Friday 9th December 2016

Resource Clips


Posts tagged ‘First Quantum Minerals Ltd (FM)’

Opportunism knocks

December 5th, 2016

First Mining Finance found bad times beneficial for good deals

by Greg Klein

Struggling junior? Not this company. Since its trading debut in April 2015, First Mining Finance TSXV:FF has compiled 25 projects covering some 300,000 hectares, from early stage to a PEA with 4.4 million gold ounces indicated. Just as aggressively, the company boosted its treasury to a current $35 million. Now First Mining looks forward to a $21-million exploration and development program for 2017 that includes 47,000 metres of drilling.

“We were able to execute on the vision of the company, which last year was to take advantage of the bear market and acquire projects,” VP of investor relations Derek Iwanaka explains. “I don’t know of any other company that was able to acquire as many projects, or projects as good as we got, during that period.”

First Mining Finance found bad times beneficial for good deals

Located in northwestern Ontario’s Birch-Uchi greenstone belt,
First Mining’s 32,448-hectare Springpole flagship has an
updated PEA scheduled for next year.

Certainly there were deals to be had for canny acquisitors. But that was while many other companies faced financing difficulties. First Mining bucked the trend last August by closing a $27-million private placement. How did they pull that off?

“Quite easily,” responds Iwanaka. “We were literally turning down millions of dollars. We had over $70 million in orders but we didn’t want that kind of dilution. So we just took the $27 million. That should carry us for at least the next few years, including all the drilling and overhead.”

First Mining seems to have something that eludes others.

“First of all we have Keith Neumeyer at the helm, who runs a multi-billion-dollar company as it stands,” says Iwanaka. “Keith has been adept at starting companies during very bad times and manoeuvring them so when times are good we can reap the rewards for our shareholders.”

Among companies founded by the First Mining director were First Quantum Minerals TSX:FM and First Majestic Silver TSX:FR, where Neumeyer’s president/CEO. First Majestic acts as a sort of mentor to First Mining, placing some FR directors in FF’s management and board, helping to get the new company started, lending it about $1 million, vending three Mexican properties and even providing office space.

Among considerations behind an acquisition are “size and quality of the project,” Iwanaka points out. “We look at projects with good grade, scalability, exploration upside. The jurisdiction’s quite important to us. We’re basically looking at North America, but not the North. We will look at South America as well. Quebec, Ontario and Newfoundland are our favourite places although we could go to other provinces too. In the U.S. we see Nevada and Arizona as fairly mining-friendly states. We could probably look at New Mexico as well. We do have some early-stage properties in Mexico, where First Majestic has its base, but we certainly focus on Canada.”

As for commodities, “we particularly like gold but silver, platinum and palladium are also attractive, as well as base metals—anything that’s exchange-tradeable.”

Other factors include “the price of the projects, the holding cost, the infrastructure. In many cases the projects we take already have roads and power lines going to them.”

If gold’s the company’s focus, the Springpole flagship explains why. Described as one of Canada’s largest undeveloped gold projects, the northwestern Ontario potential open pit came with the past owner’s 2013 PEA. Using a 0.4 g/t gold cutoff, the 2012 resource showed:

  • indicated: 128.2 million tonnes averaging 1.07 g/t gold and 5.7 g/t silver for 4.41 million ounces gold and 23.8 million ounces silver

  • inferred: 25.7 million tonnes averaging 0.83 g/t gold and 3.2 g/t silver for 690,000 ounces gold and 2.7 million ounces silver

First Mining has work underway to bring the resource and PEA up to date. But looking back at 2013, the report calculated a post-tax NPV of US$388 million using a 5% discount, with a 13.8% post-tax IRR. Initial capex came to US$438 million with payback in 35 months of an 11-year mine life.

First Mining Finance found bad times beneficial for good deals

Visible gold was one attraction of the Goldlund project,
which has another 27,000 metres of drilling planned.

“We expect the updated PEA will be even more robust,” Iwanaka says. “The U.S. dollar has appreciated since 2013, when it was at par. We’re also looking at increasing the recovery and the pit shell. Those three things could substantially improve the economics and we hope to have the new PEA out probably by the first half of next year.”

With assays pending, a four-hole, 1,712-metre fall program provided metallurgical fodder. Next summer’s agenda calls for another 6,000 metres of infill to upgrade the resource. In the meantime, pre-permitting environmental and baseline work will soon begin.

A newer acquisition gets even more rig attention next year. Goldlund, about 60 kilometres north of Dryden and roughly 200 klicks south of Springpole, has 27,000 metres planned to upgrade the resource and work towards an eventual PEA. The former open pit and underground operation came with an estimate that First Mining considers an historic non-43-101. Using a 0.4 g/t gold cutoff, it showed:

  • measured and indicated: 19.1 million tonnes averaging 1.94 g/t for 1.19 million ounces gold

  • inferred: 25.8 million tonnes averaging 2.51 g/t for 2.08 million ounces

Cameron, maybe another 100 kilometres south of Goldlund, gets up to 9,000 metres of infill to pump up the measured and indicated prior to PEA. Using a 0.5 g/t cutoff, a 2015 resource from Chalice Gold Mines TSX:CXN showed:

  • measured: 3.72 million tonnes averaging 2.64 g/t for 316,000 ounces gold

  • indicated: 4.1 million tonnes averaging 1.92 g/t for 253,000 ounces

  • inferred: 14.5 million tonnes averaging 1.92 g/t for 894,000 ounces

Moving to southwestern Newfoundland, Hope Brook will see 5,000 metres of exploration and infill. A high 3 g/t gold cutoff gives the current resource:

  • indicated: 5.5 million tonnes averaging 4.77 g/t for 844,000 ounces gold

  • inferred: 836,000 tonnes averaging 4.11 g/t for 110,000 ounces

Again, a resource upgrade precedes a PEA, this one slated for late 2017.

Back in Ontario and roughly 110 kilometres northeast of the Springpole flagship, autumn drilling has wrapped up at Pickle Crow. Assays from the nine-hole, 1,319-metre campaign are expected in early 2017. The former mine came with a 2011 inferred resource that used a 2.25 g/t gold cutoff for an underground deposit and a 0.35 g/t cutoff for an open pit deposit:

Underground

  • 6.52 million tonnes averaging 5.4 g/t for 1.14 million ounces gold

Open pit

  • 3.63 million tonnes averaging 1.1 g/t for 126,000 ounces

Total

  • 10.15 million tonnes averaging 3.9 g/t for 1.26 million ounces

With assays to come, drilling to do and announcements for other North American projects anticipated, First Mining plans a steady news flow, says Iwanaka.

Panama holds $200 billion in mineral resources waiting to be mined—Government

January 20th, 2014

by Cecilia Jamasmie | January 20, 2014 | Reprinted by permission of MINING.com

Mining has become one of the fastest-growing sectors in the Panamanian economy, and it is expected to expand even quicker after the government disclosed last week it has identified mineral reserves estimated at $200 billion at current prices.

Zorel Morales, chairman of the Mining Chamber of Panama (CAMIPA) told local paper La Estrella (in Spanish) that mining-related activities jumped 25% in 2013, but with the billions in mineral reserves waiting to be mined, that’s only the beginning.

“So far we have identified 50 billion pounds of copper reserves, 12 million ounces of gold, 25,000 ounces of silver and 250 tons of molybdenum … Of this total, 53% must stay in the country in the form of taxes on income and dividends,” Morales was quoted as saying.

Construction and development of the $6.2-billion copper, gold, silver and molybdenum Cobre Panama mine, on the country’s Atlantic coast, helped expand the mining industry by a third for the quarter.

Expected to become one of the world’s largest open pit copper developments and Panama’s biggest source of exports, the mine’s first shipments are due in 2016, according to Minera Panama, a subsidiary of Canada’s First Quantum Minerals TSX:FM.

Slow take-off

Despite its important mineral reserves, Panama has not experienced a mining boom. There is only one operating mine in the country, the Molejon gold mine, which is also run by a Canadian firm, Vancouver-based Petaquilla Minerals TSX:PTQ.

Apart from the touted Cobre Panama, there are other projects expected to begin operations soon, such as the gold-copper Cerro Quema mine by Canadian junior Pershimco Resources TSXV:PRO and the reopening of the Santa Rosa gold mine, in production from 1996 to 1998.

One of the fastest-growing economies in the world, Panama mostly evaded the global recession, expanding by double digits for four of the past six years.

Reprinted by permission of MINING.com

High profits or low profits, tensions with governments rise

November 28th, 2013

by Ana Komnenic | November 28, 2013 | Reprinted by permission of MINING.com

High profits or low profits, tensions with governments rise

 

The conflict between Romania and Canada’s Gabriel Resources TSX:GBU may be this year’s most high-profile dispute between a mining company and a state. The government has issued a semi-rejection of Gabriel’s plans to build Europe’s largest gold mine, and the company has threatened to sue for $1 billion.

But Rosia Montana is just one example of an increasingly common problem for the resource extraction industry. Since the beginning of the commodities boom more than one decade ago, clashes between companies and governments have been rising.

According to a recent report by Chatham House, the number of disputes that have resulted in international arbitration has increased tenfold for the oil and gas sector and fourfold for the mining industry. And in many parts of the world, these conflicts will only escalate, the report predicts.

Looking back at the 1990s, it seemed as if major disputes between governments and international companies in the oil, gas and minerals sectors would be over, lead researcher Paul Stevens said in an interview posted on the Chatham website.

“Exactly the opposite has been the case,” Stevens said. In fact, research shows that as the price of commodities has gone up, so have the number of conflicts.

High profits or low profits, tensions with governments rise

During the supercycle, commodities prices soared to record highs. Companies put billions toward mega mining projects—some of the biggest the world has ever seen. Barrick Gold TSX:ABX pumped billions into the Peruvian Pascua Lama project. Rio Tinto NYE:RIO launched its massive Simandou iron ore project in Guinea and has already spent $3 billion on it.

The extraction frenzy gave rise to some very high expectations from the public, governments and companies, which in turn led to clashes over how to split the bounty.

“Companies and governments are always competitors when it comes to the distribution of mineral and hydrocarbon revenues and profits,” the report reads.

And disputes are costing investors: Chatham estimates that three recent expropriations affecting Repsol, Rio Tinto and First Quantum Minerals TSX:FM have cost investors about $13 billion.

The reverse may not be true

But today’s low prices offer no relief. Tensions today are “raising questions about the long-term future of the extractive sector,” researchers write. Chatham warns that as companies respond to slumping prices by scaling back, delaying and even cancelling some projects, tensions with governments may rise.

“Higher prices have brought more disputes but the converse may not be true—falling prices could add more fuel to the fire,” Stevens said, as reported by Reuters.

Governments will increasingly adopt the “use-it-or-lose-it” mentality if projects don’t proceed as planned.

In addition to the inherently vulnerable nature of a government-extractive company relationship, the sector is also subject to increased scrutiny. A combination of various factors including fears over climate change, environmental degradation, resource security—especially in regard to water—have put resource companies under a microscope.

“The increasing level of scrutiny from multinational NGOs and the speed and reach of global communication mean that the spread of ideas and access to information about how projects should be conducted will influence local and national demands,” the report reads.

Going forward

The researchers advise caution going forward. The best option, Chatham writes, may be to “go slow” and for both sides to offer more flexibility.

“While economic and political pressure to develop resources quickly will be high, in some countries the best option may be to ‘go slow.’ The emphasis should be on building the capacity to regulate companies, generate employment opportunities and manage revenues in tandem with the resource sector.”

Improving dialogue—both with legislators and civil society—simplifying tax codes and introducing various measures to raise standards of governance are key.

Meanwhile, companies are encouraged to bring their environmental practices and transparency standards in line with “international best practice.” It’s also particularly important for firms to engage all levels of government, including regional and municipal bodies that could be most affected by a project.

Finally, Chatham recommends the creation of a high-level international ombudsperson to try to manage some of these conflicts before relations break down.

“At the heart of the problem is the absence of a practical formula or a benchmark to determine an equitable distribution of revenues between the state and companies in extractive ventures,” researchers found.

Ultimately, managing these projects is important for both sides—a government whose budget depends on the resource industry and a company that has bet billions of dollars on a project’s success.

“It’s also important for markets. Because in some ways if the conflict is not managed, this threatens future supplies of oil and gas and minerals,” Stevens said.

Reprinted by permission of MINING.com