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Canadian/International Media Resource Articles

Man Says Commodities Divergence Increasing Supply-Demand Role – by Nicholas Larkin (Bloomberg News – June 4, 2013)

http://www.bloomberg.com/

Diverging prices for raw materials and other “risk assets” is a sign that traders will once more focus on supply and demand, said Scott Kerson, the head of a commodities unit at Man Group Plc (EMG) in London.

The Standard & Poor’s GSCI (SPGSCI) gauge of 24 commodities fell 3.9 percent this year, while the MSCI All-Country World Index of equities rose 8.3 percent. The 30-week correlation coefficient between the two measures is at 0.56, down from as much as 0.88 in 2010. A figure of 1 means the two move together.

“What’s going on in commodity markets right now, and in particular the de-linkage between commodities and other risk assets, is actually a positive thing for trend followers generally and specifically for systematic commodities traders,” said Kerson, who heads commodities at Man Systematic Strategies and AHL. Assets under management at the two funds were $16.3 billion at the end of March 2013. About 25 percent of the funds’ assets are allocated to commodities.

The S&P GSCI gauge declined this year after an almost fourfold gain since the end of 2001 spurred new mines, oil wells and crop acreage. This year will probably signal “death bells” for the raw materials supercycle as China’s economic growth slows and the nation focuses less on infrastructure and urbanization, Citigroup Inc. said May 20.

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Massive gas find renews shale debate in U.K. – by Paul Waldie (Globe and Mail – June 4, 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.

LONDON — Britain’s long-simmering debate about the future of shale gas has been shaken up by a new report indicating that one large deposit could contain enough natural gas to make the country self-sufficient for decades. The announcement came Monday from IGas Energy PLC, one of a handful of companies exploring Britain for shale gas.

London-based IGas said its drilling in northwestern England indicates a deposit containing at least 15 trillion cubic feet of in-place gas, and as much as 172 tcf. This was far higher than IGas’s original estimate of nine trillion cubic feet.

IGas, which is 20 per cent owned by Calgary-based Nexen Inc., has been drilling in the Bowland basin, a large rock formation that stretches across much of England. Another company, Cuadrilla Resources Inc., has been exploring the same basin in a different area and has already announced that it has located 200 tcf of in-place gas.

IGas chief executive officer Andrew Austin said the entire basin could contain 500 tcf. “Even if the industry can only extract a fraction of that, combined with North Sea reserves, it could make the U.K. self-sufficient in gas for decades to come,” Mr. Austin told the BBC on Monday.

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Argentines hope Lula will pull off miracle on Vale potash mine – by By Samantha Pearson (Financial Times – June 2, 2013)

http://www.ft.com/home/us

It was an unnerving sight for Vale’s investors. Dressed in a traditional Andean poncho, Brazil’s former president Luiz Inácio Lula da Silva was pictured in Argentina in May discussing the future of the miner’s suspended potash project.

“We are trying to make the venture viable and he seemed open to the idea,” Francisco Pérez, the governor of Argentina’s Mendoza province where the mine is based, said after their meeting.

The visit came less than a month after President Dilma Rousseff also flew to Argentina to discuss the matter, raising concerns that Vale, the world’s second-biggest miner by volumes, is facing growing political pressure to maintain the cash-draining project.

Vale’s Rio Colorado venture was set to be one of the biggest foreign capital investments in Argentina, turning Brazil’s neighbour into a top supplier of potash – the potassium compounds that Brazilian farms so desperately need as fertiliser.

However, after spending $2.5bn completing more than 40 per cent of the project, which includes a port terminal as well as 790km of railway, Vale officially suspended it in March. Rampant inflation and exchange rate controls in Argentina have made the venture commercially unviable, Vale says, almost doubling its cost to $11bn from initial estimates.

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Posco’s iron ore project in Odisha still shrouded by clouds of uncertainty – by Meera Mohanty (India Times – June 2, 2013)

http://timesofindia.indiatimes.com/

After countless trips between New Delhi and Odisha over the past five years, Ho-Chan Ryu finally moved base to state capital Bhubaneswar in mid-May. The deputy managing director of Posco had good reason to do so. In the second week of May, a Supreme Court (SC) judgement took the Korean steelmaker one step closer to making the metal in India — a goal it has been steadfastly pursing against significant odds for the past eight years.

The SC set aside a 2010 order of the Orissa High Court — triggered by a petition by a rival, Geomin Minerals & Marketing — that had nullified the state’s government’s recommendation of allotting a prospecting licence for the Khandadhar iron ore mines to Posco. “This [judgement] will significantly help expedite the project. We are happy that it has come at a time when there has been significant progress on the land clearance work,” says YW Yoon, chairman and managing director of Posco India.

Burning issues

Getting rights to a virgin reserve of iron ore is clearly a shot in the arm but Yoon and his battle-weary team would know that celebrations are premature. After all, the fate of the Posco project — the largest singlecompany FDI inflow into India, at a little over Rs 50,000 crore when it was first blueprinted in 2005 — is proving to be as unpredictable as the tropical cyclones that hit Odisha.

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

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

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

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

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

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UPDATE 2-Indonesia says Freeport accident probe may last 3 months – by Kanupriya Kapoor and Michael Taylor (Reuter India – June 3, 2013)

http://in.reuters.com/

JAKARTA, June 3 (Reuters) – Freeport McMoRan Copper and Gold Inc’s Indonesian copper mine will not be able to resume output until a probe into a deadly tunnel collapse is completed in about three months time, a government official said, adding to worries over metal supplies.

That length of stoppage would almost certainly hit Freeport’s ability to meet its contractual obligations, though the company has not said what level of stocks it has left.

Freeport suspended operations at the world’s No. 2 copper mine on May 15 a day after a training area in a tunnel, away from its main operations, caved in on 38 workers, in one of Indonesia’s worst mining disasters.

The Grasberg mine normally produces around 220,000 tonnes of concentrated ore a day, with around 140,000 tonnes coming from open-pit mining and 80,000 tonnes from underground operations. A three month stoppage at Grasberg would take an estimated 125,000 tonnes of copper out of the global supply chain.

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The fastest-growing coal-producing region in the USA – by John Chadwick (Publisher/International Mining – June 2013)

http://www.im-mining.com/

While coal in the USA is generally a story of falling output, the Illinois Basin – which covers southern Illinois, Indiana and west Kentucky – is bucking that trend. Production across the nation fell 7% in 2012, compared with 2011, with the biggest falls in Wyoming’s Powder River Basin (PRB), and Central Appalachia; but Illinois Basin output was up 10%.

It is this coal’s high sulphur content that resulted in it being largely ignored over recent years, in favour of coal that is more expensive to mine in fields to the east.

However, with power generators equipping facilities with scrubbers that sulphur content is no longer a problem. And producers can save money from Illinois Basin coal that costs something like half that of Central Appalachia to produce.

Characterised by high BTU, mid-range sulphur, moderate ash and low moisture content coal, 2012 output declined an estimated 63.5 Mt, led by an 18% decrease in Central Appalachia. PRB production declined 8%, while the Illinois Basin
rose 11%.

According to the USGS, the area of coalbearing rocks in the Illinois Basin comprises 95,312 km2 in Illinois, 16,835 km2 in southwest Indiana, and 16,576 km2 in western Kentucky.

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Warning: ‘Prepare’ for Commodity Supercycle End – by CNBC’s Katrina Bishop (CNBC.com – June 3, 2013)

http://www.cnbc.com/

With multiple investment banks signposting the end of the commodity supercycle, a World Bank director has warned developing countries that have benefited from the surge to protect themselves against a price crash. Marcelo Giugale, the World Bank’s director of economic policy and poverty reduction programs for Africa, told CNBC that states which have gained from the commodity boom should prepare for a slump.

“We don’t want another wasted opportunity,” he said. “This time around, things should be done differently. The material bonanza has the potential to become a human bonanza – whereby the standard of living for many people across these developing countries can be raised.”

The high prices of commodities, such as industrial metals and oil, have boosted the revenues of countries rich in these resources. But notoriously volatile commodity markets have had catastrophic consequence for countries in the past. The so-called Commodity Crisis of the 1980s saw countries in Latin America and Africa battle financial, social and political instability, following rapid, commodity-driven expansions.

Economists describe the apparent pattern in these price booms and busts as the commodity supercycle, with decades of rising prices followed by a crash.

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Citibank calls the end of the Supercycle – by Trish Saywell (Northern Miner – June 3-9, 2013)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry.

A new report from Citi Research, a division of Citigroup Global Markets, says returns have peaked for the mining sector, and that this is the year that “the death bells ring for the commodity supercycle after its duly noted ‘sunset.’”

The report states that “this year should provide full affirmation that the commodity supercycle has finally ended. The ‘commodity supercycle sunset’ appeared on the horizon shortly after the 2008–2009 recession, and celebrations for the ‘supercycle funeral’ began in 2011, with 2013 perhaps ushering in a ‘supercycle funeral after-party’ in which investors could revel in new opportunities.”

In the supercycle’s place comes “a new decade of opportunities based on how individual commodities will perform against one another and against broader market indicators, such as equities or currencies,” the report states.

The authors of the 25-page report — who are metals and mining analysts at the bank’s London and New York offices — also point out that the recent separation of commodities from equity markets in some ways represents “a return to normalcy,” given “the sensitivity of commodity prices to coincident conditions and of equities to anticipatory economic changes.”

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Glencore fires 1,000 workers over wildcat strikes in S.Africa – by by Agnieszka Flak (Reuters U.K. – June 3, 2013)

http://uk.reuters.com/

JOHANNESBURG – (Reuters) – Glencore Xstrata Plc sacked 1,000 workers across three of its chrome mines in South Africa for going on illegal strike last week, bringing those operations to a standstill, the company said on Monday.

The dispute at the mines near Steelpoort, northeast of Johannesburg in Limpopo province, added to long-running friction in the mining industry that has caused production to slow, raised concerns about Africa’s largest economy and sent the rand to fresh four-year lows.

Chromium is a raw material used to produce ferrochrome, a key ingredient to make stainless steel. “About 1,000 of the employees who have participated in the unprotected (illegal) strike have been dismissed,” said Christopher Tsatsawane, a spokesman for the company’s chrome operations.

The strike, which started last Tuesday, was continuing, but supplies to customers were not yet affected, he added. The workers have until Tuesday to appeal the dismissals.

South Africa has well-defined processes for launching strikes and those who fail to get formal approval can be sacked.

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Six reasons why the gold rush is over – Nouriel Roubini – by Lawrence Williams (Mineweb.com – June 3, 2013)

http://www.mineweb.com/

Professor Nouriel Roubini, never a fan of gold, gives his reasons why he thinks that gold is in a deflating bubble situation and is set to trend lower – perhaps down to $1,000 by 2015.

LONDON (MINEWEB) – As a Devil’s Advocate writing a contrary opinion to those who are convinced that the gold price will soon resume its upwards trajectory, Economist Nouriel Roubini has few equals. Indeed to the ardent gold believer Roubini may well be considered the Devil himself, rather than just an Advocate for the Satanic master.

In his latest opinion on gold, Roubini pulls few punches, although he does condescend at the end that the gold price will be volatile and could still temporarily move higher in the next few years. But he qualifies this in saying that the overall trend will be lower over time as the global economy mends itself. “The gold rush is over”, he says and predicts gold falling towards $1,000 by 2015. The run up in gold from $800 in early 2009 to over $1900 in 2012 “had all the features of a bubble” he says. “And now, like all asset-price surges that are divorced from the fundamentals of supply and demand, the gold bubble is deflating.”

While any number of the bullish commentators on gold take delight in publishing a number of reasons why gold will move upwards, Roubini does the opposite with his six reasons why gold will continue to fall back.

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First Nations Chief’s charting economic success in Northern Manitoba – by Frank Busch (Troy Media – June 2, 2013)

http://www.troymedia.com/

Frank Busch is Director of Information and Marketing with the First Nations Finance Authority. The views expressed, however, are his own.

WESTBANK FIRST NATION, BC, Jun 2, 2013/ Troy Media/ – The Chiefs of Northern Manitoba gathered in Winnipeg for the 2013 Manitoba KeewatinowiOkimakanak (MKO) Economic Summit, Trade Show and Jobs Fair recently. MKO has their work cut out for them as they attempt to chart a course from poverty to prosperity. While approximately $3 billion in revenue from hydro, mining, forestry, fisheries and tourism is generated in Northern Manitoba every year, the First Nations in that region remain some of the poorest in the country. The MKO Chiefs understand that First Nations have been left out in the past and cannot afford to be left out in the future.

“If you fail to plan, you plan to fail” says Chief Garrison Settee of the Pimicikamak Cree Nation “it’s not enough to just talk about economic development, we have to make it happen.”

Manitoba Hydro alone will invest more than $34 billion in Northern Manitoba over the next 20 years. The main projects to be undertaken are Bipole III Transmission Project, the Keeyask and Conawapa generating stations, their associated domestic AC transmission facilities and a new Canada-U.S. transmission interconnection. The issue put to the MKO Chiefs is on how to best navigate these uncharted waters.

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

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

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

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

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

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

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

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Plan to import miners stirred a wave of anger – by James Keller (Canadian Press/Vancouver Sun – June 1, 2013)

http://www.vancouversun.com/index.html

One resident of an unnamed B.C. community claimed to personally know 40 unemployed miners who would be happy to work at a proposed coal mine in the province’s northeast, which was instead slated to temporarily employ Chinese workers. Another lamented the mine’s hiring plan as just the latest example of Canadian resources leaving this country.

And yet another bluntly asked: “Are you trying to lose the next election?” As debate swirled about Chinese owned HD Mining’s plan to use temporary foreign workers at its proposed underground coal mine – prompting several government investigations and a lawsuit by a pair of unions – the province was flooded with angry letters from the public.

Four months of those letters, obtained through freedom of information laws, reveal deep anger about the province’s public support for the project and little sympathy for politicians and company officials who insisted there was not a single Canadian qualified to work at the mine.

The dozens of emails and typewritten letters on the subject were sent to the government between October and January. All oppose the importing of Chinese workers, with many writers telling the government they simply do not believe the assertion there was no way to train and hire workers from the province.

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Chile wants Canada’s natural gas – by Richard Blackwell (Globe and Mail – June 1, 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.

Chile wants to buy Canadian liquefied natural gas to feed its energy-hungry mining industry as it bolsters its efforts to transform into a developed industrial nation and drag its citizens out of poverty.

Chilean President Sebastian Pinera, speaking to The Globe and Mail editorial board on Friday, said his government’s mission is to make Chile the first Latin American nation to become a truly developed country. “[We want to] transform Chile from an underdeveloped country to a developed country before the end of this decade,” he said.

To help Chile reach its development goals, Mr. Pinera is looking to Canada as a potential source of liquefied natural gas (LNG) and has discussed with Prime Minister Stephen Harper the possibility of importing the fuel by ship.

“We will need to import a lot of energy, because we don’t have coal, we don’t have oil,” Mr. Pinera said. While Chile is rich in potential hydroelectric resources, he added, there is opposition to development from environmental groups – both inside and outside the country – and that will delay its hydro-power expansion.

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