Republic of Mining

Fortescue Pulls $2.5 Billion Bond as Price War Hits Iron Ore – by Benjamin PurvisBrett Foley (Bloomberg News – March 17, 2015)

March 18, 2015

http://www.bloomberg.com/

(Bloomberg) — Fortescue Metals Group Ltd., the world’s fourth-largest iron ore exporter, pulled plans to refinance some of its debt with a $2.5 billion bond as tumbling prices for commodities spook investors.

The stock hit a six-year low in Sydney trading Wednesday, matching the plunge in iron ore and crude oil prices, after the producer said the sale had been scrapped, citing volatile U.S. credit markets and a failure to achieve the terms it wanted.

Iron ore sank 47 percent in 2014 and extended losses this year as surging supplies from Fortescue, BHP Billiton Ltd. and Rio Tinto Group, outpaced demand growth, spurring a surplus just as economic growth slowed in China, the biggest buyer.

“This iron ore capacity war, the race to the bottom was always going to shake the tree and maybe we are starting to see that in earnest,” Evan Lucas, a markets strategist in Melbourne at IG Ltd., said by phone. “And it’s probably going to get worse before it gets better.”

Australia, the world’s biggest exporter of iron ore, on Wednesday cut its price forecast for 2015, saying the raw material will average $60 a metric ton, down from its estimate of $63 in December. Macquarie Group Ltd. overnight cut its forecast for the year by 20 percent to $54.

South African gold mining’s fall from grace – by Lawrence Williams (Mineweb.com – March 18, 2015)

March 18, 2015

http://www.mineweb.com/

The ever-continuing gold output decline could be exacerbated by new wage negotiations.

South Africa may have regained its position as the world’s fifth largest gold producer in 2014 when all the figures have been tallied. One estimate of global gold output in 2014 records that the country produced 168 tonnes, a small increase on 2013’s 164.5 tonnes. Not so many years ago, South Africa had totally dominated world gold production producing 1 000 tonnes a year.

But latest output figures from Statistics South Africa show a serious continuing decline in monthly gold production. With new across-the-board wage negotiations coming up over the next couple of months, some suggest that this year could, as a result, see a further sharp slump in output. Initial indications suggest that the wage talks may be extremely difficult. And difficult wage negotiations in the South African context can get out of hand as witness the virtual four month shutdown of much of the country’s platinum sector in 2012.

This was coupled with some horrendously violent events (including the Marikana massacre when police opened fire on striking miners killing 44) and continued reports of other violence and intimidation throughout.

It’s not that we necessarily expect this to be replicated in the gold mining sector negotiations, but inter-union rivalries between the NUM, which represents around 57% of gold sector workers, and AMCU, which tends to be more militant in its approach, which currently looks after the interests of around 25% and is seeking to replace the NUM as the industry’s main union, could add another dimension – and probably not a positive one.

Catholic aid network urges European action on conflict minerals (Catholic Sentinel – March 17, 2015)

March 18, 2015

http://www.catholicsentinel.org/

OXFORD, England — An international consortium of Catholic aid agencies charged that European businesses are causing suffering and death by importing minerals from regions of the world experiencing armed conflict.

The Brussels-based International Cooperation for Development and Solidarity, or CIDSE, demanded firmer action by businesses to ensure that minerals used in consumer products such as cellphones and laptop computers are responsibly sourced.

“The exploitation and trade of natural resources finances armed groups responsible for serious abuses of local populations. We can all take action to end this violence,” said the CIDSE statement released March 9.

“In sourcing resources from conflict-affected or high-risk areas, European businesses risk fueling violence to the detriment of human rights, peace and development. In this way, blood minerals find their way into our computers, telephones and cars,” CIDSE said.

The statement was released ahead of March18-19 discussions in the European Parliament of a draft law, developed by the European Union’s governing commission, to control minerals from conflict-torn regions.

PDAC 2015: Scotiabank’s Patricia Mohr predicts only ‘modest’ recovery (Northern Miner – March 17, 2015)

March 18, 2015March 18, 2015

The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry.

Zinc is Mohr’s number one pick, and she forecasts prices will move up to US$1.50 per lb. in 2016.
Copper, she says, will remain flat at about US$2.75 per lb. for the next two years, but longer
term should reach US$3.50 per lb. She estimates the nickel price will reach about US$10.55 per lb.
in 2016. “I think nickel will do exceptionally well,” she predicts, “and Sudbury is going to come
back into its own in 2016.” (Patricia Mohr, Scotiabank Vice President Economics)

Commodity prices as of January this year have fallen below the previous recessionary lows of early 2009, and are now at levels not seen since January 2007, Patricia Mohr, vice president economics at Scotiabank, said during a presentation at the recent Prospectors & Developers Association of Canada conference in Toronto.

China’s massive infrastructure spending program helped lift commodity prices in 2009, but the latest dip in prices, Mohr says, is mostly due to “a fight for market share” in a very lackluster global economy. The world is entering its fourth year when global GDP growth has been just a little over 3% per annum, she warns.

“I’m beginning to realize that 3% per annum — while it is enough to turn over the global economy — it’s not high enough to really put any momentum behind global commodity prices and markets,” she says. “And when you get some capacity expansion, for example, such as in copper, and massive expansion in iron ore, and huge expansion in oil production from U.S. shales, all of this is occurring in a very lackluster market around the world, and leading prices lower.”

UPDATE 1-Investors fret as India defends reopening coal mine bids – by Krishna N. Das (Reuters India – March 17, 2015)

March 18, 2015

http://in.reuters.com/

(Reuters) – India’s coal ministry said it will decide this week the fate of nine winning mine bids it is re-examining to rule out any price discrepancies, despite criticism that its move to reopen some of the tenders will hurt business sentiment.

The government, which last month started auctioning off coal mine sites after a court said a previous method of awarding concessions was illegal, is re-examining “outlier” bids for the 33 mines auctioned so far, Coal Secretary Anil Swarup said.

The winning bids for the nine mines were the highest in their individual auctions, but were considered low when compared with the winning bids for other similar blocks.

“We are not even looking at somebody doing wrong,” Swarup told Reuters on Tuesday. “We are looking at whether the price that was quoted is good enough for the government or not, and whether we could get a better price.”

Swarup said if any discrepancy is found, the mines may be re-auctioned, given to states or handed over to government-owned Coal India Ltd. This has left some companies, including Jindal Steel and Power Ltd, uncertain as to the status of what had appeared to be winning bids in the auctions.

What Saskatchewan is doing right to attract mining investment – by Ravina Bains and Taylor Jackson (National Post – March 18, 2015)

March 18, 2015

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

“Furthermore, Saskatchewan has taken ownership of the consultation process; the provincial government
makes it very clear that it, not project proponents, is “responsible and ultimately accountable for
managing and implementing the duty to consult.” Saskatchewan is also home to innovative mining
partnerships between First Nations and resources companies. For example, Muskowekwan First Nation
and Encanto are undertaking a joint venture to develop the first on-reserve potash mine in Canada
that will generate 2.8 million tons of potash annually and create approximately 1,000 jobs.”
(Ravina Bains and Taylor Jackson)

The mining industry contributes mightily to Canada’s economic prosperity, adding $54 billion to Canada’s GDP and employing roughly 383,000 Canadians at an average annual salary of more than $110,000 in 2013.

But Canada has a serious problem with land-use certainty that may threaten future investment in the sector. Across the country, uncertainty surrounding disputed land claims remains a significant barrier to investment in the development of natural resources, particularly investment in the mining sector.

For example, every year the Fraser Institute surveys miners around the world to determine what makes a jurisdiction attractive — or unattractive — to investment. According to the most recent survey, in eight out of 12 Canadian provinces and territories in 2014, uncertainty over disputed land claims was the top barrier to investment.

Molycorp Inc at risk of financial collapse, signalling fall of rare earth industry – by Peter Koven (National Post – March 18, 2015)

March 18, 2015

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

North America’s flagship rare earth mining company is at risk of collapse, a symbol of how far the entire industry has fallen from its highs a few years ago.

Molycorp Inc. warned on Monday night that it may not be able to continue as a going concern if it can’t fix its balance sheet. The Colorado-based company has US$1.7 billion of debt, including US$206.5 million of convertible notes that mature in June of 2016. It is bleeding cash from operations and is not in a position to meet its future obligations. Its cash position was down to US$212 million at the end of December.

“We are focused on this issue and have retained financial and other advisers to assist us in strengthening our current financial position,” chief financial officer Michael Doolan said on a conference call.

The stock plunged 35% on Tuesday to close at just US48¢, giving Molycorp a market value of US$117 million. It is a stunning fall for a company that was worth almost US$80 a share at its peak in 2011, and acquired Canadian firm Neo Material Technologies Inc. for US$1.3 billion.

Molycorp went public in 2010, a period when prices for rare earth metals like dysprosium and neodymium were sky high.

New rail-car standards coming too slow, agency says – by Kim Mackrael (Globe and Mail – March 18, 2015)

March 18, 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 — Canada’s transportation watchdog is questioning a federal proposal to phase in tougher tank-car standards over the next 10 years, saying a recent spate of fiery derailments is evidence that faster action will be needed.

The Transportation Safety Board made the comments in a progress report on its investigation into a crude-oil train accident earlier this month in Northern Ontario. The TSB is investigating the derailment of a Canadian National train near Gogama, Ont., on March 7, which spilled crude oil into a nearby river and sparked a massive fire that burned for more than three days.

While investigators did not come to a conclusion on what caused the accident, they said they found a section of broken rail that had been installed two days before the accident. The rail was sent to a laboratory in Ottawa for further analysis, the report said.

All of the tank cars involved in the accident were built after 2011 and complied with the current CPC-1232 standard, the TSB report said. That means they had steel cladding at the front and protection over the valves – added safeguards that were not present on the earlier-model tank cars involved in the Lac-Mégantic disaster two years ago.

Pacific Future Energy proposes B.C. refinery for Alberta bitumen – by Brent Jang (Globe and Mail – March 18, 2015)

March 18, 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.

VANCOUVER — The backers of a bitumen refinery project in northwestern British Columbia believe their made-in-B.C. recipe for getting oil out of landlocked Alberta will win over skeptics.

Other high-profile energy projects – such as Enbridge Inc.’s Northern Gateway pipeline – remain stalled amid widespread opposition in B.C., but officials at Pacific Future Energy say their solution is to build a refinery to address fears about tankers spilling oil into the Pacific Ocean.

While the Northern Gateway proposal calls for loading unrefined heavy oil into tankers for export from Kitimat, Pacific Future Energy is seeking to build an $11.4-billion (U.S.) refinery near Prince Rupert that would turn Alberta bitumen into products such as gasoline and diesel.

Stockwell Day, the former federal international trade minister who is now Pacific Future Energy’s senior adviser, argues that Enbridge isn’t able to win a social licence for Northern Gateway because the pipeline proposal is tainted by the risk of oil spills from Asia-bound tankers.

Pacific Future Energy is casting Enbridge as an Alberta-centric company that has underestimated British Columbians’ opposition to oil tankers.

Talisman Energy Inc, Nexen Energy ULC fire hundreds of employees in ‘bloody Tuesday’ – by Claudia Cattaneo and Geoffrey Morgan (National Post – March 18, 2015)

March 18, 2015

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

CALGARY – St. Patrick’s Day turned into “bloody Tuesday” in Calgary as major companies Talisman Energy Inc. and Nexen Energy ULC — both recently acquired by foreign operators — axed hundreds of employees, adding to the surge of energy sector jobs cut as a result of low oil prices.

Talisman, the international oil and gas producer that has been purchased by Spain’s Repsol SA, said 10% to 15% of its employees and contractors would be laid off this week, or about 150 to 200 of 1,300 Calgary head-office jobs that support its global operations.

“It’s a tough week, it’s a tough time for the industry, and the reality is that no oil and gas company is immune to low commodity prices,” said Brent Anderson, spokesman for Talisman.

Nexen, a subsidiary of China’s CNOOC Ltd., also announced 400 job cuts – 300 of them in Calgary. The job losses represent 14.5% of the company’s total Canadian head count.

“A decision was made to conduct a thorough review of our organization to ensure our long-term viability and sustainability,” CEO Fang Zhi said in a statement. “While regrettable, these organizational changes are necessary to align the company with our reduced capital spending program. We take these decisions seriously, and all impacted employees have been treated fairly and with respect.”

Mining and geopolitical risk: A global breakdown – by Cole Latimer (Australian Mining – March 17, 2015)

March 17, 2015

http://www.miningaustralia.com.au/home

Australia has always had an insular view of the mining industry.

It is often forgotten that many of the mining companies that operate here have a large suite of overseas operations, or are simply headquartered here but operate solely overseas.

There is more to the resources industry than what is happening on our island tucked away in the corner of the Pacific, and the vagaries of overseas machinations that affect it.

Yet, the mining sector has always viewed itself as a global industry, and one of the most important aspects of maintaining its ability to operate is remaining closely abreast of the constantly changing geopolitical landscape.

However as Deloitte points out: “As the pace of change accelerates it’s getting harder to predict the impact of these (shifting geopolitical) trends.” “It is becoming eminently clear that mining companies face rising regulatory, geopolitical, economic, and technological uncertainty.”

It goes on to state that despite best planning, much of the time miners will have to continue embracing uncertainty, essentially planning for the worst but hoping for the best.

Now is the time for Ring of Fire development: KWG official – by Matt Vis (tbnewswatch.com – March 17, 2015)

March 17, 2015

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

THUNDER BAY – A federal treasury board statement indicating that now may not be the time to move forward with Ring of Fire development has drawn sharp criticism from at least one major stakeholder.

Tony Clement was a guest speaker at a Timmins Chamber of Commerce luncheon Monday where he told the audience he does not anticipate the federal or provincial governments taking a larger role in the Ring of Fire until mineral prices rise.

Mo Lavigne, KWG Resources vice-president of exploration and development, was a panelist at a Ring of Fire discussion hosted by the Thunder Bay Chamber of Commerce Tuesday. He responded to Clement’s statement, telling reporters after the event that the idea of current commodity prices negatively affecting development is misguided.

“He’s really regurgitating a narrative that’s totally incorrect,” lavigne said. “For chromium and nickel this is exactly the right time to be developing the Ring of Fire. “I think it’s more misinformed commentary than anything else … People making uninformed comments is rampant these days. It’s so commonplace and unfortunately it’s not really helping us make good decisions.”

He added that the only markets suffering seriously is iron ore, which played a role in Cliffs Natural Resources backing out. But the markets remain stable for the chromite.

Miners Offer Bull Rings, Clinics as Protests Ice $25 Billion – by Firat Kayakiran and Andre Janse Van Vuuren (Bloomberg News – March 17, 2015)

March 17, 2015

http://www.bloomberg.com/

(Bloomberg) — Schools and clinics. Soccer fields and bull rings. Even plump guinea pigs — to eat. From South America to Africa, mining companies are throwing all that and more at communities to quiet growing opposition to controversial projects.

“There’s something like $25 billion worth of projects tied up or stopped,” Mark Cutifani, chief executive officer of Anglo American Plc, said in an interview. “We have to get all those relationships right.”

While opposition to mines is nothing new, the issue is a growing concern for miners like Anglo American and executives are increasingly speaking out. Billions of dollars are at stake, they say. Their opponents say the companies despoil the environment and often fail to benefit local economies, or at least not as much as they claim.

Push-back has been growing since the 1980s, when communities were rarely consulted about new mines. Now, local support is critical, according to Thras Moraitis, head of strategy at Xstrata Plc before its 2013 takeover by Glencore Plc.

“You can’t get a permit without involving full and prior consent of the local communities,” he said. Communities from Peru to South Africa are mobilizing to negotiate more successfully with the companies, according to two studies released late last year. Residents who are relocated to make way for mines are demanding more in return.

It’s taken a long time to get this far nowhere – by Mark Gentili (Sudbury Northern Life – March 16, 2015)

March 17, 2015

http://www.northernlife.ca/

Ontario created the Ring of Fire Secretariat in 2011 to develop, according to an Ontario Business Report document, “the chromite and other deposits in the Ring of Fire as quickly as possible and with due regard to environmental impacts and the needs of the Aboriginal communities within the region.”

That sounds great. Except if you ask anyone with a stake in the Ring of Fire, they’ll tell you they can’t figure out what the Secretariat has done the past four years….Then, less than a year ago, Ontario unveiled the Ring of Fire Development Corporation, ostensibly to do the same thing as the Secretariat. How many cooks does one meal need?

[Dalton] McGuinty sees mining the way his environmentally conscious (but terribly misinformed) southern urban supporters see it — dirty….Which begs the question, why would the Ontario Chamber tap his son to write the report card? Even if their intentions were pure, the optics of it are awful. I mean, there’s any number of educated policy wonks with information-gathering skills and no ties to the Liberals who could’ve written it.

Instead, the chamber is playing politics by defending the Ontario Liberals and trying to shame the feds into action, when they should be coming down on the side of development — that’s why they’re there. (Mark Gentili)

Mark Gentili is the managing editor of Northern Life and NorthernLife.ca.

The Ontario Chamber of Commerce’s “Where Are We Now?” report card on the Ring of Fire development in the Far North is a nice document. It’s full colour, has some good pictures and sports an attractive layout.

‘Zombie’ miners pulling down TSX Venture exchange – by Nelson Bennett (Business in Vancouver – March 16, 2015)

March 17, 2015

http://www.biv.com/

The plug should be pulled on these marginal junior miners, say investors

Of the 2,340 companies listed on the TSX Venture Exchange, about 1,400 are junior mining and exploration companies – many of which are headquartered in Vancouver.

But to hear retail brokers like Rick Rule describe them, more than 500 of them might as well be classed as pulp and paper companies, because that’s about all they produce: paper filings to meet exchange listing requirements, at the expense of exploration.

The chairman of Sprott Global Resource Investments Ltd. is among the growing number of resource-sector investors who say the TSX Venture Exchange has become weighed down by companies that should be considered clinically dead.

Bill Sheriff, CEO of the reinsurance company Till Capital, agrees: “A bunch of these should be delisted. We’re majority owners of a couple of companies that, quite frankly, one of them should be delisted. It’s only two cents.”

Tony Simon, a founder of the Venture Capital Markets Association, recently calculated that there are 598 companies on the TSX Venture Exchange with a collective negative working capital of $2 billion. That means they can’t possibly be meeting their listing requirements, according to Simon. But only about a dozen were delisted last year, according to the exchange.