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Iamgold CEO committed to low-grade gold – by Allison Martell (Reuters U.S. – October 3, 2013)

http://www.reuters.com/

Oct 2 (Reuters) – Stephen Letwin is a man of conviction. The chief executive of mid-tier gold miner Iamgold Corp believes low-grade deposits are the future, whether the industry is ready or not.

With prices down and higher costs cutting into margins – already slim at many low-grade mines – explorers that once boasted about the size of their deposits are now wooing investors with tales of high-grade zones.

But Letwin, who was touting low-grade gold last year, before spot prices dropped more than 20 percent, sees no reason to change his tune. “I don’t care who you are – we are all migrating to lower grade,” he said in an interview. “It’s just a fact of life.”

Iamgold’s operations in Africa and South America have relatively low concentrations of gold. At the Rosebel mine in Suriname, for example, the reserve grade is one gram per tonne.

That is not far off the average reserve grades of the senior producers, but unlike some of those companies’ mines, Rosebel and Iamgold’s Essakane mine in Burkina Faso do not produce silver, copper or other valuable minerals that are often recovered with gold.

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Alaska’s Zombie Gold Mine to Nowhere – by James Greiff (Bloomberg News – October 1, 2013)

http://www.bloomberg.com/

James Greiff is a Bloomberg View editorial board member.

What happens when the main financial backer pulls out of a project? The answer is usually clear: The deal fails, which is what the foes of a gigantic gold and copper mine in Alaska are counting on. But in this case the mine has only been dealt a setback and is far from dead.

That about sums up the state of play after last month’s announcement by Anglo American Plc that it would pull out of a partnership that planned to build what’s known as Pebble Mine, proposed for the Bristol Bay region of southwest Alaska. If the mine were developed, it would be the biggest of its type in North America — and located on the headwaters of rivers flowing into the world’s most productive salmon fishery.

Environmentalists, the commercial salmon industry and local indigenous tribes were ecstatic, as one might expect. They had argued — no doubt correctly — that the mine couldn’t be safely developed without damaging the salmon fishery, and they waged a savvy campaign that no doubt raised the stakes for Anglo American.

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Rio Replacing Train Drivers Paid Like U.S. Surgeons – by Elisabeth Behrmann (Bloomberg News – October 3, 2013)

http://www.bloomberg.com/

Train drivers employed by Rio Tinto Group to haul iron ore across Australia’s outback make about the same money as surgeons in the U.S. It’s little wonder the mining company will replace them with robot locomotives.

The 400-plus workers in the remote Pilbara region who earn about A$240,000 ($224,000) a year probably are the highest-paid train drivers in the world, according to U.K.-based transport historian Christian Wolmar. Australia’s decade-long mining boom has sucked up skilled workers, raising wages for engineers to drivers at Rio, the second-largest exporter of the mineral, and its closest competitors, Vale SA (VALE) and BHP Billiton Ltd.

he three companies that control about 59 percent of the $145 billion-a-year global iron ore trade are automating to bolster margins and squeeze out extra capacity as they boost supply to a record to feed steel mills in China, the biggest buyer. The push by Rio (RIO), which aims to move about 290 million metric tons on its rail network by next year, is expected to be the biggest driver for cost cuts in its iron ore unit after currency swings, according to Deutsche Bank AG.

“All producers are chasing better margins and stronger returns,” said Chris Drew, an analyst in Sydney with Royal Bank of Canada.

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The X factor – how well timed is Davis’ return to mining? – by Lawrence Williams (Mineweb.com – October 3, 2013)

http://www.mineweb.com/

Former Xstrata CEO, Mick Davis, has raised $1 billion towards what appears to be his aim of creating a new major diversified mining company from scratch.

LONDON (MINEWEB) – Given the low commodity prices currently facing the sector, Mick Davis, former highly successful dealmaking CEO of Xstrata, could well have picked the perfect time to start a new company.

On Monday, Davis announced his return and, importantly, that he has already raised $1 billion with which he hopes to become a major player in the diversified mining sector – in short birthing another Xstrata (he has even named his new company X2 Resources). Buying when prices are depressed would seem to be the ideal time for a well-funded entity to enter the market, provided prices don’t fall too much further.

But even if commodity prices do fall further, the downside is probably relatively low given the extent of the fall to date, which has left companies really focusing on savings and cost cutting which should leave them in a far better position to weather any continuing storm. And in setting up a new major mining company you don’t invest for the short term anyway, but look for long term growth – and the depths of a market downturn are obviously the best time to do this.

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Appetite for Destruction – by Damien Ma and William Adams (Foreign Policy Magazine – October 1, 2013)

http://www.foreignpolicy.com/

Why feeding China’s 1.3 billion people could leave the rest of the world hungry.

On Aug. 20, the Australian mining giant BHP Billiton announced that it will pump nearly $3 billion into developing a deposit of Canadian potash, a mineral used in the manufacture of fertilizer destined for farms fields across the world. And in late September, Chinese pork producer Shuanghui officially purchased Smithfield Foods in the largest Chinese acquisition ever made in the United States. The companies’ investments are both decisions that speak to a vote of confidence in global food consumption growth over the next decade — and nowhere will bellies be filling up faster than in China.

For three decades, resource-intensive manufacturing fueled China’s spectacular economic rise. By 2012, the country was consuming nearly half of the world’s coal and producing 46 percent of its steel, 43 percent of its aluminum, and about 60 percent of its cement. The Chinese economy has slowed in 2013 in part because of the government’s recognition that such a resource-intensive growth model has become unsustainable.

As a result, Beijing is trying to rebalance away from exports and investments and toward domestic consumption. Companies like BHP Billiton are betting that China’s rebalancing will spur rapid growth in demand for food and the inputs needed to produce it.

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Wanted by the taxman: Indonesia’s $5 billion of lost coal – by Fergus Jensen (Reuters U.S. – October 1, 2013)

http://www.reuters.com/

JAKARTA – (Reuters) – Indonesia may be the world’s top exporter of thermal coal, but that masks an embarrassing fact for a government scrambling to raise revenue – more than $5 billion worth of the fuel is mined illegally and goes untaxed each year.

Export and consumption data shows Indonesia produces around 12-15 percent more coal annually than the ministry of energy and mineral resources reports. That’s enough to supply Taiwan, the world’s fifth-largest coal importer, for a year.

The $460 million of lost tax revenue that industry officials estimate this represents would provide Jakarta, which is considering roughly doubling royalties paid by coal producers, with some of the funds it needs to redress its budget deficit.

The gap between recorded and actual output has also attracted the attention of Indonesia’s top anti-graft agency the Corruption Eradication Commission (KPK).

A combination of export data from the Bureau of Statistics, using customs information, and consumption data from state electricity utility Perusahaan Listrik Negara PLNEG.UL, shows Indonesia’s total coal output at 451.9 million tons in 2012.

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China’s Xi to give first speech by foreign leader to Indonesia parliament – by Kanupriya Kapoor and Yayat Supriatna (Reuters India – October 2, 2013)

http://in.reuters.com/

JAKARTA – Oct 2 (Reuters) – Chinese President Xi Jinping will on Thursday become the first foreign leader to address Indonesia’s parliament, signalling a push by the Asian economic powerhouses to expand relations that were for decades frozen in hostility.

Xi arrived in Jakarta on a state visit on Wednesday, his first official visit to Southeast Asia’s biggest economy and the world’s third most populous country. He will oversee the signing of a range of contracts, several of them focused on tapping the huge Indonesian resource sector to help feed the voracious Chinese economy.

A day before his arrival, China agreed a currency swap deal for the equivalent of $15 billion, to help Indonesia if its ailing currency comes under any more attacks. It has fallen more than 16 percent this year.

The urge to improve ties is in sharp contrast with the mid-1960s when Indonesia broke off relations with China, accusing it of backing an abortive coup it blamed on Indonesia’s communist party, then the third largest in the world.

So bitter was the split, that until 1990 when the two resumed diplomatic ties, Indonesia effectively banned anything from China, and its nationals from going to China.

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The Dragons Enter: Chinese Mining Companies Shake the World of Sustainability – by Joseph Kirschke (Engineering and Mining Journal – September 16, 2013)

http://www.e-mj.com/

Six years ago, an advance team preparing for then-Chinese President Hu Jintao’s state visit to Zambia, Africa’s leading copper producer, made an unpleasant discovery: Mass protests awaited his groundbreaking event at the Cambeshi copper mine where Hu would announce the commissioning of a $200-million smelter.

Despite China Non-Ferrous Metals Corp.’s (CNMC) $130 million contribution to its rehabilitation, one of Zambia’s largest mines was also among its most controversial: Six workers, officials learned, were gunned down by Chinese managers there the year before and 50 workers died in a plant explosion in 2005; it had since ballooned into a nationwide political scandal. Pledges of $800 million in new investment aside, the damage was done: Hu’s movements were restricted to the capital, Lusaka.

When it comes to Chinese outward mining investment, such scenarios are emblematic of a worldwide trend. Chinese miners have been scouring the planet for decades. But with ramped-up industrialization beginning in 2000, unbridled access to state capital, few shareholder pressures and little CSR to speak of, moreover, they often leave many more responsible, transparent Western companies behind in the global commodities race.

Chinese miners do have their work cut out for them: with 10 cities with populations topping 10 million, the Chinese mainland is facing shortfalls in nearly all essential mineral commodities needed to fuel its spastic economic growth rate—especially copper, iron ore, bauxite, aluminum, uranium and magnesium.

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Ex-Xstrata CEO Davis Raises $1 Billion From Noble, TPG – by Firat Kayakiran (Bloomberg News – September 30, 2013)

http://www.bloomberg.com/

Mick Davis, former chief executive officer of Xstrata Plc, raised $1 billion from Noble Group (NOBL) and private-equity fund TPG to start a resources company.

Noble, Asia’s largest raw-materials trader, and TPG agreed to each invest $500 million in the new company X2 Resources, according to a statement today from X2 Partners, founded by Davis and former Xstrata Chief Financial Officer Trevor Reid.

X2, also in talks with other potential investors, will use the funds to start a diversified mining and metals group. Davis, 55, and Reid, 52, were part of the team that set up Xstrata, a company that grew 100-fold to a market value of about $50 billion after 10 years of mergers, acquisitions and expansion.

“This is a great time to acquire assets in the mining sector,” said John Meyer, an analyst at London-based SP Angel Corporate Finance LLP. “The majors continue to offer sub-scale assets, including some better quality but smaller operations as they refocus on their larger cash generators.

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Steel firm Outokumpu should help itself: Finland’s state fund – by Jussi Rosendahl (Reuters U.S. – September 30, 2013)

http://www.reuters.com/

HELSINKI – (Reuters) – Steel company Outokumpu (OUT1V.HE) should try to solve its own problems even though its heavy debts have raised the prospect it might need more money from shareholders at some stage, the head of Finland’s state investment fund Solidium said.

While Finland is often listed among the most innovative economies and remains triple-A rated, government funding is still badly needed in the country of 5.4 million people which has a limited pool of private capital. Kari Jarvinen, Solidium’s managing director, told the Reuters Nordic Investment Summit that the fund was making its long-term investment decisions independent of political pressure to help out troubled Finnish companies.

“It is better that the company tries to sort out its problems by itself. The company already had a 1 billion (euros) rights issue only one-and-a-half years ago,” Jarvinen said when asked about Outokumpu’s finances. “It is paramount that these companies find ways to be profitable in the future.”

Solidium holds stakes worth in total 7.7 billion euros in 11 Finnish listed companies including paper maker Stora Enso (STERV.HE) and investment and insurance group Sampo (SAMAS.HE).

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Australian tycoon Rinehart wants to end family feud to focus on business – by James Regan (Reuters India – October 1, 2013)

http://in.reuters.com/

SYDNEY, Oct 1 (Reuters) – Australian mining magnate Gina Rinehart, one of the world’s richest women, wants to relinquish control over a $4 billion family trust, after several years of legal wrangling with her children over who gets what and when.

Lawyers for Rinehart, 59, told a court that the legal battle with two of her four children, which has been played out in public and captivated Australia, had placed huge pressure on their client but was now “effectively over”.

Bruce McClintock, one of Rinehart’s lawyers, said the two-year legal fight between the tycoon and her children, John Hancock and Bianca Hope Rinehart, had created “untenable risk” of damage to Hancock Prospecting Group, the mining company established by her late father and the source of her wealth.

“The increased demands on her time in dealing with the … plaintiff’s issues has taken valuable time away from her responsibilities,” he told the New South Wales Supreme Court.

Hancock Prospecting is in the midst of funding negotiations to develop a $10-billion dollar iron ore project in Australia. Rinehart nor her children attended the hearing.

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Silicosis claims and the gold mines: To settle or not? – by Sarah Evans (Mail and Guardian – October 1, 2013)

http://mg.co.za/ [South Africa]

A recent settlement between miners and Anglo American could be a precedent as the gold industry prepares for a looming silicosis class action suit.

Despite being a landmark case, the confidential nature of a recent settlement between Anglo American and silicosis sufferers means there is little legal precedent for future cases, at least in terms of financial compensation.

But the agreement has other implications: as the number of silicosis damages claims against the gold mining industry piles up, and in the face of a looming class action suit, out-of-court settlements could become the norm as mining companies try to avoid bank-breaking court rulings.

In the weeks to follow, the high court in Johannesburg will decide whether to collate three class action claims against 30 of South Africa’s gold mines.

This comes on the back of a landmark settlement between Anglo American and 23 silicosis sufferers, seven of whom died waiting for the case to be finalised. Their claim was instituted in 2004 and was due to go to arbitration in 2014.

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Why Miners Walked Away From the Planet’s Richest Undeveloped Gold Deposit – by Brad Wieners (Bloomberg Business Week – September 27, 2013)

http://www.businessweek.com/

Before pulling out of the Pebble Mine project last week, Anglo American (AAUKY), one of the world’s biggest mining companies, had invested six years and at least $541 million—in a partnership with Vancouver-based Northern Dynasty Minerals (NAK)—to develop the site in southwestern Alaska. Wait, pause on that number for a sec: $541 million.

That’s right, the London-based multinational and its U.S. subsidiary (AA Pebble) just forfeited a return on more than half a billion dollars of its shareholders’ money. By the end of its 60-day withdrawal from the project (mid-November), that figure will probably end up closer to $580 million. Anglo American has also indicated it will write down a $300 million loss (misreported as a “penalty” elsewhere) to remove the proposed mine as an asset from its books.

Although a far smaller player, Northern Dynasty will soon own 100 percent of the project, thought to be worth $300 billion or more, and vows to carry on. Having completed more than a million feet of exploratory, diamond-core drilling in 1,200 holes, the former partners also amassed a 27,000-page study of the terrain, but had not begun the formal permitting process. In fact, Northern Dynasty has plowed $180 million into Pebble since it first secured the rights to the region in 2001.

Huge mining consortiums frequently seed nine-figure projects, but $760 million-plus is still a large sum, so why did Anglo American bail now?

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Newmont bids for Las Bambas to beef up copper assets – CEO Goldberg – by Dorothy Kosich (Mineweb.com – October 1, 2013)

http://www.mineweb.com/

Newmont, which began as a copper-gold miner in the early 1900s, is seeking to increase its copper mining operations as “pure gold plays” appear to be losing favor with investors.

RENO (MINEWEB) – In seeking to increase its copper holdings, Newmont Mining is apparently returning to its historic copper roots under the leadership of new CEO Gary Goldberg, a former copper mining executive for Kennecott Utah and Rio Tinto.

In an interview with the Financial Times published Monday, Goldberg said the company had expressed interest in the hotly sought after Las Bambas copper project in Peru. Mineweb was told of Newmont’s potential Las Bambas acquisition by a former top Newmont executive at last week’s Denver Gold Forum in Denver.

Newmont Founder, William Boyce Thompson, accumulated a large fortune by buying undervalued copper and gold claims through Newmont Mining. By the 1940s Newmont would become one of the world’s largest copper producers, eventually becoming a major shareholder in Magma Copper, which would be acquired by Australian uber miner BHP in the mid-1990s. By the 1960s, the company’s Carlin Trend discovered in northeastern Nevada would issue a new era for Newmont as a gold producer.

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U.S. Coal Companies Scale Back Export Goals – by Clifford Krauss (New York Times – September 13, 2013)

http://www.nytimes.com/

HOUSTON — The ailing American coal industry, which has pinned its hopes on exports to counter a declining market at home, is scaling back its ambitions as demand from abroad starts to ebb as well.

Just south of here, New Elk Coal terminated its lease late last month at the Port of Corpus Christi, where it had hoped to export coal to Brazil, Europe and Asia. Two days later, when the federal government tried to auction off a two-square-mile tract of land in Wyoming’s Powder River basin, a region once poised to grow with exports to Asia, not a single coal company made a bid.

They were the latest signs that a global coal glut and price slump, along with persistent environmental opposition, are reducing the likelihood that additional exports could shield the industry from slipping domestic demand caused by cheap natural gas and mounting regulations.

United States coal exports this year are expected to decline by roughly 5 percent from last year’s record exports of 125 million tons, and many experts predict the decline will quicken next year. At the beginning of 2012, the coal industry had plans to expand port capacity by an additional 185 million tons. But those hopes have faded this year.

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