Teck Digs in to Prosper – by Marilyn Scales

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.

Teck Cominco incurred huge loans ($10 billion) at the worst possible time (October 2008) for the acquisition of Fording Coal. Hit with the double whammy of plummeting commodity prices and a huge debt load, management in Vancouver is digging in to ensure that the company not only survives, but prospers.

Teck told investors at the recent BMO Capital Markets that it will cut sustaining capital needs by $330 million and capital projects by $400 million this year from 2008 levels. It has slowed the development of the Fort Hills oil sands project and withdrawn from the Petaquilla copper project. Zinc production at the Trail metallurgical complex has been reduced by 20%, and the Pend Oreille zinc mine has been temporarily closed.

Teck is selling its 50% share in the Williams and David Bell gold mines at Hemlo, Ont., to Barrick Gold, its joint venture partner. The deal is worth $US65 million.

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The Honourable Lisa Raitt – Canadian Minister of Natural Resources – Economic Club of Toronto Speech

Economic Club of Toronto

Toronto Ontario
January 9, 2009

Check against delivery

Thank you very much (emcee), and thanks very much to the Economic Club of Canada for the opportunity to speak here today.

Let me begin by saying what an honour and a privilege it is to serve as Canada’s Minister of Natural Resources.

I guess more people in these parts know me from my time at the Toronto Port Authority and left wondering how that meshes with my new role.

But I am also the daughter of a Cape Breton coal miner. So I understand, in a very personal way, what it means to live in a household that depends on our resource industries.

And, if anything, my time in the boardroom only further hammered home the point that so much of Canada’s trading economy still depends, in large part, on our resource industries. Something we see most clearly in how the Canadian dollar often tracks closely to commodity prices.

So I came into this job with an understanding of the importance of our resource industries to the people who work in them- as well as the impact they have on our economy as a whole.

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HudBay, Lundin Bucked off Merger-Go-Round – by Marilyn Scales

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.

Big and small companies are still jockeying for position on the merger-go-round. Unfortunately, not everyone is completing the ride; some are being bucked off. It appears, however, that even in times of scarce financing, there are deals to be done for enterprising executives.

One of the highest profile mergers, that of HudBay Minerals and Lundin Mining, has been derailed. The two companies agreed to terminate their arrangement agreement on Feb. 23. The deal was stridently opposed by HudBay corporate investors who demanded the deal go to a shareholder vote. The Ontario Securities Commission agreed and overturned a previous approval without a vote made by the Toronto Stock Exchange. Although Lundin shareholders had already voted in favour of the merger, HudBay determined that it was unlikely its shareholders would approve the deal. HudBay currently holds a 19.9% interest in Lundin.

The deal between IamGold Corp. and Orezone Resources was complete on Feb 25, and Orezone Gold Corp began trading on the TSX. The acquisition gives IamGold a 16.6% interest in Orezone, including the four-million-ounce Essakane gold project in Burkina Faso. The project could reach full production at over 300,000 oz/year in late 2010. The deal give Orezone a C$20-million equity injection toward the US$350 million needed to develop the Essakane deposit.

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The Unknown Giant of Canadian Mining – Thayer Lindsley – by Fred Bodsworth (Part 2 of 2)

Maclean’s Magazine – August 15, 1951

Lindsley is a rare combination of the four “musts” of mine-making success.

The first “must,” and Lindsley’s greatest asset, is his phenomenal insight into problems of geology and vein structure.

Second, he has an uncanny sense of economics and financing.

Third, Lindsley, though self-effacing in his personal life, is a striking contrast as a businessmen. He is willing to gamble hard and boldly with million-dollar stakes and long odds.

And fourth, he can work hard, physically and mentally, with a power of concentration so keen that he is amusingly absent-minded at times regarding matters outside his business affairs in which he has no interest.

Knack for Rock Jigsaws

Lindsley’s ability to work out complex problems of geological structure and decide whether a property is a potential mine or just another “teaser” has become a legend in Canadian mining circles. But he has made mistakes. For example, he pulled out of Red Lake, Ontario, in its early days because he was convinced the area had no promise, then had to watch with embarrassment as it developed into one of Canada’s richest gold camps.

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The Unknown Giant of Canadian Mining – Thayer Lindsley – by Fred Bodsworth (Part 1 of 2)

A shy, elderly and virtually anonymous man named Thayer Lindsley personally controls a fabulous international kingdom of gold, silver, copper, zinc and iron. With a genius for geology and finance he has made millions but he has never got around to buying a car.

Maclean’s Magazine – August 15, 1951

The financial pages of Canadian newspapers in the past few months have heralded the discovery of new high-grade ore at Giant Yellowknife, Canada’s lusty gold-producing youngster of the Northwest Territories; they have announced that United Keno, the Yukon’s big silver-lead-zinc producer, chalked up a two-and-a-half-million-dollar profit in 1950; that Falconbridge Nickel of Sudbury and its expanding overseas refinery in Norway will spend millions of dollars to boost output for defense; the “big two” of Canadian mining exploration, Ventures Ltd. and Frobisher Ltd. are pushing the search for titanium in Quebec, uranium in northern Saskatchewan, iron in British Columbia.

Mining editors have headlined a proposed thirty-three-million-dollar project to develop a fabulous copper-cobalt property in Uganda; they have announced that an American firm will reopen ancient silver mines in Greece; that Latin America’s biggest gold mine, the La Luz of Nicaragua, has acquired substantial interests in a Californian tungsten mine, and in promising mining properties of the Philippines, Costa Rica, Honduras and the state of Nevada.

There have been reports too of an exciting iron discovery in the western Sahara, of a Venezuelan move to expropriate the Guyana gold mine, and of mounting production from Southern Rhodesia’s Connemara gold mine.

It is almost inconceivable, yet every one of these enterprises is directed and financially controlled by one person, a reclusive mystery man whose genius for evading the limelight is exceeded only by his genius for geology and mining finance. He is Thayer Lindsley, undisputed No. 1 figure in Canadian mining, who carved out Canada’s biggest mineral empire and then went on to create another international empire just as great.

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Bucko Lake Canada’s Newest Nickel Producer – by Marilyn Scales

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.

Canada’s newest nickel producer is the Bucko Lake mine near Wabowden, MB. The mine, which belongs to Toronto’s Crowflight Minerals, shipped its first concentrate on Feb. 12, 2008, to Xstrata’s smelter Sudbury, ON.

The initial concentrate shipment weighed of 90.0 tonnes and contained 11.5 tonnes of nickel. Full commercial production is expected early in Q2 2009.

The Bucko Lake deposit was first investigated by Falconbridge, and a 340.0-metre-deep shaft was sunk in 1971-72. The mine is designed for longhole open stoping with sublevel access on 30.5-metres intervals. The intervals are connected via an internal decline. Backfill consists of cemented hydraulic material and development waste.

Underground mining began late last year in the first high-grade stope area on the 1,000 level (305 metres). Lower grade stopes on the 1,000 level are also being mined, and the high grade stope area on the 900 level (275 metres) is now being developed. The main ramp has been driven approximately 115 metres vertically from surface. Some ore development and crown pillar support activities will occur from the 450 level (135 metres), which should be reached late in the first quarter.

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Down to the Sea in Inco’s Alloys (Part 2 of 2)

This backgrounder was produced for Inco employees worldwide in April 1990 by Denise Welker who at that time was a Communications Manager for Inco Alloys International Inc. The Inco Alloys division was sold in the late 1990s.

Inco’s History in Marine Alloys

Long before the advent of the nuclear navy, mariners were using Inco’s high performance alloys to conquer sea water corrosion. For more than 85 years, alloys invented and produced by Inco Alloys have demonstrated a special brand of strength and corrosion resistance – shoreline or offshore; above and below the water line.

MONEL alloy 400, a nickel copper alloy, was the first modern, high-strength, corrosion-resistant alloy to serve the U.S. Navy. Then cam MONEL alloy K-500, INCOLOY alloy 825, a nickel-iron-chromium alloy; and INCONEL alloys 625 and 718, nickel-chromium alloys. These and other Inco Alloys products have been working dependably at sea ever since.

Many marine applications don’t require the high levels of strength or corrosion resistance provided by these alloys. But when they do, these qualities are often critical. Failures are expensive, sometimes dangerous. For some applications, such as those in the nuclear submarine program, Inco Alloys products are the obvious choice to meet design demands. For many others, they are the long-term, cost-effective choice.

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Down to the Sea in Inco’s Alloys (Part 1 of 2)

This backgrounder was produced for Inco employees worldwide in April 1990 by Denise Welker who at that time was a Communications Manager for Inco Alloys International Inc. The Inco Alloys division was sold in the late 1990s.

The sun beamed brilliantly in the flawless blue sky and glimmered on the white hats of 308 sailors as they marched crisply on board ship to the notes of “Anchors Aweigh.”

Thousands of people, some clad in jeans, others in business suites, strained for a view of the huge submarine which stretched under the sailors’ feet like a sleek, black, metallic whale.

Then, with ship’s blessings, patriotic speeches, and a crack of a champagne bottle across her bow, the USS West Virginia officially began service in her country’s defense.

The date – October 14, 1989. the place – the Groton, Connecticut, headquarters of the Electric Boat Division of General Dynamics Corporation. The occasion – the launching of the eleventh Ohio-class Trident submarine, named for West Virginia,  home state of Inco Alloys International, Inc.

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Calls to Nationalize Nickel Industry During Xstrata Layoff Support Meeting – by Bill Bradley

Northern Life, Greater Sudbury’s community newspaper, gave Republic of Mining.com permission to post Bill Bradley’s article. www.northernlife.ca

It was standing room only at the Quality Inn Tuesday night, when 350 people took part in an event organized by local federal and provincial NDP politicians for laid off Xstrata workers. The group listened to rhetorical speeches by everyone from NDP Leader Jack Layton to Mayor John Rodriguez to Dwight Harper, president of Mine Mill Local 598/CAW workers.

Some comments, such as Harper’s wish to nationalize nickel production, were reminders of bad community feelings during major layoffs in the late 1970s. At that time, both Falconbridge and Inco outraged workers by cutting thousands from both their workforces.

Last week, both Xstrata Nickel and the Conservative government of Stephen Harper were roundly condemned by local politicians and labour leaders for not living up to a three-year no layoff agreement. The agreement was signed in 2006 when Falconbridge was taken over by Swiss mining giant Xstrata.

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British Columbia’s Bob Quartermain is this year’s Murray Pezim Award Winner – by Marilyn Scales

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.

If Murray Pezim were around today, the larger-than-life character would approve of giving the award that bears his name to Bob Quartermain, president of Vancouver’s Silver Standard Resources. The two men met amidst the diamond drill rigs at the famous Hemlo gold find in the early 1980s. Pezim was overseeing the work of his company, International Corona Resources, and Quartermain was there on behalf of Teck. Interesting that the two companies later became partners in developing and operating the David Bell gold mine.

Quartermain is this year’s winner of the Murray Pezim Award, presented by the Association for Mineral Exploration British Columbia. It is given to an individual for “perseverance and success in financing mineral exploration.” With over 20 years at the helm of Silver Standard, Quartermain qualifies by the “perseverance” criteria.

As for financing, Quartermain excels at that, too.

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Inco Case Study (Background Reading): The End of Monopoly: A New World for Inco (Part 3 of 3)

The Advent of Nickel: From Discovery to Mid-20th Century

Canadian Business History Professor Joe Martin

This reading was prepared by Joe Martin to supplement the class discussion on the Inco case. All charts have been omitted.

Re-incorporation in Canada

In 1928, Inco was re-incorporated in Canada. There were claims that the main motivation behind the re-incorporation was to evade American anti-trust laws. In the 1920s, the American trust-busting movement had gathered momentum and was turning to the Morgan trusts. Inco’s lawyers, Sullivan & Cromwell, are said to have advised on relocation to Canada in order to escape antitrust regulation. Once Inco became a Canadian corporation, it was no longer subject to U.S. jurisdiction. In Canada the U.S. anti-trust laws and the reach of American authorities were not an issue.

At that time Inco established dual headquarters in Toronto and New York City, although New York remained the home of headquarters for top management, marketing and finance.

Another important development occurred at the Company in 1928. For the first time, Inco was included in the newly-expanded Dow Jones Industrial Average, consisting of 30 companies, just thirteen years after (24) the company first listed on the New York Stock Exchange.(25)

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Inco Case Study (Background Reading): The End of Monopoly:A New World Order for Inco (Part 2 of 3)

The Advent of Nickel: From Discovery to Mid-20th Century

Canadian Business History Professor Joe Martin

This reading was prepared by Joe Martin to supplement the class discussion on the Inco case. All charts have been omitted.

The Armament Boom and ‘The Nickel Question’

The 1905 Commercial Gazetteer of theWorld states that “there are along the district North of Georgian Bay great deposits of nickel and copper …the only important supply of this metal so far known in America, and probably the most extensive in the world;” and went on to add that New Caledonia “abounds in minerals: nickel is very important.” (13)

But as Viv Nelles writes in The Politics of Development, Canada had permanently overtaken New Caledonia as the world’s most important source of nickel by 1905, and by 1910 Canada was producing three times as much as its rival. Nelles goes on to point out that the ‘poisonous pall that weighed down upon Sudbury’ could not ‘hide the fact that the really important jobs were being exported, with the semi-finished matte, to the United States….popular opinion was summed up in the Toronto Telegram’s tart observation: “A few boarding houses around two or three holes in the ground, plus Sudbury, represents all that Ontario has to show for a monopoly of 90 per cent of the
world’s nickel supply.” (14)

Shortly after the creation of the International Nickel Company, war clouds gathered, and World War I eventually broke out. As well, new applications for nickel were introduced in the various armed forces, including the new Air Force. By 1913, Germany accounted for 57% of International Nickel’s sales outside the United States.

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Inco Case Study (Background Reading): The End of Monopoly: A New World for Inco (Part 1 of 3)

The Advent of Nickel: From Discovery to Mid-20th Century

Canadian Business History Professor Joe Martin

This reading was prepared by Joe Martin to supplement the class discussion on the Inco case. All charts have been omitted.

The International Nickel Company (Inco) is one of Canada’s oldest mining companies and the only Canadian company ever to be part of the Dow Jones Industrial Average (DJIA). Nickel was discovered by accident in the Sudbury basin in 1883 when the rail lines for the CPR were being driven through the hard rock country.

Despite the discovery two decades earlier, the company was not formed until 1902. J. Pierpont Morgan, one of the richest and most powerful men in the world, had recently created US Steel in the world’s first billion-dollar deal. Morgan decided he wanted to control his major supplier of nickel. In the late 1920s Inco became part of the DJIA and was re-incorporated as a Canadian company.

Back in those days, Inco was not really a Canadian company. Although it was true that Inco had a major refinery at Port Colborne in Ontario’s Niagara region, in addition to the mines in the Sudbury area, it should be remembered that the refinery only came to Canada for two reasons. The first was due to intense lobbying on the part of the Ontario government.The second was known as the Deutschland Incident of 1916, when it was suspected that Canadian nickel was being shipped to Germany via the United States and being used to kill Canadian soldiers during World War I.

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Inco Case Study: The End of Monopoly: A New World for Inco (Part 3 of 3)

Canadian Business History – Professor Joe Martin

This case was prepared by Anne-Mette de Place Filippini and Professor Joe Martin as the basis for class discussion rather than to illustrate either effective or ineffective handling of a managerial situation. All charts, photos, questions and exhibits omitted.

A Successful Break from the Past?

By the end of 1974, the Grubb regime had enjoyed three strong years of performance with net sales more than doubling to upwards of $1.7 billion. Meanwhile net earnings had more than tripled to nearly $300 million with the return on shareholder’s equity jumping to over 20%. Rebounding demand and cost cutting efforts had restored financial health at Inco with profitability levels now back above the levels not seen since the 1960s.

In the 1974 annual report, Grubb and President Carter wrote proudly “The year covered by this report was marked by a record level of sales and earnings, by your company’s first diversification into a completely new line of business and by continued expansion in Canada and abroad….the company acquired ESB Incorporated, one of the world’s leading battery companies, with a sound growth record and a reputation for good management….We intend to seek planned and orderly diversification…. Our criteria in making acquisitions are a good earnings potential, the capacity to offset cyclical swings in earnings in the primary metals industry and a broad compatibility with our own skills and assets.”

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Inco Case Study: The End of Monopoly: A New World for Inco (Part 2 of 3)

Canadian Business History – Professor Joe Martin

This case was prepared by Anne-Mette de Place Filippini and Professor Joe Martin as the basis for class discussion rather than to illustrate either effective or ineffective handling of a managerial situation. All charts, photos, questions and exhibits omitted.

Times Had Changed

The nickel industry was just not the same, Grubb thought as he settled into his new office in 1972. He believed that the turnaround would be even tougher to achieve than the cost-cutting measures he had implemented in Hereford. He thought back wistfully to an earlier, simpler time. And he asked his Secretary to pull out some old annual reports. At random he picked up the 1955 annual report.

Grubb read the stirring words of John Thompson, the legendary former Chairman after whom Thompson, Manitoba, is named. Grubb also looked at the words of his predecessor Henry Wingate, who was the brand-new President back in 1955 (before Wingate was promoted to Chairman in 1960) and who had just come through a level of prosperity that warranted an upbeat annual report.

The words were buoyant, and revealed to Grubb the contrast between the company’s past and present fortunes. Wingate’s message began, “In 1955 the Company achieved the largest production of nickel and realized the highest earnings in its history. A new record was made for dividend payments to shareholders.(6) Disbursements for wages were larger than ever before.”

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