Republic of Mining

PRECIOUS-Gold jumps to 4-month high on tumbling shares after SNB move – by Clara Denina (Reuters U.S. – January 15, 2015)

January 15, 2015

http://www.reuters.com/

LONDON, Jan 15 (Reuters) – Gold rose more than two percent to a 4-month high on Thursday as European shares and the dollar turned lower after a shock move by Switzerland to abandon its three-year cap on the franc sent Europe’s shares and bond yields tumbling.

Spot gold rose as much as 2.4 percent to its highest level since Sept. at $1,260.30 an ounce in earlier trade and was up 2.2 percent at $1,256.61 an ounce by 1125 GMT. U.S. gold futures for delivery in February rose 1.8 percent to $1,257.10 an ounce.

“Gold is gaining from a risk-off situation because nobody expected the Swiss central bank not to keep that cap, and this has created potential big losses in many places and is obviously triggering some flight to safety,” Saxo Bank senior manager Ole Hansen said.

European stocks plunged and the dollar fell 0.4 percent against a basket of main currencies after the Swiss National Bank’s move, which is seen potentially preceding outright money-printing by the European Central Bank at its policy meeting next week.

“This is happening a week before the ECB meeting, which could add even further pressure to the euro… more QE in the euro zone is a double-edge sword for gold in dollar-denominated terms but gold in euro terms should benefit,” Hansen said.

COLUMN-Big iron ore miners supply strategy working partially – by Clyde Russell (Reuters U.S. – January 13, 2015)

January 14, 2015

http://www.reuters.com/

LAUNCESTON, Australia, Jan 14 (Reuters) – China’s record imports of iron ore in December capped a year of strong growth, while also proving that the strategy of the big miners is at least partially working.

China brought in 86.85 million tonnes of the steel-making ingredient in December, bringing the total for 2014 to 932.5 million tonnes, a gain of 13.8 percent over the previous year.

The jump in iron ore imports isn’t because China is producing more steel, with output of crude steel rising a mere 1.9 percent in the first 11 months of 2014 over the same period in 2013, according to official figures.

It’s also not because huge stocks of iron ore are being built up in warehouses, with inventories monitored by the Shanghai Futures Exchange SH-TOT-IRONINV dropping to 99.85 million tonnes in the week to Jan. 9, the lowest in 11 months.

The most logical explanation is that the 47-percent decline in the Asian spot iron price in 2014 .IO62-CNI=SI is displacing some high-cost Chinese domestic output.

This has been the strategy of the big three iron ore miners, Brazil’s Vale and the Anglo-Australian pair of Rio Tinto and BHP Billiton.

Ex-Xstrata CEO Seeks Second Act With Vale’s Nickel Assets in Mind – by Firat Kayakiran, Dinesh Nair and Jesse Riseborough (Bloomberg News – January 14, 2015)

January 14, 2015

http://www.bloomberg.com/

Mick Davis, who built Xstrata Plc into one of the world’s biggest mining companies, is trying to do it again.

Davis, a 56-year-old South African, is considering a bid for the nickel business of Vale SA (VALE), the world’s top producer, according to people with knowledge of the situation. Davis’s investment vehicle X2 Resources values Vale’s nickel business at $5 billion to $7 billion, said two of the people, who asked not to be identified because the negotiations are private.

Through a decade of 40 mergers and expansions, the onetime cricket umpire Davis increased Xstrata’s market value more than 80 times to $50 billion, and became the world’s biggest exporter of power-station coal. After it agreed to be acquired in 2012 by its largest shareholder Glencore International Plc in a $30 billion deal, Davis was to lead the combined company. The power-sharing agreement collapsed when Glencore Chief Executive Officer Ivan Glasenberg demanded the title.

Davis’s X2 has since raised about $4.8 billion from equity investors and has been hunting for assets to buy from the world’s largest miners such as Vale, BHP Billiton Ltd. and Anglo American Plc.

“Mick Davis is a strong and a driven individual who has been very successful,” said Vince Gauci, who was managing director of M.I.M. Holdings Ltd. when Xstrata acquired the Australian metals and coal producer for $3 billion in 2003. “I’ve no doubt that he’s still got the fire in his belly to start again.”

Copper tumble risks hampering Glencore’s takeover ambitions – by Silvia Antonioli (Reuters U.S. – January 14, 2015)

January 14, 2015

http://www.reuters.com/

LONDON, Jan 14 (Reuters) – A sudden plunge in the price of copper pulled the shares of global miner Glencore to their lowest level on record on Wednesday and risks frustrating any intention to make a fresh move on larger rival Rio Tinto.

Copper prices slid to their lowest in 5-1/2 years after a downward revision to global growth forecasts by the World Bank and shares in Glencore lost as much as 12 percent to 236.20 pence on Wednesday. Glencore, among the large diversified miners, has the largest exposure to copper.

If sustained, the steeper fall in copper prices compared with that of iron ore so far this year, might derail any potential move by Glencore to take over Australian miner Rio Tinto , which is heavily exposed to iron ore.

After Glencore’s first takeover approach was rebuffed by Rio last summer, the market was widely expecting Swiss-based Glencore to make another attempt this year. The steeper fall last year in prices of iron compared with base metals made Rio a more affordable target for Glencore.

That has been partially reversed this year. Copper has lost almost 12 percent of its value, while iron ore has lost less than 5 percent.

Mining prospects remain bright in northwest, B.C. – by Gavin C. Dirom(Terrace Standard – January 14, 2015)

January 14, 2015

http://www.terracestandard.com/

Gavin C. Dirom is President & CEO of the Association for Mineral Exploration BC which will host its Mineral Exploration Roundup 2015 conference in Vancouver Jan. 26-29, 2015.

Mineral exploration and development has safely provided opportunity to generations of northwest residents and it will continue to do so.

Our world-renowned deposits of gold, silver, copper, and other critical metals such as zinc and molybdenum, not only provide a source of much needed commodities the world needs but also local family-sustaining jobs and tax revenues to government – revenue which builds schools and hospitals and roads throughout every community in British Columbia.

As British Columbians, we all care deeply about our province and its environment. Studies show resource extraction is viewed as a positive and necessary undertaking, but B.C. residents from all areas demand sustainable practices and strong regulatory oversight.

Responsible mineral exploration and development requires a permitting and environmental assessment system that is detailed and flexible enough to protect our shared environment, yet straightforward and reliable enough to attract investment and provide certainty for the industry to invest hundreds of millions of dollars annually into our economy and people.

British Columbia has a robust environmental assessment process. Project proponents commit to years of effort and multiple studies in order to complete an environmental application.

David Suzuki: Digging out of Canada’s mining dilemma – by David Suzuki (The Straight -January 13, 2015)

January 14, 2015

http://www.straight.com/

IT SOMETIMES SEEMS people in the mining and fossil fuel industries—along with their government promoters—don’t believe in the future. What else could explain the mad rush to extract and use up the Earth’s resources as quickly and wastefully as possible?

Global mining production, including fossil fuels, has almost doubled since 1984, from just over nine-billion tonnes to almost 17-billion in 2012, with the greatest increases over the past 10 years.

It’s partly to meet rising demand from expanding human populations and supply the cycle of consumerism that fuels the global economy through planned obsolescence, marketing unnecessary products and wasteful technologies. And, as the British Geological Survey notes, “It may be uncomfortable to acknowledge, but wars have been the drivers for many of mankind’s technological developments. Such technologies depend on secure supplies of numerous mineral commodities for which demand inevitably escalates in times of war.”

Mining is important to human well-being, but the current economic system means it’s often aimed at maximizing profit with little regard for people or the environment. It’s one area where Canadians can make a difference. Canada is a global leader in mining, especially in Latin America.

According to the Mining Association of Canada, “Almost 60% of the world’s public mining companies are listed on the TSX and TSX-Venture Exchanges, and 70% of the equity capital raised globally for mining companies is raised on these exchanges.”

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

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.”

Copper Tumbles Most in Six Years Amid Commodity Collapse – by Alex Davis and Chanyaporn Chanjaroen (Bloomberg News – January 14, 2015)

January 14, 2015

http://www.bloomberg.com/

Copper tumbled the most in almost six years as it followed other metals lower amid a collapse in commodities.

Lower energy costs and demand weakness amid worse-than-expected economic data in China are driving prices down, according to Goldman Sachs Group Inc. Consumption in the world’s biggest user will grow at the slowest pace since at least 2009, Deutsche Bank AG estimates. Prices slumped as much as 8.6 percent in London today and fell by the daily limit in Shanghai.

Commodities have sunk to the lowest level in more than 12 years, led by a rout in energy prices, after a decade-long bull market led producers to boost output and a stronger dollar diminished their allure to investors. Oil’s 60 percent decline since last year’s peak is cutting costs for mining companies and bolstering speculation the glut will worsen. Copper is the worst performing non-energy raw material this year on the Bloomberg Commodity Index (BCOM), which fell to the lowest since August 2002.

“People have seen oil prices decline so much and now they’re targeting other commodities,” Ivan Szpakowski, an analyst at Citigroup Inc. in Hong Kong, said in an interview with Bloomberg TV today. Copper is falling faster than most other commodities because “it’s the one that is played by the macro investors and by people who are looking at the broader picture rather than commodity fundamentals.”

Copper for delivery in three months on the London Metal Exchange dropped as much as $506.75 a metric ton to $5,353.25, the lowest since July 2009. The metal was trading 5.2 percent lower at $5,555.25 a ton by 12:49 p.m. in London.

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

January 14, 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.

Mining legend Pat Sheridan remembered as ‘successful, gritty’ – by Niall McGee (Globe and Mail – January 14, 2015)

January 14, 2015January 14, 2015

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.

There are a number of individuals that have left an indelible mark on the mining industry. John Patrick (Pat) Sheridan is one of them. The long-time prospector, stock promoter and mine developer passed away on Saturday at Sunnybrook Hospital in Toronto.

“A hard living, stubborn, successful, gritty entrepreneur and promoter,” said Tommy Humphreys, editor of CEO.ca, a website that primarily covers the mining and energy industries.

Mr. Sheridan started off his career as a prospector in Northern Ontario and Quebec in the 1950s. Over the course of the next 40-plus years, he developed many copper, nickel and gold properties.

“Canada, Ontario, Quebec, Guyana, Africa, Spain – I mean you name it. There aren’t many parts of the world that have a mining industry where he wasn’t knocking rocks one way or another,” remembers fellow prospector, Glenn Mullan, CEO of Golden Valley Mines Ltd.

Mr. Sheridan is perhaps best known for his role in developing the Lac des Iles mine, a source of palladium, platinum and other metals, in the 1980s.

Bank of Canada warns economy could be in for a rough ride – by Barrie McKenna and Bill Curry (Globe and Mail – January 14, 2015)

January 14, 2015

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.

OTTAWA — The Bank of Canada is acknowledging for the first time that the world may be facing a prolonged oil-price slump, casting a dark shadow over the country’s economic prospects.

The price of crude, already sliced in half since the summer, could fall further and stay low for a “significant period,” deputy governor Timothy Lane warned in a speech Tuesday.

That could have profound and far-reaching implications for the Canadian economy, including putting more cash in the hands of consumers and exporters. But cheap crude is also likely to sap overall growth, send the dollar lower, dent federal and provincial government revenues, and perhaps delay eventual interest-rate hikes.

The bank’s comments come as private-sector economists are making increasingly bold claims that the federal government is at risk of missing its target for a return to fiscal balance this year.

The latest challenge to the key Conservative promise came in a Toronto-Dominion Bank report that said Ottawa will be in deficit two years longer than planned even if oil prices rebound significantly from current lows.

Ex-Xstrata CEO Davis Considering a Bid for Vale Nickel Assets – by Firat Kayakiran, Dinesh Nair and Jesse Riseborough (Bloomberg News – January 13, 2015)

January 13, 2015

http://www.bloomberg.com/

Mick Davis, former Xstrata Plc chief executive officer, is considering a bid for Vale SA (VALE5)’s nickel business, according to people with knowledge of the situation.

Davis’s investment vehicle X2 Resources values Vale’s nickel business at $5 billion to $7 billion, two of the people said, who asked not to be identified because the negotiations are private. There hasn’t been any formal negotiation between X2 and Vale about the assets yet, they said.

X2 has raised about $4.8 billion from equity investors including Asia’s largest raw-materials trader Noble Group Ltd. (NOBL), private-equity fund TPG Capital and sovereign-wealth and pension funds to create a mid-tier mining company. It has been hunting for assets to buy from the world’s largest miners such as Vale, BHP Billiton Ltd. (BHP) and Anglo American Plc.

Vale’s American depositary receipts, the equivalent of one ordinary share, erased losses and rose 1.4 percent to $8.67 at 2:35 p.m. in New York.

Vale, which as well as being the world’s leading iron-ore miner is also the biggest nickel producer, has already said it may try to raise cash from the business.

The company is considering the sale of a minority stake in its metals-producing unit, which it valued at as much as $35 billion, in an initial public offering, Chief Financial Officer Luciano Siani said Dec. 2. The unit includes copper as well as nickel.

Patent office decision may help KWG to cut chromite production costs in half – by Jamie Smith (tbnewswatch.com – January 13, 2015)

January 13, 2015

http://www.tbnewswatch.com/default.aspx

THUNDER BAY — Mining is an expensive industry. Just ask KWG Resources, which received good news from the U.S. Patent Office’s International Searching Authority earlier this month. The office found that KWG’s process for using natural gas and an accelerant, rather than a standard electric arc furnace, to process chromite is a novel one.

Vice-president of exploration and development Moe Lavigne said the idea could cut costs by more than half for its proposed operation. It could also have the potential to license the process to mines around the world but it hasn’t had the chance to get the process out of the lab yet.

“We haven’t tested it on chromites from around the world yet but we suspect that it’ll be applicable to any chromite deposit on the planet,” he said. Typically an electric furnace needs to burn at around 1,700 C in order to separate chromite, made of chromium, iron and oxygen. KWG’s process could do the same using natural gas at 1,200 C. That saves energy costs but also equipment costs by burning at a lower temperature.

“At 1,700 C just about everything melts,” Lavigne said. The footprint for the plant is also about a quarter of the size of an electric furnace like the one proposed by once KWG senior partner Cliffs Natural Resources. Electricity prices means a typical plant would likely be built in Quebec or Manitoba where prices are cheaper but natural gas is the same price across the country.

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

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.

$50 Oil Kills Bonanza Dream Making Greenlanders Millionaires – by Peter Levring (Bloomberg News – January 12, 2015)

January 13, 2015

http://www.bloomberg.com/

Greenland, an island that may be sitting on trillions of dollars of oil, has had to acknowledge that its dream of tapping into that wealth looks increasingly far-fetched.

Back when oil was headed for $150 a barrel, Greenlanders girded for a production boom after inviting in some of the world’s biggest explorers, including Chevron Corp. and Exxon Mobil Corp. (XOM) Now, with Brent crude dipping below $50 last week, Deputy Prime Minister Andreas Uldum says Greenland’s hope of growing rich quickly on fossil fuels was “naïve.”

“I myself believed back when I was first elected” to parliament in 2009 “that billions from oil and minerals would start flowing to us the next year or the year after that,” he said in an interview in Copenhagen. “However, that’s just not the reality. I don’t know any politician in Greenland today who won’t admit to having fueled the hysteria.”

Oil Prices

The nation of about 56,000 had imagined its oil and mineral production would turn every citizen into a millionaire. Instead, Greenland continues to rely on an annual 3.68 billion-krone ($586 million) subsidy from Denmark to stay afloat, a sum that’s equivalent to almost half its gross domestic product. Talk of severing ties from its former colonial master has also faded as Greenlanders see little prospect of achieving economic independence anytime soon.