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Gold and Silver

Inglorious writedowns: Gold sector’s bad bets wiping out lifetime earnings — and investor confidence – by Peter Koven (National Post – January 14, 2015)

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

TORONTO – Goldcorp Inc. could soon join an inglorious group: large gold miners that have a net loss to show for their entire history as corporate entities.

The Vancouver-based company warned this week that it expects to record an impairment charge of US$2.3 billion to US$2.7 billion on its Cerro Negro mine in Argentina. Given that Goldcorp’s retained earnings were US$2.2 billion as of Sept. 30, they may be completely wiped out in its next quarterly report.

That would not be unusual in the gold industry, where writedowns have destroyed historic profits in recent years. Barrick Gold Corp. has retained earnings of negative US$7.8 billion, while Kinross Gold Corp. is at minus US$8.5 billion. AngloGold Ashanti Ltd. has a US$4 billion historic loss, while Agnico Eagle Mines Ltd. has a slimmer loss of US$740 million.

These companies have highly profitable operations that continue to perform well in a tough gold market. But they paid the price for taking risky bets that backfired and crushed shareholder value when gold prices dropped.

“It matters when you write off more than you ever earned,” said John Tumazos, an independent analyst. “The message is these particular companies were reckless and irresponsible with their shareholders’ capital.”

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Gold bulls – beware of Greeks bearing gifts! – by Lawrence Williams (Mineweb.com – January 13, 2015)

 http://www.mineweb.com/

The prospect of a Syriza victory in the Greek elections next week has been gold price supportive, but beware – it’s not a foregone conclusion.

Some of the recent positive action in the gold price has been due to fear of a Syriza win in the Greek election next week and a possible new government’s potential for cutting imposed austerity measures, defaulting on its financial commitments and, ultimately, for the country being forced out of the Eurozone. It would be the first Eurozone domino to fall and there are worries that if Greece goes, others may follow.

The attractions of the monetary flexibility of utilising one’s own currency rather than being forced to work with a currency, the Euro, the value of which is largely controlled by nations with much bigger, and more stable, economies, is strong regardless of the actual costs incurred in making the change – which would be enormous.

For a country like Greece with its enormous tourist industry, a weaker currency – probably far weaker if it should exit the Euro – could give this very significant sector an enormous boost, albeit hugely increasing the cost of imports at the same time.

Investors seem to be assuming that Alexis Tsipras’ Syriza party will win the election, but it is only perhaps 3-5% ahead of Antonis Samaras’ New Democracy party – the party of the ruling government, although the latter has only been able to rule in coalition with the much smaller Pasok party.

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Goldcorp Inc warns of massive writedown of up to US$2.7B on Argentina mine – by Peter Koven (National Post – January 13, 2015)

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

Goldcorp Inc. expects to record a massive writedown of up to US$2.7 billion on its new Cerro Negro mine in Argentina due to ongoing political and economic challenges in that country.

The Argentine government has made life extremely difficult on foreign mining companies by restricting the imports of goods and services and implementing exchange rate controls that limit companies’ ability to convert Argentine pesos into U.S. dollars. Inflation is also very high; Goldcorp previously said that every time it brings a dollar into Argentina at the official exchange rate, suppliers and contractors treat it at the “unofficial” rate, which is almost 70% higher.

The ultimate cost of the impairment, which will be reported in Goldcorp’s fourth quarter earnings, should fall between US$2.3 billion and US$2.7 billion, the Vancouver-based miner said on Monday night.

Goldcorp did not see these problems coming back in 2010, when it paid $3.6 billion to acquire the Cerro Negro project. Chief executive Chuck Jeannes has said that he expects the challenges to gradually fade over time. Construction costs at Cerro Negro ran far over budget, but the mine finally reached commercial production at the start of January. It is expected to be a major cash flow generator for Goldcorp, with production of up to 475,000 ounces this year.

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Lake Shore exceeds its gold production targets – by Staff (Timmins Daily Press – January 13, 2015)

The Daily Press is the city of Timmins broadsheet newspaper.

TIMMINS – Lake Shore Gold in Timmins reports that gold production in 2014 exceeded the yearly target by a significant amount.

The company said it had set a target range of 160,000 to 180,000 ounces of gold for 2014. As it turned out, 186,500 ounces of gold were poured in during 2014, the company said in a news release. Company president Tony Makuch said a similar production target is being set for 2015.

The company said its Bell Creek mill processed 1,245,900 tonnes of ore, at an average grade of 4.8 grams per tonne. The ore was from the LSG Timmins West mining complex and the Bell Creek Mine. Of the 186,500 ounces of gold poured last year, the company reported gold sales of 183,300 ounces at an average selling price of US$1,269 per ounce (CDN $1,398 per ounce).

Production in the fourth quarter of 2014 totalled 43,200 ounces, which resulted from processing 331,400 tonnes at an average grade of 4.2 grams per tonne. The company poured 42,400 ounces during that fourth quarter, while gold sales totalled 41,200 ounces at an average selling price of US$1,200 per ounce ($1,360 per ounce).

LSG has also reported significant improvement in debt repayments as the company strives to improve its financial position, said the release.

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Bre-X lawyer’s fight in the spotlight – by Rachel Mendleson (Toronto Star – January 9, 2015)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

 Battle continues in court for man who got client acquitted after mining scandal.

The legal community is closely watching the latest round in Bre-X lawyer Joe Groia’s battle to defend himself against a controversial charge of “incivility,” which is raising fundamental questions of judicial independence and freedom of speech.

In Ontario Divisional Court on Thursday, Groia’s lawyer framed the case as an opportunity to preserve the right of all lawyers to vigorously defend their clients without fear of reprisal from an “overzealous” professional regulator.

“No lawyer wants to be the next Joe Groia,” lawyer Earl Cherniak told the panel of three judges. “Groia (has) defended his prosecution, not only for his own sake, but also in the public interest in the profession.”

The judicial review follows nearly five years of legal wrangling over charges of professional misconduct by the Law Society of Upper Canada, which took issue with Groia’s behaviour in the early stages of the insider-trading trial of former Bre-X geologist John Felderhof.

A mining company, Bre-X Minerals announced a promising find of gold in Indonesia in 1995, sending its stock price soaring. But the samples were found to be fraudulent — the largest mining fraud in Canadian history, driving the company into bankruptcy.

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Barrick Gold Corp comes under fire, cut to underperform in extensive analyst report – by Peter Koven (National Post – January 9, 2015)

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

Barrick Gold Corp. has received plenty of criticism from the investment community over the past few years, much of it deserved. But few have been as thorough and pointed as Macquarie Capital Markets analyst Ron Stewart.

Over the course of a 17-page report released Wednesday, he argued the battered stock should still be avoided, even though it has already dropped more than 70% over the past three years, and pointed to a lot of faults at Barrick: lack of growth, excess debt, poor strategic clarity, operating risk and a head office that appears to be in turmoil.

Nearly every sell-side analyst calls Toronto-based Barrick a buy or a hold. But Mr. Stewart downgraded it to underperform with a target of $11 a share, noting the company has “limited options” to repair its balance sheet and needs more time to regain investor confidence.

“Miners are known for their ability to dig holes; big miners dig big ones,” he said in the report. “Barrick, the biggest gold miner on the planet, however has dug itself into a huge financial hole that is going to be difficult to get out of any time soon unless metal prices improve.”

Of course, he noted the company’s two biggest errors of the last few years: the botched construction of the Pascua-Lama project in South America and the $7.3-billion purchase of the Lumwana mine, which is set to be shuttered because of a massive royalty hike in Zambia.

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The Klondike Gold Rush debuts Jan. 6 on PBS – by Tony Wong (Toronto Star – January 1, 2015)

http://www.pbs.org/wned/klondike-gold-rush/home/

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Documentary about Yukon gold rush in the late 1800s based in part on Charlotte Gray’s Gold Diggers.

Canadian author Charlotte Gray has mined literary gold by plumbing the history of the Klondike. Her well-reviewed 2010 book Gold Diggers: Striking It Rich in the Klondike spawned a scripted miniseries executive-produced by Ridley Scott, starring Tim Roth and Sam Shepard on the Discovery Channel. And now PBS is premiering TheKlondike Gold Rush on Tuesday, Jan. 6.

The documentary is not entirely based on Gray’s book, but the Ottawa author is featured extensively in the hour-long program, along with historians Michael Gates and Terrence Cole.

“People set off with very little clue about where they were going, they were swept up in this mass hysteria,” says Gray in the film. “The saying was that there was gold as thick as a cheese on a sandwich.”

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Researcher poses two scenarios for Nunavut gold mine closure – by David Murphy (Nunatsiaq-On-Line.ca – December 16, 2014)

http://www.nunatsiaqonline.ca/

“People are actually left with mining skills, but not with other skills once the mine closes”

The 1,800-person community of Baker Lake has less than three years to go before the Meadowbank gold mine, about 100 kilometres from the town, closes down.

Until then, questions linger about how Nunavut’s only inland hamlet can support itself afterwards, problem free.

“People said overwhelmingly that — with the mine closing in 2017 — there is very little awareness and very little preparedness for that scenario,” said Annabell Rixen, a master’s student assessing the mine closure and community preparedness as part of a project called “Tuktu.”

Rixen’s presentation was part of the four-day Arctic Change conference, hosted by ArcticNet, which unfolded Dec. 8 to Dec. 12 at the Ottawa Conference Centre. Rixen boiled her research down to two visions: a worst and best-case scenario.

The best case: job training programs are implemented to stimulate new local businesses and money is injected into mental health, childcare and cultural programming. Also, dwindling caribou numbers return to full strength.

“As the elders emphasized: let our land recover. We need to give our land the proper time to rejuvenate,” Rixen told Nunatsiaq News.

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NEWS RELEASE: Johnson Matthey sells Gold and Silver Refining business for £118 million

The business will be divested to Asahi Holdings, Inc., a collector, refiner and recycler of precious and rare metals from waste materials

15 Dec 2014 – Johnson Matthey announces that it has agreed to divest its Gold and Silver Refining business to Asahi Holdings, Inc. (Asahi), a collector, refiner and recycler of precious and rare metals from waste materials, for £118 million (US $186 million) in cash, subject to typical post-closing adjustments. The transaction is expected to be completed by the end of March 2015.

Johnson Matthey’s Gold and Silver Refining business is a refiner of primary and secondary gold and silver materials. It serves customers globally from refineries in Salt Lake City, USA and Brampton, Canada. The business also provides investment casting services from its St Catharines facility in Canada. In total, the business employs approximately 340 people.

In the financial year ended 31st March 2014 the Gold and Silver Refining business had sales excluding the value of precious metals (sales) of £44 million and for the six months ended 30th September 2014, its sales were £19 million. Its return on sales is typically
around 25%.

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Angkor Gold: A gold standard for CSR – by Joseph Kirschke (Asia Miner – December 1, 2014)

http://www.asiaminer.com/

BANTEAY, Cambodia: Accessing this village eight hours north of Phnom Penh is daunting on the best of days, not least during the rainy season. On the main artery from the capital, buses, cars and tractor-trailers alike can be seen moored in the mud, all resembling helplessly grounded ships. Another 30-minute ride can foil the hardiest off-road vehicle at the gruelling final stretch.

Visitors are greeted by barefoot children supervised by adults and elderly, listless and weathered far beyond their years amid thatched huts and stray, emaciated oxen. But beneath the surface, something remarkable is unfolding nearby a mid-sized copper-gold deposit: Canadian junior Angkor Gold Corp is fulfilling a Corporate Social Responsibility (CSR) mandate – one unprecedented for a miner its size in the region. Stakeholder engagement through Free Prior and Informed Consent (FPIC) blooms here near a rainforest clearing of peppercorn, cassava and cashew patches, and classrooms full of students.

A clean slate

History hasn’t been kind to Cambodia. Over the half decade ending in 1979, the Khmer Rouge purged the intellectual class while bringing the country to ‘zero’ for an agrarian-based communist society after a brutal US bombing campaign. In all, two million lives were lost as the world stood by in silence; memories of forced starvation, mass graves and unspeakable atrocities continue to elicit tears to this day.

But Cambodia has turned the page, with its emerging market economy and small-scale mining industry an open book. Early next year, Angkor and Mesco Gold Cambodia will begin operating one of the country’s newest commercial mines while establishing Phnom Penh’s first continuing royalty revenue stream from mining.

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NEWS RELEASE: Silver Demand for Industrial Applications Forecast to Reach Nearly 680 Million Ounces in 2018

https://www.silverinstitute.org/site/

(Washington, D.C. – December 10, 2014) Total silver industrial demand is forecast to grow 27 percent, adding an additional 142 million ounces of silver demand through 2018 compared with 2013 levels, according to a new report issued today by the Silver Institute. Half of this growth will be accounted for by the electrical and electronics sector, but additional demand will be due to growth in other industrial applications, as highlighted in the report entitled, “Glistening Particles of Industrial Silver.”

The unique properties of silver – its excellent thermal and electrical conductivity, as well as its malleability, ductility and optical reflectivity – make it indispensable in many industrial applications, from watch batteries to industrial-scale solar energy systems, according to CRU Consulting, the London-based metals consultancy and authors of the report.

Increasingly, applications for silver are being invented, discovered and, importantly, commercialized. The report outlines the potential for growth from several of the most important industrial silver applications. Increasing demand for silver in solar panels, as well as in the production of ethylene oxide, automobiles, bearings and batteries, has influenced consumers in developed and developing countries to varying degrees, with silver industrial demand shifting among key geographical locations. Increased use of silver has driven consumption growth in both China and India and the trend seems likely to continue.

Silver Consumption in Examined Industrial Sectors – 2013 and 2018F (millions of ounces)

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Investors tapped to fund gold fraud film – by Ben Bland (Financial Times – December 10, 2014)

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

Jakarta – Two of the world’s toughest mining tycoons battle it out with a star geologist, a chancer and a dictator’s children for control of one of the world’s largest gold discoveries in the heart of the Indonesian jungle, until it is exposed as a huge fraud.

The true story of Canadian company Bre-X Minerals, which collapsed in 1997 after attaining a market capitalisation of $6bn, reads like a movie script and the producer of hit film Home Alone is trying to raise $18m from mining investors to put it on the silver screen.

Malcolm Burne, a serial mining entrepreneur and former Financial Times journalist, has given Hollywood producer Scott Rosenfelt $150,000 of seed capital and together they are tapping minerals investors from Canada to Australia to fund a film about a scandal that changed the industry.

“It’s an amazing story with political and financial intrigue and thousands of people’s lives shattered as well as those who are still standing tall like Peter Munk of Barrick Gold,” says Mr Rosenfelt, who has tentatively titled the film Bre X: King for a Day.

Gold-mining companies struggled to raise money for years after the fraud, which prompted stock market regulators in Canada and Australia to bring in rules forcing miners to disclose detailed technical information about new finds.

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Waterloo-based inventor hopes to mine riches with Gold Sniffer – by Terry Pender (Waterloo Region Record – December 6, 2014)

http://www.insidehalton.com/halton/

KITCHENER — Inside a Conestoga College lab, Jim Kendall is building a device that could revolutionize mineral exploration — a camera that detects gold in rock samples.

Kendall calls it the Gold Sniffer. He co-founded a company, Kendall Technology, to bring his remarkable idea it to market. If all goes well in the coming months, the first Gold Sniffers will be ready next May and a more sophisticated version will come out next fall. Each will sell for about $55,000.

Kendall’s unique background and boundless curiosity led to his idea that a camera could be turned into a small, portable device that quickly and accurately determines if there is gold in the mineral samples collected by prospectors.

Currently, prospectors collect samples in the bush, which are then sent to an assay lab that conducts tests to confirm the presence of gold. It can take a month to get results. Between 50 and 90 per cent of the samples tested in the assay lab contain no gold.

Kendall believes the Gold Sniffer could quickly change all that. “The exploration geologist then in a couple of minutes right there on the site has the information about whether the sample has gold, how big the particles are, and the minerals associated with it,” he says.

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$4-million investment in golden property – by Len Gillis (Timmins Daily Press – December 3, 2014)

The Daily Press is the city of Timmins broadsheet newspaper.

TIMMINS – Another junior mining company is betting it has found a viable gold property in the city with a heart of gold. Gowest Gold Ltd., a firm with solid roots in Timmins, is planning to fast track an exploration program for its Bradshaw gold deposit, located about 40 kilometres north of the built up area of Timmins.

The company held an open house Monday at the McIntyre Auditorium to bring shareholders, supporters and members of the public up to speed on the work the company is planning in the coming year.

One of the first things the company has planned is to prepare the Bradshaw site to remove overburden and create a water management infrastructure. The company has also planned significantly more exploration drilling, according to company president and CEO Greg Romain, a Timmins native.

He said the company is in an enviable position of having closed a $4-million financing deal with Fortune Future Holdings Limited of China, who Romain said has demonstrated significant faith in the project.

‘First of all it is one of the newest deposits, not near an existing mine, to be found what I’ve been told since Hoyle Pond was discovered 25 years ago.

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The 2015 Metals Outlook Series: Silver, Zinc, Lead – by Cole Latimer (Australian Mining – December 2, 2014)

http://www.miningaustralia.com.au/home

The market for base metals silver, lead, and zinc is finally seeing moderate action.

The period leading to the global financial crisis saw an explosion of growth, with the sector seeing a 30.9 per cent growth in revenue followed swiftly by a 56.2 per cent growth in revenues, creating a heady market.

However once the GFC hit the bottom swiftly fell out of the market, as prices retreated quickly, and inversely, to the rest of the mining sector.

A 13.2 per cent decline was chased by another period of plummeting revenue, with the sector recording a 43.5 per cent drop in revenue. It recovered briefly in 2010 before seeing another swift fall into negative territory in 2012 before the current lift into even pricing territory.

This, more than many real­ise, had a major effect on the Australian mining landscape as the nation is the largest lead exporter and one of the largest zinc concentrate exporters worldwide. So what lies ahead for the metals?

Much of it relies on the contin-ued weakness of the Australian dollar. IBISWorld research states that overall revenues and the price of the metals are “forecast to increase over the five years through 2018/19 due to the interplay of higher output, stronger US dollar prices for silver, lead, and zinc, and a weaker Australia dollar”.

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