Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

If Murray Pezim were around today, the larger-than-life character would approve of giving the award that bears his name to Bob Quartermain, president of Vancouver’s Silver Standard Resources. The two men met amidst the diamond drill rigs at the famous Hemlo gold find in the early 1980s. Pezim was overseeing the work of his company, International Corona Resources, and Quartermain was there on behalf of Teck. Interesting that the two companies later became partners in developing and operating the David Bell gold mine.

Quartermain is this year’s winner of the Murray Pezim Award, presented by the Association for Mineral Exploration British Columbia. It is given to an individual for “perseverance and success in financing mineral exploration.” With over 20 years at the helm of Silver Standard, Quartermain qualifies by the “perseverance” criteria.

As for financing, Quartermain excels at that, too.

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Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

What do Eric Sprott, Rob McEwen and Frank Guistra have in common? They have volunteered to be the prizes in a draw of people who donate to The Townships Project, a cause supported by the Women in Mining (WIM) networks in Vancouver and Toronto. Three winners whose names are drawn will have a one-on-one meeting with a mogul.

The Townships Project is a Canadian-based registered charity that supports microloans for South Africans (mainly women) to start up or expand their own sustainable business. A $50 loan can change a life by breaking the cycle of poverty. And because loan repayment is better than 95% the money keeps on working over and over again.

WIM aims to raise $250,000 for the Townships Project. The campaign got off to a great start when its Bedrock sponsor, Homeland Energy, donated $50,000. Corporate sponsors and individuals will be recognized for donations of $25,000 (gold), $10,000 (silver) and $2,500 (patron). Every donation brings the project closer to its goal, and small donations add up quickly. But hurry. The contest ends on March 1, and the winners will be announced at the Prospectors and Developers Association of Canada convention in Toronto on March 3, 2009.

Canada’s WIM network is 600 strong, half in Toronto and half in Vancouver. This is the group that raised $239,000 for breast cancer research in 2007. Support WIM. Go to www.Women-In-Mining.com to donate today.

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

“Xstrata Nickel today [Feb. 9, 2009] announces plans to restructure its Sudbury operations in response to ongoing challenging market conditions.” With those words the Swiss mining giant axed 686 jobs in Sudbury, Ont., and touched off a firestorm of protest from residents and union leaders.

Some of the closures were expected. In November 2008, Xstrata said it would accelerate closure of the Craig and Thayer Lindsley mines that were near the end of their productive lifespans. Operations there ceased with this month’s announcement.

The Fraser mine complex will be placed on care-and-maintenance, and the Strathcona mill will run with two work shifts rather than four due to the reduction in feed tonnage. The smelter is expected to operate at a level similar to 2008 thanks to concentrates from the new Nickel Rim south mine and Xstrata Nickel Australasia. Concentrates from the Montcalm and Raglan mines, as well as third-party feed, will also be treated.

Not all the news is bad, just the loss of 686 jobs.

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Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

The global diamond industry is suffering the same economic downturn as the rest of the world. Consumers who may be out of work or watching their investments shrink are in no mood to buy luxury goods. The result is falling diamond prices as demand shrinks.

Diamond prices have been under pressure for over a year. One Canadian producer has already bit the dust. Tahera Diamond Corp. closed its Jericho mine in Nunavut and filed for protection under the Companies’ Creditors Arrangement Act in January 2008. Its assets are for sale.

Even the largest diamond producer is feeling the pinch. Word has reached us from Diamond World Magazine of Mumbai, India, that De Beers Canada plans to suspend operations at its Snap Lake mine in the Northwest Territories for a total of 10 weeks this year. This is on top of the 105 contract workers that were laid off in November 2008. Remaining employees will be asked to take vacations or accept salary adjustments to cover a six-week closure this summer and a further four-week closure at the end of this year.

De Beers January sales of rough diamonds to selected customers was at a 25-year low. The January 2008 sales garnered $650 million, but this year’s offering drew only an estimated $80 million to $150 million. The drop is a reflection of the depth of economic woes in the United States, where consumers purchase 50% of the world’s diamonds.

I’ll do my part to support the diamond industry. I’m saving towards the purchase of a Canadian diamond. Too bad the federal budget didn’t offer a tax credit for buying Canadian luxury goods.

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

Canadians listened hopefully as federal Minister of Finance Jim Flaherty stood in his new, steel-toed shoes to deliver the Conservative’s budget on Jan. 27. It contained a wide range of spending proposals designed to kick-start the economy and tax breaks for lower income Canadians. But getting our economic engine back in high gear comes at a cost: a federal deficit that will be $34 billion this year and as much as $542 billion in fiscal 2012-13.

The chances of delivering a plan that would please everyone were slim. Both the NDP and Bloc Quebecois said they would not support the Conservative budget. Liberal leader Michael Ignatieff gave conditional approval if the Conservatives report quarterly on the budget’s implementation and cost.

Indirectly there is a glimmer of hope for the mineral industry. The Canadian government has set aside $200 billion for the financial markets in the hope of improving access to credit. That might benefit junior companies. The government also has plans to spend on infrastructure, retraining workers, and to simplify the approval process for new construction.

The budget contained one measure specifically aimed at the mineral industry. The most beneficial proposal is a one-year extension of the temporary 15% mineral exploration tax credit. This supports the flow-through share program to encourage individual investment in exploration. It has proven most helpful to junior companies that need to raise sums for property work. Moreover, funds raised through this program in 2010 may be spent until the end of 2011.

The federal government also announced last week that it is providing a $2.2 million non-repayable contribution toward building a northern mining transit centre in Val d’Or, Que. The project involves constructing a new $6.7-million building at the airport and creation of four full-time jobs. The aim is to meet the needs of mining companies that must airlift personnel and supplies to remote sites.

No matter how much the Canadian government spends, it cannot change the global metals markets in favour of our producers. The best corporate managers will use what budget provisions are available and hunker down into survival mode.

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

Last week a Geneva-based group called Covalence SA released its ethical rankings of multinational corporations. The methodology used is convoluted, and the results could be questioned. Points were added and subtracted for working conditions, impact of production, impact of product and institutional impact. For what it is worth, here is how some mining companies ranked.

Three Canadian companies made the list. Kinross Gold of Toronto, Teck Cominco of Vancouver and Barrick Gold of Toronto were ranked 212, 396 and 443, respectively. (Interestingly, these companies ranked higher than Charles Schwab, Chevron, Yahoo, Fannie Mae, Shell and Porsche, among others.)

Other integrated mineral producers fared better than the Canadians: Rio Tinto (7), Anglo American (122), Vale (201), and Xstrata (209). Some fared worse: BHP Billiton (292), Newmont (501) and Freeport-McMoRan (535).

Covalence tracks 550 large companies in 18 separate sectors. Its client roster includes many mining companies as well as Barclays, BMW, Coca-Bola, the Gap, Médecins sans Frontières, Hewlett-Packard and GlaxoSmithKline among others. Besides ethical rankings, the company offers research and reputation management services.

The thought occurred to me that the world is getting complex indeed when we rely on European think-tank to tell us if we are operating ethically.

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

Look to the gold sector for good news from Canadian miners. While base metal, coal and potash producers continue to trim output, companies such as Vancouver’s Goldcorp have recorded record quarterly production. Gold output at all of the company’s operations was 692,000 oz during the last quarter, bringing the 2008 total to 2.3 million oz.

Nor is that the only good news from Goldcorp. Although the calculation of operating costs for 2008 has not yet been completed, the company expects total cash costs will be $300/oz of gold on a byproduct basis.

The company is also predicting it will produce another 2.3 million oz of gold in 2009 at a total cash cost of $365/oz on a byproduct basis. Increases will be achieved at most mines, but production at the Alumbrera mine in Argentina and El Sauzal mine in Mexico will be significantly lower than previous years. The 2009 forecast for Goldcorp’s Canadian operations include 620,000 oz from Red Lake mines, 290,000 oz from the Porcupine division, and 235,000 oz from Musselwhite mine.

Nor is Goldcorp the only bright spot.

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Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

There was not a single initial public offering (IPO) made on the Toronto Stock Exchange (TSX) during the last six months of 2008 making it the worst year for IPOs in the last 10 years. The dearth of opportunity is highlighted in PricewaterhouseCoopers’ (PwC) annual look at activity on the exchange.

A meagre 57 new issues struggled to reach Canada’s equity markets in 2008, according to PwC, with a mere 10 registered on the TSX in the year ended Dec. 31, 2008. There were no new IPOs on the TSX in the final six months of the year. By comparison, there were 100 IPOs on all of Canada’s exchanges in 2007, with 36 new issues on the TSX.

The value of all issues on Canadian markets in 2008 was $682 million, down 80% from the $3.4 billion in 2007, the survey showed. The value of all issues on the TSX in 2008 was $547 million, off from $3.0 billion in 2007.

A quick look at the TSX numbers reveals that the mining industry successfully floated 13 IPOs on the senior exchange and 47 IPOs on the venture exchange in 2007. Activity included the largest IPO in North American history ($1.26 billion by Franco-Nevada Corp.) and B2 Gold’s $100-million issue on the venture exchange.

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Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

Never in over 30 years of writing for CMJ, have I seen a week so devoid of news in the mining industry. It has been said that no news is good news, but I think it is a case of everyone holding their collective breath to see what 2009 will bring.

The news during the last quarter of 2008 was mostly bad, and analysts have little good to say about the next six to 12 months. Perhaps they are waiting to see exactly how low metal prices will go. Predictions seem to be made grudgingly, and there is no consensus. The only bright spot appears to be gold, but even experts who follow that commodity are guessing US$1,000 an ounce to US$2,000. Or perhaps the industry movers and shakers have been enjoying the holiday season.

The vast majority of press releases hitting my inbox in the last week have been about private placements. Most of those were small, in the $500,000 to $1.5 million range. Most often the proceeds are to be used for working capital and debt reduction. Sorry to say, that sounds like an industry just trying to get by in the short term.

Our industry appears to be at a standstill, frozen we might say in the depths of a Canadian winter. Call me a cock-eyed optimist, but I don’t believe at all that “roughly half of Canada’s mining companies could go bankrupt” as was suggested by a Canadian Press item.

I trust our industry to use its resources—in the ground and in the treasury—with prudence. We have seen cyclical downturns before and weathered them. Overall, I believe the Canadian mining industry will be in a good position to profit from the next upturn as they did the last one.

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

There has been some discussion in this space over the past two weeks as to how it takes very deep pockets to keep the Aboriginal community happy when wanting to explore or develop on their lands. The assumption is that only the largest, richest companies can succeed, as De Beers Canada has done at its Victor diamond mine.

That’s not true at all, if the experience of J. Paul Stevenson is anything to go by.

“I have worked with First Nations for many years as CEO of junior companies,” he wrote. “What we don’t have in money we have in effort and communication. [I] never found lack of money an issue. In fact, I found a great deal of understanding from communities as to our issues around financing.”

Stevenson and I began a correspondence so that I might share his experiences with other CMJ readers. He is currently CEO of Vancouver-based Sego Resources. The junior has two early-stage copper-gold exploration projects in southern British Columbia.

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Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

Let’s start with the really good news. Agnico-Eagle Mines of Toronto has declared its 27th consecutive annual cash dividend. The payment of US$0.18 per common share will be made on March 27, 2009, to shareholders of record as of March 13, 2009. 

Hearing from an optimistic miner in these times is very good news, indeed.

“Agnico-Eagle enters 2009 with a strengthened balance sheet and the expectation that over the next 15 months we will complete the construction of three more gold mines. We also anticipate further increases in gold reserves and resources in 2009 as we continue with an extensive exploration program on our large gold deposits”, said Sean Boyd, vice-chairman and CEO. “We also look forward to providing the results of our ongoing studies on four internal production growth opportunities that give the potential to enhance our superior growth beyond 2010,” he added.

Agnico is in the enviable position of doubling its gold output next year and doubling it again to 1.2 million oz in 2010. Cash costs are expected to be less than US$300/oz in 2010, and only US$320/oz from 2010 to 2018. 

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Deal or no deal? – by Marilyn Scales

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

The long-simmering dispute between Frontenac Ventures of Oakville, Ontario, and the native bands with claims on a stretch of wilderness north of Sharbot Lake is settled. Or is it?

This is cottage country, picturesque and serene. Frontenac wants to explore what is known as the Robertsville property for uranium. Several Aboriginal bands protested and blockaded the area early in 2008. They have unsettled land claims, and they demand a say in how the lands is to be used. The province of Ontario mediated the dispute, and a deal appears to have been hashed out.

On Dec. 1, interested parties met for an hour in the Frontenac County Courthouse to finalize the agreement they had reached. The deal has been called “historic” because it covers consultation and accommodation of Aboriginal values and environmental protection on the part of the mineral exploration industry.

The deal finalized earlier this week involves Frontenac Ventures and the Shabot Obaadjiwan, the Snimikobi Algonquins and the Algonquins of Ontario. Therein lies the rub. It does not include the Ardoch Algonquin First Nation, which also lays claim to the area. Readers will remember that former Ardoch chief Robert Lovelace was jailed earlier this year for his part in the protests.

So a settlement has been reached, but not reached with everyone. Reportedly, the province has not responded to the Ardoch Algonquin’s request six weeks ago that negotiations with the band be reopened. I suspect the band will continue its quest, but not at the expense of sending any more members to jail, I hope.

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

Teck Cominco of Vancouver has announced the first steps of its debt reduction plans by suspending the 2009 dividend on its Class A common shares and Class B subordinate voting shares. The move is expected to result in annual savings of $486 million.

“Current global economic and financial market conditions dictate that we take all prudent steps available to us to significantly reduce spending,” said Don Lindsay, president and CEO. “The measures announced today, combined with previously announced tax savings, amount to $2.4 billion and should significantly enhance our ability to address our near-term debt obligations and better position Teck to refinance the bridge loan when conditions improve.”

The large number of cuts Teck is making is a measure of just how deep current global economic woes are. But management has a plan to conserve cash and prepare for better conditions in the future. From its news release dated Nov. 20, 2008, here are the details of its plan.

Sustaining Capital: Company-wide spending will be reduced to approximately $250 million for 2009, down from a forecast of $580 million for 2008. Teck’s operations have been well capitalized in recent years, creating an opportunity to defer sustaining capital costs while ensuring operations are maintained to a high standard.

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Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

I wonder who first said, “No good deed goes unpunished.” Wherever that bit of wisdom came from it would seem to apply perfectly to the proposed friendly business combination of Toronto’s HudBay Minerals and Vancouver’s Lundin Mining. Major backers are weighing in with their opposition, and shareholders have voted with their wallets.

On Nov. 21, HudBay and Lundin announced their intention to create “a new Canadian leader” in the mining sector. Lundin would become a wholly owned subsidiary of HudBay with each Lundin shareholder receiving 0.3919 of a HudBay common share. The offer represents a 32% premium over Lundin’s 30-day average trading price. HudBay CEO Allen J. Palmiere will be CEO of the combined company. Other members of the HudBay board will be Philip J. Wright, Lukas Lundin, M. Norman Anderson, Colin K. Benner, Donald K. Charter, Ronald P. Gagel, R. Peter Gillin and William A. Rand.

The combined company will be Canada’s second-largest base metals producer as measured by market capitalization. It will have a portfolio of mining assets in Canada, Portugal, Sweden, Spain and Ireland. It will have development projects in the Democratic Republic of Congo and Guatemala.

If all goes according to plan, HudBay will have cash-on-hand of $900 million and a total debt of US$240 million (as of Sept. 30, 2008), it says. HudBay will then loan Lundin $135.8 million for capital investments and general corporate purchases. Lundin will issue 97.0 million common shares to HudBay in return.

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Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

Last Tuesday, Nov. 18, mining executives from across Canada met in Ottawa for their annual Mining Day on the Hill. Organized by the Mining Association of Canada (MAC), the event puts industry supports in the offices of select Members of Parliament and federal officials to deliver the message that our industry deserves their support.

“A strong mining sector benefits Canadians in every riding across this country,” said Jim Gowans, president and CEO of De Beers Canada and MAC chair. “We are all facing difficult economic times. Now it is more important than ever that we work with government to ensure that programs, regulation and legislation help to sustain mining jobs across Canada. This is more relevant in remote locations where economic development options are limited and operating costs are high.”

The mining industry has enjoyed one of the longest prosperous periods in history, but it is not immune from worldwide economic events. Due to the financial crisis, all capital expenditures are under review as is the level of discretionary expenditures on exploration. All spending will be reduced in line with changing market realities. Canadian policymakers and businesses cannot be complacent.

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