Republic of Mining

Diversified mining giants becoming less so – by Lawrence Williams (Mineweb.com – August 19, 2014)

August 19, 2014

http://www.mineweb.com/

Confirmation that BHP Billiton is planning to demerge what it considers its non-core assets into a new company continues the trend for the world’s biggest miners to simplify their structures.

LONDON (MINEWEB) – The big post 2008 fallout in the global mining sector has been a major influence on corporate policy since. It has already seen the culling of the chief executives who had the misfortune to be in place as metal prices slumped and profits collapsed. They had previously been exhorted by their institutional shareholders to go for growth almost at any cost.

But once it became apparent that some of the huge capital programmes involved were actually having a negative impact on the bottom line, helped by the fact that the concentration on growth had led to management’s eyes being taken off controlling costs at existing operations, then institutional pressures changed and heads started to roll. CEOs became an endangered species

Now it looks as though there is something of a different tack coming into play. For the single commodity players – e.g. those in the precious metals sector there has also been a move to demerge, or just sell what are considered to be non-core assets – those that had appeared to be taking up too much management time and effort, but without complementary returns. A typical example of this has been Barrick Gold’s floating off of African Barrick which now at least seems to be turning itself around, but still probably falls short of its parent’s return requirements. Others have been divesting of so-called non-core projects piecemeal.

But while the gold miners were relatively quick to act – the big diversified miners perhaps took a little more time over their moves to do likewise.

UPDATE 4-BHP announces spin-off plan, no share buyback for now – by Sonali Paul and Silvia Antonioli (Reuters India – August 19, 2014)

August 19, 2014

http://in.reuters.com/

MELBOURNE/LONDON, Aug 19 (Reuters) – The world’s biggest mining company, BHP Billiton , announced plans to spin off businesses worth an estimated $16 billion, most of them acquired in a 2001 merger, to focus on its most profitable activities.

But it held off on a share buyback, disappointing investors who had hoped to receive around $5 billion. BHP’s London-listed shares fell 4.5 percent on Tuesday.

Chief Executive Andrew Mackenzie said the widely expected move to simplify BHP around the “four pillars” of iron ore, copper, coal and petroleum – with potash as a potential fifth pillar – would spur cashflow growth and boost returns.

These assets generated 96 percent of the group’s underlying core profit in the 2014 financial year.

“A demerger is a logical next step for other high quality assets also in our portfolio that don’t have a scale of those in our major business,” Mackenzie said in a call with investors.

The spin-off company, dubbed NewCo for now, will bundle BHP’s aluminium, manganese, Cerro Matoso nickel in Colombia, South African energy coal, some Australian metallurgical coal assets and the Cannington silver, lead and zinc mine. It will not include Nickel West in Australia, for which a separate sale process was continuing, Mackenzie said.

Australia rebukes mining tycoon over abusive attack on China – by Jane Wardell and Ben Blanchard (Reuters India – August 19, 2014)

August 19, 2014

http://in.reuters.com/

Aug 19 (Reuters) – Australian mining mogul and politician Clive Palmer was rebuked by the government on Tuesday for a tirade against China, in which he described its government as “bastards” who shoot their own people and want to take over the country’s resources.

Treasurer Joe Hockey said the remarks aired on Australian television on Monday were “hugely damaging”, noting that Palmer had benefited personally from doing business with China.

“Do not bring down the rest of Australia because of your biases,” he said. “They are a business partner for Australia, they’re our biggest trading partner, they buy a lot of our produce, and in doing so they help to lift the quality of life for everyday Australians.”

China is Australia’s biggest trade partner with two-way trade approaching $150 billion, representing more than 20 percent of Australia’s total trade.

Palmer, who holds the balance of power in the Australian parliament’s upper house, is currently locked in a legal battle with Chinese firm CITIC Pacific over cost blowouts and disputed royalty payments at an iron ore port in Cape Preston in Western Australia.

Rio and BHP tighten grip on world iron ore – by John Addis (Sydney Morning Herald – August 18, 2014)

August 19, 2014

http://www.smh.com.au/

Mexican drug cartels have been diversifying into the iron ore business, smuggling ore worth about $US1 billion a year into China. But it’s the emergence of a more legitimate cartel – one run largely by Australians – that should worry China more.

Rio’s latest result shows how powerful the big three global producers have become. The company’s results for the six months to June 30, with underlying earnings rising 21 per cent to $US5.1 billion ($5.47 billion), are remarkable given that iron ore prices actually fell 20 per cent over the period.

After slashing costs, capital expenditure and debt, management hinted at higher dividends and more buybacks. If the mining boom is supposed to be over, no one told Rio Tinto.

The really interesting element to the result concerned production increases. Although lower iron ore and coal prices stripped $US1.4 billion from underlying earnings, volume increases, particularly in iron ore, offset that fall by more than $US900 million. All up, iron ore contributed more than 90 per cent of total profit.

With China slowing and the country’s government frantically shifting spending away from capital expenditure towards consumption, which dampens demand for ore, Rio Tinto and BHP are expanding output.

Will the mine of the future be a mine at all? – by W.Scott Dunbar (Globe and Mail – August 18, 2014)

August 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.

The Globe and Mail has sought out columns from thought leaders in Western Canada, people whose influence is shaping debate, but whose names may not be widely recognized. Scott Dunbar is the head of the Department of Mining Engineering at the University of British Columbia.

Metals to support our way of life are extracted by mining and processing large quantities of rock. The basic extraction paradigm is “drill, blast, load, haul, dump, crush, grind, separate, process.” There are many variations, but fundamentally, the paradigm has not changed since ancient times.

Innovations have made operations in the paradigm safer, more efficient, automated and even autonomous. Rock containing very small quantities of metal can be economically mined and processed and it is tempting to think that further innovations will allow mining and processing of rock containing even smaller amounts of metal.

However, some constraints are having a significant effect on the feasibility of mining. First, economic metal deposits are very difficult to find. Some deposits exist at depths of one kilometre or more, but heat and rock-mass stability at these depths make their exploitation difficult. Also, the waste-rock dumps and tailings generated by mining and mineral processing pose significant engineering challenges, environmental concerns and financial liabilities.

B.C. mine’s breached tailings pond one of 98 to undergo independent investigation – by Sunny Dhillon (Globe and Mail – August 18, 2014)

August 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.

VANCOUVER — The B.C. government has ordered independent investigations into the spill at the Mount Polley mine and at every other tailings pond in the province, saying the disaster has shaken public confidence and threatens to undermine other resource-sector projects as well.

The province – which has been criticized by First Nations near the spill for a perceived lack of industry oversight – has also signed a letter of understanding with two bands, whose leaders say they’ll push for meaningful mining reform.

The hiring of an outside panel of experts to investigate the Mount Polley spill is a shift from the province’s earlier stance that probes by the chief inspector of mines and the Conservation Officer Service would suffice. Each of the three experts on the panel has decades of engineering experience, with one having worked on the investigation into the New Orleans levee failures during Hurricane Katrina.

At a news conference Monday, Bill Bennett, B.C.’s Minister of Energy and Mines, stressed that the province must do whatever it takes to restore public confidence in mining in particular and the resource sector in general.

NEWS RELEASE: Toronto Star finds mine well worth its salt

August 19, 2014

This article was provided by the Ontario Mining Association (OMA), an organization that was established in 1920 to represent the mining industry of the province.

The world’s largest underground salt mine has been discovered by Canada’s largest daily circulation newspaper. The Toronto Star’s edition on Saturday, August 16, 2014 featured the Sifto Salt mine in Goderich with a two-page spread starting on the front of the Weekend Life section. Sifto Salt is a member of the Ontario Mining Association.

Toronto Star reporter and restaurant critic – who better equipped to write about salt? — Amy Pataki, traveled to the shores of Lake Huron at the mouth of the Maitland River and visited the mine, which is owned by Compass Minerals. Photographer Richard Lautens accompanied her on her recent underground expedition.

The mine has been operating since 1959 and it produces 6.3 million tonnes of salt annually. Most of the output from the 600-plus employees at Sifto is rock salt used for road safety. However, the company’s nearby evaporator plant turns out about 95,000 tonnes of food grade salt annually. This high-purity product is used as table salt – yes you do shake it on your fries – salt licks for farm animals and in water softeners.

Congratulations to Sifto for this extensive article and photography display and to the Toronto Star for reminding us that we cannot live without this valuable commodity.

Why [B.C. mines minister] Bill Bennett Needs to Resign – by Rafe Mair (TheTyee.ca – August 18, 2014)

August 19, 2014

http://thetyee.ca/

By well-established precedent, Bill Bennett right about now should be typing his letter of resignation to Premier Clark.

Extreme? Not at all. Here’s a bit of history that, trust me, speaks directly to the mining minister’s duty after the catastrophic breach of the tailings pond at Mount Polley mine.

Just after the the Second World War, the British agricultural minister resigned. During the war, the Royal Air Force had expropriated a lot of farmland for airfields. After the war, this land was resold by the ministry to bidders. A lot of hanky-panky and plain unfairness came with the sales and it became a scandal.

When the scandal broke, the minister, Thomas Dugdale, who knew little of the scheme and had nothing personally to do with it, promptly resigned. When asked why, he explained simply that since he took credit for when things went well in the ministry, he had to bear responsibility when they didn’t. He perhaps was too hard on himself. Many thought so, including Winston Churchill, his prime minister. He, however, felt that his ministry had failed in its duty, which required that he take the fall.

During the Falklands War, Lord Carrington, the defence minister, felt that his ministry had not properly advised the prime minister on the ramifications. The prime minister didn’t think so but Carrington did. Again, in his view, the ministry had failed to do its duty, he was the minister, and so he must go.

COLUMN-BHP Billiton demerger shows how good a deal Billiton got – by Clyde Russell (Reuters U.K. – August 18, 2014)

August 18, 2014

http://uk.reuters.com/

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

LAUNCESTON, Australia, Aug 18 (Reuters) – BHP Billiton’s plan to demerge its unwanted aluminium, nickel and manganese assets underscores just what a fantastic deal shareholders in the old Billiton got when the two joined in 2001.

When Australia-based BHP joined forces with the London-listed, but largely South African, Billiton, a diversified natural resources giant was created.

At the time it was largely viewed as a deal that favoured Billiton shareholders. BHP shareholders got about 58 percent of the merged entity, while Billiton’s got 42 percent, meaning that BHP paid about a 20 percent premium to Billiton shareholders, according to a March 19, 2001 report in the Wall Street Journal.

With the Aug. 15 news that BHP Billiton’s board favours a demerger, the 2001 deal comes full circle. While it’s unlikely to be an exact match, the bulk of assets proposed for the new spin-off company will be those that Billiton brought into the 2001 merger.

Billiton’s main assets in the 2001 merger were the Hillside and Bayside aluminium smelters in Richards Bay on South Africa’s east coast, the Mozal smelter in neighbouring Mozambique, and energy coal mines in South Africa.

In focus: Pascua Lama remains in legal limbo – by Fermín Koop (Buenos Aires Herald – August 18, 2014)

August 18, 2014

http://www.buenosairesherald.com/

Barrick says project has slowed due to the company’s debts, lower gold prices

With more than US$5 million spent so far in what has long been described as one of the first bi-national mining projects in the world, Barrick Gold continues with its foot firmly on the brakes in Pascua Lama hoping to resolve its legal limbo in Chile as soon as possible while it seeks out new investors to join the project.

Even as Barrick likes to tout the potential benefit of the project for both Chile and Argentina, environmental groups continue to call for the cancellation of the mine’s environmental permits due to the potential risks the project could have on the area’s rivers and glaciers, which they say have already been affected.

“The project has not been abandoned, we temporarily decreased the pace of construction. It was impossible to keep working at a quick pace considering the company registered a US$10.37 billion loss last year and the price of gold dropped a lot,” a Barrick official in Buenos Aires told the Herald. “Plus, the legal issues in Chile led to the suspension of the construction there.”

Located in the Andes Mountains on the border between Argentina and Chile, Pascua Lama is an open pit mining project of gold, silver, copper and other minerals. It contains estimated deposits of 18 million ounces of gold and 676 million ounces of silver, with 75 percent of the deposits in Chile and 25 percent in Argentina.

Mount Polley inquiry must be independent – by Stephen Hume (Vancouver Sun – August 18, 2014)

August 18, 2014

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

Dam collapse: Government was involved in inspecting structure, so a true arms’-length investigation essential

The engineering firm that designed the Mount Polley tailings pond containment system that collapsed on Aug. 4 also designed a tailings dam that failed catastrophically in South America on Aug. 19, 1995.

Knight Piésold designed the tailings containment facility for the Canadian-owned Omai gold mine in Guyana. Before the accident, it had handed off operational responsibility to the mining company, which then hired another engineering consultant, the Canadian firm Golder Associates.

The Omai tailings dam collapse spilled an estimated 2.9 million cubic metres of toxic waste into the Essequibo River, the country’s biggest and most important watershed. (Some estimates run higher.) Guyana’s President Cheddi Jagan, whose government held a five per cent share of the mining venture — it was the poor country’s largest private sector employer — and had been championing its economic benefits, called it “the country’s worst environmental disaster.”

A subsequent inquiry found no criminal liability and a civil class action suit was later dismissed. It’s worth noting, perhaps, that by comparison the Mount Polley tailings dam failure, which B.C.’s Mines Minister Bill Bennett has equated with a simple natural landslide, spilled 14.5 million cubic metres — about five times as much contaminated waste as at Omai — into the Fraser River system, B.C’s biggest and most economically important watershed.

UPDATE 1-Rio Tinto to review stake in closed Papua New Guinea copper mine – by Sonali Paul (Reuters India – August 18, 2014)

August 18, 2014

http://in.reuters.com/

MELBOURNE, Aug 18 (Reuters) – Rio Tinto is set to decide on its stake in a long-dormant copper mine in Papua New Guinea’s Bougainville after the passage of a new mining law on the island, with the company possibly pulling out of the project after a quarter of a century.

The interim mining law converts Bougainville Copper Ltd’s mining lease into an exploration lease. That can be converted to a mining lease if approved by the autonomous province’s government, which now controls resources on the island.

“In light of recent developments in Papua New Guinea, including the new mining legislation passed earlier this month by the Autonomous Bougainville Government (ABG), Rio Tinto has decided now is an appropriate time to review all options for its 53.83 per cent stake in Bougainville Copper Limited (BCL),” the company said on Monday.

Rio Tinto declined to comment on what was the most likely outcome of its review or how soon a decision would be made. Selling its stake would be an option.

A secessionist rebellion on Bougainville in 1989 stopped mining at BCL’s Panguna mine. The mine produced some 3 million tonnes of copper and 9.3 million ounces of gold over 17 years.

Salt at the source: A day in a Lake Huron mine – by Amy Pataki (Toronto Star – August 16, 2014)

August 18, 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.

We visited the world’s largest salt mine, following the mineral from the tunnels under Lake Huron to our dinner tables and driveways.

GODERICH—Here’s a funny thing about road salt: In its rawest form, it is as slippery as ice. They know this down in the world’s largest operating salt mine, a four-hour drive from Toronto in the pretty town of Goderich.

The mine is 533 metres beneath the surface of the Earth, almost as deep as the CN Tower is high, and tunnels 7 kilometres underneath Lake Huron. It’s owned by Sifto Canada. Visitors are rare.

It’s a strangely beautiful environment, a crystal catacomb of glittering walls and surprisingly sweet air. Salt is everywhere, as thick pillars holding up the 20-metre ceiling and as floating particles that coat the skin and lips.
Salt is also thick underfoot. The exposed seam is rink slick. Miners lay down crushed salt for traction.

“We are standing on product,” says operations manager Mark Rowe. “It should be in a bag, and we’ll get there.”

Bagged or bulk, salt makes our winter roads safe and our summer barbecues tasty. The Goderich mine and its sister evaporation plant (where brine is turned into solid sodium chloride) meet age-old needs with modern technology. Here’s how the grains travel from the ground to your shaker or driveway.

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.