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Canadian/International Media Resource Articles

Whoever wins in BC needs to take early action on environment – by Mark Hume (Globe and Mail – May 13, 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.

VANCOUVER – Whatever happens in the election this week, it is clear the newly elected premier, whether it is Adrian Dix or Christy Clark, will have to put the environment high on the agenda for early action.

Pipelines and liquefied natural gas development emerged as key, perhaps even defining, issues during the campaign, but there are more problems out there.

No. 1: Withdraw from the Environmental Assessment Equivalency Agreement that the province signed with the federal government. There is an exit clause in the deal, which essentially gives the National Energy Board the power to do environmental assessments for B.C. By opting out, the province will have a lot more say over pipeline proposals, natural gas processing plants and off-shore oil or gas facilities. The NDP has said it will get out within 30 days. A Liberal government should do the same.

No. 2: Scrap Site C. The province shouldn’t drown valuable farm land that can produce food for thousands of years to provide power to LNG plants that will be relatively short-lived.

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The downsides of U.S. energy independence – by Konrad Yakabuski (Globe and Mail – May 13, 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.

For four decades, U.S. foreign policy has been dictated by the country’s dependence on Middle Eastern oil. What Barack Obama has called an “addiction” to foreign crude is seen as having undermined the ability of the world’s most powerful nation to control its own destiny.

No wonder the suddenly plausible prospect of U.S. energy independence is generating such giddiness. Not only is the boom in domestic oil and gas production boosting an economy in dire need of jobs and investment, it is rekindling Americans’ confidence in their country’s future.

What is more appropriately defined as North American oil independence – since the United States will continue to depend on Canadian and Mexican crude for decades to come – is almost unanimously hailed as a positive development that will enhance American security.

What gets mentioned less are the downsides of energy independence. Rising U.S. and Canadian oil production could well destabilize petro-states in the Middle East, Russia, Africa and beyond, sparking regime changes unfavourable to U.S. interests and creating an even riskier world.

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Mongolia Scolds Rio Tinto on Costs as Mine Riches Replace Yurts – by Michael Kohn & William Mellor (Bloomberg Markets Magazine – April 9, 2013)

http://www.bloomberg.com/markets-magazine/

Outside, it’s minus 30 degrees Celsius as a February wind blasts across the Central Asian steppe and through the Mongolian capital, Ulaanbaatar. Inside Government House, President Tsakhia Elbegdorj delivers a televised speech that simultaneously warms his people and chills foreign investors.

The country’s 76 legislators have convened to debate the future of one of the planet’s richest copper and gold mines, Oyu Tolgoi, which is 66 percent owned by London-based Rio Tinto Group (RIO) and 34 percent owned by the state. Elbegdorj tells them Rio Tinto has let the project’s total cost balloon by $10 billion. The higher expenses, which Rio Tinto disputes, would diminish and delay profits the government shares in, Bloomberg Markets magazine will report in its May issue.

“The time has come for the Mongolian government to take Oyu Tolgoi matters into its own hands,” Elbegdorj says to cheers from the lawmakers. His demands include giving Mongolian employees more management positions on the project, which is scheduled to begin exporting copper concentrate by June.

Few things matter more today in the political and economic life of this landlocked country of 2.8 million people than foreign investment to develop its mineral wealth. Mining money has spawned gleaming office towers, pricey gated communities and luxury-car dealerships in the capital. And yet, half of all Mongolians still live like their nomadic ancestors in circular felt yurts that can be dismantled and moved.

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On ethical oil, blood and Gore (Toronto Sun Editorial – May 11, 2013)

http://www.torontosun.com/home

For a man with a carbon footprint the size of a dwarf planet, Al Gore takes the hypocrite’s cake for his ignorant statement that there is “no such thing as ethical oil.” He was in Canada this week to sell his new book, of course, so what better way to get media attention than to insult both the host country and one of its major resources?

If you want to know the name of his book, look it up. We’re not going to shill for him, even if he is a former vice president of the United States as well as an over-hyped, over-compensated mockumentarist who is unfortunately looked upon by millions as a climate-change visionary.

“There is no such thing as ‘ethical’ oil,” he recently told Canada-AM, and others. “There is only dirty oil and dirtier oil.” This was shortly after we took him to task Wednesday for describing Alberta’s oilsands as a “reckless spewing of pollution into the Earth’s atmosphere as if it’s an open sewer.”

While we don’t know precisely what fuels all of Gore’s jet travel, or powers his mega-mansion, we doubt he has concocted a carbon-free superfuel like he supposedly invented that “information superhighway” known as the Internet.

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Gold Bears Pull $20.8 Billion as BlackRock Says Buy: Commodities – by Elizabeth Campbell (Bloomberg News – May 13, 2013)

http://www.bloomberg.com/

Hedge funds increased bets on lower gold prices after investors pulled a record $20.8 billion from bullion funds this year while BlackRock Inc. (BLK), the world’s biggest money manager, said it’s still bullish.

Speculators held 67,374 so-called short contracts on May 7, 6.4 percent more than a week earlier, U.S. Commodity Futures Trading Commission data show. The net-long position dropped 10 percent to 49,260 futures and options. Net-bullish wagers across 18 U.S.-traded raw materials climbed 5.8 percent to 582,265, with gains for cocoa, cotton and hogs.

Gold is having its worst start to a year since 1982 after dropping 15 percent and sliding into a bear market in April. Holdings in exchange-traded funds backed by bullion tumbled to the lowest since July 2011 even as central banks print money on an unprecedented scale to boost growth. BlackRock’s President Robert Kapito said May 9 he would still buy the metal, echoing billionaire John Paulson, who’s sticking with a bullish view even after losing 27 percent in his Gold Fund last month.

“People have been told the world is going to end for five years, and it hasn’t, so they’re finally moving on,” said James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees $325 billion of assets. “So even when crisis flashes now, you don’t get the same upside, and then in good times, you get more downside, and that’s what you’re getting in gold as the Armageddon premium is coming out.”

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Could gold’s fall be the start of a broader resources slump? – by Chris Sorensen (MacLean’s Magazine – April 30, 2013)

http://www2.macleans.ca/?cid=navlogo

Resource prices have driven the Canadian economy for over a decade. Are the good times coming to an end?

For investors and producers alike, gold’s recent rout was as devastating as it was unexpected. The price plummeted by $200 an ounce over a two-day period last week, suffering its biggest single-day drop in 30 years. Though it eventually stabilized at around $1,400 an ounce, stocks of gold mines—many of them Canadian—continued to be hammered by investors for days afterward, with some reports suggesting that as many as 15 per cent of the world’s gold mining companies are now wallowing in red ink.

There are many theories as to what caused gold to fall so far, so fast. They range from rumours that Cyprus planned to sell off some of its reserves to pay for its bailout, to the easing of fears that central bankers are destroying currencies with their unprecedented stimulus measures. “People thought loose monetary policies lead to rampant inflation,” says Keith Head, a professor at the University of British Columbia’s Sauder School of Business. “But gold prices stayed high, even when the underlying theory was repudiated by actual evidence, and that’s a vulnerable situation to be in.”

The big question now is whether other commodity prices will follow suit. Though gold, which traded as high as $1,888 an ounce in 2011, is unique in many respects—it is valued mostly as a way to store wealth, as opposed to as an industrial input—prices of everything from aluminum to zinc have slumped over the past several years after hitting historic highs, creating fears of a broader crash.

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Precious Holdings [Rare Earth Metals] – by Austin Ramzy (Time Magazine – Feb. 18, 2013)

http://science.time.com/

From smart phones to weaponry, cutting-edge technologies depend on access to elements called rare earths. What happened when China tried too hard to control them

In the dystopia imagined in the video game Call of Duty: Black Ops II, the year 2025 is defined by a rampaging cult, a zombie apocalypse–and a war between the U.S. and China for control of the world’s supply of rare earths, materials crucial to the production of everything from mobile phones to weapons. Early in the game, a character waves around a smart phone, lecturing on the importance of rare earths. “Who controls all of it?” he asks ominously. “China.”

It’s only a video game, but not long ago that scenario–minus the zombies–seemed uncomfortably close to reality. China, the world’s dominant producer of rare-earth elements, announced in 2010 that it was drastically cutting its exports, triggering a global panic. Rare earths are a fundamental ingredient across much of the $1 trillion high-tech manufacturing industry. Consumer companies feared shortages of the rare-earth elements that go into computer screens and lightbulbs; U.S. weapons manufacturers worried that a supply shock would imperil production of Abrams tanks and Tomahawk cruise missiles.

“The scope of this crisis is enormous, and only a concerted national effort will lead us out of this mess,” warned U.S. Representative Donald Manzullo, an Illinois Republican. Paul Krugman, a Nobel Prize–winning Princeton economist and New York Times columnist, wrote that China had achieved “a monopoly position exceeding the wildest dreams of Middle Eastern oil-fueled tyrants.”

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The commodities supercycle is far from dead – by Nitesh Shah (Financial Times Adviser – May 13, 2013)

http://www.ftadviser.com/

The commodities supercycle, that started in the late 1990s, is far from over.

The main fundamental drivers of the commodities supercycle are still in force and recent commodity price weaknesses are more related to business-cycle fluctuations and short-term commodity-specific supply increases than a change in structural fundamentals.

Resource-intensive economic growth in emerging markets, led by urbanisation and industrialisation, has been the main force behind the rise in commodity demand and prices in the past 10 years.

This process is expected to continue for the next 10 to 20 years. The rise in commodity demand in the past 10 years has occurred most strongly in China and India. Both remain in the early stages of industrialisation and urbanisation. With per capita GDP in these countries projected to triple by 2030, absolute demand for the commodity inputs necessary to produce the investment and consumption goods they will demand in this period is expected to be significant.

The size of the middle class in emerging markets is expected to rise at a rapid pace in the next decade, and with it so will their consumption of commodity-intensive goods. Offices, middle-class housing, automobiles, roads, trains, airports and related infrastructure, refrigerators, washing machines, computing devices and meat for example are all highly commodity intensive to produce.

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UPDATE 2-Rio Tinto expects Mongolia nod for copper exports soon – by James Regan (Reuters U.S. – May 9, 2013)

http://www.reuters.com/

SYDNEY, May 9 (Reuters) – Rio Tinto could be two weeks away from gaining Mongolian approval to ship copper from its Oyu Tolgoi mine, helping offset a slide in revenue from its U.S. copper business as it faces pressure to slash costs and sell non-core assets.

A landslide at the firm’s Bingham Canyon copper mine in Utah in April, which could result in over $700 million in lost sales revenue based on Reuters calculations, was unlikely to force a rethink on assets sales, Chief Executive Sam Walsh told shareholders at the annual meeting in Sydney on Thursday.

There has been speculation that moves by Rio Tinto to sell its Northparkes copper mine in Australia could be delayed until full production resumed at Bingham Canyon.

“We are not expecting that that (the landslide) will have a difference” on divestment decisions, said Walsh, adding the firm would also not be draw into a “fire sale” of businesses.

Rio Tinto hired Macquarie Bank to sell its majority stake in Northparkes, a source familiar with the matter told Reuters. . Rio Tinto and Macquarie declined comment. Japan’s Sumitomo Corp. own 20 percent of the mine.

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Mine Sales in Bear Market Brings Private Equity on Prowl – by Brett Foley & Elisabeth Behrmann (Bloomberg News – May 9, 2013)

http://www.bloomberg.com/

“I haven’t seen anything like it in more than 20 years,” said Tim Schroeders, who helps manage about $1 billion in equities, including BHP and Rio Tinto (RIO) Group, at Pengana Capital Ltd. in Melbourne. “Mining companies have done pretty well buying assets at the bottom of the cycle and turning some over near the top, but this is completely the other way around.”

BHP, the world’s biggest mining company, and London-based Rio Tinto are leading the global asset disposal and may sell businesses or stakes in mines for as much as $35 billion, according to Deutsche Bank AG. Private-equity firms are finding that tempting, raising almost $9 billion in 16 months for mine investment, more than the previous four years combined, according to data compiled by Bloomberg.

Aaron Regent, who was fired last year as chief executive officer of Barrick Gold Corp. (ABX), the biggest producer of the metal, started a company to invest in mining assets, according to two people familiar with the matter. KKR & Co. (KKR), the firm run by Henry Kravis and George Roberts, is considering a bid for Rio’s stake in an Australian copper and gold mine, two people with knowledge of the matter said last month.

Steve Okun, a spokesman for KKR in Hong Kong, said the firm doesn’t comment on market speculation.

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Amplats to slash platinum production, 6,000 jobs, in South Africa – by Geoffrey York (Globe and Mail – May 11, 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.

JOHANNESBURG — The world’s biggest platinum producer, Anglo American Platinum, has announced plans to cut 6,000 jobs from its South African mines, triggering fears of a major battle with trade unions as the platinum sector struggles with mounting losses.

The announcement was immediately greeted by furious criticism from South Africa’s powerful unions, raising the spectre of another season of violent clashes in a country where dozens of workers were killed last year.

But the company, known as Amplats, insisted that it had to reduce production in its platinum mines after suffering heavy losses last year. One study estimated that 70 per cent of all South African platinum mines were operating at a loss last year because of rising costs, oversupply and falling prices.

Amplats had originally intended to cut 14,000 jobs from a work force of about 56,000 employees. But when its plan was first mentioned in January, the South African government was outraged, accusing the company of behaving like “a child.”

The company agreed to suspend the plan while it discussed the issue with the government, but on Friday it announced that it would still go ahead with deep cuts to its production and job levels.

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A nugget of wisdom for gold miners: Think small – by Eric Reguly (Globe and Mail – May 11, 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.

ROME — I think I have figured out Canadian gold mining executives. They assume that gold is not a mineral; it is a perishable commodity that will rot in the ground, like a potato, unless it is dug up immediately.

And not just immediately but in vast quantities. Canadian gold mining executives are obsessed with the concept of bigness. They want projects they can label “game changers,” ones capable of vaulting medium-sized firms into the big leagues, or thrust the biggies to the very top of the global heap. Bigness permeates their lives. They drive big cars, live in big houses. Some, like Barrick Gold Corp. boss Peter Munk, bob around the planet in the biggest of yachts.

The problem with bigness is that it translates into trouble when it’s extended to corporate development. Big projects are big gambles. They invariably come in far over budget, sometimes billions over budget, which gets shareholders rather annoyed. Big projects also attract lots of attention from environmental activists, politicians and aboriginal peoples. The result is expensive delays and bad publicity.

Canada’s gold mining sector is a mess, with share prices down by about half even though the gold price is down by only 20 per cent from its high of almost $1,800 (U.S.) an ounce last October. Executives are being tossed into the garbage like the remains of a steak lunch. Returns on equity are sinking into single-digit territory or, in Barrick’s case, turning negative. Problems at flagship projects are not going away – in some cases they’re intensifying – after years of fix-it efforts.

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B.C. vote a ‘plebiscite on prosperity’ – by Diane Francis (National Post – May 11, 2013)

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

VANCOUVER — On May 14, British Columbians face Hobson’s choice in their provincial election: Liberal leader Christy Clark is in trouble in her own riding and the NDP’s Adrian Dix is wobbly in polls and should be.

But voters must hold their noses and re-elect the Liberals (who are actually Conservatives) because it’s the only pro-development party on the ballot. The NDP, everywhere, is a coalition of vested interests, posing as a party with broad appeal, and without free enterprise smarts. Anywhere this party runs, voters must reject it out of hand.

This is no time to get even for the B.C. Liberal sales tax fiasco or to send a message to Ottawa. This is an unusually important vote for this province and for all Canadians. In fact, this is an “existential” moment for Canada.

If the NDP wins power in such a strategically important and rich jurisdiction such as this one — a keystone within the Canadian resource economy — B.C. voters will have chosen economic decline. This is as important as was Quebec’s referendums and yet this has not been acknowledged in the lead up.

British Columbia and Vancouver (and Canada) would find itself, if anti-development attitudes become its governance model, bypassed in terms of future growth.

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South Americans Face Upheaval in Deadly Water Battles [Mining conflicts] – by Michael Smith (Bloomberg Markets Magazine – February 13, 2013)

http://www.bloomberg.com/markets-magazine/

People streamed into the central square in Celendin, a small city in the Peruvian Andes, the morning of July 3, 2012. They were protesting the government’s support for Newmont Mining Corp. (NEM)’s plan to take control of four lakes to make way for a new gold and copper mine. By midday, there were 3,000.

Some hurled rocks at police and brandished clubs. Then assailants shot two officers and an Army soldier in the leg.

Blocks away, construction worker Paulino Garcia left home on foot to buy groceries. As he approached the central square, he encountered chaos. People ran for cover as federal troops fired their weapons, Bloomberg Markets magazine will report in its March issue.

One bullet struck Garcia as he watched the mayhem. It ripped open his chest and exited through his back. The 43-year-old father of two fell to the ground and died. Another three people were shot and killed, and more than 20 were wounded.

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New era of austerity at BHP -by Barry Fitzgerald (The Australian – May 10, 2013)

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

BHP Billiton’s new chief executive Andrew Mackenzie has launched the world’s biggest resources group on a relentless productivity drive, aimed at improving shareholder returns against a backdrop of fading commodity prices.

Mr Mackenzie formally takes the reins at BHP today, with the Scottish polyglot and sometime saxophone player spending the day at BHP’s iron ore operations in the Pilbara.

He replaces the man who hand-picked him as a likely successor more than five years ago, the vegetarian Afrikaner Marius Kloppers, known as much for his safe hands during the global financial crisis as his idiosyncratic tendencies.

Speaking to The Australian before his first day as chief executive, Mr Mackenzie said there would be no big-bang change in BHP’s strategy. It would evolve over time under his leadership, but securing productivity improvements was the immediate focus, replacing the previous focus on production growth.

“Ultimately, we won’t be changing much of it at all. We will probably just be even more clear that our future prosperity is going to be based on a small number of world-class tier-one orebodies,” Mr Mackenzie said. “We are likely to invest less, and therefore the principal way we intend to grow the returns from our businesses is by driving productivity.”

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