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Canadian/International Media Resource Articles

Oil a constant in a changing energy world – by Yadullah Hussain (National Post – June 21, 2013)

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

We are not in 1974 anymore, says Maria van der Hoeven, as she scans the complex and multi-layered energy world.

That year OECD countries had hastily launched the International Energy Agency as a direct response to the Arab oil embargo that was hurting Western economies and had quadrupled crude prices. The Americans were concerned about their dwindling oil production and the Western world tasked the IEA to keep an eye on their fragile crude inventories.

But the world has moved on since then. “It has changed dramatically in more than one aspect,” Ms. van der Hoeven, who heads the agency, told a conference in Montreal last week. “The IEA has also been changing dramatically and has to change, because energy policy in 1974 was quite simple, although — how should I put it — not easy.”

The Paris-based autonomous IEA and its 28-member countries now have to balance climate change issues with economic development and the importance of non-OECD countries in the global economy — a far cry from just releasing crude stocks to counter OPEC’s machinations.

But one thing that is not going to change: the demand for oil. In 2010, fossil fuels made up more than 80% of the world’s energy, and despite the rapid deployment of renewable energy technologies, they will still command three-fourths of the market by 2035, according to the IEA’s estimates.

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As Glencore grows, investors ask about life after Ivan – by By Clara Ferreira-Marques and Sinead Cruise (Reuters U.S. – June 20, 2013)

http://www.reuters.com/

LONDON – (Reuters) – Glencore Xstrata (GLEN.L) boss Ivan Glasenberg, a former coal trader who has been at the helm for over a decade, is known for his pre-dawn runs, cut-throat competitiveness and a grueling travel schedule that shows no signs of slowing.

Yet while no one expects the imminent departure of Glencore’s top shareholder – at 56, not far above the average CEO age – the takeover of $46 billion miner Xstrata has prompted investor questions over how a company so closely identified with a boss will manage his succession.

This includes not just the process of earmarking future leaders, but that of rebuilding the board and bringing in a new chairman willing to act as a counterweight to both Glasenberg and a culture born of almost four decades as a private company.

“On the one hand you don’t want to stifle the entrepreneurialism, aggression, dynamism that people associate with Glencore versus the style of the other mining companies,” said analyst Paul Gait at Sanford Bernstein.

“But on the other hand, you do want to put into place the processes and protocols that you associate with a bluechip company,” he added.

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Rio Tinto’s Oyu Tolgoi mine in Mongolia to begin shipments – by Robb M. Stewart (Dow Jones/The Australian – June 20, 2013)

http://www.theaustralian.com.au/

RIO Tinto plans to make its first shipment of copper and gold from the Oyu Tolgoi mine in Mongolia on Friday, an operation the mining company estimates will account for over 30 per cent of the country’s gross domestic product when it reaches full production in 2020, says a person familiar with the matter.

A ceremony marking the event would be held that day at the mine in the southern Gobi Desert, about 100km north of the Mongolia-China border, the person said.

The $US6.2 billion Oyu Tolgoi mine is key to Rio Tinto reducing its dependence on iron ore, which accounts for about 80 per cent of its earnings. Faced with volatile commodities markets, new Chief executive Sam Walsh is moving to simplify the company’s structure and is selling non-core and poor performing assets and targeting more than $US5bn in cost savings by the end of next year. A number of senior managers at Rio Tinto’s iron ore division in Western Australia were laid off this week.

The first copper-gold concentrate was produced at Oyu Tolgoi in January and Rio Tinto had forecast commercial output would begin by the end of June, provided it could settle a dispute with Mongolia’s government over costs and the further development of the mine.

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Canadian-owned mine must be closed, says archbishop – by Michael Swan (The Catholic Register – June 20, 2013)

http://www.catholicregister.org/index.php

The Archbishop of San Salvador is calling for international support in shutting down a Canadian-owned gold mine just across the border in Guatemala.

Archbishop José Luis Escobar Alas told his weekly press conference June 9 his country should “go to international justice mechanisms” if bilateral talks between El Salvador and Guatemala fail to prevent Vancouver-based GoldCorp from going ahead with the Cerro Blanco mine, which is already extracting gold bearing ore as part of an advanced exploration project.
Escobar believes the Canadian mine will inevitably contaminate Lake Guija, which feeds the Lempa River, El Salvador’s main source of drinking water.

Since 2008 El Salvador has suspended all hard rock mining in the tiny country. Since taking on El Salvador’s most senior Church post in February, Escobar has spoken out frequently in support of a permanent ban on metal mining.

Escobar made his call for international help with a cross-border mining dispute just as Prime Minister Stephen Harper announced a tentative step toward regulating the conduct of Canada’s mining companies abroad.

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PRECIOUS-Gold hits 2-1/2 year low as Fed flags end to easy money – by Jan Harvey (Reuters U.S. – June 20, 2013)

http://www.reuters.com/

LONDON, June 20 (Reuters) – Gold prices tumbled to their lowest in more than 2-1/2 years on Thursday and silver fell more than 6 percent after the U.S. Federal Reserve gave its most explicit signal yet that it plans to bring the era of easy money to an end.

Gold plunged after Fed Chairman Ben Bernanke said on Wednesday the U.S. economy was expanding strongly enough for the central bank to begin slowing the pace of its bond-buying stimulus later this year.

Its fall picked up momentum after it broke through its April low at $1,321 an ounce, a key support level, knocking it to a low of $1,285.90, down 4.5 percent and its weakest since September 2010.

Spot gold was down 3.5 percent at $1,302.90 an ounce at 1141 GMT, while U.S. gold futures for August delivery were down $71.40 an ounce at $1,302.60. “For western investors, there’s certainly less incentive to hold gold at the moment,” Mitsui Precious Metals analyst David Jollie said.

“The markets have clearly decided that the withdrawal of QE is bad for gold prices,” he said. “The risk of the euro zone falling apart is less, the risk from the banking system is less, and prices certainly haven’t been going up for a while.”

Bonds, shares and commodities fell sharply around the world on Thursday and the dollar rose after Bernanke’s comments.

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Nickel price to weaken further as pig iron sector cuts costs (Reuters/Economic Times – June 19, 2013)

http://economictimes.indiatimes.com/

SINGAPORE/LONDON: China’s nickel pig iron producers are turning in droves to a new technology that allows them to survive at lower prices, a move that suggests nickel prices, already mired at four-year lows, could fall further.

As nickel prices near $14,000 a tonne, however, output cuts by loss-making producers with higher costs could steady the market, analysts said.

Nickel, mainly used to make stainless steel, is down 17 percent this year. It is the worst performer of a industrial metals complex hit hard by China’s slowing growth. Fed by a commodity boom, prices peaked above $50,000 a tonne in 2007.

Production of nickel pig iron in China, a cheaper substitute for pure nickel used as feedstock by stainless steel mills, has more than quadrupled to an estimated 400,000 tonnes this year from 89,000 tonnes in 2008, according to Macquarie.

At the same time, technical innovations have slashed costs, which has in turn lowered the floor for nickel prices.

The break-even cost for nickel pig iron produced by rotary kiln electric furnace (RKEF) technology is now as low as $12,500 a tonne and its market share has soared, said Dennis Zamora, senior vice president for marketing and strategic planning at Nickel Asia Corp.

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Ibris Group plans $1.8 bln Indonesian nickel smelter – by Fergus Jensen (Reuters U.S. – June 19, 2013)

http://www.reuters.com/

JAKARTA – (Reuters) – Ibris Group, a Singapore-based miner, announced plans to build a $1.8 billion nickel pig iron plant in Sulawesi, the latest in a series of smelter projects after Indonesia began tightening controls on ore exports.

Indonesia, the world’s top nickel ore exporter, has been pushing for greater returns from its resource wealth. In 2009, it imposed a ban on unprocessed ore exports after January 2014.

The government, which has faced widespread criticism from miners and metal importers over the rules, has indicated it may relax the ore export ban for companies with smelter projects, however.

Singapore-based Ibris, which expects to export around 3 million tonnes of nickel ore this year, triple its 2011 level, plans to build the Rotary Kiln Electric Furnace smelter in two stages, with a total budget of around $1.8 billion.

“We will draw on our own funds as well as external investment. We have agreed with a consortium of financial investors to take a share of the project finance,” Ibris Group Chief Executive Arwan Ahimsa told reporters in Jakarta. Ibris would hold a 51 percent stake in the project.

“We have the engineering and basic design, and we are adjusting this to suit the site conditions, infrastructure requirements and support material,” Ahimsa said.

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Surviving the bear market – a practical guide – by Simon Rees (MiningWeekly.com – June 19, 2013)

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

TORONTO (miningweekly.com) – Few companies in the Canadian mining sector have had much to celebrate so far this year; the bear market lumbers on, while liquidity remains in the doldrums.

Compounding matters is the uncertainty surrounding metal prices, which has “turned investors risk averse, leading to a challenging market for capital access”, Ernst & Young said in its Canadian Mining Eye for the first quarter of this year.

The country’s junior mining sector is suffering particularly hard. In late May, at the Cambridge House Vancouver Resource Investor Conference, head of Kaiser Research Online (KRO), John Kaiser, noted that 740 companies of the 1 800 junior miners tracked by KRO currently had only $200 000 in reserve.

Unsurprisingly, many companies are now solely focused on keeping afloat, Norton Rose Fulbright partner Robert Mason told Mining Weekly Online in a recent interview. Mason represents issuers and underwriters on corporate finance transactions and mergers and acquisitions (M&A), specialising in the mining and natural resources sectors.

Mason outlined three core survival strategies, starting with expenditure cuts. “All noncore work should cease, while non-integral projects should be put on care and maintenance. Exploration can be cut too; only elements essential to a key project should continue. Anything you might label ‘wouldn’t it be nice’ can be got rid of,” he advised.

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Mining equipment makers rise to efficiency challenge – by Maria Sheahan and Niklas Pollard (Reuters U.S. – June 20, 2013)

http://www.reuters.com/

FRANKFURT/STOCKHOLM – (Reuters) – Mining equipment manufacturers are making improvements to machinery that they hope will deliver productivity gains for customers and counter falling orders.

Under pressure from investors for higher returns, miners want to get the most out of every shovel, grinder and truck to help maintain margins which are being squeezed by high labour and energy costs and cooling commodity prices.

At an industry dinner this month, the new boss of the world’s largest miner, BHP Billiton, compared the sector’s search for efficiency to that of motor racing teams.

Thanks to tiny changes, he said, the Formula One pitstop – the time when cars are stationary for tyres to be changed – has gone from just under 4 seconds in 2010 to just over 2 seconds this year. “If we look at our industry, the prize is significant,” BHP Chief Executive Andrew Mackenzie told his audience.

“For us, every 1 per cent improvement in productivity translates to a $170 million saving.” Half of BHP’s operating costs are labour and contractors.

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Gold plunges again: unleashes perfect storm for the bears – by Lawrence Williams (Mineweb.com – June 20, 2013)

http://www.mineweb.com/

Ben Bernanke’s latest statements on QE hit the gold market hard, driving prices down below the $1300 level in this morning’s trading. There could still be worse to come for the gold bulls!

FUNCHAL, MADEIRA (MINEWEB) – Some heavy selling following Ben Bernanke’s upbeat statement suggesting a cutting back of QE later this year, and a possible end next, hit gold hard overnight with the bullion price falling back close to $1300 before making a small recovery – and then falling back again in London to breach the $1300 level on the downside in a very volatile market. There were renewed sales from the big SPDR gold ETF, GLD, taking it down below 1,000 tonnes for the first time since February 2009.

SocGen’s analyst Michael Haigh was predicting a fourth quarter gold price average of only $1200 while Nouriel Roubini would have been smiling given his recent prediction that gold would fall back to $1,000. The U.S. dollar surged, seemingly yet another nail in gold’s coffin. All in all something of a perfect storm for gold bears. Could the downturn be turning into a rout?

It hard to tell through all this volatility but some of the attacks on gold are misguided. There appears to be a general belief that gold protects against inflation, thus if inflation is taken out of the equation, gold must fall. But long term research doesn’t necessarily show this to be accurate. Gold does tend to rise on fears of inflation, but some of its best performances in the past have been in recessionary periods – and most notably during the years of the Great Depression of 1929 and thereafter. We’re not saying that we are heading for a repeat of this, but the dangers that we could be falling into another such period are far from over.

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Glencore Loan Wins Banks on Future Business: Corporate Finance – by Stephen Morris (Bloomberg News – June 19, 2013)

http://www.businessweek.com/

Glencore Xstrata Plc (GLEN) raised the biggest loan on record for a commodity trader at interest rates below those offered to competitors as the 80 banks backing the deal count on winning future business from the company.

The world’s biggest publicly-traded commodity supplier signed $17.3 billion of revolving credit facilities last week, paying a margin of 90 basis points more than benchmark rates for a three-year portion, according to data compiled by Bloomberg. That’s 47.5 basis points less than Vitol Group, the largest independent oil trader, pays on its main $5 billion credit line, and 100 basis points less than Trafigura Beheer BV’s $2.9 billion deal, the data show.

“Banks have fallen over themselves to provide credit as they see Glencore Xstrata as an active and attractive counterparty, which has a big trading book,” said Jeff Largey, head of European metals and mining equity research at Macquarie Group Ltd. (MQG) in London. “Glencore Xstrata is seen as a growth company, it’s been acquisitive in the past and it will remain so. If you’re seen as extending credit to them, that potentially opens up other business opportunities.”

Glencore, which generated revenue of $214 billion last year trading commodities including coal, oil and corn, awards relationship banks ancillary business in trade financing, currency hedging, and acquisitions, according to David Mannarino, a Brussels-based corporate banker for Fifth Third Bancorp, which lends to the company.

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‘Huge opportunities’ for Canadian mining industry to work in developing countries – by Kim MacKrael (Globe and Mail – June 19, 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 — Canada’s international co-operation minister says there are “huge opportunities” for the country’s mining industry to work with the Canadian government in developing countries.

Speaking at the annual board of directors’ meeting for the Mining Association of Canada, Julian Fantino said the extractive industry can play an important role in Canada’s international development efforts.

“There is huge, huge opportunities, I believe, for your industry,” Mr. Fantino said. He said mining companies are already working successfully with the Canadian government and NGOs, adding, “I encourage you to stay tuned.”

The Conservative government views the mining sector as an important player in its international development efforts as it works to increase partnerships with the private sector. Earlier this month, Prime Minister Stephen Harper announced that Canada would work with Tanzania and Peru on governance issues in the extractive industry. Canadian mining companies will also have to meet new requirements on disclosing payments to governments, Mr. Harper said.

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UPDATE 2-Brazil mine bill proposes royalty hike – by By Jeb Blount (Reuters U.S. – June 18, 2013)

http://www.reuters.com/

RIO DE JANEIRO, June 18 (Reuters) – Brazil, the world’s second-largest producer of iron ore, unveiled a long-awaited bill to reform the country’s 46-year-old mining code on Tuesday, proposing royalties of up to 4 percent, double the current rate.

Murilo Ferreira, chief executive of Vale SA, the world’s largest iron ore exporter, said the bill would hit miners hard. He estimated the government’s total take from royalties would rise to $4.2 billion reais ($1.93 billion) from $1.7 billion reais.

Even so, provisions of the bill are less onerous than the mining industry had feared when the discussion of reforms began
nearly four years ago. The top rate under the proposal is only one-third of basic royalties charged in Australia, for example.

Brazil is getting ready to enact the reforms at a time when the mining industry is experiencing a sharp slowdown. When the
bill was first proposed in 2009, the industry was in one of its most prosperous periods ever. Vale’s preferred shares, the Rio de Janeiro-based company’s most-active class of stock, rose 1.8 percent in early afternoon trading in Sao Paulo.

The legislation will test the government’s efforts to reduce tensions with investors, many of whom have criticized President Dilma Rousseff’s economic polices as erratic and her attitude toward business “heavy handed.”

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The value of mining in Arizona – by Jonathan DuHamel (Tucson Citizen – June 18, 2013)

http://tucsoncitizen.com/

Without minerals, we would not have electricity, food, or shelter. Minerals make today’s technology-based life possible, but that’s something many of us take for granted. We want the benefits from those minerals, but some want mining of minerals to be in somebody else’s neighborhood. The importance of mining has long been recognized:

If we remove metals from the service of man, all methods of protecting and sustaining health and more carefully preserving the course of life are done away with. If there were no metals, men would pass a horrible and wretched existence in the midst of wild beasts… -Georgius Agricola, in De Re Metallica, 1556.

For Arizona, it is not just metals. Arizona produces sand and gravel, limestone for cement production, coal for electrical generation, and a variety of industrial minerals which contribute almost $2 billion to Arizona’s economy.

Arizona has a long history of mining. There is archeological evidence that cinnabar, coal, turquoise, clay, pigments, and other minerals were mined in Arizona beginning at least 3,000 years ago.

According to the Arizona Mining Association, Arizona currently produces 68% of domestically mined copper. With that copper production comes by-product molybdenum, gold, silver, platinum, and rhenium.

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Bob Rae quits as MP in ‘very emotional’ decision [Ring of Fire First Nations negotiator] – CBC News Sudbury (June 19, 2013)

http://www.cbc.ca/sudbury/

The former interim Liberal leader says he wants to devote his time to First Nations issues

Bob Rae, who served as interim Liberal leader following the party’s disastrous showing in the 2011 election, is stepping down as an MP, CBC News has learned.

Rae told his Liberal colleagues of his decision during Wednesday’s party caucus meeting, an announcement that was met with tears and applause, according to sources.

Rae recently accepted the role of chief negotiator for First Nations in talks with the Ontario government about development of the Ring of Fire, and is to tour the nine Matawa communities in the mining and resource-rich area of Northern Ontario this summer. Rae is a former NDP premier of the province.

At a news conference with Liberal Leader Justin Trudeau in the foyer of the House of Commons, Rae said that work as a lawyer and mediator was taking more and more of his time and he felt he needed to focus on his role with the First Nations. He didn’t say when his resignation would be effective.

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