Thursday 31st July 2014

Resource Clips


Year in review: Part II

A mining and exploration retrospect for 2012

by Greg Klein

Read Part I of Year in Review.

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Graphite boom, bust and echo

One of the commodities that excited the 2012 market, graphite began stirring interest in 2011 and really gained momentum early this year. But the precipitous fall, right around April Fool’s Day, let cynics bask in schadenfreude. It was a bubble all along, they insisted.

Well, not quite. Despite reduced share values, work continued as the front-runners advanced their projects and earlier-stage companies competed for position in graphite’s second wave of potential producers. By autumn some of the advanced-stage outfits, far from humbled by last spring’s events, boldly indulged themselves in a blatant bragging contest.

Old king coal to regain its throne

If clean carbon doesn’t excite investors like it used to, plain old dirty carbon might. By 2017 coal’s share of the global energy market will rival that of oil. So says the International Energy Agency, which issued its Medium-Term Coal Market Report in December.

A mining and exploration retrospect for 2012

The forecast sees China consuming over half the world’s production by 2017. “Even if Chinese GDP growth were to slow to a 4.6% average over the period, coal demand would still increase both globally and in China,” the report stated. India, with the world’s “largest pocket of energy poverty,” will take second place for consumption.

Coal’s growth in demand is slowing, however. But its share of the energy mix continues to increase even though Europe’s “coal renaissance” (sic) appears to be temporary.

Bringing coal miners to new hassle

Chinese provide much of the market and often the investment. So why shouldn’t they provide the workers too? That seems to be the rationale of Chinese interests behind four British Columbia coal projects.

The proponents plan to use Chinese underground workers exclusively at the most advanced project, HD Mining International’s Murray River, for 30 months of construction and two additional years of mining. Only then would Canadians be initiated into the mysteries of Chinese longwall mining. But with only 10% of the workforce to be replaced by Canadians each year, Chinese “temporary” workers would staff the mine until about 2026. The B.C. government has known about these intentions since at least 2007.

The HD Mining saga has seen new developments almost every week since the United Steelworkers broke the story on October 9.

As Greenland’s example suggests, the scheme might represent another facet of China’s growing power.

Geopolitical geology

Resource imperialism aside, resource nationalism and other aspects of country risk continued throughout 2012. South American Silver TSX:SAC continues to seek compensation after spending over $16 million on a silver-polymetallic project that the Bolivian government then snatched as a freebie. Centerra Gold TSX:CG escaped nationalization in Kyrgyzstan but works its way through somewhat Byzantine political and regulatory intrigue, as does Stans Energy TSXV:HRE. In November the latter claimed a court victory over a hostile parliamentary committee.

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