Archive | Canada Mining

No IPO on TSX for Last Half of 2008 – 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.

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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No news is … ? – 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.

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.

Good News Gold, Bad News Base Metals – 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.

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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HudBay, Lundin Combo Under Fire – 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.

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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Taking the Message to Canada’s MPs – 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.

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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Mining Sector Budget Cuts Go Global – by Marilyn Scales

Marilyn Scales - Canadian Mining JournalMarilyn 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.

At the risk of being the bearer of even more bad news, I have been watching the world’s mining industry react to the turmoil in global stock and money markets. Not only in Canada, but around the world companies big and small are conserving capital and cutting output.

Let us recap: Liberty Mines has placed its Redstone and McWatters nickel mines in Ontario on care-and maintenance. Breakwater has suspended mining at its Langlois base metals mine in Quebec and its Myra Falls base metal producer in British Columbia. Teck is paying particular attention to debt reduction. Capital budgets have been trimmed at Suncor’s oil sands project in Alberta.

And the announcements just keep coming. It seems producers of all commodities and all parts of the world are announcing cutbacks.

Rio Tinto is slicing approximately 10% from its iron ore output in the Pilbara region of Western Australia.

BPH Billiton also expects to send fewer shiploads of iron ore to China next year.

Brazilian mining giant Vale will be slowing iron ore shipments to customers. Additionally, it has suspended a pre-feasibility study for a new bauxite and aluminum project in Ghana.

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Hopes Fades for Crystallex’s Las Cristinas Gold Project – by Marilyn Scales

Marilyn Scales - Canadian Mining JournalMarilyn 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 history of the Las Cristinas gold project that CRYSTALLEX INTERNATIONAL of Toronto has tried to lay claim to is steeped in controversy and delay. But the squabbling may soon come to an end if Venezuelan president Hugo Chavez gets his way. He wants to nationalize the Las Cristinas project along with several other industries.

Placer Dome was one of the first companies to drill the Las Cristinas deposit in the early 1990s. The Canadian company formed a joint venture with Corporacion Venezolana de Guayana (CVG), and CVG remains the owner to this day. Crystallex was drilling the adjacent Albino concession at the time.

The entire Kilometre 88 area of Venezuela became one of the hottest gold plays in Latin America during the early 1990s. But the Las Cristinas deposit with 16.9 million contained oz of gold is the richest.

In 1997 Crystallex bought up a privately owned Venezuelan company said to own the rights to part of the Las Cristinas property. Placer Dome called the claim groundless, but it decided to suspend construction at Las Cristinas until the ownership question could be settled. In June 1998 the Venezuelan court dismissed Crystallex’s claim, clearing the way for Placer Dome and CVG to move forward. The next year low gold prices forced Placer Dome put the project on hold.

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Canadian Gold Hunters Undeterred by Sliding Price – by Marilyn Scales

Marilyn Scales - Canadian Mining JournalMarilyn 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.

It seems like only yesterday pundits looked at the price of gold as it topped US$1,000 an ounce and predicted it could only go up. Actually it was seven months ago, near the middle of March 2008, and we all wish the price would return to that level. Instead, the mess in the global financial markets has for some reason made the U.S. dollar stronger and the price of gold dip to the $750/oz range.

Nonetheless, many Canadian juniors are pressing ahead with work at what they hope will someday be this country’s next generation of profitable gold mines. Here is a sampling that have landed in my inbox during the last two weeks.

ALTO VENTURES of Vancouver sais drilling has begun on targets at its Mud Lake and Three Towers properties in the Beardmore-Geraldton Gold Belt in Ontario. High grades have been unearthed in the region in the past. (www.AltoVentures.com) WESCAN GOLDFIELDS of Saskatoon is earning a 50% interest in the Mud Lake project.

BRIGADIER GOLD of Toronto has extended the gold zone to more than 200 metres vertical depth at its Larder Lake project near Kirkland Lake, Ontario. The intersections were made beneath trenches in which visible gold was discovered in 2005. (www.BrigadierGold.com)

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Financial Woes Trim Mining Sector’s Capital Budgets – 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 global financial crisis looks to be the new reality for most mineral producers. Slumping stock markets, wobbly banks and lack of consumer demand are having an effect on Canadian miners, forcing them to trim their capital spending plans.

Here are a two examples.

Don Lindsay, CEO of Vancouver-based TECK, said the number one priority for his company is debt reduction during these times of weaker metal prices. Cash flow generated from operations will be used for that purpose at the expense of capital, sustaining and exploration budgets. “We haven’t come to a determination on how much that will be cut back but they will be cut back,” he promised. Consideration will also be given to selling certain unnamed assets. Teck recently arranged for a $9.8 billion bridge loan to finance its acquisition of FORDING CANADIAN COAL TRUST, and the company has a 20% share in the FORT HILLS OIL SANDS project where development costs have ballooned by 50% over the original estimate of $14.1 billion made in July 2007.

Calgary’s SUNCOR ENERGY has trimmed its 2009 capital budget 20% to $6 billion from the $7.5 billion spent in 2008. Of the 2009 budget, $3.6 billion will be spent on the Voyageur oil sands growth project. This commitment includes meeting spending and construction timelines for the third and fourth stages of the Firebag in situ operation. The completion date of the planned Voyageur upgrader has been pushed back one year to save money. The remaining $2.4 billion will be spent in the oil sands business ($1.7 billion), natural gas operations ($300 million) and refining ($400 million).

When large, well-managed corporations cut capital spending, smaller miners might do well to heed the call. I predict delays in many projects that cannot be economically completed without another round of higher commodity prices.

Mining industry observers have long been aware that this is a cyclical business. What surprises me is how long the upward cycle lasted (five years) and how fast the situation has been reversed (five weeks).

Arming Private Security in the Philippines – 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.

Halloween is fast approaching, and I am filled with scary thoughts. I can imagine little ghosts and goblins shrieking for treats. I can imagine costumed superheroes playing gruesome tricks. But the truly frightening thing that I came across this week is the decision made by the Philippine government to allow mining companies to arm their private security forces.

According to reports from GMANews.TV, mining companies in the Philippines will be allowed to established civilian auxiliary armed groups (CAGs) as an adjunct to the local military. CAG members will carry only low-calibre guns, but that is little consolation to anyone who has ever been on the receiving end of a bullet.

Philippine Defence Secretary Gilberto C. Teodoro reportedly said that miners will be allowed to have a many armed men “as necessary depending on the threat level and the terrain” as along as each company signs an agreement with the Armed Forces.

I find this proposal frightening for several reasons.

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Grasping at Lies – NGOs, Mining and the Truth – 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.

“A lie told often enough becomes the truth.” – Lenin

Am I the only one who thinks there may be a conspiracy to defame BARRICK GOLD? The name of the Canadian company has cropped up recently in connection to a couple untruths, deliberate or not.

Last week it was a story circulated by Agence France-Presse and Dow Jones Newswires. Both implied that several miners were killed at the North Mara gold mine that Barrick operates in Tanzania. Dow Jones has since issued a corrected item. As it turns out the deaths occurred at the state-owned Buhemba gold mine. That mine is neither owned nor operated by Barrick, although the company’s mine rescue team responded immediately to the emergency.

In July there were autopsy photos of a gunshot victim allegedly killed by security guards from Barrick’s Porgera mine in Papua New Guinea circulating on the Internet. Again, neither the company or anyone in its employ had any involvement in the incident.

Barrick is not the first, only, or last mining company to be villanized by activists and NGOs with little regard for the truth. Junior miners, too, are accused of environmental and human rights abuses by organizations with political self-interests. I suspect Barrick is targeted because of its name, made recognizable by virtue of its worldwide success. I have seen the company in action at some of its Latin American projects, and I assure my readers that Barrick operates by the highest community and sustainability standards.

Okay, I’ll grant that some advocacy organizations do improve the lives of those they purport to represent. But I take issue with those that grasp at lies to put their cause into the spotlight. And a bald-faced lie that hits the press will be remembered for its shock value. The correction that follows will be largely ignored, especially by those who have an anti-mining axe to grind. I’m afraid Comrade Lenin will be proven correct.

Canadian Mining Facts from the Mining Association of Canada (MAC) – 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 MINING ASSOCIATION OF CANADA (MAC) released its latest “Facts and Figures 2008” publication at the recent Mines Ministers Conference in Saskatoon. In it are details about the production, reserves, exploration, trade and investment, innovation, tax and human resource aspects of our industry. That’s a lot of ground to cover in 65 pages, but MAC is once again the most comprehensive source of such numbers.

Here are a few of them:

VALUE: The contribution that the metals and minerals industry makes to Canada’s economy by value is relatively stable at 3.5% to 4.5%. Meanwhile, the gross domestic product (GDP) grew to $1.2 trillion in 2007. Of that amount, mineral extraction contributed $9.68 billion and mineral manufacturing $32.22 billion.

TOP TEN: Canada’s top ten minerals by value in 2007 were nickel ($9.90 billion), copper ($4.53 billion), potash ($3.14 billion), coal ($3.14 billion), uranium ($2.76 billion), iron ore ($2.51 billion), gold ($2.38 billion), zinc ($2.09 billion), cement ($1.80 billion) and diamonds ($1.45 billion). The biggest money is to be had in the oil sands. The value of synthetic crude oil last year was $14.80 billion.

RESERVES: Canadian reserves continue to decline as they have for the past 25 years. Years of rising commodity prices led to a “modest” increase in 2006 and 2007, but without exploration spending in this country, production will also decline.

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Canadian Election Overshadows Successful Mines Ministers’ Meeting – 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.

Prime Minister Stephen Harper’s call for a federal election on Oct. 14 was hardly a surprise. His Conservative party began running election-style ads at the beginning of September. Now, with the nation’s eyes and ears alert to campaign promises and mud-slinging, the recent meeting of Canada’s mines ministers has been largely overlooked.

Energy and mine ministers from the federal, provincial and territorial governments met in Saskatoon Sept. 7-9. On the agenda were issues related to the industry’s social licence.

“Key to our discussions was the recognition that the mining and industry sectors along with governments need to encourage and engage Aboriginal peoples and communities in a manner that is inclusive, transparent and characterized by mutual respect,” host and Saskatchewan Energy and Resources Minister Bill Boyd said in the warp-up press release.

The ministers recognized that the long-term prosperity of the mining and
energy sectors depends on addressing labour shortages and working with industry and other partners to address these issues on a priority and ongoing basis.

The ministers underscored the importance of continued collaboration between regulatory agencies to ensure high-quality and timely environmental assessments to promote sustainability. They also noted the importance of increasing collaboration on research and innovation with industry, governments and academic institutions to support industry competitiveness.

Finally, ministers discussed the importance of Canadian companies working to secure a social license for mineral development, at home and abroad, by building their capacity to meet the social, economic and environmental expectations of their host communities.

Seems the press release is using all the right words when it comes to creating a responsible and growing mining industry. But they are only words.

In the excitement of the coming federal election, watch for candidates to promise cash and policy support for mining. I’ll bet you won’t find much. If you do, drop me a line, [email protected].

Canada’s Mineral Reserves Crisis – by Paul Stothart

Paul Stothart - Mining Association of CanadaPaul Stothart is vice president, economic affairs of the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.

The mining industry’s fundamental importance to the Canadian economy actually predates Confederation. The fact that the Geological Survey of Canada was founded in 1842, a full quarter century before Confederation, speaks volumes about the role that mining has played throughout Canadian history. To this day, the industry remains the backbone of over 100 communities, including larger communities such as Sudbury, Flin Flon, Thompson, Timmins, and Trail.

The industry’s presence also extends well beyond the mine site to include smelters, refineries, and semi-fabrication operations – defined broadly the industry employs almost 400,000 Canadians. In the larger urban setting, the industry is important to the financial and legal community in Toronto, and features an exploration cluster in Vancouver, and research and headoffice activity in Montreal, among other examples. Beyond this, several thousand supplier firms provide engineering, environmental, transportation, and other expertise to the industry. Internationally, companies funded on the Toronto Stock Exchange have over 4,000 mining projects in play in foreign countries, and Canadian mining firms have some $50 billion in direct investment abroad.

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Canadian Mineral Facts and Figures from the Mining Association of Canada – by Marilyn Scales

Marilyn Scales - Canadian Mining JournalMarilyn 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 MINING ASSOCIATION OF CANADA (MAC) released its latest “Facts and Figures 2008” publication at the recent Mines Ministers Conference in Saskatoon. In it are details about the production, reserves, exploration, trade and investment, innovation, tax and human resource aspects of our industry. That’s a lot of ground to cover in 65 pages, but MAC is once again the most comprehensive source of such numbers.

Here are a few of them:

VALUE: The contribution that the metals and minerals industry makes to Canada’s economy by value is relatively stable at 3.5% to 4.5%. Meanwhile, the gross domestic product (GDP) grew to $1.2 trillion in 2007. Of that amount, mineral extraction contributed $9.68 billion and mineral manufacturing $32.22 billion.

TOP TEN: Canada’s top ten minerals by value in 2007 were nickel ($9.90 billion), copper ($4.53 billion), potash ($3.14 billion), coal ($3.14 billion), uranium ($2.76 billion), iron ore ($2.51 billion), gold ($2.38 billion), Continue Reading →