Wednesday 13th December 2017

Resource Clips


December, 2014

Economist David Robinson wonders how innovative transportation might improve northern industry and communities

December 23rd, 2014

…Read more

Year in review

December 23rd, 2014

A mining and exploration retrospect for 2014

by Greg Klein

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Another difficult year notwithstanding, the resource sector failed to meet its apocalyptic doom. With a mixed bag of good, bad and quirky news, ResourceClips.com looks at some of the stories that helped characterize 2014.

Mount Polley to the breach

Even British Columbia’s environment minister called it a disaster. The August tailings dam collapse at Imperial Metals’ (TSX:III) Mount Polley copper-gold mine presented Canada’s mining industry with its own Exxon Valdez as a river of effluent, later estimated by the company at 24.4 million cubic metres, poured into the once-pristine Quesnel Lake watershed.

The dam’s original engineer was quick to disassociate itself. The current engineer and Imperial each implied the other might be at fault. There were suggestions that the company and the province should have known something was wrong as far back as 2010.

A mining and exploration retrospect for 2014

B.C. appointed a panel of engineers to investigate. B.C.’s Inspector of Mines began a separate investigation. And B.C.’s Information and Privacy Commissioner launched its own investigation—into the government.

B.C. also ordered third-party inspections of 98 tailings facilities at current and former mines. The Canadian Nuclear Safety Commission requested companies report on their uranium tailings facilities.

Alaskans, meanwhile, questioned whether B.C. had the wherewithal to prevent downstream pollution from potential mines in the province’s northwest. A Vancouver Sun study found that the BC Liberal government cut mine inspections by more than half since coming to power in 2001.

Imperial has so far committed $67.4 million towards the disaster. In late December the company announced the sale of a 93-kilometre transmission line extension to the government-owned BC Hydro for $52 million.

B.C.’s performance as a mining jurisdiction

Mount Polley’s shutdown brings to mind the governing BC Liberals’ frequent reminder that more mines closed than opened when the NDP held power. So how’s the province doing under the current regime? According to a list provided by the Ministry of Mines and Energy, seven mines opened since 2001, when the BC Liberals gained power, while five shut down. One mine closed and re-opened. Another seven mines opened and closed. At least one omission in the last category, however, was Treasure Mountain which opened, closed, re-opened and re-closed.

Of course metal and coal prices play a crucial role. But during that period permitting problems plagued other potential operations, like Taseko Mines’ (TSX:TKO) New Prosperity gold-copper project and Pacific Booker Minerals’ (TSXV:BKM) Morrison copper-gold-molybdenum project. Both were refused environmental permits, arguably on non-environmental grounds—New Prosperity by the feds and Morrison by the province.

On a more positive note, Imperial has its Red Chris copper-gold mine now in development. (Please get it right this time.) Seabridge Gold TSX:SEA won provincial environmental approval in July and federal approval in December for Kerr-Sulphurets-Mitchell (KSM), which the company says hosts “one of the largest undeveloped gold and copper reserves in the world.”

An engineering marvel puts Cigar Lake in operation

Evidently the mining industry calls for optimism and perseverance in abundance. That, along with innovation, is what it took for Cameco Corp TSX:CCO to finally bring its Cigar Lake uranium project into production in March. Encouraging the heroic endeavour is an ore grade 100 times the world average, suggesting that high grade is the mother of invention.

The Saskatchewan mine’s 33-year saga began with a 1981 discovery, then continued with a number of setbacks that stalled construction. Even after the mine’s widely celebrated opening, Cigar Lake shut down from mid-July to early September for remedial freezing. Majority-owner Cameco injects and freezes a brine solution around the rock body to prevent flooding through the Athabasca sandstone. Water jet boring then pummels the ore into a slurry.

But the company’s determination seems at odds with uranium’s price. When a Scotiabank analyst asked why Cameco was bringing new uranium into an oversupplied market, president/CEO Tim Gitzel replied, “We need the pounds. We’ve got sales commitments for those pounds.”

The uranium price tease

A mining and exploration retrospect for 2014

Chart: Ux Consulting

Among the most vociferous prophets of a new uranium order, Paladin Energy TSX:PDN managing director/CEO John Borshoff keeps revising his gotta-happen-soon predictions of rising prices. He’s not the only one, so Borshoff was probably more frustrated than embarrassed when uranium once again proved him wrong.

The recalcitrant commodity seemed to perk up in early August, with a spot price indicator that rose 25% by late October. A nearly 90-degree ascent to $44 by mid-November seemed to justify Borshoff’s outlook. Alas, fickle uranium let down its believers, along with its price.

Borshoff’s boosterism, however, is backed up by others including Cameco’s Gitzel and David Talbot of Dundee Capital Markets, who in November stated, “We have always said, just like in 2006-2007, when [longer-term] contracting begins and the price moves, it will move fast.”

Next Page 1 | 2

December 23rd, 2014

Why December dog days might precede new year rally GoldSeek
Video: Mines and Money ’14 Industrial Minerals
Tesla to miss 2020 delivery target by 40%, analyst forecasts VantageWire
Evolution of China only means opportunities NAI 500
Putin promises ruble will recover, accuses West of economic sabotage Stockhouse
Why is Ontario’s Ring of Fire on the back burner? Geology for Investors
Thomas Drolet: Reactors restart uranium mines Streetwise Reports

Commerce Resources completes $3.5-million private placement

December 22nd, 2014

by Greg Klein | December 22, 2014

Commerce Resources’ (TSXV:CCE) Ashram rare earths deposit in Quebec has its finances strengthened with a $3.5-million private placement that closed December 22. The cash infusion follows last October’s oversubscribed $5-million private placement.

Commerce Resources completes $3.5-million private placement

A team of geologists examines
data at Ashram’s field office.

As Ashram moves towards pre-feasibility, the company now focuses on metallurgical studies that have already produced high-grade concentrates of over 40% total rare earth oxides with better than 70% recovery. A mini-pilot plant is scheduled to begin operations in late January.

The company has also retained Deloitte Global Metals & Mining Advisory Group to evaluate potential partnerships, joint ventures and offtake opportunities.

In British Columbia, Commerce’s Blue River tantalum-niobium project achieved a preliminary economic assessment in 2011 and a resource update the following year.

Read more about Commerce Resources here and here.

Read about rare earths in Canada.

Disclaimer: Commerce Resources Corp is a client of OnPage Media Corp, the publisher of ResourceClips.com. The principals of OnPage Media may hold shares in Commerce Resources.

December 22nd, 2014

Video: Mines and Money ’14 Industrial Minerals
Tesla to miss 2020 delivery target by 40%, analyst forecasts VantageWire
Evolution of China only means opportunities NAI 500
Putin promises ruble will recover, accuses West of economic sabotage Stockhouse
Why is Ontario’s Ring of Fire on the back burner? Geology for Investors
Dollars and gold revisited GoldSeek
Thomas Drolet: Reactors restart uranium mines Streetwise Reports

Jewellers look at Canadian investments for secure, ethical diamond supply

December 19th, 2014

by Greg Klein | December 19, 2014

Increasing concern about supply has some of the world’s top jewelry companies looking for stakes in diamond mines. Tiffany & Co and Chow Tai Fook Jewellery Group are now “reaching out to mine operators that range from the Canadian Arctic to the Kalahari Desert,” according to a December 18 Bloomberg report.

We need to measure the political risks, economic risks, deployment of staff—it’s not an easy decision.—Adrian Cheng, executive director for Chow Tai Fook

“Tiffany was a leader in the movement, investing in a Sierra Leone mine in 2011 and lining up agreements to buy future output at projects from South Africa to Canada,” the news agency stated. “Earlier this month, Adrian Cheng, the executive director for Chow Tai Fook, said his company is also examining Canadian projects with the idea of buying stakes.”

Apart from security of supply, jewellers want reassurance that the stones are mined ethically. “While Chow Tai Fook is continuing to examine Canadian projects, the company was put off by political risks in southern Africa,” Bloomberg added.

“There are a lot of opportunities, but it is not very easy because it is always in a foreign country, somewhere in Africa or Botswana, or anywhere around the world,” the agency quoted Cheng. “We need to measure the political risks, economic risks, deployment of staff—it’s not an easy decision.”

Rough diamond demand is expected to grow an average 4% to 5% up to 2024, states a December report from Bain & Company and the Antwerp World Diamond Centre. But supply forecasts see only 3.5% to 4% growth up to 2019, then 1.5% to 2% for the following five years.

Canada ranks third for global rough diamond production by value, with most of it coming from the Northwest Territories’ Lac de Gras region.

Read more about diamond supply and demand.

New Jersey operation finds widespread cash-for-gold cheating

December 19th, 2014

by Greg Klein | December 19, 2014

Undercover officers from a New Jersey cash-for-gold task force found violations in nearly half the stores they checked, Rapaport News reported December 19. Seventy-one shops in six cities piled up about 10,000 violations, according to the state’s Office of Weights and Measures. Each violation, considered a civil, not a criminal matter, can result in a penalty ranging from $500 to $1,000.

New Jersey operation finds widespread cash-for-gold cheating

New City Gold & Diamonds in Newark, NJ, pulled in a
record 1,150 alleged violations. Photo: Google Maps

“Alleged violations may have included failure to use a scale that has been state-certified and/or sealed to prevent tampering; failure to prominently post the prices offered for various precious metals; or failure to maintain serialized receipts with required, specific information about the buyer, seller, and/or precious metal items purchased; or for related matters,” Rapaport stated.

State acting attorney general John Hoffman said, “The fact that our officers confiscated the scales used in nearly half of these stores demonstrates the great need to ensure these consumers are not cheated.”

The sweep follows a June crackdown in which 21 NJ stores wracked up 936 civil citations.

End times or new age?

December 19th, 2014

John Kaiser discusses a worst-case scenario and an innovation that could “freak out” regulators

by Greg Klein

This is the second of a two-part interview with ResourceClips.com following John Kaiser’s December 9 speech to the Association for Mineral Exploration British Columbia. Read Part I here.

On big banks and the Toronto exchange

“The TMX Group is a for-profit organization owned by a consortium of banks and their agenda is different from junior exploration. In fact the juniors are anathema to their agenda,” Kaiser says. “They give you their managed return, which is the random walk of the market less their take, and that’ll be some mediocre yield on your portfolio. Then some 10-cent stock takes off and an individual makes a thousand percent. The big guys cannot possibly deliver that kind of return.”

“It’s really in their interests to have the resource sector disappear as something that can generate these discovery booms and the optimism that always comes with a discovery.”

Worst-case scenario: On the “extinction” of the Canadian junior sector

John Kaiser discusses a worst-case scenario and an innovation that could “freak out” regulators

John Kaiser strikes an optimistic pose at the
2014 Vancouver Resource Investment Conference.

“Unless capital flow into corporate treasuries resumes, the resource juniors as a group will wither away, some pursuing some other business such as medical marijuana, others clinging on as zombie shell companies and a few remaining as ‘exotics,’ possibly sponsored by a mining company or a foreign state-owned enterprise which serves as the primary source of funding and thus turns the junior into a semi-private company.”

Should worst come to worst, Canada’s demise wouldn’t deprive the world of metals, Kaiser maintains. China and Australia would fill the void.

“No extinction is sudden, it just looks that way from the perspective of the distant future.”

On unsuccessful exploration

Apart from commodity prices, major discoveries spur investment. But without adequate investment, “we lack the critical mass of drill programs to find another Voisey’s Bay,” Kaiser argues. “One thing that regulators don’t seem to understand is that if only one in a hundred companies ends up being successful, it is a statistical game. So long as those 100 companies are trying to find something to create new wealth, one of them is going to be successful. If only one company is out there, it probably won’t.”

Another oft-forgotten point concerns “all the money supposedly wasted on exploration that doesn’t produce a result. All those so-called bad results go into the information pool. It helps future explorers know where not to look but sometimes it gives them clues on how to look at the property from a different perspective. They might decide the geophysics didn’t go deep enough, the geochemical analysis might not have been as sophisticated back then. So all the failures are actually still valuable.”

On stirring up a whole new buzz through innovative technology

Having slammed regulators regularly during the interview, Kaiser evidently wasn’t worried about alarming them with a bold new suggestion.

“In the old days when brokers would be calling their clients, Murray Pezim’s phone room would be working hard, the traders would be goosing the stock and so on, you had feedback that showed the benefit of promotional activity, ideally linked to fundamentals that were changing in a positive way.”

How to get that back? Kaiser talks of an online innovation for multiple users, drawing on aspects of social media and games like SimCity and FarmVille. With actual projects in mind, participants would help build online simulations based on their impression of a project’s potential.

The mining exploration sector is difficult to understand but not nearly as difficult as biotech. With the resource sector there’s a fairly straightforward concept as to how you value something.—John Kaiser

“The mining exploration sector is difficult to understand but not nearly as difficult as biotech,” he says. “With the resource sector there’s a fairly straightforward concept as to how you value something. The value is the present value of the future cash flow. All this can be quantified through about 30 or 40 variables in the discounted cash flow model. You can get a sense of what this might be worth if it became reality. But it’s a pain in the ass to do this.”

By representing those variables through 3D graphics and letting participants critique each other’s input, Kaiser believes the resource sector will gain new adherents.

“The game aspect would be a huge educational boon. The audience that has some understanding of how resource speculation works is retiring and becoming more risk-averse, and there has been no transfer of knowledge to younger people.”

But doesn’t the idea imply excessive confidence in the wisdom of crowds? “Whenever I describe this I run into a huge wall of skepticism where critics say people are lazy and stupid and it would never take off. However they’re thinking of how this sector has typically presented itself, which is in tedious columns of numbers, 300-page technical reports and so on. The industry has never really embraced a graphical interface where you use visual methods to help people understand what is going on, that makes a project understandable, accessible and easier to track.”

Kaiser’s already working on a prototype. “It’s trickier for me because the regulators will freak out and say I’m waving my wand and fabricating outcomes. But I’ll just demonstrate the concept. It would have to be built by someone else.” That might entail a group of philanthropists, he suggests. “Or maybe Silicon Valley when they get tired of social media.”

Read Part I of this two-part interview.

Download the PowerPoint presentation that accompanied John Kaiser’s AME BC speech.

December 19th, 2014

Video: Mines and Money ’14 Industrial Minerals
Tesla to miss 2020 delivery target by 40%, analyst forecasts VantageWire
Evolution of China only means opportunities NAI 500
Putin promises ruble will recover, accuses West of economic sabotage Stockhouse
Why is Ontario’s Ring of Fire on the back burner? Geology for Investors
Dollars and gold revisited GoldSeek
Thomas Drolet: Reactors restart uranium mines Streetwise Reports

Stranded by the status quo

December 18th, 2014

Even with a cyclical upturn, juniors will face challenges, says John Kaiser

by Greg Klein

With over 30 years’ experience as a researcher, analyst, investment adviser, newsletter writer and creator of Kaiser Research Online, John Kaiser commands a looming presence over the junior resource sector. At times brash and outspoken, he nevertheless comes across as someone very concerned about the sector’s health. Following a December 9 speech to the Association for Mineral Exploration British Columbia, Kaiser took time to speak with ResourceClips.com. This is Part I of a two-part interview. Read Part II here.

On accredited investors

Even with a cyclical upturn, juniors will face challenges, says John Kaiser

John Kaiser: Accredited investor restrictions inhibit
venture capital without protecting investors.

Private placements, “the overwhelming mechanism by which companies raise money,” exclude most potential investors, Kaiser points out. The largest category allowed to participate is the accredited investor. With a net worth of $1 million excluding the value of a primary residence, or a single person making at least $200,000 annually for the past two years, or a couple jointly making at least $300,000, the category constitutes “a fairly small group, especially when restricted to Canada.” Institutions qualify too, but they’re interested mostly in major discoveries or advanced projects, Kaiser says.

“One of the paradoxes is that a tiny minority is allowed to put money into corporate treasuries based on an assumption of merit, knowledge and sophistication that nevertheless includes somebody who inherited money, who won a lottery, who’s a criminal, who’s a simpleton but makes 200 grand a year.”

“Insofar as it’s supposed to protect individuals, there’s nothing that restricts the non-accredited retail investor from opening a Charles Schwab account, putting his life savings in it and blowing his money. So to be consistent, they should ban non-accredited investors completely or re-think their accredited investor restrictions.”

He considers the point vital to the sector’s viability. “Everybody in the industry needs to talk to the regulators, talk to the stock exchanges, talk to the politicians. Ask them, ‘Why is it that a shrinking minority are the only ones allowed to make these investments? And why aren’t you changing this when the broker is no longer playing any meaningful role guiding investors?’”

On short-selling

“There’s no measurable, intrinsic value to an exploration junior,” Kaiser says. “A junior’s value exists in the minds of investors, although advanced projects are supported to some degree by economic studies.”

“So over the last three years, when companies have published something that resembles good news and buying comes in, there is selling, both from existing shareholders and this new breed of shortsellers who basically snuff out the uptrend. Because they can continue selling on a downtick, they eventually turn momentum into negative momentum. This has undermined the market’s role as a price discovery mechanism and it’s become a particular problem for junior explorers.”

On the decline of brokers

Along with the internet, deregulation has undermined brokers, who “no longer serve as a network hub of information,” Kaiser says. “In the ’80s and early ’90s, the broker played a useful role in gathering information from street sources and getting it back to their clients. After deregulation, people would pump the broker for information but go on to trade with their discount accounts.”

Everybody in the industry needs to talk to the regulators, talk to the stock exchanges, talk to the politicians. Ask them, ‘Why is it that a shrinking minority are the only ones allowed to make these investments? And why aren’t you changing this when the broker is no longer playing any meaningful role guiding investors?’—John Kaiser

Further hindering the broker’s job was a regulated client relationship model that rendered high-risk investments unsuitable for an aging demographic. “This has created a problem in that the people who do have money tend to be older. Most high-risk investments become unsuitable. So situations have emerged where the broker refuses an order from the client because if the investment doesn’t work out, the litigation system that’s emerged can argue that the broker allowed an unsuitable transaction to take place. So the regulators are foisting upon the broker some sort of nanny responsibility.”

On robo-advisers

If the decline of brokers isn’t bad enough, there’s the trend towards robo-advising, Kaiser argues. It’s evident in some American “upstarts” as well as established discount houses like Charles Schwab, he says. On signing a new client and completing a risk-tolerance profile, they provide pre-vetted products that fit each of the risk categories, monitor the account and, when an investment performs unusually well, they sell it and redistribute the money. “This is a huge threat to the financial sector because it basically means we don’t need those human beings anymore.”

“The banks are kind of behind this because that organization FAIR [Canadian Foundation for Investor Rights] has adopted this refrain,” Kaiser says. “They like robo-advising. IIROC has actually donated money to FAIR to pump this thing and the financial sector wants to get rid of human beings ultimately. So there’s not going to be human beings interfacing between people’s money and these big financial entities.”

Download the PowerPoint presentation that accompanied John Kaiser’s AME BC speech.

Read the second part of this interview here.