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Uralkali CEO’s ‘bizarre’ arrest in Belarus will heighten potash tensions, analysts say – by Peter Koven (August 27, 2013)

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

TORONTO – The potash industry has become engulfed in political intrigue, as a Russian executive at the centre of a cartel-busting plan has been detained by the autocratic government he used to do business with.

OAO Uralkali confirmed on Monday that CEO Vladislav Baumgertner was detained by authorities in Belarus. He is accused of abuse of power, according to reports. The timing is not coincidental.

Just three weeks ago, Uralkali threw the potash market into chaos by dismantling Belarusian Potash Co. (BPC), a cartel-like marketing company controlled by Uralkali and Belaruskali, its state-owned Belarusian counterpart. Uralkali vowed to end its practice of withholding production to prop up prices, prompting speculation that potash prices will fall dramatically. They are already under pressure.

Belarus is very unhappy with this development, but industry experts suggested that this arrest will only push the two sides further apart. It is the most dramatic political intervention in the potash business since Canada rejected the takeover bid for Potash Corp. of Saskatchewan Inc. in 2010. “It is certainly a bizarre development. You’ve got to think Russia and [President] Vladimir Putin will respond,” said Joel Jackson, an analyst at BMO Capital Markets.

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The Great Potash Power Play – by Gabe Collins (The Diplomat – August 23, 2013)

http://thediplomat.com/

Potash is perhaps the world’s most strategic fertilizer. Mineable deposits are concentrated in a handful of countries, it cannot be synthesized, and crop yields suffer badly without it.

Russia-based Uralkali, the world’s largest potash producer, turned the global potash market on its head when it announced in late July 2013 it would market potash independently and stop selling through the Belarus Potash Company (“BPC”) marketing structure it previously used to coordinate exports and production.

Prior to Uralkali’s move, two major global marketers—BPC and Canada’s Canpotex—controlled around 70% of potash volume traded worldwide, which helped constrain supply and keep prices high.

Uralkali aims to boost its market share in China, where it is estimated that each 10 kilos of pork consumed requires 1 kilo of potash to produce, since Chinese pigs are increasingly fed with potash-hungry corn and soybeans. Similarly, every 44kg of rice eaten in China is thought to require 1 kg of potash to grow, with application intensity likely to rise in the year to come as China runs short of arable land and seeks to produce more grain from a static land area. Uralkali exported approximately 2 million tons of potash to China in 2012—primarily by rail—and now wants to increase this to 2.5 million tons per year, approximately 22% of China’s forecast 2013 potash demand.

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B.C. mining companies digging up rage abroad – by Paul Luke (The Province – August 17, 2013)

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

Vancouver’s Eldorado Gold stayed calm in the face of rage triggered by the mine it’s building in Greece.  The company didn’t expect everyone in Aristotle’s birthplace in northeastern Greece would ­shower it with love. It knew that protests against everything from austerity to a U.S. pizza chain’s hiring policies are common in a region with a 35-per-cent jobless rate.

Eldorado’s gold project has the support of 12 of 16 villages in the area. It has a crucial environmental permit from the central government to start production at Skouries.  Opponents say the Skouries mine will trash the environment. ­Eldorado has offered detailed ­reassurances that it won’t.

Protesters say the mine will ruin the region’s tourism industry. “It’s not a big tourism area at all,” Eldorado spokeswoman Nancy Woo says.  But in the wee hours of Feb. 17, mine opponents went too far. About 50 people stormed the mine site, assaulted two Greek security guards and torched construction offices, trucks and heavy equipment.

“We fully condemn any activities that put the safety of our ­employees, contractors and assets at risk,” Eldorado CEO Paul Wright said in deploring the violence. 

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Potash: growth market in a changing economy – by Emma Rowley (The Telegraph – August 17, 2013)

http://www.telegraph.co.uk/ 

Investors are betting big on fertiliser amid soaring global demand for crops.

Nearly half a kilometre under a nondescript industrial site in the Russian region of Perm, machines are gobbling up rock. Boring through the Earth’s crust, their teeth leave great whorls scraped on the freshly-dug walls, striated pink and white.

Throughout the vast web of tunnels that expands day by day, conveyor belts carry tonnes of ore to a cathedral-sized underground warehouse before the rock is taken to the surface.

These underground stores represent the fruits of an industry many believe could be of huge importance to the world economy in years to come. The piled pyramids are rich in potassium salts and, through simple processing, will be used as the fertiliser potash, the name given to these salts.

The company behind the mine, Uralkali, is far from a household name. Yet, last year it was the world’s biggest potash producer, with 9.1m tonnes. 

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Europe’s slowdown forces Finland to turn to Russia again – by Jussi Rosendahl (Reuters India – August 12, 2013)

http://in.reuters.com/

HELSINKI, Aug 11 (Reuters) – After decades of pursuing trade with western Europe, Finland is becoming dependent on Russia again as that country’s burgeoning middle class and wealthy investors provide opportunities for growth lacking in recession-hit Europe.

While some Finns still view their eastern neighbour and former ruler with suspicion, expectations of only a slow European recovery mean more businesses are likely to embrace closer ties with Russia, signalling a readjustment after two decades of close commercial relations with Europe.

Recent trade data show a shift has already begun. Finnish exports to the rest of the European Union fell 4 percent year-on-year in the first five months of 2013, while those to Russia rose 4 percent.

Judging from second-quarter corporate results, which showed a wide range of companies hit by uncertainty in Europe, Finland may become even more dependent on Russia. Top companies such as retailer Kesko and department store chain Stockmann have cited Russia as their strongest card.

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Potash earthquake – (Northern Miner Editorial – Aug 12 – 18, 2013)

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

Like a sudden Saskatchewan thunderstorm, the potash market surprised everyone yet again with its capacity for drama and destruction, as everyone learned just how important the Russian-Belarusian potash cartel had been all this time in supporting the potash market to the benefit of Western producers and juniors alike.

As detailed in these pages, the major North American potash producers and their investors were side-swiped by news in late July that Russia’s Uralkali was leaving the BPC potash cartel it had created with Belarusalkali as a Slavic twin to the long-standing North American cartel Canpotex run by Potashcorp, Agrium and Mosaic.

Uralkali is already the world’s largest and lowest-cost potash producer, and is now vowing to ramp up production and accept lower prices in order to capture new Asian markets.  In retrospect, the fact that two Russian billionaires unloaded their substantial shareholdings in Uralkali in the weeks leading up to the announcement was a sign something was afoot. (Though, for some reason, we’re not expecting any insider trading investigations to get underway in Moscow any time soon.)

North American juniors in the potash space have always had a tough time, given that potash projects are so vast in cost and scope that developing them on their own is never a realistic option.

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Down with [potash] cartels, comrade – by William Watson (National Post – August 1, 2013)

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

The hungry of the world, who clearly would benefit from a 25% lower price of a key fertilizer, shouldn’t count their cheaper meals before they’re grown

Belarus’s President Alexander Lukashenko, Europe’s last remaining dictator, seems an unlikely devotee of Adam Smith. Yet his Decree Number 566 last December — decrees are a large part of his leadership style — is what so annoyed his Russian partners in the Eurasian half of the world potash cartel that they announced Tuesday they would be letting their exports rip, as they claim the Belarussians have already done in sales to China and India.

The other third of this Putin-Lukashenko troika is, ahem, us. We run the North American half of the cartel through Canpotex, the Saskatchewan potash export consortium formed in 1972, just about the time in fact that we were also putting together domestic cartels over milk, cheese, eggs and poultry. Trudeau times, recall, were managed-economy times.

The consensus view seems to be that this jolt of Smithian competition into the long-cartelized world market will bring potash prices down from above US$400/tonne to something more like US$300.

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Analysis: Poland to get dirtier as it leans towards lignite coal – by Agnieszka Barteczko and Henning Gloystein (Reuters India – July 31, 2013)

http://in.reuters.com/

WARSAW/LONDON – (Reuters) – Poland, one of the heaviest polluters in Europe, will become even dirtier now that its shale gas ambitions have faded and it turns to cheap domestic lignite coal to secure its energy supply.

Poland already relies on coal to produce more than 90 percent of its electricity and is home to the European installation that emits the most carbon dioxide – utility PGE’s lignite power plant in Belchatow.

Its choice of fuel now could determine its energy and environmental situation for decades to come, given that Poland needs to build new power stations to replace ageing plants and cope with future demand as its power system operates close to capacity.

The government and utilities, encouraged by firm popular support, are looking to domestic lignite reserves as a cheap way to fuel that new capacity and reduce imports of Russian gas.

“Looking at Poland’s limited reserves of gas and oil, lignite coal has to be perceived as the stabilizing factor for Poland’s energy safety,” Poland’s economy ministry said in an email, adding Poland’s lignite reserves will last for 200 to 300 years.

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‘The end of the potash world as we know it’ is no exaggeration – by Peter Koven (National Post – July 31, 2013)

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

For the potash industry, this would change everything.

If Russian producer OAO Uralkali follows through on its plan to max out production and collapse one of the sector’s two trading arms, the industry’s oligopoly-like business model is thrown out the window.

The days in which the potash producers withheld production to maintain pricing influence could break down completely. Instead, experts said the stage would be set for a dramatic battle for market share, with the companies running at much higher production capacity and selling far more product. Higher supply would mean lower prices, greater competition and a culling of higher-cost producers and eager new entrants.

In short, the potash business would start to resemble a normal commodity business. BMO analyst Joel Jackson called it “the end of the potash world as we know it,” which is no exaggeration.

Markets were rattled at that prospect. Shares of every potash producer in the world plunged on Tuesday as investors absorbed the idea of global prices falling by US$100 a tonne or more.

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The heavy price of Greek gold – by Jim Wickens (The Independent – July 21, 2013)

http://www.independent.co.uk/

The birthplace of Aristotle is being laid waste by a vast mining project, opening a rift in a cash-strapped society

This article was reported in partnership with the Investigative Fund at the Nation Institute. Shadowed by security guards who film his every move, Giannis Verginis gazes out over the slope of Mt Kakavos, listening to the whining of chainsaws in the valley below.

“We used to come to this area with my family and children,” says Mr Verginis. “Up until a few months ago it was a beautiful place and we used to have fun. Now the entire area is deforested and if my children were here they would cry seeing this.”

The large-scale clearance on this remote mountain-side in north-eastern Greece is only the preliminary part of a gold mining project green-lighted by the country’s cash-strapped government; a development that will see open-pit mines and several huge tailing dams built within a concession that spans over 31,700 hectares of ancient forest and farmland.

The peninsula of Halkidiki is the birthplace of Aristotle, a timeless landscape where bee hives stand amidst flowering gorse bushes, overlooking the glistening ripples of the Mediterranean sea.

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UPDATE 2-Atlas Copco to shed more jobs as mining slump deepens – Niklas Pollard and Helena Soderpalm (Reuters U.K. – July 18, 2013)

http://uk.reuters.com/

STOCKHOLM, July 18 (Reuters) – Engineering group Atlas Copco announced more job losses on Thursday as spending cuts across the mining industry hit demand for its trademark drill rigs and loaders and raised worries the sector’s downturn may have further to run.

Robust activity in services and industrial equipment stemmed a fall in group profit and orders but the company forecast that demand for mining gear would slip further in the near term.

Mining is suffering a hangover from years of booming expansion and has slashed capital spending as softer prices for commodities such as coal, copper and gold have raise doubts about future investment returns.

The likes of BHP Billiton and Rio Tinto have cut billions of dollars from outlays. For Atlas Copco and its cross-town rival Sandvik, which together supply more than half the global market for underground mining gear, this has brought a sharp drop-off in equipment orders though a thriving services business has cushioned the blows.

Unlike Sandvik, which is due to report on Friday, Atlas’s single biggest mining exposure – around one third – is to gold whose price has slid more than 20 percent since year-end.

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[KGHM] Ajax trolling city for ideas on convincing residents – by Bronwen Scott (Kamloops This Week – July 16, 2013)

http://www.kamloopsthisweek.com/

The recent KGHM Ajax survey (‘Yes, that phone poll was from KGHM Ajax,’ July 11) appears to be aimed at trolling the public for ideas on how the company can convince Kamloops residents its proposed open-pit copper and gold mine could be environmentally friendly.

At least, that’s the impression when the company’s pollsters terminate the survey if respondents don’t agree that mining is an “essential part of the Kamloops economy” and only bother interviewing potential allies.

In fact, KGHM Ajax admits the survey wasn’t designed to find any statistical information or quantitative results. It’s just casting a wide net in the hopes of getting “an overall perspective and understanding of the [mining-friendly] residents’ opinion towards mining.”

The in-house team at KGHM Ajax doesn’t seem to be doing a credible job of informing or persuading a decent majority of the public that the mine’s a good idea — and good PR firms are expensive.

So, while we’re all forced to wait patiently and asked to withhold judgment until KGHM Ajax releases its meters-high stack of information and intentions this fall, the company keeps throwing money at community organizations and conducting surveys of the converted.

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Troubles at Northland Resources deter Nordic mining investment – by Silvia Antonioli and Simon Johnson (Reuters India – July 16, 2013)

http://in.reuters.com/

LONDON/STOCKHOLM, July 16 (Reuters) – A financial crunch at iron ore miner Northland Resources demonstrates the impact of metal price falls on small-scale mine exploration in the Nordic region and is scaring away already rattled investors.

The sector had been flourishing since the mid-2000s, drawing in foreign and domestic companies and investment, until the price falls of the last two years in iron, base metals such as nickel, and more recently in gold. The reversal in fortunes was driven home when the Swedish unit of Norway-listed Northland Resources, one of the region’s best-known new iron ore miners, filed for bankruptcy protection in February.

In January it revealed a $425 million funding shortfall, about four times its then market capitalisation, to cover higher than expected capital and operating costs for its Swedish mine. Small Nordic miners and explorers found their efforts to raise funds suddenly got much harder, threatening to cause serious delays or even halt some projects completely.

“It doesn’t help at all. It certainly affects local confidence, adding to the lack of confidence worldwide across the industry in terms of return of capital,” Michael Hudson, the CEO and President of Mawson Resources, a Canadian firm operating in Sweden and Finland, said of Northland’s difficulties.

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The History of KGHM International Ltd.

 

This historical overview is from the 2013 KGHM International Corporate Social Responsibility Report, click here: http://www.kghm.com/files/doc_downloads/WEB_KGHM%20CSR%202013%20English.pdf

KGHM International Ltd. is a wholly owned subsidiary of KGHM Polska Miedź S.A., the 7th largest copper producer and the largest silver producer in the world based in Lubin, Poland. The KGHM International story is one of rapid growth, from a junior mining company to a global industry player.

The Early Years

KGHM International, formerly known as Quadra FNX Mining Ltd. (“Quadra FNX”), was formed as the result of a merger between two equals: Quadra Mining Ltd. (“Quadra”) and FNX Mining Company Inc. (“FNX”). Both were incorporated in 2002, and later listed on the Toronto Stock Exchange, with the goal of becoming mid-tier base-metal producers.

The Quadra strategy: to grow through acquisitions

Quadra acquired its first asset, the Robinson Mine located near Ely, Nevada, in April 2004 and restarted production in December 2004. Quadra continued to grow through a series of acquisitions; in 2004, the company acquired the Sierra Gorda property in Chile through option agreements, and in 2005, added the Carlota Project near Globe, Arizona to its portfolio of assets.

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Romania eyes 78 pct of revenues from delayed gold mine project – by Luiza Ilie (Reuters U.S. – July 11, 2013)

http://www.reuters.com/

BUCHAREST, July 11 (Reuters) – Romania aims to bank as much as 78 percent of revenues from Europe’s biggest open cast mine being developed by Canada’s Gabriel Resources and will finish renegotiating terms of the long-delayed project by September.

Gabriel controls the project which aims to use cyanide to mine for a total 314 tonnes of gold and 1,600 tonnes of silver among a cluster of villages in the Carpathian mountains, known as Rosia Montana. It owns 80 percent in local unit Rosia Montana Gold Corporation (RMGC) with the Romanian government holding the rest.

The mine has been stuck in limbo for years, waiting for a key environmental permit, but Prime Minister Victor Ponta promised his cabinet will ask parliament to vote on whether to give the 14-year-old plan the green light in the fall.

On Thursday, the government said it aims to secure larger benefits for Romania from its natural resources, including “a bigger stake and higher royalty taxes on gold resources,” according to the national infrastructure ministry. “The government is renegotiating the Rosia Montana project in its entirety to ensure Romania gets maximum and fair benefits,” the ministry said. “We will get … 78 percent of what revenues the project generates.”

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