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


Brighter and Shinier Future for Asbestos?

25 01 2011

The town of Asbestos that is. I told you about the town’s struggle to revive its asbestos industry this summer when an Australian TV show sought to brand it as a lovely touristic destination. The provincial government is considering providing a guarantee for a CAD $58 million loan to a joint venture (Balcorp LTD) wishing to restart the Jeffrey asbestos mine as underground operations. Physicians, unions, foreign delegations and a lone MP have vehemently opposed this project which could lead to 200,000 tonnes of asbestos being exported to Asia per year. Amid this ruckus, exploration activities in the region are ongoing and, if fruitful, could substitute asbestos by gold.

Bowmore Exploration (TSX-V: BOW) is undertaking exploration activities on a 700 square km area in South-East Québec as part of its St-Victor project. A portion of this area is located only 20 km away from the town of Asbestos and exploration activities have shown discoveries of higher concentrations of gold than usual in that area. Bowmore’s St-Victor project is based on a very large low-grade sediment-hosted gold deposit similarly to Kinross Paracatu mine in Brazil or even Osisko’s Canadian Malartic Project. In fact, Osisko (TSX: OSK) has a 39% stake in Bowmore Exploration. The discovery of higher gold concentration in a small area of Bowmore’s leases has even encouraged Diamond Discoveries International to expand its caribou project by acquiring more mining claims in the region. This company is exploring for gold, chromite and PGMs.

Due to its mining background, the region is prêt-à-miner as miners have access to a network of paved roads and local private trails. Local resources include abundant electricity, water supply, work force and the mining facilities in the cities of Asbestos and Thetford Mines. Neighbouring communities are reportedly favourable to those projects – a rare occurrence since most extractive projects (shale gas, uranium and asbestos) have faced strong opposition from citizens in the past year.

Other junior miners active in the region include Nevado Resources whose Nicolet copper and gold properties are located within 30 km of Thetford Mines. Amseco Exploration could also be involved in the region, yet the firm’s web site is not all that clear.

No Time Wasted!

3 01 2011

Just a few days after his presidency was inaugurated, speculation on how Guinea’s new president, Alpha Conde, will live up to his electoral promise of making mining deals more favourable to the State has already emerged. In his inaugural speech, the new president however stressed the need for political and economic stability and stated that current priorities were to modernize the army and promote good governance.

Russia’s envoy to Africa has already began the diplomatic posturing stating that while “it would be logical for Guinea to demand more favourable terms for the operations of foreign companies” Guinea’s approach should be based on “compromise and in the interests of all sides”. As the country is embarking on a “democratic path”, existing laws should be respected the envoy stressed. It remains to be seen whether Guinea’s approach is more in line with democratic processes or whether it is taking cues from Russia’s Khodorkovsky handbook. As of now, Conde’s first move as President was to purge the higher levels of the civil service and elected officials contacted for comment by Bloomberg News did not comment.

This issue is of importance to Russia as UC Rusal is sourcing 40 per cent of it bauxite from Guinea and has a plan to invest further in the country through its Dian Dian mining project. In 2006, UC Rusal was affected by a decision of the Government to cancel its purchase of the Friguia refinery through obscure court proceedings.

GM and Stillwater Mining Co. It’s Back on!

30 12 2010

After abruptly dropping a decade-long business relationship with Stillwater Mining Co, the only U.S. platinum group metal (PGM) miner, as part of its bankruptcy restructuring in July 2009, General Motors has renewed its relationship with its palladium supplier. You may remember the controversy sparked by GM’s petition to a federal bankruptcy court to reject the then existing agreement with Stillwater and retain those in effect with Russian and South African suppliers.

As per the recently concluded deal, Stillwater Mining Co will provide palladium to GM for three years based on the market average price at the time of sale. The new agreement has removed the floor and ceiling prices features of the previous contracts. Stillwater Mining Co is also in discussion other automakers including Ford whose current supply agreement will soon be expiring.

As a result of the recovery in the auto sector and increased investor interest in PGMs, palladium performed well in 2010. These factors should keep supporting prices in 2011 as it is suspected that investment demand (such as demand from exchange-traded funds) could push the metal into a supply deficit in the coming year. Moreover, some analysts predict a 15% increase in gross demand. For Q1, Société Générale predicted that palladium would trade at $800 an ounce in average but warned that a correction could be expected as it perceived the metal has over bought.

DeBeers. Panning for Gold.

9 12 2010

I am struggling to keep up with my one-entry-a-week commitment. Last week, news reports of DeBeers and AngloGold Ashanti joint venture to search for gold off South Africa’s West Coast particularly caught my attention. Here’s what, the already one year old joint venture is about.

De Beers and AngloGold Ashanti committed themselves to prospecting and exploring one of Seafield Resource’s projects in New Zealand using the technology developed by DeBeers Marine to search for diamonds in water of a depth of 20 m to 200m off the Namibian coast. The results of the prospecting campaign were considered disappointing by Seafield.

Following this setback, De Beers and AngloGold Ashanti have taken their JV to the South African West Coast where gold is thought to have washed into the sea from rivers (millions of years ago) and are covered in sediment. Drilling is set to start in Q1 of 2011 and will aim at determining the economic viability of the deposit.

Seafield Resources, part of E Oppenheimer & Son International, has been exploring the coast of South Island in New Zealand through other projects. This week Seafield Resources was brought up in Trading Markets’ “Small Cap Stocks on the Move” following a recent 148% gain.

More on Marine Mining

Marine mining is fairly new, having taken off in the 60s and 70s. Current operations are mostly focused on tin dredging, gemstones, sands and gravels. The costs of marine mining have been prohibitive for many years, but marine mining to be becoming more attractive.

Other firms such as Nautilus Minerals (TSE:NUS) and Neptune Minerals (LON:NPM) are focusing their marine operations in the “other” ring of fire, a region known for its seafloor earthquakes and volcanic eruptions in Oceania.

Marine deposits may be easier and more economical to mine than land-deposits as they are exposed on the sea floor and do not require the removal of tons of overburden. They also require less staff (DeBeers’ ships have about 40 employees onboard) and present fewer risks to workers. These operations are also mobile and can be taken from a deposit to another.

Investment Did Not Dry Up

25 11 2010

According to an entry on International Mining, it seems that Australia is experiencing an important growth in investment in major extractive projects.

Since April 2010, (remember that the Australian Government unveiled its plans to introduce a New Super Profit Tax on May 2, 2010), capital expenditures for the developments of new projects had increased by 21%. It seems this number does not take in account the capital expenditure associated with BHP Billiton and Fortescue’s iron ore expansion plans. Moreover, the Australian Bureau of Statistics survey data indicate capital expenditure in 2010-11 may be around A$54.8 billion. Other encouraging news is that exploration expenditures seem to have remained strong.

All that to say that the uncertainty caused by the announcement and the subsequent national debate, did not prevent firms from taking advantage of the commodities’ boom. Although, one must highlight that instability was perhaps the only harm caused by the projected tax. Following consultations, the mining industry has been successful in lowering the applicable tax rate and narrowing the tax base to which the super profit tax would have applied thereby preventing Armageddon.

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