Commodity Super-Cycle and Decline – Page 68

PwC NEWS RELEASE: Top 40 global mining companies’ total assets could exceed $1 trillion in 2011

June 7, 2011

For a copy of the report click here: Mine 2011: The game has changed

Largest Canadian-based miners increased revenues by 38% in 2010: PwC report

TORONTO, June 7, 2011—The top 40 global mining companies—including nine headquartered in Canada—increased their total assets to US$943 billion in 2010 and are poised to break through the US$1 trillion mark in 2011 driven by record levels of cash, and property and equipment on company balance sheets, according a new PwC report released today.

The financial results of the Top 40 in 2010 are spectacular. Total revenues increased 32% to US$435 billion, breaking the US$400 billion mark for the first time. Net profit rose 156% to US$110 billion and operating cash flows grew by 59%, leaving more than US$100 billion cash-on-hand at year end.

The report also found the Top 40’s total year-end market capitalization increased 26%, driving up the market capitalization of the smallest company on the list to US$11 billion in 2010 from US$6.5 billion in 2009.

The top Canadian-based mining firms significantly contributed to the overall Top 40 financial totals. Together, the nine Canadian companies increased revenues by 38%. Net profit increased a staggering 1,536% to US$8.9 billion and operating cash flows grew 224%. However, the 2009 base for comparison is low as a result of Barrick Gold settling its gold sales contracts that year.

Quebec to Spend Billions to Develop Resources in Northern Regions- by Ian Austen (New York Times – May 10, 2011)

May 27, 2011

www.nytimes.com

OTTAWA — Quebec province, anticipating renewed interest in its natural resources, rolled out on Monday an ambitious 25-year plan to develop its vast but largely untouched northern and Arctic regions.

The region is well endowed with mineral resources, woodlands and potential hydroelectric developments, but it lacks the roads, railways, ports, communications links and other infrastructure necessary for their exploitation.

The plan initially commits the province to spending 2.1 billion Canadian dollars ($2.2 billion). It also calls for a variety of measures, including the establishment of an investment fund, which Quebec hopes will initially lead to the development of at least 11 mines and ultimately produce overall investment of 80 billion Canadian dollars.

While the proposed project, known as Plan Nord, includes banning any industrial activity in a large portion of the mainly pristine region, the program has the potential to put the province at odds with environmentalists. Similarly, while consultations are already under way between the province and the area’s large native Canadian population, the development of their traditional lands may pose potential political difficulties.

The running out of resources myth – by Brian Lee Crowley (National Post – May 27, 2011)

May 27, 2011

The National Post is Canada’s second largest national paper. This article was originally published in the Financial Post on May 27, 2011.

Brian Lee Crowley is the managing director of the Macdonald-Laurier Institute, a national public policy think-tank based in Ottawa. www.macdonaldlaurier.ca

Markets and ingenuity will ensure supply

The premise behind the question “Are we running out of natural resources?” is terribly mistaken. There is indeed a finite quantity of fossil fuels and other resources in the Earth’s crust. But that does not mean that we will ever run out of them. In fact, human beings will likely cease using fossil fuels long before we have used them up, and this transition is independent of any policy designed to speed up the development of alternative energy sources.

Fears that we are running out of commodities are not new. In the 18th century, Thomas Malthus predicted that mass starvation would result from an inability of the food supply to adjust for rapid population growth. In the 1970s, the Club of Rome predicted massive shortages of natural resources due to overconsumption and overpopulation, with disastrous effects on human health and material well-being. In 1980, The Global 2000 Report to the President noted that: “If present trends continue, the world in 2000 will be more crowded, more polluted, less stable ecologically, and more vulnerable to disruption than the world we live in now.… ”

But the ecosystem hasn’t collapsed. We haven’t run out of oil. We are still successfully feeding ourselves. Our incomes are rising and our health status is improving around the globe. Why?

[Quebec] Mining’s future looks bright – by Robert Gibbons (Montreal Gazette – April 27, 2011)

May 27, 2011

www.montrealgazette.com

Quebec is embarking on expansion driven by growth in Asia-Pacific region and Latin America

Quebec’s mining industry may well be on the cusp of historic long-term expansion, despite fears that surging commodity markets may stumble with a slowdown in China’s growth, the Japanese nuclear crisis, North African and Mid-East turmoil and Europe’s debt.

Bank of Canada governor Mark Carney thinks the global commodity boom will continue for many years, though with plenty of volatility on the way, based on economic expansion in the Asia-Pacific region and in Latin America.

And Rio Tinto Group CEO Tom Albanese, leader of one of the world’s top three mining firms and frequent visitor to China, outlines the main driving force for higher base metals and iron ore prices:

About 2.5 billion Asians are yearning after more cars, refrigerators, roads, bridges and infrastructure, communications, aircraft and homes, absorbing lots more steel, copper, zinc and many other metals. India and other populous Asian countries are urbanizing on the Chinese model and adding to the pressure.

In China’s Orbit – by Niall Ferguson (Wall Street Journal – November 18, 2010)

May 24, 2011

The Wall Street Journal is an American English-language international daily newspaper. Published in New York City by Dow Jones & Company, the Journal has the largest newspaper circulation in the United States.

Niall Ferguson is a professor of history at Harvard University and a professor of business administration at the Harvard Business School. His next book, “Civilization: The West and the Rest,” will be published in March.

After 500 years of Western predominance, Niall Ferguson argues, the world is tilting back to the East.

“We are the masters now.” I wonder if President Barack Obama saw those words in the thought bubble over the head of his Chinese counterpart, Hu Jintao, at the G20 summit in Seoul last week. If the president was hoping for change he could believe in—in China’s currency policy, that is—all he got was small change. Maybe Treasury Secretary Timothy Geithner also heard “We are the masters now” as the Chinese shot down his proposal for capping imbalances in global current accounts. Federal Reserve Chairman Ben Bernanke got the same treatment when he announced a new round of “quantitative easing” to try to jump start the U.S. economy, a move described by one leading Chinese commentator as “uncontrolled” and “irresponsible.”

“We are the masters now.” That was certainly the refrain that I kept hearing in my head when I was in China two weeks ago. It wasn’t so much the glitzy, Olympic-quality party I attended in the Tai Miao Temple, next to the Forbidden City, that made this impression. The displays of bell ringing, martial arts and all-girl drumming are the kind of thing that Western visitors expect. It was the understated but unmistakable self-confidence of the economists I met that told me something had changed in relations between China and the West.

How Will Resources Constrain Asian Growth? – Jack Lifton (Resource Investor.com – December 9, 2011)

May 24, 2011

ResourceInvestor.com is a free service for the global community of individual and institutional investors, financial and mining professionals, and other stakeholders who can use the website for important research on natural resources investment strategy.

Jack Lifton is a leading authority on the sourcing and end use trends of rare and strategic metals. He is a founding principal of Technology Metals Research LLC and president of Jack Lifton LLC, consulting for institutional investors doing due diligence on metal-related opportunities.

Jack Lifton

The absolute importance of access to natural resources for a country’s future, can be well-illustrated by speculating on what could happen to China’s seemingly unstoppable growth, if the production rate of all metals does not grow in parallel to the world economy.

Figure 1 below, appeared last month in the Wall Street Journal, in an article by the distinguished British historian Niall Ferguson, titled “In China’s Orbit”. It projects GDP growth over the next 40 years for the world’s currently wealthiest (the USA) and the world’s two most populous nations (China and India). In his article, Professor Ferguson touches upon the extraordinary growth in China’s demand for metals over the last generation, but he doesn’t either examine the situation in depth nor draw any conclusions about this rate of growth as a limiting factor on the possibility of further such growth. Look at the chart, and I will then make a few remarks.

Rare Earth Elements and Strategic Mineral Policy – by Jaakko Kooroshy, Rem Korteweg and Marjolein de Ridder (2010)

May 24, 2011

This report was produced at the Hague Centre for Strategic Studies (HCSS) and TNO

Introduction

Newspapers report almost daily on international tensions around ‘strategic’ or ‘critical’ minerals such as rare earth elements. The temporary freeze of rare earth exports from China to Japan in retaliation of the capture of a Chinese sea captain near the disputed Senkaku islands in the East China sea is but one example of the strategic use of non-fuel minerals in international relations today.

Ensuring and safeguarding access to rare earth elements and other strategic mineral resources is quickly emerging as a strategic policy priority and a number of states are designing and implementing new policies aimed at increasing material security.

By analyzing the strategic mineral policies of three countries, the United States, the United Kingdom, and Japan, this report provides an insight into what drives policies on strategic non-fuel mineral resources.

Mineral policies do not develop in a vacuum.

Pentagon in Race for Raw Materials – by Liam Pleven (Wall Street Journal – May 3, 2010)

May 24, 2011

Stockpiling Minerals Takes on Greater Urgency as Global Supply Gets Squeezed

The U.S. military is gearing up to become a more active player in the global scramble for raw materials, as competition from China and other countries raises concerns about the cost and availability of resources deemed vital to national security.

The Defense Department holds in government warehouses a limited number of critical materials—such as cobalt, tin and zinc—worth about $1.6 billion as of late 2008. In the coming weeks, the Pentagon is likely to present a plan for Congress to overhaul its stockpiling program.

The new plan, dubbed the Strategic Materials Security Program by the Pentagon, would give the military greater power to decide what it stockpiles and how it goes about buying the materials. It would also speed up decision making at a time when military technology evolves rapidly, commodity markets swing widely and countries around the world fight to secure access to natural resources.

India vies with China for influence in Africa – by Geoffrey York (Globe and Mail – May 23, 2011)

May 23, 2011

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous impact and influence on Canada’s political and business elite as well as the rest of the country’s print, radio and television media.

The latest global scramble for Africa, with China now in the lead, is escalating to new heights this week as India sends a planeload of gift-bearing political leaders to Africa in an effort to compete with Beijing’s fast-growing influence.

It would have been unthinkable a decade ago, but China and India are now emerging as key players in the African game, and both are boosting their presence so swiftly that they are becoming major competitors of the Western nations that traditionally dominated the continent.

Indian Prime Minister Manmohan Singh, accompanied by dozens of business executives and cabinet ministers, is arriving in Ethiopia this week for an Africa-India summit on a scale rivalling China’s recent summits with African leaders.

Codelco Waning Copper Pressures $17.5 Billion Bet to Catch Boom – by Matt Craze (Bloomberg Markets Magazine – May 2011)

May 23, 2011

Bloomberg Markets magazine brings the inside view of professional investing with unparalleled access to the most influential people in global business and finance.

(Bloomberg) — Diego Hernandez, chief executive officer of Codelco, talks with Bloomberg’s Matthew Craze about the company’s financing plans and the outlook for the copper market. The world’s largest copper producer, may seek bank loans to raise the $600 million it needs to finance expansions at its Chilean copper mines this year, Hernandez said. (Source: Bloomberg)

Andres Avendano steps out of his Toyota Hilux pickup halfway down a 20-kilometer-long tunnel under Chile’s Chuquicamata copper mine. He lifts a cylindrical chunk of rock from the diamond-bit-studded drilling machine that extracted the sample.

“The copper is quite disseminated,” Avendano says, adjusting the light from his white hard hat to identify a sprinkling of gold-colored specks. In the mine’s early days, a similar specimen would have been brimming with the metal, he says.

Avendano, 33, who is in charge of mine design, and geologists from government-owned copper giant Codelco are searching around the clock for new deposits at Chuquicamata, Bloomberg Markets magazine reports in its June issue. The complex, 1,650 kilometers (1,025 miles) north of Santiago in the Atacama Desert, is so massive the open pit is visible from space.

[Mining Sector] Labour-short Oz poaching Canucks – by Michael Madigan (Winnipeg Free Press – May 20, 2011)

May 20, 2011

Michael Madigan is the Winnipeg Free Press correspondent in Australia. He writes about politics for the Brisbane-based Courier Mail.

They’ve ravaged Calgary and pillaged Edmonton, and Canadians can be sure to see a whole lot more of them in the years ahead. Australian mining companies are turning corporate Vikings as they grow increasingly desperate for what has become a rare and precious resource — skilled labour.

That Canadian mining companies also resemble Norse seafarers in their own desperation to feed the insatiable appetite of Canada’s resource sector doesn’t faze the Australians.

The Australian organizer of a recent jobs fair in Canada, Rupert Merrick, says the globe’s booming energy sector is crying out for skilled workers, and all is fair in love and war.

Thanks, we’ll take that [Resource Nationalism] – by Brenda Bouw (Globe and Mail – May 18, 2011)

May 19, 2011

States looking to tax or even nationalize assets are threatening global mining interests

As Glencore International prepared its public listing, the world’s largest commodities trader warned the market that the Bolivian government was trying to wrestle more control of its mines.

The Bolivian government, under socialist President Evo Morales, is overturning mining and investment laws to increase state control over its economy. The government wants to renegotiate contracts with companies such as Switzerland-based Glencore and give state mining company Comibol a controlling role in joint ventures, forcing companies to return concessions, according to Bloomberg News.

Bolivia, which has also seized oil and gas assets since the current government took power in 2006, is just the latest in a growing list of nations revising laws to squeeze more profits from resource extraction within their borders during times of spiking commodities prices. Many are taking a larger grab through increased taxes and royalties.

Some are using more extreme measures, like nationalization or expropriation of assets.

Commodities bloodbath ‘nothing to fear,’ mining tycoons say – by Lisa Wright (Toronto Star – May 17, 2011)

May 17, 2011

Lisa Wright is a business reporter with the Toronto Star, which has the largest circulation in Canada. The paper has an enormous impact on Canada’s federal and provincial politics as well as shaping public opinion. This article was originally published May 17, 2011.

The recent slide in metals prices — make that a slaughter in silver — has been pretty hard to stomach for the stampede of investors who have taken a shine to the gritty mining industry lately. But Peter Munk, Ian Telfer and Bob Gallagher aren’t reaching for the Rolaids.

Nor are they the least bit bearish after two rocky weeks that saw silver plummet by 35 per cent, gold dip under the $1,500 U.S. per ounce watermark and a sharp pull back in construction-friendly base metals from aluminum to zinc.

Many investors are squeamish after the gut-wrenching correction which dragged once-soaring silver squarely into bear market territory. (A 20 per cent decline from a market high is the unofficial definition of a bear market.)

In fact ‘poor man’s gold’, as it’s known, suffered its biggest four-day decline in 28 years earlier this month after hitting a peak of $48.70 U.S. in April. Silver slid another $1.85 again Monday, closing at $34.35 in London.

The Chinese in Africa: Trying to pull together – (The Economist – April 23, 2011)

May 9, 2011

The Economist is one of the most globally respected English-language weekly news publications, focusing on international politics, business and opinion.

Africans are asking whether China is making their lunch or eating it

ZHU LIANGXIU gulps down Kenyan lager in a bar in Nairobi and recites a Chinese aphorism: “One cannot step into the same river twice.” Mr Zhu, a shoemaker from Foshan, near Hong Kong, is on his second trip to Africa. Though he says he has come to love the place, you can hear disappointment in his voice.

On his first trip three years ago Mr Zhu filled a whole notebook with orders and was surprised that Africans not only wanted to trade with him but also enjoyed his company. “I have been to many continents and nowhere was the welcome as warm,” he says. Strangers congratulated him on his homeland’s high-octane engagement with developing countries. China is Africa’s biggest trading partner and buys more than one-third of its oil from the continent. Its money has paid for countless new schools and hospitals. Locals proudly told Mr Zhu that China had done more to end poverty than any other country.

He still finds business is good, perhaps even better than last time. But African attitudes have changed. His partners say he is ripping them off. Chinese goods are held up as examples of shoddy work. Politics has crept into encounters. The word “colonial” is bandied about. Children jeer and their parents whisper about street dogs disappearing into cooking pots.