December 12, 2014 – Republic of Mining

Waning investor confidence, weak commodity prices among factors limiting growth of African mining sector – by Jade Davenport (MiningWeekly.com – December 12, 2014)

December 12, 2014

http://www.miningweekly.com/page/americas-home

Along with the Arctic, sub-Saharan Africa remains the most underexplored and highly prospective mineralised region on earth. However, despite its ‘open for business’ approach and myriad investment opportunities – in terms of greenfield and brownfield projects across the commodity spectrum – Africa’s mining sector has, over the past several years, experienced limited growth.

This year proved no exception to that general trend, with Standard Bank global head of mining and metals Rajat Kohli describing it as a challenging year for the African mining sector. This is a result of a number of factors, ranging from the uncertain global macroeconomic environment, the loss of confidence in the mining sector, lower commodity prices and, most importantly, Africa’s challenging operating environment and lack of cost competitiveness.

EXTERNAL CHALLENGES

Broadly speaking, external factors beyond the control of African industry stakeholders are limiting the trajectory of mining growth on the continent, says Kohli, elaborating that this year has seen a deepening decline in investment capital for mining projects.

“Equity markets have largely closed up, while debt, though available, has been more selective,” he says.
Kohli adds that the difficulty in securing project capital has been most noticeable in the junior African mining space, with lenders exercising caution. This has prompted users of capital to seek alternative forms of funding.

Iron ore won’t reach $US100 per tonne again, says BHP Billiton – by Philip Wen (The Age – December 12, 2014)

December 12, 2014

http://www.theage.com.au/business

Shanghai: Mining giant BHP Billiton says iron ore prices are unlikely to eclipse $US100 a tonne again, with expectations of steel consumption growth in China slowing further next year.

“I’ve learnt never to say never and there’s always short-term variations, but I think that if you use basic economics … certainly $100 seems high,” BHP’s president of iron ore Jimmy Wilson told reporters in Shanghai on Thursday.

“It’s hard to see that significant bump [in demand] that we’ve seen coming from China happen again.” BHP’s senior management group, including chief executive Andrew Mackenzie, was in Shanghai to celebrate the shipping of its one billionth tonne of iron ore to China.

The first shipment departed from Port Hedland in 1973. “It took nearly 30 years for BHP Billiton to ship 100 million tonnes of iron ore to China and then only 12 more years to reach the one billion tonne milestone,” Mr Mackenzie said.

The milestone was testament to China’s extraordinary rate of development, he said. At current rates the next 1 billion tonnes milestone would take just five years to reach.

But though imports into China have surged, prices have nearly halved, dropping under $US70 a tonne for the first time in five years. The drop comes amid a supply glut brought on by aggressive expansion by major miners Rio Tinto, BHP and Vale – even as Chinese economic growth cools.

Mining’s ‘Cash Machine’ Promise Fades as Prices Crater – by Jesse Riseborough (Bloomberg News – December 8, 2014)

December 12, 2014

http://www.bloomberg.com/

BHP Billiton Ltd. (BHP) and Rio Tinto Group run the risk of taking on additional debt as a plunge in commodity prices threatens their ability to keep a promise of returning more cash to shareholders.

As the world’s two biggest mining companies reiterate pledges to bolster returns, a near five-year low in iron ore and coal prices raises the specter both will need to borrow to meet their dividend commitments. Along with rivals Glencore Plc (GLEN) and Vale SA (VALE5), the two companies are largely responsible for the supply glut that’s putting downward pressure on prices.

While investors demanded higher industry returns after $1 trillion was spent on acquisitions and new mines in the past decade, the prospect of companies “robbing Peter to pay Paul” doesn’t sit well with Clive Burstow, an investment manager at Baring Asset Management, which oversees $60.5 billion.

“If they start leveraging up the balance sheet just to give investors back some money, I’m not a great fan of that,” said Burstow, who has been reducing holdings of BHP and Rio this year. “That effectively means they are banking on there being higher commodity prices in the future.”

If current commodity prices prevail, BHP faces an estimated $5.4 billion shortfall to meet a forecast $6.6 billion dividend payout for the fiscal year ending June 30, according to Liberum Capital Ltd. mining analyst Richard Knights. That means the prospect of any additional return through a buyback is “very low,” he said. Rio’s estimated dividend shortfall is $1 billion next year, Knights said.

Take Glencore’s bullish metal forecasts with a grain of salt – by Kip Keen (Mineweb.com – December 12, 2014)

December 12, 2014

http://www.mineweb.com/

Glencore makes some worthwhile points on impending metal deficits – but they’re aggressive.

HALIFAX, NS (MINEWEB) – Glencore summarized its particularly bullish outlook on both copper and zinc – two important commodities it mines and trades – in a rather thorough presentation it gave at a recent investors day. All 193 pages here. At the very least, it makes for good reading if you want an overview of multiple metal and energy sectors in terms of supply and demand. Among its predictions two metals stand out: copper and zinc supply deficits.

Copper first.

Glencore gets very bullish and opposes the big research organizations about their views of a coming surplus. A major copper deficit is in the cards instead, Glencore says.

That should be readily apparent in an equation it puts out there on slide 72. It cuts down surplus forecasts for 2015 from a slew of global mining operations – ones relied upon by the likes of Wood Makcenzie, among others such as Brookhunt and the International Copper Study Group (ICSG) – to revise a 390kt surplus (by the ICSG and Brookhunt) – to a 1.4 million to 1.6 million tonne deficit.

Now Glencore’s a bit vague in its equation and numbers and it’s surely aspirational. It tallies 1.8 mt in certain/likely/maybe copper market revisions in terms of supply from mines around the world to deduct from that predicted 390kt surplus. It announces, “=Deficit of 1.4 – 1.6 Mt for 2015?”

A fair deal for natives – by Ken Coates (National Post – December 12, 2014)

December 12, 2014

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

Assembly of First Nations National Chief Perry Bellegarde, elected on Wednesday, has made his priority clear: “To the people across the great land, I say to you, that the values of fairness and tolerance which Canada exports to the world, is a lie when it comes to our people.” The national chief then declared that First Nations expected a far greater share of the country’s prosperity: “To Canada, we say, for far too long we have been dispossessed of our homelands and the wealth of our rightful inheritance.”

To most Canadians, Chief Bellegarde’s statement seems provocative, if not radical. Conditioned to believing that First Nations simply stand before the government of Canada, cap in hand, demanding additional funding, the general public likely looks on the latest call to action as yet another money grab. It is nothing of the sort.

The national chief, in calling for aboriginal people to receive a “rightful” share of the country’s prosperity, is asserting the First Nations’ expectation that resource-revenue sharing will become the norm across Canada. Only a few decades ago, such an argument would have been rejected out of hand.

Governments provided a variety of social welfare, housing and other payments, a process that cost the Department of Indian Affairs a great deal of money but did little to address the underlying socio-economic needs of aboriginal communities.

First Nations wanted something different. They believed, as Bellegarde himself has said many times, that the historical treaties only transferred land “to the depth of the plough,” leaving the question of control of the wealth below the surface unresolved.

Noront Resources A Little Giant in the Ring of Fire – Interview by James Murray (Netnewsledger.com – December 12, 2014)

December 12, 2014

http://www.netnewsledger.com/

Noront Resources Ltd. Working to Get the Ring of Fire Moving

THUNDER BAY – Noront Resources Limited President and CEO Al Coutts is looking to get mining. The Noront President says that getting moving on the Ring of Fire is important for Ontario.

Coutts shares in an interview with NetNewsLedger, what is key is for Ontario to move forward on the permitting process, while it is working on the Regulatory Framework Agreement.

The Ring of Fire chromite discovery in Northwestern Ontario offers opportunity for the region. “Getting the Ring of Fire right,” has been the message from the province of Ontario and Minister of Northern Development and Mines Michael Gravelle.

Nickel Seen Extending Rally Into 2015 by CLSA on Ore Stocks Fall – by Alex Davis (Bloomberg News – December 12, 2014)

December 12, 2014

http://www.bloomberg.com/

Nickel, the best-performing base metal this year, may extend its rally into 2015 as China’s output of nickel pig iron will drop amid dwindling stockpiles of higher-quality raw material, according to CLSA Ltd.

China’s production of NPI, a lower-grade alternative to the refined metal, may fall to 300,000 metric tons in 2015 from 410,000 tons in 2014 and 485,000 tons in 2013, said Ian Roper, Singapore-based commodity strategist at CLSA. The country’s inventory of Indonesian laterite ore is now down about 61 percent from a peak in January, he estimates.

The refined metal, used in making stainless steel, surged to $21,625 a ton in May on the London Metal Exchange after Indonesia started an ore-export ban in January and then slipped into a bear market in September as the Philippines filled the supply gap. Prices are still up 18 percent this year, the most among the main six base metals on the LME. China is the largest producer and user of nickel.

“Nickel should be back up above $17,600 by the middle of next year because the Indonesian ore in China will all have been consumed by the second quarter,” Roper said in a Dec. 9 interview. “It’s justified for it to go back to $17,600 to incentivize nickel pig iron running purely with Filipino ore, because that involves a 30 percent higher processing cost.”

Strateco suing Quebec for $190-million over blocked uranium project – by Nicolas Van Praet (The Globe and Mail – December 12, 2014)

December 12, 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.

MONTREAL — Quebec mining junior Strateco Resources Inc. is suing the provincial government for $190-million in investment losses following its decision to block the company’s uranium project after years of preliminary work.

“This whole thing has left us extremely frustrated,” Strateco chief executive Guy Hébert said Thursday, noting that he put two mines into production in Quebec within a nine-year period while this project has taken a decade and still isn’t producing.

Strateco’s Matoush uranium project in Northern Quebec was once hailed as a key part of former premier Jean Charest’s Plan Nord, a multibillion-dollar effort to develop Quebec’s north, pinned on natural resource extraction. Today, it sits undeveloped, highlighting the confusion that’s come from Quebec City in recent years on mining activity.

Boucherville, Que.-based Strateco, once a $4 stock that now trades for pennies, said it invested an average of $20-million a year on the Matoush project from 2006 to 2012 on the basis that uranium exploration and mining are allowed in Quebec. The government granted the company some 30 permits to start work at the site, including permission to build an airstrip.

Angkor Gold: A gold standard for CSR – by Joseph Kirschke (Asia Miner – December 1, 2014)

December 12, 2014

http://www.asiaminer.com/

BANTEAY, Cambodia: Accessing this village eight hours north of Phnom Penh is daunting on the best of days, not least during the rainy season. On the main artery from the capital, buses, cars and tractor-trailers alike can be seen moored in the mud, all resembling helplessly grounded ships. Another 30-minute ride can foil the hardiest off-road vehicle at the gruelling final stretch.

Visitors are greeted by barefoot children supervised by adults and elderly, listless and weathered far beyond their years amid thatched huts and stray, emaciated oxen. But beneath the surface, something remarkable is unfolding nearby a mid-sized copper-gold deposit: Canadian junior Angkor Gold Corp is fulfilling a Corporate Social Responsibility (CSR) mandate – one unprecedented for a miner its size in the region. Stakeholder engagement through Free Prior and Informed Consent (FPIC) blooms here near a rainforest clearing of peppercorn, cassava and cashew patches, and classrooms full of students.

A clean slate

History hasn’t been kind to Cambodia. Over the half decade ending in 1979, the Khmer Rouge purged the intellectual class while bringing the country to ‘zero’ for an agrarian-based communist society after a brutal US bombing campaign. In all, two million lives were lost as the world stood by in silence; memories of forced starvation, mass graves and unspeakable atrocities continue to elicit tears to this day.

But Cambodia has turned the page, with its emerging market economy and small-scale mining industry an open book. Early next year, Angkor and Mesco Gold Cambodia will begin operating one of the country’s newest commercial mines while establishing Phnom Penh’s first continuing royalty revenue stream from mining.

Build refineries with money, not bitumen – by Andrew Leach (The Globe and Mail – December 12, 2014)

December 12, 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.

Andrew Leach is the Enbridge Professor of Energy Policy at the University of Alberta.

Albertans own the resource. Given how the cost of oil sands production has increased over the past decade, most economists would agree that we’re likely dissipating rents through a too-rapid pace of development. For projects such as Imperial Oil’s Kearl, the impact of multibillion-dollar cost-overruns will be softened by lower future tax and royalty payments.

Others, such as Suncor, paid only 7.4 per cent of gross revenues from oil sands operations in royalties to the province in 2014. Albertans should ask whether we are taking on more risk than we should and whether we’re giving away our bitumen to drive economic activity.

We could slow the pace of development and increase the effective charges on oil sands by requiring companies to build refineries or upgraders, or we could charge them more for access to the resource. It’s the preference for the former which I’ve never understood: Why tax via demands to build refineries companies would otherwise not build? Why not simply take a larger share in cash, and deploy the cash toward the construction of things we’d likely value more – such as hospitals and schools, or toward rebuilding the Alberta Heritage Fund?

Alberta has, in effect, already made the decision to do the opposite – to use government revenues to build a refinery.

Wataynikaneyap Power signs agreement with Aecom – by Ian Ross (Northern Ontario Business – December 9, 2013)

December 12, 2014

Established in 1980, Northern Ontario Business provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North. Ian Ross is the editor of Northern Ontario Business ianross@nob.on.ca.

(Please note this article is from December 2013)

http://www.wataypower.ca/

A new energy company is planning and permitting a transmission line into Ontario’s Far North to power up an underground mine and connect remote Aborginal communities that exist on expensive diesel generation.

A group of 18 northwestern Ontario First Nations have teamed up on a joint venture with Goldcorp, operators of the Musselwhite Mine, to carry out a $1-billion project to beef up power capacity in the region.

Wataynikaneyap Power (Watay Power) has a two-phase plan that begins with stringing a 230-kV transmission line 300-kilometre long north from Dryden to Pickle Lake by 2016, and eventually further north into the communities of the James Bay region by 2017.

The early stages of an environmental assessment for the first phase is underway and a corridor study is examining options for the second phase.