Republic of Mining

COLUMN-Sliding investment, cost-cutting shows commodity boom-bust lives – by Clyde Russell (Reuters U.S. – November 28, 2014)

November 28, 2014

http://www.reuters.com/

LAUNCESTON, Australia, Nov 27 (Reuters) – Anybody who still has lingering doubts that the commodity cycle has turned bearish need only delve into two reports released this week on Australia’s resources sector.

The half-yearly report from the Bureau of Resources and Energy Economics (BREE), the government’s forecaster, showed only three projects, worth a total A$597 million ($507 million), reached a positive final investment decision (FID) in the six months to October.

This is not only the lowest number, but the lowest value for more than a decade, and is conclusive proof that investment in projects is waning under the burden of low prices and more muted demand forecasts as growth in top buyer China slows.

The other report released this week came from consultants PwC, with their annual review of mid-tier Australian miners showing companies are now trying to maximise productivity by boosting output while cutting costs.

The problem is so far these efforts aren’t bearing fruit, as prices fall faster than the companies can make improvements. “In fact, the worst may be yet to come, at least for iron ore and coal miners,” PwC said in the Nov. 25 release.

Central bankers’ love-hate gold relationship – by Lawrence Williams (Mineweb.com – November 28, 2014)

November 28, 2014

http://www.mineweb.com/

Why are most central bankers so keen not to proceed with gold repatriation? What is the true picture for gold held in official vaults?

LONDON (MINEWEB) – One senses a bit of a momentum growing in the precious metals sector. Is this just wishful thinking from someone who is something of a long-term believer in gold and silver, or is there some substance behind the feeling? After all gold is having trouble making any kind of decisive move above $1,200, being knocked back every time it sticks its head above the 1,200 parapet. But then, despite the knockbacks, it still seems to be clinging on, just about, to the $1180s and 90s with the occasional foray down a few dollars.

On the negative side the Swiss gold referendum looks to be going to come up with a No vote after unprecedented lobbying and scaremongering from the Swiss establishment. Even so the fact that this referendum is even taking place reflects the obvious unease which is running through sectors of the European financial community regarding the true levels of physical gold held on their behalf in the US in particular.

This suggests the beginnings of a growing lack of trust in the political and financial establishment. If this trust evaporates much further then government attempts to prop up their fiat currencies, which might otherwise be failing, will be called further into question as will government statistics purporting to show things are getting better the whole time while most of the people are not seeing the fruits of the so-called financial recovery.

Mining, independence at stake as Greenland goes to the polls – by Katja Vahl and Sabina Zawadzki (Reuters India – November 28, 2014)

November 28, 2014

http://in.reuters.com/

NUUK/COPENHAGEN – Nov 28 (Reuters) – Greenlanders go to the polls on Friday with hopes for a mineral-rich independence from Denmark foundering on the reality of a tiny, shrinking economy.

The fall of premier Aleqa Hammond last month in an expense scandal has muted the nationalist rhetoric that promised independence based on wealth from some of the largest mineral deposits on earth.

With major mining projects in limbo due to low commodity prices, regulatory instability and the bankruptcy of the owner of the most promising prospect in the country, politicians of all hues have focused on the ailing subsidised economy.

The campaign appears neck and neck. For weeks, polls showed opposition party Inuit Ataqatigiit, led by 36-year-old Sara Olsvig, would win for only the second time since 1979.

But the ruling Siumut party, now led by former policeman Kim Kielsen, is managing to distance itself from former premier Hammond’s expenses scandal. At least one poll in the past week shows Kielsen in the lead.

“Hammond accentuated all the differences between Denmark and Greenland.

NEWS RELEASE: David Suzuki Foundation supports call for moratorium on mining permits in northern Ontario’s Ring of Fire November 27, 2014

November 28, 2014

TORONTO — The David Suzuki Foundation has told the Ontario government it supports First Nations’ requests for a moratorium on mining exploration permits in the Ring of Fire. The Neskantaga and Nibinamik First Nations have asked the provincial government to enact an immediate moratorium on mining exploration permits in the region — the biodiversity-rich boreal forest and Hudson’s Bay Lowlands, more than 500 kilometres north of Thunder Bay.

The David Suzuki Foundation is working with the communities to help strengthen their capacity to engage in present and future policy, planning and land use decision-making processes, based on the shared objective of maintaining healthy landscapes that support traditional ways of life and provision of ecological services.

In September, Neskantaga and Nibinamik were two of nine Matawa communities calling for a moratorium on granting future and pending permits until First Nations and the Ontario government develop a regional protocol to address the issue, as they believe adequate consultations are not taking place.

“We agree that proceeding with development decisions while negotiations are under way is counterproductive,” said Rachel Plotkin, Ontario science projects manager at the David Suzuki Foundation. “The David Suzuki Foundation strongly believes that before mineral exploration begins, sufficient investments must be made in the social capital of the affected communities, such as investments in community services, so they can successfully engage in government-to-government decision-making processes.”

David Suzuki Foundation wants “social capital” invested in the Ring of Fire – by Staff (Northern Ontario Business – November 27, 2014)

November 28, 2014

Established in 1980, Northern Ontario Business provides Canadians and international investors with relevant, current and insightful editorial content and business news information about Ontario’s vibrant and resource-rich North.

The David Suzuki Foundation is siding with two northern First Nation communities in requesting a moratorium on mining exploration permits in the Ring of Fire.

The Toronto and Vancouver-based environmental organization has been working with Neskantaga and Nibinamik to build the remote communities’ policy and decision-making capacity toward making planning and land-use decisions that are in keeping with their traditional way of life.

Last September, Neskantaga and Nibinamik were two of nine Matawa tribal council communities that called for a moratorium on granting permits for mineral exploration until First Nations and Queen’s Park finalized a regional consultation protocol to address development in the James Bay lowlands.

The chiefs accused the province of moving forward on permitting companies which have not consulted with area First Nations. They insist it breaks the spirit of a regional framework signed last March that was supposed to guide future mining and infrastructure development in the Far North.

Iron-Ore Giant Vale Sees Rebound as Glut Squeezes Mines – by Juan Pablo Spinetto and Peter Millard (Bloomberg News – November 27, 2014)

November 28, 2014

http://www.bloomberg.com/

Iron-ore prices are poised to rebound from five-year lows as Asian infrastructure demand improves and high-cost mines close, according to the top producer Vale SA. (VALE5)

The steelmaking raw material, which slumped 49 percent this year to $68.49 a dry metric ton yesterday, will return to an average range of $85 to $90 next year, Chief Executive Officer Murilo Ferreira said in an interview. Prices jumped 2.2 percent today, the most in seven weeks. Vale isn’t considering slowing its expansions because of slumping prices and is pressing ahead with the $19.7 billion Serra Sul S11D mine and logistics project, the industry’s biggest, he said.

“There was a lot of volatility in prices this year and the market is undershooting at the moment and this will bring about a correction,” Ferreira, 61, said at the company’s headquarters in Rio de Janeiro yesterday. “This correction will come through the closure of many inefficient miners of high cost and poor quality iron ore.”

Vale, Rio Tinto Group (RIO) and BHP Billiton Ltd. are maintaining their expansions betting that higher-cost producers will be squeezed out of the market. The price plunge, including a 20 percent drop in the past three months, is prompting speculation China will close inefficient mines, while Cliffs Natural Resources Inc. is considering shutting a mine in Canada.

God didn’t make salmon streams for strip mining – by Judy Heilman (Alaska Dispatch – November 27, 2014)

November 28, 2014

http://www.adn.com/

This week I woke to yet another front-page story about a mining company destroying a salmon stream. This time it’s the Australian mining company XS Platinum Inc. that got caught turning the Salmon River in Southwest Alaska into a river of mine waste.

With mining disasters more and more common in the pages of Alaskan newspapers, it’s time to stop blindly trusting Outside mining companies with Alaska’s wild salmon streams. When XS Platinum applied for its permit to mine near the Salmon River, it promised Alaskans a “zero discharge” mine.

Instead, XS Platinum knowingly dumped enough pollution to turn the clear river into a filthy mess — so muddy that fisheries biologists couldn’t count the salmon from above.

But this mine isn’t alone. Another mine — heralded by the mining industry as an example of how mining and salmon can successfully co-exist — failed late this summer, sending billions of gallons of toxic mine waste into one of North America’s premier salmon streams.

The Mount Polley mine along the Fraser River in British Columbia is just the latest example how “state of the art” mining technology cannot stop the harm caused by massive dredging operations in and around sensitive salmon habitat.

Northern chief expresses opposition to Mining Advisory Council – by Ian Graham (Thompson Citizen – November 28, 2014)

November 28, 2014

The Thompson Citizen, which was established in June 1960, covers the City of Thompson and Nickel Belt Region of Northern Manitoba. The city has a population of about 13,500 residents while the regional population is more than 40,000. editor@thompsoncitizen.net

The chief of Manto Sipi Cree Nation (MSCN) at God’s River in northeastern Manitoba told attendees of the Mining and Minerals Convention in Winnipeg that he opposes the role of the provincial government’s Mining Advisory Council in mining exploration and development in Northern Manitoba.

“When I heard the presentation by the minister’s Mining Advisory Council, I had to speak out because the impression I got was that the advisory council was representing the voice of all First Nations and setting the stage how First Nations will conduct consultation and resource development in their territories,” said Chief Michael Yellowback in a Nov. 20 press release. “I had to set the record straight that Manto Sipi Cree Nation for one will not agree to any decision of the advisory council and the Province of Manitoba on matters of policy, processes or any agreement on resource development.”

Yellowback said Manto Sipi Cree Nation believes that any legislation, regulation, government policy or arrangement that affects First Nation rights is subject to Crown-First nation consultation. The Mining Advisory Council announced and signed a declaration of priorities at the Mining and Minerals Convention on Nov. 19 that included guidelines on consultation, resource development and engagement, establishment of a First Nation Economic Development Corporation and a revenue-sharing mechanism.

Iron Ore Caps Monthly Decline as Seaborne Supplies Increase – by Jasmine Ng (Bloomberg News – November 28, 2014)

November 28, 2014

http://www.businessweek.com/

Iron ore completed a monthly loss as Goldman Sachs Group Inc. said it may cut its forecast of $80 a metric ton for 2015 amid competition among seaborne producers.

Ore with 62 percent content delivered to Qingdao in China slumped 10.4 percent this month after reaching $68.49 a dry ton on Nov. 26, the lowest level since June 2009, according to data compiled by Metal Bulletin Ltd. Prices advanced 1.9 percent to $71.32 today, posting the first weekly gain in six.

The steel-making raw material has plunged 47 percent in 2014 as BHP Billiton Ltd. (BHP), Rio Tinto Group (RIO) and Vale SA expand output in Australia and Brazil, betting the increase will offset slumping prices and force less competitive mines worldwide to close. A property slump and slowdown in investment growth has set China, the biggest buyer, on course for the weakest full-year growth since 1990.

“We believe the risks are clearly skewed to the downside,” Goldman analysts Christian Lelong and Amber Cai wrote in a report e-mailed today. The New York-based bank has kept its prediction unchanged since March 2013. The raw material averaged $99.73 this year.

For now, the bank said it was keeping its average price forecasts unchanged partly because of the uncertainty related to recent Chinese statistics.

Oil drop sends Ottawa into damage control – by Shawn McCarthy and Eric Reguly (Globe and Mail – November 28, 2014)

November 28, 2014

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 – OPEC has thrown the global oil markets into turmoil with its decision not to cut its production targets in the face of a supply glut, a move that will have dire consequences for Canadian producers but offers some welcome relief at the gas pump for consumers.

Led by Saudi Arabia, the 12-member cartel ended a fractious meeting in Vienna on Thursday with a stand-pat strategy, pledging only to stick to its existing 30-million barrels-a-day target. However, increased production from non-OPEC countries, particularly Russia and the United States, means global oil supplies will be significantly higher than consumers will need in the coming months.

As a result, global crude prices – and oil company shares – plunged on Thursday.

The price of the benchmark North American crude, West Texas Intermediate, fell $4.46 (U.S.) – or 6 per cent – to $69.05 a barrel, while the leading international benchmark, North Seat Brent, lost $5 and fell to a four-year low of $72.26. Six months ago, the North American price hit $107 while Brent peaked at $115.

On the Toronto Stock Exchange, the index of energy stocks was off 7.4 per cent Thursday, as major oil stocks suffered sharp declines, while the Canadian dollar fell 0.7 cents to 88.22 cents (U.S.).

Why the collapse in oil prices is such a huge win for China – by Nathan Vanderklippe (Globe and Mail – November 28, 2014)

November 28, 2014

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.

BEIJING — The slowdown in China’s economy is so significant that oil prices, already in a free fall that has cut their value by a third since the summer, stand to remain weak for years to come, a prominent Chinese economist is warning.

Oil prices fell to four-year lows Thursday after OPEC member states opted not to trim output, a decision that sent the international Brent price of oil plunging more than $5 (U.S.) a barrel. The decision was widely viewed as a strategic move by the cartel to clip the wings of fast-rising U.S. output from booming regions like the Bakken and the Eagle Ford.

But Andy Xie, the often-contrarian former top Asia-Pacific economist for Morgan Stanley, warned that the massive investment overhang in China, valued at more than $6-trillion, will dramatically affect its energy demand growth, and will, as a result, rein in oil prices for a long time to come.

“China’s energy demand, the only source of growth for a decade, has fallen sharply,” he said in an interview. “There are several conspiracy theories out there. None can affect demand supply balance, which determines prices.”

How markets finally beat OPEC’s oil-price chokehold – by Terence Corcoran (National Post – November 28, 2014)

November 28, 2014

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

Nobody can truly say what the real long-term price of oil should be — but it would not be out of line to look at the outcome of Thursday’s OPEC blowout and conclude that the world is getting closer to the right number.

Supply, demand, competition and innovation are performing the usual service to consumers and driving prices down. That the market is performing its proper function should be no surprise, although it has taken longer than many expected for the mighty OPEC cartel to run up against the hard realities of economics.

As the North American price of crude oil dipped below US$70 a barrel Thursday, with analysts calling for US$60 or lower soon, the world’s leading source of energy appears to be heading back to where it came from. At US$60, the real price of oil (adjusted for inflation) would be close to the level it reached during the first OPEC oil crisis in the 1970s.

There may be lots more to come. As the late, great market economist Julian Simon wrote 20 years ago, the long-term data on energy prices in a market economy “show an unambiguous trend toward lower costs and greater availability.” Increasing demand spurs high prices, high prices trigger corporate innovation, prices fall.

Oil is also political, where competition also rules.

Ten things junior miners can do to survive the downturn – by David Poynton (Mining Markets Magazine – November 25, 2014)

November 28, 2014

http://www.miningmarkets.ca/

“The market turn for junior miners is just around the corner.” Really? The problem is, that corner just kept moving ahead and three years into the downturn, we all still seem to be in very tough times. With gold now under US$1,200 an oz. and our seniors making drastic cost cuts, what is next? Where are those better days?

Our industry in general — and the junior mining sector specifically — has undergone a fundamental and permanent change. Regular routine financings where all you debated about was a penny here or there, or commission, are long gone. Reasonable M&A deals and fair pricing are difficult to find — if at all — those with money can demand very steep terms. I’m not sure the “good old days” will ever return.

So let’s face it head on. Companies need to accept the new reality in order to adapt and survive. It is time to face some harsh truths — cash is king and it is time to scrimp and save every dollar. Time for some tough decisions and reviews.

Three years into this downturn, investors might be surprised at how many companies have only done the window-dressing and, hoping that elusive turnaround will save them, not even attempted to cut to the bone.

Often, management and boards are unable or uncomfortable dealing with the tough questions — they are often as not human issues: who keeps a job and who doesn’t?

Whatever happened to the Brics economies? – by Andrew Walker (BBC.com – November 26, 2014)

November 28, 2014

http://www.bbc.com/news/

Remember the Brics – Brazil, Russia, India, China and South Africa, the nations that were set to reshape the world economy? Two of them, China and Russia have the potential to cause some serious and rather unwelcome reshaping in the near future.

In China’s case it’s the risk that an economic slowdown could turn into something more damaging. With Russia, it’s the possible economic fallout from the conflict in Ukraine.

Four of these five countries – South Africa is the exception – were identified in 2001 as large and fast-growing economies that would have increasingly influential global roles in the future.

Today it’s China and Russia that are potentially the most troubling for the rest of the world in the near term. China’s story is one that we would inevitably have had to face sooner or later. Indeed you might say it is remarkable that it hasn’t come sooner.

China has recorded extraordinary rates of economic growth for a very long time – an average of 10% a year for three decades. But there are weaknesses. It’s based on very high rates of investment, currently running at 48% of national income or GDP.

When it’s so high there’s always a danger that many projects will turn out to be wasteful or unprofitable, undermining the finances of the investors themselves and anybody who has lent them money.

Barrick Gold considers asset sales – by James Wilson (Financial Times – November 27, 2014)

November 27, 2014

http://www.ft.com/intl/companies/mining

Barrick Gold is open to selling a wide range of assets as the world’s largest gold miner by output tries to cut its debts after a sharp fall in the gold price, according to one of its most senior executives.

However, co-president Kelvin Dushnisky said Barrick would not sell at any cost and made clear the miner was placing faith in a reshuffled management team and the productivity of its largest mines to try to ride out the storm engulfing the sector.

Gold miners across the world are eyeing more cost-cutting and restructuring after the price of the precious metal sank to four-year lows below $1,200 per ounce this month, leaving some companies haemorrhaging cash and investor support. Barrick’s share price has retreated to levels last seen two decades ago.

The gold price fall – from $1,900/oz in 2011 – has left many miners with lossmaking operations and sparked expectations of consolidation in the sector. This year Barrick and Newmont Mining, the second-largest producer, aborted advanced talks on a potential merger.

While many analysts have speculated that Barrick could return to talks with its US rival, Mr Dushnisky said discussions were “off the table”. He also accepted that Barrick would have little investor backing to try to acquire more mines from struggling rivals.