by Greg Klein
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Mining and exploration companies headquartered in British Columbia operate all over the world. But what’s it actually like to work in their home province? With coincidental timing, two recent events brought that question to mind. On October 3 the Fraser Institute released a report on B.C.’s mining policies. The next day the province’s minister of energy and mines touted his government’s work to a gathering of 180 industry professionals.
The Fraser Institute based its report, British Columbia’s Mining Policy Performance: Improving B.C.’s Attractiveness to Mining Investment, on past results from an annual international survey of industry executives. The 75-page B.C. study addresses “four barriers to investment”—unresolved land claims, regions declared off limits to mining, environmental uncertainty and regulatory hurdles.
Alana Wilson, one of the report’s three authors, tells ResourceClips.com the provincial mining study is the first of its kind for the Fraser Institute. A Quebec report is scheduled for release late this year or early next.
The organization’s annual mining surveys, she says, “get a tremendous amount of media interest. We also get a lot of calls and inquiries from government ministries around the world asking about our survey methodology, how specific factors are calculated. We know that governments are cognizant of the survey results and pay attention to them. But in terms of translating that into tangible policy changes, I can’t give any specific examples.”
As expected, the report finds B.C.’s unresolved land claims “the single greatest factor deterring mining investment” over the last five years. The authors call on the province to expedite the treaty process, find ways to deal with bands not participating in the process, “develop clearer guidance for third parties to facilitate meeting the Crown’s duty to consult” and discuss policy changes with industry.
Second on the list of concerns is the threat that exploration and mining will be banned from certain regions. Indeed, the Windy Craggy “horror story” continues to haunt the industry. That 1993 New Democratic Party decision saw something of a BC Liberal reprise in 2010, when the government suddenly declared the Flathead Valley off limits to exploration.
Addressing the third barrier, the authors question the credibility of B.C.’s environmental regulations. “Where regulations are opaque and unpredictable, the perception can arise that the process has been politicized, allowing special interest groups or politics, rather than scientific evidence, to guide policy decisions.” In that context the report calls on the province to reconsider its ban on uranium and thorium mining.
Duplication, inconsistencies and federal/provincial overlap make up the fourth barrier. The institute recommends Ottawa “provide greater clarity and consistent application of expenses eligible for Canadian exploration expenses,” and that both levels of government gradually remove “distortionary tax incentives in favour of a single, lower rate of corporate income tax.” Both parties should continue working “towards a single, clear and predictable one project/one process” regimen, the report urges. And, surprisingly given the public backlash that defeated the B.C./federal harmonized sales tax, the authors want the province to re-examine the HST.
Yet they give B.C. credit too. The golden years of 2003 to 2007 were “also facilitated by improvements to the permitting process, including a new online mineral tenure system.” Royalty sharing offers natives “a more active role in benefiting from mining and resource development.” Reporting comments from surveys of previous years, the report quotes unnamed exploration executives who praised B.C. policies.
Several other respondents differed, however, with remarks that are almost beyond the pale. Some examples include “aboriginal land grabs and shaking companies down for handouts and royalties” and “uncertainty related to the first nations ‘veto’ over mining projects.”
But native involvement is an opportunity, not an impediment, the province’s minister of energy and mines said in his October 4 remarks to the Association for Mineral Exploration B.C. Bill Bennett had little else to say about the industry’s greatest concern, even though he repeatedly described his talk as a report, not a speech. Nevertheless his feel-good generalities were warmly received by the lunchtime audience.
He did have some specifics, though. “We’re not going to raise your taxes,” he said to applause.
“We have no plans to change the Mineral Tenures Act with respect to notice or adding to the obligation to consult.”
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by Greg Klein | September 26, 2013
Former British Columbia cabinet minister Blair Lekstrom has joined HD Mining International, a company that plans to staff underground operations at its proposed Murray River coal mine exclusively with Chinese workers. A Canadian Press story published by the Vancouver Sun on September 25 cited an August 22 letter from HD Mining that confirmed the hire.
Last May the company defeated a court challenge by two unions against its use of Canada’s temporary foreign workers program to import Mandarin-speaking underground staff. The company argued that no Canadians were qualified to do the work. The unions presented evidence that HD Mining was offering pay rates below Canadian standards, the company rejected qualified Canadians and many of the job ads posted in Canada made Mandarin a language requirement.
Critics also expressed strong concerns about job safety, pointing to the Chinese mining industry’s notoriously high death rate. As Bloomberg reported in April, “China’s history of mining incidents includes the world’s worst safety record at its coal mines, which saw 1,973 people killed in accidents in 2011 and 2,433 the year before that, according to the State Administration of Work Safety.”
HD Mining is held 55% by Huiyong Holdings, a coal mining company in China, 40% by Canadian Dehua International Mines Group and 5% by an unnamed party.
Penggui Yan, chairperson of both HD Mining and Huiyong Holdings, was formerly a Chinese government official and manager of the state-owned mining company Shenhua Group, the Globe and Mail reported in February. Canadian Dehua has proposed at least three more Chinese-staffed coal mines for the same northeastern B.C. region.
The BC Liberal government strongly supported HD Mining’s plan and knew about a similar scheme by Naishun Liu, Canadian Dehua’s Chinese-born founder and chairperson, at least as far back as 2007.
Last November Vancouver Province columnist Michael Smyth revealed that “the main point person for the Chinese mining companies in B.C. is Jody Shimkus, a former assistant deputy minister of mining in the Liberal government.”
Smyth reported she left her government job in January 2012 to join HD Mining: “Under conflict-of-interest rules, senior managers face work restrictions for one year after they leave government. Senior managers can’t take a job with a company they dealt with in government, and can’t lobby or make representations on behalf of a company to the ministry where they formerly worked, the rules say.”
Smyth quoted Shimkus, “I never dealt with HD in government and I haven’t lobbied for them.”
Smyth added that “she also said she didn’t know about the one-year work restrictions when she signed on as HD’s vice-president of environmental and regulatory affairs.”
She told Smyth, “I don’t know what ‘make representations’ means. All I’ve done is help them through the environmental permitting process.”
Lekstrom, first elected to his northeastern B.C. riding in 2001, retired prior to last May’s B.C. provincial election. He held cabinet positions for Transportation and Infrastructure from March 2011 to September 2012, and Energy, Mines and Petroleum Resources from January 2009 to June 2010. He held the latter ministry when the province banned mining in southeastern B.C.’s Flathead Valley following pressure by American environmentalists and politicians.
HD Mining originally stated it would import between 400 and 480 Chinese workers at a time on two-year visas to staff Murray River’s underground operations up to 2025. In January, following widespread criticism, the company said it would “transition” 10% of the underground jobs to Canadians each year. The question remains of how many of those jobs will go to imported miners who become Canadian citizens.
Speaking to ResourceClips.com in May, United Steelworkers western Canada director Stephen Hunt said, “If you look at the debacle with HD Mining, no one even thought of employing first nations people.”
In an April article about Chinese-owned and staffed mines in Tibet, the Economist stated, “Managers at big state-owned firms are usually Han Chinese, who in turn tend to regard their own ethnic kin as easier to control and communicate with than Tibetans.”
by Greg Klein
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Search for quarry workers postponed, victims believed dead
Efforts to find two workers missing in a gravel quarry accident at L’Epiphanie, Quebec were postponed on Thursday. The truck drivers, employed by Maskimo Construction, were buried by a landslide two days earlier. High winds and unstable ground made it unsafe to operate the helicopter and heavy equipment involved in the mission. Searchers hope to resume their efforts on Saturday but “police have acknowledged they don’t expect to find survivors,” the CBC reported.
One co-worker described the landslide in a Canadian Press story reprinted in Wednesday’s Montreal Gazette.
Colombia exploration workers remain in captivity
Five people kidnapped from Braeval Mining’s TSX:BVL Snow Mine project in Colombia remain missing. The Monday edition of Colombia Reports stated the military, which arrested four more suspects on Sunday, claimed it was making progress. But, the journal added, the National Liberation Army (ELN) kidnappers warned that any rescue attempt would endanger the hostages.
Among the ELN’s demands are stricter regulation and heavier taxation of the mining industry, legalization of small-scale mining and a national debate on mining policy, Colombia Reports stated.
The victims—a Canadian, two Peruvians and two Colombians—were abducted on January 18 in northern Colombia’s Bolivar department.
On Thursday the country’s biggest rebel army, the Revolutionary Armed Forces of Colombia (FARC), released three Gran Tierra Energy TSX:GTE contractors after one day in captivity. But, Reuters stated, the guerrillas killed four soldiers in southwestern Colombia’s Narino department on Wednesday.
More mid- and large-cap companies selling royalties
The streaming business has grown tremendously, both from the amount of money available and the size of companies seeking it. As Bloomberg reported on Thursday, “the biggest miners have joined the queue of capital-hungry companies requesting funding.”
Silver Wheaton TSX:SLW CEO Randy Smallwood told the news agency that his company has seen increased interest from miners with market caps “up into the tens and hundreds of billions.… Doors that we’ve been knocking on for a long time, they are all of a sudden knocking on our door.”
If an operator goes down from say a one-gram cutoff to a 0.5-gram cutoff, the operator may not make any money but the royalty-holder makes money…. It’s one of the best business models that I have ever seen.—Franco-Nevada chairman Pierre Lassonde in an interview with BNN
Although Silver Wheaton completed only one transaction last year, it was a $750-million deal with HudBay Minerals TSX:HBM, which has a press-time market cap of $2 billion. Such deals obviously benefit Silver Wheaton, which has been outperforming both silver prices and metal producers, Bloomberg stated.
Not surprisingly, success brings competition. But the founder of the first royalty company, Franco-Nevada TSX:FNV chairman Pierre Lassonde, considers most of the newcomers to be small fish. In an BNN interview posted Thursday, he said, “Every week we must have two, three, four, five companies coming and approaching us, but they’re of a size that there’s only two or three royalty companies that look at them.” Over the last six months his company has been working on three “really large deals” of half a million to a billion-plus, he said.
With each transaction Franco-Nevada gets a free perpetual option on any further discoveries on the same property. “It is this optionality that has given us the kind of rate of return that we give the shareholders,” he explained.
Lassonde attributed “de-ratings in the gold stocks” to smaller, lower-grade deposits than those found in the 1980s and ’90s. “At Franco, as far as we’re concerned, if an operator goes down from say a one-gram cutoff to a 0.5-gram cutoff, the operator may not make any money but the royalty-holder makes money…. It’s one of the best business models that I have ever seen.”
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by Greg Klein
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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.
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.
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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by Greg Klein
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Algorithmic short-sellers could drive juniors to ASX
“The world’s number one stock exchange for mining companies”—that’s the consensus about Toronto, even from companies with operations and headquarters in other countries. But John Kaiser fears TSXV traders will drive juniors to the Australian Securities Exchange. In a Business News Network interview posted by Equedia on Sunday, the editor of Kaiser Research Online explained why.
Monitoring systems now in use can immediately spot significant buying, allowing traders to “intercept the capital that’s flowing in from real investors who are betting on fundamental outcomes, and they sell into this. Then, when that inflow is exhausted, they can simply lean into the order book and continue selling stock that they don’t have, selling short on a down-tick, creating a cascade of buyer’s regret and discouraging the longs, and actually facilitating being able to cover by the end of the day. So their intent to deliver the borrowed stock never has to be materialized. This sort of culture now lurks on top of a system where trading value has been in steep decline since April and May of last year.”
That’s especially troubling, he emphasized, because he believes the sector is moving back to a “discovery/exploration cycle” as prevailed during the 1980s and ’90s, “after a decade of resource feasibility demonstration.” Early-stage exploration companies are especially vulnerable, he said.
But Down Under has its downside too. “I don’t like the Australian stock exchange system because they don’t have a proper reporting system on a scale of technical detail that we in Canada have,” Kaiser added. “I think the Canadian system is fabulous for the entire resource exploration and development cycle. And I think it’s a shame that they allow this type of algorithmic hook-up that basically victimizes real speculators, as opposed to those simply trying to harvest the volatility that they’re literally manufacturing in this sector.”
Credit-card-sized gold bars as a crisis currency
A new product might make physical gold a more practical response to economic fears, according to a Friday Reuters story. The size of a credit card, the CombiBar is made up of 50 one-gram gold squares that can be broken off to use as currency. It’s selling well in Switzerland, Austria and especially Germany, where memories linger of post-WWI hyperinflation. The CombiBar is produced by the Swiss refinery Valcambi, which wants to introduce it to the American and Indian markets next year, while producing platinum and palladium CombiBars for Japan. Valcambi, by the way, is owned 60.6% by Newmont Mining TSX:NMC.
European demand “is rising every week,” Reuters quoted Andreas Habluetzel, head of the Swiss gold trading company Degussa. “Particularly in Germany, people buying gold fear that the euro will break apart or that banks will run into problems.”
Another company, Ex Oriente Lux, has sold 21 million euros of gold through its 17 vending machines in the United States, Europe and United Arab Emirates, Reuters added. “Sales rise according to the temperature of the crisis,” CEO Thomas Geissler told the news agency.
Former Solid Gold CEO accuses natives of slander
Darryl Stretch, the former CEO of Solid Gold Resources TSXV:SLD, has accused two native chiefs of “slanderous and defamatory remarks,” the Sudbury Star and Timmins Daily Press reported this week. He’s demanding public apologies from Wahgoshig chief Dave Babin and Nishnawbe Aski chief Harvey Yesno, who called him a “racist” at a Sudbury press conference in November, the Daily Press stated on Wednesday.
Stretch’s letter to the chiefs warned, “In the event that you do not respond to this notice I will take whatever action is available to me.”
Monday’s Star said Babin has no plans to respond and Yesno couldn’t be reached for comment.
Rhodes redux in Zimbabwe
Zimbabwe’s policy of “indigenisation and empowerment” requires foreign miners to divest 51% of their operations to Zimbabwean companies and community groups, as these examples show. Monday’s Harare Herald quoted Defence Minister Emmerson Mnangagwa explaining that the country was willing to work with foreign companies as long as Zimbabweans were the major beneficiaries.
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by Greg Klein
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U.S. politicians ponder windfall royalties
The United States has joined the list of countries considering additional ways to mine miners, according to a Wednesday Reuters story. Some American politicians are talking about royalties as high as 12.5%, the same benchmark applied to certain other resources, including oil and gas.
Reuters said the proposal would get about $700 million during the lifespan of Freeport-McMoRan’s copper-molybdenum operations in Colorado, Arizona and New Mexico. Last year alone, the royalty could have taken $150 million from Barrick’s TSX:ABX Goldstrike mine in Nevada, according to Reuters’ figures. Barrick told the news agency the company’s taxes have already jumped four-fold over five years.
Democrat Representative Raul Grijalva, a proponent of the 12.5% levy, sees it differently. “As we face these fiscal challenges, these are the pennies that we should pinch,” Reuters quoted him. Along with some other U.S. federal politicians, Grijalva also wants to review miners’ tax breaks.
Previous attempts to raise miners’ taxes have failed, Reuters stated, “as the industry has strong political allies.” The story added that “state and local governments often catch a windfall from mining revenue.”
Ivory Coast hikes taxes but overestimates profits, miner says
A new tax on Ivory Coast gold extraction underestimates cash costs by nearly 50%, according to at least one source. New legislation that applies to 2012 production assumes cash costs of $615 an ounce, Reuters stated on Friday. The tax on “profits” above that amount will fluctuate with the yellow metal’s price. At $1,600, that comes to 17%. The rate will be lower for companies that pay the country a corporate tax, the news agency added. Randgold Resources CEO Mark Bristow called the new levy, expected to raise $79.8 million, a “punitive tax,” Reuters said.
In a December 7 Bloomberg report, Endeavour Mining TSX:EDV spokesperson Nouho Kone said Ivory Coast gold production can actually cost between $1,000 and $1,200 an ounce. “The worst-case scenario would be to see companies shut down their mines in the short term,” he told Bloomberg. Reuters stated that Perseus Mining TSX:PRU put its $160-million Sissingue project on hold last September “pending clarification of the fiscal regime applicable to the project.”
Maybe Ghana too
Ghanaian President John Dramani Mahama’s re-election brings to mind his previous effort to impose a 10% tax on windfall profits, Monday’s Financial Post reported.
The government had already raised miners’ corporate taxes from 25% to 35% and imposed “a uniform regime for capital allowance of 20% for five years of mining,” the FP stated. But the government’s intended windfall tax had been shelved due to industry pressure, according to a Wednesday Reuters dispatch.
Reuters added that government discussions with gold miners are underway “to loosen up so-called ‘stability agreements’ held by some firms that lock in royalty and tax rates.” This year Ghana raised gold royalties from 3% to 5%, but the stability agreement exempted companies like AngloGold Ashanti and Newmont Mining TSX:NMC, the news agency stated.
Unions lose bid to block foreign workers from staffing B.C. mine
HD Mining International called it a “massive victory,” the Globe and Mail reported Friday. A federal court judge has allowed the company to import Chinese workers for its proposed Murray River coal mine in British Columbia. Two unions had applied for an injunction blocking the work permits after learning that HD Mining planned to staff its underground operation exclusively with Chinese workers—which would total over 400 at full production.
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by Greg Klein
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“So why buy the seniors?”
Briefly but significantly, Goldcorp TSX:G overtook Barrick TSX:ABX to become the world’s biggest gold miner by market cap. Goldcorp closed Tuesday with a $35.32-billion cap, slightly above Barrick’s $35.3 billion, Reuters stated.
That, despite the fact Barrick produces far more gold, with guidance of 7.3 million to 7.5 million ounces this year, compared to Goldcorp’s 2.35 million to 2.45 million ounces. Newmont, the world’s second-largest gold producer, expects to come in “at the low end” of its projected 5 million to 5.1 million ounces.
“It’s not necessarily that Goldcorp is doing so well, it’s just that Barrick is doing so poorly,” Reuters quoted John Ing, Maison Placements Canada president and mining analyst. The news agency noted that Barrick shares fell nearly 25% so far this year, while Goldcorp weathered the storms with a mere 3.5% drop.
In a Friday Bloomberg article, one of Barrick’s fired CEOs pointed out the proportionately greater potential of smaller companies. “You’ve got no growth in total in the industry and a lot of your mines are aging and closing down, so you have to work very hard just to stay even,” Randall Oliphant told the news agency. Now executive chairman of New Gold TSX:NGD, Oliphant was Barrick’s CEO from 1999 to 2003. He told Bloomberg that once a company’s producing more than two million ounces a year, shareholders’ growth expectations are hard to meet.
Bloomberg’s index of 20 mid-tier gold miners “rose 1.3% in the past three years through [Thursday], compared with a 19% decline in a gauge of 14 seniors. In the same period, New Gold has climbed 154% in Toronto, while Barrick slumped 18%,” the agency reported.
Craig West, an analyst with GMP Securities, told Bloomberg, “Barrick isn’t going to grow by 50% in the next three years. I can name eight different juniors that will, so why buy the seniors?”
The juniors West referred to might have been mid-caps like New Gold, which closed Friday with 462.55 million shares outstanding at $10.74 for a market cap of $4.97 billion. But some micro-caps don’t do too badly. On Monday Brixton Metals’ TSXV:BBB share price rose 33%, from $0.15 to $0.20, on news from its Thorn silver-gold-polymetallic project in British Columbia. The $13.55-million-market-cap company closed Friday at $0.215, with 63.03 million shares outstanding.
By Wednesday’s close, Barrick’s market cap was back on top. The giant closed Friday with a billion shares outstanding at $36.06 for a market cap of $36.08 billion. On October 31 Barrick announced a quarterly dividend of $0.20.
Goldcorp closed the week with 811.21 million shares at $44.24 for a market cap of $35.89 billion. Goldcorp announced a monthly dividend on November 5 of $0.045.
Friday’s closing bell found Newmont with 491.54 million shares at $48.07 for a $23.63-billion market cap. On October 31 the company announced a quarterly dividend of $0.35.
Cow Mountain no bull, says Barkerville
Still under a Cease Trade Order imposed last August, Barkerville Gold Mines TSXV:BGM intends to release a revised resource estimate later this month, Business in Vancouver reported on Tuesday. The CTO remains in effect until the company’s Cow Mountain resource estimate meets the B.C. Securities Commission’s satisfaction.
Last June Barkerville shocked and awed the market with an indicated resource of 69 million tons (not tonnes) grading an average 5.28 g/t gold for 10.63 million gold ounces.
On June 28 close, Barkerville’s stock sat at $0.81. The following day, when the Cow resource was announced, Barkerville opened at $1.35 and closed at $1.21. That evening the company announced “incentive stock options to certain directors, officers, employees and consultants of the company to purchase up to an aggregate of 634,980 common shares” at $1.21 a share. The next trading day, July 3, the stock hit a 52-week high of $1.67. On the August 13 CTO it closed at $1.22.
Investor enthusiasm aside, some observers were skeptical, even derisive of the resource estimate. “Hilarious” was the Northern Miner’s response.
Barkerville’s June 29 press release also suggested a non-43-101 “total geological potential” for the Island Mountain/Cow Mountain/Barkerville Mountain trend of 405 million to 684 million tons with an average grade between 4.11 g/t and 5.49 g/t for 65 million to 90 million gold ounces. Those numbers, the company stressed, were potential “and it is uncertain if further exploration will result in the delineation of mineral resources.”
Referring to the 43-101 resource estimate, Barkerville president/CEO Frank Callaghan told BIV, “We’re really confident in the numbers. We support the guy that’s done the work and we’re not prepared to throw him under the bus. He’s done a good job.”
The company has been twinning holes and drilling deeper, and has contracted Snowden Mining Industry Consultants to oversee the new 43-101. As a result it should be “very, very comprehensive to a point where a 10-year-old is going to be able to read it and understand it,” Callaghan told BIV.
The story quoted Northern Securities mining analyst Matthew Zylstra, who said that Snowden “adds some credibility. So whatever they come out with, I think this is going to be viewed a lot more positively.”
But he added, “I think they’re going to use a lot more strict criteria, so my feeling is that they won’t come out with the same kind of numbers that [the previous QP] Peter George did.”
Where better to find an elephant country than in elephant country? Except for oil, South Sudan’s underground riches have long been neglected. But, according to a Friday Reuters dispatch, artisanal miners talk of finding the occasional nugget grading 200 grams or more. Now foreign companies are lining up in anticipation of new mining legislation scheduled to pass later this month. It’s expected to spark a licensing and exploration rush for several minerals.
“Nobody knows the extent of South Sudan’s mineral reserves because the 22-year war prevented exploration,” Reuters stated. “The latest geological surveys date back to the 1970s and ‘80s, but mining officials say diamond and gold deposits in South Sudan’s mineral-rich neighbours are encouraging. They describe the 16-month-old country as virgin territory.” South Sudan split from Sudan last year.
The news agency noted the trials of working “in a landlocked country with just 300 kilometres of paved road.” As government adviser Rainer Hengstmann told Reuters, “You need a railway if you want to go large-scale. It will take time. They really need roads and power.”
In the meantime artisanal miners prevail. Reuters described dozens of “Toposa tribesmen and women, festooned with plastic necklaces, brass piercings and beaded amulets, hack[ing] away at the red soil with metal poles and shovels, digging small craters in a boozy revelry.”
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by Greg Klein
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No one ever said mining’s risk-free
A Chinese gang leader has been sentenced to death for illegal mining and a number of assaults. A story covered by China Daily and Industrial Minerals on Wednesday reported that Pan Guangjuan and his gang had been running a rare earths operation in Guangdong province from November 2011 to February 2012. On conviction he was also fined $24,000 and deprived of his political rights for life. The death sentence comes with a two-year reprieve.
Other countries have been cracking down too—not only on illegal mining, but illegal mining by Chinese. On Monday prosecutors in the Philippines dropped charges against two Chinese after police and military raided gold dredging operations. According to Reuters, small-scale gold mining, legal and illegal, is widespread in the Philippines but up to 90% of production is smuggled to China via Hong Kong.
In Ghana over 90 Chinese were arrested last month during a crackdown in which a teenage boy died, the Financial Times reported. A previous Ghanaian raid on illegal miners resulted in 38 Chinese being deported last September. Chinese are playing an increasing role in illegal mining in Ghana, partly because of their access to Chinese dredging equipment, the FT stated. The story quoted an official for the Ghana Chamber of Mines, who said, “There are environmental issues, poor working conditions and child labour problems because they use Ghanaian children. They pay them whatever they want, and there are no contracts or safety standards.”
Another government official quoted by the FT said, “Most of these Chinese illegal miners are heavily armed and shoot at anyone that gets near them.”
Are gold reserves lent out, sold short or stored safely?
Over 60 countries store gold in underground vaults at New York’s Federal Reserve Bank. Now a GATA-esque movement is growing in the country that is, theoretically, the world’s second-largest gold owner. On Tuesday Spiegel reported that a member of Germany’s governing coalition, Peter Gauweiler, has finally found limited success in his long campaign to repatriate his country’s gold. The Frankfurt-based central bank will bring home 150 tons of gold over three years for inspection. The Bundesbank also plans to count and weigh the gold bars stored in New York.
The move responds to a damning indictment from Germany’s Federal Audit Office, which criticized the Fed for refusing access to German auditors. Hardly reassured by the planned audit, politician Heinz-Peter Haustein told media that “all the gold has to be shipped back,” Spiegel reported.
Not surprisingly, the Gold Anti-Trust Action Committee was all over the story this week. An article by Lars Schall covered a Thursday speech given by Bundesbank executive Andreas Dombret. He told his New York audience that Germany’s “bizarre public discussion” will soon pass.
“We are confident that our gold is in safe hands with you,” Schall quoted him. “The days in which Hollywood Germans such as Gert Frobe, better known as Goldfinger, and East German terrorist Simon Gruber masterminded gold heists in U.S. vaults are long gone. Nobody can seriously imagine scenarios like these, which are reminiscent of a James Bond movie with Goldfinger playing the role of a U.S. Fed accounting clerk.”
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by Greg Klein
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B.C. avalanche kills mining contractor
A surveyor working for Seabridge Gold TSX:SEA lost his life in northwestern British Columbia on Tuesday. According to a company statement, “Two experienced surveyors were working on a slope near the camp located at Sulphurets Creek when the avalanche occurred. One was able to get to safety; the other was swept into a gully and did not survive. A trained emergency rescue team was at the site of the accident within minutes.”
A mountainous, isolated but busy mining and exploration region east of the Alaska Panhandle, B.C.’s Golden Triangle is subject to heavy snow. Media reports, however, said the avalanche came unusually early in the season.
The B.C. Coroners Service identified the victim as 50-year-old Pat Lawrence Desmarais of Telkwa, B.C.
Cautious optimism about South Africa
A somewhat reassuring tone accompanied news from South Africa this week. On Thursday Bloomberg reported that “gold producers represented by the Chamber of Mines signed an agreement with labour unions over changes to pay and job categories today. Members have ‘overwhelmingly’ accepted the offer which, when added to a [previous] two-year deal, will see wages increase by as much as 20.8%.” Media accounts imply that as gold miners return to work, other miners will follow.
Also on Thursday, Reuters said the strikes caused Finance Minister Pravin Gordhan to cut his 2012 GDP forecast from 2.7% to 2.5%. He emphasized more time is needed to determine the strikes’ full impact but “we will take that knock, recover from it and move on because life doesn’t end now or next week. Life moves on.”
On Friday Kitco.com provided another weekly summary of how major companies are faring in South Africa.
Dehua debacle drags on
Mandarin is no longer a requirement for Canadian miners who want to work for Canadian Dehua International’s Canadian projects. But it’s “definitely an asset.”
The company ignited controversy earlier this month over its plan to import thousands of Chinese to work in four proposed coal mines in northeastern B.C. The federal and provincial governments support the plan, partly because the company said recruitment efforts within Canada failed. The United Steelworkers union then revealed that the company, along with HD Mining International (40% held by Canadian Dehua and 55% by Huiyong Holdings), had made Mandarin-language skills essential for at least 70 positions advertised in Canada.
Now the company has downgraded that requirement to “definitely an asset.” On Wednesday the Vancouver Province reported eight such ads on the Mining Association of British Columbia’s Web site. By Friday four were still in place, for a civil engineer, electrical engineer, mechanical engineer and mining engineer.
A Wednesday Vancouver Sun story reported that Canada’s New Democratic Party (NDP) urged the federal government to suspend the Chinese miners’ work permits “until an investigation determines whether Canadians were given an adequate chance to show they can fill the jobs.”
The outrage is hardly limited to Canada. On Friday Taiwanese animators Next Media Animation presented their take in a video. With admirable consideration for Canadians, they even provided an English-language version.
Central banks move in mysterious ways
Gold resumed its unsteady rise above $1,700 after dropping to Wednesday’s $1,698.70, the lowest price since September 7, Bloomberg reported. “More and more central banks are getting involved in the gold market,” the news agency quoted David Meger of Vision Financial Markets in Chicago. In an article re-posted by MarketWatch on Saturday, 24/7 Wall St. compared central bank gold reserves with their corresponding countries’ GDP and other economic highlights. There were some surprises.
The Netherlands ranks 63rd in the world for population and 17th for GDP, but ninth for gold reserves (612.5 tonnes). Like some other European countries, the Netherlands hasn’t yet sold all the gold required under the Central Bank Gold Agreement, 24/7 Wall St. stated. “It may need that gold to protect itself if the euro comes unravelled.”
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