Republic of Mining

Eldorado Gold faces accusations of tax avoidance in Greece – by Eric Reguly (Globe and Mail – March 31, 2015)

March 31, 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.

Canada’s Eldorado Gold Corp., the biggest foreign investor in Greece, is engaged in a tax-avoidance scheme that uses mailbox companies in the Netherlands to lower its tax load, a new report from a Dutch foundation says.

The Centre for Research on Multinational Corporations, known as SOMO, made the claim in a detailed 116-page report called Fool’s Gold, which was released in Amsterdam Monday and will be presented Wednesday in Athens at a panel discussion featuring Norway’s Eva Joly, a member of the Green Party in the European Parliament.

The report claims the scheme has cost the Greek government at least €1.7-million ($2.3-million) in revenue in the past two years.

The timing of the report was apparently no accident. It came as Eldorado fights hard to keep its Greek mining operations going in the face of threats from Greece’s new radical left Syriza government to shut down or curtail them over environmental concerns. It also came a month after the European Parliament’s committee on tax rulings revealed it is examining allegations that some European Union countries are using special tax regimes or deals to favour large companies.

Putting oil revenues into a savings fund isn’t always a great idea – by Stephen Gordon (National Post – March 31, 2015)

March 31, 2015

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

Pundits outside Alberta are almost unanimous in their support for a Norway-style sovereign wealth fund. If only the Alberta government had saved more of its resource revenues, the argument goes, then the Alberta government would have saved more of its resource revenues. Or something like that; details are never the strong suit of big-picture pundits. It’s usually enough to make the clearly unarguable point that it would nice to have an extra $1 trillion on hand, just like the Norwegians.

The Alberta government could have set aside some of its revenues into a wealth fund. But then again, so could have the federal government and any of the other provincial governments; Quebec already has put away $7 billion into its Generations Fund. The mechanics are pretty simple: set expenditures less than revenues and put the savings into a wealth fund. Any government can do it, so why don’t they? The answer is of course that saving is costly, and the benefits of being able to finance future spending don’t always exceed the costs of sacrificing current expenditure.

There are two things you can do when your income goes up: You can spend the increase, or you can save it (or some combination of the two). The theory of optimal savings says that the decision depends on whether or not the increase is temporary or permanent. A purely temporary jump in earnings — a good example is winning the lottery — should be saved, so that the benefits can be spread out across a long period of time.

Vale, Sudbury employees charged – by Carol Mulligan (Sudbury Star – March 31, 2015)

March 31, 2015

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

The Ministry of Labour has laid nine charges against Vale Canada Ltd. and eight charges against three company employees in the April 6, 2014, death of millwright Paul Rochette at Vale’s Copper Cliff Smelter Complex.

Rochette, 36, died from injuries to the head after a large piston or moil operating under pressure, crushing ingots of nickel under pressure, released from an area of a processing system at the smelter.

A second man, 28, who has never been identified, also suffered injuries to the face and head. Vale has been charged under the Occupational Health and Safety Act with failing to:

– Ensure that while work was being done on the Farrel crusher, any gravity stored energy was dissipated or contained;

– Ensure that while work was being done on the Farrel crusher, all energy isolating devices were properly engaged, locked and tagged;

– Provide information, instruction and supervision to workers on a safe procedure to remove a broken moil point from the jaws of the Farrel crusher;

ENEMY OF MINE ENEMY: Mining companies and lobbyists are waging the real war on coal – by Jake Flanagin (Quartz – March 30, 2015)

March 31, 2015

http://qz.com/

It is indisputably better to be a coal miner today, in 2015, than in 1969—the year in which Congress passed the Federal Coal Mine Health and Safety Act.

Generally known in simpler terms as “the Coal Act,” the law precipitated the establishment of a number of crucial regulatory bodies, including the Mining Safety and Health Administration (MSHA)—a sort of Occupational Safety and Health Administration (OSHA), tailor-made for underground and surface-mining operations.

The act itself, in addition to creating this regulatory framework, laid down a set of nationwide health and safety standards for US miners, who, prior to, suffered some of the highest work-related mortality rates in the country.

The passage of the Coal Act, in conjunction with the establishment of MSHA, is generally credited with the precipitous decline in prevalence of coal worker’s pneumoconiosis (CWP, or “black lung”) between 1970 and 1995. This is an important distinction, because while life for the average coal miner today may be measurably better than it was 1969, it is not necessarily so when compared to industry-wide conditions in 1995.

[Rouyn-Noranda Horn mine] Shuttered mine in Abitibi may live again – by Robert Gibbens (Montreal Gazette – March 30, 2015)

March 30, 2015

http://montrealgazette.com/

A team of mining engineers and geologists is determined to relaunch the historic Horne mine in northern Quebec, which produced 11.6 million ounces of gold and 2.5 billion pounds of copper from 1927 to 1976, when reserves ran dry.

They believe the Horne 5 deposit, located immediately below the old Horne mine workings, holds reserves that could make it one of Canada’s top gold-silver-copper producers.

Their company, Falco Resources Ltd., in 2012 acquired a 100-per-cent interest in 74,000 hectares and effective control over most of the historic Noranda mining camp at Rouyn-Noranda, the Abitibi regional centre 630 kilometres northwest of Montreal.

Last year, Horne 5 exploration showed an initial inferred mineral resource of 2.8 million ounces, with an average grade of 3.4 grams per tonne of ore. An initial mine information report was based mainly on pre-1976 drilling data generated by Noranda geologists.

This year Falco plans 16,000 metres of drilling down to about 1,500 metres to confirm existing data and assess Horne 5’s silver content. Metallurgical tests will show new mineral recovery rates and studies will begin into hydrology (the old mine may have to be dewatered), ore hoisting and rock mechanics.

Southern Copper Cancels Peru Project Over “Anti-Mining Terrorism” (Latin American Herald Tribune – March 30, 2015)

March 30, 2015

http://www.laht.com/index.asp

LIMA – Southern Copper Corp. has decided to cancel its Tia Maria copper project in southern Peru because of “anti-mining terrorism” in the area.

“After evaluating the complete politicization of the (Tambo) Valley and the lack of decisiveness by the relevant authorities … I’m here to announce the cancelation of the Tia Maria project and the total withdrawal of our investment from the Arequipa region,” Southern Copper’s spokesman in Peru, Julio Morriberon, told RPP Noticias radio.

The announcement will be made official by top management via the “relevant procedures before the relevant agencies,” he said. “We’ve done our best as a company and as people to carry out a project that was going to bring great benefits for Tambo and for Peru,” Morriberon said.

Southern Copper, a unit of Mexico City-based Grupo Mexico, had been planning to invest some $1.2 billion in the construction of Tia Maria, which has an estimated mine life of 18 years and had been projected to produce 120,000 metric tons of copper cathodes annually from the start of operations in 2016.

The project had been halted for two years after peasant protests in 2011 in the small town of Islay left three dead and 44 wounded, and as a result the Peruvian government did not award construction permits until the beginning of this year.

Coal Producers: Obama Royalty Reform May Shut Us Down – by Mark Drajem (Bloomberg News – March 25, 2015)

March 30, 2015

http://www.bloomberg.com/

(Bloomberg) — The Obama administration has proposed to change how it collects royalties on coal mined from federal land, a move that environmentalists hope, and the industry worries, will cut use of the fuel linked to climate change.

The Interior Department says the accounting change is needed to update rules adopted almost three decades ago, and streamline the program for companies such as Peabody Energy Corp. and Arch Coal Inc. And more changes are on the way.

“It’s time for an honest and open conversation about modernizing the federal coal program,” Interior Secretary Sally Jewell said in a speech last week to the Center for Strategic and International Studies in Washington. “How do we manage the program in a way that is consistent with our climate-change objectives?”

For industry, the broad effort is seen through the prism of their ongoing complaints that President Barack Obama is waging a “War on Coal.” Sales of federally owned coal from the Powder River Basin in Wyoming and Montana — the biggest source — topped 350 million tons last year, generating company revenues of almost $5 billion, government data showed.

The Interior Department wants to assess the royalty when mining companies sell the coal to an unaffiliated buyer, not when sales are made to related intermediaries.

Murdochville looks to tourism to shake ghosts of mining past – by Marika Wheeler (CBC News Montreal – March 29, 2015)

March 30, 2015

http://www.cbc.ca/news/canada/montreal

Former copper town banking on outdoor recreation to secure its future

Like many small communities that once dotted Quebec’s landscape, Murdochville was born a company town, built on the back of a mining boom.

Rich in copper ore, the mine was in operation for more than 50 years, an exceptionally long run compared to the average life span. But when the mining company pulled out more than a dozen years ago, the town’s economy crashed.

Now many believe the community’s future lies in another natural resource: the nature that surrounds the Gaspé Peninsula town.The mono-industry community has at least once been on the brink of becoming a ghost town.

It was served blow after blow when the open pit mine shut down, then the underground mine, and finally the smelter in 2002. In two referendums, a majority of unionized workers, then residents, voted to shut down the town. Those results scarred the towns history.

When Audrey Lévesque-Lecours, a high school human sciences teacher who has been living in Murdochville for five years, visits her family in Baie Comeau, people are surprised to learn the town still exists.

Lusaka paying for its indecision – by Victor Kgomoeswana (Independent Online – March 29 2015)

March 30, 2015

http://www.iol.co.za/news

While Zambia see-saws over its mining tax regime, the DRC has overtaken it as a copper source, writes Victor Kgomoeswana.

Johannesburg – The African week went by pretty quickly for me, especially with the Monetary Policy Committee (MPC) of the SA Reserve Bank leaving interest rates unchanged. I need to pay off those debts, while the current rates last.

This MPC meeting happened while African finance ministers and a number of central bank governors met in Addis Ababa, continuing on that long road towards the alignment of Africa’s fiscal and monetary policy landscape.

Back in South Africa, Eskom gave us another grim reminder of the power crisis hovering above and leaving most people whispering in the dark, even as unions are calling for the axing of the chairman of the power utility.

Egypt also had to ration its electricity supply due to a fuel shortage. How’s that for Cape to Cairo? Our cricket team bowed out of the semi-finals, setting up their opponents for a final clash with Australia – although I would plead with my fellow South Africans to stop using the C-word this time around.

B.C.’s Brucejack gold mine approved; first since Mount Polley tailings dam failure – by Gordon Hoekstra (Vancouver Sun – March 29, 2015)

March 30, 2015

http://www.vancouversun.com/index.html

Mine will not use a dam to store waste

The B.C. government has approved Pretium’s $450-million Brucejack gold mine, the first mine approved since the collapse of the Mount Polley mine tailings dam last year.

Construction of the mine, about 275 km northwest of Smithers, is expected to begin this summer and it is to be in commercial production by 2017. The project will create 500 jobs during the two-year construction period and 300 permanent jobs during its 16-year life.

The Ministry of Energy and Mines said the mine, unlike Imperial Metal’s Mount Polley gold and copper mine, will not have a facility to store mine waste held back with an earth-and-rock dam.

The failure of the Mount Polley earth dam last summer released millions of cubic metres of water and finely-ground rock containing potentially-toxic metals (called tailings) into the Quesnel watershed in the B.C. Interior.

It has raised concerns on the long-term effects of the spill on millions of spawning salmon and other aquatic life, and has led to intense scrutiny of tailings dams in B.C.

Teck, Antofagasta Said to Explore Copper Mining Merger – by Matthew Campbell and Dinesh Nair (Bloomberg News – March 30, 2015)

March 30, 2015

http://www.bloomberg.com/

(Bloomberg) — Teck Resources Ltd. and Antofagasta Plc are exploring a merger that would create one of the world’s largest copper producers, people with knowledge of the matter said.

The companies have held early-stage talks, and any agreement hinges on the approval of the families that control both miners, the people said, asking not to be identified discussing private information. There’s no guarantee they will reach a deal, which would be primarily stock based, the people said.

Teck shares in Toronto rose as much as 15 percent Monday, the most since April 2009 and were trading at C$20.03 ($15.78) as of 3:13 p.m. local time.

A combination of Teck, based in Vancouver, and London-based Antofagasta would be the first major mining transaction since an across-the-board slump in commodity prices hammered the industry. Both companies have extensive copper operations in Chile which could be combined by a merger, potentially reducing costs. Representatives for both companies declined to comment.

With a market value of about C$11.3 billion, Teck is Canada’s third-largest mining group after Goldcorp Inc. and Barrick Gold Corp.

Mine your own business: Plan Nord’s disastrous consequences – by Jasreet Kaur (McGill Daily – March 30, 2015)

March 30, 2015

http://www.mcgilldaily.com/

With recent austerity measures affecting many economic sectors within Quebec, the provincial government is desperately looking for new sources of income. The precious metal industry is still profitable, and mining developments such as Plan Nord could bring investors to the province, acting as a safety net to protect people from the ongoing cuts. However, this would not come without a cost that would be shouldered by current and future generations.

The benefits of invasive projects such as Plan Nord are often only measured by their immediate value, leaving out negative externalities. Plan Nord is expected to cause substantial environmental damage to the region, due both to the resource extraction the project would entail, as well as its magnitude. In addition to the environmental damage, however, the project will have significant negative impacts on the local communities in the North, particularly with regards to women.

Plan Nord was initially proposed by the Liberal government led by Jean Charest in 2011, but was shut down by Pauline Marois after the Parti Québécois (PQ) came into power in 2012. The PQ has traditionally held an antagonistic position toward the mining sector. Recently, however, with the comeback of the Liberals, a revised version of the project has started to gain steam once again.

This version, which encompasses 72 per cent of the land area of Quebec, an area twice the size of France, is expected to create significant economic benefits for the province, including the creation of 20,000 jobs.

An idea for Ring of Fire’s riches – by Tom Mills (Sault Star – March 28, 2015)

March 30, 2015

http://www.saultstar.com/

Ontario should look to socialist Norway if it wants to capitalize on the rich mineral deposits of the far north’s Ring of Fire.

Like Canada, Norway has a resource-based economy, exploiting extensive reserves of oil, natural gas minerals and lumber. Half its export revenues come from oil and gas.

Unlike Canada, Norway is not in hock up to its eyeballs. In fact, it’s the second-wealthiest country in the world. Every Norwegian is, theoretically, a millionaire. That’s a million kroner, which translates to about $177,000 US apiece.

That’s because, unlike many other resource-rich countries and provinces, Norway put its oil revenues, from taxes, fees and ownership stakes, into a fund where politicians couldn’t get their spendthrift hands on them.

The money was invested in financial markets outside Norway. It grew. Their sovereign wealth fund, created a mere 20 years ago, now controls about one per cent of all publicly traded shares in the world.

Allana Potash Corp agrees to $137-million takeover bid from Israel Chemicals – by Peter Koven (National Post – March 28, 2015)

March 30, 2015

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

Allana Potash Corp. agreed to a $137-million takeover bid from Israel Chemicals Ltd. because its chief executive said there was no other way to avoid massive dilution of shareholders.

Toronto-based Allana is in the same position as many other junior mining firms: it has a great project but no easy way to finance it in the current rough market conditions. The company’s Danakil project in Ethiopia is expected to cost US$642 million; by comparison, Allana had less than $8 million on its balance sheet at the end of January.

“Even if we could raise half of the money through debt, which is uncertain, we would still have to raise substantial amounts through equity,” Allana CEO Farhad Abasov said in an interview. “And that equity would come at a substantial discount to the current price.”

Allana did have options apart from an outright takeover. According to a source, the company was in negotiations to sell a large stake in itself to a state-owned Chinese construction firm that could finance the project. The source said the premium was very significant. But Mr. Abasov argued the Chinese option would be punitive for shareholders.

“It would be close to 100%, if not more, dilution for shareholders,” he said.

The Iron Ore Bust into a Housing Boom – by Greg Canavan (Daily Reckoning Australia – March 30, 2015)

March 30, 2015

http://www.dailyreckoning.com.au/

Irony is thick on the ground this morning as we head into a shortened Easter trading week. Just as Sydney property prices go absolutely bonkers, the iron price crashes.

Of course, revenue from the great iron ore boom helped to fuel the housing bonfire, along with regular petrol douses from RBA boss Glenn Stevens. But now, with iron ore crashing, property prices continue to detach from reality. It’s a cheap money driven boom if there ever was one.

In case you missed it, the benchmark iron ore price finished trading on Friday down US$2.22 to US$53.14, a new low. It was another dose of irony that probably knocked the price lower.

Last week, Fortescue Metals [ASX:FMG] Chairman and major stakeholder Andrew Forrest implicitly called on iron ore miners to form a cartel to control the price (and save his company from a slow death). Rio Tinto [ASX:RIO] boss Sam Walsh replied with scorn, which the market interpreted to mean that Rio will continue to dig up as much red dirt as it can. Hence the price crack on Friday.

The comments from Forrest indicate just how much damage the iron ore bear market is having on marginal cost producers. Aussie juniors won’t survive this price rout. It’s just a matter of time before they fold.