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Commodities: Death of the ‘supercycle’ exaggerated – by Chris Flood (Financial Times – July 7, 2013)

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An air of gloom appears to have descended on commodity markets. Gold, copper and iron ore prices have tumbled sharply from their post-financial crisis highs while returns to investors have proved disappointing.
The S&P GSCI, the most widely followed commodities benchmark, has delivered a -8.9 per cent total return over the two years to June 30.

Amid concerns about a possible slowdown in demand growth in China, the once popular theory that commodity markets would enjoy a “supercycle” of prolonged growth has been declared dead.

But interest among many institutional investors remains healthy, according to leading commodity managers. “We are seeing tremendous interest in commodities from a wide range of investors that want to enlarge their current holdings or to make new allocations,” says Jonathan Berland, managing director at Gresham, a specialist commodities manager with $16bn in assets.

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Quebec Disaster Spurs Rail-Versus-Pipelines Debate on Oil – by Jeremy van Loon & Gerrit De Vynck (Bloomberg News – July 8, 2013)

http://www.bloomberg.com/

A train disaster that killed five people in Quebec promises to touch off debate over the safety of shipping crude oil by rail or pipelines such as TransCanada Corp. (TRP)’s Keystone XL. As authorities began investigating the explosion of refinery-bound tank cars hauled by Montreal, Maine & Atlantic Railway Ltd., Quebec’s Green Party demanded stricter regulations and an energy industry association predicted tough scrutiny ahead for rail carriers.

“People think rail is costless until something like this happens,” said John Stephenson, fund manager with First Asset Investment Management Inc., said from Toronto, where he helps manage C$2.70 billion ($2.65 billion). “This is another data point that shows how much costlier and riskier rail is compared to pipelines and will probably move Canada closer to having an energy strategy.”

The July 6 accident forced the evacuation of 2,000 near the town of Lac-Megantic as Montreal, Maine & Atlantic moved oil to Irving Oil Corp.’s Saint John refinery in New Brunswick. The cargo was part of Canadian producers’ growing use of rail amid tight pipeline capacity.

“It’s been a real shame that a lot of the public and especially the activists have pushed the public to sway so much from pipelines which are likely much, much safer over time,” said Arthur Salzer, chief executive officer of Northland Wealth Management, which oversees C$225 million. “It is going to be something that’s going to weigh on the public’s mind.”

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Debate flares up over Northern Ontario’s Ring of Fire – by Josh Wingrove (Globe and Mail – July 6, 2013)

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.

THUNDER BAY, ONT. – This is familiar turf for Michael Gravelle. He is in his second stint as Ontario’s point man on northern mining, an increasingly high-stakes gig rooted in his own backyard.

His hometown of Thunder Bay is the gateway for the Ring of Fire, which he bills as the biggest Ontario mining project in a century. Governments at all levels are eyeing the potential of Northwestern Ontario’s vast untapped resource deposits, while mining services companies set up in the city hoping to catch a multibillion-dollar boom.

But slumping commodity prices, environmental questions and delays threaten the Ring of Fire, which lies about 500 kilometres north of Thunder Bay, and hopes of a windfall in the region. One company has halted its environmental review, while First Nations and Thunder Bay’s mayor say the province has been slow to act.

Cue Mr. Gravelle, the local MPP who, five months ago, was shuffled back to the job of Minister of Northern Development and Mines. He is optimistic despite setbacks and tensions.

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JIM ROGERS: Gold Mining Stocks Face Two Major Headwinds – by Mamta Badkar (Business Insider – July 7, 2013)

http://www.businessinsider.com/

As gold prices plunged, gold mining stocks have taken a beating too. We saw a brutal sell-off on Friday, and the Market Vectors Gold Miners ETF has been down 49.5% year-to-date.

In the second of our two-part interview with Jim Rogers, the commodities guru told us about the biggest headwinds for gold miners.

Also, he’s not convinced that the commodities supercycle has ended just yet. Business Insider: What’s next for gold miners and mining stocks? Jim Rogers: I don’t own gold mining stocks. There’s so many other easy ways for people to buy gold now that the miners have stiff competition. And there’s lots and lots of competitive situations in mining.

30 years ago if you wanted to buy gold, you were almost restricted to gold mining shares. That’s not true anymore. You can buy all sorts of coins. In those days only Krugerrands were available, 30 years ago. Nobody even made gold coins except Krugerrands. Now many countries have them. All sorts of ETFs, ETNs, futures, now there’s many ways to buy gold. So the miners have a serious competitive situation and of course there’s hundreds of them.

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Jim Rogers Correctly Predicted Gold Would Fall To $1200, And Now He Thinks It Could Go As Low As $900 – by Mamta Badkar (Business Insider – July 6, 2013)

http://www.businessinsider.com/

The price of gold peaked at just over $1,900 per ounce in the fall of 2011. And it was right around that time that commodities guru Jim Rogers began warning investors that the yellow metal could hit a low of $1,200 before the sell-off was over.

He was right. Gold prices entered a bear market (down 20% from its high) in April. And on June 27, they touched $1,200.

In a phone interview this week, Rogers explained to us how he arrived at the $1,200 figure. He also offers his outlook for gold as it continues its complicated bottoming process. Business Insider: Two years ago, you told us you could see gold going to $1,200. How did you arrive at that level?

Jim Rogers: I’m sure it was all based on intuition from Business Insider, but gold had been up at that point 11 – 12 years in a row which is an anomaly.

I don’t know any asset that’s gone up 12 years without a down year, and gold needed and deserved a correction. And, if it’s going to happen where would it go? $1,200 was between 35% – 40% and 35% – 40% reactions are commonplace, so that was the first number. I wish I could tell you I had a formula.

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CBC The House interviews Minister Tony Clement on the Ring of Fire challenges – (July 6, 2013)

http://www.cbc.ca/thehouse/ This week on The House, guest-host Susan Lunn interviews Tony Clement, the federal government’s minister responsible for the Ring of Fire. The proposed mining development in the massive Ring of Fire in Northern Ontario could, according its proponents, transform some of Canada’s most disadvantaged native communities. But an internal government briefing note obtained by …

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Unrest, and hope, for developing economies – by David Olive (Toronto Star – July 6, 2013)

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.

The alarming social unrest in emerging economies worldwide has a common thread: a sharp slowdown in once-torrid economic growth. The disturbances so graphically depicted in the media often appear to be ethnic or religious clashes or uprisings against autocracy. Those elements are playing a role. But the real driver of discontent in emerging economies is the failed promise of ever-increasing middle-class prosperity.

Most of the estimated 800 daily riots and public demonstrations in China result from factory layoffs. Striking miners in South Africa and street protests against the rule of Russia’s Vladimir Putin had become commonplace even before the recent weeks of rioting in São Paulo and Rio, and the military ouster this week of Egyptian president Mohammed Morsi in a Cairo stricken by blackouts, food shortages and rampant unemployment.

Hero status was once conferred by grateful new middle classes on Vladimir Putin; on Dilma Rousseff, successor to the immensely popular Brazilian president Luiz Inacio Lula da Silva; and on the Turkish president, Recep Tayyip Erdogan. They all are now struggling to regain their political credibility only a year or so since winning electoral mandates.

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Booms, busts and protests – normal life in emerging countries – by Ruchir Sharma (Financial Times – July 1, 2013)

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

Unrest and slowdowns mark the end of a placid decade, writes Ruchir Sharma

Protests erupt in the formerly happy middle classes of Turkey and Brazil. A credit crisis threatens the Chinese economic juggernaut. Money flees the stocks, bonds and currencies of emerging nations. Is this the end of the emerging world miracle? Not exactly. This marks a return to the normal postwar cycle of recession and recovery, political unrest and calm, after a misleadingly placid decade.

This age is chaotic only in comparison to the brief “Goldilocks” era that began in 2003. Before that year, the emerging world’s share of global economic output had been stagnant for half a century and in decline for a decade, undermined by debt crises that struck from Thailand to Russia. By the late 1990s, these emerging nations were turning to a new generation of leaders, headed by the likes of Luiz Inácio Lula da Silva in Brazil and other giants, including Vladimir Putin in Russia and Recep Tayyip Erdogan in Turkey.

These leaders laid a stable economic foundation for the boom that began in 2003 after the US Federal Reserve and other central banks cut interest rates sharply to engineer a recovery from the technology bust. Much of the resulting easy money flowed into the emerging world, doubling the average annual gross domestic product growth rate to about 7.5 per cent from 3.6 per cent in the previous two decades.

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NEWS RELEASE: Glencore announces acquisition of 31,756,979 common shares of PolyMet and repayment of Bridge Loan

BAAR, Switzerland, July 5, 2013 /CNW/ – Glencore Xstrata plc announces that its indirect, wholly-owned subsidiary, Glencore AG (“Glencore”) has acquired 31,756,979 common shares of PolyMet Mining Corp. (“PolyMet”) at US$0.66 per common share pursuant to its basic subscription privilege and additional subscription privilege under PolyMet’s previously announced rights offering (“Rights Offering”), representing approximately 11.6% of PolyMet’s issued and outstanding common shares following the Rights Offering.

Following completion of the Rights Offering, Glencore holds 78,724,821 common shares representing approximately 28.6% of PolyMet’s issued and outstanding common shares. The Rights Offering triggered the customary anti-dilution provisions of PolyMet’s convertible debenture exchange warrant and purchase warrants held by Glencore. The numbers of common shares issuable to Glencore under the convertible debenture exchange warrant and purchase warrants have been adjusted to 24,083,366 and 6,458,001, respectively, which, if exercised, would result in Glencore holding 109,266,188 common shares representing approximately 35.8% of the outstanding common shares of PolyMet on a partially diluted basis.

In connection with the closing of the Rights Offering, PolyMet repaid the principal amount and all outstanding accrued and unpaid interest thereon of the previously announced US$20 million loan (“Bridge Loan”) advanced by Glencore to PolyMet on April 11, 2013.

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The huge potential of Congo potash – by Lawrence Williams (Mineweb.com – July 5, 2013)

http://www.mineweb.com/

The Republic of Congo (ROC), not to be confused with the neighbouring DRC, has the potential to develop into one of the world’s biggest potash miners over the next decade.

For those who are unaware there are two Congos. The former Belgian colony of the Democratic Republic of Congo – the DRC – is the one which is mostly in the news, with its huge and rich base and other industrial metals, gold and diamond resources. However, lying immediately to the west of much of the DRC on the northern side of the Congo river is the former French colony of the Republic of Congo (ROC – also known as Congo Brazzaville to more easily differentiate itself from its neighbour to the south.)

The ROC, like many African nations has had its own share of difficulties since it cast off its colonial yoke in 1960, but these have not been quite as violent as the problems which have continually beset the DRC over the years and there has been a relatively stable government in place under President Denis Sassou Nguessa since a bloody civil war in 1997. While certainly not exactly a model modern democracy, the ROC has been relatively stable for the past decade and President Sassou has won succeeding Presidential elections, although with suspiciously high percentage majorities!

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Equals go toe-to-toe over Ring of Fire – Thunder Bay Chronicle-Journal Editorial (July 5, 2013)

Thunder Bay Chronicle-Journal is the daily newspaper of Northwestern Ontario.

Let’s all say a prayer for former federal Liberal leader Bob Rae and former Supreme Court Justice Frank Iacobucci. These two individuals, so highly regarded in their respective fields, are stepping into the ring of negotiations to help clear a path for the development of the Ring of Fire.

It’s a colourful name applied to a huge swath of land some 500 kilometres northeast of Thunder Bay, which is home to massive deposits of minerals, and with it, wealth. Although prospectors and mining companies have been pecking away at this virgin region for many years, it has been the arrival of Cliffs Natural Resources and the discovery of a massive deposit of chromite that has really drawn attention to the bounty of the James Bay lowlands.

As the estimates of development and wealth started to soar, so did the interest of neighbouring aboriginal communities. The result has been a frustrating and sometimes dangerous confrontation between First Nations interests and those of the companies wishing to set up a base there.

It’s a simple set of questions when you unravel the rhetoric. Do exploration and mining companies and their investors and the Canadian public at large deserve a compensating share of the wealth the ground will yield?

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Northern Manitoba First Nation tells mining company to stop work and get out – by Ian Graham (Thompson Citizen – July 5, 2013)

The Thompson Citizen, which was established in June 1960, covers the City of Thompson and Nickel Belt Region of Northern Manitoba. The city has a population of about 13,500 residents while the regional population is more than 40,000. editor@thompsoncitizen.net

The chief, councillors and some citizens of Red Sucker Lake First Nation in northeast Manitoba near the Ontario border issued a stop work order and eviction notice at Mega Precious Metals Inc.’s Monument Bay Project mineral exploration camp 60 kilometres north of the community on July 1.

“This STOP WORK ORDER is issued because: Mega Precious Metals Inc. and affiliated companies have breached the Customary Laws of Mithkomaybin Thakaykun Ininiwak as represented by Red Sucker Lake First Nation by constructing, operating and extracting resources from Twin Lakes without the expressed permission of the owners Mithkomaybin Thakaykun Ininiwak as represented by Red Sucker Lake First Nation,” read the stop work order. “WARNING: The failure to stop work, the resumption of work without permission from the Mithkomaybin Thakaykun Ininiwak as represented by Red Sucker Lake First Nation is punishable by the Customary Laws of Red Sucker Lake First Nation.”

“On April 13, 2013, our people voted unanimously to halt all mineral exploration activity in our territory by whatever means possible,” said Red Sucker First Lake Nation Chief Les Harper in a press release. “It doesn’t matter how long it takes, we will abide by our people’s wish to enforce the Stop Work Order and the Eviction Notice.”

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Diverse careers ahead for KKETS grads – by Rick Garrick (Wawatay News – July 4, 2013)

http://www.wawataynews.ca/

Eabametoong’s Ricky Yellowhead is looking at a career in the Ring of Fire after graduating from KKETS’ Aboriginal Skills Advancement Pilot Program (ASAPP) with a GED.

“I applied for forest management and environmental technician (at college this fall),” Yellowhead said during Kiikenomaga Kikenjigewen Employment and Training Services’ June 28 graduation ceremony at the Prince Arthur Hotel in Thunder Bay. “With the mine that’s going to be opening up, I know there’s going to be a lot of opportunities and I want to be a front-line worker. I just want to work in the mines. I like working in the outdoors.”

Yellowhead and about 28 other adult learners graduated from ASAPP with GEDs (General Education Development Diplomas), Ontario Secondary School Diplomas (OSSD) or a variety of certificates.

“The KKETS’ ASAPP program has been set up to help our community members get the skills and training they need to improve their lives in the new economy that is emerging due to resource development,” said David Paul Achneepineskum, CEO of Matawa First Nation Management.

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Big Annie’s legacy honored [Great Keweenaw Copper Strike] – by Kurt Hauglie (Daily Mining Gazette – July 5, 2013)

http://www.mininggazette.com/

CALUMET – For Lyndon Comstock, the story of Anna “Big Annie” Klobuchar Clemenc hasn’t been told thoroughly enough, and because of that, he recently wrote a book called “Annie Clemenc and the Great Keweenaw Copper Strike.”

Because of her efforts on behalf of copper miners and their families before, during and after the 1913-14 copper strike, Comstock nominated Clemenc for induction into the Labor’s International Hall of Fame. The nomination was accepted, and at 7 p.m. July 26, Comstock will be part of the ceremony to honor her induction, which will take place at the Keweenaw National Historical Park Calumet Visitor Center. The ceremony is taking place in Calumet as part of the observance of the centennial of the strike, which started July 23, 1913.

Comstock said he became aware of Clemenc’s importance to the miners during the copper strike while doing research for his cousin, Joanne Thomas, who created an exhibit about her now on display at the Coppertown USA Mining Museum in Calumet Township.

Comstock said he and Thomas had Croation ancestors involved in the strike, so they both felt a connection to the period. Thomas, who lives in Bolinas, Calif., but grew up in Muskegon, said as a result of working with Thomas, he decided to write the book. “That really came out of doing that research,” he said. Thomas said Clemenc, who was born in 1888 in Calumet to Slovenian immigrant parents, was unique for her involvement with the strike.

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The Myth of “Saudi America” – by Raymond T. Pierrehumbert (Slate.com – February 6, 2013)

http://www.slate.com/

Straight talk from geologists about our new era of oil abundance.

Like swallows returning to San Juan Capistrano, every December some 20,000 geoscientists flock to San Francisco for the fall meeting of the American Geophysical Union.Slate readers have already heard about a presentation with a particularly eye-catching title, but for me some of the most thought-provoking news came in a prestigious all-Union session with the rather dry heading “Fossil Fuel Production, Economic Growth, and Climate Change.” (Search for it here.) This session dealt, in a hard-headed, geological, show-me-the-numbers way, with the claim that we are at the brink of a new era of oil and natural gas abundance.

The popularity of the abundance narrative waxes and wanes, and its current ascendance comes primarily on the heels of a report by Leonardo Maugeri, a former oil-industry chief and currently a fellow at Harvard’s Belfer Center. When his cornucopian fantasy came out, I smelled a rat (or at least a not-too-deeply buried fish). But the International Energy Agency jumped on the bandwagon with breathless, and equally fishy, forecasts of the coming “Saudi America.” Most of the media swallowed the story hook, line, and sinker, with even the usually sober Economist rising to the bait.

So what’s wrong with this story? Maugeri’s problems begin but don’t end with anarithmetic blunder so dumb (he compounded a percentage decline incorrectly) it would make even Steve Levitt blush.

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