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Canadian/International Media Resource Articles

Rudd: China Boom Over – by Anthony Fensom (The Diplomat – June 27, 2013)

http://thediplomat.com/

Australia’s second-time Prime Minister Kevin Rudd has wasted no time hammering a nail in the coffin of the China boom after ending the political career of his predecessor. Making his first press statement Wednesday night after successfully challenging Julia Gillard for the Labor Party leadership, the Mandarin-speaking Rudd said Australians must diversify away from the Middle Kingdom.

“The global economy is still experiencing the slowest of recoveries. The China resources boom is over…and when China represents such a large slice of Australia’s own economy, our jobs, and the opportunities for raising our living standards, the time has come for us to adjust to the new challenges,” he said.

“New challenges in productivity. New challenges also in the diversification of our economy. New opportunities for what we do with processed foods and agriculture, in the services sector, and also in manufacturing…..Looking at our global economic circumstances therefore, we have tough decisions ahead on the future of our economy.”

China overtook Japan as Australia’s top trading partner in late 2007 due to China’s seemingly insatiable appetite for Australia’s energy and mineral resources, including iron ore, coal and gold. Two-way trade amounted to A$125 billion in 2012, with Australia becoming China’s sixth-largest source of imports.

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China Falling? Not So Fast – by Joshua Kurlantzick (Bloomberg News – June 28, 2013)

 http://www.businessweek.com/

Over the past month, global financial markets have become terrified by the prospect of a Chinese economic slowdown. Last week, the interbank lending rate in China jumped precipitously, suggesting that Chinese banks, which for years have been piling up debt lending to state-owned enterprises and building infrastructure, may now be facing a severe credit crunch. China’s money markets slowed to a near halt, China’s stock markets suffered whiplash, and many Western fund managers began lightening their China exposure.

To some, Chinese banks’ debt loads signal the arrival of an event doomsayers have been predicting for decades—not just a slowdown but a meltdown of China’s economy. That, of course, would be catastrophic for the international economy, since nearly every other country in Asia is dependent on trade with China—as are most Western multinationals.

But although international markets, the original kind of crowdsourcing, often deliver the right verdict, there’s good reason to bet they’ll be proven wrong this time. The Chinese economy, the second-largest on earth, is not going to melt down soon; in fact, it might still grow more strongly this year than most others in the world.

Almost since it began reforming in the 1970s, China’s economy has attracted skeptics. By only partially privatizing massive state companies over the past 20 years, the government has been criticized for creating enormous inefficiencies, building up more than 100 “national champion” companies in such industries as energy, telecommunications infrastructure, and automaking and using cheap credit from state banks to help these indigenous companies grow.

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Norilsk to Focus on Arctic Circle Mines as CEO Builds Team (2) – by Yuliya Fedorinova (Bloomberg News – June 28, 2013)

 http://www.businessweek.com/

OAO GMK Norilsk Nickel (GMKN), the largest nickel and palladium producer, plans to focus on developing its operations in northern Russia over international assets after installing a new chief executive officer and management team.

“We will be looking at opportunities to optimize our portfolio of assets, including our international operations, with a key strategic focus on the sustainable increase of the firm’s return on capital,” Norilsk Deputy CEO Pavel Fedorov, head of strategy and business development, said in an interview in Moscow. “Enhancing the efficiency and capitalization of our key Polar Division would be at the heart of the new strategy.”

The division has seven mines north of the Arctic Circle, producing nickel, copper, platinum, palladium, cobalt and gold above the 69th parallel. Plants processing ore from these mines achieve an extraction rate of 83 percent of nickel from each ton of ore after the first phase of enrichment, compared with 70 percent and below for Norilsk’s assets in Africa and Australia, according to its annual report.

Billionaire Vladimir Potanin replaced Vladimir Strzhalkovsky as CEO at the end of 2012 as part of a truce to end a conflict between Norilsk shareholders Interros and United Co. Rusal over how the company was run. In April, Potanin hired Fedorov, a former mergers-and-acquisitions banker, for the 12-member management board among nine newly appointed executives.

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World Gold Council releases new gold-mining cost metrics – by Martin Creamer (MiningWeekly.com – June 27, 2013)

http://www.miningweekly.com/page/americas-home

http://www.gold.org/

JOHANNESBURG (miningweekly.com) – The World Gold Council (WGC) on Thursday released two new methods of calculating and reporting gold-mining costs to improve clarity and provide greater investor understanding of the complete costs associated with the mining of gold.

The first method is an extension of the existing “cash cost” metrics and incorporates costs that are related to sustaining production, which the council refers to as the “all-in sustaining cost”.

The second method takes into account additional costs and reflects the varying costs of producing gold over the life cycle of a mine, which the WGC dubs the “all-in cost”.

WGC director Terry Heymann told Mining Weekly Online from London that the new metrics had been developed to help provide greater clarity and consistency to improve investor understanding.

WGC has worked closely with its member companies and beyond to develop the non-Generally Accepted Accounting Principles (GAAP) measures and expects them to be helpful to investors, governments, local communities and other stakeholders.

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It’s no fun being a gold miner CEO these days – by Lawrence Williams (Mineweb.com – June 28, 2013)

http://www.mineweb.com/

FUNCHAL, MADEIRA (MINEWEB) – Only just over a couple of years ago gold mining company CEOs could seemingly do no wrong. The gold price was soaring to record levels, stock prices were mostly strong, shareholders mostly seemed happy, and the major funds which provided much of the companies’ support were calling for more and more growth.

The bandwagon was rolling, and the serious underlying problems which were already surfacing, such as hugely escalating capital costs for new projects, and ever ongoing sharp rises in operating costs were largely being ignored as they were being more than covered by the seemingly ever-rising gold price. The gold bulls were predicting ongoing gold price escalation and those who were suggesting caution were being ignored or ridiculed.

Oh what fun it was being a gold mining company CEO. Money was no object. Smaller companies were being absorbed while mega projects, which would make the execs’ names forever were entered into. As an example of what was occurring, Barrick’s huge Pascua Lama mine straddling the Chile/Argentina borders was going to be brought on stream at a mere $1.5 billion to be spent over 20 years – almost peanuts when the companies, and gold prices, were riding so high.

But the writing was already on the wall – perhaps back in 2007 before the initial market crash brought on by the Lehman Brothers collapse.

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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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Mongolian president wins second term amid focus on mining curbs (Reuters India – June 27, 2013)

http://in.reuters.com/

ULAN BATOR – (Reuters) – Mongolia’s incumbent president, Tsakhia Elbegdorj, who wants more controls on foreign mining investments, has emerged as the winner of Wednesday’s polls with a narrow majority of votes cast, the country’s election commission said on Thursday.

Elbegdorj, 50, who has served as president since 2009, was the overwhelming favourite in the contest, played out amid worries about Mongolia’s faltering economy as well as the growing role of foreign mining firms.

The commission said Elbegdorj got 50.23 percent of the votes, beating a former wrestling champion, Bat-Erdene Badmaanyambuu of the Mongolian People’s Party, and health minister Udval Natsag, of the Mongolian People’s Revolutionary Party.

The lower-than-expected margin of victory could be traced to low turnout, said Julian Dierkes, an expert in Mongolian politics at the University of British Columbia, adding that participation was 10 percent lower than the last election.

“The consensus was that Elbegdorj was winning and I suspect that a lot of potential voters thought he was winning anyway, and didn’t vote,” said Dierkes, who is in Ulan Bator to monitor the election.

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Ontario gets two nuclear-energy options – by Shawn McCarthy (Globe and Mail – June 28, 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 — Two nuclear companies are submitting competing bids to sell Ontario two reactors as the province struggles to decide how best to provide cheap, clean, reliable power over the next 20 years.

Pittsburgh’s Westinghouse Electric Co. LLC and Mississauga-based Candu Energy Inc. are to provide their proposals Friday outlining their designs, prices and the economic benefits that would flow if they won a contract that would top $10-billion. Ontario Power Generation had set a June 30 deadline for the proposals.

Plagued by concerns about high capital costs and safety issues, the nuclear industry faces a tough challenge in persuading the Ontario government to invest in new reactors.

But proponents argue they can beat renewable power on reliability and price and natural gas on economic benefits to the province. They also point out that nuclear power plants emit no greenhouse gases.

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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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The definition of being bullish on China is changing – by Clyde Russell (Reuters U.S. – June 27, 2013)

http://www.reuters.com/

Clyde Russell is a Reuters market analyst. The views expressed are his own.

HONG KONG, June 27 (Reuters) – It was hard to find anybody who didn’t profess to be bullish about the outlook for China’s commodity demand at LME Week Asia, but what is changing is exactly what market insiders mean when they express optimism.

The first major shift in thinking among participants at the metal industry’s gathering this week in Hong Kong is that it appears that they are bullish about volumes, but not necessarily about prices.

The boom in China’s commodity imports in the past decade was accompanied by a surge in prices, but it appears the market is finally coming to terms with the fact that this nexus has broken down.

Take iron ore and steel for instance. It’s not an unreasonable forecast to believe that China’s demand for iron ore imports will rise from 745 million tonnes in 2012 to a figure closer to 1 billion tonnes over the next 10 years.

Demand for the steel-making ingredient will be driven by China’s ongoing urbanisation and the infrastructure building associated with this process.

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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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Ontario Power Trip: McGuinty’s bigger debacle – by Parker Gallant (National Post – June 27, 2013)

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

The cost of Ontario’s Green Energy Act, at $1,100 per year per household, dwarfs the cost of cancelled gas plants

Filled with umbrage that his record as steward of Ontario’s electricity market is under parliamentary review, former Liberal Premier Dalton McGuinty more or less passed the buck down to his staff. Appearing before a legislative committee on Tuesday, Mr. McGuinty became irritated and accusatory, saying the search for emails and other documents deleted by underlings is nothing more than a political witch hunt over his decision to cancel two gas-powered generating stations at a cost of at least $585-million.

Mr. McGuinty is actually getting off too easy. The gas plant cash drain is far outweighed by the burden on Ontarians of Mr. McGuinty’s sprawling green energy fiasco. I say we should forget about the gas plants and the $585-million in wasted money. It’s gone. Instead, let’s order up all the emails and documents — through maybe half a dozen energy ministers under the premier’s control — as they reached the policy and economic decisions that created the 2010 Green Energy and Economy Act (GEA). That act will cost Ontarians 10 to 20 cancelled gas plants.

Let us see the emails and communications and meeting notes between bureaucrats and ministers, between Ontario Power Authority and the government, between all of them and the NGOs and industry activists who lobbied, promoted and sold the GEA policy disaster. There’s the $7-billion deal with Samsung, the false data on carbon emissions, the job creation calculations, the colossal giveaways to wind and solar entrepreneurs who formed lobby groups. On it goes.

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Occupy and Idle No More could team up to block pipelines going east – by John Ivison (National Post – June 27, 2013)

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

The failure of Canadian oil and gas producers to get world prices for their product costs the country $28-billion a year, according to the last budget, reducing federal government revenues by $4-billion. No wonder Ottawa has been so keen to push projects that would help get natural resources to Asian and European markets.

Part of the solution is to build new pipelines, but the news on that front has been decidedly mixed. The Northern Gateway pipeline to Kitimat, B.C., looks as dead as a Norwegian blue parrot. The regulatory process is still ongoing, but negative public sentiment in B.C. makes it look a long shot.

The Keystone pipeline between Alberta and the Gulf Coast hangs in the balance, at the mercy of Barack Obama’s new climate change action plan. The President said Tuesday the project will only be given the go-ahead if it does not “significantly exacerbate” carbon pollution. Quite what that means remains a riddle, wrapped in a mystery, inside an enigma.

Like Churchill’s famous quote about Russia, the key to that riddle may be America’s national interest. The Harper government argues this would be best served by North American energy security, where Canadian crude replaces equally high carbon imports from Venezuela and Nigeria. It’s not yet clear whether the President is convinced.

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Pipeline firms need $1-billion at hand for cleanups: Oliver – by Brent Jang and Ian Bailey (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.

VANCOUVER — Major pipeline companies will need to have a minimum of $1-billion on hand to tackle spill cleanups in Canada, under plans announced by the federal Conservative government.

The government will also move to enshrine in law the currently implicit polluter-pays principle. Both measures were unveiled Wednesday by Natural Resources Minister Joe Oliver during a visit to Vancouver. Current operators of major pipelines in Canada will be able to meet the financial test, department officials said.

The $1-billion threshold could consist of cash on hand, bonds, lines of credit, liability insurance and other financial assets, including third-party guarantees. New projects would need to fulfill the $1-billion requirement soon, while operators of existing pipelines will have a 12-month transition period in which to comply.

Lower minimum financial resources will be required for smaller pipeline operators, with those details to be determined by the National Energy Board.

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