July 22, 2015 – Republic of Mining

Canada’s Energy and Mines Ministers meet amid downturn (Northern Miner – July 21, 2015)

July 22, 2015

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry.

VANCOUVER — On July 20 Canadian federal, provincial and territorial energy and mines ministers gathered in Halifax, N.S., for the 72nd annual Energy and Mines Ministers’ Conference (EMMC). The event comes at a time when the mining industry is looking to government for heightened assistance in weathering what has become a prolonged recession marked by falling exploration expenditures, project investment and share prices.

If the pitfalls of a struggling global economy and ailing commodity prices were not enough for the ministers to mull over, however, there are also a bevy of socio-political issues across the country that include waste management safety, sustainable development and Aboriginal relations.

In fact, the Canadian Mineral Industry Federation (CMIF) released a brief — in partnership with The Mining Association of Canada (MAC) and Prospectors & Developers Association of Canada (PDAC) — aptly labeled Weathering the Storm, which focuses on three “priority issues” as articulated by members of the mineral industry across the country.

Quick gold mine closures not expected despite bullion’s fall – by Nicole Mordant (Reuters U.S. – July 21, 2015)

July 22, 2015

http://www.reuters.com/

Bullion’s slump to a five-year low this week is heaping new pressure on an already stressed gold mining industry but mine closures are not expected to happen quickly as operators instead try to reduce costs to keep operations going.

Exploration spending, capital to sustain operations, dividends and head office costs, including use of corporate jets, could face more cuts even after gold miners slashed costs by about a fifth since 2012 as bullion fell.

If gold was to stay around its current price of $1,100 per ounce, there could be some fairly significant mine closures over time, said Chuck Jeannes, the Chief Executive of Goldcorp Inc , the world’s biggest gold miner by market value.

“But I always warn people that they are not going to happen as fast as you think they might because mine general managers are really good at keeping their mines alive,” he said in an interview.

Mine managers could defer capital spending, crimping future growth, and raise the grade of ore that can be mined, to make mines more profitable.

Coal’s Fortunes Keep Getting Worse – by James Stafford (Huffington Post – July 21, 2015)

July 22, 2015

http://www.huffingtonpost.com/business/

James Stafford is the editor of Oilprice.com.

The coal industry is in uncharted territory. After decades of strong financial numbers and dominance in the electric power sector, coal producers are starting to fall apart faster than anyone could have anticipated. SNL Financial has produced some jaw dropping data on the quickly deteriorating coal industry, with a horrific performance in the second quarter.

The U.S. coal mining sector has exhibited an unprecedented wave of turmoil in just the last few weeks.

Walter Energy, an Alabama coal miner, announced on July 15 that it is filing for bankruptcy. Senior lenders will see their debt turned into equity, and if the company cannot turn the ship around, it will more or less sell off all of its assets. “In the face of ongoing depressed conditions in the market for met coal, we must do what is necessary to adapt to the new reality in our industry,” Walter Energy’s CEO Walt Scheller said in a press release.

Alpha Natural Resources, a top producer of metallurgical coal (used for steelmaking), was delisted from the New York Stock Exchange because its share price was “abnormally low.” The company is eyeing the possibility of declaring bankruptcy protection.

[Canada/Ontario] Mining needs better policy – Editorial (Thunder Bay Chronicle-Journal – July 22, 2015)

July 22, 2015

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

Provincial and federal governments need to provide more support to the country’s mining sector. The industry is a wealth generator, employing hundreds of people in Northwestern Ontario and across the country, and providing millions of dollars in wages to workers and taxes to government.

Communities like Red Lake and Pickle Lake were created by gold mining booms that continue today. Thunder Bay and other communities in the region supply workers, equipment and expertise to the sector. Very few communities are not receiving some economic spin-offs from mining, a industry that still faces a number of challenges to growth.

As Canada’s energy and mines ministers meet for their 72nd annual conference this week, the country’s exploration and mining industry is asking governments to turn their attention to several areas that are challenging the sector during this period of economic downturn and uncertainty.

A report prepared by the Mining Association of Canada (MAC) and the Prospectors and Developers Association of Canada (PDAC) has detailed three policy priorities that will help the industry overcome current challenges and capitalize on the opportunities before it.

Ontario mineral exploration slows to a crawl (CBC News Sudbury – July 22, 2015)

July 22, 2015July 22, 2015

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

Low metal prices, government red tape, jittery investors conspire against exploration industry

Mineral exploration in northern Ontario has been on a steady decline for the past four years, and that’s causing some to worry.

The executive director of the Ontario Prospectors Association is used to the cyclical nature of the exploration industry, but he said he isn’t used to this.

“Exploration in northern Ontario is the lowest it’s been, probably since I’ve been in the business, and I’ve been in the business 30 years,” Garry Clark said.

He estimates the number of people employed in the industry is half of what it used to be, when metal prices were up.

Figures from the Ministry of Northern Development and Mines confirm the severity of the situation. The number of active claims in the province has dropped by more than 16,000 thousand in the last five years. And exploration spending in Ontario is down about $100 million, compared to last year.

Pictures from the atomic age: The AGO’s Camera Atomica exhibit is oddly poignant – by David Berry (National Post – July 21, 2015)

July 22, 2015

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

The first official image in Camera Atomica is an x-ray; the first x-ray, actually, taken by physicist Wilhelm Rontgen, of his wife’s hand (her wedding ring is still visible as a rather large lump).

The discovery of this miraculous technology — it “makes the invisible visible” curator John O’Brian proudly proclaims — was an accident. But it was also our first, fumbling step into the atomic age, our first grasp of a power that would come to (quite literally) rewrite the DNA of the human experience.

“When Rontgen’s wife saw it, she was shocked. She said, ‘I’ve seen my own death,’” O’Brian explains, pointing to the image and pausing for dramatic effect. “That sort of predicted some of the worst sides of it. But this shows you there’s really a fatal interdependence between the camera and nuclear fission.”

O’Brian’s exhibit gathers some of the most powerful photographic images of the last 120 years of nuclear power — not, he says, to get us to contemplate our own deaths, but to bring attention back to an issue that’s still humming in the background of our everyday life.

Lifton on asteroid mining rare earths and Molycorp’s Mountain Pass – by Jack Lifton (Investor Intel – July 20, 2015)

July 22, 2015

http://investorintel.com/

Some rules don’t change. But that doesn’t mean that our poorly educated journalists have to know of them or even have to understand them, when they are described or applied. One rule, frequently swept under the rug by junior mining promoters eager to take advantage of journalistic ignorance can be stated as:

“In order for any deposit to be developed into a profitable mine the infrastructure to access it must already exist, or, if not, then its costs must be included in the feasibility study.”

Trivially this means for example no commercial mining until I can get to the deposit and either process the material to a commercial form at the site or move it to a processing site without logistics’ costs destroying the project economics.

A corollary of the above “rule” is that the cost of infrastructure must be quantified and covered before the project enters development. Now, the above rules of economics having been stated let’s get to what I am talking about today.

Gold majors skating close to the precipice – by Lawrie Williams (Mineweb.com – July 22, 2015)

July 22, 2015

http://www.mineweb.com/

The latest gold price declines are putting even the majors close to loss-making territory, and the industry’s long-term future could be seriously damaged.

LONDON – Let’s face it, in the light of the latest gold price falls, the gold mining sector now desperately needs something that can set it back on a positive track. Gold stocks are sitting at multi-year lows and for even the gold mining majors their 2015 AISC predictions are now getting perilously close to the levels where gold is currently trading.

Here’s a list of the World’s top 5 gold miners and their announced Q1 AISCs and AISC guidance for the current year.

Rank Company Q1 2015 AISC 2015 AISC costs guidance

1. Barrick Gold $927 $860-895
2. Newmont Mining $849 $960-1020
3. AngloGold Ashanti $926 $1000 – $1050
4. Goldcorp $895 $875-950
5. Kinross Gold $964 $1000-1100

Source: Company reports.

Widespread Mine Closures To Follow The Commodity Price Collapse – by Tim Treadgold (Forbes Magazine – July 21, 2015)

July 22, 2015

http://www.forbes.com/

Write down today. Close down tomorrow.

That’s the outlook for the minerals and metals complex as a glut of virtually everything, from gold to oil, and from iron ore to aluminum, forces big asset value write downs and sets the scene for wholesale mine closures over the next six-to-12 months.

BHP Billiton , the world’s biggest mining company, kicked off the current round of asset-value write downs by last week wiping $2.8 billion off the value of its U.S. onshore oil and gas business. Anglo American followed suit yesterday, booking a $4 billion write-down of a Brazilian iron ore mine and a number of Australian coal assets.

There’s a lot more to come because those decisions were made before the latest plunge in commodity prices, including oil dipping back below $50 a barrel and gold dropping to a five-year low of less than $1100 an ounce.

Not So Super Cycle

By some measures the price of industrial commodities are back to where they were in 2002, the year which unofficially marked the start of a so-called “super cycle” resources boom that investors were told would keep prices “stronger for longer”.

Mining Giants’ Push for Iron Ore Tests Mettle of Smaller Miners – by Rhiannon Hoyle (Wall Street Journal – July 22, 2015)

July 22, 2015

http://www.wsj.com/

The four biggest iron-ore suppliers accounted for 71% of all iron-ore shipments in 2014, and they aren’t slowing down

SYDNEY—Big Mining is tightening its grip on the iron-ore market.

As industry giants such as Rio Tinto PLC and BHP Billiton Ltd. dig up ever more of the steelmaking ingredient for export, the resulting supply glut has caused prices to slump. But the majors’ tactics are helping them squeeze out smaller rivals, increasing their oligopoly’s share of global trade in the ore.

The world’s four biggest iron-ore suppliers—Rio and BHP along with Brazil’s Vale SA and Australia’s Fortescue Metals Group Ltd.—accounted for 71% of the world’s iron-ore shipments in 2014, up from an average of 65% from 2009-13, according to Citi estimates. The bank now reckons that market share for the four could rise to 80% by 2018.

There is no sign the majors are ready to pull back.

BHP to open new coal mine in Borneo amid concern for orangutans – by Peter Ker (Sydney Morning Herald – July 22, 2015)

July 22, 2015

http://www.smh.com.au/

If you thought Shenhua and Adani had raised hackles with their plans to develop new coal mines in controversial parts of Australia, you ain’t seen nothing yet.

In a move likely to enrage environmental campaigners, BHP Billiton quietly flagged on Wednesday that it would soon start production of coal at the Haju mine in Indonesian Borneo. Haju will initially produce about 1 million tonnes of coal a year, which is pretty small compared to the coal mines BHP already operates in Queensland.

But Haju could be the start of a much larger coal project for BHP in Indonesian Borneo known as IndoMet, which is believed to have potential to produce around 5 million tonnes of coal per year, if it is ever fully developed.

That remains a big “if” given the depressed prices for coal, but Wednesday’s confirmation that first production will begin within 12 months will be a blow to environmental campaigners who have lobbied BHP and its joint venture partner Adaro Energy for the best part of a decade to abandon the project.

UPDATE 1-K+S rejects Potash Corp’s new attempt at takeover talks – by Patricia Weiss (Reuters U.S. – July 21, 2015)

July 22, 2015

http://www.reuters.com/

FRANKFURT, July 21 (Reuters) – Salt and fertilizer group K+S has rejected a new attempt by Canada’s Potash Corp to entice the German company into takeover talks, a K+S spokesman said on Tuesday.

K+S earlier this month rebuffed Potash Corp’s 7.9 billion euros ($8.65 billion) proposed bid of 41 euros per share as too low and suggested the suitor was planning to shrink the company.

A K+S spokesman said Potash Corp Chief Executive Jochen Tilk had met the state premier of the German regional state of Hesse – where K+S is headquartered – and had handed over documents about Potash Corp’s plans to preserve jobs after a takeover. K+S was also given the documents.

“We’ve looked into these statements and concluded that they contain nothing substantial beyond what we had already been given in writing. That’s why we still see no basis for talks,” the spokesman said.

Let’s Be Honest About Gold: It’s a Pet Rock – by Jason Zweig (Wall Street Joural – July 17, 2015)

July 22, 2015

http://www.wsj.com/

Gold is supposed to be a haven amid hard times and soft money. So why, even as Greece has defaulted, the euro has sunk against the dollar, and the Chinese stock market has stumbled, has gold been sitting there like a pet rock?

Trading this week below $1,150 an ounce, the yellow metal has fallen more than 39% since it peaked at nearly $1,900 in August 2011. Since June 2014, investors have yanked $3 billion out of funds investing in precious metals, estimates Morningstar, the financial-research firm; total assets at precious-metal funds have shrunk 20% in 12 months.

“A lot of investors have become disillusioned with gold,” says Suki Cooper, head of metals research at Barclays in New York. “Safe-haven demand hasn’t been strong enough to lift prices, but has only been strong enough to keep them from falling.”

Many people may have bought gold for the wrong reasons: because of its glittering 18.7% average annual return between 2002 and 2011, because of its purportedly magical inflation-fighting properties, because it is supposed to shine in the darkest of days.