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Day: December 19, 2014

Tax hike, copper prices force Barrick to shutter Zambian mine – by Rachelle Younglai (Globe and Mail – December 19, 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.

Barrick Gold Corp. said it will suspend operations at its Zambian copper mine and record an impairment charge after the African country’s government more than tripled its mining royalties.

The suspension is the latest setback for Barrick, which borrowed heavily to acquire the Lumwana mine in 2011, when copper prices were soaring.

The royalty on open pit mining in Zambia will jump to 20 per cent from the current 6 per cent, under a new law that will go into effect Jan.1.

“The introduction of this royalty has left us with no choice but to initiate the process of suspending operations at Lumwana,” Barrick’s co-president Kelvin Dushnisky said in a statement.

Barrick, which employs 4,000 workers at Lumwana, said it would start cutting jobs in March after giving the Zambian government the mandatory two-months notice. The mine will be idled by the middle of the year.

It is unknown whether Barrick will be able to renegotiate rates with the government before it shutters the mine.

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Western firms reduce Eritrean miners to ‘abject slavery’, UK MPs say – by Mark Anderson (The Guardian – December 19, 2014)

http://www.theguardian.com/uk

Early day motion slams mining companies for using forced labour in collusion with repressive Eritrean government and adding to the country’s human exodus

Western mining companies operating in Eritrea are reducing workers to “abject slavery” at their mines and worsening a human exodus that is driving more than 5,000 people out of the country every month, a group of British MPs has said.

An early day motion, signed by 41 MPs, blasts Eritrea’s poor human rights record, condemning “arbitrary arrest and detention and compulsory military service” carried out by the government.

The bill “notes with concern the collusion between the government of Eritrea and the international mining companies from the UK, Canada and Australia, which is using the forced labour of Eritreans for work in extractive industries in conditions which have been described as abject slavery”.

MPs called on the Eritrean government to allow Sheila Keetharuth, the UN’s special rapporteur on human rights in Eritrea, to travel to the country and assess claims of widespread rights violations. Keetharuth has not been allowed to enter the secretive country since her appointment in 2012.

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Uralkali Gains Most in 5 Years on Output Goal, Share-Deal Delay – by Yuliya Fedorinova (Bloomberg News – December 18, 2014)

http://www.businessweek.com/

OAO Uralkali jumped the most more than five years in Moscow as the largest potash company raised its output goal even after one mine was halted by flooding and it delayed a share deal that would have left it less room to pay dividends.

“With increased capacity utilization at other mines, we intend to produce 12 million tons of potash this year to meet strong demand from our customers,” Chief Executive Officer Dmitry Osipov said in a statement. In August, Uralkali estimated annual output of the fertilizer of 11.5 million metric tons.

The potash producer advanced 14 percent, the biggest gain since May 2009, to 141.50 rubles by the close in Moscow trading, paring its loss for the year to 18 percent.

Uralkali is monitoring the Solikamsk-2 mine in Russia’s Perm region after water poured into the site last month. A sinkhole that has widened to 54 meters (177 feet) by 83 meters opened near the mine, swallowing up summer homes. Uralkali sees a high risk the mine will be completely flooded, forcing it to abandon a site contributing almost 18 percent of its capacity.

“We expect the accident to have an insignificant impact on our 2014 full-year output target,” Osipov said today.

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Vale SA: Overview of the world’s largest iron ore company – by Annie Gilroy (Market Realist – December 17, 2014)

http://marketrealist.com/

Operations

Vale SA (VALE) is a Brazilian multinational diversified metals and mining company. It is the world’s largest producer of iron ore and iron ore pellets and the world’s second-largest producer of nickel. It also produces manganese ore, ferroalloys, coal, copper, PGMs (platinum group metals), gold, silver, cobalt, potash, phosphates, and other fertilizer nutrients.

Vale has mineral exploration operations in 11 countries around the globe. It operates infrastructure systems in Brazil and other regions of the world, including railroads, maritime terminals, and ports that are integrated with its mining operations.

Its main operations are divided into four main lines of business:

  • Bulk materials – iron ore and pellets, manganese, ferroalloys, and coal
  • Base metals – nickel, cobalt, copper, PGMs and other precious metals
  • Fertilizer nutrients – potash, phosphate, and nitrogen fertilizers
  • Logistics infrastructure – railroads, maritime terminals, distribution centers, and ports
  • We’ll discuss these in detail in subsequent parts of this series.

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Will Cliffs Natural Resources Inc (CLF) Go Bankrupt? – by Troy Kuhn (Bidnessetc.com – December 19, 2014)

http://www.bidnessetc.com/

Cliffs Naturals Resources Inc stock has plunged over the last year, and its weak balance sheet points to a grim future

Cliffs Natural Resources Inc (NYSE:CLF) has had a miserable year.

The company has lost around three-quarters of its market capitalization, and Credit Suisse recently downgraded the iron miner’s price target to $1. Cliffs stock has been targeted by investors and traders as a prime candidate for a short sell, as falling iron-ore prices continue to take a toll on the miner’s earnings.

Cliffs generates 83.7% of its revenue from iron-ore sales, and iron-ore assets represent 85.8% of its overall assets. Cliffs has been in trouble for a couple of years now.

Casablanca Capital LLC recently won a proxy fight against Cliffs, which forced several changes to the miner’s board. Cliffs’ CEO and chairman Lourenco Goncalves took over the company’s management after the proxy fight.

Casablanca was of the view Cliffs should sell off its Bloom Lake mine, along with its US coal operations and Australian mines. In August, Mr. Goncalves announced a share repurchase program of $200 million, and sold a minority holding in a graphite mining company.

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‘There will be some blood’: Will Canada’s oilpatch be able to withstand the price onslaught? – by Yadullah Hussain (National Post – December 19, 2014)

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

There will be bloodletting and pain as the impact of low oil prices reverberates through the Canadian oilpatch, but the industry is entering the downturn from a position of strength, according to analysts.

“There will be some blood on the streets, but if companies can keep their cash to debt ratios down below three times or in some cases four times at least they are not facing a bankruptcy-type position,” said Jeremy Kaliel, executive director, institutional equity research at CIBC World Markets Inc.

The dramatic decline in oil prices has caught the industry off guard, leaving companies scrambling to cut capital expenditures and dividends and redrawing their 2015 plans.

The U.S. oil and gas industry is already feeling the heat as much of the shale boom was fuelled by a diet of cheap debt that looked affordable at US$100 per barrel. With U.S. crude now edging towards US$55, investors have fled.

“Some of these companies have up to 75% of their market cap wiped out,” said Rick Chamberlain, managing director at Houston-based Berkeley Research Group. “The ones that leveraged didn’t make the right financial decisions.”

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Canada needs to defend its own security interests in the Pacific, instead of relying on Americans – by Matthew Fisher (National Post – December 19, 2014)

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

The great ditherer, U.S. President Barack Obama, has finally begun his vaunted Asian pivot.

More top-of-the-line American fighter jets are to be based in the western Arctic, Hawaii and Asia. Submarines and surface warships, including an aircraft carrier, are being permanently repositioned right now from the Atlantic to the Pacific.

Australia, Japan, South Korea and half a dozen other Australasian countries have been spooked by Beijing’s territorial claims to just about all of the South China Sea and much of the East China Sea, and by its determination to project power and national prestige into the Pacific by building a vast fleet of new warships, including an aircraft carrier and scores of diesel-electric and nuclear submarines that can be armed with long-range cruise missiles.

The Harper government has not been shy about telling Canadians that they are citizens of a Pacific nation. Yet its response to China’s military priorities, which much of the world considers to be the overriding security dilemma of the 21st century, has been virtually non-existent aside from slightly enhancing the country’s slim contribution to U.S.-led military games in the Pacific.

Security there is not being discussed at any level by the government or by the opposition, although it is a subject of considerable and growing concern to Canada’s admirals and generals. Nor has Canada purchased anything for the military because of security tensions over its western horizon.

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Natural Resources Minister Greg Rickford says Ring of Fire oversight body needs overhaul – by Peter Koven (National Post – December 19, 2014)

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

TORONTO – The Ontario government wants Ottawa to pony up $1 billion for the massive “Ring of Fire” mineral belt, but the federal natural resources minister is warning that key structural challenges still need to be overcome.

Foremost among these is the fact Ontario has stacked the four board seats of the Ring of Fire’s development corporation with nothing but provincial bureaucrats. They are responsible for overseeing infrastructure development in the region.

“We’ve got a problem with that,” Greg Rickford said in an interview. “That’s not a responsible way to deal with taxpayers’ money.”

The Ring of Fire, named after the famous Johnny Cash song, is a vast but very remote mineral belt located in Ontario’s James Bay Lowlands. The region is thought to hold about $60-billion worth of metals, but the federal and provincial governments need to overcome enormous infrastructure challenges to draw investment from the mining sector, especially in an environment of falling commodity prices.

Queen’s Park committed $1 billion to building infrastructure, and has waged a very public campaign asking Ottawa to match it through the federal Building Canada infrastructure fund.

“Your commitment to providing matching federal funding is key to strengthening investor confidence for development of the [Ring],” Ontario mining minister Michael Gravelle said last week in a letter to Mr. Rickford.

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