Republic of Mining

Mining lawyers bullish on next year – by Drew Hasselback (National Post – December 12, 2012)

December 12, 2012

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

Mining lawyers are fairly bullish on 2013. They’re expecting at least two trends. First, mergers and acquisitions will gather steam as cash-rich mid-tier mining companies will target increasingly cash-poor juniors. Second, weakness in traditional public debt and equity markets will fuel alternative financings, such as joint ventures, streaming or royalty deals.

Khaled Abdel-Barr, a partner with Lawson Lundell LLP in Vancouver, sees favourable market conditions for acquisitions. “I’m generally quite bullish on an uptick in M&A in the Canadian mining space.”

Commodity prices have softened, and this has weakened valuations for smaller companies. This, in turn, makes it difficult for those small companies to finance projects by raising equity through public offerings. Majors and intermediates, meanwhile, have been quietly building up cash. They’re waiting in the weeds to bid on the struggling juniors that have the best projects.

Shea Small, a partner in the Toronto office of McCarthy Tétrault LLP, says that when commodity prices were high, smaller companies were able to access capital markets to finance marginal projects. Conditions have changed — and the smaller companies are now exposed, he says. “When those high commodity prices came down, it became clearer who was swimming without a bathing suit.”

Mining costs may be abating but labour worries persist (National Post – December 12, 2012)

December 12, 2012

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

It might be minimal, but miners appear to finally be feeling some cost relief.

Despite operating in a relatively healthy commodity-price environment, the past couple of years have been mostly miserable for mining executives, as soaring costs have crimped their margins and frustrated investors. Major projects have been called off or deferred because of low projected returns, and CEOs who couldn’t turn things around got fired. By mid-2012, it was clear that investors had lost all patience with under-performing companies.

Even so, the miners are feeling a bit more optimistic as 2013 approaches. While there are few firm numbers to back it up, anecdotal evidence suggests that cost inflation in the mining sector is beginning to slow down and come under control.

As projects got delayed over the past year and companies slashed their capital spending budgets, the incredibly tight markets for inputs such as equipment and consumables began to ease, experts said. They should soften even more over the next two or three years as the pipeline of projects gets thinner due to the deferrals. Many of the largest projects in the world are on hold, including the absolute biggest: BHP Billiton Ltd.’s US$28-billion Olympic Dam expansion in Australia.

Oil pipelines remain a hard sell, industry working to ‘get the message out’ – by Claudia Cattaneo (National Post – December 12, 2012)

December 12, 2012

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

TORONTO — Compare oil production growth from Canada’s oil sands plus nearby tight-oil fields, versus pipeline infrastructure needed to transport it to consumers, and you see why Canada’s energy sector is sweating bullets.

If supplies continue to rise as expected, pipeline capacity will run out around 2015/2016, when combined production from the oil sands and the Bakken tight-oil field surpasses four million barrels a day. When production hits six million barrels a day in a decade, capacity would run out again even if all proposed pipeline plans are approved and built.

It’s a pipeline capacity cliff that’s unprecedented for Canadian oil producers and all eyes are on whether major regulatory decisions in 2013 give the go-ahead to new pipeline projects — or force a rethinking of oil production growth plans.

“On the oil side of things, we have been in and out of that situation … month to month when there are maintenance outages, but never looking forward have we had the delays … like we have seen on Keystone and some of the other regulatory processes,” Greg Stringham, vice-president for oil sands and markets at the Canadian Association of Petroleum Producers, said on the sidelines of the group’s annual investment symposium Tuesday.

Harper’s foreign ownership policy is incomprehensible – by David Olive (Toronto Star – December 12, 2012)

December 12, 2012

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.

Once again I’m dumbfounded that Stephen Harper’s university major was economics. His new policy on foreign ownership, unveiled with fanfare late last week, is as clear as the goo extracted from the dinosaur remains at Fort McMurray.

Harper last Friday rebuked the majority Canadian public opposition to a proposed Chinese government takeover of Calgary oil producer Nexen Inc. with his approval of that $15.1-billion deal, and of a $5.2-billion Malaysian government state grab for Alberta oil and gas assets. In doing so, the PM unveiled a ballyhooed “get tough” stance on future foreign state designs on the Alberta tar sands.

This embarrassment of a policy (the more fawning typists in the financial press have labelled it the “Harper Doctrine”) is rent with loopholes, is incomprehensible, and lacks the clarity to be applied consistently. Harper has conceded as much in allowing that foreign government takeovers in the oilpatch will henceforth be blocked, other than those arising from “exceptional circumstances.”

Gosh sakes, every takeover is “exceptional.” Acquisitions are a blend of price haggling, political stability, interest rates, strategic fit, industrial cycles, CEO egos, and countless arcane factors.

Nexen deal proves Harper is China’s plaything – by Heather Mallick (Toronto Star – December 12, 2012)

December 12, 2012

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.

Just this once, OK?

That sums up Prime Minister Stephen Harper’s terrified assent to China’s $15-billion CNOCC takeover of Calgary-based petroleum producer Nexen. From now on, he promises, he’ll only say yes under “exceptional” circumstances.

Harper had offered himself up to NDP Leader Thomas Mulcair on a platter, and Mulcair set the platter on fire during question period. It was fun to watch but that’s little comfort. Nexen’s an awful deal for Canadians.

But Harper couldn’t say no to China because he wants quick money for a tarsands industry that’s starting to look weak and because he’s an ideologue who thinks all business deals are good ones. Are the markets happy? Gosh, yes. Are Canadians of all political stripes pleased by increased foreign ownership of Alberta’s precious innards? Irrelevant.

Harper’s a bully at home, a wimp overseas. He happily torments environmentalists, refugee claimants, women, unions, public servants, you know, the locals. He ignores Parliament or prorogues it, and treats the Investment Canada Act — which states that foreign investment must benefit Canada — as a joke.

It took a while, but Harper got it right on SOEs – by Jeffrey Simpson (Globe and Mail – December 12, 2012)

December 12, 2012

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.

Prime Minister Stephen Harper’s decision – and it was his decision – about how to treat takeovers by state-owned companies will reverberate around the world.

Other countries – either the ones with state-owned enterprises (SOEs) or the ones with resources these SOEs wish to buy – won’t slavishly follow Mr. Harper’s lead. But some will take note of how an advanced industrial country handled this growing fact (or challenge) of world economics, as will countries with SOEs. The Canadian precedent – red-circling some industries against SOEs while toughening purchasing criteria in other industrial sectors – will be studied, if not copied.

The Canadian precedent is based on a fundamental premise: that SOEs don’t necessarily act the way shareholder-owned companies do. SOEs, such as those in China, contest that premise. They argue that, whatever the company’s controlling structure, SOEs act on market imperatives alone, up to and including listing their shares on stock markets.

It’s not easy generalizing about SOEs. It’s one thing to have an SOE from autocratic China, where the Communist Party and the military own big chunks of the economy, including interests in SOEs, and, say, Statoil of Norway, a profoundly democratic country that has wisely (unlike Alberta) husbanded its resource revenues in enterprises such as Statoil to make money for future generations.

Protests in Texas just a taste of pipeline battles to come – by Nathan Vanderklippe (Globe and Mail – December 12, 2012)

December 12, 2012

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 — For more than 70 days now, protesters have holed up in trees in Texas, trying to block construction of the southern leg of TransCanada Corp.’s Keystone XL pipeline. They have barricaded themselves inside long stretches of welded pipe, facing police mace in a bid to slow construction. They have locked themselves to equipment, and formed human chains. They have staged hunger strikes from jail cells.

“There’s a lot of resistance and animosity toward the project,” said Ron Seifert, who comes from Montana and is now a spokesman for Tar Sands Blockade, a group created earlier this year to co-ordinate civil disobedience. More than 40 people have been arrested. Tar Sands Blockade said half were Texan; TransCanada says all but one were out-of-state.

What’s happening deep in the U.S. South, however, is likely a precursor of what it is to come for other controversial pipelines. Texas is not a place that is generally opposed to oil. Yet protesters have converged on the state in hopes of interfering with construction of a project that has stoked an angry debate about the future of energy development.

If such conflict can happen in Texas, there is a strong likelihood it will happen again, and in greater force, in Nebraska – the state where opposition delayed a presidential permit for the Keystone XL pipeline – in British Columbia and other areas of North America where new pipelines are planned.

BMO bullish on Sudbury, Canadian economies – by Laura Stricker (Sudbury Star – December 11, 2012)

December 12, 2012

The Sudbury Star is the City of Greater Sudbury’s daily newspaper.

In the next 12 months, Canada will see changes in the housing market, commodity prices and a focus on the big story – household debt — the managing director and deputy chief economist of BMO Capital Markets says.

But Douglas Porter has other concerns. “By this point, Dec. 11, I thought we’d have a lot more clarity on at least one critical issue for the Canadian economy. I thought we’d have more information on the NHL lockout,” he joked.

On Tuesday, Porter spoke to about 100 people at the Greater Sudbury Chamber of Commerce luncheon about “Outlook 2013: looking beyond the cliff,” what the Bank of Montreal sees for the world’s major markets over the next 12 months.

Overall, Porter said, the outlook is positive. “If I were to speak to you just a little more than 12 months ago, the markets were actually in a fairly sour mood and we were worried about a downturn. But over the last year, the markets have swung much more to the optimistic end of the spectrum.”

The biggest risk for the global economy, he said, is still the European debt crisis. While great strides have been made on that front, there is still the possibility of a downturn.

Gold mining’s ‘Occupy’ moment – by Geoff Candy (Mineweb.com – December11, 2012)

December 11, 2012

http://www.mineweb.com/

Dissatisfaction with mining company performance is causing major institutional shareholders in mining equities to question the running of the companies in which they are invested and in some cases to demand changes in management direction – and personnel.

GRONINGEN (MINEWEB) – While the protesters that formed the heart of the Occupy movement in the US (and throughout the rest of the world) would most likely struggle to see any similarity between themselves and the fund managers and investors that buy and sell gold mining and exploration companies, one can’t help but notice a few parallels between the two.

Indeed, listening to the increasingly strident criticism of mining company management by the likes of BlackRock, Hallgarten & Co and US Global to name but three, it is not hard to imagine them siding with the 99% who want to see more of the money; disappointed as they are in the return they have so far received on their investment.

These investors feel disappointed in the management of the companies in which they have invested because they have, in many instances, failed to capitalise on the record rise in many commodity prices and, in particular gold prices and, as a result, like the Occupy protesters, have begun to make their dissatisfaction felt, albeit in a slightly more orderly fashion.

Chinese miners asked to pay for Canadian jobs – by Lisa Laventure (CBC News – December 10, 2012)

December 11, 2012

http://www.cbc.ca/bc/

CBC investigation finds recruiters offering jobs to inexperienced miners

Labour brokers may be charging Chinese miners up to $16,000 for the chance to work in Canadian mines as temporary foreign workers, a CBC investigation has found.

The National visited a prominent recruitment agency in Beijing carrying hidden cameras. Investigators posing as miners learned that workers with minimal mining experience are being offered positions in Canadian gold, copper and potash mines.

Recruiters said that, once working in Canada, miners would be paid no less than $10 per hour. Permanent workers in Canada’s underground and surface mines are paid on average $25 to $30 per hour.

Where Canadian ‘self-interest’ leads: The Congo example – by Yves Engler (Nelson Daily – December 11, 2012)

December 11, 2012

http://thenelsondaily.com/

Former Vice President of the Concordia Student Union, Yves Engler is a well-known left-wing journalist. His recenlty published book is called: THE UGLY CANADIAN – Stephen Harper’s Foreign Policy.

Thank you Julian Fantino.

The International Co-operation Minister caused a ruckus last week when he said that the Canadian International Development Agency should actively promote the country’s interests abroad rather than primarily focus on poverty reduction. Fantino defended “aid” that was given to groups partnering with Canadian companies building mines around the world. He said CIDA has “a duty and a responsibility to ensure that Canadian interests are promoted.”

While some commentators suggested the former Toronto police chief stuck his foot in his mouth, we should thank Fantino for his comments because they raise some important questions that Canadians seldom talk about.

How is Canadian foreign policy made? Which countries are we friendly towards and why? Which do we work against and why? What should be the primary purpose of Canadian foreign policy and aid?

As the author of five books on Canadian foreign policy, I know the answers to these questions can be controversial and complex. A short essay is certainly inadequate to properly address the subject.

Stephen Harper’s decision on CNOOC finally gets the China connection right – by Charles Burton (Toronto Star – December 11, 2012)

December 11, 2012

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.

Charles Burton is an associate professor of political science at Brock University in St. Catharines, and is a former counsellor at the Canadian embassy in Beijing.

Prime Minister Stephen Harper has drawn remarkably little support from political commentators since he announced approval for the Chinese National Overseas Oil Corp. to buy Nexen Inc., but then banned any further sales of Canadian oilsands companies to state-owned firms, except in “exceptional circumstances.”

Responses to the two-part announcement have ranged from “baffling” to “incoherent” to even “an irresponsible farce.”

The federal government’s decision was a long time coming, and rightly so, as it will have enormous implications for Canada’s political economy for generations to come. China is undeniably an engine of future global prosperity, so a major policy decision like this — with far-reaching consequences for Canada’s economic relations with China — cannot be made lightly. Nor should it be based on partisan political considerations, because Canada’s national interest is very much at stake here.

Harper government crafts Canada’s energy policy in Ottawa’s back rooms – Toronto Star Editorial (December 11, 2012)

December 11, 2012

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.

Prime Minister Stephen Harper is catching flak from both sides of the political spectrum as Canadians ponder the implications of his decision to let Chinese and Malaysian state-owned companies buy $20 billion worth of our oilsands industry. On the left, New Democrats complain the Tories have recklessly “rubber-stamped” a deal with no great benefit to Canada. Critics on the right fret that Ottawa will scare off investment with its murkily “incoherent” policy on acquisitions.

There’s truth to both criticisms. The Conservatives haven’t yet articulated a credible energy strategy, for all their obsession with the sector. They are making it up as they go, in back rooms, without benefit of Parliamentary debate or public input, as the Star noted on this page on Saturday. In this case they tossed a sop to China and Malaysia, without getting much in return, then decreed the rest of the oilpatch off-limits to other similar actors.

In Parliament on Monday Harper struck a populist pose, positioning his Tories as careful stewards of the public interest, as against the Liberals, who in the past reflexively waved through foreign investment, and the New Democrats who reflexively opposed it. It was a clever, if disingenuous posture. In reality, after ragging the puck for two years, the Tories took the path of least resistance.

At the end of the day Canadians are still left looking for a coherent energy strategy. The Tories have yet to enunciate a credible plan to develop the oilsands in a sustainable manner, and to address climate change.

Still plenty of private cash for oilsands, natural resources minister says – by John Spears and Vanessa Lu (Toronto Star – December 11, 2012)

December 11, 2012

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.

If cabinet ministers from Canada’s big oil producing provinces are worried by the federal government’s new limits on foreign investment in the oilsands, they’re not showing it.

And a spokesman for Canada’s oil producers said the new policy provides some welcome clarity for the sector.

They all chimed in after federal natural resources Minister Joe Oliver told an industry meeting in Toronto there is still “plenty” of private sector money for the oilsands.

Last week, the federal government had slapped limits on how much foreign state-owned companies can invest, especially in oilsands projects. But it approved takeovers of Nexen Inc. by China’s state-owned firm CNOOC. It also allowed the takeover of Progress Energy Resources Corp. by Petronas of Malaysia.

After a speech to the Canadian Association of Petroleum Producers (CAPP), Oliver said the new rules won’t hurt the oilsands, as there is a “huge amount of capital available globally and quite a bit available inside our country.”

Stephen Harper compromises on Nexen and everyone gets half a baby – by Andrew Coyne (National Post – December 11, 2012)

December 11, 2012

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

See, the thing about Solomon is, he never actually cut the baby in half.

Nevertheless, the prime minister’s split decision on foreign takeovers is being praised as Solomonic in some circles. But then, for some people cutting the baby in half — you can have the head and one of the shoulders, but the rest of it you get only in exceptional circumstances — is always the right decision. Because, you see, it’s a compromise, and compromise shows maturity, and maturity is the beginning of wisdom, and, well, it’s a compromise. God forbid he’d decided it on principle.

Aside from the baby-severing community, however, the reaction was, as you might expect, mixed. Perhaps the most memorable was Tom Mulcair’s devastating putdown, that the only clear winners from Harper’s decision to allow the sale of Calgary-based Nexen to China’s state-owned CNOOC were the “Nexen shareholders” — oh, them — in “Mr. Harper’s oilpatch.”

I wasn’t aware until now that it was Mr. Harper’s oilpatch. Still, you could make a case that, as of Monday, it is. The prime minister may not have gone so far as to dismiss Nexen’s shareholders, à la Mulcair, as some sort of bit players in the whole drama, but current and prospective owners of other oilsands firms should be on notice: they no longer truly belong to you. They are, at least in part, Stephen Harper’s.