Republic of Mining

Water scarcity and rising energy costs threaten mining industry – by James Wilson (Financial Times – July 27, 2014)

July 30, 2014

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

Access to water has become one of the most significant business risks for miners, says a report that also highlights the threat to the sector from rising energy costs in some resource-rich areas.

EY, the consultancy, said affordable water and energy should now be viewed as one of the 10 biggest problems for miners. The threat was particularly acute in South America and Africa, it said. These continents are significant in the global supply of many metals, particularly copper.

Spending by mining companies on water infrastructure amounted to almost $12bn last year, compared with $3.4bn in 2009, EY said. BHP Billiton and Rio Tinto, the two largest in the world by market capitalisation, are investing $3bn to build a desalination plant at Escondida, the Chilean copper mine that is the world’s largest by output.

The report underscores how water resources are becoming an increasingly important concern across business. Peter Brabeck, chairman of Nestlé, told the Financial Times in a recent interview that water scarcity presented a more urgent challenge than climate change.

EY said large companies such as Rio, BHP and Anglo American had the expertise and financial strength to build complex water procurement systems for large projects and were therefore “likely to emerge as the partners of choice in water-scarce countries seeking to exploit their natural resources”.

Quebec lawyers optimistic about revived Plan Nord – by Julius Melnitzer (National Post – July 30, 2014)

July 30, 2014

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

Quebec’s mining lawyers are cautiously optimistic about the impact of the Liberal government’s revival of the Plan Nord mining project.

“What lies ahead for Quebec’s mining industry is better than what the future looked like during the last two years when there was no clear signal from the PQ that the mining industry was welcome here, ” said Jean-Philippe Buteau in Norton Rose Fulbright Canada LLP’s Quebec City office. “That’s not to say we’re just a few weeks or months from being back to the good old days, but now there’s a majority government that has both hands on the steering wheel.”

Indeed, the stars seem to be lining up. On July 8, Stornoway Diamond Corp. closed a $946-million comprehensive funding package for the construction of the company’s Renard Diamond Project in north-central Quebec.

“The government assisted Stornoway in building the access road to the project and was instrumental in obtaining financing,” said Michel Brunet in Dentons Canada LLP’s Montreal office. Significant support from the new Liberal government, then, was instrumental in the deal’s culmination.

“Stornoway is a great signal that Quebec will stand beside the mining companies if their business plan makes good sense and they are willing to play by the rules,” Mr. Buteau said.

About one month earlier, Agnico Eagle Mines Ltd. and Yamana Gold Inc. completed their acquisition of Osisko Mining Corp. The new owners will take over operation of the Canadian Malarctic gold mine located in the Abitibi-Témiscamingue region about 550 kilometres northwest of Montreal.

The Brics bank is a glimpse of the future – by David Pilling (Financial Times – July 30, 2014)

July 30, 2014

http://www.ft.com/home/us

If the postwar order is being upended, the right response is ‘hear, hear’

Thirteen years ago, Brics was a marketing ploy dreamt up by Jim O’Neill, then chief economist at Goldman Sachs. Now it is a bank. Next thing you know, it will have its own line of designer handbags.

This month in Fortaleza, the five Brics nations – Brazil, Russia, India, China and South Africa – agreed to establish a development bank. They also set up a $100bn swap line, known formally as a contingent reserve arrangement, a deal that gives each country’s central bank access to emergency supplies of foreign currency. To borrow a phrase from Anton Siluanov, Russia’s finance minister, the five countries are attempting to conjure a mini-World Bank and a mini- International Monetary Fund.

The Brics’ plan is good for the world, although you would not know it from the sniffy reaction in the west. There have been two default positions. One is to scoff at the very idea of five such disparate nations organising anything coherent or staying the course. The other is to worry that the world order reflected in the two US-led institutions set up at the Bretton Woods conference of 1944 is about to crumble.

UPDATE 3-Rio Tinto pulls plug on ill-fated Mozambique coal venture – by Silvia Antonioli and Jim Regan (Reuters India – July 30, 2014)

July 30, 2014

http://in.reuters.com/

LONDON, July 30 (Reuters) – Rio Tinto has agreed to sell coal assets it bought through a $4 billion acquisition of Riversdale in 2011 for just $50 million to an Indian joint venture, ending its ill-fated venture in Mozambique’s coal sector.

The sale of Rio Tinto Coal Mozambique to International Coal Ventures Private Limited (ICVL), includes the Benga coal mine and other projects in Tete province, assets that had a value of $71 million as of March 31 in Rio’s books.

In 2013, Rio Tinto sacked its chief executive and other executives directly involved in the acquisition of Riversdale and wrote off about $3.5 billion of the purchase price, partly owing to a failure to secure a permit to move coal by barge down Mozambique’s Zambezi River.

Rio Tinto is only retaining one of the assets it got from the Riversdale acquisition: the Zululand Anthracite Colliery, a small coal mine in South Africa.

“It has clearly been a horrible experience for Rio Tinto,” said Liberum analyst Richard Knights, saying that the sale price was lower than he expected and implied a further writedown.

“The assets clearly weren’t as good as they thought but in order for them to be written down that aggressively they must have seen very little scope in the foreseeable future for the profitable export of coal from Mozambique.”

A year after brutal losses, Canada’s gold miners expected to see return to stable ground – by Peter Koven (National Post – July 30, 2014)

July 30, 2014

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

One year ago, the gold mining sector reported its most appalling quarterly earnings ever. A steep decline in the price of gold caught the industry off-guard in the spring of 2013, prompting some miners to report record writedowns and net losses in the second quarter. Barrick Gold Corp. led the way with an absurd quarterly loss of US$8.56-billion, the second biggest in Canadian history.

The senior gold miners are now set to report their latest Q2 results over the next two days. But thanks in part to the measures they took a year ago, their earnings should be a lot less noisy and a lot less troubled.

“I’m not looking for any big dislocations in this quarter,” Mackie Research Capital Barry Allan said. “Not a lot of ‘Oh my God, where did that come from?’”

When gold plunged 26% in April and May of 2013, the whole industry shifted focus. Instead of chasing production growth (as they had for many years while prices were rising), miners turned their attention to cost reductions and capital spending cuts.

At the time, the cost reduction announcements were overshadowed by some of the more ridiculous writedowns. But those moves are bearing fruit today.

The senior gold miners reported significant year-over-year reductions in all-in sustaining costs in the first quarter of 2014.

An embargo on Russia’s Norilsk Nickel would hurt West -French rival – by Gus Trompiz (Reuters India – July 30, 2014)

July 30, 2014

http://in.reuters.com/

PARIS, July 30 (Reuters) – An embargo against Norilsk Nickel as part of Western sanctions against Russia would hurt nickel users in Europe and the United States rather than Norilsk itself, the head of French mining group Eramet said.

Norilsk, the world’s largest producer of the stainless steel ingredient, has not been targeted so far by western measures aimed at punishing Russia for its support of pro-Moscow rebels in neighbouring Ukraine.

“Nobody expects sanctions against Russia and Norilsk would affect Norilsk’s production since it would sell to China if it couldn’t sell elsewhere,” Eramet Chief Executive Patrick Buffet said during a presentation of Eramet’s first-half results on Wednesday.

“It’s unlikely an embargo by Europe would materialise, because it would be shooting itself in the foot, since Norilsk could ship its production to Asia, creating a shortage in Europe and oversupply in Asia. The consequence would be a jump in physical premiums in Europe and a discount in Asia,” he added.

The most likely scenario for western restrictions against Norilsk would be a U.S.-only embargo, which would push up nickel premiums there but not hit the world market, Buffet added. Nickel prices have already rallied this year after a ban by Indonesia on nickel ore exports curbed supply to China.

Aboriginal court decisions shouldn’t be dealbreakers – by Drew Hasselback (National Post – July 30, 2014)

July 30, 2014

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

You’ve heard varying degrees of panic over the Supreme Court of Canada’s rulings in Tsilhqot’in and Grassy Narrows.

These are clearly important aboriginal rights decisions, and each will have a profound impact on Canada’s natural resource industry. Yet I’m not sure either case justifies any fear.

The cases clarify some technical aspects of aboriginal law. And, well, that’s it. They’re not legal blocades that will halt all development in this country.

Litigation is a zero-sum game. If a case makes it all the way to judgment, you have a winner and you have a loser. Now, what is it that the winner gets? A bill from the lawyers, and a bunch of legal rights that too often require a fresh round of litigation — i.e., even more legal bills — to enforce. Just because you can win a legal case doesn’t mean you instantly get what you really want.

A lot of commentary around Tsilhqot’in and the Grassy Narrows decisions treats them like winner-takes-all victories. But that’s not how it works. If you win some rights in native litigation, you still have to speak with the other side about how you will use those rights. Indeed, a lot of lawyers who practice aboriginal law actually spend their time negotiating so-called impact and benefit agreements. These are business deals that ensures a local First Nations participates in the profits from a project on or near their lands.

Timmins’s Kidd Operations earn reclamation award – by Ron Grech (Timmins Daily Press – July 30, 2014)

July 30, 2014

The Daily Press is the city of Timmins broadsheet newspaper.

TIMMINS – As David Yaschyshyn leads the way towards the former jarosite pond site, a cool mild breeze carries a waft of clover from the field up ahead.

Yaschyshyn, the environmental manager at Kidd Operations (Glencore), points to the ground, noting the fresh moose tracks along the trail.

“Since the jarosite pond has been reclaimed and re-vegetated, we have seen hundreds of geese. We’ve seen bears and their cubs and even moose wandering across. So it really has been returned to nature. It’s now an open meadow ecosystem.”

Yaschyshyn isn’t exaggerating. The 50-hectare area that was once a dumping pond for a liquid byproduct of the zinc refinery process is now covered waist-high in wildflowers and native grasses.

The jarosite (iron sulphate mud) pond was built in 1971 and was used as part of the smelting process from 1972 until the refinery at the metallurgical site closed in 2010.

After that there was no use for the storage pond, so it was dewatered, dried, covered with layers of stones, gravel and dirt, before being sealed with a specially designed 60-millimetre thick plastic liner.

Mining deals defy the doubters – by Peter Koven (National Post – July 30, 2014)

July 30, 2014

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

Mining M&A activity has defied the doubters and returned to prominence in 2014, with several big deals being struck and more in the pipeline.

After an extremely slow 2013, the expectations for mergers and acquisitions activity were muted going into this year. Metal prices remained low, junior and intermediate companies did not want to sell while their stock prices were depressed, and many seniors were still trying to recover from bad acquisitions in the last cycle. They were effectively in the investor “penalty box.”

Regardless, the takeovers have come. There have been 41 Canadian mining deals so far this year worth a total of $7.1-billion, according to Financial Post Data. By comparison, there were just $9.3-billion of deals in all of 2013.

Most notably, there has been an impressive number of large and medium-sized takeovers, including those of Osisko Mining Corp. ($3.7-billion), Augusta Resource Corp. ($555-million), Lumina Copper Corp. ($470-million), and Sulliden Gold Corp. Ltd. ($300-million). And of course, Barrick Gold Corp. and Newmont Mining Corp. were negotiating a potential US$13-billion tie-up until talks collapsed in April.

The pace and size of deals is still far below peak years like 2010, when there were 191 transactions worth almost $40-billion. But the action is very encouraging in a sector that needs more consolidation.

Kevin Thomson, a partner at Davies Ward Phillips & Vineberg LLP who works on many mining deals, said the hostile bid for Osisko back in January was the catalyst that got people looking at M&A again.

Greenpeace stands for delay, delay, delay – by Peter Foster (National Post – July 30, 2014)

July 30, 2014

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

Greenpeace Canada continues to squirm to avoid coming up with a defence against Resolute Forest Products’ $7-million lawsuit alleging “intentional interference with economic relations;” that is, trying to destroy Resolute’s business by pressuring its customers

Last Friday, lawyers for Greenpeace sought leave to appeal the decision of the Divisional Court of Ontario (which had rejected an earlier appeal and told Greenpeace to file a defence, plus pay costs).

The case has significant ramifications for whether radical NGOs will be allowed to continue to spread misinformation, trample over corporate reputations, and destroy business and jobs. This is somewhat related to those over-ballyhooed CRA audits of charitable institutions, although Greenpeace had its charity status removed long ago. In fact, “intentional interference with economic relations” could almost be Greenpeace’s mission statement.

The suit goes back to claims made by Greenpeace about Resolute’s business practices after the radical environmental NGO exited the Canadian Boreal Forest Agreement, the deeply flawed 2010 deal under which forestry companies were persuaded that they could buy off their radical opponents by becoming “partners” in plans to sanitize huge swathes of Canada in the name of “environmental protection.” Screw the people who lived there.

NEWS RELEASE: NAN REAFFIRMS RIGHT TO DEFEND LAND, CONTROL DEVELOPMENT

July 30, 2014

Tuesday July 29, 2014 – FOR IMMEDIATE RELEASE

THUNDER BAY: Nishnawbe Aski Nation (NAN) Grand Chief Harvey Yesno reaffirmed NAN First Nations’ determination to defend our lands following a Notice of Assertions of First Nations Inherent and Treaty Rights announced by First Nations leaders at Queen’s Park today.

“Proposed resource development is putting tremendous pressure on our lands and First Nations are facing unprecedented challenges and threats to our inherent and Treaty rights,” said Grand Chief Harvey Yesno. “Many communities are struggling to address basic issues such as access to health care, housing, education and economic development. NAN Chiefs have made it clear that we, the people of the land, will defend our right to control development in our territories so that the wealth from our lands continues to benefit and sustain our people and our Nation.”

The Notice of Assertions was adopted by Chiefs at the 40th All Ontario Chiefs Conference last month. It gives notice to all levels of government, industry and the public that First Nations will continue to assert their Inherent and Treaty Rights in traditional territories, and that natural resources remain within First Nation inherent jurisdiction and will be governed accordingly.

“While the governments of Canada and Ontario continue to ignore the spirit and intent of our Treaties, NAN will continue to pursue resource development opportunities with foreign investors and will enter into agreements that respect our rights and bring sustainable, long-term benefits to our communities,” said Yesno.

Disclosure of First Nations salaries raises eyebrows – by Mike De Souza (Toronto Star – July 30, 2014)

July 30, 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.

OTTAWA—Records showing a native councillor with construction contracts worth $300,000, a chief with a six-figure salary, and an eight member band council each making about $6,500 annually are among dozens of revelations that emerged Tuesday under a new transparency law targeting First Nations leaders.

The information came from multiple First Nations communities across the country trying to meet a deadline set by the new First Nations Financial Transparency Act, which requires them to publish a range of annual business and financial records, including salaries and benefits.

The communities were previously only required to submit these records to the government without sharing them with the public.

Aboriginal Affairs and Northern Development Canada posted some of the records from at least 20 communities on its website Tuesday, including four Ontario First Nations, two from Manitoba, two from Saskatchewan and 10 from British Columbia.

In its own records, the Snuneymuxw First Nation in B.C., revealed that Eric Wesley, a councillor, received $307,201 in contracts for construction related services in the last fiscal year from his own community.

The end of Cliffs in the Ring of Fire? – by Ian Ross (Northern Ontario Business – July 29, 2014)

July 29, 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. Ian Ross is the editor of Northern Ontario Business ianross@nob.on.ca.

A New York hedge fund proclaims it’s won a bitter proxy fight with Cliffs Natural Resources to achieve majority control of the Ohio iron ore and coal miner’s board of directors. Casablanca Capital said it was successful in convincing Cliffs’ shareholders to elect all six of its nominees at the miner’s annual general meeting in Cleveland, July 29.

The final results are subject to independent inspection over the next three days. If Casablanca is right, it means Cliffs’ hold on its Ring of Fire chromite properties in the James Bay region is tenuous at best.

Casablanca, which acquired 5.2 per cent of Cliffs’ shares, wants to break off Cliffs’ international assets, including its Ring of Fire properties, from its core U.S. iron and coal divisions.

“We are grateful to our fellow Cliffs shareholders for their careful consideration of the issues and gratified that they have sent a resounding message of support for our efforts to drive meaningful change at Cliffs, bring true accountability to the company’s leadership, and restore shareholder value,” said Casablanca fund chairman Donald Drapkin in a statement.

UPDATE 2-Hedge fund triumphs in proxy battle with U.S.-based miner Cliffs – by Kim Palmer (Reuters U.K. – July 29, 2014)

July 29, 2014

http://uk.reuters.com/

(Rewrites throughout with details from meeting, analyst view, background)

(Reuters) – Casablanca Capital triumphed on Tuesday in its proxy battle with miner Cliffs Natural Resources Inc, preliminary estimates show, putting the hedge fund in a position to replace Cliffs’ chief executive and sell off underperforming assets.

Shareholders of Cleveland-based Cliffs voted onto the miner’s board all six nominees put forward by Casablanca, the New York-based fund said, citing estimates from its proxy solicitor. That means they will make up a majority of the 11-person board.

Cliffs CEO Gary Halverson said at the company’s well-attended annual meeting in Cleveland that because of the contested nature of the elections, the results would be announced in the next three business days.

Shares in Cliffs, a producer of iron ore and metallurgical coal, jumped as much as 10.4 percent to $18.33 on the New York Stock Exchange. The vote outcome “is a culmination of years of frustration on behalf of shareholders,” said Garrett Nelson, a mining research analyst at BB&T Capital Markets.

Casablanca began a proxy fight in March against Cliffs, of which it owns 5.2 percent, accusing the miner of destroying shareholder value through an ill-conceived expansion strategy.

NEWS RELEASE: CLIFFS NATURAL RESOURCES INC. ISSUES STATEMENT

July 29, 2014

CLEVELAND – July 29, 2014 – Cliffs Natural Resources Inc. (NYSE: CLF) today made the following statement following the Company’s Annual General Meeting:

“We look forward to receiving the final results of today’s vote, and the Board and management team remain deeply committed to continuing to create long-term value for all of our shareholders. We appreciate the support of the Cliffs shareholders who supported the Company’s slate and the hard work everyday by Cliffs’ more than 6,000 employees.”

The Company will await the preliminary report of the Inspector of Election, IVS Associates, Inc., before releasing any further statements about the vote. The Inspector has indicated that it expects to issue a preliminary tabulation of the vote results within approximately three business days, which Cliffs will publicly announce. Final results of the election will also be announced once they are certified by the Inspector of Election following the customary review and challenge period.

About Cliffs Natural Resources Inc.

Cliffs Natural Resources Inc. is an international mining and natural resources company. The Company is a major global iron ore producer and a significant producer of high-and low-volatile metallurgical coal. Cliffs’ strategy is to continually achieve greater scale and diversification in the mining industry through a focus on serving the world’s largest and fastest growing steel markets. Driven by the core values of social, environmental and capital stewardship, Cliffs associates across the globe endeavor to provide all stakeholders operating and financial transparency.