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Editorial: This is what a washout looks like [Barrick Gold] – by John Cumming (Northern Miner – July 3, 2013)

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

Barrick Gold is the world’s leading gold company, and its Pascua-Lama gold-silver megaproject under construction on the Chilean-Argentine border is its leading development project. And so the gold industry watches in dismay as the major grapples with the project’s ballooning capital costs and construction delays, slumping gold prices, writedowns, job cuts and a pummelled share price.

At the time of writing, Barrick’s shares trade for only $15.29 — or US$14.69 — off 56% this year alone, and 74% since their peak in April 2011. Here again, Barrick is the leader of the gold sector that has seen overall share price declines around 50% this year.

Barrick has also led in terms of corporate-suite excess, with the pink-slipped minions at head office bearing the brunt. Fired CEO Aaron Regent was paid US$12 million last year, mostly as severance, while the whole management team pulled in an astonishing US$57 million, up 148% year-over-year. In April, Barrick shareholders finally had enough, and there was heated opposition to the $17-million pay package offered to incoming co-chairman John Thornton, a former president of Goldman Sachs.

Barrick may yet prove to be a leader in accumulating unwieldy debt and tabling enormous writedowns as Pascua-Lama moves forward. At the end of the first quarter, Barrick had US$2.3 billion in cash and US$15 billion in debt.

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Barrick may wipe out retained earnings with huge Pascua-Lama writedown – by Peter Koven (National Post – July 3, 2013)

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

Barrick Gold Corp. is poised to wipe out all of its retained earnings for the second time in less than four years.

An anticipated writedown of US$4.5-billion to US$5.5-billion on the bungled Pascua-Lama project would eliminate the US$3.9-billion in retained profits that the gold giant reported at the end of the first quarter. Back in 2010, Barrick wiped out more than US$2.2-billion of retained earnings when it took a US$5.2-billion charge to close out its hedge book.

It is highly unusual for a company of Barrick’s size and profitability to be in this position twice in such a short time. And while these are non-cash charges, experts said they point to a troubling trend of poor decision-making and oversight at the world’s largest gold producer.

“The writedowns impact them in perception,” said George Topping, an analyst at Stifel Nicolaus.

The red ink could be a lot bigger when the company reports second quarter earnings in four weeks. Barrick warned of other possible impairments last Friday, and analyst Greg Barnes of TD Securities estimated they could total close to US$10-billion.

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Analysis: Latest Barrick mine delay fans price tag fears – by Julie Gordon (Reuters U.S. – June 30, 2013)

http://www.reuters.com/

TORONTO – (Reuters) – Barrick Gold Corp (ABX.TO) has slowed spending at its Pascua-Lama project in South America, delaying first output to 2016, but that may not be enough for the its shareholders, who worry that the final price tag may creep beyond what the mine is worth.

While the flagship development, which straddles the border of Chile and Argentina, is one of the richest untapped gold deposits in the world, the string of delays and budget overruns have been a nightmare for world’s top producer and its investors.

“They should walk from Pascua-Lama,” said John Ing, president of boutique investment and research firm Maison Placements, adding that the embattled miner also needs to divest non-core assets, cut exploration spending and slash hefty board salaries if it wants to turn its fortunes around.

Barrick said late on Friday that it would re-sequence construction of the controversial project to target first production by mid-2016, deferring some $1.5 billion to $1.8 billion of planned capital spending in 2013 and 2014. The company has not updated the market on capital costs, last projected to be up to $8.5 billion.

The delay was in-line with a scenario that Credit Suisse analyst Anita Soni outlined earlier this week, as the bank downgraded Barrick to ‘Neutral’ from ‘Outperform’.

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Mining group head sees tough times now, but better prospects ahead – by Josh Kerr (Globe and Mail – July 2, 2013)

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.

TORONTO — Trying to get a read on the mining industry may be like peeking in a crystal ball at this point, but Zoë Yujnovich believes the long-term outlook is still a good one. “Right now it’s a little bit like reading tea leaves to try to figure out exactly what’s happening,” says the new chair of the Mining Association of Canada.

“Certainly in the longer term the industry is still poised to be very successful, and when we look at it in a Canadian context I think we’re going to continue to see the extractive industry being a major contributor to Canadian GDP,” she said.

Ms. Yujnovich’s comments come as she takes the helm of the 78-year-old association, building on an impressive résumé. The first woman to hold the post, she first made waves when put in charge of the Brazilian operations for British-Australian mining giant Rio Tinto Inc. at the age of 34.

Ms. Yujnovich, the chief executive officer of Iron Ore Co. of Canada, which is majority owned by Rio Tinto, will chair the association for two years. Pierre Gratton the current president and CEO of the mining association said he is excited to have her heading up the board and isn’t surprised that Ms. Yujnovich, who he describes as a natural leader, has risen so far so fast in an industry long dominated by men.

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Barrick faces new setback, more pressure – by Brent Jang (Globe and Mail – July 1, 2013)

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.

VANCOUVER — Barrick Gold Corp. has gained some breathing room with its decision to delay development of its Pascua-Lama project, but the company faces pressure to shrink its global mining operations amid tumbling metal prices.

Barrick says first production from the South American gold and silver venture will be postponed by more than 18 months, as the Canadian company forecasts taking a writedown of up to $5.5-billion (U.S.) on the project.

Toronto-based Barrick said it has opted to vastly scale back capital spending this year and in 2014 on the project, which is located in the Andes mountains and straddles the border between Chile and Argentina. While construction of the $8.5-billion project has suffered another setback, the venture remains strategically important to the world’s largest gold producer, analysts say.

“With all this talk about what Barrick could look like in the future, Pascua-Lama will be key to the company’s future operational performance, especially if Barrick wants to shed high-cost mines,” said Chris Thompson, a Vancouver-based mining analyst at Raymond James Ltd.

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PRESS RELEASE: (CNW) Gahcho Kué Joint Venture and the Government of the Northwest Territories (GNWT) Sign Socio Economic Agreement

June 28, 2013, 2:04 p.m. ET

YELLOWKNIFE, TORONTO and NEW YORK, June 28, 2013 /CNW/ – De Beers and Mountain Province Diamonds (TSX: MPV, NYSE MKT: MDM) are pleased to announce that De Beers as Operator of the Gahcho Kué Project today entered into a Socio Economic Agreement (SEA) with the Government of the Northwest Territories for the proposed Gahcho Kué diamond mine located in Canada’s Northwest Territories (NWT).

The agreement formalizes commitments made with respect to employment, training, business opportunities and other related benefits for NWT residents. It also establishes measures to monitor possible socio-economic impacts related to the proposed mine and establishes the mechanism to work with communities close to the mine site to ensure an adaptive management approach to socio-economic performance of the mine.

“In signing this SEA, both parties are affirming their commitment to advancing this Project in a way that not only creates jobs for our residents, but that supports the health and wellness of the region,” said Minister of Industry, Tourism and Investment, David Ramsay. “This is a significant step forward in opening this mine, a project that will translate into economic opportunities for people throughout the North and South Slave Regions, and across the territory.”

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PRESS RELEASE: Barrick Provides Updates on Pascua-Lama Project

June 28, 2013

All amounts expressed in US dollars unless otherwise indicated

TORONTO — Barrick Gold Corporation (NYSE:ABX) (TSX:ABX) (Barrick or the “company”) is providing the following updates on the Pascua-Lama project in Chile and Argentina with respect to construction re-sequencing, capital expenditures and impairment testing.

Schedule Re-sequencing and Reduction of 2013-2014 Capital Spending

The company has submitted a plan, subject to review by Chilean regulatory authorities, to construct the project’s water management system in compliance with permit conditions for completion by the end of 2014, after which Barrick expects to complete remaining construction works in Chile, including pre-stripping. Under this scenario, ore from Chile is
expected to be available for processing by mid-2016.

In line with this timeframe, and in light of challenging market conditions and materially lower metal prices, the company intends to re-sequence construction of the process plant and other facilities in Argentina in order to target first production by mid-2016 (compared to the previous schedule of the second half of 2014).

Re-sequencing the project primarily entails a reduction in project staffing levels as construction is extended over a longer period of time to coincide with the availability of ore from Chile in mid-2016.

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OSC rips miners for poor technical disclosure – by Peter Koven (National Post – June 28, 2013)

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

The Ontario Securities Commission says it has found an “unacceptable level of compliance” with proper mining disclosure practices after completing a review of 50 technical reports released by Ontario-based companies.

The problems are widespread, according to the OSC. It said it found deficient reporting of mineral resource estimates, lack of information on community and social impact of mines, poor disclosure of costs, lack of economic analysis, poor disclosure of risks, and numerous other issues.

In total, the commission found that 80% of the reports it studied had some form of compliance error, and 40% of them had at least one serious problem.

The OSC suggested that issuers should expect requests for re-filings, additional disclosure, or “other staff action” if technical reports are not compliant. It is a hint that the regulator could initiate a broader crackdown on poor mining disclosure.

Technical disclosure became a very important issue in the mining industry following the Bre-X fraud in 1997.

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Small gold, silver miners poised to close if price plunge continues – by Peter Koven (National Post – June 27, 2013)

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

Gold and silver miners are beginning to shut down money-losing mines. And if prices do not recover soon, many more are poised to close in the months ahead, in Canada and elsewhere. A vast portion of the gold industry is struggling to make any money at the current price of US$1,230 an ounce, according to analysts. While precious metal prices are plunging, costs are not falling nearly as fast.

That leaves many companies vulnerable to mine closures. The ones in the toughest positions are small miners with high costs, high debt and limited liquidity. There are several companies operating in Canada that fit that description, experts said. They include San Gold Corp., Claude Resources Inc., and Wesdome Gold Mines Ltd.

“They’re obviously in a dire position,” said Paolo Lostritto, an analyst at National Bank. “Those companies are on the higher end of the cost curve and they’re the most vulnerable.”

Senior and intermediate miners have plenty of liquidity to ride out the bear market in gold and position themselves for a recovery. But the smaller players, who lack the same economies of scale, are struggling with weak balance sheets and high sustaining and operating costs required to keep their mines running.

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Building glass mines – by John Cumming (Northern Miner – June 26, 2013)

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

Canada’s extractive industries got some high-profile international attention in mid-June. Prime Minister Stephen Harper used the lead-up to the G8 summit in London to announce that the federal government intends to establish new mandatory reporting standards for Canadian mining and oil and gas companies with, in his words, “a view to enhancing transparency on the payments they make to governments.”

The government says it’s doing this for six reasons: to improve transparency; to ensure Canada’s framework is consistent with existing international standards and aligned with other G8 countries; to ensure a level playing field for companies operating domestically and abroad; to enhance investment certainty; to help reinforce the integrity of Canadian extractive companies; and to help ensure that citizens in resource-rich countries around the world are better informed and benefit from the natural resources in their country.

Next, the federal government will consult with its provincial and territorial counterparts, industry representatives and aboriginal and civil society groups on what would be the best regime for Canada’s extractive industries to follow. Broadly speaking, this is all laudable and a good step forward. With some notable exceptions such as SNC-Lavalin in Gaddafi’s Libya, Canadian companies are generally on pretty good behaviour overseas, and so greater transparency with respect to their payments to foreign governments will shine a light on their at times underappreciated contributions to their host countries.

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Miners caught in bond rout as commodities extend slide – by Tim Kiladze and Jacquie McNish (Globe and Mail – June 27, 2013)

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.

The bond market rout is sending shock waves through the corporate credit market, but mining companies are taking a particularly hard beating as commodity prices tumble.

Corporate and government bond prices have fallen sharply since the Federal Reserve last week said it could pull back on its extraordinary bond buying program. Now commodity prices are extending their slide, creating an added level of anxiety among investors in bonds issued by some mining companies.

The price of gold plummeted about $45 to about $1,230 (U.S.) an ounce Wednesday, and earlier this week, the price of copper briefly broke through the important psychological barrier of $3 a pound. At these prices, some development projects are much less economic and miners make less money for each pound or ounce of metal they sell.

Falling bond prices in the mining sector are troublesome because many miners flocked to the bond market for refuge. Amidst massive cost overruns, multibillion-dollar writedowns and weakening commodity prices, many mining stocks fell more than 40 per cent in the past year, making it difficult for them to raise cash by selling new shares.

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The misery only gets worse for Barrick Gold – by Darcy Keith (Globe and Mail – June 26, 2013)

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.

The misery at Barrick Gold Corp. is only getting worse, with the stock today sinking to its lowest level in more than two decades amid plunging bullion prices and as Credit Suisse backed away from an earlier gutsy recommendation to buy its beaten-down shares.

Analyst Anita Soni downgraded Barrick to “neutral” from “outperform,” and dramatically cut her price target, as Credit Suisse lowered its price forecasts for gold. It now sees bullion averaging $1,452 (U.S.) an ounce in 2013 and $1,390 in 2014, down from earlier forecasts of $1,580 from $1,500, respectively.

But Ms. Soni also made clear it’s not just the gold price that is hurting the outlook on Barrick, but rather a “confluence” of factors that also includes uncertainty over the Pascua-Lama project, high debt levels relative to peers, and potential write-downs. These “in isolation would likely have been weathered, but in combination reduces the risk/reward profile for the company.”

“We are reducing our rating until the company provides clarity on the path for Pascua and for handling asset sales and its financial leverage,” Ms. Soni said. She expects Barrick will provide some clarity on Pascua-Lama, located on the Chilean-Argentian border, before third-quarter results are released in late October.

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Canaccord likens the late 90s downturn to ongoing junior dump – by Kip Keen (Mineweb.com – June 25, 2013)

http://www.mineweb.com/

Canaccord turns back the clock to look at dark times past for the junior sector, finding similarities between today’s market decline and the 1990s.

HALIFAX, NS (MINEWEB) – Canaccord Genuity casts its gaze back on junior sector downturns past to find context in the current, now two-year long rout in junior equities in its most recent Junior Mining Weekly report. As has been noted in these pages, that means skipping over the quick 2008-2009 financial crisis, when juniors rose about as quickly as they fell, to the crumbling junior market in the late 1990s.

“The drop in the TSX Venture harkens back to the 1995-2000 period where it fell (70-75%) from peak to trough over a plus 40-month time frame,” Canaccord noted, referring to the TSX Venture’s precursor, the Vancouver Stock Exchange. Canaccord notes the Venture has so far dropped about 65 percent in 29 months since it started going south, in serious, in 2011. This is more drawn out that the 2008-2009 crash and in profile reminds Canaccord of the late nineties downturn.

Adding some context here Cannacord draws on a veritable list of fear factors that some may rather have forgotten: “This period enveloped the Asian financial crisis (1997), which included Thailand, Indonesia and South Korea, the U.S. dot-com technology bubble (1997-2000), the LongTerm Capital Management hedge fund bailout (1998), Russian debt default (1997-1998) and the Brazilian financial crisis (1994-1999), not to mention the Bre-X Minerals scandal (1996-1997) that tainted investors’ confidence in the junior mining sector.”

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Mine Closure: Who Pays Giant Costs? – by Jack Caldwell (I Think Mining.com – June 25, 2013)

http://ithinkmining.com/

At this link is my EduMine course on Mine Closure: The Basics of Success. One issue I do not address in the course is a looming tendency, namely should we tax existing mines to pay for closure of old mines?

This evening in a Vancouver pub, I drank the evening away with friends of forty and more years vintage. We have all been involved in mining for that many years and have seen our share of closed mines and mines that will never be closed. We drifted inexorably to the Giant Mine in Yellowknife, Northwest Territories, Canada.

Here is what I read today about the closure of that mine:

“A northern review board has given its conditional stamp of approval to a federal cleanup plan for an abandoned gold mine near Yellowknife.

The main environmental hazard at Giant Mine is the 237,000 tonnes of highly toxic arsenic trioxide dust stored in 15 underground chambers — there’s enough to kill every person in the world. The arsenic trioxide is a byproduct from decades of gold mining.

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Barrick plans board changes after ‘huge wake-up call’ from investors – by Jacquie McNish (Globe and Mail – June 25, 2013)

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.

Barrick Gold Corp. plans to overhaul its board of directors in the wake of a backlash from powerful shareholders. Two of Barrick’s independent directors, Donald Carty and Robert Franklin, recently met or telephoned officials from eight major Canadian pension funds that spearheaded a revolt by shareholders complaining about lavish compensation practices.

More than 85 per cent of Barrick’s shareholders signalled in a non-binding vote in April that they opposed a $17-million (U.S.) paycheque for the company’s new vice-chairman John Thornton and multimillion-dollar payments to company founder Peter Munk and director Brian Mulroney.

According to people familiar with the meetings, Mr. Carty, a Dallas-based director with Virgin America and Porter Airlines Inc. described the vote as “a huge wake-up call” about the need for better governance at Barrick.

The directors told the pension funds the board has launched a search for independent directors with an emphasis on executives with mining operating experience. It is expected that some of Barrick’s current directors will be replaced but the number of departures is unclear.

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