within industry to join this important initiative”.

Mining: End of Iron Age – by Honore Banda (The Africa Report – October 21, 2014)

October 23, 2014

http://www.theafricareport.com/

Douala, Cameroon – Low prices and high supplies are driving iron ore prices down. Analysts say large companies will survive the crunch but many smaller producers and explorers may be faced with tough decisions.

In a red and muddy clearing along Cameroon’s densely forested border with the Republic of Congo, a fleet of diggers stands idle. High above the canopy of trees, dark clouds start to gather. It is an ominous portent for an iron ore project billed as transformative for the country.

Three years ago, the Mbalam mining project, spearheaded by Australian explorer Sundance Resources, was hailed by Cameroon’s President Paul Biya as a potential game changer for the Central African country. Now, as Sundance courts fresh investors to shore up its dwindling cash reserves while iron prices fall, the prospects look bad for the construction of a $5bn railway needed to make the mine economical.

Across the continent, a similar pattern emerges. From Guinea to Angola, mining projects set up to feed China’s seemingly insatiable appetite for raw materials face an uncertain future.

Demand from the world’s largest consumer of iron ore is now cooling, and the determination of the three biggest producers – Rio Tinto, Vale and BHP Billiton – to plough ahead with expansion plans is bad news for smaller rivals, many of whom have chosen Central and West Africa’s undeveloped – and thus higher cost – deposits as their way into the mix.

Oil: Blind-sided by Technology – by Gwynne Dyer (October 19, 2014)

October 23, 2014

http://gwynnedyer.com/

“The price of oil will hit its floor and it will rise again,” President Nicolas Maduro assured Venezuelans, whose shaky economy depends critically on a high oil price. “Venezuela will continue with its social plans. Venezuela will move forward.”

No it won’t, and neither will Russia, Iran, or Nigeria. The only major oil exporters that are not in deep trouble are the Arab countries, whose governments have some room for manoeuvre because of low production costs, relatively small populations, and big foreign currency reserves.

Since June the cost of a barrel of Brent crude, the benchmark for world oil prices, has fallen by almost a quarter, from around $110 a barrel (where it was stuck for the past four years) to just above $80 a barrel. Last month, for the first time in decades, Nigeria exported no oil at all to the United States. Even at a big discount, Americans just don’t need it. And the main reason for all that is fracking.

American production has almost doubled in the past five years thanks to the new drilling technologies, and the United States overtook Russia last year to become the world’s largest producer of oil and gas combined. (Saudi Arabia comes a distant third.) With production soaring and world demand for oil stalling due to slow economic growth, a collapse in prices was inevitable. The question is how far they will collapse, and for how long.

The answer is probably not much further, for the moment – but they could easily stay down in the $75-$85 range for a couple of years.