Republic of Mining

Eldorado’s move to preserve capital signals what’s to come from other gold miners – by Peter Koven (National Post – July 17, 2013)

July 17, 2013

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

Falling gold prices have pushed miners to make drastic changes to their operating plans, but companies with healthy balance sheets and low cost bases should adapt without much trouble, experts said.

For the miners with marginal projects or weak balance sheets, it is a very different story. Precious metals companies have started to announce spending reductions, project deferrals and other adjustments in recent weeks as the gold price languishes below US$1,300 an ounce. Many similar announcements will be made when the senior and mid-size miners begin reporting second quarter results next week.

On Tuesday, Eldorado Gold Corp. provided a template for the types of moves its peers are likely to make. The Vancouver-based miner delayed three projects, deferred another and reduced its capital spending and exploration budgets for 2013 by a combined US$287.5-million (or 37%). Eldorado also said it will evaluate its dividend policy, though it did not announce any immediate reduction to the payout.

The company won praise from analysts and investors for making sensible moves that allow it to preserve capital while continuing to grow. “The revisions appear prudent and preserve balance sheet flexibility. More gold companies are expected to follow this trend given the low metal prices,” BMO Capital Markets analyst David Haughton wrote in a note.

[KGHM] Ajax trolling city for ideas on convincing residents – by Bronwen Scott (Kamloops This Week – July 16, 2013)

July 17, 2013

http://www.kamloopsthisweek.com/

The recent KGHM Ajax survey (‘Yes, that phone poll was from KGHM Ajax,’ July 11) appears to be aimed at trolling the public for ideas on how the company can convince Kamloops residents its proposed open-pit copper and gold mine could be environmentally friendly.

At least, that’s the impression when the company’s pollsters terminate the survey if respondents don’t agree that mining is an “essential part of the Kamloops economy” and only bother interviewing potential allies.

In fact, KGHM Ajax admits the survey wasn’t designed to find any statistical information or quantitative results. It’s just casting a wide net in the hopes of getting “an overall perspective and understanding of the [mining-friendly] residents’ opinion towards mining.”

The in-house team at KGHM Ajax doesn’t seem to be doing a credible job of informing or persuading a decent majority of the public that the mine’s a good idea — and good PR firms are expensive.

So, while we’re all forced to wait patiently and asked to withhold judgment until KGHM Ajax releases its meters-high stack of information and intentions this fall, the company keeps throwing money at community organizations and conducting surveys of the converted.

The race to ship liquefied natural gas to Asia – by Brenda Bouw (Globe and Mail – July 17, 2013)

July 17, 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.

A huge transition is taking place in Canada’s natural gas industry. As natural gas exports to the United States drop as a result of a drilling boom south of the border, big plans are being made to ship Canada’s natural gas to growing markets in the Asia-Pacific, where it can be sold at a premium.

But getting the gas overseas is no small feat. The commodity needs to be condensed into what’s known as liquefied natural gas (LNG), stored in tanks and shipped to waiting customers in places such as Japan, South Korea, Taiwan and China. There are no LNG terminals in Canada today – a gap some of the world’s largest energy companies are vying to fill.

About a dozen multibillion-dollar proposals are on the table to build export terminals on the coast of British Columbia, many linked through proposed pipeline routes from natural gas fields across northern British Columbia and Alberta.

“What we are talking about here is a complete reorientation of Canada’s natural gas supply chains,” said Peter Tertzakian, chief energy economist and managing director with Arc Financial Corp., a private equity firm. Of the proposals being considered, Mr. Tertzakian says the market likely can support only three, maybe four. For the energy industry, it’s game on.

Fedeli provides new documents – by Jennifer Hamilton-McCharles (North Bay Nugget – July 16, 2013)

July 17, 2013

http://www.nugget.ca/

This is an aerial view of Ontario Northland Railway yards in North Nipissing MPP Vic Fedeli provided new documents to Auditor General Bonnie Lysyk to consider in her special report on the sale of the Ontario Northland Transportation Commission.

Fedeli said the Auditor General’s report is expected to be released by the end of this summer.

“Ministry of Finance documents from January of this year that I’ve unearthed through the Justice Committee’s investigation into the gas plant scandal prove what I’ve maintained from day one – that the Liberal fire sale will achieve no savings,” he said Tuesday.

“In fact, it could cost Ontario taxpayers $1 billion more than the Liberals said it would in their budget last year.” Fedeli said the government was steadfast is telling the public the sale of the ONTC would save taxpayers $260 million. “They weren’t listening to us, but their numbers were wrong,” he said. “We asked the Auditor General to get involved and prove who is right.

“There’s no hesitation, our numbers are right. I wanna ask how can this government go through with this sale? The budget will have to be changed and why would a party sell something to lose a billion dollars?”

UPDATE 3-Big iron ore miners go for volume even as glut looms – by James Regan (Reuters U.S. – July 17, 2013)

July 17, 2013

http://www.reuters.com/

SYDNEY, July 17 (Reuters) – Record iron ore output from BHP Billiton and other mining giants appears to defy logic, with demand for the steel-making raw material cooling in top customer China and a price-eroding supply glut looming.

But the sector’s heavy guns are digging more for less to tighten their stranglehold on the world’s second-biggest commodity market, as competitors struggle.

In mining parlance, this is known as a “rebalancing” strategy, designed to improve the operating margins of the majors to such an extent that smaller competitors or new projects may be all but squeezed out.

“The majors want to maximise those economies of scale,” said MineLife sector analyst Gavin Wendt. “As long as they keep margins well ahead of a declining iron ore price, they are winning.” BHP Billiton, Rio Tinto and Fortescue Metals Group, with their iron ore operations in Australia, and Brazil’s Vale are leading the charge.

Seaborne-traded iron ore prices, which have lost 10 percent so far this year, are forecast to hit their lowest in four years by the end of 2013 as these big miners dig deeper and faster.

Critics of B.C.’s Ajax mine project press federal Environment Minister for review panel – by Wendy Stueck (Globe and Mail – July 17, 2013)

July 17, 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.

A group fighting a Kamloops-area mine proposal says it will ask new federal Environment Minister Leona Aglukkaq to refer the Ajax mine to a review panel, even though previous minister Peter Kent turned down a request for that approach.

“We’re getting our ducks in a row and we are going to be asking for [the review panel],” John Schleiermacher, spokesman for the Kamloops Area Preservation Association (KAPA), said on Tuesday. Kamloops Mayor Peter Milobar is also seeking meetings with Ms. Aglukkaq and new provincial ministers of mining and environment to discuss the project.

The proposed Ajax mine would be an open-pit copper-gold mine that would fall partly within Kamloops city limits. Currently, the project is in the early stages of a joint federal-provincial assessment called a comprehensive study.

KAPA, formed in 2011 by residents worried about potential health impacts of the mine, would like to see the project go to a review panel – a panel of independent experts that, among other things, can hold public hearings and summon witnesses.

Rickford has high hopes for Ring of Fire – by Carl Clutchey (Thunder Bay Chronicle-Journal – July 17, 2013)

July 17, 2013

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

Bumps in the road regarding the Ring of Fire mining belt are not a sign the project is hitting a dead-end, says newly-minted FedNor Minister Greg Rickford.

Rickford, who spent his first day Tuesday as the head of FedNor as well as Science and Technology minister poring through background material, is also the federal government’s new point-man for the Ring of Fire file.

He said recent events like Ring of Fire proponent Cliffs Natural Resources airing its frustration over the environmental approval process are normal. “So I don’t see the project as stalling, it’s just one of the necessary movements that are going to take place,” said Rickford. “It also reminds us that this is a very complex file.”

Rickford (Kenora) said that while he plans to bring a “fresh perspective” to FedNor, he said the program was well-served by his predecessor, Industry Canada Minister Tony Clement.

Critics, like NDP MP John Rafferty, said FedNor wasn’t a high priority for Clement, who was also saddled with being Treasury Board president.

AngloGold poised to write down value of assets by up to $2.6bn – by James Wilson and Andrew England (Financial Times – July 15, 2013)

July 17, 2013

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

London/Johannesburg – AngloGold Ashanti joined other goldminers in responding to the sharp fall in the price of the precious metal by writing down the value of assets by up to $2.6bn and curbing production plans.

The South African miner will take a writedown charge of $2.2bn-$2.6bn in its most recent quarter, which included the steepest one-day drop in the gold price in more than three decades.

Goldminers around the world have cut the value of their assets by billions of dollars in recent weeks. AngloGold, the third-largest producer by volume, joins rivals including Barrick and Newcrest in acknowledging the deterioration in prospects for the sector.

AngloGold would “tighten up on costs, overheads and capital”, said Srinivasan Venkatakrishnan, chief executive, after a $220 drop in the average quarterly gold price. Output this year would now be 4m-4.1m oz, AngloGold said, cutting previous guidance of 4.1m-4.4m oz.

The fall in the gold price has squeezed margins for miners, with South Africa’s Chamber of Mines on Monday warning that about 60 per cent of the nation’s gold mining operations are lossmaking at current prices as the sector enters critical wage talks.

KPMG Commodity Insights Bulletin Chromite – July 2013

July 16, 2013

http://www.kpmg.com/ca/en/

Commodity outlook

Chrome ore witnessed challenging market conditions in 2012, especially during 2H12. There was a fall in ferrochrome prices
due to renewed concerns over European debt, general global economic weakness, weaker stainless steel demand and lack of producer discipline in South Africa.

Ferrochrome prices showed a modest increase of 2.5 cents to 112.5 cents/lb during 1Q13. Spot prices in Europe and China have also recently started rising on increased demand, restocking, higher nickel prices and some anticipation of producer cutbacks in South Africa as they enter another round of power buyback deals with Eskom (South African Power Utility).

Ferrochrome prices are expected to rise modestly during 2Q13 to 120 cents/lb as the Eskom buy-back deals start, and then remain unchanged throughout the remainder of the year. As per consensus price estimates, the yearly average prices for chrome ore and ferrochrome are expected to increase to US$219/t and 120 cents/lb, respectively, during 2013.

The prices are expected to further increase in 2014 and then remain steady till 2016. South African producers are expected to remain under cost pressure as the South African Rand appreciates. With Eskom buy-back agreements coming into implementation and the prevailing labor situation, South Africa is expected to witness only a modest production growth during 2013.

Troubles at Northland Resources deter Nordic mining investment – by Silvia Antonioli and Simon Johnson (Reuters India – July 16, 2013)

July 16, 2013

http://in.reuters.com/

LONDON/STOCKHOLM, July 16 (Reuters) – A financial crunch at iron ore miner Northland Resources demonstrates the impact of metal price falls on small-scale mine exploration in the Nordic region and is scaring away already rattled investors.

The sector had been flourishing since the mid-2000s, drawing in foreign and domestic companies and investment, until the price falls of the last two years in iron, base metals such as nickel, and more recently in gold. The reversal in fortunes was driven home when the Swedish unit of Norway-listed Northland Resources, one of the region’s best-known new iron ore miners, filed for bankruptcy protection in February.

In January it revealed a $425 million funding shortfall, about four times its then market capitalisation, to cover higher than expected capital and operating costs for its Swedish mine. Small Nordic miners and explorers found their efforts to raise funds suddenly got much harder, threatening to cause serious delays or even halt some projects completely.

“It doesn’t help at all. It certainly affects local confidence, adding to the lack of confidence worldwide across the industry in terms of return of capital,” Michael Hudson, the CEO and President of Mawson Resources, a Canadian firm operating in Sweden and Finland, said of Northland’s difficulties.

Mining company expected to finish exploratory drilling this week – by The Associated Press (Green Bay Press Gazette – July 15, 2013)

July 16, 2013

http://www.greenbaypressgazette.com/

MADISON — A company looking to dig a huge iron mine just south of Lake Superior is set to finish exploratory drilling, setting up a lull that could dampen tensions with protesters, at least for a while.

Wisconsin Department of Natural Resources officials say Gogebic Taconite workers should finish drilling their eighth and final test hole in the Penokee Hills within three or four days. The test boring is designed to help the company determine if mining in the area is economically feasible as well as what minerals lay within potential waste rock and the pollution risk they might pose, said Ann Coakley, director of the DNR’s waste and materials management bureau.

Gogebic Taconite officials next want to remove larger rock samples from five sites in the area, an effort known as bulk sampling. The company would haul those samples to a test plant, where they would be processed into final taconite pellets to give the company an idea of total processing time, Coakley said.

The DNR hasn’t granted a permit for that operation yet, though. Agency officials asked the company two weeks ago for more details on the plan, including what kind of explosives would be used, air emission estimates, a site wetland inventory and anti-erosion and anti-pollution measures. Coakley said the company had not responded to the request as of Monday morning.

UPDATE 4-Chilean court suspends Barrick’s Pascua-Lama mine project – by Erik Lopez (Reuters U.S. – July 15, 2013)

July 16, 2013

http://www.reuters.com/

SANTIAGO, July 15 (Reuters) – A Chilean appeals court on Monday suspended Barrick Gold Corp’s controversial Pascua-Lama gold mine until the company builds infrastructure to prevent water pollution, and ordered the mine’s environmental permit be reviewed.

In April, the Copiapo Court of Appeals temporarily and preventively froze construction of the $8.5 billion project, which straddles the Chile-Argentine border high in the Andes, while it examined claims by indigenous communities that it has damaged pristine glaciers and harmed water supplies.

On Monday, a three-judge panel of the appeals court, in a unanimous decision, ordered a freeze on construction of the
project until all measures required in the government’s environmental license for adequate water management, “as well as
urgent and transitory measures required by the environmental regulator,” are adopted.

Chile’s environmental regulator had already suspended Pascua-Lama, citing major environmental violations, and asked
Barrick, the world’s top gold miner, to build water management canals and drainage systems. “Barrick is committed to operating at the highest environmental standards at all of its operations around the world, including at Pascua-Lama, and is working diligently to meet all regulatory requirements at the project,” the Toronto-based company said in a statement on Monday.

Aglukkaq takes environment post as Ottawa seeks to win over First Nations, U.S. on resource projects – by Shawn McCarthy (Globe and Mail – July 16, 2013)

July 16, 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.

OTTAWA — Prime Minister Stephen Harper has moved his cabinet’s lone aboriginal minister into the sensitive portfolio of Environment as the government works to win crucial First Nations’ support for new pipelines and other resource-development projects.

In the shuffle announced on Monday, Mr. Harper demoted former broadcaster Peter Kent to the back benches and appointed health minister Leona Aglukkaq to the critical post, where one of her first jobs will be to finalize long-promised federal regulations covering greenhouse-gas emissions in the oil and gas sector.

The Conservative government is under great pressure to show it is serious about battling climate change and protecting the environment, even as it aggressively pursues energy and mining development.

Natural Resources Minister Joe Oliver, who has been the government’s point man on its so-called responsible resource development approach, remains in the post he has held since entering Parliament two years ago.

Innovation’s vastly cheaper than green subsidies – by BJØRN LOMBORG (Globe and Mail – July 16, 2013)

July 16, 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.

Bjørn Lomborg is author of The Skeptical Environmentalist and Cool It, and director of the Copenhagen Consensus Center.

The U.S. Energy Information Administration recently published a report that estimates global shale gas resources. These findings may have a significant impact on energy policy in the future: Shale gas increases global resources of natural gas by a whopping 47 per cent. And this may be the tip of the iceberg. For example, at the end of June, the British Geological Survey released shale gas estimates for just one field in mid-England that increased the global estimate by more than 18 per cent.

Canada’s shale gas resources – the world’s fifth highest in terms of technically recoverable gas, estimated at 573 trillion cubic feet – are nothing to balk at. The economic benefits from fracking are manifold: Whereas natural gas prices in the European Union have doubled since the year 2000, U.S. prices have declined about 75 per cent in the past few years. This has saved U.S. consumers $125-billion a year. So the shale gas revolution promises to be great news for the Canadian economy, but – perhaps surprisingly, it is also good news for our climate.

China’s next bet is on natural gas – by Peter Tertzakian (Globe and Mail – July 16, 2013)

July 16, 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.

They say, “What happens in Vegas, stays in Vegas,” but not so in China. Affairs in the Middle Kingdom have huge global influence – at least the mundane affairs of economic activity, primary energy use and environmental impact (in that order of causation). After a dozen boom years, the impact of small changes in China’s gargantuan condition triggers repercussion around the world, not the least for major oil and gas exporters like Canada.

Here’s what’s going on: China’s economy is decelerating, which implies caution (but not alarm) for oil markets; but its energy diet is becoming leaner, which rings a positive tone for future natural gas use. A Chinese transition to more natural gas, much more than the International Energy Agency (IEA) is forecasting, reinforces the importance of Canada’s West Coast liquefied natural gas (LNG) prospects.

China’s annual GDP growth has cooled off from its historically supercharged 10 per cent or more, down to an annualized 7.5 per cent for the second quarter of this year. Other metrics suggest loss of economic momentum; its exports are down 3.1 per cent year-over-year; domestic wages are increasing; manufacturing is weakening; and credit is crunching.