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The limits of Ecuador’s shakedown statism – by Peter Foster (National Post – October 24, 2014)

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

Ecuador is run by the left-wing caudillo windbag Rafael Correa, whose hero was Hugo Chavez

The great eighteenth century lexicographer and wit Samuel Johnson described second marriage as the “triumph of hope over experience.” How then might one characterize the tendency of Canadian mining companies to return again and again to the altar of commerce with foreign government partners who recall Glenn Close in Fatal Attraction?

This week, Vancouver-based Lundin Group confirmed that a subsidiary would take over the Fruta del Norte prospect in Ecuador from Toronto-based Kinross Gold Corporation for US$240 million. Ecuador is run by the left-wing caudillo windbag Rafael Correa, whose hero was Hugo Chavez, the man who turned oil-rich Venezuela into a basket case.

Mr. Correa’s preferred mode of money-raising is the shakedown. The two most spectacular examples in recent years have been an attempt, via the “Yasuni Initiative,” to blackmail the rest of the world into putting up US$3.6 billion in return for Mr. Correa (italics) not (close italics) drilling for oil in an Amazonian nature reserve; then there is a beyond-fiction trumped-up court case against California-based Chevron Corp. seeking (at last count) US$9.5 billion for alleged damage to the rainforest.

Kinross took a massive flier by buying Fruta del Norte in 2008 for $1.2 billion when Ecuador had no clear mining policy. The company’s attempt to develop FDN turned out to be the proverbial marriage from hell.

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How the Fruta del Norte project is another high-risk, high-reward gamble for Lundin Group – by Peter Koven (National Post – October 23, 2014)

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

If anyone was going to tackle the Fruta del Norte project, it would naturally be Lukas Lundin.

The Vancouver-based mining entrepreneur has never shied away from investing in the most politically challenging parts of the world. And by getting into countries including Argentina and the Democratic Republic of Congo ahead of the pack, the Lundin Group has taken hold of many world-class projects at low cost and made a fortune for its shareholders.

Fruta del Norte (FDN) fits the bill for Mr. Lundin perfectly. It is arguably the world’s best undeveloped gold deposit, with 6.8 million ounces of very high-grade reserves. It is also in Ecuador, a country that has been inhospitable for mining investment and has scared away the rest of the gold sector. As a result, the asset was available at a bargain-basement price.

“One of those things the Lundin family has done so well over so many years is [obtaining] great assets,” Ron Hochstein, chairman of Lundin shell company Fortress Minerals Corp., said in an interview. “And also having the ability to work with governments and with the population to see them through.”

Fortress announced late Tuesday it will buy FDN from Kinross Gold Corp. for US$240-million in cash and stock. Fortress will be renamed Lundin Gold Inc. and plans to use FDN as the foundation to build a significant gold producer.

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Iron ore giants win first round in global battle but knockout unlikely – by Clyde Russell (Reuters U.S. – October 23, 2014)

http://www.reuters.com/

LAUNCESTON, Australia – Oct 23 (Reuters) – There is now no doubt that the big three global iron ore miners are producing record amounts in their bid to dominate the industry. The question remains, what will happen if they succeed?

Anglo-Australian giants Rio Tinto and BHP Billiton both reported record output in their latest quarterly reports, and affirmed they were on track to boost production even further.

Top producer, Brazil’s Vale is also increasing output, with Brazilian trade figures showing iron ore exports rose 16.7 percent in September from August to 33 million tonnes.

These figures show that the output side of the plan to dominate global seaborne iron ore trade is going quite well for the big three.

In the case of BHP and Rio Tinto, they are well-placed to continue to put pressure on competitors based in their home turf of Western Australia state, as well as those in other parts of the world.

With the lowest cash costs, in the region between $20 to $30 a tonne, and plans to strip out even more costs, they can survive and prosper even if iron ore prices remain weak.

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Miner Opposition [Canadian Global Mining Sector’s Reputation] – by James Munson (iPolitics.ca – October 1, 2014)

http://www.ipolitics.ca/

Where mining and violence meet

James Munson (bitly.com/MinerOpposition) traveled to Guatemala in July to explore the stories of mines caught up in a global debate over the responsibilities of Canadian-owned mining firms in developing countries. With Canada moving toward a new policy for the sector, Munson explores how the Fenix nickel mine in eastern Guatemala became the test case for bringing allegations of murder, rape and assault tied to the mine to an Ontario court room. Meanwhile, Goldcorp Inc.’s Marlin mine in the western part of the country has been the subject of protests and findings that its operations broke human rights standards. The stories of these mines, and the people who live beside them are the starting point for Miner Opposition — http://www.bitly.com/MinerOpposition (Produced with support of the Ford Foundation)

EL ESTOR, GUATEMALA— One night this past April, while poring over legal documents at around four in the morning, Manuel Xo Cu drifted to sleep and had the dream that would save his life.

The dream involved him grabbing onto the roots of two trees to keep from sliding into a dark hole. During a bus ride the next day, he was confronted by three armed men who asked him to move to the back of the bus. He refused, recognizing the back of the bus as the dark hole, and sat beside a woman who he would later use as an excuse to get off at an earlier stop, thinking the would-be assassins could identify him with more certainty if he were to get off at his regular destination.

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Chile Seeking to Loosen Major Miners’ Grip on Idle Land – by Matt Craze (Bloomberg News – October 7, 2014)

http://www.bloomberg.com/

Chile’s government will seek talks with large-scale mining companies to make more land available for smaller mineral explorers as it seeks to expand the copper industry, the world’s largest.

Two-thirds of land with potential for discoveries is in the hands of major mining companies and vast areas under concession are lying idle, Deputy Mining Minister Ignacio Moreno told a conference in Santiago today. Chile is falling behind Mexico and Peru in capturing mining investment, he said.

“Everyone knows there is a problem that we have to take on,” Moreno said. “For the exploration companies this topic creates a lot of enthusiasm. For the majors it causes concern.”

The government will seek talks with the industry and act with “prudence” to achieve a consensus before reaching a conclusion next year, Moreno said. One proposal under study is to create a tax for land concessions that are not being explored, he said.

Chile, which produces a third of the world’s copper, says major companies including state-owned Codelco, Anglo American Plc and BHP Billiton Ltd. plan to invest more than $100 billion in new copper and gold mines.

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Mining Is Bolivia’s Second Source of Income (Telesurtv.net – October 8, 2014)

http://www.telesurtv.net/english/index.html

President Evo Morales pushed forward legislation to give the mining sector the dignity it lacked since the Spanish Colonization.

Since the Spanish colonization of America, Bolivia has been a mining country. This sector represents the second source of income, behind hydrocarbons. From 2006 to 2012, the mining industry contributed to the Bolivian economy with an average of US$201 million in taxes, according to official reports. The amount represented an increase of over 1,156 percent in regards to the period 1999-2005.

Mining also contributed US$4.8 billion to the Gross Domestic Product by 2011. The export of mining products contributed to the Bolivian economy with over US$11.2 billion between 2006 and 2011.

The Mining activity has always been a crucial source of income in Bolivia, although it had been marginalized for over 190 years. It was not until Evo Morales came to power that the sector was taken into consideration, becoming highly regarded due to the recently approved Mining and Metallurgy Law.

The law, which was the result of an important citizen consensus, replaced the pre-existent privatized norm that was tailored to privilege international investment.

The new law also gives the government constitutional authority over the management, administration and control of mineral resources in favor of the Bolivian people’s interest.

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UPDATE 1-Goldcorp’s El Morro mine halted by Chile Supreme Court (Reuters India – October 7, 2014)

http://in.reuters.com/

Oct 7 (Reuters) – Chile’s Supreme Court has halted the development of the El Morro gold and copper mine owned by Canada’s Goldcorp, saying that local indigenous groups who oppose the $3.9 billion project need to be better consulted.

The court said on Tuesday that an environmental permit awarded last year should be stopped until a fresh consultation, based on an International Labor Organization convention, has taken place with the local Diaguita community.

Goldcorp has just received the ruling and is reviewing it, spokeswoman Christine Marks said. “Goldcorp remains committed to open and transparent dialogue with its stakeholders.”

The decision is the latest in a string of rulings that have found against mining companies looking to invest in the top copper exporter. Like many of its resource-intensive Latin American peers, Chile is struggling to find a balance between mining-led growth and environmental protection.

Billions of dollars worth of projects have been put on ice or delayed in recent years, snarled up in red tape and opposed by local communities.

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Lundin bulks up on copper with purchase of Freeport mine – by Rachelle Younglai (Globe and Mail – October 7, 2014)

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.

Canada’s Lundin Mining Corp. has agreed to buy a Freeport-McMoRan Inc. copper mine for $1.8-billion (U.S.), a move that will double its production as the red metal slumps on fears of weaker Chinese demand.

Lundin’s deal to acquire 80 per cent of Freeport’s Candelaria mining complex in Chile comes at a rocky time in the mining industry. Mining giants such as Phoenix-based Freeport are trying to divest assets to pay down hefty debt loads incurred during the commodity boom.

Meanwhile, economic growth in China, the world’s largest consumer of copper and other commodities, is slowing. And big new copper mines are expected to start producing next year, which will add to an already well-supplied market and likely weigh on prices for some time.

For Lundin, however, the downturn represents a buying opportunity. The base-metals miner will fund the deal through debt and an equity financing.

Toronto-based mining royalty company Franco-Nevada Corp. will help finance the deal by paying Lundin $648-million for a stream of Candelaria’s future gold and silver production. The Candelaria complex includes an open-pit copper mine, infrastructure and the nearby Ojos del Salado underground copper mines.

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End of the Iron Age – by James Wilson and Neil Hume (Financial Times – September 29, 2014)

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

A collapse of ore prices throws miners’ strategies into doubt and threatens an industry shakeout

Iron is one of the most abundant elements on earth but pulling it out of the ground efficiently can be a daunting undertaking. Snaking through the low, green hills of southern Brazil is a 530km pipeline, the decisive link in Anglo American’s $8.2bn Minas-Rio project to extract iron ore in the Brazilian interior and ship it from a new Atlantic port. Way over its original $3.6bn budget and two years late, Minas-Rio is finally close to the point of “first ore on ship”.

For years, huge mining projects such as these have formed the backbone of global economic expansion. The world’s most important commodity after crude oil, iron ore has been devoured by Chinese steel mills, emerging as the raw material for an infrastructure-led growth spurt.

But Minas-Rio is about to deliver its first ore into a much less welcoming world. The price of iron ore has plunged more than 40 per cent this year, the worst performance across metals and bulk commodities in 2014. From an average price of $135 per tonne last year, the benchmark iron ore contract sank last week to less than $80 for the first time since the global financial crisis.

“The iron ore market is in the midst of a transition without precedent in recent commodity history,” says Macquarie, the Australian bank.

Behind the change is a big increase in iron ore exports – and not just the 26.5m tonnes that Minas-Rio will bring to market when fully operational in 2016.

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For Miners, Increasing Risk on a Mountain at the Heart of Bolivia’s Identity – by William Neumansept (New York Times – September 16, 2014)

http://www.nytimes.com/

POTOSÍ, Bolivia — The silver in this mountain helped finance the Spanish empire. It created vast fortunes for some and misery for many more. It fueled the early growth of European capitalism, setting the stage for the modern era.

But now, after centuries of hauling out its riches, miners working near the peak have clawed away so much of the interior of the mountain that it is caving in from the top down.

At the peak of this historic mountain — known as Cerro Rico, or Rich Hill, standing at more than 15,600 feet — a giant sinkhole has opened, a jagged mouth in the blood-red rock. In June, Unesco warned that the mountain, depicted at the center of Bolivia’s flag, faced a critical risk of collapse at its summit.

“Since the internal structure of the upper part of the Cerro Rico is severely weakened due to continuous exploitation,” it said, “there is a significant risk that miners could die from collapses inside the tunnels.”

In July, the government said that it planned to shut down mines above 14,435 feet, where about 1,500 miners work in conditions that can range from rudimentary to brutal. Many thousands of miners work in mines farther down the mountain.

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Colombian court orders mining companies to return land to natives (Reuters India – September 25, 2014)

http://in.reuters.com/

BOGOTA – (Reuters) – A Colombian legal tribunal has ordered 11 companies to halt gold-mining operations in a 50,000-hectare (124,000-acre) reserve in the northwest of the country and return the land to the native tribe that previously lived there.

The ruling, the first of its kind in the Andean nation, restores the territory in Choco department to the 7,270-person Embera Katio tribe, which inhabited the area before it was forced out by mining activities and violent illegal armed groups.

Choco, located on the Pacific coast, is strategically valuable to drug traffickers, Marxist guerrillas and right-wing paramilitary groups. The Embera Katio were victims of killings and forcible recruitment when they lived there.

“The natives who inhabited the reserve … were forcibly displaced to large urban centers,” reads the ruling, to which Reuters has access.

The government awarded mining concessions in the Bagado municipality beginning in 2008 and received applications to conduct operations in some 31,000 hectares, 62 percent of the reserve, the ruling said.

The decision orders the National Mining Agency, in coordination with the military, to “remove people from outside the community who are carrying out mining activities within the reserve.”

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Putting the Cuban nickel and cobalt resources back into its orbit – by Christopher Ecclestone (Investorintel.com – September 25, 2014)

http://investorintel.com/

To those with fertile imaginations Cuba conjures up images of rum and cigars, but even those remain forbidden fruit for US consumers as long as the troglodytic Helms-Burton Act remains extant. What also remains off-limits for the US industrial consumer is Cuban cobalt and nickel. I thought it timely to visit the theme of Cuba as it relates to US resource security, one of my recurring themes.

I should be remembered that the US has little, to no, Nickel or Cobalt resources of its own. In fact dusting off the history books one would see that the Moa Bay complex in Cuba was actually developed during the Second World War to plug the US supply gap in these two important metals. Ox-like stubbornness since 1960 by the US “powers that be” might have been justified up until 1989 but subsequent to that the US should have been thinking of its own best interests in getting the Cuban resources in these two metals back into its orbit. Instead it has let petty self-interest of the fallen Cuban oligarchs cut off its nose to spite its face.

Cuba has a history of mining extending over a period of three hundred years. Since 1900 mining has pretty much been a constant activity and, during WWII, the mining of manganese, some copper, and nickel/cobalt was most important.

Cuban mineral production is largely state-controlled, although the government has made steps to amend the mineral laws and legislation. In 1993, Geominera was formed as a private company that utilized state funds. Geominera’s focus is on gold and base metal exploration, whilst foreign investors are currently developing nickel/cobalt and gold resources. I even ran into a Cuban delegation at a London mining event recently and went away with a CD of Cuban salsa music for my troubles.

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UPDATE 2-Workers to strike at Chile’s Escondida copper mine next week – union (Reuters U.K. – September 16, 2014)

http://uk.reuters.com/

(Reuters) – The union at the world’s largest copper mine, Chile’s Escondida, has called a strike for Sept. 22 and 24, aiming to paralyze activity to win improved working conditions, the union said on Monday.

In a surprise announcement on Monday evening, the Sindicato No. 1 union said it would call on its 2,800 members to stage two 24-hour strikes at the mine, which is controlled by global miner BHP Billiton Plc .

The union, which represents the vast majority of workers at the mine, said the stoppage would affect mining and port operations. Escondida, in northern Chile’s copper belt, produced 1.19 million tonnes of copper last year, about 20 percent of the output from Chile, the world’s top copper producer.

The union carried out a similar 24-hour stoppage over pay and conditions last year, without causing any long-term impact on copper production. However, it stunned the copper market in 2011 by staging a two-week strike that sent the mine’s output tumbling.

Escondida “systematically infringed on labor norms,” the union said in a statement on Monday, citing overtime, holidays, hygiene and safety issues. It said on its blog that it held a series of meetings with company representatives on Thursday.

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The quest for improved agricultural productivity spurs investor interest – by Henry Lazenby (MiningWeekly.com – September 11, 2014)

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

TORONTO (miningweekly.com) – Rising demand for protein and more sophisticated diets in developing countries are spurring investors to get excited about investing in fertilisers.

The ‘protein story’ was still providing a good thesis for investment, as the developing world continued to consume more meat and dairy products, which required exponentially more agricultural inputs than traditional staples, which in turn, required improved nutrients to ensure better-yielding crops.

“It bodes well for phosphates, nitrogen and potash,” Brazilian entrepreneur and founder in 2005, at the age of 23, of fertiliser junior Verde Potash, Christiano Veloso told Mining Weekly Online in an interview.

He noted that the protein story was still evolving, with much of Africa still to follow the route Asia had gone in recent years. This would mean increased demand for high-quality fertilisers to achieve improved agricultural output, driven by the need for increased productivity owing to the scarcity of arable land, climate change, scarce water supplies and labour, among other factors.

In Asia and Africa, protein consumption per capita was still far below the norm in Europe and North America. The development of Brazil into what could very well be the world’s food basket for numerous generations to come, augured well for TSX-listed Verde Potash, which was developing the largest potash mine in the country.

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Kinross Gold in talks to sell Ecuador project to Lundin family – by Rachelle Younglai (Globe and Mail – September 11, 2014)

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.

Kinross Gold Corp. is in talks to sell its mothballed gold project in Ecuador in a move that could see the Lundin family develop the deposit, according to people familiar with the matter.

For about a year, Kinross has been trying to exit Ecuador and divest the Fruta del Norte after clashing with the local government on the economic terms of the project. The Ecuadorean government gave Kinross approval to sell Fruta del Norte last week, one person familiar with the matter said.

Fruta del Norte, also known as FDN, was at one time seen as critical to Kinross’s growth. The company acquired the precious metal deposit when it bought Aurelian Resources for $1.2-billion in 2008.

But after more than two years of negotiations with the Ecuadorean government, Kinross threw in the towel and said it was not going to waste any more capital developing the mine. It recorded a $720-million charge on the asset in 2013 and slashed its gold reserves by a third to reflect the loss of Fruta del Norte.

“We continue to work co-operatively with the Ecuadorean government on our exit from the country and the FDN project,” Kinross spokeswoman Andrea Mandel-Campbell said. “We do not comment on speculation,” she said.

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