Wednesday 23rd September 2020

Resource Clips

Week in review

A mining and exploration retrospect for September 22 to 28, 2012

by Greg Klein

Saskatchewan miners safe after 17-hour ordeal

Widespread relief greeted the news Tuesday evening that 20 miners surfaced safely after 24 hours underground—including 17 hours trapped by a fire.

Smoke spread through PotashCorp’s TSX:POT Rocanville Mine in southeastern Saskatchewan as plastic insulation on coiled electrical cable caught fire just before 2:00 a.m. Tuesday morning. Nine workers made it to surface within minutes but 20 others had to make their way through smoke to refuge stations.

A rescue squad spent nearly 12 hours fighting the fire with water and foam, then waited hours for the mine to cool and ventilate.

All 20 were reported safe at about 6:42 p.m. Tuesday, nearly 17 hours after the fire started and over 24 hours after their shift began. The mine re-opened Wednesday afternoon.

In a statement released Wednesday, President Dave Coles of the Communications, Energy and Paperworkers Union said, “The potash industry has seen more than 50 fatalities in Saskatchewan since its inception in the late 1950s.”

Mining and exploration week in review

Last June a backup operator died at the PotashCorp Allan Mine. Two others died in accidents at Agrium’s TSX:AGU Vanscoy Mine in May 2010 and Mosaic’s MOS Esterhazy Mine in November 2009.

Reports suggest this week’s emergency was handled effectively, with the trapped miners waiting out their vigil safely in four well-provisioned refuge stations. Some of the miners recounted their experience to the Globe and Mail. At press time, however, the cause of the fire hadn’t been determined. An internal investigation is underway.

With a market cap of $36.7 billion, PotashCorp says it is the world’s largest potash producer, providing about 20% of global capacity.

Unsettling questions about South Africa

Turmoil continues in South Africa, increasing concerns about how far the labour strife will go. After strike-related violence killed 46 people at Lonmin’s Marikana platinum mine last August the company settled with employees, most of whom returned to work on September 20. But approximately 75,000 others remain on strike at mines operated by other companies, including Anglo-American Platinum (Amplats), Impala Platinum (Implats), AngloGold Ashanti, Gold Fields and Villa Main Reef. An additional 20,000 transport workers have joined the walkouts.

Adding to the tension is rivalry among unions and politicians, including President Jacob Zuma and his arch-foe Julius Malema. The latter talks of nationalizing the country’s mining sector and has encouraged strikers to make the industry “ungovernable.” Zuma counters that the strikes could plunge the country back into recession.

Meanwhile Lonmin’s pay raises, ranging from 11% to 22%, haven’t pacified the situation. On Wednesday Bloomberg quoted SBG Securities gold analyst David Davis, who says, “Workers are now demanding wage increases according to the ‘Lonmin settlement.’” That prompts the despairing question of whether a significant pay hike from one employer can help destabilize poverty-stricken countries.

Riot shuts down Chinese factory city

Last Sunday’s riot at one of China’s sprawling labour camps might indicate deeper problems within the world’s largest consumer of resources. Although details are murky, reports indicate a personal dispute in a Foxconn factory barracks may have lead to security guards beating a worker severely, which then sparked a much bigger confrontation. As of Friday, work was still shut down and the 79,000-person company city was being patrolled by riot-equipped company cops.

As the Sydney Morning Herald explains, “The unrest underscores the social strains of a Chinese export-manufacturing model where thousands of workers, mostly young, work long hours in military-style conditions, sleeping in dormitories and surrounded by security guards.”

Foxconn’s factory cities came to Western attention in 2010 after a wave of suicides at its 300,000-person complex in Shenzhen, China. The company manufactures electronic components for Apple, Nokia, Dell and Sony.

Guess what—Bre-X has no money

That revelation came out in a Calgary courtroom Thursday as bankruptcy trustee Deloitte & Touche applied to have investors’ class action suits dismissed. The infamous gold scam came to light in March 1997, when Bre-X shares plunged faster than a geologist falling from a helicopter.

But University of Calgary Finance Professor Gordon Sick comments on the futility of the lawsuits, asking, “Who else can pay but other shareholders?” As he told the CBC, “Shareholders are essentially suing themselves. The only winner is the lawyer…”

The hearing was adjourned until December 4.

Bean honoured

Gold bugs continue to gain mainstream support. On Tuesday the Financial Post reported Morgan Stanley’s top picks for commodity investments. Gold holds the #1 spot due to “interest rates, risk aversion and strong physical market fundamentals.” The firm’s commodities team likes silver for the same reasons. Among base metals, copper, nickel and, looking further ahead, zinc get good marks. Platinum, however, “lacks safe haven status and has limited investment demand.”

But no metal follows gold into second place. Morgan Stanley reserves that honour for soybeans. “U.S. production continues to get slammed and South American harvest results have also been disappointing,” the FP states. “Meanwhile demand remains high.”

Juniors are the only way to invest in graphite

In an interview published Tuesday by the Gold Report, Industrial Minerals writer Simon Moores points out that Chinese companies and private companies dominate the graphite market. Therefore “juniors are really the only way to participate directly in this market. The non-Chinese major players, like TIMCAL Graphite & Carbon in Canada, are part of larger minerals companies. So when you invest in Imerys, which is the parent company, you’re not investing in an exclusively graphite-focused company. Graphite is only a tiny percentage of its business…. Ultimately, your most direct option is to go for the juniors.”

Moores sees a bright future for graphite, which he attributes to “layers of demand.” The commodity’s new uses don’t replace older uses, so demand keeps growing. “Electric vehicles should be the catalyst for explosive growth in graphite demand,” he adds.

Just what this industry needs

The shortage of skilled mining specialists could reach 50,000 to 100,000 people in the next five years, according to one prediction reported by the Financial Post on Tuesday. Not only that, but the industry needs new types of expertise. The paper quotes Richard Ross, former CEO of Inmet Mining TSX:IMN, who says executive responsibilities are no longer limited to “building and running a mine.” They now include “all the issues around that mine, such as sustainability, government relations, business modeling, strategic planning, etc.”

To address those issues, Ross is now program director for York University’s Global Mining Management studies, a new field for MBA specialization. Additionally Laurentian University has created a School of Mines which will eventually turn out MBAs.

The FP quotes Dave Constable, former VP of FNX Mining (now Quadra FNX Mining TSX:QUX): “You need people with the full integration of skill sets, from capital market and business development to the technical, cultural and environmental aspects of the business.”

And if there’s anything MBAs don’t learn in their theoretical studies, someone can always show them how to do it.

How junior might help the juniors

While industry executives were preparing for the Toronto Resource Investment Conference this week, five minutes of fun called Gangnam Style went viral. The video might have inspired reflection for any CEOs disappointed with offspring pursuing celebrity ambitions instead of the practical world of business. According to a Tuesday Reuters dispatch, Psy’s video helped his father’s software firm double its share price.

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