Republic of Mining

Rock-bottom prices forcing Cliffs to pull up stakes in Canada – by Bertrand Marotte and Nicolas Van Praet (Globe and Mail – November 20, 2014)

November 20, 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.

MONTREAL — Cliffs Natural Resources Inc.’s Canadian adventure is winding down. The Ohio-based mining giant is preparing to shut down its money-losing Bloom Lake iron ore mine in northeastern Quebec amid rock-bottom prices for the mineral and high operating costs. It has already closed a Labrador iron ore property at Wabush and said it is looking to sell its chromite deposits in northern Ontario’s Ring of Fire.

Cliffs has spent hundreds of millions of dollars developing the high-potential Ring of Fire deposit and the existing Lake Bloom operations, but has run into a series of roadblocks, including a five-year low for iron ore prices, slumping Chinese demand and major delays in getting agreements with Ontario and First Nations over essential infrastructure for the Ring of Fire.

A shutdown of Bloom Lake would be a major blow to the local economy and to the provincial government’s multibillion-dollar Plan Nord economic development strategy pinned on natural resources extraction north of the 49th parallel.

Likewise, the Ontario government had made the Ring of Fire the centrepiece of its ambitious development plans for the mineral-rich region about 500 kilometres northeast of Thunder Bay in the James Bay Lowlands. And Cliffs had been the leading mining player in that plan.

INTERVIEW-India to allow foreign firms mine and sell coal – by Krishna N. Das (Reuters India – November 20, 2014)

November 20, 2014

http://in.reuters.com/

NEW DELHI, Nov 20 (Reuters) – India will allow locally registered foreign firms to mine and sell coal when commercial mining is permitted as part of the opening up of the nationalised industry after four decades, Coal Secretary Anil Swarup told Reuters.

To end a chronic coal shortage that cripples power plants and curb the country’s imports of the fuel, the Narendra Modi government will also spend about $1 billion by 2019 to buy railway wagons and transport coal from remote mines, Swarup said in an interview on Thursday.

The government last month made provisions for private firms to commercially mine coal but did not set any timeline for when actual digging will start.

The decision will open the door to global giants like Rio Tinto and BHP Billiton and help ramp up output from India’s huge reserves – the world’s fifth biggest.

“Any company registered in India can bid (when a commercial coalfield auction takes place),” Swarup said. “So a foreign company registered in India can also bid, provided they fulfil other conditions.”

Opening up the industry will increase private coal production to about 400 million tonnes by 2019 from less than 50 million tonnes last year, Swarup said.

What Uralkali’s mine shutdown may mean for the potash market – by Jonathan Ratner (National Post – November 20, 2014)

November 20, 2014

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

A major supply outage at one of Uralkali’s potash mines in Russia raises the prospect of a much tighter global market for the commodity and could serve as a much-needed catalyst for Canadian fertilizer stocks.

The shutdown of the Solikamsk-2 potash mine after Uralkali detected an increased flow of brine, which can weaken a mine’s structure, bodes particularly well for producers such as Potash Corp. of Saskatchewan Inc. to increase their sales since the Russian mine has annual capacity of approximately 2.3 million tonnes.

Raymond James analyst Steve Hansen said early indications are that the shutdown will be an extended one or possibly worse, and it comes during a period of international contract negotiations, which could influence both Chinese and Indian contract pricing to the upside.

He raised his 2015 international pricing benchmarks by US$10 per tonne to reflect the additional bargaining leverage that potash marketer Canpotex, whose members include Agrium Inc., Mosaic Co. and Potash Corp., should get from this development.

“With both Uralkali and Belaruskali running close to flat out of late, we believe that much of the volume shortfall stemming from this supply outage will accrue disproportionately to the western-based producers (i.e., Canpotex) who possess ample slack capacity,” he told clients.

Cliffs’ massive closure costs at Bloom Lake stun analysts – by Peter Koven (National Post – November 20, 2014)

November 20, 2014

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

Three weeks ago, Lourenco Goncalves warned that shutting down the Bloom Lake mine in Quebec would not be a simple task. “Going away from [Bloom Lake] is not deleting it on a computer. It’s a pretty complicated process,” the chief executive of Cliffs Natural Resources Inc. told the Financial Post.

He wasn’t kidding. Cliffs announced on Wednesday that it plans to exit Bloom Lake. And if it can’t find a buyer, it expects to be on the hook for astounding closure costs of US$650-million to US$700-million during the next five years. The stock plunged US$2.04 or 20% to US$8.17 in New York on the news.

The Cleveland-based miner did not respond to requests for comment. But analysts said a key problem for Cliffs is the penalty costs involved in breaking a “take or pay” rail contract between Bloom Lake and the Quebec North Shore and Labrador Railway Company. If the mine shuts, there is no choice but to terminate that contract.

Citigroup analyst Brian Yu was forecasting US$360-million of care and maintenance and transport penalty costs over three years to close Bloom Lake, noting the company’s estimate is “obviously much larger.”

Cliffs said in a filing this month that if Bloom Lake were to close, “various commitments including rail minimums, royalties, and other ongoing costs could be incurred.”

Red Chris mine failure would eclipse Mount Polley damage: report – by By Cara McKenna (CBC News British Columbia – November 19, 2014)

November 20, 2014

http://www.cbc.ca/news/canada/british-columbia

Porous soil at site of proposed tailings pond dam called a ‘major design issue’

The Canadian Press – The results of a third-party review into the design of a northwestern B.C. gold and copper mine says it has the potential to cause significantly more environmental damage than the recent collapse of the Mount Polley tailings pond.

Engineering firm Klohn Crippen Berger made 22 recommendations for the owner of the mine, Imperial Metals, to improve the tailings dam of the Red Chris mine, 500 kilometres north of Terrace.

The review found the design of the dam is feasible, but that there are issues that must be addressed. The three-phased review looks at the tailings pond design, water quality predictions and geohazards at the mine site.

It identifies a “major design issue” for the soil on which the dams would be built, noting the porous soil could cause damaging water leaks if the planned installation of a fine-grained tailings blanket isn’t enough to limit seepage.

It also suggests that designers carefully monitor the water balance for their tailings reservoir and complete a risk assessment around the effects of another nearby landslide.

Quebec-Ontario power-sharing shows energy synergy – by Martin Regg Cohn (Toronto Star – November 20, 2014)

November 20, 2014

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Quebec has put separatism on the backburner. Is Ontario ready to reciprocate — by renouncing its own costly history of electricity separatism?

For decades, Ontario built political moats around its nuclear reactors — and raised the drawbridges to prevent the flow of cheaper hydroelectric power from our neighbouring province. But as Central Canada faces up to an era of economic upheaval and energy uncertainty, against a backdrop of newfound political stability, the calculus is changing.

We’ll get a hint of the economic and political benefits of energy co-operation Friday, when Quebec Premier Philippe Couillard and a dozen of his senior ministers sit down with Ontario’s cabinet. The meetings of ministers will produce a meeting of minds:

After months of negotiations kicked off by Wynne and Couillard, the two provinces are set to sign a historic power-sharing agreement — electrical, not political. The goal is to backstop each other’s base load electricity during peak periods, going beyond the traditional stop-gap approach of buying and selling power on short-term deals at peak periods.

This new approach will lead to ongoing power swaps without any money changing hands: Quebec’s peak load occurs during the winter heating season, when electrical baseboard heating puts a strain on its abundant reservoirs of hydroelectricity.

OBITUARY: Engineer Walter Curlook was ‘Pied Piper of productivity’ – by Judy Stoffman (Globe and Mail – November 20, 2014)

November 20, 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.

Walter Curlook’s favourite film was the Danish drama Babette’s Feast. Perhaps this story, of a Parisian chef who takes refuge in an austere religious community, then spends all her money to prepare a sumptuous meal that awakens her hosts’ repressed senses, confirmed Mr. Curlook’s belief in generosity – sharing wealth to enlarge people’s horizons.

As a metallurgist, engineer and manager who spent his entire career as an executive at Inco when it was the world’s largest nickel miner, he understood how to create wealth as well as share it. Mr. Curlook, who died on Oct. 3 in Toronto of a brain hemorrhage at the age of 85, held 14 patents for improvements to nickel refining and played a role in the establishment of a science centre, a college and a research facility for particle physics in Sudbury that has no equal in Canada.

Brilliant and tenacious, he never stopped working. After he retired from Inco, he became an adjunct professor in materials science and engineering (unpaid) at the University of Toronto and donated $1-million to set up two laboratories there for the study of minerals.

“He was one of those people able to use a larger percentage of his brain than most of us,” his son Michael said. His daughter Christine Stinson recalled her father’s ability to be so absorbed in some problem that he would not hear his children speak: “He would sort of zone out and my mother would tell us, ‘Quiet – your father is thinking.’”

PR trickery tarnishes oil patch’s credibility – by Jeffrey Jones (Globe and Mail – November 19, 2014)

November 20, 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.

CALGARY — It’s become the mantra of the oil patch and its top executives: What this country needs is an adult, fact-based conversation about energy. According to a newly unearthed document with TransCanada Corp.’s logo on it, it could also do with a heaping helping of manipulation.

And there, encapsulated in a neat package, is precisely what’s wrong with public discourse about energy development and building pipelines.

Rather than actually sticking to a policy of engaging in open dialogue, promoting economic benefits and addressing concerns with real explanations from experts – all things the industry has pledged to do time and again – there are factions preferring communications black ops, phony grassroots campaigns, squadrons of dutiful Twitter trolls and search-and-destroy missions on opponents.

The document, prepared by Edelman, the global PR firm, for TransCanada and its $12-billion Energy East pipeline proposal, was obtained by Greenpeace and released on Monday.

Some parts include obvious strategies like sticking to a positive message and framing a communication to try to gain trust. Other parts urge the kind of mean-spiritedness the company will want to avoid as it promotes a project that would change the face of the energy industry by moving oil sands crude across six provinces.

Lacking buyers, Cliffs Natural looks to exit Quebec’s Bloom Lake mine – by Bertrand Marotte (Globe and Mail – November 19, 2014)

November 19, 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.

MONTREAL — Hobbled by an iron ore price plunge and high costs, Cliffs Natural Resources Inc. says it is “pursuing exit options” for its Eastern Canadian iron ore operations which may result in the closure of the Bloom Lake mine.

The U.S. iron ore producer, cut to junk status by Standard & Poor’s last month, said on Wednesday that a “potential investment” in Bloom Lake is not “achievable within a time frame acceptable to Cliffs.”

Closing costs at the mine, located north of Sept-Îles, Que., would be in the range of $650-million (U.S.) to $700-million over the next 5 years, the company said. About 500 people work at Bloom Lake.

The price for iron ore – a key ingredient in steel-making – has slipped to its lowest level in more than five years. It is now in the $72-per-tonne range and could fall to less than $60 as output continues to rise and global demand remains weak, Citigroup Inc. said in a report.

A slump in Chinese demand and a global iron ore glut as Australian producers ramp up production have pushed prices down. “The drop in the iron ore price is forcing the closure of some of the higher-cost ore mines,” Raymond James analyst Adam Lowe said.

Nickel Rises Most in Three Weeks as Indonesia Adheres to Ore Ban – by Debarati Roy and Laura Clarke (Boomberg News – November 19, 2014)

November 19, 2014

http://www.bloomberg.com/

Nickel prices rose the most in three weeks after Indonesia said a ban on exports of unprocessed ore remains in place, reinforcing concern that global demand is set to exceed supplies.

Today, Bambang Adi Winarso, senior adviser to the coordinating minister for economic affairs, affirmed the policy by Indonesia, the world’s largest producer of mined nickel ore. Residential-construction permits in the U.S. climbed in October to a six-year high, the government said. Copper, aluminum and lead prices rose.

“Strong U.S. data, combined with supply concerns from Indonesia, is pulling nickel higher,” Tim Evans, the chief market strategist at Long Leaf Trading Group, Inc. in Chicago, said in a telephone interview. “We are seeing some buying across base metals.”

Nickel for delivery in three months on the London Metal Exchange advanced 3.2 percent to $16,149 a metric ton at 4:50 p.m. A close at that price would mark the biggest jump since Oct. 28. Through yesterday, the commodity rose 13 percent this year.

Citigroup Inc. yesterday forecast a global deficit of 62,400 tons in 2015, expanding to 103,600 tons in the following year. “Inventories of nickel in all its various forms have fallen in China, with supply now falling as well in the form of a seasonal decline in Filipino exports,” the bank said. “Optimism remains strong toward nickel prices for 2015.”

Xi’s visit to Tasmania positive, but exposes mining to dining myth – by Clyde Russell (Reuters U.S. – November 19, 2014)

November 19, 2014

http://www.reuters.com/

HOBART, Australia – Why would arguably the world’s second-most powerful person bother to visit an island at the bottom of the world most famous for a cartoon character that bears little resemblance to the real animal?

Chinese President Xi Jinping’s visit on Tuesday to Hobart was a series of photo opportunities with real Tasmanian devils, school children and very eager to impress political leaders in Australia’s southern island state.

But while Xi was busy showing his softer side, the real business was happening across town where Australian and Chinese business leaders were attending a forum on investment opportunities in Tasmania.

Tasmania is hoping to leverage its clean, green environment into booming Chinese demand for quality agricultural produce such as beef, lamb, salmon and seafood like rock lobster and abalone.

Tourism was also a key component, with Xi’s visit sparking hopes of increased Chinese interest in the natural beauty of Tasmania, which is roughly the size of Sri Lanka but has a population of only around 500,000 people. The forum also highlighted the mining opportunities in the state, particularly those for copper and nickel as well as minor metals such as tungsten.

The Commodity Supercycle Ain’t Over – Yet – by Erik Swarts (Market Anthropology – Novmeber 18, 2014)

November 19, 2014

http://marketanthropology.tumblr.com/

As surprising as it might sound today, we believe the secular trend for commodities has higher elevations to travel, before eventually running its course – possibly as far out as early into the next decade. While in 2011 we became adamant that the thesis trade in commodities – specifically in its leading sector of precious metals, had become crowded and overhyped, those excesses have been wrung out of the markets over the past three and a half years and offer what we perceive to be extremely compelling long-term valuations going forward.

This idea remains supported by our research that implies yields are not headed materially higher anytime soon – despite the anxieties surrounding the Fed raising interest rates over the next few years. Moreover, we expect that real yields (nominal – inflation) will remain suppressed and eventually retrace the rise that began in the back half of 2011.

When the real yield cycle finds its zero bound and breaks below, commodities tend to outperform in the market over an extended period of time. All things considered, the death knell spike in real yields that has historically punctuated the end of major commodity booms in the past – has yet to appear for us on the horizon.

Over the years we have shown a long-term Hawking view of the nominal yield cosmos, which depicts an antithetic and gradual troughing, versus the violent and exhaustive secular peak in yields the markets experienced in the early 1980’s. While 10-year yields this year have retraced back to the mid point of our expected range (1.5%-3.0%), taking into account the symmetrical structure and mirrored return of the long-term yield cycle, an estimated secular pivot higher would not take place until early in the next decade.

Tumbler Ridge Residents Fear for Town’s Future – by Jeremy J. Nuttall (The Tyee.ca – November 18, 2014)

November 19, 2014

http://www.thetyee.ca/

‘It’s not nice’ in region that brought in foreign workers.

Two years after politicians rushed to defend a mining company that was hiring workers from China over locals in Tumbler Ridge, B.C., residents are worried about their town’s future after layoffs at two nearby mines.

“It’s not nice,” said Clayton Knowles, who lost his job at Wolverine mine seven months ago. “Every day I’m counting the hours I get to make sure I can pay my mortgage.” As residents fret about their economic futures, local politicians are conspicuously silent.

“The federal government, the provincial government are not going to help this town,” Knowles said. “They haven’t yet, have they?”

A local newspaper recently quoted Tumbler Ridge’s deputy mayor as estimating that the unemployment rate in the town of 2,700 was as high as 70 per cent. And some local residents told The Tyee that people are leaving their homes behind as they flee the desperate economic circumstances of the town.

In April, Tumbler Ridge was walloped with news that Walter Energy’s Wolverine coal mine would be idled due to poor coal prices. Months later, Peace River Coal said it would follow suit at the end of the year, also citing low prices and a need for maintenance.

‘Yes’ vote in Swiss referendum not certain to lift gold prices-Deutsche Bank – by Jan Harvey and Anirban Nag (Reuters U.S. – November 17,2014)

November 19, 2014

http://www.reuters.com/

Nov 17 (Reuters) – A vote in favour of boosting Switzerland’s gold holdings at a Nov. 30 referendum won’t necessarily lift bullion prices, Deutsche Bank said in a note, adding there was a “considerable” chance the motion would pass.

The Swiss National Bank could spread out its gold buying, take transactions off market, or use derivatives to cushion gold prices from the impact of a ‘yes’ vote, Deutsche said.

The “Save our Swiss gold” proposal, spearheaded by the right-wing Swiss People’s Party (SVP), would force the SNB to hold at least 20 percent of its assets in gold, make it repatriate gold held overseas and commit never to sell bullion.

A survey last month said the proposal had 44 percent support, short of the majority needed to pass into law. A poll this month showed support had waned.

Gold bulls have flagged the vote as a potential driver of higher prices, but Deutsche said gold, now 38 percent below its 2011 record high, would not necessarily benefit.

Canada’s Estractive Sector Strategy well received, expected to fuel prosperity of sector – by Tracy Hancock (MiningWeekly.com – November 19, 2014)

November 19, 2014

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

JOHANNESBURG (miningweekly.com) – The Canadian government has an important role to play in supporting both the global competitiveness of the Canadian mineral industry and its ability to contribute to the sustainable development of the societies in which it operates, said Prospectors & Developers Association of Canada (PDAC) president Rod Thomas on Tuesday.

The organisation has welcomed Canada’s commitment to assist the mineral exploration and mining industry to succeed abroad, noting that measures to support the sector were included in the updated Corporate Social Responsibility (CSR) Strategy for the Canadian International Extractive Sector that was released on November 7, as well as the Extractive Sector Strategy on Tuesday in Ottawa by Minister of International Trade Ed Fast and Minister of Natural Resources Greg Rickford.

The Ministers made the announcement at the Mining Association of Canada’s annual Mining Day on the Hill luncheon. The Extractive Sector Strategy builds on Canada’s plan for responsible resource Development, ensuring that mining and energy continued to represent an engine of economic growth and prosperity for Canadians.

“Our government recognises the importance of the mining industry to Canadian jobs and long-term economic prosperity. We’re working aggressively to attract investment and open new markets. Once again, we are demonstrating our commitment to creating the conditions that enhance Canada’s competitive position as a global mining leader, ” said Rickford.