Flash News: Major Events

2 02 2011

Less than a year after the Upper Big Branch accident, Massey Energy is set to be acquired by Alpha Natural Resources. Mineweb

Rejoice! The 18-month strike at Vale’s Voisey’s Bay operations is over. Mineweb

The Russians were right. Guinea is seeking to double its share in mining projects to bring it to at least 30 per cent. It is however taking 20% in Rio Tinto, Chinalco and the IFC’s Simandou iron ore project. Mining Weekly

Mongolia is implementing a law regulating nuclear energy. Uranium exploration will begin in 2012 and according to the Prime Minister will be the most ambitious mining venture after the Oyu Tolgoi and Tavan Tolgoi projects. Talking about the later, the bid to develop about half of this coking coal deposit recently wrapped up – 15 bidders have shown interest.

The European Union still très féroce on securing rare earths. Reuters

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Flash News – Update on previous entries

31 10 2010

This week there were significant developments on issues dealt with in previous entries. Here’s the week in review.

China. In response to the production cuts of metal producers due to restricted power supplies, China’s State Reserve Bureau will be selling some of its inventory to appease the markets. Steel Guru

Labour conflict. After failing to reach an agreement, Newfoundland and Labrador has established an industrial inquiry commission to investigate and make recommendations towards ending the 15-month long labour conflict between Vale and the Voisey’s Bay workers. The Commission is tasked to examine the positions of the parties, the factors influencing the relationship climate, external factors contributing to the dispute , impacts on other labour relations as well as disputes, costs to stakeholders and options to resolve the dispute. The Packet

Potash Corp & BHP Billiton: the politics. Saskatchewan is against the acquisition period. It’s not trying to gain further concessions from BHP Billiton. The New Democratic Party is trying to get the Canadian parliament to adopt a non-binding motion in opposition to the bid. Reuters

Potash Corp & BHP Billiton: the lawsuit. Potash Corp alleges that unsealed internal documents of BHP have shown it was questioning the viability of its Jensen Project but kept telling investors otherwise to reduce Potash Corp’s share price (as an eight-million tonne a year mine Jensen could only flood the market). Potash’s interpretation is based on a briefing saying: it “‘was agreed that the primary objective for Jansen was to reduce the execution risk by ensuring phase one for Jansen had the lowest possible capital number’ and to limit the capital expenditure for that first phase.'” Is that enough of a case? Windsor Star

Hilary Clinton has commented China’s trade restrictions over rare earths in the context of the last ASEAN meeting. Commentary & Analysis





Tales of Concensus

8 07 2010

None of those two developments can be considered happy endings, but they’re certainly good compromises. On our plate today: two things. First, with a new PM and a new attitude, Australia seemed to have agreed on the shape of its upcoming new tax on super profits. Second, Vale Inco has finally reached a deal with its workers, after roughly a year-long labour conflict.

Australia New Super Profit Tax

Australia’s new Prime Minister Julia Gillard has agreed to make concessions on the parameters of the new mining tax.  A week after taking over Kevin Rudd as Prime Minister, she agreed to cut the tax rate of the new mining tax to 30% from 40% as well as to increase the threshold at which the rate will kick in. The 10-year government bond rate (currently 5%), plus 7% will be used as threshold. Moreover the tax will apply only on profits from iron ore and coal extraction. As a result the tax will affect only 320 companies instead of 2,500 under the previous version of the tax.  The projects will also be subject to a 25 per cent extraction allowance which will reduce the miners’ taxable income.

 Following the implementation of the last tax reform proposed by the Henry Review, Australia general corporate income tax rate was to be lowered to 28% from 30%. Considering the tax rate applicable to those super profits is only 2% higher than the general rate, I’m unsure whether this change of course can be called a compromise (nor proper tax policy). It’s full on back-pedalling (for re-election’s sake).  The miners call the new version of the tax a “reasonable framework”. 

Greens in the Australian Parliament have however signalled last week that they would not compromise on the rate and that the 40% rate would have to stay no matter what.  The saga may not be over yet.

Vale Inco has an Agreement with its Workers

A tentative five-year labour contract agreement has been reached by Vale Inco and employees of multiple Canadian operations who went on strike last summer over their dissatisfaction with the company’s offer regarding pensions and bonuses tied to the price of nickel. The Union of the Sudbury workers still has to vote on the proposed contract. Agreement by the Sudbury Union would likely lead to a settlement at Vale’s Voisey’s Bay operations in Newfoundland.

Sudbury and Voisey’s Bay operations collectively account for 4 per cent of the global nickel supply. The strike has thus been a major driver in the physical market in the past months. Andy Home, columnist for Reuters’ Metals Insider, suggested that the impact of a return to production to Vale Inco operations would take some time before being felt in the markets. Once the output of operations is increased, roughly 140, 000 tonnes of annualised nickel supply will hit the market. Home expects oversupply around the fourth quarter.





Escalating conflict at Vale Inco

1 09 2009

Vale Inco is currently dealing with a strike that began in July 13th at its Sudbury mine. This week it sent a letter to employees informing them that the company is in the process of training non-unionized workers to work at the mine during the strike. Admitting to hiring scabs lives up to Vale Inco’s tradition of transparency in PR but is likely to backfire.

Vale Inco announced earlier this week that it was in the process of training 1200 non-unionized staff to extract copper from its Sudbury mine. Vale Inco claims this measure is required to able to live up to supply commitments taken with customers. Vale Inco is a supplier of copper concentrate to Xstrata who announced that it would temporarily close down its copper smelting and refining operations in Kidd Creek due to a feedstock shortage.

Vale Inco is hoping to be the white knight to Xstrata’s problems and under current conditions this is extremely convenient. Doing so enables Vale Inco to bypass a labour conflict to improve cash flow by focusing on the most lucrative segments of the Sudbury mine.

During previous labour conflicts, the Sudbury mine was kept under care and maintenance. A manager at the mine told the press that since some operations were conducted in previous strikes it gives a precedent under which Vale Inco could justify mining copper segments. Care and maintenance only aims at keeping the mine dry and ventilated so activities can resume quickly when the conflict is over. Training staff so they can do the work of the unionized workers raise doubts of the legality of the operations.

It is often assumed that parties to a conflict can be brought to negotiate if they reach a mutually hurting stalemate. If Vale Inco is allowed to improve its cash flow during the conflict, it hurts only on one side of the conflict and gives no incentives whatsoever for Vale Inco to resume talks. Meanwhile, the union representatives for the workers are signalling that things could get ugly. Somehow, I am not surprised.