Republic of Mining

Resource takeovers no cause for national angst – by Howard Green (Globe and Mail – January 21, 2015)

January 21, 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.

What a difference a few years makes. Recall the bygone days when there was a fuss about foreigners wanting to buy our miners and oil companies. Sure, Spain’s Repsol played vulture when it scooped up Talisman last month, but it was welcomed rather than turned into a federal case.

The national harrumphing that went on back in 2006 and 2007 when Inco, Falconbridge and Alcan were sold to outsiders is amazing in retrospect. But who would want to be stuck with a fistful of those shares in their portfolios right now, given where commodities are?

Back then, not only commentators, but also Bay Streeters and big shot executives were critical of the CEOs of those companies, railing about how they were selling out Canada’s birthright to rapacious buyers from abroad. Or worse, that they were not willing to step up and pay up to be acquirers rather than sellers.

If only the country had such problems today. The truth is, Inco’s CEO at the time, Scott Hand, and Dick Evans, the CEO of Alcan, got absolutely brilliant prices for their shareholders when they sold their respective companies. Wouldn’t it be something to hear complaints today about selling resource companies at the top of the market?

Oil slide to shave billions off federal and provincial government revenue – by Bill Curry and Shawn McCarthy (Globe and Mail – January 21, 2015)

January 21, 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 and the provinces will lose a combined $14-billion in government revenue this year as a result of falling oil prices, according to new analysis that comes as the federal Conservatives shift their economic message ahead of Parliament’s return next week.

The federal government alone is set to lose $4.3-billion this year, the Conference Board of Canada said in a report Tuesday. The board is among the organizations that provide forecasts to the finance department and its findings add to the growing private sector opinion that Ottawa’s return to budget surplus is in jeopardy.

The International Monetary Fund lowered its forecast for global economic growth, helping trigger a 4.7 per cent drop Tuesday in the price of North American crude, which closed at $46.49 (U.S.) a barrel Tuesday. The IMF also cut its forecast for Canada. The Bank of Canada is expected to comment in detail Wednesday on the impact of low oil prices in its quarterly Monetary Policy Report. Analysts suggest the Canadian dollar could sink below 82 cents U.S. depending on what the bank has to say.

The rapidly changing economic picture is also leading to some mixed messages from the Conservative government.

Nickel miners shrug off sluggish prices – by Paul Garvey (The Australian – January 22, 2015)

January 21, 2015

http://www.theaustralian.com.au/business

NICKEL miners Western Areas and Panoramic Resources have shrugged off the sluggish nickel price with respective pieces of good news, with Western Areas flagging a big improvement in its guidance for 2015 and Panoramic surging on the back of a new discovery.

Western Areas said production costs at its high-grade Flying Fox and Spotted Quoll mines in Western Australia had fallen to their lowest in four years, clearing the way for the company to upgrade its guidance at its half-year result.

Each pound of nickel produced by Western Areas cost the company $2.23, compared with its guidance for the full year of between $2.70 and $2.80 a pound.

The lower production costs reflected higher nickel grades, a renegotiated contract with mining contractor Barminco, and optimisation efforts by the operations team.

Net cash at the company increased from $44.7 million to $53.7m, despite the falling nickel price and the payment of a dividend during the quarter. Western Areas executive director David Southam said the miner had outperformed during the December quarter.

BHP’s Spinoff Offers Glencore an Alternative to Rio: Real M&A – by Brett Foley, David Stringer and Angus Whitley (Bloomberg News – January 21, 2015)

January 21, 2015

http://www.bloomberg.com/

Rebuffed by Rio Tinto Group (RIO) last year, Glencore Plc (GLEN) will soon have another acquisition target to consider for expanding its mining empire: the company formed from the biggest spinoff in the industry’s history.

BHP Billiton Ltd. (BHP) plans to split off assets including its silver, manganese and aluminum operations to focus on larger businesses such as iron ore. The newly formed company — Perth, Australia-based South32 Ltd. — may appeal to Glencore because it’s being spun off near the bottom of the commodity cycle and it produces many of the same metals as the Swiss giant, said Aviate Global LLP.

South32 could command a market value of about $15 billion when it lists in coming months and earnings are set to surge in the next five years with prices of its materials poised to rise, said Macquarie Group Ltd. As his biggest rivals such as Vale SA and Anglo American Plc hunker down to ride out plunging prices of bulk commodities, Glencore Chief Executive Officer Ivan Glasenberg is looking for undervalued acquisition targets.

“He’s got a free pass into these assets,” Paul Gait, a London-based mining analyst at Sanford C. Bernstein & Co., said by phone. “Looking at it from Ivan’s perspective, I’d be thinking the current downturn isn’t going to last. It never does.”

Representatives for Glencore and Melbourne-based BHP declined to comment.

NEWS RELEASE: Antofagasta Investment Company Limited completes acquisition of Duluth

January 21, 2015

TORONTO, Jan. 21, 2015 /CNW/ – Duluth Metals Limited (“Duluth” or “Duluth Metals”) (TSX: DM) (TSX:DM.U) is pleased to announce that it has completed its previously announced proposed arrangement (the “Arrangement”) with Antofagasta Investment Company Limited (“Antofagasta”), a wholly-owned subsidiary of Antofagasta plc. Under the Arrangement, Antofagasta has acquired all of the outstanding common shares of Duluth (the “Duluth Shares”) (other than Duluth Shares held by Antofagasta and its affiliates) at a price of CDN$0.45 per Duluth Share in cash (the “Cash Consideration”).

The Duluth Shares are expected to be de-listed from the Toronto Stock Exchange as soon as practicable.

In order to receive the Cash Consideration in exchange for their Duluth Shares, registered shareholders must complete, sign, date and return the Letter of Transmittal that was mailed to each registered shareholder. The Letter of Transmittal is also available from Duluth’s depositary, Equity Financial Trust Company, by telephone at: (i) 1 (866) 393-4891 (North American Toll Free); or (ii) under Duluth’s issuer profile on SEDAR at www.sedar.com.

Shareholders whose Duluth Shares are registered in the name of a broker, investment dealer, bank, trust company, trustee or other intermediary or nominee should contact that intermediary or nominee for assistance in depositing their Duluth Shares and should follow the instructions of such intermediary or nominee in order to make their election and deposit their Duluth Shares.

COLUMN-China 2014 growth the template for years to come – by Clyde Russell (Reuters U.S. – January 20, 2015)

January 20, 2015

http://www.reuters.com/

LAUNCESTON, Australia, Jan 20 (Reuters) – The important thing from China’s economic deluge isn’t that fourth quarter growth was slightly higher than expected, or even that growth over the whole of 2014 was the weakest in 24 years.

These are merely the headline grabbers. What really matters is that 2014 provided the template for what China’s economy is going to look like in the next decade.

The trends that started to come to fore in the past year are likely to continue, and these include an economy less reliant on export-led manufacturing, slower growth in commodity consumption and imports and a lesser role for state stimulus spending. There will be those who bemoan the slower growth, having grown accustomed to China’s extended and rapid expansion over the past three decades.

However, a gradual slowing of the Chinese growth rate has to be seen as an overall positive, lowering the risk of creating unsustainable bubbles in the economy and transitioning the world’s most populous nation from the source of the world’s cheap labour to being the engine of middle-class consumerism.

Fourth-quarter gross domestic product (GDP) expanded 7.3 percent, above expectations for a gain of 7.2 percent and matching the third quarter number, according to official data released Tuesday.

What can we learn from latest German gold repatriation? – by Lawrence Williams (Mineweb.com – January 20, 2015)

January 20, 2015

http://www.mineweb.com/

German gold repatriation continued in 2014 at a higher pace – but the overall slow speed leaves many questions unanswered and again raises arguments for auditing the Fed. Be careful what you wish for.

Germany’s Bundesbank has made great play of the fact that it managed to repatriate some 85 tonnes of gold from New York in 2014 and 35 tonnes from Paris. Technically, as the Bundesbank points out this is very much on schedule with its promise to bring back into German vaults some 300 tonnes held in New York and 374 tonnes from France by 2020 – but still the question has to be asked: why is the agreed schedule so slow? If Germany truly wants its gold back why would it have to take so long to achieve this?

One assumes the French portion could be just loaded onto a few trucks and shipped cross border, while the U.S. part likewise flown across the Atlantic on a few 747 freighters.

It’s almost certain that the song and dance the Bundesbank is making about the latest repatriation figures is as a direct result of the media furor over the minuscule amounts repatriated in 2013 – only 5 tonnes from New York and 32 tonnes from Paris. That was true fodder for the theorists who, abound in the gold sector, seriously believe that the amounts of gold held in many of the big Central Bank vaults – notably those in the U.S., the U.K. and France – have been leased out and title to any that is remaining may belong elsewhere.

Copper takes shine off Rio Tinto result – by Matt Chambers (The Australian – January 20, 2015)

January 20, 2015

http://www.theaustralian.com.au/business

MINING giant Rio Tinto has had an uncharacteristically subdued fourth quarter, missing copper guidance and analyst forecasts and not delivering to some expectations on iron ore.

Mined copper output slumped 23 per cent from the previous quarter to 128,300 tonnes, as the big Escondida mine in Chile, which Rio (RIO) owns in a joint venture with BHP Billiton, was hit by water restrictions.

The Rio-operated Oyu Tolgoi copper and gold mine in Mongolia was hit by a fire at the concentrator. Deutsche Bank had been expecting quarterly production of 147,600 tonnes and UBS was predicting 138,900. As a result of the weak quarter, 2014 mined copper production of 603,000 tonnes missed guidance of 615,000 tonnes.

Fourth-quarter shipments (including minor partners’ share) from Rio’s WA-dominated iron ore unit rose 13 per cent to a record 82.2 million tonnes as the company continues to expand its Pilbara region infrastructure and mines.

This brought full-year sales to 302.6 million tonnes, just beating guidance of 300 million tonnes. The quarterly effort missed UBS sales expectations of 83.9 million tonnes but beat Deutsche Bank expectations of 81 million tonnes.

Investors to blame for supporting dithering juniors – by Henry Lazenby (MiningWeekly.com – January 20, 2015)

January 20, 2015

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

VANCOUVER (miningweekly.com) – In the aftermath of several key mining-related indexes having dropped significantly since 2011, the mining industry as a whole, and particularly the junior explorers and project generators, have had to “reset” and undergo a paradigm shift from being project promoters to true value creators.

This was the message institutional investor adviser Jayant Bhandari relayed to affiliated investors attending the Cambridge House International Vancouver Resource Investment Conference 2015.

He pointed to several indexes, such as gold, gold exchange traded funds, the Market Vectors Junior Gold Miners ETF and the TSX, having each shown significant declines since 2011. The fountainhead of the problem, Bhandari argued, was uneducated investors, who were supporting dithering companies that were not creating value.

He had found that investors were often influenced by passions and half-truths such as the myth of price leverage in a rising cost environment and fads, such as the axiom of “grade is king”, or the promise of a new geographic “flavour of the month”, such as Colombia or the Yukon, all while failing to look at the specific company’s financial and legal documents.

Bhandari explained, for instance, that the ‘grade is king’ fad was not always true.

COLUMN – A few rays of sunshine break through coal’s storm clouds – by Clyde Russell (Reuters India – January 19, 2015)

January 20, 2015

http://in.reuters.com/

LAUNCESTON, Australia – The new year has started positively for Asian coal, with prices rallying from a 5-1/2 year low, Chinese imports jumping to the highest in 11 months and renewed merger and acquisition interest.

While these are undoubtedly welcome developments for a sector that has witnessed four years of falling prices, there are still serious questions as to whether these swallows really do indicate a summer of good fortune ahead.

The spot price of thermal coal at Australia’s Newcastle port, an Asian benchmark, rose to $62.91 a tonne in the week ended Jan. 16, up 3 percent from $61.04 the prior week, which was the lowest since April 2009.

The obvious caveat here is that prices are still some way below the breakeven point for many miners in top exporters Australia and Indonesia, and it will take weeks of sustained gains to bring the sector as a whole back into the black.

Chinese imports were 27.22 million tonnes in December, the highest since January last year, again a positive sign but not enough to mask that imports for 2014 as a whole were down 10.9 percent to 291 million tonnes, the first annual drop in a decade.

Mosaic lifts profits hopes, citing strong phosphate, potash demand (Agrimoney.com – January 20, 2015)

January 20, 2015

http://www.agrimoney.com/

Shares in potash groups rose after Mosaic, one of North America’s biggest producers of the fertilizer, unveiled a, rare, upgrade to its profits hopes, saying the buyers had returned “in force”.

The US-based fertilizer giant said it had raised its guidance for earnings in the October-to-December quarter to $0.83-0.88 a share excluding one-off factors.

Besides representing a more-than-doubling in the underlying $0.36-a-share result from the same period of 2014, the upgraded guidance is above the $0.58 a share that Wall Street had been expecting.

Potash shares traded firmer on Tuesday, with shares in Germany’s K+S up 2.3% at E25.40 in afternoon deals in Frankfurt, outperforming a 0.2% rise in the Dax index, while in Toronto shares in PotashCorp gained 3.9% to Can$43.33 in early deals. Stock in Mosaic itself opened up 2.8% at $47.27 in New York.

‘Customers came in force’

Mosaic said its upgrade reflected demand for potash and phosphates which had “exceeded our expectations” during the latest quarter, boosted by sales to fertilizer retailers, which had run down their stocks.

Eagle GM: Nickel a ‘good place’ – by Christie Bleck (The Mining Journal – January 20, 2015)

January 20, 2015

http://www.miningjournal.net/ [Michigan]

MARQUETTE – The business of producing nickel is in good shape, Michael Welch, general manager of Lundin Mining Corp.’s Eagle Mine, told the Economic Club of Marquette County Monday.

Welch was the guest speaker at the club’s monthly program at the Ramada Inn. He joined Eagle Mine in January 2014, coming from Xstrata’s Raglan operation, a large nickel mine in northern Quebec situated in subarctic conditions and facing challenges similar to Eagle.

Eagle Mine in Michigamme Township – a Lundin subsidiary – employs more than 400 people and is producing nickel, copper and small amounts of other metals over its expected duration of eight years.

“Short term, nickel has a very good supply-and-demand outlook,” said Welch, who noted 2015 will be a transition year as demand for nickel will outstrip supply. “Bottom line is, nickel’s going to be a good place to be.”

Laptops, cell phones – items used by just about everybody in the room, according to an impromptu poll by Welch – use nickel battery technology, he pointed out.

Mining: Copper’s reputation tarnished (The Africa Report – January 20, 2015)

January 20, 2015

http://www.theafricareport.com/

Between the infrastructure deficit, revisions to the mining code, instability and Gécamines’ dodgy deals, copper is losing some of its conductivity with investors.

The year 2013 was a record breaker for the Democratic Republic of Congo (DRC), which produced an estimated 913,000tn of copper, a third more than in 2012 and its highest level for many years.

The government had predicted that copper output would be even higher in 2014, topping 1m tonnes, but a chronic and debilitating shortage of electricity has put paid to that. Annual copper output for 2014 looks like it may be less than 900,000tn.

Investors are also worried about long-delayed changes to the mining code and militia activity in Katanga Province. The electricity crisis is immensely frustrating to international mining companies operating in Katanga, all of whom were promised adequate power by the Société Nationale d’Electricité (SNEL) when they invested.

Tired of endless arguments with SNEL, the big companies went to prime minister Augustin Matata Ponyo to voice their concerns. In January 2014, he told companies that SNEL would ration power and that companies would have to restrain their expansion programmes.

Zinc and nickel price upside ‘imminent’: Clarus – by Peter Koven (National Post – January 20, 2015)

January 20, 2015

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

There has been a lot of bullish talk in the metals community about zinc and nickel over the past couple of years, as many insiders believe those commodities are poised for a rally. You can include Clarus Securities analyst Mike Bandrowski in that group.

He published a detailed note on Tuesday that suggests zinc and nickel have “imminent” upside and will perform very strongly over the next two years as inventories disappear.

In the case of zinc, Mr. Bandrowski noted the market is already in deficit, and that deficit should get bigger following the closures of the Lisheen and Century mines this year. He said exchange inventories have fallen by more than half over the last two years and should be at “critical” levels later in 2015.

“We believe the lack of funding in zinc mine development and exploration has now caught up with the marketplace and zinc prices will respond in 2015,” he said in a note. “Despite the broad commodity sell-off, zinc has held up quite well, likely an indication of the favourable supply/demand fundamentals.”

Nickel has received more attention than zinc due to an Indonesian export ban on raw ore that was imposed a year ago, which removed about 25% to 30% of global nickel supply.

Mining firm takes on B.C. environmental group in defamation court battle – by Tamsyn Burgmann (Canadian Press/CTV News – January 19, 2015)

January 20, 2015

http://www.ctvnews.ca/

VANCOUVER — Criticism of a proposed mine by an environmental group and allegations of defamation by the project’s owner have landed both parties in British Columbia Supreme Court.

Taseko Mines Ltd. (TSX:TKO) launched the lawsuit after the Wilderness Committee made claims during a 2012 public comment period that the New Prosperity mine could destroy Fish Lake. The proposed gold and copper mine, 125 kilometres southwest of Williams Lake, was undergoing a federal environmental assessment when the statements were made.

Taseko lawyer Roger McConachie told court on Monday the company’s civil complaint is based on five articles published by the non-profit organization, which were emailed to supporters and posted online starting in January 2012.

“You will hear submissions related to corporate entitlement to have its reputation protected by a defamation lawsuit,” said McConachie, noting he expects to spend weeks presenting evidence.

The material involves libellous descriptions of the proposed project, a letter-writing tool that encouraged re-publication of the organization’s claims and statements the company was pursuing a lawsuit with the purpose of silencing public debate, McConachie argued.