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The logic cliff [Canadian resource development] – by Philip Cross (National Post – February 26, 2013)

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

‘Bitumen Cliff’ report demonizes Canada’s resource boom

Ever since the staples theory was formulated decades ago, the debate has raged between those who believe natural resource exports can form the basis of sustained growth and those who do not. Canada, one of the richest economies in the world, stands as a testament to the benefits of resource development. But opponents of our reliance on such development are driven to ever more absurd contortions to justify their conviction that natural resources must be bad for us, regardless of what the evidence shows.

The latest example of the anti-­resource lemmings marching determinedly off the logic cliff is the just-released paper The Bitumen Cliff by the Canadian Centre for Policy Alternatives (CCPA). This adds to the demonization of the resource boom that has enriched Canada over the past decade. Since the prosperity generated by the resource boom continues to expand, even reaching the beleaguered forestry industry, the paper draws a bead on what it calls the implications of the “bitumen boom.”

What’s wrong with this thinking? Everything, starting with the title. Bitumen is not an accurate description of Canada’s oil patch, never mind the whole resource sector. Bitumen, broadly defined to include all non-conventional oil, accounted for just over half (56%) of all Canadian oil produced in 2011. The rest is crude oil produced by conventional methods. But surely the occasional fact can be sacrificed in the service of saving us from our natural resources.

Now that the notion of Dutch disease (that a booming resource sector leads to a higher exchange rate that depresses manufacturing) has been so discredited that even politicians shy away from its use, the CCPA’s paper picks up the old anti-resource argument of the “staple trap.”

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NEWS RELEASE: Breakthrough in Legal Liability of Canadian Mining Corporations for Abuses Overseas

Mayans’ lawsuit against HudBay over shootings and rapes at mine in Guatemala to proceed in Canadian courts

TORONTO, ONTARIO–(Marketwire – Feb. 25, 2013) – In an important precedent-setting development for the accountability of Canadian mining companies for alleged overseas human rights abuses, victims of rape and murder at a Guatemalan mine are now able to sue a Canadian mining company in Canadian courts.

Guatemalan Mayan villagers who are suing Canadian mining company HudBay Minerals for the alleged gang-rapes of eleven women, the killing of community leader Adolfo Ich and the shooting and paralyzing of German Chub at HudBay’s former mining project in Guatemala recently learned that HudBay has abruptly abandoned its legal argument that the lawsuit should not be heard in Canada, just before an Ontario court was set to determine the issue. As a result, and for the first time, a lawsuit against a Canadian mining company over alleged human rights abuses abroad will be heard in Canadian courts.

“This is a stunning victory for human rights, and paves the way for future lawsuits against Canadian mining companies” said Murray Klippenstein, lawyer for the Mayan plaintiffs. “Corporations be warned – this case clearly shows that Canadian companies can be sued in Canadian courts for alleged human rights atrocities committed at their foreign operations.”

HudBay had filed extensive legal briefs arguing that the lawsuit should be heard in Guatemala, not Canada, despite overwhelming evidence indicating that Guatemala’s justice system is dysfunctional, making it impossible for the victims to get justice there.

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First Quantum closes in on Inmet Mining takeover – by Pav Jordan (Globe and Mail – February 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.

A hostile takeover bid for Inmet Mining Corp. is looking ever more likely to succeed as the deadline approaches for shareholders to vote on the $5.1-billion offer, as the odds of a counter-bid ebb along with softening copper prices.

With just a few days to go before the First Quantum Minerals Ltd. bid expires on Feb. 27, and two months after the $72-per-share was made, there are no signs of a rival offer emerging.

Vancouver-based First Quantum began courting Inmet well before that, proposing bids at $62.50 a share and $70 a share in October and November as it pursued Inmet’s massive Cobre Panama project, one of the world’s largest undeveloped copper deposits, amid buoyant prices for the metal.

But copper prices have since retreated along with a less optimistic outlook for demand and big base metals companies appear to have lost their appetite for deal-making amid massive cost overruns.

“I’m still hoping the deal goes through with a premium to the current offer, but it’s looking in this current environment that it might just go through as it is,”said Terry Thib, a portfolio manager with Norrep Funds in Toronto, which holds Inmet shares.

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With blood in the water, mining’s great white shark is on the hunt – by Eric Reguly (Globe and Mail – February 23, 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.

ROME — Beheadings are putting the mining world through something akin to the French Revolution. Mining bosses who landed their jobs in the bubble era – 2006 and 2007 – or did their signature top-of-the-market deals in those years are being fired with alacrity. Or they are announcing their retirements, much to the delight of shareholders grown weary of the value destruction borne of stunningly overpriced takeovers and soaring costs.

The changing of the guard started in the autumn, when Cynthia Carroll said she would quit as chief executive officer of Anglo American. Not long after, BHP Billiton, the world’s top mining company, revealed that it would replace Marius Kloppers, the man who made a wrong bet on shale gas and botched the attempted takeover of Potash Corp. of Saskatchewan (the new CEO is Scotsman Andrew Mackenzie). Last month, it was Rio Tinto boss Tom Albanese’s turn. The biggest sinner of them all, he was knocked off for his boneheaded purchase of Montreal’s Alcan in 2007 for $37-billion (U.S.), most of which has now been written off.

Canadian mining bosses have been frog-marched to the guillotine too – Tye Burt of Kinross Gold and Aaron Regent of Barrick Gold were two of the late 2012 victims. A year earlier, Roger Agnelli was pushed out of Vale, the Brazilian company that paid an eye-watering price for Canada’s Inco.

The last man standing is Ivan Glasenberg, the Glencore International CEO who is about to become the head of the mining and trading colossus to be formed by the merger of Glencore and Xstrata, the Anglo-Swiss miner that owns Falconbridge.

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UPDATE 3-Kyrgyzstan sets deadline to revise Centerra Gold deal – by Olga Dzyubenko and Bhaswati Mukhopadhyay (Reuters.com – February 21, 2013)

http://www.reuters.com/

Feb 21, 2013 (Reuters) – Kyrgyzstan has given Centerra Gold three months to redraw terms before ripping up an agreement to run its flagship mine in the Central Asian country, accusing the Canadian miner of “colossal” environmental damage and underpaying the state.

Centerra said it had received a new claim from the government for $315 million for alleged environmental destruction, almost tripling the damages claims that it faces.

Parliament ended two days of fierce debate by passing a resolution on Thursday demanding the government revise a deal struck in 2009, a year before then-president Kurmanbek Bakiyev was driven from power by a popular revolt.

“If within three months our negotiations yield no results, the government will unilaterally cancel the agreement,” Economy Minister Temir Sariyev said during the debate on Wednesday.

Centerra, whose shares have halved since the Kyrgyz government said in June it would review the mine deal, said the 2009 agreement was “solid and transparent” and it had already started talking to the government.

The Kumtor mine, bisected by a glacier 4,000 meters (13,000 ft) above sea level, is the largest gold mine in Central Asia operated by a Western company. It is the industrial centerpiece of the fragile Kyrgyz economy, contributing 12 percent of GDP in 2011.

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Gold stocks’ time to shine – by Bryan Borzykowski (Canadian Business Magazine – Febuary 20, 2013)

http://www.canadianbusiness.com/

Miners who will outpace gold prices.

At first glance, the firing of Aaron Regent, Barrick Gold’s CEO, last June seemed unremarkable. The company’s share price had stalled amid concerns around cost overruns at its Pascua-Lama mine in Chile. While his dismissal was abrupt, it appeared to be a simple case of a company shakeup. But take a closer look at the gold sector and you’ll see that Regent’s ouster fits a pattern.

The list of laid-off CEOs is long. Kinross Gold’s Tye Burt, Centerra Gold’s Stephen Lang (he’s now chairman) and Great Basin Gold’s Ferdi Dippenaar are just three of the many gold company executives who found themselves out of a job or kicked upstairs.

Why the turnover? Because for the past few years, many gold companies have nearly run their businesses—and their investors’ equity—into the ground, despite an incredible rise in gold prices. Between 2008 and January 2013, gold prices climbed 82%—yet somehow, over the same period, the S&P/TSX global gold index fell about 15%. Thanks to cost overruns, labour inflation, misguided acquisitions and bad decisions, many gold companies have seen their stock plummet. Barrick’s share price has dropped 33% over the past 12 months. Kinross is down 29%.

The negative news has made the sector cheaper than it has been in years. Vincent Roy, BlackRock’s managing director of scientific active equity, points out that the S&P/TSX global gold index is trading at 16 times earnings, about half of where it traded in 2009. The inexpensive valuations, plus a gradual change in company attitudes, have made this sector attractive again. “We’re coming back to the view that it’s rational to have investments in gold equities,” says Onno Rutten, a precious-metals-focused portfolio manager with Mackenzie Investments.

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[Canada’s] TSX-V hits new bottom, what’s next? – by Kip Keen (Mineweb.com – February 21, 2013)

http://www.mineweb.com/

The TSX Venture plumbs a new bottom, raising the question of where it goes from here. Commentators weigh in.

HALIFAX, NS (MINEWEB) – It’s emblematic of the depth of pessimism hanging over the mineral exploration sector. Today the TSX Venture dug a new bottom for the year (1,129 at presstime, down four percent), dropping below one it had set back in May 2012, and thus broke what had for the past few months looked like more of a sideways crawl.

Now the trend down looks to continue. To find another date the TSX Venture was as low as it was today you have to stretch the chart back to late May 2009. This was not long after the TSX Venture had cratered in the wake of the financial market crisis and a time when the Board was just beginning to regain some strength on its way to highs in 2010-2011. To find another such low before the 2008 crash you have to stretch your chart back nearly a decade to late 2004.

Signs that juniors are out of favour amongst the speculating class, or that the appetites of the speculating class are diminished – for the time being – are myriad and have been well documented in these and other pages. Financings, the lifeblood of explorers, have dried up making it difficult, even impossible, for juniors to fund their exploration programs. In its latest update, Oreninc, which tracks financings, said that “the financing markets are as weak as ever.” It noted that in five out of the last eight weeks there hasn’t been a single brokered private placement.

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NEWS RELEASE: Canadian mining deal value and volume down 37%, 19% in 2012: Ernst & Young

Canada maintains high stake in global M&A activity

VANCOUVER, Feb. 21, 2013 /CNW/ – Canadian mining deal value and volume fell 37% and 19%, respectively, year over year in 2012, but activity is set to pick up in the year ahead, according to Ernst & Young’s new report Mergers, acquisitions and capital raising in mining and metals: 2012 trends, 2013 outlook.

“Despite mirroring the global decline in deal value and volume, Canada maintained an 18% share of global mining and metals M&A value and 37% of global volume in 2012,” says Bruce Sprague, Ernst & Young’s National Mining and Metals leader. “We saw a number of mid-tier and junior executives maintain confidence to pursue acquisitions despite turbulent times — a drive that’s set to continue in 2013.”

This appetite also contributed to a rise in Canadian outbound investment volume, with many companies pursuing large, cross-border strategic acquisitions to expand existing operations.

Meanwhile, rising costs, softer commodity prices and project execution challenges have mining and metals companies renewing their focus on cost savings, capital optimization and shedding non-core or underperforming assets until commodity prices recover sufficiently to encourage new investment.

“Mining and metals companies around the world are managing a number of macroeconomic factors,” says Sprague. “We’ve seen these factors dampen deal appetite here at home — and abroad.”

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Is now the time to reinvest in mining majors – by Lawrence Williams (Mineweb.com – February 20,2013)

http://www.mineweb.com/

The almost universal change in the top management of major diversified and gold miners should indicate that a more cautious approach will see greater profits and dividends ahead.

LONDON (MINEWEB) – Over the years the world’s biggest mining companies have proved to be spectacular investments, but have very much underperformed over the past 4-5 years as corporate dealmaking, largely entered into when the companies’ boards took on CEOs who would embrace big merger deals and huge capital projects when the mining sector seemed to be headed onwards and upwards.

The first real halt to the upwards progression came with the Great Financial Crisis of 2007/8 which decimated the values of many mining sector companies. While the megaminers, because of their diverse holdings, and continuing strength in the bulk mining sectors like iron ore and coal, may not have suffered as much as most, they have since been caught in a position which does not exactly please their major shareholders and, as a result, we have seen an unprecedented series of major asset write downs and a virtually complete change in top management right across the sector.

In the diversified miners we have seen, or are seeing, new CEOs for BHP, Vale, Rio Tinto, Anglo American and Xstrata – in short the world’s top 5 mining companies by market capitalisation.

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All animals deserve a chance, but miners deserve a better one – by Russell Noble (Canadian Mining Journal – February, March 2013)

Russell Noble is the editor of the Canadian Mining Journal, Canada’s first mining publication.

“Migrating” and “Mating” are getting to be two of the more overused excuses for slowing the mining process and I’m getting a little tired of hearing how the caribou won’t be able to find their way home because there’s now an open pit mine on the trail, or how whales and other sea creatures won’t be able to concentrate on making babies because huge ore carriers are making too much noise overhead.

It seems to me that ‘excuses’ are getting in the way of mining more than the creatures themselves and from my experiences with wildlife, animals tend to adapt to their surroundings by going around or avoiding obstacles in their path.

I don’t think the caribou or the whales are so stupid as to stop in their tracks, so to speak, and simply die, or not reproduce, because there’s a mine or a ship in their way. In fact, I think if the caribou or whale ‘whisperers’ actually knew what these creatures were thinking, they’d probably hear “It’s no big deal, I’ll just walk or swim around.”

Regardless, more and more mining projects seem to be getting trapped by permit stipulations thanks to environmentalists, or even worse, naturalists crusaders who seem to know what’s best for wildlife. Granted, the creatures are being displaced somewhat by some mining operations but on the whole, they’re not being slaughtered like the buffalo were when the railways went through in the 1800s.

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Light on facts, heavy on patriotism, focus groups help hone NRCan advertising – by Bruce Cheadle (Maclean’s Magazine – February 18, 2013)

http://www2.macleans.ca/

OTTAWA – Focus-group testing on what the Harper government calls its Responsible Resource Development campaign found the advertising to be light on facts but uplifting and patriotic, according to a government-commissioned study.

The fruits of that taxpayer-funded labour will again be on display this spring as a second wave of ads — designed to persuade Canadians of “the importance and impact of Canada’s energy sector” — hits the air.

Natural Resources Canada has budgeted $9 million in the current 2012-13 fiscal year for ads that show a cross-section of resource industries in a job-friendly and environmentally sensitive light. It’s a carefully calibrated exercise.

Conservatives have been courting controversy for more than a year with a high-octane battle over pipeline development and changes to environmental laws designed to speed up major resource projects, including oil sands extraction.

Last summer, NRCan hired Leger Marketing to fine-tune the government’s proposed advertising campaign. The project included a national telephone poll of 2,000 respondents and two separate rounds of focus groups.

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Canadian miners wading into Africa – by Jessica McDiarmid (Toronto Star – February 19, 2013)

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.

Africa is home to the latest mineral rush, with potential for great riches–and catastrophe.

When rebels in Mali launched a surprise push south toward the capital, Bamako, last month, the Canadian mining industry took notice.It’s got nearly $500 million in assets there.

As international forces landed in the West African nation to fend off the Islamist advance, Vancouver-based Nevsun Resources was hit with allegations that forced labour built its Bisha mine in Eritrea, a pariah state on the other side of the continent.

Just last week, Canadian gold giant Barrick Gold attributed $3.8 billion (U.S.) of its massive writedown to its struggling Zambian copper operation, in part due to the southern African country’s government doubling royalties. Kinross Gold took a $3.2 billion (U.S.) writedown, mostly due to its Tasiast mine in Mauritania.

The Canadian government has made no secret of its support for miners investing in the continent — 54 countries, each vastly different from the next — in what some have called the latest ‘scramble for Africa.’ But recent events — conflict, human rights complaints, regulatory changes — highlight that while the continent holds staggering mineral wealth, it can come at a price.

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Investigation continues into attack on Eldorado Gold mine in Greece – by The Canadian Press (Globe and Mail – February 18, 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.

A Greek prosecutor ordered the release Monday of a 54-year-old man hours after he was arrested in connection with an attack on a Canadian-owned gold mining operation in which about 40 masked intruders torched machinery and vehicles.

Police had arrested the man for “moral instigation” of the attack due to his contributions to an anti-mining blog. The prosecutor later ordered him released without officially charging him, while also ordering the investigation to continue.

Opposition to the Skouries mining project in northern Greece’s Halkidiki peninsula runs deep and the area has seen numerous protests in recent months, some of which have turned violent.

The mining company, Hellas Gold, which is 95 per cent owned by Vancouver-based Eldorado Gold Inc., is planning a gold mine and processing plant in the area.

Residents are divided between those who fear environmental destruction and those who support the mine for its job prospects at a time of severe financial crisis and spiralling unemployment.

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A rush and a reckoning: Why writedowns are plaguing mining companies – by Pav Jordan, Tim Kiladze, Sean Silcoff (Globe and Mail – February 16, 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.

Speaking at a mining conference in Florida nearly two years ago, David Garofalo said the words nobody wanted to hear, and most simply chose not to say.

In the midst of a wave of mergers and takeovers, the chief executive officer of HudBay Minerals Inc. fired a warning shot for the whole industry. Taking the microphone in front of his peers, he reminded them that growth for growth’s sake was “very value destructive.” And he took aim at the popular notion that commodity prices were in a “supercycle,” less vulnerable to slowing economic growth.

“We are not in a supercycle. This is a cycle and when the central banks find religion on inflation again, the cycle will be over,” the 23-year industry veteran told peers, including top brass at the world’s largest mining firms.

Mr. Garofalo may as well have been the prophet of doom, his words heralding the start of a downturn in the global mining sector that has seen a litany of multibillion-dollar losses at top companies.

In the ensuing fallout, chief executives have been fired and project financing has dried up. Acquisitions that were hailed as game-changers are now derided as dumb mistakes. A once-robust pipeline of new projects is all of a sudden looking emaciated, one mining company after another puts its ambitious growth plans on hold.

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Barrick Gold Bets Once More on Nevada After Zambian Flop – by Liezel Hill (Bloomberg.com – February 15, 2013)

http://www.bloomberg.com/

Barrick Gold Corp. is betting growth will come from Nevada, where the world’s largest producer scored its first big success three decades ago, after more than $9 billion in writedowns and cost overruns in the past two years on projects from the Andes to Zambia.

Chief Executive Officer Jamie Sokalsky said yesterday the Toronto-based company doubled the estimated resources at the Goldrush deposit in Nevada last year, even as it sells assets and cuts spending elsewhere to revive shares that slumped 24 percent. Barrick is also pushing ahead with Pascua-Lama, a gold and silver mine on the Chile-Argentina border it expects to open next year.

“The priorities for the company, once we finish Pascua- Lama, really are focused on Nevada,” Sokalsky said yesterday on the company’s earnings call. “We have one of the most exciting exploration finds in recent memory, the Goldrush discovery, to ultimately add to this Nevada production in the future.”

Sokalsky’s mantra yesterday was steady and safe. The CEO, who took the job June 6, said the company has no plans to build more new mines and is looking to sell lower-return assets including its energy unit and the 50 percent it owns in a nickel project in Tanzania.

Shareholders reacted positively to Sokalsky’s moves to do “anything that will increase shareholder value” yesterday, lifting the stock 2.3 percent in Toronto.

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