August 26, 2015 – Republic of Mining

For Emerging Markets, 2015 Isn’t 1997 – by Greg Ip (Wall Street Journal – August 26, 2015)

August 26, 2015

http://www.wsj.com/

Echoes of 1997 exist, but financial crisis is less of a risk today than economic stagnation

The Federal Reserve was planning to raise interest rates, oil prices were sinking, and an emerging Asian country devalued its currency.

For emerging markets, there are unsettling similarities between 1997, when Thailand’s devaluation touched off a crisis that engulfed Asia and eventually Russia and Latin America, and the present, when China’s devaluation has triggered selloffs in currencies, stocks and bonds.

The good news is that a lot has changed since then. Today, falling currencies aren’t a sign of a brewing crisis, but a welcome shock absorber. The bad news is that China’s slowdown and the accompanying slump in commodity prices are exposing structural weaknesses that emerging economies have neglected for too long.

For emerging markets, the Fed’s apparent determination to tighten monetary policy stirs unpleasant memories. In 1981-82, 1994, and 1997-98, the fact or fear of higher U.S. interest rates squeezed countries and companies that borrowed in dollars, precipitating crises.

[History] How Silver Wrecked China – by Stephen Mihm (Bloomberg View – August 25, 2015)

August 26, 2015

http://www.bloombergview.com/

China’s devaluation of the yuan last week surprised many market observers. The yuan, which is pegged to the dollar, had been rising in tandem with the U.S. currency — in part because of expectations the Federal Reserve will increase interest rates soon. With China’s economy slowing, currency markets were pressing for the yuan to depreciate, and the Chinese government, seeking to boost competitiveness in export markets, gave in to the pressure and moved the peg.

This isn’t the first time the two countries’ monetary policies have been closely intertwined. In the Great Depression, China found itself vulnerable to the price of silver, thanks to the misguided moves of U.S. policy makers.

The Great Depression was a global crisis — almost. Every significant economy was devastated, with one notable exception: China. The reason was simple. In 1929, the U.S. and every other major nation pegged their currencies to gold. As the economic historian Barry Eichengreen has described, adherence to this standard punished countries by imposing “golden fetters” that led to crippling deflation. The fixed exchange rates of the gold standard helped transmit the monetary shocks around the world.

China, alone among the world’s major economies, operated under a silver standard in which the currency was pegged to a specific weight of that metal.

B.C. Mine’s Minister Bill Bennett responds to Alaskan criticism (CBC News British Columbia – August 25, 2015)

August 26, 2015

http://www.cbc.ca/news/canada/british-columbia/

B.C.’s Minister of Energy and Mines Bill Bennett is traveling through Alaska in hopes to ease tensions from residents there caused by a tailings pond dam bust at Mount Polley over a year ago.

The disaster not only sent 24 million cubic meters of contaminated water and mining waste into creeks and rivers near Likely, B.C., but it also raised concerns from Alaskan residents and environmental groups who say they don’t have a meaningful role in the prevention of a similar disaster which could affect their state.

“We don’t have any voice and British Columbia and Canada have no accountability. We’re taking all of the risks of these large-scale mining projects and receiving none of the benefits,” said Heather Hardcastle, a commercial fisher in Alaska.

Bennett is currently undergoing his week long tour of the northernmost U.S state which began on Sunday. He spoke to Chris Brown of CBC Radio’s Early Edition about the trip and the need to repair any damaged relationships with the residents there.

How do you respond to that issue that the people of Alaska don’t have a voice [in B.C.’s mining projects]?

Commodity Traders Feel Unusual Pain of a Market Rout – by Sarah Kent (Wall Street Journal – August 25, 2015)

August 26, 2015

http://www.wsj.com/

Firms find they can no longer thrive on volatility after building up a physical presence

LONDON—For years, the secretive club of the world’s largest commodities traders thrived on volatility and sometimes tiny price differences in the raw materials they trade—styling themselves as nimble middlemen able to profit whether markets were rising or falling.

These days, many outfits are very different animals and that’s causing unusual pain amid today’s commodities-market rout.

During a decade of booming commodities prices, many of these trading firms put billions of dollars into mines, pipelines and storage terminals. Those bets were supposed to help their traders understand supply and demand, while providing their trading floors with a ready source of supply. But they also made them more exposed to falling prices in markets in which they have built up a physical presence.

Just how much, however, is difficult to gauge, since many of the biggest traders are still privately held and disclose little. Even the trading floors of big, publicly listed traders—including Glencore PLC of Baar, Switzerland, and Hong Kong-based Noble Group Ltd.—are difficult to value because they have so few peers.

China, US Seek ‘Clean Coal’ Agreement as Industry Struggles (Associated Press/New York Times – August 25, 2015)

August 26, 2015

http://www.nytimes.com/

BILLINGS, Mont. — U.S. and China officials took a major step Tuesday toward an agreement to advance “clean coal” technologies that purport to reduce the fuel’s contribution to climate change — and could offer a potential lifeline for an industry that’s seen its fortunes fade.

The agreement between the U.S. Department of Energy and China’s National Energy Administration would allow the two nations to share their results as they refine technologies to capture the greenhouse gases produced from burning coal, said Christopher Smith, the Energy Department’s assistant secretary for fossil energy.

Terms of the deal were finalized late Tuesday. Officials said it would be signed at a later date.

Smith spoke after he and other senior officials from President Barack Obama’s administration met with representatives of China’s National Energy Administration during an industry forum in Billings. The discussions took place near one of the largest coal reserves in the world — the Powder River Basin of Montana and Wyoming, where massive strip mines produce roughly 40 percent of the coal burned in the U.S.

Canadian Nuclear Safety Commission slams Quebec uranium mining report – by Bertrand Marotte (Globe and Mail – August 26, 2015)

August 27, 2015August 26, 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.

MONTREAL — Tempers in some quarters of Quebec are flaring after the head of Canada’s nuclear safety commission slammed a report by the province’s environmental regulation agency for allegedly “misleading Quebecers and Canadians” on the safety of uranium mining.

In a damning letter to Quebec Environment Minister David Heurtel, the president and chief executive officer of the Canadian Nuclear Safety Commission – Michael Binder – says it “is very troubling to have the [provincial agency] present your government with conclusions and recommendations that lack scientific basis and rigour.”

Quebec’s Bureau d’audiences publiques sur l’environnement (BAPE) recently released a 626-page report recommending to the environment minister that it would be premature at this time to authorize development of a uranium mining industry in the province.

There are many uncertainties and unanswered questions about the environmental, health, social and other risks and concerns involved, the three-person BAPE panel, headed by former Le Devoir environment reporter Louis-Gilles Francoeur, cautions.

Iron and Steel: BHP’s big admission – by Kip Keen (Mineweb.com – August 26, 2015)

August 26, 2015

http://www.mineweb.com/

Steel demand in China is expected to be what BHP once thought.

HALIFAX – Just a couple of weeks ago I argued BHP and Rio should defend – in detail – their bullish steel demand forecasts in China given the growing number of forecasters that say the peak has already past.

Recall that Rio Tinto and BHP have long stuck to forecasts putting peak steel demand in China at, or over, a billion tonnes a decade or so from now. Others see it behind us already.

Well, I haven’t seen that defense, yet. We got a major revision of steel demand announced to the market instead.

In outlining its year-end financials August 25, BHP slashed its forecast of Chinese demand a decade or so from now by some 100 million tonnes steel.

A half year ago BHP argued peak demand would come in the mid-2020s somewhere around 1 billion to 1.1 billion tonnes.

Corruption, Death and Tin Mining – by Yoga Rusmana (Bloomberg News – August 25, 2015)

August 26, 2015

http://www.bloomberg.com/

At the end of a muddy track through plantations of oil-palm and cocoa on the Indonesian island of Bangka, three dozen men on wooden rafts off the beach are dredging black sand from the shallow bay.

The workers, near the village of Sungai Liat, are among hundreds of illegal tin miners on the island, the first link in a chain of trucks, smelters and fishing boats that smuggles the metal out of the country. Backed by a complex web of corruption and international payments, the dark sediment is transformed into the solder that ultimately ends up binding the electronics in everything from smartphones to cars.

The trail begins on two islands off the coast of Sumatra in a sea channel that connects Indonesia’s capital, Jakarta, to Singapore and Malaysia. These islands, called Bangka and Belitung, produce more than 90 percent of the tin in Indonesia, which is the world’s biggest exporter of the metal.

Most of that production comes from mining companies such as PT Timah, the world’s third-largest producer. Pits those operators abandoned and more marginal deposits are worked illegally by men and children using diesel-powered equipment on floating platforms off remote stretches of coast, or with high-pressure hoses on land.

Vale green-lights underground mine at Voisey’s Bay – by John Cumming (August 19, 2015)

August 26, 2015

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry. Editor John Cumming MSc (Geol) is one of the country’s most well respected mining journalists. jcumming@northernminer.com

The natural resources industry of Newfoundland and Labrador — beaten down as it is by the steep decline in iron ore and oil prices — has received a most welcome board-level confirmation from Vale that it will indeed pursue underground mining at its Voisey’s Bay nickel-copper-cobalt mine in northern Labrador, once the open pit is exhausted in 2020.

Based on current resources, that would add at least another 15 years of life to the mine, which started operations in 2005.

The Voisey’s Bay site consists of a 6,000-tonne-per-day open pit and a concentrator that produces nickel-copper-cobalt concentrate, plus a copper concentrate, at a rate of 40,000 tonnes of nickel in concentrate per year. The remote, coastal site is accessible by air and sea, with concentrate stored and shipped out on a seasonal basis before the site is locked in by ice.

The decision to go underground at Voisey’s ensures a steady feed of nickel concentrate to Vale’s new US$4.3-billion Long Harbour Processing Plant (LHPP) in the town of Long Harbour on southeastern Newfoundland’s Avalon Peninsula.

Silver Prices Fall to Six-Year Lows; Market Looks ‘Horrible’ – Analysts – by Neils Christensen (Kitco News – August 26, 2015)

August 26, 2015

http://www.kitco.com/news/

(Kitco News) – The adjective analysts and traders are using to describe the price action in silver Wednesday morning is “horrible,” as the market hit new six-year lows.

The selloff in silver picked up steam late Wednesday morning with September silver futures dropping below $14 an ounce, hitting an intra-day low at $13.910 an ounce.

Silver is the worst performing commodity among the entire metals complex, down more than 3.7% on the day, compared with a 1.4% decline in gold prices, a 2.7% drop in copper prices and platinum prices, which are up 0.4% on the day.

September silver futures last traded at $14.070, down 54 cents on the day.

“The chart is really ugly. While prices don’t move in a straight line, I don’t think we have seen an end to lower silver prices,” said Chris Beauchamp, senior market strategist at IG Markets.

NEWS RELEASE: Behre Dolbear Group’s Annual Where To Invest in Mining in 2015 (August 6, 2015)

August 26, 2015

http://www.dolbear.com/

TODAY it takes 10 years to discover, define, and determine the feasibility of a project and an additional 6 years or more until investors can expect returns from a greenfield mining construction project.

Markets have taken a volatile downward trend in recent months creating concern for host country governments and miners alike. Mineral prices have dropped over the last year. For example, iron ore and coal prices have fallen by half. The market correction has led to a sharp decline in foreign direct investment, forcing the governments of countries hosting new production to reassess their recent goals of extracting more benefit from the industry.

There is now a realization that governments must be more accommodating to remain competitive internationally. Lower export-related tax receipts are putting pressure on governments to adapt more austere budgetary measures.

Today, it takes six years or more until investors can expect returns from a greenfield mining construction project. It typically takes ten years to discover, define, and determine the feasibility of a project.

Family of former Centerra Gold CEO fears he will be ‘kidnapped’ to Kyrgyzstan – by Drew Hasselback (National Post – August 26, 2015)

August 26, 2015

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

The family of former Centerra Gold chief executive Len Homeniuk says he has been re-arrested in Bulgaria and fears he may be spirited away to Kyrgyzstan.

Homeniuk, who last week spoke with the Financial Post, spent 11 days in prison after he was arrested on July 27 in the Bulgarian town of Vidin, near the border of Romania. He was later transferred to house detention in a small apartment in the capital, Sofia.

Family members now say Homeniuk was re-arrested at that apartment at 9:30 local time Monday night, then whisked back to Vidin on Tuesday.

It’s the latest twist in a saga in which the former mining executive, who holds dual U.S.-Canadian citizenship, seems to be a pawn in on-going talks over the fate of a gold mine in Kyrgyzstan, a rugged Central Asian republic located along the Silk Road.

Marina Stephens, Homeniuk’s wife, was with him when the police came Monday night, and was able to visit him at the police station a short while later.

Noront files updated Ring of Fire technical report – by Staff (Northern Ontario Business – August 25, 2015)

August 26, 2015

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.

Noront Resources has filed an updated technical report for its Black Thor, Black Label and Big Daddy chromite deposits located in the Ring of Fire.

The company filed an NI 43-101 resource report for the properties, which were acquired for $27.5 million from Cliffs Natural Resources in April, on August 21.

Black Thor and Black Label are 100 per cent owned by Noront, while Big Daddy is a joint venture between Noront (70 per cent) and Canada Chrome Mining Corporation (30 per cent), a subsidiary of KWG Resources.

According to the report, Black Thor has 107.6 million tonnes in the measured category, grading at 32.2 per cent chromium; an additional 30.2 million tonnes in the indicated category, grading at 28.9 per cent chromium; as well as 26.8 million tonnes in the inferred category, grading at 29.3 per cent chromium.

U.S. Stocks Rise as Investors Look for Floor After 6-Day Selloff – by Joseph Ciolli and Roxana Zega (Bloomberg News – August 26, 2015)

August 26, 2015

http://www.bloomberg.com/

U.S. stocks advanced, amid their steepest losing streak in four years, as investors made another go at finding a floor after yesterday’s early rally evaporated.

New York Fed Bank President William Dudley said today that the case for raising interest rates in September is less compelling because of international financial and market developments.

The Standard & Poor’s 500 Index climbed 1.6 percent to 1,898.02 at 10:59 a.m. in New York, trimming an earlier 2.5 percent rise. The Dow Jones Industrial Average added 256.62 points, or 1.6 percent, to 15,923.06. The Nasdaq Composite Index gained 1.6 percent.

“This type of short-term rally shouldn’t be much surprise given recent weakness,” said Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, New Jersey, which oversees about $170 billion. “But nonetheless, investors are resetting their global growth expectations, and that’s having a deleterious effect in the longer term. The acceleration of the situation has investors on edge.”

COLUMN-BHP downgrades China steel forecast but keeps iron ore strategy – by Clyde Russell (Reuters U.S. – August 25, 2015)

August 26, 2015

http://www.reuters.com/

LAUNCESTON, Australia, Aug 26 (Reuters) – One of the first steps in recovering from a debilitating condition like alcoholism is admitting you have a problem. It seems BHP Billiton has finally started down this path with iron ore.

In announcing a 52-percent plunge in annual profit on Tuesday, Chief Executive Andrew Mackenzie also lowered BHP’s forecast for the peak in Chinese steel output to between 935 and 985 million tonnes by the mid-2020s.

This was down from the previously long held target of 1 to 1.1 billion tonnes that had underpinned BHP’s massive expansion of its iron ore mines, which has more than doubled output in the past five years to a total of 254 million tonnes in the 2014-15 financial year.

The scaling back of BHP’s China steel forecast leaves Sam Walsh, the chief executive of rival Rio Tinto, as one of the last holdouts for a peak above 1 billion tonnes.

Walsh said after releasing Rio’s results, which saw a 43-percent drop in underlying earnings, that his company was “holding the line” on the 1 billion tonne by 2030 forecast, saying this represented growth of just 1 percent per year over the period.