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High profits or low profits, tensions with governments rise

November 28th, 2013

by Ana Komnenic | November 28, 2013 | Reprinted by permission of

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

Canada to boost support for mining, but faces challenges

September 18th, 2013

by Cecilia Jamasmie | September 18, 2013 | Reprinted by permission of

Canada’s Prime Minister Stephen Harper is ready to launch an aggressive campaign to promote the country’s mining sector abroad, in an effort to redirect trade spending and foreign affairs to core economic interests.

Canada to boost support for mining, but faces challenges

Prime Minister Stephen Harper announces support
for Northern Innovation in Mining, August 2013.
(Photo: PMO)

Ed Fast, the international trade minister, began Wednesday a cross-country campaign to get feedback from experts and actors on what kind of support they think the government should offer mining companies.

According to the Globe and Mail, the move comes as the Harper administration starts warming up its campaign machine for the 2015 elections.

But Harper faces a challenging scenario. As a result of the global mining slowdown, Canada’s mining sector has been hit hard by weak commodity prices and lack of interest from foreign and local investors.

For the first time in a decade, Canada’s normally bustling resource industry failed to book a single initial public offering (IPO) on either the Toronto Stock Exchange or the TSX Venture Exchange in the first quarter of the year, a PwC survey revealed.

Tarnished name

While Canada remains the world’s top destination for mining investments, the sector has built a less-than-popular reputation abroad. Local miners have faced domestic opposition to their projects in all parts of the globe, including Greece, Colombia, Nicaragua, Peru, Bolivia, the Dominican Republic, Slovakia, Romania and Israel.

In January, for example, hundreds of Greeks protested in Thessaloniki against several gold mining projects owned by Vancouver-based Eldorado Gold TSX:ELD.

The following month, Catholic priests and small-scale miners marched with 5,000 locals in Matagalpa, Nicaragua, against a project owned by Vancouver-based B2Gold TSX:BTO.

In April tens of thousands of Colombians took to the streets of Bucaramanga, the country’s sixth-largest city, to defend their water supply from Vancouver-based Eco Oro Minerals’ TSX:EOM gold project.

Recently, Toronto-based Barrick Gold TSX:ABX admitted before a Chilean judge it had committed several violations in regards to its touted $8.5-billion Pascua Lama gold and silver project, straddling the border of Chile and Argentina.

And the most fresh example is the renewed opposition Gabriel Resources TSX:GBU faces in Romania because of its Rosia Montana gold project. Only yesterday the country’s president, Traian Basescu, asked Parliament to withdraw a bill that would allow the London-based Canadian miner to move forward.

However the future looks auspicious. Canada is among the top five producers of potash, uranium, nickel, platinum, aluminum, diamonds and steel-making coal. And global demand for commodities is expected to grow by up to 75% over the next 15 years, according to the world’s No. 1 miner, BHP Billiton NYE:BHP.

Reprinted by permission of

Week in review

February 8th, 2013

A mining and exploration retrospect for February 2 to 8, 2013

by Greg Klein

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Dangerous work

A Quebec rescue team recovered the bodies of two quarry workers on Saturday, four days after a landslide buried them in an open gravel pit. Daniel Brisebois and Marie-Claude Laporte worked for Maskimo Construction at L’Epiphanie, about 50 kilometres northeast of Montreal.

On Tuesday Eastern Platinum TSX:ELR reported the death of Allan Swartz, a shift supervisor at the Crocodile River Mine in South Africa, after he fell through an empty ore pass.

Five workers from Braeval Mining’s TSX:BVL Snow Mine project in northern Colombia remain missing after being abducted by the National Liberation Army (ELN) on January 18.

Natives end De Beers protest

A four-day blockade outside De Beers Victor diamond mine in northern Ontario ended peacefully Thursday night, the Timmins Press reported. A company spokesperson told the paper that De Beers agreed to discuss changes to an existing impact benefit agreement regarding employment, training “and maximizing the benefits.”

Supply convoys were prevented from reaching the site by about 16 protestors from the native community of Attawapiskat, 90 kilometres away.

Vague definitions give aboriginals enormous power

A mining and exploration retrospect

In Saturday’s Globe and Mail, columnist Jeffrey Simpson rather candidly addressed the vague but powerful native rights that have created a “de facto veto” over resource development in Canada.

Native demands, he wrote, stem from “treaty rights, however defined, and from aboriginal rights, however defined, in the Charter of Rights and Freedoms.” In its 1997 Delgamuukw decision, Canada’s Supreme Court established the duty to consult natives before working on Crown land. But the court didn’t define the consultation process except to say, in effect, “the stronger the aboriginal [land] claim, the more serious the consultation,” Simpson stated.

Consequently “it’s obviously in the interests of aboriginals to make the most sweeping initial claims possible, whether they have much justification in history, current reality or law. As long as the claim is there, aboriginals can interpret Delgamuukw as giving them a de facto veto, even if that isn’t what the ruling said.”

In a later court ruling, “once again, the meaning and reality of ‘consult’ was left vague, perhaps necessarily so, since how can one define a process of consultation that would be agreed to by all parties. In practice, what ‘consult’ means to aboriginals is ‘we must agree.’”

Most recently, a December decision from the Yukon Court of Appeal declared that the territorial government must consult and “accommodate” the Ross River Dena Council even before very early-stage prospecting in the Ross River area. The ruling is considered to have strong repercussions for other jurisdictions as well.

“Even before a company does anything, the government’s obligation to consult kicks in. From now on—in ways yet to be determined—governments have to consult aboriginals before anything is done that might some day, somehow, have an impact on whatever land they might claim, or have claimed, even if such claims haven’t been tested or resolved,” Simpson wrote.

The Yukon government may appeal the decision. But Simpson’s conclusion might imply that judges already have their minds made up.

“Aboriginals must be delighted with goalposts moving closer all the time toward their conception of consultation as approval by them of anything and everything that might occur on land over which they claim rights, proven or unproven.”

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Carpathian reports Romania assays as high as 0.84 g/t Gold, 0.17% Copper over 678m

February 28th, 2012

Resource Clips - essential news on junior gold mining and junior silver miningCarpathian Gold Inc TSX:CPN announced assay results from its Rovina Valley project in west-central Romania. Highlights include

0.84 g/t gold and 0.17% copper over 678 metres
(including 1.04 g/t gold and 0.19% copper over 424 metres)
0.7 g/t gold and 0.1% copper over 298 metres
(including 1.04 g/t gold and 0.12% copper over 74 metres)
0.72 g/t gold and 0.11% copper over 191 metres
0.53 g/t gold and 0.13% copper over 175 metres
0.66 g/t gold and 0.13% copper over 283 metres
0.75 g/t gold and 0.15% copper over 216 metres

The Rovina Valley project has a 2008 resource estimate of 3.07 million ounces gold and 759.1 million pounds copper in the measured and indicated categories; and 3.09 million ounces gold and 663.1 million pounds copper inferred. An updated resource is expected to be released in 2Q 2012.

View Company Profile

Mike O’Brien
Investor Relations

by Ted Niles

Carpathian reports Romania Assays of 0.79 g/t Gold, 0.15% Copper over 711m

November 30th, 2011

Resource Clips - essential news on junior gold mining and junior silver miningCarpathian Gold Inc TSX:CPN announced results from its Rovina Valley Project in west-central Romania. Assays include

0.79 g/t gold and 0.15% copper over 711 metres
(including 1.05 g/t gold and 0.18% copper over 359 metres)
0.85 g/t gold and 0.21% copper over 518 metres
(including 0.9 g/t gold and 0.22% copper over 433 metres)
0.9 g/t gold and 0.15% copper over 487 metres
(including 1.39 g/t gold and 0.2% copper over 117 metres)
0.83 g/t gold and 0.14% copper over 493 metres
(including 0.96 g/t gold and 0.15% copper over 347 metres)
0.92 g/t gold and 0.16% copper over 353 metres
(including 1.46 g/t gold and 0.21% copper over 107 metres)
0.74 g/t gold and 0.16% copper over 355 metres
(including 0.96 g/t gold and 0.21% copper over 140 metres)

CEO Dino Titaro commented, “We continue to be pleased with the drilling results from the Ciresata porphyry, and while the drilling focus has now shifted to the nearby Colnic and Rovina porphyry deposits for use in the ongoing prefeasibility study, we believe the 2011 drill program has enhanced the size of Ciresata and its contribution to the prefeasibility study. At least one drill rig will remain committed to testing satellite targets in the Ciresata area through the end of 2011 and into next year.”

View Company Profile

Mike O’Brien
or Shobana Thaya
Investor Relations

by Greg Klein

Carpathian reports Romania Assays including 0.83 g/t Gold over 438m

September 20th, 2011

Resource Clips - essential news on junior gold mining and junior silver miningCarpathian Gold Inc TSX:CPN announced results from its Rovina Valley project in west-central Romania. Highlights include

0.83 g/t gold over 438 metres
0.71 g/t over 360 metres
0.68 g/t over 351 metres
0.67 g/t over 239 metres

CEO Dino Titaro stated, “We are pleased with the results of these perimetre drill holes which not only suggest that the Ciresata porphyry mineralization is still open to the west and southwest but that the RVP is truly becoming a world class project. The ongoing results of the resource definition drilling continue to support our belief that the size of this deposit will increase, thus contributing significantly to the results of our RVP prefeasibility study which is in progress. The larger step-out target exploration drill program, planned to start by the end of September, will test the west and southwest extension of the Ciresata mineral system as well as other satellite targets.”

View Company Profile

Mike O’Brien
Investor Relations

or Shobana Thaya
Investor Relations

by Ted Niles

Carpathian report Romania Gold Assays as high as 0.94 g/t over 603m

March 22nd, 2011

Carpathian Gold Inc TSX:CPN announced results from its Rovina Valley Project in Romania. Assays include 0.81 g/t gold over 240 metres (including 1.01 g/t over 76 metres) and 0.94 g/t over 603 metres (including 1.06 g/t over 482 metres).

President/CEO Dino Titaro stated, “We continue to be impressed with the drill results from the Ciresata porphyry and look forward to further drill results from our accelerated program.The Ciresata porphyry continues to demonstrate its high-grade tenor emphasizing the new gold-rich porphyry class of deposit we have discovered in Romania. We believe that the 2011 drill program could add significantly to the size of this deposit and provide a good basis for pre-feasibility/feasibility studies at the Rovina Valley Project in 2011.”

View Company Profile

Dino Titaro

or Mike O’Brien
Manager, Investor Relations

by Ted Niles