UPDATE 1-Kyrgyz MPs set new deadline for deal with Centerra Gold – by Olga Dzyubenko (Reuters India – June 5, 2013)

http://in.reuters.com/

BISHKEK, June 5 (Reuters) – Kyrgyzstan’s parliament has set a new Sept. 10 deadline for the government to agree an improved mining deal with Canada’s Centerra Gold or unilaterally cancel the current arrangement.

Centerra, which runs the central Asian nation’s flagship Kumtor gold mine, has come under pressure to revise a deal struck in 2009 after a state commission said it was underpaying the government and had caused “colossal” environmental damage.

Last week, hundreds of protesters forced a brief stoppage to production at the mine, hidden high in the Tien Shan mountains near the Chinese border.

In late February, the legislature gave the government three months to strike a new deal with Centerra, but the government missed a June 1 deadline, saying it needed more time for talks. These include a proposal for Kyrgyzstan to swap its stake in the Toronto-listed company for joint ownership of Kumtor.

After hours of heated debates, the new deadline was adopted by a 65-5 vote. “There are three options. The first is to redraw the 2009 agreements and start working in line with Kyrgyz laws, including taxation,” Economy Minister Temir Sariyev said before the vote.

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NEWS RELEASE: Flat revenues, falling profits, and plunging share prices — Global mining industry faces confidence crisis

 Revitalizing the industry starts with renewed focus on productivity

TORONTO, June 5, 2013 — While the Top 40 mining companies increased volumes by six per cent, softer commodity prices meant that 2012 revenues of $731 billion was only the second year in a decade that mining revenue did not increase, according to the latest PwC report: Mine: A confidence crisis.

The Mine report highlights a range of activity causing stakeholders to question the mining sector’s value proposition:

  • Net profits were down 49% to $68 billion
  • Gold equities declined despite steady gold price increases
  • Mining stocks in the first four months of 2013 fell nearly 20%

“Miners are faced with a confidence crisis and they’re focussed on trying to restore confidence,” says John Gravelle, Mining Leader for Canada and the Americas, PwC. “Across the board, there’s a renewed focused on maximizing returns from existing operations through managing productivity and improving efficiencies. Looking at the leadership changes last year, it reflects an industry that values experience and operational understanding over deal-making and growth.”

Gravelle adds, “The importance of returning to a lower cost base rather than relying on higher commodity prices should be on every miner’s agenda. Miners must deliver this while operating in an environment of intense resource nationalism where we see governments in traditional mining jurisdictions legislating substantial tax increases and emerging mining jurisdictions ignoring mining contracts after substantial investments are made.”

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Centerra mulls offering stake in Kumtor mine to Kyrgyz government amid violent protests – by Peter Koven (National Post – June 5, 2013)

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

TORONTO – As it faces a barrage of nationalization threats in Kyrgyzstan, Centerra Gold Inc. is studying a possible solution: giving the government a direct stake in its flagship mine.

Centerra revealed Tuesday that it negotiating a potential transaction with the Kyrgyz government that would convert the state’s 32.7% ownership of Centerra shares into direct ownership of the Kumtor mine through a joint venture.

The talks come amid a major crisis for Centerra. Last week, the Toronto-based miner had to temporarily shut down Kumtor after hundreds of protestors set up a roadblock near the mine and shut down a substation that was providing grid power.

The government later declared a state of emergency as hundreds of protestors clashed with riot police near Kumtor. The mine has since re-opened and the road is now clear again. “Probably by today or tomorrow, we’ll be at full capacity again,” said John Pearson, Centerra’s vice-president of investor relations.

The protestors were demanding that the government’s 2009 investment agreement with Centerra be torn up, with some calling for outright nationalization.

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‘Year of the Bear’ portends grizzly outlook for mining executives – MRG – by Dorothy Kosich (Mineweb.com – June 4, 2013)

http://www.mineweb.com/

“2013 is proving to be a year mining industry executives won’t soon forget; though most will not want to remember,” says the Mining Recruitment Group.

RENO (MINEWEB) – How bad is this year’s outlook for the international mining industry? So miserable that a measly 9% of mining executives recently polled by Vancouver’s Mining Recruitment Group said they are actually bullish on the year ahead.

In his second quarter 2013 survey, Andrew Pollard, president of The Mining Recruitment Group, observed, “2013 has been a year in which most involved in the mining industry will not soon forget; thought most will not want to remember.”

“Through the eyes of mining executives, this new report provides evidence that companies of all stage and size have had to make tough decisions in the wake of nearly unprecedented market turmoil,” said Pollard. “With investors sitting on the sidelines turning a blind eye, wildly fluctuating commodities prices and having to face escalating costs, executives aren’t counting on a short term fix, though long term, their sentiment is refreshingly rosy.”

In the document MRG: Mining Executive Outlook, Summer 2013, based on a survey completed by 2010 mining leaders, Pollard called 2013, “The Year of the Bear.”

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Greek opponents of Eldorado mine take message to company’s Canadian HQ: ‘Leave us alone’ – by David P. Ball (Rabble.com – June 4, 2013)

 http://rabble.ca/

Greek villagers brought their region’s fierce battle against Vancouver-based Eldorado Gold to the firm’s headquarters Friday, marking the end of the activists’ cross-Canada tour opposing open-pit gold mining in their homeland.

Over the past year, a growing conflict in Greece’s Halkidiki region — birthplace of the philosopher Aristotle — has seen thousands of residents blockade roads, raid mine sites, and skirmish with police they say are corrupt and beholden to the company. Another demonstration brought 20,000 protesters to the streets of Thessaloniki.

“Our will will not be curbed,” said Maria Kadoglou, a resident of Ierissos village, Greece. “We will keep on fighting until Eldorado Gold goes away.”

“Eldorado has been trying for a very long time to conceal from the Canadian public and its own investors that fact that there is huge resistance to its operations in Greece. When demonstrations got so big that they could no longer deny it any more … they have been saying the people protesting are anarchists, radical leftists, that we are flying in protesters from other parts of Greece; this is totally false. This is a genuine local resistance movement.”

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Punched out by low blows – by Russell Noble (Canadian Mining Journal – June/July 2013)

The Canadian Mining Journal is Canada’s first mining publication providing information on Canadian mining and exploration trends, technologies, operations, and industry events.

Now that the “Annual Report” season is almost over and shareholders are wondering “What the hell happened?” it’s time to look forward and talk about the Canadian mining industry in general and why it’s still a good place to invest.

First of all, as we all know, mining has always been subject to a good beating every once in a while and so far this year, many com¬panies (especially those involved with gold) have been literally pummeled into submission.
Historically, many companies suc¬cumb to the harsh blows of falling prices and rising costs while others, thankfully, dust themselves off and regroup by tak¬ing a serious look at what went wrong.

In many cases, getting ‘punched out’ of the business is the result of something that’s beyond control and unfortunately, it’s something that’s becoming far too common for mining companies.

Losing a fight because of poor planning and incompetent management is one thing, but to be counted out because of dirty tac¬tics is criminal and that’s what I think is partly to blame for more and more compa¬nies going broke.

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Harper should not be promoting mining interests in Peru – by Gerald Caplan (Globe and Mail – May 31, 2013)

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.

Here’s why Stephen Harper was in Peru last week instead of in Parliament trying to end the crisis that’s destabilized his entire government. The Prime Minister has two great economic passions. The first, of course, is building pipelines to enable ever more quantities of oil to flow from the Alberta tar sands.

Passion number 2 is the promotion of Canadian mining interests across the globe, not least in Africa and Latin America. Why? Okay, you support the oil giants because you think global warning is hooey. But mining? How does it help Canada to have our PM personally advance the interests of our multitude of mining companies in relatively poor foreign countries? How does it help the people of those countries?

In Peru, Mr. Harper announced $53-million in “aid projects” over the next six years, most of them related to extractive industries. But why aid booming Peru when the government is ending all aid to several truly needy African countries. The answer is simple. As pointed out by Ian Smillie, one of Canada’s most thoughtful development experts, the projects Canada is to fund will likely “make life easier for the 75-odd Canadian mining companies operating in Peru”.

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Issue of SEC disclosure rules applying to first nations still debated – by Shawn McCarthy (Globe and Mail – June 3, 2013)

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 — Before opening its Meadowbank gold mine in Nunavut, Agnico Eagle Mines Ltd. concluded an impact-benefits agreement with the local Inuit regional business council and is now negotiating a second deal for its Meliadine project in the territory.

While the business association operates on behalf of the local population, the financial terms of the agreements are confidential despite Agnico Eagle’s desire to make them public.

Louise Grondin, the company’s senior vice-president for sustainability, said the company is keen to have the full agreement disclosed. “We want to have this thing public so people know what is going on, and where the money goes and how much money.”

Agnico Eagle is listed in the U.S. and, under Securities and Exchange Commission regulations, must disclose all payments to governments for its projects in Canada, Finland and Mexico. But there continues to be considerable debate over whether first nations, who claim the right to self-government, should be covered by the SEC rules.

Toronto lawyer John Olthuis – who has represented aboriginal communities in benefits negotiations – said the band council and their representatives should not be considered governments because as they have no power to tax or set royalties.

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Hundreds storm office of Canadian Centerra mine in Kyrgyzstan, 55 wounded in clashes – by Leila Saralayeva (Associated Press/National Post – June 1, 2013)

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

BARSKOON, Kyrgyzstan — Hundreds of stone-throwing protesters besieged a Canadian gold mine in Kyrgyzstan on Friday, clashing violently with riot police and prompting the president to declare a state of emergency.

Over 50 people were wounded and 80 detained in the clashes, authorities said. The protest also triggered widespread unrest in the southern city of Jalal-Abad, where hundreds stormed the governor’s office.

The twin developments threatened further turmoil in this impoverished Central Asian nation of five million, which hosts a U.S. base supporting military operations in nearby Afghanistan. Protesters want the northeastern Kumtor gold mine to be nationalized and the company to provide more benefits.

The mine, operated by Toronto-based Centerra Gold, is the largest foreign-owned gold mine in the former Soviet Union. It accounts for about 12% of the nation’s economy and has been at the centre of heated debate between those favouring nationalization and officials who believe that would deter much-needed foreign investment.

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Miners lead transparency push for payments to governments – by Shawn McCarthy (Globe and Mail – June 3, 2013)

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 — HudBay Minerals Inc. is making its first big bet overseas with a $1.5-billion copper mine in Peru. As its engineers work on mine construction, the Toronto-based company’s accountants are proceeding with a related project – preparing to lay out, under contentious new U.S. securities regulations, precisely what revenues it pays to federal and local governments in the South American country.

While U.S.-listed resource companies like HudBay face such mandatory transparency reporting, companies listed only in Canada do not. Now, the mining industry is leading a charge in this country to adopt similar rules.

It’s a move that is dividing Canada’s mining and oil companies, and raises questions about whether payments to first nations should be also be made public.

And the federal government is now endorsing the adoption of mandatory reporting for both mining and energy companies, though Natural Resources Minister Joe Oliver cautioned Sunday that it will have to be done in collaboration with the provinces, which have jurisdiction over resources royalties and securities law.

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NEWS RELEASE: Taxes on mining in Canada are distortionary and are costing provincial coffers; especially Ontario’s – Report by Jack Mintz and Duanjie Chen

Click here for the report: http://policyschool.ucalgary.ca/sites/default/files/research/chen-mintz-mining.pdf

CALGARY, May 30, 2013 /CNW/ – The province of Ontario ended its fiscal year with a $12 billion deficit. Ontario may be in worse fiscal shape than well-known basket cases like the state of California. One would think that a province so financially debilitated would want to avoid giving complex and unnecessary tax breaks to resource companies. Yet, a review of the mining-tax regimes across the country by Duanjie Chen and Jack Mintz of The School of Public Policy finds that Ontario’s system is redundant, expensive and wasteful.

Ontario is not the only province that needs to improve its mining-tax regime. In every province except New Brunswick, mining firms enjoy a lower marginal rate for taxes and royalties than for non-resource companies. The result has been a distortion of investment toward mining projects that might otherwise be economically inefficient. Even in major oil-producing provinces, such as Alberta, Saskatchewan and Newfoundland, mining investment benefits from larger tax incentives than oil and gas investment.

The reasons for favouring the mining of metal over the mining of oil are unclear and economically unjustifiable. According to co-author Jack Mintz, “Provincial mining-tax systems are distortionary and complex, resulting in sub-par profitability due to excessive investment in certain tax-favoured assets. Both the federal and provincial corporate income tax regimes need to be overhauled.”

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Kyrgyzstan protesters storm Canadian mining office – The Associated Press/CBC News World (May 31, 2013)

http://www.cbc.ca/news/world/

Centerra Gold’s electricity cut off after rioters enter transformer unit

Kyrgyzstan has imposed a state of emergency on a northern district after clashes between riot police and protesters over Centerra Gold’s Kumtor mine.

Hundreds of protesters in Barskoon stormed the office of a gold mine run by the Canadian-based company, demanding its nationalization and more social benefits.

Protests at the Kumtor mine operated by Centerra Gold have been going on for several days. Police arrested 80 people Thursday night after several hundred, some on horseback, entered a power transformer unit and cut off electricity to the mine for several hours. That effectlvely prevented the mine from shutting down.

Centerra says the protests are illegal and that it is working with the government and local authorities to resolve the situation. President Almazbek Atambayev imposed the state of emergency and a curfew on Dzhety Ohuz district of the Issyk Kul region until June 10, his office said.

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Kyrgyzstan imposes state of emergency to protect Centerra mine – by Olga Dzyubenko (Reuters U.S. – May 31, 2013)

http://www.reuters.com/

BISHKEK – (Reuters) – Kyrgyzstan’s government imposed a state of emergency on a northern district on Friday to protect Centerra Gold’s Kumtor mine from protesters.

Police on Friday cleared away demonstators who had been blocking the road to Kumtor for days and arrested 92 people, Prime Minister Zhantoro Satybaldiyev told a news conference.

A few hours later police used tear gas and stun grenades in clashes with villagers who tried to seize a substation and cut power supplies to the mine, a police spokesman said. Several protesters were hurt.

Hundreds of villagers had blocked the road to Kumtor, in Dzhety Oguz district, on Tuesday afternoon and threatened to move on the mine if the government did not tear up its agreement with the company.

President Almazbek Atambayev imposed the state of emergency and a curfew on Dzhety Ohuz district of the Issyk Kul region until June 10, his office said. “Those who broke the law must be brought to justice in line with the full severity of the law,” it quoted Atambayev as saying during a meeting with security officials.

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Chilean President gives Barrick Gold its Pascua-Lama fix-it orders – by Brent Jang and Josh Wingrove (Globe and Mail – May 31, 2013)

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, OTTAWA – Chile’s President says Barrick Gold Corp. must follow 23 steps to comply with orders from his country’s environmental regulator, a message that underscores the tough road ahead for the company to get its crucial Pascua-Lama gold project back on track. Sebastian Pinera, in Ottawa to discuss Canada-Chile economic relations, admonished Barrick for its handling of the $8.5-billion (U.S.) mine development so far.

“The company didn’t comply with all the conditions that were established in that environmental impact assessment,” Mr. Pinera said during a joint news conference with Prime Minister Stephen Harper. “We have identified 23 areas where they will have to improve their behaviour with respect to the environment in Chile.”

Last Friday, Chile’s environmental regulator halted development of the gold and silver mine, citing “very serious violations” by Barrick. Mr. Pinera said Chile wants Barrick to eventually proceed with its Pascua-Lama mine – as long as it obeys environmental rules.

But lengthy delays are likely for the project, due to the time likely required for Toronto-based Barrick to carry out environmental fixes, including canals to divert run-off water away from the Chilean mine.

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Excerpt from “An Insider’s Guide to the Mining Sector: An in-depth study of gold and mining shares”– by Michael Coulson

To order a copy of An Insider’s Guide to the Mining Sector, please click here: http://www.harriman-house.com/book/view/66/investing/michael-coulson/an-insiders-guide-to-the-mining-sector/

Madness in Mining Markets

This section looks at a few examples of the sort of madness that can infect mining share markets. Such events are sometimes loosely described as scams, although often what happens is far more an issue of wild over enthusiasm on the part of investors. However, we start with a genuine scam, and a fairly recent one at that, with plenty of lessons to teach about market navigation – Bre-X and its gold project on Kalimantan.

Bre-X Minerals

The company was incorporated in Canada in 1988. The two key personalities in Bre-X were John Felderhof and David Walsh, the former a geologist and the latter a stockbroker. Both men had been short of money in their early professional years, and in its early days Bre-X seemed infected with the same problem. Interestingly Felderhof and Walsh’s first venture together was a trip to the island of Kalimantan in Indonesia some five years before Bre-X was founded.

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