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Year: 2012

Building boom adds stress to public works – by Benjamin Aubé (Timmins Daily Press – December 12, 2012)

The Daily Press is the city of Timmins broadsheet newspaper.

TIMMINS – The city’s “building boom” is resulting in unprecedented work loads and stress levels for Timmins’ community development and public works employees, explained department head Mark Jensen. In pre-budget discussions with city council, Jensen said that many of the department’s challenges are caused by a mix a comparatively low staffing levels, a rapid increase in building permit applications, and a giant geographical area to cover.

To help with efforts such as cutting down on illegal building activity, keeping up with permit processing, and managing increasing administrative duties, Jensen recommended the creation of a new position in the building inspection division.

“A good amount of that demand is coming from our non-residential permit activity,” explained Jensen. “When I say that, we’re looking at the commercial and industrial sectors, and institutional as well. It’s not to say the residential sector isn’t also realizing notable increases over previous years, because it certainly has as well.”

He used the comparable municipalities of Cornwall (pop. 45,965), Belleville (pop. 48,821) and North Bay (pop. 53,980) to make his point. Belleville’s has 11 building inspection staff, Cornwall and North Bay each have eight, while Timmins currently has five-and-a-half full-time employees in the division.

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Petroleum’s Great Revival – by Peter Foster (National Post – December 13, 2012)

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

Daniel Yergin says rebalanced oil industry must reach new markets

Trends or events attached to the word “Great” are more often to be feared than embraced. Nobody wants any more Great Wars, or another Great Depression. The “Great Moderation” celebrated just a few years ago by consecutive Federal Reserve chairmen Alan Greenspan and Ben Bernanke was followed by — indeed arguably spawned — a “Great Recession.”

Now however, there is a new “Great” in the making, and it appears to be all good news: “The Great Revival” of the North American petroleum industry. This concept was invoked on Wednesday by leading global energy analyst Daniel Yergin at a presentation on the final day of the annual investment meeting of the Canadian Association of Petroleum Producers, which was this year held in Toronto.

Time magazine has written that: “If there is one man whose opinion matters more than any other in global energy markets, it’s Daniel Yergin.” Let’s hope so, for Dr. Yergin is not merely highly knowledgeable about Canadian energy, he is also a fan, and a leading consultant to CAPP.

Dr. Yergin also outlined a “rebalancing” of the entire global energy industry, significantly related to that Great Revival. He did not dwell on the irony that this revival should have taken place under perhaps the most anti-oil president in U.S. history, but then diplomacy is needed when you have the ear of the White House, which in Dr. Yergin’s case is good news for Canada.

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Lake Shore Gold expands mill (Timmins Daily Press – December 12, 2012)

The Daily Press is the city of Timmins broadsheet newspaper.

TIMMINS – Officials with Lake Shore Gold Corp. announced this week it has achieved a processing capacity of 2,500 tonnes per day. This is following the completion of the first stage of its 50% mill expansion.

The mill’s new capacity represents an increase of 25% from the previous capacity of 2,000 tonnes per day. The second stage of expansion, to a capacity of 3,000 tonnes per day, is on track for completion during the second quarter of 2013.

“We are beginning to see the payback from a lot of hard work and investment over the last year,” said Tony Makuch, president and CEO of Lake Shore Gold “With increased mill throughput and improved grades, we are set to finish the year strong and to achieve full year production of over 85,000 ounces of gold.

“Equally important, with the progress being made at our mill and in completing our development and drilling programs at Timmins West Mine, we are looking to 2013 as a break-out year for the company, with significantly higher production, lower operating costs, and a sharp reduction in capital expenditures.

“Our balance sheet is strong and we are financed to take Timmins West Mine to full production at which time we will be generating positive free cash flow.”

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CNOOC promises billions in new spending – if oil prices stay high – by Shawn McCarthy, Mark MacKinnon and Pav Jordan (Globe and Mail – December 13, 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.

OTTAWA and BEIJING and TORONTO — CNOOC Ltd. has committed to spend an additional $5-billion to $8-billion on oil and gas development in North America as part of its deal with Ottawa to acquire Calgary-based Nexen Inc., but the promise is elastic in terms of the time frame and subject to continued high oil prices.

The company will also report annually – though confidentially – to Industry Canada on how it’s meeting its Investment Canada undertakings, Xu Xiaojie, an academic who also advised both CNOOC and China’s state council on the deal, said in an interview Tuesday.

CNOOC’s capital spending is expected to be in addition to the roughly $3-billion a year that Nexen has spent developing its oil and gas properties in recent years.

Under confidentiality provisions of the Investment Canada Act, the federal government cannot comment on the undertakings made by CNOOC in winning approval for its Nexen acquisition – nor on the commitments made by Malaysia’s Petronas in exchange for a federal green light on its $6-billion takeover of Calgary’s Progress Energy Resources Corp.

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Harper fails to toss perverse ‘net benefit’ rule – by Peter Foster (National Post – December 12, 2012)

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

Any ‘net benefit’ depends on ­managerial decisions that have yet to be made

When Prime Minister Stephen Harper announced the new provisions on investments by state-owned enterprises (SOEs) on Friday, one thing he said was unarguable: “Our statements today will not satisfy everybody.” His government has been attacked both for approving the acquisition of Nexen by Chinese SOE CNOOC and of Progress Energy by Malaysian SOE Petronas, and for restricting future SOE investment in Canada.

He has been particularly criticized for nixing SOE takeovers of oil sands companies except in “exceptional circumstances.” Alberta was bound to harrumph about legislation that, after all, is mainly about developing the province’s resources. But perhaps the most important hole in Friday’s announcement was that the vague and essentially impossible “net benefit” test remains in place.

When it comes to Nexen, Progress and SOEs, Mr. Harper steered a skilful course between offending the majority of Canadians who were against the Nexen deal, and offending the Chinese government at a time when he was seeking further commercial engagement. The oil sands acquisition ban on SOEs does not single out Beijing, which is also hardly in a position to criticize minority-ownership stipulations since it has similar rules of its own.

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China’s Ferrochrome Production: Altering the Global Balance – by Jeff Dong (The China Analyst – October 2012)

http://www.thebeijingaxis.com/tca/

China owns less than 1% of the world’s chrome reserves. However, thanks to strong growth in stainless steel demand and relatively cheap production costs, China’s domestic ferrochrome capacity has steadily increased over the past decade, with China overtaking South Africa in the first half of 2012 to become the world’s largest ferrochrome producer.

Yet, the lack of both upstream and downstream capabilities, along with looming chrome export restrictions, rising domestic production costs and stricter environmental controls, is putting Chinese ferrochrome producers in an increasingly precarious situation. To overcome these obstacles, Chinese ferrochrome producers will continue going overseas to gain control over upstream resources, significantly altering the global balance of the chrome ore trade. By Jeff Dong

Reviewing the remarkable growth in China’s demand for commodities and its domestic production during the last decade is always eye opening, with the steel industry standing out as the prime example. In 2011, China produced 61% of the world’s total steel output, and consumed most of that production domestically. This is even more astounding given China’s domestic iron ore supply meets only 40% of domestic demand.

In order to delve deeper into the stainless steel industry one must examine ferrochrome, a main ingredient used in steel production. In 2011, China consumed 3.5 million tons of high carbon ferrochrome, more than half of which was produced domestically.

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Canadian underwater miner gets sinking feeling in Papua New Guinea – by James Regan (Reuters.com – December 12, 2012)

http://www.reuters.com/

SYDNEY, Dec 12 (Reuters) – A dispute between Papua New Guinea and Canada’s Nautilus Minerals threatens to sink plans to mine gold and other metals for the first time from the ocean floor.

It could also work against efforts by the South Pacific country to restore faith in its vast resources potential and entice more foreign companies to follow the likes of Exxon Mobil , Newcrest Mining and Barrick Gold and invest billions of dollars in resource projects.

The groundbreaking undersea venture hopes to use robots operating a mile (1,600 metres) deep to mine the sea floor near hydrothermal vents that deposit copper, gold and other minerals.

Hungry for foreign investment, Papua New Guinea (PNG), a nation of 7 million spread over an equatorial archipelago the size of California, had agreed in 2011 to pay 30 percent of the costs to build the Solwara 1 project in the Bismark Sea, which Nautilus said amounts to $80 million so far.

But in June, the government’s investment arm, Petromin, said it was terminating the agreement. Without the funds, Nautilus says it cannot afford to proceed and the matter is now in arbitration in Australia under The United Nations Commission on International Trade Law (UNCITRAL).

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Chinese workers headed to Greenland – by Marilyn Scales (Canadian Mining Journal – December 11, 2012)

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 something happens twice, does that the beginning of a trend? The “something” is governments allowing foreign workers to fill jobs at mining projects. With the blessing of Canada’s federal government, HD Mining is importing “temporary” Chinese workers for its Murray River coal project in British Columbia. Greenland has passed legislation that will allow the employment of Chinese workers in Greenland at the Isua iron ore project belonging to London Mining plc.

In Canada, the idea of Chinese workers arriving to fill jobs at a coal mine was first floated a few years ago. Then the plan fell below the radar until The Globe and Mail newspaper revived the story a week ago when it was learned that speaking Mandarin is a requirement for working at the Murray River project.

In Greenland, the new legislation paves the way for companies to employ foreign workers at lower wages than they would pay natives of Greenland. All political parties voted for the law, with the exception of the largest opposition party which abstained.

The situations in Canada and Greenland vary on one notable point: Canada has a skilled mining workforce, Greenland does not.

By virtue of our world class mineral industry, Canada has a knowledgeable, inventive and hardworking pool of labour from which to choose.

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Flow-through donations may be safety net for junior explorers – by Lisa Davis (Canadian Mining Journal – December 11, 2012)

The Canadian Mining Journal is Canada’s first mining publication.

The author, Lisa Davis, LL.B, ICD.D, specializes in the areas of corporate and securities law with two of Canada’s leading national law firms, most recently with Heenan Blaikie LLP, and was general counsel for a national specialized investment fund business. She currently heads up the legal and operations team for Toronto-based PearTree Financial Services Ltd. Visit www.peartreefinserv.com for more information.

It’s no secret that tight equity markets are hurting junior mining and other resource exploration firms in Canada as they struggle to find the vein of capital to keep their operations running and their valuations from leeching away.

Yet, curiously, at a time when resource capital is harder than ever to access, a highly beneficial tool to expand the universe of capital sources — flow through donation financing (FTDF) — sits untouched by the vast majority of junior miners who are largely unaware of the existence of FTDF programs and how they work.

First, a few words to alleviate some of the mystery: Leveraging the tax benefits associated with exploration sector flow through share investing is a relatively new tax shelter gifting arrangement under which individuals wishing to give to a registered Canadian charity can do so at a significantly reduced after-tax cost relative to simply making a cash donation.

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The North should prepare itself for a prime-time TV gold rush – by John Doyle (Globe and Mail – December 12, 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.

My prediction for 2013 is the victory of the proletariat.

Okay, all righty, maybe that’s not going to happen. So let’s stick with possible trends for 2013. Here’s a trend that is not entirely unrelated to the victory of the proletariat – the North.

News arrived recently that Discovery, the fabulously successful U.S. cable channel, has ordered up its first scripted project, and that drama project is called Klondike, based on Canadian writer Charlotte Gray’s book Gold Diggers: Striking It Rich in the Klondike.

Among those involved is Ridley Scott, the English director and producer responsible for the movies Alien, Blade Runner and Black Hawk Down, among other titles. In a press release Scott says, “Klondike was the last great gold rush; one which triggered a flood of prospectors ill-equipped, emotionally or otherwise, for the extreme and gruelling conditions of the remote Yukon wilderness.”

Indeed. But what matters, too, is that the decision to make Klondike follows on the ratings success of Discovery’s reality series Gold Rush (seen on Discovery Canada, Tuesdays, 9 p.m., Saturdays, 11 p.m.). Now into its third season, the series follows the key workers at four mining companies as they dig for gold in Alaska.

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B.C. mine’s offshore hiring plan sparks conflict – by Pav Jordan and Wendy Stueck (Globe and Mail – December 12, 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 and VANCOUVER — When 60 Chinese workers arrive for work later this week at a British Columbia coal mine, they will be getting a lot more than they bargained for.

Hired by HD Mining International to work the Murray River coal project in Tumbler Ridge, B.C., the miners will walk squarely into a mushrooming debate about the use of temporary foreign workers in an industry running a massive labour deficit as Canada’s work force ages and new mines come on stream.

The workers will join 17 already here. All of them are skilled in the longwall coal mining method, and come to Canada directly from the coal operations of Huiyong Holding, one of two Chinese companies that own HD Mining. The other is Canadian Dehua International Mines Group Inc.

Local unions want Ottawa to reverse a decision to allow HD to hire up to 201 workers from China under the Temporary Foreign Worker Program. They say HD did not make sufficient efforts to hire locally before going abroad, that the company made Mandarin a requirement and advertised wages below the industry norm. Some question whether HD pushed the limits of the program in hiring so many workers for one operation, potentially creating the first Canadian mine that is not operated in either French or English. They also question whether advertised wages were truly competitive.

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Mining lawyers bullish on next year – by Drew Hasselback (National Post – December 12, 2012)

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

Mining lawyers are fairly bullish on 2013. They’re expecting at least two trends. First, mergers and acquisitions will gather steam as cash-rich mid-tier mining companies will target increasingly cash-poor juniors. Second, weakness in traditional public debt and equity markets will fuel alternative financings, such as joint ventures, streaming or royalty deals.

Khaled Abdel-Barr, a partner with Lawson Lundell LLP in Vancouver, sees favourable market conditions for acquisitions. “I’m generally quite bullish on an uptick in M&A in the Canadian mining space.”

Commodity prices have softened, and this has weakened valuations for smaller companies. This, in turn, makes it difficult for those small companies to finance projects by raising equity through public offerings. Majors and intermediates, meanwhile, have been quietly building up cash. They’re waiting in the weeds to bid on the struggling juniors that have the best projects.

Shea Small, a partner in the Toronto office of McCarthy Tétrault LLP, says that when commodity prices were high, smaller companies were able to access capital markets to finance marginal projects. Conditions have changed — and the smaller companies are now exposed, he says. “When those high commodity prices came down, it became clearer who was swimming without a bathing suit.”

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Mining costs may be abating but labour worries persist (National Post – December 12, 2012)

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

It might be minimal, but miners appear to finally be feeling some cost relief.

Despite operating in a relatively healthy commodity-price environment, the past couple of years have been mostly miserable for mining executives, as soaring costs have crimped their margins and frustrated investors. Major projects have been called off or deferred because of low projected returns, and CEOs who couldn’t turn things around got fired. By mid-2012, it was clear that investors had lost all patience with under-performing companies.

Even so, the miners are feeling a bit more optimistic as 2013 approaches. While there are few firm numbers to back it up, anecdotal evidence suggests that cost inflation in the mining sector is beginning to slow down and come under control.

As projects got delayed over the past year and companies slashed their capital spending budgets, the incredibly tight markets for inputs such as equipment and consumables began to ease, experts said. They should soften even more over the next two or three years as the pipeline of projects gets thinner due to the deferrals. Many of the largest projects in the world are on hold, including the absolute biggest: BHP Billiton Ltd.’s US$28-billion Olympic Dam expansion in Australia.

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Oil pipelines remain a hard sell, industry working to ‘get the message out’ – by Claudia Cattaneo (National Post – December 12, 2012)

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

TORONTO — Compare oil production growth from Canada’s oil sands plus nearby tight-oil fields, versus pipeline infrastructure needed to transport it to consumers, and you see why Canada’s energy sector is sweating bullets.

If supplies continue to rise as expected, pipeline capacity will run out around 2015/2016, when combined production from the oil sands and the Bakken tight-oil field surpasses four million barrels a day. When production hits six million barrels a day in a decade, capacity would run out again even if all proposed pipeline plans are approved and built.

It’s a pipeline capacity cliff that’s unprecedented for Canadian oil producers and all eyes are on whether major regulatory decisions in 2013 give the go-ahead to new pipeline projects — or force a rethinking of oil production growth plans.

“On the oil side of things, we have been in and out of that situation … month to month when there are maintenance outages, but never looking forward have we had the delays … like we have seen on Keystone and some of the other regulatory processes,” Greg Stringham, vice-president for oil sands and markets at the Canadian Association of Petroleum Producers, said on the sidelines of the group’s annual investment symposium Tuesday.

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Harper’s foreign ownership policy is incomprehensible – by David Olive (Toronto Star – December 12, 2012)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Once again I’m dumbfounded that Stephen Harper’s university major was economics. His new policy on foreign ownership, unveiled with fanfare late last week, is as clear as the goo extracted from the dinosaur remains at Fort McMurray.

Harper last Friday rebuked the majority Canadian public opposition to a proposed Chinese government takeover of Calgary oil producer Nexen Inc. with his approval of that $15.1-billion deal, and of a $5.2-billion Malaysian government state grab for Alberta oil and gas assets. In doing so, the PM unveiled a ballyhooed “get tough” stance on future foreign state designs on the Alberta tar sands.

This embarrassment of a policy (the more fawning typists in the financial press have labelled it the “Harper Doctrine”) is rent with loopholes, is incomprehensible, and lacks the clarity to be applied consistently. Harper has conceded as much in allowing that foreign government takeovers in the oilpatch will henceforth be blocked, other than those arising from “exceptional circumstances.”

Gosh sakes, every takeover is “exceptional.” Acquisitions are a blend of price haggling, political stability, interest rates, strategic fit, industrial cycles, CEO egos, and countless arcane factors.

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