July 8, 2015 – Republic of Mining

Mining’s $143 Billion Stock Rout Signals Escalating China Fears – by Jesse Riseborough (Bloomberg News – July 8, 2015)

July 8, 2015

http://www.bloomberg.com/

Fears of faltering Chinese growth ignited a $143 billion meltdown in global mining stocks as investors confront sputtering demand in the world’s biggest consumer of commodities.

The Bloomberg World Mining Index of 79 producers dropped 17 percent in the past 10 days as prices for industrial metals such as copper, nickel and aluminum sank to six-year lows. The price of iron ore, a key profit driver for top-ranked BHP Billiton Ltd. and Rio Tinto Group, slumped 10 percent Wednesday to its lowest since at least 2009 as new supply floods the market.

China is set to grow at its slowest pace in a quarter of a century, sapping the country’s demand for commodities and crimping mining companies’ profits. Chinese authorities are struggling to contain a $3.5 trillion stock rout with a slew of market-boosting measures, rattling investors.

“It’s pretty bleak at the moment, there’s no getting away from that,” James Sutton, a portfolio manager at JPMorgan Chase & Co.’s $2 billion Natural Resources Fund in London, said in an interview. “Overwhelmingly it’s technical factors that are driving the severity of the move. Amazing moves to happen, just whipsawing around like this.”

We’ll manage mining, thanks – Editorial (Thunder Bay Chronicle-Journal – July 8, 2015)

July 8, 2015

Thunder Bay Chronicle-Journal is the daily newspaper of Northwestern Ontario.

Southern Ontario environmental groups should lobby more extensively in their own backyard before briefly flying over and criticizing development in ours.

Last week, Toronto-based Wildlands League said that mining exploration in the Ring of Fire has already caused damage to the Far North’s ecosystem. It released aerial photos showing exploration activity — rudimentary mining camps and a runway.

Wildlands claims that the photos challenge the idea of mining exploration having little impact on the area. What would Wildlands have exploration companies do — drop their employees into the bush by helicopter to sleep on the ground and conduct staking operations without cutting a single tree? The “impact” is a minor intrusion on a massive area of the Far North.

Meanwhile, one has only to look at the constant expansion of urbanization north of Toronto to see what new housing and strip malls can do for the environment — destroy it. The steady advance of development has gobbled up thousands of acres of once productive farmland and wildlife habitat.

INSIGHT-China’s ‘infrastructure for minerals’ deal gets reality-check in Congo – by Aaron Ross (Reuters U.S. – July 8, 2015)

July 8, 2015

http://www.reuters.com/

KOLWEZI, Democratic Republic of Congo, July 8 (Reuters) – W hen it was signed in 2007, China’s $6 billion ‘minerals for infrastructure’ deal in Congo stirred fears among Western countries that Beijing’s hunger for resources would erode their influence and saddle the vast central African country with unmanageable debt.

Eight years on, as Sicomines prepares to produce its first copper after long delays, the main lesson from the giant project is that investing in one of Africa’s most chaotic countries is a messy and frustrating business, no matter who you are.

While most mining projects in Congo go years before paying significant taxes under the mining code, Sicomines was meant to have an immediate economic impact. The government says the deal has already produced at least $800 million in infrastructure investment.

Chinese firms Sinohydro Corp and China Railway Group Limited are building roads and hospitals in exchange for a 68 percent stake in the Sicomines copper and cobalt mine, one of the largest in Africa with about 6.8 million tonnes in proven reserves.

China’s state-run Exim Bank and smaller Chinese banks are stumping up $3 billion for infrastructure plus a further $3 billion to develop Sicomines, with all the loans to be repaid with mining profits.

Conference Board cuts 2 N.W.T. mining projects from economic forecast – by Guy Quenneville (CBC News North – July 8, 2015)

July 8, 2015

http://www.cbc.ca/news

Two other advanced-stage projects look uncertain, says think tank

The Conference Board of Canada has dropped two N.W.T. mining projects from its latest Northern economic outlook and says two other projects probably won’t be included in its next forecast unless the conditions for raising money improve.

Tyhee N.W.T. Corp.’s Yellowknife gold project and Fortune Minerals’ NICO base metals project didn’t make the cut in the think tank’s latest forecast of future GDP growth in the territory, which will be released next week, says Marie-Christine Bernard, a forecaster with the conference board.

Avalon Rare Metals’ Nechalacho rare earth development project and North American Tungsten’s Mactung tungsten project likely won’t be included in the conference board’s next forecast either, added Bernard.

“When a project is just too far from obtaining financing, we take a second look [to see] if we postpone the project or pull it from the outlook altogether,” she said.

Canada faces questions from UN rights committee on mining industry – by Mike Blanchfield (Canadian Press/CTV News – July 7, 2015)

July 8, 2015

http://www.ctvnews.ca/

OTTAWA — The federal government is sidestepping a UN panel’s request to explain how Canadian mining and resource companies deal with human rights complaints.

Tuesday was the Canadian government’s first opportunity to address the UN Human Rights Committee in Geneva, which is conducting the first review in 10 years of Canada’s compliance to a major international treaty.

The committee, comprised of 18 experts, heard repeated concerns about Canada’s extractives industry, the treatment of aboriginals and anti-terrorism measures from two dozen groups, including the Canadian Human Rights Commission and Amnesty International.

The committee asked Canada to provide answers to 24 separate questions about how it implements the International Covenant on Civil and Political Rights — including how it monitors the human rights conduct of Canadian resource companies operating abroad, some of which face lawsuits alleging abuses.

“Please inform the committee of any measures taken or envisaged to monitor the human rights conduct of Canadian oil, mining and gas companies operating abroad,” said the list of issues given by the committee to Canada last fall in preparation for Tuesday’s testimony.

Why commodities cycles inflict pain (as we are now feeling) – by Robin Bromby (Investorintel.com – July 8, 2015)

July 8, 2015

http://investorintel.com/

InvestorIntel publisher Tracy Weslosky asked some pertinent questions on my posting Tuesday about low prices not, in the long term, affecting the validity of technology metals stories. In the 24 hours since I wrote that piece, we have seen the Chinese markets tumble further with 51% of A-shares in Shanghai and Shenzhen suspending themselves to avoid the carnage (boy, if only American stocks had had that option in October 1929). Then the base metals took more hits. Get this: in one session (Tuesday) on the London Metal Exchange nickel lost $1,050 a tonne. In one session!

Things don’t look too good, in other words. Tracy asks when we will turn around: I don’t know, and I doubt whether anyone else does either. But last year I self-published a short e-book on Amazon that attempted, not to explain what various metals do, but rather to pick some underlying, long-term factors that investors should keep in mind. Here’s a short excerpt:

In 2013 David Jacks, an economics professor at Simon Fraser University in Vancouver and a research fellow at the Massachusetts-based National Bureau of Economic Research, put the metals world into some sort of perspective. As he pointed out, the global economy witnesses protracted and widespread commodity booms once in a generation.

How Man-made Wetlands Help Treat Mine Wastewater – by Teresa Matich (Copper Investing News – July 6, 2015)

July 8, 2015

http://copperinvestingnews.com/

When a mine closes, mining companies must face the challenge of handling contaminated water and returning the surrounding environment to its natural state.

One way that some mining companies are handling mine wastewater is through the use of man-made wetlands. While that might seem novel, the use of constructed wetlands is anything but new.

The US Environmental Protection Agency notes that about 5,000 wetlands have been built in Europe, with about 1,000 in operation in the US — and that was in 2004. In addition to being used to treat wastewater from mines, constructed wetlands can be used to filter wastewater from other industries and to improve water quality in general. The process works by mimicking the complex filtration processes of natural wetlands, involving soils and vegetation as well as bacteria and other microorganisms.

Now, researchers are taking a look at using man-made wetlands to treat mine wastewater in Canada’s north. According to an article from Yukon News, scientists at the Yukon Research Center at Yukon College have been looking at the potential of man-made wetlands by running water containing copper, selenium, cadmium and zinc through eight Rubbermaid containers containing sand, gravel and wetland plants.

COLUMN-Miners paint rosy iron ore picture by skirting tough issues – by Clyde Russell (Reuters U.S. – July 8, 2015)

July 8, 2015

http://www.reuters.com/

LAUNCESTON, Australia, July 8 (Reuters) – Australia’s major iron ore miners have had a torrid year so far, battling low prices, engaging in an ugly slanging match with each other and dealing with persistent questions about the wisdom of their expansion strategies.

It was therefore not surprising when the mining industry’s peak body launched a report on Tuesday that puts quite a different spin on the iron ore industry.

The Minerals Council of Australia’s report, entitled “Iron Ore: The Bigger Picture”, points out the enormous benefits the industry has brought Australia and will continue to provide.

The major Australian iron ore miners, Rio Tinto and BHP Billiton, are members of the council and sit on the board of directors, but the country’s third-biggest producer, Fortescue Metals Group, is absent from the list.

The report doesn’t really make an effort to explain how the major miners got their forecasts on Chinese demand so wrong, and it glosses over whether they really expected the price to fall as low as it has.

National Post View: Ontario has to get its house in order now, while it still can (National Post – July 8, 2015)

July 8, 2015

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

If Charles Sousa ever tires of being Ontario’s finance minister, he might find a second career as a corporate communications expert. Specialty: disaster management.

When Moody’s Investors Service reduced the province’s debt outlook from stable to negative a year ago, Sousa responded that it was no big deal. “The bankers aren’t freaking here.… What has happened is the degree of revenue has not met expectations,” Sousa said, as if a revenue shortfall in a chronically indebted economy wasn’t worth troubling himself with.

Similarly, when Standard & Poor’s downgraded Ontario’s long-term credit rating on Monday, Sousa managed once again to find the tiny ray of sunshine in the gathering gloom. “Part of the basis for S&P’s stable rating is that Ontario has a stable, majority government,” he beamed. “The report,” he added, “further notes that Ontario has ‘had some success in bending its cost curve over the past several years.”

The provincial debt is on track to reach $298 billion this year, almost half the size of the federal debt in an economy barely a third as large; servicing it costs $11 billion a year, the third-largest expense in the budget, even at today’s record-low interest rates; and the province’s productivity, according to a recent study by the Centre for the Study of Living Standards, is growing at the second-slowest rate in the country: just 0.5% a year between 2000 and 2012.

Silver Wheaton Corp shares slump 12% on possible tax reassessment, payments of more than $200M – by Peter Koven (National Post – July 8, 2015)

July 8, 2015

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

The Canada Revenue Agency is seeking more than US$200 million in back taxes and penalties from Silver Wheaton Corp. in a probe that raises concerns about the company’s entire business model.

Shares of the Vancouver-based firm dropped 12 per cent on Tuesday after the CRA’s proposal became public, wiping out more than $1 billion of shareholder value. Investors were alarmed by the possibility the CRA’s back tax demands could grow much bigger in the months ahead, and that Silver Wheaton could have to pay higher taxes on all its future income.

Silver Wheaton, for its part, fiercely denied that it has ever avoided taxes. “We remain confident in our business structure, which we believe is consistent with that typically used by Canadian companies,” chief executive Randy Smallwood said on a conference call.

The CRA’s probe involves the complex issue of transfer pricing and deals conducted through Silver Wheaton’s foreign subsidiaries.

[Saskatchewan] A uranium mid-cap – by Kip Keen (Mineweb.com – July 8, 2015)

July 8, 2015

http://www.mineweb.com/

Denison, Fission argue a merger of equals means a unique position as uranium mid-cap.

Fission Uranium and Denison Mines announced a merger of equals Monday that, if consummated, combines a few, key high-grade assets in a premier uranium mining region of the world in terms of grade. In selling the marriage of two key uranium juniors focused on the Athabasca Basin, the sales pitch was largely focused on the benefit of being a bigger company in a sour mining market.

Fission has emerged in recent years with an important uranium discovery, called Triple R, and first resource that catapulted its prospects as a uranium developer. It has gone from a virtual unknown, chasing a U3O8-mineralized boulder train, to one of the relatively rare junior explorers with a market capitalization counted in the hundreds of millions (~C$400m).

That has helped it catch up to and near equal Denison, a Lundin Group company that has a more established position in the Athabasca Basin. Denison’s assets include another, deeper, but uber grade uranium deposit (60% Wheeler project) and a 22.5% stake in a sizeable uranium toll mill operated by Areva, which processes ore from Cameco’s Cigar Lake mine.

Potash Corp. confident of K+S bid, could raise if more value seen – by Pachelle Younglai (Globe and Mail – July 8, 2015)

July 8, 2015

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.

Potash Corp. of Saskatchewan Inc. is confident K+S AG shareholders would accept its $8.7-billion (U.S.) bid, but is open to raising the offer if its German rival could reveal more value not currently seen by the Canadian company, according to a source close to the deal.

K+S has rejected Potash Corp.’s offer of €41 ($45 U.S.) a share, saying it is too low and grossly undervalues its Legacy potash project in Saskatchewan. K+S has said it believes Legacy alone is worth €21 a share, which has led some analysts to speculate that K+S is looking for an offer of about €50 a share.

The source characterized that amount as inconceivable and said there was no chance that such an offer would materialize given the average takeover premium in Germany is 32 per cent and Potash Corp. is offering a 57-per-cent premium to K+S’s share price over the past year.

China panic crushes mining stocks – by Frik Els (Mining.com – July 7, 2015)

July 8, 2015

http://www.mining.com/

Billions wiped from mining sector as gold, silver prices fall and copper, iron ore prices plummet to 2009 levels amid Chinese stock market collapse

The value of base and precious metal miners and the diversified giants all fell on Tuesday as commodity prices dropped to fresh multi-year lows hit by the triple whammy of a stronger dollar and turmoil in the eurozone and China.

In New York trade on Tuesday copper for delivery in September dropped as much as 6% to a low of $2.39 per pound or around $5,260 a tonne, the lowest since July 2009 and down 16% so far this year.

Despite a rebound in late trade, base metals prices ended the day at multi-year lows. Nickel lost as much 9% hitting $10,637 a tonne, tin ended 4.4% lower at $13,700 a tonne while zinc gave up 3.7% to $1,934 a tonne.

Lead prices dropped more than 2% to $1,722 a tonne entering a bear market with a 20% decline since its May high. The same fate befell aluminum which declined 1.7% to $1,666 a tonne, more than 20% below its September highs. Crude oil despite a slight gain late in the day is now back into bear territory.

‘Scratch & Lose’ cards aim to bring attention to mining industry woes – by Susan Bradley (CBC News Nova Scotia – July 8, 2015)

July 8, 2015

http://www.cbc.ca/news/canada/nova-scotia

Mining association lobbying for fuel tax rebate, better tax break

Nova Scotia’s mining industry is seeking recognition as being an important employer in the province. As a result, the Mining Association of Nova Scotia has issued “Scratch & Lose” cards to illustrate how jobs are being lost here because of government policies.

“The mining and quarrying industry, all over the province, has lost 800 jobs since 2008,” association executive director Sean Kirby said. He said mining and quarrying employs 5,500 people and generates $420 million in economic activity, a big chunk of it in rural areas.

The association sent out the cards, modelled on lottery scratch-and-win cards, to bring home the message Nova Scotia’s global reputation in the mining sector is suffering.

“We feel we need to get that fixed so we can help the industry grow and create more jobs,” Kirby said.

Refracking the hot new craze sweeping across shale oil fields – by Dan Murtaugh, Lynn Doan and Bradley Olson (National Post/Bloomberg News – July 8, 2015)

July 8, 2015

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

The technique itself is nothing new. Oil crews across the world have been schooled on its simple principles for generations: Identify aging, low-output wells and hit them with a blast of sand and water to bolster the flow of crude. The idea originated somewhere in the plains of the American Midwest, back in the 1950s.

But as today’s engineers start applying the procedure to the horizontal wells that went up during the fracking boom that swept across U.S. shale fields over the past decade, something more powerful, more financially rewarding is happening.

The short life span of these wells, long thought to be perhaps the single biggest weakness of the shale industry, is being stretched out. Early evidence of the effects of restimulation suggests that the fields could actually contain enough reserves to last about 50 years, according to a calculation based on Wood Mackenzie Ltd and ITG Investment Research data.

If the word fracking has carved out a spot in the lexicon of Americans as the nation advances toward energy independence, then refracking, as roughnecks have begun calling it, could be next.