Friday 22nd August 2014

Resource Clips


Week in review

A mining and exploration retrospect for October 6 to 12, 2012

by Greg Klein

«Le Plan Nord est enterré»

Plan Nord was nothing more than “marketing” for projects that were already in the pipeline. So says Quebec’s new natural resources minister, according to Sunday’s Montreal Gazette. But industry observers still don’t know how the newly elected Parti Quebecois will treat the mining sector.

Prior to the province’s September 4 election, then-premier Jean Charest vowed his Liberal government would spend $2.1 billion on a massive infrastructure program to develop Quebec north of the 49th parallel. Over a 25-year period, Plan Nord would attract $80 billion in private and public investment, he said. During the election campaign, however, PQ leader Pauline Marois called the Liberals’ planned expenditure a $2.1-billion giveaway to the private sector.

A mining and exploration retrospect

Marois also talked of imposing a 5% royalty on all minerals extracted and a 30% tax on all mining profits above 8%. Her election victory raised obvious concerns throughout the sector.

“People involved in the Plan Nord are very anxious to know the position of the government,” Nochane Rousseau, a partner in PricewaterhouseCoopers’ Montreal office, told the Gazette. He pronounced the Plan Nord “brand” dead but added, “In order to create wealth, we absolutely will have to develop our natural resources, and northern Quebec is overflowing with them.”

Natural Resources Minister Martine Ouellet made her dismissive comment in a meeting with the editorial board of La Presse. She refused the Gazette’s requests for an interview.

New regulations disappoint Ontario explorers

Ontario’s exploration sector suffered a setback with a new mining law that takes full effect April 1. Probably the industry’s biggest chagrin is the requirement to consult native bands prior to early-stage exploration drilling on Crown land. The bands will have 30 days to express concerns, which could then block a permit, according to a Tuesday dispatch from Bloomberg. “It’s going to cost a lot more now and there are going to be a lot more delays,” the news agency quoted Mistango River CEO Robert Kasner.

Solid Gold Resources TSXV:SLD CEO Darryl Stretch told Bloomberg, “It should be the government’s duty to consult with first nations, not the mining industry’s.”

Stretch was a vocal member of Miners United, a group representing about 60 companies that surfaced at last spring’s Toronto PDAC convention to express concern about native relations. In a March 27 Globe and Mail story about the group, Ontario Prospectors Association Executive Director Garry Clark said that native bands charge companies for exploration drilling in confidential deals that often surpass $100,000.

Bullish, but …

Among those predicting more merger-and-acquisition activity are the three principals of NewGen Asset Management, which was written up in Friday’s Financial Post. “Our strategy is to identify those [most] likely M&A candidates,” said Manager David Dattels. The FP explained that one of the company’s portfolios “typically has about 20 core holdings, with others used as trading positions, including short positions that usually represent 5% to 20% of the portfolio.”

Dattels’ enthusiasm for the industry has its limits. “Mining has traditionally been a poorly managed industry. Corporate governance is probably the worst relative to other industries. Investors are smartening up to that.”

Consumers acquire critical commodity companies

Increasing demand and a 15% Chinese export tax have put another EU-designated critical mineral in the spotlight. Fluorspar “is used throughout the world, primarily by the chemical industry, for refrigerants and foam products and in the manufacturing of aluminum, Teflon, refined petroleum products, glass and medicine,” the Gold Report quoted Jennings Capital Analyst Ken Chernin on Tuesday. “There are virtually no substitutes for many of its uses and it is an essential ingredient in hydrofluoric acid.”

Chernin added that companies with deposits outside China are candidates for acquisition—and not necessarily by other miners. “In February 2012, the aluminum company RUSAL acquired the remaining 50% of Russia’s only fluorspar producer, [Yaroslavsk Mining Company], from Russkaya Gornorudnaya Kompaniya,” he said. “Fluorspar is used to produce aluminum fluoride, which is used in the production of aluminum. And in January 2012, the chemical group Solvay announced it acquired a 30,000 tonne-per-year fluorspar mine in Bulgaria from Italy’s M&M Group. DuPont and Honeywell are also big consumers of fluorspar.”

More of the same for Venezuela

Hugo Chavez “gets six more years to squeeze industries.” That’s how the Globe and Mail commemorated the results of Venezuela’s Sunday election. His 54% vote gives Chavez another six years in office, which would extend his presidency to 20 years. The Reuters commentary notes that “the nationalization campaign Mr. Chavez launched in 2007 has saddled the state with scores of loss-making companies.” Nevertheless he plans to continue nationalizing companies and confiscating mining operations.

Sad SAC

“Vehement” was South American Silver’s TSX:SAC denial of the latest allegations from the Bolivian government. The company’s Tuesday statement responded to an October 5 threat of legal action from Minister of Mines Mario Virreira, who claimed South American Silver had been working in Bolivia illegally.

The accusations “are patently false and have no factual basis,” the company said, repeating its intention to seek international arbitration “to obtain full compensation, including the fair market value of the Malku Khota Project.” Bolivia confiscated the silver-indium project in July, after SAC had sunk over $16 million building a resource. On October 3 Virreira stated the company would get zero compensation.

Cry the troubled country

Reports from South Africa said two more people died in labour-related violence early Thursday, while on Friday the three-week truck drivers’ strike ended. Also on Friday Atlatsa Resources TSXV:ATL announced that 2,161 fired employees would be reinstated provided they return to work at the company’s Bokoni Platinum Mines by October 15.

An attempt at reassurance came from Platinum Group Metals TSX:PTM. On Friday the company stated that progress continues on its application for a $260-million loan to build the WBJV Project 1 Platinum Mine in South Africa. Phase I development “has been progressing steadily and well…. There are approximately 325 people on site and the project has completed 880,000 man hours with a single minor lost-time incident.”

Not surprisingly the news was buried by allegations that surfaced on Thursday. South African President Jacob Zuma reportedly spent $23 million of public money renovating his home.

On Monday Kitco News summarized the situation for 10 major companies recently affected by South African strikes.

Canadian juniors explore the world. But beyond?

It’s twice the size of earth, mostly diamond with some graphite thrown in—but credit for the discovery goes to astronomers, not geologists. Apparently not the first diamond planet ever discovered, 55 Cancri e, as it’s unhelpfully named, “is the first time one has been seen orbiting a sun-like star and studied in such detail,” according to a Thursday report from Reuters.

And, as the news agency pointed out, “any fortune-hunter not dissuaded by The Diamond as Big as the Ritz, F. Scott Fitzgerald’s jazz age morality tale of thwarted greed, will find Cancri e about 40 light years, or 230 trillion miles, from Park Avenue.”


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