A mining and exploration retrospect for January 5 to 11, 2013
by Greg Klein
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A rescue plan for the juniors
What started as a routine update from MacDonald Mines Exploration TSXV:BMK quickly became a cri de coeur about the state of the juniors. But the company’s Wednesday news release blamed more than economic uncertainty. President/CEO Kirk McKinnon took on high-frequency traders, banks that discourage exploration investment and politicians who seem not to know or care.
He went on to make some recommendations: Ban high-frequency trading, disallow TSX trading credits for placing bids, ease the way for bank customers to allocate a small portion of their portfolio to junior explorers, require bank analysts to rate individual juniors, increase flow-through tax credits and stop short-selling stocks valued under $1.
Pointing to “dire predictions that over half of the junior mining companies will disappear within the next few years,” McKinnon warned that Canada could face higher unemployment while driving out expertise that’s “recognized as the world’s best” in a sector that stimulates the wider economy.
According to Friday’s Financial Post, “McKinnon’s comments have generated excitement, including many e-mails applauding his statements but wondering why they hadn’t been made in the past. One market participant, not a shareholder of MacDonald Mines, noted: ‘This guy is bang on about the HFT, flowthroughs [given that the low-hanging fruit has been harvested], banks’ non-participation, bid credits and no liquidity or capital in the junior markets.’”
In December Kaiser Research Online editor John Kaiser said algorithmic short-sellers could drive juniors from the TSXV to the Australian Securities Exchange.
Arctic iron mega-project suddenly slashed
The announcement came as a “bolt from the blue,” the Nunatsiaq News reported on Thursday. Just weeks after receiving environmental approval for the largest mining project in the Canadian Arctic, Baffinland Iron Mines asked Nunavut regulators for permission to downsize and delay aspects of its Mary River iron ore project.
Under the revised proposal, Baffinland would put off building a 150-kilometre railway and deep-sea port, cut shipping from year-round to a three-month season and slash production from 18 million to 3.5 million tonnes a year.
The company blamed financing difficulties. “This same effect is being felt by many major projects around the world,” Baffinland stated. “Additionally, the risks associated with large capital developments are magnified during tight financial markets.”
Baffinland decided on the revision just before Christmas, the News reported. The Nunavut Impact Review Board approved the original proposal just after Christmas.
Baffinland said it’s still committed to the entire $4-billion plan. But the company didn’t set a date for full implementation.
Baffinland is owned 50/50 by ArcelorMittal and Iron Ore Holdings. Last October the Financial Times reported that ArcelorMittal was considering the sale of 30% of its Canadian operations.
Meanwhile “volatile iron ore prices in 2013 should prompt Chinese firms to continue investing in Canadian development projects,” stated a Canadian Press story in Wednesday’s Victoria Times Colonist. The news agency said Chinese bought into five Canadian iron projects last year, including the 15% acquisition of ArcelorMittal Mines Canada by China Steel and South Korea’s POSCO for $1.1 billion. Desjardins Capital Markets analyst Jackie Przybylowski told CP she thinks investments will continue on “an opportunistic basis.”
Click here for a Globe and Mail infographic showing Baffinland’s original proposal.
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