Republic of Mining

China faces buyer’s remorse in Canada’s oil patch – by Jeffrey Jones (Globe and Mail – August 18, 2014)

August 18, 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 — Chinese companies have shelled out more than $30-billion in Canada’s energy industry, but many of those investments have been hit with operational problems, delays and weak returns, leading to growing impatience in some quarters in China.

PetroChina Co. Ltd., Sinopec, CNOOC Ltd., China Investment Corp. and other state-owned enterprises made a raft of big bets on oil sands projects, shale developments and domestic companies since 2005 and many have yet to pay off.

There is “absolutely” some buyer’s remorse stemming from many of China’s big-ticket acquisitions, said Samir Kayande, vice-president of energy research at ITG Investment Research, who has done intensive studies of some of the deals.

Some problems were the result of purchases made during a rush on assets across the industry, when competition from both domestic and foreign buyers was brisk, Mr. Kayande said. Eventually, assets in the best geological regions are likely to pay off, and those further from the earliest developments will lag in performance, he said.

Officials with the Chinese companies, and Canadians familiar with their thinking, say it is far too early to deem the buying spree, in a notoriously difficult industry, a bust.

When coal was king: Drumheller’s Atlas coal mine takes visitors back in time – by Karan Smith (Canadian Geolgraphic Travel – Summer 2014)

August 18, 2014

http://travelclub.canadiangeographic.ca/

TWO. ONE.” CLICK. We all turn off our headlamps. And it’s dark in here. Really dark. I reach for my daughter’s hand. Above our heads is 12 metres of earth; ahead of us, the mouth of the mine. We’re walking up the angled ramp of the underground gantry in the Atlas coal mine. Alongside us is the wide rubberized canvas belt that once carried the chunks of coal shovelled out of the mine, in East Coulee, Alta., to homes across Canada.

As we click our lights back on, our guide, Chelsea Saltys, an area local and engineering student, tells the story of a young miner named Eric Houghton, who slipped one rainy day on the wet links between the coal cars. He fell underneath the moving train and was severely hurt: broken hip and leg, punctured lung, crushed ribs. After a shot of morphine and a cigarette, he made it to the hospital, then spent months in traction. When he got out of the hospital, he got a job at the Banff Springs Hotel as a night watchman. Physiotherapy was climbing the stairs at the grand resort. But the black gold called him back and he returned for his old job. “It goes to show you what these men were made of,” says Saltys.

THERE’S A KIND OF DESOLATE BEAUTY that comes with abandoned towns. Driving along the hoodoo-lined highway to the Atlas coal mine, the eight-storey wooden tipple, once used to load coal into railway cars, stands out as a landmark. It’s the last wooden tipple in Canada and a national historic site.

(You might have seen it on last summer’s Amazing Race Canada, where contestants competed to load a two-tonne coal car.) On the site, rusting trucks from the 1940s are permanently parked. A narrow gauge track runs in front, evidence of the railway’s role here.

Mr. Harper, Tear down this wall! – by Stephen Stewart (Mining Markets – August 15, 2014)

August 18, 2014

http://www.miningmarkets.ca/

Stephen Stewart is a managing partner of the natural resource private equity firm Minvest Partners in Toronto.

Canada’s mining sector needs clear, consistent rules to thrive

Mining has been an integral part of Canada’s social fabric for well over a century and accordingly we have cultivated an abundance of talented geologists, engineers, technicians and financiers who give us a tremendous competitive advantage. Yet many of these professionals sit by idly, frustrated with what amounts to an inability to broaden Canada’s mineral wealth, while other nations position their natural resources to prosper in a globalized economy. Our abundance of oil remains thwarted from transport to any one of our three oceans, and world class orebodies lay dormant as disorder surrounds their required infrastructure.

While Canada’s natural resource industry needs to look inwards in order to analyze and exit its current depressed state, the rulemakers — ie. the federal and provincial governments, as well as any number of regulatory bodies — need to work towards a regulatory system that is meant to safeguard without injuring those it seeks to protect.

Understanding risk is fundamental to investment in natural resource projects so the investor, when making capital allocation decisions, can quantify the risks versus rewards. When projects operate within a congested and opaque regulatory environment, investors balk and follow the path of least resistance away from the unknown. The groundswell of politicized agendas, which layers on increased regulation, have created uncertainty, which delays the advancement of countless resource projects and their related infrastructure.

UPDATE 5-BHP Billiton set to spin off unwanted assets – by Sonali Paul and Silvia Antonioli (Reuters U.K. – August 15, 2014)

August 18, 2014

http://uk.reuters.com/

MELBOURNE/LONDON, Aug 15 (Reuters) – Diversified mining company BHP Billiton declared its preference for a demerger of its aluminium, manganese and nickel assets on Friday, setting the stage for the formation of a separate business that could be worth at least $12 billion.

BHP said its board was considering a spin-off at meetings ahead of its annual results announcement next week. An Australian newspaper said those plans were well advanced and would include the Nickel West business that the world’s biggest miner has been trying to sell.

“A demerger of a selection of assets is our preferred option,” the company, which has a market capitalisation of $185 billion, said in a statement to the Australian stock exchange. BHP has long aimed to sell or spin off its manganese, aluminium and nickel assets, which contribute little to its earnings. Simplifying the company would “generate stronger growth in cash flow and a superior return on investment”, it said on Friday.

Some of the largest shareholders in BHP welcomed the announcement. “It’s good to see BHP taking the lead in the sector on this. It reassures you as a shareholder. It makes me more willing to have it as a significant bet within my fund,” said Christopher Moore, portfolio manager of Fidelity Global Industrials Fund.

Oilsands mogul Murray Edwards to help fund Mount Polley mine spill cleanup – by Christopher Donville and Andy Hoffman, (Bloomberg News – August 15, 2014)

August 18, 2014

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

Oilsands mogul Murray Edwards is backing a $100 million bond sale by Imperial Metals Corp. that will help fund the cleanup of a B.C. mine-waste spill, the worst accident of its kind in Canada in 20 years.

Edwards, Imperial’s largest shareholder, agreed to buy $40 million of the 6 percent, 6-year senior unsecured convertible debentures via Edco Capital Corp., a company he controls.

The Fairholme Partnership LP will buy another $40 million. If the issuance fails to raise the full amount sought, Edco will buy non-convertible notes bearing interest at 12 percent to make up the shortfall, Imperial said yesterday in a statement.

Murray, 54, who holds a 36 percent stake in Imperial, has business interests that span energy, engineering and a stake in a National Hockey League team. Buying the bonds isn’t the first time that he’s helped fund development of the Mount Polley copper and gold mine, the scene of last week’s accident, said David Davidson, an analyst at Paradigm Capital Inc.

“Once he invests in something, he supports it through thick and thin,” Davidson, who’s based in Toronto and whose rating on Imperial is under review following the spill, said today in an interview. “Not only is he committed to Mount Polley, but he’s committed at a really tough time.”

Building roads to resources a priority, says NWT premier – by Trish Saywell (Northern Miner – August 13, 2014)

August 18, 2014

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

Mining is the largest industrial sector in the Northwest Territories (NWT), and building transportation and other important infrastructure is the key to unlocking its potential, NWT Premier Bob McLeod said at a symposium in Toronto on Aug. 6.

“We have long understood that stranded resources represent significant lost opportunity for economic development,” McLeod said in prepared remarks at the infrastructure summit of Canada’s premiers hosted by Ontario Premier Kathleen Wynne. “Without dependable, all-weather connections, the huge base metal and mineral potential in the Northwest Territories will remain locked in place.”

On the sidelines of the conference the premier told The Northern Miner that he expects seven new mines will be built in the NWT between now and 2020, but emphasized infrastructure must be built to help support development in the north.

In addition to diamonds and base and precious metals, the Northwest Territories has conventional and non-conventional oil and gas potential in the Mackenzie Valley and Beaufort Delta, he noted.

McLeod believes that one of the most important steps his government must take is to build a $2-billion highway system through the Mackenzie Valley linking the rest of Canada to Tuktoyaktuk, a small community on the Arctic Ocean.

Talk will not solve mining’s problems – by Business Day Live Editorial (August 14, 2014)

August 18, 2014

http://www.bdlive.co.za/

A DAY after Deputy President Cyril Ramaphosa endured searing cross-examination at the Marikana commission of inquiry, government and mining stakeholders convened in Midrand to discuss some of the very issues he was being made to answer for.

The state of South Africa’s mining industry has been debated ad nauseam in the past few years, in particular after the Marikana massacre in 2012. What has been lacking is a clear plan to not only resolve the issues causing so much conflict, but also to put the industry in a position to meet historically high expectations from across the spectrum.

When the mining lekgotla was first convened two years ago, hopes were high that it would result in concrete steps being taken to pull the sector back from the brink. Since then it has seen more conflict, which includes the longest protected strike in the history of the country, in platinum mines.

The sector has also not won any new friends through its contribution to transformation and broader social development. In turn, the matters that have dogged the industry’s competitiveness for years continue to be an obstacle to further growth.

Rising input costs, including for electricity and labour, look far from abating, while policy uncertainty continues in mineral resources law amendments that appear to remain unattended in the president’s in-tray.

COLUMN-Is China’s economy like Clouseau’s inflatable parrot? – by Clyde Russell (Reuters U.K. – August 14, 2014)

August 14, 2014

http://uk.reuters.com/

Clyde Russell is a Reuters columnist. The views expressed are his own.

LAUNCESTON, Australia, Aug 14 (Reuters) – Why does the Chinese economy remind me of Chief Inspector Jacques Clouseau?

One of the many memorable scenes featuring the late Peter Sellers as the bumbling French detective comes in the Revenge of the Pink Panther, when he disguises himself as a peg-legged Swedish sailor, complete with an inflatable rubber parrot on his shoulder. [here ]

Problem is the parrot leaks, requiring Clouseau to flap his arm to operate a pump to re-inflate the bird, which eventually pops off as too much air is put in.

The connection to the Chinese economy is that once again a set of softer-than-expected economic numbers has the market anticipating that the authorities will act to boost activity. Like Clouseau’s parrot, every time the economy loses some air, the expectation is that it will be pumped up again and it will return to health.

The release of economic data that failed to meet expectations on Wednesday is the latest case in point. Credit figures showed that the amount of money flowing into the Chinese economy fell to a six-year low in July, while growth in investment, retail sales and bank lending was short of the market consensus.

B.C. First Nations band evicts mining company that owns Mount Polley tailings pond – by James Keller (Vancouver Province – August 14, 2014)

August 14, 2014

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

THE CANADIAN PRESS – CHASE, B.C. — A British Columbia First Nation plans to issue an eviction notice to Imperial Metals Corp. (TSX:III) — the company behind a massive tailings pond breach at a gold and copper mine last week — over a separate project in the band’s territory.

The declaration from the Neskonlith Indian Band is the latest sign that last week’s tailings spill at the Mount Polley Mine in central B.C. could ripple across the company’s other projects and possibly the province’s entire mining industry.

The Neskonlith band said the notice, which its chief planned to hand-deliver to Imperial Metals in Vancouver on Thursday, orders the company to stay away from the site of its proposed Ruddock Creek zinc and lead mine, which is located about 150 kilometres northeast of Kamloops.

The mine, which is still in the development phase and has yet to go through the environmental assessment process, would be located near the headwaters of the Adams River, home of an important sockeye salmon run. The Neskonlith band opposed the mine long before the Mount Polley tailings spill.

“We do not want the mine developing or operating in that sacred headwaters,” Neskonlith Chief Judy Wilson said in an interview Wednesday.

U.S. Mining Winning The Costs Race – by Tim Treadgold (Forbes Magazine – August 13, 2014)

August 14, 2014

http://www.forbes.com/

Mining booms are nearly always driven by rising commodity prices but what’s happening in the U.S. today indicates that falling costs are the driving force behind a revitalized interest in all forms of resources, from oil and gas to gold.

Activist investors, sometimes criticized for being too aggressive, have spotted the value gap developing between international mining and oil operations and those in the country winning the low-cost race, the U.S.

Cliffs Natural Resources CLF -3.04% and Apache APA -0.67% Corporation have been targeted by activist funds demanding the sale of high-cost, low-profit, assets in Australia, with Cliffs under pressure to sell an iron ore mine in Western Australia, and Apache planning to sell a 13% stake in a big Australian liquefied natural gas project being developed by Chevron CVX -0.5% Corporation.

Both U.S.-based companies will probably re-invest the capital generated in U.S. projects in much the same way some industrial companies are shifting their international operations back to the U.S. because it has become the global go-to destination, in some cases surpassing the long-term low-cost leaders, China and Germany.

Gold Cheapest To Mine In The Americas

In the commodity world, the value-gap is best illustrated by that universal material gold, with the cost profile of one company demonstrating why the U.S. is a preferred destination for new mine developments.

Appeals court OKs permits for U.P. mine – by John Flesher (Detroit News – August 13, 2014)

August 14, 2014

http://www.detroitnews.com/

Associated Press – Traverse City — The Michigan Court of Appeals on Wednesday upheld a decision by state regulators to allow construction of a nickel and copper mine in the Upper Peninsula backwoods, the latest development in a 12-year legal and political struggle.

A three-judge panel ruled unanimously that the Department of Environmental Quality was within the law to approve mining and groundwater discharge permits for the Eagle Mine in Marquette County. Kennecott Minerals Co. began the project but its present owner is Lundin Mining Corp., a Canadian company.

Environmental groups, a Native American tribe and a private hunting and fishing club have fought to prevent the mine from being built since Kennecott conducted exploratory drilling in 2002, saying it poses numerous ecological risks. The department issued the permits five years later, a decision upheld by an administrative law judge and a circuit court before the appeals court took the case.

“Today’s ruling validates the MDEQ’s thorough and extensive permitting review process, which ensures responsible development with strong environmental protections,” said Dan Blondeau, spokesman for the mining company.

A spokesman for the National Wildlife Federation, one of the groups that challenged the permits, said no decision had been made about whether to appeal to the Michigan Supreme Court.

MiedziCopper loses concessions in Poland – by Northern Miner (August 13, 2014)

August 14, 2014

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

Ross Beaty isn’t the type of businessman who normally airs his grievances in public. But when two of his copper concessions in Poland were apparently revoked by the Polish government, he felt he had no choice.

On July 30 Poland’s Minister of the Environment revoked two concessions awarded to MiedziCopper, a private copper exploration company in which Beaty’s Lumina Capital investment group has a large stake. The ministry also cancelled a third concession that it awarded to MiedziCopper’s rival KGHM Polska Miedzi (WSE: KGH), Poland’s largest copper producer and a company in which the government owns 63.6 million shares or about 31.79% of the share capital.

Beaty alleges that KGHM brought political pressure to bear on the Ministry of Environment to reverse its decision awarding two of the concessions to his group and MiedziCopper is now suspending all new investment in Poland.

MiedziCopper has invested about $35 million on exploration in the country since 2010 and had planned to spend a further $65 million over the next few years. The company continues to hold 11 concessions in the country on which it has carried out extensive geochemical, geophysical, geological and drilling activities.

Former Chilean president slams Codelco’s governance, calls for greater autonomy – by Cecilia Jamasmie (Mining.com – August 14, 2014)

August 14, 2014

http://www.mining.com/

Former Chilean president Ricardo Lagos (2000-2006) has called for a more independent Codelco, the state-owned copper company that is the world’s No.1 producer of the industrial metal.

Speaking at the 30-year anniversary of local mining think tank Cesco, Lagos said the miner’s corporate governance should be similar to that of the country’s central bank, La Segunda reports (in Spanish).

Chile’s monetary authority has its own legal framework and The President is responsible for appointing its five directors for a 10-year period, with the consent of the senate.

A nine-member board currently rules Codelco, with of three of the directors named by the President, four selected from a shortlist provided by the senior public management council, and two workers’ representatives.

“If you compare Codelco’s current corporate structure to that of the central bank, the degrees of autonomy are clearly different, which is based on the importance the company plays in the country’s public finances,” Lagos was quoted as saying.

Budget battles

Australian state approves $2 bln rail line for Adani coal project – by Sonali Paul (Reuters India – August 14, 2014)

August 14, 2014

http://in.reuters.com/

MELBOURNE – Aug 14 (Reuters) – India’s Adani Mining has won state approval to build a rail line for its $15 billion Carmichael coal project in Australia, it said on Thursday, bringing it a step closer towards making a final decision on whether to go ahead with the massive scheme.

The state of Queensland approved the A$2.2 billion ($2 billion) North Galilee Basin Rail project, a 300 kilometre (186 mile) railway to connect the Carmichael mine and potentially other mines in the untapped Galilee Basin to the east coast port of Abbot Point.

Despite analysts’ views that Adani’s project would be unprofitable at current coal prices, the company said it remained committed to pushing ahead with it to supply coal to power stations in India.

“Adani looks forward to continuing to work with our project partners and all levels of government to see this through,” Adani Mining, the Australian arm of Adani Enterprises, said in a statement.

Adani recently signed an agreement with POSCO Engineering & Construction Co Ltd to build the rail line. Costs and other details of the contract are due to be set by the end of this year.

Regulate Canadian, Not American Metals Mine, Murkowski Says – by Alan Neuhauser (U.S. News and World Report – August 14, 2014)

August 14, 2014

http://www.usnews.com/

The Alaska senator seeks greater environmental enforcement at a Canadian metals mine, but opposes regs at a similar mine in Alaska.

Sen. Lisa Murkowski, R-Alaska, has called for greater oversight of a Canadian metals mine – even as she lambastes federal regulation of a similar proposed mining project in Alaska.

“It’s an irony, because the risks associated with Pebble Mine are precisely those that we have seen unfolding before our eyes over the past week in British Columbia,” says Joel Reynolds, western director and senior attorney with the Natural Resources Defense Council. “That is to say, a major containment dam failure resulting in significant off-site contamination in salmon habitats.”

Last week, a dam containing the wastewater pond for Canada’s open-pit Mount Polley mine ruptured, sending millions of gallons of potentially contaminated water spilling into a river along the Alaska border (Canadian officials lifted a ban on drinking tap water Tuesday). Later that week, Murkowski dashed off a letter to Secretary of State John Kerry, urging him to impress upon Canadian leaders “the potential impacts that large-scale mining in Canada could hold” for the state’s fishing and tourism industries, as well as its indigenous population.

“The tailings pond breach at Mount Polley on August 4 has renewed the specter of environmental impacts from large-scale hardrock [sic] mineral developments in Canada that are located near transboundary rivers,” Murkowski wrote.