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Canadian Mining Journal

Size Does Not Matter to Sego in Partnering With Native Communities – 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.

There has been some discussion in this space over the past two weeks as to how it takes very deep pockets to keep the Aboriginal community happy when wanting to explore or develop on their lands. The assumption is that only the largest, richest companies can succeed, as De Beers Canada has done at its Victor diamond mine.

That’s not true at all, if the experience of J. Paul Stevenson is anything to go by.

“I have worked with First Nations for many years as CEO of junior companies,” he wrote. “What we don’t have in money we have in effort and communication. [I] never found lack of money an issue. In fact, I found a great deal of understanding from communities as to our issues around financing.”

Stevenson and I began a correspondence so that I might share his experiences with other CMJ readers. He is currently CEO of Vancouver-based Sego Resources. The junior has two early-stage copper-gold exploration projects in southern British Columbia.

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Good News Gold, Bad News Base Metals – 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.

Let’s start with the really good news. Agnico-Eagle Mines of Toronto has declared its 27th consecutive annual cash dividend. The payment of US$0.18 per common share will be made on March 27, 2009, to shareholders of record as of March 13, 2009. 

Hearing from an optimistic miner in these times is very good news, indeed.

“Agnico-Eagle enters 2009 with a strengthened balance sheet and the expectation that over the next 15 months we will complete the construction of three more gold mines. We also anticipate further increases in gold reserves and resources in 2009 as we continue with an extensive exploration program on our large gold deposits”, said Sean Boyd, vice-chairman and CEO. “We also look forward to providing the results of our ongoing studies on four internal production growth opportunities that give the potential to enhance our superior growth beyond 2010,” he added.

Agnico is in the enviable position of doubling its gold output next year and doubling it again to 1.2 million oz in 2010. Cash costs are expected to be less than US$300/oz in 2010, and only US$320/oz from 2010 to 2018. 

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Deal With Ontario Aboriginal Groups or No Deal? – by Marilyn Scales

Deal or no deal? – 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. The long-simmering dispute between Frontenac Ventures of Oakville, Ontario, and the native bands with claims on a stretch of wilderness north of Sharbot …

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Debt Reduction Begins at Teck – 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 of Vancouver has announced the first steps of its debt reduction plans by suspending the 2009 dividend on its Class A common shares and Class B subordinate voting shares. The move is expected to result in annual savings of $486 million.

“Current global economic and financial market conditions dictate that we take all prudent steps available to us to significantly reduce spending,” said Don Lindsay, president and CEO. “The measures announced today, combined with previously announced tax savings, amount to $2.4 billion and should significantly enhance our ability to address our near-term debt obligations and better position Teck to refinance the bridge loan when conditions improve.”

The large number of cuts Teck is making is a measure of just how deep current global economic woes are. But management has a plan to conserve cash and prepare for better conditions in the future. From its news release dated Nov. 20, 2008, here are the details of its plan.

Sustaining Capital: Company-wide spending will be reduced to approximately $250 million for 2009, down from a forecast of $580 million for 2008. Teck’s operations have been well capitalized in recent years, creating an opportunity to defer sustaining capital costs while ensuring operations are maintained to a high standard.

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HudBay, Lundin Combo Under Fire – 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.

I wonder who first said, “No good deed goes unpunished.” Wherever that bit of wisdom came from it would seem to apply perfectly to the proposed friendly business combination of Toronto’s HudBay Minerals and Vancouver’s Lundin Mining. Major backers are weighing in with their opposition, and shareholders have voted with their wallets.

On Nov. 21, HudBay and Lundin announced their intention to create “a new Canadian leader” in the mining sector. Lundin would become a wholly owned subsidiary of HudBay with each Lundin shareholder receiving 0.3919 of a HudBay common share. The offer represents a 32% premium over Lundin’s 30-day average trading price. HudBay CEO Allen J. Palmiere will be CEO of the combined company. Other members of the HudBay board will be Philip J. Wright, Lukas Lundin, M. Norman Anderson, Colin K. Benner, Donald K. Charter, Ronald P. Gagel, R. Peter Gillin and William A. Rand.

The combined company will be Canada’s second-largest base metals producer as measured by market capitalization. It will have a portfolio of mining assets in Canada, Portugal, Sweden, Spain and Ireland. It will have development projects in the Democratic Republic of Congo and Guatemala.

If all goes according to plan, HudBay will have cash-on-hand of $900 million and a total debt of US$240 million (as of Sept. 30, 2008), it says. HudBay will then loan Lundin $135.8 million for capital investments and general corporate purchases. Lundin will issue 97.0 million common shares to HudBay in return.

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Taking the Message to Canada’s MPs – 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.

Last Tuesday, Nov. 18, mining executives from across Canada met in Ottawa for their annual Mining Day on the Hill. Organized by the Mining Association of Canada (MAC), the event puts industry supports in the offices of select Members of Parliament and federal officials to deliver the message that our industry deserves their support.

“A strong mining sector benefits Canadians in every riding across this country,” said Jim Gowans, president and CEO of De Beers Canada and MAC chair. “We are all facing difficult economic times. Now it is more important than ever that we work with government to ensure that programs, regulation and legislation help to sustain mining jobs across Canada. This is more relevant in remote locations where economic development options are limited and operating costs are high.”

The mining industry has enjoyed one of the longest prosperous periods in history, but it is not immune from worldwide economic events. Due to the financial crisis, all capital expenditures are under review as is the level of discretionary expenditures on exploration. All spending will be reduced in line with changing market realities. Canadian policymakers and businesses cannot be complacent.

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Western Australia Lifts Uranium Ban – 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.

The six-year ban on uranium mining in Western Australia has been lifted, newly elected Premier Colin Barnett announced on Nov. 17, 2008. New mining leases will no longer exclude the hunt for uranium.

Australia is the world’s second largest producer of uranium (19.7 million lb U3O8 in 2006), behind Canada (26.7 million lb). Between them they account for half the world’s production. With the hunt on again for new uranium producers in Western Australia, that country may give Canada a run for the its top-ranked status.

The change in policy will benefit companies with advanced projects in Western Australia.

Canada’s Cameco Corp. looks like it was ahead of the curve when it partnered with Mitsubishi Development (30%) to pay US$346.5 million to buy the promising Kintyre deposit earlier this year. The project, located 1,250 km northeast of Perth, is in the advanced exploration stage. The original uranium discovery was made in 1985, and former owner Rio Tinto eventually outlined eight separate deposits. Cameco estimates that the Kintyre project may host between 62 million and 80 million lb of U3O8 with grades averaging 0.3% to 0.4% U3O8. These numbers do not comply with 43-101 definitions.

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Mining Sector Budget Cuts Go Global – by Marilyn Scales

Marilyn Scales - Canadian Mining JournalMarilyn 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.

At the risk of being the bearer of even more bad news, I have been watching the world’s mining industry react to the turmoil in global stock and money markets. Not only in Canada, but around the world companies big and small are conserving capital and cutting output.

Let us recap: Liberty Mines has placed its Redstone and McWatters nickel mines in Ontario on care-and maintenance. Breakwater has suspended mining at its Langlois base metals mine in Quebec and its Myra Falls base metal producer in British Columbia. Teck is paying particular attention to debt reduction. Capital budgets have been trimmed at Suncor’s oil sands project in Alberta.

And the announcements just keep coming. It seems producers of all commodities and all parts of the world are announcing cutbacks.

Rio Tinto is slicing approximately 10% from its iron ore output in the Pilbara region of Western Australia.

BPH Billiton also expects to send fewer shiploads of iron ore to China next year.

Brazilian mining giant Vale will be slowing iron ore shipments to customers. Additionally, it has suspended a pre-feasibility study for a new bauxite and aluminum project in Ghana.

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Risk Taking and Venezuela – 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.

The nationalization of the Las Cristinas gold project by the Venezuelan government looks like a done deal. There has yet to be an official pronouncement, but Toronto-based Crystallex International looks to have lost its chance to develop and operate this project.

Where is the outrage over such actions, asks Fredric Hambler, a financial systems analyst in San Francisco. “I say it’s time for Crystallex, and the Canadian Mining Journal, to loudly condemn the actions of the Venezuelan government. Thomas Bowden of the Ayn Rand Institute has an excellent article on the subject of ownership rights and the Las Cristinas project, which is available online at: http://www.aynrand.org/site/News2?page=NewsArticle&id=21879&news_iv_ctrl=1021”

Our reader is right, of course. We are outraged by the turn of events in that Latin American country. The planning, hopes and money expended by Crystallex will never be recovered. The truly angry among the industry can call this an outright theft. But what is to be gained by ranting and raving?

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Hopes Fades for Crystallex’s Las Cristinas Gold Project – by Marilyn Scales

Marilyn Scales - Canadian Mining JournalMarilyn 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.

The history of the Las Cristinas gold project that CRYSTALLEX INTERNATIONAL of Toronto has tried to lay claim to is steeped in controversy and delay. But the squabbling may soon come to an end if Venezuelan president Hugo Chavez gets his way. He wants to nationalize the Las Cristinas project along with several other industries.

Placer Dome was one of the first companies to drill the Las Cristinas deposit in the early 1990s. The Canadian company formed a joint venture with Corporacion Venezolana de Guayana (CVG), and CVG remains the owner to this day. Crystallex was drilling the adjacent Albino concession at the time.

The entire Kilometre 88 area of Venezuela became one of the hottest gold plays in Latin America during the early 1990s. But the Las Cristinas deposit with 16.9 million contained oz of gold is the richest.

In 1997 Crystallex bought up a privately owned Venezuelan company said to own the rights to part of the Las Cristinas property. Placer Dome called the claim groundless, but it decided to suspend construction at Las Cristinas until the ownership question could be settled. In June 1998 the Venezuelan court dismissed Crystallex’s claim, clearing the way for Placer Dome and CVG to move forward. The next year low gold prices forced Placer Dome put the project on hold.

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Canadian Gold Hunters Undeterred by Sliding Price – by Marilyn Scales

Marilyn Scales - Canadian Mining JournalMarilyn 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.

It seems like only yesterday pundits looked at the price of gold as it topped US$1,000 an ounce and predicted it could only go up. Actually it was seven months ago, near the middle of March 2008, and we all wish the price would return to that level. Instead, the mess in the global financial markets has for some reason made the U.S. dollar stronger and the price of gold dip to the $750/oz range.

Nonetheless, many Canadian juniors are pressing ahead with work at what they hope will someday be this country’s next generation of profitable gold mines. Here is a sampling that have landed in my inbox during the last two weeks.

ALTO VENTURES of Vancouver sais drilling has begun on targets at its Mud Lake and Three Towers properties in the Beardmore-Geraldton Gold Belt in Ontario. High grades have been unearthed in the region in the past. (www.AltoVentures.com) WESCAN GOLDFIELDS of Saskatoon is earning a 50% interest in the Mud Lake project.

BRIGADIER GOLD of Toronto has extended the gold zone to more than 200 metres vertical depth at its Larder Lake project near Kirkland Lake, Ontario. The intersections were made beneath trenches in which visible gold was discovered in 2005. (www.BrigadierGold.com)

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Financial Woes Trim Mining Sector’s Capital Budgets – 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. The global financial crisis looks to be the new reality for most mineral producers. Slumping stock markets, wobbly banks and lack of consumer demand are having an effect on Canadian miners, …

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Arming Private Security in the Philippines – 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.

Halloween is fast approaching, and I am filled with scary thoughts. I can imagine little ghosts and goblins shrieking for treats. I can imagine costumed superheroes playing gruesome tricks. But the truly frightening thing that I came across this week is the decision made by the Philippine government to allow mining companies to arm their private security forces.

According to reports from GMANews.TV, mining companies in the Philippines will be allowed to established civilian auxiliary armed groups (CAGs) as an adjunct to the local military. CAG members will carry only low-calibre guns, but that is little consolation to anyone who has ever been on the receiving end of a bullet.

Philippine Defence Secretary Gilberto C. Teodoro reportedly said that miners will be allowed to have a many armed men “as necessary depending on the threat level and the terrain” as along as each company signs an agreement with the Armed Forces.

I find this proposal frightening for several reasons.

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Grasping at Lies – NGOs, Mining and the Truth – 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. “A lie told often enough becomes the truth.” – Lenin Am I the only one who thinks there may be a conspiracy to defame BARRICK GOLD? The name of the Canadian …

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Canadian Mining Facts from the Mining Association of Canada (MAC) – 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.

The MINING ASSOCIATION OF CANADA (MAC) released its latest “Facts and Figures 2008” publication at the recent Mines Ministers Conference in Saskatoon. In it are details about the production, reserves, exploration, trade and investment, innovation, tax and human resource aspects of our industry. That’s a lot of ground to cover in 65 pages, but MAC is once again the most comprehensive source of such numbers.

Here are a few of them:

VALUE: The contribution that the metals and minerals industry makes to Canada’s economy by value is relatively stable at 3.5% to 4.5%. Meanwhile, the gross domestic product (GDP) grew to $1.2 trillion in 2007. Of that amount, mineral extraction contributed $9.68 billion and mineral manufacturing $32.22 billion.

TOP TEN: Canada’s top ten minerals by value in 2007 were nickel ($9.90 billion), copper ($4.53 billion), potash ($3.14 billion), coal ($3.14 billion), uranium ($2.76 billion), iron ore ($2.51 billion), gold ($2.38 billion), zinc ($2.09 billion), cement ($1.80 billion) and diamonds ($1.45 billion). The biggest money is to be had in the oil sands. The value of synthetic crude oil last year was $14.80 billion.

RESERVES: Canadian reserves continue to decline as they have for the past 25 years. Years of rising commodity prices led to a “modest” increase in 2006 and 2007, but without exploration spending in this country, production will also decline.

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