2012 – Page 36 – Republic of Mining

Here’s what Ottawa’s new rules on foreign takeovers by state-owned buyers could look like – by Claudia Cattaneo and Jameson Berkow (National Post – October 26, 2012)

October 26, 2012

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

CALGARY — Squeezed between public alarm over increasing ownership of Canadian resources by state-owned entities and investors demanding their payday, Prime Minister Stephen Harper has promised new rules to ensure Canadians don’t get short-changed.

While state-owned enterprises (SOEs) have been quietly building their holdings in Canada’s oil and gas industry, China’s largest attempt at a foreign acquisition to date — CNOOC Ltd.’s $15.2-billion bid for Nexen Inc. — has ignited an intense public policy debate over what Canada should do while foreign governments seek to plant their flags across the oil patch. That debate contributed to the government blocking a $5.9-billion takeover of Progress Energy Resources Corp. by Malaysia’s Petronas last Friday.

With Ottawa under pressure to complete the reviews of the two deals by year-end, the focus now is on what government is planning and how billions in planned investments could be affected.

In interviews this week, industry sources and foreign-ownership experts painted a picture of what we could see when the statement is finally released. Taxes and royalties, transfer pricing, ownership limits and corporate governance policies could all be in play to address concerns ranging from espionage to productivity.

The case against SOEs – by Vikas Mehrotra and Randall Morck (National Post – October 26, 2012)

October 26, 2012

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

Randall Morck is Jarislowsky distinguished professor of finance and University professor, School of Business, University of Alberta. Vikas Mehrotra is A. F. (Chip) Collins professor of finance and Jarislowsky fellow, School of Business, University of Alberta.

Bids must meet corporate-governance standards. SOEs fall short

China-phobia is a bad idea. China will soon be the world’s largest economy, and Canadian consumers and businesses can benefit from China’s rise. Canada needs foreign-investment policies that apply evenly to all foreign companies, and that businesses can expect to remain the same over time. A two-track policy makes sense: an open door to private-sector foreign bidders but skepticism toward foreign state-controlled bidders, unless they make a compelling case.

Research into corporate takeovers shows that some are good and others bad — for the firms involved, their employees, consumers and the economy. In general, society benefits from takeovers that transfer control of a company from top managers who are running it poorly to top managers who will run it well. Unfortunately, many Canadian firms are indeed run by people who invest in white elephants, fail to invest in productivity improvement, or neglect their firms while enjoying the perks of being a CEO.

But many other takeovers feature poor managers, temporarily flush with cash, wresting control of a target firm away from its perfectly fine managers. An ideal takeover law would encourage the first kind of takeover and forbid the second kind. Unfortunately, making such a decision requires hugely expensive information and expertise that is often highly specific to a given industry. If government officials actually could decide what constitutes running a firm well versus badly, Soviet-style communism would have worked.

Fascism by another name – by Terence Corcoran (National Post – October 26, 2012)

October 26, 2012

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

State ownership makes mockery of markets

Recent media reports portray Ottawa as ready to horse-trade its way out of a looming foreign investment crisis over takeovers of Canadian companies by state-owned enterprises. In Bloomberg’s version, “Canada plans to ask China to allow several transactions in exchange for approval of state-owned CNOOC Ltd.’s $15.1-billion bid for Nexen Inc., said a person with knowledge of the matter.”

Finance Minister Jim Flaherty quickly announced that he personally had no knowledge of the matter. But speculation persists, particularly over attempts by the Bank of Nova Scotia and Manulife Financial to secure greater access to Chinese financial sectors. The Canadian mining industry is also keen on massaging its way into the Chinese market, and if that means using CNOOC’s $15-billion Nexen takeover as a reciprocity play, so much the better. Or so it is said.

As the Harper government wades deeper into the challenge posed by state-owned enterprises investing in Canada, whether from China or Malaysia or even the United States, some overarching issues need to be recognized. Foremost is this: The global rise of state-owned enterprises (SOEs) poses a threat to the market principles that have governed international and national investment for decades, and that dominate Canadian law and policy today.

Investor-driven corporations, aiming to maximize profits in an open competitive market, are at the heart of market capitalism.

Cynthia Carroll exits as Anglo American CEO – by Eric Reguly (Globe and Mail – October 26, 2012)

October 26, 2012

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.

Rome — And then there were three. The surprise resignation Friday of Cynthia Carroll, the Alcan-trained CEO of global mining group Anglo American PLC, comes as a blow to female corporate advancement.

Ms. Carroll, 55, was one of only the four women CEOs among FTSE-100 companies. She was the first woman to take the top job at Anglo when she joined the company in 2007, as well as the first non-South African and the first non-insider. Founded in Johannesburg in 1917 by Sir Ernest Oppenheimer, Anglo had always picked its bosses from its own ranks.

Her departure, however, does not come as a blow to shareholder advancement. Anglo shares rose more almost 3 per cent Friday morning on the news that the search has begun for a new CEO. Ms. Carroll will not leave the company until her replacement is named, likely some time in the first half of 2013.

Ms. Carroll, an American who graduated from Skidmore College with a geology degree, worked for Alcan in Montreal from 1989 until she joined Anglo in March, 2007. Her last job at Alcan was head of its primary metals group, one of aluminium maker’s top jobs.

Vale will stay [in Sudbury]: Analyst – by Sebastien Perth (Sudbury Star – October 26, 2012)

October 26, 2012

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

A leading mining analyst thinks Vale is likely to hold onto its Sudbury operations, even though executives with the Brazilian mining company said Thursday it plans to sell underperforming assets to control costs and boost profit.

However, Raymond Goldie at Salman Partners said he believes Vale’s Sudbury operations are flexible enough to stay off the auction block. Goldie said while nickel prices are depressed, copper, platinum and palladium prices are “pretty high. My speculation was not that they would sell assets in Sudbury, but they would focus less on nickel-rich ore and focus more on copper, platinum and palladium-rich ore.”

He said unlike Sudbury, many of Vale’s mining operations are one-trick ponies where the company can only mine one mineral.

“(Vale) would consider Sudbury less for sale because you have the possibility of switching mining from nickel to copper and precious metals. Some of Vale’s other mining operations, such as the problem- plagued Goro nickel operations in New Caledonia, it’s nickel or nothing.

“They would be more likely to sell their interest in Goro or Indonesia because they are mostly nickel and cobalt operations. They don’t have the flexibility of you folks in Sudbury.”

Cliffs holds open house to discuss [Sudbury] chromite smelter – by Carol Mulligan (Sudbury Star – October 26, 2012)

October 26, 2012

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

Interested residents who attended an open house Thursd ay in Capreol on had an opportunity to have their comments and complaints considered by Cliffs Natural Resources as it undertakes the environmental assessment for its chromite smelter project.

Cleveland-based Cliffs is about two years into collecting baseline data for its combined federal and provincial environmental assessment for development of its Black Thor deposit near McFaulds Lake in the Ring of Fire.

Jason Aagenes, director of environmental affairs for Cliffs’ ferroalloys division, briefed reporters on the environmental assessment of the four components of its Ring of Fire. Cliffs is looking to develop an open-pit mine in the James Bay lowlands, which will include a concentrator to crush chromite ore and a lined tailings pond.

It is also developing an integrated transportation corridor to move concentrated ore from the Ring of Fire to a ferrochrome processing plant it plans to build at the former Moose Mountain Mine site, north of Capreol.

Aagenes said the project is in the feasibility and environmental assessment stages, and said Cliffs is working on an aggressive deadline to begin mining and processing by 2016. Cliffs originally intended to be in production by 2015.

NEWS RELEASE: NWT Government Recognizes and Celebrates Two Geoscience Milestones

October 25, 2012

Yellowknife, NT (October 25, 2012) “This year … marks the 10th anniversary of the NWT Geoscience Office … as well as the 40th anniversary of the Yellowknife Geoscience Forum, both notable achievements,” so said the NWT Industry, Tourism and Investment Minister Dave Ramsay in the Legislative Assembly yesterday.

The Minister went on to say: “The NWT remains a land of opportunity. Our mining, oil and gas industries rely on modern, accessible geoscience information to make investment and land use decisions. Investing in geoscience programs attracts investment to our territory and creates spin-off exploration projects that will provide employment and business opportunities for NWT residents.

The Northwest Territories Geoscience Office provides governments, industry, Aboriginal organizations and many other stakeholders with up-to-date, easily accessible geoscience information. This information is key to encouraging investment in mineral and petroleum exploration.”

President of the Chamber of Mines, Pamela Strand said, “We are very pleased to hear Minister Ramsay explain that for every dollar invested in government-funded geosciences in the NWT, five dollars are in turn spent by our mineral exploration companies. And since the NWT is one of the least mapped regions of Canada, we are also very pleased that the NWT Government will continue to support the work of the NWT Geoscience Office.”

New rules, new tools in Ontario’s Mining Act – by Rick Bartolucci (Northern Miner – October 22-28, 2012)

October 25, 2012

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

Rick Bartolucci is Ontario’s minister of Northern Development and Mines.

In 2006, the Ontario government introduced its first-ever Mineral Development Strategy, which provided the foundation for the sustainable management and stewardship of Ontario’s mineral resources.

Our government’s goal was to reinforce the province’s international position as a leading mining jurisdiction and promote responsible mineral development for the benefit of all Ontarians. Our modernized Mining Act continues to support these aims.

Four years of wide-ranging consultation with stakeholders, provincial and territorial organizations, tribal councils and Aboriginal leaders has resulted in legislation and regulations that deliver on the government’s commitment to modernize mineral exploration and development in the province.

Ontario wants to ensure its mining industry remains strong and that the rights and interests of Aboriginal groups and private landowners are properly addressed throughout the mining sequence.

That’s why we’ve worked with our stakeholders and Aboriginal partners to make changes to the act that provide clear rules to help reduce the impact of mineral exploration activities on the environment, and make Aboriginal consultation a cornerstone of mineral exploration and mine-closure.

Death of an Industry: The Decline of Canadian Mineral Exploration – by Brent McNiven, B.Sc Geology, MBA-PM (October 2012 – Part 2 of 2)

October 25, 2012

Brent McNiven holds a B.Sc Geology from the University of Calgary, and MBA-PM from Athabasca University. Working in 12 countries in the Americas since 1993, he has been a business consultant involved in market and industry analysis, owned / operated various consulting and contracting businesses related to mineral exploration, and has extensive experience in cross cultural project management. Fluent in Spanish, he is a former resident of Peru, Venezuela, and Brazil. He can be contacted at: sedex@shaw.ca

Lowest Common Denominator:

Of interest are the results of an informal poll conducted at the PDAC 2012, where Canadian students soliciting field exploration work were asked “what does a geologist do”. The responses to the question were disturbing in that none could provide more than simplistic one word answers, and not a single response presented a higher level, or comprehensive understanding of the field of study, even when prompted.

The results of the poll, combined with their demonstrated lack of field experience, present an equivalent level of preparation of the recent graduates interviewed in Mexico and Peru. Latin American labor laws (and culture) generally eliminate the possibility for students to gain summer work experience, so their response was expected, but it is not the historical condition of Canadian graduates.

The quality of education, and by extension the quality of the graduates varies widely across countries, and universities, however the findings and cost benefit analysis are, that provided interview and selection process were valid ie the best candidates were carefully selected and duds weeded out, that in actual field exploration conditions, the difference in performance by nationality is not significant.

Death of an Industry: The Decline of Canadian Mineral Exploration – by Brent McNiven, B.Sc Geology, MBA-PM (October 2012 – Part 1 of 2)

October 25, 2012

Executive Summary:

The purpose of this paper is to provide a qualitative overview of the state of the Canadian mineral exploration industry, and the changes observed over the past 15 years, and hopefully provoke meaningful discussion on future direction.

The junior mining and exploration sector that once formed a discreet, integrated and dynamic economic entity has become a fragmented and isolated group of investors / managers with narrow focus and short term (often short-sighted) mandates, operating too many companies (excess supply) lacking sufficient resources to be effective.

The contracting and consulting sectors have been sharply reduced in scope and capacity, and face increasing international competition, for example Australia, but also local actors in every market, resulting in consolidation, increased barriers to entry and lost opportunities.

Where Canada once produced world class exploration geologists, the failed industry / university link consistently graduates students without any field experience and lacking even the most basic exploration skills.

Cliffs in early stages of EA (Thunder Bay Chronicle-Journal – October 25, 2012)

October 25, 2012

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

Cliffs Natural Resources is conducting an environmental assessment of mining activity in Northwestern Ontario as part of the potential Ring of Fire mining development.

While it is still too early to determine any negative impacts mining activity might have on the environment, Jason Aagenes, director of environmental affairs at Cliffs, said Wednesday the company is still in the early stages of an ongoing process.
“We have been collecting baseline data for a number of years,” Aagenes said.

“We will be starting the actual environmental assessment in the upcoming months.” The environmental assessment is collecting baseline data on the main aspects of the environment, including biological, physical and human, as well as traditional knowledge.

It is being conducted in consultation from First Nations and municipalities. It will examine environmental impacts of the four main components of the project, including the mine to be built near McFaulds Lake, an ore processing facility near the mine, the transportation system and the ferrochrome production facility.

No benefit in net benefit test – by Steven Globerman (National Post – October 25, 2012)

October 25, 2012

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

Steven Globerman is the Kaiser professor of international business at Western Washington University and a senior fellow at the Fraser Institute.

Competitive markets beat regulators every time

The recent decision by the federal government to block a proposed takeover of Progress Energy Resources by Petronas, a Malaysian state-owned company, increases the likelihood of a rejection of the pending acquisition of Nexen by CNOOC, a Chinese state-owned oil company.

It also follows the federal government’s action denying the takeover of Potash Corp. by BHP Billiton, a privately owned Australian company. These developments justify reconsideration of whether the net benefit test used by the Canadian government to assess foreign takeovers of Canadian companies makes economic sense.

Since Petronas is a state-owned enterprise (SOE), as is CNOOC, the economic issues raised by their proposed acquisitions are more complicated than in cases when the foreign investor is privately owned, as is BHP. Nevertheless, the basic economic arguments against making government approval of foreign takeovers of Canadian companies conditional on a net benefit test are similar and compelling, regardless of the ownership status of the foreign investor.

[Quebec] The next Alberta – by Ted Morton (National Post – October 25, 2012)

October 25, 2012

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

Ted Morton, formerly a minister in the Alberta government in the portfolios of energy, finance and sustainable resource development, is an executive fellow at the School of Public Policy at the University of Calgary. This is excerpted from a presentation to the annual meeting of the Quebec Oil and Gas Association in Montreal on Oct. 22.

Natural gas might reverse Quebec’s declining influence

A made-in-Quebec natural gas industry would help to build a stronger Quebec. It would mean lower gas prices and huge savings for both households and businesses. This would make Quebec businesses more competitive, which translates into more exports, more jobs, and less out-migration.

Shale gas does not have to be at the expense of the environment. Increased natural gas production is the most immediate and cost-effective way to reduce carbon dioxide emissions in North America — including Quebec.

With respect to protecting groundwater and safe regulation of hydraulic fracturing, Quebec doesn’t have to reinvent the wheel. Alberta is able and willing to share its experience and expertise in regulating fracking. Indeed, because of its unique geology, Quebec has the opportunity to set the standard for the cleanest natural gas production in North America.

Teck makes cuts amid global tumult – by Pav Jordan and Carrie Tait (Globe and Mail – October 25, 2012)

October 25, 2012

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.

TORONTO, CALGARY – Canada’s largest diversified miner is cutting back in the face of a global economic slowdown.

Buffeted by volatile markets for the commodities it produces, Teck Resources Ltd. is deferring some $1.5-billion in capital spending over the next year or so, the latest in a string of Canadian resource companies to rewrite its plans in response to rising costs and an unpredictable outlook for the economy.

Among the casualties announced was Fort Hills, an oil sands joint venture in which Teck is a 20-per-cent partner along with Suncor Energy Inc. and Total SA. The project is not scheduled to begin producing oil until after 2017, but now some of the pre-production work will occur at a slower pace.

Canadian mining companies are increasingly joining the ranks of resource businesses that are being forced to rethink capital spending as the demand drops for key industrial commodities. The commodities cycle is sputtering along with the economies of the United States and Europe and as growth slows in China.

Suncor said in July that it was reevaluating tens of billions of dollars of planned spending, and pledged to apply “rigorous scrutiny” to the cost of three projects, including Fort Hills.

In race to export LNG, a new Atlantic plan – by Bertrand Marotte (Globe and Mail – October 25, 2012)

October 25, 2012

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.

The vision to export natural gas from Canada is taking a sharp turn to the east.

Alfred Sorensen, president of Pieridae Energy Canada, has a dream to build a major liquefied natural gas export facility on Canada’s East Coast, the first of its kind. The $5-billion (U.S.) project is an eastern addition to a race unfolding in Western Canada to build LNG infrastructure that would allow major exports from the coast of British Columbia to global markets.

The former Duke Energy Corp. executive says the timing and conditions are right for construction of a complex in Goldboro, N.S. that would liquefy natural gas and ship it to markets in Europe and India. The site would have on-site storage capacity of 420,000 cubic metres.

But the plan must overcome some major challenges if it is to become reality. One is whether Pieridae can successfully lock in a sufficient number of long-term contracts to justify the project’s high price tag. Another is growing pressure for cheaper prices from overseas buyers.

A planned LNG export facility on the east coast is another element in the rapidly shifting energy flows of North America.