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Latin America Mining

Vale Tax Appeal Suspended as Justice Requests Revision – by Mario Sergio Lima & Juan Pablo Spinetto (Bloomberg News – November 26, 2013)

http://www.bloomberg.com/

Vale SA (VALE5), the world’s biggest iron-ore miner, had its appeal of a 30.5 billion-real ($13.3 billion) government tax claim suspended by Brazil’s Superior Court as the deadline approaches for an out-of-court settlement.

Justice Ari Pargendler, one of five presiding judges, asked to revise the case in a session today in Brasilia. The request followed Justice Napoleao Maia’s proposed approval, Justice Sergio Kukina’s rejection and Justice Benedito Goncalves abstinence. Vale shares fell the most since July.

The case, in which the Rio de Janeiro-based miner is arguing that earnings from foreign operations can’t be taxed in Brazil if they were paid abroad, probably will resume next week, Roberto Duque Estrada, a lawyer for the company, said from the tribunal. That would be after a Nov. 29 deadline for companies to accept a government proposal to scrap fines, interest and legal charges if they agree to pay in one tranche or reduce taxes and interest if they settle in installments.

“The market already priced in this dispute and just wants it to be over,” Leonardo Brito, an analyst at hedge fund Teorica Investimentos, said by telephone from Rio before today’s suspension. “This and the new set of mining rules that Brazil is establishing are pending like swords over the company’s head.”

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HudBay Minerals Meets a Legacy of Guatemalan Violence in Canadian Court – by Joseph Kirschke (Engineering and Mining Journal – November 11, 2013)

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

Five years ago, officials at Canada’s Skye Resources Inc. had a simple goal: to become a mid-tier nickel producer representing 1% of the global market by 2015 through developing their open-pit Phoenix project in El Estor, Guatemala, with a local subsidiary.

But as with many things in the troubled Central American nation, the focus was doomed from the start. Within two years, the Vancouver-based miner and Compania Guatemalteca de Niquel (GCN) would stand accused of colluding with private security forces and the local military in the gang rape of 11 indigenous women and two other attacks that left one man dead and another paralyzed, while clearing land for operations.

Such incidents are not unique to Guatemala. Indeed, the nation of 13 million heaves equally under drug trafficking violence and the simmering legacy of a brutal 36-year civil war, which claimed more than 250,000 lives and displaced more than 1.5 million. What is novel about this case, however, was its arrival before HudBay Minerals Inc.—which bought Skye in 2008 and abandoned Phoenix in 2011—in three separate lawsuits in a Canadian court this summer.

These will be the first such trials in the world’s top mining nation following three attempts by other foreign plaintiffs to hold Canadian miners accountable to their own court systems since 1997.

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Latin America losing allure for global resource companies – by Marta Lillo (Globe and Mail – November 12, 2013)

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.

SANTIAGO — Natural resource companies are growing increasingly skittish about Latin America, a region that until recently was one of the world’s most powerful magnets for foreign investment.

In Brazil, the country’s recent move to sell interests in its vast Libra oilfield highlighted growing friction over national resources. Brazilian social activists say the government of Dilma Rousseff “gave away” the country’s resources in the auction, where international energy giants Royal Dutch Shell PLC, Total SA and two Chinese oil companies joined with Brazil’s Petrobras as owners of Libra.

Protesters clashed violently with police near Rio de Janeiro last month. “The country’s strategic oil reserves should not be auctioned. Petrobras is perfectly capable of developing Libra,” said Ronaldo Leite, president of the Rio de Janeiro chapter of the Central Workers of Brazil (CTB).

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UPDATE 3-Vale Q3 profit doubles on higher iron ore sales, prices – by Jeb Blount and Sabrina Lorenzi (Reuters India – November 7, 2013)

http://in.reuters.com/

Nov 6 (Reuters) – Brazil’s Vale SA , the world’s second-largest mining company, reported on Wednesday that its third-quarter net income more than doubled from a year earlier, beating analysts’ expectations as iron ore prices and sales volumes rose.

Net income for the three months ended Sept. 30 soared 114 percent to $3.50 billion from $1.64 billion in the same period a year earlier, the company said. The result was 6 percent higher than the $3.3 billion average profit estimate of seven analysts surveyed by Reuters.

Iron ore prices averaged about a fifth higher in the third quarter of this year than in the same quarter of 2012, according to Thomson Reuters. Net sales, or total sales minus sales taxes, rose 11 percent from a year earlier to $12.7 billion, beating the average analyst estimate of $12.5 billion. The volume of iron ore sales rose 11 percent to 73.4 million tonnes.

“We expected strong volumes, given the robust Brazilian iron ore export figures for July-September, but shipments still exceeded our expectations,” mining analysts Garrett S. Nelson, Mark A. Levin and Nathan P. Martin of BB&T capital markets in Richmond, Virginia said in a report to investors.

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Barrick Gold Corp to raise more than US$3-billion in share sale, shelve Pascua-Lama mine – by Peter Koven (National Post – November 1, 2013)

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

Barrick Gold Corp. has launched a monster US$3-billion equity offering in an effort to repair its debt-laden balance sheet. The move was announced late Thursday afternoon, just hours after the Toronto-based miner said it is suspending construction of the troubled Pascua-Lama project.

“Both actions will radically improve Barrick’s balance sheet, which had become the major overhang to its outlook,” Deutsche Bank analyst Jorge Beristain wrote in a note.

Barrick shares were down more than 6% at US$18.15 in early trading Friday. It is the third largest bought deal in Canadian history, according to Financial Post data, and follows months of speculation that Barrick would tackle its debt load. The company is carrying US$15.4-billion of debt, much of it tied to the disastrous $7.3-billion takeover of Equinox Minerals Ltd. in 2011.

As gold prices declined this year, servicing that debt became more of a burden and pushed Barrick into action. The company plans to use at least US$2.6-billion of the proceeds from the offering to repay debt.

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Troubled Barrick launches $3 billion stock sale – by Lisa WRight (Toronto Star – November 1, 2013)

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.

The world’s largest gold mining company has decided to suspend construction of a mine that straddles the border between Chile and Argentina.

Barrick Gold Corp. announced one of Canada’s largest stock sales Thursday right after it shelved indefinitely its prized Pascua-Lama gold and silver project on the border of Chile and Argentina in a double-whammy to its already withering share price.

The TSX halted trading on the world’s largest gold company at 4:15 p.m. after Barrick announced it seeks to raise $3 billion in cash to reduce debt and strengthen a damaged balance sheet that has been under fire lately by increasingly disgruntled shareholders.

Shares of the cash-strapped Toronto miner – which has seen its share price cut in half over the last year — had fallen another 6 per cent earlier in the day as investors learned construction is now suspended on of one of the richest, untapped gold deposits in the world.

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Editorial: Mexico, the great hope… for higher taxes on mining – by John Cumming (Northern Miner – October 30, 2013)

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry. Editor John Cumming MSc (Geol) is one of the country’s most well respected mining journalists. jcumming@northernminer.com

If there’s been one consistent refrain in Canadian mining circles this millennium, it’s been mining personnel — from top executives to scruffy field geologists — singing the praises of Mexico and its rich mineral potential, easy permitting, mining-friendly culture, skilled population, low costs and enjoyable, snow-challenged lifestyle.

But that’s all changed in the last few months, and it accelerated in the last week of October, as Canada’s globe-trotting miners, especially executives in Vancouver and Toronto, have had to grapple with the dramatically higher federal mining taxes that are on the verge of becoming law in Mexico.

On Oct. 29, Mexico’s Fiscal Reform Act — already passed the previous week by the lower Chamber of Deputies — was approved by the upper Senate in a late-night, 73 to 50 vote.

This fiscal reform package includes a special mining fee of 7.5% on profits (specifically, on earnings before interest, tax, depreciation and amortization), plus another 0.5% gross royalty for gold and silver. The act also wipes out generous accelerated depreciation of assets and immediate deduction of pre-development expenses.

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Barrick Gold may raise Pascua-Lama costs once more – by Allison Martell (Reuters Canada – October 29, 2013)

http://ca.reuters.com/

TORONTO (Reuters) – Barrick Gold Corp (ABX.TO: Quote) will likely raise the cost estimate for its huge Pascua-Lama mine project in South America for the third time in less than two years when the world’s top gold producer reports results on Thursday.

Much has changed since November, when Toronto-based Barrick pegged the cost of the gold and silver project at $8.5 billion, and markets are anxious to see the company’s new capital cost estimate.

High in the Andes, on the border between Chile and Argentina, Pascua-Lama is Barrick’s biggest and most important growth project. It’s risky, but the potential is great: when and if the mine is completed, it is expected to have exceptionally low operating costs, which could pay dividends for years to come.

Since Barrick released its November estimate, regulators have halted construction on the Chilean side of the project, citing serious environmental violations. Barrick has agreed to build a new water management system to meet their concerns, and said in June it would defer some spending that had been scheduled for 2013 and 2014.

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HudBay case raises litigation risk for Canadian resource companies – by Peter Koven (National Post – October 30, 2013)

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

When an Ontario court ruled against HudBay Minerals Inc. in a human rights case in July, it sent shockwaves across the Canadian mining and legal communities. Months later, lawyers remain far from certain what kind of long-term impact the decision will have.

In its decision, the Ontario Superior Court of Justice determined that the suit against Toronto-based HudBay should proceed in Canada, even though the alleged abuses took place in Guatemala. HudBay is not appealing the ruling, which paves the way for a trial some years in the future. The plaintiffs claim that HudBay’s security personnel killed a local activist and gang-raped 11 women.

The implication of the court ruling was obvious: In the future, Canadian resource companies with foreign operations (which is most of them) face a real risk of increased litigation at home based on their conduct abroad. That introduces significant risk for companies like Barrick Gold Corp. and Goldcorp Inc. that have been accused of massive misconduct in far-flung jurisdictions.

Murray Klippenstein, the plaintiff lawyer in the Choc vs. HudBay case who played a key role in bringing it to Canada, said he does expect more lawsuits of this kind.

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Grupo Mexico will focus offshore if Mexico mining tax enacted – by Dorothy Kosich (Mineweb.com – October 29, 2013)

http://www.mineweb.com/

Greater production from Grupo Mexico’s mining division increased third-quarter base metals sales, but precious metals sales declined.

RENO (MINEWEB) – Grupo Mexico warned Monday that Mexico’s proposed 7.5% tax on mining earnings–in addition to a 0.5% tax on precious metals revenue and the elimination of the immediate deduction on exploration expenses–“will jeopardize investment in current and future projects in the sector, along with the consequent effect on jobs and infrastructure.”

“If approved, we will conclude our current investment program of US$3.5 billion for 2013 and US$1.5 billion for 2014,” said the company.

“Nevertheless, we will be obliged to re-direct our future investment program of US$5.3 billion for the coming years, which is primarily allocated to Mexico, and analyze opportunities in countries where the investment conditions are more favorable, such as the US, Canada, Peru or Chile which offer a stable tax regime with stimuli and low energy costs,” Grupo Mexico advised.

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Preventing and managing social conflict in Peru (Beyond Borders – July 2, 2013)

Beyond Borders is published by Barrick Gold Corporation: http://barrickbeyondborders.com/

Peru has one of the world’s fastest-growing economies, driven largely by its mineral wealth and the expansion of the mining industry. Today, most major global mining companies have operations in the country, including Barrick, BHP-Billiton, Newmont, Freeport McMoran, Glencore Xstrata and others.

Increased mining sector investment and revenues have provided significant benefits to Peru’s national economy. The sector’s contribution to total government revenue averaged 14 percent between 2000 and 2010. In 2010 alone, Peru mined $18 billion worth of minerals, accounting for 12 percent of the country’s gross domestic product. The mining boom has contributed to a marked reduction in Peru’s poverty rate to about 28 percent in 2011 from 42 percent five years earlier, according to The World Bank.

Barrick has been operating in Peru for the past 15 years and has two mines in northern Peru — Pierina and Lagunas Norte. The contribution of these operations to economic prosperity is significant. In 2012, Barrick paid nearly $400 million in taxes and royalties in Peru, and purchased approximately $340 million in goods and services in the country. Ninety-nine percent of the 1,200 Barrick employees who work at Pierina and Lagunas Norte are Peruvian nationals.

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Trading ice for gold in Chile – by Sarah Tory (Santiago Times – September 22, 2013) [Part 3 of 3]

http://www.santiagotimes.cl/ [Chile]

Part III of a three-part series on Chile’s water crisis: Melting glaciers in the Andes have dire implications and may prove a robust obstacle to future economic growth.

t the 1992 world fair in Seville, Spain, Chile’s pavilion featured a large iceberg. Some 100 tons of ice — the equivalent of 15 full-grown African elephants — were extracted from the Southern Patagonian Ice Cap and shipped across the Atlantic where they were conserved for six months during the European summer.

To the newly democratic government, the spectacle was meant to symbolize Chile’s emergence as Latin America’s success story, ready to take its place on the world stage. It was also a telling symbol of what drove Chile’s surging economy: a frenzy of digging, cutting and exporting from copper mines in the North to logging in the South.

More than two decades later, the symbol of Chile’s growth is more relevant than ever. With dwindling reserves and growing water shortages, the country’s copper mines — its economic backbone — are being squeezed by two opposing forces: financial pressure to expand and concern over environmental impacts. Now the model that was once hailed as the emblem of Chile’s success is beginning to look as unstable as a massive chunk of ice plunked down under the Mediterranean heat.

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As reservoirs shrink and farms expand, Chile’s agriculture at risk – by Rosalind Adams and Sarah Tory (Santiago Times – September 1, 2013) [Part 2 of 3]

http://www.santiagotimes.cl/ [Chile]

Part II of a three-part series on Chile’s water crisis: A combination of severe drought, climate change and overuse leaves farmers struggling to compete for a dwindling resource.

Last year the river in Petorca ran dry, leaving a dusty brown ditch running through the once fertile valley in Chile’s Valparaíso Region, home to 40 percent of the country’s avocado production.

The area, forming part of the “norte-chico” zone that starts north of Santiago and runs all the way to the southern edge of the Atacama Desert, contains some of Chile’s most important agriculture pockets. It’s also one of the driest parts of the country.

Here, almost all the rain falls over a short three month period from June to August. Over the last decade, though, the rainy season has delivered only the occasional shower. That has left the farmland in the North thirstier than ever.

In the province of Petorca, currently in the midst of a seven-year dry spell, reports of widespread “water robbing” have emerged as desperate farmers construct illegal wells to access what little remains of the water available in underground aquifers.

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In Chile’s dry north, big mining threatens a vital resource – by Rosalind Adams and Sarah Tory (Santiago Times – August 24, 2013) [Part 1 of 3]

http://www.santiagotimes.cl/ [Chile]

Part I of a three-part series on Chile’s water crisis: Amid a growing water shortage, the Huasco Valley struggles to find a balance between mining and agriculture.

Deep in Chile’s Atacama Region, Sandra Anacona makes jam from the apricots and peaches that grow on her two-acre farm, land that has been in her husband’s family for six generations. Her face wrinkled into a permanent smile, she shuffles around the kitchen preparing meals and piping-hot cups of Nescafé for the endless parade of neighbors and family who show up at her dining table.

In the Valle del Huasco, these family-run farms, clustered around small pueblos like Alto del Carmen and San Félix, are permanent fixtures: ask for directions, and people give names instead of addresses — testament to a lifestyle that has changed little in 200 years.

Formed by the river snaking between Andean peaks, the Valle del Huasco appears like a ribbon of green in one of the driest places on Earth. Defying the surrounding desert, acres of pisco grapes grow, along with mangos, oranges, papayas and avocados.

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Australia’s iron ore miners shrug off glut fears – by James Regan (Mineweb.com – October 15, 2013)

http://www.mineweb.com/

Rio Tinto upped annualised output of the steel-making raw material by 20% in October, while BHP Billiton and Fortescue Mining are in the midst of robust expansion work.

SYDNEY (REUTERS) – Australia’s “big three” iron ore miners are set to unveil a boost in third-quarter production and will mine even more in the fourth quarter, ignoring forecasts of a looming supply glut in favour of capturing greater economies of scale.

Rio Tinto this month upped annualised output of the steel-making raw material by 20 percent to 290 million tonnes, while BHP Billiton and Fortescue Mining are in the midst of robust expansion work.

All three already mine ore at costs well below selling prices — thanks to a combination of rich grades and high volumes — and see any dip in prices as simply weeding out less competitive rivals.

Rio Tinto, which is set to post a 3 percent rise in third-quarter output against the previous quarter to 53 million tonnes on Tuesday, is expected to announce a further mine expansion to 360 million tonnes a year by a Dec. 3 meeting with investors.

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