Mark Mobius bullish on gold, oil and Southeast Asia – by John Shmuel (National Post – July 19, 2013)

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

The Financial Post sat down with emerging markets guru Mark Mobius of Franklin Templeton Investments on Friday to talk about his outlook for global stock markets and commodities. Mr. Mobius is known as one of the pioneers of emerging market investing, and despite the bloodbath in emerging market stocks this year, he still sees plenty of investment opportunities. He also sees potential in gold, which has suffered from its own epic price crash in 2013. Below is an edited transcript from our interview with Mr. Mobius.

Q It’s been a bloodbath for BRIC stocks and economies this year. Is there still opportunity there or should investors move on?

A There’s no question, they’ve bombed.

Overall, however, I think the BRIC countries will definitely have big comebacks, and they’ll do quite well, despite what we’ve seen recently. They’re huge, they have growth, and a lot of companies there are showing us sustained, strong earnings.

Q It’s also been a bad year to be a gold investor. Is the gold story over, or is this just a hiccup for the precious metal?

A There are really two markets in gold. There is the market price, and there is real demand. Market price is influenced by derivatives, by short sellers, by all kinds of actions by traders who are not taking physical delivery.

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‘The time is now to extend railhead into Ring of Fire’ – KWG Resources – by Henry Lazenby (MiningWeekly.com – July 24, 2013)

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

TORONTO (miningweekly.com) – Given the vast potential of northern Ontario’s still-dormant Ring of Fire polymetallic region, the timing is now ideal to extend the existing provincial railway infrastructure northwards to open up the region up for mining, KWG Resources president and CEO Frank Smeenk told Mining Weekly Online on Tuesday.

He argued that the historically low prevailing interest rates, and reduced materials costs, currently provided Canada and the province with the best window of opportunity yet to construct a railway that would enable minerals to be brought to market at the lowest possible unit cost, for more than a century of expected mining in the region.

“Canadian chromite production would have to earn its place in the international market, where we would compete with the world’s leading producers South Africa, India and Kazakhstan. Critical to the success of opening up the Ring of Fire is to ensure minerals could be transported to market in the most efficient manner at the lowest possible unit costs,” Smeenk said.

Despite being JV partners in developing certain projects in the Ring of Fire, KWG and US diversified miner Cliffs Natural Resources are at loggerheads over the proposed mode of transport into the Ring of Fire.

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Miners brace for painful second-quarter earnings season – by Peter Koven (National Post – July 23, 2013)

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

It is going to be ugly. The only question is how ugly. The mining earnings season kicks into full gear this week, and investors and analysts are bracing themselves for a set of painful second-quarter results. Writedowns, project deferrals and plummeting profits will all be front-and-centre as the miners try to make sense of one of the most turbulent quarters they have faced in years.

The sector is full of new CEOs, and the market will be watching closely to see how they respond to the challenges. Many of them are under intense pressure to cut costs due to shrinking margins.

Of course, the majority of the pain will be felt in the precious metals sector. The average gold price plunged 13% in the second quarter to US$1,414 an ounce, marking the single biggest quarterly decline since 1980. Silver did even worse, falling 22% to US$23.33.

What matters for mining companies is not the average quarterly prices but their realized selling prices, which are based on when they sell their material. And that is one potential problem.

Greg Taylor, a vice-president and portfolio manager at Aurion Capital Management, said there are rumblings gold miners “got cute” and held off on selling their product when gold fell sharply in mid-April because they anticipated much higher prices later in the quarter. Those prices never materialized; in fact, gold had another steep correction in June.

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Muskrat madness: Quebec motion puts Newfoundland’s multi-billion dollar magaproject at risk – by Tom Adams (National Post – July 23, 2013)

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

Notwithstanding the construction crews now swarming Labrador’s Muskrat Falls power dam site, sunk costs in excess of $1 billion and a federal loan guarantee standing behind the project, the future of the Newfoundland & Labrador (NFLD) government’s pet megaproject suffered two blows Monday so grave that they threaten the entire project.

Muskrat Fall is seen as a Newfoundland’s new destiny project. The project involves building a new 824 MW power dam on the Lower Churchill River near the town of Goose Bay. The power would be transmitted to the island of Newfoundland by means of a transmission line tunnelled under the Strait of Belisle. Another submarine transmission line would link the island of Newfoundland to Nova Scotia’s Cape Breton.

The project’s cost is usually reported as $7.7 billion, a price tag that includes almost no contingency and no interest expense during construction, which could add another $1 billion. The provincial government’s plan is to sell a large portion of the production from Muskrat Falls to Nova Scotia.

But Hydro Quebec on Monday filed a motion with the Quebec Superior Court seeking clarification of its rights under the Quebec’s existing 1969 Churchill Falls Contract.

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Guatemalan mine claims against HudBay can be tried in Canada, judge says – by Bertrand Marotte (Globe and Mail – July 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.

Canadian mining company HudBay Minerals Inc. can potentially be held liable for alleged violence at a Guatemalan mine owned by a subsidiary, a Ontario Superior Court judge has ruled in what plaintiffs say is a precedent-setting case.

Madame Justice Carole Brown’s ruling, handed down Monday, means that the claims of 13 Guatemalans can proceed to trial in Canadian courts, according to Murray Klippenstein, lawyer for the plaintiffs.

Mr. Klippenstein had argued that HudBay itself can be held liable for alleged negligence in the case, alleging that HudBay executives made decisions for its subsidiary regarding security at the mine, relations with local indigenous people and the “forced evictions” of Mayan protestors claiming the mine is theirs.

Lawsuits were launched against HudBay after clashes that pitted protestors against security details at the Fenix nickel mine in 2007 and 2009. The allegations have not been proven and HuBay has since sold the mine.

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SA mining and the almost ‘unwinnable’ labour situation – by Jeff Candy (Mineweb.com – July 23, 2013)

http://www.mineweb.com/

Norton Rose Fulbright’s Joe Mothibi discusses the lay of the South African mining labour landscape and looks at the best and worst case outcomes for the current gold wage negotiations

GRONINGEN (MINEWEB) – GEOFF CANDY: Hello and welcome to this edition of Mineweb.com Newsmaker podcast. Joining me on the line is Joe Mothibi – he is a partner with Norton Rose Fulbright. Joe we saw over the course of last week, significant movement on the wage negotiation space within the South African gold sector. We saw the gold companies represented by the Chamber of Mines, putting out their first offer of 4% increases across the board for basic wages and for housing allowances, and on the other end of the spectrum we saw demands from the likes of AMCU of up to 130%, we saw demands from NUM of 61%. Clearly these are very far apart numbers, is this as far apart as you’ve seen it in the South African labour sector?

JOE MOTHIBI: Without a doubt, certainly in recent memory. What concerns me most is this probably is an indication or symptom of the instability which is actually occurring within the federation of COSATU and the weakness that is perceived by unions such as AMCU who then see a weakness and try and go in there and get a piece of the cake in terms of membership. Yes, but certainly it’s been quite stark indeed, the gap between what they each put on the table.

GEOFF CANDY: Now we’ve heard fairly strong words from the likes of AMCU and from NUM, Lesiba Seshoka telling Mineweb earlier last week that these demands or the offer by the companies was an insult, was a cause for provocation, Joseph Mathunjwa telling Mineweb that he probably wasn’t going to take it back to his members because it wasn’t very good.

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Aussie Drop Gives Relief to Iron-Ore Miners – by Rhiannon Hoyle (Wall Street Journal – July 22, 2013)

http://online.wsj.com/home-page

SYDNEY–Slugged by weaker prices, spiraling costs and simmering anxiety over China’s economic slowdown, Australia’s iron-ore producers are finally getting a welcome shot in the arm.

The longest slide in the Australian dollar since the financial crisis is lifting the bottom line of companies from BHP Billiton Ltd. (BHP) and Rio Tinto PLC (RIO) to smaller players like Atlas Iron Ltd. (AGO.AU) and Mount Gibson Iron Ltd. (MGX.AU) that export the key steelmaking ingredient.

The so-called Aussie has slid 11% in the past three months to around 92 U.S. cents–having soared above parity with the U.S. dollar in 2010 and traded near historic highs for much of the past three years.

The larger iron-ore producers, which tend to report in U.S. dollars, are benefiting from the resulting sharp drop in local costs like wages, while their smaller rivals are getting significantly more income when repatriating their U.S.-denominated earnings into the local currency.

In both cases, the impact of the weaker dollar is likely to feed through into the profits of Australia’s iron-ore producers, many of which are due to report earnings next month.

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Vale may hire foreign workers to solve Long Harbour crunch (CBC News Newfoundland – July 23, 2013)

http://www.cbc.ca/nl/

Mining giant Vale admits it may have to look outside the country to hire specialized workers to finish its massive nickel processing facility in Newfoundland’s Placentia Bay.

However, Vale says it wants to explore other options first to find such skilled workers as welders and pipefitters for its site at Long Harbour, where the company ultimately intends to process nickel mined at Voisey’s Bay in northern Labrador.

To accomplish that, the company is moving skilled workers from its port site to its main construction site, which the company calls the upper tier. “Because we are short some of those resources, we thought it was best to redirect those resources to the upper tier,” Bob Carter, Vale’s director of corporate affairs, told CBC News.

On Friday, layoff notices were handed out to more than 250 workers with skills that are currently not needed at the main site. Vale, which now plans to finish the port site later, admits it is concerned that it will not be able to find all the workers it needs within Canada.

The company is applying to the federal government for permission to bring in foreign workers.

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Residents question cleanup costs of proposed mine (CBC News New Brunswick – July 22, 2013)

http://www.cbc.ca/nb/

Northcliff Resources considering large open-pit mine in Nashwaak Valley

Some people living north of Fredericton want to know who will pay for the future clean-up of a proposed tungsten mine in the Nashwaak Valley area. The Sisson Project is being led by Northcliff Resources and, if approved, could turn into one of the world’s largest open-pit mines.

Gary Spencer said he wants to know who is going to foot the bill for cleaning up after the mine closes. “Somebody’s going to have to treat the water and, I start sounding silly when I say this, but, forever,” he said. “Somebody’s going to have to maintain the roads, provide electricity to the pumps that are going to pump the water back, and so on and so forth.”

The mining project is still in the environmental impact assessment stage.

  • Nature vs. economic nurturing divides Nashwaak Valley
  • Mining firm seeks ‘social licence’ with First Nations
  • Northcliff Resources continues tungsten mine review

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Rising China domestic oil output hurts import demand – by Clyde Russell (Reuters U.S. – July 22, 2013)

http://www.reuters.com/

(Reuters) – One of the clouds hanging over the global oil demand outlook is what’s happening to Chinese consumption, with crude imports falling in the first half of 2013.

The 1.4 percent drop in imports contrasts with modest growth in implied oil demand. Such differences are often ascribed to changes in commercial inventories, which are difficult to assess accurately given China doesn’t report stockpile levels. However, another factor has come to the fore, with domestic oil production rising a fairly strong 4.3 percent over the first six months of the year from the same period in 2012.

Domestic output was 103.615 million tonnes in the first half, according to figures released on July 19 by the National Bureau of Statistics. This equates to about 4.179 million barrels per day (bpd), or about 172,000 bpd more than in the first half of last year.

This is quite a substantial jump from the figures for the first five months of the year, which showed domestic oil output rising by a more modest 2.7 percent, or 62,000 bpd. There is a risk the domestic oil figures are subject to statistical noise from month to month, however, there does seem to be a fairly clear trend of rising production in China.

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It’s a long way to Prosperity – by Ezra Levant (Sudbury Star – July 23, 2013)

 http://www.thesudburystar.com/

A company called Taseko Mines wants to build a copper and gold mine in central British Columbia. Hearings began on the proposal Monday in Williams Lake, B.C.

Taseko will invest $1.1 billion in the project and hire 550 people directly, plus 1,280 more indirectly in everything from construction to housing to restaurants.

Over the long life of the mine, it’s expected to generate more than a third of a billion dollars a year in GDP. For comparison, that one mine will produce more wealth than B.C.’s entire commercial fishing industry does. So, of course, Taseko must be stopped.

Taseko’s mine — well named as the New Prosperity project — already received provincial approval. But then Ottawa’s extremist Environmental Assessment Agency balked. You see, there’s a little lake nearby, called Fish Lake, that would have been drained by the original proposal. And those fish are more important to Ottawa’s regulators than nearly 2,000 families having well-paid jobs. To Ottawa, if no one else, those fish are worth more than gold.

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Taseko should expect local opposition at BC mine public hearings – by Henry Lazenby (MiningWeekly.com – July 22, 2013)

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

TORONTO (miningweekly.com) – The Tsilhqot’in First Nation on Monday said it was disappointed at being forced to once again oppose base metals producer Taseko Mine’s proposed New Prosperity mine, in the Cariboo-Chilcotin region of British Columbia, imploring the federal government to listen to community members, scientists and the public who were condemning the proposal for what it sees as “an environmental and cultural disaster”.

The Conservative Stephen Harper-led government in November 2010 rejected the mine proposal based on what then-Environment Minister Jim Prentice, described as one of the most “scathing” independent panel reports ever written.

The report documented both significant environmental and cultural impacts, many of which the first panel noted could not be mitigated with an alternative option proposed by the company.

“We look forward to the opportunity to share with this new panel all the reasons that this new proposal is just as unacceptable as the last one, regardless of the name or spin thrown out there by this company,” Xeni Gwet’in First Nation chief Roger William said.

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Canadian energy stocks buoyed by surge in prices for U.S. crude – by Jeffrey Jones (Globe and Mail – July 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.

CALGARY – Canadian energy stocks are finally playing catch-up with sizzling oil markets. In the past four weeks, the S&P/TSX capped energy index, which includes big names such as Cenovus Energy Inc., Suncor Energy Inc. and Canadian Natural Resources Ltd., has climbed 9 per cent as U.S. crude prices approached, then rocketed above, $100 (U.S.) a barrel.

The gains come as companies prepare to deliver second-quarter financial results that in many cases will display rich rewards from a steady improvement in heavy crude prices that has accompanied the run-up in the West Texas Intermediate light oil benchmark.

There could even be potential acquirers running the numbers on deals after a long hiatus, to take advantage of still-discounted values.

“I think people with a longer-term view are eyeing this sector, and from a strategic standpoint or a market standpoint, it’s looking pretty attractive,” said John Stephenson, senior vice-president and portfolio manager at First Asset Capital Corp.

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Minor miners face major headache from iron ore giants – by James Regan (Reuters U.S. – July 21, 2013)

http://www.reuters.com/

SYDNEY, July 22 (Reuters) – From Africa to Australia, opportunities to develop small iron mines are fast disappearing, as cash dries up and miners are unable to compete with the crushingly low production costs of the sector’s heavyweights.

In Australia alone, a half a dozen or more projects pegged by prospectors in better times sit stranded in the outback with no timetable for development. Most are running short on money and have stripped payrolls and equipment spending to a bare minimum, awaiting a turnaround that forecasters predict is a long way off at best.

Companies such as Aquila Resources Ltd, Flinders Mines Ltd and Iron Road Ltd, which a year ago were leading a wave of new investment in iron ore, have had their stocks gutted as investors turned cold on their prospects.

“This is not the time to be developing a new iron ore mine, the big boys are making sure of that,” said Keith Goode, an analyst for Eagle Mining Research. Global miners Vale, BHP Billiton and Rio Tinto are increasing their supply dominance in the world’s second-biggest shipped commodity market after oil.

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Australia’s Waning Boom Saps Mining Area Housing Demand – by Nichola Saminather (Bloomberg News – July 21, 2013)

http://www.bloomberg.com/

After slashing the price of three planned townhouses by a third in the coal-mining town of Moranbah in remote northeastern Australia, agent Ricardo Baggio still can’t find buyers.

“No one’s got confidence,” said Baggio from broker Ray White Group’s Townsville franchise, about 550 kilometers (341 miles) north of Moranbah in Queensland state. “There are a few mines around the town but they’re not hiring or they’re downsizing.”

Home prices in Australia’s isolated mining towns, which outpaced increases in the rest of the nation over the past decade, are falling as companies such as Glencore Xstrata PLC (GLEN) and Peabody Energy Corp. (BTU) delay projects and lay off workers amid a slowing resources boom. The percentage of homeowners more than 30 days behind on their mortgage payments in Gladstone, a Queensland coastal town near more than $60 billion of gas projects, was 0.94 percent in March, according to Fitch Ratings, a 71 percent increase in six months.

The Moranbah townhouses, which will be built on a flat, sparsely landscaped street about 1 kilometer from the center of town, are on the market for A$525,000 ($478,485) each, down from an initial price of A$750,000, said Baggio. The median price of a home in Brisbane, the state capital, is A$425,000.

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