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Mining bosses doubt private equity investors can strike gold – by SILVIA ANTONIOLI AND DMITRY ZHDANNIKOV (Reuters U.K. – April 1, 2014)

http://uk.reuters.com/

LAUSANNE, Switzerland – (Reuters) – Private equity firms, which have been showing an increased interest in investing in the mining industry, will have a hard time even if they are betting on recovery in the longer term, the bosses of Anglo American (AAL.L) and Glencore Xstrata (GLEN.L) said on Tuesday.

Private equity firms such as Warburg Pincus have hired executives from the mining industry to start investing in the sector and some top industry veterans such as Vale’s (VALE5.SA) former chief executive Roger Agnelli and Mick Davies, head of Xstrata before its takeover by Glencore, have also lined up funding for new ventures.

X2, the investment vehicle run by Davies for example, said on Monday it now has $3.75 billion (2.25 billion pounds) backing his plans to create a new medium-sized diversified mining company.

But the chief executives of the two biggest diversified miners said choppy commodity markets and unpredictable returns will make it hard for the highly geared private equity firms to pay interest on their debt.

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Commodities Defy Citigroup ‘Death Bells’ With Quarter’s Best (3) – by Elizabeth Campbell (Bloomberg Business Week – April 01, 2014)

http://www.businessweek.com/

A year after Citigroup Inc. declared the decade-long run of commodity gains over, wacky weather, dead piglets and Vladimir Putin have gotten in the way.

While Citigroup rang “death bells” in April 2013 for the synchronized super cycle fueled by economic growth in China, extreme weather and supply squeezes led to surprise rallies in 2014’s first three months. Coffee hit a two-year high, cattle and hogs rose to records and nickel had its best quarter since 2010. Gold rebounded from the worst rout in 32 years after Putin’s incursion into Ukraine’s Crimea region set off the biggest standoff between Russia and the U.S. since the Cold War.

Commodities are “still a powerful hedge,” Rob Haworth, a Seattle-based senior investment strategist at U.S. Bank Wealth Management, which oversees $115 billion, said in a telephone interview. “Things happen that we don’t anticipate, whether it’s an invasion in Ukraine or twice as much snow in the middle of America as we normally get. Our clients benefit from having a little exposure to protect against the unanticipated.”

Commodities topped returns for stocks, bonds and currencies, the first quarterly outperformance against all asset classes since 2012. New York-based Citigroup and Goldman Sachs Group Inc. say the rally won’t last as supply surpluses start to emerge in everything from sugar to zinc.

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The Most Dangerous Coal Mine In The World: Mongolia’s Illegal Nalaikh Pits – by Jacopo Dettoni (International Business Times – April 01 2014)

http://www.ibtimes.com/

ULAANBATAAR, Mongolia — Deep inside the earth, the eyes of blackened miners shimmer under spotlights as they hammer endlessly upon rock, tapping the vein of Mongolia’s largest illegal coal mine. The Nalaikh mine, 40 kilometers (25 miles) from the capital, Ulaanbaatar, is both a vision from the past and a rogue operation from the present.

Coal dust streaks the miners’ cheeks, their hands, their worn clothes. In many cases, whether they know it or not, their lungs are being ruined by coal and nicotine. They risk their lives every time they go into the pits.

Frequently, theirs is a losing bet. The miners here are part of a booming complex of illegal mining in Mongolia, the seamy underside of an expansion of legal mining in the past several years. Fatal accidents take place at a higher rate here than in the infamously deadly China mines, as private operators seek to maximize profits by skimping on safety gear.

The miners crawl in the darkness for hundreds of meters through narrow, rambling passages before reaching the working face, where the new coal is cut. Dug with shovels and picks, the tunnels have few timber supports — a minimum safety standard in any coal mine, and the walls crumble as carts loaded with coal slide up, pulled from the outside by trucks.

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The Monumental Copper Disconnect – by Christopher Pollon (TheTyee.ca – March 28, 2014)

http://thetyee.ca/

Click here for the entire series about copper: http://thetyee.ca/News/2014/03/24/Travels-with-Copper/

Billions to mine, refine and assemble into products that last maybe a year or so? Last in a series.

LANGLEY, B.C. — Not long ago this industrial park was farmland: now it’s home to a virtual mine harvesting metal, plastic and glass from all the electronics British Columbians throw away.

For anyone who has ever disposed of a cell phone, hair dryer or appliance at a B.C. drop-off box, this is where some of it goes: a graveyard of sorts, where “end-of-life” products take the first step toward life anew. In any given month, a million pounds of “e-waste” comes through this plant alone.

Cindy Coutts is the President of Sims Canada, a subsidiary of the biggest urban “mining” company on earth. Walking through the Walmart-sized plant (which will double to 60,000 square feet this year), she grabs a printed circuit board the size of a coffee table book and holds it up. Gold and copper gleam against a green backing.

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Welcome to Peak Copper – by Christopher Pollon (TheTyee.ca – March 28, 2014)

http://thetyee.ca/

Click here for the entire series about copper: http://thetyee.ca/News/2014/03/24/Travels-with-Copper/

It’s not far off. So, why aren’t there more operations like this one in BC’s north? Fifth in a series.

FORT ST. JOHN, B.C. — The stretch of Highway 97 in the northeastern B.C. Interior between Dawson Creek and Fort St. John is an odd place for a two-kilometre traffic jam — until you consider that this roadway straddles a resource boom.

Gregg Drury is idling his pick-up on a July morning amid logging trucks, oil field suppliers and RVs, trying to get to the metal salvage yard he operates for ABC Recycling near Fort St. John. He’s doing a huge business these days buying all the metal discarded from old farms, local residents, and more than anything else, the oil patch.

“They’re generating incredible amounts of waste up here,” he says. “From pipelines, I get all that steel, but when they tear a plant down for instance, there’s lots of aluminum, stainless steel, and excess copper and wire.”

The metal salvage yard buys thousands of pounds of copper each day. It’s a tiny part of the business by volume, but huge in dollar value. Steel fetches about eight cents a pound, aluminum about 40 cents; copper, anywhere from $2 to 2.40.

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Cell Phones, Brought to You by BC Copper via China – by Christopher Pollon (TheTyee.ca – March 27, 2014)

http://thetyee.ca/

Click here for the entire series about copper: http://thetyee.ca/News/2014/03/24/Travels-with-Copper/

Home to Apple’s Foxconn plant, Kunshan is China’s Silicon Valley. But for how long? Fourth in a series.

KUNSHAN, CHINA — The kid standing outside the barbed wire fence at Unimicron’s electronics factory near Shanghai is feeling anxious. “Is the work hard?” he asks a middle-aged man, a private recruiter who brought the youth here.

The man tells him to relax. “It’ll be easy. Don’t worry.” It’s a Wednesday morning in September, and I’m standing with a crowd of recent high-school grads gathered to submit resumes at Unimicron, one of the world’s biggest electronics manufacturing companies, and a destination for copper mined 9,000 kilometres away near Princeton, B.C.

These kids are gathered here hoping to land an entry level factory job. High-school grads with no formal training are being offered up to CDN$680 (4000 Renminbi) per month to start, with medical insurance, room and board included (no tattoos allowed, see the translated job ad they are responding to here.)It’s a package that would have been unthinkably rich even five years ago, when Shanghai was booming as a low-cost workshop to the world, drawing millions of migrant labourers from across rural China.

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Where Copper Meets Fire – by Christopher Pollon (TheTyee.ca – March 26, 2014)

http://thetyee.ca/

Click here for the entire series about copper: http://thetyee.ca/News/2014/03/24/Travels-with-Copper/

Naoshima Island in Japan is a surreal melting pot of BC metal and fine art. Third in a series.

From the deck of a private ferry racing across the Seto inland sea, Naoshima Island appears as a tower of yellow rock on the horizon, tipped in a lush emerald. As we approach, blue-uniformed figures appear, darting in tiny vehicles around an imposing industrial complex bearing the red insignia of Mitsubishi, one of the world’s most powerful corporate conglomerates.

If this were a James Bond movie, Naoshima would be the island lair of an arch-villain. Instead it’s home to one of Japan’s oldest operating copper smelters, in almost continuous use since 1917. It’s also the first destination for the raw copper produced at the Copper Mountain mine near Princeton, and much of the rest of the copper mined today in British Columbia.

I came expecting Mordor, only to find the world’s oddest fine art display, with a 230-metre smokestack rising from the northern tip. In a surreal twist that is uniquely Japanese, Naoshima is also a world famous art gallery “park,” covering most of the island’s 17 square-kilometres. It’s home to three major art galleries featuring works by Pollock, Warhol and Monet.

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Betting at the Copper Casino – by Christopher Pollon (TheTyee.ca – March 25, 2014)

http://thetyee.ca/

Click here for the entire series about copper: http://thetyee.ca/News/2014/03/24/Travels-with-Copper/

That would be Vancouver’s mining district, where BC’s future is low-grade and high-risk. Second in a series.

VANCOUVER, B.C. — British Columbia copper ends up in smartphones, in the cars we drive, in our plumbing and electrical systems, as well as in our scrap yards and landfills. But to understand how it gets there, you need to visit a nondescript office tower on Pender Street in Vancouver’s financial district. Or perhaps more aptly put, Vancouver’s mining district.

If mining capital were mineral ore, Vancouver would be the mother lode of all mother lodes. More publicly-traded mining companies are headquartered here (and in Toronto) than anywhere else on earth: 60 per cent of all mining corporations on the planet are found in Canada. Their collective market value in 2012 approached half a trillion dollars: an estimated $449 billion. (See sidebar.)

Many in the mining industry view this global cluster as proof that we are the unrivalled masters of mining on the planet. This has some basis, but the reality is a lot more complex.

“The single largest reason for the concentration of head offices here,” says Alan Young, former executive director of the watchdog group Environmental Mining Council of B.C., “is that stock exchanges like the TSX Venture Exchange or TSX [Toronto Stock Exchange] have been developed to promote venture capital that mid-level and small exploration companies require to exist.”

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REVIEW: Bre-X – Dead Man’s Story – by Marilyn Scales (Canadian Mining Journal – April 1, 2014)

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

You don’t have to be an industry insider to remember the story of Bre-X – the 200 million oz of gold in the jungles of Borneo that disappeared overnight. The story of the company’s rollercoaster ride – propelled by enormous greed – made headlines all over the world and severely damaging the reputation of Canada’s stock exchanges and mining community.

The facts should be familiar. A junior explorer sets out in a remote part of Indonesia to make a gold mine. They drilled, and released promising results. Investors invested, driving up the Bre-X stock price, and the company suddenly had no shortage of investors. More drilling was done, and even better results were released. The analysts loved the project. Bre-X management made higher and higher contained gold estimates – 20 million, 30 million, 100 million, and finally 200 million oz of gold just waiting to make everyone rich.

Of course, promises of huge riches attracts huge appetites. Bigger companies considered buying out Bre-X and gaining control of the Busang gold. The head of the Indonesian government, Suharto, wanted the pot of gold enough to usurp Bre-X’s claim to the property and asked an American miner to develop the project.

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Glencore Xstrata blocking progress at Donkin coal mine – by Roger Taylor (Halifax Chronicle Herald – March 31, 2014)

http://thechronicleherald.ca/

In hindsight it may have been a mistake for the Nova Scotia government to allow mining giant Xstrata plc to win control of the mothballed Donkin coal mine.

It seemed like a good idea at the time to have a company of the stature of Xstrata, with the know-how and financial backing to get the job done, to take over management of the underground mine.

But now, after several years of waiting, the market for coal has changed and so has the makeup of Xstrata, which was acquired by a major competitor, Glencore, in 2012. It didn’t take long for the new company, Glencore Xstrata plc, to realize the Donkin mine was too small for a corporation of its scale and that the return on investment couldn’t possibly meet its expectations.

So Glencore Xstrata announced it would instead sell its 75 per cent stake. But until a buyer could be found it would lay off the few workers looking after the site and would allow the mine to flood.

Although Glencore considers the Cape Breton project small, its 25 per cent minority partner in the Donkin mine, Morien Resources Corp. of Dartmouth, believes the development of the mine is still a winning proposition.

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The Resurrection of Copper Mountain – by Christopher Pollon (TheTyee.ca – March 24 2014)

http://thetyee.ca/

Click here for the entire series about copper: http://thetyee.ca/News/2014/03/24/Travels-with-Copper/

PRINCETON B.C. — The “cradle” of this copper story lies here, about 300 kilometres east of Vancouver near Princeton, B.C., a boom-and-bust mining and logging town that by the late 20th century seemed used up and ready to die.

Between 1927 and 1996, some US$6-billion worth of copper had been dug from the mountains south of town, extracted by at least five corporations, now all long gone. What was left, most traditional assays concluded, wasn’t worth the cost of pulling out of the ground.

But by 2011, change was on the horizon, driven by both new technologies and distant market forces 9,000 km to the east (see sidebar). Under new management, Copper Mountain again began producing raw copper for export, putting 380 people to work full time, and supporting about 1,500 other jobs indirectly.

“I’ve died and gone to mining heaven,” Princeton town councillor Frank Armitage gushed at the mine’s official re-opening. A 40-year veteran of the industry, Armitage is now both Princeton’s mayor and Copper Mountain’s human resources manager.

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Travels with Copper (with INTERACTIVE MAP) – by Christopher Pollon (TheTyee.ca – March 24 2014)

http://thetyee.ca/

Click here for the entire series about copper: http://thetyee.ca/News/2014/03/24/Travels-with-Copper/

Tyee contributing editor Christopher Pollon criss-crossed the Pacific on the trail of BC copper. Here’s why.

I’m standing on top of five billion pounds of copper on a sunny August afternoon in southwest British Columbia near Princeton, trying to figure out where it all goes.

Dust and smoke rise, as explosives shatter seams of rock into moveable chunks 350 metres below me. Bungalow-sized Komatsu trucks (the tires alone cost $40,000 each) wind downward around the terraced edges of the pit toward North America’s biggest hydraulic shovel which can scoop up 80 tons of rock in a single bite. Deceptively toy-like from a distance, the moving parts of the mine perform their ritual 24 hours a day, seven days a week. “Mining on this scale is what makes it economical,” Don Strickland, Copper Mountain’s VP of Operations, tells me.

By last century’s standards, there’s not enough high-grade ore here to warrant mining it. But ever-bigger equipment and new processing methods have made it possible to move — and mine — mountains. With historically high copper prices over the last five years, and most of the world’s best deposits already tapped, Copper Mountain can afford to break and crush 150,000 tonnes of rock a day that will produce just 90 tonnes of refined copper down the road — and still make a profit.

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COLUMN-China PMI not that strong, but may be good for commodities – by Clyde Russell (Reuters India – April 1, 2014)

http://in.reuters.com/

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

LAUNCESTON, Australia, April 1 (Reuters) – China’s official Purchasing Managers’ Index for March probably isn’t as strong as it looks, but that’s likely not a bad thing for commodity demand in the next few months.

The National Bureau of Statistics (NBS) PMI rose to 50.3 in March from 50.2 in February, matching the consensus expectation and indicating that the factory sector expanded slightly in the month.

The official measure, which focuses more on large, state-owned enterprises, is somewhat at odds with the HSBC PMI, which fell to an 8-month low of 48 in March, its third straight month below the 50 level that separates expansion from contraction.

It’s likely that the HSBC survey is painting a more accurate picture of current conditions in China, given the NBS measure tends to be seasonally strong in March, as this is the first month after the Lunar New Year holidays, which this year straddled January and February.

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Why are platinum and palladium not meeting analyst expectations? – by Lawrence Williams (Mineweb.com – April 1, 2014)

http://www.mineweb.com/

The impact of the 10 week old strike which has halted production at a number of South Africa’s platinum mines so far seems to have had little impact on pgm prices. Why?

LONDON (MINEWEB) – While every now and again some analyst or other comments that perhaps palladium is outperforming gold, or platinum is, on the year to date both the pgms have moved up pretty well pari passu with gold overall. All three metals are around 7-8% up since the beginning of the year. Indeed gold moved up substantially further during the height of the Ukraine crisis and while the pgms followed they did not quite do so to the same extent. As gold has fallen back though, the pgms have caught up again.

Many analysts have been preaching the investment merits of the pgms in the light of the long running platinum strike in South Africa which has seen a number of mines effectively shut down so far for some ten weeks – with no end in sight to the strikes yet.

The more aggressive AMCU which has become the dominant player among the platinum mine unions, has been demanding an effective doubling of the workers’ wages which the mining companies have concertedly said they cannot afford – and with many of the deep narrow reef platinum producers finding it tough to make any kind of profit even at current platinum prices they do have a point.

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CFMEU slams Rio Tinto’s warning on robots replacing Aussie workers – by Ben Hagemann (Ferret.com – March 31, 2014)

http://www.ferret.com.au/

The Construction, Forestry, Mining and Energy Union (CFMEU) has struck back after Rio Tinto’s warned that Australian mining labour forces could be replaced by robots.

Rio Tinto CEO Sam Walsh has cautioned Australia against allowing resource projects to shut because of local cost pressures, and warned that Australian society and Australian workers had to ensure they didn’t price themselves out of the market.

He said that the carbon and mining taxes were an issue, and that Rio Tinto is banking on the repeal of both the mining and carbon taxes. “It’s awfully important Australia maintains its competitiveness,” Walsh said.

He said Rio Tinto’s push into the “robotisation” of mining was partly due to the massive wages the company has been forced to pay in Australia. Walsh first introduced automated workshops when he headed Nissan’s manufacturing operations, and said that was done because Australians didn’t want to do the hard, dirty work.

“Some people have expressed concern about automation but quite frankly it’s getting harder and harder to attract young people to remote areas,” he said.

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