August 20, 2015 – Republic of Mining

Bible in one hand, shovel in the other: Tony Abbott is for coal – by Laura Tingle (Australian Financial Review – August 20, 2015)

August 20, 2015

http://www.afr.com/

Booms and busts used to be in the very marrow of the Australian experience. The gold rushes remain a staple of our education. Until the last 20 years or so of continuous growth, the spectacular nature of the booms and busts in the economy set the rhythm and drama, not just of personal fortunes but politics.

Yet even in recent decades, there has been nothing like a mining boom to stir a swarm of political flies.

The trouble now is that the longest and most spectacular boom in our history has ended. But politicians don’t seem quite sure what to do about it.

Where to go next when your rhetoric is all supposed to be about jobs and growth, and reassuring people that the economy will continue to be okay, even as the boom fades?

You could focus on new areas of growth – for example, the government recently announced a doubling of the NBN workforce to 9000 – or you could grab on to signs that the resources boom isn’t entirely over with a project that is boasting will generate (a contested) 10,000 jobs.

Glencore CDS Costs Soar On Poor Results – by Christopher Whittall and Laurence Fletcher (Wall Street Journal – August 20, 2015)

August 20, 2015

http://www.wsj.com/

Costs have tripled since last September as company’s earnings drivers trade at six-year lows

The price investors must pay to insure against a default on Glencore PLC’s debt ballooned after poor results from the commodities giant.

As of Thursday, investors had to pay $330,000 to insure against $10 million of Glencore debt for five years using credit default swaps, or CDS, according to data group Markit. That is more than three times the price of insuring against a default last September. At the end of last week, it cost $294,000.

The Swiss mining firm reported a sharp half-year loss on Wednesday amid a slump in commodity prices and a slowdown in the Chinese economy. Prices for copper and oil, two of Glencore’s earnings drivers, are trading at or near six-year lows.

Andrey Kuznetsov, a credit analyst at Hermes Investment Management, which oversees £30 billion ($47 billion) in assets, said the main takeaway from Glencore’s earnings call was that the company was caught off guard by the slowdown in China.

“They are involved in metals and trading, so you would expect them to have a better understanding of what’s happening in China.

[Mining Pollution] When a River Runs Orange – by Gwen Lacheltaug (New York Times – August 20, 2015)

August 20, 2015

http://www.nytimes.com/

Gwen Lachelt is a La Plata County commissioner.

Durango, Colo. — THE recent mining pollution spill in my corner of Colorado — La Plata County — is making national news for all the wrong reasons. Beyond the spill and its impact on everyone downstream, the underlying causes are far more worrisome and dangerous than just a mistake made by the Environmental Protection Agency.

Yes, it is a cruel irony that an E.P.A. contractor, while trying to clean up pollution from old mines, instead made the problem much, much worse. The jaw-dropping before-and-after photos contrasting the pre-spill Animas River I know and love with the subsequent bright orange, acidic, heavy-metal-laden travesty are sadly accurate.

The Animas River is the heart of La Plata County. Our jobs rely on it, people the world over travel here to raft and fish it, and farmers and ranchers feed their animals and water their crops with it. But more than that, it’s a member of the community. We see it every day. We play in it. We work with it. And of course we drink it. It’s no overstatement to say that La Plata County as we know it would not exist without the Animas River.

Fine tuning Barrick – by Kip Keen (Mineweb.com – August 20, 2015)

November 5, 2015August 20, 2015

http://www.mineweb.com/

A subtle shift in analyst perspective on the gold producer.

Broadly of course, Barrick’s stock has been pummeled by the bearish gold market that relatively speaking, tends to punish, and conversely reward, miners far more than the yo-yo-ing gold price. But more specifically, Barrick has also been punished, harder than some, for its past failings in acquisitions, strategies and appetite for debt.

This has made for one of those perversions of the market, at least in very simplistic terms, where in recent years Goldcorp, more the market darling, has exceeded Barrick by market cap despite Goldcorp doing half the production and the fact Barrick has longer life assets. As it stands, it is C$16.4 billion to C$12 billion Goldcorp market cap versus Barrick.

In evening out that playing field, Barrick’s John Thornton, Executive Chairman, has some ways to go. But he may be starting to make a little headway.

With much fanfare (at least from Barrick) the company outlined its back to the future strategy earlier this year. It’s a story of cuts and tweaking of management to, it’s hoped, increase efficiencies at operations. It’s also a story of mine sales and debt reduction.

COLUMN-Glencore caution, Rio optimism over China? You decide – by Clyde Russell (Reuters U.S. – August 20, 2015)

August 20, 2015

http://www.reuters.com/

LAUNCESTON, Australia, Aug 20 (Reuters) – Take two top mining executives and ask them about China. One says he cannot fathom what’s happening in the world’s biggest commodity consumer, the other says he remains unashamedly bullish.

This isn’t an exercise to determine which executive is right and which is wrong, rather it underscores just how difficult it has become to make long-term investment decisions at the current stage of the commodity cycle. Ivan Glasenberg, the outspoken chief executive of Glencore , was candid when presenting the London-listed miner’s 29-percent slump in first half earnings on Wednesday.

“(Commodity demand is) difficult to call at the moment with what we see in China,” Glasenberg said. “That’s the one we are all struggling to read, demand in China.”

Battling to understand the dynamics of President Xi Jinping’s “new normal” isn’t confined to Glasenberg, with views on China currently ranging from the doom and gloom of an imminent hard landing to the more benign gradual, if somewhat disorderly, transition toward a more sustainable, consumer-driven economy.

Oil producers brace for more cost-cutting ‘pain’ as prices threaten to fall below $40 – by Yadullah Hussain (National Post – August 20, 2015)

August 20, 2015

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

Oil’s price plunge to $40 prices this week will force producers to contemplate more cost-cutting measures at a time of great austerity.

The decline continued Thursday with futures sliding as much as 1.4 per cent in New York, trading near US$40 a barrel, after losing 4.3 per cent on Wednesday.

West Texas Intermediate for September delivery, which expires Thursday, declined as much as 59 cents to $40.21 a barrel on the New York Mercantile Exchange, and traded at $40.30 at 11:30 a.m. London time. The contract slid $1.82 to $40.80 on Wednesday, the lowest close since March 2009. The more-active October futures lost 59 cents to $40.68.

The plunge began Wednesday after the U.S. Department of Energy slashed US$6 off its average oil price estimate this year to US$49 per barrel, citing increases in global oil inventories.

“We get down to US$40 level, companies will have a hard time just to sustain their businesses,” Kyle Preston, analyst at National Bank Financial Inc. said in an interview.

Why Ontario should look west, not east, for hydro power – by Wil Tishinski (Globe and Mail – August 20, 2015)

August 20, 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.

Will Tishinski is former vice-president of power supply planning (retired) for Manitoba Hydro.

It was recently reported that Ontario is looking to buy power from Newfoundland and Labrador. This is the wrong direction. Ontario should be looking westward to Manitoba, which is more accessible.

Manitoba currently receives 75 per cent of its electricity requirements from the Nelson River, which has an ultimate capacity of 6,000 megawatts. Only half of that potential is developed today. To meet its own needs, Manitoba will build the generating sites incrementally, with the last plant being constructed perhaps 50 years down the road.

It makes more sense to develop the unharnessed 3,000 MW now and to share at least half that with Ontario. The entire block of power could be transmitted by direct-current transmission to a converter station near Dryden, Ont.

From Mining to Refining: Low Commodity Prices Force Shift at Industry Giants (Wall Street Journal – August 20, 2015)

August 20, 2015

http://www.wsj.com/

Share prices of many mining companies have fallen sharply this year

The world’s largest mining companies have plenty of nickel. Now they are scrounging around for nickels.

In a sign of desperation amid plunging commodity prices, mining companies are delving into low-margin businesses—traditionally the domain of the industry’s middlemen—for new sources of revenue.

Rio Tinto PLC for the first time has started to refine other companies’ copper ore. Brazil’s Vale SA, the world’s largest iron-ore producer, has begun mixing minerals to make custom supplies for buyers. U.S. coal miner Murray Energy Corp. in June launched its own trading unit.

The mining companies are seeking to alleviate the financial pressure from tumbling raw-materials prices. With industrial metals and coal at lows last seen during the financial crisis, the share prices of many companies have collapsed by more than half in the past year. A global supply glut and weak demand have spurred the selloff in futures markets and mining stocks.

Opinion: Put the brakes on mineral development – by Stewart Phillip and Rob Sanderson (Vancouver Sun – August 19, 2015)

August 20, 2015

http://www.vancouversun.com/

Grand Chief Stewart Phillip is president of the Union of B.C. Indian Chiefs. Rob Sanderson is second vice-president of Central Council of the Tlingit and Haida Indian Tribes of Alaska and co-chair of the United Tribal Transboundary Mining Work Group.

This month marks the one-year anniversary of the Mount Polley tailings dam failure, Canada’s worst mining disaster.

That catastrophe in central British Columbia, which unleashed 24 million cubic metres of mine contamination into nearby lakes and waters, served as a wakeup call for everyone who values clean water, wild salmon, fishing and tourism, and ways of life intrinsically tied to pristine lands.

For First Nations and Alaska Native tribes, in particular, Mount Polley was a lightning rod. The disaster brought us together as never before. Alaskans have a clear stake in what’s happening in neighbouring B.C.; at least 10 large mines in the transboundary region have the very real possibility of tainting Alaska’s downstream waters and the billion-dollar seafood and tourism industries these rivers sustain. More so, these developments have the potential to harm our shared rivers, our coastal waters, and the salmon our cultures rely on.

The real reason the copper price is being crushed – by Frik Els (Mining.com – August 19, 2015)

August 20, 2015

http://www.mining.com/

The turmoil on Chinese share and currency markets, and worries about the true extent of the country’s economic slowdown continue to rattle investors.
Given its widespread use in manufacturing and construction coupled with the fact that China consumes 45% of the world’s supply, copper has been bearing the brunt of this bearishness.

On Wednesday in New York trade December copper contracts were trending weaker again after breaching the key $5,000 level yesterday for the first time since the global financial crisis.

Bloomberg Intelligence analyst Kenneth Hoffman spoke to MINING.com after returning from a tour of China to find out the true state of copper demand in the country.

Hoffman has been visiting China for the past twenty years and in 2015 saw a sea-change in sentiment inside the world’s second largest economy:

Time to ’embrace’ Sudbury’s mining heritage – by Mary Katherine Keown (Sudbury Star – August 20, 2015)

August 20, 2015

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

Up, up and away we rose, into the clouds and swirling winds over Copper Cliff. It was my first-ever helicopter ride and an exhilarating way to spend 15 minutes on a Wednesday afternoon.

My hawk’s eye view of the Vale smelter complex was unparalleled and unforgettable. The tailings ponds were all shades of Pantone pretty and deep in the belly of the vast property, there was a gigantic hole in the ground. It looked like it may have been an old quarry or open-pit mine, long disused and perhaps one of the first spots in town to be mined.

The ride, courtesy of the Canadian Shield Consultants Agency, was part of the annual North American Mining Expo (NAME). The trade show extravaganza included more than 300 vendors and exhibitors from around the world — many with massive multi-wheeled, motorized rigs in tow — spread over the Copper Cliff curling club, McClelland Arena and Veterans Road.

Jay Cornelsen, national publicity director with Canadian Trade-Ex, suggested the Nickel City offers unparalleled strengths in terms of mining expertise and innovation.